MegaBank Financial Corporation
8100 E. Arapahoe Road, Suite 214
Englewood, Colorado 80112
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1999
To the Shareholders of MegaBank Financial Corporation:
The annual meeting of shareholders of MegaBank Financial
Corporation ("MegaBank") will be held at Phipps' Mansion, 3400 Belcaro
Drive, Denver, Colorado at 9:30 a.m. local time on Thursday, May 6,
1999, for the following purposes:
1. The election of seven directors;
2. Approval of the appointment of Fortner, Bayens, Levkulich and
Co., P.C. as independent auditors for 1999; and
3. Transaction of such other business as may properly come before
the annual meeting.
The Board of Directors has fixed the close of business on March
26, 1999 as the record date for the determination of shareholders
entitled to vote at the annual meeting. Only shareholders of record
at the close of business on March 26, 1999 will be entitled to vote at
the annual meeting.
All shareholders are cordially invited to attend the annual
meeting in person. TO ENSURE THAT YOU ARE REPRESENTED AT THE ANNUAL
MEETING, PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE. IF YOU ATTEND THE ANNUAL MEETING YOU CAN REVOKE
YOUR PROXY AND VOTE IN PERSON. Your early attention to the proxy will
be greatly appreciated because it will reduce the costs incurred in
obtaining voting instructions from shareholders.
By Order of the Board of Directors
April 1, 1999 /s/ Susan A. Putland
Susan A. Putland, Secretary
1
<PAGE>
MegaBank Financial Corporation
8100 E. Arapahoe Road, Suite 214
Englewood, Colorado 80112
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1999
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of MegaBank
Financial Corporation ("MegaBank") for use at the annual meeting of
shareholders of MegaBank to be held at the Phipps' Mansion, 3400
Belcaro Drive, Denver, Colorado on Thursday, May 6, 1999 at 9:30 a.m.
local time and any postponement or adjournment thereof.
This Proxy Statement and the enclosed proxy card were sent to
MegaBank's shareholders on or about April 1, 1999.
Matters to be considered.
The following matters will be acted on by the holders of Common
Stock at the annual meeting:
1. Election of seven Directors to serve for the ensuing
year and until their successors are elected and
qualified;
2. Approval of the appointment of Fortner, Bayens,
Levkulich and Co., P.C. as independent auditors for
1999; and
3. Transaction of such other business as may properly come
before the annual meeting.
Voting Securities and Voting Rights.
Only shareholders of record on March 26, 1999, or their proxies,
will be entitled to vote at the annual meeting. The Common Stock is
the only class of stock outstanding. On March 26, 1999, MegaBank had
7,607,340 shares of Common Stock outstanding.
A majority of the shares of Common Stock outstanding must be
represented at the annual meeting in person or by proxy to constitute
a quorum for the above two proposals and for the transaction of
business. Each share of Common Stock is entitled to one vote on all
matters. In the election of directors, each share of Common Stock is
entitled to one vote for a nominee for each director position.
MegaBank does not have cumulative voting in the election of Directors.
A shareholders' list will be available for examination by shareholders
at the annual meeting.
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Voting Procedure.
The shares represented by each properly executed proxy returned
to MegaBank will be voted at the meeting as indicated on the proxy.
If no instructions are given on a proxy for Common Stock, the persons
authorized by such proxy will vote in favor of election of the
nominees as Directors named in this Proxy Statement and for the
approval of the appointment of Fortner, Bayens, Levkulich and Co.,
P.C. as independent auditors of MegaBank for 1999. Any person giving
a proxy has the right to revoke it at any time before it is exercised
by filing with the Secretary of MegaBank a duly signed revocation or
proxy bearing a later date or by voting in person at the meeting.
The Board of Directors is not aware of any matters other than
those set forth above that may come before the annual meeting. If any
other matters are properly presented to the meeting for action, unless
contrary instructions are given, the persons named in the enclosed
form of proxy and acting thereunder have the power to vote in
accordance with their best judgment on such matters.
Election of the nominees as Directors and approval of the
appointment of independent auditors will require the affirmative vote
of a majority of the shares of Common Stock represented at the meeting
in person or by proxy.
