<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER , 1996
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
GOLD BANC CORPORATION, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
KANSAS 6712 48-1008593
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION)
11301 NALL AVENUE
LEAWOOD, KANSAS 66211
(913) 451-8050
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL
PLACE OF BUSINESS)
MICHAEL W. GULLION
11301 NALL AVENUE
LEAWOOD, KANSAS 66211
(913) 663-3228
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
STEVEN F. CARMAN, ESQ. MARY ANNE O'CONNELL, ESQ.
BLACKWELL SANDERS MATHENY WEARY & HUSCH & EPPENBERGER
LOMBARDI L.C. 1700 ONE KANSAS CITY PLACE
TWO PERSHING SQUARE 1200 MAIN STREET
2300 MAIN, SUITE 1100 KANSAS CITY, MISSOURI 64105
KANSAS CITY, MISSOURI 64108 (816) 421-4800
(816) 274-6931
---------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE FEE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$1.00 par value........................... 2,300,000 $9.00 $20,700,000 $7,138
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes an option to purchase 300,000 shares of Common Stock granted to
the Underwriter to cover over allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
GOLD BANC CORPORATION, INC.
CROSS REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY PART I OF FORM SB-2
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION PROSPECTUS HEADING
- ----------------------- ------------------
<S> <C>
1. Front of Registration Statement
and Outside Front Cover of
Prospectus..................... Outside Front Cover of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus...... Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information and Risk
Factors........................ PROSPECTUS SUMMARY; RISK FACTORS
4. Use of Proceeds................ USE OF PROCEEDS
5. Determination of Offering
Price.......................... UNDERWRITING
6. Dilution....................... DILUTION
7. Selling Security Holders....... Not applicable
8. Plan of Distribution........... UNDERWRITING
9. Legal Proceedings.............. BUSINESS--Legal Proceedings
10. Directors, Executive Officers,
Promoters and Control Persons.. MANAGEMENT
11. Security Ownership of Certain
Beneficial Owners and SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
Management..................... OWNERS AND MANAGEMENT
12. Description of Securities...... DESCRIPTION OF SECURITIES
13. Interest of Named Experts and
Counsel........................ Not applicable
14. Disclosure of Commission
Position on Indemnification for MANAGEMENT--Indemnification and Limitation
Securities Act Liabilities..... of Liability
15. Organization Within Last Five
Years.......................... Not applicable
16. Description of Business........ BUSINESS
17. Management's Discussion and
Analysis or Plan of Operation.. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
18. Description of Property........ BUSINESS--Property
19. Certain Relationships and
Related Transactions........... CERTAIN TRANSACTIONS
20. Market for Common Equity and
Related Stockholder Matters.... MARKET FOR COMMON STOCK AND SHARES ELIGIBLE
FOR FUTURE SALE; SUPERVISION AND REGULATION
21. Executive Compensation......... MANAGEMENT--Executive Compensation
22. Financial Statements........... FINANCIAL INFORMATION
23. Changes In and Disagreements
With Accountants on Accounting
and Financial Disclosure....... EXPERTS
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 20, 1996
2,000,000 SHARES
LOGO GOLD BANC CORPORATION, INC.
COMMON STOCK
-----------
Gold Banc Corporation, Inc., a Kansas corporation (the "Company"), is
offering for sale 2,000,000 shares of its common stock, $1.00 par value per
share (the "Common Stock"). Prior to this offering (the "Offering"), there has
been no public market for the Common Stock. It is currently anticipated that
the initial public offering price will be between $8.50 and $9.00 per share.
See "UNDERWRITING" for a discussion of the factors to be considered in
determining the initial public offering price.
The Common Stock has been approved for listing, upon notice of issuance, on
the National Association of Securities Dealers Automated Quotation System
National Market under the symbol "GLDB."
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION DISCUSSED
UNDER "RISK FACTORS" BEGINNING ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................... $ $ $
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Total(3).................................... $ $ $
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</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "UNDERWRITING."
(2) Before deducting offering expenses payable by the Company estimated at
$500,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
300,000 additional shares of Common Stock, on the same terms and conditions
set forth above, solely to cover over-allotments, if any. If all such
shares are purchased, the total Price to Public, Underwriting Commissions
and Proceeds to Company will be $ , $ and
$ , respectively. The managing underwriter will receive a
supplemental financial advisory fee of $50,000, payable upon consummation
of the Offering. See "UNDERWRITING."
-----------
The shares of Common Stock are being offered by the several Underwriters
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters. The Underwriters reserve the right to withdraw, cancel or modify
the Offering without notice and to reject any order in whole or in part. It is
expected that delivery of certificates representing the Common Stock will be
made against payment therefore at the office of Advest, Inc., New York, New
York, on or about , 1996.
-----------
ADVEST, INC.
THE DATE OF THIS PROSPECTUS IS
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR OTHERWISE AND ARE NOT SECURED
BY ANY COLLATERAL.
The Company intends to furnish to its stockholders (i) annual reports
containing audited consolidated financial statements for each fiscal year and
(ii) quarterly reports for each of the first three quarters of each fiscal
year which will contain unaudited summary financial information.
GOLD BANC CORPORATION, INC.
SERVICE AREA MAP
----------------
[MAP INCLUDING KANSAS AND MISSOURI]
<PAGE>
PROSPECTUS SUMMARY
The following Prospectus Summary is qualified in its entirety by, and should
be read in conjunction with, the more detailed information and the consolidated
financial statements and notes thereto included elsewhere in this Prospectus.
Potential investors should read this Prospectus carefully in its entirety.
THE COMPANY
Gold Banc Corporation, Inc. (the "Company") is a multi-bank holding company
that owns and operates two commercial banks and a federal savings bank
(together, the "Banks"). The Banks include: (i) Exchange National Bank
("Exchange Bank"), a national bank headquartered in Marysville, Kansas, the
county seat of Marshall County, that has branch locations in Leawood and
Shawnee, two cities in Johnson County, Kansas; (ii) Citizens State Bank and
Trust Company ("Citizens"), a state bank located in Seneca, Kansas, the county
seat of Nemaha County; and (iii) Provident Bank, f.s.b. ("Provident Bank"), a
federal savings bank located in St. Joseph, Missouri, the county seat of
Buchanan County. The Banks are community banks providing a full range of
commercial and consumer banking services to small and medium-sized communities
and the surrounding market areas. Additionally, Provident Bank engages in
mortgage banking operations. References to the Company include the Banks and
the assets of the Banks where the context requires. Since December 1978, the
Company has grown internally and through acquisitions from a one bank holding
company with $2.9 million in total assets to a three bank holding company with
total assets as of June 30, 1996 of $280.1 million. The Company's principal
executive offices are located at 11301 Nall Avenue, Leawood, Kansas 66211,
telephone number (913) 451-8050.
COMMUNITY BANKING STRATEGY
The Company's strategy is to maintain responsive community banking offices
with local decision makers. To implement this strategy, the Company allows
senior management at each banking location, within certain limitations, to make
credit and pricing decisions and allows each Bank to retain a local identity
and board of directors intended to foster long-term customer relationships, a
high quality of service and responsiveness to specific customer needs. The
Company serves the needs and caters to the economic strengths of the local
communities in which the Banks are located.
The Company has historically focused its efforts on county seat towns in
rural markets. These towns are generally the focal point of economic activity
in their county. As a result, county seat towns have historically provided a
more stable base of relatively low-cost deposits compared to larger
metropolitan markets with larger competitors. The Company has recently applied
its community banking strategy to two communities in the rapidly developing
Johnson County suburbs southwest of Kansas City. The expansion into suburban
communities has also allowed the Company to diversify a loan portfolio linked
principally to agriculture into a portfolio predominated by commercial loans
and residential real estate loans. In addition, the Company has taken advantage
of the more stable deposit base and lower cost of funds in its rural markets,
where there is relatively low commercial loan demand, and deployed those
deposits in Johnson County suburbs southwest of Kansas City where commercial
loan demand is greater. See "BUSINESS--Community Banking Strategy."
ACQUISITIONS AND EXPANSION
The Company's strategy is to operate and continue to acquire banks that
generally have between $25 and $150 million in assets and operate in county
seat towns. The Company believes such banks provide a stable, relatively low-
cost deposit base and have cultures and economic bases similar to those of the
Banks' communities. The Company believes this is a strategic focus shared by
relatively few bank holding companies operating in the Midwest. The Company's
acquisition focus is in the Midwest, primarily in the States of Kansas and
Missouri. The Company believes it is well positioned to acquire and operate
profitably community banks
1
<PAGE>
because of its experience in operating community banks, its ability to provide
centralized management to those banks and its access to capital. The Company
believes there are owners of community banks seeking to sell their banks for,
among other reasons, stockholder liquidity, lack of family successor operators
and the difficulty of compliance with bank regulations.
The Company has recently expanded and diversified its operations by opening
branch offices in the suburban areas of Shawnee and Leawood, Kansas. Management
believes this has allowed the Company to take advantage of growth opportunities
provided by the strong economic and population expansion occurring in those
markets. See "BUSINESS--Growth Strategy;--Market Areas."
MARKET AREAS
The Banks are located in northeastern Kansas and northwestern Missouri, as
shown in the map on the inside front cover of this Prospectus. The Banks and
the communities they serve are described below:
EXCHANGE BANK
Marysville, Kansas. Exchange Bank's main office and a branch are located in
the city of Marysville, Kansas and serve the approximately 3,300 residents of
that community and the approximately 11,700 residents of Marshall County.
Marshall County has a civilian work force of approximately 6,200 persons that
is evenly divided among manufacturing, services, government, retail and
agricultural sectors.
Shawnee, Kansas. Exchange Bank has a branch location in Shawnee, Kansas, a
western suburb of Kansas City that has a population of 45,000 persons and is
growing at a rate of 4.5 persons per day according to the Shawnee Department of
Economic Development. The service sector makes up the largest part of the
employment base of Shawnee, followed by manufacturing, government and wholesale
and retail sales. Shawnee is located in Johnson County, Kansas. According to
the city of Shawnee, in the ten years ended 1993, Johnson County's population
grew 32%, averaged a net total of 427 new business establishments every year,
accounted for 69% of the net increase in new businesses in the state of Kansas
and had an average annual growth rate of private sector employment of 5.8%,
more than twice the national growth rate. Of counties in the United States
having populations above 250,000, Johnson County ranks first in the percentage
of adults with at least a high school education. The state of Kansas projects
that Johnson County's population will grow by more than 10,000 people per year
over the next decade.
Leawood, Kansas. Exchange Bank has a branch location in Leawood, Kansas,
another Johnson County suburb of Kansas City, that has a population of
approximately 25,000 persons and for the ten year period ended 1993 experienced
a population growth rate of approximately 47%. In 1994, 265 single family
building permits were issued in Leawood and total building construction costs
were nearly $84 million. In 1995, the Leawood Information Services estimated
the average home value to be $213,000. The average household income in Leawood
in 1996 is estimated by the Leawood Planning and Development Commission to be
approximately $97,000. Approximately 50% of the city's economic base is the
service sector, approximately 21% is retail and approximately 16% is financial
services, insurance and real estate service.
PROVIDENT BANK
St. Joseph, Missouri. Provident Bank is located in St. Joseph, Missouri,
approximately 45 miles north of Kansas City, Missouri. St. Joseph has a
population of approximately 75,000 residents and a fully accredited and state
funded four-year college as well as other vocational institutions. The economic
base of St. Joseph includes manufacturing, agribusiness, research and
development, health care and small business.
2
<PAGE>
CITIZENS
Seneca, Kansas. Citizens is located in Seneca, Kansas and serves the
approximately 2,200 residents of that community and the approximately 11,000
residents of Nemaha County. The economic base of Nemaha County is primarily
agricultural, and Citizens relies on the agricultural community, schools and
local governments for its customers. Agricultural production in Nemaha County
consists of corn, milo, soybeans, wheat, dairy cattle and hog production. In
addition, the county has some oil production and local manufacturing
operations.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered............... 2,000,000 shares(1)
Common Stock Outstanding After the 4,000,000(1)
Offering..........................
Estimated Net Proceeds............. $15,775,000(1)(2)(3)
Use of Proceeds.................... To retire debt of $6.6 million, to make a
$3 million capital contribution to Exchange
Bank to support its internal growth, to
finance the Company's future growth
strategy and for general corporate
purposes. See "USE OF PROCEEDS."
Risk Factors....................... Prospective investors in the Common Stock
should consider the information discussed
under the heading "RISK FACTORS."
NASDAQ National Market Symbol...... GLDB
</TABLE>
- --------
(1) Assumes no exercise of the Underwriters' over-allotment option to purchase
300,000 shares. See "UNDERWRITING."
(2) After deducting expenses of the Offering payable by the Company estimated
at $500,000.
(3) Assumes an offering price of $8.75 per share (the mid-point of the price
range set forth on the cover page of this Prospectus).
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
GOLD BANC CORPORATION, INC.
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS AT OR FOR THE
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........... $ 280,097 $ 233,686 $ 263,957 $ 221,174 $ 176,952
Loans receivable, net.. 179,473 153,252 161,470 136,241 90,687
Investment securities.. 72,527 60,076 67,375 67,807 57,159
Federal funds sold..... 1,425 5,075 5,900 -- 8,430
Deposits............... 241,111 200,404 226,381 186,429 149,464
Repurchase agreements.. 16,092 10,892 15,638 7,476 12,071
Federal funds
purchased............. 1,800 -- -- 6,850 --
Preferred stockholders'
equity................ -- 65 65 65 65
Common stockholders'
equity................ 11,090 12,010 11,257 9,899 8,803
INCOME STATEMENT DATA:
Interest income........ $ 10,347 $ 8,831 $ 18,431 $ 15,349 $ 11,281
Interest expense....... 5,990 4,756 10,045 7,759 5,874
--------- --------- --------- --------- ---------
Net interest income.... 4,357 4,075 8,386 7,590 5,407
Provision for loan
losses................ 60 129 1,284 147 296
--------- --------- --------- --------- ---------
Net interest income
after provision for
loan losses........... 4,297 3,946 7,102 7,443 5,111
Non-interest income.... 1,131 410 1,938 1,347 1,419
Non-interest expense... 4,341 3,729 8,001 6,619 4,481
--------- --------- --------- --------- ---------
Income before income
taxes................. 1,087 627 1,039 2,171 2,049
Income tax expense..... 372 218 335 777 731
--------- --------- --------- --------- ---------
Net income............. $ 715 $ 409 $ 704 $ 1,394 $ 1,318
========= ========= ========= ========= =========
COMMON SHARE DATA:
Net income per share... $ .36 $ .20 $ .34 $ .69 $ .71
Book value per common
share................. $ 5.54 $ 5.87 $ 5.63 $ 4.85 $ 4.78
Tangible book value per
common share.......... $ 5.29 $ 5.61 $ 5.36 $ 4.58 $ 4.49
Weighted average shares
outstanding........... 2,001,825 2,069,517 2,063,415 2,012,894 1,860,106
FINANCIAL RATIOS AND
OTHER DATA:
Net interest
margin(1)(6).......... 3.57% 3.93% 3.93% 3.76% 3.57%
Net interest spread(1). 3.37% 3.74% 3.72% 3.63% 3.40%
Return on average
assets(1)............. 0.54% 0.36% 0.30% 0.64% 0.80%
Return on average
equity(1)............. 12.82% 7.43% 6.09% 14.96% 16.90%
Leverage ratio(2)(3)... 4.00% 5.12% 4.62% 4.32% 5.02%
Tier 1 risk-based
capital(3)............ 6.76% 8.20% 6.99% 8.33% 8.27%
Total risk-based
capital(3)............ 8.02% 9.46% 8.25% 9.59% 9.53%
Non-performing assets
to total assets....... 0.34% 0.31% 0.72% 0.30% 0.42%
Non-performing loans to
total loans........... 0.48% 0.36% 1.06% 0.29% 0.74%
Allowance for loan
losses to total loans. 1.44% 1.36% 1.65% 1.48% 1.28%
Allowance for loan
losses to non-
performing loans(4)... 303.47% 376.33% 155.94% 511.75% 172.75%
Net loan charge-offs
(recoveries) to
average loans......... 0.09% (0.03)% 0.41% 0.01% 0.09%
Efficiency ratio(5).... 79.10% 83.14% 77.50% 74.06% 65.65%
</TABLE>
- --------
(1) Information is annualized for the periods ended June 30, 1996 and 1995.
(2) The leverage ratio is defined as the ratio of Tier 1 capital to average
total assets.
(3) The minimum regulatory capital ratios for the Company are: Tier 1 capital--
4.00%; total risk-based capital--8.00%; and leverage ratio--4.00%
(4) Non-performing loans consist of non-accrual loans and accruing loans
contractually past due 90 days or more.
(5) The efficiency ratio represents total non-interest expense divided by net
interest income plus total non-interest income.
(6) Represents net interest income as a percentage of average interest earning
assets. Calculation is shown tax-effected for tax-exempt interest income.
4
<PAGE>
THE COMPANY AND THE BANKS
GOLD BANC CORPORATION, INC.
The Company, a Kansas corporation organized on December 5, 1985, is a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended (the "BHCA"). The Company, through its ownership of the Banks, is
engaged in a general commercial banking business and its primary source of
earnings is derived from income generated by the Banks. As of June 30, 1996,
the Company had total assets of $280.1 million, total loans of $179.5 million,
total deposits of $241.1 million, and stockholders' equity of $11.1 million.
The Company and the Banks employ 112 persons on a full-time basis.
The Company's strategy is to maintain responsive community banking offices
with local decision makers. To implement this strategy the Company allows
senior management at each banking location, within certain limitations, to
make credit and pricing decisions and allows each Bank to retain a local
identity and board of directors intended to foster long-term customer
relationships, a high quality of service, and responsiveness to specific
customer needs. The Company serves the needs and caters to the economic
strengths of the local communities in which the Banks are located.
BANK SUBSIDIARIES
Exchange Bank. Exchange Bank has four locations and is chartered in
Marysville, Kansas. The two Marysville locations ("Exchange Bank--Marysville")
as of June 30, 1996, ranked second in terms of deposits among the eight other
banks and two other lending institutions in Marshall County, Kansas. Exchange
Bank--Marysville's loan mix consists of approximately 25% agricultural loans,
33% commercial and industrial loans, 27% residential real estate loans, and
15% consumer and other loans. As of June 30, 1996, Exchange Bank--Marysville
had assets of approximately $79 million. The Marysville facilities employ 31
full and part-time persons and, through its predecessors, have served the
Marshall County community since 1870.
Since April 1992 and October 1995, Exchange Bank has been operating branches
in Shawnee and Leawood, Kansas, respectively. These branches are located in
Johnson County, which is considered to be the fourth fastest growing county in
the country. See "BUSINESS--Market Areas." The two Johnson County, Kansas
branches of Exchange Bank provide primarily commercial, consumer and
residential real estate and construction loans. As of June 30, 1996, these
branches combined had $68 million in assets and employed 27 full and part-time
persons. The Company's management believes the expansion in Johnson County
will further enhance the Company's growth opportunities while diversifying its
overall loan portfolio.
Provident Bank. Provident Bank competes with ten banks, four savings and
loans and eleven credit unions in the city of St. Joseph, Missouri and for the
year ended June 30, 1996 was the leading home lender, based on mortgage
volume, for home purchases in St. Joseph. Forty-five percent of the Bank's
loan portfolio consists of residential home loans, 15% commercial real estate
loans, 20% industrial loans and 20% consumer and other loans. As of June 30,
1996, Provident Bank had assets of approximately $78 million. The Bank employs
a total of 47 persons on a full and part-time basis and relies primarily on
the deposits of the St. Joseph area for its funds. Provident Bank was
established in 1889 and has been serving the St. Joseph community for 107
years.
Citizens. As of June 30, 1996, Citizens was the largest in terms of deposits
among the ten bank locations serving the approximately 11,000 residents of
Nemaha County, Kansas. Approximately 40% of the loans generated by the Bank
are related to the agricultural sector, including farm residential,
agricultural production and agricultural industrial. Approximately 25% of its
loans are residential home loans and the remainder are commercial, consumer
and other loans. As of June 30, 1996, the Bank had assets of approximately $55
million. The Bank has 20 full and part-time employees and relies primarily on
consumer, commercial and local government deposits for funds. Citizens has
served the Nemaha County community for 101 years.
The Banks' income is derived principally from interest and fees earned in
connection with their lending activities, interest and dividends on investment
securities and other sources. Principal expenses are interest paid
5
<PAGE>
on deposits and operating expenses. The Company and the Banks are subject to
examination and comprehensive regulation by various federal and state banking
authorities and the Banks' deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") to the extent permitted by law. The Company is
a legal entity separate and distinct from the Banks, and there are various
legal limitations on the ability of the Banks to finance or otherwise supply
funds to the Company. See "SUPERVISION AND REGULATION."
RISK FACTORS
An investment in the shares of Common Stock being offered hereby involves a
high degree of risk. In addition to the other information in this Prospectus,
the following risk factors should be considered carefully.
COMPETITION AND OTHER RISKS ASSOCIATED WITH EXPANSION STRATEGY
The rural market areas now served by the Company afford limited, if any,
opportunities for growth in such markets. Management believes future growth in
the earnings of the Company will depend in part on consummation of
acquisitions in other markets and growth in Exchange Bank's Johnson County
branches. The Company must compete with a variety of institutions and
individuals for suitable acquisition candidates. This competition is expected
to intensify with the advent of interstate banking and branching. Competition
for acquisitions is expected to include money center banks and major regional
bank holding companies. These same institutions, as well as other financial
institutions, also compete intensely for assets and deposits within the
Company's southwestern Kansas City market. Competition from these institutions
could adversely affect the Company's ability to make acquisitions and to grow
profitably its Kansas City asset and deposit base. Acquisitions also involve
risks of adversely changing results of operations, unforeseen liabilities or
asset quality problems of the acquired entity and other conditions not within
the control of the Company, such as adverse personnel relations, loss of
customers because of change of identity, deterioration in local economic
conditions and other risks affecting the acquired institution.
To support the Company's growth strategy, the Company will require
additional managerial, operational and financial resources. The Company
regularly evaluates the adequacy of its current policies, procedures, systems
and resources. There can be no assurance the Company will adequately address
all of the changing demands its planned expansion will impose on such
policies, procedures, systems and resources. In this regard, the Company
contemplates the capital generated by the Offering will be sufficient to meet
its requirements for growth through 1997. At that time, the Company will
likely be required to obtain additional financing in the form of debt or
equity in order to achieve its growth strategy. The Company currently has no
commitment for additional financing, and there can be no assurance financing
will be available on terms satisfactory to the Company.
LIMITED NUMBER OF BANKS
The Company currently owns three banks. Due to this relatively small
existing base of banks, adverse results or events at a particular Bank could
have a more significant impact on the Company's results of operations or
financial condition than would be the case for a company with a greater number
of banks. Further, under federal law, a depository institution insured by the
FDIC can be held liable for any loss incurred by, or reasonably expected to be
incurred by, the FDIC in connection with the default of a commonly controlled
FDIC-insured depository institution or any assistance provided by the FDIC to
a commonly controlled FDIC-insured institution in danger of default. These
provisions can have the effect of making subsidiary Banks of the Company
responsible for FDIC-insured losses at another subsidiary Bank.
GEOGRAPHIC CONCENTRATION; SIGNIFICANCE OF AGRICULTURAL ECONOMY
Approximately 78% of the Company's deposits and 78% of the Company's assets
at June 30, 1996 were derived from Banks operating in the relatively rural
markets of Marysville and Seneca, Kansas and St. Joseph,
6
<PAGE>
Missouri. Adverse economic changes in these geographic markets may have a
material adverse effect on the Company's results of operations and financial
condition. In the rural northeastern Kansas markets served by the Banks, the
predominant economic sector is agriculture. Changes in the agricultural
economy have had, and are expected to continue to have, a significant impact
on the results of operations and financial condition of the Company. For
example, recent increases in grain prices and reduced prices for livestock
have had an adverse impact on loan demand in the rural communities served by
certain of the Banks. Agriculture in these communities is affected by many
factors beyond the control of the Banks, including weather, governmental
policies, fluctuating commodity prices, demand, production and natural
disasters.
CONCENTRATIONS IN REAL ESTATE LENDING
The Company is dependent to a significant degree on a broad spectrum of
commercial, construction, 1 to 4 residential and agricultural real estate
loans, both with respect to loans originated and retained in the Company's
loan portfolio, which generate interest income, and loans originated and sold
in connection with the Company's mortgage banking operations, which generate
fee income and gains on sale. At June 30, 1996, real estate loans totaled
approximately 64% of the Company's loan portfolio. Real estate loan
origination activity, including refinancings, generally is greater during
periods of declining interest rates and favorable economic conditions, and has
been favorably affected by relatively lower market interest rates during the
past several years. There is no assurance such favorable conditions will
continue. Within the real estate lending sector, the Company has recently
emphasized residential construction lending in the suburban Kansas City
market. Construction loan balances aggregated approximately 24% of real estate
loans at June 30, 1996. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Lending Activities."
SUPERVISION AND REGULATION
The Company and the Banks are subject to extensive governmental supervision
and regulation. This regulation limits the manner in which the Company
conducts its business and obtains financing and is primarily intended to
protect depositors of the Banks, not the Company or its stockholders. Among
other powers, the regulatory authorities may impose restrictions on the
operation of a financial institution, may require the classification of assets
by an institution, and may dictate an increase in an institution's allowance
for loan losses. Federal and state legislation and regulations are under
continuous review and change. Proposals now before Congress, if enacted, would
repeal substantially limitations on the affiliation of banks and securities
firms, amend the Community Reinvestment Act and effect other changes. Although
the impact of such future legislation and regulation cannot be predicted,
changes in the applicable statutes, regulations or policies or in the
regulatory structure, whether by the Federal Reserve, the Office of the
Comptroller of the Currency (the "OCC"), the FDIC, the Office of Thrift
Supervision ("OTS"), Congress, or any controlling state legislature or
regulatory body could have a material impact on the Company and the Banks and
their operations.
The savings deposits of two of the Company's subsidiary locations are
insured by the Savings Association Insurance Fund ("SAIF"), which is
administered by the FDIC. The FDIC also administers the Bank Insurance Fund
("BIF"), which has the same designated reserve ratio as the SAIF. Because the
BIF has met its designated reserve ratio while the SAIF has not, there
presently exists a substantial disparity in the deposit insurance premiums
paid by BIF and SAIF members, placing SAIF-insured savings institutions at a
significant competitive disadvantage to BIF-insured institutions. A number of
proposals have been considered to recapitalize the SAIF in order to eliminate
the premium disparity. The United States House of Representatives and Senate
have both proposed legislation requiring a one-time assessment to be imposed
on all SAIF-insured deposits. The assessment would have resulted, as of
December 31, 1995, in a one-time charge of approximately $340,000 (net of
income tax benefits) to the Company. See "SUPERVISION AND REGULATION."
7
<PAGE>
COMPETITION WITHIN MARKETS
The Banks operate in a competitive environment, competing for deposits and
loans with commercial banks, thrift institutions and other financial
institutions. Numerous mergers and consolidations involving banks and thrifts
in the geographic market in which the Company operates have occurred recently,
resulting in an intensification of competition. The Banks also compete with
money market mutual funds for funds from depositors. Many of the Banks'
competitors possess greater financial resources or have substantially higher
lending limits than do the Banks.
Recent changes in federal banking laws are expected to facilitate interstate
branching and merger activity among banks. Since September 1995, with
exceptions, certain bank holding companies are authorized to acquire banks
throughout the United States. In addition, on and after June 1, 1997, certain
banks will be permitted to merge with banks organized under the laws of
different states and to operate branches in the Banks' markets without the
need for a separate charter. Such changes may result in an even greater degree
of competition in the banking industry, and the Company may be brought into
competition with institutions with which it does not presently compete. There
can be no assurance the profitability of the Company will not be affected
adversely by the increased competition that may characterize the banking
industry in the future. See "BUSINESS--Competition."
KEY PERSONNEL
Continued profitability of the Banks and the Company are dependent on the
retention of a limited number of key persons, including Michael W. Gullion,
the Chairman, President and Chief Executive Officer of the Company, and Keith
E. Bouchey, the Executive Vice President, Secretary, Treasurer and Chief
Financial Officer of the Company. There would likely be a difficult transition
period if the Company lost the services of either or both men. In recognition
of this risk, the Company owns and is the beneficiary of an insurance policy
on the life of Mr. Gullion providing for death benefits of $1.5 million and
has entered into employment agreements with Mr. Gullion and Mr. Bouchey. The
Company also places great value on the experience of Bank and branch
presidents and on their relationships within the communities served by the
Banks. The loss of these key persons could negatively impact the affected
banking locations. Moreover, given the growth plans of the Company, it will be
necessary in the future for the Company to engage the services of additional
skilled key employees and officers. There is no assurance the Company will be
able to retain its current key personnel or attract additional qualified key
persons as needed. See "MANAGEMENT."
CONTROL OF THE COMPANY BY MR. GULLION
Following completion of the Offering Mr. Michael Gullion, Chairman,
President and Chief Executive Officer of the Company, will directly own 8.32%
of the outstanding stock of the Company, and through certain agreements will
have the right to vote an additional 16.59% of the Common Stock, for total
voting power covering 24.91% of the Common Stock. As a result, Mr. Gullion
will be in a position to control the management policy and the conduct of the
business of the Company following the Offering. The Company's Amended and
Restated Articles of Incorporation do not permit stockholders to cumulate
their votes in the election of directors, which could impair stockholders
holding a small number of shares from effectively participating in the
election of the Company's directors. See "MANAGEMENT; SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
ASSET/LIABILITY MANAGEMENT
The operating results of the Company depend to a great extent on the
difference between the income each Bank receives from its loans, securities
and other earning assets and the interest expense each Bank pays on its
deposits and other interest-bearing liabilities. Given the Banks' current
volume and mix of interest bearing liabilities and interest earning assets,
the Banks' aggregate interest rate spread could be expected to decrease during
times of rising interest rates and, conversely, to increase during times of
falling interest rates. These rate differentials are highly sensitive to many
factors beyond the control of the Company, including general economic
8
<PAGE>
conditions and the policies of various governmental and regulatory
authorities, in particular the Federal Reserve. Also, adverse changes in
general economic conditions could impair the ability of each Bank's borrowers
to repay loans as they mature and the Banks' ability to make loans and attract
deposits.
MORTGAGE BANKING OPERATIONS
Provident Bank operates a mortgage banking business as a means of increasing
its residential loan portfolio and resulting interest income, and increasing
non-interest income through sales of loans in the secondary market together
with the fee generating mortgage servicing rights associated with such loans.
For the year ended December 31, 1995, Provident Bank originated approximately
$83.3 million in residential real estate loans.
Although mortgage banking is expected to remain an important part of
Provident Bank's operations, it has recently scaled back the resources it had
committed to the mortgage banking business. The ability to sell mortgages to
the secondary market requires compliance with strict underwriting standards.
There can be no assurance the underwriting standards will be met or income
from mortgage banking can be achieved. See "BUSINESS--Mortgage Banking
Operations; --Operating Strategy."
ADEQUACY OF ALLOWANCE FOR LOAN LOSSES
In originating loans, there is a substantial likelihood credit losses will
be experienced. The risk of loss varies with, among other things, general
economic conditions, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the quality of the collateral for the loan. Management maintains an allowance
for loan losses based on, among other things, industry standards, management's
experience, historical experience, an evaluation of economic conditions, and
regular reviews of delinquencies and loan portfolio quality. Based upon such
factors, management makes various assumptions and judgments about the ultimate
collectability of the loan portfolio and provides an allowance for potential
loan losses based upon a percentage of the outstanding balances and for
specific loans when their ultimate collectability is considered questionable.
As of June 30, 1996, the allowance for possible loan losses was $2.6
million, which represented 1.44% of total loans, and loans in non-accrual
status totaled $900,000. As of December 31, 1995, the allowance for possible
loan losses was $2.7 million, which represented 1.65% of total loans, and
loans in non-accrual status totaled $1.7 million. The Company intends to
review its allowance for loan losses on a monthly basis and to provide
increases in the allowance, if necessary.
The Banks actively manage past due and non-performing loans in an effort to
minimize credit losses and monitor asset quality to maintain an adequate loan
loss allowance. Although management believes its allowance for loan losses is
adequate, there can be no assurance the allowance will prove sufficient to
cover future loan losses. Further, future adjustments may be necessary if
economic conditions differ substantially from the assumptions used or adverse
developments arise with respect to the Banks' non-performing or performing
loans. Accordingly, there can be no assurance the allowance for loan losses
will be adequate to cover loan losses or significant increases to the
allowance will not be required in the future if economic conditions should
worsen. Material additions to the Banks' allowance for loan losses would
result in a decrease in the Company's net income. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Allowance for
Loan Losses."
ANTI-TAKEOVER MEASURES
The Company has adopted certain provisions in its Amended and Restated
Articles of Incorporation and Restated Bylaws that may be considered as having
the effect of discouraging attempts to take over control of the Company. In
addition, the employment agreements of Mr. Gullion and Mr. Bouchey may require
the Company to make certain cash payments to them following a change in
control of the Company. Such provisions may benefit the Company's stockholders
if a takeover were attempted with a view to impose a merger, a sale of all or
9
<PAGE>
any part of the assets of the Company or a similar transaction that may not be
in the best interests of all of the stockholders. On the other hand, the anti-
takeover provisions could adversely affect stockholders of the Company by
discouraging takeovers that are structured in a way that would be favorable to
the interests of the stockholders. See "MANAGEMENT; DESCRIPTION OF SECURITIES."
Various banking statutes may also have the effect of preventing or delaying a
change of control of the Company. See "SUPERVISION AND REGULATION."
DIVIDENDS ON COMMON STOCK
The Company has not paid any cash dividends on its Common Stock and does not
presently anticipate paying cash dividends in the foreseeable future. The
availability of funds for distributions to stockholders will depend
substantially on the earnings of the Banks and their ability to pay dividends
to the Company. Even if earnings are available, the Banks' payment of dividends
is restricted by federal and state regulations. See "DIVIDENDS; SUPERVISION AND
REGULATION--Dividends."
ABSENCE OF PRIOR MARKET; SHARES ELIGIBLE FOR FUTURE SALES; DILUTION
The Company's Common Stock has been approved for quotation on the NASDAQ
National Market, subject to notice of issuance. There has been no public market
for the Common Stock and there can be no assurance an active market will
develop following the Offering. The initial public offering price has been
determined by negotiation between the Company and the Underwriters and will not
necessarily reflect the market price of the Common Stock after the Offering or
the price at which the Common Stock may be sold in the future. In addition, the
public markets have from time to time experienced price and volume volatility.
These fluctuations may be unrelated to the operating performance of particular
companies whose shares are traded on such markets. Market fluctuations may
adversely affect the market price of the Common Stock. The market price could
be subject to significant fluctuations in response to the Company's operating
results, the results of its competitors, government regulation, litigation and
other factors. Market prices of the Common Stock may be adversely affected by
sales of shares of Common Stock which become eligible for sale after the
Offering. Further, investors purchasing shares in this Offering will experience
immediate and substantial dilution. See "DILUTION; SHARES ELIGIBLE FOR FUTURE
SALE; UNDERWRITING."
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be approximately $15.8 million ($18.2 million if the
Underwriters' over-allotment option is exercised) after deducting the
Underwriting discount and estimated expenses of the Offering and assuming an
initial public offering price of $8.75 per share (the mid-point of the price
range set forth on the cover page of this Prospectus).
The Company intends to use the net proceeds of this Offering as follows: (i)
to repay a $6.6 million note payable that is due on demand or no later than
March 1, 1997 and bears interest at 6%, (ii) to make a $3 million capital
contribution to Exchange Bank to support its internal growth, (iii) to finance
the Company's growth strategy and (iv) for general corporate purposes. Pending
use of the proceeds for such purposes, the Company expects to invest the
proceeds of the Offering in short-term investment grade securities.
MARKET FOR COMMON STOCK
Prior to this Offering there has been no public market for the Common Stock.
Following completion of the Offering, the Common Stock will be listed for
trading on the NASDAQ National Market under the symbol "GLDB." As of September
15, 1996, there were 2,000,000 shares of Common Stock outstanding held by 65
stockholders of record.
There has been limited trading of the Common Stock. Management has reviewed
available Company records of purchases and sales of Common Stock and according
to such records, there have been 6 trades since January 1995 involving, in the
aggregate, 76,681 shares of Common Stock, all of which traded at $7.50 per
share. Five of those trades involved officers at the Company.
DIVIDENDS
The holders of Common Stock are entitled to receive cash dividends when and
if declared by the Board of Directors of the Company out of funds legally
available therefor. The Company has not declared or paid cash dividends in the
past and expects in the foreseeable future it will retain all future earnings
for the growth and development of its business. The primary source of funds
available to the Company is the payment of dividends by the Banks and tax
transfers from the filing of consolidated tax returns. Regulations limit the
amount of dividends that may be paid by the Banks to the Company without prior
approval of their respective regulatory agencies. See "SUPERVISION AND
REGULATION."
11
<PAGE>
CAPITALIZATION
The following table, which should be read in conjunction with the financial
information contained elsewhere in this Prospectus, sets forth the
capitalization of the Company at June 30, 1996, and as adjusted to reflect the
issuance of the 2,000,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $8.75 per share (the mid-point of the price
range set forth on the cover page of this Prospectus) and the application of
the estimated net proceeds of the Offering.
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------
ACTUAL AS ADJUSTED(1)
------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Borrowings:
Federal funds purchased.............................. $ 1,800 $ 1,800
Repurchase agreements................................ 16,092 16,092
Long-term Federal Home Loan Bank borrowings.......... 1,797 1,797
Note payable......................................... 6,620 -0-
------- -------
Total borrowings................................... $26,309 $19,689
======= =======
Stockholders' equity:
Common stock, $1.00 par value, 15,000,000 shares
authorized; 2,000,000 shares issued and outstanding;
4,000,000 shares as adjusted for the Offering....... $ 2,000 $ 4,000
Additional paid-in capital........................... 949 14,724
Retained earnings.................................... 9,068 9,068
Unrealized loss on available-for-sale securities,
net................................................. (927) (927)
------- -------
Total stockholders' equity......................... $11,090 $26,865
======= =======
</TABLE>
- --------
(1) Assumes no exercise of the Underwriters' over-allotment option.
The following table shows the capital ratios required by the Federal Reserve
to be maintained by the Company, and the Banks' actual and pro forma ratios of
capital to total regulatory and risk-weighted assets, as applicable, as of
June 30, 1996.
<TABLE>
<CAPTION>
BANKS' BANKS'
COMPANY ACTUAL AT ADJUSTED AT
REGULATORY JUNE 30, JUNE 30,
MINIMUM 1996 1996(1)(2)(3)
---------- --------- -------------
<S> <C> <C> <C>
Tier 1 risk-based capital.................... 4.00% 6.76% 16.04%
Total risk-based capital..................... 8.00% 8.02% 17.30%
Leverage ratio............................... 4.00% 4.00% 9.40%
</TABLE>
- --------
(1) Assumes the net proceeds of the Offering were invested in assets that have
a risk-weight equivalent to investment securities assigned to the 20%
category at June 30, 1996.
(2) Assumes the net proceeds of the Offering were received on June 30, 1996.
(3) Assumes no exercise of the Underwriters' over-allotment option.
12
<PAGE>
DILUTION
The net tangible book value (stockholders' equity less goodwill) of the
Company as of June 30, 1996 was $10.6 million or $5.29 per share. Giving
effect to the sale by the Company of 2,000,000 shares of Common Stock at an
estimated offering price of $8.75 per share, and assuming underwriting
commissions and expenses of the Offering equal 10% of gross proceeds, the pro
forma net tangible book value of the Company at June 30, 1996, would have been
$26.3 million, or $6.59 per share, representing an immediate increase in the
net tangible book value of $1.30 per share to present stockholders and an
immediate dilution of $2.16 per share to new investors purchasing shares at
the assumed public offering price. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed Public Offering Price............................... $8.75
Net tangible book value before Offering..................... $5.29
Increase attributable to payment for shares purchased by new
investors.................................................. $1.30
-----
Pro forma net tangible book value after Offering(1)......... $6.59
-----
Dilution to new investors................................... $2.16
=====
</TABLE>
- --------
(1) Pro forma net tangible book value per share is determined by dividing the
number of common shares outstanding into the net tangible book value of
the Company.
The following table summarizes the difference between the number of shares
purchased from the Company, the total investment (inclusive of retained
earnings and unrealized gains/losses on available for sale securities), and
the average price per share paid by existing stockholders (inclusive of
retained earnings and unrealized gains/losses on available for sale
securities) and by new investors purchasing shares of Common Stock from the
Company pursuant to the Offering as of June 30, 1996.
<TABLE>
<CAPTION>
SHARES % OF TOTAL %OF AVG. PRICE
PURCHASED TOTAL CONSIDERATION TOTAL PER SHARE
--------- ----- ------------- ----- ----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Existing Stockholders.......... 2,000,000 50.0% $11,090 38.8% $5.54
New Investors(1)............... 2,000,000 50.0% $17,500 61.2% $8.75
--------- ----- ------- -----
Total...................... 4,000,000 100.0% $28,590 100.0%
========= ===== ======= =====
</TABLE>
- --------
(1) Assumes an initial public offering price of $8.75 per share (the mid-point
of the price range set forth on the cover page of this Prospectus).
Assumes the Underwriters' over-allotment option is not exercised.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data for the
Company. The data for the fiscal years ended December 31, 1995, 1994 and 1993
is derived from audited financial statements of the Company. The data for the
six month periods ended June 30, 1996 and 1995 has been derived from unaudited
financial statements of the Company which, in the opinion of management,
contain normal, recurring adjustments necessary for the fair presentation of
the results of such periods. Operating results for the six months ended June
30, 1996 are not necessarily indicative of results that may be expected for
the entire fiscal year ending December 31, 1996. The selected financial data
should be read in conjunction with, and are qualified in its entirety by, the
consolidated financial statements of the Company and Management's Discussion
and Analysis of Financial Condition and Results of Operations included
elsewhere herein.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS AT OR FOR THE
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........... $ 280,097 $ 233,686 $ 263,957 $ 221,174 $ 176,952
Loans receivable, net.. 179,473 153,252 161,470 136,241 90,687
Investment securities.. 72,527 60,076 67,375 67,807 57,159
Federal funds sold..... 1,425 5,075 5,900 -- 8,430
Deposits............... 241,111 200,404 226,381 186,429 149,464
Repurchase agreements.. 16,092 10,892 15,638 7,476 12,071
Federal funds
purchased............. 1,800 -- -- 6,850 --
Long-term debt and
other borrowings...... 8,417 9,043 8,992 9,087 4,987
Preferred stockholders'
equity................ -- 65 65 65 65
Common stockholders'
equity................ 11,090 12,010 11,257 9,899 8,803
INCOME STATEMENT DATA:
Interest income........ $ 10,347 $ 8,831 $ 18,431 $ 15,349 $ 11,281
Interest expense....... 5,990 4,756 10,045 7,759 5,874
---------- ---------- ---------- ---------- ----------
Net interest income.... 4,357 4,075 8,386 7,590 5,407
Provision for loan
losses................ 60 129 1,284 147 296
---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses........... 4,297 3,946 7,102 7,443 5,111
Non-interest income.... 1,131 410 1,938 1,347 1,419
Non-interest expense... 4,341 3,729 8,001 6,619 4,481
---------- ---------- ---------- ---------- ----------
Income before income
taxes................. 1,087 627 1,039 2,171 2,049
Income tax expense..... 372 218 335 777 731
---------- ---------- ---------- ---------- ----------
Net income............. $ 715 $ 409 $ 704 $ 1,394 $ 1,318
========== ========== ========== ========== ==========
COMMON SHARE DATA:
Net income per share... $ .36 $ .20 $ .34 $ .69 $ .71
Book value per common
share................. $ 5.54 $ 5.87 $ 5.63 $ 4.85 $ 4.78
Tangible book value per
common share.......... $ 5.29 $ 5.61 $ 5.36 $ 4.58 $ 4.49
Weighted average shares
outstanding........... 2,001,825 2,069,517 2,063,415 2,012,894 1,860,106
FINANCIAL RATIOS AND
OTHER DATA:
Net interest
margin(1)(6).......... 3.57% 3.93% 3.93% 3.76% 3.57%
Net interest spread(1). 3.37% 3.74% 3.72% 3.63% 3.40%
Return on average
assets(1)............. 0.54% 0.36% 0.30% 0.64% 0.80%
Return on average
equity(1)............. 12.82% 7.43% 6.09% 14.96% 16.90%
Leverage ratio(2)(3)... 4.00% 5.12% 4.62% 4.32% 5.02%
Tier 1 risk-based
capital(3)............ 6.76% 8.20% 6.99% 8.33% 8.27%
Total risk-based
capital(3)............ 8.02% 9.46% 8.25% 9.59% 9.53%
Non-performing assets
to total assets....... 0.34% 0.31% 0.72% 0.30% 0.42%
Non-performing loans to
total loans........... 0.48% 0.36% 1.06% 0.29% 0.74%
Allowance for loan
losses to total loans. 1.44% 1.36% 1.65% 1.48% 1.28%
Allowance for loan
losses to non-
performing loans(4)... 303.47% 376.33% 155.94% 511.75% 172.75%
Net loan charge-offs
(recoveries) to
average loans......... 0.09% (0.03)% 0.41% 0.01% 0.09%
Efficiency ratio(5).... 79.10% 83.14% 77.50% 74.06% 65.65%
</TABLE>
- --------
(1) Information is annualized for the periods ended June 30, 1996 and 1995.
(2) The leverage ratio is defined as the ratio of Tier 1 capital to average
total assets.
(3) The minimum regulatory capital ratios for the Company are: Tier 1
capital--4.00%; total risk-based capital--8.00%; and leverage ratio--
4.00%.
(4) Non-performing loans consist of non-accrual loans and accruing loans
contractually past due 90 days or more.
(5) The efficiency ratio represents total non-interest expense divided by net
interest income plus total non-interest income.
(6) Represents net interest income as a percentage of average interest earning
assets. Calculation is shown tax-effected for tax exempt interest income.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's principal asset is its ownership of the Banks. Accordingly,
the Company's net income is dependent upon the combined results of operations
of the Banks. Each Bank conducts a commercial and consumer banking business
that consists of attracting deposits from the general public and redeploying
those funds to earning assets. Each Bank's profitability depends primarily on
net interest income, which is the difference between interest income generated
from interest-earning assets, primarily consisting of loans and investments,
and interest expense incurred on interest-bearing liabilities, primarily
consisting of customer deposits and borrowed funds. Net interest income is
affected by the balances of interest-earning assets and interest-bearing
liabilities and each Bank's interest rate spread, which is the difference
between the average yield earned on its interest-earning assets and the
average rate paid on its interest-bearing liabilities. The interest rate
spread is impacted by, among other factors, changes in interest rates, deposit
flows and loan demand. See "--Asset/Liability Management; RISK FACTORS--Asset
Liability Management."
The Company's profitability is also affected by the level of non-interest
income of the Banks and non-interest expense of the Company and the Banks.
Non-interest income consists primarily of loan fees, service fees, other fees
and income from the gain on the sale of loans and investment securities. Non-
interest expense consists of compensation and benefits, occupancy related
expenses, deposit insurance premiums, expenses of opening branch offices and
other operating expenses. The Company's profitability is further impacted by
the Company's effective tax rate, the Banks' provision for loan losses, and
various extraordinary items.
In March 1994, the Company purchased Provident Bancshares, Inc.
("Provident"), together with its wholly-owned subsidiary, Provident Bank, a
federal savings bank with $58 million in assets at the time of purchase. See
"BUSINESS--History." This transaction was partially financed through the sale
by the Company on June 30, 1994 of Peoples Bank, N.A. ("Peoples"), a rural $23
million asset bank. Provident Bank has a mortgage banking division with a
substantial residential loan portfolio. It sells in the secondary market
residential real estate loans it originates, usually together with the
servicing rights associated with such loans. For the six-month period ended
June 30, 1996 and for the years ended December 31, 1995 and 1994, the
Provident Bank mortgage banking operation originated approximately $43.2
million, $83.3 million and $12.1 million, respectively, in residential real
estate loans.
In the first quarter of 1995, the Company restructured its investment
portfolio to shift the maturity of its portfolio to a shorter term. Included
in this restructuring were the sale of bonds resulting in significant losses
included in other income. See "--Non-Interest Income."
In 1995, management of the Company set a goal to achieve an allowance for
loan loss reserves to loans ratio of approximately 1.4%. This goal was based
upon several factors, including the changing loan mix and the portfolio growth
resulting from the expansion into suburban Kansas City. In 1995, the Company
made significant additions to its allowance for loan losses in order to meet
this goal. The additions had a significant negative impact on earnings for
1995. See "--Provision for Loan Losses; --Allowance for Loan Losses."
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 AND 1995
The Company's net income was $715,000 for the six months ended June 30, 1996,
compared to net income of $409,000 for the six months ended June 30, 1995,
yielding an annualized return on average assets ("ROA") of .54% for the six
months ended June 30, 1996, compared with .36% for the six months ended June
30, 1995. Return on average common stockholders' equity ("ROE") on an
annualized basis for the same 1996 and 1995 six-month periods was 12.82% and
7.43%, respectively. The primary reason for the earnings increase in 1996 was
the negative impact on the Company's net income in the first half of 1995
related to losses from the sale of bonds. See "--Investment Portfolio."
15
<PAGE>
Total assets were $280.1 million at June 30, 1996, an increase of $46.4
million or 19.85% from $233.7 million at June 30, 1995. Total average assets
were $264.9 million for the six months ended June 30, 1996, compared to $226.2
million for the six months ended June 30, 1995. Average interest-earning
assets were $245.9 million for the six months ended June 30, 1996 and $209.7
million for the same period in 1995. Assets increased primarily because of the
opening of Exchange Bank's Leawood, Kansas location and growth at its Shawnee,
Kansas location.
The Company's loans totalled $179.5 million and $153.3 million, net, as of
June 30, 1996 and 1995, respectively. Increases in total loans of $26.2
million and the net increase in investment securities of $12.5 million during
the six month period in 1996 compared to the same period in 1995, were funded
through increases in deposits of $40.7 million, repurchase agreements of $5.2
million, and federal funds purchased of $1.8 million. The allowance for loan
losses increased to $2.6 million at June 30, 1996 from $2.1 million at June
30, 1995. This represented 1.44% and 1.36% of total loans as of June 30, 1996
and 1995, respectively. See "--Allowance for Loan Losses."
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
Net income for the year ended 1995 was $704,000, a decrease of $690,000 or
49.50% over 1994, primarily as a result of additional provisions for loan
losses made by the Company in support of the significant loan growth and
general risk associated therewith. See "--Provision for Loan Losses." Net
income in 1994 was $1.4 million, an increase of $76,000 or 5.77% over 1993.
ROA was .30%, .64% and .80% for the years ended December 31, 1995, 1994 and
1993, respectively. ROE was 6.09%, 14.96% and 16.90% in 1995, 1994 and 1993,
respectively.
The Banks' total assets at December 31, 1995 were $263.9 million, an
increase of $42.8 million from December 31, 1994. See "--Lending Activities."
Total average assets were $232.4 million and $217.2 million for the years
ended December 31, 1995 and 1994, respectively. Average interest-earning
assets were $215.6 million and $204.3 million for the years ended December 31,
1995 and 1994, respectively. Total assets increased by 19.34% and 24.99% for
these two years, primarily through internal growth and acquisition activity.
The Banks' loans at December 31, 1995 totaled $161.4 million, net, up from
$136.2 million at December 31, 1994. Of this total, $101.9 million consisted
of real estate loans, $38.7 million of commercial loans, $12.5 million of
consumer and other loans and $11.0 million of agricultural loans. Loans held
for sale were $6.7 million. The allowance for loan losses increased from $2.0
million at December 31, 1994 to $2.7 million at December 31, 1995. The loan
loss allowance represented approximately 1.65% of total loans, up from 1.48%
at December 31, 1994 because of management's decision to increase the
allowance for loan losses as a percentage of total loans. See "--Provision for
Loan Losses."
NET INTEREST INCOME
Net interest income is interest earned on interest-earning assets less
interest accrued on interest-bearing liabilities. Interest-earning assets are
categorized as loans, investment securities and other earning assets, which
include Federal Funds sold and certificates of deposit issued from other
financial institutions. Interest-bearing liabilities are categorized as
customer deposits, time and savings deposits and other borrowings including
Federal Funds borrowed, short-term borrowings and long-term debt.
Average total earning assets increased $30.2 million or 14.03% at June 30,
1996, compared to the period ended December 31, 1995. The increase is
primarily the result of the opening of Exchange Bank's branch facility in
Leawood, Kansas in the fourth quarter of 1995 as well as the continued growth
in loans at the Shawnee branch. Total interest income for the six months ended
June 30, 1996 was $10.3 million, a $1.5 million or 17.17% increase over the
comparable 1995 period. Average total earning assets increased by $11.3
million and $50.2 million or 5.55% and 32.56% for the years ended 1995 and
1994, respectively. For 1995, the growth was
16
<PAGE>
primarily generated through expansion in Shawnee and Leawood, two Johnson
County, Kansas suburbs southwest of Kansas City, while the growth in 1994 was a
combination of growth in the Kansas City area and the acquisition of Provident
Bank. Average total loans for the years 1995 and 1994 increased by $28.6
million and $43.2 million or 23.62% and 55.58%, respectively. The increase is
attributed to the Company's successful operation of the Shawnee and Leawood
branches. The larger balance of average earning assets was the primary reason
for the $3.1 million and $4.1 million or 20.08% and 36.06% increases for 1995
and 1994, respectively, of interest earned on average total earning assets.
