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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
May 26, 1994
Date of Report_________________________________
(Date of earliest event reported)
LSB INDUSTRIES, INC.
_________________________________________________
(Exact Name of Registrant as Specified in Its Charter)
Delaware 1-7677 73-1015226
_____________ _________ ____________
(State of (Commission (I.R.S. Employer
Incorporation) File No.) Identification No.)
16 South Pennsylvania, Oklahoma City, Oklahoma 73107
______________________________________________ _________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (405) 235-4546
______________
Item 2. Acquisition or Disposition of Assets.
On May 26, 1994, 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") consummated the sale by the Company, and the purchase by Fourth, of
all of the issued and outstanding shares of capital stock of Equity Bank for
Savings, F.A. ("Equity Bank"), pursuant to the terms of a Stock Purchase
Agreement, dated as of February 9, 1994 (the "Stock Purchase Agreement").
Equity Bank was a wholly-owned subsidiary of Prime, and Prime is a wholly-
owned subsidiary of LSB.
Equity Bank comprised LSB's Financial Services Business, which
offered retail banking services, mortgage, consumer and commercial lending,
and other related financial products and services through fifteen (15) branch
offices located in the Oklahoma City metropolitan area and western Oklahoma.
In addition, the Financial Services Business operated an Oklahoma-based credit
card division in order to complement its consumer lending activities.
The purchase price ("Purchase Price") paid by Fourth for Equity
Bank under the Stock Purchase Agreement at the closing was $92,055,850. The
exact amount of the Purchase price was determined at the closing based on the
following formula: (i) $44,646,387, representing the tangible book value of
Equity Bank (defined as the aggregate consolidated stockholder's equity of
Equity Bank, less the amounts in the accounts relating to purchased mortgage
servicing rights, goodwill, and United BankCard goodwill) at the closing, plus
(ii) $9.3 million for Equity Bank's credit card business, (iii) $509,925,
representing as of the closing (a) 1% of the aggregate of the unpaid principal
balance at Closing of Equity 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, (b) 6% of the aggregate
unpaid principal balance at closing of Equity 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 (c) 2% of the aggregate unpaid principal balance
at closing of Equity Bank's loans secured by variable rate mortages, excluding
loans originated after October 31, 1993; (iv) $9,657,336, representing the
unamortized discount on Equity Bank's mortgages included in (iii) (a), (b),
and (c) above; (v) $1,691,422, representing as of the closing (a) 0.65% of the
aggregate unpaid principal balance of loans serviced by Equity Bank prior to
March 1, 1993, on which Equity Bank performs mortgage servicing (other than
loans serviced for the account of Equity Bank), (b) 1% of such balance on such
loans serviced by Equity Bank that were originated after March 1, 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; (vi) $2,954,091,
representing an amount obtained by subtracting the "required reserve" (as
defined below) from Equity Bank's actual loan loss reserve account at the
Closing, with the "required reserve" meaning $2.6 million as adjusted by the
amount by which Equity 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, or
originating since October 31, 1993, and not reviewed in advance by Fourth;
provided, that no such change in the quality of a loan was included in the
calculation to the extent such change was reflected in the tangible book value
of Equity Bank at the closing or if such change was less than $25,000; (vii)
$2,259,359, representing the difference between the carrying value of Equity
Bank's time deposits and the aggregate value of such deposits after repricing
them to the Treasury yield curve at the Closing; (viii) $10.5 million for
Equity Bank's net operating loss carryforward; (ix) $11.0 million for Equity
Bank's deposit balances; and, (x) $1.4 million for certain of Equity Bank's
branches; less (xi) $1,862,670, representing the amount by which the aggregate
fair market value of Equity Bank's securities portfolio at the closing
differed from Equity Bank's book value of such portfolio at the Closing to the
extent not otherwise reflected in the calculations of the tangible book value
of Equity Bank.
