As filed with the Securities and Exchange Commission on September 3, 2015
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
INDEPENDENT BANK GROUP, INC.
(Exact name of registrant as specified in its charter)
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Texas |
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6022 |
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13-4219346 |
(State or other jurisdiction of
incorporation or organization) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer
Identification Number) |
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069-3257
(972) 562-9004
(Address,
including zip code and telephone number, including area code, of registrants principal executive offices)
Mr. David R. Brooks
Chairman and Chief Executive Officer
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069-3257
(972) 562-9004
(Name,
address, including zip code and telephone number, including area code, of agent for service)
Copies to:
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Joseph A. Hoffman, Esq.
Dudley Murrey, Esq. Andrews
Kurth LLP 1717 Main Street, Suite 3700
Dallas, Texas 75201 (214)
659-4593 |
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Mark Haynie, Esq.
Haynie Rake Repass & Klimko, P.C.
14643 Dallas Parkway, Suite 550
Dallas, Texas 75254 (972)
716-1855 |
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Larry Temple, Esq.
400 West 15th Street, Suite 705
Austin, Texas 78701 (512)
477-4467 |
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes
effective and all other conditions to the proposed merger described herein have been satisfied or waived.
If the securities being
registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ¨
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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x |
Nonaccelerated filer |
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¨ (Do not check if a smaller reporting company) |
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Smaller reporting company |
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of
Securities to be Registered |
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Amount
to be Registered(1) |
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Proposed
Maximum Offering
Price per Share |
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Proposed
Maximum Aggregate
Offering Price(2) |
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Amount of Registration Fee |
Common Stock, $0.01 par value |
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1,279,532 |
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$15.54 |
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$19,883,970 |
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$2,310.52 |
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(1) |
Represented the estimated maximum number of shares of registrants common stock that could be issued in connection with the merger described herein. |
(2) |
Estimated solely for the purpose of determining the registration fee in accordance with Rule 457(f)(2) and (f)(3) under the Securities Act by multiplying the book value of Grand Bank common stock of $24.11 per share as
of June 30, 2015, by the maximum number of shares of Grand Bank common stock to be acquired by the registrant in the merger described herein, minus the cash portion of the merger consideration to be paid by the registrant to the holder of
shares of Grand Bank common stock. |
The registrant hereby amends
this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this proxy statement/prospectus is not complete and may be changed.
Independent Bank Group, Inc. may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities, and it is not
soliciting to buy these securities, in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 2015
GRAND BANK
MERGER
PROPOSED YOUR VOTE IS VERY IMPORTANT
Dear Shareholder of Grand Bank:
You are cordially invited to attend the special meeting of shareholders of Grand Bank, to be held on
, 2015, at p.m., Central Time, at the main office of Grand Bank,
16660 Dallas Parkway, Suite 1700, Dallas, Texas 75248. At this important special meeting, you will be asked to consider and vote on the approval of an agreement and plan of reorganization and related agreement and plan of merger, together
referred to as the reorganization agreement, which provide for the acquisition of Grand Bank by Independent Bank Group, Inc., or Independent, through a merger transaction. You may also be asked to adjourn the special meeting to a later date or
dates, if the board of directors of Grand Bank determines such an adjournment is necessary.
Under the terms of the reorganization
agreement, if the reorganization agreement is approved and the merger is completed, all outstanding shares of Grand Bank common stock will be converted into an aggregate of $24.1 million in cash and 1,279,532 shares of Independent common stock,
subject in each case to adjustment under certain circumstances as set forth in the reorganization agreement. Based upon 1,824,304 shares of Grand Bank common stock anticipated to be outstanding immediately prior to the effective time of the merger,
which includes 1,726,810 shares outstanding on August 31, 2015, and 97,494 shares to be issued upon the exercise of options to purchase shares of Grand Bank common stock held by Grand Bank option holders who have irrevocably agreed to exercise
such options prior to the effective time of the merger and based upon the payment of a total of approximately $2.2 million to Grand Bank option holders who have irrevocably elected to receive a net cash payment for the surrender and
cancellation of their options, holders of Grand Bank common stock will receive 0.7014 of a share of Independent common stock and $12.03 in cash, subject in each case to adjustment under certain circumstances as set forth in the reorganization
agreement and as described in this proxy statement/prospectus, for each share of Grand Bank common stock they own at the effective time of the merger.
Independents common stock is listed on the NASDAQ Stock Market, Inc. Global Select Market System, or NASDAQ Global Select Market, under
the symbol IBTX. The closing price of Independents common stock on August 31, 2015, was $42.39 per share. Based on the closing price of Independent common stock on August 31, 2015, of $42.39, and assuming that Grand
Banks tangible book value is at least $40.0 million on the calculation date and that there are 1,824,304 shares of Grand Bank common stock outstanding on the closing date, upon completion of the merger, shareholders of Grand Bank would receive
merger consideration with a value of approximately $41.76 for each share of Grand Bank common stock that they own.
Your vote is very
important. Whether or not you plan to attend the special meeting, please take the time to vote by completing and mailing the enclosed proxy card to Grand Bank. We cannot complete the merger unless we obtain the necessary government approvals and
unless the holders of two-thirds of the shares of Grand Bank common stock outstanding on , 2015, the record date for the special
meeting, approve the reorganization agreement. The board of directors of Grand Bank unanimously supports the merger and recommends that you vote in favor of the reorganization agreement and the merger.
The accompanying proxy statement/prospectus contains a more complete description of the special meeting and the terms of the
reorganization agreement and the acquisition of Grand Bank. We urge you to review this entire document carefully, including the considerations discussed under Risk Factors beginning on page 28, and the
appendices to the accompanying proxy statement/prospectus, which include the reorganization agreement. You may also obtain information about Independent from documents that Independent has filed with the Securities and Exchange Commission, or
the SEC.
Based on our reasons for the merger described in the accompanying proxy statement/prospectus, including the fairness
opinion issued by our financial advisor, Hovde Group, LLC, our board of directors believes that the transaction is fair to you from a financial point of view and is in your best interests. Accordingly, our board of directors unanimously
recommends that you vote FOR approval of the reorganization agreement and the related agreement and plan of merger.
We
appreciate your continuing loyalty and support, and we look forward to seeing you at the special meeting.
Lee Dinkel
President and Chief Executive Officer, Grand Bank
Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued under this proxy
statement/prospectus or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.
The securities that Independent is offering through this document are not savings or deposit accounts or other obligations of any bank or
nonbank subsidiary of either of our companies, and they are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.
Proxy statement/prospectus dated
, 2015
and
first mailed to shareholders of Grand Bank on or about , 2015
HOW TO OBTAIN ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates certain business and financial information about Independent from documents filed with the SEC
that is not included in or delivered with this document. This information is described on page 102 under Where You Can Find More Information. You can obtain free copies of this information by writing or calling:
Independent Bank Group, Inc.
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069-3257
Attention: Michelle S. Hickox
Executive Vice President and Chief Financial Officer
(972) 562-9004
To
obtain timely delivery of the documents before the special meeting of Grand Bank, you must request the information by , 2015.
[FIVE BUSINESS DAYS BEFORE VOTE]
In addition, if you have questions about the merger or the special meeting, need additional copies
of this proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, you may contact Lee Dinkel, Grand Banks President and Chief Executive Officer, at the following address or by calling the
following telephone number:
Grand Bank
16660 Dallas Parkway, Suite 1700
Dallas, TX 75248
(972)
735-1000
Grand Bank does not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act and accordingly does not file documents or reports with the SEC.
Grand Bank is required to file Consolidated Reports of Condition and Statements of Income, or Call Reports, quarterly with the Federal
Financial Institutions Examination Counsel, or FFIEC. The Call Reports contain financial information (including, but not limited to, detailed information on loan charge-offs and recoveries, changes in the allowance for and lease losses, securities
portfolio, loans and lease financing receivables and past due, nonaccrual and renegotiated loans and lease financing receivables) not otherwise set forth separately in this proxy statement/prospectus. All Call Reports filed by Grand Bank may be
obtained online from the Federal Deposit Insurance Corporation or FDIC at www2.fdic.gov/call_TFR_Rpts/.
PLEASE NOTE
We have not authorized anyone to provide you with any information other than the information included in this document and the documents to
which we refer you. If someone provides you with other information, please do not rely on it as being authorized by us.
This proxy
statement/prospectus has been prepared as of , 2015. There may be changes in the affairs of Grand Bank or Independent since that
date, which are not reflected in this document.
Grand Bank
16660 Dallas Parkway, Suite 1700
Dallas, TX 75248
(972)
735-1000
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the shareholders of Grand Bank:
A special
meeting of shareholders of Grand Bank will be held on , 2015, at p.m., Central
Time, at the main office of Grand Bank, 16660 Dallas Parkway, Suite 1700, Dallas, Texas 75248, for the following purposes:
1. To
consider and vote upon a proposal to approve the Agreement and Plan of Reorganization, dated as of July 23, 2015, by and between Independent Bank Group, Inc., or Independent, and Grand Bank, and the related Agreement and Plan of Merger, by and
between Independents wholly owned subsidiary, Independent Bank, McKinney, Texas, and Grand Bank or, collectively, the reorganization agreement, pursuant to which Grand Bank will merge with and into Independent Bank, all on and subject to the
terms and conditions contained therein; and
2. To consider and vote upon any proposal to adjourn the special meeting to a later date or
dates, if the board of directors of Grand Bank determines such an adjournment is necessary to permit further solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to constitute a quorum or to approve
the reorganization agreement.
No other business may be conducted at the special meeting.
Only holders of Grand Bank common stock of record as of 5:00 p.m., on
, 2015, will be entitled to notice of and to vote at the special meeting and any adjournments thereof. The special meeting may be
adjourned from time to time upon approval of holders of Grand Bank common stock without any notice other than by announcement at the meeting of the adjournment thereof, and any and all business for which notice is hereby given may be transacted at
such adjourned meeting.
Holders of Grand Bank common stock have the right to dissent from the merger and obtain payment in cash of the
appraised fair value of their shares of Grand Bank common stock under applicable provisions of the Texas Business Organizations Code, or the TBOC. In order for such a shareholder of Grand Bank to perfect his or her right to dissent, the shareholder
must carefully follow the procedure set forth in the TBOC. A copy of the applicable statutory provisions of the TBOC is included as Appendix C to the accompanying proxy statement/prospectus and a summary of these provisions can be found
under the caption Proposal to Approve the Reorganization AgreementDissenters Rights of Grand Bank Shareholders.
If
you have any questions concerning the merger or the proxy statement/prospectus, would like additional copies of the proxy statement/prospectus or need help voting your shares of Grand Bank common stock, please contact Lee Dinkel, Grand Banks
President and Chief Executive Officer, at (972) 735-1000.
By Order of the Board of Directors,
Lee Dinkel
President and Chief Executive Officer
Dallas, Texas
, 2015
The board of directors of Grand Bank unanimously recommends that you vote FOR the proposals to approve the reorganization agreement and any
adjournment of the special meeting, if necessary, among other things, to permit further solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to constitute a quorum or to approve the reorganization
agreement.
Your Vote is Very Important
A proxy card is enclosed. Whether or not you plan to attend the special meeting, please complete, sign and date the proxy card and promptly
mail it in the enclosed envelope. You may revoke your proxy card in the manner described in the proxy statement/prospectus at any time before it is exercised. If you attend the special meeting, you may vote in person if you desire, even if you have
previously returned your proxy card.
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
The following are some questions that you may have regarding the Agreement and Plan of Reorganization, dated as of July 23,
2015, by and between Independent Bank Group, Inc., or Independent, and Grand Bank, and the special meeting, and brief answers to those questions. Independent and Grand Bank advise you to read carefully the remainder of this proxy
statement/prospectus because the information contained in this section does not provide all of the information that might be important to you with respect to the merger and the special meeting. Additional important information is also referred to
under the caption Where You Can Find More Information beginning on page 102.
Q: |
Why am I receiving this proxy statement/prospectus? |
A: |
Grand Bank is sending these materials to its shareholders to help them decide how to vote their shares of Grand Bank common stock with respect to the reorganization agreement and any other matter to be considered at the
special meeting. This document constitutes both a proxy statement of Grand Bank and a prospectus of Independent. It is a proxy statement because the board of directors of Grand Bank is soliciting proxies from their shareholders using this document.
It is a prospectus because Independent is offering shares of its common stock in exchange for outstanding shares of Grand Bank common stock in the merger. |
Q: |
What are Grand Bank shareholders being asked to vote upon? |
A: |
The board of directors Grand Bank is proposing that Grand Bank be acquired by Independent through a merger transaction. As part of the overall transaction, the holders of Grand Bank common stock are being asked to
consider and vote on the following two proposals: |
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Proposal One: to approve the reorganization agreement and the related Agreement and Plan of Merger, by and between Independents wholly owned subsidiary bank, Independent Bank, McKinney, Texas, and Grand Bank or,
collectively, the reorganization agreement, pursuant to which Grand Bank will merge with and into Independent Bank; and |
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Proposal Two: to approve the adjournment of the special meeting to a later date or dates, if the board of directors of Grand Bank determines such an adjournment is necessary to permit further solicitation of additional
proxies if there are not sufficient votes at the time of the special meeting to constitute a quorum or to approve the reorganization agreement. |
No other business may be conducted at the special meeting.
Q: |
What will happen in the merger? |
A: |
In the merger, Grand Bank will be merged with and into Independent Bank, with Independent Bank being the surviving bank. Grand Bank will cease to exist after the merger with Independent Bank occurs. Grand Bank is a
commercial bank with its headquarters in Dallas, Texas. Independent Bank is a commercial bank headquartered in McKinney, Texas, and a wholly owned subsidiary of Independent. Upon the merger of Grand Bank with and into Independent Bank, the shares of
Grand Bank common stock will be converted into the right to receive the consideration described below. For ease of reference, the merger of Grand Bank with and into Independent Bank is referred to in this proxy statement/prospectus as the
merger. |
Q: |
What is the aggregate amount of consideration to be paid by Independent in the transaction? |
A: |
Under the terms of the reorganization agreement, all outstanding shares of Grand Bank common stock will be converted into an aggregate of
$24.1 million in cash and 1,279,532 shares of Independent common stock, subject in each case to adjustment under certain circumstances as set forth in the reorganization agreement
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and described in this proxy statement/prospectus. Based upon the closing price of Independent common stock on August 31, 2015 of $42.39 and assuming that Grand Banks tangible book
value is at least $40.0 million on the calculation date, the aggregate amount of merger consideration to be paid by Independent is valued at approximately $76.2 million. |
Q: |
What consideration will Grand Bank shareholders receive as a result of the merger? |
A: |
Based upon 1,824,304 shares anticipated to be outstanding immediately prior to the effective time of the merger, which includes 1,726,810 shares outstanding on August 31, 2015, and 97,494 shares to be issued upon
the exercise of options to purchase shares of Grand Bank common stock held by Grand Bank option holders who have irrevocably agreed to exercise such options prior to the effective time of the merger and based upon the payment of a total of
approximately $2.2 million to Grand Bank option holders who have irrevocably elected to receive a net cash payment for the surrender and cancellation of their options, holders of Grand Bank common stock will be entitled to receive 0.7014 of a share
of Independent common stock and $12.03 in cash, subject in each case to adjustment under certain circumstances as set forth in the reorganization agreement and described in this proxy statement/prospectus, for each share of Grand Bank common stock
they own at the effective time of the merger. |
Q: |
Under what circumstances would the cash portion of the merger consideration be adjusted? |
A: |
The amount of aggregate cash consideration paid by Independent would be reduced if Grand Banks tangible book value, as calculated pursuant to the reorganization agreement, is less than $40.0 million but more
than $39.0 million on the fifth business day prior to the closing date, or the calculation date. Under those circumstances, the aggregate cash consideration would be reduced by the difference between $40.0 million and the amount of Grand
Banks tangible book value on that date. If there is a tangible book value adjustment, the per share cash consideration would be reduced by an amount equal to the quotient of (i) the amount of the reduction in aggregate cash consideration,
divided by (ii) the number of shares of Grand Bank common stock outstanding on the closing date. If the tangible book value of Grand Bank is less than $39.0 million on the closing date, Independent would not be obligated to consummate the
transaction. |
As noted above, pursuant to the terms of the reorganization agreement, the amount of aggregate cash
consideration paid by Independent to shareholders of Grand Bank will also be reduced by the aggregate amount of cash paid by Independent to the holders of options to purchase shares of Grand Bank common stock who have irrevocably agreed to surrender
their options in exchange for a cash payment equal to the difference between the aggregate value of the shares subject to their options (as determined pursuant to the reorganization agreement) and the aggregate exercise price for such options. The
holders of options to purchase an aggregate of 127,156 shares of Grand Bank common stock have elected to receive such cash payment. Based upon this election, Independent will pay an aggregate of approximately $2.2 million in cash to such option
holders. Therefore, the aggregate amount of cash consideration to be paid by Independent to Grand Bank shareholders will be reduced by approximately $2.2 million. The $12.03 per share cash consideration to be paid to Grand Bank shareholders set
forth above reflects this adjustment.
Q: |
Under what circumstances would the stock portion of the merger consideration be adjusted? |
A: |
The amount of aggregate stock consideration paid by Independent Bank would be adjusted if the average of the daily volume weighted average sale price per share of the Independent common stock on The NASDAQ Stock Market,
Inc. Global Select Market System, or NASDAQ Global Select Market, for the ten consecutive trading days ending on and including the third trading day preceding the closing date as reported by Bloomberg, or the average sales price, is 10% more or 10%
less than $43.7660. |
If the average sales price is less than 90% of $43.7660, or $39.3894, the per share stock consideration
would be adjusted to a fraction of a share of Independent common stock (rounded to the nearest ten thousandth)
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equal to the quotient of (x) $27.6270; divided by (y) the average sales price.
If the average sales price is more than 110% of $43.7660, or $48.1426, the per share stock consideration would be adjusted to a fraction of a
share of Independent common stock (rounded to the nearest ten thousandth) equal to the quotient of (x) $33.7663; divided by (y) the average sales price.
Q: |
Are there other financial aspects of the merger? |
A: |
Yes. If Grand Banks tangible book value is greater than $40.0 million on the calculation date, then on the day prior to the closing date, Grand Bank may distribute to its shareholders an amount equal to the
difference between the actual amount of tangible book value on the calculation date minus $40.0 million. |
Q: |
What is Grand Banks current tangible book value? Are there factors which could change the tangible book value prior to the closing date? |
A: |
Grand Banks tangible book value, as calculated pursuant to the reorganization agreement, was approximately $41.5 million as of June 30, 2015. |
Tangible book value will increase or decrease by the amount of net income or net loss, respectively, of Grand Bank through the closing date.
Tangible book value will also increase by the amount of additional paid in capital resulting from the exercise of stock options. However, all costs and expenses of Grand Bank related to the merger will be included as a deduction in the calculation
of Grand Banks tangible book value. For more detail about how Grand Banks tangible book value will be calculated pursuant to the reorganization agreement, see the section entitled Proposal to Approve the Reorganization
AgreementTerms of the Merger beginning on page 40. Management of Grand Bank estimates net income (before costs and expenses of the merger) of approximately $2.1 million from July 1, 2015, through November 30, 2015
(the estimated closing date), additional paid in capital of approximately $2.4 million resulting from the exercise of stock options, and aggregate merger-related deductions to tangible book value of approximately $5.6 million. If these
assumptions are correct, the amount of Grand Banks tangible book value, as calculated pursuant to the reorganization agreement, would be approximately $40.4 million on the closing date. This amount is only an estimate and is based upon
several assumptions, many of which are beyond the control of Grand Bank. Accordingly, the actual amount of Grand Banks tangible book value may vary from this estimated amount.
Q: |
Do Grand Bank shareholders have a choice of the form of consideration that they will receive in the merger? |
A: |
No. All shareholders of Grand Bank will receive the merger consolidation in the form of cash and Independent common stock in the amounts set forth in the reorganization agreement and as described herein.
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When do you expect the merger to be completed? |
A: |
We are working to complete the merger during the fourth quarter of 2015, although delays could occur. |
Q: |
Are there any risks I should consider in deciding whether I vote for the reorganization agreement? |
A: |
Yes. Set forth under the heading of Risk Factors, beginning on page 28, are a number of risk factors that you should consider carefully. |
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Q: |
When and where will Grand Bank special shareholders meeting be held? |
A: |
The special meeting is scheduled to take place at p.m., Central Time, on
, 2015, at the main office of Grand Bank, 16660 Dallas Parkway, Suite 1700, Dallas, Texas 75248. |
Q: |
Who is entitled to vote at the special meeting? |
A: |
The holders of record of Grand Bank common stock as of 5:00 p.m. on , 2015, which is the date that
Grand Banks board of directors has fixed as the record date for the special meeting, are entitled to vote at the special meeting. |
Q: |
What are my choices when voting? |
A: |
With respect to each of the proposals, you may vote for the proposal, against the proposal or abstain from voting on the proposal. |
Q: |
What vote is required for approval of the reorganization agreement? |
A: |
Approval of the reorganization agreement by holders of Grand Bank common stock requires the affirmative vote of the holders of two-thirds of the shares of Grand Bank common stock outstanding as of 5:00 p.m. on
, 2015, or 1,216,081 shares of Grand Bank common stock. |
Q: |
What vote is required to adjourn the special meeting? |
A: |
To adjourn the special meeting, the affirmative vote of the holders of a majority of the shares of Grand Bank common stock cast at the meeting on such proposal is required. |
Q: |
How does the board of directors of Grand Bank recommend that I vote at the special meeting? |
A: |
The board of directors of Grand Bank unanimously recommends that the shareholders vote their shares as follows: |
Item 1FOR the approval of the reorganization agreement and the merger; and
Item 2FOR the adjournment of the special meeting if the board of directors of Grand Bank determines an adjournment is necessary to
permit further solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to constitute a quorum or to approve the reorganization agreement.
Q: |
Do I have any rights to avoid participating in the merger? |
A: |
You have the right to dissent from the merger and seek payment of the appraised fair value of your shares in cash. In order for a shareholder of Grand
Bank to perfect his or her right to dissent, the shareholder must deliver to Grand Bank a written objection to the merger prior to the special meeting that states that such shareholder will exercise his or her right to dissent if the reorganization
agreement is approved and the merger is completed, must vote his or her shares of Grand Bank common stock against approval of the reorganization agreement at the special meeting, must, not later than the 20th day after Independent sends such shareholder notice that the merger was completed, deliver to Independent a written demand for payment of the fair value of his or her shares of Grand Bank common
stock that states the number and class of shares of Grand Bank common stock the shareholder owns, his or her estimate of the fair value of such stock and an address to which a notice relating to the dissent and appraisal procedures may be sent, and,
not later than the 20th day after he or she makes that demand, submit to Independent the certificates representing his or her shares of Grand Bank common stock. The steps you must follow to
perfect your right |
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of dissent are described in greater detail under the caption Proposal to Approve the Reorganization AgreementDissenters Rights of Grand Bank Shareholders starting on
page 79, and this discussion is qualified by that description and by the text of the provisions of the TBOC relating to rights of dissent set forth in Appendix C hereto. The appraised fair value of your shares of Grand Bank common
stock may be more or less than the value of the Independent common stock and cash being paid in the merger. If the holders of more than 5% of the outstanding shares of Grand Bank common stock dissent from the merger, Independent has the right to
terminate the reorganization agreement. |
Q: |
What happens if I transfer my shares after the record date for the special meeting? |
A: |
The record date for the special meeting is earlier than the expected date of completion of the merger. Therefore, if you transfer your shares of Grand Bank common stock after the applicable record date, but prior to the
merger, you will retain the right to vote at the special meeting, but the right to receive the merger consideration will transfer with the shares of common stock. |
Q: |
What do I need to do now? |
A: |
After you have thoroughly read and considered the information contained in this proxy statement/ prospectus, you simply need to vote your shares of Grand Bank common stock at the special meeting. |
As a record holder (that is, your shares of Grand Bank common stock are held in your own name), you may vote by proxy or you may attend the
special meeting and vote in person. If you are a record holder on the record date for the special meeting and want to vote your shares by proxy, simply indicate on the proxy card(s) applicable to your shares of Grand Bank common stock how you want
to vote and sign, date and mail your proxy card(s) in the enclosed pre-addressed postage-paid envelope as soon as possible, but in any event by such time that your proxy card may be received prior to the vote at the special meeting.
Your proxy card(s) must be received by Grand Bank by no later than the time the polls close for voting at the special meeting for your vote to
be counted at the meeting.
Voting your shares by proxy will enable your shares of Grand Bank common stock to be represented and voted at
the special meeting if you do not attend the special meeting and vote your shares in person.
Q: |
How will my shares be voted if I return a signed and dated proxy card, but dont specify how my shares will be voted? |
A: |
The shares to which such proxy card relates enable your shares of Grand Bank common stock to be represented and voted at the special meeting if you do not attend the special meeting and vote your shares in person. If
you return a signed and dated proxy, but do not specify how your shares are to be voted, your shares will be voted FOR approval of the reorganization agreement and merger and FOR any adjournments of the special meeting that
the board of directors of Grand Bank deems necessary. |
Q: |
Can I attend the special meeting and vote in person? |
A: |
Yes. All Grand Bank shareholders are invited to attend the special meeting and can vote in person at the special meeting. |
Q: |
May I change my vote after I have submitted my proxy card? |
A: |
Yes. Regardless of the method used to cast a vote, a Grand Bank shareholder may change his or her vote by: |
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delivering to Grand Bank prior to the special meeting a written notice of revocation addressed to: Lisa Murray, Corporate Secretary, Grand Bank, 16660 Dallas Parkway, Suite 1700, Dallas, Texas 75248;
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completing, signing and returning a new proxy card with a later date than the date of your original proxy before the date of the special meeting, and any earlier proxy will be revoked automatically; or
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attending the special meeting and voting in person, and any earlier proxy will be revoked. However, simply attending the special meeting without voting will not revoke your proxy. |
Q: |
What happens if I abstain from voting? |
A: |
If you are a record holder of Grand Bank common stock and you abstain from voting, then the abstention will be counted towards a quorum at the special meeting, but such shares will have the same effect as a vote against
the proposal to approve the reorganization agreement. Abstentions will have no effect on the proposal to adjourn the special meeting, if necessary. |
Q: |
Should I send in my stock certificates now? |
A: |
No. Wells Fargo Shareowner Services, Independents exchange agent, will send you written instructions for exchanging your stock certificates. You should not send your Grand Bank stock certificates with your proxy
card. |
Q: |
Who can help answer my questions? |
A: |
If you have additional questions about the merger, you should contact Lee Dinkel, President and Chief Executive Officer, Grand Bank, 16660 Dallas Parkway, Suite 1700, Dallas, Texas 75248, telephone
(972) 735-1000. |
6
SUMMARY
This summary highlights selected information from this proxy statement/prospectus and may not contain all of the information that is
important to you. Independent urges you to carefully read this entire document and the other information that Independent refers to in this document. These documents will give you a more complete description of the items for consideration at the
special meeting. For more information about Independent, see Where You Can Find More Information on page 102. Independent has included page references in this summary to direct you to other places in this proxy
statement/prospectus where you can find a more complete description of the topics that Independent has summarized.
The
Companies
Independent Bank Group, Inc.
1600 Redbud
Boulevard, Suite 400
McKinney, Texas 75069-3257
(972)
562-9004
Independent, a Texas corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended,
or the BHC Act. Through Independent Bank, its wholly owned subsidiary bank, which is a Texas state banking association, Independent provides a wide range of relationship driven, commercial banking products and services. Independent currently
operates a total of 40 full-service banking centers in three regions in Texas: Dallas/North Texas, Austin/Central Texas, and Houston. As of June 30, 2015, on a consolidated basis, Independent had total assets of $4.4 billion, total loans
of $3.4 billion, total deposits of $3.5 billion and shareholders equity of $559.4 million.
Grand Bank
16660 Dallas Parkway, Suite 1700
Dallas, Texas 75248
(972) 735-1000
Grand Bank, a Texas banking
association, is a full service commercial bank with two branches located in the Dallas, Texas, metropolitan area. As of June 30, 2015, Grand Bank had total assets of $608.6 million, total deposits of $507.1 million, total net loans of
$246.3 million and total shareholders equity of $41.6 million.
Proposed Merger
Independent has attached the reorganization agreement to this document as Appendix A. Please read the entire reorganization
agreement, which includes the related agreement and plan of merger, attached thereto as Exhibit A. They are the legal documents that govern the merger.
The reorganization agreement provides that Grand Bank will be merged with and into Independent Bank with Independent Bank being the surviving
bank. Grand Bank will cease to exist after the merger occurs. The existing locations of Grand Bank will become banking centers of Independent Bank. Independent expects to complete the merger in the fourth quarter of 2015, although delays could
occur. The merger will be accounted for as an acquisition of Grand Bank by Independent and Independent Bank under the acquisition method of accounting in accordance with Financial Accounting Standard Boards Accounting Standard Codification
Topic 805, Business Combinations.
Terms of the Merger (page 40)
Aggregate Merger Consideration. Under the terms of the reorganization agreement, if the reorganization agreement is approved and the
merger is completed, all outstanding shares of Grand Bank common stock will be
7
converted into an aggregate of $24.1 million in cash and 1,279,532 shares of Independent common stock, subject in each case to adjustment under certain circumstances as set forth in the
reorganization agreement and described in this proxy statement/prospectus. Based upon the closing price of Independent common stock on August 31, 2015, of $42.39, and assuming that the tangible book value of Grand Bank is at least $40.0 million
on the calculation date, the aggregate amount of the total merger consideration to be paid by Independent is valued at $76.2 million.
Per Share Merger Consideration. Based upon 1,824,304 shares anticipated to be outstanding immediately prior to the effective time of
the merger, which includes 1,726,810 shares outstanding on August 31, 2015 and 97,494 shares to be issued upon the exercise of options to purchase shares of Grand Bank common stock held by Grand Bank option holders who have irrevocably agreed
to exercise such options prior to the effective time of the merger and based upon the payment of a total of approximately $2.2 million to Grand Bank option holders who have irrevocably elected to receive a net cash payment for the surrender and
cancellation of their options, holders of Grand Bank common stock will receive 0.7014 of a share of Independent common stock and $12.03 in cash, subject in each case to adjustment under certain circumstances as set forth in the reorganization
agreement and described in this proxy statement/prospectus, for each share of Grand Bank common stock they own at the effective time of the merger.
Adjustment to Cash Consideration. The amount of aggregate cash consideration paid by Independent would be reduced if Grand Banks
tangible book value, as calculated pursuant to the reorganization agreement, is less than $40.0 million but more than $39.0 million on the calculation date. Under those circumstances, the aggregate cash consideration would be reduced by
the difference between $40.0 million and the amount of Grand Banks tangible book value on that date. In the event of such a reduction, the per share cash consideration would be reduced by an amount equal to the quotient of (i) the
amount of the reduction in aggregate cash consideration, divided by (ii) 1,824,304, the number of shares of Grand Bank common stock expected to be outstanding on the closing date. If the tangible book value of Grand Bank is less than
$39.0 million on the closing date, Independent would not be obligated to consummate the transaction.
As noted above, pursuant
to the terms of the reorganization agreement, the amount of aggregate cash consideration paid by Independent to shareholders of Grand Bank will also be reduced by the aggregate amount of cash paid by Independent to the holders of options to purchase
shares of Grand Bank common stock who have irrevocably agreed to surrender their options in exchange for a cash payment equal to the difference between the aggregate value of the shares subject to their options (as determined pursuant to the
reorganization agreement) and the aggregate exercise price for such options. The holders of options to purchase an aggregate of 127,156 shares of Grand Bank common stock have elected to receive such cash payment. Based upon this election,
Independent will pay an aggregate of approximately $2.2 million in cash to such option holders. Therefore, the aggregate amount of cash consideration to be paid by Independent to the Grand Bank shareholders will be reduced by approximately
$2.2 million. The $12.03 per share cash consideration to be paid to Grand Bank shareholders set forth above reflects this adjustment.
Adjustment to Stock Consideration. The amount of aggregate stock consideration paid by Independent will be adjusted if the average of
the daily volume weighted average sale price per share of Independent common stock on the NASDAQ Global Select Market for the ten consecutive trading days ending on and including the third trading day preceding the closing date as reported by
Bloomberg, or the average sales price, is 10% more or 10% less than $43.7660.
If the average sales price is less than 90% of
$43.7660, or $39.3894, the per share stock consideration would be adjusted to a fraction of a share of Independent common stock (rounded to the nearest ten thousandth) equal to the quotient of (x) $27.6270; divided by (y) the average sales
price. If the average sales price is more than 110% of $43.7660, or $48.1426, the per share stock consideration would be adjusted to a fraction of a share of
8
Independent common stock (rounded to the nearest ten thousandth) equal to the quotient of (x) $33.7663; divided by (y) the average sales price. Therefore, the maximum aggregate value of
Independent common stock to be issued to Grand Bank shareholders is $61.6 million and the minimum aggregate value of Independent common stock to be issued to Grand Bank shareholders is $50.4 million. As of August 31, 2015, the closing
sales price of Independent common stock was $42.39 per share.
Other Financial Aspects. If Grand Banks tangible book value is
greater than $40.0 million on the calculation date, then on the day prior to the closing date, Grand Bank may distribute to its shareholders an amount equal to the difference between the actual amount of tangible book value on the calculation
date minus $40.0 million.
Grand Banks tangible book value as calculated pursuant to the reorganization agreement was
approximately $41.5 million as of June 30, 2015. Tangible book value will increase or decrease by the amount of net income or net loss, respectively, of Grand Bank through the closing date. Tangible book value will also increase by the
amount of additional paid in capital resulting from the exercise of stock options. However, all costs and expenses of Grand Bank related to the merger will be included as a deduction in the calculation of tangible book value. For more detail about
how Grand Banks tangible book value will be calculated pursuant to the reorganization agreement, see the section titled Proposal to Approve the Reorganization AgreementTerms of the Merger beginning on page 40.
Fractional shares of Independent common stock will be paid in cash, without interest. The market price of Independent common stock will
fluctuate from the date of this proxy statement/prospectus through the third trading date prior to the effective date of the merger, which is the date on which the per share stock consideration is determined for the merger. Because of the
possibility of the tangible book value adjustment to the amount of the per share cash consideration and the fluctuation of the market price of Independent common stock that will comprise the per share stock consideration, you will not know the exact
amount of cash or the exact number of shares of Independent common stock you will receive in connection with the merger when you vote on the reorganization agreement.
Material U.S. Federal Income Tax Consequences of the Merger (page 74)
The merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, as amended, or
the Code, for U.S. federal income tax purposes, and the closing is conditioned upon the receipt by Independent of an opinion from Andrews Kurth LLP, special counsel to Independent, to the effect that the merger so qualifies. This summary of U.S.
federal income tax consequences assumes that the merger will be consummated as described in the reorganization agreement and this proxy statement/prospectus and that Independent will not waive the opinion condition described in Proposal to
Approve the Reorganization AgreementMaterial U.S. Federal Income Tax Consequences of the MergerTax Opinion. If the merger qualifies as such a reorganization, the material U.S. federal income tax consequences of the merger to U.S.
holders of Grand Bank common stock will be as follows: holders of Grand Bank common stock generally will recognize gain (but not loss) with respect to their Grand Bank common stock. The gain a U.S. holder of Grand Bank common stock recognizes
generally will be equal to the lesser of (i) the amount of cash consideration received in the merger (excluding any cash received in lieu of a fractional share of Independent common stock), or (ii) the amount by which the cash
consideration received in the merger for the Grand Bank common stock plus the stock consideration received in the merger (based upon the fair market value of the Independent common stock at the effective time of the merger) exceeds the adjusted tax
basis in the Grand Bank common stock exchanged in the merger.
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For further information, please refer to Proposal to Approve the Reorganization
AgreementMaterial U.S. Federal Income Tax Consequences of the Merger. The U.S. federal income tax consequences described above may not apply to all holders of Grand Bank common stock. Your tax consequences will depend on your individual
situation. Accordingly, we strongly urge you to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.
Fairness Opinion of Grand Banks Financial Advisor (page 47)
Hovde Group, LLC, or Hovde Group, has delivered a written opinion to the board of directors of Grand Bank that, as of the date of the
reorganization agreement, based upon and subject to certain matters stated in the opinion, the merger consideration is fair to the shareholders of Grand Bank from a financial point of view. This opinion is attached to this proxy statement/prospectus
as Appendix B. The opinion of Hovde Group is not a recommendation to any Grand Bank shareholder as to how to vote on the proposal to approve the reorganization agreement. You should read this opinion completely to understand the
procedures followed, matters considered and limitations on the reviews undertaken by Hovde Group in providing its opinion.
Independent Plans to Continue Payment of Quarterly Dividends (page 88)
Independent has paid cash dividends on its common stock since the third quarter of 2013, and, subject to applicable statutory and regulatory
restrictions, intends to continue to pay quarterly cash dividends on its common stock following the merger. See Dividends.
Ownership of Independent Common Stock After the Merger (page 78)
Based on the closing price of Independent common stock on
August 31, 2015, of $42.39 per share, Independent would issue 1,279,532 shares of its common stock to Grand Bank shareholders in connection with the merger. The number of shares of Independent common stock issued in connection with the merger
is subject to change if the average sales price of the Independent common stock is less than $39.3894 or more than $48.1426. See SummaryTerms of the Merger.
Based on 17,111,394 shares of Independent common stock outstanding and the closing price of $42.39 on August 31, 2015, immediately after
the merger, the former Grand Bank shareholders would own approximately 6.96% of the outstanding shares of Independent common stock assuming 1,279,532 shares of Independent common stock are issued in the merger. That ownership percentage would be
reduced by any future issuances of shares of Independent common stock.
Market Prices of Independent Common Stock
(page 88)
Shares of Independent common stock are quoted on the NASDAQ Global Select Market under the symbol IBTX. On
July 22, 2015, the last trading day before the merger was announced, Independent common stock closed at $44.65 per share. On August 31, 2015, Independent common stock closed at $42.39 per share. The market price of Independent common stock
will fluctuate prior to the merger. You should obtain the most recent closing price for Independent common stock on the NASDAQ Global Select Market prior to deciding how to vote. Shares of the common stock of Grand Bank are not traded on any
national securities exchange or on an established public trading market, and no quotations of any market price exists for the Grand Bank shares of common stock.
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Special Meeting (page 35)
The special meeting of shareholders of Grand Bank will be held on
, 2015, at p.m., Central Time, at the main office of Grand Bank,
16660 Dallas Parkway, Suite 1700, Dallas, Texas 75248. At the special meeting, you will be asked to consider and vote on the following:
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a proposal to approve the reorganization agreement, which provides for Independent to acquire Grand Bank through the merger; and |
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a proposal to adjourn the special meeting to a later date or dates, if the board of directors of Grand Bank determines such adjournment is necessary to permit further solicitation of additional proxies if there are not
sufficient votes at the time of the special meeting to constitute a quorum or to approve the reorganization agreement. |
Record Date Set at , 2015; Two-Thirds Shareholder Vote Required to Approve the Reorganization Agreement (pages
36 and 37)
You may vote at the special meeting of Grand Bank shareholders if you owned Grand Bank common stock of record as of 5:00
p.m. on , 2015. You can cast one vote for each share of Grand Bank common stock you owned of record at that time. As of the
record date, there were shares of Grand Bank common stock outstanding.
Approval of the reorganization agreement requires the affirmative vote of the holders of at least two-thirds of the shares of Grand Bank
common stock outstanding and entitled to vote as of 5:00 p.m. on the record date. If you fail to vote, it will have the effect of a vote against the reorganization agreement. The affirmative vote of the holders of a majority of the shares of Grand
Bank common stock cast at the special meeting is required to approve the adjournment of the special meeting.
You may vote your shares of
Grand Bank common stock by attending the special meeting and voting in person or by completing and mailing the enclosed proxy card. If you are the record holder of your shares, you can revoke your proxy at any time before the vote is taken at the
special meeting by sending a written notice revoking the proxy or submitting a later-dated proxy to the Secretary of Grand Bank, which must be received no later than immediately prior to the vote at the special meeting, or by voting in person at the
special meeting. See The Special Meeting beginning on page 35.
Recommendation of Grand Bank Board and Its
Reasons for the Merger (page 35)
Based on the reasons discussed elsewhere in this proxy statement/prospectus, including the
fairness opinion of Hovde Group, the board of directors of Grand Bank believes that the merger is fair to you and in your best interests, and unanimously recommends that you vote FOR the proposal to approve the reorganization agreement and the
merger. For a discussion of the circumstances surrounding the merger and the factors considered by Grand Banks board of directors in approving the reorganization agreement, see page 46.
Certain Shareholders of Grand Bank are Expected to Vote Their Shares For Approval of the Reorganization Agreement (page 74;
Exhibit A to Appendix A)
The directors of Grand Bank have entered into an agreement to vote the
shares of Grand Bank common stock that they control in favor of approval of the reorganization agreement. As of the record date, 509,223 shares of Grand Bank common stock, or approximately 29% of the outstanding shares of Grand Bank common stock
entitled to vote at the special meeting, were bound by the voting agreement.
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Effective Time of the Merger (page 59)
The merger of Grand Bank with and into Independent Bank will become effective at the date and time specified in the certificate of merger to be
filed with the Texas Department of Banking, or the TDB. If Grand Bank shareholders approve the reorganization agreement at the special meeting, and if all necessary regulatory approvals are obtained and the other conditions to the parties
respective obligations to effect the merger are satisfied or are waived by the party entitled to do so, Independent anticipates that the merger will be completed in the late fourth quarter of 2015, although delays could occur.
Grand Bank and Independent cannot assure you that the necessary shareholder and regulatory approvals will be obtained or that the other
conditions to completion of the merger can or will be satisfied. See Risk FactorsThe merger may not be completed on page
28.
Exchange of Grand Bank Stock Certificates (page 58)
Approximately twenty days prior to closing, you will receive a letter and instructions from Wells Fargo Shareowner Services, acting in its role
as Independents exchange agent and stock transfer agent, or the exchange agent, describing the procedures for surrendering your stock certificates representing shares of Grand Bank common stock in exchange for shares of Independent common
stock and cash. If you surrender your certificate representing shares of Grand Bank common stock and properly completed transmittal materials at least two days prior to closing, then Independent will use its best efforts to cause the exchange agent
to mail the merger consideration to you within five business days following the effective time of the merger. If you surrender your certificates and transmittal materials after two business day prior to closing, Independent will use its best efforts
to cause the exchange agent to deliver the merger consideration to you promptly, with the intent that the exchange agent will mail the merger consideration to you within ten business days following receipt of the surrendered certificates and
transmittal materials. You must carefully review and complete these transmittal materials and return them as instructed along with your stock certificates for Grand Bank common stock. Please do not send Grand Bank or Independent any stock
certificates for your shares of Grand Bank common stock until you receive these instructions. Share certificates delivered to the exchange agent without a properly completed letter of transmittal will be rejected and returned for corrective action.
The shares of Independent common stock issuable in exchange for the shares of Grand Bank common stock will be issued solely in
uncertificated book-entry form and a holders shares of Independent common stock will be reflected in the shareholders account established in the Direct Registration System of the Depositary Trust Company, or DTC, by Independents
stock transfer agent. You will receive a statement to this effect from the transfer agent as part of the delivery of the merger consideration. You may then contact your broker and arrange for the transfer of shares to your brokerage account should
you desire to do so.
Conditions to Completion of the Merger (page 64)
The completion of the merger depends on a number of conditions being satisfied. These include, among others:
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approval of the reorganization agreement and the merger by the shareholders of Grand Bank by the requisite vote; |
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accuracy of each partys representations and warranties contained in the reorganization agreement as of the closing date of the merger; |
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receipt of all required governmental approvals of the merger in a manner that does not impose any material adverse requirement upon Independent or its subsidiaries, including any requirement to sell or dispose of any
significant amount of assets, which is reasonably unacceptable to Independent; |
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receipt of all required consents, approvals, waivers and other assurances from nongovernmental third parties; |
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absence of certain litigation regarding either party; |
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absence of any material adverse change in the financial condition, assets, properties, liabilities, reserves, business or results of operations of either party; |
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performance or compliance in all material respects by each party with its respective covenants and obligations required by the reorganization agreement; |
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registration with the SEC of the shares of Independent common stock to be issued to shareholders of Grand Bank; |
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authorization for listing on the NASDAQ Global Select Market of the shares of Independent common stock to be issued to shareholders of Grand Bank; |
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Grand Banks tangible book value, as of the closing date, being at least $39.0 million; |
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Grand Banks allowance for loan losses, as of the closing date, being equal to at least $2.5 million; |
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the daily volume weighted average of the sales price per share of Independent common stock on the NASDAQ Global Select Market over a ten consecutive trading day period ending on and including the third trading day prior
to the closing date being at least $35.0128 and not more than $52.5192; |
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termination of all Grand Bank employee benefit plans; |
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delivery of the merger consideration by Independent to the exchange agent; |
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the receipt by Independent of an opinion from Andrews Kurth LLP to the effect that for federal income tax purposes the merger will be treated as a reorganization within the meaning of Section 368(a) of the Code,
and (ii) each of Independent, Independent Bank and Grand Bank will be a party to such reorganization within the meaning of Section 368(b) of the Code; and |
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the exercise of statutory dissenters rights by the holders of no more than five percent of the shares of Grand Bank common stock. |
Additionally, the completion of the merger depends on the execution of the following agreements, but those agreements will not become
effective until the effective time of the merger:
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execution of releases from each of the directors and certain officers of Grand Bank, releasing Grand Bank and its successors from any and all claims of such directors and officers, subject to certain limited exceptions;
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execution of resignations from each of the directors of Grand Bank, resigning from the board of directors of Grand Bank; and |
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execution of amendments to the executive medical agreements between Grand Bank and Roy Gene Evans and D. Michael Redden releasing Grand Bank from further liability under the executive medical agreements in exchange
for a lump-sum payment from Grand Bank. |
Any condition to the completion of the merger, other than the required shareholder
and regulatory approvals and the absence of an order prohibiting the merger, may be waived in writing by the party to the reorganization agreement entitled to the benefit of such condition. A party to the reorganization agreement could choose to
complete the merger even though a condition has not been satisfied, as long as permitted by law. Independent cannot be certain when or if the conditions to the merger will be satisfied or waived, or that the merger will be completed.
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Regulatory Approvals Required for the Merger (page 79)
The acquisition of Grand Bank by Independent requires the approval of the Board of Governors of the Federal Reserve System, or the Federal
Reserve. In addition, the merger requires the approval of the Federal Deposit Insurance Corporation, or the FDIC, and the TDB. On August 27, 2015, Independent, Independent Bank and Grand Bank filed applications with the Federal Reserve, the
FDIC and the TDB to obtain approval of the transaction. Independent expects to obtain all necessary regulatory approvals, although Independent cannot be certain if or when Independent will obtain them.
Amendments or Waiver of the Reorganization Agreement (page 71)
Independent and Grand Bank may amend the reorganization agreement and each party may waive its right to require the other party to adhere to
any term or satisfy any condition of the reorganization agreement. However, the merger consideration to be received by the shareholders of Grand Bank pursuant to the terms of the reorganization agreement may not be decreased after the approval of
the reorganization agreement without the further approval of the Grand Bank shareholders.
No Solicitation (page 63)
Pursuant to the reorganization agreement, Grand Bank has agreed that it will not, and that it will cause its employees, directors,
officers, financial advisors or agents not to, solicit, knowingly encourage, initiate or participate in any negotiations or discussions with any third party regarding an acquisition proposal, disclose to any third party any information concerning
its business, properties, books or records in connection with any acquisition proposal, or cooperate with any third party to make any acquisition proposal. Grand Bank has also agreed that, promptly upon receipt of any unsolicited offer, it will
communicate to Independent the terms of any proposal or request for information and the identity of the parties involved.
Provided that
Grand Bank has complied with the foregoing restrictions, if prior to obtaining shareholder approval of the merger, Grand Bank receives a bona fide, unsolicited written acquisition proposal, it may engage in negotiations and discussions with, and
furnish any information and other access to, any person making such acquisition proposal if, and only if, Grand Banks board of directors determines in good faith, after consultation with outside legal and financial advisors, that such
acquisition proposal is or is reasonably capable of becoming a superior offer to the merger with Independent Bank and the failure of Grand Banks board of directors to furnish such information or access or enter into such discussions or
negotiations would reasonably be expected to be a violation of its fiduciary duties to the shareholders of Grand Bank; provided further that Grand Bank obtains an appropriately executed confidentiality agreement from the person making the
acquisition proposal before furnishing any material nonpublic information to that person.
Termination of the Reorganization
Agreement (page 71)
Independent and Grand Bank can mutually agree at any time to terminate the reorganization agreement without
completing the merger. In addition, either Independent or Grand Bank may decide, without the consent of the other, to terminate the reorganization agreement if:
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the conditions to such partys obligations to close have not been satisfied on or before December 31, 2015; subject to a unilateral 30-day extension by either party for the receipt of regulatory approvals and
provided that the terminating party is not in breach of the reorganization agreement; |
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any of the transactions contemplated by the reorganization agreement or by any other agreement contemplated by the reorganization agreement are disapproved by any regulatory agency whose approval is required to
consummate those transactions; or |
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if the reorganization agreement and merger are not approved by the shareholders of Grand Bank at the special meeting. |
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Grand Bank may terminate the reorganization agreement, without the consent of Independent,
if:
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Independent breaches or fails to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the reorganization agreement or any other agreement contemplated by the
reorganization agreement, and such failure has not been cured within a period of 30 calendar days after written notice from Grand Bank; |
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at any time prior to the special meeting in order to enter into, concurrently with such termination, an acquisition agreement or similar agreement with respect to a superior proposal that has been received and
considered by Grand Bank and the Grand Bank board in accordance with all of the requirements of the reorganization agreement; or |
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there has been any material adverse change in the financial condition, assets, properties, liabilities, reserves, business or results of operations of Independent since March 31, 2015. |
In addition, Independent may terminate the reorganization agreement, without the consent of Grand Bank, if:
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Grand Bank breaches or fails to perform in any material respect any of its representations, warranties, covenants or agreements contained in the reorganization agreement or any other agreement contemplated by the
reorganization agreement, and such failure has not been cured within a period of 30 calendar days after written notice from Independent; |
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the Grand Bank board has (i) recommended to the holders of Grand Bank common stock that they tender their shares in a tender or exchange offer commenced by an unaffiliated third party for more than 15% of the
outstanding Grand Bank common stock, (ii) effected a change in the boards recommendation with respect to the merger or recommended to the Grand Bank shareholders acceptance or approval of any alternative acquisition proposal,
(iii) notified Independent in writing that Grand Bank is prepared to accept a superior proposal, or (iv) resolved to do any of the foregoing; |
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any of the following have occurred with respect to environmental matters regarding Grand Bank: (i) the factual substance of any of the environmental representations and warranties of Grand Bank in the
reorganization agreement is not materially true and accurate, (ii) the results of any environmental inspection or other environmental survey are disapproved by Independent because such inspection or survey identifies a material or potential
material violation of applicable environmental laws, (iii) Grand Bank refuses to allow such an inspection or survey in a manner that Independent reasonably considers necessary, (iv) such an inspection or survey identifies an event,
condition or circumstance that would or potentially could reasonably be expected to require a material remedial or cleanup action or result in a material adverse change in the financial condition, assets, properties, liabilities, reserves, business
or results of operations of Grand Bank since March 31, 2015, (v) such an inspection or survey reveals the presence of any underground or above ground storage tank in, on or under any real property owned or leased by Grand Bank that is not
shown to be in material compliance with all applicable environmental laws, or that has had a release of petroleum or some other hazardous material that has not been cleaned up to the satisfaction of the relevant governmental authority or any other
party with a right to compel such cleanup, or (vi) such an inspection or survey identifies the presence of any asbestos-containing material in, on or under any real property owned or leased by Grand Bank, the removal of which could reasonably
be expected to result in a material adverse change in the financial condition, assets, properties, liabilities, reserves, business or results of operations of Grand Bank since March 31, 2015, subject, in the case of each of the foregoing, to
notice to and the right of Grand Bank to correct any such matter to Independents reasonable satisfaction within 30 days of receipt of notice; |
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Independent determines, in good faith after consulting with counsel, there is a substantial likelihood that any necessary regulatory approval will not be obtained or will be obtained only upon one or more conditions
that make it inadvisable to proceed with the transactions; or |
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there has been any material adverse change in the financial condition, assets, properties, liabilities, reserves, business or results of operations of Grand Bank since March 31, 2015. |
Termination Fee (page 72)
To compensate Independent for entering into the reorganization agreement, taking actions to consummate the transactions contemplated by the
reorganization agreement and incurring the related costs and expenses and other losses and expense, including foregoing the pursuit of other opportunities, Grand Bank has agreed to pay Independent a $2.8 million termination fee, provided that
Independent is not in material breach of any covenant or obligation under the reorganization agreement, if the reorganization agreement is terminated:
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by Grand Bank at any time prior to the special meeting in order to enter into, concurrently with such termination, an acquisition agreement or similar agreement with respect to a superior proposal that has been received
and considered by Grand Bank and the Grand Bank board in accordance with all of the requirements of the reorganization agreement; |
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by either Independent or Grand Bank if the reorganization agreement and the merger are not approved by the shareholders of Grand Bank at the special meeting and at the time of such failure to approve, there exists an
acquisition proposal with respect to Grand Bank other than that of Independent that has not been withdrawn prior to the special meeting; or |
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by Independent if the Grand Bank board has (i) recommended to the holders of Grand Bank common stock that such holders tender their shares in a tender or exchange offer commenced by an unaffiliated third party for
more than 15% of the outstanding Grand Bank common stock, (ii) effected a change in the boards recommendation regarding the merger or recommended to the Grand Bank shareholders acceptance or approval of any alternative acquisition
proposal, (iii) notified Independent in writing that Grand Bank is prepared to accept a superior proposal, or (iv) resolved to do any of the foregoing. |
Financial Interests of Directors and Executive Officers of Grand Bank in the Merger (page 73)
Some of the directors and executive officers of Grand Bank have interests in the merger that differ from, or are in addition to, their
interests as shareholders of Grand Bank. These interests include:
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as a condition to the merger, Independent has required that executive officers Lee Dinkel and Mark Wells enter into employment agreements, effective upon completion of the merger, that include noncompetition and
nonsolicitation obligations to Independent Bank and pursuant to which each executive officer is entitled to receive a completion bonus, salary, annual bonus and certain additional incentives from Independent Bank; |
|
|
|
Grand Bank plans to pay retention bonuses in the aggregate amount of approximately $2.2 million to executive officers of Grand Bank, all of which are directors, in connection with the completion of the merger.
These payments will reduce the tangible book value of Grand Bank for the purpose of calculating the merger consideration payable to shareholders of Grand Bank; |
|
|
|
as a condition to the merger, Independent has required that each of Roy Gene Evans and D. Michael Redden, who are directors and executive officers of Grand Bank, enter into a consulting agreement, effective upon
completion of the merger, that includes noncompetition and nonsolicitation obligations to Independent Bank and pursuant to which each of Mr. Evans and Mr. Redden is entitled to receive a monthly consulting fee from Independent Bank and is
eligible to receive an incentive bonus from Independent Bank; |
|
|
|
as a condition to the merger, Independent has required that each outside director of Grand Bank (Tyler Cooper, Jack W. Evans, Jr., Al Goode, Pete Schenkel and James W. Williford) enter into a Director Support Agreement
that includes noncompetition, nonsolicitation, and business relationship obligations in consideration of an aggregate $250,000 of payments made to these individuals by Independent; |
16
|
|
|
each of Roy Gene Evans and D. Michael Redden is a party to an executive medical agreement with Grand Bank, which were entered into in 2003, that provides for Grand Bank to provide lifetime medical insurance coverage to
Mr. Evans, Mr. Redden and their spouses, or pay the costs for the provision of lifetime medical insurance coverage under individual health insurance policies. As a condition to the merger, Independent has required that each of
Mr. Evans and Mr. Redden execute amendments to the executive medical agreements releasing Grand Bank from further liability under the executive medical agreements, effective at the closing of the merger, in exchange for lump-sum payments
from Grand Bank. The aggregate amount of the lump sum payments to be made by Grand Bank is $1,240,242, of which $244,939 has been previously accrued. Grand Bank will make the lump sum payments to these directors and executive officers in connection
with the completion of the merger. These payments will reduce the tangible book value of Grand Bank for the purpose of calculating the merger consideration payable to shareholders of Grand Bank; and |
|
|
|
the directors and executive officers of Grand Bank will receive indemnification from Independent for a period of four years after completion of the merger to the same extent and subject to the conditions set forth in
the articles of association and bylaws of Grand Bank and continued director and officer liability coverage for a period of four years after completion of the merger. Any amounts paid by Grand Bank to purchase continued director and officer liability
coverage will reduce the tangible book value of Grand Bank for the purpose of calculating the merger consideration payable to shareholders of Grand Bank. |
Comparison of Rights of Shareholders of Grand Bank and Independent (page 97)
Grand Bank is a Texas banking association, and the rights of shareholders of Grand Bank are governed by Texas law and Grand Banks
articles of association and bylaws. Independent is a Texas corporation that is a registered bank holding company, and the rights of Independents shareholders are governed by Texas law and Independents certificate of formation and bylaws.
Upon completion of the merger, shareholders of Grand Bank will become shareholders of Independent and their rights as shareholders of Independent will be governed by Independents certificate of formation and bylaws, in addition to Texas law.
Independents certificate of formation and bylaws will not be amended in the merger, but could be later restated, amended or, as regards the bylaws, repealed.
Dissenters Rights of Grand Bank Shareholders (page 79)
As a holder of Grand Bank common stock, you have the right under Texas law to dissent from the merger and have the appraised fair value of your
shares of Grand Bank common stock as of the date immediately preceding the effective date of the merger paid to you in cash. The appraised fair value may be more or less than the value of the shares of Independent common stock and cash shareholders
of Grand Bank will receive for their Grand Bank shares in the merger.
In order to dissent, you must carefully follow the requirements of
the TBOC, including providing Grand Bank, prior to the special meeting, with a written objection to the merger that states that you will exercise your right to dissent if the Grand Bank shareholders approve the reorganization agreement and the
merger is completed. These steps for perfecting your right of dissent are summarized under the caption Dissenters Rights of Grand Bank Shareholders on page 79. The provisions of the TBOC pertaining to dissenters
rights are attached to this proxy statement/prospectus as Appendix C and the summaries of those provisions in this proxy statement/prospectus should be read in conjunction with, and are qualified by, those provisions of the TBOC.
If you intend to exercise dissenters rights, you should read the provisions of the TBOC governing dissenters rights carefully and
consult with your own legal counsel. You should also remember that if you return
17
a signed proxy card, but fail to provide instructions as to how your shares of Grand Bank common stock are to be voted, you will be considered to have voted in favor of the reorganization
agreement. In that event, you will not be able to assert dissenters rights.
If the Grand Bank shareholders approve the
reorganization agreement, a holder of Grand Bank common stock who delivers to the president and the secretary of Grand Bank a written objection to the merger prior to the special meeting that states that such holder will exercise his or her right to
dissent if the reorganization agreement is approved and the merger is completed and includes an address for notice of the effectiveness of the merger, who votes his or her shares of Grand Bank common stock against approval of the reorganization
agreement at the special meeting, who, not later than the 20th day after Independent sends such holder notice that the merger was completed, delivers to the president and secretary of Independent
a written demand for payment of the fair value of his or her shares of Grand Bank common stock that states the number and class of shares of Grand Bank common stock such holder owns, his or her estimate of the fair value of such stock and an address
to which a notice relating to the dissent and appraisal procedures may be sent, and who, not later than the 20th day after he or she makes that demand for payment, submits to Independent the
certificates representing his or her shares of Grand Bank common stock will be entitled under the TBOC to receive the appraised fair value of his or her shares of Grand Bank common stock, as of the date immediately prior to the effective time of the
merger, in cash under the TBOC.
Selected Financial Information of Independent
The following selected historical consolidated financial information of Independent as of and for the six months ended June 30, 2015 and
2014 has been derived from Independents unaudited consolidated financial statements as of June 30, 2015, and for the six months ended June 30, 2015 and 2014, incorporated by reference in this proxy statement/prospectus. The following
selected consolidated financial information of Independent as of June 30, 2014, has been derived from Independents unaudited consolidated financial statements not incorporated by reference in this proxy statement/prospectus. The following
selected consolidated financial information of Independent as of December 31, 2014 and 2013, and for the years ended December 31, 2014, 2013 and 2012, has been derived from Independents audited consolidated financial statements
incorporated by reference in this proxy statement/prospectus. The selected consolidated financial information as of December 31, 2012, 2011 and 2010, and for the years ended December 31, 2011 and 2010, has been derived from
Independents audited consolidated financial statements not incorporated by reference in this proxy statement/prospectus.
18
You should read the following financial information relating to Independent in conjunction
with other information contained in this proxy statement/prospectus, including consolidated financial statements of Independent and related accompanying notes incorporated by reference in this proxy statement/prospectus. Independents
historical results for any prior period are not necessarily indicative of results to be expected in any future period, and Independents historical results for the six months ended June 30, 2015, are not necessarily indicative of its
results to be expected for all of 2015. Independent has consummated several acquisitions in recent fiscal periods. The results and other financial information of those acquired operations are not included in the table below for the periods or dates
prior to their respective acquisition dates and, therefore, the results for these prior periods are not comparable in all respects and may not be predictive of Independents future results. In addition, the selected financial information in the
table immediately below does not include, on any basis, the results or financial condition for any period or as of any date of Grand Bank or of any other entity the acquisition of which may be consummated by Independent after June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Six Months Ended June 30, |
|
|
As of and for the Year Ended December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
(dollars in thousands except per share) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Income Statement Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
83,483 |
|
|
$ |
60,240 |
|
|
$ |
140,132 |
|
|
$ |
87,214 |
|
|
$ |
71,890 |
|
|
$ |
59,639 |
|
|
$ |
51,734 |
|
Interest expense |
|
|
9,625 |
|
|
|
6,701 |
|
|
|
15,987 |
|
|
|
12,281 |
|
|
|
13,337 |
|
|
|
13,358 |
|
|
|
13,669 |
|
Net interest income |
|
|
73,858 |
|
|
|
53,539 |
|
|
|
124,145 |
|
|
|
74,933 |
|
|
|
58,553 |
|
|
|
46,281 |
|
|
|
38,065 |
|
Provision for loan losses |
|
|
3,329 |
|
|
|
2,632 |
|
|
|
5,359 |
|
|
|
3,822 |
|
|
|
3,184 |
|
|
|
1,650 |
|
|
|
4,043 |
|
Net interest income after provision for loan losses |
|
|
70,529 |
|
|
|
50,907 |
|
|
|
118,786 |
|
|
|
71,111 |
|
|
|
55,369 |
|
|
|
44,631 |
|
|
|
34,022 |
|
Noninterest income (excluding acquisition gains) |
|
|
8,075 |
|
|
|
5,453 |
|
|
|
13,624 |
|
|
|
11,021 |
|
|
|
9,168 |
|
|
|
7,708 |
|
|
|
5,464 |
|
Gain on acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,692 |
|
Noninterest expense |
|
|
48,841 |
|
|
|
41,419 |
|
|
|
88,512 |
|
|
|
57,671 |
|
|
|
47,160 |
|
|
|
38,639 |
|
|
|
33,062 |
|
Income tax expense |
|
|
9,740 |
|
|
|
5,021 |
|
|
|
14,920 |
|
|
|
4,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
20,023 |
|
|
|
9,920 |
|
|
|
28,978 |
|
|
|
19,800 |
|
|
|
17,377 |
|
|
|
13,700 |
|
|
|
13,116 |
|
Preferred stock dividends |
|
|
120 |
|
|
|
49 |
|
|
|
169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders |
|
|
19,903 |
|
|
|
9,871 |
|
|
|
28,809 |
|
|
|
19,800 |
|
|
|
17,377 |
|
|
|
13,700 |
|
|
|
13,116 |
|
Pro forma net income(1) (unaudited) |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
16,174 |
|
|
|
12,147 |
|
|
|
9,357 |
|
|
|
8,775 |
|
Per Share Data (Common Stock)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.16 |
|
|
$ |
0.70 |
|
|
$ |
1.86 |
|
|
$ |
1.78 |
|
|
$ |
2.23 |
|
|
$ |
2.00 |
|
|
$ |
1.95 |
|
Diluted(3) |
|
|
1.16 |
|
|
|
0.69 |
|
|
|
1.85 |
|
|
|
1.77 |
|
|
|
2.23 |
|
|
|
2.00 |
|
|
|
1.95 |
|
Pro forma earnings:(1) (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
1.45 |
|
|
|
1.56 |
|
|
|
1.37 |
|
|
|
1.31 |
|
Diluted(3) |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
1.44 |
|
|
|
1.56 |
|
|
|
1.37 |
|
|
|
1.31 |
|
Dividends(4) |
|
|
0.16 |
|
|
|
0.12 |
|
|
|
0.24 |
|
|
|
0.77 |
|
|
|
1.12 |
|
|
|
0.89 |
|
|
|
0.63 |
|
Book value(5) |
|
|
31.30 |
|
|
|
28.54 |
|
|
|
30.35 |
|
|
|
18.96 |
|
|
|
15.06 |
|
|
|
12.55 |
|
|
|
11.13 |
|
Tangible book value(6) |
|
|
17.18 |
|
|
|
15.22 |
|
|
|
16.15 |
|
|
|
15.89 |
|
|
|
11.19 |
|
|
|
10.53 |
|
|
|
9.01 |
|
Selected Period End Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
4,375,727 |
|
|
$ |
3,654,311 |
|
|
$ |
4,132,639 |
|
|
$ |
2,163,984 |
|
|
$ |
1,740,060 |
|
|
$ |
1,254,377 |
|
|
$ |
1,098,216 |
|
Cash and cash equivalents |
|
|
424,196 |
|
|
|
192,528 |
|
|
|
324,047 |
|
|
|
93,054 |
|
|
|
102,290 |
|
|
|
56,654 |
|
|
|
86,346 |
|
Securities available for sale |
|
|
180,465 |
|
|
|
249,856 |
|
|
|
206,062 |
|
|
|
194,038 |
|
|
|
113,355 |
|
|
|
93,991 |
|
|
|
52,611 |
|
Total loans (gross) |
|
|
3,381,847 |
|
|
|
2,850,043 |
|
|
|
3,205,537 |
|
|
|
1,726,543 |
|
|
|
1,378,676 |
|
|
|
988,671 |
|
|
|
860,128 |
|
Allowance for loan losses |
|
|
21,764 |
|
|
|
16,219 |
|
|
|
18,552 |
|
|
|
13,960 |
|
|
|
11,478 |
|
|
|
9,060 |
|
|
|
8,403 |
|
Goodwill and core deposit intangible |
|
|
241,534 |
|
|
|
217,954 |
|
|
|
241,912 |
|
|
|
37,852 |
|
|
|
31,993 |
|
|
|
13,886 |
|
|
|
14,453 |
|
Noninterest-bearing deposits |
|
|
886,087 |
|
|
|
711,475 |
|
|
|
818,022 |
|
|
|
302,756 |
|
|
|
259,664 |
|
|
|
168,849 |
|
|
|
133,307 |
|
Interest-bearing deposits |
|
|
2,581,397 |
|
|
|
2,141,943 |
|
|
|
2,431,576 |
|
|
|
1,407,563 |
|
|
|
1,131,076 |
|
|
|
861,635 |
|
|
|
794,236 |
|
Borrowings (other than junior subordinated debentures) |
|
|
271,504 |
|
|
|
281,105 |
|
|
|
306,147 |
|
|
|
195,214 |
|
|
|
201,118 |
|
|
|
118,086 |
|
|
|
75,656 |
|
Junior subordinated debentures(7) |
|
|
18,147 |
|
|
|
18,147 |
|
|
|
18,147 |
|
|
|
18,147 |
|
|
|
18,147 |
|
|
|
14,538 |
|
|
|
14,538 |
|
Series A Preferred Stock |
|
|
23,938 |
|
|
|
23,938 |
|
|
|
23,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
559,447 |
|
|
|
491,091 |
|
|
|
540,851 |
|
|
|
233,772 |
|
|
|
124,510 |
|
|
|
85,997 |
|
|
|
76,044 |
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Six Months Ended June 30, |
|
|
As of and for the Year Ended December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
(dollars in thousands except per share) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Performance Metrics(8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets(9) |
|
|
0.96 |
% |
|
|
0.70 |
% |
|
|
0.87 |
% |
|
|
1.04 |
% |
|
|
1.17 |
% |
|
|
1.16 |
% |
|
|
1.35 |
% |
Return on average equity(9) |
|
|
7.27 |
|
|
|
5.64 |
|
|
|
6.65 |
|
|
|
9.90 |
|
|
|
16.54 |
|
|
|
17.36 |
|
|
|
19.19 |
|
Return on average common equity(9) |
|
|
7.60 |
|
|
|
5.80 |
|
|
|
6.89 |
|
|
|
9.90 |
|
|
|
16.54 |
|
|
|
17.36 |
|
|
|
19.19 |
|
Pro forma return on average assets(1)(9) (unaudited) |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
0.85 |
|
|
|
0.82 |
|
|
|
0.79 |
|
|
|
0.91 |
|
Pro forma return on average equity(1)(9) (unaudited) |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
8.09 |
|
|
|
11.56 |
|
|
|
11.86 |
|
|
|
12.84 |
|
Net interest margin(10) |
|
|
4.08 |
|
|
|
4.23 |
|
|
|
4.19 |
|
|
|
4.30 |
|
|
|
4.40 |
|
|
|
4.42 |
|
|
|
4.43 |
|
Efficiency ratio(11) |
|
|
59.61 |
|
|
|
70.21 |
|
|
|
64.25 |
|
|
|
67.10 |
|
|
|
69.64 |
|
|
|
71.57 |
|
|
|
75.95 |
|
Dividend payout ratio(12) |
|
|
13.79 |
|
|
|
17.14 |
|
|
|
12.90 |
|
|
|
14.20 |
|
|
|
11.89 |
|
|
|
13.26 |
|
|
|
13.54 |
|
Credit Quality Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets to total assets |
|
|
0.37 |
% |
|
|
0.35 |
% |
|
|
0.36 |
% |
|
|
0.58 |
% |
|
|
1.59 |
% |
|
|
2.85 |
% |
|
|
2.19 |
% |
Nonperforming loans to total loans(13) |
|
|
0.40 |
|
|
|
0.32 |
|
|
|
0.32 |
|
|
|
0.53 |
|
|
|
0.81 |
|
|
|
1.14 |
|
|
|
1.89 |
|
Allowance for loan losses to nonperforming loans(13) |
|
|
163.12 |
|
|
|
177.86 |
|
|
|
183.43 |
|
|
|
152.93 |
|
|
|
104.02 |
|
|
|
80.32 |
|
|
|
51.93 |
|
Allowance for loan losses to total loans |
|
|
0.64 |
|
|
|
0.57 |
|
|
|
0.58 |
|
|
|
0.81 |
|
|
|
0.83 |
|
|
|
0.92 |
|
|
|
0.98 |
|
Net charge-offs to average loans outstanding (unaudited) |
|
|
0.01 |
|
|
|
0.03 |
|
|
|
0.03 |
|
|
|
0.09 |
|
|
|
0.06 |
|
|
|
0.11 |
|
|
|
0.31 |
|
Capital Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital(14) |
|
|
8.43 |
% |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
Tier 1 capital to average assets |
|
|
8.50 |
|
|
|
9.07 |
% |
|
|
8.15 |
% |
|
|
10.71 |
% |
|
|
6.45 |
% |
|
|
6.89 |
% |
|
|
6.98 |
% |
Tier 1 capital to risk-weighted assets(14) |
|
|
9.60 |
|
|
|
10.21 |
|
|
|
9.83 |
|
|
|
12.64 |
|
|
|
8.22 |
|
|
|
8.59 |
|
|
|
8.88 |
|
Total capital to risk-weighted assets(14) |
|
|
12.14 |
|
|
|
11.00 |
|
|
|
12.59 |
|
|
|
13.83 |
|
|
|
10.51 |
|
|
|
11.19 |
|
|
|
11.10 |
|
Total stockholders equity to total assets |
|
|
12.79 |
|
|
|
13.44 |
|
|
|
13.09 |
|
|
|
10.80 |
|
|
|
7.16 |
|
|
|
6.86 |
|
|
|
6.92 |
|
Total common equity to total assets |
|
|
12.24 |
|
|
|
12.78 |
|
|
|
12.51 |
|
|
|
10.80 |
|
|
|
7.16 |
|
|
|
6.86 |
|
|
|
6.92 |
|
Tangible common equity to tangible assets(15) |
|
|
7.11 |
|
|
|
7.25 |
|
|
|
7.07 |
|
|
|
9.21 |
|
|
|
5.42 |
|
|
|
5.81 |
|
|
|
5.68 |
|
(1) |
Prior to April 1, 2013, Independent elected to be taxed for federal income tax purposes as an S corporation under the provisions of Sections 1361 through 1379 of the Code, as amended, and, as a result, Independent
did not pay U.S. federal income taxes and has not been required to make any provision or recognize any liability for federal income tax in its consolidated financial statements for any period ending on or before March 31, 2013. As of
April 1, 2013, Independent terminated its S corporation election and commenced being subject to federal income taxation as a C corporation. Independent has calculated its pro forma net income, pro forma earnings per share on a basic and diluted
basis, pro forma return on average assets and pro forma return on average equity for each period presented by calculating a pro forma provision for federal income taxes using an assumed annual effective federal income tax rate of 33.9%, 30.1%, 31.7%
and 33.1% for the years ended December 31, 2013, 2012, 2011 and 2010, respectively, and adjusting its historical net income for each period presented to give effect to the pro forma provision for federal income taxes for such period.
|
(2) |
The per share amounts and the weighted-average shares outstanding for each of the periods shown have been adjusted to give effect to the 3.2-for-one split of the shares of Independents common stock that was
effective as of February 22, 2013. |
(3) |
Independent calculates its diluted earnings per share for each period shown as its net income divided by the weighted-average number of its common shares outstanding during the relevant period adjusted for the dilutive
effect of its outstanding warrants to purchase shares of common stock. The increase in the shares outstanding in 2013 largely relates to the Companys initial public offering and the increase in 2014 and the six months ended June 30, 2015,
largely relates to shares issued in three acquisitions completed in 2014. Earnings per share on a basic and diluted basis and pro forma earnings per share on a basic and diluted basis were calculated using the following outstanding share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
|
As of December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
Weighted average shares outstandingbasic |
|
|
16,740,881 |
|
|
|
13,951,830 |
|
|
|
15,208,544 |
|
|
|
10,921,777 |
|
|
|
7,626,205 |
|
|
|
6,668,534 |
|
|
|
6,518,224 |
|
Weighted average shares outstandingdiluted |
|
|
16,823,733 |
|
|
|
14,053,343 |
|
|
|
15,306,998 |
|
|
|
10,990,245 |
|
|
|
7,649,366 |
|
|
|
6,675,078 |
|
|
|
6,518,224 |
|
(4) |
Dividends declared include quarterly cash distributions paid to Independents shareholders in the relevant period to provide them with funds to pay their federal income tax liabilities incurred as a result of the
pass-through of Independents net taxable income for the first three months of the year ended December 31, 2013, and for each other such period shown to its shareholders as holders of shares in an S corporation for federal income tax
purposes. The aggregate amounts of such cash distributions relating to the payment of tax liabilities were $0.00 per share, $.0.52 per share, $0.85 per share, $0.63 per share, and $0.36 per share for the years ended December 31, 2014, 2013,
2012, 2011 and 2010, respectively. |
(5) |
Book value per share equals Independents total stockholders equity (excluding preferred stock) as of the date presented divided by the number of shares of its common stock outstanding as of the date
presented. The number of shares of its common stock outstanding as of June 30, 2015 and 2014, was 17,108,394 and 16,370,707, respectively, and as of December 31, 2014, 2013, 2012, 2011 and 2010 was 17,032,669 shares, 12,330,158 shares,
8,269,707 shares, 6,850,288 shares and 6,832,323 shares, respectively. |
20
(6) |
Independent calculates tangible book value per share as of the end of a period as total stockholders equity (excluding preferred stock) less goodwill and other intangible assets at the end of the relevant period
divided by the outstanding number of shares of its common stock at the end of that period. Tangible book value is a non-GAAP financial measure, and, as Independent calculates tangible book value, the most directly comparable GAAP financial measure
is total stockholders equity. Independent believes that the presentation of tangible book value per share provides useful information to investors regarding Independents financial condition because, as do Independents management,
banking regulators, many financial analysts and other investors, you can use the tangible book value in conjunction with more traditional bank capital ratios to assess Independents capital adequacy without the effect of Independents
goodwill and other intangible assets and compare Independents capital adequacy with the capital adequacy of other banking organizations with significant amounts of goodwill and/or other intangible assets, which typically stem from the use of
the purchase accounting method of accounting for mergers and acquisitions. A reconciliation of tangible book value to total stockholders equity is presented below. |
(7) |
Each of five wholly owned, but nonconsolidated, subsidiaries of Independent holds a series of Independents junior subordinated debentures purchased by the subsidiary in connection with, and paid for with the
proceeds of, the issuance of trust issued preferred securities by that subsidiary. Independent has guaranteed the payment of the amounts payable under each of those issues of trust preferred securities. |
(8) |
The values for the selected performance metrics presented for the six months ended June 30, 2015 and 2014, other than the dividend payout ratio, are annualized. |
(9) |
Independent has calculated its return on average assets and return on average equity for a period by dividing net income available to common shareholders for that period by its average assets and average equity, as the
case may be, for that period. Independent has calculated its pro forma return on average assets and pro forma return on average equity for a period by calculating its pro forma net income for that period as described in note 1 above and dividing
that by its average assets and average equity, as the case be, for that period. Independent calculates its average assets and average equity for a period by dividing the sum of its total asset balance or total stockholders equity balance, as
the case may be, as of the close of business on each day in the relevant period and dividing by the number of days in the period. Independent calculates its return on average common equity by excluding the preferred stock dividends to derive at net
income available to common shareholders and excluding the average balance of its Series A preferred stock from the total average equity to derive at common average equity. |
(10) |
Net interest margin for a period represents net interest income for that period divided by average interest-earning assets for that period. |
(11) |
Efficiency ratio for a period represents noninterest expenses for that period divided by the sum of net interest income and noninterest income for that period, excluding bargain purchase gains recognized in connection
with certain of Independents acquisitions and realized gains or losses from sales of investment securities for that period. |
(12) |
Independent calculates its dividend payout ratio for each period presented as the dividends paid per share for such period (excluding cash distributions made to shareholders in connection with tax liabilities as
described in note 4 above) divided by its basic earnings per share for such period. |
(13) |
Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest, and accruing loans modified under troubled debt restructurings. |
(14) |
For December 31, 2014, 2013, 2012, 2011 and 2010, and June 30, 2014, Independent calculated its risk-weighted assets using the standardized method of the Basel II Framework, as implemented by the Federal
Reserve and the FDIC. Effective January 1, 2015, Independent became subject to the Basel III Capital Rules. These rules revise the regulatory capital elements, add a new common equity Tier 1 capital ratio, increase the minimum
Tier 1 capital ratio requirements and implement a new capital conservation buffer. The ratios as of June 30, 2015, were calculated under the new Basel III Framework. |
(15) |
Independent calculates common equity as of the end of the period as total stockholders equity less the preferred stock at period end. Independent calculates tangible common equity as of the end of a period as
total stockholders equity (excluding preferred stock) less goodwill and other intangible assets as of the end of the period and calculates tangible assets as of the end of a period as total assets less goodwill and other intangible assets as
of the end of the period. Tangible common equity to tangible assets is a non-GAAP financial measure, and as Independent calculates tangible common equity to tangible assets, the most directly comparable GAAP financial measure is total
stockholders equity to total assets. |
Independent believes that the presentation of tangible common equity to tangible
assets provides useful information to investors regarding Independents financial condition because, as do Independents management, banking regulators, many financial analysts and other investors, you can use the tangible common equity in
conjunction with more traditional bank capital ratios to assess Independents capital adequacy without the effect of Independents goodwill and core deposit intangibles and compare Independents capital adequacy with the capital
adequacy of other banking organizations with significant amounts of goodwill and/or core deposit intangibles. A reconciliation of the ratios of tangible common equity to tangible assets to the ratios of total stockholders equity to total
assets is presented below.
21
Reconciliations of Non-GAAP Financial Measures
The following information reconciles: (i) Independents tangible book value per common share, a non-GAAP financial measure, as of the
dates presented to Independents book value per common share, a financial measure calculated and presented in accordance with GAAP, as of the dates presented; and (ii) our ratio of tangible common equity to tangible assets, a non-GAAP
financial measure, as of the dates presented to Independents ratios of total stockholders equity to total assets, a financial measure calculated and presented in accordance with GAAP, as of the dates presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
(dollars in thousands except per share) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common stockholders equity |
|
$ |
535,509 |
|
|
$ |
467,153 |
|
|
$ |
516,913 |
|
|
$ |
233,772 |
|
|
$ |
124,510 |
|
|
$ |
85,997 |
|
|
$ |
76,044 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
(229,818 |
) |
|
|
(207,175 |
) |
|
|
(229,457 |
) |
|
|
(34,704 |
) |
|
|
(28,742 |
) |
|
|
(11,222 |
) |
|
|
(11,222 |
) |
Core deposit intangibles |
|
|
(11,716 |
) |
|
|
(10,779 |
) |
|
|
(12,455 |
) |
|
|
(3,148 |
) |
|
|
(3,251 |
) |
|
|
(2,664 |
) |
|
|
(3,231 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible Common Equity |
|
$ |
293,975 |
|
|
$ |
249,199 |
|
|
$ |
275,001 |
|
|
$ |
195,920 |
|
|
$ |
92,517 |
|
|
$ |
72,111 |
|
|
$ |
61,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding |
|
|
17,108,394 |
|
|
|
16,370,707 |
|
|
|
17,032,669 |
|
|
|
12,330,158 |
|
|
|
8,269,707 |
|
|
|
6,850,288 |
|
|
|
6,832,323 |
|
|
|
|
|
|
|
|
|
Book value per common share |
|
$ |
31.30 |
|
|
$ |
28.54 |
|
|
$ |
30.35 |
|
|
$ |
18.96 |
|
|
$ |
15.06 |
|
|
$ |
12.55 |
|
|
$ |
11.13 |
|
Tangible book value per common share |
|
|
17.18 |
|
|
|
15.22 |
|
|
|
16.15 |
|
|
|
15.89 |
|
|
|
11.19 |
|
|
|
10.53 |
|
|
|
9.01 |
|
Tangible Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets-GAAP |
|
$ |
4,375,727 |
|
|
$ |
3,654,311 |
|
|
$ |
4,132,639 |
|
|
$ |
2,163,984 |
|
|
$ |
1,740,060 |
|
|
$ |
1,254,377 |
|
|
$ |
1,098,216 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
(229,818 |
) |
|
|
(207,175 |
) |
|
|
(229,457 |
) |
|
|
(34,704 |
) |
|
|
(28,742 |
) |
|
|
(11,222 |
) |
|
|
(11,222 |
) |
Core deposit intangibles |
|
|
(11,716 |
) |
|
|
(10,779 |
) |
|
|
(12,455 |
) |
|
|
(3,148 |
) |
|
|
(3,251 |
) |
|
|
(2,664 |
) |
|
|
(3,231 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible Assets |
|
$ |
4,134,193 |
|
|
$ |
3,436,357 |
|
|
$ |
3,890,727 |
|
|
$ |
2,126,132 |
|
|
$ |
1,708,067 |
|
|
$ |
1,240,491 |
|
|
$ |
1,083,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common stockholders equity to total assets |
|
|
12.24 |
% |
|
|
12.78 |
% |
|
|
12.51 |
% |
|
|
10.80 |
% |
|
|
7.16 |
% |
|
|
6.86 |
% |
|
|
6.92 |
% |
Tangible common equity to tangible assets |
|
|
7.11 |
|
|
|
7.25 |
|
|
|
7.07 |
|
|
|
9.21 |
|
|
|
5.42 |
|
|
|
5.81 |
|
|
|
5.68 |
|
22
Selected Financial Information of Grand Bank
The following selected historical financial information of Grand Bank for the capital ratios described below as of and for the six months ended
June 30, 2015 and 2014 has been derived from Grand Banks unaudited financial statements as of and for the six months ended June 30, 2015 and 2014, which Grand Banks management believes reflect all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of its financial position and results of operations as of and for the periods ended on such dates. The following selected historical financial information of Grand Bank as of and for
each of the five years ended December 31, 2014, has been derived from Grand Banks audited financial statements. Grand Banks historical results for any prior period are not necessarily indicative of results to be expected in any
future period, and Grand Banks historical results for the six months ended June 30, 2015, are not necessarily indicative of its results to be expected for all of 2015. Consistent with the rules of the SEC, Grand Banks financial
statements are not presented in this proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Six Months Ended June 30, |
|
|
As of and for the Year Ended December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
|
|
(unaudited) |
|
|
|
|
(dollars in thousands except per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Income Statement Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
7,032 |
|
|
$ |
5,842 |
|
|
$ |
12,097 |
|
|
$ |
11,333 |
|
|
$ |
10,738 |
|
|
$ |
9,977 |
|
|
$ |
10,727 |
|
Interest expense |
|
|
810 |
|
|
|
908 |
|
|
|
1,743 |
|
|
|
1,906 |
|
|
|
1,990 |
|
|
|
2,436 |
|
|
|
3,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
6,222 |
|
|
|
4,934 |
|
|
|
10,354 |
|
|
|
9,427 |
|
|
|
8,748 |
|
|
|
7,541 |
|
|
|
7,528 |
|
Provision for loan losses |
|
|
150 |
|
|
|
|
|
|
|
|
|
|
|
(300 |
) |
|
|
15 |
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
|
6,072 |
|
|
|
4,934 |
|
|
|
10,354 |
|
|
|
9,727 |
|
|
|
8,733 |
|
|
|
7,541 |
|
|
|
7,510 |
|
Noninterest income |
|
|
675 |
|
|
|
419 |
|
|
|
910 |
|
|
|
951 |
|
|
|
495 |
|
|
|
153 |
|
|
|
708 |
|
Noninterest expense |
|
|
4,578 |
|
|
|
4,221 |
|
|
|
8,543 |
|
|
|
7,828 |
|
|
|
6,921 |
|
|
|
6,313 |
|
|
|
5,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
2,169 |
|
|
|
1,132 |
|
|
|
2,721 |
|
|
|
2,850 |
|
|
|
2,307 |
|
|
|
1,381 |
|
|
|
2,223 |
|
Tax exempt income(1) (unaudited) |
|
|
20 |
|
|
|
31 |
|
|
|
54 |
|
|
|
61 |
|
|
|
32 |
|
|
|
21 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma book income before taxes(1) (unaudited) |
|
|
2,149 |
|
|
|
1,101 |
|
|
|
2,667 |
|
|
|
2,789 |
|
|
|
2,275 |
|
|
|
1,360 |
|
|
|
2,216 |
|
Estimated tax provision(1) (unaudited) |
|
|
731 |
|
|
|
374 |
|
|
|
907 |
|
|
|
948 |
|
|
|
774 |
|
|
|
462 |
|
|
|
753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income(1) (unaudited) |
|
$ |
1,438 |
|
|
$ |
758 |
|
|
$ |
1,814 |
|
|
$ |
1,902 |
|
|
$ |
1,534 |
|
|
$ |
919 |
|
|
$ |
1,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate(1) (unaudited) |
|
|
34 |
% |
|
|
33 |
% |
|
|
33 |
% |
|
|
33 |
% |
|
|
34 |
% |
|
|
33 |
% |
|
|
34 |
% |
Per Share Data (Common Shares)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic(2) |
|
$ |
1.26 |
|
|
$ |
0.66 |
|
|
$ |
1.58 |
|
|
$ |
1.65 |
|
|
$ |
1.35 |
|
|
$ |
0.81 |
|
|
$ |
1.30 |
|
Diluted |
|
|
1.22 |
|
|
|
0.64 |
|
|
|
1.54 |
|
|
|
1.63 |
|
|
|
1.34 |
|
|
|
0.80 |
|
|
|
1.26 |
|
Pro forma earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic(2) |
|
|
0.83 |
|
|
|
0.44 |
|
|
|
1.05 |
|
|
|
1.10 |
|
|
|
0.90 |
|
|
|
0.54 |
|
|
|
0.86 |
|
Diluted |
|
|
0.81 |
|
|
|
0.43 |
|
|
|
1.03 |
|
|
|
1.09 |
|
|
|
0.89 |
|
|
|
0.53 |
|
|
|
0.83 |
|
Distributions |
|
|
|
|
|
|
|
|
|
|
1,035 |
|
|
|
966 |
|
|
|
897 |
|
|
|
546 |
|
|
|
989 |
|
Book value per share(3) |
|
|
24.11 |
|
|
|
22.34 |
|
|
|
22.70 |
|
|
|
21.41 |
|
|
|
20.96 |
|
|
|
19.82 |
|
|
|
18.91 |
|
Tangible book value per share(4) |
|
|
24.11 |
|
|
|
22.34 |
|
|
|
22.70 |
|
|
|
21.41 |
|
|
|
20.96 |
|
|
|
19.82 |
|
|
|
18.91 |
|
Selected Period End Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
608,837 |
|
|
$ |
532,680 |
|
|
$ |
530,498 |
|
|
$ |
513,905 |
|
|
$ |
538,099 |
|
|
$ |
427,716 |
|
|
$ |
411,140 |
|
Cash and cash equivalents |
|
|
157,999 |
|
|
|
185,257 |
|
|
|
85,671 |
|
|
|
164,417 |
|
|
|
200,607 |
|
|
|
106,298 |
|
|
|
115,627 |
|
Interest bearing time deposits in banks |
|
|
117,300 |
|
|
|
74,591 |
|
|
|
104,860 |
|
|
|
50,911 |
|
|
|
41,192 |
|
|
|
60,922 |
|
|
|
98,036 |
|
Securities available for sale |
|
|
79,762 |
|
|
|
57,297 |
|
|
|
94,206 |
|
|
|
86,136 |
|
|
|
109,032 |
|
|
|
97,735 |
|
|
|
74,251 |
|
Total loans (gross) |
|
|
248,840 |
|
|
|
212,016 |
|
|
|
244,156 |
|
|
|
210,128 |
|
|
|
184,830 |
|
|
|
161,367 |
|
|
|
122,074 |
|
Allowance for loan losses |
|
|
2,575 |
|
|
|
2,425 |
|
|
|
2,425 |
|
|
|
2,425 |
|
|
|
2,725 |
|
|
|
2,700 |
|
|
|
2,700 |
|
Goodwill and core deposit intangible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
|
|
211,612 |
|
|
|
183,814 |
|
|
|
173,799 |
|
|
|
147,313 |
|
|
|
156,995 |
|
|
|
91,344 |
|
|
|
76,008 |
|
Interest-bearing deposits |
|
|
295,893 |
|
|
|
246,853 |
|
|
|
254,405 |
|
|
|
247,601 |
|
|
|
262,390 |
|
|
|
232,932 |
|
|
|
229,514 |
|
FHLB Advances |
|
|
44,608 |
|
|
|
47,816 |
|
|
|
46,163 |
|
|
|
50,971 |
|
|
|
44,117 |
|
|
|
36,184 |
|
|
|
25,492 |
|
Total shareholders equity |
|
|
41,599 |
|
|
|
38,536 |
|
|
|
39,162 |
|
|
|
36,947 |
|
|
|
36,155 |
|
|
|
33,799 |
|
|
|
32,256 |
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Six Months Ended June 30, |
|
|
As of and for the Year Ended December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
|
|
(unaudited) |
|
|
|
|
(dollars in thousands except per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Performance Metrics(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets(6) |
|
|
0.39 |
% |
|
|
0.22 |
% |
|
|
0.52 |
% |
|
|
0.54 |
% |
|
|
0.46 |
% |
|
|
0.33 |
% |
|
|
0.56 |
% |
Return on average equity(6) |
|
|
5.34 |
|
|
|
2.99 |
|
|
|
7.03 |
|
|
|
7.68 |
|
|
|
6.48 |
|
|
|
4.14 |
|
|
|
7.04 |
|
Pro forma return on average assets(1)(6) |
|
|
0.26 |
|
|
|
0.15 |
|
|
|
0.35 |
|
|
|
0.36 |
|
|
|
0.30 |
|
|
|
0.22 |
|
|
|
0.37 |
|
Pro forma return on average equity(1)(6) |
|
|
3.54 |
|
|
|
2.00 |
|
|
|
4.69 |
|
|
|
5.12 |
|
|
|
4.31 |
|
|
|
2.75 |
|
|
|
4.65 |
|
Net interest margin(7) |
|
|
2.22 |
|
|
|
1.92 |
|
|
|
2.00 |
|
|
|
1.78 |
|
|
|
1.74 |
|
|
|
1.80 |
|
|
|
1.90 |
|
Efficiency ratio(8) |
|
|
66.28 |
|
|
|
78.85 |
|
|
|
75.65 |
|
|
|
75.44 |
|
|
|
74.88 |
|
|
|
82.05 |
|
|
|
78.22 |
|
Credit Quality Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets to total assets(9) |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.88 |
% |
|
|
0.00 |
% |
Nonperforming loans to total loans(9) |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
2.34 |
|
|
|
0.00 |
|
Allowance for loan losses to nonperforming loans(9) |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
71.39 |
|
|
|
0.00 |
|
Allowance for loan losses to total loans |
|
|
1.03 |
|
|
|
1.14 |
|
|
|
0.99 |
|
|
|
1.15 |
|
|
|
1.47 |
|
|
|
1.67 |
|
|
|
2.21 |
|
Net charge-offs to average loans outstanding |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.16 |
|
Capital Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital to average assets |
|
|
7.12 |
% |
|
|
7.46 |
% |
|
|
7.32 |
% |
|
|
7.05 |
% |
|
|
6.57 |
% |
|
|
7.59 |
% |
|
|
7.89 |
% |
Tier 1 capital to risk-weighted assets(10) |
|
|
13.87 |
|
|
|
16.70 |
|
|
|
14.14 |
|
|
|
16.49 |
|
|
|
17.24 |
|
|
|
19.47 |
|
|
|
24.71 |
|
Total capital to risk-weighted assets(10) |
|
|
14.75 |
|
|
|
17.77 |
|
|
|
15.03 |
|
|
|
17.58 |
|
|
|
18.49 |
|
|
|
20.73 |
|
|
|
25.97 |
|
Total shareholders equity to total assets (unaudited) |
|
|
6.83 |
|
|
|
7.23 |
|
|
|
7.38 |
|
|
|
7.19 |
|
|
|
6.72 |
|
|
|
7.90 |
|
|
|
7.85 |
|
(1) |
Grand Bank has elected to be taxed for federal income tax purposes as a Subchapter S corporation under the provisions of Sections 1361 through 1379 of the Code, as amended, for all periods presented in the
table appearing immediately above, and, as a result, Grand Bank did not pay U.S. federal income taxes and has not been required to make any provision or recognize any liability for federal income tax in its financial statements. Grand Bank has
calculated its pro forma net income, pro forma earnings per share, pro forma return on average assets and pro forma return on average equity for each period presented in the table above by calculating a pro forma provision for federal income taxes
applying an assumed annual federal income tax rate of 34% to net taxable income (which excludes Grand Banks significant amounts of nontaxable interest income that is derived from municipal securities), resulting in a net effective federal
income tax rate of between 33% and 34% for each period, and adjusting its historical net income for each period to give effect to the pro forma provision for federal income taxes for such period. |
(2) |
Grand Bank calculates its earnings per share for each period shown as its net income divided by the weighted-average number of its common shares outstanding during the relevant period. Earnings per share and pro forma
earnings per share were calculated using the following outstanding share amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
|
As of December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
Weighted average shares outstanding |
|
|
1,725,520 |
|
|
|
1,725,350 |
|
|
|
1,725,350 |
|
|
|
1,725,350 |
|
|
|
1,713,856 |
|
|
|
1,705,528 |
|
|
|
1,704,350 |
|
(3) |
Book value per share equals Grand Banks total shareholders equity as of the date presented divided by the number of Grand Bank common shares outstanding as of the date presented. The number of Grand Bank
common shares outstanding as of June 30, 2015 and 2014, was 1,725,550 shares and 1,725,350 shares, respectively, and as of December 31, 2014, 2013, 2012, 2011 and 2010, was 1,725,350 shares, 1,725,350 shares, 1,725,350 shares, 1,705,560
shares and 1,705,460 shares, respectively. |
(4) |
Grand Bank calculates tangible book value per share as of the end of any period as total stockholders equity less goodwill and other intangible assets at the end of that period divided by the outstanding number of
shares of its common stock at the end of that period. Tangible book value is a non-GAAP financial measure, and, as Grand Bank calculates tangible book value, the most directly comparable GAAP financial measure is total stockholders equity.
|
Grand Banks management believes that presenting tangible book value per share provides useful information to investors
regarding Grand Banks financial condition because, as do Grand Banks management, banking regulators, many financial analysts and other investors, you can use tangible book value in conjunction with more traditional bank capital ratios to
assess Grand Banks capital adequacy without the effect of goodwill and other intangible assets, and to compare Grand Banks capital adequacy with that of other banking organizations with significant amounts of goodwill and/or other
intangible assets, which typically result from the use of the purchase method of accounting for mergers and acquisitions.
