<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 1999
REGISTRATION NO. 333-76163
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
TEAM FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
KANSAS 6719 48-1017164
(State or other jurisdiction of (Primary S.I.C. Code Number) (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
8 WEST PEORIA, SUITE 200
PAOLA, KANSAS 66071
(913) 294-9667
(Address, including zip code, and telephone number, including area code,
of principal executive offices and principal place of business)
ROBERT J. WEATHERBIE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
8 WEST PEORIA, SUITE 200
PAOLA, KANSAS 66071
(913) 294-9667
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
<TABLE>
<S> <C>
REID A. GODBOLT, ESQ. MATTHEW C. BOBA, ESQ.
DAVID A. THAYER, ESQ. CHAPMAN AND CUTLER
JONES & KELLER, P.C. 111 WEST MONROE STREET
1625 BROADWAY, SUITE 1600 CHICAGO, ILLINOIS 60603
DENVER, COLORADO 80202 TELEPHONE: (312) 845-3000
TELEPHONE: (303) 573-1600
</TABLE>
-------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [X]
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON THE DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED JUNE , 1999
1,000,000 SHARES
TEAM FINANCIAL, INC.
[TEAM FINANCIAL, INC. LOGO]
COMMON STOCK
-------------------------
This is our initial public offering of shares of common stock. Of the 1,000,000
shares offered, Team is offering 700,000 shares and 300,000 shares are being
offered by a selling shareholder, Team's employee stock ownership plan. Team
will not receive any proceeds from shares sold by the selling shareholder.
We have filed an application to list the shares on the Nasdaq National Market(R)
under the symbol TFIN. The anticipated price range is $11.00 to $13.00 per
share.
INVESTING IN THE SHARES INVOLVES RISKS. PLEASE REFER TO "RISK FACTORS" BEGINNING
ON PAGE 4.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS TO TEAM SHAREHOLDER
-------- ------------- -------- -----------
<S> <C> <C> <C> <C>
Per Share.................................... $ $ $ $
Total........................................ $ $ $ $
</TABLE>
This is a firm commitment underwriting. Team has granted the underwriters a
30-day option to purchase up to 150,000 additional shares on the same terms as
above to cover over-allotments, if any.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
Howe Barnes Investments, Inc., on behalf of the underwriters, expects to deliver
the shares on or about , 1999.
-------------------------
HOWE BARNES INVESTMENTS, INC.
, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 3
[TEAM LOGO]
[MAP]
2
<PAGE> 4
PROSPECTUS SUMMARY
This summary provides an overview of selected information contained
elsewhere in this prospectus and does not contain all the information you should
consider. Therefore, you should also read the more detailed information set
forth in this prospectus and in our financial statements appearing elsewhere in
this prospectus. Unless otherwise indicated, all information in this prospectus
gives effect to the five-for-one stock split of our common stock made in
December 1998 and assumes that the underwriters' over-allotment option is not
exercised.
TEAM
Team Financial, Inc., a multi-bank holding company, offers full service
community banking through 15 banking locations, seven in the Kansas City area,
three in southeastern Kansas, two in western Missouri and three in the Omaha,
Nebraska area. Team's growth strategy is focused on a combination of
acquisitions, establishing new branches and internal growth.
Team is majority owned by its employee stock ownership plan or ESOP. Team
was formed in 1986 by the purchase of a one-bank holding company by certain of
its executive officers and the ESOP. A majority of the funding of the purchase
was obtained through ESOP borrowings which were guaranteed by Team. After giving
effect to this offering, including the sale of ESOP-owned shares, the ESOP will
continue to hold 34.7% of Team's common stock.
Team has grown dramatically over recent years, from assets of $237.8
million as of December 31, 1994, to $434.7 million as of March 31, 1999. Growth
was achieved primarily through purchases of branches of large banks and through
an acquisition of a community bank. Additional asset growth occurred through
internal growth at existing banks as well as starting three new branches. During
this period of asset growth and corresponding revenue increases, net income has
remained level, as Team has absorbed the costs of its acquisitions and
expansion. Team's strategy takes into account, and its experience is, that it
takes up to 18 months to realize meaningful net income improvements from
acquisitions and expansion.
Team's principal executive office is located at 8 West Peoria, Suite 200,
Paola, Kansas, and its telephone number is (913) 294-9667.
THE OFFERING
Common stock offered....... 700,000 shares by Team
300,000 shares by Team's ESOP as selling
shareholder
---------
1,000,000 total shares
=========
Common stock to be
outstanding after the
offering................. 3,701,803 based on the number of shares outstanding
as of the date of this prospectus
Proposed Nasdaq National
Market(R) symbol......... TFIN
Use of Proceeds............ Net proceeds to Team will be used to repay $6.0
million of debt and to contribute $1.5 million as
capital to a subsidiary bank. The selling
shareholder currently intends to use $1.0 million
of its proceeds to pay debt guaranteed by Team.
This will reduce Team's liabilities and increase
its stockholders' equity by $1.0 million. See
"Capitalization."
3
<PAGE> 5
RISK FACTORS
You should carefully read the following risk factors and other sections of
this prospectus before purchasing any shares.
TEAM'S GROWTH STRATEGY INVOLVES OPERATING AND ACQUISITION RISKS THAT MAY
NEGATIVELY IMPACT ITS PROFITS.
Team faces risks in its growth strategy, including the risks that it will
be unable to expand its business through the acquisition of other financial
institutions or bank branches or by internal growth, including the opening of
new branch offices. Team's ability to grow profitably through the opening of new
branches involves the risks that the growth depends primarily on Team
identifying profitable or growing markets and acquiring or establishing branch
locations in those markets at reasonable costs. In addition, Team must attract
the necessary deposits and locate sound loans in those markets.
Acquiring other financial institutions or bank branches involves these same
risks, as well as additional risks, including:
- adverse change in the results of operations of the acquired entities;
- unforeseen liabilities or asset quality problems of the acquired
entities;
- greater than anticipated costs of integrating acquisitions;
- adverse personnel relations;
- loss of customers; and
- deterioration of local economic conditions.
The risks discussed above may inhibit or restrict Team's strategy to grow
through acquisition and branch expansion, negatively impact Team's revenue
growth and ultimately reduce its profits.
IF TEAM IS UNABLE TO SUCCESSFULLY INTEGRATE ACQUISITIONS, ITS EARNINGS COULD
DECREASE.
In connection with its acquisitions of banks or bank branches, Team faces
risks in integrating and managing the businesses which may be acquired. Team has
a history of growth through acquisitions and plans to continue this strategy.
See "Business -- Overview." To integrate an acquisition operationally, Team
must:
- centralize and standardize policies, procedures, practices and processes;
- combine employee benefit plans;
- implement a unified investment policy and adjust the combined investment
portfolio to comply with the policy;
- implement a unified loan policy and confirm lending authority;
- implement a standard loan management system; and
- implement a loan loss reserve policy.
INTEGRATING ACQUISITIONS MAY DETRACT ATTENTION FROM DAY-TO-DAY BUSINESS OF TEAM
AND MAY RESULT IN UNEXPECTED COSTS TO TEAM.
Once an acquired business is integrated, the future prospects of Team will
be subject to a number of risks, including, among others:
- its ability to compete effectively in new market areas;
- its successful retention of earning assets, including loans acquired in
acquisitions;
- its ability to generate new earning assets;
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<PAGE> 6
- its ability to attract deposits;
- its ability to achieve cost savings. Historically, Team has not
implemented wholesale cost cutting after acquisitions, preferring to
adjust operational costs on an ongoing basis in order to preserve market
share and each acquired entity's standing in its community; and
- its ability to attract and retain qualified management and other
appropriate personnel.
A failure to manage these factors may have a material adverse effect on the
financial condition and results of operations of Team.
WE MAY NOT BE SUCCESSFUL IN IMPLEMENTING OUR INTERNAL GROWTH STRATEGY DUE TO
NUMEROUS FACTORS WHICH AFFECT EARNINGS.
Team intends to continue pursuing an internal growth strategy, the success
of which is subject to Team's ability to generate an increasing level of loans
and deposits at acceptable risk levels without corresponding increases in
non-interest expenses. There can be no assurance that Team will be successful in
continuing its internal growth strategies due to delays and other impediments
resulting from regulatory oversight, lack of qualified personnel, scarcity of
branch sites or deficient site selection of bank branches. In addition, the
success of Team's internal growth strategy will depend on maintaining sufficient
regulatory capital levels and on continued favorable economic conditions in
Team's primary market areas.
WE FACE SIGNIFICANT COMPETITION WHICH MAY LIMIT OUR ABILITY TO GROW.
A primary risk relating to Team's ability to achieve internal growth is
competition. The banking business in Team's operating areas is highly
competitive. Team competes for loans and deposits with other local, regional and
national commercial banks, savings banks, savings and loan associations, finance
companies, money market funds, brokerage houses, credit unions and nonfinancial
institutions, many of which have substantially greater financial resources than
Team. In addition, interstate banking is permitted in Kansas, Missouri and to a
lesser extent in Nebraska. As a result, management believes that Team may
experience significant competition in its market areas that may negatively
impact its ability to achieve growth.
TEAM'S STOCK PRICE COULD BE VOLATILE.
Team has filed an application with the Nasdaq National Market(R) to list
the shares of common stock offered by this prospectus. Team anticipates that the
common stock will be listed on the Nasdaq National Market(R) under the trading
symbol "TFIN." However, there can be no assurance that you will be able to sell
your common stock at any particular price. The market price of Team's common
stock could fluctuate significantly due to variations in quarterly and yearly
results of operations, general trends in the banking industry and other unknown
factors. Additionally, there have historically been price and volume
fluctuations in the stock market that often have been unrelated or
disproportionate to the operating performance of affected companies. These broad
fluctuations might adversely affect the market price of Team's common stock.
IN THE EVENT A PUBLIC MARKET FOR OUR COMMON STOCK TERMINATES, WE MAY BE EXPOSED
TO AN ESOP STOCK REPURCHASE LIABILITY WHICH WOULD REDUCE STOCKHOLDERS' EQUITY.
If a public market for Team common stock were to no longer exist, Team may
be exposed to a liability to repurchase shares of its common stock held by ESOP
participants. Team would then be obligated to repurchase common stock of its
ESOP participants who terminate employment and elect to sell back their shares
to Team, or elect to diversify their ESOP accounts pursuant to diversification
rights in the Internal Revenue Code and the ESOP. Team fully expects that a
public market for its common stock will develop upon completion of this offering
and will continue for the foreseeable future. However, in the event repurchase
obligations were to arise, they could be expected to have an adverse effect on
5
<PAGE> 7
stockholders' equity. For further discussion, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity."
SINCE CONTROL OF TEAM IS HELD BY ITS ESOP, DIRECTORS AND OFFICERS, THEY WILL
HAVE SUBSTANTIALLY MORE INFLUENCE OVER TEAM THAN YOU.
Team's ESOP, directors and executive officers exercise substantial
influence over the affairs of Team and, subject to their fiduciary duties under
the law, this factor may impede the acquisition of control of Team by a third
party. Other shareholders, as a practical matter, will not have significant
influence in Team's direction. As of March 31, 1999, Team's ESOP, directors and
executive officers beneficially owned 60.6% of the common stock. At the present
time, the trustee of the ESOP is Team, acting through its board of directors,
which means that the board exerts substantial influence over the ESOP. An
independent fiduciary and independent trustee have been or will be appointed
with respect to the ESOP's sale of shares in this offering. Upon completion of
the offering, Team's ESOP, directors and executive officers will beneficially
own 41.0% of the common stock. See "Management" and "Principal Shareholders and
Selling Shareholder."
IF THE COMPUTER SYSTEMS OF TEAM OR ITS SUPPLIERS AND CUSTOMERS ARE NOT YEAR 2000
COMPLIANT, TEAM'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS MAY SUFFER.
Team faces a significant business risk regarding how existing application
software programs and operating systems will accommodate the date value for the
year 2000. Many existing software application products, including software
application products used by Team and its suppliers and customers, were designed
to accommodate only a two-digit date value, which represents the year. The
interruption to Team's business could be substantial if its current computer
service provider fails in efforts to assist Team in becoming year 2000
compliant.
In addition, failure by suppliers and customers of Team to modify and
convert their own computer systems could have a significant adverse effect on
the suppliers' or customers' operations and profitability, thus inhibiting their
ability to provide services or repay loans to Team. It is unlikely that Team
will accumulate sufficient information on its suppliers' and customers' year
2000 programs to assess adequately the impact on Team. This uncertainty may
negatively impact Team's financial condition and results of operations since
potential problems may not be identified prior to January 1, 2000. For further
information, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Year 2000 Considerations."
IF OUR ALLOWANCE FOR LOAN LOSSES IS NOT ADEQUATE TO COVER ACTUAL LOSSES, OUR
EARNINGS COULD DECREASE.
Team faces the risk that its allowance for loan losses may not be adequate
to cover actual losses, and future provisions for loan losses could materially
and adversely affect its results of operations. The inability of borrowers to
repay loans can erode earnings and capital of banks. Like all financial
institutions, Team maintains an allowance for loan losses that may result from
loan defaults and nonperformance. The allowance for loan losses is based on
prior experience with loan losses, as well as an evaluation of the risks in the
current portfolio. This allowance is maintained at a level considered adequate
by management to absorb anticipated losses. The amount of future losses is
susceptible to changes in economic, operating and other conditions, including
changes in interest rates, that may be beyond management's control. These losses
may exceed current estimates.
State and federal regulatory agencies, as an integral part of their
examination process, review Team's loans and its allowance for loan losses.
Management may determine a need to further increase the allowance for loan
losses. Regulators, when reviewing Team's loan portfolios in the future, may
require Team to increase this allowance, adversely affecting Team's earnings.
Further, Team's actual loan losses may exceed its allowance for loan losses
resulting in additional charges to Team and reducing profitability. For further
information regarding loan loss allowances, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
6
<PAGE> 8
IF ECONOMIC CONDITIONS IN GENERAL AND IN OUR PRIMARY MARKET AREAS DETERIORATE,
OUR REVENUES COULD DECREASE.
Team's financial results may be adversely affected by changes in prevailing
economic conditions, including declines in real estate values, rapid changes in
interest rates, adverse employment conditions and the monetary and fiscal
policies of the federal government. Because Team has a significant amount of
real estate loans, declines in real estate values could adversely affect the
value of property used as collateral.
In addition, substantially all of the loans of Team are to individuals and
businesses in suburban Kansas City, eastern Kansas, western Missouri and the
Omaha, Nebraska area. Any decline in the economy of these market areas could
have an adverse impact on Team's revenues. There can be no assurance that
positive trends or developments discussed in this prospectus will continue or
that negative trends or developments will not have a significant adverse effect
on Team's revenues.
A DECREASE IN INTEREST RATE SPREADS MAY DECREASE OUR PROFITS.
A sustained decrease in interest rate spreads would have a negative effect
on the net interest income and profitability of Team, and there can be no
assurance that a decrease will not occur. Team's profitability is in part a
function of the spread between the interest rates earned on assets and the
interest rates paid on deposits and other interest-bearing liabilities. Although
management believes that the maturities of Team's assets are moderately balanced
in relation to maturities of liabilities, this balance involves estimates as to
how changes in the general level of interest rates will impact the yields earned
on assets and the rates paid on liabilities. For further information regarding
these matters, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations -- Net Interest Income" and
"-- Liquidity -- Asset Liability Management."
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION OF BOOK VALUE UPON
PURCHASE OF YOUR SHARES.
If you purchase shares in this offering, and 700,000 shares are sold by
Team at the assumed offering price of $12.00 per share, the net tangible book
value of your shares as of March 31, 1999 will be $7.76. As this is $4.24 less
than your purchase price, you will incur immediate and substantial dilution in
the book value of your shares. See "Dilution."
SALES OF COMMON STOCK BY EXISTING SHAREHOLDERS COULD ADVERSELY AFFECT THE PRICE
OF YOUR STOCK.
Sales of a significant number of shares of common stock in the public
market following this offering, or the perception that the sales could occur,
could adversely affect the market price of Team's common stock. Following
completion of this offering, Team will have 3,701,803 shares of common stock
outstanding, or 3,851,803 if the underwriters' over-allotment option is
exercised in full. The shares offered pursuant to this prospectus will be freely
tradeable without restriction, except for any shares which are purchased by
affiliates of Team. The directors and executive officers of Team and certain
other shareholders, who will hold or beneficially own an aggregate of 2,380,602
shares upon completion of the offering, have agreed not to offer, sell, or
contract to sell any common stock for 180 days after the date of this prospectus
without the prior written consent of the representative of the underwriters.
Team's ESOP, which will own 1,282,700 shares upon completion of this offering,
has agreed not to sell its shares for the 180 day period, except in connection
with ordinary course of business distributions of cash or common stock to its
participants. See "Underwriting." Upon expiration of this 180-day period all of
these shares, representing 41.0% of the total number of shares which will be
outstanding following completion of the offering, could be resold by these and
other persons who are affiliates of Team, subject to certain requirements of
Rule 144 under the Securities Act. Rule 144 includes a limit on the number of
shares that may be sold in any three-month period equal to the greater of 1% of
the shares outstanding, or the average weekly trading volume of shares of common
stock for the four-week period prior to the time of the resale. See "Shares
Eligible for Future Sale."
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<PAGE> 9
IMPEDIMENTS TO TAKEOVER ATTEMPTS AND REMOVAL OF DIRECTORS AND EXECUTIVE OFFICERS
MAY DEPRESS THE PRICE OF YOUR SHARES.
Team's board of directors has adopted a shareholder rights agreement. This
agreement would cause substantial dilution to any person or group that attempts
to acquire Team on terms not approved in advance by Team's board of directors.
In addition, there are provisions in the articles of incorporation of Team and
other restrictions that would make it difficult and expensive to pursue a change
in control or takeover attempt which is opposed by Team's board of directors. As
a result, shareholders may not have an opportunity to participate in these types
of transactions and thereby not take advantage of certain premiums paid in
today's market. These restrictions may make the removal of the current board of
directors difficult and could have the effect of depressing the trading price of
the shares of common stock. These restrictions include:
- management, through the ESOP and the board of directors, has effective
voting and operational control of Team.
- federal law imposes restrictions on the acquisition of control of a bank
holding company, including regulatory approval requirements.
- Kansas law, under which Team is incorporated, gives the board of
directors broad discretion to resist takeover attempts, even if such a
transaction would be in the best interests of Team's shareholders.
- provisions in Team's articles of incorporation and bylaws providing that:
- the board of directors is authorized to issue blank check preferred
stock, which could be issued as part of a takeover defense.
- the board of directors is divided into three classes that are elected
over a three-year period, thus making it more difficult for a third
party to acquire control of Team. See "Description of Capital
Stock -- Anti-takeover Provisions."
- a proposed amendment to the articles of incorporation to require a
two-thirds affirmative shareholder vote for mergers, consolidations,
liquidations or dissolutions of Team, and management expects the
amendment will be effective as of the date of this prospectus.
- allocation of shares in the ESOP. Certain shares of common stock
allocated to Team employees under its ESOP may be voted by the ESOP
trustee at the direction of employees. The ESOP trustee will vote
unallocated shares, and allocated shares as to which no instructions are
received, subject to the requirements of its fiduciary duties. Team,
acting through its board of directors, serves as the ESOP trustee,
although Team has retained an independent fiduciary to act for the ESOP
in connection with this offering and will also appoint an independent
trustee.
- employment agreements with several executive officers of Team or of its
subsidiary banks require severance pay of a discounted cash value for
remaining unpaid base salary under the agreements plus the continuation
of other benefits for up to two years upon termination of the employment
agreements without cause. See "Management -- Executive Compensation."
SIGNIFICANT GOVERNMENT REGULATION MAY RESULT IN HIGHER OPERATING COSTS FOR TEAM.
Team and its banks are subject to extensive federal and state legislation,
regulation and supervision which is intended primarily to protect depositors and
the Federal Deposit Insurance Corporation's Bank Insurance Fund, rather than
investors. Some of the legislative and regulatory changes may increase Team's
and its subsidiary banks' costs of doing business or otherwise adversely affect
them and create competitive advantages for non-bank competitors. For further
information concerning regulation of Team and its banks, see "Supervision and
Regulation."
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SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statements of operations data for the years ended December
31, 1998, 1997 and 1996 and the consolidated balance sheet data as of December
31, 1998 and 1997 are derived from the consolidated financial statements and
related notes which have been audited by KPMG LLP, independent public
accountants, and are included elsewhere in this prospectus. The consolidated
statements of operations data for the years ended December 31, 1995 and 1994 and
the balance sheet data as of December 31, 1996, 1995 and 1994 are derived from
consolidated financial statements which have been audited by KPMG LLP, but are
not included in this prospectus. The data as of and for the three months ended
March 31, 1999 and March 31, 1998 have been derived from unaudited financial
statements which, in the opinion of management, contain all normal, recurring
adjustments needed for the fair presentation of results of such periods.
Operating results for the three months ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 1999. The following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED
MARCH 31, AT OR FOR THE YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements of Operations data:
Interest income.......................... $ 7,892 $ 7,526 $ 31,854 $ 26,137 $ 21,635 $ 19,661 $ 16,573
Interest expense......................... 4,028 3,907 16,573 12,887 10,462 9,745 7,530
Net interest income...................... 3,864 3,619 15,281 13,250 11,173 9,916 9,043
Provision for loan losses................ 183 446 1,486 1,095 623 245 121
Other income............................. 1,183 913 4,606 3,279 2,812 2,708 2,106
Other expenses........................... 3,689 3,505 15,384 12,667 10,132 10,034 9,991
Income taxes............................. 348 145 673 553 938 701 130
Net income............................... 827 436 2,344 2,214 2,292 1,644 907
Consolidated Balance Sheet data:
Total assets............................. $434,680 $420,460 $442,352 $386,996 $300,007 $260,268 $237,770
Total loans.............................. 250,280 235,714 256,126 223,675 183,494 161,492 139,996
Allowance for loan losses................ 2,625 2,028 2,541 1,629 1,518 1,289 1,199
Investment securities
available-for-sale..................... 112,298 121,723 109,296 103,304 68,806 67,245 67,611
Investment securities held-to-maturity... 25,734 24,544 25,742 22,399 17,889 13,204 12,290
Nonperforming assets(1).................. 3,391 3,305 3,578 1,962 2,216 2,259 2,436
Deposits................................. 375,202 367,314 384,347 333,864 258,890 225,691 206,407
Stockholders' equity and ESOP redeemable
common stock........................... 26,077 23,196 25,401 22,642 19,392 15,796 12,800
Per Common Share (3):
Basic income per share................... $ 0.29 $ 0.16 $ 0.85 $ 0.84 $ 1.02 $ 0.74 $ 0.72
Book value per share(2).................. 8.69 7.85 8.49 7.68 6.87 6.28 5.00
Tangible book value per share(2)......... 6.76 5.76 6.53 6.21 6.64 6.25 4.98
Dividends paid per common share.......... -- -- 0.23 0.23 0.23 0.22 0.10
Key Ratios:
Net interest margin(4)................... 3.95% 4.11% 4.00% 4.36% 4.48% 4.26% 4.14%
Return on average assets(5).............. 0.76 0.44 0.56 0.67 0.85 0.66 0.39
Return on average stockholders'
equity(2)(5)........................... 13.32 8.00 10.00 10.49 12.96 11.33 6.80
Core risk-based capital ratio(2)......... 7.68 6.79 7.05 6.97 9.39 8.97 9.03
Total risk-based capital ratio(2)........ 8.69 7.61 8.00 7.61 10.15 9.72 9.80
Leverage ratio(2)........................ 4.61 4.22 4.50 5.39 6.94 6.01 6.00
Nonperforming assets to total assets..... 0.78 0.79 0.81 0.51 0.74 0.85 1.02
Nonperforming loans to total loans....... 1.00 1.24 1.04 0.71 1.03 1.05 1.38
Allowance for loan losses to total
loans.................................. 1.05 0.86 0.99 0.73 0.83 0.80 0.86
Allowance for loan losses to
nonperforming loans.................... 105.00 69.57 95.10 102.13 80.36 73.83 62.29
</TABLE>
- ---------------
(1) Includes loans 90 days or more delinquent and still accruing interest,
nonaccrual loans and other real estate owned.
(2) Includes redeemable common stock held by ESOP.
(3) No difference exists between basic and diluted earnings per share. Gives
effect to the five-for-one stock split of the common stock in December 1998.
(4) On a tax equivalent basis.
(5) Information for March 31, 1999 and 1998 is annualized.
9
<PAGE> 11
USE OF PROCEEDS
The net proceeds to Team from the sale of the common stock in this
offering, assuming an initial offering price of $12.00 per share and after
deducting the estimated underwriting discount and offering expenses, will be
$7.5 million or $9.1 million if the over-allotment option is exercised in full.
The net proceeds will be used to repay $6.0 million of debt, which bears
interest at 1% under prime and is due on June 30, 1999, and remaining proceeds
will be contributed to Team Bank N.A., one of Team's subsidiary banks. Although
Team will not receive any of the proceeds from the selling shareholder's sale of
shares, the ESOP currently intends to repay $1.0 million in borrowings which
will reduce Team's liabilities as primary obligor and increase its stockholders'
equity. In this instance, Team will incur a one-time federal tax expense of
approximately $60,000. See "Dilution" and "Capitalization."
DIVIDEND POLICY; NO PRIOR MARKET FOR COMMON STOCK
Team has paid yearly dividends on its common stock since 1987. The table
below shows the amount of dividends paid by Team for the years indicated. In
past years dividend payments were advantageous to Team, because under the
Internal Revenue Code, certain dividends paid to the ESOP were deductible as
long as the ESOP had debt outstanding. However, after this offering it is not
contemplated that the ESOP will have debt. Notwithstanding the possible loss of
the deductibility of dividends paid to the ESOP, Team initiated quarterly
dividends on its common stock of $.05 per share beginning in April 1999.
Although Team currently intends to continue the payment of dividends, no
assurance can be given that Team will continue to pay or declare dividends on
common stock in the future.
<TABLE>
<CAPTION>
DIVIDENDS PAID
YEAR PER COMMON SHARE
- ---- ----------------
<S> <C>
1994................................................. $.10
1995................................................. .22
1996................................................. .23
1997................................................. .23
1998................................................. .23
</TABLE>
Kansas law permits Team to pay dividends on its common stock when Team is
solvent and when the dividend payments would not render it insolvent. Under
Kansas law, dividends may be declared and paid only out of the unsecured,
unrestricted earned surplus of a corporation. The ability of Team to pay cash
dividends largely depends on the amount of cash dividends paid to it by its
subsidiary banks. Capital distributions, including dividends by financial
institutions such as the subsidiary banks of Team, are subject to restrictions
tied to the institutions' earnings and capital. Payment of dividends on Team
common stock depends on payment of dividends to Team by its subsidiary banks.
Generally, without prior regulatory approval, the banks cannot pay dividends
during any calendar year in excess of the sum of their earnings during that year
and the two previous years, less any other distributions during that period. At
March 31, 1999, the banks could have paid total dividends to Team of
approximately $3.2 million without prior regulatory approval. See "Supervision
and Regulation" and "Description of Capital Stock."
Prior to this offering, there has been no public market for Team's common
stock, and thus no market price information is available. An application to list
the common stock on the Nasdaq National Market(R) has been filed by Team but not
yet approved. Even if the application is approved there can be no assurance that
a market for the common stock will develop or, if developed, will be sustained.
10
<PAGE> 12
DILUTION
The net tangible book value of Team at March 31, 1999 was approximately
$20.3 million, or approximately $6.76 per share of common stock. Net tangible
book value is defined as the total stockholders' equity of Team plus total
redeemable ESOP common stock, less goodwill and certain other intangible assets.
Net tangible book value per share is determined by dividing the net tangible
book value of Team by the number of outstanding shares of common stock. After
giving effect to the offering, without exercise of underwriters' over-allotment
option, at an assumed offering price of $12.00 per share, and the application of
the estimated net proceeds by Team from the offering, the net tangible book
value of the common stock at March 31, 1999 would have been approximately $28.7
million, or $7.76 per share. This represents an immediate dilution of $4.24 per
share to investors who purchase shares of common stock in the offering. Dilution
is the difference between the offering price per share and the pro forma net
tangible book value per share as adjusted for the offering. The following table
illustrates this per share dilution as of March 31, 1999, which is determined by
subtracting the net tangible book value per share after the offering from the
price paid by a new investor.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1).......... $12.00
Net tangible book value per share of common stock at March
31, 1999.................................................. $6.76
Increase per share of common stock attributable to new
investors(2)(3)........................................... 1.00
-----
Pro forma net tangible book value per share of common stock
after the offering(2)(3).................................. 7.76
------
Dilution per share of common stock to new investors......... $ 4.24
======
</TABLE>
- ---------------
(1) Before deducting the estimated underwriting discount and offering expenses.
(2) After deducting the estimated underwriting discount and offering expenses.
(3) Includes a reduction of $1.0 million of debt by Team's ESOP. See "Use of
Proceeds" and "Capitalization."
The following table summarizes on a pro forma basis as of May 31, 1999, the
differences between the average price per share paid by officers and directors
of Team during the past five years, including ESOP allocations, compared to the
consideration paid by new investors in this offering at an assumed offering
price of $12.00 per share:
<TABLE>
<CAPTION>
AVERAGE
SHARES TOTAL PRICE
PURCHASED CONSIDERATION PER SHARE
--------- ------------- ---------
<S> <C> <C> <C>
Officers............................................ 141,341 $1,352,132 $ 9.57
New investors....................................... 700,000 8,400,000 12.00
</TABLE>
Team expects that 3,701,803 shares of common stock will be outstanding
after the offering. In addition to the shares outstanding after the offering,
Team may issue up to 75,000 additional shares of common stock under the employee
stock purchase plan and up to 70,000 shares which Team has reserved under a
stock incentive plan. See "Management -- Executive Compensation."
11
<PAGE> 13
CAPITALIZATION
The following table sets forth the capitalization of Team at March 31, 1999
and as adjusted to give effect to the issuance and sale by Team of 700,000
shares of the common stock in this offering at an assumed initial public
offering price of $12.00 per share and the use of net proceeds as described in
"Use of Proceeds." Management believes a public market for Team's common stock
will exist upon completion of this offering. Therefore, the redeemable common
stock reflected outside of stockholders' equity in the historical financial
statements has been classified into stockholders' equity in the as adjusted
column. See note 2 to the unaudited consolidated financial statements for the
periods ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Borrowings:
Federal funds purchased and securities sold under
agreements to repurchase............................... $ 6,462 $ 6,462
Notes payable............................................. 23,058 16,058
-------- -------
Total borrowings.................................. 29,520 22,520
Redeemable common stock held by ESOP........................ 16,876 --
Stockholders' equity:
Preferred stock, 10,000,000 shares authorized; no shares
issued or outstanding.................................. -- --
Common stock, no par value, 50,000,000 shares authorized;
3,028,808 shares issued (3,728,808 shares issued as
adjusted).............................................. 14,044 21,505
Capital surplus........................................... 122 122
Retained earnings......................................... 12,748 12,748
Treasury stock, 27,005 shares of common stock............. (187) (187)
Accumulated other comprehensive income.................... 350 350
Unearned compensation..................................... (1,000) --
Less redeemable common stock held by ESOP................. (16,876) --
-------- -------
Total stockholders' equity........................ 9,201 34,538
Total capitalization.............................. $ 55,597 $57,058
======== =======
Consolidated regulatory capital ratios:
Total risk-based capital ratio............................ 8.69% 11.94%
Core risk-based capital ratio............................. 7.68 10.93
Leverage ratio............................................ 4.61 6.56
</TABLE>
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS ENVIRONMENT AND RISK FACTORS
The following discussion should be read in conjunction with the
consolidated financial statements of Team and the notes included elsewhere in
this prospectus. Team's future operating results may be affected by various
trends and factors that are beyond Team's control. These include the factors set
forth in "Risk Factors" and "Forward-Looking Statements." Accordingly, past
results and trends may not be reliable indicators of future results or trends.
With the exception of historical information, the matters discussed below
include forward-looking statements that involve risks and uncertainties. Team
cautions readers that a number of important factors discussed below could affect
Team's actual results and cause actual results to differ materially from those
in the forward-looking statements.
OVERVIEW
Team's earnings over the past three years have essentially remained level,
although asset growth has been substantial. While asset growth has resulted in
increases in revenues, these increases have been offset by operating expenses,
increases in provisions for loan losses and amortization of premiums paid in
acquisitions accounted for by the purchase method. Team believes, however, that
its existing management and systems are capable of supporting additional growth
without significant increases in administrative costs to integrate the growth
into operations. Team's strategy takes into account, and its experience is, that
it takes up to 18 months to realize meaningful net income improvements from
acquisitions and expansion.
At March 31, 1999 total assets of Team were $434.7 million, a slight
decrease from $442.4 million in total assets as of December 31, 1998. Total
assets at December 31, 1997 were $387.0 million. The increase as of December 31,
1998 was the result of internal growth and the purchase of a NationsBank branch
in Ottawa, Kansas completed during the first quarter of 1998. The branch's
deposits of $32.0 million were invested in earning assets during the year. The
decrease in total assets as of March 31, 1999 primarily resulted from a $5.9
million decline in Team's net loan balance. Commercial and other real estate
loan payoffs, along with loan refinancings, were the cause of the reduction of
the loan portfolio.
Team's net income totaled $827,000 for the three months ended March 31,
1999 compared to $436,000 for the three months ended March 31, 1998, a 91.78%
increase. The increase in net income was a result of an increase in net interest
income of $245,000 and other income of $270,000, and a decline in the provisions
for loan losses of $263,000. These changes were offset by an increase of
$184,000 in other expenses.
Net income totaled $2.3 million for 1998 compared to $2.2 million for 1997.
Net income in 1998 improved as a result of increased net interest income of $2.0
million and other income of $1.3 million. These increases were offset by
increased provisions for loan losses of $391,000 and other expenses of $2.7
million.
At December 31, 1997, total assets of Team were $387.0 million,
representing an $87.0 million, or 29.00% increase over that as of December 31,
1996. This increase was the result of internal growth and the 1997 purchase of
one bank branch from Roosevelt Bank and one branch purchase from Mercantile
Bancorporation. These branch purchases resulted in additional deposits of
approximately $70.0 million. Team's net income totaled $2.2 million for 1997
compared to $2.3 million for 1996. The $78,000 decrease from 1996 was a result
of increases in provisions for loan losses and other expenses which were offset
by increases in net interest income and other income.
RESULTS OF OPERATIONS
Net Interest Income
Team's income is derived primarily from net interest income. Net interest
income is the difference between interest income, principally from loans,
investment securities and federal funds sold, and interest
13
<PAGE> 15
expense, principally on customer deposits and other borrowings. Changes in net
interest income result from changes in volume and interest rates earned and
expensed. Volume refers to the average dollar levels of interest-earning assets
and interest-bearing liabilities.
The following tables set forth the average balances of interest-earning
assets and interest-bearing liabilities, as well as the amount of interest
income or interest expense and the average rate for each category of
interest-earning assets and interest-bearing liabilities on a tax-equivalent
basis assuming a 34% tax rate for the periods indicated. Included in the average
balances are non-accruing loans. Loan fees are included in interest income.
Average balances are computed on a daily basis.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
AVERAGE AVERAGE
RATE RATE
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSES PAID BALANCE EXPENSES PAID
-------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Loans, net(1)(2)(3).............................. $249,098 $5,679 9.12% $227,166 $5,394 9.50%
Investment securities -- taxable................. 111,356 1,727 6.20 107,943 1,780 6.60
Investment securities -- nontaxable(4)........... 24,258 440 7.26 21,422 421 7.86
Federal funds sold and interest-bearing
deposits....................................... 21,065 190 3.61 11,434 89 3.11
-------- ------ ----- -------- ------ -----
Total interest-earning assets.............. $405,777 $8,036 7.92% $367,965 $7,684 8.35%
======== ----- ======== -----
INTEREST-BEARING LIABILITIES
Savings deposits and interest bearing checking... $130,634 $ 927 2.84% $118,784 $ 925 3.11%
Time deposits.................................... 206,236 2,689 5.22 186,716 2,597 5.56
Federal funds purchased and securities sold under
agreements to repurchase....................... 6,313 89 4.75 12,633 168 5.32
Notes payable.................................... 22,058 323 6.11 10,929 217 7.94
-------- ------ ----- -------- ------ -----
Total interest-bearing liabilities......... $365,241 4,028 4.41% $329,062 3,907 4.75%
======== ------ ----- ======== ------ -----
Net interest income (tax equivalent)............... $4,008 $3,777
====== ======
Net interest margin(4)(5).......................... 3.95% 4.11%
===== =====
Ratio of average interest-bearing liabilities to
average interest-earning assets.................. 90.01% 89.43%
===== =====
</TABLE>
- ---------------
(1) Loans are net of deferred loan fees.
(2) Non-accruing loans are included in the computation of average balances.
(3) Team includes loan fees in interest income. These fees totaled for the three
months ended March 31, 1999 -- $205,000 and 1998 -- $180,000.
(4) Yield is adjusted for the tax effect of tax exempt securities. The tax
effects for the three months ended March 31, 1999 was $144,000 and March 31,
1998 was $158,000.
(5) The net interest margin is net interest income divided by average
interest-earning assets.
Net interest income, on a tax equivalent basis, was $4.0 million for the
three months ended March 31, 1999 an increase of $231,000 over the same period
in 1998. Interest income for the three months ended March 31, 1999 totaled $8.0
million compared to $7.7 million for the same period in 1998. The increase of
$352,000 is primarily due to an increase of $37.8 million, or 10.28%, in the
average balance of earning assets. The majority of the increase in earning
assets was attributable to average loans outstanding which increased from $227.2
million at March 31, 1998 to $249.1 million at March 31, 1999. Interest income
on loans was negatively impacted by a decrease in the yield earned on loans. The
average yield on loans was 9.12% for the three months ended March 31, 1999 as
compared to 9.50% for the same period in 1998.
Interest expense increased $121,000 for the three months ended March 31,
1999 compared to the same period in 1998. Interest expense on time deposits
increased $92,000 primarily as a result of an
14
<PAGE> 16
increase in the average balance of such deposits of $19.5 million for the three
month period ended March 31, 1999 compared to the same period in 1998. Interest
expense on notes payable increased $74,000, or 29.70%, primarily as a result of
an increase in the average balance of such borrowings of $11.1 million, in the
three month period ended March 31, 1999 compared to the same period in 1998.
Additional borrowings subsequent to March 31, 1998 were necessary to fund the
acquisition of the Nations Bank branch and redeem mandatory equity replacement
notes.
As a result of these factors, net interest margin, on a tax-equivalent
basis, decreased to 3.95% for the three months ended March 31, 1999 from 4.11%
for the comparable period in 1998.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------- ----------------------------- -----------------------------
AVERAGE AVERAGE AVERAGE
RATE RATE RATE
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSES PAID BALANCE EXPENSES PAID BALANCE EXPENSES PAID
-------- -------- ------- -------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Loans, net (1)(2)(3)............ $245,012 $23,183 9.46% $200,747 $19,475 9.70% $165,725 $16,196 9.77%
Investment
securities -- taxable......... 115,461 7,127 6.17 85,688 5,458 6.37 69,649 4,492 6.45
Investment securities --
nontaxable(4)................. 22,387 1,717 7.67 16,151 1,253 7.76 12,495 1,011 8.09
Federal funds sold and interest-
bearing deposits.............. 13,455 411 3.05 11,338 377 3.33 9,106 280 3.07
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total interest-earning
assets.................. $396,315 $32,438 8.18% $313,924 $26,563 8.46% $256,975 $21,979 8.55%
======== ----- ======== ----- ======== -----
INTEREST-BEARING LIABILITIES
Savings deposits and interest
bearing checking.............. $126,963 $ 3,878 3.05% $101,734 $ 3,181 3.13% $ 84,107 $ 2,575 3.06%
Time deposits................... 198,006 10,929 5.52 153,135 8,613 5.62 124,577 6,957 5.58
Federal funds purchased and
securities sold under
agreements to repurchase...... 9,987 528 5.29 10,654 569 5.34 10,086 535 5.30
Notes payable................... 18,461 1,238 6.71 7,272 524 7.21 6,161 395 6.41
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total interest-bearing
liabilities............. $353,417 16,573 4.69% $272,795 12,887 4.72% $224,931 10,462 4.65%
======== ------- ----- ======== ------- ----- ======== ------- -----
Net interest income (tax
equivalent)..................... $15,865 $13,676 $11,517
======= ======= =======
Net interest margin(4)(5)......... 4.00% 4.36% 4.48%
===== ===== =====
Ratio of average interest-bearing
liabilities to average
interest-earning assets......... 89.18% 86.90% 87.53%
===== ===== =====
</TABLE>
- ---------------
(1) Loans are net of deferred loan fees.
(2) Non-accruing loans are included in the computation of average balances.
(3) Team includes loan fees in interest income. These fees totaled $974,000 in
1998, $905,000 in 1997 and $713,000 in 1996.
(4) Yield is adjusted for the tax effect of tax exempt securities. The tax
effects were $584,000 in 1998, $426,000 in 1997 and $344,000 in 1996.
(5) The net interest margin is net interest income divided by average
interest-earning assets.
Total interest income on a tax equivalent basis was $32.4 million for 1998
compared to $26.6 million in 1997, representing a 22.12% increase. The overall
increase in interest income is the result of Team's purchase of a NationsBank
branch in the first quarter of 1998, which resulted in increased deposits of
approximately $32.0 million. These deposits were used to fund loans as Team's
growth strategy continued, with the remainder placed in investment securities.
Deployment of purchased deposits into loans, the
15
<PAGE> 17
highest yielding interest-earning assets, takes a significant period of time to
complete. This time lag of deployment of assets from the branch purchase also
contributed to the decreases in net interest margin for 1997 and 1998. Interest
income on loans increased $3.7 million, or 19.04%, primarily due to increased
loan volume in 1998. For 1998, the average balance of loans increased by $44.3
million or 22.05%. Interest income on loans in 1998 was negatively impacted by a
0.24% decrease in the yield earned on loans, 9.46% in 1998 compared to 9.70% in
1997. Tax equivalent interest income on investment securities increased $2.1
million, or 31.78%, primarily due to increased volume in 1998. For 1998, the
average combined investment balances increased by $36.0 million or 35.36%.
Total interest expense was $16.6 million for 1998 compared to $12.9 million
for 1997, representing a 28.60% increase. Interest expense on savings and
interest-bearing checking increased $697,000, or 21.91%, primarily as a result
of an increase in the balance of these deposits of $25.2 million, or 24.80% in
1998 compared to 1997. Interest expense on time deposits increased $2.3 million,
or 26.89%, primarily as a result of an increase in the average balance of these
deposits of $44.9 million, or 29.30% in 1998. Interest expense on notes payable
increased $714,000, or 136.26%, primarily as a result of an increase in the
average balance of these borrowings of $11.2 million, or 153.86% in 1998
compared to 1997. Additional borrowings in 1998 were necessary to fund the
acquisition of the branch noted above, meet $1.4 million of payments associated
with repurchase obligations under its ESOP and redeem $937,000 of mandatory
equity replacement notes. See "-- Liquidity" and notes 9 and 10 to the
consolidated financial statements.
As a result of the changes described above, the net interest income on a
tax equivalent basis increased to $2.2 million, or 16.01% for 1998 compared to
1997.
Total interest income on a tax equivalent basis was $26.6 million for 1997
compared to $22.0 million for 1996, representing a 20.86% increase. Interest
income on loans increased $3.3 million, or 20.25%. This increase was primarily
the result of increased loan volume in 1997 as the average rate decreased
slightly. For 1997, the average balance of loans increased by $35.0 million or
21.13%. Interest income on a tax equivalent basis for investments increased $1.2
million, or 21.95%, primarily due to increased volume in 1997 as rates again
decreased. For 1997, the average combined investment balance increased by $19.7
million or 23.98% compared to 1996.
Total interest expense was $12.9 million for 1997 compared to $10.5 million
for 1996, representing a 23.18% increase. Interest expense on savings and
interest bearing checking increased $606,000, or 23.53%, as a result of an
increase in the average balance of these deposits of $17.6 million, or 20.96%
and a slight increase paid on these deposits in 1997. Interest expense on time
deposits increased $1.7 million, or 23.80%, as a result of an increase in the
average balance of these deposits of $28.6 million, or 22.92% in 1997 compared
to 1996 and a slight increase in rates paid on these deposits in 1997.
As a result of the changes described above, the net interest income on a
tax equivalent basis increased to $2.2 million, or 18.75% for 1997 compared to
1996.
16
<PAGE> 18
The following table presents the components of changes in Team's net
interest income, on a tax-equivalent basis, attributed to volume and rate. The
net change attributable to the combined impact of volume and rate has been
solely allocated to the change in rate.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------------ ---------------------------------------------------
1999 COMPARED TO 1998 1998 COMPARED TO 1997 1997 COMPARED TO 1996
------------------------ ------------------------ ------------------------
TOTAL TOTAL TOTAL
VOLUME RATE CHANGES VOLUME RATE CHANGES VOLUME RATE CHANGES
------ ----- ------- ------ ----- ------- ------ ----- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans......................... $521 $(236) $285 $4,294 $(586) $3,708 $3,423 $(144) $3,279
Investment
securities -- taxable....... 56 (109) (53) 1,896 (227) 1,669 1,034 (68) 966
Investment securities --
nontaxable.................. 56 (37) 19 484 (20) 464 296 (54) 242
Federal funds sold and
interest-bearing deposits... 75 26 101 71 (37) 34 69 28 97
---- ----- ---- ------ ----- ------ ------ ----- ------
Total interest
income............... 708 (356) 352 6,745 (870) 5,875 4,822 (238) 4,584
INTEREST EXPENSE
Savings deposits and interest-
bearing checking............ 92 (90) 2 789 (92) 697 540 66 606
Time deposits................. 272 (180) 92 2,524 (208) 2,316 1,595 61 1,656
Federal funds purchased and
securities sold under
agreements to repurchase.... (15) (32) (47) (36) (5) (41) 30 4 34
Notes payable................. 254 (180) 74 806 (92) 714 71 58 129
---- ----- ---- ------ ----- ------ ------ ----- ------
Total interest
expense.............. 603 (482) 121 4,083 (397) 3,686 2,236 189 2,425
---- ----- ---- ------ ----- ------ ------ ----- ------
Increase (decrease) in net
interest income............... $105 $ 126 $231 $2,662 $(473) $2,189 $2,586 $(427) $2,159
==== ===== ==== ====== ===== ====== ====== ===== ======
</TABLE>
Other Income
The following table sets forth Team's other income for the indicated
periods.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
---------------- ------------------------
1999 1998 1998 1997 1996
------- ----- ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Service charges.................................... $ 540 $461 $2,039 $1,670 $1,400
Trust fees......................................... 141 79 454 408 368
Gain on sales of mortgage loans.................... 192 137 664 268 230
Gain (loss) on sales of investment securities...... -- 1 18 2 (40)
Mortgage servicing fees............................ 77 65 267 239 228
Credit card fees................................... 32 37 148 147 144
ATM fees........................................... 20 24 91 84 55
Other.............................................. 181 109 925 461 427
------ ---- ------ ------ ------
Total other income....................... $1,183 $913 $4,606 $3,279 $2,812
====== ==== ====== ====== ======
</TABLE>
During the three months ended March 31, 1999, total other income increased
$270,000, or 29.57%, compared to the same period in 1998. The increase was
attributable to service charges, trust fees, and gain on sale of mortgage loans,
which increased $79,000, $62,000, and $55,000. Service charges and trust fees
reported increases due to a larger customer base. Gain on sale of real estate
loans increased as a result of the lower rate environment. This environment
generated significant refinancings and higher turnover of loans, which in turn
resulted in origination fees and gains from sales of above-market rate loans.
Other income was $4.6 million for 1998 compared to $3.3 million for 1997,
representing a 40.47% increase. In 1998, service charges increased $369,000 and
trust fees increased $46,000 in 1998 as a result
17
<PAGE> 19
of a larger customer base. Gain on sale of mortgage loans increased $396,000 in
1998 as a result of the lower rate environment, which generated significant
refinancings.
Other income was $3.3 million for 1997 compared to $2.8 million for 1996,
representing a 16.61% increase. This increase was primarily due to an increase
in service charges of $270,000, again resulting from Team's acquisitions and the
resulting increased customer base.
Other Expenses
The following table presents Team's operating expenses for the indicated
periods.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
--------------- ---------------------------
1999 1998 1998 1997 1996
------ ------ ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits................. $1,858 $1,766 $ 7,835 $ 6,419 $ 5,128
Occupancy and equipment........................ 461 412 1,805 1,668 1,298
Data processing................................ 343 273 1,265 1,033 879
Professional fees.............................. 203 106 874 717 599
Marketing...................................... 54 121 479 395 274
Goodwill and other intangible amortization..... 173 158 611 202 32
Other.......................................... 597 669 2,515 2,233 1,922
------ ------ ------- ------- -------
Total other expenses................. $3,689 $3,505 $15,384 $12,667 $10,132
====== ====== ======= ======= =======
</TABLE>
Other expenses were $3.7 million for the three months ended March 31, 1999
compared to $3.5 million for the same period in 1998. The increase was primarily
attributable to an increase in salaries and employee benefits of $92,000 and
professional fees of $97,000 resulting from Team's growth. The increases were
reduced by a decline in marketing costs of $67,000.
Other expenses were $15.4 million for 1998 compared to $12.7 million for
1997, representing a 21.45% increase. The increase was attributable to an
increase in salaries and employee benefits of $1.4 million resulting from
employees who were retained in acquisitions and new employees hired in
connection with a branch opening.
Goodwill and other intangible amortization increased from 1997 primarily as
a result of amortization of goodwill established by premiums paid on branch
acquisitions purchased in the latter part of 1997 and early 1998. Recent
acquisitions by Team of branches have been accounted for using purchase
accounting, which means that the excess of the purchase price over the carrying
value of the assets acquired is recorded in the consolidated financial
statements as goodwill, which is amortized over 15 years from the date of each
acquisition. This amortization is a non-cash operating expense which reduces net
income. For example, goodwill amortization increased $33,000 in the first
quarter of 1999 from the same period in 1998 and was $405,000 in 1998 versus
$140,000 in 1997 and $17,000 in 1996.
The balance of goodwill on Team's balance sheet at March 31, 1999 was $5.7
million. Amortization of this amount over 15 years will result in expense of
$380,000 per year.
Other expenses were $12.7 million for 1997 compared to $10.1 million for
1996, representing a 25.02% increase. The increase is primarily attributable to
an increase in salaries and employee benefits of $1.3 million in 1997 due
primarily to staff retained at acquired branches. Additionally, occupancy and
equipment expense increased $370,000 in 1997.
Income Tax Expense
Income tax expense was $348,000 for the three months ended March 31, 1999
compared to $145,000 for the same period in 1998. Income tax expense was
$673,000 for 1998 compared to $553,000 for 1997, representing a 21.70% increase.
The effective tax rates were 22% for 1998 and 20% for 1997. The effective
18
<PAGE> 20
tax rate is less than the statutory federal rate of 34% due primarily to
municipal interest income and the income tax benefit resulting from dividends
paid to the ESOP. Under the Internal Revenue Code, Team can deduct dividends
paid to its ESOP under limited circumstances.
Income tax expense was $553,000 for 1997 compared to $938,000 for 1996,
representing a 41.04% decrease. The effective tax rates were 20% for 1997 and
29% for 1996. Team's effective tax rate was significantly lower in 1997 as
compared to 1996 as a result of increased municipal interest income, lower state
taxes and the utilization of federal tax credits.
FINANCIAL CONDITION
Loan Portfolio Composition
The following tables present the composition of Team's loan portfolio by
type of loan at the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
MARCH 31, 1999 1998 1997 1996 1995
---------------- ---------------- ---------------- ---------------- --------
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT
-------- ----- -------- ----- -------- ----- -------- ----- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate:
1-4 family........... $ 82,831 33.4% $ 85,093 33.5% $ 74,049 33.3% $ 63,575 34.9% $ 57,618
Construction......... 13,709 5.6 14,411 5.7 12,292 5.5 9,608 5.3 6,265
Other................ 25,223 10.2 25,809 10.2 26,816 12.1 20,655 11.4 20,576
-------- ----- -------- ----- -------- ----- -------- ----- --------
Total.......... 121,763 49.2 125,313 49.4 113,157 50.9 93,838 51.6 84,459
Commercial............. 92,388 37.3 94,478 37.3 75,048 33.8 57,709 31.7 47,728
Installment and
other................ 36,440 14.7 36,652 14.4 35,785 16.1 32,274 17.7 29,585
-------- ----- -------- ----- -------- ----- -------- ----- --------
Gross loans............ 250,591 101.2 256,443 101.1 223,990 100.8 183,821 101.0 161,772
Unearned fees.......... (311) (0.1) (317) (0.1) (315) (0.1) (327) (0.2) (280)
-------- ----- -------- ----- -------- ----- -------- ----- --------
Loans.................. 250,280 101.1 256,126 101.0 223,675 100.7 183,494 100.8 161,492
Less allowance for loan
losses............... (2,625) (1.1) (2,541) (1.0) (1,629) (0.7) (1,518) (0.8) (1,289)
-------- ----- -------- ----- -------- ----- -------- ----- --------
Total net
loans........ $247,655 100.0% $253,585 100.0% $222,046 100.0% $181,976 100.0% $160,203
======== ===== ======== ===== ======== ===== ======== ===== ========
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
----- ----------------
% AMOUNT %
----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Real estate:
1-4 family........... 36.0% $ 53,998 38.9%
Construction......... 3.9 4,870 3.5
Other................ 12.8 17,689 12.7
----- -------- -----
Total.......... 52.7 76,557 55.2
Commercial............. 29.8 37,372 26.9
Installment and
other................ 18.5 26,341 19.0
----- -------- -----
Gross loans............ 101.0 140,270 101.1
Unearned fees.......... (0.2) (274) (0.2)
----- -------- -----
Loans.................. 100.8 139,996 100.9
Less allowance for loan
losses............... (0.8) (1,199) (0.9)
----- -------- -----
Total net
loans........ 100.0% $138,797 100.0%
===== ======== =====
</TABLE>
As of March 31, 1999, loans were $250.3 million compared to $256.1 million
at December 31, 1998, representing a slight decrease of $5.8 million mainly due
to refinances and sales of mortgage loans. Loans at December 31, 1998 increased
by $32.4 million compared to loans of $223.7 million at December 31, 1997. This
increase resulted primarily from internal growth, and was funded through an
increase in deposits associated with the acquisition of a NationsBank branch in
the first quarter of 1998.
Real estate mortgage loans represent the largest type of loans of Team. As
of March 31, 1999, these loans of $121.8 million decreased from $125.3 million
as of December 31, 1998. These loans at December 31, 1998 increased by $12.1
million, or 10.74%, compared to real estate mortgage loans of $113.2 million at
December 31, 1997. Included in real estate mortgage loans are 1 to 4 family
residential loans with a balance of $82.8 million at March 31, 1999.
Substantially all of these loans were originated in Team's market area.
Additionally, included in real estate mortgage loans are real estate mortgage
loans held for sale. Team will typically sell fixed rate mortgage loans to
permanent investors with the servicing rights retained. Capitalized servicing
rights are recorded at the time the loan is sold, thereby increasing the gain on
sale by such amount. At March 31, 1999 the balance of these loans held for sale
was $3.3 million.
Real estate construction loans consist primarily of single family
construction in Team's primary market areas. The balance of these loans was
$13.7 million at March 31, 1999, compared to the December 31, 1998 balance of
$14.4 million. Team recently has experienced steady growth in its markets for
these loans with the balance increasing in each of the last five years to $14.4
million at December 31, 1998 from $4.9 million at December 31, 1994.
19
<PAGE> 21
Commercial loans include loans to service, retail, wholesale and light
manufacturing businesses. At March 31, 1999, commercial loans, excluding
agriculture, were $70.0 million compared to $69.5 million at December 31, 1998
and $55.4 million at December 31, 1997, reflecting an overall increase of $14.6
million, or 30.56%.
Included within commercial loans are agricultural loans to farmers for
production and other agricultural needs. At March 31, 1999, agricultural loans
were $22.4 million compared to 25.0 million at December 31, 1998, and $19.6
million at December 31, 1997, reflecting an overall increase of 14.29%.
