SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 27, 1998
UNION BANKSHARES, LTD.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-21078 84-0986148
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(State or other jurisdiction (Commission (IRS Employee
of incorporation) File Number) Identification No.)
1825 Lawrence Street
Suite 444
Denver, Colorado 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 298-5352
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ITEM 5. OTHER EVENTS.
On August 27, 1998, Union Bankshares, Ltd., and its wholly-owned
subsidiary, Union Bank and Trust Company ("Union"), announced that Union had
entered into a definitive agreement to acquire Lakewood State Bank in a cash
merger transaction.
A Press Release with respect to this transaction is included as Exhibit
99.1 hereto and is incorporated herein in its entirety by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated August 27, 1998, among Union
Bank and Trust Company, LSB Acquisition Corp. and Lakewood State
Bank.
99.1 Press release dated August 27, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNION BANKSHARES, LTD.
(Registrant)
Date: August 31, 1998 By: /S/ BRUCE E. HALL
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Name: Bruce E. Hall
Title: Vice President, Secretary and Treasurer
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EXHIBIT INDEX
Exhibit
No. Description
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2.1 Agreement and Plan of Merger, dated August 27, 1998, among Union
Bank and Trust, LSB Acquisition Corp. and Lakewood State Bank.
99.1 Press release dated May 27, 1998
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AGREEMENT AND PLAN OF MERGER
BETWEEN
UNION BANK AND TRUST COMPANY,
LSB ACQUISITION CORP.
AND
LAKEWOOD STATE BANK
DATED: AUGUST 27, 1998
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ARTICLE 1 DEFINITIONS............................................................................1
ARTICLE 2 BASIC TRANSACTION......................................................................5
2.1 The Merger....................................................................5
2.2 The Closing...................................................................5
2.3 Actions at the Closing........................................................6
2.4 Effect of Merger..............................................................6
2.4.1 General...............................................................6
2.4.2 Articles of Incorporation.............................................6
2.4.3 Bylaws................................................................6
2.4.4 Directors and Officers................................................6
2.4.5 Conversion of Lakewood Shares.........................................6
2.4.6 Union Shares..........................................................7
2.4.7 Merger Subsidiary Shares..............................................7
2.5 Procedure for Payment of Merger Consideration.................................7
2.6 Closing of Transfer Records...................................................7
2.7 Tax Matters...................................................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF UNION................................................7
3.1 Organization..................................................................8
3.2 Authorization of Transaction..................................................8
3.3 Noncontravention..............................................................8
3.4 Brokers' Fees.................................................................8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
CONCERNING LAKEWOOD....................................................................8
4.1 Organization, Qualification, and Corporate Power..............................9
4.2 Capitalization................................................................9
4.3 Authorization of Transaction..................................................9
4.4 Noncontravention..............................................................9
4.5 Brokers' Fees................................................................10
4.6 Financial Statements.........................................................10
4.7 Subsequent Events; Corporate Transactions....................................11
4.8 Undisclosed Liabilities......................................................11
4.9 Legal Compliance.............................................................12
4.10 Tax Matters..................................................................12
4.11 Other Interests; Title to Assets.............................................13
4.12 Contracts....................................................................13
4.13 Powers of Attorney; Bank Accounts............................................14
4.14 Employees....................................................................14
4.15 ERISA........................................................................14
4.16 Environmental, Health, and Safety Matters....................................16
4.17 Litigation...................................................................17
4.18 Claims against Insurance.....................................................17
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4.19 Intellectual Property........................................................17
4.20 Transactions With Affiliates.................................................18
4.21 Call Reports.................................................................18
4.22 Reserve for Possible Credit Losses...........................................18
4.23 Loans, Leases and Discounts..................................................18
4.24 Examinations.................................................................19
4.25 Disclosure...................................................................19
ARTICLE 5 PRE-CLOSING COVENANTS.................................................................19
5.1 General......................................................................19
5.2 Notices and Consents.........................................................19
5.3 Regulatory Matters and Approvals.............................................19
5.4 Notices......................................................................20
5.5 Special Stockholder Meeting..................................................20
5.6 Environmental Analysis.......................................................20
5.7 Title to Real Property.......................................................20
5.8 Operation of Business........................................................20
5.9 Access to Information........................................................21
5.10 Right to Attend Meetings and Review Significant Forms........................22
5.11 Notice of Developments.......................................................22
5.12 Exclusivity..................................................................22
5.13 Information Statement........................................................22
ARTICLE 6 POST-CLOSING COVENANTS................................................................23
6.1 General......................................................................23
6.2 Litigation Support...........................................................23
ARTICLE 7 CONDITIONS TO OBLIGATION TO CLOSE.....................................................23
7.1 Conditions to Obligation of Union and Merger Subsidiary......................23
7.2 Conditions to Obligations of Lakewood........................................25
ARTICLE 8 SURVIVAL AND ESCROW...................................................................26
8.1 Delivery of Merger Consideration to the Escrow Agent.........................26
8.2 Survival of Representations..................................................26
8.3 Indemnity....................................................................26
8.4 Application by Union or Merger Subsidiary to
Escrow Agent for Payment of Claims...........................................27
8.5 Distribution of Deferred Merger Consideration
to the Lakewood Stockholders. ...............................................27
8.6 Unclaimed Funds..............................................................27
ARTICLE 9 TAX MATTERS...........................................................................27
9.1 Tax Periods Ending on or before the Closing Date.............................27
9.2 Tax Periods Beginning before and Ending after the
Closing Date.................................................................28
9.3 Cooperation on Tax Matters...................................................28
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9.4 Tax Sharing Agreements.......................................................29
9.5 Certain Taxes................................................................29
ARTICLE 10 TERMINATION...........................................................................29
10.1 Termination of Agreement.....................................................29
10.2 Effect of Termination........................................................30
ARTICLE 11 MISCELLANEOUS.........................................................................30
11.1 Confidentiality..............................................................30
11.2 No Third-Party Beneficiaries.................................................30
11.3 Entire Agreement.............................................................31
11.4 Succession and Assignment....................................................31
11.5 Counterparts.................................................................31
11.6 Headings.....................................................................31
11.7 Notices......................................................................31
11.8 Governing Law................................................................32
11.9 Amendments and Waivers.......................................................32
11.10 Severability.................................................................32
11.11 Expenses.....................................................................32
11.12 Construction.................................................................32
11.13 Incorporation of Exhibits, Annexes, and Schedules............................32
11.14 Specific Performance.........................................................32
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ATTACHMENTS
Exhibit A - Form of Articles of Merger
Exhibit B - Form of Release and Consent to Termination of
Stockholders' "S" Corporation Agreement
Exhibit C - Form of Tax Procedures Agreement
Exhibit D - Form of Voting Agreement
Exhibit E - List of Lakewood State Bank Stockholders and Ownership
Exhibit F - Form of Opinion of Lakewood State Bank Counsel to Union
and Merger Subsidiary
Exhibit G-1 - Form of Powers Employment Agreement
Exhibit G-2 - Form of Horton Employment Agreement
Exhibit H - Form of Shareholders Agreement
Exhibit I - Form of Escrow Agreement
Disclosure Schedules
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger Agreement (this "AGREEMENT") entered
into as of August 27, 1998, by and among Union Bank and Trust Company, a State
chartered commercial bank organized under the laws of the State of Colorado
("UNION"), LSB Acquisition Corp., a Colorado corporation and wholly-owned
subsidiary of Union ("MERGER SUBSIDIARY"), and Lakewood State Bank, a State
chartered commercial bank organized under the laws of the State of Colorado
("LAKEWOOD").
RECITALS:
WHEREAS, upon the terms and subject to the conditions of this Agreement,
Merger Subsidiary will merge with and into Lakewood with Lakewood surviving as a
wholly-owned subsidiary of Union (the "MERGER") followed immediately by the
merger of Lakewood with and into Union (the "RESULTING BANK MERGER");
WHEREAS, the Board of Directors of each of Union, Merger Subsidiary and
Lakewood has (a) determined that the Merger is consistent with, and in
furtherance of, the long-term business strategies and is fair to, and in the
best interest of, the stockholders of Union, Merger Subsidiary and Lakewood,
respectively, and has approved and adopted this Agreement and (b) has approved
the Merger and the transactions contemplated by this Agreement;
WHEREAS, the Board of Directors of each of Merger Subsidiary and
Lakewood has recommended approval and adoption of this Agreement and approval of
the Merger and the transactions contemplated by this Agreement by their
respective stockholders; and
WHEREAS, each of the holders of five percent or more of the outstanding
Lakewood Shares (as defined herein) (which in the aggregate represent more than
two-thirds of the outstanding Lakewood Shares) have entered into the Voting
Agreement, pursuant to which such holders have agreed to vote such shares in
favor of the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants in this Agreement, Union, Merger Subsidiary and Lakewood
(individually, a "PARTY" and collectively, the "PARTIES") agree as follows:
ARTICLE 1
DEFINITIONS
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
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"AFFILIATED GROUP" means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"AGREEMENT" means this Agreement and Plan of Merger.
"ARTICLES OF MERGER" means the articles of merger of Lakewood and Merger
Subsidiary, in form and substance as set forth in EXHIBIT A or equivalent
document to be filed with the Banking Board of the Colorado Division of Banking.
"CBCA" means the Colorado Business Corporations Act, as amended.
"CLOSING" has the meaning set forth in SECTION 2.2.
"CLOSING DATE" has meaning set forth in SECTION 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTRACTS" has the meaning set forth in SECTION 4.12.
"DISCLOSURE SCHEDULES" has the meaning set forth in ARTICLE 3.
"EFFECTIVE TIME" has the meaning set forth in SECTION 2.4.1.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" means each trade or business (whether or not
incorporated) that together with the Party would be deemed to be a "SINGLE
EMPLOYER" within the meaning of Section 4001(b)(1) of ERISA or subsections (b),
(c), (m) or (o) of Section 414 of the Code.