24
The following table presents, as of the dates set forth below, Grand Banks total
assets, tangible assets, total stockholders equity and tangible common equity and presents reconciliations of Grand Banks tangible book value per common share to its book value per common share and of its ratio of tangible common equity
to tangible assets to its ratio of total stockholders equity to total assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
|
As of December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
(dollars in thousands except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible Assets(11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
608,837 |
|
|
$ |
532,680 |
|
|
$ |
530,498 |
|
|
$ |
513,905 |
|
|
$ |
538,099 |
|
|
$ |
427,716 |
|
|
$ |
411,140 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible assets(11) |
|
$ |
608,837 |
|
|
$ |
532,680 |
|
|
$ |
530,498 |
|
|
$ |
513,905 |
|
|
$ |
538,099 |
|
|
$ |
427,716 |
|
|
$ |
411,140 |
|
Tangible Common Equity(11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
$ |
41,599 |
|
|
$ |
38,536 |
|
|
$ |
39,162 |
|
|
$ |
36,947 |
|
|
$ |
36,155 |
|
|
$ |
33,799 |
|
|
$ |
32,256 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity(11) |
|
$ |
41,599 |
|
|
$ |
38,536 |
|
|
$ |
39,162 |
|
|
$ |
36,947 |
|
|
$ |
36,155 |
|
|
$ |
33,799 |
|
|
$ |
32,256 |
|
Common shares outstanding |
|
|
1,725,550 |
|
|
|
1,725,350 |
|
|
|
1,725,350 |
|
|
|
1,725,350 |
|
|
|
1,725,350 |
|
|
|
1,705,560 |
|
|
|
1,705,460 |
|
Book value per common share |
|
$ |
24.11 |
|
|
$ |
22.34 |
|
|
$ |
22.70 |
|
|
$ |
21.41 |
|
|
$ |
20.96 |
|
|
$ |
19.82 |
|
|
$ |
18.91 |
|
Tangible book value per common share(4)(11) |
|
|
24.11 |
|
|
|
22.34 |
|
|
|
22.70 |
|
|
|
21.41 |
|
|
|
20.96 |
|
|
|
19.82 |
|
|
|
18.91 |
|
Total stockholders equity to total assets(11) |
|
|
6.83 |
% |
|
|
7.23 |
% |
|
|
7.38 |
% |
|
|
7.19 |
% |
|
|
6.72 |
% |
|
|
7.90 |
% |
|
|
7.85 |
% |
Tangible common equity to tangible assets(11) |
|
|
6.83 |
|
|
|
7.23 |
|
|
|
7.38 |
|
|
|
7.19 |
|
|
|
6.72 |
|
|
|
7.90 |
|
|
|
7.85 |
|
(5) |
The values for the selected performance metrics presented for the six months ended June 30, 2015 and 2014, are annualized. |
(6) |
Grand Bank has calculated its return on average assets and return on average equity for a period by dividing net income for that period by its average assets or average equity, respectively, for that period. Grand Bank
has calculated its pro forma return on average assets and pro forma return on average equity for a period by calculating its pro forma net income for that period as described in note 1 above and dividing that by its average assets or average equity,
respectively, for that period. Grand Bank calculates its average assets and average equity for a period by dividing the sum of its total asset balance or total shareholders equity balance, respectively, as of the close of business on each day
in the relevant period and dividing by the number of days in the period. |
(7) |
Net interest margin for a period represents net interest income for that period divided by average interest-earning assets for that period. |
(8) |
Efficiency ratio for a period represents noninterest expenses for that period divided by the sum of net interest income and noninterest income for that period, excluding realized gains or losses from sales of investment
securities for that period. |
(9) |
Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest and accruing loans modified under troubled debt restructurings. Nonperforming assets includes nonperforming loans
plus other real estate owned. |
(10) |
Grand Bank calculates its risk-weighted assets using the standardized method of the Basel II Framework, as implemented by the FDIC. Effective January 1, 2015, Grand Bank became subject to the Basel III Capital
Rules. These rules revise the regulatory capital elements, add a new common equity Tier 1 capital ratio, increase the minimum Tier 1 capital ratio requirements and implement a new capital conservation buffer. The ratios as of June 30,
2015, were calculated under the new Basel III Framework. |
(11) |
Grand Bank calculates tangible common equity as of the end of a period as total stockholders equity less goodwill and other intangible assets as of the end of the period and calculates tangible assets as of the
end of a period as total assets less goodwill and other intangible assets as of the end of the period. Tangible common equity to tangible assets is a non-GAAP financial measure, and as Grand Bank calculates tangible common equity to tangible assets,
the most directly comparable GAAP financial measure is total stockholders equity to total assets. |
Grand Bank believes
that the presentation of tangible common equity to tangible assets provides useful information to investors regarding Grand Banks financial condition because, as do Grand Banks management, banking regulators, many financial analysts and
other investors, you can use the tangible common equity in conjunction with more traditional bank capital ratios to assess Grand Banks capital adequacy without the effect of Grand Banks goodwill and core deposit intangibles and compare
Grand Banks capital adequacy with the capital adequacy of other banking organizations with significant amounts of goodwill and/or core deposit intangibles.
25
Comparative Stock Prices
The following table shows (1) the market value of Independent common stock at the close of business on July 22, 2015, the business
day prior to the announcement of the proposed merger, and as of the most recent practicable date preceding the date of this proxy statement/prospectus and (2) the equivalent pro forma value of a share of Grand Bank common stock at such dates
based on the value of the consideration to be received in the merger with respect to each share. Historical market value information regarding Grand Bank common stock is not provided because there is no active market for Grand Bank common stock.
|
|
|
|
|
|
|
|
|
|
|
Independent Common Stock(1) |
|
|
Equivalent Pro Forma Per Share of Grand Bank Common
Stock(2) |
|
July 22, 2015 |
|
$ |
44.65 |
|
|
$ |
43.35 |
|
August 31, 2015 |
|
$ |
42.39 |
|
|
$ |
41.76 |
|
(1) |
Represents the closing price of Independent common stock on the NASDAQ Global Select Market on the date indicated. |
(2) |
Equivalent pro forma market value per share of Grand Bank common stock represents the historical market value per share of Independent common stock multiplied by the assumed exchange ratio of 0.7014 of a share of
Independent common stock for each share of Grand Bank common stock and adding the assumed per-share cash consideration of $12.03, and assumes an adjusted tangible book value of Grand Bank of at least $40.0 million. Such assumed ratio was
calculated based on the assumption that 1,824,304 shares of Grand Bank common stock were outstanding on the date indicated, which is the expected number of shares to be outstanding at the effective time of the merger. |
For an explanation of how the Grand Bank tangible book value will be calculated, the effect on the purchase price if tangible book value is
less than $40.0 million on the effective date and other estimates, please refer to Proposal to Approve the Reorganization AgreementTerms of the Merger, beginning on page 40 of this proxy statement/prospectus.
Dividends
Dividend Payments
As approved by Independents board of directors, Independent declared and paid a cash dividend to holders of Independent common
stock in each quarter since the third quarter of 2013. Independent intends to continue to pay regular quarterly cash dividends on its common stock following the merger, when, as and if declared by the Companys board of directors out of funds
legally available for that purpose and subject to regulatory restrictions. No dividends payable in the future have been declared by Independents board of directors.
Independents dividend policy may change with respect to the payment of dividends as a return on investment, and Independents board
of directors may change or eliminate the payment of future dividends at its discretion, without notice to Independents shareholders. There can be no assurance that Independent will continue to pay dividends in the future. Future dividends on
Independent common stock will depend upon its earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, its ability to service any equity or debt obligations senior to the common stock
(including Independents preferred stock discussed below) and other factors deemed relevant by the board of directors of Independent.
Dividend
Restrictions; Source of Strength
Under the terms of its junior subordinated debentures issued in connection with the issuance of trust
preferred securities by subsidiaries of Independent, Independent is not permitted to pay any dividends on its common stock if it is in default on any payments required to be made on the junior subordinated debentures.
Independent is regarded as a legal entity separate and distinct from Independent Bank. The principal source of Independents revenues is
dividends received from Independent Bank. Texas state law places limitations on
26
the amount that state banks may pay in dividends, which Independent Bank must adhere to when paying dividends to Independent. The Federal Reserve has issued a policy statement that provides that
a bank holding company should not pay dividends unless (a) its net income over the last four quarters (net of dividends paid) has been sufficient to fully fund the dividends, (b) the prospective rate of earnings retention appears to be
consistent with the capital needs, asset quality and overall financial condition of the bank holding company and its subsidiaries and (c) the bank holding company will continue to meet minimum required capital adequacy ratios. Accordingly,
Independent should not pay cash dividends that exceed its net income in any year or that can only be funded in ways that weaken its financial strength, including by borrowing money to pay dividends. Regulatory authorities could impose
administratively stricter limitations on the ability of Independent Bank to pay dividends to Independent if such limits were deemed appropriate to preserve certain capital adequacy requirements.
Under Federal Reserve policy, bank holding companies have historically been required to act as a source of financial and managerial strength
to each of its banking subsidiaries, and the DoddFrank Wall Street Reform and Consumer Protection Act codified this policy as a statutory requirement. Under this requirement, Independent is expected to commit resources to support Independent
Bank, including at times when Independent may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary banks. A bank holding company, in certain circumstances, could be required to guarantee the capital restoration plan of an undercapitalized banking subsidiary.
Dividends paid by Independent Bank have provided a substantial part of Independents operating funds, and for the foreseeable future, it
is anticipated that dividends paid by Independent Bank to Independent will continue to be Independents principal source of operating funds. However, capital adequacy requirements serve to limit the amount of dividends that may be paid by
Independent Bank. Under federal law, Independent Bank cannot pay a dividend if, after paying the dividend, it would be undercapitalized. The FDIC may declare a dividend payment to be unsafe and unsound even though Independent Bank would continue to
meet its capital requirements after payment of the dividend.
Additionally, under the credit agreement between Independent and U.S. Bank
National Association and Frost Bank, or the lenders, Independent cannot make any dividend payments without the prior written consent of Independents lenders; provided, however, that, so long as no default under the credit agreement has
occurred and is continuing, or will occur as a result of any such dividend, Independent may pay dividends and distributions to its shareholders as permitted by applicable governmental laws and regulations, including dividends with respect to the
Independent Series A preferred stock.
So long as any share of Independent Series A preferred stock remains outstanding, Independent may
declare and pay dividends on its common stock only if, after giving effect to such dividend, Independent satisfies certain formula requirements under the Independent Series A preferred stock and full dividends on all outstanding shares of
Independent Series A preferred stock for the most recently completed dividend period have been or are contemporaneously declared and paid. If a dividend is not declared and paid in full on the Independent Series A preferred stock in respect of any
dividend period, then from the last day of such dividend period until the last day of the third dividend period immediately following it, no dividend or distribution shall be declared or paid on the common stock (other than dividends payable solely
in shares of common stock).
Payment of Dividends on Independent Preferred Stock
Holders of Independents Series A preferred stock, which ranks senior to Independents common stock, are entitled to receive at the
end of each quarter a dividend equal to the quarterly dividend rate (which rate is approximately 1%) multiplied by the liquidation amount per each share of Series A preferred stock, which liquidation amount is currently equal to $1,000 per share, or
approximately $60,000 per quarter. In January 2016, the dividend on the Series A preferred stock increases from 1% to 9% annually, and, at that time, it is anticipated that Independent will redeem all of the Series A preferred stock.
27
RISK FACTORS
An investment in Independent common stock in connection with the merger involves risks. Independent describes below the material risks and
uncertainties that it believes affect its business and an investment in Independent common stock. You should carefully read and consider all of these risks and all other information contained in this proxy statement/prospectus in deciding whether to
vote for approval of the reorganization agreement. If any of the risks described in this proxy statement/prospectus occur, Independents financial condition, results of operations and cash flows could be materially and adversely affected. If
this were to happen, the value of Independent common stock could decline significantly, and you could lose all or part of your investment.
Fluctuations in the market price of Independent common stock could affect the number and value of shares that Grand Bank shareholders receive for their
shares of Grand Bank common stock. Grand Bank shareholders bear the risk of price fluctuations in Independent common stock after the exchange ratio is established.
The price of Independent common stock will fluctuate prior to the closing of the merger. The value of the per share stock consideration and the
number of shares comprising the per share stock consideration will be subject to adjustment if the average of the daily volume weighted average sale price of Independent common stock over a ten consecutive trading day period ending on and including
the third trading day prior to the closing date, or the average sales price, is less than $39.3894 or more than $48.1426. Accordingly, at the time Grand Banks shareholders vote with respect to the reorganization agreement, they will not know
the exact value and number of shares of Independent common stock they will actually receive in the merger. In addition, shareholders of Grand Bank bear the risk that the value of the shares of Independent common stock they will receive in the merger
will decline from the value of those shares after the date the per share stock consideration is fixed three trading days prior to the closing date and until their shares of Independent common stock are credited to their account in the Direct
Registration System. See Proposal to Approve the Reorganization AgreementTerms of the Merger.
The merger may not be completed.
Completion of the merger is subject to regulatory approval. Independent cannot assure you that it will be successful in obtaining
required the regulatory approvals. If Independent is not successful in obtaining the required regulatory approvals, the merger will not be completed. If such regulatory approvals are received, there can be no assurance to the timing of those
approvals or whether any conditions will be imposed that would result in certain closing conditions of the merger not being satisfied.
Shareholders should bear in mind that regulatory approval reflects only the view that the merger does not contravene applicable competitive
standards imposed by law, and that the merger is consistent with regulatory policies relating to safety and soundness. Further, regulatory approval is not an opinion that the proposed merger is favorable to the shareholders of either party to the
merger from a financial point of view or that the regulatory authority has considered the adequacy of the terms of the merger. Regulatory approval is not an endorsement or recommendation of the merger.
The consummation of the merger is also subject to other conditions precedent described in the reorganization agreement, including Grand Bank
maintaining minimum capital and allowance for loan loss levels, there being no material adverse change in the condition of Grand Bank or Independent and the average sales price of Independent common stock being at least $35.0128 per share and not
more than $52.5192 per share. If a condition of either party is not satisfied, that party may be able to terminate the reorganization agreement and, in such case, the transaction would not be consummated. The parties cannot assure you that all of
the conditions precedent in the reorganization agreement will be satisfied or that the merger will be completed.
28
The tangible book value of Grand Bank at closing could be an amount that results in the reduction of the
amount of cash consideration that Grand Bank shareholders receive for their shares of Grand Bank common stock or in Independents election to terminate the merger.
The amount of aggregate cash consideration to be received by Grand Bank shareholders in the merger will be reduced if Grand Banks
tangible book value is less than $40.0 million but greater than $39.0 million on the calculation date. Accordingly, at the time Grand Banks shareholders vote with respect to the reorganization agreement, they will not know the exact
value of the cash consideration they will receive in the merger. Neither Independent nor Grand Bank can assure Grand Banks shareholders of the exact amount of cash consideration that they will receive in the merger.
In the event that Grand Bank does not have a tangible book value equal to or greater than $39.0 million as of the date of the closing,
Independent has the right to elect either to terminate the transaction without completing the merger, or completing the merger regardless of the tangible book value. If the Grand Bank tangible book value is materially less than $39.0 million and if
Independent desires to waive the condition and proceed with the transaction, Independent and Grand Bank anticipate that they would renegotiate the amount of cash consideration to be paid pursuant to the merger and amend the reorganization agreement.
Grand Bank would resolicit proxies and hold an additional meeting of shareholders to consider and act upon any such amendment.
Grand Bank
does not have the right to terminate the merger in the event its tangible book value, which was $41.5 million at June 30, 2015, calculated in accordance with the reorganization agreement, is below $39.0 million on the closing date
under the terms of the reorganization agreement.
You may pay U.S. federal income tax as a result of the merger.
The amount of the cash consideration that you receive in the merger in exchange for your common stock of Grand Bank is anticipated to be
taxable for U.S. federal income tax purposes. See Proposal to Approve the Reorganization AgreementMaterial U.S. Federal Income Tax Consequences of the Merger on page 74.
Grand Bank will be subject to business uncertainties and contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Grand Bank and consequently on Independent.
These uncertainties may impair Grand Banks ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with Grand Bank to seek to change existing business relationships
with Grand Bank. In addition, the reorganization agreement restricts Grand Bank from taking other specified actions until the merger occurs without the consent of Independent. These restrictions may prevent Grand Bank from pursuing attractive
business opportunities that may arise prior to the completion of the merger. See Proposal to Approve the Reorganization AgreementConduct of Business Pending Effective Time beginning on page 60 of this proxy
statement/prospectus for a description of the restrictive covenants to which Grand Bank is subject.
Integrating Grand Bank into Independent
Banks operations may be more difficult, costly or time-consuming than Independent expects.
Independent Bank and Grand Bank have
operated and, until the merger is completed, will continue to operate, independently. Accordingly, it is possible that the process of integrating Grand Banks operations into Independent Banks operations could result in the disruption of
operations, the loss of Grand Bank customers and employees and make it more difficult to achieve the intended benefits of the merger. Specifically, inconsistencies between the standards, controls, procedures and policies of Independent Bank and
those of Grand Bank could adversely affect Independent Banks ability to maintain relationships with current customers and employees of Grand Bank if and when the merger is completed. Further, as with any merger of banking institutions,
business disruptions may occur that may cause Independent Bank to lose customers or may cause customers to withdraw
29
their deposits from Grand Bank prior to the mergers consummation and from Independent Bank thereafter. The realization of the anticipated benefits of the merger may depend in large part on
Independents ability to integrate Grand Banks operations into Independent Banks operations, and to address differences in business models and cultures. If Independent is not able to integrate the operations of Grand Bank into
Independent Banks operations successfully and on a timely basis, some or all of the expected benefits of the acquisition may not be realized.
Some of the directors and executive officers of Grand Bank may have interests and arrangements that may have influenced their decisions to support or
recommend that you approve the reorganization agreement.
The interests of some of the directors and executive officers of Grand Bank
may be different from those of Grand Bank shareholders. The directors and executive officers of Grand Bank are or will be participants in arrangements relating to or that are affected by the merger that are different from, or in addition to, those
of Grand Bank shareholders. These interests are described in more detail in the section of this proxy statement/prospectus entitled Financial Interests of Directors and Officers of Grand Bank in the Merger beginning on page 73.
Independent may fail to realize the cost savings anticipated from the merger.
Although Independent anticipates that it will realize certain cost savings as to the Grand Bank operations and otherwise from the merger if and
when the Grand Bank operations are fully integrated into Independent Banks operations, it is possible that Independent may not realize all of the cost savings that Independent has estimated it can realize. For example, unanticipated growth in
Independents business may require Independent to continue to operate or maintain some facilities or support functions that are currently expected to be combined or reduced as a result of the merger. Independents realization of the
estimated cost savings also will depend on Independents ability to combine the operations of Independent Bank and Grand Bank in a manner that permits those costs savings to be realized. Independent is not able to integrate Grand Banks
operations into Independent Banks operations successfully, the anticipated cost savings may not be fully realized, if at all, or may take longer to realize than expected.
Grand Bank shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.
Grand Bank shareholders currently have the right to vote in the election of the board of directors of Grand Bank and on other matters affecting
Grand Bank. The merger will transfer control of Grand Bank to Independent and to the shareholders of Independent. When the merger occurs, each Grand Bank shareholder will become a shareholder of Independent with a percentage ownership of Independent
much smaller than such shareholders percentage ownership of Grand Bank. Because of this, Grand Bank shareholders will have less influence on the management and policies of Independent than they now have on the management and policies of Grand
Bank.
The dissenters rights appraisal process is uncertain.
Grand Bank shareholders may or may not be entitled to receive more than the amount provided for in the reorganization agreement for their
shares of Grand Bank common stock if they elect to exercise their right to dissent from the proposed merger, depending on the appraisal of the fair value of the Grand Bank common stock pursuant to the dissenting shareholder procedures under the
TBOC. See Proposal to Approve the Reorganization AgreementDissenters Rights of Grand Bank Shareholders on page 79 and Appendix C. For this reason, the amount of cash that you might be entitled to receive should
you elect to exercise your right to dissent to the merger may be more or less than the value of the merger consideration to be paid pursuant to the reorganization agreement. In addition, it is a condition in the reorganization agreement that the
holders of not more than 5% of the outstanding shares of Grand Bank common stock shall have exercised their statutory dissenters rights under the TBOC. The number of shares of Grand Bank common stock that will exercise dissenters rights
under the TBOC is not known and therefore there is no assurance of this closing condition being satisfied.
30
The fairness opinion obtained by Grand Bank from its financial advisor will not reflect changes in
circumstances subsequent to the date of the fairness opinion.
Hovde Group, Grand Banks financial advisor in connection with the
proposed merger, has delivered to the board of directors of Grand Bank its opinion dated as of July 22, 2015. The opinion of Hovde Group stated that as of such date, and based upon and subject to the factors and assumptions set forth therein,
the merger consideration was fair to the Grand Bank shareholders from a financial point of view. The opinion is necessarily based on economic, market, regulatory and other conditions as in effect on, and the information made available to Hovde Group
as of July 22, 2015. Events occurring after the date of the opinion could materially affect the assumptions used in preparing the opinion and its resulting conclusion. Any such changes, or changes in other factors on which the opinion is based, may
materially alter or affect the relative values of Independent and Grand Bank.
The shares of Independent common stock to be received by Grand Bank
shareholders as a result of the merger will have different rights than the shares of Grand Bank common stock and in some cases may be less favorable.
The rights associated with Grand Bank common stock are different from the rights associated with Independent common stock and in some cases may
be less favorable. See Comparison of Rights of Shareholders of Grand Bank and Independent on page 97 for a more detailed description of the shareholder rights of each of Independent and Grand Bank.
31
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this proxy statement/prospectus that are not statements of historical fact constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of operations of
Independent after the merger is completed as well as information about the merger, including Independents future revenues, income, expenses, provision for taxes, effective tax rate, earnings per share and cash flows, Independents future
capital expenditures and dividends, Independents future financial condition and changes therein, including changes in Independents loan portfolio and allowance for loan losses, Independents future capital structure or changes
therein, the plan and objectives of management for future operations, Independents future or proposed acquisitions, the future or expected effect of acquisitions on Independents operations, results of operations and financial condition,
Independents future economic performance and the statements of the assumptions underlying any such statement. Such statements are typically identified by the use in the statements of words or phrases such as aim,
anticipate, estimate, expect, goal, guidance, intend, is anticipated, is estimated, is expected, is intended,
objective, plan, projected, projection, will affect, will be, will continue, will decrease, will grow, will impact, will
increase, will incur, will reduce, will remain, will result, would be, variations of such words or phrases (including where the word could, may or
would is used rather than the word will in a phrase) and similar words and phrases indicating that the statement addresses some future result, occurrence, plan or objective. The forward-looking statements that we make are
based on Independents current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to future results and occurrences, they are subject to inherent
uncertainties, risks and changes in circumstances that are difficult to predict. Many possible events or factors could affect the future financial results and performance of each of Independent and Grand Bank before the merger or Independent after
the merger, and could cause those results or performance to differ materially from those expressed in the forward-looking statements. These possible events or factors include, but are not limited to:
|
|
|
worsening business and economic conditions nationally, regionally and in Independents target markets, particularly in Texas and the geographic areas in which Independent operates or particularly affecting the
financial or banking industry generally; |
|
|
|
Independents dependence on its management team and its ability to attract, motivate and retain qualified personnel; |
|
|
|
the concentration of Independents business within its geographic areas of operation in Texas; |
|
|
|
deteriorating asset quality and higher levels of nonperforming assets and loan charge-offs; |
|
|
|
concentration of Independents loan portfolio in commercial and residential real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate; |
|
|
|
inaccuracy of the assumptions and estimates Independent makes in establishing reserves for probable loan losses and other estimates; |
|
|
|
lack of liquidity, including as a result of a reduction in the amount of sources of liquidity Independent currently has; |
|
|
|
material decreases in the amount of deposits Independent holds; |
|
|
|
regulatory requirements to maintain minimum capital levels; |
|
|
|
changes in market interest rates that affect the pricing of Independents loans and deposits and its interest margins and net interest income; |
|
|
|
fluctuations in the market value and liquidity of the securities that Independent holds for sale and changes in the securities market; |
|
|
|
effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services, which likely will increase; |
32
|
|
|
changes in economic and market conditions that affect the amount of assets that Independent has under administration; |
|
|
|
the institution and outcome of litigation and other legal proceeding against Independent or to which Independent becomes subject; |
|
|
|
the occurrence of market conditions adversely affecting the financial industry generally; |
|
|
|
the impact of recent and future legislative and regulatory changes, including changes in banking, securities and tax laws and regulations, such as the Dodd-Frank Act, and their application by Independents
regulators; |
|
|
|
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the SEC and Public Company Accounting Oversight Board; |
|
|
|
governmental monetary and fiscal policies; |
|
|
|
changes in the scope and cost of FDIC insurance and other coverage; |
|
|
|
the effects of war or other conflicts, acts of terrorism (including cyber-attacks) or other catastrophic events, including storms, droughts, tornadoes and flooding, that may affect general economic conditions;
|
|
|
|
Independents actual cost savings resulting from the merger are less than expected, Independent is unable to realize those cost savings as soon as expected or Independent incurs additional or unexpected costs;
|
|
|
|
Independents revenues after the merger are less than expected; |
|
|
|
deposit attrition, operating costs, customer loss and business disruption before and after the merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than
Independent expected; |
|
|
|
the risk that the businesses of Independent and Grand Bank and any other financial institution acquired by Independent will not be integrated successfully, or such integrations may be more difficult, time-consuming or
costly than expected; |
|
|
|
the failure of Grand Banks shareholders to approve the reorganization agreement; |
|
|
|
the ability to obtain the governmental approvals of the merger on the proposed terms and schedule; |
|
|
|
the quality of the assets acquired from Grand Bank and any other financial institution acquired by Independent being lower than determined in Independents due diligence investigation and related exposure to
unrecoverable losses on loans acquired; |
|
|
|
general business and economic conditions in the markets Independent or Grand Bank serve change or are less favorable than expected; |
|
|
|
changes occur in business conditions and inflation; |
|
|
|
personal or commercial customers bankruptcies increase; and |
|
|
|
technology-related changes are harder to make or more expensive than expected. |
For other
factors, risks and uncertainties that could cause actual results to differ materially from estimates contained in forward-looking statements, please read the Risk Factors section of this proxy statement/prospectus.
Independent urges you to consider all of these risks, uncertainties and other factors carefully in evaluating all such forward-looking
statements Independent may make. As a result of these and other matters, including changes in facts, assumptions not being realized or other factors, the actual results relating to the subject matter of any forward-looking statement may different
materially from the anticipated results expressed or implied in
33
that forward-looking statement. Any forward-looking statement made by Independent in any report, filing, press release, document, report or announcement speaks only as of the date on which it is
made. Independent undertakes no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. Independent believes
that it has chosen these assumptions or bases in good faith and that they are reasonable. However, Independent cautions you that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual
results can be material. Therefore, Independent cautions you not to place undue reliance on its forward-looking statements.
34
GENERAL INFORMATION
This document constitutes a proxy statement of Grand Bank and is being furnished to all record holders as of
, 2015 of Grand Bank common stock in connection with the solicitation of proxies by the board of directors of Grand Bank to be
used at the special meeting of shareholders of Grand Bank to be held on , 2015. The purpose of the special meeting is to consider
and vote to approve the reorganization agreement, which provides for, among other things, the merger of Grand Bank with and into Independent Bank, with Independent Bank being the surviving bank. This document also constitutes a prospectus relating
to offer and sale of the Independent common stock to be issued to holders of Grand Bank common stock upon completion of the merger.
THE SPECIAL MEETING
Date, Place and Time of the Special Meeting
The special meeting of Grand Bank shareholders will be held at p.m.,
Central Time, on , 2015, at the main office of Grand Bank, 16660 Dallas Parkway, Suite 1700, Dallas, Texas 75248.
Matters to be Considered
The purpose of the special meeting is to consider and vote on the following:
Proposal One: to approve the Agreement and Plan of Reorganization, dated as of July 23, 2015, by and between Independent and Grand
Bank and the related Agreement and Plan of Merger, which is attached to the reorganization agreement as Exhibit A, pursuant to which Grand Bank will merge with and into Independent Bank, all on the terms and subject to conditions
contained therein; and
Proposal Two: to approve the adjournment of the special meeting to a later date or dates if the
board of directors of Grand Bank determines such an adjournment is necessary to permit further solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to constitute a quorum or to approve the
reorganization agreement.
Completion of the merger is conditioned on, among other things, shareholder approval of the
reorganization agreement, the merger and the other transactions contemplated by the reorganization agreement. No other business may be conducted at the special meeting.
Recommendation of the Grand Bank Board of Directors
On July 22, 2015, the Grand Bank board of directors unanimously approved the reorganization agreement and the transactions contemplated
thereby. Based on Grand Banks reasons for the merger described in this proxy statement/prospectus, including the fairness opinion of Hovde Group, the board of directors of Grand Bank believes that the merger is in the best interests of Grand
Banks shareholders.
Accordingly, the Grand Bank board of directors unanimously recommends that Grand Bank shareholders vote as
follows:
FOR approval of the reorganization agreement and the merger; and
FOR any proposal to adjourn the special meeting that the Grand Bank board of directors determines is necessary, including
to permit further solicitation of additional proxies on the proposal to approve the reorganization agreement.
35
See Proposal to Approve the Reorganization AgreementRecommendation of Grand
Banks Board and Its Reasons for the Merger beginning on page 46.
Holders of Grand Bank common stock should carefully
read this proxy statement/prospectus, including any documents incorporated by reference, and the Appendices in their entirety for more detailed information concerning the merger and the transactions contemplated by the reorganization agreement.
Grand Bank Record Date; Shareholders Entitled to Vote
The record date for the special meeting is
, 2015, or the record date. Only record holders of shares of Grand Bank common stock at 5:00 p.m. Central Time, or the close of
business, on the record date are entitled to notice of, and to vote at, the special meeting or any adjournment(s) thereof. At the close of business on the record date, the only outstanding class of securities of Grand Bank with a right to vote on
the proposals was Grand Bank common stock, with shares of Grand Bank common stock issued and outstanding. Each share of Grand Bank common stock outstanding on the record date is
entitled to one vote on each proposal. Holders of at least two-thirds of the outstanding shares of Grand Bank common stock must vote in favor of the reorganization agreement in order to permit consummation of the merger.
Voting by Grand Banks Directors and Executive Officers Subject to the Voting Agreement
All of the directors and executive officers of Grand Bank have entered into an agreement to vote the shares of Grand Bank common stock they
control in favor of approval of the reorganization agreement and the merger and in the manner most favorable to the consummation of the merger and the transactions contemplated by the reorganization agreement; provided, however, that the Grand Bank
shareholders who entered into the voting agreement would be permitted to vote to accept a superior proposal, if any, under the terms of the reorganization agreement. As of the record date, 509,223 shares of Grand Bank common stock, or approximately
29% of the outstanding shares of such common stock entitled to vote at the special meeting, are bound by the voting agreement.
Quorum and Adjournment
No business may be transacted at the special meeting unless a quorum is present. Shareholders who hold shares representing at least a majority
of each class of the shares entitled to vote at the special meeting must be present in person or represented by proxy to constitute a quorum, but the holders of at least two-thirds of the shares of Grand Bank common stock entitled to vote at the
special meeting must be present, in person or by proxy, at the special meeting in order for the necessary vote to be able to take action on the merger proposal. The affirmative vote of the holders of at least two-thirds of the outstanding Grand Bank
common stock is required to approve the reorganization agreement. As a result, if shares representing at two-thirds of the shares of Grand Bank common stock outstanding on the close of business on the record date are not present at the special
meeting, the presence of a quorum will still not permit the merger to be approved at the special meeting.
If a quorum is not present, or
if fewer shares than are required are voted in favor of the proposal to approve the reorganization agreement, the merger and the other transactions contemplated by the reorganization agreement, then the special meeting may be adjourned to allow for
the solicitation of additional proxies, if the approval of a majority of the votes cast at the special meeting on such proposal is obtained.
No notice of an adjourned special meeting need be given unless after the adjournment, a new record date is fixed for the adjourned special
meeting, in which case a notice of the adjourned special meeting shall be given to each Grand Bank shareholder of record entitled to vote at the special meeting. At any adjourned special meeting, all proxies will be voted in the same manner as they
would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned special meeting.
36
All shares of Grand Bank common stock represented at the special meeting, including shares that
are represented but that vote to abstain, will be treated as present for purposes of determining the presence or absence of a quorum.
Required Vote
The required votes to approve the Grand Bank proposals are as follows:
Proposal One: approving the reorganization agreement and the merger requires the affirmative vote of at least two-thirds of the issued
and outstanding shares of Grand Bank common stock entitled to vote at the special meeting. Failures to vote and abstentions will have the same effect as votes against this proposal.
Proposal Two: approving the adjournment of the special meeting, if necessary, to allow for the solicitation of additional proxies
requires the approval of a majority of the votes cast by holders of Grand Bank common stock at the special meeting, regardless of whether there is a quorum. Failures to vote and abstentions will have no effect on the vote for the proposal.
Voting of Proxies by Holders of Record
If you were a record holder of Grand Bank common stock at the close of business on the record date, a proxy card is enclosed for your use.
Grand Bank requests that you vote your shares as promptly as possible by submitting your Grand Bank proxy card by mail using the enclosed return envelope. When the accompanying proxy card is returned properly executed, the shares of Grand Bank
common stock represented by it will be voted at the special meeting or any adjournment(s) thereof in accordance with the instructions contained in the proxy card.
If a proxy card is returned without an indication as to how the shares of Grand Bank common stock represented by it are to be voted with
regard to a particular proposal, the shares of Grand Bank common stock represented by the proxy will be voted in accordance with the recommendation of the Grand Bank board of directors and, therefore, such shares will be voted:
FOR Proposal One approving the reorganization agreement and the merger; and
FOR Proposal Two approving the adjournment of the special meeting, if necessary to permit solicitation of additional
proxies.
At the date hereof, the Grand Bank board of directors has no knowledge of any business that will be presented for
consideration at the special meeting and that would be required to be set forth in this proxy statement/prospectus or the related proxy card other than the matters set forth in Grand Banks Notice of Special Meeting of Shareholders.
No other matter can be brought up or voted upon at the special meeting.
Your vote is important. Accordingly, if you were a record holder of Grand Bank common stock on the record date of the special meeting,
please sign and return the enclosed proxy card whether or not you plan to attend the special meeting in person.
Attending the Meeting; Voting in Person
Only record holders of Grand Bank common stock on the record date, their duly appointed proxies, and invited guests may attend the special
meeting. All attendees must present government-issued photo identification (such as a drivers license or passport) for admittance. The additional items, if any, that attendees must bring to gain admittance to the special meeting depend on
whether they are shareholders of record or proxy holders. A Grand Bank shareholder who holds shares of Grand Bank common stock directly registered in such shareholders name who desires to attend the special meeting in person should bring
government-issued photo identification.
37
A person who holds a validly executed proxy entitling such person to vote on behalf of a record
owner of Grand Bank common stock who desires to attend the special meeting in person must bring the validly executed proxy naming such person as the proxy holder, signed by the Grand Bank shareholder of record, and proof of the signing
shareholders record ownership as of the record date.
No cameras, recording equipment or other electronic devices will be allowed in
the meeting room. Failure to provide the requested documents at the door or failure to comply with the procedures for the special meeting may prevent Grand Bank shareholders from being admitted to the special meeting.
Revocation of Proxies
A Grand Bank shareholder entitled to vote at the special meeting may revoke a proxy at any time before such time that the proxy card for any
such holders of Grand Bank common stock must be received at the special meeting by taking any of the following three actions:
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delivering written notice of revocation to Lisa Murray, Corporate Secretary, Grand Bank, 16660 Dallas Parkway, Suite 1700, Dallas, Texas 75248; |
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delivering a proxy card bearing a later date than the proxy that such shareholder desires to revoke; or |
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attending the special meeting and voting in person. |
Merely attending the special meeting will
not, by itself, revoke your proxy; a Grand Bank shareholder must cast a subsequent vote at the special meeting using forms provided for that purpose. The last valid vote that we receive before or at the special meeting is the vote that will be
counted.
Tabulation of Votes
Grand Bank has appointed Lisa Murray to serve as the Inspector of Election for the special meeting. The Inspector of Election will
independently tabulate affirmative votes, negative votes and abstentions.
Solicitation of Proxies
The Grand Bank board of directors is soliciting proxies for the special meeting from holders of Grand Bank common stock entitled to vote at
such special meeting. In accordance with the reorganization agreement, Grand Bank will pay its own cost of soliciting proxies from its shareholders, including the cost of printing and mailing this proxy statement/prospectus. In addition to
solicitation of proxies by mail, proxies may be solicited by Grand Banks officers, directors and regular employees, without additional remuneration, by personal interview, telephone or other means of communication.
Abstentions are included in determining whether a quorum exists at the special meeting, but such shares will have the same effect as a vote
against the proposal to approve the reorganization agreement. Abstentions will have no effect on the proposal to adjourn the special meeting, if necessary.
Adjournments
Any adjournment of the special meeting may be made from time to time if the approval of the holders of a majority of the votes cast by the
holders of shares of Grand Bank common stock at the special meeting is obtained, whether or not a quorum exists, without further notice other than by an announcement made at the special meeting (unless a new record date is fixed). If a quorum is not
present at the special meeting, or if a quorum is present at the special meeting but there are not sufficient votes at the time of the special meeting to approve the proposals, then Grand Bank shareholders may be asked to vote on a proposal to
adjourn the special meeting so as to permit solicitation of additional proxies.
38
Questions and Additional Information
If a Grand Bank shareholder has questions about the merger or the process for voting or if additional copies of this document or a replacement
proxy card are needed, please contact Lee Dinkel, Grand Banks President and Chief Executive Officer, at (972) 735-1000.
39
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT
(Proposal One)
The
following information describes the material aspects of the merger. A copy of the reorganization agreement is included as Appendix A to this proxy statement/prospectus and is incorporated herein by reference. You are urged to read the
reorganization agreement in its entirety.
Terms of the Merger
The reorganization agreement provides for the acquisition of Grand Bank by Independent through a merger transaction. Specifically, the
reorganization agreement provides for the merger of Grand Bank with and into Independent Bank, with Independent Bank being the surviving bank. If the shareholders of Grand Bank approve the reorganization agreement at the special meeting, and if the
required regulatory approvals are obtained and the other conditions to the parties obligations to effect the merger are satisfied or are waived by the party entitled to do so, the parties anticipate that the merger will be completed in the
fourth quarter of 2015, although delays could occur.
Independent is currently the sole shareholder of Independent Bank, a Texas state
banking association, and Independent Bank will remain a wholly owned subsidiary of Independent.
Aggregate Merger Consideration.
Under the terms of the reorganization agreement, if the reorganization agreement is approved and the merger is completed, all outstanding shares of Grand Bank common stock will be converted into an aggregate of $24.1 million in cash and 1,279,532
shares of Independent common stock, subject in each case to adjustment under certain circumstances as set forth in the reorganization agreement and as described in this proxy statement/prospectus. Based upon the closing price of Independent common
stock on August 31, 2015, of $42.39, and assuming that Grand Banks tangible book value is at least $40.0 million on the calculation date, the aggregate amount of the total merger consideration to be paid by Independent is valued at
$76.2 million.
Per Share Merger Consideration. Based upon 1,824,304 shares anticipated to be outstanding immediately prior
to the effective time of the merger, which includes 1,726,810 shares outstanding on August 31, 2015 and 97,494 shares to be issued upon the exercise of options to purchase shares of Grand Bank common stock held by Grand Bank option holders who
have irrevocably agreed to exercise such options prior to the effective time of the merger and based upon the payment of a total of approximately $2.2 million to Grand Bank option holders who have irrevocably elected to receive a net cash payment
for the surrender and cancellation of their options, holders of Grand Bank common stock will receive 0.7014 of a share of Independent common stock and $12.03 in cash, subject in each case to adjustment under certain circumstances as set forth
in the reorganization agreement and as described in this proxy statement/prospectus, for each share of Grand Bank common stock they own at the effective time of the merger.
Adjustment to Cash Consideration. The amount of aggregate cash consideration paid by Independent would be reduced if Grand Banks
tangible book value, as calculated pursuant to the reorganization agreement, is less than $40.0 million, but more than $39.0 million on the calculation date. Under those circumstances, the aggregate cash consideration would be reduced by
the difference between $40.0 million and the amount of Grand Banks tangible book value on that date. For example, if tangible book value was $39.1 million on the calculation date, there would be a reduction in the aggregate cash
merger consideration of $900,000, and the aggregate cash merger consideration distributed among the holders of Grand Bank common stock would be $23.2 million rather than $24.1 million. In the event of a reduction in the aggregate cash
consideration, the per share cash consideration would be reduced by an amount equal to the quotient of (i) the amount of the reduction in aggregate cash consideration, divided by (ii) 1,824,304, the number of shares of Grand Bank common
stock outstanding on the closing date.
40
As noted above, pursuant to the terms of the reorganization agreement, the amount of aggregate
cash consideration paid by Independent to the shareholders of Grand Bank will also be reduced by the aggregate amount of cash paid by Independent to the holders of options to purchase shares of Grand Bank common stock who have irrevocably agreed to
surrender their options in exchange for a cash payment equal to the difference between the aggregate value of the shares subject to their options (as determined pursuant to the reorganization agreement) and the aggregate exercise price for such
options. The holders of options to purchase an aggregate of 127,156 shares of Grand Bank common stock have elected to receive such cash payment. Based upon this election, Independent will pay an aggregate of approximately $2.2 million in cash to
such option holders. Therefore, the aggregate amount of cash consideration to be paid by Independent to the Grand Bank shareholders will be reduced by approximately $2.2 million. The $12.03 per share cash consideration to be paid to Grand Bank
shareholders set forth above reflects this adjustment.
Adjustment to Stock Consideration. The amount of stock consideration paid
by Independent will be adjusted if the average sales price is 10% more or 10% less than $43.7660.
If the average sales price is
less than 90% of $43.7660, or $39.3894, the per share stock consideration would be adjusted to a fraction of a share of Independent common stock (rounded to the nearest ten thousandth) equal to the quotient of (x) $27.6270; divided by
(y) the average sales price. For example, if the average sale price was $39.00, then per share stock consideration would increase from 0.7014 to 0.7084.
If the average sales price is more than 110% of $43.7660, or $48.1426, the per share stock consideration would be adjusted to a fraction of a
share of Independent common stock (rounded to the nearest ten thousandth) equal to the quotient of (x) $33.7663; divided by (y) the average sales price. For example, if the average sale price was $48.25, then per share stock consideration
would decrease from 0.7014 to 0.6998.
Therefore, the maximum aggregate value of Independent common stock to be issued to Grand Bank
shareholders is $61.6 million and the minimum aggregate value of Independent common stock to be issued to Grand Bank shareholders is $50.4 million. As of August 31, 2015, the closing sales price of Independent common stock was $42.39
per share.
Other Financial Aspects. If Grand Banks tangible book value is greater than $40.0 million on the calculation
date, then on the day prior to the closing date, Grand Bank may distribute to its shareholders an amount equal to the difference between the actual amount of tangible book value on the calculation date minus $40.0 million.
Pursuant to the terms of the reorganization agreement, the tangible book value of Grand Bank will be determined from Grand Banks
financial statements prepared in accordance with GAAP, consistently applied, adjusted as provided below. Any unrealized gains or losses in investment securities are excluded from the calculation of tangible book value.
Grand Banks tangible book value as calculated pursuant to the reorganization agreement was approximately $41.5 million as of
June 30, 2015. Tangible book value will increase or decrease by the amount of net income or net loss, respectively, of Grand Bank through the calculation date. Management of Grand Bank estimates that net income will be approximately
$2.1 million from July 1, 2015,through November 30, 2015. Tangible book value will also increase by the amount of additional paid in capital resulting from the exercise of stock options. Management of Grand Bank estimates that
additional paid in capital resulting from the exercise of stock options will be approximately $2.4 million. The calculation of tangible book value will include a reduction for the following costs and expenses of Grand Bank, currently estimated to
be, in the aggregate, approximately $5.6 million:
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any and all transaction-related costs contemplated or required by the reorganization agreement, which would include any: |
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professional fees, including investment banking fees, legal fees and accounting fees; |
41
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director, officer or employee bonuses or payments and any change in control payments or other payments due under employment arrangements or anticipated stay or retention bonuses paid or to be
paid to Grand Bank employees; and |
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payments made by Grand Bank in connection with the amendment of the executive medical agreements; |
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any costs or fees (including forfeited prepaid expenses) associated with the termination and deconversion of Grand Banks material contracts, including its data processing and other IT contracts; |
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the printing and mailing costs related to sending this joint proxy statement/prospectus to Grand Banks shareholders; |
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the premium for director and officer insurance tail coverage; and |
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all costs and expenses resulting from the repayment of outstanding principal and interest due and owing on all Federal Home Loan Bank of Dallas advances owed by Grand Bank, including prepayment fees and penalties.
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The table set forth below shows the estimate for the amounts that would affect the calculation of Grand Banks
tangible book value, assuming the closing of the merger on November 30, 2015:
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Estimate |
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Tangible shareholders equity as of June 30, 2015 (excludes unrealized gains/losses on securities) |
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$ |
41,488,692 |
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Plus: Projected net income through November 30, 2015 |
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2,098,279 |
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Plus: Additional paid in capital from stock option exercise |
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2,415,650 |
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Projected tangible shareholders equity |
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$ |
46,002,621 |
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Estimated deductions to projected tangible shareholders equity: |
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Professional fees (investment banking, legal and accounting fees) |
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$ |
210,000 |
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Retention bonuses |
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3,195,032 |
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Payments to modify executive medical agreements adopted in 2003 (net of amount previously accrued) |
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995,303 |
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Costs associated with the termination and deconversion of material contracts and forfeited prepaid expenses |
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452,972 |
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Printing and mailing costs |
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2,500 |
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Premium for director and officer insurance tail coverage |
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53,058 |
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Repayment of FHLB advances |
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691,362 |
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Estimated total deductions |
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5,600,227 |
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Estimated tangible book value as of November 30, 2015 |
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$ |
40,402,394 |
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These amounts are only estimates and are based upon several assumptions, many of which are beyond the control
of Grand Bank. Accordingly, the actual amount of Grand Banks tangible book value may vary from these estimated amounts.
Grand Bank
will provide Independent with a preliminary calculation of tangible book value at least three business days before the closing date. If Independent disagrees with such calculation of tangible book value, Grand Bank and Independent will meet to
resolve any such disagreement. If the parties cannot resolve any such disagreement, then an independent accounting firm mutually agreed to by Grand Bank and Independent will resolve any such disagreement, which resolution will be final and binding
upon both parties.
Independents obligation to consummate the merger is conditioned upon Grand Bank having a tangible book value of
at least $39.0 million on the closing date. Should Grand Banks tangible book value be less than $39.0 million on the closing date, then Independent may, in its sole discretion refuse to close the transactions and consummate the
merger, or Independent may elect to proceed with the transactions and consummate the merger.
42
If Grand Banks tangible book value is below $39.0 million on the closing date, Independents board of directors intends to exercise its independent judgment in determining whether
to complete the merger or to terminate the reorganization agreement. In making this determination, the Independent board of directors will exercise its fiduciary duties, including fulfilling its duty to review the reasons why Grand Banks
tangible book value was lower than $39.0 million and whether that lower valuation negatively impacts the benefits that Independent hoped to achieve as a result of the merger, and the Independent board of directors will consult with its legal
and financial advisors in evaluating whether it would be in the best interests of the Independent shareholders to complete the merger in light of all the relevant facts and circumstances surrounding the lower tangible book value of Grand Bank.
If the Grand Bank tangible book value is materially less than $39.0 million and if Independent desires to waive the condition and proceed with
the transaction, Independent Bank and Grand Bank anticipate that they would renegotiate the cash portion of the merger consideration and amend the reorganization agreement. In that event, Grand Bank will resolicit proxies from its shareholders.
Please refer to the Risk Factor, The tangible book value of Grand Bank at closing could be an amount that results in the reduction of the amount of cash consideration that Grand Bank shareholders receive for their shares of Grand Bank common
stock or in Independents election to terminate the merger on page 29.
If Grand Bank achieves the estimates set forth above
and the tangible book value of Grand Bank on the closing date is at least $40.0
million, there would be no downward adjustment.
Treatment of Shares of Grand Bank Common Stock
As a result of the merger, holders of Grand Bank common stock will be entitled to receive whole shares of Independent common stock and cash,
with cash paid in lieu of a fractional share, and will no longer be owners of Grand Bank common stock. As a result of the merger, certificates of Grand Bank common stock will represent only the right to receive the merger consideration pursuant to
the reorganization agreement. Grand Bank will cease to exist following the completion of the merger.
Fractional shares of Independent
common stock will be paid in cash, without interest. The market price of Independent common stock will fluctuate from the date of this proxy statement/prospectus through the third trading date prior to the effective date of the merger, which is the
date on which the per share stock consideration is determined for the merger. Because of the possibility of the tangible book value adjustment to the amount of the per share cash consideration and the fluctuation in the market price of Independent
common stock that will comprise the per share stock consideration, you will not know the exact amount of cash or the exact number of shares of Independent common stock you will receive in connection with the merger when you vote on the
reorganization agreement. See Proposal to Approve the Reorganization AgreementTerms of the Merger beginning on page
40.
Background of the Merger
From time to time in recent years, the board of directors and management of Grand Bank have received inquiries about the possibility of a sale
of Grand Bank or Grand Bank entering into some form of strategic alliance with another bank. Those inquiries triggered some informal discussions at Grand Bank about the advisability, feasibility and benefits of continuing the operation of Grand Bank
as an independent bank compared to the advisability, feasibility and benefits of the alternatives of a sale or strategic alliance with another bank.
In early 2014, management of Grand Bank received an unsolicited specific oral proposal from Bank A to purchase Grand Bank. That oral
proposal was followed up with a written proposal in February 2014 for Bank A to acquire Grand Bank for a cash price of $71 million contingent upon Grand Bank having a tangible common equity of $37 million at the time the transaction
would be consummated.
The specific proposal prompted management of Grand Bank to seek independent third party professional advice
regarding the value of Grand Bank, available opportunities for sale of Grand Bank or partnering with
43
another bank, and the benefits of Grand Bank continuing in its then current status as a stand-alone bank. Accordingly, the Grand Bank board of directors engaged the Hovde Group to advise and
assist the board of directors and Grand Bank. Hovde Group came to the attention of Grand Bank when a representative of Hovde Group advised Grand Bank management that Bank A was seeking an acquisition in the Dallas area. Hovde Group is a
nationally recognized investment banking firm with substantial experience in transactions relating to banks. Hovde Group is continually engaged in the valuation of banks and their securities in connection with, among other things, mergers and
acquisitions. Hovde Group was engaged by Grand Bank on March 4, 2014.
Hovde Group representatives both advised Grand Bank about
alternatives available to it and engaged in conversation with representatives of Bank A about its proposal. Other potential alternative oral proposals were conveyed to both the Hovde Group representatives and to Grand Bank board members
regarding the purchase of or merger with Grand Bank, but no other written proposals were received at that time.
On February 27,
2014, Grand Bank received an unsolicited written offer by Bank B to purchase all of the capital stock of Grand Bank for a purchase price of $47 million. After discussion with the board of directors, management advised Bank B that the
price was not acceptable, and no additional proposal was ever received from Bank B.
In early March 2014, Bank A orally advised
Hovde Group that it was willing to modify its offer to provide for a purchase price of $73 million conditioned upon Grand Bank having a minimum capital at closing of $37.5 million. Subsequently, by letter dated March 27, 2014,
Bank A modified its proposal to provide for acquisition of all of the capital stock of Grand Bank for a cash price of $75 million, provided that Grand Bank had a tangible common equity of $38 million at the time the transaction was
completed. The proposed purchase price would be reduced dollar for dollar for any amount of shortfall in the minimum tangible common equity of Grand Bank.
On March 26, 2014, Grand Bank received an unsolicited written letter proposal from Bank C to acquire all of the capital stock of
Grand Bank for an aggregate consideration of an amount equal to 1.6 times Grand Banks book value. After discussion, the Grand Bank board of directors concluded that the proposal was not acceptable, and that decision was conveyed to
Bank C. Then on April 2, 2014, Grand Bank received an additional unsolicited written letter proposal from Bank C to acquire all of the capital stock of Grand Bank for an aggregate consideration of an amount equal to 1.90 times Grand
Banks total equity capital at the time the transaction would be completed. Bank C stated that it was open to discussion of whether the purchase price would be in cash or shares of capital stock of Bank C or some combination thereof.
The Grand Bank board of directors reviewed the proposal by Bank C and concluded that it was not acceptable, and management of Grand Bank advised representatives of Bank C of that conclusion.
After a detailed review and analysis by Hovde Group and extensive discussion by the Grand Bank directors, the Grand Bank board of directors
agreed to enter into the nonbinding letter of intent with Bank A for the cash purchase price of $75 million conditioned upon Grand Bank having a tangible common equity of $38 million. The letter of intent with Bank A was executed
by management of Grand Bank on March 27, 2014.
Counsel for Bank A prepared a definitive agreement proposed to be entered into
between Bank A and Grand Bank setting forth the details of the proposed transaction. That definitive agreement was reviewed by counsel for Grand Bank who made repeated contacts with counsel for Bank A to negotiate multiple changes in
provisions of the definitive agreement.
While Grand Bank was negotiating with Bank A for a definitive agreement, Bank A
received an unsolicited letter of intent from another bank offering to purchase Bank A. That event made pursuit of any agreement between Bank A and Grand Bank impractical. Therefore, in June 2014, Bank A and Grand Bank mutually agreed
to terminate any further discussions regarding transaction between the two banks.
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With the termination of discussion and negotiation with Bank A, Grand Bank effectively
concluded its formal relationship with Hovde Group. But Hovde Group informally continued to advise Grand Bank and present potential proposals to Grand Bank.
In July 2014, Hovde Group introduced representatives of Bank D to certain individuals in the management of Grand Bank. The
representatives of Bank D expressed an interest in a possible future transaction with Grand Bank. No specific terms were proposed at that time.
The representatives of Bank D renewed their contact with certain individuals in the management of Grand Bank in May 2015 and pursued
multiple discussionsby telephone and by meetingsduring June 2015. Bank D ultimately submitted a letter of intent proposing to acquire Grand Bank for $74.43 million.
In October 2014, management of Grand Bank was contacted by Bank E about a potential transaction. An initial meeting with representatives
of Bank E was held on October 16, 2014, and subsequent meetings were held on April 30, 2015, and June 11, 2015. By letter dated June 26, 2015, Bank E proposed to acquire Grand Bank for a price range of 150% to 175% of
Grand Banks tangible book value with the final multiple to be determined after Bank E completed due diligence. Management of Grand Bank advised Bank E that the proposal was not acceptable, and all discussions ended with Bank E.
Independent first made contact with management of Grand Bank in May 2015, and an initial meeting between the principals of the two
parties was held on June 7, 2015. Following the initial discussions, Independent submitted a nonbinding expression of interest, dated June 8, 2015, to acquire all of the capital stock of Grand Bank through a merger of Grand Bank with its
wholly owned subsidiary Independent Bank for a payment to Grand Bank shareholders of total consideration of $70 million.
After Grand
Bank management conducted informal discussions with the Grand Bank board of directors, Independent was advised that its proposal was not acceptable. Discussions continued throughout the month of June. Independent eventually asked what price might be
acceptable to the Grand Bank board of directors. The Grand Bank board of directors met on June 29, 2015, and discussed at length (a) the value of Grand Bank, (b) what is in the best interest of Grand Banks shareholders, and
(c) alternatives available to Grand Bank. The board of directors of Grand Bank concluded that any proposal to acquire all of the capital stock of Grand Bank would only be acceptable if the proposal was for a minimum of $80 million. That
fact was conveyed both to Bank D and Independent. Bank D increased its bid to $80 million and when given the opportunity to change its bid in any way, declined to change its bid.
On July 3, 2015, Independent submitted a revised nonbinding expression of interest for the current proposal to acquire all of the capital
stock of Grand Bank through a merger of Grand Bank with Independent Bank with the shareholders of Grand Bank receiving an aggregate consideration of $80.1 million, provided that Grand Bank had a tangible equity at closing of at least
$40.0 million. The expression of interest proposed that $24.1 million (approximately 30%) of the aggregate purchase price would be paid in cash and $56 million (approximately 70%) would be paid in registered shares of Independent
common stock. After review with the Grand Bank board of directors, Grand Bank management advised Independent that the proposal was acceptable. Grand Bank signed a binding standstill agreement and agreed to negotiate exclusively with Independent on a
definitive agreement to document and implement the transaction.
Grand Bank directors and management deemed it advisable to obtain
independent third party evaluation of the proposalincluding the provisions to be negotiated within the definitive agreement. So Hovde Group was again engaged by Grand Bank to advise and assist in the negotiation of the provisions of the
definitive agreement and to provide a fairness opinion based on its review of the transaction in the context of bank values in the marketplace and other similar transactions.
Thereafter, Grand Bank legal counsel, Mr. Larry Temple, discussed and negotiated provisions of the reorganization agreement with counsel
for Independent. At a meeting of the board of directors of Grand Bank
45
held on July 22, 2015, a thorough review of the proposed agreement and the ancillary legal documents related to it was provided by Grand Banks counsel. Representatives of Hovde Group
discussed the financial aspects of the transaction and stated that the overall proposal was fair to the shareholders of Grand Bank from a financial standpoint. Hovde Groups oral opinion was subsequently confirmed by the delivery of a written
opinion dated July 22, 2015 to the Grand Bank board of directors. On July 23, 2015, Grand Bank executed the proposed reorganization agreement, and Independent announced the transaction that day.
Recommendation of Grand Banks Board and Its Reasons for the Merger
Grand Banks board of directors has unanimously approved the reorganization agreement and unanimously recommends that the Grand Bank
shareholders vote FOR approval of the reorganization agreement.
The terms of the reorganization agreement, including the
consideration to be paid to Grand Bank shareholders, were the result of arms length negotiations between representatives of Grand Bank and representatives of Independent. Grand Banks board of directors has determined that the merger is
fair to, and in the best interests of, Grand Banks shareholders. In approving the reorganization agreement, Grand Banks board of directors consulted with (a) Hovde Group with respect to financial aspects and fairness of the merger
consideration, from a financial point of view, to the Grand Bank shareholders and (b) its outside legal counsel as to its legal duties and the terms of the reorganization agreement. In arriving at its determination, Grand Banks board also
considered a number of factors, including:
|
|
|
Grand Banks board of directors familiarity with and review of information concerning the business, results of operations, financial condition, competitive position and future prospects of Grand Bank;
|
|
|
|
Grand Banks board of directors knowledge and analysis of the current and prospective industry and economic conditions facing the financial services generally, including continued consolidation in the
industry, increasing competition, and the increasing importance of operational scale and financial resources in maintaining efficiency, remaining competitive and capitalizing on technological developments; |
|
|
|
The increased regulatory burdens on financial institutions and the associated costs of regulatory compliance; |
|
|
|
The terms of the reorganization agreement; |
|
|
|
The opinion provided to the Grand Bank board of directors by Hovde Group that the consideration to be received in the transaction is fair to the shareholders of Grand Bank from a financial point of view;
|
|
|
|
The future prospects of Grand Bank compared with the future prospects of Independent considering that by receiving Independent common stock in the transaction, Grand Bank shareholders would be investing in a larger,
more diversified banking organization operating in a broader geographic area; |
|
|
|
The shareholders of Grand Bank would receive part of the merger consideration in shares of Independent common stock, which is publicly traded on the NASDAQ Global Select Market, thereby representing a more liquid and
flexible investment than does Grand Bank common stock; |
|
|
|
The ability of Independent to pay the cash portion of the aggregate merger consideration; |
|
|
|
That the number of shares to be issued to Grand Bank shareholders will be determined based on the daily volume weighted average sale price of Independents common stock on the NASDAQ Global Select Market for the
ten (10) consecutive trading days ending on and including the third trading day preceding the closing date; |
|
|
|
The results that Grand Bank could expect to obtain if it continued to operate independently, and the likely benefit to shareholders of that course of action, as compared with the value of the merger consideration
offered by Independent; |
|
|
|
The noneconomic terms of the transaction, including the impact on existing customers and employees; |
46
|
|
|
That a merger with a large bank could provide the opportunity to realize the economies of scale, increased efficiencies of operations, and enhance the development of new products and services that would benefit
customers; |
|
|
|
The ability of Independent as an experienced acquirer of financial institutions to integrate the operations of Grand Bank; and |
|
|
|
The likelihood that the transaction would receive approval from the appropriate regulatory authorities in a timely manner. |
The reasons set out above for the merger are not intended to be exhaustive but do include all material factors considered by Grand Banks
board of directors in approving the reorganization agreement and the merger. In reaching its determination, the Grand Bank board of directors did not assign any relative or specific weights to different factors, and individual directors may have
given different weights to different factors. Based on the reasons stated, the Grand Bank board believed that the merger was in the best interest of Grand Banks shareholders, and therefore the board of directors of Grand Bank unanimously
approved the reorganization agreement and the merger. In addition, all members of the Grand Bank board of directors have entered into voting agreements requiring them to vote the shares of Grand Bank common stock over which they have voting
authority in favor of the reorganization agreement.
GRAND BANKS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF GRAND
BANK COMMON STOCK VOTE FOR THE REORGANIZATION AGREEMENT.
Fairness Opinion of Grand Banks Financial Advisor
The fairness opinion of Grand Banks financial advisor, Hovde Group, is described below. The description contains projections,
estimates and other forward-looking statements about the future earnings or other measures of the future performance of Grand Bank. The projections were based on numerous variables and assumptions, which are inherently uncertain, including factors
related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in the projections. You should not rely on any of these statements as having been made or adopted by Grand Bank or
Independent. You should review the copy of the Fairness Opinion, which is attached as Appendix B.
Hovde Group has
acted as Grand Banks financial advisor in connection with the proposed merger. Hovde Group is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger and is familiar with Grand Bank and
its operations. As part of its investment banking business, Hovde Group is continually engaged in the valuation of businesses and their securities in connection with, among other things, mergers and acquisitions.
Hovde Group reviewed the financial aspects of the proposed merger with Grand Banks board of directors and, on July 22, 2015,
rendered a written opinion to Grand Banks board of directors that the aggregate merger consideration to be paid in connection with the merger was fair to the shareholders of Grand Bank from a financial point of view.
The full text of Hovde Groups written opinion is included in this proxy statement/prospectus as Appendix B and is
incorporated herein by reference. You are urged to read the opinion in its entirety for a description of the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Hovde Group. The
summary of the opinion of Hovde Group set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion.
Hovde Groups opinion is directed to Grand Banks board of directors and addresses only the fairness, from a financial point of
view, of the aggregate merger consideration to Grand Banks shareholders. It does not address the underlying business decision to proceed with the merger and does not constitute a recommendation to
47
any of the shareholders as to how such shareholder should vote at the special meeting on the merger or any related matter.
During the course of its engagement, and as a basis for arriving at its opinion, Hovde Group reviewed and analyzed material bearing upon the
financial and operating conditions of Grand Bank and Independent and material prepared in connection with the merger, including, among other things, the following:
|
|
|
reviewed a draft of the reorganization agreement, as provided to Hovde Group by Grand Bank; |
|
|
|
reviewed certain unaudited financial statements of Grand Bank and Independent for the six month period ended June 30, 2015; |
|
|
|
reviewed certain historical annual reports of each of Grand Bank and Independent, including audited annual reports for Grand Bank and Independent for the year ended December 31, 2014; |
|
|
|
reviewed certain historical publicly available business and financial information concerning each of Grand Bank and Independent; |
|
|
|
reviewed certain internal financial statements and other financial and operating data concerning Grand Bank, including, without limitation, internal financial analyses and forecasts prepared by management of Grand Bank,
and held discussions with senior management of Grand Bank and Independent regarding recent developments and regulatory matters; |
|
|
|
analyzed financial projections prepared by the certain members of senior management of Grand Bank; |
|
|
|
reviewed the terms of recent merger, acquisition and control investment transactions, to the extent publicly available, involving financial institutions and financial institution holding companies that Hovde Group
considered relevant; |
|
|
|
assessed the general economic, market and financial conditions; |
|
|
|
analyzed the pro forma impact of the merger on the combined companys earnings per share, consolidated capitalization and financial ratios; |
|
|
|
reviewed historical market prices and trading volumes of Independents common stock; and |
|
|
|
reviewed and analyzed certain publicly available financial and stock market data relating to selected public companies that Hovde Group deemed relevant to its analysis. |
Additionally, Hovde Group held discussions with members of senior management of Grand Bank and Independent for purposes of reviewing the
business, financial condition, results of operations and future prospects of Grand Bank and Independent, as well as the history and past and current operations of Grand Bank and Independent, and Grand Banks historical financial performance,
outlook and future prospects. In addition, Hovde Group held discussions with senior management of Grand Bank and Independent regarding recent business developments and regulatory matters. Hovde Group also discussed with management of Grand Bank and
Independent their assessment of the rationale for the merger. Hovde Group also performed such other analyses and considered such other factors as Hovde Group deemed appropriate and took into account its experience in other transactions, as well as
its knowledge of the banking and financial services industry and its general experience in securities valuations.
In rendering its
opinion, Hovde Group assumed, without independent verification, the accuracy and completeness of the financial and other information and representations contained in the materials provided to it by Grand Bank, and in the discussions it had with the
management of Grand Bank. Hovde Group relied upon the reasonableness and achievability of the financial forecasts and projections (and the assumptions and bases therein) provided to Hovde Group by Grand Bank and assumed that the financial forecasts,
including, without limitation, the projections regarding under-performing and nonperforming assets and net charge-offs were reasonably prepared by Grand Bank on a basis reflecting the best currently available information and judgments and estimates
by Grand Bank, and that such forecasts will be realized in the amounts and at the times
48
contemplated thereby. Hovde Group did not assume any responsibility to verify such information or assumptions independently.
Hovde Group is not an expert in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for loan
losses with respect thereto. Hovde Group assumed that such allowances for Grand Bank and Independent are, in the aggregate, adequate to cover such losses, and would be adequate on a pro forma basis for the combined entity. Hovde Group was not
requested to make, and did not conduct, an independent evaluation, physical inspection or appraisal of the assets, properties, facilities or liabilities (contingent or otherwise) of Grand Bank or Independent, the collateral securing any such assets
or liabilities, or the collectability of any such assets, and Hovde Group was not furnished with any such evaluations or appraisals, nor did Hovde Group review any loan or credit files of Grand Bank or Independent.
Hovde Group assumed that the merger will be consummated substantially in accordance with the terms set forth in the reorganization agreement,
without any waiver of material terms or conditions by Grand Bank or any other party to the reorganization agreement and that the final reorganization agreement will not differ materially from the draft Hovde Group reviewed. Hovde Group assumed that
the merger is, and will be, in compliance with all laws and regulations that are applicable to Grand Bank, Independent and their respective affiliates. Hovde Group further assumed that, in the course of obtaining the necessary regulatory and
government approvals, no restriction will be imposed on Grand Bank or Independent that would have a material adverse effect on the contemplated benefits of the merger. Hovde Group also assumed that no changes in applicable law or regulation will
occur that will cause a material adverse change in the prospects or operations of the institutions after the merger.
In performing its
analyses, Hovde Group made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Hovde Group, Grand Bank and Independent.
Hovde Groups opinion was necessarily based on financial, economic, market, and other conditions and circumstances as they existed on, and on the information made available to Hovde Group as of, the date of its opinion. Hovde Group has no
obligation to update or reaffirm its opinion at any time. Any estimates contained in the analyses performed by Hovde Group are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than
suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities may be sold or the prices at which any securities may trade
at any time in the future. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. Hovde Groups opinion does not address the relative merits of the merger as compared to any other business combination in
which Grand Bank might engage. In addition, Hovde Groups fairness opinion was among several factors taken into consideration by Grand Banks board of directors in making its determination to approve the reorganization agreement and the
merger. Consequently, the analyses described below should not be viewed as solely determinative of the decision of Grand Banks board of directors or Grand Banks management with respect to the fairness of the aggregate merger
consideration.
The following is a summary of the material analyses prepared by Hovde Group and presented to Grand Banks board of
directors on July 22, 2015 in connection with the fairness opinion. This summary is not a complete description of the analyses underlying the fairness opinion or the presentation prepared by Hovde Group, but it summarizes the material analyses
performed and presented in connection with such opinion. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application
of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Hovde Group did not attribute any particular weight to any analysis or
factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. The financial analyses summarized below include the information presented in tabular format. The analyses and the
summary of the analyses must be considered as a whole and selecting portions of the analyses and factors or focusing on the information presented below in tabular format, without considering all analyses
49
and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the
process underlying the analyses and opinion of Hovde Group. The tables alone are not a complete description of the financial analyses.
All net income information for Grand Bank and other Subchapter S banks incorporated in these analyses are represented on an after-tax basis
utilizing an approximate 34% tax rate after taking into consideration any tax-free income, to the extent tax-free income information was readily available. For Grand Bank, all tangible equity calculations are based upon the minimum tangible equity
required of Grand Bank at closing of $40.0 million.
Throughout the following analyses, Hovde Group references an estimated
transaction value of $80.1 million. This is based upon the cash consideration of $24.1 million plus an estimated stock consideration value of $56.0 million of Independent common stock.
Precedent Transactions Analysis (Texas Group). As part of its analysis, Hovde Group reviewed publicly available information related to
select acquisition transactions of banks based in Texas announced since January 1, 2012, in which each target had assets between $250 million and $1.75 billion and nonperforming assets represented less than 2% of total assets.
Information for the target institutions was based on the most recent quarter prior to announcement of the transaction. The resulting group consisted of the following fifteen transactions:
|
|
|
Buyer (State) |
|
Target (State) |
Green Bancorp, Inc. (TX) |
|
Patriot Bancshares, Inc. (TX) |
|
|
First Financial Bankshares, Inc. (TX) |
|
FBC Bancshares, Inc. (TX) |
|
|
Independent Bank Group, Inc. (TX) |
|
Houston City Bancshares, Inc. (TX) |
|
|
Green Bancorp, Inc. (TX) |
|
SP Bancorp, Inc. (TX) |
|
|
Southside Bancshares, Inc. (TX) |
|
OmniAmerican Bancorp, Inc. (TX) |
|
|
CBFH, Inc. (TX) |
|
MC Bancshares, Inc. (TX) |
|
|
IBERIABANK Corporation (LA) |
|
First Private Holdings, Inc. (TX) |
|
|
ViewPoint Financial Group, Inc. (TX) |
|
LegacyTexas Group, Inc. (TX) |
|
|
Independent Bank Group, Inc. (TX) |
|
BOH Holdings, Inc. (TX) |
|
|
East West Bancorp, Inc. (CA) |
|
MetroCorp Bancshares, Inc. (TX) |
|
|
Cullen/Frost Bankers, Inc. (TX) |
|
WNB Bancshares, Inc. (TX) |
|
|
First Financial Bankshares, Inc. (TX) |
|
Orange Savings Bank, SSB (TX) |
|
|
Pacific Premier Bancorp, Inc. (CA) |
|
First Associations Bank (TX) |
|
|
FVNB Corp. (TX) |
|
First State Bank (TX) |
|
|
Cadence Bancorp, LLC (TX) |
|
Encore Bancshares, Inc. (TX) |
For each precedent transaction, Hovde Group derived and compared the implied ratio of deal value to the
implied ratio based on certain financial characteristics of Grand Bank as follows:
|
|
|
the multiple of the purchase consideration to the acquired companys last twelve months (LTM) tax-affected net income (the Price-to-LTM EPS Multiple);
|
|
|
|
the multiple of the purchase consideration to the acquired companys tangible common (TC) book value, as adjusted (the Price-to-TC Book Value Multiple); |
|
|
|
the multiple of the purchase consideration, as adjusted, to the acquired companys core equity representing 8% of total assets (the Price-to-8% Core Equity Multiple); and |
50
|
|
|
the multiple of the difference between the purchase consideration and the acquired companys tangible book value, as adjusted, to the acquired companys core deposits (the Premium-to-Core Deposits
Multiple). |
The results of the analysis are set forth in the table below. Transaction multiples for the merger were
derived from an aggregate merger consideration value of $80.1 million for Grand Bank and financial information as of June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Value to
Grand Bank Based On: |
|
Price to LTM EPS Multiple |
|
|
Price to TC Book Value Multiple |
|
|
Price to 8% Core Equity Multiple |
|
|
Premium to Core Deposits Multiple |
|
Reorganization Agreement |
|
|
32.2x |
|
|
|
192 200 |
%* %** |
|
|
179 |
% |
|
|
7.7 |
% |
|
|
|
|
|
Precedent Transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
44.4x |
|
|
|
389 |
% |
|
|
252 |
% |
|
|
18.4 |
% |
Median |
|
|
17.7x |
|
|
|
188 |
% |
|
|
205 |
% |
|
|
13.2 |
% |
Minimum |
|
|
12.8x |
|
|
|
118 |
% |
|
|
129 |
% |
|
|
2.8 |
% |
|
|
|
* |
|
Based on TC Book Value as of June 30, 2015. |
** |
|
Based on deliverable TC Book Value of $40.0 million. |
Notes: |
|
LTM EPS = last twelve months tax-affected earnings per share. |
Comparative Company Analysis (Texas Group). Using publicly available information, Hovde Group compared
the financial performance of Grand Bank with that of the maximum and minimum of the precedent transactions. The performance highlights are based on the trailing twelve months information of Grand Bank at June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROAA |
|
|
ROAE |
|
|
Tangible Equity/ Tangible Assets |
|
|
Core Deposits |
|
|
Efficiency Ratio |
|
|
NPAs/Assets |
|
|
LLR/NPLs |
|
Grand Bank |
|
|
0.43 |
% |
|
|
6.4 |
% |
|
|
6.9 |
% |
|
|
97.5 |
% |
|
|
69.7 |
% |
|
|
0.0 |
% |
|
|
N/A |
|
|
|
|
|
|
|
|
|
Precedent Transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
1.64 |
% |
|
|
20.5 |
% |
|
|
14.9 |
% |
|
|
97.3 |
% |
|
|
82.8 |
% |
|
|
1.7 |
% |
|
|
374.1 |
% |
Median |
|
|
0.89 |
% |
|
|
7.2 |
% |
|
|
9.0 |
% |
|
|
78.1 |
% |
|
|
66.1 |
% |
|
|
1.0 |
% |
|
|
163.8 |
% |
Minimum |
|
|
0.41 |
% |
|
|
3.1 |
% |
|
|
4.1 |
% |
|
|
61.8 |
% |
|
|
51.9 |
% |
|
|
0.0 |
% |
|
|
52.8 |
% |
|
|
|
Notes: |
|
ROAA = return on average assets; ROAE = return on average equity; NPAs = nonperforming assets; LLR = loan loss reserves; and NPLs = nonperforming loans. |
51
Precedent Transactions Analysis (Texas and Contiguous States Group). As part of its
analysis, Hovde Group reviewed publicly available information related to select acquisition transactions of banks based in Texas and contiguous states announced since January 1, 2013, in which each target had assets between $300 million
and $1.5 billion and nonperforming assets represented less than 1.5% of total assets. Information for the target institutions was based on the most recent quarter prior to announcement of the transaction. The resulting group consisted of the
following 16 transactions:
|
|
|
Buyer (State) |
|
Target (State) |
Home Bancorp, Inc. (LA) |
|
Louisiana Bancorp, Inc. (LA) |
|
|
Green Bancorp, Inc. (TX) |
|
Patriot Bancshares, Inc. (TX) |
|
|
Southwest Bancorp, Inc. (OK) |
|
First Commercial Bancshares, Inc. (OK) |
|
|
First Financial Bankshares, Inc. (TX) |
|
FBC Bancshares, Inc. (TX) |
|
|
Magnolia Banking Corporation (AR) |
|
First National Bancshares of Hempstead County, Inc. (AR) |
|
|
Independent Bank Group, Inc. (TX) |
|
Houston City Bancshares, Inc. (TX) |
|
|
Green Bancorp, Inc. (TX) |
|
SP Bancorp, Inc. (TX) |
|
|
Southside Bancshares, Inc. (TX) |
|
OmniAmerican Bancorp, Inc. (TX) |
|
|
IBERIABANK Corporation (LA) |
|
First Private Holdings, Inc. (TX) |
|
|
Bank of the Ozarks, Inc. (AR) |
|
Summit Bancorp, Inc. (AR) |
|
|
IBERIABANK Corporation (LA) |
|
Teche Holding Company (LA) |
|
|
BancorpSouth, Inc. (MS) |
|
Ouachita Bancshares Corp. (LA) |
|
|
Independent Bank Group, Inc. (TX) |
|
BOH Holdings, Inc. (TX) |
|
|
Cullen/Frost Bankers, Inc. (TX) |
|
WNB Bancshares, Inc. (TX) |
|
|
Bear State Financial, Inc. (AR) |
|
First National Security Company (AR) |
|
|
First Financial Bankshares, Inc. (TX) |
|
Orange Savings Bank, SSB (TX) |
For each precedent transaction, Hovde Group derived and compared the implied ratio of deal value to the
implied ratio based on certain financial characteristics of Grand Bank as follows:
|
|
|
the Price-to-LTM EPS Multiple; |
|
|
|
the Price-to-TC Book Value Multiple; |
|
|
|
Price-to-8% Core Equity Multiple; and |
|
|
|
the Premium-to-Core Deposits Multiple. |
The results of the analysis are set forth in the table
below. Transaction multiples for the merger were derived from an aggregate merger consideration value of $80.1 million for Grand Bank and financial information as of June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Value to Grand Bank Based On: |
|
Price to LTM EPS Multiple |
|
|
Price to TC Book Value Multiple |
|
|
Price to 8% Core Equity Multiple |
|
|
Premium to Core Deposits Multiple |
|
Reorganization Agreement |
|
|
32.2x |
|
|
|
192 200 |
%* %** |
|
|
179 |
% |
|
|
7.7 |
% |
|
|
|
|
|
Precedent Transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
44.4x |
|
|
|
389 |
% |
|
|
252 |
% |
|
|
18.4 |
% |
Median |
|
|
17.2x |
|
|
|
158 |
% |
|
|
187 |
% |
|
|
11.6 |
% |
Minimum |
|
|
12.8x |
|
|
|
120 |
% |
|
|
133 |
% |
|
|
3.8 |
% |
|
|
|
* |
|
Based on TC Book Value as of June 30, 2015. |
** |
|
Based on deliverable TC Book Value of $40.0 million. |
Notes: |
|
LTM EPS = last twelve months tax-affected earnings per share. |
52
Comparative Company Analysis (Texas and Contiguous States Group). Using publicly available
information, Hovde Group compared the financial performance of Grand Bank with that of the maximum and minimum of the precedent transactions. The performance highlights are based on the trailing twelve months information of Grand Bank at
June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROAA |
|
|
ROAE |
|
|
Tangible Equity/ Tangible Assets |
|
|
Core Deposits |
|
|
Efficiency Ratio |
|
|
NPAs/Assets |
|
|
LLR/NPLs |
|
Grand Bank |
|
|
0.43 |
% |
|
|
6.4 |
% |
|
|
6.9 |
% |
|
|
97.5 |
% |
|
|
69.7 |
% |
|
|
0.0 |
% |
|
|
N/A |
|
|
|
|
|
|
|
|
|
Precedent Transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
1.28 |
% |
|
|
18.8 |
% |
|
|
17.8 |
% |
|
|
89.3 |
% |
|
|
88.5 |
% |
|
|
1.5 |
% |
|
|
635.2 |
% |
Median |
|
|
0.92 |
% |
|
|
8.3 |
% |
|
|
9.4 |
% |
|
|
77.7 |
% |
|
|
65.7 |
% |
|
|
0.85 |
% |
|
|
151.5 |
% |
Minimum |
|
|
0.24 |
% |
|
|
2.3 |
% |
|
|
4.1 |
% |
|
|
61.8 |
% |
|
|
51.9 |
% |
|
|
0.0 |
% |
|
|
52.8 |
% |
|
|
|
Notes: |
|
ROAA = return on average assets; ROAE = return on average equity; NPAs = nonperforming assets; LLR = loan loss reserves; and NPLs = nonperforming loans. |
Precedent Transactions Analysis (Nationwide Group). As part of its analysis, Hovde Group reviewed
publicly available information related to select acquisition transactions of banks based in the United States announced since January 1, 2014, in which each target had assets between $350 million and $1 billion, a return on average assets
between 0.00% and 0.80%, and nonperforming assets represented less than 1.5% of total assets. Information for the target institutions was based on the most recent quarter prior to announcement of the transaction. The resulting group consisted of the
following 16 transactions:
|
|
|
Buyer (State) |
|
Target (State) |
Bear State Financial, Inc. (AR) |
|
Metropolitan National Bank (MO) |
|
|
Liberty Bank (CT) |
|
Naugatuck Valley Financial Corporation (CT) |
|
|
Heritage Commerce Corp. (CA) |
|
Focus Business Bank (CA) |
|
|
Community Bank System, Inc. (NY) |
|
Oneida Financial Corp. (NY) |
|
|
United Community Banks, Inc. (GA) |
|
MoneyTree Corporation (TN) |
|
|
Bridge Bancorp, Inc. (NY) |
|
Community National Bank (NY) |
|
|
Berkshire Hills Bancorp, Inc. (MA) |
|
Hampden Bancorp, Inc. (MA) |
|
|
Pacific Premier Bancorp, Inc. (CA) |
|
Independence Bank (CA) |
|
|
IBERIABANK Corporation (LA) |
|
Florida Bank Group, Inc. (FL) |
|
|
Independent Bank Corp. (MA) |
|
Peoples Federal Bancshares, Inc. (MA) |
|
|
Peoples Bancorp, Inc. (OH) |
|
NB&T Financial Group, Inc. (OH) |
|
|
BNC Bancorp, Inc. (NC) |
|
Harbor Bank Group, Inc. (SC) |
|
|
CU Bancorp (CA) |
|
1st Enterprise Bank (CA) |
|
|
Bryn Mawr Bank Corporation (PA) |
|
Continental Bank Holdings, Inc. (PA) |
|
|
F.N.B. Corporation (PA) |
|
OBA Financial Services, Inc. (MD) |
|
|
IBERIABANK Corporation (LA) |
|
First Private Holdings, Inc. (TX) |
For each precedent transaction, Hovde Group derived and compared the implied ratio of deal value to the
implied ratio based on certain financial characteristics of Grand Bank as follows:
|
|
|
the Price-to-LTM EPS Multiple; |
|
|
|
the Price-to-TC Book Value Multiple; |
|
|
|
the Price-to-8% Core Equity Multiple; and |
|
|
|
the Premium-to-Core Deposits Multiple. |
53
The results of the analysis are set forth in the table below. Transaction multiples for the
merger were derived from an aggregate merger consideration value of $80.1 million for Grand Bank and financial information as of June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Value to Grand Bank Based On: |
|
Price to LTM EPS Multiple |
|
|
Price to TC Book Value Multiple |
|
|
Price to 8% Core Equity Multiple |
|
|
Premium to Core Deposits Multiple |
|
Reorganization Agreement |
|
|
32.2x |
|
|
|
192 200 |
%* %** |
|
|
179 |
% |
|
|
7.7 |
% |
|
|
|
|
|
Precedent Transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
60.0x |
|
|
|
202 |
% |
|
|
212 |
% |
|
|
15.7 |
% |
Median |
|
|
27.4x |
|
|
|
147 |
% |
|
|
170 |
% |
|
|
8.0 |
% |
Minimum |
|
|
19.0x |
|
|
|
123 |
% |
|
|
139 |
% |
|
|
4.8 |
% |
|
|
|
* |
|
Based on TC Book Value as of June 30, 2015. |
** |
|
Based on deliverable TC Book Value of $40.0 million. |
Notes: |
|
LTM EPS = last twelve months tax-affected earnings per share. |
Comparative Company Analysis (Nationwide Group). Using publicly available information, Hovde Group
compared the financial performance of Grand Bank with that of the maximum and minimum of the precedent transactions. The performance highlights and metrics are based on the trailing twelve months information of Grand Bank at June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROAA |
|
|
ROAE |
|
|
Tangible Equity/ Tangible Assets |
|
|
Core Deposits |
|
|
Efficiency Ratio |
|
|
NPAs/Assets |
|
|
LLR/NPLs |
|
Grand Bank |
|
|
0.43 |
% |
|
|
6.4 |
% |
|
|
6.9 |
% |
|
|
97.5 |
% |
|
|
69.7 |
% |
|
|
0.0 |
% |
|
|
N/A |
|
|
|
|
|
|
|
|
|
Precedent Transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
0.80 |
% |
|
|
8.0 |
% |
|
|
18.8 |
% |
|
|
97.6 |
% |
|
|
106.1 |
% |
|
|
1.5 |
% |
|
|
436.3 |
% |
Median |
|
|
0.47 |
% |
|
|
4.9 |
% |
|
|
10.6 |
% |
|
|
84.9 |
% |
|
|
77.7 |
% |
|
|
0.9 |
% |
|
|
120.5 |
% |
Minimum |
|
|
0.11 |
% |
|
|
1.1 |
% |
|
|
7.3 |
% |
|
|
64.1 |
% |
|
|
28.3 |
% |
|
|
0.0 |
% |
|
|
47.3 |
% |
|
|
|
Notes: |
|
ROAA = return on average assets; ROAE = return on average equity; NPAs = nonperforming assets; LLR = loan loss reserves; and NPLs = nonperforming loans. |
No company or transaction used as comparison in the above transaction analyses is identical to Grand Bank or
Independent, and no transaction was consummated on terms identical to the terms of the reorganization agreement. Accordingly, an analysis of these results is not strictly mathematical. Rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the companies.
Discounted Cash Flow Analysis. Taking into
account various factors including, but not limited to, Grand Banks recent performance, the current banking environment and the local economy in which Grand Bank operates, Hovde Group determined earnings estimates for a forward looking
five-year period with the assistance of information and guidance provided by the management of Grand Bank. These estimates were based on asset growth of 6% annually through 2020. The after-tax return on average assets ranged between 0.5% and
1.0% per year. It was assumed that distributions of 40% of pre-tax earnings would be paid each year, the estimated tax obligation would be approximately 34% of pretax earnings and the remainder would serve as discretionary cash flow to
shareholders. A range of discount rates between 12% and 15% were employed in determining the present value of the cash flows plus the terminal value. Hovde Group utilized three different discounted cash flow methodologies to arrive at implied values
for Grand Bank.
For the first discounted cash flow analysis (DCF Perpetuity), an aggregate value to Grand Bank
shareholders was calculated based on the present value of future free cash flows after tax. Hovde Group utilized a
54
range of terminal values to capitalized Grand Banks after-tax free cash flow at the end of 2020 based on Grand Banks after-tax free cash flow increasing perpetually thereafter at an
annual rate of 3.0% to 5.0%. Present values were calculated based the after-tax free cash flows plus the terminal value and the range of discount rates. The resulting values of the DCF Perpetuity ranged between $48.3 million and
$80.0 million with a midpoint of $60.0 million.
In the second discounted cash flow analysis (DCF PE Multiple), the
same earnings estimates were used; however, in arriving at the terminal value of Grand Banks earnings at the end of 2020, Hovde Group applied the median price-to-earnings multiple of 17.7x from precedent transactions in the Precedent
Transaction Analysis (Texas Group). Present values were calculated based the free cash flows plus the terminal value and the range of discount rates. The resulting values of the DCF PE Multiple ranged between $60.2 million and
$86.7 million with a midpoint of $72.7 million.
In the third and final discounted cash flow analysis (DCF PTBV
Multiple), the same earnings estimates were used as in the DCF PE Multiple analysis; however, in arriving at the terminal value at the end of 2020, Hovde Group applied the median price-to-tangible book value multiple of 1.88x from precedent
transactions in the Precedent Transaction Analysis (Texas Group). Present values were calculated based the free cash flows plus the terminal value and the range of discount rates. The resulting values of the DCF PTBV Multiple ranged between
$56.1 million and $79.7 million with a midpoint of $67.2 million.
These analyses and their underlying assumptions yielded
a range of values for Grand Bank, and the median values is outlined in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Value to Grand Bank Based On: |
|
Implied Transaction Value (Millions) |
|
|
Price to LTM Net Income Multiple |
|
|
Price to TC Book Value Multiple |
|
|
Price to 8% Core Equity Multiple |
|
|
Premium to Core Deposits Multiple |
|
Reorganization Agreement |
|
$ |
80.1 |
|
|
|
32.2x |
|
|
|
192 |
% |
|
|
179 |
% |
|
|
7.7 |
% |
DCF Perpetuity (midpoint) |
|
$ |
60.0 |
|
|
|
24.1x |
|
|
|
144 |
% |
|
|
137 |
% |
|
|
3.7 |
% |
DCF PE Multiple (midpoint) |
|
$ |
72.7 |
|
|
|
29.2x |
|
|
|
174 |
% |
|
|
163 |
% |
|
|
6.2 |
% |
DCF PTBV Analysis (midpoint) |
|
$ |
67.2 |
|
|
|
27.0x |
|
|
|
161 |
% |
|
|
152 |
% |
|
|
5.1 |
% |
Notes: LTM = last twelve months; and TC = total common.
Hovde Group noted that while the discounted cash flow present value analysis is a widely used valuation methodology, it relies on numerous
assumptions, including asset and earnings growth rates, distribution payout rates, terminal values and discount rates. Hovde Groups analysis does not purport to be indicative of the actual values or expected values of Grand Banks common
stock.
55
Public Peer Analysis (Regional Group). As part of its analysis, Hovde Group reviewed two
groups of financial institutions that Hovde Group deemed to be comparable to Independent. The first group was based on publicly traded financial institutions with a significant portion of their operations in Texas or a contiguous state with total
assets of less than $20 billion (the Regional Group). The Regional Group consisted of the following 14 institutions:
|
Regional Group |
IBERIABANK Corporation (LA) |
|
Texas Capital Bancshares, Inc. (TX) |
|
BancorpSouth, Inc. (MS) |
|
Hilltop Holdings Inc. (TX) |
|
Trustmark Corporation (MS) |
|
Bank of the Ozarks, Inc. (AR) |
|
Home BancShares, Inc. (AR) |
|
LegacyTexas Financial Group, Inc. (TX) |
|
BancFirst Corporation (OK) |
|
First Financial Bankshares, Inc. (TX) |
|
Southside Bancshares, Inc. (TX) |
|
Green Bancorp, Inc. (TX) |
|
MidSouth Bancorp, Inc. (LA) |
|
Veritex Holdings, Inc. (TX) |
The table below shows the results of this analysis comparing the values and multiples of Independent to the
Regional Group. This analysis utilized the closing common stock prices on July 20, 2015, and financial data as of March 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price to Tangible Book Multiple |
|
|
Price to LTM Core EPS Multiple |
|
|
Price to 2015 Estimated EPS Multiple |
|
|
Price to 2016 Estimated EPS Multiple |
|
|
Dividend Yield |
|
Independent |
|
|
272 |
% |
|
|
22.6x |
|
|
|
17.5x |
|
|
|
14.6x |
|
|
|
0.7 |
% |
|
|
|
|
|
|
Regional Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
376 |
% |
|
|
30.6x |
|
|
|
22.6x |
|
|
|
20.7x |
|
|
|
3.7 |
% |
Median |
|
|
184 |
% |
|
|
20.5x |
|
|
|
17.5x |
|
|
|
15.5x |
|
|
|
1.8 |
% |
Minimum |
|
|
140 |
% |
|
|
11.7x |
|
|
|
14.2x |
|
|
|
10.2x |
|
|
|
0.0 |
% |
Notes: |
LTM = last twelve months; and Estimated EPS = estimated earnings per share. EPS estimates are based on the mean of research analysts as compiled by FactSet Research Systems Inc. |
Comparative Company Analysis (Regional Group). Using publicly available information, Hovde Group compared Independents financial
performance with that of the maximum and minimum of the institutions included in the Regional Group. Independents performance highlights and the performance highlights of the comparative companies are based on trailing twelve months
information at March 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROAA |
|
|
Efficiency Ratio |
|
|
Net Interest Margin |
|
|
Loans/ Deposits |
|
|
NPAs/Assets |
|
|
TCE/ Tangible Assets |
|
Independent |
|
|
0.87 |
% |
|
|
55.5 |
% |
|
|
4.2 |
% |
|
|
98 |
% |
|
|
0.4 |
% |
|
|
7.1 |
% |
|
|
|
|
|
|
|
Regional Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
2.05 |
% |
|
|
82.4 |
% |
|
|
5.5 |
% |
|
|
119 |
% |
|
|
1.4 |
% |
|
|
12.6 |
% |
Median |
|
|
0.92 |
% |
|
|
59.4 |
% |
|
|
3.9 |
% |
|
|
86 |
% |
|
|
0.6 |
% |
|
|
9.2 |
% |
Minimum |
|
|
0.58 |
% |
|
|
39.9 |
% |
|
|
3.1 |
% |
|
|
61 |
% |
|
|
0.3 |
% |
|
|
6.2 |
% |
Notes: ROAA = return on average assets; NPAs = nonperforming assets; and TCE = tangible common equity.