If a proxy is marked with instructions to withhold authority to
vote for one or more Director nominees or to abstain from voting on
any matter, those shares will be treated as represented at the meeting
and entitled to vote in determining whether a quorum is present. In
other matters where approval is required by a majority of shares
outstanding or represented at the meeting, abstentions from voting on
a matter will have the effect of a vote against the matter.
Solicitation of Proxies.
The cost of solicitation of proxies will be borne by MegaBank.
Solicitation of proxies may be made by officers, Directors and
employees of MegaBank in person, by telephone or by mail. In
addition, brokers, banks and other nominee holders will be reimbursed
for expenses they incur in forwarding proxy materials to and obtaining
voting instructions from beneficial owners of MegaBank's stock.
Holdings of Nominees, Certain Officers and Principal Holders of Common
Stock.
On March 26, 1999, there were approximately 48 record holders of
MegaBank Common Stock; management estimates that there are another 800
beneficial owners of the Common Stock.
The following tables set forth certain information regarding
beneficial ownership of Common Stock, as of March 1, 1999, by (i) each
shareholder known by MegaBank to be the beneficial owner of more than
5% of the outstanding Common Stock and (ii) each nominee of MegaBank
and its executive officers and (iii) all nominees and executive
officers as a group. Unless otherwise indicated, based on information
furnished by such owners, management believes that the shareholders
listed below have sole investment and voting power with respect to
their shares.
<TABLE>
<CAPTION>
Shares
Beneficially Percentage
Beneficial Owner Owned of Class
---------------- ------------ ----------
Directors and Executive Officers
<S> <C> <C>
Thomas R. Kowalski 3,021,650(1) 39.7%
8100 East Arapahoe Road
Englewood, Colorado 80112
Raymond L. Anilionis 642,780(2) 8.4%
9034 East Easter Place, Suite 202
Englewood, Colorado 80112
</TABLE>
3
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<TABLE>
<S> <C> <C>
Larry A. Olsen 151,590 2.0%
8100 East Arapahoe Road
Englewood, Colorado 80112
Susan A. Putland 545 *
8100 East Arapahoe Road
Englewood, Colorado 80112
Hiram J. Welton 1,000 *
8100 East Arapahoe Road
Englewood, Colorado 80112
Dr. Donald B. Brown -- --
4545 East Ninth Avenue
Denver, Colorado 80220
William F. Sievers 2,000 *
26 West Dry Creek Circle, Suite 750
Littleton, Colorado 80120
Roger L. Morgan -- --
1615 Country Club Road
Ft. Collins, Colorado 80524
Ryan R. Kowalski 388,890(3) 5.1%
8100 East Arapahoe Road
Englewood, Colorado 80112
All executive officers and directors
as a group (nine persons) 3,819,565(4) 50.2%
</TABLE>
____________
(1) Of this amount, 1,394,690 shares are owned directly, and all
other shares are owned indirectly through entities or persons
controlled by Thomas R. Kowalski.
(2) Of this amount, 394,000 shares are owned directly, and all other
shares are owned by an entity controlled by Mr. Anilionis.
(3) All shares are owned indirectly through entities controlled by
Ryan R. Kowalski or of which he is a beneficiary. These shares
are also included in the ownership of Thomas R. Kowalski.
(4) Shares owned indirectly through entities controlled by Ryan R.
Kowalski or Thomas R. Kowalski or of which Ryan R. Kowalski is a
beneficiary have been included once in this number.
* Represents less than 1%.
Other principal shareholders are as follows:
<TABLE>
<CAPTION>
Shares
Beneficially Percentage
Beneficial Owner Owned of Class
---------------- ------------ ----------
<S> <C> <C>
Realtek Company Employees' Profit 614,820(1) 8.1%
Sharing Plan and Trust
8100 East Arapahoe Road, Suite 214
Englewood, Colorado 80112
Warren P. Cohen 712,500(2) 9.4%
595 South Broadway, Suite 200
Denver, Colorado 80209
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Vernon J. Purdy 468,750 6.2%
1900 East Girard, Suite 509
Englewood, Colorado 80110
William D. Kenny 390,000 5.1%
38 Eagle Drive
Littleton, Colorado 80123
</TABLE>
____________
(1) This entity is controlled by Thomas R. Kowalski and its shares
are also included in his beneficial ownership in the table above.
