U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 30, 1996
HOMELAND BANKSHARES CORPORATION
Commission file number: 0-14507
Incorporated in Iowa I.R.S. Employer Identification
No. 42-1168487
229 EAST PARK AVENUE, WATERLOO, IOWA 50704-5300
TELEPHONE NUMBER: (319) 291-5260
ITEM 5. OTHER EVENTS
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On August 30, 1996, Homeland Bankshares Corporation ("Homeland") and Magna
Group, Inc. ("Magna") entered into a definitive Agreement and Plan of
Reorganization (the "Merger Agreement"), which provides, among other things,
for the merger ("Merger") of Homeland with and into a newly-formed wholly-
owned subsidiary of Magna.
Under the terms of the Agreement and subject to certain adjustments as
provided therein, Magna will issue 5,038,934 shares of Magna $2.00 par value
common stock and $91,966,970 in cash in exchange for all of the outstanding
shares of Homeland's $12.50 par value common stock. Each share of Homeland's
common stock may be exchanged for approximately 1.55 shares of Magna common
stock or a comparable amount in cash. Homeland stockholders may elect to
receive all Magna common stock, all cash, or a mixture of stock and cash,
subject to certain limitations. The transaction has a current aggregate
market value of approximately $216 million.
Also, on August 30, 1996, as a condition to Magna entering into the Merger
Agreement, Homeland entered into a Stock Option Agreement (the "Stock Option
Agreement") pursuant to which Magna was granted an option to purchase, under
certain circumstances, 1,134,972 shares of Homeland common stock (19.9% of
the number of such shares then outstanding), at an exercise price of $34.00
per share.
Consummation of the Merger is subject to certain conditions, including:
(i) approval of Homeland's shareholders; (ii) receipt of approvals of the
Federal Reserve Board, the Office of Thrift Supervision, and the Iowa
Division of Banking, and any other applicable regulatory authority; (iii)
registration of the shares of Magna common stock to be issued pursuant to the
Merger under the Securities Act of 1933, as amended, and all applicable state
securities laws; (iv) receipt of opinions of counsel that the Merger will
qualify as a tax-free reorganization under the Internal Revenue Code of 1986,
as amended, and (v) satisfaction of certain other closing conditions. The
transaction is expected to be consummated in the first quarter of 1997.
Copies of the Merger Agreement and the Stock Option Agreement are attached
as Exhibits hereto and are incorporated by reference herein. The foregoing
summaries of such documents are qualified in their entirety by reference to
the actual documents.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS
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(C) EXHIBITS IN ACCORDANCE WITH THE PROVISIONS OF ITEM 601 OF REGULATION S-K
Exhibit 2 Agreement and Plan of Reorganization dated
August 30, 1996 between Magna Group, Inc.
and Homeland Bankshares Corporation.
Exhibit 99.1 Stock Option Agreement dated August 30, 1996
between Magna Group, Inc. and Homeland
Bankshares Corporation.
Exhibit 99.2 News Release of Homeland Bankshares
Corporation dated September 3, 1996.
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 hereunto duly authorized.
HOMELAND BANKSHARES CORPORATION
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September 10, 1996 /s/ Robert S. Kahler
---------------------- -----------------------------------
Date Robert S. Kahler, Executive Vice
President and CFO
(Principal Financial and Accounting
Officer)
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
INDEX TO EXHIBITS
TO FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------------------
HOMELAND BANKSHARES CORPORATION
229 EAST PARK AVENUE
WATERLOO, IOWA 50704-5300
EXHIBIT NO. ITEM
----------- --------------------------------------------------------------
2 Agreement and Plan of Reorganization* dated August 30, 1996
between Magna Group, Inc. and Homeland Bankshares Corporation.
99.1 Stock Option Agreement dated August 30, 1996 between Magna Group,
Inc. and Homeland Bankshares Corporation.
99.2 News Release of Homeland Bankshares Corporation dated September 3,
1996.
*An appendix and the schedules to the Agreement and Plan of
Reorganization have been omitted. These are:
Appendix A Illustration of Consideration at Varying Valuation
Period Market Values
Schedule Description
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2.02 Homeland Bankshares Corporation Subsidiaries
2.03 Seller Stock Plans
2.10A Commitments and Material Contracts
2.11 Litigation
2.12 Insurance Policies
2.15B Insider Loans
2.16A Employee Benefits Plans
2.16C Pension Plan Reportable Events and Terminations
2.16D Post-Retirement Health Benefits
2.16F Material Payments and Acceleration of Payments
2.17 Conduct of Seller's Business from January 1, 1996 to Date
2.19 Registration Obligations
2.22A Insurance Activities
2.23A Interest Rate Risk Management
3.01 Buyer Banks
3.02 Buyer Stock Options
3.08A Buyer Compliance with Laws
3.08C Buyer Regulatory Compliance
3.10 Buyer Labor Unions
3.12A Buyer Employee Benefit Plans
3.12B Buyer Employee Plan Compliance
3.12C Buyer Pension Plan Reportable Events and Terminations
3.12D Buyer Post-Retirement Health Benefits
3.12F Buyer Material Payments and Acceleration of Payments
4.03 Buyer Forebearances
Registrant agrees to furnish supplementally a copy of any
committed schedule to the Commission upon request.