56
Public Peer Analysis (Nationwide Group). This second peer group was based on publicly
traded financial institutions in the United States with total assets between $3 billion and $6 billion, a return on average assets during the last twelve months of between 0.75% and 1.25%, and nonperforming assets were less than 1.0% of total assets
(the Nationwide Group). The Nationwide Group consisted of the following 19 institutions:
|
Nationwide Group |
S&T Bancorp, Inc. (PA) |
|
Brookline Bancorp, Inc. (MA) |
|
Opus Bank (CA) |
|
Tompkins Financial Corporation (NY) |
|
Flushing Financial Corporation (NY) |
|
Westamerica Bancorporation (CA) |
|
WSFS Financial Corporation (DE) |
|
1st Source Corporation (IN) |
|
Dime Community Bancshares, Inc. (NY) |
|
Sandy Spring Bancorp, Inc. (MD) |
|
Yadkin Financial Corporation (NC) |
|
First Busey Corporation (IL) |
|
Lakeland Bancorp, Inc. (NJ) |
|
Washington Trust Bancorp, Inc. (RI) |
|
ConnectOne Bancorp, Inc. (NJ) |
|
Heritage Financial Corporation (WA) |
|
Enterprise Financial Services Corp. (MO) |
|
Financial Institutions, Inc. (NY) |
|
MainSource Financial Group, Inc. (IN) |
The table below shows the results of this analysis comparing the values and multiples of Independent to the
Nationwide Group. This analysis utilized the closing common stock prices on July 20, 2015, and financial data as of March 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price to Tangible Book Multiple |
|
|
Price to LTM Core EPS Multiple |
|
|
Price to 2015 Estimated EPS Multiple |
|
|
Price to 2016 Estimated EPS Multiple |
|
|
Dividend Yield |
|
Independent |
|
|
272 |
% |
|
|
22.6x |
|
|
|
17.5x |
|
|
|
14.6x |
|
|
|
0.7 |
% |
|
|
|
|
|
|
Nationwide Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
366 |
% |
|
|
29.7x |
|
|
|
22.3x |
|
|
|
22.0x |
|
|
|
3.4 |
% |
Median |
|
|
172 |
% |
|
|
16.5x |
|
|
|
15.1x |
|
|
|
13.7x |
|
|
|
2.6 |
% |
Minimum |
|
|
141 |
% |
|
|
12.4x |
|
|
|
13.3x |
|
|
|
12.2x |
|
|
|
0.0 |
% |
Notes: |
LTM = last twelve months; and Estimated EPS = estimated earnings per share. EPS estimates are based on the mean of research analysts as compiled by FactSet Research Systems Inc. |
Comparative Company Analysis (Nationwide Group). Using publicly available information, Hovde Group compared Independents
financial performance with that of the maximum and minimum of the institutions included in the Nationwide Group. Independents performance highlights and the performance highlights of comparative companies are based on trailing twelve months
information at March 31, 2015.
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROAA |
|
|
Efficiency Ratio |
|
|
Net Interest Margin |
|
|
Loans/ Deposits |
|
|
NPAs/Assets |
|
|
TCE/ Tangible Assets |
|
Independent |
|
|
0.87 |
% |
|
|
55.5 |
% |
|
|
4.2 |
% |
|
|
98 |
% |
|
|
0.4 |
% |
|
|
7.1 |
% |
|
|
|
|
|
|
|
Nationwide Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
1.24 |
% |
|
|
65.7 |
% |
|
|
4.4 |
% |
|
|
149 |
% |
|
|
1.0 |
% |
|
|
11.3 |
% |
Median |
|
|
0.94 |
% |
|
|
60.0 |
% |
|
|
3.6 |
% |
|
|
95 |
% |
|
|
0.7 |
% |
|
|
8.9 |
% |
Minimum |
|
|
0.81 |
% |
|
|
39.6 |
% |
|
|
3.0 |
% |
|
|
38 |
% |
|
|
0.2 |
% |
|
|
6.4 |
% |
Notes: ROAA = return on average assets; NPAs = nonperforming assets; and TCE = tangible common equity.
No company used for comparison in the above transaction analyses is identical to Independent. Accordingly, the analysis and comparison is not
strictly mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies.
Other Factors and Analyses. Hovde Group took into consideration various other factors and analyses, including, but not limited to:
current market environment; merger and acquisition environment; movements in the common stock valuations of selected publicly traded banking companies; and movements in the S&P 500 Index.
Conclusion. Based upon the foregoing analyses and other investigations and assumptions set forth in its opinion, without
giving specific weightings to any one factor or comparison, Hovde Group determined that the aggregate merger consideration to be paid in connection with the merger is fair from a financial point of view to Grand Banks shareholders. Each
shareholder is encouraged to read Hovde Groups fairness opinion in its entirety. The full text of this fairness opinion is included as Appendix B to this proxy statement/prospectus.
Hovde Groups Compensation and Other Relationships with Grand Bank
Grand Bank engaged Hovde Group to provide Grand Bank with financial advisory services. Pursuant to the terms of the engagement, Hovde Group
will receive certain consideration from Grand Bank for services provided, including a $25,000 fee for the delivery of its fairness opinion and a completion fee related to Hovde Groups advisory services. The completion fee is contingent upon
the completion of the merger. Pursuant to the engagement agreement, in addition to its fees and regardless of whether the merger is consummated, Grand Bank has agreed to reimburse Hovde Group for certain reasonable out-of-pocket expenses incurred in
performing its services and to indemnify Hovde Group against certain claims, losses and expenses arising out of the merger or Hovde Groups engagement. Hovde Group has not received any other fees from Grand Bank for investment banking or other
services. Hovde Group has consented to the inclusion of its opinion in the registration statement of which this proxy statement/prospectus is a part.
Hovde Groups Relationship with Independent
In the prior two years, Independent engaged Hovde Group to evaluate a potential
acquisition of a financial institution, but Independent is not currently pursuing this acquisition. Because the acquisition was not completed, Hovde Group did not receive any payment from Independent, other than reimbursement for certain reasonable
out-of-pocket expenses incurred in performing its services. Hovde Group has not received any other fees from Independent for investment banking or other services.
Hovde Group may also actively trade the debt and/or equity securities of Independent for its own account and for the accounts of its customers
and, accordingly, may at any time and from time to time hold a long or short position in such securities.
Exchange of Grand
Bank Stock Certificates
Approximately twenty days prior to closing, your will receive a letter and instructions from Wells Fargo
Shareowner Services acting in its role as Independents exchange agent and stock transfer agent, and describing
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the procedures for surrendering your stock certificate representing shares of Grand Bank common stock in exchange for the shares of Independent common stock and cash. If you surrender your
certificate and transmittal materials at least two business days prior to closing, Independent will use its best efforts to cause the exchange agent to mail the merger consideration to you within five business days of the effective time. If you
surrender your certificates and transmittal materials after two business days prior to closing, Independent will use its best efforts to cause the exchange agent to deliver the merger consideration to you promptly, with the intent that the exchange
agent will mail the merger consideration to you within ten business days following receipt of the surrendered certificates and transmittal materials. You must carefully review and complete these transmittal materials and return them as instructed
along with your stock certificates for Grand Bank common stock. Please do not send Grand Bank or Independent any stock certificates for your shares of Grand Bank common stock until you receive these instructions. Share certificates delivered to the
exchange agent without a properly completed letter of transmittal will be rejected and returned for corrective action.
The shares of
Independent common stock issuable in exchange for the shares of Grand Bank common stock will be issued solely in uncertificated book-entry form and a holders shares of Independent common stock will be reflected in the shareholders
account established in the Direct Registration System of the DTC by Independents stock transfer agent. You will receive a statement to this effect from the transfer agent as part of the delivery of the merger consideration. You may then
contact your broker and arrange for the transfer of shares to your brokerage account should you desire to do so.
You should not send in your
certificates until you receive the letter of transmittal and instructions.
At the effective time of the merger, and until
surrendered as described above, other than shares of Grand Bank common stock subject to the exercise of dissenters rights, each outstanding Grand Bank stock certificate will be deemed for all purposes to represent only the right to receive the
merger consideration to be paid pursuant to the reorganization agreement without interest thereon. With respect to any Grand Bank stock certificate that has been lost, stolen or destroyed, Independent will pay the merger consideration attributable
to such stock certificate upon receipt of a surety bond or other adequate indemnity, as required in accordance with Independents standard policy, and evidence reasonably satisfactory to Independent of ownership of the shares in question. After
the effective time of the merger, Grand Banks transfer books will be closed and no transfer of the shares of Grand Bank common stock outstanding immediately prior to the effective time will be permitted on Independents stock transfer
books.
To the extent permitted by law, you will be entitled to vote after the effective time of the merger at any special meeting of
Independents shareholders the number of whole shares of Independent common stock into which your shares of Grand Bank are converted, regardless of whether you have surrendered your Grand Bank stock certificates to the exchange agent. Whenever
Independent declares a dividend or other distribution on Independent common stock which has a record date after the effective time of the merger, the declaration will include dividends or other distributions on all shares of Independent common stock
issued pursuant to the reorganization agreement. However, no dividend or other distribution payable to the holders of record of Independent common stock will be delivered to you until you surrender your Grand Bank stock certificates.
Effective Time of the Merger
The merger will become effective at the date and time specified in the certificate of merger to be filed with the TDB regarding the merger of
Grand Bank with and into Independent Bank.
If the shareholders of Grand Bank approve the reorganization agreement at the special meeting,
and if all required regulatory approvals are obtained and the other conditions to the parties obligations to effect the merger are satisfied or waived by the party entitled to do so, Independent anticipates that the merger will be completed in
the fourth quarter of 2015, although delays could occur.
Independent cannot assure you that the necessary shareholder and regulatory
approvals will be obtained or that the other conditions to completion of the merger can or will be satisfied.
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Conduct of Business Pending Effective Time
From the date of the reorganization agreement to and including the closing date, Grand Bank has agreed to:
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maintain its corporate existence in good standing; |
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maintain the general character of its business and conduct its business in its ordinary and usual manner; |
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extend credit only in accordance with existing lending policies and practices; |
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use commercially reasonable efforts to preserve its business organization intact; retain the services of its present employees, officers, directors and agents; retain its present customers, depositors, suppliers and
correspondent banks; and preserve its goodwill and the goodwill of its suppliers, customers and others having business relationships with it; |
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maintain all offices, machinery, equipment, materials, supplies, inventories, vehicles and other properties owned, leased or used by it (whether under its control or the control of others) in good operating repair and
condition, ordinary wear and tear excepted; |
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comply in all material respects with all laws, regulations, ordinances, codes, orders, licenses and permits applicable to its properties and operations, where such noncompliance could reasonably be expected to cause a
material adverse change to its financial condition, assets, properties, reserves, liabilities, business or results of operations; |
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timely file all tax returns required to be filed by it and promptly pay all taxes, assessments, governmental charges, duties, penalties, interest and fines that become due and payable, except those being contested in
good faith by appropriate proceedings; |
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withhold from each payment made to each of its employees the amount of all taxes (including federal income taxes, FICA taxes and state and local income and wage taxes) required to be withheld therefrom and pay the same
to the proper tax receiving officers; |
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continue to follow and implement policies, procedures and practices regarding the identification, monitoring, classification and treatment of all assets in substantially the same manner as it has in the past;
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account for all transactions in accordance with GAAP (unless otherwise instructed by regulatory accounting principles, in which instance account for such transaction in accordance with regulatory accounting principles)
and specifically, without limitation, to (i) maintain the allowance for loan and lease losses account for Grand Bank at not less than $2.5 million and (ii) pay or accrue for, by the fifth business day prior to the closing date of the
merger (i.e., the calculation date), all liabilities, obligations, costs and expenses owed or incurred by Grand Bank on or before the closing date; |
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perform all of its material obligations under contracts, leases and documents relating to or affecting its assets, properties and business, except such obligations as it may in good faith reasonably dispute;
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maintain and keep in full force and effect, in all material respects, presently existing insurance coverage and give all notices and present all claims under all insurance policies in due and timely fashion; and
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timely file all reports required to be filed with governmental authorities and observe and conform, in all material respects, to all applicable laws, rules, regulations, ordinances, codes, orders, licenses and permits,
except those being contested in good faith by appropriate proceedings. |
From the date of the reorganization agreement
through the effective time of the merger, Grand Bank has agreed not to, without the prior written consent of Independent:
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introduce any new material method of management or operation; |
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intentionally take any action that could reasonably be anticipated to result in a material adverse change to its financial condition, assets, properties, reserves, liabilities and business or results of operations;
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take or fail to take any action that could reasonably be expected to cause its representations and warranties made in the reorganization agreement to be inaccurate in any material respect at the effective time of the
merger or preclude Grand Bank from making such representations and warranties at the effective time of the merger; |
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declare, set aside or pay any dividend or other distribution with respect to its capital stock, except that (i) Grand Bank may pay Subchapter S tax distributions consistent with past practices and
(ii) if Grand Banks tangible book value, as calculated pursuant to the reorganization agreement on the calculation date, is greater than $40.0 million, then on the day prior to the closing date, Grand Bank may distribute to its
shareholders an amount equal to the difference between the actual amount of tangible book value on such date less $40.0 million. |
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enter into, alter, amend, renew or extend any material contract or commitment that would result in an obligation of Grand Bank to make payments in excess of $50,000, except for loans and extensions of credit in the
ordinary course of business; |
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mortgage, pledge or subject to lien, charge, security interest or any other encumbrance or restriction any of its properties, business or assets, tangible or intangible, except in the ordinary course of business and
consistent with past practices; |
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cause or allow the loss of insurance coverage, unless replaced with coverage that is substantially similar (in amount and insurer) to that in effect as of the date of the reorganization agreement; |
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incur any indebtedness, obligation or liability, whether absolute or contingent, other than the receipt of deposits and trade debt or except in the ordinary course of business and consistent with prudent banking
practices or in connection with the transactions contemplated by the reorganization agreement or any of the agreements or documents contemplated therein; |
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discharge or satisfy any lien or pay any obligation or liability, whether absolute or contingent, due or to become due, except in the ordinary course of business and consistent with past practices; |
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issue, reserve for issuance, grant, sell or authorize the issuance of any shares of its capital stock or other securities or subscriptions, options, warrants, calls, rights or commitments of any kind relating to the
issuance thereof, except to the extent any commitment to do so is outstanding as of the date of the reorganization agreement; |
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amend or otherwise change its article of association or bylaws; |
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sell, transfer, lease to others or otherwise dispose of any material amount of its assets or properties, discount or arrange for a payoff of a charged off or deficiency credit, cancel or compromise any material debt or
claim, or waive or release any right or claim other than in the ordinary course of business and consistent with past practices, provided that any such transaction involving amounts in excess of $100,000 shall be deemed to not be in the ordinary
course of business; |
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enter into any material transaction other than in the ordinary course of business; |
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except with respect to the collection of checks and other negotiable instruments or otherwise in the ordinary course of the business and consistent with past practices, enter into or give any promise, assurance or
guarantee of the payment, discharge or fulfillment of any undertaking or promise made by any other third person, firm or corporation; |
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sell or knowingly dispose of, or otherwise divest itself of the ownership, possession, custody or control, of any corporate books or records of any nature that, in accordance with sound business practice, normally are
retained for a period of time after their use, creation or receipt, except at the end of the normal retention period; |
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except for salary increases and the accrual for annual bonuses in the ordinary course of business and consistent with past practices, and the payment
of employee bonuses in connection with the completion of the merger (all of which will be included (as a deduction) in the calculation of tangible book value), |
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(i) make any material change in the rate of compensation, commission, bonus or other direct or indirect remuneration payable, (ii) pay, agree to pay, or orally promise to pay,
conditionally or otherwise, any additional bonus or extra compensation, pension, severance or vacation pay, to or for the benefit of any of its shareholders, directors, officers or employees, or (iii) enter into any employment or consulting
contract (other than as contemplated by the reorganization agreement) or other agreement with any director, officer or employee or adopt, amend in any material respect or terminate (other than termination of any employee benefit plans contemplated
by the reorganization agreement) any pension, employee welfare, retirement, stock purchase, stock option, stock appreciation rights, termination, severance, income protection, golden parachute, savings or profit-sharing plan (including trust
agreements and insurance contracts embodying such plans), any deferred compensation or collective bargaining agreement, any group insurance contract (except as contemplated by the reorganization agreement) or any other incentive, welfare or employee
benefit plan or agreement maintained by it for the benefit of its directors, employees or former employees; |
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engage in any transaction with any of its affiliates, except in the ordinary course of business and consistent with past practices; |
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acquire any capital stock or other equity securities or acquire any equity or ownership interest in any bank, corporation, partnership or other entity, except (i) through settlement of indebtedness, foreclosure or
the exercise of creditors remedies or (ii) in a fiduciary capacity, the ownership of which does not expose it to any liability from the business, operations or liabilities of such person; |
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except as contemplated by the reorganization agreement, terminate, cancel or surrender any contract, lease or other agreement or unreasonably permit any damage, destruction or loss which, in any case or in the
aggregate, may reasonably be expected to result in a material adverse change to its financial condition, assets, properties, reserves, liabilities, business or results of operations; |
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dispose of, permit to lapse, transfer or grant any rights under, or knowingly breach or infringe upon, any United States or foreign license or proprietary right or materially modify any existing rights with respect
thereto, except in the ordinary course of business and consistent with past practices; |
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make any capital expenditures, capital additions or betterments, except in the ordinary course of business consistent with past practices; |
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hire or employ any new officer or hire or employ any new nonofficer employee, other than to replace nonofficer employees; |
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make any, or acquiesce with any, change in accounting methods, principles or material practices, except as required by GAAP, or regulatory accounting principles, including, without limitation, making any reverse
provision for loan losses or other similar entry or accounting method that would reduce the allowance for loan and lease losses of Grand Bank, provided, however, that the reversal of previously accrued amounts (not to exceed $200,000) for
expenses that Grand Bank would have incurred if the reorganization agreement had not been entered into and if it were to continue operations independently in 2016, such as 2016 audit fees, year-end advertising, and similar expenses, do not require
the prior written consent of Independent; |
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pay a rate on deposits at Grand Bank materially higher than is consistent with the ordinary course of business and consistent with past practices; |
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make any new loan, except in compliance with Grand Banks existing policies and procedures and consistent with past practices; |
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renew, extend the maturity of, or alter the material terms of, any loan except in compliance with Grand Banks existing policies and procedures and consistent with past practices; |
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renew, extend the maturity of, or alter any of the material terms of any loan classified as substandard or doubtful; |
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sell (provided, however, that payment at maturity or prepayment is not deemed a sale) investment securities or purchase investment securities, other than U.S. Treasuries with a maturity of two years or less; or
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redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock. |
For
a complete description of such restrictions on the conduct of the business of Grand Bank, Independent refers you to the reorganization agreement, which is attached as Appendix A to this proxy statement/prospectus.
From the date of the reorganization agreement through the effective time of the merger, Independent has agreed to:
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maintain its corporate existence in good standing; |
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maintain the general character of its business and conduct its business in its ordinary and usual manner; |
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extend credit only in accordance with existing lending policies and practices; |
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use commercially reasonable efforts to preserve its business organization intact; retain the services of its present employees, officers, directors and agents; retain its present customers, depositors, suppliers and
correspondent banks; and preserve its goodwill and the goodwill of its suppliers, customers and others having business relationships with it; |
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timely file all reports required to be filed with governmental authorities and observe and conform, in all material respects, to all applicable laws, rules, regulations, ordinances, codes, orders, licenses and permits,
except those being contested in good faith by appropriate proceedings; and |
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comply in all material respects with all laws, regulations, ordinances, codes, orders, licenses and permits applicable to its assets, properties and operations, where such noncompliance could be reasonably expected to
cause a material adverse change to its financial condition, assets, properties, reserves, liabilities, business or results of operations. |
No Solicitation
Grand Bank has agreed that it will not, and that it will cause its employees, directors, officers, financial advisors and agents not to:
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solicit, knowingly encourage, initiate or participate in any negotiations or discussions with any third party regarding an acquisition proposal, whether by acquisition, business combination, purchase of securities or
assets or otherwise; |
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disclose to any third party any information concerning the business, properties, books or records of Grand Bank in connection with any acquisition proposal, other than as provided in the reorganization agreement or as
required by applicable law; or |
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cooperate with any third party to make any acquisition proposal, other than a sale of assets of Grand Bank in the ordinary course of business consistent with past practices. |
Promptly upon receipt of any unsolicited offer, Grand Bank is required to communicate to Independent the terms of any proposal or request for
information and the identity of the parties involved.
Provided that Grand Bank has complied with the restrictions set forth above, if,
after the date of the reorganization agreement and before obtaining approval of the merger by its shareholders, Grand Bank receives a bona fide, unsolicited written acquisition proposal, it may engage in negotiations and discussions with, and
furnish any information and other access to, any person making such acquisition proposal if, and only if, the board of directors of Grand Bank determines in good faith, after consultation with outside legal and financial advisors, that (i) such
acquisition proposal is or is reasonably capable of becoming a superior proposal and (ii) the failure of the Grand Bank board of directors to furnish such information or access or enter into such
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discussions or negotiations would reasonably be expected to be a violation of its fiduciary duties to the shareholders of Grand Bank; but before furnishing any material nonpublic information,
Grand Bank must receive from the person making such acquisition proposal an executed confidentiality agreement with terms at least as restrictive in all material respects on such person as the confidentiality agreement entered into with Independent.
In such case, Grand Bank is required to:
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promptly notify Independent of the receipt of such acquisition proposal or any request for nonpublic information relating to Grand Bank or for access to its properties, books or records by any person that has made, or
may be considering making, an acquisition proposal; |
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communicate the material terms of such acquisition proposal to Independent, including as they may change upon any modification or amendment to the terms thereof; and |
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keep Independent reasonably apprised of the status of and other matters relating to any such acquisition proposal on a timely basis. |
An acquisition proposal means a written offer or proposal from a party other than Independent that contains a fixed price per
share or a mathematically ascertainable formula for calculating a price per share for the Grand Bank common stock regarding any of the following involving Grand Bank: (i) any merger, reorganization, consolidation, share exchange,
recapitalization, business combination, liquidation, dissolution or other similar transaction involving any sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or substantially all of the assets or equity securities or
deposits of Grand Bank, in a single transaction or series of related transactions, which could reasonably be expected to impede, interfere with, prevent or materially delay the completion of the merger; (ii) any tender offer or exchange offer
for 50% or more of the outstanding shares of Grand Bank common stock or the filing of a registration statement in connection therewith; or (iii) any public announcement of a proposal, plan or intention to do, or any agreement to engage in, any
of the foregoing. A superior proposal means a bona fide acquisition proposal made by a party other than Independent that the board of directors of Grand Bank determines in its good faith judgment to be more favorable to Grand Banks
shareholders than the merger and for which financing, to the extent required, is then committed or which, in the good faith judgment of the board of directors of Grand Bank is reasonably capable of being obtained by such third person.
Conditions to Completion of the Merger
The reorganization agreement contains a number of conditions to the obligations of Independent and Grand Bank to complete the merger that must
be satisfied as of the closing date, including, but not limited to, the following:
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approval of the reorganization agreement and the merger by the holders of the percentage of the outstanding Grand Bank common stock required for approval under the Grand Bank articles of association and the TBOC;
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receipt by Independent of all approvals and consents required by applicable law from all applicable governmental authorities in connection with the reorganization agreement, any other agreement contemplated thereby and
the consummation of the transactions contemplated thereby; |
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the registration statement of which this proxy statement/prospectus forms a part has become effective and no stop order suspending its effectiveness is in effect and no proceedings for that purpose have been initiated
and continuing or threatened by the SEC, and all necessary approvals under state securities laws relating to the issuance or trading of the Independent common stock to be issued have been received; |
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the shares of Independent common stock to be issued to Grand Banks shareholders being authorized for listing on the NASDAQ Global Select Market; |
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no action shall have been taken, and no statute, rule, regulation or order shall have been promulgated, enacted, entered, enforced or deemed
applicable to the reorganization agreement, or the transactions |
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contemplated thereby, by any governmental authority, including by means of the entry of a preliminary or permanent injunction, that would (i) make the reorganization agreement or any other
agreement contemplated thereby, or the transactions contemplated thereby, illegal, invalid or unenforceable, (ii) impose material limits on the ability of any party to consummate the transactions contemplated by the reorganization agreement, or
(iii) could reasonably be expected to subject Independent, Grand Bank or any of their respective subsidiaries, or any of their respective officers, directors, shareholders or employees, to criminal or civil liability upon the consummation of
the reorganization agreement or any other agreement contemplated thereby, or the transactions contemplated thereby; |
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the other partys representations and warranties contained in the reorganization agreement being true and correct as of the date of the reorganization agreement and being true and correct in all material respects
as of the closing date and receipt of a certificate signed by an appropriate representative of the other party to that effect; |
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the absence of a material adverse change in the financial condition, assets, properties, reserves, liabilities, business or results of operations of either party since March 31, 2015; |
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the performance or compliance in all material respects by each party with its respective covenants and obligations required by the reorganization agreement to be performed or complied with before the closing of the
merger and receipt of a certificate signed by an appropriate representative of the other party to that effect; and |
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the average of the daily volume weighted average sale price per share of Independent common stock on the NASDAQ Global Select Market over a ten consecutive trading day period ending on the third trading day prior to the
closing date (i.e., the average sales price) being at least $35.0128 and no more than $52.5192. |
In addition to the
conditions listed above, Grand Banks obligations to complete the merger is subject to Independents delivery of the merger consideration to Wells Fargo Shareowner Services, as exchange agent.
In addition to the conditions listed above, Independents obligation to complete the merger is subject to the satisfaction of the
following conditions:
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the terms and conditions of any approvals and consents received by Independent from governmental authorities and third parties being on terms and conditions reasonably acceptable to Independent; |
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Grand Banks tangible book value as of the closing date being not be less than $39.0 million; |
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Grand Banks allowance for loan and lease losses as of the closing date being at least $2.5 million; |
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all Grand Bank employee plans being terminated in accordance with their respective terms and all applicable laws and regulations and the affected participants being notified of such terminations; |
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the amendments to the executive medical agreements between Grand Bank and each of Roy Gene Evans and D. Michael Redden not being terminated and remaining in full force and effect; |
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receipt by Independent of executed releases from the directors and certain officers of Grand Bank as specified in the reorganization agreement; |
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receipt by Independent of the resignations of each of the directors of Grand Bank, effective as of the closing date; |
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the support agreements between Independent and each of the outside directors of Grand Bank, which have been executed, but are not currently effective, not being terminated and remaining in full force and effect;
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the employment agreements between Independent Bank and each of Lee Dinkel, Burton French, Ryan Hefton, Kaitlin Mahard and Mark Wells, which have been executed, but are not currently effective, not being terminated and
remaining in full force and effect; |
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the consulting agreements between Independent Bank and each of Roy Gene Evans and D. Michael Redden, which have been executed, but are not currently effective, not being terminated and remaining in full force and
effect; |
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the holders of no more than 5% of the capital stock of Grand Bank having exercised their statutory dissenters rights under the TBOC; |
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all material consents and approvals from all nongovernmental third parties which are required to be obtained under the terms of any contract, agreement or instrument to which Grand Bank is a party must have been
obtained; |
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the receipt by Independent of an opinion from Andrews Kurth LLP to the effect that (i) the merger will be treated as a reorganization within the meaning of Section 368(a) of the Code, and (ii) each of
Independent, Independent Bank and Grand Bank will be a party to such reorganization within the meaning of Section 368(b) of the Code; |
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all outstanding options to acquire shares of Grand Bank common stock being exercised or surrendered and all rights of the holders of such options to acquire Grand Bank common stock being terminated. |
Any condition to the completion of the merger, except the required shareholder and regulatory or governmental approvals, and the absence of an
order or ruling prohibiting the merger, may be waived in writing by the party to the reorganization agreement entitled to the benefit of such condition.
Additional Agreements
In addition to the agreements described above, each party agreed in the reorganization agreement to take certain other actions, including but
not limited to the following:
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to use commercially reasonable best efforts to cause the consummation of the transactions contemplated by the reorganization agreement in accordance with its terms and conditions; |
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to promptly notify the other party in writing of any litigation, or of any claim, controversy or contingent liability that might reasonably be expected to become the subject of litigation, against such party or
affecting any of its properties, if such litigation or potential litigation is reasonably likely, in the event of an unfavorable outcome, to result in a material adverse change to such party; |
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to promptly notify the other party of any legal action, suit or proceeding or judicial, administrative or governmental investigation, pending or, to the best knowledge of such party, threatened against such party that
(i) questions or would reasonably be expected to question the validity of the reorganization agreement or the agreements contemplated thereby, or any actions taken or to be taken by such party pursuant thereto or (ii) seeks to enjoin or
otherwise restrain the transactions contemplated by the reorganization agreement; |
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to promptly notify the other party in writing if any change occurred or was threatened (or any development occurred or was threatened involving a prospective change) in the business, financial condition or operations of
such party that has resulted in or would reasonably be expected to result in a material adverse change; |
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that the confidential information provided by the other party would be used solely for the purpose of reviewing and evaluating the transactions contemplated by the reorganization agreement and any other agreement
contemplated thereby, and that such confidential information would be kept confidential by such party; |
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that it would not make, issue or release, or cause to be made, issued or released, any announcement, statement, press release, acknowledgment or other public disclosure of the existence, terms, conditions or status of
the reorganization agreement or the transactions contemplated thereby without the prior written consent of the other party; and |
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to provide to the other party, at least three business days prior to the closing of the merger, with supplemental disclosure schedules pursuant to the reorganization agreement reflecting any material changes between the
date of the reorganization agreement and the closing date. |
Grand Bank agreed in the reorganization agreement to take
certain other actions, including, but not limited to the following:
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to use commercially reasonable best efforts to obtain all consents and approvals from regulatory authorities and other third parties required in connection with the consummation of the transactions contemplated by the
reorganization agreement, and to cooperate in all commercially reasonable respects with Independent to obtain all such approvals and consents required of Independent; |
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to the extent permitted by law, to use its commercially reasonable best efforts to provide Independent all information concerning Grand Bank that is required for inclusion in this proxy statement/prospectus, or any
other application, filing, statement or document to be made or filed with any regulatory or governmental authority in connection with the merger and the other transactions contemplated by the reorganization agreement and to promptly inform
Independent if Grand Bank becomes aware that any information provided or cross referenced contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein
not misleading and to take the necessary steps to correct such information; |
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to promptly notify Independent in writing if it becomes aware of any fact or condition that makes untrue, or shows to have been untrue, in any material respect, any material information furnished to Independent by Grand
Bank or any representation or warranty made in or pursuant to the reorganization agreement or that results in Grand Banks failure to comply with any covenant, condition or agreement contained in the reorganization agreement; |
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to afford Independents officers, directors, employees, attorneys, accountants, investment bankers and authorized representatives, upon reasonable notice and subject to applicable laws related to the exchange of
information, access during regular business hours to the books, contracts, commitments, personnel and records of Grand Bank, and furnish during such period such other information concerning Grand Bank as Independent may reasonably request;
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to terminate, subject to compliance with applicable law and limitations, all Grand Bank employee benefit plans and to terminate and pay all amounts owed under any employment agreements; |
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to use its commercially reasonable best efforts to cause two of Grand Banks directors to execute and deliver a written commitment to enter into amendments to the executive medical agreements releasing Grand Bank
from further liability under the executive medical agreements in exchange for a lump-sum payment from Grand Bank (which commitment has been executed and delivered); |
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to use its best efforts to cause the directors of Grand Bank to execute and deliver a voting agreement agreeing to vote the shares of stock of Grand Bank owned by them in favor of the reorganization agreement and the
transactions contemplated hereby (which has occurred); |
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to deliver a certified shareholder list at least thirty days prior to closing; |
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consistent with generally accepted accounting principles, regulatory accounting principles and banking laws and regulations, to make such accounting entries as Independent may reasonably request in order to conform the
accounting records of Grand Bank to the accounting policies and practices of Independent; |
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to purchase contemporaneously with the closing of the merger an extended reporting period for four years under its existing directors and officers liability insurance policy for purposes of covering actions occurring
prior to the effective time of the merger; |
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to use its commercially reasonable best efforts to obtain a release from each of the directors and executive officers of Grand Bank releasing Grand Bank and its successors from any and all claims of such directors and
officers, subject to certain limited exceptions; |
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to use its commercially reasonable best efforts to obtain support agreements from each of the outside directors of Grand Bank agreeing to support, and not compete with, the business of Independent Bank (which has
occurred); |
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to allow Independent, at its sole cost and expense, to have the right to the same extent that Grand Bank has the right to, upon written notice to Grand Bank, inspect any real property leased or owned by Grand Bank,
including conducting asbestos surveys and sampling, environmental assessments and investigations, and other environmental surveys and analysis, and to conduct further investigation if deemed desirable by Independent and upon reasonable written
notice to Grand Bank and subject to Grand Banks right to place reasonable time and place restrictions on any such further investigation, and further subject to Independents obligation to make available to Grand Bank the results and
reports of any such investigation or survey; |
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to use its commercially reasonable best efforts to cause certain of its executive officers to execute and deliver to Independent, contemporaneously with the execution of the reorganization agreement, an employment
agreement providing for their continued employment with Independent Bank (which has occurred); |
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to use reasonable best efforts to ensure that its contracts related to the provision of data processing services and other electronic banking services be terminated after the consummation of the merger on a date to be
mutually agreed upon by Independent and Grand Bank; |
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to use reasonable efforts and cooperate with Independent to facilitated a smooth conversion of data processing, item processing, network and related hardware and software, telephone systems, telecommunications, data
communications and other technologies; |
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to repay the outstanding principal and interest due and arising on all advances that Grand Bank owes to the FHLB, together with prepayment fees and related costs and expenses; and |
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to use commercially reasonable best efforts to cause two of Grand Banks directors to execute and deliver to Independent a consulting agreement providing for their continuing arrangement with Independent Bank
(which has occurred). |
Independent agreed in the reorganization agreement to take certain other actions, including, but not
limited to the following:
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to prepare and file a registration statement with the SEC with respect to the shares of Independent common stock to be issued pursuant to the reorganization agreement, and use its reasonable best efforts to cause the
registration statement to become and remain effective; Independent further agreed that none of the information supplied or to be supplied by it for inclusion in (i) the registration statement will, at the time the registration statement and any
amendment or supplement thereto becomes effective, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the proxy
statement/prospectus and any amendment or supplement thereto will, at the date(s) of mailing to Grand Bank shareholders and at the time of the special meeting, contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not misleading, and that Independent will take the necessary steps to correct such information; |
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to take all actions reasonably necessary to have the shares of Independent common stock to be issued pursuant to the reorganization agreement included for listing on the NASDAQ Global Select Market and use its
reasonable best efforts to effect said listing; |
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to use its commercially reasonable efforts to prepare all documentation, to effect all filings and to obtain all permits, consents, approvals and authorizations of all third parties and federal or state bank regulatory
or governmental authorities necessary to consummate the merger and the transactions contemplated by the reorganization agreement; |
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for a period of four years from the effective time of the merger to indemnify, defend and hold harmless each person entitled to indemnification from Grand Bank against all liabilities arising out of actions or omissions
occurring at or prior to the effective time of the merger, including the transaction contemplated by the reorganization agreement; |
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to the extent permitted by applicable law, to, and to cause each of its subsidiaries to, upon reasonable notice from Grand Bank, afford Grand Banks employees and officers and authorized representatives reasonable
access to the properties, books and records of Independent and its subsidiaries during normal business hours and furnish Grand Bank with such additional financial and operating data and other information as to the business and properties of
Independent as Grand Bank may reasonably request from time to time; |
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that it may, but is not be required to, cause Independent Bank to offer employment to the employees of Grand Bank, who will be entitled to receive, from and after the effective time of the merger to the extent they
become employees of Independent Bank, the same pension, profit sharing, health, welfare, incentive, vacation and other benefits as are customarily offered or afforded to the similarly situated employees of Independent Bank; and |
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that the Independent common stock to be issued by Independent to the shareholders of Grand Bank pursuant to the reorganization agreement will, on the issuance and delivery to such shareholders pursuant to the
reorganization agreement, be duly authorized, validly issued, fully paid and nonassessable, will be free of any preemptive rights of the shareholders of Independent or any other person, firm or entity, and will be, except for Independent common
stock issued to any shareholders of Grand Bank who may be deemed to be an affiliate (under the Exchange Act) of Independent after completion of the merger, freely tradable by each Grand Bank shareholders who is not a dealer for purposes
of the Securities Act. |
Representations and Warranties of Grand Bank and Independent
In the reorganization agreement, Grand Bank has made representations and warranties to Independent, and Independent has made representations
and warranties to Grand Bank. The more significant of these relate to (among other things):
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corporate organization and existence; |
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authority and power to execute the reorganization agreement and the bank merger agreement and to complete the transactions contemplated by the reorganization agreement and the bank merger agreement; |
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the absence of conflicts between the execution of the reorganization agreement and completion of the transactions contemplated by the reorganization agreement and the parties charter documents, applicable law and
certain other agreements; |
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compliance with applicable laws and regulatory filings, including tax filings; |
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the accuracy of their financial statements and reports; |
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pending or threatened litigation and other proceedings; |
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actions taken by regulatory authorities and its ability to receive required regulatory approval; |
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the absence of certain changes and events; and |
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the absence of undisclosed liabilities. |
Grand Bank also has made additional representations
and warranties to Independent with respect to (among other things):
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its loan portfolio and reserve for loan losses; |
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the existence of indebtedness, certain loan agreements and related matters; |
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title and conditions of personal property assets; |
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its compliance with regulatory and environmental laws and regulations; |
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its compliance with tax laws, payment of taxes and filing of tax returns; |
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the existence of certain contracts and commitments and contractual relationships; |
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its insurance coverage and fidelity bonds; |
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its employment relations; |
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its employees, compensation and benefits plans; |
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its deferred compensation and salary continuation arrangements, including no excess parachute payments; |
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its related person transactions; |
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the absence of certain business practices; |
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the absence of guarantees; |
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its data processing agreements; |
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its loan practices and compliance with financial institution laws, rules and regulations; |
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its use of intellectual property rights; |
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completeness of its books and records; |
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its compliance with zoning and related laws; |
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dissenting shareholders; |
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business combination restrictions; |
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compliance with the Community Reinvestment Act; and |
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Grand Banks performance of its fiduciary responsibilities as trustee, custodian, guardian or escrow agent. |
Independent has also made additional representations and warranties to Grand Bank with respect to (among other things) its compliance with its
SEC reporting obligations and with NASDAQ listing and corporate governance rules.
For detailed information concerning these
representations and warranties, reference is made to Articles III and IV of the reorganization agreement included as Appendix A to this proxy statement/prospectus.
The reorganization agreement contains representations and warranties that Grand Bank and Independent made to and solely for the benefit of
each other. These representations and warranties are subject to materiality standards, which may differ from what may be viewed as material by investors and shareholders, and, in certain cases, were used for the purpose of allocating risk among the
parties rather than establishing matters as facts. The assertions embodied in those representations and warranties also are qualified by information in confidential disclosure schedules that the parties have exchanged in connection with signing the
reorganization agreement. Although neither Grand Bank nor Independent believes that the disclosure schedules contain information that the federal securities laws require to be publicly disclosed, the disclosure schedules do contain information that
modifies, qualifies and creates exceptions to the representations and warranties set forth in the attached reorganization agreement.
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Accordingly, you should not rely on the representations and warranties as characterizations of
the actual state of facts, since they were only made as of the date of the reorganization agreement and are modified in important part by the underlying disclosure schedules. Moreover, information concerning the subject matter of the representations
and warranties may have changed since the date of the reorganization agreement, which subsequent information may or may not be fully reflected in Independents public disclosures in this proxy statement/prospectus.
Amendment or Waiver of the Reorganization Agreement
No termination, cancellation, modification, amendment, deletion, addition or other change in the reorganization agreement, or any provision
thereof, or waiver of any right or remedy therein provided, is effective for any purpose unless specifically set forth in a writing signed by the party or parties to be bound thereby. The waiver of any right or remedy in respect to any occurrence or
event on one occasion is not deemed a waiver of such right or remedy in respect to such occurrence or event on any other occasion. The merger consideration to be received by the shareholders of Grand Bank pursuant to the terms of the reorganization
agreement may not be decreased after the approval of the reorganization agreement without the further approval of the Grand Bank shareholders.
Termination of the Reorganization Agreement
Independent and Grand Bank can mutually agree at any time to terminate the
reorganization agreement without completing the merger. In addition, either Independent or Grand Bank may decide, without the consent of the other, to terminate the reorganization agreement if:
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the conditions to such partys obligations to close have not been satisfied on or before December 31, 2015; subject to a unilateral 30-day extension by either party for the receipt of regulatory approvals and
provided that the terminating party is not in breach of the reorganization agreement; |
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any of the transactions contemplated by the reorganization agreement or by any other agreement contemplated by the reorganization agreement are disapproved by any regulatory agency whose approval is required to
consummate those transactions; or |
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if the reorganization agreement and merger are not approved by the shareholders of Grand Bank at the special meeting. |
Grand Bank may terminate the reorganization agreement, without the consent of Independent, if:
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Independent breaches or fails to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the reorganization agreement or any other agreement contemplated by the
reorganization agreement, and such failure has not been cured within a period of 30 calendar days after written notice from Grand Bank; |
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at any time prior to the special meeting in order to enter into, concurrently with such termination, an acquisition agreement or similar agreement with respect to a superior proposal, that has been received and
considered by Grand Bank and the Grand Bank board in accordance with all of the requirements of the reorganization agreement; or |
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there has been any material adverse change in the financial condition, assets, properties, liabilities, reserves, business or results of operations of Independent since March 31, 2015. |
In addition, Independent may terminate the reorganization agreement, without the consent of Grand Bank, if:
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Grand Bank breaches or fails to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the reorganization agreement or any other agreement contemplated by the
reorganization agreement, and such failure has not been cured within a period of 30 calendar days after written notice from Independent; |
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the Grand Bank board has (i) recommended to the holders of Grand Bank common stock that they tender their shares in a tender or exchange offer commenced by an unaffiliated third party for more than 15% of the
outstanding Grand Bank common stock, (ii) effected a change in the boards recommendation with respect to the merger or recommended to the Grand Bank shareholders acceptance or approval of any alternative acquisition proposal,
(iii) notified Independent in writing that Grand Bank is prepared to accept a superior proposal or (iv) resolved to do any of the foregoing; |
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any of the following have occurred with respect to environmental matters regarding Grand Bank: (i) the factual substance of any environmental representations and warranties of Grand Bank in the reorganization
agreement is not materially true and accurate, (ii) the results of any environmental inspection or other environmental survey are disapproved by Independent because such inspection or survey identifies a material or potential material violation
of applicable environmental laws, (iii) Grand Bank refuses to allow such an inspection or survey in a manner that Independent reasonably considers necessary, (iv) such an inspection or survey identifies an event, condition or circumstance
that would or potentially could reasonably be expected to require a material remedial or cleanup action or result in a material adverse change in the financial condition, assets, properties, liabilities, reserves, business or results of operations
of Grand Bank since March 31, 2015, (v) such an inspection or survey reveals the presence of any underground or above ground storage tank in, on or under any real property owned or leased by Grand Bank that is not shown to be in material
compliance with all applicable environmental laws, or that has had a release of petroleum or some other hazardous material that has not been cleaned up to the satisfaction of the relevant governmental authority or any other party with a right to
compel such cleanup, or (vi) such an inspection or survey identifies the presence of any asbestos-containing material in, on or under any real property owned or leased by Grand Bank, the removal of which could reasonably be expected to result
in a material adverse change in the financial condition, assets, properties, liabilities, reserves, business or results of operations of Grand Bank since March 31, 2015, subject, in the case of each of the foregoing, to notice to and the right
of Grand Bank to correct any such matter to Independents reasonable satisfaction within 30 days of receipt of notice; |
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Independent determines, in good faith after consulting with counsel, there is a substantial likelihood that any necessary regulatory approval will not be obtained or will be obtained only upon one or more conditions
that make it inadvisable to proceed with the transactions; or |
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there has been any material adverse change in the financial condition, assets, properties, liabilities, reserves, business or results of operations of Grand Bank since March 31, 2015. |
Termination Fee
To compensate Independent for entering into the reorganization agreement, taking actions to consummate the transactions contemplated by the
reorganization agreement and incurring the related costs and expenses and other losses and expense, including foregoing the pursuit of other opportunities, Grand Bank has agreed to pay Independent a $2.8 million termination fee, provided that
Independent is not in material breach of any covenant or obligation under the reorganization agreement, if the reorganization agreement is terminated:
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by Grand Bank at any time prior to the special meeting in order to enter into, concurrently with such termination, an acquisition agreement or similar agreement with respect to a superior proposal that has been received
and considered by Grand Bank and the Grand Bank board in accordance with all of the requirements of the reorganization agreement; |
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by either Independent or Grand Bank if the reorganization agreement and the merger are not approved by the shareholders of Grand Bank at the special meeting and at the time of such failure to approve, there exists an
acquisition proposal with respect to Grand Bank other than that of Independent that has not been withdrawn prior to the special meeting; or |
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by Independent if the Grand Bank board has (i) recommended to the holders of Grand Bank common stock that they tender their shares in a tender or
exchange offer commenced by an unaffiliated third party for more than 15% of the outstanding Grand Bank common stock, (ii) effected a change in the |
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boards recommendation regarding the merger or recommended to the Grand Bank shareholders acceptance or approval of any alternative acquisition proposal, (iii) notified Independent in
writing that Grand Bank is prepared to accept a superior proposal, or (iv) resolved to do any of the foregoing. |
Except with respect to termination fees and expenses, as discussed above, in the event of the termination of the reorganization agreement
without breach by any party, the reorganization agreement will be void and have no effect, without liability on the part of any party or the directors, officers or shareholders of any party, except as specifically contemplated in the reorganization
agreement.
Financial Interests of Directors and Executive Officers of Grand Bank in the Merger
In considering the recommendation of the board of directors of Grand Bank to vote for the proposal to approve the reorganization agreement, you
should be aware that certain directors and executive officers of Grand Bank have interests in the merger that are in addition to, or different from, their interests as shareholders of Grand Bank. The board of Grand Bank was aware of these interests
and considered them in approving the reorganization agreement. These interests include:
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Employment Agreements with Independent Bank. Independent and Independent Bank have entered into employment agreements with Lee Dinkel and Mark Wells, two executive officers of Grand Bank, to be effective,
if at all, upon completion of the merger, that include noncompetition and nonsolicitation obligations to Independent Bank. Pursuant to these agreements, the executive officer is entitled to receive a salary, a one-time bonus upon completion of the
merger, annual bonus, restricted shares of Independent common stock and certain additional incentives from Independent and Independent Bank. The following persons have such employment agreements and the parenthetical amounts represent the aggregate
financial interest that each person is expected to receive from Independent upon completion of the merger, excluding amounts for salary and incentive bonus payments to be earned by such individuals for service to be rendered to Independent Bank and
excluding the value of any Independent restricted stock awards that vest over time and are dependent upon continued employment with Independent: Lee Dinkel ($100,000) and Mark Wells ($75,000). |
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Retention Payments. Grand Bank plans to pay retention bonuses to executive officers of Grand Bank, all of which are directors, in the aggregate amount of approximately $2.2 million, which includes anticipated
payments to Lee Dinkel ($468,205), Roy Gene Evans ($802,483), D. Michael Redden ($342,493) and Mark Wells ($362,483). These payments will reduce the tangible book value of Grand Bank at closing and could reduce the amount of merger
consideration payable to the shareholders of Grand Bank. |
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Support Agreements. As a condition to the merger, Independent has required that each outside director (Tyler Cooper, Jack W. Evans, Jr., Al Goode, Pete Schenkel and James W. Williford) enter into a
Director Support Agreement that includes noncompetition, nonsolicitation, and business relationship obligations in consideration of payments to these individuals by Independent in the amount of $50,000 to each such outside director, payable $25,000
at closing and $25,000 at the one year anniversary of closing. |
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Consulting Agreements. As a condition to the merger, Independent has required that each of Roy Gene Evans and D. Michael Redden, directors and executive officers of Grand Bank enter into a consulting
agreement, effective upon completion of the merger, that includes noncompetition and nonsolicitation obligations to Independent Bank and pursuant to which each of Mr. Evans and Mr. Redden is entitled to receive a monthly consulting fee
from Independent Bank for services to be rendered to Independent Bank for a two year period, and each of Ms. Evans and Mr. Redden is eligible to receive an incentive bonus from Independent Bank at the end of the two year term.
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Executive Medical Agreements. Each of Roy Gene Evans and D. Michael Redden, who are directors and executive officers of Grand Bank,
is a party to an executive medical agreement with Grand Bank, |
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which were entered into in 2003, that provides for Grand Bank to provide lifetime medical insurance coverage to Mr. Evans, Mr. Redden and their spouses, or pay the costs for the
provision of lifetime medical insurance coverage under individual health insurance policies. As a condition to the merger, Independent has required that each of Mr. Evans and Mr. Redden execute amendments to the executive medical
agreements releasing Grand Bank from further liability under the executive medical agreements, effective at the closing of the merger, in exchange for lump-sum payments from Grand Bank. The aggregate amount of the lump sum payments to be made by
Grand Bank is $1,240,242, of which $244,939 has been previously accrued . Grand Bank will make the lump sum payments to these officers in connection with the completion of the merger. These payments will reduce the tangible book value of Grand Bank
for the purpose of calculating the merger consideration payable to shareholders of Grand Bank. |
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Indemnification. The directors and executive officers of Grand Bank will receive indemnification from Independent for a period of four years after completion of the merger to the same extent and subject to
the conditions set forth in the respective articles of incorporation or articles of association and bylaws of Grand Bank and continued director and officer liability coverage for a period of four years after completion of the merger. Any amounts
paid by Grand Bank to purchase continued director and officer liability coverage will reduce Grand Banks closing tangible book value for purposes of calculating the merger consideration payable to Grand Bank shareholders. |
Voting Agreement
Certain shareholders of Grand Bank have entered into an agreement to vote, referred to in this proxy statement/prospectus as the voting
agreement, the shares of Grand Bank common stock that they control in favor of approval of the reorganization agreement and the related agreement and plan of merger and otherwise in the manner most favorable to the consummation of the merger and the
transactions contemplated by the reorganization agreements; provided, however, that the Grand Bank shareholders who have entered into the voting agreement are permitted to vote to accept a superior proposal, if any, under the terms of the
reorganization agreement. As of the record date, 509,223 shares of Grand Bank common stock, or approximately 29% of the outstanding shares of the Grand Bank common stock entitled to vote at the special meeting, were bound by the voting agreement. A
copy of the form of Voting Agreement is included as Exhibit B to the reorganization agreement included in Appendix
A.
NASDAQ Global Select Market Listing
Independent has agreed to file all documents required to be filed to have the shares of Independent common stock to be issued pursuant to the
reorganization agreement approved for listing on the NASDAQ Global Select Market and to use its reasonable best efforts to effect such listing. The obligations of the parties to complete the merger are subject to such shares having been authorized
for listing on the NASDAQ Global Select Market.
Material U.S. Federal Income Tax Consequences of the Merger
The following discussion addresses the material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of Grand
Bank common stock. The discussion is based on the Internal Revenue Code of 1986, as amended, referred to as the Code, Treasury regulations, administrative rulings and judicial decisions, all as currently in effect and all of which are
subject to change (possibly with retroactive effect) and to differing interpretations, and is the opinion of Andrews Kurth LLP, insofar as it sets forth specific legal conclusions under U.S. federal income tax law. The opinion of counsel is included
as an exhibit to the registration statement of which this proxy statement/prospectus forms a part.
This discussion applies only to U.S.
holders (as defined below) that hold their Grand Bank common stock as a capital asset within the meaning of Section 1221 of the Code, each of which we refer to in this document as a holder. Further, this discussion does not address
all aspects of U.S. federal taxation that may be relevant to a
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particular stockholder in light of its personal circumstances or to stockholders subject to special treatment under U.S. federal income tax laws, including:
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tax-exempt organizations, |
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dealers in securities or foreign currency, |
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traders in securities who elect to apply a mark-to-market method of accounting, |
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pass-through entities and investors in such entities, |
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regulated investment companies and real estate investment trusts, |
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holders liable for the alternative minimum tax, |
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holders that have a functional currency other than the U.S. dollar, |
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holders who received their Grand Bank common stock through the exercise of employee stock options, through a tax-qualified retirement plan or otherwise as compensation, and |
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holders who hold Grand Bank common stock as part of a hedge, straddle, constructive sale, conversion transaction or other integrated investment. |
In addition, the discussion does not address any alternative minimum tax or any state, local or foreign tax consequences of the merger, nor
does it address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010.
For purposes of this discussion, a U.S. holder is a beneficial owner of Grand Bank common stock who is, for U.S. federal income
tax purposes: (i) an individual who is a citizen or resident of the United States; (ii) a corporation or other entity taxable as a corporation created or organized under the laws of the United States or any of its political subdivisions;
(iii) an estate that is subject to U.S. federal income tax on its income regardless of its source; or (iv) a trust (A) if a U.S. court is able to exercise primary supervision over its administration and one or more U.S. persons have
the authority to control all substantial decisions of the trust or (B) that was in existence on August 29, 1996, and has made a valid election to be treated as a United States person for U.S. federal income tax purposes.
This discussion does not address the tax treatment of partnerships (or entities or arrangements that are treated as partnerships for U.S.
federal income tax purposes) or persons that hold their Grand Bank common stock through partnerships or other pass-through entities for U.S. federal income tax purposes. If a partnership, including any entity or arrangement treated as a partnership
for U.S. federal income tax purposes, holds shares of Grand Bank common stock, the U.S. federal income tax treatment of a partner in such partnership will depend upon the status of the partner and the activities of the partnership. We urge such
partners and partnerships to consult their own tax advisors regarding the particular tax consequences of the merger to them.
We urge each
holder of Grand Bank common stock to consult its tax advisor with respect to the particular tax consequences of the merger to such holder.
Tax Opinion
The obligations of the parties to complete the merger are conditioned on, among other things, the receipt by Independent and Grand
Bank of an opinion from Andrews Kurth LLP, each dated the closing date of the merger,
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that for U.S. federal income tax purposes the merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. The conditions relating to receipt of the opinion
may be waived by both Independent and Grand Bank. Neither Independent nor Grand Bank currently intends to waive the conditions related to the receipt of the opinion. However, if these conditions were waived, Grand Bank would resolicit the approval
of its shareholders prior to completing the merger. In addition, the obligation of each of Andrews Kurth LLP to deliver such opinion is conditioned on the mergers satisfying the continuity of proprietary interest requirement. That requirement
generally will be satisfied if the aggregate value of the Independent common stock constitutes at least 42% of the aggregate value of the aggregate merger consideration at the time the merger becomes effective. The opinion will be based on certain
facts, representations, covenants and assumptions, including representations of Independent and Grand Bank.
If any of the representations
or assumptions upon which such opinion is based are inconsistent with the actual facts, the U.S. federal income tax consequences of the merger could be adversely affected. These opinions are not binding on the Internal Revenue Service or the courts,
and neither Independent nor Grand Bank intends to request a ruling from the Internal Revenue Service regarding the U.S. federal income tax consequences of the merger. Therefore, while the merger is conditioned upon the delivery by tax counsel to
Independent of its opinion that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, no assurance can be given that the Internal Revenue Service will not assert, or that a court would not sustain, a
position contrary to any of those set forth below.
U.S. Federal Income Tax Consequences of the Merger Generally
The following discussion regarding the U.S. federal income tax consequences of the merger assumes that the merger will be consummated as
described in the reorganization agreement and this proxy statement/prospectus and Independent and Grand Bank will not waive the opinion condition described above in Tax Opinion. The merger will be treated for U.S. federal income
tax purposes as a reorganization qualifying under the provisions of Section 368(a) of the Code. If the merger is treated as a reorganization within the meaning of Section 368(a) of the Code, the merger will have the following U.S. federal
income tax consequences.
If, pursuant to the merger, a holder exchanges all of the shares of Grand Bank common stock actually owned by it
for a combination of Independent common stock and cash, the holder will recognize gain (but not loss) equal to the lesser of (i) the amount of cash consideration received in the merger (excluding any cash received in lieu of a fractional share
of Independent common stock), or (ii) the amount by which the cash consideration received in the merger for the Grand Bank common stock plus the stock consideration received in the merger for the Grand Bank common stock (based upon the fair
market value of the Independent common stock at the effective time of the merger) exceeds the adjusted tax basis in the Grand Bank common stock exchanged in the merger. For this purpose, gain or loss must be calculated separately for each
identifiable block of shares surrendered in the exchange, and a loss realized on one block of shares may not be used to offset a gain realized on another block of shares. We urge holders to consult their tax advisors regarding the manner in which
cash and Independent common stock should be allocated among different blocks of Grand Bank common stock. Any recognized gain generally will be long-term capital gain if the holders holding period with respect to the Grand Bank common stock
surrendered is more than one year at the effective time of the merger. If, however, the cash consideration received has the effect of the distribution of a dividend, the gain will be treated as a dividend to the extent of the holders ratable
share of accumulated earnings and profits of Grand Bank as calculated for U.S. federal income tax purposes. See Possible Treatment of Cash as a Dividend below.
The aggregate adjusted tax basis of Independent common stock received (including fractional shares deemed received and redeemed as described
below) by a holder that exchanges its shares of Grand Bank common stock for a combination of Independent common stock and cash pursuant to the merger will be equal to the aggregate adjusted tax basis of the shares of Grand Bank common stock
surrendered for Independent common stock and cash, reduced by the amount of cash received by the holder pursuant to the merger (excluding any cash received instead of a fractional share of Independent common stock) and increased by the amount of
gain (including any portion of the gain that is treated as a dividend as described below but excluding any gain or loss resulting from the deemed
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receipt and redemption of fractional shares described below), if any, recognized by the holder on the exchange. The holding period of the Independent common stock (including fractional shares
deemed received and redeemed as described below) will include the holding period of the shares of Grand Bank common stock surrendered.
Possible
Treatment of Cash as a Dividend
Any gain recognized by a holder may be treated as a dividend for U.S. federal income tax purposes to
the extent of the holders ratable share of Grand Banks accumulated earnings and profits. In general, the determination of whether the gain recognized in the exchange will be treated as capital gain or has the effect of a
distribution of a dividend depends upon whether and to what extent the exchange reduces the holders deemed percentage stock ownership of Independent. For purposes of this determination, the holder is treated as if it first exchanged all of its
shares of Grand Bank common stock solely for Independent common stock and then Independent immediately redeemed, which we refer to as the deemed redemption, a portion of the Independent common stock in exchange for the cash the holder
actually received. The gain recognized in the deemed redemption will be treated as capital gain if the deemed redemption is (1) substantially disproportionate with respect to the holder or (2) not essentially equivalent
to a dividend.
The deemed redemption will generally be substantially disproportionate with respect to a holder if the
percentage described in (2) below is less than 80% of the percentage described in (1) below. Whether the deemed redemption is not essentially equivalent to a dividend with respect to a holder will depend upon the holders
particular circumstances. At a minimum, however, in order for the deemed redemption to be not essentially equivalent to a dividend, the deemed redemption must result in a meaningful reduction in the holders deemed
percentage stock ownership of Independent. That determination requires a comparison of (1) the percentage of the outstanding stock of Independent that the holder is deemed actually and constructively to have owned immediately before the deemed
redemption and (2) the percentage of the outstanding stock of Independent that is actually and constructively owned by the holder immediately after the deemed redemption. In applying the above tests, a holder may, under the constructive
ownership rules, be deemed to own stock that is owned by other persons or stock underlying a holders option to purchase in addition to the stock actually owned by the holder.
The Internal Revenue Service has ruled that a stockholder in a publicly held corporation whose relative stock interest is minimal (e.g., less
than 1%) and who exercises no control with respect to corporate affairs is generally considered to have a meaningful reduction if that stockholder has a relatively minor (e.g., approximately 3%) reduction in its percentage stock
ownership under the above analysis. Accordingly, the gain recognized in the exchange by such a stockholder would be treated as capital gain.
These rules are complex and dependent upon the specific factual circumstances particular to each holder. Consequently, we urge each holder
that may be subject to these rules to consult its tax advisor as to the application of these rules to the particular facts relevant to such holder.
Cash Received Instead of a Fractional Share.
A holder who receives cash instead of a fractional share of Independent common stock will be treated as having received such fractional share
and then as having received such cash in redemption of the fractional share. Gain or loss generally will be recognized based on the difference between the amount of cash received instead of the fractional share and the portion of the holders
aggregate adjusted tax basis of the shares of Grand Bank common stock surrendered which is allocable to the fractional share. Such gain or loss generally will be long-term capital gain or loss if the holding period for such shares of Grand Bank
common stock is more than one year at the effective time of the merger. Long-term capital gains of noncorporate taxpayers are subject to reduced rates of taxation. The deductibility of capital losses is subject to limitations.
Dissenters
Upon the proper exercise of
dissenters rights, a holder will exchange all of the shares of Grand Bank common stock actually owned by that holder solely for cash and that holder will recognize gain or loss equal to
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the difference between the amount of cash received and its adjusted tax basis in the shares of Grand Bank common stock surrendered, which gain or loss will be long-term capital gain or loss if
the holders holding period with respect to the Grand Bank common stock surrendered is more than one year. Long-term capital gains of noncorporate taxpayers are subject to reduced rates of taxation. The deductibility of capital losses is
subject to limitations. Although the law is unclear, if the holder constructively owns shares of Grand Bank common stock that are exchanged for shares of Independent common stock in the merger or otherwise owns shares of Independent common stock
actually or constructively after the merger, the consequences to that holder may be similar to the consequences described above under the heading U.S. Federal Income Tax Consequences of the Merger Generally, except that the amount
of consideration, if any, treated as a dividend may not be limited to the amount of that holders gain.
Certain Tax Reporting Rules
Under applicable Treasury regulations, significant holders of Grand Bank stock will be required to comply with certain reporting
requirements. A Grand Bank shareholder should be viewed as a significant holder if, immediately before the merger, such holder held 5% or more, by vote or value, of the total outstanding Grand Bank common stock. Significant holders
generally will be required to file a statement with the holders U.S. federal income tax return for the taxable year that includes the consummation of the merger. That statement must set forth the holders adjusted tax basis in, and the
fair market value of, the shares of Grand Bank common stock surrendered pursuant to the merger (both as determined immediately before the surrender of shares), the date of the merger, and the name and employer identification number of Independent
and Grand Bank, and the holder will be required to retain permanent records of these facts. We urge each holder of Grand Bank common stock to consult its tax advisor as to whether such holder may be treated as a significant holder.
Information Reporting and Backup Withholding
Payments of cash pursuant to the merger may, under certain circumstances, be subject to information reporting and backup withholding unless the
recipient provides proof of an applicable exemption or furnishes its taxpayer identification number, and otherwise complies with all applicable requirements of the backup withholding rules. Any amounts withheld under the backup withholding rules are
not an additional tax and will be allowed as a refund or credit against such holders U.S. federal income tax liability, provided the required information is timely furnished to the Internal Revenue Service.
This discussion of certain material U.S. federal income tax consequences is for general information only and is not tax advice. We urge
holders of Grand Bank common stock to consult their tax advisors with respect to the application of U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the U.S. federal estate or gift tax rules,
or under the laws of any state, local, foreign or other taxing jurisdiction or under any applicable tax treaty.
Accounting Treatment
The merger will be accounted for under the acquisition method of accounting under accounting principles generally accepted in the United States
of America. Under this method, Grand Banks assets and liabilities as of the date of the merger will be recorded at their respective fair values. Any difference between the purchase price for Grand Bank and the fair value of the identifiable
net assets acquired (including core deposit intangibles) will be recorded as goodwill. In accordance with ASC Topic 805, Business Combinations, issued in July 2001, the goodwill resulting from the merger will not be amortized to expense, but instead
will be reviewed for impairment at least annually and to the extent goodwill is impaired, its carrying value will be written down to its implied fair value and a charge will be made to earnings. Core deposit and other intangibles with definite
useful lives recorded by Independent in connection with the merger will be amortized to expense in accordance with such rules. The consolidated financial statements of Independent issued after the merger will reflect the results attributable to the
acquired operations of Grand Bank beginning on the date of completion of the merger.
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Ownership of Independent Common Stock After the Merger
Based on the closing price of Independent common stock on August 31, 2015, of $42.39 per share, Independent would issue 1,279,532 shares
of its common stock to Grand Bank shareholders in connection with the merger. The number of shares of Independent common stock issued in connection with the merger is subject to change if the average sales price of the Independent common stock is
less than $39.3894 or more than $48.1426. See SummaryTerms of the Merger.
Based on 17,111,394 shares of Independent
common stock outstanding and the closing price of $42.39 on August 31, 2015, immediately after the merger, the former Grand Bank shareholders would own approximately 6.96% of the outstanding shares of Independent common stock assuming 1,279,532
shares of Independent common stock are issued in the merger. That ownership percentage would be reduced by any future issuances of shares of Independent common stock.
Restrictions on Resales of Independent Common Stock Received in the Merger
The shares of Independent common stock issued in the merger will not be subject to any restrictions on transfer arising under the Securities
Act of 1933, as amended, except for shares of Independent common stock issued to any Grand Bank shareholder who may be deemed to be an affiliate of Independent after completion of the merger. Affiliates generally are defined
as persons or entities who control, are controlled by or are under common control with Independent at or after the effective time of the merger and generally include executive officers, directors and beneficial owners of 10% or more of the common
stock of Independent. Former Grand Bank shareholders who are not affiliates of Independent after the completion of the merger may sell their shares of Independent common stock received in the merger at any time.
Former Grand Bank shareholders who become affiliates of Independent after completion of the merger will be subject to the volume and sale
limitations of Rule 144 under the Securities Act of 1933, as amended, until they are no longer affiliates of Independent. This proxy statement/prospectus does not cover resales of Independent common stock received by any person upon completion of
the merger, and no person is authorized to make any use of or rely on this proxy statement/prospectus in connection with or to effect any resale of Independent shares.
Regulatory Approvals Required for the Merger
The acquisition of Grand Bank by Independent requires the approval of the Federal Reserve. The merger requires the approval of the FDIC and the
TDB. Independent filed an application with the Federal Reserve, and Independent Bank and Grand Bank filed applications with the FDIC and TDB for applicable regulatory approval on August 27, 2015.
Independent expects to receive all necessary regulatory approvals. You should note that the approval of any notice or application merely
implies satisfaction of regulatory criteria for approval, and does not include review of the merger from the standpoint of the adequacy of the consideration to be received by, or fairness to, shareholders. Regulatory approval does not constitute an
endorsement or recommendation of the proposed merger.
Independent cannot assure you as to whether or when the requisite regulatory
approvals will be obtained, and, if obtained, Independent cannot assure you as to the date of receipt of any of these approvals, the terms thereof or the absence of any litigation challenging them. Independent and Grand Bank are not aware of any
other material governmental approvals or actions that are required prior to the parties completion of the merger.
Dissenters Rights of Grand Bank Shareholders
General. If you hold one or more shares of Grand Bank common stock, you are entitled to dissenters rights under Texas law and have
the right to dissent from the merger and have the appraised fair value of your shares of Grand Bank common stock as of the date immediately prior to the effective date of the merger paid to you in
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cash. The appraised fair value may be more or less than the value of the shares of Independent common stock and cash being paid in the merger in exchange for shares of Grand Bank common stock. If
you are contemplating exercising your right to dissent, we urge you to read carefully the provisions of Chapter 10, Subchapter H of the Texas Business Organizations Code, or TBOC, which are attached to this proxy statement/prospectus as
Appendix C and which qualify in all respects the following discussion of those provisions, and consult with your legal counsel before electing or attempting to exercise these rights. The following discussion describes the steps you must
take if you want to exercise your right to dissent. You should read this summary and the full text of the law carefully. In this description of the dissenters rights of the Grand Bank shareholders, references to the merger are to
the merger of Grand Bank and Independent Bank.
How to Exercise and Perfect Your Right to Dissent. To be eligible to exercise your
right to dissent to the merger:
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you must, prior to the special meeting of the Grand Bank shareholders, provide Grand Bank with a written objection to the merger that states that your right to dissent will be exercised if the reorganization agreement
are approved and the merger is completed and that provides an address to which a notice of effectiveness of the merger should be delivered or mailed to you if the merger is completed; |
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you must vote your shares of Grand Bank common stock against approval of the reorganization agreement at the special meeting in person or by proxy; |
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you must, not later than the 20th day after Independent (which will be the ultimate the successor to Grand Bank) sends you notice that the merger was completed, deliver to Independent a written demand for payment of the
fair value of the shares of Grand Bank common stock you own that states the number and class of shares of Grand Bank common stock you own, your estimate of the fair value of such stock and an address to which a notice relating to the dissent and
appraisal procedures may be sent; and |
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you must, not later than the 20th day after you make your demand for payment to Independent as described above, submit your certificates representing Grand Bank common stock to Independent. |
If you intend to exercise your right to dissent from the merger, prior to the special meeting you must send the notice of objection to Grand
Bank, addressed to:
Grand Bank
16660 Dallas Parkway, Suite 1700
Dallas, Texas 75248
Attention:
Chairman of the Board and Secretary
If you fail to send the written objection to the merger in the proper form and prior to the special
meeting, to vote your shares of Grand Bank common stock at the special meeting against the approval of the merger and the reorganization agreement or to submit your demand for payment in the proper form and on a timely basis, you will lose your
right to dissent from the merger. If you fail to submit to Independent on a timely basis the certificates representing the shares of Grand Bank common stock after you have submitted the demand for payment as described above, Independent will have
the option to terminate your right of dissent as to your shares of Grand Bank common stock. In any instance of a termination or loss of a your right of dissent, you will instead receive the merger consideration. If you comply with the first two
items above and the merger is completed, Independent will send you a written notice advising you that the merger has been completed. Independent Bank must deliver this notice to you within ten days after the merger is completed.
Your Demand for Payment. If the merger is completed, you have provided your written objection to the merger to Grand Bank in a timely
manner and in proper form and you have voted against the reorganization agreement at the special meeting as described above and you desire to receive the fair value of your shares of Grand Bank common stock in cash, you must, within 20 days of the
date on which Independent sends to you the
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notice of the effectiveness of the merger, give Independent a written demand for payment of the fair value of your shares of Grand Bank common stock. The fair value of your shares of
Grand Bank common stock will be the value of the shares on the day immediately preceding the merger, excluding any appreciation or depreciation in anticipation of the merger. After the merger is completed, your written demand and any notice
sent to Independent must be addressed to:
Independent Bank Group, Inc.
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069-3257
Attention: President and Secretary
Your written demand must include a demand for payment for your shares for which rights of dissent and appraisal are sought and must state the
number of shares and class of Grand Bank common stock you own and your estimate of the fair value of your shares of Grand Bank common stock and an address to which a notice relating to the dissent and appraisal procedures may be sent. This written
demand must be delivered to Independent within 20 days of the date on which Independent sends to you the notice of the effectiveness of the merger. If your written demand for payment in proper form is not received by Independent within that 20 day
period, you will be bound by the merger and you will not be entitled to receive a cash payment representing the fair value of your shares of Grand Bank common stock. Instead, you will receive shares of Independent common stock and cash as the merger
consideration set forth in the reorganization agreement.
Delivery of Stock Certificates. If you have satisfied the requirements
for the exercise of your right to dissent described above, including the delivery of the written demand for payment to Independent as described above, you must, not later than the 20th day after you make your written demand for payment to
Independent, submit to Independent your certificate or certificates representing the shares of Grand Bank common stock you own. You may submit those certificates with your demand for payment if you prefer. In accordance with the provisions of the
TBOC, Independent will note on each such certificate that you have demanded payment of the fair value of the shares of Grand Bank common stock that were represented by such certificate under the provisions of the TBOC relating to the rights of
dissenting owners. After making those notations on those certificates, Independent will return each such certificate to you at your request. If you fail to submit all of the certificates representing the shares of Grand Bank common stock for which
you have exercised the right of dissent in a timely fashion, Independent will have the right to terminate your rights of dissent and appraisal with respect to all of your shares of Grand Bank common stock unless a court, for good cause shown,
directs Independent not to terminate those rights.
Independents Actions Upon Receipt of Your Demand for Payment.
Within 20 days after Independent receives your written demand for payment and your estimate of the fair value of your shares of Grand Bank common stock submitted as described above, Independent must send you written notice stating whether or not it
accepts your estimate of the fair value of your shares.
If Independent accepts your estimate, Independent will notify you that it
will pay the amount of your estimated fair value within 90 days after the effective date of the merger. Independent will make this payment to you only if you have surrendered the share certificates representing your shares of Grand Bank common
stock, duly endorsed for transfer, to Independent.
If Independent does not accept your estimate, Independent will notify you of this fact
and will make an offer of an alternative estimate of the fair value of your shares that it is willing to pay you within 120 days after the effective date of the merger, which you may accept within 90 days after the effective date of the merger or
decline.
Payment of the Fair Value of Your Shares of Grand Bank Common Stock Upon Agreement of an Estimate. If you and Independent
have reached an agreement on the fair value of your shares of Grand Bank common stock within 90 days after the effective date of the merger, Independent must pay you the agreed amount within 120 days after the effective date of the merger,
provided that you have surrendered the share certificates representing your shares of Grand Bank common stock, duly endorsed for transfer, to Independent.
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Commencement of Legal Proceedings if a Demand for Payment Remains Unsettled. If you and
Independent have not reached an agreement as to the fair market value of your shares of Grand Bank common stock within 90 days after the effective date of the merger, you or Independent may, within 60 days after the expiration of the 90 day period,
commence proceedings in Collin County, Texas, asking the court to determine the fair value of your shares of Grand Bank common stock. The court will determine if you have complied with the provisions of the TBOC regarding their right of dissent and
if you have become entitled to receive payment for your shares of Grand Bank common stock. The court will appoint one or more qualified persons to act as appraisers to determine the fair value of your shares in the manner prescribed by the TBOC. The
appraisers will determine the fair value of your shares and will report this value to the court. Once the appraisers report is filed with the court, you will receive a notice from the court indicating that the report has been filed. You will
be responsible for obtaining a copy of the report from the court. If you or Independent objects to the report or any part of it, the court will hold a hearing to determine the fair value of your shares of Grand Bank common stock. Both you and
Independent may address the court about the report. The court will determine the fair value of your shares and direct Independent to pay that amount, plus interest, which will begin to accrue 91 days after the merger is completed. The court may
require you to share in the court costs relating to the matter to the extent the court deems it fair and equitable that you do so.
Rights as a Shareholder. If you have made a written demand on Independent for payment of the fair value of your shares of Grand Bank
common stock, you will not thereafter be entitled to vote or exercise any other rights as a shareholder of Independent, but will only have the right to receive payment for your shares as described herein and the right to maintain an appropriate
action to obtain relief on the ground that the merger would be or was fraudulent. In the absence of fraud in the transaction, your right under the dissent provisions described herein is the exclusive remedy for the recovery of the value of your
shares of Grand Bank common stock or money damages with respect to the merger.
Withdrawal of Demand. If you have made a
written demand on Independent for payment of the fair value of your Grand Bank common stock, you may withdraw such demand at any time before payment for your shares has been made or before a petition has been filed with a court for determination of
the fair value of your shares. If you withdraw your demand or are otherwise unsuccessful in asserting your dissenters rights, you will be bound by the merger and you will have the same rights to receive of the merger consideration with respect
to your shares of Grand Bank common stock as you would have had if you had not made a demand for payment as to those shares, as well as to participate to the appropriate extent in any dividends or distributions on the shares of Independent common
stock that may have been paid to Independent shareholders after the effective date of the merger. Such rights will, however, be subject to any change in or adjustment to those shares made because of an action taken after the date your demand for
payment.
Beneficial Owners. Persons who beneficially own shares of Grand Bank common stock that are held of record in the
name of another person, such as a broker, bank, trustee or other nominee, and who desire to have the right of dissent exercised as to those shares must act promptly to cause the record holder of those shares to take the actions required under Texas
law to exercise the dissenters rights with respect to those shares. Only the persons in whose names shares of Grand Bank common stock are registered on the share transfer records of Grand Bank may exercise the right of dissent and appraisal
discussed above.
U.S. Federal Income Tax Consequences. See Proposal to Approve the Reorganization
AgreementMaterial U.S. Federal Income Tax Consequences of the Merger on page 74 for a discussion on how the federal income tax consequences of your action will change if you elect to dissent from the merger.
You should remember that if you return a signed proxy card, but fail to provide instructions as to how your shares of Grand Bank common
stock are to be voted, you will be considered to have voted in favor of the reorganization agreement and you will not be able to assert dissenters rights. You should also remember that if you otherwise vote at the special meeting
in favor of the reorganization agreement, you will not be able to assert dissenters rights.
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PROPOSAL TO ADJOURN THE SPECIAL MEETING
(Proposal Two)
If there
are not sufficient votes to constitute a quorum or to approve the reorganization agreement at the time of the special meeting, the special meeting may be adjourned to a later date or dates in order to permit further solicitation of additional
proxies. Pursuant to the TBOC, the Grand Bank board of directors is not required to fix a new record date to determine the Grand Bank shareholders entitled to vote at the adjourned special meeting. At the adjourned special meeting, any business may
be transacted which might have been transacted at the special meeting. If the Grand Bank board of directors does not fix a new record date, it is not necessary to give any notice of the time and place of the adjourned special meeting other than an
announcement at the special meeting at which the adjournment is taken, unless the adjournment is for more than thirty (30) days. If a new record date is fixed, notice of the adjourned special meeting shall be given as in the case of an original
special meeting.
In order to allow proxies that have been received at the time of the special meeting to be voted for an adjournment, if
necessary, this proposal regarding the question of adjournment is being submitted to the Grand Bank shareholders as a separate matter for their consideration. If approved, the adjournment proposal will authorize the holder of any proxy solicited by
the Grand Bank board of directors to vote in favor of adjourning the special meeting and any later adjournments. If the Grand Bank shareholders approve this adjournment proposal, Grand Bank could adjourn the special meeting and use the additional
time to solicit additional proxies to gain a quorum for the special meeting or approve the reorganization agreement, including the solicitation of proxies from Grand Bank shareholders who previously have voted against the reorganization agreement.
Among other things, approval of the adjournment proposal could mean that, even if proxies representing a sufficient number of votes against the reorganization agreement have been received, Grand Bank could adjourn the special meeting without a vote
on the proposal to approve the reorganization agreement and seek to convince the holders of those shares to change their votes to votes in favor of the proposal to approve the reorganization agreement.
Vote Required
The affirmative vote of
holders of the majority of the shares for which votes are cast at the special meeting is needed to approve this proposal. Abstentions will not be counted as votes cast and, therefore, will not affect this proposal. Further, the failure to vote,
either by proxy or in person, will not have an effect on this proposal. Unless instructions to the contrary are specified in a proxy properly voted and returned through available channels, the proxies will be voted FOR this proposal.
Certain directors and shareholders of Grand Bank entered into a voting agreement with Independent, pursuant to which they have agreed to vote
FOR the this proposal to adjourn the special meeting. For more information regarding the voting agreement, please see the section entitled Proposal to Approve the Reorganization AgreementVoting Agreement beginning on page 74.
GRAND BANKS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ADJOURNMENT PROPOSAL.
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BUSINESS OF GRAND BANK
General
Grand Bank was incorporated as a
state chartered bank on June 3, 2002. Grand Banks original location is in far North Dallas. In 2002, Grand Bank formed a wholly owned subsidiary, Preston Grand, Inc., whose only asset is the real property where Grand Banks second
office is located in Preston Center, Dallas, Texas. Grand Bank has elected to be taxed for federal income tax purposes as an S corporation under the provisions of the Code.
As a state bank, Grand Bank is subject to supervision and regulation by the FDIC and TDB.
As of June 30, 2015, Grand Bank had, on a consolidated basis, total assets of $608.8 million, total deposits of $507.5 million,
total loans (net of unearned discount and allowance for loan losses) of $246.3 million, and total shareholders equity of $41.6 million. Grand Bank does not file reports with the SEC. Grand Bank does, however, voluntarily provide
annual reports, including audited financial statements to its shareholders.
Products and Services
Grand Bank is a traditional commercial bank offering a variety of banking services to consumer and commercial customers in the greater Dallas,
Texas, area. Grand Bank offers a range of consumer and commercial loans. Commercial loans offered include loans to small- and medium-sized businesses for the purpose of purchasing equipment, inventory, facilities or for working capital. Consumer
loans offered include loans for the purpose of purchasing automobiles, recreational vehicles, personal residences, home improvements or for investment needs.
Grand Bank offers depository services and various checking account services. Grand Bank also offers commercial treasury management services,
safe deposit boxes, debit card services, wire transfer services, cashiers checks, Internet banking, direct deposit and automatic transfers between accounts. Grand Banks business is not seasonal in any material respect.
Grand Bank funds its lending activities primarily from its core deposit base. Grand Bank obtains deposits from the local market with no
material position (in excess of 10% of total deposits) dependent upon any one person or entity as of June 30, 2015.
Properties
Grand Bank leases its 16,162 square foot main and principal executive offices, which are located at 16660 Dallas Parkway, Suite 1700,
Dallas, Dallas County, Texas, 75248. The lease agreement has an existing term that expires in 2023. Additionally, the lease contains two (2) five-year renewal options.
Grand Bank also owns (through its wholly owned subsidiary) and operates one additional 3,600 square foot banking office located at 6044 Sherry
Lane, Dallas, Dallas County, Texas 75225.
Competition
Grand Banks deposit market share as of June 30, 2014 (the most recent date as of which the relevant data is available from the
FDIC), for the DFW MSA, which is the only market in which Grand Bank provides services is reported at .21%.
Each activity in which Grand
Bank is engaged involves competition with other banks, as well as with nonbanking financial institutions and nonfinancial enterprises. In addition to competing with other commercial banks within and outside its primary service area, Grand Bank
competes with other financial institutions engaged in the business of making loans or accepting deposits, such as savings and loan associations, credit unions,
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industrial loan associations, insurance companies, small loan companies, financial companies, mortgage companies, real estate investment trusts, certain governmental agencies, credit card
organizations and other enterprises. Grand Bank also competes with suppliers of equipment in furnishing equipment financing. Banks and other financial institutions with which Grand Bank competes may have capital resources and legal loan limits
substantially higher than those maintained by Grand Bank.
Employees
As of July 31, 2015, Grand Bank had 41 full-time employees and 2 part-time employees, none of whom is covered by a collective bargaining
agreement.
Legal Proceedings
Grand
Bank is, from time to time, subject to various pending and threatened legal actions which arise out of the normal course of its business. As of the date of this proxy statement/prospectus, there are no material threatened or pending legal
proceedings against Grand Bank.
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BENEFICIAL OWNERSHIP OF GRAND BANK COMMON STOCK BY MANAGEMENT AND
PRINCIPAL SHAREHOLDERS OF GRAND BANK
The following table sets forth certain information regarding the beneficial ownership of Grand
Bank common shares as of the record date by (1) each director, the Chief Executive Officer, the Chief Financial Officer and the three other most highly compensated executive officers of Grand Bank (2) each person who is known by Grand Bank
to own beneficially 5% or more of the common shares of Grand Bank and (3) all directors and executive officers as a group. Unless otherwise indicated, based on information furnished by such shareholders, management of Grand Bank believes that
each person has sole voting and dispositive power over the shares indicated as owned by such person.
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Name of Beneficial Owner, Director or Executive Officer |
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Grand Bank Common Stock |
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Stock Options to be Exercised Prior to Closing |
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Stock Options to be Surrendered for Cash Payments |
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Number of Shares Beneficially Owned(1) |
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Percent Beneficially Owned including all Options(2) |
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Lee M. Dinkel |
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23,776 |
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29,777 |
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16,923 |
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70,476 |
(3) |
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3.974 |
% |
Jack W. Evans, Jr. |
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50,789 |
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5,125 |
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55,914 |
(4) |
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3.228 |
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Roy Gene Evans |
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214,218 |
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10,450 |
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44,760 |
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269,428 |
(5) |
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15.119 |
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Al Goode |
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6,000 |
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3,375 |
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9,375 |
(6) |
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0.542 |
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D. Michael Redden |
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55,000 |
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29,777 |
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15,423 |
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100,200 |
(7) |
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5.655 |
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Pete Schenkel |
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105,186 |
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8,750 |
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113,936 |
(8) |
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6.565 |
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Mark Wells |
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31,000 |
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16,000 |
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47,000 |
(9) |
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2.697 |
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Ward Williford |
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22,754 |
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10,750 |
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33,504 |
(10) |
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1.928 |
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Lisa Murray |
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500 |
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5,500 |
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4,500 |
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10,500 |
(11) |
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0.605 |
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Adena Nichols |
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500 |
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2,500 |
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2,500 |
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5,500 |
(12) |
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.318 |
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Directors and Executive Officers as a Group |
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509,723 |
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94,004 |
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112,106 |
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715,833 |
(13) |
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37.034 |
% |
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Current Stock Outstanding as of August 31, 2015 |
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1,726,810 |
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1,951,460 |
|
|
|
|
|
(1) |
Beneficial ownership includes unexercised options shares that are exercisable as a result of the change of control to occur as a result of the merger. All outstanding shares of Grand Bank common stock held by the listed
shareholders will be converted into the merger consideration on the same basis as all other shareholders of Grand Bank. See Proposal to Approve the Reorganization AgreementTerms of the Merger beginning on page 40.
|
(2) |
The percentages are based on 1,726,810 shares of Grand Banks common stock outstanding as of August 31, 2015 and all unexercised options held by directors and executive officers that are exercisable as a
result of the change of control to occur as a result of the merger. |
(3) |
Includes 23,776 shares owned jointly with spouse and 46,700 options that are exercisable for stock or for which he will receive a cash payment for surrender of the options as a result of the merger. |
(4) |
Includes 50,789 shares owned jointly with spouse and 5,125 options for which he will receive a cash payment for surrender of the options as a result of the merger. |
(5) |
Includes 55,210 options that are exercisable for stock or for which he will receive a cash payment for surrender of the options as a result of the merger. Mr. Evans address is c/o Grand Bank, 16660 Dallas
Parkway, Suite 1700, Dallas, Texas 75248. |
(6) |
Includes 3,375 options for which he will receive a cash payment for surrender of the options as a result of the merger. |
(7) |
Includes 45,200 options that are exercisable for stock or for which he will receive a cash payment for surrender of the options as a result of the merger. |
(8) |
Includes 30,135 shares held by Mr. Schenkels wife, and 8,750 options for which he will receive a cash payment for surrender of the options as a result of the merger. |
(9) |
Includes 16,000 options that are exercisable for stock as a result of the merger. |
(10) |
Includes 13,000 shares owned jointly with spouse and 10,750 options for which he will receive a cash payment for surrender of the options as a result of the merger. |
(11) |
Includes 10,000 options that are exercisable for stock or for which she will receive a cash payment for surrender of the options as a result of the merger. |
(12) |
Includes 500 shares owned jointly with spouse and 5,000 options that are exercisable for stock or for which she will receive a cash payment for surrender of the options as a result of the merger. |
(13) |
Includes 206,110 options that are exercisable by directors and executive officers and 18,540 options that are exercisable by other employees as a result of the change of control to occur as a result of the merger.
|
86
In addition to the shares outstanding as of the record date, Grand Bank currently has outstanding
stock options both vested and unvested totaling 224,650 shares. The vesting of all options will be accelerated in the event of a change in control. The merger would constitute a change in control and thereby all unvested options
generally would be accelerated upon consummation of the merger. All options will be exercised prior to closing or unexercised options would be cancelled upon closing for a cash payment equal to the net value of the option, as if exercised. As noted
in the table above, it is anticipated that all beneficial owners, directors and executive officers of Grand Bank will exercise their stock options prior to closing.
87
COMPARATIVE MARKET PRICES AND DIVIDEND DATA
Independent
From April 3, 2013, through January 1, 2014, Independent common stock was listed for trading on the NASDAQ Global Market under the
symbol IBTX. On January 2, 2014, Independent common stock started trading on the NASDAQ Global Select Market. Quotations of the sales volume and the closing sales prices of the common stock of Independent are listed daily in the
NASDAQ Global Select Markets listings.
The following table sets forth, for the periods indicated, the high and low intraday sales
prices for Independent common stock as reported by the NASDAQ Global Market and NASDAQ Global Select Market and the cash dividends declared per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
Low |
|
|
Cash Dividend Per Share |
|
Quarter ended June 30, 2013 (beginning April 3, 2013) |
|
$ |
31.66 |
|
|
$ |
26.00 |
|
|
|
|
|
Quarter ended September 30, 2013 |
|
|
37.69 |
|
|
|
29.20 |
|
|
$ |
0.06 |
|
Quarter ended December 30, 2013 |
|
|
50.58 |
|
|
|
35.67 |
|
|
|
0.06 |
|
|
|
|
|
Quarter ended March 31, 2014 |
|
$ |
59.96 |
|
|
$ |
48.54 |
|
|
$ |
0.06 |
|
Quarter ended June 30, 2014 |
|
|
61.49 |
|
|
|
44.86 |
|
|
|
0.06 |
|
Quarter ended September 30, 2014 |
|
|
56.20 |
|
|
|
46.01 |
|
|
|
0.06 |
|
Quarter ended December 31, 2014 |
|
|
48.78 |
|
|
|
38.13 |
|
|
|
0.06 |
|
|
|
|
|
Quarter ended March 31, 2015 |
|
$ |
39.45 |
|
|
$ |
29.73 |
|
|
$ |
0.08 |
|
Quarter ended June 30, 2015 |
|
|
45.93 |
|
|
|
38.04 |
|
|
|
0.08 |
|
Quarter ended September 30, 2015 (through August 31, 2015) |
|
|
46.66 |
|
|
|
38.15 |
|
|
|
0.08 |
|
Grand Bank shareholders are advised to obtain the current stock quotation for Independent common stock. The
market price of Independent common stock will fluctuate from the date of this proxy statement/prospectus through the third trading date prior to the effective date of the merger, which is the date on which the per share stock consideration is
determined for the merger. Because of the possibility of an adjustment to each of the number of shares constituting the per share stock consideration and the per share cash consideration, you will not know the exact number of shares of Independent
common stock or the exact amount of cash that you will receive in connection with the merger when you vote on the reorganization agreement. See Proposal to Approve the Reorganization AgreementTerms of the Merger beginning on
page 40.
Prior to April 3, 2013, there was no established public trading market for Independent common stock, and Independent
is not aware of any trading in its common stock during the period from January 1, 2013, through April 3, 2013.
After the
merger, Independent currently expects to continue to pay (when, as and if declared by Independents board of directors out of funds legally available for that purpose and subject to regulatory restrictions) regular quarterly cash dividends.
There is no assurance that Independent will continue to pay dividends in the future. Future dividends on Independent common stock will depend upon its earnings and financial condition, liquidity and capital requirements, the general economic and
regulatory climate, its ability to service any equity or debt obligations senior to the common stock and other factors deemed relevant by the board of directors of Independent.
As a holding company, Independent is ultimately dependent upon its subsidiaries particularly Independent Bank, to provide funding for its
operating expenses, debt service and dividends. Various banking laws applicable to Independent Bank limit the payment of dividends and other distributions by Independent Bank to Independent, and may therefore limit Independents ability to pay
dividends on its common stock. If required payments on Independents outstanding junior subordinated debentures held by its unconsolidated subsidiary trusts are not
88
made or are suspended, Independent will be prohibited from paying dividends on its common stock. Regulatory authorities could impose administratively stricter limitations on the ability of
Independent Bank to pay dividends to Independent if such limits were deemed appropriate to preserve certain capital adequacy requirements. See SummaryDividends.
Grand Bank
There is no established public trading market for the shares of Grand Bank common stock, and no market for Grand Bank common stock is expected
to develop if the merger does not occur. No registered broker/dealer makes a market in Grand Banks common stock, and Grand Banks common stock is not listed for trading or quoted on any stock exchange or automated quotation system. Grand
Bank acts as the transfer agent and registrar for its own shares. As of the record date, there were approximately holders of record of Grand Banks common stock.
Grand Bank becomes aware of trades of shares as transfer agent of its common stock and sometimes is advised of the prices at which
these trades are made. In that regard, during the period from January 1, 2013, through August 31, 2015, there were six trades of Grand Banks common stock.
The following table sets forth the high and low sales prices known to management of Grand Bank for trades of its common stock for the periods
shown:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
Low |
|
|
Number of Trades |
|
|
Number of Shares Traded |
|
2013 |
|
First Quarter |
|
|
N/A |
|
|
|
N/A |
|
|
|
0 |
|
|
|
N/A |
|
|
|
Second Quarter |
|
|
N/A |
|
|
|
N/A |
|
|
|
0 |
|
|
|
N/A |
|
|
|
Third Quarter |
|
$ |
30.00 |
|
|
$ |
30.00 |
|
|
|
2 |
|
|
|
6,027 |
|
|
|
Fourth Quarter |
|
|
N/A |
|
|
|
N/A |
|
|
|
0 |
|
|
|
N/A |
|
|
|
|
|
|
|
2014 |
|
First Quarter |
|
|
N/A |
|
|
|
N/A |
|
|
|
0 |
|
|
|
N/A |
|
|
|
Second Quarter |
|
|
N/A |
|
|
|
N/A |
|
|
|
0 |
|
|
|
N/A |
|
|
|
Third Quarter |
|
|
N/A |
|
|
|
N/A |
|
|
|
0 |
|
|
|
N/A |
|
|
|
Fourth Quarter |
|
|
N/A |
|
|
|
N/A |
|
|
|
0 |
|
|
|
N/A |
|
|
|
|
|
|
|
2015 |
|
First Quarter |
|
$ |
34.00 |
|
|
$ |
22.96 |
|
|
|
3 |
|
|
|
36,008 |
|
|
|
Second Quarter |
|
|
34.00 |
|
|
|
34.00 |
|
|
|
1 |
|
|
|
10,000 |
|
|
|
Third Quarter (through August 31, 2015) |
|
|
N/A |
|
|
|
N/A |
|
|
|
0 |
|
|
|
N/A |
|
The most recent trade of Grand Bank common stock occurred on April 15, 2015, when 10,000 shares were
traded at a price of $34.00 per share. There have been other limited transfers of shares of Grand Banks common stock, but which were excluded from being disclosed as such shares were transferred between related parties (as gifts or to trusts
or estates or heirs). Because of limited trading, the price described above may not be representative of the actual or fair value of Grand Banks common stock.
Grand Bank is not obligated to register its common stock with the Commission or any state securities commission or, upon any registration, to
create a market for its common stock. Grand Bank has no outstanding obligations to repurchase its common stock.
89
For the years ended December 31, 2014 and 2013, Grand Bank paid annual distributions (in
arrears), which were intended to cover the tax liabilities incurred by the shareholders as a result of Grand Banks operations and election as an S corporation, as follows:
|
|
|
|
|
|
|
|
|
Date Paid |
|
Amount of Distributions Per Share |
|
|
Total Distribution Amount |
|
January 14, 2015 |
|
$ |
0.60 |
|
|
$ |
1,035,210 |
|
January 29, 2014 |
|
$ |
0.56 |
|
|
$ |
966,196 |
|
Grand Bank has not paid any distributions in 2015 and will not pay any distributions in 2015 other than the
distribution to Grand Bank shareholders permitted by the reorganization agreement if Grand Banks tangible book value on the calculation date exceeds $40.0 million. See Proposal to Approve the Reorganization AgreementTerms of
the MergerOther Financial Aspects on page 41.
Grand Banks shareholders are entitled to receive distributions out
of legally available funds as and when declared by Grand Banks board of directors, in its sole discretion. As a Texas state chartered bank, Grand Bank is subject to certain restrictions on distributions under the Texas Finance Code. Generally,
a Texas state bank may pay distributions to its shareholder out of its retained earnings or undivided surplus account unless distribution would result in the bank falling below its minimum capital requirement or the bank is in a condition resulting
in regulatory limitation on dividends.
As a state chartered bank, Grand Banks ability to pay distributions is restricted by certain
laws and regulations. Federal law prohibits Grand Bank from paying distributions that would be greater than the banks undivided profits after deducting statutory bad debt in excess of the banks allowance for loan and lease losses.
