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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER: 0-06181
J.C. NICHOLS COMPANY
(Exact name of registrant as specified in its charter)
MISSOURI
(State or other jurisdiction of
incorporation or organization)
44-0371610
(I.R.S. Employer
Identification No.)
310 WARD PARKWAY, KANSAS CITY, MISSOURI
(Address of principal executive offices)
64112
(Zip code)
(816) 561-3456
(Registrant's telephone number, including area code)
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 the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT JULY 31, 1997
----- ----------------------------
<S> <C>
Common Stock, $0.01 par value 3,849,358
</TABLE>
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J.C. NICHOLS COMPANY
INDEX TO FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 1997 and December
31, 1996.................................................... 1
Consolidated Statements of Operations for the Six Months
Ended June 30, 1997 and June 30, 1996....................... 2
Consolidated Statements of Operations for the Three Months
Ended June 30, 1997 and June 30, 1996....................... 3
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1997 and June 30, 1996....................... 4
Notes to Unaudited Consolidated Financial Statements........ 5
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 7
PART II -- OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS........................................... 13
ITEM 2 CHANGES IN SECURITIES....................................... 13
ITEM 3 DEFAULTS UPON SENIOR SECURITIES............................. 13
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 13
ITEM 5 OTHER INFORMATION........................................... 14
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K............................ 14
SIGNATURES.................................................. 15
</TABLE>
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS.
J.C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Revenue-producing properties................................ $184,970,000 $189,011,000
Land and improvement inventories............................ 15,792,000 27,368,000
Property held for future development........................ 3,754,000 3,754,000
------------ ------------
Total properties....................................... 204,516,000 220,133,000
Cash and cash equivalents................................... 18,312,000 14,454,000
Temporary investments....................................... 39,008,000 45,053,000
Accounts receivable......................................... 1,346,000 2,000,000
Prepaid expenses............................................ 7,313,000 6,355,000
Notes receivable............................................ 29,279,000 21,514,000
Investments in real estate partnerships..................... 1,542,000 2,163,000
Minority interest in consolidated partnerships.............. 4,487,000 4,431,000
Deferred income taxes....................................... 1,171,000 3,456,000
Other assets, net........................................... 590,000 768,000
------------ ------------
$307,564,000 $320,327,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Mortgage indebtedness....................................... $302,773,000 $309,188,000
Notes payable to banks and others........................... 14,989,000 2,000,000
Accounts payable and tenants' deposits...................... 6,220,000 6,633,000
Accrued expenses and other liabilities...................... 9,540,000 8,020,000
Income taxes payable........................................ 13,597,000 11,525,000
Accrued contribution to Employee Stock Ownership Trust...... 11,050,000 11,050,000
Deferred gains on the sale of property...................... 2,032,000 517,000
------------ ------------
360,201,000 348,933,000
------------ ------------
Shareholders' equity (deficit):
Common stock, par value $.01 per share; 10,000,000 shares
authorized and 5,016,745 shares issued................. 100,000 100,000
Additional paid-in capital................................ 8,319,000 8,319,000
Retained earnings......................................... 84,211,000 80,402,000
------------ ------------
92,630,000 88,821,000
Less:
Treasury stock, at cost (1,167,387 and 164,345 shares of
common stock) (note 3)................................. 145,267,000 117,427,000
------------ ------------
Total shareholders' equity (deficit).............. (52,637,000) (28,606,000)
Commitments and contingencies...............................
------------ ------------
$307,564,000 $320,327,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
J. C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Sales and revenues:
Rents..................................................... $39,731,000 $40,150,000
Property sales............................................ 3,286,000 4,289,000
Commissions and fees...................................... 469,000 557,000
Dividends and interest.................................... 2,353,000 2,025,000
Gains on sales of investments and other assets............ 236,000 33,072,000
Equity in earnings of unconsolidated affiliates........... 172,000 233,000
Other..................................................... 436,000 474,000
----------- -----------
46,683,000 80,800,000
----------- -----------
Costs and expenses:
Selling, general and operating expenses................... 19,378,000 22,951,000
Cost of property sales.................................... 2,831,000 3,486,000
Interest.................................................. 11,639,000 12,109,000
Depreciation and amortization............................. 6,741,000 6,892,000
----------- -----------
40,589,000 45,438,000
----------- -----------
Income before income taxes............................. 6,094,000 35,362,000
Income tax expense.......................................... 2,285,000 13,225,000
----------- -----------
Net income............................................. $ 3,809,000 $22,137,000
=========== ===========
Net income per share (note 2)............................... $ 0.92 $ 4.46
=========== ===========
Average number of shares outstanding (notes 2 and 3)........ 4,129,993 4,963,191
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
J.C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Sales and revenues:
Rents..................................................... $19,720,000 $20,083,000
Property sales............................................ 1,939,000 1,638,000
Commissions and fees...................................... 241,000 257,000
Dividends and interest.................................... 1,282,000 953,000
Gains on sales of investments and other assets............ 221,000 96,000
Equity in earnings of unconsolidated affiliates........... 249,000 292,000
Other..................................................... 187,000 263,000
----------- -----------
23,839,000 23,582,000
----------- -----------
Costs and expenses:
Selling, general and operating expenses................... 9,405,000 11,086,000
Cost of property sales.................................... 1,724,000 1,343,000
Interest.................................................. 5,790,000 5,848,000
Depreciation and amortization............................. 3,368,000 3,431,000
----------- -----------
20,287,000 21,708,000
=========== ===========
Income before income taxes............................. 3,552,000 1,874,000
Income tax expense.......................................... 1,330,000 725,000
----------- -----------
Net income............................................. $ 2,222,000 $ 1,149,000
=========== ===========
Net income per share (note 2)............................... $ 0.56 $ 0.23
=========== ===========
Average number of shares outstanding (notes 2 and 3)........ 3,974,638 4,985,866
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
J.C. NICHOLS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1997 1996
---- ----
<S> <C> <C>
Operating activities:
Net income................................................ $ 3,809,000 $ 22,137,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation of properties............................. 6,319,000 6,375,000
Amortization of deferred costs......................... 422,000 517,000
Deferred income taxes.................................. 2,285,000 13,225,000
Equity in earnings of unconsolidated affiliates........ (172,000) (233,000)
Earned stock compensation.............................. - 930,000
Gains on sales of investments and other assets......... (236,000) (33,072,000)
Changes in:
Land and improvement inventories..................... 1,691,000 2,284,000
Accounts receivable.................................. 654,000 2,399,000
Prepaid expenses..................................... (1,380,000) 17,000
Income taxes receivable.............................. 2,072,000 50,000
Minority interest in consolidated partnerships....... (76,000) (99,000)
Accounts payable and tenants' deposits............... (413,000) (625,000)
Accrued expenses and other liabilities............... 1,520,000 1,741,000
Deferred gain on property sales...................... (8,000) (3,000)
Other, net........................................... (315,000) (498,000)
------------ ------------
Net cash provided by operating activities......... 16,172,000 15,145,000
------------ ------------
Investing activities:
Net (increase) decrease in temporary investments.......... 6,045,000 (27,261,000)
Payments on notes receivable.............................. 4,858,000 5,432,000
Issuance of notes receivable.............................. (3,760,000) (1,946,000)
Additions to revenue-producing properties................. (2,968,000) (1,821,000)
Proceeds from sales of marketable equity securities....... - 38,617,000
Proceeds from sales of capital assets..................... 932,000 101,000
Return of capital from real estate partnerships........... 800,000 347,000
Other, net................................................ 184,000 -
------------ ------------
Net cash provided by investing activities......... 6,091,000 13,469,000
------------ ------------
Financing activities:
Payments on mortgage indebtedness......................... (20,231,000) (19,757,000)
Issuance of mortgage indebtedness......................... 14,616,000 4,225,000
Purchase of treasury stock................................ (12,810,000) -
Payments on notes to banks and others..................... - (3,658,000)
Capital contributions from minority partners.............. 20,000 -
------------ ------------
Net cash used in financing activities............. (18,405,000) (19,190,000)
------------ ------------
Net increase in cash and cash equivalent.......... 3,858,000 9,424,000
Cash and cash equivalents, beginning of period.............. 14,454,000 7,209,000
------------ ------------
Cash and cash equivalents, end of period.................... $ 18,312,000 $ 16,633,000
============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of note receivable in exchange for land and
improvement inventories................................... $ 10,845,000 $ -
Issuance of note payable in exchange for treasury stock..... $ 12,990,000 $ -
Payment of note receivable in exchange for treasury stock... $ 1,982,000 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
J.C. NICHOLS COMPANY
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(1) BASIS OF PREPARATION
The consolidated financial statements of J.C. Nichols Company and
subsidiaries (the Company) have been prepared in accordance with the
instructions to Form 10-Q. To the extent that information and footnotes required
by generally accepted accounting principles for complete financial statements
are contained in or consistent with the audited consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, such information and footnotes have not been duplicated
herein. The December 31, 1996 consolidated balance sheet has been derived from
the audited consolidated financial statements as of that date. In the opinion of
management, all adjustments, including normal recurring accruals, considered
necessary for a fair presentation of financial statements have been reflected
herein. The results of the interim period ended June 30, 1997 are not
necessarily indicative of the results expected for the year ended December 31,
1997. Certain amounts in the consolidated financial statements have been
reclassified to conform with the 1997 presentation.
(2) NET INCOME PER SHARE
Net income per share has been computed based on the average number of
common and common equivalent shares outstanding during the period. All periods
presented reflect retroactive adjustment for the 80-for-1 stock split approved
by the Company on May 29, 1996.
(3) TREASURY STOCK
During January, 1997, the Company purchased 948,880 shares of its common
stock from a shareholder for $25,857,000, payable in cash of $12,849,000 (which
included approximately $39,000 of interest) and a note payable of $12,990,000
(net of expenses totaling approximately $57,000), bearing interest at 8% and due
January 29, 1999. Also in January 1997, the J.C. Nichols Company Employee Stock
Ownership Trust transferred 54,162 shares of the Company's common stock to the
Company in repayment of a loan of $1,983,000.
(4) EMPLOYEE STOCK OWNERSHIP TRUST
On August 1, 1997, the Company entered into an agreement with the Internal
Revenue Service (IRS). This agreement was a condition to payment of $2,326,000,
plus certain accrued interest, and 680,000 shares of common stock (collectively,
the "conveyance") to the Company's Employee Stock Ownership Trust (ESOT)
pursuant to a settlement agreement dated June 30, 1995 ("Settlement Agreement")
between the Company and a class of participants in the Company's Employee Stock
Ownership Plan (ESOP). The Company also agreed to make a nondeductible payment
of approximately $585,000 to the IRS. The IRS agreed, among other things, not to
assert that the events that were the subject of the Settlement Agreement
disqualified the ESOP or gave rise to liability for prohibited transaction
excise taxes. The IRS also agreed that the Company may deduct in full the value
of the settlement payment to the ESOT and that such payment and method of
allocating it will not adversely affect the tax qualification of the ESOP.
Additionally, the Company agreed to resolve related claims with certain ESOP
participants by reducing the settlement payment by approximately $59,000 and
59,000 shares of the Company's common stock and tendering such amounts to a
court to determine the proper payee or payees.
During 1995, the Company accrued an expense of $11,050,000 representing the
estimated value of the 680,000 shares of the Company's common stock at the date
the Company agreed to the conveyance obligation. The Company also previously
recorded a $2,000,000 note payable, plus accrued interest, and a $326,000
accrued expense in accordance with the Settlement Agreement. Accordingly, the
conveyance will result in a decrease in liabilities of $13,376,000, plus certain
accrued interest, and a decrease in stockholder's deficit of
5
<PAGE> 8
$11,050,000. In addition, based on prices established by recent market trades of
the Company's common stock, the conveyance will also provide previously
unrecorded net income tax benefit of approximately $6,000,000. The ultimate
amount of net income tax benefit realized will be dependent upon the value of
the shares of the Company's common stock at the date on which they are conveyed
to the ESOT.