Pursuant to the Stock Purchase Agreement, the Company purchased
from Equity Bank on May 25, 1994, those subsidiaries of Equity Bank ("Retained
Corporations") that hold any of the assets contributed by the Company and
several of its subsidiaries to a wholly-owned subsidiary of Equity Bank at the
time that the Company acquired Equity Bank in March, 1988 (the "Transferred
Assets"). The Company purchased such Retained Corporations for $67,421,363,
representing an amount equal to the Retained Corporations' carrying value of
the Transferred Assets at Closing. Under the Stock Purchase Agreement, the
Company further purchased from Equity 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 $13,967,500,
which amount is equal to Equity Bank's carrying value of such Equity Tower
Loan at the time of Closing; (ii) all other real estate owned by Equity Bank
as a result of foreclosure ("OREO") for $3,597,836, which amount is equal to
the carrying value thereof as shown on the books of Equity Bank at the
Closing, and (iii) certain loans in the principal amount of $1,213,723 owned
by Equity Bank that Equity has charged off or written down (the "Loans") for a
purchase price of $370,084, representing the net book value of each loan that
has been written down and $1.00 in the case of each loan that has been charged
off. In addition, pursuant to the Stock Purchase Agreement, the Company
further acquired from Equity Bank at the Closing all outstanding accounts
receivable owned by Equity Bank at the Closing ("Receivables") previously sold
by the Company and certain other subsidiaries of the Company to Equity Bank
under various purchase agreements, dated March 8, 1988, which purchase
agreements were approved by the appropriate regulatory authority at such time,
for the aggregate carrying value of such Receivables on the books of Equity
Bank as of the Closing equal to $6,966,174.
The Company also exercised its option to be released from its
obligations to indemnify Fourth regarding Equity Bank's net operating loss
carryovers by paying $600,000 to Fourth from the sale proceeds.
To assist the Company in the consummation of the transactions
described in the preceding paragraph, the Company obtained from Fourth, for
one day, financing in the amount of $67,421,363 to purchase the Retained
Corporations from Equity Bank, which financing was repaid together with
interest thereon on May 26, 1994. The Company paid $23,990,434 of the total
$24,901,539 paid by the Company to purchase the Equity Tower Loan, OREO
properties, the Loans, and the Receivables from the proceeds of the purchase
price received from Fourth to the extent of the amount of such proceeds. The
remaining amount paid by the Company for the Equity Loan, OREO properties, the
Loans and the Receivables in excess of the proceeds of the purchase price
received from Fourth was $911,105, which amount was paid from the Company's
working capital funds.
In addition to the foregoing, the Company purchased at Closing
from Bank IV Oklahoma, National Association, a subsidiary of Fourth ("Bank
IV"), loans in the orignal principal amount of approximately $4,600,000 for a
purchase price of $2,660,000 which purchase price was paid from the Company's
working capital funds. The Company is currently negotiating with Bank IV to
obtain financing on a short term basis to restore the $2,660,000 of working
capital which was utilized to purchase such loans.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired - Not applicable.
(b) Pro forma Financial Information. The following unaudited pro
forma financial information has been included as required by the rules of the
Securities and Exchange Commission and is provided for comparative purposes
only. The unaudited pro forma information presented is based upon, and should
be read in conjunction with, the historical financial statements of the
Company. The pro forma information presented does not purport to represent
the actual results which would have occurred if the transaction reported
herein had been consummated on the dates before the period indicated, nor is
it indicative of the operating results in any future period.
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited) March 31, 1994 P-2
Pro Forma Condensed Consolidated Statement of Income
(Unaudited), year ended December 31, 1993 P-3
Pro Forma Condensed Consolidated Statement of Income
(Unaudited), three months ended March 31, 1994 P-4
Pro Forma Condensed Consolidated Statement of Income
(Unaudited), three months ended March 31, 1993 P-5
Notes to Pro Forma Condensed Consolidated Financial
Statements (Unaudited) P-6
(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. The Stock Purchase Agreement is attached as Exhibit 2
to the Form 8-K, dated February 9, 1994, and is incorporated herein by
reference.
2.2 Second Supplemental Agreement, dated as of May 25, 1994,
among Fourth Financial Corporation, LSB Industries Inc., and Prime Financial
Corporation.
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: June 10, 1994 LSB INDUSTRIES, INC.
(Registrant)
By /s/ Tony M. Shelby
______________________
Tony M. Shelby
Senior Vice President and
Chief Financial Officer
The following unaudited Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1994, and the Pro Forma Condensed Consolidated Statements of Income
for the periods ended December 31, 1993, March 31, 1994, and March 31, 1993,
are presented to give effect to the sale of Equity Bank.
The pro forma adjustments reflected herein are based on available information
and certain assumptions that the Company's management believes are reasonable.