Average total interest-bearing liabilities increased by $30.0 million or
14.54% over the six months ended June 30, 1996, primarily due to increased
volume of time deposits originated by Exchange Bank in connection with the
opening of its Leawood location. Total interest expense for this period was
25.95% higher than the comparable period in 1995 as a result of the increases
in interest-bearing liabilities and interest rates. Average total interest-
bearing liabilities increased by $9.1 million and $49.5 million or 4.61% and
33.47%, respectively, for the years ended 1995 and 1994. These liability
increases are consistent with the asset growth activities of the Company during
the same periods. Total interest expense in the years 1995, 1994 and 1993 was
$10.0 million, $7.8 million and $5.9 million, or increases in 1995 and 1994 of
29.46% and 32.09%, respectively, over the previous year. The disproportionate
increase in interest expense as compared to liabilities for the twelve months
ended December 31, 1995 was the result of rising interest rates. See "--Deposit
Activities; RISK FACTORS--Asset/Liability Management."
Net interest income was $4.4 million for the six months ended June 30, 1996,
compared to $4.1 million for the comparable period in 1995, an increase of
6.92%. This modest growth is attributed to an increase in interest expense in
connection with offering above-market rates on time deposits to promote the
opening of Exchange Bank's Leawood branch. Net interest income for the years
ended December 31, 1995, 1994 and 1993 was $8.4 million, $7.6 million and $5.4
million, respectively, or increases in 1995 and 1994 of 10.49% and 40.37%,
respectively, over the previous year. These increases are attributed to an
increased earning asset base resulting from the acquisition of Provident in
1994 and new loan production in the Shawnee and Leawood branches in 1995 and
1994. The increase in investment securities and other earning assets, which
consist primarily of Federal Funds sold, over the six months ended June 30,
1996 is the result of promotional rates offered in connection with the opening
of Exchange Bank's Leawood branch in the fourth quarter of 1995. The promotion
attracted a large amount of deposits that were invested by the Company pending
disbursal as loans. Non-interest bearing liabilities include interest accrued
on interest bearing accounts as well as accrued tax liabilities, but is
primarily composed of non-interest bearing demand deposits. The steady increase
in this account is attributed to new deposits at Exchange Bank's Leawood and
Shawnee locations. The decrease in demand deposits during 1994 as compared to
1995 is the result of the sale of Peoples in 1994. Provident Bank, which was
acquired in connection with the sale of Peoples, had very few customer
transaction accounts at the time it was acquired. See "--Deposit Activities."
17
<PAGE>
The following table presents the Company's average balances, interest earned
or accrued, and the related yields and rates on major categories of the
Company's interest-earning assets and interest-bearing liabilities for the
periods indicated:
COMPARATIVE AVERAGE BALANCES, YIELDS AND RATES
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------------------
1996 1995
------------------------- -------------------------
AVERAGE AVERAGE
INTEREST RATE INTEREST RATE
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID(1) BALANCE EXPENSE PAID(1)
-------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans, net(2)............. $164,151 $8,026 9.78% $142,842 $6,811 9.54%
Investment securities(3).. 70,559 2,017 5.77 61,525 1,865 6.14
Other earning assets...... 11,145 304 5.46 5,367 155 5.78
-------- ------ ---- -------- ------ ----
Total interest-earning
assets.................. 245,855 10,347 8.44% 209,734 8,831 8.46%
------ ------
Non-interest-earning
assets.................... 19,087 16,436
-------- --------
Total assets.............. $264,942 $226,170
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing
liabilities:
Savings deposits and
interest-bearing
checking................. $ 60,403 $ 794 2.63% $ 55,377 $ 950 3.43%
Time deposits............. 154,045 4,547 5.90 124,650 3,174 5.09
Short-term borrowings..... 13,220 384 5.81 12,532 321 5.12
Long-term borrowings(4)... 8,683 265 6.10 9,131 311 6.81
-------- ------ ---- -------- ------ ----
Total interest-bearing
liabilities............. 236,351 5,990 5.07% 201,690 4,756 4.72%
------ ------
Non-interest-bearing
liabilities............... 17,436 13,476
Stockholders' equity....... 11,155 11,004
-------- --------
Total liabilities and
stockholders' equity..... $264,942 $226,170
======== ========
Net interest income........ $4,357 $4,075
====== ======
Net interest spread........ 3.37% 3.74%
==== ====
Net interest margin(5)..... 3.57% 3.93%
==== ====
</TABLE>
- --------
(1) Annualized for comparability with full year data.
(2) Non-accruing loans included in computation of average balance.
(3) Yield is adjusted for the tax effect of tax exempt securities.
(4) Includes a borrowing that financed acquisition activities and had an
outstanding balance of $6.6 million at June 30, 1996. See Note 7 to the
audited consolidated financial statements. Also includes FHLB borrowings
of the Banks.
(5) The net yield on average earning assets is the net interest income divided
by average interest-earning assets.
18
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1995 1994 1993
------------------------- ------------------------- -------------------------
AVERAGE AVERAGE AVERAGE
INTEREST RATE INTEREST RATE INTEREST RATE
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID BALANCE EXPENSE PAID BALANCE EXPENSE PAID
-------- -------- ------- -------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans, net(1).......... $149,578 $14,486 9.68% $120,993 $10,725 8.86% $ 77,767 $6,562 8.44%
Investment
securities(2)......... 59,433 3,563 6.14 78,281 4,385 5.72 73,122 4,615 6.43
Other earning assets... 6,601 382 5.79 5,005 239 4.77 3,209 104 3.24
-------- ------- ---- -------- ------- ---- -------- ------ ----
Total interest-earning
assets............... 215,612 18,431 8.59% 204,279 15,349 7.56% 154,098 11,281 7.38%
------- ------- ------
Non-interest-earning
assets................. 16,750 12,887 10,920
-------- -------- --------
Total assets........... $232,362 $217,166 $165,018
======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing
liabilities:
Savings deposits and
interest-bearing
checking.............. $ 55,819 $ 1,726 3.09% $ 60,987 $ 1,687 2.77% $ 50,960 $1,440 2.83%
Time deposits.......... 129,543 7,078 5.46 116,593 5,102 4.38 88,492 4,034 4.56
Short-term borrowings.. 11,677 639 5.47 9,307 392 4.21 4,344 154 3.55
Long-term
borrowings(3)......... 9,300 602 6.47 10,353 578 5.58 3,977 246 6.19
-------- ------- ---- -------- ------- ---- -------- ------ ----
Total interest-bearing
liabilities.......... 206,339 10,045 4.87% 197,240 7,759 3.93% 147,773 5,874 3.98%
------- ------- ------
Non-interest-bearing
liabilities............ 14,463 10,610 9,446
Stockholders' equity.... 11,560 9,316 7,799
-------- -------- --------
Total liabilities and
stockholders' equity.. $232,362 $217,166 $165,018
======== ======== ========
Net interest income..... $ 8,386 $ 7,590 $5,407
======= ======= ======
Net interest spread..... 3.72% 3.63% 3.40%
==== ==== ====
Net interest margin(4).. 3.93% 3.76% 3.57%
==== ==== ====
</TABLE>
- --------
(1) Non-accruing loans included in computation of average balance.
(2) Yield is adjusted for the tax effect of tax exempt securities.
(3) Includes a borrowing that financed acquisition activities and had an
outstanding balance of $6.6 million at June 30, 1996. See Note 7 to the
audited consolidated financial statements. Also includes FHLB borrowings
of the Banks.
(4) The net yield on average earning assets is the net interest income divided
by average interest-earning assets.
19
<PAGE>
The following table presents the components of changes in the Company's net
interest income as attributed to volume and rate on a tax-equivalent basis.
The net change attributable to the combined impact of volume and rate has been
solely allocated to the change in rate.
RATE/VOLUME INTEREST ANALYSIS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996 COMPARED
TO JUNE 30, 1995
-----------------------
AVERAGE AVERAGE TOTAL
VOLUME RATE CHANGE
------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME:
Loans................................................. $1,016 $ 199 $1,215
Investment securities................................. 277 (125) 152
Other earning assets.................................. 167 (18) 149
------ ----- ------
Total interest income............................... $1,460 $ 56 $1,516
------ ----- ------
INTEREST EXPENSE:
Savings deposits and interest bearing checking........ $ 86 $ 24 $ 110
Time deposits......................................... 748 359 1,107
Short-term borrowings................................. 18 55 73
Long-term borrowings(1)............................... (15) (41) (56)
------ ----- ------
Total interest expense.............................. $ 837 $ 397 $1,234
------ ----- ------
Change in net interest income........................... $ 623 $(341) $ 282
====== ===== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 COMPARED TO 1994 1994 COMPARED TO 1993
------------------------ ----------------------
AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL
VOLUME RATE CHANGE VOLUME RATE CHANGE
------- ------- ------ ------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans....................... $ 2,533 $1,228 $3,761 $3,648 $ 515 $4,163
Investment securities....... (1,078) 256 (822) 332 (562) (230)
Other earning assets........ 76 67 143 58 77 135
------- ------ ------ ------ ----- ------
Total interest income..... $ 1,531 $1,551 $3,082 $4,038 $ 30 $4,068
------- ------ ------ ------ ----- ------
INTEREST EXPENSE:
Savings deposits and
interest bearing checking.. $ (143) $ 182 $ 39 $ 284 $ (37) $ 247
Time deposits............... 567 1,409 1,976 1,281 (213) 1,068
Short-term borrowings....... 100 147 247 176 62 238
Long-term borrowings(1)..... (59) 83 24 395 (63) 332
------- ------ ------ ------ ----- ------
Total interest expense.... $ 465 $1,821 $2,286 $2,136 $(251) $1,885
------- ------ ------ ------ ----- ------
Change in net interest income. $ 1,066 $ (270) $ 796 $1,902 $ 281 $2,183
======= ====== ====== ====== ===== ======
</TABLE>
- --------
(1) Includes a borrowing that financed acquisition activities and had an
outstanding balance of $6.6 million at June 30, 1996. See Note 7 to the
audited consolidated financial statements. Also includes FHLB borrowings
of the Banks.
PROVISION FOR LOAN LOSSES
The targeted level of loan loss allowance is based on management's review of
the loan portfolio. Management reviews the loans by type and nature of
collateral and establishes an appropriate provision for loan losses based upon
industry standards, management's experience, historical charge-off experience,
the present and
20
<PAGE>
prospective financial condition of specific borrowers, industry concentrations
within the loan portfolio, size of credit, existence and quality of any
collateral, profitability and general economic conditions. The Banks have
experienced relatively low delinquency and default rates in their portfolio,
due in part to adherence to established underwriting guidelines. Management of
the Banks review their allowance for loan losses on a monthly basis and
increase the allowance, if necessary, based on the results of this review.
Management believes the allowance for loan losses is adequate based on its
assessment of the risks of loan defaults.
In 1995, the Company substantially increased its allowance for loan losses
based upon an analysis of several factors, including the changing loan mix and
portfolio growth resulting from the expansion into suburban Kansas City. Based
on its future business and lending plans, and depending upon specific facts
and circumstances with respect to certain loans and general economic
conditions, management expects to maintain its allowance, as a percentage of
total loans, at a level consistent with that as of June 30, 1996. See "--
Allowance for Loan Losses."
NON-INTEREST INCOME
Non-interest income for the six months ended June 30, 1996, was $1.1
million, an increase of $721,000 from the comparable period in 1995. The
increase is primarily a result of securities losses incurred in the first half
of 1995 and the gain on the sale of mortgage loans in the first half of 1996.
See "--Investment Activities."
Non-interest income was $1.9 million, $1.3 million and $1.4 million in 1995,
1994 and 1993, respectively, a change in 1995 and 1994 of 43.88% and (5.07)%,
respectively, from the previous year. Income from service charges increased
because the Banks have raised the rates for services. The increase in the gain
on the sale of mortgage loans occurred in connection with the acquisition of
Provident Bank and its mortgage banking operation in the middle of 1994. The
Company has incurred periodic gains and losses in connection with the sale of
securities to meet its liquidity needs and in anticipation of changes in
interest rates.
The following table presents the components of the Company's non-interest
income for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE YEAR ENDED DECEMBER
30, 31,
------------ ----------------------
1996 1995 1995 1994 1993
------ ---- ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts...... $ 256 $226 $ 495 $ 483 $ 354
Gain (loss) on sale of loans............. 699 331 1,058 107 --
Gain (loss) on sale of securities........ -- (409) (84) (243) 729
Insurance premium income................. 9 32 58 52 87
Fiduciary income......................... 58 50 125 96 85
Other non-interest income................ 109 180 286 852 164
------ ---- ------ ------ ------
Total non-interest income............ $1,131 $410 $1,938 $1,347 $1,419
====== ==== ====== ====== ======
Non-interest income as a percentage of
average total assets (interim periods
annualized)............................. 0.43% 0.18% 0.83% 0.62% 0.86%
====== ==== ====== ====== ======
</TABLE>
In June 1994, Provident Bank opened a loan production office in Prairie
Village, Johnson County, Kansas. Management of the Company concluded in the
second quarter of 1996 that the expenses associated with such office warranted
a substantial modification in the manner in which the mortgage banking
business was conducted by Provident Bank in Johnson County, Kansas. As a
result, the Company began in the third quarter of 1996 to streamline its
Johnson County mortgage banking operations by reducing significantly the
personnel in the Johnson County mortgage origination office and eliminating
certain support positions in the Provident Bank office in St. Joseph. The
Johnson County mortgage banking operations will be moved into Exchange Bank's
Leawood facility. The Company will seek to create arrangements with
residential builders and developers, many of which are existing customers of
the Banks, in order to develop a mortgage origination system. These changes
are expected by the Company's management to permit the Company to operate its
mortgage banking business in Johnson County more efficiently, but are also
expected to decrease significantly the Company's revenue from the sale of
loans. See "BUSINESS--Operating Strategy."
21
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense increased by $612,000 for the six months ended June 30,
1996, as compared to the same period in 1995. This increase was primarily due
to the addition of employees at the newly opened Leawood branch and Provident
Bank's mortgage loan production office and also was affected by annual
increases in salaries and employee benefits and the addition of both executive
and controller positions at the Company. Net occupancy expense increased due to
remodeling projects that were completed in Shawnee and St. Joseph, and because
Exchange Bank's new Leawood branch was not open in the first half of 1995.
Offsetting these increased expenses was an industry wide decrease in FDIC
insurance premiums on commercial bank deposits. As a percentage of average
assets, non-interest expense was 3.28% and 3.30% on an annualized basis as of
June 30, 1996 and 1995, respectively.
Non-interest expense increased $1.4 million or 20.88% and $2.1 million or
47.71% over the years ended December 31, 1995 and 1994, respectively. These
increases are a result of several factors. Salaries and employee benefits
expenses increased in 1995 by $1.1 million or 30.08%, primarily due to the
growth of Provident Bank's loan production office in Prairie Village, Kansas in
June of 1994, the addition of new personnel at Exchange Bank's branch in
Shawnee in connection with its significant expansion and the staffing of
Exchange Bank's new branch in Leawood. In 1994, salary and benefits increased
$1.1 million or 49.01% primarily from the addition of new personnel in
connection with the acquisition of Provident Bank. Occupancy expense also
increased in 1994 as a result of the acquisition of Provident Bank. A slight
increase in 1995 occupancy expense occurred because of the opening of the new
Leawood branch location and various renovation projects at the end of 1995.
Also, data processing expenses increased in concert with Provident Bank's loan
volume and as a result of the opening of the new Leawood branch. As a
percentage of average assets, non-interest expense was 3.44%, 3.05% and 2.72%
for the years 1995, 1994 and 1993, respectively.
The following table presents the components of non-interest expense for the
periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE YEAR ENDED DECEMBER
30, 31,
-------------- ----------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits.......... $2,605 $2,001 $4,438 $3,393 $2,277
Net occupancy expense................... 518 467 980 956 504
Deposit insurance expense............... 66 233 332 479 365
Professional services................... 165 176 467 445 360
Data processing expense................. 141 115 202 107 38
Supplies................................ 135 93 206 161 116
Telephone............................... 82 66 137 85 48
Postage................................. 78 67 143 100 78
Advertising/promotion................... 160 97 252 195 135
Other................................... 391 414 844 698 560
------ ------ ------ ------ ------
Total non-interest expense.......... $4,341 $3,729 $8,001 $6,619 $4,481
====== ====== ====== ====== ======
Efficiency ratio........................ 79.10% 83.14% 77.50% 74.06% 65.65%
</TABLE>
Management anticipates that the changes contemplated in the mortgage
origination system described above will reduce the rate of future increases in
salary and employee benefits expense of the Company. See "--Non-Interest
Income; BUSINESS--Operating Strategy."
INCOME TAX EXPENSE
Income tax expense for the six months ended June 30, 1996 and June 30, 1995,
and years ended December 31, 1995, 1994 and 1993 was $372,000, $218,000,
$335,000, $777,000 and $731,000, respectively. The effective tax rates for
those periods were 34.2%, 34.8%, 32.3%, 35.8% and 35.7%, respectively. The
effective tax rates differ from the expected federal rate of 34% primarily
because of the additional expense of state taxes offset by tax exempt municipal
securities.
22
<PAGE>
ASSET/LIABILITY MANAGEMENT
Asset liability management refers to management's efforts to minimize
fluctuations in net interest income caused by interest rate changes. This is
accomplished by managing the repricing of interest rate sensitive interest-
earning assets and interest-bearing liabilities. An interest rate sensitive
balance sheet item is one that is able to reprice quickly, through maturity or
otherwise. Controlling the maturity or repricing of an institution's
liabilities and assets in order to minimize interest rate risk is commonly
referred to as gap management. Close matching of the repricing of assets and
liabilities will normally result in little change in net interest income when
interest rates change. A mismatched gap position will normally result in
changes in net interest income as interest rates change.
Along with internal gap management reports, the Company and the Banks use an
external asset/liability modeling service to analyze each Bank's current gap
position. The system simulates the Bank's asset and liability base and
projects future earnings results under several interest rate assumptions. The
Company strives to maintain an aggregate gap position such that changes in
interest rates within ranges determined by management to be reasonable will
not affect net interest income by more than five percent in any twelve month
period. See "RISK FACTORS--Asset/Liability Management."
The following table presents the anticipated maturities or repricing of the
Company's interest-earning assets and interest-bearing liabilities at June 30,
1996. The table may not be indicative of the Company's rate sensitivity
position at other points in time. The balances shown have been derived based
on the financial characteristics of the various assets and liabilities.
Adjustable and floating rate assets are included in the period in which
interest rates are next scheduled to adjust rather than their scheduled
maturity dates. Fixed rate loans are shown in the period in which they are
scheduled to be repaid. Repricing of time deposits is based on their scheduled
maturities. Deposits without a stated maturity are repriced based on known
characteristics of the deposit product.
INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
TERM TO REPRICING
------------------------------------------
OVER 1
1 YEAR TO OVER 5
OR LESS 5 YEARS YEARS TOTAL
-------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans............................. $119,103(/1/) $ 50,267 $12,728 $182,098
Investment securities............. 18,671 38,076 15,780 72,527
Other interest-bearing assets..... 4,780 -- -- 4,780
-------- -------- ------- --------
Total interest-earning assets..... 142,544 88,343 28,508 259,405
-------- -------- ------- --------
Interest-bearing liabilities:
Savings deposits and interest-
bearing checking................. 32,954 35,939 -- 68,793
Time deposits..................... 101,943 53,309 137 155,389
Short-term borrowings............. 16,973 919 -- 17,892
Long-term borrowings.............. 7,005 919 493 8,417
-------- -------- ------- --------
Total interest-bearing
liabilities...................... 158,875 90,986 630 250,491
-------- -------- ------- --------
Interest sensitivity gap............ $(16,321) $( 2,643) $27,878 $ 8,914
======== ======== ======= ========
Cumulative gap...................... $(16,321) $(18,964) $ 8,914
======== ======== =======
Cumulative ratio of interest-earning
assets to
interest-bearing liabilities....... 89.73 % 92.41 % 103.56%
Ratio of cumulative gap to interest-
earning assets..................... (11.45)% (8.21)% 3.44%
</TABLE>
- --------
(1) Includes $42.0 million and $53.4 million of loans that reprice daily and
within six months or less, respectively.
23
<PAGE>
The negative cumulative gap value indicated above for the zero to 5 year
time period means that over these time periods the assets of the Company will
reprice slightly more slowly than will the Company's liabilities. Thus, in a
rising interest rate environment, net interest income can be expected to
decrease and, in a declining interest rate environment, net interest income
can be expected to increase.
FINANCIAL CONDITION
LENDING ACTIVITIES
Real Estate Loans. Real estate loans represent the largest class of loans of
the Company. The Company categorizes real estate loans as follows:
i) Commercial. Commercial real estate loans increased significantly from
December 31, 1993 to December 31, 1995 due primarily to increased lending
activity in the Johnson County suburbs southwest of Kansas City. The June
30, 1996 balance of $25.4 million, an increase of 30.48% over the balance
at December 31, 1995, shows continued growth in the Johnson County market.
ii) Construction. Construction lending consists primarily of single
family construction in Johnson County, Kansas. The Company has experienced
steady growth in the suburban Kansas City market place. The June 30, 1996
balance of $27.5 million, an increase of 38.73% over the balance at
December 31, 1995, reflects continued, although seasonal, growth in the
Johnson County market.
iii) 1 to 4 Family Residential. Loans in this category consist primarily
of owner-occupied residential loans. The Company recognized significant
growth in loans in this category from the acquisition of Provident Bank in
1994. Despite the substantial increase in the origination of new
residential home loans, the portfolio balance did not increase in 1995
because the Company sold all its fixed rate loans on the secondary market.
Since December 31, 1995, the mix of loans has begun to shift from fixed
rate loans to variable rate products. The Company has elected to portfolio
selected variable rate real estate loans, which has resulted in the loan
growth in this category.
iv) Agricultural. This category consists of loans secured by agricultural
real estate. The demand for agricultural real estate loans has remained
flat since December 31, 1993 due to an historically low turnover of farm
property.
v) Held for Sale. Loans held for sale represent residential loans
intended to be sold to secondary market investors and in the process of
being delivered. This loan category was created through the addition of
Provident Bank's mortgage banking operation.
Commercial Loans. Loans in this category include loans to service, retail,
wholesale and light manufacturing businesses, including agricultural service
businesses. Commercial loans increased $7.6 million or 24.57% from December
31, 1994 to December 31, 1995. This loan growth is attributable to Exchange
Bank's expanding business development in Shawnee, Kansas and the opening of
Exchange Bank's location in Leawood, Kansas. Provident Bank has also increased
its commercial loan portfolio. Commercial loans increased $6.5 million or
26.32% from December 31, 1993 to December 31, 1994. That increase is
attributable to loan growth in Shawnee, Kansas and a gain in commercial loans
from the purchase of Provident Bank.
Consumer and Other Loans. Loans classified as consumer and other loans
include automobile, second mortgage loans, other personal loans and credit
card loans. The majority of these loans are installment loans with fixed
interest rates. The balance in consumer and other loans at June 30, 1996
approximated the December 31, 1995 balance of $12.5 million. The balance
steadily increased through December 31, 1995 because of increased consumer
confidence in the economy and new product development, such as the issuance of
the Company's own credit card beginning in late 1994. The Company issues
credit cards to its existing customers and at June 30, 1996 there were no
balances on such cards past due more than 30 days. The percentage of consumer
and other loans to total loans has remained stable since December 31, 1993.
Agricultural Loans. Agricultural loans are typically made to farmers, small
corporate farms and feed and grain dealers. Agricultural loans were $17.3
million as of December 31, 1993 or 18.83% of total loans. At
24
<PAGE>
December 31, 1994, agricultural loans totaled $12.8 million or 9.26% of total
loans. The decline in loan volume is primarily the result of the sale of
Peoples, which had a portfolio of $5.2 million in agricultural loans at the
time of its sale on June 30, 1994. More recently, agricultural loan demand has
remained steady as a result of depressed livestock prices and high grain
prices that reduce the demand for livestock purchases. Additionally, favorable
grain production in the Banks' regions coupled with higher commodity prices
have allowed agricultural producers to improve their cash positions, reducing
the need for borrowed funds.
The following table presents the balance of each major category of the
Company's loans at the dates indicated.
LOAN PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
JUNE 30, 1996 1995 1994 1993
--------------- --------------- --------------- --------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT %
-------- ----- -------- ----- -------- ----- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate:
Commercial............. $ 25,357 13.92% $ 19,434 11.84% $ 14,937 10.80% $ 8,157 8.88%
Construction........... 27,537 15.12 19,850 12.09 12,943 9.36 7,750 8.44
1 to 4 family
residential........... 52,026 28.57 48,510 29.55 47,540 34.38 20,153 21.94
Agricultural........... 8,108 4.45 7,444 4.53 8,171 5.91 7,490 8.15
Loans held for sale.... 2,853 1.57 6,665 4.06 1,786 1.29 0 0
-------- ----- -------- ----- -------- ----- ------- -----
Total real estate...... 115,881 63.65 101,903 62.07 85,377 61.74 43,550 47.41
Commercial.............. 41,975 23.05 38,715 23.58 31,078 22.47 24,602 26.78
Consumer and other..... 12,431 6.83 12,538 7.64 9,033 6.53 6,412 6.98
Agricultural............ 11,811 6.49 11,029 6.72 12,800 9.26 17,296 18.83
-------- ----- -------- ----- -------- ----- ------- -----
Total loans............. 182,098 100% 164,185 100% 138,288 100% 91,860 100%
Less allowance for loan
losses................. (2,625) (2,715) (2,047) (1,173)
-------- -------- -------- -------
Total.................. $179,473 $161,470 $136,241 $90,687
======== ======== ======== =======
</TABLE>
The following table sets forth the repricing of portfolio loans outstanding
at June 30, 1996 by loan category.
LOAN REPRICING SCHEDULE
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------
DUE
AFTER 1
YEAR
DUE IN 1 BUT DUE
YEAR OR BEFORE AFTER 5
LESS(/1/) 5 YEARS YEARS TOTAL
--------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Loan category:
Commercial................................. $ 36,713 $ 4,568 $ 694 $ 41,975
Real estate................................ 61,023 40,509 11,503 113,035
Loans held for sale........................ 2,853 -- -- --
Agricultural............................... 11,001 462 348 11,811
Consumer and other......................... 7,513 4,728 183 12,424
-------- ------- ------- --------
Total loans.............................. $119,103 $50,267 $12,728 $182,098
======== ======= ======= ========
</TABLE>
- --------
(1) Includes $42.0 million and $53.4 million of loans that reprice daily and
within six months or less, respectively.
ASSET QUALITY
The Company follows regulatory guidelines in placing loans on a nonaccrual
basis and places loans with doubtful principal repayment on a nonaccrual
basis, whether current or past due. The Company considers non-performing
assets to include all nonaccrual loans, other loans past due 90 days or more
as to principal and interest (with the exception of those loans which in
management's opinion are well collateralized or exhibit other characteristics
suggesting they are collectable), restructured loans defined as troubled debt
restructuring under
25
<PAGE>
Statement of Financial Accounting Standards No. 15 (SFAS 15), and other real
estate owned ("OREO"). The Company does not return a loan to accrual status
until it is brought current with respect to both principal and interest and
future principal payments are no longer in doubt. When a loan is placed on
nonaccrual status, any previously accrued and uncollected interest is
reversed.
Non-performing loans as of June 30, 1996 were down from December 31, 1995 as
the result of the collection and restructuring of three notes and, since June
30, 1996, non-performing loans have been virtually eliminated.
The following four largest non-performing assets represented 98.8% of all
non-performing assets of the Company as of June 30, 1996.
1) Default by a retail and wholesale lumber company on a $1.6 million
note held by Exchange Bank, which was put on non-accrual status in 1995.
Since December 31, 1995, the assets of the borrower have been liquidated
and Exchange Bank has begun foreclosing its security interest in the
accounts receivable and other assets of the borrower. As of June 30, 1996,
the borrower's obligation had been reduced to $487,000. Exchange Bank is
also pursuing the personal guarantees of the business owners for settlement
of any potential deficiency following collection of all proceeds from the
liquidation of the borrower. It is anticipated that both the liquidation
and the settlement will be completed by year-end 1996.
2) Default by a builder on a $320,000 note held by Exchange Bank and
secured by a speculative house. Since June 30, 1996, the house has been
sold and the debt repaid in full.
3) Default by an agricultural borrower on a $46,400 note held by
Citizens. Since June 30, 1996, the note has been paid off.
4) Property of which Provident Bank has taken ownership as a result of a
default on a $90,000 mortgage loan on a condominium. Provident Bank has
taken a $10,000 specific reserve, and subsequent to June 30, 1996,
Provident Bank entered into a contract to sell the condominium for $80,000.
The sale is expected to close in October 1996.
OREO as of June 30, 1996 totaled $80,000, down from the December 31, 1995
balance of $149,000 as a result of the sale of a single family residence
maintained by Provident Bank. OREO as of June 30, 1996, consisted of one
property that is described in item 4 above. OREO decreased from $272,000 in
1994 to $149,000 in 1995. This decrease in inventory is attributed to the sale
of single family residences held by Provident Bank.
The increase in non-performing assets from December 31, 1994 to December 31,
1995 is attributable to the default by the agricultural borrower and the
lumber company, both of which are discussed above.
Non-performing assets are summarized in the following table:
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
JUNE 30, 1996 1995 1994 1993
------------- ------ ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Loans:
Loans 90 days or more past due but still
accruing.................................. $ 1 $ 2 $231 $258
Nonaccrual loans........................... 864 1,739 169 421
---- ------ ---- ----
Non-performing loans...................... 865 1,741 400 679
OREO......................................... 80 149 272 73
---- ------ ---- ----
Non-performing assets..................... $945 $1,890 $672 $752
==== ====== ==== ====
Non-performing loans as a percentage of total
loans....................................... .48% 1.06% .29% .74%
Non-performing assets as a percentage of
total assets................................ .34% .72% .30% .42%
Non-performing assets as a percentage of
total loans and OREO........................ .58% 1.16% .49% .82%
</TABLE>
26
<PAGE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses on June 30, 1996 totaled $2.6 million, a
slight decrease over December 31, 1995 resulting from charge-offs of $155,000
and recoveries of $5,000. The allowance for loan losses totaled $2.7 million
as of December 31, 1995, a $668,000 increase from December 31, 1994. The
increase in the allowance during 1995 of $668,000 was a combination of
additional provisions of $1.3 million and net charge-offs of $616,000. See "--
Provision for Loan Losses."
During 1994, the Company experienced an increase in its allowance for loan
losses of $874,000, primarily as a result of the first quarter acquisition of
Provident Bank and the second quarter sale of Peoples.
The following table sets forth activity in the Company's allowance for loan
losses during the periods indicated:
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------- -----------------------------
1996 1995 1994 1993
-------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Total net loans outstanding at the end
of period............................ $179,473 $161,470 $136,241 $90,687
======== ======== ======== =======
Average net loans outstanding during
the period........................... $164,151 $149,578 $120,993 $77,767
======== ======== ======== =======
Allowance for loan losses, beginning
of period............................ $ 2,715 $ 2,047 $ 1,173 $ 945
Charge-offs:
Real estate:
Construction...................... 22 -- -- --
1 to 4 family residential......... 2 12 21 --
Agricultural...................... -- -- -- --
Commercial.......................... 45 538 91 185
Consumer and other.................. 20 46 4 14
Agricultural........................ 66 75 86 1
-------- -------- -------- -------
Total charge-offs................. 155 671 202 200
-------- -------- -------- -------
Recoveries of loans previously charged
off:
Real estate:
Construction...................... -- -- -- --
1 to 4 family residential......... 2 -- 20 12
Agricultural...................... -- -- 6 --
Commercial.......................... 2 9 127 27
Consumer and other.................. 1 3 7 9
Agricultural........................ -- 43 25 84
-------- -------- -------- -------
Total recoveries.................. 5 55 185 132
-------- -------- -------- -------
Net charge-offs....................... 150 616 17 68
Provision charged to operations....... 60 1,284 147 296
Adjustments due to acquisitions and
disposals............................ -- -- 744(1) --
-------- -------- -------- -------
Allowance for loan losses, end of
period............................... $ 2,625 $ 2,715 $ 2,047 $ 1,173
======== ======== ======== =======
Ratios:
Net charge offs to average loans
outstanding........................ 0.09% 0.41% 0.01% 0.09%
Allowance for loan losses to loans,
end of period...................... 1.44% 1.65% 1.48% 1.28%
Allowance for loan losses to non-
performing assets.................. 277.78% 143.65% 304.61% 155.98%
</TABLE>
- --------
(1) Adjustment related to acquisition of Provident Bank and sale of Peoples.
27
<PAGE>
INVESTMENT ACTIVITIES
The Company's investment portfolio serves three important functions: first,
it enables the adjustment of the balance sheet's sensitivity to changes in
interest rate movements; second, it provides an outlet for investing excess
funds; and third, it provides liquidity. The investment portfolio is
structured to maximize the return on invested funds within conservative risk
guidelines.
The portfolio is comprised of U.S. Treasury securities, U.S. Government
agency obligations, state municipal obligations, Federal Reserve Bank stock,
FNMA stock and FHLB stock. The U.S. government agency obligations include
Federal Home Loan Mortgage Corporation ("FHLMC") notes, FNMA notes and
mortgage- backed securities, FHLB notes and Government National Mortgage
Association ("GNMA") mortgage-backed securities. The portfolio includes
approximately $10.6 million of collateralized mortgage obligations, all of
which are rated AA or better. Federal Funds sold are not classified as
investment securities.
On December 31, 1993, the Company adopted SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities. Securities classified as available
for sale are carried at fair value and any unrealized gains or losses on such
securities are reported net of income taxes in a separate component of
stockholders' equity. Securities classified as held to maturity are carried at
amortized cost. In November 1995, the Financial Accounting Standards Board
("FASB") allowed a one-time redesignation between the categories. The Company
redesignated approximately $26.1 million of held to maturity securities to
available for sale. This transfer did not represent a change in the investment
portfolio strategy, but rather was done to provide greater flexibility to
manage the portfolio. This change had no impact on regulatory capital.
The investment portfolio increased $5.2 million or 7.65% during the six
months ended June 30, 1996. The increase since December 31, 1995 was a result
of deposit growth from Exchange Bank's new Leawood branch, a portion of which
funds were invested in U.S. Treasury and U.S. government agency obligations.
The composition of the investment portfolio as of June 30, 1996 was 38.45%
U.S. Treasury notes, 13.67% U.S. government obligations, 39.68% mortgage-
backed securities, 5.36% state and municipal securities and 2.84% other
securities. The comparable distribution for December 31, 1995 was 31.03% U.S.
Treasury notes, 20.72% U.S. government obligations, 39.21% mortgage backed
securities, 5.99% state and municipal securities and 3.05% other securities.
The estimated maturity of the investment portfolio on June 30, 1996 was 2
years and 7.1 months. The average balance of the investment portfolio as of
June 30, 1996 represented 28.70% of average earning assets as compared to
27.56% on December 31, 1995. No change in investment strategy was made during
the first half of 1996.
Average investment securities decreased from 38.32% of earning average
assets at December 31, 1994, to 27.56% of average earning assets at December
31, 1995 due to the Company's ownership of both Provident Bank and Peoples
during the second quarter of 1994. Peoples had approximately $12 million of
investment securities. During the same period average loans increased to
69.37% of average earning assets at December 31, 1995 as compared to 59.23% of
average earning assets at December 31, 1994. At December 31,1993, average
investment securities were 47.45% of average earning assets while loans were
50.47% for the same period. This trend is consistent with the Company's
strategy of obtaining an asset portfolio in which at least 75% of earning
assets consist of loans.
The Company periodically changes its balance sheet strategy to accommodate a
new interest rate environment when, in management's opinion, economic and
policy signals indicate a changing trend in interest rates. Accordingly, in
the first half of 1995 the Company sold bonds in anticipation of an increase
in interest rates. Although management believes its action will benefit the
Company, the securities sales resulted in an immediate loss of $409,000.
28
<PAGE>
The following table sets forth the composition of the Company's investment
portfolio at the dates indicated:
INVESTMENT SECURITIES PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
----------- ------------------------
1996 1995 1994 1993
----------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities held to maturity(1):
U.S. Treasury and other U.S. agencies
and corporations....................... $ -- $ -- $ 7,693 $ 7,359
Obligations of states and political
subdivisions........................... 25 25 5,183 5,481
Mortgage-backed securities.............. -- -- 13,935 3,564
------- ------- ------- --------
Total................................. $ 25 $ 25 $26,811 $ 16,404
======= ======= ======= ========
Securities available for sale(2):
U.S. Treasury and other U.S. agencies
and corporations....................... $37,799 $34,865 $34,200 $24,564
Obligations of states and political
subdivisions........................... 3,865 4,008 -- --
Mortgage-backed securities.............. 28,776 26,422 5,014 15,517
Other(3)................................ 2,062 2,055 1,782 674
------- ------- ------- --------
Total................................. $72,502 $67,350 $40,996 $ 40,755
======= ======= ======= ========
</TABLE>
- --------
(1) Securities held to maturity are carried on the Company's financial
statements at book value.
(2) Securities available for sale are carried on the Company's financial
statements at market value.
(3) Includes FHLB stock, Federal Reserve stock and FNMA stock.
The following table sets forth a summary of maturities in the investment
portfolio at June 30, 1996:
MATURITY SCHEDULE OF SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
AT JUNE 30, 1996
(AT MARKET VALUE)
-----------------------------------------------------------------------------------
OVER 5 YEARS
OVER ONE YEAR THROUGH 10
ONE YEAR OR LESS THROUGH 5 YEARS YEARS OVER 10 YEARS TOTAL
---------------- ---------------- --------------- ---------------- ----------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AMOUNT YIELD(1) AMOUNT YIELD(1) AMOUNT YIELD(1) AMOUNT YIELD(1) AMOUNT YIELD(1)
------- -------- ------- -------- ------ -------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other
U.S. agencies and
corporations........... $11,199 5.51% $26,599 5.51% $ -- -- $ -- -- $37,799 5.51%
Obligations of states
and political
subdivisions........... 318 9.04% 3,451 7.37% 96 6.82% -- -- 3,865 7.49%
Mortgage-backed
securities............. -- -- 8,526 5.70% 7,445 6.03% 12,805 6.31% 28,776 6.06%
Other................... 2,062 6.51% -- -- -- -- -- -- 2,062 6.51%
------- ------- ------ ------- ------- ----
Total.................. $13,580 $38,576 $7,541 $12,805 $72,502 5.86%
======= ======= ====== ======= ======= ====
</TABLE>
- --------
(1) Yield is adjusted for the effect of tax-exempt securities.
DEPOSIT ACTIVITIES
Deposits are the major source of the Banks' funds for lending and other
investment purposes. In addition to deposits, the Banks derive funds from
interest payments, loan principal payments, loan and security sales, and funds
from operations. Scheduled loan repayments are a relatively stable source of
funds, while deposit inflows are significantly influenced by general interest
rates and money market conditions. The Banks may use borrowings on a short-
term basis if necessary to compensate for reductions in the availability of
other sources of funds, or borrowings may be used on a longer term basis for
general business purposes.
29
<PAGE>
Deposits are attracted principally from within the Banks' primary market
areas through the offering of a broad variety of deposit products, including
checking accounts, money market accounts, savings accounts, certificates of
deposit (including jumbo certificates in denominations of $100,000 or more),
and retirement savings plans. The Company has not sought brokered deposits and
does not intend to do so in the future.
Maturity terms, service fees and withdrawal penalties are established by the
Banks and reviewed on a periodic basis. The determination of rates and terms
is predicated on funds acquisition and liquidity requirements, rates paid by
competitors, growth goals and federal regulations.
The following table sets forth the average balances and weighted average
rates for the Company's categories of deposits for the periods indicated:
AVERAGE DEPOSIT BALANCES AND RATES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------------------------------------------------
JUNE 30, 1996 1995 1994 1993
------------------------- ------------------------- ------------------------- -------------------------
% OF % OF % OF % OF
AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL
BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS
-------- ------- -------- -------- ------- -------- -------- ------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest
checking........ $ 16,495 0.00% 7% $ 13,733 0.00% 7% $ 10,389 0.00% 6% $ 7,915 0.00% 5%
Savings deposits
and interest-
bearing
checking........ 60,403 2.63% 26% 55,819 3.09% 28% 60,987 2.77% 32% 50,960 2.83% 35%
Certificates of
deposit......... 154,045 5.90% 67% 129,543 5.46% 65% 116,593 4.38% 62% 88,492 4.56% 60%
-------- --- -------- --- -------- --- -------- ---
Total........... $230,943 100% $199,095 100% $187,969 100% $147,367 100%
======== === ======== === ======== === ======== ===
</TABLE>
The growth in deposits is the result of the Company's new branch locations
in Shawnee and Leawood, Kansas. During the first six months of 1996, the
Company experienced a $13.7 million or 24.77% increase in savings and NOW
account balances, substantially all of which are less than $100,000, which
allowed the Company to reduce its reliance on more expensive balances
exceeding $100,000. The non-interest-bearing account balance as of June 30,
1996 showed a slight decrease from the balance as of December 31, 1995, but
the average balance increased $2.3 million or 13.95%.
The Company does not have a concentration of deposits from any one source,
the loss of which would have a material adverse effect on its business.
Management believes that substantially all the Banks' depositors are residents
in their primary market areas.
The following table sets forth a summary of the deposits of the Company at
the dates indicated:
DEPOSIT COMPOSITION
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------------
1996 1995 1994 1993
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Non-interest-bearing........................ $ 16,929 $ 18,934 $ 11,470 $ 10,293
Interest-bearing:
Savings and NOW accounts.................. 68,793 55,134 56,540 50,575
Time accounts less than $100,000.......... 129,222 127,239 101,998 75,678
Time accounts greater than $100,000....... 26,167 25,074 16,421 12,918
-------- -------- -------- --------
Total deposits.......................... $241,111 $226,381 $186,429 $149,464
======== ======== ======== ========
</TABLE>
30
<PAGE>
The following table summarizes at June 30, 1996 the Company's certificates
of deposit of $100,000 or more by time remaining until maturity:
<TABLE>
<CAPTION>
CERTIFICATES OF DEPOSIT
$100,000 OR GREATER
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Maturity Period:
Less than three months................................ $ 9,522
Over three months through six months.................. 5,324
Over six months through twelve months................. 11,221
Over twelve months.................................... 100
-------
Total............................................... $26,167
=======
</TABLE>
CAPITAL AND LIQUIDITY
Acquisition Indebtedness. The Company has borrowed to finance acquisitions.
The balance of such borrowing was $6.6 million as of June 30, 1996, and $7.0
million, $7.1 million, and $3.9 million, as of December 31, 1995, 1994 and
1993, respectively. In March 1994, the Company borrowed $4.0 million in
connection with the acquisition of Provident. All amounts borrowed are due on
demand or no later than March 1, 1997. The Company intends to use proceeds
from the Offering to retire such debt. See "USE OF PROCEEDS."
Sources of Liquidity. Liquidity defines the ability of the Company and the
Banks to generate funds to support asset growth, satisfy other disbursement
needs, meet deposit withdrawals and other fund reductions, maintain reserve
requirements and otherwise operate on an ongoing basis. The immediate
liquidity needs of the Banks are met primarily by Federal Funds sold, short-
term investments, deposits and the generally predictable cash flow (primarily
prepayments) from each Bank's assets. Intermediate term liquidity is provided
by the Banks' investment portfolios. The Banks also have established a credit
facility with the FHLB under which the Banks are eligible for short or long-
term advances secured by real estate loans or mortgage-related investments.
The Company's liquidity needs and funding are provided through non-affiliated
bank borrowing, cash dividends and tax payments from its subsidiary banks. The
Company has agreed not to increase its borrowings without approval of the
Federal Reserve.
Capital. The Company and the Banks actively monitor their compliance with
regulatory capital requirements. The elements of capital adequacy standards
include strict definitions of core capital and total assets, which include
off-balance sheet items such as commitments to extend credit. Under the risk-
based capital method of capital measurement, the ratio computed is dependent
on the amount and composition of assets recorded on the balance sheet and the
amount and composition of off-balance sheet items, in addition to the level of
capital. Historically, the Banks have increased core capital through the
retention of earnings or capital infusions. Each Bank's ability to incur
additional indebtedness or to issue or pay dividends on common or preferred
stock may be limited by regulatory policies and the terms of the outstanding
securities. See "SUPERVISION AND REGULATION--Payment of Dividends." The
Offering is expected to substantially increase the capital of the Company. See
"CAPITALIZATION; USE OF PROCEEDS."
ACCOUNTING AND FINANCIAL REPORTING ISSUES
In October 1994, the FASB issued SFAS 119, "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments." SFAS 119
requires disclosures about derivative financial instruments, futures, forward,
swap and option contracts, and other financial instruments with similar
characteristics. It also amends existing requirements of SFAS 105, "Disclosure
of Information about Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risk," and SFAS 107,
"Disclosures about Fair Value of Financial Instruments." SFAS 119 requires
disclosures about the amounts, nature and terms of derivative financial
instruments that are not subject to SFAS 105 because they do not result in
off-balance-sheet
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risk of accounting loss. It requires that a distinction be made between
financial instruments held or issued for trading purposes (including dealing
and other trading activities measured at fair value with gains and losses
recognized in earnings) and financial instruments held or issued for purposes
other than trading. SFAS 119 is effective for financial statements for fiscal
years beginning after December 15, 1995, with earlier application encouraged.
The Company does not have financial instruments that require disclosure under
SFAS 119.
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," issued by the FASB in March 1995, is
effective for fiscal years beginning on or after December 15, 1995. SFAS 121
requires long-lived assets and certain identifiable intangibles to be held and
used by an entity to be reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
In performing the review for recoverability, the entity should estimate the
future cash flows expected to result from the use of the asset and its
eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount
of the asset, an impairment loss is recognized. Measurement of an impairment
loss for long-lived assets and identifiable intangibles an entity expects to
hold and use should be based on the fair value of the asset. Management does
not anticipate the adoption of SFAS 121 will have a material impact on the
financial position of the Company.
In May 1995, the FASB issued SFAS 122, "Accounting for Mortgage Servicing
Rights, an Amendment of FASB Statement No. 65." SFAS 122 amends SFAS 65,
"Accounting for Certain Mortgage Banking Activities," to require a mortgage
banking enterprise to recognize as separate assets the rights to service
mortgage loans for others, however those service rights are acquired. SFAS 122
is effective for fiscal years beginning after December 15, 1995. Management
does not anticipate the adoption of SFAS 122 will have a material impact on
the financial position of the Company.
In October 1995, the FASB issued SFAS 123, "Accounting for Stock-Based
Compensation," effective for fiscal years beginning after December 15, 1995.
SFAS 123 requires a fair value based method of accounting for stock-based
compensation. SFAS 123 is not expected to have a material impact on the
financial position of the Company.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related financial data concerning the Company
presented in this Prospectus have been prepared in accordance with generally
accepted accounting principles, with the measurement of financial position and
operating results in terms of historical dollars without considering changes
in the relative purchasing power of money over time due to inflation. The
primary impact of inflation on the operations of the Company is reflected in
increased operating costs. Unlike most industrial companies, virtually all of
the assets and liabilities of a financial institution are monetary in nature.
As a result, changes in interest rates have a more significant impact on the
performance of a financial institution than do the effects of changes in the
general rate of inflation and changes in prices. Interest rate changes do not
necessarily move in the same direction or have the same magnitude as changes
in the prices of goods and services. See "RISK FACTORS--Asset/Liability
Management."
BUSINESS
GENERAL
The Company is a multi-bank holding company incorporated under the laws of
the state of Kansas on December 5, 1985 and headquartered in Leawood, Johnson
County, Kansas, a southwestern suburb of Kansas City. The Company owns and
operates two commercial banks and, indirectly, a federal savings bank.
Exchange Bank is headquartered in Marysville, Kansas, the county seat of
Marshall County and has branch locations in Leawood and Shawnee, two cities in
Johnson County, Kansas. Citizens is located in Seneca, Kansas, the county seat
of Nemaha County. The Company owns 100% of Provident, the parent company of
Provident Bank, a federal savings bank located in St. Joseph, Missouri, the
county seat of Buchanan County. The Banks had total
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assets as of June 30, 1996 of $280.1 million. The Banks are community banks
providing a full range of commercial and consumer banking services to small and
medium-sized communities and the surrounding market areas. Additionally,
Provident Bank engages in mortgage banking operations. The mortgage banking
division of Provident Bank operates from the main Provident Bank location in
St. Joseph, Missouri. At June 30, 1996, the Banks ranged in size from $55
million to $147 million in total assets.
HISTORY
In December 1978, Michael W. Gullion made his ownership entry into the
banking business by purchasing Oketo State Bank. Oketo State Bank had assets at
the time of $2.9 million, and was located in the small 125 person community of
Oketo, Kansas, just south of Mr. Gullion's home town of Beatrice, Nebraska.
Shortly after acquiring Oketo State Bank, Mr. Gullion formed Oketo Bancshares,
Inc. to hold the stock of that bank.
In April 1981, Mr. Gullion used the equity created by the successful
operation of Oketo State Bank, as well as financing provided by additional
shareholders, to purchase Comanche Bancshares, Inc., parent company of Peoples,
an $11 million bank in the southwest Kansas county seat town of Coldwater.
In June 1984, Oketo State Bank converted to a national bank charter and
relocated its main office to Marysville, Kansas, a county seat town in north
central Kansas approximately eight miles from Oketo. The relocated bank, which
had total assets of $5 million, was renamed Blue Valley National Bank.
In September 1985, the Gullion-led investor group purchased 24.9% of Seneca
Bancshares, Inc., a Missouri bank holding company that owned all of the
outstanding stock of Citizens. The same investor group acquired controlling
ownership in Seneca Bancshares, Inc., and renamed it Gold Bancshares, Inc. (now
Gold Banc Corporation, Inc.) and moved its charter to Kansas.
In September 1989, Oketo Bancshares and Comanche Bancshares were merged into
the Company, creating a multi-bank holding company headquartered in Marysville,
Kansas. At that time, the Company owned all of the outstanding stock of Blue
Valley National Bank, Peoples and Citizens. The new corporate structure allowed
the commingling of dividends generated by the subsidiary banks and created an
entity to be used as an acquisition vehicle.
In November 1991, the Company purchased Exchange Bank of Schmidt and Koester
in Marysville, Kansas, merged it with Blue Valley National Bank, creating a $73
million bank in Marysville with two locations, and renamed the combined entity
Exchange National Bank. In April 1992, Exchange Bank acquired a branch of Home
Federal Savings Association of Kansas City, a failed savings and loan
association in Shawnee, Kansas through a government-assisted auction. The
Shawnee acquisition allowed Exchange Bank to diversify its predominantly
agriculturally based loan portfolio and to target owner-operated businesses as
its customers. The offices of the Company were then moved to Leawood, Kansas.
In March 1994, the Company purchased Provident, the holding company for
Provident Bank, a $53 million thrift. The acquisition of Provident gave the
Company access to an institution with experience in selling loans on the
secondary market and that had established itself in a position of dominance in
the real estate loan market of a county seat town. As part of the financing of
the Provident acquisition, the Company sold Peoples.
In the fall of 1995, Exchange Bank opened a temporary branch in Leawood,
Kansas on the site where the new corporate headquarters of the Company and the
headquarters for Exchange Bank opened in September 1996. Leawood is a rapidly
developing suburb of Kansas City with a significant number of owner-operated
businesses.
COMMUNITY BANKING STRATEGY
The Company serves the needs and caters to the economic strengths of the
local communities in which the Banks are located. Through the Banks and their
employees, the Company strives to provide a high level of
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personal and professional customer service. Employee participation in
community affairs is encouraged in order to build long-term banking
relationships with established businesses and individual customers in these
market areas.
The Company believes its Marysville and Seneca locations, together with the
surrounding counties that comprise their market areas, provide a stable base
of relatively low-cost deposits compared to larger metropolitan markets with
larger competitors. Although Provident Bank is located in a city of over
70,000 residents, it is the Company's experience that the demographics of St.
Joseph, Missouri, as a county seat, are generally comparable to those of
Seneca and Marysville, Kansas. The Company believes that, through good
management, community banks such as Exchange Bank and Citizens can maximize
earnings by attracting relatively low cost core deposits and investing those
funds in loans and other high yielding investments, while maintaining risk at
an acceptable level.