(2) Of this amount, 460,473 shares are owned directly, and all other
shares are owned indirectly through an entity controlled by Mr. Cohen.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of MegaBank currently consists of six
members. As authorized by the Bylaws, the Board of Directors has
decided to add one additional director for 1999. Thus, seven
Directors are to be elected at the annual meeting by the holders of
the Common Stock. The person authorized by the enclosed form of proxy
will vote each proxy received by him for the election of the nominees
named below unless contrary instructions are given. The term of
office for all Directors will commence on election and such persons
will serve as Directors until their successors are elected and
qualified. Each nominee has consented to be named in this Proxy
Statement and to serve if elected. It is not expected that any
nominee will become unable to serve as a Director prior to or after
the annual meeting.
The Board of Directors of MegaBank recommends a vote FOR the
election of the nominees named below. Proxies solicited by the Board
of Directors will be voted FOR the named nominees unless instructions
are given to the contrary.
The following sets forth certain information with respect to each
of the nominees:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Thomas R. Kowalski 59 Chairman of the Board and Chief
Executive Officer of MegaBank and its
subsidiary bank
Larry A. Olsen(1) 53 President, Chief Operating Officer and
Director of MegaBank and its subsidiary bank
Raymond L. Anilionis 51 Vice President and Director of MegaBank
and Director of its subsidiary bank
Dr. Donald B. Brown(1) 70 Director of MegaBank and its subsidiary
bank
William F. Sievers(1) 55 Director of MegaBank and its subsidiary
bank
Roger L. Morgan 56 Director of MegaBank and its subsidiary
bank
Ryan R. Kowalski(2) 30 Vice President, Real Estate and Director
of MegaBank's subsidiary bank
</TABLE>
__________
(1) Member of the Audit Committee.
(2) New Nominee for 1999.
There are no family relationships among any of the directors and
executive officers except that Thomas R. Kowalski is the father Ryan
R. Kowalski.
5
<PAGE>
Thomas R. Kowalski has been Chairman of the Board and Chief
Executive Officer of MegaBank since he founded it in 1984, and has
served in the same positions for its subsidiary bank since November
1983. Since 1980 he has been Chairman of the Board and Chief
Executive Officer of the First State Bank of Hotchkiss, a Colorado
bank. Mr. Kowalski is also Chief Executive Officer, and beneficial
owner of approximately 97.0% of the outstanding stock, of Orchard
Valley Financial Corporation, the bank holding company that owns First
State Bank of Hotchkiss. From October 1972 through September 1992,
Mr. Kowalski was President of Realtek Company, a general contractor
and real estate development corporation he sold to Ryan Kowalski in
1992.
Larry A. Olsen has been President, Chief Operating Officer and
Director of MegaBank since 1997 and has served in the same positions
of its subsidiary since 1994. From 1989 to 1994, Mr. Olsen was the
Chief Operating Officer of Non-Legal Affairs for Codilis and
Stawiarski, P.C., a law firm. From 1972 to 1988, Mr. Olsen was
employed by Columbia Savings & Loan Association, having served from
1986 to 1988 as President and Chief Operating Officer.
Raymond L. Anilionis has been a Vice President and Director of
MegaBank since 1984 and a Director of its subsidiary bank since 1984.
Since January 1994, Mr. Anilionis has been the President of Landmark
Realty Advisors, a real estate consulting and appraisal company. From
1974 to December 1993, Mr. Anilionis was employed in the mortgage
banking and real estate development and management industry by
Mortgage Investment Company and Associated Investment Company in
various positions, including Senior Vice President. He is also the
owner of First Fidelity Service Corp., a real estate consulting firm.
Dr. Donald B. Brown has been a Director of MegaBank since 1997
and a Director of its subsidiary since 1989. Dr. Brown previously
served as a Director of MegaBank from 1989 to 1994. Dr. Brown has
practiced medicine as an endocrinologist since 1961.
William F. Sievers has been a Director of both MegaBank and its
subsidiary bank since 1997. Since 1994, Mr. Sievers has been employed
with Lucent Technologies as Program Management Vice President in the
Network Systems Division. Previously, he worked for AT&T for over 30
years in several capacities, including the senior management positions
of Manufacturing Vice President and Regional Vice President.