Pro forma adjustments made in the Pro Forma Condensed Consolidated Balance
Sheet assume that the sale of Equity Bank was consummated on March 31, 1994,
and do not reflect the impact of Equity Bank's historical operating results or
changes in other balance sheet amounts subsequent to March 31, 1994. The pro
forma adjustments related to the Pro Forma Condensed Consolidated Statements
of Income assume that the sale of Equity Bank was consummated on January 1,
1994 for the period ended March 31, 1994 and January 1, 1993 for the periods
ended March 31, 1993 and December 31, 1993.
The Pro Forma Condensed Consolidated Balance Sheet and Pro Forma Condensed
Consolidated Statements of Income are based on assumptions and approximations
and, therefore, do not reflect in precise numerical terms the impact of the
transaction on the historical financial statements. In addition, such pro
forma financial statements should not be used as a basis for forecasting the
future operations of the Company.
P-1
SECOND SUPPLEMENTAL AGREEMENT Exhibit 2.2
SECOND SUPPLEMENTAL AGREEMENT, dated as of May 25, 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, LSB, and Prime are parties to a Stock Purchase
Agreement, dated as of February 9, 1994, as supplemented by a Supplemental
Agreement (the "Supplemental Agreement"), dated as of May 20, 1994
(collectively the "Agreement"); and
WHEREAS, the parties desire to enter into this Second Supplemental
Agreement for the other purposes set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Defined Terms. All capitalized terms used herein shall have the
same meaning as in the Stock Purchase Agreement unless otherwise defined
herein.
2. Amendment to Schedule 1 to Supplemental Agreement. The parties
hereby agree that Schedule 1 to the Supplemental Agreement is hereby amended
to reduce the "Guarantied Amount" of the Loan loss premium for $2,600,000 by
the aggregate amount of the loan charge-offs being taken to reflect the amount
being paid by Prime Financial Corporation to BANK IV Oklahoma to purchase
certain loans currently owned by the Bank pursuant to a letter agreement of
even date between Prime and BANK IV and related Assignment of Loans. Although
the effect of such amendment would be to increase the purchase price payable
at the Closing, a decrease in the Bank's loan loss reserve in the same amount
is also required because of such charge-offs, resulting in no net change in
the final purchase price being effected by the amendment being made hereby.
3. 401(k) Plan. The parties hereby agree that Prime will assume
sponsorship of the United BankCard "frozen" 401(k) plan described in Section
4.1(m) of the Agreement (the "BankCard Loan") on May 25, 1994. As soon as
practicable following the Effective Time, Prime and LSB shall correct all plan
qualification defects, obtain the necessary or desirable Internal Revenue
Service ("IRS") approvals concerning said corrections (including, without
limitation, utilization of the IRS's CAP and VCR programs), and prepare a
request for a favorable determination letter from the IRS to the effect that
the BankCard Plan is a "qualified plan". Prior to filing any VCR, CAP, and/or
determination letter request with the IRS, Prime and LSB shall provide copies
of drafts of the proposed requests and other documents relating to the
BankCard Plan to Fourth and its representatives and allow Fourth and its
representatives a reasonable opportunity to review and approve such draft
documents. If (i) LSB and Prime receive favorable IRS approvals, and (ii)
Prime or LSB is unable to effect a payout of the assets of the BankCard Plan
to the plan participants, Fourth agrees to assume (or cause BANK IV to assume)
sponsorship of the BankCard Plan.
4. Purchase Price for Retained Assets. The parties hereby agree that
for purposes of Closing, the purchase price to be paid by Prime to the Bank
for the Retained Assets is as set forth on Schedule A hereto. The parties
further agree that appropriate post closing equitable adjustments will be made
to the purchase price for the Retained Assets to reflect any payments received
by the Bank prior to the Effective Time with respect to any of the Retained
Assets.
5. Ratification of Agreement. Except as expressly amended or
supplemented hereby, the Stock Purchase Agreement continues in effect.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Supplemental Agreement as of the 25th day of May, 1994.
FOURTH FINANCIAL CORPORATION
By /s/ Ronald Baldwin
___________________________
President
LSB INDUSTRIES, INC.
By /s/ Tony M. Shelby
___________________________
Vice President
PRIME FINANCIAL CORPORATION
By /s/ Tony M. Shelby
____________________________
Vice President
SCHEDULE A
Purchase Price for Retained Assets:
1. Assignment of Equity Tower loan $13,967,499.57
______________
2. Assignment of Receivables $ 6,966,173.58
______________
3. Assignment of OREO $ 3,597,835.65
______________
4. Assignment of loans, judgements
and other Charged Off Assets $ 370,084.27
______________
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TOTAL $24,901,539.07
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