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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report February 9, 1994
-------------------------------------
(Date of earliest event reported)
LSB INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 1-7677 73-1015226
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(State of (Commission (I.R.S. Employer
Incorporation) File No.) Identification No.)
16 South Pennsylvania, Oklahoma City, Oklahoma 73107
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (405) 235-4546
------------------
Item 5. Other Events.
LSB Industries, Inc. ("LSB"), Prime Financial Corporation
("Prime"), a wholly-owned subsidiary of LSB (LSB and Prime are collectively
called the "Company"), and Fourth Financial Corporation ("Fourth") entered
into a Stock Purchase Agreement, dated as of February 9, 1994 (the "Stock
Purchase Agreement"), pursuant to which at the closing the Company has
agreed to sell, and Fourth has agreed to purchase, all of the issued and
outstanding shares of capital stock of Equity Bank for Savings, F.A. (the
"Bank"), pursuant and subject to the terms of the Agreement. The Bank is a
wholly-owned subsidiary of Prime, and Prime is a wholly-owned subsidiary of
LSB. The Bank comprises LSB's Financial Services Business.
The consummation of the Stock Purchase Agreement is
conditioned upon, among other things, (i) the Company and Fourth obtaining
appropriate regulatory approvals, and (ii) the Company obtaining shareholder
approval. Closing of the transactions contemplated by the Stock Purchase
Agreement is anticipated to occur on or before June 30, 1994. If such is not
closed on or before June 30, 1994, the Stock Purchase Agreement shall
terminate unless extended by written agreement of the parties.
The purchase price to be paid by Fourth to the Company for the
Bank at the closing of the transaction contemplated by the Stock Purchase
Agreement is estimated to be approximately $92 million. The exact amount
of such purchase price is to be determined at the closing based on a formula
and is to be equal to the sum of the following: (i) the tangible book value of
the Bank (defined as the aggregate consolidated stockholders' equity of the
Bank, calculated in accordance with generally accepted accounting principles,
less the amounts in certain accounts relating to purchased mortgage servicing
rights, goodwill, and United BankCard goodwill, net of accumulated
amortization) at the closing, plus a premium over the Bank's tangible book
value of the following determined at the closing: (a) $9.3 million for the
Bank's credit card business, (b) 1% of the aggregate of the unpaid principal
balance at closing of the Bank's loans secured by fixed rate mortgages having
fully amortizing original terms of fifteen (15) years or less, excluding loans
originated after October 31, 1993, (c) 6% of the aggregate unpaid principal
balance at closing of the Bank's loans secured by fixed rate mortgages having
fully amortizing original terms in excess of fifteen (15) years but not more
than thirty (30) years, excluding loans originated after October 31, 1993, and
(d) 2% of the aggregate unpaid principal balance at the closing of the Bank's
loans secured by variable rate mortgages, excluding loans originated after
October 31, 1993; (ii) an amount at the closing equal to the unamortized
discount on the Bank's mortgages included in (i)(b), (c), and (d) above; (iii)
an amount at the closing equal to (a) 0.65% of the aggregate unpaid principal
balance of loans serviced by the Bank prior to March 1, 1993, on which the
Bank performs mortgage servicing (other than loans serviced for the account
of the Bank), (b) 1% of such balance on such loans serviced by the Bank that
were originated after March 31, 1993, secured by fixed or adjustable rate
mortgages of fully amortizing original terms of at least ten (10) but not more
than fifteen (15) years, and (c) 1.25% of such balance on such loans
originated on or after March 1, 1993, secured by fixed or adjustable rate
mortgages having original fully amortized terms of more than fifteen (15) but
not more than thirty (30) years; (iv) an amount obtained by subtracting the
"required reserve" (as defined below) from the Bank's actual loan loss reserve
account at the closing, with the "required reserve" meaning $2.7 million as
adjusted by the amount by which the Bank's loan loss account would have
been adjusted at the closing under normal and prudent banking practice to
reflect aggregate changes of at least $500,000 occurring subsequent to
October 31, 1993, in the quality of commercial and energy loans held by the
Bank on October 31, 1993, or originating since October 31, 1993, and not
reviewed in advance by Fourth; provided, that no such change in the quality
of a loan is to be included in the calculation to the extent such change has
been reflected in the tangible book value of the Bank at the closing or if such
change is less than $25,000; (v) to the extent not otherwise reflected in the
tangible book value of the Bank, an amount, either positive or negative, by
which the aggregate fair market value of the Bank's securities portfolio at the
closing differs from the Bank's book value of such portfolio at the closing;
(vi) the difference, positive or negative, between the carrying value of the
Bank's time deposits and the aggregate value of such deposits after repricing
them to the Treasury yield curve at the closing; (vii) $10.5 million for the
Bank's net operating loss; (viii) $11.0 million for the Bank's deposit balance;
and, (ix) $1.4 million for certain of the Bank's branches.
The percentages specified in (i)(b) and (c) immediately above are
determined utilizing the spread between the Bank's average portfolio yield
and FNMA required thirty (30) day yield as of August 31, 1993. If, at the
time of the closing, such spreads have fluctuated by more than 0.25%, the
applicable percentages in such subparagraphs (i)(b) and (c) will be adjusted
up or down by one-fourth of 1% for each full one-eighth of 1% change in the
spread, in the case of loans with an original term of fifteen (15) years or
less, and by three-eighths of 1% for each full one-eighth of 1% change, in the
case of loans with an original term of more than fifteen (15) but not more than
thirty (30) years.
Based on the above, the Company estimates that at the closing the
purchase price will be approximately $92 million, which amount is estimated
based upon estimates which cannot be definitively determined until the
closing. Among other things, management of the Company has estimated the
Bank's earnings through March 31, 1994, in order to estimate tangible net
worth of the Bank, a major component of the purchase price, and made
estimates with respect to the other variables which make up the purchase
price. The purchase price will be affected by the results of operations of and
the fluctuation of interest rates between the date of this report and the
closing. Notwithstanding the foregoing, if the purchase price, as finally
determined at the closing, is less than $92 million, the Company may, at its
option, terminate the Stock Purchase Agreement.
Under the Agreement, the Company has agreed to purchase
from the Bank at least one (1) business day prior to the closing those
subsidiaries of the Bank ("Retained Corporations") that hold any of the assets
contributed by the Company and several of its subsidiaries to a wholly-owned
subsidiary of the Bank at the time that the Company acquired the Bank in
March, 1988 (the "Transferred Assets"). The Company has agreed to
purchase such Retained Corporations for an amount equal to the Retained
Corporations' carrying value of the Transferred Assets at the time that the
Company acquires the Retained Corporations, which the Company anticipates
to be approximately $65.4 million. Under the Agreement, the Company has
further agreed to purchase from the Bank at the closing (i) the loan and
mortgage on and an option to purchase the twenty-two (22) story Equity
Tower located in Oklahoma City, Oklahoma ("Equity Tower Loan"), for an
amount equal to the Bank's carrying value of such Equity Tower Loan at the
time of closing, and (ii) all other real estate owned by the Bank as a result of
foreclosure ("OREO") for an amount equal to the carrying value thereof as
shown on the books of the Bank at the closing. As of December 31, 1993, the
carrying value of the Equity Tower Loan and the OREO on the books of the
Bank was approximately $20.5 million. In addition, the Company has further
agreed under the Agreement to acquire from the Bank at the closing all
outstanding accounts receivable ("Receivables") previously sold by the
Company and certain other subsidiaries of the Company to the Bank under
various purchase agreements, dated March 8, 1988, which purchase
agreements were approved by the appropriate regulatory authority at such
time, that have not been previously repurchased as of the closing for the
aggregate carrying value of such Receivables on the books of the Bank as of
the closing. As of February 18, 1994, there were approximately $25.8 million
of such Receivables outstanding on the books of the Bank. The Company
anticipates, however, that if the closing occurs on or about June 30, 1994, that
there will be less than $10 million of such Receivables on the books of the
Bank at such closing.
The Company anticipates, although there are no assurances, that
it will obtain from a subsidiary of Fourth (i) on a short-term basis, financing
to purchase the Retained Corporations from the Bank, which financing, plus
interest, will be repaid with a portion of the proceeds of the purchase price
received from Fourth as soon as possible after the closing, and (ii) a line of
credit to finance the accounts receivable of the Company and certain of its
subsidiaries, including those Receivables to be repurchased by the Company
from the Bank at closing.
Under the Agreement, the Company has made certain
representations and warranties. The Company has also agreed under the
Stock Purchase Agreement to indemnify Fourth and its wholly-owned
subsidiary, Bank IV Oklahoma, National Association ("Bank IV"), against,
among other things, (i) losses that may be sustained by them due to breach
of any representations or warranties made by the Company in the Stock
Purchase Agreement or failure by the Company to fulfill any agreement made
by the Company in the Stock Purchase Agreement, provided losses by Fourth
and Bank IV under (i) exceed $1 million in the aggregate, net of income tax
effect, and such liability by the Company shall not exceed $25 million; (ii) the
Bank's net operating loss for federal income tax purposes ("NOL") reducing
below $64 million if such a reduction is (a) due to a final action relating to
an audit or adjustment by the Internal Revenue Service and such is
retroactive to the period prior to the closing of the Agreement or (b)
attributable to the consolidated taxable income of LSB, provided that the
Company's liability for such reduction in the NOL of the Bank shall not
exceed an amount equal to the product of the dollar amount of such
reduction by a fraction, the numerator of which shall be $10.5 million and the
denominator shall be $64 million. The Company has the option to be
released from its indemnification obligation relating to the Bank's NOL by
having the purchase price to be paid by Fourth reduced by $600,000 at the
closing. The Company has further agreed to indemnify Fourth and Bank IV
against certain liabilities due to environmental matters relating to certain
real estate, and such indemnification is not subject to the $1 million
deductible and the $25 million maximum liability.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation
or Succession.
2.1 Stock Purchase Agreement, dated as of February 9, 1994,
between Fourth Financial Corporation, LSB Industries, Inc., and Prime
Financial Corporation. Contained in the table of contents in the front of such
agreement is a reference to exhibits that are attached to such agreement but
not included with the agreement attached hereto. The Company agrees to
furnish supplementally a copy of any omitted exhibit to the Commission upon
request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned duly authorized.
Date: February 22, 1994. LSB INDUSTRIES, INC.
