SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 21, 1998
GOLD BANC CORPORATION, INC.
(Exact name of registrant as specified in its charter)
KANSAS 0-28936 48-1008593
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
11301 Nall Avenue, Leawood, Kansas 66211
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 451-8050
None
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On October 21, 1998, Gold Banc Corporation, Inc. ("Company") completed the
acquisition of First State Bancorp, Inc. ("First State Bancorp"), a one bank
holding company that owned The First State Bank and Trust Company, located in
Pittsburg, Kansas. The Company acquired First State Bancorp pursuant to a merger
of First State Bancorp with and into a wholly-owned subsidiary of the Company
(the "Sub"). In connection with the acquisition, the Company issued an aggregate
of 1,787,219 shares of the Company's common stock, par value $1.00 per share,
("Company Common Stock") to First State Bancorp stockholders as provided in the
Agreement and Plan of Reorganization among the Company, the Sub, and First State
Bancorp. The stockholders of First State Bancorp received 19.6082 shares of the
Company Common Stock for each share of First State Bancorp Common Stock held at
the consummation of the transaction. First State Bancorp had total assets of
$111.4 million, deposits of $93.0 million and loans of $59.6 million at June 30,
1998.
The acquisition of First State Bancorp by the Company will be treated
as a pooling of interests for accounting and financial reporting purposes.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Index to Financial Statements and Exhibits
(i) Unaudited Pro Forma Consolidated Financial Statements
Introduction F-1
Unaudited Pro Forma Combined Balance Sheet of
June 30, 1998 F-2
Unaudited Pro Forma Combined Income Statements for the
Six Months Ended June 30, 1998 F-3
Unaudited Pro Forma Combined Income Statements for the
Six Months Ended June 30, 1997 F-4
Unaudited Pro Forma Combined Balance Sheet of
December 31, 1997 F-5
Unaudited Pro Forma Combined Income Statements for the
Year Ended December 31, 1997 F-6
Unaudited Pro Forma Combined Income Statements for the
Year Ended December 31, 1996 F-7
Unaudited Pro Forma Combined Income Statements for the
Year Ended December 31, 1995 F-8
(ii) First State Bancorp, Inc. Financial Statements
Independent Accountant's Report F-9
Consolidated Balance Sheets of June 30, 1998 and
December 31, 1997 and 1996 F-10
Consolidated Statements of Income -- Three and Six
Months Ended June 30, 1998 and 1997 and Years
Ended December 31, 1997, 1996 and 1995 F-11
Consolidated Statements of Changes in Stockholders
Equity -- Six Months Ended June 30, 1998 and
1997 and Years Ended December 31, 1997, 1996
and 1995 F-12
Consolidated Statements of Cash Flows -- Six Months
Ended June 30, 1998 and 1997 and Years Ended
December 31, 1997, 1996, and 1995 F-13
Notes to Consolidated Financial Statements F-14
(b) Exhibits
The exhibits listed in the accompanying Exhibit
Index are filed as part of the Current Report
on Form 8-K.
<PAGE>
PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements reflect
the business combination between the Company and First State Bancorp (in the
form of a merger) accounted for on a pooling of interests basis. The pro forma
combined balance sheets combine the Company's June 30, 1998, and December 31,
1997, consolidated balance sheets with First State Bancorp's June 30, 1998, and
December 31, 1997, consolidated balance sheets, respectively, giving effect to
the merger as if such transaction had occurred as of such dates. The pro forma
combined statements of income combine the Company's historical consolidated
statements of income for the unaudited six month periods ended June 30, 1998 and
1997, and the three fiscal years ended December 31, 1997, 1996 and 1995, with
the corresponding historical consolidated statements of income of First State
Bancorp for such periods, giving effect to the merger as if such transaction had
occurred at the beginning of the respective periods.
The unaudited historical consolidated financial statement data of the
Company as of June 30, 1998, and for the six month periods ended June 30, 1998
and 1997, and the unaudited historical consolidated financial statement data of
First State Bancorp as of June 30, 1998, and for the six month periods ended
June 30, 1998 and 1997, have been prepared on the same basis as the historical
information derived from audited financial statements, and, in the opinion of
their respective managements, reflect all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation of the financial position
and results of operation for such periods.
The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the actual operating results or financial
position of the combined entity that would have been achieved had the merger
been consummated at the dates presented, nor is it necessarily indicative of the
combined entity's future operating results or financial position. The unaudited
pro forma combined financial statements do not incorporate any benefits from
cost savings or synergies of operations of the combined entity that may occur.
The Company and First State Bancorp anticipate incurring direct transaction
costs and integration costs related to the merger. Such anticipated costs are
not reflected in the pro forma information.
The pro forma combined financial statements are based on the historical
consolidated financial statements of the Company and First State Bancorp and the
notes thereto, and should be read in conjunction with the financial statements
of the Company incorporated by reference herein and First State Bancorp included
elsewhere herein.
F-1
<PAGE>
<TABLE>
<CAPTION>
GOLD BANC CORPORATION, INC.
PRO FORMA COMBINED BALANCE SHEET (Unaudited)
June 30, 1998
(In Thousands)
<S> <C> <C> <C> <C>
Gold Banc
Gold Banc Corporation, Inc.
Corporation, Inc First State and Subsidiaries
and Subsidiaries Bancorp, Inc. Adjustments Pro Forma
------------------ --------------- ------------- ----------------------
ASSETS
Cash and cash equivalents $ 28,056 $ 4,276 $ 32,332
Available-for-sale securities 117,186 38,339 155,525
Other securities 10,683 3,769 14,452
Loans, net 387,034 59,636 446,670
Other assets 42,722 5,385 48,107
-------------- --------------- --------------
$ 585,681 $ 111,405 $ 697,086
============== =============== ==============
LIABILITIES
Deposits $ 465,295 $ 93,072 $ 558,367
Other liabilities 70,351 7,726 78,077
-------------- --------------- --------------
Total Liabilities 535,646 100,798 636,444
-------------- --------------- --------------
EQUITY CAPITAL
Common stock 10,704 920 867 (1) 12,491
Additional paid-in capital 22,610 1,499 (867) (2) 23,216
(26) (3)
Undivided profits 16,745 8,015 24,760
Treasury stock (26) 26 (3) -
Accumulated other comprehensive income 212 199 411
Unearned compensation (236) (236)
-------------- --------------- ------------- --------------
50,035 10,607 - 60,642
-------------- --------------- ------------- --------------
$ 585,681 $ 111,405 $ $ 697,086
============== =============== ============= ==============
(1)Adjustment to common stock to account for merger computed as
follows:
Number of shares of First State Bancorp shares outstanding prior to merger 91
Exchange ratio of Gold Banc Corporation for First State Bancorp 19.6082
-------------
Gold Banc Corporation shares to be issued ($1 par value) 1,787
Gold Banc Corporation shares outstanding prior to merger ($1 par value) 10,704
-------------
Pro forma common stock $ 12,491
=============
(2)Adjustment to additional paid-in capital to account for merger computed as follows:
Historical capital:
Gold Banc Corporation common stock $ 10,704
First State Bancorp common stock 920
Gold Banc Corporation additional paid-in capital 22,610
First State Bancorp additional paid-in capital 1,499
First State Bancorp treasury stock (26)
--------------
Total historical capital 35,707
Less: Pro forma common stock (12,491)
--------------
Pro forma additional paid-in capital $ 23,216
==============
(3)Adjustment to eliminate First State Bancorp treasury stock.
F-2
<PAGE>
GOLD BANC CORPORATION, INC.
PRO FORMA COMBINED INCOME STATEMENTS (Unaudited)
For The Six Months Ended June 30, 1998
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Gold Banc
Gold Banc Corporation, Inc.
Corporation, Inc First State and Subsidiaries
and Subsidiaries Bancorp, Inc. Pro Forma
-------------------- -------------------- ----------------------
INTEREST INCOME
Loans, including fees $ 17,442 $ 2,849 $ 20,291
Investment securities 3,571 1,150 4,721
Other interest income 454 73 527
-------------------- -------------------- ----------------------
Total interest income 21,467 4,072 25,539
-------------------- -------------------- ----------------------
INTEREST EXPENSE
Deposits 9,925 1,948 11,873
Borrowings and other 1,962 79 2,041
-------------------- -------------------- ----------------------
Total interest expense 11,887 2,027 13,914
-------------------- -------------------- ----------------------
NET INTEREST INCOME 9,580 2,045 11,625
PROVISION FOR LOAN LOSSES 594 160 754
-------------------- -------------------- ----------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,986 1,885 10,871
-------------------- -------------------- ----------------------
NONINTEREST INCOME
Service charges on deposits 664 172 836
Investment trading fees & commissions 1,409 1,409
Net gains on sale of mortgage loans 519 519
All other noninterest income 407 225 632
-------------------- -------------------- ----------------------
Total noninterest income 2,999 397 3,396
-------------------- -------------------- ----------------------
NONINTEREST EXPENSE
Salaries and employee benefits 4,507 595 5,102
Net occupancy expense 1,176 87 1,263
Other noninterest expense 2,553 652 3,205
-------------------- -------------------- ----------------------
Total noninterest expense 8,236 1,334 9,570
-------------------- -------------------- ----------------------
INCOME BEFORE INCOME TAXES 3,749 948 4,697
PROVISION FOR INCOME TAXES 1,234 286 1,520
-------------------- -------------------- ----------------------
NET INCOME $ 2,515 $ 662 $ 3,177
==================== ==================== ======================
BASIC EARNINGS PER SHARE $ 0.24 $ 0.26
==================== ======================
DILUTED EARNINGS PER SHARE $ 0.24 $ 0.26
==================== ======================
F-3
<PAGE>
GOLD BANC CORPORATION, INC.
PRO FORMA COMBINED INCOME STATEMENTS (Unaudited)
For The Six Months Ended June 30, 1997
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Gold Banc
Gold Banc Corporation, Inc.
Corporation, Inc First State and Subsidiaries
and Subsidiaries Bancorp, Inc. Pro Forma
------------------- ----------------- ------------------
INTEREST INCOME
Loans, including fees $ 11,462 $ 2,485 $ 13,947
Investment securities 2,826 1,093 3,919
Other interest income 244 49 293
--------------- ----------------- ------------------
Total interest income 14,532 3,627 18,159
--------------- ----------------- ------------------
INTEREST EXPENSE
Deposits 6,877 1,714 8,591
Borrowings and other 660 57 717
--------------- ----------------- ------------------
Total interest expense 7,537 1,771 9,308
--------------- ----------------- ------------------
NET INTEREST INCOME 6,995 1,856 8,851
PROVISION FOR LOAN LOSSES 255 60 315
--------------- ----------------- ------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,740 1,796 8,536
--------------- ----------------- ------------------
NONINTEREST INCOME
Service charges on deposits 490 172 662
Net gains on sale of mortgage loans 289 289
All other noninterest income 386 197 583
--------------- ----------------- ------------------
Total noninterest income 1,165 369 1,534
--------------- ----------------- ------------------
NONINTEREST EXPENSE
Salaries and employee benefits 2,841 521 3,362
Net occupancy expense 934 99 1,033
Other noninterest expense 1,462 581 2,043
--------------- ----------------- ------------------
Total noninterest expense 5,237 1,201 6,438
--------------- ----------------- ------------------
INCOME BEFORE INCOME TAXES 2,668 964 3,632
PROVISION FOR INCOME TAXES 896 300 1,196
--------------- ----------------- ------------------
NET INCOME $ 1,772 $ 664 $ 2,436
=============== ================= ==================
BASIC EARNINGS PER SHARE $ 0.19 $ 0.21
============== ==================
DILUTED EARNINGS PER SHARE $ 0.19 $ 0.21
=============== ==================
F-4
<PAGE>
GOLD BANC CORPORATION, INC.
PRO FORMA COMBINED BALANCE SHEET (Unaudited)
December 31, 1997
(In Thousands) Gold Banc
Corporation,
Gold Banc Inc.
Corporation, Inc First State and
and Bancorp, Subsidiaries
Subsidiaries Inc. Adjustments Pro Forma
----------------- ------------ ----------- -------------
ASSETS
Cash and cash equivalents $ 41,111 $ 4,747 $ 45,858
Available-for-sale securities 100,500 36,671 137,171
Other securities 3,937 3,657 7,594
Loans, net 340,630 56,100 396,730
Other assets 28,419 5,122 33,541
---------------- ------------- -------------
$ 514,597 $ 106,297 $ 620,894
================ ============= =============
LIABILITIES
Deposits $ 419,139 $ 91,561 $ 510,700
Other liabilities 53,725 4,563 58,288
---------------- ------------- -------------
472,864 96,124 568,988
Total Liabilities
---------------- ------------- -------------
EQUITY CAPITAL
Common stock 10,133 920 864 (1) 11,917
Additional paid-in capital 17,199 1,489 (864)(2) 17,794
(30)(3)
Undivided profits 14,605 7,535 22,140
Treasury Stock (30) 30 (3) -
Accumulated other comprehensive income 32 259 291
Unearned compensation (236) (236)
---------------- ------------- ------------- -------------
41,733 10,173 - 51,906
---------------- ------------- ------------- -------------
$ 514,597 106,297 $ - $ 620,897
================ ============= ============= =============
(1) Adjustment to common stock to account for merger computed as follows:
Number of shares of First State Bancorp shares outstanding prior to merger 91
Exchange ratio of Gold Banc Corporation for First State Bancorp 19.6082
------------
Gold Banc Corporation shares to be issued ($1 par value) 1,784
Gold Banc Corporation shares outstanding prior to merger ($1 par value) 10,133
------------
Pro forma common stock $ 11,917
============
(2) Adjustment to additional paid-in capital to account for merger computed as follows:
Historical capital:
Gold Banc Corporation common stock $ 10,133
First State Bancorp common stock 920
Gold Banc Corporation additional paid-in capital 17,199
First State Bancorp additional paid-in capital 1,489
First State Bancorp treasury stock (30)
------------
Total historical capital 29,711
Less: Pro forma common stock (11,917)
------------
Pro forma additional paid-in capital $ 17,974
============
(3) Adjustment to eliminate First State Bancorp treasury stock.
F-5
<PAGE>
GOLD BANC CORPORATION, INC.
PRO FORMA COMBINED INCOME STATEMENTS (Unaudited)
For The Year Ended December 31, 1997
(In Thousands, Except Per Share Data)
Gold Banc
Corporation, Inc.
Gold Banc First State and Subsidiaries
and Subsidiaries Bancorp, Inc. Pro Forma
------------------ ------------------ ---------------------
INTEREST INCOME
Loans, including fees $ 25,871 $ 5,174 $ 31,045
Investment securities 5,408 2,215 7,623
Other interest income 669 88 757
------------------- ----------------- ------------------
Total interest income 31,948 7,477 39,425
------------------- ----------------- ------------------
INTEREST EXPENSE
Deposits 15,160 3,543 18,703
Borrowings and other 1,532 139 1,671
------------------- ----------------- ------------------
Total interest expense 16,692 3,682 20,374
------------------- ----------------- ------------------
NET INTEREST INCOME 15,256 3,795 19,051
PROVISION FOR LOAN LOSSES 865 120 985
------------------- ----------------- ------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 14,391 3,675 18,066
------------------- ----------------- ------------------
NONINTEREST INCOME
Service charges on deposits 1,060 349 1,409
Net gains on sale of mortgage loans 679 679
All other noninterest income 1,037 399 1,436
------------------- ----------------- ------------------
Total noninterest income 2,776 748 3,524
------------------- ----------------- ------------------
NONINTEREST EXPENSE
Salaries and employee benefits 6,244 1,147 7,391
Net occupancy expense 1,931 212 2,143
Other noninterest expense 3,373 1,262 4,635
------------------- ----------------- ------------------
Total noninterest expense 11,548 2,621 14,169
------------------- ----------------- ------------------
INCOME BEFORE INCOME TAXES 5,619 1,802 7,421
PROVISION FOR INCOME TAXES 1,888 544 2,432
------------------- ----------------- -----------------
NET INCOME $ 3,731 $ 1,258 $ 4,989
=================== ================= ==================
BASIC EARNINGS PER SHARE $ 0.39 $ 0.43
=================== ==================
DILUTED EARNINGS PER SHARE $ 0.38 $ 0.43
=================== ==================
F-6
<PAGE>
GOLD BANC CORPORATION, INC.
PRO FORMA COMBINED INCOME STATEMENTS (Unaudited)
For The Year Ended December 31, 1996
(In Thousands, Except Per Share Data)
Gold Banc
Corporation, Inc.
