SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a 6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant toss.240.14a-11(c) orss.240.14a-12
First Kansas Financial Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
FIRST KANSAS FINANCIAL CORPORATION
Parent Corporation Of
FIRST KANSAS FEDERAL SAVINGS BANK
March 14, 2000
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of First Kansas
Financial Corporation (the "Corporation"), I cordially invite you to attend the
annual meeting of stockholders to be held at the Corporation's offices at 600
Main Street, Osawatomie, Kansas, on April 18, 2000, at 1:00 p.m. The attached
Notice of Annual Meeting and Proxy Statement describe the formal business to be
transacted at the meeting.
The Board of Directors of the Corporation has determined that the
matters to be considered at the meeting, described in the accompanying Notice of
Annual Meeting and proxy statement, are in the best interest of the Corporation
and its stockholders. For the reasons set forth in the proxy statement, the
Board of Directors unanimously recommends a vote "FOR" each matter to be
considered.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE-PAID RETURN
ENVELOPE AS PROMPTLY AS POSSIBLE. This will not prevent you from voting in
person at the meeting, but will assure that your vote is counted if you are
unable to attend. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/Larry V. Bailey
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Larry V. Bailey
President
<PAGE>
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FIRST KANSAS FINANCIAL CORPORATION
600 MAIN STREET
OSAWATOMIE, KANSAS 66064
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on April 18, 2000
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NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Meeting") of First Kansas Financial Corporation (the "Corporation"), will be
held at the Corporation's corporate headquarters at 600 Main Street, Osawatomie,
Kansas on April 18, 2000, at 1:00 p.m.
The Meeting is for the purpose of considering and acting upon the following
matters:
1. The election of three directors of the Corporation;
2. The ratification of the First Kansas Financial Corporation 1999 Stock
Option Plan; and
3. The ratification of the First Kansas Federal Savings Bank 1999
Restricted Stock Plan.
The transaction of such other matters as may properly come before the Meeting or
any adjournments thereof may also be acted upon. The Board of Directors is not
aware of any other business to come before the Meeting. Action may be taken on
the foregoing proposal at the Meeting on the date specified above, or on any
date or dates to which, by original or later adjournment, the Meeting may be
adjourned. Pursuant to the Corporation's Bylaws, the Board of Directors has
fixed the close of business on March 3, 2000, as the record date for
determination of the stockholders entitled to vote at the Meeting and any
adjournments thereof.
EACH STOCKHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY SIGNED PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED BY FILING WITH THE SECRETARY OF THE CORPORATION A WRITTEN REVOCATION OR
A DULY EXECUTED PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE
MEETING MAY REVOKE HIS PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE
THE MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED
IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER
TO VOTE PERSONALLY AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Galen E. Graham
----------------------------
Galen E. Graham
Secretary
Osawatomie, Kansas
March 14, 2000
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
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<PAGE>
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PROXY STATEMENT
OF
FIRST KANSAS FINANCIAL CORPORATION
600 MAIN STREET
OSAWATOMIE, KANSAS 66064
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ANNUAL MEETING OF STOCKHOLDERS
April 18, 2000
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of First Kansas Financial Corporation (the
"Corporation") to be used at the Annual Meeting of Stockholders of the
Corporation which will be held at the corporate headquarters at 600 Main Street,
Osawatomie, Kansas on April 18, 2000, at 1:00 p.m. local time (the "Meeting").
The accompanying Notice of Annual Meeting of Stockholders and this Proxy
Statement are being first mailed to stockholders on or about March 14, 2000. The
Corporation is the parent corporation of First Kansas Federal Savings Bank (the
"Bank").
At the Meeting, stockholders will consider and vote upon (1) the
election of three directors; (2) the ratification of the First Kansas Financial
Corporation 1999 Stock Option Plan (the "Option Plan");and (3) the ratification
of the First Kansas Federal Savings Bank 1999 Restricted Stock Plan (the "RSP").
The Board of Directors knows of no additional matters that will be presented for
consideration at the Meeting. Execution of a proxy, however, confers on the
designated proxyholder the discretionary authority to vote the shares
represented by such proxy in accordance with his best judgment on such other
business, if any, that may properly come before the Meeting or any adjournment
thereof.
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VOTING AND REVOCABILITY OF PROXIES
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Stockholders who execute proxies may revoke them at any time. Unless so
revoked, the shares represented by proxies will be voted at the Meeting and all
adjournments thereof. Proxies may be revoked by written notice to the Secretary
of the Corporation at the address above or by the filing of a later dated proxy
prior to a vote being taken on a particular proposal at the Meeting. A proxy
will not be voted if a stockholder attends the Meeting and votes in person.
Proxies solicited by the Board of Directors will be voted in accordance with the
directions given therein. Where no instructions are indicated, signed proxies
will be voted "FOR" the nominees for director set forth below and "FOR" the
other listed proposals. The proxy confers discretionary authority on the persons
named therein to vote with respect to the election of any person as a director
where the nominee is unable to serve, or for good cause will not serve, matters
incident to the conduct of the Meeting, and as to any other matters that may
properly come before the Meeting or any adjournment thereof.
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INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
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Executive officers and directors of the Corporation have an interest in
certain matters to be acted upon at the Meeting. Upon stockholder ratification
of the Option Plan and the RSP, the awards under these plans will properly vest
upon a change in control, as defined in the Option Plan and the RSP. Such
accelerated vesting will be permitted only if these plans are ratified by
stockholders more than one year
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<PAGE>
after the Bank completed its mutual-to-stock conversion. The ratification of the
Option Plan and the RSP are being presented as Proposal II and Proposal III,
respectively.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Stockholders of record as of the close of business on March 3, 2000
(the "Record Date"), are entitled to one vote for each share of common stock of
the Corporation (the "Common Stock") then held. As of the Record Date, the
Corporation had 1,332,308 shares of Common Stock issued and outstanding.
The Articles of Incorporation of the Corporation ("Articles of
Incorporation") provide that in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns in excess of 10% of the then outstanding shares
of Common Stock (the "Limit") be entitled or permitted to any vote with respect
to the shares held in excess of the Limit. Beneficial ownership is determined
pursuant to the definition in the Articles of Incorporation and includes shares
beneficially owned by such person or any of his or her affiliates (as such terms
are defined in the Articles of Incorporation), or which such person or any of
his or her affiliates has the right to acquire upon the exercise of conversion
rights or options and shares as to which such person or any of his or her
affiliates or associates have or share investment or voting power, but neither
any employee stock ownership or similar plan of the Corporation or any
subsidiary, nor any trustee with respect thereto or any affiliate of such
trustee (solely by reason of such capacity of such trustee), shall be deemed,
for purposes of the Articles of Incorporation, to beneficially own any Common
Stock held under any such plan.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote (after subtracting any
shares held in excess of the Limit) is necessary to constitute a quorum at the
Meeting. In the event there are not sufficient votes for a quorum, the Meeting
may be adjourned in order to permit the further solicitation of proxies.
As to the election of directors, the proxy card being provided by the
Board of Directors enables a stockholder to vote for the election of the
nominees proposed by the Board of Directors, or to withhold authority to vote
for the nominees being proposed. Under the Corporation's bylaws, directors are
elected by a plurality of votes cast.