(Registrant)
By___________________________
Tony M. Shelby
Senior Vice President and
Chief Financial Officer
STOCK PURCHASE AGREEMENT
among
FOURTH FINANCIAL CORPORATION,
as Purchaser
and
LSB INDUSTRIES, INC.,
and
PRIME FINANCIAL CORPORATION,
as Sellers
Dated as of February 9, 1994
TABLE OF CONTENTS
Page #
ARTICLE I. Definitions . . . . . . . . . . . . . . . . . . .1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . .1
Section 1.2 Accounting Terms. . . . . . . . . . . . . . . . .8
Section 1.3 Use of Defined Terms. . . . . . . . . . . . . . .8
ARTICLE II. Sale and Transfer of Stock; Closing . . . . . . .8
Section 2.1 Sale of the Shares. . . . . . . . . . . . . . . .8
Section 2.2 Purchase Price. . . . . . . . . . . . . . . . . .8
Section 2.3 Additional Adjustments to Purchase Price. . . . 10
Section 2.4 Post-Closing Adjustments. . . . . . . . . . . . 11
Section 2.5 Closing . . . . . . . . . . . . . . . . . . . . 11
Section 2.6 Closing Deliveries. . . . . . . . . . . . . . . 12
Section 2.7 Option to Acquire Certain Loans . . . . . . . . 13
Section 2.8 Retained Assets and Retained Corporations
and Certain Loans . . . . . . . . . . . . . . . 13
ARTICLE III. Agreements of the Parties . . . . . . . . . . . 13
Section 3.1 Agreements of Fourth. . . . . . . . . . . . . . 13
Section 3.2 Agreements of Sellers . . . . . . . . . . . . . 15
ARTICLE IV. Representations and Warranties. . . . . . . . . 20
Section 4.1 Representations and Warranties of Sellers . . . 20
Section 4.2 Representations and Warranties of Fourth . . . 30
ARTICLE V. Closing Conditions. . . . . . . . . . . . . . . 32
Section 5.1 Conditions to Obligations of Fourth . . . . . . 32
Section 5.2 Conditions to Obligations of Sellers. . . . . . 34
ARTICLE VI. Termination of Agreement. . . . . . . . . . . . 35
Section 6.1 Mutual Consent; Termination Date. . . . . . . . 35
Section 6.2 Election by Fourth. . . . . . . . . . . . . . . 35
Section 6.3 Election by Sellers . . . . . . . . . . . . . . 36
ARTICLE VII. Indemnification . . . . . . . . . . . . . . . . 36
Section 7.1 Effect of Closing . . . . . . . . . . . . . . . 36
Section 7.2 General Indemnification . . . . . . . . . . . . 37
Section 7.3 Procedure . . . . . . . . . . . . . . . . . . . 38
Section 7.4 Survival of Representations and Warranties. . . 38
Section 7.5 Special Indemnification . . . . . . . . . . . . 39
Section 7.6 Separate Indemnification for Environmental
Matters . . . . . . . . . . . . . . . . . . . . 40
Section 7.7 Separate Indemnification for Barki
Litigation. . . . . . . . . . . . . . . . . . . 41
Section 7.8 Director and Officer Indemnification . . . . . 41
ARTICLE VIII. Miscellaneous . . . . . . . . . . . . . . . . . 42
Section 8.1 Expenses. . . . . . . . . . . . . . . . . . . . 42
Section 8.2 Notices . . . . . . . . . . . . . . . . . . . . 42
Section 8.3 Time. . . . . . . . . . . . . . . . . . . . . . 43
Section 8.4 Law Governing . . . . . . . . . . . . . . . . . 43
Section 8.5 Entire Agreement; Amendment . . . . . . . . . . 43
Section 8.6 Successors and Assigns. . . . . . . . . . . . . 43
Section 8.7 Cover, Table of Contents, and Headings. . . . . 43
Section 8.8 Counterparts. . . . . . . . . . . . . . . . . . 43
Section 8.9 No Third Party Beneficiaries. . . . . . . . . . 43
Section 8.10 Severability. . . . . . . . . . . . . . . . . . 43
EXHIBITS
Exhibit "A" Form of Housley Goldberg & Kantarian, P.C. legal
opinion with attached opinion of David A. Shear
Exhibit "B" Form of Foulston and Siefkin legal opinion
Exhibit "C" Form of Lease - Equity Tower
Exhibit "D" Form of Real Estate Contract - Retained Assets
Exhibit "E" Form of Bank Merger Agreement
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 9, 1994,
among FOURTH FINANCIAL CORPORATION, a Kansas corporation
("Fourth"), LSB INDUSTRIES, INC., a Delaware corporation ("LSB"),
and PRIME FINANCIAL CORPORATION, an Oklahoma corporation ("Prime").
W I T N E S S E T H: That,
WHEREAS, Fourth desires to acquire all, and not less than
all, of the issued and outstanding capital stock of all classes of
Equity Bank for Savings, F.A. (the "Bank") and to simultaneously
merge the Bank into Fourth's subsidiary, BANK IV Oklahoma, National
Association ("BANK IV") as permitted by Section 501.1D of the
Oklahoma Banking Code of 1965 as amended, subject to and pursuant
to the terms of this Agreement; and
WHEREAS, LSB owns all of the issued and outstanding
capital stock of all classes of Prime and Prime owns all of the
issued and outstanding capital stock of the Bank; and
WHEREAS, each party hereto believes that the proposed
acquisition by Fourth of Bank and the merger of the Bank into BANK
IV pursuant to the terms and conditions of this Agreement would be
desirable and in their respective best interests;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. The following terms as used in this
Agreement shall have the following meanings unless the context
otherwise requires.
"This Agreement" refers to this Stock Purchase Agreement
and all exhibits hereto and all amendments hereto.
"Bank" means Equity Bank for Savings, F.A., a savings
bank organized under the laws of the United States.
"BANK IV" means BANK IV Oklahoma, National Association,
a national banking association.
"Bank Holding Company Act" means the federal Bank Holding
Company Act of 1956, as amended (12 U.S.C. Sect. 1841 et seq.), or any
successor federal statute, and the rules and regulations of the
Board promulgated thereunder, all as the same may be in effect at
the time.
"Bank Merger Agreement" means the Agreement to Merge,
substantially in the form of Exhibit "E" hereto, pursuant to which
the Bank will be merged into BANK IV at the Closing simultaneously
with the consummation of the Purchase.
"Bank Stock" means common stock of the Bank, par value
$.01 per share.
"Board" means the Board of Governors of the Federal
Reserve System or any successor governmental entity which may be
granted powers currently exercised by the Board of Governors.
"Closing" shall mean the purchase and sale of the Shares
and the simultaneous consummation of the Merger.
"Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder, all
as the same may be in effect at the time.
"Comptroller" means the United States Comptroller of the
Currency or any successor governmental agency which may be granted
powers currently exercised by the Comptroller of the Currency.
"Corporations" means collectively the Bank and all of the
following of its Subsidiaries: Credit Card Center, Inc., Equity
Financial Service Corp., and United BankCard, Inc.; and
"Corporation" means any one of them.
"Disclosure Statement" means the Disclosure Statement
prepared by Sellers and delivered by Sellers to Fourth prior to the
execution and delivery of this Agreement by Fourth.
"Effective Time" means the date and time on which the
Purchase is effected as more fully defined in this Agreement.
"Environmental Liabilities" means all losses, costs,
expenses, claims, demands, liabilities, or obligations of whatever
kind or otherwise, based upon an Environmental Law relating to:
(i) any environmental matter or condition,
including, but not limited to, on-site or off-site
contamination, and regulation of chemical substances or
products;
(ii) fines, penalties, judgments, awards,
settlements, legal or administrative proceedings,
damages, losses, claims, demands, and response, remedial
or inspection costs and expenses arising under
Environmental Laws;
(iii) financial responsibility under any
Environmental Law for cleanup costs or corrective
actions, including for any removal, remedial or other
response actions, and for any natural resource damage;
and
(iv) any other compliance, corrective, or
remedial action required under any Environmental Law.
"Environmental Law" means any provision of Law relating
to any environmental matters or conditions, Hazardous Materials,
pollution, or protection of the environment, including, but not
limited to, on-site and off-site contamination, and regulation of
chemical substances or products, emissions, discharges, release, or
threatened release of contaminants, chemicals, or industrial,
toxic, radioactive, or Hazardous Materials or wastes into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of Hazardous Materials, pollutants, contaminants,
chemicals, or industrial, toxic, radioactive, or hazardous
substances or wastes.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the rules and regulations promulgated
thereunder, all as the same may be in effect at the time.
"Facilities" means any real property, leaseholds, or
other interests owned by the Bank or any of the Corporations and/or
any buildings, plants, structures, or equipment of any of the
Corporations, but shall not include any real property, leaseholds,
or other interests owned by any of the Retained Corporations nor
any of the Retained Assets other than the Equity Tower.
"Federal Deposit Insurance Act" means the Federal Deposit
Insurance Act, as amended, and the rules and regulations
promulgated thereunder, all as the same may be in effect at the
time.
"FDIC" means the Federal Deposit Insurance Corporation or
any successor agency.
"Financial Statements" refers to all of the financial
statements described in clause h of Section 4.1 and clause h of
Section 5.1 of this Agreement.
"GAAP" means generally accepted accounting principles,
applied on a consistent basis.
"Hazardous Materials" means and includes: (i) any
hazardous substance or toxic material (excluding any lawful product
in customary quantities for use in the Bank's or other occupant's
ordinary course of business which contains such substance or
material), pollutant, contaminant, toxic material, or hazardous
waste as defined in any state, federal, or local Environmental Law;
(ii) waste oil and petroleum products; and (iii) any asbestos,
asbestos containing material, urea formaldehyde or material which
contains urea formaldehyde.
"Indemnifying Losses" has the meaning set forth in
Section 7.2 of this Agreement.
"Indemnitee" and "Indemnitees" shall have the meanings
set forth in Section 7.2 of this Agreement.
"Law" or "Laws" means all applicable statutes, laws,
ordinances, regulations, orders, writs, injunctions, or decrees of
the United States of America, any state or commonwealth, or any
subdivision thereof, or of any court or governmental department,
agency, commission, board, bureau, or other instrumentality.
"Litigation" means any proceeding, claim, lawsuit, and/or
investigation being conducted or, to the best of the knowledge of
the person or corporation making the representation, threatened
before any court or other tribunal, including, but not limited to,
proceedings, claims, lawsuits, and/or investigations, under or
pursuant to any occupational safety and health, banking, antitrust,
securities, tax, or other Laws, or under or pursuant to any
contract, agreement, or other instrument.
"LSB" means LSB Industries, Inc., a Delaware corporation.
"Merger" means the merger of the Bank into BANK IV at the
Closing immediately following the Purchase.
"OREO Properties" means any interest in any real or
personal property owned by the Bank or any other Corporation
acquired through foreclosure or otherwise in connection with
collecting a loan or lease.
"OTS" means the Office of Thrift Supervision of the
United States Treasury and any successor agency which may be
granted powers currently exercised by the Office of Thrift
Supervision.
"Permitted Contract" means a contract or agreement,
written or oral, between the Bank or another of the Corporations,
on the one hand, and a person other than a customer of the Bank or
another financial institution, on the other hand, which (i) was
entered into in the ordinary course of business, (ii) may be
terminated by the Bank after the Effective Time on no more than 60
days' prior notice, (iii) provides for a payment of no more than
$5,000 in any calendar month by the Bank or a Corporation, and (iv)
provides for no payment upon termination in excess of $5,000.