6
<PAGE> 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL BACKGROUND
The following is a discussion of the historical operating results of the
Company. The discussion should be read in conjunction with the Company's 1996
Annual Report on Form 10-K.
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 TO THE SIX MONTHS ENDED JUNE
30, 1996
SUMMARY. Net income decreased by $18.3 million from $22.1 million for the
six months ended June 30, 1996 to $3.8 million for the six months ended June 30,
1997, primarily as a result of the absence of gains from disposition of the
Company's marketable equity securities portfolio for the six months ended June
30, 1997. This reduction was partially offset by lower selling, general, and
operating expenses, lower interest expense and lower income tax expense for the
six months ended June 30, 1997.
RENTS. Rental income decreased by $419,000 from $40.1 million for the six
months ended June 30, 1996 to $39.7 million for the six months ended June 30,
1997, primarily due to the absence of $1.8 million in rental income from the
Company's leasehold interest in the Raphael Hotel of San Francisco (as the
underlying lease expired in the third quarter of 1996) and $200,000 of certain
nonrecurring items. These decreases were substantially offset by an increase in
rental income of $893,000 related to one of the Company's larger office
buildings that was substantially vacant during the first half of 1996 while the
Company made significant tenant improvements for a new tenant that is now
leasing all of the vacant space in that building. The remainder of the $688,000
increase is due primarily to improved rents in the Company's office, retail, and
apartment properties.
PROPERTY SALES. Property sales primarily represent sales of residential
lots in subdivisions developed by the Company, sales of condominiums in the
Alameda Towers project, and sales of villas in the Corinth Place Villas project.
The Company had only two villas remaining to be sold as of June 30, 1997.
Property sales decreased by $1.0 million (23.4%) from $4.3 million for the six
months ended June 30, 1996 to $3.3 million for the six months ended June 30,
1997 and included lot sales of $1.4 million, condominium sales of $1.7 million,
and villa sales of $169,000. Property sales of $4.3 million for the six months
ended June 30, 1996 included lot sales of $1.1 million, condominium sales of
$2.6 million and villa sales of $633,000.
DIVIDENDS AND INTEREST INCOME. Dividends were received on the marketable
equity securities that were held for investment purposes prior to March 31,
1996. Interest income is received on the Company's cash balances held in banks
and on notes receivable. Interest income fluctuates with interest rates, the
level of the Company's excess cash, and the level of notes receivable. Dividends
and interest income increased $328,000 (16.2%) from $2.0 million for the six
months ended June 30, 1996 to $2.4 million for the six months ended June 30,
1997. This increase is primarily due to the higher average balances of cash and
notes receivable outstanding during the six months ended June 30, 1997.
GAINS ON SALES OF INVESTMENTS AND OTHER ASSETS. Gains on sales of
investments and other assets represent gains associated with the sales of
revenue-producing properties, property held for future development, marketable
equity securities, and other assets used in the business. These gains fluctuate
with the volume of asset dispositions and the magnitude of the difference
between sales proceeds and carrying value. In the first quarter of 1996, the
Company liquidated for $38.6 million its entire investment in marketable equity
securities recognizing a pre-tax gain of approximately $33.0 million.
SELLING, GENERAL AND OPERATING EXPENSES. Selling, general, and operating
expenses (S,G, & O) represent the expenses directly associated with operating
the Company's real estate assets and expenses that are considered to be
overhead. These expenses decreased by $3.6 million (15.6%) from $23.0 million
for the six months ended June 30, 1996 to $19.4 million for the six months ended
June 30, 1997, principally due to the absence of $1.1 million of costs to secure
a new management team and the absence of $1.7 million in expenses related to the
operation of the Raphael Hotel of San Francisco due to the expiration of the
underlying lease.
7
<PAGE> 10
Certain S, G, & O expenses of a non-recurring nature decreased by $464,000. The
remainder of the $336,000 decrease is due primarily to lower maintenance
expenses in the Company's office, retail and apartment properties. The timing of
maintenance expenses varies according to the availability of third party
contractors to perform major maintenance projects as well as weather conditions.
The Company has traditionally incurred significantly higher maintenance expenses
in the second half of the fiscal year than in the first half of the fiscal year.
COST OF PROPERTY SALES. Cost of property sales represents the Company's
cost basis in residential lots, condominium units, and villas sold during the
year. The cost of property sales is a function of the number of lots,
condominium units, and villas sold and their underlying cost basis. Cost of
property sales decreased by $655,000 (18.8%) from $3.5 million for the six
months ended June 30, 1996 to $2.8 million for the six months ended June 30,
1997. Of this $655,000 decrease, the cost of condominium sales decreased by
$416,000, the cost of lot sales increased by $214,000, and the cost of villa
sales decreased by $453,000. The gross margin percentage on lot sales was 36.3%
for the six months ended June 30, 1997 as compared to 41.0% for the six months
ended June 30, 1996. The decrease in gross margin percentage on lot sales for
the six months ended June 30, 1997 resulted from a change in sales mix, as sales
for this period contained a lower percentage of sales from higher margin
subdivisions. The gross margin percentage on condominium sales was (3.1%) for
the six months ended June 30, 1997, as compared to 12.7% for the six months
ended June 30, 1996. The decrease in gross margin percentage on condominium
sales for the six months ended June 30, 1997 resulted from the Company incurring
greater finishing costs on condominium sales for the six months ended June 30,
1997 than for the six months ended June 30, 1996.
INTEREST EXPENSE. Fluctuations in interest expense occur due to the level
of the Company's interest bearing indebtedness and the effect changes in
interest rates have on the Company's variable rate indebtedness. Interest
expense declined by $470,000 (3.9%) from $12.1 million for the six months ended
June 30, 1996 to $11.6 million for the six months ended June 30, 1997 primarily
due to the lower average balance of outstanding indebtedness during the six
months ended June 30, 1997.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1997 TO THE THREE MONTHS ENDED
JUNE 30, 1996
SUMMARY. Net income increased by $1.1 million from $1.1 million for the
three months ended June 30, 1996 to $2.2 million for the three months ended June
30, 1997, primarily as a result of lower selling, general, and operating
expenses for the three months ended June 30, 1997, partially offset by higher
income tax expense.
RENTS. Rental income decreased by $363,000 from $20.1 million for the three
months ended June 30, 1996 to $19.7 million for the three months ended June 30,
1997 primarily due to the absence of $1.0 million in rental income from the
Company's leasehold interest in the Raphael Hotel of San Francisco (as the
underlying lease expired in the third quarter of 1996). This decrease was
substantially offset by an increase in rental income of $421,000 related to one
of the Company's larger office buildings that was substantially vacant during
the first half of 1996 while the Company made significant tenant improvements
for a new tenant that is now leasing all of the vacant space in that building.
The remainder of the $216,000 increase is due primarily to improved rents in the
Company's office, retail, and apartment properties.
PROPERTY SALES. Property sales increased by $301,000 (18.4%) from $1.6
million for the three months ended June 30, 1996 to $1.9 million for the three
months ended June 30, 1997 and included lot sales of $845,000 and condominium
sales of $1.1 million. Property sales of $1.6 million for the three months ended
June 30, 1996 included lot sales of $545,000, condominium sales of $600,000 and
villa sales of $493,000.
DIVIDENDS AND INTEREST INCOME. Dividends and interest increased $329,000
(34.5%) from $953,000 for the three months ended June 30, 1996 to $1,282,000 for
the three months ended June 30, 1997. This increase is primarily due to the
higher average balances of cash and notes receivable outstanding during the
three months ended June 30, 1997.
SELLING, GENERAL AND OPERATING EXPENSES. S, G & O decreased by $1.7
million (15.2%) from $11.1 million for the three months ended June 30, 1996 to
$9.4 million for the three months ended June 30, 1997,
8
<PAGE> 11
principally due to the absence of $155,000 of costs to secure a new management
team and the absence of $886,000 in expenses related to the operation of the
Raphael Hotel of San Francisco due to the expiration of the underlying lease.
Certain S, G, & O expenses of a non-recurring nature decreased by $350,000. The
remainder of the $309,000 decrease is due primarily to lower maintenance
expenses in the Company's office, retail and apartment properties. The timing of
maintenance expenses varies according to the availability of third party
contractors to perform major maintenance projects as well as weather conditions.
COST OF PROPERTY SALES. Cost of property sales increased by $381,000
(28.4%) from $1.3 million for the three months ended June 30, 1996 to $1.7
million for the three months ended June 30, 1997. Of this $381,000 increase, the
cost of condominium sales increased by $629,000, the cost of lot sales increased
by $189,000, and the cost of villa sales decreased by $437,000. The gross margin
percentage on lot sales was 37.7% for the three months ended June 30, 1997 as
compared to 37.9% for the three months ended June 30, 1996. The gross margin
percentage on condominium sales was (8.4%) for the three months ended June 30,
1997, as compared to 7.2% for the three months ended June 30, 1996. The decrease
in gross margin percentage on condominium sales for the three months ended June
30, 1997 resulted from the Company incurring greater finishing costs on
condominium sales for the three months ended June 30, 1997 than for the three
months ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, permanent mortgage financing,
and short term notes payable to banks represent the Company's primary sources of
liquidity to fund recurring capital costs associated with renewing leases and
renovating the Company's properties, payments on the Company's outstanding
indebtedness, and distributions to shareholders. The Company has a $10 million
unsecured line of credit with Commerce Bank, N.A. (Kansas City, Missouri)
bearing interest at the prime rate. At June 30, 1997, there were no outstanding
borrowings on this line of credit.
Management anticipates that cash generated before debt payments and capital
expenditures, together with the bank line of credit, will provide adequate
liquidity to conduct the Company's operations, fund its recurring capital costs
and interest expense, and permit normal amortization payments on outstanding
indebtedness.
On January 29, 1997, the Company purchased all outstanding shares of the
Company owned beneficially and of record by AHI Metnall L.P. ("AHI"). The
Company paid consideration of $27.25 per share, or a total of $25.9 million for
the 948,880 shares of the Company's common stock owned by AHI. At the closing,
the Company delivered to AHI $12.8 million in cash (which included approximately
$39,000 of interest) and executed a promissory note in the amount of $13.0
million (which reflected a $57,500 reduction for certain expenses), bearing
interest at a rate of eight percent (8%) per annum with interest only payable
quarterly. The promissory note is secured by the pledge of a mortgage receivable
and real property, and is due on January 29, 1999. The purchase by the Company
of such stock decreased the number of outstanding shares of common stock of the
Company from 4,852,400 to 3,903,520 shares. (The number of outstanding shares of
common stock of the Company was further reduced to 3,849,358 in January 1997
when the Employee Stock Ownership Trust transferred 54,162 shares to the Company
in repayment of a loan from the Company of approximately $2.0 million).
On December 19, 1996, the Company announced a comprehensive plan to
redevelop areas on and around the Plaza. The proposed $240 million redevelopment
includes 780,000 square feet of new construction on the Plaza, rehabilitation of
180,000 square feet of existing structures on the Plaza, and the addition of 350
residential apartment units near the Plaza. The proposal also includes
construction of 3,965 parking spaces and $5 million of public amenities on the
Plaza. The Company filed on December 20, 1996, an application with the Tax
Increment Financing Commission of Kansas City seeking to use funds generated
from tax increment financing to fund approximately 25% of the proposed
redevelopment. The application was approved by the Tax Increment Financing
Commission, and the City Council of Kansas City, Missouri gave final approval on
April 17, 1997. The plan is to be executed over the next ten years and is
contingent on market demand. The Company is currently exploring various options
for funding development costs in excess of the approved tax increment financing.
9
<PAGE> 12
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 TO SIX MONTHS ENDED JUNE 30, 1996
Net cash provided by operating activities increased by $1.1 million from
$15.1 million for the six months ended June 30, 1996 to $16.2 million for the
six months ended June 30, 1997. The primary reasons for such increase are
discussed above under "Results of Operations."