As to the ratification of the Option Plan and the RSP, which are
submitted as Proposals II and III, respectively, a stockholder may: (i) vote
"FOR" the ratification; (ii) vote "AGAINST" the ratification; or (iii) "ABSTAIN"
with respect to the ratification. With respect to Proposals II and III, the
affirmative vote of a majority of the votes cast at the Meeting, in person or by
proxy, is required to constitute stockholder ratification.
Security Ownership of Certain Beneficial Owners
Persons and groups owning in excess of 5% of the Common Stock are
required to file certain reports regarding such ownership pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The following
table sets forth, as of the Record Date, persons or groups who own more than 5%
of the Common Stock and the ownership of all executive officers and directors of
the Corporation as a group. Other than as noted below, management knows of no
person or group that owns more than 5% of the outstanding shares of Common Stock
at the Record Date.
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<PAGE>
<TABLE>
<CAPTION>
Percent of Shares of
Amount and Nature of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership Outstanding
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<S> <C> <C>
First Kansas Federal Savings Bank 124,315 9.3%
Employee Stock Ownership Plan (the "ESOP")
600 Main Street
Osawatomie, Kansas 66064 (1)
Sandler O'Neill Asset Management, LLC 115,000 8.6%
712 Fifth Avenue
New York, New York 10019 (2)
Mr. Bradford M. Johnson 124,200 9.3%
P.O. Box 8208
Shawnee Mission, Kansas 66208 (3)
First Manhattan Co. 90,800 6.8%
437 Madison Avenue
New York, NY 10022 (4)
All directors and officers of the Corporation 132,377 9.9%
as a group (8 persons) (5)
</TABLE>
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(1) The ESOP purchased such shares for the exclusive benefit of plan
participants with funds borrowed from the Corporation. These shares are
held in a suspense account and will be allocated among ESOP participants
annually on the basis of compensation as the ESOP debt is repaid. The ESOP
Committee consisting of certain non-employee directors of the Board
instructs the ESOP Trustee regarding investment of ESOP plan assets. The
ESOP Trustee must vote all shares allocated to participant accounts under
the ESOP as directed by participants. Unallocated shares, and shares for
which no timely voting direction is received, will be voted by the ESOP
Trustee as directed by the ESOP Committee.
(2) Number of shares is based upon an amended Schedule 13D, filed with the
Securities and Exchange Commission ("SEC"), on January 10, 2000, on behalf
of the named entity, Malta Partners, L.P., Malta Hedge Fund, L.P., Malta
Partners II, L.P., Malta Hedge Fund II, L.G., SOAM Holdings, LLC, and Mr.
Terry Maltese.
(3) Number of shares is based upon an amended Schedule 13D filed with the SEC
on December 14, 1999.
(4) Number of shares is based upon a Schedule 13G, filed with the Securities
and Exchange Commission ("SEC") on February 10, 2000, on behalf of the
named entity by Neal K. Stearns, General Partner. (5) Includes shares of
Common Stock held directly as well as by spouses or minor children, in
trust and other indirect ownership, over which shares the individuals
effectively exercise sole voting and investment power, unless otherwise
indicated. Includes 23,308 shares of Common Stock that may be acquired
pursuant to the exercise of options within 60 days of the Record Date.
Excludes 120,334 shares held by the ESOP (124,315 shares less 3,981 shares
allocated to executive officers) over which certain non-employee directors,
as trustees to the ESOP, exercise shared voting power. Excludes 62,157
shares of Common Stock held by the RSP over which certain directors, as
members of the RSP Committee and as RSP Trustees, exercise voting power.
Such individuals disclaim beneficial ownership with respect to such shares
held by the ESOP and the RSP.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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Section 16(a) of the 1934 Act requires the Corporation's officers and
directors, and persons who own more than ten percent of the Common Stock, to
file reports of ownership and changes in ownership of the Common Stock, on Forms
3, 4 and 5, with the Securities and Exchange Commission ("SEC") and to provide
copies of those Forms 3, 4 and 5 to the Corporation. The Corporation is not
aware of any beneficial owner, as defined under Section 16(a), of more than ten
percent of its Common Stock.
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<PAGE>
Based upon a review of the copies of the forms furnished to the
Corporation, or written representations from certain reporting persons that no
Forms 5 were required, the Corporation believes that all Section 16(a) filing
requirements applicable to its officers and directors were complied with during
the 1999 fiscal year.
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PROPOSAL I -- ELECTION OF DIRECTORS
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The Articles of Incorporation require that directors be divided into
three classes, each class to be elected for a term of three years or until their
successors are elected or qualified. The Board of Directors currently consists
of six members. The Board of Directors has nominated James E. Breckenridge and
Roger L. Coltrin to serve as directors of the Corporation, each for a three-year
term, and Sherman W. Cole to serve as director of the Corporation for a one-year
term.
Directors of the Corporation are elected by a plurality of the votes
cast. It is intended that proxies solicited by the Board of Directors will,
unless otherwise specified, be voted for the election of the named nominees. If
any of the nominees are unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute as the Board of
Directors may recommend. At this time, the Board of Directors knows of no reason
any of the nominees might be unavailable to serve.
The following table sets forth the nominees and the directors, their
names, ages, the year they first became a director of the Bank and the
Corporation, the expiration date of their current term as a director of the
Corporation, and the number and percentage of shares of the Common Stock
beneficially owned.
<TABLE>
<CAPTION>
Shares of
Age at Year First Current Common Stock Percent
December 31, Elected or Term to Beneficially of
Name 1999 Appointed(1) Expire Owned (2)(3) Class
- ---- ---------- ----------- ------- ------------ -------
BOARD NOMINEES FOR TERM TO EXPIRE IN 2003
<S> <C> <C> <C> <C> <C>
James E. Breckenridge 52 1977 2000 12,175(4)(5) --*
Roger L. Coltrin 60 1996 2000 31,455(4)(5) 2.36%
</TABLE>
<TABLE>
<CAPTION>
BOARD NOMINEE FOR TERM TO EXPIRE IN 2001
<S> <C> <C> <C> <C> <C>
Sherman W. Cole 56 n/a n/a 12,876 --*
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS IN OFFICE
<S> <C> <C> <C> <C> <C>
J. Darcy Domoney 46 1995 2001 6,195(4)(5) --*
Donald V. Meyer 54 1989 2002 22,175(4)(5) 1.66%
Larry V. Bailey 57 1989 2002 32,188(6) 2.40%
</TABLE>
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*Less than 1%.
(1) Refers to the year the individual first became a director of the Bank. All
directors of the Bank as of February 1998 became directors of the
Corporation when it was incorporated in February 1998.
(2) Beneficial ownership as of the Record Date.
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<PAGE>
(3) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which shares
the individuals effectively exercise sole or shared voting and investment
power, unless otherwise indicated.
(4) Includes 1,553 shares of Common Stock which may be acquired pursuant to the
exercise of options within 60 days of the Record Date.
(5) Excludes 124,315 shares of Common Stock held by the ESOP over which such
individual, as a member of the ESOP Committee and as an ESOP Trustee,
exercises voting power. Once allocated to participant accounts, such Common
Stock are voted by the ESOP Trustees as directed by the plan participant as
the beneficial owner of such Common Stock. Shares which are unallocated to
participating employees (111,884 shares) and shares for which no voting
directions are received are voted by the ESOP Trustees as directed by the
ESOP Committee. Also excludes 62,517 shares of Common Stock held by the RSP
over which such individual, as a member of the RSP Committee and as an RSP
Trustee, exercises voting power. Such individuals disclaim beneficial
ownership of with respect to ESOP and RSP shares.