Gold Banc First State and Subsidiaries
and Subsidiaries Bancorp, Inc. Pro Forma
------------------ ------------------ ---------------------
INTEREST INCOME
Loans, including fees $ 19,796 $ 4,853 $ 24,649
Investment securities 6,134 1,738 7,872
Other interest income 469 89 558
----------------- -------------------- ---------------------
Total interest income 26,399 6,680 33,079
----------------- -------------------- ---------------------
INTEREST EXPENSE
Deposits 13,340 3,197 16,537
Borrowings and other 1,725 137 1,862
----------------- -------------------- ---------------------
Total interest expense 15,065 3,334 18,399
----------------- -------------------- ---------------------
NET INTEREST INCOME 11,334 3,346 14,680
PROVISION (CREDIT) FOR
LOAN LOSSES (25) 118 93
----------------- -------------------- ---------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 11,359 3,228 14,587
----------------- -------------------- ---------------------
NONINTEREST INCOME
Service charges on deposits 1,033 308 1,341
Net gains on sale of mortgage loans 1,128 1,128
All other noninterest income 691 302 993
----------------- -------------------- ---------------------
Total noninterest income 2,852 610 3,462
----------------- -------------------- ---------------------
NONINTEREST EXPENSE
Salaries and employee benefits 6,063 1,082 7,145
Net occupancy expense 1,675 178 1,853
Other noninterest expense 3,329 1,093 4,422
----------------- -------------------- ---------------------
Total noninterest expense 11,067 2,353 13,420
----------------- -------------------- ---------------------
INCOME BEFORE INCOME TAXES 3,144 1,485 4,629
PROVISION FOR INCOME TAXES 1,066 435 1,501
----------------- -------------------- ---------------------
NET INCOME $ 2,078 $ 1,050 $ 3,128
================= ==================== =====================
BASIC EARNINGS PER SHARE $ 0.38 $ 0.43
================= =====================
DILUTED EARNINGS PER SHARE $ 0.38 $ 0.43
================= =====================
F-7
<PAGE>
GOLD BANC CORPORATION, INC.
PRO FORMA COMBINED INCOME STATEMENTS (Unaudited)
For The Year Ended December 31, 1995
(In Thousands, Except Per Share Data)
Gold Banc
Corporation, Inc.
Gold Banc First State and Subsidiaries
and Subsidiaries Bancorp, Inc. Pro Forma
------------------ ------------------ ---------------------
INTEREST INCOME
Loans, including fees $ 17,254 $ 4,613 $ 21,867
Investment securities 5,992 1,582 7,574
Other interest income 195 92 287
-------------- -------------------- ---------------
Total interest income 23,441 6,287 29,728
-------------- -------------------- ---------------
INTEREST EXPENSE
Deposits 11,257 3,064 14,321
Borrowings and other 1,637 182 1,819
-------------- -------------------- ---------------
Total interest expense 12,894 3,246 16,140
-------------- -------------------- ---------------
NET INTEREST INCOME 10,547 3,041 13,588
PROVISION FOR LOAN LOSSES 1,334 60 1,394
-------------- -------------------- ---------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 9,213 2,981 12,194
-------------- -------------------- ---------------
NONINTEREST INCOME
Service charges on deposits 999 234 1,233
Net gains on sale of mortgage loans 1,058 1,058
All other noninterest income 258 262 520
-------------- -------------------- ---------------
Total noninterest income 2,315 496 2,811
-------------- -------------------- ---------------
NONINTEREST EXPENSE
Salaries and employee benefits 5,339 1,030 6,369
Net occupancy expense 1,444 157 1,601
Other noninterest expense 3,007 1,103 4,110
-------------- -------------------- ---------------
Total noninterest expense 9,790 2,290 12,080
-------------- -------------------- ---------------
INCOME BEFORE INCOME TAXES 1,738 1,187 2,925
PROVISION FOR INCOME TAXES 520 300 820
-------------- -------------------- ---------------
NET INCOME $ 1,218 $ 887 $ 2,105
============== ==================== ===============
BASIC EARNINGS PER SHARE $ 0.24 $ 0.30
============== ===============
DILUTED EARNINGS PER SHARE $ 0.24 $ 0.30
============== ===============
F-8
<PAGE>
Independent Accountants' Report
Board of Directors
First State Bancorp, Inc.
Pittsburg, Kansas
We have audited the accompanying consolidated balance sheets of FIRST STATE
BANCORP, INC. as of December 31, 1997 and 1996, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 FIRST STATE
BANCORP, INC. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ BAIRD, KURTZ & DOBSON
Joplin, Missouri
February 6, 1998, except for Note 17
as to which the date is May 19, 1998
F-9
<PAGE>
FIRST STATE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997 and 1996
ASSETS
---------------
<S> <C> <C> <C>
December 31,
June 30, ---------------------------
1998 1997 1996
------------- ------------- -------------
(Unaudited)
Cash and due from banks $ 4,232,172 $ 4,741,013 $ 2,957,695
Interest bearing deposits with banks 44,119 6,172 10,729
Federal funds sold - - 2,800,000
---------- ----------- -----------
Cash and cash equivalents 4,276,291 4,747,185 5,768,424
Available-for-sale securities 38,338,639 36,671,001 29,455,823
Other investments 603,740 156,616 56,177
Student loans held for sale 3,165,377 3,500,591 2,751,997
Loans 59,636,333 56,099,607 51,649,955
Interest receivable 1,100,665 985,706 856,753
Premises and equipment, net 2,065,891 2,077,700 1,853,614
Excess of cost over fair value of net assets acquired, at amortized
cost 1,486,204 1,516,948 1,578,435
Other assets 731,422 541,315 557,242
---------- --------- ---------
Total Assets $ 111,404,562 $106,296,669 $94,528,420
============ ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES
Deposits
Non-interest bearing demand deposits $7,833,010 $7,568,236 $6,638,593
Interest bearing demand deposits 23,572,508 24,110,776 20,486,600
Savings deposits 7,657,589 8,581,811 8,777,830
Time deposits 54,008,728 51,300,456 47,227,632
----------- ----------- ----------
Total Deposits 93,071,835 91,561,279 83,130,655
Federal funds purchased 4,000,000 1,900,000 -
Federal Home Loan Bank advances 2,101,430 648,572 -
Note payable 431,065 631,065 1,181,065
Accrued interest, taxes and other expenses 920,232 1,015,125 835,755
Deferred income taxes 272,560 367,637 327,949
-------- -------- -------
Total Liabilities 100,797,122 96,123,678 85,475,424
------------ ----------- ----------
STOCKHOLDERS' EQUITY
Common stock; $10 par value; 500,000 shares authorized; 92,008
shares issued 920,080 920,080 920,080
Additional paid-in capital 1,499,203 1,488,884 1,488,884
Retained earnings 8,014,962 7,535,202 6,504,356
Accumulated other comprehensive income-unrealized appreciation on
available-for-sale securities, net of income taxes of $103,173 at
June 30, 1998 and $133,996 and $88,071 at December 31, 1997 and 1996,
respectively 198,995 258,825 169,676
Treasury stock, at cost - 860 shares at June 30, 1998 and 1,000
shares at December 31, 1997 and 1996 (25,800) (30,000) (30,000)
-------- -------- --------
Total Stockholders' Equity 10,607,440 10,172,991 9,052,996
------------- ------------- -------------
Total Liabilities and Stockholders' Equity $111,404,562 $106,296,669 $94,528,420
============ ============ ==========
See Notes to Consolidated Financial Statements
F-10
<PAGE>
FIRST STATE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three and Six Months Ended June 30, 1998 and 1997 and
Years Ended December 31, 1997, 1996 and 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30, December 31,
---------------------- ----------------------- ----------------------------------
1998 1997 1998 1997 1997 1996 1995
---------- ----------- ----------- ----------- ---------- ---------- -----------
(Unaudited)(Unaudited) (Unaudited) (Unaudited)
INTEREST INCOME
Loans $1,459,958 $1,288,457 $2,848,869 $2,484,696 $5,174,394 $4,853,334 $4,612,713
Investment securities -
taxable 456,580 467,179 886,657 842,174 1,728,363 1,181,383 948,481
Investment securities -
nontaxable 136,690 126,318 263,088 251,246 486,511 556,490 633,746
Federal funds sold 10,484 3,133 50,284 35,175 59,877 63,585 72,116
Other investments 7,705 1,890 10,497 3,954 7,246 6,658 4,712
Deposits with other banks 6,005 5,176 12,758 10,080 21,274 18,642 14,838
------ ------ ------- ------- ------- ------- -------
Total Interest Income 2,077,422 1,892,153 4,072,153 3,627,325 7,477,665 6,680,092 6,286,606
---------- --------- --------- --------- --------- ---------- ---------
INTEREST EXPENSE
Deposits 981,620 879,734 1,948,223 1,713,683 3,542,977 3,197,399 3,063,554
Federal funds and advances 32,278 11,268 55,003 11,332 55,607 13,956 28,063
Note payable 10,429 22,451 23,711 45,541 83,670 123,212 154,418
------- ------- ------- ------- ------- -------- --------
Total Interest Expense 1,024,327 913,453 2,026,937 1,770,556 3,682,254 3,334,567 3,246,035
---------- -------- ---------- ---------- ---------- ---------- ---------
NET INTEREST INCOME 1,053,095 978,700 2,045,216 1,856,769 3,795,411 3,345,525 3,040,571
PROVISION FOR LOAN LOSSES 130,000 30,000 160,000 60,000 120,000 118,000 60,000
-------- ------- -------- ------- -------- -------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 923,095 948,700 1,885,216 1,796,769 3,675,411 3,227,525 2,980,571
-------- -------- ---------- ---------- ---------- ---------- ---------
NONINTEREST INCOME
Income from fiduciary
activities 65,949 58,320 129,620 113,204 223,688 165,369 126,559
Service charges on deposit
accounts 90,820 89,943 172,263 172,112 348,924 307,925 234,136
Net realized gain (loss) on
sale of available-for-sale
securities - - - 2,600 11,851 11,105 (1,034)
Other income 47,568 39,370 95,256 79,948 163,154 126,460 135,955
------- ------- ------- ------- -------- -------- --------
Total Noninterest Income 204,337 187,633 397,139 367,864 747,617 610,859 495,616
-------- -------- -------- -------- -------- -------- --------
NONINTEREST EXPENSE
Salaries and employee
benefits 296,216 268,120 594,753 521,138 1,146,746 1,082,306 1,030,080
Advertising 21,990 21,493 53,423 45,100 104,582 80,022 70,032
Equipment 77,552 62,811 144,846 117,614 262,658 203,317 168,796
Occupancy 42,219 51,157 87,499 98,578 211,995 178,227 156,787
Legal and professional fees 43,683 17,438 74,342 40,212 83,319 81,285 71,248
Stationary and supplies 24,331 25,003 42,358 44,024 98,367 85,195 70,392
Data processing 32,030 28,939 64,431 57,622 115,483 101,281 97,239
Insurance 8,182 7,379 13,601 14,883 31,836 25,025 115,706
Examinations and dues 21,592 22,648 43,540 41,582 88,705 82,450 81,163
Other operating expenses 108,193 119,838 215,680 220,440 476,724 434,139 428,082
-------- -------- -------- -------- -------- -------- --------
Total Noninterest Expense 675,988 624,826 1,334,473 1,201,193 2,620,415 2,353,247 2,289,525
-------- -------- ---------- ---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 451,444 511,507 947,882 963,440 1,802,613 1,485,137 1,186,662
PROVISION FOR INCOME TAXES 135,284 159,103 285,964 299,708 544,247 434,767 299,916
-------- -------- -------- -------- -------- -------- --------
NET INCOME 316,160 352,404 661,918 663,732 1,258,366 1,050,370 886,746
OTHER COMPREHENSIVE INCOME
Unrealized appreciation
(depreciation) on available-
for-sale securities,
net of income taxes (21,845) (127,061) (59,830) 27,203 89,149 (177,630) 449,187
-------- --------- -------- ------- ------- --------- -------
COMPREHENSIVE INCOME $294,315 $225,343 $602,088 $690,935 $1,347,515 $872,740 $1,335,933
======== ======== ======== ======== ========== ======== =========
BASIC AND DILUTED EARNINGS
PER SHARE $3.47 $3.87 $7.27 $7.29 $13.83 $11.54 $9.25
===== ===== ===== ===== ====== ====== =====
See Notes to Consolidated Financial Statements
F-11
<PAGE>
FIRST STATE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1998 and 1997 and
Years Ended December 31, 1997, 1996 and 1995
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other
Comprehensive
Income -
Unrealized
Appreciation
(Depreciation)
on
Available-
Additional For-Sale
Common Paid-In Retained Securities, Treasury
Stock Capital Earnings Net Stock Total
--------- ----------- ---------- --------------- --------- ------------
BALANCE, JANUARY 1, 1995 $1,040,850 $1,880,625 $4,635,497 $(101,000) $(183,810) $7,272,162
Purchase and retirement of
6,760 shares of common stock (67,500) (279,201) - - - (346,701)
Retirement of 5,127 shares of treasury
common stock (51,270) (102,540) - - 153,810 -
Net income - - 886,746 - - 886,746
Unrealized appreciation on
available-for-sale securities,
net of income taxes of $231,399 - - - 449,187 - 449,187
--------- --------- --------- -------- ------ -------
BALANCE, DECEMBER 31, 1995 922,080 1,498,884 5,522,243 348,187 (30,000) 8,261,394
Purchase and retirement of 200 shares of
common stock (2,000) (10,000) - - (12,000)
Net income - - 1,050,370 1,050,370
Cash dividends declared - $.75 per share - - (68,257) - - (68,257)
Unrealized depreciation on
available-for-sale securities,
net of income tax credit of $90,625 - - - (178,511) - (178,511)
---------- --------- --------- --------- ------- ---------
BALANCE, DECEMBER 31, 1996 920,080 1,488,884 6,504,356 169,676 (30,000) 9,052,996
Net income - - 1,258,366 - - 1,258,366
Cash dividends declared - $2.50 per share - - (227,520) - - (227,520)
Unrealized appreciation on
available-for-sale securities,
net of income taxes of $45,925 - - - 89,149 - 89,149
------ -------- -------- ------- ------- -------
BALANCE, DECEMBER 31, 1997 920,080 1,488,884 7,535,202 258,825 (30,000) 10,172,991
Reissuance of 140 shares of treasury stock
(unaudited) - 10,319 - - 4,200 14,519
Net income (unaudited) - - 661,918 - - 661,918
Cash dividends declared - $2.00 per share
(unaudited) - - (182,158) - - (182,158)
Unrealized depreciation on
available-for-sale securities,
net of income tax credit of $30,823
(unaudited) - - - (59,830) - (59,830)
------ -------- -------- ------- ------- -------
BALANCE, JUNE 30, 1998 (UNAUDITED) $ 920,080 $1,499,203 $8,014,962 $198,995 $(25,800) $10,607,440
========== =========== ========== ======== ========= ===========
See Notes to Consolidated Financial Statements
F-12
<PAGE>
FIRST STATE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1998 and 1997 and
Years Ended December 31, 1997, 1996 and 1995
June 30, December 31,
------------------------ -----------------------------------
1998 1997 1997 1996 1995
----------- ------------ ----------- -----------------------
<S> <C> <C> <C> <C> <C>
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 661,918 $663,732 $1,258,366 $1,050,370 $886,746
Items not requiring (providing) cash
Depreciation and amortization 158,705 133,258 279,528 242,423 220,896
Provision for loan losses 160,000 60,000 120,000 118,000 60,000
Amortization of premiums and discounts on
securities (26,751) 30,083 46,853 89,905 112,486
Net realized (gain) loss on
available-for-sale securities - (2,600) (11,851) (11,105) 1,034
Gain on sale of loans (13,516) (9,142) (17,310) (31,880) -
Deferred income taxes (64,254) 1,628 (6,900) (11,430) 15,775
Other - - - (349) -
Changes in:
Interest receivable (114,959) (234,758) (128,953) (67,378) (83,375)
Other assets (22,389) 21,256 82,836 109,310 164,141
Accrued interest, taxes and other expenses (274,578) 65,290 179,370 210,476 111,246
--------- ------- -------- -------- --------
Net cash provided by operating activities 464,176 728,747 1,801,939 1,698,342 1,488,949
-------- -------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans (4,765,379) (2,495,062) (7,098,328)(4,690,613) (3,422,149)
Proceeds from sales of loans 1,377,122 98,991 1,727,283 3,411,824 3,863,615
Proceeds from sales of available-for-sale
securities - 187,600 1,984,569 306,613 998,966
Proceeds from maturities of available-for-sale
securities 14,700,473 4,536,544 14,419,595 8,293,965 9,847,651
Purchases of available-for-sale securities (16,432,013) (12,894,913) (23,518,607)(12,269,607)(13,851,195)
Proceeds from maturities of held-to-maturity
securities - - - - 4,405,027
Proceeds from sale of other investments - - - 8,330 -
Purchases of other investments (447,124) (69,500) (100,439) - (5,889)
Proceeds from sale of foreclosed assets 52,228 3,000 3,200 38,800 47,631
Purchase of premises and equipment (116,152) (209,810) (442,127) (239,784) (166,803)
--------- --------- ---------- --------- ---------
Net cash provided by (used in) investing
activities (5,630,845) (10,843,150) (13,024,854) (5,140,472) 1,716,854
----------- ------------ ------------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand and savings
deposits $(1,197,715) $1,963,678 $4,357,800 $2,356,615 $(3,148,937)
Net increase in certificates of deposit 2,708,272 2,217,910 4,072,824 2,575,960 2,986,076
Dividends paid (182,158) (91,008) (227,520) (68,257) -
Proceeds from Federal Home Loan Bank advances 1,500,000 160,000 660,000 - -
Repayment of Federal Home Loan Bank advances (47,142) - (11,428) - (2,000,000)
Proceeds from issuance of note payable - - - - 263,000
Principal payments on note payable (200,000) (200,000) (550,000) (400,000) (480,000)
Net increase in federal funds purchased 2,100,000 2,700,000 1,900,000 - -
Purchase of common stock for retirement - - - (12,000) (346,701)
Reissuance of treasury stock 14,518 - - - -
------- --------- --------- --------- ---------
Net cash provided by (used in) financing
activities 4,695,775 6,750,580 10,201,676 4,452,318 (2,726,562)
---------- ---------- ----------- ---------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (470,894) (3,363,823) (1,021,239) 1,010,188 479,241
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,747,185 5,768,424 5,768,424 4,758,236 4,278,995
---------- ---------- ---------- ---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,276,291 $2,404,601 $4,747,185 $5,768,424 $4,758,236
========== ========== ========== ========== ==========
See Notes to Consolidated Financial Statements
F-13
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
Six Months Ended June 30, 1998 and 1997 (Unaudited)
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Operations
First State Bancorp, Inc. ("FSBI" or the "Company") operates as a one bank
holding company. FSBI's business primarily consists of the business of First
State Bank and Trust Company (the "Bank"), which is primarily engaged in
providing a full range of banking services to individual and corporate customers
through its facilities in Pittsburg, Kansas. The Bank is subject to competition
from other financial institutions. The Company and the Bank are also subject to
regulation by certain federal and state agencies and undergo periodic
examinations by those regulatory authorities.