Installment and other loans include automobile, residential, and other
personal loans. The majority of these loans are installment loans with fixed
interest rates. Although increasing in dollar amount, installment and other
loans have been decreasing as a percentage of total loans over the past several
years as Team places more emphasis on growing the real estate and commercial
portion of their loan portfolio. Team also has a small portfolio of credit card
loans.
Team believes that its philosophy in extending credit is relatively
conservative in nature, with a presumption that most credit should have both a
primary and secondary source of repayment, and that the primary source should
generally be operating cash flows, while the secondary source should generally
be disposition of collateral. Team engages in very little unsecured lending, and
generally requires personal guarantees of principals for business obligations.
Team's lending policy requires both loan officer and loan committee approval for
significant credits. See "Business -- Loan Administration."
At March 31, 1999 net loans totaled 65.98% of total deposits and 57.00% of
total assets.
Loan Maturities
The following tables present, at March 31, 1999 and December 31, 1998,
loans by maturity in each major category of Team's portfolio based on
contractual repricing schedules. Actual maturities may differ from the
contractual repricing maturities shown below as a result of renewals and
prepayments. Loan renewals are re-evaluated using substantially the same credit
procedures that are used when loans are made.
<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------------------------------------------------------------
OVER ONE YEAR
THROUGH FIVE YEARS OVER FIVE YEARS
ONE YEAR -------------------------- --------------------------
OR LESS FIXED RATE FLOATING RATE FIXED RATE FLOATING RATE TOTAL
-------- ---------- ------------- ---------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real estate:
1-4 family..................... $ 23,990 $ 3,253 $20,217 $22,232 $13,139 $ 82,831
Construction................... 12,563 724 408 -- 14 13,709
Other.......................... 13,155 4,238 2,766 4,171 893 25,223
-------- ------- ------- ------- ------- --------
Total.................. 49,708 8,215 23,391 26,403 14,046 121,763
Commercial....................... 54,239 18,477 14,196 3,547 1,929 92,388
Installment and other............ 8,804 25,635 220 1,759 22 36,440
-------- ------- ------- ------- ------- --------
Gross loans.................... 112,751 52,327 37,807 31,709 15,997 250,591
Unearned loan fees............... (45) (72) (153) (21) (20) (311)
-------- ------- ------- ------- ------- --------
Loans.......................... $112,706 $52,255 $37,654 $31,688 $15,977 $250,280
======== ======= ======= ======= ======= ========
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------------------------------
OVER ONE YEAR
THROUGH FIVE YEARS OVER FIVE YEARS
ONE YEAR -------------------------- --------------------------
OR LESS FIXED RATE FLOATING RATE FIXED RATE FLOATING RATE TOTAL
-------- ---------- ------------- ---------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real estate:
1-4 family..................... $ 24,323 $ 4,497 $21,325 $23,310 $11,638 $ 85,093
Construction................... 13,402 768 155 86 -- 14,411
Other.......................... 11,641 3,215 5,751 4,077 1,125 25,809
-------- ------- ------- ------- ------- --------
Total.................. 49,366 8,480 27,231 27,473 12,763 125,313
Commercial....................... 59,865 17,743 11,309 5,061 500 94,478
Installment and other............ 9,499 25,662 233 1,198 60 36,652
-------- ------- ------- ------- ------- --------
Gross loans.................... 118,730 51,885 38,773 33,732 13,323 256,443
Unearned loan fees............... (42) (75) (152) (25) (23) (317)
-------- ------- ------- ------- ------- --------
Loans.......................... $118,688 $51,810 $38,621 $33,707 $13,300 $256,126
======== ======= ======= ======= ======= ========
</TABLE>
Nonperforming loans
Nonperforming loans consist of loans 90 days or more delinquent and still
accruing interest, nonaccrual loans and restructured loans. When, in the opinion
of management, a reasonable doubt exists as to the collectibility of interest,
regardless of the delinquency status of a loan, the accrual of interest income
is discontinued and any interest accrued to date is reversed through a charge to
income. While a loan is on nonaccrual status, it is Team's policy that interest
income is recognized only after payment in full of principal. Generally,
management places loans which are greater than 90 days past due on nonaccrual.
At March 31, 1999 and December 31, 1998, Team had an insignificant amount of
restructured loans.
The following table presents information concerning the nonperforming
assets of Team at the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------------------------------
1999 1998 1997 1996 1995 1994
--------- ------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans........................ $2,010 $2,241 $1,078 $1,652 $1,458 $1,122
Loans 90 days past due and still
accruing.............................. 490 431 517 236 232 803
------ ------ ------ ------ ------ ------
Non-performing loans.................. 2,500 2,672 1,595 1,888 1,690 1,925
Other real estate owned................. 891 906 367 327 513 511
------ ------ ------ ------ ------ ------
Total non-performing assets... $3,391 $3,578 $1,962 $2,215 $2,203 $2,436
====== ====== ====== ====== ====== ======
Non-performing loans as a percentage of
total loans........................... 1.00% 1.04% 0.71% 1.03% 1.05% 1.38%
Non-performing assets as a percentage of
total assets.......................... 0.78% 0.81% 0.51% 0.74% 0.85% 1.02%
</TABLE>
Total non-performing assets totaled $3.4 million at March 31, 1999,
compared to $3.6 million at December 31, 1998, representing a decrease of 5.23%.
Other real estate owned at March 31, 1999 consists of 18 properties held by
Team's subsidiary banks. Two properties with an aggregate book value of $284,000
represent commercial real estate lots foreclosed in 1998. Another property with
a book value of $142,000 is a commercial office building which is leased by one
of Team's subsidiary banks. Management is not aware of any adverse trend
relating to Team's loan portfolio.
As of March 31, 1999 and December 31, 1998, there were no significant
balance of loans excluded from nonperforming loans set forth above, where known
information about possible credit problems of borrowers caused management to
have serious doubts as to the ability of such borrowers to comply with the
present loan repayment terms and which may result in such loans becoming
nonperforming.
21
<PAGE> 23
Analysis of Allowance for Loan Losses
Management maintains its allowance for loan losses based on industry
standards, historical experience and an evaluation of economic conditions. Team
regularly reviews delinquencies and loan portfolio quality. Based upon such
factors, management makes various assumptions and judgments about the ultimate
collectibility of the loan portfolio and provides an allowance for potential
loan losses based upon a percentage of the outstanding balances and for specific
loans if their ultimate collectibility is considered questionable. Since certain
lending activities involve greater risks, the percentage applied to specific
loan types may vary. The allowance is increased by provisions for loan losses
and reduced by loans charged-off, net of recoveries.
The following table sets forth information regarding changes in the
allowance for loan losses of Team for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------------------------------
1999 1998 1997 1996 1994 1996
------------------ -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Average total loans....................... $249,098 $245,012 $200,747 $165,725 $158,958 $133,694
Total loans at end of period.............. $250,280 $256,126 $223,675 $183,494 $161,492 $139,996
Allowance at beginning of year............ $ 2,541 $ 1,629 $ 1,518 $ 1,289 $ 1,199 $ 1,052
Loans charged-off:
Real estate:
1-4 family............................ (12) (14) (6) (8) (9) (22)
Construction.......................... -- -- -- -- -- --
Other................................. -- -- -- -- -- --
Commercial.............................. (10) (169) (655) (316) (72) (42)
Installment and other................... (125) (540) (481) (371) (199) (207)
-------- -------- -------- -------- -------- --------
Total charge-offs................. (147) (723) (1,142) (695) (280) (271)
Recoveries
Real estate:
1-4 family............................ 8 1 -- -- 9 110
Construction.......................... -- -- -- -- -- --
Other................................. -- -- -- 9 -- --
Commercial, financial and
agricultural.......................... 8 28 59 49 46 109
Installment and other................... 32 120 99 92 70 78
-------- -------- -------- -------- -------- --------
Total recoveries.................. 48 149 158 150 125 297
Net (charge-offs) recoveries.............. (99) (574) (984) (545) (155) 26
Provision for loan losses................. 183 1,486 1,095 623 245 121
Allowance of acquired bank................ -- -- -- 151 -- --
-------- -------- -------- -------- -------- --------
Allowance at end of period................ $ 2,625 $ 2,541 $ 1,629 $ 1,518 $ 1,289 $ 1,199
======== ======== ======== ======== ======== ========
Ratio of net charge-offs to average total
loans................................... (0.16)% (0.23)% (0.49)% (0.33)% (0.10)% (0.02)%
Allowance to total loans at end of
period.................................. 1.05 0.99 0.73 0.83 0.80 0.86
Allowance to nonperforming loans.......... 105.00 95.10 102.13 80.36 73.83 62.29
</TABLE>
The allowance for loan losses at March 31, 1999 totaled $2.6 million, and
at December 31, 1998 totaled $2.5 million, 1997 totaled $1.6 million and 1996
totaled $1.5 million. The allowance for loan losses as a percentage of total
loans was 1.05% at March 31, 1999, and 0.99% at December 31, 1998, 0.73% at 1997
and 0.83% at 1996. The provision for loan losses was $1.5 million for 1998
compared to $1.1 million for 1997 and $623,000 for 1996. The allowance to
non-performing loans ratio was 105.00% at March 31, 1999 and was 95.10% at
December 31, 1998, 102.13% at 1997 and 80.36% at 1996.
Net charge-offs were $99,000 for the first three months of 1999, and were
$574,000 for 1998, $984,000 for 1997 and $545,000 for 1996. Charge-offs in 1997
were higher as a result of a large commercial loan customer which filed for
bankruptcy. As a result, charge-offs of $557,000 were recognized on this loan.
Provisions for loan losses have increased steadily over the past several
years to keep pace with the loan growth Team has experienced and to maintain the
allowance at a level sufficient to absorb identified
22
<PAGE> 24
and unidentified loan losses. However, due to a decline in non-performing loans
and the outstanding loan balance since the end of the year, largely due to
payoffs in commercial and other real estate loans, Team reduced the provision
for the three month period ended March 31, 1999. The provision recorded during
the three month period ended March 31, 1999 was consistent with management's
philosophy of maintaining reserves at or near 1.0% of total loans outstanding.
Team's lending personnel are responsible for continuous monitoring of the
loan portfolio. Additionally, since 1997 Team has retained an independent loan
review company which reviews the loan portfolio on a quarterly basis to
determine compliance with loan policy, including the appropriateness of risk
ratings assigned to individual loans, as well as the allowance for loan losses.
The allowance for loan losses is based primarily on management's estimates of
possible loan losses from the foregoing processes and historical experience.
Team's loan portfolio is also subject to periodic examination by regulatory
agencies. These agencies may require charge-offs or additions to the allowance
based upon their judgments about information available at the time of their
examination.
The following tables present an allocation of the allowance for loan losses
by loan category as of the dates indicated. The allocation tables should not be
interpreted as an indication of the specific amounts, by loan classification, to
be charged to the allowance. Management believes that the table may be a useful
device for assessing the adequacy of the allowance as a whole. The table has
been derived in part by applying historical loan loss ratios to both internally
classified loans and the portfolio as a whole to determine the allocation of the
loan losses attributable to each category of loans.
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------------------------------------------------------------
1999 1998 1997 1996
---------------------- ---------------------- ---------------------- ----------------------
LOANS IN LOANS IN LOANS IN LOANS IN
CATEGORY CATEGORY CATEGORY CATEGORY
AS OF AS OF AS OF AS OF
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
OF GROSS OF TOTAL OF GROSS OF TOTAL OF GROSS OF TOTAL OF GROSS OF TOTAL
ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS
--------- ---------- --------- ---------- --------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate:
1-4 family......... $ 232 33.1% $ 213 33.2% $ 185 33.1% $ 159 34.7%
Construction....... 41 5.3 36 5.6 31 5.5 24 5.2
Other.............. 65 10.1 65 10.2 67 12.1 52 11.3
Commercial........... 1,015 36.9 945 36.8 750 33.5 577 31.3
Installment and
other.............. 570 14.6 550 14.2 537 15.8 484 17.5
Unallocated.......... 702 -- 732 -- 59 -- 222 --
------ ----- ------ ----- ------ ----- ------ -----
Total........ $2,625 100.0% $2,541 100.0% $1,629 100.0% $1,518 100.0%
====== ===== ====== ===== ====== ===== ====== =====
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1995 1994
---------------------- ----------------------
LOANS IN LOANS IN
CATEGORY CATEGORY
AS OF AS OF
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
OF GROSS OF TOTAL OF GROSS OF TOTAL
ALLOWANCE LOANS ALLOWANCE LOANS
--------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real estate:
1-4 family......... $ 144 35.7% $ 135 38.6%
Construction....... 16 3.9 12 3.5
Other.............. 51 12.6 44 12.5
Commercial........... 477 29.5 374 26.6
Installment and
other.............. 444 18.3 395 18.8
Unallocated.......... 157 -- 239 --
------ ----- ------ -----
Total........ $1,289 100.0% $1,199 100.0%
====== ===== ====== =====
</TABLE>
The provision for loan losses takes into account many factors such as
Team's prior experience with loan losses and an evaluation of the risks in the
loan portfolio at any given time, including changes in economic, operating and
other conditions of borrowers, the economies in Team's areas of operations and,
to a lesser extent, the national economy. Management believes that the
approximate amount of charge-offs remaining in 1999 by loan category will be
consistent with historical experience. This is a good faith estimate only and is
subject to several factors beyond the control of Team.
Investments
Team invests a portion of its available funds in short-term and long-term
instruments, including federal funds sold and investment securities. Team's
investment portfolio is designed to provide liquidity for cash-flow
requirements, aid in the interest rate risk management process and provide
collateral for certain public deposits and other borrowing arrangements. At
March 31, 1999 and December 31, 1998, the investment portfolio was comprised
principally of obligations of the U.S. Government or its agencies, obligations
of states and political subdivisions and mortgage-backed securities.
23
<PAGE> 25
The following table presents Team's investments in certain securities
accounted for as available-for-sale and held-to-maturity. "Other" investments is
comprised of Federal Home Loan Bank stock, Federal Reserve stock, mutual funds
and certain equity securities, all of which carry no stated maturity.
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------------
1999 1998 1997 1996
--------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities available-for-sale:
U.S. Treasury and government agencies............. $ 43,449 $ 43,172 $ 59,395 $62,709
Obligations of state and political subdivisions... 2,237 2,471 2,205 2,177
Mortgage-backed securities........................ 63,070 59,785 37,326 --
Other............................................. 3,542 3,868 4,378 3,920
-------- -------- -------- -------
Total..................................... $112,298 $109,296 $103,304 $68,806
Securities held-to-maturity:
U.S. Treasury and government agencies............. $ 3,324 $ 3,925 $ 4,401 $ 4,729
Obligations of state and political subdivisions... 22,328 21,817 17,998 13,160
Mortgage-backed securities........................ -- -- -- --
Other............................................. 82 -- -- --
-------- -------- -------- -------
Total..................................... $ 25,734 $ 25,742 $ 22,399 $17,889
-------- -------- -------- -------
Total investment securities............... $138,032 $135,038 $125,703 $86,695
======== ======== ======== =======
</TABLE>
Team invests a portion of its available funds in short-term and long-term
instruments, including federal funds sold and investment securities. Team's
investment portfolio is designed to provide liquidity for cash-flow
requirements, aid in the interest rate risk management process and provide
collateral for certain public deposits and other borrowing arrangements. At
March 31, 1999, the investment portfolio was comprised principally of
obligations of the U.S. Government or its agencies, obligation of states and
political subdivisions, and mortgage backed securities.
At March 31, 1999 and December 31, 1998, the investment portfolio contained
no investments which were considered to be derivatives, structured notes or
similar instruments that are classified as "High-Risk Securities" as defined by
the Federal Financial Institutions Examinations Council.
The following tables set forth a summary of the maturities in the
investment portfolio at March 31, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------------------------------------------------------------------------
OVER ONE YEAR OVER FIVE YEARS
THROUGH THROUGH
ONE YEAR OR LESS FIVE YEARS TEN YEARS OVER TEN YEARS TOTAL
----------------- --------------- --------------- -------------- ----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
-------- ------ ------- ----- ------- ----- ------ ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
agencies.................. $18,076 6.43% $25,826 6.18% $2,397 6.11% $ 474 5.91% $ 46,773 6.27%
Obligations of states and
political subdivisions.... 1,118 7.46 7,919 7.46 9,534 7.11 5,994 7.40 24,565 7.31
Mortgage-backed
securities................ 19,086 5.65 34,362 6.52 7,496 6.07 2,126 6.77 63,070 6.18
Other(1).................... 3,624 -- -- -- -- -- -- -- 3,624 --
------- ---- ------- ---- ------- ---- ------ ---- -------- ----
Total............... $41,904 $68,107 $19,427 $8,594 $138,032
======= ======= ======= ====== ========
</TABLE>
- ---------------
(1) Other securities consist principally of Federal Home Loan Bank stock,
Federal Reserve stock, and mutual funds which have no stated yield.
24
<PAGE> 26
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------------------------------------------
OVER ONE YEAR OVER FIVE YEARS
THROUGH THROUGH
ONE YEAR OR LESS FIVE YEARS TEN YEARS OVER TEN YEARS TOTAL
----------------- --------------- --------------- -------------- ----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
-------- ------ ------- ----- ------- ----- ------ ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and agencies.... $14,297 6.35% $30,895 6.23% $ 1,412 5.73% $ 493 5.96% $ 47,097 6.25%
Obligations of states and
political subdivisions...... 1,219 7.62 7,472 7.47 9,714 7.40 5,883 7.41 24,288 7.43
Mortgage-backed securities.... 28,029 5.95 23,719 6.16 6,502 6.10 1,535 5.73 59,785 6.04
Other(1)...................... 3,868 -- -- -- -- -- -- -- 3,868 --
------- ------- ------- ------ --------
Total................ $47,413 $62,086 $17,628 $7,911 $135,038
======= ======= ======= ====== ========
</TABLE>
- ---------------
(1) Other securities consist principally of Federal Home Loan Bank stock,
Federal Reserve stock, and mutual funds which have no stated yield.
Deposits
Team's primary source of funds has historically been customer deposits,
which totaled $375.2 million at March 31, 1999, a $9.1 million decrease from
December 31, 1998. Deposits increased to $384.3 million at December 31, 1998
from $225.7 million at December 31, 1995, representing a $158.7 million
increase. The increase is the result of the purchase of three bank branches and
a bank with aggregate deposits of $115.0 million and internal growth of $43.7
million.
The following table sets forth the average balances and weighted average
rates for Team's categories of deposits for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31,
--------------------------------------- ------------------------------------------------------------
1999 1998 1998 1997 1996
------------------ ------------------ ------------------ ------------------ ------------------
(DOLLARS IN THOUSANDS)
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE BALANCE BALANCE BALANCE BALANCE RATE BALANCE RATE BALANCE RATE
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing
demand................. $ 39,013 --% $ 36,787 --% $ 39,707 --% $ 32,493 --% $ 23,747 --%
Interest-bearing
demand................. 110,585 2.89 100,767 3.19 107,412 3.12 85,065 3.18 69,579 3.11
Savings.................. 20,049 2.61 18,017 2.71 19,551 2.68 16,669 2.84 14,528 2.84
Time..................... 206,236 5.22 186,716 5.56 198,006 5.52 153,135 5.62 124,577 5.58
-------- -------- -------- -------- --------
Total............ $375,883 $342,287 $364,676 $287,362 $232,431
======== ======== ======== ======== ========
</TABLE>
The following table summarizes at March 31, 1999 and December 31, 1998,
Team's certificates of deposit of $100,000 or more by time remaining until
maturity.
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
REMAINING MATURITY
Less than three months...................................... $18,919 $19,911
Three months up to six months............................... 9,780 9,650
Six months up to one year................................... 8,895 8,834
One year and over........................................... 9,715 7,073
------- -------
Total.............................................. $47,309 $45,468
======= =======
</TABLE>
FEDERAL HOME LOAN BANK AND FEDERAL RESERVE BANK BORROWINGS
Team's subsidiary banks are members of the Federal Home Loan Bank of Topeka
(FHLB), which is one of 12 regional Federal Home Loan Banks. The FHLB system
functions as a central bank providing credit for members. As members of the
FHLB, Team's subsidiary banks are entitled to borrow funds from the FHLB and are
required to own FHLB stock in an amount determined by a formula based upon total
assets and FHLB borrowings. Team's subsidiary banks may use FHLB borrowings to
supplement deposits
25
<PAGE> 27
as a source of funds. At March 31, 1999 and December 31, 1998, FHLB borrowings
aggregated $9.2 million, compared to $2.6 million at December 31, 1997. At March
31, 1999, based on its FHLB stockholdings, the aggregate available and unused
borrowing capacity of Team's subsidiary banks was approximately $58.8 million
which was available through a line of credit and term advances. FHLB borrowings
are collateralized by FHLB stock and certain qualifying mortgage loans of Team.
A variety of borrowing terms and maturities can be chosen from the FHLB.
Maturities available range generally from one day up to 15 years. Interest rates
can be either fixed or variable and prepayment options are available if desired.
The FHLB offers both amortizing and non-amortizing advances. To date, FHLB stock
has been redeemable at the preset price of $100 per share, but there can be no
assurance that this policy will continue.
Three of Team's banks, TeamBank, N.A., Iola Bank and Trust Company and
First National Bank and Trust Co., Inc., are member banks of the Federal Reserve
Bank of Kansas City and may use the Federal Reserve Bank discount window to meet
short-term funding needs. These loans are available on a secured basis.
Generally the banks pledge U.S. Government or qualifying municipal securities
for these notes. None of Team's subsidiary banks has utilized short-term Federal
Reserve Bank borrowings for over five years.
CAPITAL RESOURCES
Team monitors compliance with bank and bank holding company regulatory
capital requirements, focusing primarily on risk-based capital guidelines. Under
the risk-based capital method of capital measurement, the ratio computed is
dependent upon the amount and composition of assets recorded on the balance
sheet, and the amount and composition of off-balance sheet items, in addition to
the level of capital. Included in the risk-based capital method are two measures
of capital adequacy, core capital and total capital, which consists of core and
secondary capital. See "Supervision and Regulation -- Team -- Capital Adequacy."
26
<PAGE> 28
The following tables present Team's capital ratios as of the indicated
dates.
<TABLE>
<CAPTION>
RISK BASED CAPITAL RATIOS
--------------------------------------------------------
AT DECEMBER 31,
AT MARCH 31, ------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Core capital.......................... $ 19,987 7.68% $ 18,936 7.05% $ 17,823 6.97%
Core capital minimum requirement(1)... 10,410 4.00 10,737 4.00 10,224 4.00
-------- ---- -------- ---- -------- -----
Excess................................ $ 9,577 3.68% $ 8,199 3.05 $ 7,599 2.97
======== ==== ======== ==== ======== =====
Total risk-based capital.............. $ 22,612 8.69% $ 21,477 8.00% $ 19,452 7.61%
Total risk-based capital
requirement......................... 20,820 8.00 21,474 8.00 20,450 8.00
-------- ---- -------- ---- -------- -----
Excess (deficit)...................... $ 1,792 0.69% $ 3 0.00 $ (998) (0.39)
======== ==== ======== ==== ======== =====
Total risk adjusted
assets.................... $260,244 $260,433 $255,621
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
LEVERAGE RATIOS
---------------------------------------------------------
AT DECEMBER 31,
AT MARCH 31, -------------------------------------
1999 1998 1997
---------------- ---------------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Core capital.......................... $ 19,987 4.67% $ 18,936 4.50% $ 17,823 5.39%
Core capital minimum requirement(2)... 17,343 4.00 16,847 4.00 13,235 4.00
-------- ---- -------- ---- -------- ----
Excess................................ $ 2,644 0.67% $ 2,089 0.50% $ 4,588 1.39%
======== ==== ======== ==== ======== ====
Average total assets.................. $433,564 $421,184 $330,884
======== ======== ========
</TABLE>
- ---------------
(1) Based on risk-based capital guidelines of the Federal Reserve, a bank
holding company is required to maintain a core capital to risk-adjusted
assets ratio of 4% and a total capital, risk based, to risk-adjusted assets
ratio of 8%.
(2) The leverage ratio is defined as the ratio of core capital to average
tangible assets. Based on Federal Reserve guidelines, a bank holding company
generally is required to maintain a leverage ratio in excess of 4%.
LIQUIDITY
Team continuously forecasts and manages its liquidity in order to satisfy
cash flow requirements of depositors and borrowers and allow Team to meet its
own cash flow needs. Team has developed internal and external sources of
liquidity to meet its continued growth needs. These include, but are not limited
to, the ability to raise deposits through branch promotional campaigns, maturity
of overnight funds, short term investment securities classified as
available-for-sale and draws on credit facilities established through the
Federal Home Loan Bank.
Upon completion of this offering, management fully expects that a public
market for Team common stock will develop and will exist for the foreseeable
future. However, in the event a public market for Team's common stock no longer
existed, under the provisions of Team's ESOP and the requirements of the
Internal Revenue Code, Team would be obligated to repurchase shares of common
stock distributed to participants of the ESOP who terminate employment or who
elect to diversify their ESOP accounts. The dollar amount of any repurchase
obligation would be computed after the ESOP allocations are made following a
year end appraisal. The obligation would be the amount that Team would be
required to fund, if the ESOP did not choose or was not sufficiently liquid to
meet the obligation initially, for those people who terminated employment during
the previous year or who elected diversification distributions, and assuming
that no public market for the common stock exists.
27
<PAGE> 29
Computing ESOP values requires an employer to study the population of the
participants to determine the retirement dates, and to factor in change of
employment, disability, death, and other termination facts which occur in the
course of employee terminations. The studies also include projections for the
future value of stock, dividends paid on stock, and the projected amount of the
contributions to the plan for the participants' benefit. The valuation would
provide Team with an estimate of the amount of liquidity required to be
available. Assuming no public market for Team stock, the repurchase obligation
at December 31, 1998 would have been in the range of $17.0 million, payable over
six years. See note 10 of the consolidated financial statements for further
information.
ASSET/LIABILITY MANAGEMENT
Asset and liability management encompasses both interest rate risk and
liquidity management. Team's net interest margin can be vulnerable to
significant fluctuations arising from a change in the general level of interest
rates which may affect yield on interest earning assets differently than the
cost of interest bearing liabilities. Team monitors its asset and liability mix
monthly in an effort to maintain consistent earnings performance through control
of interest rate risk.
Below is a static gap schedule for Team as of March 31, 1999. This is just
one of several tools which may be used to measure and manage interest rate
sensitivity. Earning assets and interest-bearing liabilities are presented below
within selected time intervals based on their repricing and maturity
characteristics. In this view, the sensitivity position is perfectly matched
when an equal amount of assets and liabilities reprice during any given time
period. Excess assets or liabilities repricing in a given time period result in
the interest rate gap shown in the table. A positive gap indicates more assets
than liabilities will reprice in that time period, while a negative gap
indicates more liabilities than assets will reprice.
<TABLE>
<CAPTION>
ESTIMATED MATURITY OR REPRICING AT MARCH 31, 1999
----------------------------------------------------------------
THREE MONTHS
LESS THAN TO LESS THAN ONE TO OVER
THREE MONTHS ONE YEAR FIVE YEARS FIVE YEARS TOTAL
------------ ------------ ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans.............................. $ 42,160 $ 70,546 $ 89,909 $47,655 $250,280
Investment securities -- taxable... 7,942 32,844 60,188 12,493 113,467
Investment
securities -- nontaxable........ 134 984 7,919 15,528 24,565
Federal funds sold and interest
bearing deposits................ 6,467 -- -- -- 6,467
--------- --------- -------- ------- --------
Total interest-earning
assets................... 56,703 104,374 158,016 75,686 394,779
Interest-bearing liabilities:
Savings and interest bearing
demand.......................... 127,521 -- -- -- 127,521
Time deposits less than $100,000... 28,990 78,707 51,319 1,639 160,655
Time deposits greater than
$100,000........................ 18,919 9,780 8,895 9,715 47,309
Federal funds purchased and
securities sold under agreements
to purchase..................... 3,663 2,799 -- -- 6,462
Notes payable...................... 2,013 13,543 1,621 5,881 23,058
--------- --------- -------- ------- --------
Total interest-bearing
liabilities.............. $ 181,106 $ 104,829 $ 61,835 $17,235 $365,005
Interest rate gap.................... $(124,403) $ (455) $ 96,181 $58,451 $ 29,774
Cumulative interest rate gap......... $(124,403) $(124,858) $(28,677) $29,774
Cumulative ratio of interest-earning
assets to interest-bearing
liabilities........................ 31.31% 56.33% 91.75% 108.16%
Ratio of cumulative interest rate gap
to interest-earning assets......... (219.39)% (77.51)% (8.99)% 7.54%
</TABLE>
The table indicates that Team is liability sensitive in the less than three
month period and the three months to less than one year period, and it is asset
sensitive for all other periods. This means that during the first two period
classifications, interest bearing liabilities reprice faster than interest
earning assets,
28
<PAGE> 30
thereby improving net interest income when rates are falling and reducing net
interest income when rates are rising. While the "static gap" method is a widely
used measure of interest sensitivity, it is not, in management's opinion, the
only indicator of Team's interest rate sensitivity position.
The following table indicates that at March 31, 1999, if there had been a
sudden and sustained increase in prevailing market interest rates, Team's 1999
interest income would be expected to decrease, while a decrease in rates would
indicate an increase in income.
<TABLE>
<CAPTION>
NET INTEREST (DECREASE) PERCENT
CHANGES IN INTEREST RATES INCOME INCREASE CHANGE
- ------------------------- ------------ ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
200 basis point rise................................... $15,618 $(305) (3.13)%
100 basis point rise................................... 15,871 (252) (1.56)
Base rate scenario..................................... 16,123 -- --
100 basis point decline................................ 16,312 189 1.17
200 basis point decline................................ 16,560 437 2.71
</TABLE>
EFFECTS OF INFLATION AND CHANGING PRICES
Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on a financial
institution's performance than inflation. Although interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services, increases in inflation generally have resulted in increased
interest rates. Over short periods of time rates may not move in the same
direction or magnitude as inflation.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 133, Accounting
for Derivative Financial Instruments and Hedging Activities which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. The
adoption of the standard is not expected to have a significant impact on the
consolidated financial statements of Team.
YEAR 2000 CONSIDERATIONS
As the year 2000 approaches, a significant business issue has emerged
regarding how existing software programs and operating systems can accommodate
the date value for the year 2000. Many existing software products, including
products used by Team and its affiliates were designed to accommodate only a
two-digit date value, which represents the year. For example, information
relating to the year 1996 is stored in the system as 96. As a result, the year
1999 could be the maximum date value that these systems will be able to process
accurately. Regulatory agencies monitor bank holding companies and banks'
readiness for the year 2000 as part of the regular examination process.
Team believes that with modifications to existing software and conversion
to new software, the year 2000 issue will not pose significant operational
problems for Team's business operations. Substantially all data processing
services for Team are provided by M&I Data Services, a subsidiary of M&I Bank,
Milwaukee, Wisconsin. M&I Data Services' Year 2000 Outsourcing Solution division
has received Information Technology Association of America 2000 certification.
M&I Data Services provides bi-monthly written status reports to management.
Reports to date indicate that M&I Data Services has met all target dates and is
prepared to meet all future target dates for completion of the project.
Currently one of Team's banks is not on the M&I Data Services system. Management
expects this bank to be converted to the M&I Data Services system by the end of
the second quarter 1999. Management is not aware of limitations on Team's legal
remedies should the conversion not be completed on time.
29
<PAGE> 31
Additionally, implementation of Team's plan to test in-house software has
been underway since the fourth quarter of 1998. Testing of applications
considered to be mission critical was completed in the first quarter of 1999.
Total compliance for all systems, including Team's outsourced computer systems,
is expected by management to be completed by the second quarter of 1999.
Management currently estimates that year 2000 compliance for Team will cost
$500,000. Of this amount, $65,000 was expensed through March 31, 1999. Team
expects that the remaining amount will be expended during the remainder of 1999,
of which $55,000 will be expensed and $380,000 will be capitalized. The plan
implementation team is responsible for progress and will continue to provide a
status report to the board of directors on a bi-monthly basis through December
31, 1999. However, if the modifications and conversion are not made, or are not
completed on time, the year 2000 issue could have a material adverse impact on
the operations of Team. Because of the factors discussed below, management
cannot estimate with any reasonable degree of certainty the magnitude of lost
revenues should the worst case scenario develop in which Team would need to
fully implement its contingency plan to operate in the year 2000 environment and
noncompliant customers are unable to repay their loans.
Team is developing a contingency plan in the event services from its
outsourced computer systems are not available in the year 2000. The essential
elements of this plan include procedures to be followed in the event of
disruptions to business which may impact Team's customers and business partners,
as well as procedures to handle business disruptions from natural disasters and
utility outages. This plan will be completed and tested by the end of the second
quarter 1999. In the event Team were to fully implement all phases of the
contingency plan, management believes that operational costs would increase
modestly.
Team's banks have sent direct mail to their customers regarding the year
2000 issue and the need for readiness pursuant to guidelines of the banking
industry regulators. Management continues to solicit customer response. Failure
of customers to prepare for year 2000 compatibility could have a significant
adverse effect on customers' operations and profitability, thus inhibiting their
ability to repay loans and adversely affecting Team's operations. At this time,
Team is unable to estimate with reliability the degree to which customers'
operations are susceptible to potential problems relating to the year 2000 issue
or, further, to quantify the potential lost revenue to Team in this case.
30
<PAGE> 32
BUSINESS
OVERVIEW
Team was formed in 1986 when its founders, including Robert J. Weatherbie,
Chairman and Chief Executive Officer, Michael J. Gibson,
President -- Acquisitions/Investments and Chief Financial Officer and Carolyn S.
Jacobs, Treasurer, along with an Employee Stock Ownership Plan or ESOP,
purchased a one-bank holding company in Paola, Kansas in a leveraged
transaction. A majority of the funding for the transaction was obtained through
ESOP borrowings which were guaranteed by Team. ESOP borrowings at December 31,
1998 were $1.0 million, a decrease from its high of $3.5 million at December 31,
1992. Since 1986, total principal payments on debt by the ESOP have been $4.6
million. Contributions by Team to the ESOP through March 31, 1999 were $4.9
million.
Team is majority owned by its ESOP. See "Principal Shareholders and Selling
Shareholder." Management believes that the ESOP reflects Team's corporate
culture that employees are the integral component of a financial institution.
Management intends to continue the ESOP, as it is a significant incentive to
attract and retain qualified employees. In addition, because of tax advantages
which are only available to the ESOP, it can be used to assist in financing
acquisitions. Management believes that Team is the only ESOP majority-owned
multi-bank holding company in Team's market areas.
Since 1986 Team has grown from a one-bank holding company with $85 million
in assets to a multibank holding company with $435 million in assets as of March
31, 1999. This growth was achieved primarily through seven acquisitions of
community banks or branches of large banks that were sold to Team as a result of
consolidations. Additional asset growth was achieved through internal growth, as
well as the establishment of three new branches during the past five years.
The following table summarizes Team's asset growth through its bank
subsidiaries.
<TABLE>
<CAPTION>
DATE OF ASSET SIZE AT
ACQUISITION DATE OF ACQUISITION ASSET SIZE AT
TYPE OF TRANSACTION AND ENTITY OR FORMATION OR FORMATION MARCH 31, 1999
- ------------------------------ ------------ ------------------- --------------------
(IN MILLIONS)
<S> <C> <C> <C>
Bank purchase -- TeamBank, N.A. .................. 1986 $ 85 *
Paola, Kansas
Bank purchase -- American State Bank............ 1993 18 *
Osawatomie, Kansas
Branch startup.................................. 1994 -- *
Spring Hill, Kansas
Branch startup.................................. 1995 -- *
DeSoto, Kansas
Branch purchase -- Mercantile Bancorporation.... 1997 30 *
Nevada, Missouri
Branch purchase -- Roosevelt Bank............... 1997 39 *
Lamar, Missouri
Branch purchase -- NationsBank.................. 1998 34 *
---- ----
Ottawa, Kansas
Total for TeamBank, N.A. ............... $206 $257
Bank purchase -- Iola Bank and Trust Company...... 1990 35 83
Iola, Kansas
Bank purchase -- First National Bank and Trust
Co., Inc........................................ 1992 42 62
Parsons, Kansas
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
DATE OF ASSET SIZE AT
ACQUISITION DATE OF ACQUISITION ASSET SIZE AT
TYPE OF TRANSACTION AND ENTITY OR FORMATION OR FORMATION MARCH 31, 1999
- ------------------------------ ------------ ------------------- --------------------
(IN MILLIONS)
<S> <C> <C> <C>
Bank purchase -- Crown Bancshares, Inc............ 1996 25 33
Omaha, Nebraska
Branch startup.................................. 1998 -- *
---- ----
Omaha, Nebraska
Total assets............................ $308 $435
==== ====
</TABLE>
- ---------------
* Team does not maintain separate branch asset information.
Fundings for the acquisitions were made through a combination of debt,
private stock issuances as well as ESOP borrowings which were either guaranteed
by or made by Team loaning the proceeds to the ESOP. See notes 9 and 14 to the
consolidated financial statements. Contributions by Team to the ESOP, along with
cash dividends paid by Team on shares of common stock held by the ESOP, are used
by the ESOP to pay principal and interest on the borrowings. See note 10 to the
consolidated financial statements. In the event Team acquires banks or bank
branches in the future, management expects that similar funding arrangements may
be used.
Team has four wholly-owned bank subsidiaries. The table below presents
information concerning these subsidiaries. Team expects to consolidate or merge
TeamBank Nebraska into TeamBank, N.A. during 1999.
<TABLE>
<CAPTION>
NUMBER OF ASSET SIZE AT
NAME OF BANK BANKING LOCATIONS LENDING LIMIT MARCH 31, 1999
- ------------ ----------------- ------------- --------------
(IN MILLIONS)
<S> <C> <C> <C>
TeamBank, N.A. ........................... 9 $2.90 $257
Freeman, Missouri, a
national banking association
Iola Bank and Trust Company............... 1 1.70 83
Iola, Kansas, a Kansas
state chartered bank
First National Bank and Trust Co.,
Inc. ................................... 1 0.80 62
Parsons, Kansas, a national
banking association
TeamBank Nebraska......................... 3 0.57 33
Omaha, Nebraska, a Nebraska
state chartered bank
</TABLE>
MARKET AREAS
TeamBank, N.A. TeamBank, N.A.'s primary Kansas service area is in Miami
County, Kansas with a total 1997 estimated population of 26,000. Located in the
Kansas City metropolitan area, Miami County adjoins Johnson County, Kansas,
which is one of the highest per capita income counties in the United States. As
of February 1998, Miami County had 550 businesses and an unemployment rate of
3.2%. Total deposits in FDIC-insured financial institutions located in Miami
County were $342.7 million as of June 30, 1998 and TeamBank, N.A. had the
largest market share in that group, 35%.
TeamBank, N.A.'s Miami County branches are located in Paola, the county
seat of Miami County with 1997 estimated population of 5,500, and Osawatomie,
the second largest city in the county, with 1997 estimated population of 5,000.
Another TeamBank, N.A. Kansas branch location is Ottawa, which is the county
seat of adjoining Franklin County, Kansas, with a total estimated 1997
population of 23,000. TeamBank, N.A. also operates two branches in Johnson
County, Kansas which has a total estimated 1997 population of approximately
417,000. According to available statistical data, TeamBank, N.A.'s Johnson
32
<PAGE> 34
County branches have less than 1% of the total deposits in all FDIC-insured
institutions in the county which totals approximately $7.2 billion.
TeamBank, N.A. is chartered in Freeman, Missouri, located in Cass County,
Missouri which adjoins Miami County, Kansas. However, TeamBank, N.A.'s primary
Missouri service area is in Barton and Vernon counties which adjoin each other
and are located in the southwest section of Missouri along the Kansas-Missouri
border. Barton County has an estimated 1997 population of 12,000. As of 1997,
Barton County had an estimated unemployment rate of 3.7%. Of the total deposits
in FDIC-insured financial institutions in Barton County, TeamBank, N.A. has 16%
of the market. Vernon County has an estimated 1997 population of 18,000 and an
unemployment rate of 4.4%. Of the total deposits in FDIC-insured financial
institutions located in Vernon County, TeamBank, N.A. has 12% of the market.
According to Missouri Regional Economic Profiles produced in July 1998 per
capita income in the southwest region increased 34% between 1990 and 1996
compared to a 9% increase in the United States.
Iola Bank and Trust Company. The primary Kansas service area of Iola Bank
and Trust Company is in Allen County, Kansas, with a total estimated 1996
population of 14,600. Iola Bank and Trust Company is the leading provider of
financial services in Allen County. As of June 30, 1998 Iola Bank and Trust
Company had an approximate 32% market share of the $221 million total deposits
made in all FDIC-insured financial institutions operating in Allen County.
According to the most recent statistics as of October 1998, Allen County had an
unemployment rate of approximately 4.9%. Allen County's primary economic
activity is farming, with 55% of the 323,100 acres being crop land and 35%
pasture and range. Allen County has 25 industries, and the majority of
industrial employment is textile mill products, concrete products, rubber and
plastics, transportation equipment, and food products.
First National Bank and Trust Co., Inc. First National Bank and Trust Co.,
Inc.'s primary Kansas service area is in Labette County, Kansas, with a total
estimated population of 22,850 as of July 1997. Labette County is located in
southeast Kansas along the Oklahoma-Kansas border. First National Bank and Trust
Co., Inc. is the third largest financial institution in Labette County based
upon its 25% market share of deposits in all FDIC-insured financial institutions
operating in Labette County. According to the most recent statistics available
as of October 1998, Labette County had an unemployment rate of approximately
4.7%. Labette County has a significant industrial base with a majority of its
employment in printing, metal fabrication and machinery.
TeamBank Nebraska. TeamBank Nebraska operates three facilities in the
Omaha, Nebraska metropolitan area. The primary Nebraska service area is in
Douglas and Sarpy Counties with a combined total estimated 1998 population of
575,000. As of June 30, 1998, total deposits in FDIC-insured financial
institutions located in the two county area were $9 billion, of which TeamBank
Nebraska had less than 1%. As of October 1998, the Omaha area had an
unemployment rate of approximately 2%. Employment in the area is diversified
throughout insurance and other financial services companies, as well as small to
medium-sized businesses.
GROWTH STRATEGIES
Team's growth strategy is focused on a combination of acquisitions,
existing branch growth and establishing new branches.
Acquisitions. Management believes that the consolidation in the banking
industry, along with the easing of branch banking throughout Kansas, Missouri,
Nebraska, Oklahoma and Iowa, as well as increased regulatory burdens, concerns
about technology and marketing, are likely to lead owners of community banks
within these areas to explore the possibility of sale or combination with a
broader-based holding company such as Team.
In addition, branching opportunities have arisen as a result of divestiture
of branches by large national and regional bank holding companies of certain
overlapping branches resulting from consolidations. As a result, branch
locations have become available from time to time for purchase by Team. Team
completed
33
<PAGE> 35
three branch acquisitions from 1997 through 1998. See note 14 to the
consolidated financial statements. At this time, Team does not have any
agreements, either written or oral, for acquisitions.
Management's strategy in assimilating acquisitions is to emphasize revenue
growth as well as continuously review the operations of the acquired entities
and streamline operations where feasible. Management does not believe that
implementing wholesale administrative cost reductions in acquired institutions
are beneficial to Team's long-term growth, because significant administrative
changes in smaller banks can have an adverse impact on customer satisfaction in
the acquired institution's community. However, management has determined that
certain processing and accounting functions can be consolidated immediately upon
acquisition to achieve higher productivity levels without compromising customer
service. Increases in revenue growth are emphasized by offering customers a
broader product line consistent with full service banking.
Branch Expansion. Since 1994, Team has established three new branches.
Because of the significant economic growth in the Omaha, Nebraska area, as well
as Johnson County, Kansas, over the past several years, management intends to
focus short term branch expansion in these two areas. However, management does
not rule out branch expansion in other areas experiencing economic growth.
Management has considered and intends to consider a variety of criteria
when evaluating potential acquisition candidates or branching opportunities.
These include:
- the geographic market location of the potential acquisition target or
branch and demographics of the surrounding community;
- the financial soundness of a potential acquisition target;
- opportunities to improve the efficiency and/or asset quality of an
acquisition target through merger;
- the effect of the acquisition on earnings per share and book value.
Management seeks to undertake acquisitions that will be accretive to
earnings within 18 months of the acquisition;
- whether Team has sufficient management and other resources to integrate
or add the operations of the target or branch; and
- the investment required for, and opportunity costs of, the acquisition or
branch.
Internal Growth. Management believes that Team's largest source of internal
growth is through Team's ongoing solicitation program conducted by bank
presidents and lending officers, followed by referrals from customers. The
primary reason for referrals is positive customer feedback regarding Team's
customer service and response time.
Team's goal in continuing its expansion is to maintain a profitable,
customer-focused financial institution. Management believes that Team's existing
structure, management, data and operational systems are sufficient to achieve
further internal growth in asset size, revenues and capital without
proportionate increases in operating costs. This growth should also allow Team
to increase the lending limits of its banks, thereby enabling Team to increase
its ability to serve the needs of existing and new customers. Team's operating
strategy has always been to provide high quality community banking services to
its customers and increase market share through active solicitation of new
business, repeat business and referrals from customers, and continuation of
selected promotional strategies.
For the most part, Team's banking customers seek a banking relationship
with a service-oriented community banking organization. Team's operational
systems have been designed to facilitate personalized service. Management
believes Team's banking locations have an atmosphere which facilitates
personalized services and decision-making, yet are of sufficient financial size
with broad product lines to meet customers' needs. Management also believes that
economic expansion in Team's market areas will continue to contribute to
internal growth. Through Team's primary emphasis on customer service and its
34
<PAGE> 36
management's banking experience, Team intends to continue internal growth by
attracting customers and primarily focusing on the following:
- Products Offered -- Team offers personal and corporate banking services,
trusts and estate planning, mortgage origination, mortgage servicing,
personal investment, and financial counseling services as well as
telephone banking. Team offers a full range of commercial banking
services, including the following: checking accounts, ATM's, checking
accounts with interest, savings accounts, money market accounts,
certificates of deposit, NOW accounts, Individual Retirement Accounts,
brokerage and residential mortgage services, branch banking, and Team
Financial Visa debit cards and Visa/MC credit cards. Team also offers
installment loans, including auto, recreational vehicle, and other
secured and unsecured loans sourced directly by its branches. See
"-- Loans" below for a discussion of products Team provides to commercial
accounts.
- Operational Efficiencies -- Team seeks to maximize operational and
support efficiencies consistent with maintaining high quality customer
service. All of Team's banks are on a common information system designed
to enhance customer service and improve efficiencies by providing
system-wide voice and data communication connections. Team has
consolidated loan processing, bank balancing, financial reporting,
investment management, information system, payroll and benefit
management, loan review and audit. A common data processing system will
be fully implemented in mid-1999.
- Marketing Activities -- Team focuses on an active solicitation program
for new business, as well as identifying and developing products and
services that satisfy customer needs. Team's marketing programs also
utilize local print and promotional materials in each location. Team also
actively sponsors community events within its branch areas. Management
believes that active community involvement contributes to Team's
long-term success.
LOANS
Team provides a broad range of commercial and retail lending services. Each
of Team's banks follow a uniform credit policy which contains underwriting and
loan administration criteria, levels of loan commitment, loan types, credit
criteria, concentration limits, loan administration, loan review and grading and
related matters. In addition, Team provides ongoing loan officer training and
review, obtains outside independent loan reviews and operates a centralized
processing and servicing center for loans. At March 31, 1999, substantially all
loans outstanding were to customers within Team's market areas.
Loan Administration. Team maintains a loan committee approach to lending,
which it believes yields positive results in both responsiveness to customer
needs and asset quality. Each Team bank has a loan committee, which meets at
least once per week to review and discuss loans. Each of Team's banks has a loan
level threshold which, if exceeded, requires the approval of Team's loan
committee, which meets on an on-call basis. Loans greater than $2.5 million
require the approval of the board of directors of Team.
Interest rates charged on loans vary with the degree of risk, maturity,
costs of underwriting and servicing, loan amount, and extent of other banking
relationships maintained with customers, and are further subject to competitive
pressures, availability of funds and government regulations. Most of the loans
in Team's portfolio at March 31, 1999, had floating interest rates.
Real Estate Loans. These loans include various types of loans for which
Team holds real property as collateral. Of the $125.3 million of real estate
loans at March 31, 1999, approximately $85.1 million were first mortgages on
homes. Interest rates on these loans typically adjust annually. Real estate
construction loans include commercial and residential real estate construction
loans, but are principally made to builders to construct business buildings or
single and multi-family residences. Real estate construction loans typically
have maturities of six to 12 months, and charge origination fees. Terms may vary
depending upon many factors, including location, type of project and financial
condition of the borrower. It is Team's standard practice in making commercial
loans to receive real estate as collateral in addition to other appropriate
collateral. Therefore, loans categorized in the other real estate loan category
can be characterized as commercial loans which are secured by real estate.
Commercial loans secured by real
35
<PAGE> 37
estate typically have adjustable interest rates. The primary risks of real
estate mortgage loans include the borrower's inability to pay and deterioration
in value of real estate that is held as collateral.
Commercial Loans. These loans consist primarily of loans to businesses for
various purposes, including revolving lines of credit and equipment financing.
The loans secured by collateral other than real estate, generally mature within
one year, have adjustable interest rates and are secured by inventory, accounts
receivable, machinery, government guarantees, or other commercial assets.
Revolving lines of credit are generally for business purposes, mature annually
and have adjustable interest rates. The primary repayment risk of commercial
loans is the failure of the borrower's business due to economic or financial
factors.
Agricultural Loans. Team makes a variety of agricultural loans which are
included in real estate and commercial loans. These loans relate to equipment,
livestock, crops and farmland. The primary risks of agricultural loans include
the prices of crops and livestock, as well as weather conditions.
Installment Loans. Installment loans are primarily to individuals, are
typically secured by the financed assets, generally have terms of two to five
years and bear interest at fixed rates. These loans usually are secured by motor
vehicles or other personal assets and in some instances are unsecured. The
primary risk of consumer lending relates to the personal circumstances of the
borrower.
LETTERS OF CREDIT
In the ordinary course of business, Team issues letters of credit. See note
15 to the consolidated financial statements. Team applies the same credit
standards to these commitments as it uses in all its lending activities and has
included these commitments in its lending risk evaluations. Team's exposure to
credit loss under letters of credit is represented by the amount of these
commitments.
COMPETITION
Team faces a high degree of competition. In its market areas, there are
numerous small banks and several larger national and regional financial banking
groups. Team also competes with insurance companies, savings and loan
associations, credit unions, leasing companies, mortgage companies, and other
financial service providers. Many of the banks and other financial institutions
with which Team competes have capital resources and legal lending limits
substantially in excess of the capital resources and legal lending limits of
Team.
Team competes for loans and deposits principally based on the availability
and quality of services provided, responsiveness to customers, interest rates,
loan fees and office locations. Team actively solicits deposit customers and
competes by offering them high quality customer service and a complete product
line. Team believes its personalized customer service, broad product line and
banking franchise enable it to compete effectively in its market area.
Team faces competition for its personnel. Team competes through its
emphasis as a community banking culture and through the use of its ESOP.
Management believes that Team is able to compete for personnel effectively in
Team's market areas because the ESOP provides incentives for employees to join
Team and motivation to enhance shareholder value.
Team will also face significant competition from other financial
institutions in any potential acquisitions. Many of these competitors have
substantially greater resources than Team.
36
<PAGE> 38
PROPERTIES
The table below presents property information concerning the offices of
Team and its subsidiary banks.
<TABLE>
<CAPTION>
YEAR TYPE OF SQUARE FOOTAGE
NAME AND ADDRESS OF OFFICE OPENED INTEREST OF FACILITY
- -------------------------- ------ -------- --------------
<S> <C> <C> <C>
Team Financial, Inc................................... 1986 Leased 5,000
8 West Peoria
Paola, Kansas 66071
TeamBank, N.A., Paola Branch.......................... 1986 Owned 17,951
1 South Pearl
Paola, Kansas 66071
East Bank -- Paola Branch............................. 1988 Owned 9,630
1515 Baptiste Drive
Paola, Kansas 66071
TeamBank, N.A., DeSoto Branch......................... 1994 Owned 6,800
34102 West 92 Street
DeSoto, Kansas 66018
TeamBank, N.A., Freeman............................... 1997 Leased 1,375
100 West Main Street
Freeman, Missouri 64746-0246
TeamBank, N.A., Lamar Branch.......................... 1997 Leased 2,650
127 West 11th Street
Lamar, Missouri 64759
TeamBank, N.A., Nevada Branch......................... 1997 Owned 16,000
201 East Cherry
Nevada, Missouri 64772
TeamBank, N.A., Osawatomie Branch..................... 1993 Owned 4,756
6th and Brown
Osawatomie, Kansas 66064
TeamBank, N.A., Ottawa Branch......................... 1998 Owned 8,000
421 South Hickory
Ottawa, Kansas 66067
TeamBank, N.A., Spring Hill Branch.................... 1994 Leased 600
110 East Wilson
Spring Hill, Kansas 66083
Iola Bank and Trust Company (Main Office)............. 1990 Owned 13,768
119 East Madison
Iola, Kansas 66749
First National Bank of Parsons (including drive in)... 1992 Owned 11,000
1902 Main
Parsons, Kansas 66357
TeamBank Nebraska (Main Office)....................... 1996 Leased 4,679
1902 Harlan Drive
Bellevue, Nebraska 68005
TeamBank Nebraska -- Bellevue Branch.................. 1996 Leased 1,980
7001 South 36th
Bellevue, Nebraska 68147
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
YEAR TYPE OF SQUARE FOOTAGE
NAME AND ADDRESS OF OFFICE OPENED INTEREST OF FACILITY
- -------------------------- ------ -------- --------------
<S> <C> <C> <C>
TeamBank Nebraska -- Omaha Branch..................... 1998 Leased 3,000
2809 South 160th Street, #20
Omaha, Nebraska 68130
</TABLE>
Other than the Spring Hill branch, which is leased on a month-to-month basis,
all of the leased properties are leased from unrelated third parties and are
subject to long-term leases, none of which expire prior to the year 2002.
LEGAL PROCEEDINGS
Team and its subsidiaries are from time to time parties to various legal
actions arising in the normal course of business. Management believes that there
is no proceeding threatened or pending against Team or any of its subsidiaries
which, if determined adversely, would have a material adverse effect on the
financial condition or results of operations of Team.
EMPLOYEES
As of March 31, 1999, Team had approximately 210 full-time equivalent
employees. Neither Team nor any of its subsidiaries is a party to any collective
bargaining agreement. Management considers Team's relationship with its
employees to be good.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of Team, their respective ages and
positions as of May 1, 1999, are as follows:
<TABLE>
<CAPTION>
OFFICER OR
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
Robert J. Weatherbie............ 52 Chief Executive Officer and 1986
Chairman of the Board
Michael L. Gibson............... 52 President -- Acquisitions/ 1986
Investments, Chief Financial
Officer and Director
Carolyn S. Jacobs............... 55 Senior Vice President and Trust 1986
Officer of TeamBank, N.A. and
Treasurer and Director(2)
Neil Blakeman................... 59 Executive Vice President of 1986
TeamBank, N.A. and Director
Denis A. Kurtenbach............. 61 Director(1)(2) 1995
Glen E. Gilpin.................. 76 Director(1) 1997
R.G. (Gary) Kilkenny............ 67 Director(1)(2) 1997
Montie K. Taylor................ 48 Director 1997
Rick P. Bartley................. 48 President and Chief Executive 1997
Officer of TeamBank N.A.
</TABLE>
- ---------------
(1) Member of the audit committee.
(2) Member of the compensation committee.
There are no family relationships among any of the directors and executive
officers of Team.
38
<PAGE> 40
Robert J. Weatherbie has served as Team's Chief Executive Officer since
September 1995, and Chairman of the Board and director since May 1986. Prior to
that time he was an executive officer of TeamBank, N.A., formerly known as Miami
County National Bank, for 13 years. Mr. Weatherbie is a member of the Miami
County Bankers Association. He obtained a Bachelor of Arts degree from Emporia
State University, Emporia, Kansas in 1969 and graduated from the Colorado School
of Banking at the University of Colorado and the American Institute of
Banking -- Kansas City Chapter.
