SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1995 Commission File No. 0-9377
------------------ ------
KINNARD INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0972952
(State of incorporation) (I.R.S. Employer identification number)
920 Second Avenue South,
Minneapolis, Minnesota 55402 (612) 370-2700
---------------------------------------------------------------------------
(Address of principal executive offices) Telephone number
Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for at least the past 90 days. Yes ___X_ No _____
Shares of $0.02 par value common stock outstanding at November 13, 1995:
6,255,451
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONTENTS
PART I
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statements of financial condition
Consolidated statements of operations
Consolidated statements of shareholders' equity
Consolidated statements of cash flows
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIION AND RESULTS OF OPERATIONS
PART II
OTHER INFORMATION
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1995 1994
(Unaudited)
ASSETS
Cash and cash equivalents $ 6,594 $ 2,750
Receivable from clearing firm and other broker-dealers 4,643 1,618
Receivable from customers 6,525 3,324
Miscellaneous receivables 1,914 1,579
Trading securities, at market 9,481 9,952
Office equipment at cost, less accumulated depreciation
of $3,409 and $2,710, respectively 1,850 2,234
Investment securities, at fair value 12,899 7,193
Income tax receivable 0 1,187
Deferred tax asset 401 946
Other assets 580 834
------ ------
Total assets $44,887 $31,617
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Notes payable $ 1,715 $ 0
Due to clearing firm and other broker-dealers 915 1,945
Payable to customers 2,694 2,152
Securities sold but not yet purchased 1,293 665
Employee compensation and related taxes payable 5,512 2,365
Income tax payable 1,080 0
Other accounts payable and accrued expenses 7,045 3,415
------- ------
Total liabilities 20,254 10,542
Commitments and Contingent Liabilities
Minority Interest (5) 0
Shareholders' Equity
Preferred stock, authorized 1,000 shares; none issued or outstanding 0 0
Undesignated stock, authorized 16,500 shares; none issued or outstanding 0 0
Common stock, $.02 par value; authorized 7,500 shares; issued and
outstanding 6,255 and 5,881 shares, respectively 125 118
Additional paid-in capital 13,675 12,861
Unearned compensation (4) (26)
Retained earnings 10,842 8,122
------- -------
Total shareholders' equity 24,638 21,075
------- -------
Total liabilities and shareholders' equity $44,887 $31,617
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Commission income $ 6,706 $ 5,904 $18,977 $18,887
Principal transactions 9,488 5,958 24,869 18,247
Investment account income 2,070 (553) 6,585 (811)
Investment banking 1,938 1,365 3,434 4,955
Interest 511 388 1,333 1,124
Other 975 633 2,813 2,061
------- ------- ------- -------
Total revenues 21,688 13,695 58,011 44,463
Operating Expenses:
Compensation and benefits 11,293 8,095 29,064 26,599
Bank commissions 2,630 2,238 7,101 7,186
Floor brokerage and clearance 1,225 975 3,180 2,822
Communications 306 339 936 994
Occupancy, equipment and computer 1,432 1,284 4,303 4,124
Litigation settlement charge 232 0 2,223 0
Other 2,626 2,116 6,602 5,989
------- ------ ------ ------
Total operating expenses 19,744 15,047 53,409 47,714
Income (loss) before income taxes 1,944 (1,352) 4,602 (3,251)
Income tax expense (benefit) 812 (522) 1,889 (1,303)
Minority interest (3) 0 (5) 0
-------- ------- ------- ------
Net income (loss) $ 1,135 ($830) $ 2,718 ($1,948)
Earnings (loss) per common share:
Primary $.18 ($.14) $.44 ($.32)
Fully diluted $.18 ($.14) $.43 ($.32)
Weighted average number of common and common equivalent shares outstanding:
Primary 6,272 5,957 6,212 6,010
Fully diluted 6,276 5,957 6,283 6,020
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except per share data)
<TABLE>
<CAPTION>
Additional Unearned
Common Stock Issued Paid-in Compen- Retained
Shares Amount Capital sation Earnings
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 3,798 $76 $4,146 $ 0 $8,950
Issuance of shares under employee
stock purchase plan 336 7 1,374
Issuance of shares under employee
stock option plan 17 0 31
Dividends on common stock ($.15 per share) (817)
Exercise of warrants 37 1 69
Secondary public offering 1,725 35 7,023
Issuance of shares to the employee
stock ownership trust 106 2 539
Repurchase of stock (9) 0 (51)
Issuance of restricted stock 23 0 114 (107)
Net income 3,797
------ --- ------ ------ -------
Balance, December 31, 1993 6,033 121 13,245 (107) 11,930
Dividends on common stock ($.10 per share) (598)
Exercise of warrants 21 0 47
Issuance of shares under employee
stock option plan 57 1 299
Repurchase of stock (230) (4) (730)
Amortization of unearned compensation 81
Net loss (3,210)
------- --- ------- ------ ------
Balance, December 31, 1994 5,881 118 12,861 (26) 8,122
Dividends on common stock (adjustment) 2
Exercise of warrants 381 7 850
Issuance of shares under employee
stock option plan 9 0 17
Repurchase of stock (15) 0 (48)
Amortization of unearned compensation 16
Forfeiture of restricted shares (1) (5) 6
Net income 2,718
------ ---- ------- ------ -------
Balance, September 30, 1995 (unaudited) 6,255 $125 $13,675 ($4) $10,842
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers and clearing firm $45,516 $45,722
Cash paid to suppliers and employees (46,826) (49,184)
Minority interest 5 0
Interest:
Received 1,333 1,124
Paid (49) (26)
Income taxes (paid) refunded 923 (182)
-------- -------
Net cash provided by (used in) operating activities 902 (2,546)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investment securities 26,791 7,989
Purchase of:
Office equipment (331) (1,061)
Investment securities (25,912) (7,948)
-------- -------
Net cash provided by (used in) investing activities 548 (1,020)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repurchase of) common stock 826 (230)
Proceeds from notes payable 1,715 3,100
Dividends paid (147) (452)
------- ------
Net cash provided by financing activities 2,394 2,418
Increase (decrease) in cash and cash equivalents 3,844 (1,148)
Cash and cash equivalents at beginning of period 2,750 4,283
------- ------
Cash and cash equivalents at end of period $ 6,594 $3,135
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
(Unaudited)
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss) $ 2,718 ($1,948)
Adjustments to reconcile net income (loss) to net cash
Provided by (used in) operating activities:
Depreciation and amortization 701 547
Unearned compensation 17 64
Net unrealized loss (gain) on investment securities (3,117) 997
Net realized gain on sale of investment securities (3,468) (186)
Net realized loss on sale of assets 14 122
Deferred income tax 545 (435)
(Increase) decrease in:
Receivable from clearing firm and other brokers-dealers (3,025) (443)
Receivable from customers (3,201) 3,325
Miscellaneous receivables (335) (74)
Trading securities, at market 471 (2,498)
Income tax receivable 1,187 (1,050)
Other assets 254 385
Increase (decrease) in:
Due to clearing firm and other broker-dealers (1,030) 53
Payable to customers 542 392
Securities sold but not yet purchased 628 674
Employee compensation and related taxes payable 3,147 (2,569)
Income taxes payable 1,080 0
Other accounts payable and accrued expenses 3,774 98
------- ------
Net cash provided by (used in) operating activities $ 902 ($2,546)
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
The accompanying consolidated financial statements of Kinnard
Investments, Inc., (the "Company") have been prepared in
conformity with generally accepted accounting principles and
should be read in conjunction with the Company's annual report for
the year ended December 31, 1994. The results of operations for
the nine months ended September 30, 1995 are not necessarily
indicative of the results to be expected for the year ended
December 31, 1995.