Recently the Company has applied its community banking strategy to two
affluent communities in the rapidly developing Johnson County suburbs
southwest of Kansas City. The Company believes the recent wave of regional
bank acquisitions of local banks in those suburban communities, and the
subsequent conversion of some of those acquired banks to branch locations, has
alienated the customers of those locations. This has created an opportunity
for the Company to attract and retain as loan customers those owner-operated
businesses that require flexibility and responsiveness in lending decisions
and desire a more personal banking relationship. The success of this strategy
is reflected in the Company's growth and ability to attract significant levels
of non-interest-bearing deposits in the suburban communities of Leawood and
Shawnee, Kansas. The expansion into suburban Johnson County communities also
has allowed Exchange Bank and Citizens to diversify their predominantly
agriculturally related loan portfolio into commercial and residential real
estate loans. In addition, the Company has taken advantage of the relatively
stable deposit base and low cost of funds in Marysville and Seneca, Kansas,
where there is a relatively low commercial loan demand, and has deployed those
funds in the suburban communities of Leawood and Shawnee, Kansas, where
commercial loan demand is greater.
MARKET AREAS
The Banks owned by the Company are located in northeastern Kansas and
northwestern Missouri, as shown in the map on the inside front cover of this
Prospectus. The Banks and the communities they serve are described below:
Marysville, Kansas. Exchange Bank's main office and a branch are located in
the city of Marysville, Kansas and serve the approximately 3,300 residents of
that community and the approximately 11,700 residents of Marshall County.
Marshall County has a civilian work force of approximately 6,200 persons that
is fairly evenly divided between manufacturing, services, government, retail
and agricultural sectors.
Shawnee, Kansas. Exchange Bank has a branch location in Shawnee, Kansas, a
western suburb of Kansas City that has a population of 45,000 persons and is
growing at a rate of 4.5 people per day. The service sector makes up the
largest part of the employment base of Shawnee, followed by manufacturing,
government and wholesale and retail sales. Shawnee is located in Johnson
County, Kansas. According to the city of Shawnee, in the ten years ended 1993,
Johnson County's population grew 32%, averaged a net total of 427 new business
establishments every year, accounted for 69% of the net increase in new
businesses in the state of Kansas and had an average annual growth rate of
private sector employment of 5.8%, more than twice the national growth rate.
Of counties in the United States having populations above 250,000, Johnson
County ranks first in the percentage of adults with at least a high school
education. The state of Kansas projects that Johnson County's population will
grow by more than 10,000 people per year over the next decade.
Leawood, Kansas. Exchange Bank has a branch location in Leawood, Kansas,
another Johnson County suburb of Kansas City, that has a population of
approximately 25,000 and for the ten year period ended 1993 experienced a
population growth rate of approximately 47%. In 1994, 265 single family
building permits were issued in Leawood and total building construction costs
were nearly $84 million. In 1995, the Leawood
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Information Services estimated the average home value to be $213,000. The
average household income in Leawood in 1996 is estimated by the Leawood
Planning and Development Commission to be approximately $97,000. Approximately
50% of the city's economic base is the service sector, approximately 21% is
retail and approximately 16% is financial services, insurance and real estate
service.
St. Joseph, Missouri. Provident Bank is located in St. Joseph, Missouri,
approximately 45 miles north of Kansas City, Missouri. St. Joseph has a
population of approximately 75,000 residents and a fully accredited and state
funded four-year college as well as other vocational institutions. The economic
base of St. Joseph includes manufacturing, agribusiness, research and
development, health care and small business.
Seneca, Kansas. Citizens is located in Seneca, Kansas and serves the
approximately 2,200 residents of that community and the approximately 11,000
residents of Nemaha County. The economic base of Nemaha County is primarily
agricultural, and Citizens relies on the agricultural community, schools and
local governments for its customers. Agricultural production in Nemaha County
consists of corn, milo, soybeans, wheat, dairy cattle and hog production. In
addition, the county has some oil production and local manufacturing
operations.
THE BANKS
Exchange Bank. Exchange Bank has four locations and is chartered in
Marysville, Kansas. The two Marysville locations ("Exchange Bank--Marysville")
as of June 30, 1996, ranked second in terms of deposits among the eight other
banks and two other lending institutions in Marshall County, Kansas. Exchange
Bank--Marysville offers a wide variety of services and financial products
including checking and deposit accounts, certificates of deposit, IRAs and cash
management, a variety of consumer and small commercial loans, trust and
investment management services, insurance products and other miscellaneous
services. Exchange Bank--Marysville's loan mix consists of approximately 25%
agricultural loans, 33% commercial and industrial loans, 27% residential real
estate loans and 15% consumer and other loans. As of June 30, 1996, Exchange
Bank--Marysville had assets of approximately $79 million. The Marysville
facilities employ 31 full and part-time persons. Nearly three-quarters of
Exchange Bank--Marysville's funds are obtained from Marshall County depositors,
and over 90% of its loan commitments are within Marshall County. Exchange
Bank--Marysville traces its roots to Oketo State Bank, organized in the town of
Oketo, Kansas in Marshall County in 1889, and also to Exchange Bank of Schmidt
and Koester, established in Marysville in 1870 and one of the oldest banks in
the state of Kansas.
Exchange Bank's Shawnee, Kansas location ("Exchange Bank--Shawnee") as of
June 30, 1996, ranked sixth in terms of deposits among the twelve financial
institution locations in the city. Exchange Bank--Shawnee provides the same
products and services offered by Exchange Bank--Marysville. The branch's loan
mix consists of a broad range of commercial, consumer, residential real estate,
construction, residential development and small business administration loans.
Exchange Bank--Shawnee had total assets of $44 million as of June 30, 1996. It
has 17 full and part-time employees and derives its funds from deposits
generated within the community and from Exchange Bank--Marysville through
inter-branch transactions. The branch was opened in April 1992.
Exchange Bank's Leawood, Kansas location ("Exchange Bank--Leawood") competes
with two other bank branches in Leawood and numerous other branches and several
banks in communities adjoining Leawood. Exchange Bank--Leawood offers the same
products and services offered by Exchange Bank--Marysville. Sixty-five percent
of the branch's asset base consists of small commercial business loans and
approximately 25% of its loan business is residential real estate loans. The
branch had total assets of approximately $24 million as of June 30, 1996 and
employs 10 full and part-time employees. Funds are derived primarily from the
local customer base and from Exchange Bank--Marysville through inter-branch
transactions. The branch was opened in October of 1995.
Provident Bank. Provident Bank competes with ten banks, four savings and
loans and eleven credit unions in the city of St. Joseph, Missouri and for the
year ended June 30, 1996 was the leading home lender, based on mortgage volume,
for home purchases in St. Joseph. Forty-five percent of the bank's loan
portfolio consists of
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residential home loans, 15% commercial real estate loans, 20% industrial loans
and 20% consumer and other loans. As of June 30, 1996, Provident Bank had
assets of approximately $78 million. Provident Bank offers a wide variety of
financial products and services including checking, savings and money market
accounts, certificates of deposit and IRAs and a variety of consumer and small
business loans. The bank employs 47 persons on a full and part-time basis and
relies primarily on the deposits of the St. Joseph area for its funds.
Provident Bank was incorporated in 1889 and has been serving the St. Joseph
community for 107 years.
Citizens. As of June 30, 1996, Citizens was the largest in terms of deposits
among the ten bank locations serving the approximately 11,000 residents of
Nemaha County, Kansas. Approximately 40% of the loans generated by the Bank
are related to the agricultural sector, including farm residential,
agricultural production and agricultural industrial. Approximately 25% of its
loans are residential home loans and the remainder are commercial, consumer
and other loans. As of June 30, 1996, the Bank had assets of approximately $55
million. Citizens offers a wide variety of services and financial products,
including checking and deposit accounts, certificates of deposit, IRAs and
cash management, a variety of consumer and small commercial loans, trust and
investment management services, insurance products and other miscellaneous
services. The Bank has 20 full and part-time employees and relies primarily on
consumer, commercial and local government deposits for funds. Citizens has
served the Nemaha County community for 101 years.
The Company owns, directly or indirectly, 100% of the outstanding common
stock of each of its subsidiaries.
OPERATING STRATEGY
The Company's operating strategy is to provide in each market in which it
operates a full range of financial products and services to small and medium-
sized businesses and to consumers. The Company emphasizes personal
relationships with customers, involvement in local community activities and
responsive lending decisions. The Company strives to maintain responsive
community banking offices with local decision makers, allowing senior
management at each banking location, within certain limitations, to make its
own credit and pricing decisions and retaining at each Bank a local identity
and board of directors. The Company's goals include long-term customer
relationships, a high quality of service and responsiveness to specific
customer needs. The principal elements of the Company's operating strategy
are:
Maintain Market Position in Existing Market Areas. As described above, each
Bank dominates an aspect of the market in which it competes. The Company has
invested in facilities and personnel and has emphasized customer service in
order to maintain and enhance its market position in these areas.
Emphasize Personalized Customer Service and Community Involvement. The
Company believes that, in most of its market areas, customer loyalty and
service are the most important competitive factors. The Banks have experienced
low turnover in their management and lending staffs, enabling them to provide
continuity of service by the same staff members, leading to long-term customer
relationships, high quality service and quick response to customer needs. The
Banks' management and other employees participate actively in a wide variety
of community activities and organizations in order to develop and maintain
customer relationships. The Banks recruit the best available banking talent to
deliver the quality of personal banking services required to meet customer
expectations and to permit the Company to meet its goals for long-term
profitable growth.
Capitalize on Changing Market Conditions. The Company's management
continually monitors economic developments in its market areas in order to
tailor its operations to the evolving strengths and needs of the local
communities. For example, Exchange Bank has opened branch locations in the
high growth areas of Shawnee and Leawood, Kansas to fill the void of community
banks created by the recent acquisition activity of regional banking
institutions and to deploy excess low-cost funds derived from its rural
northeastern Kansas market.
Centralize and Streamline Operations to Achieve Economies. While each of the
Banks presently operates autonomously, the Company, in order to minimize
duplication of functions, is centralizing certain management
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and administrative functions, including data processing, human resources and
regulatory administration, that can better and more efficiently be performed
by the Company. Such centralization will help to reduce operating expenses and
enable Bank personnel to focus on customer service and community involvement.
The Company believes it has recently acquired the personnel necessary to make
implementation of these operating efficiencies possible. Such implementation
is likely to occur when the Company reaches the point that consolidation would
be cost efficient.
Because of the high costs associated with Provident Bank's mortgage banking
division, the Company began to significantly streamline these operations in
the third quarter of 1996. The Company believes substantial improvements can
be made to both expenses and income of the division through implementation of
the following plan: (i) replacement of labor with technology; (ii) a reduction
in the number of loan underwriters that participate in mortgage banking
operations; (iii) retaining the servicing rights for loans sold; (iv)
undertaking its own loan underwriting; and (v) creating arrangements pursuant
to which the Bank would finance developers and builders in the acquisition of
property for, and the development and construction of, residential
communities, and also would provide the residential real estate loans to the
ultimate consumers in those communities. Provident Bank recently hired an
Executive Vice President whose job function includes implementation of the
foregoing plan. As part of the restructuring, the Company began in the third
quarter of 1996 to streamline its Johnson County mortgage banking operations
by reducing significantly the personnel in the Johnson County mortgage
origination office and eliminating certain support positions in the Provident
Bank office in St. Joseph.
GROWTH STRATEGY
Acquisitions. Management of the Company believes that, following the
Offering, the Company will be well positioned to acquire and profitably
operate community banks because of its experience in operating community
banks, its ability to provide centralized management assistance to those banks
and its access to capital. Additionally, other than FHLB borrowings matched
against specific loans, the Company will have no significant long-term
indebtedness immediately after the Offering and does not anticipate paying
dividends in the foreseeable future. Therefore, a substantial portion of
future earnings can be retained to pursue this growth strategy. See "RISK
FACTORS--Competition and Other Risks Associated with Expansion Strategy."
Management of the Company believes there are owners of community banks who
may be willing to sell their banks in the future for, among other reasons,
stockholder liquidity, to diversify their own investment portfolios, lack of
family successor operators and the difficulty of compliance with bank
regulations. Management of the Company believes there are individual community
bank owners in the targeted regions who will be interested in selling their
banks to an organization that has a strong capital base and management that
has demonstrated a commitment to maintaining local bank identity. The
Company's goal is to acquire banks with strong existing management such that
the Company's strategies can be implemented while retaining the individual
identity of the banks through the continuation of the existing management,
boards of directors and bank charters.
The Company will generally target dominant, profitable community banks in
county seat towns of 2,000 persons or more. Market factors to be considered by
the Company will include the size and long-term viability of the community and
market area served by the target bank, the dominance of the acquisition target
in the market and the proximity of other banks owned by the Company.
Generally, the bank target must be among the top three financial institutions
in its market in terms of deposit share. Financial criteria will include
historical performance, comparison to peers in terms of key operating
performance and capital ratios, loan asset quality, operating procedures and
deposit structure. Also of significant financial importance will be the
investment required for, and opportunity costs of, the acquisition. Non-
financial considerations in evaluating an acquisition prospect will include
the quality of the target's management and the demand on Company resources to
integrate the target institution.
The Company has recently had introductory discussions with the principal
owners of a number of community banks to determine their interest in selling
their banks to the Company. However, the Company has
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decided not to pursue any preliminary expressions of interest until such time
as acquisition funds become available, which is expected to occur following
the completion of the Offering. None of these discussions have included any
proposed transaction terms. The Company contemplates that, because of the
large number of county seat towns and banks and its familiarity with the
market place, its acquisition focus will be in the Midwest and primarily in
the States of Kansas and Missouri. Kansas is perceived by management to be the
Company's best market for bank acquisitions because only recently have state
banking laws permitted the large regional banking institutions based in
Missouri to conduct branching activities in the State of Kansas.
Internal Growth. The recent wave of regional bank acquisitions of community
banks in the Midwest has created what management of the Company perceives to
be a void in the community banking market. It is management's belief that it
has been the practice of regional banking institutions to convert the banks
they acquire into branches of the acquiring institution. Management of the
Company believes this practice detracts from the delivery of quality
personalized services to the existing customer base of those branches. The
Company entered the Kansas City suburban community market by acquiring the
deposits of a failed thrift in Shawnee, Kansas in 1992. The Company's
implementation of its community banking strategy through the operation of a
branch location on the property in Shawnee was well received, as indicated by
the rapid growth (37.5% over 3 years) and significant percentage of non-
interest-bearing deposits. Exchange Bank has acquired a tract of land for the
development of another branch location in a rapidly developing part of
Shawnee, Kansas that presently has few other lending institutions in the
immediate area. In October 1995, Exchange Bank further expanded its presence
in the suburban Johnson County communities of Kansas City by opening a branch
location in Leawood, Kansas, another rapidly growing residential and small
business community. Management of the Company believes its branching
activities are distinguished from those of regional banking institutions by
the high degree of autonomy given each branch location.
The Company's expansion activity also has allowed Exchange Bank to diversify
its loan portfolio, which was previously dominated by loans related to the
agricultural industry. Further, the loan demand in these suburban Johnson
County communities, due to heavy residential and small business development,
is greater than that experienced in the market areas served by Citizens and
Exchange Bank--Marysville. The difference in the deposit characteristics,
which are more stable in Seneca and Marysville, and borrowing characteristics
between the communities has allowed the Company to deploy excess low-cost
deposit funds derived from Citizens and Exchange Bank--Marysville into loans
in the growing Kansas City metropolitan communities of Shawnee and Leawood,
Kansas.
The Company expects it will continue to expand in the suburban Johnson
County communities west of Kansas City through growth in the assets and loan
portfolios of existing branches and to a limited extent through additional
branching activities.
LENDING ACTIVITIES
General. The Company strives to provide in each market area it serves a full
range of financial products and services to small and medium-sized businesses
and to consumers. The Company targets owner-operated businesses and emphasizes
the use of Small Business Administration and Farmers Home Administration
lending. The Banks participate in credits originated within the organization
but generally do not participate in loans from nonaffiliated lenders. Each
Bank has an established loan committee which has authority to approve credits,
within established guidelines, of up to $200,000. Concentrations in excess of
$200,000 must be approved by an executive loan committee comprised of the
Chief Executive Officer and the Vice President of the Company and the local
Bank's president and senior lending officer. The loan mix within the
individual Banks is subject to the discretion of the Bank board of directors
and the demands of the local marketplace. The following is a brief description
of each major category of the Company's lending activities.
Real Estate Lending. Commercial, residential and agricultural real estate
loans represent the largest class of loans of the Company. As of June 30,
1996, real estate loans totaled $115.9 million or 63.63% of all loans. One to
four family residential loans make up approximately 44.90% of real estate
loans, followed by construction
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23.76%, commercial 21.88%, agricultural 7.00%, and loans held for sale 2.46%.
Generally, loans are written on a variable rate basis with terms of five years
or less and amortized over either 15 or 30 years. Agricultural and commercial
real estate loans are amortized over 15 or 20 years. The Company also generates
long-term fixed rate residential real estate loans which it sells in the
secondary market. The Company takes a security interest in the real estate and,
with respect to residential property, generally requires mortgage insurance to
the extent the loan exceeds 80% of the appraised value of the associated
property.
Commercial Lending. Loans in this category principally include loans to
service, retail, wholesale and light manufacturing businesses, including
agricultural service businesses. Commercial loans are made based on the
financial strength and repayment ability of the borrower, as well as the
collateral securing the loans. As of June 30, 1996, commercial loans
represented the second largest class of loans at $42.0 million, or 23.05% of
total loans. The Company targets owner-operated businesses as its customers and
makes lending decisions based upon a cash flow analysis of the borrower as well
as the accounts receivable, inventory and equipment assets of the borrower.
Loans for inventory purchases are generally of a one-year renewable term and
those for equipment generally have a five-year term. The Company generally
takes a blanket security interest in all assets of the borrower. Each of the
Banks has been approved to make loans under the Small Business Administration
program.
Agricultural Lending. The Company provides short-term credit for operating
loans and intermediate-term loans for farm product, livestock and machinery
purchases and other agricultural improvements. Agricultural loans were $11.8
million as of June 30, 1996, or 6.49% of total loans. Farm product loans are
generally a one-year term and machinery and equipment and breeding livestock
loans generally have five to seven-year terms. Extension of credit is based
upon the ability to repay, as well as the existence of federal guarantees and
crop insurance coverage. Farmers Home Administration guarantees are pursued
wherever possible. Exchange Bank and Citizens hold "Preferred Lender Status"
from the Farmers Home Administration, a guarantee program similar to the Small
Business Administration, that minimizes the credit exposure of the Banks
through partial transfer of the credit risk to the federal government.
Preferred Lender Status expedites the processing of loan applications.
Consumer and Other Lending. Loans classified as consumer and other loans
include automobile, credit card, boat, home improvement and home equity loans,
the latter two secured principally through second mortgages. The Company
generally takes a purchase money security interest in goods for which it
provides the original financing. The terms of the loans range from one to five
years, depending upon the use of the proceeds, and range from 75% to 90% of the
value of the collateral. The majority of these loans are installment loans with
fixed interest rates. As of June 30, 1996, consumer and other loans amounted to
$12.4 million, or 6.83% of total loans. The Company implemented a credit card
program in late 1994 and targeted the Banks' existing customer base as
potential consumers. As of June 30, 1996, the Company had issued 1,737 cards
having an aggregate outstanding balance of $1.1 million in credit card
receivables. The Company has not marketed credit cards to persons other than
existing customers.
LOAN SOLICITATION AND PROCESSING
Loan originations are derived from a number of sources. Residential loan
originations can be attributed to real estate broker referrals, mortgage loan
brokers, direct solicitation by the Banks' loan officers, present savers and
borrowers, builders, attorneys, walk-in customers and, in some instances, other
lenders. Residential loan applications, whether originated through the Banks or
through mortgage brokers, are underwritten and closed based on the same
standards, which generally meet FNMA underwriting guidelines. Consumer and
commercial real estate loan originations emanate from many of the same sources.
The legal lending limit of each of the Banks was approximately $1.5 million,
$1.1 million and $800,000 for Exchange Bank, Citizens and Provident Bank,
respectively, as of June 30, 1996.
The loan underwriting procedures followed by the Banks conform to regulatory
specifications and are designed to assess both the borrower's ability to make
principal and interest payments and the value of any assets
39
<PAGE>
or property serving as collateral for the loan. Generally, as part of the
process, a loan officer meets with each applicant to obtain the appropriate
employment and financial information as well as any other required loan
information. The Bank then obtains reports with respect to the borrower's
credit record, and orders and reviews an appraisal of any collateral for the
loan (prepared for the Bank through an independent appraiser). The loan
information supplied by the borrower is independently verified.
Loan applicants are notified promptly of the decision of the Bank by
telephone and a letter. If the loan is approved, the commitment letter
specifies the terms and conditions of the proposed loan including the amount
of the loan, interest rate, amortization term, a brief description of the
required collateral, and required insurance coverage. Prior to closing any
long-term loan, the borrower must provide proof of fire and casualty insurance
on the property serving as collateral, and such insurance must be maintained
during the full term of the loan. Title insurance is required on loans
collateralized by real property. Interest rates on committed loans are
normally locked in at the time of application for a 30 to 45-day period.
MORTGAGE BANKING DIVISION OPERATIONS
The mortgage banking division of Provident Bank is engaged in the business
of originating and selling principally first-lien mortgages secured by single
family residences. Loans originated through Provident Bank's mortgage banking
division were $83.3 million and $12.1 million in 1995 and 1994, respectively.
The mortgage banking division's principal sources of revenue consist of loan
origination fees and gain (loss) on the sale of mortgage loans. Mortgage loans
are originated primarily in St. Joseph, Missouri, Johnson County, Kansas and
throughout the metropolitan Kansas City area. Loans usually are purchased by
Provident Bank for investment pending resale into the secondary market. Loans
usually are sold to investment banking firms and other investors as whole
loans.
Mortgage loans are originated primarily through loan originators and from
referrals from real estate brokers, builders, developers and prior customers.
The origination of a loan from the date of initial application to a loan
closing normally takes three to eight weeks. It involves processing the
borrower's loan application, evaluating the borrower's credit and other
qualifications consistent with underwriting criteria established by private
institutional investors and insuring or guaranteeing agencies, obtaining
investor approvals, property appraisals, and title insurance, arranging for
hazard insurance and handling various other matters customarily associated
with the closing of a residential loan. For this service, the division
typically collects an origination fee of one percent of the principal amount
of the loan. Costs that are incurred in originating mortgage loans include:
overhead, origination commissions paid to the originators, certain out-of-
pocket costs and in some cases commitment fees where the loans are made
subject to a purchase commitment from wholesale lenders, private investors or
other intermediaries. In the third quarter of 1996, Provident Bank
substantially altered the resources committed to its mortgage banking
operations. See "--Operating Strategy."
INVESTMENT PORTFOLIO
The Banks' investment portfolio is used to meet the Banks' liquidity needs
while endeavoring to maximize investment income. Additionally, management
augments the quality of the loan portfolio by maintaining a high quality
investment portfolio oriented toward U.S. government and U.S. government
agency securities. The portfolio is comprised of U.S. Treasury securities,
U.S. government agency instruments and a modest amount of investment grade
obligations of state and political subdivisions. In managing its interest rate
exposure, the Company also invests in mortgage-backed securities and
collateralized mortgage obligations. Federal funds sold and certificates of
deposit are additional investments that are not classified as investment
securities. Investment securities were $72 million, or 25.69% of total assets,
at June 30, 1996.
DEPOSITS AND BORROWINGS
Deposits are the major source of the Banks' funds for lending and other
investment purposes. In addition to deposits, including local public fund
deposits and demand deposits of commercial customers, the Banks derive
40
<PAGE>
funds from loan principal repayments, maturing investments, Federal Funds
borrowings from commercial banks, borrowings from the Federal Reserve Bank of
Kansas City and the FHLB and from repurchase agreements. Loan repayments and
maturing investments are a relatively stable source of funds, while deposit
inflows are significantly influenced by general interest rates and money
market conditions. Borrowings may be used on a short-term basis to compensate
for reductions in the availability of funds from other sources. They also may
be used on a longer term basis for funding specific loan transactions and for
general business purposes.
The Banks offer a variety of accounts for depositors designed to attract
both short-term and long-term deposits. These accounts include certificates of
deposit savings accounts, money market accounts, checking and individual
retirement accounts. Deposit accounts generally earn interest at rates
established by management based on competitive market factors and management's
desire to increase or decrease certain types or maturities of deposits. The
Company has not sought brokered deposits and does not intend to do so in the
future.
COMPETITION
The deregulation of the banking industry, the widespread enactment of state
laws which permit multi-bank holding companies, and the availability of
nationwide interstate banking has created a highly competitive environment for
financial services providers, particularly for institutions in suburban areas,
such as Exchange Bank's Shawnee and Leawood branches. These branches compete
with other commercial banks, savings and loan associations, credit unions,
finance companies, mutual funds, insurance companies, brokerage and investment
banking companies and other financial intermediaries. Some of these
competitors have substantially greater resources and lending limits, and may
offer certain services that these branches do not currently provide. In
addition, some of the non-bank competitors are not subject to the same
extensive federal regulations that govern these branches.
The Company believes its Marysville, Kansas and Seneca, Kansas locations are
less subject to competition based on deposit and loan pricing in those markets
than is the case in larger metropolitan markets with larger competitors.
However, these locations compete with other financial institutions, including
government lending agencies, for high quality loans in their market areas.
Management believes the Banks have generally been able to compete
successfully in their respective communities because of the Company's emphasis
on local control and the autonomy of Bank management, allowing the Banks to
meet what is perceived to be the preference of community residents and
businesses to deal with "local" banks. While management believes the Banks
will continue to compete successfully in their communities, there is no
assurance future competition will not adversely affect the Banks' earnings.
EMPLOYEES
The Company maintains a corporate staff of six persons. At September 15,
1996, the Banks had 125 employees. None of the employees of the Company or the
Banks are covered by a collective bargaining agreement. The Company and the
Banks believe their employee relations are good. See "MANAGEMENT--Employment
Contracts with Officers."
PROPERTY
The Company or the Banks own each of the banking facilities described below.
The Company believes each of the facilities is in good condition, adequately
covered by insurance and sufficient to meet the needs at that location for the
foreseeable future. Each of the facilities described below has an automated
teller machine.
Exchange Bank has two banking locations in Marysville, Kansas. The property
at 823 Broadway is a one-story 8,800 square foot building with four teller
windows and was remodeled in 1995. The property at 1016 Broadway is a two-
story 4,684 square foot building built in 1985 with three teller windows and a
two-lane drive up.
41
<PAGE>
Exchange Bank's banking location at 13425 Shawnee Mission Parkway, Shawnee,
Kansas, with 3,400 square feet, three teller windows and a four-lane drive up
was remodeled in 1995. Exchange Bank's Leawood branch located at 11301 Nall
Avenue opened in the third quarter of 1996 and features four teller windows, a
four-lane drive up and encompass 25,000 square feet, sixty percent of which
Exchange Bank intends to lease to third parties.
Citizens has two banking locations in Seneca, Kansas. The property at 502
Main Street is a one-story 4,840 square foot building with three teller windows
and seven offices and was remodeled in 1994. The property at Highway 36 and 6th
Street is a one-story 3,388 square foot building with three teller windows and
a two-lane drive up.
Provident Bank has a banking location in a 29,500 square foot two-story
building located at 4305 Frederick Boulevard, St. Joseph, Missouri that has
four teller windows and a three-lane drive up. The building was remodeled in
1996 and the second floor is leased to third parties.
Exchange Bank has also acquired vacant property located at the intersection
of Shawnee Mission Parkway and Monticello Road in Shawnee, Kansas, upon which
it expects to build a 3,000 square foot branch location with three teller
windows and a two-lane drive up. The new Shawnee bank location is expected to
be completed in early 1997.
LITIGATION
Neither the Company nor the Banks are a party to, nor is any of their
property the subject of, any material pending or threatened legal proceedings.
MANAGEMENT
DIRECTORS AND SENIOR OFFICERS
The following table sets forth certain information with respect to the
directors and senior officers of the Company and the Banks.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael W. Gullion........... 42 Chairman of the Board of Directors, President
and Chief Executive Officer of the Company and
Chairman of the Board of Directors and Chief
Executive Officer of each of the Banks
Keith E. Bouchey............. 45 Director, Executive Vice President, Chief
Financial Officer, Secretary and Treasurer of
the Company
William Wallman.............. 72 Director of the Company
D. Michael Browne............ 43 Director of the Company
William F. Wright............ 54 Director of the Company
Marc J. Degenhardt........... 35 President of Exchange Bank
Richard B. Erwin............. 50 President of Citizens
John R. Wray................. 53 President of Provident Bank
John C. Waters............... 51 Executive Vice President of Exchange Bank--
Shawnee
Charles N. Van Zante......... 50 Executive Vice President of Exchange Bank--
Leawood
John R. Price................ 39 Vice President of the Company and Senior Vice
President of Exchange Bank
</TABLE>
Each of the officers of the Company and the Banks serves at the pleasure of
the board of directors of the Company or Banks, as the case may be, except that
Mr. Gullion and Mr. Bouchey have three year employment
42
<PAGE>
agreements with the Company. See "MANAGEMENT--Employment Contracts with
Officers." The Company has a classified board of directors pursuant to which
directors are divided into three separate classes and elected for three-year
terms. See "DESCRIPTION OF SECURITIES--Restrictions on Change in Control."
MICHAEL W. GULLION has served as Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since inception of the
Company. He is also Chairman of the Board of Directors and Chief Executive
Officer of each of Exchange Bank, Citizens and Provident Bank, which positions
he has held with each such Bank since October 1991, September 1985 and March
1994, respectively. His term of office as a director of the Company expires at
the annual meeting of stockholders in 1999. Mr. Gullion is the son-in-law of
Mr. Wallman.
KEITH E. BOUCHEY was elected to the Board of Directors of the Company on May
30, 1996. He has served as the Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of the Company since joining the Company in
November 1995. Prior to joining the Company, Mr. Bouchey had been a principal
of GRA, Thompson, White & Company, P.C., a regional bank accounting and
consulting firm since August 1977, where he served on the executive committee
and as the managing director of the firm's regulatory services practice. Mr.
Bouchey is also a director, officer and significant stockholder of Holyrood
Bancshares, Inc., a closely held one-bank holding company located in Holyrood,
Kansas. His term of office as a director of the Company expires at the annual
meeting of stockholders in 1997.
WILLIAM WALLMAN was elected to the Board of Directors of the Company in
November 1989. For more than five years Mr. Wallman has been the President and
owner of Wallman Chrysler-Plymouth, Inc., a car dealership located in
Beatrice, Nebraska. His term of office as a director of the Company expires at
the annual meeting of stockholders in 1999. Mr. Wallman is the father-in-law
of Mr. Gullion.
D. MICHAEL BROWNE has served as a director of the Company since November
1989. He has been the Chairman and Chief Executive Officer of Mike Browne
International LTD, a direct marketing advertising agency, since 1987. His term
of office as a director of the Company expires at the annual meeting of
stockholders in 1998.
WILLIAM F. WRIGHT was elected as a director of the Company on May 30, 1996.
Previously he had served as an advisor to the Board of Directors. Mr. Wright
has served as the Chairman of the Board and the Chief Executive Officer of
Amcon Corporation, a wholesale distributor of beer and wine, since 1978. His
term of office as a director of the Company expires at the annual meeting of
stockholders in 1997.
MARC J. DEGENHARDT has served as Executive Vice President of Exchange Bank
since 1991. Mr. Degenhardt was appointed President of Exchange Bank in
September 1996. He was Senior Vice President of Exchange Bank of Schmidt and
Koester immediately prior to its participation in the merger which formed
Exchange Bank in November 1991.
RICHARD B. ERWIN joined Citizens in 1982 and has served as the President of
that Bank since June 1988.
JOHN R. WRAY has served as the President and Chief Financial Officer of
Provident since April 1996. He served as Vice Chairman of Provident from
October 1995 to March 1996. Prior to his affiliation with the Company, Mr.
Wray was the President of St. Joseph Banking Center, First Bank of Missouri
where he had served since December 1993 and the President and Chief Executive
Officer of Bank of St. Joseph from October 1987 through December 1993.
JOHN C. WATERS has served as the Executive Vice President of Exchange Bank--
Shawnee, since February 1995. Prior to that time he was Vice Chairman of the
Board of Mark Twain Banks of Kansas from 1993 through February 1995. Mr.
Waters was the President of First National Bank, Shawnee, Kansas from 1986
through 1993.
CHARLES N. VAN ZANTE has served as the Executive Vice President of Exchange
Bank--Leawood since June 1996. Prior to that time, Mr. Van Zante was involved
in the commercial lending and administrative activities at
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<PAGE>
the $1.4 billion Mercantile Bank organization in Kansas, and at the $600
million Mid-American Bank from 1989 until its acquisition by Mercantile Bank.
Earlier, he served as President and Chief Executive Officer of the $115
million United Missouri Bank South for seven years.
JOHN R. PRICE has served as a Vice President of the Company and Senior Vice
President of Exchange Bank since November 1992. Prior to joining the Company,
Mr. Price was employed by the Farmers Home Administration division of the
United States Department of Agriculture where he served as the Kansas State
Director since November 1989.
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal year ended December 31, 1995
the cash compensation paid or accrued by the Company and the Banks, as well as
other compensation paid or accrued for that year, for services in all
capacities to Michael W. Gullion, the Chairman, President and Chief Executive
Officer of the Company. No executive officer of the Company other than Mr.
Gullion earned salary and bonus in excess of $100,000 for the year ended
December 31, 1995.
<TABLE>
<CAPTION>
ALL OTHER
SALARY BONUS COMPENSATION (1)
-------- -------- ---------------
<S> <C> <C> <C>
Michael W. Gullion, Chairman $156,000 $165,000 $9,587
President and Chief Executive
Officer
</TABLE>
- --------
(1) Includes contributions to the Company's Employee Stock Ownership Plan--
$4,687; personal use of Company-owned automobile--$1,374; and country club
membership dues--$3,526.
EMPLOYMENT CONTRACTS WITH OFFICERS
Mr. Gullion and Mr. Bouchey (the "Executives") have entered into employment
agreements with the Company that will take effect upon the completion of the
Offering (each an "Agreement"). The terms of the Agreements are three years
(automatically renewed on the anniversary date of the Agreements unless either
party gives notice of its intention not to renew) and provide that Mr. Gullion
will be the Chairman, Chief Executive Officer and President and Mr. Bouchey
will be the Chief Financial Officer, Secretary, Treasurer, and Executive Vice
President of the Company. Throughout the employment period, each of the
Executives will be nominated by the Board of Directors for directorships and
the base compensation of the Executives and their opportunity to earn
incentive compensation will be at least as great as in existence prior to the
effectiveness of the Agreements. An Executive may be terminated for "cause"
only (as defined in the Agreement). An Executive may terminate the Agreement
for "good reason" which is defined as a material breach of the Agreement by
the Company. The death or disability of an Executive automatically terminates
the Agreement.
If the Company terminates the Agreement for cause or the Executive
terminates without good reason, neither the Company nor the Executive has any
further obligations to the other. If the Company terminates an Executive
without cause (as defined in the Agreement), an Executive terminates for good
reason (as defined in the Agreement), or a Change in Control (as defined
below) of the Company occurs, the Company is obligated to pay the Executive
three times the present value of the Executive's long and short-term
compensation in place immediately prior to the termination or Change in
Control, provided that such benefits cannot exceed an amount that would be
subject to federal excise taxes.
A Change in Control of the Company will be deemed to occur upon (i) the
hostile replacement of at least the majority of the Board of Directors, (ii) a
person acquiring 25% or more of the shares or voting power of the stock of the
Company, provided such person is not an existing director or Executive or
relative of such a person or does not acquire such shares or voting rights
pursuant to an agreement to which the Executive is a party, or as a result of
the acquisition does not become the largest stockholder of the Company, (iii)
a merger or sale of substantially all of the assets of the Company or (iv) the
occurrence of any other event the Board of Directors determines to be a Change
in Control.
44
<PAGE>
EQUITY COMPENSATION PLAN
The Company has adopted the Gold Banc Corporation, Inc. 1996 Equity
Compensation Plan (the "Plan"). The Plan provides for the grant of stock
options, stock appreciation rights, restricted stock awards, performance units
and performance share awards. The Plan will be administered by a committee
composed of two outside directors. The type, amount, terms or persons who are
to be granted awards will be within the sole discretion of the Committee.
There are 250,000 shares of Common Stock reserved for issuance under the Plan.
The purpose of the Plan is to retain, motivate and attract employees,
directors and consultants of the Company who provide significant services to
the Company and the Banks, and to align the interests of the participants of
the Plan with the interests of the Company's stockholders.
DIRECTOR COMPENSATION
Non-employee and advisory directors of the Company receive $3,000 per year
for serving on the Board of Directors, plus reimbursement for reasonable
expenses.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Amended and Restated Articles of Incorporation of the Company require it
to indemnify its directors and officers against liabilities, fines, penalties,
settlements, claims and reasonable expenses incurred by them in connection
with any proceeding to which they may be made a party by reason of their
service in those capacities to the fullest extent permitted by the Kansas
General Corporation Code (the "KGCC"). The KGCC permits a corporation to
indemnify its present and former directors and officers if ordered to do so by
a court or after a determination by its independent counsel, stockholders or a
majority of its disinterested directors that the person to be indemnified
acted in good faith and in a manner such person reasonably believed to be in
or not opposed to the best interests of the corporation.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or controlling persons pursuant to the
foregoing provisions, the Company has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
CERTAIN TRANSACTIONS
Certain of the officers, directors and principal stockholders of the Company
and the Banks, and members of their immediate families and businesses in which
these individuals hold controlling interests, are customers of the Banks and
it is anticipated such parties will continue to be customers of the Banks in
the future. Credit transactions with these parties are subject to review by
each Bank's Board of Directors. All outstanding loans and extensions of credit
by the Banks to these parties were made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons,
and, in the opinion of management, did not and do not involve more than the
normal risk of collectibility or present other features unfavorable to the
Banks. At December 31, 1995 and December 31, 1994, the aggregate balance of
the Banks' loans and advances under existing lines of credit to these parties
was approximately $4.6 million, or 2.90% and $4.4 million or 3.15% of the
Banks' total loans, respectively.
45
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of September 15, 1996, by each director, the named executive
officers, by directors and executive officers as a group, and by each person
known to the Company to own beneficially more than 5% of such Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
------------------------
NAME AND ADDRESS OF BENEFICIAL NUMBER OF SHARES PRIOR TO AFTER THE
OWNER BENEFICIALLY OWNED(1) THE OFFERING OFFERING(2)
------------------------------ --------------------- ------------ -----------
<S> <C> <C> <C>
Michael W. Gullion(3)........... 996,587 49.83% 24.91%
11301 Nall Avenue, Box 7368
Leawood, Kansas 66211
Keith E. Bouchey(4)............. 23,338 1.17% .58%
11301 Nall Avenue
Leawood, Kansas 66211
William Wallman(5).............. 214,901 10.75% 5.37%
538 W. Mary
Beatrice, Nebraska 68310
Allen D. Petersen(5)............ 171,828 8.59% 4.30%
1220 W. County Line Road
Barrington Hills, Illinois 60010
Betty J. Dam(6)................. 262,974 13.15% 6.57%
1506 Calhoun
Marysville, Kansas 66508
D. Michael Browne............... 27,753 1.39% .69%
6450 Campbell Drive
Lincoln, Nebraska 68510
B. J. Dam Investment Company.... 179,516 8.98% 4.49%
1506 Calhoun
Marysville, Kansas 66508
Mercantile Bank, Trustee of the
Gold Banc Corporation, Inc.
Employee Stock Ownership
Plan(5)......................... 105,136 5.26% 2.63%
800 Jackson
P.O. Box 192
Topeka, Kansas 66601-0192
William F. Wright(5)............ 171,826 8.59% 4.30%
1431 Stratford Court
Del Mar, California 92014
Directors and executive officers
as a group (11 persons)........ 1,273,949 63.70% 31.85%
</TABLE>
- --------
(1) Unless otherwise specified, each person has sole voting and investment
power with respect to the shares indicated.
(2) Assumes the Underwriters' over-allotment option is not exercised.
(3) Includes: 558,555 shares for which Mr. Wallman, Mr. Petersen or Mr. Wright
are the record owners and which are subject to the terms of an agreement
granting Mr. Gullion voting control over such shares and 105,136 shares
owned by the Gold Banc Corporation, Inc. Employee Stock Ownership Plan,
the voting of which Mr. Gullion controls.
46
<PAGE>
(4) Held in the name of Holyrood Bancshares, Inc. Mr. Bouchey is a director,
officer and stockholder of Holyrood Bancshares, Inc.
(5) Subject to the terms of an agreement granting Mr. Gullion voting control
over such shares.
(6) Includes the 179,516 shares owned by B.J. Dam Investment Company over
which Ms. Dam claims beneficial ownership and 38,350 shares held in the
Betty J. Dam Trust #1.
Mr. Gullion has entered into an agreement with Mr. Wallman pursuant to which
Mr. Wallman has granted to Mr. Gullion an irrevocable proxy to vote all shares
of Common Stock (other than any director qualifying shares) owned or
subsequently acquired by Mr. Wallman. The agreement also grants to Mr.
Gullion: (i) a 180-day first right of refusal in the event Mr. Wallman
receives a bona fide offer from a third party to purchase, or proposes to sell
on the public market, some or all of the shares of Common Stock held by Mr.
Wallman or certain permitted transferees to whom Mr. Wallman may transfer
shares; and (ii) in the event Mr. Wallman dies, a 180-day option to purchase
some or all of the shares of Common Stock held by Mr. Wallman or certain
permitted transferees to whom Mr. Wallman may transfer shares. This agreement
terminates on the earlier to occur of: (i) the date Mr. Gullion ceases to be
President, Chairman and/or Chief Executive Officer of the Company; or (ii) six
months after Mr. Wallman's death.
Mr. Gullion has also entered into an agreement with Mr. Wright and Mr.
Petersen pursuant to which Mr. Wright and Mr. Petersen have granted to Mr.
Gullion an irrevocable proxy to vote all shares of Common Stock owned or
subsequently acquired by Mr. Wright or Mr. Petersen. Such proxy continues
until the earlier of: (i) the death of Mr. Gullion; (ii) the date Mr. Gullion
ceases to be President, Chairman and/or Chief Executive Officer of the
Company; or (iii) termination of the agreement as described below. The
agreement also grants to Mr. Gullion a 180 day first right of refusal in the
event either Mr. Wright or Mr. Petersen receives a bona fide offer from a
third party to purchase, or proposes to sell on the public market, some or all
of the shares of Common Stock held by such individual or by certain permitted
transferees to whom such individual may transfer shares. The agreement also
grants to Mr. Wright and Mr. Petersen a 180 day first right of refusal in the
event Mr. Gullion receives a bona fide offer from a third party to purchase,
or proposes to sell on the public market, some or all of the shares of Common
Stock held by Mr. Gullion or certain permitted transferees to whom Mr. Gullion
may transfer shares. This agreement terminates in September 2006.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company has authorized 7,500,000 shares of Common Stock, $1.00 par
value. The holders of Common Stock are entitled to receive dividends when and
as declared by the Board of Directors out of funds legally available therefor.
Upon dissolution of the Company, the holders of Common Stock are entitled to
share pro rata in the Company's net assets after payment or provision for
payment of all debts and liabilities of the Company, and after provisions for
any class of preferred stock or other senior security which may be issued by
the Company.
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders and may not cumulate their
votes for the election of directors. Thus, the holders of a majority of the
shares of Common Stock have the power to elect all the directors. Subject to
the voting rights of the holders of preferred stock, if any, the exclusive
voting power for all purposes is vested in the holders of the Common Stock.
Each share of Common Stock is entitled to participate on a pro rata basis in
dividends and other distribution to holders of Common Stock. There are no
redemption, sinking fund, conversion or preemptive rights with respect to
shares of Common Stock. The transfer agent and the registrar for the Common
Stock is American Stock Transfer & Trust Company. As of September 15, 1996
there were 2,000,000 shares of Common Stock issued and outstanding held by 65
stockholders of record. All shares of Common Stock currently outstanding are,
and the shares offered hereby, when issued, will be, fully paid and
nonassessable.
47
<PAGE>
PREFERRED STOCK
The Company has authorized 7,500,000 shares of preferred stock. There are no
shares of preferred stock currently outstanding. The Company has the
authority, exercisable by its Board of Directors and without stockholder
approval, to issue, in one or more series, shares of preferred stock from time
to time and in such series and with such preferences, limitations and relative
rights as may be determined by the Board of Directors for such purposes and
for such consideration as it may deem advisable. Accordingly, the Board of
Directors, without stockholder approval, may authorize the issuance of one or
more series of preferred stock with terms (including terms with respect to
redemption, sinking fund, dividend, liquidation, preemptive, conversion and
voting rights and preferences) that could adversely affect the voting power
and other rights of holders of the Common Stock.
The creation and issuance of any series of preferred stock and the relative
rights, designations and preferences of such series, if and when established,
will depend upon, among other things, the future capital needs of the Company,
then existing market conditions and other factors that, in the judgment of the
Board of Directors might warrant the issuance of preferred stock. Preferred
stock may have the effect of discouraging an attempt, through acquisition of a
substantial number of shares of Common Stock, to acquire control of the
Company with a view to effecting a merger, sale or exchange of assets or a
similar transaction. The anti-takeover effects of the preferred stock may deny
stockholders the receipt of a premium on their Common Stock and may also
depress the market price of the Common Stock. As of the date of this
Prospectus, the Company has no arrangements, undertakings or plans with
respect to the issuance of preferred stock.
RESTRICTIONS ON CHANGES IN CONTROL
Certain provisions of the KGCC, the Amended and Restated Articles of
Incorporation and the Restated Bylaws of the Company could make more difficult
the acquisition of the Company by means of a tender offer, a proxy contest or
otherwise or the removal of incumbent officers and directors. These provisions
are expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control
of the Company to first negotiate with the Company. The Company believes that
the benefits of increased protection of the Company's potential ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to
acquire or restructure the Company outweigh the disadvantages of discouraging
such proposals because, among other things, negotiation of such proposals
could result in an improvement of their terms.
The Company will be subject to the provisions of Section 17-12,100 et. seq.
of the KGCC (the "Business Combination Statute"). In general, the Business
Combination Statute prohibits a publicly held Kansas corporation from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date that the person became an interested stockholder
unless (with certain exceptions) the business combination or the transaction
in which the person became an interested stockholder is approved in a
prescribed manner. Generally, a "business combination" includes a merger,
asset sale, stock sale, or other transaction resulting in a financial benefit
to the stockholder. Generally, an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years prior,
did own) 15% or more of the corporation's outstanding voting stock. This
provision may have the effect of delaying, deferring or preventing a change in
control of the Company without further action by the interested stockholder.
The Company will also be subject to the provisions of Section 17-1286 et.
seq. of the KGCC (the "Control Share Statute"). In general, the Control Share
Statute provides that shares of a Kansas corporation acquired in a "control
share acquisition" have no voting rights except to the extent approved by a
vote of a majority of the votes entitled to be cast on the matter, excluding
shares of stock owned by the acquirer or by officers or directors who are
employees of the corporation. A control share acquisition means, subject to
certain exceptions, the acquisition of beneficial ownership of voting shares
of stock which, if aggregated with all other shares of stock which then have
voting rights and are beneficially owned by such a person, would entitle the
acquirer to exercise
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voting power in electing directors within one of the following ranges of voting
power: (a) 20% or more but less than 33 1/3%; (b) 33 1/3% or more but less than
a majority; or (c) a majority of all voting power. The acquisition of shares of
stock in addition to shares an acquiring person is entitled to vote as a result
of having previously obtained stockholder approval does not constitute a
control share acquisition unless, as a result of such acquisition, the voting
power of the shares beneficially owned by the acquirer would exceed the range
in respect of which voting rights had previously been granted. A number of
other acquisitions of shares are not deemed to constitute control share
acquisitions, including good faith gifts, transfers pursuant to wills,
purchases pursuant to an issuance by the corporation and certain mergers
involving the corporation.
If voting rights are not approved at a meeting of stockholders or if the
acquiring person does not deliver an acquiring person statement as permitted by
statute, then, subject to certain conditions and limitations, the corporation
may redeem at market value any and all of the shares acquired in the control
share acquisition. If voting rights for such shares are restored at a
stockholders' meeting and the acquirer becomes entitled to vote a majority of
the shares entitled to vote, stockholders who properly objected to the control
share acquisition may exercise appraisal rights and receive, in exchange for
their stock, the fair value of such stock. The fair value of the stock as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid in the control share acquisition.
The Company's Amended and Restated Articles of Incorporation require that the
Board of Directors consist of three classes with staggered three-year terms.
The number of directors in each class must be as nearly equal as possible.
Thus, only one class of directors will be elected at each annual meeting of
stockholders of the Company, with the other classes continuing for the
remainder of their respective three-year terms. The classification of the Board
of Directors makes it more difficult for the Company's existing stockholders to
replace quickly the majority of the Board of Directors as well as for another
party to obtain control of the Company by replacing the majority of the Board
of Directors. Since the Board of Directors has the power to retain and
discharge officers of the Company, these provisions also make it more difficult
for existing stockholders or another party to effect quickly a change in
management.
The Company's Amended and Restated Articles of Incorporation provide
stockholder action can be taken only at an annual or a special meeting of
stockholders and cannot be taken by written consent. The Company's Restated
Bylaws provide special meetings of stockholders can be called only by a
majority of the Board of Directors, the Chief Executive Officer, or 55% or more
of the stockholders. Moreover, the business permitted to be conducted at any
special meeting of stockholders will be limited to the business for which the
meeting was called. The Restated Bylaws set forth an advance notice procedure
with regard to the nomination, other than by or at the direction of the Board
of Directors, of candidates for election as directors and with regard to
business to be brought before an annual meeting of stockholders of the Company.
Stockholders will not be permitted to fill vacancies on the Board of Directors
caused by resignation or newly created directorships.
The Company's Amended and Restated Articles of Incorporation and Restated
Bylaws contain provisions requiring the affirmative vote of the holders of at
least two-thirds of the voting stock of the Company to amend many of the
foregoing provisions.
SUPERVISION AND REGULATION
GENERAL
The Company and the Banks are subject to state and federal banking laws and
regulations that impose specific requirements or restrictions on and provide
for general regulatory oversight of virtually all aspects of operations. These
laws and regulations are generally intended for the protection of depositors,
not stockholders. The following is a brief summary of certain statutes, rules
and regulations affecting the Company and the Banks. To the extent the
following summary describes statutory or regulatory provisions, it is qualified
in its entirety by reference to the particular statutory and regulatory
provisions.
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THE COMPANY
The Company is a bank holding company within the meaning of the BHCA and the
Savings & Loan Holding Company Act, as amended (the "SLHCA").
The BHCA. Under the BHCA, the Company is subject to periodic examination by
the Board of Governors of the Federal Reserve and is required to file periodic
reports of its operations and such additional information as the Federal
Reserve may require. The Company's and the Banks' activities are limited to
banking, managing or controlling banks, furnishing services to or performing
services for its subsidiaries, or engaging in any other activity the Federal
Reserve determines to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Some of the activities
the Federal Reserve has determined by regulation to be proper incidents to the
business of banking include making or servicing loans and certain types of
leases, engaging in certain insurance and discount brokerage activities,
performing certain data processing services, acting in certain circumstances
as a fiduciary or investment or financial advisor, owning savings
associations, and making investments in certain corporations or projects
designed primarily to promote community welfare.
With certain limited exceptions, the BHCA requires every bank holding
company to obtain the prior approval of the Federal Reserve before (i)
acquiring substantially all of the assets of any bank, (ii) acquiring direct
or indirect ownership or control of any voting shares of any bank if after
such acquisition it would own or control more than 5% of the voting shares of
such bank (unless it already owns or controls the majority of such shares), or
(iii) merging or consolidating with another bank holding company.
In addition, and subject to certain exceptions, the BHCA and the federal
Change in Bank Control Act, together with regulations thereunder, require
Federal Reserve approval (or, depending on the circumstances, no notice of
disapproval) prior to any person or company acquiring "control" of a bank
holding company, such as the Company. Control is conclusively presumed to
exist if any individual or company acquires 25% or more of any class of voting
securities of the bank holding company. With respect to corporations with
securities registered under the Exchange Act, control will be rebuttably
presumed to exist if a person acquires at least 10% of any class of voting
securities of the corporation. Following completion of the Offering, the
Company's Common Stock will be registered under the Exchange Act.
In accordance with Federal Reserve policy, the Company is expected to act as
a source of financial strength for and commit resources to support the Banks.
Under the BHCA, the Federal Reserve may require a bank holding company to
terminate any activity or relinquish control of a non-bank subsidiary (other
than a non-bank subsidiary of a bank) upon the Federal Reserve Board's
determination that such activity or control constitutes a serious risk to the
financial soundness or stability of any subsidiary depository institution of
the bank holding company. Further, federal bank regulatory authorities have
additional discretion to require a bank holding company to divest itself of
any bank or non-bank subsidiary if the agency determines that divestiture may
aid the depository institution's financial condition. The Company currently
does not have any subsidiaries other than the Banks.