Net cash flows provided by investing activities decreased by $7.4 million
from $13.5 million for the six months ended June 30, 1996 to $6.1 million for
the six months ended June 30, 1997. The $6.1 million in net cash flows provided
by investing activities for the six months ended June 30, 1997 was principally a
result of decreasing temporary investments $6.0 million, receiving $4.9 million
in payments on notes receivable, receiving $932,000 from the sale of capital
assets and receiving an $800,000 return of capital from real estate
partnerships. These receipts were partially offset by investments of $3.0
million for additions to revenue-producing properties and issuance of an
additional $3.8 million of notes receivable. For the six months ended June 30,
1996, the Company's net cash provided by investing activities of $13.5 million
was principally a result of the receipt of $5.4 million of payments on notes
receivable and proceeds from the sale of marketable equity securities of $38.6
million. These receipts were substantially offset by a net increase in temporary
investments of $27.3 million, the issuance of an additional $1.9 million of
notes receivable and investments of $1.8 million for additions to
revenue-producing properties.
Net cash used by financing activities decreased by $785,000 from $19.2
million for the six months ended June 30, 1996 to $18.4 million for the six
months ended June 30, 1997. The $18.4 million of net cash used by financing
activities for the six months ended June 30, 1997 was principally a result of
the $12.8 million cash portion of the purchase price paid in acquiring 948,880
shares of the Company's stock and from a net reduction of mortgage indebtedness
of $5.6 million. For the six months ended June 30, 1996, the Company's net cash
used in financing activities of $19.2 million resulted from a net reduction of
mortgage and notes payable indebtedness.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
It is management's intent to apply the majority of the Company's operating
cash flows to reduce indebtedness and to improve and increase the Company's
portfolio of revenue-producing properties. The Company is organized as a
"Subchapter C" corporation and as such pays income taxes on its taxable income
and is generally not subject to distribution requirements based on net income.
Management believes that the Company's core operations are best measured by its
earnings before interest and dividend income, interest expense, income taxes,
depreciation and amortization, gains or losses from debt restructuring and sales
of assets, and valuation allowances, and after adjustments needed to similarly
convert the earnings of minority interests and unconsolidated partnerships.
Earnings, as so computed, are referred to herein as "EBITDA". This is a
supplemental performance measure used along with net income to report operating
results. EBITDA is not a measure of operating results or cash flows from
operating activities as defined by generally accepted accounting principles.
Additionally, EBITDA is not necessarily indicative of cash available to fund
operating needs and should not be considered as an alternative to cash flow as a
measure of liquidity. However, the Company believes that EBITDA provides
relevant information about its operations and, along with net income (loss),
facilitates understanding of its operating results. The EBITDA and EBITDA, as
adjusted, set
10
<PAGE> 13
forth below may not be comparable to other real estate companies, as each real
estate company may define differently such terms.
<TABLE>
<CAPTION>
EBITDA
$(000)
------------------
FOR THE SIX MONTHS
ENDED JUNE 30,
------------------
1997 1996
---- ----
<S> <C> <C>
NET INCOME.................................................. $ 3,809 $ 22,137
ADJUSTMENTS TO RECONCILE NET INCOME TO EBITDA:
Interest and dividend income.............................. (2,353) (2,025)
Interest expense.......................................... 11,639 12,109
Income tax expense........................................ 2,285 13,225
Depreciation and amortization............................. 6,741 6,892
Gains on sales of investments and other assets............ (236) (33,072)
Minority interest portion of add-backs.................... (1,389) (1,439)
Unconsolidated subsidiaries' portion of add-backs......... 2,187 1,896
------- --------
EBITDA...................................................... $22,683 $ 19,723
======= ========
</TABLE>
Because of the number and size of non-recurring transactions included in
the Company's consolidated financial statements during the last three years,
management believes it is important to also present a reconciliation of the
foregoing EBITDA to "adjusted" EBITDA, as described below, which represents
EBITDA exclusive of certain non-recurring transactions. Management believes
adjusted EBITDA is more representative of the Company's underlying operations.
<TABLE>
<CAPTION>
ADJUSTED EBITDA
$(000)
------------------
FOR THE SIX MONTHS
ENDED JUNE 30,
------------------
1997 1996
---- ----
<S> <C> <C>
EBITDA...................................................... $22,683 $ 19,723
NON-RECURRING ITEMS:
Costs of securing new management (including stock
options)............................................... -- 1,052
Other, net................................................ (289) (25)
------- --------
ADJUSTED EBITDA............................................. $22,394 $ 20,750
======= ========
</TABLE>
The above adjusted EBITDA amounts illustrate the Company's EBITDA if
certain non-recurring items had been eliminated from the Company's statements of
operations. These amounts are not necessarily indicative of future performance.
However, management does believe that, when read in conjunction with the
Company's consolidated financial statements, they assist the reader in better
understanding the Company's underlying business operations. The adjustments made
to arrive at adjusted EBITDA are explained as follows: "Costs of securing new
management (including stock options)" reflects the expense to the Company for
the six months ended June 30, 1996 of obtaining the new members of its senior
management. "Other, net" for the six months ended June 30, 1997 and 1996
reflects the net of other less significant, non-recurring adjustments.
SUBSEQUENT EVENT
As discussed in Note 4 to the June 30, 1997 unaudited consolidated
financial statements and Part II -- Item 5 "Other Information", the Company
entered into a Closing Agreement with the Internal Revenue Service on August 1,
1997.
11
<PAGE> 14
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" which revises the calculation and presentation
provisions of Accounting Principles Board Opinion 15 and related
interpretations. Statement No. 128 is effective for the Company's fiscal year
ending December 31, 1997. Retroactive application will be required. The Company
believes the adoption of Statement No. 128 will not have a significant effect on
its reported earnings per share.
12
<PAGE> 15
PART II -- OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The dispute between Nichols Equity, Inc., a wholly-owned subsidiary of J.C.
Nichols Company, and Justin Management, Inc. and Winstead's Restaurant, Inc. was
arbitrated in June 1997. On July 29, 1997, the arbitrator issued his opinion
finding that pursuant to the subject agreement, Nichols Equity, Inc. had
forfeited its interests in 47th Street Development Corporation, Grand Street
Partners I, L.P. and Creekview Partners II, L.P. The June 30, 1997 financial
statements do not reflect the impact of this forfeiture. This forfeiture will be
recorded in the third quarter of 1997, and the resulting net impact on the
financial condition of the Company and the results of its operations will be
immaterial due to the Company's insignificant net liability position in the
forfeited interests.
ITEM 2 CHANGES IN SECURITIES
On May 15, 1997, the Board of Directors of the Company adopted amendments
to the Company's Bylaws that (a) permit shareholders to fill a vacancy on the
board of directors only if created by the resignation of a director and only at
the annual meeting of shareholders at which such director would have been
required to stand for re-election, (b) permit special meetings of the
shareholders to be called by shareholders only upon the written request of
shareholders holding not less than one-fifth (1/5) of all outstanding shares
entitled to vote at such meeting, (c) require any shareholder intending to take
action to bring a matter to a vote at a meeting of the shareholders to provide
notice of such matter and the purpose or purposes thereof not less than
one-hundred and twenty (120) days prior to the meeting, unless, as to a
particular matter, other or further notice is required by law, and (d) require
shareholder nominations of board of director candidates to be made in writing
not less than sixty (60) days prior to the meeting. A nomination must include
all information necessary to comply with Federal securities laws and must
contain the written consent of the nominee. Failure to give proper notice of a
matter to be brought before a shareholders' meeting or of a nomination will
result in denial of the shareholder's right to propose such matter or to make
such nomination at the meeting.
The Company filed a report on Form 8-A on July 29, 1997, announcing the
adoption of a shareholder rights plan, effective July 28, 1997. For additional
information, reference is made to the Form 8-A filed on July 29, 1997, including
the exhibits thereto.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders of the Company held on May 28, 1997,
the following numbers of votes were cast for the matters indicated:
1. Election of Barrett Brady, Kay N. Callison, and William V. Morgan as
directors to serve for a term of three (3) years.
<TABLE>
<CAPTION>
NOMINEE FOR AGAINST WITHHOLD NON-VOTE
------- --- ------- -------- --------
<S> <C> <C> <C> <C>
Barrett Brady.......................................... 3,084,245 60,440 -- 704,673
Kay N. Callison........................................ 3,095,645 49,040 -- 704,673
William V. Morgan...................................... 3,096,443 48,242 -- 704,673
</TABLE>
Directors who were previously elected and whose terms of office as
directors continued after the meeting were: William K. Hoskins, Mark C.
Demetree, John A. Ovel, Clarence L. Roeder, and Thomas J. Turner, III. In
addition, Mr. C.Q. Chandler III had been earlier elected by the Board of
Directors to fill the seat left vacant by Mr. James Quinn who resigned on
January 29, 1997.
13
<PAGE> 16
2. Ratification of the appointment of KPMG Peat Marwick LLP, as auditors
for the Company and its wholly-owned subsidiaries for the 1997 fiscal
year.
<TABLE>
<CAPTION>
FOR AGAINST WITHHOLD NON-VOTE
--- ------- -------- --------
<S> <C> <C> <C>
2,904,733 82 1,470 943,073
</TABLE>
ITEM 5 OTHER INFORMATION
On August 1, 1997, the Company entered into an agreement with the Internal
Revenue Service (the "Closing Agreement"). This agreement was a condition to
payment of common stock and cash to the Company's Employee Stock Ownership Trust
(the "ESOT") pursuant to a settlement agreement dated June 30, 1995 (the
"Settlement Agreement") between the Company and a class of participants in the
Company's Employee Stock Ownership Plan (the "ESOP").
In addition to the payment of 680,000 shares and $2,000,000, plus interest,
the Company agreed to pay approximately $326,000 to the ESOT as an adjustment to
a 1992 dividend allocation. All amounts will be allocated pursuant to the
Settlement Agreement. The Company also agreed to make a nondeductible payment of
approximately $585,000 to the IRS. The IRS agreed, among other things, not to
assert that the events that were the subject of the Settlement Agreement
disqualified the ESOP or gave rise to liability for prohibited transaction
excise taxes. The IRS also agreed that the Company may deduct in full the value
of the settlement payment to the ESOT and that such payment and the method of
allocating it will not adversely affect the tax qualification of the ESOP.
Additionally, the Company agreed to resolve related claims with certain ESOP
participants by reducing the settlement payment by approximately $59,000 and
59,000 shares of the Company's common stock and tendering such amounts to a
court to determine the proper payee or payees.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Company incorporated by
reference to the Company's Registration Statement on Form 10.
3.2 Bylaws of the Company, as amended.
4.1 Rights Agreement dated as of July 28, 1997, incorporated by
reference to the Company's Registration Statement on Form
8-A filed on July 29, 1997.
10.1 Closing Agreement with the Internal Revenue Service.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None
14
<PAGE> 17
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.
J.C. NICHOLS COMPANY
Date: August 13, 1997 By: /s/ MARK A. PETERSON
--------------------------------------
Mark A. Peterson
Vice President, Chief Financial
Officer and Treasurer (Authorized
officer and principal financial
officer of the registrant)
15
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
J. C. NICHOLS COMPANY
Offices and Records
1. Offices and Registered Agent.
(a) Registered Office and Registered Agent. The location
of the registered office and the name of the registered agent of the
corporation in the State of Missouri shall be such as shall be determined from
time to time by the board of directors and on file in the appropriate office of
the State of Missouri pursuant to applicable provisions of law. Unless
otherwise permitted by law, the address of the registered office of the
corporation and the address of the business office of the registered agent
shall be identical.
(b) Corporate Offices. The corporation may have such
corporate offices anywhere within or without the State of Missouri as the board
of directors from time to time may determine or the business of the corporation
may require. The "principal place of business" or "principal business" or
"executive" office or offices of the corporation may be fixed and so designated
from time to time by the board of directors, but the location or residence of
the corporation in Missouri shall be deemed for all purposes to be in the
county in which its registered office in Missouri is maintained.