Under the Federal Deposit Insurance Corporation Improvement Act, Grand Bank may not pay any distribution if the payment of the distribution
would cause Grand Bank to become undercapitalized or if Grand Bank is undercapitalized. The FDIC may further restrict the payment of distributions by requiring that Grand Bank maintain a higher level of capital than would otherwise be
required to be adequately capitalized for regulatory purposes. If, in the opinion of the FDIC, Grand Bank is engaged in an unsound practice (which could include the payment of distributions), the FDIC may require, generally after notice
and hearing, that Grand Bank cease such practice. The FDIC has indicated that paying distributions that deplete a depository institutions capital base to an inadequate level would be an unsafe banking practice. The FDIC also has issued policy
statements providing that insured depository institutions generally should pay distributions only out of current operating earnings.
Under regulatory capital guidelines as phased in for 2015, Grand Bank must maintain a Minimum Common Equity Tier 1 Capital Ratio plus
Capital Conservation Buffer of at least 4.5%, a Tier 1 Capital Ratio of at least 6.0%, and a Total Capital Ratio of at least 8.0%. As of June 30, 2015, Grand Bank had a Common Equity Tier 1 Capital Ratio 13.87%, a Tier 1 Capital
ratio of 13.87% and a Total Capital Ratio of 14.75%. In addition, Grand Bank has a Tier I Leverage Capital to Total Asset Ratio of 7.12% as of June 30, 2015.
90
DESCRIPTION OF INDEPENDENT CAPITAL STOCK
General
The
following summarizes some of the important rights of Independent shareholders. This discussion does not purport to be a complete description of these rights. These rights can be determined in full only by reference to federal and state banking laws
and regulations, the TBOC and Independents certificate of formation and bylaws.
Independents authorized capital stock
consists of 100,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. As of August 31, 2015, Independent had 17,111,394 outstanding shares of its common stock and
23,938.35 shares of its Series A preferred stock were outstanding. All of Independents shares outstanding at that date were fully paid and nonassessable. As of August 31, 2015, Independent had 362 holders of record of common stock.
Independent Common Stock
Voting Rights. Subject to any special voting rights that may be given to any series of preferred stock that Independent may issue in the
future, holders of Independents common stock are entitled to one vote per share in the election of directors and on all other matters submitted to a vote at a meeting of shareholders. No shareholder has the right of cumulative voting with
respect to the election of directors.
With respect to any matter other than the election of directors or a matter for which the
affirmative vote of the holders of a specified portion of the shares entitled to vote is required by Texas law or Independents certificate of formation, the act of the shareholders will be the affirmative vote of the holders of a majority of
the shares entitled to vote on, and voted for or against, the matter at a meeting of shareholders at which a quorum is present. For purposes of such a vote, however, all abstentions and broker nonvotes are not counted as voted either for or against
such matter.
In elections of directors in which the number of nominees for election as director does not exceed the number of directors
to be elected (generally referred to as an uncontested election), the directors will be elected by a majority of the votes cast by the holders of shares entitled to vote in the election of directors at a meeting of shareholders at which
a quorum is present. If the number of nominees for election exceeds the number of directors to be elected at a meeting of shareholders (generally referred to as a contested election), directors will be elected by a plurality of the votes
cast. For purposes of determining whether a director is elected in an uncontested election, a majority of the votes cast means that the number of votes cast for a director must exceed the number of votes cast against that director, and abstentions
and broker nonvotes shall not be counted as votes cast either for or against any nominee for director. For purposes of determining whether a director is elected in a contested election, the nominees equal in number to the number of directors to be
elected who receive the highest number of votes among all nominees will be elected as directors.
Dividend Rights. Holders of
Independents common stock are entitled to dividends when, as and if declared by Independents board of directors out of funds legally available therefor.
Liquidation Rights. In the event of Independents liquidation, the holders of Independent common stock will be entitled to share
ratably in any assets remaining after payment of all debts and other liabilities.
Other. Independents common stock
has no preemptive or conversion rights and is not entitled to the benefits of any redemption or sinking fund provision.
Transfer Agent and Registrar. The transfer agent and registrar for Independents common stock is Wells Fargo Shareowner Services,
at 1110 Centre Point Curve, Suite 101, Mendota Heights, Minnesota 55120-4101.
Listing. Independents common stock is
listed on the NASDAQ Global Select Market under the symbol IBTX.
91
Independent Preferred Stock
Upon authorization of Independents board of directors, Independent may issue shares of one or more series of its preferred stock from
time to time. Independents board of directors may, without any action by holders of common stock (and except as may be otherwise provided in the terms of any series of preferred stock of which there are shares outstanding holders of preferred
stock) adopt resolutions to designate and establish a new series of preferred stock. Upon establishing such a series of preferred stock, the board will determine the number of shares of preferred stock of that series that may be issued and the
rights and preferences of that series of preferred stock. Independents board of directors has not designated or established any series of preferred stock. The rights of any series of preferred stock may include, among others:
|
|
|
general or special voting rights; |
|
|
|
preferential liquidation or preemptive rights; |
|
|
|
preferential cumulative or noncumulative dividend rights; |
|
|
|
redemption or put rights; and |
|
|
|
conversion or exchange rights. |
Independent may issue shares of, or rights to purchase shares
of, one or more series of Independents preferred stock that have been designated from time to time, the terms of which might:
|
|
|
adversely affect voting or other rights evidenced by, or amounts otherwise payable with respect to, the common stock or other series of preferred stock; |
|
|
|
discourage an unsolicited proposal to acquire Independent; or |
|
|
|
facilitate a particular business combination involving Independent. |
Any of these actions
could have an anti-takeover effect and discourage a transaction that some or a majority of Independents shareholders might believe to be in their best interests or in which Independents shareholders might receive a premium for their
stock over Independents then market price.
Independent Series A Preferred Stock
The following description is a general summary of the terms of our Senior Non-Cumulative Perpetual Preferred Stock, Series A, or Series A
preferred stock. The description below does not purport to be complete and is subject to and qualified in its entirety by reference to our certificate of formation, as amended, and the applicable certificate of designation to our certificate of
formation establishing the terms of the Series A preferred stock and our bylaws, as amended, each of which we will make available upon request. The descriptions herein does not contain all of the information that you may find useful or that may be
important to you. You should refer to the provisions of our certificate of formation, the applicable certificate of designation and our bylaws because they, and not the summaries, define the rights of holders of shares of our Series A preferred
stock. See Where You Can Find More Information on page 102 for more information.
Original Issuance
In connection with the consummation of the acquisition of BOH Holdings, Inc. on April 15, 2014, we exchanged a share of our Series A
preferred stock for each share of the BOH Holdings Series C preferred stock then outstanding. Our Series A preferred stock provides the same relative rights, preferences, privileges and voting powers, and is subject to the same limitations and
restrictions as were the shares of the BOH Holdings Series C preferred stock, taken as a whole, existing immediately prior to the consummation of the acquisition. All of our outstanding shares of Series A preferred stock issued in the BOH Holdings,
Inc. acquisition is held and owned by the U.S. Treasury. The following is a summary of the relative rights, privileges and preferences of our Series A preferred stock.
92
Authorized Shares
There are 23,938.35 authorized shares of the series of our Series A preferred stock, all of which are issued and outstanding.
Ranking
The Series A preferred stock is
ranked senior to the common stock with respect to dividend rights and rights to participate in our assets upon our winding up or termination.
Exchange/Conversion Rights
Holders of
shares of the Series A preferred stock have no rights to exchange or convert their shares into any other securities of the Company.
Dividends
Holders of Series A preferred stock are entitled to receive at the end of each quarterly dividend period an amount equal to one-quarter of the
applicable dividend rate (which rate is approximately 1%) multiplied by the liquidation amount per each share of Series A preferred stock, which liquidation amount is currently equal to $1,000 per share, or approximately $60,000 per quarter. In
January 2016, the dividend on the Series A preferred stock increases from 1% to 9% annually, and, at that time, it is anticipated that Independent will redeem all of the Series A preferred stock.
Voting Rights
The holders of the Series
A preferred stock have no general voting rights other than as required under Texas law or expressly provided by the Company and summarized below.
The written consent of the U.S. Treasury, as long as the U.S. Treasury holds any shares of Series A preferred stock, or the written consent of
holders of a majority of the outstanding shares of Series A preferred stock if the U.S. Treasury no longer holds any such shares, is required generally to approve the following actions by the Company, subject to certain exceptions as stated in the
statement of designation for the Series A preferred stock:
|
|
|
Authorization of any shares of, or securities convertible, exchangeable or exercisable for shares of, any Company capital stock ranking senior to the Series A preferred stock with respect to either or both the payment
of dividends and/or the distribution of our assets upon our winding up or termination; |
|
|
|
Any amendment of the statement of designation for the series of the Series A preferred stock that would adversely affect the rights, preferences, privileges or voting powers for such Series A preferred stock;
|
|
|
|
Certain share exchanges or reclassifications involving the Series A preferred stock or any merger of the Company unless the shares of Series A preferred stock remain outstanding or become securities of the resulting
entity or its ultimate parent and the shares continue to have equivalent rights, preferences, privileges and voting powers; |
|
|
|
Any sale of all or substantially all of the assets of the Company unless the Series A preferred stock were redeemed in full in connection with such sale; and |
|
|
|
The consummation of certain change of control transactions resulting in the surviving entity continuing as a bank holding company or savings and loan holding company, unless the shares of Series A preferred stock are
converted into securities of the surviving entity or its ultimate parent and the shares continue to have equivalent rights, preferences, privileges and voting powers. |
93
Board Observer Rights
A majority of the outstanding shares of Series A preferred stock have the right to designate a representative to be invited to attend, in a
nonvoting capacity, all meetings of the Companys board of directors in the event that the Company has failed to timely pay dividends due upon the Series A preferred stock for an aggregate of five quarterly dividend periods, whether or not
consecutive. This right to select an observer terminates upon timely dividend payments for four consecutive quarterly dividends periods, but would be revived in the event there are additional failures to make timely dividend payments for five
quarters, in the aggregate, following the termination of observer rights.
Director Designation Rights
Whenever dividends on the Series A preferred stock have not been declared and timely paid in full for an aggregate of six quarterly dividend
periods, whether or not consecutive, and the aggregate liquidation preferences of the then-outstanding shares of Series A preferred stock is greater than or equal to $25 million, the authorized number of the Companys directors will be
increased by two and the holders of Series A preferred stock, voting together as a single class, will have the right to elect two directors to fill those newly created directorships at either its next annual meeting (if one is to be held within
thirty days) or at a special meeting of shareholders, and this right continues until complete and timely dividend payment have been made for four consecutive quarterly dividend periods. This right to appoint directors revives in the event of any
such future failure of the Company to pay complete and timely dividends.
Preemptive Rights
Holders of the Series A preferred stock do not have any preemptive rights.
Liquidation Rights
The holders of Series
A preferred stock have a liquidation preference equal to the liquidation amount per share plus any accrued and unpaid dividends on each such share. The current liquidation amount for the Series A preferred stock is $1,000 per share for
an aggregate liquidation amount of $23,938,350.
Redemption Rights
The Company has the option to redeem, in whole or in part, any or all of the shares of the Series A preferred stock, subject to any required
regulatory approval, for a price per share equal to the sum of the liquidation amount per share plus any unpaid dividends for the then current quarterly dividend period up to the day before the redemption date.
Restriction on Redemption and Repurchases of Company Securities
Under the terms of the Series A preferred stock, we may not repurchase or redeem any shares of our capital stock, including any equity
securities or trust preferred securities issued by us or any of our affiliates, unless after giving effect to such repurchase or redemption, our Tier 1 capital would be at least equal to $79,376,715 and all dividends have been paid on the Series A
preferred stock for the most recently completed quarterly dividend period (or sufficient funds have been reserved).
If the Company does
not declare and pay the required dividends on the Series A preferred stock, then for the period of time beginning on the last day of such quarterly dividend period until the last day of the third quarterly dividend period immediately following, the
Company will be prohibited from redeeming, purchasing, repurchasing or otherwise acquiring any shares of its capital stock at any time, subject to certain enumerated exceptions.
94
Business Combinations under Texas Law
A number of provisions of Texas law, Independents certificate of formation and bylaws could have an anti-takeover effect and make more
difficult the acquisition of Independent by means of a tender offer, a proxy contest or otherwise and the removal of incumbent directors. These provisions are intended to discourage coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of Independent to negotiate first with Independents board of directors.
Independent is
subject to the provisions of Title 2, Chapter 21, Subchapter M of the TBOC, or the Texas Business Combination Law, which provides that a Texas corporation may not engage in specified types of business combinations, including mergers, consolidations
and asset sales, with a person, or an affiliate or associate of that person, who is an affiliated shareholder. For purposes of this law, an affiliated shareholder is generally defined as the holder of 20% or more of the
corporations voting shares, for a period of three years from the date that person became an affiliated shareholder. The laws prohibitions do not apply if:
|
|
|
the business combination or the acquisition of shares by the affiliated shareholder was approved by the board of directors of the corporation before the affiliated shareholder became an affiliated shareholder; or
|
|
|
|
the business combination was approved by the affirmative vote of the holders of at least two-thirds of the outstanding voting shares of the corporation not beneficially owned by the affiliated shareholder, at a meeting
of shareholders called for that purpose, not less than six months after the affiliated shareholder became an affiliated shareholder. |
Independent has more than 100 shareholders and is considered to be an issuing public corporation for purposes of this law. The
Texas Business Combination Law does not apply to the following:
|
|
|
the business combination of an issuing public corporation: where the corporations original certificate of formation or bylaws contain a provision expressly electing not to be governed by the Texas Business
Combination Law; or that adopts an amendment to its certificate of formation or bylaws, by the affirmative vote of the holders, other than affiliated shareholders, of at least two-thirds of the outstanding voting shares of the corporation, expressly
electing not to be governed by the Texas Business Combination Law and so long as the amendment does not take effect for 18 months following the date of the vote and does not apply to a business combination with an affiliated shareholder who became
affiliated on or before the effective date of the amendment; |
|
|
|
a business combination of an issuing public corporation with an affiliated shareholder that became an affiliated shareholder inadvertently, if the affiliated shareholder divests itself, as soon as possible, of enough
shares to no longer be an affiliated shareholder and would not at any time within the three- year period preceding the announcement of the business combination have been an affiliated shareholder but for the inadvertent acquisition;
|
|
|
|
a business combination with an affiliated shareholder who became an affiliated shareholder through a transfer of shares by will or intestacy and continuously was an affiliated shareholder until the announcement date of
the business combination; and |
|
|
|
a business combination of a corporation with its wholly owned Texas subsidiary if the subsidiary is not an affiliate or associate of the affiliated shareholder other than by reason of the affiliated shareholders
beneficial ownership of voting shares of the corporation. |
Neither Independents certificate of formation nor
Independents bylaws contain any provision expressly providing that Independent will not be subject to the Texas Business Combination Law. The Texas Business Combination Law may have the effect of inhibiting a nonnegotiated merger or other
business combination involving Independent, even if that event would be beneficial to Independents shareholders.
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Certain Certificate of Formation and Bylaw Provisions Potentially Having an
Anti-takeover Effect
Independents certificate of formation and bylaws contain certain provisions that could have an
anti-takeover effect and thus discourage potential takeover attempts and make it more difficult for Independents shareholders to change management or receive a premium for their shares. These provisions include:
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authorization for Independents board of directors to issue shares of one or more series of preferred stock without shareholder approval; |
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the establishment of a classified board of directors, with directors of each class serving a three-year term; |
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a requirement that directors only be removed from office for cause and only upon a majority shareholder vote; |
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a provision that vacancies on Independents board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office; |
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a prohibition of shareholder action by written consent, requiring all actions to be taken at a meeting of the shareholders; |
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the requirement that shareholders representing two-thirds of the outstanding shares of common stock approve all amendments to Independents certificate of formation or bylaws and approve mergers and similar
transactions; |
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the requirement that any shareholders that desire to bring business before Independents annual meeting of shareholders or nominate candidates for election as directors at Independents annual meeting of
shareholders must provide timely notice of their intent in writing; |
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the prohibition of cumulative voting in the election of directors; and |
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a limitation on the ability of shareholders to call special meetings to those shareholders or groups of shareholders owning at least 20% of Independents outstanding shares of common stock. |
Limitation of Liability and Indemnification of Officers and Directors
Independents certificate of formation provides that its directors are not liable to Independent or its shareholders for monetary damages
for an act or omission in their capacity as a director. A director may, however, be found liable for:
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any breach of the directors duty of loyalty to Independent or its shareholders; |
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acts or omissions not in good faith that constitute a breach of the directors duty to Independent; |
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acts or omissions not in good faith that involve intentional misconduct or a knowing violation of law; |
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any transaction from which the director receives an improper benefit, whether or not the benefit resulted from an action taken with the scope of the directors duties; |
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acts or omissions for which the liability of the director is expressly provided by an applicable statute; and |
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acts related to an unlawful stock repurchase or payment of a dividend. |
Independents
certificate of formation also provides that Independent will indemnify its directors and officers, and may indemnify its employees and agents, to the fullest extent permitted by applicable Texas law from any expenses, liabilities or other matters.
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COMPARISON OF RIGHTS OF SHAREHOLDERS OF GRAND BANK AND INDEPENDENT
The rights of shareholders of Grand Bank under the articles of association and bylaws of Grand Bank will differ in some respects
from the rights that shareholders of Grand Bank will have as shareholders of Independent under the certificate of formation and bylaws of Independent. Copies of Independents certificate of formation and bylaws have been previously filed by
Independent with the SEC. Copies of Grand Banks articles of association and bylaws are available upon written request from Independent.
Certain differences between the provisions contained in the certificate of formation and bylaws of Independent and the articles of association
and bylaws of Grand Bank, as such differences may affect the rights of shareholders, are summarized below. The summary set forth below is not intended to be complete and is qualified by reference to Texas law, as appropriate, and the articles of
association and bylaws of Grand Bank and the certificate of formation and bylaws of Independent.
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GRAND BANK |
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INDEPENDENT |
Capitalization: |
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The articles of association of Grand Bank authorizes the issuance of up to 3,750,000 shares of common stock, par value $5.00 per share. |
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The certificate of formation of Independent authorizes the issuance of up to 100,000,000 shares of common stock, par value $0.01 and
10,000,000 shares of preferred stock, par value $0.01. The board of directors is
authorized to provide for the issuance of preferred stock in one or more classes or series and to fix the rights, designations, preferences related thereto. Currently, 23,938.35 shares of Independents Series A preferred stock are
outstanding. |
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Corporate Governance: |
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The rights of the Grand Bank shareholders are governed by Texas law and the articles of association and bylaws of Grand Bank. |
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The rights of the Independent shareholders are governed by Texas law and the certificate of formation and bylaws of Independent. |
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Convertibility of Stock: |
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The common stock of Grand Bank is not convertible into any other securities of Grand Bank. |
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The common stock of Independent is not convertible into any other securities of Independent. |
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Preemptive Rights: |
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Preemptive rights are denied pursuant to the articles of association. |
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Preemptive rights are denied pursuant to the certificate of formation. |
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Election of Directors: |
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Under Texas law, directors are elected by a plurality of the votes cast by the shareholders entitled to vote in the election of directors at a meeting of the shareholders at which a quorum is present unless otherwise provided in the
articles of association or bylaws. |
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Under Texas law, directors are elected by a plurality of the votes cast by the shareholders entitled to vote in the election of directors at a meeting of the shareholders at which a quorum is present unless otherwise provided in the
certificate of formation or bylaws. |
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GRAND BANK |
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INDEPENDENT |
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The bylaws provide that, with the exception of board vacancies, directors shall be elected at the regular or special meetings of the
shareholders and shall serve until a successor is qualified and elected, or until the earlier of the directors death, resignation or removal. The right to have cumulative voting for the election of directors by any shareholder is expressly
denied by the bylaws. The bylaws provide that no one shall be nominated or shall
serve as a director without the prior written consent of the Texas Banking Commissioner if (i) the bank holds a judgment against such person, (ii) the bank holds a charged-off note on which such person is liable, or (iii) such person has been
convicted of a felony. |
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The certificate of formation provides for three classes of directors and which are intended to consist as nearly as possible to one third of
the total number of directors serving on the board. Except for the initial term of two classes of such directors, the directors shall be elected to a three year term. The elections of the directors shall be staggered such that one class of directors
will elected in each year. Any individual that receives the plurality of the votes
cast, up to the number of directors to be elected in such election, shall be elected to the board. No cumulative voting is permitted for the election of directors pursuant to the certificate of formation. |
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Removal of Directors and Board Vacancies: |
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The bylaws provide that any director may be removed with or without cause at a meeting of the shareholders called expressly for that purpose
by the affirmative vote of a majority of the number of shares of the shareholders entitled to vote for the election of such director.
The bylaws also provide that any vacancy on the board of directors may be filled by the affirmative vote of a majority of directors then in office or by a
shareholder election at any annual or special meeting called for such purpose. The
bylaws provide that whenever the authorized number of directors is increased, the shareholders may authorize by resolution that a majority of the directors in office shall have the power to fill up to two such directorships. |
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Independents certificate of formation provides that subject to the right of holders of a class of stock having the right to elect a
director solely by the holders of that class, any director may be removed only (i) for cause and (ii) by the affirmative vote of the holders of a majority of the combined voting power of the outstanding stock entitled to vote in the election of
directors, voting together as a single class. The certificate of formation also
provides that any vacancy on the board occurring between the annual meetings of shareholders, including up to two newly created directorships may be filled by a majority of the board of directors then in office (even if less than quorum), or by a
sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor.
The certificate of formation provides that any change to the number of directors, any
increase or decrease is to be apportioned among the classes so as to maintain the representation of one third of the directors in each class. |
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Amendment of Governing Documents: |
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The bylaws provide that the board of directors have the power to alter, amend, repeal or adopt any bylaws subject to the right of the shareholders to rescind any board action with regard to the bylaws at a regular meeting of the
shareholders or at a properly called special meeting of the shareholders. |
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The certificate of formation provides that the bylaws of Independent may be amended, repealed, or adopted by (i) the affirmative vote of the majority of the board or (ii) the affirmative vote of at least two-thirds of the holders
of voting stock, voting as a single class at a meeting of the shareholders called for that purpose. |
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GRAND BANK |
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INDEPENDENT |
Shareholder Actions: |
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Under Texas law, the affirmative vote of the holders of at least two-thirds of the outstanding shares of the corporation entitled to vote is
required to approve a fundamental business transaction, unless a different vote but not less than a majority of the shares entitled to vote on the matter, is specified in the certificate of formation.
The bylaws provide that unless otherwise required by law, special meetings of the
shareholders for any purpose may be called by (i) the president, (ii) the board of directors, or (iii) the holders of not less than 10% of all of the shares entitled to vote at the meeting. Special meetings shall be held on such date as designated
by the person calling the meeting. The bylaws provide that at any meeting of the
shareholders, only actions that are set forth in the notice of such meeting may be presented at the meeting.
The bylaws provide that at written waiver of any notice required pursuant to law, the articles of association or the bylaws, whether before or after the time
of the event for which notice is required to be given, is the equivalent of any required notice.
The bylaws provide that the vote of the holders of a majority of the shares entitled to vote and represented at a meeting at which a quorum is present will
decide any question brought before such meeting of the shareholders, unless the vote of a greater number is required by law other articles of association or the bylaws.
Shareholder action by written consent is expressly permitted pursuant to the banks bylaws, provided such written consent is executed by shareholders of
Grand Bank holding not less than all of the shareholders entitled to vote on the subject matter thereof. No prior written notice is required for actions taken by written consent. |
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Texas law provides that on matters other than the election of directors, the affirmative vote of the holders of a majority of the shares
entitled to vote on, and who voted for, against, or expressly abstained with respect to the matter, will be the act of the shareholders unless the vote of a greater number is required by law, the certificate of formation, or the bylaws. Under Texas
law, a corporations certificate of formation or bylaws may provide that the affirmative vote of holders of a specified portion of the shares, not less than a majority, entitled to vote on the matter will be the act of the shareholders, rather
than the specified portion of the shares required pursuant to Texas law. Under Texas law, the affirmative vote of the holders of at least two-thirds of the outstanding shares of the corporation entitled to vote is required to approve a fundamental
business transaction. The certificate of formation provides that unless otherwise
required by law, special meetings of the shareholders for any purpose may be called by (i) the chairman of the board or (ii) the Secretary or Assistant Secretary at the written request of either (a) the majority of the board of directors or (b) the
holders of at least twenty percent (20%) of the corporations outstanding capital stock entitled to vote in the election of directors.
Shareholder action by written consent is not permitted. |
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Shareholder Proposal of Business or Nominations for Directors: |
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Neither Grand Banks articles of association nor its bylaws contain express provisions regarding shareholder proposals of business.
The bylaws provide that nominations for the election of directors may be made by (i) the
board or (ii) any |
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The Bylaws provide that a notice of a shareholders to make a nomination of a person for election as a director or to bring any other matter before a meeting shall be made in writing and received by the Secretary of Independent in
the event of an annual meeting of the shareholders, no more than 120 days |
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GRAND BANK |
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INDEPENDENT |
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shareholder entitled to vote that complies with the nominating procedures set forth in the bylaws.
The bylaws require that all shareholder nominations for directors must be received by the
Secretary of Grand Bank, and shall be mailed and received at the principal executive officers of Grand Bank not less than sixty business days prior to the meeting or not later than the close of business on the seventh day following the day on which
notice of the meeting was mailed to the shareholders. Shareholder notice to the
Secretary must set forth in writing (i) the name and address of the shareholder who intents to make the nomination and of the person or persons to be nominated, (ii) the number of shares of stock of Grand Bank that are beneficially owned by the
shareholder that makes the nomination, (iii) a representation that the nominating shareholder is a holder of record of shares of Grand Bank entitled to vote at such meeting and intends to appear in person or by proxy at the meeting, (iv) a
description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person) pursuant to which the nomination or nominations are to be made by the shareholder, (v) such other
information regarding each nominee proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had each nominee been nominated by Grand Banks board, (vi) the number
of shares of stock of Grand Bank that the nominee beneficially owns, (vii) the number of shares of capital stock of any other bank or similar entity that the nominee or the shareholder beneficially owns and the identities and locations of such
institutions, (viii) whether the nominee has ever been convicted of a felony or convicted of or pleaded nolo contendere to any criminal offense involving dishonesty or breach of trust, filed a petition of bankruptcy or been adjudged bankrupt, (ix)
whether Grand Bank holds a judgment against the nominee and (x) whether Grand Bank holds a charged-off note on which the nominee is liable.
The Chairman may refuse to acknowledge the nomination of any person not made in compliance with the bylaws. |
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and no less than 90 days in advance of the anniversary date of the immediately preceding annual meeting, provided that in the event that the
annual meeting is called on a date that is not within 30 days before or after such anniversary date, notice by the shareholder in order to be timely must be so received not later than the close of business on the 15th day following the day on which
notice of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs.
In the event of a special meeting of the shareholders, such notice shall be received by the Secretary of Independent not later than the close of business on
the 15th day following the day on which notice of the meeting is first mailed to shareholders or public disclosure of the date of the special meeting was made, whichever occurs first.
Every notice by a shareholder must set forth (i) the name and residence of the
shareholder of the corporation that intends to make a nomination or bring up any other matter, (ii) a representation that the shareholder is a holder of Independents voting stock which indicates the class and number of shares owned and intends
to appear in person or by proxy at the meeting to make the nomination or bring up the matter specified in the notice, (iii) with respect to notice of an intent to make a nomination for a director, a description of all arrangements and understandings
between the shareholder and each nominee pursuant to which the nominations are made, (iv) with respect to an intent to make a nomination, such other information regarding each nominee proposed by such shareholder required to be disclosed in a proxy
statement filed pursuant to the proxy rules of the SEC had each nominee been nominated by Independents board, and (v) with respect to the notice of intent to bring up any other matter, a description of the matter and any material interest of
the shareholder in the matter. The Chairman may refuse to acknowledge the nomination
of any person not made in compliance with the bylaws. |
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GRAND BANK |
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INDEPENDENT |
Indemnification; Limitation of Director Liability: |
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The bylaws provide that Grand Bank shall indemnify each person who was or is a director or executive officer of Grand Bank, and may indemnify
any other person, including any person who was serving as a director or other representative of another entity at the request of Grand Bank, in connection with any actual or threatened action, claim, investigation or inquiry, against all expenses,
judgments and amounts paid in settlement actually and reasonably incurred in connection with such action, claim, investigation or inquiry.
The bylaws provide that, notwithstanding the foregoing, Grand Bank shall not indemnify any such person in respect of a proceeding (i) in which the person is
found liable on the basis that personal benefit was improperly received by him or (ii) in which the person is found liable to Grand Bank.
Additionally, the bylaws provide that indemnification in connection with an action brought by such person against Grand Bank will be available only if the
indemnification (i) is limited to reasonable expenses actually incurred by the person in connection with the proceeding and (ii) shall not be made in respect of any proceeding in which the person is found liable for willful or intentional misconduct
in the performance of his duty to Grand Bank. Grand Bank must pay to such person any
expenses incurred in defending an action, investigation or inquiry, in advance of final disposition, upon Grand Bank receiving an undertaking or agreement by such person to repay such expenses unless it is ultimately determined that such person is
entitled to indemnification. The bylaws provide that Grand Bank may purchase
insurance or other arrangements on behalf of any person who is or was a director or officer of Grand Bank or who was or is serving at the request of Grand Bank as a director, officer, employee or agent of another foreign or domestic entity, against
liability asserted against any liability incurred by him in such position or arising out of his status as such, irrespective of whether Grand Bank has the power to indemnify him under the articles of association or the bylaws. |
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The certificate of formation provides for mandatory indemnification of any and all persons who was, are, or are threatened to be, made a
party to a proceeding because such person (i) is or was a director or (ii) while a director or officer of Independent, is or was serving at the request of Independent as a director of another foreign or domestic entity, against expenses and other
amounts reasonably incurred in connection with legal proceedings to the fullest extent permitted pursuant to the TBOC and the bylaws of Independent.
The certificate of formation permits indemnification of any employee and agent of the corporation in the sole discretion of the board, against expenses and
other amounts reasonably incurred in connection with legal proceedings to the fullest extent permitted pursuant to the TBOC and the bylaws of Independent.
The bylaws permit Independent to purchase and maintain insurance on behalf of indemnified persons. |
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EXPERTS
The consolidated financial statements of Independent Bank Group, Inc. appearing in Independent Bank Group, Inc.s Annual Report on Form
10-K for the year ended December 31, 2014, have been audited by McGladrey LLP, an independent registered public accounting firm, as set forth in their report thereon, included therein, and incorporated by reference herein. Such consolidated
financial statements are incorporated by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
In connection with its role as financial adviser to Grand Bank, Hovde Group has rendered a fairness opinion and will receive certain
professional fees in connection with its services. In addition, Grand Bank has agreed to indemnify Hovde Group against certain liabilities, including certain liabilities that may arise under the securities laws. For more information, see
Proposal to Approve the Reorganization AgreementHovde Groups Compensation and Other Relationships with Grand Bank on page 58.
LEGAL MATTERS
The validity of the shares of Independent common stock to be issued by Independent in connection with the merger will be passed upon by
Andrews Kurth LLP, Dallas, Texas.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the board of directors of Grand Bank knows of no matters that will be presented for
consideration at the special meeting of its shareholders other than as described in this proxy statement/prospectus. However, if any other matters are properly brought before the special meeting or any adjournment thereof, it is intended that the
proxies will act in accordance with their best judgment unless otherwise indicated in the appropriate box on the proxy.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Exchange Act and file annual, quarterly
and current reports, proxy statements, information statements and other information with the SEC. Because our common stock trades on the NASDAQ Global Select Market under the symbol IBTX, those materials can also be inspected and copied
at the offices of that organization. Here are ways you can review and obtain copies of this information:
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Paper copies of information |
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SECs Public Reference Room 100 F Street,
N.E. Washington, D.C. 20549 |
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NASDAQ Stock Market, Inc. Global Select Market
One Liberty Plaza 165 Broadway
New York, NY 10006 |
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On-line information, free of charge |
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SECs Internet website at www.sec.gov |
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Information about the SECs Public Reference Room |
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Call the SEC at
1-800-SEC-0330 |
We have filed with the SEC a registration statement on Form S-4 under the Securities Act (File No. 333- ), relating to the securities covered by this prospectus. The registration statement, including
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the attached exhibits and schedules, contains additional relevant information about us and the securities. This prospectus does not contain all of the information set forth in the registration
statement. Whenever a reference is made in this prospectus to a contract or other document, the reference is only a summary and you should refer to the exhibits that form a part of the registration statement for a copy of the contract or other
document. You can get a copy of the registration statement, at prescribed rates, from the sources listed above. The registration statement and the documents referred to below under Incorporation of Certain Documents by Reference are also
available on our Internet website, www.ibtx.com. You can also obtain these documents from us, without charge (other than exhibits, unless the exhibits are specifically incorporated by reference), by requesting them in writing or by telephone
at the following address:
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069-3257
(972)
562-9004
Attention: Jan Webb, Executive Vice President and Secretary
Independent has filed a registration statement on Form S-4 under the Securities Act of 1933 with the SEC with respect to the Independent
common stock to be issued to shareholders of Grand Bank in the merger. This proxy statement/prospectus constitutes the prospectus of Independent filed as part of the registration statement. This proxy statement/prospectus does not contain all of the
information set forth in the registration statement because certain parts of the registration statement are omitted in accordance with the rules and regulations of the SEC. The registration statement and its exhibits are available for inspection and
copying as set forth above.
In addition to being a proxy statement of Grand Bank, this document is the prospectus of Independent for the
shares of its common stock that will be issued in connection with the merger.
Grand Bank does not have a class of securities registered
under Section 12 of the Exchange Act, is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act and, accordingly, does not file documents and reports with the SEC.
If you have any questions concerning the merger or this proxy statement/prospectus, would like additional copies of this proxy
statement/prospectus or need help voting your shares of Grand Bank common stock, please contact Lee Dinkel, Grand Banks President and Chief Executive Officer, at the following address and telephone number:
Grand Bank
16660 Dallas
Parkway, Suite 1700
Dallas, Texas 75248
(972) 735-1000
Grand Bank is
required to file Consolidated Reports of Condition and Statements of Income, or Call Reports, quarterly with the Federal Financial Institutions Examination Counsel, or FFIEC. The Call Reports contain financial information (including, but not limited
to, detailed information on loan charge-offs and recoveries, changes in the allowance for and lease losses, securities portfolio, loans and lease financing receivables and past due, nonaccrual and renegotiated loans and lease financing receivables)
not otherwise set forth separately in this proxy statement/prospectus. All Call Reports filed by Grand Bank may be obtained online from the FDIC at www2.fdic.gov/call_TFR_Rpts/.
You should rely only on the information contained in this proxy statement/prospectus. Neither Independent nor Grand Bank has authorized
anyone to provide you with different information. Therefore, if anyone gives you different or additional information, you should not rely on it. The information contained in this proxy statement/prospectus is correct as of its date. It may not
continue to be correct after this date. Grand Bank has supplied all of the information about Grand Bank contained in this proxy
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statement/prospectus and Independent has supplied all of the information contained in this proxy statement/prospectus about Independent and its subsidiaries. Each of us is relying on the
correctness of the information supplied by the other.
This proxy statement/prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by this proxy statement/prospectus, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from it is unlawful to make such offer, solicitation of an offer or
proxy solicitation in such jurisdiction.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference information into this proxy statement/prospectus, which means:
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incorporated documents are considered part of this proxy statement/prospectus; |
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we can disclose important information to you by referring you to those documents; and |
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information that we file later with the SEC automatically will update and supersede information contained in this proxy statement/prospectus. |
This proxy statement/prospectus incorporates by reference the documents listed below that we have previously filed with the SEC (File
No. 001-35854). These documents contain important information about us:
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our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on February 27, 2015, including the information in our proxy statement that is part of our Schedule 14A filed
with the SEC on April 13, 2015, that is incorporated by reference in that Annual Report on Form 10-K; |
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our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 1, 2015, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed with the
SEC on July 31, 2015; |
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our Current Reports on Form 8-K (and any amendments thereto) filed with the SEC on May 1, 2015, May 15, 2015, July 23, 2015, July 27, 2015 and July 31, 2015 (other than any portions thereof
deemed furnished and not filed in accordance with SEC rules); and |
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the description of our common stock contained in our Registration Statement on Form 8-A, filed with the SEC on April 2, 2013, and any other amendment or report filed for the purposes of updating such
description. |
We incorporate by reference in this proxy statement/prospectus any additional documents that we may file with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than those furnished pursuant to Item 2.02 or Item 7.01 of Form 8-K or other information furnished to the SEC), from the date of the registration
statement of which this proxy statement/prospectus is a part through the date on which the Grand Bank special shareholders meeting described in the proxy statement/prospectus is held. These documents may include annual, quarterly and current
reports, as well as proxy statements. Any material that we later file with the SEC will automatically update and supersede, where appropriate, the information previously filed with the SEC. These documents are available to you without charge as
described above in Where You Can Find More Information.
For purposes of this proxy statement/prospectus, any statement
contained in a document incorporated or deemed to be incorporated herein by reference shall be deemed to be modified or superseded to the extent that a statement contained herein or in any other subsequently filed document that also is or is deemed
to be incorporated herein by reference modifies or supersedes such statement in such document.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
(INCLUDING EXHIBIT AAGREEMENT AND PLAN OF MERGER)
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
INDEPENDENT BANK GROUP, INC.
AND
GRAND BANK
Dated as of July 23, 2015
TABLE OF CONTENTS
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ARTICLE I ACQUISITION OF GRAND BANK BY IBG |
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A-1 |
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Section 1.01. |
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Merger of Grand Bank with and into Independent Bank |
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A-1 |
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Section 1.02. |
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Effects of the Merger |
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A-1 |
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Section 1.03. |
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Certificate of Formation |
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A-2 |
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Section 1.04. |
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Directors and Officers |
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A-2 |
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Section 1.05. |
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Merger Consideration |
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A-2 |
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Section 1.06. |
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Treatment of Grand Bank Stock Options |
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A-3 |
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Section 1.07. |
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Treatment of Independent Bank Stock |
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A-4 |
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Section 1.08. |
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Dissenting Shareholders |
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A-4 |
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Section 1.09. |
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SEC Filing and Shareholder Approval |
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A-4 |
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Section 1.10. |
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Exchange Procedures |
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A-6 |
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Section 1.11. |
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Effective Time |
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A-8 |
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Section 1.12. |
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Anti-Dilution Provisions |
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A-8 |
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Section 1.13. |
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Tax Matters |
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A-8 |
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ARTICLE II THE CLOSING AND THE CLOSING DATE |
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A-9 |
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Section 2.01. |
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Time and Place of the Closing and Closing Date |
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A-9 |
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Section 2.02. |
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Actions to be Taken at Closing by Grand Bank |
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A-9 |
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Section 2.03. |
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Actions to be Taken at Closing by IBG |
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A-10 |
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Section 2.04. |
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Further Assurances |
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A-11 |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF GRAND BANK |
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A-11 |
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Section 3.01. |
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Organization |
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A-11 |
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Section 3.02. |
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Capitalization |
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A-11 |
|
Section 3.03. |
|
Execution and Delivery |
|
|
A-12 |
|
Section 3.04. |
|
No Violation |
|
|
A-12 |
|
Section 3.05. |
|
Compliance with Laws, Permits and Instruments |
|
|
A-12 |
|
Section 3.06. |
|
Financial Statements |
|
|
A-12 |
|
Section 3.07. |
|
Litigation |
|
|
A-13 |
|
Section 3.08. |
|
Consents and Approvals |
|
|
A-13 |
|
Section 3.09. |
|
Undisclosed Liabilities |
|
|
A-13 |
|
Section 3.10. |
|
Title to Tangible Assets |
|
|
A-13 |
|
Section 3.11. |
|
Absence of Certain Changes or Events |
|
|
A-14 |
|
Section 3.12. |
|
Leases, Contracts and Agreements |
|
|
A-16 |
|
Section 3.13. |
|
Taxes and Tax Returns |
|
|
A-16 |
|
Section 3.14. |
|
Insurance |
|
|
A-17 |
|
Section 3.15. |
|
No Adverse Change |
|
|
A-18 |
|
Section 3.16. |
|
Proprietary Rights |
|
|
A-18 |
|
Section 3.17. |
|
Transactions with Certain Persons and Entities |
|
|
A-18 |
|
Section 3.18. |
|
Evidences of Indebtedness |
|
|
A-18 |
|
Section 3.19. |
|
Employee Relationships |
|
|
A-18 |
|
Section 3.20. |
|
Condition of Assets |
|
|
A-19 |
|
Section 3.21. |
|
Environmental Compliance |
|
|
A-19 |
|
Section 3.22. |
|
Regulatory Compliance |
|
|
A-19 |
|
Section 3.23. |
|
Absence of Certain Business Practices |
|
|
A-20 |
|
Section 3.24. |
|
Books and Records |
|
|
A-20 |
|
Section 3.25. |
|
Forms of Instruments, Etc |
|
|
A-20 |
|
Section 3.26. |
|
Fiduciary Responsibilities |
|
|
A-20 |
|
Section 3.27. |
|
Guaranties |
|
|
A-20 |
|
Section 3.28. |
|
Employee Benefit Plans |
|
|
A-20 |
|
Section 3.29. |
|
No Excess Parachute Payments |
|
|
A-22 |
|
A-i
Table of Contents
|
|
|
|
|
|
|
Section 3.30. |
|
Bank Secrecy Act, Foreign Corrupt Practices Act and U.S.A. Patriot Act |
|
|
A-22 |
|
Section 3.31. |
|
Data Processing Agreements |
|
|
A-22 |
|
Section 3.32. |
|
Dissenting Shareholders |
|
|
A-22 |
|
Section 3.33. |
|
Fair Housing Act, Home Mortgage Disclosure Act and Equal Credit Opportunity Act and Flood Disaster Protection Act |
|
|
A-22 |
|
Section 3.34. |
|
Usury Laws and Other Consumer Compliance Laws |
|
|
A-22 |
|
Section 3.35. |
|
Zoning and Related Laws |
|
|
A-22 |
|
Section 3.36. |
|
Business Combination |
|
|
A-23 |
|
Section 3.37. |
|
Community Reinvestment Act |
|
|
A-23 |
|
Section 3.38. |
|
Representations Not Misleading |
|
|
A-23 |
|
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF IBG |
|
|
A-23 |
|
Section 4.01. |
|
Organization |
|
|
A-23 |
|
Section 4.02. |
|
Execution and Delivery |
|
|
A-23 |
|
Section 4.03. |
|
IBG Capitalization |
|
|
A-23 |
|
Section 4.04. |
|
Independent Bank |
|
|
A-24 |
|
Section 4.05. |
|
Consents and Approvals |
|
|
A-24 |
|
Section 4.06. |
|
Regulatory Approval |
|
|
A-24 |
|
Section 4.07. |
|
SEC Filings; Financial Statements |
|
|
A-25 |
|
Section 4.08. |
|
Undisclosed Liabilities |
|
|
A-25 |
|
Section 4.09. |
|
No Violation |
|
|
A-26 |
|
Section 4.10. |
|
Litigation |
|
|
A-26 |
|
Section 4.11. |
|
Compliance with Laws, Permits and Instruments |
|
|
A-26 |
|
Section 4.12. |
|
No Material Adverse Change |
|
|
A-26 |
|
Section 4.13. |
|
Financing |
|
|
A-26 |
|
Section 4.14. |
|
Representations Not Misleading |
|
|
A-26 |
|
|
|
ARTICLE V COVENANTS OF GRAND BANK |
|
|
A-27 |
|
Section 5.01. |
|
Commercially Reasonable Efforts |
|
|
A-27 |
|
Section 5.02. |
|
Information for Regulatory Applications and Registration Statement |
|
|
A-27 |
|
Section 5.03. |
|
Affirmative Covenants |
|
|
A-27 |
|
Section 5.04. |
|
Negative Covenants |
|
|
A-28 |
|
Section 5.05. |
|
Access; Pre Closing Investigation |
|
|
A-30 |
|
Section 5.06. |
|
Intentionally Reserved |
|
|
A-31 |
|
Section 5.07. |
|
Untrue Representations |
|
|
A-31 |
|
Section 5.08. |
|
Litigation and Claims |
|
|
A-31 |
|
Section 5.09. |
|
Adverse Changes |
|
|
A-31 |
|
Section 5.10. |
|
No Negotiation with Others |
|
|
A-31 |
|
Section 5.11. |
|
Consents and Approvals |
|
|
A-32 |
|
Section 5.12. |
|
Environmental Investigation; Right to Terminate Agreement |
|
|
A-33 |
|
Section 5.13. |
|
Termination of Employee Plans and Contracts |
|
|
A-34 |
|
Section 5.14. |
|
Disclosure Schedules |
|
|
A-34 |
|
Section 5.15. |
|
Voting Agreement |
|
|
A-34 |
|
Section 5.16. |
|
Releases |
|
|
A-34 |
|
Section 5.17. |
|
Other Agreements |
|
|
A-34 |
|
Section 5.18. |
|
Support Agreement |
|
|
A-34 |
|
Section 5.19. |
|
Shareholder Lists |
|
|
A-35 |
|
Section 5.20. |
|
Conforming Accounting Adjustments |
|
|
A-35 |
|
Section 5.21. |
|
D & O Liability Insurance |
|
|
A-35 |
|
Section 5.22. |
|
Employment Agreement |
|
|
A-35 |
|
Section 5.23. |
|
Intentionally Reserved |
|
|
A-35 |
|
A-ii
Table of Contents
|
|
|
|
|
|
|
Section 5.24. |
|
Termination of DP Contracts and IT Conversion |
|
|
A-35 |
|
Section 5.25. |
|
Repayment of FHLB Advances |
|
|
A-35 |
|
Section 5.26. |
|
Consulting Agreements |
|
|
A-35 |
|
|
|
ARTICLE VI COVENANTS OF IBG |
|
|
A-36 |
|
Section 6.01. |
|
Commercially Reasonable Efforts |
|
|
A-36 |
|
Section 6.02. |
|
Untrue Representations |
|
|
A-36 |
|
Section 6.03. |
|
Affirmative Covenants |
|
|
A-36 |
|
Section 6.04. |
|
Litigation and Claims |
|
|
A-36 |
|
Section 6.05. |
|
Registration Statement |
|
|
A-36 |
|
Section 6.06. |
|
NASDAQ Listing |
|
|
A-37 |
|
Section 6.07. |
|
Regulatory and Other Approvals |
|
|
A-37 |
|
Section 6.08. |
|
Other Agreements |
|
|
A-37 |
|
Section 6.09. |
|
Employee Matters |
|
|
A-37 |
|
Section 6.10. |
|
Adverse Changes |
|
|
A-38 |
|
Section 6.11. |
|
Issuance of IBG Common Shares |
|
|
A-38 |
|
Section 6.12. |
|
Access to Properties and Records |
|
|
A-38 |
|
Section 6.13. |
|
Disclosure Schedules |
|
|
A-38 |
|
Section 6.14. |
|
Director and Officer Indemnification |
|
|
A-38 |
|
|
|
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF GRAND BANK |
|
|
A-39 |
|
Section 7.01. |
|
Representations and Warranties |
|
|
A-39 |
|
Section 7.02. |
|
Performance of Obligations |
|
|
A-39 |
|
Section 7.03. |
|
Government and Other Approvals |
|
|
A-39 |
|
Section 7.04. |
|
No Litigation |
|
|
A-39 |
|
Section 7.05. |
|
Delivery of Closing Documents |
|
|
A-39 |
|
Section 7.06. |
|
Shareholder Approvals |
|
|
A-39 |
|
Section 7.07. |
|
Registration Statement |
|
|
A-39 |
|
Section 7.08. |
|
Listing of IBG Stock |
|
|
A-40 |
|
Section 7.09. |
|
No Material Adverse Change |
|
|
A-40 |
|
Section 7.10. |
|
Delivery of Merger Consideration |
|
|
A-40 |
|
Section 7.11. |
|
Average Closing Price |
|
|
A-40 |
|
|
|
ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF IBG |
|
|
A-40 |
|
Section 8.01. |
|
Representations and Warranties |
|
|
A-40 |
|
Section 8.02. |
|
Performance of Obligations |
|
|
A-40 |
|
Section 8.03. |
|
Delivery of Closing Documents |
|
|
A-40 |
|
Section 8.04. |
|
Government and Other Approvals |
|
|
A-40 |
|
Section 8.05. |
|
No Litigation |
|
|
A-41 |
|
Section 8.06. |
|
No Material Adverse Change |
|
|
A-41 |
|
Section 8.07. |
|
Minimum Tangible Book Value |
|
|
A-41 |
|
Section 8.08. |
|
Registration Statement |
|
|
A-41 |
|
Section 8.09. |
|
Listing |
|
|
A-41 |
|
Section 8.10. |
|
No Material Adverse Change |
|
|
A-41 |
|
Section 8.11. |
|
Minimum ALLL |
|
|
A-41 |
|
Section 8.12. |
|
Shareholder Approvals |
|
|
A-41 |
|
Section 8.13. |
|
Termination of Employee Benefit Plans |
|
|
A-41 |
|
Section 8.14. |
|
Releases, and Resignations |
|
|
A-41 |
|
Section 8.15. |
|
Support Agreements |
|
|
A-42 |
|
Section 8.16. |
|
Employment Agreement |
|
|
A-42 |
|
Section 8.17. |
|
Consulting Agreement |
|
|
A-42 |
|
A-iii
Table of Contents
|
|
|
|
|
|
|
Section 8.18. |
|
Tax Opinion |
|
|
A-42 |
|
Section 8.19. |
|
Average Closing Price |
|
|
A-42 |
|
Section 8.20. |
|
Options |
|
|
A-42 |
|
|
|
ARTICLE IX TERMINATION AND ABANDONMENT |
|
|
A-42 |
|
Section 9.01. |
|
Right of Termination |
|
|
A-42 |
|
Section 9.02. |
|
Notice of Termination |
|
|
A-43 |
|
Section 9.03. |
|
Effect of Termination |
|
|
A-43 |
|
Section 9.04. |
|
Grand Bank Termination Fee |
|
|
A-44 |
|
|
|
ARTICLE X CONFIDENTIAL INFORMATION |
|
|
A-44 |
|
Section 10.01. |
|
Definition of Recipient, Disclosing Party and Representative |
|
|
A-44 |
|
Section 10.02. |
|
Definition of Subject Information |
|
|
A-44 |
|
Section 10.03. |
|
Confidentiality |
|
|
A-45 |
|
Section 10.04. |
|
Securities Law Concerns |
|
|
A-45 |
|
Section 10.05. |
|
Return of Subject Information |
|
|
A-45 |
|
|
|
ARTICLE XI MISCELLANEOUS |
|
|
A-45 |
|
Section 11.01. |
|
No Survival of Representations and Warranties |
|
|
A-45 |
|
Section 11.02. |
|
Expenses |
|
|
A-45 |
|
Section 11.03. |
|
Brokerage Fees and Commissions |
|
|
A-45 |
|
Section 11.04. |
|
Entire Agreement |
|
|
A-46 |
|
Section 11.05. |
|
Further Cooperation |
|
|
A-46 |
|
Section 11.06. |
|
Severability |
|
|
A-46 |
|
Section 11.07. |
|
Notices |
|
|
A-46 |
|
Section 11.08. |
|
GOVERNING LAW; VENUE |
|
|
A-47 |
|
Section 11.09. |
|
Multiple Counterparts; Electronic Transmission |
|
|
A-47 |
|
Section 11.10. |
|
Certain Definitions |
|
|
A-47 |
|
Section 11.11. |
|
Specific Performance |
|
|
A-49 |
|
Section 11.12. |
|
Attorneys Fees and Costs |
|
|
A-49 |
|
Section 11.13. |
|
Rules of Construction |
|
|
A-49 |
|
Section 11.14. |
|
Binding Effect; Assignment |
|
|
A-49 |
|
Section 11.15. |
|
Public Disclosure |
|
|
A-50 |
|
Section 11.16. |
|
Extension; Waiver |
|
|
A-50 |
|
Section 11.17. |
|
Amendments |
|
|
A-50 |
|
EXHIBITS:
EXHIBIT A:
Agreement and Plan of Merger
EXHIBIT B: Voting Agreement
EXHIBIT C: Release
A-iv
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (Agreement) is made and entered into as of July 23, 2015, by and between
INDEPENDENT BANK GROUP, INC., a Texas corporation and registered bank holding company with its principal offices in McKinney, Texas (IBG), and GRAND BANK, a Texas state banking association with its principal office in Dallas,
Texas (Grand Bank).
W I T N E S S E T H:
WHEREAS, IBG desires to acquire all of the issued and outstanding shares of Grand Bank common stock (the Grand Bank Stock),
through the merger of Grand Bank with and into Independent Bank, a Texas state banking association and wholly owned subsidiary of IBG (Independent Bank), with Independent Bank continuing as the surviving bank (the
Merger), pursuant to which holders of the Grand Bank Stock will be entitled to receive cash and shares of common stock of IBG (the IBG Stock) as provided for herein;
WHEREAS, IBG and Grand Bank believe that the Merger, as provided for and subject to the terms and conditions set forth in this Agreement and
all exhibits, schedules and supplements hereto, is in the best interests of IBG and Grand Bank and their respective shareholders;
WHEREAS, the parties intend that the Merger qualify as a reorganization within the meaning of § 368(a) of the Internal Revenue Code of
1986, as amended (the Code) and the rules and regulations promulgated thereunder;
WHEREAS, to induce IBG to enter into
this Agreement, certain shareholders of Grand Bank have agreed to execute and deliver to IBG a Voting Agreement, in the form attached as Exhibit B, pursuant to which these shareholders agree to vote their shares of Grand Bank Stock in
favor of the Merger;
WHEREAS, IBG and Grand Bank desire to set forth certain representations, warranties and covenants made by each to
the other as an inducement to the execution and delivery of this Agreement and certain additional agreements related to the transactions contemplated hereby; and
WHEREAS, the respective boards of directors of IBG and Grand Bank have approved this Agreement and the proposed transactions substantially on
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the foregoing and of the mutual
representations, warranties, covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be bound hereby, the parties hereby agree as
follows:
ARTICLE I
ACQUISITION OF GRAND BANK BY IBG
Section 1.01. Merger of Grand Bank with and into Independent Bank. Subject to the terms and conditions of this Agreement and the
Agreement and Plan of Merger to be entered into between Grand Bank and Independent Bank in the form attached hereto as Exhibit A (the Merger Agreement), Grand Bank will merge with and into Independent Bank
pursuant to the provisions of Section 32.301 of the Texas Finance Code (the TFC) and Chapter 10 of the Texas Business Organizations Code (the TBOC).
Section 1.02. Effects of the Merger. Independent Bank shall continue as the entity resulting from the Merger (the
Resulting Entity), and the Merger shall otherwise have the effects set forth in Section 32.301 of the TFC, Section 10.008 of the TBOC, and as set forth in the Merger Agreement.
A-1
Section 1.03. Certificate of Formation. The Certificate of Formation and Bylaws of
the Resulting Entity shall be as set forth in the Merger Agreement.
Section 1.04. Directors and Officers. The directors and
officers of the Resulting Entity shall be as set forth in the Merger Agreement.
Section 1.05. Merger Consideration. At the
Effective Time (as defined in Section 1.11), by virtue of this Agreement and without any further action on the part of IBG, Grand Bank or any holder of Grand Bank Stock, all of the shares of Grand Bank Stock outstanding at the Effective Time
shall be converted into the right to receive an aggregate $24,100,000, subject to adjustment pursuant to Section 1.05(E) and Section 1.06(D), in cash (the Aggregate Cash Consideration), and an aggregate number of shares
of IBG Stock as calculated pursuant to Section 1.05(B)(2) with the intent that such shares of IBG Stock have an aggregate value of approximately $56,000,000 (collectively, the Aggregate Merger Consideration).
A. Any shares of Grand Bank Stock that are owned by Grand Bank (other than as a fiduciary) shall automatically be canceled and retired and
all rights with respect thereto shall cease to exist, and no consideration shall be delivered in exchange therefor.
B. Each share of
Grand Bank Stock issued and outstanding immediately prior to the Effective Time (excluding shares of Grand Bank Stock cancelled pursuant to Section 1.05(A)) shall be converted into, and shall be canceled in exchange for, the right to receive:
1. A cash amount equal to the quotient of (i) the Aggregate Cash Consideration, divided by (ii) the number of shares of Grand
Bank Stock outstanding immediately prior to the Effective Time (the Per Share Cash Consideration), subject to adjustment pursuant to Section 1.05(E) and Section 1.06(D); and
2. A fraction of a share of IBG Stock (rounded to the nearest ten thousandth) equal to the quotient of (i) the quotient of
(x) $56,000,000, divided by (y) the number of shares of Grand Bank Stock outstanding immediately prior to the Effective Time (this quotient is referred to as the Per Share Stock Value), divided by (ii) $43.7660 (the
Per Share Stock Consideration).
3. In the event the Average Closing Price of IBG Stock (as defined below) is less than
$39.3894, the Per Share Stock Consideration shall be adjusted to be a fraction (rounded to the nearest ten thousandth) determined by dividing (i) the product of (x) the Per Share Stock Value, multiplied by (y) 90%, by
(ii) the Average Closing Price of IBG Stock.
4. In the event the Average Closing Price of IBG Stock is greater than $48.1426, the
Per Share Stock Consideration shall be adjusted to be a fraction (rounded to the nearest ten thousandth) determined by dividing (i) the product of (x) the Per Share Stock Value, multiplied by (y) 110%, by (ii) the Average
Closing Price of IBG Stock.
5. The Average Closing Price shall be the average of the daily volume weighted average
sale price per share of IBG Stock on The NASDAQ Stock Market, Inc. Global Select Market System (NASDAQ) for the ten (10) consecutive trading days ending on and including the third trading day preceding the Closing Date, as reported
by Bloomberg;
6. Notwithstanding anything in this Agreement to the contrary, IBG will not issue any certificates or scrip representing
fractional shares of IBG Stock otherwise issuable pursuant to the Merger. In lieu of the issuance of any such fractional shares, IBG shall pay to each former holder of Grand Bank Stock otherwise entitled to receive such fractional share an amount of
cash determined by multiplying (i) the Average Closing Price of IBG Stock by (ii) the fraction of a share of IBG Stock which such holder would otherwise be entitled to receive pursuant to this Section 1.05.
A-2
C. Subject only to dissenters rights under Subchapter H of Chapter 10 of the TBOC, all
shares of Grand Bank Stock shall no longer be outstanding and shall be cancelled and retired and all rights with respect thereto shall cease to exist, and each holder of Grand Bank Stock shall cease to have any rights with respect thereto, except
the right to receive the consideration provided for in this Section 1.05.
D. If the Tangible Book Value (as defined below) on the
fifth business day preceding the Closing Date (as defined in Section 2.01) (the Calculation Date) is greater than $40,000,000, then on the day prior to the Closing Date, Grand Bank may distribute to its shareholders an amount
equal to the difference between (i) the actual amount of Tangible Book Value as of the Calculation Date, less (ii) $40,000,000. Any such distribution is referred to as the Section 1.05(D) Distribution.
E. If the Tangible Book Value on the Calculation Date is less than $40,000,000, but more than $39,000,000, then the Aggregate Cash
Consideration shall be reduced by an amount equal to the difference between (i) $40,000,000, minus (ii) the Tangible Book Value on the Calculation Date.
F. For purposes of this Agreement, Tangible Book Value means the tangible shareholders equity of Grand Bank as determined
from Grand Banks financial statements prepared in accordance with generally accepted accounting principles, consistently applied. The following items shall have been paid or properly accrued for in the calculation of Tangible Book Value:
1. All professional fees incurred by Grand Bank in connection with the transactions contemplated by this Agreement, including investment
banking fees, legal fees, accounting fees, and similar costs and expenses;
2. Costs and fees associated with the termination and
deconversion of Grand Banks material contracts, including its data processing and other IT contracts;
3. All payments owed under
employment and change in control agreements, all payments made to directors, officers and employees as closing bonuses, retention payments or similar compensation related to closing, and the costs described in Schedule 1.05(F)(3);
4. The effect on Tangible Book Value of the repayment of outstanding principal and interest due and owing on all FHLB advances owed by Grand
Bank, including without limitation the payment of prepayment fees or penalties and other costs and expenses resulting from the repayment of such advances; and
5. The premium for D&O insurance tail coverage.
Unrealized gains and losses on Grand Banks investment securities shall be excluded from the calculation of Tangible Book Value.
Grand Bank shall, at least three business days before the Closing Date, provide IBG with a preliminary calculation of Tangible Book Value. If
IBG disagrees with such calculation of Tangible Book Value, Grand Bank and IBG shall meet to resolve any such disagreement. If Grand Bank and IBG cannot resolve any such disagreement, then an independent accounting firm mutually agreed to by IBG and
Grand Bank shall resolve any such disagreement which resolution shall be final and binding upon Grand Bank and IBG. For clarity, IBG and Grand Bank agree that the tangible shareholders equity of Grand Bank as of June 30, 2015 was
$41,488,692. The calculation of Tangible Book Value will be prepared and presented in the form set forth in Schedule 1.05(F).
Section 1.06. Treatment of Grand Bank Stock Options. As represented by Grand Bank in Section 3.02(A), Grand Bank has granted
options to purchase shares of Grand Bank Stock which are unexercised and outstanding (the Options). A list of the outstanding Options is set forth in Schedule 3.02(A).
A-3
A. Grand Bank shall use its commercially reasonable best efforts to enter into a written
agreement (the Option Holder Agreement) with the holders of the Options listed on Schedule 3.02(A) (the Option Holders). Within ten calendar days of the date of this Agreement, Grand Bank shall send written notice to
the Option Holders, together with the Option Holder Agreement in a form reasonably acceptable to IBG, of the following:
1. Each Option
Holder may irrevocably elect to exercise his or her outstanding vested Options by submitting a notice of exercise to Grand Bank, in a form to be attached to the Option Holder Agreement, and tendering the exercise price for such Options in cash to
Grand Bank in exchange for the number of shares of Grand Bank Stock subject to the Option. The shares of Grand Bank Stock issued upon the exercise of the Options shall subsequently be converted into the right to receive the consideration set forth
in Section 1.05 at the Effective Time; or
2. Each Option Holder may irrevocably elect, by so indicating and executing the Option
Holder Agreement, to surrender and terminate the Option in exchange for a cash payment by IBG to the Option Holder in an amount equal to the product of (a) the difference between (i) the sum of (x) the Per Share Cash Consideration,
plus (y) the value of Per Share Stock Consideration, minus (ii) the exercise price of the Options, multiplied by (b) the number of shares of Grand Bank Stock subject to the Options that remain unexercised as of
the date of the Option Holder Agreement (the Option Cash Payment).
B. The Option Holder Agreement shall provide that each
Option that is not otherwise immediately exercisable will be deemed to be fully exercisable on the business day immediately preceding the Closing Date. The Option Holder Agreement shall provide that following the surrender or exercise of the Options
on the Specified Date, the Options shall terminate and the Option Holders shall have no further rights to acquire shares of Grand Bank Stock pursuant to any such terminated Option.
C. The Options of any Option Holder who has not elected to exercise his or her Options under Section 1.06(A)(1) or who has not signed
and delivered to Grand Bank an Option Holder Agreement within thirty calendar days of the date of this Agreement shall be surrendered and terminated in exchange for the Option Cash Payment pursuant to the terms of Section 1.11 of the Grand Bank
2007 Equity Incentive Plan.
D. The Aggregate Cash Consideration shall be reduced by the aggregate amount of cash paid by IBG to the
Option Holders who elect to surrender their Options in exchange for the Option Cash Payment.
E. Solely for purposes of determining the
Option Cash Payment, the amount of Per Share Cash Consideration and the value of the Per Share Stock Consideration shall be calculated as if the Options being surrendered in exchange for the Option Cash Payment had been exercised in exchange for
shares of Grand Bank Stock.
Section 1.07. Treatment of Independent Bank Stock. Each share of Independent Bank Stock
outstanding immediately prior to the Effective Time shall, on and after the Effective Time, remain issued and outstanding as one share of common stock of Independent Bank as the bank surviving the Merger.
Section 1.08. Dissenting Shareholders. Notwithstanding anything in this Agreement to the contrary, shares of Grand Bank Stock that
are held by shareholders of Grand Bank who have complied with the terms and provisions of Subchapter H of Chapter 10 of the TBOC (each a Dissenting Shareholder) shall be entitled to those rights and remedies set forth in
Subchapter H of Chapter 10 of the TBOC; provided, however, in the event that a shareholder of Grand Bank fails to perfect, withdraws or otherwise loses any such right or remedy granted by the Subchapter H of Chapter 10 of the TBOC, each share of
Grand Bank Stock held by such shareholder shall be converted into and represent only the right to receive the consideration as specified in Section 1.05.
Section 1.09. SEC Filing and Shareholder Approval.
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A. IBG shall prepare a registration statement on Form S-4 or other applicable form (the
Registration Statement) to be filed by IBG with the Securities and Exchange Commission (SEC) in connection with the issuance of the shares of IBG Stock to the Grand Bank stockholders pursuant to
Section 1.05 (including the Proxy Statement for the Shareholder Meeting (as defined below) and prospectus and other proxy solicitation materials of Grand Bank constituting a part thereof (together, the Proxy Statement) and
all related documents). Grand Bank shall prepare and furnish to IBG such information relating to Grand Bank and its directors, officers and stockholders as may be reasonably required to comply with SEC rules and regulations in connection with the
Registration Statement. IBG shall provide Grand Bank, and its legal, financial and accounting advisors, the right to review and provide comments upon (i) the Registration Statement in advance of such Registration Statement being filed with the
SEC and (ii) on all amendments and supplements to the Registration Statement and all responses to requests for additional information and replies to comments relating to the Registration Statement prior to filing or submission to the SEC. IBG
shall consider in good faith all comments from Grand Bank and its legal, financial and accounting advisors to the Registration Statement, all amendments and supplements thereto and all responses to requests for additional information. Grand Bank
agrees to cooperate with IBG and IBGs counsel and accountants in requesting and obtaining appropriate opinions, consents and letters from its financial advisor and independent auditor and in taking such other actions in connection with the
Registration Statement and the Proxy Statement. Provided that Grand Bank has cooperated and promptly provided all information reasonably requested as described above, IBG shall file, or cause to be filed, the Registration Statement with the SEC on
or before September 7, 2015. IBG shall use its commercially reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as reasonably practicable after the filing thereof. IBG
also agrees to use its commercially reasonable best efforts to obtain all necessary state securities law or Blue Sky permits and approvals required to carry out the transactions contemplated by this Agreement.
B. The Grand Bank Board shall duly call, give notice of, and cause to be held, a meeting of its shareholders (the Shareholder
Meeting) and will direct that this Agreement and the transactions contemplated hereby be submitted to a vote at the Shareholder Meeting. Specifically, the Grand Bank Board will present for the consideration of Grand Bank shareholders a
proposal to approve and adopt this Agreement, the Merger, the Merger Agreement and the transactions contemplated hereby and thereby. The Grand Bank Board will (i) cause proper notice of the Shareholder Meeting to be given to the Grand Bank
shareholders in compliance with applicable law and regulations, (ii) distribute to the Grand Bank shareholders the Proxy Statement, (iii) recommend by the affirmative vote of the Grand Bank Board a vote in favor of approval of the
proposals set forth in this Section 1.09(B), subject to Section 1.09(C) hereof, and (iv) perform such other acts as may reasonably be requested by IBG to ensure that shareholder approval of the proposals set forth in this
Section 1.09(B) are obtained. Grand Bank shall print and commence the mailing (at its expense) of the Proxy Statement to its shareholders on or before the fifth business day following the date that the Registration Statement is declared
effective and a final prospectus (relating to the Registration Statement) and Proxy Statement is on file with the SEC prior to or as of such mailing.
C. Notwithstanding the foregoing, Grand Bank and the Board of Directors of Grand Bank (the Grand Bank Board) shall be
permitted to effect a change in its recommendation as contemplated by Section 1.09(B)(iii) (Change in Recommendation) if and only to the extent that:
1. Grand Bank and the Grand Bank Representatives (as defined in Section 5.10) have complied in all material respects with
Section 5.10;
2. the Grand Bank Board, after consultation with its outside counsel, shall have determined in good faith that
failure to make a Change in Recommendation would reasonably be expected to result in a violation of its fiduciary duties under applicable law; and
3. if the Grand Bank Board intends to effect a Change in Recommendation after Grand Bank has received an Acquisition Proposal (as defined in
Section 5.10(D)), (a) the Grand Bank Board shall have
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concluded in good faith, after giving effect to all of the adjustments which may be offered by IBG pursuant to subclause (c) below, that such Acquisition Proposal constitutes a Superior
Proposal (as defined in Section 5.10(E)), (b) Grand Bank shall notify IBG, at least five (5) business days in advance, of its intention to effect a Change in Recommendation in response to such Superior Proposal (including the identity
of the party making such Acquisition Proposal) and furnish to IBG a written description of the material terms of the Superior Proposal and copies of such other material documents that Grand Bank is not required to keep confidential, and
(c) prior to effecting such a Change in Recommendation, Grand Bank shall, and shall cause its financial and legal advisors to, during the period following Grand Banks delivery of the notice referred to in subclause (b) above,
negotiate with IBG in good faith for a period of up to five (5) business days (to the extent IBG desires to negotiate) to make such adjustments in the terms and conditions of this Agreement so that such Acquisition Proposal ceases to constitute
a Superior Proposal.
Section 1.10. Exchange Procedures.
A. On the business day prior to the Closing Date, IBG shall deposit or cause to be deposited in trust with Wells Fargo Bank, N.A. (the
Exchange Agent) (i) certificates for shares or evidence of shares in book entry form representing the aggregate number of shares of IBG Stock which the holders of Grand Bank Stock are entitled to receive pursuant to
Section 1.05, and (ii) an amount of cash equal to the aggregate amount of cash which the holders of Grand Bank Stock are entitled to receive pursuant to Section 1.05 (collectively, the Aggregate Merger
Consideration).
B. At least thirty calendar days prior to the Closing Date, Grand Bank shall deliver to IBG a final list of
shareholders (the Shareholder List). The Shareholder List shall be in a form satisfactory to the Exchange Agent and certified as true and correct by the Secretary of Grand Bank. Grand Bank shall reasonably cooperate with the Exchange
Agent to finalize the Shareholder List as to content and format. After the date of the Shareholder List, the stock transfer ledger of Grand Bank shall be closed and there shall be no transfers of the shares of Grand Bank Stock on, or changes or
modifications of any kind (including without limitation issuances of new certificates to replace lost certificates or to reflect gifts of shares to family members or charitable organizations) to, the stock transfer books of Grand Bank.
C. IBG shall use its commercially reasonable best efforts to cause the Exchange Agent to mail, within ten calendar days following IBGs
receipt of the Shareholder List, to each record holder of an outstanding certificate or certificates representing shares of Grand Bank Stock (the Certificates), a form letter of transmittal which will specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and contain instructions for use in effecting the surrender of the Certificates for payment therefor. The
form and substance of the letter of transmittal and any associated cover letter shall be mutually acceptable to IBG and Grand Bank before such transmittal materials are mailed to the holders of the Certificates. Upon surrender to the Exchange Agent
of a Certificate, together with such letter of transmittal properly completed and duly executed (the Transmittal Materials), the holder of such Certificate shall be entitled to receive in exchange therefor (i) an amount of
cash (the Shareholder Cash Consideration) equal to the product of (x) the Per Share Cash Consideration, multiplied by (y) the number of shares of Grand Bank Stock represented by the Certificate (the Surrendered
Shares), (ii) a number of shares of IBG Stock (the Shareholder Stock Consideration) equal to the product of (x) the Per Share Stock Consideration, multiplied by (y) the number of Surrendered Shares, and
(iii) an amount of cash as payment in lieu of the issuance of fractional shares of IBG Stock calculated in accordance with Section 1.05(B)(6) (the Fractional Share Consideration), and such Certificate shall forthwith be
canceled. The consideration to be received by a shareholder of Grand Bank upon surrender of his Certificate is referred to as the Merger Consideration. Until surrendered in accordance with this Section 1.10, each Certificate
(other than Certificates representing Dissenting Shares) shall represent for all purposes the right to receive the Merger Consideration without any interest thereon.
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D. If a holder of Certificates surrenders his Certificates and a properly completed and executed
letter of transmittal (collectively, the Transmittal Materials) at least two business days prior to the Closing Date, then IBG shall use commercially reasonable best efforts to cause the Exchange Agent to, within five business days after
the Effective Time, deposit in the United States mail (first class) the following:
1. A check payable to such holder in
the amount of the Shareholder Cash Consideration and the Fractional Share Consideration, if applicable; and
2. An account
statement issued by the Exchange Agent stating that the Shareholder Stock Consideration has been issued in book entry form and is being held by the Exchange Agent for the benefit of such holder.
If a holder of Certificates presents to the Exchange Agent his Transmittal Materials after two business days prior to the Closing Date, IBG shall use
commercially reasonable efforts to cause the Exchange Agent to deliver the Merger Consideration to such holder promptly, with the intent that the Exchange Agent will mail the Merger Consideration to such holder within ten business days following the
Exchange Agents receipt of the Transmittal Materials from such holder.
E. Former shareholders of Grand Bank shall be entitled to
vote after the Effective Time at any meeting of IBGs shareholders the number of shares of IBG Stock into which their shares are converted, regardless of whether such shareholders of Grand Bank have surrendered their Certificates in exchange
therefor.
F. No dividends or other distributions declared after the Effective Time with respect to shares of IBG Stock and payable to
the holders thereof shall be paid to the holder of a Certificate until such holder surrenders such Certificate to the Exchange Agent in accordance with this Section 1.10. After the surrender of a Certificate in accordance with this
Section 1.10, the holder thereof shall be entitled to receive any such dividends or other distributions, without interest thereon, which had become payable after the Effective Time with respect to the shares of IBG Stock represented by such
Certificate.
G. Any portion of the Aggregate Merger Consideration (including the proceeds of any investments thereof) that remains
unclaimed by the shareholders of Grand Bank for six months after the Exchange Agent mails the letter of transmittal pursuant to this Section 1.10 shall be delivered to IBG upon demand, and any shareholder of Grand Bank who has not theretofore
complied with the exchange procedures in this Section 1.10 shall look to IBG only, and not the Exchange Agent, for the payment of the Merger Consideration in respect of such shares. If outstanding Certificates for shares of Grand Bank Stock are
not surrendered or the payment for them is not claimed prior to the date on which such shares of IBG Stock or cash would otherwise escheat to any governmental unit or agency, the unclaimed items shall, to the extent permitted by abandoned property
or any other applicable law, become the property of IBG (and to the extent not in its possession shall be delivered to it), free and clear of all claims or interest of any Person previously entitled to such property.
H. If any shares of IBG Stock are to be issued in a name other than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the Certificate so surrendered shall be appropriately endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form (reasonably satisfactory to IBG)
for transfer, and that the person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other taxes required by reason of the issuance of a certificate representing shares of IBG Stock in any name other than that of the
registered holder of the Certificate surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or not payable.
I. None of IBG, Grand Bank, the Exchange Agent or any other person shall be liable to any former holder of shares of Grand Bank Stock for any
IBG Stock (or dividends or distributions with respect thereto) or cash properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.
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J. In the event any Certificate shall have been lost, stolen or destroyed, then upon the making
of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by IBG or the Exchange Agent, the posting by such person of a bond in such amount as IBG or the Exchange Agent may direct, not to
exceed the amount of Merger Consideration to be paid with respect to such lost Certificate, as indemnity against any claim that may be made against IBG, Independent Bank, or Grand Bank with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof pursuant to this Agreement.
Section 1.11. Effective Time. The Effective Time as that term is used in this Agreement means the effective
time of the Merger as specified in the Certificate of Merger filed with and certified by the Texas Department of Banking (TDB). The Certificate of Merger shall be filed with the TDB on the Closing Date.
Section 1.12. Anti-Dilution Provisions. If, between the date hereof and the Effective Time, the shares of IBG Stock shall be
changed into a different number or class of shares by reason of any reclassification, recapitalization, split-up, combination, exchange of shares or readjustment, or a stock dividend thereon shall be declared with a record date within said period,
the Per Share Stock Consideration shall be adjusted accordingly; provided that an offering or sale of IBG Stock shall not be deemed a reclassification, recapitalization, split-up, combination, exchange of shares or readjustment of the IBG Stock.
Section 1.13. Tax Matters. None of IBG, Independent Bank, or Grand Bank has taken or agreed to take any action, or is aware
of any fact or circumstance, that would prevent the Merger from qualifying as a reorganization within the meaning of § 368 of the Code. IBG, Independent Bank, Grand Bank shall each use its reasonable best efforts to cause (i) the Merger to
qualify as a reorganization within the meaning of § 368(a) of the Code, and (ii) each of IBG, Independent Bank, and Grand Bank to be a party to the reorganization within the meaning of § 368(b) of the Code. Each of IBG,
Independent Bank, and Grand Bank agrees to file all of its tax returns, including complying with the filing requirements of Treasury Regulations § 1.368-3, consistent with the treatment of the Merger as a reorganization within the
meaning of § 368(a) of the Code and in particular as a transaction described in § 368(a)(2)(D) of the Code, Treasury Regulations § 1.368-2(b)(2). This Agreement is intended to constitute a plan of reorganization within the
meaning of Treasury Regulations § 1.368-2(g).
A. IBG and Independent Bank shall deliver to Andrews Kurth LLP a Tax
Representation Letter, dated as of the effective date of the Registration Statement and signed by an officer of IBG, containing representations of IBG and Independent Bank, and Grand Bank shall deliver to Andrews Kurth LLP a Tax
Representation Letter, dated as of the effective date of the Registration Statement and signed by an officer of Grand Bank, containing representations of Grand Bank, in each case as shall be reasonably necessary or appropriate to enable
Andrews Kurth LLP to render its tax opinion in connection with the Registration Statement. IBG and Independent Bank shall deliver to Andrews Kurth LLP a Tax Representation Letter, dated as of the Closing Date and signed by an
officer of IBG, containing representations of IBG and Independent Bank, and Grand Bank shall deliver to Andrews Kurth LLP a Tax Representation Letter, dated as of the Closing Date and signed by an officer of Grand Bank, containing
representations of Grand Bank, in each case as shall be reasonably necessary or appropriate to enable Andrews Kurth LLP to render the tax opinion described in Section 8.17. Each of IBG, Independent Bank, and Grand Bank shall use its reasonable
best efforts not to take or cause to be taken any action that would cause to be untrue (or fail to take or cause not to be taken any action that would cause to be untrue) any of the certifications and representations included in the tax
representation letters described in this Section 1.13(A).
B. A Grand Bank representative shall prepare or cause to be prepared and
file or cause to be filed, subject to the review and reasonable approval of IBG, all Tax Returns for Grand Bank for all periods ending on or prior to the Closing Date that are required to be filed after the Closing Date. If required by applicable
law, IBG shall, and shall cause Grand Bank to, authorize and direct their respective officers to execute any and all Tax Returns required to be filed by Grand Bank pursuant to this Section 1.13(B). The shareholders of Grand Bank shall be
responsible for the amount of Taxes of Grand Bank shown due on such Tax Returns. All such Tax
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Returns shall be prepared in a manner that is consistent with the past custom and practice of Grand Bank effective for fiscal year 2014, except as required by a change in applicable law.
ARTICLE II
THE CLOSING
AND THE CLOSING DATE
Section 2.01. Time and Place of the Closing and Closing Date. The transactions contemplated under
this Agreement shall be consummated on a date mutually agreeable to IBG and Grand Bank that is within forty-five days after the receipt of all necessary regulatory, corporate and other approvals, and the expiration of all associated mandatory
waiting periods, or such other date to which the parties may agree in writing (Closing Date). On the Closing Date, a meeting (the Closing) will take place at which the parties to this Agreement will exchange
certificates, letters and other documents in order to determine whether all of the conditions set forth in ARTICLE VII and ARTICLE VIII have been satisfied or waived or whether any condition exists that would permit a party to this Agreement to
terminate this Agreement. If no such condition then exists or if no party elects to exercise any right it may have to terminate this Agreement, then and thereupon the appropriate parties shall execute such documents and instruments as may be
necessary or appropriate in order to effect the transactions contemplated by this Agreement.
The Closing shall take place at 10:00 a.m.,
local time at IBGs headquarters on the Closing Date, or at such other time and place to which IBG and Grand Bank may agree.
Section 2.02. Actions to be Taken at Closing by Grand Bank. At the Closing, Grand Bank shall execute and acknowledge (where
appropriate) and deliver to IBG such documents and certificates necessary to carry out the terms and provisions of this Agreement, including the following (all of such actions constituting conditions precedent to IBGs obligation to close
hereunder):
A. A certificate, dated as of the Closing Date, duly executed by the Secretary of Grand Bank, acting solely in his capacity
as an officer of Grand Bank, pursuant to which Grand Bank shall certify (i) the due adoption by the Grand Bank Board of resolutions attached to such certificate authorizing the execution and delivery of this Agreement, the Merger Agreement and
any other agreements and documents contemplated hereby and thereby, and the consummation of the transactions contemplated hereby and thereby; (ii) the approval by the shareholders of Grand Bank of this Agreement, the Merger Agreement and any
other agreements and documents contemplated hereby and thereby, and the consummation of the transactions contemplated hereby, including the Merger; (iii) the incumbency and true signatures of those officers of Grand Bank duly authorized to act
on its behalf in connection with the execution and delivery of this Agreement, the Merger Agreement and any other agreements and documents contemplated hereby and thereby, and the taking of all actions contemplated hereby on behalf of Grand Bank;
and (iv) a true and correct list of the record holders of Grand Bank Stock as of the Closing Date;
B. A certificate duly executed
by the President of Grand Bank, acting solely in his capacity as an officer of Grand Bank, dated as of the Closing Date, pursuant to which Grand Bank shall certify, that (i) all of the representations and warranties made in ARTICLE III of this
Agreement are true and correct in all material respects on and as of the date of such certificate as if made on such date (except to the extent such representations and warranties are by their express provisions made as of a specified date),
(ii) Grand Bank has performed and complied in all material respects with all of its obligations and agreements required to be performed on or before the Closing Date under this Agreement, and (iii) there has been no Material Adverse Change
(as defined in Section 11.10(G)) with respect to Grand Bank since March 31, 2015;
C. Evidence reasonably satisfactory to IBG
that, as of the Effective Time, (i) all Grand Bank Employee Plans (as defined in Section 3.28) required to be terminated by IBG prior to the Closing pursuant to Section 5.13 shall have been terminated or amended in accordance with the
terms of such Grand Bank Employee
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Plans, the Code, the Employee Retirement Income Security Act of 1974, as amended (ERISA), and all other applicable laws and regulations and that all affected participants have
been notified of such terminations;
D. All consents and approvals required to be obtained by Grand Bank pursuant from third parties to
consummate the transaction contemplated by this Agreement, including those noted in Schedule 3.08;
E. Supplemental disclosure
schedules reflecting any material changes to the representations of Grand Bank in ARTICLE III between the date of this Agreement and the Closing Date;
F. The Releases (as defined in Section 5.16), signed by the directors and executive officers of Grand Bank; and
G. All other documents required to be delivered to IBG by Grand Bank under the provisions of this Agreement and all other documents,
certificates and instruments as are consistent with the intent of this Agreement and reasonably requested by IBG or its counsel.
Section 2.03. Actions to be Taken at Closing by IBG. At the Closing, IBG shall execute and acknowledge (where appropriate) and
deliver to Grand Bank such documents and certificates necessary to carry out the terms and provisions of this Agreement, including the following (all of such actions constituting conditions precedent to Grand Banks obligations to close
hereunder):
A. A certificate, dated as of the Closing Date, executed by the Secretary of IBG, acting solely in her capacity as an officer
of IBG, pursuant to which IBG shall certify (i) the due adoption by the IBG Board of corporate resolutions attached to such certificate authorizing the execution and delivery of this Agreement, the Merger Agreement, and the other agreements and
documents contemplated hereby and thereby, and the consummation of the transactions contemplated hereby and thereby, including the Merger; and (ii) the incumbency and true signatures of those officers of IBG duly authorized to act on its behalf
in connection with the execution and delivery of this Agreement, the Merger Agreement, and any other agreements and documents contemplated hereby and thereby, and the consummation of the transactions contemplated hereby and thereby on behalf of IBG;
B. A certificate, dated as of the Closing Date, executed by the Secretary of Independent Bank, acting solely in her capacity as an
officer of Independent Bank, pursuant to which Independent Bank shall certify (i) the due adoption by the Board of Directors of Independent Bank (the Independent Bank Board) of corporate resolutions attached to such
certificate authorizing the execution and delivery of this Agreement and the Merger Agreement and the other agreements and documents contemplated hereby and thereby, and the consummation of the transactions contemplated hereby and thereby;
(ii) the approval by IBG as the sole shareholder of Independent Bank of the Merger Agreement and any other agreements and documents contemplated hereby and thereby, and the consummation of the transactions contemplated hereby and thereby,
including the Merger; and (iii) the incumbency and true signatures of those officers of Independent Bank duly authorized to act on its behalf in connection with the execution and delivery of the Merger Agreement and any other agreements and
documents contemplated hereby and thereby, and the consummation of the transactions contemplated hereby and thereby on behalf of Independent Bank;
C. A certificate, dated as of the Closing Date, duly executed by the Chairman of the Board of IBG, acting solely in his capacity as an
officer of IBG, pursuant to which IBG shall certify that (i) all of the representations and warranties made in ARTICLE IV of this Agreement are true and correct in all material respects on and as of the date of such certificate as if made on
such date (except to the extent such representations and warranties are by their express provisions made as of a specified date), (ii) IBG has performed and complied in all material respects with all of its obligations and agreements required
to be performed on or before the Closing Date under this Agreement, and (iii) there has been no Material Adverse Change with respect to IBG since March 31, 2015;
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D. All consents and approvals required to be obtained by IBG from third parties to consummate
the transactions contemplated by this Agreement, including those listed on Schedule 4.05;
E. Supplemental disclosure schedules
reflecting any material changes to the representations of IBG in ARTICLE IV between the date of this Agreement and the Closing Date; and
F. All other documents required to be delivered to Grand Bank by IBG under the provisions of this Agreement and all other documents,
certificates and instruments as are consistent with the terms of this Agreement and reasonably requested by Grand Bank or its counsel.
Section 2.04. Further Assurances. At any time and from time to time within twelve months after the Closing, at the reasonable
request of any party to this Agreement and without further consideration, any party so requested will execute and deliver such other instruments and take such other action as the requesting party may reasonably deem necessary or desirable in order
to effectuate the transactions contemplated hereby. In the event that, at any time after the Closing any further commercially reasonable action is necessary or desirable to carry out the purposes of this Agreement, each party hereto shall take or
cause to be taken all such commercially reasonable actions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GRAND BANK
Grand Bank hereby makes the following representations and warranties to IBG.
Section 3.01. Organization. Grand Bank is a Texas banking association, duly organized, validly existing and in good standing under
the laws of the State of Texas. Grand Bank has all requisite corporate power and authority (including all licenses, franchises, permits and other governmental authorizations as are legally required) to carry on its business as now being conducted,
to own, lease and operate its properties and assets as now owned, leased or operated and to enter into and to carry on the business and activities now conducted by it. True and complete copies of the Articles of Association and Bylaws of Grand Bank,
as amended to date, have been made available to IBG. Grand Bank is an insured bank as defined in the Federal Deposit Insurance Act of 1950, as amended (the FDIA). The nature of the business of Grand Bank does not require it to be
qualified to do business in any jurisdiction other than the State of Texas. Except as set forth in Schedule 3.01, Grand Bank has no equity interest, direct or indirect, in any other bank or corporation or in any partnership, joint venture or
other business enterprise or entity, except as acquired through settlement of indebtedness, foreclosure, the exercise of creditors remedies or in a fiduciary capacity, and the business carried on by Grand Bank has not been conducted through
any other direct or indirect Subsidiary or Affiliate of Grand Bank.
Section 3.02. Capitalization.
A. The authorized capital stock of Grand Bank consists of 3,750,000 shares of Grand Bank Stock, $5.00 par value per share, of which 1,725,550
shares are issued and outstanding as of the date of this Agreement. All of the outstanding shares of capital stock or other securities evidencing ownership of Grand Bank are duly authorized, validly issued, fully paid and nonassessable and have not
been issued in violation of the preemptive rights of any person and have been issued in material compliance with applicable securities laws. The shares of Grand Bank Stock have been issued in material compliance with the securities laws of the
United States and other jurisdictions having applicable securities laws. There are no restrictions applicable to the payment of dividends on the shares of Grand Bank Stock except pursuant to applicable laws or regulations, and all dividends declared
prior to the date of this Agreement on the capital stock of Grand Bank have been paid. Except as set forth in Schedule 3.02(A), there are no shareholder agreements, voting trusts or similar agreements relating to the shares of Grand Bank
Stock and the Bylaws of Grand Bank do not impose any restriction on the transfer or voting of the shares of Grand Bank Stock. Except as set forth in Schedule 3.02(A), there are no (i) other
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outstanding equity securities of any kind or character, or (ii) outstanding subscriptions, contracts, options, convertible securities, preemptive rights, warrants, calls or other agreements
or commitments of any kind issued or granted by, binding upon or otherwise obligating Grand Bank to issue, sell or otherwise dispose of, or to purchase, redeem or otherwise acquire, any shares of capital stock of Grand Bank (collectively, the
Stock Rights). Upon the exercise of the Options listed on Schedule 3.02(A), the number of issued and outstanding shares of Grand Bank Stock will increase.
B. Schedule 3.02(B) contains a true and correct list of the holders of Grand Bank Stock as of the date of this Agreement and, no
other person or entity has any equity or other interest in Grand Bank. True and correct copies of all offering materials, as amended and supplemented, distributed by Grand Bank since January 1, 2013, have been made available to IBG.
Section 3.03. Execution and Delivery. Grand Bank has full corporate power and corporate authority to execute and deliver this
Agreement and the Merger Agreement and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Merger Agreement, and (provided the required regulatory and shareholder approvals are
obtained) the consummation of the transactions contemplated hereby and thereby, have been duly and validly approved by the Grand Bank Board. Other than approval by the requisite vote of the shareholders of Grand Bank, no other corporate proceedings
or approvals are necessary on the part of Grand Bank to approve this Agreement or the Merger Agreement, and to consummate the transactions contemplated hereby and thereby. This Agreement, the Merger Agreement, and the other agreements and documents
contemplated hereby and thereby, have been or at Closing will be duly executed by Grand Bank and, assuming due authorization, execution and delivery by the other parties to such agreements and documents, each such agreement or document constitutes
or at Closing will constitute a legal, valid and binding obligation of Grand Bank, enforceable in accordance with its respective terms and conditions, except as enforceability may be limited by bankruptcy, conservatorship, insolvency, moratorium,
reorganization, receivership or similar laws and judicial decisions affecting the rights of creditors generally and by general principles of equity (whether applied in a proceeding at law or in equity).
Section 3.04. No Violation. Neither the execution and delivery of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Grand Bank with any of the terms or provisions hereof (provided the required regulatory and shareholder approvals are obtained) will (A) violate any provision of the Articles of Association or Bylaws of
Grand Bank, as amended to date; (B) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Grand Bank or any of its Properties (as defined in Section 11.10) or assets; or
(C) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or the lapse of time, or both, would constitute a default) under, result in the
termination or cancellation under, accelerate the performance required by or rights or obligations under, or result in the creation of any lien upon any of the respective Properties or assets of Grand Bank under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture or deed of trust, or any material license, lease, agreement, contract or other instrument or obligation to which Grand Bank is a party, or by which Grand Bank or any of its Properties or assets may
be bound or subject.
Section 3.05. Compliance with Laws, Permits and Instruments. Grand Bank and its employees hold all
material licenses, registrations, franchises, permits and authorizations necessary for the lawful conduct of its business. Grand Bank is compliance with all applicable laws, statutes, orders, rules, regulations and policies of any Governmental
Authority (as defined in Section 11.10), except where the failure, whether individually or in the aggregate, to be so in compliance could not reasonably be expected to cause a Material Adverse Change.
Section 3.06. Financial Statements.
A. Grand Bank has made available to IBG copies of the audited financial statements of Grand Bank as of and for the years ended
December 31, 2014 and December 31, 2013 (the Grand Bank Financial
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Statements). The Grand Bank Financial Statements (including, in each case, any related notes), were prepared in accordance with GAAP (except as may be indicated in the notes to such
financial statements) and fairly present, in all material respects, the financial position of Grand Bank at the dates and for the periods indicated.
B. Grand Bank has made available to IBG true and complete copies of the Reports of Condition and Income for Grand Bank filed with the Federal
Deposit Insurance Corporation (FDIC) during 2015 and 2014 (Grand Bank Call Reports). Each of the Grand Bank Call Reports fairly presents, in all material respects, the financial position of Grand Bank and the
results of its operations at the dates and for the periods indicated in conformity, in all material respects, with the instructions for the preparation of Grand Bank Call Reports as promulgated by applicable regulatory authorities. The Grand Bank
Call Reports do not contain any items of special or nonrecurring income or any other income not earned in the ordinary course of business. Grand Bank has calculated its allowance for loan losses in accordance with GAAP and, to the extent applicable,
regulatory accounting principles (RAP) as applied to Texas banking associations and in accordance with all applicable rules and regulations. To the Best Knowledge of Grand Bank, the allowance for loan losses for Grand Bank is, and
as of the Closing Date shall be, adequate in all material respects to provide for all losses on the loans and other real estate owned by Grand Bank.
Section 3.07. Litigation. Except as disclosed in Schedule 3.07, Grand Bank is not a party to any, and there are no
pending or, to the Best Knowledge (as defined in Section 11.10) of Grand Bank, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Grand Bank which
are reasonably likely, individually or in the aggregate, to result in a Material Adverse Change, nor, to the Best Knowledge of Grand Bank, is there any reasonable basis for any proceeding, claim or action against Grand Bank that would be reasonably
likely, individually or in the aggregate, to result in a Material Adverse Change. There is no injunction, order, judgment or decree imposed upon Grand Bank or the assets or Property of Grand Bank that has resulted in, or is reasonably likely to
result in, a Material Adverse Change.
Section 3.08. Consents and Approvals. The Grand Bank Board has resolved or will resolve
to (i) call a special meeting of shareholders for the purpose of approving and adopting this Agreement, the Merger Agreement and the Merger, and (ii) recommend to the Grand Bank shareholders the approval and adoption of this Agreement, the
Merger Agreement and the Merger. No approval, consent, order or authorization of, or registration, declaration or filing with, any Governmental Authority or other third party is required on the part of Grand Bank in connection with the execution,
delivery or performance of this Agreement or the agreements contemplated hereby, or the consummation by Grand Bank of the transactions contemplated hereby or thereby, except as set forth in Schedule 3.08.
Section 3.09. Undisclosed Liabilities. Grand Bank has no material liability or obligation, accrued, absolute, contingent or
otherwise and whether due or to become due (including unfunded obligations under any Grand Bank Employee Plan or liabilities for federal, state or local taxes or assessments) that are not reflected in or disclosed in the Grand Bank Financial
Statements or the Grand Bank Call Reports, except (A) those liabilities, obligations and expenses incurred in the ordinary course of business and materially consistent with past business practices since March 31, 2015,
(B) liabilities, obligations and expenses incurred as a result of or arising from this Agreement or any other agreement or document contemplated hereby, or any of the transactions contemplated hereby or thereby, or (C) liabilities,
obligations and expenses as disclosed on Schedule 3.09.