First State Bancorp, Inc. owned 100% of the Bank's outstanding capital
stock at June 30, 1998 and December 31, 1997 and 1996.
The consolidated financial statements as of June 30, 1998 and for the
periods ended June 30, 1998 and 1997 are unaudited, but in the opinion of
management, include all adjustments, consisting only of normal, recurring items,
necessary for fair presentation.
Use of Estimates
The preparation of 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.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses and the valuation
of real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowance for loan losses and
the valuation of foreclosed assets held for sale, management obtains independent
appraisals for significant properties.
Management believes that the allowances for losses on loans and valuation
of foreclosed assets held for sale are adequate. While management uses available
information to recognize losses on loans and foreclosed assets held for sale,
changes in economic conditions may necessitate revision of these estimates in
future years. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowances for losses
on loans and valuation of foreclosed assets held for sale. Such agencies may
require the Bank to recognize additional losses based on their judgments of
information available to them at the time of their examination.
Principles of Consolidation
The consolidated financial statements include the accounts of the First
State Bancorp, Inc. and its subsidiary, First State Bank and Trust Company.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
F-14
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Reclassifications
Various items within the accompanying financial statements for previous
years have been reclassified to provide more comparative information. These
reclassifications had no effect on net earnings.
Cash Equivalents
The Company considers all liquid investments with original maturities of
three months or less to be cash equivalents. At June 30, 1998 and December 31,
1997, the Company had no cash equivalents. At December 31, 1996, cash
equivalents consisted of federal funds sold.
Investments in Debt Securities
Available-for-sale securities, which include any security for which the
Company has no immediate plan to sell but which may be sold in the future, are
carried at fair value. Realized gains and losses, based on the amortized cost of
the specific security, are included in noninterest income. Unrealized gains and
losses are recorded, net of related income tax effects, in stockholders' equity.
Premiums and discounts are amortized and accreted, respectively, to interest
income using the level-yield method over the period to maturity.
Interest on investments in debt securities is included in income when
earned.
Student Loans Held for Sale
Student loans held for sale are carried at the lower of cost or fair value,
determined using an aggregate basis. Gains and losses resulting from sales of
student loans are recognized when the respective loans are sold to investors.
Gains and losses are determined by the difference between the selling price and
the carrying amount of the loans sold.
Loans
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal adjusted for any charge-offs, the allowance for loan
losses and any deferred fees or costs on originated loans and unamortized
premiums or discounts on purchased loans.
Excess of Cost Over Fair Value of Purchased Subsidiary
The excess of purchase price over the net assets of First State Bank and
Trust Company at acquisition date is being amortized on a straight-line basis
over forty years.
Earnings Per Share
The Company adopted Statement of Financial Accounting Standards No. 128,
Earnings Per Share, in the period ended June 30, 1998, by reclassifying earnings
per share for all periods presented. This Statement replaces the presentation of
primary earnings per share with a presentation of basic earnings per share. The
Statement also requires dual presentation of basic and diluted earnings per
share by entities with complex capital structures and requires a reconciliation
of the numerators and denominators between the two calcaluations.
Earnings per share are based on the weighted average number of shares
outstanding during each period less the weighted average number of shares of
treasury stock. There were no common stock equivalents during any of the
periods. Weighted average shares outstanding were 91,148 and 91,008 for the
periods ended June 30, 1998 and 1997, and 91,008, 91,008 and 95,898 for the
years ended December 31, 1997, 1996 and 1995, respectively.
F-15
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Allowance for Loan Losses
The allowance for loan losses is increased by provisions charged to
operating expenses and reduced by loans charged off, net of recoveries. The
allowance is maintained at a level considered adequate to provide for potential
loan losses, based on management's evaluation of the loan portfolio, as well as
on prevailing and anticipated economic conditions and historical losses by loan
category. General allowances have been established based upon the aforementioned
factors and allocated to the individual loan categories. Allowances are accrued
on specific loans evaluated for impairment for which the basis of each loan,
including accrued interest, exceeds the discounted amount of expected future
collections of interest and principal or, alternatively, the fair value of loan
collateral.
A loan is considered impaired when it is probable that the Bank will not
receive all amounts due according to the contractual terms of the loan. This
includes loans that are delinquent 90 days or more (nonaccrual loans) and
certain other loans identified by management. Loans which become 90 days or more
delinquent are reviewed by management and placed on nonaccrual status when, in
management's opinion, the collectibility of the recorded amount is in doubt.
Interest is recognized for nonaccrual loans only upon receipt, and only after
all principal amounts are current according to the terms of the contract.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is charged to expense using the straight-line method over the
estimated useful lives of the assets.
Foreclosed Assets Held for Sale
Assets acquired by foreclosure or in settlement of debt and held for sale
are valued at fair value as of the date of foreclosure and a related valuation
allowance is provided for estimated costs to sell the assets. Management
estimates the value of foreclosed assets held for sale periodically and
increases the valuation allowance for any subsequent declines in estimated fair
value. Changes in the valuation allowance are charged or credited to other
operating expense.
Trust Department Assets
Property held by the Bank in a fiduciary or agency capacity for its
customers is not included in the balance sheet as such items are not assets of
the Bank.
Fee Income
Loan fees and costs are deferred and recognized over the life of the loan
as an adjustment of yield (interest income) using the interest method.
F-16
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Income Taxes
Deferred tax liabilities and assets are recognized for the tax effect of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.
Advertising
The Company expenses advertising costs as they are incurred.
Impact of Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) recently adopted Statement
of Financial Accounting Standards (SFAS), No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 125 was
effective for transactions that occur after December 31, 1997, and imposes new
rules for determining when transfers of financial assets are accounted for as
sales versus when transfers are accounted for as borrowings. Management believes
that SFAS 125 does not have a material impact on the Company's financial
statements.
The FASB recently adopted SFAS 130, Reporting Comprehensive Income. This
Statement establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements. It does not
address issues of recognition or measurement. During the period ended June 30,
1998, the Company adopted the provisions of SFAS 130, by reclassification
adjustments of prior periods presented.
The FASB recently adopted SFAS 131, Disclosures about Segments of an
Enterprise and Related Information. This Statement establishes standards for the
way that public business enterprises report information about operating
segments. The Statement also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS 131 is
effective for years beginning after December 15, 1997. SFAS 131, which the
Company will initially adopt for calendar year 1998, is not expected to have a
material impact on the Company's financial statements.
The FASB recently adopted SFAS 133, Accounting for Derivative Financial
Instruments and Hedging Activities. This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999,
may be adopted early for periods beginning after issuance of the Statement and
may not be applied retroactively. The Company does not expect to adopt SFAS 133
early. Management is currently unable to determine whether the effects of
adoption of SFAS 133 will have a material impact on the Company's financial
statements.
F-17
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 2: INVESTMENTS IN DEBT SECURITIES
The amortized cost and approximate fair value of available-for-sale
securities are as follows:
June 30, 1998
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains (Losses) Fair Value
-------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
U. S. Government agencies $21,795,914 $77,764 $(25,672) $21,848,006
Mortgage-backed securities 6,090,233 17,046 (13,581) 6,093,698
State and political subdivisions 10,150,324 262,903 (16,292) 10,396,935
----------- -------- --------- -----------
$38,036,471 $357,713 $(55,545) $38,338,639
=========== ======== ========= ===========
December 31, 1997
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains (Losses) Fair Value
-------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
U. S. Government agencies $23,325,952 $117,796 (13,791) 23,429,957
Mortgage-backed securities 3,800,581 11,164 (8,950) 3,802,795
State and political subdivisions 9,151,647 290,365 (3,763) 9,438,249
---------- -------- ------- ---------
$36,278,180 $419,325 $(26,504) $36,671,001
=========== ========= ========= ===========
December 31, 1996
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains (Losses) Fair Value
-------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
U. S. Treasury obligations $497,281 $ 0 $(718) $496,563
U. S. Government agencies 17,553,501 126,210 (82,919) 17,596,792
Mortgage-backed securities 1,623,165 1,110 (24,985) 1,599,290
State and political subdivisions 9,524,792 259,386 (21,000) 9,763,178
---------- -------- -------- ----------
$29,198,739 $386,706 $(129,622) $29,455,823
=========== ======== ========= ==========
Maturities of available-for-sale securities are as follows:
June 30, 1998 December 31, 1997
------------------------------ -------------------------------
Approximate Approximate
Amortized Fair Amortized Fair
Cost Value Cost Value
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
One year or less $2,318,882 $2,324,468 $5,018,613 $5,032,482
After one through five years 15,628,568 15,729,686 12,744,555 12,876,311
After five through ten years 11,883,628 12,058,141 13,170,400 13,350,599
After ten years 2,115,160 2,132,646 1,544,031 1,608,814
Mortgage-backed securities not due on a single 6,090,233 6,093,698 3,800,581 3,802,795
maturity date ============= ============= ============= ==============
$38,036,471 $38,338,639 $36,278,180 $36,671,001
============= ============= ============= ==============
Gross gains of $0, $2,600, $11,851 and $11,105 resulting from sales of
available-for-sale securities were realized for the six months ended June 30,
1998 and 1997 and the years ended December 31, 1997 and 1996, respectively.
Gross losses of $1,034 resulting from sales of available-for-sale securities
were realized for the year ended December 31, 1995.
The carrying value, which is also the market value, of securities pledged as
collateral to secure public and trust deposits and for other purposes amounted
to $15,895,246 at June 30, 1998 and $15,403,315 and $10,544,175 at December 31,
1997 and 1996, respectively.
F-18
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
At June 30, 1998 and December 31, 1997, available-for-sale securities with a
fair value of $12,051,246 and $11,829,000, respectively, were pledged as
collateral against Federal Home Loan Bank advances.
NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES
Categories of loans are as follows:
June 30, December 31,
------------- -----------------------------
1998 1997 1996
------------- ------------- --------------
<S> <C> <C> <C>
Residential real estate $32,043,613 $29,396,249 $27,546,008
Real estate construction 3,985,769 3,923,834 3,160,409
Commercial real estate 8,196,836 7,038,505 5,823,726
Commercial and agricultural 8,567,166 8,405,280 6,673,201
Consumer and other 8,469,059 9,101,542 9,603,277
---------- ---------- ----------
Total loans 61,262,443 57,865,410 52,806,621
----------- ----------- -----------
Less:
Unearned discount and fees 477 254 651
Undisbursed portion of construction
loans 905,660 1,120,636 569,166
Allowance for loan losses 719,973 644,913 586,849
-------- -------- --------
Net loans $59,636,333 $56,099,607 $51,649,955
=========== =========== ===========
At June 30, 1998 and December 31, 1997, mortgage loans totaling $33,881,000
and $18,610,000, respectively, were pledged as collateral against Federal Home
Loan Bank advances.
Activity in the allowance for loan losses was as follows:
Six Months Ended
June 30, December 31,
------------------------ -----------------------------------
1998 1997 1997 1996 1995
----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $644,913 $586,849 $586,849 $532,370 $542,540
Provision charged to operating
expenses 160,000 60,000 120,000 118,000 60,000
Loans charged off, net of
recoveries (84,940) (29,077) (61,936) (63,521) (70,170)
-------- -------- -------- -------- --------
Balance, end of period $719,973 $617,772 $644,913 $586,849 $532,370
======== ======== ======== ======== ========
F-19
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Impaired loans totaled approximately $1,193,000, $511,000 and $972,000 at
June 30, 1998, December 31, 1997 and 1996, respectively. An allowance for loan
losses of $199,000, $75,000 and $107,000 relates to these impaired loans at June
30, 1998, December 31, 1997 and 1996, respectively.
Interest of approximately $60,000, $37,000, $39,000, $74,000, and $28,000 was
recognized on average impaired loans of $852,000, $1,085,000, $742,000, $635,000
and $334,000 for the six months ended June 30, 1998 and 1997 and the years ended
December 31, 1997, 1996 and 1995, respectively. Interest of approximately
$38,000, $33,000, $35,000, $49,000 and $25,000 was recognized on impaired loans
on a cash basis during the six months ended June 30, 1998 and 1997 and the years
ended December 31, 1997, 1996 and 1995, respectively.
NOTE 4: PREMISES AND EQUIPMENT
Major classifications of premises and equipment are as follows:
June 30, December 31,
-----------------------------------
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Land $ 347,080 $ 347,080 $ 347,080
Building and improvements 1,790,568 1,790,568 1,636,389
Bank equipment 2,020,747 1,868,210 1,613,434
Construction in process - 36,386 3,220
--------- --------- ---------
4,158,395 4,042,244 3,600,123
Less accumulated depreciation 2,092,504 1,964,544 1,746,509
---------- ---------- ---------
$2,065,891 $2,077,700 $1,853,614
========== ========== =========
NOTE 5: TIME DEPOSITS
Interest bearing time deposits in denominations of $100,000 or more were
approximately $9,813,000, $7,897,000 and $8,797,000 on June 30, 1998, December
31, 1997 and 1996, respectively.
The scheduled maturities of certificates of deposit are as follows:
June 30, December 31,
1998 1997
----------------- ------------------
<S> <C> <C>
One year or less 20,207,894 31,932,457
After one through two years 16,049,952 5,801,001
After two through three 14,273,117 11,545,001
After three through four years 837,717 1,323,001
After four through five years 1,038,371 401,001
After five years 1,601,677 297,995
---------- --------
$54,008,728 $51,300,456
=========== ===========
F-20
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 6: INCOME TAXES
The provision (credit) for income taxes consists of:
Six Months Ended
June 30, December 31,
-------------------------- -------------------------------------
1998 1997 1997 1996 1995
------------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Taxes currently payable $350,218 $298,080 $551,147 $446,197 $284,141
Deferred income taxes (64,254) 1,628 (6,900) (11,430) 15,775
-------- --------- -------- -------- --------
$285,964 $299,708 $544,247 $434,767 $299,916
======== ======== ======== ======== =======
The tax effects of temporary differences related to deferred taxes shown on
the balance sheets are:
December 31,
June 30, -------------------------
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Allowance for loan losses $190,621 $143,934 $124,266
Other - - 3,870
------- ------- --------
190,621 143,934 128,136
-------- -------- --------
Deferred tax liabilities:
Accumulated depreciation (315,521) (331,131) (341,242)
Discount accretion (10,949) (9,488) (7,986)
Available-for-sale securities (103,173) (133,996) (87,408)
Deferred loan fees (19,449) (19,449) (19,449)
Other (14,089) (17,507) -
-------- -------- ---------
(463,181) (511,571) (456,085)
--------- --------- ---------
Net deferred tax liability $(272,560) $367,637) $(327,949)
========= ========= =========
A reconciliation of income tax expense at the statutory rate to the Company's
actual income tax expense is shown below:
Six Months Ended
June 30, December 31,
------------------------ ------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Computed at the statutory rate
(34%) $322,280 $327,570 $ 612,888 $504,947 $ 403,465
Increase (decrease) in taxes
resulting from:
Tax-exempt municipal interest (77,628) (73,688) (142,959) (163,612) (185,707)
Non-deductible amortization 10,453 10,453 20,906 20,906 20,906
State privilege tax, net of
federal tax benefits 31,758 41,856 84,071 70,827 56,909
Other, net (899) (6,483) (30,659) 1,699 4,343
------ -------- --------- -------- --------
Actual provision $285,964 $299,708 $544,247 $434,767 $299,916
======== ======== ======== ======== =========
NOTE 7: NOTE PAYABLE
December 31,
June 30, -------------------------
1998 1997 1996
----------- ----------- -------------
<S> <C> <C> <C>
Note to a commercial bank, interest at corporate base rate adjusted
daily not to exceed 9.50%, due February 17, 1999 and secured by
50 shares of Bank Stock $431,065 $631,065 $1,181,065
======== ======== ==========
NOTE 8: REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
F-21
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
can initiate certain mandatory--and possibly additional discretionary--actions
by regulators that, if undertaken, could have a direct and material effect on
the Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital to average assets (as
defined). Management believes that, as of June 30, 1998 and December 31, 1997,
the Bank meets all capital adequacy requirements to which it is subject.
