1. (a) Agreement in writing. A sale or lease agreement between a trust company and an officer, director, principal shareholder, or affiliate of the trust company must be in writing. Existing verbal agreements must be reduced to writing and approved by the board.
2. (b) Terms of agreement. A sale or lease agreement between a trust company and an officer, director, principal shareholder, or affiliate must comply with applicable laws and regulations, be subject to the exercise of prudent judgment, and have terms and rates that are substantially equivalent to or more favorable to the trust company than those prevailing at the time for comparable transactions with or involving nonaffiliated parties.
3. (c) Board action. All transactions subject to Texas Civil Statutes, Article 342a-4.107(a), must receive the prior approval of at least a majority of a quorum composed entirely of disinterested directors of the Board or the transaction at issue must be submitted for prior approval of the banking commissioner. For purposes of this section, a quorum shall consist of a majority of the number of directors elected at the last meeting of shareholders. Even if the transaction is subject to the prior approval of the banking commissioner because a quorum composed entirely of disinterested directors cannot be obtained, as a matter of good corporate policy, a trust company proposing to enter into a transaction subject to Texas Civil Statutes, Article 342a-4.107, should obtain the affirmative vote of a majority of the disinterested directors of the board.

4. (d) Application for approval. If a sale or lease agreement requires the written approval of the banking commissioner prior to consummating, renewing, or extending a sale or lease agreement, a written request for approval must be submitted to the banking commissioner at least 60 days prior to the proposed effective date of the sale or lease agreement and must include the following information:

   1. (1) a copy of the proposed sale or lease agreement;
   2. (2) a complete description of the personal or real property to be sold or leased;
   3. (3) a full disclosure of all existing transactions and/or relationships, whether direct or indirect, between the trust company and the parties involved;
   4. (4) in the case of a lease agreement involving real property, a copy of the minutes of the board meeting reflecting an analysis of the information contained in this subsection;

   5. (5) a certified copy of a board resolution approving the transaction and indicating those directors voting or abstaining, as the case may be, and either:

      1. (A) evidence that the transaction received the affirmative vote of at least a majority of disinterested directors on the board; or
      2. (B) a statement explaining the reasons the affirmative vote of at least a majority of disinterested directors on the board could not be obtained;
   6. (6) copies of appropriate supporting documentation, including analysis of comparable terms and rates for the real or personal property to be sold or leased;
   7. (7) in the case of a lease agreement, evidence demonstrating that the trust company will account for the lease in accordance with Financial Accounting Standards Board Statement Number 13; and
   8. (8) other information which the banking commissioner may request.
5. (e) Records. A trust company shall maintain the originals of all sale or lease agreements with an officer, director, manager, managing participant, principal shareholder, or principal participant of the trust company, or an affiliate, which documents must be made available at all times to the Texas Department of Banking for examination and review. For purposes of this subsection, required documentation need not be retained beyond three years after the expiration of the sale or lease agreement to which the documentation pertains.
6. (f) Exemption. Subsection (d) of this section does not apply to a legally binding, written lease entered into by a trust company prior to June 16, 1991, until such lease is renewed or extended beyond its original term.

Source Note:The provisions of this §17.3 adopted to be effective July 2, 1998, 23 TexReg 6715.