(6) Includes 7,769 shares of Common Stock which may be acquired pursuant to the
exercise of options within 60 days of the Record Date.
The principal occupation of, and other information about, each
director, nominee and executive officer is set forth below as of December 31,
1999. All directors, nominees and executive officers have held their present
positions for five years unless otherwise stated.
James E. Breckenridge has been a director of the Bank since 1977. Since
January 1997 Mr. Breckenridge has been employed by Thorn Industries, an
appliance, electronics and furniture store. Until January 1996, Mr. Breckenridge
was President and majority stockholder of Breck's Inc., a men's clothing store.
Sherman W. Cole has been an advisory director of the Bank since 1992.
Mr. Cole presently assists on special projects at the Osawatomie State Hospital
where he retired from full-time employment after 33 years of service. Mr. Cole
is mayor of Osawatomie and is active in many civic roles throughout Miami
County.
Roger L. Coltrin has served the Bank as an advisory director since
1989. In January 1996 he became a voting director. Mr. Coltrin is the manager of
the Runyan Funeral Home and until 1997 was a majority stockholder in this
business. He is a member of the Past Mayors Council, the High School Site
Committee and the local Lions Clubs. Mr. Coltrin is also a member of the
Louisburg Chamber of Commerce.
J. Darcy Domoney has served the Bank as a director since 1995 and as
Chairman since January 1997. Mr. Domoney is a partner in the law firm of
Winkler, Lee, Tetwiler, Domoney & Schultz. He is a member of the Paola Rotary
Club and is on the Rotary District Youth Exchange Committee.
Donald V. Meyer has been a director of the Bank since 1989 and was
Chairman of the Board for four years. He is a dentist with a solo practice in
Paola.
Larry V. Bailey has served the Bank since 1989 as President and Chief
Executive Officer ("CEO"). He is also Chief Financial Officer ("CFO") of the
Bank and a member of the Board of Directors. Mr. Bailey was a director of the
Osawatomie Chamber of Commerce and is the Treasurer of the local Lions Club. He
is also a director of the Miami County Economic Development Corporation and a
director of Osawatomie's "Christmas in October."
William R. Butler, Jr. has been a director of the Bank since 1977. He
has been actively involved in the local community, having owned and operated
several retail businesses in Osawatomie. Mr. Butler has served as an Osawatomie
City Councilman and presently serves as a Miami County Commissioner. Mr. Butler
is a member of the Osawatomie Chamber of Commerce, a member of the Miami County
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<PAGE>
Crimestoppers, and serves as a director of the Miami County Economic Development
Corp. Mr. Butler will retire from the Board as of April 18, 2000.
Executive Officers
Daniel G. Droste, age 42, is a Senior Vice President and the Treasurer
of the Bank. He has been employed with the Bank since 1979. Mr. Droste is also
the Treasurer and Assistant Scout Master for Boy Scout Troop 100 and a member of
the Paola Sunrise Lions Club. He is also currently the Chairman of the Holy
Trinity Church Building Committee and Co-Chairman of the Holy Trinity Church
Development Team. He has also over the past several years been an active
participant in the "Christmas in October" program.
Galen E. Graham, age 60, has served as an executive officer of the Bank
since 1970. He is a Senior Vice President and the Secretary of the Bank.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The Board of Directors conducts its business through meetings of the
Board and through activities of its committees. During the year ended December
31, 1999, the Board of Directors held 12 regular meetings and no special
meetings. No director attended fewer than 75% of the total meetings of the Board
of Directors and committees on which such director served during this time
period.
During the 1999 fiscal year, Directors Breckenridge, Butler, Coltrin,
Meyer, Bailey and Domoney acted as the Corporation's nominating committee
("Nominating Committee"), which is a non-standing committee, for selecting the
management nominees for election of directors in accordance with the
Corporation's Bylaws. In its deliberations, the Nominating Committee considers
the candidate's knowledge of the banking business and involvement in community,
business, and civic affairs. While the Board of Directors will consider nominees
recommended by stockholders, it has not actively solicited recommendations from
stockholders for nominees nor, subject to the procedural requirements set forth
in the Articles of Incorporation and Bylaws, established any procedures for this
purpose. The Board of Directors met twice as the Nominating Committee during the
1999 fiscal year.
The Audit Committee, a standing committee, is comprised of Directors
Breckenridge (Chairman), Coltrin and Meyer. The Audit Committee annually selects
the independent auditors and meets with the accountants to discuss and review
the annual audit. The Audit Committee is further responsible for internal
controls for financial reporting. The Audit Committee met quarterly during the
fiscal year ended December 31, 1999.
The Compensation Committee, a standing committee, consists of Directors
Coltrin (Chairman), Domoney and Breckenridge. The Compensation Committee meets
on call. It offers guidance to the Bank's and the Corporation's management. The
Corporation's Compensation Committee met two times during the fiscal year ended
December 31, 1999.
The Compensation Committee is directed to act on compensation matters,
and any action taken by the Compensation Committee must be approved by the Board
of Directors. The Board of Directors did meet in fiscal 1999 to review and
approve salary adjustments for the Corporation's senior management. The Bank's
Board of Directors met two times during fiscal 1999 to act on compensation
matters.
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<PAGE>
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DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
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Director Compensation
Each director is paid monthly. Since January 1, 1999, each director
(including the Chairman of the Board) has been paid a monthly fee of $1,000.
Total aggregate fees paid to the directors for the year ended December 31, 1999
were $72,000.
Stock Awards. Under the Option Plan, each non-employee director has
been awarded options to purchase 7,769 shares of Common Stock at an exercise
price of $10.75. Each non-employee director has been granted 3,107 shares of
restricted Common Stock under the RSP. Stockholders have previously approved the
Option Plan and the RSP, and such plans are being presented for stockholder
ratification at the Meeting in order to comply with certain regulatory
requirements.
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by Larry V. Bailey for the years
ended December 31, 1999, 1998 and 1997. No other employee earned in excess of
$100,000 for the year ended December 31, 1999.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
-------------------- ----------------------
Securities
Restricted Underlying
Name and Fiscal Stock Options/ All Other
Principal Position Year Salary Bonus Awards($)(1) SARs(#)(3) Compensation(4)
- ------------------- ---- ------ ----- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Larry V. Bailey 1999 $125,000 $15,000 $167,044(2) 38,848 $63,081
Director, President, 1998 120,000 15,000 -- -- 6,818
CEO & CFO 1997 120,000 15,000 -- -- 11,845
</TABLE>
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(1) At December 31, 1999, Mr. Bailey held 15,539 shares of restricted Common
Stock with a value of $174,814 based on the closing market price of the
Common Stock on December 31, 1999.
(2) Represents 15,539 shares of restricted Common Stock awarded to Mr. Bailey
on February 2, 1999, based upon the closing market price of $10.75 as of
the date of the award. Dividends will be paid on restricted stock granted
under the RSP. Awards are earned at a rate of 20% per year beginning one
year after the effective date of the grant.