The consolidated statement of financial condition as of September
30, 1995 and other financial information for the nine months ended
September 30, 1995 and 1994, are unaudited, but management of the
Company believes that all adjustments necessary for a fair
statement of the results of operations for the periods have been
included.
For comparability, certain 1994 amounts have been reclassified to
conform with the presentation for 1995. The reclassifications had
no effect on net income or shareholders' equity as previously
reported.
Note 2. Net Capital Requirements
The Company's two broker-dealer subsidiaries, John G. Kinnard and
Company, Incorporated (JGK), and PRIMEVEST Financial Services,
Inc. (PFS), are subject to the Securities and Exchange
Commission's uniform net capital rule, which requires maintaining
minimum net capital as defined under such provisions and may
prohibit the Company from expanding its business or paying cash
dividends if certain criteria are not met.
JGK computes its net capital using the standard net capital
method, which requires that the ratio of aggregate indebtedness to
net capital not exceed 15 to 1. At September 30, 1995, JGK had net
capital of $4.6 million, a net capital requirement of $754,000 and
a ratio of aggregate indebtedness to net capital of 2.46 to 1.
PFS computes its net capital using the alternative net capital
method, which requires that the percentage of net capital to
aggregate debit items, both as defined, be greater than 2%. At
September 30, 1995, PFS had net capital of $2.1 million, a net
capital requirement of $250,000 and a ratio of net capital to
aggregate debit items of 28%.
Note 3. Shareholders' Equity
In February 1995, the Company announced that it had discontinued
its regular quarterly dividend until further notice. The payment
of future dividends, if any, rests within the discretion of its
Board of Directors and will depend upon the Company's earnings,
regulatory capital requirements, financial condition, and other
relevant factors.
During the first nine months of 1995, the Company granted options
to purchase 62,500 shares of the Company's common stock at prices
ranging from $3.55 to $3.76 per share.
At December 31, 1994 there were outstanding warrants to purchase
419,973 shares of the Company's common stock at an exercise price
of $2.25 per share with an expiration date of February 1995. In
January and February 1995, warrants were exercised for the
purchase of 381,056 shares of common stock generating proceeds of
$857,000. The warrants that were not exercised expired.
The Board of Directors has authorized the repurchase of up to
600,000 shares of the Company's common stock, of which a total of
242,769 shares had been repurchased as of December 31, 1994. A
total of 15,000 shares have been repurchased in the first nine
months of 1995.
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Management Changes
In September 1995, the Company's Chairman and President resigned
and a Director of the Company was appointed as Chairman of the
Board. In the third quarter of 1995, the Company incurred a charge
of $437,500 related to payments due the Company's former Chairman
and President under a Separation Agreement.
Note 5. Commitments and Contingent Liabilities
JGK was one of many brokerage firms across the country through
whom investors purchased limited partnership interests and
mortgage loan units from a number of limited partnerships
sponsored by Citi-Equity Group, Inc. ("Citi-Equity") for the
purpose of building and maintaining affordable housing projects.
Although many of the projects are built, leased and functioning,
others have not been built, and many others suffer from a variety
of problems. A number of purported class action lawsuits were
commenced against JGK alleging some or all of the following
claims: violation of state and federal securities laws, negligent
and fraudulent misrepresentation and consumer fraud. Each seeks an
unspecified amount of damages. In June 1995, JGK reached a
settlement, subject to certain conditions and judicial approval,
resolving all claims against it in the putative class action
lawsuits pending in state and federal courts relating to
Citi-Equity litigation. As part of the settlement, JGK agreed to
pay $1 million in cash, to transfer its interest in the principal
amount of approximately $1.4 million Class C Mortgage Pass-Through
Certificates in the MCA Multi-Family Affordable Housing REMIC
("MCA Certificate"), and to pay 20% of the profits, if any, to a
maximum amount of $1 million, which may be realized from the sale
of shares of stock that may be obtained through the exercise of
certain warrants held by JGK. These warrants are exercisable
during various periods through April 2000. In addition, JGK has
guaranteed that principal and interest payments on the MCA
Certificate will total at least $919,750. A pre-tax charge of
approximately $2.2 million has been recorded in 1995 related to
the Citi-Equity settlement. The charge is less than the $3.4
million maximum amount of the settlement because JGK was carrying
the MCA Certificate at a value below the principal amount, and the
portion of the settlement related to warrant appreciation will
only be accrued when the value of warrants increase, or shares
obtained on the exercise of warrants increase.
In October 1994, a purported class action lawsuit was commenced in
U.S. District Court for the District of Minnesota, against Palace
Casinos, Inc. ("Palace Casinos") and a number of other defendants,
including JGK, alleging violation of state and federal securities
laws and breach of fiduciary duty. The lawsuit seeks an
unspecified amount of damages. The plaintiff seeks to represent a
class of persons who purchased Palace Casinos preferred stock in a
private placement, in which JGK acted as a selling agent. In
addition, two non-class action lawsuits with similar allegations
have been commenced. JGK believes it has substantial defenses
against these claims, and intends to defend itself vigorously.
Although the ultimate outcome of these other matters cannot be
predicted with certainty, the Company's management believes that
while the outcome of these matters may have a material effect on
the earnings in a particular period, the outcome will not have a
material adverse effect on the financial condition of the Company.
JGK is a defendant in various other actions relating to its
business, some of which involve claims for unspecified amounts.
Although the ultimate outcome of these other matters cannot be
predicted with certainty, the Company's management believes that
while the outcome of these matters may have a material effect on
the earnings in a particular period, the outcome will not have a
material adverse effect on the financial condition of the Company.
In the normal course of business, the Company enters into
underwriting and other commitments. The ultimate settlement of
such transactions is not expected to have a material effect on the
financial statements.
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with Management's Discussion and
Analysis contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
Results of Operations
The following table sets forth a summary of changes in the major
categories of revenues and expenses:
<TABLE>
<CAPTION>
(In thousands)
Unaudited Three months ended Nine months ended
September 30, 1995 vs. 1994 September 30, 1995 vs. 1994
Increase (decrease) Increase (decrease)
<S> <C> <C> <C> <C>
Revenues:
Commission income $ 802 14% $ 90 0%
Principal transactions 3,530 59 6,622 36
Investment account income 2,623 474 7,396 912
Investment banking 573 42 (1,521) (31)
Interest 123 32 209 19
Other 342 54 752 36
----- --- ------ ----
Total revenues 7,993 58 13,548 30
Operating Expenses:
Compensation and benefits 3,198 40 2,465 9
Bank commissions 392 18 (85) (1)
Floor brokerage and clearance 250 26 358 13
Communications (33) (10) (58) (6)
Occupancy, equipment and computer 148 12 179 4
Litigation settlement charge 232 100 2,223 100
Other 510 24 613 10
------- --- ------ ----
Total operating expenses 4,697 31 5,695 12
Income before income taxes 3,296 244 7,853 242
Income taxes 1,334 256 3,192 245
Minority interest 3 100 5 100
------- --- ----- ----
Net income $1,965 237% $4,666 240%
</TABLE>
Three months ended September 30, 1995 and 1994
Favorable equity markets contributed to the continued success of the Company's
core business of underwriting, trading and researching emerging growth stocks,
as well as gains in the firm's investment portfolio. The Company recorded $21.7
million in revenues for the quarter compared to $13.7 million a year ago.
Primary earnings per share were $.18, compared to a loss of $.14 last year
resulting from the improved market and cost reduction efforts.
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three months ended September 30, 1995 and 1994 (continued)
Commission income increased by 14% during the quarter compared to last year as
activity in OTC stocks and mutual fund products rose in tandem with equity
markets that climbed to new record highs. The Dow Jones Industrial Average and
Nasdaq Composite indices increased 5.1% and 11.8%, respectively, during the
quarter. These revenue increases were partially offset by a decrease in sales of
insurance products.