Roger L. Morgan has been a Director of MegaBank and its
subsidiary bank since January 1999. Prior to his retirement in 1998,
for twelve years, Mr. Morgan was President, Chief Operating Officer
and Director of HomeAmerican Mortgage Corporation, a nationwide
residential mortgage lender affiliated with M.D.C. Holdings, Inc., and
Richmond American Homes.
Ryan R. Kowalski has been Vice President, Real Estate since
January 1997, and a Director since January 1998, of MegaBank's
subsidiary bank. Mr. Kowalski was previously President and Chief
Executive Officer of Realtek Company, a custom homebuilder and
developer, from 1992 through 1996.
Directors of MegaBank receive $500 for each regular board meeting
attended. In addition, directors are reimbursed for expenses incurred
in attending board meetings. The Board of Directors held six meetings
during 1998. Each Director attended at least 75% of the meetings.
MegaBank's Board of Directors has an Audit Committee which is
responsible for making recommendations to the Board of Directors
concerning the engagement of independent public accountants, reviewing
the overall scope and results of the annual audit of MegaBank and
performing such other functions as may be prescribed by the Board of
Directors. The members of the Audit Committee are elected annually by
the Directors. The Audit Committee met once in 1998 and is comprised
of Messrs. Brown, Olsen and Sievers. All committee members attended
each meeting.
Section 16(a) Beneficial Ownership Reporting Compliance.
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to MegaBank during the year ended December 31, 1998, the
following officers and directors failed to file reports required by
Section 16 of the Securities Exchange Act of 1934 on a timely basis:
Hiram J. Welton filed late a Form 3 relating to his ownership of
Common Stock, and William F. Sievers filed late a Form 3 relating to
his ownership of Common Stock. MegaBank is not aware of any other
persons who have failed to file timely reports.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the
Company to its Chief Executive Officer and each of its executive
officers who received cash compensation exceeding $100,000 for 1998,
1997 or 1996. No other executive officer of the Company received
compensation from the Company exceeding $100,000 during 1998, 1997 and
1996.
Summary Compensation Table
<TABLE>
<CAPTION>
Awards Payouts
-------------------------------
Securities
Other Under-
Name Annual Restricted lying All Other
Compen- Stock Options/ LTIP Compen-
Name and Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------ ---- ------- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas R. Kowalski 1998 150,000 298,490 -- -- -- -- --
Chairman of the 1997 150,000 275,000 -- -- -- -- --
Board and CEO 1996 150,000 238,101 -- -- -- -- --
Larry A. Olsen 1998 105,000 11,167 -- -- -- -- --
President and COO 1997 86,250 8,733 -- -- -- -- --
of the Company 1996 80,000 9,637 -- -- -- -- --
and the Bank
</TABLE>
Stock Incentive Plan.
In August 1998, the Company adopted the 1998 Long-Term Incentive
Plan (the "Incentive Plan"). The purpose of the Incentive Plan is to
provide continuing incentives to the Company's and its subsidiaries'
key employees, which may include officers and members of the Board of
Directors. The Incentive Plan authorizes 500,000 shares of common
stock to be reserved for issuance thereunder. Under the Incentive
Plan, the Company may grant to participants awards of stock options,
restricted stock, stock appreciation rights, performance shares or any
combination thereof. The Incentive Plan is to be administered by the
Board of Directors or a Compensation Committee of the Board of
Directors composed of at least two non-employee members. Subject to
the terms of the Incentive Plan, the Board or Compensation Committee
determines, among other matters, the persons to whom awards are
granted and the terms of the awards.
Under the stock option component of the Incentive Plan, the
Company may grant both incentive stock options intended to qualify
under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and options which are not qualified as incentive stock
options. Incentive stock options may not be granted at an exercise
price of less than the fair market value of the common stock on the
date of grant, while non-qualified stock options may be granted at any
exercise price. The exercise price may be paid in cash, in shares of
common stock (valued at fair market value at the date of exercise) or
by a combination of such means of payment, as may be determined by the
Board or Compensation Committee.
Under the restricted stock component of the Incentive Plan, the
Company may award shares of restricted stock upon payment of
consideration as determined by the Board or Compensation Committee.