"Permitted Encumbrances" means with respect to any asset:
(a) liens for taxes not past due;
(b) mechanics' and materialmen's liens for
services or materials for which payment is not past due;
and
(c) minor defects, encumbrances, and
irregularities in title which do not, in the aggregate,
materially diminish the value of an asset or materially
impair the use of an asset for the purposes for which it
is or is intended to be used.
"Purchase" means the purchase at the Closing of all of
the Shares from Sellers by Fourth pursuant to this Agreement.
"Purchase Price" has the meaning set forth in Section 2.2
of this Agreement as adjusted in accordance with this Agreement.
"Required Approvals" means the approval, consent, or
non-objection, as the case may be, of the Board, the OTS, the
Comptroller, and all other governmental or self-governing agencies,
boards, departments, and bodies whose approval, consent, or
non-action is required in order to consummate the Purchase and the
Merger and the retention by BANK IV of all of the Corporations
engaged in banking or thrift-related activities and their
operations in substantially their present form except as
specifically otherwise provided in this Agreement, which approvals,
consents, and non-objections shall have become final and
nonappealable without any appeal or other form of review having
been initiated and as to which all required waiting periods shall
have expired.
"Retained Assets" means collectively (i) the loan and all
related rights and agreements on the books of the Bank secured by
the Equity Tower building (the "Equity Tower"), (ii) all OREO
Properties, (iii) receivables sold to the Bank pursuant to various
purchase agreements dated March 8, 1988, and (iv) such other assets
that Sellers elect to acquire from the Bank pursuant to the
provisions of Section 2.7 hereof; and "Retained Asset" means any
one of the Retained Assets.
"Retained Corporations" means all of the following wholly
owned Subsidiaries of the Bank all of the capital stock of each of
which is to be purchased by LSB or Prime prior to the Effective
Time: Northwest Financial Corporation, Northwest Energy
Enterprises, Inc., and Northwest Capital Corporation; and "Retained
Corporation" means any one of them.
"Securities Portfolio" means (i) all equity securities
other than investments in Subsidiaries, (ii) all mortgage-backed
securities (as defined by Section 5(c)(1)(R) of the Home Owners'
Loan Act), (iii) all government securities (as defined by Section
5(c)(1)(F) of the Home Owners' Loan Act), and (iv) all obligations
of or fully insured as to principal and interest by the United
States, owned by the Bank as of the Effective Time, whether held
for sale or otherwise.
"Sellers" means LSB and Prime collectively.
"Shares" means collectively all of the 100,000 shares of
Bank Stock being purchased and sold pursuant to this Agreement.
"Subsidiary" means any corporation fifty percent or more
of the common stock or other form of equity of which shall be
owned, directly or indirectly, by another corporation.
"Tangible Book Value of the Bank" means the aggregate
consolidated stockholders' equity of the Bank, calculated in
accordance with GAAP, less the amounts in the following accounts:
purchased mortgage servicing rights (account number 1797), goodwill
(account number 1799), and United BankCard goodwill (account number
1305), net of accumulated amortization (account number 1310).
"Time Deposits" means all deposit liabilities shown on
the Bank's records as time deposits.
1.2. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
GAAP consistent with that applied in the preparation of the
financial statements submitted pursuant to this Agreement, and all
financial statements submitted pursuant to this Agreement shall be
prepared in all material respects in accordance with such
principles.
1.3. Use of Defined Terms. All terms defined in this
Agreement shall have the defined meanings when used in any other
agreement, document, or certificate made or delivered pursuant to
this Agreement, unless the context otherwise requires.
ARTICLE II
SALE AND TRANSFER OF STOCK; CLOSING
2.1. Sale of the Shares. Subject to the terms and
conditions of this Agreement, at the Closing, Sellers shall sell,
transfer, and deliver to Fourth, and Fourth shall purchase, all of
the Shares for the Purchase Price.
2.2. Purchase Price. (a) The Purchase Price for all of
the Shares shall be the sum of:
(i) the Tangible Book Value of the Bank at the
Effective Time;
(ii) $9,300,000 with respect to the Bank's
credit card receivables;
(iii) one percent of the aggregate unpaid
principal balance at the Effective Time of loans secured
by fixed-rate mortgages having fully amortizing original
terms of 15 years or less, excluding loans originated
after October 31, 1993;
(iv) six percent of the aggregate unpaid
principal balance at the Effective Time of loans secured
by fixed-rate mortgages having fully amortizing original
terms of more than 15 years but not more than 30 years,
excluding loans originated after October 31, 1993;
(v) two percent of the aggregate unpaid
principal balance at the Effective Time of loans secured
by variable rate mortgages, excluding loans originated
after October 31, 1993;
(vi) the amount of unamortized discount on the
mortgages included in (iii), (iv), and (v) above;
(vii) 0.65% of the aggregate unpaid principal
balance at the Effective Time of loans serviced by Bank
prior to March 1, 1993 on which the Bank performs
mortgage servicing (other than loans serviced for the
account of Bank), one percent of such balance on such
loans originated on or after March 1, 1993 secured by
fixed or adjustable rate mortgages of fully amortizing
original terms of at least ten but not more than 15
years, and 1.25% of such balance on such loans originated
on or after March 1, 1993, secured by fixed or adjustable
rate mortgages having original fully amortizing terms of
more than 15 but not more than 30 years;
(viii) the remainder obtained by subtracting the
Required Reserve (as hereinafter defined) from the Bank's
actual loan loss reserve account (including its
unallocated loan loss reserve) at the Effective Time.
"Required Reserve" means $2,700,000 as adjusted by the
amount by which the Bank's loan loss reserve account
(including its unallocated loan loss reserve) would have
to be adjusted at the Effective Time under normal prudent
banking practice to reflect aggregate changes of at least
$500,000 occurring subsequent to October 31, 1993 in the
quality of commercial and energy loans held by the Bank
on October 31, 1993 or originated since October 31, 1993
and not reviewed in advance by Fourth; provided, that no
such change in the quality of a loan shall be included in
this calculation to the extent such change has been
reflected in the calculation of the Tangible Book Value
of the Bank at the Effective Time, or if such change is
less than $25,000;
(ix) to the extent not otherwise reflected in
the calculations of the Tangible Book Value of the Bank,
the amount, either positive (if the aggregate fair market
value exceeds book value) or negative (if the aggregate
fair market value is less than book value), by which the
aggregate fair market value of the Bank's Securities
Portfolio at the Effective Time differs from the
aggregate book value of the Securities Portfolio on such
date;
(x) $11,000,000, with respect to the Bank's
deposit balances;
(xi) $10,500,000, with respect to the Bank's
net operating loss carryforward at the Effective Time;
(xii) the difference, positive (in the case of
a rise in the yield curve) or negative (in the case of a
decline in the yield curve), between the aggregate book
value of all of the Bank's Time Deposits at the Effective
Time and the aggregate value of such deposits after
repricing them to the Treasury yield curve at the
Effective Time; and
(xiii) $1,400,000, representing the aggregate
premiums attributable to the Sayre, Clinton, Thomas, and
Beaver branches of the Bank.
2.3. Additional Adjustments to Purchase Price. (a) The
percentages specified in subparagraphs (iii) and (iv) of Section
2.2 were calculated using the following yields and spreads as of
August 31, 1993:
15 year 30 year
------- -------
Bank's average portfolio yield 7.44% 8.79%
FNMA required 30-day yield 6.19% 6.66%
------- -------
Spread 1.25% 2.13%
If, at the Effective Time, either of such spreads has fluctuated by
more than 0.25%, the applicable percentages in subparagraphs (iii)
and (iv) of Section 2.2(a) will be adjusted up (if the spread has
widened) or down (if the spread has narrowed) by 1/4 of one percent
for each full 1/8 of one percent change in the spread, in the case
of loans with an original term of 15 years or less, and by 3/8 of
one percent for each full 1/8 of one percent change in the spread,
in the case of loans with an original term of more than 15 but not
more than 30 years.
(b) The amount of the Purchase Price will be increased
by the aggregate amount, if any, the Tangible Book Value of the
Bank at the Effective Time has been reduced by any restructuring
charge or charges that the Bank shall have recorded on its books as
the result of the anticipated effects of the Purchase, none of
which the Bank shall be obligated to take, and all of which shall
have been approved in advance in writing by Fourth to the extent
permitted by Law.
2.4. Post-Closing Adjustments. (a) Unless otherwise
specifically provided herein, each component of the Purchase Price
shall be calculated as of the Effective Time; provided, however,
that if any element of the Purchase Price cannot be calculated
accurately as of the Effective Time, such items shall be calculated
as of the end of the month preceding the Effective Time. Any
element of the Purchase Price so calculated shall be adjusted to
reflect the accurate amount as of the Effective Time and Sellers
and Fourth agree to enter into mutually agreeable arrangements for
the final adjustment and the payment or repayment of the net amount
thereof with interest from the Effective Time at four percent per
year within five business days after Sellers deliver to Fourth a
written statement setting forth in reasonable detail all proposed
price adjustments and the basis of calculating each.
(b) Upon completion of the 1994 consolidated corporate
income tax return of LSB, LSB shall notify Fourth of the amount of
the final net operating loss carryforward of the Bank at the
Effective Time. To the extent any payment shall be owing to Fourth
pursuant to the formula set forth in clause (ii) and the second
sentence of Section 7.5(a) and regardless of whether Sellers
exercise the option referred to in Section 7.5(c), LSB shall make
such payment to Fourth no later than the due date of LSB's 1994
consolidated federal income tax return (including extensions).
2.5. Closing. The Closing shall take place at the
offices of Foulston & Siefkin, 700 Fourth Financial Center,
Wichita, Kansas, at 10:00 a.m., or at such other time or place as
the parties may agree, on a date selected by Fourth upon giving
reasonable notice to Sellers, which, unless otherwise agreed, shall
be on the 15th day (or the closest Friday if the 15th is not a
Friday) of the month in which the final Regulatory Approval is
obtained and in which all required waiting periods expire if such
earliest legal closing date is during the first 15 days of the
month and on the last business day of the month if the earliest
legal closing date occurs after the 15th day of a month. The
parties agree to exert their best efforts to cause the Closing to
occur on or before June 30, 1994.
2.6. Closing Deliveries. At the Closing:
a. Sellers shall deliver to Fourth:
(i) certificates representing all of
the Shares, endorsed for transfer to Fourth, free
and clear of all encumbrances, liens, security
interests, claims, and equities whatsoever;
(ii) such other documents including
officers' certificates as may be required by this
Agreement or reasonably requested by Fourth; and
(iii) the opinion of Housley Goldberg &
Kantarian, P.C., counsel to Sellers and the Bank,
substantially in the form of Exhibit "A" hereto.
b. Fourth shall deliver to Sellers:
(i) immediately available funds in the
total amount of the Purchase Price;
(ii) such documents including officers'
certificates as may be required by this Agreement
or reasonably requested by Sellers; and
(iii) the opinion of Foulston & Siefkin,
counsel to Fourth, substantially in the form of
Exhibit "B" hereto.
c. BANK IV and Northwest Tower Limited
Partnership shall execute and deliver a real estate lease
substantially in the form of Exhibit "C" hereto pursuant
to which Bank will lease from Northeast Tower Limited
Partnership certain first-floor and other space in the
Equity Tower in Oklahoma City for a ten-year term, with
renewal options and options to rent additional space in
such building.