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AGREEMENT AND PLAN OF REORGANIZATION
between
MAGNA GROUP, INC.
as Buyer,
and
HOMELAND BANKSHARES CORPORATION,
as Seller
-----------------------------
Dated August 30, 1996
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made and entered into on August 30, 1996 by and between MAGNA GROUP, INC., a
Delaware corporation ("Buyer"), and HOMELAND BANKSHARES CORPORATION, an Iowa
corporation ("Seller").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Buyer is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended (the "Holding Company Act"); and
WHEREAS, Seller is a registered bank holding company under the
Holding Company Act; and
WHEREAS, the Board of Directors of Seller and the Board of
Directors of Buyer have approved the merger (the "Merger") of Seller with and
into a wholly owned subsidiary of Buyer organized or to be organized under
the laws of Iowa ("Merger Sub") pursuant to the terms and subject to the con-
ditions of this Agreement; and
WHEREAS, as a condition to, and immediately following the execution
of this Agreement, Buyer and Seller will enter into a stock option agreement
(the "Stock Option Agreement") in the form attached hereto as Exhibit A; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties
agree as follows:
ARTICLE I
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THE MERGER
1.01. The Merger. (a) Subject to the terms and conditions of
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this
Agreement, Seller shall be merged with and into Merger Sub in accordance
with the Iowa Business Corporation Act (the "Iowa Act") and the separate cor-
porate existence of Seller shall cease. Merger Sub shall be the surviving
corporation of the Merger (sometimes referred to herein as the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Iowa.
1.02. Closing. The closing (the "Closing") of the Merger shall
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take
place at 10:00 a.m., local time, on the date that the Effective Time (as
defined in Section 1.03) occurs, or at such other time, and at such place, as
Buyer and Seller shall agree (the "Closing Date").
1.03. Effective Time. The Articles of Merger filed with the
--------------
Secretary of State of the State of Iowa shall specify the Closing Date as the
effective date of the Merger (the "Effective Date", and the effective time of
the Merger, the "Effective Time"). The parties hereto shall take all actions
necessary to satisfy the requirements for effectuating the Merger in
accordance with the Iowa Act, including by adopting Articles of Merger in the
form required under the Iowa Act. The Articles of Merger shall include the
Plan of Merger set forth as Exhibit B. Subject to the terms and conditions of
this Agreement, the Effective Date shall occur on such date as Buyer shall
notify Seller in writing (such notice to be at least five business days in
advance of the Effective Date) but (i) not earlier than the satisfaction of
all conditions set forth in Section 6.01 (the "Approval Date") and (ii)
subject to clause (i), not later than the first business day of the first
full calendar month commencing at least five business days after the Approval
Date. The Approval Date shall in no event be earlier than January 1, 1997.
1.04. Additional Actions. If, at any time after the Effective
------------------
Time,
Buyer or the Surviving Corporation shall consider or be advised that any
further deeds, assignments or assurances or any other acts are necessary or
desirable to (b) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Seller or Merger Sub or (c) otherwise carry
out the purposes of this Agreement, Seller and Merger Sub and each of their
respective officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such deeds, assignments or assurances and to do all acts necessary or
desirable to vest, perfect or confirm title and possession to such rights,
properties or assets in the Surviving Corporation and otherwise to carry out
the purposes of this Agreement, and the officers and directors of the
Surviving Corporation are authorized in the name of Seller and Merger Sub or
otherwise to take any and all such action.
1.05. Articles of Incorporation and Bylaws. The Articles of
------------------------------------
Incorporation and Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation following the Merger until otherwise amended or
repealed.
1.06. Boards of Directors and Officers. At the Effective Time,
--------------------------------
the directors and officers of Merger Sub immediately prior to the Effective
Time shall be directors and officers, respectively, of the Surviving Corpor-
ation following the Merger; such directors and officers shall hold office
in accordance with the Surviving Corporation's Bylaws and applicable law.
1.07. Conversion of Securities. At the Effective Time, by virtue
------------------------
of the Merger and without any action on the part of Buyer, Seller or the
holder of any of the following securities:
(i) Each share of the common stock, par value $.01 per share, of
Merger Sub that is issued and outstanding immediately prior to the Effective
Time shall remain outstanding and shall be unchanged after the Merger and
shall thereafter constitute all of the issued and outstanding capital stock
of the Surviving Corporation; and
(ii) Each share of the common stock, par value $12.50 per share
("Seller Common Stock"), of Seller issued and outstanding immediately prior
to the Effective Time, other than any Dissenting Shares (as defined in
Section 1.13), shall cease to be outstanding and shall be converted into and
become the right to receive, at the election of the holder thereof as pro-
vided in Section 1.08, either:
(A) 1.55 (as adjusted pursuant to Section 1.09, the "Exchange
Ratio") shares of common stock ("Buyer Common Stock"), par value
$2.00 per share, of Buyer and associated Preferred Share Purchase
Rights ("Buyer Rights") issued pursuant to the rights agreement
(the "Buyer Rights Agreement"), dated as of November 11, 1988, by
and between Buyer and Magna Trust Company, as rights agent (as ad-
justed pursuant to Section 1.09, the "Per Share Stock Con-
sideration"), or
(B) $37.50 in cash (as adjusted pursuant to Section 1.09, the
"Per Share Cash Consideration");
provided that the aggregate number of shares of Buyer Common Stock that
--------
shall be issued in the Merger shall not exceed 5,038,934 (the "Stock
Amount").
1.08. Election Procedures. Election forms and other appropriate
-------------------
and
customary transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing Seller Common Stock ("Certificates") shall pass, only upon
proper delivery of such Certificates to an exchange agent designated by Buyer
(the "Exchange Agent")) in such form as Buyer and Seller shall mutually agree
("Election Forms") shall be mailed 30 days prior to the anticipated Effective
Time or on such other earlier date as Seller and Buyer shall mutually agree
("Mailing Date") to each holder of record of Seller Common Stock as of five
business days prior to the Mailing Date ("Election Form Record Date").