Upon the award, a restriction period (not to exceed 10 years) and/or
performance goals may be set. Subject to the terms of each individual
award, a restricted stock award is forfeited upon termination of
employment by the recipient during the restriction period and any
consideration paid by the participant is returned.
An award of a stock appreciation right allows a recipient to
receive a cash payment or shares of common stock to the extent of any
appreciation in the book value or the fair market value of the common
stock of the Company over a specified period of time. Stock
appreciation rights may also be awarded in tandem with stock options,
and recipients of such tandem awards may elect to exercise the award
as a stock option or as a stock appreciation right. Under the
performance share component of the Incentive Plan, recipients are
awarded a
7
<PAGE>
specified number of shares of common stock subject to the
recipient or the Company attaining specified performance goals. The
Board or Compensation Committee, under certain circumstances, may
waive or modify performance criteria on existing performance share
awards.
The Incentive Plan will be discontinued in the event of the
dissolution or liquidation of the Company or in the event of a
reorganization in which the Company is not the surviving or acquiring
company, or in which the Company is or becomes a wholly-owned
subsidiary of another company after the effective date of the
reorganization and no plan or agreement respecting the reorganization
is established which specifically provides for the continuation of the
Incentive Plan and the conversion, or exchange of the common stock
relating to existing awards for securities of another company. Upon
the dissolution of the Incentive Plan, all awards will become fully
vested and all outstanding options and stock appreciation rights will
become immediately exercisable by the holders.
In the case of any reclassification, recapitalization, stock
dividend, stock split or other similar event, the Board or
Compensation Committee is empowered to make adjustments as to the
number and kind of securities covered by each outstanding award and,
where applicable to adjust the exercise price thereunder.
The following table set forth certain information regarding stock
options granted to the above named executive officers during 1998.
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options
nderlying Granted to
Options Employees in Exercise Expiration
Name Granted(#) Fiscal Year(1) Price($/Sh) Date
- ---- ------------ --------------- ----------- ----------
<S> <C> <C> <C> <C>
Thomas R. Kowalski 50,000 46.1% $11.00 9/1/2008
Larry A. Olsen 5,000 4.6% $10.00 9/1/2008
</TABLE>
_________
(1) Based on a total of 108,500 option shares granted to employees
during 1998.
No options were exercised by the Executive Officers during 1998.
The following table sets forth the aggregate options held by
certain executive officers of MegaBank along with values of in-the-
money options at December 31, 1998.
<TABLE>
<CAPTION>
Aggregate Option Values
Number of securities Value of unexercised
underlying unexercised in-the-money options
options at fiscal year end(#) at fiscal year end($)(1)
---------------------------- ------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Thomas R. Kowalski -- 50,000 -- --
Larry A. Olsen -- 5,000 -- --
</TABLE>
_________
(1) Based upon the market price per share of Common Stock at
December 31, 1998 of $9.50 per share.
Certain Transactions
Nagrom LLC, a Colorado limited liability company, owns the
building and land in which the Company's principal office is located.
The Bank leases office space in the building. The lease began in 1995
and is for a period of 10 years. The rent for 1998 was approximately
$334,000, and will increase 3.5% per year. The Board of Directors of
the Company believes that the rates are comparable to those that could
be obtained from unaffiliated third parties. Nagrom LLC is
beneficially owned by Kowalski Capital LLC, a Colorado limited
liability company (71.0%), Raymond L. Anilionis (13.0%), an officer
and director of the Company, and Warren P. Cohen (16.0%), a director
of the Bank. Kowalski Capital LLC is owned 95.0% by the Thomas R.
Kowalski Irrevocable Trust. The beneficiaries of the trust are Ryan
Kowalski (the adult son of Thomas R. Kowalski) and Ryan Kowalski's
minor daughter. The remaining 5.0% of Kowalski Capital LLC is owned
by Respond Corp., of which Thomas R. Kowalski is the sole shareholder.
8
<PAGE>
1996 Newton LLC, a Colorado limited liability company, leases
space to the Bank for its branch at 32nd Avenue and Newton, Denver.