2. Records.
(a) Maintenance. The corporation shall keep at its
registered office, or principal place of business, in Missouri, original or
duplicate books in which shall be recorded the number of its shares subscribed,
the names of the owners of its shares, the numbers owned of record by them
respectively, the amount of shares paid, and by whom, the transfer of said
shares with the date of transfer, the amount of its assets and liabilities,
minutes of proceedings of its shareholders and directors, and the names and
places of residence of its officers, and from time to time such other or
additional records, statements, lists, and information as may be required by
law.
(b) Inspection of Records. A shareholder, if he be
entitled and demands to inspect the records of the corporation pursuant to any
statutory or other legal right, shall be privileged to inspect such records
only during the usual and customary hours of business and in such manner as
will not unduly interfere with the regular conduct of the business of the
corporation. A shareholder may delegate his right of inspection to an attorney
or a certified or public accountant. A shareholder must, as a condition
precedent to any inspection, agree that neither he nor his agent shall use,
permit to be used or acquiesce in the use by others of any information so
obtained to the detriment competitively of the corporation, nor shall he
furnish or permit to be furnished any information so obtained to any competitor
or prospective competitor of the corporation. The corporation as a condition
precedent to any shareholder's inspection of the records of the corporation may
require the shareholder to indemnify the corporation, in such manner and for
such amount as may be determined by the board of directors, against any loss or
damage which may be suffered by it arising out of or resulting from any
unauthorized
<PAGE> 2
disclosure made or permitted to be made by such shareholder of information
obtained in the course of such inspection.
3. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the corporation and the words: Corporate Seal--Missouri.
Said seal may be used by causing it or a facsimile thereof to be impressed or
affixed or in any manner reproduced. If deemed advisable by the board of
directors, a duplicate seal or duplicate seals may be provided and kept for the
necessary purposes of the corporation.
Shareholders' Meetings
4. Place of Meetings. All meetings of the shareholders shall be
held at the principal business office of the corporation in Missouri, except
such meetings as the board of directors to the extent permissible by law
expressly determine may be held elsewhere, in which case such meetings may be
held, upon notice thereof as hereinafter provided, at such other place or
places, within or without the State of Missouri, as the board of directors
determine, and as shall be stated in such notice; and, unless specifically
prohibited by law, any meeting may be held at any place and time, and for any
purpose, if consented to in writing by all of the shareholders entitled to vote
thereat.
5. Meetings.
(a) Annual Meetings. The annual meeting of shareholders
shall be held at 10:00 a.m., local time, on the fourth Monday in April of each
year, or on such other date or at such other time as the board of directors may
determine by resolution. The purpose of the annual meeting shall be to elect
directors and transact such other business as may come before the meeting. If
the day fixed for the annual meeting shall be a legal holiday, such meeting
shall be held on the next succeeding business day.
(b) Special Meetings. Special meetings of the
shareholders may be held for any purpose or purposes and may be called by the
chairman of the board, by the president, by the secretary, by the board of
directors, or by shareholders upon the written request of the holders of not
less than one-fifth (1/5) of all outstanding shares entitled to vote at any
such meeting, and notice of any duly called meeting shall be given by any
officer directed to do so by the board of directors.
(c) Consent of Shareholders in Lieu of Meeting. Any
action required to be taken or which may be taken at a meeting of the
shareholders may be taken without a meeting if consents in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the action so taken. Such consent shall have the same
force and effect of a meeting duly held and may be stated as such in any
certificate or document filed under the General and Business Corporation Law of
Missouri. The secretary shall file such consents with the minutes of the
meetings of the shareholders.
2
<PAGE> 3
6. Procedural Matters.
(a) Notice. Written or printed notice of each meeting of
the shareholders, whether annual or special, stating the place, day and hour of
the meeting, and, in case of a special meeting, the purpose or purposes
thereof, shall be given to each shareholder entitled to vote thereat, by or at
the direction of the chairman of the board, president, or secretary, either
personally or by mail, not less than ten (10) days or more than seventy (70)
days prior to the meeting, unless, as to a particular matter, other or further
notice is required by law, in which case such other or further notice shall be
given. Any notice of a shareholders' meeting sent by mail shall be deemed to
be delivered when deposited in the United States mail with postage thereon
prepaid addressed to the shareholder at his address as it appears on the
records of the corporation.
(b) Shareholder Proposals. Whenever any shareholder
intends to take action to bring a matter to a vote at a meeting of the
shareholders, such shareholder shall provide notice of such matter and the
purpose or purposes thereof to the Chairman of the Board, President, or
Secretary, either personally or by mail not less than one-hundred and fifty
(150) days prior to the meeting, unless, as to a particular matter, other or
further notice is required by law, in which case such other or further notice
shall be given. Any notice from a shareholder to the corporation sent by mail
shall be deemed to be delivered when deposited in the United States mail with
postage thereon prepaid and addressed to the Chairman of the Board, President,
or Secretary at his address at the executive offices of the corporation.
(c) Shareholder Nomination of Directors. Shareholder
nominations of board of director candidates shall be made in writing to the
Chairman of the Board at the executive offices of the corporation not less than
sixty (60) days prior to the regular scheduled date of the annual meeting.
Such nomination shall include all information necessary to comply with Federal
securities laws and shall contain the written consent of the nominee.
(d) Waiver of Notice. Whenever any notice is required to
be given under the provisions of these bylaws, or of the articles of
incorporation or of any law, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed the equivalent to the giving of such notice.
Attendance of a shareholder at any meeting shall constitute a waiver of notice
of such meeting except where a shareholder attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened.
(e) Conduct of Meetings. The Chairman of the Board, if
any, or in his absence the President, or in their absence any Vice President,
shall call to order meetings of shareholders and shall act as chairman of such
meetings. The board of directors, or, if the board fails to act, the
shareholders, may appoint any stockholder, director or officer of the
corporation to act as chairman of any meeting in the absence of the Chairman of
the Board, the President and all Vice Presidents. The Secretary of the
corporation, or in his absence the Assistant Secretary, shall act as Secretary
of all meetings of shareholders, but, in the absence of the Secretary and
Assistant Secretary, the chairman of the meeting may appoint any other person
to act as secretary of the meeting. The board of directors of the corporation
may adopt by resolution such rules or regulations for the conduct of meetings
of shareholders as it shall deem appropriate. Except to the extent
inconsistent with such rules and regulations as adopted by the board of
directors, the chairman of any meeting of shareholders shall have the right and
authority to prescribe such rules, regulations and procedures and to do all
such acts as, in
3
<PAGE> 4
the judgment of such chairman, are appropriate for the proper conduct of the
meeting. Such rules, regulations or procedures, whether adopted by the board
of directors or prescribed by the chairman of the meeting, may include, without
limitation, the following: (1) the establishment of an agenda or order of
business for the meeting; (2) rules and procedures for maintaining order at the
meeting; (3) limitation on attendance at or participation in the meeting to
shareholders of record of the corporation, their duly authorized and
constituted proxies or such other persons as the chairman shall permit; (4)
restrictions on entry to the meeting after the time fixed for the commencement
thereof; (5) whether the election of directors shall be by written ballot; and
(6) limitations on the time allotted to questions or comments by participants.
Unless and to the extent determined by the board of directors or the chairman
of the meeting, meetings of shareholders shall not be required to be held in
accordance with rules of parliamentary procedure.
7. Business of Meetings.
(a) Business which may be Transacted at Annual meetings.
At each annual meeting of the shareholders, the shareholders shall elect
one-third of the total number of the full board of directors. Such individuals
shall hold office for a three year term ending after the annual meeting held in
the third year after the year of election and after their successors shall have
been elected and qualified and shall elect to serve. In addition the
shareholders may transact such other business as may be desired, whether or not
the same was specified in the notice of the meeting, unless the consideration
of such other business without its having been specified in the notice of the
meeting as one of the purposes thereof is prohibited by law.
(b) Business which may be Transacted at Special Meetings.
Business transacted at all special meetings shall be confined to the purposes
stated in the notice of such meeting, unless the transaction of other business
is consented to by the holders of all of the outstanding shares of stock of the
corporation entitled to vote thereat.
8. Quorum. Except as otherwise may be provided by law or by the
articles of incorporation, the holders of a majority of the outstanding shares
entitled to vote thereat, present in person or by proxy, shall constitute a
quorum for the transaction of business at all meetings of the shareholders.
Every decision of a majority in amount of shares of such quorum shall be valid
as a corporate act, except in those specific instances in which a larger vote
is required by law or by the articles of incorporation. If, however, such
quorum should not be present at any meeting, the shareholders present and
entitled to vote shall have power successively to adjourn the meeting, without
notice to any shareholder other than announcement at the meeting, to a
specified date not longer than 90 days after such adjournment. At any
subsequent session of the meeting at which a quorum is present in person or by
proxy any business may be transacted which could have been transacted at the
initial session of the meeting if a quorum had been present.
9. Voting.
(a) Proxies. At any meeting of the shareholders, every
shareholder entitled to vote at such meeting may vote either in person or by
proxy executed in writing by the shareholder or his duly authorized attorney in
fact. Such proxy shall be filed with the secretary of the corporation before
or at the time of the meeting. No proxy shall be valid after 11 months from
the date of its execution unless otherwise provided in the proxy. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only so long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A shareholder may revoke any proxy which is not
irrevocable by attending the
4
<PAGE> 5
meeting and voting in person or by filing a written revocation or another duly
executed proxy bearing a later date with the secretary of the corporation.
(b) Votes per Share. Each shareholder shall have one
vote for each share of stock entitled to vote under the provisions of the
articles of incorporation and which is registered in his name on the books of
the corporation, but in the election of directors, cumulative voting shall
prevail. Accordingly, each shareholder shall have the right to cast as many
votes in the aggregate as shall equal the number of voting shares so held by
him, multiplied by the number of directors to be elected at such election, and
he may cast the whole number of such votes for one candidate or distribute them
among two or more candidates. Directors shall not be elected in any other
manner, unless such cumulative voting be unanimously waived by all shareholders
present.
No person shall be permitted to vote any shares belonging,
hypothecated or pledged to the corporation.
(c) Registered Shareholders--Exceptions--Stock Ownership
Presumed. If the board of directors shall not have closed the transfer books
of the corporation and there shall be no date fixed by the board of directors
or by statute for the determination of its shareholders entitled to vote, no
person shall be admitted to vote directly or by proxy except those in whose
names the shares of the corporation shall stand on the transfer books at the
time of the meeting. The corporation shall be entitled to treat the holders of
the shares of stock of the corporation, as recorded on the stock record or
transfer books of the corporation, as the holders of record and as the holders
and owners in fact thereof and, accordingly, the corporation shall not be
required to recognize any equitable or other claim to or interest in any such
shares on the part of any other person, firm, partnership, corporation or
association, whether or not the corporation shall have express or other notice
thereof, except as is otherwise expressly required by law, and the term
"shareholder" as used in these bylaws means one who is a holder of record of
shares of the corporation; provided, however, that if permitted by law,
(i) shares standing in the name of another corporation, domestic
or foreign, may be voted by such officer, agent or proxy as
the bylaws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such
corporation may determine;
(ii) shares standing in the name of a deceased person may be voted
by his administrator or executor, either in person or by
proxy; and shares standing in the name of a guardian, curator
or trustee may be voted by such fiduciary, either in person or
by proxy, but no guardian, curator or trustee shall be
entitled, as such fiduciary, to vote shares held by him
without a transfer of such shares into his name;
(iii) shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer
thereof into his name if authority to do so be contained in an
appropriate order of the court by which such receiver was
appointed; or
(iv) except as limited by paragraph 9(b), a shareholder whose
shares are pledged shall be entitled to vote such shares until
the shares have been transferred of record into the name of
the pledgee, and thereafter the pledgee shall be entitled to
vote the shares so transferred.