Section 3.10. Title to Tangible Assets. True and complete
copies of all existing deeds, leases and title insurance policies for all Properties and all mortgages, deeds of trust, security agreements and other documents describing encumbrances to which each such Property is subject have been made available
to IBG. Grand Bank has good and indefeasible title to, or valid leasehold interest in, all of its tangible assets and Properties including all material personal properties reflected in the Grand Bank Financial Statements or the Grand Bank Call
Reports or acquired subsequent thereto, subject to no liens, mortgages, security interests, encumbrances or charges of any kind except (A) as described in Schedule 3.10, (B) as noted in the Grand Bank Financial Statements or
the Grand
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Bank Call Reports, (C) statutory liens not yet delinquent or which are being contested in good faith, (D) consensual landlord liens, (E) minor defects and irregularities in title
and encumbrances that do not materially impair the use thereof for the purpose for which they are held, (F) pledges of assets in the ordinary course of business to secure public funds deposits, and (G) those assets and Properties disposed
of for fair value in the ordinary course of business since March 31, 2015.
Section 3.11. Absence of Certain Changes or
Events. Except as disclosed on Schedule 3.11, since March 31, 2015, Grand Bank has conducted its business only in the ordinary course and has not, other than in the ordinary course of business and materially consistent with past
practices:
A. Incurred any obligation or liability, whether absolute, accrued, contingent or otherwise, whether due or to become due,
except deposits taken, federal funds purchased, and current liabilities for trade or business obligations), none of which, individually or in the aggregate, would result in a Material Adverse Change;
B. Discharged or satisfied any lien or paid any obligation or liability, whether absolute or contingent, due or to become due in an amount
greater than $50,000 in the aggregate;
C. Declared or made any payment of dividends or other distribution to its shareholders, or
purchased, retired or redeemed, or obligated itself to purchase, retire or redeem, any of its shares of capital stock or other securities;
D. Issued, reserved for issuance, granted, sold or authorized the issuance of any shares of its capital stock or other securities or
subscriptions, options, warrants, calls, rights or commitments of any kind relating to the issuance thereof;
E. Acquired any capital
stock or other equity securities or acquired any ownership interest in any bank, corporation, partnership or other entity, except (i) through settlement of indebtedness, foreclosure, or the exercise of creditors remedies or (ii) in a
fiduciary capacity, the ownership of which does not expose it to any liability from the business, operations or liabilities of such person;
F. Mortgaged, pledged or subjected to lien, charge, security interest or any other encumbrance or restriction on any of its Property,
business or assets, tangible or intangible except (i) statutory liens not yet delinquent or which are being contested in good faith, (ii) consensual landlord liens, (iii) minor defects and irregularities in title and encumbrances that
do not materially impair the use thereof for the purpose for which they are held, (iv) pledges of assets to secure public funds deposits, and (v) those assets and Properties disposed of for fair value since March 31, 2015;
G. Sold, transferred, leased to others or otherwise disposed of any material amount of its assets (except for assets disposed of for fair
value in the ordinary course of business) or canceled or compromised any debt or claim, or waived or released any right or claim, of material value;
H. Terminated, canceled or surrendered, or received any notice of or threat of termination or cancellation of, any contract, lease or other
agreement, or suffered any damage, destruction or loss, which, individually or in the aggregate, would constitute a Material Adverse Change;
I. Disposed of, permitted to lapse, transferred or granted any rights under, or entered into any settlement regarding the breach or
infringement of, any United States or foreign license or Proprietary Right (as defined in Section 3.16) or modified any existing material rights with respect thereto;
J. Except for routine salary increases made in the ordinary course of business and materially consistent with past practices or as
contemplated by this Agreement, made any material change in the rate of
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compensation, commission, bonus, vesting or other direct or indirect remuneration payable, paid or agreed or orally promised to pay, conditionally or otherwise, any bonus, extra compensation,
pension, severance or vacation pay, to or for the benefit of any of its shareholders, directors, officers, employees or agents, or entered into any employment or consulting contract or other agreement with any director, officer or employee or
adopted, amended or terminated (except as expressly provided herein) any pension, employee welfare, retirement, stock purchase, stock option, stock appreciation rights, termination, severance, income protection, golden parachute, savings or profit
sharing plan (including trust agreements and insurance contracts embodying such plans), any deferred compensation, or collective bargaining agreement, any group insurance contract or any other incentive, welfare or employee benefit plan or agreement
maintained by Grand Bank for the benefit of its directors, employees or former employees;
K. Made any capital expenditures or capital
additions or betterments in excess of an aggregate of $50,000;
L. Instituted, had instituted against it, settled or agreed to settle,
any litigation, action or proceeding other than routine collection suits instituted by Grand Bank to collect amounts owed or suits in which the amount in controversy is less than $50,000;
M. Suffered any change, event or condition that, individually or in the aggregate, has caused or would reasonably be expected to cause in a
Material Adverse Change, or any Material Adverse Change in earnings or costs or relations with its employees, agents, depositors, loan customers, correspondent banks, or suppliers;
N. Except for the transactions contemplated by this Agreement or as otherwise permitted hereunder, entered into any transaction, or entered
into, modified or amended any contract or commitment involving a financial commitment over the term of the contract or commitment in excess of $50,000 other than commitments to extend credit made in the ordinary course of business and materially
consistent with past practices;
O. Entered into or given any promise, assurance or guarantee of the payment, discharge or fulfillment of
any undertaking or promise made by any third person, firm or corporation other than in the ordinary course of business and materially consistent with past practices;
P. Sold, or knowingly disposed of, or otherwise divested of the ownership, possession, custody or control, of any corporate books or records
of any nature that, in accordance with sound business practice, normally are retained for a period of time after their use, creation or receipt, except at the end of the normal retention period;
Q. Made any, or acquiesced with any, change in any accounting methods, principles or material practices, except as required by GAAP or RAP;
R. Sold (provided, however, that payment at maturity or prepayment is not deemed a sale) Investment Securities (as defined in
Section 11.10) or purchased Investment Securities, other than U.S. Treasury securities with a maturity of two years or less;
S.
Made, renewed, extended the maturity of, or altered any of the material terms of any loan to any single borrower and his related interests in excess of the principal amount of $500,000;
T. Amended or made any change in its Articles of Association, or Bylaws; or
U. Entered into any agreement or made any commitment whether in writing or otherwise to take any of the types of action described in
subsections A through T above.
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Section 3.12. Leases, Contracts and Agreements. Schedule 3.12 sets forth
an accurate and complete description of all contracts, leases, subleases, licenses and agreements to which Grand Bank is a party or by which Grand Bank is bound that obligate or could reasonably be expected to obligate Grand Bank for an amount in
excess of $50,000 over the entire term of any such agreement (collectively, the Contracts). Grand Bank has delivered or made available to IBG true and correct copies of all Contracts. For the purposes of this Agreement, the
Contracts shall be deemed not to include loans made by, repurchase agreements made by, spot foreign exchange transactions of, bankers acceptances of or deposits by Grand Bank, but do include unfunded loan commitments and letters of credit issued by
Grand Bank where the borrowers total direct and indirect indebtedness to Grand Bank is in excess of $100,000. Except as set forth in Schedule 3.12, no participations or loans have been sold that have buy back, recourse or guaranty
provisions that create contingent or direct liabilities of Grand Bank. Grand Bank has not received any written notice of material default under or material noncompliance with any Contract. For each lease in which Grand Bank is named as lessee, Grand
Bank is the owner and holder of all the leasehold estates or other rights and interest purported to be granted by such instruments, in each case free and clear of any lessee-granted security interests, claims, liens (including tax liens),
forfeitures, mortgages, pledges, penalties, encumbrances, assignments or charges whatsoever except as established by the lease or applicable law. Grand Bank enjoys peaceful and undisturbed possession under all leases under which it is currently
operating.
Section 3.13. Taxes and Tax Returns.
A. Grand Bank has duly and timely filed or caused to be filed all federal, state, foreign and local tax returns and reports required to be
filed by it on or prior to the date of this Agreement (all such returns and reports being accurate and complete in all material respects) and has duly paid or caused to be paid on its behalf all taxes that are due and payable by it on or prior to
the date of this Agreement, other than taxes that are being contested in good faith and are adequately reserved against or provided for (in accordance with GAAP) on its financial statements. As of the date hereof, Grand Bank has no material
liability for taxes in excess of the amount reserved or provided for on its financial statements as of the date thereof.
B. There are no
disputes pending with respect to, or claims or assessments asserted in writing for, any material amount of taxes upon Grand Bank, nor has Grand Bank given or been requested in writing to give any currently effective waivers extending the statutory
period of limitation applicable to any tax return for any period.
C. Proper and accurate amounts, if required, have been withheld by
Grand Bank from its employees, independent contractors, creditors, shareholders or other third parties for all periods in material compliance with the tax withholding provisions of applicable law.
D. With respect to any taxable period beginning after December 31, 2011, the federal income tax returns of Grand Bank have not been
audited or examined and no such audit is currently pending or, to the Best Knowledge of Grand Bank, threatened.
E. Grand Bank has not
entered into any tax sharing agreement, tax allocation agreement, tax indemnity agreement, or similar contract or arrangement or any current or potential contractual obligation to indemnify any other person with respect to taxes that will require
any payment by Grand Bank after the date of this Agreement.
F. As used in this Agreement, the terms tax and
taxes mean all federal, state, local and foreign income, excise, gross receipts, gross income, ad valorem, profits, gains, property, capital, sales, transfer, use, value-added, stamp, documentation, payroll, employment, severance,
withholding, duties, intangibles, franchise, backup withholding, and other taxes, charges, levies or like assessments together with all penalties and additions to tax and interest thereon. Additionally, the terms tax return and tax
returns means any return, declaration, report, property rendition, claim for refund or information return or statement relating to taxes, including any schedule or attachment thereto and including any amendment thereof.
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G. Grand Bank has delivered or made available to IBG correct and complete copies of all federal
income tax returns filed by Grand Bank with the Internal Revenue Service (IRS), examination reports, and statements of deficiencies assessed against or agreed to by Grand Bank, if any, with respect to any taxable period beginning
after December 31, 2011.
H. Schedule 3.13(H) sets forth an accurate and complete description as to the United States
federal net operating and capital loss carryforwards for Grand Bank (including the year such net operating or capital loss was generated and any limitations of such net operating or capital loss carryforwards under Code Sections 382, 383 or 384 or
the Treasury Regulations, excluding any such limitations arising from the transactions contemplated under this Agreement) as of December 31, 2012.
I. Effective as of June 3, 2002 (the S Election Date), Grand Bank made a valid election to be taxed, for federal
income tax purposes (and, where applicable, for state income tax purposes), as a Subchapter S corporation and that election is in effect as of the date of this Agreement. Grand Bank has not taken, and to the Best Knowledge of Grand Bank no
shareholder of Grand Bank has taken, any action that would cause Grand Bank to cease being an S corporation. Grand Bank is not currently and will not at any time before the Closing Date be liable for any tax under Code §1374.
J. Except as set forth in Confidential Schedule 3.13(J), for any tax year of Grand Bank beginning on or after the S Election Date, no
audit by the IRS has commenced or been completed pursuant to Code §§6241 through 6245 regarding Subchapter S items, and no agreement, consent or waiver to extend the statute of limitations of Subchapter S items of Grand Bank has been
given. To Grand Banks Best Knowledge, for any tax year of Grand Bank beginning after the S Election Date, each Grand Bank shareholders treatment of Subchapter S items with respect to Grand Bank is consistent with the manner in which
Grand Bank has filed its tax returns, and no audit by the IRS or any Grand Bank shareholder has occurred except as set forth in Confidential Schedule 3.13(J).
K. Since the S Election Date, Grand Bank has not been required to include in income any material adjustment pursuant to Code §481 by
reason of a voluntary change in accounting method initiated by Grand Bank, and the IRS has not initiated or proposed any such material adjustment or change in accounting method (including any method for determining reserves for bad debts maintained
by Grand Bank). No dividend or other distribution declared or paid by Grand Bank since the S Election Date has exceeded the portion of Grand Banks accumulated adjustments account (within the meaning of Treasury Regulation §
1.1368-2) property allocated to such distribution in accordance with that regulation, and no dividend or distribution declared or paid by Grand Bank before the Effective Time will exceed the portion of Grand Banks accumulated adjustments
account properly allocated to such distribution in accordance with that regulation.
Section 3.14. Insurance.
Schedule 3.14 contains a complete list and brief description of all policies of insurance, including fidelity and bond insurance, maintained as of the date of this Agreement by Grand Bank. All such policies (A) are sufficient for
compliance by Grand Bank, in all material respects, with all requirements of applicable law and all agreements to which Grand Bank is a party, (B) are valid, outstanding and enforceable, except as enforceability may be limited by bankruptcy,
conservatorship, insolvency, moratorium, reorganization, receivership, or similar laws and judicial decisions affecting the rights of creditors generally and by general principles of equity (whether applied in a proceeding at law or equity), and
(C) are presently in full force and effect, and, except as set forth in Schedule 3.14, no written notice has been received of the cancellation, or threatened or proposed cancellation, of any such policy and there are no unpaid
premiums due thereon. Grand Bank is not in default with respect to the material provisions of any such policy or has failed to give any notice or present any known claim thereunder in a due and timely fashion. Each material Property of Grand Bank is
insured for the benefit of Grand Bank in amounts deemed adequate by Grand Banks management against risks customarily insured against. Except as set forth in Schedule 3.14, there have been no claims under any fidelity bonds of Grand
Bank since January 1, 2013, and to the Best Knowledge of Grand Bank, there are no facts that could reasonably be expected to form the basis of a claim under such bonds.
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Section 3.15. No Adverse Change. Except as disclosed in the representations and
warranties made in this ARTICLE III and the Schedules hereto, there has not been any Material Adverse Change since March 31, 2015, nor to the Best Knowledge of Grand Bank, has any event occurred that has resulted in, or has a reasonable
probability of resulting in the future in, a Material Adverse Change with respect to Grand Bank.
Section 3.16. Proprietary
Rights. Grand Bank does not require the use of any material patent, patent application, patent right, invention, process, trademark (whether registered or unregistered), trademark application, trademark right, trade name, service name, service
mark, copyright or any trade secret (collectively, Proprietary Rights) for the business or operations of Grand Bank that are not owned, held or licensed by Grand Bank. Grand Bank has not received within the past three years any
written notice of infringement of or conflict with the rights of others with respect to the use by Grand Bank of Proprietary Rights. There is no claim or action by any such person pending or, to the Best Knowledge of Grand Bank, threatened, with
respect thereto.
Section 3.17. Transactions with Certain Persons and Entities. Except as set forth in
Schedule 3.17, Grand Bank does not owe any amount to (excluding deposit liabilities), or has any loan, contract, lease, commitment or other obligation from or to, any of the present or former directors or officers (other than
compensation for current services not yet due and payable and reimbursement of expenses arising in the ordinary course of business) of Grand Bank, and none of such persons owes any amount to Grand Bank. There are no agreements, instruments,
commitments, extensions of credit, tax sharing or allocation agreements or other contractual agreements of any kind between or among Grand Bank, whether on its own behalf or in its capacity as trustee or custodian for the funds of any Grand Bank
Employee Plan, and any of its Affiliates (as defined in Section 11.10).
Section 3.18. Evidences of Indebtedness. All
evidences of indebtedness and leases that are reflected as assets of Grand Bank are legal, valid and binding obligations of the respective obligors thereof, enforceable in accordance with its terms (except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors generally and the availability of injunctive relief, specific performance and other equitable remedies), and are not subject to any asserted or, to the Best Knowledge of
Grand Bank, threatened, defenses, offsets or counterclaims that may reasonably be asserted against Grand Bank or the present holder thereof. The credit and collateral files of Grand Bank contain all material information (excluding general, local or
national industry, economic or similar conditions) actually known to Grand Bank that is required to evaluate, in accordance with generally prevailing practices in the banking industry, the collectability of the loan portfolio of Grand Bank
(including loans that will be outstanding if Grand Bank advances funds it is obligated to advance), except for items identified on Grand Banks internal exception list which has been made available to IBG. All loans classified substandard,
doubtful, loss, nonperforming or problem loans internally by management of Grand Bank or any applicable Regulatory Agency (as defined in Section 11.10) are set forth on Grand Banks watch list, which is set forth in
Schedule 3.18. Notwithstanding anything to the contrary contained in this Section 3.18, no representation or warranty is being made as to the sufficiency of collateral securing, or the collectability of, the loans of Grand Bank.
Section 3.19. Employee Relationships. Grand Bank has complied in all material respects with all applicable material laws
relating to its relationships with its employees, and Grand Bank reasonably believes that the relationship between Grand Bank and its employees is good. To the Best Knowledge of Grand Bank, no key executive officer or manager of any of the
operations of Grand Bank or any group of employees of Grand Bank has or have any present plans to terminate their employment with Grand Bank. Schedule 3.19 contains a list of all employees of Grand Bank and their annual compensation and
a list of all employment agreements, employment letters, change in control payment letter agreements and all other similar contracts, arrangements, or understandings with any employee of Grand Bank (the Employment Contracts) and
the amounts owed by Grand Bank under the Employment Contracts in connection with the consummation of the transactions contemplated by this Agreement.
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Section 3.20. Condition of Assets. All tangible assets used by Grand Bank are in good
operating condition, ordinary wear and tear excepted, and conform, in all material respects, with all applicable ordinances, regulations, zoning and other laws, whether federal, state or local. None of Grand Banks premises or equipment is in
need of maintenance or repairs other than ordinary routine maintenance or repairs that are not material in nature or cost.
Section 3.21. Environmental Compliance.
A. Grand Bank and all of its Properties and operations are in material compliance with all applicable Environmental Laws (as defined in
Section 11.10). Grand Bank has not received any written notice of any past, present, or future conditions, events, activities, practices or incidents that could reasonably be expected to materially interfere with or prevent the compliance of
Grand Bank with all applicable Environmental Laws.
B. Grand Bank has obtained all material permits, licenses and authorizations that are
required under all applicable Environmental Laws.
C. No Hazardous Materials (as defined in Section 11.10) exist on, about or within
any of the Properties, nor to the Best Knowledge of Grand Bank, have any Hazardous Materials previously existed on, about or within or been used, generated, stored, transported, disposed of, on or released from any of the Properties, except as would
not be expected to have or cause a Material Adverse Change. The use that Grand Bank makes of the Properties will not result in the use, generation, storage, transportation, accumulation, disposal or release of any Hazardous Material on, in or from
any of the Properties, except as would not be expected to have or cause a Material Adverse Change.
D. There is no action, suit,
proceeding, investigation, or inquiry before any Governmental Authority pending or, to the Best Knowledge of Grand Bank, threatened, against Grand Bank relating in any way to any Environmental Law. Grand Bank has no liability for remedial action
under any Environmental Law. Grand Bank has not received any written request for information by any Governmental Authority with respect to the condition, use or operation of any of the Properties nor has Grand Bank received any written notice from
any Governmental Authority or other person with respect to any violation of or claimed or potential liability of any kind under any Environmental Law (including any letter, notice or inquiry from any person or Governmental Authority informing Grand
Bank that it is or may be liable in any way under any Environmental Laws or requesting information to enable such a determination to be made).
Section 3.22. Regulatory Compliance.
A. Since January 1, 2013, Grand Bank has not been and is currently not, (i) subject to any cease-and-desist or other order or
enforcement action issued by, (ii) a party to any written agreement, consent agreement or memorandum of understanding with, (iii) a party to any commitment letter or similar undertaking to, (iv) subject to any order or directive by,
(v) ordered to pay any civil penalty by, (vi) a recipient of a supervisory letter from, or (vii) subject to any board resolutions adopted at the request or suggestion of, any Regulatory Agency or other Governmental Authority that
restricts the conduct of its business or that relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business (each of the items set forth in the preceding clauses
(i) through (vii), a Regulatory Agreement). There are no pending or, to the Best Knowledge of Grand Bank, threatened investigations by any Regulatory Agency with regard to Grand Bank.
B. All reports, records, registrations, statements, notices and other documents or information required to be filed by Grand Bank with any
Regulatory Agency have been duly and timely filed and, to the Best Knowledge of Grand Bank, all information and data contained in such reports, records or other documents are true, accurate, correct and complete in all material respects.
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Section 3.23. Absence of Certain Business Practices. Neither Grand Bank, nor any of
its officers, employees or agents or any other person authorized to act on their behalf, has, directly or indirectly, since January 1, 2013, given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or
other person who is or may be in a position to help or hinder the business of Grand Bank (or assist Grand Bank in connection with any actual or proposed transaction) that (A) may reasonably be expected to
subject Grand Bank to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (B) if not given in the past, may reasonably
have resulted in a Material Adverse Change or (C) if not continued in the future may reasonably be expected to result in a Material Adverse Change or may reasonably be expected to subject Grand Bank to suit or penalty in any private or
governmental litigation or proceeding.
Section 3.24. Books and Records. The minute books, stock certificate books and stock
transfer ledgers of Grand Bank have been kept accurately in the ordinary course of business and are complete and correct in all material respects. The transactions entered therein represent bona fide transactions, and there have been no material
transactions involving the business of Grand Bank that properly should have been set forth therein and that have not been accurately so set forth.
Section 3.25. Forms of Instruments, Etc. Grand Bank has made and will make available to IBG copies of all of its standard forms of
notes, mortgages, deeds of trust and other routine documents of a like nature used on a regular and recurring basis in the ordinary course of its business.
Section 3.26. Fiduciary Responsibilities. Grand Bank has performed in all material respects all of its duties as a trustee,
custodian, guardian or as an escrow agent in a manner that complies in all material respects with all applicable laws, regulations, orders, agreements, instruments and common law standards, where the failure to so perform would result in a Material
Adverse Change.
Section 3.27. Guaranties. Except in the ordinary course of business, according to past business practices and
in material compliance with applicable law, Grand Bank has not guaranteed the obligations or liabilities of any other person, firm or corporation.
Section 3.28. Employee Benefit Plans.
A. Set forth on Schedule 3.28 is a complete and correct list of all employee benefit plans (as defined in
Section 3(3) of ERISA), all specified fringe benefit plans as defined in Section 6039D of the Code, and all other bonus, incentive, compensation, deferred compensation, retention profit sharing, stock option, stock appreciation right,
stock bonus, stock purchase, employee stock ownership, savings, severance, supplemental unemployment, layoff, salary continuation, retirement, pension, health, life insurance, disability, group insurance, vacation, holiday, sick leave, fringe
benefit or welfare plan, or any other similar plan, agreement, policy or understanding (whether written or oral, qualified or nonqualified, currently effective or terminated), and any trust, escrow or other agreement related thereto, which
(i) is currently maintained or contributed to by Grand Bank, or with respect to which Grand Bank has any liability, and (ii) provides benefits to any officer, employee, service provider, former officer or former employee of Grand Bank, or
the dependents of any thereof, regardless of whether funded or unfunded (herein collectively the Grand Bank Employee Plans and each individually an Grand Bank Employee Plan).
B. No Grand Bank Employee Plan is a defined benefit plan within the meaning of Section 3(35) of ERISA. Grand Bank has delivered or made
available to IBG true, accurate and complete copies of the documents comprising each Grand Bank Employee Plan and any related trust agreements, annuity contracts, insurance policies or any other funding instruments (Funding
Arrangements), any contracts with independent contractors (including actuaries and investment managers) that relate to any Grand Bank Employee Plan, the Form 5500 filed with the IRS in each of the three (3) most recent plan years with
respect to each Grand Bank Employee Plan, and related schedules and opinions, and such other documents, records or other materials related thereto, as reasonably requested by IBG. There have been no prohibited transactions (described under
Section 406 of
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ERISA or Section 4975(c) of the Code), breaches of fiduciary duty or any other material breaches or violations of any law applicable to the Grand Bank Employee Plans and related Funding
Arrangements that could reasonably be expected to subject IBG, Independent Bank, or Grand Bank to any material taxes, penalties or other liabilities. Each Grand Bank Employee Plan that is represented to be qualified under Section 401(a) of the
Code has a current favorable determination or opinion letter, and does not have any amendments for which the remedial amendment period under Code Section 401(b) has expired. To the Best Knowledge of Grand Bank, all reports, descriptions and
filings required by the Code, ERISA or any government agency with respect to each Grand Bank Employee Plan have been timely and completely filed or distributed. Each Grand Bank Employee Plan has been operated in material compliance with applicable
law or in accordance with its terms. There are no pending claims, lawsuits or actions relating to any Grand Bank Employee Plan (other than ordinary course claims for benefits) and, to the Best Knowledge of Grand Bank, none are threatened. Except as
otherwise disclosed in accordance with Section 5.13, no written or, to the Best Knowledge of Grand Bank, oral representations have been made by Grand Bank to any employee or former employee of Grand Bank promising or guaranteeing any employer
payment or funding for the continuation of medical, dental, life or disability coverage for such person, their dependent, or any beneficiary for any period of time beyond the end of the current plan year or beyond termination of employment (except
to the extent of coverage required under Section 4980B of the Code or applicable state law). Compliance with FAS 106 will not create any material change to the Grand Call Reports. Except to the extent that the payment could constitute an
excess parachute payment under Section 280G of the Code, there are no contracts or arrangements providing for payments that will be nondeductible or subject to excise tax under Code Sections 4999 or 280G, nor will IBG or Independent
Bank be required to gross up or otherwise compensate any person because of the limits contained in such Code sections. There are no surrender charges, penalties, or other costs or fees that could reasonably be expected to be imposed by
any person against Grand Bank, an Employee Plan, or any other person, including an Grand Bank Employee Plan participant or beneficiary, as a result of the consummation of the transactions contemplated by this Agreement with respect to any insurance,
annuity or investment contracts or other similar investment held by any Grand Bank Employee Plan.
C. With respect to each employee
benefit plan (as defined in Section 3(3) of ERISA) maintained or contributed to or required to be contributed to, currently or in the past, by any trade or business with which Grand Bank is required by any of the rules contained in the
Code or ERISA to be treated as a single employer (Controlled Group Plans):
1. All Controlled Group Plans which are
group health plans (as defined in the Code and ERISA) have been operated prior to the Closing in compliance, in all material respects, with Part 6 of Subtitle B of Title 1 of ERISA and Section 4980B of the Code and could not
reasonably be expected to subject Grand to material liability;
2. There is no Controlled Group Plan that is a defined benefit plan (as
defined in Section 3(35) of ERISA), nor has there been a Controlled Group Plan that is a defined benefit plan in the last five (5) calendar years; and
3. Except as disclosed in Schedule 3.28, there is no Controlled Group Plan that is a multiple employer plan or
multi-employer plan (as either such term is defined in ERISA), nor has there been a Controlled Group Plan that is either a multiple employer plan or multi-employer plan since January 1, 2010.
D. All Grand Bank Employee Plan documents, annual reports or returns, audited or unaudited financial statements, actuarial valuations,
summary annual reports, and summary plan descriptions issued with respect to the Grand Bank Employee Plans are correct, complete, and current in all material respects, have been timely filed, and there have been no material changes in the
information set forth therein.
E. All contributions (including all employer contributions, employee salary reduction contributions and
all premiums or other payments (other than claims)) that are due have been made with respect to each Grand Bank Employee Plan.
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Section 3.29. No Excess Parachute Payments. No amount, whether in cash or property or
vesting of property, that will be received by or benefit provided to, any officer, director or employee of Grand Bank or any of its Affiliates who is a disqualified individual (as such term is defined in Treasury Regulation 1.280 G-1)
under any employment, severance or termination agreement, other compensation arrangement or benefit plan currently in effect will be an excess parachute payment (as such term is defined in 280G(b)(1) of the Code) solely as a result of
the transactions contemplated by this Agreement; and no such person is entitled to receive any additional payment from Grand Bank or IBG in the event that the excise tax of Section 4999(a) of the Code is imposed on such person.
Section 3.30. Bank Secrecy Act, Foreign Corrupt Practices Act and U.S.A. Patriot Act. Grand Bank is in material compliance with
the Bank Secrecy Act (12 U.S.C. § 1730(d) and 1829(b)), the United States Foreign Corrupt Practices Act and the International Money Laundering Abatement and Anti-Terrorist Financing Act, otherwise known as the U.S.A. Patriot Act, and all
regulations promulgated thereunder. Grand Bank has properly certified all foreign deposit accounts and has made all necessary tax withholdings on all of its deposit accounts; furthermore, Grand Bank has timely and properly filed and maintained all
requisite Currency Transaction Reports and other related forms, including any requisite Custom Reports required by any agency of the United States Treasury Department, including the IRS. Grand Bank has timely filed all Suspicious Activity Reports
with the Financial Institutions Financial Crimes Enforcement Network (U.S. Department of the Treasury) required to be filed by it pursuant to the laws and regulations referenced in this Section.
Section 3.31. Data Processing Agreements. Grand Bank obtains its data processing services, ATM, and other information technology
services exclusively through the contracts or agreements with the persons or entities described on Schedule 3.31 (DP Contracts). A true and correct executed copy of each DP Contract, as in effect as of the date hereof,
has been provided to IBG. Other than the DP Contracts, Grand Bank has no agreement with any other person or entity for data processing, ATM or other technology services.
Section 3.32. Dissenting Shareholders. To the Best Knowledge of Grand Bank, there is no plan or intention on the part of any
shareholders of Grand Bank to exercise their appraisal rights in the manner provided by applicable law.
Section 3.33. Fair
Housing Act, Home Mortgage Disclosure Act and Equal Credit Opportunity Act and Flood Disaster Protection Act. Grand Bank is in compliance in all material respects with the Fair Housing Act (42 U.S.C. § 3601 et seq.), the Home Mortgage
Disclosure Act (12 U.S.C. § 2801 et seq.), the Equal Credit Opportunity Act (15 U.S.C. § 1691 et seq.), and the Flood Disaster Protection Act (42 USC § 4002, et seq.), and all regulations promulgated thereunder. Since January 1,
2013, Grand Bank has not received any written notices of any violation of such acts or any of the regulations promulgated thereunder, and it has not received any written notice of any, and to the Best Knowledge of Grand Bank there is no, threatened
administrative inquiry, proceeding or investigation with respect to its compliance with such laws.
Section 3.34. Usury Laws and
Other Consumer Compliance Laws. All loans of Grand Bank have been made in compliance in all material respects with all applicable statutes and regulatory requirements at the time of such loan or any renewal thereof, including the Texas usury
statutes as currently interpreted, Regulation Z (12 C.F.R. § 226 et seq.) issued by the FRB, the Federal Consumer Credit Protection Act (15 U.S.C. § 1601 et seq.), the Texas Consumer Credit Code (Tex. Rev. Civ. Stat. Ann. Art. 5062-2.01,
et seq.) and all statutes governing the operation of banks operating in the State of Texas. Each such loan was made by Grand Bank in the ordinary course of its lending business.
Section 3.35. Zoning and Related Laws. All real property owned or operated by Grand Bank and the use thereof is in compliance with
all applicable laws, ordinances, regulations, orders or requirements, including building, zoning and other laws, except where the failure, whether individually or in the aggregate, to be so in compliance could not reasonably be expected to cause a
Material Adverse Change.
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Section 3.36. Business Combination. This Agreement and the transactions contemplated
hereby are exempt from the requirements of Subchapter M of Chapter 21 of the TBOC and, any other applicable state takeover law or state law that purports to limit or restrict business combinations or the ability to acquire or vote shares.
Section 3.37. Community Reinvestment Act. Grand Bank is in material compliance with the Community Reinvestment Act (12 U.S.C.
§ 2901 et seq.) (the CRA) and all regulations issued thereunder. Grand Bank has a rating of not less than satisfactory as of its most recent CRA compliance examination and Grand Bank has no Knowledge of any reason
why Grand Bank would not receive a rating of satisfactory or better in its next CRA compliance examination or why any Governmental Agency may seek to restrain, delay or prohibit the transactions contemplated hereby as a result of any act
or omission of Grand Bank under the CRA.
Section 3.38. Representations Not Misleading. No representation or warranty by Grand
Bank contained in this Agreement contains or will contain on the Closing Date any untrue statement of a material fact or omits or will omit on the Closing Date to state a material fact necessary to make the statements contained herein, in light of
the circumstances under which they were made, not misleading. To the Best Knowledge of Grand Bank, all written statements, exhibits, schedules, and other documents furnished to IBG by Grand Bank as part of the due diligence for this Agreement are
accurate in all materials respects.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IBG
IBG hereby makes the following representations and warranties to Grand Bank.
Section 4.01. Organization. IBG is a registered bank holding company under the Bank Holding Company Act of 1956, as amended. IBG
is a corporation duly organized, validly existing and in good standing under the laws, rules and regulations of the State of Texas. IBG has all requisite corporate power and authority to own Independent Bank as now owned and to enter into and carry
out its obligations under this Agreement and the Merger Agreement. True and complete copies of the Certificate of Formation and Bylaws of IBG, as amended to date, have been made available to Grand Bank. IBG is the sole beneficial and record owner of
all of the issued and outstanding shares of capital stock of Independent Bank, free and clear of all liens, security interests, and encumbrances of any kind or character.
Section 4.02. Execution and Delivery. IBG has full corporate power and authority to execute and deliver this Agreement and the
Merger Agreement and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Merger Agreement and (provided the required regulatory approvals are obtained) the consummation of the
transactions contemplated hereby and thereby, have been duly and validly approved by the IBG Board. Except for the written consent of IBG as the sole shareholder of Independent Bank, no other corporate proceedings on the part of IBG are necessary to
approve this Agreement or the Merger Agreement and to consummate the transactions contemplated hereby and thereby. This Agreement, the Merger Agreement, and the other agreements and documents contemplated hereby and thereby have been, or at Closing
will be, duly and validly executed and delivered to Grand Bank, and each constitutes or at Closing will constitute a valid and binding obligation of IBG, enforceable against IBG in accordance with its terms and conditions, except as enforceability
may be limited by bankruptcy, conservatorship, insolvency, moratorium, reorganization, receivership or similar laws and judicial decisions affecting the rights of creditors generally and by general principles of equity (whether applied in a
proceeding at law or in equity).
Section 4.03. IBG Capitalization. The authorized capital stock of IBG consists of
100,000,000 shares of common stock, $0.01 par value per share, of which 17,108,394 shares are outstanding as of the date of this Agreement and 10,000,000 shares of preferred stock, par value $0.01 per share, of which 23,938.35 shares of Senior
Non-Cumulative Perpetual Preferred Stock, Series A were issued or outstanding as of the date of this
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Agreement. Except as set forth in Schedule 4.03, there are no (A) other outstanding equity securities of any kind or character, or (B) outstanding subscriptions, options,
convertible securities, rights, warrants, calls or other agreements or commitments of any kind issued or granted by, or binding upon, IBG to purchase or otherwise acquire any security of or equity interest in IBG, obligating IBG to issue any shares
of, restricting the transfer of, or otherwise relating to shares of its capital stock of any class. There are no outstanding contractual obligations of IBG to vote or dispose of any shares of IBG Stock. There are no shareholder agreements, voting
trusts or similar agreements relating to the IBG Stock. All of the issued and outstanding shares of the IBG Stock have been duly authorized, validly issued and are fully paid and nonassessable, and have not been issued in violation of the preemptive
rights of any person. Such shares of the IBG Stock have been issued in material compliance with the securities laws of the United States and other jurisdictions having applicable securities laws. There are no restrictions applicable to the payment
of dividends on the shares of the IBG Stock except pursuant to applicable laws and regulations, and all dividends declared prior to the date of this Agreement have been paid.
Section 4.04. Independent Bank.
A. Independent Bank is a Texas state banking association, duly organized, validly existing and in good standing under the laws of the state
of Texas. Independent Bank has all requisite corporate power and authority (including all licenses, franchises, permits and other governmental authorizations as are legally required) to carry on its business as now being conducted, to own, lease and
operate its properties and assets as now owned, leased or operated and to enter into and to carry on the business and activities now conducted by it. True and complete copies of the Certificate of Formation and Bylaws of Independent Bank, as amended
to date, have been made available to Grand Bank. Independent Bank is an insured bank as defined in the FDIA. The nature of the business of Independent Bank does not require it to be qualified to do business in any jurisdiction other than the State
of Texas. Except as set forth in Schedule 4.04(A), Independent Bank has no equity interest, direct or indirect, in any other bank or corporation or in any partnership, joint venture or other business enterprise or entity, except as
acquired through settlement of indebtedness, foreclosure, the exercise of creditors remedies or in a fiduciary capacity, and the business carried on by Independent Bank has not been conducted through any other direct or indirect Subsidiary or
Affiliate of Independent Bank.
B. The authorized capital stock of Independent Bank consists of 2,000,000 shares of common stock, $1.00
par value per share, of which 985,930 shares are issued and outstanding as of the date of this Agreement (the Independent Bank Stock) and owned by IBG. All of the outstanding shares of capital stock or other securities evidencing
ownership of Independent Bank are duly authorized, validly issued, fully paid and nonassessable and have not been issued in violation of the preemptive rights of any person and have been issued in material compliance with applicable securities laws.
There are no restrictions applicable to the payment of dividends on the shares of the capital stock of Independent Bank, except pursuant to applicable laws and regulations, and all dividends declared prior to the date of this Agreement on such
capital stock have been paid. There are no (i) other outstanding equity securities of any kind or character, or (ii) outstanding subscriptions, contracts, options, convertible securities, preemptive rights, warrants, calls or other
agreements or commitments of any kind issued or granted by, binding upon or otherwise obligating Independent Bank to issue, sell or otherwise dispose of, or to purchase, redeem or otherwise acquire, any shares of capital stock of Independent Bank.
There are no shareholder agreements, voting trusts or similar agreements relating to the capital stock of Independent Bank.
Section 4.05. Consents and Approvals. Except for regulatory and other approvals as disclosed in Schedule 4.05, no
approval, consent, order or authorization of, or registration, declaration or filing with, any Governmental Authority or other third party is required on the part of IBG in connection with the execution, delivery or performance of this Agreement or
the agreements contemplated hereby, including the Merger Agreement or the consummation by IBG of the transactions contemplated hereby or thereby.
Section 4.06. Regulatory Approval. Each of IBG and Independent Bank is well capitalized as defined by federal
regulations as of the date hereof. Independent Bank has a CRA rating of satisfactory. IBG reasonably believes that it will be able to obtain all requisite regulatory approvals necessary to consummate the Merger in a timely manner.
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Section 4.07. SEC Filings; Financial Statements.
A. Except as set forth in Schedule 4.07, IBG has timely filed and made available to Grand Bank all documents required to be filed by
IBG since April 1, 2013 (the IBG SEC Reports). The IBG SEC Reports, including any IBG SEC Reports filed after the date of this Agreement until the Effective Time, at the time filed (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) (A) complied in all material respects with the applicable requirements of the U.S. federal securities laws and other applicable laws, statutes, rules and regulations, and
(B) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated in such IBG SEC Reports or necessary in order to make the statements in such IBG SEC Reports, in light of the circumstances under
which they were made, not misleading. As of the date of this Agreement, there are no outstanding or unrestricted comments received from the SEC staff with respect to the IBG SEC Reports. To the Best Knowledge of IBG, none of the IBG SEC Reports is
the subject of ongoing SEC review or investigation.
B. Each of the IBG financial statements (including, in each case, any related notes)
contained in the IBG SEC Reports, including any IBG SEC Reports filed after the date of this Agreement until the Effective Time, complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect
thereto, was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited interim statements, as permitted by Form
10-Q of the SEC), and fairly presented in all material respects the consolidated financial position of IBG and its Subsidiaries as at the respective dates and the consolidated results of operations and cash flows for the periods indicated, except
that the unaudited interim consolidated financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount or effect.
C. IBG has not been notified by its independent public accounting firm that such accounting firm is of the view that any of financial
statements should be restated which has not been restated in subsequent financial statements or that IBG should modify its accounting in future periods.
D. Since December 31, 2012, none of IBG nor any of its Subsidiaries, nor, to IBGs Best Knowledge any director, officer or employee
of IBG or any of its Subsidiaries or any auditor, accountant or representative of IBG or any of its Subsidiaries, has received any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of IBG or any of its Subsidiaries or their respective internal accounting controls, including any complaint, allegation, assertion or claim that IBG or any of its Subsidiaries has engaged in questionable
accounting or auditing practices. No attorney representing IBG or any of its Subsidiaries, whether or not employed by IBG or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or
similar violation by IBG, any of its Subsidiaries or any of their officers, directors, employees or agents to IBGs or any of its Subsidiaries board of directors or any committee thereof or to any director or officer of IBG or any of its
Subsidiaries. Since December 31, 2012, there have been no internal investigations regarding accounting or revenue recognition discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer,
individuals performing similar functions, IBGs or any of its Subsidiaries board of directors or any committee thereof.
E.
There are no outstanding loans made by IBG or any of its Subsidiaries to any executive officer or director of IBG, other than loans that are subject to and in compliance with Regulation O under the Federal Reserve Act.
Section 4.08. Undisclosed Liabilities. IBG and Independent Bank have no material liability or obligation, accrued, absolute,
contingent or otherwise and whether due or to become due (including unfunded obligations under any Employee Plan or liabilities for federal, state or local taxes or assessments) that are not reflected in or disclosed in the IBG SEC Reports, except
(A) those liabilities, obligations and expenses incurred
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in the ordinary course of business and materially consistent with past business practices since the date of the most recent IBG SEC Report, (B) liabilities, obligations and expenses incurred
as a result of or arising from this Agreement or any other agreement or document contemplated hereby, or any of the transactions contemplated hereby or thereby, or (C) liabilities, obligations and expenses as disclosed on
Schedule 4.08.
Section 4.09. No Violation. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, nor compliance by IBG or Independent Bank with any of the terms or provisions hereof or thereof (provided the required regulatory and shareholder approvals are obtained) will (A) violate any
provision of the charters, articles, certificates or bylaws of IBG, or Independent Bank; (B) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to IBG or Independent Bank or any of
their respective properties or assets; (C) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or the lapse of time, or both, would constitute a
default) under, result in the termination or cancellation under, accelerate the performance required by or rights or obligations under, or result in the creation of any lien upon any of the respective properties or assets of IBG, or Independent Bank
under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement, contract or other instrument or obligation to which IBG or Independent Bank is a party, or by which IBG or
Independent Bank or any of their respective properties or assets or business activities, may be bound or subject.
Section 4.10.
Litigation. Except as disclosed in Schedule 4.10, neither IBG nor any of its Subsidiaries are parties to any, and there are no pending or, to the Best Knowledge of IBG, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of any nature against IBG or its Subsidiaries which are reasonably likely, individually or in the aggregate, to result in a Material Adverse Change, nor, to the Best Knowledge
of IBG, is there any basis for any proceeding, claim or any action against IBG or its Subsidiaries that would be reasonably likely, individually or in the aggregate, to result in a Material Adverse Change. There is no injunction, order, judgment or
decree imposed upon IBG or its Subsidiaries or the assets or properties of IBG or its Subsidiaries that has resulted in, or is reasonably likely to result in, a Material Adverse Change.
Section 4.11. Compliance with Laws, Permits and Instruments. IBG, its Subsidiaries and its employees hold all material licenses,
registrations, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses. IBG and its Subsidiaries are in compliance with all applicable laws, statutes, orders, rules, regulations and policies of any
Governmental Authority, except where the failure, whether individually or in the aggregate, to be so in compliance could not reasonably be expected to cause a Material Adverse Change with respect to IBG or any of its Subsidiaries. IBG is in material
compliance with all applicable listing and corporate governance rules of NASDAQ.
Section 4.12. No Material Adverse Change.
Except as disclosed in the representations and warranties made in this ARTICLE IV and the Schedules hereto, there has not been any Material Adverse Change with respect to IBG or Independent Bank since March 31, 2015, nor to the Best Knowledge
of IBG, has any event occurred that has resulted in, or has a reasonable probability of resulting in the future in, a Material Adverse Change with respect to IBG or Independent Bank.
Section 4.13. Financing. IBG has, or at the Closing will have, sufficient cash on hand which is uncommitted as to any other use,
or a credit facility with sufficient availability, to pay the Aggregate Cash Consideration.
Section 4.14. Representations Not
Misleading. No representation or warranty by IBG contained in this Agreement contains or will contain on the Closing Date any untrue statement of a material fact or omits or will omit on the Closing Date to state a material fact necessary to
make the statements contained herein, in light of the circumstances under which they were made, not misleading. To the Best Knowledge of IBG, all written statements, exhibits, schedules, and other documents furnished to Grand Bank by IBG or
Independent Bank as part of the due diligence for this Agreement are accurate in all material respects.
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ARTICLE V
COVENANTS OF GRAND BANK
Grand Bank covenants and agrees with IBG as follows:
Section 5.01. Commercially Reasonable Efforts. Grand Bank will use commercially reasonable best efforts to cause the consummation
of the transactions contemplated hereby in accordance with the terms and conditions of this Agreement.
Section 5.02. Information
for Regulatory Applications and Registration Statement.
A. Grand Bank shall use its commercially reasonable best efforts to promptly
furnish IBG with all information concerning Grand Bank that is required for inclusion in any application, statement or document to be made or filed by IBG with any federal or state bank regulatory or supervisory authority in connection with the
transactions contemplated by this Agreement during the pendency of this Agreement. Grand Bank shall have the right to review in advance, and to the extent practicable consult with IBG, in each case subject to applicable laws relating to the exchange
of information, with respect to all written information submitted to any third party or any federal or state bank regulatory or supervisory authority in connection with the transactions contemplated by this Agreement, provided that IBG shall not be
required to provide Grand Bank with confidential portions of any filing with a federal or state bank regulatory or supervisory authority. In exercising the foregoing right, Grand Bank agrees to act reasonably and as promptly as practicable.
B. Grand Bank agrees that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in
(i) the Registration Statement shall, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Proxy Statement and any amendment or supplement thereto shall, at the date(s) of mailing to stockholders and at the time of the
Shareholder Meeting, and (iii) any other filings made under applicable federal or state banking or securities laws and regulations, shall contain any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. Grand Bank further agrees that if it shall become aware prior to the effectiveness of the Registration Statement of any information furnished by such party that would cause any of
the statements in the Registration Statement or the Proxy Statement to be false or misleading with respect to any material fact, or to omit to state any material fact necessary to make the statements therein not false or misleading, to promptly
inform IBG thereof and to take the necessary steps to correct the Registration Statement or the Proxy Statement.
Section 5.03.
Affirmative Covenants. Except as otherwise permitted or required by this Agreement, from the date hereof until the Effective Time, Grand Bank shall:
A. Maintain its corporate existence in good standing;
B. Maintain the general character of its business and conduct its business in its ordinary and usual manner;
C. Extend credit only in accordance with existing lending policies and practices;
D. Use commercially reasonable efforts to preserve its business organization intact; to retain the services of its present employees,
officers, directors and agents; to retain its present customers, depositors, suppliers and correspondent banks; and to preserve its goodwill and the goodwill of its suppliers, customers and others having business relationships with it;
E. Maintain all offices, machinery, equipment, materials, supplies, inventories, vehicles and other Properties owned, leased or used by it
(whether under its control or the control of others) in good operating repair and condition, ordinary wear and tear excepted;
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F. Comply in all material respects with all laws, regulations, ordinances, codes, orders,
licenses, and permits applicable to its Properties and operations, where such non-compliance could be reasonably expected to cause a Material Adverse Change;
G. Timely file all tax returns required to be filed by it and promptly pay all taxes, assessments, governmental charges, duties, penalties,
interest and fines that become due and payable, except those being contested in good faith by appropriate proceedings;
H. Withhold from
each payment made to each of its employees the amount of all taxes (including federal income taxes, FICA taxes and state and local income and wage taxes) required to be withheld therefrom and pay the same to the proper tax receiving officers;
I. Continue to follow and implement policies, procedures and practices regarding the identification, monitoring, classification and treatment
of all assets in substantially the same manner as it has in the past;
J. Account for all transactions in accordance with GAAP (unless
otherwise instructed by RAP, in which instance account for such transaction in accordance with RAP) specifically without limitation (i) maintaining an allowance for loan and lease losses of at least $2,500,000, and (ii) paying or accruing
for by the Calculation Date all liabilities, obligations, costs, and expenses owed or incurred by Grand Bank on or before the Closing Date;
K. Perform all of its material obligations under contracts, leases and documents relating to or affecting its assets, Properties and
business, except such obligations as it may in good faith reasonably dispute;
L. Maintain and keep in full force and effect, in all
material respects, presently existing insurance coverage and give all notices and present all claims under all insurance policies in due and timely fashion; and
M. Timely file all reports required to be filed with Governmental Authorities and observe and conform, in all material respects, to all
applicable laws, rules, regulations, ordinances, codes, orders, licenses and permits, except those being contested in good faith by appropriate proceedings.
Section 5.04. Negative Covenants. From the date of this Agreement through the Closing, without the prior written consent of IBG,
Grand Bank shall not:
A. Introduce any new material method of management or operation;
B. Intentionally take any action that could reasonably be anticipated to result in a Material Adverse Change;
C. Take or fail to take any action that could reasonably be expected to cause the representations and warranties made in ARTICLE III to be
inaccurate in any material respect at the time of the Closing or preclude Grand Bank from making such representations and warranties (as modified by the supplemental Schedules) at the time of the Closing;
D. Declare, set aside or pay any dividend or other distribution with respect to its capital stock, except that Grand Bank may pay
(i) Subchapter S tax distributions consistent with past practices, and (ii) the Section 1.05(D) Distribution;
E. Enter into, alter, amend, renew or extend any material contract or commitment which would result in an obligation of Grand Bank to make
payments in excess of $50,000, except for loans and extensions of credit in the ordinary course of business, which are subject to the provisions of Sections 5.04(Y), 5.04(Z), and 5.04(AA);
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F. Mortgage, pledge or subject to lien, charge, security interest or any other encumbrance or
restriction any of its Properties, business or assets, tangible or intangible except in the ordinary course of business and consistent with past practices;
G. Cause or allow the loss of insurance coverage, unless replaced with coverage which is substantially similar (in amount and insurer) to
that in effect as of the date of this Agreement;
H. Incur any indebtedness, obligation or liability, whether absolute or contingent,
other than the receipt of deposits and trade debt or except in the ordinary course of business and consistent with prudent banking practices or in connection with the transactions contemplated by this Agreement or any of the agreements or documents
contemplated hereby;
I. Discharge or satisfy any lien or pay any obligation or liability, whether absolute or contingent, due or to
become due, except in the ordinary course of business and consistent with past practices;
J. Issue, reserve for issuance, grant, sell or
authorize the issuance of any shares of its capital stock or other securities or subscriptions, options, warrants, calls, rights or commitments of any kind relating to the issuance thereto, except to the extent any commitment to do so is outstanding
as of the date of this Agreement;
K. Amend or otherwise change its Articles of Association or Bylaws;
L. Sell, transfer, lease to others or otherwise dispose of any material amount of its assets or Properties, discount or arrange for a payoff
of a charged off or deficiency credit, cancel or compromise any material debt or claim, or waive or release any right or claim other than in the ordinary course of business and consistent with past practices; provided, that any such transaction
involving amounts in excess of $100,000 shall be deemed to not be in the ordinary course of business;
M. Enter into any material
transaction other than in the ordinary course of business;
N. Except with respect to the collection of checks and other negotiable
instruments or otherwise in the ordinary course of the business and consistent with past practices, enter into or give any promise, assurance or guarantee of the payment, discharge or fulfillment of any undertaking or promise made by any other third
person, firm or corporation;
O. Sell or knowingly dispose of, or otherwise divest itself of the ownership, possession, custody or
control, of any corporate books or records of any nature that, in accordance with sound business practice, normally are retained for a period of time after their use, creation or receipt, except at the end of the normal retention period;
P. Except for salary increases and the accrual for annual bonuses in the ordinary course of business and consistent with past practices, and
the payment of employee bonuses in connection with the completion of the Merger (all of which shall be included (as a deduction) in the calculation of Tangible Book Value), (i) make any material change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, (ii) pay, agree to, or orally promise to pay, conditionally or otherwise, any additional bonus or extra compensation, pension, severance or vacation pay, to or for the benefit of any of
its shareholders, directors, officers or employees, or (iii) enter into any employment or consulting contract (other than as contemplated by this Agreement) or other agreement with any director, officer or employee or adopt, amend in any
material respect or terminate (other than termination of the Employee Benefit Plans contemplated by this Agreement) any pension, employee welfare, retirement, stock purchase, stock option, stock appreciation rights, termination, severance, income
protection, golden parachute, savings or profit-sharing plan (including trust agreements and insurance contracts embodying such plans), any deferred compensation, or collective bargaining agreement, any group insurance contract (except as
contemplated by this Agreement) or any other incentive, welfare or employee benefit plan or agreement maintained by it for the benefit of its directors, employees or former employees;
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Q. Engage in any transaction with any Affiliate, except in the ordinary course of business and
consistent with past practices;
R. Acquire any capital stock or other equity securities or acquire any equity or ownership interest in
any bank, corporation, partnership or other entity, except (i) through settlement of indebtedness, foreclosure, or the exercise of creditors remedies or (ii) in a fiduciary capacity, the ownership of which does not expose it to any
liability from the business, operations or liabilities of such person;
S. Except as contemplated by this Agreement, terminate, cancel or
surrender any contract, lease or other agreement, or unreasonably permit any damage, destruction or loss which, in any case or in the aggregate, may reasonably be expected to result in a Material Adverse Change;
T. Dispose of, permit to lapse, transfer or grant any rights under, or knowingly breach or infringe upon, any United States or foreign
license or Proprietary Right or materially modify any existing rights with respect thereto, except in the ordinary course of business and consistent with past practices;
U. Make any capital expenditures, capital additions or betterments except in the ordinary course of business consistent with past practices;
V. Hire or employ any new officer or hire or employ any new non-officer employee, other than to replace non-officer employees;
W. Make any, or acquiesce with any, change in accounting methods, principles or material practices, except as required by GAAP or RAP,
including without limitation making any reverse provision for loan losses or other similar entry or accounting method that would reduce the allowance for loan and lease losses of Grand Bank; provided, however, that the reversal of
previously accrued amounts (not to exceed $200,000) for expenses that Grand Bank would have incurred if the Agreement had not been entered into and if it were to continue operations independently in 2016, such as 2016 audit fees, year-end
advertising, and similar expenses, shall not require the prior written consent of IBG;
X. Pay a rate on deposits at Grand Bank
materially higher than is consistent with the ordinary course of business and consistent with past practices;
Y. Make any new loan
except in compliance with Grand Banks existing policies and procedures and consistent with past practices;
Z. Renew, extend the
maturity of, or alter the material terms of any loan except in compliance with Grand Banks existing policies and procedures and consistent with past practices;
AA. Renew, extend the maturity of, or alter any of the material terms of any loan classified as substandard and
doubtful;
BB. Sell (provided, however, that payment at maturity or prepayment is not deemed a sale) Investment Securities or
purchase Investment Securities, other than U.S. Treasuries with a maturity of two years or less; or
CC. Redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock.
Section 5.05. Access; Pre Closing Investigation. Grand Bank agrees
that upon reasonable notice and subject to applicable laws relating to the exchange of information, it shall afford the officers, directors,
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employees, attorneys, accountants, investment bankers and authorized representatives of IBG access during regular business hours to the books, contracts, commitments, personnel and records of
Grand Bank, and furnish to IBG during such period such other information concerning Grand Bank as IBG may reasonably request, so that IBG may have the opportunity to make such reasonable investigation as it shall desire to make of the affairs of
Grand Bank, including access sufficient to verify the value of the assets and the liabilities of Grand Bank and the satisfaction of the conditions precedent to IBGs obligations described in ARTICLE VIII. Grand Bank agrees at any time, and from
time to time, to furnish to IBG as soon as practicable, any additional information that IBG may reasonably request, and shall specifically provide to IBG a weekly written report of all loans made, renewed, or modified. No investigation by IBG or its
representatives shall affect the representations and warranties set forth herein.
Section 5.06. Intentionally Reserved.
Section 5.07. Untrue Representations. Grand Bank shall promptly notify IBG in writing if Grand Bank becomes aware of any fact or
condition that makes untrue, or shows to have been untrue, in any material respect, any material information furnished to IBG by Grand Bank or any representation or warranty made in or pursuant to this Agreement or that results in Grand Banks
failure to comply with any covenant, condition or agreement contained in this Agreement.
Section 5.08. Litigation and Claims.
Grand Bank shall promptly notify IBG in writing of any litigation, or of any claim, controversy or contingent liability that is not disclosed in the Schedules to this Agreement by Grand Bank that is reasonably expected to become the subject of
litigation, against Grand Bank or affecting any of its Properties, if such litigation or potential litigation is reasonably likely, in the event of an unfavorable outcome, to result in a Material Adverse Change. Grand Bank shall promptly notify IBG
of any legal action, suit or proceeding or judicial, administrative or governmental investigation, pending or, to the Best Knowledge of Grand Bank, threatened against Grand Bank that (A) questions or could reasonably be expected to question the
validity of this Agreement or the agreements contemplated hereby, or any actions taken or to be taken by Grand Bank pursuant hereto or (B) seeks to enjoin or otherwise restrain the transactions contemplated hereby or thereby.
Section 5.09. Adverse Changes. Grand Bank shall promptly notify IBG in writing if any change shall have occurred or, to the Best
Knowledge of Grand Bank, been threatened (or any development shall have occurred or, to the Best Knowledge of Grand Bank, been threatened involving a prospective change) in the business, financial condition or operations of Grand Bank that has
resulted in or would reasonably be expected to result in a Material Adverse Change.
Section 5.10. No Negotiation with Others.
A. Grand Bank agrees that it shall not, and that it shall direct and use its commercially reasonable best efforts to cause its
employees, directors, officers, financial advisors or agents (collectively, Grand Bank Representatives) not to (i) solicit, knowingly encourage, initiate or participate in any negotiations or discussions with any third party
(except for the limited purpose of notifying such person of the existence of the provisions of this Section 5.10) regarding an Acquisition Proposal, whether by acquisition, business combination, purchase of stock or assets or otherwise;
(ii) disclose to any third party any information concerning the business, Properties, books or records of Grand Bank in connection with any Acquisition Proposal, other than as provided herein or as compelled by law; or (iii) cooperate with
any third party to make any Acquisition Proposal, other than the sale by Grand Bank of assets in the ordinary course of business consistent with past practices. Promptly upon receipt of any unsolicited offer, Grand Bank will communicate to IBG the
terms of any proposal or request for information and the identity of the parties involved.
B. Notwithstanding anything to the contrary
contained in this Section 5.10, if at any time after the date hereof and prior to obtaining Shareholder Approval, Grand Bank and the Grand Bank Representatives,
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having each theretofore complied with the terms of Section 5.10(A), receives a bona fide, unsolicited written Acquisition Proposal, Grand Bank and the Grand Bank Representatives may engage
in negotiations and discussions with, and furnish any information and other access (so long as all such information and access has previously been made available to IBG or is made available to IBG prior to or concurrently with the time such
information or access is made available to such person) to, any person making such Acquisition Proposal if, and only if, the Grand Bank Board determines in good faith, after consultation with outside legal and financial advisors, that (i) such
Acquisition Proposal is or is reasonably capable of becoming a Superior Proposal and (ii) the failure of the Grand Bank Board to furnish such information or access or enter into such discussions or negotiations would reasonably be expected to
be a violation of its fiduciary duties to the Grand Bank shareholders; provided that prior to furnishing any material nonpublic information, Grand Bank shall have received from the person making such Acquisition Proposal an executed confidentiality
agreement with terms at least as restrictive in all material respects on such person as the Confidentiality Agreement entered into with IBG on July 1, 2015, which confidentiality agreement shall not prohibit Grand Bank from complying with the
terms of this Section 5.10. Grand Bank will promptly, and in any event within two (2) business days, (x) notify IBG in writing of the receipt of such Acquisition Proposal or any request for nonpublic information relating to Grand Bank
or for access to the properties, books or records of the Company by any Person that has made, or to the Best Knowledge of Grand Bank may be considering making, an Acquisition Proposal and (y) communicate the material terms of such Acquisition
Proposal to IBG, including as they may change upon any modification or amendment to the terms thereof. Grand Bank will keep IBG reasonably apprised of the status of and other matters relating to any such Acquisition Proposal on a timely basis.
C. Nothing contained in this Section 5.10 shall prevent Grand Bank or the Grand Bank Board from (i) taking the actions provided in
Sections 1.09(C) or 5.10(B) of this Agreement, (ii) responding to an unsolicited bona fide Acquisition Proposal for the sole purpose of clarifying the terms and conditions of the Acquisition Proposal, (iii) informing any Person who submits
an unsolicited bona fide Acquisition Proposal of Grand Banks obligations pursuant to Section 5.10(A) or (iv) in consultation with outside counsel, complying with its disclosure obligations under federal or state law in connection
with a Change in Recommendation.
D. For purposes of this Agreement, Acquisition Proposal means a written offer or proposal
from a party other than IBG which contains a fixed price per share or a mathematically ascertainable formula for calculating a price per share for the Grand Bank Stock regarding any of the following (other than the transactions contemplated by this
Agreement) involving Grand Bank: (i) any merger, reorganization, consolidation, share exchange, recapitalization, business combination, liquidation, dissolution or other similar transaction involving any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of all or substantially all of the assets or equity securities or deposits of, Grand Bank, in a single transaction or series of related transactions which could reasonably be expected to impede, interfere with, prevent
or materially delay the completion of the Merger; (ii) any tender offer or exchange offer for 50% or more of the outstanding shares of capital stock of Grand Bank or the filing of a registration statement in connection therewith; or
(iii) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.
E. For purposes of this Agreement, Superior Proposal means a bona fide Acquisition Proposal made by a party other than IBG that
the Grand Bank Board determines in its good faith judgment to be more favorable to Grand Banks shareholders than the Merger (taking into account, in good faith, the written opinion, with only customary qualifications, of Grand Banks
independent financial advisor that the value of the consideration to Grand Banks shareholders provided for in such Acquisition Proposal exceeds the value of the consideration to Grand Banks shareholders provided for in the Merger) and
for which financing, to the extent required, is then committed or which, in the good faith judgment of the Grand Bank Board (taking into account, in good faith, the written advice of Grand Banks independent financial advisor), is reasonably
capable of being obtained by such third person.
Section 5.11. Consents and Approvals. Grand Bank shall use commercially
reasonable best efforts to obtain all consents and approvals from Regulatory Authorities and other third parties, including the third party
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consents listed on Schedule 3.08, required of Grand Bank in connection with the consummation of the transactions contemplated by this Agreement. Grand Bank will cooperate in all
commercially reasonable respects with IBG to obtain all such approvals and consents required of IBG.
Section 5.12. Environmental
Investigation; Right to Terminate Agreement.
A. IBG and its consultants, agents and representatives, at the sole cost and expense of
IBG, shall have the right to the same extent that Grand Bank has the right, but not the obligation or responsibility, to inspect any Property, including conducting asbestos surveys and sampling, environmental assessments and investigation, and other
environmental surveys and analyses including soil and ground sampling (Environmental Inspections). IBG shall notify Grand Bank in writing before any Environmental Inspection, and Grand Bank may place reasonable restrictions on the
time of such Environmental Inspection. If, as a result of any such Environmental Inspection, further investigation (Secondary Investigation) including, test borings, soil, water and other sampling is deemed desirable by IBG, IBG
shall (i) notify Grand Bank in writing of any Property for which it intends to conduct such a Secondary Investigation and the reasons for the Secondary Investigation, and (ii) at the sole cost and expense of IBG, commence the Secondary
Investigation. IBG shall give reasonable written notice to Grand Bank of the Secondary Investigation, and Grand Bank may place reasonable time and place restrictions on the Secondary Investigation.
B. IBG shall make available to Grand Bank the results and reports of such Environmental Inspections and Secondary Investigations promptly
after IBG receives or is advised of such results. IBG shall not have any liability or responsibility of any nature whatsoever for the results, conclusions or other findings related to any Environmental Inspection, Secondary Investigation or other
environmental survey. If this Agreement is terminated, except as otherwise required by law, reports to any Governmental Authority of the results of any Environmental Inspection, Secondary Investigation or other environmental survey shall not be made
by IBG. IBG shall make no such report before Closing unless required to do so by applicable law, and in such case will give Grand Bank reasonable written notice of IBGs intentions.
C. IBG shall have the right to terminate this Agreement if (i) the factual substance of any warranty or representation set forth in
Section 3.21 is not materially true and accurate; (ii) the results of such Environmental Inspection, Secondary Investigation or other environmental survey are disapproved by IBG because the Environmental Inspection, Secondary Investigation
or other environmental survey identifies material violations or potential material violations of Environmental Laws; (iii) Grand Bank has refused to allow IBG to conduct an Environmental Inspection or Secondary Investigation in a manner that
IBG reasonably considers necessary; (iv) the Environmental Inspection, Secondary Investigation or other environmental survey identifies any past or present event, condition or circumstance that would or potentially could reasonably be expected
to require a material remedial or cleanup action or result in a Material Adverse Change; (v) the Environmental Inspection, Secondary Investigation or other environmental survey identifies the presence of any underground or above ground storage
tank in, on or under any Property that is not shown to be in material compliance with all Environmental Laws applicable to the tank either at the date of this Agreement or at a future time certain, or that has had a release of petroleum or some
other Hazardous Material that has not been cleaned up to the satisfaction of the relevant Governmental Authority or any other party with a legal right to compel cleanup; or (vi) the Environmental Inspection, Secondary Investigation or other
environmental survey identifies the presence of any asbestos-containing material in, on or under any Property, the removal of which could reasonably be expected to result in a Material Adverse Change. IBG shall advise Grand Bank in writing (the
Environmental Notice) as to whether IBG intends to terminate this Agreement because IBG disapproves of the results of the Environmental Inspection, Secondary Inspection or other environmental survey. Upon receipt of the
Environmental Notice, Grand Bank shall have the opportunity to correct any objected to violations or conditions to IBGs reasonable satisfaction within 30 days after the date of the Environmental Notice. If that Grand Bank fails to demonstrate
its satisfactory correction of the violations or conditions to IBG, IBG may terminate the Agreement on the 31st day after the date of the Environmental Notice.
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D. Grand Bank agrees to make available to IBG and its consultants, agents and representatives
all documents and other material relating to environmental conditions of any Property including the results of other environmental inspections and surveys. Grand Bank also agrees that all engineers and consultants who prepared or furnished such
reports may discuss such reports and information with IBG and shall be entitled to certify the same in favor of IBG and its consultants, agents and representatives and make all other data available to IBG and its consultants, agents and
representatives.
Section 5.13. Termination of Employee Plans and Contracts. Prior to the Closing Date, Grand Bank shall
(i) terminate or otherwise cease participating in the Grand Bank Employee Plans, subject to compliance with applicable law, and (ii) use its commercially reasonable best efforts to cause the persons identified in Schedule 5.13 to
execute and deliver to IBG, contemporaneously with the execution of this Agreement, a written commitment to enter into an amendment to the Medical Agreement between Grand Bank and such persons to be effective at the Effective Time of the Merger (the
Medical Agreement Amendment), providing for a distribution on the Closing Date of a lump-sum cash equivalent of the amounts owed by Grand Bank under the Executive Medical Agreements in a manner that complies with Section 409A of the
Code and expressly stating that Grand Bank and its successors shall thereafter have no obligation to make any further payment or distribution under the Executive Medical Agreements.
Section 5.14. Disclosure Schedules. At least three (3) business days prior to the Closing Date, Grand Bank agrees to provide
IBG with supplemental disclosure schedules to be delivered by Grand Bank pursuant to this Agreement reflecting any material changes thereto between the date of this Agreement and the date thereof. Any such supplemental disclosure schedules shall be
deemed to modify the representations and warranties of Grand Bank for purposes of determining whether there has been a breach of any representation or warranty of Grand Bank in Article III hereof; provided, however, that such supplemental disclosure
schedules shall not modify the representations and warranties of Grand Bank for purposes of determining whether there has been a breach of the representations and warranties of Grand Bank pursuant to Section 8.01 of this Agreement.
Section 5.15. Voting Agreement. Grand Bank shall execute and deliver, and shall use its best efforts to cause each director of
Grand Bank to execute and deliver contemporaneously with the execution of this Agreement, the Voting Agreement, in the form attached hereto as Exhibit B, and Grand Bank acknowledges that, upon the execution and delivery of the
Voting Agreement, such persons or entities shall have agreed that they will vote the shares of the Grand Bank Stock owned by them in favor of this Agreement and the transactions contemplated hereby, including the Merger, subject to required
regulatory approvals for the transactions contemplated by this Agreement.
Section 5.16. Releases. Grand Bank shall use its
commercially reasonable best efforts to obtain from each of the directors and Executive Officers (as defined in Section 11.10(B))of Grand Bank a written release, in the form attached hereto as Exhibit C, executed by such director or
executive officer and dated the Closing Date, releasing Grand Bank from claims arising prior to the Effective Time (the Releases).
Section 5.17. Other Agreements. Grand Bank will, as soon as practicable after the execution of this Agreement, enter into the
Merger Agreement with Independent Bank and shall perform all of its obligations thereunder. Grand Bank shall execute and deliver the Merger Agreement and such other agreements, certificates of merger, certificates, and other documents reasonably
necessary to effect and evidence the Merger, and to take all actions necessary or required to consummate the transactions contemplated thereby.
Section 5.18. Support Agreement. Grand Bank shall use its commercially reasonable best efforts to cause each outside director of
Grand Bank to execute and deliver to IBG, contemporaneously with the execution of this Agreement, a Director Support Agreement providing for the continuing support of Independent Bank by the outside directors (the Support
Agreements).
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Section 5.19. Shareholder Lists. After the date of this Agreement, Grand Bank shall
from time to time make available to IBG, upon its request, a list of the Grand Bank shareholders and their addresses, a list showing all transfers of the Grand Bank Stock and such other information as IBG may reasonably request regarding both the
ownership and prior transfers of the Grand Bank Stock. Specifically, Grand Bank shall deliver a certified shareholder list, in form and content reasonably satisfactory to the Exchange Agent, at least ten days prior to the Closing Date.
Section 5.20. Conforming Accounting Adjustments. Grand Bank shall, if requested in writing by IBG, consistent with GAAP, RAP and
applicable banking laws and regulations, immediately prior to Closing, make such accounting entries as IBG may reasonably request in order to conform the accounting records of Grand Bank to the accounting policies and practices of IBG. No such
modification or change by Grand Bank shall constitute or be deemed to be a breach, violation or failure by Grand Bank to satisfy any representation, warranty, covenant, condition or other provision or constitute grounds for termination of this
Agreement by IBG or otherwise be considered in determining whether the conditions to IBGs obligations under this Agreement have been satisfied not will any such adjustment affect the calculation of Tangible Book Value under Section 1.05.
Section 5.21. D & O Liability Insurance. Contemporaneously with the Closing, Grand Bank shall purchase an extended
reporting period for four (4) years under Grand Banks existing directors and officers liability insurance policy for purposes of covering actions occurring prior to the Effective Time, on terms approved by IBG. Notwithstanding any other
provision of this Agreement, the cost of the premiums for such coverage shall be paid by Grand Bank and shall be included (as a deduction) in the calculation of Tangible Book Value.
Section 5.22. Employment Agreement. Grand Bank shall use its commercially reasonable best efforts to cause the executive officers
identified in Schedule 5.22 to execute and deliver to IBG, contemporaneously with the execution of this Agreement, an employment agreement providing for their continued employment with Independent Bank following the Merger.
Section 5.23. Intentionally Reserved.
Section 5.24. Termination of DP Contracts and IT Conversion. Grand Bank will use its reasonable best efforts, including but not
limited to notifying appropriate parties and negotiation in good faith a reasonable settlement, to ensure that its DP Contracts and contracts related to the provision of any other electronic banking services, if the Merger occurs, be terminated
after the consummation of the Merger on a date to be mutually agreed upon by IBG and Grand Bank. Such notice and actions by Grand Bank will be in accordance with the terms of such contracts. Grand Bank shall use reasonable efforts and cooperate with
IBG to facilitate a smooth conversion of data processing, item processing, network and related hardware and software, telephone systems, telecommunications, data communications and other technologies, including participating in conversion planning,
design, mapping and testing activities before the Closing Date.
Section 5.25. Repayment of FHLB Advances. Prior to the
Calculation Date, Grand Bank shall repay the outstanding principal and interest due and owing on all advances it owes to the FHLB, together with all prepayment fees and penalties and all other costs and expenses associated with the repayment of such
advances.
Section 5.26. Consulting Agreements. Grand Bank shall use its commercially reasonable best efforts to cause the
persons identified on Schedule 5.26 to execute and deliver to IBG, contemporaneously with the execution of this Agreement, a consulting agreement providing for their continuing arrangement with Independent Bank following the Merger (the
Consulting Agreement).
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ARTICLE VI
COVENANTS OF IBG
IBG
hereby makes the covenants set forth in this ARTICLE VI to Grand Bank.
Section 6.01. Commercially Reasonable Efforts. IBG
agrees to use commercially reasonable best efforts to cause the consummation of the transactions contemplated hereby in accordance with the terms and conditions of this Agreement.
Section 6.02. Untrue Representations. IBG shall promptly notify Grand Bank in writing if IBG becomes aware of any fact or
condition that makes untrue, or shows to have been untrue, in any material respect, any schedule or any representation or warranty made in or pursuant to this Agreement or that results in IBGs failure to comply with any covenant, condition or
agreement contained in this Agreement.
Section 6.03. Affirmative Covenants. Except as otherwise permitted or required by this
Agreement, from the date hereof until the Effective Time, IBG shall and shall cause Independent Bank to:
A. Maintain its corporate
existence in good standing;
B. Maintain the general character of its business and conduct its business in its ordinary and usual manner;
C. Extend credit only in accordance with existing lending policies and practices;
D. Use commercially reasonable efforts to preserve its business organization intact; to retain the services of its present employees,
officers, directors and agents; to retain its present customers, depositors, suppliers and correspondent banks; and to preserve its goodwill and the goodwill of its suppliers, customers and others having business relationships with it;
E. Timely file all reports required to be filed with Governmental Authorities and observe and conform, in all material respects, to all
applicable laws, rules, regulations, ordinances, codes, orders, licenses and permits, except those being contested in good faith by appropriate proceedings; and
F. Comply in all material respects with all laws, regulations, ordinances, codes, orders, licenses, and permits applicable to its assets,
properties and operations, where such non-compliance could be reasonably expected to cause a Material Adverse Change.
Section 6.04.
Litigation and Claims. IBG shall promptly notify Grand Bank in writing of any litigation, or of any claim, controversy or contingent liability that might reasonably be expected to become the subject of litigation, against IBG or Independent
Bank or affecting any of their respective Properties, if such litigation or potential litigation is reasonably likely, in the event of an unfavorable outcome, to result in a Material Adverse Change. IBG shall promptly notify Grand Bank in writing of
any legal action, suit or proceeding or judicial, administrative or governmental investigation, pending or, to the Best Knowledge of IBG, threatened against IBG or Independent Bank that (A) questions or could reasonably be expected to question
the validity of this Agreement or the agreements contemplated hereby or any actions taken or to be taken by IBG with respect hereto or thereto or (B) seeks to enjoin or otherwise restrain the transactions contemplated hereby or thereby
Section 6.05. Registration Statement.
A. IBG agrees that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in (i) the
Registration Statement shall, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act, contain any untrue
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statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the Proxy Statement and any
amendment or supplement thereto shall, at the date(s) of mailing to stockholders and at the time of the Shareholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. IBG further agrees that if it shall become aware prior to the effectiveness of the Registration Statement of any information furnished by such party that would cause any of the statements in
the Registration Statement or the Proxy Statement to be false or misleading with respect to any material fact, or to omit to state any material fact necessary to make the statements therein not false or misleading, to promptly inform Grand Bank
thereof and to take the necessary steps to correct the Registration Statement or the Proxy Statement.
B. IBG agrees to advise Grand
Bank, promptly after IBG receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order or the suspension of the qualification of IBG Stock
for offering or sale in any jurisdiction, of the initiation or, to the extent IBG is aware thereof, threat of any proceeding for any such purpose, or of any request by the SEC for the amendment or supplement of the Registration Statement or for
additional information. IBG agrees to promptly provide to Grand Bank copies of all correspondence between IBG or any of its representatives, on the one hand, and the SEC, on the other hand.
Section 6.06. NASDAQ Listing. IBG shall, as promptly as practicable, file all documents, take all actions reasonably necessary and
otherwise use its reasonable best efforts to list, prior to the Effective Date, on NASDAQ the shares of IBG Stock to be issued to the Grand Bank shareholders as part of the Aggregate Merger Consideration in connection with the Merger.
Section 6.07. Regulatory and Other Approvals. With the cooperation of Grand Bank, IBG shall use its commercially reasonable best
efforts to prepare all documentation, to effect all filings and to obtain all permits, consents, approvals and authorizations of all third parties and federal or state bank regulatory or Governmental Authority necessary to consummate the Merger and
the transactions contemplated by this Agreement, including the applications for the prior approval of the Merger and the Bank Merger by the FRB (or appropriate Federal Reserve Bank acting on delegated authority), the TDB and the FDIC. Provided that
Grand Bank has promptly provided information reasonably requested by IBG and its comments to draft applications, and otherwise complied with Section 5.02, such applications shall be filed on or before August 31, 2015. IBG shall use
commercially reasonable best efforts to obtain all such regulatory approvals and any other approvals from third parties at the earliest practicable time. IBG shall keep Grand Bank reasonably informed as to the status of such applications and
filings, and IBG shall promptly furnish Grand Bank and its counsel with copies of all such regulatory filings and all correspondence for which confidential treatment has not been requested.
Section 6.08. Other Agreements. IBG will, as soon as practicable after the execution of this Agreement, cause Independent Bank to
enter into the Merger Agreement with Grand Bank, and to perform all of its obligations thereunder. IBG shall, and shall cause Independent Bank to, take such actions and to execute the Merger Agreement, and such other agreements, certificates of
merger, certificates, and other documents reasonably necessary to effect and evidence the Merger and to take any and all actions necessary or required to consummate the transactions contemplated thereby.
Section 6.09. Employee Matters. On the Closing Date, IBG may, but shall not be required to, cause Independent Bank to offer
employment to the employees of Grand Bank. Each of the employees of Grand Bank who become an employee of Independent Bank after the Effective Time shall be entitled to receive, from and after the Effective Time, the same pension, profit sharing,
health, welfare, incentive, vacation and other benefits as are customarily offered or afforded to similarly situated employees of Independent Bank. Each of the employees of Grand Bank who becomes an employee of Independent Bank after the Effective
Time shall receive credit for their prior service at Grand Bank for purposes of vesting, eligibility, level of benefits or other purpose under the employee benefit plans of Independent Bank; and such persons shall not be subject to exclusions or
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lack of coverage for pre-existing conditions or be subject to any additional deductibles or waiting periods otherwise required for health insurance coverage. IBG shall provide each such employee
with credit for any co-payments and deductibles paid in the plan year in which the Closing Date occurs in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans in which such employee is eligible to participate
after the Closing Date. Independent Bank shall, within 45 calendar days of the date of this Agreement, provide Grand Bank with a list of employees of Grand Bank to whom Independent Bank will not offer employment. Such list will be kept confidential
by Grand Bank and shall be disclosed only to the executive officers of Grand Bank who need to know such information, and such information shall not be discussed with employees of Grand Bank except upon the mutual consent of Grand Bank and IBG, which
consent will not be unreasonably withheld by either party.
Section 6.10. Adverse Changes. IBG shall promptly notify Grand
Bank in writing if any change shall have occurred or been threatened (or any development shall have occurred or been threatened involving a prospective change) in the business, financial condition, or operations of IBG and/or Independent Bank that
has or may reasonably be expected to have to result in a Material Adverse Change or lead to a failure to obtain all necessary regulatory approvals for the transactions contemplated by this Agreement.
Section 6.11. Issuance of IBG Common Shares. The shares of IBG Stock to be issued by IBG to the shareholders of Grand Bank
pursuant to this Agreement will, on the issuance and delivery to such shareholders pursuant to this Agreement, be duly authorized, validly issued, fully paid and nonassessable. The shares of IBG Stock to be issued to the shareholders of Grand Bank
pursuant to this Agreement are and will be free of any preemptive rights of the shareholders of IBG or any other person, firm or entity. The shares of IBG Stock to be issued to the shareholders of Grand Bank pursuant to this Agreement pursuant to
the Registration Statements which has become effective, except for the shares of IBG Stock issued to any shareholder of Grand Bank who may be deemed to be an affiliate (under the Exchange Act) of IBG after completion of the Merger, will
be freely tradable by each Grand Bank shareholder who is not a dealer for purposes of the Securities Act.
Section 6.12. Access to
Properties and Records. To the extent permitted by applicable law, IBG shall and shall cause each of its Subsidiaries, upon reasonable notice from Grand Bank to IBG to: (a) afford the employees and officers and authorized representatives
(including legal counsel, accountants and consultants) of Grand Bank reasonable access to the properties, books and records of IBG and its Subsidiaries during normal business hours in order that Grand Bank may have the opportunity to make such
reasonable investigation as it shall desire to make of the affairs of IBG and its Subsidiaries, and (b) furnish Grand Bank with such additional financial and operating data and other information as to the business and properties of IBG as Grand
Bank may, from time to time, reasonably request.
Section 6.13. Disclosure Schedules. At least three (3) business days
prior to the Closing, IBG agrees to provide Grand Bank with supplemental disclosure Schedules to be delivered by IBG pursuant to this Agreement reflecting any material changes thereto between the date of this Agreement and the date thereof. Any such
supplemental disclosure schedules shall be deemed to modify the representations and warranties of IBG for purposes of determining whether there has been a breach of any representation or warranty of IBG in Article III hereof; provided, however, that
such supplemental disclosure schedules shall not modify the representations and warranties of IBG for purposes of determining whether there has been a breach of the representations and warranties of IBG pursuant to Section 7.01 of this
Agreement.
Section 6.14. Director and Officer Indemnification. For a period of four (4) years after the Effective Time,
IBG shall indemnify, defend and hold harmless each person entitled to indemnification from Grand Bank (each, an Indemnified Party) against all liabilities arising out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this Agreement) to the same extent and subject to the conditions set forth in the Articles of Association and Bylaws of Grand Bank, as in effect on the date hereof.
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ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF GRAND BANK
The obligations of Grand Bank under this Agreement are subject to the satisfaction, prior to or at the Closing, of each of the following
conditions, which may be waived in whole or in part by Grand Bank:
Section 7.01. Representations and Warranties. All
representations and warranties made by IBG in this Agreement or in any document or schedule delivered to Grand Bank in connection with this Agreement shall have been true and correct when made and shall be true and correct in all material respects
as of the Closing with the same force and effect as if such representations and warranties were made at and as of the Closing, except with respect to those representations and warranties specifically made as of an earlier date (in which case such
representations and warranties shall be true and correct as of such earlier date).
Section 7.02. Performance of Obligations.
IBG shall have, or shall have caused to be, performed or complied with, in all material respects, all agreements, terms, covenants and conditions required by this Agreement to be performed or complied with by IBG at or prior to the Closing.
Section 7.03. Government and Other Approvals. IBG shall have received approval by such Governmental Authorities as may be required
by applicable law of the transactions contemplated by this Agreement, the Merger Agreement, and the Bank Merger Agreement all such approvals shall be in full force and effect, and all applicable waiting periods prescribed by applicable law or
regulation shall have expired. Such approvals and the transactions contemplated hereby shall not have been contested or threatened to be contested by any Governmental Authority or by any other third party (except shareholders asserting statutory
dissenters appraisal rights) by formal legal proceedings.
Section 7.04. No Litigation. No action shall have been taken,
and no statute, rule, regulation or order shall have been promulgated, enacted, entered, enforced or deemed applicable to this Agreement, the Merger Agreement, or the transactions contemplated hereby or thereby by any Governmental Authority,
including by means of the entry of a preliminary or permanent injunction, that would (A) make this Agreement or any other agreement contemplated hereby or thereby, or the transactions contemplated hereby or thereby, illegal, invalid or
unenforceable, (B) impose material limits on the ability of any party to this Agreement to perform its obligations as set forth in this Agreement and consummate this Agreement or any other agreement contemplated hereby, or the transactions
contemplated hereby or thereby, or (C) if the consummation of this Agreement or any other agreement contemplated hereby, or the transactions contemplated hereby or thereby, subject or could reasonably be expected to subject Grand Bank or any of
its officers, directors, shareholders or employees, to criminal or civil liability. No action or proceeding by or before any Governmental Authority or by any other person shall be threatened, instituted or pending that could reasonably be expected
to result in any of the consequences referred to in clauses (A) through (C) above.
Section 7.05. Delivery of Closing
Documents. Grand Bank shall have received all documents required to be delivered by IBG and Independent Bank on or prior to the Closing Date as set forth in Section 2.03, all in form and substance reasonably satisfactory to Grand Bank.
Section 7.06. Shareholder Approvals. The holders of at least the minimum number of shares of the Grand Bank Stock necessary under
applicable law to approve this Agreement, the Merger, the Merger Agreement and all other agreements contemplated hereby, shall have approved this Agreement, the Merger, the Merger Agreement and all other agreements contemplated hereby in accordance
with the Articles of Association of Grand Bank and applicable law.
Section 7.07. Registration Statement. The Registration
Statement shall have become effective under the Securities Act and no stop order suspending such effectiveness shall be in effect, and no action, suit, proceeding, or investigation by the SEC to suspend the effectiveness shall have been initiated,
continuing, or have been
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threatened and be unresolved, and all necessary approvals under state securities laws relating to the issuance or trading of the IBG Stock to be issued in the Merger shall have been received.
Section 7.08. Listing of IBG Stock. The shares of IBG Stock to be delivered to the shareholders of Grand Bank pursuant to
this Agreement shall have been authorized for listing on NASDAQ.
Section 7.09. No Material Adverse Change. There shall have
been no Material Adverse Change in IBG since March 31, 2015.
Section 7.10. Delivery of Merger Consideration. IBG shall
have delivered, or caused to be delivered, to the Exchange Agent, the shares of IBG Stock issuable to the holders of Grand Bank Stock as part of the Aggregate Merger Consideration and the cash portion of the Aggregate Merger Consideration payable
pursuant to ARTICLE I, and Grand Bank shall have received evidence of the same from IBG.
Section 7.11. Average Closing Price.
The Average Closing Price shall be at least $35.0128 and not more than $52.5192.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF IBG
The obligations of IBG under this Agreement are subject to the satisfaction, prior to or at the Closing, of each of the following conditions,
which may be waived in whole or in part by IBG.
Section 8.01. Representations and Warranties. All representations and
warranties made by Grand Bank in this Agreement or in any schedule delivered to IBG pursuant hereto shall have been true and correct when made and shall be true and correct in all material respects as of the Closing with the same force and effect as
if such representations and warranties were made at and as of the Closing, except with respect to those representations and warranties specifically made as of an earlier date (in which case such representations and warranties shall be true as of
such earlier date) or changes or updates contemplated by this Agreement.
Section 8.02. Performance of Obligations. Grand Bank
shall have performed or complied with, in all material respects, all agreements, terms, covenants and conditions required by this Agreement to be performed or complied with by Grand Bank prior to or at the Closing.
Section 8.03. Delivery of Closing Documents. IBG shall have received all documents required to be delivered by Grand Bank on or
prior to the Closing Date as set forth in Section 2.02, all in form and substance reasonably satisfactory to IBG.
Section 8.04.
Government and Other Approvals. IBG shall have received approvals and consents, on terms and conditions reasonably acceptable to IBG, as may be required (A) by applicable law from all applicable Governmental Authorities, including the
FRB, the FDIC and the TDB, and (B) from all third parties, in each case, in connection with this Agreement and any other agreement contemplated hereby, and with the consummation of the transactions contemplated hereby and thereby, and all
applicable waiting periods shall have expired. Such approvals and consents shall not have imposed, in the reasonable judgment of IBG, any material adverse requirement upon IBG or its Subsidiaries, including any requirement that IBG sell or dispose
of any significant amount of its assets or any IBG Subsidiary. Neither such approvals or consents, nor any of the transactions contemplated hereby, shall have been contested or threatened to be contested by any Governmental Authority or by any other
third party (except shareholders asserting statutory dissenters appraisal rights) by formal proceedings. It is understood that, if such contest is brought by formal proceedings, IBG may, but shall not be obligated to, answer and defend such
contest or otherwise pursue this transaction over such objection.
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Section 8.05. No Litigation. No action shall have been taken, and no statute, rule,
regulation or order shall have been promulgated, enacted, entered, enforced or deemed applicable to this Agreement, the Merger Agreement, or the transactions contemplated hereby or thereby, by any Governmental Authority, including by means of the
entry of a preliminary or permanent injunction, that would (A) make this Agreement or any other agreement contemplated hereby, or the transactions contemplated hereby or thereby, illegal, invalid or unenforceable, (B) require the
divestiture of a material portion of the assets of IBG, (C) impose material limits on the ability of any party to this Agreement to consummate the Agreement or any other agreement contemplated hereby, or the transactions contemplated hereby or
thereby, (D) otherwise result in a Material Adverse Change, or (E) if the consummation of this Agreement or any other agreement contemplated hereby, or the transactions contemplated hereby or thereby, subject or could reasonably be
expected to subject IBG or any of its Subsidiaries, or any officer, director, shareholder or employee of IBG or any of its Subsidiaries, to criminal or civil liability. No action or proceeding by or before any Governmental Authority or by any other
person shall be threatened, instituted or pending that would reasonably be expected to result in any of the consequences referred to in clauses (A) through (E) above.
Section 8.06. No Material Adverse Change. There shall have been no Material Adverse Change in Grand Bank since March 31,
2015.
Section 8.07. Minimum Tangible Book Value. As of the Closing Date, the Tangible Book Value of Grand Bank shall be not
less than $39,000,000.
Section 8.08. Registration Statement. The Registration Statement covering the shares of IBG Stock to
be issued in the Merger shall have become effective under the Securities Act and no stop order suspending such effectiveness shall be in effect, and no action, suit, proceeding, or investigation by the SEC to suspend the effectiveness shall have
been initiated, continuing, or have been threatened and be unresolved, and all necessary approvals under state securities laws relating to the issuance or trading of the IBG Stock to be issued in the Merger shall have been received.
Section 8.09. Listing. The shares of IBG Stock to be issued to the Grand Bank stockholders as part of the Merger Consideration in
the Merger shall have been approved for listing on NASDAQ.
Section 8.10. No Material Adverse Change. There shall have been no
Material Adverse Change in Grand Bank since March 31, 2015.
Section 8.11. Minimum ALLL. As of the Closing Date, the
Allowance for Loan and Lease Losses of Grand Bank shall be at least $2,500,000.
Section 8.12. Shareholder Approvals. The
holders of at least the minimum number of shares of the Grand Bank Stock necessary under applicable law to approve this Agreement, the Merger, the Merger Agreement and all other agreements contemplated hereby, shall have approved this Agreement, the
Merger, the Merger Agreement and all other agreements contemplated hereby in accordance with the Articles of Association of Grand Bank and applicable law, and the holders of no more than five percent of the shares of Grand Bank Stock shall have
exercised their statutory dissenters rights under the TBOC.
Section 8.13. Termination of Employee Benefit Plans. All
Grand Bank Employee Plans shall have been terminated in accordance with the respective terms of such Grand Bank Employee Plans, the Code, ERISA and all other applicable laws and regulations and the affected participants shall have been notified of
such terminations. The Medical Agreement Amendments entered into between Grand Bank and the persons listed on Schedule 5.13 shall not have been terminated and shall remain in full force and effect.
Section 8.14. Releases, and Resignations. IBG shall have received executed Releases as provided in Section 5.16, and the
resignations of each of the directors of Grand Bank, effective as of the Closing Date.
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Section 8.15. Support Agreements. The Support Agreements entered into between IBG and
the outside directors of Grand Bank contemporaneously with the execution of this Agreement shall not have been terminated and shall remain in full force and effect.
Section 8.16. Employment Agreement. The employment agreement entered into between those persons listed on Schedule 5.22 and
Independent Bank contemporaneously with the execution of this Agreement shall not have been terminated and shall remain in full force and effect.
Section 8.17. Consulting Agreement. The Consulting Agreement entered into between those persons listed on Schedule 5.22 and
Independent Bank contemporaneously with the execution of this Agreement shall not have been terminated and shall remain in full force and effect.
Section 8.18. Tax Opinion. IBG shall have received an opinion (reasonably acceptable in form and substance to IBG) from Andrews
Kurth LLP, dated as of the Closing Date, to the effect that for federal income tax purposes (i) the Merger will be treated as a reorganization within the meaning of § 368(a) of the Code, (ii) each of IBG, Independent Bank and Grand
Bank will be a party to such reorganization within the meaning of § 368(b) of the Code, and such opinion shall not have been withdrawn, revoked or modified. Such opinion will be based upon representations of the Parties contained in this
Agreement and in the tax representation letters described in Section 1.13(A).
Section 8.19. Average Closing Price. The
Average Closing Price shall be at least $35.0128 and not more than $52.5192.
Section 8.20. Options. All of the Options shall
have been exercised or surrendered and all rights of the Option Holders to acquire shares of Grand Bank Stock shall have been terminated.
ARTICLE IX
TERMINATION
AND ABANDONMENT
Section 9.01. Right of Termination. This Agreement and the transactions contemplated hereby may be
terminated at any time prior to the Effective Time (except as otherwise set forth in this Section 9.01), whether before or after approval by the Grand Bank shareholders as follows, and in no other manner:
A. By the mutual written consent of Grand Bank and IBG, duly authorized by the Grand Bank Board and the IBG Board, respectively.
B. By either Grand Bank or IBG (provided that the terminating party has not failed to perform or is not in material breach of any
representation, warranty, covenant or other agreement contained herein) if the conditions precedent to such partys obligations to close specified in ARTICLES VII and VIII, respectively, shall not have been satisfied on or before
December 31, 2015; provided, however, if conditions precedent have not been satisfied because approval of this Agreement or any other agreement contemplated hereby has not been received from any Regulatory Agency whose approval is required to
consummate such transactions, either Grand Bank or IBG can unilaterally extend such deadline by up to thirty (30) days by providing written notice thereof to the other.
C. By either IBG or Grand Bank if any of the transactions contemplated by this Agreement or any other agreement contemplated hereby are
disapproved by any Regulatory Agency whose approval is required to consummate such transactions or if any Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining, invalidating or otherwise
prohibiting this Agreement or any other agreement contemplated hereby, or the transactions contemplated hereby or thereby and such order, decree, ruling or other action shall have been final and nonappealable.
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D. By IBG if it reasonably determines, in good faith and after consulting with counsel, there is
substantial likelihood that any necessary regulatory approval will not be obtained or will be obtained only upon a condition or conditions that make it inadvisable to proceed with the transactions contemplated by this Agreement or any other
agreement contemplated hereby.
E. By IBG if there shall have been any Material Adverse Change in Grand Bank; and by Grand Bank, if there
shall have been any Material Adverse Change in IBG.
F. By IBG, if Grand Bank shall have breached or failed to perform in any material
respect any of its representations, warranties, covenants or other agreements contained in this Agreement or any other agreement contemplated hereby, and such failure shall not have been cured within a period of thirty (30) calendar days after
written notice from IBG.
G. By Grand Bank, if IBG shall have breached or failed to perform in any material respect any of its
representations, warranties, covenants or other agreements contained in this Agreement or any other agreement contemplated hereby, and such failure shall not have been cured within a period of thirty (30) calendar days after written notice from
Grand Bank.
H. By IBG, in accordance with the provisions of Section 5.12 (Environmental Investigation).
I. By either IBG or Grand Bank, if the approval of this Agreement and the Merger by the shareholders of Grand Bank shall not have been
obtained by reason of the failure to obtain the required vote at the Shareholder Meeting.
J. By Grand Bank at any time prior to the
Shareholder Meeting in order to concurrently enter into an acquisition agreement or similar agreement (each, an Acquisition Agreement) with respect to a Superior Proposal which has been received and considered by Grand Bank and
the Grand Bank Board in accordance with all of the requirements of Section 5.10 hereof.