"ENVIRONMENTAL LAWS" means any federal, state and local energy, public
utility, health, safety and environmental laws, regulations, orders, permits,
licenses, approvals, ordinances and directives including the Clean Air Act, the
Clean Water Act, the Resources Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Occupational Health
and Safety Act, the Toxic Substances Control Act and any similar state or local
law.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GOVERNMENTAL AUTHORITY" means the United States of America, any state
or other political subdivision thereof, the Federal Reserve Bank of Kansas City,
the Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, the Colorado Division of Banking, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, or any arbitrator.
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"HORTON EMPLOYMENT AGREEMENT" means the Employment Agreement between the
Resulting Bank and Allen E. Horton in form and substance as set forth in EXHIBIT
G-2.
"INTELLECTUAL PROPERTY" means any and all of the following used by
Lakewood in connection with its business: (i) United States, international, and
foreign patents, patent applications and statutory invention registrations, (ii)
trademarks, service marks, trade dress, logos, trade names, corporate names, and
other source identifiers, (iii) copyrightable works, copyrights, whether or not
registered, and registrations and applications for registration thereof, (iv)
computer software, and (v) confidential and proprietary information, including
trade secrets and know-how.
"KNOWLEDGE" means a Person's knowledge after reasonable investigation,
including knowledge of a particular fact or matter that any director, officer or
employee employed by or serving a Person has or had.
"LAKEWOOD LOAN LOSS RESERVE" means the aggregate reserve for loan losses
of Lakewood determined in accordance with GAAP.
"LAKEWOOD NET WORTH" means the net worth of Lakewood determined in
accordance with GAAP, excluding gains or losses on securities sales.
"LAKEWOOD SHARE" means any share of the Common Stock of Lakewood.
"LAKEWOOD STOCKHOLDER" means any Person who or which holds any Lakewood
Shares.
"LAKEWOOD TRANSACTION COSTS" means all legal, accounting, tax,
consulting and financial advisory and other fees and expenses (including, but
not limited to, any transfer taxes, fees and expenses, and the cost of preparing
and delivering any notice, consent, authorization, permit, license, survey,
title policy or commitment) incurred by Lakewood or any Lakewood Stockholder in
connection with this Agreement or the transactions contemplated herein prior to
or on the Closing Date.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LICENSES" means all franchises, leases, permits, licenses and similar
authorizations of Governmental Authorities.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the Party's
business, prospects, financial condition, operations or results of operations,
including, but not limited to, any matter which, individually or in the
aggregate with all other matters, results, or would reasonably be expected to
result, in losses, liabilities, or obligations in excess of $100,000.
"MERGER" has the meaning set forth in the preface of this Agreement.
"MERGER CONSIDERATION" has the meaning set forth in SECTION 2.3.
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"MERGER SUBSIDIARY" has the meaning set forth in the preface of this
Agreement.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARENT" means Union Bankshares, Ltd., a Delaware corporation and the
sole stockholder of Union.
"PARTY" has the meaning set forth in the preface of this Agreement.
"PARTIES" has the meaning set forth in the preface to this Agreement.
"PENSION PLAN" means an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, tribal entity, or a governmental entity
(or any department, agency or political subdivision thereof).
"POWERS EMPLOYMENT AGREEMENT" means the Employment Agreement between the
Resulting Bank and Barbara J. Powers in form and substance as set forth in
EXHIBIT G.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"RELEASE AND TERMINATION AGREEMENT" means the Release and Consent to
Termination of Stockholders' "S" Corporation Agreement among Union, Merger
Subsidiary and each Lakewood Stockholder, in form and substance as set forth in
EXHIBIT B.
"REQUISITE LAKEWOOD STOCKHOLDER APPROVAL" means the affirmative vote of
the holders of two-thirds of Lakewood Shares in favor of this Agreement and the
Merger.
"RESULTING BANK" has the meaning set forth in SECTION 2.4.1.
"RESULTING BANK MERGER" has the meaning set forth in the preface of this
Agreement.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialman's,
and similar liens, (b) liens for taxes not
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yet due and payable or for taxes that the taxpayer is contesting in good faith
through appropriate proceedings, (c) purchase money liens and liens securing
rental payments under capital lease arrangements, and (d) other liens arising in
the Ordinary Course of Business and not incurred in connection with the
borrowing of money.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs, duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX PROCEDURES AGREEMENT" means the agreement among Union, Merger
Subsidiary and each Lakewood Stockholder, in form and substance as set forth in
EXHIBIT C.
"TAX RETURN" means any federal, state, local, or foreign return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
"TREASURY REGULATION" or "TREAS. REG." means the proposed, temporary,
and final regulations promulgated under the Code.
"VOTING AGREEMENT" means the voting agreement entered into by each of
the holders of five percent or more of the outstanding Lakewood Shares (which in
the aggregate represent more than two-thirds of the outstanding Lakewood Shares)
in the form attached hereto as EXHIBIT D.
"WELFARE PLAN" means an "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA).
ARTICLE 2
BASIC TRANSACTION
2.1 THE MERGER. On and subject to the terms and conditions of this
Agreement, the Parties shall consummate the Merger at the Effective Time.
2.2 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Davis, Graham &
Stubbs LLP in Denver, Colorado, commencing at 9:00 a.m., local time, or at such
other place and time as is agreed upon by the Parties, as soon as practicable
but in no event later than five business days following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contem-
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plated hereby (other than conditions with respect to actions the respective
Parties will take at the Closing itself) or such other date as the Parties may
mutually determine (the "CLOSING DATE").
2.3 ACTIONS AT THE CLOSING. At the Closing, (a) Lakewood will deliver to
Union and Merger Subsidiary the various certificates, instruments, and documents
referred to in SECTION 7.1, (b) Union and Merger Subsidiary will deliver to
Lakewood the various certificates, instruments, and documents referred to in
SECTION 7.2, (c) Union, Merger Subsidiary and Lakewood will file this Agreement
with the Banking Board of the Colorado Division of Banking, (d) Union will pay
to the Lakewood Stockholders the Merger Consideration (as defined) in accordance
with SECTION 2.4.5, and (e) Union will take such steps necessary to consummate
the Resulting Bank Merger.
The Merger Consideration shall be allocated among the Lakewood
Stockholders in proportion to their respective holdings of the Lakewood Shares
as set forth in EXHIBIT E.
2.4 EFFECT OF MERGER.
2.4.1 GENERAL. The Merger shall become effective (the "EFFECTIVE
TIME") immediately following receipt of all approvals from any and all
Governmental Authorities having jurisdiction over the transactions contemplated
by this Agreement and the expiration of any waiting or similar period required
by applicable law, or such other date as the parties hereto may mutually agree,
and upon the filing of this Agreement, together with certified copies of
resolutions of the shareholders of Merger Subsidiary and Lakewood and, if
required, Union, approving this Agreement. The certificate of merger to be
issued by the Banking Board of the Colorado Division of Banking evidencing the
merger of Merger Subsidiary with and into Lakewood and Lakewood with and into
Union shall provide that Union is the resulting bank (the "RESULTING BANK"). The
Merger and the Resulting Bank Merger shall have the effect set forth in Section
11-4-102 of the Colorado Revised Statutes. The Resulting Bank may, at any time
after the Effective Time, take any action (including executing and delivering
any document) in the name and on behalf of either Union, Merger Subsidiary or
Lakewood in order to carry out and effectuate the transactions contemplated by
this Agreement.
2.4.2 ARTICLES OF INCORPORATION. The articles of incorporation of
Union at and as of the Effective Time shall be the articles of incorporation of
the Resulting Bank.
2.4.3 BYLAWS. The bylaws of Union at and as of the Effective Time
shall be the bylaws of the Resulting Bank.
2.4.4 DIRECTORS AND OFFICERS. The directors and officers of Union
in office at and as of the Effective Time shall be the directors and officers of
the Resulting Bank (retaining their respective positions and terms of office).
2.4.5 CONVERSION OF LAKEWOOD SHARES. At and as of the Effective
Time, (a) each Lakewood Share (other than any share owned by Union, if any, and
any share as to which the stockholder has exercised its dissenter's rights
pursuant to Section 11-4-103 of the Colorado Revised Statutes (a "DISSENTING
SHARE")) shall be converted into the right to receive $83.50, less such
stockholder's pro rata share of (i) the Lakewood Transaction Costs and (ii) the
$200,000 fee payable
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to Barbara J. Powers as contemplated by Section 4.5 (the "MERGER
CONSIDERATION"), and provided that $835,000 shall be placed into escrow as
contemplated by SECTION 8.1 hereof; (b) each Dissenting Share shall be converted
into the right to receive payment from the Resulting Bank with respect thereto
in accordance with the provisions of Section 11-4-103 of the Colorado Revised
Statutes; (c) each Lakewood Share that is owned by Lakewood as treasury stock
shall be canceled and retired and shall cease to exist and no consideration
shall be delivered in exchange therefor; and (d) each Union-owned Lakewood
Share, if any, shall be canceled. No Lakewood Share shall be deemed to be
outstanding or to have any rights other than those set forth in this SECTION
2.4.5 after the Effective Time.
2.4.6 UNION SHARES. Each share of capital stock of Union issued
and outstanding at and as of the Effective Time shall remain outstanding and
shall be unchanged at and after the Merger and immediately following the
Effective Time shall constitute all of the issued and outstanding Common Stock
of the Resulting Bank.
2.4.7 MERGER SUBSIDIARY SHARES. Each share of capital stock of
Merger Subsidiary issued and outstanding at and as of the Effective Time will be
canceled.
2.5 PROCEDURE FOR PAYMENT OF MERGER CONSIDERATION. At the Effective
Time, (a) Union will furnish to each of the Lakewood Stockholders such Lakewood
Stockholder's pro-rata share of the Merger Consideration by cashier's check and
(b) Lakewood will cause each Lakewood Stockholder to surrender the
certificate(s) which represented such holder's Lakewood Shares in exchange for
the share of the Merger Consideration to which such holder is entitled.