10. Shareholders' Lists. A complete list of the shareholders
entitled to vote at each meeting
5
<PAGE> 6
of the shareholders, arranged in alphabetical order, with the address of, and
the number of voting shares held by each, shall be prepared by the officer of
the corporation having charge of the stock transfer books of the corporation,
and shall, for a period of ten (10) days prior to the meeting, be kept on file
at the registered office of the corporation in Missouri and shall at any time
during the usual hours for business be subject to inspection by any
shareholder. Such list or a duplicate thereof shall also be produced and kept
open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting. The
original share ledger or transfer book, or a duplicate thereof kept in the
State of Missouri, shall be prima facie evidence as to who are the shareholders
entitled to examine such list, share ledger or transfer book or to vote at any
meeting of shareholders.
Failure to comply with the foregoing shall not affect the validity of
any action taken at any such meeting.
Directors
11. Directors--Number. The number of directors to constitute the
board of directors shall be as is provided from time to time in the articles of
incorporation. Directors need not be shareholders unless the articles of
incorporation at any time so require.
Advisory directors may be appointed by the Chairman to serve for an
indefinite period of time at the discretion of the Chairman.
12. Class of Directors. The board of directors shall be divided
equally into three classes, the directors in each class shall be elected for a
three year term, and only one class of directors shall be elected at each
annual meeting of the shareholders. At each annual meeting, directors to
replace those whose terms expire at such annual meeting shall be elected to
hold office until the third succeeding annual meeting. Each director shall
hold office until such director's successor shall have been elected and
qualified. Directors need not be residents of Missouri or shareholders of the
corporation. Each director, upon election, shall qualify by accepting the
office of director and such person's attendance at, or written approval of the
minutes of, any meeting of the board of directors held subsequent to election
shall constitute acceptance.
13. Powers of the Board. The property and business of the
corporation shall be controlled and managed by the directors, acting as a
board. The board shall have and is vested with all and unlimited powers and
authorities, except as may be expressly limited by law, the articles of
incorporation or these bylaws, to do or cause to be done any and all lawful
things for and in behalf of the corporation, to exercise or cause to be
exercised any or all of its power, privileges and franchises, and to seek the
effectuation of its objects and purposes.
14. Meetings of the Newly Elected Board--Notice. The newly
elected members of the board and those members of the board who continue in
office shall meet (i) at such time and place, either within or without the
State of Missouri, as shall be suggested or provided for by resolution of the
shareholders at the annual meeting and no notice of such meeting shall be
necessary to such directors in order legally to constitute the meeting,
provided a quorum shall be present, or (ii) if not so suggested or provided for
by resolution of the shareholders or if a quorum shall not be present, the
members of such board may meet at such time and place as shall be consented to
in writing by a majority of the directors, provided that written or printed
notice of such meeting shall be communicated to each of the other
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directors in the same manner as provided in paragraph 16 of these bylaws with
respect to the giving of notice for special meetings of the board except that
it shall not be necessary to state the purpose of the meeting in such notice,
or (iii) regardless of whether or not the time and place of such meeting shall
be suggested or provided for by resolution of the shareholders at the annual
meeting, the members of such board may meet at such time and place as shall be
consented to in writing by a majority of the directors, which consent shall be
deemed to exist for those directors attending such meeting.
15. Regular Meetings--Notice. Regular meetings of the board or
any committee thereof may be held without notice at such times and places
either within or without the State of Missouri as shall from time to time be
fixed by resolution adopted by the full board of directors in the case of the
board or, in the case of a committee of the board, by resolution adopted by the
respective committee. Any business may be transacted at a regular meeting.
16. Special Meetings--Notice. Special meetings of the board may
be called at any time by the chairman of the board, the president, any vice
president or the secretary, or by any one or more of the directors. Special
meetings of any committee of the board may be called at any time by the
chairman of the committee or by any one or more of the members of the
committee. The place may be within or without the State of Missouri as
designated in the notice.
Written or printed notice of each special meeting of the board,
stating the place, day and hour of the meeting and the purpose or purposes
thereof, shall be mailed to each director at least five (5) days before the day
on which the meeting is to be held, or shall either be sent to him by
electronic or facsimile transmission or be hand delivered, in either case
during regular and customary business hours at least one full business day in
advance of the meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail with postage thereon, addressed to the
director at his residence or usual place of business. If notice be given by
delivery, such notice shall be deemed to be delivered when the same is
delivered by hand. If notice is given by electronic or facsimile transmission,
such notice shall be deemed to be delivered when transmitted as set forth above
to the director at his residence or usual place of business.
Written or printed notice of each special meeting of a committee of
the board, stating the place, day and hour of the meeting and the purpose or
purposes thereof, shall be mailed to each member of the committee at least five
(5) days before the day on which the meeting is to be held, or shall either be
sent to him by electronic or facsimile transmission or be hand delivered, in
either case during regular and customary business hours at least one full
business day in advance of the meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail with postage thereon,
addressed to the member of the committee at his residence or usual place of
business. If notice be given by delivery, such notice shall be deemed to be
delivered when the same is delivered by hand. If notice is given by electronic
or facsimile transmission, such notice shall be deemed to be delivered when
transmitted as set forth above to the member of the committee at his residence
or usual place of business.
"Notice" and "call" with respect to such meetings shall be deemed to
be synonymous.
17. Waiver of Notice. Whenever any notice is required to be given
to any director under the provisions of these bylaws, or of the articles of
incorporation or of any law, a waiver thereof in writing signed by such
director, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Attendance of a director at any
meeting shall constitute a waiver of notice of such
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meeting, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not
lawfully called or convened.
18. Quorum. At all meetings of the board, a majority of the full
board of directors shall, unless a greater number as to any particular matter
is required by the articles of incorporation or these bylaws, constitute a
quorum for the transaction of business. The act of a majority of the directors
present at any meeting at which a quorum is present, except as may be otherwise
specifically provided by statute, the articles of incorporation, or these
bylaws, shall be the act of the board of directors.
19. Vacancies and Newly Created Directorships. Vacancies on the
board of directors and newly created directorships resulting from any increase
in the number of directors may be filled by a majority of the directors then in
office, although less than a quorum, or by the sole remaining director.
Shareholders may only fill a vacancy created by the resignation of a director,
and may only fill such vacancy at the annual meeting of shareholders at which
such director would have been required to stand for re-election.
20. Telephone Meeting and Attendance By Telephone. Members of
Board of directors or any committee of the board of directors may participate
in any meeting of the Board of directors or such committee by means of
conference telephone or similar communications equipment whereby all persons
participating in the meeting can hear each other, and participation in a
meeting in this manner shall constitute presence in person at the meeting.
21. Action Without A Meeting. Any action which is required to be
or may be taken at a meeting of the board of directors or any committee of the
board of directors may be taken without a meeting if consents in writing,
setting forth the action so taken, are signed by all of the directors or of the
committee members as the case may be. The consents shall have the same force
and effect as a unanimous vote at a meeting held, and may be stated as such in
any certificate or document filed under the General Business and Corporation
Law of Missouri. The secretary shall file the consents with the minutes of the
meetings of the board of directors or of the committee as the case may be.
22. Indemnification of Officers and Directors.
(a) Indemnification of Directors and Officers Against
Liabilities and Expenses in Actions. Subject to Section (b), the corporation
shall indemnify any person who is or was a director or officer of the
corporation who is or was a party, or is threatened to be made a party:
(i) to any threatened, pending or completed
action, suit or proceeding, whether civil,
criminal, administrative or investigative; or
(ii) to any threatened, pending or completed
action or suit by or in the right of the
corporation to procure a judgment in its
favor,
by reason of the fact that such person is or was a director or officer 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, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding.
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Notwithstanding, the corporation may in its discretion, by action of its board
of directors, grant indemnification to employees and agents of the corporation
to the extent provided for in this bylaw.
(b) Limits of Indemnification: No indemnification shall
be made to any person from or on account of such person's conduct which was
finally adjudged to have been knowingly fraudulent, deliberately dishonest or
willful misconduct. The corporation may in its discretion, by action of its
board of directors, deny to any person the indemnity provided in this bylaw in
the event that such person fails to notify the corporation within a reasonable
period of time of the commencement of any action, suit or proceeding or threat
thereof, is to be made against the corporation. The failure of such person to
so notify the corporation shall not relieve the corporation from any liability
which it may otherwise have under Mo. Rev. Stat. 351.355, or under any other
bylaw, any agreement or otherwise. The corporation shall be entitled to
participate in any such action, suit, or proceeding at its own expense and may
employ its own counsel.
(c) Advancement of Expenses: Expenses incurred in
defending a civil or criminal action, suit or proceeding shall be paid by the
corporation in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation as provided in this
bylaw.
(d) Nonexclusive Right: The indemnification and
advancement of expenses provided by this bylaw shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under the Articles of Incorporation or any other bylaw
or any agreement, vote of the shareholders or otherwise, both as to action in a
person's official capacity and as to action in another capacity while holding
the office of director or officer. The corporation is hereby expressly
authorized by the shareholders to enter into agreements with its present and
future directors and officers which provide further indemnification as granted
pursuant to this bylaw. Any such agreement providing for further indemnity
entered into pursuant to this bylaw after the date of approval of this bylaw by
the corporation's shareholders need not be further approved by the shareholders
of the corporation to be fully effective and enforceable. Such indemnification
(whether by agreement or otherwise) shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person.
(e) Liability to corporation: No director or officer of
the corporation shall be liable to the corporation for any loss, damage,
liability or expense suffered by it on account of any action taken or omitted
to be taken by such person as a director or officer of the corporation, or of
another corporation, partnership, joint venture, trust or other enterprise
(including employee benefit plans) which such person serves as a director,
officer, employee or agent at the request of the corporation, if such person:
(i) exercised the same degree of care and skill
as a prudent man would have exercised under
the circumstances in the conduct of his own
affairs, or
(ii) took or omitted to take such action in
reliance upon advice of counsel for the
corporation, or for another corporation,
partnership, joint venture, trust or other
enterprise or upon statements made or
information furnished by directors, officers,
employees or agents of the corporation,
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or of another corporation, partnership,
joint venture, trust or other enterprise
(including employee benefit plans) which
such person had no reasonable grounds to
disbelieve.
23. Removal of Directors. Notwithstanding the foregoing, a
director may be removed by the affirmative vote of the holders of a majority of
the shares of the corporation, or such greater number of shares as may be
required by law, at an annual meeting or any special meeting called for that
purpose. In addition, a director may be removed by the affirmative vote of a
majority of the entire board of directors if, in the opinion of the board based
on its knowledge at the time, such director has: (i) violated the fiduciary
duties of such director to the corporation and its shareholders, (ii) engaged
in self-dealing or other interested transactions without fully informing the
board of those transactions, or (iii) personally engaged in any conduct or
transactions involving corporate property that were not fully disclosed to the
board and were not fair to the corporation.
24. Board Committees. The board of directors may, by resolution
or resolutions adopted by a majority of the whole board of directors, designate
an executive committee, such committee to consist of two or more directors of
the corporation, which committee, to the extent provided in said resolution or
resolutions, shall have and may exercise all of the authority of the board of
directors in the management of the corporation; provided, however, that the
designation of such committee and the delegation thereto of authority shall not
operate to relieve the board of directors, or any member thereof, of any
responsibility imposed upon it or him by law. The board of directors may, by
resolution or resolutions adopted by a majority of the whole board of
directors, designate a compensation committee and an audit committee, each such
committee to consist of two or more directors of the corporation. The audit
committee shall have responsibility for working with the accounting firm
retained by the corporation to review the annual financial statements of the
corporation and related management letter and for periodic review with the
chief financial officer of the corporation of the financial performance of the
corporation. The compensation committee shall be responsible for at least
annual review of the compensation for the chief executive officer, chief
financial officer and any senior vice president of the corporation.