Revenue from principal transactions increased to $9.5 million from $6.0 million
for the same period last year. Income from equity transactions increased by 82%
in response to the active equity market and comparison to weak results in the
prior year. Revenue from debt transactions decreased by 11% as interest rates
stabilized and investors sought higher returns in the equity markets.
The $2.6 million increase of investment account income was due largely to
unrealized gains on stocks and warrants that appreciated in value during the
period. In the comparable period last year the investment account loss was $.6
million. The investment portfolio has historically produced volatile results for
the Company.
Investment banking revenues increased by $573,000 as the Company completed one
public offering and three private placements. During the third quarter of last
year two public offerings were completed.
Employee compensation increased 40% from the prior year. Revenue based
compensation increased in line with revenues, and salaries declined as a result
of cost reduction programs implemented during the past year. In addition, the
Company incurred a charge of $437,500 related to payments due the Company's
former Chairman and President under a Separation Agreement (see Note 4). The
total number of employees at September 30, 1995 was down 9% from a year ago.
Bank commissions increased by 18%, which was in line with the increase in
associated revenues. Floor and clearing charges increased as a result of the
increases in operating revenues. Communication costs were down from last year
due to the effect of reducing the number of employees.
The increase in other expense during the current quarter is due primarily to a
one-time pre-tax charge of approximately $350,000 resulting from cancellation of
an underwriting by Headwaters Capital Corporation, a subsidiary that was formed
in early 1995, and the increase in reserves for various legal matters.
Nine months ended September 30, 1995 and 1994
The Company recorded net income of $2.7 million for the nine months ended
September 30, 1995, compared to a loss of $1.9 million in the prior year.
Primary earnings per share rose to $0.44 from the previous years loss per
primary share of $0.32. The significant improvement in profitability is
attributable to a 30% increase in revenue combined with decreased operating
expenses resulting from the Company's cost reduction programs that began in
1994.
The increase in revenues was fueled by strong results from equity trading and
the investment account, which were positively impacted by favorable equity
markets during the period. These increases were partially offset by a decline in
investment banking revenues due primarily to completing fewer underwritings.
Total expenses rose 12% from the prior year, but the increase would have been 7%
excluding the charge for settlement of litigation. The modest increase in
expenses compared to a 30% increase in revenues is the result of cost reduction
programs, increased productivity and significant investment account income.
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Operating Activities
A large portion of the Company's assets are cash and assets readily convertible
to cash. The liquid portion of the Company's trading and investment securities
are stated at quoted market value and are readily marketable. The less liquid
trading and investment securities are stated at fair value as determined by
management's best estimate.
During the nine months ended September 30, 1995, the value of trading securities
decreased $471,000 and securities sold but not yet purchased increased by
$628,000. Trading securities were reduced even though trading volume increased
due in part to more extensive risk management practices.
As securities broker-dealers, JGK and PFS are required by SEC regulations to
meet certain liquidity and capital standards. JGK and PFS have been in
compliance with these regulations at all times.
Based on the Company's current liquidity positions, available bank lines and
operating plans, it is anticipated that the Company has sufficient resources to
meet the cash requirements of its operations in the foreseeable future.
Investing Activities
The majority of investing activity during the current period resulted from the
sale and purchase of securities held in the investment account. A large portion
of the investment account is comprised of liquid investment-grade fixed income
securities, which matured or were sold and the proceeds re-invested. The
remainder is invested primarily in stocks, warrants and private financings of
emerging growth companies.
Financing Activities
The Company's subsidiaries maintain various credit facilities in order to meet
short-term operating needs. At September 30, 1995 and December 31, 1994 there
were outstanding balances of $1.7 million and $0, respectively, under these
facilities.
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
-----------------
See Note 4 in Notes to Consolidated Financial Statements.
ITEM 2 - CHANGES IN SECURITIES
---------------------
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None
ITEM 5 - OTHER INFORMATION
-----------------
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
10.1 - Separation Agreement with Thomas J. Mulvaney dated
September 21, 1995.
3.1 - Bylaws of Kinnard Investments, Inc. as
amended to date.
27 - Financial Data Schedule (filed in
electronic format only)
(b) Reports on Form 8-K
None
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KINNARD INVESTMENTS, INC.
/s/ Stephen H. Fischer
Stephen H. Fischer
Treasurer (principal financial officer)
Date 11/13/95
<PAGE>
KINNARD INVESTMENTS, INC.
--------------------
EXHIBIT INDEX
to
Form 10-Q
for Quarter Ended September 30, 1995
--------------------
Exhibit
Number Description
------- -----------
10.1 Separation Agreement with Thomas J. Mulvaney dated
September 21, 1995
3.1 Bylaws of Kinnard Investments, Inc. as amended to date
27 Financial Data Schedule (filed in electronic format only)
AGREEMENT AND RELEASE
IT IS HEREBY STIPULATED AND AGREED by and between THOMAS J.
MULVANEY ("MULVANEY") and KINNARD INVESTMENTS, INC. ("KINNARD"), for
the good and sufficient consideration set forth below, as follows:
1. KINNARD INVESTMENTS, INC., as used herein, shall at all times mean
KINNARD INVESTMENTS, INC., its parent, subsidiaries (including, but not limited
to John G. Kinnard & Co., Inc., PRIMEVEST Financial Services, Inc. and
Headwaters Capital Management, LLC), successors and assigns, its affiliated and
predecessor companies, their successors and assigns, their affiliated and
predecessor companies and the present or former directors, officers, employees,
shareholders and agents of any of them, whether in their individual or official
capacities, and the current and former trustees or administrators of any pension
or other benefit plan applicable to the employees or former employees of KINNARD
INVESTMENTS, INC., in their official and individual capacities.
2. MULVANEY hereby agrees that on the Effective Date of this Agreement
and Release, as set forth in Paragraph 5 hereof, he voluntarily resigns all of
his positions of employment with KINNARD, including, but not limited to (1)
Chairman of the Board of Directors of KINNARD INVESTMENTS, INC., (2) a member of
KINNARD INVESTMENTS, INC.'s Board of Directors, (3) an Officer of KINNARD
INVESTMENTS, INC., (Including the position of President and Chief Executive
Officer), (4) an employee of KINNARD INVESTMENTS, INC., (5) Chairman of the
Board of Directors of John G. Kinnard & Co., Inc. ("JGK"), (6) a member of JGK's
Board of Directors, (7) an Officer of JGK (including, but not limited to
President and Chief Executive Officer), (8) an employee of JGK, (9) a member of
<PAGE>
PRIMEVEST Financial Service, Inc.'s Board of Directors, and (10) Governor of
Headwaters Capital Management, LLC.
3. Specifically, in consideration for MULVANEY's agreement to the terms
hereof, KINNARD agrees to pay MULVANEY the payments and provide MULVANEY the
benefits as described below:
(a) Severance pay in the form of salary continuation
(according to regular payroll practices at his regular base salary as of
September 14, 1995) for the period from September 15, 1995, through December 31,
1995, in the amount of FORTY-THREE THOUSAND, SEVEN HUNDRED FIFTY DOLLARS AND NO
CENTS ($43,750.00), which salary continuation shall be subject to appropriate
federal, state and FICA and other tax withholdings.
(b) Severance pay in the total amount of TWO HUNDRED-FIFTY
THOUSAND DOLLARS AND NO CENTS ($250,000.00), to be paid in twenty (20) bimonthly
payments of TWELVE THOUSAND FIVE HUNDRED DOLLARS AND NO CENTS ($12,500.00),
during the period from January 1996 through October 1996, which payments shall
be subject to federal and state tax and FICA withholdings.