K. By IBG, if the Grand Bank Board shall
have (i) recommended to the shareholders of Grand Bank that they tender their shares in a tender or exchange offer commenced by an un-Affiliated third party for more than 15% of the outstanding Grand Bank stock, (ii) effected a Change in
Recommendation or recommended to the Grand Bank shareholders acceptance or approval of any alternative Acquisition Proposal, (iii) has notified IBG in writing that Grand Bank is prepared to accept a Superior Proposal, or (iv) shall have
resolved to do the foregoing.
Section 9.02. Notice of Termination. The power of termination provided for by Section 9.01
may be exercised only by a notice given in writing, as provided in Section 11.07.
Section 9.03. Effect of Termination.
In the event of the termination of this Agreement and abandonment of the Merger pursuant to the provisions of Section 9.01, no party to this Agreement shall have any further liability or obligation in respect of this Agreement, except that
(A) the provisions of ARTICLE X and Section 9.03, 9.04, 11.02, 11.03, and 11.08 shall survive any such termination of the Agreement and abandonment of the Merger, and (B) notwithstanding anything to the contrary, neither IBG nor Grand
Bank shall be relieved or released from any liabilities or damages arising out of its fraud or willful breach of any provision of this Agreement.
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Section 9.04. Grand Bank Termination Fee. To compensate IBG 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, Grand Bank and IBG agree as
follows:
A. If IBG is not in material breach of any covenant or obligation under this Agreement, Grand Bank shall pay to IBG the sum of
$2,800,000 (the Termination Fee) if this Agreement is terminated:
|
(i) |
by Grand Bank under the provisions of Section 9.01(J), |
|
(ii) |
by either IBG or Grand Bank under the provisions of Section 9.01(I) and if at the time of any failure by the shareholders of Grand Bank to approve and adopt this Agreement and the Merger, there shall exist an
Acquisition Proposal with respect to Grand Bank that has not been withdrawn before the Meeting, or |
|
(iii) |
by IBG under the provisions of Section 9.01(K). |
Grand Banks obligation to pay the
Termination Fee pursuant to this Section 9.04(A) shall survive the termination of this Agreement. Grand Bank shall not be obligated to pay the Termination Fee in the event this Agreement is terminated other than as referenced in subsections
(A)(i) through (A)(iii) above.
B. Any payment required by Section 9.04(A) shall become payable within two business days after
receipt by the non-terminating party of written notice of termination of this Agreement, except that any payment required by Section 9.04(A)(ii)(b) above shall become payable within two business days after execution of the definitive agreement
referenced therein.
ARTICLE X
CONFIDENTIAL INFORMATION
Section 10.01. Definition of Recipient, Disclosing Party and Representative. For purposes of
this ARTICLE X, the term Recipient shall mean the party receiving the Subject Information (as such term is defined in Section 10.02) and the term Disclosing Party shall mean the party furnishing the Subject Information.
The terms Recipient or Disclosing Party, as used herein, include: (A) all persons and entities related to or affiliated in any way with the Recipient or the Disclosing Party, as the case may be, and (B) any
Affiliate the Recipient or the Disclosing Party, as the case may be. The term Representative, as used herein, shall include all directors, officers, shareholders, employees, representatives, advisors, attorneys, accountants and agents of
the Recipient or the Disclosing Party, as the case may be. The term person as used in this ARTICLE X shall be broadly interpreted to include, without limitation, any corporation, company, group, partnership, Governmental Authority or
individual.
Section 10.02. Definition of Subject Information. For purposes of this ARTICLE X, the term
Subject Information shall mean all information furnished to the Recipient or its Representatives (whether prepared by the Disclosing Party, its Representatives or otherwise and whether or not identified as being non-public, confidential
or proprietary) by or on behalf of the Disclosing Party or its Representatives relating to or involving the business, operations or affairs of the Disclosing Party or otherwise in possession of the Disclosing Party. The term Subject
Information shall not include information that (A) was already in the Recipients possession at the time it was first furnished to Recipient by or on behalf of Disclosing Party, provided that such information is not known by the
Recipient to be subject to another confidentiality agreement with or other obligation of secrecy to the Disclosing Party, its Subsidiaries or another party, or (B) becomes generally available to the public other than as a result of a disclosure
by the Recipient or its Representatives, or (C) becomes available to the Recipient on a non-confidential basis from a source other than the Disclosing Party, its Representative or otherwise, provided that
such source is not known by the Recipient to be bound by a confidentiality agreement with or other obligation of secrecy to the Disclosing Party, its Representative or another party.
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Section 10.03. Confidentiality. Each Recipient hereby agrees that the Subject
Information will be used solely for the purpose of reviewing and evaluating the transactions contemplated by this Agreement and any other agreement contemplated hereby, and that the Subject Information will be kept confidential by the Recipient and
the Recipients Representatives; provided, however, that (A) any of such Subject Information may be disclosed to the Recipients Representatives (including the Recipients accountants, attorneys and investment bankers) who need
to know such Subject Information for the purpose of evaluating any such possible transaction between the Disclosing Party and the Recipient (it being understood that such Representatives shall be informed by the Recipient of the confidential nature
of such Subject Information and that the Recipient shall direct and cause such persons to treat such Subject Information confidentially); (B) any of such Subject Information may be disclosed by a Recipient who has been ordered by a court to do
so or is required by law to do so provided Recipient has notified the Disclosing Party prior to such disclosure and cooperates with the Disclosing Party if the Disclosing Party elects to pursue legal means to contest and avoid the disclosure; and
(C) any disclosure of such Subject Information may be made to which the Disclosing Party expressly consents in writing prior to any such disclosure by Recipient. Each Recipient hereby agrees that it will not use the Subject Information to
solicit customers from the Disclosing Party.
Section 10.04. Securities Law Concerns. Each Recipient hereby acknowledges that
the Recipient is aware, and the Recipient will advise the Recipients Representatives who are informed as to the matters that are the subject of this Agreement, that the United States securities laws prohibit any person who has received
material, non-public information from an issuer of securities from purchasing or selling securities of such issuer or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person
is likely to purchase or sell such securities.
Section 10.05. Return of Subject Information. In the event of termination of
this Agreement, for any reason, the Recipient shall promptly return to the Disclosing Party all written material containing or reflecting any of the Subject Information, other than information contained in any application, notice or other document
filed with any Governmental Authority and not returned to the Recipient by such Governmental Authority. In making any such filing, the Recipient will request confidential treatment of such Subject Information included in any application, notice or
other document filed with any Governmental Authority.
ARTICLE XI
MISCELLANEOUS
Section 11.01. No Survival of Representations and Warranties. The parties hereto agree that all of the representations, warranties
and covenants contained in this Agreement shall terminate and be extinguished at Closing, except for those covenants that specifically require performance after the Closing, which covenants shall survive the Closing. Nothing in this
Section 11.01 shall limit or otherwise affect the remedies available to a party to the Agreement with respect to a cause of action arising out of an intentional misrepresentation against the person who made such intentional misrepresentation.
Section 11.02. Expenses. Except as specifically provided in this Agreement, all costs and expenses incurred in connection
with this Agreement and all agreements and documents contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, shall be borne and paid by the party incurring such costs or expenses.
Section 11.03. Brokerage Fees and Commissions.
A. Except as set forth in Schedule 11.03(A), IBG hereby represents to Grand Bank that no agent, representative or broker has
represented IBG or Independent Bank in connection with the transactions described in this Agreement. Grand Bank shall not have any responsibility or liability for any fees, expenses or commissions payable to any agent, representative or broker of
IBG or Independent Bank, and IBG hereby agrees to indemnify and hold harmless Grand Bank for any amounts owed to any agent, representative or broker of IBG or Independent Bank.
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B. Except as set forth in Schedule 11.03(B), Grand Bank hereby represents to IBG that, no
agent, representative or broker has represented Grand Bank in connection with the transactions described in this Agreement. IBG shall have no responsibility or liability for any other fees, expenses or commissions payable to any agent,
representative or broker of Grand Bank and Grand Bank hereby agrees to indemnify and hold harmless IBG for any amounts owed to any other agent, representative or broker of Grand Bank.
Section 11.04. Entire Agreement. This Agreement (including the documents and instruments referred to herein) and the other
agreements, documents, schedules and instruments executed and delivered by the parties to each other at the Closing constitute the full understanding of the parties, a complete allocation of risks between them and a complete and exclusive statement
of the terms and conditions of their agreement relating to the subject matter hereof, and supersede any and all prior agreements, whether written or oral, that may exist between the parties with respect thereto. Except as otherwise specifically
provided in this Agreement, no conditions, usage of trade, course of dealing or performance, understanding or agreement purporting to modify, vary, explain or supplement the terms or conditions of this Agreement shall be binding unless hereafter or
contemporaneously herewith made in writing and signed by the party to be bound, and no modification shall be effected by the acknowledgment or acceptance of documents containing terms or conditions at variance with or in addition to those set forth
in this Agreement.
Section 11.05. Further Cooperation. The parties agree that they will, at any time and from time to time
after the Closing, upon request by the other and without further consideration, do, perform, execute, acknowledge and deliver all such further acts, deeds, assignments, assumptions, transfers, conveyances, powers of attorney, certificates and
assurances as may be reasonably required in order to fully consummate the transactions contemplated hereby in accordance with this Agreement or to carry out and perform any undertaking made by the parties hereunder.
Section 11.06. Severability. If any term or other provision of this Agreement is held to be illegal, invalid or unenforceable by
any rule of law or public policy, such term or provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision were not a part hereof, and all other conditions and
provisions of this Agreement shall remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or unenforceable, there shall be added automatically as a part of this Agreement a provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible and still be legal, valid and enforceable. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad
as is enforceable.
Section 11.07. Notices. All payments (other than payments at the Closing), notices, requests, claims,
demands, instructions and other communications required or permitted to be given under this Agreement after the date hereof by any party hereto to any other party shall be in writing; and may be delivered personally, by nationally-recognized
overnight courier service, by United States mail, or by e-mail or facsimile transmission, to such party at the address or transmission numbers set forth below:
A. If given to Grand Bank, or to an officer thereof, in such officers official capacity, at Grand Banks mailing address or
transmission number set forth below (or such address or transmission number as Grand Bank may give notice to IBG by like notice):
Lee
Dinkel
President and CEO
Grand Bank
16660 Dallas
Parkway, Suite 1700
Dallas, TX 75248
Email: ldinkel@gbtx.com
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with a copy (which shall not constitute notice) to:
Larry Temple
400 West 15th
Street, Suite 705
Austin, Texas 78701
Email: larry@larrytemple.com
B. If given to IBG, or to an officer thereof, in such officers official capacity, at IBGs mailing address or transmission number
set forth below (or such address or transmission number as IBG may give notice to Grand Bank by like notice):
Mr. David Brooks
Independent Bank Group, Inc.
1600 Redbud Blvd., Suite 400
McKinney, TX 75069
Facsimile:
972-562-5496
Email: drbrooks@independent-bank.com
with a copy (which shall not constitute notice) to:
Mark Haynie, Esq.
Haynie Rake
Repass & Klimko, P.C.
14643 Dallas Parkway, Suite 550
Dallas, Texas 75254
Facsimile:
(972) 716-1850
Email: mark@hrrpc.com
Any notice given pursuant to this Agreement shall be effective (i) in the case of personal delivery, e-mail or facsimile transmission,
when received; (ii) in the case of mail, upon the earlier of actual receipt or three (3) business days after deposit with the United States Postal Service, first class certified or registered mail, postage prepaid, return receipt
requested; and (iii) in the case of nationally-recognized overnight courier service, one (1) business day after delivery to the courier service together with all appropriate fees or charges and instructions for overnight delivery.
Section 11.08. GOVERNING LAW; VENUE. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE PARTIES SUBJECT TO THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. IN THE EVENT OF A DISPUTE ARISING UNDER OR
RELATED TO THIS AGREEMENT, THE PARTIES IRREVOCABLY AGREE THAT VENUE FOR SUCH DISPUTE SHALL LIE EXCLUSIVELY IN ANY COURT OF COMPETENT JURISDICTION IN DALLAS COUNTY, TEXAS.
Section 11.09. Multiple Counterparts; Electronic Transmission. For the convenience of the parties hereto, this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original, and all counterparts hereof so executed by the parties hereto, whether or not such counterpart shall bear the execution of each of the parties hereto, shall be deemed
to be, and shall be construed as, one and the same Agreement. An e-mail, facsimile or other electronic transmission of a signed counterpart of this Agreement shall be sufficient to bind the party or parties whose signature(s) appear thereon if
transmission thereof was authorized by such party or parties.
Section 11.10. Certain Definitions.
A. Affiliate means any business entity, bank, or person that, directly or indirectly, controls, is controlled by, or is under
common control with, such person in question. For the purposes of this definition,
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control (including, with correlative meaning, the terms controlled by and under common control with) as used with respect to any business entity, bank, or
person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or by contract or otherwise.
B. Best Knowledge means the actual knowledge of (i) with respect to Grand Bank, any of the persons listed on Schedule
11.10(B) (the Executive Officers), and (ii) with respect to IBG, any of those persons with the title of Chairman of the Board, Vice Chairman of the Board, President or Executive Vice President of IBG, as applicable, with respect
to a particular matter, after reasonable inquiry.
C. Environmental Laws means any applicable federal, state, or local laws
or regulations, codes, or ordinances, now in effect and in each case as amended to date, including any judicial or administrative order, consent decree, judgment relating to pollution or protection of public or employee health or safety or the
environment, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601, et seq.; the Hazardous Materials Transportation Authorization Act, as amended 49 U.S.C.
§ 5101, et. seq.; the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. § 6901, et. seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. §1201, et. seq.; the Toxic Substances Control Act, 15 U.S.C.
§ 2601, et. seq.; the Clean Air Act, 42 U.S.C. §7401, et. seq.; and the Safe Drinking Water Act, 42 U.S.C. § 300f. et. seq.
D. Governmental Authority means any United States or foreign federal, state or local court, administrative agency, commission or
other governmental authority, Regulatory Agency or instrumentality thereof, in each case, of competent jurisdiction.
E. Hazardous
Material means any pollutant, contaminant, chemical, or toxic or hazardous substance, constituent, material or waste, or any other chemical, substances, constituent or waste including petroleum, including crude oil or any fraction thereof, or
any petroleum product, defined as or included in the definition of hazardous substances, hazardous wastes, hazardous materials, extremely hazardous wastes, restricted hazardous wastes,
toxic substances, toxic pollutants, contaminants, or pollutants, or words of similar import, under any Environmental Laws, or which is in any way regulated as hazardous or toxic by any federal, state or
local government authority, agency or instrumentality, including mixtures thereof with other materials, and including any regulated building materials such as asbestos and lead, provided, notwithstanding the foregoing or any other provision in this
Agreement to the contrary, the words Hazardous Material shall not mean or include any such Hazardous Material used, generated, manufactured, stored, disposed of or otherwise handled in normal quantities in the ordinary course of the
business of Grand Bank in compliance with all Environmental Laws, or such that may be naturally occurring in any ambient air, surface water, ground water, land surface or subsurface strata.
F. Investment Securities means a security held by Grand Bank and reflected as an asset of Grand Bank in accordance with RAP.
G. Material Adverse Change means any material adverse change in the financial condition, assets, properties, liabilities
(absolute, accrued, contingent or otherwise), reserves, business or results of operations; other than, in each case, any change, circumstance, event or effect relating to (i) any change occurring after the date hereof in any federal or state
law, rule or regulation, which change affects banking institutions and their holding companies generally, including any change affecting the Deposit Insurance Fund administered by the FDIC, or (ii) changes in general economic, legal, regulatory
or political conditions affecting financial institutions generally, including changes in interest rates.
H. Property or
Properties means all real property owned or leased by Grand Bank as of the date hereof, including real property that Grand Bank has foreclosed on and owns, as well as its premises and all improvements and fixtures thereon.
A-48
I. Regulatory Agency means (i) the SEC, (ii) any self-regulatory
organization, (iii) the FRB, (iv) the FDIC, (v) TDB, or (vi) any other federal or state governmental or regulatory agency or authority.
J. Subsidiary means, when used with reference to any entity, any corporation, a majority of the outstanding voting securities of
which are owned, directly or indirectly, by such entity or any partnership, joint venture or other enterprise in which such entity has, directly or indirectly, any equity interest.
Section 11.11. Specific Performance. Each of the parties hereto acknowledges that the other party would be irreparably damaged and
would not have an adequate remedy at law for money damages in the event that any of the covenants contained in this Agreement were not performed in accordance with its terms or otherwise were materially breached. Each of the parties hereto therefore
agrees that, without the necessity of proving actual damages or posting bond or other security, the other party shall be entitled to seek temporary and/or permanent injunction or injunctions to prevent breaches of such performance and to specific
enforcement of such covenants in addition to any other remedy to which such other party may be entitled, at law or in equity.
Section 11.12. Attorneys Fees and Costs. In the event attorneys fees or other costs are incurred to secure performance
of any of the obligations herein provided for, or to establish damages for the breach thereof, or to obtain any other appropriate relief, whether by way of prosecution or defense, the prevailing party shall be entitled to recover reasonable
attorneys fees and costs incurred therein.
Section 11.13. Rules of Construction. When a reference is made in this
Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words include, includes or including are used in this Agreement, they shall be deemed
to be followed by the words without limitation. The words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision in this Agreement. Each use herein of the masculine, neuter or feminine gender shall be deemed to include the other genders. Each use herein of the plural shall include the singular and vice versa, in each case as the context
requires or as is otherwise appropriate. The word or is used in the inclusive sense. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to
all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors or assigns.
Section 11.14. Binding Effect; Assignment. All of the terms, covenants, representations, warranties and conditions of this
Agreement shall be binding upon, and inure to the benefit of and be enforceable by, the parties hereto and their respective heirs, successors, representatives and permitted assigns. Nothing expressed or referred to herein is intended or shall be
construed to give any person other than the parties hereto any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provision herein contained, it being the intention of the parties hereto that this Agreement, the
assumption of obligations and statements of responsibilities hereunder, and all other conditions and provisions hereof are for the sole benefit of the parties to this Agreement and for the benefit of no other person, except for the Indemnified
Parties right to enforce IBGs obligation under Section 6.14 which are expressly intended to be for the irrevocable benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives. Nothing in
this Agreement shall act to relieve or discharge the obligation or liability of any third party to any party to this Agreement, nor shall any provision give any third party any right of subrogation or action over or against any party to this
Agreement. No party to this Agreement shall assign this Agreement, by operation of law or otherwise, in whole or in part, without the prior written consent of the other party. Any assignment made or attempted in violation of this Section 11.14
shall be void and of no effect.
A-49
Section 11.15. Public Disclosure. None of IBG, Independent Bank, or Grand Bank will
make, issue or release, or cause to be made, issued or released, any announcement, statement, press release, acknowledgment or other public disclosure of the existence, terms, conditions or status of this Agreement or the transactions contemplated
hereby without the prior written consent of the other parties to this Agreement. Notwithstanding the foregoing, IBG and Grand Bank will be permitted to make any public disclosures or governmental or securities exchange filings as legal counsel may
deem necessary to maintain compliance with or to prevent violations of applicable federal or state laws or regulations or securities exchange rules or that may be necessary to obtain regulatory approval for the transactions contemplated hereby.
Section 11.16. Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by
their respective boards of directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other party hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing delivered pursuant hereto or (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such
extension of waiver shall be valid only if set forth in a written instrument signed on behalf of such party in the manner provided in Section 11.17, but such extension or waiver or failure to insist on strict compliance with an obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. No party to this Agreement shall by any act (except by a written instrument given pursuant to Section 11.17) be
deemed to have waived any right or remedy hereunder or to have acquiesced in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising any right, power or privilege hereunder by any party hereto shall
operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver of any party of any right or
remedy on any one occasion shall not be construed as a bar to any right or remedy that such party would otherwise have on any future occasion or to any right or remedy that any other party may have hereunder.
Section 11.17. Amendments. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective
boards of directors, at any time before or after approval of this Agreement by the Grand Bank shareholders; provided, however, that after the approval of this Agreement by the Grand Bank shareholders, there shall not be, without the further approval
of the Grand Bank shareholders, any amendment of this Agreement that decreases the consideration to be paid for the Grand Bank Stock pursuant to Section 1.05 or that materially and adversely affects the rights of the Grand Bank shareholders
hereunder. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.
[Signature Page to Follow]
A-50
[Signature Page to Agreement and Plan of Reorganization]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first above
written.
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INDEPENDENT BANK GROUP, INC. |
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By: |
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/s/ David R. Brooks
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David R. Brooks Chairman of the Board and
CEO |
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GRAND BANK |
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By: |
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/s/ Lee
Dinkel |
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Lee Dinkel President and CEO |
A-51
Exhibit A
AGREEMENT AND PLAN OF MERGER
GRAND BANK
DALLAS,
TEXAS
WITH AND INTO
INDEPENDENT BANK
MCKINNEY, TEXAS
THIS
AGREEMENT AND PLAN OF MERGER (the Merger Agreement) is made as of , 2015, between GRAND BANK, Dallas, Texas
(Grand Bank) and INDEPENDENT BANK, McKinney, Texas (Independent Bank), and provides as follows:
W I T N E S S E T H:
A. Independent Bank is a wholly owned subsidiary of Independent Bank Group, Inc., a Texas corporation (IBG);
B. IBG and Grand Bank are parties to that certain Agreement and Plan of Reorganization dated as of July 23, 2015 (the
Reorganization Agreement). The Reorganization Agreement provides for the merger of Grand Bank with and into Independent Bank.
C. Grand Bank is a Texas banking association bank duly organized and existing under the laws of the State of Texas, having its principal
office in the City of Dallas, County of Dallas, State of Texas;
D. Independent Bank is a Texas banking association duly organized and
existing under the laws of the State of Texas, having its principal office in the City of McKinney, County of Collin, State of Texas;
E.
Grand Bank has authorized capital stock of 3,750,000 shares of common stock, of which 1,725,550 shares are issued and outstanding, (all of such shares are hereby referred to as the Grand Bank Stock);
F. Independent Bank has authorized capital stock of 2,000,000 shares of common stock (Independent Bank Common Stock) of
which 985,930 shares are issued and outstanding and owned by IBG;
G. The majorities of the Boards of Directors of Grand Bank and
Independent Bank have approved this Merger Agreement under which Grand Bank shall be merged with and into Independent Bank (the Merger) and have authorized the execution and performance hereof.
H. As and when required by the provisions of this Merger Agreement, all such action as may be necessary or appropriate shall be taken by
Independent Bank and Grand Bank in order to consummate the Merger.
NOW, THEREFORE, in consideration of the premises, Independent
Bank and Grand Bank hereby agree that Grand Bank shall be merged with and into Independent Bank pursuant to § 32.301 of the Texas Finance Code on the following terms and conditions:
1. Merger of Grand Bank with and into Independent Bank. At the Effective Time, Grand Bank shall be merged with and into Independent Bank
pursuant to the provisions of and with the effect provided in § 32.301 of the Texas Finance Code and Chapter 10 of the Texas Business Organizations Code. Independent Bank shall
A-A-1
Exhibit A
continue as the bank resulting from the Merger (the Receiving Bank), and the separate corporate existence of Grand Bank shall cease. The Certificate of Formation and Bylaws of
Independent Bank shall continue in effect as the Certificate of Formation and Bylaws of the Receiving Bank, until the same shall be amended and changed as provided by law.
2. Receiving Bank. The name of the Receiving Bank shall be Independent Bank. The established office and facilities of
Independent Bank immediately prior to the Merger shall continue as the established office and facilities of the Receiving Bank and the established offices of Grand Bank immediately prior to the Merger shall become branch offices of the Receiving
Bank.
3. Rights and Property of Receiving Bank. At the Effective Time, the corporate existence of Independent Bank and Grand Bank
shall, as provided in § 32.301 of the Texas Finance Code and Chapter 10 of the Texas Business Organizations Code, be merged into and continued in the Receiving Bank; and the Receiving Bank shall be deemed to be the same Texas banking
association as Independent Bank and Grand Bank. All rights, franchises and interests of Independent Bank and Grand Bank, respectively, in and to every type of property (real, personal and mixed) and choses in action shall be transferred to and
vested in the Receiving Bank by virtue of the Merger without further act or deed, and without any assignment having occurred, but subject to any existing liens or other encumbrances thereon. The Receiving Bank at the Effective Time and without any
order or other action on the part of any court or otherwise, shall hold and enjoy all rights of property, franchises and interests, including appointments, designations and nominations, and all other rights and interests as trustee, executor,
administrator, transfer agent and registrar of stocks and bonds, guardian of estates, assignee, receiver, and in every other fiduciary capacity, and in every agency capacity, in the same manner and to the same extent as such rights, franchises and
interests were held or enjoyed by Independent Bank and Grand Bank, respectively, at the Effective Time.
4. Liabilities and Obligations
of Receiving Bank. At the Effective Time, the Receiving Bank shall be liable for all liabilities of Independent Bank and of Grand Bank, respectively; and all deposits, debts, liabilities, obligations and contracts of Independent Bank and of
Grand Bank, respectively, matured or unmatured, whether accrued, absolute, contingent or otherwise, and whether or not reflected or reserved against on balance sheets, books of account or records of Independent Bank or Grand Bank, as the case may
be, including all liabilities of Independent Bank and Grand Bank for taxes, whether existing at the Effective Time or arising as a result of or pursuant to the Merger, shall be those of the Receiving Bank and shall not be released or impaired by the
Merger; and all rights of creditors and other obligees and all liens on property of either Independent Bank or Grand Bank shall be preserved unimpaired.
5. Exchange and Conversion of Shares. At the Effective Time, the shares of Grand Bank Stock outstanding at the Effective Time shall, by
virtue of the Merger and without any action on the part of the holders thereof, be converted into the right to receive the consideration set forth in Section 1.05 of the Reorganization Agreement. At the Effective Time, the shares of Independent
Bank Common Stock issued and outstanding at the Effective Time shall, by virtue of the Merger and without any action on the part of holder thereof, continue to be issued and outstanding. The result of such conversions shall be that Independent Bank,
as the Receiving Bank, shall have 985,930 shares of its capital stock issued and outstanding, all of which shares shall be owned by IBG.
A. Until surrendered for exchange in accordance with the Reorganization Agreement, each certificate theretofore representing shares of Grand
Bank Stock shall, from and after the Effective Time, represent for all purposes only the right to receive the applicable consideration therefor set forth in Section 1.05 of the Reorganization Agreement. No interest will be paid on such
consideration.
B. The stock transfer books of Grand Bank shall be closed as of the close of business at the Effective Time, and no
transfer of record of any of the shares of the Grand Bank Stock shall take place thereafter.
A-A-2
Exhibit A
6. Directors and Officers. The directors and officers of Independent Bank at the
Effective Time shall be the directors and officers of the Receiving Bank plus the officers of Grand Bank shall become officers of the Receiving Bank as determined by the Board of Directors of the Receiving Bank.
7. Shareholder Approval. This Merger Agreement shall be submitted to IBG, as the sole shareholder of Independent Bank, for approval by
written consent, and to the shareholders of Grand Bank for approval at a duly called meeting of shareholders of Grand Bank. Upon approval by IBG and the shareholders of Grand Bank, this Merger Agreement shall be made effective as soon as practicable
thereafter in the manner provided in Section 13 hereof.
8. Dissenting Shareholders. Any shareholder of Grand Bank who objects
to the Merger and follows the procedure for dissent set forth in the Texas Business Organizations Code, as amended, shall be entitled to the rights and benefits afforded to dissenting shareholders by such statute.
9. Conditions to Consummation of the Bank Merger. Consummation of the Merger as provided herein shall be conditioned upon the
satisfaction of the conditions set forth in the Reorganization Agreement, certain of which may be waived in accordance with the terms and provisions of the Reorganization Agreement.
10. Termination. This Merger Agreement may be terminated and abandoned at any time, whether before or after action thereon by the
shareholders of Grand Bank pursuant to the terms and provisions of the Reorganization Agreement.
11. Effect of Termination. In the
event of the termination and abandonment of this Merger Agreement pursuant to the provisions of Section 10, the liability by reason of this Merger Agreement or the termination thereof on the part of either Grand Bank, Independent Bank or the
directors, officers, employees, agents or shareholders of either of them shall be determined pursuant to the terms and provisions of the Reorganization Agreement. Such terms and provisions are hereby incorporated herein by reference for all
purposes.
12. Amendment. To the extent permitted by law, this Merger Agreement may be amended by a subsequent writing signed by
all of the parties hereto upon the approval of the Board of Directors of each of the parties.
13. Closing Date and Effective Time.
The closing date (the Closing Date) shall be on a date as provided for in the Reorganization Agreement. Subject to the terms, and upon satisfaction on or before the Closing Date of all requirements of law and the conditions
specified in this Merger Agreement, the Merger shall become effective at the date and time specified in the Certificate of Merger to be issued by the Texas Department of Banking under the seal of that office authorizing the Receiving Bank to conduct
the business of banking, such time being herein called the Effective Time.
14. Multiple Counterparts. For the
convenience of the parties hereto and to facilitate the filing and recording of this Merger Agreement, any number of counterparts thereof may be executed, each of which shall for all purposes be deemed to be an original and all of which shall
constitute the same instrument, but only one of which need be produced.
15. Rules of Construction. Descriptive headings as to the
contents of particular sections are for convenience only and shall not control or affect the meaning, construction or interpretation of any provision of this Merger Agreement. All sections referred to herein are sections of this Merger Agreement.
Each use herein of the masculine, neuter or feminine gender shall be deemed to include the other genders. Each use herein of the plural shall include the singular and vice versa, in each case as the context requires or as it is otherwise
appropriate. The word or is used in the inclusive sense.
A-A-3
Exhibit A
16. Binding Effect; Assignment. All of the terms, covenants, representations,
warranties and conditions of this Merger Agreement shall be binding upon, and inure to the benefit of and be enforceable by, the parties hereto and their respective successors, representatives and permitted assigns. Nothing expressed or referred to
herein is intended or shall be construed to give any person other than the parties hereto any legal or equitable right, remedy or claim under or in respect of this Merger Agreement, or any provision herein contained, it being the intention of the
parties hereto that this Merger Agreement, the assumption of obligations and statements of Independent Bank hereunder, and all other conditions and provisions hereof are for the sole benefit of the parties to this Merger Agreement and for the
benefit of no other person. Nothing in this Merger Agreement shall act to relieve or discharge the obligation or liability of any third party to any party to this Merger Agreement, nor shall any provision give any third party any right of
subrogation or action over or against any party to this Merger Agreement. No party to this Merger Agreement shall assign this Merger Agreement, by operation of law or otherwise, in whole or in part, without the prior written consent of the other
parties. Any assignment made or attempted in violation of this Section 16 shall be void and of no effect.
A-A-4
Exhibit A
IN WITNESS WHEREOF, Independent Bank and Grand Bank have caused this Merger Agreement
to be executed in counterparts by their duly authorized officers as of the date first above written, and the directors constituting a majority of the Board of Directors of each such bank have approved the Merger and the execution of this Merger
Agreement.
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INDEPENDENT BANK |
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ATTEST: |
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By: |
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David R. Brooks |
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Secretary |
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Chairman of the Board and CEO |
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GRAND BANK |
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ATTEST: |
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By: |
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Lee Dinkel |
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Secretary |
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President and CEO |
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A-A-5
Exhibit B
VOTING AGREEMENT
THIS
VOTING AGREEMENT (this Voting Agreement) dated July 23, 2015, is executed by and among INDEPENDENT BANK GROUP, INC., a Texas corporation and registered bank holding company with its principal offices in McKinney, Texas
(IBG), and GRAND BANK, a Texas banking association with its principal offices in Dallas, Texas (Grand Bank), and the shareholders of Grand Bank whose names are set forth on the signature page hereto
(individually, a Shareholder and collectively, the Shareholders).
W I T N E S S E T H:
WHEREAS, Grand Bank and IBG are parties to that certain Agreement and Plan of Reorganization, dated as of July 23, 2015 (the
Reorganization Agreement), which provides for the acquisition of Grand Bank by IBG through the merger of Grand Bank with and into Independent Bank, a wholly owned subsidiary of IBG (the Merger). Terms with their
initial letter capitalized and not otherwise defined herein shall have the meanings given them in the Reorganization Agreement;
WHEREAS,
the Reorganization Agreement requires that Grand Bank deliver this Voting Agreement to IBG; and
WHEREAS, Grand Bank and IBG are relying
on this Voting Agreement in incurring expenses in reviewing the business of Grand Bank, in preparing the Registration Statement and related Proxy Statement for the meeting of shareholders of Grand Bank, in proceeding with the filing of applications
for regulatory approvals, and in undertaking other actions necessary for the consummation of the Merger.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Grand Bank, IBG and the Shareholders undertake, promise, covenant and agree with each other as follows:
1. As of the
date hereof, the Shareholders own the shares of common stock of Grand Bank (Grand Bank Stock), set forth beside their respective names on Schedule 1 attached hereto (with respect to each Shareholder, all such shares of
Grand Bank Stock and any shares of Grand Bank Stock hereafter acquired by such Shareholder prior to the termination of this Voting Agreement, collectively, such Shareholders Shares).
2. Each Shareholder represents that he, she or it has the full legal capacity and authority to execute, deliver and perform this Voting
Agreement, including the exclusive right to vote such Shareholders Shares. Each Shareholder hereby agrees to vote at the shareholders meeting of Grand Bank called to consider and act upon the Merger (the Meeting) such
Shareholders Shares in favor of approval of the Reorganization Agreement, the Merger, and all of the agreements and transactions contemplated by the Reorganization Agreement.
3. If Grand Bank conducts a meeting of, solicits written consents from or otherwise seeks a vote of its shareholders with respect to any
Acquisition Proposal (as that term is defined in the Reorganization Agreement) or any other matter which may contradict any provision of this Voting Agreement or may prevent IBG or Grand Bank from consummating the Merger, then each Shareholder shall
vote such Shareholders Shares in the manner most favorable to consummation of the Merger and the transactions contemplated by the Reorganization Agreement.
A-B-1
Exhibit B
Notwithstanding, the foregoing sentence, the Shareholders may vote in favor of a Superior
Proposal (as that term is defined in the Reorganization Agreement).
4. Each Shareholder hereby covenants and agrees that, until this
Voting Agreement is terminated in accordance with its terms, each Shareholder will not, and will not agree to, directly or indirectly, without the prior written consent of IBG, (i) sell, assign, transfer or dispose of any of such
Shareholders Shares, (ii) hypothecate such Shareholders Shares under terms that would prevent the voting thereof, (iii) deposit such Shareholders Shares into a voting trust or enter into a voting agreement or arrangement
with respect to such Shareholders Shares or grant any proxy with respect thereto except as herein provided, or (iv) enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect sale,
assignment, transfer or other disposition of any of such Shareholders Shares, in connection with a transaction pursuant to which twenty five percent (25%) or more of the voting power of Grand Bank Stock is, or control of Grand Bank
otherwise is, transferred to a person or entity other than a party to this Voting Agreement.
Notwithstanding any of the foregoing, any
Shareholder may (i) make such gifts of such Shareholders Shares as such Shareholder may choose to make, (ii) transfer such Shares to trusts or other entities controlled by the Shareholder or for estate planning purposes, so long as
the recipient of such Shareholders Shares executes and delivers an amendment to this Voting Agreement whereby such recipient becomes bound by the terms of this Voting Agreement.
5. This Voting Agreement shall continue in effect until the earlier to occur of (i) the termination of the Reorganization Agreement, as
it may be amended or extended from time to time, or (ii) the consummation of the transactions contemplated by the Reorganization Agreement.
6. In the event that a Shareholder transfers a certificate representing any of such Shareholders Shares prior to the Meeting, Grand Bank
shall require such certificate to bear the following endorsement, noted conspicuously thereon:
The shares of stock represented by
this certificate are subject to the terms of a Voting Agreement dated July 23, 2015, a copy of which is on file in the principal office of Grand Bank.
7. This Voting Agreement may not be modified, amended, altered or supplemented with respect to a particular Shareholder except upon the
execution and delivery of a written agreement executed by Grand Bank, IBG and such Shareholder.
8. This Voting Agreement may be executed
in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. An electronic or facsimile transmission of a signed counterpart of this Voting Agreement shall be sufficient to
bind the party or parties whose signature(s) appear thereon.
9. This Voting Agreement, together with the Reorganization Agreement and the
agreements contemplated thereby, embody the entire agreement and understanding of the parties hereto in respect to the subject matter contained herein. This Voting Agreement supersedes all prior agreements and understandings among the parties with
respect to such subject matter contained herein.
10. All notices, requests, demands and other communications required or permitted hereby
shall be in writing and shall be deemed to have been duly given if delivered by hand or mail, certified or registered mail (return receipt requested) with postage prepaid to the addresses of the parties hereto set forth on below their signature on
the signature pages hereof or to such other address as any party may have furnished to the others in writing in accordance herewith.
A-B-2
Exhibit B
11. THIS VOTING AGREEMENT AND THE RELATIONS AMONG THE PARTIES HERETO ARISING FROM THIS
VOTING AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. VENUE FOR DISPUTES ARISING UNDER THIS AGREEMENT SHALL BE SOLELY IN DALLAS COUNTY, TEXAS.
[Signature page to follow]
A-B-3
Exhibit B
[Signature Page to Voting Agreement]
IN WITNESS WHEREOF, the parties have executed this Voting Agreement as of the date above written.
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GRAND BANK |
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By: |
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Lee Dinkel
President and CEO |
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INDEPENDENT BANK GROUP, INC. |
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By: |
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David R. Brooks
Chairman of the Board |
A-B-4
Exhibit B
[Signature Page to Voting Agreement]
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SHAREHOLDER
(Individual) |
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Signature |
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Printed Name |
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SHAREHOLDER
(Entity) |
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Entity Name |
A-B-5
Exhibit B
SCHEDULE 1
VOTING AGREEMENT SHAREHOLDERS
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Name of Shareholder |
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Number of Shares of Grand Bank Stock |
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TOTAL NO. OF SHARES: |
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TOTAL VOTING POWER: |
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A-B-6
Exhibit C
RELEASE
(Director)
THIS RELEASE (the Release), effective as of
, 2015, is made by (the Director), a
director of Grand Bank (Grand Bank), Dallas, Texas, in favor of Grand Bank.
WITNESSETH:
WHEREAS, pursuant to that certain Agreement and Plan of Reorganization (the Agreement), dated as of July 23,
2015, by and between Independent Bank Group, Inc. (IBG) and Grand Bank, it is a condition to the consummation of the transactions contemplated by the Agreement that the Director shall have executed and delivered to IBG an
instrument releasing Grand Bank from any and all claims of such Director (except for certain matters described herein);
WHEREAS,
the purpose of this Release is to serve as the instrument referred to in Section 5.16 and Section 8.14 of the Agreement; and
WHEREAS, the Director desires to enter into this Release in consideration of the matters set forth herein.
NOW, THEREFORE, for and in consideration of $1.00 and other good and valuable consideration, the receipt and sufficiency of which is
hereby expressly acknowledged, the Director agrees as follows:
1. Attached hereto is a list of all loans outstanding from Grand Bank to
the Director. The Director acknowledges that, to his knowledge, as of the date hereof there are no existing claims or defenses, personal or otherwise, or rights of set off whatsoever against Grand Bank, except as a result of the Directors
capacity as a depositor with Grand Bank or pursuant to other written contractual obligations of Grand Bank to the Director. Effective as of the effective time of the acquisition of Grand Bank by IBG pursuant to the Agreement, the Director for
himself and on behalf of his heirs and assigns (the Director Releasing Parties) releases, acquits and forever discharges Grand Bank and its predecessors, successors, assigns, officers, directors, employees, agents and servants,
and all persons, natural or corporate, in privity with them or any of them from any and all claims or causes of action of any kind whatsoever, at common law, statutory or otherwise, which the Director Releasing Parties, or any of them, has now,
known or unknown, now existing or that may hereafter arise in respect of any and all agreements and obligations incurred on or prior to the date hereof, or in respect of any event occurring or circumstances existing on or prior to the date hereof;
provided, however, that Grand Bank shall not be released from any obligations or liabilities to the Director (i) pursuant to the provisions of the Certificate of Formation and bylaws of Grand Bank regarding the indemnification of
directors, and (ii) in connection with any deposits of the Director or any other written contractual obligations of Grand Bank to the Director existing on the date of this Release (collectively, the Specified Claims).
2. It is expressly understood and agreed that the terms hereof are contractual and not merely recitals, and that the agreements herein
contained and the consideration herein transferred is to compromise doubtful and disputed claims, and that no releases made or other consideration given hereby or in connection herewith shall be construed as an admission of liability, all liability
being expressly denied by Grand Bank. The Director hereby represents and warrants that the consideration hereby acknowledged for entering into this Release and the transactions contemplated hereby is greater than the value of all claims, demands,
actions and causes of action herein relinquished, released, renounced, abandoned, acquitted, waived and/or discharged, and that this Release is in full settlement, satisfaction and discharge of any and all such claims, demands, actions, and causes
of action that the Director may have or be entitled to against Grand Bank and its predecessors, assigns, legal representatives, officers, directors, employees, attorneys and agents other than Specified Claims.
A-C-1
Exhibit C
3. The Director represents and warrants that he has full power and authority to enter into,
execute and deliver this Release, all proceedings required to be taken to authorize the execution, delivery and performance of this Release and the agreements and undertakings relating hereto and the transactions contemplated hereby have been
validly and properly taken and this Release constitutes a valid and binding obligation of the Director in the capacity in which executed. The Director further represents and warrants that he has entered into this Release freely of his own accord and
without reliance on any representations of any kind or character not set forth herein. The Director enters into this Release after the opportunity to consult with his or her own legal counsel.
4. This Release shall be governed by, and construed in accordance with, the laws of the State of Texas, without regard to the laws that might
otherwise govern under applicable principles of conflicts of law. If any provision of this Release or the application thereof to any person or circumstance shall be determined to be invalid or unenforceable to any extent, such provision shall be
deemed severable, the remainder of this Release and the application of all other provisions shall not be affected thereby and shall be enforced to the greatest extent permitted by law. This Release is executed as of the date first above written. As
used herein, the singular includes the plural, the masculine includes the feminine and neuter, and vice versa.
[Signature page to
follow]
A-C-2
Exhibit C
[Signature Page to Release]
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STATE OF TEXAS |
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COUNTY OF
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This instrument was acknowledged before me on
, 2015, by , individually.
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Notary Public in and for
the State of Texas |
A-C-3
Exhibit C
RELEASE
(Officer)
THIS RELEASE
(the Release), effective as of , 2015, is made by
(the Officer), an officer of Grand Bank, Dallas, Texas, in favor of Grand Bank.
RECITALS:
WHEREAS, pursuant to that certain Agreement and Plan of Reorganization (the Agreement), dated as of
July 23, 2015, by and between Independent Bank Group, Inc. (IBG) and Grand Bank, it is a condition to the consummation of the transactions contemplated by the Agreement that the Officer shall have executed and delivered to
IBG an instrument releasing Grand Bank from any and all claims of such Officer (except for certain matters described herein);
WHEREAS, the purpose of this Release is to serve as the instrument referred to in Section 5.16 and Section 8.14 of the
Agreement; and
WHEREAS, the Officer desires to enter into this Release in consideration of the matters set forth herein.
AGREEMENT:
NOW,
THEREFORE, for and in consideration of $1.00 and other good and valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, the Officer agrees as follows:
1. Attached hereto is a list of all loans outstanding from Grand Bank to the Officer. The Officer acknowledges that as of the date hereof there
are no existing claims or defenses, personal or otherwise, or rights of set off whatsoever against Grand Bank, except (i) as a result of the Officers capacity as a depositor with Grand Bank or pursuant to other written contractual
obligations of Grand Bank to the Officer; (ii) for salary or bonus due to such Officer from Grand Bank in the ordinary course of business; or (iii) in connection with medical claims not yet filed. Effective as of the effective time of the
acquisition of Grand Bank by IBG pursuant to the Agreement, the Officer for himself and on behalf of his heirs and assigns (the Officer Releasing Parties) releases, acquits and forever discharges Grand Bank and its predecessors,
successors, assigns, officers, directors, employees, agents and servants, and all persons, natural or corporate, in privity with them or any of them, from any and all claims or causes of action of any kind whatsoever, at common law, statutory or
otherwise, which the Officer Releasing Parties, or any of them, has now, known or unknown, now existing or that may hereafter arise in respect of any and all agreements and obligations incurred on or before the date hereof, or in respect of any
event occurring or circumstances existing on or before the date hereof; but Grand Bank shall not be released from any obligations or liabilities to the Officer (i) in connection with any deposits of the Officer or written contractual
obligations of Grand Bank to the Officer existing on the date of this Release; (ii) accrued compensation and benefits; (iii) in connection with medical claims not yet filed; and (iv) pursuant to the provisions of the articles of
association and bylaws of Grand Bank regarding the indemnification of officers (collectively, the Specified Claims).
2. It is
expressly understood and agreed that the terms hereof are contractual and not merely recitals, and that the agreements herein contained and the consideration herein transferred is to compromise doubtful and disputed claims, and that no releases made
or other consideration given hereby or in connection herewith shall be construed as an admission of liability, all liability being expressly denied by Grand Bank. The Officer hereby represents and warrants that the consideration hereby acknowledged
for entering into this Release and the
A-C-4
Exhibit C
transactions contemplated hereby is greater than the value of all claims, demands, actions and causes of action herein relinquished, released, renounced, abandoned, acquitted, waived and/or
discharged, and that this Release is in full settlement, satisfaction and discharge of any and all such claims, demands, actions, and causes of action that the Officer may have or be entitled to against Grand Bank and its predecessors, assigns,
legal representatives, officers, directors, employees, attorneys and agents other than the Specified Claims.
3. The Officer represents
and warrants that he has full power and authority to enter into, execute and deliver this Release, all proceedings required to be taken to authorize the execution, delivery and performance of this Release and the agreements and undertakings relating
hereto and the transactions contemplated hereby have been validly and properly taken and this Release constitutes a valid and binding obligation of the Officer in the capacity in which executed. The Officer further represents and warrants that he
has entered into this Release freely of his own accord and without reliance on any representations of any kind or character not set forth herein. The Officer enters into this release having had the opportunity to seek the advice of his own legal
counsel.
4. This Release shall be governed by, and construed in accordance with, the laws of the State of Texas, without regard to the
laws that might otherwise govern under applicable principles of conflicts of law. If any provision of this Release or the application thereof to any person or circumstance shall be determined to be invalid or unenforceable to any extent, such
provision shall be deemed severable, the remainder of this Release and the application of all other provisions shall not be affected thereby and shall be enforced to the greatest extent permitted by law. This Release is executed as of the date first
above written. As used herein, the singular includes the plural, the masculine includes the feminine and neuter, and vice versa.
[Signature Page to Follow]
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Exhibit C
[Signature Page to Release]
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STATE OF TEXAS |
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This instrument was acknowledged before me on
, 2015, by , individually.
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Notary Public in and for the State of Texas |
(End of Appendix A)
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APPENDIX B
FAIRNESS OPINION OF HOVDE GROUP, LLC
July 22, 2015
Board of Directors
Grand Bank
16660 Dallas Parkway, Suite 1700
Dallas, TX 75248
Dear Members of the Board:
Hovde Group, LLC
(we or Hovde) understand that Independent Bank Group, Inc., a Texas corporation and registered bank holding company with its principal offices in McKinney, Texas (IBG), and Grand Bank, a Texas
state banking association with its principal office in Dallas, Texas (Grand Bank or the Company), are about to enter into an Agreement and Plan of Reorganization to be dated on or about July 23, 2015 (the
Agreement). Pursuant to the Agreement, IBG will acquire all of the issued and outstanding shares of Grand Bank common stock (the Grand Bank Stock), through the merger of Grand Bank with and into Independent
Bank, a Texas state banking association and wholly owned subsidiary of IBG (Independent Bank), with Independent Bank continuing as the surviving bank (the Merger), pursuant to which the holders of the Grand Bank
Stock will be entitled to receive cash and shares of common stock of IBG (the IBG Stock).
Pursuant and subject to the
terms and conditions of the Agreement, at the Effective Time, by virtue of the Agreement and without any further action on the part of IBG, Grand Bank, or any holder of Grand Bank Stock, all of the shares of Grand Bank Stock outstanding at the
Effective Time shall be converted into the right to receive an aggregate $24,100,000, subject to adjustment pursuant to Section 1.05(E) and Section 1.06(D) of the Agreement, in cash (the Aggregate Cash Consideration),
and an aggregate number of shares of IBG Stock as calculated pursuant to Section 1.05(B)(2) of the Agreement with the intent that such shares of IBG Stock have an aggregate value of approximately $56,000,000 (collectively, the
Aggregate Merger Consideration).
We note that each share of Grand Bank Stock issued and outstanding immediately prior
to the Effective Time (excluding shares of Grand Bank Stock cancelled pursuant to Section 1.5(A) of the Agreement), shall be converted into the right to receive: (1) a cash amount equal to the quotient of (i) the Aggregate Cash
Consideration, divided by (ii) the number of shares of Grand Bank Stock outstanding immediately prior to the Effective Time (the Per Share Cash Consideration) subject to adjustment pursuant to Section 1.05(E) and
Section 1.06(D) of the Agreement; and (2) a fraction of a share of IBG Stock (rounded to the nearest ten thousandth) equal to the quotient of (i) the quotient of (x) $56,000,000, divided by (y) the number of shares of Grand
Bank Stock outstanding immediately prior to the Effective Time (this quotient is referred to as the Per Share Stock Value), divided by (ii) $43.7660 (the Per Share Stock Consideration).
Additionally, in the event the Average Closing Price of IBG Stock is less than $39.3894, the Per Share Stock Consideration shall be adjusted
to be a fraction (rounded to the nearest ten thousandth) determined by dividing (i) the product of (x) the Per Share Stock Value, multiplied by (y) 90%, by (ii) the Average Closing Price of IBG Stock. In the event the Average
Closing Price of IBG Stock is greater than $48.1426, the Per Share Stock Consideration shall be adjusted to be a fraction (rounded to the nearest ten thousandth) determined by dividing (i) the product of (x) the Per Share Stock Value,
multiplied by (y) 110%, by (ii) the Average Closing Price of IBG Stock. As used in the Agreement, Average Closing Price means the average of the daily volume
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weighted average sale price per share of IBG Stock on The NASDAQ Stock Market, Inc. Global Select Market System (NASDAQ) for the ten (10) consecutive trading days ending
on and including the third trading day preceding the Closing Date, as reported by Bloomberg.
We note that the Agreement provides that if
the Tangible Book Value (as defined in the Agreement) on the fifth business day preceding the Closing Date (the Calculation Date) is greater than $40,000,000, then on the day prior to the Closing Date, Grand Bank may distribute to
its shareholders an amount equal to the difference between (i) the actual amount of Tangible Book Value as of the Calculation Date, less (ii) $40,000,000. Any such distribution is referred to as the Section 1.05(D)
Distribution. We further note that if the Tangible Book Value on the Calculation Date is less than $40,000,000, but more than $39,000,000, then the Aggregate Cash Consideration shall be reduced by an amount equal to the difference between
(i) $40,000,000, minus (ii) the Tangible Book Value on the Calculation Date.
We also note that Grand Bank has granted
options to purchase shares of Grand Bank Stock which are unexercised and outstanding (the Options). Pursuant to the Agreement, Grand Bank shall use its commercially reasonable best efforts to enter into a written agreement (the
Option Holder Agreement) with the holders of the Options listed on Schedule 3.02(A) of the Agreement (the Option Holders), pursuant to which each Option Holder shall agree to either: (1) surrender and
terminate the Option in exchange for a cash payment by IBG to the Option Holder in an amount equal to the product of (a) the difference between (i) the sum of (x) the Per Share Cash Consideration, plus (y) the value of Per Share
Stock Consideration, minus (ii) the exercise price of the Options, multiplied by (b) the number of shares of Grand Bank Stock underlying the Options (the Option Cash Payment); or (2) exercise the Option by tendering
the exercise price for the Option in cash to Grand Bank in exchange for the number of shares of Grand Bank Stock underlying the Option. The shares of Grand Bank Stock issued upon the exercise of the Options shall subsequently be converted into the
right to receive the consideration set forth in Section 1.05 of the Agreement at the Effective Time. The Aggregate Cash Consideration shall be reduced by the aggregate amount of cash paid by IBG to the Option Holders who elect to surrender
their Options in exchange for the Option Cash Payment. For purposes of determining the Option Cash Payment, the amount of Per Share Cash Consideration and the value of the Per Share Stock Consideration shall be calculated as if the Options being
surrendered in exchange for the Option Cash Payment had been exercised in exchange for shares of Grand Bank Stock.
Since the Average
Closing Price of IBG Stock, the Tangible Book Value of the Company, and the Option Cash Payment as of their respective determination dates, and the related amounts derived from those figures cannot be determined until dates after the date of this
opinion, potential future adjustments to the Per Share Cash Consideration, Per Share Stock Consideration, Aggregate Cash Consideration, and Aggregate Merger Consideration, if any, attributable to changes in the Average Closing Price, Tangible Book
Value, or treatment of Options pursuant to the Option Holder Agreement, as applicable, if any, cannot be predicted with precision. In forming our opinion, we have not accounted for the payment of any additional consideration resulting from the
Section 1.05(D) Distribution or the exercise of any Options as such events cannot be determined as of the date of this opinion. However, you have instructed us to assume, for purposes of the foregoing and our opinion, that the Average Closing
Price of IBG Stock as of the determination date would not be less than $35.0128 and would not be greater than $52.5192, and that the Per Share Stock Consideration to be paid in connection with the Merger will have an aggregate estimated value of not
less than $50,400,000 and not greater than $61,600,000. You have further advised us to assume that the Tangible Book Value of the Company as of the determination date would be in an amount equal to or greater than $40,000,000. Accordingly, if the
Tangible Book Value as of the Calculation Date were equal to or greater than $40,000,000, the total value of Aggregate Cash Consideration, inclusive of any Option Cash Payment, that would be paid in connection with the Merger would be $24,100,000.
We have assumed that these amounts are reasonable estimates or projections of the corresponding actual amounts as of the date the Per Share Cash Consideration, Per Share Stock Consideration, Aggregate Cash Consideration, and Aggregate Merger
Consideration will be determined, and that any difference between actual amounts assumed in this letter would be immaterial. Accordingly, based on the foregoing assumptions, and for the purposes of this opinion, the holders of Grand Bank Stock will
have the right to receive estimated Aggregate Merger Consideration with an aggregate value of not less than $74,500,000 and not greater than $85,700,000.
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The foregoing descriptions of the Aggregate Cash Consideration, Per Share Cash Consideration, Per
Share Stock Consideration, Options, and Aggregate Merger Consideration are qualified in their entirety by reference to the Agreement. Capitalized terms used herein that are not otherwise defined shall have the same meanings attributed to them in the
Agreement. In connection therewith, you have requested our opinion as to the fairness, from a financial point of view, of the Aggregate Merger Consideration to the shareholders of Grand Bank. This opinion addresses only the fairness of the Aggregate
Merger Consideration to be paid in connection with the Merger, and we are not opining on the individual cash, stock or option components of the Aggregate Merger Consideration.
During the course of our engagement and for the purposes of the opinion set forth herein, we have:
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reviewed a draft of the Agreement dated July 21, 2015, as provided to Hovde by the Company; |
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reviewed certain unaudited financial statements for Grand Bank and IBG for the six-month period ended June 30, 2015; |
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reviewed certain historical annual reports of each of Grand Bank and IBG, including audited annual reports for Grand Bank and IBG for the year ending December 31, 2014; |
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reviewed certain historical publicly available business and financial information concerning each of the Company and IBG; |
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reviewed certain internal financial statements and other financial and operating data concerning of the Company, including, without limitation, internal financial analyses and forecasts prepared by management of the
Company, and held discussions with senior management of the Company and IBG regarding recent developments and regulatory matters; |
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analyzed financial projections prepared by certain members of senior management of the Company; |
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discussed with certain members of senior management of the Company and IBG, the business, financial condition, results of operations and future prospects of the Company and IBG, as well as the history and past and
current operations of the Company and IBG, and the Companys historical financial performance and the Company outlook and future prospects; |
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reviewed the terms of recent merger, acquisition and control investment transactions, to the extent publicly available, involving financial institutions and financial institution holding companies that we considered
relevant; |
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assessed the general economic, market and financial conditions; |
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analyzed the pro forma impact of the Merger on the combined companys earnings per share, consolidated capitalization and financial ratios; |
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taken into consideration our experience in other similar transactions and securities valuations as well as our knowledge of the banking and financial services industry; |
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reviewed historical market prices and trading volumes of IBGs Common Stock; |
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reviewed and analyzed certain publicly available financial and stock market data relating to selected public companies that Hovde deemed relevant to our analysis; |
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discussed with management of the Company and IBG, their assessment of the rationale for the Merger; and |
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performed such other analyses and considered such other factors as we have deemed appropriate. |
We have assumed, without independent verification, the representations as well as the financial and other information provided to us by the
Company or included in the Agreement, which has formed a substantial basis for this opinion, are true and complete. Hovde has relied upon the management of the Company as to the reasonableness and achievability of the financial forecasts and
projections (and the assumptions and bases
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therein) provided to and/or discussed with Hovde by the Company and used by us in our analysis, and Hovde has assumed that such forecasts and projections reflect the best currently available
information and the Companys judgments and estimates. We have assumed that such forecasts would be realized in the amounts and at the times contemplated thereby. We have been authorized by the Company to rely upon such forecasts and other
information and data, including without limitation the projections, and we express no view as to any such forecasts or other information or data, or the bases or assumptions on which they were prepared. We have assumed that each party to the
Agreement would advise us promptly if any information previously provided to us became inaccurate or was required to be updated during the period of our review. Hovde has relied on these forecasts without independent verification or analyses and
does not in any respect assume any responsibility for the accuracy or completeness thereof.
We are not experts in the evaluation of loan
and lease portfolios for purposes of assessing the adequacy of the allowances for losses with respect thereto. We have assumed that such allowances for the Company and IBG are, in the aggregate, adequate to cover such losses, and will be adequate on
a pro forma basis for the combined entity. We were not requested to make, and have not made, an independent evaluation, physical inspection or appraisal of the assets, properties, facilities, or liabilities (contingent or otherwise) of the Company
or IBG, the collateral securing any such assets or liabilities, or the collectability of any such assets and we were not furnished with any such evaluations or appraisals; nor did we review any loan or credit files of the Company or IBG.
We have assumed that the Merger will be consummated substantially in accordance with the terms set forth in the Agreement, without any waiver
of material terms or conditions by the Company, or any other party to the Agreement and that the final Agreement will not differ materially from the draft we reviewed. We have assumed that the Merger has been, and will be, conducted in compliance
with all laws and regulations that are applicable to the Company and IBG. The Company has advised us that there are no factors that would impede any necessary regulatory or governmental approval of the Merger. We have assumed that, in the course of
obtaining the necessary regulatory and governmental approvals, no restrictions will be imposed on the Company or on IBG that would have a material adverse effect on the contemplated benefits of the Merger.
Our opinion does not constitute a recommendation to the Company as to whether or not such the Company should enter into the Agreement or to
any shareholders of the Company as to how such shareholders should vote at any meetings of shareholders called to consider and vote upon the Merger. Our opinion neither addresses the underlying business decision to proceed with the Merger nor the
fairness of the amount or nature of the compensation, if any, to be received by any of the officers, directors or employees of the Company, or class of such persons, relative to the amounts of consideration to be paid with respect to the Merger. Our
opinion should not be construed as implying that the Aggregate Merger Consideration to be paid in connection with the Merger is necessarily the highest or best price that could be obtained in the Merger or in a sale, merger, or combination
transaction with a third party. We do not express any opinion as to the value of Grand Banks common stock or IBGs common stock following the announcement of the proposed Merger, the value of Grand Banks common stock or IBGs
common stock following the consummation of the Merger, or the prices at which shares of Grand Banks common stock or IBGs common stock may be purchased or sold at any time, which in each case, may vary depending on numerous factors,
including factors outside of the control of Grand Bank and IBG. Other than as specifically set forth herein, we are not expressing any opinion with respect to the terms and provisions of the Agreement and/or the enforceability of any such terms or
provisions. Our opinion is not a solvency opinion and does not in any way address the solvency or financial condition of the Company.
This opinion was approved by Hovdes fairness opinion committee. This letter is directed solely to the board of directors of Grand Bank
and is not to be used for any other purpose or quoted or referred to, in whole or in part, in any registration statement, prospectus, proxy statement, or any other document, except in each case in accordance with our prior written consent; provided,
however, that we hereby consent to the inclusion and reference to this letter in any registration statement, proxy statement, information statement or tender offer document to be delivered to the holders of Grand Banks common stock in
connection with the Merger if, and only if, this letter is quoted in full or attached as an exhibit to such document and this letter has not been withdrawn prior to the date of such document.
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Our opinion is based solely upon the information available to us, and the economic, market and
other circumstances as they exist as of the date hereof. Events occurring and information that becomes available after the date hereof could materially affect the assumptions and analyses used in preparing this opinion. We have not undertaken to
reaffirm or revise this opinion or otherwise comment upon any events occurring or information that becomes available after the date hereof. We express no opinion as to the underlying business decision of the Board of Directors of Grand Bank to
effectuate the Merger, the structure or legal, tax, accounting or regulatory aspects or consequences of the Merger or the availability or advisability of any alternatives to the Merger. No assurance can be given that adjustments to the consideration
to be paid in the Merger will not be required by the actual results of operations of the Company after June 30, 2015.
In arriving at
this opinion, Hovde did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Hovde believes that its
analyses must be considered as a whole and that selecting portions of its analyses, without considering all analyses, would create an incomplete view of the process underlying this opinion.
Hovde, as part of its investment banking business, regularly performs valuations of businesses and their securities in connection with mergers
and acquisitions and other corporate transactions. In addition to being retained to render this opinion letter, we were retained by the Company to act as their financial advisor in connection with the Merger.
We will receive compensation from the Company in connection with our services, which may include, without limitation, a fairness opinion fee
that is contingent upon the issuance of this opinion letter and a completion fee that is contingent upon the consummation of the Merger. Further, the Company has agreed to indemnify us and our affiliates for certain liabilities that may arise out of
our engagement. Additionally, we, or our affiliates have been engaged by and/or received compensation from the Company and IBG in the past, and may presently or in the future, receive compensation from IBG in connection with future transactions, in
connection with other potential advisory services and corporate transactions, although to our knowledge none are presently expected at this time. Further, in the ordinary course of our business as a broker dealer, we may purchase securities from and
sell securities to the Company and IBG and their affiliates. We may also trade the securities of IBG and their affiliates for our own account and the accounts of our customers. Except for the foregoing, during the past two years there have not been,
and there are no mutual understandings contemplating in the future, any material relationships between Hovde and the Company or IBG.
Based upon and subject to the foregoing, we are of the opinion, as of the date hereof, that the estimated Aggregate Merger Consideration to be
paid in connection with the Merger is fair to the shareholders of Grand Bank from a financial point of view.
Sincerely,
HOVDE GROUP, LLC
/s/ Hovde Group, LLC
(End of Appendix B)
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APPENDIX CRIGHTS OF DISSENTING OWNERS: CHAPTER 10,
SUBCHAPTER H OF THE TEXAS BUSINESS ORGANIZATIONS CODE
CHAPTER 10. MERGERS, INTEREST EXCHANGES,
CONVERSIONS, AND SALES OF ASSETS
SUBCHAPTER H. RIGHTS OF DISSENTING OWNERS
Section 10.351. APPLICABILITY OF SUBCHAPTER.
(a) This subchapter does not apply to a fundamental business transaction of a domestic entity if, immediately before the effective date of the
fundamental business transaction, all of the ownership interests of the entity otherwise entitled to rights to dissent and appraisal under this code are held by one owner or only by the owners who approved the fundamental business transaction.
(b) This subchapter applies only to a domestic entity subject to dissenters rights, as defined in Section 1.002. That
term includes a domestic for-profit corporation, professional corporation, professional association, and real estate investment trust. Except as provided in Subsection (c), that term does not include a partnership or limited liability company.
(c) The governing documents of a partnership or a limited liability company may provide that its owners are entitled to the rights of dissent
and appraisal provided by this subchapter, subject to any modification to those rights as provided by the entitys governing documents.
Section 10.352. DEFINITIONS.
In
this subchapter:
(1) Dissenting owner means an owner of an ownership interest in a domestic entity subject to dissenters
rights who:
(A) provides notice under Section 10.356; and
(B) complies with the requirements for perfecting that owners right to dissent under this subchapter.
(2) Responsible organization means:
(A) the organization responsible for:
(i) the provision of notices under this subchapter; and
(ii) the primary obligation of paying the fair value for an ownership interest held by a dissenting owner;
(B) with respect to a merger or conversion:
(i) for matters occurring before the merger or conversion, the organization that is merging or converting; and
(ii) for matters occurring after the merger or conversion, the surviving or new organization that is primarily obligated for the payment of
the fair value of the dissenting owners ownership interest in the merger or conversion;
(C) with respect to an interest exchange,
the organization the ownership interests of which are being acquired in the interest exchange; and
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(D) with respect to the sale of all or substantially all of the assets of an organization, the
organization the assets of which are to be transferred by sale or in another manner.
Section 10.353. FORM AND VALIDITY OF NOTICE.
(a) Notice required under this subchapter:
(1) must be in writing; and
(2)
may be mailed, hand-delivered, or delivered by courier or electronic transmission.
(b) Failure to provide notice as required by this
subchapter does not invalidate any action taken.
Section 10.354. RIGHTS OF DISSENT AND APPRAISAL.
(a) Subject to Subsection (b), an owner of an ownership interest in a domestic entity subject to dissenters rights is entitled to:
(1) dissent from:
(A) a plan of
merger to which the domestic entity is a party if owner approval is required by this code and the owner owns in the domestic entity an ownership interest that was entitled to vote on the plan of merger;
(B) a sale of all or substantially all of the assets of the domestic entity if owner approval is required by this code and the owner owns in
the domestic entity an ownership interest that was entitled to vote on the sale;
(C) a plan of exchange in which the ownership interest
of the owner is to be acquired;
(D) a plan of conversion in which the domestic entity is the converting entity if owner approval is
required by this code and the owner owns in the domestic entity an ownership interest that was entitled to vote on the plan of conversion; or
(E) a merger effected under Section 10.006 in which:
(i) the owner is entitled to vote on the merger; or
(ii) the ownership interest of the owner is converted or exchanged; and
(2) Subject to compliance with the procedures set forth in this subchapter, obtain the fair value of that ownership interest through an
appraisal.
(b) Notwithstanding Subsection (a), subject to Subsection (c), an owner may not dissent from a plan of merger or conversion in
which there is a single surviving or new domestic entity or noncode organization, or from a plan of exchange, if:
(1) the ownership
interest, or a depository receipt in respect of the ownership interest, held by the owner is part of a class or series of ownership interests, or depository receipts in respect of ownership interests, that are, on the record date set for purposes of
determining which owners are entitled to vote on the plan of merger, conversion, or exchange, as appropriate:
(A) listed on a national
securities exchange; or
(B) held of record by at least 2,000 owners;
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(2) the owner is not required by the terms of the plan of merger, conversion, or exchange, as
appropriate, to accept for the owners ownership interest any consideration that is different from the consideration to be provided to any other holder of an ownership interest of the same class or series as the ownership interest held by the
owner, other than cash instead of fractional shares or interests the owner would otherwise be entitled to receive; and
(3) the owner is
not required by the terms of the plan of merger, conversion, or exchange, as appropriate, to accept for the owners ownership interest any consideration other than:
(A) ownership interests, or depository receipts in respect of ownership interests, of a domestic entity or noncode organization of the same
general organizational type that, immediately after the effective date of the merger, conversion, or exchange, as appropriate, will be part of a class or series of ownership interests, or depository receipts in respect of ownership interests, that
are:
(i) listed on a national securities exchange or authorized for listing on the exchange on official notice of issuance; or
(ii) held of record by at least 2,000 owners;
(B) cash instead of fractional ownership interests the owner would otherwise be entitled to receive; or
(C) any combination of the ownership interests and cash described by Paragraphs (A) and (B).
(c) Subsection (b) shall not apply to a domestic entity that is a subsidiary with respect to a merger under Section 10.006.
Section 10.355. NOTICE OF RIGHT OF DISSENT AND APPRAISAL.
(a) A domestic entity subject to dissenters rights that takes or proposes to take an action regarding which an owner has a right to
dissent and obtain an appraisal under Section 10.354 shall notify each affected owner of the owners rights under that section if:
(1) the action or proposed action is submitted to a vote of the owners at a meeting; or
(2) approval of the action or proposed action is obtained by written consent of the owners instead of being submitted to a vote of the owners.
(b) If a parent organization effects a merger under Section 10.006 and a subsidiary organization that is a party to the merger is a
domestic entity subject to dissenters rights, the responsible organization shall notify the owners of that subsidiary organization who have a right to dissent to the merger under Section 10.354 of their rights under this subchapter not
later than the 10th day after the effective date of the merger. The notice must also include a copy of the certificate of merger and a statement that the merger has become effective.
(c) A notice required to be provided under Subsection (a) or (b) must:
(1) be accompanied by a copy of this subchapter; and
(2) advise the owner of the location of the responsible organizations principal executive offices to which a notice required under
Section 10.356(b)(1) or (3) may be provided.
(d) In addition to the requirements prescribed by Subsection (c), a notice
required to be provided under Subsection (a)(1) must accompany the notice of the meeting to consider the action, and a notice required under Subsection (a)(2) must be provided to:
(1) each owner who consents in writing to the action before the owner delivers the written consent; and
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(2) each owner who is entitled to vote on the action and does not consent in writing to the
action before the 11th day after the date the action takes effect.
(e) Not later than the 10th day after the date an action described by
Subsection (a)(1) takes effect, the responsible organization shall give notice that the action has been effected to each owner who voted against the action and sent notice under Section 10.356(b)(1).
Section 10.356. PROCEDURE FOR DISSENT BY OWNERS AS TO ACTIONS; PERFECTION OF RIGHT OF DISSENT AND APPRAISAL.
(a) An owner of an ownership interest of a domestic entity subject to dissenters rights who has the right to dissent and appraisal from
any of the actions referred to in Section 10.354 may exercise that right to dissent and appraisal only by complying with the procedures specified in this subchapter. An owners right of dissent and appraisal under Section 10.354 may
be exercised by an owner only with respect to an ownership interest that is not voted in favor of the action.
(b) To perfect the
owners rights of dissent and appraisal under Section 10.354, an owner:
(1) if the proposed action is to be submitted to a vote
of the owners at a meeting, must give to the domestic entity a written notice of objection to the action that:
(A) is addressed to the
entitys president and secretary;
(B) states that the owners right to dissent will be exercised if the action takes effect;
(C) provides an address to which notice of effectiveness of the action should be delivered or mailed; and
(D) is delivered to the entitys principal executive offices before the meeting;
(2) with respect to the ownership interest for which the rights of dissent and appraisal are sought:
(A) must vote against the action if the owner is entitled to vote on the action and the action is approved at a meeting of the owners; and
(B) may not consent to the action if the action is approved by written consent; and
(3) must give to the responsible organization a demand in writing that:
(A) is addressed to the president and secretary of the responsible organization;
(B) demands payment of the fair value of the ownership interests for which the rights of dissent and appraisal are sought;
(C) provides to the responsible organization an address to which a notice relating to the dissent and appraisal procedures under this
subchapter may be sent;
(D) states the number and class of the ownership interests of the domestic entity owned by the owner and the
fair value of the ownership interests as estimated by the owner; and
(E) is delivered to the responsible organization at its principal
executive offices at the following time:
(i) not later than the 20th day after the date the responsible organization sends to the owner
the notice required by Section 10.355(e) that the action has taken effect, if the action was approved by a vote of the owners at a meeting;
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(ii) not later than the 20th day after the date the responsible organization sends to the owner
the notice required by Section 10.355(d)(2) that the action has taken effect, if the action was approved by the written consent of the owners; or
(iii) not later than the 20th day after the date the responsible organization sends to the owner a notice that the merger was effected, if
the action is a merger effected under Section 10.006.
(c) An owner who does not make a demand within the period required by
Subsection (b)(3)(E) or, if Subsection (b)(1) is applicable, does not give the notice of objection before the meeting of the owners is bound by the action and is not entitled to exercise the rights of dissent and appraisal under Section 10.354.
(d) Not later than the 20th day after the date an owner makes a demand under Subsection (b)(3), the owner must submit to the responsible
organization any certificates representing the ownership interest to which the demand relates for purposes of making a notation on the certificates that a demand for the payment of the fair value of an ownership interest has been made under this
section. An owners failure to submit the certificates within the required period has the effect of terminating, at the option of the responsible organization, the owners rights to dissent and appraisal under Section 10.354 unless a
court, for good cause shown, directs otherwise.
(e) If a domestic entity and responsible organization satisfy the requirements of this
subchapter relating to the rights of owners of ownership interests in the entity to dissent to an action and seek appraisal of those ownership interests, an owner of an ownership interest who fails to perfect that owners right of dissent in
accordance with this subchapter may not bring suit to recover the value of the ownership interest or money damages relating to the action.
Section 10.357. WITHDRAWAL OF DEMAND FOR FAIR VALUE OF OWNERSHIP INTEREST.
(a) An owner may withdraw a demand for the payment of the fair value of an ownership interest made under Section 10.356 before:
(1) payment for the ownership interest has been made under Sections 10.358 and 10.361; or
(2) a petition has been filed under Section 10.361.
(b) Unless the responsible organization consents to the withdrawal of the demand, an owner may not withdraw a demand for payment under
Subsection (a) after either of the events specified in Subsections (a)(1) and (2).
Section 10.358. RESPONSE BY ORGANIZATION TO NOTICE
OF DISSENT AND DEMAND FOR FAIR VALUE BY DISSENTING OWNER.
(a) Not later than the 20th day after the date a responsible organization
receives a demand for payment made by a dissenting owner in accordance with Section 10.356(b)(3), the responsible organization shall respond to the dissenting owner in writing by:
(1) accepting the amount claimed in the demand as the fair value of the ownership interests specified in the notice; or
(2) rejecting the demand and including in the response the requirements prescribed by Subsection (c).
(b) If the responsible organization accepts the amount claimed in the demand, the responsible organization shall pay the amount not later than
the 90th day after the date the action that is the subject of the demand was effected if the owner delivers to the responsible organization:
(1) endorsed certificates representing the ownership interests if the ownership interests are certificated; or
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(2) signed assignments of the ownership interests if the ownership interests are uncertificated.
(c) If the responsible organization rejects the amount claimed in the demand, the responsible organization shall provide to the owner:
(1) an estimate by the responsible organization of the fair value of the ownership interests; and
(2) an offer to pay the amount of the estimate provided under Subdivision (1).
(d) If the dissenting owner decides to accept the offer made by the responsible organization under Subsection (c)(2), the owner must provide
to the responsible organization notice of the acceptance of the offer not later than the 90th day after the date the action that is the subject of the demand took effect
(e) If, not later than the 90th day after the date the action that is the subject of the demand took effect, a dissenting owner accepts an
offer made by a responsible organization under Subsection (c)(2) or a dissenting owner and a responsible organization reach an agreement on the fair value of the ownership interests, the responsible organization shall pay the agreed amount not later
than the 120th day after the date the action that is the subject of the demand took effect, if the dissenting owner delivers to the responsible organization:
(1) endorsed certificates representing the ownership interests if the ownership interests are certificated; or
(2) signed assignments of the ownership interests if the ownership interests are uncertificated.
Section 10.359. RECORD OF DEMAND FOR FAIR VALUE OF OWNERSHIP INTEREST.
(a) A responsible organization shall note in the organizations ownership interest records maintained under Section 3.151 the receipt
of a demand for payment from any dissenting owner made under Section 10.356.
(b) If an ownership interest that is the subject of a
demand for payment made under Section 10.356 is transferred, a new certificate representing that ownership interest must contain:
(1)
a reference to the demand; and
(2) the name of the original dissenting owner of the ownership interest.
Section 10.360. RIGHTS OF TRANSFEREE OF CERTAIN OWNERSHIP INTEREST.
A transferee of an ownership interest that is the subject of a demand for payment made under Section 10.356 does not acquire additional
rights with respect to the responsible organization following the transfer. The transferee has only the rights the original dissenting owner had with respect to the responsible organization after making the demand.
Section 10.361. PROCEEDING TO DETERMINE FAIR VALUE OF OWNERSHIP INTEREST AND OWNERS ENTITLED TO PAYMENT; APPOINTMENT OF APPRAISERS.
(a) If a responsible organization rejects the amount demanded by a dissenting owner under Section 10.358 and the dissenting owner and
responsible organization are unable to reach an agreement relating to the fair value of the ownership interests within the period prescribed by Section 10.358(d), the dissenting owner or responsible organization may file a petition requesting a
finding and determination of the fair value of the owners ownership interests in a court in:
(1) the county in which the
organizations principal office is located in this state; or
(2) the county in which the organizations registered office is
located in this state, if the organization does not have a business office in this state.
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(b) A petition described by Subsection (a) must be filed not later than the 60th day after
the expiration of the period required by Section 10.358(d).
(c) On the filing of a petition by an owner under Subsection (a),
service of a copy of the petition shall be made to the responsible organization. Not later than the 10th day after the date a responsible organization receives service under this subsection, the responsible organization shall file with the clerk of
the court in which the petition was filed a list containing the names and addresses of each owner of the organization who has demanded payment for ownership interests under Section 10.356 and with whom agreement as to the value of the ownership
interests has not been reached with the responsible organization. If the responsible organization files a petition under Subsection (a), the petition must be accompanied by this list.
(d) The clerk of the court in which a petition is filed under this section shall provide by registered mail notice of the time and place set
for the hearing to:
(1) the responsible organization; and
(2) each owner named on the list described by Subsection (c) at the address shown for the owner on the list.
(e) The court shall:
(1)
determine which owners have:
(A) perfected their rights by complying with this subchapter; and
(B) become subsequently entitled to receive payment for the fair value of their ownership interests; and
(2) appoint one or more qualified appraisers to determine the fair value of the ownership interests of the owners described by Subdivision
(1).
(f) The court shall approve the form of a notice required to be provided under this section. The judgment of the court is final and
binding on the responsible organization, any other organization obligated to make payment under this subchapter for an ownership interest, and each owner who is notified as required by this section.
(g) The beneficial owner of an ownership interest subject to dissenters rights held in a voting trust or by a nominee on the beneficial
owners behalf may file a petition described by Subsection (a) if no agreement between the dissenting owner of the ownership interest and the responsible organization has been reached within the period prescribed by Section 10.358(d).
When the beneficial owner files a petition described by Subsection (a):
(1) the beneficial owner shall at that time be considered,
for purposes of this subchapter, the owner, the dissenting owner, and the holder of the ownership interest subject to the petition; and
(2) the dissenting owner who demanded payment under Section 10.356 has no further rights regarding the ownership interest subject to the
petition.
Section 10.362. COMPUTATION AND DETERMINATION OF FAIR VALUE OF OWNERSHIP INTEREST.
(a) For purposes of this subchapter, the fair value of an ownership interest of a domestic entity subject to dissenters rights is the
value of the ownership interest on the date preceding the date of the action that is the subject of the appraisal. Any appreciation or depreciation in the value of the ownership interest occurring in anticipation of the proposed action or as a
result of the action must be specifically excluded from the computation of the fair value of the ownership interest.
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(b) In computing the fair value of an ownership interest under this subchapter, consideration
must be given to the value of the domestic entity as a going concern without including in the computation of value any control premium, any minority ownership discount, or any discount for lack of marketability. If the domestic entity has different
classes or series of ownership interests, the relative rights and preferences of and limitations placed on the class or series of ownership interests, other than relative voting rights, held by the dissenting owner must be taken into account in the
computation of value.
(c) The determination of the fair value of an ownership interest made for purposes of this subchapter may not be
used for purposes of making a determination of the fair value of that ownership interest for another purpose or of the fair value of another ownership interest, including for purposes of determining any minority or liquidity discount that might
apply to a sale of an ownership interest.
Section 10.363. POWERS AND DUTIES OF APPRAISER; APPRAISAL PROCEDURES.
(a) An appraiser appointed under Section 10.361 has the power and authority that:
(1) is granted by the court in the order appointing the appraiser; and
(2) may be conferred by a court to a master in chancery as provided by Rule 171, Texas Rules of Civil Procedure.
(b) The appraiser shall:
(1)
determine the fair value of an ownership interest of an owner adjudged by the court to be entitled to payment for the ownership interest; and
(2) file with the court a report of that determination.
(c) The appraiser is entitled to examine the books and records of a responsible organization and may conduct investigations as the appraiser
considers appropriate. A dissenting owner or responsible organization may submit to an appraiser evidence or other information relevant to the determination of the fair value of the ownership interest required by Subsection (b)(1).
(d) The clerk of the court appointing the appraiser shall provide notice of the filing of the report under Subsection (b) to each
dissenting owner named in the list filed under Section 10.361 and the responsible organization.
Section 10.364. OBJECTION TO APPRAISAL;
HEARING.
(a) A dissenting owner or responsible organization may object, based on the law or the facts, to all or part of an appraisal
report containing the fair value of an ownership interest determined under Section 10.363(b).
(b) If an objection to a report is
raised under Subsection (a), the court shall hold a hearing to determine the fair value of the ownership interest that is the subject of the report. After the hearing, the court shall require the responsible organization to pay to the holders of the
ownership interest the amount of the determined value with interest, accruing from the 91st day after the date the applicable action for which the owner elected to dissent was effected until the date of the judgment.
(c) Interest under Subsection (b) accrues at the same rate as is provided for the accrual of prejudgment interest in civil cases.
(d) The responsible organization shall:
(1) immediately pay the amount of the judgment to a holder of an uncertificated ownership interest; and
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(2) pay the amount of the judgment to a holder of a certificated ownership interest immediately
after the certificate holder surrenders to the responsible organization an endorsed certificate representing the ownership interest.
(e)
On payment of the judgment, the dissenting owner does not have an interest in the:
(1) ownership interest for which the payment is made;
or
(2) responsible organization with respect to that ownership interest.
Section 10.365. COURT COSTS; COMPENSATION FOR APPRAISER.
(a) An appraiser appointed under Section 10.361 is entitled to a reasonable fee payable from court costs.
(b) All court costs shall be allocated between the responsible organization and the dissenting owners in the manner that the court determines
to be fair and equitable.
Section 10.366. STATUS OF OWNERSHIP INTEREST HELD OR FORMERLY HELD BY DISSENTING OWNER.
(a) An ownership interest of an organization acquired by a responsible organization under this subchapter:
(1) in the case of a merger, conversion, or interest exchange, shall be held or disposed of as provided in the plan of merger, conversion, or
interest exchange; and
(2) in any other case, may be held or disposed of by the responsible organization in the same manner as other
ownership interests acquired by the organization or held in its treasury.
(b) An owner who has demanded payment for the owners
ownership interest under Section 10.356 is not entitled to vote or exercise any other rights of an owner with respect to the ownership interest except the right to:
(1) receive payment for the ownership interest under this subchapter; and
(2) bring an appropriate action to obtain relief on the ground that the action to which the demand relates would be or was fraudulent.
(c) An ownership interest for which payment has been demanded under Section 10.356 may not be considered outstanding for purposes of any
subsequent vote or action.
Section 10.367. RIGHTS OF OWNERS FOLLOWING TERMINATION OF RIGHT OF DISSENT.
(a) The rights of a dissenting owner terminate if:
(1) the owner withdraws the demand under Section 10.356;
(2) the owners right of dissent is terminated under Section 10.356;
(3) a petition is not filed within the period required by Section 10.361; or
(4) after a hearing held under Section 10.361, the court adjudges that the owner is not entitled to elect to dissent from an action under
this subchapter.
(b) On termination of the right of dissent under this section:
(1) the dissenting owner and all persons claiming a right under the owner are conclusively presumed to have approved and ratified the action to
which the owner dissented and are bound by that action;
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(2) the owners right to be paid the fair value of the owners ownership interests
ceases;
(3) the owners status as an owner of those ownership interests is restored, as if the owners demand for payment of
the fair value of the ownership interests had not been made under Section 10.356, if the owners ownership interests were not canceled, converted, or exchanged as a result of the action or a subsequent action;
(4) the dissenting owner is entitled to receive the same cash, property, rights, and other consideration received by owners of the same class
and series of ownership interests held by the owner, as if the owners demand for payment of the fair value of the ownership interests had not been made under Section 10.356, if the owners ownership interests were canceled,
converted, or exchanged as a result of the action or a subsequent action;
(5) any action of the domestic entity taken after the date of
the demand for payment by the owner under Section 10.356 will not be considered ineffective or invalid because of the restoration of the owners ownership interests or the other rights or entitlements of the owner under this subsection;
and
(6) the dissenting owner is entitled to receive dividends or other distributions made after the date of the owners payment
demand under Section 10.356, to owners of the same class and series of ownership interests held by the owner as if the demand had not been made, subject to any change in or adjustment to the ownership interests because of an action taken by the
domestic entity after the date of the demand.
Section 10.368. EXCLUSIVITY OF REMEDY OF DISSENT AND APPRAISAL.
In the absence of fraud in the transaction, any right of an owner of an ownership interest to dissent from an action and obtain the fair value
of the ownership interest under this subchapter is the exclusive remedy for recovery of:
(1) the value of the ownership interest; or
(2) money damages to the owner with respect to the action.
(End of Appendix C)
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. |
Indemnification of Directors and Officers of Independent |
Article VI of
Independents certificate of formation and Article VI of Independents bylaws provide that Independent shall indemnify any person made a party to or involved in any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that such person is or was a director or officer of Independent or is or was serving at the request of Independent as a director or officer of another foreign or domestic
association, corporation, partnership, joint venture, trust or other entity, or employee benefit plan (whether such action, suit or proceeding is based in whole or in part on the sole or contributory gross or ordinary negligence of such person or
otherwise).
Article VII of Independents certificate of formation provides that a director of Independent shall not be liable to
Independent or its shareholders for monetary damages for an act or omission in the directors capacity as a director, subject to certain limitations.
In Article VI of Independents certificate of formation and Article VI of Independents bylaws, Independent makes mandatory for
directors and officers the indemnification provided for in Section 8.101 of the Texas Business Organizations Code (TBOC), which provides that, subject to certain limitations, a corporation may indemnify a governing person, former
governing person, or delegate who was, is, or is threatened to be made a respondent in a proceeding to the extent permitted by Section 8.102 of the TBOC if it is determined in accordance with Section 8.103 of the TBOC that:
(1) the person:
(A) acted in
good faith;
(B) reasonably believed:
(i) in the case of conduct in the persons official capacity, that the persons conduct was in the corporations best
interests; and
(ii) in any other case, that the persons conduct was not opposed to the corporations best interests; and
(C) in the case of a criminal proceeding, did not have a reasonable cause to believe the persons conduct was unlawful.
(2) with respect to expenses, the amount of expenses other than a judgment is reasonable; and
(3) indemnification should be paid.
Independent has entered into indemnification agreements with the members of its board of directors (each an indemnitee). Each
indemnification agreement requires Independent to indemnify each indemnitee to the fullest extent permitted by the TBOC and any successor statute thereto when such successor statute becomes applicable to Independent. Independent will also, among
other things, make the indemnitee whole for costs in any action to establish indemnitees right to indemnification, whether or not wholly successful.
Independent also maintains directors and officers liability insurance.
The Amended and Restated Certificate of Formation and Third Amended and Restated Bylaws of the Registrant were previously filed with the
Securities and Exchange Commission and are incorporated by reference into the registration statement.
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Item 21. |
Exhibits and Financial Statement Schedules |
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Exhibit Number |
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Description |
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2.1 |
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Agreement and Plan of Reorganization, dated as of July 23, 2015, by and among the Registrant and Grand Bank (included as Appendix A to the proxy statement/prospectus, which forms a part of this Registration Statement on Form S-4) |
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3.1 |
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Amended and Restated Certificate of Formation of the Registrant (incorporated herein by reference to Exhibit 3.1 to the Registrants Registration Statement on Form S-1
(Registration No. 333-186354) (the Form S-1 Registration Statement)) |
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3.2 |
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Certificate of Amendment to Amended and Restated Certificate of Formation of the Registrant (incorporated herein by reference to Exhibit 3.3 to Amendment No. 2 to the Form S-1
Registration Statement) |
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3.3 |
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Third Amended and Restated Bylaws of the Registrant (incorporated herein by reference to Exhibit 3.2 to Amendment No. 1 to the Form S-1 Registration Statement) |
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3.4 |
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Statement of Designation of Senior Non-Cumulative Perpetual Preferred Stock, Series A of the Registrant, as filed with the Office of the Secretary of State of the State of Texas on
April 15, 2014 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Registrant filed with the SEC on April 17, 2014) |
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3.5 |
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Certificate of Merger, dated January 2, 2014, of Live Oak Financial Corp. with and into Independent Bank Group, Inc. (incorporated herein by reference to Exhibit 3.4 to the Registrants Registration Statement on Form S-3 (Registration No. 333-196627 (the Form S-3 Registration Statement)). |
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3.6 |
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Certificate of Merger, dated April 15, 2014, of BOH Holdings, Inc. with and into Independent Bank Group, Inc. (incorporated herein by reference to Exhibit 3.5 to the Form S-3
Registration Statement) |
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3.7 |
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Certificate of Merger, dated September 30, 2014, of Houston City Bancshares, Inc. with and into Independent Bank Group, Inc. (incorporated herein by reference to Exhibit 3.7 to the Registrants Quarterly Report on Form 10-Q, dated July 31, 2015) |
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4.1 |
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Form of certificate representing shares of the Registrants common stock (incorporated herein by reference to Exhibit 4.1 to Amendment No. 1 to the Form S-1
Registration Statement) |
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4.2 |
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Form of Common Stock Purchase Warrant, with schedules of differences (incorporated herein by reference to Exhibit 4.2 to the Form S-1 Registration Statement) |
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The other instruments defining the rights of holders of the long-term debt securities of the Registrant and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of
Regulation S-K. The Registrant hereby agrees to furnish copies of these instruments to the Securities and Exchange Commission upon request. |
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4.3 |
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Form of certificate representing shares of the Registrants Series A preferred stock (incorporated herein by reference to Exhibit 4.3 to the Form S-3 Registration
Statement) |
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4.4 |
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Subordinated Debt Indenture, dated as of June 25, 2014, between the Registrant and Wells Fargo Bank, National Association, in its capacity as Indenture Trustee (incorporated herein by reference to Exhibit 4.6 to Amendment
No. 1 to the Form S-3 Registration Statement) |
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4.5 |
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First Supplemental Indenture, dated as of July 17, 2014, between the Registrant and Wells Fargo Shareowners Services, in its capacity as Indenture Trustee (incorporated herein by reference to Exhibit 4.2 to the
Registrants Current Report on Form 8-K, dated July 17, 2014) |
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Exhibit Number |
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Description |
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4.6 |
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Form of Global Note to represent the 5.875% Subordinated Notes due August 1, 2024, of the Registrant (incorporated herein by reference to Exhibit 4.3 to the Registrants Current Report on
Form 8-K, dated July 17, 2014) |
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4.7 |
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Independent Bank 401(k) Profit Sharing Plan, including related Adoption Agreement (incorporated herein by reference to Exhibit 4.9 to the Registrants Registration Statement on
Form S-8 filed with the SEC on August 29, 2014) |
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5.1 |
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Form of Opinion of Andrews Kurth LLP regarding the legality of the securities being registered* |
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8.1 |
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Form of Opinion of Andrews Kurth LLP as to certain tax matters* |
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10.1 |
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Loan and Subordinated Debenture Purchase Agreement, dated December 23, 2008, between Independent Bank Group, Inc. and TIB The Independent BankersBank (incorporated herein by reference to Exhibit 10.1 to the Form S-1 Registration Statement) |
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10.2 |
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Term Promissory Note, dated December 24, 2008, by Independent Bank Group, Inc. payable to TIB The Independent BankersBank in the original principal amount of $12,000,000 (incorporated herein by reference to Exhibit 10.2 to
the Form S-1 Registration Statement) |
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10.3 |
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Subordinated Debenture, dated December 24, 2008, by Independent Bank Group, Inc. payable to TIB The Independent BankersBank in the original principal amount of $4,500,000 (incorporated herein by reference to Exhibit 10.3
to the Form S-1 Registration Statement) |
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10.4 |
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Pledge and Security Agreement, dated December 24, 2008, between Independent Bank Group, Inc. and TIB The Independent BankersBank (incorporated herein by reference to Exhibit 10.4 to the
Form S-1 Registration Statement) |
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10.5 |
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Letter Loan Agreement, dated March 15, 2012, between Independent Bank Group, Inc. and TIB The Independent BankersBank (incorporated herein by reference to Exhibit 10.5 to the
Form S-1 Registration Statement) |
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10.6 |
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Promissory Note, dated March 15, 2012, by Independent Bank Group, Inc. payable to TIB The Independent BankersBank in the original principal amount of $7,000,000 (incorporated herein by reference to Exhibit 10.6 to the Form S-1 Registration Statement) |
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10.7 |
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Pledge Agreement, dated March 15, 2012, between Independent Bank Group, Inc. and TIB The Independent BankersBank (incorporated herein by reference to Exhibit 10.7 to the
Form S-1 Registration Statement) |
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10.8 |
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Loan Agreement, dated June 28, 2011, between IBG Adriatica Holdings, Inc. and First United Bank and Trust Company (incorporated herein by reference to Exhibit 10.8 to the
Form S-1 Registration Statement) |
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10.9 |
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Commercial Promissory Note, dated June 28, 2011, by IBG Adriatica Holdings, Inc. payable to First United Bank and Trust Company in the original principal amount of $12,187,500 (incorporated herein by reference to
Exhibit 10.9 to the Form S-1 Registration Statement) |
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10.10 |
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Security Agreement, dated June 28, 2011, between IBG Adriatica Holdings, Inc. and First United Bank and Trust Company (incorporated herein by reference to Exhibit 10.10 to the
Form S-1 Registration Statement) |
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10.11 |
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Commercial Deed of Trust, Security Agreement, Financing Statement and Assignment of Rents, dated July 29, 2011, by IBG Adriatica Holdings, Inc. for the benefit of First United Bank and Trust Company (incorporated herein by
reference to Exhibit 10.11 to the Form S-1 Registration Statement) |
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10.12 |
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Commercial Guaranty Agreement, dated June 28, 2011, by Independent Bank Group, Inc. in favor of First United Bank and Trust Company (incorporated herein by reference to Exhibit 10.12 to the
Form S-1 Registration Statement) |
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Exhibit Number |
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Description |
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10.13 |
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Loan Purchase and Sale Agreement between IBG Adriatica Holdings, Inc., as assignee of Independent Bank Group, Inc., and First United Bank and Trust Company, as amended (incorporated herein by reference to Exhibit 10.13 to the Form S-1 Registration Statement) |
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10.14 |
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Real Estate Acquisition and Option Agreement, dated the December 22, 2011, between IBG Adriatica Holdings, Inc. and Himalayan Ventures, L.P. (incorporated herein by reference to Exhibit 10.14 to the Form S-1 Registration Statement) |
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10.15 |
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Real Estate Acquisition Agreement, dated November 15, 2012, between IBG Adriatica Holdings, Inc. and Himalayan St. Pauls Square Holdings, LLC (incorporated herein by reference to Exhibit 10.15 to the Form S-1 Registration Statement) |
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10.16 |
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Real Estate Acquisition Agreements by and between IBG Adriatica Holdings, Inc. and Himalayan Ventures, L.P. dated December 5, 2013 (incorporated herein by reference to Exhibit 10.16 to the Registrants Registration
Statement on Form S-4 (Registration No. 333-193373) (the BOH Registration Statement)). |
|
|
10.17 |
|
Form of Indemnification Agreement for directors and officers (incorporated herein by reference to Exhibit 10.16 to the Form S-1 Registration Statement) |
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10.18 |
|
Form of S-Corporation Revocation, Tax Allocation and Indemnification Agreement (incorporated herein by reference to Exhibit 10.17 to the
Form S-1 Registration Statement) |
|
|
10.19 |
|
2005 Stock Grant Plan, with form of Notice of Grant Letter Agreement, as amended, and related Form of Notice of Grant Letter Agreement relating to the written compensation contracts (incorporated herein by reference to
Exhibit 10.18 to the Form S-1 Registration Statement) |
|
|
10.20 |
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2012 Stock Grant Plan, with form of Notice of Grant Letter Agreement (incorporated herein by reference to Exhibit 10.19 to the Form S-1 Registration Statement) |
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10.21 |
|
2013 Equity Incentive Plan, with form of Restricted Stock Award Agreement (incorporated herein by reference to Exhibit 10.20 to the Form S-1 Registration Statement) |
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|
10.22 |
|
Agreement and Plan of Reorganization, dated as of June 2, 2014, by and among the Registrant and Houston City Bancshares (incorporated by reference to Exhibit 2.1 to the Registrants Registration Statement on Form S-4) (Registration No. 333-197556)) |
|
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10.23 |
|
Agreement and Plan of Reorganization by and between Independent Bank Group, Inc. and BOH Holdings, Inc., dated as of November 21, 2013 (incorporated by reference to Exhibit 2.1 to the Registrants Registration Statement on
Form S-4 (Registration No. 333-193373)) |
|
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10.24 |
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Agreement and Plan of Reorganization by and between Independent Bank Group, Inc. and Collin Bank dated as of July 18, 2013 (incorporated by reference to Exhibit 2.1 to the Registrants Registration Statement on Form S-4 (Registration No. 333-190946)) |
|
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10.25 |
|
Agreement and Plan of Reorganization by and between Independent Bank Group, Inc. and Live Oak Financial Corp. dated as of August 22, 2013 (incorporated by reference to Exhibit 2.1 to the Registrants Registration
Statement on Form S-4 (Registration No. 333-191670)) |
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10.26 |
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Employment Agreement, dated November 21, 2013, between Independent Bank Group, Inc. and James D. Stein, including related Restricted Stock Grant (incorporated herein by reference to Exhibit 10.28 to the BOH Registration
Statement) |
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10.27 |
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Subordinated Debt Indenture, dated as of June 25, 2014, between Independent Bank Group, Inc. and Wells Fargo Shareowner Services, in its capacity as Indenture Trustee (incorporated herein by reference to Exhibit 4.6 to the
Registrants Amendment No. 1 to the Form S-3 Registration Statement) |
II-4
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Exhibit Number |
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Description |
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10.28 |
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First Supplemental Indenture, dated as of July 17, 2014, between Independent Bank Group, Inc. and Wells Fargo Shareowner Services, in its capacity as Indenture Trustee (incorporated herein by reference to Exhibit 4.2 to
the Registrants Current Report on Form 8-K, dated July 17, 2014) |
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10.29.1 |
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Credit Agreement, dated as of July 22, 2015, between Independent Bank Group, Inc., U.S. Bank National Association and Frost Bank* |
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10.29.2 |
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Revolving Credit Note, dated July 22, 2015, by Independent Bank Group, Inc., in favor of U.S. Bank National Association* |
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10.29.3 |
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Revolving Credit Note, dated July 22, 2015, by Independent Bank Group, Inc., in favor of Frost Bank* |
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10.29.4 |
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Negative Pledge Agreement, dated as of July 22, 2015, by Independent Bank Group, Inc., in favor of U.S. Bank National Association* |
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10.30 |
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Voting Agreement, dated July 23, 2015, between Independent Bank Group, Inc., Grand Bank and certain shareholders of Grand Bank* |
|
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21.1 |
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Subsidiaries of Independent Bank Group, Inc. (incorporated herein by reference to Exhibit 21.1 to the Registrants Annual Report on Form 10-K for the year ended December 31,
2014) |
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23.1 |
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Consent of McGladrey LLP, independent registered public accounting firm of the Registrant* |
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23.2 |
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Consent of Andrews Kurth LLP, to be included as part of its opinion filed as Exhibit 5.1 and incorporated herein by reference |
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23.3 |
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Consent of Hovde Group, LLC, Grand Banks financial advisor, included as part of its opinion included as Appendix B to the joint proxy statement/prospectus, which forms a part of this Form S-4 and is incorporated herein
by reference |
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23.4 |
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Consent of Andrews Kurth LLP, to be included as part of its opinion filed as Exhibit 8.1 and incorporated herein by reference |
|
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24.1 |
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Power of Attorney of Directors and Officers of the Registrant, included on the signature page of the original filing of this Form S-4 Registration Statement and incorporated herein by
reference |
|
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99.1 |
|
Opinion of Hovde Group, LLC, dated July 22, 2015 (included as Appendix B to the joint proxy statement/prospectus, which forms a part of this Registration Statement on
Form S-4) and is incorporated herein by reference |
|
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99.2 |
|
Form of proxy card for special meeting of shareholders of Grand Bank* |
(b) |
Financial Statement Schedules |
None. All other schedules for which provision is made in
Regulation S-X of the Securities and Exchange Commission are not required under the related restrictions or are inapplicable, and, therefore, have been omitted.