Each committee shall keep regular minutes of its proceedings, which
minutes shall be recorded in the minute book of the corporation. The secretary
or an assistant secretary of the corporation may act as secretary for any
committee if the committee so requests.
In addition to the committees specifically provided for in these
bylaws, the board of directors, by resolution adopted a majority of the whole
board of directors, may designate and appoint two (2) or more directors to
constitute any other committee. Persons other than directors may be designated
to serve in an advisory capacity to any such committee. Each such committee,
to the extent provided in the resolution, shall have and may exercise all of
the authority provided in the resolutions designating and appointing any such
committee, or reasonably inferred therefrom, and the board of directors;
provided, however, that the designation of any such committee and the
delegation thereto of authority shall not operate to relieve the board of
directors, or any members thereof, of any responsibility imposed upon it or him
by law. The board of directors may also, by resolution adopted by a majority
of the whole board of directors, from time to time appoint special advisory
committees, the member of which may but need not be Directors and which shall
serve at the pleasure of the board of directors, which shall have such
authority as may be conferred by the board of directors and shall report and
make recommendations to the board of directors with respect to specified
subjects.
25. Compensation of Directors and Committee Members. Directors
and members of all committees of the board shall not receive any stated salary
for their services as such, but by resolution of
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the board, a fixed sum and expenses of attendance, paid in cash, stock or other
securities of the corporation or such other consideration as the board may
select, if any, may be allowed for attendance at each regular or special
meeting of the board or committee; provided that nothing herein contained shall
be construed to preclude any director or committee member from serving the
corporation in any other capacity and receiving compensation therefor.
Officers
26. (a) Officers--Who Shall Constitute. The officers of the
corporation shall be a chairman of the board, a president, one or more vice
presidents, a secretary, a treasurer, one or more assistant secretaries, and
one or more assistant treasurers. The board shall elect or appoint a president
and secretary at its first meeting after each annual meeting of the
shareholders. The board then, or from time to time, may also elect or appoint
one or more of the other prescribed officers as it shall deem advisable, but
need not elect or appoint any officers other than a president and a secretary.
The board may, if it desires, designate any vice president as an executive or
senior vice president and may further identify or describe any one or more of
such officers.
The officers of the corporation need not be members of the
board of directors. Any two or more offices may be held by the same person,
except the offices of president and secretary.
An officer shall be deemed qualified when he enters upon the
duties of the office to which he has been elected or appointed and furnishes
any bond required by the board; but the board may also require of such person
his written acceptance and promise to faithfully discharge the duties of such
office.
(b) Term of Office and Vacancies. Each officer of the
corporation shall hold his office at the pleasure of the board of directors or
for such other period as the board may specify at the time of his election or
appointment, or until his death, resignation or removal by the board, whichever
first occurs. In any event, the term of office of each officer of the
corporation holding his office at the pleasure of the board shall terminate at
the annual meeting of the board next succeeding his election or appointment and
at which any officer of the corporation is elected or appointed, unless the
board provides otherwise at the time of his election or appointment. Any
vacancy occurring in the office of president or secretary of the corporation by
death, resignation, removal or otherwise may be filled for the unexpired
portion of the term by the board of directors at any regular or special meeting
and any vacancy occurring in any other office may be filled for the unexpired
portion of the term by the president.
(c) Other Agents. The board from time to time may also
appoint such other agents for the corporation as it shall deem necessary or
advisable, each of whom shall serve at the pleasure of the board or for such
period as the board may specify, and shall exercise such powers, have such
titles and perform such duties as shall be determined from time to time by the
board or by an officer empowered by the board to make such determinations.
27. Removal and Resignation. Any officer or agent elected or
appointed by the board of directors, and any employee, may be removed or
discharged by the board whenever in its judgment the best interests of the
corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Any
officer of the corporation may resign at any time by giving written notice to
the board of directors, the president or the secretary of the corporation. Any
such resignation shall take effect at the time specified therein or, if the
time is not specified therein, then upon the receipt of the notice. The
acceptance of such resignation shall not be necessary to make it
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effective. Such resignation shall be without prejudice to the contract rights,
if any, of the corporation.
28. Salaries and Compensation. Salaries and compensation of all
elected officers of the corporation shall be fixed, increased or decreased by
the board of directors, but this power, except as to the salary or compensation
of the chairman of the board and the president, may, unless prohibited by law,
be delegated by the board to the chairman of the board, the president, or a
committee. Salaries and compensation of all appointed officers and agents, and
of all employees of the corporation, may be fixed, increased or decreased by
the board of directors, but until action is taken with respect thereto by the
board of directors, the same may be fixed, increased or decreased by the
president or by such other officer or officers as may be empowered by the board
of directors to do so.
29. Delegation of Authority to Hire, Discharge and Designate
Duties. The board from time to time may delegate to the chairman of the board,
the president or other officer or executive employee of the corporation,
authority to hire, discharge and fix and modify the duties, salary or other
compensation of employees of the corporation under their jurisdiction, and the
board may delegate to such officer or executive employee similar authority with
respect to obtaining and retaining for the corporation the services of
attorneys, accountants and other experts.
30. The Chairman of the Board. If a chairman of the board be
elected or appointed, he shall, preside at all meetings of the shareholders and
directors at which he may be present and shall have such other duties, powers
and authority as may be prescribed elsewhere in these bylaws. The board of
directors may delegate such other authority and assign such additional duties
to the chairman of the board, other than those conferred by law exclusively
upon the president, as it may from time to time determine.
31. The President. Unless the board otherwise provides, the
president shall be the chief executive officer of the corporation with such
general executive powers and duties of supervision and management as are
usually vested in the office of the chief executive officer of a corporation,
and he shall carry into effect all directions and resolutions of the board.
The president, in the absence of the chairman of the board, or if there be no
chairman of the board, shall preside at all meetings of the shareholders and
directors.
The president may execute all bonds, notes, debentures, mortgages and
other contracts requiring a seal, under the seal of the corporation and may
cause the seal to be affixed thereto, and all other instruments for and in the
name of the corporation.
Unless the board otherwise provides, the president, or any person
designated in writing by him, may (i) attend meetings of shareholders of other
corporations to represent this corporation thereat and to vote or take action
with respect to the shares of any such corporation owned by this corporation in
such manner as he or his designee may determine, and (ii) execute and deliver
waivers of notice and proxies for and in the name of the corporation with
respect to any such shares owned by this corporation.
He shall have such other or further duties and authority as may be
prescribed elsewhere in these bylaws or from time to time by the board of
directors.
If a chairman of the board be elected or appointed and designated as
the chief executive officer of the corporation, as provided in paragraph 29 of
these bylaws, the president shall perform such duties as may be specifically
delegated to him by the board of directors and as are conferred by law
exclusively upon him, and in the absence, disability or inability to act of the
chairman of the board, the president
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shall perform the duties and exercise the powers of the chairman of the board.
32. Vice Presidents. The vice presidents, in the order of their
seniority, as determined by the board, shall, in the absence, disability or
inability to act of the president, perform the duties and exercise the powers
of the president, and shall perform such other duties as the board of directors
shall from time to time prescribe.
33. The Secretary and Assistant Secretaries. The secretary shall
attend all sessions of the board and, all meetings of the shareholders, and
shall record or cause to be recorded all votes taken and the minutes of all
proceedings in a minute book of the corporation to be kept for that purpose.
He shall perform like duties for the executive and other standing committees
when requested by the board or any such committee to do so.
He shall see that all books, records, lists and information, or
duplicates, required to be maintained at the registered or some office of the
corporation in Missouri, or elsewhere, are so maintained.
He shall keep in safe custody the seal of the corporation, and when
duly authorized to do so shall affix the same to any instrument requiring it,
and when so affixed, he shall attest the same by his signature.
He shall perform such other duties and have such other authority as
may be prescribed elsewhere in these bylaws or from time to time by the board
of directors or the chief executive officer of the corporation, under whose
direct supervision he shall be.
He shall have the general duties, powers and responsibilities of a
secretary of a corporation.
Any assistant secretary, in the absence, disability or inability to
act of the secretary, may perform the duties and exercise the powers of the
secretary, and shall perform such other duties and have such other authority as
the board of directors may from time to time prescribe.
34. The Treasurer and Assistant Treasurers. The treasurer shall
have responsibility for the safekeeping of the funds and securities of the
corporation, shall keep or cause to be kept full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
keep, or cause to be kept, all other books of account and accounting records of
the corporation. He shall deposit or cause to be deposited all moneys and
other valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors or by any officer
of the corporation to whom such authority has been granted by the board of
directors.
He shall disburse, or permit to be disbursed, the funds of the
corporation as may be ordered, or authorized generally, by the board, and shall
render to the chief executive officer of the corporation and the directors
whenever they may require it, an account of all his transactions as treasurer
and of those under his jurisdiction, and of the financial condition of the
corporation.
He shall perform such other duties and shall have such other
responsibility and authority as may be prescribed elsewhere in these bylaws or
from time to time by the board of directors.
He shall have the general duties, powers and responsibility of a
treasurer of a corporation and shall, unless otherwise provided by the board,
be the chief financial and accounting officer of the
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corporation.
If required by the board, he shall give the corporation a bond in a
sum and with one or more sureties satisfactory to the board, for the faithful
performance of the duties of his office, and for the restoration to the
corporation, in the case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control which belong to the corporation.
Any assistant treasurer, in the absence, disability or inability to
act of the treasurer, may perform the duties and exercise the powers of the
treasurer, and shall perform such other duties and have such other authority as
the board of directors may from time to time prescribe.
35. Duties of Officers May Be Delegated. If any officer of the
corporation be absent or unable to act, or for any other reason that the board
may deem sufficient, the board may delegate, for the time being, some or all of
the functions, duties, powers and responsibilities of any officer to any other
officer, or to any other agent or employee of the corporation or other
responsible person, provided a majority of the whole board of directors concurs
therein.
Shares of Stock
36. Payment for Shares of Stock. The corporation shall not issue
shares of stock except for money paid, labor done or property actually
received; provided, however, that shares may be issued in consideration of
valid bona fide antecedent debts. No note or obligation given by any
shareholder, whether secured by deed of trust, mortgage or otherwise, shall be
considered as payment of any part of any share or shares.
37. Certificates for Shares of Stock. The certificates for shares
of stock of the corporation shall be numbered, shall be in such form as may be
prescribed by the board of directors in conformity with law, and shall be
entered in the stock books of the corporation as they are issued. Such entries
shall show the name and address of the person, firm, partnership, corporation
or association to whom each certificate is issued. Each certificate shall have
printed, typed or written thereon the name of the person, firm, partnership,
corporation or association to whom it is issued and the number of shares
represented thereby. It shall be signed by the president or a vice president
and the secretary or an assistant secretary or the treasurer or an assistant
treasurer of the corporation, and sealed with the seal of the corporation,
which seal may be facsimile, engraved or printed. If the corporation has a
transfer agent or a transfer clerk who signs such certificates, the signatures
of any of the other officers above mentioned may be facsimiles, engraved or
printed. In case any such officer who has signed or whose facsimile signature
has been placed upon any such certificate shall have ceased to be such officer
before such certificate is issued, such certificate may nevertheless be issued
by the corporation with the same effect as if such officer were an officer at
the date of its issue.
38. Transfers of Shares--Transfer Agent--Registrar. Transfers of
shares of stock shall be made on the stock record or transfer books of the
corporation only by the person named in the stock certificate, or by his
attorney lawfully constituted in writing, and upon surrender of the certificate
therefor. The stock record book and other transfer records shall be in the
possession of the secretary or of a transfer agent or transfer clerk for the
corporation. The corporation, by resolution of the board, may from time to
time appoint a transfer agent or transfer clerk, and, if desired, a registrar,
under such arrangements and upon such terms and conditions as the board deems
advisable, but until and unless the board appoints some other person, firm or
corporation as its transfer agent or transfer clerk (and upon the
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revocation of any such appointment thereafter until a new appointment is
similarly made), the secretary of the corporation shall be the transfer agent
or transfer clerk of the corporation without the necessity of any formal action
of the board, and the secretary, or any person designated by him, shall perform
all the duties thereof.