2.6 CLOSING OF TRANSFER RECORDS. After the Effective Time, transfers of
Lakewood Shares outstanding prior to the Effective Time shall not be made on the
stock transfer books of the Resulting Bank.
2.7 TAX MATTERS. All parties have had this Agreement and Plan of Merger
and its ancillary schedules reviewed by tax advisers of its own choice and all
parties understand the tax effects of this Agreement and Plan of Merger and its
ancillary schedules and all parties waive any right to assert a claim against
another party as a result of any tax effects generated by the implementation of
the Agreement and Plan of Merger and the ancillary schedules either at the time
of closing or any time thereafter.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF UNION
AND MERGER SUBSIDIARY
Union and Merger Subsidiary represent and warrant to Lakewood that the
statements contained in this ARTICLE 3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this ARTICLE 3). The disclosure schedules (the
"DISCLOSURE SCHEDULES") contemplated by this ARTICLE 3 and ARTICLE 4 will be
arranged to correspond to the numbered and lettered sections contained in this
ARTICLE 3 and ARTICLE 4 and will be delivered concurrently with the execution of
this Agreement.
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3.1 ORGANIZATION. Each of Union and Merger Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Colorado. Each of Union and Merger Subsidiary is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the failure to be so
qualified would not have a Material Adverse Effect on Union.
3.2 AUTHORIZATION OF TRANSACTION. (a) Each of Union and Merger
Subsidiary has full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder, (b) the execution, delivery
and performance of this Agreement, and the consummation of the transactions
contemplated hereby, by Union and Merger Subsidiary have been duly and validly
authorized by all requisite corporate action, and will not require for their
validity any authorization, consent, approval, or other action by the
stockholders of Union or Merger Subsidiary, and (c) this Agreement constitutes
the valid and legally binding obligation of Union and Merger Subsidiary,
enforceable against each of them in accordance with its terms and conditions,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.
3.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Union or Merger Subsidiary is subject or
any provision of the articles of incorporation or bylaws of Union or Merger
Subsidiary, or (b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Union or Merger Subsidiary is a party or by which it is bound or to which any of
its assets is subject, except in each case for such violations, conflicts,
breaches or defaults that do not have a Material Adverse Effect on Union. Other
than in connection with the provisions of the CBCA, the Securities Act,
applicable state securities laws, Article 11, Chapter 4 of the Colorado Revised
Statutes, the Federal Reserve Act and the Federal Deposit Insurance Act, no
notice to, filing with, or authorization, consent, or approval of any government
or governmental agency is required in order for the Parties to consummate the
transactions contemplated by this Agreement.
3.4 BROKERS' FEES. Neither Union nor Merger Subsidiary has any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which any
Lakewood Stockholder could become liable or obligated.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES CONCERNING LAKEWOOD
Lakewood represents and warrants to Union and Merger Subsidiary that the
statements contained in this ARTICLE 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this ARTICLE 4).
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4.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Lakewood is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Colorado. Lakewood is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the failure to be so qualified would not
have a Material Adverse Effect on Lakewood. Lakewood has the requisite power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it, except for such licenses, permits and authorizations, the
failure of which to have would not have a Material Adverse Effect on Lakewood.
DISCLOSURE SCHEDULE 4.1 lists the directors and officers of Lakewood. Lakewood
has delivered to Union correct and complete copies of the articles of
incorporation and bylaws of Lakewood (as amended to date). The minute books
(containing the records of meetings of the stockholders, the board of directors,
and any committees of the board of directors), the stock certificate books, and
the stock record books of Lakewood are true, correct and complete. Lakewood is
not in default under or in violation of any provision of its articles of
incorporation or bylaws.
4.2 CAPITALIZATION. The authorized capital stock of Lakewood consists of
100,000 Lakewood Shares, all of which are issued and outstanding. No Lakewood
Shares are held in treasury. All of the issued and outstanding Lakewood Shares
have been duly authorized, are validly issued, fully paid, and nonassessable,
and are held of record by the respective Lakewood Stockholders as set forth in
EXHIBIT E. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require Lakewood to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Lakewood. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of Lakewood.
4.3 AUTHORIZATION OF TRANSACTION. Lakewood has full power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby by Lakewood have been duly and validly
authorized by all requisite corporate action, and do not require for their
validity any authorization, consent, approval, exemption or other action, except
for the approval of the Lakewood Stockholders required by Section 11-4-105 of
the Colorado Revised Statutes, Article 11, Chapter 4 of the Colorado Revised
Statutes, the Federal Reserve Act and the Federal Deposit Insurance Act. This
Agreement constitutes the valid and legally binding obligation of Lakewood
enforceable against it in accordance with its terms and conditions, subject, as
to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
4.4 NONCONTRAVENTION. Except as set forth in DISCLOSURE SCHEDULE 4.4
hereto, neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (a) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Lakewood is subject or any provision of the articles of
incorporation or bylaws of Lakewood or (b) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, concession, joint
venture
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agreement, partnership agreement, association contract or other arrangement to
which Lakewood is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any Security Interest upon any of its
assets). Except as set forth in DISCLOSURE SCHEDULE 4.4 hereto, Lakewood does
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
4.5 BROKERS' FEES. Except for the $200,000 fee payable to Barbara J.
Powers, which will be paid by the Lakewood Stockholders at Closing, Lakewood
does not have any Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement.
4.6 FINANCIAL STATEMENTS. The following Financial Statements (as
hereinafter defined) of Lakewood have been delivered or will be delivered by
Lakewood to Union:
(a) audited balance sheets of Lakewood, dated as of December 31,
1997, December 31, 1996 and December 31, 1995 and an unaudited balance sheet of
Lakewood, dated as of March 31, 1998 (together, the "BALANCE SHEETS");
(b) audited income statements for the twelve month periods ending
December 31, 1997 and December 31, 1996 and an unaudited income statement for
the three month period ending March 31, 1998 (together, the "INCOME
STATEMENTS");
(c) audited statements of stockholders' equity for the twelve
month periods ending December 31, 1997 and December 31, 1996 and an unaudited
statement of stockholders' equity for the three month period ending March 31,
1998 (together, the "STATEMENT OF STOCKHOLDERS' EQUITY").
Together, the Balance Sheets, Income Statements and Statements of Stockholders'
Equity and the notes thereto shall be referred to herein as the "FINANCIAL
STATEMENTS." The Financial Statements have been prepared from the books and
records of Lakewood (which are themselves complete and accurate) in accordance
with GAAP consistently applied, and maintained throughout the periods indicated,
and fairly present the financial condition of Lakewood as at their respective
dates and the results of operations for the periods covered thereby, including
but not limited to, reflecting all reserves necessary to correctly present the
appropriate value of assets and all accruals necessary to record all contingent
and accrued liabilities.
Except as noted on DISCLOSURE SCHEDULE 4.6 hereof, such Income
Statements do not (or will not) contain any items of special or non-recurring
income or any other income not earned in the ordinary course of business except
as expressly specified therein, and such Financial Statements include or will
include all adjustments (including all normal recurring accruals for unusual or
non-recurring items) considered necessary for a fair presentation, and no
adjustments or restatements are or will be necessary in respect of any items of
an unusual or non-recurring nature, except as expressly specified therein. There
has been no change in Lakewood's method of accounting or keeping of its books of
account or accounting practices for the three-year period ended Closing Date.
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4.7 SUBSEQUENT EVENTS; CORPORATE TRANSACTIONS.
(a) Except as set forth in DISCLOSURE SCHEDULE 4.7, since
December 31, 1997, there has not been any material adverse change in the
business, prospects, financial condition, operations or results of operations of
Lakewood.
(b) Since December 31, 1997, and except as set forth in
DISCLOSURE SCHEDULE 4.7.
(i) Lakewood has not sold, leased, transferred, or
assigned any assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
(ii) except for this Agreement, Lakewood has not entered
into any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) outside the
Ordinary Course of Business;
(iii) Lakewood has not accelerated, terminated or
canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) to which
Lakewood is a party or by which it is bound;
(iv) Lakewood has not imposed any Security Interest upon
any of its assets, tangible or intangible;
(v) Lakewood has not made any capital expenditure (or
series of related capital expenditures) outside the Ordinary
Course of Business;
(vi) Lakewood has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any
other Person (or series of related capital investments, loans,
and acquisitions) outside the Ordinary Course of Business;
(vii) Lakewood has not issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation,
other than deposits in the ordinary course of business;
(viii) there has been no change made or authorized in the
articles of incorporation or bylaws of Lakewood;
(ix) Except as contemplated in Section 5.8.3 hereof,
Lakewood has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether
in cash or in kind) or redeemed, purchased, or otherwise acquired
any of its capital stock;
(x) Lakewood has not committed to any of the foregoing.
4.8 UNDISCLOSED LIABILITIES. Lakewood does not have any Liability,
except for (a) Liabilities reflected in the Lakewood Financial Statements
(including any notes thereto), (b) Liabilities which have arisen after December
31, 1997, in the Ordinary Course of Business
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(none of which is a liability resulting from breach of contract, breach of
warrant, tort, infringement, misappropriation, claim or lawsuit); (c)
Liabilities set forth in the Disclosure Schedules (including the liabilities
described on Disclosure Schedule 4.10(c) ) hereto.
4.9 LEGAL COMPLIANCE. Lakewood has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of any Governmental Authority, except
for such matters as would not have a Material Adverse Effect on Lakewood.
4.10 TAX MATTERS.
(a) Lakewood has filed all federal, state and local Tax Returns
that it was required to file. All such Tax Returns were correct and complete in
all material respects. All Taxes owed by Lakewood shown on any Tax Return have
been paid. Lakewood currently is not the beneficiary of any extension of time
within which to file any Tax Return. Lakewood has not received written notice
from an authority in a jurisdiction where Lakewood does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of Lakewood that arose in connection
with any failure (or alleged failure) to pay any Tax.