Each Election Form shall permit the holder (or the beneficial owner
through appropriate and customary documentation and instructions) either (i)
to elect to receive only Buyer Common Stock with respect to such holder's
Seller Common Stock ("Stock Election Shares"); (ii) to elect to receive only
cash with respect to such holder's Seller Common Stock ("Cash Election
Shares"); (iii) to elect to receive Buyer Common Stock with respect to 57% of
such holder's Seller Common Stock and cash with respect to 43% of such
holder's Seller Common Stock rounded, in each case, to the nearest whole
share ("Mixed Election Shares"); or (iv) to indicate that such holder makes
no election ("No Election Shares"). Dissenting Shares (as defined below)
shall be treated as Cash Election Shares for purposes of this Section but
shall not be converted into the Per Share Cash Consideration or the Per Share
Stock Consideration except as provided in Section 1.13. Subject to the
provisions of this Section, the Mixed Election Shares shall be divided by the
Exchange Agent into such portion (to be approximately 57% in aggregate) with
respect to which the holder has elected to receive Buyer Common Stock (the
"Mixed Stock Shares") and such portion (to be approximately 43% in aggregate)
with respect to which the holder has elected to receive cash (the "Mixed Cash
Shares") for the purposes of allocating the total consideration as specified
below, it being the intention that, to the fullest extent possible, subject
to all applicable constraints, all Mixed Election Shares shall receive the
consideration with respect to which a Mixed election has been made without
regard to the pro rata selection process set forth below.
Any Seller Common Stock with respect to which the holder (or the
beneficial owner, as the case may be) shall not have submitted to the
Exchange Agent an effective, properly completed Election Form on or before
5:00 p.m. on the 25th day following the Mailing Date (or such other time and
date as Buyer and Seller may mutually agree) (the "Election Deadline") shall
also be deemed to be "No Election Shares."
Buyer shall make available up to two separate Election Forms, or
such additional Election Forms as the Buyer in its sole discretion may
permit, to all persons who become holders (or beneficial owners) of Seller
Common Stock between the Election Form Record Date and close of business on
the business day prior to the Election Deadline, and Seller shall provide to
the Exchange Agent all information reasonably necessary for it to perform as
specified herein.
Any such election shall have been properly made only if the
Exchange Agent shall have actually received a properly completed Election
Form by the Election Deadline. An Election Form shall be deemed properly
completed only if accompanied by one or more Certificates (or customary
affidavits and indemnification regarding the loss or destruction of such
Certificates or the guaranteed delivery of such Certificates) representing
all shares of Seller Common Stock covered by such Election Form, together
with duly executed transmittal materials included in the Election Form. Any
Election Form may be revoked or changed by the person submitting such
Election Form at or prior to the Election Deadline. In the event an Election
Form is revoked prior to the Election Deadline, the shares of Seller Common
Stock represented by such Election Form shall become No Election Shares and
Buyer shall cause the Certificates to be promptly returned without charge to
the person submitting the Election Form upon written request to that effect
from the person who submitted the Election Form. Subject to the terms of
this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any good faith decisions of the Exchange Agent regarding
such matters shall be binding and conclusive. Neither Buyer nor the Exchange
Agent shall be under any obligation to notify any person of any defect in an
Election Form.
Within five business days after the Election Deadline, unless the
Effective Time has not yet occurred, in which case as soon thereafter as
practicable, Buyer shall cause the Exchange Agent to effect the allocation
among the holders of Seller Common Stock of rights to receive Buyer Common
Stock or cash in the Merger in accordance with the Election Forms as follows:
(i) Stock Elections Plus the Mixed Stock Shares Less Than Stock
-----------------------------------------------------------
Amount. If the number of shares of Buyer Common Stock that would be issued
upon conversion in the Merger of the Stock Election Shares and the Mixed
Stock Shares is less than the Stock Amount, then:
(A) all Mixed Stock Shares and Stock Election Shares shall be
converted into the right to receive the Per Share Stock
Consideration,
(B) the Exchange Agent shall then select first from among the
No Election Shares and then (if necessary) from among the Cash -
Election Shares, by a pro rata selection process (as described be-
low), a sufficient number of shares ("Stock Designated Shares")
such that the number of shares of Buyer Common Stock that will be
issued in the Merger equals as closely as practicable the Stock
Amount, and all Stock Designated Shares shall be converted into the
right to receive the Per Share Stock Consideration, and
(C) the Cash Election Shares and the No Election Shares which
are not Stock Designated Shares and all Mixed Cash Shares shall be
converted into the right to receive the Per Share Cash Consider-
ation.
(ii) Stock Elections and the Mixed Stock Shares More Than Stock
----------------------------------------------------------
Amount. If the number of shares of Buyer Common Stock that would be issued
upon the conversion into Buyer Common Stock of the Stock Election Shares is
greater than the Stock Amount, then:
(A) all Mixed Cash Shares, Cash Election Shares and No
Election Shares shall be converted into the right to receive the
Per Share Cash Consideration,
(B) the Exchange Agent shall then select from among the Stock
Election Shares, by a pro rata selection process (as described
below) a sufficient number of shares ("Cash Designated Shares")
such that the number of shares of Buyer Common Stock that will be
issued in the Merger equals as closely as practicable the Stock
Amount, and all Cash Designated Shares shall be converted into the
right to receive the Per Share Cash Consideration, and
(C) the Stock Election Shares which are not Cash Designated
Shares and all Mixed Stock Shares shall be converted into the right
to receive the Per Share Stock Consideration.
(iii) Stock Elections and Mixed Stock Shares Equal to Stock Amount.