39. Closing of Transfer Books. The board of directors shall have
power to close the stock transfer books of the corporation for a period not
exceeding seventy (70) days preceding the date of any meeting of the
shareholders, or the date of payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
shares shall go into effect; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the board of directors may fix in advance a
date not exceeding seventy (70) days preceding the date of any meeting of
shareholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
shares shall go into effect, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend, or
entitled to any such allotment of rights, or entitled to exercise the rights in
respect of any such change, conversion or exchange of shares. In such case
such shareholders and only such shareholders as shall be shareholders of record
on the date of closing of the transfer books or on the record date so fixed
shall be entitled to notice of, and to vote at, such meeting, and any
adjournment thereof, or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after such date of closing of the transfer books, or such record date fixed as
aforesaid.
40. Lost or Destroyed Certificates. In case of the loss or
destruction of any certificate for shares of stock of the corporation, another
may be issued in its place upon proof of such loss or destruction and upon the
giving of a satisfactory bond of indemnity to the corporation and the transfer
agent and the registrar of such stock, if any, in such sum as the board of
directors may provide; provided, however, that a new certificate may be issued
without requiring a bond when in the judgment of the board it is proper so to
do.
41. Regulations. The board of directors shall have power and
authority to make all such rules and regulations as it may deem expedient
concerning the issue, transfer, conversion and registration of certificates for
shares of stock of the corporation, not inconsistent with the laws of Missouri,
the articles of incorporation or these bylaws.
General
42. Fixing of Capital--Transfers of Surplus. Except as may be
specifically otherwise provided in the articles of incorporation, the board of
directors is expressly empowered to exercise all authority conferred upon it or
the corporation by any law or statute, and in conformity therewith, relative
to:
(i) the determination of what part of the consideration received
for shares of the corporation shall be stated capital,
(ii) increasing stated capital,
(iii) transferring surplus to stated capital,
15
<PAGE> 16
(iv) the consideration to be received by the
corporation for its shares, and
(v) all similar or related matters;
provided that any concurrent action or consent by or of the corporation and its
shareholders required to be taken or given pursuant to law, shall be duly taken
or given in connection therewith.
43. Dividends. Dividends upon the outstanding shares of the
corporation, subject to the provisions of the articles of incorporation and of
any applicable law, may be declared by the board of directors at any meeting.
Dividends may be paid in cash, in property, or in shares of the corporation's
stock.
Liquidating dividends or dividends representing a distribution of
paid-in surplus or a return of capital shall be made only when and in the
manner permitted by law.
44. Creation of Reserves. Before the payment of any dividend,
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the board of directors from time to time deems
proper as a reserve fund or funds to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for any other purpose deemed by the board to be conducive to the interests of
the corporation, and the board may abolish any such reserve in the manner in
which it was created.
45. Checks. All checks and similar instruments for the payment of
money shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate. If no such
designation is made, and unless and until the board otherwise provides, the
president and secretary or the president and treasurer, shall have power to
sign all such instruments for, in behalf and in the name of the corporation
which are executed or made in the ordinary course of the corporation's
business.
46. Fiscal Year. The board of directors shall have power to fix
and from time to time change the fiscal year of the corporation. In the
absence of action by the board of directors, however, the fiscal year of the
corporation shall end each year on the date which the corporation treated as
the close of its first fiscal year, until such time, if any, as the fiscal year
shall be changed by the board of directors.
47. Directors' Annual Statement. The board of directors may
present at each annual meeting, and when called for by vote of the
shareholders, shall present to any annual or special meeting of the
shareholders, a full and clear statement of the business and condition of the
corporation.
48. Amendments. The bylaws of the corporation may from time to
time be suspended, repealed, amended or altered, or new bylaws may be adopted,
in the manner provided in the articles of incorporation.
16
<PAGE> 17
CERTIFICATE
I, the undersigned, hereby certify that the foregoing bylaws are the
duly authorized bylaws of the Corporation and hereby further certify that the
foregoing constitute the bylaws of said Corporation effective as of 5/15/97.
/s/ Price A. Sloan,
-------------------------------
Price A. Sloan,
Secretary
17
<PAGE> 1
EXHIBIT 10.1
CLOSING AGREEMENT ON FINAL
DETERMINATION COVERING SPECIFIC MATTERS
Under section 7121 of the Internal Revenue Code (the "Code"), the J.
C. Nichols Company (the "Employer"), 310 Ward Parkway, Kansas City, MO 64112,
EIN 44-0371610, acting in its own capacity, in its capacity as settlor of the
trust (the "Trust") established pursuant to the J. C. Nichols Company Employee
Stock Ownership Plan (the "Plan"), and in its capacity as sponsor of the Plan;
and the Commissioner of Internal Revenue (the "Service") make the following
closing agreement:
WHEREAS, the Plan and related Trust were adopted on or about November
12, 1987 effective as of January 1, 1987; and
WHEREAS, the Service has issued a favorable determination letter with
respect to the Plan and Trust dated September 26, 1995, and the Employer
represents that the Plan and Trust have been drafted and operated with the
intent to comply with the requirements of section 401(a) of the Code; and
WHEREAS, a lawsuit was filed in early 1995 (the "Lawsuit") on behalf
of a class of plaintiffs consisting of participants in the Plan (the "Class
Members") alleging that the chief executive officer of the Employer, the
Employer and its board of directors, and the trustees of the Plan violated
certain fiduciary duties and responsibilities under Part 4, Subtitle B of Title
I of the Employee Retirement Income Security Act of 1974 ("ERISA") and caused
the Plan to enter into a number of prohibited transactions with disqualified
persons in violation of section 4975 of the Code; and
WHEREAS, the Employer and the class of plaintiffs entered into a
Settlement Agreement and Mutual Releases dated as of June 30, 1995 (the
"Settlement Agreement"), which Settlement Agreement was approved by an Order
dated October 4, 1995 issued by United States District Judge Dean Whipple, as
modified by an Order Nunc Pro Tunc dated October 12,1995; and
WHEREAS, pursuant to the terms of the Settlement Agreement, the
Employer will, following the execution of this agreement, transfer a specified
number of shares of the Employer's common stock and cash as set forth herein;
and
WHEREAS, the Employer requested a private letter ruling from the
National Office of the Service on October 31, 1995 with respect to the specific
matters outlined therein ("PLR Request"); and
WHEREAS, the Service has declined to issue a private letter ruling,
but is willing to resolve the matters by entering into this Agreement; and
WHEREAS, the Employer has determined that this Agreement is in the
best interests of the Employer, the Trust and the Plan; and
WHEREAS, the Service, through its authorized representative, has
determined that said Agreement is also in its best interests; and
WHEREAS, this Agreement shall become effective on the date executed by
the Internal Revenue Service (the "Effective Date").
NOW IT IS HEREBY DETERMINED AND AGREED for federal income and excise
tax purposes that the above representations are material to this Agreement and
that:
<PAGE> 2
1. The Employer shall pay a settlement of $585,042.50 to the
Service in consideration of the Service's agreement to be bound by the terms of
this agreement. Such settlement amount shall be paid concurrently with the
execution of this Agreement and is a condition to this Agreement becoming
effective. Payment shall be by certified check payable to the "Internal
Revenue Service". Such settlement amount shall not be deductible for federal
tax purposes.
2. With respect to any "Transaction" described in paragraph 4
below, the Service shall not assert that the qualified status of the Plan under
Sections 401(a) and 4975(e)(7) of the Code, and of the Trust under Section
501(a) of the Code is, or has been adversely affected.
3. The Service shall not assert that any excise taxes or
additions to tax which may be imposed on any party under Section 4975 of the
Code are owed as a result of any "Transaction" described in paragraph 4 below.
4. For purposes of this Agreement, "Transaction" shall mean the
transactions relating to the following:
(a) The 1988 borrowing by the Plan and Trust of about $50
million and the related purchase by the Plan and
Trust of shares of common stock of the Employer. The
refinancing of such loan to convert such loan into a
loan from the Employer. The 1988 borrowings by the
Plan and Trust of about $48 million from the Employer
and the related purchases by the Plan and Trust of
additional shares of common stock of the Employer.
The 1989 borrowing by the Plan and Trust from the
Employer and the related purchase by the Plan and
Trust of additional shares of common stock of the
Employer. Any guarantee of the foregoing loans by
the Employer.
(b) The failure by the Employer to contribute to the Plan
and Trust more than about $4 million for repayment of
the Plan's and Trust's indebtedness. The receipt and
use of dividends by the Plan and Trust to repay its
debt.
(c) The Plan and Trust defaulting on its debt. The
Employer's repayment of the Employer's debt to third
party lenders. The accrual of interest on the Plan's
and Trust's debt, including any accrual of interest
on unpaid interest.
(d) Transactions and agreements between or among the
Plan, the Trust, fiduciaries of the Plan and/or
Trust, the Employer and the Bowser Limited
Partnership ("Bowser"), a limited partnership
controlled by Lynn McCarthy, the Employer's former
President, Chairman of the Board, and Chief Executive
Officer, and the events related thereto, which
transactions, agreements and events occurred on or
before October 12, 1995.
(e) Any actions or failures to act relating to the
allegations in the Lawsuit that there was a failure
to, or a failure to attempt to: (i) refinance or
<PAGE> 3
reschedule the Plan's and Trust's loan repayments;
(ii) write down the Plan's and Trust's indebtedness;
(iii) obtain purchasers for the Plan's and Trust's
shares of Employer stock, other than Bowser; (iv)
transfer the Plan's and Trust's unallocated shares to
the Employer in whole, in part or incrementally in
repayment of the Plan's and Trust's debt; (v) release
from encumbrance the Plan's and Trust's unallocated
stock due to the Employer's payment of the Employer's
debt to third party lender(s) and/or (vi) require the
Employer to make additional contributions to the Plan
and Trust.
(f) Execution of the Settlement Agreement and the
occurrence of the transactions and activities
provided for therein.
5. None of the Settlement Proceeds transferred to the Trust
pursuant to the Settlement Agreement will be allocated to the Participation
Accounts of any 1042 Participants because all of the Settlement Proceeds shall
be subject to the nonallocation restrictions under section 409(n) of the Code
("the 1042 Restrictions"). For purposes of applying section 409(n) of the Code
and this paragraph, the Settlement Proceeds shall be treated as accruing on the
date of this Agreement, so that this nonallocation restriction shall apply with
respect to the Participation Accounts of individuals who are 1042 Participants
as of the date of this Agreement, event if the following dates occur after the
"nonallocation period": (I) the date on which the judicial proceeding
referenced in clause (a)(ii) below is resolved; or (II) the date, if ever, that
the 1042 Settlement Proceeds are actually transferred to the Trust or allocated
pursuant to the Plan.
For purposes of this Agreement, "Settlement Proceeds" shall
mean the cash and Employer Stock (as defined in the Plan) to be transferred by
the Employer to the Trust pursuant to the Settlement Agreement.
(a) The Settlement Proceeds shall be divided between the "1042
Settlement Proceeds" and the "Non-1042 Settlement Proceeds". The "1042
Settlement Proceeds" shall be the portion of the Settlement Proceeds that would
be allocated to the 1042 Participants pursuant to sub-paragraphs (b), (c) and
(d) of this paragraph 5, if all Settlement Proceeds were paid and transferred
to the Trust, if the 1042 Restrictions were not applicable to the allocation of
the Settlement Proceeds, and if the 1042 Participants were not excluded from
being Eligible Members (as defined in sub-paragraph (f) of this paragraph 5).