(3) Such options, by their terms, shall be first exercisable at a rate of 20%
one year following the date of the grant of the option and 20% per year on
the anniversary date of the date of the grant thereafter, but in no event
shall such option be exercisable more than ten years after the effective
date of grant.
(4) Includes Bank matching contributions of $3,320, $3,333, and $3,167 under
the 401(k) Plan and Bank contributions of $0, $3,485, and $8,678 made
pursuant to the Profit Sharing Plan for 1999, 1998 and 1997, respectively.
No benefits were accrued under the Bank's Supplemental Executive Retirement
Plan during the year ended December 31, 1997. For the years ended December
31, 1999 and 1998, Mr. Bailey accrued $36,750 and $29,500, respectively, in
benefits under the Supplemental Executive Retirement Plan. Also includes
the award of 2,153 shares under the ESOP during the fiscal year ended
December 31, 1999, based upon the last sale price of the Common Stock on
the date of the award.
Employment Agreement. The Bank has entered into an employment agreement
with its President, Larry V. Bailey. Mr. Bailey's base salary under the
employment agreement is $130,000. The employment agreement has a term of three
years. The agreement is terminable by the Bank for "just cause" as defined in
the agreement. If the Bank terminates Mr. Bailey without just cause, he will be
entitled to a continuation of his salary from the date of termination through
the remaining term of the agreement but in no event for
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<PAGE>
a period of less than twenty-four months. The employment agreement contains a
provision stating that in the event of the termination of employment in
connection with any change in control of the Corporation, Mr. Bailey will be
paid a lump sum amount equal to 2.99 times his five year average annual taxable
cash compensation. If such payments had been made under the agreement as of
December 31, 1999, such payments would have equaled approximately $399,863. The
aggregate payments that would have been made to Mr. Bailey would be an expense
to the Bank, thereby reducing the Bank's net income and its capital by that
amount. The agreement may be renewed annually by the Bank's Board of Directors
upon a determination of satisfactory performance within the Board's sole
discretion. If Mr. Bailey shall become disabled during the term of the
agreement, he shall continue to receive payment of 100% of the base salary for a
period of 12 months and 65% of such base salary for the remaining term of such
agreement. Such payments shall be reduced by any other benefit payments made
under other disability programs in effect for the Bank's employees.
Supplemental Executive Retirement Plan. The Bank has a supplemental
executive retirement plan ("SERP") for the benefit of its President, Mr. Bailey.
The SERP will provide Mr. Bailey with a supplemental retirement benefit in
addition to benefits under the Pension Plan and the ESOP. Under the SERP, Mr.
Bailey's retirement pension will be supplemented by the crediting of an
additional 15 years of service, provided that he retires after attainment of age
58. The SERP will provide a retirement benefit equal to 30% of final average
earnings at retirement after age 65, in addition to the projected benefit of 36%
of final average earnings under the Pension Plan (Pension Plan benefits are
calculated based upon 2% times years of service times Final Average Earnings).
Benefits payable under the Pension Plan will be reduced for retirement prior to
age 65 based upon fewer years of service. Additionally, the SERP will reduce the
Pension Plan reduction for retirement prior to age 65 from 3% per year to 2% per
year. Payments under the SERP are accrued for financial reporting purposes
during the period of employment. The SERP is unfunded. All benefits payable
under the SERP would be paid from the Bank's current assets. There are no tax
consequences to either the participant or the Bank related to the SERP prior to
payment of benefits. Upon receipt of payment of benefits, the participant will
recognize taxable ordinary income in the amount of such payments received, and
the Bank will be entitled to recognize a tax-deductible compensation expense at
that time.
Option Plan. The Option Plan was approved by stockholders at a special
meeting of stockholders held on February 2, 1999. Pursuant to the Option Plan, a
number of additional authorized shares equal to up to 10% of the Common Stock
issued in the Corporation's initial stock offering were reserved for issuance by
the Corporation upon exercise of stock options to be granted to officers,
directors, and employees of the Corporation and the Bank from time to time under
the Option Plan (i.e., 155,393 shares). The purpose of the Option Plan is to
provide additional incentive to certain officers, directors, and key employees
by facilitating their purchase of a stock interest in the Corporation. The
Option Plan, which became effective upon stockholder approval, provides for a
term of ten years, after which no awards may be made, unless earlier terminated
by the Board of Directors pursuant to the Option Plan.
The following tables set forth additional information concerning
options granted under the Option Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total
# of Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base
Name Granted(#)(1) Fiscal Year Price ($/Sh) Expiration Date
----- ------------ -------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Larry V. Bailey 38,848 45.5% $10.75 February 1, 2009
</TABLE>
- ------------------------
(1) No Stock Appreciation Rights (SARs) are authorized under the Option Plan
-8-
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES (1)
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised In-The-Money
Options/SARs at Options/SARs at
FY-End (#)(1)(2) FY-End ($)(1)(3)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
---- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry V. Bailey -- -- 7,769 / 31,079 $3,885 / $15,450
</TABLE>
- -------------------
(1) No Stock Appreciation Rights (SARs) are authorized under the Option Plan.
(2) Includes options that are exercisable within 60 days of the Voting Record
Date.
(3) Based upon an exercise price of $10.75 per share and the Common Stock's
average bid and asked price of $11.25 as of December 31, 1999.
- --------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
Certain Related Transactions
The Bank, like many financial institutions, has followed a policy of
granting various types of loans to officers, directors, and employees. As part
of the employee and director benefit package, full-time and qualified part-time
employees and directors of the Corporation are eligible for preferential
interest rates on certain adjustable-rate residential mortgage loans and
fixed-rate consumer loans made by the Bank after November 18, 1997. While such
loans are made with a discounted interest rate based on the greater of the
Bank's cost of funds or the Applicable Federal Rate, they are underwritten in
accordance with the Bank's established underwriting guidelines. All other loans
made by the Bank to employees and directors are on the same terms and conditions
as those available to the general public.
- --------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF THE OPTION PLAN
- --------------------------------------------------------------------------------
General
The Board of Directors adopted the Option Plan, and the Corporation's
stockholders approved it on February 2, 1999 (the "Effective Date"). Pursuant to
the Option Plan, up to 155,393 shares of Common Stock are reserved under the
Corporation's authorized but unissued shares for issuance by the Corporation
upon exercise of stock options granted to officers, directors, key employees and
other persons from time to time. The purpose of the Option Plan is to attract
and retain qualified personnel for positions of substantial responsibility and
to provide additional incentive to certain officers, directors, key employees
and other persons to promote the success of the business of the Corporation and
the Bank. There have been no changes made to the Option Plan since it was
originally adopted by the Board of Directors and approved by stockholders of the
Corporation. The only reason the Option Plan is being resubmitted to
stockholders of the Corporation for ratification at this time is to comply with
OTS interpretive letters, as discussed below.
-9-
<PAGE>
Pursuant to regulations of the Office of Thrift Supervision ("OTS"),
applicable to stock benefit plans established or implemented within one year
following the completion of a mutual-to-stock conversion of a federally
chartered savings institution such as the Bank, the Option Plan contains certain
restrictions and limitations. The Option Plan provides that options granted to
employees or directors become first exercisable no more rapidly than ratably
over a five-year period (with acceleration upon death or disability or a Change
in control, as such term is defined in the Option Plan); provided, however, that
such accelerated vesting is not inconsistent with the regulations of the OTS at
the time of such acceleration. Recent OTS interpretive letters permit awards
under stock benefit plans to accelerate vesting of awards upon a Change in
control; provided that stockholders ratify such plan provisions by action of
stockholders taken more than one year following the completion of the
mutual-to-stock conversion. The Board of Directors is seeking ratification of
the Option Plan (as previously approved by the stockholders on February 2, 1999)
as a means of complying with the OTS interpretive letters.