Michael L. Gibson has served as an executive officer and director of Team
since May 1986 and as Chief Financial Officer and
President -- Acquisitions/Investments since September 1995. Prior to 1986 he was
an executive officer for TeamBank, N.A., formerly known as Miami County National
Bank, for 15 years. He has also been a member of the board of directors of
Bauersfeld Enterprises, Inc., a retail grocery store operator, since 1990. He
obtained a Bachelor's degree from Kansas State University in Manhattan, Kansas
in 1970, and graduated from the Colorado School of Banking at the University of
Colorado, the Intermediate School of Banking in Lincoln, Nebraska, and the
American Institute of Banking -- Kansas City Chapter. He is a member and is
currently Chairman of the Kansas Bankers Association BankPac Committee and past
member of the Governing Council. He is a member of the American Bankers
Association BankPac Committee.
Carolyn S. Jacobs has served as Treasurer and director of Team, as well as
Senior Vice President and Trust Officer of TeamBank, N.A., since May 1986. Prior
to 1986, she had worked for Miami County National Bank, the predecessor to
TeamBank, N.A., since 1961. Ms. Jacobs has attended the American Institute of
Banking -- Kansas City Chapter, MoKan Basic Trust School, graduating in 1977,
the National Business Institute and was designated as a Certified Trust
Financial Advisor in June 1992. Ms. Jacobs is a member of the Kansas Bankers
Association Trust Division and the Miami County Bankers Association.
Neil Blakeman has served as a director of Team since April 1986. He has
been Executive Vice President of TeamBank, N.A. since December 1995 and a
director of TeamBank N.A. since June 1996. Prior to December 1995 he worked for
Miami County National Bank, the predecessor to TeamBank, N.A., where he served
as a vice president, beginning in 1976. Mr. Blakeman obtained a Masters of
Business Administration degree in 1970 from the University of Iowa and graduated
with a Bachelor of Science degree in Agriculture in 1964 from Kansas State
University. Mr. Blakeman is a director of the Miami County Economic Development
Corp., a non-profit entity.
Denis A. Kurtenbach has served as a director of Team since December 1995.
He is Chairman and a director of Pemco, Inc., a privately held construction
management company. He is also Chairman and director of two subsidiaries of
Pemco, Inc., Carrothers Construction Company, L.L.C. and Triangle Builders,
L.L.C. Mr. Kurtenbach is a life director of the Associated General Contractors
of America and was a member of the 1996-1997 Executive Committee. He is also a
director of the Kansas Contractors Association. Mr. Kurtenbach graduated in 1962
with a Bachelor's Degree in Civil Engineering from South Dakota State
University.
Glen E. Gilpin has served as a director of Team since June 1996. Since
1949, Mr. Gilpin has been owner and manager of Blacktop Construction, Inc. Mr.
Gilpin received a Bachelor of Science Degree in Business from the University of
Kansas in 1944.
Montie Taylor has served as a director of Team since 1997. He has served as
President and a director of First National Bank and Trust Company since
September 1987. Mr. Taylor received a Bachelor of Arts Degree from Pittsburgh
State University, Pittsburgh, Kansas in 1972. He was previously employed by the
thrift industry for 13 years prior to his employment with First National Bank
and Trust Company.
R.G. (Gary) Kilkenny has served as a director of Team since June 1997. He
has been Chairman or President of Taylor Forge Engineered Systems, Inc., a
manufacturing company, since 1982. He currently serves as President of the Steel
Plate Fabricators Association. He received a Bachelor's Degree in 1953 from the
University of Santa Clara, Santa Clara, California.
Rick P. Bartley has been President and Chief Executive Officer of TeamBank
N.A. since May 1997. From 1993 through April 1997, he worked for Compass Bank,
Alabama, as the Manager of Corporate
39
<PAGE> 41
Banking Division in Montgomery. From 1974 to 1993 he worked for Bank of Oklahoma
in several positions, including Manager of Private Banking and president of a
member bank. Mr. Bartley has a Bachelor's Degree from the University of Arkansas
and has attended the Southern Methodist University Graduate School of Banking.
Team's board of directors is divided into three classes that serve
staggered three-year terms as follows:
<TABLE>
<CAPTION>
CLASS EXPIRATION MEMBERS
- ----- ---------- -------
<S> <C> <C>
Class I.. 1999 Glen E. Gilpin, Denis A. Kurtenbach and Carolyn S. Jacobs
Class
II..... 2000 Neil Blakeman and R.G. (Gary) Kilkenny
Class
III.... 2001 Michael L. Gibson, Montie Taylor and Robert J. Weatherbie
</TABLE>
Non-employee directors of Team receive $200 per month and $150 per board
meeting attended. In addition, directors are reimbursed for expenses incurred in
attending board meetings.
Team's board of directors maintains two committees, an audit committee and
a compensation committee. See the table above under "Executive Officers and
Directors" for information on the board members who serve on the committees. Ms.
Jacobs, who has served as a member of the compensation committee continuously
since 1997, is the only member of the compensation committee who is also an
executive officer of Team. Each committee meets two to four times a year.
Directors who serve on the committees are paid $150 per committee meeting
attended.
EXECUTIVE COMPENSATION
Compensation. The following table sets forth the compensation paid by Team
to its Chairman and Chief Executive Officer for 1998, 1997 and 1996 as well as
to the other named officers in the table for these years. No other executive
officer of Team received compensation from Team exceeding $100,000 during 1998,
1997 or 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
AWARDS PAYOUTS
---------- SECURITIES -------
UNDER-
OTHER RESTRICTED LYING
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME SALARY BONUS COMPENSATION(3) AWARD(S) SARS PAYOUTS COMPENSATION
AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ---------------------- ---- ------- ------ --------------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert J. Weatherbie......... 1998 135,000 76,350(1) -- -- -- -- --
Chairman of the Board and 1997 125,000 30,757(1) -- -- -- -- --
Chief Executive Officer 1996 113,596 5,206 -- -- -- -- --
Michael L. Gibson............ 1998 128,400 45,818(1) -- -- -- -- --
President-Acquisitions/ 1997 120,000 26,915(1) -- -- -- -- --
Investments and Chief 1996 113,596 5,207 -- -- -- -- --
Financial Officer
Rick P. Bartley.............. 1998 110,000 30,210(1) -- -- -- -- --
President and Chief 1997 83,300 14,383(1) -- -- -- -- --
Executive Officer of
TeamBank, N.A.(2)
</TABLE>
- ---------------
(1) Represents bonuses paid in cash and common stock of Team.
(2) Mr. Bartley became employed by TeamBank, N.A. in May 1997.
(3) Other annual compensation was less than 10% of each executive's salary and
bonuses in each year.
40
<PAGE> 42
On January 1, 1998, Team entered into a three-year employment agreement
with Mr. Weatherbie under which he receives a beginning base annual salary of
$135,000, an annual bonus at the discretion of the board of directors, life
insurance, a car allowance and participation in all other benefits received by
Team employees. Under certain circumstances, such as his death or disability,
Team has also agreed to pay Mr. Weatherbie or his estate $500,000. Team has
obtained life insurance and is in the process of obtaining disability insurance
for these contingencies. In the event of termination of Mr. Weatherbie's
employment without cause, he will be entitled to payments equal to his annual
base salary for the longer of one year or the remaining term of the agreement
discounted at 8% annually, along with reimbursement for out-of-pocket expenses
incurred for professional and tax advice not to exceed 75% of his annual base
salary, as well as job search expenses incurred not to exceed 50% of his annual
base salary. Team has also entered into an employment agreement with Mr. Gibson,
the terms of which are substantially similar to the employment agreement with
Mr. Weatherbie, except that Mr. Gibson's annual base salary is $128,400. In
addition, Team has a similar agreement with Mr. Bartley except that his annual
base salary is $110,000, his disability or death payment is $100,000, and
reimbursement of out-of-pocket expenses incurred for professional and tax advice
in the event of termination of his employment without cause is over a one year
period for a maximum of 75% of his base salary.
EMPLOYEE STOCK PURCHASE PLAN
The Team Employee Stock Purchase Plan was adopted in 1994. The plan
provides eligible employees the right to purchase Team common stock on an annual
basis through payroll deductions. Up to 75,000 shares of common stock are
reserved under the plan and may be issued in five annual increments of 15,000
beginning in 1999. Shares not issued in any year may be issued in future years.
The price per share of the common stock under the plan is 85% of the fair market
value of the stock at the commencement of each offering period. The plan has not
been registered under the Securities Act with the Commission. Accordingly,
shares issued pursuant to the plan are considered restricted securities. The
plan is not subject to the requirements of the Employee Retirement Income
Security Act of 1974, nor is it a qualified plan under Section 401(a) of the
Internal Revenue Code.
1999 STOCK INCENTIVE PLAN
In May 1999, Team adopted the 1999 Stock Incentive Plan, subject to
shareholder approval. The plan provides for the following stock and stock-based
awards: restricted stock, stock options, stock appreciation rights and
performance shares. Up to 70,000 shares of common stock may be issued under the
plan. All employees, directors and consultants are eligible to participate in
the plan. The plan is administered by Team's board of directors, or the board
can designate a committee composed of at least two non-employee directors to
administer the plan. The board of directors or committee will determine the
participants in the plan and the types of awards they are to be granted and the
terms and conditions of all awards. No awards have been granted under the plan.
EMPLOYEE STOCK OWNERSHIP PLAN
The ESOP is a restatement and continuation of a plan previously maintained
by a predecessor company, which commenced receiving contributions in 1981. In
1986, the ESOP was the vehicle used in establishing Team and financing the
acquisition of the one-bank holding company that owned TeamBank, N.A. All of
Team's wholly-owned subsidiaries with employees participate in the ESOP.
The ESOP is a retirement plan for eligible employees and is funded entirely
with contributions made by Team and dividends paid by Team with respect to the
common stock owned by the ESOP. The ESOP is designed to be invested primarily in
the securities of Team. The ESOP is a leveraged plan which permits it to borrow
money to buy securities of Team, which are held in a suspense account until the
loan is paid. As the loan is repaid, securities are gradually released from the
suspense account for allocation to the accounts of ESOP participants.
Allocations are made annually and are based on the relative compensation of the
participants. Retirement benefits under the ESOP depend on the amount of an
employee's account balance at death, disability, separation from service or
retirement, and there is no fixed
41
<PAGE> 43
amount. See notes 9 and 10 to the consolidated financial statements for further
information regarding the ESOP and Team's related borrowings.
Employees are eligible to participate in the ESOP on the January 1 or July
1 following the date six months after the first day of employment. Employees
also must achieve a minimum age in order to participate. To be eligible for
allocations of Team contributions, employees must complete 1,000 hours of
service during a year and must be employed on the last day of the plan year. The
employment requirement does not apply if the participant dies or becomes
disabled or attains age 65 in the plan year. Allocations are also potentially
subject to certain minimums. Following three years of service, employees become
vested in their ESOP accounts at 20% per year, with 100% vesting occurring after
seven years. However, if a participant dies or is disabled while still employed,
a participant becomes vested immediately.
OTHER EMPLOYEE PLANS
Team has a 401(k) plan and an employee performance bonus plan that covers
all of its employees, including officers. With respect to the 401(k) plan, Team
makes a matching contribution of 50% of the employee's contribution up to a
maximum contribution of 6% of the employee's salary. The bonus plan utilizes a
continuous improvement model to determine the amount of award for Team and each
of its subsidiaries. The model measures improvements in asset growth,
profitability, productivity and asset quality growth. Team employees must exceed
the performance of the previous year to earn a bonus. Results are reported
monthly.
INDEMNIFICATION
Team's articles of incorporation and Kansas law provide that the board of
directors is authorized to indemnify or advance expenses to directors, officers
and other persons who are a party, or threatened to be made a party, to any
proceeding or action due to such person's relationship with Team.
Indemnification or the advancement of expenses may be made without shareholder
approval. Generally under Team's articles of incorporation and Kansas law, any
director, officer, employee or agent who is made or threatened to be made a
party to any suit or proceeding may be indemnified if such director or officer
acted in good faith and had reasonably believed that:
- in the case of conduct in an official capacity with Team, his or her
conduct was in or not opposed to Team's best interests; and
- with respect to any criminal proceeding, he or she had no reasonable
cause to believe his or her conduct was unlawful.
To the extent a person has been successful on the merits or otherwise in defense
of any proceeding or action, Kansas law and Team's articles of incorporation
require indemnification of such person's reasonable expenses. Kansas law is not
exclusive of any other indemnification, advancement of expenses or rights which
may be allowed under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of Team as to which indemnification is being sought.
Team is not aware of any other threatened litigation that may result in claims
for indemnification by any director, officer, employee or other agent.
RELATED PARTY TRANSACTIONS
The officers, directors and principal shareholders of Team and businesses
they control are customers of Team's subsidiary banks. Credit transactions with
these parties are subject to review by loan committees of the banks or by Team's
loan committee. All outstanding loans and extensions of credit to these parties
were made in the ordinary course of business on terms substantially similar to
comparable transactions with unaffiliated persons. At December 31, 1998, the
aggregate balance of loans and advances under extensions of credits made by the
subsidiary banks to these affiliated parties was approximately $3,635,000.
42
<PAGE> 44
At December 31, 1998 Team had $1.0 million of notes payable relating to
borrowings of its ESOP. The notes are also secured by 134,560 shares of common
stock held by the ESOP. The ESOP, as selling shareholder currently intends to
repay this indebtedness with proceeds from the sales of unallocated shares it is
offering pursuant to this prospectus. See "Use of Proceeds," "Capitalization"
and notes 9 and 10 to the consolidated financial statements.
PRINCIPAL SHAREHOLDERS AND SELLING SHAREHOLDER
The following table sets forth certain information regarding the beneficial
ownership of Team's common stock as of May 31, 1999, and as adjusted to reflect
the sale of the common stock offered by this prospectus, for: (1) each of Team's
directors; (2) each person known by Team to own beneficially more than 5% of the
outstanding common stock; (3) each executive officer; and (4) Team's executive
officers and directors as a group. All information with respect to beneficial
ownership by Team's directors, officers or beneficial owners has been furnished
by the respective director, officer or beneficial owners. Except as otherwise
described in the notes below, the owners have sole voting power and sole
investment power with respect to all common stock set forth opposite their
names.
<TABLE>
<CAPTION>
TEAM COMMON SHARES BENEFICIALLY OWNED
----------------------------------------------------
BEFORE THE OFFERING SHARES AFTER THE OFFERING
-------------------- BEING -------------------
NAMES AND ADDRESSES OF BENEFICIAL OWNER(1) NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------ --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Robert J. Weatherbie(10).................... 55,359(2) 1.8% -- 55,359 1.5%
8 West Peoria, Suite 200
P.O. Box 402
Paola, Kansas 66071-0402
Michael L. Gibson(10)....................... 47,050(3) 1.6% -- 47,050 1.3%
8 West Peoria, Suite 200
P.O. Box 402
Paola, Kansas 66071-0402
Rick P. Bartley............................. 3,128(4) * -- 3,128 *
8 West Peoria, Suite 200
P.O. Box 402
Paola, Kansas 66071-0402
Carolyn S. Jacobs(10)....................... 19,450(5) * -- 19,450 *
8 West Peoria, Suite 200
P.O. Box 402
Paola, Kansas 66071-0402
Neil Blakeman(10)........................... 800(6) * -- 800 *
8 West Peoria, Suite 200
P.O. Box 402
Paola, Kansas 66071-0402
R.G. (Gary) Kilkenny(10).................... 19,185(7) * -- 19,185 *
4304 West 115th
Leawood, Kansas 66211
Denis A. Kurtenbach(10)..................... 3,925(8) * -- 3,925 *
8 West Peoria, Suite 200
P.O. Box 402
Paola, Kansas 66071-0402
Glen E. Gilpin(10).......................... 63,780 2.1% -- 63,780 1.7%
302 Peyton Street
Emporia, Kansas 66801
Montie K. Taylor(10)........................ 24,080(9) * -- 24,080 *
1900 Main
Parsons, Kansas 67357
</TABLE>
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<PAGE> 45
<TABLE>
<CAPTION>
TEAM COMMON SHARES BENEFICIALLY OWNED
----------------------------------------------------
BEFORE THE OFFERING SHARES AFTER THE OFFERING
-------------------- BEING -------------------
NAMES AND ADDRESSES OF BENEFICIAL OWNER(1) NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------ --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Employee Stock Ownership Plan(10)........... 1,582,700 52.7% 300,000 1,282,700 34.7%
8 West Peoria, Suite 200
P.O. Box 402
Paola, Kansas 66071-0402
All executive officers and directors as a
group (nine persons)(10).................. 1,819,457 60.6% -- 1,519,457 41.0%
</TABLE>
- ---------------
(1) Unless otherwise indicated, the shares are held directly in the names of
the beneficial owners and each person has sole voting and sole investment
power with respect to the shares. Participants to whom certain shares held
by the ESOP have been allocated are entitled to direct the ESOP trustee as
to matters in which voting rights may be exercised, and the ESOP trustee
will vote such shares, subject to its fiduciary duties. With respect to
other matters, participants are only entitled to direct the ESOP trustee
with respect to voting on major corporate matters, such as mergers,
reorganizations, recapitalizations, liquidations, consolidations or sales
of substantially all of Team's assets.
(2) Includes 55,359 shares of common stock owned by his wife, over which he may
be deemed to have shared voting and investment power. Does not include
125,404 shares of common stock that were allocated to Mr. Weatherbie's
account in the ESOP as of December 31, 1998, the latest ESOP allocation
date.
(3) Includes 500 shares of common stock owned jointly with his wife, over which
he may be deemed to have shared voting and investment power. Does not
include 128,207 shares of common stock that were allocated to Mr. Gibson's
account in the ESOP as of December 31, 1998, the latest ESOP allocation
date.
(4) Does not include 2,350 shares of common stock that were allocated to Mr.
Bartley's account in the ESOP as of December 31, 1998, the latest ESOP
allocation date.
(5) Includes 19,450 shares of common stock owned by her husband's revocable
trust, over which she may be deemed to have shared voting and investment
power. Does not include 108,405 shares of common stock that were allocated
to Ms. Jacobs's account in the ESOP as of December 31, 1998, the latest
ESOP allocation date.
(6) Includes 200 shares owned jointly by Mr. Blakeman and his wife and 300
shares of common stock owned individually by Mr. Blakeman's wife, over all
of which shares Mr. Blakeman may be deemed to have shared voting and
investment power. Does not include 60,556 shares of common stock that were
allocated to Mr. Blakeman's account in the ESOP as of December 31, 1998,
the latest ESOP allocation date.
(7) Includes 8,545 shares owned jointly by Mr. Kilkenny and his wife and 10,640
shares owned by a corporation controlled by Mr. Kilkenny.
(8) Includes 925 shares of common stock held by Mr. Kurtenbach in an Individual
Retirement Account over which he may be deemed to have voting and
investment power.
(9) Includes 640 shares owned jointly by Mr. Taylor and his wife. Does not
include 20,962 shares that were allocated to Mr. Taylor's account in the
ESOP as of December 31, 1998, the latest ESOP allocation date.
(10) The ESOP holds 1,582,700 shares of record. Team, acting through its board
of directors, is the ESOP trustee, although it is anticipated that David L.
Heald will be appointed as an interim, independent trustee about June 10,
1999. Therefore, each of the above named persons, other than Rick P.
Bartley, may be deemed to be the beneficial owner of the shares in the name
of the ESOP, although each of these persons disclaims beneficial ownership
of these shares. The Team board of directors has appointed an independent
fiduciary, Consulting Fiduciaries, Inc., Northbrook, Illinois, to represent
the ESOP in relation to this offering.
* Less than 1%.
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<PAGE> 46
SUPERVISION AND REGULATION
GOVERNMENT REGULATION
Team and its banks are extensively regulated under federal, Kansas and
Nebraska law. These laws and regulations are primarily intended to protect
depositors and the deposit insurance fund of the Federal Deposit Insurance
Corporation, not shareholders of Team. The following information is qualified in
its entirety by reference to the particular statutory and regulatory provisions.
Any change in applicable laws, regulations or regulatory policies may have a
material effect on the business, operations and prospects of Team and its banks.
Team is unable to predict the nature or extent of the effects that fiscal or
monetary policies, economic controls or new federal or state legislation may
have on its business and earnings in the future.
TEAM
General. Team is a bank holding company registered under the Bank Holding
Company Act of 1956 and is subject to regulation, supervision and examination by
the Federal Reserve. Team is required to file an annual report and the other
periodic reports as the Federal Reserve now requires or may require.
Acquisitions. As a bank holding company, Team is required to obtain the
prior approval of the Federal Reserve before acquiring direct or indirect
ownership or control of more than 5% of the voting shares of a bank or bank
holding company. The Federal Reserve will not approve any acquisition, merger or
consolidation that would have a substantial anti-competitive effect, unless the
anti-competitive effects of the proposed transaction are outweighed by a greater
public interest in meeting the needs and convenience of the community. The
Federal Reserve also considers managerial resources, current and projected
capital positions and other financial factors in acting on acquisition or merger
applications.
Permissible Activities. Subject to limited exceptions, a bank holding
company may not engage in, or acquire direct or indirect control of more than 5%
of the voting shares of any company engaged in a non-banking activity, unless
this activity has been determined by the Federal Reserve to be closely related
to banking or managing or controlling banks. The Federal Reserve has identified
specific non-banking activities in which a bank holding company may engage with
notice to, or prior approval by, the Federal Reserve.
Capital Adequacy. The Federal Reserve monitors the regulatory capital
adequacy of bank holding companies. As discussed below, Team's banks are also
subject to the regulatory capital adequacy requirements of the Federal Deposit
Insurance Corporation, the Comptroller of the Currency, and Kansas and Nebraska
regulations, as applicable. The Federal Reserve uses a combination of risk-based
guidelines and leverage ratios to evaluate the regulatory capital adequacy of
Team.
The Federal Reserve has adopted a system using risk-based capital adequacy
guidelines to evaluate the regulatory capital adequacy of bank holding
companies. The guidelines apply on a consolidated basis to bank holding
companies with consolidated assets of at least $150 million. Under the
risk-based capital guidelines, different categories of assets are assigned to
different risk categories based generally on the perceived credit risk of the
asset. The risk weights of the particular category are multiplied by the
corresponding asset balances and added together to determine a risk-weighted
asset base. Some off balance sheet items, such as loan commitments in excess of
one year, mortgage loans sold with recourse and letters of credit, are added to
the risk-weighted asset base by converting them to a credit equivalent and
assigning them to the appropriate risk category. For purposes of the Federal
Reserve's regulatory risk-based capital guidelines, total capital is defined as
the sum of core and secondary capital elements, with secondary capital being
limited to 100% of core capital. For bank holding companies, core capital, also
known as Tier 1 capital, generally includes common shareholders' equity,
perpetual preferred stock and minority interests in consolidated subsidiaries,
less goodwill and intangible assets. No more than 25% of core capital elements
may consist of cumulative preferred stock. Secondary capital, also known as Tier
2 capital, generally includes the allowance for loan losses limited to 1.25% of
weighted risk assets, certain forms of perpetual preferred stock, as well as
hybrid capital instruments. The Federal Reserve's regulatory
45
<PAGE> 47
guidelines require a minimum ratio of qualifying total capital to weighted risk
assets of 8%, of which at least 4% should be in the form of core capital. At
March 31, 1999, Team's core capital was $20.3 million.
In addition to the risk-based capital guidelines, the Federal Reserve, the
Federal Deposit Insurance Corporation and the Comptroller of the Currency use a
leverage ratio as an additional tool to evaluate capital adequacy. The leverage
ratio is defined by the Federal Reserve to be a company's core capital divided
by its average total consolidated assets, and the Comptroller of the Currency's
and Federal Deposit Insurance Corporation's definitions are similar. Based upon
the current capital status of Team, the applicable minimum required leverage
ratio is 4%.
The table below presents Team's ratios of (1) total capital to
risk-weighted assets, (2) core capital to risk-weighted assets and (3) core
capital to average assets, at March 31, 1999.
<TABLE>
<CAPTION>
AT MARCH 31, 1999
-------------------------
RATIO ACTUAL MINIMUM REQUIRED
- ----- ------ ----------------
<S> <C> <C>
Total capital to risk-weighted assets....................... 8.69% 8.00%
Core capital to risk-weighted assets........................ 7.68% 4.00%
Core capital to average assets.............................. 4.67% 4.00%
</TABLE>
Failure to meet the regulatory capital guidelines may result in the
initiation by the Federal Reserve of appropriate supervisory or enforcement
actions.
THE BANKS
General. Team owns four banks. The deposits of all of the banks are insured
by the Federal Deposit Insurance Corporation. Iola Bank and Trust Company
("IB&T") and TeamBank Nebraska are subject to supervision and regulation by the
Federal Deposit Insurance Corporation. In addition, IB&T is regulated by the
Kansas Office of the State Bank Commissioner and TeamBank Nebraska is regulated
by the Nebraska Department of Banking and Finance. Team Bank N.A. and First
National Bank and Trust Company ("First National"), as national banks, are
subject to regulation by the Comptroller of the Currency.
Permissible Activities. A Kansas or Nebraska state chartered bank may not
engage in any activity not permitted for national banks, unless the institution
complies with applicable capital requirements and the Federal Deposit Insurance
Corporation determines that the activity poses no significant risk to the Bank
Insurance Fund. Neither the IB&T nor TeamBank Nebraska are presently involved in
the types of transactions covered by this limitation.
Community Reinvestment Act. Enacted in 1977, the federal Community
Reinvestment Act has become important to financial institutions, including their
holding companies. Financial institutions have a continuing and affirmative
obligation, consistent with safe and sound operations of such institutions, to
serve the "convenience and needs" of the communities in which they are chartered
to do business, including low- and moderate-income neighborhoods. The Community
Reinvestment Act currently requires that regulators consider an applicant's
Community Reinvestment Act record when evaluating certain applications,
including charters, branches and relocations, as well as mergers and
consolidations. The applicable federal regulators regularly conduct Community
Reinvestment Act examinations to assess the performance of financial
institutions and assign one of four ratings to the institution's records of
meeting the credit needs of its community. During their last examinations,
ratings of at least satisfactory were received by all of Team's banks. As a
result, management believes that the banks' performance under Community
Reinvestment Act will not impede regulatory approvals of any proposed
acquisitions or branching opportunities.
Dividend Restrictions. Dividends paid by Team's banks provide substantially
all of the operating and investing cash flow of Team. Under Nebraska law, the
approval of the principal regulator is required prior to the declaration of any
dividend by a bank if the total of all dividends declared in any calendar year
exceeds the total of its net profits of that year combined with its retained net
profits for the preceding two
46
<PAGE> 48
years. Under Kansas law, the current dividends can be paid only from undivided
profits after deducting losses, but before declaring dividends the bank must
transfer 25% of its net profits since the last preceding dividend to its surplus
fund until the surplus fund equals the total capital stock.
With respect to national banks, the directors of any such bank may
quarterly, semiannually, or annually declare a dividend of so much of the bank's
undivided profits as they deem expedient, except until the bank's surplus fund
equals its common capital, no dividends may be declared unless the bank has
carried to the surplus fund at least one-tenth of the bank's net income of the
preceding half year in the case of quarterly or semiannual dividends, or at
least one-tenth of its net income of the preceding two consecutive half-year
periods in the case of annual dividends. However, the Comptroller of the
Currency's approval is required if the total of all dividends declared by a bank
in any calendar year exceeds the total of its net income of that year combined
with its retained net income of the preceding two years, less any required
transfers to surplus or a fund for the retirement of any preferred stock.
Examinations. Team's banks are examined from time to time by their primary
federal banking regulators. Based upon an evaluation, the examining regulator
may revalue a bank's assets and require that it establish specific reserves to
compensate for the difference between the value determined by the regulator and
the book value of the assets. The Kansas Office of the State Bank Commissioner
and the Nebraska Department of Banking and Finance also conduct examinations of
state-chartered banks. Both of these regulators may accept the results of a
federal examination in lieu of conducting an independent examination. Both the
Kansas and Nebraska regulators have the authority to revalue the assets of a
state-chartered institution and require it to establish reserves.
Capital Adequacy. The Federal Deposit Insurance Corporation and the
Comptroller of the Currency have adopted regulations establishing minimum
requirements for the capital adequacy of insured institutions. The requirements
address both risk-based capital and leverage capital, with risk-based assets and
core and secondary capital being determined in basically the same manner as
described above for bank holding companies. The Federal Deposit Insurance
Corporation or the Comptroller of the Currency may establish higher minimum
requirements if, for example, a bank has previously received special attention
or has a high susceptibility to interest rate risk.
The Federal Deposit Insurance Corporation risk-based capital guidelines
require state non-member banks and national banks to have a ratio of total
capital to total risk-weighted assets of 8%, of which total capital at least 4%
points should be in the form of core capital.
The table below presents the regulatory capital ratios of the IB&T and
TeamBank Nebraska at March 31, 1999.
<TABLE>
<CAPTION>
AT MARCH 31, 1999
-------------------------------------
TEAMBANK
IB&T NEBRASKA
----------------- -----------------
MINIMUM MINIMUM
RATIO ACTUAL REQUIRED ACTUAL REQUIRED
- ----- ------ -------- ------ --------
<S> <C> <C> <C> <C>
Total capital to risk-weighted assets............. 14.59% 8.00% 13.68% 8.00%
Core capital to risk-weighted assets.............. 13.52 4.00 12.67 4.00
Core capital to assets............................ 7.62 4.00 8.36 4.00
</TABLE>
The Comptroller of the Currency risk-based capital guidelines expect
national banks to maintain a minimum ratio of total capital, after deductions,
to weighted risk assets of 8%, and national banks and state non-member banks
must have and maintain core capital in an amount equal to at least 3% of
adjusted total assets; but for all but the most highly rated banks, the minimum
core leverage ratio is to be 3% plus an additional cushion of at least 100 to
200 basis points. The applicable guideline for TeamBank, N.A. and First National
are 4%.
47
<PAGE> 49
The table below presents the regulatory capital ratios of TeamBank N.A. and
First National at December 31, 1998.
<TABLE>
<CAPTION>
AT MARCH 31, 1999
-------------------------------------
TEAMBANK, N.A. FIRST NATIONAL
----------------- -----------------
MINIMUM MINIMUM
RATIO ACTUAL REQUIRED ACTUAL REQUIRED
- ----- ------ -------- ------ --------
<S> <C> <C> <C> <C>
Total capital to risk-weighted assets..................... 12.54% 8.00% 14.51% 8.00%
Core capital to risk-weighted assets...................... 11.59 4.00 13.37 4.00
Core capital to assets.................................... 7.34 4.00 7.93 4.00
</TABLE>
Banks with regulatory capital ratios below the required minimum are subject
to administrative actions, including the termination of deposit insurance upon
notice and hearing, or a temporary suspension of insurance without a hearing in
the event the institution has no tangible capital.
The Federal Deposit Insurance Corporation and Comptroller of the Currency
regulators have adopted regulations that define five capital levels: well
capitalized, adequately capitalized, undercapitalized, severely undercapitalized
and critically undercapitalized. An institution is critically undercapitalized
if it has a tangible equity to total assets ratio that is equal to or less than
2%. An institution is well capitalized if it has a total risk-based capital
ratio of 10% or greater, core risk-based capital ratio of 6% or greater, and a
leverage ratio of 5% or greater, and the institution is not subject to an order,
written agreement, capital directive, or prompt corrective action directive to
meet and maintain a specific capital level for any capital measure. An
institution is adequately capitalized if it has a total risk-based capital ratio
of 8% or greater, a core risk-based capital ratio of 4% or greater, and a
leverage ratio of 4% or greater.
The Federal Deposit Insurance Corporation Improvement Act requires the
federal banking regulators to take prompt corrective action to resolve the
problems of insured depository institutions, including capital-deficient
institutions. In addition to requiring the submission of a capital restoration
plan, the Federal Deposit Insurance Corporation Improvement Act contains broad
restrictions on activities of institutions that are not adequately capitalized
involving asset growth, acquisitions, branch establishment, and expansion into
new lines of business. With limited exceptions, an insured depository
institution is prohibited from making capital distributions, including
dividends, and is prohibited from paying management fees to control persons if
the institution would be undercapitalized after any distribution or payment.
As an institution's capital decreases, the powers of the federal regulators
become greater. A significantly undercapitalized institution is subject to
mandated capital raising activities, restrictions on interest rates paid and
transactions with affiliates, removal of management, and other restrictions. The
regulators have limited discretion in dealing with a critically undercapitalized
institution and are virtually required to appoint a receiver or conservator if
the capital deficiency is not promptly corrected.
Real Estate Lending Evaluations. The federal regulators have adopted
uniform standards for evaluations of loans secured by real estate or made to
finance improvements to real estate. Banks are required to establish and
maintain written internal real estate lending policies consistent with safe and
sound banking practices and appropriate to the size of the institution and the
nature and scope of its operations. The regulations establish loan to value
ratio limitations on real estate loans, which generally are equal to or less
than the loan to value limitations established by Team's banks.
Deposit Insurance Premiums. Deposits of Team's banks are insured up to the
regulatory limit by the FDIC and are subject to deposit assessments. The
assessment schedule for banks ranges from 0 to 27 cents per $100 of deposits,
based on capital and supervisory factors. The banks' insured deposits are
subject to assessment payable to Bank Insurance Fund. An institution's
assessment is based on the assignment of the institution by the Federal Deposit
Insurance Corporation to one of three capital groups and to one of three
supervisory subgroups. The capital groups are well capitalized, adequately
capitalized and undercapitalized. The three supervisory subgroups are Group A,
for financially solid institutions with only a few minor weaknesses, Group B,
for those institutions with weaknesses which, if uncorrected could
48
<PAGE> 50
cause substantial deterioration of the institution and increase the risk to the
deposit insurance fund, and Group C, for those institutions with a substantial
probability of loss to the fund absent effective corrective action. Currently,
all four of Team's banks are in Group A.
Branching Authority. National banks headquartered in Missouri, such as
TeamBank, N.A., have the same branching rights in Missouri as banks chartered
under Missouri law. Missouri law grants Missouri-chartered banks the authority
to establish branches anywhere in the State of Missouri, subject to receipt of
all required regulatory approvals.
Kansas law permits a Kansas bank to install remote service units, also
known as automatic teller machines, throughout the state. Remote service units
which are not located at the principal place of business of the bank or at a
branch location of the bank must be available for use by other banks and their
customers on a non-discriminatory basis. Federal law generally allows national
banks to establish branches in locations which do not violate state law.
Interstate Banking Legislation. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994, which became effective September 1995, has
eliminated many of the historical barriers to the acquisition of banks by
out-of-state bank holding companies. This law facilitates the interstate
expansion and consolidation of banking organizations by permitting: (1) bank
holding companies that are adequately capitalized and managed, subject to
certain limitations, to acquire banks located in states outside their home
states regardless of whether acquisitions are authorized under the laws of the
host state; (2) the interstate merger of banks after June 1, 1997, subject to
the right of individual states either to pass legislation providing for earlier
effectiveness of mergers or to opt out of this authority prior to that date; (3)
banks to establish new branches on an interstate basis provided that this action
is specifically authorized by the law of the host state; (4) foreign banks to
establish, with approval of the appropriate regulators in the United States,
branches outside their home states to the same extent that national or state
banks located in that state would be authorized to do so; and (5) banks to
receive deposits, renew time deposits, close loans, service loans and receive
payments on loans and other obligations as agent for any bank or thrift
affiliate, whether the affiliate is located in the same or different state.
Team's banks do not currently have any plans to take any actions permitted by
this law.
CHANGING REGULATORY STRUCTURE
The laws and regulations affecting banks and bank holding companies are in
a state of flux. The rules and the regulatory agencies in this area have changed
significantly over recent years, and there is reason to expect that similar
changes will continue in the future. It is not possible to predict the outcome
of these changes.
One of the major additional burdens imposed on the banking industry is the
increased authority of federal agencies to regulate the activities of federal
and state banks and their holding companies. The Federal Reserve, the
Comptroller of the Currency and the Federal Deposit Insurance Corporation have
extensive authority to police unsafe or unsound practices and violations of
applicable laws and regulations by depository institutions and their holding
companies. These agencies can assess civil money penalties and other laws have
expanded the agencies' authority in recent years, and the agencies have not yet
fully tested the limits of their powers. In addition, the Kansas Office of the
State Bank Commissioner and the Nebraska Department of Banking and Finance
possess broad enforcement powers to address violations of their banking laws by
banks chartered in each respective state.
PENDING FINANCIAL MODERNIZATION LEGISLATION
In June 1998, in the 105th Congress, the Senate began hearings on the
legislation on a sweeping financial modernization bill, H.R. 10, The Financial
Services Act of 1998, which was passed by the U.S. House of Representatives. The
Senate did not pass that bill prior to the end of the 105th Congress. This year,
in the 106th Congress, a bill referred to as the Financial Services Act of 1999
(based on The Financial Services Act of 1998) is under consideration by House
and Senate Committees. The House and Senate versions of the bill are
substantially similar.
49
<PAGE> 51
If passed by Congress, the bill would not become law unless it is signed by
the President, whose Administration, with respect to The Financial Services Act
of 1998, had commented publicly that it will not support the legislation in the
form that was previously passed by the House. Accordingly, whether The Financial
Services Act of 1999 will be passed by Congress in the near future remains
uncertain, and the ultimate form the legislation might take if enacted cannot be
predicted at this time.
The Financial Services Act of 1999, among other things, addresses the
ongoing debate concerning mixing banking and commerce. Under the proposal, banks
could affiliate with insurance and securities companies in a holding company
structure, subject to functional regulation. The proposal provides for further
study of the issues relating to merging the Savings Association Insurance Fund
and Bank Insurance Fund. If adopted, the legislation would represent the most
significant overhaul of financial services laws since the 1930's when the
Glass-Steagall Act was enacted.
EFFECT ON ECONOMIC ENVIRONMENT
The policies of regulatory authorities, including the monetary policy of
the Federal Reserve, have a significant effect on the operating results of bank
holding companies and their subsidiaries. Among the means available to the
Federal Reserve to affect the money supply are open market operations in U.S.
Government securities, changes in the discount rate on member bank borrowings,
and changes in reserve requirements against member bank deposits. These means
are used in varying combinations to influence overall growth and distribution of
bank loans, investments and deposits, and their use may affect interest rates
charged on loans or paid on deposits.
The Federal Reserve's monetary policies have materially affected the
operating results of commercial banks in the past and are expected to continue
to do so in the future. The nature of future monetary policies and the effect of
these policies on the business and earnings of Team and its subsidiaries cannot
be predicted.
TRANSACTIONS WITH AFFILIATES
Transactions between a bank, its holding company and/or affiliated entities
are subject to various restrictions imposed by statute and by state and federal
regulatory agencies. These transactions include loans and other extensions of
credit, purchases of securities and other assets and payments of fees or other
distributions. These restrictions may limit the amount of transactions between
an institution and its affiliates based on a percentage of a bank's capital and
surplus, impose collateral requirements on extensions of credit in some cases
and require transactions with affiliates to be on terms comparable to those for
transactions with unaffiliated entities and consistent with safe and sound
banking practices.
RESERVE REQUIREMENTS
As national banks and state member banks, the banks are subject to Federal
Reserve regulations requiring depository institutions to maintain reserves
against a specified percentage of transaction accounts (primarily NOW and
regular checking). Reserves are maintained in the form of vault cash or
non-interest bearing deposits with the Federal Reserve Bank. The Federal Reserve
regulations generally require 3% reserves on the first $47.8 million of
transaction accounts; however, the first $4 million of these otherwise
reservable balances are exempted from the 3% reserve requirement. Net
transaction account balances over $47.8 million are subject to a reserve
requirement of $1,434,000 plus 10% of the amount of net transaction balances
over $47.8 million. The banks of Team are in compliance with the foregoing
requirements.
LIABILITIES OF COMMONLY CONTROLLED DEPOSITORY INSTITUTIONS
A bank insured by the Federal Deposit Insurance Corporation can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
Federal Deposit Insurance Corporation in connection with (a) the default of a
commonly controlled FDIC-insured financial institution or (b) any assistance
provided by the Federal Deposit Insurance Corporation to a commonly controlled
depository institution in danger of default. Thus, the banks could incur
liability to the Federal Deposit Insurance Corporation in
50
<PAGE> 52
the event of the default of any of the other FDIC-insured financial institutions
owned or controlled by Team. Such liability would be subordinate in right of
payment to deposit liabilities, secured obligations, any other general or senior
liability and any obligation subordinate to depositors or other general
creditors, other than obligations owed to any affiliate of the depository
institution and any obligations owed to shareholders in their capacity as
shareholders. The imposition of liabilities in sufficient amounts could lead to
the appointment of the Federal Deposit Insurance Corporation as conservator or
receiver for the banks.
DESCRIPTION OF CAPITAL STOCK
Team's articles of incorporation, as restated and amended, authorize the
issuance of 60,000,000 shares of stock, comprised of 50,000,000 shares of common
stock and 10,000,000 shares of preferred stock. As of June 3, 1999, there were a
total of 3,001,803 shares of common stock issued and outstanding. As permitted
by Kansas law, Team's articles of incorporation allow its board to issue
additional shares of its stock up to the total amount of common or preferred
stock authorized without obtaining additional approval of its shareholders. No
shares of preferred stock are currently outstanding.
The board may, within certain regulatory guidelines, issue additional
shares of common stock without the prior approval of the Federal Reserve. There
is no current intent to issue any additional common stock at this time except
with respect to this offering, or pursuant to Team's Employee Stock Purchase
Plan and its 1999 Incentive Stock Plan.
COMMON STOCK
Dividend Rights. Holders of common stock will be entitled to dividends as,
if and when declared by the board out of funds legally available for such
dividends. Team has paid dividends on its common stock out of net earnings since
1987 and intends to pay quarterly dividends on its common stock beginning in the
second quarter of 1999. See "Dividend Policy; No Prior Market for Common Stock."
However, there can be no assurance that Team will continue to be able to pay, or
that the board of directors of Team will authorize payment of, dividends on
common stock.
Voting Rights. All voting rights are vested in the holders of common stock
of Team, each share being entitled to one vote. Team's articles of incorporation
specifically provide that holders of common stock have cumulative voting rights
in the election of directors at shareholders' meetings. Cumulative voting rights
permit minority shareholders who control a significant block of stock to elect a
representative to the board. Accordingly, with cumulative voting rights,
minority holders of common stock may be able to elect persons to the board of
directors. Directors are elected by a plurality of the votes present at a
meeting of shareholders called for that purpose.
In all matters other than the election of directors and where otherwise
required by Kansas law, the affirmative vote of holders of a majority of the
shares present in person or by proxy at a meeting will be sufficient to act on a
matter. Mergers and business combinations require the affirmative vote of 51% of
the outstanding shares of common stock.
Preemptive Rights. Holders of common stock and preferred stock of Team do
not have preemptive rights to subscribe for additional shares or securities of
Team in the event more shares or securities are issued. This lack of preemptive
rights means that Team may issue additional stock or securities without any
obligation to holders of common stock or preferred stock. To the extent shares
of common stock are issued in the future without first offering the stock to
shareholders, the proportionate ownership of Team's shareholders could be
diminished.
Liquidation Rights. Upon liquidation or dissolution of Team, holders of its
stock and securities will share in the proceeds as follows: Subject to the
specific terms of any series of preferred stock, in order of priority and to the
extent funds are available, the holders of preferred stock will be repaid the
liquidation value of the preferred stock, and to the extent additional funds are
available upon liquidation, holders of preferred stock will receive payments of
any unpaid accumulated dividends on preferred stock. Next, holders of common
stock will be entitled to share on a pro rata basis in the net assets which
remain after
51
<PAGE> 53
satisfaction of all other liabilities, including payments to holders of
preferred stock as outlined above. In other words, holders of common stock will
have rights to Team's assets subordinate to the rights of all of Team's other
creditors.
Other. Shares of common stock to be sold in this offering will, when
issued, be fully paid and nonassessable. Team's common stock is not subject to
any mandatory redemptive provisions, sinking fund provisions or conversion
rights.
PREFERRED STOCK
The preferred stock of Team may be issued from time to time by the board of
directors as in one or more series. The description of shares of each series of
preferred stock will be as set forth in resolutions adopted by the board of
directors and a certificate of designation to be filed as required by Kansas law
prior to the issuance of any shares of the series. The certificate of
designation will set the number of shares to be included in each series of
preferred stock and set the designations, preferences, conversion or other
rights, voting powers, restrictions, limitations as to distributions,
qualifications, or terms and conditions of redemption relating to the shares of
each series. However, the board of directors is not authorized to change the
right of the common stock to vote one vote per share on all matters submitted
for shareholder action. The authority of the board of directors with respect to
each series of preferred stock includes, but is not limited to, setting or
changing the following:
- the designation of the series and the number of shares constituting the
series, provided that the aggregate number of shares constituting all
series of preferred stock may not exceed 10,000,000;
- the annual distribution rate on shares of the series, whether
distributions will be cumulative and, if so, from which date or dates;
- whether the shares of the series will be redeemable and, if so, the terms
and conditions of redemption, including the date or dates upon and after
which the shares will be redeemable, and the amount per share payable in
case of redemption, which amount may vary under different conditions and
at different redemption dates;
- the obligation, if any, of Team to redeem or repurchase shares of the
series pursuant to a sinking fund;
- whether shares of the series will be convertible into, or exchangeable
for, shares of stock of any other class or classes and, if so, the terms
and conditions of conversion or exchange, including the price or prices
or the rate or rates of conversion or exchange and the terms of
adjustment, if any;
- whether the shares of the series will have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of the voting
rights;
- the rights of the shares of the series in the event of voluntary or
involuntary liquidation, dissolution or winding up of Team; and
- any other relative rights, powers, preferences, qualifications,
limitations or restrictions thereof relating to the series which may be
authorized or permitted under Kansas law.
The shares of preferred stock of any one series will be identical with each
other in all respects except as to the dates from and after which dividends
thereon will cumulate, if cumulative.
ANTI-TAKEOVER PROVISIONS
Article Tenth of Team's articles of incorporation provide authority to the
board of directors to oppose a tender or merger offer on the basis of factors
other than economic benefit to shareholders. Such factors
52
<PAGE> 54
that the board of directors may but will not be legally obligated to consider,
in the event of a tender offer for Team's securities, are the following:
- whether the offered price is acceptable based on the historical and
present operating results or financial condition of Team;
- whether a more favorable price could be obtained for Team's securities in
the future;
- the impact which an acquisition of Team would have on the employees,
depositors, and customers of Team and its subsidiaries in the communities
which they serve;
- the reputation and business practices of the offeror and its management
and affiliates as they would affect the employees, depositors and
customers of Team and its subsidiaries and the future value of Team's
stock;
- the value of the securities, if any, which the offeror is offering in
exchange for Team's securities, based on an analysis of the worth of Team
as compared to the corporation or other entity whose securities are being
offered; and
- any anti-trust or other legal and regulatory issues that are raised by
the offeror.
Article Tenth might discourage a tender offer for Team common stock, which
might be at a price above the prevailing market rate. Management believes that
the advantages of the provisions to all the shareholders of Team outweigh any
possible disadvantages resulting from the decrease in the likelihood of Team
becoming a target of a takeover bid which might be desired or favored by a
majority of Team shareholders.
The board has noted that uninvited or unsolicited tender offers or other
attempts to acquire control of companies, if successful, are sometimes followed
by a merger or similar transaction that involves the elimination of minority
shareholders or a change in their interest as shareholders. Such a two-step,
non-negotiated, or a board of director disapproved, transaction often results in
the elimination of minority shareholders who did not tender their stock in the
first step or who, as a result of proration, did not have all their tendered
stock purchased. In connection with the second step, minority shareholders are
often forced to accept consideration that, in the opinion of the board, is less
valuable or desirable for stock that was available or offered in the first step.
The board of directors believes that substantial inequities could befall
the remaining shareholders after Team has come under the control of another
person or company and the acquiror then proceeds to combine a company owned by
the person acquiring or the acquiring person itself with Team by merger or
otherwise. The terms of such a business combination may not reflect arm's-length
bargaining and thus may not assure fair treatment of the remaining shareholders,
because the same party controls both sides of the negotiations. Kansas law
permits a Kansas corporation to be merged with or into another corporation upon
the approval of the holders of a majority of its outstanding stock. Hence, a
party who held or controlled a majority of Team's voting stock after a takeover
could force a merger, sale of substantially all of Team or a subsidiary's assets
or other transactions on terms it dictated. While objecting shareholders have
certain statutory rights of appraisal under Kansas law, pursuant to which they
may enforce their right to receive the fair value of their shares, fair value is
a difficult term to define and may require significant cost to determine. Team's
shareholders could rely on certain common law rights based on the fiduciary duty
of a controlling shareholder to deal fairly with minority shareholders and upon
federal securities laws governing disclosures in the event of a business
combination pursuant to which shareholder action is required, but efforts to
pursue these rights may involve protracted and expensive litigation. A minority
shareholder may not have the financial resources to wait out such litigation
and, faced with the inability to liquidate his investment at the value equal to
that paid under the tender offer, may be coerced by economic considerations into
accepting the terms of a business combination.
The provisions of Team's articles of incorporation discussed above may not
deter an acquisition of Team. It may, however, discourage attempts by other
persons, companies or groups to acquire control of
53
<PAGE> 55
Team without negotiation with Team through the acquisition of a substantial
number of shares of Team's stock, possibly followed by a forced merger or other
business combination in which the remaining shareholders of Team may not receive
a fair price for their shares. Management believes that shareholders other than
the person seeking control may suffer inequities and may not receive a fair
price if Team falls under the control of another person without that other
person first negotiating with management to obtain the fairest terms for the
shareholders and Team.
Team also intends to amend Article Eighth of its articles of incorporation,
effective as of the date of this prospectus, to require an affirmative vote of
two-thirds of the outstanding voting shares for mergers, consolidating
dissolutions and liquidations of Team. This amendment may also have the effect
of deterring an acquisition of Team.
RIGHTS AGREEMENT
Team's board has adopted a rights shareholder agreement or plan. Pursuant
to the plan, one right will be issued and attached to each outstanding share of
common stock. Each right will entitle the holder, in circumstances described
below, to purchase from Team one one-hundredth of a share of Series A preferred
stock at an exercise price of $48.00 per right, subject to adjustment in certain
events. Each one one-hundredth of a share of Series A preferred stock will be
entitled to dividends equal to dividends which may from time to time be declared
on a share of common stock. In the event of liquidation or merger, the preferred
shareholders will be entitled to a return which will result in the one
one-hundredth of a share of Series A preferred stock being treated identically
to a share of common stock. These rights are protected by customary
anti-dilution provisions.
The rights initially will be represented by the certificates evidencing the
common stock and will not be exercisable, or transferable apart from the common
stock, until the earliest to occur of:
- the twentieth day after the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 15%, or more
of the outstanding common stock of Team, or 10% or more of the
outstanding common stock, if the board determines that such person or
group intends to take actions which would be detrimental to the long-term
interests of Team or its shareholders or that such ownership would be
detrimental to Team in other respects; provided, that if within the
20-day period the acquiring person reduces his beneficial ownership to
less than 15%, or 10% for an adverse person, then he will be deemed not
to be an acquiring person;
- the twentieth day after the commencement of a tender or exchange offer
the consummation of which would result in the beneficial ownership by a
person or group of affiliated or associated persons of 15% or more of the
outstanding common stock of Team; provided, that if within the 20-day
period the person withdraws the tender or exchange offer, then such offer
will be deemed not to have been made; and
- the twentieth day after the date of filing of a registration statement
for any exchange offer of the type addressed above under the Securities
Act of 1933.
Under the rights plan, any of the above three dates, is known as a
"distribution date." Any person or group described in item (i) above is referred
to as an "acquiring person," and the date upon which a person or group first
becomes an acquiring person is referred to as the "stock acquisition date."
Team, its subsidiaries or its benefit plans, including the ESOP, will not be
considered acquiring persons. In addition, an underwriter acting for Team
pursuant to an underwriting agreement will not be considered an acquiring
person.
The rights, unless sooner redeemed, will first become exercisable on the
distribution date, at which time Team will distribute separate right
certificates representing the rights to its then current shareholders, and it is
expected that the rights could then begin trading separately from the common
stock of Team. The rights will expire on June 3, 2009, unless this date is
extended or unless the rights are earlier redeemed or exchanged by Team.
54
<PAGE> 56
Following the distribution date, each right initially would give holders,
other than the acquiring person, its affiliates and transferees, the right to
purchase, for the purchase price, one one-hundredth of a share of Series A
preferred stock. On a stock acquisition date which follows the commencement of a
tender offer or an exchange offer, or on the distribution date with respect to
any other stock acquisition date, the rights would give holders, other than the
acquiring person, its affiliates and transferees, the right to purchase from
Team, for the purchase price, that number of one one-hundredths of a share of
Series A preferred stock having a market value of twice the purchase price.
Alternatively, before an acquiring person acquires 50% of the outstanding common
stock, Team's board of directors may exchange each right, except for the rights
held by the acquiring person, in whole or in part, for half of the number of one
one-hundredths of a share of the Series A preferred stock or shares of the
common stock which the holders could otherwise purchase by exercising the
rights.
In addition, in a merger, consolidation or sale or transfer of 50% or more
of the consolidated assets or earning power of Team occurring after the rights
become exercisable, each right will be converted into the right to purchase, for
the purchase price, that number of shares of common stock of the surviving
entity or, in limited circumstances, its parent corporation, which at the time
of such transaction will have a market value of two times the purchase price of
the right.
Following the distribution date, exercisable rights may be exercised, at
the option of the holder, without the payment of the purchase price in cash. In
this case, the holder would receive a number of one one-hundredths of a share of
Series A preferred stock having a value equal to the difference between the
value of the Series A preferred stock that would have been issuable upon payment
of the purchase price and the purchase price.
The rights will not interfere with any merger or other business combination
that is approved by Team's board of directors because the rights may be redeemed
by Team at $.001 per right at any time prior to 20 days following a 15%
acquisition.
Until a right is exercised, the holder will have no rights as a shareholder
of Team, including, without limitation, the right to vote or to receive
dividends.
The rights have certain anti-takeover effects. The rights may cause
substantial dilution to a person or group that attempts to acquire Team on terms
not approved by the board of directors of Team. The rights should not interfere
with any merger or other business combination approved by the board of directors
prior to the time that holders of the rights become entitled to exercise their
rights for Series A preferred stock, or common stock of the surviving entity in
a merger with Team, since until that time the rights may be redeemed by the
board of directors of Team.
Team's board of directors may amend the rights agreement, without
limitation, prior to the distribution of the rights, without the approval of the
holders of the rights.
TRANSFER AND DIVIDEND PAYING AGENT
American Securities Transfer & Trust, Inc., Denver, Colorado, will act as
transfer and dividend paying agent for Team's common stock.
55
<PAGE> 57
SHARES ELIGIBLE FOR FUTURE SALE
After this offering, Team will have 3,701,803 shares of common stock
outstanding, or 3,851,803 shares of common stock if the underwriters'
over-allotment option is exercised in full. The common stock sold in the
offering will be freely transferable without restriction under the Securities
Act, unless such shares are held by affiliates of Team as that term is defined
in the Securities Act. The remaining 3,001,803 shares of common stock held by
existing shareholders are restricted shares. Team issued and sold the restricted
shares in private transactions in reliance on exemptions from registration under
the Securities Act. Restricted shares may be sold in the public market only if
they are registered under the Securities Act or are sold pursuant to an
exemption from registration, such as Rule 144.
Under Rule 144, beginning 90 days after the date of this prospectus, a
person who has beneficially owned restricted shares for at least one year would
be entitled to sell in any three-month period up to the greater of:
- 1% of the then-outstanding shares of common stock, or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale.
Also, sales under Rule 144: (1) must be made through customary broker
transactions; (2) are subject to notice requirements; and (3) may only be made
if current public information is available on Team. Finally, Rule 144 permits a
person who is unaffiliated with Team to sell restricted shares without complying
with any of the Rule 144 limitations discussed above.
Team, its directors and executive officers and certain other shareholders,
who will hold an aggregate of 2,380,602 shares upon completion of the offering,
have agreed that they will not, with certain limited exceptions, offer, sell,
grant options to purchase or otherwise dispose of any shares of common stock
without the prior written consent of the representative of the underwriters for
a period of 180 days from the date of this prospectus. Team's ESOP will be
permitted, in the ordinary course of its business, to transfer shares to ESOP
participants who terminate employment with Team or elect to diversify their
portfolio.