(c) A lump sum payment in the gross amount of ONE HUNDRED
FORTY- THREE THOUSAND SEVEN HUNDRED FIFTY DOLLARS AND NO/CENTS ($143,750.00) for
claims for personal injury, pain and suffering, emotional anguish, distress and
anxiety, loss of self esteem, humiliation, and damage to his personal
reputation, to be paid on the Effective Date of this Agreement and Release as
described below in Paragraph 5.
<PAGE>
(d) In the event of MULVANEY's death prior to the making of
any payment due under Paragraphs 3(a) through 3(c), such payment shall be made
to the beneficiary designated by MULVANEY for the purposes of this Agreement, if
any, otherwise to the personal representative of MULVANEY's estate.
(e) Payment to MULVANEY'S attorneys, Mackall, Crounse & Moore,
in an amount not to exceed FIVE THOUSAND DOLLARS AND NO CENTS ($5,000.00),
within five (5) days of Mackall, Crounse & Moore's submission of a detailed
invoice to KINNARD.
(f) Subject to the terms of Paragraph 3(d), MULVANEY agrees
that neither he nor his attorneys will make any claim against KINNARD for
attorneys' fees, costs, interest or any and all other expenses which may have
been incurred by MULVANEY.
(g) MULVANEY shall also receive a contribution for 1995 to the John G.
Kinnard and Company, Incorporated Employee Stock Ownership Plan, pro rated at
seven- twelfths (7/12ths) the annual contribution.
(h) The PARTIES acknowledge that recovery for personal injury
damages, as described above in Paragraph 3(c), may be compensated in accordance
with Section 104(a)(2) of the Internal Revenue Code of the United States [26
U.S.C. ss. 104(a)(2)] and the administrative regulations promulgated thereunder
as well as recent federal appellate court decisions. Therefore, there shall be
no deduction for state or federal taxes, FICA taxes, or any other tax deduction
or reporting.
(i) KINNARD makes no warranty concerning the tax treatment of any sums paid
hereunder under said laws, and MULVANEY has not relied on any such warranty.
Further, MULVANEY agrees to indemnify KINNARD and hold KINNARD harmless from any
<PAGE>
claim against KINNARD resulting from the characterization and tax treatment of
the payments made under Paragraph 3(c).
(j) In addition to the above-described payments, MULVANEY
shall also be eligible to receive the medical and life insurance benefits he
previously received as an employee through December 31, 1995, at which time he
shall become eligible for his COBRA rights.
(k) MULVANEY shall be eligible to exercise his stock options
in accordance with the terms of his option agreements and the Kinnard 1990 Stock
Option Plan and 1992 Employee Stock Ownership Plan.
4. (a) MULVANEY acknowledges that he was given at least twenty-one (21)
days after September 20, 1995, which was the date he received a copy of this
Agreement and Release, to consider whether the terms of this Agreement and
Release are acceptable to him. Insofar as MULVANEY may have signed this
Agreement and Release prior to the expiration of such twenty-one (21) day
period, he hereby acknowledges that he did so freely and voluntarily, and upon
advice of his legal counsel to the effect that his so doing does not impair the
validity of any release given by him hereunder.
(b) Notification of Rights Pursuant to the Minnesota Human Rights Act
(Minnesota Statutes & 363.01. et seq.) and the Federal Age Discrimination in
Employment Act, (29 U.S.C. ss. 621 et seq.) MULVANEY is hereby notified of his
right to rescind the release of claims in regard to claims arising under the
Minnesota Human Rights Act, Minnesota Statutes Chapter 363, within fifteen (15)
days of the signing of this Agreement and Release, and with regard to his rights
under the federal Age Discrimination in Employment Act, 29 U.S.C. ss. 621, et
seq., within seven (7) days after the signing of this Agreement and Release. In
order to be effective, the rescission must be in writing and delivered to Gerald
M. Gifford, Secretary, Kinnard Investments, Inc., 920 2nd Avenue South,
Minneapolis, Minnesota 55402, by hand or mail. If delivered by mail, the
rescission must be postmarked within the required period, properly addressed to
Gerald M. Gifford, as set forth above, and sent by certified mail, return
receipt requested. It is further understood that if MULVANEY rescinds the
release of claims, in accordance with this Paragraph 4(a), that KINNARD shall
have no obligation to make the payments or provide the benefits as described in
Paragraph 3 of this Agreement and MULVANEY shall immediately repay any monies
paid to him pursuant to this Agreement and Release on or after September 14,
1995.
<PAGE>
(c) Acknowledgement of Reading and Understanding Consultation
With Counsel: Period to Consider Agreement. MULVANEY, by his signature to this
Agreement, acknowledges and agrees that he has carefully read and understood all
provisions of this Agreement, and that he has entered into this Agreement
knowingly and voluntarily. MULVANEY further acknowledges that KINNARD has
advised him to consult with counsel prior to signing this Agreement, and
MULVANEY acknowledges that he has consulted with or had the opportunity to
consult with legal counsel.
5. The Effective Date of this Agreement and Release shall be on the
eighteenth (18th) day after MULVANEY signs this Agreement and Release, as set
forth in Paragraph 4(a) hereof.
6. MULVANEY agrees that he has or will return to KINNARD all property
in his possession, including but not limited to all customer lists, computer
discs, employment manuals, records, correspondence and any and all other
documents or materials.
<PAGE>
7. KINNARD specifically denies any liability to MULVANEY for any and
all claims which have been or could be asserted by MULVANEY against KINNARD and
neither this Agreement and Release, nor anything contained herein, shall be
construed as an admission by KINNARD of any liability or unlawful conduct
whatsoever. MULVANEY specifically denies any liability to KINNARD for any and
all claims which have been or could be asserted by KINNARD against MULVANEY and
neither this Agreement and Release, nor anything contained herein, shall be
construed as an admission by MULVANEY of any liability or unlawful conduct
whatsoever.
8. MULVANEY agrees that for the period from September 15, 1995, through
September 14, 1996, MULVANEY shall not, directly or indirectly, induce any
employee of KINNARD or its subsidiaries to engage, directly or indirectly, in
competition with KINNARD in any manner or capacity (e.g., as a principal, agent,
partner, officer, director, stockholder, employee or otherwise), in any aspect
of the securities, brokerage and/or investment business which KINNARD is engaged
in on September 15, 1995, or solicit any customers of KINNARD or its
subsidiaries, directly or indirectly, for purposes competitive with KINNARD or
its subsidiaries. Nothing in this Paragraph 8 shall be interpreted to prohibit
MULVANEY from continuing to offer brokerage services to those persons who were
his customers during the time he was employed with KINNARD. The parties agree
that KINNARD would not have an adequate remedy at law for the breach of any
provision of this Paragraph 8 so, in addition to any other relief afforded by
law, KINNARD shall have the right to enforce any provision of this Paragraph 8
by preliminary temporary and permanent injunctive relief against MULVANEY and
any other person concerned thereby; it being understood that both damages and
injunctive relief
<PAGE>
shall be proper modes of relief and are not to be considered as alternative
remedies. KINNARD seeking such relief shall not be considered a breach of
KINNARD's right to demand arbitration. In the event of any breach of this
Paragraph 8 by MULVANEY, the duration of MULVANEY's obligation under this
Paragraph 8 shall automatically be extended beyond its then-scheduled expiration
date for an additional period equal to the duration of the breach, provided an
action shall have been commenced on account of such breach during the initial
period of MULVANEY's obligation under this Paragraph 8. In the event that a
court of competent jurisdiction determines that any provision of this Agreement
is unreasonable, it may limit such provision to the extent it deems reasonable,
without declaring the provision invalid in its entirety. The preceding sentence
shall not be construed as an admission by KINNARD, but is only included to
provide KINNARD with the maximum possible protection consistent with the right
of MULVANEY to earn a livelihood subsequent to the termination of his
employment.