(c) |
Opinion of Financial Advisor |
Furnished as Appendix B to the proxy
statement/prospectus, which forms a part of this Registration Statement on Form S-4.
II-5
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the
effective Registration Statement; and
(iii) To include any material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such information in the Registration Statement.
(2) That, for the
purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the offering.
(g)(1) The undersigned registrant hereby
undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
II-6
The undersigned registrant hereby undertakes to respond to requests for information that is
incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of McKinney, Texas, on September 3, 2015.
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INDEPENDENT BANK GROUP, INC. |
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By: |
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/s/ David R. Brooks |
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David R. Brooks |
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Chairman of the Board and Chief Executive Officer |
Power of Attorney
Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in their respective
capacities and on the respective dates indicated opposite their names. Each person whose signature appears below hereby authorizes each of David R. Brooks, Daniel W. Brooks and Torry Berntsen with full power of substitution, to execute in the name
and on behalf of such person any amendment (including any post-effective amendment) to this Registration Statement and to file the same, with exhibits thereto, and other documents in connection therewith, making such changes in this Registration
Statement as the registrant deems appropriate, and appoints David R. Brooks, Daniel W. Brooks and Torry Berntsen with full power of substitution, attorney-in-fact to sign any and all amendments (including post-effective amendments and any related
registration statement pursuant to Rule 462(b) under the Securities Act) hereto to this Registration Statement and to file the same, with exhibits thereto, and other documents in connection therewith and we do hereby ratify and confirm that said
attorney and agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the capacities and on the dates indicated.
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Signature |
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Title |
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Date |
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/s/ David R. Brooks |
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Chairman of the Board, Chief Executive Officer
and Director (Principal Executive Officer) |
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September 3, 2015 |
David R. Brooks |
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/s/ Michelle S. Hickox |
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Executive Vice President and Chief Financial
Officer (Principal Financial and Principal Accounting
Officer) |
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September 3, 2015 |
Michelle S. Hickox |
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/s/ Torry Berntsen |
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President, Chief Operating Officer and Director |
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September 3, 2015 |
Torry Berntsen |
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/s/ Daniel W. Brooks |
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Vice Chairman, Chief Risk Officer and Director |
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September 3, 2015 |
Daniel W. Brooks |
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/s/ James D. Stein |
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Vice Chairman, Houston Region Chief Executive Officer and Director |
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September 3, 2015 |
James D. Stein |
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/s/ M. Brian Aynesworth |
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Director |
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September 3, 2015 |
M. Brian Aynesworth |
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Signature |
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Title |
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Date |
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/s/ Douglas A. Cifu |
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Director |
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September 3, 2015 |
Douglas A. Cifu |
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/s/ William E. Fair |
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Director |
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September 3, 2015 |
William E. Fair |
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/s/ Craig E. Holmes |
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Director |
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September 3, 2015 |
Craig E. Holmes |
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/s/ J. Webb Jennings III |
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Director |
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September 3, 2015 |
J. Webb Jennings III |
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/s/ Donald L. Poarch |
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Director |
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September 3, 2015 |
Donald L. Poarch |
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/s/ Jack M. Radke |
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Director |
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September 3, 2015 |
Jack M. Radke |
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/s/ G. Stacy Smith |
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Director |
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September 3, 2015 |
G. Stacy Smith |
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/s/ Michael T. Viola |
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Director |
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September 3, 2015 |
Michael T. Viola |
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EXHIBIT LIST
|
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Exhibit
Number |
|
Description |
|
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2.1 |
|
Agreement and Plan of Reorganization, dated as of July 23, 2015, by and among the Registrant and Grand Bank (included as Appendix A to the proxy statement/prospectus, which forms a part of this Registration Statement on Form S-4) |
|
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3.1 |
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Amended and Restated Certificate of Formation of the Registrant (incorporated herein by reference to Exhibit 3.1 to the Registrants Registration Statement on Form S-1
(Registration No. 333-186354) (the Form S-1 Registration Statement)) |
|
|
3.2 |
|
Certificate of Amendment to Amended and Restated Certificate of Formation of the Registrant (incorporated herein by reference to Exhibit 3.3 to Amendment No. 2 to the Form S-1
Registration Statement) |
|
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3.3 |
|
Third Amended and Restated Bylaws of the Registrant (incorporated herein by reference to Exhibit 3.2 to Amendment No. 1 to the Form S-1 Registration Statement) |
|
|
3.4 |
|
Statement of Designation of Senior Non-Cumulative Perpetual Preferred Stock, Series A of the Registrant, as filed with the Office of the Secretary of State of the State of Texas on
April 15, 2014 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Registrant filed with the SEC on April 17, 2014) |
|
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3.5 |
|
Certificate of Merger, dated January 2, 2014, of Live Oak Financial Corp. with and into Independent Bank Group, Inc. (incorporated herein by reference to Exhibit 3.4 to the Registrants Registration Statement on Form S-3 (Registration No. 333-196627 (the Form S-3 Registration Statement)). |
|
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3.6 |
|
Certificate of Merger, dated April 15, 2014, of BOH Holdings, Inc. with and into Independent Bank Group, Inc. (incorporated herein by reference to Exhibit 3.5 to the Form S-3
Registration Statement) |
|
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3.7 |
|
Certificate of Merger, dated September 30, 2014, of Houston City Bancshares, Inc. with and into Independent Bank Group, Inc. (incorporated herein by reference to Exhibit 3.7 to the Registrants Quarterly Report on Form 10-Q, dated July 31, 2015) |
|
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4.1 |
|
Form of certificate representing shares of the Registrants common stock (incorporated herein by reference to Exhibit 4.1 to Amendment No. 1 to the Form S-1
Registration Statement) |
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4.2 |
|
Form of Common Stock Purchase Warrant, with schedules of differences (incorporated herein by reference to Exhibit 4.2 to the Form S-1 Registration Statement) |
|
|
|
|
The other instruments defining the rights of holders of the long-term debt securities of the Registrant and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of
Regulation S-K. The Registrant hereby agrees to furnish copies of these instruments to the Securities and Exchange Commission upon request. |
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4.3 |
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Form of certificate representing shares of the Registrants Series A preferred stock (incorporated herein by reference to Exhibit 4.3 to the Form S-3 Registration
Statement) |
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4.4 |
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Subordinated Debt Indenture, dated as of June 25, 2014, between the Registrant and Wells Fargo Bank, National Association, in its capacity as Indenture Trustee (incorporated herein by reference to Exhibit 4.6 to Amendment
No. 1 to the Form S-3 Registration Statement) |
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4.5 |
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First Supplemental Indenture, dated as of July 17, 2014, between the Registrant and Wells Fargo Shareowners Services, in its capacity as Indenture Trustee (incorporated herein by reference to Exhibit 4.2 to the
Registrants Current Report on Form 8-K, dated July 17, 2014) |
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4.6 |
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Form of Global Note to represent the 5.875% Subordinated Notes due August 1, 2024, of the Registrant (incorporated herein by reference to Exhibit 4.3 to the Registrants Current Report on
Form 8-K, dated July 17, 2014) |
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Exhibit
Number |
|
Description |
|
|
4.7 |
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Independent Bank 401(k) Profit Sharing Plan, including related Adoption Agreement (incorporated herein by reference to Exhibit 4.9 to the Registrants Registration Statement on
Form S-8 filed with the SEC on August 29, 2014) |
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5.1 |
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Form of Opinion of Andrews Kurth LLP regarding the legality of the securities being registered* |
|
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8.1 |
|
Form of Opinion of Andrews Kurth LLP as to certain tax matters* |
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10.1 |
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Loan and Subordinated Debenture Purchase Agreement, dated December 23, 2008, between Independent Bank Group, Inc. and TIB The Independent BankersBank (incorporated herein by reference to Exhibit 10.1 to the Form S-1 Registration Statement) |
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10.2 |
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Term Promissory Note, dated December 24, 2008, by Independent Bank Group, Inc. payable to TIB The Independent BankersBank in the original principal amount of $12,000,000 (incorporated herein by reference to Exhibit 10.2 to
the Form S-1 Registration Statement) |
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10.3 |
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Subordinated Debenture, dated December 24, 2008, by Independent Bank Group, Inc. payable to TIB The Independent BankersBank in the original principal amount of $4,500,000 (incorporated herein by reference to Exhibit 10.3
to the Form S-1 Registration Statement) |
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10.4 |
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Pledge and Security Agreement, dated December 24, 2008, between Independent Bank Group, Inc. and TIB The Independent BankersBank (incorporated herein by reference to Exhibit 10.4 to the
Form S-1 Registration Statement) |
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10.5 |
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Letter Loan Agreement, dated March 15, 2012, between Independent Bank Group, Inc. and TIB The Independent BankersBank (incorporated herein by reference to Exhibit 10.5 to the
Form S-1 Registration Statement) |
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10.6 |
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Promissory Note, dated March 15, 2012, by Independent Bank Group, Inc. payable to TIB The Independent BankersBank in the original principal amount of $7,000,000 (incorporated herein by reference to Exhibit 10.6 to the Form S-1 Registration Statement) |
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10.7 |
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Pledge Agreement, dated March 15, 2012, between Independent Bank Group, Inc. and TIB The Independent BankersBank (incorporated herein by reference to Exhibit 10.7 to the
Form S-1 Registration Statement) |
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10.8 |
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Loan Agreement, dated June 28, 2011, between IBG Adriatica Holdings, Inc. and First United Bank and Trust Company (incorporated herein by reference to Exhibit 10.8 to the
Form S-1 Registration Statement) |
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10.9 |
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Commercial Promissory Note, dated June 28, 2011, by IBG Adriatica Holdings, Inc. payable to First United Bank and Trust Company in the original principal amount of $12,187,500 (incorporated herein by reference to
Exhibit 10.9 to the Form S-1 Registration Statement) |
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10.10 |
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Security Agreement, dated June 28, 2011, between IBG Adriatica Holdings, Inc. and First United Bank and Trust Company (incorporated herein by reference to Exhibit 10.10 to the
Form S-1 Registration Statement) |
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10.11 |
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Commercial Deed of Trust, Security Agreement, Financing Statement and Assignment of Rents, dated July 29, 2011, by IBG Adriatica Holdings, Inc. for the benefit of First United Bank and Trust Company (incorporated herein by
reference to Exhibit 10.11 to the Form S-1 Registration Statement) |
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10.12 |
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Commercial Guaranty Agreement, dated June 28, 2011, by Independent Bank Group, Inc. in favor of First United Bank and Trust Company (incorporated herein by reference to Exhibit 10.12 to the
Form S-1 Registration Statement) |
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10.13 |
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Loan Purchase and Sale Agreement between IBG Adriatica Holdings, Inc., as assignee of Independent Bank Group, Inc., and First United Bank and Trust Company, as amended (incorporated herein by reference to Exhibit 10.13 to the Form S-1 Registration Statement) |
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|
Exhibit
Number |
|
Description |
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10.14 |
|
Real Estate Acquisition and Option Agreement, dated the December 22, 2011, between IBG Adriatica Holdings, Inc. and Himalayan Ventures, L.P. (incorporated herein by reference to Exhibit 10.14 to the Form S-1 Registration Statement) |
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10.15 |
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Real Estate Acquisition Agreement, dated November 15, 2012, between IBG Adriatica Holdings, Inc. and Himalayan St. Pauls Square Holdings, LLC (incorporated herein by reference to Exhibit 10.15 to the Form S-1 Registration Statement) |
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10.16 |
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Real Estate Acquisition Agreements by and between IBG Adriatica Holdings, Inc. and Himalayan Ventures, L.P. dated December 5, 2013 (incorporated herein by reference to Exhibit 10.16 to the Registrants Registration
Statement on Form S-4 (Registration No. 333-193373) (the BOH Registration Statement)). |
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10.17 |
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Form of Indemnification Agreement for directors and officers (incorporated herein by reference to Exhibit 10.16 to the Form S-1 Registration Statement) |
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10.18 |
|
Form of S-Corporation Revocation, Tax Allocation and Indemnification Agreement (incorporated herein by reference to Exhibit 10.17 to the
Form S-1 Registration Statement) |
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|
10.19 |
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2005 Stock Grant Plan, with form of Notice of Grant Letter Agreement, as amended, and related Form of Notice of Grant Letter Agreement relating to the written compensation contracts (incorporated herein by reference to
Exhibit 10.18 to the Form S-1 Registration Statement) |
|
|
10.20 |
|
2012 Stock Grant Plan, with form of Notice of Grant Letter Agreement (incorporated herein by reference to Exhibit 10.19 to the Form S-1 Registration Statement) |
|
|
10.21 |
|
2013 Equity Incentive Plan, with form of Restricted Stock Award Agreement (incorporated herein by reference to Exhibit 10.20 to the Form S-1 Registration Statement) |
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|
10.22 |
|
Agreement and Plan of Reorganization, dated as of June 2, 2014, by and among the Registrant and Houston City Bancshares (incorporated by reference to Exhibit 2.1 to the Registrants Registration Statement on Form S-4) (Registration No. 333-197556)) |
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10.23 |
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Agreement and Plan of Reorganization by and between Independent Bank Group, Inc. and BOH Holdings, Inc., dated as of November 21, 2013 (incorporated by reference to Exhibit 2.1 to the Registrants Registration Statement on
Form S-4 (Registration No. 333-193373)) |
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10.24 |
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Agreement and Plan of Reorganization by and between Independent Bank Group, Inc. and Collin Bank dated as of July 18, 2013 (incorporated by reference to Exhibit 2.1 to the Registrants Registration Statement on Form S-4 (Registration No. 333-190946)) |
|
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10.25 |
|
Agreement and Plan of Reorganization by and between Independent Bank Group, Inc. and Live Oak Financial Corp. dated as of August 22, 2013 (incorporated by reference to Exhibit 2.1 to the Registrants Registration
Statement on Form S-4 (Registration No. 333-191670)) |
|
|
10.26 |
|
Employment Agreement, dated November 21, 2013, between Independent Bank Group, Inc. and James D. Stein, including related Restricted Stock Grant (incorporated herein by reference to Exhibit 10.28 to the BOH Registration
Statement) |
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|
10.27 |
|
Subordinated Debt Indenture, dated as of June 25, 2014, between Independent Bank Group, Inc. and Wells Fargo Shareowner Services, in its capacity as Indenture Trustee (incorporated herein by reference to Exhibit 4.6 to the
Registrants Amendment No. 1 to the Form S-3 Registration Statement) |
|
|
10.28 |
|
First Supplemental Indenture, dated as of July 17, 2014, between Independent Bank Group, Inc. and Wells Fargo Shareowner Services, in its capacity as Indenture Trustee (incorporated herein by reference to Exhibit 4.2 to
the Registrants Current Report on Form 8-K, dated July 17, 2014) |
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|
10.29.1 |
|
Credit Agreement, dated as of July 22, 2015, between Independent Bank Group, Inc., U.S. Bank National Association and Frost Bank* |
|
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|
Exhibit
Number |
|
Description |
|
|
10.29.2 |
|
Revolving Credit Note, dated July 22, 2015, by Independent Bank Group, Inc., in favor of U.S. Bank National Association* |
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|
10.29.3 |
|
Revolving Credit Note, dated July 22, 2015, by Independent Bank Group, Inc., in favor of Frost Bank* |
|
|
10.29.4 |
|
Negative Pledge Agreement, dated as of July 22, 2015, by Independent Bank Group, Inc., in favor of U.S. Bank National Association* |
|
|
10.30 |
|
Voting Agreement, dated July 23, 2015, between Independent Bank Group, Inc., Grand Bank and certain shareholders of Grand Bank* |
|
|
21.1 |
|
Subsidiaries of Independent Bank Group, Inc. (incorporated herein by reference to Exhibit 21.1 to the Registrants Annual Report on Form 10-K for the year ended December 31,
2014) |
|
|
23.1 |
|
Consent of McGladrey LLP, independent registered public accounting firm of the Registrant* |
|
|
23.2 |
|
Consent of Andrews Kurth LLP, to be included as part of its opinion filed as Exhibit 5.1 and incorporated herein by reference |
|
|
23.3 |
|
Consent of Hovde Group, LLC, Grand Banks financial advisor, included as part of its opinion included as Appendix B to the joint proxy statement/prospectus, which forms a part of this Registration Statement on Form S-4
and is incorporated herein by reference |
|
|
23.4 |
|
Consent of Andrews Kurth LLP, to be included as part of its opinion filed as Exhibit 8.1 and incorporated herein by reference |
|
|
24.1 |
|
Power of Attorney of Directors and Officers of the Registrant, included on the signature page of the original filing of this Form S-4 Registration Statement and incorporated herein by
reference |
|
|
99.1 |
|
Opinion of Hovde Group, LLC, dated July 22, 2015 (included as Appendix B to the joint proxy statement/prospectus, which forms a part of this Registration Statement on
Form S-4) and is incorporated herein by reference |
|
|
99.2 |
|
Form of proxy card for special meeting of shareholders of Grand Bank* |
Exhibit 5.1
, 2015
Independent Bank Group, Inc.
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069
Ladies and Gentlemen:
We have acted as special counsel to Independent Bank Group, Inc., a Texas corporation (the Company), in connection with the
preparation and filing of the Companys Registration Statement on Form S-4 (No. 333- ), as amended (the Registration
Statement), as filed with the Securities and Exchange Commission (the Commission) pursuant to the Securities Act of 1933, as amended (the Securities Act) and the rules and regulations thereunder (the
Rules). The Registration Statement relates to the registration of the proposed offer and sale of an aggregate of up to 1,279,532 shares (the Shares) of the Companys common stock, par value $0.01 per share,
to be issued in connection with the merger (the Merger) of Grand Bank, a Texas state banking association (Grand Bank), with and into Independent Bank, a Texas state banking association and wholly owned
subsidiary of the Company, with Independent Bank continuing as the surviving bank, as contemplated by the Agreement and Plan of Reorganization, dated July 23, 2015, between the Company and Grand Bank (the Reorganization
Agreement). This opinion letter is being delivered in connection with the filing of the Registration Statement with the Commission.
As the basis for the opinion expressed herein, we have examined the Registration Statement, the form of Reorganization Agreement filed as an
exhibit to the Registration Statement, such statutes, including the Texas Business Organizations Code, as amended (the TBOC), regulations, corporate records and documents, including the Amended and Restated Certificate of
Formation, as amended, of the Company and the Third Amended and Restated Bylaws of the Company, and other instruments and documents and have made such other investigations as we have deemed necessary or advisable for the purposes of rendering the
opinion expressed herein. As to questions of fact material to this opinion, we have relied, with your concurrence, upon certificates of representatives of the Company and public officials.
In making such examination and rendering the opinion expressed herein, we have assumed, but have not verified, (i) that all signatures on
documents examined by us are genuine, (ii) the legal capacity of all natural persons, (iii) the authenticity and completeness of all documents submitted to us as originals and (iv) the conformity to authentic and complete original
documents of all documents submitted to us as certified, conformed or photostatic copies.
Based upon the foregoing, but assuming no
responsibility for the accuracy or the completeness of the data supplied by the Company and subject to the qualifications, limitations and assumptions set forth herein, and having due regard for such legal considerations as we deem relevant, we are
of the opinion that, when the Registration Statement has been declared effective by the Commission in accordance with the Securities Act and the Rules and the Shares have been issued and delivered pursuant to and in accordance with the
Reorganization Agreement for the consideration set forth therein, the Shares will be validly issued, fully paid and nonassessable.
The
foregoing opinion is based on and limited to the laws of the State of Texas and the federal laws of the United States of America, and we express no opinion as to the laws of any other jurisdiction.
We hereby consent to the filing by you of this opinion as an exhibit to the Registration Statement and the use of our name under the caption
Legal Matters in the Registration Statement. In giving these consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act and the rules and regulations
of the SEC promulgated thereunder.
Very truly yours,
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Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, Texas 75201
+1.214.659.4400 Phone
+1.214.659.4401 Fax
andrewskurth.com |
Exhibit 8.1
, 2015
Independent Bank Group, Inc.
1600 Redbud Blvd., Suite 400
McKinney, TX 75069
Ladies and Gentlemen:
We have acted as counsel to Independent Bank Group, Inc., a Texas corporation (Parent), in connection with the preparation and
filing of Registration Statement on Form S-4, as amended (the Registration Statement), filed by Parent with the Securities and Exchange Commission (the Commission) pursuant to the Securities Act of 1933, as amended (the
Act). The Registration Statement relates to the merger of Grand Bank, a Texas state banking association (the Company), with and into Independent Bank, McKinney, Texas, a Texas state banking association and a wholly-owned
subsidiary of Parent (Independent Bank), with Independent Bank surviving (the Merger), pursuant to the Agreement and Plan of Reorganization dated as of July 23, 2015 (the Merger Agreement), by and between
Parent and the Company.
In arriving at the opinion expressed below, we have examined the Registration Statement, including the proxy
statement/prospectus included therein and the documents incorporated by reference therein, and we have made such investigations of law as we have deemed appropriate as a basis for the opinion expressed below. As to any facts material to the opinion
expressed herein which were not independently established or verified, we have relied upon oral or written statements and representations of officers and other representatives of the Company and Parent.
Subject to the limitations and qualifications stated in the Registration Statement and set forth herein, we hereby confirm the opinion of
Andrews Kurth LLP that is attributed to us in the discussion of the United States federal income tax consequences appearing under the heading Proposal to Approve the Reorganization AgreementMaterial U.S. Federal Income Tax Consequences
of the Merger in the proxy statement/prospectus forming part of the Registration Statement (the Discussion).
Our
opinion is based upon and conditioned upon the initial and continuing accuracy of the statements, representations and assumptions set forth in the Merger Agreement and the Registration Statement and the oral or written statements and representations
of officers and other representatives of the Company and Parent. Further, we have assumed that the Merger will be consummated as of the date hereof in the manner contemplated by, and in accordance with, the terms set forth in the Merger Agreement
and described in the Registration Statement, without the waiver of any material condition, and that the Merger will be effective under applicable state law. This opinion letter is limited to the matters set forth herein, and no opinions are intended
to be implied or may be inferred beyond those expressly stated herein. Our opinion is rendered as of the date hereof and we assume no obligation to update or supplement this opinion or any matter related to this opinion to reflect any change of
fact, circumstances, or law after such time as the Registration Statement is declared effective. In addition, our opinion is based on the assumption that
Austin Beijing Dallas Dubai Houston London New York
Research Triangle Park The Woodlands Washington, DC
Independent Bank Group, Inc.
, 2015
Page 2
the matter will be properly presented to the applicable
court. Furthermore, our opinion is not binding on the Internal Revenue Service or a court. In addition, we must note that our opinion represents merely our best legal judgment on the matters presented and that others may disagree with our
conclusion. There can be no assurance that the Internal Revenue Service will not take a contrary position or that a court would agree with our opinion if litigated.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm in the proxy
statement/prospectus forming a part of the Registration Statement. In giving this consent, however, we do not hereby admit that we are within the category of persons whose consent is required under section 7 of the Act or the rules and regulations
of the Commission issued thereunder.
Very truly yours,
Exhibit 10.29.1
DEFINITIVE AGREEMENT
Deal CUSIP: 45384NAA8
Revolving Loan CUSIP: 45384NAB6
CREDIT AGREEMENT
DATED
AS OF JULY 22, 2015
AMONG
INDEPENDENT BANK GROUP, INC.,
THE LENDERS,
U.S. BANK
NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT
AND
U.S. BANK NATIONAL
ASSOCIATION,
AS SOLE LEAD ARRANGER AND BOOK RUNNER
Table of Contents
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Page |
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ARTICLE I DEFINITIONS |
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1 |
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ARTICLE II THE CREDITS |
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16 |
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2.1 |
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Commitment |
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16 |
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2.2 |
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Required Payments; Termination |
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16 |
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2.3 |
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Ratable Revolving Loans |
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17 |
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2.4 |
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Minimum Amount of Each Advance |
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17 |
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2.5 |
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Optional Principal Payments |
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17 |
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2.6 |
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Method of Borrowing |
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17 |
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2.7 |
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Interest Rates |
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17 |
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2.8 |
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Rates Applicable After Event of Default |
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17 |
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2.9 |
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Method of Payment |
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17 |
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2.10 |
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Evidence of Indebtedness |
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18 |
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2.11 |
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Telephonic Notices |
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18 |
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2.12 |
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Interest Payment Dates; Interest and Fee Basis |
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19 |
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2.13 |
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Notification of Advances, Interest Rates, Prepayments and Commitment Reductions |
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19 |
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2.14 |
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Lending Installations |
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19 |
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2.15 |
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Non-Receipt of Funds by the Administrative Agent |
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19 |
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2.16 |
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Replacement of Lender |
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19 |
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2.17 |
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Limitation of Interest |
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20 |
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2.18 |
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Defaulting Lenders |
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21 |
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ARTICLE III YIELD PROTECTION; TAXES |
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22 |
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3.1 |
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Yield Protection |
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22 |
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3.2 |
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Changes in Capital Adequacy Regulations |
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23 |
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3.3 |
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Availability of Types of Advances; Adequacy of Interest Rate |
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23 |
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3.4 |
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Taxes |
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24 |
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3.5 |
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Selection of Lending Installation; Mitigation Obligations; Lender Statements; Survival of Indemnity |
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27 |
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3.6 |
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Break-Funding Compensation |
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27 |
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ARTICLE IV CONDITIONS PRECEDENT |
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28 |
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4.1 |
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Initial Advances |
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28 |
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4.2 |
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Each Advance |
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29 |
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ARTICLE V REPRESENTATIONS AND WARRANTIES |
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30 |
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5.1 |
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Organization, Qualification and Subsidiaries |
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30 |
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5.2 |
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Financial Statements |
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30 |
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5.3 |
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Authorization |
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30 |
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5.4 |
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Absence of Conflicting Obligations |
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31 |
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5.5 |
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Taxes |
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31 |
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5.6 |
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Absence of Litigation |
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31 |
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5.7 |
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Accuracy of Information |
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31 |
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5.8 |
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Ownership of Property |
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31 |
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5.9 |
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Federal Reserve Regulations |
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32 |
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5.10 |
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ERISA |
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32 |
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5.11 |
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Places of Business |
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32 |
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5.12 |
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Other Names |
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32 |
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5.13 |
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Not an Investment Company |
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32 |
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5.14 |
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No Defaults |
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32 |
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5.15 |
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Environmental Laws |
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33 |
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5.16 |
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Labor Matters |
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33 |
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5.17 |
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Restricted Payments |
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33 |
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5.18 |
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Solvency |
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33 |
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5.19 |
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Bank Holding Company |
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34 |
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5.20 |
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FDIC Insurance |
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34 |
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5.21 |
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Investigations |
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34 |
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5.22 |
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Anti-Corruption Laws; OFAC; Anti-Terrorism Laws |
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34 |
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ARTICLE VI COVENANTS |
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34 |
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6.1 |
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Corporate Existence; Compliance With Laws; Maintenance of Business; Taxes |
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34 |
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6.2 |
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Maintenance of Property; Insurance |
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35 |
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6.3 |
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Financial Statements; Notices |
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35 |
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6.4 |
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Inspection of Property and Records |
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37 |
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6.5 |
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Use of Proceeds |
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37 |
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6.6 |
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Comply With, Pay and Discharge All Notes, Mortgages, Deeds of Trust and Leases |
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38 |
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6.7 |
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Environmental Compliance |
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38 |
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6.8 |
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Fees and Costs |
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39 |
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6.9 |
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Financial Covenants |
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40 |
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6.10 |
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Revolving Loans Resting Period |
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40 |
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6.11 |
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OFAC, PATRIOT Act, Anti-Corruption Laws Compliance |
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40 |
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ARTICLE VII NEGATIVE COVENANTS |
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41 |
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7.1 |
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Change of Control; Consolidation, Merger, Acquisitions, Etc. |
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41 |
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7.2 |
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Holding Company Indebtedness |
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41 |
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7.3 |
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Liens; Negative Pledges |
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41 |
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7.4 |
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Dividend; Distributions |
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41 |
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7.5 |
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Loans; Investments |
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42 |
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7.6 |
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Compliance with ERISA |
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42 |
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7.7 |
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Affiliates |
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42 |
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7.8 |
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Prepayment or Redemption of Subordinated Indebtedness |
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42 |
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ARTICLE VIII DEFAULTS |
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43 |
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8.1 |
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Events of Default Defined |
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43 |
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ARTICLE IX ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES |
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45 |
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9.1 |
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Acceleration; Remedies |
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45 |
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9.2 |
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Application of Funds |
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45 |
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9.3 |
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Amendments |
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46 |
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9.4 |
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Preservation of Rights |
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46 |
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ARTICLE X GENERAL PROVISIONS |
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47 |
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10.1 |
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Survival of Representations |
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47 |
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10.2 |
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Governmental Regulation |
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47 |
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10.3 |
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Headings |
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47 |
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10.4 |
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Entire Agreement |
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47 |
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10.5 |
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Several Obligations; Benefits of this Agreement |
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47 |
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10.6 |
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Expenses; Indemnification |
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47 |
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10.7 |
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Numbers of Documents |
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48 |
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10.8 |
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Accounting and Financial Determinations |
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48 |
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10.9 |
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Severability of Provisions |
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49 |
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10.10 |
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Nonliability of Lenders |
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49 |
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10.11 |
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Confidentiality |
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50 |
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10.12 |
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Nonreliance |
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50 |
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10.13 |
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Disclosure |
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50 |
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10.14 |
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USA PATRIOT Act Notification |
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50 |
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ARTICLE XI THE ADMINISTRATIVE AGENT |
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51 |
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11.1 |
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Appointment; Nature of Relationship |
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51 |
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11.2 |
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Powers |
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51 |
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11.3 |
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General Immunity |
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51 |
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11.4 |
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No Responsibility for Revolving Loans, Recitals, Etc. |
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51 |
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11.5 |
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Action on Instructions of Lenders |
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52 |
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11.6 |
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Employment of Administrative Agents and Counsel |
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52 |
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11.7 |
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Reliance on Documents; Counsel |
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52 |
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11.8 |
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Administrative Agents Reimbursement and Indemnification |
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52 |
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11.9 |
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Notice of Event of Default |
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53 |
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11.10 |
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Rights as a Lender |
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53 |
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11.11 |
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Lender Credit Decision, Legal Representation |
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53 |
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11.12 |
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Successor Administrative Agent |
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54 |
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11.13 |
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Delegation to Affiliates |
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55 |
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11.14 |
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Negative Pledge Agreement |
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55 |
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11.15 |
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No Advisory or Fiduciary Responsibility |
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55 |
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ARTICLE XII SETOFF; RATABLE PAYMENTS |
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55 |
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12.1 |
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Setoff |
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55 |
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12.2 |
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Ratable Payments |
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56 |
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iii
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ARTICLE XIII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS |
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56 |
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13.1 |
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Successors and Assigns |
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56 |
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13.2 |
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Participations |
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57 |
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13.3 |
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Assignments |
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58 |
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ARTICLE XIV NOTICES |
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60 |
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14.1 |
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Notices; Effectiveness; Electronic Communication |
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60 |
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ARTICLE XV COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION |
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61 |
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15.1 |
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Counterparts; Effectiveness |
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61 |
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15.2 |
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Electronic Execution of Assignments |
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61 |
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ARTICLE XVI CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL |
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62 |
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16.1 |
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Choice of Law |
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62 |
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16.2 |
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Consent to Jurisdiction |
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62 |
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16.3 |
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Waiver of Jury Trial |
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62 |
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iv
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SCHEDULES |
Schedule 1 - Commitments |
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Schedule 5.1 Subsidiaries |
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Schedule 5.12 Other Names |
EXHIBITS
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Exhibit A Form of Negative Pledge Agreement |
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Exhibit B Form of Loan Request |
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Exhibit C Form of Revolving Credit Note |
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Exhibit D Form of Assignment and Assumption Agreement |
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Exhibit E Form of Compliance Certificate |
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Exhibit F Form of Notice of Authorized Borrowers |
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Exhibit G Form of Authority to Debit Account |
v
CREDIT AGREEMENT
This Credit Agreement (the Agreement), dated as of July 22, 2015, is among INDEPENDENT BANK GROUP, INC., the Lenders and U.S.
Bank National Association, a national banking association, as Administrative Agent. The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
Administrative Agent means U.S. Bank in its capacity as contractual representative of the Lenders pursuant to Article XI, and not
in its individual capacity as a Lender, and any successor Administrative Agent appointed pursuant to Article XI.
Advance
means a borrowing of Revolving Loans.
Affected Lender is defined in Section 2.16.
Affiliate of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such
Person, including, without limitation, such Persons Subsidiaries. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled
Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.
Aggregate Commitment means the aggregate amount of the Commitments of all the Lenders. As of the date of this Agreement, the
Aggregate Commitment is $50,000,000.
Agreement means this Credit Agreement, as it may be amended or modified and in effect
from time to time.
Anti-Corruption Laws means all laws of any jurisdiction applicable to the Borrower or any of its
Subsidiaries from time to time concerning or relating to bribery or corruption.
Approved Fund means any Fund that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
Arranger means U.S. Bank, and its successors, in its capacity as Sole Lead Arranger and Book Runner.
Authority to Debit Account means the Authority to Debit Account to be executed by the Borrower and delivered to the
Administrative Agent, substantially in the form of Exhibit G.
Authorized Officer means any authorized officer set forth in a duly completed Notice
of Authorized Borrowers delivered by the Borrower to the Administrative Agent, as in effect from time to time.
Available
Aggregate Commitment means, at any time, the Aggregate Commitment in effect at such time minus the aggregate principal amount of the Revolving Loans outstanding at such time.
Average Daily Principal Balance means, for any Fiscal Quarter (or portion thereof), the average daily principal balance of the
Revolving Loans outstanding during such Fiscal Quarter (or portion thereof).
Bank Subsidiary means Independent Bank, and any
Person which is now or hereafter an insured depository institution within the meaning of 12 U.S.C. Section 1831(c), as amended, and which is now or hereafter controlled by the Borrower within the meaning of 12 U.S.C.
Section 1841(a), as amended.
Borrower means Independent Bank Group, Inc., a Texas corporation and a registered bank
holding company, and its successors and assigns.
Borrowing Date means a date on which an Advance is made hereunder.
Business Day means any day (other than a Saturday or Sunday) on which commercial banks are open for business in New York, New
York.
Cash Management Services means any banking services that are provided to the Borrower or any Subsidiary by the
Administrative Agent, any Lender or any Affiliate of any of the foregoing, including without limitation: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) stored value cards,
(f) automated clearing house or wire transfer services, or (g) treasury management, including controlled disbursement, consolidated account, lockbox, overdraft, return items, sweep and interstate depository network services.
Change of Control means (a) the acquisition by any Person, or two (2) or more Persons acting in concert, of the
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 10% or more of the outstanding shares of voting ownership interests of the Borrower, or (b) the
lease, sale or transfer or other disposition of all or substantially all of the assets of the Borrower or any Bank Subsidiary in one or a series of transactions to any Person, or two (2) or more Persons acting in concert. Change of
Control shall not include, however, any of the foregoing transactions among Subsidiaries of the Borrower.
Change in Law
means the adoption of or change in any law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) or in the interpretation, promulgation, implementation or
administration thereof by any Governmental or quasi-Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, including, notwithstanding the foregoing, all requests, rules, guidelines or
directives (x) in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act or (y) promulgated by the Bank for
2
International Settlements, the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) or the United States financial regulatory authorities, in
each case of clauses (x) and (y), regardless of the date enacted, adopted, issued, promulgated or implemented, or compliance by any Lender or applicable Lending Installation with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency.
Code means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
Collateral means all of the Property, if any, granted to the Lender as collateral
under the Loan Documents, if any.
Commitment means, for each Lender, the obligation of such Lender to make Revolving
Loans to the Borrower as set forth on Schedule 1, as it may be modified (i) as a result of any assignment that has become effective pursuant to Section 13.3(c), or (ii) otherwise from time to time pursuant to the terms hereof.
As of the date of this Agreement, the aggregate amount of the Lenders Commitments is $50,000,000.
Commitment Fee
Percentage means 0.30%.
Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. §1 et seq.), as amended
from time to time, and any successor statute.
Consolidated Bank Subsidiaries means the Bank Subsidiaries on a consolidated
basis.
Debtor Relief Laws means the Bankruptcy Code of the United States of America, and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in
effect.
Default means an event which but for the lapse of time or the giving of notice, or both, would constitute an Event of
Default.
Defaulting Lender means, subject to Section 2.18(b), any Lender that (a) has failed to (i) fund all
or any portion of its Revolving Loans within two (2) Business Days after the date such Revolving Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is
the result of such Lenders determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied or
waived, or (ii) pay to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within two (2) Business Days after the date when due, (b) has notified the Borrower and the Administrative Agent
in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lenders obligation to fund a Revolving Loan hereunder
and states that such position is based on such Lenders determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement)
cannot be satisfied),
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(c) has failed, within three (3) Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that
it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the
Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator,
assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets (other than an Undisclosed Administration), including the Federal Deposit Insurance Corporation or any other state or
federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company
thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on
its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under
any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.18(b)) upon delivery of written notice of such
determination to the Borrower and each Lender.
Deposits is defined in Section 12.1.
Dollar and $ means the lawful currency of the United States of America.
EDGAR means the Electronic Data Gathering, Analysis and Retrieval system of the United States Securities and Exchange Commission.
Eligible Assignee means any Person except a natural Person, the Borrower, any of the Borrowers Affiliates or
Subsidiaries or any Defaulting Lender or any of its Subsidiaries; provided that such Person is in the business of making or purchasing commercial loans similar to the Revolving Loans and has total assets in excess of $500,000,000, calculated
in accordance with the accounting principles prescribed by the regulatory authority applicable to such Person in its jurisdiction of organization.
Employee Plan means any savings, profit sharing, or retirement plan or any deferred compensation contract or other plan maintained
for employees of the Borrower or its Subsidiaries and covered by Title IV of ERISA, including any multiemployer plan as defined in ERISA.
Environmental Law means any local, state or federal law or other statute, law, ordinance, rule, code, regulation, decree or order,
presently in effect or hereafter enacted, promulgated or implemented governing, regulating or imposing liability or standards of conduct concerning the use, treatment, generation, storage, disposal, discharge or other handling or release of any
Hazardous Substance.
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Environmental Liability means all liability arising under, resulting from or imposed
by any Environmental Law and all liability imposed under common law with respect to the use, treatment, generation, storage, disposal, discharge or other handling or release of any Hazardous Substance.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued
thereunder.
Event of Default is defined in Article VIII.
Excluded Taxes means, in the case of each Lender or applicable Lending Installation and the Administrative Agent, (i) Taxes
imposed on its overall net income, franchise Taxes, and branch profits Taxes imposed on it, by the respective jurisdiction under the laws of which such Lender or the Administrative Agent is incorporated or is organized or in which its principal
executive office is located or, in the case of a Lender, in which such Lenders applicable Lending Installation is located, (ii) in the case of a Non-U.S. Lender, any withholding tax that is imposed on amounts payable to such Non-U.S.
Lender pursuant to the laws in effect at the time such Non-U.S. Lender becomes a party to this Agreement or designates a new Lending Installation, except in each case to the extent that, pursuant to Section 3.4(a), amounts with respect to such
Taxes were payable either to such Lenders assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Installation, or is attributable to the Non-U.S. Lenders failure to
comply with Section 3.4(f), and (iii) any U.S. federal withholding taxes imposed by FATCA.
FATCA means Sections
1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), and any current or future regulations or official interpretations
thereof.
FDIC means the Federal Deposit Insurance Corporation and any successor thereof.
Federal Funds Effective Rate means, for any day, an interest rate per annum equal to the greater of (a) zero percent (0.0%)
and (b) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for
the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m., New York City time on such day on
such transactions received by the Administrative Agent from three (3) Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion.
Fee Letter means the Senior Credit Facility Fee Letter of even date herewith from U.S. Bank National Association to, and
accepted and agreed to by, the Borrower.
Fiscal Quarter means any of the quarterly accounting periods of the Borrower, ending
on the last day of March, June, September and December of each calendar year.
Fitch means Fitch, Inc.
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Fund means any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
GAAP means those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting
Standards Board and the Securities and Exchange Commission acting through appropriate boards or committees thereof for all periods so as to properly reflect the financial condition, results of operations and cash flows of the Borrower and its
Subsidiaries.
Governmental Authority means the government of the United States of America or any other nation, or of any
political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of, or pertaining to, government (including, without limitation, any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules
or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervisory Practices or any successor or similar authority to any of the foregoing).
Guaranteed Loan Amount means, as of any date and with respect to each Bank Subsidiary, 100% of the aggregate principal amount
set forth in (a) Columns B and C of item 11.f. on Schedule RC-N of the quarterly Consolidated Reports of Condition and Income for A Bank with Domestic Offices Only Federal Financial Institution Examination Counsel Form 041 most recently
filed by such Bank Subsidiary with the appropriate Regulatory Authorities or (b) items PD940 and PD1040 on Schedule PD of the quarterly Thrift Financial Report most recently filed by such Bank Subsidiary with the appropriate Regulatory
Authorities, as applicable.
Guaranteed OREO Amount means, as of any date and with respect to each Bank Subsidiary, 100% of
the aggregate principal amount set forth in (a) item 13.b.7 on Schedule RC-M of the quarterly Consolidated Reports of Condition and Income for A Bank with Domestic Offices Only Federal Financial
Institution Examination Counsel Form 041 most recently filed by such Bank Subsidiary with the appropriate Regulatory Authorities or (b) item SI795 on Schedule SI of the quarterly Thrift Financial Report most recently filed by such Bank
Subsidiary with the appropriate Regulatory Authorities, as applicable.
Hazardous Substance means any pollutant, contaminant,
waste, or toxic or hazardous chemicals, wastes or substances, including asbestos, urea formaldehyde insulation, petroleum, PCBs, air pollutants, water pollutants, and other substances defined as hazardous or toxic in, or subject to regulation
under, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9061 et seq., Hazardous Substances Transportation Act, 49 U.S.C. § 1801, et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. § 6901 et seq., the Toxic Substance Control Act of 1976, as amended, 15 U.S.C. § 2601 et seq., the Solid Waste Disposal Act, 42 U.S.C. § 3251 et seq., the Clean Air Act, 42 U.S.C. § 1857 et seq., the Clean Water
Act, 33 U.S.C. § 1251 et seq., Emergency Planning and
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Community Right to Know Act, 42 U.S.C. § 11001, et seq., or any other statute, rule, regulation or order of any Governmental Authority having jurisdiction over the control of such
wastes or substances, including without limitation the United States Environmental Protection Agency, the United States Nuclear Regulatory Agency, and any applicable state department or county department of health or similar entity.
Highest Lawful Rate means, on any day, the maximum non-usurious rate of interest permitted for that day by applicable federal or
state law stated as a rate per annum.
Holding Company Indebtedness means all (a) indebtedness of the Borrower for
borrowed money; (b) indebtedness for the deferred purchase price of property or services for which the Borrower is liable, contingently or otherwise, as obligor, guarantor or otherwise; (c) commitments by which the Borrower assures a
creditor against loss, including contingent reimbursement obligations of the Borrower with respect to letters of credit; (d) obligations of the Borrower which are evidenced by notes, acceptances or other instruments; (e) indebtedness
guaranteed in any manner by the Borrower, including guaranties in the form of an agreement to repurchase or reimburse; (f) obligations of the Borrower under leases which are or should be, in accordance with GAAP, recorded as capital leases for
which obligations the Borrower is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations the Borrower assures a creditor against loss; (g) unfunded obligations of the Borrower to any Employee
Plan; (h) liabilities secured by any Lien on any Property owned by the Borrower even though it has not assumed or otherwise become liable for the payment thereof; and (i) other liabilities or obligations of the Borrower which would, in
accordance with GAAP, be included on the liability portion of a balance sheet; provided that Holding Company Indebtedness shall not include any liabilities incurred by the Borrower in the ordinary course of business (including any such
liabilities arising under interest rate management transactions or other financial contracts that are entered into in the ordinary course of business that are non-speculative in nature) and other liabilities which do not exceed $1,000,000.
Indebtedness means all (a) indebtedness of the Borrower or a Subsidiary for borrowed money;
(b) indebtedness for the deferred purchase price of property or services for which the Borrower or a Subsidiary is liable, contingently or otherwise, as obligor, guarantor or otherwise; (c) commitments by which the Borrower or a Subsidiary
assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit; (d) obligations of the Borrower or a Subsidiary which are evidenced by notes, acceptances or other instruments;
(e) indebtedness guaranteed in any manner by the Borrower or a Subsidiary, including guaranties in the form of an agreement to repurchase or reimburse; (f) obligations under leases which are or should be, in accordance with GAAP, recorded
as capital leases for which obligations the Borrower or a Subsidiary is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations the Borrower or a Subsidiary assures a creditor against loss;
(g) unfunded obligations of the Borrower or a Subsidiary to any Employee Plan; (h) liabilities secured by any Lien on any Property owned by the Borrower or any Subsidiary even though it has not assumed or otherwise become liable for the
payment thereof; and (i) other liabilities or obligations of the Borrower and its Subsidiaries which would, in accordance with GAAP, be included on the liability portion of a balance sheet; provided that Indebtedness shall not include
any liabilities incurred by the Borrower in the ordinary course of business (including any such liabilities arising under interest rate management transactions or other financial contracts that are entered into in the ordinary course of business
that are non-speculative in nature) and other liabilities which do not exceed) which do not exceed $1,000,000.
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Indemnified Taxes means Taxes imposed on or with respect to any payment made by or on
account of any obligation of the Borrower under any Loan Document, other than Excluded Taxes and Other Taxes.
Independent
Bank means Independent Bank, a Texas state chartered bank.
Lenders means the lending institutions listed on the
signature pages of this Agreement and their respective successors and assigns.
Lending Installation means, with respect to a
Lender or the Administrative Agent, the office, branch, subsidiary or affiliate of such Lender or the Administrative Agent listed on the signature pages hereof (in the case of the Administrative Agent) or on its Administrative Questionnaire (in the
case of a Lender) or otherwise selected by such Lender or the Administrative Agent pursuant to Section 2.14.
LIBOR Loan
means each Revolving Loan to the extent the LIBOR Rate is the base rate of interest for such Revolving Loan under this Agreement.
LIBOR Rate means an annual rate equal to 2.50% plus the greater of (a) zero percent (0.0%) and (b) the one-month LIBOR
rate quoted by the Administrative Agent from Reuters Screen LIBOR01 Page or any successor thereto, which shall be that one-month LIBOR rate in effect two Business Days prior to the Reprice Date, adjusted for any reserve requirement and any
subsequent costs arising from a change in government regulation, such rate to be reset monthly on each Reprice Date. If the initial Advance occurs other than on the Reprice Date, the initial one-month LIBOR rate shall be that one-month LIBOR rate in
effect two Business Days prior to the date of the initial advance, which rate plus the percentage described above shall be in effect until the next Reprice Date. The Administrative Agents internal records of applicable interest rates shall be
determinative in the absence of manifest error.
Lien means any mortgage, pledge, hypothecation, assignment, collateral
deposit arrangement, encumbrance, lien (statutory or other), deed of trust, charge, preference, priority, security interest or other security agreement or preferential arrangement of any kind or nature whatsoever including any conditional sale or
other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction.
Liquid Assets means, with respect to the Borrower (on a non-consolidated basis), cash, reserves, and U.S. treasury securities or
agency securities having a maturity no longer than one year after the date of issuance and rated at least AA+ by S&P and Fitch and Aa1 by Moodys, in each case held by the Borrower or maintained for the account of the Borrower at any member
bank of the U.S. Federal Reserve System.
Loan Documents means this Agreement and the Related Documents.
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Loan Loss Reserves means, with respect to any Bank Subsidiary as at any date of
determination, the loan loss reserves of such Bank Subsidiary and its consolidated Subsidiaries on a consolidated basis as of such date.
Loan Request is defined in Section 2.6.
Material means having or relating to meaningful consequences, and for purposes of this Agreement shall be determined reasonably in
light of the facts and circumstances of the matter in question. The term Materially shall have a correlative meaning.
Material Adverse Effect means (a) a Default, (b) a Materially adverse change in the business, Property, operations,
prospects or condition (financial or otherwise) of the Borrower or any Bank Subsidiary, (c) the termination of any Material agreement to which the Borrower or any Subsidiary is a party which would have a Material adverse effect on the Borrower
or any Bank Subsidiary, (d) any Material impairment of the right to carry on the business as now or proposed to be conducted by the Borrower or any Subsidiary, which would have a Material effect on the Borrower or any Bank Subsidiary, or
(e) any Material impairment of the ability of the Borrower to perform the Obligations under this Agreement or the Borrower or any Subsidiary under any Related Document to which it is a party. A Material Adverse Effect shall be deemed to have
occurred if the cumulative effect of an individual event and all other than existing events would result in a Material Adverse Effect.
Moodys means Moodys Investors Service, Inc.
Negative Pledge Agreement means the Negative Pledge Agreement, in the form of Exhibit A hereto, by and between the
Borrower and the Administrative Agent for the benefit of the Lenders, as amended, supplemented, modified, extended or restated from time to time, pursuant to which the Borrower shall agree not to pledge or grant a lien on the stock of any Bank
Subsidiary to any Person.
Non-Defaulting Lender means, at any time, each Lender that is not a Defaulting Lender at
such time.
Non-U.S. Lender means a Lender that is not a United States person as defined in Section 8701(a)(30) of the
Code.
Non-Performing Asset Amount means, with respect to any Bank Subsidiary at any time, the sum of all
Non-Performing Loans plus OREO minus Guaranteed OREO Amount of such Bank Subsidiary at such time.
Non-Performing Loans means, with respect to any Bank Subsidiary at any time, the aggregate principal amount (including any
capitalized interest) of all nonaccruing loans of such Bank Subsidiary plus the aggregate principal amount of all loans of such Bank Subsidiary that are ninety (90) days or more past due and still accruing minus the Guaranteed
Loan Amount of such Bank Subsidiary, in each case at such time.
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Notice of Authorized Borrowers means the Notice of Authorized Borrowers to be
executed by the Borrower and delivered to the Administrative Agent, substantially in the form of Exhibit F.
Obligations means all unpaid principal of and accrued and unpaid interest on the Revolving Loans, all obligations in
connection with Cash Management Services, all Rate Management Obligations provided to the Borrower or any Subsidiary by the Administrative Agent or any Lender or any Affiliate of any of the foregoing, all accrued and unpaid fees, and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Administrative Agent or to any Lender, or any indemnified party arising under the Loan Documents; provided, that obligations in respect of Cash Management Services and
Rate Management Obligations shall only constitute Obligations if owed to the Administrative Agent or if the Administrative Agent shall have received notice from the relevant Lender not later than sixty (60) days after such Cash
Management Services or Rate Management Obligations have been provided.
OCC means the Office of the Comptroller of the
Currency and any successor thereof.
OFAC means the U.S. Department of the Treasurys Office of Foreign Assets Control,
and any successor thereto.
OREO means, of any Bank Subsidiary, all real estate other than premises owned or controlled by
such Bank Subsidiary and its consolidated Subsidiaries and direct and indirect investments of such Bank Subsidiary and Subsidiaries in real estate ventures, in each case to the extent included in OREO Amount.
OREO Amount means, of each Bank Subsidiary as of any date of determination, 100% of the aggregate principal amount set forth in
item 3.f. on Schedule RC-M of the quarterly Consolidated Reports of Condition and Income for A Bank with Domestic Offices Only Federal Financial Institution Examination Counsel Form 041 most recently filed by such Bank Subsidiary with the
appropriate Regulatory Authorities.
Other Taxes means all present or future stamp, court or documentary, intangible,
recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan
Document.
Participant is defined in Section 13.2(a).
Participant Register is defined in Section 13.2(c).
PATRIOT Act means USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended from time to
time, and any successor statute.
Payment Date means the first day of each month, provided, that if such day is
not a Business Day, the Payment Date shall be the immediately preceding Business Day.
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PBGC means the Pension Benefit Guaranty Corporation established pursuant to Subtitle
A of Title IV of ERISA, and any successor thereof.
Permitted Liens means: (a) Liens for Taxes, assessments, or
governmental charges, carriers, warehousemens, repairmens, mechanics, materialmens and other like Liens, which are either not delinquent or are being contested in good faith by appropriate proceedings which will prevent
foreclosure of such Liens, and against which adequate cash reserves have been provided; (b) easements, restrictions, minor title irregularities and similar matters which have no Material adverse impact upon the ownership and use of the affected
Property; (c) Liens or deposits in connection with workers compensation, unemployment insurance, social security or other insurance or to secure customs duties, public or statutory obligations in lieu of surety, stay or appeal bonds, or
to secure performance of contracts or bids, other than contracts for the payment of money borrowed, or deposits required by law as a condition to the transaction of business or other Liens or deposits of a like nature made in the ordinary course of
business; (d) Liens in favor of the Administrative Agent for the benefit of the Lenders pursuant to the Loan Documents; (e) Liens evidenced by conditional sales, purchase money mortgages or other title retention agreements on machinery and
equipment (acquired in the ordinary course of business and otherwise permitted to be acquired hereunder) which are created at the time of the acquisition of Property solely for the purposes of securing the Indebtedness incurred to finance the cost
of such Property, provided no such Lien shall extend to any Property other than the Property so acquired and identifiable proceeds; (f) government deposit security pledges; (g) liens and pledges made in connection with repurchase
agreements entered into by any Bank Subsidiary; (h) Liens existing on any asset of any Person at the time such Person is acquired by or is combined with any of the Borrowers Subsidiaries, provided the Lien was not created in contemplation
of that event; (i) Liens on Property required by Regulation W promulgated by the Federal Reserve System; (j) Liens in the ordinary course of business in favor of any Federal Reserve Bank or the United States Treasury; (k) Liens in the
ordinary course of business in favor of any Federal Home Loan Bank; (l) Liens not otherwise permitted by the foregoing clauses of this definition securing Indebtedness (other than indebtedness represented by the Revolving Credit Notes) in an
aggregate principal amount at any time outstanding not to exceed $50,000,000; (m) Liens incidental to the conduct of business or ownership of Property of any of the Borrowers Subsidiaries which do not in the aggregate Materially detract
from the value of the Property of the Borrowers Subsidiaries or Materially impair the use thereof in business operations; and (n) Liens arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any of
the foregoing Liens.
Person means any natural person, corporation, firm, joint venture, partnership, limited liability
company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.
Prime Rate means the interest rate publicly announced by U.S. Bank from time to time in Minneapolis, Minnesota (or any other bank
that may serve as a successor administrative agent under the Loan Documents) as its prime rate for interest rate determinations, which is solely a reference rate and may be at, above or below the rate or rates at which U.S. Bank (or such other bank
acting as successor administrative agent) lends to other Persons. Any change in the Prime Rate shall become effective as of the opening of business on the day on which such change is publicly announced by U.S. Bank (or such other bank acting as
successor administrative agent).
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Prime Rate Advance means an Advance which, except as otherwise provided in
Section 2.8, bears interest at the Prime Rate.
Property means any interest of any Person of any kind in property or
assets, whether real, personal, mixed, tangible or intangible, wherever located, and whether now owned or subsequently acquired or arising and in the products, proceeds, additions and accessions thereof or thereto.
Pro Rata Share means, with respect to a Lender, a portion equal to a fraction the numerator of which is such Lenders
Commitment and the denominator of which is the Aggregate Commitment, provided, however, if all of the Commitments are terminated pursuant to the terms of this Agreement, then Pro Rata Share means the percentage obtained by
dividing (a) the aggregate outstanding amount of such Lenders Revolving Loans at such time by (b) the aggregate outstanding amount of all Revolving Loans at such time; and provided, further, that when a Defaulting
Lender shall exist, Pro Rata Share shall mean the percentage of the Aggregate Commitment (disregarding any Defaulting Lenders Commitment) represented by such Lenders Commitment (except that no Lender is required to fund or
participate in Revolving Loans to the extent that, after giving effect thereto, the aggregate amount of its outstanding Revolving Loans would exceed the amount of its Commitment (determined as though no Defaulting Lender existed)).
Purchasers is defined in Section 13.3(a).
Rate Management Obligations means any and all obligations of the Borrower or any Subsidiary, whether absolute or contingent and
howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions.
Rate Management
Transaction means any transaction (including an agreement with respect thereto) now existing or hereafter entered into by the Borrower or any Subsidiary which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more
interest rates, foreign currencies, commodity prices, equity prices or other financial measures.
Register is defined in
Section 13.3(d).
Regulation U means Regulation U of the Board of Governors of the Federal Reserve System as from time to
time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal
Reserve System.
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Regulation W means Regulation W of the Board of Governors of the Federal Reserve
System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors implementing Section 23A and 23B of the Federal Reserve Act.
Regulatory Authority means any state, federal or other Governmental Authority, agency or instrumentality, including the FDIC, the
Federal Reserve Board, the OCC, Texas Department of Banking, and the Securities and Exchange Commission, responsible for the examination and oversight of the Borrower and each Bank Subsidiary.
Related Documents means the Revolving Credit Note, the Negative Pledge Agreement, and all other instruments, agreements,
certificates, and other documents, now or in the future, executed by or on behalf of the Borrower, any Subsidiary or any guarantor in connection with the Agreement or any of the foregoing, any of the Obligations, or any of the transactions
contemplated under the Agreement or any of the foregoing, all as amended, supplemented, modified or extended from time to time.
Reports is defined in Section 10.6(a).
Reprice Date means the first day of each month.
Required Lenders means Lenders in the aggregate having greater than 50% of the Aggregate Commitment or, if the Aggregate
Commitment has been terminated, Lenders in the aggregate holding greater than 50% of the aggregate outstanding Revolving Loans; provided that, if at any time there shall be fewer than three Lenders, Required Lenders shall mean all
Lenders; and provided further that, for so long as US Bank or Frost Bank shall be a Lender, the consent of US Bank or Frost Bank, as the case may be, shall be required with respect to any matter requiring the consent of the Required Lenders under
this Agreement or the Related Documents. The Commitments and Revolving Loans of any Defaulting Lender shall be disregarded in determining Required Lenders at any time.
Requirements of Law means as to any matter or Person, the Certificate or Articles of Incorporation and Bylaws or other
organizational or governing documents of such Person, and any law (including any Environmental Law), ordinance, treaty, rule, regulation, order, decree, determination or other requirement having the force of law relating to such matter or Person
and, where applicable, any interpretation thereof by any Governmental Authority.
Restricted Payments means (a) dividends
or other distributions by the Borrower or any Subsidiary based upon the equity interests of the Borrower or any Subsidiary (except (i) dividends payable to the Borrower or any Subsidiary by any Subsidiary and (ii) dividends payable solely
in equity interests of the Borrower), (b) any other distribution by the Borrower in respect of the equity interests of the Borrower, whether now or hereafter outstanding, either directly or indirectly, whether in cash or property or otherwise,
and (c) payment of management fees by the Borrower or any Subsidiary to any Affiliate of the Borrower or any such Subsidiary, either directly or indirectly, whether in cash or property or otherwise (but excluding (i) management fees paid
among the Borrower and its Subsidiaries in the ordinary course of business, (ii) fees paid by and among the Borrower and its Subsidiaries consistent with past
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practices, and (iii) payments by the Borrower and its Subsidiaries pursuant to the Borrowers or such Subsidiaries Supplemental Executive Retirement Plans, provided such payments
are consistent with past practices).
Return on Average Assets means, for the Consolidated Bank Subsidiaries as at the end
Fiscal Quarter (or portion thereof), the quotient, expressed as a percentage, obtained by dividing the net income of the Consolidated Bank Subsidiaries for such Fiscal Quarter by the average total daily assets of the Consolidated Bank Subsidiaries
during such Fiscal Quarter (or portion thereof).
Revolving Credit Note is defined in Section 2.10(d).
Revolving Loans has the meaning set forth in Section 2.1.
Risk-Based Capital Guidelines means (i) the risk-based capital guidelines in effect in the United States on the date of this
Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States, including transition rules, and, in each case, any amendments to such regulations.
S&P means Standard & Poors Ratings Services, a Standard & Poors Financial Services LLC business.
Sanctioned Country means a country subject to a sanctions program identified on the list maintained by OFAC and available at
http://www.treas.gov/offices/enforcement/ ofac/sanctions/index.html, or as otherwise published from time to time.
Sanctioned
Person means (i) a Person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/ enforcement/ofac/sdn/index.html, or as otherwise published from time to time,
or (ii) (A) an agency of the government of a Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or (C) a Person resident in a Sanctioned Country, to the extent subject to a sanctions program administered
by OFAC.
Sanctions means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to
time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union or Her Majestys Treasury of the United Kingdom.
SBLF Preferred Stock means senior perpetual noncumulative preferred stock (or equivalent securities) of the Borrower that is
funded by the U.S. Treasury Department out of the Small Business Lending Fund established under the Small Business Jobs Act of 2010.
Special Event means, with respect to any subordinated indebtedness of the Borrower, the occurrence of any of the following:
(a) a change or prospective change in law occurs that could prevent the Borrower from deducting interest payable on such subordinated indebtedness for U.S. federal income tax purposes; (b) an event that precludes such subordinated
indebtedness from being recognized as Tier 2 capital for regulatory capital purposes; and (c) the Borrower is required to register as an investment company under the Investment Company Act of 1940, as amended.
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Stated Rate is defined in Section 2.17.
Subordinated Indebtedness means Indebtedness of the Borrower that (a) is evidenced by bonds or notes, (b) at or before
the time of issuance or distribution, is fully subordinated in right of payment to the Obligations and any instruments or securities issued in substitution of, or exchange for, all or any portion of the Obligations, (c) does not have the
benefit of any obligation of any Person (whether as issuer, guarantor or otherwise), (d) is unsecured, (e) does not contain any financial covenants and does not contain any other terms which are more burdensome to the Borrower, this
Agreement or the Related Documents, and (f) is not subject to optional or mandatory redemption or prepayment, except for optional redemption or prepayment in connection with the occurrence of a Special Event, and (g) does not mature prior
to the date that is five (5) years after the date of its issuance.
Subsidiary means as to any Person, a Bank Subsidiary,
a corporation, limited liability Borrower, partnership, association, joint venture or other entity of which shares of stock, membership interests or other voting interests having voting power (other than stock having such power only by reason of the
happening of a contingency that has not occurred) sufficient to elect a majority of the board of directors or other managers of such entity are at the time owned, or the management of which is otherwise controlled, directly, or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise specified, the term Subsidiary shall mean a Subsidiary of the Borrower and shall include all Bank Subsidiaries.
swap means any agreement, contract or transaction that constitutes a swap within the meaning of section 1a(47) of the
Commodity Exchange Act.
Taxes means any and all present or future taxes, duties, levies, imposts, deductions, fees,
assessments, charges or withholdings, and any and all liabilities with respect to the foregoing, including interest, additions to tax and penalties applicable thereto.
Termination Date means July 19, 2016 or any earlier date on which the Aggregate Commitment is reduced to zero or otherwise
terminated pursuant to the terms hereof.
Texas Ratio means, of the Consolidated Bank Subsidiaries as at any date of
determination, the ratio (expressed as a percentage rounded to two decimal places) of (a) the Non-Performing Asset Amount of the Consolidated Bank Subsidiaries to (b) (i) the aggregate amount of total equity capital of Borrower and
its Subsidiaries as at such date of determination, plus (ii) the amount of Loan Loss Reserves as at such date of determination, minus (iii) the aggregate amount of all disallowed goodwill and other intangible assets of the Borrower and its
Subsidiaries as at the date of determination.
Total Risk-Based Capital Ratio means the Total Risk-Based Capital Ratio
determined in accordance with the rules and regulations of the appropriate Regulatory Authority as from time to time in effect, and any successor or other regulation or official interpretation of said Regulatory Authority relating thereto.
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Transferee is defined in Section 13.3(e).
UCC means the Uniform Commercial Code as the same may, from time to time, be in effect and codified in the State of New
York; provided, however, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of Administrative Agents security interest in any Collateral for the benefit of the
Lenders is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term UCC shall mean the Uniform Commercial Code as in effect in such other jurisdiction solely for purposes of the
provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions.
Undisclosed Administration means in relation to a Lender the appointment of an administrator, provisional liquidator, conservator,
receiver, trustee, custodian or other similar official by a supervisory authority or regulator under or based on the law in the country where such Lender is subject to home jurisdiction supervision if applicable law requires that such appointment is
not to be publicly disclosed.
U.S. Bank means U.S. Bank National Association, a national banking association, in its
individual capacity, and its successors.
The foregoing definitions shall be equally applicable to both the singular and plural forms of
the defined terms. Except as otherwise expressly stated, each reference to an Article, Section, Schedule, or Exhibit shall be deemed to refer to an Article, Section,
Schedule, or Exhibit of or to this Agreement, as applicable.
ARTICLE II
THE CREDITS
2.1
Commitment. From and including the date of this Agreement and prior to the Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make loans (Revolving Loans) to the Borrower,
provided that, after giving effect to the making of each such Revolving Loan, (a) the aggregate outstanding amount of such Lenders Revolving Loans shall not exceed its Commitment, and (b) the aggregate outstanding amount of
the Revolving Loans shall not exceed the Aggregate Commitment. All Revolving Loans shall be made in Dollars. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow the Revolving Loans at any time prior to the Termination
Date. Unless previously terminated, the Commitments shall terminate on the Termination Date.
2.2 Required Payments; Termination.
If at any time (i) the aggregate amount of the outstanding Revolving Loans of any Lender exceeds the amount of such Lenders Commitments, or (ii) the aggregate outstanding amount of the Revolving Loans exceeds the Aggregate
Commitment, the Borrower shall immediately make a payment on the Revolving Loans sufficient to eliminate such excess. The outstanding Revolving Loans and all other unpaid Obligations under this Agreement and the Related Documents shall be paid in
full by the Borrower on the Termination Date.
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2.3 Ratable Revolving Loans. Each Advance hereunder shall consist of Revolving Loans made
by the several Lenders ratably according to their Pro Rata Shares. Except as otherwise provided in Section 3.3, the Advances shall be LIBOR Loans.
2.4 Minimum Amount of Each Advance. Each Advance shall be in an amount equal to the lesser of (a) the minimum amount of $100,000
and incremental amounts in integral multiples of $100,000 and (b) the amount of the Available Aggregate Commitment.
2.5 Optional
Principal Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Revolving Loans or Revolving Loans in a minimum aggregate amount of $100,000 and incremental amounts in integral multiples of $100,000, upon
at least three (3) Business Days prior written notice to the Administrative Agent.
2.6 Method of Borrowing. The
Borrower shall give the Administrative Agent irrevocable notice in the form of Exhibit B (a Loan Request) not later than 10:00 a.m. (New York City time) on the Borrowing Date of each Advance, two (2) Business Days before the
Borrowing Date for such Advance, specifying:
(a) the Borrowing Date, which shall be a Business Day, of such Advance, and
(b) the aggregate amount of such Advance.
Not
later than 12:00 noon (New York City time) on each Borrowing Date, each Lender shall make available its Revolving Loan or Revolving Loans in funds immediately available to the Administrative Agent at its address specified pursuant to Article XIV.
The Administrative Agent will make the funds so received from the Lenders available to the Borrower at the Administrative Agents aforesaid address.
2.7 Interest Rates. Prior to an Event of Default, and except as otherwise provided herein, each Revolving Loan shall bear interest on
the unpaid principal balance before maturity (whether upon demand, acceleration, default or otherwise) at the rate per annum equal to the LIBOR Rate for each day such Revolving Loan shall be outstanding.
2.8 Rates Applicable After Event of Default. During the continuance of an Event of Default, the Required Lenders may, at their option,
by notice from the Administrative Agent to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 9.3 requiring unanimous consent of the Lenders to changes in interest rates),
declare that each Revolving Loan and the principal amount of each other Obligation shall bear interest at the rate of three percent (3%) per annum in excess of the applicable rates set forth in this Agreement. After an Event of Default
has been waived, the interest rate applicable to the Revolving Loans (and any such Obligations) shall revert to the rates applicable prior to the occurrence of an Event of Default.
2.9 Method of Payment. All payments of the Obligations under this Agreement and the Related Documents shall be made, without setoff,
deduction, or counterclaim, in immediately available funds to the Administrative Agent at the Administrative Agents address specified pursuant to Article XIV, or at any other Lending Installation of the Administrative Agent specified in
writing by the Administrative Agent to the Borrower, by 12:00 noon (New York
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City time) on the date when due and shall (except as otherwise specifically required hereunder) be applied ratably by the Administrative Agent among the Lenders. Each payment delivered to the
Administrative Agent for the account of any Lender shall be delivered promptly by the Administrative Agent to such Lender in the same type of funds that the Administrative Agent received at its address specified pursuant to Article XIV or at any
Lending Installation specified in a notice received by the Administrative Agent from such Lender. The Administrative Agent is hereby authorized to charge the account of the Borrower maintained with U.S. Bank for each payment of principal, interest,
and fees as it becomes due hereunder.
2.10 Evidence of Indebtedness.
(a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to
such Lender resulting from each Revolving Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(b) The Administrative Agent shall also maintain accounts in which it will record (i) the amount of each Revolving Loan made hereunder,
(ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each
Lenders share thereof.
(c) The entries maintained in the accounts maintained pursuant to paragraphs (a) and (b) above
shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Administrative Agent or any Lender to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms.
(d) The Revolving Loans of each
Lender may, at the request of a Lender, be evidenced by a promissory note substantially in the form of Exhibit C (each a Revolving Credit Note). Upon receipt of any such request, the Borrower shall prepare, execute and deliver to
such Lender such a Revolving Credit Note or Revolving Credit Notes payable to the order of such Lender in such form. Thereafter, the Revolving Loans evidenced by such Revolving Credit Note or Revolving Credit Notes and interest thereon shall at all
times (prior to any assignment pursuant to Section 13.3) be represented by one or more Revolving Credit Notes payable to the order of the payee named therein.
2.11 Telephonic Notices. The Borrower hereby authorizes the Lenders and the Administrative Agent to extend Advances and to transfer
funds based on telephonic notices made by any Person or Persons the Administrative Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to
allow Loan Requests to be given telephonically. The Borrower agrees to deliver promptly to the Administrative Agent a written confirmation (which may include e-mail) of each telephonic notice authenticated by an Authorized Officer. If the written
confirmation differs in any material respect from the action taken by the Administrative Agent and the Lenders, the records of the Administrative Agent and the Lenders shall govern absent manifest error. The parties agree to prepare appropriate
documentation to correct any such error within ten (10) days after discovery by any party to this Agreement.
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2.12 Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Advance
shall be payable on each Payment Date, commencing with the first such Payment Date to occur after the date hereof and at the Termination Date. Interest accrued pursuant to Section 2.8 shall be payable on demand. Interest on all Advances and
fees shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to 12:00 noon (New York City
time) at the place of payment. If any payment of principal of, or interest on, an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day.
2.13 Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. Promptly after receipt thereof, the
Administrative Agent will notify each Lender of the contents of each Loan Request and repayment notice received by it hereunder.
2.14
Lending Installations. Each Lender may book its Revolving Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Revolving Loans and any Revolving Credit Notes issued hereunder shall be deemed held by each Lender for the benefit of any such Lending Installation. Each Lender may, by written notice to the Administrative Agent and the
Borrower in accordance with Article XIV, designate replacement or additional Lending Installations through which Revolving Loans will be made by it and for whose account Revolving Loan payments are to be made.
2.15 Non-Receipt of Funds by the Administrative Agent. Unless the Borrower or a Lender, as the case may be, notifies the Administrative
Agent prior to the date on which it is scheduled to make payment to the Administrative Agent of (a) in the case of a Lender, the proceeds of a Revolving Loan or (b) in the case of the Borrower, a payment of principal, interest or fees to
the Administrative Agent for the account of the Lenders, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made. The Administrative Agent may, but shall not be obligated to, make the amount
of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Administrative Agent, the recipient of such payment shall, on demand
by the Administrative Agent, repay to the Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Administrative Agent
until the date the Administrative Agent recovers such amount at a rate per annum equal to (y) in the case of payment by a Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation or (z) in the case of payment by the Borrower, the interest rate applicable to the Revolving Loans.
2.16 Replacement of Lender. If the Borrower is required pursuant to Sections 3.1, 3.2 or 3.4 to make any additional payment to any
Lender or if any Lender defaults in its obligation to make a Revolving Loan or declines to approve an amendment or waiver that is approved by the
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Required Lenders or otherwise becomes a Defaulting Lender (any Lender so affected an Affected Lender), the Borrower may elect, if such amounts continue to be charged or such
suspension is still effective, to replace such Affected Lender as a Lender party to this Agreement, provided that no Default or Event of Default shall have occurred and be continuing at the time of such replacement, and provided
further that, concurrently with such replacement, (a) another bank or other entity which is reasonably satisfactory to the Borrower and the Administrative Agent shall agree, as of such date, to purchase for cash at par the Revolving Loans
and other Obligations due to the Affected Lender under this Agreement and the Related Documents pursuant to an assignment substantially in the form of Exhibit D and to become a Lender for all purposes under this Agreement and to assume all
obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 13.3 applicable to assignments, and (b) the Borrower shall pay to such Affected Lender in same day funds on the day of such
replacement all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Affected Lender under Sections
3.1, 3.2 and 3.4.
2.17 Limitation of Interest. The Borrower, the Administrative Agent and the Lenders intend to strictly comply
with all applicable laws, including applicable usury laws. Accordingly, the provisions of this Section 2.17 shall govern and control over every other provision of this Agreement and the Related Documents which conflicts or is inconsistent with
this Section 2.17, even if such provision declares that it controls. As used in this Section 2.17, the term interest includes the aggregate of all charges, fees, benefits or other compensation which constitute interest under
applicable law, provided that, to the maximum extent permitted by applicable law, (a) any non-principal payment shall be characterized as an expense or as compensation for something other than the use, forbearance or detention of money
and not as interest, and (b) all interest at any time contracted for, reserved, charged or received shall be amortized, prorated, allocated and spread, in equal parts during the full term of this Agreement. In no event shall the Borrower or any
other Person be obligated to pay, or any Lender have any right or privilege to reserve, receive or retain, (y) any interest in excess of the maximum amount of non-usurious interest permitted under the applicable laws (if any) of the United
States or of any applicable state, or (z) total interest in excess of the amount which such Lender could lawfully have contracted for, reserved, received, retained or charged had the interest been calculated for the full term of this Agreement
at the Highest Lawful Rate. On each day, if any, that the interest rate (the Stated Rate) called for under this Agreement or any Related Document exceeds the Highest Lawful Rate, the rate at which interest shall accrue shall
automatically be fixed by operation of this sentence at the Highest Lawful Rate for that day, and shall remain fixed at the Highest Lawful Rate for each day thereafter until the total amount of interest accrued equals the total amount of interest
which would have accrued if there were no such ceiling rate as is imposed by this sentence. Thereafter, interest shall accrue at the Stated Rate unless and until the Stated Rate again exceeds the Highest Lawful Rate when the provisions of the
immediately preceding sentence shall again automatically operate to limit the interest accrual rate. The daily interest rates to be used in calculating interest at the Highest Lawful Rate shall be determined by dividing the applicable Highest Lawful
Rate per annum by the number of days in the calendar year for which such calculation is being made. None of the terms and provisions contained in this Agreement and the Related Documents which directly or indirectly relate to interest shall ever be
construed without reference to this Section 2.17, or be construed to create a contract to pay for the use, forbearance or detention of money at an interest rate in excess of the Highest
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Lawful Rate. If the term of any Revolving Loan or any other Obligation outstanding hereunder or under the Related Documents is shortened by reason of acceleration of maturity as a result of any
Event of Default or by any other cause, or by reason of any required or permitted prepayment, and if for that (or any other) reason any Lender at any time, including but not limited to, the stated maturity, is owed or receives (and/or has received)
interest in excess of interest calculated at the Highest Lawful Rate, then and in any such event all of any such excess interest shall be canceled automatically as of the date of such acceleration, prepayment or other event which produces the
excess, and, if such excess interest has been paid to such Lender, it shall be credited pro tanto against the then-outstanding principal balance of the Borrowers Obligations to such Lender, effective as of the date or dates when the
event occurs which causes it to be excess interest, until such excess is exhausted or all of such principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor.
2.18 Defaulting Lenders.
(a) Defaulting Lender Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a
Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:
(i)
Waivers and Amendments. Such Defaulting Lenders right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of Required Lenders.
(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for
the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 12.1 shall be applied at such time
or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, as the Borrower may request (so long as no
Default or Event of Default exists), to the funding of any Revolving Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; third, if so
determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lenders potential future funding obligations with respect to Revolving Loans under this
Agreement; fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lenders breach
of its obligations under this Agreement; fifth, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower
against such Defaulting Lender as a result of such Defaulting Lenders breach of its obligations under this Agreement; sixth, if so determined by the Administrative Agent, distributed to the Lenders other than the Defaulting Lender until
the ratio of the amount of the outstanding Revolving Loans of such Lenders to the aggregate amount of the outstanding Revolving Loans of all Lenders equals such ratio immediately prior to the Defaulting Lenders failure to fund any portion of
any Revolving Loans; and seventh, to such Defaulting Lender or as otherwise directed
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by a court of competent jurisdiction; provided that if (A) such payment is a payment of the principal amount of any Revolving Loans in respect of which such Defaulting Lender has not
fully funded its appropriate share, and (B) such Revolving Loans were made at a time when the conditions set forth in Section 4.2 were satisfied or waived, such payment shall be applied solely to pay the Revolving Loans of all
Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Revolving Loans of such Defaulting Lender until such time as all Revolving Loans are held by the Lenders pro rata in accordance with the Commitments. Any
payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender pursuant to this Section 2.18(a)(ii) shall be deemed paid to and redirected by such Defaulting
Lender, and each Lender irrevocably consents hereto.
(iii) Certain Fees. (A) No Defaulting Lender shall be entitled to
receive any commitment fee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).
(b) Defaulting Lender Cure. If the Borrower and the Administrative Agent agree in writing that a Lender is no longer a Defaulting
Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein, that Lender will, to the extent applicable, purchase at par that portion
of outstanding Revolving Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Loans to be held pro rata by the Lenders in accordance with the Commitments, whereupon
such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and
provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from
that Lenders having been a Defaulting Lender.
ARTICLE III
YIELD PROTECTION; TAXES
3.1 Yield Protection. If, after the date of this Agreement, there occurs any Change in Law which:
(a) subjects any Lender or any applicable Lending Installation or the Administrative Agent to any Taxes (other than with respect to
Indemnified Taxes, Excluded Taxes, and Other Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto, or
(b) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to LIBOR Loans), or
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(c) imposes any other condition (other than Taxes), cost or expense affecting this Agreement or
the Revolving Loans made by such Lender or participation therein,
and the result of any of the foregoing is to increase the cost to such Person of
making or maintaining its Revolving Loans or Commitment or to reduce the amount received by such Person in connection with such Revolving Loans or Commitment, then, within fifteen (15) days after demand by such Person, the Borrower shall pay
such Person, as the case may be, such additional amount or amounts as will compensate such Person for such increased cost or reduction in amount received. Failure or delay on the part of any such Person to demand compensation pursuant to this
Section 3.1 shall not constitute a waiver of such Persons right to demand such compensation; provided that the Borrower shall not be required to compensate a Person pursuant to this Section 3.1 for any increased costs or
reductions suffered more than 270 days prior to the date that such Person notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Persons intention to claim compensation therefor; provided
further, that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.
3.2 Changes in Capital Adequacy Regulations. If a Lender determines that the amount of capital or liquidity required or expected to be
maintained by such Lender or any Lending Installation of such Lender, or any corporation or holding company controlling such Lender is increased as a result of (a) a Change in Law or (b) any change after the date of this Agreement in the
Risk-Based Capital Guidelines, then, within fifteen (15) days after demand by such Lender, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital or
liquidity which such Lender determines is attributable to this Agreement, its outstanding Revolving Loans or its Commitment to make Revolving Loans, as the case may be, hereunder (after taking into account such Lenders policies as to capital
adequacy or liquidity), in each case that is attributable to such Change in Law or change in the Risk-Based Capital Guidelines, as applicable. Failure or delay on the part of such Lender to demand compensation pursuant to this Section 3.2 shall
not constitute a waiver of such Lenders right to demand such compensation; provided that the Borrower shall not be required to compensate any Lender pursuant to this Section 3.2 for any shortfall suffered more than 270 days prior
to the date that such Lender notifies the Borrower of the Change in Law or change in the Risk-Based Capital Guidelines giving rise to such shortfall and of such Lenders intention to claim compensation therefor; provided further, that if
the Change in Law or change in Risk-Based Capital Guidelines giving rise to such shortfall is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof
3.3 Availability of Types of Advances; Adequacy of Interest Rate. If the Administrative Agent or the Required Lenders determine that
deposits of a type and maturity appropriate to match fund LIBOR Loans are not available to such Lenders in the relevant market or the Administrative Agent, in consultation with the Lenders, determines that the interest rate applicable to LIBOR Loans
is not ascertainable or does not adequately and fairly reflect the cost
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of making or maintaining LIBOR Loans, then the Administrative Agent shall suspend the availability of LIBOR Loans and require any affected LIBOR Loans to be repaid or converted to Prime Rate
Advances.
3.4 Taxes.
(a) Any and all payments by or on account of any obligation of the Borrower under any Loan Document shall be made without deduction or
withholding for any Taxes, except as required by applicable law. If any applicable law requires the deduction or withholding of any Tax from any such payment, then the Borrower shall be entitled to make such deduction or withholding and shall timely
pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax or Other Tax, then the sum payable by the Borrower shall be increased as necessary so that after
such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 3.4) the applicable Lender or the Administrative Agent receives an amount equal to the sum it would
have received had no such deduction or withholding been made.
(b) The Borrower shall timely pay to the relevant Governmental Authority in
accordance with applicable law or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.
(c)
The Borrower shall indemnify the applicable Lender or the Administrative Agent, within fifteen (15) days after demand therefor, for the full amount of any Indemnified Taxes and Other Taxes (including Indemnified Taxes and Other Taxes imposed or
asserted on or attributable to amounts payable under this Section 3.4) payable or paid by such Lender or the Administrative Agent or required to be withheld or deducted from a payment to such Lender or the Administrative Agent and any
reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes and Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment
or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(d) Each Lender shall severally indemnify the Administrative Agent, within fifteen (15) days after demand therefor, for (i) any
Indemnified Taxes and Other Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and Other Taxes and without limiting the obligation of the
Borrower to do so), (ii) any Taxes attributable to such Lenders failure to comply with the provisions of Section 13.2(c) relating to the maintenance of a Participant Register, and (iii) any Excluded Taxes attributable to such
Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative
Agent under this paragraph (d).
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(e) As soon as practicable after any payment of Taxes by the Borrower to a Governmental Authority
pursuant to this Section 3.4, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or
other evidence of such payment reasonably satisfactory to the Administrative Agent.
(f) (i) Any Lender that is entitled to an exemption
from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such
properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably
requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to
determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation
(other than such documentation set forth in Section 3.4(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lenders reasonable judgment such completion, execution or submission would subject such Lender to any material
unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(ii) Without limiting the
generality of the foregoing,
(A) any Lender that is a United States Person for U.S. federal income Tax purposes shall deliver to the
Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals
of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding Tax;
(B) any Non-U.S. Lender shall, to the
extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Non-U.S. Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(1) in the case of a Non-U.S. Lender claiming the benefits of an income Tax treaty to which the United States is a party (x) with
respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the interest article of such Tax treaty and
(y) with respect to any other applicable payments under
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any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the business profits or other income article
of such Tax treaty;
(2) executed originals of IRS Form W-8ECI;
(3) in the case of a Non-U.S. Lender claiming the benefits of the exemption for portfolio interest under Section 981(c) of the Code,
(x) a certificate to the effect that such Non-U.S. Lender is not a bank within the meaning of Section 981(c)(3)(A) of the Code, a 10 percent shareholder of the Borrower within the meaning of
Section 981(c)(3)(B) of the Code, or a controlled foreign corporation described in Section 981(c)(3)(C) of the Code and (y) executed originals of IRS Form W-8BEN; or
(4) to the extent a Non-U.S. Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS
Form W-8BEN, IRS Form W-8IMY or IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable.
(C) any Non-U.S. Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such
number of copies as shall be requested by the recipient) on or prior to the date on which such Non-U.S. Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative
Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by
applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and
(D)
if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in
Section 1571(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the
Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1571(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be
necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lenders obligations under FATCA or to determine the amount to deduct and withhold
from such payment. Solely for purposes of this clause (D), FATCA shall include any amendments made to FATCA after the date of this Agreement.
(iii) Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect,
it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
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(g) If any party determines, in its sole discretion exercised in good faith, that it has received
a refund of any Taxes as to which it has been indemnified pursuant to this Section 3.4 (including by the payment of additional amounts pursuant to this Section 3.4), it shall pay to the indemnifying party an amount equal to such refund
(but only to the extent of indemnity payments made under this Section 3.4 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph
(g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the
contrary in this paragraph (g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (g) the payment of which would place the indemnified party in a less favorable net
after-Tax position than the indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This paragraph shall not be construed to require any indemnified party to make
available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
(h) Each partys obligations under this Section 3.4 shall survive the resignation or replacement of the Administrative Agent or any
assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
3.5 Selection of Lending Installation; Mitigation Obligations; Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with respect to its Revolving Loans to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.4 or to avoid the unavailability of LIBOR Loans under
Section 3.3, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Administrative Agent) as to the
amount due, if any, under Section 3.1, 3.2 or 3.4. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the
absence of manifest error. Determination of amounts payable under such Sections in connection with a LIBOR Loan shall be calculated as though each Lender funded its LIBOR Loan through the purchase of a deposit of the type and maturity corresponding
to the deposit used as a reference in determining the LIBOR Rate applicable to such Revolving Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be
payable on demand after receipt by the Borrower of such written statement. The obligations of the Borrower under Sections 3.1, 3.2 and 3.4 shall survive payment of the Obligations and termination of this Agreement.
3.6 Break-Funding Compensation. In the event any Lender shall incur any loss, cost, expense or premium (including any loss of profit or
loss, cost, expense or premium incurred by reason of the liquidation or reemployment of deposits or other funds acquired or contracted to be acquired by the Lender to fund or maintain LIBOR Loans or the relending or reinvesting of such deposits or
other funds or amounts paid or prepaid to the Lender), as a result of any failure by the
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Borrower to borrow any LIBOR Loan on the date specified in the applicable Loan Request given pursuant to this Agreement; then upon the demand of the Lender, the Borrower shall pay to the Lender
such amount as will reimburse the Lender for such loss, cost, expense or premium. If the Lender requests such a reimbursement it shall provide the Borrower with a certificate setting forth the computation of the loss, cost, expense or premium giving
rise to the request for reimbursement in reasonable detail and such certificate shall be deemed prima facie correct.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Initial Advances. In addition to the terms and conditions set forth in Section 4.2, the obligation of the Lenders to make the
initial Advance is conditioned on the Administrative Agent receiving, prior to or on the date of such Advance, each of the following items in form, detail and content reasonably satisfactory to the Administrative Agent, each Lender, and its counsel:
(a) a duly executed Revolving Credit Note for each Lender which has requested the same;
(b) a certificate of the secretary or an assistant secretary of the Borrower and each of its Subsidiaries (i) certifying an attached
complete and correct copy of its bylaws; (ii) solely in the case of the Borrower, certifying an attached complete and correct copy of resolutions duly adopted by the Borrowers board of directors which have not been amended since their
adoption and remain in full force and effect, authorizing the execution, delivery and performance of this Agreement and the Related Documents to which it is a party; (iii) solely in the case of Independent Bank, certifying an attached copy of
its certificate of formation, and in the case of the Borrower and each other Subsidiary, certifying that the articles of incorporation or charter attached to the applicable certificate of the Office of the Secretary of State of incorporation
delivered pursuant to Section 4.1(d) hereof are complete and correct and have not been amended since the date of the last date of amendment thereto indicated on such certificate of the secretary of state; and (iv) certifying as to the
incumbency and specimen signature of each officer executing this Agreement and all other Related Documents to which it is a party, and including a certification by another officer as to the incumbency and signature of the secretary or assistant
secretary executing the certificate;
(c) an opinion of counsel for the Borrower in form and substance reasonably satisfactory to the
Administrative Agent, its counsel, and each Lender;
(d) certificates of status or good standing for the Borrower and each Subsidiary
issued by the applicable Office of the Secretary of State of incorporation or organization and the respective state, if any, in which the Borrowers or such Subsidiarys principal place of business is located, and certified copies of the
articles of incorporation for the Borrower and each Subsidiary, all issued by the Office of the Secretary of State of the state of the Borrowers or such Subsidiarys incorporation, as applicable, within thirty (30) days of the date
hereof;
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(e) certification that there are no (i) Material Liens of record on the Property of the
Borrower only (and not any of its Subsidiaries) other than Permitted Liens and (ii) Material Liens of record on the Property of any Bank Subsidiary other than Permitted Liens;
(f) a duly executed Negative Pledge Agreement;
(g) a duly executed Notice of Authorized Borrowers; and
(h) a duly executed Authority to Debit Account.
4.2 Each Advance. The obligation of the Lenders to make each Advance is subject to the satisfaction, on the date of making such
Advance, of the following conditions:
(a) receipt by the Administrative Agent of a Loan Request executed by the Borrower;
(b) since the date of the most recent financial statements referred to in Section 6.3, no event or condition shall have occurred and be
continuing that constitutes a Material Adverse Effect;
(c) all of the representations, warranties and acknowledgments of the Borrower
contained in this Agreement and the Related Documents shall be true and accurate in all Material respects as if made on such date (except for representations, warranties and acknowledgments which speak as of a particular date);
(d) there shall not exist on such date any Default and no Default shall occur as the result of the making or incurring of such Obligation;
(e) the aggregate principal amount of all Revolving Loans outstanding together with the amount of any Advance requested shall not exceed
the Aggregate Commitment;
(f) each of the Loan Documents shall remain in full force and effect; and
(g) the Borrower shall not be in default of any agreement of any type with any Lender.
Each Loan Request with respect to a Revolving Loan shall constitute a representation and warranty by the Borrower that the conditions contained in Sections
4.2(b), (c), and (d) have been satisfied.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1 Organization, Qualification and Subsidiaries. The Borrower is lawfully existing and in good standing as a Texas corporation and as
a registered bank holding company. The Borrower and each Subsidiary are lawfully existing and in good standing under the laws of their respective jurisdiction of incorporation or organization, and are duly qualified, in good standing and authorized
to do business in each jurisdiction where failure to do so might have a Material adverse impact on the consolidated assets, condition or prospects of such Subsidiary or the Borrower. The Borrower has the corporate power and authority and all
necessary licenses, permits and franchises to borrow hereunder, and the Borrower and each Subsidiary has the corporate power and authority and all necessary licenses, permits and franchises to own its assets and conduct its business as presently
conducted. All of the issued and outstanding capital stock of the Borrower and each of its Subsidiaries has been validly issued and is fully paid and non-assessable. Except as set forth on Schedule 5.1 attached hereto, as of the date hereof,
the Borrower has no Subsidiaries and the Borrower does not own, directly or indirectly, any outstanding shares of any class of capital stock of any other Person.