Prior to the offering, there was no public market for the common stock, and
there can be no assurance that a significant public market for the common stock
will develop or be sustained after the offering. Any future sale of substantial
amounts of common stock in the open market or the perception that such sales may
occur could adversely affect the market price of the common stock.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement among
Team, the selling shareholder and the underwriters listed on the table below for
whom Howe Barnes Investments, Inc. is acting as representative, the underwriters
have severally agreed to purchase from Team and the selling shareholder an
aggregate of 1,000,000 shares of common stock in the amounts set forth below
opposite their names.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
<S> <C>
Howe Barnes Investments, Inc................................
Total............................................. 1,000,000
=========
</TABLE>
56
<PAGE> 58
Under the terms and conditions of the underwriting agreement, the
underwriters are committed to accept and pay for all of the common stock, if any
are taken.
Team has granted to the underwriters an option, exercisable within 30 days
after the date of this prospectus, to purchase up to an additional 150,000
shares of common stock at the public offering price. If the underwriters
purchase any of the additional shares of common stock under this option, each
underwriter will be committed to purchase the additional shares in approximately
the same proportion as in the table above. The underwriters may exercise the
option only for the purpose of covering over-allotments, if any, made in
connection with the distribution of the common stock offered pursuant to this
prospectus.
The table below shows the price and proceeds on a per security and
aggregate basis. The proceeds to be received by Team and the selling shareholder
as shown in the table below do not reflect estimated offering expenses of
$350,000 payable by Team and the selling shareholder.
<TABLE>
<CAPTION>
PER SHARE OF COMMON STOCK TOTAL
------------------------- --------
<S> <C> <C>
Price to Investors................................. $ $
Proceeds to Team................................... $ $
Proceeds to the selling shareholder................ $ $
</TABLE>
Team has agreed to pay the underwriters $ per share of common stock, or
a total of $ as compensation for arranging the sale of common stock. Should
the underwriters exercise the over-allotment option, an aggregate of $ will
be paid to the underwriters for arranging the sale of the common stock.
The underwriters propose to offer the common stock in part directly to the
public at the initial public offering price set forth on the cover page of this
prospectus, and in part to securities dealers at this price less a concession
not in excess of $ per share of common stock. The underwriters may allow,
and the dealers may reallow, a concession not in excess of $ per share of
common stock to brokers and dealers. After the shares of common stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the underwriters.
Team has agreed to indemnify the several underwriters against several
liabilities, including liabilities under the Securities Act of 1933.
In connection with the offering, the underwriters may purchase and sell the
common stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. Stabilizing transactions consist of
bids or purchases for the purpose of preventing or retarding a decline in the
market price of the common stock; and syndicate short positions involve the sale
by the underwriters of a greater number of securities than they are required to
purchase from Team and the selling shareholder in the offering. The underwriters
also may impose a penalty bid, whereby selling concessions allowed to syndicate
members of other broker-dealers in respect of the securities sold in the
offering for their account may be reclaimed by the syndicate if the shares of
common stock are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the common stock, which may be higher than the price that might
otherwise prevail in the open market. These activities, if begun, may be
discontinued at any time. These transactions may be effected in the
over-the-counter market or otherwise.
57
<PAGE> 59
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon
for Team by Jones & Keller P.C., Denver, Colorado. The validity of the common
stock offered under Kansas law pursuant to this prospectus will be passed upon
for Team by Hartley, Nicholson & Hartley, P.A., Paola, Kansas. Certain legal
matters in connection with this offering will be passed upon for the selling
shareholder by Shook, Hardy & Bacon LLP, Kansas City, Missouri. Certain legal
matters in connection with this offering will be passed upon for the
underwriters by Chapman and Cutler, Chicago, Illinois. Jones & Keller, P.C. and
Chapman and Cutler will rely on the opinion of Hartley, Nicholson & Hartley,
P.A. regarding certain matters.
EXPERTS
The consolidated financial statements of Team as of December 31, 1998 and
for each of the years in the three year period ended December 31, 1998 have been
included and incorporated herein by reference in reliance upon the report of
KPMG LLP, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that reflect Team's
views about future events and financial performance. Actual results could differ
materially from those suggested by the forward-looking statements for various
reasons, including those discussed in the "Risk Factors" section beginning on
page 4. Therefore, you should not place undue reliance on these forward-looking
statements.
ADDITIONAL INFORMATION
Team has filed with the Commission a registration statement on Form S-1.
This prospectus, which forms a part of the registration statement, does not
contain all the information included in the registration statement. Certain
information is omitted and you should refer to the registration statement and
its exhibits. With respect to references made in this prospectus to any contract
or other document of Team, these references are not necessarily complete and you
should refer to the exhibits attached to the registration statement, including
exhibits and schedules filed with it, at the Commission's public reference
facilities in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, or at the regional offices of the Commission. Please call the
Commission at 1-800-SEC-0330 for more information on the public reference rooms.
You may also obtain copies of these materials from the Public Reference Section
of the Securities and Exchange Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site (http:/www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, such as
Team, that file electronically with the Commission.
58
<PAGE> 60
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Interim Unaudited Consolidated Financial Statements
Consolidated Balance Sheets............................... F-2
Consolidated Statements of Income......................... F-3
Consolidated Statements of Cash Flows..................... F-4
Notes to Consolidated Financial Statements................ F-5
Consolidated Financial Statements
Independent Auditors' Report.............................. F-7
Consolidated Balance Sheets............................... F-8
Consolidated Statements of Income......................... F-9
Consolidated Statements of Comprehensive Income........... F-10
Consolidated Statements of Stockholders' Equity........... F-11
Consolidated Statements of Cash Flows..................... F-12
Notes to Consolidated Financial Statements................ F-13
</TABLE>
F-1
<PAGE> 61
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, 1999
---------------------- DECEMBER 31,
PRO FORMA HISTORICAL 1998
--------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Cash and due from banks..................................... $ 20,610 $ 20,610 $ 27,397
Federal funds sold and interest-bearing deposits............ 6,467 6,467 4,502
-------- -------- --------
27,077 27,077 31,899
-------- -------- --------
Investment securities:
Available-for-sale........................................ 112,298 112,298 109,296
Held-to-maturity.......................................... 25,734 25,734 25,742
-------- -------- --------
Total investment securities........................ 138,032 138,032 135,038
-------- -------- --------
Loans, net of unearned fees................................. 250,280 250,280 256,126
Allowance for loan losses................................... 2,625 2,625 2,541
-------- -------- --------
Net loans.......................................... 247,655 247,655 253,585
-------- -------- --------
Bank premises and equipment, net............................ 8,823 8,823 8,560
Assets acquired through foreclosure......................... 891 891 906
Goodwill, net of accumulated amortization................... 5,740 5,740 5,850
Other assets................................................ 6,462 6,462 6,514
-------- -------- --------
$434,680 $434,680 $442,352
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits.................................................... $375,202 $375,202 $384,347
Federal funds purchased and securities sold under agreements
to repurchase............................................. 6,462 6,462 6,273
Accrued expenses and other liabilities...................... 3,881 3,881 3,271
Notes payable............................................... 23,058 23,058 23,060
-------- -------- --------
Total liabilities.................................. 408,603 408,603 416,951
-------- -------- --------
Redeemable common stock held by employee stock ownership
plan, net of unearned compensation........................ -- 16,876 16,876
-------- -------- --------
Nonredeemable stockholders' equity:
Preferred stock, no par value; 10,000,000 shares
authorized, no shares issued............................ -- -- --
Common stock, no par value; 50,000,000 shares authorized,
3,028,808 and 3,020,098 shares issued at March 31, 1999
and December 31, 1998................................... 14,044 14,044 13,980
Capital surplus........................................... 122 122 122
Retained earnings......................................... 12,748 12,748 11,921
Treasury stock, 27,005 shares of common stock at March 31,
1999 and December 31, 1998.............................. (187) (187) (187)
Accumulated other comprehensive income.................... 350 350 565
Unearned compensation..................................... (1,000) (1,000) (1,000)
-------- -------- --------
26,077 26,077 25,401
Less redeemable common stock held by employee stock
ownership plan, net of unearned compensation............ -- 16,876 16,876
-------- -------- --------
Total nonredeemable stockholders' equity........... 26,077 9,201 8,525
Commitments and contingencies
-------- -------- --------
$434,680 $434,680 $442,352
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 62
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 1998
----------- ---------
(UNAUDITED)
<S> <C> <C>
Interest income:
Loans, including fees..................................... $5,679 $5,394
Taxable investment securities............................. 1,727 1,780
Nontaxable investment securities.......................... 296 263
Other..................................................... 190 89
------ ------
Total interest income............................. 7,892 7,526
------ ------
Interest expense:
Deposits.................................................. 3,616 3,522
Federal funds purchased and securities sold under
agreements to repurchase............................... 89 136
Notes payable............................................. 323 249
------ ------
Total interest expense............................ 4,028 3,907
------ ------
Net interest income............................... 3,864 3,619
Provision for loan losses................................... 183 446
------ ------
Net interest income after provision for loan losses.... 3,681 3,173
------ ------
Other income:
Service charges........................................... 540 461
Trust fees................................................ 141 79
Gain on sales of mortgage loans........................... 192 137
Gain on sales of investment securities.................... -- 1
Other..................................................... 310 235
------ ------
Total other income................................ 1,183 913
------ ------
Other expenses:
Salaries and employee benefits............................ 1,858 1,766
Occupancy and equipment................................... 461 412
Data processing........................................... 343 273
Professional fees......................................... 203 106
Marketing................................................. 54 121
Goodwill and other intangible amortization................ 173 158
Other..................................................... 597 669
------ ------
Total other expenses.............................. 3,689 3,505
------ ------
Income before income taxes........................ 1,175 581
Income taxes................................................ 348 145
------ ------
Net income........................................ $ 827 $ 436
====== ======
Basic and diluted income per share.......................... $ .29 $ .16
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 63
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 1998
------------ ---------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 827 $ 436
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses.............................. 183 446
Depreciation and amortization.......................... 424 348
Net gain on sales of investment securities............. -- (1)
Net gain on sales of mortgage loans.................... (192) (137)
Net gain on sales of assets acquired through
foreclosure........................................... -- (5)
Proceeds from sale of mortgage loans................... 16,003 8,688
Origination of mortgage loans for sale................. (13,897) (10,963)
Increase (decrease) in other assets.................... 124 (2,268)
Increase in accrued expenses and other liabilities..... 610 696
-------- --------
Net cash provided by (used in) operating
activities...................................... 4,082 (2,760)
-------- --------
Cash flows from investing activities:
Net (increase) decrease in loans.......................... 3,947 (9,609)
Proceeds from sale of investment securities
available-for-sale..................................... -- 4,023
Proceeds from maturities and principal reductions of
investment securities available-for-sale............... 12,667 5,986
Purchases of investment securities available-for-sale..... (16,068) (28,339)
Proceeds from maturities and principal reductions of
investment securities
held-to-maturity....................................... 1,990 1,843
Purchases of investment securities held-to-maturity....... (2,097) (3,884)
Purchases of bank premises and equipment, net of sales.... (449) (905)
Proceeds from sales or payments on assets acquired through
foreclosure............................................ -- (36)
-------- --------
Net cash used in investing activities............. (10) (30,921)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits....................... (9,145) 33,450
Net increase (decrease) in federal funds purchased and
securities sold under agreement to repurchase.......... 189 (5,306)
Payments on notes payable................................. (2) --
Proceeds from notes payable............................... -- 4,000
Common stock issued....................................... 64 45
-------- --------
Net cash provided by (used in) financing
activities...................................... (8,894) 32,189
-------- --------
Net decrease in cash and cash equivalents......... (4,822) (1,492)
Cash and cash equivalents at beginning of period............ 31,899 20,205
-------- --------
Cash and cash equivalents at end of period.................. $ 27,077 $ 18,713
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 64
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with the instructions for Form 10-Q.
The consolidated financial statements include the accounts of Team
Financial, Inc. and subsidiaries (the Company). All significant intercompany
balances and transactions have been eliminated.
The consolidated financial statements as of March 31, 1999 and for the
three months ended March 31, 1999 and 1998 are unaudited but include all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for a fair presentation of financial position and results of
operations for those periods. The consolidated statements of income for the
three months ended March 31, 1999 are not necessarily indicative of the results
that will be achieved for the entire year.
(2) PRO FORMA BALANCE SHEET
The Company expects to complete an initial public offering in June 1999.
Management believes that, subsequent to the offering, the common stock will meet
the Internal Revenue Code requirement to be considered a liquid security. As a
result, the Company will no longer be obligated to redeem shares held by the
ESOP. The redeemable common stock, reflected outside of nonredeemable
stockholders' equity in the accompanying historical financial statements, has
been classified into stockholders' equity in the accompanying March 31, 1999 pro
forma balance sheet. If the stock ceases to meet the Internal Revenue Code
requirement to be a liquid security, the Company would again be obligated to
redeem such shares and would reclassify their fair value, net of unearned
compensation, outside of stockholders' equity.
(3) INCOME PER SHARE
Income per share is computed in accordance with Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings per Share. Basic income per share
is based upon the weighted average number of common shares outstanding during
the periods presented. In accordance with SOP 93-6, Employers' Accounting for
Employee Stock Ownership Plan, unallocated ESOP shares are not considered
outstanding for EPS computations until they are committed to be released.
Diluted income per share includes the effects of all dilutive potential common
shares outstanding during each period.
The shares used in the calculation of basic and diluted income per share
are shown below (in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 1998
--------- ---------
<S> <C> <C>
Weighted average common shares outstanding.................. 2,867 2,753
===== =====
</TABLE>
(4) COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
130, Reporting Comprehensive Income, effective January 1, 1998. SFAS No. 130
establishes standards for reporting comprehensive income and its components
(revenues, expenses, gains, and losses). Components of comprehensive income are
net income and all other nonowner changes in equity. SFAS No. 130 requires that
an enterprise (a) classify items of other comprehensive income by their nature
in a financial statement, and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position.
Reclassifications of financial statements for earlier periods provided for
comparative purposes is required. Comprehensive income as defined by SFAS No.
130 was $612,000 and $510,000 for the three months
F-5
<PAGE> 65
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ended March 31, 1999 and 1998, respectively. The only component of comprehensive
income consists of unrealized holding gains and losses on available-for-sale
securities.
F-6
<PAGE> 66
INDEPENDENT AUDITORS' REPORT
Board of Directors
Team Financial, Inc.:
We have audited the accompanying consolidated balance sheets of Team
Financial, Inc. and subsidiaries as of December 31, 1998 and 1997 and the
related consolidated statements of income, comprehensive income, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated 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 Team
Financial, Inc. and subsidiaries as of December 31, 1998 and 1997 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
February 12, 1999
F-7
<PAGE> 67
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash and due from banks..................................... $ 27,397 $ 17,517
Federal funds sold and interest-bearing deposits............ 4,502 2,688
-------- --------
31,899 20,205
-------- --------
Investment securities (note 2):
Available-for-sale........................................ 109,296 103,304
Held-to-maturity.......................................... 25,742 22,399
-------- --------
Total investment securities....................... 135,038 125,703
-------- --------
Loans, net of unearned fees (note 3)........................ 256,126 223,675
Allowance for loan losses (note 5).......................... 2,541 1,629
-------- --------
Net loans......................................... 253,585 222,046
-------- --------
Bank premises and equipment, net (note 6)................... 8,560 8,136
Assets acquired through foreclosure......................... 906 367
Goodwill, net of accumulated amortization................... 5,850 4,332
Other assets (note 4)....................................... 6,514 6,207
-------- --------
$442,352 $386,996
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (note 7)........................................... $384,347 $333,864
Federal funds purchased and securities sold under agreements
to repurchase (note 8).................................... 6,273 13,558
Accrued expenses and other liabilities...................... 3,271 3,248
Notes payable (notes 9 and 10).............................. 23,060 13,684
-------- --------
Total liabilities................................. 416,951 364,354
-------- --------
Redeemable common stock held by employee stock ownership
plan, net of unearned compensation (note 10).............. 16,876 18,143
-------- --------
Nonredeemable stockholders' equity (note 13):
Preferred stock, no par value; 10,000,000 shares
authorized, no shares issued........................... -- --
Common stock, no par value; 50,000,000 shares authorized,
3,020,098 and 2,999,825 shares issued at December 31,
1998 and 1997 (note 10)................................ 13,980 13,834
Capital surplus........................................... 122 --
Retained earnings......................................... 11,921 10,263
Treasury stock, 27,005 and 52,500 shares of common stock
at December 31, 1998 and 1997.......................... (187) (363)
Accumulated other comprehensive income.................... 565 359
Unearned compensation (note 10)........................... (1,000) (1,451)
-------- --------
25,401 22,642
Less redeemable common stock held by employee stock
ownership plan, net of unearned compensation (note
10).................................................... 16,876 18,143
-------- --------
Total nonredeemable stockholders' equity.......... 8,525 4,499
Commitments and contingencies (notes 10 and 15)
-------- --------
$442,352 $386,996
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 68
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Interest income:
Loans, including fees..................................... $23,183 $19,475 $16,196
Taxable investment securities............................. 7,127 5,458 4,492
Nontaxable investment securities.......................... 1,133 827 667
Other..................................................... 411 377 280
------- ------- -------
Total interest income............................. 31,854 26,137 21,635
------- ------- -------
Interest expense:
Deposits.................................................. 14,807 11,794 9,532
Federal funds purchased and securities sold under
agreements to repurchase............................... 528 569 535
Notes payable............................................. 1,238 524 395
------- ------- -------
Total interest expense............................ 16,573 12,887 10,462
------- ------- -------
Net interest income............................... 15,281 13,250 11,173
Provision for loan losses (note 5).......................... 1,486 1,095 623
------- ------- -------
Net interest income after provision for loan
losses.......................................... 13,795 12,155 10,550
------- ------- -------
Other income:
Service charges........................................... 2,039 1,670 1,400
Trust fees................................................ 454 408 368
Gain on sales of mortgage loans (note 4).................. 664 268 230
Gain (loss) on sales of investment securities............. 18 2 (40)
Other (note 4)............................................ 1,431 931 854
------- ------- -------
Total other income................................ 4,606 3,279 2,812
------- ------- -------
Other expenses:
Salaries and employee benefits (note 10).................. 7,835 6,419 5,128
Occupancy and equipment (note 6).......................... 1,805 1,668 1,298
Data processing........................................... 1,265 1,033 879
Professional fees......................................... 874 717 599
Marketing................................................. 479 395 274
Goodwill amortization..................................... 405 140 17
Other..................................................... 2,721 2,295 1,937
------- ------- -------
Total other expenses.............................. 15,384 12,667 10,132
------- ------- -------
Income before income taxes........................ 3,017 2,767 3,230
Income taxes (note 11)...................................... 673 553 938
------- ------- -------
Net income........................................ $ 2,344 $ 2,214 $ 2,292
======= ======= =======
Basic and diluted income per share.......................... $ .85 $ .84 $ 1.02
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 69
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Net income.................................................. $2,344 $2,214 $2,292
------ ------ ------
Other comprehensive income, net of tax:
Unrealized gains (losses) on investment securities
available-for-sale..................................... 218 280 (251)
Reclassification adjustment for gains included in net
income................................................. (12) (1) 26
------ ------ ------
Other comprehensive income............................. 206 279 (225)
------ ------ ------
Comprehensive income................................... $2,550 $2,493 $2,067
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE> 70
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
LESS REDEEMABLE
COMMON STOCK
HELD BY
EMPLOYEE STOCK
ACCUMULATED OWNERSHIP PLAN,
OTHER NET OF UNEARNED
COMMON CAPITAL RETAINED TREASURY COMPREHENSIVE UNEARNED COMPENSATION
STOCK SURPLUS EARNINGS STOCK INCOME COMPENSATION (NOTE 10) TOTAL
------ ------- -------- -------- ------------- ------------ --------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995.... $10,549 -- 7,004 (363) 305 (1,699) (12,375) 3,421
Common stock issued in
acquisition of subsidiary
(300,750 shares)............ 2,105 -- -- -- -- -- -- 2,105
Common stock issued in
connection with compensation
plans (6,845 shares)........ 35 -- -- -- -- -- -- 35
Net income.................... -- -- 2,292 -- -- -- -- 2,292
Dividends paid ($.23 per
share)...................... -- -- (588) -- -- -- -- (588)
Income tax benefit of
dividends paid to employee
stock ownership plan related
to unallocated shares of
common stock................ -- -- 24 -- -- -- -- 24
Other comprehensive income.... -- -- -- -- (225) -- -- (225)
Increase of unearned
compensation, net of
principal payments on ESOP
notes payable............... -- -- -- -- -- (47) -- (47)
Market value adjustment to
redeemable ESOP common
stock....................... -- -- -- -- -- -- (2,501) (2,501)
------- --- ------ ---- ---- ------ ------- ------
Balance, December 31, 1996.... 12,689 -- 8,732 (363) 80 (1,746) (14,876) 4,516
Common stock issued in
connection with compensation
plans (9,540 shares)........ 61 -- -- -- -- -- -- 61
Common stock issued (115,265
shares) in connection with
private placement........... 1,084 -- -- -- -- -- -- 1,084
Net income.................... -- -- 2,214 -- -- -- -- 2,214
Dividends paid ($.23 per
share)...................... -- -- (683) -- -- -- -- (683)
Other comprehensive income.... -- -- -- -- 279 -- -- 279
Principal payments on ESOP
notes payable............... -- -- -- -- -- 295 -- 295
Market value adjustment to
redeemable ESOP common
stock....................... -- -- -- -- -- -- (3,267) (3,267)
------- --- ------ ---- ---- ------ ------- ------
Balance, December 31, 1997.... 13,834 -- 10,263 (363) 359 (1,451) (18,143) 4,499
Common stock issued in
connection with compensation
plans (20,273 shares)....... 146 -- -- -- -- -- -- 146
Net income.................... -- -- 2,344 -- -- -- -- 2,344
Dividends paid ($.23 per
share)...................... -- -- (686) -- -- -- -- (686)
Treasury stock purchased
(74,310 shares)............. -- -- -- (869) -- -- -- (869)
Treasury stock sold in
connection with private
placement (31,995 shares)... -- 31 -- 343 -- -- -- 374
Treasury stock sold (67,810
shares) in exchange for
notes payable............... -- 91 -- 702 -- -- -- 793
Other comprehensive income.... -- -- -- -- 206 -- -- 206
Principal payments on ESOP
notes payable............... -- -- -- -- -- 451 -- 451
Market value adjustment to
redeemable ESOP common
stock....................... -- -- -- -- -- -- 1,267 1,267
------- --- ------ ---- ---- ------ ------- ------
Balance, December 31, 1998.... $13,980 122 11,921 (187) 565 (1,000) (16,876) 8,525
======= === ====== ==== ==== ====== ======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE> 71
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 2,344 $ 2,214 $ 2,292
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses............................... 1,486 1,095 623
Depreciation and amortization........................... 1,642 1,118 877
Allocation of ESOP shares............................... 451 295 (47)
Net (gain) loss on sales of investment securities....... (18) (2) 40
Net gain on sales of mortgage loans..................... (664) (268) (230)
Net (gain) loss on sales of assets acquired through
foreclosure............................................ (4) (12) 60
Proceeds from sale of mortgage loans.................... 49,024 20,212 20,251
Origination of mortgage loans for sale.................. (53,269) (20,119) (18,926)
Increase in other assets................................ (617) (938) (1,602)
Increase in accrued expenses and other liabilities...... (148) 40 323
-------- -------- --------
Net cash provided by operating activities........... 227 3,635 3,661
-------- -------- --------
Cash flows from investing activities:
Net increase in loans..................................... (25,818) (23,465) (11,271)
Proceeds from sale of investment securities
available-for-sale...................................... 13,756 13,179 6,515
Proceeds from maturities and principal reductions of
investment securities available-for-sale................ 36,703 14,216 12,967
Purchases of investment securities available-for-sale..... (56,251) (61,515) (21,542)
Proceeds from maturities and principal reductions of
investment securities held-to-maturity.................. 4,624 1,658 1,209
Purchases of investment securities held-to-maturity....... (8,017) (6,188) (929)
Purchases of bank premises and equipment.................. (825) (1,321) (874)
Proceeds from sales or payments on assets acquired through
foreclosure............................................. 70 127 379
Cash received in acquisitions, net of cash paid........... 28,501 46,368 3,096
-------- -------- --------
Net cash used in investing activities............... (7,257) (16,941) (10,450)
-------- -------- --------
Cash flows from financing activities:
Net increase in deposits.................................. 16,875 5,500 14,102
Net increase (decrease) in federal funds purchased and
securities sold under agreement to repurchase........... (7,285) 3,250 2,036
Payments on notes payable................................. (1,481) (4,209) (2,860)
Proceeds from notes payable............................... 11,650 9,325 3,544
Common stock issued....................................... 146 1,145 35
Purchases of treasury stock............................... (869) -- --
Proceeds from sales of treasury stock..................... 374 -- --
Dividends paid on common stock............................ (686) (683) (588)
-------- -------- --------
Net cash provided by financing activities........... 18,724 14,328 16,269
-------- -------- --------
Net increase in cash and cash equivalents........... 11,694 1,022 9,480
Cash and cash equivalents at beginning of year.............. 20,205 19,183 9,703
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 31,899 $ 20,205 $ 19,183
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................ $ 16,587 $ 12,764 $ 10,589
Income taxes............................................ 274 930 967
======== ======== ========
Noncash activities related to acquisitions:
Investing activities:
Increase in investments................................. $ -- $ -- $ 5,023
Net increase in loans................................... 2,903 17,680 12,376
Increase in premises and equipment...................... 429 1,675 419
Financing activities:
Increase in deposits.................................... 33,608 69,474 19,097
======== ======== ========
Noncash financing activities -- issuance of treasury stock
in exchange for notes payable............................. $ 793 $ -- $ --
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE> 72
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Team Financial, Inc. and
subsidiaries (the Company) conform with generally accepted accounting principles
and general practices within the banking industry. The following is a
description of the more significant policies.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, TeamBanc, N.A., Iola Bank and
Trust Company, First National Bank and Trust Company and TeamBank Nebraska.
Intercompany transactions and balances have been eliminated in consolidation. As
described in note 10, the employees of the Company and its subsidiary
participate in the Team Financial Employee Stock Ownership Plan (ESOP). At
December 31, 1998 and 1997, the ESOP owned 1,582,700 and 1,674,110 shares,
respectively (approximately 53% and 57%, respectively), of the Company's
outstanding common stock.
In December 1998, the Company completed a five-for-one stock split. All
share and per share information for all periods presented has been restated for
the split.
(b) Investment Securities
The Company classifies investment securities as either available-for-sale
or held-to-maturity. Held-to-maturity securities are those which the Company has
the positive intent and ability to hold to maturity. All other securities are
classified as available-for-sale.
Held-to-maturity securities are recorded at amortized cost.
Available-for-sale securities are recorded at fair value. Unrealized holding
gains and losses, net of related tax effect, on available-for-sale securities
are excluded from earnings and are reported as a separate component of
stockholders' equity until realized.
A decline in the market value of any security below cost that is deemed
other than temporary is charged to income resulting in the establishment of a
new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to interest income. Dividend and interest
income is recognized when earned. Realized gains and losses upon disposition of
available-for-sale securities are included in income using the specific
identification method for determining the cost of the securities sold.
(c) Loans
Loans are stated at the amount of unpaid principal, reduced by unearned
fees. Interest on loans is calculated by using the simple interest method on
daily balances of the principal amount outstanding. The accrual of interest on
loans is discontinued when, in management's judgment, the interest is
uncollectible in the ordinary course of business. Fees received on loans in
excess of amounts representing the estimated cost of origination are deferred
and credited to income using the interest method.
(d) Mortgage Banking
Certain of the Company's subsidiary banks originate first mortgage loans
for sale to permanent investors in the secondary market. Unearned fees related
to the origination of such loans are recorded as a reduction of the loan's cost.
Loans held for sale are recorded at the lower of aggregate cost or market (as
determined by outstanding commitments from investors or current investor yield
requirements) through the establishment of a valuation reserve. If, subsequent
to origination, management decides to hold certain loans to maturity or on a
long-term basis, any unrealized holding loss is recorded as a reduction of the
F-13
<PAGE> 73
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
loan's cost, and the unrealized loss is amortized as an adjustment of yield over
the estimated contractual life of the loan.
Typically, loans are sold to permanent investors with the banks retaining
the right to service the loans. Service fees are recorded in income when earned.
Capitalized servicing rights are recorded at the time the loan is sold, thereby
increasing the gain on sale by such amount, and subsequently amortized over nine
years on a straight-line basis. Any remaining unamortized amount is charged to
expense if the related loan is repaid prior to maturity.
Management monitors the capitalized mortgage servicing rights for
impairment based on the fair value of those rights, as determined on a quarterly
basis. Any impairment is recognized through a valuation allowance.
(e) Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb possible losses on existing loans that may become uncollectible, based
on evaluations of the collectibility of loans and prior loan loss experience.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the allowance for loan losses. Such
agencies may require charge-offs and/or additions to the allowance based on
their judgment about information available to them at the time of their
examination.
(f) Bank Premises and Equipment
Land is stated at cost and buildings and equipment are stated at cost less
accumulated depreciation. Depreciation is computed on the straight-line method
over the useful life of the asset ranging from three to forty years. Maintenance
and repairs are charged to expense as incurred. Major betterments are considered
individually and expensed or capitalized as the facts dictate.
(g) Goodwill
Goodwill resulting from the acquisition of bank branches and subsidiaries
represents the excess of the purchase price over the fair value of the net
assets acquired or net liabilities assumed. Goodwill is amortized straight-line
over ten to fifteen years. When facts and circumstances indicate potential
impairment, the Company evaluates the recoverability of asset carrying values,
including goodwill, using estimates of undiscounted cash flows over remaining
asset lives. Any impairment is measured by the excess of carrying values over
fair dues.
(h) Income Taxes
The Company and its subsidiaries file consolidated federal income tax
returns. Certain income and expense items are treated differently for financial
reporting purposes than for income tax purposes. Deferred income taxes are
provided in recognition of these temporary differences, using the tax rates
expected to be in effect when the related temporary differences reverse.
(i) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, clearings and transit items in process of
collection, federal funds sold and overnight deposits.
F-14
<PAGE> 74
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(j) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(k) Income Per Share
Basic income per share is based upon the weighted average number of common
shares outstanding during the periods presented. In accordance with SOP 93-6,
Employers' Accounting for Employee Stock Ownership Plan, unallocated ESOP shares
are not considered outstanding for EPS computations until they are committed to
be released. Diluted income per share includes the effects of all dilutive
potential common shares outstanding during each period.
The shares used in the calculation of basic and diluted income per share
are shown below (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Weighted average common shares outstanding.................. 2,765 2,645 2,243
===== ===== =====
</TABLE>
(l) Comprehensive Income
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
130, Reporting Comprehensive Income, effective January 1, 1998. SFAS No. 130
establishes standards for reporting comprehensive income and its components
(revenues, expenses, gains, and losses). Components of comprehensive income are
net income and all other nonowner changes in equity. SFAS No. 130 requires that
an enterprise (a) classify items of other comprehensive income by their nature
in a financial statement, and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position.
Reclassifications of financial statements for earlier periods provided for
comparative purposes is required. The Company has disclosed comprehensive income
in a separate statement. The only component of comprehensive income consists of
unrealized holding gains and losses on available-for-sale securities.
(m) Operating Segments
The Company adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, effective January 1, 1998. SFAS No. 131
establishes standards for reporting information about segments in annual and
interim financial statements. SFAS No. 131 introduces a new model for segment
reporting called the "management approach." The management approach is based on
the way the chief operating decision-maker organizes segments within the Company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure, and any other in which management disaggregates a company. Based on
the management approach model, the Company has determined that its business is
comprised of a single operating segment and that SFAS No. 131, therefore, has no
impact on its financial statements.
(n) Future Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued SFAS No. 133,
Accounting for Derivative Financial Instruments and Hedging Activities. SFAS No.
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. SFAS No. 133 is effective for fiscal years beginning after
June 15, 1999. The
F-15
<PAGE> 75
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adoption of the standard is not expected to have a significant impact on the
consolidated financial statements of the Company.
(2) INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and fair value of
investment securities by major security type at December 31, 1998 and 1997 are
as follows (in thousands):
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
1998 COST GAINS LOSSES VALUE
- ---- --------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Available-for-sale:
U. S. treasury securities................ $ 7,503 $ 143 $ -- $ 7,646
U. S. government agency securities....... 34,882 670 26 35,526
Mortgage-backed securities............... 59,735 347 297 59,785
Obligations of state and political
subdivisions.......................... 2,397 75 1 2,471
Other investments........................ 3,868 -- -- 3,868
-------- ------ ---- --------
108,385 1,235 324 109,296
-------- ------ ---- --------
Held-to-maturity:
U. S. treasury securities................ 200 2 -- 202
U. S. government agencies................ 3,725 12 4 3,733
Obligations of state and political
subdivisions.......................... 21,817 882 13 22,686
-------- ------ ---- --------
25,742 896 17 26,621
-------- ------ ---- --------
$134,127 $2,131 $341 $135,917
======== ====== ==== ========
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- ---- --------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Available-for-sale:
U. S. treasury securities................ $ 16,263 $ 135 $ 14 $ 16,384
U. S. government agency securities....... 42,685 353 27 43,011
Mortgage-backed securities............... 37,237 245 156 37,326
Obligations of state and political
subdivisions.......................... 2,170 42 7 2,205
Other investments........................ 4,370 8 -- 4,378
-------- ------ ---- --------
102,725 783 204 103,304
-------- ------ ---- --------
Held-to-maturity:
U. S. treasury securities................ 799 2 -- 801
U. S. government agencies................ 3,602 9 6 3,605
Obligations of state and political
subdivisions.......................... 17,998 359 28 18,329
-------- ------ ---- --------
22,399 370 34 22,735
-------- ------ ---- --------
$125,124 $1,153 $238 $126,039
======== ====== ==== ========
</TABLE>
F-16
<PAGE> 76
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of investment securities classified as available-for-sale and
held-to-maturity are as follows at December 31, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
AMORTIZED FAIR
1998 COST VALUE
- ---- --------- --------
<S> <C> <C>
Available-for-sale:
Due less than one year.................................... $ 42,040 $ 42,102
Due after one through five years.......................... 51,413 52,163
Due after five through ten years.......................... 8,722 8,797
Due after ten years....................................... 2,342 2,366
Other investments......................................... 3,868 3,868
-------- --------
108,385 109,296
-------- --------
Held-to-maturity:
Due less than one year.................................... 1,443 1,458
Due after one through five years.......................... 9,923 10,134
Due after five through ten years.......................... 8,831 9,229
Due after ten years....................................... 5,545 5,800
-------- --------
25,742 26,621
-------- --------
$134,127 $135,917
======== ========
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED FAIR
1997 COST VALUE
- ---- --------- --------
<S> <C> <C>
Available-for-sale:
Due less than one year.................................... $ 15,676 $ 15,677
Due after one through five years.......................... 58,535 59,030
Due after five through ten years.......................... 15,177 15,294
Due after ten years....................................... 9,089 9,048
Other investments......................................... 4,248 4,255
-------- --------
102,725 103,304
-------- --------
Held-to-maturity:
Due less than one year.................................... 2,125 2,127
Due after one through five years.......................... 6,776 6,841
Due after five through ten years.......................... 6,567 6,745
Due after ten years....................................... 6,931 7,022
-------- --------
22,399 22,735
-------- --------
$125,124 $126,039
======== ========
</TABLE>
Other securities consist principally of Federal Home Loan Bank stock,
Federal Reserve stock, and mutual funds.
Investment securities with amortized cost of $93,913,000 and $75,622,000
and fair value of $95,240,000 and $76,248,000 at December 31, 1998 and 1997,
respectively, are pledged to secure public deposits and for other purposes as
required by state law.
F-17
<PAGE> 77
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) LOANS
Major classifications of loans at December 31, 1998 and 1997 are as follows
(in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Real estate:
1-4 family................................................ $ 85,093 $ 74,049
Construction.............................................. 14,411 12,292
Other..................................................... 25,809 26,816
Commercial.................................................. 94,478 75,048
Installment and other....................................... 36,652 35,785
-------- --------
Gross loans............................................... 256,443 223,990
Less unearned fees.......................................... 317 315
-------- --------
$256,126 $223,675
======== ========
</TABLE>
Included in real estate mortgage loans are loans held for sale of
approximately $6,321,000 and $1,418,000 at December 31, 1998 and 1997,
respectively.
Nonaccruing loans approximated $2,241,000 and $1,078,000 at December 31,
1998 and 1997, respectively. The interest income not recognized on these loans
was approximately $157,000, $81,000, and $93,000 in 1998, 1997, and 1996,
respectively. Impaired loans are comprised entirely of nonaccrual loans at
December 31, 1998 and 1997. Allocated reserves related to such loans aggregated
$214,000 and $112,000 at December 31, 1998 and 1997, respectively.
Activity related to loans made to directors and executive officers of the
Company for 1998 is presented below. Such loans were made in the ordinary course
of business on normal credit terms, including interest rate and
collateralization (in thousands):
<TABLE>
<S> <C>
Balance at January 1, 1998................................. $ 3,742
Additions.................................................. 1,399
Amounts collected.......................................... (1,506)
-------
Balance at December 31, 1998............................... $ 3,635
=======
</TABLE>
The Company's primary market areas in Kansas are Miami County, Allen
County, Labette County and surrounding counties, in Nebraska are Douglas County
and Sarpy County and in Missouri are Vernon County and Barton County.
Accordingly, the majority of the loans made by the Company's subsidiary banks
are within these primary market areas.
(4) MORTGAGE BANKING ACTIVITIES
The Company services first mortgage loans for permanent investors
aggregating approximately $107,368,000 and $90,240,000 at December 31, 1998 and
1997, respectively. Escrow balances held on deposit in subsidiary banks
aggregated $225,000 and $191,000 at December 31, 1998 and 1997, respectively.
F-18
<PAGE> 78
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Included in gain on sales of mortgage loans are capitalized mortgage
servicing rights. A summary of the mortgage servicing rights for the years ended
December 31, 1998 and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Balance at January 1........................................ $ 290 $151 $ --
Mortgage servicing rights capitalized during the year....... 445 182 166
Amortization................................................ (134) (33) (15)
Valuation allowance......................................... -- (10) --
----- ---- ----
Balance at December 31...................................... $ 601 $290 $151
===== ==== ====
</TABLE>
Service fees earned by the Company (net of amortization of capitalized
mortgage servicing rights), included in other income in the accompanying
consolidated statements of income, aggregated approximately $267,000, $239,000,
and $228,000 for the years ended December 31, 1998, 1997, and 1996,
respectively.
(5) ALLOWANCE FOR LOAN LOSSES
A summary of the allowance for loan losses for the years ended December 31,
1998, 1997, and 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------- ------
<S> <C> <C> <C>
Balance at January 1...................................... $1,629 $ 1,518 $1,289
Provision for loan losses................................. 1,486 1,095 623
Allowance for loan losses of acquired bank................ -- -- 151
Charge-offs............................................... (723) (1,142) (695)
Recoveries................................................ 149 158 150
------ ------- ------
Balance at December 31.................................... $2,541 $ 1,629 $1,518
====== ======= ======
</TABLE>
(6) BANK PREMISES AND EQUIPMENT
Major classifications of bank premises and equipment at December 31, 1998
and 1997 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Land........................................................ $ 1,038 $ 973
Bank premises............................................... 8,181 7,658
Furniture and equipment..................................... 6,251 5,604
------- -------
15,470 14,235
Less accumulated depreciation............................... 6,910 6,099
------- -------
$ 8,560 $ 8,136
======= =======
</TABLE>
Depreciation expense aggregating $830,000, $852,000, and $695,000 for the
years ended December 31, 1998, 1997, and 1996, respectively, has been included
in occupancy and equipment expense in the accompanying consolidated statements
of income.
F-19
<PAGE> 79
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) DEPOSITS
Deposits are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Demand:
Noninterest bearing....................................... $ 42,234 $ 39,742
-------- --------
Interest bearing:
NOW.................................................... 75,679 63,887
Money market........................................... 41,560 30,937
-------- --------
117,239 94,824
-------- --------
Total demand......................................... 159,473 134,566
Savings..................................................... 20,250 17,873
Time........................................................ 204,624 181,425
-------- --------
$384,347 $333,864
======== ========
</TABLE>
Time deposits include certificates of deposit of $100,000 and over totaling
approximately $45,468,000 and $43,243,000 at December 31, 1998 and 1997,
respectively.
Principal maturities of time deposits at December 31, 1998 are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- --------
<S> <C>
1999..................................................... $145,351
2000..................................................... 37,705
2001..................................................... 9,557
2002..................................................... 6,898
2003..................................................... 3,646
Thereafter............................................... 1,467
--------
$204,624
========
</TABLE>
(8) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Company's obligation to repurchase securities sold at December 31, 1998
and 1997 aggregated $6,273,000 and $8,058,000, respectively. Information
concerning securities sold under agreements to repurchase is as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Average monthly balance during the year..................... $ 7,479 $ 8,320
Weighted average interest rate during the year.............. 4.83% 5.20%
Maximum month-end balance during the year................... $12,491 $10,046
======= =======
</TABLE>
At December 31, 1998, such agreements were secured by investment and
mortgage-backed securities. Pledged securities are maintained by a safekeeping
agent under the control of the Company.
F-20
<PAGE> 80
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) NOTES PAYABLE
Following is a summary of notes payable at December 31, 1998 and 1997 (in
thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Notes payable of Company related to ESOP borrowings, at
interest rates ranging from 5.60% to 6.75% due in 2002 and
2004, secured by 134,560 shares of Team Financial, Inc.
common stock at December 31, 1998 (see note 10)........... $ 1,000 $ 1,451
Mandatory equity replacement notes of Team Financial, Inc.,
interest at 6.22%, redeemed in 1998, unsecured............ -- 1,730
Note payable of Team Financial, Inc. to unrelated bank,
interest at 1% under prime rate (7.75% at December 31,
1998), due June 30, 1999, secured by common stock of
subsidiary banks.......................................... 12,400 7,900
FHLB borrowings by certain subsidiary banks at interest
rates ranging from 4.27% to 6.97%; maturities ranging from
1999 to 2013; secured by real estate loans, investment
securities and FHLB stock................................. 9,160 2,603
Unsecured notes payable of Team Financial, Inc., interest at
7.0%, due in 1999, unsecured.............................. 500 --
------- -------
$23,060 $13,684
======= =======
</TABLE>
As a result of the Company's acquisition of Teambank, N.A. in 1986, the
Company issued mandatory equity replacement notes (MERNs). Each MERN had a face
value of $90, with interest payable at 6.22% annually. The MERNs matured in
1998, at which time they were convertible into one share of $90 par value
perpetual preferred stock. The MERNs were redeemable by the Company at any time
prior to this maturity at face value plus accrued interest, were redeemable by
the holders with the prior written approval of the Company, and were
subordinated to the payment of senior indebtedness. During 1998, the Company
redeemed MERNs with an aggregate face value of $937,000 for cash, and exchanged
the remaining MERNs with an aggregate face value of $793,000 for 67,810 shares
of common stock issued out of treasury.
Principal maturities on notes payable outstanding at December 31, 1998 are
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -------
<S> <C>
1999...................................................... $14,199
2000...................................................... 1,301
2001...................................................... 704
2002...................................................... 337
2003...................................................... 744
Thereafter................................................ 5,775
-------
$23,060
=======
</TABLE>
Management expects the $12,400,000 loan maturing June 30, 1999 to be
renewed at maturity, but can provide no assurance to that effect.
(10) EMPLOYEE BENEFIT PLANS
Eligible employees of the Company and subsidiary banks participate in an
employee stock ownership plan (ESOP) which was formed in 1986. The Company has
related ESOP borrowings under bank loan agreements (see note 9) that qualify as
"exempt loans" under Internal Revenue Code (IRC) Sec-
F-21
<PAGE> 81
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
tion 4975(d)(3), the proceeds of which were used to acquire Company common
stock. Those funds, in turn, were used by the Company to acquire certain
subsidiary banks. Contributions, along with dividends on unallocated shares of
common stock, are used by the ESOP to make payments of principal and interest on
the bank loans. ESOP contributions by the Company and the banks charged to
salaries and benefits expense in 1998 and 1997 aggregated $542,000 and $624,000,
respectively. The debt related to the ESOP is recorded as debt and the shares
pledged as collateral are reported as unearned compensation in the accompanying
consolidated balance sheets. Unearned compensation is reduced as the related
notes payable are reduced or increased upon additional ESOP borrowings. At
December 31, 1998 and 1997, ESOP participants had been allocated 1,448,140 and
1,473,080 shares of Company common stock, respectively. These shares are
redeemable under certain circumstances by former employees at the fair value of
the common stock and, accordingly, are classified, net of unearned compensation,
outside of nonredeemable stockholders' equity. The repurchase obligation of the
Company at December 31, 1998 and 1997 aggregated approximately $16,876,000 and
$18,143,000, respectively.
In May 1994, the Company adopted an employee stock purchase plan. The plan
provides employees the opportunity to purchase common stock in the Company
pursuant to Section 423 of the IRC. The Company issued 8,710, 6,500, and 6,490
shares in January 1999, 1998, and 1997, respectively, in exchange for cash of
$65,000, $45,000, and $40,000.
In January 1996, the Company implemented a bonus program which awards
employees for their performance based on certain financial and growth targets
determined by management. Bonus awards are at the discretion of the compensation
committee and may consist of cash, common stock, or a combination thereof. The
Company and subsidiary banks charged $459,000, $139,000, and $276,000 to
salaries and benefits expense as a result of this bonus program in 1998, 1997,
and 1996, respectively.
In November 1998, the Board of Directors of the Company approved the Team
Financial, Inc. 401(k) Savings Plan. The Plan is effective January 1, 1999.
Employees, meeting certain conditions, are eligible to participate in the Plan
immediately upon their employment date. The Company will match 50% of the first
6% of compensation which employees contribute to the Plan. The Company's
contributions will vest ratably over five years.
(11) INCOME TAXES
Income tax expense (benefit) attributable to income from operations for
1998 and 1997 consists of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current..................................................... $730 $366 $862
Deferred.................................................... (57) 187 76
---- ---- ----
$673 $553 $938
==== ==== ====
</TABLE>
F-22
<PAGE> 82
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Following is a reconciliation between income tax expense attributable to
income from operations and the amount computed by multiplying earnings before
income taxes by the statutory federal income tax rate of 34% (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- ------
<S> <C> <C> <C>
Expected federal income tax expense......................... $1,026 $ 941 $1,098
Interest on obligations of states and political
subdivisions.............................................. (362) (249) (204)
State income taxes, net of federal tax benefit.............. 114 7 135
Income tax benefit of dividends paid to ESOP................ (125) (132) (122)
Other....................................................... 20 (14) 31
------ ----- ------
Income tax expense attributable to income from
operations............................................. $ 673 $ 553 $ 938
====== ===== ======
</TABLE>
The income tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 1998 and 1997 are presented below (in thousands):
<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses................................. $ 346 $ 87
Net operating loss carryforwards of acquired subsidiary... 294 384
Deferred compensation..................................... 74 75
Loans..................................................... 21 32
State taxes............................................... -- 7
----- ----
Total gross deferred tax assets................... 735 585
----- ----
Deferred tax liabilities:
Investment securities..................................... 348 291
Mortgage servicing rights................................. 205 --
Bank premises and equipment............................... 138 169
FHLB stock................................................ 115 113
Other assets.............................................. 38 69
State taxes............................................... 5 --
----- ----
Total gross deferred tax liabilities.............. 849 642
----- ----
Net deferred tax liabilities...................... $(114) $(57)
===== ====
</TABLE>
The net operating loss carryforward, if not utilized, will expire in 2003.
F-23
<PAGE> 83
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates of financial instruments at December 31, 1998 and
1997, including methods and assumptions utilized, are set forth below (in
thousands):
<TABLE>
<CAPTION>
1998 1997
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Investment securities...................... $135,000 $136,000 $126,000 $126,000
======== ======== ======== ========
Loans, net of unearned discounts and
allowance for loan losses................ $254,000 $256,000 $222,000 $225,000
======== ======== ======== ========
Demand deposits............................ $ 42,000 $ 43,000 $ 40,000 $ 40,000
Money markets and NOW deposits............. 117,000 117,000 95,000 95,000
Savings deposits........................... 20,000 20,000 18,000 18,000
Time deposits.............................. 205,000 206,000 181,000 182,000
-------- -------- -------- --------
Total deposits................... $384,000 $386,000 $334,000 $335,000
======== ======== ======== ========
Notes payable $ 23,000 $ 23,000 $ 14,000 $ 14,000
======== ======== ======== ========
</TABLE>
Methods and Assumptions Utilized
The estimated fair value of investment securities is based on bid prices
published in financial newspapers or bid quotations received from securities
dealers.
The estimated fair value of the Company's loan portfolio is based on the
segregation of loans by maturity using a weighted average pool rate. In
estimating the fair value of loans, the carrying amount is reduced by the
allowance for loan losses. The estimated fair value is calculated by discounting
scheduled cash flows through the estimated maturity using estimated market
discount rates based upon the Company's average cost of funds that reflect the
interest rate risk inherent in the loan, reduced by the allowance for loan
losses.
The estimated fair value of deposits with no stated maturity, such as
noninterest bearing demand deposits, savings, NOW accounts and money market
accounts, is equal to the amount payable on demand. The fair value of
interest-bearing time deposits is based on the discounted value of contractual
cash flows of such deposits. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities.
The carrying value of all notes payable approximates fair value, as all
notes are either based upon floating market rates of interest or based upon
fixed rates which approximate market rates.
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instruments.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of the
Company's financial instruments, fair value estimates are based on judgments
regarding future loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates. Fair value
estimates are based on existing balance sheet financial instruments without
attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments.
F-24
<PAGE> 84
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) CAPITAL ADEQUACY
Quantitative measures established by regulation to ensure capital adequacy
require the Company and its subsidiary banks to maintain minimum amounts and
ratios (set forth in the table below for the Company's significant subsidiary
banks, dollars in thousands) of total risk-based and Tier 1 capital (as defined
in the regulations) to risk-weighted assets, and of Tier 1 capital to average
assets. Management believes, as of December 31, 1998, that the banks meet all
capital adequacy requirements to which they are subject.
<TABLE>
<CAPTION>
TO BE WELL-CAPITALIZED
UNDER PROMPT
FOR CAPITAL ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES PROVISIONS
---------------- -------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ------ --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1998:
TeamBank N.A.:
Total risk-based capital (to
risk-weighted assets)....... $19,318 12.07% $12,805 8.00% $16,006 10.00%
Tier 1 capital (to
risk-weighted assets)....... 17,872 11.17 6,403 4.00 9,604 6.00
Tier 1 capital (to average
assets)..................... 17,872 7.07 10,118 4.00 12,648 5.00
======= ====== ======= ====== ======= ======
Iola Bank and Trust Company:
Total risk-based capital (to
risk-weighted assets)....... $ 6,612 13.81% $ 3,830 8.00% $ 4,787 10.00%
Tier 1 capital (to
risk-weighted assets)....... 6,136 12.82 1,915 4.00 2,872 6.00
Tier 1 capital (to average
assets)..................... 6,136 7.67 3,200 4.00 4,000 5.00
======= ====== ======= ====== ======= ======
First National Bank and Trust
Company:
Total risk-based capital (to
risk-weighted assets)....... $ 5,230 13.65% $ 3,065 8.00% $ 3,831 10.00%
Tier 1 capital (to
risk-weighted assets)....... 4,811 12.56 1,532 4.00 2,298 6.00
Tier 1 capital (to average
assets)..................... 4,811 7.80 2,466 4.00 3,082 5.00
======= ====== ======= ====== ======= ======
</TABLE>
(14) MERGERS AND ACQUISITIONS
In August 1997, the Company assumed the branch deposits and acquired
certain assets, consisting of loans, accrued interest and premises and
equipment, of a Mercantile Bancorporation branch located in Nevada, Missouri.
The deposits and their accrued interest payable approximated $30,454,000 and the
acquired assets aggregated $19,166,000. The Company paid a premium of $2,523,000
in connection with the transaction, which has been recorded as goodwill in the
accompanying consolidated financial statements and is being amortized over
fifteen years on a straight-line basis.
In August 1997, the Company assumed the branch deposits and acquired
certain assets, consisting of loans, accrued interest and premises and
equipment, of a Roosevelt Bank branch located in Lamar, Missouri. Such deposits
and their accrued interest payable approximated $39,379,000 and the acquired
assets aggregated $442,000. The Company paid a premium of $1,298,000 in
connection with the transaction, which has been recorded as goodwill in the
accompanying consolidated financial statements and is being amortized over
fifteen years.
F-25
<PAGE> 85
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In March 1998, the Company assumed the branch deposits and acquired certain
assets, consisting of loans, accrued interest and premises and equipment, of a
NationsBank branch located in Ottawa, Kansas. The deposits and their accrued
interest payable approximated $33,777,000 and the acquired assets aggregated
$3,585,000. The Company paid a premium of $1,922,000 in connection with the
transaction, which has been recorded as goodwill in the accompanying
consolidated financial statements and is being amortized over fifteen years.
(15) COMMITMENTS AND CONTINGENCIES
Standby letters of credit were approximately $2,658,000 and $2,268,000 and
outstanding loan commitments and available lines of credit with customers were
approximately $45,115,000 and $39,549,000 at December 31, 1998 and 1997,
respectively. Substantially all letters of credit and loan commitments are at
variable interest rates which approximate market rates. The credit risk involved
in issuing these standby letters of credit and loan commitments is essentially
the same as that involved in extending loans to customers.
(16) PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
Following is condensed financial information of the Company as of December
31, 1998 and 1997 and for each of the years in the three-year period ended
December 31, 1998 (in thousands):
CONDENSED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
Assets
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Cash........................................................ $ 616 $ 486
Investment in subsidiaries.................................. 38,141 32,518
Other....................................................... 740 792
------- -------
Total assets...................................... $39,497 $33,796
======= =======
Liabilities and Stockholders' Equity
Long-term debt.............................................. $13,900 $11,081
Other....................................................... 196 73
Redeemable common stock held by ESOP, net................... 16,876 18,143
Nonredeemable stockholders' equity.......................... 8,525 4,499
------- -------
Total liabilities and stockholders' equity........ $39,497 $33,796
======= =======
</TABLE>
F-26
<PAGE> 86
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
Dividends from subsidiaries............................ $ 2,300 $ 1,601 $1,008
Interest income........................................ 29 19 11
Other expense, net..................................... (2,363) (1,396) (857)
------- ------- ------
Income (loss) before equity in undistributed earnings
of subsidiaries................................... (34) 224 162
Increase in undistributed equity of subsidiaries....... 1,418 1,264 1,660
------- ------- ------
Income before income taxes........................... 1,384 1,488 1,822
Income tax benefit..................................... 960 726 470
------- ------- ------
Net income................................... $ 2,344 $ 2,214 $2,292
======= ======= ======
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 2,344 $ 2,214 $ 2,292
Increase in undistributed equity of subsidiaries...... (1,418) (1,264) (1,660)
Allocation of ESOP shares............................. 451 295 (47)
Other................................................. 218.... (237) (155)
------- ------- -------
Net cash provided by operating activities..... 1,595 1,008 430
------- ------- -------
Cash flows from investing activities:
Capital contributions to subsidiaries................. (4,000) (7,000) --
Acquisition of subsidiary............................. -- -- (3,117)
Other................................................. (42) (161) 24
------- ------- -------
Net cash used in investing activities......... (4,042) (7,161) (3,093)
------- ------- -------
Cash flows from financing activities:
Proceeds from long-term debt.......................... 5,000 7,700 1,344
Principal payments on long-term debt.................. (1,388) (1,745) (397)
Purchase of treasury stock............................ (869) 1,145 --
Proceeds from sales of treasury stock................. 374 -- --
Issuance of common stock.............................. 146 -- 2,140
Payment of dividends.................................. (686) (683) (588)
------- ------- -------
Net cash provided by (used in) financing
activities.................................. 2,577 6,417 2,499
------- ------- -------
Net increase (decrease) in cash............... 130 264 (164)
------- ------- -------
Cash at beginning of year............................... 486 222 386
------- ------- -------
Cash at end of year..................................... $ 616 $ 486 $ 222
======= ======= =======
Noncash financing activities -- issuance of treasury
stock to retire notes payable......................... $ 793 $ -- $ --
======= ======= =======
</TABLE>
F-27
<PAGE> 87
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The primary sources of funds available to the Company is the payment of
dividends by the subsidiaries. Subject to maintaining certain minimum regulatory
capital requirements, regulations limit the amount of dividends that may be paid
without prior approval of the subsidiaries' regulatory agencies. At December 31,
1998, the subsidiaries could pay dividends of $3,179,000 without prior
regulatory approval.