(b) Lakewood has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owed to any employee,
independent contractor, creditor, stockholder, or other third party and has
complied with all information reporting requirements with respect thereto.
(c) Lakewood has no reason to believe that additional Taxes will
be assessed for any period for which Tax Returns have been filed. Except as
disclosed in DISCLOSURE SCHEDULE 4.10(C), there is no dispute or claim
concerning any Tax Liability of Lakewood either (i) claimed or raised by any
authority in writing or (ii) as to which Lakewood has Knowledge. DISCLOSURE
SCHEDULE 4.10(C) lists all Tax Returns filed in the United States with respect
to Lakewood for taxable periods ended on or after December 31, 1991 and
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. Lakewood has delivered to Union
correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by
Lakewood since December 31, 1991.
(d) Lakewood has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) Lakewood has not filed a consent under Code Section 341(f)
concerning collapsible corporations.
(f) Since January 1, 1999, Lakewood has qualified as a "small
business corporation" within the meaning of Section 1362(b)(1) of the Code and
has had in effect a valid and binding election to be treated as an "S
Corporation" (within the meaning of Section 1361(a)(1) of the Code) for federal
income tax purposes.
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(g) No items of income attributable to transactions occurring on
or before the Closing Date will be required to be included in taxable income by
Lakewood in a taxable year ending after the Closing Date by reason of Lakewood
reporting income on the installment sales method of accounting, the cash method
of accounting or any other method of accounting.
(h) Lakewood is not currently, and has not been, a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii).
(i) Lakewood has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662.
(j) Lakewood is not a party to any Tax allocation or sharing
agreement.
(k) Lakewood (i) has not been a member of an Affiliated Group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was Lakewood and other than a group of which the common parent
was Thirty Second Avenue Corporation, which corporation was dissolved in 1994)
and (ii) does not have any Liability for the Taxes of any Person (other than
Lakewood) under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
(l) The unpaid Taxes of Lakewood (i) did not, as of December 31,
1997, exceed the reserve for Tax Liability set forth on the face of the Lakewood
Financial Statements (rather than in any notes thereto) and (ii) do not exceed
that reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Lakewood in filing their Tax
Returns.
4.11 OTHER INTERESTS; TITLE TO ASSETS. Lakewood does not own, directly
or indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or entity. Except as
set forth on Disclosure Schedule 4.11, Lakewood has good and marketable title
to, or a valid leasehold interest in, the properties and assets used by it,
located on its premises, or shown on the Lakewood Financial Statements or
acquired after the date thereof, free and clear of all Security Interests.
4.12 CONTRACTS. DISCLOSURE SCHEDULE 4.12 contains a list of all
contracts and other agreements to which Lakewood is a party (together, the
"CONTRACTS"). Lakewood has delivered to Union a correct and complete copy of
each written agreement listed in DISCLOSURE SCHEDULE 4.12 (as amended to date)
and a written summary setting forth the terms and conditions of each oral
agreement referred to in DISCLOSURE SCHEDULE 4.12. With respect to each such
agreement:
(a) the agreement is legal, valid, binding, enforceable, and
in full force and effect;
(b) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
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(c) no party is in breach or default, and no event has occurred
which, with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the agreement; and
(d) no party has repudiated any provision of the agreement.
4.13 POWERS OF ATTORNEY; BANK ACCOUNTS. DISCLOSURE SCHEDULE 4.13 hereto
sets forth a list of all outstanding powers of attorney executed on behalf of
Lakewood and Lakewood's bank accounts, safe deposits and lock boxes at other
institutions (designating each authorized signatory with respect thereto).
4.14 EMPLOYEES. Lakewood is not a party to or bound by any collective
bargaining agreement, nor has Lakewood experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes.
Lakewood has not committed any unfair labor practice. Lakewood has complied with
all applicable laws of all Government Authorities thereof relating to employment
matters, including employee benefit matters. No executive or key employee of
Lakewood or any group of employees of Lakewood has any plans to terminate
employment with Lakewood.
4.15 ERISA.
(a) DISCLOSURE SCHEDULE 4.15 contains a list and brief
description of each Pension Plan, Welfare Plan and each other written plan,
arrangement or policy relating to stock options, stock purchases, compensation,
deferred compensation, severance, fringe benefits or other employee benefits
(other than the employment agreements listed on DISCLOSURE SCHEDULE 4.15), in
each case maintained or contributed to, or required to be maintained or
contributed to, by Lakewood or any Lakewood ERISA Affiliate (each, together with
Lakewood, a "Commonly Controlled Entity") for the benefit of any present or
former officers, employees, agents, directors or independent contractors of
Lakewood (all the foregoing being herein called "Benefit Plans"). Lakewood has
delivered to Union true, complete and correct copies of (1) each Benefit Plan,
(2) the most recent annual report on Form 5500 filed with the Internal Revenue
Service with respect to each Benefit Plan (if any such report was required by
applicable law), (3) the most recent summary plan description (or similar
document) for each Benefit Plan for which such a summary plan description is
required by applicable law or was otherwise provided to plan participants or
beneficiaries and (4) each trust agreement and insurance or annuity contract
relating to any Benefit Plan. To the knowledge of Lakewood, each such Form 5500
and each such summary plan description (or similar document) was and is as of
the date hereof true, complete and correct in all material respects, except for
those forms and descriptions that would not reasonably be expected to have a
Material Adverse Effect.
(b) Each Benefit Plan has been administered in all material
respects in accordance with its terms and in compliance in all material respects
with the applicable provisions of ERISA and the Code. There are no
investigations by any governmental agency, termination proceedings or other
claims (except claims for benefits payable in the normal operation of the
Benefit Plans), suits or proceedings against or involving any Benefit Plan or
asserting any rights to or claims for benefits under any Benefit Plan that would
reasonably be expected to cause a Material Adverse Effect.
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(c) None of the Benefit Plans (i) constitutes a "multiemployer
plan," as defined in Section 3(37) of ERISA or (ii) has been or is subject to
Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code.
(d) All contributions to, and benefit payments from, the Benefit
Plans required to be made in accordance with the terms of the Benefit Plans have
been timely made. All such contributions to, and payments from, the Benefit
Plans, except those payments to be made from any trust qualified under Section
501(c) of the Code, for any period ending before the Effective Time that are not
yet, but will be, required to be made, will be properly accrued and reflected in
the Financial Statements.
(e) Each Benefit Plan that is a Pension Plan (hereinafter a
"Lakewood Pension Plan") that is intended to be a tax-qualified plan has been
the subject of a determination letter from the Internal Revenue Service to the
effect that such Lakewood Pension Plan is qualified and exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code; no
such determination letter has been revoked and, to the knowledge of Lakewood,
revocation has not been threatened; to the knowledge of Lakewood, no
circumstances exist that would adversely affect the tax-qualification of such
Lakewood Pension Plan; and such Lakewood Pension Plan has not been amended since
the effective date of its most recent determination letter in any respect that
might materially adversely affect its qualification, materially increase its
cost or require security under Section 307 of ERISA. Lakewood has delivered to
Union a copy of the most recent determination letter received with respect to
each Lakewood Pension Plan for which such a letter has been issued; a copy of
any pending application for a determination letter and a list of all Lakewood
Pension Plan amendments as to which a favorable determination letter has not yet
been received.
(f) No "prohibited transaction" (as defined in Section 4975 of
the Code or Section 406 of ERISA) has occurred that involves the assets of any
Benefit Plan; (2) no prohibited transaction has occurred that could subject
Lakewood, any of its employees or a trustee, administrator or other fiduciary of
any trust created under any Benefit Plan to the tax or sanctions on prohibited
transactions imposed by Section 4975 of the Code or Title I of ERISA; and (3)
neither Lakewood nor any trustee, administrator or other fiduciary of any
Benefit Plan nor any agent of any of the foregoing has engaged in any
transaction or acted in a manner that could, or has failed to act so as to,
subject Lakewood or any trustee, administrator or other fiduciary to liability
for breach of fiduciary duty under ERISA other than for liabilities that would
not reasonably be expected to have a Material Adverse Effect.
(g) The list of Welfare Plans in DISCLOSURE SCHEDULE 4.15
discloses whether each Welfare Plan is (i) unfunded, (ii) funded through a
"welfare benefit fund," as such term is defined in Section 419(e) of the Code,
or other funding mechanism or (iii) insured. Each such Welfare Plan may be
amended or terminated without Lakewood suffering a Material Adverse Effect at
any time after the Effective Time. Lakewood complies in all material respects
with the applicable requirements of Section 4980B(f) of the Code with respect to
each Benefit Plan that is a group health plan, as such term is defined in
Section 5000(b)(1) of the Code.
(h) No compensation payable by Lakewood to any of its employees,
officers or directors under any existing contract, Benefit Plan or other
employment arrangement or
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understanding (including by reason of the transactions contemplated hereby) will
be subject to disallowance under Section 162(m) of the Code.
(i) Any amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of Lakewood
or any of its affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or Benefit
Plan currently in effect would not be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(l) of the Code). DISCLOSURE
SCHEDULE 4.15 sets forth (i) the maximum amount that could be paid to each
executive officer of Lakewood as a result of the transactions contemplated by
this Agreement under all employment, severance and termination agreements, other
compensation arrangements and Benefit Plans currently in effect and (ii) the
"base amount" (as such term is defined in Section 280G(b)(3) of the Code) for
each such executive officer calculated as of the date of this Agreement.
(j) Except as disclosed on DISCLOSURE SCHEDULE 4.15, with respect
to any Employee, Lakewood has no obligation to contribute to (or any other
liability with respect to) any funded or unfunded Welfare Plan, whether or not
terminated, which provides medical, health, life insurance or other welfare-type
benefits for current or future retirees or current, future or former Employees
(including their dependents and spouses) except for limited continued medical
benefit coverage for former Employees, their spouses and their other dependents
as required to be provided under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA"), and Lakewood is in compliance in all material
respects with the continued medical and other welfare benefit coverage
requirements of COBRA and all other applicable laws.