Ratification of the Option Plan will not increase the number of shares
reserved for issuance thereunder, alter the classes of individuals eligible to
participate in the Option Plan, or otherwise amend or modify the terms of the
Option Plan. In the event that the Option Plan is not ratified by stockholders
at the Meeting, the Option Plan will nevertheless remain in effect. However, any
employee or director of the Corporation or the Bank that has their service
terminated prior to the vesting of such stock awards may forfeit such unvested
awards to the extent that may be required under applicable OTS regulations and
policies.
The Option Plan is administered by a committee of not less than two
non-employee directors appointed by the Corporation's Board of Directors and
serving at the pleasure of the Board (the "Option Committee"). Members of the
Option Committee are "Non-Employee Directors" within the meaning of Rule 16b-3
pursuant to the 1934 Act. The Option Committee selects the officers and
employees to whom options are granted and the number of options granted based
upon several factors including prior and anticipated future job duties and
responsibilities, job performance, the Bank's financial performance and a
comparison of awards given by other institutions. A majority of the members of
the Option Committee constitutes a quorum and the action of a majority of the
members present at any meeting at which a quorum is present constitutes the
action of the Option Committee.
Officers, directors, key employees and other persons who are designated
by the Option Committee are eligible to receive, at no cost to them, options
under the Option Plan (the "Optionees"). Each option granted pursuant to the
Option Plan is evidenced by an instrument in such form as the Option Committee
from time to time approves. Option shares may be paid for in cash, shares of
Common Stock, or a combination of both. The Corporation receives no monetary
consideration for the granting of stock options under the Option Plan. Further,
the Corporation receives no consideration other than the option exercise price
per share for Common Stock issued to Optionees upon the exercise of those
options.
Shares of Common Stock issuable under the Option Plan may be from
authorized but unissued shares, treasury shares or shares purchased in the open
market. An option which expires, becomes unexercisable, or is forfeited for any
reason prior to its exercise is again available for issuance under the option
Plan. No option or any right or interest therein is assignable or transferable
except by will or the laws of descent and distribution. The Option Plan shall
continue in effect for a term of ten years from the Effective Date.
Stock Options
The Option Committee may grant either incentive stock options or
non-incentive stock options. In general, if an Optionee ceases to serve as an
employee of the Corporation for any reason other than
-10-
<PAGE>
disability or death, an exercisable incentive stock option may continue to be
exercisable for three months but in no event after the expiration date of the
option, except as may otherwise be determined by the Option Committee at the
time of the award. In the event of the disability or death of an Optionee during
employment, an exercisable incentive stock option will continue to be
exercisable for one year and two years, respectively, to the extent exercisable
by the Optionee immediately prior to the Optionee's disability or death but only
if, and to the extent that, the Optionee was entitled to exercise such incentive
stock options on the date of termination of employment. The terms and conditions
of non-incentive stock options relating to the effect of an Optionee's
termination of employment or service, disability, or death shall be such terms
as the Option Committee, in its sole discretion, shall determine at the time of
termination of service, disability or death, unless specifically determined at
the time of grant of such options.
Currently, the Option Plan requires that options granted to employees
or directors become first exercisable no more rapidly than ratably over a
five-year period (with acceleration upon death or disability or a Change in
control, as such terms are defined in the Option Plan); provided, however, that
such accelerated vesting is not inconsistent with the regulations of the OTS at
the time of such acceleration. Ratification of the Option Plan at the Meeting
will conform the acceleration of vesting of options upon a Change in control
with applicable OTS interpretive letters. Such stockholder ratification will be
effective with respect to previously awarded options and any options that may be
granted in the future. Pursuant to the Option Plan, upon a Change in control,
all options previously granted and outstanding as of the date of a Change in
control will automatically become exercisable and non-forfeitable.
No shares of Common Stock shall be issued upon the exercise of an
option until full payment has been received by the Corporation, and no Optionee
shall have any of the rights of a stockholder of the Corporation until shares of
Common Stock are issued to such Optionee. Upon the exercise of an option by an
Optionee (or the Optionee's personal representative), the Option Committee, in
its sole and absolute discretion, may make a cash payment to the Optionee, in
whole or in part, in lieu of the delivery of shares of Common Stock. Such cash
payment to be paid in lieu of delivery of Common Stock shall be equal to the
difference between the fair market value of the Common Stock on the date of the
option exercise and the exercise price per share of the option. Such cash
payment shall be in exchange for the cancellation of such option. A cash payment
shall not be made in the event that such transaction would result in liability
to the Optionee and the Corporation under Section 16(b) of the 1934 Act, and
regulations promulgated thereunder.
The Option Plan provides that the Board of Directors of the Corporation
may authorize the Option Committee to direct the execution of an instrument
providing for the modification, extension or renewal of any outstanding option,
provided that no such modification, extension or renewal shall confer on the
Optionee any right or benefit which could not be conferred on the Optionee by
the grant of a new option at such time, and shall not materially decrease the
Optionee's benefits under the option without the Optionee's consent, except as
otherwise provided under the Option Plan.
Awards Under the Option Plan
The Board or the Option Committee shall from time to time determine the
officers, directors, key employees and other persons who shall be granted
options under the Option Plan, the number of options to be granted to any
participant, and whether options granted to each such participant shall be
incentive stock options and/or non-incentive stock options. In selecting
participants and in determining the number of shares of Common Stock subject to
options to be granted to each participant, the Board or the Option Committee may
consider the nature of the services rendered, current and potential contribution
to the Corporation and other factors as may be deemed relevant. Participants who
have been granted an option may, if otherwise eligible, be granted additional
options. In no event shall Common Stock subject to
-11-
<PAGE>
options granted to non-employee directors in the aggregate under the Option Plan
exceed 30% of the total number of shares authorized for delivery, and no more
than 5% of total shares may be awarded to any individual non-employee director.
In no event shall Common Stock subject to options granted to any employee exceed
25% of the total number of shares authorized for delivery under the Option Plan.
The table below presents information related to options previously
awarded by the Corporation under the Option Plan. Ratification of the Option
Plan does not impact the number of options previously awarded. Stockholder
ratification of the Option Plan confirms the provisions of the Option Plan
previously approved by stockholders of the Corporation. In accordance with the
Option Plan, all outstanding options shall become immediately exercisable in the
event of a change in control of the Corporation or the Bank.
PREVIOUSLY AWARDED BENEFITS UNDER THE OPTION PLAN
-------------------------------------------------
Number of Options
Name and Position Granted(1)(2)
- ----------------- -------------
Larry V. Bailey, President, CEO, CFO and Director 38,848
Daniel G. Droste, Senior Vice President and Treasurer 19,424
Galen E. Graham, Senior Vice President and Secretary 19,424
Mark K. Fuchs, Vice President 7,769
Roger L. Coltrin, Director(3) 7,769
Donald V. Meyer, Director 7,769
James E. Breckenridge, Director(3) 7,769
William R. Butler, Jr., Director 7,769
J. Darcy Domoney, Director 7,769
Sherman W. Cole, Advisory Director 7,769
Executive Officer Group (3 persons) 77,696
Non-Executive Director Group (5 persons) 38,845
Non-Executive Officer Employee Group (35 persons) 7,769
- ------------------------
(1) The exercise price of such options is $10.75 per share, the fair market
value of the Common Stock on February 2, 1999, the date of grant. The exact
dollar value of the options will equal the market price of the Common Stock
on the date the option is exercised less the exercise price.