As of June 30, 1998 and December 31, 1997, the most recent notification
from the Federal Deposit Insurance Corporation categorized the Bank as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Bank must maintain minimum total risk-based,
Tier I risk-based and Tier 1 leverage ratios as set forth in the table. There
are no conditions or events since that notification that management believes
have changed the Bank's category.
The Bank's actual capital amounts and ratios are also presented in the
table.
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------------- -------------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
----------- --------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1998:
Total Risk-Based Capital $9,873,000 17.64% $4,477,000 > 8.0% $5,597,000 >10.0%
(to Risk-Weighted Assets)
Tier I Capital $9,153,000 16.35% $2,239,000 > 4.0% $3,358,000 > 6.0%
(to Risk-Weighted Assets)
Tier I Capital $9,153,000 8.28% $4,420,000 > 4.0% $5,525,000 > 5.0%
(to Average Assets)
As of December 31, 1997:
Total Risk Based Capital $9,750,000 18.13% $4,302,000 > 8.0% $5,378,000 >10.0%
(to Risk-Weighted Assets)
Tier I Capital $9,106,000 16.90% $2,151,000 > 4.0% $3,227,000 >6.0%
(to Risk-Weighted Assets)
Tier I Capital $9,106,000 8.90% $4,098,000 > 4.0% $5,122,000 >5.0%
(to Average Assets)
As of December 31, 1996:
Total Risk Based Capital $9,095,000 18.43% $3,947,000 > 8.0% $4,934,000 >10.0%
(to Risk-Weighted Assets)
Tier I Capital $8,508,000 17.20% $1,974,000 > 4.0% $2,960,000 >6.0%
(to Risk-Weighted Assets)
Tier I Capital $8,508,000 9.20% $3,710,000 > 4.0% $4,638,000 >5.0%
(to Average Assets)
F-22
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Bank is subject to certain restrictions on the amount of dividends that it
may declare without prior regulatory approval. At June 30, 1998 and December 31,
1997, approximately $5,114,000 and $5,065,000 respectively, of stockholders'
equity was available for dividend declaration without prior regulatory approval.
NOTE 9: TRANSACTIONS WITH RELATED PARTIES
As of June 30, 1998 and December 31, 1997 and 1996, the Bank had loans
outstanding to employees, officers, directors, principal stockholders and
companies with which the Bank's officers or directors are affiliated.
Loans outstanding to these individuals are summarized as follows:
Six Months
Ended December 31,
June 30, --------------------------
1998 1997 1996
------------- ------------ -------------
<S> <C> <C> <C>
Balance, beginning of the period $ 1,320,895 $1,583,772 $1,763,989
New loans, including existing loans outstanding to new directors 1,135,856 313,592 785,991
Repayments (306,235) (576,469) (966,208)
--------- --------- ---------
Balance, end of the period $ 2,150,516 $1,320,895 $1,583,772
========== ========== =========
In management's opinion, such loans and other extensions of credit and
deposits were made in the ordinary course of business and were made on
substantially the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with other persons. Further,
in management's opinion, these loans did not involve more than normal risk of
collectibility or present other unfavorable features.
NOTE 10: PROFIT-SHARING PLAN
Substantially all full-time employees of the Bank are covered by a defined
contribution profit-sharing plan. Contributions to the plan are made at the
discretion of the Board of Directors. Amounts charged to expense were $26,949,
$24,965, $49,256, $54,911 and $50,301 for the six months ended June 30, 1998 and
1997, and the years ended December 31, 1997, 1996 and 1995, respectively.
NOTE 11: ADDITIONAL CASH FLOW INFORMATION
Six Months Ended
June 30, December 31,
----------------------------------------------------------------
1998 1997 1997 1996 1995
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Non-Cash Investing and Financing Activities:
Sale and financing of foreclosed assets $ 4,200 $ 9,500 $ 68,597 37,900 50,835
Real estate and repossessed assets
acquired in settlement of loans $28,114 14,317 132,389 63,041 150,195
Additional Cash Payment Information:
Interest paid $2,156,410 $1,824,539 $3,568,204 $3,356,540 $3,120,335
Income taxes paid $ 538,514 $ 295,284 $ 574,213 $ 253,213 $ 305,734
F-23
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 12: FEDERAL HOME LOAN BANK STOCK
The Bank is a member of the Federal Home Loan Bank (FHLB) system. As a
member of this system, the Bank is required to maintain an investment in capital
stock of the FHLB in an amount equal to the greater of 1% of its outstanding
mortgage loans or .3% of its total assets. No ready market exists for such stock
and it has no quoted market value. The Bank held 3,367, 3,182 and 2,975 shares
with a book value of $336,700, $318,200 and $297,500 at June 30, 1998, December
31, 1997 and 1996, respectively. FHLB stock is included in other assets on the
balance sheets. At June 30, 1998 and December 31, 1997, all shares were pledged
as collateral against FHLB advances.
NOTE 13: COMMITMENTS AND CREDIT RISK
Letters of credit are conditional commitments issued to guarantee the
performance of a customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loans to customers.
Total outstanding letters of credit amounted to approximately $103,000,
$92,000 and $286,000 at June 30, 1998, December 31, 1997 and 1996, respectively,
with terms ranging from one to five years.
Lines of credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Lines of credit
generally have fixed expiration dates. Since a portion of the line may expire
without being drawn upon, the total unused lines do not necessarily represent
future cash requirements. Each customer's credit worthiness is evaluated on a
case-by-case basis. The amount of collateral obtained, if deemed necessary, upon
extension of credit is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts receivable,
inventory, property and equipment, commercial real estate and residential real
estate. The same credit policies are used in granting lines of credit as those
for on-balance-sheet instruments.
At June 30, 1998 and December 31, 1997 and 1996, the Bank had granted
unused lines of credit to borrowers aggregating approximately $3,530,000,
$3,019,000 and $1,607,000, respectively, for commercial lines and $2,149,000,
$1,448,000 and $1,319,000, respectively, for open-end consumer lines.
Loans aggregating approximately $7,127,000 and $6,928,000 or 12% of the
portfolio at June 30, 1998 and December 31, 1997 are collateralized by
residential rental real estate.
NOTE 14: SIGNIFICANT ESTIMATES
Generally accepted accounting principles require disclosure of certain
significant estimates. Estimates related to the allowance for loan losses are
reflected in the footnote regarding loans (Note 3). Current vulnerabilities due
to certain concentrations of credit risk are discussed in the footnote on
commitments and credit risk (Note 13).
F-24
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 15: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and Cash Equivalents
For these short-term instruments, the carrying amount approximates fair
value.
Available-For-Sale Securities
Fair values for available-for-sale securities, which also are the amounts
recognized in the balance sheets, equal quoted market prices, if available. If
quoted market prices are not available, fair values are estimates based on
quoted market prices of similar securities.
Other Investments
For these short-term instruments, the carrying value approximates fair
value.
Student Loans Held for Sale
For these variable rate loans, the carrying amount approximates fair value.
Loans and Interest Receivable
The fair value 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. Loans with similar
characteristics were aggregated for purposes of the calculations. The carrying
amount of accrued interest approximates its fair value.
Deposits and Interest Payable
The fair value of demand deposits, savings accounts, NOW accounts, and
certain money market deposits is the amount payable on demand at the reporting
date (i.e., their carrying amount). The fair value of fixed-maturity time
deposits is estimated using a discounted cash flow calculation that applies the
rates currently offered for deposits of similar remaining maturities. The
carrying amount of accrued interest payable approximates its fair value.
Federal Funds Purchased
The fair value of federal funds purchased approximates their carrying
value.
Federal Home Loan Bank Advances
Fair values for Federal Home Loan Bank advances are estimated using a
discounted cash flow calculation that applies the rates currently offered for
short-term borrowings of similar remaining maturities.
F-25
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note Payable
The fair value of this variable rate note payable approximates its carrying
value.
Commitments to Extend Credit, Letters of Credit and Lines of Credit
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For
fixed-rate loan commitments, fair value also considers the difference between
current levels of interest rates and the committed rates. The fair value of
letters of credit and lines of credit is based on fees currently charged for
similar agreements or on the estimated cost to terminate or otherwise settle the
obligations with the counterparties at the reporting date.
The following table presents estimated fair values of the Company's
financial instruments. The fair values of certain of these instruments were
calculated by discounting expected cash flows, which method involves significant
judgments by management and uncertainties. Fair value is the estimated amount at
which financial assets or liabilities could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
Because no market exists for certain of these financial instruments and because
management does not intend to sell these financial instruments, the Company does
not know whether the fair values shown below represent values at which the
respective financial instruments could be sold individually or in the aggregate.
June 30, 1998 December 31, 1997
----------------------------- -----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 4,276,291 $ 4,276,291 $ 4,747,185 $ 4,747,185
Available-for-sale securities 38,338,639 38,338,639 36,671,001 36,671,001
Other investments 603,740 603,740 156,616 156,616
Student loans held for sale 3,165,377 3,165,377 3,500,591 3,500,591
Interest receivable 1,100,665 1,100,665 985,706 985,706
Loans, net of allowance for
loan losses 59,636,333 59,747,324 56,099,607 56,427,000
Financial liabilities:
Non-interest bearing demand deposits 7,833,010 7,833,010 7,568,236 7,568,236
Interest bearing demand deposits
and savings deposits 31,230,097 31,230,097 32,692,587 32,692,587
Certificates of deposit 54,008,728 54,115,105 51,300,456 51,306,000
Interest payable 618,554 618,554 741,199 741,199
Federal funds purchased 4,000,000 4,000,000 1,900,000 1,900,000
Federal Home Loan Bank
advances 2,101,430 2,100,691 648,572 650,000
Note payable 431,065 431,065 631,065 631,065
Unrecognized financial instruments:
Letters of credit - - - -
Lines of credit - - - -
</TABLE>
F-26
<PAGE>
FIRST STATE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 16: PARENT COMPANY INFORMATION
The financial statements of First State Bancorp, Inc. (Parent) reflect its
investment in First State Bank and Trust Company (Bank) and its equity in the
Bank's distributed and undistributed net assets. The Parent has no other
significant assets, liabilities or operating activities. At June 30, 1998 and
December 31, 1997 and 1996, the equity in undistributed earnings of the Bank was
$9,352,349, $9,364,713 and $8,677,735, respectively. The Bank distributed
dividends to the Parent of $670,000, $382,500, $782,501, $427,752 and $705,500
during the six months ended June 30, 1998 and 1997 and the years ended December
31, 1997, 1996 and 1995, respectively. The Bank may distribute dividends without
regulatory approval from undistributed earnings, subject to maintenance of
minimum capital requirements.
NOTE 17: MERGER AGREEMENT
On May 19, 1998 management of the Company, as authorized by the Board of
Directors, signed a merger agreement with Gold Banc Corporation, Inc., a Kansas
based multi-bank holding company with approximately $550 million in total
assets. The agreement formulates a transaction whereby all of the outstanding
stock of First State Bancorp, Inc. would be exchanged for shares of Gold Banc
Corporation, Inc. The merger is subject to regulatory and stockholder approval
and, if approved, is anticipated to occur in the fourth quarter of 1998.
F-27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Gold Banc Corporation, Inc.
(Registrant)
DATE: November 4, 1998 /s/ Keith E. Bouchey
--------------------- ------------------------------
Keith E. Bouchey
Executive Vice President, Chief Financial
Officer and Corporate Secretary
<PAGE>
EXHIBIT INDEX TO FORM 8-K REPORT
Exhibit
Number Exhibit
2 Agreement and Plan of Reorganization dated the 19th day of
May 1998, by and among Gold Banc Corporation, Inc., Gold
Banc Acquisition Corporation VII, Inc., and First State
Bancorp, Inc.
23 Consent of Baird, Kurtz & Dobson.
Exhibit 2
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") dated as of
the 19th day of May 1998, is made by and among GOLD BANC CORPORATION, INC., a
Kansas corporation ("Gold"), GOLD BANC ACQUISITION CORPORATION VII, INC., a
Kansas corporation ("Sub") and FIRST STATE BANCORP, INC., a Kansas corporation
("Company").
WITNESSETH:
WHEREAS, the Boards of Directors of Gold, Sub and Company have approved
and deem it advisable and in the best interests of their respective companies
and shareholders that Gold and Company become affiliated through the merger of
Company with and into Sub in the manner hereinafter set forth (the "Merger" or
the "Company Merger"); and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereby agree as follows:
ARTICLE I
THE COMPANY MERGER
1.1 The Company Merger. Upon the terms and subject to the conditions of
this Agreement at the Effective Time (as hereinafter defined), Company shall be
merged with and into Sub and the separate existence and corporate organization
of Company shall thereupon cease and Sub and Company shall thereupon be a single
corporation. Sub shall be the surviving corporation in the Merger and the
separate corporate existence of Sub shall continue unaffected and unimpaired by
the Merger.
1.2 Effective Time of the Company Merger. On the Closing Date (as
hereinafter defined), the proper officers of Company and Sub shall execute and
acknowledge appropriate certificates of merger that shall be filed with the
Kansas Secretary of State on the first business day following the Closing Date,
all in accordance with the Kansas General Corporation Code (the "KGCC"). The
Merger shall become effective on the first day of the first calendar month
following the Closing Date (the "Effective Time"). The closing shall be on a day
(the "Closing Date") occurring not less than two (2) and not more than five (5)
business days before the Effective Time and not later than forty-five (45) days
following the satisfaction or waiver, to the extent permitted hereunder, of the
last of the conditions to the consummation of the Merger specified in Articles
VII and VIII of this Agreement at 10:00 a.m. at Gold Banc Corporation, 11301
Nall Avenue, Leawood, Kansas, which day shall be specified by notice from Gold
to Company (such notice to be at least five (5) days in advance of such Closing
Date), or on such other date and at such other place and time as the parties
hereto may mutually agree.
1
<PAGE>
1.3 The Articles of Incorporation. The Articles of Incorporation and
By-Laws of Sub as in effect immediately prior to the Effective Time shall be and
remain the Articles of Incorporation and By-Laws of the surviving corporation
from and after the Effective Time until amended as provided by law and the
officers and directors of Sub shall continue as the officers and directors of
the surviving corporation from and after the Effective Time.
1.4 Effect of Company Merger. Subject to Kansas law, at the Effective
Time (a) Sub shall possess all assets and property of every description, and
every interest therein, wherever located, and the rights, privileges,
immunities, powers, franchises, and authority, of a public as well as of a
private nature, of Company and all obligations belonging to or due each of
Company and Sub shall be vested in Sub without further act or deed; (b) title to
any real estate or any interest therein vested in Company shall not revert or in
any way be impaired by reason of the Company Merger; (c) all rights of creditors
and all liens on any property of the Company shall be preserved unimpaired; and
(d) Sub shall be liable for all the obligations of Company, and any claim
existing, or action or proceeding pending, by or against either of Company or
Sub, may be prosecuted to judgment with the right of appeal, as if the Company
Merger had not taken place.
1.5 Further Assurances. If at any time after the Effective Time, Sub
shall consider it advisable that any further conveyances, agreements, documents,
instruments or assurances of law or any other actions or things are necessary or
desirable to vest, perfect, confirm, or record in Sub the title to any property,
rights, privileges, powers, or franchises of the Company, the former Board of
Directors and officers of the Company shall, and will be authorized to, execute
and deliver in the name and on behalf of the Company or otherwise, any and all
proper conveyances, agreements, documents, instruments, and assurances of law
and do all things necessary or proper to vest, perfect, or confirm title to such
property, rights, privileges, powers and franchises in Sub, and otherwise to
carry out the provisions of this Agreement.
ARTICLE II
PROVISIONS OF MERGER TRANSACTION
2.1 Effect of Merger on Sub Stock. At the Effective Time, each share of
common stock, $1.00 par value per share, of Sub ("Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding, and shall be unaffected by the Company Merger.
2.2 Conversion of the Company Shares in the Company Merger. At the
Effective Time, by virtue of the Merger and without any action on the part of
any holder thereof:
(a) Each share of common stock, $10.00 par value per share of
the Company ("Company Common Stock"), that is either authorized but unissued or
held in the treasury of the Company, if any, or held by the Company or any
subsidiary of the Company other than as trustee, fiduciary, nominee or some
similar capacity shall be canceled and retired and shall cease to exist from and
after the Effective Time, and no cash or other consideration shall be delivered
in exchange therefore;
2
<PAGE>
(b) Each outstanding share of Company Common Stock, of which
Ninety-One Thousand One Hundred Forty-Eight (91,148) are issued and outstanding
(but excepting Company Dissenting Shares as defined below) shall be converted
into 19.6082 shares (the "Exchange Ratio) of common stock, $1.00 par value per
share of Gold ("Gold Common Stock") with fractions of shares rounded to the
nearest 1/1000th of a share. The Exchange Ratio set forth in this Section 2.2(b)
has been calculated after giving effect to the 100% stock dividend referenced in
Section 3.6 hereinafter.