--------------------------------------------------------------
If the number of shares of Buyer Common Stock that would be issued upon
conversion into Buyer Common Stock of the Stock Election Shares and Mixed
Stock Shares is equal or nearly equal (as determined by the Exchange Agent)
to the Stock Amount, then subparagraphs (i) and (ii) above and subparagraphs
(iv) and (v) below shall not apply and all Stock Election Shares and Mixed
Stock Shares shall be converted into the right to receive the Per Share Stock
Consideration and all Cash Election Shares, Mixed Cash Shares and No Election
Shares shall be converted into the right to receive the Per Share Cash
Consideration; or
(iv) Stock Elections, Mixed Stock Shares and No Elections Equal to
-------------------------------------------------------------
Stock Amount. If the number of shares of Buyer Common Stock that would be
issued upon the conversion into Buyer Common Stock of the Stock Election
Shares, Mixed Stock Shares and No Election Shares would equal or nearly equal
(as determined by the Exchange Agent) the Stock Amount, then subparagraphs
(i), (ii) and (iii) above and subparagraph (v) below shall not apply and all
Cash Election Shares and Mixed Cash Shares shall be converted into the right
to receive the Per Share Cash Consideration and all Stock Election Shares,
Mixed Stock Shares and No Election Shares shall be converted into the right
to receive the Per Share Stock Consideration.
(v) Mixed Stock Shares More Than Stock Amount. If the number of
-----------------------------------------
shares of Buyer Common Stock that would be issued upon the conversion in the
Merger into Buyer Common Stock of the Mixed Stock Shares is greater than the
Stock Amount, then;
(A) all Mixed Cash Shares, Cash Election Shares, No Election
Shares and Stock Election Shares shall be converted into the
right to receive the Per Share Cash Consideration,
(B) the Exchange Agent shall select from among the Mixed
Stock Shares by a pro rata selection process (as described below)
a sufficient number of shares ("Mixed Designated Shares") such
that the number of shares of Buyer Common Stock that will be
issued in the Merger equals as closely as practicable the Stock
Amount, and all Mixed Designated Shares shall be converted into
the right to receive the Per Share Cash Consideration, and
(C) the Mixed Stock Shares that are not Mixed Designated
Shares shall be converted into the right to receive the Per Share
Stock Consideration.
The pro rata selection process to be used by the Exchange Agent
shall consist of such equitable pro ration processes as shall be mutually
determined by Buyer and Seller.
1.09. Adjustments to the Merger Consideration.
---------------------------------------
(a) The Per Share Stock Consideration and the Per Share Cash Consideration
shall each be adjusted as of the end of the ten (10) consecutive trading-day
period (the "Valuation Period") during which the shares of Buyer Common Stock
are traded on the Nasdaq Stock Market National Market System ("NASDAQ")
ending on the tenth calendar day immediately prior to the anticipated
Effective Time. The Per Share Stock Consideration shall be adjusted by
adjusting the Exchange Ratio such that the product of the Exchange Ratio
(rounded to the nearest 1/1000th of a share) and the Valuation Period Market
Value shall equal the Average Per Share Consideration. The Per Share Cash
Consideration shall be adjusted to equal the Average Per Share Consideration.
(b) For purposes of this Agreement the following definitions shall
apply:
"Valuation Period Market Value" shall mean the average of the
closing-sale prices for the Buyer Common Stock as reported on NASDAQ (as
reported in The Wall Street Journal, Midwest edition, or, in the absence
------------------------
thereof, by another authoritative source) during the Valuation Period.
"Average Per Share Consideration" shall mean the Aggregate
Consideration divided by the Valuation Period Share Number (rounder to the
nearest cent).
"Aggregate Consideration" shall mean the sum of (x) the product of
1.55 times the Valuation Period Market Value times 0.57 times the Valuation
Period Share Number and (y) $37.50 times 0.43 times the Valuation Period
Share Number.
"Valuation Period Share Number" shall mean the total number of
shares of Seller Common Stock outstanding (other than treasury shares) on the
last day of the Valuation Period.
1.10. Adjustments for Dilution and Other Matters. If prior to the
------------------------------------------
Effective Time, (i) Seller shall declare a stock dividend or distribution
upon or subdivide, split up, reclassify or combine the Seller Common Stock,
or declare a dividend or make a distribution on the Seller Common Stock in
any security convertible into Seller Common Stock, or (ii) Buyer shall
declare a stock dividend or distribution upon or subdivide, split up,
reclassify or combine the Buyer Common Stock or declare a dividend or make a
distribution on the Buyer Common Stock in any security convertible into Buyer
Common Stock, appropriate adjustment or adjustments will be made to the Per
Share Cash Consideration, the Per Share Stock Consideration and the Stock
Amount.
1.11. Illustrative Cases. Appendix A hereto illustrates, among
------------------
other things, the value to be received per share of Seller Common Stock,
whether in cash or in Buyer Common Stock, at varying Valuation Period Market
Values, as well as the resulting exchange ratios.
1.12. Exchange Procedures. (a) Subject to Section 1.10, each
-------------------
previous holder of a Certificate that has surrendered such Certificate to-
gether with duly executed transmittal materials included in the Election Form
to the Buyer or, at the election of Buyer, the Exchange Agent, pursuant to
Section 1.08 will, upon acceptance thereof by Buyer or the Exchange Agent, be
entitled to a certificate or certificates representing the number of full -
shares of Buyer Common Stock or cash into which the Certificate so sur-
rendered shall have been converted pursuant to this Agreement and any
distribution theretofore declared and not yet paid with respect to such
shares of Buyer Common Stock, without interest.
(b) Buyer or, at the election of Buyer, the Exchange Agent shall
accept Certificates upon compliance with such reasonable terms and conditions
as Buyer or the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with customary exchange practices. Certificates shall
be appropriately endorsed or accompanied by such instruments of transfer as
Buyer or the Exchange Agent may reasonably require.
(c) Each outstanding Certificate shall until duly surrendered to
Buyer or the Exchange Agent be deemed to evidence ownership of the
consideration into which the stock previously represented by such Certificate
shall have been converted pursuant to this Agreement.