F-28
<PAGE> 88
- ------------------------------------------------------
- ------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR ANY OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AUTHORIZED BY US AND REFERRED TO IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, YOU MUST NOT RELY UPON THE INFORMATION AND REPRESENTATIONS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE AN
OFFER. WE DO NOT INTEND THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE TO
CREATE THE IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR AFFAIRS SINCE THE
DATE OF THE INFORMATION PROVIDED IN THIS PROSPECTUS. HOWEVER, IF THERE IS ANY
MATERIAL CHANGE IN OUR AFFAIRS DURING THE TIME WHEN A COPY OF THIS PROSPECTUS IS
REQUIRED TO BE DELIVERED, WE WILL AMEND OR SUPPLEMENT THIS PROSPECTUS TO REFLECT
THE CHANGE.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 4
Selected Consolidated Financial
Data................................ 9
Use of Proceeds....................... 10
Dividend Policy; No Prior Market for
Common Stock........................ 10
Dilution.............................. 11
Capitalization........................ 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13
Business.............................. 31
Management............................ 38
Related Party Transactions............ 42
Principal Shareholders and Selling
Shareholder......................... 43
Supervision and Regulation............ 45
Description of Capital Stock.......... 51
Shares Eligible for Future Sale....... 56
Underwriting.......................... 56
Legal Matters......................... 58
Experts............................... 58
Forward-Looking Statements............ 58
Additional Information................ 58
Index to Financial Statements......... F-1
</TABLE>
DEALER PROSPECTUS DELIVERY OBLIGATIONS. UNTIL , 1999, ALL DEALERS THAT
EFFECT TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND REGARDING THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,000,000 SHARES
TEAM FINANCIAL, INC.
COMMON STOCK
[TEAM FINANCIAL, INC. LOGO]
--------------------
PROSPECTUS
--------------------
HOWE BARNES INVESTMENTS, INC.
-, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 89
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 4,157
NASD fee.................................................... 1,995
Nasdaq National Market fee.................................. 23,500
Legal fees and expenses..................................... 125,000
Accounting fees and expenses................................ 80,000
Printing expenses........................................... 80,000
Transfer agent fees......................................... 10,000
Miscellaneous expenses...................................... 25,348
--------
Total............................................. $350,000
========
</TABLE>
All of the above items except the registration fee are estimated. The
Selling Shareholder will incur and pay its counsel fees for the offering.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Directors, officers, employees and agents of Team and/or the subsidiary
banks may be entitled to benefit from the indemnification provisions contained
in the Kansas General Corporation Code (the "KGCC"), Team's Articles of
Incorporation and certain indemnification provisions. The general effect of
these provisions is summarized below:
Section 17-6305 of the KGCC permits a Kansas corporation to indemnify any
person who was or is a party or is threatened to be made a party to any suit,
action or other proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, or other enterprise. Such indemnification may
be against expenses, including attorneys' fees, judgments, fines and other
amounts in connection with such proceeding. Indemnification is available if such
person acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, or, with respect to any
criminal action or proceeding, such person had no reasonable cause to believe
that the conduct was unlawful. Unless a court of competent jurisdiction
otherwise orders, indemnification is not available in connection with a
proceeding by or in the right of the corporation if the person is adjudged
liable to the corporation. A corporation is required to indemnify a director or
officer who is successful on the merits or otherwise in the defense of any such
proceeding. Expenses (including attorneys' fees) incurred by a director,
officer, employee or agent of the corporation in defending any such proceeding
may be advanced by the corporation before the final disposition if such person
furnishes an undertaking to repay such advances if it is ultimately determined
that such person is not entitled to be indemnified. Before a corporation may
indemnify or advance expenses to a person under these provisions, the board of
directors (excluding any directors who are parties to such a proceeding),
independent legal counsel appointed by the board of directors, or the
shareholders must provide authorization. A corporation may purchase insurance
against any liability of individuals for whom the corporation may provide such
indemnification. The indemnification and advancement of expenses authorized by
the KGCC is not exclusive of any other rights that such persons may be entitled
to under any bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.
Article Eleventh of Team's Restated and Amended Articles of Incorporation
provides powers to indemnify and make advances to any person, or such person's
estate, in connection with any threatened, pending or completed action, suit or
proceeding that such person is involved in due to their capacity as a director,
officer, employee or agent of Team or any other entity in which they were
serving at the request of Team.
II-1
<PAGE> 90
Section 11 of the proposed Underwriting Agreement filed herewith as Exhibit
1.1 among Team, the selling shareholder and the underwriter contains customary
cross indemnification provisions.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
All issuances of common stock discussed below have been adjusted to reflect
the five-for-one stock split made by Team in December 1998.
From 1994 through 1998, Team issued 32,670 shares of its common stock
pursuant to Team's Employee Stock Purchase Plan. Sales were only made to
eligible employees of Team or its subsidiaries who elected to participate in the
plan. The sales were made in transactions exempt from the registration
requirements of Section 5 of the Securities Act, pursuant to Section 4(2) and
Rule 701. Also, in establishing the exemption, pertinent investment information
was made available to participants in the plan and Team received a
representation from each person of his or her intent to acquire the securities
for purposes of investment only and not with a view toward any distribution or
public resale, and each of the certificates representing the securities has been
embossed with a restrictive legend restricting transfer of the securities.
In 1997 and 1998, Team issued 11,378 shares of its common stock to certain
executive officers of Team and its subsidiaries who elected to take such shares
in lieu of a cash bonus. The sales were made in transactions exempt from the
registration requirements of Section 5 of the Securities Act, pursuant to
Section 4(2).
In February 1997, Team issued 23,053 shares of its common stock in a
private offering with nine investors, most of whom were affiliates of Team or
its subsidiary banks. No underwriters or broker-dealers were involved in the
offer and sale of the securities. The sales were made in transactions exempt
from the registration requirements of Section 5 of the Securities Act, pursuant
to Section 4(2) and Rule 506 of Regulation D. With regard to Team's reliance
upon such exemption, sales were limited to affiliates of, or persons with a
business or pre-existing relationship to, Team or its subsidiary banks. Team
also made certain inquiries to establish that such sales qualified for the
exemption. In particular, Team received written representations from each
person, among other things, that he or she was an experienced and sophisticated
investor not in need of the protection afforded investors by the Securities Act
and that he or she had made available all information necessary in order to make
an informed investment decision. Team further obtained a representation from
each person of his or her intent to acquire the securities for purposes of
investment only and not with a view toward any distribution or public resale,
and each of the certificates representing the securities has been embossed with
a restrictive legend restricting transfer of the securities.
In June 1997, 150 shares of common stock were issued and sold to Rick P.
Bartley, President of TeamBank, N.A. The issuance and sale was made to comply
with federal banking laws which required Mr. Bartley to own at least $1,000
worth of Team's common stock. In May 1998, an additional 1,435 shares of common
stock were issued to Mr. Bartley pursuant to the terms of his employment
contract. Both issuances were made in transactions exempt from the registration
requirements of Section 5 of the Securities Act, pursuant to Section 4(2). Each
of the certificates representing the securities have been embossed with a
restrictive legend restricting transfer of the securities.
In May 1998, Team issued 3,860 shares of its common stock to Heartland
Management Services, Inc. pursuant to the terms of a consulting agreement
between Team and Heartland. The issuance was made in a transaction exempt from
the registration requirements of Section 5 of the Securities Act, pursuant to
Section 4(2). The certificate representing the securities has been embossed with
a restrictive legend restricting transfer of the securities.
In September 1998, Team issued 67,810 shares of its common stock as part of
an exchange with all holders (eight persons) of Team's MERN Preferred Stock. At
the same time, Team also sold 31,995 shares of its common stock to three
investors in a private offering. No underwriters or broker-dealers were involved
in the exchange offering or sale to the singular investor. The issuances were
made in
II-2
<PAGE> 91
transactions exempt from the registration requirements of Section 5 of the
Securities Act, pursuant to Section 4(2). With regard to Team's reliance upon
such exemption, it made certain inquiries to establish that such exchange
qualified for the exemption. In particular, Team received written
representations from each person, among other things, that he or she was an
experienced and sophisticated investor not in need of the protection afforded
investors by the Securities Act and that he or she had made available all
information necessary in order to make an informed investment decision to
exchange the securities. Team further obtained a representation from each person
of his or her intent to acquire the securities for purposes of investment only
and not with a view toward any distribution or public resale, and each of the
certificates representing the securities has been embossed with a restrictive
legend restricting transfer of the securities.
ITEM 16. EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 -- Form of Underwriting Agreement(2).
3.1 -- Restated and Amended Articles of Incorporation of Team
Financial, Inc.(1).
3.2 -- Amended Bylaws of Team Financial, Inc.(1).
4.1 -- Specimen common stock certificate(2).
5.1 -- Opinion of Hartley, Nicholson & Hartley, P.A.(2).
10.1 -- Employment Agreement between Team Financial, Inc. and
Robert J. Weatherbie dated January 1, 1998(1).
10.2 -- Employment Agreement between Team Financial, Inc. and
Michael L. Gibson dated January 1, 1998(1).
10.3 -- Employment Agreement between Team Financial, Inc. and
Rick P. Bartley dated January 1, 1999(1).
10.4 -- Laser Pro License and Maintenance Agreement between Miami
County National Bank (now TeamBank, N.A.) and CFI Bankers
Service Group, Inc. dated March 17, 1989(1).
10.5 -- Data Processing Services Agreement between TeamBanc, Inc.
(now Team Financial, Inc.) and M&I Data Services, Inc.
dated December 22, 1992(1).
10.6 -- 401K Plan of Team Financial, Inc. 401(k) Trust, effective
January 1, 1999 and administered by Nationwide Life
Insurance Company (1).
10.7 -- The following documents regarding the loan agreement
between Team Financial, Inc., Team Financial, Inc.
Employee Stock Ownership Plan and Commerce Bank all of
which are dated August 21, 1997, unless otherwise noted:
(i) Term Loan Agreement and Amendment One to Term Loan
Agreement dated October 31, 1997; (ii) Term Note in the
principal amount of $1,199,000; (iii) Collateral
Assignment; (iv) ESOP Note (and Pledge Agreement) in the
amount of $1,199,000; (v) Lending Agreement; (vi)
Corporate Guaranty for Team Financial Acquisition
Subsidiary, Inc.; and (vii) Collateral Pledge Agreements
from Team Financial, Inc. and from Team Financial
Acquisition Subsidiary, Inc.(1)
10.8 -- The following documents regarding the loan agreement
between Team Financial, Inc., Team Financial, Inc.
Employee Stock Ownership Plan and Commerce Bank all of
which are dated August 21, 1997, unless otherwise noted:
(i) Term Loan Agreement and Amendment One to Term Loan
Agreement dated October 31, 1997; (ii) Term Note in the
principal amount of $247,000; (iii) Collateral
Assignment; (iv) ESOP Note (and Pledge Agreement) in the
amount of $247,000; and (v) Lending Agreement.(1)
</TABLE>
II-3
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.9 -- The following documents regarding the loan agreement
between Team Financial, Inc., Team Financial, Inc.
Employee Stock Ownership Plan and Commerce Bank all of
which are dated September 30, 1997, unless otherwise
noted: (i) Term Loan Agreement and Amendment One to Term
Loan Agreement dated October 31, 1997; (ii) Term Note in
the principal amount of $200,018; (iii) Collateral
Assignment; (iv) ESOP Note (and Pledge Agreement) in the
amount of $200,018; and (v) Lending Agreement.(1)
10.10 -- The following documents regarding the loan agreement
between Team Financial, Inc. and Commerce Bank all of
which are dated August 9, 1997, unless otherwise noted:
(i) Loan Agreement and Amendment One and Two to the Loan
Agreement dated March 19, 1998 and June 29, 1998,
respectively; (ii) Second Amended and Restated Term Note
in the principal amount of $12,400,000 dated June 29,
1999; and (iii) Corporate Guaranty.(1)
10.11 -- Summary Plan Description For The Team Financial, Inc.
Employee Stock Ownership Plan.(1)
10.12 -- Team Financial, Inc. -- 1999 Stock Incentive Plan.(2)
10.13 -- Rights Agreement Between Team Financial, Inc. and
American Securities Transfer & Trust, Inc. dated June 3,
1999.(2)
10.14 -- Team Financial, Inc. -- Employee Stock Purchase Plan.(2)
11.1 -- Statement re Computation of per share earnings -- see
consolidated financial statements.
21 -- Subsidiaries of Team(1).
23.1 -- Consent of KPMG LLP(2).
23.2 -- Consent of Hartley, Nicholson & Hartley, P.A. (included
in Exhibit 5.1 above).
24.1 -- Power of attorney(1).
27 -- Financial Data Schedule(2).
</TABLE>
- ---------------
(1) Filed with this Registration Statement on April 13, 1999.
(2) Filed herewith.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, Team has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Team of expenses incurred or paid by
a director, officer or controlling person of Team in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, Team
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Team hereby undertakes to provide to the underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
II-4
<PAGE> 93
Team hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by Team pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Paola, State of Kansas, on this 7th day of June, 1999.
TEAM FINANCIAL, INC.
By: /s/ ROBERT J. WEATHERBIE
----------------------------------
Robert J. Weatherbie,
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ ROBERT J. WEATHERBIE Director, Chairman and Chief June 7, 1999
- ----------------------------------------------------- Executive Officer (Principal
Robert J. Weatherbie Executive Officer)
/s/ MICHAEL L. GIBSON Director, President -- June 7, 1999
- ----------------------------------------------------- Acquisitions/Investments and
Michael L. Gibson Chief Financial Officer
/s/ ROBERT J. WEATHERBIE Director June 7, 1999
- -----------------------------------------------------
Attorney-in-fact for
Montie K. Taylor
/s/ ROBERT J. WEATHERBIE Director June 7, 1999
- -----------------------------------------------------
Attorney-in-fact for
R.G. (Gary) Kilkenny
/s/ ROBERT J. WEATHERBIE Director June 7, 1999
- -----------------------------------------------------
Attorney-in-fact for
Carolyn S. Jacobs
/s/ ROBERT J. WEATHERBIE Director June 7, 1999
- -----------------------------------------------------
Attorney-in-fact for
Neil Blakeman
/s/ ROBERT J. WEATHERBIE Director June 7, 1999
- -----------------------------------------------------
Attorney-in-fact for
Denis A. Kurtenbach
/s/ ROBERT J. WEATHERBIE Director June 7, 1999
- -----------------------------------------------------
Attorney-in-fact for
Glen E. Gilpin
</TABLE>
II-6
<PAGE> 95
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 -- Form of Underwriting Agreement
4.1 -- Specimen common stock certificate
5.1 -- Opinion of Hartley, Nicholson & Hartley, P.A.
10.12 -- Team Financial, Inc. -- 1999 Stock Incentive Plan
10.13 -- Rights Agreement Between Team Financial, Inc. and
American Securities Transfer & Trust, Inc. dated June 3,
1999
10.14 -- Team Financial, Inc. -- Employee Stock Purchase Plan
11.1 -- Statement re Computation of per share earnings -- see
consolidated financial statements
23.1 -- Consent of KPMG LLP
23.2 -- Consent of Hartley, Nicholson & Hartley, P.A. (included
in Exhibit 5.1 above).
27 -- Financial Data Schedule
</TABLE>
<PAGE> 1
CHAPMAN AND CUTLER
DRAFT OF JUNE 7, 1999
TEAM FINANCIAL, INC.
1,000,000 SHARES COMMON STOCK*
UNDERWRITING AGREEMENT
June __, 1999
Howe Barnes Investments, Inc.
As Representative of the several Underwriters
named in Schedule A
135 South LaSalle Street
Chicago, Illinois 60603
Ladies and Gentlemen:
Section 1. Introductory. Team Financial, Inc. (the "Company"), a bank
holding company, has an authorized capital stock consisting of 10,000,000 shares
of Preferred Stock, none of which were outstanding as of June __, 1999, and
50,000,000 shares of Common Stock ("Common Stock"), of which ____________ shares
were outstanding as of such date. The Company proposes to issue and sell 700,000
shares of its authorized but unissued Common Stock and a shareholder of the
Company (referred to as the "Selling Shareholder" and named in Schedule B)
proposes to sell 300,000 shares of the Company's issued and outstanding Common
Stock to the several underwriters named in Schedule A, as it may be amended by
the Pricing Agreement hereinafter defined (the "Underwriters"), who are acting
severally and not jointly. Collectively, such total of 1,000,000 shares of
Common Stock proposed to be sold by the Company and the Selling Shareholder is
hereinafter referred to as the "Firm Shares." In addition, the Company proposes
to grant to the Underwriters an option to purchase up to 150,000 additional
shares of Common Stock ("Option Shares") as provided in Section 5 hereof. The
Firm Shares and, to the extent such option is exercised, the Option Shares, are
hereinafter collectively referred to as the "Shares."
You have advised the Company and the Selling Shareholder that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon as you deem advisable after the registration statement
hereinafter referred to becomes effective, if it has not yet become effective,
and after the Pricing Agreement hereinafter defined has been executed and
delivered.
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company, the Selling Shareholder and the Representative,
acting on behalf of the several Underwriters, shall enter into an agreement
substantially in the form of Exhibit A hereto ("Pricing Agreement"). The Pricing
Agreement may take the form of an exchange of any standard form of written
communication between the Company, the Selling Shareholder and the
Representative and shall specify such applicable information as is indicated in
Exhibit A hereto.
- -----------------
*Plus an option to acquire up to 150,000 additional shares to cover
overallotments.
<PAGE> 2
The offering of the Shares will be governed by this Agreement, as supplemented
by the Pricing Agreement. From and after the date of the execution and delivery
of the Pricing Agreement, this Agreement shall be deemed to incorporate the
Pricing Agreement.
The Company and the Selling Shareholder hereby confirm their agreements
with the Underwriters as follows:
Section 2. Representations and Warranties of the Company. The Company
represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-76163)
and a related preliminary prospectus with respect to the Shares have
been prepared and filed with the Securities and Exchange Commission
("Commission") by the Company in conformity with the requirements of
the Securities Act of 1933, as amended, and the rules and regulations
of the Commission thereunder (collectively, the "1933 Act;" unless
indicated to the contrary, all references herein to specific rules are
rules promulgated under the 1933 Act); and the Company has so prepared
and has filed such amendments thereto, if any, and such amended
preliminary prospectuses as may have been required to the date hereof,
and will file such additional amendments thereto and such amended
prospectuses as may hereafter be required. There have been or will
promptly be delivered to you three signed copies of such registration
statement and amendments, three copies of each exhibit filed therewith,
and conformed copies of such registration statement and amendments (but
without exhibits) and the related preliminary prospectus or
prospectuses and final forms of prospectus for each of the
Underwriters. Such registration statement (as amended, if applicable)
at the time it becomes effective and the prospectus constituting a part
thereof (including the information, if any, deemed to be part thereof
pursuant to Rule 430A(b) and/or Rule 434), as from time to time amended
or supplemented, are hereinafter referred to as the "Registration
Statement," and the "Prospectus," respectively, except that if any
revised prospectus shall be provided to the Underwriters by the Company
for use in connection with the offering of the Shares which differs
from the Prospectus on file at the Commission at the time the
Registration Statement became or becomes effective (whether or not such
revised prospectus is required to be filed by the Company pursuant to
Rule 424(b)), the term Prospectus shall refer to such revised
prospectus from and after the time it was provided to the Underwriters
for such use. If the Company elects to rely on Rule 434 of the 1933
Act, all references to "Prospectus" shall be deemed to include, without
limitation, the form of prospectus and the term sheet, taken together,
provided to the Underwriters by the Company in accordance with Rule 434
of the 1933 Act ("Rule 434 Prospectus"). Any registration statement
(including any amendment or supplement thereto or information which is
deemed part thereof) filed by the Company under Rule 462(b) ("Rule
462(b) Registration Statement") shall be deemed to be part of the
"Registration Statement" as defined herein, and any prospectus
(including any amendment or supplement thereto or information which is
deemed part thereof) included in such registration statement shall be
deemed to be part of the "Prospectus," as defined herein, as
appropriate. The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder are hereinafter
collectively referred to as the "Exchange Act."
-2-
<PAGE> 3
(b) The Commission has not issued any order preventing or
suspending the use of any preliminary prospectus, and each preliminary
prospectus has conformed in all material respects with the requirements
of the 1933 Act and, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading; and when the
Registration Statement became or becomes effective, and at all times
subsequent thereto, up to the First Closing Date or the Second Closing
Date hereinafter defined, as the case may be, the Registration
Statement, including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule
430A(b), if applicable, and the Prospectus and any amendments or
supplements thereto, contained or will contain all statements that are
required to be stated therein in accordance with the 1933 Act and in
all material respects conformed or will in all material respects
conform to the requirements of the 1933 Act, and neither the
Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, included or will include any untrue statement of a
material fact or omitted or will omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company makes no representation
or warranty as to information contained in or omitted from any
preliminary prospectus, the Registration Statement, the Prospectus or
any such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
any Underwriter through the Representative specifically for use in the
preparation thereof.
(c) The Company has been duly organized and is validly
existing and in good standing as a bank holding company within the
meaning of the Bank Holding Company Act of 1956, as amended ("BHCA"),
and is registered with the Board of Governors of the Federal Reserve
System ("FRB"). Except as otherwise noted in the financial statements,
the Company does not directly or indirectly own any stock or other
equity interest in excess of five percent (5%) in any corporation,
partnership, joint venture, unincorporated association or other entity
other than TeamBanc, N.A., Iola Bank and Trust Company, First National
Bank and Trust Company and TeamBank Nebraska (collectively, the
"Banks") and Team Financial Acquisition Subsidiary, Inc. (the
"Acquisition") (the Banks, Acquisition and any other entities owned by
the Company being collectively referred to herein as the
"Subsidiaries"). Each Subsidiary has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own or lease its properties and conduct its business as
described in the Prospectus, and is duly qualified to transact business
in all jurisdictions in which the conduct of its business or its
ownership or leasing of property requires such qualification and the
failure so to qualify would have a material adverse effect on the
business or condition, financial or otherwise, of the Company and the
Subsidiaries, taken as a whole; and no proceeding of which the Company
has knowledge has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification. All outstanding shares of capital
stock of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable, and are owned, directly or
indirectly, by the Company free and clear of all liens, encumbrances
and security interests, except as otherwise noted to you. Except as
provided in the
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Registration Statement, no options, warrants or other rights to
purchase, agreements or other obligations to issue, or other rights to
convert any obligations into, shares of capital stock or ownership
interests in any of the Subsidiaries are outstanding.
(d) Except as disclosed in the Registration Statement, the
Company owns directly or indirectly 100 percent of the issued and
outstanding capital stock of each of its Subsidiaries, free and clear
of any claims, liens, encumbrances or security interests and all of
such capital stock has been duly authorized and validly issued and is
fully paid and nonassessable.
(e) The issued and outstanding shares of capital stock of the
Company as set forth in the Prospectus have been duly authorized and
validly issued, are fully paid and nonassessable, and conform to the
description thereof contained in the Prospectus.
(f) The Shares to be sold by the Company have been duly
authorized and when issued, delivered and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable, and
will conform to the description thereof contained in the Prospectus.
(g) The making and performance by the Company of this
Agreement and the Pricing Agreement have been duly authorized by all
necessary corporate action and will not violate any provision of the
Company's charter or bylaws and will not result in the breach, or be in
contravention, of any provision of any agreement, franchise, license,
indenture, mortgage, deed of trust, or other instrument to which the
Company or any subsidiary is a party or by which the Company, any
subsidiary or the property of any of them may be bound or affected, or
any order, rule or regulation applicable to the Company or any
subsidiary of any court or regulatory body, administrative agency or
other governmental body having jurisdiction over the Company or any
subsidiary or any of their respective properties, or any order of any
court or governmental agency or authority entered in any proceeding to
which the Company or any subsidiary was or is now a party or by which
it is bound. No consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental
body is required for the execution and delivery of this Agreement or
the Pricing Agreement or the consummation of the transactions
contemplated herein or therein, except for compliance with the 1933 Act
and blue sky laws applicable to the public offering of the Shares by
the several Underwriters and clearance of such offering with the
National Association of Securities Dealers, Inc. ("NASD"). This
Agreement has been duly executed and delivered by the Company.
(h) The accountants who have expressed their opinions with
respect to certain of the financial statements and schedules included
in the Registration Statement are independent accountants as required
by the 1933 Act.
(i) The financial statements, together with the related notes
and schedules, contained in the Registration Statement and Prospectus
present fairly the consolidated financial position, results of
operations, shareholders' equity and cash flows of the
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<PAGE> 5
Company and its consolidated Subsidiaries on the basis stated therein
at the indicated dates and for the indicated periods. Such financial
statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved, and all adjustments necessary for a fair presentation of
results for such periods have been made, except as otherwise stated
therein. The selected financial and statistical data included in the
Registration Statement present fairly the information shown therein on
the basis stated in the Registration Statement and have been compiled
on a basis consistent with the financial statements presented therein.
(j) Neither the Company nor any Subsidiary is in violation of
its charter or in default under any consent decree, or in default with
respect to any material provision of any lease, loan agreement,
franchise, license, permit or other contract obligation to which it is
a party; and there does not exist any state of facts which constitutes
an event of default as defined in such documents or which, with notice
or lapse of time or both, would constitute such an event of default, in
each case, except for defaults which neither singly nor in the
aggregate are material to the Company and its Subsidiaries taken as a
whole.
(k) There are no material legal or governmental proceedings
pending, or to the Company's knowledge, threatened to which the Company
or any Subsidiary is or may be a party or of which material property
owned or leased by the Company or any Subsidiary is or may be the
subject, or related to environmental or discrimination matters which
are not disclosed in the Prospectus, or which question the validity of
this Agreement or the Pricing Agreement or any action taken or to be
taken pursuant hereto or thereto.
(l) There are no holders of securities of the Company having
rights to registration thereof or preemptive rights to purchase Common
Stock except as disclosed in the Prospectus. Holders of registration
rights have waived such rights with respect to the offering being made
by the Prospectus.
(m) The Company and each of its Subsidiaries have good and
marketable title to all the properties and assets reflected as owned in
the financial statements hereinabove described (or elsewhere in the
Prospectus), subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except those, if any, reflected in such
financial statements (or elsewhere in the Prospectus) or which are not
material to the Company and its Subsidiaries taken as a whole. The
Company and each of its Subsidiaries hold their respective leased
properties which are material to the Company and its Subsidiaries taken
as a whole under valid and binding leases.
(n) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result, under the Exchange Act
or otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
(o) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or
supplemented, (A) there has not been
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<PAGE> 6
any material adverse change, or any development involving a prospective
material adverse change, in or affecting the condition, financial or
otherwise, of the Company and the Subsidiaries taken as a whole, or the
business affairs, management, financial position, shareholders' equity
or results of operations of the Company and the Subsidiaries, taken as
a whole, whether or not occurring in the ordinary course of business,
(B) there has not been any transaction not in the ordinary course of
business entered into by the Company or any of the Subsidiaries which
is material to the Company and the Subsidiaries, taken as a whole,
other than transactions described or contemplated in the Registration
Statement, (C) the Company and the Subsidiaries have not incurred any
material liabilities or obligations, which are not in the ordinary
course of business or which could result in a material reduction in the
future earnings of the Company and the Subsidiaries, (D) the Company
and the Subsidiaries have not sustained any material loss or
interference with their respective businesses or properties from fire,
flood, windstorm, accident or other calamity, whether or not covered by
insurance, (E) there has not been any change in the capital stock of
the Company or the Subsidiaries (other than upon the exercise of
options and warrants described in the Registration Statement), or any
material increase in the short-term or long-term debt (including
capitalized lease obligations) of the Company and the Subsidiaries,
taken as a whole, and (F) there has not been any declaration or payment
of any dividends or any distributions of any kind with respect to the
capital stock of the Company or the Subsidiaries other than any
dividends or distributions described or contemplated in the
Registration Statement.
(p) The Company agrees not to sell, contract to sell or
otherwise dispose of any Common Stock or securities convertible into
Common Stock (except Common Stock issued pursuant to currently
outstanding options, warrants or convertible securities) for a period
of 180 days after this Agreement becomes effective without the prior
written consent of the Representatives unless such disposition is
required by ERISA (as defined herein). The Company has obtained similar
agreements from each of its officers and directors who own Common Stock
and principal shareholders.
(q) There is no material document of a character required to
be described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement which is not
described or filed as required.
(r) The Company together with its Subsidiaries owns and
possesses all right, title and interest in and to, or has duly licensed
from third parties, all patents, patent rights, trade secrets,
inventions, know-how, trademarks, trade names, copyrights, service
marks and other proprietary rights ("Trade Rights") material to the
business of the Company and each of its Subsidiaries taken as a whole.
Neither the Company nor any of its Subsidiaries has received any notice
of infringement, misappropriation or conflict from any third party as
to such material Trade Rights which has not been resolved or disposed
of and neither the Company nor any of its subsidiaries has infringed,
misappropriated or otherwise conflicted with material Trade Rights of
any third parties, which infringement, misappropriation or conflict
would have a material adverse effect upon the condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries
taken as a whole.
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<PAGE> 7
(s) The conduct of the business of the Company and each of
its Subsidiaries is in compliance in all respects with applicable
federal, state, local and foreign laws and regulations, except where
the failure to be in compliance would not have a material adverse
effect upon the condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole.
(t) All offers and sales of the Company's capital stock prior
to the date hereof were at all relevant times exempt from the
registration requirements of the 1933 Act and were duly registered with
or the subject of an available exemption from the registration
requirements of the applicable state securities or blue sky laws.
(u) The Company has filed all necessary federal and state
income and franchise tax returns and has paid all taxes shown as due
thereon, and there is no tax deficiency that has been, or to the
knowledge of the Company might be, asserted against the Company or any
of its properties or assets that would or could be expected to have a
material adverse affect upon the condition (financial or otherwise) or
results of operations of the Company and its subsidiaries taken as a
whole.
(v) The Company has filed a registration statement pursuant
to Section 12(g) of the Exchange Act to register the Common Stock
thereunder, has filed an application to list the Shares on the Nasdaq
National Market, and has received notification that the listing has
been approved, subject to notice of issuance or sale of the Shares, as
the case may be.
(w) The Company is not, and does not intend to conduct its
business in a manner in which it would become, an "investment company"
as defined in Section 3(a) of the Investment Company Act of 1940, as
amended ("Investment Company Act").
(x) The deposit accounts of the Banks are insured by the
Federal Deposit Insurance Corporation (the "FDIC") to the fullest
extent provided by law. No proceeding for the termination of such
insurance is pending or is threatened. Neither the Company nor any
Subsidiary has received or is subject to any directive or order from
the FDIC or the FRB or any other regulatory authority to make any
material change in the method of conducting their respective businesses
that has not been complied with in all material respects.
(y) Neither the Company nor any of its affiliates does any
business, directly or indirectly, with the government of Cuba or with
any person or entity located in Cuba.
(z) The Company and its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with
management's general or specific authorization; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (C) access to records is permitted
only in accordance with management's general or specific authorization;
and (D) the recorded accountability for assets is
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<PAGE> 8
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(aa) Other than as contemplated by this Agreement and as
disclosed in the Registration Statement, the Company has not incurred
any liability for any finder's or broker's fee or agent's commission in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(bb) No report or application filed by the Company or any of
its subsidiaries with the FDIC or the FRB, as of the date it was filed,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading when made or failed to comply with
the applicable requirements of the FDIC or the FRB, as the case may be.
Section 3. Joint Representations, Warranties and Covenants of the
Company and the Selling Shareholder.
(a) The Company and the Selling Shareholder represent and
warrant to the Underwriters that:
(i) The Selling Shareholder has received a favorable
determination letter dated October 26, 1995, stating that the
document pursuant to which the Selling Shareholder was
operated at such time constitutes a valid employee stock
ownership plan and trust for purposes of Section 4975(e)(7) of
the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"). An amendment and restatement of such document
was adopted on December 16, 1998 and will be submitted to the
Internal Revenue Service with a request for a favorable
determination letter thereon. Subject to any conforming
amendments that may be requested or required by the Internal
Revenue Service in connection with such submission, the
Selling Shareholder will be a valid employee stock ownership
plan and trust for purposes of Section 4975(e)(7) of the
Internal Revenue Code. Except as disclosed in Schedule D, the
plan has been administered in form and in operation in
compliance with all requirements of law and regulation
applicable thereto and no event has occurred which will or
could give rise to disqualification of such plan under
Section 401 of the Internal Revenue Code.
(ii) The duly appointed "investment manager" (as such
term is defined in Section 3(38) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) of the
Selling Shareholder has found and concluded that the execution
of this Agreement and the Pricing Agreement by the Selling
Shareholder and that the Selling Shareholders entering into
the transactions contemplated by this Agreement and the
Pricing Agreement are appropriate and consistent with the
investment manager's fiduciary responsibility requirements of
ERISA and that such contemplated transactions are exempt from
the prohibited transaction restrictions under ERISA and the
Internal Revenue Code.
(iii) Except as disclosed on Schedule E, the Selling
Shareholder has, and on the First Closing Date or the Second
Closing Date hereinafter defined, as the case may be, will
have, valid marketable title to the Shares proposed to be sold
by such Selling Shareholder hereunder on such date and full
right, power and authority to enter into this Agreement and
the Pricing Agreement and to sell,
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<PAGE> 9
assign, transfer and deliver such Shares hereunder, free and
clear of all voting trust arrangements, liens, encumbrances,
equities, claims and community property rights; and upon
delivery of and payment for such Shares hereunder, the
Underwriters will acquire valid marketable title thereto, free
and clear of all voting trust arrangements, liens,
encumbrances, equities, claims and community property rights.
(iv) The Selling Shareholder has not taken and will
not take, directly or indirectly, any action designed to or
which might be reasonably expected to cause or result, under
the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(v) The Selling Shareholder further represents,
warrants and agrees that such Selling Shareholder has
deposited in custody, under a Custody Agreement ("Custody
Agreement") with ______________________________, as custodian
("Custodian"), certificates in negotiable form for the Shares
to be sold hereunder by the Selling Shareholder, for the
purpose of further delivery pursuant to this Agreement. The
Selling Shareholder agrees that the Shares to be sold by the
Selling Shareholder on deposit with the Custodian are subject
to the interests of the Company and the Underwriters, that the
arrangements made for such custody are to that extent
irrevocable, and that the obligations of the Selling
Shareholder hereunder and under the Custody Agreement shall
not be terminated except as provided in this Agreement or the
Custody Agreement by any act of the Selling Shareholder, by
operation of law, whether by the termination of the Selling
Shareholder, or by the occurrence of any other event. If the
Selling Shareholder should be terminated, or if any other
event should occur before the delivery of the Shares
hereunder, the documents evidencing Shares then on deposit
with the Custodian shall be delivered by the Custodian in
accordance with the terms and conditions of this Agreement as
if such termination or other event had not occurred,
regardless of whether or not the Custodian shall have received
notice thereof. The Custodian has been authorized to receive
and acknowledge receipt of the proceeds of sale of the Shares
to be sold by the Selling Shareholder against delivery thereof
and otherwise act on behalf of the Selling Shareholder. The
Custody Agreement has been duly executed by the Selling
Shareholder and a copy thereof has been delivered to you.
(vi) Each preliminary prospectus, insofar as it has
related to the Selling Shareholder and, to the knowledge of
the Selling Shareholder in all other respects, as of its date,
has conformed in all material respects with the requirements
of the 1933 Act and, as of its date, has not included any
untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein not
misleading; and the Registration Statement at the time of
effectiveness, and at all times subsequent thereto, up to the
First Closing Date, (1) such parts of the Registration
Statement and the Prospectus and any amendments or supplements
thereto as relate to the Selling Shareholder, and the
Registration Statement and the
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<PAGE> 10
Prospectus and any amendments or supplements thereto, to the
knowledge of the Selling Shareholder in all other respects,
contained or will contain all statements that are required to
be stated therein in accordance with the 1933 Act and in all
material respects conformed or will in all material respects
conform to the requirements of the 1933 Act, and (2) neither
the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, as it relates to the Selling
Shareholder, and, to the knowledge of the Selling Shareholder
in all other respects, included or will include any untrue
statement of a material fact or omitted or will omit to state
any material fact required to be stated therein or necessary
to make the statements therein not misleading; provided that
neither clause (1) nor (2) shall have any effect if
information has been given by the Selling Shareholder to the
Company and the Representative in writing which would
eliminate or remedy any such untrue statement or omission.
(vii) The Selling Shareholder agrees not to sell,
contract to sell or otherwise dispose of any Common Stock for
a period of 180 days after this Agreement becomes effective
without the prior written consent of the Representative;
provided however, distributions of Common Stock are
permissible if such distributions or dispositions are made
under the normal operations of the Selling Shareholder.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Internal Revenue Code with respect to the Sale
of Shares by the Selling Shareholder, the Selling Shareholder agrees to deliver
to you prior to or on the First Closing Date, as hereinafter defined, a properly
completed and executed United States Treasury Department Form W-8 or W-9 (or
other applicable form of statement specified by Treasury Department regulations
in lieu thereof).
Section 4. Representations and Warranties of the Underwriters. The
Representative, on behalf of the several Underwriters, represents and warrants
to the Company and the Selling Shareholder that the information set forth (a) on
the cover page of the Prospectus with respect to price, underwriting discount
and terms of the offering and (b) under "Underwriting" in the Prospectus was
furnished to the Company by and on behalf of the Underwriters for use in
connection with the preparation of the Registration Statement and is correct and
complete in all material respects.
Section 5. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company and the Selling Shareholder,
severally and not jointly, agree to sell to the Underwriters named in Schedule A
hereto, and the Underwriters agree, severally and not jointly, to purchase
700,000 Firm Shares from the Company and 300,000 Firm Shares from the Selling
Shareholder at the price per share set forth in the Pricing Agreement. The
obligation of each Underwriter to the Company shall be to purchase from the
Company that number of full shares which (as nearly as practicable, as
determined by you) bears to 700,000, the same proportion as the number of Shares
set forth opposite the name of such Underwriter in Schedule A hereto bears to
the total number of Firm Shares to be purchased by all Underwriters under this
Agreement.
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<PAGE> 11
The obligation of each Underwriter to the Selling Shareholder shall be to
purchase from the Selling Shareholder the number of full shares which (as nearly
as practicable, as determined by you) bears to 300,000, the same proportion as
the number of Shares set forth opposite the name of such Underwriter in Schedule
A hereto bears to the total number of Firm Shares to be purchased by all
Underwriters under this Agreement. The initial public offering price and the
purchase price shall be set forth in the Pricing Agreement.
At 9:00 A.M., Chicago Time, on the fourth business day, if permitted
under Rule 15c6-1 under the Exchange Act, (or the third business day if required
under Rule 15c6-1 under the Exchange Act or unless postponed in accordance with
the provisions of Section 12) following the date the Registration Statement
becomes effective (or, if the Company has elected to rely upon Rule 430A, the
fourth business day, if permitted under Rule 15c6-1 under the Exchange Act, (or
the third business day if required under Rule 15c6-1 under the Exchange Act)
after execution of the Pricing Agreement), or such other time not later than ten
business days after such date as shall be agreed upon by the Representative, the
Selling Shareholder and the Company, the Company and the Custodian will deliver
to you at the offices of counsel for the Underwriters or through the facilities
of The Depository Trust Company for the accounts of the several Underwriters,
certificates representing the Firm Shares to be sold by them, respectively,
against payment of the purchase price therefor by delivery of federal or other
immediately available funds, by wire transfer or otherwise, to the Company and
the Custodian. Such time of delivery and payment is herein referred to as the
"First Closing Date." The certificates for the Firm Shares so to be delivered
will be in such denominations and registered in such names as you request by
notice to the Company and the Custodian prior to 10:00 A.M., Chicago Time, on
the second business day preceding the First Closing Date, and will be made
available at the Company's expense for checking and packaging by the
Representative at 10:00 A.M., Chicago Time, on the business day preceding the
First Closing Date. Payment for the Firm Shares so to be delivered shall be made
at the time and in the manner described above at the offices of counsel for the
Underwriters.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 150,000 Option
Shares, at the same purchase price per share to be paid for the Firm Shares, for
use solely in covering any overallotments made by the Underwriters in the sale
and distribution of the Firm Shares. The option granted hereunder may be
exercised at any time (but not more than once) within 30 days after the date of
the initial public offering upon notice by you to the Company setting forth the
aggregate number of Option Shares as to which the Underwriters are exercising
the option, the names and denominations in which the certificates for such
shares are to be registered and the time and place at which such certificates
will be delivered. Such time of delivery (which may not be earlier than the
First Closing Date), being herein referred to as the "Second Closing Date,"
shall be determined by you, but if at any time other than the First Closing
Date, shall not be earlier than three nor later than 10 full business days after
delivery of such notice of exercise. The number of Option Shares to be purchased
by each Underwriter shall be determined by multiplying the number of Option
Shares to be sold by the Company pursuant to such notice of exercise by a
fraction, the numerator of which is the number of Firm Shares to be purchased by
such Underwriter as set forth opposite its name in Schedule A and the
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<PAGE> 12
denominator of which is the total number of Firm Shares (subject to such
adjustments to eliminate any fractional share purchases as you in your absolute
discretion may make). Certificates for the Option Shares will be made available
at the Company's expense for checking and packaging at 10:00 A.M., Chicago Time,
on the business day preceding the Second Closing Date. The manner of payment for
and delivery of the Option Shares shall be the same as for the Firm Shares as
specified in the preceding paragraph.
You have advised the Company and the Selling Shareholder that each
Underwriter has authorized you to accept delivery of its Shares, to make payment
and to receipt therefor. You, individually and not as the Representative of the
Underwriters, may make payment for any Shares to be purchased by any Underwriter
whose funds shall not have been received by you by the First Closing Date or the
Second Closing Date, as the case may be, for the account of such Underwriter,
but any such payment shall not relieve such Underwriter from any obligation
hereunder.
Section 6. Covenants of the Company. The Company covenants and agrees
that:
(a) The Company will advise you and the Selling Shareholder
promptly of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of the institution
of any proceedings for that purpose, or of any notification of the
suspension of qualification of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceedings for that purpose,
and will also advise you and the Selling Shareholder promptly of any
request of the Commission for amendment or supplement of the
Registration Statement, of any preliminary prospectus or of the
Prospectus, or for additional information.
(b) The Company will give you and the Selling Shareholder
notice of its intention to file or prepare any amendment to the
Registration Statement (including any post-effective amendment) or any
Rule 462(b) Registration Statement or any amendment or supplement to
the Prospectus (including any revised prospectus which the Company
proposes for use by the Underwriters in connection with the offering of
the Shares which differs from the prospectus on file at the Commission
at the time the Registration Statement became or becomes effective,
whether or not such revised prospectus is required to be filed pursuant
to Rule 424(b) and any term sheet as contemplated by Rule 434) and will
furnish you and the Selling Shareholder with copies of any such
amendment or supplement a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file any such
amendment or supplement or use any such prospectus to which you or
counsel for the Underwriters shall reasonably object.
(c) If the Company elects to rely on Rule 434 of the 1933 Act,
the Company will prepare a term sheet that complies with the
requirements of Rule 434. If the Company elects not to rely on Rule
434, the Company will provide the Underwriters with copies of the form
of prospectus, in such numbers as the Underwriters may reasonably
request, and file with the Commission such prospectus in accordance
with Rule 424(b) of the 1933 Act by the close of business in New York
City on the second business day immediately succeeding the date of the
Pricing Agreement. If the Company elects to rely
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<PAGE> 13
on Rule 434, the Company will provide the Underwriters with copies of
the form of Rule 434 Prospectus, in such numbers as the Underwriters
may reasonably request, by the close of business in New York on the
business day immediately succeeding the date of the Pricing Agreement.
(d) If at any time when a prospectus relating to the Shares is
required to be delivered under the 1933 Act any event occurs as a
result of which the Prospectus, including any amendments or
supplements, would include an 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, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus, including any amendments
or supplements thereto and including any revised prospectus which the
Company proposes for use by the Underwriters in connection with the
offering of the Shares which differs from the prospectus on file with
the Commission at the time of effectiveness of the Registration
Statement, whether or not such revised prospectus is required to be
filed pursuant to Rule 424(b) to comply with the 1933 Act, the Company
promptly will advise you thereof and will promptly prepare and file
with the Commission an amendment or supplement which will correct such
statement or omission or an amendment which will effect such
compliance; and, in case any Underwriter is required to deliver a
prospectus nine months or more after the effective date of the
Registration Statement, the Company upon request, but at the expense of
such Underwriter, will prepare promptly such prospectus or prospectuses
as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the 1933 Act.
(e) Neither the Company nor any of its Subsidiaries will,
prior to the earlier of the Second Closing Date or termination or
expiration of the related option, incur any liability or obligation,
direct or contingent, or enter into any material transaction, other
than in the ordinary course of business, except as contemplated by the
Prospectus.
(f) Neither the Company nor any of its Subsidiaries will
acquire any capital stock of the Company prior to the earlier of the
Second Closing Date or termination or expiration of the related option
nor will the Company declare or pay any dividend or make any other
distribution upon the Common Stock payable to shareholders of record on
a date prior to the earlier of the Second Closing Date or termination
or expiration of the related option, except in either case as
contemplated by the Prospectus; provided, however, nothing herein shall
preclude the Selling Shareholder from purchasing Common Stock from
distributees pursuant to the exercise by such distributees of the put
option described in the document pursuant to which the Selling
Shareholder operates.
(g) The Company will make generally available to its
shareholders, as soon as it is practicable to do so, but in any event
not later than 18 months after the effective date of the Registration
Statement, an earnings statement (which need not be audited) in
reasonable detail, covering a period of at least 12 consecutive months
beginning after the effective date of the Registration Statement, which
earnings statement shall satisfy the requirements of Section 11(a) of
the Act and Rule 158 thereunder and will advise you in writing when
such statement has been so made available.
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(h) During such period as a prospectus is required by law to
be delivered in connection with offers and sales of the Shares by an
Underwriter or dealer, the Company will furnish to you at its expense,
subject to the provisions of subsection (d) hereof, copies of the
Registration Statement, the Prospectus, each preliminary prospectus and
all amendments and supplements to any such documents in each case as
soon as available and in such quantities as you may reasonably request,
for the purposes contemplated by the 1933 Act.
(i) The Company will cooperate with the Underwriters in
qualifying or registering the Shares for sale under the blue sky laws
of such jurisdictions as you designate, and will continue such
qualifications in effect so long as reasonably required for the
distribution of the Shares. The Company shall not be required to
qualify as a foreign corporation or to file a general consent to
service of process in any such jurisdiction where it is not currently
qualified or where it would be subject to taxation as a foreign
corporation.
(j) During the period of five years hereafter, the Company
will furnish you and each of the other Underwriters with a copy (i) as
soon as practicable after the filing thereof, of each report filed by
the Company with the Commission, any securities exchange or the NASD;
(ii) as soon as practicable after the release thereof, of each material
press release in respect of the Company; and (iii) as soon as
available, of each report of the Company mailed to shareholders.
(k) The Company will use the net proceeds received by it from
the sale of the Shares being sold by it in the manner specified in the
Prospectus.
(l) If, at the time of effectiveness of the Registration
Statement, any information shall have been omitted therefrom in
reliance upon Rule 430A and/or Rule 434, then immediately following the
execution of the Pricing Agreement, the Company will prepare, and file
or transmit for filing with the Commission in accordance with such Rule
430A, Rule 424(b) and/or Rule 434, copies of an amended Prospectus, or,
if required by such Rule 430A and/or Rule 434, a post-effective
amendment to the Registration Statement (including an amended
Prospectus), containing all information so omitted. If required, the
Company will prepare and file, or transmit for filing, a Rule 462(b)
Registration Statement not later than the date of the execution of the
Pricing Agreement. If a Rule 462(b) Registration Statement is filed,
the Company shall make payment of, or arrange for payment of, the
additional registration fee owing to the Commission required by Rule
111.
(m) The Company will comply with all registration, filing and
reporting requirements of the Exchange Act and the Nasdaq National
Market.
Section 7. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective as to
all of its provisions or is terminated, the Company agrees to pay (i) all costs,
fees and expenses (other than legal fees and disbursements of counsel for the
Underwriters and the expenses incurred by the Underwriters)
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<PAGE> 15
incurred in connection with the performance of the Company's and the Selling
Shareholder's obligations hereunder, including without limiting the generality
of the foregoing, all fees and expenses of legal counsel for the Company and of
the Company's independent accountants, all costs and expenses incurred in
connection with the preparation, printing, filing and distribution of the
Registration Statement, each preliminary prospectus and the Prospectus
(including all exhibits and financial statements) and all amendments and
supplements provided for herein, this Agreement, the Pricing Agreement and the
Blue Sky Memorandum, (ii) all costs, fees and expenses (including legal fees not
to exceed $3,000 and disbursements of counsel for the Underwriters) incurred by
the Underwriters in connection with qualifying or registering all or any part of
the Shares for offer and sale under blue sky laws, including the preparation of
a blue sky memorandum relating to the Shares and clearance of such offering with
the NASD; and (iii) all fees and expenses of the Company's transfer agent and
the Custodian, printing of the certificates for the Shares and all transfer
taxes, if any, with respect to the sale and delivery of the Shares to the
several Underwriters.
Section 8. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm Shares
on the First Closing Date and the Option Shares on the Second Closing Date shall
be subject to the accuracy of the representations and warranties on the part of
the Company and the Selling Shareholder herein set forth as of the date hereof
and as of the First Closing Date or the Second Closing Date, as the case may be,
to the accuracy of the statements of officers of the Company made pursuant to
the provisions hereof, to the performance by the Company and the Selling
Shareholder of their respective obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement shall have become effective
either prior to the execution of this Agreement or not later than 1:00
P.M., Chicago Time, on the first full business day after the date of
this Agreement, or such later time as shall have been consented to by
you but in no event later than 1:00 P.M., Chicago Time, on the third
full business day following the date hereof; and prior to the First
Closing Date or the Second Closing Date, as the case may be, no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or, to the knowledge of the Company, the
Selling Shareholder or you, shall be contemplated by the Commission. If
the Company has elected to rely upon Rule 430A and/or Rule 434, the
information concerning the initial public offering price of the Shares
and price-related information shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) within the prescribed
period and the Company will provide evidence satisfactory to the
Representative of such timely filing (or a post-effective amendment
providing such information shall have been filed and declared effective
in accordance with the requirements of Rules 430A and 424(b)). If a
Rule 462(b) Registration Statement is required, such Registration
Statement shall have been transmitted to the Commission for filing and
become effective within the prescribed time period and, prior to the
First Closing Date, the Company shall have provided evidence of such
filing and effectiveness in accordance with Rule 462(b).
(b) The Shares shall have been qualified for sale under the
blue sky laws of such states as shall have been specified by the
Representative.
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<PAGE> 16
(c) The legality and sufficiency of the authorization,
issuance and sale or transfer and sale of the Shares hereunder, the
validity and form of the certificates representing the Shares, the
execution and delivery of this Agreement and the Pricing Agreement, and
all corporate proceedings and other legal matters incident thereto, and
the form of the Registration Statement and the Prospectus (except
financial statements) shall have been approved by counsel for the
Underwriters exercising reasonable judgment.
(d) You shall not have advised the Company and the Selling
Shareholder that the Registration Statement or the Prospectus or any
amendment or supplement thereto, contains an untrue statement of fact,
which, in the opinion of counsel for the Underwriters, is material or
omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein or necessary to make the
statements therein not misleading.
(e) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred any change, or any development
involving a prospective change, in or affecting particularly the
business or properties of the Company or its Subsidiaries, whether or
not arising in the ordinary course of business, which, in the judgment
of the Representative, makes it impractical or inadvisable to proceed
with the public offering or purchase of the Shares as contemplated
hereby.
(f) There shall have been furnished to you, as Representative
of the Underwriters, on the First Closing Date or the Second Closing
Date, as the case may be, except as otherwise expressly provided below:
(i) An opinion of Jones & Keller, P.C., Denver,
Colorado, counsel for the Company, addressed to the
Underwriters and dated the First Closing Date or the Second
Closing Date, as the case may be, to the effect that:
(1) the Registration Statement has become
effective under the 1933 Act, and, to the best
knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under
the 1933 Act, and the Registration Statement
(including the information deemed to be part of the
Registration Statement at the time of effectiveness
pursuant to Rule 430A(b) and/or Rule 434, if
applicable), the Prospectus and each amendment or
supplement thereto (except for the financial
statements and other statistical or financial data
included therein as to which such counsel need
express no opinion) comply as to form in all material
respects with the requirements of the 1933 Act; such
counsel have no reason to believe that either the
Registration Statement (including the information
deemed to be part of the Registration Statement at
the time of effectiveness pursuant to Rule 430A(b)
and/or Rule 434, if applicable) or the Prospectus, or
the Registration Statement or the Prospectus as
amended or supplemented (except as aforesaid), as of
their respective effective or issue dates,
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<PAGE> 17
contained any untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading or that the Prospectus as
amended or supplemented, if applicable, as of the
First Closing Date or the Second Closing Date, as the
case may be, contained any untrue statement of a
material fact or omitted to state any material fact
necessary to make the statements therein not
misleading in light of the circumstances under which
they were made; the statements in the Registration
Statement and the Prospectus summarizing statutes,
rules and regulations are accurate and fairly and
correctly present the information required to be
presented by the 1933 Act or the rules and
regulations thereunder, in all material respects and
such counsel does not know of any statutes, rules and
regulations required to be described or referred to
in the Registration Statement or the Prospectus that
are not described or referred to therein as required;
and such counsel does not know of any legal or
governmental proceedings pending or threatened
required to be described in the Prospectus which are
not described as required, nor of any contracts or
documents of a character required to be described in
the Registration Statement or Prospectus or to be
filed as exhibits to the Registration Statement which
are not described or filed, as required;
(2) the statements under the captions
"Management - Executive Compensation - Compensation,"
"Related Party Transactions," "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the
Prospectus, insofar as such statements constitute a
summary of documents referred to therein or matters
of law, are accurate summaries and fairly and
correctly present, in all material respects, the
information called for with respect to such documents
and matters;
(3) this Agreement and the Pricing
Agreement and the performance of the Company's
obligations hereunder have been duly authorized by
all necessary corporate action and this Agreement and
the Pricing Agreement have been duly executed and
delivered by and on behalf of the Company, and are
legal, valid and binding agreements of the Company,
enforceable in accordance with their respective
terms, except as enforceability of the same may be
limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors'
rights and by the exercise of judicial discretion in
accordance with general principles applicable to
equitable and similar remedies and except as to those
provisions relating to indemnities for liabilities
arising under the 1933 Act as to which no opinion
need be expressed; and no approval, authorization or
consent of any public board, agency, or
instrumentality of the United States or of any state
or other jurisdiction is necessary in connection with
the issue or sale of the Shares by the Company
pursuant to this Agreement (other than under the 1933
Act, applicable blue sky laws
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<PAGE> 18
and the rules of the NASD) or the consummation by the
Company of any other transactions contemplated
hereby;
(4) the execution and performance of this
Agreement will not contravene any of the provisions
of, or result in a default under, any agreement,
franchise, license, indenture, mortgage, deed of
trust, or other instrument known to such counsel, of
the Company or any of its subsidiaries or by which
the property of any of them is bound and which
contravention or default would be material to the
Company and its subsidiaries taken as a whole; or
violate any of the provisions of the charter or
bylaws of the Company or any of its Subsidiaries or,
so far as is known to such counsel, violate any
statute, order, rule or regulation of any regulatory
or governmental body having jurisdiction over the
Company or any of its Subsidiaries;
(5) to such counsel's knowledge, all offers
and sales of the Company's capital stock since
January 1, 1996 were at all relevant times exempt
from the registration requirements of the 1933 Act
and were duly registered or the subject of an
available exemption from the registration
requirements of the applicable state securities or
blue sky laws; and
(6) the Company is not an "investment
company" or a person "controlled by" an "investment
company" within the meaning of the Investment Company
Act.