9. THE PARTIES, for themselves, heirs, legal representatives, estates
and successors in interest, hereby releases and forever discharges each other of
and from any and all actions or causes of action, suits, debts, claims,
complaints, contracts, controversies, agreements, promises, damages, claims for
attorneys fees, judgments, costs, disbursements, severance benefits, bonuses,
deferred compensation and demands whatsoever, in law or entity, they ever had,
now have, or shall have as of the Effective Date of this Agreement and Release,
including, but not limited to, any alleged violation of any federal, state or
local law, regulation or ordinance prohibiting discrimination or other unlawful
activity on the basis of race, color, creed, marital status, sex, age, religion,
national origin, handicap, sexual harassment, disability or any other basis, or
any alleged obligation created by statute (including, but not limited to the Age
<PAGE>
Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act and the Minnesota Human Rights Act), ordinance,
rule or regulation or by common law contract or tort theory, that they ever had,
now have or shall have as of the Effective Date of this Agreement and Release;
provided, that this release shall not extend to claims arising under the terms,
or by reason of any breach, of this Agreement.
10. THE PARTIES agree to release and discharge each other not only from
any and all claims which they could make on their own behalf, but also those
which may or could be brought by any other person or organization in their
behalf, and they specifically waive any right to become, and promises not to
become, a member of any class in any proceeding or case in which a claim or
claims against the other arise, in whole or in part, from any event which
occurred as of the date of this Agreement and Release.
11. THE PARTIES affirm that they have not caused or permitted to be
filed any charge, complaint or action against each other. In the event that
there is outstanding any such charge, complaint, or action, the PARTIES agree to
seek their immediate withdrawal and dismissal with prejudice. In the event that
for any reason said charge, complaint, or action is not withdrawn, the PARTIES
agree not to voluntarily testify, provide documents, or otherwise participate,
or to permit others to voluntarily participate on their behalf, in any
investigation or litigation arising therefrom or associated therewith and to
execute such other papers or documents as their respective counsel determines
may be necessary to have said charge, complaint or action dismissed with
prejudice.
12. MULVANEY shall be entitled to indemnification from KINNARD as set forth
in the KINNARD's Bylaws, which provide, among other things, that the
indemnification provided for in the Bylaws continues as to a person who ceases
being a director, officer, employee or agent of KINNARD.
<PAGE>
13. All terms and conditions of this Agreement shall be kept strictly
confidential by all PARTIES hereto until disclosed by KINNARD in accordance with
disclosure requirements of federal securities laws; disclosure by KINNARD of any
term or condition shall not waive the obligation of confidentiality as to any
other terms or conditions. 14. MULVANEY promises and agrees not to disclose,
either directly or indirectly, in any manner whatsoever, any information of any
kind regarding either (a) the substance or the existence of any belief he or any
other person may have that KINNARD engaged in any unlawful or tortious conduct
towards him, or breached any contract, or (b) subject to paragraph 13 above, the
terms of this Agreement and Release, to any person or organization, including,
but not limited to, representatives of local, state or federal agencies, members
of the press and media, present and former officers, employees and agents of
KINNARD, and other members of the public. The PARTIES agree that KINNARD would
not have an adequate remedy at law for the breach of any provision of this
Paragraph 14 so, in addition to any other relief afforded by law, KINNARD shall
have the right to enforce any provision of this Paragraph 13 by preliminary
temporary and permanent injunctive relief against MULVANEY and other person
concerned thereby; it being understood that both damages and injunctive relief
shall be proper modes of relief and are not to be considered as alternative
remedies. KINNARD seeking such relief shall not be considered a breach of
KINNARD's right to demand arbitration. In the event that KINNARD takes steps to
seek relief from an alleged breach of this Paragraph all of the remaining
provisions of this Agreement and Release shall remain in full force and effect.
This Paragraph shall not prohibit MULVANEY from (i) discussing the consideration
being provided him pursuant thereto with his tax advisors, (ii) accurately
reporting the nature of the consideration being provided him pursuant thereto on
his income tax returns, (iii) discussing the underlying terms of this Agreement
and Release with his attorneys, his wife or his medical doctors, (iv) advising a
governmental taxing authority of the said consideration or of the existence of
this Agreement and Release, in response to a question or questions posed by such
taxing authority, (v) testifying pursuant to a court order or a subpoena issued
by a governmental agency which appears valid on its face, (vi) revealing the
terms of this Agreement and Release as required by and in accordance with any
law, regulation or ordinance, or (vii) stating "the matter has been resolved and
the terms of the resolution are confidential" in response to an inquiry.
<PAGE>
15. Notwithstanding any provisions contained in this Agreement,
MULVANEY agrees that he will fully cooperate as a witness for KINNARD with
respect to any current or future litigation, arbitration or dispute, including
but not limited to being available for deposition testimony, trial testimony,
preparation of written discovery or responses to written discovery. KINNARD
shall reimburse MULVANEY for reasonable expenses reasonably incurred by him in
connection with such activities, including lost wages (not to exceed $600.00 per
day unless mutually agreed upon).
16. The PARTIES to this Agreement and Release mutually agree that they
shall not defame or disparage the other party.
17. Any dispute arising out of or relating to this Agreement or the alleged
breach of it, or the making of this Agreement, including claims of fraud in the
inducement, shall be discussed between the disputing parties in a good faith
effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding, such dispute cannot be resolved, such dispute shall be settled
by binding arbitration (subject to KINNARD's right to seek injunctive relief as
set forth in Paragraphs 8 and 14.) Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The
arbitrator shall be a retired state or federal judge or an attorney who has
practice securities or business litigation for at least 10 years. If the parties
cannot agree on an arbitrator within 20 days, any party may request that the
chief judge of the District Court for Hennepin County, Minnesota, select an
arbitrator. Arbitration will be conducted pursuant to the provisions of this
Agreement, and the commercial arbitration rules of the American Arbitration
Association, unless such rules are inconsistent with the provisions of this
Agreement. Limited civil discovery shall be permitted for the production of
documents and taking of depositions as permitted under such rules. Unresolved
discovery disputes may be brought to the attention of the arbitrator who may
dispose of such dispute. The arbitrator shall have the authority to award any
remedy or relief that a court of this state could order or grant. The arbitrator
may award to the prevailing party, if any, as determined by the arbitrator, all
of its costs and fees, including the arbitrator's fees, administrative fees,
travel expenses, out-of-pocket expenses; provided, that each party shall pay its
own attorneys' fees. Unless otherwise agreed by the parties, the place of any
arbitration proceedings shall be Hennepin County, Minnesota.
18. This Agreement and Release shall be construed under and governed by the
laws of the State of Minnesota.
<PAGE>
19. If any provision of this Agreement and Release shall, for any
reason, be breached by a party hereto or be adjudged to be void, invalid or
unenforceable, the remainder of this Agreement and Release shall nonetheless
continue and remain in full force and effect.
20. All notices from or to any of the parties hereto shall be in
writing and shall be considered to have been duly given if sent by certified or
registered United States mail postage prepaid, return receipt requested, to the
other party at such address as both parties may hereafter designate to the
other.
21. This Agreement and Release may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
22. This Agreement and Release shall be binding upon, and each and
every benefit and obligation provided for herein shall inure to, the PARTIES
hereto and their respective heirs, legal representatives, successors, affiliated
entities, transferees or assigns.
23. The waiver by KINNARD or MULVANEY of the breach or nonperformance
of any provision of this Agreement and Release by the other will not operate or
be construed as a waiver of any future breach or nonperformance under any such
provision of this Agreement and Release or any similar agreement with any other
employee.