(d) After the Effective Time, holders of Certificates shall cease
to have rights with respect to the stock previously represented by such
Certificates, and their sole rights shall be to exchange such Certificates
for the consideration provided for in this Agreement. After the Effective
Time, there shall be no further transfer on the records of Seller of
Certificates, and if such Certificates are presented to Seller for transfer,
they shall be cancelled against delivery of the consideration provided
therefor in this Agreement. Buyer shall not be obligated to deliver the
consideration to which any former holder of Seller Common Stock is entitled
as a result of the Merger until such holder surrenders the Certificates as
provided herein. No dividends declared will be remitted to any person
entitled to receive Buyer Common Stock under this Agreement until such person
surrenders the Certificate representing the right to receive such Buyer
Common Stock, at which time such dividends shall be remitted to such person,
without interest and less any taxes that may have been imposed thereon.
Certificates surrendered for exchange by any person constituting an "affili-
ate" of Seller for purposes of Rule 145 of the Securities Act of 1933, as
amended (together with the rules and regulations thereunder, the "Securities
Act"), shall not be exchanged for certificates representing Buyer Common
Stock until Buyer has received a written agreement from such person in the
form attached as Exhibit C. Neither the Exchange Agent nor any party to this
Agreement nor any affiliate thereof shall be liable to any holder of stock
represented by any Certificate for any consideration paid to a public
official pursuant to applicable abandoned property, escheat or similar laws.
Buyer and the Exchange Agent shall be entitled to rely upon the stock
transfer books of Seller to establish the identity of those persons entitled
to receive consideration specified in this Agreement, which books shall be
conclusive with respect thereto. In the event of a dispute with respect to
ownership of stock represented by any Certificate, Buyer and the Exchange
Agent shall be entitled to deposit any consideration represented thereby in
escrow with an independent third party and thereafter be relieved with
respect to any claims thereto.
1.13. Dissenting Shares. (a) "Dissenting Shares" means any
-----------------
shares held by any holder who becomes entitled to payment of the fair value of
such shares under the Iowa Act. Any holders of Dissenting Shares shall
be entitled to payment for such shares only to the extent permitted by and
in accordance with the provisions of the Iowa Act; provided, however, that
-------- -------
if, in accordance with the Iowa Act, any holder of Dissenting Shares shall
forfeit such right to payment of the fair value of such shares, such shares
shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the consi-
deration provided in this Article I.
(b) Seller shall give Buyer (i) prompt notice of any written
objections to the Merger and any written demands for the payment of the fair
value of any shares, withdrawals of such demands, and any other instruments
served pursuant to the Iowa Act received by Seller and (ii) the opportunity
to direct all negotiations and proceedings with respect to such demands under
the Iowa Act. Seller shall not voluntarily make any payment with respect to
any demands for payment of fair value and shall not, except with the prior
written consent of Buyer, settle or offer to settle any such demands.
1.14. No Fractional Shares. Notwithstanding any other provision
---------------------
of this Agreement, neither certificates nor scrip for fractional shares of
Buyer Common Stock shall be issued in the Merger. Each holder who otherwise
would have been entitled to a fraction of a share of Buyer Common Stock
shall receive in lieu thereof cash (without interest) in an amount determined
by multiplying the fractional share interest to which such holder would
otherwise be entitled by the Closing Price per share of Buyer Common Stock on
the last business day preceding the Effective Time. With respect to a share
of stock, "Closing Price" shall mean: the closing-sale price as reported on
NASDAQ (as reported in The Wall Street Journal, Midwest edition, or in the
-----------------------
absence thereof, by another authoritative source). No such holder shall be
entitled to dividends, voting rights or any other rights in respect of any
fractional share.
ARTICLE II
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REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
Seller represents and warrants to and covenants with Buyer as
follows:
2.01. Organization and Authority. Seller is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State
of Iowa, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and has corporate power and
authority to own its properties and assets and to carry on its business as it
is now being conducted; except where the failure to so qualify would not have
a material adverse effect on the financial condition, results of operation or
the business (collectively, "Condition") of Seller or Seller Subsidiaries (as
defined in Section 2.02), taken as a whole. Seller is registered as a bank
holding company with the Board of Governors of the Federal Reserve System
(the "Board") under the Holding Company Act. True and complete copies of the
Articles of Incorporation and the Bylaws of Seller and, to the extent re-
quested in writing by Buyer, of the Articles of Incorporation and Bylaws of
the Seller Subsidiaries (as defined below), each as in effect on the date of
this Agreement, have been provided to Buyer.
