Several class actions have been filed against commercial banking and wealth management firm Gold Banc Corporation (GLDB) and certain of its officers and directors by stockholders who owned the company's common stock as of February 25, 2004, the time of the company's acquisition agreement by Silver Acquisition Corporation. The actions claim that the defendants violated their fiduciary duties by permitting directors who had substantial restricted holdings to cash out their shares too early, and accepting a sale price that did not provide an adequate premium to public shareholders. The stockholders seek to recover compensatory damages for the loss of value of their stock.

On February 25, Gold Banc announced that it had agreed to be acquired by Silver Acquisition Corporation for $672 million and expected the acquisition to be complete in the third quarter of 2004. The lawsuit alleges that the sale of the company was actually a mechanism that permitted several of the directors who had substantial holdings in restricted shares of the company's stock to cash out those shares before they otherwise would have been permitted to sell them. Motivated by a desire to redeem their shares, the directors allegedly accepted a sale price that did not provide an adequate premium to the company's public shareholders.

According to the lawsuit, the restricted shares in question were originally owned by the company's former chairman and chief executive officer, Michael W. Gullion. After Gullion was charged with diverting $2.5 million in company funds for personal use in 2003, he entered into a restitution agreement with the company in May 2003 in which the company bought back from him just over 583,000 shares of its common stock for $6.3 million, a price of $10.81 per share. About 530,000 of these shares were purchased by five of the directors in August and September 2003. Under SEC regulations, the resale of the shares was restricted for two years.

When the defendants agreed to the sale of the company to Silver for $16.60 per share in February 2004, the price that was offered amounted to a 16% premium to the company's public stockholders over the company's $14.32-per-share closing price on February 24, 2004, the day before the transaction was signed. By contrast, the sale price allegedly represented a 54% premium to the directors for their restricted shares, which they acquired at a price of $10.81 per share.

Arkansas banker C. Stanley Bailey and other individual and institutional investors formed Silver Acquisition to acquire Gold Banc, which has about $4 billion in assets. The deal, which would take Gold Banc private, is subject to shareholder and regulatory approval. The new owners plan to consolidate Gold's banks into a federal savings bank. Gold Banc says it plans to offer the same products and services after its conversion and will retain its name.

The five Gold Banc directors to whom the company resold Gullion's stock were Daniel P. Connealy, former chief financial officer of Stilwell Financial Inc., who acquired 10,000 shares on Aug. 1, 2003; William M. Randon, co-CEO of B2B Solutions, who acquired 70,000 shares on Aug. 5, 2003; D. Patrick Curran, chairman and CEO of Cook Composites & Polymers, who acquired 100,000 shares on Aug. 28, 2003; Allen D. Petersen, former chairman and CEO of American Tool Cos., who acquired 300,000 shares on Sept. 3, 2003; and Robert J. Gourley, former CEO of Lawrence Photo-Graphic, who acquired 50,000 shares on Sept. 8, 2003. Gourley was appointed chairman of Gold Banc in October.

All five are named as defendants, as are Gold Banc itself and the company's other directors: William Hagman Jr., president of Hagman Cos. Inc.; Donald C. McNeill, former president of Banc West Inc.; J. Gary Russ, manager and general partner of Citrus Groves Ltd; and E. Miles Prentice III, a partner with the law firm of Eaton & Van Winkle.