24. This Agreement and Release contains the full agreement of the PARTIES
and may not be modified, altered or changed in any respect except upon the
express prior written consent of both PARTIES hereto. The PARTIES hereby agree
and acknowledge that this Agreement and Release supersedes and terminates any
prior agreements and understandings between the PARTIES. The PARTIES, who have
negotiated with respect to the terms hereof, have read the foregoing Agreement
and Release, have consulted with counsel, and understand the meaning of each of
the terms hereof. The PARTIES enter into this Agreement and Release freely and
of their own volition.
<PAGE>
IN WITNESS WHEREOF, the PARTIES have hereunto set their hand this 21st day
of September 1995.
9/21/95 /s/ Thomas J. Mulvaney
Date THOMAS J. MULVANEY
STATE OF MINNESOTA )
) ss:
COUNTY OF HENNEPIN )
I /s/ Dennis E. Grande , a Notary Public, do hereby certify that Thomas
J. Mulvaney, personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that he signed and delivered the said instrument as his free
and voluntary act, for the uses and purposes therein set forth.
Given under my hand and official seal this 21 day of September 1995.
/s/ Dennis E. Grande
NOTARY PUBLIC
My Commission Expires:
1/31/00
KINNARD INVESTMENTS, INC.
Date: 9/25/95 By /s/ Hilding C. Nelson
Title Director
STATE OF MINNESOTA )
)ss:
COUNTY OF HENNEPIN )
Before me, a notary public for and within the county of Hennepin, State of
Minnesota, this 25th day of September 1995, personally appeared Hilding C.
Nelson , to me known, and, who after being first duly sworn deposed and stated
that _(s)he is the Director of KINNARD INVESTMENTS, INC., and that (s)he is duly
authorized by KINNARD INVESTMENTS, INC., to execute and acknowledge the
foregoing Agreement and Release and that said Director did acknowledge to me
that _(s)he executed the same as his own free act and deed on behalf of KINNARD
INVESTMENTS, INC.
Given under my hand and official seal this 25th day of September 1995.
/s/ Angela I. Rodine
NOTARY PUBLIC
My Commission Expires:
1/31/00
Date
RESTATED BYLAWS (COMPOSITE)
OF
KINNARD INVESTMENTS, INC.
ARTICLE 1.
OFFICES
1.1) Offices. The principal office of the corporation shall be 110
South Seventh Street, Minneapolis, Minnesota, and the corporation may have
offices at such other places within or without the State of Minnesota as the
Board of Directors shall from time to time determine or the business of the
corporation requires.
ARTICLE 2.
MEETINGS OF SHAREHOLDERS
2.1) Annual Meeting. The annual meeting of the shareholders of the
corporation entitled to vote shall be held at the principal office of the
corporation or at such other place, within or without the State of Minnesota, as
is designated by the Board of Directors, or by written consent of all the
shareholders entitled to vote thereat, at such time on such day during the month
of May of each year (other than a Saturday, Sunday or holiday), or during such
other month as shall be determined by the Board of Directors. At the annual
meeting, the shareholders, voting as provided in the Articles of Incorporation,
shall elect directors and shall transact such other business as shall properly
come before the meeting.
2.2) Special Meetings. Special meetings of the shareholders entitled to
vote shall be called by the Secretary at any time upon request of the Chairman
of the Board, the President or the Board of Directors (acting upon majority
vote), or upon request by shareholders holding ten percent (10%) or more of the
voting power of the shareholders.
2.3) Notice of Meetings. There shall be mailed to each shareholder entitled
to vote, at his address as shown by the books of the corporation, a notice
setting out the place, date and hour of the annual meeting or any special
meeting, which notice shall be mailed at least seven (7) days prior to the date
of the meeting; provided, that (i) notice of a meeting at which an agreement of
merger or consolidation is to be considered shall be mailed to all shareholders
of record, whether or not entitled to vote, at least two (2) weeks prior
thereto, (ii) notice of a meeting at which a proposal to dispose of all, or
substantially all, of the property and assets of the corporation is to be
considered shall be mailed to all shareholders of record, whether or not
entitled to vote, at least ten (10) days prior thereto, and (iii) notice of a
meeting at which a proposal to dissolve the corporation or to amend the Articles
of Incorporation is to be considered shall be mailed to all shareholders of
record, whether or not entitled to vote, at least ten (10) days prior thereto.
Notice of any special meeting shall state the purpose or purposes of the
proposed meeting, and the business transacted at all special meetings shall be
confined to purposes stated in the notice. Attendance at a meeting by any
shareholders, without objection in writing by him, shall constitute his waiver
of notice of the meeting.
<PAGE>
2.4) Quorum and Adjourned Meetings. The holders of twenty-five percent
(25%) of all shares outstanding and entitled to vote, represented either in
person or by proxy, shall constitute a quorum for the transaction of business at
any annual or special meeting of the shareholders. In case a quorum is not
present at any meeting, those present shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until the requisite number of voting shares shall be represented. At
such adjourned meetings at which the required amount of voting shares shall be
represented, any business may be transacted which might have been transacted at
the original meeting.
2.5) Voting. At each meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote in person or by proxy duly
appointed by an instrument in writing subscribed by such shareholder. Each
shareholder shall have one (1) vote for each share having voting power standing
in his name on the books of the corporation except as may be otherwise required
to provide for cumulative voting (if not denied by the Articles). Upon the
demand of any shareholder, the vote for directors or the vote upon any question
before the meeting shall be by ballot. All elections shall be determined and all
questions decided by a majority vote of the number of shares entitled to vote
and represented at any meeting at which there is a quorum except in such cases
as shall otherwise be required by statute, the Articles of Incorporation or
these Bylaws. Except as may otherwise be required to conform to cumulative
voting procedures, directors shall be elected by a plurality of the votes cast
by holders of shares entitled to vote thereon.
2.6) Record Date. The Board of Directors may fix a time, not exceeding
sixty (60) days preceding the date of any meeting of shareholders, as a record
date for the determination of the shareholders entitled to notice of and to vote
at such meeting, notwithstanding any transfer of any shares on the books of the
corporation after any record date so fixed. The Board of Directors may close the
books of the corporation against transfer of shares during the whole or any part
of such period. In the absence of action by the Board, only shareholders of
record twenty (20) days prior to a meeting may vote at such meeting.
2.7) Order of Business. The suggested order of business at the annual
meeting and, to the extent appropriate, at all other meetings of the
shareholders shall, unless modified by the presiding chairman, be:
(a) Call of roll
(b) Proof of due notice of meeting or waiver of notice
<PAGE>
(c) Determination of existence of quorum
(d) Reading and disposal of any unapproved minutes
(e) Annual reports of officers and committees
(f) Election of directors
(g) Unfinished business
(h) New business
(i) Adjournment.
ARTICLE 3.
DIRECTORS
3.1) General Powers. The property, affairs and business of the corporation
shall be managed by a Board of Directors.
3.2) Number, Term and Qualifications. At each annual meeting the
shareholders shall determine the number of directors, which shall not be less
than the minimum required by law; provided, that between annual meetings the
authorized number of directors may be increased by the shareholders or by the
Board of Directors or decreased by the shareholders. Each director at each
annual meeting of shareholders shall be elected for a term of one (1) year and
shall hold office until his successor is elected and qualified, or until his
resignation or removal as provided by statute.
3.3) Vacancies. Vacancies on the Board of Directors shall be filled by
the remaining members of the Board, though less than a quorum; provided that
newly created directorships resulting from an increase in the authorized number
of directors shall be filled by two-thirds (2/3) of the directors serving at the
time of such increase. Persons so elected shall be directors until their
successors are elected by the shareholders, who may make such election at their
next annual meeting or at any special meeting duly called for that purpose.