Contemporaneously with the Purchase, the Bank
shall be merged into BANK IV pursuant to the Bank Merger
Agreement.
2.7. Option to Acquire Certain Loans. Sellers shall
have the option, but not the obligation, to acquire any loan owned
by the Bank that has been charged off or written down for a
purchase price equal to the net book value of each loan that has
been written down and for a purchase price of $1.00 in the case of
each loan that has been charged off.
2.8. Retained Assets, Retained Corporations, and
Certain Loans. Subject to all of the closing conditions set forth
in Sections 5.1 and 5.2 having occurred and continuing in effect,
Sellers shall purchase the Retained Assets from the Bank at the
Effective Time for the aggregate book value thereof as of the
Effective Time (or $1.00 in the case of each loan that has been
charged off), and Sellers shall purchase all of the capital stock
of all of the Retained Corporations from the Bank not later than
the business day immediately preceding the Effective Time for the
aggregate book value thereof as of such date. Each such purchase
shall be effected by the payment to the Bank of immediately
available funds. All sales by the Bank of OREO Properties shall be
pursuant to a real estate contract substantially in the form of
Exhibit "D" hereto.
ARTICLE III
AGREEMENTS OF THE PARTIES
3.1. Agreements of Fourth.
a. Prior to the Effective Time, Fourth,
separately and with Sellers, shall use its best efforts
in good faith to take or cause to be taken as promptly as
practicable all such steps as shall be necessary to
obtain all of the Required Approvals.
b. Fourth shall promptly prepare and file all
applications necessary to obtain the Required Approvals
and shall afford Sellers at least four days' opportunity
to review and comment upon the drafts of such
applications prior to the filing thereof.
c. Fourth shall observe the confidentiality
obligations set forth in Section 3.2.c, below.
d. Fourth shall consult with Sellers prior to
issuing any press release or other planned public
statement regarding the subject matter of this Agreement
or the termination thereof as to the contents of such
press release or statement.
e. Fourth agrees to take such action as may be
necessary to cause BANK IV to be well capitalized upon
the consummation of the transactions contemplated by this
Agreement at and immediately following the Effective
Time.
f. Fourth agrees to provide such information as
LSB may reasonably request in connection with the
preparation of material for the conduct of a meeting of
LSB's stockholders to approve this Agreement, and such
information furnished by Fourth will not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
g. Following the Closing, in the event Sellers
or any of their Subsidiaries, officers, directors, or
affiliates shall be called upon to provide an indemnity
pursuant to the provisions of this Agreement, or should
otherwise be called upon to take or defend against legal
action with respect to matters occurring prior to the
Effective Time, Fourth shall permit Sellers to examine
(subject to reasonable limitations) the former records of
the Bank or the Corporations.
h. BANK IV shall reimburse LSB for all out-of-
pocket COBRA liabilities incurred by LSB with respect to
employees of the Bank at the Effective Time who are
terminated after the Effective Time by BANK IV to the
extent not paid or reimbursed by re-insurance or stop
loss coverage; provided, however that such reimbursement
shall be net of all COBRA premiums paid by such employees
after the Effective Time and net of the aggregate amount
of all Bank employee forfeitures under the Bank's
cafeteria plan.
3.2. Agreements of Sellers.
a. Prior to the Closing, except with respect to
those commitments binding as of the date of this
Agreement described in an exhibit to the Disclosure
Statement, or as otherwise provided in this Agreement,
Sellers shall not, without the prior written consent of
Fourth which shall not unreasonably be withheld, permit
any of the Corporations to:
(1) Amend its articles or certificate of
incorporation, bylaws, or other charter
documents, make any change in its authorized,
issued, or outstanding capital stock, grant any
stock options or right to acquire shares of any
class of its capital stock or any security
convertible into any class of capital stock,
purchase, redeem, retire, or otherwise acquire
(otherwise than in a fiduciary capacity) any
shares of any class of its capital stock or any
security convertible into any class of its
capital stock, or agree to do any of the
foregoing;
(2) Declare, set aside, or pay any dividend
or other distribution in respect of any class of
its capital stock;
(3) Adopt, enter into, or amend materially
any employment contract or any bonus, stock
option, profit sharing, pension, retirement,
incentive, or similar employee benefit program or
arrangement or grant any salary or wage increase,
except (a) normal individual increases in
compensation to employees in accordance with
established employee procedures of the
Corporations; (b) the Fourth Financial
Corporation Acquisition Severance Schedule
previously furnished to Seller; and (c) severance
agreements to be performed by Sellers without any
obligation of the Bank or Fourth;
(4) Incur any indebtedness for borrowed
money (except for federal funds, repurchase
agreements entered into in the ordinary and usual
course of business, deposits received by the
Bank, endorsement, for collection or deposit, of
negotiable instruments received in the ordinary
and usual course of business, and issuance of
letters of credit by the Bank in the ordinary and
usual course of business), assume, guarantee,
endorse, or otherwise as an accommodation become
liable or responsible for obligations of any
other individual, firm, or corporation;
(5) Pay or incur any obligation or
liability, absolute or contingent, other than
liabilities incurred in the ordinary and usual
course of business of the Corporations;
(6) Except for transactions in the ordinary
and usual course of business of the Bank,
mortgage, pledge, or subject to lien or other
encumbrance any of its properties or assets;
(7) Except for transactions in the ordinary
and usual course of business of the Bank
(including, without limitation, sales of assets
acquired by the Bank in the course of collecting
loans) or as permitted by this Agreement, sell or
transfer any of its properties or assets or
cancel, release, or assign any indebtedness owed
to it or any claims held by it;
(8) Make any investment of a capital nature
in excess of $25,000 for any one item or group of
similar items either by the purchase of stock or
securities (not including bonds or collateralized
mortgage obligations purchased in the ordinary
and usual course of business by the Bank),
contributions to capital, property transfers, or
otherwise, or by the purchase of any property or
assets of any other individual, firm, or
corporation other than certain planned
improvements being made to the Bank's Classen and
Portland branches;
(9) Enter into any other agreement not in
the ordinary and usual course of business;
(10) Merge or consolidate with any other
corporation, acquire any stock (except in a
fiduciary capacity), solicit any offers for any
Bank Stock, or a substantial portion of the
assets of any of the Corporations or, except in
the ordinary course of business, acquire any
assets of any other person, corporation, or other
business organization, or enter into any
discussions with any person concerning, or agree
to do, any of the foregoing;
(11) Own at the Effective Time any bonds,
notes, loans, or other investment securities of
any kind which are not expressly enumerated in
the definition of "Securities Portfolio" in
Section 1.1 of this Agreement other than Bank's
investments in the other Corporations; or
(12) Except as permitted or contemplated by
this Agreement, enter into any transaction or
take any action which would, if effected prior to
the Effective Time, constitute a material breach
of any of the representations, warranties, or
covenants contained in this Agreement.
b. Except as otherwise provided in this
Agreement, prior to the Effective Time, each Seller shall
use its reasonable best efforts to cause each of the
Corporations to conduct its respective business in the
ordinary and usual course as heretofore conducted and to
use its reasonable best efforts (1) to preserve its
business and business organization intact, (2) to keep
available to BANK IV the services of the present
officers and employees of the Bank, (3) to preserve the
good will of customers and others having business
relations with the Bank, (4) to maintain its properties
in customary repair, working order and condition
(reasonable wear and tear excepted), (5) to comply in all
material respects with all Laws applicable to it and the
conduct of its businesses, (6) to keep in force at not
less than their present limits all existing policies of
insurance, (7) to make no material changes in the
customary terms and conditions upon which it does
business, (8) to continue its current practice of selling
loans secured by fixed rate mortgages on a
servicing-retained basis, (9) to duly and timely file all
reports, tax returns, and other material documents
required to be filed with federal, state, local and other
authorities, and (10) unless it is contesting the same in
good faith and has established reasonable reserves
therefor, to pay when required to be paid all material
taxes indicated by tax returns so filed or otherwise
lawfully levied or assessed upon it or any of its
properties and to withhold or collect and pay to the
proper governmental authorities or hold in separate bank
accounts for such payment all taxes and other assessments
which it believes in good faith to be required by law to
be so withheld or collected.
c. Prior to the Effective Time, Sellers shall
cause the Corporations, to the extent permitted by Law,
to give Fourth and its counsel and accountants full
access, during normal business hours and upon reasonable
notice, to their respective properties, books, and
records, and to furnish Fourth during such period with
all such information concerning their affairs as Fourth
may reasonably request. Except for matters expressly
disclosed in the Disclosure Statement, the availability
or actual delivery of information about the Corporations
to Fourth shall not affect the covenants,
representations, and warranties of Sellers contained in
this Agreement. Except for information disclosed in the
course of obtaining Required Approvals, Fourth shall
treat as confidential all confidential information
disclosed to it by Sellers or the Corporations in the
same manner as Fourth treats similar confidential
information of its own and, if this Agreement is
terminated, Fourth shall continue to treat all such
confidential information obtained through such disclosure
and not otherwise known to Fourth or already in the
public domain, as confidential and shall return such
documents theretofore delivered by Sellers to Fourth as
Sellers shall request.
d. Sellers shall cause the Corporations,
separately and jointly with each other and with Fourth,
to each use reasonable efforts in good faith to take or
cause to be taken as promptly as practicable all such
steps as shall be necessary to obtain all Required
Approvals as promptly as practicable.
e. Sellers agree not to sell, pledge, encumber,
or otherwise hypothecate or transfer any shares of Bank
Stock prior to the Effective Time.
f. At the Closing, BANK IV, as lessee, and
Northwest Tower Limited Partnership, as lessor, shall
execute and deliver a real estate lease substantially in
the form of Exhibit "C," to this Agreement. No party
hereto shall be liable to any other party if such lessor
fails to execute such lease.
g. Sellers agree to cause the Corporations to
cooperate with Fourth in Fourth's efforts to obtain
current title evidence or insurance, environmental
assessment reports, and surveys on such of the
Corporations' real properties as Fourth may desire.
h. Sellers will take, and will cause the Bank to
take, all such corporate action as may be required to
authorize, execute, and perform the Bank Merger
Agreement.
i. LSB agrees:
(1) To file all required federal, state,
and local income tax returns in a timely manner
for 1993 and 1994 or obtain appropriate
extensions for such filings and to pay, when due,
all income taxes due for such periods;
(2) To give Fourth written notice promptly
of any issues raised by any taxing authorities
which might reasonably result in an increase in
the income tax liabilities of the Bank for any
period in which it is or was a member of the
"Group" defined in Section 4.1.k of this
Agreement or which might reasonably affect the
amount of the Bank's net operating loss;
(3) To consult with Fourth and BANK IV
about the resolution of any such issues and not
to settle any such issues without giving Fourth
an opportunity to assume responsibility for the
resolution of such issues, at Fourth's expense,
if the effect of such settlement would be to
increase the liability of Fourth or any of its
affiliates for any tax for any period beginning
after the Effective Time or affect the amount of
the Bank's net operating loss unless Sellers
agree to pay and do pay to Fourth the full amount
of such increase in liability grossed up for any
federal or state tax attributable to such
payment; and
(4) That all existing income tax sharing or
allocation agreements or arrangements of any kind
between the Corporations and LSB or any other
member of such Group, whether or not in writing,
shall automatically be terminated at the
Effective Time and no further payments shall be
made by Bank thereunder except to the extent the
amount thereof has been taken into account in
calculating the Tangible Book Value of the Bank.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of Sellers. Except
as expressly disclosed in the Disclosure Statement, Sellers jointly
and severally represent and warrant to Fourth as follows:
a. Organization, Good Standing, and Authority.