The SLHCA. Under the SLHCA, the Company is regulated by the OTS. Generally,
there are no limitations on activities of a savings and loan holding company
provided the Company holds only one savings association which is a Qualified
Thrift Lender ("QTL"), as is the case with the Company. As a unitary savings
and loan holding company, the Company is registered and files reports with the
OTS and is subject to regulation and examination by the OTS. In addition, the
OTS has enforcement authority over the Company and its non-savings association
subsidiaries, which also permits the OTS to restrict or prohibit activities
that are determined to be a serious risk to the subsidiary savings
association. The OTS has broad investigative powers to determine whether
provisions under the SLHCA are complied with by the Company. If the OTS
discovers violations, it may seek an injunction to enjoin the acts which
violate the laws or regulations or may order the Company or its subsidiaries
to terminate activities or terminate control or ownership of a subsidiary if
the OTS reasonably believes
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continuation of such activity, ownership or control by the savings and loan
holding company poses a serious risk to financial safety, soundness or
stability of the savings association held by the Company.
Generally, a savings and loan holding company must get prior written
approval from the director of the OTS to acquire control of a savings
association, to acquire another savings association or savings and loan
holding company by merger, consolidation or purchase of assets, or to acquire
or retain more than 5% of the voting shares of a savings association or a
savings and loan holding company which is not a subsidiary. The savings and
loan holding company may not acquire control of an uninsured institution or
retain control for more than one year from the date control was acquired,
unless extended by the director of the OTS for a period not to exceed three
years.
If the Company were to acquire control of another savings association as a
separate subsidiary, it would become a multiple savings and loan holding
company, and the activities of the Company and any of its subsidiaries would
become subject to such restrictions unless such other association qualified as
a QTL and was acquired in a supervisory acquisition.
If Provident Bank fails the QTL test, the Company must obtain the approval
of the OTS prior to continuing after such failure, directly or through its
other subsidiaries, any business activity other than those approved for
multiple savings and loan holding companies or their subsidiaries.
THE BANKS
Exchange Bank. Exchange Bank operates as a national banking association
incorporated under the laws of the United States and is subject to examination
by the Office of the Comptroller of the Currency (the "OCC"). Deposits in
Exchange Bank are insured by the FDIC up to a maximum amount (generally
$100,000 per depositor, subject to aggregation rules). The OCC and the FDIC
regulate or monitor all areas of Exchange Bank's operations, including
security devices and procedures, adequacy of capitalization and loss reserves,
loans, investments, borrowings, deposits, mergers, issuances of securities,
payment of dividends, interest rate risk management, establishment of
branches, corporate reorganizations, maintenance of books and records, and
adequacy of staff training to carry on safe lending and deposit gathering
practices. The OCC requires Exchange Bank to maintain certain capital ratios
and imposes limitations on its aggregate investment in real estate, bank
premises, and furniture and fixtures. Exchange Bank is currently required by
the OCC to prepare quarterly reports on its financial condition and to conduct
an annual audit of its financial affairs in compliance with minimum standards
and procedures prescribed by the OCC.
Citizens. Citizens operates under a Kansas state bank charter and is subject
to regulation by the Kansas Banking Department and the FDIC. The Kansas
Banking Department and FDIC regulate or monitor all areas of Citizen's
operations, including capital requirements, issuance of stock, declaration of
dividends, interest rates, deposits, record keeping, establishment of
branches, acquisitions, mergers, loans, investments, borrowing, security
devices and procedures and employee responsibility and conduct. The Kansas
Banking Department places limitations on activities of Citizens including the
issuing of capital notes or debentures and the holding of real estate and
personal property and requires Citizens to maintain a certain ratio of
reserves against deposits. The Kansas Banking Department requires Citizens to
file a report annually showing receipts and disbursements of the bank, in
addition to any periodic report requested. Citizens is examined by the Kansas
Banking Department at least once every 18 months and at any other time deemed
necessary. The FDIC insures deposits held in Citizens up to a maximum amount,
which is generally $100,000 per depositor.
Provident. Provident is a savings and loan holding company within the
meaning of the SLHCA and is subject to the same regulation under the SLHCA as
is the Company.
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Provident Bank. Provident Bank operates as a federal savings bank and
provides full savings bank services. As a savings institution, Provident Bank
is subject to regulation by the OTS. The OTS regulates or monitors all areas
of Provident Bank's operations, including capital requirements, loans,
investments, establishment of branch offices, mergers, conversions,
dissolutions, acquisitions, borrowing, management, record keeping, security
devices and procedures and offerings of securities. The OTS requires Provident
Bank to file annual current reports in compliance with OTS procedures, as well
as periodic reports upon the request of the director of OTS. Provident Bank
must also prepare a statement of condition report showing the savings
association's assets, liabilities and capital at the end of each fiscal year.
The OTS may require an independent audit of financial statements by a
qualified independent public accountant when needed for safety and soundness
purposes. With some exceptions, an appraisal by a state certified or licensed
appraiser is required for all real estate related financial transactions.
All savings associations, including Provident Bank, are required to meet the
QTL test to avoid certain restrictions on their operations. This test requires
a savings association to have at least 65% of its portfolio assets (as defined
by regulation) in qualified thrift investments on a monthly average for nine
out of every 12 months on a rolling basis. Such assets primarily consist of
residential housing related loans and investments.
Any savings association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF. If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings association and a national bank, and it is
limited to national bank branching rights in its home state. In addition, the
association is immediately ineligible to receive any new FHLB borrowings and
is subject to national bank limits for payment of dividends. If such
association has not requalified or converted to a national bank within three
years after the failure, it must divest of all investments and cease all
activities not permissible for a national bank. In addition, it must repay
promptly any outstanding FHLB borrowings, which may result in repayment
penalties. If any association that fails the QTL test is controlled by a
holding company, then within one year after the failure, the holding company
must register as a bank holding company and become subject to all restrictions
on bank holding companies. See "The Company--BHCA."
Provident Bank is a member of the SAIF, which is administered by the FDIC.
As insurer, the FDIC imposes deposit insurance premiums and is authorized to
conduct examinations of and to require reporting by FDIC-insured institutions.
It also may prohibit any FDIC-insured institution from engaging in any
activity the FDIC determines by regulation or order to pose a serious risk to
the FDIC. The FDIC also has the authority to initiate enforcement actions
against savings associations, after giving the OTS an opportunity to take such
action, and may terminate the deposit insurance if it determines that the
institution has engaged in unsafe or unsound practices, or is in an unsafe or
unsound condition.
PAYMENT OF DIVIDENDS
Exchange Bank is subject to the dividend restrictions set forth by the OCC.
Under such restrictions, Exchange Bank may not, without prior approval of the
OCC, declare dividends in excess of the sum of the current year's earnings (as
defined) plus the retained earnings (as defined) from the prior two years.
Provident Bank, as a Tier 1 savings institution, is limited in its payment of
dividends during a calendar year to the higher of 100% of the current year
earnings during the calendar year plus the amount that would reduce by one-
half its surplus capital ratio at the beginning of the calendar year, or 75%
of its current earnings over the most recent four-quarter period. Provident
Bank is required to obtain OTS approval for dividends exceeding the preceding
amount. There are no specific regulatory restrictions on the ability of
Citizens to pay dividends. In addition, under the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), a FDIC-insured depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or in the event it is undercapitalized.
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If, in the opinion of the applicable federal bank regulatory authority, a
depository institution or holding company is engaged in or is about to engage
in an unsafe or unsound practice (which, depending on the financial condition
of the depository institution or holding company, could include the payment of
dividends), such authority may require, after notice and hearing (except in the
case of an emergency proceeding where there is no notice or hearing), that such
institution or holding company cease and desist from such practice. The federal
banking agencies have indicated that paying dividends that deplete a depository
institution's or holding company's capital base to an inadequate level would be
such an unsafe and unsound banking practice. Moreover, the Federal Reserve and
the FDIC have issued policy statements providing that bank holding companies
and insured depository institutions generally should only pay dividends out of
current operating earnings.
TRANSACTIONS WITH AFFILIATES AND INSIDERS
The Banks are subject to Section 23A of the Federal Reserve Act, which places
limits on the amount of loans or extensions of credit to, or investments in, or
certain other transactions with, affiliates, including the Company. In
addition, limits are placed on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. Most of these
loans and certain other transactions must be secured in prescribed amounts. The
Banks are also subject to Section 23B of the Federal Reserve Act, which, among
other things, prohibits an institution from engaging in transactions with
certain affiliates unless the transactions are on terms substantially the same,
or at least as favorable to such institution or its subsidiaries, as those
prevailing at the time for comparable transactions with non-affiliated
companies. The Banks are subject to restrictions on extensions of credit to
executive officers, directors, certain principal stockholders, and their
related interests. Such extensions of credit (i) must be made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with third parties and (ii) must not
involve more than the normal risk of repayment or present other unfavorable
features.
BRANCHING
National bank branches are required by the National Bank Act to adhere to
branch banking laws applicable to state banks in the states in which they are
located. Under federal legislation, effective June 1, 1997, a bank may merge or
consolidate across state lines, unless, prior to May 31, 1997, either of the
states involved elects to prohibit such mergers or consolidations. Prior to the
effective date of this legislation, a bank may merge or consolidate across
state lines only if both of the states involved elect to "opt-in" early to the
provisions of the legislation. States may also authorize banks from other
states to engage in branching across state lines de novo and by acquisition of
branches without acquiring a whole banking institution. Missouri has enacted
legislation authorizing interstate branching within thirty miles of its state
borders and placing a minimum age requirement of five years on acquired
institutions. Missouri has not chosen to opt-in early to the provisions of the
new federal law. The Kansas legislature recently failed to take action with
regard to the above-referenced federal legislation. State law in Missouri
permits branching anywhere in the state. Statewide branching is also allowed in
Kansas.
COMMUNITY REINVESTMENT ACT
The Community Reinvestment Act requires that, in connection with examinations
of financial institutions within their jurisdiction, the Federal Reserve, the
FDIC, the OCC and the OTS evaluate the record of such financial institutions in
meeting the credit needs of their local communities, including low and moderate
income neighborhoods, consistent with the safe and sound operation of those
institutions. These factors are also considered in evaluating mergers,
acquisitions and applications to open a branch or facility.
OTHER REGULATIONS
Interest and certain other charges collected or contracted for by the Banks
are subject to state usury laws and certain federal laws concerning interest
rates. The Banks' loan operations are also subject to certain federal laws
applicable to credit transactions, such as the federal Truth-In-Lending Act
governing disclosures of credit
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terms to consumer borrowers, the Home Mortgage Disclosure Act of 1975
requiring financial institutions to provide information to enable the public
and public officials to determine whether a financial institution is
fulfilling its obligation to help meet the housing needs of the community it
serves, the Equal Credit Opportunity Act prohibiting discrimination on the
basis of race, creed or other prohibited factors in extending credit, the Fair
Credit Reporting Act of 1978 governing the use and provision of information to
credit reporting agencies, the Fair Debt Collection Act governing the manner
in which consumer debts may be collected by collection agencies, and the rules
and regulations of the various federal agencies charged with the
responsibility of implementing such federal laws. The deposit operations of
the Bank also are subject to the Right to Financial Privacy Act, which imposes
a duty to maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative subpoenas of financial
records, and the Electronic Funds Transfer Act and Regulation E issued by the
Federal Reserve Board to implement that act, which govern automatic deposits
to and withdrawals from deposit accounts and customers' rights and liabilities
arising from the use of automated teller machines and other electronic banking
services.
REGULATORY CAPITAL REQUIREMENTS
Federal regulations establish minimum requirements for the capital adequacy
of depository institutions. The regulators may establish higher minimum
requirements if, for example, a bank has previously received special attention
or has a high susceptibility to interest rate risk. Banks with capital ratios
below the required minimum are subject to certain administrative actions,
including prompt corrective action, the termination of deposit insurance upon
notice and hearing, or a temporary suspension of insurance without a hearing.
The federal risk-based capital guidelines for banks require a ratio of Tier
1, or core capital, to total risk-weighted assets of 4% and a ratio of total
capital to total risk-weighted assets of 8%. The leveraged capital guidelines
require that banks maintain Tier 1 capital of no less than 5% of total
adjusted assets, except in the case of certain highly rated banks for which
the minimum leverage ratio is 3% of total adjusted assets. OTS capital
regulations require savings institutions to meet three capital standards: (1)
tangible capital equal to 1.5% of total adjusted assets, (2) a leverage ratio
(core capital to total adjusted assets) of at least 3% and (3) a risk-based
capital requirement equal to at least 8% of total risk-weighted assets.
Federal regulations applicable to financial institutions define five capital
levels: well capitalized, adequately capitalized, undercapitalized, severely
undercapitalized and critically undercapitalized. An institution is critically
undercapitalized if it has a tangible equity to total assets ratio that is
equal to or less than 2%. An institution is well capitalized if it has a total
risk-based capital ratio (total capital to risk-weighted assets) of 10% or
greater, has a Tier 1 risk-based capital ratio (Tier 1 capital to risk-
weighted assets) of 6% or greater, has a leveraged ratio (Tier 1 capital to
total adjusted assets) of 5% or greater, and is not subject to an order,
written agreement, capital directive, or prompt corrective action directive to
meet and maintain a specific capital level for any capital measure. Under the
regulations, each of the Banks is at least adequately capitalized at June 30,
1996.
The FDICIA requires the federal banking regulators to take "prompt
corrective action" with respect to capital-deficient institutions. In addition
to requiring the submission of a capital restoration plan, FDICIA contains
broad restrictions on certain activities of undercapitalized institutions
involving asset growth, acquisitions, branch establishment, and expansion into
new lines of business. With certain exceptions, an insured depository
institution is prohibited from making capital distributions, including
dividends, and is prohibited from paying management fees to control persons if
the institution would be undercapitalized after any such distribution or
payment.
As an institution's capital decreases, the powers of the federal regulators
become greater. A significantly undercapitalized institution is subject to
mandated capital raising activities, restrictions on interest rates paid and
transactions with affiliates, removal of management, and other restrictions.
The regulators have very limited discretion in dealing with a critically
undercapitalized institution and are virtually required to appoint a receiver
or conservator if the capital deficiency is not corrected promptly.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no established public trading market
for the Common Stock. Future sales of substantial amounts of Common Stock in
the public market could adversely affect the prevailing market price and
impair the Company's ability to raise additional funds.
Upon completion of this Offering the Company will have outstanding 4,000,000
shares of Common Stock (assuming no exercise of the Underwriters' over-
allotment option). The shares sold in this Offering will be freely tradeable
by persons other than "affiliates" of the Company, as that term is defined in
the Securities Act. The 2,000,000 shares of Common Stock outstanding prior to
this Offering may not be sold unless they are registered under the Act or are
sold pursuant to Rule 144 under the Act or another exemption from
registration. Certain holders of shares of Common Stock are subject to an
agreement with the Underwriters prohibiting their transfer of Common Stock for
180 days after the date of this Prospectus, without the prior written consent
of the Underwriters.
Beginning 90 days after the date of this Prospectus, if a period of at least
two years has elapsed from the date that shares of Common Stock were acquired
from the Company or an affiliate of the Company, then, pursuant to Rule 144,
the holder of such shares (including an affiliate of the Company), may sell
within any three month period that number of shares which does not exceed the
greater of 1% of the then outstanding shares of Common Stock (40,000 shares
immediately following the Offering, assuming no exercise of the Underwriters'
over-allotment option) or the average weekly trading volume of the Common
Stock during the four calendar weeks preceding such sale. Sales pursuant to
Rule 144 are subject to certain requirements relating to the manner of sale,
notice and availability of current public information about the Company. If at
least three years has elapsed from the date the shares of Common Stock were
acquired from the Company, or an affiliate of the Company, and the proposed
seller has not been an affiliate of the Company at any time during the three
months immediately preceding the sale, such person is entitled to sell such
shares pursuant to Rule 144(k) without regard to the limitations described
above. As of the date of this Prospectus, 616,436 shares of Common Stock are
eligible for immediate resale to the public without restriction pursuant to
Rule 144(k) following the expiration of any agreement with the Underwriters
described above prohibiting transfer for 180 days after the date of this
Prospectus.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Company and the several Underwriters named below, each of the Underwriters has
severally and not jointly agreed to purchase from the Company, and the Company
has agreed to sell to the Underwriters, the respective numbers of shares set
forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Advest, Inc.....................................................
---------
Total Underwriters ( ).................................... 2,000,000
=========
</TABLE>
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The Underwriters are committed to purchase and pay for all such shares if any
are purchased. The Underwriting Agreement provides the obligations of the
several Underwriters are subject to approval of certain matters by their
counsel and to various other conditions.
The Company has been advised the Underwriters propose to offer the shares of
Common Shares directly to the public at the offering price set forth on the
cover page of this Prospectus and to certain selected dealers at such price
less a concession of $ per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to certain
other dealers. After the initial public offering of the shares, the public
offering price, concession and reallowance to dealers may be changed by the
Underwriters. In addition, the Company has agreed to pay a supplemental
financial advisory fee of $50,000 to the managing underwriter, Advest, Inc.,
payable upon consummation of the public offering.
The Company has granted to the Underwriters an option exercisable during the
thirty (30) day period beginning on the effective date of the Registration
Statement, to purchase up to 300,000 additional shares of common stock, solely
to cover over-allotments, if any, at the public offering price less the
underwriting discount, as set forth on the cover page of this Prospectus. If
the Underwriters exercise such option, the Underwriters have severally and not
jointly agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the table above, bears to the 2,000,000 shares of common
stock. If purchased, such additional shares will be sold by the Underwriters on
the same terms as those on which the 2,000,000 shares are being sold.
The persons listed in the prospectus under the caption "Security Ownership of
Certain Beneficial Owners and Management" have agreed they will not publicly
sell, contract to publicly sell, or otherwise publicly dispose of any shares of
common stock for a period of 180 days from the date of this Prospectus, without
the written consent of the Underwriters.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities including liabilities under the Securities Act, or to
contribute payments that the Underwriters or the Company may be required to
make in respect thereof.
The foregoing is a summary of the principal terms of the Underwriting
Agreement and does not purport to be complete. Reference is made to a copy of
the Underwriting Agreement which is on file as an exhibit to the Registration
Statement.
The Underwriters have informed the Company that the Underwriters may make
sales to accounts over which they exercise discretionary authority.
Prior to this Offering there has been no public market for the Common Stock
of the Company. The offering price of the Common Stock and other terms of this
Offering were determined by negotiations between the Company and the
Underwriters. Among the factors considered in determining such price and terms,
in addition to prevailing market conditions, included the history of and the
prospects for the industry in which the Company competes, an assessment of the
Company's management, the prospects of the Company, an assessment of the
Company's results of operations, its capital structure, and such other factors
as were deemed relevant.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Blackwell Sanders Matheny Weary & Lombardi L.C., Kansas City,
Missouri. Certain legal matters in connection with the Offering will be passed
upon for the Underwriters by Husch & Eppenberger, Kansas City, Missouri.
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EXPERTS
The Consolidated Financial Statements of the Company at December 31, 1995,
and for the year then ended are included herein in reliance upon the report of
KPMG Peat Marwick LLP ("KPMG"), independent certified public accountants,
appearing elsewhere herein, and upon the authority of such firm as experts in
accounting and auditing.
The Consolidated Financial Statements of the Company at December 31, 1993 and
1994, and for the years then ended are included herein in reliance upon the
report of GRA Thompson, White & Co., P.C. ("GRA Thompson"), independent
certified public accountants, appearing elsewhere herein, and upon the
authority of such firm as experts in accounting and auditing.
In November 1995, the Company retained Keith E. Bouchey, a principal of GRA
Thompson, to serve as its Executive Vice President, Chief Financial Officer,
Secretary and Treasurer. At the time of his employment by the Company, GRA
Thompson served as the Company's independent certified public accountants. In
view of the Commission's rules dealing with the independence of accountants,
the Board of Directors of the Company retained KPMG to serve as the Company's
new independent certified public accountants on April 29, 1996. There were and
are no disagreements with GRA Thompson on any matter of accounting principles
or practice, financial statement disclosure, or auditing scope and procedure
and GRA Thompson's report on any of the Company's financial statements have not
contained an adverse opinion or disclaimer of opinion or been qualified as to
uncertainty, audit scope or accounting principles. The Company has authorized,
and GRA Thompson has agreed, to respond fully to the inquiries of KPMG
concerning GRA Thompson's prior engagement by the Company. GRA Thompson will
continue to provide consulting and advisory services to the Company.
AVAILABLE INFORMATION
The Company is not subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Company has filed
with the Securities and Exchange Commission (the "Commission") a Registration
Statement on Form SB-2 (together with all amendments and exhibits, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered by this Prospectus. This Prospectus contains information
concerning the Company but does not contain all of the information set forth in
the Registration Statement which can be inspected without charge at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such material can be obtained
from the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, reports and other
information concerning the Company may be inspected at the offices of The
Nasdaq Stock Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
57
<PAGE>
INDEX TO FINANCIAL INFORMATION
<TABLE>
<S> <C>
Independent Auditors' Report.............................................. F-2
Independent Auditors' Report.............................................. F-3
Consolidated Balance Sheets at December 31, 1995, 1994, and 1993.......... F-4
Consolidated Statements of Earnings for the years ended December 31, 1995,
1994, and 1993........................................................... F-5
Consolidated Statements of Stockholders Equity for the years ended
December 31, 1995, 1994, and 1993........................................ F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994, and 1993..................................................... F-7
Notes to Consolidated Financial Statements................................ F-8
Consolidated Balance Sheet at June 30, 1996 (Unaudited)................... F-20
Consolidated Statements of Earnings for the six months ended June 30, 1996
and 1995 (Unaudited)..................................................... F-21
Consolidated Statements of Cash Flows for the six months ended June 30,
1996 and 1995 (Unaudited)................................................ F-22
Notes to Consolidated Financial Statements (Unaudited).................... F-23
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Gold Banc Corporation, Inc.:
We have audited the accompanying consolidated balance sheet of Gold Banc
Corporation, Inc. and subsidiaries as of December 31, 1995 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Gold Banc
Corporation, Inc. and subsidiaries as of December 31, 1995 and the results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Kansas City, Missouri
May 30, 1996 except for note 16, which is as of September 6, 1996
F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Gold Bancshares, Inc.
Prairie Village, Kansas
We have audited the accompanying consolidated balance sheets of Gold
Bancshares, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of earnings, stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are
the responsibility of management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Gold
Bancshares, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flow for the years then ended in
conformity with generally accepted accounting principles.
/s/ GRA, Thompson, White & Co., P.C.
February 17, 1995
F-3
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 1995 1994 1993
------ -------- ------- -------
<S> <C> <C> <C>
Cash and due from banks................................. $ 8,281 6,539 5,645
Federal funds sold and interest-bearing deposits........ 14,942 803 8,430
-------- ------- -------
Total cash and cash equivalents................... 23,223 7,342 14,075
-------- ------- -------
Investment securities (note 2):
Held-to-maturity securities........................... 25 26,811 16,404
Available-for-sale securities......................... 65,295 39,214 40,081
Other................................................. 2,055 1,782 674
-------- ------- -------
Total investment securities....................... 67,375 67,807 57,159
-------- ------- -------
Mortgage loans held for sale, net....................... 6,665 1,786 --
Loans, net (note 3)..................................... 154,805 134,455 90,687
Premises and equipment, net (note 4).................... 7,328 4,947 2,465
Securities sold pending settlement...................... -- -- 9,569
Deferred tax benefits (note 9).......................... 872 1,062 --
Accrued interest and other assets....................... 3,689 3,775 2,997
-------- ------- -------
$263,957 221,174 176,952
======== ======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Liabilities:
Deposits (note 5)..................................... $226,381 186,429 149,464
Securities sold under agreements to repurchase (note
6)................................................... 15,638 7,476 12,071
Federal funds purchased, long-term debt and other
borrowings (note 7).................................. 8,992 15,937 4,987
Accrued interest and other liabilities................ 1,624 1,368 1,562
-------- ------- -------
Total liabilities................................. 252,635 211,210 168,084
-------- ------- -------
Stockholders' equity (notes 9, 13 and 16):
Preferred stock, Class A $100 par value, 8%
noncumulative dividends, 1,000 shares authorized, no
shares issued........................................ -- -- --
Preferred stock, Class B $1,000 par value, 1,000
shares authorized, 65, 100 and 100 shares issued,
respectively......................................... 65 100 100
Common stock, $1 par value, 5,000,000 shares
authorized at December 31, 1995; 2,000,000 and
2,041,876 shares issued and outstanding at December
31, 1995 and 1994, respectively; and 1,897,618 shares
issued at December 31, 1993.......................... 2,000 2,042 1,898
Additional paid-in capital............................ 1,015 1,405 597
Retained earnings..................................... 8,353 7,649 6,225
Unrealized gain (loss) on available-for-sale
securities, net...................................... (111) (1,197) 363
Less:
Cost of common stock securing ESOP debt............. -- -- (10)
Treasury stock, 35 shares of Class B preferred stock
at December 31, 1994 and 1993 and 56,514 shares of
common stock at December 31, 1993, at cost......... -- (35) (335)
-------- ------- -------
Total stockholders' equity........................ 11,322 9,964 8,868
Commitments and contingent liabilities (notes 9 and 14)
-------- ------- -------
$263,957 221,174 176,952
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Interest income:
Loans, including fees........................ $ 14,486 10,725 6,562
Investment securities........................ 3,760 4,554 4,637
Other........................................ 185 70 82
--------- --------- ---------
18,431 15,349 11,281
--------- --------- ---------
Interest expense:
Deposits..................................... 8,804 6,789 5,474
Borrowings and other......................... 1,241 970 400
--------- --------- ---------
10,045 7,759 5,874
--------- --------- ---------
Net interest income........................ 8,386 7,590 5,407
Provision for loan losses (note 3)............. 1,284 147 296
--------- --------- ---------
Net interest income after provision for
loan losses............................... 7,102 7,443 5,111
--------- --------- ---------
Other income:
Service fees................................. 650 557 355
Net gains on sale of mortgage loans.......... 1,058 107 --
Net securities gains (losses)................ (84) (243) 729
Gain on sale of subsidiary (note 12)......... -- 619 --
Other........................................ 314 307 335
--------- --------- ---------
1,938 1,347 1,419
--------- --------- ---------
Other expense:
Salaries and employee benefits............... 4,438 3,393 2,276
Net occupancy expense........................ 1,137 1,025 447
Federal deposit insurance premiums........... 332 479 365
Other........................................ 2,094 1,722 1,393
--------- --------- ---------
8,001 6,619 4,481
--------- --------- ---------
Earnings before income taxes............... 1,039 2,171 2,049
Income taxes (note 8).......................... 335 777 731
--------- --------- ---------
Net earnings............................... $ 704 1,394 1,318
========= ========= =========
Earnings per share............................. $ .34 .69 .71
========= ========= =========
Weighted average common shares outstanding..... 2,063,415 2,012,894 1,860,106
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ADDITIONAL ON SECURITIES
PREFERRED COMMON PAID-IN RETAINED AVAILABLE- ESOP TREASURY
STOCK STOCK CAPITAL EARNINGS FOR-SALE, NET DEBT STOCK TOTAL
--------- ------ ---------- -------- ------------- ---- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992................... $109 1,898 597 4,937 -- (20) (2) 7,519
Purchase of 70 shares
and retirement of 90
shares of Class A
preferred stock....... (9) -- -- -- -- -- 2 (7)
Purchase of 56,514
shares of common
stock................. -- -- -- -- -- -- (300) (300)
Purchase of 35 shares
of Class B preferred
stock................. -- -- -- -- -- -- (35) (35)
Payment on ESOP debt... -- -- -- -- -- 10 -- 10
Adoption of SFAS No.
115................... -- -- -- -- 363 -- -- 363
Net earnings........... -- -- -- 1,318 -- -- -- 1,318
---- ----- ----- ----- ------ --- ------ ------
Balance at December 31,
1993................... 100 1,898 597 6,255 363 (10) (335) 8,868
Issuance of 144,258
shares of common
stock................. -- 144 753 -- -- -- -- 897
Sale of 56,514 shares
of common stock....... -- -- 55 -- -- -- 300 355
Payment on ESOP debt... -- -- -- -- -- 10 -- 10
Change in unrealized
loss of securities
available-for-sale.... -- -- -- -- (1,560) -- -- (1,560)
Net earnings........... -- -- -- 1,394 -- -- -- 1,394
---- ----- ----- ----- ------ --- ------ ------
Balance at December 31,
1994................... 100 2,042 1,405 7,649 (1,197) -- (35) 9,964
Purchase of 117,756
shares of common
stock................. -- -- -- -- -- -- (1,095) (1,095)
Issuance of 53,346
shares of common
stock................. -- 53 347 -- -- -- -- 400
Sale of 23,339 shares
of common stock....... -- -- (25) -- -- -- 288 263
Retirement of 35 shares
of Class B preferred
stock................. (35) -- -- -- -- -- 35 --
Retirement of 94,416
shares of common
stock................. -- (95) (712) -- -- -- 807 --
Change in unrealized
gain (loss) of
securities available-
for-sale.............. -- -- -- -- 1,086 -- -- 1,086
Net earnings........... -- -- -- 704 -- -- -- 704
---- ----- ----- ----- ------ --- ------ ------
Balance at December 31,
1995................... $ 65 2,000 1,015 8,353 (11) -- -- 11,322
==== ===== ===== ===== ====== === ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings....................................... $ 704 1,394 1,318
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Gain on sale of subsidiary....................... -- (619) --
Provision for loan losses........................ 1,284 147 296
Net (gains) losses on sales of available-for-sale
securities...................................... 84 243 (729)
Amortization of investment securities' premiums,
net of accretion................................ 92 274 279
Depreciation and amortization.................... 512 344 285
(Gain) loss on sale of assets, net............... (22) 30 --
Originations of mortgage loans held for sale, net
of sales proceeds............................... (4,879) (1,786) --
Other changes:
Accrued interest receivable and other assets... (502) (372) 110
Accrued interest payable and other liabilities. 255 (1,140) 10
------- ------- -------
Net cash provided by (used in) operating
activities................................... (2,472) (1,485) 1,569
------- ------- -------
Cash flows from investing activities:
Loans originated, net of principal collections..... (21,728) (30,017) (22,887)
Principal collections and proceeds from maturities
of held-to-maturity securities.................... 609 1,510 17,830
Principal collections and proceeds from sales and
maturities of available-for-sale securities....... 29,535 37,504 25,722
Securities sold pending settlement................. -- 9,569 (9,569)
Purchases of held-to-maturity securities........... -- (11,211) (22,791)
Purchases of available-for-sale securities......... (28,152) (25,684) --
Net additions to premises and equipment............ (2,866) (1,376) (213)
Acquisition of subsidiary, net of cash acquired.... -- 1,935 --
Sale of subsidiary, net of cash paid............... -- 1,417 --
Proceeds from sale of other assets................. 269 62 --
------- ------- -------
Net cash used in investing activities......... (22,333) (16,291) (11,908)
------- ------- -------
Cash flows from financing activities:
Increase in deposits............................... 39,951 5,126 4,269
Net increase in short-term borrowings.............. 1,312 2,630 5,146
Proceeds from long-term debt....................... 500 5,100 1,100
Principal payments on long-term debt............... (595) (3,065) (250)
Purchase of treasury stock......................... (1,095) -- (333)
Proceeds from issuance of common stock............. 350 897 --
Proceeds from sale of treasury stock............... 263 355 --
------- ------- -------
Net cash provided by financing activities..... 40,686 11,043 9,932
------- ------- -------
Increase (decrease) in cash and cash
equivalents.................................. 15,881 (6,733) (407)
Cash and cash equivalents, beginning of year........ 7,342 14,075 14,482
------- ------- -------
Cash and cash equivalents, end of year.............. $23,223 7,342 14,075
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for interest............. $ 9,740 7,855 5,952
======= ======= =======
Cash paid during the year for income taxes......... $ 1,165 1,241 550
======= ======= =======
Supplemental schedule of noncash investing
activities:
Loans transferred to other real estate owned....... $ 94 33 --
======= ======= =======
Transfer of held-to-maturity investment securities
to available-for-sale............................. $26,129 -- --
======= ======= =======
Transfer of available-for-sale investment
securities to held-to-maturity.................... $ -- 3,009 --
======= ======= =======
Designation of investment securities as available-
for-sale at adoption of SFAS No. 115.............. $ -- -- 40,081
======= ======= =======
Supplemental schedule of noncash financing
activities:
Retirement of treasury stock....................... $ 842 -- --
======= ======= =======
Common stock subscribed............................ $ 50 -- --
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Gold Banc
Corporation, Inc. (formerly Gold Bancshares, Inc.) and its subsidiaries,
Exchange National Bank, Marysville, Kansas, Citizens State Bank and Trust
Company, Seneca, Kansas and Provident Bancshares, Inc., St. Joseph, Missouri,
collectively referred to as the Company, all of which are wholly-owned
subsidiaries. Provident owns 100% of Provident Bank, f.s.b., St. Joseph,
Missouri. During 1994, the Company sold its interest in Peoples Bank, N.A.,
Coldwater, Kansas (Coldwater), and, accordingly, the accounts of Coldwater are
not included in the consolidated balance sheet at December 31, 1995 or 1994.
All significant intercompany transactions have been eliminated.
Nature of Operations
The Company is a multibank holding company that owns and operates the banks
located in northeastern Kansas and northwestern Missouri. The banks are
community banks that provide a full range of commercial and consumer banking
services primarily to small and medium sized communities and the surrounding
market areas and, most recently, to suburban Kansas City.
Estimates
The preparation of the consolidated financial statements, in conformity with
generally accepted accounting principles, requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Investment Securities
The Company classifies its investment securities portfolio as held-to-
maturity or available-for-sale. On December 31, 1993, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Pursuant to SFAS No. 115
implementation guidance issued in 1995 by the Financial Accounting Standards
Board (FASB), the Company reclassified certain held-to-maturity securities
with aggregate costs and fair values of approximately $26,129,000 and
$25,979,000, respectively, to available-for-sale in December 1995.
Premiums and discounts are amortized over the estimated lives of the
securities using a method which approximates the interest method. Gains and
losses on sales are calculated using the specific identification method.
Mortgage Loans Held for Sale
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of aggregate cost or estimated fair value. Fees received
on such loans are deferred and recognized in income as part of the gain or
loss on sale. Net unrealized losses are recognized through a valuation
allowance by charges to income.
Loans
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their
outstanding principal adjusted for any charge-offs, the allowance for loan
F-8
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
losses, and any deferred fees or costs on originated loans and unamortized
premiums or discounts on purchased loans.
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS No. 118, "Accounting by
Creditors for Impairment of Loan-Income Recognition and Disclosure." SFAS No.
114 requires that impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate or
at the loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. SFAS No. 118 amends SFAS No. 114 to allow a
creditor to use existing methods for recognizing interest income on an
impaired loan if those methods are more conservative than methods required by
SFAS No. 114. The impact of these statements on the consolidated financial
statements of the Company was immaterial.
Interest income on loans is accrued and credited to operations based on the
principal amount outstanding. The accrual of interest on impaired loans is
discontinued when, in management's opinion, the borrower may be unable to meet
payments as they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently recognized only
to the extent cash payments are received. Significant loan and commitment fee
income and related costs are deferred and amortized in relationship to the
respective loan or commitment.
Allowance for Loan Losses
Provisions for losses on loans receivable are based upon management's
estimate of the amount required to maintain an adequate allowance for losses,
relative to the risk in the loan portfolio. This estimate is based on reviews
of the loan portfolio, including assessment of the estimated net realizable
value of the related underlying collateral, and upon consideration of past
loss experience, current economic conditions and such other factors which, in
the opinion of management, deserve current recognition. Amounts are charged
off as soon as probability of loss is established, taking into consideration
such factors as the borrower's financial condition, underlying collateral and
guarantees. Loans are also subject to periodic examination by regulatory
agencies. Such agencies may require charge-offs or additions to the allowance
based upon their judgments about information available at the time of their
examination.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation and amortization are computed using the straight-
line and accelerated methods based on the estimated useful lives of the
related assets.
Goodwill
The excess cost over fair value of assets acquired of consolidated
subsidiaries is being amortized on a straight-line basis over periods of ten
to fifteen years.
Income Taxes
The Company and its subsidiaries file consolidated federal income tax
returns. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities for
subsequent changes in tax rates is recognized in the period that includes the
tax rate change.
F-9
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, cash equivalents
include cash on hand, amounts due from banks, federal funds sold and interest-
bearing deposits.
Earnings Per Share
Earnings per share is based upon the weighted average shares outstanding
during the periods presented, including 14,048 shares issued in March 1996
upon conversion of the 65 shares of Class B preferred stock outstanding at
December 31, 1995.
(2) INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair
value of investment securities by major security type at December 31, 1995,
1994 and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
1995 COST GAINS LOSSES VALUE
---- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Held-to-maturity:
Obligations of states and political
subdivisions...................... $ 25 -- -- 25
======== === ====== ======
Available-for-sale:
U.S. treasury and agency
securities........................ $ 34,918 129 (182) 34,865
Obligations of states and political
subdivisions...................... 3,936 75 (3) 4,008
Mortgage-backed securities......... 26,619 2 (199) 26,422
-------- --- ------ ------
Total............................ $ 65,473 206 (384) 65,295
======== === ====== ======
<CAPTION>
1994
----
<S> <C> <C> <C> <C>
Held-to-maturity:
U.S. treasury and agency
securities........................ $ 7,693 -- (648) 7,045
Obligations of states and political
subdivisions...................... 5,183 10 (210) 4,983
Mortgage-backed securities......... 13,935 -- (1,270) 12,665
-------- --- ------ ------
Total............................ $ 26,811 10 (2,128) 24,693
======== === ====== ======
Available-for-sale:
U.S. treasury and agency
securities........................ $ 35,763 1 (1,564) 34,200
Mortgage-backed securities......... 5,367 -- (353) 5,014
-------- --- ------ ------
Total............................ $ 41,130 1 (1,917) 39,214
======== === ====== ======
<CAPTION>
1993
----
<S> <C> <C> <C> <C>
Held-to-maturity:
U.S. treasury and agency
securities........................ $ 7,359 84 (25) 7,418
Obligations of state and political
subdivisions...................... 5,481 229 (7) 5,703
Mortgage-backed securities......... 3,564 88 (5) 3,647
-------- --- ------ ------
Total............................ $ 16,404 401 (37) 16,768
======== === ====== ======
Available-for-sale:
U.S. treasury and agency
securities........................ $ 24,165 409 (10) 24,564
Mortgage-backed securities......... 15,331 223 (37) 15,517
-------- --- ------ ------
Total............................ $ 39,496 632 (47) 40,081
======== === ====== ======
</TABLE>
F-10
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The amortized cost and estimated fair value of debt securities at December
31, 1995, by contractual maturity, are shown below (in thousands). Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------- -------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Due in one year or less..... $-- -- 13,845 13,837
Due after one year through
five years................. 25 25 24,909 24,938
Due after five years through
ten years.................. -- -- 100 98
Mortgage-backed securities.. -- -- 26,619 26,422
---- --- ------ ------
Total................... $ 25 25 65,473 65,295
==== === ====== ======
</TABLE>
Other securities at December 31, 1995, 1994 and 1993 consist primarily of
stock in the Federal Reserve Bank and Federal Home Loan Bank. Amortized cost
of such investments approximates their fair value. At December 31, 1995,
investment securities with fair values of approximately $48,272,000 were
pledged to secure public deposits and for other purposes.
(3) LOANS
Loans are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- ------
<S> <C> <C> <C>
Real estate--mortgage.......................... $ 71,690 70,648 35,800
Real estate--construction...................... 24,398 12,943 7,750
Commercial..................................... 38,715 31,078 24,602
Agricultural................................... 11,029 12,800 17,296
Consumer....................................... 8,387 6,903 5,175
Other.......................................... 3,301 2,130 1,237
-------- ------- ------
157,520 136,502 91,860
Allowance for loan losses...................... (2,715) (2,047) (1,173)
-------- ------- ------
$154,805 134,455 90,687
======== ======= ======
</TABLE>
At December 31, 1995, the Company serviced loans of approximately
$29,200,000 for the Federal National Mortgage Association and approximately
$3,800,000 for the Federal Home Loan Mortgage Corporation. Service fee income
of approximately $90,000 and $74,000, respectively, related to these
portfolios is included in service fee income in the consolidated statements of
earnings for the years ended December 31, 1995 and 1994. SFAS No. 122,
"Accounting for Mortgage Servicing Rights," is effective January 1, 1996. SFAS
No. 122 requires that the Company recognize as separate assets the rights to
service mortgage loans originated by the Company. It is not expected that the
adoption of this new accounting standard in the first quarter of 1996 will
have a significant impact on the Company's consolidated financial statements.
Loans made to directors and officers of the Company approximated $3,960,000,
$4,362,000 and $4,565,000 at December 31, 1995, 1994 and 1993. Such loans were
made in the ordinary course of business on normal credit terms, including
interest rate and collateralization.
Nonaccrual loans approximated $1,739,000, $169,000 and $421,000 at December
31, 1995, 1994 and 1993. The interest income not recognized on these loans was
approximately $27,000, $18,000 and $11,000 in 1995, 1994 and 1993.
F-11
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Activity in the allowance for loan losses during the years ended December
31, 1995, 1994 and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ----- -----
<S> <C> <C> <C>
Balance at beginning of year.............................. $2,047 1,173 945
Allowance for loans relating to purchased subsidiary.... -- 903 --
Allowance for loans relating to sold subsidiary......... -- (159) --
Provision for loan losses............................... 1,284 147 296
Loan charge-offs........................................ (671) (202) (200)
Loan recoveries......................................... 55 185 132
------ ----- -----
Balance at end of year.................................... $2,715 2,047 1,173
====== ===== =====
</TABLE>
(4) PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Land.............................................. $1,418 501 115
Buildings and leasehold improvements.............. 4,470 3,855 2,182
Construction in progress.......................... 509 1,123 --
Furniture, fixtures and equipment................. 2,756 2,253 1,756
Automobiles....................................... 198 180 160
------ ------ ------
9,351 7,912 4,213
Accumulated depreciation and amortization......... (2,023) (2,965) (1,748)
------ ------ ------
$7,328 4,947 2,465
====== ====== ======
</TABLE>
(5) DEPOSITS
Deposits are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Demand:
Noninterest bearing............................ $ 18,935 11,470 10,293
-------- ------- -------
Interest-bearing:
NOW.......................................... 6,598 8,786 4,756
Advantage.................................... 10,119 9,307 9,474
Super NOW.................................... 9,963 7,884 9,900
Money market................................. 17,287 18,270 18,654
-------- ------- -------
43,967 44,247 42,784
-------- ------- -------
Total demand............................... 62,902 55,717 53,077
Savings.......................................... 11,166 12,293 7,791
Time............................................. 152,313 118,419 88,596
-------- ------- -------
$226,381 186,429 149,464
======== ======= =======
</TABLE>
Time deposits include certificates of deposit of $100,000 and over totaling
approximately $25,074,000, $16,421,000 and $12,918,000 at December 31, 1995,
1994 and 1993, respectively.
F-12
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Information concerning securities sold under agreements to repurchase is as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Average monthly balance during the year.................. $ 5,937 5,856 3,825
Average interest rate during the year.................... 5.39% 3.50 3.47
Maximum month-end balance during the year................ $15,638 12,835 12,071
</TABLE>
(7) FEDERAL FUNDS PURCHASED, LONG-TERM DEBT AND OTHER BORROWINGS
During 1995, the Company participated in the Federal Reserve Bank's 1995
Seasonal Lending Program and was authorized to borrow up to $4,000,000 at
December 31, 1995. The interest rate is based on an average of the Federal
funds rate and the secondary market rate for ninety-day certificates of
deposit. There were no borrowings under this program at December 31, 1995.
Long-term debt at December 31, 1995, 1994 and 1993 includes a note payable
with balances of $7,000,000, $7,145,000 and $3,887,000, respectively. The note
payable is due March 1, 1997 and bears interest at 6.0%. Interest is paid
quarterly with principal due upon maturity, and the stock of the Company's
subsidiaries have been pledged as collateral.
Also included in long-term debt at December 31, 1995, 1994 and 1993 were
long-term FHLB advances aggregating $1,992,000, $1,942,000 and $1,100,000,
respectively. Such advances bear a weighted average fixed interest rate of
6.02%, 5.63% and 5.29% at December 31, 1995, 1994 and 1993, respectively. The
principal repayment requirements on such advances at December 31, 1995 are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1996.............................. $ 390
1997.............................. 323
1998.............................. 323
1999.............................. 253
2000.............................. 213
Thereafter........................ 490
------
$1,992
======
</TABLE>
The Company has entered into blanket pledge agreements with the FHLB which
securitize these advances. The agreements pledge qualifying one-to-four family
mortgage loans.
Federal funds purchased fluctuate daily based on the liquidity needs of the
Company. As of December 31, 1994, Federal funds purchased of $2,100,000 had an
interest rate of 6.2% and a one-day maturity.
Other short-term borrowings consist of Federal Home Loan Bank (FHLB)
advances of $4,750,000 at December 31, 1994. These advances were repaid in
1995.
F-13
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) INCOME TAXES
Income tax expense (benefit) related to operations for 1995, 1994 and 1993
is summarized as follows (in thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
1995:
Federal.......................................... $581 (450) 131
State............................................ 214 (10) 204
---- ---- ---
$795 (460) 335
==== ==== ===
1994:
Federal.......................................... $685 (108) 577
State............................................ 214 (14) 200
---- ---- ---
$899 (122) 777
==== ==== ===
1993:
Federal.......................................... $659 (108) 551
State............................................ 187 (7) 180
---- ---- ---
$846 (115) 731
==== ==== ===
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at December 31,
1995, 1994 and 1993 are presented below (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ----- ----
<S> <C> <C> <C>
Deferred tax assets:
Allowance for loan losses.................................. $ 758 311 255
Unrealized losses on available-for-sale securities, net.... 67 718 --
Other...................................................... 461 585 --
------ ----- ----
Total deferred tax assets................................ 1,286 1,614 255
------ ----- ----
Deferred tax liabilities:
FHLB stock dividends....................................... 125 114 --
Depreciable assets......................................... 206 352 117
Unrealized gains on available-for-sale securities, net..... -- -- 222
Other...................................................... 83 86 95
------ ----- ----
Total deferred tax liabilities........................... 414 552 434
------ ----- ----
Net deferred tax asset (liability)....................... $ 872 1,062 (179)
====== ===== ====
</TABLE>
A valuation allowance for deferred tax assets is not necessary at December
31, 1995, 1994 and 1993.
A reconciliation of expected income tax expense based on the statutory rate
of 34% to actual tax expense for 1995, 1994 and 1993 is summarized as follows
(dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Expected Federal income tax
expense.......................... $353 34.0% $737 34.0% $696 34.0%
Municipal interest................ (76) (7.3) (82) (3.8) (86) (4.2)
State taxes, net of Federal tax
benefit.......................... 135 13.0 132 6.1 119 5.8
Other, net........................ (77) (7.4) (10) (.5) 2 .1
---- ---- ---- ---- ---- ----
$335 32.3% $777 35.8% $731 35.7%
==== ==== ==== ==== ==== ====
</TABLE>
F-14
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) EMPLOYEE BENEFIT PLANS
On January 1, 1986, the Company established the Gold Banc Corporation, Inc.
Employee Stock Ownership Plan (ESOP) to acquire shares of the Company common
stock for the benefit of all eligible employees. The amount of annual
contributions from the Company, if any, is determined by the Board of
Directors. Contributions were approximately $98,000, $45,000 and $40,000 for
the years ended December 31, 1995, 1994 and 1993, respectively. The ESOP,
which is noncontributory, covers substantially all employees of the
corporation.
In 1995, the Company established a 401(k) savings plan for the benefit of
all eligible employees. The Company does not match employee contributions. The
401(k) plan covers substantially all employees of the corporation.
The Company's Board of Directors and stockholders have approved the adoption
of the 1996 Equity Compensation Plan (the Plan). Under the terms of the Plan,
the Company can grant stock options, stock appreciation rights, restricted
stock, performance units or performance shares. Options granted under the Plan
will carry an exercise price equal to or greater than the fair market value at
the date of grant, and generally expire ten years after grant. The Company has
reserved 250,000 shares of common stock for issuance under the Plan, and has
not yet made any awards under the Plan.
(10) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Financial instruments which represent off-balance sheet credit risk consist
of open commitments to extend credit, irrevocable letters of credit and loans
sold with recourse. Open commitments to extend credit and irrevocable letters
of credit amounted to approximately $40,813,000 at December 31, 1995. Such
agreements require the Company to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses. Since many of the
commitments are expected to expire without being fully drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Company evaluates each customer's creditworthiness on a case-by-case basis.
The amount of collateral obtained (if deemed necessary by the Company upon
extension of credit) is based on management's credit evaluation of the
customer. Collateral held varies, but may include accounts receivable,
inventory, property, plant and equipment, and income-producing commercial
properties.
The Company processes residential home mortgage loans for sale in the
secondary market. In conjunction with the sale of such loans, the Company has
entered into agreements with the purchasers of the loans, setting forth
certain provisions. Among those provisions is the right of the purchaser to
return the loans to the Company in the event the borrower defaults within a
stated period. This period ranges among the various purchasers from between
one to twelve months. Loans sold with recourse amounted to approximately
$26,511,000 and $2,178,000 at December 31, 1995 and 1994, respectively. There
were no loans sold with recourse outstanding at December 31, 1993. The
Company's exposure to credit loss in the event of default by the borrower and
the return of the loan by the purchaser is represented by the difference in
the amount of the loan and the recovery value of the underlying collateral.
(11) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of the estimated fair value of financial
instruments are made in accordance with the requirements of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company and its subsidiaries using
available market information and valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts the Company and its
subsidiaries could realize in a current market exchange. The use of different
F-15
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
market assumptions and/or estimation methodologies may have a material impact
on the estimated fair value amounts.
The estimated fair value of the Company's financial instruments is as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------------------ ------------------ ------------------
ESTIMATED ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment securities... $ 67,375 67,375 67,807 65,688 57,159 57,523
======== ======= ======= ======= ======= =======
Mortgage loans held for
sale................... $ 6,665 6,765 1,786 1,786 -- --
======== ======= ======= ======= ======= =======
Loans................... $154,805 155,573 134,455 134,072 90,687 91,610
======== ======= ======= ======= ======= =======
Deposits................ $226,381 226,290 186,429 185,527 149,464 149,879
======== ======= ======= ======= ======= =======
Securities sold under
agreements to
repurchase............. $ 15,638 15,638 7,476 7,476 12,071 12,071
======== ======= ======= ======= ======= =======
Federal funds purchased
and other short-term
borrowings............. $ -- -- 6,850 6,850 -- --
======== ======= ======= ======= ======= =======
Long-term debt.......... $ 8,992 8,786 9,087 8,939 4,987 4,987
======== ======= ======= ======= ======= =======
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Investment Securities--Various methods and assumptions were used to
estimate fair value of the investment securities. For investment
securities, excluding other securities, fair values are based on quoted
market prices or dealer quotes. If a quoted market price is not available,
fair value is estimated using quoted prices for similar securities. The
carrying value of other securities approximates fair values.
Loans Held for Sale--The fair value of loans held for sale equals the
contractual sales price agreed upon with third-party investors.
Loans--For certain homogenous categories of loans, such as some Small
Business Administration guaranteed loans, student loans, residential
mortgages, consumer loans and commercial loans, fair value is estimated
using quoted market prices for similar loans or securities backed by
similar loans, adjusted for differences in loan characteristics. The fair
value of other types of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities.
Deposits--The fair value of demand deposits, savings accounts and money
market deposits is the amount payable on demand at the reporting date. The
fair value of fixed-maturity certificates of deposit is estimated by
discounting the future cash flows using the rates currently offered for
deposits of similar remaining maturities.
Long-term Debt--The fair value of long-term debt is estimated using
discounted cash flow analyses based on the Company's and subsidiaries'
current incremental borrowing rates for similar types of borrowing
arrangements.
Federal Funds Purchased and Securities Sold Under Agreement to
Repurchase--For federal funds purchased and securities sold under
agreements to repurchase, the current carrying amount is a reasonable
estimate of fair value.
Commitments to Extend Credit and Irrevocable Letters of Credit--The fair
value of commitments is estimated using the fees currently charged to enter
into similar agreements, taking into account the
F-16
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
remaining terms of the agreements and the present creditworthiness of the
customers. For fixed-rate loan commitments, fair value also considers the
difference between current levels of interest rates and the committed
rates. The estimated fair value of letters of credit is based on the fees
currently charged for similar agreements. These instruments were determined
to have no positive or negative market value adjustments and are not listed
in the following table.
Loans Sold with Recourse--The fair value of loans sold with recourse is
limited to the contractual amount of the loans required to be repurchased.
Loans currently under the recourse provision have been sold to investors
within the last twelve months. Because the recourse provisions have not yet
expired, it is impractical to determine the fair value; however, it is not
believed they would have a material market value adjustment.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1995, 1994 and 1993. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of the financial statements since that date and,
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
(12) SALE AND ACQUISITION OF SUBSIDIARY BANKS
On June 30, 1994, the Company sold its wholly-owned subsidiary, Peoples
Bank, N.A. located in Coldwater, Kansas. The sales price was approximately
$2,400,000, resulting in a gain of approximately $619,000. The consolidated
statement of earnings for the year ended December 31, 1994 includes the
operating results of Coldwater from January 1, 1994 to June 30, 1994.