The "Non-1042 Settlement Proceeds" shall be the portion of the Settlement
Proceeds that would be allocated pursuant to sub-paragraphs (b), (c) and (d) of
this paragraph 5 to persons who are not 1042 Participants, if all Settlement
Proceeds were paid and transferred to the Trust, if the 1042 Restrictions were
not applicable to the allocation of the Settlement Proceeds, and if the 1042
Participants were not excluded from being Eligible Members.
(i) The Non-1042 Settlement Proceeds shall be paid and
transferred to the Trust by the Employer within 91 days following the
Effective Date of this Agreement and shall be allocated and credited
to the Participation Accounts of Eligible Members in the manner set
forth in this paragraph 5. For purposes of this Agreement,
"Participation Account" shall mean the separate account maintained for
each Participant pursuant to Plan Section 6.1 for the purpose of
recording the Participant's proportionate interest in the Trust Fund.
(ii) The 1042 Settlement Proceeds shall, within 91 days
following the Effective Date of this Agreement, be tendered to the
3
<PAGE> 4
United States District Court in connection with an
interpleader/declaratory judgment action to determine whether such
amount shall be paid and transferred to the Trust or be paid directly
to the 1042 Participants without being paid to the Trust. In the
event that the 1042 Settlement Proceeds are paid to the Trust: (I)
the cash shall be allocated and credited to the Other Investments
Accounts of Eligible Members in the manner set forth in sub-paragraphs
(b) and (d) of this paragraph 5; and (II) the stock shall be allocated
and credited to the Company Stock Accounts of Eligible Members
pursuant to sub-paragraph (c) of this paragraph 5 in an amount that is
the difference between -- (A) the number of shares that would have
been allocated pursuant to sub-paragraph (a)(i) above, if all
Settlement Proceeds had been allocated, and (B) the number of shares
from the Non-1042 Settlement Proceeds that were allocated pursuant to
sub-paragraph (a)(i) above. For purposes of this Agreement, "Company
Stock Account" shall mean the account established pursuant to the
terms of the Plan which reflects an individual's interest in Employer
stock held under the Trust; and "Other Investments Account" shall mean
the account established pursuant to the terms of the Plan which
reflects an individual's interest in certain assets other than
Employer stock held under the Trust.
(iii) Any Settlement Proceeds allocated to any Participant's
Participation Account shall not be considered an Employer contribution
for purposes of the Plan (including, but not limited to Article IV of
the Plan).
(b) The cash portion of the Settlement Proceeds paid to the Trust
pursuant to sub-paragraph (a) above and Paragraph 81(b) of the Settlement
Agreement and pursuant to the portion of Paragraph 82(b) of the Settlement
Agreement that relates to Paragraph 81(b), shall be allocated to the Other
Investments Account of each Eligible Member as of the Plan's Valuation Date
next following the date each payment is received by the Trust in the same
proportion that the sum of such Eligible Member's balance in his Participation
Account as of December 31, 1992, and the portion of his Special Allocation that
is made pursuant to sub-paragraph (e) below, bears to the sum of the total
balance of all Eligible Members' Participation Accounts as of December 31,
1992, and the portion of all Special Allocations that is made pursuant to
sub-paragraph (e). For purposes of this Agreement, "Special Allocation" means
any allocation of 1042 Settlement Proceeds or Non-1042 Settlement Proceeds
pursuant to this Agreement; and "Valuation Date" means December 31st of each
Plan Year as specified in the Plan, or such other date set by an amendment to
the Plan that complies with Code Section 401(a).
(c) With respect to the Employer Stock portion of the Settlement
Proceeds transferred to the Trust pursuant to sub-paragraph (a) and Paragraphs
81(a) and 81(g) of the Settlement Agreement, as adjusted pursuant to Paragraph
82(b)(ii)(C) of the Settlement Agreement, the amount allocated to the Company
Stock Account of each Eligible Member as of the Plan's Valuation Date next
following the date each transfer is received by the Trust shall be determined
as follows:
4
<PAGE> 5
The Employer Stock portion of the Settlement Proceeds shall be
added to the amount of Employer Stock previously allocated
under the Plan for Plan Years 1988 through 1995 attributable to
Employer contributions made under Plan Section 4.1. The portion of
this amount allocable to each of the Plan Years 1988 through 1995
based upon the total Allocation Compensation (as defined in
sub-paragraph (f) of this paragraph 5) of all Eligible Members for
each such year as a percentage of such compensation for all such years
shall be reduced by the amount of Employer Stock previously allocated
for each such year that was attributable to Employer contributions
under Plan Section 4.1; provided that if the net amount for any year
would be less than zero, such net amount for such year shall be zero
and the negative amount shall reduce the net amounts for the other
years in proportion to the net amounts for such other years prior to
such reduction. The results shall then be divided based upon the pro
rata Allocation Compensation of each Eligible Member for each of the
Plan Years 1988 through 1995, and the total of such amounts for each
Eligible Member shall be allocated to his Company Stock Account. For
purposes of this Agreement, "Plan Year" refers to the twelve
consecutive month fiscal period beginning January 1st and ending the
following December 31st.
(d) The cash to be paid pursuant to the portion of Paragraph
82(b) of the Settlement Agreement that relates to Paragraph 81(a) and
81(g) shall be allocated to the Other Investments Account of each
Eligible Member as of the Plan's Valuation Date next following the
date such payment is received by the Trust in the same proportion that
Employer Stock was allocated to such Eligible Member's Company Stock
Account pursuant to sub-paragraph (c) above.
(e) The Employer shall pay cash to the Trust in an amount
necessary to provide the credit to Participants' accounts
referenced in the second sentence of Paragraph 81(f) of the Settlement
Agreement, and such amount shall be allocated to the Other Investments
Account of each Eligible Member as of the Plan's Valuation Date next
following the date such payment is received by the Trust in an amount
equal to:
(i) The portion of the dividend on Employer Stock paid to
shareholders of record as of January 6, 1992 (the "1992
dividend") and received by the Plan, which would have been
allocable to such Eligible Member's Participation Account based
on the proportion that such Eligible Member's balance in his
Participation Account as of January 2, 1992, bears to the total
balance of all Eligible Members' Participation Accounts as of
January 2, 1992, reduced by.
(ii) The portion of the 1992 dividend allocated to such
Eligible Member pursuant to Plan Section 6.5(c), if any.
In no event shall the amount allocated to an Eligible Member pursuant
to this sub-paragraph (e) be less than zero.
(f) Definitions.
"1042 Participant" refers to: (w) during the "nonallocation
period": (w1) any taxpayer who makes an election under Code
Section 1042(a) with respect to Company Stock (the "Section 1042
Seller"); and (w2) any individual who is related to the Section 1042
Seller (within
5
<PAGE> 6
the meaning of Code Section 267(b)); and (x) any other person who owns
(after application of Code Section 318(a)) more than twenty-five
percent (25%) of: (x1) any class of outstanding stock of the Employer
which issued such Company Stock; or (x2) the total value of any class
of outstanding stock of the Employer. Clause (w2) above shall not
apply to lineal descendants of the Section 1042 Seller if the
aggregate amount allocated to such descendants during the
nonallocation period does not exceed more than five percent (5%) of
the Company Stock (or amounts allocated in lieu thereof) held by the
Trust which is attributable to a sale to the Trust by any person
related to such descendants (within the meaning of Code
Section 267(c)(4)) in a transaction to which Code Section 1042
applied. A person shall be treated as failing to meet the stock
ownership limitation under clause (x) above if such person fails such
limitation: (y1) at any time during the one (1) year period ending on
the date of sale of Company Stock to the Trust; or (y2) on the date as
of which Company Stock is allocated to Participants in the Plan.
"Allocation Compensation" refers to the Compensation (as such
term is defined in the Plan) of each Eligible Member used for
Plan purposes for each of the Plan Years 1988 through 1995
during which such Eligible Member was an Active Participant
(as such term is defined in the Plan).
"Eligible Member" refers to each member of the plaintiff class
as defined in the Settlement Agreement, to wit: (i) any person who
participates in or has participated in the Plan between the Effective
Date and July 31, 1995; (ii) any person who has been determined by the
plan administrator of the Plan to be an "alternate payee" under a
qualified domestic relations order within the meaning of Code Section
414(p) prior to July 31, 1995; and (iii) any person who is or has been
a beneficiary of a deceased Participant under the Plan prior to July
31, 1995. Notwithstanding the foregoing, an "Eligible Member" shall
not include any non-Vested Former Participant (as such term is defined
in the Plan) who terminated employment with the Employer prior to
January 1, 1990, and who has incurred at least five consecutive One
Year Breaks-in-Service (as such term is defined in the Plan), and
shall not include 1042 Participants. For purposes of this Agreement,
"Vested" shall mean that portion of a Participant's Participation
Account that is nonforfeitable.
"Nonallocation period" means the ten (10) year period
beginning on the date of sale of the Company Stock and ending on the
later of: (i) the date which is ten (10) years after the date of
sale; or (ii) the date of the Plan allocation attributable to the
final payment of acquisition indebtedness incurred in connection with
such sale.
6. The cash and the value of the stock transferred by the
Employer to the Trust pursuant to the Settlement Agreement (all of which
amounts of cash and stock shall be the "Settlement Amount") will be deductible
by the Employer in full under section 404(a) of the Code for the Employer's
taxable year during which the Settlement Amount is paid to the Trust, without
regard to whether any limitations of section 404(a) of the Code would otherwise
limit the amount of such deduction.
7. The transfer of the Settlement Amount to the Trust pursuant to
the Settlement Agreement and this Agreement will not constitute an annual
addition for purposes of section 415 of the Code.
8. The transfer of the Settlement Proceeds to the Trust pursuant
to the Settlement Agreement and this Agreement will not result in taxable
income to any Plan participants or their
6
<PAGE> 7
beneficiaries until such amounts are received by participants and beneficiaries
from the Trust.
9. The transfer of the Settlement Amount to the Trust pursuant to
the Settlement Agreement and this Agreement will not result in the imposition
of any excise taxes under Section 4972(a) of the Code.
10. Each Special Allocation pursuant to the Settlement Agreement
shall be allocated among participants as of the Valuation Date next following
the receipt by the Trust of such Special Allocation, and the Employer may amend
the Plan to declare a special Valuation Date, but shall not be required to do
so by the Service. The transfer of the Settlement Proceeds to the Trust
pursuant to the Settlement Agreement and this Agreement, the method of
allocating the Settlement Proceeds among the accounts of the Plan participants
pursuant to the terms of the Settlement Agreement and this Agreement, and
distributions and diversifications made in accordance with the Plan following
allocation of each Special Allocation as of the Valuation Date next following
the receipt by the Trust of each Special Allocation will not adversely affect
the qualification of the Plan under sections 401(a) and 4975(e)(7) of the Code
or the tax-exempt status of its related Trust under section 501(a) of the Code.
7
<PAGE> 8
11. This Agreement constitutes a resolution under the Code solely
of the specific matters discussed herein. No inference shall be made as to the
application of the Code under any facts and circumstances outside this
Agreement. No inference shall be made with respect to whether this resolution
satisfies other Federal law, including Title I of ERISA.
12. This Agreement is final and conclusive except:
(a) the matters it relates to may be reopened in the
event of fraud, malfeasance, or misrepresentation of
material fact;
(b) it is subject to the sections of the Code that
expressly provide that effect be given to their
provisions (including any stated exception for
section 7122 of the Code) notwithstanding any other
law or rule of law; and
(c) if it relates to a tax period ending after the date
of this Agreement, it is subject to any law, enacted
after the Agreement date, that applies to that tax
period. By signing, the above parties certify that
they have read and agreed to the terms of this
document.
J. C. NICHOLS COMPANY
By: /s/ Barrett Brady
----------------------------------
Title: President
----------------------------------
Date Signed: 7-21-97
-------
COMMISSIONER OF INTERNAL REVENUE
By: /s/ Carol P. Gold
----------------------------------
Title: Acting Assistant Commissioner EPEO
----------------------------------
Date Signed: 8-1-97
------
8
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<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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0
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