Each Seller is a savings and loan holding company duly
registered pursuant to the federal Home Owners' Loan Act.
Each of the Corporations is a corporation or savings bank
duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation,
and each has all requisite corporate power and authority
to conduct its business as it is now conducted, to own
its properties and assets, and to lease properties used
in its business. None of the Corporations is in
violation of its charter documents or bylaws, or of any
applicable Law in any material respect, or in default in
any material respect under any material agreement,
indenture, lease, or other document to which it is a
party or by which it is bound. The deposits of the Bank
are insured by the FDIC to the extent provided by the
Federal Deposit Insurance Act and the Bank has paid all
assessments and filed all reports required to be filed
under the Federal Deposit Insurance Act of which failure
to do so would have a material adverse effect upon the
Bank.
b. Binding Obligations; Due Authorization. This
Agreement constitutes the valid and binding obligation of
each Seller, enforceable against it in accordance with
the terms hereof, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or
other similar laws and equitable principles affecting
creditors' rights generally.
c. Absence of Default. The execution and the
delivery of this Agreement, the sale of the Shares, and
the consummation of the other transactions contemplated
hereby, and the fulfillment of the terms hereof will not
(1) conflict with, or result in a breach of the terms,
conditions, or provisions of, or constitute a default
under the organizational documents or bylaws of any of
the Corporations or under any agreement or instrument
under which any of the Corporations or either Seller is
obligated, or (2) violate any Law to which any of the
Corporations or any Seller is subject.
d. Subsidiaries. LSB is the owner of all of the
issued and outstanding capital stock of all classes of
Prime. The only Subsidiaries of the Bank are the
following:
Name State of Incorporation
---- ----------------------
Northwest Financial Corporation Oklahoma
Northwest Energy Enterprises, Inc. Oklahoma
Credit Card Center, Inc. Oklahoma
Equity Financial Service Corp. Oklahoma
United BankCard, Inc. Oklahoma
Northwest Capital Corporation Oklahoma
e. Capitalization. The Bank is authorized to
issue 1,000,000 shares of capital stock, par value $.01
per share, of which 100,000 shares are issued and
outstanding. Prime is the owner, free and clear of all
encumbrances, liens, security interests, and claims
whatsoever, of all 100,000 shares of Bank Stock. The
capitalization of each of the Bank's Subsidiaries
excluding the Retained Corporations, is as follows:
Number of Shares
---------------------
Name Par Value Issued Outstanding
---- --------- ------ -----------
Credit Card Center, Inc. $ 10.00 6,700 5,200
Equity Financial Service
Corp. 1.00 1,000 1,000
United BankCard, Inc. 1,000.00 250 250
f. Charter Documents. True and correct copies
of the charter documents and bylaws of each of the
Corporations, with all amendments thereto, are included
in the Disclosure Statement as Exhibits "E-1" to "E-8."
g. Options, Warrants, and Other Rights. None of
the Corporations has outstanding any options, warrants,
or rights of any kind requiring it to sell or issue to
anyone any capital stock of any class and none of the
Corporations has agreed to issue or sell any additional
shares of its capital stock.
h. Financial Statements. Included in the
Disclosure Statement as Exhibits "H-1" through "H-6" are
copies of the following financial statements, all of
which are true and complete in all material respects and
have been prepared in all material respects in accordance
with GAAP and all applicable regulatory accounting
principles consistently followed throughout the periods
indicated, subject in the case of interim financial
statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the
aggregate, be materially adverse) and the absence of
notes (which if presented would not differ materially
from those included in the most recent year-end financial
statements):
(1) Audited Consolidated Financial
Statements of the Bank as of December 31, 1992,
and 1991, and for the fiscal years then ended
with auditors' report thereon and notes thereto,
which have been examined by Ernst & Young,
independent certified public accountants;
(2) Thrift Financial Reports filed by the
Bank with the OTS for the quarters ended December
31, 1992, March 31, 1993, June 30, 1993, and
September 30, 1993; and
(3) Unaudited financial statements of the
Bank as of October 31, 1993 and for the period
then ended.
As soon as practicable between the date hereof and the
Effective Time, Sellers will deliver to Fourth copies of
monthly operating statements of the Bank and of all
reports filed by any of the Corporations with any
regulatory agencies. The books of account of each of the
Corporations and each of the Financial Statements fairly
and correctly reflect and, when delivered, will reflect
in all material respects in accordance with GAAP and all
applicable rules and regulations of regulatory agencies
applied on a consistent basis, the respective financial
conditions and results of operations of each of the
Corporations (except for the absence in the monthly
operating statements of the Bank of certain information
and footnotes normally included in financial statements
prepared in accordance with GAAP). There have been, and
prior to the Effective Time there will be, no material
adverse changes in the financial condition of the
Corporations from December 31, 1992, other than changes
made in the usual and ordinary conduct of the businesses
of the Corporations, none of which has been or will be
materially adverse and all of which have been or will be
recorded in the books of account of the Corporations; and
except as specifically permitted by this Agreement, there
have been, and prior to the Effective Time there will be,
no substantial adverse changes in the respective
businesses, assets, properties, or liabilities, absolute
or contingent, of any of the Corporations, or in their
respective condition, financial or otherwise, from the
date of the most recent of the Financial Statements that
has been delivered to Fourth on the date hereof other
than changes occurring in the usual and ordinary conduct
of the business of the Corporations, none of which has
been or will be materially adverse and all of which have
been or will be recorded in the respective books of
account of the Corporations. None of the Corporations
has any contingent liabilities, other than letters of
credit and similar obligations of the Bank incurred in
the ordinary course of business, that are not described
in or reserved against in the Financial Statements listed
above.
i. Real Properties. Exhibit "I" to the
Disclosure Statement is a complete list of all real
estate owned or leased by any of the Corporations. Each
Corporation has good and marketable title in fee simple
to all lands and buildings described in the Disclosure
Statement as being owned by it, free and clear of all
liens, encumbrances, and charges, except for Permitted
Encumbrances. All leases of real property to which any
of the Corporations is a party as lessee, complete copies
of each of which with all amendments thereto are included
in Exhibit "I" to the Disclosure Statement, are each
valid and enforceable in accordance with their respective
terms except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar Laws
and equitable principles affecting creditors' rights
generally, and there has been no material default by any
party thereto. No zoning ordinance prohibits, interferes
with, or materially impairs the usefulness of any of the
Facilities owned or used by any Corporation for the
purposes for which it is now being used; and all the
Facilities owned or leased by any of the Corporations are
in good operating condition and repair, normal wear and
tear excepted.
j. Personal Property. Except for leased
properties, each of the Corporations has good and
marketable title to all of the machinery, equipment,
materials, supplies, and other property of every kind,
tangible or intangible, contained in its offices and
other facilities or shown as assets in its records and
books of account, free and clear of all liens,
encumbrances, and charges. All leases of personal
property to which any of the Corporations is a party as
lessee are valid and enforceable in accordance with their
terms, and there has been no material default by any
party thereto. The material items of personal property
owned or leased by any of the Corporations are generally
in good operating condition, normal wear and tear
excepted.
k. Taxes. LSB, Prime, the Bank, the
Corporations, and the Retained Corporations are members
of the same "affiliated group" (the "Group"), as defined
in Section 1504(a)(1) of the Code. Each member of the
Group has filed or caused to be filed, or a filing was
made on its behalf, all tax returns and reports required
to have been filed by or for it, and all material
information set forth in such returns or reports is
accurate and complete. Each member of the Group has paid
or made adequate provision for all taxes, additions to
tax, penalties, and interest for all periods covered by
those returns or reports. There are no material unpaid
taxes, additions to tax, penalties, or interest due and
payable by any member of the Group, except for taxes and
any such related liabilities being contested in good
faith and disclosed in Exhibit "K" to the Disclosure
Statement. Each member of the Group has collected or
withheld all amounts required to be collected or withheld
by it for any taxes, and all such amounts have been paid
to the appropriate governmental agencies or set aside in
appropriate accounts for future payment when due. Each
member of the Group is in material compliance with, and
its records contain all information and documents
(including, without limitation, IRS Forms W-9) necessary
to comply in all material respects with applicable
information reporting and tax withholding requirements
under federal, state, and local laws, rules, and
regulations, and such records identify with specificity
all accounts subject to backup withholding. The
Financial Statements fully and properly reflect, as of
the dates thereof, the accrued taxes, additions to tax,
penalties, and interest. No extension of time for the
assessment of deficiencies for any years is in effect.