In March 1994, the Company acquired Provident, paying cash of approximately
$2,700,000. The acquisition was accounted for as a purchase transaction and,
accordingly, the purchase price was allocated to assets and liabilities based
on the estimated fair value as of the acquisition date. The excess purchase
price over the fair value of the net assets acquired of approximately $71,000
has been recorded as goodwill at the date of acquisition. The consolidated
statement of earnings for the year ended December 31, 1994 includes the
operating results of Provident for the ten months ended December 31, 1994. Pro
forma 1994 net earnings and earnings per share, which would have been reported
if the acquisition had been consummated on January 1, 1994, were approximately
$1,448,000 and $.72, respectively.
(13) REGULATORY CAPITAL REQUIREMENTS
The Company and its subsidiaries are subject to various regulatory capital
requirements administered by the Federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have
a direct material effect on the Company's consolidated financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company and its subsidiaries must meet specific capital
guidelines that involve quantitative measures of their assets, liabilities,
and certain off-balance sheet items as calculated under regulatory accounting
practices. The Company and its subsidiaries' capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
(14) SAVINGS ASSOCIATION INSURANCE FUND (SAIF) CONTINGENT LIABILITY
The savings deposits of two of the Company's subsidiary locations are
insured by the Savings Association Insurance Fund (SAIF), which is
administered by the FDIC. The FDIC also administers the Bank Insurance Fund
(BIF), which has the same designated reserve ratio as the SAIF. Because the
BIF has met its designated reserve
F-17
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ratio while the SAIF has not, there presently exists a substantial disparity
in the deposit insurance premiums paid by BIF and SAIF members, placing SAIF-
insured savings institutions at a significant competitive disadvantage to BIF-
insured institutions. A number of proposals have been considered to
recapitalize the SAIF in order to eliminate the premium disparity. The House
of Representatives and Senate have both approved, as a part of a budget
reconciliation package to balance the federal budget, legislation requiring a
one-time assessment of .85% of insured deposits to be imposed on all SAIF-
insured deposits held as of March 31, 1995. This assessment was originally
scheduled to be payable during the first quarter of 1996. The assessment would
result, as of December 31, 1995, in additional expense of approximately
$340,000 (net of income tax benefits) to the Company.
(15) PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
Following is condensed financial information of the Company as of and for
the years ended December 31, 1995, 1994 and 1993 (in thousands):
CONDENSED BALANCE SHEETS
DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS 1995 1994 1993
------ -------- ------ ------
<S> <C> <C> <C>
Cash................................................... $ 103 276 62
Loans, net............................................. 852 350 --
Investment in subsidiaries............................. 16,853 16,004 12,137
Other.................................................. 632 581 964
-------- ------ ------
Total assets....................................... $ 18,440 17,211 13,163
======== ====== ======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Borrowed funds......................................... $ 7,000 7,145 3,887
Other.................................................. 118 102 408
Stockholders' equity................................... 11,322 9,964 8,868
-------- ------ ------
Total liabilities and stockholders' equity......... $ 18,440 17,211 13,163
======== ====== ======
CONDENSED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
-------- ------ ------
<S> <C> <C> <C>
Dividends from subsidiaries............................ $ 1,770 935 1,150
Gain on sale of subsidiary............................. -- 619 --
Interest income........................................ 24 30 --
Other expense, net..................................... 1,295 1,141 787
-------- ------ ------
Income before equity in undistributed earnings of
subsidiaries...................................... 499 443 363
Increase (decrease) in undistributed equity of
subsidiaries.......................................... (237) 826 693
-------- ------ ------
Earnings before income taxes....................... 262 1,269 1,056
Income tax benefit..................................... 442 125 262
-------- ------ ------
Net earnings....................................... $ 704 1,394 1,318
======== ====== ======
</TABLE>
F-18
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ------ -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................................ $704 1,394 1,318
(Increase) decrease in undistributed equity of
subsidiary............................................. 237 (826) (693)
Gain on sale of Peoples Bank, N.A....................... -- (619) --
Other................................................... 2 104 4
---- ------ -----
Net cash provided by operating activities............. 943 53 629
---- ------ -----
Cash flows from investing activities:
Net change in loans..................................... (501) (350) --
Net additions to premises and equipment................. 12 (40) (50)
Capital contributions to subsidiaries................... -- (3,677) --
Acquisition of Provident Bancshares, Inc. .............. -- (2,693) --
Sale of Peoples Bank, N.A............................... -- 2,411 --
---- ------ -----
Net cash used in investing activities................. (489) (4,349) (50)
---- ------ -----
Cash flows from financing activities:
Principal payments on long-term debt.................... (145) (742) (250)
Proceeds from borrowings................................ -- 4,000 --
(Purchase of) proceeds from treasury stock transactions. (832) 355 (333)
Issuance of common stock................................ 350 897 --
---- ------ -----
Net cash provided by (used in) financing activities... (627) 4,510 (583)
---- ------ -----
Net increase (decrease) in cash....................... (173) 214 (4)
Cash at beginning of year................................. 276 62 66
---- ------ -----
Cash at end of year....................................... $103 276 62
==== ====== =====
</TABLE>
The primary source of funds available to the Company is the payment of
dividends by the subsidiaries. Subject to maintaining certain minimum
regulatory capital requirements, regulations limit the amount of dividends
that may be paid without prior approval of the subsidiaries' regulatory
agencies. At December 31, 1995, the subsidiaries could pay dividends of
$2,076,000 without prior regulatory approval.
(16) SUBSEQUENT EVENT
On September 6, 1996, the Company increased the number of authorized shares
of common stock and declared a 140 for 1 stock split. All share and per share
information presented in the accompanying consolidated financial statements
has been retroactively adjusted for the stock split.
F-19
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Cash and due from banks.............................................. $ 11,023
Federal funds sold and interest-bearing deposits..................... 1,425
--------
Total cash and cash equivalents.................................. 12,448
--------
Investment securities:
Held-to-maturity securities........................................ 25
Available-for-sale securities...................................... 70,440
Other.............................................................. 2,062
--------
Total investment securities...................................... 72,527
--------
Mortgage loans held for sale, net.................................... --
Loans, net........................................................... 179,472
Premises and equipment, net.......................................... 8,503
Deferred tax benefits................................................ 1,227
Accrued interest and other assets.................................... 5,920
--------
$280,097
========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C>
Liabilities:
Deposits........................................................... $241,111
Securities sold under agreements to repurchase..................... 16,092
Federal funds purchased, long-term debt and other borrowings....... 10,217
Accrued interest and other liabilities............................. 1,587
--------
Total liabilities................................................ 269,007
--------
Stockholders' equity:
Common stock, $1 par value per share; 5,000,000 shares authorized,
2,000,000 shares issued and outstanding........................... 2,000
Additional paid-in capital......................................... 949
Retained earnings.................................................. 9,068
Unrealized loss on available-for-sale securities, net.............. (927)
--------
Total stockholders' equity....................................... 11,090
--------
$280,097
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Interest income:
Loans, including fees................................... $ 8,026 6,811
Investments............................................. 2,017 1,865
Other................................................... 304 155
---------- ---------
10,347 8,831
---------- ---------
Interest expense:
Deposits................................................ 5,341 4,124
Borrowings.............................................. 265 311
Other................................................... 384 321
---------- ---------
5,990 4,756
---------- ---------
Net interest income................................... 4,357 4,075
Provision for loan losses (note 2)........................ 60 129
---------- ---------
Net interest income after provision for loan losses... 4,297 3,946
---------- ---------
Other income:
Service charges......................................... 329 257
Gain on sale of mortgage loans.......................... 699 298
Net securities gains (losses)........................... -- (376)
Gain on sale of subsidiary.............................. -- --
Other................................................... 103 231
---------- ---------
1,131 410
---------- ---------
Other expense:
Salaries and employee benefits.......................... 2,605 2,001
Net occupancy expense................................... 646 565
Federal deposit insurance premiums...................... 65 182
Other................................................... 1,025 981
---------- ---------
4,341 3,729
---------- ---------
Earnings before income tax............................ 1,087 627
Income tax expense........................................ 372 218
---------- ---------
Net earnings.......................................... $ 715 409
========== =========
Earnings per share........................................ $ .36 0.20
========== =========
Average common shares outstanding......................... 2,001,825 2,069,517
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 715 409
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Provision for loan losses............................... 60 129
Net (gains) losses on sales of available-for-sale
securities............................................. -- 409
Amortization of investment securities' premiums, net of
accretion.............................................. (63) (76)
Depreciation and amortization........................... 367 112
Gain on sale of assets, net............................. -- (12)
Originations of mortgage loans held for sale, net of
sales proceeds......................................... (3,812) (5,153)
Other changes:
Accrued interest receivable and other assets.......... (2,041) (895)
Accrued interest payable and other liabilities........ 288 715
-------- -------
Net cash used in operating activities............... (4,486) (4,362)
-------- -------
Cash flows from investing activities:
Loans originated, net of principal collections............ (14,601) (11,987)
Principal collections and proceeds from maturities of
held-to-maturity securities.............................. -- 248
Principal collections and proceeds from sales and
maturities of available-for-sale securities.............. 11,511 15,570
Purchases of equity securities............................ -- (241)
Purchases of available-for-sale securities................ (17,999) (6,497)
Net additions to premises and equipment................... (1,405) (999)
Proceeds from sale of other assets........................ 63 171
-------- -------
Net cash used in investing activities............... (22,431) (3,735)
-------- -------
Cash flows from financing activities:
Increase in deposits...................................... 14,597 12,571
Net increase (decrease) in short-term borrowings.......... 2,254 (2,816)
Proceeds from long-term debt.............................. -- 100
Principal payments on long-term debt...................... (575) (168)
Purchase of treasury stock................................ (134) --
Proceeds from issuance of common stock.................... -- 346
-------- -------
Net cash provided by financing activities........... 16,142 10,033
-------- -------
Increase (decrease) in cash and cash equivalents.... (10,775) 1,936
Cash and cash equivalents, beginning of period.............. 23,223 7,342
-------- -------
Cash and cash equivalents, end of period.................... $ 12,448 9,278
======== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest.................. $ 5,917 4,431
======== =======
Cash paid during the period for income taxes.............. $ 353 315
======== =======
Supplemental schedule of noncash financing activities:
Stock subscribed.......................................... $ -- 50
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(1) PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The accompanying consolidated financial statements include the accounts of
Gold Banc Corporation, Inc. and its wholly-owned subsidiaries (the Company).
All significant intercompany accounts and transactions have been eliminated.
The unaudited consolidated balance sheet as of June 30, 1996 and the related
unaudited consolidated statements of earnings and cash flows for the six
months ended June 30, 1996 and 1995 have been prepared in a manner consistent
with the audited financial statements. Management believes that all
adjustments (all of which are normal and recurring in nature) have been
reported to the best of its knowledge and that the unaudited financial
information fairly presents the financial condition and results of operations
and cash flows of the Company in accordance with generally accepted accounting
principles.
In January 1996 the Company adopted Statement of Financial Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights." The adoption of
this new standard did not have a significant impact on the Company's
consolidated financial statements.
(2) ALLOWANCE FOR LOAN LOSSES
The following is a summary of the allowance for loan losses for the three
months ended June 30, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
Balance, January 1......... $2,715 2,047
Provision for loan losses.. 60 129
Charge-offs, net of
recoveries................ (150) (138)
------ -----
Balance, June 30........... $2,625 2,038
====== =====
</TABLE>
At June 30, 1996, interest income was not being recognized on an accrual
basis for loans with an outstanding balance of $864,000.
F-23
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION TO ANY PERSON IN ANY JURISDICTION OR UNDER ANY
CIRCUMSTANCES IN WHICH SUCH OFFERING WOULD BE UNLAWFUL. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
<TABLE>
<CAPTION>
TABLE OF PAGE
CONTENTS ----
<S> <C>
Prospectus Summary......................................................... 1
Summary Consolidated Financial Information................................. 4
The Company and the Banks.................................................. 5
Risk Factors............................................................... 6
Use of Proceeds............................................................ 11
Market for Common Stock.................................................... 11
Dividends.................................................................. 11
Capitalization............................................................. 12
Dilution................................................................... 13
Selected Consolidated Financial Data....................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 15
Business................................................................... 32
Management................................................................. 42
Certain Transactions....................................................... 45
Security Ownership of Certain Beneficial Owners and Management............. 46
Description of Securities.................................................. 47
Supervision and Regulation................................................. 49
Shares Eligible for Future Sale............................................ 55
Underwriting............................................................... 55
Legal Matters.............................................................. 56
Experts.................................................................... 57
Available Information...................................................... 57
Index to Financial Information............................................. F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,000,000 SHARES
GOLD BANC
CORPORATION, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
ADVEST, INC.
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Amended and Restated Articles of Incorporation of the Company and the
Amended and Restated Bylaws of the Company require it to indemnify its
directors and officers and advisory directors against liabilities, fines,
penalties, settlements, claims and reasonable expenses incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those capacities to the fullest extent permitted by the KGCC.
The KGCC permits a corporation to indemnify its present and former directors
and officers if ordered to do so by a court or after a determination by its
independent counsel, stockholders or a majority of its disinterested directors
that the person to be indemnified acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of
the corporation.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses, other than underwriting discounts and commissions,
in connection with the Offering are as follows:
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 7,138
NASD Filing Fee................................................. 2,570
Nasdaq Fees..................................................... 26,500
Blue Sky Fees and Expenses*..................................... 7,500
Printing Expenses*.............................................. 70,000
Legal Fees and Expenses*........................................ 175,000
Auditing and Accounting Service*................................ 100,000
Transfer Agent Fees and Expenses*............................... 10,000
Miscellaneous*.................................................. 101,292
--------
Total....................................................... $500,000
========
</TABLE>
--------
*Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Company has sold shares of its Common Stock
in two separate offerings. The first such offering occurred on March 14, 1994
and resulted in the sale for cash of 200,772 shares of Common Stock for an
aggregate sale price of $1,251,683.70. These shares of Common Stock were sold
to 33 investors, a majority of whom were at the time stockholders, directors,
or officers of the Company. During the period from January 1995 through June
1996, the Company sold 90,733 shares of Common Stock, of which 14,047 shares
were issued to one person in exchange for 100 shares of preferred stock. The
remaining 76,686 shares were sold to six persons for $575,000 in cash. A
majority of such shares were acquired by employees of the Company and the
Banks. No underwriter or independent selling agent was used and no
compensation or commissions were paid in connection with such offerings, as
all such offers and sales were effected by the Company's directors and
executive officers.
The Company recently completed a rescission offer undertaken pursuant to
Rule 506 of Regulation D with respect to the shares of Common Stock sold in
the March 1994 offering. The results of the rescission offer are reflected in
the Form D filed with the Commission in September 1996. The sales conducted in
the period from January 1995 through June 1996 were completed in reliance on
the exemption from the registration requirements provided by Section 4(2) of
the Securities Act.
ITEM 27. EXHIBITS
<TABLE>
<C> <S> <C>
1 Form of Underwriting Agreement
3(a) Amended and Restated Articles of Incorporation of the Com-
pany
3(b) Restated By-laws of the Company
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
4 Form of Common Stock Certificate*
5 Opinion of Blackwell Sanders Matheny Weary & Lombardi L.C. regarding legality of shares
10(a) Employment Agreement between the Company and Michael W. Gullion
10(b) Employment Agreement between the Company and Keith E. Bouchey
10(c) Gold Banc Corporation, Inc. 1996 Equity Compensation Plan
10(d) Agreement among the Company and its subsidiaries and Boatmen's First National Bank of
Kansas City dated April 14, 1996
10(e) Form of Tax Sharing Agreements between the Company and the Banks
10(f) Form of Federal Home Loan Bank Credit Agreement to which each of the Banks is a party
16 Letter Regarding Change in Certifying Accountants
21 List of Subsidiaries of the Company
23(a) Consent of GRA, Thompson, White & Co., P.C.
23(b) Consent of KPMG Peat Marwick LLP
23(c) Consent of Blackwell Sanders Matheny Weary & Lombardi L.C. (included in Exhibit 5)
24 Powers of Attorney (contained in signature page of Registration Statement)
27 Financial Data Schedule
</TABLE>
- --------
*To be filed by amendment
ITEM 28. UNDERTAKINGS
(a) The undersigned Company hereby undertakes to provide to the Underwriters
at the Closing Date specified in the Purchase Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(c) The undersigned Company hereby undertakes to, for purposes of
determining any liability under the Securities Act, treat the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the Company under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
(d) The undersigned Company hereby undertakes to, for purposes of
determining any liability under the Securities Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement
for the securities offered in the registration statement, and that offering of
the securities at that time as the initial bona fide offering of those
securities.
ii
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS OF FILING ON FORM SB-2 AND AUTHORIZED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, IN THE
CITY OF LEAWOOD, STATE OF KANSAS ON SEPTEMBER 19, 1996.
Gold Banc Corporation, Inc.
/s/ Michael W. Gullion
By: _________________________________
Michael W. Gullion
President and Chief Executive
Officer
POWER OF ATTORNEY
WE, THE UNDERSIGNED DIRECTORS AND OFFICERS OF GOLD BANC CORPORATION, INC.,
DO HEREBY CONSTITUTE AND APPOINT MICHAEL W. GULLION AND KEITH E. BOUCHEY, AND
EACH OF THEM, OUR TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR US AND IN OUR NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS TO THIS
REGISTRATION STATEMENT, AND ANY ADDITIONAL REGISTRATION STATEMENTS FILED
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, AND TO FILE THE SAME, WITH
ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, AND WE DO HEREBY RATIFY AND CONFIRM ALL
THAT SAID ATTORNEYS-IN-FACT AND AGENTS, OR THEIR SUBSTITUTES, MAY LAWFULLY DO
OR CAUSE TO BE DONE BY VIRTUE HEREOF.
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES STATED.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
---- -------- ----
<S> <C> <C>
/s/ Michael W. Gullion Chief Executive Officer, September 19, 1996
____________________________________ President, Director
Michael W. Gullion (principal executive
officer)
/s/ Keith E. Bouchey Chief Financial Officer, September 19, 1996
____________________________________ Executive Vice President,
Keith E. Bouchey Secretary, Treasurer,
Director (principal
financial and accounting
officer)
/s/ William Wallman Director September 19, 1996
____________________________________
William Wallman
/s/ D. Michael Browne Director September 19, 1996
____________________________________
D. Michael Browne
/s/ William F. Wright Director September 19, 1996
____________________________________
William F. Wright
</TABLE>
iii
<PAGE>
Exhibit 1
2,000,000 SHARES*
GOLD BANC CORPORATION, INC.
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
UNDERWRITING AGREEMENT
----------------------
____________, 1996
ADVEST, INC.
As Representative of the Several Underwriters
One World Financial Center
200 Liberty Street, 30th Floor
New York, NY 10281
Gentlemen:
Gold Banc Corporation, Inc., a Kansas corporation (the "Company"), hereby
confirms its agreement with you and the several underwriters, on whose behalf
you have been duly authorized to act as their representative, as follows:
SECTION 1. Introduction. The Company, has authorized capital stock
consisting solely of 7,500,000 shares of preferred stock, $1.00 par value, and
7,500,000 shares of common stock, $1.00 par value (the "Common Stock"), of which
2,000,000 shares are issued and outstanding. Subject to the terms and conditions
contained in this Underwriting Agreement (this "Agreement"), the Company
proposes to issue and sell an aggregate of 2,000,000 shares of Common Stock
("Firm Shares"), to the several underwriters identified in Schedule A annexed
hereto (the "Underwriters") who are acting severally and not jointly. In
addition, the Company has agreed to grant the Underwriters an option to purchase
up to 300,000 additional shares of Common Stock (the "Optional Shares") as
provided in Section 5 hereof. The Firm Shares and, to the extent such option is
exercised, the Optional Shares, are hereinafter collectively called the
"Shares."
You, as the representative of the several Underwriters (the
"Representative"), have advised the Company that the Underwriters propose to
make an initial public offering of their respective portions of the Shares as
soon hereafter as in your judgment is advisable and that the initial public
offering price of the Shares will be $_____ per share.
SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the several Underwriters as
follows:
- ----------------------------
* Plus an option to acquire up to 300,000 additional shares from the Company
to cover over-allotments.
<PAGE>
(a) The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Kansas with full
power and authority (corporate and other) to own, lease, and operate its
properties and conduct its business as described in the Prospectus (as defined
in Section 2(e) of this Agreement); the Company is duly registered under the
Bank Holding Company Act of 1956, as amended (the "BHCA"); the Company has no
subsidiaries except those listed on Exhibit 21 (each a "Subsidiary" and
collectively the "Subsidiaries") to the Registration Statement (as defined in
Section 2(e) of this Agreement); the Company owns, directly or indirectly,
beneficially and of record all of the outstanding capital stock of each
Subsidiary free and clear of any claim, lien, encumbrance or security interest.
The Company and each of its Subsidiaries is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in which any of
them own or lease properties, has an office, or in which the business conducted
by any of them make such qualification necessary, except where the failure to so
qualify would not have a material adverse effect on the condition (financial or
otherwise), business, prospects, assets, properties, results of operations, or
net worth of the Company or any of the Subsidiaries ("Material Adverse Effect");
and no proceeding has been instituted in any jurisdiction revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification.
(b) Exchange National Bank is duly organized and validly existing as
a national banking corporation and Provident Bank, f.s.b., is duly organized and
validly existing as a federal savings bank, in each case under the laws of the
United States. Citizens State Bank & Trust Co. is duly organized and validly
existing as a state banking corporation under the laws of the State of Kansas.
Each other Subsidiary is duly incorporated and validly existing as a corporation
in good standing under the laws of Missouri. Each Subsidiary has full power and
authority (corporate and other) to own, lease, and operate its properties and
conduct its business as described in the Prospectus.
(c) The issued and outstanding shares of Common Stock as set forth in
the Prospectus have been duly authorized and validly issued, are fully paid and
nonassessable, and conform to the descriptions thereof contained in the
Prospectus. All of the outstanding shares of capital stock of each Subsidiary
have been duly authorized and validly issued, are fully paid and nonassessable.
There are no preemptive, preferential, or other rights to subscribe for or to
purchase any of the shares of Common Stock and no shares of Common Stock have
been issued in violation of any such rights. Except as disclosed in the
Prospectus, there are no restrictions upon the voting or transfer of the Common
Stock pursuant to the Company's Articles of Incorporation, bylaws, and other
governing documents, or any agreement or other instrument to which the Company
or any of its Subsidiaries is a party or by which any of them may be bound. The
Shares to be sold by the Company have been duly authorized and, when issued,
delivered, and paid for pursuant to this Agreement, will be validly issued,
fully paid and nonassessable and will conform to the description thereof
contained in the Prospectus. There are no outstanding options, warrants, or
other rights of any description, contractual or otherwise, entitling any person
to receive any class of security from the Company, except as set forth in the
Prospectus, and the Common Stock has been approved for designation upon notice
of issuance as a National Market System security on the National Association of
Security Dealers, Inc. Automated Quotation System ("Nasdaq") concurrently with
the effectiveness of the Registration Statement. Except as disclosed in the
disclosure document dated August 15, 1996, prepared by the Company in connection
with its recently completed rescission offer, a copy of which was provided to
the Representative, all of the securities previously issued by the Company and
each of its Subsidiaries, including the Common Stock and any warrants and stock
options to purchase Common Stock, were duly offered, sold, issued or granted and
were made in compliance with, and were registered under or exempt from the
registration requirements of, the
-2-
<PAGE>
Securities Act of 1933, as amended (the "Act"), and were duly registered or
qualified under, or the subject of an available exemption from, the registration
provisions of all applicable state securities laws ("Blue Sky Laws"). No
document distributed to prospective security holders in connection with any such
offer, sale or issuance of any securities of the Company or any of its
Subsidiaries contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(d) Neither the Company nor any of its Subsidiaries, is, or with the
giving of notice or lapse of time or both will be, in violation or breach of, or
in default under, nor will the execution or delivery of, or the performance and
consummation of the transactions contemplated by this Agreement (including the
offer, sale, or delivery of the Shares), conflict with, or result in a violation
or breach of, or constitute a default under, any provision of the Articles of
Incorporation, bylaws (as amended or restated), or other governing documents of
the Company or any of its Subsidiaries, or of any provision of any agreement,
contract, mortgage, deed of trust, lease, loan agreement, indenture, note, bond,
or other evidence of indebtedness, or other material agreement or instrument to
which the Company or any Subsidiary is a party or by which any of them is bound
or to which any of their properties is subject, nor will the performance by the
Company of its obligations hereunder violate any rule, regulation, order, or
decree, applicable to the Company or any Subsidiary of any court or any
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any Subsidiary or any of their respective
properties, or any order of any court or governmental agency or authority
entered in any proceeding to which the Company or any Subsidiary was or is now a
party or by which it is bound, except those, if any, described in the Prospectus
or which are not material to the Company taken as a whole. No consent, approval,
filing, authorization, registration, qualification, or order, including with or
by any bank regulatory agency, is required for the execution, delivery, and
performance of this Agreement or the consummation of the transactions
contemplated by this Agreement, other than such that have been obtained or made,
except for compliance with the Act, the Securities Exchange Act of 1934, as
amended ("Exchange Act"), and the Blue Sky Laws applicable to the public
offering of the Shares by the several Underwriters, the clearance of such
offering and the underwriting arrangements evidenced hereby with the National
Association of Securities Dealers, Inc. ("NASD"), and the listing of the Common
Stock on the Nasdaq Stock Market. This Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company and is enforceable against the Company in accordance
with the terms.
(e) A registration statement on Form SB-2 (File No. 333-______) with
respect to the Shares, including a form of preliminary prospectus, has been
carefully prepared by the Company in conformity with the requirements of the Act
and the rules and regulations ("Rules and Regulations") of the Securities and
Exchange Commission ("Commission") promulgated thereunder, and has been filed
with the Commission. The Company has prepared and filed such amendments thereto,
if any, and such amended preliminary prospectus as may have been required to the
date hereof, and will file such additional amendments thereto and such amended
preliminary prospectuses as may hereafter be required. There have been delivered
to the Representative two signed copies of such registration statement,
including Part II thereof, and each amendment thereto, if any, together with two
copies of each exhibit filed therewith, and conformed copies for each of the
Underwriters of such registration statement and each amendment thereto, if any
(but without exhibits), and of the related preliminary prospectus ("Preliminary
Prospectus") and of the Prospectus. Such registration statement has been
declared effective by the Commission under the Act and is not proposed to be
amended. Such registration statement, as finally amended and revised at the time
such registration statement was declared effective by the
-3-
<PAGE>
Commission (including the Prospectus and the information contained in the form
of final prospectus filed with the Commission pursuant to Rule 424(b) and Rule
430A under the Act, and Part II and all financial statements and exhibits
thereto), is herein referred to as the "Registration Statement" and the related
final prospectus in the form first filed with the Commission pursuant to Rule
424(b) is herein referred to as the "Prospectus."
(f) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus complies
with the requirements of the Act and the Rules and Regulations. As of the
effective date of the Registration Statement, and at all times subsequent
thereto up to each Closing Date (as defined in Section 5 hereof), the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained or will contain all statements that are required to be stated
therein in accordance with the Act and the Rules and Regulations and conformed
or will conform in all respects to the requirements of the Act and the Rules and
Regulations, and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto included or will include any untrue statement of
a material fact or omitted or will omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that no representation or warranty is made as to information
contained in or omitted from the Registration Statement, the Prospectus or any
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representative.
(g) KPMG Peat Marwick LLP, which has audited, reviewed, and expressed
its opinion with respect to certain of the financial statements and schedules
filed with the Commission as a part of the Registration Statement and included
or to be included, as the case may be, in the Prospectus and in the Registration
Statement, and whose report is included in the Prospectus and the Registration
Statement are independent accountants as required by the Act and the Rules and
Regulations. GRA Thompson, White & Co., which has audited, reviewed, and
expressed its opinion with respect to certain of the financial statements and
schedules filed with the Commission as a part of the Registration Statement and
included or to be included, as the case may be, in the Prospectus and in the
Registration Statement, and whose report is included in the Prospectus and the
Registration Statement were at all times during which they provided such
services to the Company, independent accountants as required by the Act and the
Rules and Regulations.
(h) The financial statements and schedules and the related notes
thereto included or to be included, as the case may be, in the Registration
Statement, the Preliminary Prospectus, and the Prospectus present fairly the
financial position of the entities purported to be shown thereby as of the
respective dates of such financial statements and schedules, and the results of
operations and changes in equity and in cash flows of the entities purported to
be shown thereby for the respective periods covered thereby, all in conformity
with generally accepted accounting principles consistently applied throughout
the periods involved, except as may be disclosed in the Prospectus. All
adjustments necessary for a fair presentation of the results of such periods
have been made. The Company had an outstanding capitalization as set forth under
"Capitalization" in the Prospectus as of the date indicated therein and there
has been no material change therein since such date except as disclosed in the
Prospectus. The financial, operating, and statistical information set forth in
the Prospectus under captions "Prospectus Summary," "Summary Financial
Information," "Use of Proceeds," "Dividend Policy," "Capitalization," "Selected
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," "Management," "Principal
Stockholders," and "Description of
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<PAGE>
Securities" are fairly presented and prepared on a basis consistent with the
audited financial statements of the Company.
(i) There is no litigation or governmental proceeding, action, or
investigation pending or, to the knowledge of the Company, threatened, to which
the Company or any Subsidiary is or may be a party or to which property owned or
leased by the Company or any Subsidiary is or may be subject, or related to
environmental or discrimination matters, which is required to be disclosed in
the Registration Statement or the Prospectus by the Act or the Rules and
Regulations and is not so disclosed, or which questions the validity of this
Agreement or any action taken or to be taken pursuant hereto.
(j) Either the Company or a Subsidiary, as the case may be, has good
and marketable title in fee simple to all items of real property and good and
marketable title to all the personal properties and assets reflected as owned by
the Company or a Subsidiary in the Prospectus (or elsewhere in the Registration
Statement), in each case clear of all liens, mortgages, pledges, charges, or
encumbrances of any kind or nature except those, if any, reflected in the
financial statements described above (or elsewhere in the Registration
Statement) or which are not material to the Company or any Subsidiary; all
properties held or used by the Company or a Subsidiary under leases, licenses,
franchises or other agreements are held by them under valid, existing, binding,
and enforceable leases, franchises, licenses, or other agreements with respect
to which it is not in default.
(k) Neither the Company nor any Subsidiary has taken or will take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation, under the Exchange Act or otherwise, of the price
of the Common Stock.
(l) Except as reflected in or contemplated by the Registration
Statement, since the respective dates as of which information is given in the
Registration Statement and prior to the First Closing Date and Second Closing
Date (as such terms are hereinafter defined):
(i) neither the Company nor any of its Subsidiaries has or
will have incurred any material liabilities or obligations, direct or
contingent, or entered into any material transaction not in the ordinary course
of business;
(ii) neither the Company nor any Subsidiary has or will have
paid or declared any dividend or other distribution with respect to its capital
stock and neither the Company nor any Subsidiary has or will be delinquent in
the payment of principal or interest on any outstanding debt obligations; and
(iii) there has not been and will not be any change in the
capital stock (except as may result from the First Closing) or any material
change in the indebtedness of the Company or any Subsidiary, or any adverse
change in the condition (financial or otherwise), or any development involving a
prospective adverse change in their respective businesses (resulting from
litigation or otherwise), prospects, properties, condition (financial or
otherwise), net worth, or results of operations which is material to the Company
or any Subsidiary.
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<PAGE>
(m) There is no contract or other document, transaction, or
relationship required to be described in the Registration Statement, or to be
filed as an exhibit to the Registration Statement, by the Act or by the Rules
and Regulations that has not been described or filed as required.
(n) All documents delivered or to be delivered by the Company or any
of its representatives in connection with the issuance and sale of the Shares
were on the dates on which they were delivered, or will be on the dates on which
they are to be delivered, true, complete, and correct in all material respects.
(o) The Company and each Subsidiary have filed all necessary federal
and all state and foreign income and franchise tax returns and paid all taxes
shown as due thereon; and no tax deficiency has been asserted or threatened
against the Company or any Subsidiary that would have a Material Adverse Effect,
except as described in the Prospectus.
(p) Neither the Company nor any Subsidiary has, directly or
indirectly, at any time:
(i) made any unlawful contribution to any candidate for
political office, or failed to disclose any contribution in violation of law;
or
(ii) made any payment to any federal, state, local, or foreign
government officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States or any jurisdiction thereof or applicable foreign
jurisdictions.
(q) There are no holders of Common Stock or other securities of the
Company having rights to registration thereof under the Act.
(r) The Company or a Subsidiary owns or possesses adequate rights to
use all patents, patent applications, trademarks, service marks, trade names,
trademark registrations, servicemark registrations, copyrights, and licenses
necessary for the conduct of the business of the Company and the Subsidiaries or
ownership of their respective properties, and neither the Company nor any
Subsidiary has received notice of conflict with the asserted rights of others in
respect thereof which has not been resolved.
(s) The Company and each Subsidiary have in place and effective such
policies of insurance, with limits of liability in such amounts, as are normal
and prudent in the ordinary scope of business similar to that of the Company and
such Subsidiary in the respective jurisdiction in which they conduct business.
(t) The Company and each Subsidiary have and hold, and at each
Closing Date will have and hold, and are operating in compliance with, and have
fulfilled and performed all of their material obligations with respect to all
permits, certificates, franchises, grants, easements, consents, licenses,
approvals, charters, registrations, authorizations, and orders ("Permit")
required under all laws, rules, and regulations in connection with their
respective businesses, and all of such Permits are in full force and effect; and
there is no pending proceeding, and neither the Company nor any Subsidiary has
received notice of any threatened proceeding, relating to the revocation or
modification of any such Permit. Neither the Company nor any Subsidiary is or
has been (by virtue of any action, omission to
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<PAGE>
act, contract to which it is a party or by which it is bound, or any occurrence
or state of facts whatsoever) in violation of any applicable federal, state,
municipal, or local statutes, laws, ordinances, rules, regulations, and/or
orders issued pursuant to foreign, federal, state, municipal, or local statutes,
laws, ordinances, rules, or regulations (including those relating to any aspect
of banking, bank holding companies, environmental protection, occupational
safety and health, and equal employment practices) heretofore or currently in
effect, except such violation that has been fully cured or satisfied without
recourse or that is not reasonably likely to have a Material Adverse Effect.
(u) The provisions of any employee pension benefit plan ("Pension
Plan") as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), in which the Company or any Subsidiary is a
participating employer are in substantial compliance with ERISA, and neither the
Company nor any Subsidiary is in violation of ERISA. The Company, each
Subsidiary, or the plan sponsor thereof, as the case may be, has duly and timely
filed the reports required to be filed by ERISA in connection with the
maintenance of any Pension Plans in which the Company or any Subsidiary is a
participating employer, and no facts, including any "reportable event" as
defined by ERISA and the regulations thereunder, exist in connection with any
Pension Plan in which the Company or any Subsidiary is a participating employer
which might constitute grounds for the termination of such plan by the Pension
Benefit Guaranty Corporation or for the appointment by the appropriate U.S.
District Court of a trustee to administer any such plan. The provisions of any
employee benefit welfare plan, as defined in Section 3(1) of ERISA, in which the
Company or any Subsidiary is a participating employer, are in substantial
compliance with ERISA, and the Company, any Subsidiary, or the plan sponsor
thereof, as the case may be, has duly and timely filed the reports required to
be filed by ERISA in connection with the maintenance of any such plans.
(v) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, and is not subject to regulation
under such Act.
(w) The Company is a member in good standing of the Federal Reserve
System and the deposits of each bank or savings bank Subsidiary are insured by
the Federal Deposit Insurance Corporation ("FDIC").
(x) Neither this Agreement nor any certificate, statement or other
document delivered or to be delivered by the Company or any Subsidiary contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(y) The Company has satisfied the conditions for the use of Form SB-2
with respect to the offering of the Shares for sale to the public.
Any certificate signed by any director or officer of the Company and
delivered to the Representative or to counsel for the Underwriters shall be
deemed a representation and warranty of the Company to the Underwriters as to
the matters covered thereby.
Any certificate delivered by the Company to its counsel for purposes of
enabling such counsel to render the opinion referred to in Section 8(d) will
also be furnished to the Representative and counsel
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<PAGE>
for the Underwriters and shall be deemed to be additional representations and
warranties to the Underwriters by the Company as to the matters covered thereby.
SECTION 3. Representative of the Underwriters. The Representative will
act as the representative for the several Underwriters in connection with this
financing, and any action under or in respect of this Agreement taken by the
Representative will be binding upon all of the Underwriters.
SECTION 4. Representations and Warranties of the Underwriters. The
Representative, on behalf of the several Underwriters, represents and warrants
to the Company that the information set forth (a) in the last paragraph of the
cover page of the Prospectus, (b) on the inside front cover page of the
Prospectus relating to stabilization, and (c) in the section in the Prospectus
entitled "Underwriting," was the only written information furnished to the
Company by and on behalf of any Underwriter expressly for use in connection with
the preparation of the Registration Statement, and is correct and complete in
all material respects and does not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
SECTION 5. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties, and agreements contained herein, but subject to the
terms and conditions set forth herein, the Company agrees to issue and sell to
the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, that number of Firm Shares set forth
opposite the name of such Underwriter in Schedule A at the purchase price of
$_____ per Share.
At 9:00 a.m., eastern time, on the third full business day following the
commencement of the initial public offering contemplated by this Agreement, or
at such other time not later than five (5) full business days following the date
of this Agreement, as the Representative and the Company may agree, the Company
will deliver to the Representative through the facilities of The Depository
Trust Company ("DTC"), or at the offices of Advest, Inc., One World Financial
Center, 200 Liberty Street, New York, New York 10281, or such other location as
specified by the Representative, for the accounts of the several Underwriters,
certificates representing the Firm Shares to be sold by them, against payment in
New York, New York, or such other location agreed upon by the parties, of the
purchase price therefor in next day funds payable to the order of the Company
for Firm Shares. Such time of delivery and payment is referred to in this
Agreement as the "First Closing Date." The certificates for Firm Shares to be
so delivered shall be in definitive form and shall be registered in such names
and in such denominations as the Representative shall request by written notice
to the Company at least two business days prior to the First Closing Date. The
Company agrees to make such certificates available for inspection at least
twenty-four (24) hours prior to the First Closing Date at the offices of the
DTC, or its designated custodian, or at any other location designated by the
Representative.
In addition, on the basis of the representations, warranties, and
agreements contained herein, but subject to the terms and conditions set forth
herein, the Company hereby grants to the several Underwriters an option to
purchase, severally and not jointly, from the Company up to 300,000 Optional
Shares in the same proportion as the number of shares set forth opposite their
names on Schedule A bears to the total number of Firm Shares, at the same
purchase price per share to be paid for the Firm Shares, for use solely in
covering any over-allotments made by the Underwriters in the sale and
distribution of the Firm Shares. The option granted hereunder may be exercised
at any time (but not more than once) within thirty (30) days after the date of
this Agreement, upon notice by the Representatives to the Company which sets
forth the aggregate number of Optional Shares as to which the Underwriters are
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<PAGE>
exercising the option, the names and denominations in which the certificates for
such shares are to be registered, and the time and place at which such
certificates will be delivered. Such time of delivery may not be earlier than
the First Closing Date and herein is called the "Second Closing Date." The
Second Closing Date shall be determined by the Representative, but if at any
time other than the First Closing Date, shall not be earlier than three nor
later than five full business days after delivery of such notice to exercise.
Certificates for the Optional Shares will be made available for inspection at
least 24 hours prior to the Second Closing Date at the offices of the DTC, or
its designated custodian, or at such other location as specified by the
Representative. The manner of payment for and delivery of (including the
denominations of and the names in which certificates are to be registered) the
Optional Shares shall be the same as for the Firm Shares as specified in this
Section 5.
The Representative has advised the Company that each Underwriter has
authorized the Representative to accept delivery of its Shares and to make
payment therefor. It is understood that the Representative, individually and
not as representative of the Underwriters, may (but shall not be obligated to)
make payment for any Shares to be purchased by any Underwriter whose funds shall
not have been received by the Representative by the First Closing Date or the
Second Closing Date, as the case may be, for the account of such Underwriter,
but any such payment shall not relieve such Underwriter from any obligation
under this Agreement.
SECTION 6. Agreements of the Company. The Company covenants and agrees
with each of the several Underwriters that:
(a) If any information shall have been omitted from the Registration
Statement in reliance upon Rule 430A, the Company, at the earliest possible
time, will furnish the Representative with a copy of the Prospectus to be filed
by the Company with the Commission to comply with Rule 424(b) and Rule 430A
under the Act, and, if the Representative does not object to the contents
thereof, will file such Prospectus with the Commission in compliance with such
Rules. Upon compliance with such Rules, the Company will so advise the
Representative promptly. The Company will advise the Representative and counsel
to the Underwriters promptly of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the institution
of any proceedings for that purpose, or of any notification of the suspension of
qualification of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceedings for that purpose. The Company also will advise
the Representative and counsel to the Underwriters promptly of any request of
the Commission for amendment or supplement of the Registration Statement, of any
Preliminary Prospectus, or of the Prospectus, or for additional information, and
the Company will not file any amendment or supplement to the Registration
Statement (either before or after it becomes effective), to any Preliminary
Prospectus, or to the Prospectus (including a prospectus filed pursuant to Rule
424(b)) if the Representative has not been furnished with a copy prior to such
filing or if the Representative reasonably objects to such filing.
(b) During the time during which a Prospectus relating to the Shares
is required to be delivered under the Act, the Company shall comply with all
requirements imposed on it by the Act, as now and hereafter amended, and by the
Rules and Regulations, as from time to time in force, so far as is necessary to
permit the continuance of sales or dealings in the Shares as contemplated by the
provisions hereof and the Prospectus. If any event occurs as a result of which
the Prospectus, including any subsequent amendment or supplement, would include
an untrue statement of a material fact, or would omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it becomes necessary
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<PAGE>
at any time to amend the Prospectus, including any amendment or supplement
thereto, to comply with the Act, the Company promptly will advise the
Representative and counsel to the Underwriters thereof and will promptly prepare
and file with the Commission an amendment or supplement that will correct such
statement or omission or an amendment that will effect such compliance; and, if
any Underwriter is required to deliver a prospectus nine (9) months or more
after the effective date of the Registration Statement, the Company, upon
request of the Representative but at the expense of such Underwriter, will
prepare promptly such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Act.
(c) The Company will not, prior to the Second Closing Date or thirty
(30) days after the date of this Agreement, whichever occurs first, incur any
material liability or obligation, direct or contingent, or enter into any
material transaction, other than in the ordinary course of business, or any
transaction with a related party which is required to be disclosed in the
Prospectus pursuant to Item 404 of Regulation S-B under the Act, except as
contemplated by the Prospectus.
(d) The Company will not acquire any of the Common Stock before the
Second Closing Date or thirty (30) days after the date of this Agreement,
whichever occurs first, nor will the Company declare or pay any dividend or make
any other distribution upon its Common Stock payable to stockholders of record
on a date prior to such date.
(e) The Company will make generally available to its security holders
and the Representative an earnings statement of the Company as soon as
practicable, but in no event later than fifteen (15) months after the end of the
Company's current fiscal quarter, covering a period of twelve (12) consecutive
calendar months beginning after the effective date of the Registration
Statement, but beginning not later than four months after such effective date,
which will satisfy the provisions of the last subsection of Section 11(a) of the
Act and Rule 158 promulgated thereunder.
(f) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the Company will
furnish to the Representative, at the expense of the Company, copies of the
Registration Statement, the Prospectus, any Preliminary Prospectus, and all
amendments and supplements to any such documents in each case as soon as
available and in such quantities as the Representative may reasonably request,
for the purposes contemplated by the Act.
(g) The Company shall take or cause to be taken in cooperation with
the Representative and counsel to the Underwriters all actions required in
qualifying or registering the Shares for sale under the Blue Sky Laws of such
jurisdictions as the Representative may reasonably designate, provided the
Company shall not be required to qualify generally as a foreign corporation or
to consent generally to the service of process under the law of any such state
(except with respect to the offering and sale of the Shares), and will continue
such qualifications or registrations in effect so long as reasonably requested
by the Representative to effect the distribution of the Shares (including,
without limitation, compliance with all undertakings given pursuant to such
qualifications or registrations). In each jurisdiction where any of the Shares
shall have been qualified as provided above, the Company will file such reports
and statements as may be required to continue such qualification for a period of
not less than one year from the date of this Agreement.
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<PAGE>
(h) The Company will furnish to its security holders annual reports
containing financial statements audited by independent public accountants and
quarterly reports containing financial statements and financial information
which may be unaudited. During the period ending five years after the date of
this Agreement, (i) as soon as practicable after the end of the fiscal year, the
Company will furnish to the Representative two copies, and to each of the other
Underwriters who may so request, one copy, of the annual report of the Company
containing the consolidated balance sheet of the Company as of the close of such
fiscal year and corresponding consolidated statements of earnings, stockholders'
equity, and cash flows for the year then ended, such consolidated financial
statements to be under the certificate or opinion of the Company's independent
accountants, and (ii) the Company will file promptly and will furnish to the
Representative at or before the filing thereof copies of all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Sections 13, 14, or 15 of the Exchange Act.
During such five-year period the Company also will furnish to the Representative
one copy of the following:
(i) as soon as practicable after the filing thereof, each
other report, statement, or other document filed by the Company with the
Commission;
(ii) as soon as practicable after the filing thereof, all
reports, statements, other documents, and financial statements furnished by the
Company to Nasdaq pursuant to requirements of or agreements with Nasdaq; and
(iii) as soon as available, each report, statement, or other
document of the Company mailed to its stockholders.
(i) The Company will use its best efforts to satisfy or cause to be
satisfied the conditions to the obligations of the Underwriters in Section 8
hereof.
(j) The Company shall deliver the requisite notice of issuance to the
NASD and shall take all necessary or appropriate action within its power to
maintain the authorization for trading of the Common Stock on the Nasdaq Stock
Market for a period of at least thirty-six (36) months after the date of this
Agreement.
(k) The Company shall prepare and timely file with the Commission,
from time to time, such reports as may be required by the Rules and Regulations.
(l) The Company shall comply in all respects with the undertakings
given by the Company in connection with the qualification or registration of the
Shares for offering and sale under the Blue Sky Laws.
(m) The Company shall apply the net proceeds from the sale of the
Shares to be sold by it hereunder in the manner and for the purposes specified
under the heading "Use of Proceeds" in the Prospectus. The Company shall file,
and will furnish or cause to be furnished to the Representative and counsel to
the Underwriters copies of all reports as may be required in accordance with
Rule 463 under the Act.
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<PAGE>
(n) The Company shall supply the Representative and counsel to the
Underwriters, at the Company's cost, four copies of a bound volume of the
Offering and Underwriting materials within a reasonable time after the Closing
Date.
(o) Except for the sale of Common Stock pursuant to this Agreement,
and the granting of options for up to 75,000 shares of Common Stock pursuant to
the Company's Incentive Compensation Plan, neither the Company nor any of its
Subsidiaries shall, directly or indirectly, offer, sell, contract to sell,
issue, distribute, grant any option, right, or warrant to purchase or otherwise
dispose of any shares of Common Stock or securities convertible into, or
exercisable, or exchangeable for shares of Common Stock, in the open market or
otherwise, for a period of one-hundred eighty (180) days after the later of the
effective date of the Registration Statement or the date of this Agreement,
without the express prior written consent of the Representative.
(p) The Company shall cause each person listed in the table in the
Prospectus under the heading "Security Ownership of Certain Beneficial Owners
and Management" to furnish to the Representative, on or before the date of this
Agreement, a letter or letters, in form and substance satisfactory to counsel
for the Underwriters, pursuant to which each such person shall agree not to
offer for sale, contract to sell, sell, distribute, grant any option, right or
warrant to purchase, pledge, hypothecate, or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into, or
exercisable or exchangeable for, shares of Common Stock for a period of one
hundred eighty (180) days following the effective date of the Registration
Statement, except with the express prior written consent of the Representative.
SECTION 7. Payment of Expenses and Fees.
----------------------------
(a) Whether or not the transactions contemplated hereunder are
consummated, or if this Agreement is terminated for any reason, the Company will
pay or cause to be paid the costs, fees, and expenses incurred in connection
with the initial public offering as follows:
(i) All costs, fees, and expenses incurred in connection with
the performance of the Company's obligations hereunder, including all fees and
expenses of the Company's accountants and counsel, all costs and expenses
incurred in connection with the preparation, printing, filing, and distribution
(including delivery and shipping costs) of the Registration Statement, each
Preliminary Prospectus, and the Prospectus (including all amendments and
exhibits thereto and the financial statements therein), and agreements and
supplements provided for herein, this Agreement and other underwriting
documents, including the Agreement Among Underwriters, the Selected Dealer
Agreement, the Underwriters' Questionnaire, various Underwriters' letters, and
the Preliminary and Supplemental Blue Sky Memoranda.
(ii) All filing and registration fees and expenses, including
the legal fees and disbursements of counsel, incurred in connection with
qualifying or registering all or any part of the Shares for offer and sale under
the Blue Sky Laws.
(iii) All fees and expenses of the Company's transfer agent, the
cost of printing the certificates representing the Shares, all transfer taxes,
if any, and all other fees and expenses incurred in connection with the sale and
delivery of the Shares to the Underwriters.
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<PAGE>
(iv) The filing fees of the NASD and applicable fees charged by
Nasdaq for inclusion of the Common Stock for quotation on the National Market
System, and
(v) All other costs and expenses incident to the performance
of the Company's obligations hereunder which are not otherwise provided for in
this Section 7(a).
(b) On the First Closing Date, the Company shall pay Advest, Inc.
Fifty Thousand Dollars and 00/100 ($50,000.00) as a financial advisory fee.
SECTION 8. Conditions to the Obligations of the Underwriters. The
respective obligations of the several Underwriters under this Agreement shall be
subject to the accuracy of the representations and warranties on the part of the
Company set forth herein as of the date of the First Closing Date, and if
applicable, as of the Second Closing Date, as the case may be, to the accuracy
of the statements of the Company's directors and officers, to the performance by
the Company of its obligations hereunder, and to the following additional
conditions, except to the extent expressly waived in writing by the
Representative:
(a) The Registration Statement and all post-effective amendments
thereto shall have been declared effective by the Commission not later than 5:30
p.m. eastern time, on the date of this Agreement, or such later time as shall
have been consented to by the Representative, but in any event not later than
5:30 p.m., eastern time, on the third full business day following the date
hereof; if the Company omitted information from the Registration Statement at
the time it became effective in reliance on Rule 430A under the Act, the
Prospectus shall have been filed with the Commission in compliance with Rule
424(b) and Rule 430A under the Act; no stop order suspending the effectiveness
of the Registration Statement or any amendment or supplement thereto shall have
been issued; no proceeding for the issuance of such an order shall have been
initiated or shall be pending or, to the knowledge of the Company or the
Representative, threatened or contemplated by the Commission; and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been disclosed to the
Representative and complied with to the Representative's satisfaction.
(b) The Shares shall have been qualified or registered for sale, or
subject to an available exemption from such qualification or registration, under
the Blue Sky Laws of such jurisdictions as shall have been reasonably specified
by the Representative and the offering shall have been cleared by the NASD.
(c) Since the dates as of which information is given in the
Registration Statement:
(i) There shall not have been any adverse change, or any
development involving a prospective material adverse change, in the ability of
the Company or any Subsidiary to conduct their respective businesses (whether by
reason of any court, legislative, other governmental action, order, decree, or
otherwise), or in the general affairs, condition (financial and otherwise)
business, prospects, properties, management, financial position or earnings,
results of operations, or net worth of the Company or any Subsidiary, whether or
not arising from transactions in the ordinary course of business; and
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(ii) Neither the Company nor any Subsidiary shall have
sustained any loss or interference from any labor dispute, strike, fire, flood,
windstorm, accident, or other calamity (whether or not insured) or from any
court or governmental action, order, or decree,
the effect of which on the Company or any Subsidiary, in any such case described
in clause (c)(i) or (ii) above, is in the reasonable opinion of the
Representative so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares on
the terms and in the manner contemplated in the Registration Statement and the
Prospectus.
(d) There shall have been furnished to the Representative, as the
representative of the Underwriters, on each Closing Date, except as otherwise
expressly provided below:
(i) An opinion of Blackwell Sanders Matheny Weary & Lombardi
L.C. Kansas City, Missouri, counsel for the Company, in form reasonably
satisfactory to the Representative and counsel for the Underwriters, addressed
to the Representative as representative of the Underwriters and dated as of the
First Closing Date or the Second Closing Date, as the case may be, to the effect
that:
(1) The Company and each Subsidiary have been duly
incorporated and are validly existing as corporations in good standing under
the laws of the jurisdiction of organization, with full corporate power and
authority to own, lease, and operate their respective properties and conduct
their respective businesses as described in the Registration Statement; the
Company and each Subsidiary are duly qualified to do business as foreign
corporations under the corporation laws of, and are in good standing as such in,
each jurisdiction in which the Company or such Subsidiary, as the case may be,
owns or leases properties, has an office, or in which business is conducted and
such qualification is required, except where the failure to so qualify would not
have a Material Adverse Effect; and the Company is duly registered and in good
standing under the BHCA; and neither the Company nor any Subsidiary is subject
to any current formal arrangements or memorandum of understanding with, or cease
and desist order by, any banking or similar regulatory agency, other than
commitments to the Federal Reserve Bank dated in 1989, as amended March 12,
1991, March 14, 1994, February 5, 1996 and February 26, 1996.