(2) Options shall vest 20% annually during periods of continued service as an
employee, director, or director emeritus. Upon vesting, options shall
remain exercisable for ten years from the date of grant without regard to
continued service as an employee, director, or director emeritus. Upon
disability, death, or a change in control of the Corporation or the Bank,
such options shall be 100% exercisable.
(3) Nominee for election as a director.
Effect of Mergers, Change of Control and Other Adjustments
Subject to any required action by the stockholders of the Corporation,
within the sole discretion of the Option Committee, the aggregate number of
shares of Common Stock for which options may be granted hereunder or the number
of shares of Common Stock represented by each outstanding option will be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other increase
or decrease in the number of shares of Common Stock effected without the receipt
or payment of consideration by the Corporation. Subject to any required action
by the stockholders of the Corporation, in the event of any change in control,
recapitalization, merger, consolidation, exchange of shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Option Committee, in its sole
discretion, shall have the power, prior to or
-12-
<PAGE>
subsequent to such action or events, to (i) appropriately adjust the number of
shares of Common Stock subject to each option, the exercise price per share of
such option, and the consideration to be given or received by the Corporation
upon the exercise of any outstanding options; (ii) cancel any or all previously
granted options, provided that appropriate consideration is paid to the Optionee
in connection therewith; and/or (iii) make such other adjustments in connection
with the Option Plan as the Option Committee, in its sole discretion, deems
necessary, desirable, appropriate or advisable. However, no action may be taken
by the Option Committee which would cause incentive stock options granted
pursuant to the Option Plan to fail to meet the requirements of Section 422 of
the Code without the consent of the Optionee. The Option Plan provision to
accelerate the exercise of options and the immediate exercisability of options
in the case of a change in control of the Corporation could have an
anti-takeover effect by making it more costly for a potential acquiror to obtain
control of the Corporation due to the higher number of shares outstanding
following such exercise of options.
The power of the Option Committee to accelerate the exercise of options
and the immediate exercisability of options in the case of a Change in control
of the Corporation could have an anti-takeover effect by making it more costly
for a potential acquiror to obtain control of the Corporation due to the higher
number of shares outstanding following such exercise of options. The power of
the Option Committee to make adjustments in connection with the Option Plan,
including adjusting the number of shares subject to options and canceling
Options, prior to or after the occurrence of an extraordinary corporate action,
allows the Option Committee to adapt the Option Plan to operate in changed
circumstances, to adjust the Option Plan to fit a smaller or larger company, and
to permit the issuance of Options to new management following such extraordinary
corporate action. However, this power of the Option Committee also has an
anti-takeover effect, by allowing the Option Committee to adjust the Option Plan
in a manner to allow the present management of the Corporation to exercise more
options and hold more shares of the Corporation's Common Stock, and to possibly
decrease the number of Options available to new management of the Corporation.
Amendment and Termination of the Option Plan
The Board of Directors may alter, suspend or discontinue the Option
Plan, except that no action of the Board shall increase the maximum number of
shares of Common Stock issuable under the Option Plan, materially increase the
benefits accruing to Optionees under the Option Plan or materially modify the
requirements for eligibility for participation in the Option Plan unless such
action of the Board shall be subject to approval or ratification by the
stockholders of the Corporation.
Possible Dilutive Effects of the Option Plan
The Common Stock issued upon the exercise of options awarded under the
Option Plan may either be authorized but unissued shares of Common Stock or
shares purchased in the open market. Because the stockholders of the Corporation
do not have preemptive rights, to the extent that the Corporation funds the
Option Plan, in whole or in part, with authorized but unissued shares, the
interests of current stockholders would be diluted. If upon the exercise of all
of the options, the Corporation delivers newly issued shares of Common Stock
(i.e., 155,393 shares of Common Stock), then the dilutive effect to current
stockholders would be approximately 10.5%. Ratification of the Option Plan does
not increase the maximum number of shares issuable under the Option Plan as
previously approved by stockholders.
Federal Income Tax Consequences
Under present federal tax laws, awards under the Option Plan have the
following consequences:
-13-
<PAGE>
1. The grant of an option does not by itself result in the recognition of
taxable income to an Optionee nor entitle the Corporation to a tax
deduction at the time of such grant.
2. The exercise of an option which is an "Incentive Stock Option" within
the meaning of Section 422 of the Code generally will not, by itself,
result in the recognition of taxable income to an Optionee nor entitle
the Corporation to a deduction at the time of such exercise. However,
the difference between the option exercise price and the fair market
value of the Common Stock on the date of option exercise is an item of
tax preference which may, in certain situations, trigger the
alternative minimum tax for an Optionee. An Optionee will recognize
capital gain or loss upon resale of the shares of Common Stock
received pursuant to the exercise of Incentive Stock Options, provided
that such shares are held for at least one year after transfer of the
shares or two years after the grant of the option, whichever is later.
Generally, if the shares are not held for that period, the Optionee
will recognize ordinary income upon disposition in an amount equal to
the difference between the option exercise price and the fair market
value of the Common Stock on the date of exercise, or, if less, the
sales proceeds of the shares acquired pursuant to the option.
3. The exercise of a non-incentive stock option will result in the
recognition of ordinary income by the Optionee on the date of exercise
in an amount equal to the difference between the exercise price and
the fair market value of the Common Stock acquired pursuant to the
option.
4. The Corporation will be allowed a tax deduction for federal tax
purposes equal to the amount of ordinary income recognized by an
Optionee at the time the Optionee recognizes such ordinary income.
5. In accordance with Section 162(m) of the Code, the Corporation's tax
deductions for compensation paid to the most highly paid executives
named in the Corporation's Proxy Statement may be limited to no more
than $1 million per year, excluding certain "performance-based"
compensation. The Corporation intends for the award of options under
the Option Plan to comply with the requirement for an exception to
Section 162(m) of the Code applicable to stock option plans so that
the Corporation's deduction for compensation related to the exercise
of options would not be subject to the deduction limitation set forth
in Section 162(m) of the Code.
Accounting Treatment
The Corporation uses the "intrinsic value based method" as prescribed
by APB Opinion 25. Accordingly, neither the grant nor the exercise of an option
under the Option Plan currently requires any charge against earnings under
generally accepted accounting principles. Common Stock issuable pursuant to
outstanding options which are exercisable under the Option Plan will be
considered outstanding for purposes of calculating earnings per share on a
diluted basis.
Stockholder Ratification
Stockholder ratification of the Option Plan is being sought in
accordance with interpretive letters of the OTS. An affirmative vote of a
majority of the votes cast at the Meeting on the matter, in person or by proxy,
is required to constitute stockholder ratification of the Option Plan, submitted
as Proposal II.
-14-
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE OPTION PLAN.