2.02. Subsidiaries. Schedule 2.02 sets forth, among other things,
------------
a complete and correct list of all of Seller's Subsidiaries (each, a "Seller
Subsidiary" and collectively, the "Seller Subsidiaries"), all outstanding
Equity Securities of each of which, except as set forth on Schedule 2.02, are
owned directly or indirectly by Seller. "Equity Securities" of an issuer
means capital stock or other equity securities of such issuer, options,
warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
shares of any capital stock or other Equity Securities of such issuer, or
contracts, commitments, understandings or arrangements by which such issuer
is or may become bound to issue additional shares of its capital stock or
other Equity Securities of such issuer, or options, warrants, scrip or rights
to purchase, acquire, subscribe to, calls on or commitments for, or stock
appreciation or similar rights in respect of, any shares of its capital stock
or other Equity Securities. Except as set forth on Schedule 2.02, all of the
outstanding shares of capital stock of the Seller Subsidiaries are validly
issued, fully paid and nonassessable, and those shares owned by Seller are
owned free and clear of any lien, claim, charge, option, encumbrance,
agreement, mortgage, pledge, security interest or restriction (a "Lien") with
respect thereto. Each of the Seller Subsidiaries is a corporation or
association duly incorporated or organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation or organization,
and has corporate power and authority to own or lease its properties and
assets and to carry on its business as it is now being conducted. Each of
the Seller Subsidiaries is duly qualified to do business in each jurisdiction
where its ownership or leasing of property or the conduct of its business
requires it so to be qualified, except where the failure to so qualify would
not have a material adverse effect on the Condition of Seller and its
Subsidiaries, taken as a whole. Except as set forth on Schedule 2.02, Seller
does not own beneficially, directly or indirectly, five percent or more of
any shares of any class of Equity Securities or similar interests of any cor-
poration, bank, business trust, association or similar organization. All of
Seller's bank Subsidiaries (the "Banks") are either state banking associa-
tions chartered under the laws of the State of Iowa, federally chartered
savings and loan associations supervised by the Office of Thrift Supervision
("OTS") or national banking associations chartered by the Office of the
Comptroller of the Currency ("OCC"). The deposits of each of the Banks are
insured by the Bank Insurance Fund ("BIF") or by the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation (the
"FDIC"), including to the extent such deposits were transferred to a Bank by
the Resolution Trust Corporation. The Banks identified as such on Schedule
2.02 are members in good standing of the Federal Reserve System. Except as
set forth on Schedule 2.02, neither Seller nor any Seller Subsidiary holds
any interest in a partnership or joint venture of any kind.
2.03. Capitalization. The authorized capital stock of Seller
--------------
consists of 25,000,000 shares of Seller Common Stock, of which, as of August
23, 1996, 5,703,378 shares were issued and outstanding. As of August 23,
1996, Seller had reserved 16,371 shares of Seller Common Stock for issuance
under Seller's stock option plans, a list of which is set forth on Schedule
2.03 (the "Seller Stock Plans"), pursuant to which options ("Seller Stock Op-
tions") covering 15,000 shares of Seller Common Stock were outstanding as of
August 23, 1996. Since August 23, 1996, no Equity Securities of Seller have
been issued other than shares of Seller Common Stock which may have been
issued upon the exercise of Seller Employee Stock Options. Except as set
forth above, there are no other Equity Securities of Seller outstanding. All
of the issued and outstanding shares of Seller Common Stock are validly
issued, fully paid, and nonassessable, and have not been issued in violation
of any preemptive right of any stockholder of Seller.
2.04. Authorization. (a) Seller has the corporate power and
-------------
authority to enter into this Agreement and, subject to the approval of this
Agreement by the stockholders of Seller, to carry out its obligations
hereunder. The only stockholder vote required for Seller to approve this
Agreement is the affirmative vote of the holders of at least a majority of
the votes entitled to be cast on the Agreement by the holders of shares of
Seller Common Stock. The execution, delivery and performance of this
Agreement by Seller and the consummation by Seller of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Seller and are not a "Covered Transaction" as such term is defined in
Seller's Articles of Incorporation. Subject to approval by the stockholders
of Seller, this Agreement is a valid and binding obligation of Seller
enforceable against Seller in accordance with its terms.
(b) Neither the execution nor delivery nor performance by Seller
of this Agreement, nor the consummation by Seller of the transactions
contemplated hereby, nor compliance by Seller with any of the provisions
hereof, will (i) violate, conflict with, or result in a breach of any provi-
sions of, or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of, any Lien upon
any of the material properties or assets of Seller or any Seller Subsidiary
under any of the terms, conditions or provisions of (x) its articles or cer-
tificate of incorporation or bylaws or (y) any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Seller or any Seller Subsidiary is a party or by which it
may be bound, or to which Seller or any Seller Subsidiary or any of the
material properties or assets of Seller or any Seller Subsidiary may be
subject, or (ii) subject to compliance with the statutes and regulations
referred to in paragraph (c) of this Section 2.04, to the best knowledge of
Seller, violate any judgment, ruling, order, writ, injunction, decree, stat-
ute, rule or regulation applicable to Seller or any Seller Subsidiary or any
of their respective material properties or assets.
(c) Other than in connection or in compliance with the provisions
of the Iowa Act, the Securities Act, the Securities Exchange Act of 1934 and
the rules and regulations thereunder (the "Exchange Act"), the securities or
blue sky laws of the various states or filings, consents, reviews,
authorizations, approvals or exemptions required under the Holding Company
Act, and the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), or any required approvals of or filings with the Superintendent of the
Banking Division of the Commerce Department of the State of Iowa (the "State
Bank Regulator"), the OTS or the OCC, no notice to, filing with, exemption or
review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Seller of the transactions
contemplated by this Agreement.
2.05. Seller Financial Statements. The consolidated and parent
---------------------------
company-only balance sheets of Seller and its Subsidiaries as of December 31,
1995, 1994 and 1993 and related consolidated statements of income, cash flows
and changes in stockholders' equity for each of the three years in the three-
year period ended December 31, 1995, together with the notes thereto, audited
by Deloitte & Touche LLP and included in an annual report on Form 10-K as
filed with the SEC, and the unaudited consolidated balance sheets of Seller
and its Subsidiaries as of March 31 and June 30, 1996 and the related
unaudited consolidated statements of income and cash flows for the periods
then ended included in quarterly reports on Form 10-Q (each a "Seller Form
10-Q") as filed with the Securities and Exchange Commission (collectively,
the "Seller Financial Statements"), have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
("GAAP"), present fairly the consolidated financial position of Seller and
its Subsidiaries at the dates and the consolidated results of operations,
cash flows and changes in stockholders' equity of Seller and its Subsidiaries
for the periods stated therein and are derived from the books and records of
Seller and its Subsidiaries, which are complete and accurate in all material
respects and have been maintained in all material respects in accordance with
applicable laws and regulations. Neither Seller nor any of its Subsidiaries
has any material contingent liabilities that are not described in the finan-
cial statements described above.