(2) The Common Stock conforms to the description thereof in
the Registration Statement;
(3) The authorized, issued and outstanding shares of Common
Stock are as set forth in the Registration Statement, have been duly authorized
and validly issued, and are fully paid and nonassessable and there are no
preemptive, preferential, or other rights to subscribe for or purchase any
shares of Common Stock or the Shares to be sold by the Company hereunder and, to
the best of such counsel's knowledge after due investigation, no shares of
Common Stock have been issued in violation of such rights; except as referred to
in the Prospectus, there are no restrictions upon the voting or transfer of the
Common Stock or the Shares pursuant to the Company's Articles of Incorporation,
bylaws, and other governing documents, or any agreement or other instrument to
which the Company or any of its Subsidiaries is a party or by which any of them
may be bound; all of the outstanding shares of capital stock of each Subsidiary
have been duly authorized and validly issued, are fully paid and nonassessable,
and are held free and clear of any lien, claim, encumbrance or security
interests, except for the security interest in favor of Boatmen's First National
Bank, N.A., which interest shall terminate immediately upon the application of
the net proceeds from the sale of the Shares as described in the Prospectus; all
offers, sales and issuances of the capital stock of the Company and its
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Subsidiaries within three years prior to the date hereof are, to the best of
such counsel's knowledge, described in Part II of the Registration Statement,
and were made in compliance with, and the offers and sales made from January
1995 through January 1996 were registered under or exempt from, the registration
requirements of the Act and were duly registered or qualified under, or the
subject of an available exemption from, the registration provisions of the
applicable Blue Sky Laws;
(4) The Shares, when delivered to the Representative or
upon the order of the Representative against payment therefor in accordance with
the provisions of this Agreement, will be duly authorized and validly issued,
fully paid, and nonassessable and the Underwriters will acquire good title to
the Shares sold by the Company, free and clear of any lien, claim, encumbrance,
or other security interest created by the Company;
(5) The Registration Statement and all post-effective
amendments thereto have become effective under the Act, no stop order suspending
the effectiveness of the Registration Statement has been issued and, to the best
of such counsel's knowledge, no proceedings for that purpose have been
instituted or are pending or contemplated under the Act, and all filings
required by Rule 424 and Rule 430A of the Rules and Regulations have been made;
the Registration Statement, the Prospectus, and each amendment or supplement
thereto (except for the financial statements and other statistical or financial
data included therein as to which such counsel need express no opinion) comply
as to form in all material respects with the requirements of the Act and the
Rules and Regulations; such counsel has participated in the preparation of the
Registration Statement and the Prospectus, including review of and discussion of
the contents thereof, and no facts have come to the attention of such counsel
which lead it to believe that either the Registration Statement, the Prospectus,
or any such amendment or supplement, as of their respective effective or issue
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus, as amended or supplemented, if
applicable, as of the First Closing Date or the Second Closing Date, as the case
may be, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which made (except
for the financial statements and other statistical or financial data included
therein as to which such counsel need express no opinion). There are no
amendments to the Registration Statement required to be filed that have not been
so filed. To the best of such counsel's knowledge after due investigation, there
are no legal or governmental proceedings pending or threatened that are required
to be described in the Registration Statement that are not described as
required, nor are there any contracts or documents of a character required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement that are not described or filed as required;
(6) The Company has full corporate power and authority to
execute, deliver, and perform this Agreement and to issue, sell, and deliver the
Shares to be sold by it to the Underwriters as provided herein; this Agreement
has been duly authorized, executed and delivered by the Company, and constitutes
a legal, valid, and binding obligation of the Company and is enforceable against
the Company in accordance with its terms, except that rights to indemnity or
contribution may be limited by federal or state securities laws and except as
enforceability of this Agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights
generally, and by equitable principles limiting the right to specific
performance or other equitable relief;
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(7) Neither the Company nor any of its Subsidiaries is, or
with the giving of notice or the lapse of time or both will be, in violation or
breach of, or in default under, nor will the execution or delivery of, or
performance and consummation of the transactions contemplated by this Agreement
(including the offer, sale or delivery of the Shares) conflict with, or result
in a violation or breach of, or constitute a default under, any provision of the
Articles of Incorporation, bylaws (as amended or restated), or other governing
documents of the Company or any Subsidiary or any provision of any agreement,
contract, mortgage, deed of trust, lease, loan agreement, indenture, note, bond
or other evidence of indebtedness, or any other material agreement or instrument
to which the Company or any Subsidiary is a party or by which any of them is
bound, or to which any of their properties is subject, (in the case of any
document not filed as an exhibit to the Registration Statement, to the knowledge
of such counsel after due investigation), nor will the performance by the
Company of its obligations hereunder violate any rule, regulation, order, or
decree known to such counsel after due investigation, applicable to the Company
or any Subsidiary of any court or any regulatory body, administrative agency, or
other governmental body having jurisdiction over the Company, any Subsidiary or
any of their respective properties, or any order of any court or governmental
agency or authority entered in any proceeding to which the Company or any
Subsidiary was or is now a party or by which it is bound;
(8) To the knowledge of such counsel, there are no holders
of Common Stock or other securities of the Company with rights to have such
securities included in the Registration Statement;
(9) No consent, approval, filing, authorization,
registration, qualification, or order of or with any court or governmental
agency or body (including any bank regulatory agency) is required for the issue
and sale of the Shares or in connection with the consummation of the
transactions contemplated in this Agreement, other than such as have been
obtained or made;
(10) Neither the Company nor any Subsidiary owns any equity
interest in any corporation, joint venture, proprietorship, or other commercial
entity or organization except the Subsidiaries listed in the Registration
Statement; and the Company owns, directly or indirectly, beneficially and of
record all of the outstanding capital stock of each Subsidiary free and clear of
any claim, lien, encumbrance, or security interest, except for the security
interest in favor of Boatmen's First National Bank, N.A., which interest shall
terminate immediately upon the application of the net proceeds of the sale of
the Shares as described in the Prospectus;
(11) The Common Stock has been designated for inclusion as a
National Market System security on Nasdaq;
(12) The conditions for the use of Form SB-2 have been
satisfied with respect to the Registration Statement;
(13) Except where such failure would not be reasonably
likely to have a Material Adverse Effect, the Company and each Subsidiary have
and hold, and are in substantial compliance with, all Permits required under all
state and federal laws, rules, and regulations in connection with their
respective businesses, and all of such Permits are in full force and effect;
and, to the knowledge of such counsel after due investigation, there is no
pending proceeding, and neither the Company nor any Subsidiary has received
notice of any threatened proceeding, relating to the revocation or modification
of any such Permit. Neither the Company nor any Subsidiary is (by virtue of any
action,
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omission to act, contract to which it is a party or by which it is bound, or any
occurrence or state of facts whatsoever) in violation of any applicable federal
or state laws, rules, regulations, or, to the knowledge of such counsel, orders
issued pursuant to federal or state statutes, laws, ordinances, rules, or
regulations (including those relating to any aspect of banking, bank holding
companies, environmental protection, occupational safety and health, and equal
employment practices), except any such violation that has been fully cured or
satisfied without recourse or that is not reasonably likely to have a Material
Adverse Effect;
(14) The Company is not an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940 and, upon its receipt of the net proceeds from the sale of
the Shares, will not become or be deemed to be an "investment company"
thereunder; and
(15) Such counsel has reviewed all agreements, contracts,
indentures, leases, and other documents and instruments referred to in the
Registration Statement and the Prospectus and the descriptions of such documents
are fairly summarized or disclosed therein, and filed as exhibits thereto as
required and such counsel does not know, after due inquiry, of any agreements,
contracts, indentures, leases or other documents or instrument required to be so
summarized or disclosed or filed which have not been so summarized, disclosed,
or filed. The descriptions in the Registration Statement of statutes,
regulations, and legal or governmental proceedings are accurate and present
fairly the information required to be shown.
Such counsel may rely as to factual matters on certificates of officers of
the Company and of state officials and, as to legal matters in jurisdictions
other than those in which they are domiciled, on opinions of local counsel, in
each case satisfactory to the Representative, in which case their opinion shall
state that they are so doing and copies of such certificates or opinions will be
attached to their opinion unless such certificates or opinions or the
information therein has been furnished to Representative in other form.
(ii) Such opinion or opinions of Husch & Eppenberger, counsel
for the Underwriters, dated the First Closing Date or the Second Closing Date,
as the case may be, with respect to the incorporation of the Company, validity
of the Shares, the Registration Statement and the Prospectus, and other related
matters as the Representative may reasonably require, and the Company shall have
furnished to such counsel such documents and shall have exhibited to them such
papers and records as they reasonably request for the purpose of enabling them
to pass upon such matters.
(iii) A certificate of the chief executive officer and the
principal financial officer of the Company, dated the First Closing Date or the
Second Closing Date, as the case may be, to the effect that:
(1) The representations and warranties of the Company set
forth in Section 2 of this Agreement are true and correct as of the date of this
Agreement and as of the First Closing Date or the Second Closing Date, as the
case may be, and the Company has complied in all respects with all the covenants
and satisfied all the conditions to be performed or satisfied by it at or prior
to such Closing Date;
(2) The Commission has not issued an order preventing or
suspending the use of the Prospectus or any Preliminary Prospectus or any
amendment thereto; no stop order
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suspending the effectiveness of the Registration Statement has been issued; and,
to the best knowledge of the respective signatories, no proceeding for that
purpose has been instituted or is pending or contemplated under the Act;
(3) Each of the respective signatories of the certificate
has carefully examined the Registration Statement, the Prospectus, and any
amendments or supplements thereto, and such documents contain all statements and
information required to be made therein, and neither the Registration Statement
nor any amendment or supplement thereto includes any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and, since the date
on which the Registration Statement was initially filed, no event has occurred
that was required to be set forth in an amended or supplemented prospectus or in
an amendment to the Registration Statement that has not been so set forth;
provided, however, that no representation need be made as to information
contained in or omitted from the Registration Statement or any amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any Underwriter through the Representative;
and
(4) Since the date on which the Registration Statement was
initially filed with the Commission, there has not been any material adverse
change or a development involving a prospective material adverse change in the
business, properties, financial condition, or earnings of the Company or any of
its Subsidiaries, whether or not arising from transactions in the ordinary
course of business, except as disclosed in the Registration Statement as
heretofore amended or (but only if the Representative expressly consents thereto
in writing) as disclosed in an amendment or supplement thereto filed with the
Commission and delivered to the Representative after the execution of this
Agreement; since such date and except as so disclosed or in the ordinary course
of business, neither the Company nor any Subsidiary has incurred any liability
or obligation, direct or indirect, or entered into any transaction that is
material to the Company or such Subsidiary, as the case may be, not contemplated
in the Prospectus; since such date and except as disclosed there has not been
any change in the outstanding capital stock of the Company, or any change that
is material to the Company or any of its Subsidiaries in the short-term debt or
long-term debt of the Company or any Subsidiary; since such date and except as
so disclosed the Company has not acquired any Common Stock or other capital
stock of the Company nor has the Company declared or paid any dividend or made
any other distribution not expressly consented to in writing by the
Representative, upon its outstanding Common Stock payable to stockholders of
record on a date prior to the First Closing Date or Second Closing Date, as the
case may be; since such date and except as so disclosed, neither the Company nor
any of its Subsidiaries have incurred any material contingent obligations, and
no material litigation is pending or threatened against the Company or any
Subsidiary; and, since such date and except as so disclosed, neither the Company
nor any of its Subsidiaries have sustained any material loss or interference
from any strike, fire, flood, windstorm, accident or other calamity (whether or
not insured) or from any court or governmental action, order, or decree.
(iv) At the time this Agreement is executed and also on the First
Closing Date and the Second Closing Date, as the case may be, there shall be
delivered to the Representative a letter addressed to the Representative, as
representative of the Underwriters, from KPMG Peat Marwick LLP, the Company's
independent accountants, the first letter to be dated the date of this
Agreement, the second letter to be dated the First Closing Date, and the third
letter (in the event of a Second Closing) to be dated the Second Closing Date,
which shall be in form and substance reasonably satisfactory to the
Representative and shall contain information as of a date within five days of
the date of such letter.
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There shall not have been any change set forth in any letter referred to in this
subsection (iv) that makes it impracticable or inadvisable in the judgment of
the Representative to proceed with the public offering or purchase of the Shares
as contemplated hereby.
(v) Such further certificates and documents as the
Representative may reasonably request (including certificates of officers of the
Company).
All such opinions, certificates, letters, and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
to the Representative and to Husch & Eppenberger, counsel for the Underwriters,
and the Underwriters. The Company shall furnish the Representative with such
manually signed or conformed copies of such opinions, certificates, letters, and
documents as the Representative may reasonably request.
(e) No Underwriter, including the Representative, shall have advised
the Company that the Registration Statement, the Prospectus, or any amendment or
supplement thereto, contains any untrue statement of fact which, in the opinion
of the Representative or counsel for the Underwriters, is material or omits to
state a fact which, in the opinion of the Representative or counsel for the
Underwriters, is material and is required to be stated therein or necessary to
make the statements therein not misleading.
(f) The Common Stock shall have been designated for inclusion as a
National Market System security on Nasdaq.
All such opinions, certificates, letters, and documents shall be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Representative and counsel for the Underwriters. The Company
shall furnish the Representative with such conformed copies of such opinions,
certificates, letters, and documents as the Representative shall reasonably
request. If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at either Closing Date is not so satisfied, this Agreement
at the Representative's election will terminate upon notification to the Company
without liability on the part of any Underwriter, including the Representative
or the Company, except for expenses to be paid by the Company pursuant to
Section 7 hereof or reimbursed by the Company pursuant to Section 9 and except
to the extent provided in Section 11.
SECTION 9. Reimbursement of Underwriters' Expenses. If the sale of the
Shares to the several Underwriters at the First Closing is not consummated
because the offering is terminated or indefinitely suspended by the Company or
by the Representative for any reason permitted by this Agreement, other than the
Representative's inability to legally act as Representative, the Company will
reimburse the Representative and the other several Underwriters for their
reasonable out-of-pocket expenses, including fees and disbursements of its
counsel, that shall have been incurred by the Representative and the other
several Underwriters in connection with the proposed purchase and sale of the
Shares in an aggregate amount not to exceed $50,000. Any such termination or
suspension shall be without liability of any party to the other except that the
provisions of this Section 9, and Sections 7 and 11 shall remain effective and
shall apply.
SECTION 10. Maintain Effectiveness of Registration Statement. The
Representative and the Company will use their respective best efforts to prevent
the issuance of any stop order or other such order suspending the effectiveness
of the Registration Statement and, if such stop order is issued, to obtain the
lifting thereof as soon as possible.
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<PAGE>
SECTION 11. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act or the Exchange Act, against any losses, claims, damages,
expenses, liabilities, or actions in respect thereof ("Claims"), joint or
several, to which such Underwriter or each such controlling person may become
subject under the Act, the Exchange Act, the Rules and Regulations, Blue Sky
Laws, or other federal or state statutory laws or regulations, at common law or
otherwise (including payments made in settlement of any litigation, if such
settlement is effected with the written consent of the Company, which consent
shall not be unreasonably withheld), insofar as such Claims arise out of or are
based upon the inaccuracy or breach of any representation, warranty, or covenant
of the Company contained in this Agreement, any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
any Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, or in any application filed under any Blue Sky Law or other document
executed by the Company for that purpose or based upon written information
furnished by the Company and filed in any state or other jurisdiction to qualify
or register any or all of the Shares under the securities laws thereof (any such
document, application, or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in any of the foregoing a material fact required to be stated
therein or necessary to make the statements therein not misleading. The Company
agrees to reimburse each Underwriter and each such controlling person promptly
for any legal fees or other expenses incurred by such Underwriter or any such
controlling person in connection with investigating or defending any such Claim
or appearing as a third-party witness in connection with any such Claim;
provided, however, that the Company will not be liable in any such case to the
extent that:
(i) Any such Claim arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto or in any Blue Sky Application in reliance upon
and in conformity with the written information furnished by or on behalf of the
Underwriters or the Company expressly for use therein pursuant to Section 4 of
this Agreement; or
(ii) Such statement or omission was contained or made in any
Preliminary Prospectus and corrected in the Prospectus and (1) any such Claim
suffered or incurred by any Underwriter (or any person who controls any
Underwriter) resulted from an action, claim, or suit by any person who purchased
Shares that are the subject thereof from such Underwriter in the offering, and
(2) such Underwriter failed to deliver a copy of the Prospectus (as then amended
if the Company shall have amended the Prospectus) to such person at or prior to
the confirmation of the sale of such Shares in any case where such delivery is
required by the Act, unless such failure was due to failure by the Company to
provide copies of the Prospectus (as so amended) to the Underwriters as required
by this Agreement.
(b) Each Underwriter severally, but not jointly, agrees to indemnify
and hold harmless the Company, each of its directors, each of its officers who
signs the Registration Statement, and each person who controls the Company
within the meaning of the Act or the Exchange Act, against any Claim to which
the Company, or any such director, officer, or controlling person may become
subject under the Act, the Exchange Act, the Rules and Regulations, Blue Sky
Laws, or other federal or state statutory laws or regulations, at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Underwriter and the Representative,
which
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consent shall not be unreasonably withheld), insofar as such Claim arises out of
or is based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
Application, or arises out of or is based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or in any Blue Sky Application, in reliance upon and in conformity with the
written information furnished by such Underwriter to the Company pursuant to
Section 4 of this Agreement. Each Underwriter will severally reimburse any legal
fees or other expenses reasonably incurred by the Company, or any such director,
officer, or controlling person in connection with investigating or defending any
such Claim, and from any and all Claims resulting from failure of such
Underwriter to deliver a copy of the Prospectus, if the person asserting such
Claim purchased Shares from such Underwriter and a copy of the Prospectus (as
then amended if the Company shall have amended the Prospectus) was not sent or
given by or on behalf of such Underwriter to such person, if required by law so
to have been delivered, at or prior to the written confirmation of the sale of
the Shares to such person, and if the Prospectus (as so amended) would have
cured the defect giving rise to such Claim (unless such failure was due to a
failure by the Company to provide sufficient copies of the Prospectuses (as so
amended) to the Underwriters). The indemnification obligations of each
Underwriter as provided above are in addition to any liabilities any such
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) of this Section 11 of notice of the commencement of any action in
respect of a Claim, such indemnified party will, if a Claim in respect thereof
is to be made against an indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof. In case any such
action is brought against any indemnified party, and such indemnified party
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in and, to the extent that it may wish,
jointly with all other indemnifying parties, similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to the
indemnified party and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties.
(d) Upon receipt of notice from the indemnifying party to such
indemnified party of the indemnifying party's election to assume the defense of
such action and upon approval by the indemnified party of counsel selected by
the indemnifying party, the indemnifying party will not be liable to such
indemnified party under subsection (a) or (b) of this Section 11 for any legal
fees or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, unless:
(i) the indemnified party shall have employed separate counsel
in connection with the assumption of legal defenses in accordance with the
proviso to the last sentence of subsection (c) of this Section 11 (it being
understood, however, that the indemnified party shall not be liable for the
legal fees and expenses of more than one separate counsel, approved by the
Representative if one or more of the Underwriters or their controlling persons
are the indemnified parties);
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(ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the indemnified party's notice to the
indemnifying party of commencement of the action; or
(iii) the indemnifying party has authorized the employment of
counsel at the expense of the indemnifying party.
(e) If the indemnification provided for in this Section 11 is
unavailable to an indemnified party or insufficient to hold harmless an
indemnified party under subsection (a) or (b) of this Section 11 in respect of
any Claim referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall, subject, to the limitations
hereinafter set forth, contribute to the amount paid or payable by such
indemnified party as a result of such Claim:
(i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other hand from the offering of the Shares; or
(ii) if the allocation provided by clause (e)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (e)(i) above, but also the
relative fault of the Company on the one hand and the Underwriters on the other
hand in connection with the statements or omissions that resulted in such Claim,
as well as any other relevant equitable considerations.
The respective relative benefits received by the Company on the one hand
and the Underwriters on the other hand shall be deemed to be in such proportion
that the Underwriters are responsible for that portion represented by the
percentage that the amount of the underwriting discount per Share appearing on
the cover page of the Prospectus bears to the initial public offering price per
Share appearing thereon, and the Company (including the Company's directors,
officers, and controlling persons) is responsible for the remaining portion.
The relative fault of the Company on the one hand and the Underwriters on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other hand and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by a party
as a result of the Claims referred to above shall be deemed to include, subject
to the limitations set forth in subsections (c) and (d) of this Section 11, any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim.
(f) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 11 were determined by pro
rata or per capita allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method or allocation that does not take
into account the equitable considerations referred to in subsection (e) of this
Section 11. Notwithstanding the other provisions of this Section 11, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
such
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Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 11 are several in proportion to their respective
underwriting commitments and not joint.
(g) The obligations of the Company and the Underwriters under this
Section 11 shall be in addition to any liability that the Company or the
Underwriters may otherwise have.
SECTION 12. Default of Underwriters. It shall be a condition to this
Agreement and to the obligations of the Company to sell and deliver the Shares
hereunder, and to the obligations of each Underwriter to purchase the Shares in
the manner described herein, that, except as hereinafter provided in this
Section 12, each of the Underwriters (except a defaulting Underwriter) shall
purchase and pay for all the Shares agreed to be purchased by such Underwriter
hereunder upon tender to the Representative of all such Shares in accordance
with the terms hereof. If any Underwriter or Underwriters defaults in its or
their obligations to purchase Shares hereunder on either the First Closing Date
or the Second Closing Date and the aggregate number of Shares that such
defaulting Underwriter or Underwriters agreed but failed to purchase does not
exceed ten percent (10% ) of the total number of Shares the Underwriters are
obligated to purchase on such Closing Date, the Representative may make
arrangements for the purchase of such Shares by other persons, including any of
the Underwriters, but if no such arrangements are made by such Closing Date the
nondefaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Shares such defaulting
Underwriters agreed but failed to purchase on such Closing Date. If any
Underwriter or Underwriters so default and the aggregate number of Shares with
respect to which such default or defaults occur is greater than the above
percentage and arrangements satisfactory to the Representative for the purchase
of such Shares by other persons are not made within thirty-six (36) hours after
such default, this Agreement will terminate without liability on the part of any
nondefaulting Underwriter or the Company, except to the extent provided in
Section 11.
If Shares to which a default relates are to be purchased by the
nondefaulting Underwriters or by another party or parties, the Representative or
the Company shall have the right to postpone the First or Second Closing Date,
as the case may be, for not more than seven business days in order that the
necessary changes in the Registration Statement, Prospectus, and any other
documents, as well as any other arrangements, may be effected. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 12. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 13. Effective Date. This Agreement shall become effective
immediately on the date hereof.
SECTION 14. Termination. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof, this Agreement may be
terminated by the Representative prior to the First Closing Date and the option
from the Company referred to in Section 5, if exercised, may be canceled by the
Representative at any time prior to the Second Closing Date, if:
(a) The Company shall have failed, refused, or been unable, at or
prior to such Closing Date, to perform any agreement on its part to be performed
hereunder;
-23-
<PAGE>
(b) Any other condition to the obligations of the Underwriters
hereunder is not fulfilled; or
(c) In the Representative's judgment, payment for and delivery of the
Shares is rendered impracticable or inadvisable because:
(i) Additional governmental restrictions, not in force and
effect on the date hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally established on
any national securities exchange or over-the-counter market, or trading in
securities generally shall have been suspended on any national securities
exchange or on the Nasdaq Stock Market, or a general banking moratorium shall
have been established by federal or state authorities;
(ii) Any event shall have occurred or shall exist that makes
untrue or incorrect in any material respect any statement or information
contained in the Registration Statement or that is not reflected in the
Registration Statement but should be reflected therein to make the statements or
information contained therein not misleading in any material respect; or
(iii) An outbreak or escalation of major hostilities or other
national or international calamity or any substantial change in political,
financial or economic conditions shall have occurred or shall have accelerated
to such extent, in the Representative's judgment, as to have a material adverse
effect on the general securities market or make it impracticable or inadvisable
to proceed with completion of the sale and payment for the Shares as provided in
this Agreement.
Any termination pursuant to this Section 14 shall be without liability on
the part of any Underwriter to the Company or on the part of the Company to any
Underwriter (except for expenses to be paid by the Company pursuant to Section 7
or reimbursed by the Company pursuant to Section 9 and except as to
indemnification to the extent provided in Section 11).
This Agreement also may be terminated as provided in Section 12 hereof.
SECTION 15. Representations and Indemnities to Survive Delivery. The
respective indemnity and contribution agreements of the Company and the several
Underwriters, and the representations, warranties, covenants, and other
statements of the Company and of its directors and officers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of any Underwriter, the Company, or any
of its or their partners, officers, directors, or any controlling person, as the
case may be, and will survive delivery of and payment for the shares sold
hereunder or the termination or cancellation of this Agreement.
SECTION 16. Notices. All communications hereunder will be in writing and,
if sent to the Representative, will be mailed, delivered, or telecopied (with
receipt confirmed) to Advest, Inc., at One World Financial Center, 200 Liberty
Street, New York, New York 10281, Attention: Thomas G. Rudkin, Managing Director
(Fax No. (212) 786-4097) with a copy to Mary Anne O'Connell, Husch &
Eppenberger, 1200 Main, Suite 1700, Kansas City, Missouri 64105 (Fax No. (816)
421-0569); and if sent to the Company will be mailed, delivered, or telecopied
(with receipt confirmed) to Gold Banc Corporation, Inc. 11301 Nall Avenue,
Leawood, Kansas 66211 (Fax No. (913) 451-8004) with a copy
-24-
<PAGE>
to Steven Carman, Blackwell, Sanders, Matheny, Weary & Lombardi, L.C., P.O. Box
419777, Kansas City, MO 64141 (Fax No. (816) 274-6914)
SECTION 17. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors or assigns,
and to the benefit of the directors and officers (and their personal
representatives) and controlling persons referred to in Section 11, and no other
person shall acquire or have any right or obligation hereunder. The terms
"successors or assigns," as used in this Agreement, shall not include any
purchaser of the Shares from any Underwriters merely by reason of such purchase.
SECTION 18. Partial Unenforceability. If any section, subsection, clause
or provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, subsection, clause, or provision hereof.
SECTION 19. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
SECTION 20. Entire Agreement. This Agreement embodies the entire
agreement among the parties hereto with respect to the transactions contemplated
herein, and there have been and are no agreements among the parties with respect
to such transactions other than as set forth or provided for herein.
SECTION 21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed counterparts hereof, whereupon it will
become a binding agreement among the Company and the several Underwriters,
including the Representative, in accordance with its terms.
Very truly yours,
GOLD BANC CORPORATION, INC.
By:
--------------------------------
Title:
-----------------------------
ADVEST, INC.,
As Representative of the several
Underwriters listed in Schedule A.
By:
--------------------------------
Title:
-----------------------------
-25-
<PAGE>
GOLD BANC CORPORATION, INC.
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm
Shares to be
Name of Underwriter Purchased
- ------------------- --------------
<S> <C>
Advest, Inc........................................
Total........................................... 2,000,000
=========
</TABLE>
-26-
<PAGE>
EXHIBIT 3(a)
RESTATED ARTICLES OF INCORPORATION
OF
GOLD BANC CORPORATION, INC.
A CORPORATION ORIGINALLY INCORPORATED IN THE
STATE OF KANSAS AS GOLD BANCSHARES, INC. ON DECEMBER 5, 1985
ARTICLE ONE
NAME OF CORPORATION
The name of the corporation is Gold Banc Corporation, Inc. (the
"Corporation").
ARTICLE TWO
REGISTERED OFFICE AND AGENT
The address of the Corporation's registered office in the State of Kansas
is 11301 Nall Avenue, Leawood, Johnson County, Kansas 66211. The name of its
registered agent at such address is Michael W. Gullion.
ARTICLE THREE
GENERAL NATURE OF BUSINESS
The purpose of the Corporation is to engage in any lawful conduct or
activity for which corporations may be organized under the Kansas General
Corporation Code.
ARTICLE FOUR
CAPITAL STOCK
AUTHORIZED SHARES
-----------------
<PAGE>
1. The total number of shares of stock which the Corporation has
authority to issue shall be 15,000,000 shares, of which 7,500,000 shares shall
be designated Preferred Stock (the "Preferred Stock") and 7,500,000 shares shall
be designated Common Stock, par value $1.00 per share (the "Common Stock").
2. The relative rights, voting power, preferences and restrictions of the
shares of each class of stock which are fixed by the Articles of Incorporation,
and the express grant of authority to the board of directors of the corporation
to fix by resolution or resolutions certain rights, voting power, preferences
and restrictions, are as follows:
PREFERRED STOCK
---------------
3. Shares of Preferred Stock may be issued in one or more series at such
time or times and for such consideration as the board of directors may
determine. Each such series shall be given a distinguishing designation. All
shares of any one series shall have preferences, limitations and relative rights
identical with those of other shares of the same series and, except to the
extent otherwise provided in the description of such series, with those of other
shares of Preferred Stock.
4. The authority of the board of directors with respect to each series
shall include, but not be limited to, determination of the following:
(a) The distinguishing designation and number of shares constituting
that series, which number may (except where otherwise provided by the board of
directors in creating such series) be increased or decreased from time to time
by action of the board of directors;
(b) The dividend rate, if any, on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that
series over shares of any other series or over the Common Stock;
(c) The voting rights, if any, which shares of that series shall
have, and the terms of such voting rights;
(d) Whether the shares of that series shall be convertible into or
exchangeable for cash, shares of stock of any other class or any other series,
indebtedness, or other property or rights, including securities of another
corporation, and, if so, the terms and conditions of such exchange or
conversion, including the rate or rates of conversion, and whether such rate
shall be a designated amount or an amount determined in accordance with a
designated formula or by reference to extrinsic data or events, the date or
dates upon or after which they shall be convertible or exchangeable, the
duration for which they shall be convertible or exchangeable, the event or
events upon or after
2
<PAGE>
which they shall be convertible or exchangeable, and whether they shall be
convertible or exchangeable at the option of the Corporation, the
shareholder or another person, and the method (if any) of adjusting the
rate of conversion or exchange in the event of a stock split, stock
dividend, combination of shares or similar event;
(e) Whether or not the shares of that series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date or
dates upon or after which the shares of that series shall be redeemable,
whether they shall be redeemable at the option of the Corporation, the
shareholder or another person, the amount per share payable in the event of
redemption (which amount may vary under different conditions and at
different redemption dates), whether such amount shall be a designated
amount or an amount determined in accordance with a designated formula or
by reference to extrinsic data or events, and whether such amount shall be
paid in cash, indebtedness, securities or other property or rights,
including securities of any other corporation;
(f) Whether that series shall have a retirement or sinking fund for
the purchase or redemption of shares of that series, and, if so, the terms
and amount payable into such fund;
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of that
series over shares of any other series or over the Common Stock;
(h) Whether the issuance of any additional shares of such series, or
of any shares of any other series, shall be subject to restrictions as to
issuance, or as to the powers, preferences or rights of any such other
series; and
(i) Any other preferences, powers, privileges, and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of the shares of that series, as the
board of directors may deem advisable and as shall not be inconsistent with
these Articles of Incorporation or the Kansas General Corporation Code.
COMMON STOCK
------------
5. The holders of Common Stock shall be entitled to one vote per share on
all matters to be voted on by the stockholders of the Corporation.
6. To the extent permitted under the Kansas General Corporation Code and
subject to the provisions of the Preferred Stock, the holders of Common Stock
shall be entitled to
3
<PAGE>
participate ratably on a per share basis in the payment of dividends, whether in
cash, property or securities of the Corporation, when and as declared thereon by
the board of directors.
7. Subject to the provisions of the Preferred Stock, the holders of
Common Stock shall be entitled to participate ratably on a per share basis in
all distributions to the holders of Common Stock in any liquidation, dissolution
or winding up of the Corporation.
ARTICLE FIVE
ACTION BY STOCKHOLDERS
1. Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders. Meetings of stockholders may be held within or
without the State of Kansas, as the bylaws of the Corporation may provide.
Election of directors need not be by written ballot unless the bylaws of the
Corporation so provide.
2. The books of the Corporation may be kept outside the State of Kansas
at such place or places as may be designated from time to time by the board of
directors or in the bylaws of the Corporation. Stockholders shall have the
right to inspect the books and records of the Corporation to the extent and in
the manner provided by Kansas law, subject to reasonable restrictions as may be
determined by the board of directors or the officers of the Corporation, from
time to time or with respect to any request for such inspection.
3. Except as otherwise required by law and subject to the right of
holders of any Preferred Stock then outstanding, special meetings of
stockholders may be called by the chief executive officer of the Corporation or
by or at the direction of a majority of the board of directors, and shall be
called by the chairman of the board, the chief executive officer or the
secretary upon the written request of the holders of not less than fifty-five
percent (55%) percent of all of the outstanding shares of the Corporation
entitled to vote at the meeting. The business transacted at a special meeting
of stockholders shall be limited to that stated in the notice of such meeting or
in a duly executed waiver thereof.
4. Except as otherwise provided by these Articles of Incorporation or as
otherwise required by any applicable law, and subject to the rights of the
holders of any Preferred Stock then outstanding, all of the shares of the
capital stock of the Corporation entitled to vote on a matter shall vote on such
matter together as a single class.
5. The holders of capital stock of the Corporation shall not be entitled
to use cumulative voting on any matter.
4
<PAGE>
ARTICLE SIX
NUMBER AND CLASSIFICATION OF DIRECTORS; VACANCIES
1. The number of directors constituting the entire board of directors
shall be not less than three (3) nor more than fifteen (15). Subject to the
rights of the holders of any Preferred Stock then outstanding, the specific
number of directors within such minimum and maximum shall be authorized from
time to time by, and only by, resolution duly adopted by a majority of the total
number of directors then constituting the entire board of directors.
2. Upon the filing of these Articles of Incorporation with the Secretary
of State of the State of Kansas after being adopted by the stockholders of the
Corporation, the board of directors shall be divided into three (3) classes,
designated Class I, Class II and Class III. Each class shall consist, as nearly
as possible, of one-third of the total number of directors then constituting the
entire board of directors. Upon the initial classification, the directors and
the class of each shall be as follows:
<TABLE>
<CAPTION>
Name Class Term Expires
---- ----- ------------
<S> <C> <C>
Keith E. Bouchey I 1997
William F. Wright I 1997
D. Michael Browne II 1998
Michael W. Gullion III 1999
William Wallman III 1999
</TABLE>
The term of the initial Class I directors shall expire at the annual
stockholders' meeting for 1997, the term of the initial Class II directors shall
expire at the annual stockholders' meeting for 1998, and the term of the initial
Class III directors shall expire at the annual stockholders' meeting for 1999.
At each annual stockholders' meeting beginning with the annual stockholders'
meeting for 1997, directors elected to succeed the directors whose terms expire
at such meeting shall be elected for a full three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain or attain, to the extent possible, the equality of the
number of directors in each class. In no case shall a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which such director's term
expires and until a successor shall be duly elected and qualified, or until such
director's earlier death, resignation or removal.
5
<PAGE>
3. Subject to the rights of the holders of any Preferred Stock then
outstanding, any vacancies existing on the board of directors for any reason,
including by reason of any increase in the number of directors, shall be filled
only by the board of directors, acting by the affirmative vote of a majority of
the directors then in office. The term of a director elected to fill a vacancy
shall expire upon the expiration of the term of office of the class in which
such vacancy occurred.
ARTICLE SEVEN
REMOVAL OF DIRECTORS
Subject to the rights of the holders of any Preferred Stock then
outstanding, (i) any director, or the entire board of directors, may be removed
from office at any time, but only for Cause, by the affirmative vote of the
holders of record of outstanding shares representing at least a majority of the
voting power of all the shares of capital stock of the Corporation then entitled
to vote generally in the election of directors, voting together as a single
class, and (ii) to the extent permitted by law, any director may be removed from
office at any time, but only for Cause, by the affirmative vote of a majority of
the entire board of directors. As used in these Articles of Incorporation, the
term "Cause" means (i) conviction of the director of a felony; (ii) declaration
by order of a court that the director is of unsound mind; or (iii) gross abuse
of trust which is proven by clear and convincing evidence to have been committed
in bad faith.
ARTICLE EIGHT
INDEMNIFICATION OF OFFICERS, DIRECTORS AND ADVISORY DIRECTORS
The Corporation shall indemnify each officer, director and advisory
director of the Corporation to the fullest extent permitted by applicable law.
The modification or repeal of this ARTICLE EIGHT shall not adversely affect the
right to indemnification of an officer, director or advisory director hereunder
with respect to any act or omission occurring prior to such modification or
repeal.
ARTICLE NINE
LIMITATION ON PERSONAL LIABILITY OF DIRECTORS AND ADVISORY DIRECTORS
No director or advisory director of this Corporation shall be liable to
the Corporation or its stockholders for monetary damages for a breach of
fiduciary duty as a director, except to the extent such exemption from liability
or limitation thereof is not permitted under the Kansas General Corporation Code
as presently in effect or as the same may hereafter be amended. Any repeal or
modification of this ARTICLE NINE shall not adversely affect any right or
protection
6
<PAGE>
of a director or advisory director of the Corporation existing at the time of
such repeal or modification.
ARTICLE TEN
CONTROL SHARE ACQUISITIONS
The Corporation expressly elects to be governed by (S)(S) 17-1286 et seq.
of the Kansas General Corporation Code.
ARTICLE ELEVEN
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
The Corporation expressly elects to be governed by (S)(S) 17-12,100 et
seq. of the Kansas General Corporation Code.
ARTICLE TWELVE
AMENDMENT OF BYLAWS
The board of directors is hereby authorized to make, amend, alter or
repeal the bylaws of the Corporation, subject to the power of the stockholders
to make, amend, alter or repeal the bylaws of the Corporation. Notwithstanding
the foregoing or any other provisions of these Articles of Incorporation or of
the bylaws of the Corporation, the affirmative vote of at least sixty-six and
two-thirds percent (66 2/3%) of the then outstanding capital stock of the
Corporation, voting together as a single class, shall be required to amend or
repeal, or adopt any provisions inconsistent with, ARTICLE II, ARTICLE III and
ARTICLE VI of the bylaws of the Corporation.
ARTICLE THIRTEEN
AMENDMENT OF ARTICLES
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed herein and by the laws of the State of Kansas, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
7
<PAGE>
Notwithstanding the above provision or any other provisions of the Articles
of Incorporation or the bylaws of the Corporation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of the shares of the then outstanding voting stock of the Corporation,
voting together as a single class, shall be required to amend or repeal, or
adopt any provisions inconsistent with, ARTICLES FOUR, FIVE, SIX, SEVEN, EIGHT,
NINE, TEN, TWELVE, or this ARTICLE THIRTEEN of these Articles of Incorporation.
These Restated Articles of Incorporation were proposed by the board of directors
of the Corporation and adopted by the Corporation's stockholders in accordance
with the provisions of K.S.A. 17-6605 and K.S.A. 17-6602.
Dated August 22, 1996. GOLD BANCSHARES, INC.
By: /s/ Michael W. Gullion
---------------------------------
Michael W. Gullion
Chief Executive Officer
ATTEST:
/s/ Keith E. Bouchy
- --------------------------------------
, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF JOHNSON )
Subscribed and sworn to before me, this 22nd day of August, 1996.
Steven E. Rector
-----------------------------------------
Notary Public
My Commission Expires:
Oct. 1, 1996
<PAGE>
EXHIBIT 3(b)
AMENDED AND RESTATED BYLAWS
OF
GOLD BANC CORPORATION, INC.
A CORPORATION ORIGINALLY INCORPORATED IN THE
STATE OF KANSAS AS GOLD BANCSHARES, INC. ON DECEMBER 5, 1985
Effective as of August 27, 1996
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Kansas shall be located at 11301 Nall Avenue, Leawood, Johnson
County, Kansas 66211. The name of the corporation's registered agent at such
address shall be Michael W. Gullion. The registered office and/or registered
agent of the corporation may be changed from time to time by action of the board
of directors.
Section 2. Other Offices. The corporation may have additional offices at
such other places, both within and without the State of Kansas, as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. The annual meeting of the stockholders of the
corporation shall be held each year within one hundred and twenty (120) days
after the close of the immediately preceding fiscal year of the corporation for
the purpose of electing directors and conducting such other proper business as
may come before the meeting. The date, time and place of the annual meeting
shall be determined by the board of directors of the corporation.
Section 2. Special Meetings. Except as otherwise required by law and
subject to the right of holders of any preferred stock then oustanding, special
meetings of stockholders may be called at any time by the chief executive
officer of the corporation or by or at the direction of a majority
<PAGE>
of the board of directors, and shall be called by the chairman of the board, the
chief executive officer or the secretary upon the written request of the holders
of not less than fifty-five percent (55%) of all of the outstanding shares of
the corporation entitled to vote at the meeting. Such meetings may be called for
any proper purpose and may be held at such time and place as shall be stated in
a notice of the meeting or in a duly executed waiver thereof. The business
transacted at a special meeting of stockholders shall be limited to that stated
in the notice of such meeting or in a duly executed waiver thereof.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Kansas, as the place of meeting for
any annual meeting. The person or persons calling a special meeting may
designate any place, either within or without the State of Kansas, as the place
of meeting for such special meeting. If no designation is made, the place of the
annual or special meeting shall be the registered office of the corporation in
the State of Kansas.
Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date and
time of such meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given to each stockholder
entitled to vote at such meeting not less than ten (10) nor more than fifty (50)
days before the date of the meeting. All such notices shall be delivered, either
personally or by mail, by or at the direction of the board of directors, the
chief executive officer or the secretary. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, postage prepaid,
addressed to the stockholder at his, her or its address as the same appears on
the records of the corporation. Attendance of a stockholder at a meeting shall
constitute a waiver of notice of such meeting, except when the stockholder
attends for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened.
Section 5. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock of the corporation, present in person or represented by proxy at a
meeting of the stockholders and entitled to vote thereat, shall constitute a
quorum at such meeting, except as otherwise provided by statute or by the
articles of incorporation. If a quorum is not present, the holders of a majority
of the shares present in person or represented by proxy at the meeting and
entitled to vote thereat
-2-
<PAGE>
may adjourn the meeting to another time and/or place. When a quorum is once
present to commence a meeting of stockholders, it is not broken by the
subsequent withdrawal of any stockholders or their proxies.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
time and/or place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. The corporation may transact any business at the adjourned meeting which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
of a majority of shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the stockholders,
unless the question is one upon which, by express provisions of an applicable
law, the articles of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the Kansas
General Corporation Code or by the articles of incorporation, and subject to
Section 3 of Article VII hereof, every stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
capital stock having voting power held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after eleven (11)
months from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the stockholders,
and before any voting commences, all proxies filed at or before the meeting
shall be submitted to and examined by the secretary of the corporation or a
person designated by the secretary, and no shares may be represented or voted
under a proxy that has been found to be invalid or irregular.
Section 11. Proposed Business for Annual Meetings. Except as may
otherwise be required by applicable law or regulation or be expressly authorized
by the entire board of directors, a stockholder may make a nomination or
nominations for director of the corporation
-3-
<PAGE>
at an annual meeting of stockholders or may bring up any other matter for
consideration and action by the stockholders at an annual meeting of
stockholders, only if the provisions of subsections A, B, C and D hereto shall
have been satisfied. If such provisions shall not have been satisfied, any
nomination sought to be made or other business sought to be presented by a
stockholder for consideration and action by the stockholders at such a meeting
shall be deemed not properly brought before the meeting, shall be ruled by the
chairman of the meeting to be out of order, and shall not be presented or acted
upon at the meeting.
A. The stockholder must be a stockholder of record on the record date for
such annual meeting, must continue to be a stockholder of record at
the time of such meeting, and must be entitled to vote thereat.
B. The stockholder must deliver or cause to be delivered a written notice
to the secretary of the corporation. Such notice must be received by
the secretary no less than one hundred twenty (120) days prior to the
day corresponding to the date on which the corporation released its
proxy statement in connection with the previous year's annual meeting;
provided, however, that if the date of the annual meeting has been
changed by more than thirty (30) days from the date of the previous
year's annual meeting, such notice must be received by the secretary a
reasonable time prior to the time at which notice of such meeting is
delivered to the stockholders. The notice shall specify (a) the name
and address of the stockholder as they appear on the books of the
corporation, (b) the class and number of shares of the corporation
which are beneficially owned by the stockholder; (c) any material
interest of the stockholder in the proposed business described in the
notice; (d) if such business is a nomination for director, each
nomination sought to be made, together with the reasons for each
nomination, a description of the qualifications and business or
professional experience of each proposed nominee and a statement
signed by each nominee indicating his or her willingness to serve if
elected, and disclosing the information about him or her that is
required by the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the rules and regulations promulgated thereunder to be
disclosed in the proxy materials for the meeting involved if he or she
were a nominee of the corporation for election as one of its
directors; (e) if such business is other than a nomination for
director, the nature of the business, the reasons why it is sought to
be raised and submitted for a vote of the stockholders and if and why
it is deemed by the stockholder to be beneficial to the corporation,
and (f) if so requested by the corporation, all other information that
would be required to be filed with the Securities and Exchange
Commission if, with respect to the business proposed to be brought
before the meeting, the person proposing such business was a
participant in a solicitation subject to Section 14 of the 1934 Act.
C. Notwithstanding satisfaction of the provisions of subsection A and
subsection B, the proposed business described in the notice may be
deemed not to be properly brought before the meeting if, pursuant to
state law or to any rule or regulation of
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the Securities and Exchange Commission, it was offered as a
stockholder proposal and was omitted, or had it been so offered, it
could have been omitted, from the notice of, and proxy material for,
the meeting (or any supplement thereto) authorized by the board of
directors.
D. In the event such notice is timely given pursuant to subsection B and
the business described therein is not disqualified pursuant to
subsection C, such business may be presented by, and only by, the
stockholder who shall have given the notice required by subsection A
or a representative of such stockholder who is qualified under the law
of the State of Kansas to present the proposal on the stockholder's
behalf at the meeting.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. Upon the effective date
of these bylaws, the number of directors which shall constitute the board of
directors shall be five (5). Thereafter, the number of directors which shall
constitute the board of directors shall be established from time to time by, and
only by, resolution duly adopted by a majority of the directors then
constituting the entire board of directors. Any change in the number of
directors shall be reported to the Secretary of State of the State of Kansas
within thirty (30) calendar days after the adoption thereof. Except as otherwise
provided in the articles of incorporation or in Section 3 of this Article III, a
director shall be elected at an annual meeting of the stockholders by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote in the election of directors. A director's
term of office shall be as provided in the articles of incorporation. A director
shall hold office until the annual meeting for the year in which such director's
term expires and until a successor shall be duly elected and qualified, or until
such director's earlier death, resignation or removal as hereinafter provided.
Section 3. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled only by
the board of directors and in the manner provided in the articles of
incorporation. The term of office of a director so chosen shall be as provided
in the articles of incorporation. Each director so chosen shall hold office
until the annual meeting for the year in which such director's term expires and
until a successor shall be duly elected and qualified, or until such director's
earlier death, resignation or removal as hereinafter provided.
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Section 4. Removal and Resignation. Any director or the entire board of
directors may be removed at such time and in such manner as provided in the
articles of incorporation. Any director may resign at any time upon written
notice to the corporation.
Section 5. Regular Meetings. The annual meeting of each newly elected
board of directors shall be held without notice other than this bylaw
immediately after, and at the same place as, the annual meeting of stockholders.
Other regular meetings of the board of directors may be held without notice at
such time and at such place, either within or without the State of Kansas, as
shall from time to time be determined by resolution of the board of directors.
Section 6. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the chief executive officer or a majority
of the board of directors. The person or persons so calling such special meeting
shall designate the time and place for the holding of such meeting. The place so
designated may be any place in the United States, either within or without the
State of Kansas. Notice of any special meeting shall be given at least three (3)
days prior to the date fixed for such meeting by written notice delivered
personally, by mail, or by a nationally recognized overnight delivery service to
each director at his business address, or by telex or telecopy; provided,
however, that if the designated meeting place is without the State of Kansas, an
additional five (5) days' notice shall be given. If notice is given by mail,
such notice shall be deemed to be delivered three (3) days after such notice is
deposited with the United States mail properly addressed, postage prepaid. If
notice is given by overnight delivery service, such notice shall be deemed
delivered one (1) day after such notice is delivered during business hours to
such overnight delivery service properly addressed, postage prepaid. If notice
is given personally or by telex or telecopy, such notice shall be deemed to be
delivered when received. Neither the business to be transacted at nor the
purpose of any special meeting of the board of directors need be specified in
the notice or waiver of notice of such meeting. Any member of the board of
directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors then in office shall constitute a quorum for the transaction
of business at any meeting of the board of directors. Except as otherwise
provided by the articles of incorporation, the vote of a majority of directors
present at a meeting at which a quorum is present shall be the act of the board
of directors. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 8. Committees. The board of directors may, by resolution or
resolutions adopted by a majority of the whole board, designate an executive
committee, such committee to consist of three (3) or more directors of the
corporation. To the extent provided in said resolution or resolutions, such
executive committee shall have and may exercise all of the authority of the
board of directors in the management of the corporation. The board of directors
may, by resolution or
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resolutions adopted by a majority of the whole board, designate an audit
committee, a compensation committee, and a nominating committee, each such
committee to consist of one (1) or more directors of the corporation. The audit
committee shall have responsibility for working with the accounting firm
retained by the corporation to review the annual financial statements of the
corporation and related management letters and for periodic review with the
chief financial officer of the corporation of the financial performance of the
corporation. The compensation committee shall be responsible for at least annual
review of the compensation for the senior executive officers of the corporation.
The nominating committee shall annually nominate persons as candidates to fill
vacancies on the board of directors.
In addition to the committees specifically provided for in these bylaws,
the board of directors of the corporation, by resolution or resolutions adopted
by a majority of the whole board of directors, may designate any other
committees, each such committee to consist of one (1) or more of the directors
of the corporation. To the extent provided in such resolution or resolutions,
each such committee shall have and may exercise all of the authority of the
board of directors in the management of the corporation.
The designation of any such committee and the delegation thereto of
authority shall not operate to relieve the board of directors, or any member
thereof, of any responsibility imposed upon the board or any director by law.
The board of directors shall elect the members of any such committee, which
members shall serve at the pleasure of the board. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of such committee.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, a majority of the members of the committee shall constitute a
quorum. In the event that a member and that member's alternate, if alternates
are designated by the board of directors as provided in Section 8 of this
Article III, of such committee is or are absent or disqualified, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in place of any
such absent or disqualified member.
Each committee shall keep regular minutes of its proceedings, which minutes
shall be recorded in the minute book of the corporation. The secretary or an
assistant secretary of the corporation may act as secretary for any committee if
the committee so requests.
Section 10. Communications Equipment. Members of the board of directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all
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persons participating in the meeting can hear each other, and participation in
the meeting pursuant to this section shall constitute presence in person at the
meeting.
Section 11. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to such action unless his or
her dissent shall be entered in the minutes of the meeting or unless such
director shall file his or her written dissent to such action with the person
acting as the secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered or certified mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
articles of incorporation, any action required or permitted to be taken at any
meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing. Such written consents shall be filed with the
minutes of proceedings of the board or committee.
Section 13. Compensation. Directors as such shall not receive any stated
salaries for their services, but a fixed sum may be allowed for attendance at
each regular or special meeting of the board of directors; provided, however,
that such fixed sum shall not be paid to directors who are also employees of the
corporation. The amount of such fixed sum shall be seven hundred and fifty
dollars ($750.00), which amount may be increased or decreased from time to time
by resolution adopted by a majority of the board of directors. The corporation
shall reimburse to all directors and advisory directors the expenses of
attendance at each regular or special meeting of the board of directors or of
any committee thereof. Nothing herein contained shall be construed to preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
ADVISORY BOARD
The board of directors of the corporation may appoint individuals to serve
as members of an advisory board of directors. Such advisory directors shall
attend all meetings of the board of directors and shall serve in the same
capacity as the board of directors, except that such members shall be without
the power to vote.
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ARTICLE V
OFFICERS
Section 1. Number. The officers of the corporation shall be elected
by the board of directors and shall consist of a chairman of the board, a chief
executive officer, one or more vice-presidents (the number thereof to be
determined by the board), a secretary, a chief financial officer, and such other
officers and assistant officers as may be deemed necessary or desirable by the
board of directors. Any number of offices may be held by the same person except
that neither the chairman of the board nor the chief executive officer shall
also hold the office of secretary. In its discretion, the board of directors may
choose not to fill any office for any period as it may deem advisable, except
that the offices of chief executive officer and secretary shall be filled as
expeditiously as possible.
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the board of directors at its first
meeting held after each annual meeting of stockholders or as soon thereafter as
conveniently may be. Vacancies may be filled or new offices created and filled
at any meeting of the board of directors. Each officer shall hold office until a
successor is duly elected and qualified or until such officer's earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term.
Section 5. Compensation. Compensation of all officers shall be fixed
by the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his her or her also being a director of the
corporation.