4.16 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(a) No Property of Lakewood nor the operations conducted thereon
violate any Environmental Laws, nor are there any conditions existing on any
such Property or resulting from operations conducted thereon that may give rise
to any on-site or off-site remedial obligations under any Environmental Law.
(b) No Property of Lakewood nor the operations currently
conducted thereon or by any prior owner or operator of such Property or
operation, are subject to any existing, pending or, to the best of Lakewood's
knowledge, threatened action, suit, investigation, inquiry or proceeding
relating to human health or environmental quality or any Environmental Laws by
or before any court or other Governmental Authority.
(c) All notices and Licenses, if any, required to be obtained or
filed in connection with the operation or use of any and all Property of
Lakewood under Environmental Laws have been duly obtained or filed, and Lakewood
is in compliance with the terms and conditions of all such notices and Licenses.
(d) Lakewood has not (and to the best Knowledge of Lakewood, nor
has any other Person) filed any notice under any Environmental Laws indicating
that Lakewood is responsible for the release into the environment, or the
improper storage, of any hazardous or toxic
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waste, substance or constituent or that any such waste, substance or constituent
has been released, or is improperly stored, upon any Property of Lakewood.
(e) Lakewood does not otherwise have any material contingent
liability in connection with the release into the environment, or the improper
storage of any such waste, substance or constituent.
4.17 LITIGATION. Except as set forth in DISCLOSURE SCHEDULE 4.17 (all of
which disclosed items are either adequately covered by insurance or reserved on
the Financial Statements), there are no actions, suits, proceedings or claims
against Lakewood or any of its properties pending or, to the Knowledge of
Lakewood, threatened, before any court or by or before any governmental
instrumentality, in which there is a reasonable likelihood of an adverse
determination.
4.18 CLAIMS AGAINST INSURANCE. Lakewood does not have any Liability for
which any claim may be made against the Lakewood's property and casualty
insurance and no event or circumstance has occurred or arisen that is likely to
result in such a claim.
4.19 INTELLECTUAL PROPERTY.
(a) DISCLOSURE SCHEDULE 4.19 sets forth a true and complete list
of all Intellectual Property owned, licensed or leased by Lakewood material to
the continued operation of Lakewood's business in a manner consistent with past
practice (the "INTELLECTUAL PROPERTY").
(b) Except for such infringements as could not reasonably be
expected to have a Material Adverse Effect on Lakewood, to the Knowledge of
Lakewood the Intellectual Property does not infringe upon any patent, trademark,
copyright or other rights of any third party, and no claim has been asserted to
Lakewood that the use of such Intellectual Property infringes or may infringe
upon any patent, trademark, copyright or other rights of any third party.
(c) Except as could not be reasonably be expected to have a
Material Adverse Effect on Lakewood, with respect to each item of Intellectual
Property, Lakewood is the owner or lessor of the entire right, title and
interest in and to such Intellectual Property and is entitled to use such
Intellectual Property in the continued operation of its business in a manner
consistent with past practice.
(d) Other than prepackaged and over-the-counter software, no
licenses or sublicenses pertaining to the Intellectual Property have been
entered into by Lakewood.
(e) Except as could not reasonably be expected to have a Material
Adverse Effect on Lakewood, to the Knowledge of Lakewood the Intellectual
Property owned by Lakewood is valid and enforceable, and has not been adjudged
invalid or unenforceable in whole or part.
(f) Except as could not reasonably be expected to have a Material
Adverse Effect on Lakewood, to the Knowledge of Lakewood no person is engaging
in any activity that infringes upon the Intellectual Property. Except as could
not reasonably be expected to have a Material Adverse Effect on Lakewood, no
actions, suits, proceedings or claims have been asserted or are pending or, to
Lakewood's Knowledge, threatened against Lakewood, and to Lakewood's
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Knowledge no fact or event exists which could reasonably be likely to give rise
to any action, suit, proceeding or claim, which (i) are based upon or
challenging or seeking to deny or restrict the use by Lakewood of any
Intellectual Property, or (ii) allege that any services provided by Lakewood,
infringe upon any patent, trademark, copyright or any other right of any third
party. Except as could not reasonably be expected to have a Material Adverse
Effect on Lakewood, the consummation of the transactions contemplated by this
Agreement will not result in the termination or impairment of any of the
Intellectual Property.
(g) Except as could not reasonably be expected to have a Material
Adverse Effect on Lakewood, with respect to any Intellectual Property consisting
of software, to the Knowledge of Lakewood (i) such software is free of viruses,
worms, trojan horses and other known contaminants, and such software does not
contain a feature to disable the operation of all or any part of such software
that arises automatically, through passage of time, or through any act of a user
of such software, (ii) such software does not contain any bugs, errors, or
problems that materially disrupt its operation or have a material adverse impact
on the operation of other software programs or operating systems, (iii) the
source code of such software contains comments regarding operation and revision
history in accordance with standard industry practices, (iv) all source codes,
software tools, library functions and other software that, with respect to the
Intellectual Property, is material to Lakewood or that is required to operate or
modify such software is, and after consummation of the transactions contemplated
hereby will remain, in the possession of Lakewood, and (v) Lakewood has the
right, with respect to the Intellectual Property, to use such source code,
software tools, library functions, and other software to the extent necessary to
conduct and to continue to conduct its business in a manner consistent with past
practice.
4.20 TRANSACTIONS WITH AFFILIATES. Except as set forth in DISCLOSURE
SCHEDULE 4.20, Lakewood is not a party to any contract, lease, agreement or
other commitment with any officer, director or stockholder of Lakewood or any
affiliate of any such person, and there are no loans outstanding from Lakewood
to, or to Lakewood from, any such person or any affiliate of any such person,
other than in the ordinary course of business.
4.21 CALL REPORTS. Lakewood has made available to Union its Consolidate
Reports of Condition and Consolidated Reports of Income for the calender quarter
ended March 31, 1998 (the "CALL REPORT") and thereafter. Such Call Report,
including the related schedules and memorandum items, were prepared in
accordance with GAAP or, to the extent different from GAAP, accounting
principles mandated by the applicable instructions to such Call Report. No
adjustments are required to be made to the equity capital account Lakewood as
reported on any Call Report referred to herein, in any material amount, in order
to conform such equity capital account to equity capital as would be determined
in accordance with GAAP as of such date.
4.22 RESERVE FOR POSSIBLE CREDIT LOSSES. Lakewood's consolidated reserve
for possible credit losses is adequate to absorb reasonably anticipated losses
in the consolidated loan and lease portfolios of Lakewood, in view of the size
and character of such portfolios, current economic conditions, and other
pertinent factors. Management periodically reevaluates the adequacy of such
reserves based on portfolio performance, current economic conditions, and other
factors.
4.23 LOANS, LEASES AND DISCOUNTS.
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(a) To the best of the Knowledge of Lakewood, each loan, lease
and discount reflected as an asset of Lakewood in the Financial Statements as of
March 31, 1998, or acquired since that date, is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms; and no loan, lease or discount having an unpaid balance (principal and
accrued interest) in excess of $10,000 is subject to any asserted defense,
offset or counterclaim known to Lakewood.
(b) Except as set forth in DISCLOSURE SCHEDULE 4.23 hereof,
Lakewood does not hold any loan participation interests originated by any third
party.
4.24 EXAMINATIONS. To the extent consistent with law, Lakewood has
heretofore disclosed to Union relevant information contained in the most recent
safety-and-soundness, compliance, Community Reinvestment Act and other Reports
of Examination with respect to Lakewood issued by the Federal Deposit Insurance
Corporation and the Colorado Division of Banking. Such information so disclosed
consists of all material information with respect to the financial, operational
and legal condition of Lakewood which is included in such reports, and does not
omit or will not omit any information necessary to make the information
disclosed not misleading.
4.25 DISCLOSURE. No representation or warranty by Lakewood in this
Agreement, and no statement contained in the Disclosure Schedules or any
certificate delivered by Lakewood pursuant to this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit any
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they are or were made, not misleading.
ARTICLE 5
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
5.1 GENERAL. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
ARTICLE 7).
5.2 NOTICES AND CONSENTS. Each of the Parties will give any notices to
third parties, and will use its reasonable best efforts to obtain any third
party consents, that the other party may request in connection with the matters
referred to in SECTIONS 3.3 AND 4.4.
5.3 REGULATORY MATTERS AND APPROVALS. Union and Merger Subsidiary shall
prepare, with Lakewood's assistance, and submit for filing on or prior to
forty-five days from the date hereof any and all applications, filings, and
registrations with, and notifications to, all federal and state Governmental
Authorities required on the part of Union, Merger Subsidiary and Lakewood or any
shareholder or affiliate of Union, Merger Subsidiary and Lakewood for the merger
to be consummated as contemplated by this Agreement. Thereafter, Union, Merger
Subsidiary and
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Lakewood shall pursue all such applications, filings, registrations, and
notifications diligently and in good faith, and shall file such supplements,
amendments, and additional information in connection therewith as may be
reasonably necessary for the Merger and the Resulting Bank Merger to be
consummated at the Effective Date. Union, Merger Subsidiary and Lakewood shall
deliver to each other evidence of the filing of each and all such applications,
filings, registrations and notifications (except for any portions thereof deemed
confidential), and any supplement, amendment or item of additional information
in connection therewith (except for any portions thereof deemed confidential).
Union, Merger Subsidiary and Lakewood shall also deliver to each other a copy of
each material notice, order, opinion and other correspondence received by Union,
Merger Subsidiary or Lakewood from such federal and state authorities and shall
advise each other of material developments and progress with respect to such
matters.
5.4 NOTICES. Each of the Parties will give any notices to, make any
filings with, and use its best efforts to obtain any authorizations, consents,
and approvals of governments and governmental agencies in connection with the
matters referred to in SECTION 3.3 and SECTION 4.4.