- --------------------------------------------------------------------------------
PROPOSAL III - RATIFICATION OF THE RSP
- --------------------------------------------------------------------------------
General
The Board of Directors of the Corporation and the Bank have previously
adopted the RSP as a method of providing directors, officers, and key employees
of the Bank with a proprietary interest in the Corporation in a manner designed
to encourage such persons to remain in the employment or service of the Bank.
There have been no changes made to the RSP since it was originally adopted by
the Board of Directors and approved by stockholders of the Corporation on
February 2, 1999. The only reason the RSP is being resubmitted to stockholders
of the Corporation for ratification at this time is to comply with OTS
interpretive letters, as discussed below. As previously approved by stockholders
of the Corporation on February 2, 1999 the Bank contributed sufficient funds to
the RSP to purchase Common Stock representing up to 4% of the aggregate number
of shares issued in the Conversion (i.e., 62,157 shares of Common Stock) in the
open market. All of the Common Stock purchased by the RSP was purchased at the
fair market value of such stock on the date of purchase. Awards under the RSP
were made in recognition of expected future services to the Bank by its
directors, officers and key employees responsible for implementation of the
policies adopted by the Bank's Board of Directors and as a means of providing a
further retention incentive.
Pursuant to regulations of the OTS applicable to stock benefit plans
established or implemented within one year following the completion of a
mutual-to-stock conversion of a federally chartered savings institution such as
the Bank, the RSP contains certain restrictions and limitations. The RSP
provides that stock awards ("Awards") granted to employees or directors become
vested no more rapidly than ratably over a five-year period (with acceleration
upon death or disability or a change in control, as such term is defined in the
RSP); provided, however, that such accelerated vesting is not inconsistent with
the regulations of the OTS at the time of acceleration. Recent OTS interpretive
letters permit awards under stock benefit plans to accelerate vesting of such
awards upon a Change in control; provided that stockholders ratify such plan
provisions by action of stockholders taken more than one year following the
completion of the mutual-to-stock conversion. The Board of Directors is seeking
ratification of the RSP (as previously approved by the stockholders on February
2, 1999) as a means of complying with the OTS interpretive letters.
Ratification of the RSP does not increase the number of shares reserved
for issuance thereunder, after the classes of individuals eligible to
participate in the RSP, or otherwise amend or modify the terms of the RSP. In
the event that the RSP is not ratified by stockholders at the Meeting, the RSP
will nevertheless remain in effect. However, any employee or director of the
Corporation or the Bank that has their service terminated prior to the vesting
of such stock awards may forfeit such unvested awards to the extent that may be
required under applicable OTS regulations and policies.
Awards Under the RSP
Currently, the RSP requires that Awards granted to employees or
directors become first exercisable no more rapidly than ratably over a five-year
period (with accelerated vesting upon death or disability or a Change in
control, as such terms are defined in the RSP), provided, however, that such
accelerated vesting is not inconsistent with the regulations of the OTS at the
time of such acceleration. Ratification of the RSP at the meeting will conform
the acceleration of vesting of Awards upon a Change in control with
-15-
<PAGE>
applicable OTS interpretive letters. Such stockholder ratification will be
effective with respect to previously granted Awards and any Awards that may be
granted in the future. Pursuant to the RSP upon a Change in control, all Awards
previously granted and outstanding as of the date of a Change in control will
automatically become exercisable and non-forfeitable.
Benefits under the RSP ("Plan Share Awards") may be granted at the sole
discretion of a committee comprised of not less than two directors who are not
employees of the Bank or the Corporation (the "RSP Committee") appointed by the
Bank's Board of Directors. The RSP is managed by trustees (the "RSP Trustees")
who are non-employee directors of the Bank or the Corporation and who have the
responsibility to invest all funds contributed by the Bank to the trust created
for the RSP (the "RSP Trust"). Unless the terms of the RSP or the RSP Committee
specifies otherwise, awards under the RSP will be in the form of restricted
stock payable as the Plan Share Awards shall be earned and non-forfeitable.
Twenty percent (20%) of such awards shall be earned and non-forfeitable on the
one year anniversary of the date of grant of such awards, and 20% annually
thereafter, provided that the recipient of the award remains an employee,
director or director emeritus during such period. A recipient of such restricted
stock will not be entitled to voting rights associated with such shares prior to
the applicable date such shares are earned. Dividends paid on Plan Share Awards
shall be held in arrears and distributed upon the date such applicable Plan
Share Awards are earned. Any shares held by the RSP Trust which are not yet
earned shall be voted by the RSP Trustees, as directed by the RSP Committee. If
a recipient of such restricted stock terminates employment or service for
reasons other than death, disability, or a change in control of the Corporation
or the Bank, the recipient forfeits all rights to the awards under restriction.
If the recipient's termination of employment or service is caused by death,
disability, or a change in control of the Corporation or the Bank (provided that
such accelerated vesting is not inconsistent with applicable regulations of the
OTS at the time of such change in control), all restrictions expire and all
shares allocated shall become unrestricted. Awards of restricted stock to
directors shall be immediately non-forfeitable in the event of the death or
disability of such director, or a change in control of the Corporation or the
Bank and distributed as soon as practicable thereafter. The Board of Directors
can terminate the RSP at any time, and if it does so, any shares not allocated
will revert to the Corporation.
Plan Share Awards under the RSP will be determined by the RSP
Committee. In no event shall any Employee receive Plan Share Awards in excess of
25% of the aggregate Plan Shares authorized under the Plan. Plan Share Awards
may be granted to newly elected or appointed non-employee directors of the Bank
subsequent to the effective date (as defined in the RSP) provided that the Plan
Share Awards made to non-employee directors shall not exceed 30% of total Plan
Share Reserve in the aggregate under the Plan or 5% of the total Plan Share
Reserve to any individual non-employee director.
The aggregate number of Plan Shares available for issuance pursuant to
the Plan Share Awards and the number of shares to which any Plan Share Award
relates shall be proportionately adjusted for any increase or decrease in the
total number of outstanding shares of Common Stock issued subsequent to the
effective date (as defined in the RSP) of the RSP resulting from any split,
subdivision or consolidation of the Common Stock or other capital adjustment,
change or exchange of Common Stock, or other increase or decrease in the number
or kind of shares effected without receipt or payment of consideration by the
Corporation.
The following table presents information related to the previously
granted award of Common Stock under the RSP as authorized pursuant to the terms
of the RSP. Ratification of such RSP does not change the number of shares
awarded or other terms. Such ratification of the RSP confirms the provisions of
the RSP previously approved by the stockholders of the Corporation.
-16-
<PAGE>
PRIOR AWARDS UNDER THE RSP
--------------------------
Name and Position Number of Shares (1)(2)
- ----------------- -----------------------
Larry V. Bailey, President, CEO, CFO and Director 15,539
Daniel G. Droste, Senior Vice President and Treasurer 7,769
Galen E. Graham, Senior Vice President and Secretary 7,769
Mark K. Fuchs, Vice President 3,107
Roger L. Coltrin, Director(3) 3,107
Donald V. Meyer, Director 3,107
James E. Breckenridge, Director(3) 3,107
William R. Butler, Jr., Director 3,107
J. Darcy Domoney, Director 3,107
Sherman W. Cole, Advisory Director 3,107
Executive Officer Group (3 persons) 31,077
Non-Executive Director Group (5 persons) 15,535
Non-Executive Officer Employee Group (35 persons) 3,107
- ----------------------
(1) The exact dollar value of the shares of Common Stock granted will equal
the market price of the Common Stock on the date of vesting of such
awards. Accordingly, the exact dollar value of these awards is not
presently determinable. On February 2, 2000, the date on which 20% of
the awards previously granted vested, the closing market price of the
Common Stock was $10.00.