1996 Newton LLC is owned by Kowalski Capital (50.0%), Raymond L.
Anilionis (25.0%) and the Warren P. Cohen Beneficial Trust (25.0%).
The lease commenced in May 1996 and runs for a period of 10 years.
Rent is approximately $31,000 per annum, and incrementally increases
to $36,000 per year for the last five years of the lease. The Board
of Directors of the Company believes that the rates are comparable to
those that could be obtained from unaffiliated third parties.
Osage 3734, LLC, a Colorado limited liability company, leases
space to the Bank for its new centralized processing center at 3734
Osage Street, Denver. Osage 3734, LLC is owned equally by KLA/4
Family Limited Partnership RLLLP, an entity controlled by Raymond L.
Anilionis, Ryan Kowalski, Vice President and Director of the Bank and
son of Thomas R. Kowalski, and Respond Corporation, an entity owned by
Thomas R. Kowalski. The building is currently undergoing renovations
to suit the needs of the Bank. Rent is approximately $48,000 per
annum and the Bank expects to occupy the building in 1999 under the
terms of a ten-year triple net lease. The Board of Directors of the
Company believes that the leasing terms are comparable to those that
could be obtained from unaffiliated third parties.
In July 1995, Thomas R. Kowalski, Raymond L. Anilionis and Warren
P. Cohen (the "Guarantors"), all of whom are officers and/or directors
of the Company and/or the Bank and significant shareholders of the
Company, entered into an agreement with the Company in connection with
their personal guarantee of a $3.0 million loan to the Bank from First
Interstate Bank of Denver. In return for the guarantee, the Company
agreed to indemnify the Guarantors for all liabilities, costs or
expenses relating to the guarantee and to provide additional
compensation to the Guarantors. The additional compensation consisted
of an aggregate fee, allocated among the three Guarantors, equal to
1.5% of the outstanding balance of the loan on each anniversary date
plus a performance bonus based on earnings of the Bank as specified in
the agreement. The loan was repaid in February 1998. The fees paid
to the Guarantors from 1995 through 1998 in the aggregate were as
follows: Mr. Kowalski - $507,965; Mr. Anilionis - $121,191; and Mr.
Cohen - $121,191.
In March 1997, the Bank entered into a Consulting Agreement with
First Fidelity Service Corp. ("First Fidelity"), a consulting firm,
which is wholly-owned by Raymond L. Anilionis. The agreement provides
that First Fidelity will render services regarding bank site
acquisitions, real estate acquisitions, management of construction
projects, evaluation and assistance with negotiations of complex loans
and work out transactions and any other services reasonably requested
by the Bank. The term of the agreement is for one year, but
automatically renews each year unless terminated by either party upon
30 days notice. Pursuant to the terms of the consulting agreement,
First Fidelity is paid $5,000 per month for its services.
The subsidiary bank has entered into certain loan participations
with First State Bank of Hotchkiss, an entity controlled by Thomas R.
Kowalski. Approximate loan principal balances outstanding under these
participations are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Participations sold $9,703 $8,227 $10,916
Participations purchased 1,346 3,459 250
</TABLE>
The subsidiary bank has also sold loan participations to
shareholders, officers and directors of the Company on the same terms
as sold to third parties. At December 31, 1998, the participations
sold to related parties were approximately $2.3 million. At December
31, 1997 and 1996, the participations sold to related parties were
approximately $2.4 million and $7.9, respectively.
In September 1993 the subsidiary bank entered into an agreement
with First State Bank of Hotchkiss to purchase its branching rights.
In total, the subsidiary bank paid First State Bank of Hotchkiss
$2,500 a month over 40 months ending in September 1997.
9
<PAGE>
The officers, directors and principal shareholders of the Company
and members of their immediate families and businesses in which they
hold controlling interests are customers of the Bank. Credit
transactions with these parties are subject to review by the Bank's
board of directors. All outstanding loans and extensions of credit by
the Bank to these parties were made in the ordinary course of business
on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with other persons, and in the opinion of management did
not involve more than the normal risk of collectibility or present
other unfavorable features. At December 31, 1998, the aggregate
balance of loans and advances under existing lines of credit to these
parties was approximately $1.3 million or 0.69% of the Bank's total
loans.