No member of the Group has any knowledge of any
unassessed tax deficiency proposed or threatened against
any of them.
l. Contracts. Other than Permitted Contracts
and agreements with customers of the Bank and with
financial institutions entered into by the Bank in the
ordinary course of its banking business, attached to the
Disclosure Statement as Exhibit "L" is a list of all
material contracts and other agreements and arrangements,
both written and oral, to which Bank or any of the other
Corporations is a party and which involve $10,000 or
more, which affect or pertain to the operation of their
respective businesses. To the knowledge of Sellers, all
parties thereto have in all material respects performed,
and are in good standing with respect to, all the
material obligations required to be performed under all
such contracts and other agreements and arrangements,
and no obligation with respect thereto is overdue. All
of the material agreements of the Corporations, including
without limitation the agreements disclosed in writing
pursuant to this clause (l), are valid, binding, and
enforceable in accordance with their terms, except as
limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws and equitable
principles affecting creditors' rights generally. Except
as otherwise noted in Exhibit "L" to the Disclosure
Statement, no material contract, lease, or other
agreement or arrangement to which either Bank or one of
the other Corporations is a party or as to which any of
their assets is subject requires the consent of any third
party in connection with this Agreement. Except as
described in Exhibit "L" to the Disclosure Statement,
neither any Corporation nor any Seller has any knowledge
of any threatened cancellation of, any outstanding
disputes or default under, or of any basis for any claim
of breach or default of, any material lease, contract, or
other agreement or arrangement to which any of the
Corporations is a party. Except for Permitted Contracts
and except as set forth in Exhibit "L" to the Disclosure
Statement, neither the Bank nor any of the other
Corporations is a party to:
(1) Any contract for the purchase or sale
of any materials or supplies having an aggregate
purchase or sale price in excess of $10,000 which
contains any escalator, renegotiation, or
redetermination clause or which commits it for a
fixed term;
(2) Any contract of employment with any
officer or employee not terminable at will
without liability on account of such termination;
(3) Any management or consultation
agreement not terminable at will without
liability on account of such termination;
(4) Any license or royalty agreement having
an aggregate future commitment to pay at least
$10,000, or union agreement, or loan agreement in
which any of the Corporations is the borrower;
(5) Any contract, accepted order, or
commitment for the purchase or sale of materials,
services, or supplies having a total remaining
contract price in excess of $10,000;
(6) Any contract containing any
restrictions on any party thereto competing with
the Bank, any of the other Corporations, or any
other person in the business of banking or
activities relating to banking;
(7) Any other agreement which materially
affects the business, properties, or assets of
either Bank or one of the other Corporations, or
which was entered into other than in the ordinary
and usual course of business; or
(8) Any letter of credit or commitment to
make any loan or group of loans to related
parties in an amount in excess of $500,000.
None of LSB, Prime, or any of the Corporations has any
knowledge based upon which it has formed a conclusion
that a material loss is reasonably anticipated with
respect to any of the agreements described in clause "l."
m. Labor Relations; Employees; ERISA. None of
the Corporations is a party to or affected by any
collective bargaining agreement, nor is any Corporation
a party to any pending or, to the knowledge of Sellers,
threatened labor dispute, organizational efforts, or
labor negotiations. Each of the Corporations has
complied in all material respects with all applicable
Laws relating to the employment of labor, including, but
not limited to, the provisions thereof relating to wages,
hours, collective bargaining, payment of social security
taxes, and equal employment opportunity, the violation of
which would have a materially adverse impact on their
respective businesses. None of the Corporations is
liable for any arrears of wages or any taxes or penalties
for failure to comply with any of the foregoing in an
amount which would have a material adverse effect on the
Bank or any of the Corporations. None of the
Corporations has any written or oral retirement, pension,
profit sharing, stock option, bonus, or other employee
benefit plan or practice other than group health and
accident insurance except that Bank employees participate
in Bank's and LSB's cafeteria plans, which include
health, disability insurance (long and short term), life
insurance, and supplemental life insurance, and LSB's
401(k) plan, and thirteen employees in the United
BankCard division of the Bank participate in a "frozen"
401(k) plan. The Bank is in the process of attempting to
terminate this "frozen" plan. None of the Corporations
has violated any of the provisions of ERISA, and none of
them has engaged in any "prohibited transactions" as such
term is defined in Section 406 of ERISA in an amount
which would have a material adverse effect on the Bank or
the Corporations. There is no employee of any of the
Corporations whose employment is governed by a written or
oral employment agreement for a specific term of
employment.
n. Government Authorizations. Each of the
Corporations has all permits, charters, licenses, orders,
and approvals of every federal, state, local, or foreign
governmental or regulatory body required in order to
permit it to carry on its business substantially as
presently conducted except where the absence thereof
would not have a material adverse effect on the Bank or
the affected Corporation. All such licenses, permits,
charters, orders, and approvals are in full force and
effect, and, to the knowledge of the Corporations and
Seller, no suspension or cancellation of any of them is
threatened and none of the Corporations knows of any fact
or circumstance that will materially interfere with or
materially adversely affect the renewal of any of such
licenses, permits, charters, orders, or approvals; and
none of such permits, charters, licenses, orders, and
approvals will be affected by the consummation of the
transactions contemplated by this Agreement.
o. Insurance. Exhibit "O" to the Disclosure
Statement is a complete list of all insurance policies
presently in effect and in effect during the past three
years. All the insurance policies and bonds currently
maintained by any of the Corporations are in full force
and effect.
p. Litigation. Exhibit "P" to the Disclosure
Statement contains a true and complete list and brief
description of all pending or, to the knowledge of any of
the Corporations or any Seller, threatened, Litigation to
which any of the Corporations is or would be a party or
to which any of their assets is or would be subject.
Except as described on Exhibit "P" to the Disclosure
Statement, none of the Corporations is a party to any
Litigation other than routine litigation commenced by the
Bank to enforce obligations of borrowers in which no
counterclaims for any material amounts of money have been
asserted or, to the knowledge of the Corporations or any
Seller, threatened.
q. Brokers or Finders. Except for an agreement
with Lazard Freres & Co., whose fee will be paid by LSB,
no broker, agent, finder, consultant, or other party
(other than legal and accounting advisors) has been
retained by either of the Sellers or any of the
Corporations or is entitled to be paid based upon any
agreements, arrangements, or understandings made by
either of the Sellers or any of the Corporations in
connection with any of the transactions contemplated by
this Agreement.
r. Environmental Compliance. Except as
disclosed in Exhibit "R", to Sellers' knowledge, each of
the Corporations is in material compliance with all
relevant Environmental Laws and none of the Corporations
has any material Environmental Liabilities. None of the
Facilities is now being used or, to either Seller's
knowledge, has at any time in the past ever been used for
the storage (whether permanent or temporary), by any of
the Corporations, or to the knowledge of either Seller,
by third parties, disposal, or handling of any Hazardous
Materials, nor are any Hazardous Materials located in,
on, under, or at any of the Facilities. No Corporation
has received any notice of material violation of any
Environmental Law, or any notice of any material
potential Environmental Liabilities with respect to any
of the Facilities or to any other properties and assets
in which any Corporation has had an interest.
s. Employment of Aliens. Each Corporation is in
material compliance with the Immigration and Control Act
of 1986.
t. Notes and Leases. All promissory notes and
leases owned by the Bank or any other Corporation at the
Effective Time will represent bona fide indebtedness or
obligations to the Bank and are and will be fully
enforceable in accordance with their terms without valid
set-offs or counterclaims, except as limited by
applicable bankruptcy, insolvency, reorganization,
moratorium, or similar Laws and equitable principles
affecting creditors' rights generally; provided, however,
no representation or warranty is made in this Agreement
as to the collectibility of such notes and leases.
u. Updating of Representations and Warranties .
Between the date hereof and the Effective Time, Sellers
will promptly disclose to Fourth in writing any
information of which either of them has actual knowledge
(1) concerning any event that would render any
representation or warranty of Sellers untrue if made as
to the date of such event, (2) which renders any
information set forth in this Agreement or the Disclosure
Statement no longer correct in all material respects, or
(3) which arises after the date hereof and which would
have been required to be included in this Agreement or
Disclosure Statement if such information had existed on
the date hereof.
v. True at Effective Time. Except as otherwise
specifically provided in this Agreement, all of the
representations and warranties of Sellers set forth above
will be true and correct at the Effective Time with the
same force and effect as though such representations and
warranties had been made at the Effective Time.
4.2. Representations and Warranties of Fourth. Fourth
represents and warrants to Sellers as follows:
a. Organization, Good Standing, and Authority.
Fourth is a corporation duly organized, validly existing,
and in good standing under the laws of the State of
Kansas, and has all requisite corporate power and
authority to conduct its business as it is now conducted,
to own its properties and assets, and to lease properties
used in its business. Fourth is not in violation of its
charter documents or bylaws, or of any applicable Law in
any material respect, or in default in any material
respect under any material agreement, indenture, lease,
or other document to which it is a party or by which it
is bound.
b. Binding Obligations; Due Authorization. This
Agreement constitutes the valid and binding obligations
of Fourth, enforceable against it in accordance with its
terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar
laws and equitable principles affecting creditors' rights
generally. The execution, delivery, and performance of
this Agreement and the transactions contemplated hereby
have been duly authorized by the board of directors of
Fourth.
c. Absence of Default. None of the execution or
the delivery of this Agreement, the consummation of the
transactions contemplated hereby, or the fulfillment of
the terms hereof, will (1) conflict with, or result in
a breach of the terms, conditions, or provisions of, or
constitute a default under the charter documents or
bylaws of Fourth or under any agreement or instrument
under which Fourth is obligated, or (2) violate any Law
to which it is subject.
d. Brokers or Finders. No broker, agent,
finder, consultant, or other party (other than legal and
accounting advisors) has been retained by Fourth or is
entitled to be paid based upon any agreements,
arrangements, or understandings made by Fourth in
connection with any of the transactions contemplated by
this Agreement.
e. Required Approvals. Fourth knows of no
reason that would preclude obtaining the Required
Approvals in a timely manner, but various persons have
the right to object to the granting of Required Approvals
and the various governmental agencies involved can be
expected to conduct various types of economic and other
analysis, any one of which may cause a delay or denial of
a requested approval.
f. Capitalization of the Bank. Fourth will
contribute such additional capital to BANK IV as may be
necessary in order for BANK IV to be well capitalized
following consummation of the Purchase, the Merger, and
the other transactions contemplated or permitted by this
Agreement. Fourth has sufficient capital resources to be
able to make such additional capital contribution and to
perform its obligations under this Agreement.
ARTICLE V
CLOSING CONDITIONS
5.1. Conditions to Obligations of Fourth. The
obligations of Fourth to purchase the Shares shall be subject to
the following conditions which may, to the extent permitted by Law,
be waived by Fourth at its option:
a. Absence of Litigation. No order, judgment,
or decree shall be outstanding restraining or enjoining
consummation of the purchase of the Shares, the Merger,
or any of the other transactions permitted or
contemplated by this Agreement; and no Litigation shall
be pending or threatened in which it is sought to
restrain or prohibit the purchase of the Shares, the
Merger, or any of the other transactions permitted or
contemplated by this Agreement or to obtain other
substantial monetary or other relief against one or more
of the parties hereto in connection with this Agreement.
b. Regulatory Approvals. All Required Approvals
shall have been procured (and shall continue to be in
effect) and all other requirements prescribed by Law
shall have been satisfied.
c. Minimum Tangible Book Value of Bank. The
Tangible Book Value of the Bank as of the Effective Time,
without taking into account any restructuring charges
described in Section 2.3(b) of this Agreement, shall be
not less than $41,000,000. Such amount shall be
substantiated by the total consolidated stockholder's
equity of the Bank as reflected in the books of record
and balance sheets of the Bank.
d. Opinion of Counsel. Fourth shall have
received the opinion of Housley Goldberg & Kantarian,
P.C., counsel to the Corporations and Sellers,
substantially in the form of Exhibit "A" hereto.
e. Representations and Warranties; Covenants.