5.2 Financial Statements. The Borrowers (a) year-end audited financial statements for December 31, 2014, audited by
McGladrey LLP, and (b) quarter-end unaudited financial statements for the three-month period ended March 31, 2015, were prepared in accordance with GAAP consistently applied throughout the applicable period, excepting any change in
accounting methodology and/or business combination reporting resulting from the adoption of new accounting guidance, and present fairly in all Material respects the financial condition of the Borrower and its consolidated Subsidiaries as of such
dates and the results of its operations and cash flows for the periods then ended. The balance sheets and footnotes thereto show all known Material liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the
respective dates thereof in accordance with GAAP. There has been no Material Adverse Effect since the date of the latest of such statements. The Fiscal Year of the Borrower and each Subsidiary begins on January 1.
5.3 Authorization. The making, execution, delivery and performance of this Agreement and the Related Documents by the Borrower have
each been duly authorized by all necessary corporate action. The valid execution, delivery and performance of this Agreement, the Related Documents and the transactions contemplated hereby and thereby, are not and will not be subject to any
approval, consent or authorization of any Governmental Authority. This Agreement and the Related Documents are the valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except to
the extent enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to time in effect which affect creditors rights generally; (b) legal and equitable limitations
on the availability of injunctive relief, specific performance, and other equitable remedies, and (c) general principles of equity and applicable laws or court decisions limiting the enforceability of particular provisions.
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5.4 Absence of Conflicting Obligations. The making, execution, delivery and performance of
this Agreement and the Related Documents, and compliance with their respective terms, do not violate or constitute a default, breach or violation under any Requirements of Law or any covenant, indenture, deed, lease, contract, agreement, mortgage,
deed of trust, note or instrument to which the Borrower or any of its Subsidiaries is a party or by which it is bound.
5.5 Taxes.
The Borrower and each Subsidiary have filed all federal, state, foreign and local Tax returns which were required to be filed, except those returns for which the due date has been validly extended. The Borrower and each Subsidiary have paid or made
provisions for the payment of all Taxes, assessments, fees and other governmental charges owed, and no Material Tax deficiencies have been assessed, or to the Borrowers knowledge after due inquiry, proposed or threatened against the Borrower
or its Subsidiaries. The federal income Tax liability of the Borrower and its Subsidiaries has been paid for all taxable years up to and including the taxable year ended December 31, 2014, and there is no pending or, to the Borrowers
knowledge, threatened Material Tax controversy or dispute as of the date hereof.
5.6 Absence of Litigation. There is no pending
or, to the knowledge of the Borrower, threatened litigation or administrative proceeding at law or in equity which would, if adversely determined, result in a Material Adverse Effect, and, to the best of the Borrowers knowledge after due
inquiry, there are no presently existing facts or circumstances likely to give rise to any such litigation or administrative proceeding.
5.7 Accuracy of Information. All information, certificates or statements given or made by or on behalf of the Borrower to the
Administrative Agent or any Lender in writing in connection with or pursuant to this Agreement and the Related Documents were accurate, true and complete in all Material respects when given, continue to be accurate, true and complete in all Material
respects as of the date hereof (except for information, certificates or statements which speak as of a specific date), and do not contain any untrue statement or omission of a Material fact necessary to make the statements herein or therein not
misleading. There is no fact known to the Borrower on the date of execution and delivery of this Agreement which is not set forth in this Agreement, the Related Documents or other documents, certificates or statements furnished to the Administrative
Agent or any Lender by or on behalf of the Borrower in connection with the transactions contemplated hereby and which will, or which in the future may (so far as the Borrower can reasonably foresee), cause a Material Adverse Effect.
5.8 Ownership of Property. The Borrower and each of its Subsidiaries has good and marketable title to all of its Material Property,
including the Property reflected in the Borrowers consolidated balance sheets most recently delivered to or received by the Administrative Agent. There are no Material Liens of any nature on any of the Property of the Borrower and its
Subsidiaries except Permitted Liens. All Property useful or necessary in the Borrowers and its Subsidiaries business, whether leased or owned, is in adequate condition and, to the best of the Borrowers knowledge after due inquiry,
conforms in all Material respects to all applicable Requirements of Law. The Borrower and each Subsidiary owns (or is licensed to use) and possesses all such patents, trademarks, trade names, service marks, copyrights and rights with respect to the
foregoing as are reasonably necessary for the conduct of the businesses of the Borrower and such Subsidiaries as now conducted and proposed to be conducted without, individually or in the aggregate, any infringement upon rights of other Persons.
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5.9 Federal Reserve Regulations. The Borrower and its Subsidiaries will not, directly or
indirectly use any proceeds of the Obligations to: (a) purchase or carry any margin stock within the meaning of Regulation U; (b) extend credit to other Persons for any such purpose or refund Indebtedness originally incurred
for any such purpose, except in compliance with all Requirements of Law; or (c) otherwise take or permit any action which would involve a violation of Section 8 of the Securities Exchange Act of 1934, as amended, or any regulation of the
Board of Governors of the Federal Reserve System.
5.10 ERISA. The Borrower and each of its Subsidiaries and anyone under common
control with the Borrower under Section 4001(b) of ERISA is in compliance in all Material respects with the applicable provisions of ERISA and, except where any such occurrence would not cause a Material Adverse Effect: (a) no
prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the Code has occurred; (b) no reportable event as defined in Section 4043 of ERISA has occurred; (c) no accumulated
funding deficiency as defined in Section 302 of ERISA (whether or not waived) has occurred; (d) there are no unfunded vested liabilities of any Employee Plan administered by the Borrower or its Subsidiaries; and (e) the Borrower
and its Subsidiaries or the plan sponsor have timely filed all returns and reports required to be filed for each Employee Plan.
5.11
Places of Business. As of the date hereof, the principal place of business and chief executive office of the Borrower is located at the address specified in Section 14.1 for the Borrower, and the corporate books and records of the
Borrower are located and hereafter shall continue to be located at the Borrowers principal place of business and chief executive office.
5.12 Other Names. Except as provided on Schedule 5.12 hereto, the business conducted by the Borrower (and not of its
Subsidiaries) has not been conducted under any other corporate, trade or fictitious name during the last five years, and following the date hereof the Borrower will not conduct its business under any other corporate, trade or fictitious name unless
the Borrower shall have delivered at least thirty (30) days prior written notice to the Administrative Agent of such name change.
5.13 Not an Investment Company. The Borrower is not (a) an investment company or a company controlled by an
investment company within the meaning of the Investment Company Act of 1940, as amended, or (b) a holding company or a subsidiary of a holding company or an affiliate of a holding
company within the meaning of the Public Utility Holding Company Act of 2005.
5.14 No Defaults. Neither the Borrower nor any
Subsidiary is in default under or in violation of (a) any Requirements of Law, (b) any covenant, indenture, deed, lease, agreement, mortgage, deed of trust, note or other instrument to which the Borrower or any Subsidiary is a party or by
which the Borrower or any Subsidiary is bound, or to which any of its Property is subject, or (c) any Indebtedness; or if any default or violation under Sections 5.14(a), (b) or (c) exists, the failure to cure such default or
violation would not result in a Material Adverse Effect.
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5.15 Environmental Laws. The business of the Borrower and each of its Subsidiaries has
been operated in all Material respects in compliance with all Environmental Laws and neither the Borrower nor any Subsidiary is subject to any known Environmental Liability relating to the conduct of its business or the ownership of its Property and
no facts or circumstances are known by the Borrower, after due inquiry, to exist which could give rise to such Environmental Liabilities, except for such Environmental Liabilities that in the aggregate would not cause a Material Adverse Effect. No
notice has been served on the Borrower or any Subsidiary claiming any violation of Environmental Laws, asserting Environmental Liability or demanding payment or contribution for Environmental Liability or violation of Environmental Laws which would
cause a Material Adverse Effect.
5.16 Labor Matters. There are no labor disputes between the Borrower or any Subsidiary, and any
of its employees which individually or in the aggregate, if resolved in a manner adverse to the Borrower or a Subsidiary, would result in a Material Adverse Effect.
5.17 Restricted Payments. Other than declared dividends and distributions consistent with the Borrowers past practices or as
otherwise permitted under this Agreement, the Borrower has not, since the date of the most recent financial statements referred to in Section 6.3 and as of the date hereof, made any Restricted Payments.
5.18 Solvency. The Borrower is not insolvent, nor will the Borrowers incurrence of loans, direct or contingent, to
repay the Obligations render the Borrower insolvent. For purposes of this Section 5.18, a corporation is insolvent if (a) the present fair salable value (as defined below) of its assets is less than the
amount that will be required to pay its probable liability on its existing debts and other liabilities (including contingent liabilities) as they become absolute and matured; (b) its property constitutes unreasonably small capital for it to
carry out its business as now conducted and as proposed to be conducted including its capital needs; (c) it intends to, or believes that it will, incur debts beyond its ability to pay such debts as they mature (taking into account the timing
and amounts of cash to be received by it and amounts to be payable on or in respect of debt of it), or the cash available to it after taking into account all of its other anticipated uses of the cash is anticipated to be insufficient to pay all such
amounts on or in respect of its debt when such amounts are required to be paid; or (d) it believes that final judgments against it in actions for money damages will be rendered at a time when, or in an amount such that, it will be unable to
satisfy any such judgments promptly in accordance with their terms (taking into account the maximum reasonable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered), or the cash
available to it after taking into account all other anticipated uses of its cash, is anticipated to be insufficient to pay all such judgments promptly in accordance with their terms. For purposes of this Section 5.18, the following definitions
shall apply: (x) the term debts includes any legal liability, whether matured or unmatured, liquidated, absolute, fixed or contingent, (y) the term present fair salable value of assets means the amount which may be
realized, within a reasonable time, either through collection or sale of such assets at their regular market value, and (z) the term regular market value means the amount which a capable and diligent businessman could obtain for the
property in question within a reasonable time from an interested buyer who is willing to purchase under ordinary conditions.
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5.19 Bank Holding Company. The Borrower has complied in all Material respects with all
federal, state and local laws pertaining to bank holding companies, including the Bank Holding Company Act of 1956 (12 U.S.C. § 1841(a)(2)(A) et seq.) and Chapter 202 of the Texas Finance Code, and there are no unsatisfied conditions precedent
to its engaging in the business of being a registered bank holding company.
5.20 FDIC Insurance. The deposits held by each Bank
Subsidiary of the Borrower are insured by the FDIC to the maximum extent permitted by applicable federal law and no event, act or omission has occurred which would adversely affect the status of any Bank Subsidiary as an FDIC-insured bank.
5.21 Investigations. Neither the Borrower nor any Bank Subsidiary is
(a) to the Borrowers knowledge, under investigation by any Regulatory Authority or any other Governmental Authority which would cause a Material Adverse Effect, or (b) is operating under any Material formal or informal restrictions
or understandings imposed by, or agreed to in connection with, any Regulatory Authority or any other Governmental Authority.
5.22
Anti-Corruption Laws; OFAC; Anti-Terrorism Laws.
(a) The Borrower, its Subsidiaries and their respective officers and employees
and to the knowledge of the Borrower its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all Material respects. None of the Borrower, any Subsidiary or to the knowledge of the Borrower or such Subsidiary
any of their respective directors, officers or employees is a Sanctioned Person. No Revolving Loan, use of the proceeds of any Revolving Loan or other transactions contemplated hereby will violate Anti-Corruption Laws or applicable Sanctions.
(b) Neither the making of the Revolving Loans hereunder nor the use of the proceeds thereof will violate the PATRIOT Act, the Trading with the
Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or successor statute
thereto. The Borrower and its Subsidiaries are in compliance in all material respects with the PATRIOT Act.
ARTICLE VI
COVENANTS
The
Borrower covenants and agrees, that, from and after the date of this Agreement and until the Termination Date and until the entire amount of all Obligations are paid in full, it shall and, with the exception of Sections 6.8 and 6.9, shall cause each
Subsidiary to:
6.1 Corporate Existence; Compliance With Laws; Maintenance of Business; Taxes. (a)(i) With respect to the
Borrower, maintain its corporate existence, (ii) with respect to each Subsidiary, maintain its corporate existence except in the case of a merger or consolidation with another Subsidiary, or where the failure to maintain such corporate
existence could not be reasonably expected to have a Material Adverse Effect, and (iii) with respect to the Borrower and
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each Subsidiary, except where the failure to do so could not be expected to have a Material Adverse Effect, maintain its licenses, permits, rights and franchises; (b) comply in all Material
respects with all Requirements of Law, including, without limitation, Anti-Corruption Laws and applicable Sanctions; (c) conduct its business substantially as now conducted and proposed to be conducted; and (d) pay before the same become
delinquent and before penalties accrue thereon, all Taxes, assessments and other government charges against it and its Property, and all other liabilities except to the extent and so long as the same are being contested in good faith by appropriate
proceedings, with adequate reserves having been provided, and except where the failure to do so would not be expected to have a Material Adverse Effect.
6.2 Maintenance of Property; Insurance.
(a) Keep all Property Material to its business, useful and necessary in its business, whether leased or owned, in adequate condition.
(b) Maintain with good, reputable and financially sound insurance underwriters insurance of such nature and in such amounts as is customarily
maintained by companies engaged in the same or similar business and such other insurance as may be required by law or as may be reasonably required in writing by the Required Lenders. Upon the Administrative Agentss request, the Borrower shall
furnish to the Administrative Agent and the Lenders copies of all such insurance policies or a certificate evidencing that the Borrower has complied with the requirements of this paragraph on the date hereof and on each renewal date of such
policies.
6.3 Financial Statements; Notices. Maintain an adequate system of accounting in accordance with sound accounting
practice, and furnish to the Administrative Agent and the Lenders such information respecting the business, assets and financial condition of the Borrower and its Subsidiaries as the Administrative Agent or any Lender may reasonably request and,
without request, furnish to the Administrative Agent and the Lenders:
(a) as soon as available, and in any event within forty five
(45) days after the end of each Fiscal Quarter (other than any Fiscal Quarter that completes a Fiscal Year), financial statements including the balance sheet for the Borrower and its Subsidiaries as of the end of each such Fiscal Quarter and
statements of income, changes in shareholders equity and cash flows of the Borrower and its Subsidiaries for each such Fiscal Quarter and for that part of the Fiscal Year ending with such Fiscal Quarter, setting forth in each case, in
comparative form, figures for the corresponding periods in the preceding Fiscal Year certified as true, correct and complete, subject to review and normal year-end adjustments, by the chief financial officer of the Borrower. The Administrative Agent
and the Lenders agree that posting to EDGAR of the Form 10-Q for the Borrower for each Fiscal Quarter will meet all financial statement delivery requirements of this Section 6.3(a);
(b) as soon as available, and in any event within seventy-five (75) days after the close of each Fiscal Year, a copy of the detailed
annual audit report for such year and accompanying financial statements for the Borrower and its Subsidiaries as of the end of such year, containing balance sheets and statements of income, changes in shareholders equity and cash flows for
such year and for the previous Fiscal Year, as audited by independent certified
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public accountants of recognized standing selected by the Borrower and satisfactory to the Required Lenders, which report shall be accompanied by (i) the unqualified opinion of such
accountants to the effect that the statements present fairly, in all Material respects, the financial position of the Borrower as of the end of such year and the results of its operations and its cash flows for the year then ended in conformity with
GAAP; and (ii) a certificate of such accountants stating that their audit disclosed no Default or that their audit disclosed a Default and specifying the same and the action taken or proposed to be taken with respect thereto. The Administrative
Agent and the Lenders agree that the posting to EDGAR of the FORM 10-K for the Borrower for each Fiscal Year will meet all financial statement delivery requirements of this Section 6.3(b);
(c) as soon as available, and in any event within sixty (60) days after the end of each Fiscal Quarter (other than any Fiscal Quarter
that completes a Fiscal Year) and sixty (60) days after the end of each Fiscal Year, copies of the Borrowers quarterly Parent Borrower Only Financial Statements for Large Bank Holding Companies FR Y-9LP and Consolidated Financial
Statements for Bank Holding Companies FR Y-9C prepared by the Borrower in compliance with the requirements of each applicable Regulatory Authority, all prepared in accordance with the requirements imposed by the applicable Regulatory
Authorities. The Administrative Agent and the Lenders agree that the posting to the applicable Regulatory Authoritys website of the Parent Borrower Only Financial Statements for Large Bank Holding Companies FR Y-9LP and Consolidated
Financial Statements for Bank Holding Companies FR Y-9C for the Borrower will meet all report delivery requirements of this Section 6.3(c);
(d) as soon as available, and in any event within forty five (45) days after the end of each Fiscal Quarter (excluding any Fiscal Quarter
that completes a Fiscal Year) and forty five (45) days after the end of each Fiscal Year, the certificate of the president or chief financial officer of the Borrower substantially in the form of Exhibit E attached hereto, among other
things: (i) showing the calculations of the financial covenants contained herein; (ii) stating that a review of the activities of the Borrower during such period has been made under his supervision to determine whether the Borrower has
observed, performed and fulfilled each and every covenant and condition in this Agreement and the Related Documents; and (iii) stating that no Default has occurred (or if such Default has occurred, describing such Default in reasonable detail
and specifying the period of existence thereof and the steps, if any, being undertaken to correct the same);
(e) as soon as available,
and in any event within five (5) Business Days of filing, a copy of each other filing and report made by the Borrower with or to any securities exchange or the Securities and Exchange Commission, and of each communication from the Borrower to
its equity holders generally. The Administrative Agent and the Lenders agree that the posting to EDGAR of any such communication will meet all filing and report delivery requirements of this Section 6.3(e);
(f) as soon as available, and in any event within forty (45) days after the end of each Fiscal Quarter, the complete Call Report and/or
Thrift Financial Report, as applicable, prepared by Borrower and/or each Bank Subsidiary at the end of such Fiscal Quarter in compliance with the requirements of each applicable Regulatory Authority, all prepared in accordance with the requirements
imposed by the applicable Regulatory Authorities. The Administrative Agent and the Lenders agree that the posting to the applicable Regulatory
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Authoritys website of the Call Report and/or Thrift Financial Report, as applicable, for the Borrower and each Bank Subsidiary will meet all report delivery requirements of this
Section 6.3(f);
(g) as soon as available, and in any event within five (5) days, but without duplication of any other
requirements set forth in this Section 6.3, a copy of all periodic reports which are required by law to be furnished to any Regulatory Authority having jurisdiction over the Borrower or any Bank Subsidiary (including Federal Reserve Bank
reports, but excluding any report which applicable law or regulation prohibits the Borrower or a Bank Subsidiary from furnishing to the Administrative Agent or the Lenders). The Administrative Agent and the Lenders agree that the posting to the
applicable Regulatory Authoritys website for the Borrower and each Bank Subsidiary will meet all report delivery requirements of this Section 6.3(g); and
(h) promptly upon learning of the occurrence of any of the following, written notice thereof, describing the same in reasonable detail and the
steps being taken with respect thereto: (i) the occurrence of any Default or Event of Default; (ii) the institution of, or any Materially adverse determination or development in, any Material litigation, arbitration proceeding or
governmental proceeding; (iii) the occurrence of a reportable event under, or the institution of steps by the Borrower or any Subsidiary to withdraw from, or the institution of any steps to terminate, any Employee Plan as to which
the Borrower or any Subsidiary may have liability; (iv) the commencement of any dispute which could reasonably be expected to lead to the modification, transfer, revocation, suspension or termination of this Agreement or any Related Document;
(v) any event which would have a Material Adverse Effect; (vi) any change in the Chief Executive Officer or Executive Vice President of the Borrower or any change in the Chief Executive Officer of any Bank Subsidiary; or (vii) the
determination by the Borrower to prepay or redeem any Subordinated Indebtedness upon the occurrence of a Special Event.
All financial statements referred
to herein shall be complete and correct in all Material respects and shall be prepared in reasonable detail and on a consolidated and consolidating basis in accordance with GAAP (including financial statements for the Consolidated Bank Subsidiaries
on a consolidated basis), applied consistently throughout all accounting periods, excepting any change in accounting methodology and/or business combination reporting resulting from the adoption of new accounting guidance.
6.4 Inspection of Property and Records. At any reasonable time following reasonable notice, as often as may be reasonably desired and,
from and after the occurrence of and during the continuance of an Event of Default, at the Borrowers expense, permit representatives of the Administrative Agent and the Lenders to visit the Borrowers and its Subsidiaries Property,
to examine the Borrowers and its Subsidiaries books and records and to discuss the Borrowers and its Subsidiaries affairs, finances and accounts with its respective officers and independent certified public accountants (who shall
be instructed by the Borrower to comply with reasonable requests of the Lender or its agents for access to the work papers of such accountants) and the Borrower shall facilitate such inspection and examination; provided, however, that
if no Default or Event of Default has occurred, no more than two such examinations shall occur per year.
6.5 Use of Proceeds. Use
the entire proceeds of the Obligations only for general corporate purposes of the Borrower and its Subsidiaries, including, without limitation, funding operating expenses, dividends that are not prohibited under Section 7.4 hereof, and interest
on Indebtedness of the Borrower and its Subsidiaries.
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6.6 Comply With, Pay and Discharge All Notes, Mortgages, Deeds of Trust and Leases. Comply
with, pay and discharge all existing notes, mortgages, deeds of trust, leases, indentures and any other contractual arrangements to which the Borrower or any Subsidiary is a party (including all Indebtedness) in accordance with the respective terms
of such instruments so as to prevent any default thereunder, except where the failure to do so would not be expected to have a Material Adverse Effect.
6.7 Environmental Compliance.
(a) Maintain at all times all Material permits, licenses and other authorizations required under Environmental Laws, and comply in all
Material respects with all terms and conditions of the required permits, licenses and authorizations and all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the
Environmental Laws.
(b) Notify the Administrative Agent and the Lenders promptly upon obtaining knowledge that (i) any Property
previously or presently owned or operated by the Borrower or any Subsidiary is the subject of a Material environmental investigation by any Governmental Authority having jurisdiction over the enforcement of Environmental Laws, (ii) the Borrower
or any of its Subsidiaries has been or may be named as a responsible party subject to a Material Environmental Liability, or (iii) the Borrower obtains knowledge of any Hazardous Substance located on any Property of the Borrower that might lead
to a Material Environmental Liability.
(c) At any time following the Borrowers notification to the Administrative Agent and the
Lenders pursuant to Section 6.7(b) hereof or the Administrative Agent and the Lenders otherwise becoming aware of any of the items described in Section 6.7(b) hereof, following notice from the Administrative Agent, and as often as may be
reasonably desired, permit the Administrative Agent and the Lenders or an independent consultant selected by the Required Lenders to conduct an environmental investigation satisfactory to the Required Lenders for the purpose of determining whether
the Borrower, each Subsidiary and their respective Properties comply with Environmental Laws and whether there exists any condition or circumstance which may require a cleanup, removal or other remedial action by the Borrower or a Subsidiary with
respect to any Hazardous Substance. The Borrower and its Subsidiaries shall facilitate such environmental audit. The Administrative Agent shall provide the Borrower, at the Borrowers request, with all reports and findings but the Borrower may
not rely on such environmental investigation for any purpose. Reasonable costs for any environmental investigation of Property by the Administrative Agent and the Lenders shall be at the Borrowers expense where conducted (i) under this
Section 6.7(c), (ii) upon the occurrence of an event described in Section 6.7(b), or (iii) at any time the Property is the subject of an environmental investigation by a Governmental Authority having jurisdiction over the
enforcement of Environmental Laws.
Notwithstanding the foregoing, nothing contained in this Agreement, or in the Related Documents, or in the enforcement
of this Agreement or the Related Documents, shall constitute
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or be construed as granting or providing the right, power or capacity to the Administrative Agent or any Lender to exercise (y) decision making control of the Borrowers or any
Subsidiarys compliance with any Environmental Law, or (z) day to day decision making of the Borrower or any Subsidiary with respect to (i) compliance with Environmental Laws or (ii) all or substantially all of the operational
aspects of the Borrower or any Subsidiary.
6.8 Fees and Costs.
(a) Pay the Administrative Agent for the account of the Lenders on the first Business Day of each of January, April, July and October,
commencing with October 1, 2015, in arrears, the accrued and unpaid commitment fee for the Revolving Loan Commitment, which commitment fee shall accrue at a rate per annum equal to the Commitment Fee Percentage of the difference between
(i) the Revolving Loan Commitment and (ii) the Average Daily Principal Balance during the most recently ended Fiscal Quarter (or portion of such Fiscal Quarter). The commitment fee shall be computed daily based on the actual number of days
elapsed in a year of 360 days. All unpaid commitment fees shall be due and payable on the Termination Date. The Administrative Agent may debit to any account of the Borrower at which it makes Advances available to the Borrower all commitment fees
when due, without prior notice to or consent of the Borrower.
(b) Pay immediately upon receipt of an invoice from the Administrative
Agent or any Lender the fees and expenses to be reimbursed to such Person pursuant to Section 6.4, including travel expenses incurred by representatives of such Person.
(c) Pay immediately upon receipt of an invoice from the Administrative Agent or any Lender all fees and expenses to be reimbursed to such
Person pursuant to this Agreement, the Related Documents and the Obligations, and any amendments thereof and supplements thereto, including the reasonable fees of counsel to the Administrative Agent in connection with the preparation and negotiation
of this Agreement, the Related Documents and all amendments thereto, and any waivers of the terms and provisions thereof and the consummation of the transactions contemplated herein.
(d) Pay immediately upon receipt of an invoice from the Administrative Agent or any Lender all fees and expenses (including attorneys
fees) incurred by such Person in seeking advice under this Agreement and the Related Documents with respect to protection or enforcement (including collection and disposition of Collateral, if any) of such Persons rights and remedies under
this Agreement and the Related Documents and with respect to the Obligations (including collection thereof) and all costs and expenses which may be incurred by such Person as a consequence of a Default as provided in Section 9.1(c) and all
reasonable fees and expenses incurred by such Person in connection with any bankruptcy, receivership, conservatorship or other debtor relief proceeding or any federal or state liquidation, rehabilitation or supervisory proceeding involving the
Borrower or any of its Subsidiaries.
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6.9 Financial Covenants.
(a) Loan Loss Reserves to Non-Performing Loans Ratio. With respect to the Consolidated Bank Subsidiaries, maintain as at the end of
each Fiscal Quarter a ratio of Loan Loss Reserves to Non-Performing Loans of not less than 80%.
(b) Maximum Texas Ratio. With
respect to the Consolidated Bank Subsidiaries, maintain as at the end of each Fiscal Quarter a Texas Ratio of not more than 15%.
(c)
Total Risk-Based Capital Ratio of Consolidated Bank Subsidiaries. With respect to the Consolidated Bank Subsidiaries, maintain as at the end of each Fiscal Quarter a Total Risk-Based Capital Ratio equal to or greater than 10.75%.
(d) Minimum Return on Average Assets. With respect to the Consolidated Bank Subsidiaries, maintain as at the end of any Fiscal Quarter
a Return on Average Assets of at least equal to 0.90%.
(e) Minimum Liquid Assets. With respect to the Borrower, maintain at all
times Liquid Assets of at least equal to $5,000,000.
(f) Total Risk-Based Capital Ratio of Borrower and Consolidated Subsidiaries.
With respect to the Borrower and its consolidated Subsidiaries, on a consolidated basis, maintain as at the end of each Fiscal Quarter a Total Risk-Based Capital Ratio equal to or greater than 11.00%.
(g) Well-Capitalized Status. With respect to each Bank Subsidiary, maintain at all times such capital as may be necessary to cause such
Bank Subsidiary to be classified as a well capitalized institution in accordance with all laws and regulations (as such laws and regulations may be amended, supplemented or otherwise modified from time to time) of the FDIC and each other
Regulatory Authority that has supervisory authority over such Subsidiary.
(h) Compliance with Regulatory Requirements. At all
times remain in Material compliance with all regulatory rules and requirements of or imposed by the FDIC and all other Regulatory Authorities which are applicable to or govern the Borrower or any of its Subsidiaries.
6.10 Revolving Loans Resting Period. For a period of not less than thirty (30) consecutive days during each twelve (12) month
period from July 1 through June 30 of any calendar year, pay so much of the aggregate outstanding principal amount of Revolving Loans as is necessary to reduce the aggregate outstanding amount of Revolving Loans to an amount equal to $0.00
at all times during such thirty (30) day consecutive period.
6.11 OFAC, PATRIOT Act, Anti-Corruption Laws Compliance. The
Borrower shall, and shall cause each Subsidiary to, (i) refrain from doing business in a Sanctioned Country or with a Sanctioned Person in violation of the economic sanctions of the United States administered by OFAC, and (ii) provide, to
the extent commercially reasonable, such information and take such actions as are reasonably requested by the Administrative Agent or any Lender in order to assist the Administrative Agent and the Lenders in maintaining
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compliance with the PATRIOT Act. The Borrower will not request any Revolving Loan, and the Borrower will not use, and the Borrower will ensure that its Subsidiaries and its or their respective
directors, officers, employees and agents will not use, the proceeds of any Revolving Loan (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in
violation of any Anti-Corruption Laws or (ii) in any manner that would result in the violation of any applicable Sanctions.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that, from and after the date of this Agreement and until the Termination Date and until all Obligations are
paid in full, the Borrower and each Subsidiary shall not directly or indirectly without the prior written consent of the Lenders required under Section 9.3 hereof:
7.1 Change of Control; Consolidation, Merger, Acquisitions, Etc. (a) Enter into a Change of Control transaction; or
(b) purchase of otherwise acquire all or substantially all of the assets or stock of a Person (which Person would, upon the consummation of such transaction, become a Bank Subsidiary), unless, at the time such purchase or other acquisition is
announced, the Borrower provides the Administrative Agent and the Lenders with a pro forma compliance certificate that includes a certification that such purchase or other acquisition will not cause an Event of Default (assuming for the
purposes of the pro forma calculation of the financial covenants set forth in Section 6.9 hereof that the effective date of such purchase or other acquisition were the end of a Fiscal Quarter or Fiscal Year, as applicable).
7.2 Holding Company Indebtedness. With respect to the Borrower only (and not any of its Subsidiaries) issue, create, incur, assume or
otherwise become liable with respect to (or agree to issue, create, incur, assume or otherwise become liable with respect to), or permit to remain outstanding, any Holding Company Indebtedness, except: (a) the Obligations; (b) Holding
Company Indebtedness disclosed on the Borrowers quarterly Parent Borrower Only Financial Statements for Large Bank Holding Companies FR Y-9LP dated March 31,2014, and (c) Subordinated Indebtedness.
7.3 Liens; Negative Pledges. With respect to (a) the Borrower only (and not any of its Subsidiaries), create or permit to be
created or allow to exist any Lien upon or interest in any Property of the Borrower, and (b) any Bank Subsidiary only, create or permit to be created or allow to exist any Lien upon or interest in any Property of such Bank Subsidiary except
Permitted Liens. The Borrower further agrees that it shall not, without the prior written consent of the Administrative Agent and the Lenders, enter into, become a party to or become subject to any negative pledge agreement relating to any of its
assets with any third party except as set forth in the Related Documents.
7.4 Dividend; Distributions. Make any Restricted
Payments; provided, however, that, so long as no Default has occurred and is continuing, or will occur as a result of any such payment (with the calculation of the covenants set forth in Section 6.9 being made on a pro
forma basis as at the date of such payment), the Borrower may pay dividends and distributions to its shareholders as permitted by applicable governmental laws and regulations, including dividends with respect to SBLF Preferred Stock.
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7.5 Loans; Investments. Make or commit to make advances, loans, extensions of credit or
capital contributions to, or purchases of any stock, bonds, notes, debentures or other securities of, or make any other investment in, any Person except, advances in the ordinary course of business to Subsidiaries consistent with past practices, or
for purposes of acquiring, merging, consolidating Subsidiaries, or as otherwise permitted by applicable governmental laws and regulations, or as otherwise permitted by this Article VII.
7.6 Compliance with ERISA. (a) Terminate any Employee Plan so as to result in any Material liability to PBGC; (b) engage in
any prohibited transaction (as defined in Section 4975 of the Code) involving any Employee Plan which would result in a Material liability for an excise tax or civil penalty in connection therewith; or (c) incur or suffer to
exist any Material accumulated funding deficiency (as defined in Section 302 of ERISA), whether or not waived, involving any condition, which presents a risk of incurring a Material liability to PBGC by reason of termination of any
such Employee Plan.
7.7 Affiliates. Permit any transaction with any Affiliate of the Borrower or a Subsidiary that violates
Section 23A or 23B of the Federal Reserve Act, as amended, or enter into any transaction (including the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate of the Borrower or a Subsidiary, except
in the ordinary course of business and pursuant to the reasonable requirements of the Borrowers or such Subsidiarys business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or
such Subsidiary would obtain in a comparable arms-length transaction.
7.8 Prepayment or Redemption of Subordinated Indebtedness.
Prepay or redeem, or permit any prepayment or redemption of, any Subordinated Indebtedness, except upon the occurrence of a Special Event, provided that (a) immediately after giving effect to any such prepayment or redemption the
Borrower shall be in compliance with Section 6.9 hereof, determined on a pro forma basis as at the date of such prepayment or redemption (except in the case of Section 6.9(d) which shall be determined as at the end of the
immediately preceding Fiscal Quarter), which compliance shall be demonstrated by delivery by the Borrower to the Administrative Agent and the Lenders of a duly completed certificate of the president or chief financial officer of the Borrower in the
form of Exhibit E attached hereto, and (b) both immediately before and after giving effect to any such prepayment or redemption no Default or Event of Default shall have occurred and be continuing.
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ARTICLE VIII
DEFAULTS
8.1
Events of Default Defined. The occurrence of any one or more of the following events shall constitute an Event of Default (each, an Event of Default):
(a) the Borrower shall fail to pay (i) principal of any Revolving Loan (including, without limitation, the Revolving Credit Notes and the
payments required by Section 2.2) when and as the same shall become due and payable, or (ii) interest on any Revolving Loan (including, without limitation, the Revolving Credit Notes and the payments required by Section 2.2), within
five (5) days after the same shall become due and payable, or (iii) fees or other obligations in respect of the Obligations (including, without limitation, payments required by Sections 3.6 and 6.8) within ten (10) days after the same
shall become due and payable, in either case whether upon demand, at maturity, by acceleration or otherwise;
(b) the Borrower or any of
its Subsidiaries shall fail to observe or perform any of the covenants, agreements or conditions contained in Section 6.3(h) or Section 6.8;
(c) the Borrower or any of its Subsidiaries shall fail to observe or perform any of the covenants, agreements or conditions contained in this
Agreement or the Related Documents (other than any such failure that results in an Event of Default as expressly provided in any other paragraph of this Section 8.1) and such failure shall continue for 15 Business Days after Borrowers
receipt of written notice of such failure by the Administrative Agent;
(d) (i) the Borrower or any of its Subsidiaries shall default
(as principal or guarantor or otherwise) in the payment of any Indebtedness (other than the Obligations) aggregating $100,000 or more; (ii) the maturity of any such Indebtedness shall, in whole or in part, have been accelerated, or any such
Indebtedness shall, in whole or in part, have been required to be prepaid prior to the stated maturity thereof, in accordance with the provisions of any contract evidencing, providing for the creation of, or concerning such Indebtedness; or
(iii) (A) any event shall have occurred and be continuing that permits (or, with the passage of time or the giving of notice or both, would permit) any holder or holders of such Indebtedness, any trustee or agent acting on behalf of such holder
or holders or any other Person so to accelerate such maturity or require any such prepayment and (B) if the contract evidencing, providing for the creation of, or concerning such Indebtedness provides for a cure period for such event, such
event shall not be cured prior to the end of such cure period or such shorter period of time as the Required Lenders may specify;
(e) A
default shall be continuing under any contract, arrangement, or agreement (other than a contract relating to Indebtedness to which clause (d) of this Section is applicable) binding upon the Borrower or any Subsidiary, except a default that,
together with all other such defaults, has not had and will not have a Materially Adverse Effect on the Borrower and the Subsidiaries taken as a whole.
(f) any representation or warranty made by the Borrower herein or in any of the Related Documents or in any certificate, document or financial
statement delivered to the Administrative Agent or the Lenders shall prove to have been incorrect in any Material adverse respect as of the time when made or given;
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(g) a final judgment (or judgments) for the payment of amounts aggregating in excess of $100,000
shall be entered and final against the Borrower or any of its Subsidiaries, and such judgment (or judgments) shall remain outstanding and unsatisfied, unbonded or unstayed after thirty (30) days from the date of entry thereof;
(h) the Borrower or any of its Subsidiaries shall (i) become insolvent or take or fail to take any action which constitutes an admission
of inability to pay its debts as they mature; (ii) make an assignment for the benefit of creditors; (iii) petition or apply to any tribunal for the appointment of a custodian, receiver or any trustee for the Borrower or such Subsidiary or
a substantial part of its respective assets; (vi) suffer a rehabilitation proceeding, custodianship, receivership, conservatorship or trusteeship to continue undischarged for a period of sixty (60) days or more; (iv) commence any
proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; (v) by any act or omission indicate its consent to, approval
of or acquiescence in any rehabilitation proceeding or any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver, conservator or any trustee for it or any substantial part of any of its properties;
or (vi) adopt a plan of liquidation of its assets;
(i) any Person shall: (i) petition or apply to any tribunal for the
appointment of a custodian, receiver, conservator or any trustee for the Borrower or any Subsidiary or a substantial part of its respective assets which continues undischarged for a period of sixty (60) days or more; (ii) commence any
proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, rehabilitation, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect, in which an order for relief is entered or which
remains undismissed for a period of sixty (60) days or more;
(j) any Governmental Authority or any geotechnical engineer or
environmental consultant hired by the Borrower, the Required Lenders or any Governmental Authority shall determine that the potential uninsured or unrecoverable liability of the Borrower or a Subsidiary for damages caused by the discharge of any
Hazardous Substance, including liability for real property damage or remedial action related thereto or liability for personal injury claims, exceeds $1,000,000 and the Borrower is unable to provide for such liability in a manner reasonably
acceptable in good faith to the Required Lenders;
(k) (i) the FDIC, the Federal Reserve Board, the OCC, or any other Regulatory Authority
shall (A) issue any formal or informal Material notice, order or directive involving activities deemed unsafe or unsound by the Borrower or any of its Subsidiaries, (B) issue a memorandum of understanding, capital maintenance agreement,
cease and desist order, prompt corrective action order, or other directive (including a capital raise directive) involving the Borrower or any of its Subsidiaries, (C) cause the suspension or removal of the Chief Executive Officer or any
Executive Vice President of the Borrower or the Chief Executive Officer of any of the Subsidiaries, or (D) otherwise restrict the ability of any Subsidiary to pay dividends to the Borrower without prior regulatory approval, or (ii) the
FDIC shall terminate its insurance coverage with respect to the Bank Subsidiaries; or
(l) this Agreement or any of the Related Documents
shall at any time cease to be in full force and effect, or the Borrower shall so assert or shall attempt to revoke or terminate this Agreement or any Related Document.
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ARTICLE IX
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
9.1 Acceleration; Remedies.
(a) If any Event of Default described in Section 8.1(h) or 8.1(i) occurs with respect to the Borrower, the obligations of the Lenders to
make Revolving Loans hereunder shall automatically terminate and the Obligations under this Agreement and the Related Documents shall immediately become due and payable without any election or action on the part of the Administrative Agent or any
Lender. If any other Event of Default occurs, the Administrative Agent may, and at the request of the Required Lenders shall, terminate or suspend the obligations of the Lenders to make Revolving Loans hereunder or declare the Obligations under this
Agreement and the Related Documents to be due and payable, or both, whereupon the Obligations under this Agreement and the Related Documents shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of
which the Borrower hereby expressly waives.
(b) If, within thirty (30) days after acceleration of the maturity of the Obligations
under this Agreement and the Related Documents or termination of the obligations of the Lenders to make Revolving Loans hereunder as a result of any Event of Default (other than any Event of Default as described in Section 8.1(h) or 8.1(i) with
respect to the Borrower) and before any judgment or decree for the payment of the Obligations due under this Agreement and the Related Documents shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct,
the Administrative Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination.
(c) Upon the
occurrence and during the continuation of any Event of Default, the Administrative Agent may, and at the request of the Required Lenders shall, exercise all rights and remedies under the Loan Documents and enforce all other rights and remedies under
applicable law.
9.2 Application of Funds. After the exercise of remedies provided for in Section 9.1 (or after the
Obligations under this Agreement and the Related Documents have automatically become immediately due and payable as set forth in the first sentence of Section 9.1(a)), any amounts received by the Administrative Agent on account of the
Obligations shall be applied by the Administrative Agent in the following order:
(a) First, to payment of fees, indemnities, expenses and
other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;
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(b) second, to payment of fees, indemnities and other amounts (other than principal, interest,
and commitment fees) payable to the Lenders (including fees, charges and disbursements of counsel to the respective Lenders as required by Section 10.6 and amounts payable under Article III);
(c) third, to payment of accrued and unpaid commitment fees and interest on the Revolving Loans, ratably among the Lenders in proportion to
the respective amounts described in this Section 9.2(c) payable to them;
(d) fourth, to payment of all Obligations ratably among the
Lenders; and
(e) last, the balance, if any, to the Borrower or as otherwise required by law.
9.3 Amendments. Subject to the provisions of this Section 9.3, the Required Lenders (or the Administrative Agent with the consent
in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to this Agreement or changing in any manner the rights of the Lenders or the Borrower hereunder
or thereunder or waiving any Default or Event of Default hereunder; provided, however, that no such supplemental agreement shall:
(a) without the consent of each Lender directly affected thereby, extend the final maturity of any Revolving Loan to a date after the
Termination Date or postpone any regularly scheduled payment of principal of any Revolving Loan or forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon or increase
the amount of the Commitment of such Lender hereunder.
(b) without the consent of all of the Lenders, reduce the percentage specified in
the definition of Required Lenders.
(c) without the consent of all of the Lenders, amend this Section 9.3.
No amendment of any provision of this Agreement relating to the Administrative Agent shall be effective without the written consent of the
Administrative Agent. The Administrative Agent may waive payment of the fee required under Section 13.3(c) without obtaining the consent of any other party to this Agreement. Notwithstanding anything to the contrary herein, the Administrative
Agent may, with the consent of the Borrower only, amend, modify or supplement this Agreement or any of the Related Documents to cure any ambiguity, omission, mistake, defect or inconsistency of a technical or immaterial nature, as determined in good
faith by the Administrative Agent.
9.4 Preservation of Rights. No delay or omission of the Lenders or the Administrative Agent to
exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Event of Default or an acquiescence therein, and the making of an Advance notwithstanding the existence of an Event of Default or the inability
of the Borrower to satisfy the conditions precedent to such Advance shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other
right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in
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writing signed by the Lenders required pursuant to Section 9.3, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Administrative Agent and the Lenders until the Obligations have been paid in full.
ARTICLE X
GENERAL
PROVISIONS
10.1 Survival of Representations. All representations and warranties of the Borrower contained in this
Agreement shall survive the making of the Advances herein contemplated.
10.2 Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation.
10.3 Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of
any of the provisions of the Loan Documents.
10.4 Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Administrative Agent, and the Lenders and supersede all prior agreements and understandings among the Borrower, the Administrative Agent, and the Lenders relating to the subject matter thereof other than those
contained in the Fee Letter which shall survive and remain in full force and effect during the term of this Agreement.
10.5 Several
Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Administrative Agent is authorized
to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any
Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that the Arranger shall enjoy the benefits of the provisions of Sections 10.6,
10.10 and 11.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement.
10.6 Expenses; Indemnification.
(a) The Borrower shall reimburse the Administrative Agent and the Arranger upon demand for all reasonable out-of-pocket expenses paid or
incurred by the Administrative Agent or the Arranger, including, without limitation, filing and recording costs and fees, costs of any environmental review, and consultants fees, travel expenses and reasonable fees, charges and disbursements
of outside counsel to the Administrative Agent and the Arranger and/or the allocated costs of in-house counsel incurred from time to time, in connection with the due diligence, preparation, administration, negotiation, execution, delivery,
syndication, distribution (including, without limitation, via DebtX and any other internet service selected by the
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Administrative Agent), review, amendment, modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Administrative Agent, the Arranger, and the Lenders for
any costs, internal charges and out-of-pocket expenses, including, without limitation, filing and recording costs and fees, costs of any environmental review, and consultants fees, travel expenses and reasonable fees, charges and disbursements
of outside counsel to the Administrative Agent, the Arranger, and the Lenders and/or the allocated costs of in-house counsel incurred from time to time, paid or incurred by the Administrative Agent, the Arranger, or any Lender in connection with the
collection and enforcement of the Loan Documents. Expenses being reimbursed by the Borrower under this Section 10.6(a) include, without limitation, costs and expenses incurred in connection with the Reports described in the following sentence.
The Borrower acknowledges that from time to time U.S. Bank may prepare and may distribute to the Lenders (but shall have no obligation or duty to prepare or to distribute to the Lenders) certain audit reports (the Reports) pertaining to
the Borrowers assets for internal use by U.S. Bank from information furnished to it by or on behalf of the Borrower, after U.S. Bank has exercised its rights of inspection pursuant to this Agreement.
(b) The Borrower hereby further agrees to indemnify and hold harmless the Administrative Agent, the Arranger, each Lender, their respective
affiliates, and each of their directors, officers and employees, agents and advisors against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, reasonable attorneys fees, charges and
disbursements and settlement costs (including, without limitation, all expenses of litigation or preparation therefor) whether or not the Administrative Agent, the Arranger, any Lender or any affiliate is a party thereto) which any of them may pay
or incur arising out of or relating to this Agreement, the Related Documents, the transactions contemplated hereby, any actual or alleged presence or release of Hazardous Substances on or from any Property owned or operated by Borrower or any of its
Subsidiaries, any environmental liability related in any way to Borrower or any of its Subsidiaries, or any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any
other theory, whether brought by a third party or by Borrower or any of its Subsidiaries, or the direct or indirect application or proposed application of the proceeds of any Advance hereunder except to the extent that they are determined in a final
non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking indemnification. The obligations of the Borrower under this Section 10.6 shall survive the
termination of this Agreement.
10.7 Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall
be furnished to the Administrative Agent with sufficient counterparts so that the Administrative Agent may furnish one to each of the Lenders.
10.8 Accounting and Financial Determinations.
(a) To the extent applicable and except as otherwise specified in this Agreement, where the character or amount of any asset or liability or
item of income or expense is required to be determined, or any accounting computation is required to be made, for the purpose of this Agreement, such determination or calculation shall be made on a consolidated basis so as to include Borrower and
each Subsidiary of the Borrower in each such calculation and shall be made in accordance with GAAP; provided, however, that if any change in GAAP from
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those applied in the preparation of the financial statements referred to in Section 6.3 is occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by
the Financial Accounting Standards Board or the Securities and Exchange Commission (or its boards or committees or successors thereto or agencies with similar functions), the initial announcement of which change is made after the date hereof,
results in a change in the method of calculation of financial covenants, standards or terms found in Section 6, the parties hereto agree to enter into good faith negotiations in order to amend such provisions so as to reflect such changes with
the desired result that the criteria for evaluating the Borrowers financial condition shall be the same after such changes as if such changes had not been made; and provided, further, that until such time as the parties hereto agree
upon such amendments, such financial covenants, standards and terms shall be construed and calculated as though no change had taken place.
(b) All regulatory determinations and calculations made in connection with the determination of the status of the Borrower and any Bank
Subsidiary as well-capitalized under Section 6.9 hereof, shall be made in accordance with the laws, rules, regulations and interpretations thereof by the Governmental Authority charged with interpretations thereof, as in effect on the date of
such determination or calculation, as the case may be.
(c) When used herein, the term financial statement shall include
balance sheets, statements of earnings, statements of stockholders equity, statements of cash flows and the notes and schedules thereto, and each reference herein to a balance sheet or other financial statement of the Borrower shall be to a
statement prepared on a consolidated basis, unless otherwise specified.
10.9 Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable.
10.10 Nonliability of Lenders. The relationship between the Borrower on the one hand and the Lenders and the Administrative Agent on
the other hand shall be solely that of borrower and lender. None of the Administrative Agent, the Arranger, and any Lender shall have any fiduciary responsibilities to the Borrower. None of the Administrative Agent, the Arranger, and any Lender
undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrowers business or operations. The Borrower agrees that none of the Administrative Agent, the Arranger, and any
Lender shall have liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship
established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such
losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. None of the Administrative Agent, the Arranger, and any Lender shall have any liability with respect to, and the Borrower hereby waives,
releases and agrees not to sue for, any special, indirect, consequential or punitive damages suffered by the Borrower in connection with, arising out of, or in any way related to the
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Loan Documents or the transactions contemplated thereby. It is agreed that the Arranger shall, in its capacity as such, have no duties or responsibilities under the Agreement or any Related
Document. Each Lender acknowledges that it has not relied and will not rely on the Arranger in deciding to enter into the Agreement or any Related Document or in taking or not taking any action.
10.11 Confidentiality. The Administrative Agent and each Lender agrees to hold any confidential information which it may receive from
the Borrower in connection with this Agreement in confidence, except for disclosure (i) to its Affiliates and to the Administrative Agent and any other Lender and their respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to the Administrative Agent or such Lender provided such parties have been notified of the confidential nature of such information, (iii) as provided in Section 13.3(e), (iv) to regulatory officials, (v) to
any Person as requested pursuant to or as required by law, regulation, or legal process, (vi) to any Person in connection with any legal proceeding to which it is a party, (vii) to its direct or indirect contractual counterparties in swap
agreements or to legal counsel, accountants and other professional advisors to such counterparties provided such parties have been notified of the confidential nature of such information, (viii) to rating agencies if requested or required by
such agencies in connection with a rating relating to the Advances hereunder, (ix) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any Related Document or the enforcement
of rights hereunder or thereunder, and (x) to the extent such information (1) becomes publicly available other than as a result of a breach of this Section 10.11 or (2) becomes available to the Administrative Agent or any Lender
on a non-confidential basis from a source other than the Borrower. Without limiting Section 10.4, the Borrower agrees that the terms of this Section 10.11 shall set forth the entire agreement between the Borrower and the Administrative
Agent and each Lender with respect to any confidential information previously or hereafter received by the Administrative Agent or such Lender in connection with this Agreement, and this Section 10.11 shall supersede any and all prior
confidentiality agreements entered into by the Administrative Agent or any Lender with respect to such confidential information.
10.12
Nonreliance. Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U) for the repayment of the Revolving Loans provided for herein.
10.13 Disclosure. The Borrower and each Lender hereby acknowledge and agree that U.S. Bank and/or its Affiliates from time to time may
hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates.
10.14 USA PATRIOT ACT
NOTIFICATION. The following notification is provided to Borrower pursuant to Section 326 of the PATRIOT Act:
Each Lender that is subject to the
requirements of the PATRIOT Act hereby notifies the Borrower that pursuant to the requirements of the PATRIOT Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address
of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the PATRIOT Act.
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ARTICLE XI
THE ADMINISTRATIVE AGENT
11.1 Appointment; Nature of Relationship. U.S. Bank National Association is hereby appointed by each of the Lenders as its contractual
representative (herein referred to as the Administrative Agent) hereunder and under each Related Document, and each of the Lenders irrevocably authorizes the Administrative Agent to act as the contractual representative of such Lender
with the rights and duties expressly set forth herein and in the Related Documents. The Administrative Agent agrees to act as such contractual representative upon the express conditions contained in this Article XI. Notwithstanding the use of the
defined term Administrative Agent, it is expressly understood and agreed that the Administrative Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any Related Document and that the
Administrative Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the Related Documents. In its capacity as the Lenders contractual representative,
the Administrative Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, and (ii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and
the Related Documents. Each of the Lenders hereby agrees to assert no claim against the Administrative Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives.
11.2 Powers. The Administrative Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to
the Administrative Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Administrative Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action
thereunder except any action specifically provided by the Loan Documents to be taken by the Administrative Agent.
11.3 General
Immunity. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any
Related Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct
of such Person.
11.4 No Responsibility for Revolving Loans, Recitals, Etc. Neither the Administrative Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder;
(b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction
of any condition specified in Article IV, except receipt of items required to be delivered solely to the Administrative Agent; (d) the existence or possible existence of any Default or Event of Default; (e) the validity, enforceability,
effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any Collateral; or (g) the
financial condition of the Borrower or any Subsidiary of the Borrower.
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11.5 Action on Instructions of Lenders. The Administrative Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any Related Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto
shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any Related
Document unless it shall be requested in writing to do so by the Required Lenders. The Administrative Agent shall be fully justified in failing or refusing to take any action hereunder and under any Related Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.
11.6 Employment of Administrative Agents and Counsel. The Administrative Agent may execute any of its duties as Administrative Agent
hereunder and under any Related Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of
any such agents or attorneys-in-fact selected by it with reasonable care.
The Administrative Agent shall be entitled to advice of counsel concerning the
contractual arrangement between the Administrative Agent and the Lenders and all matters pertaining to the Administrative Agents duties hereunder and under any Related Document.
11.7 Reliance on Documents; Counsel. The Administrative Agent shall be entitled to rely upon any Revolving Credit Note, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex, electronic mail message, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Administrative Agent, which counsel may be employees of the Administrative Agent. For purposes of determining compliance with the conditions specified in Sections 4.1 and 4.2, each Lender
that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless
the Administrative Agent shall have received notice from such Lender prior to the applicable date specifying its objection thereto.
11.8
Administrative Agents Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Administrative Agent ratably in proportion to their respective Pro Rata Shares (disregarding, for the avoidance of doubt, the
exclusion of Defaulting Lenders therein) (i) for any amounts not reimbursed by the Borrower for which the Administrative Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by
the Administrative Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Administrative Agent in
connection with any dispute between the Administrative Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties,
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actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating
to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Administrative Agent in
connection with any dispute between the Administrative Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (i) no Lender
shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Administrative Agent
and (ii) any indemnification required pursuant to Section 3.4(d) shall, notwithstanding the provisions of this Section 11.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders
under this Section 11.8 shall survive payment of the Obligations and termination of this Agreement.
11.9 Notice of Event of
Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received written notice from a Lender or the Borrower referring
to this Agreement describing such Default or Event of Default and stating that such notice is a notice of default. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice
thereof to the Lenders; provided that, except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the
Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity.
11.10 Rights as a Lender. In the event the Administrative Agent is a Lender, the Administrative Agent shall have the same rights and
powers hereunder and under any Related Document with respect to its Commitment and its Revolving Loans as any Lender and may exercise the same as though it were not the Administrative Agent, and the term Lender or Lenders
shall, at any time when the Administrative Agent is a Lender, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent and its Affiliates may accept deposits from, lend money to,
and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any Related Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not
restricted hereby from engaging with any other Person.
11.11 Lender Credit Decision, Legal Representation.
(a) Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, the Arranger or any other Lender
and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the Related Documents. Each Lender also
acknowledges that it will, independently and without reliance upon the Administrative Agent, the Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own
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credit decisions in taking or not taking action under this Agreement and the Related Documents. Except for any notice, report, document or other information expressly required to be furnished to
the Lenders by the Administrative Agent or Arranger hereunder, neither the Administrative Agent nor the Arranger shall have any duty or responsibility (either initially or on a continuing basis) to provide any Lender with any notice, report,
document, credit information or other information concerning the affairs, financial condition or business of the Borrower or any of its Affiliates that may come into the possession of the Administrative Agent or Arranger (whether or not in their
respective capacity as Administrative Agent or Arranger) or any of their Affiliates.
(b) Each Lender further acknowledges that it has had
the opportunity to be represented by legal counsel in connection with its execution of this Agreement and the Related Documents, that it has made its own evaluation of all applicable laws and regulations relating to the transactions contemplated
hereby, and that the counsel to the Administrative Agent represents only the Administrative Agent and not the Lenders in connection with this Agreement and the transactions contemplated hereby.
11.12 Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders
and the Borrower, such resignation to be effective upon the appointment of a successor Administrative Agent or, if no successor Administrative Agent has been appointed, thirty (30) days after the retiring Administrative Agent gives notice of
its intention to resign. Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed
by the Required Lenders within fifteen (15) days after the resigning Administrative Agents giving notice of its intention to resign, then the resigning Administrative Agent may appoint, on behalf of the Borrower and the Lenders, a
successor Administrative Agent. Notwithstanding the previous sentence, the Administrative Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Administrative
Agent hereunder. If the Administrative Agent has resigned and no successor Administrative Agent has been appointed, the Lenders may perform all the duties of the Administrative Agent hereunder and the Borrower shall make all payments in respect of
the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Administrative Agent shall be deemed to be appointed hereunder until such successor Administrative Agent has accepted the
appointment. Any such successor Administrative Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Administrative Agent. Upon the effectiveness of the resignation of the Administrative Agent,
the resigning Administrative Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation of an Administrative Agent, the provisions of this Article XI shall continue in
effect for the benefit of such Administrative Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder and under the Related Documents. In the event that there is a successor to the
Administrative Agent by merger, or the Administrative Agent assigns its duties and obligations to an Affiliate pursuant to this Section 11.12, then the term Prime Rate as used in this Agreement shall mean the prime rate, base rate
or other analogous rate of the new Administrative Agent.
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11.13 Delegation to Affiliates. The Borrower and the Lenders agree that the Administrative
Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliates directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to
the same benefits of the indemnification, waiver and other protective provisions to which the Administrative Agent is entitled under Articles X and XI.
11.14 Negative Pledge Agreement. The Lenders hereby empower and authorize the Administrative Agent to execute and deliver to the
Borrower on their behalf the Negative Pledge Agreement.
11.15 No Advisory or Fiduciary Responsibility. In connection with all
aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any Related Document), the Borrower acknowledges and agrees that: (a) (i) the arranging and other
services regarding this Agreement provided by the Lenders are arms-length commercial transactions between the Borrower and its Affiliates, on the one hand, and the Lenders, on the other hand, (ii) the Borrower has consulted its own legal,
accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (iii) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the
Related Documents; (b) (i) each of the Lenders is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary
for the Borrower or any of its Affiliates, or any other Person and (ii) no Lender has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth
herein and in the Related Documents; and (c) each of the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and no Lender has
any obligation to disclose any of such interests to the Borrower or its Affiliates. To the fullest extent permitted by law, the Borrower hereby waives and releases any claims that it may have against each of the Lenders with respect to any breach or
alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
ARTICLE XII
SETOFF; RATABLE PAYMENTS
12.1 Setoff. The Borrower hereby grants each Lender a security interest in all deposits, credits and deposit accounts (including all
account balances, whether provisional or final and whether or not collected or available) of the Borrower with such Lender or any Affiliate of such Lender (the Deposits) to secure the Obligations. In addition to, and without limitation
of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Event of Default occurs, Borrower authorizes each Lender to offset and apply all such Deposits toward the payment of the Obligations
owing to such Lender, whether or not the Obligations, or any part thereof, shall then be due and regardless of the existence or adequacy
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of any collateral, guaranty or any other security, right or remedy available to such Lender or the Lenders; provided, that in the event that any Defaulting Lender shall exercise such right
of setoff, (y) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.18 and, pending such payment, shall be segregated by such Defaulting
Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders, and (z) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the
Obligations owing to such Defaulting Lender as to which it exercised such right of setoff.
12.2 Ratable Payments. If any Lender,
whether by setoff or otherwise, has payment made to it upon its outstanding Revolving Loans (other than payments received pursuant to Section 3.1, 3.2 or 3.4) in a greater proportion than that received by any other Lender, such Lender agrees,
promptly upon demand, to purchase a portion of the outstanding Revolving Loans held by the other Lenders so that after such purchase each Lender will hold its Pro Rata Share of the aggregate outstanding Revolving Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such
action necessary such that all Lenders share in the benefits of such collateral or other protection ratably in proportion to their respective Pro Rata Shares of the aggregate outstanding Revolving Loans. In case any such payment is disturbed by
legal process, or otherwise, appropriate further adjustments shall be made.
ARTICLE XIII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
13.1 Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the
Borrower and the Lenders and their respective successors and assigns permitted hereby, except that (a) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents without the prior written consent of each
Lender, (b) any assignment by any Lender must be made in compliance with Section 13.3, and (c) any transfer by participation must be made in compliance with Section 13.2. Any attempted assignment or transfer by any party not made
in compliance with this Section 13.1 shall be null and void, unless such attempted assignment or transfer is treated as a participation in accordance with the terms of this Agreement. The parties to this Agreement acknowledge that clause
(b) of this Section 13.1 relates only to absolute assignments and this Section 13.1 does not prohibit assignments creating security interests, including, without limitation, (y) any pledge or assignment by any Lender of all or
any portion of its rights under this Agreement and any Revolving Credit Note to a Federal Reserve Bank or (z) in the case of a Lender which is a Fund, any pledge or assignment of all or any portion of its rights under this Agreement and any
Revolving Credit Note to its trustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and
until the parties thereto have complied with the provisions of Section 13.3. The Administrative Agent may treat the Person which made any Revolving Loan or which holds any Revolving Credit Note as the owner thereof for all purposes hereof
unless and until such Person complies with Section 13.3; provided, however, that the Administrative Agent may in its discretion (but shall not be required to) follow instructions from
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the Person which made any Revolving Loan or which holds any Revolving Credit Note to direct payments relating to such Revolving Loan or Revolving Credit Note to another Person. Any assignee of
the rights to any Revolving Loan or any Revolving Credit Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the owner of the rights to any Revolving Loan (whether or not a Revolving Credit Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the
rights to such Revolving Loan.
13.2 Participations.
(a) Permitted Participants; Effect. Any Lender may at any time sell to one or more entities (Participants) participating
interests in any Revolving Loans owing to such Lender, any Revolving Credit Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of
participating interests to a Participant, such Lenders obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender
shall remain the owner of its Revolving Loans and Commitment and the holder of any Revolving Credit Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be
determined as if such Lender had not sold such participating interests, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under the
Loan Documents.
(b) Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any
amendment, modification or waiver of any provision of the Loan Documents provided that each such Lender may agree in its participation agreement with its Participant that such Lender will not vote to approve any amendment, modification or
waiver with respect to any Revolving Loan or Commitment in which such Participant has an interest which would require consent of all of the Lenders pursuant to the terms of Section 9.3 or of any Related Document.
(c) Benefit of Certain Provisions. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in
Section 12.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided
that each Lender shall retain the right of setoff provided in Section 12.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the
right of setoff provided in Section 12.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 12.2 as if each Participant were a
Lender. The Borrower further agrees that each Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4, 10.6 and 10.10 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to
Section 13.3, provided that (i) a Participant shall not be entitled to receive any greater payment under Section 3.1 or 3.2 than the Lender who sold the participating interest to such Participant would have received had it
retained such interest for its
57
own account, unless the sale of such interest to such Participant is made with the prior written consent of the Borrower, and (ii) a Participant shall not be entitled to receive any greater
payment under Section 3.4 than the Lender who sold the participating interest to such Participant would have received had it retained such interest for its own account (A) except to the extent such entitlement to receive a greater payment
results from a change in treaty, law or regulation (or any change in the interpretation or administration thereof by any Governmental Authority) that occurs after the Participant acquired the applicable participation and (B), in the case of any
Participant that would be a Non-U.S. Lender if it were a Lender, such Participant agrees to comply with the provisions of Section 3.4 to the same extent as if it were a Lender (it being understood that the documentation required under
Section 3.4(f) shall be delivered to the participating Lender). Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each
Participant and the principal amounts (and stated interest) of each Participants interest in any Revolving Loans, any Revolving Credit Note, any Commitment or any other obligations under the Loan Documents (the Participant
Register); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participants interest in any
Revolving Loans, any Revolving Credit Note, any Commitment or any other obligations under the Loan Documents) to any Person except to the extent that such disclosure is necessary to establish that such Revolving Loans, any Revolving Credit Note, any
Commitment or any other obligations under the Loan Documents is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such
Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent
(in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
13.3 Assignments.
(a) Permitted Assignments. Any Lender may at any time assign to one or more Eligible Assignees (Purchasers) all or any
part of its rights and obligations under the Loan Documents. Such assignment shall be substantially in the form of Exhibit D or in such other form reasonably acceptable to the Administrative Agent as may be agreed to by the parties thereto.
Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate of a Lender or an Approved Fund shall either be in an amount equal to the entire applicable Commitment and the Revolving Loans of the assigning Lender or (unless
each of the Borrower and the Administrative Agent otherwise consents) be in an aggregate amount not less than $5,000,000. The amount of the assignment shall be based on the Commitment or Revolving Loans (if the Commitment has been terminated)
subject to the assignment, determined as of the date of such assignment or as of the Trade Date, if the Trade Date is specified in the assignment.
(b) Consents. The consent of the Borrower shall be required prior to an assignment becoming effective unless the Purchaser is a Lender,
an Affiliate of a Lender or an Approved Fund, provided that the consent of the Borrower shall not be required if an Event of Default has occurred and is continuing; provided further that the Borrower shall be deemed to have consented
to any such assignment unless it shall object thereto by written notice to the
58
Administrative Agent within five (5) Business Days after having received notice thereof. The consent of the Administrative Agent shall be required prior to an assignment becoming effective
unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund. Any consent required under this Section 13.3(b) shall not be unreasonably withheld or delayed.
(c) Effect; Assignment Effective Date. Upon (i) delivery to the Administrative Agent of an assignment, together with any consents
required by Sections 13.3(a) and 13.3(b), and (ii) payment of a $3,500 fee to the Administrative Agent for processing such assignment (unless such fee is waived by the Administrative Agent), such assignment shall become effective on the
effective date specified in such assignment. The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Revolving Loans under the applicable assignment
agreement constitutes plan assets as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be plan assets under ERISA. On and after the effective date of such
assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any Related Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same
extent as if it were an original party thereto, and the transferor Lender shall be released with respect to the Commitment and Revolving Loans assigned to such Purchaser without any further consent or action by the Borrower, the Lenders or the
Administrative Agent. In the case of an assignment covering all of the assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a Lender hereunder but shall continue to be entitled to the benefits of, and
subject to, those provisions of this Agreement and the Related Documents which survive payment of the Obligations and termination of the applicable agreement. Any assignment or transfer by a Lender of rights or obligations under this Agreement that
does not comply with this Section 13.3 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 13.2. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 13.3(c), the transferor Lender, the Administrative Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Revolving Loans be evidenced by Revolving Credit Notes, make
appropriate arrangements so that new Revolving Credit Notes or, as appropriate, replacement Revolving Credit Notes are issued to such transferor Lender and new Revolving Credit Notes or, as appropriate, replacement Revolving Credit Notes, are issued
to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment.
(d) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its
offices in the United States of America, a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of
the Revolving Loans owing to, each Lender, pursuant to the terms hereof from time to time (the Register). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and each Lender at
any reasonable time and from time to time upon reasonable prior notice.
(e) Dissemination of Information. The Borrower authorizes
each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a Transferee) and any prospective Transferee any and all information in such Lenders
possession; provided that each Transferee and prospective Transferee agrees to be bound by Section 10.11 of this Agreement.
59
ARTICLE XIV
NOTICES
14.1
Notices; Effectiveness; Electronic Communication.
(a) Notices Generally. Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by facsimile as follows:
(i) if to the Borrower, to it at Independent Bank
Group, Inc., 1600 Redbud Blvd. Ste. #400, McKinney, TX 75069, Attention: Torry Bernsten, President & Chief Operating Officer, Michelle Hickox, Executive Vice President & Chief Financial Officer, Facsimile:
(972) 562-5496;
(ii) if to the Administrative Agent, to it at U.S. Bank National Association, 1420 Fifth Ave., Seattle Tower, 9th
Floor, Seattle, WA 98101, Attention: Maria Cel Gatdula, Telephone: 206-344-5399, Toll Free: 877-653-3117, Facsimile: 206-587-7023, Email: maria.gatdula@usbank.com; and
(iii) if to a Lender, to it at its address (or facsimile number) set forth in its Administrative Questionnaire.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent
by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices
delivered through electronic communications to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).
(b) Electronic Communications. Notices and other communications to the Lenders may be delivered or furnished by electronic
communication (including e-mail and internet or intranet websites) pursuant to procedures approved by the Administrative Agent or as otherwise determined by the Administrative Agent, provided that the foregoing shall not apply to notices to
any Lender pursuant to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its respective
discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it or as it otherwise determines, provided that such determination or approval may be limited to
particular notices or communications.
60
Unless the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the senders receipt of an acknowledgement from the intended recipient (such as by the return receipt requested function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication is not given during the normal business hours of the recipient, such notice or communication shall be deemed to have been given at the opening of business on the
next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing
clause (i) of notification that such notice or communication is available and identifying the website address therefor.
(c)
Change of Address, Etc. Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto given in the manner set forth in this Section 14.1.
ARTICLE XV
COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION
15.1 Counterparts; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Except as provided in Article IV, this Agreement shall become effective when it shall have been executed by the
Administrative Agent, and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the parties hereto, and thereafter shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
15.2 Electronic Execution of Assignments. The words execution, signed, signature, and words of like
import in any assignment and assumption agreement shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed
signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, or any other state laws based
on the Uniform Electronic Transactions Act.
61
ARTICLE XVI
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
16.1 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
16.2 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE ADMINISTRATIVE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE
ADMINISTRATIVE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
16.3 WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
[Signature Pages Follow]
62
IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative Agent have executed this
Agreement as of the date first above written
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INDEPENDENT BANK GROUP, INC. |
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By: |
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/s/ Torry Bernsten |
Name: |
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Torry Bernsten |
Title: |
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President |
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U.S. BANK NATIONAL ASSOCIATION as a
Lender and as Administrative Agent |
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By: |
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/s/ Greg Hargis |
Name: |
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Greg Hargis |
Title: |
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Vice President |
Signature Page to
Credit Agreement among Independent Bank Group, Inc.,
the Lenders, and U.S. Bank National Association as Administrative Agent
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FROST BANK, as Lender |
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By: |
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/s/ Justin D. Steinbach |
Name: |
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Justin D. Steinbach |
Title: |
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Senior Vice President |
Signature Page to
Credit Agreement among Independent Bank Group, Inc.,
the Lenders, and U.S. Bank National Association as Administrative Agent
SCHEDULE 1
Commitments
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Lender: |
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Commitment: |
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Total Commitment: |
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U.S. BANK NATIONAL ASSOCIATION |
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$ |
35,000,000 |
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$ |
35,000,000 |
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FROST BANK |
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$ |
15,000,000 |
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$ |
15,000,000 |
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[ ] |
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$ |
[ |
] |
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$ |
[ |
] |
[ ] |
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$ |
[ |
] |
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$ |
[ |
] |
[ ] |
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$ |
[ |
] |
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$ |
[ |
] |
[ ] |
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$ |
[ |
] |
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$ |
[ |
] |
[ ] |
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$ |
[ |
] |
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$ |
[ |
] |
[ ] |
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$ |
[ |
] |
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$ |
[ |
] |
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TOTAL COMMITMENTS |
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$ |
50,000,000 |
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$ |
50,000,000 |
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SCHEDULE 5.1
Subsidiaries
IBG Subsidiaries:
1. Independent Bank
2.
IBG Adriatica Holdings, Inc.
SCHEDULE 5.12
Other Names
None
Exhibit 10.29.2
REVOLVING CREDIT NOTE
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$35,000,000 |
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July 22, 2015 |
FOR VALUE RECEIVED, INDEPENDENT BANK GROUP, INC., a Texas corporation and a registered bank holding company
(the Borrower), hereby promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION (Lender), at its main office in Minneapolis, Minnesota or at such other place as the holder hereof may from time to time in
writing designate, in lawful money of the United States of America, the principal sum of Thirty Five Million Dollars ($35,000,000.00), or so much thereof as has been advanced and remains outstanding pursuant to Section 2.1 of the Credit
Agreement by and between the Borrower and Lender dated as of the date hereof (as the same may be amended, modified, supplemented, extended or restated from time to time, the Credit Agreement). The Borrower also promises to pay all
accrued interest on the unpaid principal amount of each Revolving Loan payable at such rates and at such times as provided in the Credit Agreement, and shall pay all other costs, charges and fees due thereunder, all as provided in the Credit
Agreement. This Revolving Credit Note (as the same may be amended, modified, supplemented, extended or restated from time to time, this Note) shall bear interest on the unpaid principal balance before maturity (whether upon
demand, acceleration or otherwise) at the rates set forth in the Credit Agreement. Capitalized terms not defined in this Note shall have the meanings ascribed thereto in the Credit Agreement.
Subject to the provisions of the Credit Agreement with respect to acceleration, prepayment or loan limitations, all unpaid principal with
respect to each Revolving Loan, together with accrued interest and all other costs, charges and fees, shall be due and payable in full on the Termination Date for the Revolving Loans.
This Note evidences indebtedness incurred under, and is entitled to the benefits of and is subject to, the Credit Agreement, together with all
future amendments, modifications, waivers, supplements and replacements thereof, to which Credit Agreement reference is made for a statement of the terms and provisions applicable to this Note, including those governing payment and acceleration of
this Note. Payment and performance of this Note are secured pursuant to a Negative Pledge Agreement, and reference is made thereto and to the Credit Agreement for a statement of terms and provisions thereof. In the event of any conflict between the
terms of this Note and the Credit Agreement, the Credit Agreement shall control.
Subject to the Credit Agreement, the Borrower may, from
time to time and without premium or penalty, borrow, prepay and reborrow all loans evidenced by this Note in whole or in part, pursuant to the terms of the Credit Agreement.
The Borrower hereby agrees to pay such costs incurred by Lender, including reasonable attorneys fees and legal expenses, as are
specified in the Credit Agreement.
This Note is issued in and shall be governed by the laws of the State of New York.
No delay or omission on the part of Lender in exercising any right hereunder shall operate as a waiver of such right or of any other remedy
under this Note. A waiver on any one occasion shall not be construed as a waiver of any such right or remedy on a future occasion.
1
All makers, endorsers, sureties, guarantors and other accommodation parties hereby waive
presentment for payment, protest, notice of demand, notice of dishonor and notice of nonpayment and consent, without affecting their liability hereunder, to any and all extensions, renewals, substitutions and alterations of any of the terms of this
Note and to the release of or failure by Lender to exercise any rights against any party liable for or any property securing payment of this Note.
[signature page follows]
2
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INDEPENDENT BANK GROUP, INC. |
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By: |
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/s/ Torry Berntsen |
Name: |
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Torry Berntsen |
Title: |
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President |
Signature Page to
Revolving Credit Note
Exhibit 10.29.3
REVOLVING CREDIT NOTE
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$15,000,000 |
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July 22, 2015 |
FOR VALUE RECEIVED, INDEPENDENT BANK GROUP, INC., a Texas corporation and a registered bank holding company
(the Borrower), hereby promises to pay to the order of FROST BANK, a Texas state bank (Lender), at its main office in San Antonio, Texas or at such other place as the holder hereof may from time to time in
writing designate, in lawful money of the United States of America, the principal sum of Fifteen Million Dollars ($15,000,000.00), or so much thereof as has been advanced and remains outstanding pursuant to Section 2.1 of the Credit Agreement
by and between the Borrower and Lender dated as of the date hereof (as the same may be amended, modified, supplemented, extended or restated from time to time, the Credit Agreement). The Borrower also promises to pay all accrued
interest on the unpaid principal amount of each Revolving Loan payable at such rates and at such times as provided in the Credit Agreement, and shall pay all other costs, charges and fees due thereunder, all as provided in the Credit Agreement. This
Revolving Credit Note (as the same may be amended, modified, supplemented, extended or restated from time to time, this Note) shall bear interest on the unpaid principal balance before maturity (whether upon demand, acceleration
or otherwise) at the rates set forth in the Credit Agreement. Capitalized terms not defined in this Note shall have the meanings ascribed thereto in the Credit Agreement.
Subject to the provisions of the Credit Agreement with respect to acceleration, prepayment or loan limitations, all unpaid principal with
respect to each Revolving Loan, together with accrued interest and all other costs, charges and fees, shall be due and payable in full on the Termination Date for the Revolving Loans.
This Note evidences indebtedness incurred under, and is entitled to the benefits of and is subject to, the Credit Agreement, together with all
future amendments, modifications, waivers, supplements and replacements thereof, to which Credit Agreement reference is made for a statement of the terms and provisions applicable to this Note, including those governing payment and acceleration of
this Note. Payment and performance of this Note are secured pursuant to a Negative Pledge Agreement, and reference is made thereto and to the Credit Agreement for a statement of terms and provisions thereof. In the event of any conflict between the
terms of this Note and the Credit Agreement, the Credit Agreement shall control.
Subject to the Credit Agreement, the Borrower may, from
time to time and without premium or penalty, borrow, prepay and reborrow all loans evidenced by this Note in whole or in part, pursuant to the terms of the Credit Agreement.
The Borrower hereby agrees to pay such costs incurred by Lender, including reasonable attorneys fees and legal expenses, as are
specified in the Credit Agreement.
This Note is issued in and shall be governed by the laws of the State of New York.
No delay or omission on the part of Lender in exercising any right hereunder shall operate as a waiver of such right or of any other remedy
under this Note. A waiver on any one occasion shall not be construed as a waiver of any such right or remedy on a future occasion.
1
All makers, endorsers, sureties, guarantors and other accommodation parties hereby waive
presentment for payment, protest, notice of demand, notice of dishonor and notice of nonpayment and consent, without affecting their liability hereunder, to any and all extensions, renewals, substitutions and alterations of any of the terms of this
Note and to the release of or failure by Lender to exercise any rights against any party liable for or any property securing payment of this Note.
[signature page follows]
2
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INDEPENDENT BANK GROUP, INC. |
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By: |
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/s/ Torry Berntsen |
Name: |
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Torry Berntsen |
Title: |
|
President |
Signature Page to
Revolving Credit Note
Exhibit 10.29.4
DEFINITIVE AGREEMENT
NEGATIVE PLEDGE AGREEMENT
This NEGATIVE PLEDGE AGREEMENT (this Agreement) is made as of this 22nd day of July, 2015, by INDEPENDENT BANK GROUP, INC.,
a Texas corporation and a registered bank holding company (the Borrower), in favor of U.S. BANK NATIONAL ASSOCIATION, a national banking association, as Administrative Agent for the Lenders (defined below) (the
Administrative Agent).
RECITALS
The Administrative Agent and the Lenders have entered into the Credit Agreement (defined below) with the Borrower pursuant to which the
Administrative Agent and the Lenders have agreed to extend credit to the Borrower upon the terms set forth in the Credit Agreement. The Administrative Agent and the Lenders would not have agreed to extend such credit but for this Agreement. The
Lenders have authorized and directed the Administrative Agent to accept and acknowledge this Agreement on their behalf.
NOW, THEREFORE,
in consideration of the extension of credit to the Borrower, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Borrower hereby agrees:
AGREEMENT
1.
Definitions. Capitalized terms used herein without definition shall have the meanings ascribed thereto in the Credit Agreement (as hereinafter defined). In addition, the following terms used in this Agreement shall have the following
meanings:
Credit Agreement shall mean the Credit Agreement among the Borrower, the Lenders and the Administrative
Agent, dated as of the date hereof, as the same may be amended, modified, extended, supplemented or restated from time to time hereafter.
Shares shall mean, collectively, 100% of the issued and outstanding capital stock, equity and other ownership interests
(and any rights to acquire any of such interests) of each Bank Subsidiary owned by the Borrower, and any further securities, warrants, options, rights, cash or property issued as an addition to, in substitution of, in exchange for, or with respect
to such ownership interests.
2. Negative Pledge. The Borrower covenants and agrees that, unless consented to by the Administrative
Agent, from and after the date of this Agreement and until the Termination Date and until all Obligations to the Lenders are paid in full, the Borrower will (a) not sell, option, exchange or otherwise convey any legal, equitable or beneficial
interest in the Shares or any part thereof, and (b) keep the Shares free and clear from any pledge, mortgage, security interest, hypothecation, lien, charge, encumbrance, conditional sale agreements, rights or claims of third parties, other
burdens and any security interest therein, other than Permitted Liens.
1
3. Certain Representations and Warranties. The Borrower represents and warrants to the
Administrative Agent and the Lenders as follows:
(a) Ownership. The Borrower is the record and beneficial owner of all the Shares.
The Shares represent, and during the term of this Agreement will represent, all of the issued and outstanding capital stock, equity and other ownership interests (and any rights to acquire any of such interests) of each Bank Subsidiary.
(b) Authority. The Borrower has all necessary power and authority to enter into this Agreement and perform its obligations hereunder.
The execution, delivery and performance of this Agreement: (i) do not require the approval of any Governmental Authority or other Person; and (ii) will not violate any law, agreement or restriction by which the Borrower is bound. This
Agreement is the legal, valid and binding obligation of the Borrower and is enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors rights generally or by equitable principles relating to enforceability.
(c) Title. The Shares are genuine, and the
Borrower has good title to the Shares. The Shares are owned by the Borrower free and clear of any pledge, mortgage, security interest, hypothecation, lien, charge, encumbrance, conditional sale agreements, rights or claims of third parties, other
burdens and any security interest therein, other than Permitted Liens.
4. Default; Expenses. The failure of the Borrower to comply
with any term of this Agreement shall constitute an Event of Default under the Credit Agreement. In addition, the Borrower shall reimburse the Administrative Agent and the Lenders (and any agent or representative of the Administrative Agent or the
Lenders) for any expenses incurred by the Administrative Agent or the Lenders (or such agent or representative of the Administrative Agent or the Lenders) in protecting or enforcing their rights under this Agreement, including, without limitation,
reasonable attorneys fees.
5. Further Assurances. The Borrower agrees to execute and deliver, or cause to be executed and
delivered, all such other papers and to take all such other actions as the Administrative Agent may reasonably request from time to time in order to carry out the purposes of this Agreement.
6. Term. When all of the Obligations are irrevocably and fully paid and fully discharged and the Lenders shall have no further
obligation or commitment to advance or extend credit to the Borrower under the Credit Agreement, this Agreement shall terminate. Notwithstanding the foregoing, this Agreement shall apply to all extensions, renewals, refinancings or modifications, if
any, of the Obligations.
7. Miscellaneous.
(a) Waivers. No failure to exercise and no delay in exercising on the part of the Administrative Agent or the Lenders any right, power
or remedy under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or remedy.
The failure of the Administrative Agent or the Lenders to insist upon the strict
2
observance or enforcement of any provision of this Agreement shall not be construed as a waiver or relinquishment of such provision. Any waiver of any right, power, remedy, term or condition
contained herein shall only be effective if it is in writing and signed by the Administrative Agent and the Required Lenders.
(b)
Amendments. This Agreement may only be amended by a writing executed by the Borrower, the Administrative Agent and the Required Lenders.
(c) Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.
(d) Successors and Assigns. This Agreement shall inure to the benefit of the Administrative Agent and the Lenders and be binding
upon the Borrower and its successors and assigns. This Agreement shall not be assigned by the Borrower.
(e) Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which when taken together shall be deemed to constitute one and the same agreement.
(f) Headings. The Section headings set forth in this Agreement are for convenience of reference only and shall not be deemed to define
or limit the provisions hereof or to affect in any way their construction and application.
(g) Incorporation of Recitals. The
Recitals to this Agreement are true, correct and incorporated herein by reference.
[Signature Page Follows]
3
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Negative Pledge
Agreement as of the date first above written.
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INDEPENDENT BANK GROUP, INC. |
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By: |
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/s/ Torry Berntsen |
Name: |
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Torry Berntsen |
Title: |
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President |
Acknowledged and accepted by:
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U.S. BANK NATIONAL ASSOCIATION, |
as Administrative Agent |
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By: |
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/s/ Greg Havlees |
Name: |
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Greg Havlees |
Title: |
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Vice President |
Signature Page to
Negative Pledge Agreement
Exhibit 10.30
VOTING AGREEMENT
THIS
VOTING AGREEMENT (this Voting Agreement) dated July 23, 2015, is executed by and among INDEPENDENT BANK GROUP, INC., a Texas corporation and registered bank holding company with its principal offices in McKinney, Texas
(IBG), and GRAND BANK, a Texas banking association with its principal offices in Dallas, Texas (Grand Bank), and the shareholders of Grand Bank whose names are set forth on the signature page hereto
(individually, a Shareholder and collectively, the Shareholders).
W I T N E S S E T H:
WHEREAS, Grand Bank and IBG are parties to that certain Agreement and Plan of Reorganization, dated as of July 23, 2015 (the
Reorganization Agreement), which provides for the acquisition of Grand Bank by IBG through the merger of Grand Bank with and into Independent Bank, a wholly owned subsidiary of IBG (the Merger). Terms with their
initial letter capitalized and not otherwise defined herein shall have the meanings given them in the Reorganization Agreement;
WHEREAS,
the Reorganization Agreement requires that Grand Bank deliver this Voting Agreement to IBG; and
WHEREAS, Grand Bank and IBG are relying
on this Voting Agreement in incurring expenses in reviewing the business of Grand Bank, in preparing the Registration Statement and related Proxy Statement for the meeting of shareholders of Grand Bank, in proceeding with the filing of applications
for regulatory approvals, and in undertaking other actions necessary for the consummation of the Merger.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Grand Bank, IBG and the Shareholders undertake, promise, covenant and agree with each other as follows:
1. As of the
date hereof, the Shareholders own the shares of common stock of Grand Bank (Grand Bank Stock), set forth beside their respective names on Schedule 1 attached hereto (with respect to each Shareholder, all such shares of
Grand Bank Stock and any shares of Grand Bank Stock hereafter acquired by such Shareholder prior to the termination of this Voting Agreement, collectively, such Shareholders Shares).
2. Each Shareholder represents that he, she or it has the full legal capacity and authority to execute, deliver and perform this Voting
Agreement, including the exclusive right to vote such Shareholders Shares. Each Shareholder hereby agrees to vote at the shareholders meeting of Grand Bank called to consider and act upon the Merger (the Meeting) such
Shareholders Shares in favor of approval of the Reorganization Agreement, the Merger, and all of the agreements and transactions contemplated by the Reorganization Agreement.
1
3. If Grand Bank conducts a meeting of, solicits written consents from or otherwise seeks a vote
of its shareholders with respect to any Acquisition Proposal (as that term is defined in the Reorganization Agreement) or any other matter which may contradict any provision of this Voting Agreement or may prevent IBG or Grand Bank from consummating
the Merger, then each Shareholder shall vote such Shareholders Shares in the manner most favorable to consummation of the Merger and the transactions contemplated by the Reorganization Agreement.
Notwithstanding, the foregoing sentence, the Shareholders may vote in favor of a Superior Proposal (as that term is defined in the
Reorganization Agreement).
4. Each Shareholder hereby covenants and agrees that, until this Voting Agreement is terminated in accordance
with its terms, each Shareholder will not, and will not agree to, directly or indirectly, without the prior written consent of IBG, (i) sell, assign, transfer or dispose of any of such Shareholders Shares, (ii) hypothecate such
Shareholders Shares under terms that would prevent the voting thereof, (iii) deposit such Shareholders Shares into a voting trust or enter into a voting agreement or arrangement with respect to such Shareholders Shares or
grant any proxy with respect thereto except as herein provided, or (iv) enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect sale, assignment, transfer or other disposition of any of such
Shareholders Shares, in connection with a transaction pursuant to which twenty five percent (25%) or more of the voting power of Grand Bank Stock is, or control of Grand Bank otherwise is, transferred to a person or entity other than a
party to this Voting Agreement.
Notwithstanding any of the foregoing, any Shareholder may (i) make such gifts of such
Shareholders Shares as such Shareholder may choose to make, (ii) transfer such Shares to trusts or other entities controlled by the Shareholder or for estate planning purposes, so long as the recipient of such Shareholders Shares
executes and delivers an amendment to this Voting Agreement whereby such recipient becomes bound by the terms of this Voting Agreement.
5. This Voting Agreement shall continue in effect until the earlier to occur of (i) the termination of the Reorganization Agreement, as
it may be amended or extended from time to time, or (ii) the consummation of the transactions contemplated by the Reorganization Agreement.
6. In the event that a Shareholder transfers a certificate representing any of such Shareholders Shares prior to the Meeting, Grand Bank
shall require such certificate to bear the following endorsement, noted conspicuously thereon:
The shares of stock represented by
this certificate are subject to the terms of a Voting Agreement dated July 23, 2015, a copy of which is on file in the principal office of Grand Bank.
7. This Voting Agreement may not be modified, amended, altered or supplemented with respect to a particular Shareholder except upon the
execution and delivery of a written agreement executed by Grand Bank, IBG and such Shareholder.
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8. This Voting Agreement may be executed in any number of counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same instrument. An electronic or facsimile transmission of a signed counterpart of this Voting Agreement shall be sufficient to bind the party or parties whose signature(s) appear
thereon.
9. This Voting Agreement, together with the Reorganization Agreement and the agreements contemplated thereby, embody the entire
agreement and understanding of the parties hereto in respect to the subject matter contained herein. This Voting Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter contained herein.
10. All notices, requests, demands and other communications required or permitted hereby shall be in writing and shall be deemed to have
been duly given if delivered by hand or mail, certified or registered mail (return receipt requested) with postage prepaid to the addresses of the parties hereto set forth on below their signature on the signature pages hereof or to such other
address as any party may have furnished to the others in writing in accordance herewith.
11. THIS VOTING AGREEMENT AND THE RELATIONS
AMONG THE PARTIES HERETO ARISING FROM THIS VOTING AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. VENUE FOR DISPUTES ARISING UNDER THIS AGREEMENT SHALL BE SOLELY IN DALLAS COUNTY, TEXAS.
[Signature page to follow]
3
[Signature Page to Voting Agreement]
IN WITNESS WHEREOF, the parties have executed this Voting Agreement as of the date above written.
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GRAND BANK |
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By: |
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/s/ Lee Dinkel |
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Lee Dinkel |
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President and CEO |
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INDEPENDENT BANK GROUP, INC. |
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By: |
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/s/ David R. Brooks |
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David R. Brooks |
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Chairman of the Board |
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[Signature Page to Voting Agreement]
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SHAREHOLDER: |
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/s/ Roy Evans |
Roy Evans |
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/s/ Lee Dinkel |
Lee Dinkel |
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/s/ Jack Evans, Jr. |
Jack Evans, Jr. |
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/s/ Al Goode |
Al Goode |
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/s/ Lisa Murray |
Lisa Murray |
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/s/ Mike Redden |
Mike Redden |
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/s/ Pete Schenkel |
Pete Schenkel |
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/s/ Patricia A. Schenkel |
Patricia A. Schenkel |
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/s/ Mark Wells |
Mark Wells |
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/s/ Ward Williford |
Ward Williford |
5
SCHEDULE 1
VOTING AGREEMENT SHAREHOLDERS
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Name of Shareholder |
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Number of Shares of Grand Bank Stock |
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Roy Evans, Chairman |
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214,218 |
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Lee Dinkel |
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23,776 |
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Jack Evans, Jr. |
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50,789 |
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Al Goode |
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6,000 |
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Lisa Murray |
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500 |
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Mike Redden |
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55,000 |
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Pete Schenkel |
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75,051 |
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Patricia A. Schenkel |
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30,135 |
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Mark Wells |
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31,000 |
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Ward Williford |
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22,754 |
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TOTAL NO. OF SHARES: |
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509,223 |
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TOTAL VOTING POWER: |
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29.4 |
% |
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in this Registration Statement on Form S-4 of Independent Bank Group, Inc. of our report, dated February 27,
2015, relating to our audit of the consolidated financial statements, which appear in the Annual Report on Form 10-K of Independent Bank Group, Inc. for the year ended December 31, 2014.
We also consent to the reference to our Firm under the caption, Experts in the Proxy Statement/Prospectus, which is part of the Registration
Statement.
/s/ McGladrey LLP
Dallas, Texas
September 3, 2015
Exhibit 99.2
GRAND BANK
Special
Meeting of Shareholders
[ ], 2015:
[ a.m./p.m.]
This proxy is solicited by the Board of Directors
The undersigned holder(s) of Grand Bank common stock hereby revokes all previous proxies, if any, hereby acknowledges receipt of the Notice of Special Meeting
of Shareholders and Proxy Statement/Prospectus, and hereby appoints Lisa Murray and Carol Felty and each of them, as attorneys, agents and proxies of the undersigned, with full powers of substitution, to attend and act as proxies of the
undersigned at the Special Meeting of Shareholders of Grand Bank to be held at the offices of Grand Bank, 16660 Dallas Parkway, Suite 1700, Dallas, Texas 75248, on [ ],
[ ], 2015 at [ a.m./p.m.], Central Time, and any and all adjournments
thereof, and to vote as specified herein the number of shares of common stock that the undersigned, if personally present, would be entitled to vote, with the same force and effect as the undersigned might or could do if personally present.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with
the recommendations of the board of directors of Grand Bank.
THE BOARD OF DIRECTORS OF GRAND BANK UNANIMOUSLY RECOMMENDS A VOTE FOR
PROPOSALS 1 AND 2: (1) THE APPROVAL OF THE REORGANIZATION AGREEMENT AND THE RELATED AGREEMENT AND PLAN OF MERGER AND (2) THE APPROVAL TO ADJOURN THE SPECIAL MEETING TO A LATER DATE OR DATES, IF THE BOARD OF DIRECTORS OF GRAND BANK
DETERMINES SUCH AN ADJOURNMENT IS NECESSARY TO PERMIT SOLICITATION OF ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES AT THE TIME OF THE SPECIAL MEETING TO CONSTITUTE A QUORUM OR TO APPROVE THE REORGANIZATION AGREEMENT.
Continued and to be signed on reverse side
To the Holders of Grand Bank Common Stock
To vote in the Grand Bank special meeting, please mark, sign and date your proxy card and return it in the postage-paid envelope that we have provided or
return it to Lee Dinkel, President and Chief Executive Officer, Grand Bank, 16660 Dallas Parkway, Suite 1700, Dallas, Texas 75248.
TO VOTE, MARK BLOCKS
BELOW IN BLUE OR BLACK INK AS FOLLOWS:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
1. APPROVAL OF THE MERGER PROPOSAL. To approve the Agreement and Plan of Reorganization, dated as of July 23, 2015, by and between
Independent Bank Group, Inc. and Grand Bank, and the related Agreement and Plan of Merger, by and between Independent Bank and Grand Bank and joined in by Independent Bank Group, Inc. pursuant to which Grand Bank will merge with and into Independent
Bank (which is a wholly owned subsidiary of Independent Bank Group, Inc.), all on and subject to the terms and conditions contained therein.
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¨ |
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FOR |
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¨ |
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AGAINST |
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¨ |
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ABSTAIN |
2. APPROVAL OF THE ADJOURNMENT PROPOSAL. To approve the adjournment of the Grand Bank special meeting to a
later date or dates, if the board of directors of Grand Bank determines such an adjournment is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to constitute a quorum or to
approve the reorganization agreement.
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FOR |
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AGAINST |
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ABSTAIN |
NOTE: There will be no other business conducted at the Meeting.
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Yes |
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No |
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Please indicate if you plan to attend this meeting |
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator or other fiduciary,
please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX] Date |
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Signature (Joint Owners) [PLEASE SIGN WITHIN BOX] Date |
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting: If you have questions about the merger or the Grand Bank
special meeting, need additional copies of the proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, you may contact Lee Dinkel, Grand Banks President and Chief Executive Officer, at
the following address or by calling the following telephone number: Grand Bank, 16660 Dallas Parkway, Suite 1700, Dallas, Texas 75248, (972) 735-1000.
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