PROPOSAL NO. 2
Appointment of Independent Auditors
The Board of Directors has engaged the firm of Fortner, Bayens,
Levkulich and Co., P.C. as independent auditors to audit and report to
the shareholders on the financial statements of MegaBank for the past
three years. Representatives of Fortner, Bayens, Levkulich and Co.,
P.C. are expected to be present at the annual meeting and will have
the opportunity make a statement if they desire to do so and will be
available to respond to appropriate questions. Although shareholder
approval of the engagement is not required by law, the Board of
Directors desires to solicit approval by the holders of the Common
Stock. If the appointment of Fortner, Bayens, Levkulich and Co., P.C.
is not approved by a majority of the shares of Common Stock
represented at the meeting, the Board of Directors will consider the
appointment of other independent auditors for 1999.
Fortner, Bayens, Levkulich and Co., P.C.'s report on the
financial statements of MegaBank for 1996, 1997 and 1998 did not
contain an adverse opinion or a disclaimer of opinion and the reports
were not qualified or modified as to uncertainty, audit scope, or
accounting principles. During 1996, 1997 and 1998, there were no
disagreements with Fortner, Bayens, Levkulich and Co. P.C. on any
matter of accounting principle or practice, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to
the satisfaction of Fortner, Bayens, Levkulich and Co., P.C. would
have caused Fortner, Bayens, Levkulich and Co. P.C. to make a
reference to the subject matter of the disagreement in connection with
its reports.
The Board of Directors of MegaBank recommends a vote FOR the
approval of appointment of Fortner, Bayens, Levkulich and Co., P.C. as
independent auditors for the year 1999.
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Proxy Statement for the
2000 annual meeting of shareholders, proposals of the shareholders
must be received by MegaBank no later than December 26, 1999. Such
proposals should be directed to the Secretary of MegaBank.
OTHER BUSINESS
Management knows of no other matters to be presented at the
annual meeting. If any other matter properly comes before the
meeting, the appointed proxies will vote the proxies in accordance
with their best judgment.
ANNUAL REPORT TO SHAREHOLDERS
A copy of MegaBank's Annual Report to Shareholders for the fiscal
year ended December 31, 1998, accompanies this Notice of Annual
Meeting and Proxy Statement. No part of the Annual Report is
incorporated herein and no part thereof is to be considered proxy
soliciting material.
By Order of the Board of Directors
Englewood, Colorado
April 1, 1999
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<PAGE>
PROXY PROXY
MegaBank Financial Corporation
8100 E. Arapahoe Road, Suite 214
Englewood, Colorado 80112
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of MegaBank Financial Corporation
acknowledges receipt of the notice of Annual Meeting of Shareholders
to be held Thursday, May 6, 1999 at 9:30 a.m. local time at the
Phipps' Mansion, 3400 Belcaro Drive, Denver, Colorado and hereby
appoints Thomas R. Kowalski and Larry A. Olsen, each with the power of
substitution, as Attorneys and Proxies to appear and vote all the
shares of the undersigned at the Annual Meeting and at all adjournments
thereof, hereby ratifying and confirming all that the Attorneys and
Proxies may do or cause to be done by virtue hereof. The above-named
Attorneys and Proxies are instructed to vote all of the undersigned's
shares as follows:
1. Election of seven Directors
[ ] FOR [ ] AGAINST
[ ] Thomas R. Kowalski [ ] Dr. Donald B. Brown
[ ] Larry A. Olsen [ ] William F. Sievers
[ ] Raymond L. Anilionis [ ] Ryan R. Kowalski
[ ] Roger L. Morgan
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, MARK THE BOX NEXT TO NOMINEE'S NAME.)
2. Approval of the appointment of Fortner, Bayens, Levkulich and
Co., P.C. as independent auditors for 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Transaction of such other business as may properly come before
the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 2, AND FOR THE NOMINEES
LISTED ABOVE IN PROPOSAL 1.
Please sign your name exactly as it appears below. When shares are
held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
DATED: __________________,1999
_________________________________
SIGNATURE
_________________________________
SIGNATURE IF HELD JOINTLY
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY. NOTE:
SECURITIES DEALERS PLEASE STATE THE NUMBER OF SHARES VOTED BY THIS
PROXY: ________
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