5.5 SPECIAL STOCKHOLDER MEETING. Lakewood will call a special meeting of
the Lakewood Stockholders as soon as reasonably practicable, but in no event
more than 45 days, following the date hereof in order that the Lakewood
Stockholders may consider and vote upon the adoption of this Agreement and the
approval of the Merger in accordance with Section 11-4-105 of the Colorado
Revised Statutes. The Board of Directors of Lakewood shall recommend such
approval and Lakewood shall take all lawful action to solicit such approval,
including, without limitation, timely mailing the Information Statement (as
defined in SECTION 5.13).
5.6 ENVIRONMENTAL ANALYSIS. Within 30 days, Lakewood shall retain an
environmental consultant reasonably acceptable to Union to conduct a Phase I
environmental study of Lakewood's real property at 1858 South Wadsworth
Boulevard, Lakewood, Colorado 80232-0637 and all real property held as OREO.
Such study shall be consummated, and delivered to Lakewood and Union within 90
days of the date hereof. The cost of this study shall constitute a Lakewood
Transaction Cost. In the event the results of the Phase I environmental study
are not acceptable to Union in its sole discretion, Union may terminate this
Agreement pursuant to SECTION 10.1.2.
5.7 TITLE TO REAL PROPERTY. Lakewood shall deliver to Union within 30
days of the date of this Agreement, a title insurance commitment for all real
property owned by Lakewood (including property held as OREO) (the "TITLE
COMMITMENT"). Union shall have 30 days after receipt by Union's counsel of the
Title Commitment with which to notify Lakewood, in writing, of Union's objection
to any exceptions to the title shown in the Title Commitment. In the event of
such objection, Lakewood shall have 30 days from the date of such objection
within which to attempt to eliminate such objected to exceptions to title from
the Title Commitment. In the event such objected to exceptions are not
eliminated or satisfied to the reasonable satisfaction of Union, Union may
terminate this Agreement pursuant to SECTION 10.1.2. The cost of the Title
Commitment(s) shall constitute a Lakewood Transaction Cost.
5.8 OPERATION OF BUSINESS. Without the written consent of Union, which
consent shall not be unreasonably withheld, Lakewood will not engage in any
practice, take any action, or enter
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into any transaction outside the Ordinary Course of Business. Without limiting
the generality of the foregoing:
5.8.1 Lakewood will not authorize or effect any change in its
Articles of Incorporation or Bylaws;
5.8.2 Lakewood will not grant any options, warrants, or other
rights to purchase or obtain any of its capital stock or issue, sell, or
otherwise dispose of any of its capital stock;
5.8.3 Except as contemplated by SECTION 7.1.12 hereof, Lakewood
will not declare, set aside, or pay any dividend or distribution with respect to
its capital stock (whether in cash or in kind), or redeem, repurchase, or
otherwise acquire any of its capital stock;
5.8.4 Lakewood will not issue any note, bond, or other debt
security or create, incur, assume, or guarantee any indebtedness for borrowed
money or capitalized lease obligation (other than deposits) outside the Ordinary
Course of Business;
5.8.5 Lakewood will not impose any Security Interest upon any of
its assets outside the Ordinary Course of Business;
5.8.6 Lakewood will not make any capital investment in, or
acquire the securities or assets of any other Person outside the Ordinary Course
of Business;
5.8.7 Lakewood will not make or incur any obligation to make any
capital expenditures in excess of $10,000 individually or $50,000 in the
aggregate;
5.8.8 Lakewood will not make or commit to make any new loan to
any borrower, or repurchase, or enter into any agreement to repurchase, all or
any portion of any loan or commitment from any other financial institution
except in accordance with the current loan policy and current underwriting
practices of Lakewood and all regulatory authorities to which it is subject; or
renew any existing loan in excess of the original principal balance except in
accordance with the current loan policy and current underwriting practices of
Lakewood, unless such loan is classified or criticized, in which case no renewal
shall be in excess of the then current outstanding principal balance;
5.8.9 Lakewood will not make any change in employment terms for
any of its directors, officers, and employees outside the Ordinary Course of
Business; and
5.8.10 Lakewood will not commit to do any of the actions
contemplated in SECTIONS 5.8.1 THROUGH 5.8.9.
5.9 ACCESS TO INFORMATION. Upon reasonable notice and subject to
applicable laws relating to the exchange of information, Lakewood shall afford
to the officers, employees, accountants, counsel and other representatives of
Union, access during normal business hours during the period prior to the
Effective Time, to all of its properties, books, contracts, commitments and
records for the purpose of updating any review of such times performed prior to
the date of this Agreement and, during such period, Lakewood shall make
available (a) copy of each report,
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schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal or state securities
laws or federal or state banking laws (other than reports or documents which
either party is not permitted to disclose under applicable law); and (b) all
other information concerning its business, properties and personnel as Union may
reasonably request. It is the intention of the parties that Union shall conduct
an examination of Lakewood prior to the Effective Date in order to confirm
compliance with the representations, warranties and covenants set forth in this
Agreement. All information provided by Lakewood to Union and Merger Subsidiary
prior to Closing shall be complete and accurate in all material respects. No
investigation by Union or Merger Subsidiary shall affect the representations and
warranties set forth herein. Lakewood will permit representatives of Union and
Merger Subsidiary to have full access at all reasonable times, and in a manner
so as not to interfere with the normal business operations of Lakewood, to all
premises, properties personnel, books records (including Tax records),
contracts, and documents of or pertaining to Lakewood.
5.10 RIGHT TO ATTEND MEETINGS AND REVIEW SIGNIFICANT FORMS. Lakewood
will permit a representative of Union to attend all loan or discount committee,
asset and liability committee, investment committee and board of director's
meetings, including any meetings with representatives of bank regulatory
agencies to the extent permitted by the regulatory agencies, and to the extent
such attendance does not compromise privileged materials or privileged
discussions. In addition, Lakewood will provide Union with at least 48 hours
prior written notice of, and an opportunity to comment on, all unsecured loans
(including increases in such loans) in excess of $10,000 and all fully secured
loans (including increases in such loans) in excess of $50,000.
5.11 NOTICE OF DEVELOPMENTS. Lakewood will give prompt written notice to
Union of any material adverse development in its business, prospects,
operations, financial condition or results of operations. Each Party will give
prompt written notice to the others of any material adverse development causing
a breach of any of such Party's own representations and warranties set forth
herein. No disclosure by any Party pursuant to this SECTION 5.11 shall be deemed
to amend or supplement the Disclosure Schedules or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
5.12 EXCLUSIVITY. In light of the consideration given by its Board of
Directors prior to the execution of this Agreement, neither Lakewood nor its
officers, directors, Affiliates or agents will (a) solicit, initiate, or
actively encourage the submission of any proposal or offer from any Person
relating to the acquisition of any material equity interest in, or any
substantial portion of the assets, of Lakewood (including any acquisition
structured as a merger, consolidation, or share exchange) or (b) participate in
any discussions or negotiations, furnish any information or assist any effort or
attempt by any Person relating to any such acquisition. Lakewood will notify
Union immediately if any Person makes any proposal or offer with respect to any
of the foregoing. Notwithstanding the foregoing, each director of Lakewood may,
in the exercise of his fiduciary duties as a director, take such action as is
necessary to discharge such duties.
5.13 INFORMATION STATEMENT. Lakewood shall promptly prepare, subject to
the review and comment of Union, as soon as practicable an information statement
with respect to the meeting of stockholders of Lakewood in connection with the
Merger (the "INFORMATION STATEMENT"). Lakewood will cause the Information
Statement to comply as to form in all material respects with the applicable
provisions of the CBCA and the rules and regulations thereunder. Lakewood agrees
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that the Information Statement and each amendment or supplement thereto at the
time of mailing thereof and at the time of the meeting of stockholders of
Lakewood will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No amendment or supplement to the Information Statement will be
made by Lakewood without the approval of Union.
ARTICLE 6
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
6.1 GENERAL. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under ARTICLE 8).
Lakewood agrees to deliver, within 10 days after the Closing, all documents,
books, records (including Tax records), agreements, and financial data of any
sort relating to Lakewood; provided, that the Lakewood Stockholders and its
representatives shall have access to such information in the manner contemplated
by SECTION 5.9.
6.2 LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(a) any transaction contemplated under this Agreement or (b) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Lakewood, each of the other Parties will cooperate
with such Party and such Party's counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be reasonably necessary in connection with the contest or
defense, at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under ARTICLE 8 in which case the rights and obligations of the Parties
will be determined as set forth in ARTICLE 8).