The representations and warranties of the Sellers
contained in this Agreement shall have been true and
correct in all material respects on the date made and
shall be true and correct in all material respects at the
Effective Time as though made at such time, excepting any
changes occurring in the ordinary course of business,
none of which shall have been materially adverse, and
excepting any changes contemplated or permitted by this
Agreement. Sellers shall have performed all of their
obligations under this Agreement.
f. Certificates. Sellers shall have delivered
to Fourth a certificate, in form and substance
satisfactory to Fourth, dated the Effective Time and
signed by the chief executive officer and chief financial
officer of each of the Corporations, certifying in such
detail as Fourth may reasonably request the fulfillment
of the foregoing conditions.
g. Resignations. Sellers shall have delivered
to Fourth the written resignations, effective at the
Effective Time, of those officers and directors of the
Bank and the other Corporations as Fourth shall have
requested at least two business days prior to the
Effective Time.
h. 1993 Audit Report. Seller shall have
delivered to Fourth a copy of the Bank's audited
consolidated Financial Statements as of December 31, 1993
and for the year then ended, with auditor's report
thereon and notes thereto.
i. Lease of Equity Tower. Northwest Tower
Limited Partnership shall have entered into a lease as
lessor of the Equity Tower, substantially in the form of
Exhibit "C" hereto.
j. Satisfactory Environmental Reports. Fourth
shall have received environmental assessment reports
covering all of the Facilities, in form and substance
reasonably satisfactory to Fourth, which do not cause
Fourth reasonably to conclude that there are any material
Environmental Liabilities associated with any of the
Facilities.
5.2. Conditions to Obligations of Sellers. The
obligation of Sellers to sell the Shares and to consummate the
transactions contemplated hereby shall be subject to the following
conditions which may, to the extent permitted by Law, be jointly
waived by Sellers at their option:
a. General. Each of the conditions specified in
clauses a and b of Section 5.1 shall have occurred and be
continuing.
b. Representations and Warranties; Covenants.
The representations and warranties of Fourth contained in
this Agreement shall have been true and correct in all
material respects on the date made and shall be true and
correct in all material respects at the Effective Time as
though made at such time. Fourth shall have duly
performed all of its obligations under this Agreement.
c. Minimum Purchase Price. The Purchase Price
shall be not less than $92,000,000, which minimum amount
shall be reduced by the amount of the option price
described in clause c of Section 7.5 if such option has
been exercised by Sellers.
d. Fairness Opinion. LSB shall have received by
February 10, 1994, a written opinion from Lazard Freres
& Co. to the effect that the Purchase Price is fair to
Sellers from a financial point of view.
e. Opinion of Counsel. Sellers shall have
received the opinion of Foulston & Siefkin, counsel to
Fourth, substantially in the form of Exhibit "B" hereto.
f. Certificates. Fourth shall have delivered to
Sellers a certificate, in form and substance reasonably
satisfactory to Sellers, dated the Effective Time and
signed by the chief executive officer and chief financial
officer of Fourth, certifying in such detail as Sellers
may reasonably request, the accuracy of the
representations and warranties and the fulfillment of the
covenants of Fourth hereunder.
g. LSB's Stockholder Approval. The stockholders
of LSB shall have approved this Agreement and the
Purchase.
h. Change in Treasury Regulations. The United
States Department of the Treasury shall not have finally
adopted the proposed changes to the Treasury Regulations,
at Sec. 1.1502-33 (56 FR 47379, Sept. 19, 1991, revised
57 FR 53550, Nov. 12, 1992, revised, 57 FR 62251, Dec.
30, 1992), nor shall have any other change in the Law
occurred with the effect, in the reasonable judgment of
Sellers based upon the advice of their tax advisors, that
the tax basis of LSB or Prime in the Bank Stock shall be
significantly reduced.
i. Conveyance of Retained Corporations and
Retained Assets. On or before the Effective Time, all of
the Retained Assets and all of the Bank's interests in
the Retained Corporations shall have been transferred to
Sellers or their designee or designees as provided in
this Agreement.
ARTICLE VI
TERMINATION OF AGREEMENT
6.1. Mutual Consent; Termination Date. This Agreement
shall terminate at any time when the parties hereto mutually agree
in writing. This Agreement may also be terminated at the election
of either Sellers (acting jointly) or Fourth, upon written notice
from the party electing to terminate this Agreement to the other
party if, without fault on the part of the party electing to
terminate this Agreement, there has been a denial of a Required
Approval or the imposition of one or more terms (not including a
requirement to divest a single branch of the Bank not located in
Oklahoma City) reasonably deemed onerous by Fourth or Sellers as a
condition to obtaining a Regulatory Approval. Unless extended by
written agreement of the parties, this Agreement shall terminate if
all conditions to the obligations of the parties hereto have not
occurred on or before June 30, 1994.
6.2. Election by Fourth. This Agreement shall
terminate at Fourth's election, upon written notice from Fourth to
Sellers if any one or more of the following events shall occur and
shall not have been remedied to the satisfaction of Fourth within
30 days after written notice is delivered to Seller: (a) there
shall have been any uncured material breach of any of the
obligations, covenants, or warranties of the Sellers hereunder; or
(b) there shall have been any written representation or statement
furnished by the Sellers hereunder which at the time furnished is
false or misleading in any material respect in relation to the size
and scope of the transactions contemplated by this Agreement.
6.3. Election by Sellers. This Agreement shall
terminate at the election of Sellers (acting jointly) upon written
notice from Sellers to Fourth if any one or more of the following
events shall occur and shall not have been remedied to its
satisfaction within 30 days after written notice is delivered to
Fourth: (a) there shall have been any uncured material breach of
any of the obligations, covenants, or warranties of Fourth
hereunder; or (b) there shall have been any written representation
or statement furnished by Fourth hereunder which at the time
furnished is false or misleading in any material respect in
relation to the size and scope of the transactions contemplated by
this Agreement.
ARTICLE VII
INDEMNIFICATION
7.1. Effect of Closing. Except as provided in this
Section, closing of the transactions contemplated by this Agreement
shall not prejudice any claim for damages which any of the parties
hereto may have hereunder in law or in equity, due to an uncured
material default in observance or the due and timely performance of
any of the covenants and agreements herein contained or for the
material breach of any warranty or representation hereunder, unless
such observance, performance, warranty, or representation is
specifically waived in writing by the party making such claim. If
any warranty or representation contained herein is or becomes
untrue or breached in any material respect (other than by reason of
any willful misrepresentation or breach of warranty) and such
breach or misrepresentation is promptly communicated to the other
parties in writing prior to the Effective Time, such non-breaching
parties shall have the right (jointly in the case of Sellers), at
their sole option, either to waive such misrepresentation or breach
in writing or to terminate this Agreement, but in either such
event, the breaching parties shall not be liable to the other
parties for any such damages, costs, expenses, or otherwise by
reason of such breach or misrepresentation. If such non-breaching
parties elect to close the transactions contemplated by this
Agreement notwithstanding the written communication of such breach
or misrepresentation, they shall be deemed to have waived such
breach or misrepresentation in writing. Similarly, if Fourth
receives an environmental assessment report on the Facilities
pursuant to Section 5.1(j) indicating the existence of any
Environmental Liability and elects to close the transactions
contemplated by this Agreement, it shall be deemed to have waived
all right to indemnification with respect thereto.
7.2. General Indemnification. Subject to the
limitations on the liability of Sellers contained in Section 7.1
and this Section 7.2, Sellers shall be jointly and severally liable
for, and shall defend, save, indemnify, and hold harmless Fourth,
BANK IV, the Corporations, and their respective successors,
officers, directors, employees, and agents, and each of them
(hereinafter individually referred to as an "Indemnitee" and
collectively as "Indemnitees") against and with respect to any
losses, liabilities, claims, diminution in value, litigation,
demands, damages, costs, charges, reasonable legal fees, suits,
actions, proceedings, judgments, expenses, or any other losses
(herein collectively referred to as "Indemnifying Losses") that may
be sustained, suffered, or incurred by, or obtained against, any
Indemnitee arising from or by reason of the material uncured breach
or nonfulfillment of any of the warranties, agreements, or
representations made by the Sellers, in this Agreement; provided,
however that the liability of Sellers to defend, save, indemnify,
and hold harmless any of the Indemnitees for any liabilities,
claims, or demands indemnified under this Section 7.2 (but not
under Section 7.5, 7.6, or 7.7) or any damages, costs, charges,
reasonable legal fees, suits, actions, proceedings, or judgments
received, incurred, filed, or entered thereon, shall be limited to
the amount by which all such liabilities, claims, and demands so
discovered or made, and all damages, costs, charges, reasonable
legal fees, suits, actions, proceedings, judgments, expenses, and
other losses recovered, incurred, filed, or entered thereon or in
connection therewith, exceed $1,000,000 in the aggregate, net of
income tax effect and such liability shall not exceed $25,000,000.
Indemnitees shall be obligated to exhaust all reasonably available
remedies as a condition to being indemnified hereunder but not as
a condition to giving notice pursuant to Sections 7.3 and 7.4. It
is agreed that the indemnification obligations of Sellers hereunder
shall be solely for the benefit of the Indemnitees and may not be
enforced by any insuror under any subrogation or similar agreement
or arrangement or by any governmental agency except as a receiver
for an Indemnitee.
7.3. Procedure. If any claim or demand shall be made
or liability asserted against any Indemnitee, or if any Litigation,
suit, action, or administrative or legal proceedings shall be
instituted or commenced in which any Indemnitee is involved or
shall be named as a defendant either individually or with others,
and if such Litigation, claim, demand, liability, suit, action, or
proceeding, if successfully maintained, will result in any
Indemnifying Losses as defined in Section 7.2, Fourth shall give
Sellers written notice thereof as soon as practicable but within 20
days (ten days in the case of legal process) after it acquires
knowledge thereof. If the Indemnifying Loss arises otherwise,
Fourth shall give notice to Sellers within 20 days of the discovery
of the basis therefor. If, within 20 days after the giving of such
notice, Fourth receives written notice from Sellers stating that
Sellers dispute or intend to defend against or prosecute, as the
case may be, such claim, demand, liability, suit, action, or
proceeding, then Sellers shall have the joint right to select
counsel of their choice and to dispute or defend against,
prosecute, or settle such claim at their expense, and the
Indemnitees shall fully cooperate with Sellers in such dispute,
prosecution, defense or settlement so long as Sellers are
conducting such dispute, defense, or prosecution diligently and in
good faith. If no such notice of intent to dispute or defend is
received by Fourth within the aforesaid 20-day period, of if such
diligent and good faith defense is not being, or ceases to be,
conducted, Fourth shall have the right, directly or through one or
more of the Indemnitees, to dispute and defend against the claim,
demand, or other liability at the cost and expense of Sellers, to
settle such claim, demand, or other liability, together with
interest or late charges thereon, and in either event to be
indemnified as provided in this Agreement so long as Fourth
conducts such defense diligently and in good faith. If any event
shall occur that would entitle Indemnitees to a right of
indemnification hereunder, any loss, damage, or expense subject to
indemnification shall be the after-tax net loss to the Indemnitees
(in excess of $1,000,000 but not to exceed $25,000,000, as provided
in the preceding section) after due allowance for the income tax
effect, if any, of amounts to be received by the Indemnitees
hereunder, insurance, or offsetting income or assets resulting
therefrom.