2.3 Exchange of Certificates.
(a) Gold, on behalf of Sub, shall make available to Exchange
National Bank and/or to Advest, Inc., which are hereby designated as exchange
agents (the "Exchange Agents"), at and after the Effective Time, such number of
shares of Gold Common Stock as shall be issuable to the holders of Company
Common Stock in accordance with Section 2.2 hereof. As soon as practicable after
the Closing Date, Gold, on behalf of the Exchange Agents, shall mail to each
holder of record of a certificate that immediately prior to the Closing Date
represented outstanding shares of Company Common Stock (i) a form letter of
transmittal and (ii) instructions for effecting the surrender of certificates of
Company Common Stock for exchange into certificates of Gold Common Stock. The
Gold Common Stock into which the Company Common Stock is being converted in
accordance with Section 2.2(b) hereof may be delivered to a brokerage account
established at Advest, Inc. for each shareholder of the Company; provided,
however, that definitive stock certificates for shares of Gold Common Stock will
be issued by the Exchange Agents and delivered to each Company shareholder that
requests such certificates.
(b) Notwithstanding any other provision herein, no fractional
shares of Gold Common Stock and no certificates or script therefor or other
evidence of ownership thereof will be issued. All fractional shares of Gold
Common Stock to which a holder of Company Common Stock would otherwise be
entitled to under Section 2.2 hereof shall be aggregated. If a fractional share
results from such aggregation, such shareholder shall be entitled, after the
Effective Time and upon the surrender of such shareholder's certificate or
certificates representing shares of Company Common Stock, to receive from the
Exchange Agent an amount in cash in lieu of such fractional share equal to the
product of such fraction and the average of the closing sales price of Gold
Common Stock as reported by the National Association of Securities Dealers
Automated Quotation National Marketing System on each of the ten consecutive
trading days immediately preceding the third trading day prior to the Effective
Time (the "Gold Stock Price"). Gold, on behalf of Sub, shall make available to
the Exchange Agent, as required from time to time, any cash necessary for this
purpose.
2.4 Closing of the Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Company
Common Stock shall thereafter be made.
2.5 Dividends. No dividends or other distributions that are declared
after the Effective Time with respect to Gold Common Stock payable to holders of
record thereof after the Effective Time shall be paid to the Company
shareholders entitled to receive certificates representing Gold Common Stock
until such shareholders surrender to the Exchange Agent their
3
<PAGE>
certificates representing Company Common Stock. Upon such surrender, there shall
be paid to the shareholder in whose name the certificates representing such Gold
Common Stock shall be issued any dividends which shall have become payable with
respect to such Gold Common Stock between the Effective Time and the time of
such surrender, without interest. After such surrender there shall also be paid
to the shareholder in whose name the certificates representing such Gold Common
Stock shall be issued any dividend on such Gold Common Stock that shall have (a)
a record date subsequent to the Effective Time and prior to such surrender and
(b) a payment date after such surrender, and such payment shall be made on such
payment date. In no event shall the shareholders entitled to receive such
dividends be entitled to receive interest on such dividends.
2.6 Shareholders' Approval. Company agrees to submit this Agreement and
the transactions contemplated hereby to its shareholders for approval to the
extent required and as provided by law and the Articles of Incorporation and
By-Laws of Company and in accordance with Section 10.1 hereof. A shareholders'
meeting of Company shall be held and Company shall use its reasonable best
efforts to take all steps as shall be required for said meeting to be held as
soon as reasonably practicable after the effective date of the Registration
Statement (as defined in Section 10.1 hereof). Company and its Board of
Directors shall recommend that the shareholders of Company approve this
Agreement and the transactions contemplated hereby and shall use their
reasonable best efforts to secure such approval.
2.7 Dissenting Shares. Notwithstanding anything to the contrary
contained in this Agreement, to the extent appraisal rights are available to the
Company's shareholders pursuant to the KGCC, any shares of Company Common Stock
held by a person who objects to the Merger, whose shares of Company Common Stock
were not entitled to vote or were not voted in favor of the Merger and who
complies with all of the provisions of the KGCC concerning the rights of such
person to dissent from the Merger and to require appraisal of such person's
shares of Company Common Stock and who has not withdrawn such objection or
waived such rights prior to the Closing Date ("Company Dissenting Shares") shall
not be converted pursuant to Section 2.2 but shall become the right to receive
such consideration as may be determined to be due to the holder of such Company
Dissenting Shares pursuant to the KGCC, including, if applicable, any costs
determined to be payable by Sub or the Company to the holders of the Company
Dissenting Shares pursuant to an order of the district court in accordance with
the KGCC. Notwithstanding the foregoing, as set forth hereinafter, the
obligation of Gold to close on this transaction is contingent upon the total
required cash payments due Company's shareholders totaling less than 5% of the
total consideration being provided by Gold to Company as consideration for this
Merger.
2.8 Adjustments. If at any time during the period between the date
hereof and the Effective Time, any change in the outstanding shares of Gold
Common Stock is effected by reason of any reclassification, recapitalization,
stock split or combination, exchange or readjustment of shares, or any stock
dividend thereon with a record date during such period, the Exchange Ratio shall
be adjusted on a pro rata basis.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GOLD AND SUB
Except as set forth on the Gold Disclosure Schedule attached hereto,
Gold and Sub, jointly and severally, hereby represent and warrant to the Company
and the Shareholders of the Company as follows:
3.1 Organization and Authority.
(a) Gold is a corporation duly organized, validly existing and
in good standing under the laws of the State of Kansas with the corporate power
and authority to own its properties and conduct its business as it is now being
conducted and is duly registered as a bank holding company under the provisions
of the Bank Holding Company Act of 1956, as amended.
(b) Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Kansas. Sub has the corporate
power to enter into and perform this Agreement and the execution, delivery and
performance of this Agreement by Sub and the consummation by Sub of the
transactions contemplated hereby have been duly authorized by its Board of
Directors and by Gold as the sole shareholder of Sub.
3.2 Authority. Gold has all requisite corporate power and authority to
enter into this Agreement, and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement, and the
consummation by Gold of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of Gold. This Agreement
has been duly executed and delivered by Gold, and assuming due execution and
delivery by Company, constitutes a valid and binding obligation of Gold,
enforceable against Gold in accordance with its terms subject to applicable
conservatorship, receivership, bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity (including without limitation specific
performance), whether applied in a court of law or a court of equity.
3.3 No Gold Shareholder Approval. The shareholders of Gold are not
required by law, the Articles of Incorporation or Bylaws of Gold, or any NASD
rule or regulation to approve this Agreement.
3.4 No Violations. Subject to approval by the appropriate regulatory
agencies, the execution, delivery and performance of this Agreement by Gold and
Sub do not, and the consummation of the transactions contemplated hereby will
not, constitute (i) a breach or violation of, or a default under, any law, rule
or regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of Gold or any subsidiary of Gold or to which
Gold or any subsidiary (or any of their respective properties) is subject, (ii)
a breach or violation of, or a default under, the articles of incorporation,
charter or bylaws of Gold or any subsidiary of Gold or (iii) a breach or
violation of, or a default under (or an event which with due notice or lapse of
time or both would constitute a default under), or result in the
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termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of Gold or any subsidiary of Gold under any
of the terms, conditions or provisions of any note, bond, indenture, deed of
trust, loan agreement or other agreement, instrument or obligation to which Gold
or any subsidiary of Gold is a party, or to which any of their respective
properties or assets may be bound or affected.
3.5 Consents. Except for approvals of the appropriate regulatory
agencies and such filings and registrations as are required under federal and
state securities and Blue Sky laws, no filing or registration with, or
authorization, consent or approval of, any public body or authority is necessary
for the consummation by Gold of the Merger or the other transactions
contemplated by this Agreement.
3.6 Capital Stock of Gold. Gold has authorized capital stock consisting
of (a) 25,000,000 shares of common stock, $1.00 par value ("Gold Common Stock"),
of which 5,352,196 shares were issued and outstanding on March 31, 1998,
subject, however, to a 100% stock dividend for shareholders of record as of May
6, 1998 with such stock split payable on May 18, 1998, (b) $28.75 Million of
8.75% Junior Subordinated Deferrable Interest Debentures and (c) 25,000,000
shares of preferred stock, none of which are issued and outstanding. All of the
issued and outstanding shares of Gold Common Stock are validly issued, fully
paid and non-assessable. Holders of Gold Common Stock do not have any preemptive
rights with respect to the issuance of additional authorized shares of Gold
Common Stock.
3.7 Government Regulation. Gold and its subsidiaries hold all material
licenses, certificates, permits, franchises and rights from all appropriate
federal, state or other public authorities necessary for the lawful conduct of
their respective businesses and ownership of their respective properties. Gold
and its subsidiaries have substantially complied with all material federal,
state and local statutes, regulations, ordinances or rules applicable to the
ownership of their respective properties or the conduct of their respective
businesses.
3.8 Financial Statements. The consolidated balance sheets of Gold as of
December 31, 1997, the consolidated statement of earnings for the year ended
December 31, 1997, and all related schedules and notes to the foregoing, all of
which have been delivered to Company, have been certified by KPMG Peat Marwick
LLP, independent certified public accountants. All of the foregoing financial
statements, together with the financial statements of Gold dated as of March 31,
1998 and for the period then ending, have been prepared in accordance with
generally accepted accounting principles and practices which were applied on a
consistent basis, and present fairly in all material respects the financial
position, results of operation and changes of financial position of Gold as of
their respective dates and for the periods indicated. From March 31, 1998 until
the date hereof, there has been no material adverse change in the financial
condition, properties, assets, liabilities, business or prospects of Gold.
3.9 SEC Reports. Gold's Report on Form 10-K for year ended December 31,
1997, filed with the Securities and Exchange Commission and all subsequent
reports and proxy statements filed by Gold thereafter pursuant to Section 13(a)
or 14(a) of the Securities Exchange Act of 1934 do not and will not contain a
misstatement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading as of
the time the document was filed. Since the filing of such Report on Form 10-K,
no other report, proxy statement, or other document has been required to be
filed by Gold pursuant to Section 13(a) or 14(a) of the Securities Exchange Act
of 1934 which has not been filed. Gold has delivered to Company the Form 10-K
for the fiscal year ended December 31, 1997 and unaudited financial statements
for the quarter ended March 31, 1998.
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3.10 Status of Gold Common Stock to be Issued. The shares of Gold
Common Stock into which the Company Common Stock are to be exchanged or
converted pursuant to this Agreement will be, when delivered as specified in
this Agreement, validly authorized and issued, fully paid and non-assessable,
and registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, or any successor federal statute and the
rules and regulations promulgated thereunder, all as the same shall be in effect
at the time (the "Securities Act").
3.11 Legal Proceedings. There are as of the date hereof no actions,
suits, claims, demands or other proceedings or investigations, either judicial
or administrative, pending or, to the knowledge of Gold, threatened against or
affecting the properties, assets, rights or business of Gold or any subsidiary
of Gold or the right to carry on or conduct their business, nor are there to the
knowledge of Gold any grounds therefor, which, if adversely determined, would
have a material adverse effect on the business, operations, properties or
financial condition of Gold. There are as of the date hereof no actions, suits,
claims, demands or other proceedings or investigations, either judicial or
administrative, pending or, to the knowledge of Gold, threatened which will or
could prevent or interfere with the consummation of the transactions
contemplated by this Agreement.
3.12 Taxes. Gold and Sub have timely filed all federal, state and local
tax returns required to be filed by them, and have timely paid and discharged
any taxes due in connection with all such tax returns. To the best knowledge of
Gold, the liability for taxes set forth on each such tax return adequately
reflects the taxes due with respect to such returns. Neither the Internal
Revenue Service nor any other taxing authority is now asserting, either through
audits, administrative proceedings, court proceedings or otherwise any
deficiency or claim for additional taxes against Gold or Sub or any subsidiary
of Gold. Neither Gold nor Sub has granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessments
of, any tax. There are no tax liens on any of the assets of Gold or Sub or any
subsidiary of Gold.
3.13 Defaults. Neither Gold nor any of its subsidiaries is in material
breach or material default under any agreement or commitment to which Gold or
any of its subsidiaries is a party, or under any loan agreement, note, security
agreement, guarantee or other document pursuant to or in connection with Gold's
or any of its subsidiaries' extension of credit; and, to their knowledge, there
has not occurred any event which, after the giving of notice, the lapse of time
or otherwise, would constitute any such default under, or result in any such
breach of, any such agreement, commitment or extension of credit.
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3.14 Information Supplied. Gold will ensure that none of the
information supplied or to be supplied by Gold and Sub for inclusion or
incorporation by reference in (a) the Registration Statement (as defined in
Section 10.1) will, at the time the Registration Statement is filed with the
Securities and Exchange Commission (the "SEC") and at the time it becomes
effective under the Securities Act, contain 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, and (b) the Proxy
Statement (as defined in Section 10.1) will, at the date of mailing to
stockholders and at the time of the meetings of stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to have stated a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, other than information supplied by
Company.
3.15 Absence of Adverse Agreements. Neither Gold nor Sub nor any
subsidiary of Gold is a party to any agreement or instrument or any judgment,
order or decree or any rule or regulation of any court or other governmental
agency or authority which materially and adversely affects or in the future may
have a material adverse effect on the financial condition, results or
operations, assets, business or prospects of Gold or Sub or any subsidiary of
Gold, taken as a whole.
3.16 Broker's Fees. Neither Gold nor Sub nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker's fees, commissions or finder's fees in connection with
any of the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth on the Company Disclosure Schedule hereto, Company
hereby represents and warrants to each of Gold and Sub as follows:
4.1 Organization and Good Standing.
(a) Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Kansas with the corporate
power and authority to own its properties and conduct its business as it is now
being conducted and is duly registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended. The conduct of Company's business and
the ownership of its properties do not require Company to qualify as a foreign
corporation in any jurisdiction except where the failure to be so qualified
individually or in the aggregate would not materially and adversely affect the
business, operations, properties or financial condition of Company and its
subsidiary.
(b) Company has one subsidiary: First State Bank & Trust
Company, Pittsburg, Kansas ("Bank"), which is a Kansas banking corporation duly
organized, validly existing and in good standing under the laws of the State of
Kansas, with the corporate power and authority to carry on its business as it is
now being conducted. Bank is duly qualified to do business in each jurisdiction
in which the conduct of its business requires such qualification except where
the
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failure to be so qualified individually or in the aggregate would not materially
and adversely affect the business, operations, properties or financial condition
of Company and/or Bank.
4.2 Authority. Company has all requisite corporate power and authority
to enter into this Agreement, and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement, and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Company. This Agreement has been duly executed
and delivered by Company, and assuming due execution and delivery by Gold,
constitutes a valid and binding obligation of Company, enforceable in accordance
with its terms subject to applicable conservatorship, receivership, bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity (including
without limitation specific performance), whether applied in a court of law or a
court of equity.
4.3 Shareholder Approval. The Board of Directors of Company has
directed or will direct, that this Agreement and the transactions contemplated
hereby be submitted to the Company's shareholders for approval at a meeting of
such shareholders and, except for adoption of this Agreement by the requisite
vote of the Company's shareholders, no other shareholder action is necessary to
approve this Agreement and to consummate the transactions contemplated hereby.
The Board of Directors will recommend that the shareholders approve the
transactions contemplated hereby, subject to their fiduciary duties. The
approval of the majority of the outstanding shares of Company Common Stock
entitled to vote with respect to such matter is required for approval of this
Agreement and to consummate the transactions contemplated hereby. No approval of
a number of outstanding shares of Company greater than that required by the
relevant statutory provisions is required for approval of this Agreement and the
consummation of the transactions contemplated hereby.
4.4 No Violations. Except for the approvals of the appropriate
regulatory agencies and such filings and registrations as are required under
federal and state securities and Blue Sky laws, the execution, delivery and
performance of this Agreement by Company do not, and the consummation of the
transactions contemplated hereby will not, constitute (i) a breach or violation
of, or a default under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or instrument of
Company or Bank or to which Company or Bank (or any of their respective
properties) is subject, (ii) a breach or violation of, or a default under, the
articles of incorporation, charter or bylaws of Company or Bank or (iii) a
breach or violation of, or a default under (or an event which with due notice or
lapse of time or both would constitute a default under), or result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of Company or Bank under any of the terms,
conditions or provisions of any note, bond, indenture, deed of trust, loan
agreement or other agreement, instrument or obligation to which the Company or
Bank is a party, or to which any of their respective properties or assets may be
bound or affected.
4.5 Consents. Except for the approvals of the appropriate regulatory
agencies and such filings and registrations as are required under federal and
state securities and Blue Sky laws, no filing or registration with, or
authorization, consent or approval of, any public body or authority
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is necessary for the consummation by Company of the Merger or the other
transactions contemplated by this Agreement.