ARTICLE 7
CONDITIONS TO OBLIGATION TO CLOSE
7.1 CONDITIONS TO OBLIGATION OF UNION AND MERGER SUBSIDIARY. The
obligation of Union and Merger Subsidiary to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
7.1.1 the representations and warranties set forth in ARTICLE 4
shall be true and correct at and as of the date hereof and as of the Closing
Date;
7.1.2 Lakewood shall have performed and complied in all material
respects with all of its covenants hereunder through the Closing;
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7.1.3 Lakewood shall have procured all of the third-party
consents specified in SECTION 5.2;
7.1.4 no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of Parent to own the
capital stock of the Resulting Bank and to control the Resulting Bank, or (D)
affect adversely the right of any of the Resulting Bank to own its assets and to
operate its businesses (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
7.1.5 Lakewood shall have delivered to Union and Merger
Subsidiary a certificate to the effect that each of the conditions specified in
SECTIONS 7.1.1 THROUGH 7.1.4 is satisfied in all respects;
7.1.6 since December 31, 1997 there shall have been no material
adverse change with respect to the assets, liabilities, condition (financial or
otherwise), operating results, employee, customer or supplier relations,
business activities or business prospects of Lakewood;
7.1.7 Lakewood shall have delivered to Union and Merger
Subsidiary (i) a copy of the Articles of Incorporation (or similar document) of
Lakewood certified by an appropriate authority of the jurisdiction of its
incorporation, (ii) a copy of the Bylaws of Lakewood certified by the Secretary
thereof, (iii) a copy of the resolutions of the Board of Directors of Lakewood
and the Lakewood Stockholders approving the transactions contemplated by this
Agreement certified by the Secretary thereof, and (iv) certificates of good
standing/existence of Lakewood certified by an appropriate authority of the
jurisdiction issuing such certificate;
7.1.8 the relevant parties shall have entered into the (i) Tax
Procedures Agreements, (ii) Articles of Merger, (iii) Release and Termination
Agreement, (iv) Shareholders Agreements, (v) the Powers Employment Agreement,
and (vi) the Horton Employment Agreement;
7.1.9 Union and Merger Subsidiary shall have received from
counsel to Lakewood an opinion, in form and substance as set forth in EXHIBIT F,
addressed to Union and Merger Subsidiary and dated as of the Closing Date;
7.1.10 Lakewood shall have obtained the Requisite Lakewood
Stockholder Approval;
7.1.11 Union shall be satisfied with the results of its due
diligence in respect of Lakewood in Union's sole discretion;
7.1.12 Lakewood shall not have paid dividends after March 31,
1998 in excess of 45% of pre-tax earnings after March 31, 1998, such dividends
shall have been paid only from
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recurring income from the Ordinary Course of Business, excluding income relating
to gains on the sale of securities or assets or recoveries or from reversals out
of the Loan Loss Reserve;
7.1.13 Lakewood's Net Worth shall be greater than or equal to
$4,250,000;
7.1.14 Union shall have received the resignations, effective as
of the Closing, of each director of Lakewood;
7.1.15 Lakewood's Loan Loss Reserve shall be greater than or
equal to the greater of $350,000 or 1.46% of Loans Outstanding;
7.1.16 The holders of not more than 5% of the Lakewood shares
shall have exercised their dissenters' rights pursuant to Section 11-4-105 of
the Colorado Revised Statutes; and
7.1.17 Lakewood's contract with FISERVE shall have been assigned
to the Resulting Bank, and extended to April 1, 1999, and month-to-month
thereafter, on terms and conditions acceptable to Union in its sole discretion.
Union may waive any condition specified in this SECTION 7.1 if it executes a
writing so stating at or prior to the Closing.
7.2 CONDITIONS TO OBLIGATIONS OF LAKEWOOD. The obligations of Lakewood
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
7.2.1 the representations and warranties set forth in ARTICLE 3
shall be true and correct when made and at and as of the Closing Date, except
for such inaccuracies as would not have a Material Adverse Effect on Union after
the Closing;
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7.2.2 Union and Merger Subsidiary shall have performed and
complied with all of its covenants hereunder in all material respects through
the Closing, except for such failures to perform as would not have a Material
Adverse Effect on Union, Merger Subsidiary or the transactions contemplated by
this Agreement;
7.2.3 no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation;
7.2.4 Union and Merger Subsidiary shall have delivered to
Lakewood a certificate to the effect that each of the conditions specified in
SECTIONS 7.2.1 THROUGH 7.2.3 is satisfied in all respects;
7.2.5 Union shall have delivered the Merger Consideration;
Lakewood may waive any condition specified in this SECTION 7.2 if it executes a
writing so stating at or prior to the Closing.
ARTICLE 8
SURVIVAL AND ESCROW
8.1 DELIVERY OF MERGER CONSIDERATION TO THE ESCROW AGENT. As of the
Effective Time, Union shall deposit, or shall cause to be deposited, with an
escrow agent reasonably satisfactory to the parties (the "ESCROW AGENT")
pursuant to an escrow agreement substantially in the form attached as EXHIBIT I
hereto (the "ESCROW AGREEMENT")for the benefit of the holders of shares of the
Lakewood Common Stock (other than Dissenting Shares), for distribution in
accordance with this Article 8, the Deferred Merger Consideration (the "DEFERRED
MERGER CONSIDERATION FUND").
8.2 SURVIVAL OF REPRESENTATIONS. Notwithstanding any examination made by
or on behalf of Parent, Union or Merger Subsidiary, the knowledge of Parent,
Union or Merger Subsidiary, or any of the respective officers, directors,
stockholders, employees or agents of Parent, Union or Merger Subsidiary, or the
acceptance by any party of any certificate or opinion, the representations,
warranties, covenants and agreements set forth in this Agreement, or in any
writing delivered by Lakewood in connection with this Agreement, shall survive
the consummation of the transactions contemplated hereby and shall expire on the
date that is 12 months from the Closing Date.
8.3 INDEMNITY. On or prior to the Closing Date, the holders of at least
ninety-five percent (95%) of the issued and outstanding Lakewood Shares shall
have executed and delivered to Lakewood an agreement with respect to the payment
of the Deferred Merger Consideration Fund and the indemnification of Union and
Merger Subsidiary with respect to breaches of the terms and conditions of this
Agreement (the "SHAREHOLDERS AGREEMENT"), which Shareholders Agreement shall be
substantially in the form of EXHIBIT H attached hereto. Except for the rights
granted to
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Union and Merger Subsidiary pursuant to SECTION 9.5 hereof and the Escrow
Agreement, the Shareholders Agreement shall govern the rights of Union and
Merger Subsidiary in the event of a breach of any representation, warranty,
covenant or agreement contained in this Agreement or any document contemplated
hereby.
8.4 APPLICATION BY UNION OR MERGER SUBSIDIARY TO ESCROW AGENT FOR
PAYMENT OF CLAIMS. On or prior to the Closing Date, Lakewood, Union, Merger
Subsidiary and a designated representative of the holders of Lakewood Shares
shall execute and deliver the Escrow Agreement, which Escrow Agreement shall
provide for Union's and Merger Subsidiary's right to seek payment for a breach
of any representation, warranty, covenant or agreement contained in this
Agreement or any document contemplated hereby from the Deferred Merger
Consideration Fund. The right of Union and Merger Subsidiary to seek payment of
any such claim from the Deferred Merger Consideration Fund shall be governed by
the Escrow Agreement.
8.5 DISTRIBUTION OF DEFERRED MERGER CONSIDERATION TO THE LAKEWOOD
STOCKHOLDERS. Upon the expiration of 12 months after the Closing Date, the
Escrow Agent shall, in accordance with the terms of the Escrow Agreement,
deliver to the Lakewood Stockholders (other than holders of Dissenting Shares)
each stockholder's pro rata share of any cash and securities in the Deferred
Merger Consideration Fund remaining after the payment for any claims by Union or
Merger Subsidiary for breaches of any representation, warranty, covenant or
agreement contained in this Agreement or any document contemplated hereby.
8.6 UNCLAIMED FUNDS. Any portion of the Deferred Merger Consideration
Fund (including the proceeds of any investments thereof) that remains unclaimed
by the former stockholders of Lakewood two years after the Effective Time shall
be delivered to the Resulting Bank. Any former stockholders of Lakewood who have
not theretofore complied with this Article 8 and the Escrow Agreement shall
thereafter look only to the Resulting Bank for payment of their pro-rata share
of the remaining Deferred Merger Consideration Fund, without any interest
thereon.
ARTICLE 9
TAX MATTERS
The following provisions shall govern the allocation of responsibility
as between Union and the Lakewood Stockholders for certain tax matters following
the Closing Date:
9.1 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. Union shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for Lakewood for all periods ending on or prior to the Closing Date which are
filed after the Closing Date other than income Tax Returns with respect to
periods for which a consolidated, unitary or combined income Tax Return of any
Lakewood Stockholder will include the operations of Lakewood. Union shall
provide to Steven Fisher, as designated representative of the Lakewood
Stockholders (the "REPRESENTATIVE") for their review and comment drafts of such
Tax Returns no later than 20 days prior to filing, and Union shall consider in
good faith the comments of the Representative in finalizing such Tax Returns.
Union shall make reasonable efforts to take positions on such Tax Returns to
minimize any liability of the Lakewood Stockholders under this SECTION 9.1 for
Taxes shown thereon. The Lakewood
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Stockholders shall reimburse Union for Taxes of Lakewood, if any, with respect
to such periods within 10 days after payment by Union or Lakewood of such Taxes
to the extent such Taxes are not reflected in the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face of the Most Recent
Balance Sheet.
9.2 TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING DATE.
Union shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of Lakewood for Tax periods which begin before the Closing Date and
end after the Closing Date. The Lakewood Stockholders shall pay to Union within
10 days after the date on which Taxes are paid with respect to such periods an
amount equal to the portion of such Taxes which relates to the portion of such
Taxable period ending on the Closing Date to the extent such Taxes are not
reflected in the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
shown on the face of the Closing Balance Sheet. For purposes of this Section, in
the case of any Taxes that are imposed on a periodic basis and are payable for a
Taxable period that includes (but does not end on) the Closing Date, the portion
of such Tax which relates to the portion of such Taxable period ending on the
Closing Date shall (a) in the case of any Taxes other than Taxes based upon or
related to income or receipts, be deemed to be the amount of such Tax for the
entire Taxable period multiplied by a fraction the numerator of which is the
number of days in the Taxable period ending on the Closing Date and the
denominator of which is the number of days in the entire Taxable period, and (b)
in the case of any Tax based upon or related to income or receipts be deemed
equal to the amount which would be payable if the relevant Taxable period ended
on the Closing Date. Any credits or losses relating to a Taxable period that
begins before and ends after the Closing Date shall be taken into account as
though the relevant Taxable period ended on the Closing Date. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with prior practice of Lakewood. The parties acknowledge that the
transactions contemplated herein will result in a termination of Lakewood's
status as a small business corporation under Section 1361(b) of the Code. For
purposes of determining the federal, state and local taxable income of Lakewood
during the period between January 1, 1998 and the effective date of the
termination of its status as a small business corporation, the parties agree
that Lakewood shall close its books as of the Closing Date in accordance with
Section 1362(e)(6)(D) of the Code.