Section 6. The Chairman of the Board. The chairman of the board
shall preside at all meetings of the stockholders and of the board of directors
at which he or she is present. The chairman of the board may execute any deeds,
mortgages, bonds, contracts and other instruments that the board of directors
have authorized to be executed, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly reserved by the board of directors or by these bylaws to some
other officer or agent of the corporation. The chairman of the board shall have
such other powers and perform such other duties as the board of directors or
these bylaws may from time to time prescribe.
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Section 7. The Chief Executive Officer. The chief executive officer
shall, subject to the powers of the board of directors, supervise and control
the business, affairs and property of the corporation and have general charge
over its officers, agents and employees. The chief executive officer shall, in
the absence of the chairman of the board, preside at all meetings of the
stockholders and of the board of directors at which he or she is present and
shall see that all orders and resolutions of the board of directors are carried
into effect. The chief executive officer may sign, with the secretary or an
assistant secretary, certificates for shares of the corporation. The chief
executive officer may execute any deeds, mortgages, bonds, contracts and other
instruments that the board of directors have authorized to be executed, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly reserved by
the board of directors or by these bylaws to some other officer or agent of the
corporation. The chief executive officer shall have such other powers and
perform such other duties as the board of directors or these bylaws may from
time to time prescribe.
Section 8. Vice-presidents. In the absence or disability of the
chief executive officer, the vice-president, or if there shall be more than one,
the vice-presidents in the order determined by the board of directors, shall
perform the duties of the chief executive officer, and when so acting shall have
all the powers of and be subject to all the restrictions upon the chief
executive officer. Any vice-president may sign, with the secretary or an
assistant secretary, certificates for shares of the corporation. The vice-
presidents shall perform such other duties and have such other powers as the
board of directors, the chief executive officer or these bylaws may from time to
time prescribe.
Section 9. The Secretary and Assistant Secretaries. The secretary
shall keep the minutes of the meetings of the stockholders and of the meetings
of the board of directors in one or more books provided for that purpose; shall
give, or cause to be given, all notices required to be given by these bylaws or
by law; shall have custody of the corporate seal of the corporation; shall keep
a register of the addresses of the stockholders furnished to the secretary by
such stockholders; shall have general charge of the stock transfer books of the
corporation; and shall have such other powers and perform such other duties as
the board of directors, the chief executive officer or these bylaws may from
time to time prescribe. The secretary or any assistant secretary shall sign,
with the chief executive officer or any vice-president, certificates for shares
of the corporation. The secretary, or any assistant secretary, may affix the
corporate seal to any instrument requiring it, and when so affixed, it may be
attested by his or her signature. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his or her signature. The assistant secretary, or if
there be more than one, the assistant secretaries in the order determined by the
board of directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary, and shall have such
other powers and perform such other duties as the board of directors, the chief
executive officer, the secretary or these bylaws may from time to time
prescribe.
Section 10. The Chief Financial Officer and Assistant Financial
Officers. The chief financial officer shall have charge and custody of the
corporate funds and securities; shall keep
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full and accurate accounts of receipts and disbursements in books belonging to
the corporation; shall deposit all monies and other valuable effects in the name
and to the credit of the corporation as may be ordered by the board of
directors; shall cause the funds of the corporation to be disbursed when such
disbursements have been duly authorized, taking proper vouchers for such
disbursements; shall render to the chief executive officer and the board of
directors, at its regular meeting or when the board of directors so requires, an
account of the corporation; and shall have such other powers and perform such
other duties as the board of directors, the chief executive officer or these
bylaws may from time to time prescribe. If required by the board of directors,
the chief financial officer and any assistant financial officer shall give the
corporation a bond in such sums and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of the office of chief financial officer or assistant financial officer,
as the case may be, and for the restoration to the corporation, in case of
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in the possession or under
the control of the chief financial officer or assistant financial officer, as
the case may be, belonging to the corporation. The assistant financial officer,
or if there shall be more than one, the assistant financial officers in the
order determined by the board of directors, shall, in the absence or disability
of the chief financial officer, perform the duties and exercise the powers of
the chief financial officer, and shall perform such other duties and have such
other powers as the board of directors, the chief executive officer, the chief
financial officer or these bylaws may from time to time prescribe.
Section 11. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 12. Absence or Disability of Officers. In the case of the
absence or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer, to any director, or to any other
person whom it may select.
ARTICLE VI
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Nature of Indemnity. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director, advisory
director or officer of the corporation, or is or was serving at the request of
the corporation as a director, advisory director, officer, employee, fiduciary
or agent of another corporation or of a partnership, joint venture, trust or
other enterprise, shall be indemnified and held harmless by the corporation
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to the fullest extent which it is empowered to do so by the Kansas General
Corporation Code, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment) against all expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such proceeding, including attorneys' fees,
and such indemnification shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
Section 2 hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the board of directors of the corporation. The
right to indemnification conferred in this Article VI shall be a contract right
and, subject to Sections 2 and 5 hereof, shall include the right to be paid by
the corporation the expenses incurred in defending any such proceeding in
advance of its final disposition.
Section 2. Procedure for Indemnification of Directors, Advisory
Directors and Officers. Any indemnification of a director, advisory director or
officer of the corporation under Section 1 of this Article VI or advance of
expenses under Section 5 of this Article VI shall be made promptly, and in any
event within thirty (30) days, upon the written request of the director,
advisory director or officer. If a determination by the corporation that the
director, advisory director or officer is entitled to indemnification pursuant
to this Article VI is required, and the corporation fails to respond within
sixty (60) days to a written request for indemnity, the corporation shall be
deemed to have approved the request. If the corporation denies a written request
for indemnification or advancing of expenses, in whole or in part, or if payment
in full pursuant to such request is not made within thirty (30) days, the right
to indemnification or advances as granted by this Article VI shall be
enforceable by the director, advisory director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to the
corporation) that the claimant has not met the standards of conduct which make
it permissible under the Kansas General Corporation Code for the corporation to
indemnify the claimant for the amount claimed, but the burden of such defense
shall be on the corporation. Neither the failure of the corporation (including
its board of directors, independent legal counsel or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the Kansas General
Corporation Code, nor an actual determination by the corporation (including its
board of directors, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this
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Article VI shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision or the articles of
incorporation, bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.
Section 4. Insurance. The corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, advisory director, officer, employee, fiduciary, or agent of the
corporation or was serving at the request of the corporation as a director,
advisory director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity,
whether or not the corporation would have the power to indemnify such person
against such liability under this Article VI.
Section 5. Expenses. Unless otherwise determined by the board of
directors in the specific case, expenses (including attorneys' fees) incurred by
any person described in Section 1 of this Article VI in defending a proceeding
shall be paid by the corporation in advance of such proceeding's final
disposition upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the corporation. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article VI and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article VI shall
be deemed to be a contract right between the corporation and each director,
advisory director or officer who serves in any such capacity at any time while
this Article VI and the relevant provisions of the Kansas General Corporation
Code or other applicable law are in effect, and any repeal or modification of
this Article VI or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article VI,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, advisory directors, officers, and employees or agents, so that any
person who is a director, advisory director, officer, employee or agent of such
constituent corporation or is or was serving at the request of such constituent
corporation as a director, advisory director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this Article VI with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
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ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate signed by, or in the name of, the corporation by
the chief executive officer or a vice-president of the corporation and by the
secretary or an assistant secretary of the corporation, certifying the number of
shares of the corporation owned by such holder. If such a certificate is
countersigned (1) by a transfer agent or an assistant transfer agent other than
the corporation or its employee or (2) by a registrar other than the corporation
or its employee, the signature of any such chief executive officer, vice-
president, secretary or assistant secretary may be facsimiles. In case any
officer or officers who have signed, or whose facsimile signature or signatures
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the corporation, whether because of death, resignation or
otherwise, before such certificate or certificates have been delivered by the
corporation, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the books of the
corporation. Shares of stock of the corporation shall be transferred on the
books of the corporation only by the holder of record thereof or by such
holder's attorney duly authorized in writing, upon surrender to the corporation
of the certificate or certificates for such shares endorsed by the appropriate
person or persons, with such evidence of the authenticity of such endorsement,
transfer, authorization and other matters as the corporation may reasonably
require, and accompanied by all necessary stock transfer stamps. In that event,
it shall be the duty of the corporation to issue a new certificate or
certificates and record the transaction on its books. The board of directors may
appoint a bank or trust company organized under the laws of the United States or
any state thereof to act as its transfer agent or registrar, or both, in
connection with the transfer of any class or series of securities of the
corporation.
Section 2. Lost Certificates. The board of directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of the fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
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Section 3. Fixing a Record Date for Stockholder Meetings. In order
that the corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by the
board of directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of the stockholders shall be the close of
business on the next day preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
Section 4. Fixing a Record Date for Other Purposes. In order that
the corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment or any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purposes of any other lawful action,
the board of directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty (60) days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
board of directors adopts the resolution relating thereto.
Section 5. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation may be declared by the board of directors at any regular or special
meeting, subject to and in the manner provided by law, applicable provisions of
the articles of incorporation, if any, and the terms of the preferred stock then
outstanding, if any. Dividends may be paid in cash, in property, or in shares of
the capital stock. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, to equalize dividends, to repair or
maintain any property of the corporation, or to accomplish any
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other purpose, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts or other
orders for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall from time to time be determined by resolution of the board of
directors or a duly authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any
officer or officers, or any agent or agents, of the corporation to enter into
any contract or to execute and deliver any instrument in the name of and on
behalf of the corporation, and such authority may be general or confined to
specific instances.
Section 4. Fiscal Year. The fiscal year of the corporation shall
begin on January 1 of each year and end on December 31 of each year unless
otherwise fixed by resolution of the board of directors.
Section 5. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Kansas". The
seal may be used by causing it or a facsimile thereof to be impressed, affixed
or otherwise reproduced.
Section 6. Voting Securities Owned by Corporation. Voting securities
in any other corporation held by the corporation shall be voted by the chief
executive officer, unless the board of directors specifically confers authority
to vote with respect thereto, which authority may be general or confined to
specific instances, upon some other person or officer. Any person authorized to
vote securities shall have the power to appoint proxies, with general power of
substitution.
Section 7. Inspection of Books and Records. Subject to reasonable
restrictions and conditions as may be determined from time to time by the board
of directors or the officers of the corporation, any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered
office in the State of Kansas or at its principal place of business.
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Section 8. Section Headings. Section headings in these bylaws are
for convenience of reference only and shall not be given any substantive effect
in limiting or otherwise construing any provision herein.
Section 9. Inconsistent Provisions. In the event that any provision
of these bylaws is or becomes inconsistent with any provision of the articles of
incorporation, the Kansas General Corporation Code or any other applicable law,
the provision of these bylaws shall not be given any effect to the extent of
such inconsistency but shall otherwise be given full force and effect.
ARTICLE IX
AMENDMENTS
These bylaws may be amended, altered, or repealed and new bylaws
adopted in the manner provided in the articles of incorporation.
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<PAGE>
EXHIBIT 5
September 19, 1996
Gold Banc Corporation, Inc.
11301 Nall Avenue
Leawood, KS 66211
Ladies and Gentlemen:
We refer to the Registration Statement of Gold Banc Corporation, Inc.
(the "Company") on Form SB-2 (the "Registration Statement") to be filed with
the Securities and Exchange Commission for the purpose of registering under
the Securities Act of 1933, as amended, 2,300,000 shares of the Company's
Common Stock, par value $1.00 per share (the "Common Stock"), to be sold by
the Company.
We are familiar with the proceedings to date with respect to such
proposed sale and have examined such records, documents and matters of law and
satisfied ourselves as to such matters of fact as we have considered relevant
for the purposes of this opinion.
We are of the opinion that when such 2,300,000 shares of Common Stock
have been issued and sold by the Company as contemplated by the Registration
Statement they will constitute legally issued, fully paid and nonassessable
shares of the Company.
We hereby consent to the reference to us under the heading "LEGAL
MATTERS" in the prospectus constituting a part of the Registration Statement
and to the filing of this opinion as Exhibit 5 to the Registration Statement.
Very truly yours,
/s/ Blackwell Sanders Matheny Weary & Lombardi
L.C.
<PAGE>
EXHIBIT 10(a)
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT made and entered into as of the 19th day of September,
1996 by and between Gold Banc Corporation, Inc., a Kansas corporation (the
"Company"), and Michael W. Gullion (the "Executive");
WHEREAS, the Executive is currently serving as Chairman, President and
Chief Executive Officer of the Company and the Company desires to secure the
continued employment of the Executive in accordance herewith;
WHEREAS, the Executive is willing to commit himself to be employed by the
Company on the terms and conditions herein set forth and thus to forego
opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement, as of the
Effective Date (as hereinafter defined) setting forth the terms and conditions
for the employment relationship of the Executive with the Company during the
Employment Period (as hereinafter defined).
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
(a) Employment. The Company agrees to employ the Executive, and the
Executive agrees to be employed by the Company, in accordance with the terms and
provisions of this Agreement during the term hereof (as described below).
(b) Term and Extension. The term of this Agreement shall commence as of
the closing date of the initial public offering of the stock of the Company (the
"Effective Date") and shall continue until the third anniversary of the
Effective Date (such term being referred to hereinafter as the "Employment
Period"). The Employment Period shall automatically be extended for one year on
each anniversary of the Effective Date unless either party gives the other
written notice of its intention not to extend the Employment Period at least 10
days prior to such automatic extension, in which case no further extensions will
occur.
2. Duties and Powers of Executive.
(a) Position; Location. During the Employment Period, the Executive
shall serve as Chief Executive Officer with such authority, duties and
responsibilities with respect to such position as set forth on Annex A attached
hereto and also as President of the Company with such authority, duties and
responsibilities with respect to such position as set forth in the Bylaws of the
Company as in effect on the Effective Date. The titles, authority, duties and
responsibilities
<PAGE>
set forth in Annex A attached hereto may be changed from time to time but only
with the mutual written agreement of the Executive and the Company. The
Executive's services shall be performed primarily at the Company's headquarters
which shall be located in the Kansas City metropolitan area.
(b) Board Membership. The Executive shall be a member of the Board
on the first day of the Employment Period, and the Board shall propose the
Executive for re-election to the Board throughout the Employment Period.
(c) Attention. During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive shall devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive under this Agreement,
use the Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
3. Compensation. The Executive shall receive the following compensation
for his services hereunder to the Company:
(a) Salary. During the Employment Period, the Executive's annual base
salary (the "Annual Base Salary"), payable in accordance with the Company's
general payroll practices, in effect from time to time, shall be at the annual
rate established by the Board, but in no event less than his annual base salary
with the Company as in effect as of the day before the Effective Date. The Board
may from time to time direct such upward adjustments in Annual Base Salary as
the Board deems to be necessary or desirable, including, without limitation,
adjustments in order to reflect increases in the cost of living. The Annual Base
Salary shall not be reduced after any increase thereof. Any increase in the
Annual Base Salary shall not serve to limit or reduce any other obligation of
the Company under this Agreement.
(b) Incentive Compensation. During the Employment Period, the
Executive shall participate in short-term incentive compensation plans and long-
term incentive compensation plans (the latter to consist of plans offering stock
options, restricted stock and other long-term incentive compensation) providing
him with the opportunity to earn, on a year-by-year basis, short-term and long-
term incentive compensation (the "Incentive Compensation") at least equal to the
amounts that he had the opportunity to earn immediately before the Effective
Date.
(c) Retirement, Incentive and Welfare Benefit Plans. During the
Employment Period and so long as the Executive is employed by the Company, he
shall be eligible to participate in all other incentive, stock option,
restricted stock, performance unit, savings, retirement and welfare plans,
practices, policies and programs applicable generally to employees
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<PAGE>
and/or executive officers of the Company and its subsidiaries, except with
respect to any benefits under any plan, practice, policy or program to which the
Executive has waived his rights in writing.
(d) Expenses. The Company shall reimburse the Executive for all
expenses, including those for travel and entertainment, properly incurred by him
in the performance of his duties hereunder in accordance with policies
established from time to time by the Board.
(e) Fringe Benefits. During the Employment Period and so long as the
Executive is employed by the Company, he shall be entitled to receive fringe
benefits in accordance with the plans, practices, programs and policies of the
Company from time to time in effect, commensurate with his position and at least
the same as to those received by any executive officer of the Company.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's Death or Disability during the Employment
Period. For purposes of this Agreement, "Disability" shall mean a permanent and
total disability within the meaning of Section 22(e)(3) of the Internal Revenue
Code of 1986, as amended (the "Code").
(b) By the Company for Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For purposes of
this Agreement, "Cause" shall mean: (i) the refusal by the Executive to carry
out the reasonable and lawful directions of the Board of Directors of the
Company, (ii) if the Executive shall defraud the Company, embezzle funds of the
Company, or engage in proven fraud, dishonesty, or conduct that would, if
proven, result in conviction of a felony or (iii) engage in wilful misconduct in
connection with the fulfillment of the Executive's duties and responsibilities
hereunder.
(c) By the Company without Cause. Notwithstanding any other
provision of this Agreement, the Company may terminate the Executive's
employment other than by a termination for Cause during the Employment Period,
but only upon the affirmative vote of two-thirds of the membership of the Board.
(d) By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the reduction in the Executive's Annual Base Salary as
specified in Section 3(a) of this Agreement, the Executive's Incentive
Compensation benefit as specified in Section 3(b) of this Agreement, or
any other benefit or payment described in Section 3 of this Agreement;
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(ii) the change without the Executive's consent of the Executive's
title, authority, duties or responsibilities as specified in Section
2(a) of this Agreement;
(iii) the Company's requiring the Executive without his consent
to be based at any office or location other than the Company's
headquarters which shall be located in the Kansas City metropolitan
area; or
(iv) any breach by the Company of any other material provision of
this Agreement.
(e) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 10(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which indicates the specific termination provision in this
Agreement relied upon, to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and if the Date of
Termination (as defined in Section 4(f)) is other than the date of receipt of
such notice, specifies the termination date (which date shall not be more than
30 days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(f) Date of Termination. "Date of Termination" means if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, if the Executive's
employment is terminated by the Company other than for Cause, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and if the Executive's employment is terminated by reason of
death, the Date of Termination shall be the date of death.
5. Obligations of the Company Upon Termination.
(a) Termination Other Than for Cause/Change of Control of Benefits.
(i) Compensation. If (a) the Executive's employment with the
Company is terminated by the Company for any reason other than for
Cause or the Executive's death, or (b) the Executive shall terminate
his employment for Good Reason, or (c) a Change of Control (as
hereinafter defined) occurs during the Employment Period (whether or
not Executive remains employed by the Company after the Change of
Control is consummated), then the Company shall pay to the Executive in
a lump sum, in cash, on the fifth business day following the Date of
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<PAGE>
Termination or the consummation of the Change of Control, an amount
equal to three times the present value of the Executive's Annual Base
Salary and Incentive Compensation in effect immediately prior to that
time and, with respect to the Incentive Compensation, assuming full
achievement of all target performance goals; provided, that if, after
giving effect to this Agreement, any portion of any payments to the
Executive by the Company hereunder and pursuant to any other present or
future plan, program or agreement of the Company and any of its
subsidiaries would not be deductible by the Company for Federal income
tax purposes by reason of application of Section 162(m) of the Code,
then payment of that portion to the Executive shall be deferred until
the earliest date upon which payment thereof can be made to the
Executive without being nondeductible pursuant to Section 162(m) of the
Code and such deferred payment shall include interest on the amount
deferred at the Federal short-term rate prescribed pursuant to Section
1274(d)(1)(C)(i) of the Code, compounded semi-annually; and provided
further, that if the payment hereunder, either alone or together with
other payments which the Executive has the right to receive from the
Company, would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Code), such payment shall be reduced to the largest
amount that the Executive may receive without imposition of the excise
tax imposed by Section 4999 of the Code.
(ii) Change of Control. A "Change of Control" shall be deemed to
have occurred at any of the following times:
(1) At the time individuals who, as of the Effective Date,
constitute the Board (as of the date hereof, the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a
majority of the directors then compromising the Incumbent Board
(other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) shall be, for purposes of
this subsection 5(a)(ii)(1), considered as though such person were
a member of the Incumbent Board; or
(2) Upon the acquisition by any person, entity or "group"
within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (excluding, for this purpose, the Company or its affiliates,
the Executive, Keith E. Bouchey, any employee benefit plan of the
Company or its affiliates and any person pursuant to an agreement
to which any of the
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<PAGE>
foregoing is a party) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 25% or more
of either the then outstanding shares of common stock of the
Company or the Combined Voting Power of the Company's then
outstanding voting securities if such person, entity or group
becomes the largest shareholder of the Company. "Combined Voting
Power" means the combined voting power of the Company's then
outstanding voting securities generally entitled to vote in the
election of directors; or
(3) Upon the approval by the shareholders of the Company of
a reorganization, merger, consolidation (in each case, with
respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger or consolidation
do not, immediately thereafter, own more than 50% of the Combined
Voting Power of the reorganized, merged or consolidated company's
then outstanding voting securities) or a liquidation or
dissolution of the Company or of the sale of all or substantially
all of the assets of the Company; or
(4) The occurrence of any other event which the Incumbent
Board in its sole discretion determines constitutes a Change of
Control.
(iii) Continued Employment after Change of Control. If the
Executive is requested to remain as an employee of the Company as a
condition imposed by the buying or selling shareholders in connection
with a Change of Control, the Executive agrees to remain employed by
the Company for up to one year after such Change of Control at an
annual base salary in an amount no less than the Executive's Annual
Base Salary in effect immediately prior to the consummation of the
Change of Control in addition to the other benefits provided in this
Agreement in connection with a Change of Control.
(iv) Offset for Other Arrangements. The benefits provided
hereunder will be reduced by the amount of any severance benefits to
which Executive is entitled under the Company's severance benefits
policy for terminated employees, if any, or any other agreement between
the Executive and the Company for severance benefits.
(b) Termination by Reason of Death or Disability. During the
Employment Period, if the Executive's employment shall terminate by reason of
Death or Disability, the Company shall pay to the Executive a lump sum amount in
cash equal to the sum of (A) the Executive's Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (B) an amount equal to the
Incentive Compensation benefit described in Section 3(b) of this Agreement for
the fiscal year that includes the Date of Termination multiplied by a fraction
the numerator of which shall be the number of days from the beginning of such
fiscal year to and
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<PAGE>
including the Date of Termination and the denominator of which shall be 365, and
(C) any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in each case
to the extent not theretofore paid. The amounts specified in this Section
5(a)(i) shall be paid within 30 days after the Date of Termination.
(c) Termination by the Company for Cause or by the Executive Other than
for Good Reason. Subject to the provisions of Section 6 of this Agreement, if
the Executive's employment shall be terminated for Cause during the Employment
Period, or if the Executive terminates employment during the Employment Period
other than a termination for Good Reason, the Company shall have no further
obligations to the Executive under this Agreement other than the obligation to
pay to the Executive the Annual Base Salary through the Date of Termination plus
the amount of any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon), in each case to the extent
theretofore unpaid.
6. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, plan,
program, policy or practice provided by the Company and for which the Executive
may qualify (except with respect to any benefit to which the Executive has
waived his rights in writing), nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement entered into after the Effective Date with the Company. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any benefit, plan, policy, practice or program of, or any contract or
agreement entered into with, the Company shall be payable in accordance with
such benefit, plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.
7. Full Settlement; Mitigation. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts
(including amounts for damages for breach) payable to the Executive under any of
the provisions of this Agreement and, except as provided in Section 5, such
amounts shall not be reduced whether or not the Executive obtains other
employment.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret, confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and that shall not have been or now or hereafter have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). During the Employment Period, the
Executive shall not, without the prior written consent of the Company or as may
otherwise be required by law or legal process,
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<PAGE>
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it.
9. Successors.
(a) Assignment by Executive. This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) Successors and Assigns of Company. This Agreement shall inure to
the benefit of and be binding upon the Company, its successors and assigns.
(c) Assumption. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its businesses
and/or assets as aforesaid that assumes and agrees to perform this
Agreement by operation of law, or otherwise.
10. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Kansas, without reference to its
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or the appropriate
committee thereof, shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto.
(b) Notices. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return-receipt requested, postage prepaid,
addressed, in either case, at the Company's headquarters or to such other
address as either party shall have furnished to the other in writing in
accordance herewith. Notice and communications shall be effective when actually
received by the addressee.
(c) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
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<PAGE>
(d) Taxes. The Company may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) No Waiver. The Executive's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(d) of this Agreement,
or the right of the Company to terminate the Executive's employment for Cause
pursuant to Section 4(b) of this Agreement shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.
(f) Entire Agreement. This instrument contains the entire agreement
of the Executive and the Company with respect to the subject matter hereof, and
all promises, representations, understandings, arrangements and prior agreements
are merged herein and superseded hereby.
IN WITNESS WHEREOF, the Executive and, pursuant to due authorization from
its Board of Directors, the Company have caused this Agreement to be executed as
of the day and year first above written.
Gold Banc Corporation, Inc.
/s/ Keith E. Bouchey
--------------------------------------------
Name: Keith E. Bouchey
Title: Executive Vice President, Chief Financial
Officer, Treasurer and Secretary
/s/ Michael W. Gullion
--------------------------------------------
Michael W. Gullion
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<PAGE>
ANNEX A
TO EMPLOYMENT
AGREEMENT
CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall be responsible for (a) the strategic
direction, development and oversight of the Company, (b) the growth of the
Company and (c) the deployment of strategic assets of the Company. The Chief
Executive Officer shall have responsibility for external relations with the
financial community and corporate governance. The Chief Financial Officer will
report directly to the Chief Executive Officer. The Chief Executive Officer
shall submit a report of the operations of the Company for the fiscal year to
the shareholders at their annual meeting and from time-to-time shall report to
the Board of Directors all matters within his knowledge which the interests of
the Company may require be brought to their notice. So long as the Chief
Executive Officer is a member of the Board of Directors, he shall be the
Chairman of the Board of Directors.
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EXHIBIT 10(b)
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT made and entered into as of the 19th day of September,
1996, by and between Gold Banc Corporation, Inc., a Kansas corporation (the
"Company"), and Keith E. Bouchey (the "Executive");
WHEREAS, the Executive is currently serving as Chief Financial Officer,
Secretary, Treasurer and Executive Vice President of the Company and the Company
desires to secure the continued employment of the Executive in accordance
herewith;
WHEREAS, the Executive is willing to commit himself to be employed by the
Company on the terms and conditions herein set forth and thus to forego
opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement, as of the
Effective Date (as hereinafter defined) setting forth the terms and conditions
for the employment relationship of the Executive with the Company during the
Employment Period (as hereinafter defined).
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
(a) Employment. The Company agrees to employ the Executive, and the
Executive agrees to be employed by the Company, in accordance with the terms and
provisions of this Agreement during the term hereof (as described below).
(b) Term and Extension. The term of this Agreement shall commence as
of the closing date of the initial public offering of the stock of the Company
(the "Effective Date") and shall continue until the third anniversary of the
Effective Date (such term being referred to hereinafter as the "Employment
Period"). The Employment Period shall automatically be extended for one year on
each anniversary of the Effective Date unless either party gives the other
written notice of its intention not to extend the Employment Period at least 10
days prior to such automatic extension, in which case no further extensions will
occur.
2. Duties and Powers of Executive.
(a) Position; Location. During the Employment Period, the Executive
shall serve as Chief Financial Officer with such authority, duties and
responsibilities with respect to such position as set forth on Annex A attached
hereto, and as the Secretary and Treasurer and Executive Vice President of the
Company with such authority, duties and responsibilities with respect to such
positions as set forth in the Bylaws of the Company as in effect on the
Effective
<PAGE>
Date. The titles, authority, duties and responsibilities set forth in Annex A
attached hereto may be changed from time to time but only with the mutual
written agreement of the Executive and the Company. The Executive's services
shall be performed primarily at the Company's headquarters which shall be
located in the Kansas City metropolitan area.
(b) Board Membership. The Executive shall be a member of the
Board on the first day of the Employment Period, and the Board shall propose the
Executive for re-election to the Board throughout the Employment Period.
(c) Attention. During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive shall devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive under this Agreement,
use the Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. Nor shall it be considered a
violation of the foregoing for the Executive to serve as a director or employee
of Holyrood Bancshares, Inc. ("Holyrood") so long as Holyrood does not engage in
branching or acquisition activities.
3. Compensation. The Executive shall receive the following
compensation for his services hereunder to the Company:
(a) Salary. During the Employment Period, the Executive's annual
base salary (the "Annual Base Salary"), payable in accordance with the Company's
general payroll practices, in effect from time to time, shall be at the annual
rate established by the Board, but in no event less than his annual base salary
with the Company as in effect as of the day before the Effective Date. The Board
may from time to time direct such upward adjustments in Annual Base Salary as
the Board deems to be necessary or desirable, including, without limitation,
adjustments in order to reflect increases in the cost of living. The Annual Base
Salary shall not be reduced after any increase thereof. Any increase in the
Annual Base Salary shall not serve to limit or reduce any other obligation of
the Company under this Agreement.
(b) Incentive Compensation. During the Employment Period, the
Executive shall participate in short-term incentive compensation plans and
long-term incentive compensation plans (the latter to consist of plans offering
stock options, restricted stock and other long-term incentive compensation)
providing him with the opportunity to earn, on a year-by-year basis, short-term
and long-term incentive compensation (the "Incentive Compensation") at least
equal to the amounts that he had the opportunity to earn immediately before the
Effective Date.
(c) Retirement, Incentive and Welfare Benefit Plans. During the
Employment Period and so long as the Executive is employed by the Company, he
shall be eligible to
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participate in all other incentive, stock option, restricted stock, performance
unit, savings, retirement and welfare plans, practices, policies and programs
applicable generally to employees and/or executive officers of the Company and
its subsidiaries, except with respect to any benefits under any plan, practice,
policy or program to which the Executive has waived his rights in writing.
(d) Expenses. The Company shall reimburse the Executive for all
expenses, including those for travel and entertainment, properly incurred by him
in the performance of his duties hereunder in accordance with policies
established from time to time by the Board.
(e) Fringe Benefits. During the Employment Period and so long
as the Executive is employed by the Company, he shall be entitled to receive
fringe benefits in accordance with the plans, practices, programs and policies
of the Company from time to time in effect and commensurate with his position.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's Death or Disability during the
Employment Period. For purposes of this Agreement, "Disability" shall mean a
permanent and total disability within the meaning of Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code").
(b) By the Company for Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For purposes of
this Agreement, "Cause" shall mean: (i) the refusal by the Executive to carry
out the reasonable and lawful directions of the Board of Directors of the
Company, (ii) if the Executive shall defraud the Company, embezzle funds of the
Company, or engage in proven fraud, dishonesty, or conduct that would, if
proven, result in conviction of a felony or (iii) engage in wilful misconduct in
connection with the fulfillment of the Executive's duties and responsibilities
hereunder.
(c) By the Company without Cause. Notwithstanding any other
provision of this Agreement, the Company may terminate the Executive's
employment other than by a termination for Cause during the Employment Period,
but only upon the affirmative vote of two-thirds of the membership of the Board.
(d) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:
(i) the reduction in the Executive's Annual Base Salary as
specified in Section 3(a) of this Agreement, the Executive's
Incentive Compensation benefit as specified in Section 3(b) of
this Agreement, or any other benefit or payment described in
Section 3 of this Agreement;
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(ii) the change without the Executive's consent of the
Executive's title, authority, duties or responsibilities as specified
in Section 2(a) of this Agreement;
(iii) the Company's requiring the Executive without his consent
to be based at any office or location other than the Company's
headquarters which shall be located in the Kansas City metropolitan
area; or
(iv) any breach by the Company of any other material provision
of this Agreement.
(e) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 10(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which indicates the specific termination provision in this
Agreement relied upon, to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and if the Date of
Termination (as defined in Section 4(f)) is other than the date of receipt of
such notice, specifies the termination date (which date shall not be more than
30 days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(f) Date of Termination. "Date of Termination" means if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, if the Executive's
employment is terminated by the Company other than for Cause, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and if the Executive's employment is terminated by reason of
death, the Date of Termination shall be the date of death.
5. Obligations of the Company Upon Termination.
(a) Termination Other Than for Cause/Change of Control of Benefits.
(i) Compensation. If (a) the Executive's employment with the
Company is terminated by the Company for any reason other than for
Cause or the Executive's death, or (b) the Executive shall terminate
his employment for Good Reason, or (c) a Change of Control (as
hereinafter defined) occurs during the Employment Period (whether or
not Executive remains employed by the Company after the Change of
Control is consummated), then the Company shall pay to the
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Executive in a lump sum, in cash, on the fifth business day following
the Date of Termination or the consummation of the Change of Control,
an amount equal to three times the present value of the Executive's
Annual Base Salary and Incentive Compensation in effect immediately
prior to that time and, with respect to the Incentive Compensation,
assuming full achievement of all target performance goals; provided,
that if, after giving effect to this Agreement, any portion of any
payments to the Executive by the Company hereunder and pursuant to any
other present or future plan, program or agreement of the Company and
any of its subsidiaries would not be deductible by the Company for
Federal income tax purposes by reason of application of Section 162(m)
of the Code, then payment of that portion to the Executive shall be
deferred until the earliest date upon which payment thereof can be
made to the Executive without being nondeductible pursuant to Section
162(m) of the Code and such deferred payment shall include interest on
the amount deferred at the Federal short-term rate prescribed pursuant
to Section 1274(d)(1)(C)(i) of the Code, compounded semi-annually; and
provided further, that if the payment hereunder, either alone or
together with other payments which the Executive has the right to
receive from the Company, would constitute a "parachute payment" (as
defined in Section 280G(b)(2) of the Code), such payment shall be
reduced to the largest amount that the Executive may receive without
imposition of the excise tax imposed by Section 4999 of the Code.
(ii) Change of Control. A "Change of Control" shall be deemed to
have occurred at any of the following times:
(1) At the time individuals who, as of the Effective Date,
constitute the Board (as of the date hereof, the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then compromising the
Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) shall be,
for purposes of this subsection 5(a)(ii)(1), considered as
though such person were a member of the Incumbent Board; or
(2) Upon the acquisition by any person, entity or "group"
within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act (excluding, for this purpose, the Company or its
affiliates, the Executive, Michael W. Gullion, any employee
benefit plan of the Company or its
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affiliates and any person pursuant to an agreement to which any
of the foregoing is a party) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 25%
or more of either the then outstanding shares of common stock of
the Company or the Combined Voting Power of the Company's then
outstanding voting securities if such person, entity or group
becomes the largest shareholder of the Company. "Combined Voting
Power" means the combined voting power of the Company's then
outstanding voting securities generally entitled to vote in the
election of directors; or
(3) Upon the approval by the shareholders of the Company of
a reorganization, merger, consolidation (in each case, with
respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger or consolidation
do not, immediately thereafter, own more than 50% of the Combined
Voting Power of the reorganized, merged or consolidated company's
then outstanding voting securities) or a liquidation or
dissolution of the Company or of the sale of all or substantially
all of the assets of the Company; or
(4) The occurrence of any other event which the Incumbent
Board in its sole discretion determines constitutes a Change of
Control.
(iii) Continued Employment after Change of Control. If the
Executive is requested to remain as an employee of the Company as a
condition imposed by the buying or selling shareholders in connection
with a Change of Control, the Executive agrees to remain employed by
the Company for up to one year after such Change of Control at an
annual base salary in an amount no less than the Executive's Annual
Base Salary in effect immediately prior to the consummation of the
Change of Control in addition to the other benefits provided in this
Agreement in connection with a Change of Control.
(iv) Offset for Other Arrangements. The benefits provided
hereunder will be reduced by the amount of any severance benefits to
which Executive is entitled under the Company's severance benefits
policy for terminated employees, if any, or any other agreement
between the Executive and the Company for severance benefits.
(b) Termination by Reason of Death or Disability. During the Employment
Period, if the Executive's employment shall terminate by reason of Death or
Disability, the Company shall pay to the Executive a lump sum amount in cash
equal to the sum of (A) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (B) an amount equal to the
Incentive Compensation benefit described in Section 3(b) of this Agreement for
the fiscal year that incudes the Date of Termination multiplied by a fraction
the
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numerator of which shall be the number of days from the beginning of such
fiscal year to and including the Date of Termination and the denominator of
which shall 365, and (C) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid. The amounts
specified in this Section 5(a)(i) shall be paid within 30 days after the Date of
Termination.
(c) Termination by the Company for Cause or by the Executive Other
than for Good Reason. Subject to the provisions of Section 6 of this Agreement,
if the Executive's employment shall be terminated for Cause during the
Employment Period, or if the Executive terminates employment during the
Employment Period other than a termination for Good Reason, the Company shall
have no further obligations to the Executive under this Agreement other than the
obligation to pay to the Executive the Annual Base Salary through the Date of
Termination plus the amount of any compensation previously deferred by the
Executive (together with any accrued interest or earnings thereon), in each case
to the extent theretofore unpaid.
6. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, plan,
program, policy or practice provided by the Company and for which the Executive
may qualify (except with respect to any benefit to which the Executive has
waived his rights in writing), nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement entered into after the Effective Date with the Company. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any benefit, plan, policy, practice or program of, or any contract or
agreement entered into with, the Company shall be payable in accordance with
such benefit, plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.
7. Full Settlement; Mitigation. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts
(including amounts for damages for breach) payable to the Executive under any of
the provisions of this Agreement and, except as provided in Section 5, such
amounts shall not be reduced whether or not the Executive obtains other
employment.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret, confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and that shall not have been or now or hereafter have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). During the Employment Period, the
Executive shall not, without the prior
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written consent of the Company or as may otherwise be required by law or legal
process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.
9. Successors.
(a) Assignment by Executive. This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) Successors and Assigns of Company. This Agreement shall inure to
the benefit of and be binding upon the Company, its successors and assigns.
(c) Assumption. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its businesses and/or assets as
aforesaid that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
10. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Kansas, without reference to its
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or the appropriate
committee thereof, shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto.
(b) Notices. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed, in either case, at the Company's headquarters or to such other
address as either party shall have furnished to the other in writing in
accordance herewith. Notice and communications shall be effective when actually
received by the addressee.
(c) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
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(d) Taxes. The Company may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) No Waiver. The Executive's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(d) of this Agreement,
or the right of the Company to terminate the Executive's employment for Cause
pursuant to Section 4(b) of this Agreement shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.
(f) Entire Agreement. This instrument contains the entire agreement
of the Executive and the Company with respect to the subject matter hereof, and
all promises, representations, understandings, arrangements and prior agreements
are merged herein and superseded hereby.
IN WITNESS WHEREOF, the Executive and, pursuant to due authorization from
its Board of Directors, the Company have caused this Agreement to be executed as
of the day and year first above written.
Gold Banc Corporation, Inc.
/s/ Michael W. Gullion
---------------------------
Name: Michael W. Gullion
Title: President and Chief Executive Officer
/s/ Keith E. Bouchey
---------------------------
Keith E. Bouchey
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ANNEX A
TO EMPLOYMENT
AGREEMENT
CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall be the principal financial officer and
the principal accounting officer of the Company and shall report directly to the
Chief Executive Officer and to the Board of Directors.
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EXHIBIT 10(c)
GOLD BANC CORPORATION, INC.
1996 EQUITY COMPENSATION PLAN
SECTION 1
PURPOSE AND DURATION
1.1 Effective Date. This Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units and
Performance Shares. This Plan shall become effective upon approval of the Board
of Directors of the Company.
1.2 Purpose of this Plan. This Plan is intended to attract, motivate, and
retain (a) employees and directors of the Company and its Affiliates and (b)
consultants who provide significant services to the Company and its Affiliates.
This Plan also is designed to further the growth and financial success of the
Company and its Affiliates by aligning the interests of the Participants,
through the ownership of Shares and through other equity based incentives, with
the interests of the Company's shareholders.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:
2.1 "1933 Act" means the Securities Act of 1933, as amended. Reference to
a specific section of the 1933 Act or regulation thereunder shall include such
section or regulation, any valid regulation promulgated under such section, and
any comparable provision of any future legislation or regulation amending,
supplementing, or superseding such section or regulation.
2.2 "1934 Act" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing, or superseding such section or regulation.
2.3 "Advisory Director" means such persons designated by the Board of
Directors of the Company as being entitled to notice of and to attend and
participate in meetings of the Board of Directors of the Company with voice, but
without vote.
2.4 "Affiliate" means any corporation or any other entity, including
partnerships and joint ventures, which, directly or indirectly, controls, is
controlled by, or is under common control with, the Company, whether now or
hereafter existing.
<PAGE>
2.5 "Affiliated SAR" means a SAR which is granted in connection with, and
is related to, an Option, and which automatically will be deemed to be exercised
at the same time that such related Option is exercised.
2.6 "Award" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units or Performance Shares.
2.7 "Award Agreement" means the written agreement setting forth the terms
and provisions applicable to each Award granted under this Plan.
2.8 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.9 "Change in Control" shall have the meaning assigned to such term in
Section 12.2.
2.10 "Code" means the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing, or superseding such section or regulation.
2.11 "Committee" means the committee appointed by the Board pursuant to
Section 3.1 to administer this Plan.
2.12 "Company" means Gold Banc Corporation, Inc., a Kansas corporation,
and any successor thereto. With respect to the definitions of the Performance
Goals, the Committee in its sole discretion may determine that "Company" means
Gold Banc Corporation, Inc. and its Subsidiaries.
2.13 "Consultant" means any consultant, independent contractor or other
person who provides significant services to the Company or to an Affiliate, and
who is compensated for such services, but who is neither an Employee nor a
member of the Board of Directors, but may be an Advisory Director.
2.14 "Director" means any individual who is a member of the Board of
Directors of the Company or is an Advisory Director of the Company.
2.15 "Disability" means a permanent and total disability within the
meaning of Section 22(e)(3) of the Code, provided that in the case of Awards
other than Incentive Stock Options, the Committee in its sole discretion may
determine whether a permanent and total disability exists in accordance with
uniform and nondiscriminatory standards adopted by the Committee from time to
time.
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2.16 "Earnings Per Share" means as to any Fiscal Year, the Company's Net
Income or a specified business unit's Pro Forma Net Income, divided by a
weighted average number of Shares outstanding calculated on a fully diluted
basis.
2.17 "Employee" means any employee of the Company or of an Affiliate,
whether now or hereafter employed.
2.18 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended. Reference to a specific section of ERISA or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
2.19 "Exercise Price" means the price at which a Share may be purchased by
a Participant pursuant to the exercise of an Option.
2.20 "Fair Market Value" means, in descending order of determination, (i)
the last quoted per share selling price at which Shares were traded, as reported
in The Wall Street Journal; provided that the most recent trade date is less
than sixty (60) days prior to the date of determining Fair Market Value
hereunder, or (ii) the value determined in good faith by the Committee in
accordance with uniform and nondiscriminatory standards. Notwithstanding the
preceding, for federal, state and local income tax reporting purposes, fair
market value shall be determined by the Committee or its delegate in accordance
with uniform and nondiscriminatory standards adopted by it from time to time.
2.21 "Fiscal Year" means the fiscal year of the Company.
2.22 "Freestanding SAR" means a SAR that is granted independently of any
Option.
2.23 "Grant Date" means, with respect to an Award, the date on which the
Award was granted.
2.24 "Incentive Stock Option" means an Option to purchase Shares which is
designated as an Incentive Stock Option, and is intended to meet the
requirements of Section 422 of the Code.
2.25 "Individual MBOs" means as to a Participant, the objective and
measurable goals set by a "management by objectives" process, and approved by
the Committee in its sole discretion.
2.26 "Net Income" means as to any Fiscal Year, the income after taxes of
the Company for that Fiscal Year determined in accordance with generally
accepted accounting principles; provided, however, that prior to the Fiscal
Year, the Committee shall determine whether any
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significant items shall be included or excluded from the calculation of Net
Income with respect to one or more Participants.
2.27 "Nonqualified Stock Option" means an Option to purchase Shares which
is not an Incentive Stock Option.
2.28 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option granted pursuant to this Plan.
2.29 "Participant" means an Employee, Consultant or Director to whom an
outstanding Award has been granted.
2.30 "Performance Goals" means the goals determined by the Committee in
its sole discretion to be applicable to a Participant with respect to an Award.
As determined by the Committee, the Performance Goals applicable to an Award may
provide for a targeted level or levels of achievement using one or more of the
following measures: (a) Earnings Per Share, (b) Individual MBOs, (c) Net Income,
(d) Pro Forma Net Income, (e) Return on Designated Assets, (f) Return on
Revenues, and (g) Satisfaction MBOs. The Performance Goals may differ from
Participant to Participant and from Award to Award.
2.31 "Performance Period" shall have the meaning assigned to such term in
Section 8.3.
2.32 "Performance Share" means an Award granted to a Participant pursuant
to Section 8.
2.33 "Performance Unit" means an Award granted to a Participant pursuant
to Section 8.
2.34 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock are subject to restrictions. As provided in Section
7, such restrictions may be based on the passage of time, the achievement of
target levels of performance or the occurrence of other events as determined by
the Committee in its sole discretion.
2.35 "Plan" means the Gold Banc Corporation, Inc. 1996 Equity Compensation
Plan, as set forth in this instrument and as hereafter amended from time to
time.
2.36 "Pro Forma Net Income" means as to any specified business unit for
any Fiscal Year, the portion of the Company's Net Income allocable to such
business unit; provided, however, that prior to such Fiscal Year, the Committee
shall determine the basis on which such allocation shall be made.
2.37 "Restricted Stock" means an Award granted to a Participant pursuant
to Section 7.
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2.38 "Retirement" means, in the case of an Employee, a Termination of
Service by reason of the Employee's retirement at or after age sixty-five (65)
or pursuant to any early retirement program instituted by the Company. With
respect to a Director, "Retirement" means termination of service on the Board.
2.39 "Return on Designated Assets" means as to any Fiscal Year, (a) the
Pro Forma Net Income of a specified business unit, divided by the average of
that business unit's designated assets measured as of the beginning and end of
such Fiscal Year, or (b) the Net Income of the Company, divided by the average
of the Company's designated assets measured as of the beginning and end of such
Fiscal Year.
2.40 "Return on Revenues" means as to any Fiscal Year, the percentage
equal to the Company's Net Income or a specified business unit's Pro Forma Net
Income, divided by the Company's or that business unit's Annual Revenue.
2.41 "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, and any
future regulation amending, supplementing, or superseding such regulation.
2.42 "Satisfaction MBOs" means as to any Participant, the objective and
measurable individual goals set by a "management by objectives" process and
approved by the Committee, which goals relate to the satisfaction of external or
internal requirements.
2.43 "Section 16 Person" means a person who, with respect to the Shares,
is subject to Section 16 of the 1934 Act.
2.44 "Shares" means the shares of common stock of the Company.
2.45 "Stock Appreciation Right" or "SAR" means an Award, granted either
alone or in connection with a related Option, that is designated as a SAR
pursuant to Section 6.
2.46 "Subsidiary" means a "subsidiary corporation" as defined in Section
424(f) of the Code, whether now or hereafter existing.
2.47 "Tandem SAR" means a SAR which is granted in connection with, or
related to, an Option, and which requires forfeiture of the right to purchase an
equal number of Shares under the related Option upon the exercise of such SAR;
or alternatively, which requires the cancellation of an equal amount of SAR upon
the purchase of the Shares subject to the Option.
2.48 "Termination of Service" or "Terminates" means (a) in the case of an
Employee, a cessation of the employee-employer relationship between an Employee
and the Company or an Affiliate for any reason, including, but not limited to, a
cessation by resignation, discharge, death, Disability, Retirement or the
disaffiliation of an Affiliate, but excluding any such cessation where there is
a simultaneous reemployment by the Company or by an Affiliate, (b) in the case
of a
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Director, a cessation of the status of the Director as a member of the Board of
Directors of the Company or as an Advisory Director for any reason, including,
but not limited to, a cessation by resignation, removal, death, disability, or
the failure to be reelected or reappointed, as the case may be, and (c) in the
case of a Consultant, a cessation of the service relationship between a
Consultant and the Company or an Affiliate for any reason, including, but not
limited to, a cessation by resignation, discharge, death, Disability or the
disaffiliation of an Affiliate, but excluding any such cessation where there is
a simultaneous re-engagement of the Consultant by the Company or by an
Affiliate.
SECTION 3
ADMINISTRATION
3.1 The Committee. This Plan shall be administered by the Committee. The
Committee shall consist of not less than two (2) Directors. The members of the
Committee shall be appointed from time to time by, and shall serve at the
pleasure of, the Board of Directors. The Committee shall be comprised solely of
Directors who both are (a) "disinterested persons" under Rule 16b-3, and (b)
"outside directors" under Section 162(m) of the Code.
3.2 Authority of the Committee. It shall be the duty of the Committee to
administer this Plan in accordance with the provisions hereof. The Committee
shall have all powers and discretion necessary or appropriate to administer this
Plan and to control its operation, including, but not limited to, the power to
(a) determine which Employees, Directors and Consultants shall be granted
Awards, (b) prescribe the terms and conditions of the Awards, (c) interpret the
terms and provision of this Plan and of the Awards, (d) adopt rules for the
administration, interpretation and application of this Plan, and (e) interpret,
amend, or revoke any such rules.
3.3 Delegation by the Committee. The Committee, in its sole discretion
and on such terms and conditions as it may provide, may delegate all or any part
of its authority and powers under this Plan to one or more directors or officers
of the Company; provided, however, that the Committee may not delegate its
authority and powers (a) with respect to Section 16 Persons, or (b) in any way
which would jeopardize this Plan's qualification under Section 162(m) of the
Code or Rule 16b-3.
3.4 Decisions Binding. All determinations and decisions made by the
Committee, the Board and any delegate of the Committee appointed pursuant to
Section 3.3 shall be final, conclusive, and binding on all persons, and shall be
given the maximum deference permitted by law.
SECTION 4
SHARES SUBJECT TO THIS PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3,
the total number of Shares available for grant under this Plan shall not exceed
250,000. Shares granted
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under this Plan may be either authorized but unissued Shares or treasury Shares,
or any combination thereof.
4.2 Lapsed Awards. If an Award is settled in cash, or is cancelled,
terminates, expires or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award thereafter shall be available to be the subject
of a subsequent Award.
4.3 Adjustments in Awards and Authorized Shares. In the event of any
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, stock split, Share combination, or other change in
the corporate structure of the Company affecting the Shares, the Committee shall
adjust the number and class of Shares which may be delivered under this Plan,
the number, class, and price of Shares subject to outstanding Awards, and the
numerical limits of Sections 4.1, 5.1, 6.1.1, 7.1 and 8.1, in such manner as the
Committee in its sole discretion shall determine to be advisable or appropriate
to prevent the dilution or diminution of such Awards. Notwithstanding the
preceding, the number of Shares subject to any Award always shall be a whole
number.
SECTION 5
STOCK OPTIONS
5.1 Grant of Options. Subject to the terms and provisions of this Plan,
Options may be granted to Employees, Directors and Consultants at any time and
from time to time as determined by the Committee in its sole discretion. The
Committee in its sole discretion shall determine the number of Shares subject to
each Option; provided, however, that during any Fiscal Year, no Participant
shall be granted Options covering more than 100,000 Shares. The Committee may
grant Incentive Stock Options, Nonqualified Stock Options, or any combination
thereof.
5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement
that shall specify the Exercise Price, the expiration date of the Option, the
number of Shares to which the Option pertains, any conditions to exercise of the
Option and such other terms and conditions as the Committee in its sole
discretion shall determine. The Award Agreement also shall specify whether the
Option is intended to be an Incentive Stock Option or a Nonqualified Stock
Option.
5.3 Exercise Price. Subject to the provisions of this Section 5.3, the
Exercise Price per Share for each Option shall be determined by the Committee in
its sole discretion.
5.3.1 Incentive Stock Options. In the case of an Incentive Stock
Option, the Exercise Price per Share shall be not less than one hundred
percent (100%) of the Fair Market Value of a Share on the Grant Date;
provided, however, that if on the Grant Date, the Employee (together with
persons whose stock ownership is attributed to the Employee
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pursuant to Section 424(d) of the Code) owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any of
its Subsidiaries, the Exercise Price per Share shall be not less than one
hundred ten percent (110%) of the Fair Market Value of a Share on the Grant
Date.
5.3.2 Substitute Options. Notwithstanding the provisions of Section 5.3.1,
in the event that the Company or an Affiliate consummates a transaction
described in Section 424(a) of the Code (e.g., the acquisition of property or
stock from an unrelated corporation), persons who become Employees or
Consultants on account of such transaction may be granted Options in
substitution for options granted by such former employer or recipient of
services. If such substitute Options are granted, the Committee, in its sole
discretion and consistent with Section 424(a) of the Code, may determine that
such substitute Options shall have an Exercise Price per Share less than one
hundred (100%) of the Fair Market Value of the Shares on the Grant Date.
5.4 Expiration of Options.
5.4.1 Expiration Dates. Each Option shall terminate upon the earlier
of the first to occur of the following events:
(a) The date for termination of the Option set forth in the Award
Agreement; or
(b) The expiration of ten (10) years from the Grant Date (except as
provided in Section 5.8.2 regarding Incentive Stock Options); or
(c) The expiration of one (1) year from the date of the Optionee's
Termination of Service for a reason other than the Optionee's death,
Disability or Retirement (except as provided in Section 5.8.2 regarding
Incentive Stock Options); or
(d) The expiration of three (3) years from the date of the Optionee's
Termination of Service by reason of Disability, death, or Retirement
(except as provided in Section 5.8.2 regarding Incentive Stock Options).