3.4) Quorum and Voting. A majority of the whole Board of Directors
shall constitute a quorum for the transaction of business except that when a
vacancy or vacancies exist, a majority of the remaining directors (provided such
majority consists of not less than two directors) shall constitute a quorum.
Except as otherwise provided in the Articles of Incorporation or these Bylaws,
the acts of a majority of the directors present at a meeting at which a quorum
is present shall be the acts of the Board of Directors.
3.5) First Meeting. As soon as practicable after each annual election of
directors, the Board of Directors shall meet for the purpose or organization,
electing or appointing officers of the corporation, and transaction of other
business, at the place where the shareholders' meeting is held or at the place
where regular meetings of the Board of Directors are held. No notice of such
meeting need be given. Such first meeting may be held at any other time and
place specified in a notice given as hereinafter provided for special meetings
or in a waiver of notice signed by all the directors.
<PAGE>
3.6) Regular Meetings. Regular meetings of the Board of Directors shall
be held from time to time at such time and place as may from time to time be
fixed by resolution adopted by a majority of the entire Board of Directors. No
notice need be given of any regular meeting.
3.7) Special Meetings. Special meetings of the Board of Directors may
be held at such time and place as may be designated in the notice or the waiver
of notice of the meeting. Special meetings of the Board of Directors may be
called by the Chairman of the Board, the President or by any two (2) directors.
Unless notice shall be waived by all directors, notice of such special meeting
(including a statement of the purposes thereof) shall be given to each director
at least twenty-four (24) hours in advance of the meeting if oral or three (3)
days in advance of the meeting if by mail, telegraph or other written
communication; provided, however, that meetings may be held without waiver of
notice from or giving notice to any director while he is in the armed forces of
the United States or outside the continental limits of the United States.
Attendance at a meeting by any director, without objection in writing by him,
shall constitute a waiver of notice of such meeting.
3.8) Compensation. Directors who are not salaried officers of the
corporation shall receive such fixed sum per meeting attended or such fixed
annual sum as shall be determined from time to time by resolution of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving this corporation in any other capacity and receiving
proper compensation therefor.
3.9) Executive Committee. The Board of Directors may, by the
affirmative vote of the majority of the Board, designate two or more of its
number to constitute an Executive Committee, which, to the extent determined by
the affirmative vote of the majority of the Board, shall have and exercise the
authority of the Board in the management of the business of the corporation. Any
such Executive Committee shall act only in the interval between meetings of the
Board and shall be subject at all times to the control and direction of the
Board.
3.10) Order of Business. The suggested order of business at any meeting
of the Board of Directors shall, to the extent appropriate and unless modified
by the presiding chairman, be:
(a) Roll call
(b) Proof of due notice of meeting or waiver of notice,
or unanimous presence and declaration by President
(c) Determination of existence of quorum
(d) Reading and disposal of any unapproved minutes
(e) Reports of officers and committees
(f) Election of officers
(g) Unfinished business
<PAGE>
(h) New business
(i) Adjournment.
ARTICLE 4.
OFFICERS
4.1) Number and Designation. The Board of Directors shall elect a
President, a Secretary and a Treasurer, and may elect or appoint a Chairman of
the Board, one or more Vice Presidents, and such other officers and agents as it
may from time to time determine. Any two of the offices except those of
President and Vice president may be held by one person.
4.2) Election, Term of Office and Qualifications. At each annual
meeting of the Board of Directors, the Board shall elect the officers provided
for in Section 4.1 and such officers shall hold office until the next annual
meeting of the Board or until their successors are elected or appointed and
qualify; provided, however, that any officer may be removed with or without
cause by the affirmative vote of a majority of the entire Board of Directors
(without prejudice, however, to any contract rights of such officer).
4.3) Resignations. Any officer may resign at any time by giving written
notice to the Board of Directors or to the Chairman, President or Secretary. The
resignation shall take effect at the time specified in the notice and, unless
otherwise specified therein, acceptance of the resignation shall not be
necessary to make it effective.
4.4) Vacancies in Office. If there be a vacancy in any office of the
corporation, by reason of death, resignation, removal or otherwise, such vacancy
shall be filled for the unexpired term by the Board of Directors at any regular
or special meeting.
4.5) Chairman of the Board. The Board of Directors may, in its
discretion elect one of its number as Chairman of the Board. The Chairman shall
perform all duties as may from time to time be assigned to the Chairman by the
Board.
4.6) President. The President shall perform all duties as may from time to
time be assigned to the President by the Board.
4.7) Vice President. Each Vice President shall have such powers and
shall perform such duties as may be specified in these Bylaws or prescribed by
the Board of Directors. In the event of absence or disability of the President,
the Board of Directors may designate a Vice President or Vice Presidents to
succeed to the powers and duties of the President.
4.8) Secretary. The Secretary shall be secretary of and shall attend all
meetings of the shareholders and Board of Directors. He shall act as clerk
thereof and shall record all the proceedings of such meetings in the minute book
of the corporation. He shall give proper notice of meetings of shareholders and
directors. He may, with the Chairman of the Board, President or Vice President,
sign all certificates representing shares of the corporation and shall perform
the duties usually incident to his office and such other duties as may be
prescribed by the Board of Directors from time to time.
4.9) Treasurer. The Treasurer shall keep accurate accounts of all
monies of the corporation received or disbursed, and shall deposit all monies,
drafts and checks in the name of and to the credit of the corporation in such
banks and depositories as the Board of Directors shall designate from time to
time. He shall have power to endorse for deposit the funds of the corporation as
authorized by the Board of Directors. He shall render to the Chairman of the
Board, President and the Board of Directors, whenever required, an account of
all of his transactions as Treasurer and statements of the financial condition
of the corporation, and shall perform the duties usually incident to his office
and such other duties as may be prescribed by the Board of Directors from time
to time.
4.10) Other Officers. The Board of Directors may appoint one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other
officers, agents and employees as the Board may deem advisable. Each officer,
agent or employee so appointed shall hold office at the pleasure of the Board
and shall perform such duties as may be assigned to him by the Board, Chairman
of the Board or President.
ARTICLE 5.
INDEMNIFICATION
5.1) Indemnification of Directors and Officers. To the full extent
permitted by Minnesota Statutes, Section 301.095, as amended from time to time,
or by other provisions of law, each person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, wherever brought, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director or
executive officer of the corporation (defined to mean President, Executive Vice
President, Secretary, Treasurer and such other officers as may be specifically
designated by the Board of Directors from time to time) or by reason of the fact
that such person is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by the corporation
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding; provided, however, that the indemnification
with respect to a person who is or was serving as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise shall apply only to the extent such person is not indemnified by such
other corporation, partnership, joint venture, trust or other enterprise. The
indemnification provided by this section shall continue as to a person who has
ceased to be a director or officer of the corporation and shall inure to the
benefit of the heirs, executors and administrators of such person.
5.2) Indemnification of Employees and Agents. Each person who is not
eligible for indemnification pursuant to Section 5.1 above and who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, wherever brought, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was an employee or agent of the corporation or by reason of the fact that such
person is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, may be indemnified by the corporation to the extent
permitted and in accordance with the procedures described by Minnesota Statutes,
Chapter 301, as amended from time to time, against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by such person in connection with such action, suit or
proceeding; provided, however, that the indemnification with respect to a person
who is or was serving as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall apply
only to the extent such person is not indemnified by such other corporation,
partnership, joint venture, trust or other enterprise. The indemnification
provided by this section shall continue as to a person who has ceased to be an
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
5.3) Nonexclusivity. The foregoing right of indemnification in the case
of a director or officer and permissive indemnification in the case of an agent
or employee shall not be exclusive of other rights to which a director, officer,
employee or agent may be entitled as a matter of law.