4.6 Capitalization. Company has authorized capital stock consisting of
100,000 shares of common stock, par value $10.00 per share, of which 91,148
shares are issued and outstanding, and 860 shares held as treasury stock. All of
the issued and outstanding shares of Company Common Stock are validly issued,
fully paid and non-assessable. There are no outstanding warrants, options,
subscriptions, contracts, rights or other agreements or commitments obligating
Company to issue or sell any additional shares of Company Common Stock nor are
there outstanding any securities, debts, obligations or rights which are
convertible into or exchangeable for shares of Company Common Stock. The
authorized capital stock of Bank consists of 100,000 shares of common stock,
$10.00 par value per share ("Bank Stock"), of which 100,000 shares have been
duly and validly issued, are fully paid, and, are owned directly by Company.
Such shares are free and clear of all liens, encumbrances, equities or claims
save and except for a pledge of such shares to secure the obligation of the
Company to NationsBank of Kansas, the outstanding principal balance of which is
$531,065.00 as of the date hereof (the "Bank Stock Loan"). There are no
outstanding warrants, options, subscriptions, contracts, rights or other
arrangements or commitments obligating Company or Bank to issue or sell any
additional shares of Bank's capital stock nor are there outstanding any
securities, debts, obligations or rights which are convertible into or
exchangeable for shares of capital stock or any other equity security of Bank.
4.7 Government Regulation. Company and Bank hold all material licenses,
certificates, permits, franchises and rights from all appropriate federal, state
or other public authorities necessary for the lawful conduct of their respective
businesses and ownership of their respective properties. Company and Bank have
substantially complied with all material federal, state and local statutes,
regulations, ordinances or rules applicable to the ownership of their respective
properties or the conduct of their respective businesses.
4.8 Financial Statements. The Company has previously delivered to Gold
and Sub balance sheets for the Company as of March 31, 1998, December 31, 1997
and December 31, 1996, the statements of earnings for the period ended March 31,
1998 and for the years ended December 31, 1997 and December 31, 1996, the
balance sheet and statement of earnings for the Bank as of March 31, 1998 and
for the period then ending, and all related schedules and notes to the foregoing
(collectively the "Company Financial Statements"). Although such statements have
not been certified as of the date hereof by independent certified public
accountants, the Company Financial Statements have been prepared (except for the
absence of notes thereto) in accordance with generally accepted accounting
principles and practices which were applied on a consistent basis, and present
fairly in all material respects the financial position, results of operation and
changes of financial position of Company or the Bank, as applicable, as of their
respective dates and for the periods indicated. Company has no material
liabilities or obligations of a type which would be included in a balance sheet
prepared in accordance with generally accepted accounting principles whether
related to tax or non-tax matters, accrued or contingent, due or not yet due,
liquidated or unliquidated, or otherwise, except as and to the extent disclosed
or reflected in the balance sheet of Company as of March 31, 1998, or incurred
since March 31, 1998, in the ordinary course of business. From March 31, 1998
until the date hereof, there has
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been no material adverse change in the financial condition, properties, assets,
liabilities, rights or business of Company or Bank, or in the relationship of
Company and Bank with respect to its employees, creditors, suppliers,
distributors, customers or others with whom it has business relationships.
4.9 Legal Proceedings. There are as of the date hereof no actions,
suits, claims, demands or other proceedings or investigations, either judicial
or administrative, pending or, to the knowledge of Company, threatened against
or affecting the properties, assets, rights or business of Company or Bank or
the right to carry on or conduct their respective businesses, nor are there to
the knowledge of Company any grounds therefor, which, if adversely determined,
would in the aggregate materially adversely affect the business, operations,
properties or financial condition of Company or Bank. There are as of the date
hereof no actions, suits, claims, demands or other proceedings or
investigations, either judicial or administrative, pending or, to the knowledge
of Company, threatened which will or could prevent or interfere with the
consummation of the transactions contemplated by this Agreement. The Company
agrees to advise Gold and Sub if at any time between the date hereof and the
Effective Time, any legal proceeding as described in this paragraph is initiated
or, to the knowledge of Company, threatened.
4.10 Title to Assets. Except for securities pledged to secure public
funds deposits or subject to customer repurchase agreements entered into in the
ordinary course of business, and leased property discussed below, Company and
Bank have good and marketable title to and possession of all of their respective
real and personal properties and assets, in each case free and clear of any
liens, restrictions, encumbrances, rights, title and interests of others, except
for other real estate owned and except as reflected on their respective
financial statements and except for the lien of current taxes, covenants and
restrictions of record, and other minor imperfections of title not affecting
marketability, which liens, covenants, restrictions and imperfections do not
materially affect the value of such property and do not interfere with the use
made of such property by Company and Bank. The real and personal properties and
assets held under lease by Company and Bank are held by them under valid,
subsisting and enforceable leases with such exceptions as do not interfere with
the use made of such properties and assets by Company and Bank. No consent is
necessary under the terms of any such lease in connection with the consummation
of the transactions contemplated hereby.
4.11 Undisclosed Liabilities. As of the date hereof, neither Company
nor Bank have any debt, liability or obligation (whether accrued, contingent,
absolute or otherwise) known to any of such corporations of the nature which
would customarily be included in a corporate balance sheet or the notes thereto
prepared in accordance with generally accepted accounting principles that is not
reflected or reserved against in the Company Financial Statements or was not
incurred in the ordinary course of their business.
4.12 Taxes. The Company and Bank have timely filed all tax returns
required to be filed by them, and the Company and Bank have timely paid and
discharged all taxes due in connection with or with respect to the filing of
such tax returns and have timely paid all other taxes as are due, except such as
are being contested in good faith by appropriate proceedings and with respect to
which the Company is maintaining reserves adequate for their payment. To the
best
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knowledge of the Company, the liability for taxes set forth on each such tax
return adequately reflects the taxes required to be reflected on such tax
return. Neither the IRS nor any other governmental entity or taxing authority or
agency is now asserting, either through audits, administrative proceedings,
court proceedings or otherwise, or, to the best of Company's knowledge,
threatening to assert against Company or Bank any deficiency or claim for
additional taxes. Neither the Company nor Bank has granted any waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any tax. There are no tax liens on any assets (excluding OREO
properties) of the Company or Bank. Neither the Company nor Bank has received a
ruling or entered into an agreement with the Internal Revenue Service or any
other governmental entity or taxing authority or agency that would have a
Material Adverse Effect (as defined below) on the Company or Bank, taken as a
whole, after the Effective Time. For purposes of this Agreement, "Material
Adverse Effect" with respect to the Company or Bank means an effect that: (1) is
materially adverse to the business, financial condition, results of operations
or prospects of the Company or Bank taken as a whole; (2) significantly and
adversely affects the ability of the Company or Bank to consummate the
transactions contemplated by this Agreement by the Closing Date or to perform
their material obligations under this Agreement; or (3) enables any persons to
prevent the consummation by the Closing Date of the transactions contemplated by
this Agreement. The Company agrees to provide assistance in the preparation of
income tax returns for the Company and Bank from the commencement of the current
fiscal year through the Effective Time with such returns to be completed within
ninety (90) days after the Effective Time.
4.13 Contracts. Neither Company nor Bank is party to or bound by any:
(a) employment contract;
(b) bonus, deferred compensation, savings, profit sharing,
severance pay, pension or retirement plan or arrangement, except for the Plans
referenced in Section 4.16 hereof;
(c) material lease or license with respect to any property,
real or personal, whether Company or Bank is landlord or tenant, licensor or
licensee, involving a liability or obligation of Company or Bank as obligor in
excess of $5,000 on an annual basis;.
(d) agreement, contract or indenture relating to the borrowing
of money by Company or any subsidiary, excluding deposit obligations,
obligations under certificates of deposit, letters of credit, items in the
process of collection, commitments to loan or discount, endorsements made for
collection and guarantees made in the ordinary course of business;
(e) agreement with any present or former officer, director
or shareholder of Company or Bank; or
(f) other contract, agreement or other commitment which is
material to the business, operations, property, prospects or assets or to the
condition, financial or otherwise, of Company or Bank or which involve a payment
by Company or Bank of more than $5,000 on an annual basis.
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4.14 Regulatory Reports; Examinations. Company and Bank have timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, with all governmental or
regulatory authorities, agencies, courts, commissions or other entity
("Governmental Entity") and have paid all fees and assessments due and payable
in connection therewith. Except for normal examinations conducted by a
Governmental Entity in the regular course of the business of Company and Bank,
no Governmental Entity has initiated any proceeding or, to the best knowledge of
Company, investigation into the business or operations of Company or Bank. To
the best knowledge of Company, there is no unresolved material violation,
criticism, or exception by any Governmental Entity with respect to any written
report or statement relating to any examinations of Company or Bank. Company has
made available to Gold all reports of examinations conducted by any Governmental
Entity with respect to Company and/or Bank, during the preceding three (3)
years. Company will also make available to Gold and Sub any subsequent reports
of examination received from any Government Entity between the date hereof and
the Effective Time.
4.15 Conduct. From March 31, 1998 until the date hereof:
(a) There has been no material adverse change in the financial
condition of, or in the properties, assets, liabilities, rights or business,
taken as a whole, of Company or Bank or in the relationship of Company or Bank
with respect to their employees, creditors, suppliers, distributors, customers
or others with whom they have business relationships.
(b) The business affairs of Company and Bank have been
conducted and carried on only in their ordinary and regular course of business,
and Company and Bank have not incurred or become subject to any liabilities or
obligations other than those incurred in their ordinary course of business,
those incurred pursuant to existing contracts included on the Disclosure
Schedule and those incurred pursuant to commitments permitted hereby.
(c) Neither Company nor Bank have entered into any employment
contract with any director, officer or salaried employee, paid any or made any
accrual or arrangement for payment of bonuses or special compensation of any
kind or any severance or termination pay to any of their officers, employees or
directors, increased the rate of compensation, if any, or instituted or made any
material increase in any officer's, employee's or director's welfare, retirement
or similar plan or arrangement, other than merit increases made in accordance
with past practices and procedures.
4.16 Compliance with ERISA. Neither Company nor Bank has established,
maintained or contributed at any time during the five-year period ending as of
the Effective Time to any employee benefit plan (as defined in Sections 3(3) or
3(37) of the Employment Retirement Income Security Act of 1974 ("ERISA")) or any
other plan with respect to which any governmental filings are required, except
for the plans listed on the Company Disclosure Schedule (collectively, the
"Plans"). A true and accurate copy of each of the Plans, any related trust
agreements and each of the amendments thereto has been provided to Gold together
with (i) all determination letters received in respect of any qualified plans,
and (ii) all required reports and supporting schedules filed with any government
agency in respect of the Plans for the three most recent years ending on or
before the date hereof. To Company's knowledge as sponsor of
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the Plans, the Plans and each fiduciary (as defined in Section 3(21) of ERISA)
of the Plans are in compliance in all material respects with all applicable
requirements (including nondiscrimination requirements in effect as of the date
hereof) of the Internal Revenue Code of 1986 ("Code"), including, but not
limited to, Sections 79, 105, 106, 125, 401, 501, and 4975 of the Code. For
purposes of this Section 4.16, noncompliance with the Code or ERISA is material
if such noncompliance could have a Material Adverse Effect on the condition of
one or more of the Plans or of Company or Bank, either as of the Effective Time
or upon discovery of the noncompliance. To Company's knowledge as sponsor of the
Plans, all required contributions to the Plans through the date hereof have been
made. To Company's knowledge, Company and Bank (each with respect to the Plans),
as well as the Plans, have no material current or threatened liability of any
kind to any person, including but not limited to any government agency, as of
the date hereof, other than for the payment of benefits in the ordinary course.
4.17 Defaults. Neither Company nor Bank is in material breach or
material default known to Company under any agreement or commitment to which the
Company or Bank is a party, or under any loan agreement, note, security
agreement, guarantee or other document pursuant to or in connection with the
Company's or Bank's extension of credit; and to Company's knowledge, there has
not occurred any event which, after the giving of notice, the lapse time or
otherwise, would constitute any such default under, or result in any such breach
of, any such agreement, commitment or extension of credit.
4.18 Insurance. Complete and correct copies of all material policies of
fire, product or other liability, workers' compensation and other similar forms
of insurance owned or held by Company and Bank have been delivered or made
available to Gold. Subject to expirations and renewals of insurance policies in
the ordinary course of business, all such policies are in full force and effect,
all premiums with respect thereto covering all periods up to and including the
date as of which this representation is being made have been paid (other than
retrospective premiums which may be payable with respect to worker's
compensation insurance policies), and no notice of cancellation or termination
has been received with respect to any such policy. Such policies are valid and
enforceable policies. To the best knowledge of Company, the insurance policies
to which Company or Bank are parties are sufficient for compliance with all
material requirements of law and all material agreements to which Company or
Bank are parties and will be maintained by Company and Bank until the Effective
Time. Neither Company nor Bank has been refused any insurance with respect to
any material assets or operations, nor has coverage been limited in any respect
material to their operations by any insurance carrier to which they have applied
for any such insurance or with which they have carried insurance during the last
five (5) years.
4.19 Absence of Adverse Agreements. Neither the Company nor Bank is a
party to any agreement or instrument or any judgment, order or decree or any
rule or regulation of any court or other governmental agency or authority which
materially and adversely affects or is reasonably likely to result in a Material
Adverse Effect on the financial condition, results or operations, assets,
business or prospects of the Company or Bank, taken as a whole.
4.20 Internal Controls and Records. The Company and Bank maintain books
of account which accurately and validly reflect, in all material respects, all
loans, mortgages, collateral and
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other business transactions and maintain accounting controls sufficient to
ensure that all such transactions are (a) in all material respects, executed in
accordance with its management's general or specific authorization, and (b)
recorded in conformity with generally accepted accounting principles.
4.21 Loans. (a) Bank is not a party to any written or oral loan
agreement, note or borrowing arrangement which has been classified as
"substandard", "doubtful," "loss," "other loans especially mentioned" or any
comparable classifications by Company or Bank or banking regulators, except as
reflected on a list previously provided to Gold and Sub during the due diligence
period; (b) neither Company nor Bank is a party to any written or oral loan
agreement, note, or borrowing arrangement, including any loan guaranty, with any
director or executive officer of Company or Bank, or any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing; (c) to the best knowledge of Company neither Company nor Bank is a
party to any written or oral loan agreement, note or borrowing arrangement in
violation of any law, regulation or rule of any governmental authority and which
violation is reasonably likely to result in a Material Adverse Effect on the
Company or the Bank.
4.22 Environmental Laws. To the best knowledge of the Company: (i) the
operations of Company and Bank comply in all material respects with all
applicable past and present federal, state and local environmental statutes and
regulations and neither the condition of any property owned by Company or Bank
nor the operation of the business of any of such entities violates in all
material respects any applicable federal, state or local environmental statute
or regulation; (ii) none of the operations of Company or Bank is subject to any
judicial or administrative proceeding alleging the violation of any federal,
state or local environmental health or safety statute or regulation nor is it
the subject of any claim alleging damages to health or property pursuant to
which the Company or Bank may be liable; (iii) none of the operations of nor any
of the properties owned by Company or Bank is the subject of any federal, state
or local investigation in evaluating whether any remedial action is needed to
respond to a release or threatened release of any hazardous waste or substance
from whatever source; (iv) no condition or event has occurred which, with notice
or the passage of time or both, would constitute a violation of any federal,
state or local environmental law and at no time has the Company or Bank stored
or used any pollutants, contaminants or hazardous or toxic waste, substances or
materials on or at any location owned by Company or Bank; (v)there are no
underground storage tanks now or heretofore located on any real property owned
by Company or Bank; (vi)neither Company nor Bank has ever been notified by
either a federal, state or local governmental authority, or any private party,
that Company or Bank is a potentially responsible party for remedial costs spent
addressing the release, or threat of a release, of a hazardous substance and to
the environment pursuant to the Comprehensive Environmental Response,
Compensation or Liability Act, 42 U.S.C. ss.ss. 9601, et seq. Or any
corresponding state law.
Gold may obtain at its option and expense on or prior to 120 days
following the date hereof an environmental audit of all properties and assets of
Company and Bank whether directly owned or classified as other real estate
owned. Such environmental audit shall constitute a part of the due diligence
process, should Gold choose to pursue it, and if Gold determines in its sole
discretion that such environmental audit reflects the potential of a material
environmental problem with respect to any of the properties or assets of Company
or Bank, then Gold may
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deem the due diligence unsatisfactory and terminate this Agreement under the
terms of Section 9.1 hereinafter.
4.23 Broker's Fees. Neither Company nor Bank nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement.
4.24 Labor Matters. (a) To the best knowledge of Company, Company and
Bank are in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and are not engaged in any unfair labor practice; (b) there is no unfair labor
practice complaint against Company or Bank pending before the National Labor
Relations Board; (c) there is no labor strike, dispute, slowdown, representation
campaign or work stoppage actually pending or threatened against or affecting
Company or Bank; (d) no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending and no claim therefor has been
asserted against Company or Bank; and (e) neither Company nor Bank is
experiencing any material work stoppage.
4.25. Information Supplied. None of the information supplied or to be
supplied by Company for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement is filed
with the SEC and at the time it becomes effective under the Securities Act,
contain 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, and (ii) the Proxy Statement will, at the date of mailing to
stockholders and at the times of the meetings of stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, other than information supplied by Gold or Sub.