In rendering such opinion, such counsel may state
that they are relying upon the certificate of American
Securities Transfer & Trust, Inc., the transfer agent for the
Common Stock, as to the number of shares of Common Stock at
any time or times outstanding, and that insofar as their
opinion under clause (1) above relates to the accuracy and
completeness of the Prospectus and Registration Statement, it
is based upon a general review with the Company's
representatives and independent accountants of the information
contained therein, without independent verification by such
counsel of the accuracy or completeness of such information.
Such counsel may also rely upon the opinions of other
competent counsel and, as to factual matters, on certificates
of the Selling Shareholders and of officers of the Company and
of state officials, in which case their opinion is to state
that they are so doing and copies of said opinions or
certificates are to be attached to the opinion unless said
opinions or certificates (or, in the case of certificates, the
information therein) have been furnished to the
Representatives in other form.
(ii) An opinion of Hartley, Nicholson, Hartley &
Arnett, Paola, Kansas, banking counsel for the Company, dated
the First Closing Date or the Second Closing Date, as the case
may be, addressed to the Underwriters, to the effect that:
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<PAGE> 19
(1) the Company has been duly incorporated
and is validly existing in good standing as a unitary
thrift holding company under BHCA with corporate
power and authority to own its properties and conduct
its business as described in the Prospectus; and the
Company has been duly qualified to do business as a
foreign corporation under the corporation law of, and
is in good standing as such in, every jurisdiction
where the ownership or leasing of property, or the
conduct of its business requires such qualification
except where the failure so to qualify would not have
a material adverse effect upon the condition
(financial or otherwise) or results of operations of
the Company and its Subsidiaries taken as a whole;
(2) an opinion to the same general effect
as clause (1) of this subparagraph (i) in respect of
each direct and indirect Subsidiary of the Company;
(3) all of the issued and outstanding
capital stock of each Subsidiary of the Company has
been duly authorized, validly issued and is fully
paid and nonassessable, and, except as disclosed in
the Registration Statement, the Company owns directly
or indirectly 100 percent of the outstanding capital
stock of each Subsidiary, and to the best knowledge
of such counsel, such stock is owned free and clear
of any claims, liens, encumbrances or security
interests;
(4) the authorized capital stock of the
Company, of which there is outstanding the amount set
forth in the Registration Statement and Prospectus
(except for subsequent issuances, if any, pursuant to
stock options or other rights referred to in the
Prospectus), conforms as to legal matters in all
material respects to the description thereof in the
Registration Statement and Prospectus;
(5) the issued and outstanding capital
stock of the Company has been duly authorized and
validly issued and is fully paid and nonassessable;
(6) the certificates for the Shares to be
delivered hereunder are in due and proper form, and
when duly countersigned by the Company's transfer
agent and delivered to you or upon your order against
payment of the agreed consideration therefor in
accordance with the provisions of this Agreement and
the Pricing Agreement, the Shares represented thereby
will be duly authorized and validly issued, fully
paid and nonassessable;
(7) the Banks have been duly chartered to
conduct the business of banking in its state of
domicile and the Company has all necessary power and
authority to own the Banks. The Company and the Banks
have all necessary consents and approvals under
applicable federal and state laws and regulations
relating to thrifts and thrift holding companies
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<PAGE> 20
("banking laws") to own their respective assets and
carry on their respective businesses as currently
conducted;
(8) the statements in the Prospectus under
the captions "Supervision and Regulation" insofar as
such statements constitute a summary of banking laws,
are accurate summaries and fairly present the
information called for with respect to such matters;
(9) such counsel knows of no legal or
governmental proceeding, pending or threatened,
before any court or administrative body or regulatory
agency, to which the Company or any of the
Subsidiaries is a party or to which any of the
properties of the Company or any of the Subsidiaries
is subject that are required to be described in the
Registration Statement or Prospectus and are not so
described, or statutes or regulations that are
required to be described in the Registration
Statement or the Prospectus that are not so
described;
(10) the execution and delivery of this
Agreement and the Pricing Agreement and the
consummation of the transactions herein and therein
contemplated do not and will not conflict with or
result in a violation of or default under any banking
laws, or any permit, judgment, decree or order known
to such counsel, or any lease, contract, indenture,
mortgage, loan agreement or other agreement or other
instrument or obligation known to such counsel to
which the Company or the Banks are a party or by
which the Company or the Banks or any of their
respective properties is bound; and
(11) no approval, consent, order,
authorization, designation, declaration or filing by
or with any regulatory, administrative or other
governmental body under banking laws is necessary in
connection with the execution and delivery of this
Agreement and the Pricing Agreement and the
consummation of the transactions herein and therein
contemplated, except such as have been obtained or
made, specifying the same.
(iii) An opinion of Shook, Hardy & Bacon L.L.P.,
Overland Park, Kansas, counsel to the Selling Shareholder,
dated the First Closing Date or the Second Closing Date, as
the case may be, to the effect that:
(1) this Agreement and the Pricing
Agreement have been duly authorized, executed and
delivered by or on behalf of the Selling Shareholder;
the Custodian for the Selling Shareholder has been
duly and validly authorized to carry out all
transactions contemplated herein on behalf of such
Selling Shareholder; and the performance of this
Agreement and the Pricing Agreement and the
consummation of the transactions herein contemplated
by the Selling Shareholder will not result in a
breach or violation of any of the terms and
provisions of, or constitute a default
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<PAGE> 21
under, any statute, any indenture, mortgage, deed of
trust, note agreement or other agreement or
instrument known to such counsel to which the Selling
Shareholder is a party or by which it is bound or to
which any of the property of the Selling Shareholder
is subject, or any order, rule or regulation known to
such counsel of any court or governmental agency or
body having jurisdiction over the Selling Shareholder
or any of its properties; and no consent, approval,
authorization or order of any court or governmental
agency or body is required for the consummation of
the transactions contemplated by this Agreement and
the Pricing Agreement in connection with the sale of
Shares to be sold by the Selling Shareholder
hereunder, except such as have been obtained under
the 1933 Act and such as may be required under
applicable blue sky laws in connection with the
purchase and distribution of such Shares by the
Underwriters and the clearance of such offering with
the NASD;
(2) the Selling Shareholder has full right,
power and authority to enter into this Agreement and
the Pricing Agreement and to sell, transfer and
deliver the Shares to be sold on the First Closing
Date or the Second Closing Date, as the case may be,
by the Selling Shareholder hereunder and good and
marketable title to such Shares so sold, free and
clear of all voting trust arrangements, liens,
encumbrances, equities, claims and community property
rights whatsoever, has been transferred to the
Underwriters (who counsel may assume to be bona fide
purchasers) who have purchased such Shares hereunder;
(3) this Agreement and the Pricing
Agreement are legal, valid and binding agreements of
the Selling Shareholder except as enforceability of
the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws
affecting creditors' rights and by the exercise of
judicial discretion in accordance with general
principles applicable to equitable and similar
remedies and except with respect to those provisions
relating to indemnities for liabilities arising under
the 1933 Act, as to which no opinion need be
expressed; and
(4) the Selling Shareholder in form is a
valid employee stock ownership plan and trust for
purposes of Section 4975(e)(7) of the Internal
Revenue Code and the regulations promulgated
thereunder. The opinion above respecting the validity
of the plan and trust for purposes of Section
4975(e)(7) of the Internal Revenue Code are
conditioned on compliance in operation by the plan
and trust with Section 401(a) of the Internal Revenue
Code. The sale of Shares and the performance of the
other transactions contemplated by this Agreement and
the Pricing Agreement by the Selling Shareholder do
not constitute "prohibited transactions" under
Section 4975(c) of the Internal Revenue Code or
Section 406 of ERISA.
(iv) Such opinion or opinions of Chapman and Cutler,
Chicago, Illinois, counsel for the Underwriters, dated the
First Closing Date or the Second Closing Date, as the case may
be, with respect to the incorporation of the Company, the
validity of the Shares to be sold by the Company, the
Registration
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<PAGE> 22
Statement and the Prospectus and other related matters as you
may reasonably require, and the Company shall have furnished
to such counsel such documents and shall have exhibited to
them such papers and records as they request for the purpose
of enabling them to pass upon such matters.
(v) A certificate of the chief executive officer and
the principal financial officer of the Company, dated the
First Closing Date or the Second Closing Date, as the case may
be, to the effect that:
(1) the representations and warranties of
the Company set forth in Section 2 of this Agreement
are true and correct as of the date of this Agreement
and as of the First Closing Date or the Second
Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all
the conditions on its part to be performed or
satisfied at or prior to such Closing Date; and
(2) the Commission has not issued an order
preventing or suspending the use of the Prospectus or
any preliminary prospectus filed as a part of the
Registration Statement or any amendment thereto; no
stop order suspending the effectiveness of the
Registration Statement has been issued; and to the
best knowledge of the respective signers, no
proceedings for that purpose have been instituted or
are pending or contemplated under the 1933 Act.
The delivery of the certificate provided for in this
subparagraph shall be and constitute a representation and
warranty of the Company as to the facts required in the
immediately foregoing clauses (1) and (2) of this subparagraph
to be set forth in said certificate.
(vi) A certificate of the Selling Shareholder dated
the First Closing Date to the effect that the representations
and warranties of such Selling Shareholder set forth in
Section 3 of this Agreement are true and correct as of such
date and the Selling Shareholder has complied with all the
agreements and satisfied all the conditions on the part of the
Selling Shareholder to be performed or satisfied at or prior
to such date.
(vii) At the time the Pricing Agreement is executed
and also on the First Closing Date or the Second Closing Date,
as the case may be, there shall be delivered to you a letter
addressed to you, as Representative of the Underwriters, from
KPMG LLP, independent accountants, the first one to be dated
the date of the Pricing Agreement, the second one to be dated
the First Closing Date and the third one (in the event of a
second closing) to be dated the Second Closing Date, to the
effect set forth in Schedule C. There shall not have been any
change or decrease specified in the letters referred to in
this subparagraph which makes it impractical or inadvisable in
the judgment of the Representative to proceed with the public
offering or purchase of the Shares as contemplated hereby.
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<PAGE> 23
(viii) Such further certificates and documents as the
Representative may reasonably request.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to Chapman and Cutler, counsel for the Underwriters, which approval shall not be
unreasonably withheld. The Company shall furnish you with such manually signed
or conformed copies of such opinions, certificates, letters and documents as you
request.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification to the Company and
the Selling Shareholder without liability on the part of any Underwriter or the
Company or the Selling Shareholder, except for the expenses to be paid or
reimbursed by the Company pursuant to Sections 7 and 9 hereof and except to the
extent provided in Section 11 hereof.
Section 9. Reimbursement of Underwriters' Expenses. If the sale to the
Underwriters of the Shares on the First Closing Date is not consummated because
any condition of the Underwriters' obligations hereunder is not satisfied or
because of any refusal, inability or failure on the part of the Company or the
Selling Shareholder to perform any agreement herein or to comply with any
provision hereof, unless such failure to satisfy such condition or to comply
with any provision hereof is due to the default or omission of any Underwriter,
the Company agrees to reimburse you and the other Underwriters upon demand for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been reasonably incurred by you and them in connection
with the proposed purchase and the sale of the Shares. Any such termination
shall be without liability of any party to any other party except that the
provisions of this Section, Section 7 and Section 11 shall at all times be
effective and shall apply.
Section 10. Effectiveness of Registration Statement. You, the Company
and the Selling Shareholder will use your, its and their best efforts to cause
the Registration Statement to become effective, if it has not yet become
effective, and to prevent the issuance of any stop order suspending the
effectiveness of the Registration Statement and, if such stop order be issued,
to obtain as soon as possible the lifting thereof.
Section 11. Indemnification. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of the 1933 Act or the Exchange Act against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject under the 1933 Act,
the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise (including in settlement of any litigation if such
settlement is effected with the written consent of the Company and/or the
Selling Shareholder, as the case may be), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, including the information deemed to be
part of the Registration Statement at the time of effectiveness pursuant to Rule
430A and/or Rule 434, if applicable, any preliminary prospectus, the Prospectus,
or any amendment or supplement thereto, or arise out of
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<PAGE> 24
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; and will reimburse each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that (i) any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representative, specifically for use therein; or (ii) if such statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus and (1) any such loss, claim, damage or liability suffered or
incurred by any Underwriter (or any person who controls any Underwriter)
resulted from an action, claim or suit by any person who purchased Shares which
are the subject thereof from such Underwriter in the offering and (2) such
Underwriter failed to deliver or provide a copy of the Prospectus to such person
at or prior to the confirmation of the sale of such Shares in any case where
such delivery is required by the 1933 Act. In addition to their other
obligations under this Section 11(a), the Company agrees that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 11(a), it will
reimburse the Underwriters on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, and the Selling Shareholder and each person, if any, who controls the
Company within the meaning of the 1933 Act or the Exchange Act, against any
losses, claims, damages or liabilities to which the Company, or any such
director, officer, Selling Shareholder or controlling person may become subject
under the 1933 Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Registration Statement, any
preliminary prospectus, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus, or any amendment or supplement thereto in reliance
upon and in conformity with Section 4 of this Agreement or any other written
information furnished to the Company by such Underwriter through the
Representatives specifically for use in the preparation thereof; and will
reimburse
-24-
<PAGE> 25
any legal or other expenses reasonably incurred by the Company, or any such
director, officer, the Selling Shareholder or controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action. In addition to their other obligations under this Section 11(b), the
Underwriters agree that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
this Section 11(b), they will reimburse the Company and the Selling Shareholder
on a monthly basis for all reasonable legal and other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company and the Selling Shareholder
for such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. This indemnity
agreement will be in addition to any liability which such Underwriter may
otherwise have.
(c) The Selling Shareholder will indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, and the Underwriters and each person, if any, who controls the
Company or any Underwriter within the meaning of the 1933 Act or the Exchange
Act, against any losses, claims, damages or liabilities to which the Company, or
any such director, officer, any Underwriter or controlling person may become
subject under the 1933 Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Selling Shareholder), insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in the Registration Statement,
any preliminary prospectus, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus, or any amendment or supplement thereto in reliance
upon the number of shares beneficially owned by the Selling Shareholder as set
forth in the "Principal Shareholders and Selling Shareholder" before the
offering and after the offering; and in conformity with Section 4 of this
Agreement or any other written information furnished to the Company by the
Selling Shareholder specifically for use in the preparation thereof; and will
reimburse any legal or other expenses reasonably incurred by the Company, or any
such director, officer, any Underwriter or controlling persons in connection
with investigating or defending any such loss, claim, damage, liability or
action. In addition to their other obligations under this Section 11(c), the
Selling Shareholder agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in this Section 11(c), they will reimburse the Company and the
Underwriters on a monthly basis for all reasonable legal and other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Selling
Shareholder's obligation to reimburse the Company and the Underwriters for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. This
-25-
<PAGE> 26
indemnity agreement will be in addition to any liability which the Selling
Shareholder may otherwise have.
(d) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party except to the extent that
the indemnifying party was prejudiced by such failure to notify. In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, or the indemnified and indemnifying parties may have
conflicting interests which would make it inappropriate for the same counsel to
represent both of them, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defense and otherwise to
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defense in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by the Representative in the case of paragraph (a)
representing all indemnified parties not having different or additional defenses
or potential conflicting interest among themselves who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such proceeding.
(e) If the indemnification provided for in this Section is unavailable
to an indemnified party under paragraphs (a), (b) or (c) hereof in respect of
any losses, claims, damages or liabilities referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company, the
Selling Shareholder and the
-26-
<PAGE> 27
Underwriters from the offering of the Shares or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, the Selling Shareholder and
the Underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company, the Selling Shareholder and the Underwriters shall be deemed to be in
the same proportion in the case of the Company and the Selling Shareholder, as
the total price paid to the Company and the Selling Shareholder for the Shares
by the Underwriters (net of underwriting discount but before deducting
expenses), and in the case of the Underwriters as the underwriting discount
received by them bears to the total of such amounts paid to the Company and the
Selling Shareholder and received by the Underwriters as underwriting discount in
each case as contemplated by the Prospectus. The relative fault of the Company,
the Selling Shareholder and the Underwriters shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the Company, by the Selling Shareholder or by the Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company, the Selling Shareholder and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section,
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section are several in proportion to their
respective underwriting commitments and not joint.
(f) The provisions of this Section shall survive any termination of
this Agreement.
Section 12. Default of Underwriters. It shall be a condition to the
agreement and obligation of the Company and the Selling Shareholder to sell and
deliver the Shares hereunder, and of each Underwriter to purchase the Shares
hereunder, that, except as hereinafter in this paragraph provided, each of the
Underwriters shall purchase and pay for all Shares agreed to be purchased by
such Underwriter hereunder upon tender to the Representative of all such Shares
in accordance with the terms hereof. If any Underwriter or Underwriters default
in their obligations to purchase Shares hereunder on the First Closing Date and
the aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed to purchase does not exceed 10 percent of the total number of
Shares which the Underwriters are obligated to purchase on the
-27-
<PAGE> 28
First Closing Date, the Representative may make arrangements satisfactory to the
Company and the Selling Shareholder for the purchase of such Shares by other
persons, including any of the Underwriters; but if no such arrangements are made
by such date, the nondefaulting Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Shares
which such defaulting Underwriters agreed but failed to purchase on such date.
If any Underwriter or Underwriters so default and the aggregate number of Shares
with respect to which such default or defaults occur is more than the above
percentage and arrangements satisfactory to the Representative and the Company
and the Selling Shareholder for the purchase of such Shares by other persons are
not made within 36 hours after such default, this Agreement will terminate
without liability on the part of any nondefaulting Underwriter or the Company or
the Selling Shareholder, except for the expenses to be paid by the Company
pursuant to Section 7 hereof and except to the extent provided in Section 11
hereof.
In the event that Shares to which a default relates are to be purchased
by the nondefaulting Underwriters or by another party or parties, the
Representative or the Company shall have the right to postpone the First Closing
Date for not more than seven business days in order that the necessary changes
in the Registration Statement, Prospectus and any other documents, as well as
any other arrangements, may be effected. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability for
its default.
Section 13. Effective Date. This Agreement shall become effective
immediately as to Sections 7, 9, 11 and 14 and as to all other provisions at
10:00 A.M., Chicago Time, on the day following the date upon which the Pricing
Agreement is executed and delivered, unless such a day is a Saturday, Sunday or
holiday (and in that event this Agreement shall become effective at such hour on
the business day next succeeding such Saturday, Sunday or holiday); but this
Agreement shall nevertheless become effective at such earlier time after the
Pricing Agreement is executed and delivered as you may determine on and by
notice to the Company and the Selling Shareholder or by release of any Shares
for sale to the public. For the purposes of this Section, the Shares shall be
deemed to have been so released upon the release for publication of any
newspaper advertisement relating to the Shares or upon the release by you of
telegrams (i) advising Underwriters that the Shares are released for public
offering, or (ii) offering the Shares for sale to securities dealers, whichever
may occur first.
Section 14. Termination. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice
to you and the Selling Shareholder or by you by notice to the Company
and the Selling Shareholder at any time prior to the time this
Agreement shall become effective as to all its provisions, and any such
termination shall be without liability on the part of the Company or
the Selling Shareholder to any Underwriter (except for the expenses to
be paid or reimbursed pursuant to Section 7 hereof and except to the
extent provided in Section 11 hereof) or of any Underwriter to the
Company or the Selling Shareholder.
-28-
<PAGE> 29
(b) This Agreement may also be terminated by you prior to the
First Closing Date, and the option referred to in Section 5, if
exercised, may be cancelled at any time prior to the Second Closing
Date, if (i) trading in securities on the New York Stock Exchange shall
have been suspended or minimum prices shall have been established on
such exchange, (ii) a banking moratorium shall have been declared by
Illinois, New York, or United States authorities, (iii) there shall
have been any change in financial markets or in political, economic or
financial conditions which, in the opinion of the Representative,
either renders it impracticable or inadvisable to proceed with the
offering and sale of the Shares on the terms set forth in the
Prospectus or materially and adversely affects the market for the
Shares, or (iv) there shall have been an outbreak of major armed
hostilities between the United States and any foreign power which in
the opinion of the Representative makes it impractical or inadvisable
to offer or sell the Shares. Any termination pursuant to this paragraph
(b) shall be without liability on the part of any Underwriter to the
Company or the Selling Shareholder or on the part of the Company or the
Selling Shareholder to any Underwriter (except for expenses to be paid
or reimbursed pursuant to Section 7 hereof and except to the extent
provided in Section 11 hereof).
Section 15. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Shareholder and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
principals, members, officers or directors or any controlling person, or the
Selling Shareholder as the case may be, and will survive delivery of and payment
for the Shares sold hereunder.
Section 16. Notices. All communications hereunder will be in writing
and, if sent to the Underwriters will be mailed, delivered or telegraphed and
confirmed to you c/o Howe Barnes Investments, Inc., 135 South LaSalle Street,
Chicago, Illinois 60603, Attention: Paul A. O'Connor; if sent to the Company
will be mailed, delivered or telegraphed and confirmed to the Company at its
corporate headquarters; and if sent to the Selling Shareholder will be mailed,
delivered or telegraphed and confirmed to Consulting Fiduciaries, Inc. at such
address as they have previously furnished to the Company and the Representative.
Section 17. Successors. This Agreement and the Pricing Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors, personal representatives and assigns, and to the benefit
of the officers and directors and controlling persons referred to in Section 11,
and no other person will have any right or obligation hereunder. The term
"successors" shall not include any purchaser of the Shares as such from any of
the Underwriters merely by reason of such purchase.
Section 18. Representation of Underwriters. You will act as
Representative for the several Underwriters in connection with this financing,
and any action under or in respect of this Agreement taken by you will be
binding upon all the Underwriters.
-29-
<PAGE> 30
Section 19. Partial Unenforceability. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
Section 20. Applicable Law. This Agreement and the Pricing Agreement
shall be governed by and construed in accordance with the laws of the State of
Illinois.
-30-
<PAGE> 31
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Shareholder and the several Underwriters including you, all in accordance with
its terms.
Very truly yours,
TEAM FINANCIAL, INC.
By
Robert J. Weatherbie
Chairman and Chief Executive Officer
SELLING SHAREHOLDER
TEAM FINANCIAL, INC. EMPLOYEES' STOCK
OWNERSHIP PLAN
By
---------------------------------------
Authorized Signatory
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
HOWE BARNES INVESTMENTS, INC.
Acting as Representative of the
several Underwriters named in
Schedule A.
By
---------------------------------
Michael E. Sammon
Senior Vice President
-31-
<PAGE> 32
SCHEDULE A
NUMBER OF FIRM
SHARES TO BE
UNDERWRITER PURCHASED
Howe Barnes Investments, Inc.
---------
TOTAL 1,000,000
=========
<PAGE> 33
SCHEDULE B
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
FIRM SHARES OPTION SHARES
TO BE SOLD TO BE SOLD
<S> <C> <C>
Company 700,000 150,000
Team Financial, Inc.
Employee Stock Ownership Plan 300,000 0
-------- -------
TOTAL 1,000,000 150,000
========= =======
</TABLE>
<PAGE> 34
SCHEDULE C
COMFORT LETTER OF KPMG LLP
(1) They are independent public accountants with respect to the Company
and its subsidiaries within the meaning of the 1933 Act.
(2) In their opinion the consolidated financial statements and
schedules of the Company and its Subsidiaries included in the Registration
Statement and the consolidated financial statements of the Company from which
the information presented under the caption "Selected Consolidated Financial
Data" has been derived which are stated therein to have been examined by them
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act.
(3) On the basis of specified procedures (but not an examination in
accordance with generally accepted auditing standards), including inquiries of
certain officers of the Company and its Subsidiaries responsible for financial
and accounting matters as to transactions and events subsequent to March 31,
1999, a reading of minutes of meetings of the shareholders and directors of the
Company and its Subsidiaries since March 31, 1999, a reading of the latest
available interim unaudited consolidated financial statements of the Company and
its Subsidiaries (with an indication of the date thereof) and other procedures
as specified in such letter, nothing came to their attention which caused them
to believe that (i) the unaudited consolidated financial statements of the
Company and its Subsidiaries included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act or that such unaudited financial statements are not
fairly presented in accordance with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited financial
statements included in the Registration Statement, and (ii) at a specified date
not more than five days prior to the date thereof in the case of the first
letter and not more than two business days prior to the date thereof in the case
of the second and third letters, there was any change in the capital stock or
long-term debt or short-term debt (other than normal payments) of the Company
and its Subsidiaries on a consolidated basis or any decrease in consolidated net
current assets or consolidated shareholders' equity as compared with amounts
shown on the latest unaudited balance sheet of the Company included in the
Registration Statement or for the period from the date of such balance sheet to
a date not more than five days prior to the date thereof in the case of the
first letter and not more than two business days prior to the date thereof in
the case of the second and third letters, there were any decreases, as compared
with the corresponding period of the prior year, in consolidated net sales,
consolidated income before income taxes or in the total or per share amounts of
consolidated net income except, in all instances, for changes or decreases which
the Prospectus discloses have occurred or may occur or which are set forth in
such letter.
(4) They have carried out specified procedures, which have been agreed
to by the Representative, with respect to certain information in the Prospectus
specified by the Representative, and on the basis of such procedures, they have
found such information to be in agreement with the general accounting records of
the Company and its Subsidiaries.
<PAGE> 35
SCHEDULE D
EXCEPTIONS TO SECTION 3(A)(I)
<PAGE> 36
SCHEDULE E
EXCEPTIONS TO SECTION 3(A)(III)
<PAGE> 37
EXHIBIT A
TEAM FINANCIAL, INC.
1,000,000 Shares Common Stock*
PRICING AGREEMENT
June __, 1999
Howe Barnes Investments, Inc.
As Representative of the several Underwriters
135 South LaSalle Street
Chicago, Illinois 60603
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated June __, 1999
(the "Underwriting Agreement") relating to the sale by the Company and the
Selling Shareholder and the purchase by the several Underwriters for whom Howe
Barnes Investments, Inc. is acting as the representative (the "Representative"),
of the above Shares. All terms herein shall have the definitions contained in
the Underwriting Agreement except as otherwise defined herein.
Pursuant to Section 5 of the Underwriting Agreement, the Company and
the Selling Shareholder agree with the Representative as follows:
1. The initial public offering price per share for the
Shares shall be $______.
2. The purchase price per share for the Shares to be paid by
the several Underwriters shall be $___________, being an amount equal
to the initial public offering price set forth above less $____________
per share.
Schedule A is amended as follows:
- --------
*Plus an option to acquire up to 150,000 additional shares to cover
overallotments.
<PAGE> 38
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Shareholder and the several Underwriters, including you, all in accordance with
its terms.
Very truly yours,
TEAM FINANCIAL, INC.
By
Robert J. Weatherbie
Chairman and Chief Executive Officer
SELLING SHAREHOLDER
TEAM FINANCIAL, INC. EMPLOYEES' STOCK
OWNERSHIP PLAN
By
---------------------------------------
Authorized Signatory
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
HOWE BARNES INVESTMENTS, INC.
Acting as Representative of the
several Underwriters.
By
---------------------------------
Michael E. Sammon
Senior Vice President
-2-
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
NUMBER SHARES
TEAM FINANCIAL, INC.
Incorporated Under the Laws of the State of Kansas
Authorized Shares No Par Value
----------------------
CUSIP 87815X 10 9
----------------------
SEE REVERSE
FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
Is The Owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
TEAM FINANCIAL, INC.
transferable on the books of the Corporation by the owner thereof in person or
by authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate and the shares represented herein are issued and shall be held
subject to all of the provisions of the Articles of Incorporation of the
Corporation and the Bylaws of the Corporation and all amendments thereto, to all
of which the owner by the acceptance hereof assents. This certificate is not
valid unless countersigned and registered by the and Transfer Agent and
Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
SECRETARY [SEAL] PRESIDENT
COUNTERSIGNED AND REGISTERED:
By
-----------------------------------------------
Transfer Agent & Registrar Authorized Signature
<PAGE> 2
TEAM FINANCIALS INC.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT-.........Custodian..............
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act..............................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
- --------------------------------------------------------------------------------
For Value Received, _____________ does hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------
- ---------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
of the Common Stock represented by the within Certificate, and does hereby
irrevocably constitute and appoint
attorney-in-fact
- ----------------------------------------------------------------
to transfer the said stock on the books of the within-named Corporation, with
full power of substitution in the premises.
Dated
---------------------
Signature:
--------------------------------------------------
--------------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Signature(s) Guaranteed:
- --------------------------------------
<PAGE> 3
The signature(s) must be guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with
membership in an approved signature guarantee Medallion Program), pursuant to
S.E.C. Rule 17Ad-15.
This certificate also evidences and entitles the holder hereof to certain Rights
as set forth in a Rights Agreement between Team Financial Inc. (the "Company")
and American Securities Transfer & Trust, Inc., as Rights Agent, dated as of
June 3, 1999, as it may from time to time be supplemented or amended pursuant to
its terms (the "Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal executive
offices of the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights may be redeemed, may expire, or may be evidenced by
separate certificates and no longer be evidenced by this certificate. The
Company will mail to the holder of record of this certificate a copy of the
Rights Agreement without charge within ten business days after receipt of a
written request therefor. Under certain circumstances, as set forth in the
Rights Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or an Affiliate or Associate thereof (as such terms
are defined in the Rights Agreement), whether currently held by or on behalf of
such Person or by any subsequent holder, may become null and void.
THE CORPORATION IS AUTHORIZED TO ISSUE STOCK OF MORE THAN ONE CLASS OR SERIES.
THE CORPORATION WILL FURNISH UPON REQUEST AND WITHOUT CHARGE WRITTEN INFORMATION
ON THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SHARES
OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED AND THE VARIATIONS IN RIGHTS,
PREFERENCES AND LIMITATIONS FOR EACH CLASS OR SERIES OF STOCK, SO FAR AS THE
SAME HAVE BEEN FIXED AND DETERMINED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS
TO DETERMINE VARIATIONS FOR FUTURE CLASSES OR SERIES.
<PAGE> 1
EXHIBITS 5.1
AND 23.2
June 7, 1999
Team Financial, Inc.
8 West Peoria
Paola, Kansas 66071
Re: Common Stock of Team Financial, Inc.
Ladies and Gentlemen:
We have examined the Registration Statement (No. 333-76163) on Form S-1
(the "Registration Statement") originally filed on April 13, 1999 by Team
Financial, Inc. (the "Company") with the Securities and Exchange Commission (the
"Commission") in connection with the registration under the Securities Act of
1933, as amended (the "Securities Act"), of 1,150,000 shares of the Company's
Common Stock (the "Registered Shares"), of which 700,000 shares are to be sold
by the Company, 300,000 shares are to be sold by a selling shareholder and
150,000 shares are subject to an over-allotment option granted by the Company to
the underwriters. All of the Registered Shares are to be sold to several
underwriters (the "Underwriters") of which Howe Barnes Investments, Inc. is the
representative (the "Representative") pursuant to an underwriting agreement (the
"Underwriting Agreement") to be entered into between the Company and the
Representative. We are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the proposed authorization, issuance and
sale of the Registered Shares.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records and other instruments
as we have deemed necessary for the purposes of this opinion, including the
following: (a) the Restated and Amended Articles of Incorporation of the
Company; (b) the Amended Bylaws of the Company; and (c) resolutions by the Board
of Directors of the Company pertaining to the offering.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies, and the authenticity of the originals of
all documents submitted to us as copies. We have also assumed the genuineness of
the signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Company, and the due authorization, execution and
delivery of all documents by the parties thereto other than the Company.
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Team Financial, Inc.
June 7, 1999
Page 2
Based upon the foregoing, we are of the opinion that: when, as and if
(i) the Registration Statement shall have become effective pursuant to the
provisions of the Securities Act, (ii) the Registered Shares are sold to the
Underwriters and paid for pursuant to the terms of the Underwriting Agreement,
(iii) the Registered Shares shall have been issued in the form and containing
the terms described in the Registration Statement, and (iv) any legally required
consents or any other regulatory authorities shall have been obtained, the
Registered Shares will be legally issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of our name under the heading "Legal Matters" in the
Registration Statement.
We are admitted to practice law in the State of Kansas and we express
no opinions as to the matters under or involving any laws other than the laws of
the State of Kansas and the federal laws of the United States of America.
Very truly yours,
/s/ Hartley, Nicholson & Hartley, P.A.
HARTLEY, NICHOLSON & HARTLEY, P.A.
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EXHIBIT 10.12
TEAM FINANCIAL, INC.
1999 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of the Team Financial, Inc. 1999 Stock Incentive is to
provide incentives and rewards for Employees, non-Employee Directors and
consultants of the Corporation and its Subsidiaries (i) to support the
execution of the Corporation's business strategies and the achievement of its
goals, (ii) to associate the interests of Employees, non-Employee Directors and
consultants with those of the Corporation's stockholders, and (iii) to help
provide a competitive compensation program that will enable the Corporation to
attract and retain the highest quality Employees, non-Employee Directors and
consultants.
2. DEFINITIONS
(a) "Award" means individually or collectively Restricted Stock, Stock
Options (including incentive stock options under Section 422 of the Code),
Stock Appreciation Rights or Performance Shares granted hereunder.
(b) "Award Period" means the period of time during which a Stock
Appreciation Right which has not been granted pursuant to an option may be
exercised. The Award Period shall be set forth in the Award Summary issuing the
Stock Appreciation Right to the person granted the Award.
(c) "Award Summary" means a written summary or agreement setting forth
the terms and conditions of each Award made under this Plan.
(d) "Board" means the Board of Directors of the Corporation.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" means the Compensation Committee of the Board or such
other committee of the Board consisting of at least two members as may be
designated by the Board from time to time to administer this Plan; provided,
however, that no person may serve on the Committee who would not be considered
(i) a "non-employee director" within the meaning of Rule 16b-3 promulgated
under the Exchange Act, and (ii) an "outside director" within the meaning of
Section 162(m) of the Code.
(g) "Common Stock" means the Common Stock of the Corporation.
(h) "Corporation" means Team Financial, Inc., a Kansas corporation.
(i) "Director" means a non-Employee director of the Corporation. For
purposes of Awards granted pursuant to this Plan, the term "Director" may, at
the discretion of the Board, include directors of Subsidiaries.
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(j) "Eligible Person" or "Eligible Persons" has the meaning assigned
to it in Section 3.
(k) "Employee" means an employee of the Corporation or a Subsidiary.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Exercise Period" means the period or periods during which a Stock
Appreciation Right is exercisable as described in Section 8(b).
(n) "Fair Market Value" means the fair market value of the Common
Stock as of the date on which a determination is to be made, as determined by
the Board.
(o) "Option Period" or "Option Periods" means the period or periods
during which an option is exercisable as described in Section 7(e).
(p) "Option Price" means the price, expressed on a per share basis,
for which the Common Stock can be acquired by the holder of the option pursuant
to the exercise of such option.
(q) "Participant" means an Eligible Person who has been granted an
Award under this Plan.
(r) "Performance Share" is an Award granted under Section 9.
(s) "Plan" means this Team Financial, Inc. 1999 Stock Incentive Plan.
(t) "Plan Year" means a twelve-month period beginning with January 1
of each year.
(u) "Stock Appreciation Right" is an Award granted under Section 8.
(v) "Subsidiary" means any corporation or other entity, whether
domestic or foreign, in which the Corporation has or obtains, directly or
indirectly, a proprietary interest of more than 50% by reason of stock
ownership or otherwise.
3. ELIGIBILITY
Awards under the Plan may be granted to Employees, Directors and
consultants of the Corporation and its Subsidiaries ("Eligible Person" or
"Eligible Persons"). Notwithstanding the foregoing, for purposes of the Plan,
and the Plan only, no person shall be granted an Award under the Plan unless
such person:
1. is an Employee, Director or consultant of the Corporation or a
Subsidiary; and
2. shall have first been presented with financial statements for
the most recent fiscal year, plus all quarterly financial
reports of the Corporation since its most recent fiscal year.
Awards may be issued to the same person on more than one occasion.
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4. PLAN ADMINISTRATION
(a) Board of Directors. The Plan shall be administered by the Board of
Directors of the Corporation or by the Committee (unless the context otherwise
requires, the Board of Directors of the Corporation or Committee thereof as
provided herein shall be referred to herein as the "Board"). The Board shall
periodically make determinations with respect to the participation of Eligible
Persons in this Plan and, except as otherwise required by law or this Plan, the
grant terms of Awards including vesting schedules, price, length of relevant
performance, restriction or option periods, termination rights, payment
alternatives or other means of payment consistent with the purposes of this
Plan, and such other terms and conditions as the Board deems appropriate.
Awards may be granted as replacements of Awards outstanding under the Plan or
under previous stock incentive plans maintained by the Corporation.
(b) Construction. The interpretation and construction by the Board of
any provisions of the Plan, or of any Award granted under it, shall be final.
No member of the Board shall be liable for any action or determination made in
good faith with respect to the Plan, option or restricted stock granted under
it.
(c) Indemnification. The Board shall have authority to interpret and
construe the provisions of this Plan and the Award Summaries and make
determinations pursuant to any Plan provision or Award Summary which shall be
final and binding on all persons. No member of the Board shall be liable for
any action or determination made in good faith, and the members shall be
entitled to indemnification and reimbursement in the manner provided in the
Corporation's Articles of Incorporation and Bylaws, and to the fullest extent
allowed by law.
5. STOCK SUBJECT TO PROVISIONS OF PLAN
The stock for which Awards may be granted and which may be sold
pursuant to the Plan shall not, subject to Sections 13 and 15, exceed in the
aggregate 70,000 shares of the Corporation's common stock. Such shares may be
authorized and unissued shares or may be issued shares reacquired by the
Corporation. All shares for which an Award is granted under the Plan, which for
any reason are not issued as a result of non-exercise of such Award or
fulfillment of the conditions and terms of such Award, shall be available for
the granting of further Awards under the Plan.
6. AWARDS TO EMPLOYEES UNDER PLAN: RESTRICTED STOCK AWARDS
(a) Grants of Shares of Restricted Stock. An award made pursuant to
this Section 6 shall be granted in the form of shares of common stock,
restricted as provided in this Section 6 ("Restricted Stock"). Shares of
Restricted Stock shall be issued to the Eligible Person upon the payment of
consideration as determined by the Board. The shares of Restricted Stock shall
be issued in the name of the Eligible Person and shall bear a restrictive
legend prohibiting sale, transfer, pledge or hypothecation of the shares of
Restricted Stock until the expiration of the restriction period.
The Board may also impose such other restrictions and conditions on
the shares of Restricted Stock as it deems appropriate, including but not
limited to requiring the Eligible Person
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to keep the Restricted Stock certificates, duly endorsed, in the custody of the
Corporation while the restrictions remain in effect.
(b) Restriction Period. At the time a Restricted Stock award is made,
the Board may establish a restriction period applicable to such award which
shall not be more than ten (10) years. Each Restricted Stock award may have a
different restriction period, at the discretion of the Board. In addition to or
in lieu of a restriction period, the Board may establish a performance goal
which must be achieved as a condition to the retention of the Restricted Stock.
The performance goal may be based on the attainment of specified types of
performance measurement criteria, which may differ as to various Eligible
Persons or classes or categories of Eligible Persons. Such criteria may
include, without limitation, the attainment of certain performance levels by
the Eligible Person, the Corporation, a department or division of the
Corporation and/or a group or class of Eligible Persons. Any such performance
goals, together with the ranges of Restricted Stock awards for which the
Eligible Persons may be eligible shall be set from time to time by the Board
and shall be timely communicated in writing to the Eligible Persons in advance
of the commencement of the performance of services to which such performance
goals relate.
(c) Forfeiture or Payout of Award. In the event a Participant ceases
to be an Eligible Person during a restriction period, or in the event
performance goals attributable to a Restricted Stock award are not achieved,
subject to the terms of each particular Restricted Stock award, a Restricted
Stock award is subject to forfeiture of the shares of common stock which had
not previously been removed from restriction under the terms of the award.
Any shares of Restricted Stock which are forfeited will be transferred
to the Corporation. Any consideration paid by the Eligible Person for the
Restricted Stock shall be returned, without interest, to such Eligible Person
upon forfeiture.
Upon completion of the restriction period and satisfaction of any
performance-goal criteria, all restrictions upon the award will expire and new
certificates representing the award will be issued or released without the
restrictive legend. As a condition precedent to receipt of the certificates,
the Eligible Person (or the designated beneficiary or personal representative
of the Eligible Person) will agree to make payment to the Corporation in the
amount of any taxes, payable by the Eligible Person, which are required to be
withheld with respect to such shares of common stock.
7. STOCK OPTIONS
(a) Grant of Option. One or more options may be granted to any
Eligible Person. Upon the grant of an option to an Eligible Person, the Board
shall specify whether the option is intended to constitute a non-qualified
stock option or an incentive stock option; provided, however, that incentive
stock options may only be issued to persons who are Employees. An incentive
stock option is an option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
(b) Stock Option Agreement. Each option granted under the Plan shall
be evidenced by a written stock option agreement between the Corporation and
the Eligible Person containing such terms and conditions as the Board
determines, including, without limitation, provisions to qualify Incentive
Stock Options as such under Section 422 of the Code. Such agreements shall
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<PAGE> 5
incorporate the provisions of this Plan by reference. The date of granting an
option is the date specified in the written stock option agreement which is
signed by the Eligible Person and the Corporation.
(c) Exercise Price. The exercise price of the common stock offered to
Employees persons under the Plan by grant of an incentive stock option to
purchase common stock may not be less than the fair market value of the common
stock at the date of grant; provided, however, that the exercise price shall
not be less than 110% of the fair market value of the common stock on the date
of grant in the event an Employees owns 10% or more of the common stock of the
Corporation. The exercise price of the common stock offered to Eligible Persons
under the Plan by grant of a non-qualified stock option may be less than fair
market value of the common stock at the date of grant.
(d) Term of Options. The terms of each option shall be no more than
ten years from the date of grant as determined by the Board but shall be
subject to earlier termination as subsequently provided; however, if an
incentive stock option is granted to an Employee who, as of the date of grant,
owns 10% or more of the Corporation's Common Stock, the term of the option
shall be no more than five years.
(e) Schedule For Exercise. Immediately after grant of an option, it
may be exercised (subject to sections (f) and (g) of this Section) on terms and
conditions as the Board shall so determine on the date of grant. The Board may
limit an option by restricting its exercise in whole or in part for specified
periods in its sole discretion.
(f) Manner of Exercise
(i) Notice to The Corporation. Each exercise of an option
granted shall be made by the delivery by the optionee (or his legal
representative, as the case may be) of written notice of such election to the
Corporation, either in person or by certified mail to the Corporation's mailing
address, stating the number of shares with respect to which the option is being
exercised and specifying a date on which the shares will be taken and payment
made therefor. Such date shall be at least 30 days after such notice is given.
(ii) Issuance of Stock. On the date specified in the notice
of election, the Corporation shall deliver, or cause to be delivered, to the
optionee (or his legal representative, as the case may be), stock certificates
for the number of shares with respect to which the option is being exercised,
against payment therefor. Delivery of the certificate(s) may be made at the
office of the Corporation or at the office of a transfer agent appointed for
the transfer of shares of the Corporation, as the Corporation shall determine.
Shares shall be issued in the name of the optionee (or his legal
representative, as the case may be). No shares shall be issued until full
payment therefor shall have been made by cash or by certified check equal to
the exercise price; provided however, that the Board may adopt customary
"cashless exercise" provisions if deemed appropriate. In the event of a failure
on the date stated to pay for and accept delivery of the certificate(s)
representing the full number of shares specified in the notice of election, the
option shall become inoperative only as to those shares which are not paid for
and accepted, but shall continue with respect to any remaining shares subject
to the option as to which exercise has not yet been made.
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(g) Purchase of Investment
(i) Written Agreement. Unless a registration statement under
the Securities Act of 1933 is then in effect with respect to the common stock
an Eligible Person receives upon exercise of his or her option, an Eligible
Person shall acquire the common stock he or she receives upon exercise of the
option for investment and not for resale or distribution, and he or she shall
furnish the Corporation with a written statement to that effect when exercising
the option and a reference to such investment warranty shall be inscribed on
the stock certificate(s).
(ii) Registration Requirement. Each option shall be subject
to the requirement that, if at any time the Board determines that the listing,
registration or qualification of the common stock subject to the option upon
any securities exchange or quotation system, or under any state or Federal law
is necessary or desirable as a condition of, or in connection with, the
issuance of the common stock thereunder, the option may not be exercised in
whole or in part unless such listing, registration or qualification shall have
been effected or obtained (and the same shall have been free of any conditions
not acceptable to the Board).
(h) Date of Grant. Each option granted under the Plan, unless
otherwise specifically indicated, shall be granted as of the date of the
Board's resolution conferring the option ("date of grant").
(i) Special Limitations on Exercise of Incentive Stock Options. The
aggregate fair market value (determined at the time the incentive stock option
is granted) of the common stock with respect to which any incentive stock
option is first exercisable during any calendar year shall not exceed $100,000.
8. STOCK APPRECIATION RIGHTS
(a) Grant of Stock Appreciation Rights. One or more Stock Appreciation
Right awards may be granted to Eligible Persons. Stock Appreciation Rights may
be granted under the Plan in tandem with an option either at the time of grant
or by amendment or may be separately awarded. Stock Appreciation Rights shall
be subject to such terms and conditions not inconsistent with the Plan as the
Board shall impose.
(b) Right to Exercise; Exercise Period. A Stock Appreciation Right
issued in tandem with an option shall be exercisable to the extent the option
is exercisable. A Stock Appreciation Right issued independent of an option
shall be exercisable pursuant to such terms and conditions established in the
grant.
(c) Automatic Redemption of Unexercised Stock Appreciation Rights. If
on the last day of the Option Period, in the case of a Stock Appreciation Right
granted in tandem with an option, or the specified Award Period, in the case of
a Stock Appreciation Right issued independent of an option, the Participant has
not exercised such Stock Appreciation Right, then such Stock Appreciation Right
shall be automatically redeemed by the Corporation for an amount equal to the
payment that would otherwise have been made to the Participant if the
Participant had chosen to
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exercise the Stock Appreciation Right on the last day of the Option Period or
the specified Award Period, as the case may be.
(d) Rights Upon Exercise. An exercisable Stock Appreciation Right
granted in tandem with an option shall entitle the Participant to surrender
unexercised the option or any portion thereof to which the Stock Appreciation
Right is attached, and to receive in exchange for the Stock Appreciation Right
a payment (in cash or shares of Common Stock or a combination thereof as
described below) equal to the Fair Market Value of one share of Common Stock at
the date of exercise minus the Option Price times the number of shares called
for by the Stock Appreciation Right (or portion thereof) which is so exercised.
For example, assume that a Participant is granted a tandem Award of an option
to purchase 1,000 shares of Common Stock at an Option Price of $2.00 per share
and 1,000 Stock Appreciation Rights. In such a case, the exercise of 700
options by the Participant would relinquish and terminate 700 Stock
Appreciation Rights; similarly, the exercise of the remaining 300 Stock
Appreciation Rights would relinquish and terminate the remaining 300 options.
If the Fair Market Value of the Stock was $5.00 per share at both the time of
the exercise of the options and Stock Appreciation Rights, then the Participant
would receive 700 shares of Common Stock upon payment of $1,400 (700 times the
Option Price of $2.00) and the Corporation would pay the Participant $900 upon
the exercise of the 300 Stock Appreciation Rights (($5.00 minus $2.00) times
300).
With respect to the issuance of Stock Appreciation Rights which are
not granted in tandem with an option, the Board shall specify upon the date of
grant of the Stock Appreciation Right whether the Stock Appreciation Right is a
"regular" Stock Appreciation Right or a "book value" Stock Appreciation Right.
Upon the exercise of a "regular" Stock Appreciation Right, the Participant will
receive a payment equal to the Fair Market Value of one share of Stock at the
date of exercise minus the Fair Market Value of one share of Common Stock as of
the Date of Grant of the Stock Appreciation Right times the number of shares
called for by the Stock Appreciation Right (or portion thereof) which is so
exercised. Upon the exercise of a "book value" Stock Appreciation Right, the
Participant will receive a payment equal to the Book Value of one share of
Stock at the date of exercise minus the Book Value of one share of Common Stock
as of the Date of the Grant of the Stock Appreciation Right times the number of
shares called for by the Stock Appreciation Right (or portion thereof) which is
so exercised.
The value of any Common Stock to be received upon exercise of a Stock
Appreciation Right shall be the Fair Market Value of the Stock on such date of
exercise. To the extent that a Stock Appreciation Right issued in tandem with
an option is exercised, such option shall be deemed to have been exercised, and
shall not be deemed to have lapsed.
(e) Transferability. The Board may impose such restrictions on
transferability of Stock Appreciation Rights, if any, as it may in its sole
discretion determine; provided however, that Stock Appreciation Rights issued
in tandem with the grant of an incentive stock option must be subject to the
same transferability restriction as the incentive stock option itself.
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9. PERFORMANCE SHARES
(a) Grant of Performance Shares. One or more Performance Shares awards
may be granted to Eligible Persons. Awards made pursuant to this Section 9
shall be granted in the form of Performance Shares, subject to such terms and
conditions not inconsistent with the Plan as the Board shall impose.
Performance Shares shall be issued to the Participant without the payment of
consideration by the Participant. Awards shall be based on the attainment of
specified types and combination of performance measurement criteria, which may
differ as to various Participants or classes or categories of Participants.
Such criteria may include, without limitation, the attainment of certain
performance levels by the individual Participant, the Corporation, a department
or division of the Corporation and/or a group or class of Participants.
(b) Performance Period. The measuring period to establish the
performance criteria set forth in a Performance Share Award shall be determined
by the Board. A Performance Share Award may initially provide, or the Board may
at any time thereafter, but no more frequently than once in any six (6) month
period, amend it to provide, for waiver or reduction of the measuring period
and, if appropriate, for adjustment of the performance criteria set forth in
the Performance Share Award, upon the occurrence of events determined by the
Board in its sole discretion to justify such waiver, reduction or adjustment.
(c) Form of Payment. Upon the completion of the applicable measuring
period, a determination shall be made by the Board in accordance with the Award
as to (i) the extent to which performance criteria have been attained, (ii) the
satisfaction of any other terms and conditions with respect to the Award, and
(iii) the number of shares of Common Stock to be awarded to the Participant.
The appropriate number of shares of Common Stock shall thereupon be issued to
the Participant in accordance with the Award in satisfaction of such
Performance Share Award.
10. AWARD SUMMARIES
Each Award under this Plan shall be evidenced by an Award Summary.
Delivery of an Award Summary to each Participant shall constitute an agreement
between the Corporation and the Participant as to the terms and conditions of
the Award.
11. OTHER TERMS AND CONDITIONS
(a) Assignability. Except as otherwise provided below, no Award shall
be assignable or transferable except by will or the laws of descent and
distribution and, during the lifetime of a Participant, the Award shall be
exercisable only by such Participant or such Participant's guardian or legal
representative. The Board, in its discretion, may permit a Participant during
their lifetime, to transfer a non-qualified stock option, for no consideration,
to or for the benefit of the Participant's immediate family (including a trust
for the benefit of the Participant's immediate family) or to a partnership or
limited liability company for one or more members of the Participant's
immediate family), subject to such limits as the Board may establish, and the
transferee shall remain subject to all the terms and conditions applicable to
the Award prior to such transfer. Any vesting period applicable to an Award
shall, however, continue to be measured in terms of the Participant's
employment or service to the Corporation or its Subsidiaries. The term
"immediate family" shall mean the Participant's spouse, parents, children,
stepchildren, adoptive children, sisters, brothers and grandchildren (and, for
these purposes, shall also include the Participant).
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(b) Termination of Employment or Relationship. If the employment or
relationship of a Participant as identified in his or her particular option
and/or Stock Appreciation Right agreement terminates for any reason other than
death or total and permanent disability, any options and/or Stock Appreciation
Rights granted to the Participant under the Plan which have not been exercised
shall be canceled, except that such an option and/or Stock Appreciation Right
may be exercised within three months after such termination of such
relationship to the extent the option and/or Stock Appreciation Right was
exercisable on the date of termination of such relationship. The Plan will not
confer upon any Participant any right with respect to continuance of such
relationship with the Corporation; nor will it interfere in any way with the
Corporation's right to terminate such relationship at any time.
In the event of the death of a Participant, any option and/or Stock
Appreciation Right held by him or her at the time of his or her death shall be
transferred as provided in his will or as determined by the laws of descent and
distribution, and the terms of the option and/or Stock Appreciation Right may
provide that it may be exercised by the estate of the Participant, or by any
person who acquired such option and/or Stock Appreciation Right by bequest or
inheritance from the Participant, at any time or from time to time within three
months after the date of death (such date to be determined by the Board), but
not thereafter, to the extent the option and/or Stock Appreciation Right was
exercisable on such date.
In the event of permanent disability (within the meaning of section
22(e)(3)) of a Participant, any option and/or Stock Appreciation Right granted
pursuant to the Plan and held by him or her may be exercised by the Participant
or his or her representative at any time or from time to time within one year
after the date of termination (such date to be determined by the Board), but
not thereafter, to the extent the option and/or Stock Appreciation Right was
exercisable on such date.
(c) Rights as a Stockholder. An Eligible Person shall have all voting,
dividend, liquidation and other rights with respect to Common Stock in
accordance with its terms received by him or her as a Restricted Stock award
upon his or her becoming the holder of record of such Common Stock; provided,
however, that the Eligible Person's right to sell, encumber or otherwise
transfer such Common Stock shall be subject to the restrictions set forth in
the grant of the Award and elsewhere in this Plan. A Participant shall not, by
reason of any option and/or Stock Appreciation Right granted pursuant to this
Plan, have any rights of a stockholder of the Corporation until the date of
issuance of the stock certificate(s) to him or her in respect of exercise of an
option and/or Stock Appreciation Right granted hereunder.
(d) Payments by Participants. The Board may determine that Awards for
which a payment is due from a Participant may be payable: (i) in U.S. dollars
by personal check, bank draft or money order payable to the order of the
Corporation, by money transfers or direct account debits; (ii) through the
delivery or deemed delivery based on attestation to the ownership of shares of
Common Stock held by the payor for at least six months, with a Fair Market
Value equal to the total payment due; (iii) by a combination of the methods
described in (i) and (ii) above; (iv) in the case of a non-qualified stock
option, by authorizing a third party to sell shares of Common Stock (or a
sufficient portion of the shares) acquired upon exercise of the option and
remit to the Corporation a sufficient portion of the sale proceeds to pay the
entire exercise price and any tax withholding resulting from such exercise, or
(v) by such other methods as the Board may deem appropriate.
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(e) Withholding. The Corporation shall have the right to deduct from
an Award pursuant to the Plan any federal, state or local taxes as it deems to
be required by law to be withheld with respect to such award. In the case of
awards paid in Common Stock, the Eligible Person or other person receiving such
Common Stock may be required to pay to the Corporation the amount of any such
taxes which the Corporation is required to withhold with respect to such Common
Stock. At the request of an Eligible Person, or as required by law, such sums
as may be required for the payment of any estimated or accrued income tax
liability may be withheld and paid over to the governmental entity entitled to
receive the same. The Board may from time to time establish procedures for
withholding of Common Stock.
12. AMENDMENTS
The Board (but not the Committee) may alter, amend, suspend or
discontinue this Plan to the extent permitted by law; provided, however, that
no alteration, amendment, suspension or discontinuance of this Plan shall
adversely affect any right acquired by any Participant under an Award granted
before the date of such alteration, amendment, suspension or discontinuance of
this Plan without the written consent of the Eligible Person to whom the stock
award has been granted. Any such action of the Board may be taken without the
approval of the Corporation's stockholders, but only to the extent that such
stockholder approval is not required by applicable law or regulation, including
specifically Section 422 of the Code and the rules or policies of the primary
exchange or trading system on which the Common Stock is then traded.