5.4) Advance Payments. To the full extent permitted by Minnesota
Statutes, Section 301.095, as amended from time to time, or by other provisions
of law, the corporation may pay in advance of final disposition expenses
incurred in actions, suits and proceedings specified in Sections 5.1 and 5.2
above.
5.5) Insurance. To the full extent permitted by Minnesota Statutes,
Section 301.095, as amended from time to time, or by other provisions of law,
the corporation may purchase and maintain insurance on behalf of any indemnified
party against any liability asserted against such person and incurred by such
person in such capacity.
<PAGE>
ARTICLE 6.
SHARES AND THEIR TRANSFER
6.1) Certificates of Stock. Every owner of stock of the corporation
shall be entitled to a certificate, in such form as the Board of Directors may
prescribe, certifying the number of shares of stock of the corporation owned by
him. The certificates for such stock shall be numbered (separately for each
class) in the order in which they shall be issued and shall be signed in the
name of the corporation by the Chairman of the Board, President or a Vice
President, and by the Secretary, Assistant Secretary, Treasurer, Assistant
Treasurer, or any other proper officer of the corporation thereunto authorized
by the Board of Directors. Signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the corporation. Certificates on which a facsimile
signature of a former officer appears may be issued with the same effect as if
he were such officer on the date of issue.
6.2) Stock Record. As used in these Bylaws, the term "shareholder"
shall mean the person, firm or corporation in whose name outstanding shares of
capital stock of the corporation are currently registered on the stock record
books of the corporation. A record shall be kept of the name of the person, firm
or corporation owning the stock represented by such certificates respectively,
the respective dates thereof and, in the case of cancellation, the respective
dates of cancellation. Every certificate surrendered to the corporation for
exchange or transfer shall be cancelled and no new certificate or certificates
shall be issued in exchange for any existing certificate until such existing
certificate shall have been so cancelled (except as provided for in Section 6.4
of this Article 6).
6.3) Transfer of Shares. Transfer of shares on the books of the
corporation may be authorized only by the shareholder named in the certificate
(or his legal representative or duly authorized attorney-in-fact) and upon
surrender for cancellation of the certificate or certificates for such shares.
The shareholder in whose name shares of stock stand on the books of the
corporation shall be deemed the owner thereof for all purposes as regards the
corporation; provided, that when any transfer of shares shall be made as
collateral security and not absolutely, such fact, if known to the Secretary of
the corporation or to the transfer agent, shall be so expressed in the entry of
transfer.
6.4) Lost Certificates. Any shareholder claiming a certificate of stock
to be lost or destroyed shall make an affidavit or affirmation of that fact in
such form as the Board of Directors may require, and shall, if the directors so
require, give the corporation a bond of indemnity in form and with one or more
sureties satisfactory to the Board of at least double the value, as determined
by the Board, of the stock represented by such certificate in order to indemnify
the corporation against any claim that may be made against it on account of the
alleged loss or destruction of such certificate, whereupon a new certificate may
be issued in the same tenor and for the same number of shares as the one alleged
to have been destroyed or lost.
<PAGE>
6.5) Treasury Stock. Treasury stock shall be held by the corporation
subject to disposal by the Board of Directors in accordance with the Articles
and these Bylaws, and shall not have voting rights nor participate in dividends.
6.6) Inspection of Books by Shareholders. Shareholders shall be permitted
to inspect the books of the corporation for a proper purpose at all reasonable
times.
ARTICLE 7.
GENERAL PROVISIONS
7.1) Dividends. Subject to the provisions of the Articles of
Incorporation and of these Bylaws, the Board of Directors may declare dividends
from the net earnings or net assets of the corporation available for dividends
whenever and in such amounts as, in its opinion, the condition of the affairs of
the corporation shall render it advisable.
7.2) Surplus and Reserves. Subject to the provisions of the Articles of
Incorporation and of these Bylaws, the Board of Directors in its discretion may
use and apply any of the net earnings or net assets of the corporation available
for such purpose to purchase or acquire any of the shares of the capital stock
of the corporation in accordance with law, or any of its bonds, debentures,
notes, scrip or other securities or evidences of indebtedness, or from time to
time may set aside from its net assets or net earnings such sums as it, in its
absolute discretion, may think proper as a reserve fund to meet contingencies,
for the purpose of maintaining or increasing the property or business of the
corporation, or for any other purpose it may think conducive to the best
interests of the corporation.
7.3) Fiscal Year. The fiscal year of the corporation shall be established
by the Board of Directors.
7.4) Audit of Books and Accounts. The books and accounts of the
corporation shall be audited at least once in each fiscal year or at such times
as may be ordered by the Board of Directors.
7.5) Seal. The corporation shall have such corporate seal or no
corporate seal as the Board of Directors shall from time to time determine.
7.6) Securities of Other Corporations.
(a) Voting Securities Held by the Corporation. Unless otherwise ordered by
the Board of Directors, the President shall have full power and authority on
behalf of the corporation (i) to attend and to vote at any meeting of security
holders of other companies in which the corporation may hold securities; (ii) to
execute any proxy for such meeting on behalf of the corporation and (iii) to
execute a written action in lieu of a meeting of such other company on behalf of
this corporation. At such meeting, by such proxy or by such writing in lieu of
meeting, the President shall possess and may exercise any and all rights and
powers incident to the ownership of such securities that the corporation might
have possessed and exercised if it had been present. The Board of Directors may,
from time to time, confer like powers upon any other person or persons.
(b) Purchase and Sale of Securities. Unless otherwise ordered
by the Board of Directors, the President shall have full power and authority on
behalf of the corporation to purchase, sell, transfer or encumber any and all
securities of any other company owned by the corporation and may execute and
deliver such documents as may be necessary to effectuate such purchase, sale,
transfer or encumbrance. The Board of Directors may, from time to time, confer
like powers upon any other person or persons.
ARTICLE 8.
MEETINGS
8.1) Waiver of Notice. Whenever any notice whatsoever is required to be
given by these Bylaws, the Articles of Incorporation or any of the laws of the
State of Minnesota, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before, at or after the time stated therein,
shall be deemed equivalent to the actual required notice.
8.2) Participation by Conference Telephone. Members of the Board of
Directors, or any committee designated by the Board, may participate in a
meeting of the Board of Directors or of such committee by means of conference
telephone or similar communications equipment whereby all persons participating
in the meeting can hear and communicate with each other, and participation in a
meeting pursuant to this Section shall constitute presence in person at such
meeting. The place of the meeting shall be deemed to be the place of origination
of the conference telephone call or similar communication technique.
8.3) Authorization Without Meeting. Any action of the shareholders, the
Board of Directors, or any lawfully constituted Executive Committee of the
corporation which may be taken at a meeting thereof, may be taken without a
meeting if authorized by a writing signed by all of the holders of shares who
would be entitled to notice of a meeting for such purpose, by all of the
directors, or by all of the members of such Executive Committee, as the case may
be.
<PAGE>
ARTICLE 9.
AMENDMENTS OF BYLAWS
9.1) Amendments. These Bylaws may be altered, amended, added to or
repealed by the affirmative vote of a majority of the members of the Board of
Directors at any regular meeting of the Board or at any special meeting of the
Board called for that purpose, subject to the power of the shareholders to
change or repeal such Bylaws and subject to any other limitations on such
authority of the Board provided by the Minnesota Business Corporation Act.
** * **
The undersigned, Gerald M. Gifford, Secretary of Kinnard Investments,
Inc., hereby certifies that the foregoing Restated Bylaws were duly adopted as
the Bylaws of the corporation by its sole shareholder on October 29, , 1979.
Gerald M. Gifford
Secretary
Attest:
President
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