4.26 Full Disclosure. No statement contained in any document,
certificate, or other writing furnished or to be furnished by or at the
direction of Company to Gold in, or pursuant to the provisions of, this
Agreement contains or shall contain any untrue statement of a material fact or
omits or shall omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
ARTICLE V
COVENANTS OF COMPANY
5.1 Affirmative Covenants of the Company. Unless the prior written
consent of Gold shall have been obtained, and which consent will be given or
denied within 3 business days of receipt of written request for such consent,
and except as otherwise expressly contemplated herein, the Company shall and
shall cause Bank to (i) operate its business only in the usual, regular, and
ordinary course, (ii) preserve intact its business organization and assets and
maintain its rights and franchises; (iii) maintain as valid and enforceable all
policies of insurance as referenced in Section 4.18 herein, (iv) provide updates
to Gold and Sub with respect to those loans reflected on the list previously
provided to Gold and Sub as referenced in Section 4.21
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herein and (v) take no action which would (a) materially adversely affect the
ability of any party to obtain any consents required for the transactions
contemplated hereby , (b) would prevent the transactions contemplated hereby,
including the Merger, from qualifying as a reorganization within the meaning of
Section 368(a) of the Code, or (c) materially adversely affect the ability of
any party to perform its covenants and agreements under this Agreement.
5.2 Negative Covenants of the Company. Except as specifically permitted
by this Agreement, from the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement, the Company covenants and
agrees that it will not do or agree to commit to do, or permit Bank to do or
agree to commit to do, any of the following without the prior written consent of
Gold, which consent shall not be unreasonably withheld and which consent will be
given or denied within 3 business days of receipt of written request for such
consent:
(a) make any single loan (or series of loans to the same or
related entities or persons) or any commitment (verbal or written) for a loan
(or series of commitments to the same or related entities or persons) in an
amount greater than $100,000.00 other than renewals of existing loans or
commitments to loan;
(b) purchase or invest in any securities, other than U.S.
government obligations or other securities backed by the full faith and credit
of the United States having a maturity of not more than two years from the date
of purchase;
(c) amend or adopt any employee benefit plan or grant any
increase in the rates of pay of their employees or any increase in the
compensation payable or to become payable, if any, to any director, officer,
employee or agent thereof, or contribute to any pension plan or otherwise
increase in any amount the benefits or compensation of any such directors,
officers or employees of Company or Bank under any pension plan or other
contract or commitment except for merit increases in accordance with past
practices;
(d) make any capital expenditure or enter into any material
contract or commitment (except loan commitments as permitted in Subparagraph (a)
of this Section 5.2); involving an obligation or commitment in excess of $5,000
or engage in any transaction not in their usual and ordinary course of business
and consistent with past practices;
(e) declare or pay any dividend or make any other distribution
in respect of any capital stock of Company or Bank, split, combine or reclassify
any shares of its capital stock or, directly or indirectly, redeem, purchase or
otherwise acquire any share of the capital stock of the Company or Bank;
provided, however, that (i) each of the Bank and the Company may declare and pay
quarterly cash dividends, in an amount equal to $1.00 per share, consistent with
past practices (with such dividends payable during the first month following the
end of each calendar quarter between the date hereof and the Closing Date such
that the dividends referenced in this clause (i) are payable in the month of
July for the quarter ending June 30, 1998, and in the month of October for the
quarter ending September 30, 1998; provided, however, that if the Closing Date
occurs on or before September 30, 1998, then the Company and the Bank, on or
before the Closing Date, may declare and pay a dividend equal to $1.00 per share
reduced by the amount
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of any cash dividends [on a per share basis] to be received by the shareholders
of the Company on shares of Gold Common Stock which they will receive pursuant
hereto if the Closing Date has occurred prior to the record date of a dividend
declared by Gold during the quarter ending September 30, 1998), (ii) if the
transactions contemplated hereby are not consummated in time to permit the
shareholders of the Company to receive any cash dividends declared and payable
on the Gold Common Stock after September 30, 1998, with respect to the shares of
Gold Common Stock which they will receive pursuant hereto (the aggregate dollar
amount of such dividends is referred to herein as the "Gold Equivalent
Dividend"), then the Bank and the Company may declare and pay a cash dividend in
an amount equal to the Gold Equivalent Dividend and (iii) the Bank may declare
and pay cash dividends in amounts sufficient to pay reasonable out-of-pocket
fees and expenses incurred by the Company (including, without limitation, fees
and expenses payable pursuant to Section 11.1 hereof) in connection with the
consummation of the transactions contemplated hereby (the amounts referred to in
(i), (ii) and (iii) herein are collectively referred to herein as "Permitted
Dividends").
(f) amend the Articles of Incorporation or By-Laws of either
of the Company or Bank or make any change in the authorized, issued or
outstanding capital stock (or any change in the par value thereof) of Company or
Bank;
(g) acquire or purchase any assets of or make any investment
in any financial institution other than the purchase of loans or participations
therein in the ordinary course of business, but subject to Section 5.2(a);
(h) enter into any new line of business;
(i) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof, or
otherwise acquire any assets, which would be material, individually or in the
aggregate, to Company or Bank, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructuring in the
ordinary course of business consistent with prudent banking practices;
(j) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect, or in any of
the conditions to the Merger set forth in Article VII not being satisfied, or in
a violation of any provisions of this Agreement except, in every case, as may be
required by applicable law;
(k) change its methods of accounting in effect on the date
hereof, except as required by changes in generally accepted accounting
principles ("GAAP") or regulatory accounting principles as concurred with by the
Company's independent accountants;
(l) other than activities in the ordinary course of business
consistent with prior practice, sell, lease, encumber, assign or otherwise
dispose of any of its material assets or properties;
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(m) file any application to relocate or terminate the
operations of any banking office;
(n) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructuring in the ordinary course of business consistent with
prudent banking practices;
(o) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any material contract, agreement
or lease for goods, services or office space to which the Company or Bank is a
party or by which the Company or Bank or their respective properties is bound;
or
(p) make any new loan or new extension of credit, or commit to
make any such loan or extension of credit, to any director or officer of the
Company or Bank without giving Gold three days' notice in advance of the
Company's or Bank's approval of such loan or extension of credit or commitment
relating thereto.
5.3 Inspection. Between the date hereof and the Closing Date and upon
reasonable notice, Gold and its authorized representatives shall be permitted
full access during regular business hours to all properties, books, records,
contracts and documents of Company and Bank. The Company shall furnish to Gold
and its authorized representative all information with respect to the affairs of
Company and Bank as Gold may reasonably request.
5.4 Financial Statements and Call Reports. From and after the date
hereof through the Closing Date, Company shall deliver to Gold monthly reports
of condition and income statements of Bank and shall deliver to Gold copies of
the call reports for Bank as filed with any regulatory agency promptly after
such filing.
5.5 Right to Attend Meetings. Company and Bank shall allow a
representative of Gold to attend as an observer all meetings of the Board of
Directors of Company and Bank and all meetings of the committees of each such
board, including, without limitation, the audit and executive committees thereof
and any other meetings of Company or Bank officials at which policy is being
made. Company and Bank shall give reasonable notice to Gold of any such meeting
and, if known, the agenda for or business to be discussed at such meeting.
Company and Bank shall provide to Gold all information provided to the directors
on all such boards and committees in connection with all such meetings or
otherwise provided to the directors and shall provide any other financial
reports or other analyses prepared for senior management of Company or Bank.
5.6. Data Processing. Company shall cooperate with Gold in taking those
planning actions necessary to be in a position to convert its data processing
procedures and formats to procedures and formats used by Gold. Gold shall
provide such assistance and consultation as Company may reasonably require in
such planning process.
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5.7 No Solicitation. Neither Company nor Bank nor any affiliates or
associates of Company nor Bank acting for or on behalf of Company or Bank shall,
directly or indirectly, make, encourage, facilitate, solicit, assist or initiate
any inquiry or proposal, or participate in any negotiations with, or, subject to
the provisos to this sentence, provide any information to, any corporation,
partnership, agent, attorney, financial adviser, person, or other entity or
group (other than (a) Gold, Sub, an affiliate or associate of Gold or Sub or an
officer, employee or other authorized representative of Gold, Sub or such
affiliate or associate or (b) the Company's counsel, accountants and financial
adviser solely for use in connection with the transactions contemplated hereby)
relating to any (i) liquidation, dissolution, recapitalization, merger or
consolidation of the Company or Bank, (ii) outside the ordinary course of
business, sale of a significant amount of assets of the Company or Bank, (iii)
purchase or sale of shares of capital stock of the Company or Bank, or (iv) any
similar transactions involving Company or Bank, other than the transactions
contemplated by this Agreement; provided, however, that the Company may provide
information at the request of a third party if the Board of Directors of the
Company determines, in good faith, that the exercise of its fiduciary duties to
the Company's shareholders under applicable law, as advised in writing by
outside counsel reasonably acceptable to Gold and Sub, requires it to take such
action, and, provided further, that Company may not, in any event, provide to
such third party any information which it has not provided to Gold and Sub.
Company shall immediately cease and cause to be terminated any and all such
contacts and negotiations with respect to any such transaction. Company shall
immediately inform Gold and Sub of any inquiry, proposal or request for
information (including the terms thereof and the person making such inquiry)
which it may receive in respect of such a transaction.
5.8 Regulatory Approvals. Subject to the terms and conditions of this
Agreement, Company agrees to use its reasonable best efforts to cooperate with
Gold in Gold's efforts to secure as expeditiously as practicable all the
necessary approvals, regulatory or otherwise, needed to consummate the
transactions contemplated herein.
5.9 Information. Company shall provide such information and answer such
inquiries as Gold may reasonably request or make concerning the subject matter
of the representations and warranties of Company herein.
5.10 TaxFree Reorganization Treatment. Company shall not intentionally
take or cause to be taken any action, whether before or after the Effective
Time, which would disqualify the Merger as a tax free "reorganization" within
the meaning of Section 368(a) of the Code (subject to required recognition of
gain or loss with respect to cash paid pursuant hereto or to any holder of
Company Common Stock who dissents from the merger).
ARTICLE VI
COVENANTS OF GOLD AND SUB
6.1 Regulatory Approvals. Subject to the terms and conditions of this
Agreement, Gold and Sub agree to use their reasonable best efforts to secure as
expeditiously as practicable all the necessary approvals, regulatory or
otherwise, needed to consummate the transactions contemplated herein and agree
to exercise best efforts to file applications relating to such
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approvals within thirty (30) days from the date hereof or as soon thereafter as
is reasonably possible. Gold and Sub shall provide to Company's counsel a copy
of all applications for such approvals and shall keep such counsel or the
Company advised of the status of the regulatory review process.
6.2 Information. Gold and Sub shall provide such information and answer
such inquiries, as the Company may reasonably request or make concerning the
subject matter of the representations and warranties of Gold and Sub herein.
6.3 TaxFree Reorganization Treatment. Neither Gold nor Sub shall
intentionally take or cause to be taken any action, whether before or after the
Effective Time, which would disqualify the Merger as a tax free "reorganization"
within the meaning of Section 368(a) of the Code.
6.4 Employee Benefits. Employees of Company or Bank shall be eligible
to participate in all Gold employee welfare benefit plans in accordance with
their terms, and for such purpose all service of such employees with the Company
and Bank shall be counted as service with Gold.
ARTICLE VII
CONDITIONS PRECEDENT TO GOLD'S OBLIGATIONS
The obligations of Gold and Sub to consummate the transactions
hereunder shall be subject to the satisfaction on or before the Closing Date of
all of the following conditions, except such conditions as Gold or Sub may waive
in writing:
7.1 Representations, Warranties and Covenants. All representations and
warranties of Company contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date, except for changes
permitted by or contemplated by this Agreement and except to the extent that any
such representation or warranty is made solely as of a specified date. Company
shall have performed all agreements and covenants in all material respects
required by this Agreement to be performed on or prior to the Closing Date and
Gold shall have received a certificate signed by an executive officer of the
Company, dated the Closing Date, to the foregoing effect.
7.2 Material Actions; Debts or Defaults. On the Closing Date, there
shall not be: (i) except as set forth on the Company Disclosure Schedule, any
actions, suits, claims, demands or other proceedings or investigations, either
judicial or administration, pending or, to the knowledge of Company or Bank,
threatened against or affecting the properties, assets, rights or business of
Company or Bank or the right to carry on or conduct their respective businesses;
(ii) any debt, liability or obligation of Company or Bank known to either
(whether accrued, contingent, absolute or otherwise) required to be reflected in
a corporate balance sheet or the notes thereto that is not reflected or reserved
against in their respective financial statements or was not incurred in ordinary
course of their respective businesses; or (iii) any material breach or material
default of Company or Bank known to either under any agreement or commitment to
which either is a party, or under any loan agreement, note, security agreement,
guarantee or other document pursuant to or in connection with the Company's or
Bank's extension of credit, any of which would have a Material Adverse Effect on
the Company or Bank.
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7.3 Adverse Changes. From the date hereof to the Closing Date, there
have been no material adverse change in the financial condition of, or in the
properties, assets, liabilities, rights or business, taken as a whole, of
Company or Bank, and taking into account for this purpose the proceeds of any
applicable insurance.
7.4 Regulatory Authority Approval. Orders, consents and approvals in
form and substance reasonably satisfactory to Gold shall have been entered by or
obtained from the appropriate regulatory authorities authorizing consummation of
the transactions contemplated hereby pursuant to the provisions of the Bank
Holding Company Act and any other applicable federal or state banking regulatory
statute or rule, and no such order, consent or approval shall be conditioned or
restricted in any manner which in the reasonable judgment of Gold would
materially adversely affect the operations of or be unduly burdensome to Gold.
7.5 Litigation. At the Closing Date, there shall not be pending or
threatened litigation in any court or any proceeding by any governmental
commission, board or agency which Gold reasonably believes could reasonably
result in restraining, enjoining or prohibiting the consummation of this
Agreement.
7.6 Financial Measures. On the Closing Date, the capital of Bank shall
be not less than $9,435,005.00, the reserve for loan and lease loss of Bank
shall be not less than $671,555.00 and the total indebtedness of the Company
shall not exceed $531,065.00, all as determined on the basis of the March 31,
1998 financial statements of the Bank delivered to Gold. Subject to Section
5.2(e) hereof, it is fully understood all future earnings from the date hereof
forward shall accrue to the retained earnings or reserves of the Bank,
respectively, and shall not result in an increase of any consideration payable
by Gold or Sub hereunder.
7.7 Approval by Shareholders. The shareholders of Company shall have
duly approved and adopted this Agreement and the other transactions contemplated
hereby to the extent required by applicable requirements of law and the Articles
of Incorporation and ByLaws of Company.
7.8 Tax Representations. Each shareholder of Company owning more than
10% of the outstanding Company Common Stock shall have made those
representations reasonably requested by counsel and necessary to enable them to
render the opinion described in Section 7.11 hereof.
7.9 Affiliate Agreements. Each person who is an "affiliate" (for
purposes of Rule 145 under the Securities Act and for pooling-of-interests
accounting treatment) of the Company and Bank at the time this Agreement is
submitted to approval of the stockholders of the Company and Bank shall deliver
to Gold a letter in substantially the form set forth in Exhibit 7.9.
7.10. Satisfactory Due Diligence. Representatives of Company and Bank
have cooperated with Gold, Sub and representatives of Gold and Sub in conducting
its due diligence in accordance with the terms of Section 5.3 above.
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7.11 Federal Tax Opinion. Gold shall have received an opinion of Payne
& Jones, Chartered, counsel to Gold ("Gold's Counsel"), in form and substance
reasonably satisfactory to Gold, dated the Closing Date, stating that the Merger
will be treated as a tax-free reorganization within the meaning of Section
368(a)(1)(C) of the Code, subject to required recognition of gain or loss with
respect to cash paid to holders of Company Common Stock who dissent from the
Merger.
7.12 Opinion of Counsel. Gold shall have received an opinion of
Stinson, Mag & Fizzell, P.C. ("Company's Counsel"), dated the Closing Date, in
form and substance reasonably satisfactory to Gold covering the matters set out
in Exhibit 7.12 hereto.
7.13 Qualification for Pooling-of-Interest Treatment. Gold shall have
received an opinion from an accounting firm reasonably acceptable to Gold that
this transaction will qualify for pooling-of-interest accounting treatment and
that all conditions applicable thereto (including limitation of any cash
consideration paid by Gold hereunder and absence of any capital transactions
involving any parties hereto) have been met.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATION
OF COMPANY AND BANK
The obligations of Company to consummate the transactions contemplated
hereunder shall be subject to satisfaction on or before the Closing Date of all
of the following conditions, except such conditions as Company may waive in
writing:
8.1 Representations, Warranties and Covenants. All representations and
warranties of Gold and Sub contained in this Agreement shall be true in all
material respects on and as of the Closing Date, except to the extent that any
such representation or warranty is made solely as of a specified date, and Gold
shall have performed all agreements and covenants in all material respects
required by this Agreement to be performed on or prior to the Closing Date, and
Company shall have received a certificate signed by an executive officer of
Gold, dated the Closing Date, to the foregoing effect.