13. RECAPITALIZATION
The aggregate number of shares of Common Stock as to which Awards may
be granted hereunder, the number of shares thereof covered by each outstanding
Award, and the price per share thereof in each such Award, shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a subdivision or consolidation of shares
or other capital adjustment, or the payment of a stock dividend or other
increase or decrease in such shares, effected without receipt of consideration
by the Corporation, or other change in corporate or capital structure;
provided, however, that any fractional shares resulting from any such
adjustment shall be eliminated. The Board shall make the foregoing changes and
any other changes, including changes in the classes of securities available, to
the extent necessary or desirable to preserve the intended benefits of this
Plan for the Corporation and the Participants in the event of any other
reorganization, recapitalization, merger, consolidation, spin-off,
extraordinary dividend or other distribution or similar transaction.
14. NO RIGHT TO EMPLOYMENT
No person shall have any claim or right to be granted an Award, and
the grant of an Award shall not be construed as giving a Participant, Director
or consultant the right to be retained in the employ of the Corporation or a
Subsidiary; provided, however, that this Section 14 shall not in any way modify
or void any written employment agreement, consulting agreement or other similar
agreement between the Corporation and the Participant The Corporation and each
Subsidiary further expressly reserve the right at any time to dismiss a
Participant free from any liability, or any claim under this Plan, except as
provided herein or in any Award Summary issued hereunder.
-10-
<PAGE> 11
15. CHANGE IN CONTROL
(a) Discontinuation of the Plan. The Plan shall be discontinued in the
event of the dissolution or liquidation of the Corporation or in the event of a
Reorganization (as hereinafter defined) in which the Corporation is not the
surviving or acquiring company, or in which the Corporation is or becomes a
wholly-owned subsidiary of another company after the effective date of the
Reorganization and no plan or agreement respecting the Reorganization is
established which specifically provides for the continuation of the Plan and
the change, conversion, or exchange of the Common Stock relating to existing
Awards under this Plan for securities of another corporation. Upon the
dissolution of the Plan in connection with an event described in this
subsection (a), all Awards shall become fully vested and unrestricted and all
outstanding options and Stock Appreciation Rights shall become immediately
exercisable by the holder thereof. Any options or Stock Appreciation Rights
granted under the Plan may be terminated as of a date fixed by the Board,
provided that no less than fifteen (15) days written notice of the date so
fixed shall be given to each Participant and each such Participant shall have
the right during such period to exercise all or any portion of such options or
Stock Appreciation Rights. Any Stock Appreciation Right not so exercised shall
be redeemed.
(b) Continuation of the Plan Upon a Reorganization. In the event of a
Reorganization (as hereinafter defined) (i) in which the Corporation is not the
surviving or acquiring company, or in which the Corporation is or becomes a
wholly-owned subsidiary of another company after the effective date of the
Reorganization, and (ii) with respect to which there is a reorganization
agreement which undertakes to continue the Plan and to provide for the change,
conversion or exchange of the Stock attributable to outstanding Awards for
securities of another corporation, then the Plan shall continue and the Board
shall adjust the shares under such outstanding Awards (and shall adjust the
shares remaining under the Plan which are then to be available for the grant of
additional Awards under the Plan, if the reorganization agreement makes
specific provisions therefor), in a manner not inconsistent with the provisions
of the reorganization agreement and this Plan for the adjustment, change,
conversion or exchange of such Awards.
The term "Reorganization" as used in this Section 15 shall mean any
statutory merger, statutory consolidation, sale of all or substantially all of
the assets of the Corporation, or sale, pursuant to an agreement with the
Corporation, of securities of the Corporation pursuant to which the Corporation
is or becomes a wholly-owned subsidiary of another company after the effective
date of the Reorganization.
(c) Adjustments and Determinations. Adjustments and determinations
under this Section 15 shall be made by the Board, whose decisions as to what
adjustments or determinations shall be made, and the extent thereof, shall be
final, binding, and conclusive.
-11-
<PAGE> 12
16. RETIREMENT
The Board may, in its discretion, waive the forfeiture, termination,
or lapse of an Award in the event of retirement of a Participant (each as
determined by the Board, in its discretion). Exercise of such discretion by the
Board in any individual case, however, shall not be deemed to require, or to
establish a precedent suggesting such waiver in any other case.
17. GOVERNING LAW
To the extent that federal laws do not otherwise control, this Plan
and the Awards issued hereunder shall be construed in accordance with and
governed by the law of the State of Kansas to the extent not inconsistent with
Section 422 of the Code and regulations issued thereunder.
18. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable law and
regulation. In case any one or more of the provisions of this Plan shall be
held invalid, illegal or unenforceable in any respect under applicable law and
regulation, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and the
invalid, illegal or unenforceable provision shall be deemed null and void;
however, to the extent permissible by law, any provision which could be deemed
null and void shall first be construed, interpreted or revised retroactively to
permit this Plan to be construed in compliance with all applicable laws so as
to foster the intent of this Plan.
19. SUCCESSORS
Awards issued under the Plan should be binding upon, and inure to the
benefit of, the Corporation and its successors and assigns, and upon any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of the Corporation's assets and business.
20. EFFECTIVE DATE AND TERM
The Team Financial, Inc. 1999 Stock Incentive Plan shall be effective
this 13th day of May, subject to stockholder approval within one year of this
date. No option or restricted stock award shall be granted hereunder after the
expiration of ten years from the earlier of the date on which the Plan was
adopted by the Board of Directors or the date it was approved by the
stockholders of the Corporation.
-12-
<PAGE> 1
EXHIBIT 10.13
RIGHTS AGREEMENT
BETWEEN
TEAM FINANCIAL, INC.
AND
AMERICAN SECURITIES TRANSFER & TRUST, INC.
AS RIGHTS AGENT
-----------------------------------
DATED AS OF JUNE 3, 1999
----------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
SECTION 1. CERTAIN DEFINITIONS............................................................................................-1-
SECTION 2. APPOINTMENT OF RIGHTS AGENT....................................................................................-5-
SECTION 3. ISSUANCE OF RIGHT CERTIFICATES.................................................................................-5-
SECTION 4. FORM OF RIGHT CERTIFICATES.....................................................................................-7-
SECTION 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION...................................................................-7-
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST
OR STOLEN RIGHT CERTIFICATES...................................................................................-8-
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS..................................................-8-
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES............................................................-10-
SECTION 9. RESERVATION AND AVAILABILITY OF SHARES OF PREFERRED STOCK.....................................................-10-
SECTION 10. PREFERRED STOCK RECORD DATE..................................................................................-12-
SECTION 11. ADJUSTMENTS TO PURCHASE PRICE, NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS.................................-12-
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES...................................................-16-
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER.........................................-17-
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES......................................................................-19-
SECTION 15. RIGHTS OF ACTION.............................................................................................-20-
SECTION 16. AGREEMENT OF RIGHT HOLDERS...................................................................................-20-
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER............................................................-21-
SECTION 18. CONCERNING THE RIGHTS AGENT..................................................................................-21-
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT....................................................-22-
SECTION 20. DUTIES OF RIGHTS AGENT.......................................................................................-22-
SECTION 21. CHANGE OF RIGHTS AGENT.......................................................................................-24-
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES...........................................................................-24-
SECTION 23. REDEMPTION...................................................................................................-25-
SECTION 24. NOTICE OF CERTAIN EVENTS.....................................................................................-26-
</TABLE>
-2-
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 25. NOTICES......................................................................................................-26-
SECTION 26. SUPPLEMENTS AND AMENDMENTS...................................................................................-27-
SECTION 27. EXCHANGE.....................................................................................................-27-
SECTION 28. SUCCESSORS...................................................................................................-28-
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC....................................................-28-
SECTION 30. BENEFITS OF THIS RIGHTS AGREEMENT............................................................................-28-
SECTION 31. SEVERABILITY.................................................................................................-28-
SECTION 32. GOVERNING LAW................................................................................................-28-
SECTION 33. COUNTERPARTS; EFFECTIVENESS..................................................................................-28-
SECTION 34. DESCRIPTIVE HEADINGS.........................................................................................-29-
EXHIBITS:
- ---------
EXHIBIT A CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF SERIES A PREFERRED STOCK
EXHIBIT B FORM OF RIGHT CERTIFICATE
EXHIBIT C SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
</TABLE>
-3-
<PAGE> 4
RIGHTS AGREEMENT
This Rights Agreement, dated as of June 3, 1999, is made between Team
Financial, Inc., a Kansas corporation (the "Company"), and American Securities
Transfer & Trust, Inc., a Colorado corporation, as Rights Agent (the "Rights
Agent"),
WITNESSETH
WHEREAS, on June 3, 1999 (the "Declaration Date") the Board of
Directors of the Company authorized and declared a dividend distribution of one
right (a "Right") for each share of the Common Stock of the Company (the "Common
Stock") outstanding at the close of business on June 3, 1999 (the "Record Date")
and has further authorized the issuance of one Right (as such number may
hereafter be adjusted pursuant to the provisions of this Rights Agreement) with
respect to each share of Common Stock issued between the Record Date and the
earliest of the Distribution Date and the Expiration Date (as such terms are
hereinafter defined). Each Right shall represent the right to purchase, upon the
terms and subject to the conditions hereinafter set forth, one one-hundredth
(1/100th) of a share (subject to adjustment) of the Series A Preferred Stock
(the "Preferred Stock"), of the Company having the rights and preferences set
forth in the form of Certificate of Designation of Rights, Preferences and
Privileges of Series A Preferred Stock attached hereto as EXHIBIT A;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated;
"Acquiring Person" shall mean any Adverse Person or any Person who or
which, together with all Affiliates (as hereinafter defined) and Associates (as
hereinafter defined) of such Person, shall, subsequent to the Declaration Date,
become the Beneficial Owner (as hereinafter defined) of 15% or more of the
shares of Common Stock then outstanding, but shall not include (x) any Exempt
Person (as hereinafter defined), or (y) any Person who becomes a Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding solely
because (1) of a change in the aggregate number of shares of Common Stock
outstanding since the last date on which such Person acquired Beneficial
Ownership of any shares of Common Stock, or (2) it acquired such Beneficial
Ownership in the good faith belief that such acquisition would not (A) cause
such Beneficial Ownership to exceed 15% of the shares of Common Stock then
outstanding and such Person relied in good faith in computing the percentage of
its Beneficial Ownership on publicly filed reports or documents of the Company
which are inaccurate or out-of-date, or (B) otherwise cause a Distribution Date
or the adjustment provided for in Section 11 to occur. Notwithstanding clause
(y) of the prior sentence, if any Person that is not an Acquiring Person because
of the operation of such clause (y) does not reduce its Beneficial Ownership of
shares of Common Stock to less than 15% by the close of business on the fifth
Business Day after notice from the Company (the date of notice being the first
day) that such Person's Beneficial Ownership of Common Stock so equals or
exceeds 15%, such Person shall, at the end of such five Business Day period,
become an Acquiring Person (and clause (y) shall no longer apply to such
Person). For purposes of this definition, the determination whether any Person
acted in "good faith" shall be conclusively determined by the Board of
Directors, acting by a vote of those directors of the Company whose approval
would be required to redeem the Rights under Section 23.
(b) "Adverse Person" means a Person who or which, together with all
Affiliates (as hereinafter defined) and Associates (as hereinafter defined) of
such Person, as to which the Board of Directors has, after consultation with
such advisors and such other investigation as it considers necessary, made the
following determinations: (i) such Person any time after the Rights Dividend
Declaration Date has become the Beneficial Owner of a substantial (but in no
event less than 10% of the shares of Common Stock then
-1-
<PAGE> 5
outstanding) amount of Common Stock; and (ii) (A) such Person intends to cause
the Company or its Affiliates to repurchase such Common Stock beneficially owned
by such Person or to exert pressure against the Company or its Affiliates to
take any action or enter into any transaction or series of transactions with the
intent or effect of providing such Person with short-term gains or profits under
circumstances in which the Board of Directors of the Company determines that the
long-term interests of the Company and its stockholders would not be served by
taking such action or entering into such transaction or series of transactions;
or (B) Beneficial Ownership of Common Stock by such Person is reasonably likely
to have a material adverse effect on the business, competitive position,
prospects, business reputation, or financial condition of the Company and its
Subsidiaries. No delay or failure by the Board of Directors to make a
determination that any Person is an Adverse Person will in any way waive or
otherwise adversely affect the power of the Board of Directors to declare any
Person an Adverse Person.
"Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date of this Agreement.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed
to "beneficially own," and shall be deemed to have "Beneficial Ownership" of,
any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, is deemed to beneficially own (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act as in effect on the date of this Agreement) or has the right to dispose of;
(ii) which such Person or any of such Person's Affiliates or
Associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), arrangement or understanding (whether or not in writing), or upon
the exercise of conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; PROVIDED, HOWEVER, that a Person
shall not be deemed the "Beneficial Owner" of or to "beneficially own," or to
have the "Beneficial Ownership" of, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for payment
or exchange; or (B) the right to vote, including pursuant to any agreement,
arrangement or understanding (whether or not in writing); PROVIDED, HOWEVER,
that a Person shall not be deemed the "Beneficial Owner" of or to "beneficially
own," or to have the "Beneficial Ownership" of, any security under this clause
(ii)(B) as a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding (1) arises solely from
a revocable proxy or consent given to such Person in response to a public proxy
or consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations under the Exchange Act, and (2) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
or any of such Person's Affiliates or Associates has any agreement (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities), arrangement or
understanding (whether or not in writing) for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in clause (B) of
subparagraph (ii) of this definition) or disposing of any voting securities of
the Company.
"Board of Directors" shall mean the Board of Directors of the Company
or any duly authorized committee thereof.
-2-
<PAGE> 6
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of Kansas are authorized or
obligated by law or executive order to close.
"Certificate of Designation" shall mean the Certificate of Designation
of Rights, Preferences and Privileges of Series A Preferred Stock, a copy of
which is attached hereto as EXHIBIT A.
"Close of business" on any given date shall mean 5:00 P.M., Central
Time, on such date; PROVIDED, HOWEVER, that if such date is not a Business Day,
"Close of business" shall mean 5:00 P.M., Central Time, on the next succeeding
Business Day.
"Common Stock" when used with reference to the Company shall mean the
shares of Common Stock of the Company, or any other shares of capital stock of
the Company into which the Common Stock shall be reclassified or changed.
"Common Stock" when used with reference to any Person other than the Company
shall mean the Common Stock (or, in the case of a trust, partnership or other
unincorporated entity, the equivalent equity interest) with the greatest voting
power of such Person (or, (i) if such Person is a Subsidiary of another Person,
the Person which ultimately controls such first-mentioned Person, or (ii) if
such Person is ultimately controlled by two or more Persons, the controlling
Person having Common Stock or equivalent equity interests with the greatest
current aggregate market value (as determined pursuant to Section 13(b)
hereof)), together with all rights and benefits (however denominated or
constituted) relating to such Common Stock (including, without limitation, any
rights or warrants to acquire additional shares of such Common Stock or other
securities or assets, or to participate in any trust for the benefit of holders
of such shares, or to share in the benefits of any agreements or other
arrangements for the benefit of such holders), whether or not such rights are
yet exercisable, and together with any other securities which are represented by
the certificates for such shares or are transferred in connection with transfers
of such shares.
"Current Market Price" per share of Common Stock or Preferred Stock
("Stock") on any date shall be deemed to be the average of the daily closing bid
price per share of Stock for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; PROVIDED, HOWEVER, that in
the event that the Current Market Price per share of Stock is determined during
a period following the announcement by the issuer of such Stock of (A) a
dividend or distribution on such Stock, or (B) any subdivision, combination or
reclassification of such Stock, and prior to the expiration of 30 Trading Days
after the ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification of such Stock, then, and
in such case, the "Current Market Price" shall be proportionately adjusted to
take into account ex-dividend or ex-distribution trading and calculated as if
such ex-dividend or record date had occurred on the first day of 30-day period.
The closing bid price for each day shall be the bid price as reported on the
Nasdaq SmallCap Market or, if the Stock is not authorized for quotation on the
Nasdaq SmallCap Market, the Nasdaq National Market, or as reported in the
principal consolidated transaction reporting system with respect to securities
listed or the principal national securities exchange on which the Stock is
listed or admitted to trading or, if the Stock is not listed or admitted to
trading on any national securities exchange, the last price or, if not so
quoted, the average of the closing bid prices per share for the securities in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("Nasdaq") or such other
system then in use, or, if on any such date the security is not quoted by such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Stock selected by the Board of
Directors. If on any such date no market maker is making a market in the Stock
the fair value of such shares on such date as determined in good faith by the
Board of Directors shall be used. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the shares of the
Stock are listed or admitted to trading or traded is open for the transaction of
business or, if the Stock is not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is not publicly held or
not so listed or traded, "Current Market Price" per share shall mean the fair
value per share of Common Stock as determined in good faith by the Board of
Directors.
-3-
<PAGE> 7
If the current market price per share of Preferred Stock cannot be
determined in the manner provided above or if the Preferred Stock is not
publicly traded, the "Current Market Price" per share of the Preferred Stock
shall be conclusively deemed to be an amount equal to the Current Market Price
per share of the Common Stock, as determined (appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof), multiplied by 100. If neither the Common Stock nor the Preferred Stock
are publicly held or so listed or traded, the "Current Market Price" per share
of the Preferred Stock shall mean the fair market value per share as determined
in good faith by the Board of Directors, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclusive and binding
for all purposes.
"Distribution Date" shall have the meaning set forth in Section 3
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as in
effect on the date in question, unless otherwise specifically provided.
"Exempt Person" shall include (i) the Company, (ii) any Subsidiary (as
hereinafter defined) of the Company, (iii) any employee benefit plan of the
Company or any of its Subsidiaries, or any entity holding shares of Common Stock
which was organized, appointed or established by the Company or any Subsidiary
of the Company for or pursuant to the terms of any such plan, or (iv) any
underwriter, as defined in the Securities Act of 1933, who enters into an
underwriting agreement with the Company where such underwriting agreement is
approved by the Board of Directors.
"Person" shall mean any individual, firm, corporation, trust,
partnership or other entity, whether similar or dissimilar to the foregoing.
"Preferred Stock" shall mean the Series A Preferred Stock of the
Company having the rights and preferences set forth in the form of Certificate
of Designation of Rights, Preferences and Privileges of Series A Preferred Stock
attached to this Agreement as EXHIBIT A.
"Purchase Price" with respect to each Right shall mean $48.00, as such
amount may from time to time be adjusted as provided herein, and shall be
payable in lawful money of the United States of America. All references hereto
to the Purchase Price shall mean the Purchase Price as in effect at the time in
question.
"Redemption Price" with respect to each Right shall mean $0.001, as
such amount may from time to time be adjusted in accordance with Section 23. All
references herein to the Redemption Price shall mean the Redemption Price in
effect at the time in question.
"Right Certificate" shall mean a certificate representing a Right in
substantially the form attached hereto as EXHIBIT B.
"Rights" shall mean the rights to purchase shares of Preferred Stock
(or other securities) as provided in this Rights Agreement.
"Securities Act" shall mean the Securities Act of 1933, as in effect on
the date in question, unless otherwise specifically provided.
"Stock Acquisition Date" shall mean 5:00 P.M., Central Time, on the
first date of public announcement by the Company or an Acquiring Person that an
Acquiring Person has become such; PROVIDED, HOWEVER, that if such Person is
determined not to have become an Acquiring Person pursuant to clause (y) of the
definition of Acquiring Person above, then no Stock Acquisition Date shall be
deemed to have occurred.
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<PAGE> 8
"Subsidiary" shall mean, with respect to any Person, any other Person
of which securities or other ownership interests having ordinary voting power,
in the absence of contingencies, to elect a majority of the board of directors
of such Person (if such Person is a corporation) or to participate in the
management and control of such Person (if such Person is not a corporation), are
at the time directly or indirectly owned by such first Person.
The terms set forth below are defined in the Sections indicated below:
<TABLE>
<CAPTION>
TERM SECTION
<S> <C>
Declaration Date RECITAL
Distribution Date 3(a)
Equivalent Shares 11(b)
Exchange Consideration 27
Expiration Date 7(a)
Final Expiration Date 7(a)
Principal Party 13(b)
Record Date RECITAL
Right RECITAL
Rights Agent RECITAL
Summary of Rights 3(b)
</TABLE>
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable. In the event the Company appoints one or more co-Rights
Agents, the respective duties of the Rights Agent and any co-Rights Agents shall
be as the Company shall determine.
SECTION 3. ISSUANCE OF RIGHT CERTIFICATES.
(a) Until the earlier of (i) the close of business on the twentieth day
after the Stock Acquisition Date (including any such date which is after the
Declaration Date and prior to the issuance of the Rights), (ii) the close of
business on the twentieth day (or such later day as may be determined by action
of the Board of Directors of the Company prior to such time as any Person
becomes an Acquiring Person) after the date of the commencement of a tender or
exchange offer by any Person (other than an Exempt Person) to acquire (when
added to any equity securities as to which such Person is the Beneficial Owner
immediately prior to such commencement) Beneficial Ownership of 15% or more of
the issued and outstanding Common Stock (including any such date which is after
the Declaration Date and prior to the issuance of the Rights), and (iii) the
close of business on the twentieth day (or such later day as may be determined
by action of the Board of Directors of the Company prior to such time as any
Person becomes an Acquiring Person) after the filing by any Person (other than
an Exempt Person) of a registration statement under the Securities Act, with
respect to a contemplated exchange offer to acquire (when added to any equity
securities as to which such Person is the Beneficial Owner immediately prior to
such filing) beneficial ownership of 15% or more of the issued and outstanding
Common Stock (including any such date which is after the Declaration Date and
prior to the issuance of the Rights) (the earliest of such dates referred to in
clauses (i), (ii) and (iii) of this Section 3(a) being herein referred to as the
"Distribution Date"), (A) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for the Common Stock
registered in the names of the holders of the Common Stock (which certificates
for shares of Common Stock also shall be deemed to be Right Certificates (as
such term is hereinafter defined)) and not by separate Right Certificates, and
(B) the Rights (and the right to receive Right Certificates) will be
transferable only in connection with the transfer of the underlying Common
Stock; PROVIDED, that if the Distribution Date would be prior to the Record
Date, the Record Date shall be the Distribution Date, and PROVIDED, FURTHER,
that (x) if,
-5-
<PAGE> 9
following the occurrence of the Stock Acquisition Date and prior to the
Distribution Date, (1) a Person who is an Acquiring Person shall have
transferred or otherwise disposed of a number of shares of Common Stock of the
Company in one transaction or a series of transactions (not directly or
indirectly involving the Company or any of its Subsidiaries) such that such
Person is thereafter the Beneficial Owner of less than 15% (or, in the case of
an Adverse Person, 10%) of the outstanding Common Stock of the Company, (2)
there are no other Persons, immediately following the occurrence of the event
described in clause (1), who are Acquiring Persons, and (3) the Board of
Directors of the Company shall so approve, then, for purposes of this Agreement,
the Stock Acquisition Date shall be deemed never to have occurred, and (y) if a
tender or exchange offer referred to in clauses (ii) or (iii) above is canceled
or withdrawn prior to the Distribution Date, such offer shall be deemed, for
purposes of this Agreement, never to have been made. As soon as practicable
after the Company has notified the Rights Agent of the occurrence of the
Distribution Date, the Rights Agent will send, by first-class, insured, postage
prepaid mail, to each record holder of the Common Stock as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more Right Certificates, evidencing one Right for
each share of Common Stock so held, subject to adjustment as herein provided. As
of and after the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form of EXHIBIT C hereto (the "Summary of Rights"), by
first-class, postage prepaid mail, to each record holder of the Common Stock on
the Record Date, as shown by the records of the Company, at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Stock outstanding as of the Record Date, until the Distribution Date (or
the earlier redemption, exchange, expiration or termination of the Rights), the
Rights will be evidenced solely by such certificates for Common Stock registered
in the names of the holders of the Common Stock and the registered holders of
the Common Stock shall also be registered holders of the associated Rights.
Until the Distribution Date (or the earlier redemption, exchange, expiration or
termination of the Rights), the surrender for transfer of any certificate for
Common Stock in respect of which Rights have been issued shall also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificates.
(c) The Company will mail to any record holder of a Right (including,
prior to the Distribution Date, a record holder of Common Stock) a copy of this
Rights Agreement, without charge, within ten Business Days of a written request
therefor.
(d) Rights shall be issued in respect of all shares of Common Stock
which are issued or sold out of treasury after the Record Date but prior to the
Distribution Date (or the earlier redemption, exchange, expiration or
termination of the Rights). All certificates for Common Stock issued or sold
after the Record Date but prior to the earlier of the Distribution Date and the
Expiration Date shall be deemed also to be certificates for Rights and shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Rights Agreement between
Team Financial Inc. (the "Company") and American Securities
Transfer & Trust, Inc., as Rights Agent, dated as of May __,
1999, as it may from time to time be supplemented or amended
pursuant to its terms (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy
of which is on file at the principal executive offices of the
Company. Under certain circumstances, as set forth in the
Rights Agreement, such Rights may be redeemed, may expire, or
may be evidenced by separate certificates and no longer be
evidenced by this certificate. The Company will mail to the
holder of record of this certificate a copy of the Rights
Agreement without charge within ten business days after
receipt of a written request therefor. Under certain
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circumstances, as set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an
Acquiring Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement), whether currently
held by or on behalf of such Person or by any subsequent
holder, may become null and void.
With respect to certificates containing the foregoing legend, until the
Distribution Date (or the earlier redemption, exchange, expiration or
termination of the Rights) the Rights associated with the Common Stock
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any of such certificates shall also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificates. Notwithstanding this clause (d), the omission of a legend shall
not affect the enforceability of any part of this Rights Agreement or the rights
of any holder of Rights.
SECTION 4. FORM OF RIGHT CERTIFICATES.
(a) The Right Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse thereof) shall be substantially in
the form of EXHIBIT B hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Rights Agreement, or as may be required to comply with any applicable law,
rule or regulation or with any rule or regulation of any stock exchange or
quotation system on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 7, Section 11 and Section
22 hereof, the Right Certificates, whenever issued, shall be dated as of the
Distribution Date, and on their face shall entitle the holders thereof to
purchase such number of one one-hundredths (1/100ths) of one share of Preferred
Stock as shall be set forth therein at the Purchase Price set forth therein, but
the number and type of shares of Preferred Stock and other securities
purchasable upon the exercise of each Right and the Purchase Price thereof shall
be subject to adjustment as provided herein. To the extent provided in Section
4(b) hereof, certain Rights Certificates shall contain the legend provided for
therein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights which are null and void pursuant to Section
11(a)(iii) hereof and any Right Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence shall contain (to the
extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Right Certificate and the Rights represented hereby are
null and void.
The provisions of Section 11(a)(iii) hereof shall be operative whether
or not the foregoing legend is contained on any such Right Certificate.
SECTION 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, Vice Chairman of the Board, Chief Executive
Officer, President or Chief Financial Officer, either manually or by facsimile
signature. The Right Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose unless so countersigned. In case
any officer of the Company whose manual or facsimile signature is affixed to the
Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
issued and delivered with the same force and effect as though the Person who
signed such Right Certificates had not ceased to be such
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<PAGE> 11
officer of the Company. Any Right Certificate may be signed on behalf of the
Company by any Person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Right Certificates upon exercise or transfer,
books for registration and transfer of the Right Certificates issued hereunder.
Such books shall show the names and addresses of the respective holders of the
Right Certificates, the number of Rights evidenced on its face by each of the
Right Certificates and the date of each of the Right Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT
CERTIFICATES.
(a) Subject to the provisions of Section 11(a)(iii), Section 14 and
Section 27 hereof, at any time after the close of business on the Distribution
Date and at or prior to the close of business on the Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become null and void pursuant to Section 11(a)(iii) hereof or
that have been exchanged pursuant to Section 27 hereof) may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates, representing, in the aggregate, the same number of Rights as the
Right Certificate or Right Certificates surrendered then represented. Any
registered holder desiring to transfer, split up, combine or exchange any Right
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Right Certificate or Right Certificates to
be transferred, split up, combined or exchanged at the principal office or
offices of the Rights Agent designated for such purpose. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right Certificate or Right
Certificates until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Right Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner, former Beneficial Owner and transferee
Beneficial Owner (and Associates and Affiliates of the foregoing) as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Section
11(a)(iii), Section 14 and Section 27 hereof, countersign and deliver to the
Person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment by such holder of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
(c) Notwithstanding any other provision hereof, the Company and the
Rights Agent may amend this Rights Agreement to provide for uncertificated
Rights in addition to or in place of Rights evidenced by Right Certificates.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Section 11(a)(iii), Section 23 and Section 27 hereof,
each Right shall entitle the registered holder thereof, upon exercise thereof as
provided herein, to purchase for the Purchase Price at
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<PAGE> 12
any time after the Distribution Date and prior to the earlier of (i) the close
of business on June 3, 2009 (the "Final Expiration Date"), (ii) the date and
time that the Rights are redeemed as provided in Section 23 hereof and (iii) the
time at which all exercisable Rights are exchanged pursuant to Section 27 hereof
(the earlier of (i), (ii) and (iii) herein being referred to as the "Expiration
Date"), one one-hundredth (1/100th) of a share of Preferred Stock, subject to
adjustment from time to time as provided in Section 11.
(b) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth (1/100th)
of a share of Preferred Stock as to which the Rights are exercised, at or prior
to the Expiration Date.
(c) The Purchase Price for each one one-hundredth (1/100th) of a share
of Preferred Stock pursuant to the exercise of a Right shall initially be
$48.00, shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof and shall, except as otherwise provided in this Section 7(c),
be payable in lawful money of the United States of America in accordance with
Section 7(d) below. In lieu of the cash payment referred to in the immediately
preceding sentence, following the occurrence of a Distribution Date, the
registered holder of a Right Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part upon surrender
of the Right Certificate together with an election to exercise such Rights
without payment of cash on the reverse side thereof duly completed. With respect
to any such Rights as to which such an election is made, the holder shall
receive a number of one one-hundredths (1/100ths) of a share of Preferred Stock
or other securities having a value equal to the difference between (i) the value
of the Preferred Stock or other securities that would have been issuable upon
payment of the Purchase Price and (ii) the Purchase Price. For purposes of this
Section 7(c), the value of any securities shall be the Current Market Value
thereof (or of the security to which such security is deemed for purposes of
this Agreement to be an equivalent). For purposes of this Section 7(c), Current
Market Value shall mean the closing price of any such securities on the Trading
Day immediately preceding the Distribution Date.
(d) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-hundredth (1/100th) of a share of Preferred Stock (or other
securities, as the case may be) to be purchased, and an amount equal to any
applicable transfer tax, in cash or by certified check or bank draft payable to
the order of the Company, or a duly completed election to exercise without
payment of cash, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i)(A) requisition from any transfer agent of the Preferred
Stock (or make available, if the Rights Agent is the transfer agent)
certificates for the total number of shares of Preferred Stock to be purchased
or acquired and/or (B) requisition from the depositary agent depositary receipts
representing such number of fractional shares of Preferred Stock as are to be
purchased, in which case certificates for the fractional shares of Preferred
Stock so represented shall be deposited with the depositary agent (and the
Company hereby irrevocably authorizes and directs its transfer agent and any
such depositary agent to comply with all such requests), (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 14 hereof, (iii) promptly after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt thereof, promptly deliver any
such cash to or upon the order of the registered holder of such Right
Certificate; PROVIDED, that in the case of a purchase of securities other than
Preferred Stock, the Rights Agent shall promptly take the appropriate actions
corresponding to the foregoing clauses (i) through (iii). In the event that the
Company is obligated to issue other securities and/or distribute other property
pursuant to Section 9 or Section 11 hereof, the Company will make all
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<PAGE> 13
arrangements necessary so that such other securities, or other property are
available for distribution by the Rights Agent, if and when appropriate.
(e) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action
whatsoever with respect to a registered holder of Rights upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered or presented for the purpose of exercise,
transfer, split-up, combination or exchange shall, and any Right Certificate
representing Rights that have become null and void and non-transferable pursuant
to Section 11(a)(iii) surrendered or presented for any purpose shall, if
surrendered to the Company or to any of its agents, be delivered to the Rights
Agent for cancellation or in canceled form, or, if surrendered to the Rights
Agent, shall be canceled by it, and no Right Certificates shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Rights Agreement. The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any Right
Certificate purchased or acquired by the Company. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written request
of the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF SHARES OF PREFERRED STOCK.
(a) The Company covenants and agrees that it shall use its best efforts
to at all times cause to be reserved and kept available out of its authorized
and unissued shares of Preferred Stock the number of shares of Preferred Stock
that, as provided in this Agreement, will be sufficient to permit the exercise
in full of all outstanding Rights.
(b) In the event that there shall not be sufficient shares of Preferred
Stock issued but not outstanding or authorized but unissued to permit the
exercise or exchange of Rights in accordance with Section 11 and Section 27, the
Company covenants and agrees that it will take all such action as may be
necessary to authorize additional Preferred Stock for issuance upon the exercise
or exchange of Rights pursuant to Section 11 and Section 27; PROVIDED, HOWEVER,
that if the Company is unable to cause the authorization of additional shares of
Preferred Stock, then the Company shall, or in lieu of seeking any such
authorization, the Company may, to the extent necessary and permitted by
applicable law and any agreements or instruments in effect prior to the
Distribution Date to which it is a party, (A) upon surrender of a Right, pay
cash equal to the Purchase Price in lieu of issuing Preferred Stock and
requiring payment therefor, (B) upon due exercise of a Right and payment of the
Purchase Price for each share of Preferred Stock as to which such Right is
exercised, issue equity securities (including shares of Common Stock) having a
value equal to the value of the Preferred Stock which otherwise would have been
issuable pursuant to Section 11 or Section 27, or (C) upon due exercise of a
Right and payment of the Purchase Price, for each share of Preferred Stock as to
which such Right is exercised, distribute a combination of Preferred Stock, cash
and/or other equity and/or debt securities having an aggregate value equal to
the value of the
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<PAGE> 14
Preferred Stock which otherwise would have been issuable pursuant to Section 11
or Section 27. To the extent that any legal or contractual restrictions
(pursuant to agreements or instruments in effect prior to the Distribution Date
to which it is party) prevent the Company from paying the full amount payable in
accordance with the foregoing sentence, the Company shall pay to holders of the
Rights as to which such payments are being made all amounts which are not then
restricted on a pro rata basis as such payments become permissible under such
legal or contractual restrictions until such payments have been paid in full.
(c) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all shares of Preferred Stock and/or Common
Stock or other securities delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such shares of Preferred Stock or Common
Stock or other securities (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and nonassessable shares.
(d) The Company covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any shares of Preferred Stock and/or Common Stock or other securities, as the
case may be, upon exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
involved in the transfer or delivery of Right Certificates or the issuance or
delivery of certificates or depository receipts for shares of Preferred Stock
and/or Common Stock or other securities, as the case may be, in a name other
than that of the registered holder of the Right Certificate evidencing rights
surrendered for exercise or to issue or deliver any certificates or depository
receipts for shares of Preferred Stock and/or Common Stock or other securities,
as the case may be, upon the exercise of any Rights until any such tax shall
have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
(e) So long as the shares of Preferred Stock issuable upon the exercise
of the Rights may be listed on any national securities exchange or quoted on
Nasdaq, the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for such issuance to
be listed on such exchange or quoted on Nasdaq upon official notice of issuance
of such exercise.
(f) The Company shall, unless an appropriate exemption from the
provisions of the Securities Act is available, use its best efforts (i) to file,
as soon as practicable following the Stock Acquisition Date or at such earlier
date as may be required by law, as the case may be, a registration statement
under the Securities Act with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act and the
rules and regulations promulgated by the Securities Exchange Commission
thereunder) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities and (B) the expiration of the Rights. The
Company will also take such action as may be appropriate to ensure compliance
with the securities or "blue sky" laws of the various states in connection with
the Rights and the exercisability of the Rights. The Company may temporarily
suspend, for a period of time not to exceed 90 days after the date set forth in
clause (i) of the first sentence of this Section 9(f), the exercisability of the
Rights in order to prepare and file such registration statement and permit it to
become effective; PROVIDED, HOWEVER, that no such suspension shall remain
effective after, and the Rights without any further action by the Company or any
other Person shall become exercisable immediately upon, the effectiveness of
such Registration Statement. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable (x) unless and
until the registration statement under the Securities Act referred to above
shall have been declared effective by the Securities and Exchange Commission,
(y) in any jurisdiction, unless and until any
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<PAGE> 15
requisite state securities or "blue sky" qualification in such jurisdiction
shall have been obtained, and (z) in a jurisdiction in which the exercise of
such Right shall not then be permitted under applicable law.
SECTION 10. PREFERRED STOCK RECORD DATE. Each Person (other than the
Company) in whose name any certificate or depository receipt for Preferred
Stock, Common Stock and/or other securities, as the case may be, is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such Preferred Stock, Common Stock and/or other securities,
as the case may be, represented thereby on, and such certificate or depository
receipt shall be dated the date upon which the Right Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the date of such
surrender and payment is a date upon which the transfer books of the Company for
the Preferred Stock, Common Stock and/or other securities are closed, such
Person shall be deemed to have become the record holder of such shares of
Preferred Stock, Common Stock and/or other securities on, and such certificate
or depository receipt shall be dated, the next succeeding Business Day on which
the transfer books of the Company for the Preferred Stock, Common Stock and/or
other securities are open. Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate shall not be entitled to any rights
of a holder of shares of Preferred Stock, Common Stock and/or other securities
of the Company with respect to which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
SECTION 11. ADJUSTMENTS TO PURCHASE PRICE, NUMBER AND KIND OF SHARES
OR NUMBER OF RIGHTS.
The Purchase Price, the number and kind of shares subject to purchase
upon exercise of each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event that the Company shall at any time after the date
of this Rights Agreement (A) declare or pay a dividend on the Preferred Stock
which is payable in shares of Preferred Stock or other securities of the
Company, (B) subdivide or split the outstanding shares of Preferred Stock into a
greater number of shares, (C) combine or consolidate the outstanding shares of
Preferred Stock into a smaller number of shares of Preferred Stock or effect a
reverse split of the outstanding shares of Preferred Stock or (D) issue any
shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving entity), except as
otherwise provided in this Section 11, the Purchase Price in effect at the time
of the record date for such dividend or the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of Preferred
Stock or capital stock or interests therein issuable upon exercise of a Right on
such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of an
amount equal to (x) the Purchase Price in effect immediately prior to the record
date or effective date of such dividend, subdivision, combination or
reclassification multiplied by (y) the number of one one-hundredths (1/100ths)
of a share of Preferred Stock, or the number of shares of capital stock, as the
case may be, as to which a Right was exercisable immediately prior to such date,
the aggregate number and kind of shares of Preferred Stock or of capital stock
or interests therein which, if such Right had been exercised immediately prior
to such date he would have owned upon such exercise and been entitled to
receive, or would be deemed to have owned, by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which would
require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
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<PAGE> 16
(ii) Subject to the second proviso of the first sentence of
Section 3(a), and Sections 13(a) and 27 of this Agreement, in the event that the
Stock Acquisition Date occurs, then, subject to the last sentence of Section
23(b) hereof, and in each such case, proper provision shall be made so that each
holder of a Right (except as otherwise provided in clause (iii) below)
thereafter (or, if the Distribution Date has not then occurred, upon the
Distribution Date) shall have the right to receive, upon exercise thereof at a
price equal to the current Purchase Price in accordance with this Rights
Agreement, such number of one one-hundredths (1/100ths) of a share of Preferred
Stock as shall equal the result obtained by multiplying the Purchase Price by a
fraction, the numerator of which is the number of one one-hundredths (1/100ths)
of a share of Preferred Stock for which a Right is then exercisable, and the
denominator of which is 50% of the then Current Market Price of the Company's
Common Stock on the Stock Acquisition Date.
(iii) Notwithstanding any provision of this Agreement other
than the second proviso of the first sentence of Section 3(a), from and after
the Stock Acquisition Date, any rights beneficially owned by (A) an Acquiring
Person or any Associate or Affiliate thereof, (B) a transferee of an Acquiring
Person or any Associate of Affiliate thereof, (C) a transferee of an Acquiring
Person (or Associate or Affiliate thereof) who becomes the transferee of such
Rights concurrently with such Acquiring Person becoming such or at any time
thereafter, or (D) a transferee of an Acquiring Person (or Associate or
Affiliate thereof) who becomes a transferee prior to the Acquiring Person
becoming such and receives such Rights pursuant to either (1) a transfer
(whether or not for consideration) by the Acquiring Person to holders of its
stock or other equity securities or to any Person with whom the Acquiring Person
has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (2) a transfer which the Board of Directors of the Company
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 11(a)(iii) shall be and
become null and void, and any existing or subsequent holder of such Rights shall
thereafter have no right to exercise such Rights under any provision of this
Agreement. The Company shall use all reasonable efforts to insure that the
provisions of this Section 11(a)(iii) and Section 4(b) hereof are complied with,
but shall have no liability to any holder of Right Certificates or other Person
as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder. No
Right Certificate shall be issued at any time upon the transfer of any Rights to
an Acquiring Person whose Rights would be void pursuant to the preceding
sentence or any Associate or Affiliate thereof or to any nominee of such
Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to
the Rights Agent for transfer to an Acquiring Person whose Rights would be void
pursuant to the preceding sentence shall be canceled.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of shares of Preferred Stock
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Stock (or securities having the
same rights, privileges and preferences as the Preferred Stock ("Equivalent
Shares")) or securities convertible into Preferred Stock or Equivalent Shares at
a price per share of Preferred Stock or per Equivalent Share (or having a
conversion or exercise price per share of Preferred Stock, if a security
convertible into or exercisable for Preferred Shares or Equivalent Shares) less
than the Current Market Price per share of Preferred Stock on such record date,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such date by a
fraction, the numerator of which shall be the sum of (i) the number of shares of
Preferred Stock and Equivalent Shares outstanding on such record date, plus (ii)
the number of shares of Preferred Stock which the aggregate offering price of
the total number of shares of Preferred Stock and/or Equivalent Shares to be so
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such Current Market Price and the
denominator of which shall be the sum of (A) the number of shares of Preferred
Stock and Equivalent Shares outstanding on such record date plus (B) the number
of additional shares of Preferred Stock and/or Equivalent Shares to be offered
for subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); PROVIDED, HOWEVER, that in no event shall
the consideration to be paid upon the exercise of on Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid by delivery
of
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<PAGE> 17
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agents and shall be conclusive and binding on the Rights
Agent and the holders of Rights. Shares of Preferred Stock owned by or held for
the account of the Company shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights, options or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of shares of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving entity) of evidences of indebtedness or
assets (other than a regular periodic cash dividend or a dividend payable in
shares of Preferred Stock), or convertible securities, subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the difference between (i) the Current
Market Price per share of Preferred Stock on such record date, minus (ii) the
fair market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive and binding on the Rights Agent and the
holder of Rights) of the portion of the assets or evidences of indebtedness to
be so distributed or of such convertible securities, subscription rights or
warrants applicable to one share of Preferred Stock and the denominator of which
shall be such Current Market Price per share of Preferred Stock; PROVIDED,
HOWEVER, that in no event shall the consideration to be paid upon the exercise
of on Right be less than the aggregate par value of the shares of capital stock
of the Company issuable upon exercise of one Right. Such adjustments shall be
made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Purchase Price shall again be adjusted to
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) Anything herein to the contrary notwithstanding, no adjustment to
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% to the Purchase Price; PROVIDED, HOWEVER,
that any adjustments which by reason of this Section 11(d) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one one-millionth of a share of Preferred Stock, or one
one-hundredth interest in any other share or security, as the case may be,
whichever is of lesser value. Notwithstanding the first sentence of this Section
11(d), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three years from the date of the transaction which mandates
such adjustment or (ii) the Expiration Date.
(e) In the event that at any time, as a result of an adjustment made
pursuant to Section 11 or Section 13 hereof, the holder of any Right thereafter
exercised shall be entitled to receive upon exercise of such Right any
securities other than shares of Preferred Stock or interests therein, thereafter
the number or amount of such other securities so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Section 11(a), (b),
(c), (d), (f), (g), (h), (i), (j) and (l), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other securities.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths
(1/100ths) of a share of Preferred Stock purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustments as provided
herein.
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(g) Unless the Company shall have exercised its election as provided in
Section 11(h) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made in Section 11(a), (b) and (c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths (1/100ths) of a share of Preferred Stock (calculated to the
nearest one one-millionth of a share of Preferred Stock) obtained by (i)
multiplying (A) the number of one one-hundredths (1/100ths) of a share of
Preferred Stock covered by a Right immediately prior to this adjustment by (B)
the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(h) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-hundredths (1/100ths) of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredths (1/100ths) of a share of Preferred Stock for which such Right
was exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one one-millionth of a share of Preferred
Stock) obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(h), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holder shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(i) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths (1/100ths) of a share of Preferred Stock
issuable upon the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and the number of
one one-hundredths (1/100ths) of a share of Preferred Stock which were expressed
in the initial Right Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par or stated value, if any, of the Preferred
Stock issuable upon exercise of the Rights, the Company shall take any action
which may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue, as fully paid and nonassessable, such number of
shares of Preferred Stock at such adjusted Purchase Price.
(k) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the number of shares of Preferred Stock and other securities of the Company, if
any, issuable upon such exercise on
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<PAGE> 19
the basis of such adjustment, PROVIDED, HOWEVER, that the Company shall deliver
to such holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional shares of Preferred Stock upon the
occurrence of the event requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any (i) consolidation or subdivision of the Preferred Stock, (ii)
issuance wholly for cash of any shares of Preferred Stock at less than the
Current Market Price, (iii) issuance wholly for cash of shares of Preferred
Stock or securities which by their terms are convertible into or exchangeable
for shares of Preferred Stock, (iv) dividends on the Preferred Stock payable
solely in Preferred Stock or (v) issuance of rights, options or warrants
referred to hereinabove in this Section 11, hereafter made by the Company to the
holders of its Preferred Stock, shall not be taxable to such stockholders.
(m) The Company covenants and agrees that it shall not at any time
after the Distribution Date (i) consolidate with, (ii) merge with or into, or
(iii) sell or transfer, in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries taken as a whole, to any other Person or
Persons if (A) at the time or immediately after such consolidation, merger or
sale there are any rights, warrants or other instruments outstanding or
agreements or arrangements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights or (B)
prior to, simultaneously with or immediately after such consolidation, merger or
sale, the stockholders of a Person who constitutes, or would constitute, the
"Principal Party" for the purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.
(n) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Stock payable in Common Stock or (ii) effect a
subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise then by payment of dividends in Common Stock) into
a greater or lesser number of shares of Common Stock, then in any such case (i)
the number of one one-hundredths (1/100ths) of shares of Preferred Stock
purchasable after such event upon proper exercise of each Right shall be
determined by multiplying the number of one one-hundredths (1/100ths) of a share
of Preferred Stock so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event, and (ii) each
share of Common Stock outstanding immediately after such event shall be issued
with respect to it that number of rights which each share of Common Stock
outstanding immediately prior to such event have issued with respect to it. The
adjustments provided for in this Section 11(n) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
(o) The Company covenants and agrees that after the Distribution Date
it will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock a copy of such certificate, and (c) mail a brief summary thereof
to each holder of a Right Certificate (or, if prior to the Distribution Date, to
each holder of a certificate representing Common Stock) in
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<PAGE> 20
accordance with Section 25 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person, and the Company
shall not be the continuing or surviving entity of such consolidation or merger,
(y) any Person shall consolidate with, or merge with and into the Company, and
the Company shall be the continuing or surviving entity of such merger and, in
connection with such merger, all or part of the Common Stock shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (z) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole and calculated on the basis of the Company's most
recent regularly prepared financial statements) to any other Person or Persons,
then, and in each such case, appropriate provision shall be made so that (i)
each holder of a Right, except as provided in Section 11(a)(iii) hereof, shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price multiplied by the number of one one-hundredths (1/100ths)
of a share of Preferred Stock for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of shares of Preferred
Stock, such number of validly authorized and issued, fully paid and
nonassessable shares of freely tradeable Common Stock of the Principal Party (as
hereinafter defined, including the Company as successor thereto or as the
surviving entity), not subject to any rights of call or first refusal, liens,
encumbrances or other claims, as shall be equal to the result obtained by (A)
multiplying the then current Purchase Price by the number of one one-hundredths
(1/100ths) of a share of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of any event described in Section
13(a)(x), (y) or (z) hereof, and (B) dividing that product (which, following the
first occurrence of any event referred to in Section 13(a)(x), (y) or (z), shall
be referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price per share of Common Stock of
such Principal Party on the date of consummation of such consolidation, merger,
sale or transfer; (ii) the Principal Party shall thereafter be liable for, and
shall assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Agreement; (iii) the term
"Company" shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall apply to
such Principal Party and (iv) such Principal Party shall take such steps
(including, but not limited to, the authorization and reservation of a
sufficient number of shares of its Common Stock to permit exercise of all
outstanding Rights in accordance with this Section 13(a)) in connection with
such consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
shares of its Common Stock thereafter deliverable upon the exercise of the
Rights, PROVIDED, that upon the subsequent occurrence of any merger,
consolidation, sale of all or substantially all of the assets, recapitalization,
reclassification of shares, reorganization or other extraordinary transaction in
respect of such Principal Party, each holder of the Right shall thereupon be
entitled to receive, upon exercise of a Right and payment of the Purchase Price,
such cash, shares, rights, warrants and other property which the holder would
have been entitled to receive had he, at the time of such transaction, owned the
shares of Common Stock of the Principal Party purchasable upon the exercise of a
Right, and such Principal Party shall take such steps (including, but not
limited to, reservation of shares of stock) as may be necessary to permit the
subsequent exercise of the Rights in accordance with the terms hereof for such
cash, shares, rights, warrants and other property and (v) the provisions of
Section 11(a)(ii) hereof shall be of no effect following the occurrence of any
event described in Section 13(a)(x), (y) or (z).
(b) "Principal Party" shall mean
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<PAGE> 21
(i) in the case of any transaction described in clause (x) or
(y) of Section 13(a) hereof: (A) the Person that is the issuer of any securities
into which shares of Common Stock of the Company is converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the Common
Stock of which has the greatest aggregate market value of shares outstanding or
(B) if no securities are so issued, (x) the Person that is the other party to
the merger, or, if there is more than one such Person, the Person the Common
Stock of which has the greatest aggregate market value of shares outstanding or
(y) if the Person that is the other party to the merger does not survive the
merger, the Person that does survive the merger (including the corporation if it
survives) or (z) the Person resulting from the consolidation; and
(ii) in the case of any transaction described in clause (z) of
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions or, if each person that is a party to such transaction or
transactions receives the same portion of the assets or earning power so
transferred or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons as is the issuer
of Common Stock having the greatest aggregate market value of shares
outstanding;
PROVIDED, HOWEVER, that in any such case described in the foregoing clause
(b)(i) or (ii), (A) if the Common Stock of such Person is not at such time and
has not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, "Principal Party" shall refer to such other Person; and (B) if such
Person is a Subsidiary, directly or indirectly, of more than one Person, the
Common Stock of two or more of which are and have been so registered, "Principal
Party" shall refer to whichever of such Persons is the issuer of the Common
Stock having the greatest aggregate market value of shares outstanding, or (C)
if such Person is owned, directly or indirectly, by a joint venture formed by
two or more persons that are not owned, directly or indirectly, by the same
person, the rules set forth in (A) and (B) above shall apply to each of the
owners having an interest in the venture as if the Person owned by the joint
venture was a Subsidiary of both or all of such joint venturers, and the
Principal Party in each such case shall bear the obligations set forth in this
Section 13 in the same ratio as its interest in such Person bears to the total
of such interests.
(c) The Company shall not enter into any transaction of the kind
referred to in this Section 13 if at the time of such transaction there are
rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights. The Company shall not agree to consummate or consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock which have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement so providing, confirming that the requirements of
Sections 13(a) and (b) hereof promptly shall be performed in accordance with
their terms and that such consolidation, merger, sale or transfer of assets
shall not result in a default by the Principal Party under this Agreement as the
same shall have been assumed by the Principal Party pursuant to Sections 13(a)
and (b) hereof and further providing that, as soon as practicable after the date
of any consolidation, merger or sale of assets mentioned in Section 13(a), the
Principal Party will
(i) prepare and file a registration statement under the
Securities Act, if necessary, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, will use its
best efforts to cause such registration statement to become effective as soon as
practicable after such filing and to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the date of
expiration of the Rights, and similarly comply with applicable state securities
laws; and
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<PAGE> 22
(ii) use its best efforts, if the Common Stock of the
Principal Party shall become listed on a national securities exchange, to list
(or continue the listing of) the Rights and the securities purchasable upon
exercise of the Rights on such securities exchange and, if the Common Stock of
the Principal Party shall not be listed on a national securities exchange, to
cause the Rights and the securities purchasable upon exercise of the Rights to
be reported by Nasdaq or such other system then in use; and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 (or any successor
form) under the Exchange Act; and
(iv) obtain waivers of any rights of first refusal or
preemptive rights in respect of the shares of the Common Stock of the Principal
Party subject to purchase upon exercise of outstanding Rights.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. If any event described in this
Section 13 shall occur at any time after the occurrence of a Stock Acquisition
Date, the Rights which have not theretofore been exercised shall thereafter
become exercisable in the manner described in Section 13(a) hereof.
(d) If the Principal Party which is to be a party to a transaction
referred to in this Section 13 has a provision in any of its authorized
securities or in its Certificate of Incorporation or Bylaws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue, in connection with or as a consequence
of, the consummation of the transaction referred to in this Section 13, shares
of Common Stock of such Principal Party at less than the Current Market Price
per share or securities exercisable for, or convertible into, Common Stock of
such Principal Party at less than such then Current Market Price (other than to
holders of Rights pursuant to this Section 13) or (ii) providing for any special
payment, tax or similar provisions in connection with the issuance of the Common
Stock of such Principal Party pursuant to the provisions of Section 13, then, in
such event, the corporation hereby agrees with each holder of Rights that it
shall not consummate any such transaction unless prior thereto the Corporation
and such Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with or as a consequence of, the consummation of
the proposed transaction.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights existing or arising subsequent to the Distribution Date,
there shall be paid to the registered holders of the Right Certificates with
regard to which such fractional Rights would otherwise be issuable, an amount in
cash equal to the same fraction of the Current Market Value of a whole Right.
For the purposes of this Section 14(a), the Current Market Value of a whole
Right shall be the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights otherwise would have been
issuable. The closing price of the Rights for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price, or, if not so quoted, the average of the closing bid and asked
prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a
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<PAGE> 23
market in the Rights selected by the Board of Directors of the Company. If on
any such date Rights are not quoted by any such organization and no professional
market maker is making such a market in the Rights, the fair value of the Rights
on such date as determined in good faith by the Board of Directors shall be
used.
(b) The Company shall not be required to issue fractional interests in
the shares of Preferred Stock (other than fractional interests which are
integral multiples of one one-hundredth (1/100th) of a share of Preferred Stock)
upon exercise of the Rights or to distribute certificates which evidence
fractional interests in shares of Preferred Stock (other than fractions which
are integral multiplies of one one-hundredth (1/100th) of a share of Preferred
Stock). Fractional interests in shares of Preferred Stock in integral multiples
of one one-hundredth (1/100th) of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
PROVIDED, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional interests in shares of Preferred
Stock, the Company shall pay to the registered holders of Right Certificates at
the time such Right Certificates are exercised as herein provided an amount in
cash equal to the same fraction of the Current Market Value of one share of
Preferred Stock or other securities of the Company. For purposes of this Section
14(b), the Current Market Value of one share of Preferred Stock shall be the
closing price of one share of Preferred Stock for the Trading Day immediately
prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the Current Market Value of one share of
Common Stock. For purposes of this Section 14(c), the Current Market Value of
one share of Common Stock shall be the closing price of one share of Common
Stock for the Trading Date immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights subsequent to the Distribution
Date, or any fractional share of Preferred Stock upon exercise of Rights (except
as provided above).
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Rights Agreement, to the extent any such rights exist, are vested in the
respective registered holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of Common Stock); and any registered
holder of any Right Certificate (or, prior to the Distribution Date, of the
Common Stock), without the consent of the Rights Agent or of the holder of any
other Right Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Rights Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Rights Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Rights Agreement.
SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
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<PAGE> 24
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate certificates fully executed;
(c) subject to Section 6, Section 7(f) and Section 11(a) hereof, the
Company and the Rights Agent may deem and treat the Person in whose name the
Right Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, shall be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Rights Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation; PROVIDED, HOWEVER, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of shares of
Preferred Stock or any interest therein or any other securities of the Company
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Right Certificate be
construed to confer upon the holder of any Right Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of Directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 24 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in its capacity as Rights Agent in
reliance upon any Right Certificate or certificate for Common Stock or Preferred
Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.
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<PAGE> 25
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any trust, corporation or other entity into which the Rights Agent
or any successor Rights Agent may be merged or with which it may be
consolidated, or any trust, corporation or other entity resulting from any
merger or consolidation to which the Rights Agent or any successor Rights Agent
shall be a party or any trust, corporation or other entity succeeding to the
corporate trust business of the Rights Agent, shall be the successor to the
Rights Agent under this Rights Agreement without the execution or filing of any
paper or any further action on the part of any of the parties hereto, provided
that such trust, corporation or other entity would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21 hereof. In case
at the time such successor Rights Agent shall succeed to the agency created by
this Agreement, any of the Right Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this Rights
Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Rights Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations expressly set forth in this Rights Agreement and no
implied duties or obligations shall be read into this Rights Agreement against
the Rights Agent. The Rights Agent undertakes the duties and obligations imposed
by this Rights Agreement upon the following terms and conditions, by all of
which the Company and the holders of Right Certificates, by their acceptance
thereof, shall be bound;
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person or
any Affiliate or Associate thereof and the determination of Current Market
Price) be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the Vice
Chairman of the Board, the President or the Chief Financial Officer and by the
Secretary or an Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Rights Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agents shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Rights Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
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<PAGE> 26
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Rights Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any change in the exercisability of
the Rights (including certain of the Rights becoming void pursuant to Section
11(a)(iii) hereof) or any adjustment in the terms of the Rights (including the
manner, method or amount thereof) provided for in Sections 3, 11, 13 or 23
hereof, or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Preferred Stock to be issued
pursuant to this Rights Agreement or any Right Certificate or as to whether any
shares of Preferred Stock will, when issued, be validly authorized and issued,
fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the Chief Executive Officer, the President or the Chief
Financial Officer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Rights Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, PROVIDED reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Rights Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
(l) The Company agrees to indemnify and to hold the Rights Agent
harmless against any loss, liability, damage or expense (including reasonable
fees and expenses of counsel) which the Rights Agent
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<PAGE> 27
may incur resulting from its actions as Rights Agent pursuant to this Rights
Agreement; PROVIDED, HOWEVER, that the Rights Agent shall not be indemnified or
held harmless with respect to any such loss, liability, damage or expense
incurred by the Rights Agent as a result of, or arising out of, its own
negligence, bad faith or wilful misconduct. In no case shall the Company be
liable with respect to any action, proceeding, suit or claim against the Rights
Agent unless the Rights Agent shall have notified the Company, by letter or by
facsimile confirmed by letter, of the assertion of an action, proceeding, suit
or claim against the Rights Agent, promptly after the Rights Agent shall have
notice of any such assertion of an action, proceeding, suit or claim or have
been served with the summons or other first legal process giving information as
to the nature and basis of the action, proceeding, suit or claim. The Company
shall be entitled to participate at its own expense in the defense of any such
action, proceeding, suit or claim, and, if the Company so elects, the Company
shall assume the defense of any such action, proceeding, suit or claim. In the
event that the Company assumes such defense, the Company shall not thereafter be
liable for the fees and expenses of any additional counsel retained by the
Rights Agent, so long as the Company shall retain counsel satisfactory to the
Rights Agent, in the exercise of its reasonable judgment, to defend such action,
proceeding, suit or claim. The Rights Agent agrees not to settle any litigation
in connection with any action, proceeding, suit or claim with respect to which
it may seek indemnification from the Company without the prior written consent
of the Company.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Rights
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the shares of Common Stock and Preferred Stock, if any, by
registered or certified mail, and, subsequent to the Distribution Date, to the
holders of the Right Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Stock and Preferred Stock, if any, by
registered or certified mail, and subsequent to the Distribution Date, to the
holders of the Right Certificates by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of 30 days after such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any state at the United States, in good standing, having a principal office
in the United States of America, which is authorized under such laws to exercise
stock transfer or corporate trust powers and is subject to supervision or
examination by federal or state authority. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of such appointment, the Company
shall file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Stock and the Preferred Stock and, subsequent to
the Distribution Date, mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Rights Agreement or of the Rights to the contrary, the
company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares of
Preferred Stock or other securities or property purchasable under the Right
Certificates made in accordance with the
-24-
<PAGE> 28
provisions of this Rights Agreement. In addition, if deemed necessary or
appropriate by the Board of Directors of the Company, the Company may issue
Right Certificates representing the appropriate number of Rights in connection
with the issuance or sale of Common Stock following the Distribution Date but
prior to the Expiration Date; PROVIDED, HOWEVER, that (a) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the person to whom such
Right Certificate would be issued, and (b) no such Right Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
SECTION 23. REDEMPTION.
(a) The Company may, by resolution of the Board of Directors, at its
option, at any time prior to the earlier to occur of (i) the close of business
on the twentieth day following the Stock Acquisition Date, and (ii) the close of
business on the Final Expiration Date, elect to redeem all but not less than all
of the then outstanding Rights at a redemption price of $.001 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The Company may, at its
option, pay the Redemption Price in cash, shares of Common Stock or Preferred
Stock (based on the Current Market Price of the Common Stock or Preferred Stock,
as applicable at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
(b) If, following the occurrence of a Stock Acquisition Date and prior
to the Distribution Date, (i) a Person who is an Acquiring Person shall have
transferred or otherwise disposed of a number of shares of Common Stock of the
Company in one transaction, or a series of transactions (not directly or
indirectly involving the Company or any of its Subsidiaries), which did not
result in an event described in Section 13 hereof, such that such Person is
thereafter a Beneficial Owner of less than 10% of the outstanding Common Stock
of the Company, (ii) there are no other Persons, immediately following the
occurrence of the event described in clause (i), who are Acquiring Persons, and
(iii) the Board of Directors of the Company shall so approve, then the Company's
right of redemption provided in subparagraph (a) of this Section 23 shall be
reinstated and thereafter all outstanding Rights shall again be subject to the
provisions of this Section 23. Notwithstanding anything to the contrary
contained in this Rights Agreement, the Rights shall not be exercisable after
the first occurrence of a Stock Acquisition Date until such time as the
Company's right of redemption hereunder has expired.
(c) Immediately upon the action of the Board of Directors of the
Company electing to redeem the Rights (or, if such redemption is subject to
conditions, immediately upon satisfaction of such conditions), evidence of which
shall have been filed with the Rights Agent, and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price for each Right so held. Promptly (but, in any event, within ten days)
after the action of the Board of Directors ordering the redemption of the
Rights, the Company shall give notice of such redemption to the Rights Agent and
the holders of the then outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than as specifically set forth in this Section 23,
and other than in connection with the purchase, acquisition or redemption of
Common Stock prior to the Distribution Date.
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<PAGE> 29
SECTION 24. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in securities of the Company
of any class to the holders of its shares of Preferred Stock or to make any
other distribution to the holders of shares of Preferred Stock (other than a
regular periodic cash dividend), or (ii) to offer to the holders of its shares
of Preferred Stock rights, options or warrants to subscribe for or to purchase
any additional shares of Preferred Stock or securities convertible into shares
of Preferred Stock, or (iii) to effect any reclassification of its shares of
Preferred Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one transaction or a series of related transactions, of more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons, or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Right, to the extent feasible and in accordance
with Section 25, a notice of such proposed action, which notice shall specify
the record date for the purposes of such share dividend, distribution of rights
or warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of Common Stock, if any such date
is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i), (ii) or (v) above at least 20 days prior to the record
date for determining holders of Preferred Stock for purposes of such action, and
in the case of any such other action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of Preferred Stock, whichever shall be the earlier. The failure to give
notice required by this Section 24 or any defect therein shall not affect the
legality or validity of the action taken by the Company or the vote upon any
such action.
(b) Notwithstanding anything in this Rights Agreement to the contrary,
prior to the Distribution Date a filing by the Company with the Securities and
Exchange Commission shall constitute sufficient notice to the holders of
securities of the Company, including the Rights, for purposes of this Rights
Agreement and no other notice need be given.
SECTION 25. NOTICES. Notices or demands authorized by this Rights
Agreement to be given or made by the Rights Agents or by the holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Stock) to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address if filed in writing with the
Rights Agent) as follows:
Team Financial, Inc.
8 West Peoria, Suite 200
Paola, Kansas 66071
Attention: Chairman
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Rights Agreement to be given or made by the Company or by the holder of
any Right Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows
American Securities Transfer & Trust, Inc.
938 Quail
Lakewood, Colorado 80215
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate (or,
prior to the Distribution Date, to the holder of any certificate
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<PAGE> 30
representing Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
SECTION 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date,
the Company may and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Rights Agreement (including, without
limitation, the date on which the Distribution Date shall occur, the definition
of Acquiring Person, the time during which the Rights may be redeemed or any
provision of the Certificate of Designation) without the approval of any holders
of certificates representing shares of Common Stock. From and after the
Distribution Date and subject to the third to last sentence of this Section 26,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Rights Agreement without the approval of any holders of Rights
Certificates in order (a) to cure any ambiguity, (b) to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, (c) to shorten or lengthen any time period hereunder or
(d) to change or supplement the provisions hereof in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificate (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person); PROVIDED, HOWEVER, that
this Rights Agreement may not be supplemented or amended to lengthen, pursuant
to clause (c) of this sentence, (i) a time period relating to when the Rights
may be redeemed at such time as the Rights are not then redeemable or (ii) any
other time period unless such lengthening is for the purposes of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights. Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 26, the Rights Agent shall execute such
supplement or amendment. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Stock.
SECTION 27. EXCHANGE.
(a) The Board of Directors of the Company may, at its option, at any
time after a Stock Acquisition Date (and, if the Distribution Date has not then
occurred, after the Distribution Date), mandatorily exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
shall have become null and void and nontransferable pursuant to the provisions
of Section 11(a)(iii) hereof) for consideration per Right consisting of one-half
of the securities that would be issuable at such time upon the exercise of one
Right in accordance with Section 11(a) (the consideration issuable per Right
pursuant to this Section 27 being the "Exchange Consideration"). The Board of
Directors of the Company may, at its option, issue, in substitution for
Preferred Stock, shares of Common Stock in an amount per whole share of
Preferred Stock equal to the Formula Number (as defined in the Certificate of
Designation) if there are sufficient shares of Common Stock issued but not
outstanding or authorized but unissued. If the Board of Directors of the Company
elects to exchange all the Rights for Exchange Consideration pursuant to this
Section 27 prior to the physical distribution of the Rights Certificates, the
Company may distribute the Exchange Consideration in lieu of distributing Right
Certificates, in which case for purposes of this Rights Agreement holders of
Rights shall be deemed to have simultaneously received and surrendered for
exchange Rights Certificates on the date of such distribution. Notwithstanding
the foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than an Exempt Person), which,
together with all Affiliates and Associates of such Person, becomes the
beneficial owner of 50% or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to Section 27(a) hereof, and without any further
action and without any notice, the right to exercise such Right shall terminate
and the only right with respect to such Rights thereafter of the holder of such
Rights shall be to receive the Exchange Consideration. Promptly after the action
of Board of Directors ordering the exchange of any Rights pursuant to Section
27(a) hereof, the Company shall publicly announce such action, and within ten
calendar days thereafter shall give notice of any such exchange to all of the
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<PAGE> 31
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent; PROVIDED, HOWEVER, that the failure to give, or any
defect in, such notice shall not affect the validity of such exchange. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
shall state the method by which the exchange of the Rights for the Exchange
Consideration will be effected, and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be effected
pro rata based on the number of Rights (other than Rights which have become null
and void pursuant to the provisions of Section 11(a)(iii) hereof) held by each
holder of Rights.
SECTION 28. SUCCESSORS. All the covenants and provisions of this Rights
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Rights Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act. Except as explicitly otherwise provided
herein, the Board of Directors of the Company shall have the exclusive power and
authority to administer this Rights Agreement and to exercise all rights and
powers specifically granted to the Board of Directors or to the Company, or as
may be necessary or advisable in the administration of this Rights Agreement,
including without limitation, the right and power to (a) interpret the
provisions of this Rights Agreement and (b) make all determinations deemed
necessary or advisable for the administration of this Rights Agreement
(including a determination to redeem or not redeem the Rights or to amend the
Rights Agreement and a determination of whether there is an Acquiring Person).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (ii) below, all omissions with respect to the foregoing)
which are done or made by the Board of Directors in good faith, shall (i) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (ii) not subject the Board of Directors to
any liability to the holders of the Rights.
SECTION 30. BENEFITS OF THIS RIGHTS AGREEMENT. Nothing in this Rights
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Stock) any legal or equitable right, remedy or
claim under this Rights Agreement; but this Rights Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Stock).
SECTION 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Rights Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Rights
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
SECTION 32. GOVERNING LAW. THIS RIGHTS AGREEMENT, EACH RIGHT AND EACH
RIGHT CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
THE LAWS OF THE STATE OF KANSAS AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO
BE MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE.
SECTION 33. COUNTERPARTS; EFFECTIVENESS. This Rights Agreement may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an
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<PAGE> 32
original, and all such counterparts shall together constitute one and the same
instrument. This Rights Agreement shall be effective as of the close of business
on the date hereof.
SECTION 34. DESCRIPTIVE HEADINGS. The captions herein are included for
convenience of reference only, do not constitute a part of this Rights Agreement
and shall be ignored in the construction and interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed, all as of the date and year first above written.
<TABLE>
<S> <C>
ATTEST: TEAM FINANCIAL, INC.
By:
- ----------------------------------- ----------------------------------------
Secretary Robert J. Weatherbie, Chairman
ATTEST: AMERICAN SECURITIES TRANSFER & TRUST, INC.
as Rights Agent
By:
- ----------------------------------- ----------------------------------------
[name and title] [name and title]
</TABLE>
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<PAGE> 33
EXHIBIT A
CERTIFICATE OF DESIGNATION OF
RIGHTS, PREFERENCES AND PRIVILEGES OF
SERIES A PREFERRED STOCK
OF
TEAM FINANCIAL, INC.
Pursuant to Section 17-6401 of the Kansas General Corporation Code:
The undersigned hereby certifies that the following resolution has been adopted
by the Board of Directors of Team Financial, Inc., a Kansas corporation (the
"Corporation") as required by Section 17-6401 of the Kansas General Corporation
Code, pursuant to a resolution unanimously adopted as of June 3, 1999;
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of the Corporation in accordance
with the provisions of its Certificate of Incorporation, the
Board of Directors hereby creates a series of Preferred Stock
of the Corporation and hereby states the designation and
number of shares, and fixes the relative rights, preferences
and limitations thereof (in addition to the provisions set
forth in the Certificate of Incorporation of the Corporation,
which are applicable to the Preferred Stock of all classes and
series), as follows:
Series A Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Preferred Stock" (the "Series A Preferred Stock") and
the number of shares constituting the Series A Preferred Stock shall be
1,000,000 shares of Series A Preferred Stock and shall not have a par value.
Such number of shares may be increased or decreased by resolution of the Board
of Directors; PROVIDED, that no decrease shall reduce the number of shares of
Series A Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series A
Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common Stock (the "Common
Stock"), of the Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, cash dividends in an amount per whole share (rounded
to the nearest cent) equal to the Formula Number (as defined below) then in
effect times the aggregate per share amount of all cash dividends declared or
paid on the Common Stock. In addition, if the Corporation shall pay any dividend
or make any distribution on the Common Stock payable in assets, securities or
other forms of noncash consideration (other than dividends or distributions
solely in shares of Common Stock), then, in each such case, the Corporation
shall simultaneously pay or make on each whole outstanding share of Series A
Preferred Stock, a dividend or distribution in like kind equal to the Formula
Number then in effect times such dividend or distribution on each share of the
Common Stock. As used herein, the "Formula Number" shall be 100; PROVIDED,
HOWEVER, that if at any time after ______ 1999, the Corporation shall (i)
declare or pay any dividend or make any distribution on the Common Stock,
payable in shares of Common Stock, (ii) subdivide (by a stock split or
otherwise), the outstanding shares of Common Stock into a larger number of
shares of Common Stock, or (iii) combine (by a reverse stock split or otherwise)
the outstanding shares of Common Stock into a smaller number of shares of Common
Stock,
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<PAGE> 34
then in each such case the Formula Number in effect immediately prior to such
event shall be adjusted to a number determined by multiplying the Formula Number
then in effect by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event (and rounding the result to the nearest whole number); and
provided further, that, if at any time after ______ 1999, the Corporation shall
issue any shares of its capital stock in a merger, reclassification, or change
of the outstanding shares of Common Stock, then in each such event the Formula
Number shall be appropriately adjusted to reflect such merger, reclassification,
or change so that each share or Series A Preferred Stock continues to be the
economic equivalent of a Formula Number of shares of Common Stock prior to such
merger, reclassification or change.
(b) The Corporation shall declare each dividend immediately prior to or
at the same time it declares any cash or non-cash dividend or distribution on
the Common Stock in respect of which a dividend is required to be paid. No cash
or non-cash dividend or distribution on the Common Stock in respect of which a
dividend is required shall be paid or set aside for payment on the Common Stock
unless a dividend in respect of such dividend shall have been paid.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a
number of votes equal to the Formula Number then in effect, for each share of
Series A Preferred Stock held of record on each matter on which holders of the
Common Stock or stockholders generally are entitled to vote, multiplied by the
maximum number of votes per share which any holder of the Common Stock or
stockholders generally then have with respect to such matter (assuming any
holding period or other requirement to vote a greater number of shares is
satisfied).
(b) Except as otherwise provided herein, in any other Certificate of
Amendment creating a series of Preferred Stock or any similar stock, or by law,
the holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever dividends are in arrears or the Corporation shall be in
default in payment thereof, thereafter and until all declared and unpaid
dividends on shares of Series A Preferred Stock outstanding shall have been paid
or set aside for payment in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions
on or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on the shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;
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<PAGE> 35
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior or on a parity (either as to
dividends or upon liquidation, dissolution or winding up) to or with the Series
A Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior or parity stock in
exchange for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
shares of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Restated Certificate of Incorporation, or in any other Certificate of Amendment
or Certificate of Designation creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (a) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received an amount equal to the declared and unpaid
dividends and distributions thereon to the date of such payment, plus an amount
equal to the greater of (i) $0.01 per whole share, or (ii) an aggregate amount
per share equal to the Formula Number then in effect times the aggregate amount
to be distributed per share to holders of Common Stock, or (b) to the holders of
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, unless
simultaneously therewith distributions are made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of Series A Preferred Stock shares are entitled under clause
(a)(i) of this sentence and to which the holders of such parity shares are
entitled in each case upon such liquidation, dissolution or winding up.
Section 7. CONSOLIDATION, MERGER, ETC. If the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share equal to the Formula Number then in effect
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event that both this Section 7 and
Section 2 appear to apply to a transaction, this Section 7 shall control.
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<PAGE> 36
Section 8. EFFECTIVE TIME OF ADJUSTMENTS.
(a) Adjustments to the Series A Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event requiring
such adjustments occurs.
(b) The Corporation shall give prompt written notice to each holder of
a share of Series A Preferred Stock of the effect on any such shares of any
adjustment to the dividend rights or rights upon liquidation, dissolution or
winding up of the Corporation required by the provisions hereof. Notwithstanding
the foregoing sentence, the failure of the Corporation to give such notice shall
not affect the validity of or the force or effect of or the requirement for such
adjustment.
Section 9. NO REDEMPTION. The shares of Series A Preferred Stock shall
not be redeemable.
Section 10. RANK. Unless otherwise provided in the Restated Certificate
of Incorporation or a Certificate of Designation relating to a subsequent series
of Preferred Stock of the Corporation, the Series A Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of assets, junior
to all series of any other class of the Corporation's Preferred Stock.
Section 11. FRACTIONAL SHARES. The Series A Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-hundredths (1/100ths)
of a share or any integral multiple of such fraction which shall entitle the
holder, in proportion to such holder's fractional shares, to receive dividends,
exercise voting rights, participate in distributions and to have the benefit of
all other rights of holders of Series A Preferred Stock. In lieu of fractional
shares, the Corporation, prior to the first issuance of a share or a fraction of
a share of Series A Preferred Stock, may elect (1) to make a cash payment as
provided in the Rights Agreement for fractions of a share other than one
one-hundredths (1/100ths) of a share or any integral multiple thereof, or (2) to
issue depository receipts evidencing such authorized fraction of a share of
Series A Preferred Stock pursuant to an appropriate agreement between the
Corporation and a depository selected by the Corporation; provided that such
agreement shall provide that the holders of such depository receipts shall have
the rights, privileges and preferences to which they are entitled as holders of
the Series A Preferred Stock.
Section 12. AMENDMENT. The Restated Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, TEAM FINANCIAL, INC. has caused this Certificate to
be signed this 3rd day of June, 1999.
-----------------------------------------
Robert J. Weatherbie, Chairman
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<PAGE> 37
B-6
EXHIBIT B
FORM OF RIGHT CERTIFICATE
CERTIFICATE NO. ____________ ____________ RIGHTS
NOT EXERCISABLE AFTER _______, 2009 OR EARLIER IF REDEEMED OR
EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID
AND NON-TRANSFERABLE.
RIGHT CERTIFICATE
TEAM FINANCIAL, INC.
This certifies that __________________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement dated as of ______, 1999 (the "Rights
Agreement") between Team Financial, Inc., a Kansas corporation (the "Company"),
and American Securities Transfer & Trust, Inc., as Rights Agent (the "Rights
Agent"), unless the rights evidenced hereby shall have been previously redeemed
by the Company, to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m.
Central Time on ______, 2009, at the principal office or offices of the Rights
Agent designated for such purpose, or at the office of its successor as Rights
Agent or its successors as Rights Agent, one one-hundredth (1/100th) of a fully
paid and non-assessable share of Series A Preferred Stock (the "Preferred
Stock") of the Company, at a cash purchase price of $48.00 per one one-hundredth
(1/100th) of a share of Preferred Stock, as the same may from time to time be
adjusted in accordance with the Rights Agreement (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the form of election
to purchase and the related certificate duly executed. The number of Rights
evidenced by this Right Certificate (and the number of fractional shares of
Preferred Stock which may be purchased upon exercise thereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
__________, ____, based on the shares of Preferred Stock as constituted at such
date.
As provided in the Rights Agreement, the Purchase Price and the number
of shares of Preferred Stock which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events, and in certain circumstances
may be exercised to purchase securities other than shares of Preferred Stock or
securities of issuers other than the Company.
If the Rights evidenced by this Rights Certificate are at any time
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of
B-1
<PAGE> 38
the Rights Agreement are on file at the office of the Company and the Rights
Agent and are also available free of charge upon written request mailed to the
Rights Agent at:
American Securities Transfer & Trust, Inc.
938 Quail
Lakewood, Colorado 80215
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Right Certificate may be redeemed by the Board of Directors at a
redemption price of $.001 per Right (payable in cash or other consideration)
appropriately adjusted as provided in the Rights Agreement at any time prior to
the earlier to occur of (i) 10 business days after a Stock Acquisition Date (as
defined in the Rights Agreement), and (ii) the Final Expiration Date.
No fractional shares of Preferred Stock (other than integral multiples
of one one-hundredth (1/100th) of a share, which may, at the election of the
Company, be evidenced by depositary receipts) will be issued upon the exercise
of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will
be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company.
Dated as of ,
----------- -------
TEAM FINANCIAL, INC.
By:
- -------------------------------------- ---------------------------------
Secretary Robert J. Weatherbie, Chairman
Countersigned:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
as Rights Agent
By:
-----------------------------------
Name and Title:
-----------------------
B-2
<PAGE> 39
[On Reverse Side of Right Certificate]
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: TEAM FINANCIAL, INC.
The undersigned hereby irrevocably elects to exercise Rights
represented by this Right Certificate to purchase one one-hundredth (1/100th) of
a share of Preferred Stock issuable upon the exercise of the Rights (or such
other securities of the Company or of any other Person which may be issuable
upon the exercise of the Rights) and requests that certificates for such
securities be issued in the name of and delivered to:
Please insert social security
or other identifying number
- -----------------------------------------
(Please print name and address)
- -----------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance of such Rights shall
be registered in the name of and delivered to:
Please insert social security
or other identifying number
OPTIONAL ELECTION TO EXERCISE WITHOUT PAYMENT OF CASH:
- -----------------------------------------
(Please print name and address)
- -----------------------------------------
With respect to the exercise of ______________ of the Rights specified
above, the undersigned hereby elects to exercise such Rights without payment of
cash and to receive a number of one one-hundredths (1/100ths) of a share of
Preferred Stock or other securities having a value (as determined pursuant to
the Rights Agreement) equal to the difference between (i) the value of the
Preferred Stock or other securities that would have been issuable upon exercise
thereof upon payment of the Purchase Price as provided in the Rights Agreement,
and (ii) the amount of such Purchase Price.
Dated: ,
------------ -----
-----------------------------
Signature
Medallion Guaranteed:
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<PAGE> 40
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
1. the Rights evidenced by this Right Certificate ____are ____are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
2. after due inquiry and to the best knowledge of the undersigned, it
____did ____did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ,
------------ -----
-----------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or any change whatsoever.
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED _________________________________________ hereby
sells, assigns and transfers unto:
-----------------------------------------------
(Please print name and address of transferee)
-----------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ______________________________
Attorney, to transfer the within Right Certificate on the books of Team
Financial, Inc. with full power of substitution.
Dated: ,
------------ -----
-----------------------------
Signature
Medallion Guaranteed:
B-4
<PAGE> 41
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
1. the Rights evidenced by this Right Certificate ____are ____are not
being sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate of any such Acquiring Person
(as such terms are defined in the Rights Agreement);
2. after due inquiry and to the best knowledge of the undersigned, it
____did ____did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ,
------------ -----
-----------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-5
<PAGE> 42
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
DISTRIBUTION OF RIGHTS: On June 3, 1999, the Board of Directors of Team
Financial, Inc., a Kansas corporation (the "Company") authorized and declared a
dividend of one right (a "Right") for each issued and outstanding share of the
Common Stock (the "Common Stock") of the Company. The dividend is payable to the
stockholders of record on June 3, 1999 (the "Record Date"). All Rights are
issued pursuant to, and will be subject to the terms and conditions of, the
Rights Agreement between the Company and American Securities Transfer & Trust,
Inc., as Rights Agent, dated as of June 3, 1999. The following is a brief
summary of the terms of the Rights.
Each Right, when exercisable, will entitle the registered holder
thereof to purchase from the Company one or more one-hundredths (1/100th) of a
share of non-redeemable Series A Preferred Stock of the Company (the "Preferred
Stock") at an exercise price of $48.00 per Right (the "Purchase Price"), subject
to certain adjustments.
The terms of each one one-hundredth of a share of Preferred Stock will
be equivalent to those of a share of the Company's Common Stock. Each one
one-hundredth of a share of Preferred Stock will have the same voting rights as
a share of Common Stock. Each one one-hundredth (1/100th) of a share of
Preferred Stock will be entitled to dividends per one one-hundredth (1/100th) of
a share equal to dividends which may from time to time be declared on a share of
Common Stock. In the event of liquidation or merger, the Preferred Stock holders
will be entitled to a priority return which will result in the one one-hundredth
(1/100th) of a share of Preferred Stock being treated identically to a share of
Common Stock. These rights are protected by customary anti-dilution provisions.
EXERCISE OF RIGHTS: The Rights initially will be represented by the
certificates evidencing the Common Stock and will not be exercisable, or
transferable apart from the Common Stock, until the earliest to occur of:
(i) the twentieth day after the acquisition by a person or
group of affiliated or associated persons (other than an Exempt Person)
of beneficial ownership of 15% (or 10%, if the Board determines that
such person or group ("Adverse Person") intends to take actions which
would be detrimental to the long-term interests of the Company or its
stockholders or that such ownership would be detrimental to the Company
in other respects) or more of the outstanding Common Stock; PROVIDED,
that if within said 20-day period the Acquiring Person reduces his
beneficial ownership to less than 15% (or 10% for an Adverse Person),
then he shall be deemed not to be an Acquiring Person and the Stock
Acquisition Date (as defined below) shall be deemed not to have
occurred;
(ii) the twentieth day after the commencement of a tender or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of affiliated or associated persons of
15% or more of the outstanding Common Stock; PROVIDED, that if within
said 20-day period the person withdraws the tender or exchange offer,
then such offer shall be deemed not to have been made; and
(iii) the twentieth day after the date of filing of a
registration statement for any such exchange offer under the Securities
Act of 1933, as amended.
C-1
<PAGE> 43
Under the Rights Agreement, any of the above three dates, under (i),
(ii) or (iii), is a "Distribution Date." Any person or group described in item
(i) above is referred to as an "Acquiring Person," and the date upon which a
person or group first becomes an Acquiring Person is referred to as the "Stock
Acquisition Date." An "Exempt Person" is defined as the Company, a subsidiary of
the company, an employee benefit plan of the Company, or any of its
subsidiaries.
The Rights (unless sooner redeemed) will first become exercisable on
the Distribution Date, at which time the Company will distribute separate Right
Certificates representing the Rights to its then current stockholders, and it is
expected that the Rights could then begin trading separately from the Common
Stock. The Rights will expire on June 3, 2009, unless this date is extended or
unless the Rights are earlier redeemed or exchanged by the Company.
ANTI-TAKEOVER PROVISIONS: Following the Distribution Date, each Right
initially would give holders (other than the Acquiring Person, its affiliates
and transferees) the right to purchase, for the Purchase Price, one
one-hundredth (1/100th) of a share of Preferred Stock. On a Stock Acquisition
Date which follows the commencement of a tender offer or an exchange offer, or
on the Distribution Date with respect to any other Stock Acquisition Date, the
Rights would give holders (other than the Acquiring Person, its affiliates and
transferees) the right to purchase from the Company, for the Purchase Price,
that number of one one-hundredths (1/100ths) of a share of Preferred Stock
having a market value of twice the Purchase Price. Alternatively, before an
Acquiring Person acquires 50% of the outstanding Common Stock, the Board of
Directors may exchange each Right, except for the Rights held by the Acquiring
Person, in whole or in part, for half of the number of one one-hundredths of a
share of the Preferred Stock or shares of the Common Stock which the holders
could otherwise purchase by exercising the Rights.
Further, in a merger, consolidation or sale or transfer of 50% or more
of the consolidated assets or earning power of the Company occurring after the
Rights become exercisable, each Right will be converted into the right to
purchase, for the Purchase Price, that number of shares of common stock of the
surviving entity or (in certain circumstances) its parent corporation, which at
the time of such transaction will have a market value of two times the Purchase
Price of the Right.
Following the Distribution Date, exercisable Rights may be exercised,
at the option of the holder thereof, without the payment of the Purchase Price
in cash. In any such case, the holder would receive a number of one
one-hundredths (1/100ths) of a share of Preferred Stock having a value equal to
the difference between the value of the Preferred Stock that would have been
issuable upon payment of the Purchase Price and the Purchase Price.
AMENDMENT OF PLAN: The Board may amend the Rights Agreement in any and
all respects and particulars at any time before a Distribution Date. Afterwards
the Board may amend the Rights Agreement only to eliminate ambiguities or to
provide additional benefits to the holders of the Rights (other than any
Acquiring Person).
REDEMPTION OF RIGHTS: At any time prior before the date which is twenty
days after the Stock Acquisition Date, the Board may redeem the outstanding
Rights at a price of $.001 per Right. If during the 20-day period the Acquiring
Person reduces its beneficial ownership to less than 15%, the Rights will again
be redeemable. Subsequent to 20 days following the Stock Acquisition Date, the
Rights are not redeemable.
VOTING OR DIVIDEND RIGHTS: Until a Right is exercised, the holder
thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends.
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<PAGE> 44
EFFECT OF RIGHTS: The Rights have certain anti-takeover effects. The
Rights may cause substantial dilution to a person or group that attempts to
acquire the Company on terms not approved by the Board of Directors of the
Company. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors prior to the time that holders of
the Rights become entitled to exercise their Rights for Preferred Stock (or
common stock of the surviving entity in a merger with the Company), since until
that time the Rights may be redeemed by the Board of Directors of the Company at
$.001 per Right.
EXPIRATION OF RIGHTS: The Rights will expire on June 3, 2009, unless
earlier redeemed by the Company.
C-3
<PAGE> 1
EXHIBIT 10.14
TEAM FINANCIAL, INC. EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I--PURPOSE
1.01. Purpose.
The Team Financial, Inc. Employee Stock Purchase Plan ("Plan") is
intended to provide a method whereby employees of Team Financial, Inc. and any
of its subsidiary corporations (hereinafter referred to, unless the context
otherwise requires, as the "Company") will have an opportunity to acquire a
proprietary interest in the Company through the purchase of shares of the common
stock of the Company. It is the intention of the Company to have the Plan
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). The provisions of the Plan shall
be construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
ARTICLE II--DEFINITIONS
2.01. Base Pay.
"Base Pay" shall mean regular straight-time earnings excluding payments
for overtime, shift premium, bonuses and other special payments, commissions and
other marketing incentive payments.
2.02. Committee.
"Committee" shall mean the individuals described in Article XI.
2.03. Employee.
"Employee" means any person who is customarily employed on a full-time
or part-time basis by the Company to work more than 20 hours per week.
2.04. Subsidiary Corporation.
"Subsidiary Corporation" shall mean any present or future corporation
which (i) would be a subsidiary corporation" of Team Financial, Inc. as that
term is defined in Section 424 of the Code and (ii) is designated as a
participant in the Plan by the Committee.
ARTICLE III--ELIGIBILITY AND PARTICIPATION
3.01. Initial Eligibility.
Any employee who shall be employed by the Company on the date the
employee's participation in the Plan is to become effective shall be eligible to
participate in Offerings under the Plan.
<PAGE> 2
3.02. Leave of Absence.
For purposes of participation in the Plan, a person on leave of absence
shall be deemed to be an employee for the first 90 days of such leave of absence
and such employee's employment shall be deemed to have terminated at the close
of business on the 90th day of such leave of absence unless such employee shall
have returned to regular full-time or part-time employment (as the case may be)
prior to the close of business on such 90th day. Termination by the Company of
any employee's leave of absence, other than termination of such leave of absence
on return to full time or part time employment, shall terminate an employee's
employment for all purposes of the Plan.
3.03. Restrictions on Participation.
Notwithstanding any provisions of the Plan to the contrary, no employee
shall be granted an option to Participate in the Plan:
(a) if, immediately after the grant such employee would own
stock, and/or hold outstanding options to purchase stock, possessing 5%
or more of the total combined voting power or value of all classes of
stock of the Company (for purposes of this paragraph, the rules of
Section 424(d) of the Code shall apply in determining stock ownership
of any employee); or
(b) which permits the employee's rights to purchase stock
under all employee stock purchase plans of the Company to accrue at a
rate which exceeds $25,000 in fair market value of the stock
(determined at the time such option is granted) for each calendar year
in which such option is outstanding.
3.04. Commencement of Participation.
An eligible employee may become a participant by completing an
authorization for a payroll deduction on the form provided by the Company and
filing it with the office of the Treasurer of the Company on or before the date
set therefor by the Committee, which date shall be prior to the Offering
Commencement Date for the Offering (as such terms are defined below). Payroll
deductions for a participant shall commence on the applicable Offering
Commencement Date when an authorization for a payroll deduction becomes
effective and shall end on the Offering Termination Date of the Offering to
which such authorization is applicable unless sooner terminated by the
participant as provided in Article VIII.
ARTICLE IV--OFFERINGS
4.01. Annual Offerings.
The Plan will be implemented by five annual Offerings of the Company's
common stock (the "Offerings") beginning on January 1, 1999 and on the first day
of January in each of the years 2000, 2001, 2002 and 2003, each Offering
terminating on December 31 of the year in
<PAGE> 3
which the Offering commenced, provided, however, that each annual Offering may,
in the discretion of the Committee exercised prior to the commencement thereof,
be divided into two six-month Offerings commencing, respectively, on January 1
and July 1 of such year and terminating on June 30 and December 31 of the year
in which the Offering commenced, respectively. The maximum number of shares
issued in the respective years shall be:
o FROM JANUARY 1, 1999 TO DECEMBER 31, 1999: 15,000 shares.
o FROM JANUARY 1, 2000 TO DECEMBER 31, 2000: 15,000 shares plus unissued
shares from the prior Offerings, whether offered or not.
o FROM JANUARY 1, 2001 TO DECEMBER 31, 2001: 15,000 shares plus unissued
shares from the prior Offerings, whether offered or not.
o FROM JANUARY 1, 2002 TO DECEMBER 31, 2002: 15,000 shares plus unissued
shares from the prior Offerings, whether offered or not.
o FROM JANUARY 1, 2003 TO DECEMBER 31, 2003: 15,000 shares plus unissued
shares from the prior Offerings, whether offered or not.
If a six-month Offering is made, the maximum number of shares to be
issued shall be one-half of the number of shares set forth for the annual period
in which the six-month Offering falls, plus, if the Offering is a July 1 to
December 31 Offering, unissued shares, whether offered or not, from the
immediately preceding six-month Offering. As used in the Plan, "Offering
Commencement Date" means January 1, on which the particular Offering begins and
"Offering Termination Date" means December 31, on which the particular Offering
terminates.
ARTICLE V--PAYROLL DEDUCTIONS
5.01. Amount of Deduction.
At the time a participant files an authorization for payroll deduction,
the participant shall elect to have deductions made from the participant's pay
on each payday during the time the participant is a participant in an Offering
at the rate of between one and ten percent of the participant's base pay in
effect at the Offering Commencement Date of such Offering. In the case of a
part-time hourly employee, such employee's base pay during an Offering shall be
determined by multiplying such employee's hourly rate of pay in effect on the
Offering Commencement Date by the number of regularly scheduled hours of work
for such employee during such Offering.
5.02. Participant's Account.
All payroll deductions made for a participant shall be credited to the
participant's account under the Plan. A participant may not make any separate
cash payment into such account except when on leave of absence and then only as
provided in Section 5.04.
<PAGE> 4
5.03. Changes in Payroll Deductions.
A participant may discontinue participation in the Plan as provided in
Article VIII, but no other change can be made during an Offering and,
specifically, a participant may not alter the amount of the payroll deductions
for that Offering.
5.04. Leave of Absence.
If a participant goes on a leave of absence, such participant shall
have the right to elect: (a) to withdraw the balance in the participant's
account pursuant to Section 7.02, (b) to discontinue contributions to the Plan
but remain a participant in the Plan, or remain a participant in the Plan during
such leave of absence and undertake to make cash payments to the Plan at the end
of each payroll period to the extent that amounts payable by the Company to such
participant are insufficient to meet such participant's authorized Plan
deductions.
ARTICLE VI--GRANTING OF OPTION
6.01. Number of Option Shares.
On the Commencement Date of each Offering, a participating employee
shall be deemed to have been granted an option to purchase a maximum number of
shares of the common stock of the Company equal to an amount determined as
follows: an amount equal to (i) that percentage of the participating employee's
base pay which the employee has elected to have withheld (but not in any case in
excess of 10%) multiplied by (ii) the employee's base pay during the period of
the Offering (iii) divided by 85% of the market value of the common stock of the
Company on the applicable Offering Commencement Date. The market value of the
Company's common stock shall be determined as provided in Section 6.02 below. An
employee's base pay during the period of an Offering shall be determined by
multiplying, in the case of a one-year Offering, the employee's normal weekly
rate of pay (as in effect on the last day prior to the Commencement Date of the
particular Offering) by 52 or the hourly rate by 2,080 or, in the case of a
six-month Offering, by 26 or 1040, as the case may be, provided that, in the
case of a part time hourly employee, the employee's base pay during the period
of an Offering shall be determined by multiplying such employee's hourly rate by
the number of regularly scheduled hours of work for such employee during such
Offering.
6.02. Option Price.
The option price of common stock purchased with payroll deductions made
during such annual Offering for a participant therein shall be 85% of the Fair
Market Value of the common stock on the date of granting of the option. For
purposes of this Section 6.02, Fair Market Value shall mean:
(a) If the common stock is neither listed on a national
securities exchange nor traded on the over-the-counter market, such
value as the Board, in good faith, shall determine;
<PAGE> 5
(b) If the common stock is listed on a national securities
exchange or traded in the over-the-counter market and sales prices are
regularly reported for the common stock, the closing or last price of
the common stock on the Composite Tape or other comparable reporting
system for such applicable date; and
(c) If the common stock is not traded on a national
securities exchange but is traded on the over-the -counter market, if
sales prices are not regularly reported for the common stock but bid
and asked prices for the stock are regularly reported, the average of
the mean between the bid and the asked price for the common stock at
the close of trading in the over-the-counter market for the 10 days on
which this common stock was traded immediately preceding such
applicable date.
Notwithstanding any provision of the Plan to the contrary, no
determination made with respect to the Fair Market Value of common stock subject
to an Option shall be inconsistent with Section 423 of the Code or regulations
thereunder.
ARTICLE VII--EXERCISE OF OPTION
7.01. Automatic Exercise.
Unless a participant gives written notice to the Company as hereinafter
provided, the option for the purchase of common stock with payroll deductions
made during any Offering will be deemed to have been exercised automatically on
the Offering Termination Date applicable to such Offering, for the purchase of
the number of full shares of common stock which the accumulated payroll
deductions in the participant's account at that time will purchase at the
applicable option price (but not in excess of the number of shares for which
options have been granted to the employee pursuant to Section 6.01), and any
excess in the employee's account at that time will be returned to him.
7.02. Withdrawal of Account.
By written notice to the Treasurer of the Company, at any time prior to
the Offering Termination Date applicable to any Offering, a participant may
elect to withdraw all the accumulated payroll deductions in the participant's
account at such time.
7.03. Fractional Shares.
Fractional shares will not be issued under the Plan and any accumulated
payroll deductions which would have been used to purchase fractional shares will
be returned to any employee promptly following the termination of an Offering,
without interest.
7.04. Exercise and Transferability of Option.
During a participant's lifetime, options held by such participant shall
be exercisable only by that participant. Options shall not be transferable other
than by will or the laws of descent and distribution.
<PAGE> 6
7.05. Delivery of Common Stock.
As promptly as practicable after the Offering Termination Date of each
Offering, the Company will deliver to each participant, as appropriate, the
common stock purchased upon exercise of the option.
7.06. Resale of Common Stock.
Participants may resell the common stock to a party other than the
Company only after satisfying the Company or its designated legal counsel that
such resale has been or will be in full compliance with all applicable state
and federal securities laws. In the discretion of the Company, Certificates
representing the common stock issued under the Plan may bear a restrictive
legend noting the foregoing restrictions on transfer.
ARTICLE VIII--WITHDRAWAL
8.01. In General.
As indicated in Section 7.02, a participant may withdraw payroll
deductions credited to the participant's account under the Plan at any time by
giving written notice to the Treasurer of the Company. All of the participant's
payroll deductions credited to the participant's account will be paid to the
participant promptly after receipt of a notice of withdrawal, and no further
payroll deductions will be made from the participant's pay during such Offering.
The Company shall treat any attempt to borrow by an employee on the security of
the employee's accumulated payroll deductions as an election, under Section
7.02, to withdraw such deductions.
8.02. Effect on Subsequent Participation.
A participant's withdrawal from any Offering will not have any effect
upon the participant's eligibility to participate in any succeeding Offering or
in any similar plan which may hereafter be adopted by the Company.
8.03. Termination of Employment.
Upon termination of the participant's employment for any reason,
including retirement (but excluding death while in the employ of the Company),
the payroll deductions credited to the participant's account will be returned to
the participant, or, in the case of the participant's death subsequent to the
termination of employment, to the person or persons entitled thereto under
Section 12.01.
8.04. Termination of Employment Due to Death.
Upon termination of the participant's employment because of death, the
participant's beneficiary (as defined in Section 12.01) shall have the right to
elect, by written notice given to the Treasurer of the Company prior to the
Offering Termination Date or the expiration of a period of sixty (60) days
commencing with the date of the death of the participant, either:
<PAGE> 7
(a) to withdraw all of the payroll deductions credited to the
participant's account under the Plan, or
(b) to exercise the participant's option for the purchase of
stock on the Offering Termination Date next following the date of the
participant's death for the purchase of the number of full shares of
stock which the accumulated payroll deductions in the participant's
account at the date of the participant's death will purchase at the
applicable option price, and any excess in such account will be
returned to said beneficiary, without interest.
In the event that no such written notice of election shall be duly
received by the office of the Treasurer of the Company, the beneficiary shall
automatically be deemed to have elected, pursuant to paragraph (b), to exercise
the participant's option.
8.05 Leave of Absence.
A participant on leave of absence shall, subject to the election made
by such participant pursuant to Section 5.04, continue to be a participant in
the Plan while he is treated as an employee pursuant to Section 3.02. A
participant who has been on leave of absence for more than 90 days and who
therefore is not an employee under the Plan, shall not be entitled to
participate in any Offering commencing after the 90th day of such leave of
absence.
ARTICLE IX--INTEREST
9.01 Payment of Interest.
No interest will be paid or allowed on any money paid into the Plan or
credited to the account of any participant employee; provided, however, that
interest shall be paid on any and all money which is distributed to an employee
or a beneficiary pursuant to the provisions of Sections 7.02, 8.01, 8.03, 8.04
and 10.01. Such distributions shall bear simple interest during the period from
the date of withholding to the date of return at the regular passbook savings
account rates per annum in effect at the Miami County National Bank of Paola,
Paola, Kansas, during the applicable Offering period or, if such rates are not
published or otherwise available for such purpose, at the regular passbook
savings account rates per annum in effect during such period at another major
commercial bank in Paola, Kansas selected by the Committee. Where the amount
returned represents an excess amount in an employee's account after such account
has been applied to the purchase of stock, the employee's withholding account
shall be deemed to have been applied first toward purchase of common stock under
the Plan, so that interest shall be paid on the last withholdings during the
period which results in the excess amount.
ARTICLE X--STOCK
10.01. Maximum Shares.
The maximum number of shares of common stock which shall be issued
under the Plan, subject to adjustment upon changes in capitalization of the
Company as provided in Section 12.04
<PAGE> 8
shall be 15,000 shares in each annual Offering (7,500 shares in each six-month
Offering) plus in each Offering all unissued shares from prior Offerings,
whether offered or not, but in total not to exceed 75,000 shares for all
Offerings. If the total number of shares for which options are exercised on any
Offering Termination Date in Accordance with Article VI exceeds the maximum
number of shares for the applicable Offering, the Company shall make a pro rata
allocation of the shares available for delivery and distribution in an nearly a
uniform manner as shall be practicable and as it shall determine to be
equitable, and the balance of payroll deductions credited to the account of each
participant under the Plan shall be returned to him as promptly as possible.
10.02. Participant's Interest in Option Stock.
The participant will have no interest in common stock covered by an
option until such option has been exercised.
10.03. Registration of Common Stock.
Common stock to be delivered to a participant under the Plan will be
registered in the name of the participant, or, if the participant so directs by
written notice to the Treasurer of the Company prior to the Offering Termination
Date applicable thereto, in the names of the participant and one such other
person as may be designated by the participant, as joint tenants with rights of
survivorship or as tenants by the entireties, to the extent permitted by
applicable law.
10.04. Restrictions on Exercise.
The Board of Directors may, in its discretion, require as conditions to
the exercise of any option that either:
(a) a Registration Statement under the Securities Act of
1933, as amended, with respect to said shares shall be effective and
such qualifications as are necessary under applicable state "blue sky"
laws, shall be obtained, or
(b) the participant shall have executed a written
representation at the time of purchase, in form and substance
satisfactory to the Company, that it is the participant's intention to
purchase the shares for investment and not for resale or distribution.
ARTICLE XI--ADMINISTRATION
11.01. Appointment of Committee.
The Board of Directors shall appoint a committee (the "Committee") to
administer the Plan, which shall consist of two or more members of the Company's
Board of Directors or executive management. Notwithstanding the preceding
provisions of this Section, at such time as the Company becomes subject to the
periodic reporting requirements of the Securities and Exchange Act of 1934, no
member of the Board may exercise discretion with respect to, or
<PAGE> 9
participate in, the administration of the Plan if, at any time within one year
prior to such exercise or participation said director or member of executive
management has been eligible for selection as a person to whom stock may be
allocated or to whom stock options or stock appreciation rights may be granted
pursuant to the Plan or any other plan of the Company or any Subsidiary or other
affiliate thereof entitling the participants therein to acquire stock, stock
options or stock appreciation rights of the Company or of any of its
Subsidiaries or other affiliates and no member of the Committee shall be
eligible to purchase common stock under the Plan.
11.02. Authority of Committee.
Subject to the express provisions of the Plan, the Committee shall have
plenary authority in its discretion to interpret and construe any and all
provisions of the Plan, to adopt rules and regulations for administering the
Plan, and to make all other determinations deemed necessary or advisable for
administering the Plan. The Committee's determination on the foregoing matters
shall be conclusive.
11.03. Rules Governing the Administration of the Committee.
The Board of Directors may from time to time appoint members of the
Committee in substitution for or in addition to members previously appointed and
may fill vacancies, however caused, in the Committee. The Committee may select
one of its members as its chairman and shall hold its meetings at such times and
places as it shall deem advisable and may hold telephonic meetings. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. The Committee may correct any defect
or omission or reconcile any inconsistency in the Plan, in the manner and to the
extent it shall deem desirable. Any decision or determination reduced to writing
and signed by a majority of the members of the Committee shall be as fully
effective as if it had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary and shall make such rules and
regulations of the conduct of its business as it shall deem advisable.
ARTICLE XII--MISCELLANEOUS
12.01. Designation of Beneficiary.
A participant may file a written designation of a beneficiary who is to
receive any common stock and/or cash. Such designation of beneficiary may be
changed by the participant at any time by written notice to the Treasurer of the
Company. Upon the death of a participant and upon receipt by the Company of
proof of identity and existence at the participant's death of a beneficiary
validly designated by him under the Plan, the Company shall deliver such common
stock and/or cash to such beneficiary. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such common stock and/or cash to the executor or administrator of the
estate of the participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company shall deliver such
common stock and/or cash to the surviving spouse of the participant, if any, and
if there is no surviving spouse, to those persons entitled to a distribution of
the participant's estate under the
<PAGE> 10
applicable laws of descent and distribution. No beneficiary shall, prior to the
death of the participant who designated said beneficiary, acquire any interest
in the common stock or cash credited to the participant under the Plan.
12.02. Transferability.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive common stock under
the Plan may be assigned, transferred, pledged, or otherwise disposed of in any
way by the participant other than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge or other
disposition shall be without effect, except that the Company shall treat such
act as an election to withdraw funds in accordance with Section 7.02.
12.03. Use of Funds.
All payroll deductions received or held by the Company under this Plan
may be used by the Company for any corporation purpose and the Company shall not
be obligated to segregate such payroll deductions.
12.04. Adjustment Upon Changes in Capitalization.
(a) If, while any options are outstanding, the outstanding
shares of common stock of the Company have increased, decreased,
changed into, or been exchanged for a different number or kind of
shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock split
or similar transaction, appropriate and proportionate adjustments may
be made by the Committee in the number and/or kind of shares which are
subject to purchase under outstanding options and on the option
exercise price or prices applicable to such outstanding options. In
addition, in any such event, the number and/or kind of shares which
may be offered in the Offerings described in Article IV hereof shall
also be proportionately adjusted. No adjustments shall be made for
stock dividends. For the purposes of this Paragraph, any distribution
of shares to shareholders in an amount aggregating 20% or more of the
outstanding shares shall be deemed a stock split and any distributions
of shares aggregating less than 20% of the outstanding shares shall be
deemed a stock dividend.
(b) Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company with one
or more corporations as a result of which the Company is not the
surviving corporation, or upon a sale of substantially all of the
property or common stock of the Company to another corporation, the
holder of each option then outstanding under the Plan will thereafter
be entitled to receive at the next Offering Termination Date upon the
exercise of such option for each share as to which such option shall
be exercised, as nearly as reasonably may be determined, the cash,
securities and/or property which a holder of one share of the common
stock was entitled to receive upon and at the time of such
transaction. The Board of Directors shall take such steps in
connection with such transactions as the Board shall deem necessary to
assure that the provisions of this
<PAGE> 11
Section 12.04 shall thereafter be applicable, as nearly as reasonably
may be determined, in relation to the said cash, securities and/or
property as to which such holder of such option might thereafter be
entitled to receive.
12.05. Amendment and Termination.
The Board of Directors shall have complete power and authority to
terminate or amend the Plan; provided, however, that the Board of Directors
shall not, without the approval of the stockholders of the Corporation (i)
increase the maximum number of shares which may be issued under any Offering
(except pursuant to Section 12.04) ; (ii) amend the requirements as to the class
of employees eligible to purchase common stock under the Plan or permit the
members of the Committee to purchase common stock under the Plan; (iii) extend
the duration of the Plan; (iv) increase the term of options granted hereunder;
(v) change the option price; or (vi) effect a change inconsistent with Section
423 of the Code or regulations thereunder. No termination, modification, or
amendment of the Plan may, without the consent of an employee then having an
option under the Plan to purchase common stock, adversely affect the rights of
such employee under such option.
12.06. Effective Date.
The Plan shall become effective as of December 31, 1998, subject to
approval by the holders of the majority of the common stock present and
represented at a special or annual meeting of the shareholders held on or
before December 31, 1999. If the Plan is not so approved, the Plan shall not
become effective.
12.07. No Employment Rights.
The Plan does not, directly or indirectly, create any right for the
benefit of any employee or class of employees to purchase any shares under the
Plan, or create in any employee or class of employees any right with respect to
continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise
modify, an employee's employment at any time.
12.08. Effect of Plan.
The provisions of the Plan shall, in accordance with its terms, be
binding upon, and inure to the benefit of, all successors of each employee
participating in the Plan, including, without limitation, such employee's
estate and the executors, administrators or trustees thereof, heirs and
legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such employee.
12.09. Governing Law.
The law of the State of Kansas will govern all matters relating to this
Plan except to the extent it is superseded by the laws of the United States.
<PAGE> 1
EXHIBIT 23.1
Board of Directors
Team Financial, Inc.:
We consent to the use of our report on the consolidated financial statements of
Team Financial, Inc. included herein and to the reference to our firm under the
heading "Experts" in Amendment No. 1 to the Registration Statement on Form S-1
of Team Financial, Inc., SEC File No. 333-76163.
/s/ KPMG LLP
Kansas City, Missouri
June 4, 1999
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 DEC-31-1998
<CASH> 20,610 27,397
<INT-BEARING-DEPOSITS> 6,467 149
<FED-FUNDS-SOLD> 0 11,310
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 112,298 109,296
<INVESTMENTS-CARRYING> 25,734 25,742
<INVESTMENTS-MARKET> 0 13,125
<LOANS> 250,280 256,126
<ALLOWANCE> 2,625 2,541
<TOTAL-ASSETS> 434,680 442,352
<DEPOSITS> 375,202 384,347
<SHORT-TERM> 6,462 6,273
<LIABILITIES-OTHER> 3,881 3,271
<LONG-TERM> 23,058 23,060
0 0
0 0
<COMMON> 14,044 13,980
<OTHER-SE> 12,033 11,421
<TOTAL-LIABILITIES-AND-EQUITY> 434,680 442,352
<INTEREST-LOAN> 5,679 23,183
<INTEREST-INVEST> 2,023 8,260
<INTEREST-OTHER> 190 411
<INTEREST-TOTAL> 7,892 31,854
<INTEREST-DEPOSIT> 3,616 14,807
<INTEREST-EXPENSE> 412 1,766
<INTEREST-INCOME-NET> 3,864 15,281
<LOAN-LOSSES> 183 1,486
<SECURITIES-GAINS> 0 18
<EXPENSE-OTHER> 3,689 15,384
<INCOME-PRETAX> 1,175 3,017
<INCOME-PRE-EXTRAORDINARY> 827 2,344
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 827 2,344
<EPS-BASIC> .30 .85
<EPS-DILUTED> .30 .85
<YIELD-ACTUAL> 0 0
<LOANS-NON> 1,260 2,241
<LOANS-PAST> 2,641 3,578
<LOANS-TROUBLED> 0 0
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<CHARGE-OFFS> 147 723
<RECOVERIES> 48 149
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