2.06. Seller Reports. Since January 1, 1993, each of Seller and
---------------
the Seller Subsidiaries has filed all material reports, registrations and
statements, together with any required material amendments thereto, that it
was required to file with (i) the Securities and Exchange Commission, includ-
ing, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy
statements, (ii) the Board, (iii) the FDIC, (iv) the State Bank Regulator,
and (v) any other federal, state, municipal, local or foreign government,
securities, banking, savings and loan, insurance and other governmental or
regulatory authority and the agencies and staffs thereof (the entities in the
foregoing clauses (i) through (v) being referred to herein collectively as
the "Regulatory Authorities" and individually as a "Regulatory Authority").
All such reports and statements filed with any such Regulatory Authority are
collectively referred to herein as the "Seller Reports." As of its
respective date, each Seller Report complied in all material respects with
all the rules and regulations promulgated by the applicable Regulatory
Authority and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
2.07. Properties and Leases. Except as may be reflected in the
---------------------
Seller Financial Statements, except for any Lien for current taxes not yet
delinquent and except with respect to assets classified as real estate owned,
Seller and its Subsidiaries have good title free and clear of any material
Lien to all the real and personal property reflected in Seller's consolidated
balance sheet as of June 30, 1996 included in the most recent Seller Form
10-Q and, in each case, all real and personal property acquired since such
date, except such real and personal property as has been disposed of in the
ordinary course of business. All leases material to Seller or any Seller
Subsidiary pursuant to which Seller or any Seller Subsidiary, as lessee,
leases real or personal property, are valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any
material existing default by Seller or any Seller Subsidiary or any event
which, with notice or lapse of time or both, would constitute such a material
default. Substantially all of Seller's and Seller Subsidiaries' buildings,
structures and equipment in regular use have been well maintained and are in
good and serviceable condition, normal wear and tear excepted.
2.08. Taxes. Seller and each Seller Subsidiary have timely filed
-----
or will timely (including extensions) file all material tax returns required
to be filed at or prior to the Closing Date ("Seller Returns"). Each of
Seller and its Subsidiaries has paid, or set up adequate reserves on the
Seller Financial Statements for the payment of, all taxes required to be
paid in respect of the periods covered by the Seller Financial Statements and
has set up adequate reserves on the most recent financial statements Seller
has filed under the Exchange Act for the payment of all taxes anticipated to
be payable in respect of all periods up to and including the latest period
covered by such financial statements. To the best of Seller's knowledge,
neither Seller nor any Seller Subsidiary will have any liability material to
the Condition of Seller and the Seller Subsidiaries, taken as a whole, for
any such taxes in excess of the amounts so paid or reserves so established
and no material deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed (tentatively or definitely)
against any of Seller or any Seller Subsidiary which would not be
covered by existing reserves. Neither Seller nor any Seller Subsidiary
is delinquent in the payment of any material tax, assessment or governmental
charge, nor, except as previously disclosed, has it requested any extension
of time within which to file any tax returns in respect of any fiscal year
which have not since been filed and no requests for waivers of the time
to assess any tax are pending. The federal and state income tax returns of
Seller and the Seller Subsidiaries have been audited and settled by the
Internal Revenue Service (the "IRS") or appropriate state tax authorities
for all periods ended - through December 31, 1987. There is no
material deficiency or refund litigation or matter in controversy with
respect to Seller Returns. Neither Seller nor any Seller Subsidiary has
extended or waived any statute of limitations on the assessment of any tax
due that is currently in effect.
2.09. Material Adverse Change. Since June 30, 1996, there has
-----------------------
been no material adverse change in the Condition of Seller and its Subsidi-
aries, taken as a whole.
2.10. Commitments and Contracts. (a) Except as set forth on
-------------------------
Schedule 2.10A, neither Seller nor any Seller Subsidiary is a party or
subject to any of the following (whether written or oral, express or
implied):
(i) any material agreement, arrangement or commitment (A) not made
in the ordinary course of business or (B) pursuant to which Seller or
any of its Subsidiaries is or may become obligated to invest in or
contribute capital to any Seller Subsidiary;
(ii) any agreement, indenture or other instrument not disclosed in
the Seller Financial Statements relating to the borrowing of money by
Seller or any Seller Subsidiary or the guarantee by Seller or any Seller
Subsidiary of any such obligation (other than trade payables or
instruments related to transactions entered into in the ordinary course
of business by any Seller Subsidiary, such as deposits and Fed Funds
borrowings);
(iii) any contract, agreement or understanding with any labor union
or collective bargaining organization;
(iv) any contract containing covenants which limit the ability of
Seller or any Seller Subsidiary to compete in any line of business or
with any person or which involve any restriction of the geographical
area in which, or method by which, Seller or any Seller Subsidiary may
carry on its business;
(v) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K promulgated by
the Securities and Exchange Commission; or
(vi) any lease with annual rental payments aggregating $250,000 or
more.
(b) Neither Seller nor any Seller Subsidiary is in violation of
its charter documents or bylaws or in default under any material agreement,
commitment, arrangement, lease, insurance policy, or other instrument,
whether entered into in the ordinary course of business or otherwise and
whether written or oral, and there has not occurred any event that, with the
lapse of time or giving of notice or both, would constitute such a default,
except, in all cases, where such default would not have a material adverse
effect on the Condition of Seller and its Subsidiaries, taken as a whole.