7.4. Survival of Representations and Warranties.
Notwithstanding any rule of law or provision of this Agreement to
the contrary, the representations and warranties of Sellers
contained in this Agreement shall survive the Closing and the
Purchase and the closing of the transactions described in this
Agreement; provided, however, that (except for the indemnification
obligations contained in Sections 7.6 and 7.7 hereof, as to which
there shall be no time limit) no claim for indemnification or
breach of warranty under this Agreement shall be valid unless an
Indemnitee shall have given written notice of its assertion or
claim to Seller:
(a) within three years from the Effective Time in
the case of a claim for breach of any representation or
warranty contained in Section 4.1.k of this Agreement;
(b) by the earlier of October 31, 1998 or 30 days
after the date on which the Internal Revenue Service
completes its examination of Fourth's 1994 federal income
tax return and gives Fourth written notice of any
proposed adjustments (provided that both such periods
shall be extended by a period of time equal to 30 days
plus the length of in each case any periods for which LSB
shall have agreed to a tolling of any limitation period
applicable to the assertion against LSB or any member of
the Group described in Section 4.1.k of any deficiency by
the Internal Revenue Service) in the case of a claim
under Section 7.5 of this Agreement; and
(c) within two years of the Effective Time in all
other cases.
7.5. Special Indemnification.
(a) Separate and apart from the indemnification
provisions in the preceding sections of this Article VII,
and not subject to the deductibility and maximum
liability provisions contained in Section 7.2, Sellers
jointly and severally agree to indemnify BANK IV and
Fourth from any reduction in the aggregate amount of the
Bank's net operating loss carryforward for federal income
tax purposes (to the extent an adjustment has not already
been made pursuant to Section 2.4(b)), below $64,000,000;
provided, however, that such reduction results from
either (i) a reduction required by final action related
to an audit or adjustment by the Internal Revenue Service
and made retroactive to the period prior to the Effective
Time or (ii) a reduction in the net operating loss
carryforward of the Bank at the Effective Time
attributable to the consolidated taxable income of LSB
(after taking into account the taxable income or loss of
each member of the consolidated group contained in the
consolidated return of LSB and taking into account the
allocations of consolidated income, gain, and loss
affecting such net operating loss carryforward),
including the effects of the sale of the Retained Assets
and Retained Corporations to Sellers and all
extraordinary items. The payment to be made by Sellers
shall be equal to the product of (a) the dollar amount of
the reduction required in (i) above and/or the reduction
determined in (ii) above, and (b) a fraction, the
numerator of which shall be $10,500,000, and the
denominator of which shall be $64,000,000. However, to
the extent that an adjustment merely postpones the
related tax benefit to BANK IV or Fourth to a later,
reasonably ascertainable period, then such adjustment
shall not be subject to this special indemnification.
(b) If there is an audit or similar inquiry of
the Internal Revenue Service of any tax return which may
have the effect of reducing the Bank's net operating loss
as of or for a period prior to the Closing, all parties
to this Agreement shall cooperate with each other as to
the determination of the adjustments under such audit,
shall make available to each other as may reasonably be
requested all information, records, and documents until
the expiration of any applicable statute of limitations
or extensions thereof.
(c) Sellers shall have the right and option,
exercisable at any time prior to the business day next
preceding the Effective Time, by giving written notice to
Fourth, to elect to have the Purchase Price reduced by
$600,000 in consideration of the termination of Section
7.5(a) of this Agreement, in which event the provisions
of Section 7.5(a) shall thereupon be of no further force
and effect.
7.6. Separate Indemnification for Environmental
Matters. Separate and apart from the indemnification provided in
the preceding sections of this Article VII, and not subject to the
$1,000,000 deductibility and $25,000,000 maximum liability
provisions contained in Section 7.2, Sellers shall be jointly and
severally liable for, and shall forever defend, save, indemnify,
and hold harmless Fourth, Bank, and BANK IV from and against, any
and all Environmental Liabilities that may be incurred or sustained
by, or rendered against Fourth, Bank, or BANK IV arising in any
manner out of the direct or indirect ownership or operation at any
time by the Bank or by any of its current or former Subsidiaries
of any current or former Non-Bank Facility (as hereinafter
defined). "Non-Bank Facility" means any interest in real property,
building, plant, structure, or equipment which is not (i) currently
or formerly owned or operated by the Bank in the ordinary course of
its banking business as a banking facility, (ii) the Equity Tower,
(iii) property located at Coffee Creek Road and Kelly Avenue,
Edmond, Oklahoma, (iv) an OREO Property, or (v) collateral held as
security for loans or participations.
7.7. Separate Indemnification for Barki Litigation,
COMAC, and 401(k) Plan. Separate and apart from the
indemnification provided in the preceding sections of this Article
VII, and not subject to the $1,000,000 deductibility and
$25,000,000 maximum liability provisions contained in Section 7.2,
Sellers shall be jointly severally liable for, and shall forever
defend, save, indemnify, and hold harmless Fourth, BANK IV, and
Bank from and against any and all losses, expenses (including
amounts reasonably paid in settlement), liabilities, costs,
penalties, damages, and judgments that may be incurred or sustained
by, or rendered against, Fourth, BANK IV, or Bank arising out of or
associated in any manner with (i) the United BankCard division
"frozen" 401(k) plan described in Section 4.1(m) of this Agreement,
(ii) Mai-Li Barki vs. Equity Bank for Savings, F.A. et al., Case
No. CJ-91-90852, filed in the District Court of Oklahoma County,
Oklahoma or otherwise out of the claims contained in such case, or
(iii) the pending Internal Revenue Service examination of COMAC
Financial Services Ltd Partnership described in Exhibit "K" to the
Disclosure Statement; provided, however, BANK IV shall be
responsible for the payment of one-half of the out-of-pocket
attorneys' fees and costs incurred in connection with the Barki
litigation. Sellers shall have the right to defend the Barki
action in accordance with the provisions of Section 7.2 of this
Agreement.
7.8. Director and Officer Indemnification. From and
after the Effective Time, Fourth shall indemnify, defend, and hold
harmless each person who is now, or has been at any time prior to
the date hereof or who becomes prior to the Effective Time, an
officer, director, or employee of any of the Corporations (the
"Bank Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorney's fees), liabilities, or
judgments or amounts that are paid in settlement (which settlement
shall require the prior written consent of Fourth, which consent
shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding, or investigation (each a "Claim")
in which a Bank Indemnified Party is, or is threatened to be made,
a party based in whole or in part on or arising in whole or in part
out of the fact that such person is or was a director, officer, or
employee of a Corporation if such Claim pertains to any matter or
fact arising, existing, or occurring prior to the Effective Time
(but excluding the transactions expressly contemplated by this
Agreement), regardless of whether such Claim is asserted or claimed
prior to, or at or after, the Effective Time (the "Indemnified
Liabilities") to the full extent required under applicable law in
effect as of the date hereof or as amended applicable to a time
prior to the Effective Time or as required under the Bank's charter
and bylaws (and Fourth shall pay expenses in advance of the final
disposition of any such action or proceeding to each Bank
Indemnified Party to the full extent permitted by applicable law
in effect as of the date hereof or as amended applicable to a time
prior to the Effective Time upon receipt of any undertaking
required by applicable law). Any Bank Indemnified Party wishing to
claim indemnification under this Section 7.8 upon learning of any
Claim, shall notify Fourth (but the failure so to notify Fourth
shall not relieve Fourth from any liability which it may have under
this Section 7.8 except to the extent such failure materially
prejudices Fourth) and shall deliver to Fourth copies of all demand
letters, notices, summonses, pleadings, and other documents which
such party may have received relating to such Claim. The
obligations of Fourth described in this Section 7.8 continue in
full force and effect, without any amendment thereto, for a period
of three years from the Effective Time; provided, however, that all
rights to indemnification in respect of any Claim asserted or made
within such period shall continue until the final disposition of
such Claim.
ARTICLE VIII
MISCELLANEOUS
8.1. Expenses. Whether or not the Purchase is effected
and whether or not this Agreement is terminated, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expense.
8.2. Notices. All notices or other communications
required or permitted hereunder shall be sufficiently given if
personally delivered or if sent by certified or registered mail,
postage prepaid, return receipt requested, addressed as follows:
(a) If to Fourth, addressed to Ronald L. Baldwin, Executive Vice
President, Post Office Box 2360, Tulsa, Oklahoma 74101-2360; and
(b) if to the Sellers, addressed to Tony M. Shelby, Senior Vice
President, Post Office Box 754, 16 South Pennsylvania, Oklahoma
City, Oklahoma 73107, or to such other person or such other address
as shall have been furnished in writing in the manner provided
herein for giving notice.
8.3. Time. Time is of the essence of this Agreement.
8.4. Law Governing. This Agreement shall, except to
the extent federal law is applicable, be construed in accordance
with and governed by the laws of the State of Kansas, without
regard to the principles of conflicts of laws thereof.
8.5. Entire Agreement; Amendment. This Agreement
contains and incorporates the entire agreement and understanding of
the parties hereto with respect to the subject matter hereof and
supersedes all prior negotiations, agreements, letters of intent,
and understandings. This Agreement may only be amended by an
instrument in writing duly executed by Fourth and Sellers and all
attempted oral waivers, modifications, and amendments shall be
ineffective.
8.6. Successors and Assigns. The rights and
obligations of the parties hereto shall inure to the benefit of and
shall be binding upon the successors and permitted assigns of each
of them; provided, however, that this Agreement or any of the
rights, interests, or obligations hereunder may not be assigned by
any of the parties hereto without the prior written consent of the
other parties hereto.
8.7. Cover, Table of Contents, and Headings. The
cover, table of contents, and the headings of the sections and
subsections of this Agreement are for convenience of reference only
and shall not be deemed to be a part hereof or thereof or taken
into account in construing this Agreement.
8.8. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original
but which together shall constitute but one agreement.
8.9. No Third Party Beneficiaries. Except as
specifically provided herein, nothing in this Agreement shall
entitle any person other than Sellers and Fourth to any claim,
cause of action, remedy, or right of any kind.
8.10. Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed.
FOURTH FINANCIAL CORPORATION
By
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Darrell G. Knudson,
Chairman of the Board
"Fourth"
PRIME FINANCIAL CORPORATION LSB INDUSTRIES, INC.
By By
------------------------- ------------------------
"Prime" "LSB"
"Sellers"