9.3 COOPERATION ON TAX MATTERS.
9.3.1 Lakewood and the Lakewood Stockholders shall cooperate
fully, as and to the extent reasonably requested by Union, in connection with
the filing of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request and expense) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Lakewood and the Lakewood Stockholders agree (i) to
retain all books and records with respect to Tax matters pertinent to Lakewood
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Union,
any extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (ii) to
give Union reasonable written notice prior to transferring, destroying or
discarding any such books and
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records and, if Union so requests, Lakewood or the Lakewood Stockholders, as the
case may be, shall allow Union to take possession of such books and records.
9.3.2 The Lakewood Stockholders further agree, upon request by
Union, to use their reasonable best efforts to obtain any certificate or other
document from any governmental authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions contemplated hereby).
9.3.3 The Lakewood Stockholders further agree, upon request by
Union, to provide Union with all information that either party may be required
to report pursuant to Code Section 6043 and all Treas. Regs.
9.3.4 Union shall keep the Lakewood Stockholders fully informed
of any Tax audit, litigation or other proceeding with respect to Taxes for which
the Lakewood Stockholders are or could be liable to Union hereunder. The
Lakewood Stockholders may, at their own expense, participate in any such audit,
litigation or proceeding. Union shall cooperate fully in connection with such
participation, including, without limitation, the retention and (upon the
request and at the expenses of one or more Lakewood Stockholder) the provision
of records and information which are reasonably relevant to such matter, making
employees available on a mutually convenient basis to provide additional
information and explanation of any reasonably relevant matter, and executing
petitions, complaints, settlement agreements and other documents at the
reasonable request of an Lakewood Stockholder.
9.4 TAX SHARING AGREEMENTS. Except as otherwise provided in SECTION 9.2,
all tax sharing agreements or similar agreements with respect to or involving
Lakewood shall be terminated as of the Closing Date and, after the Closing Date,
Lakewood shall not be bound thereby or have any liability thereunder.
9.5 CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any gains or
transfer Tax and any similar tax imposed in any state or political subdivision)
shall be paid by the Lakewood Stockholders when due, and the Lakewood
Stockholders will, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and, if required by applicable
law, Union will, and will cause its Affiliates to, join in the execution of any
such Tax Returns and other documentation.
ARTICLE 10
TERMINATION
10.1 TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
10.1.1 Union and Merger Subsidiary, on one hand, and Lakewood, on
the other hand, may terminate this Agreement by mutual written consent at any
time prior to the Closing;
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10.1.2 Union and Merger Subsidiary may terminate this Agreement
by giving written notice to Lakewood at any time prior to the Closing (i) in the
event Lakewood has breached when made any representation or warranty, or has
breached any covenant contained in this Agreement in a manner which would have a
Material Adverse Effect on Lakewood, Union has notified Lakewood of the breach,
and the breach has continued without cure for a period of 30 days after the
notice of breach; (ii) if the Closing shall not have occurred on or before
February 28, 1999, by reason of the failure of any condition precedent under
SECTION 7.1 (unless the failure results primarily from Union itself breaching
any representation, warranty, or covenant contained in this Agreement); or (iii)
as contemplated by SECTIONS 5.6 AND 5.7; and
10.1.3 Lakewood may terminate this Agreement by giving written
notice to Union at any time prior to the Closing (i) in the event Union or
Merger Subsidiary has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, Lakewood has
notified Union of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or (ii) if the Closing shall not
have occurred on or before February 28, 1999, by reason of the failure of any
condition precedent under SECTION 7.2 (unless the failure results primarily from
Lakewood itself breaching any representation, warranty, or covenant contained in
this Agreement).
10.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to SECTION 10.1.1, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party.
ARTICLE 11
MISCELLANEOUS
11.1 CONFIDENTIALITY. Each Party, its branches and affiliates agrees
that it shall, and it shall direct and use its best efforts to cause its
officers, directors, stockholders, employees, agents and representatives to,
keep the existence of this Agreement, the information obtained by it and its
stockholders in the course of due diligence in connection herewith and the terms
of the transactions contemplated hereby strictly confidential and to not
disclose such matters to any third party without the other Party's prior written
consent. Lakewood acknowledges that Parent has certain reporting obligations as
a public company, and agrees that Parent may make public disclosure of the
existence of this Agreement and the terms of the transactions contemplated
hereby at such time as it believes it to be prudent to do so, based upon the
advice of counsel. Lakewood further acknowledges and agrees that the information
obtained by it and its stockholders in connection herewith constitutes material,
non-public information and that the United States securities laws prohibit any
person in possession of such information from purchasing or selling securities
of Union or from communicating such information to any other person or entity
under circumstances in which it is reasonably foreseeable that such person or
entity is likely to purchase or sell securities.
11.2 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
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<PAGE>
11.3 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
11.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of their
rights, interests, or obligations hereunder without the prior written approval
of Union and the Lakewood Stockholders; provided, however, that Union may (a)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (b) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases Union nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
11.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.6 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Union or Merger Subsidiary: Copy to:
Union Bank and Trust Company Davis, Graham & Stubbs LLP
100 Broadway 370 Seventeenth Street, Suite 4700
Denver, Colorado Denver, Colorado 80202
Attention: Herman J. Zueck Attention: Ronald R. Levine, II
Telephone: (303) 698-5701 Telephone: (303) 892-7514
Telecopy: (303) 715-2424 Telecopy: (303) 893-1379
If to Lakewood: Copy to:
Lakewood State Bank Delbert J. Ellis, Esq.
1858 South Wadsworth 4465 Kipling Street, Suite 200
Lakewood, Colorado 80232 Wheat Ridge, Colorado 80033
Attention: Barbara J. Powers Telephone: (303) 424-3387
Telephone: (303) 986-5581 Telecopy: (303) 421-4309
Telecopy: (303) 987-0163
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such
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<PAGE>
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
11.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Colorado without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Colorado or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Colorado.
11.9 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Union
and Lakewood. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
11.10 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.11 EXPENSES. Subject to SECTION 2.4.5, each of the Parties will bear
its own costs and expenses (including legal, fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby;
provided, however, that if Lakewood is required by Union to incur any expense in
excess of $10,000, which is not an expense reasonably within the definition of
Lakewood Transaction Costs, the Parties shall mutually agree on a reasonable
sharing of such expense.
11.12 CONSTRUCTION. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty or covenant relating to the same subject
matter (regardless of the relative levels of specificity) which the Party has
not breached shall not detract from or mitigate the fact that the Party is in
breach of the first representation, warranty, or covenant.
11.13 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
11.14 SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
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breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in SECTION 11.8), in
addition to any other remedy to which they may be entitled, at law or in equity.
*********************
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first written above.
UNION BANK & TRUST COMPANY
By:---------------------------------
Herman J. Zueck
Chief Executive Officer
LSB ACQUISITION CORP.
By:---------------------------------
Herman J. Zueck
Chief Executive Officer
LAKEWOOD STATE BANK
By:---------------------------------
Barbara J. Powers
Chief Executive Officer
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FOR IMMEDIATE RELEASE: CONTACT:
August 27, 1998 Charles R. Harrison 303-298-5352
Bruce Hall 303-298-5352
Herman J. Zueck 303-744-3221
Jerold B. Evans 303-744-3221
Barbara Powers 303-986-5581
UNION BANKSHARES LTD. ANNOUNCES A MERGER BETWEEN
UNION BANK & TRUST, ITS WHOLLY OWNED SUBSIDIARY
AND LAKEWOOD STATE BANK
Charles R. Harrison, Chairman of the Board of Union Bankshares Ltd. (NASDAQ;
UBSC), today announced that its wholly owned subsidiary, Union Bank & Trust has
entered into a definitive agreement to acquire Lakewood State Bank in a cash
merger transaction. Under the terms of the agreement, the total purchase price
is $8.35 million in cash. It is anticipated that the purchase will be financed
through available working capital and borrowings under available credit lines or
otherwise, and that the future earnings per share of Union Bankshares, Ltd.,
will not be diluted as a result of the merger.
"This merger with Lakewood State Bank will expand our presence in a very
attractive west Denver market," said Charles R. Harrison. Herman J. Zueck,
Chairman and Chief Executive Officer of Union Bank & Trust added, "Our similar
philosophies on how to treat customers and employees make this merger a natural.
We're very pleased to be teaming up with another true community bank." Barbara
Powers, Chairman of the Board and Chief Executive Officer of Lakewood State Bank
stated, "Lakewood State Bank has operated as an independent, locally owned bank
and is fortunate to have found the perfect group with which to merge. The merger
will offer Lakewood State Bank's customers the opportunity to bank at several
convenient locations as well as continue to receive the same level of
professional and personal service as experienced in the past."
Union Bank & Trust is headquartered in Denver. The bank currently operates five
branches in the greater Denver Metro area and one to open soon in downtown
Golden. Union Bank & Trust was established in 1934, and maintains at each
branch, local management teams with strong community identities. With the
addition of Lakewood State Bank's approximate $42 million in total assets, Union
Bank & Trust, as a whole will have total assets of approximately $300 million.
This merger is subject to regulatory approval, and expected to close in the
fourth quarter of 1998.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
Statements which are not historical facts contained in this document are forward
looking statements that involve risks and uncertainties that could cause actual
results to differ from projected results. Factors that could cause actual
results to differ materially include, among
<PAGE>
others, management's ability to integrate the operations of Lakewood State Bank
and Union Bank & Trust; general economic conditions, economic conditions in the
Denver metropolitan area, the monetary policy of the Federal Reserve Board,
changes in interest rates, inflation, competition in the banking business,
changes in the state and federal regulatory regime applicable to the Company's
and the Bank's operations, the results of financing efforts and other risk
factors detailed in the Company's Forms 10-KSB, 10-QSB and 8-K filed with the
Securities and Exchange Commission.
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