5.4.2 Committee Discretion. Subject to the limits of Section 5.4.1, the
Committee in its sole discretion (a) shall provide in each Award Agreement when
each Option expires and becomes unexercisable and (b) may, after an Option is
granted, extend the maximum term of the Option (subject to Section 5.8.4
regarding Incentive Stock Options), provided however, in the case of Incentive
Stock Options, that the maximum term of the Option may not be extended if the
Fair Market Value per Share is greater than the Exercise Price per Share.
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5.5 Exercisability of Options. Options granted under this Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall determine in its sole discretion. After an Option is
granted, the Committee in its sole discretion may accelerate the exercisability
of the Option. However, in no event may any Option granted to a Section 16
Person be exercisable until at least six (6) months following the Grant Date or
such shorter period as may be permissible while maintaining compliance with Rule
16b-3.
5.6 Payment. Options shall be exercised by the Participant's delivery of
a written notice of exercise to the Secretary of the Company or its designee,
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares. Upon the exercise of any
Option, the Exercise Price shall be payable to the Company in full in cash or by
certified or cashiers check. The Committee in its sole discretion also may
permit exercise (a) by tendering previously acquired Shares having an aggregate
Fair Market Value at the time of exercise equal to the total Exercise Price, (b)
by delivery of an executed promissory note representing indebtedness of the
Participant to the Company, (c) by any other means which the Committee in its
sole discretion determines (i) to provide legal consideration for the Shares,
and (ii) to be consistent with the purposes of this Plan, or (d) any combination
of the methods of payment set forth in this Section. As soon as practicable
after receipt of a written notification of exercise and full payment for the
Shares purchased, the Company shall deliver to the Participant or to the
Participant's designated broker, Share certificates (which may be in book entry
form) representing such Shares.
5.7 Share Transferability. The Committee may impose transfer restrictions
on any Shares acquired pursuant to the exercise of an Option as it may deem
advisable or appropriate in its sole discretion, including, but not limited to,
restrictions related to applicable Federal securities laws, the requirements of
any national securities exchange or system upon which Shares are then listed or
traded, and any blue sky or state securities laws.
5.8 Certain Additional Provisions for Incentive Stock Options.
5.8.1 Eligible Participants. Incentive Stock Options may be granted
only to persons who are employees of the Company or a Subsidiary on the
Grant Date.
5.8.2 Exercisability. The aggregate Fair Market Value of the Shares
(as determined on the applicable Grant Date) with respect to which
Incentive Stock Options are exercisable for the first time by any Employee
during any calendar year (under all plans of the Company and its
Subsidiaries) shall not exceed $100,000.
5.8.3 Termination of Service. No Incentive Stock Option may be
exercised more than three (3) months after the Participant's Termination of
Service for any reason other than Disability or death, unless (a) the
Participant dies during such three-month period, and (b) the Award
Agreement or the Committee permits later exercise. No Incentive Stock
Option may be exercised more than one (1) year after the Participant's
termination of employment on account of Disability, unless (a) the
Participant dies during such one-year period, and (b) the Award Agreement
or the Committee permits later exercise.
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5.8.4 Expiration. No Incentive Stock Option may be exercised after the
expiration of ten (10) years from the Grant Date; provided, however, that
if the Option is granted to an Employee who, together with persons whose
stock ownership is attributed to the Employee pursuant to Section 424(d) of
the Code, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries,
the Option may not be exercised after the expiration of five (5) years from
the Grant Date.
SECTION 6
STOCK APPRECIATION RIGHTS
6.1 Grant of SARs. Subject to the terms and conditions of this Plan, a
SAR may be granted to Employees, Directors and Consultants at any time and from
time to time as shall be determined by the Committee in its sole discretion. The
Committee may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any
combination thereof.
6.1.1 Number of Shares. The Committee shall have complete discretion
to determine the number of SARs granted to any Participant, provided that
during any Fiscal Year, no Participant shall be granted SARs covering more
than 100,000 Shares.
6.1.2 Exercise Price and Other Terms. The Committee, subject to the
provisions of this Plan, shall have complete discretion to determine the
terms and conditions of SARs granted under this Plan. The exercise price
per Share of Tandem or Affiliated SARs shall equal the Exercise Price per
Share of the related Option. In no event shall a SAR granted to a Section
16 Person become exercisable until at least six (6) months after the Grant
Date or such shorter period as may be permissible while maintaining
compliance with Rule 16b-3.
6.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable. With respect to a Tandem SAR granted in connection with an
Incentive Stock Option: (a) the Tandem SAR shall expire no later than the
expiration of the underlying Incentive Stock Option; (b) the value of the payout
with respect to the Tandem SAR shall be for no more than one hundred percent
(100%) of the difference between the Exercise Price per Share of the underlying
Incentive Stock Option and the Fair Market Value per Share of the Shares subject
to the underlying Incentive Stock Option at the time the Tandem SAR is
exercised; and (c) the Tandem SAR shall be exercisable only when the Fair Market
Value per Share of the Shares subject to the Incentive Stock Option exceeds the
Exercise Price per Share of the Incentive Stock Option.
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6.3 Exercise of Affiliated SARs. An Affiliated SAR shall be deemed to be
exercised upon the exercise of the related Option. The deemed exercise of an
Affiliated SAR shall not necessitate a reduction in the number of Shares subject
to the related Option.
6.4 Exercise of Freestanding SARs. Freestanding SARs shall be exercisable
on such terms and conditions as the Committee in its sole discretion shall
determine; provided, however, that no SAR granted to a Section 16 Person shall
be exercisable until at least six (6) months after the Grant Date or such
shorter period as may be permissible while maintaining compliance with Rule
16b-3.
6.5 SAR Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the exercise price per share, the term of the SAR,
the conditions of exercise, and such other terms and conditions as the Committee
in its sole discretion shall determine.
6.6 Expiration of SARs. A SAR granted under this Plan shall expire on the
date set forth in the Award Agreement, which date shall be determined by the
Committee in its sole discretion. Notwithstanding the foregoing, the terms and
provisions of Section 5.4 also shall apply to SARs.
6.7 Payment of SAR Amount. Upon exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying (i) the positive difference between the Fair Market Value of a Share
on the date of exercise over the exercise price per Share by (ii) the number of
Shares with respect to which the SAR is exercised. At the sole discretion of
the Committee, the payment upon SAR exercise may be in cash, in Shares of
equivalent value, or in any combination thereof.
SECTION 7
RESTRICTED STOCK
7.1 Grant of Restricted Stock. Subject to the terms and provisions of
this Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Employees, Directors and Consultants in such amounts as the
Committee in its sole discretion shall determine. The Committee in its sole
discretion shall determine the number of Shares to be granted to each
Participant; provided, however, that during any Fiscal Year, no Participant
shall receive more than 100,000 Shares of Restricted Stock.
7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Committee in its sole discretion shall determine. Unless the Committee in its
sole discretion determines otherwise, Shares of Restricted Stock shall be held
by the Company as escrow agent until the end of the applicable Period of
Restriction.
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7.3 Transferability. Except as provided in this Section 7, Shares of
Restricted Stock may not be sold, transferred, gifted, bequeathed, pledged,
assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily,
until the end of the applicable Period of Restriction; provided, however, that
in no event may the restrictions on Restricted Stock granted to a Section 16
Person lapse prior to six (6) months following the Grant Date or such shorter
period as may be permissible while maintaining compliance with Rule 16b-3.
7.4 Other Restrictions. The Committee in its sole discretion may impose
such other restrictions on Shares of Restricted Stock as it may deem advisable
or appropriate in accordance with this Section 7.4.
7.4.1 General Restrictions. The Committee may set restrictions based
upon (a) the achievement of specific performance objectives (Company-wide,
divisional or individual), (b) applicable Federal or state securities laws,
(c) continued employment or service to the Company, or (d) any other basis
determined by the Committee in its sole discretion.
7.4.2 Section 162(m) Performance Restrictions. For purposes of
qualifying grants of Restricted Stock as "performance-based compensation"
under Section 162(m) of the Code, the Committee in its sole discretion may
either condition Awards on the achievement of Performance Goals or set
restrictions based upon the achievement of Performance Goals. The
Performance Goals shall be set by the Committee on or before the latest
date permissible to enable the Restricted Stock to qualify as "performance-
based compensation" under Section 162(m) of the Code. In granting
Restricted Stock that is intended to qualify under Section 162(m) of the
Code, the Committee shall follow any procedures determined by it in its
sole discretion from time to time to be necessary, advisable, or
appropriate to ensure qualification of the Restricted Stock under Section
162(m) of the Code (e.g., in determining the Performance Goals).
7.4.3 Legend on Certificates. The Committee in its sole discretion may
legend the certificates representing Restricted Stock to give appropriate
notice of such restrictions. For example, the Committee may determine that
some or all certificates representing Shares of Restricted Stock shall bear
the following legend:
"THE SALE OR OTHER TRANSFER OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION OF LAW,
IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER IMPOSED PURSUANT TO THE
GOLD BANC CORPORATION, INC. 1996 EQUITY COMPENSATION PLAN AND IN A
RESTRICTED STOCK AGREEMENT. A COPY OF THE PLAN AND SUCH RESTRICTED
STOCK AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF GOLD BANC
CORPORATION, INC."
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7.5 Removal of Restrictions. Except as otherwise provided in this Section
7, Shares of Restricted Stock covered by each Restricted Stock grant made under
this Plan shall be released from escrow as soon as practicable after the end of
the applicable Period of Restriction. The Committee in its sole discretion may
accelerate the time at which any restrictions shall lapse and remove any
restrictions; provided, however, that the Period of Restriction on Shares
granted to a Section 16 Person may not lapse until at least six (6) months after
the Grant Date or such shorter period as may be permissible while maintaining
compliance with Rule 16b-3. After the end of the applicable Period of
Restriction, the Participant shall be entitled to have any legend or legends
under Section 7.4.3 removed from his or her Share certificate, and the Shares
shall be freely transferable by the Participant.
7.6 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares, unless the applicable Award Agreement provides
otherwise.
7.7 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the applicable Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid. With respect to Restricted Stock
granted to a Section 16 Person, any dividend or distribution that constitutes a
"derivative security" or an "equity security" under Section 16 of the 1934 Act
shall be subject to a Period of Restriction equal to the longer of (a) the
remaining Period of Restriction on the Shares of Restricted Stock with respect
to which the dividend or distribution is paid, or (b) six (6) months.
7.8 Return of Restricted Stock to Company. On the date set forth in the
applicable Award Agreement, the Restricted Stock for which the applicable
restrictions have not either lapsed or been satisfied shall revert to the
Company and thereafter shall be available for grant under this Plan.
SECTION 8
PERFORMANCE UNITS AND PERFORMANCE SHARES
8.1 Grant of Performance Units/Shares. Performance Units and Performance
Shares may be granted to Employees, Directors and Consultants at any time and
from time to time, as shall be determined by the Committee in its sole
discretion. The Committee shall have complete discretion in determining the
number of Performance Units and Performance Shares granted to each Participant;
provided, however, that during any Fiscal Year, (a) no Participant shall receive
Performance Units having an initial value greater than $100,000, and (b) no
Participant shall receive more than 100,000 Performance Shares.
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8.2 Value of Performance Units/Shares. Each Performance Unit shall have
an initial value that is established by the Committee on or before the Grant
Date.
8.3 Performance Objectives and Other Terms. The Committee shall set
performance objectives in its sole discretion which, depending on the extent to
which they are met, will determine the number or value of Performance Units or
Performance Shares, or both, that will be paid out to the Participants. The
time period during which the performance objectives must be met shall be called
the "Performance Period." Performance Periods of Awards granted to Section 16
Persons shall, in all cases, exceed six (6) months in length or such shorter
period as may be permissible while maintaining compliance with Rule 16b-3. Each
Award of Performance Units or Performance Shares shall be evidenced by an Award
Agreement that shall specify the Performance Period, and such other terms and
conditions as the Committee in its sole discretion shall determine.
8.3.1 General Performance Objectives. The Committee may set
performance objectives based upon (a) the achievement of Company-wide,
divisional or individual goals, (b) applicable Federal or state securities
laws, or (c) any other basis determined by the Committee in its discretion.
8.3.2 Section 162(m) Performance Objectives. For purposes of
qualifying grants of Performance Units or Performance Shares as
"performance-based compensation" under Section 162(m) of the Code, the
Committee in its sole discretion may determine that the performance
objectives applicable to Performance Units or Performance Shares, as the
case may be, shall be based on the achievement of Performance Goals. The
Performance Goals shall be set by the Committee on or before the latest
date permissible to enable the Performance Units or Performance Shares, as
the case may be, to qualify as "performance-based compensation" under
Section 162(m) of the Code. In granting Performance Units or Performance
Shares which are intended to qualify under Section 162(m) of the Code, the
Committee shall follow any procedures determined by it from time to time to
be necessary or appropriate in its sole discretion to ensure qualification
of the Performance Units or Performance Shares, as the case may be, under
Section 162(m) of the Code (e.g., in determining the Performance Goals).
8.4 Earning of Performance Units/Shares. After the applicable Performance
Period has ended, the holder of Performance Units or Performance Shares shall be
entitled to receive a payout of the number of Performance Units or Performance
Shares, as the case may be, earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance objectives have been achieved. After the grant of a Performance Unit
or Performance Share, the Committee in its sole discretion may reduce or waive
any performance objectives for such Performance Unit or Performance Share;
provided, however, that Performance Periods of Awards granted to Section 16
Persons shall not be less than six (6) months or such shorter period as may be
permissible while maintaining compliance with Rule 16b-3.
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8.5 Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units or Performance Shares shall be made as soon as
practicable after the end of the applicable Performance Period. The Committee
in its sole discretion may pay earned Performance Units or Performance Shares in
the form of cash, in Shares (which have an aggregate Fair Market Value equal to
the value of the earned Performance Units or Performance Shares, as the case may
be, at the end of the applicable Performance Period), or in any combination
thereof.
8.6 Cancellation of Performance Units/Shares. On the earlier of the date
set forth in the Award Agreement or the Participant's Termination of Service
(other than by death, Disability or, with respect to an Employee, Retirement),
all unearned or unvested Performance Units or Performance Shares shall be
forfeited to the Company, and thereafter shall be available for grant under this
Plan. In the event of a Participant's death, Disability or, with respect to an
Employee, Retirement, prior to the end of a Performance Period, the Committee
shall reduce his or her Performance Units or Performance Shares proportionately
based on the date of such Termination of Service.
SECTION 9
MISCELLANEOUS
9.1 Deferrals. The Committee in its sole discretion may permit a
Participant to defer receipt of the payment of cash or the delivery of Shares
that would otherwise be due to such Participant under an Award. Any such
deferral election shall be made at least one year prior to the due date, and
shall be subject to such rules and procedures as shall be determined by the
Committee in its sole discretion.
9.2 No Effect on Employment or Service. Nothing in this Plan shall
interfere with or limit in any way the right of the Company to terminate any
Participant's employment or service at any time, with or without cause. For
purposes of this Plan, transfer of employment of a Participant between the
Company and any of its Affiliates (or between Affiliates) shall not be deemed a
Termination of Service. Employment with the Company and its Affiliates is on an
at-will basis only, unless otherwise provided by an applicable employment
agreement between the Participant and the Company or its Affiliate, as the case
may be.
9.3 Participation. No Employee, Director or Consultant shall have the
right to be selected to receive an Award under this Plan, or, having been so
selected, to receive a future Award.
9.4 Indemnification. Each person who is or shall have been a member of
the Committee or the Board shall be indemnified and held harmless by the Company
against and from (a) any loss, cost, liability or expense (including attorneys'
fees) that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit or proceeding to which
he or she may be a party or in which he or she may be involved by reason
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of any action taken or failure to act under this Plan or any Award Agreement,
and (b) from any and all amounts paid by him or her in settlement thereof, with
the Company's prior written approval, or paid by him or her in satisfaction of
any judgment in any such claim, action, suit, or proceeding against him or her;
provided, however, that he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to handle
and defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such
persons may be entitled under the Company's incorporation documents or Bylaws,
by contract, as a matter of law or otherwise, or under any power that the
Company may have to indemnify them or hold them harmless.
9.5 Successors. All obligations of the Company under this Plan, with
respect to Awards granted hereunder, shall be binding on any successor of the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise, of all or substantially
all of the business or assets of the Company.
9.6 Beneficiary Designations. If permitted by the Committee, a
Participant under this Plan may name a beneficiary or beneficiaries to whom any
vested but unpaid Award shall be paid in the event of the Participant's death.
Each such designation shall revoke all prior designations by the Participant,
and shall be effective only if given in a form and manner acceptable to the
Committee. In the absence of any such designation, any vested benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate and, subject to the terms of this Plan and of the applicable Award
Agreement, any unexercised vested Award may be exercised by the administrator or
executor of the Participant's estate.
9.7 Nontransferability of Awards. No Award granted under this Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, by the laws of descent and distribution, or to the limited
extent provided in Sections 7.3 and 9.6. All rights with respect to an Award
granted to a Participant shall be available during his or her lifetime only to
the Participant.
9.8 No Rights as Shareholder. Except to the limited extent provided in
Sections 7.6 and 7.7, no Participant nor any beneficiary thereof shall have any
of the rights or privileges of a shareholder of the Company with respect to any
Shares issuable pursuant to an Award or the exercise thereof, unless and until
certificates representing such Shares shall have been issued, recorded on the
records of the Company or its transfer agents or registrars, and delivered to
the Participant or his or her beneficiary.
SECTION 10
AMENDMENT, TERMINATION, AND DURATION
10.1 Amendment, Suspension, or Termination. The Board in its sole
discretion may amend or terminate this Plan, or any part thereof, at any time
and for any reason. The amendment, suspension or termination of this Plan shall
not, without the consent of the
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Participant, alter or impair any rights or obligations under any Award
previously granted to such Participant. No Award may be granted during any
period of suspension or after termination of this Plan.
10.2 Duration of this Plan. This Plan shall become effective on the date
specified herein, and subject to Section 10.1, shall remain in effect
thereafter; provided, however, that without further shareholder approval, no
Incentive Stock Option may be granted under this Plan after the tenth
anniversary of the effective date of this Plan.
SECTION 11
TAX WITHHOLDING
11.1 Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award or the exercise thereof, the Company shall have the power
and the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy Federal, state, and local taxes,
including the Participant's Social Security tax obligation, required to be
withheld with respect to such Award or the exercise thereof.
11.2 Withholding Arrangements. The Committee, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part, by
(a) electing to have the Company withhold otherwise deliverable Shares, or (b)
delivering to the Company Shares then owned by the Participant having a Fair
Market Value equal to the amount required to be withheld. The amount of the
withholding requirement shall be deemed to include any amount that the Committee
agrees may be withheld at the time any such election is made, not to exceed the
amount determined by using the maximum federal, state, or local marginal income
tax rates applicable to the Participant with respect to the Award on the date
that the amount of tax to be withheld is to be determined. The Fair Market Value
of the Shares to be withheld or delivered shall be determined as of the date
that the taxes are required to be withheld.
SECTION 12
CHANGE IN CONTROL
12.1 Change in Control. In the event of a Change in Control of the
Company, all Awards granted under this Plan that are then outstanding and not
then exercisable, or are then subject to restrictions, shall, unless otherwise
provided for in the Agreements applicable thereto, become immediately
exercisable, and all restrictions shall be removed, as of the first date that
the Change in Control shall be deemed to have occurred, and shall remain as such
for the remaining life of the Award as provided herein and within the provisions
of the related Agreements; provided however, that the Board of Directors of the
Company may limit the applicability of this Section with respect to that portion
of any Award to which Section 280G of the Code is applicable.
-17-
<PAGE>
12.2 Definition. For purposes of Section 12.1 above, a Change in
Control of the Company shall be deemed to have occurred if the conditions set
forth in any one or more of the following shall have been satisfied, unless such
condition shall have received prior approval of a majority vote of the
Continuing Directors, as defined below, indicating that Section 12.1 shall not
apply thereto:
(a) any "person" (as such term is used in Section 13(d) of the
Exchange Act, but excluding the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as
their ownership of stock of the Company) first becomes, subsequent to
the adoption of this Plan, the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing thirty percent (30%) or more of the
combined voting power of the Company's then outstanding securities;
(b) during any period of two consecutive years (not including
any period prior to the Effective Date of this Plan), individuals
("Existing Directors") who at the beginning of such period constitute
the Board of Directors, and any new director (an "Approved Director")
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in
paragraph (a), (b) or (c) of this Section 12.2) whose election by the
Board of Directors or nomination for election by the Company's
shareholders was approved by a vote of a least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
previously was so approved (Existing Directors together with Approved
Directors constituting "Continuing Directors"), cease for any reason
to constitute at least a majority of the Board of Directors; or
(c) the shareholders of the Company approve a merger or
consolidation of the Company with any other person, other than (i) a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities for the surviving entity) more than fifty percent
(50%) of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger in which no "person" (as
defined in Section 12.2(a)) acquires more than thirty percent (30%) of
the combined voting power of the Company's then outstanding
securities; or
(d) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets or
any transaction having a similar effect.
-18-
<PAGE>
SECTION 13
LEGAL CONSTRUCTION
13.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
13.2 Severability. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Plan, and this Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.
13.3 Requirements of Law. The grant of Awards and the issuance of Shares
under this Plan shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required from time to time.
13.4 Securities Law Compliance. With respect to Section 16 Persons, Awards
under this Plan are intended to comply with all applicable conditions of Rule
16b-3. To the extent any provision of this Plan, Award Agreement or action by
the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable or appropriate by the Committee in
its sole discretion.
13.5 Governing Law. This Plan and all Award Agreements shall be construed
in accordance with and governed by the laws of the State of Kansas, excluding
its conflict of laws provisions.
13.6 Captions. Captions are provided herein for convenience of reference
only, and shall not serve as a basis for interpretation or construction of this
Plan.
-19-
<PAGE>
EXHIBIT 10(d)
AGREEMENT
This Agreement is made this 14th day of April, 1996, between Gold
Bancshares, Inc., a Kansas corporation (the "Borrower"), the Exchange National
Bank of Marysville, Kansas, the Citizens State Bank of Seneca, Kansas, Kansas
corporations, Provident Bancshares, Inc. and Provident Savings Bank of St.
Joseph, Missouri, Missouri corporations (the "Subsidiary Banks"), and Boatmen's
First National Bank of Kansas City (the "Bank"), having its principal office at
14 West 10th Street, Kansas City, Missouri.
Subject to the terms and conditions of this Agreement and the Note and
Security Agreements issued hereunder, the Bank agrees to extend credit to the
Borrower in an amount not to exceed Six Million Six Hundred Twenty Thousand
Dollars ($6,620,000.00).
1. PROMISSORY NOTE. The loan to be made hereunder will be evidenced by the
Note which will be payable on the following terms:
1.1 INTEREST. The Note will bear interest on the unpaid balance at six
percent (6.00%). Interest will be payable commencing July 15, 1996 and
each quarter thereafter.
1.2 MATURITY. The entire unpaid balance of the Note and all accrued
interest will be due and payable ON DEMAND, but no later than March 1,
1997.
1.3 PRINCIPAL REDUCTION. It is the Bank's expectation that, if the
Borrower reduces the principal amount of the Note in the amount of
$410,500 on March 1, 1997, the Note will be renewed from on
principally the same terms and under the same conditions until the
Borrower's obligations are paid in full. Notwithstanding the above,
the Borrower understands that should the Bank determine, in its
absolute discretion, that Borrower's credit standing is
unsatisfactory, the Note will not be renewed by the Bank and must be
paid in full.
2. COLLATERAL SECURITY. Payment of the Note will be secured by a first pledge
and security interest covering Two Thousand Three Hundred Seventy-Five (2,375)
shares of capital stock of the Exchange National Bank of Marysville, Kansas,
Five Thousand (5,000) shares of the capital stock of the Citizens State Bank of
Seneca, Kansas, Eight Hundred Two and one-half (802.50) shares of the capital
stock of Provident Bancshares, Inc. and Ten Thousand (10,000) shares of the
capital stock of Provident Savings Bank, F.S.B. of St. Joseph, Missouri.
3. AFFIRMATIVE COVENANTS. Until payment in full of the Note, the Borrower
agrees that, unless the Bank otherwise consents in writing, the Borrower will
perform or cause to be performed the following:
<PAGE>
3.1 RECORDS. Accurate books and records of account will be maintained by
the Borrower and the Subsidiary Banks in accordance with sound
accounting practices consistently applied, and the Bank and its
designated representatives will have the right to examine such books
and records, and to discuss the affairs, finances, accounts, and
contents of such books and records of the Borrower and the Subsidiary
Banks.
3.2 FINANCIAL STATEMENTS. Furnish within ninety (90) days after the close
of each fiscal year of the Borrower, complete copies of the balance
sheets as of the close of such fiscal year and the profit and loss
statements and surplus reconciliation of the Borrower for such fiscal
year prepared in accordance with sound accounting principles by
accountants approved by and in form satisfactory to, the Bank.
3.3 REPORTS. Furnish within thirty (30) days after each filing thereof:
(a) copies of the FRY-6 Annual Report of the Borrower to the Federal
Reserve System; and (b) copies of all Consolidated Reports of
Condition and Consolidated Reports of Income and Call Reports filed by
the Subsidiary Banks with the appropriate regulatory agency.
3.4 OTHER INFORMATION. Such other information concerning the Borrower and
Subsidiary Banks as the Bank might reasonably request.
4. ADVERSE CHANGE. The Borrower will immediately advise the Bank of any
requirement by the regulatory authorities for additional capital in the
Subsidiary Banks, or the institution of any agreement, order, or proceeding
between any regulatory authority and the Borrower or Subsidiary Banks,
whether or not such agreement, order, or proceeding is agreed to by the
Borrower or Subsidiary Banks. The Borrower will immediately advise the Bank
of any significant litigation or other matter which might result in a
material adverse change in the financial condition of the Borrower or the
Subsidiary Banks.
5. CHANGE IN OWNERSHIP. Any change in the ownership of the Borrower resulting
in a change in voting control of the Borrower or any merger or
consolidation with or into another corporation or other disposition of
property by the Borrower, without the prior written consent of the Bank,
shall constitute an event of default and upon such an occurrence the Bank
may demand the entire obligation of the Borrower to be immediately due and
payable.
6. CROSS DEFAULT. The cross default agreement among the Borrower, the Bank
and Allen D. Petersen dated October 31, 1991 remains in effect during the
term of this Agreement.
2
<PAGE>
7. CAPITAL INJECTION. In the event additional capital shall be injected in
Subsidiary Banks, whether by capital note, stock or in other form, such
capital note, stock or other instrument shall be immediately pledged to
the Bank.
8. DEFAULT. If default shall be made in the due observances or performance of
any terms, covenants or agreements in this Agreement, the Bank may demand
the entire obligation of the Borrower to be due and payable. No failure on
the part of the Bank to exercise and no delay in exercising any right
hereunder shall operate as a waiver thereof.
9. GOVERNING LAW. This agreement and the rights and obligation of the parties
shall be governed by and interpreted in accordance with the laws of the
State of Missouri.
THIS IS THE FINAL EXPRESSION OF THE CREDIT AGREEMENT BETWEEN THE CREDITOR AND
DEBTOR AND SUCH WRITTEN CREDIT AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF
ANY PRIOR ORAL CREDIT AGREEMENT OR OF A CONTEMPORANEOUS ORAL CREDIT AGREEMENT
BETWEEN THE CREDITOR AND DEBTOR. ANY ADDITIONAL NON-STANDARD TERMS OF THE
CREDIT AGREEMENT AND THE REDUCTION TO WRITING OF ANY PREVIOUS ORAL CREDIT
AGREEMENT BETWEEN THE CREDITOR AND DEBTOR IS SET FORTH IN THE SPACE BELOW:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
CREDITOR AND DEBTOR AFFIRM THAT NO WRITTEN ORAL CREDIT AGREEMENT BETWEEN THEM
EXISTS. /S/ DP /S/ MG
-------------- -------------- (PLEASE INITIAL)
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
effective on the date first above written.
BOATMEN'S FIRST NATIONAL BANK
GOLD BANCSHARES, INC. OF KANSAS CITY
"Borrower" "Bank"
By: /s/ Michael W. Gullion By: /s/
-------------------------------- --------------------------------------
Title: Chairman, CEO Title:
----------------------------- -----------------------------------
Date: 4/25/96 Date:
------------------------------ ------------------------------------
EXCHANGE NATIONAL BANK CITIZENS STATE BANK
"Subsidiary Bank" "Subsidiary Bank"
By: /s/ Michael W. Gullion By: /s/ Michael W. Gullion
-------------------------------- --------------------------------------
Title: Chairman, CEO Title: Chairman, CEO
----------------------------- -----------------------------------
Date: 4/25/96 Date: 4/25/96
------------------------------ ------------------------------------
PROVIDENT BANCSHARES, INC. PROVIDENT SAVINGS BANK
"Subsidiary Bank" "Subsidiary Bank"
By: /s/ Michael W. Gullion By: /s/ Michael W. Gullion
-------------------------------- --------------------------------------
Title: Chairman, CEO Title: Chairman, CEO
----------------------------- -----------------------------------
Date: 4/25/96 Date: 4/25/96
------------------------------ ------------------------------------
4
<PAGE>
EXHIBIT 10(e)
TAX SHARING AGREEMENT
---------------------
AGREEMENT made this ____ day of ____________, 19__, by and between Gold
Banc Corporation, Inc., a Kansas corporation ("Bancshares") and _______________,
a Kansas banking corporation ("Bank").
WHEREAS, Bancshares owns in excess of eighty (80) percent of the issued and
outstanding shares of voting common stock of Bank, the only class of stock that
Bank is authorized to issue; and
WHEREAS, Bancshares has become a member of an affiliated group within the
meaning of Section 1504(c) of the Internal Revenue Code of which Bancshares is
the common parent corporation (the "Group"); and
WHEREAS, Bancshares proposed to include Bank in the filing of a
consolidated federal income tax return; and
WHEREAS, Bank is willing to be so included in the filing of a consolidated
federal income tax return, provided that Bancshares is willing to undertake the
responsibilities regarding the preparation of, filing of and accounting with
respect to such consolidated federal income tax return; and
WHEREAS, Bancshares and Bank each desire to compensate the other fully for
any tax benefits provided by it in the filing of any consolidated federal income
tax return.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and undertakings hereinafter provided, Bancshares and Bank hereby agree as
follows:
1. CONSOLIDATED RETURN ELECTION. Bank agrees to join in the filing of a
consolidated federal income tax return by Bancshares for the current calendar
year and for any subsequent taxable periods for which the Group is required if
Bancshares so elects. Bank agrees to execute and file such consents and
Bancshares agrees to execute and file such consents, elections and other
documents and to take all such other actions as may be necessary or appropriate
to carry out the purposes of this Agreement. Any period for which Bank is
included in a consolidated federal income tax return filed by Bancshares is
referred to in this Agreement as a "Bank Consolidated Return Year."
2. BANK LIABILITY TO BANCSHARES FOR BANK CONSOLIDATED RETURN YEARS.
Bank agrees to remit Bancshares its prorata share of the total consolidated tax
liability less applicable credits, estimates and other payments, calculated as
if it were filing a separate return for the year. Bank agrees to transfer
quarterly an amount to Bancshares equal to an amount
<PAGE>
2
of estimated payment based upon a method acceptable by the Internal Revenue
Service which Bank might choose had Bank filed separate Federal income tax
returns in the preceding year. Bancshares further agrees not to receive from
Bank and Bank further agrees not to pay Bancshares any portion of the Bank's
deferred tax account. The quarterly estimated payments and final liability must
be remitted to Bancshares within five days of the Federal due dates for payment.
Any overpayment by Bank of quarterly estimate or year-end liability shall be
refunded to Bank at the time such overpayment is finally determined, upon
receipt of any refunds from the I.R.S. or applied to the next immediate
quarterly payment at the sole election of Bancshares if this is consistent with
the election made to the taxing authority at the consolidated level. Any
repayment or election to apply to the next quarterly estimate shall be made
within a reasonable amount of time and as the Bank would reasonably choose had
it filed a separate return. If Bank's overpayment is in excess of the next
immediate quarterly amount due or any I.R.S. refunds, such excess shall be
refunded to Bank by Bancshares within five days of the date such overpayment is
finally determined.
The Bank and Bancshares further agree to allocate the surtax exemption,
when applicable, in a reasonable manner according to that entity's proportionate
contribution to taxable income.
3. BANCSHARES LIABILITY TO BANK FOR BANK CONSOLIDATED RETURN YEARS. If for
any Bank Consolidated Return Year, Bank has a net operating loss that reduces
the consolidated federal tax liability of the Group below the amount that would
have been payable if Bank had not incurred such loss, Bancshares agrees to pay
the full amount of the reduction so computed to Bank within the approximate time
in which the taxing authority would have made a refund. If for any Bank
Consolidated Tax Return Year, Bank has a net operating loss, Bank's loss
carryback will be computed on a separate entity basis. If this separate entity
net operating loss carryback is fully offset by taxable income generated in pre-
consolidation years, Bank will receive all refunds from the Internal Revenue
Service. If this separate entity net operating loss carryback offsets taxable
income generated by Bank in any Bank Consolidated Return Years, Bancshares will
refund the Bank any amounts due even if refunds received from the Internal
Revenue Service are not sufficient to cover the amount due. It is understood and
agreed that in any year when a Bank net operating loss and a consolidated net
net operating loss occur, the Bank's net operating loss is to be carried back
and fully utilized prior to any consolidated net operating loss (Bancshares
loss) carryback. Refund to be paid by Bancshares to Bank will be paid within
five days of receipt of the refund from the taxing authority by Bancshares or if
no refund is to be received, then five days within the time a refund would have
been received if the Bank has filed Separately.
If, at any time, any unpaid tax benefit exists for more than five days
following the payment s from the taxing authority, an intercompany payable
account should be established by both Bank and Bancshares reducing capital, if
necessary. To the extent possible, this will be done without violating any
provisions of the Federal Reserve Act. Bancshares shall waive all claims
<PAGE>
3
to tax benefits arising prior to this agreement that were not provided for
consistent with this paragraph.
4. ALTERNATIVE MINIMUM TAX. If for any Bank Consolidated Return Year,
alternative minimum tax (AMT) is incurred, the additional tax will be allocated
between Bancshares and Bank on an equitable and consistent manner. The
allocation method utilized will be based upon the portion of tax preferences,
adjustments, and other items causing the AMT to be applicable at the
consolidated level that are generated by Bancshares and Bank. In no case will
AMT be allocated to Bank if it has not generated tax preference or positive tax
adjustment items. In addition, the AMT allocated to Bank within the consolidated
return group should not exceed the consolidated AMT in any year. Furthermore,
AMT credit carryforward will be allocated to the entity that paid the tax
originally. Allocated AMT credits utilized in any one year will not be greater
than what is utilized on a consolidated basis. AMT credit carryforward will be
utilized in the following year's estimated tax payments if it is reasonable to
assume the credits can be applied.
AMT net operating losses will be allocated and treated in the same manner
as ordinary net operation losses. Please reference section 3 for a complete
description of the agreement in this area.
5. TAX ADJUSTMENTS. In the event of any adjustment to the consolidated
federal income tax returns of Bancshares and Bank as filed (whether by reason of
an amended return, claim for refund, or an audit by the Internal Revenue
Service), the liability of Bancshares and Bank under Paragraphs 2 and 3 shall
be redetermined to give effect to any such adjustment as if it had been made as
part of the original computation of tax liability, and any payment thereby
required under paragraphs 2 and 3, by Bancshares to Bank or by Bank to
Bancshares, as the case may be, shall be settled between Bancshares and the Bank
at the same time that the Bank would either have received a refund or been
required to pay additional tax to the Internal Revenue Service on a separate
return basis.
6. BANCSHARES RESPONSIBILITIES. Bancshares agrees that it will prepare and
maintain all books, records and accounts which are required of Bancshares and
Bank by the Internal Revenue Code and regulations promulgated thereunder to be
prepared or maintained by members of groups filing consolidated federal income
tax returns including, but not limited to, all books, records and accounts with
regard to intercompany transactions and earnings and profits. Bancshares further
agrees that it will prepare and file timely (including any properly obtained
extensions of time) all returns which are required by Bancshares and Bank by the
Internal Revenue Code and regulations promulgated thereunder to be filed by
members of groups filing liabilities for federal income taxes reflected thereon,
provided, however, that quarterly tax estimates established by Bank for the
purpose of paying federal income taxes for any Bank Consolidated Return Year and
any final federal income tax liabilities, computed as though Bank were filing a
<PAGE>
4
separate return for such year, shall be transferred to Bancshares pursuant to
the provisions of Section 2 herein, permitting Bancshares funds to satisfy any
federal income taxes for which Bank will be liable.
7. BINDING EFFECT. This Agreement shall be binding on and inure to the
benefit of any successor, by merger, acquisition of assets or otherwise, to
either of the parties hereto to the same extent as if such successor had been an
original party to this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement this ___
day of ________, 19__.
ATTEST: By
--------------------------------------------
-----------------------, President of Bancshares
By
--------------------------------------------
-----------------------, Secretary of Bancshares
ATTEST: By
--------------------------------------------
-----------------------, President of Bank
<PAGE>
EXHIBIT 10(f)
FEDERAL HOME LOAN BANK OF DES MOINES
Des Moines, Iowa
AGREEMENT FOR ADVANCES, PLEDGE AND SECURITY AGREEMENT
This Agreement for Advances, Pledge and Security Agreement ("Agreement"),
effective the ______ day of ________________________, 19____, is entered into
between_________________________________________________________________________
____ ("Member"), with principal offices at ___________________________________,
and the Federal Home Loan Bank of Des Moines ("Bank"), with principal offices at
907 Walnut, Des Moines, Iowa 50309.
WHEREAS, the Bank in accordance with the Federal Home Loan Bank Act,
regulations and directives of the Federal Home Loan Bank Board, and policies
promulgated by its own Board, makes available advances to its members. The
available advances are set forth by the Bank in a statement of "Credit Policy,"
as may be amended from time to time.
WHEREAS, the Member may, from time to time, apply for an advance or
advances which may be available to it.
NOW, THEREFORE, for valuable consideration and with respect to each and
every such advance, the Parties agree as follows:
SECTION 1. CONFIRMATION OF ADVANCE. To be bound by the terms and
conditions set forth herein, in the confirmation of advance issued with respect
to each advance, and in the Bank's Credit Policy as may be amended from time to
time. A confirmation of advance shall mean a writing or machine readable
electronic transmission in such form or forms as may be determined by the Bank
from time to time.
SECTION 2. PAYMENT TO THE BANK. To repay each and any advance together
with interest thereon according to the confirmation of each such advance
communicated to the Member by the Bank, together with any unpaid costs and
expenses in connection therewith. Such payment shall be made at the office of
the Bank in Des Moines, Iowa, or at such other place as the Bank, or its
successors or assigns, may from time to time appoint in writing.
The default rate on past due principal and interest may, at the option of
the Bank, be at a rate 1% per annum, higher than the then current rate being
charged by the Bank for advances.
SECTION 3. ASSIGNMENT TO BANK OF SECURITY INTEREST IN BANK STOCK. The
member hereby assigns, transfers and pledges to the Bank, its successors or
assigns, all stock of the Federal Home Loan Bank of Des Moines owned by the
Member as
<PAGE>
collateral security for payment of any and all indebtedness, whether in the
nature of an advance or otherwise, of the Member to the Bank, its successors and
assigns.
SECTION 4. ASSIGNMENT OF SECURITY INTEREST IN OTHER COLLATERAL. As
additional collateral security for any and all such advances, Member assigns,
transfers, and pledges to the Bank, its successors or assigns, each and every
note or other instrument evidencing a debt and any mortgage, deed of trust,
title, or document of title securing it; all securities (including but not
limited to mortgage-backed securities issued or guaranteed by the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association,
obligations of or guaranteed by the United States or an agency thereof, share
certificates or other participation interests in any securities trust, mortgage
loan participation certificates); all contract for deeds; all chattel paper; any
chose in action; all general intangibles; all deposit accounts; certificates of
deposit; and proceeds from any of the above (hereinafter "Collateral"). With
respect to such Collateral, Member undertakes and agrees as follows:
A. That such security interest shall extend to after acquired Collateral
of a similar nature;
B. That the Member shall be at liberty to use, commingle, and dispose of
all or part of the Collateral, and to collect, compromise, and dispose of the
proceeds of the Collateral without being required to account for the proceeds or
replace the Collateral subject only to its obligation to maintain the Collateral
as herein provided;
C. To keep and maintain such Collateral free and clear of pledges, liens,
and encumbrances to others at the required collateral maintenance level. The
"required collateral maintenance level" means the amount of collateral the
Member is required to maintain free and clear of pledge, liens, and encumbrances
to others as set forth from time to time in the Credit Policy.
D. To assemble and deliver Collateral to the Bank or its authorized
agents immediately upon demand of the Bank; and as specified by the Bank in its
Credit Policy from time to time, and to pay for the safekeeping collateral as
established by the Bank.
E. To make, execute, and delivery to the Bank such assignment,
endorsements, listings, powers, financing statements, or other instruments as
the Bank may reasonably require respecting such Collateral.
SECTION 5. DUTY TO USE REASONABLE CARE. In the event Member delivers
security to Bank or its Agent pursuant to paragraph 4 above, the duty of the
Bank with respect to said security shall be solely to use reasonable care in the
custody and preservation of the security in its possession.
2
<PAGE>
SECTION 6. ADDITIONAL SECURITY. Member shall assign additional or
substituted Collateral for such advances at any time the Bank shall deem it
necessary for the Bank's protection.
SECTION 7. EVENTS OF DEFAULT. The Bank may consider the Member in default
hereunder upon the occurrence of any of the following events or conditions:
A. Failure of the Member to pay any interest, or repay any principal, of
any advances as herein required; or
B. Breach or failure to perform by the Member of any covenant, promise,
condition, obligation, or liability contained or referred to herein, or any
other agreement to which the Member and the Bank are parties; or
C. Proof being made that any representations, statements, or warranty
made or furnished in any manner to the Bank by or on behalf of the Member in
connection with all or part of any advance with false in any material respect
when made or furnished; or
D. Loss, theft, damages, destruction, sale or encumbrance to or of any of
the Collateral except as herein permitted, or the making of any levy, seizure or
attachment thereof or therein; or
E. Any tax levy, attachment, garnishment, levy of execution, or other
process issued against the Member or the Collateral; or
F. Any suspension of payment by the Member to any creditor or any events
which result in acceleration to the maturity of any indebtedness of the Member
to others under any indenture, agreement or undertaking; or
G. Application for, or appointment of, a receiver of any part of the
property of the Member, or in case of adjudication of insolvency, or assignment
for benefit of creditors, or general transfer of assets by the Member, or if
management of the Member is taken over by any supervisory authority, or in case
of any other form of liquidation, merger, sale of assets, or voluntary
dissolution, or upon termination of the membership of the Member in the Federal
Home Loan Bank of Des Moines, or in the case of advances made under the
provisions of 12 USC (S) 1431(9)(4), if at any time thereafter the creditor
liabilities of the Member, excepting its liabilities to the Bank, are increased
in any manner or an amount exceeding 5% of its net assets; or
H. Determination by the Bank that a material adverse change has occurred
in the financial condition of the Member from that disclosed at the time of the
making of any advance, or from the condition of the Member as theretofore most
recently disclosed to the Bank in any manner; or
3
<PAGE>
I. If the Bank reasonably and in good faith deems itself insecure even
though the Member is not otherwise in default.
SECTION 8. BANK REMEDIES IN THE EVENT OF DEFAULT. At any time after any
default as hereinbefore provided, the Bank may, at its option, declare the
entire amount of any and all advances to be immediately due and payable. The
Bank shall have all of the remedies of a secured party under the Uniform
Commercial Code of the State of Iowa. In addition thereto, the Bank may take
immediate possession of any of the Collateral or any part thereof wherever the
same may be found. The Member agrees to pay all the costs and expenses or the
Bank in the collection of the secured indebtedness and enforcement of the Bank's
rights hereunder including, without limitation, reasonable attorneys' fees. The
Bank may sell the Collateral or any part thereof in such manner and for such
price as the Bank deems appropriate without any liability for any loss due to
decrease in the market value of the Collateral during the period held. The Bank
shall have the right to purchase all or part of the Collateral at public or
private sale. If any notification of intended disposition of any of the
Collateral is required by law, such notification shall be deemed reasonable and
properly given if mailed, postage prepaid, at least five days before any such
disposition to the address of the Member appearing on the records of the Bank.
The proceeds of any sale shall be applied in the following order: First, to pay
all costs and expenses of every kind for the care, collection, safekeeping,
sale, foreclosure, delivery or otherwise respecting the Collateral (including
expenses incurred in the protection of the Bank's title to or lien upon or right
in any of the Collateral, expenses for legal services of any kind in connection
therewith or in making any such sale or sales, insurance, commission for sales,
and guaranty); then to interest on all indebtedness of the Member to the Bank,
then to the principal amount of any such indebtedness whether or not such
indebtedness is due or accrued. The Bank, at its discretion, may apply any
surplus to indebtedness of Member to third parties claiming a secondary security
interest in the Collateral. Any remaining surplus shall be paid to the Member.
SECTION 9. APPOINTMENT OF BANK AS ATTORNEY-IN-FACT. In the event of
default, and without limiting any other rights the Bank might have as a secured
party under the Uniform Commercial Code of Iowa, or the laws of any jurisdiction
under which Bank might be exercising rights hereunder, and under this Agreement,
Member does hereby make, constitute, and appoint Bank its true and lawful
attorney-in-fact to deal with the Collateral and, in its name and stead to
release, collect, compromise, settle, and release or record any mortgage of deed
or trust which is a part of such Collateral as fully as the Member could do if
acting for itself. The powers herein granted are coupled with an interest, and
are irrevocable, and full power of substitution is granted to the Bank in the
premises.
SECTION 10. AUDIT AND VERIFICATION OF COLLATERAL. In extension and not in
limitation of all requirements of law respecting examination of the Member by or
on behalf of the Bank, the Member agrees that all Collateral pledged hereunder
shall always be subject to audit and verification by or on behalf of the Bank in
its corporate capacity.
4
<PAGE>
SECTION 11. RESOLUTION TO BE FURNISHED BY MEMBER. Member agrees to
furnish to the Bank from time to time a certified copy of resolution of its
Board of Directors or other governing body authorizing such of the Member's
officers as the Member shall select to apply for advances from the Bank. Unless
the Bank shall be otherwise notified in writing, the Bank may honor applications
made by such officers other than in writing, but, in such event the Member shall
confirm such application for advance in writing on forms furnished by the Bank.
But the Member shall forever be estopped to deny its obligation to repay such
advance whether or not an application in writing is ever received by the Bank so
long only as the advance is made in good faith by the Bank on the request of an
officer or employee so authorized by the Member.
SECTION 12. APPLICABILITY OF BANK ACT. In addition to the terms and
conditions herein specifically set forth, all advances are subject to the
rights, powers, privileges and duties conferred upon the Federal Home Loan Bank
Board, the Federal Home Loan Banks, and on member institutions by the Act of
Congress entitled, "Federal Home Loan Bank Act, as amended."
SECTION 13. JURISDICTION. In any action or proceeding brought by the Bank
or the Member in order to enforce any right or remedy under this agreement,
Member will submit to the jurisdiction of the United States District Court for
the Southern District of Iowa, or if such action or proceeding may not be
brought in Federal Court, the jurisdiction of the Iowa District Court in Polk
County.
If any action or proceeding is brought by the Member seeking to obtain
relief against the Bank arising out of this Agreement and such relief is not
granted by a court of competent jurisdiction, the Member will pay all attorneys'
fees and court costs incurred by the Bank in connection therewith.
SECTION 14. CHOICE OF LAW. This Agreement shall be construed and enforced
according to the laws of the State of Iowa, except that the rate of interest on
advances hereunder shall be governed by the provisions of 12 USC 1430(e) (as
amended).
SECTION 15. AGREEMENT CONSTITUTES ENTIRE AGREEMENT. This Agreement
embodies the entire Agreement and understanding between the parties hereto
relating to the subject matter hereof and supersedes all prior agreements
between such parties that relate to the subject matter except that: The Credit
Policy as duly adopted by the Bank's Board of Directors from time to time shall
be incorporated herein, unless agreed to in writing by both parties. Advances
made by the Bank to Member prior to the execution of this Agreement shall
continue to be governed exclusively by the terms of the prior agreements
pursuant to which such advances were made, except that (i) any default
thereunder shall constitute default hereunder; (ii) Collateral furnished as
security hereunder shall also secure such prior advances, and (iii) the rights
and obligations with respect to such Collateral shall be governed by the terms
of this Agreement.
5
<PAGE>
SECTION 16. SECTION HEADINGS. Section headings are not to be considered
part of this Agreement. Section headings are solely for convenience of
reference, and shall not effect the meaning or interpretation of this Agreement
or any of its provisions.
SECTION 17. SEVERABILITY OF SECTIONS. If any section or portion thereof
is deemed void in any legal proceeding, the remainder of the Agreement shall
remain in full force and effect.
SECTION 18. Each person signing this document on behalf of the Member
represents that its execution was authorized by appropriate action of the
directors of the Member which was completed on the _____ day of _______________,
19___, and that such action is duly reflected in the records of the Member.
MEMBER FEDERAL HOME LOAN BANK OF
DES MOINES
By:___________________________________ By:______________________________________
Title:________________________________ Title:___________________________________
Date:_________________________________ Date:____________________________________
<PAGE>
EXHIBIT 16
September 19, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We were previously the principal accountant for Gold Banc Corporation, Inc.
(formerly Gold Bancshares, Inc.) and, under the date of February 17, 1995, we
reported on the Consolidated Financial Statements of Gold Bancshares, Inc. and
Subsidiaries as of and for the years ended December 31, 1994 and 1993. We have
read the disclosure in the Experts section of Gold Banc Corporation, Inc.'s Form
SB-2 dated September 19, 1996 and are in agreement with the statements contained
in the third paragraph therein.
/s/ GRA Thompson, White & Co., P.C.
GRA Thompson, White & Co., P.C.
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE COMPANY
Exchange National Bank
Citizens State Bank and Trust Company
Provident Banchares, Inc.
Provident Bank, f.s.b. (subsidiary of Provident Bancshares, Inc.)
Provident Financial Services, Inc. (subsidiary of Provident Bank, f.s.b.)
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration Statement on Form SB-2 of
our report dated February 17, 1995, relating to the Consolidated Financial
Statements of Gold Bancshares, Inc. and subsidiaries (now Gold Banc Corporation,
Inc. and subsidiaries) and to the reference to our Firm under the heading
"Experts" in the Prospectus.
Merriam, Kansas
September 19, 1996
/s/ GRA Thompson, White & Co., P.C.
<PAGE>
Exhibit 23 (b)
ACCOUNTANTS' CONSENT
Board of Directors
Gold Banc Corporation, Inc.:
We consent to the use of our report on the consolidated financial statements of
Gold Banc Corporation, Inc. as of and for the year ended December 31, 1995
included herein and to the reference to our firm under the heading "Experts" in
the prospectus.
/s/ KPMG Peat Marwick LLP
Kansas City, Missouri
September 19, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 7,678 8,281
<INT-BEARING-DEPOSITS> 3,345 9,042
<FED-FUNDS-SOLD> 1,425 5,900
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 72,502 67,350
<INVESTMENTS-CARRYING> 25 25
<INVESTMENTS-MARKET> 0 0
<LOANS> 182,098 157,520
<ALLOWANCE> 2,625 (2,715)
<TOTAL-ASSETS> 280,097 263,957
<DEPOSITS> 241,111 226,381
<SHORT-TERM> 17,892 15,638
<LIABILITIES-OTHER> 1,587 1,624
<LONG-TERM> 8,417 8,992
<COMMON> 2,000 2,001
0 0
0 65
<OTHER-SE> 9,090 9,256
<TOTAL-LIABILITIES-AND-EQUITY> 280,097 263,957
<INTEREST-LOAN> 8,026 14,486
<INTEREST-INVEST> 2,017 3,760
<INTEREST-OTHER> 304 185
<INTEREST-TOTAL> 10,347 18,431
<INTEREST-DEPOSIT> 5,341 8,804
<INTEREST-EXPENSE> 5,990 10,045
<INTEREST-INCOME-NET> 4,357 8,386
<LOAN-LOSSES> 60 1,284
<SECURITIES-GAINS> 0 (84)
<EXPENSE-OTHER> 4,341 8,001
<INCOME-PRETAX> 1,087 1,039
<INCOME-PRE-EXTRAORDINARY> 1,087 1,039
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 715 704
<EPS-PRIMARY> .36 .34
<EPS-DILUTED> .36 .34
<YIELD-ACTUAL> 3.38 3.72
<LOANS-NON> 864 1,739
<LOANS-PAST> 1 2
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 2,715 2,047
<CHARGE-OFFS> 155 671
<RECOVERIES> 5 55
<ALLOWANCE-CLOSE> 2,625 2,715
<ALLOWANCE-DOMESTIC> 2,625 2,715
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