(2) All Plan Share Awards presented herein shall be earned at the rate of
20% one year after the date of grant and 20% annually thereafter. All
awards shall become immediately 100% vested upon death, disability, or
termination of service following a change in control (as defined in the
RSP). Awards shall continue to vest during periods of service as an
employee, director, or director emeritus.
Amendment and Termination of the RSP
The Board may amend or terminate the RSP at any time. However, no
action of the Board may increase the maximum number of Plan Shares permitted to
be awarded under the RSP, except for adjustments in the Common Stock of the
Corporation, materially increase the benefits accruing to Participants under the
RSP or materially modify the requirements for eligibility for participation in
the RSP unless such action of the Board shall be subject to ratification by the
stockholders of the Corporation.
In the event that the RSP is not ratified at the Meeting, the RSP will
nevertheless remain in effect. Because shares for Awards under the RSP have
already been purchased in the market, current shareholders will suffer no
ownership dilution. However, in the event the RSP is ratified and a change in
control of the Corporation occurs prior to the time that shares that have been
awarded pursuant to the RSP would otherwise vest, the aggregate purchase price
received by stockholders could be effectively reduced by the value of shares
that vest solely because of the change in control. The Corporation currently has
no plan in place that will result in the change in control.
Federal Income Tax Consequences
Common Stock awarded under the RSP is generally taxable to the
recipient at the time that such awards become earned and non-forfeitable, based
upon the fair market value of such stock at the time of such vesting.
Alternatively, a recipient may make an election pursuant to Section 83(b) of the
Code within 30 days of the date of the transfer of such Plan Share Award to
elect to include in gross income for the current taxable year the fair market
value of such award. Such election must be filed with the Internal
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Revenue Service within 30 days of the date of the transfer of the stock award.
The Corporation will be allowed a tax deduction for federal tax purposes as a
compensation expense equal to the amount of ordinary income recognized by a
recipient of Plan Share Awards at the time the recipient recognizes taxable
ordinary income. A recipient of a Plan Share Award may elect to have a portion
of such award withheld by the RSP Trust in order to meet any necessary tax
withholding obligations.
Accounting Treatment
For accounting purposes, the Corporation will recognize compensation
expense in the amount of the fair market value of the Common Stock subject to
Plan Share Awards at the grant date pro rata over the period of years during
which the Awards are earned.
Stockholder Ratification
The Corporation is submitting the RSP to stockholders for ratification
in accordance with certain interpretive letters of the OTS. An affirmative vote
of a majority of the votes cast at the Meeting on the matter, in person or by
proxy, is required to constitute stockholder ratification of the RSP, submitted
as Proposal III.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE RSP.
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STOCKHOLDER PROPOSALS
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In order to be considered for inclusion in the Corporation's proxy
materials for next year's annual meeting of stockholders, any stockholder
proposal to take action at such meeting must be received at the Corporation's
executive offices at 600 Main Street, Osawatomie, Kansas 66064, no later than
November 24, 2000. In addition, stockholder proposals must meet other applicable
criteria as set forth in the Corporation's bylaws in order to be considered for
inclusion in the Corporation's proxy materials.
Under the Corporation's bylaws, stockholder proposals that are not
included in the Corporation's proxy materials for next year's annual meeting,
will only be considered at the next year's annual meeting if the stockholder
submits notice of the proposal to the Corporation at the above address by
February 17, 2001. In addition, stockholder proposals must meet other applicable
criteria as set forth in the Corporation's bylaws in order to be considered at
next year's annual meeting.
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OTHER MATTERS
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The Board of Directors is not aware of any business to come before the
Meeting other than those matters described in this Proxy Statement. However, if
any other matters should properly come before the Meeting, it is intended that
proxies in the accompanying form will be voted in respect thereof in accordance
with the judgment of the persons named in the accompanying proxy.
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MISCELLANEOUS
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The cost of soliciting proxies will be borne by the Corporation. The
Corporation will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them
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<PAGE>
in sending proxy materials to the beneficial owners of Common Stock. In addition
to solicitations by mail, directors, officers, and regular employees of the
Corporation may solicit proxies personally or by telegraph or telephone without
additional compensation.
The Corporation's 1999 Annual Report to Stockholders was mailed to all
stockholders of record on or about March 14, 2000. Any stockholder who has not
received a copy of the Annual Report may obtain a copy by writing to the
Secretary of the Corporation.
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FORM 10-KSB
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A copy of the Corporation's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1999 will be furnished without charge to stockholders as
of the record date upon written request to the Secretary, First Kansas Financial
Corporation, 600 Main Street, Osawatomie, Kansas 66064.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Galen E. Graham
---------------------------------
Galen E. Graham
Secretary
Osawatomie, Kansas
March 14, 2000
<PAGE>
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FIRST KANSAS FINANCIAL CORPORATION
600 MAIN STREET
OSAWATOMIE, KANSAS 66064
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ANNUAL MEETING OF STOCKHOLDERS
April 18, 2000
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The undersigned hereby appoints the Board of Directors of First Kansas
Financial Corporation (the "Corporation"), or its designee, with full powers of
substitution, to act as attorneys and proxies for the undersigned, to vote all
shares of Common Stock of the Corporation which the undersigned is entitled to
vote at the 2000 Annual Meeting of Stockholders (the "Meeting"), to be held at
600 Main Street, Osawatomie, Kansas, on April 18, 2000, at 1:00 p.m. and at any
and all adjournments thereof, in the following manner:
FOR WITHHELD
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1. The election as director of the nominees
listed below for the terms indicated
(except as marked to the contrary below): [ ] [ ]
James E. Breckenridge (3-year term)
Roger L. Coltrin (3-year term)
Sherman W. Cole (1-year term)
INSTRUCTIONS: To withhold your vote for any nominee, write the nominee's name on
the line provided below.
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FOR AGAINST ABSTAIN
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2. The ratification of the First Kansas Financial
Corporation 1999 Stock Option Plan [ ] [ ] [ ]
3. The ratification of the First Kansas Federal
Savings Bank 1999 Restricted Stock Plan [ ] [ ] [ ]
In their discretion, such attorneys and proxies are authorized to vote upon such
other business as may properly come before the Meeting or any adjournments
thereof.
The Board of Directors recommends a vote "FOR" all of the above listed
proposals.
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THIS SIGNED PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS SIGNED PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS STATED. IF
ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS SIGNED PROXY WILL BE VOTED
BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE
BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
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<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting, or
at any adjournments thereof, and after notification to the Secretary of the
Corporation at the Meeting of the stockholder's decision to terminate this
Proxy, the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. The undersigned may also revoke this Proxy by
filing a subsequently dated Proxy or by written notification to the Secretary of
the Corporation of his or her decision to terminate this Proxy.
The undersigned acknowledges receipt from the Corporation prior to the
execution of this proxy of a Notice of Annual Meeting, a Proxy Statement dated
March 14, 2000 and the Annual Report.
Dated:-------------------------
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PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
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SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this Proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
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PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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