8.2 Regulatory Authority Approval. Orders, consents and approvals in
form and substance reasonably satisfactory to Company shall have been entered by
or obtained from the appropriate regulatory authorities authorizing consummation
of the transactions contemplated by this Agreement pursuant to the provisions of
the Bank Holding Company Act and any other applicable federal or state banking
regulatory statute or rule.
8.3 Litigation. There shall not be pending or threatened litigation in
any court or any proceeding by any governmental commission, board or agency
which Company believes could reasonably result in restraining, enjoining or
prohibiting the consummation of the transactions contemplated by this Agreement.
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8.4 Approval by Shareholders. The shareholders of Company shall have
duly approved and adopted this Agreement, the Merger and the transactions
contemplated hereby to the extent required by applicable requirements of law and
the Articles of Incorporation and ByLaws of the Company and Bank.
8.5 Adverse Changes. From the date of this Agreement to the Closing
Date, there will have been no material adverse change in the financial
condition, properties, assets, liabilities, rights, business or prospects of
Gold.
8.6. Federal Tax Opinion. The Company shall have received, at Gold's
expense, an opinion of Gold's Counsel, addressed to the Company and its
shareholders in form and substance reasonably satisfactory to the Company and
Company's Counsel, dated the Closing Date, to the effect that the Merger will be
a tax-free reorganization under Section 368(a)(1)(C) of the Code and no gain or
loss will be recognized by the shareholders of the Company, except for
recognition of gain or loss with respect to cash paid to holders of Company
Common Stock who dissent from the Merger.
8.7. Opinion of Counsel. Company shall have received, at Gold's
expense, an opinion of Gold's Counsel, dated the Closing Date, in form and
substance reasonably satisfactory to Company, covering the matters set out in
Exhibit 8.7 hereto.
8.8. Cash Dividend. The Board of Directors of the Company shall have
declared and the Company shall have paid the Permitted Dividends on Company
Common Stock authorized by Section 5.2(e) hereof.
ARTICLE IX
TERMINATION OF AGREEMENT; INDEMNIFICATION
9.1 Basis for Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing Date: (a)
by mutual consent in writing of the parties hereto; (b) by Gold upon written
notice to Company if any regulatory approval of the transactions contemplated
under the terms of this Agreement shall be denied or if any such regulatory
approval shall be conditioned or restricted in any manner which in the
reasonable judgment of Gold would materially adversely affect the operations of
or would be unduly burdensome to Gold; (c) by Gold or Company if the other party
has materially breached this Agreement and has not cured such breach within the
earlier of (i) 30 days after the nonbreaching party shall have given notice to
the breaching party of the existence of such breach or (ii) the Closing Date;
(d) by Gold or Company upon written notice to the other of any other condition
imposed for the benefit of such party that shall not have been satisfied or
waived prior to the Closing Date; or (e) by either Gold or Company if the
Closing Date shall not have occurred by December 31, 1998, unless Gold and
Company agree in writing to extend such deadline; provided that the terminating
party is not then in material breach of this Agreement. As used in this Section
9.1, actions contemplated as being taken by Gold or the Company must be taken by
their respective Board of Directors or the Executive Committee of such Board.
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9.2 Effect of Termination. In the event of termination of this
Agreement for any reason set forth in Section 9.1, other than a breach thereof,
no party hereto shall have any liability to the other of any nature whatsoever,
including any liability for loss, damages or expenses suffered or claimed to be
suffered by reason thereof.
In the event Gold and Sub have performed all of their obligations
hereunder and all conditions precedent to the obligation of Company to close
have been met or waived in writing by Company, but Company fails or otherwise
refuses to close, then Gold shall be entitled to enforce the terms hereof by an
action seeking specific performance. Such right is not exclusive and shall not
preclude Gold from also pursuing an action to recover any and all damages
resulting from the Company's default hereunder. All remedies available to Gold
hereunder or by law are cumulative.
In the event Company has performed all of its obligations hereunder and
all conditions precedent to the obligations of Gold and Sub to close have been
met or waived in writing by Gold and Sub, but Gold and Sub fail or otherwise
refuse to close, then Company shall be entitled to enforce the terms hereof by
an action seeking specific performance. Such right is not exclusive and shall
not preclude Company from also pursuing an action to recover any and all damages
resulting from the default by Gold and Sub hereunder. All remedies available to
Company hereunder or by law are cumulative.
9.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Company or Sub, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
9.5 Indemnification by Company. The Company agrees to indemnify and
hold harmless Gold, Sub and the officers, shareholders and directors of each
such entity from and against and in respect of any and all damages, losses,
diminution of value, or expenses suffered or incurred by any such party (whether
as a result of third party claims, demands, suits, causes of action,
proceedings, investigations, judgments or liabilities or otherwise), including
costs of investigation in defense and reasonable attorneys' fees assessed,
incurred or sustained by or against any of them, with respect to or arising out
of any breach of the representations, warranties and/or covenants of the Company
set forth herein.
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9.6 Indemnification by Gold. Gold agrees to indemnify, defend and hold
harmless Company and the Bank, and the shareholders, directors, officers,
employees, agents and representatives of each such entity, from and against and
in respect of any and all damages, losses, diminution of value, or expenses
suffered or incurred by Company (whether as a result of third party claims,
demands, suits, causes of action, proceedings, investigations, judgments,
liabilities or otherwise), including costs of investigation and defense and
reasonable attorneys' fees assessed or incurred or sustained by or against
Company or its shareholders, with respect to or arising out of any breach of the
representations, warranties and covenants of Gold and Sub set forth herein.
9.7 Limitations on Indemnification. Notwithstanding anything herein
contained to the contrary, no person shall be entitled to indemnification under
the provisions of this Agreement: (i) unless such party shall have given written
notice to the indemnifying party setting forth its claim for indemnification in
reasonable detail, (ii) unless the total aggregate claims for indemnification
have exceeded $50,000.00 and (iii) to the extent that the aggregate amount of
all indemnification liability under Section 9.5 or Section 9.6, as applicable,
exceeds the total value of consideration provided (as of the Closing Date) by
Gold and Sub under Section 2.2 in exchange for Company Common Stock.
9.8. Procedure for Indemnification. If a party hereto becomes aware of
an event which gives rise to a claim for indemnification hereunder, such party
shall give the other party prompt notice of any such action, claim, liability,
assessment or notice of deficiency received by such party which might result in
any liability under this provision. Further, any party who may claim a right of
indemnification hereunder agrees to refrain from paying, settling or
compromising any such claim for which indemnification may be sought without
giving notice of same to the other party. If the other party wishes to contest
or defend such third party claim, then the party against whom the claim was made
shall be obligated to cooperate fully with such party in contesting and
preserving all rights with respect to such contest; provided, however, that if
the other party does not wish to challenge or contest such third party claim,
then the party against whom the claim was being made by settle same on terms and
conditions it deems to be the most favorable it can be obtained and then
inserting the indemnification claim against the other party hereto. When giving
a notice under this provision, a party may specify a time for a response from
the other party as to whether such other party wishes to contest or defend such
third party claim. Such deadline for response may be established consistent with
the facts and circumstances surrounding the situation. If a party hereunder
claims indemnification for a claim other than a third party claim, the party
seeking indemnification shall notify the indemnifying party in writing of the
basis for such claim setting forth the nature and amount of the damages
resulting from such claim. To the extent a party is deemed to have ultimately
been responsible for indemnification, then interest shall be deemed to accrue on
the unpaid amount of indemnification obligation at the prime rate of interest
announced from time to time by Exchange National Bank, such interest to be
calculated based on the actual number of days elapsed from the date each
indemnification obligation becomes due and owing until paid in full and based on
365 day year.
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ARTICLE X
SECURITIES LAWS MATTERS
10.1 Registration Statement and Proxy Statement. Gold shall, at Gold's
expense (but subject to the terms of Section 11.1 hereinafter) as soon as
practicable prepare and file a registration statement on Form S-4 to be filed
with the SEC pursuant to the Securities Act for the purpose of registering the
shares of Gold Common Stock to be issued in the Merger (the "Registration
Statement"). Company, Gold and Sub shall each provide promptly to the other such
information concerning their respective businesses, financial conditions, and
affairs as may be required or appropriate for inclusion in the Registration
Statement or the proxy statement to be used in connection with the special
stockholders' meetings of Company and to be called for the purpose of
considering and voting on the Merger (the "Proxy Statement"). Company, Gold and
Sub shall each cause their counsel and auditors to cooperate with the other's
counsel and auditors in the preparation and filing of the Registration Statement
and the Proxy Statement. Gold shall not include in the Registration Statement
any information concerning Company or Bank to which Company shall reasonably and
timely object in writing. Gold, Sub and Company shall use their reasonable best
efforts to have the Registration Statement declared effective under the
Securities Act as soon as may be practicable and thereafter Company shall
distribute the Proxy Statement to its stockholders in accordance with applicable
laws not fewer than 20 business days prior to the date on which this Agreement
is to be submitted to its stockholders for voting thereon. If necessary, in
light of developments occurring subsequent to the distribution of the Proxy
Statement, Company shall mail or otherwise furnish to its shareholders such
amendments to the Proxy Statement or supplements to the Proxy Statement as may,
in the reasonable opinion of Gold, Sub or Company, be necessary so that the
Proxy Statement, as so amended or supplemented, will contain no untrue statement
of any material fact and will not omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or as may be necessary
to comply with applicable law. Gold and Sub shall not be required to maintain
the effectiveness of the Registration Statement after delivery of the Gold
Common Stock issued pursuant hereto for the purpose of resale of Gold Common
Stock by any person. For a period of at least two years from the Effective Time,
Gold shall make available "adequate current public information" within the
meaning of and as required by paragraph (c) of Rule 144 adopted pursuant to the
Securities Act.
10.2 State Securities Laws. The parties hereto shall cooperate in
making any filings required under the securities laws of any state in order
either to qualify or register the Gold Common Stock so it may be offered and
sold lawfully in such state in connection with the Merger or to obtain an
exemption from such qualification or registration.
10.3 Publication of Combined Financial Results. Gold will file with the
Securities and Exchange Commission a Periodic Report on Form 8K containing
financial statements which include no less than 30 days of combined operations
of Gold and Company, ended on a normal closing date, as soon as practicable
after the Effective Time unless the first 30 day period of combined operations
is reflected in and ends on the normal closing date of an annual report on Form
10K or quarterly report on Form 10Q.
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10.4. Affiliates. Certificates representing shares of Gold Common Stock
issued to "Affiliates" (as defined in Rules 145 and 405 adopted under the
Securities Act) of Company pursuant to this Agreement will be subject to stop
transfer orders (as reasonably required in connection with Rule 145) and will
bear a restrictive legend set out in the Affiliate Letter; provided, however,
that following publication of financial results covering at least thirty (30)
days of combined operations of Gold and the Company and upon receipt of an
opinion of counsel reasonably satisfactory to Gold that a proposed sale, pledge,
transfer or other disposition of a specified number of shares of Gold Common
Stock by an Affiliate will comply with or will be exempt from the Securities
Act, Gold shall, as promptly as practicable after receipt of the stock
certificates representing such Affiliate's Gold Common Stock (and in any event
within seven (7) business days after such receipt), direct the Transfer Agent
for the Gold Common Stock to remove the stock transfer order related thereto and
reissue a stock certificate evidencing such shares to the Affiliate with such
restrictive legend.
10.5. Indemnification. Gold agrees to indemnify and hold harmless
Company and its shareholders, directors, officers, employees, representatives
and agents from and against any and all claims, liabilities, damages and
expenses (including reasonable attorneys' fees), whether arising under federal
or state securities or Blue Sky laws or otherwise, which may be asserted against
any of them and which arise as a result of any alleged act or failure to act, or
any alleged statement or omission, of Gold done or made in connection with the
Merger, Registration Statement, Proxy Statement, or any other statement or form
filed or required to be filed with the SEC or any state securities department or
delivered or required to be delivered to the holders of Company Common Stock
except to the extent any such alleged act, failure to act, statement or omission
is a result of information provided by the Company.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Except as set forth herein, each party shall be
responsible for its own expenses in connection with this transaction.
Specifically, each party shall be responsible for their own legal and accounting
fees and any related costs or charges associated with the negotiation, execution
and consummation of this Agreement. However, notwithstanding anything herein
contained to the contrary, it is understood and agreed that the Company shall
pay up to an aggregate of $50,000.00 of the total cost of (i) the certified
audit of the consolidated balance sheet of the Company as of December 31, 1997
(if required) and the statement of income for the year then ended and (ii) the
preparation and filing of the Registration Statement and Proxy Statement
referenced in Section 10.1 above.
11.2 Parties in Interest. This Agreement and the rights hereunder are
not assignable unless such assignment is consented to in writing by all parties
hereto. Except as otherwise expressly provided herein, all of the terms and
provisions of this Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the respective heirs, beneficiaries, personal and
legal representatives, successors and permitted assigns of the parties hereto.
11.3 Entire Agreement, Amendments, Waiver. This Agreement contains the
entire understanding of Gold, Sub and Company with respect to the Merger and
supersedes all prior
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agreements and understandings, whether written or oral, between them with
respect to the Merger contemplated herein. This Agreement may be amended only by
a written instrument duly executed by the parties or their respective successors
or permitted assigns. Any condition to a party's obligation hereunder may be
waived by such party in writing.
11.4 Notices. All notices, requests, demands or other communications
hereunder shall be in writing and shall be deemed to have been duly given when
personally delivered or transmitted by telefacsimile with a copy thereof
transmitted by a nationally recognized overnight delivery service or deposited
in the United States mail, certified or registered, return receipt requested,
postage prepaid, addressed to the parties at the following addresses or at such
other address as shall be given in like manner by any party to the other:
If to Company: First State Bancorp, Inc.
5th and Broadway
Pittsburg, KS 66762
Telephone: (316) 231-2000
FAX: (316) 231-3974
with a copy to: Mr. William R. Hagman, Jr.
224 Via Napoli
Naples, FL 34105
Telephone: (941) 234-6030
FAX: (941) 261-3568
and: Michael W. Lochmann
Stinson, Mag & Fizzell, P.C.
1201 Walnut Street
Suite 2800
Kansas City, MO 64106
Telephone: (816) 842-8600
FAX: (816) 691-3495
If to Gold: Mr. Michael W. Gullion
Gold Banc Corporation, Inc.
11301 Nall Avenue
Leawood, KS 66211
Telephone: (913) 451-8050
FAX: (913) 451-8004
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with a copy to: Thomas K. Jones
Payne & Jones, Chartered
P.O. Box 25625
Overland Park, KS 66225
Telephone: (913) 469-4100
FAX: (913) 469-8182
11.5 Law Governing. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Kansas.
11.6 Further Acts. Gold, Company and Sub agree to execute and deliver
on or before the Closing Date such other documents, certificates, agreements or
other writings and take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.
11.7. Special Provision Regarding Disclosure Schedules. The parties
hereto acknowledge and agree that neither side has had time to prepare completed
and comprehensive drafts of the Company Disclosure Schedule or the Gold
Disclosure Schedule, but desire to proceed with the execution, delivery and
announcement of this Agreement. Therefore, the parties hereto covenant and agree
that within twenty-one (21) days after the date hereof, the Company will prepare
and deliver to Gold the Company Disclosure Schedule, and Gold will prepare and
deliver to Company the Gold Disclosure Schedule, each of which shall be deemed
to have been given on and prepared as of the date hereof. If for any reason,
Gold, in the exercise of its reasonable discretion, determines that the Company
Disclosure Schedule discloses a Material Adverse Change in the Company of which
Gold was not previously aware, or Company, in the exercise of its reasonable
discretion, determines that the Gold Disclosure Schedule discloses a Material
Adverse Change in Gold of which Company was not previously aware, then
notwithstanding any other provision of this Agreement, either Gold or Company
may immediately terminate this Agreement within seven (7) days after receipt of
such schedule, without any further liability to the other party hereto. The
provisions of this Section 11.7 shall supersede all other provisions of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
GOLD BANC CORPORATION, INC.
By:/s/ Michael W. Gullion
---------------------------------------
Name: Michael W. Gullion
Title: President and Chief Executive
Officer
ATTEST:
/s/ Keith E. Bouchey
- -----------------------------
Name: Keith E. Bouchey
Title: Secretary
GOLD BANC ACQUISITION
CORPORATION VII, INC.
By:/s/ Michael W. Gullion
---------------------------------------
Name: Michael W. Gullion
Title: President and Chief Executive
Officer
ATTEST:
/s/ Keith E. Bouchey
- ----------------------------
Name: Keith E. Bouchey
Title: Secretary
FIRST STATE BANCORP, INC.
By:/s/ Jack H. Overman
---------------------------------------
Name: Jack H. Overman
Title: Vice President
ATTEST:
/s/ Juliana M. Story
- ----------------------------
Name: Juliana M. Story
Title: Secretary
31
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in the Gold Banc Corporation, Inc.
Current Report on Form 8-K dated October 21, 1998, filed with the Securities and
Exchange Commission, of our report dated February 6, 1998, except for Note 17 as
to which the date is May 19, 1998, with respect to First State Bancorp, Inc.'s
financial statements as of December 31, 1997 and 1996, and for each of the years
in the three-year period ended December 31, 1997.
/s/ Baird, Kurtz & Dobson
Joplin, Missouri
November 4, 1998