2.11. Litigation and Other Proceedings. Except as set forth on
--------------------------------
Schedule 2.11, neither Seller nor any Seller Subsidiary is a party to any
pending or, to the best knowledge of Seller, threatened claim, action, suit,
investigation or proceeding, or is subject to any order, judgment or decree,
except for matters which, in the aggregate, will not have, or reasonably
could not be expected to have, a material adverse effect on the Condition of
Seller and its Subsidiaries, taken as a whole, or which purports or seeks to
enjoin or restrain the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, there are no actions, suits, or
proceedings pending or, to the best knowledge of Seller, threatened against
Seller or any Seller Subsidiary or any of their respective officers or
directors by any stockholder of Seller or any Seller Subsidiary (or any
former stockholder of Seller or any Seller Subsidiary) or involving claims
under the Securities Act, the Exchange Act, the Community Reinvestment Act of
1977, as amended ("CRA"), or the fair lending laws.
2.12. Insurance. Set forth on Schedule 2.12 is a list of all
---------
insurance policies maintained by or for the benefit of Seller or its
Subsidiaries or their directors, officers, employees or agents.
2.13. Compliance with Laws. (a) Seller and each of its
---------------------
Subsidiaries have all permits, licenses, authorizations, orders and approvals
of, and have made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit them to own or
lease their properties and assets and to carry on their business as presently
conducted and that are material to the business of Seller and its Subsidi-
aries; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best knowledge of Seller,
no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current.
(b) Except for failures to comply or defaults which individually
or in the aggregate would not have a material adverse effect on the Condition
of Seller and its Subsidiaries, taken as a whole, (i) each of Seller and its
Subsidiaries has complied with all laws, regulations and orders (including
without limitation zoning ordinances, building codes, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and securities, tax,
environmental, civil rights, and occupational health and safety laws and
regulations and including without limitation in the case of any Seller Sub-
sidiary that is a bank or savings association, banking organization, banking
corporation or trust company, all statutes, rules, regulations and policy
statements pertaining to the conduct of a banking, deposit-taking, lending or
related business, or to the exercise of trust powers) and governing
instruments applicable to them and to the conduct of their business, and (ii)
neither Seller nor any Seller Subsidiary is in default under, and no event
has occurred which, with the lapse of time or notice or both, could result in
the default under, the terms of any judgment, order, writ, decree, permit, or
license of any Regulatory Authority or court, whether federal, state,
municipal, or local and whether at law or in equity. Except for liabilities
which individually or in the aggregate would not have a material adverse
effect on the Condition of Seller and its Subsidiaries, taken as a whole, and
neither Seller nor any Seller Subsidiary is subject to or reasonably likely
to incur a liability as a result of its ownership, operation, or use of any
Property (as defined below) of Seller (whether directly or, to the best
knowledge of Seller, as a consequence of such Property being part of the
investment portfolio of Seller or any Seller Subsidiary) (A) that is
contaminated by or contains any hazardous waste, toxic substance, or related
materials, including without limitation asbestos, PCBs, pesticides, her-
bicides, and any other substance or waste that is hazardous to human health
or the environment (collectively, a "Toxic Substance"), or (B) on which any
Toxic Substance has been stored, disposed of, placed, or used in the
construction thereof. "Property" of a person shall include all property
(real or personal, tangible or intangible) owned or controlled by such
person, including without limitation property under foreclosure, property
held by such person or any Subsidiary of such person in its capacity as a
trustee and property in which any venture capital or similar unit of such
person or any Subsidiary of such person has an interest. No claim, action,
suit, or proceeding is pending against Seller or any Seller Subsidiary
relating to Property of Seller before any court or other Regulatory Authority
or arbitration tribunal relating to hazardous substances, pollution, or the
environment, and there is no outstanding judgment, order, writ, injunction,
decree, or award against or affecting Seller or any Seller Subsidiary with
respect to the same. Except for statutory or regulatory restrictions of
general application, no Regulatory Authority has placed any restriction on
the business of Seller or any Seller Subsidiary which reasonably could be
expected to have a material adverse effect on the Condition of Seller and its
Subsidiaries, taken as a whole.
(c) From and after January 1, 1993, neither Seller nor any Seller
Subsidiary has received any notification or communication which has not been
resolved from any Regulatory Authority (i) asserting that any Seller or any
Subsidiary of Seller is not in compliance in any material respect with any of
the statutes, regulations or ordinances that such Regulatory Authority
enforces, or (ii) threatening to revoke any license, franchise, permit or
governmental authorization that is material to the Condition of Seller and
its Subsidiaries, taken as a whole, including without limitation such
company's status as an insured depositary institution under the Federal
Deposit Insurance Act, or (iii) requiring or threatening to require Seller or
any of its Subsidiaries, or indicating that Seller or any of its Subsidiaries
may be required, to enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement restricting or limiting or
purporting to direct, restrict or limit in any manner the operations of
Seller or any of its Subsidiaries, including without limitation any re-
striction on the payment of dividends. No such cease and desist order,
agreement or memorandum of understanding or other agreement is currently in
effect.
(d) Neither Seller nor any Seller Subsidiary is required by
Section 32 of the Federal Deposit Insurance Act to give prior notice to any
federal banking agency of the proposed addition of an individual to its board
of directors or the employment of an individual as a senior executive of-
ficer.
2.14. Labor. No work stoppage involving Seller or any Seller
-----
Subsidiary, is pending or, to the best knowledge of Seller, threatened.
Neither Seller nor any Seller Subsidiary is involved in, or, to the best
knowledge of Seller, threatened with or affected by, any labor dispute,
arbitration, lawsuit or administrative proceeding which reasonably could be
expected to have a material adverse effect on the Condition of Seller and its
Subsidiaries, taken as a whole. Employees of neither Seller nor any Seller
Subsidiary are represented by any labor union or any collective bargaining
organization.
2.15. Material Interests of Certain Persons. (a) Except as set
---------------------------------------
forth in Seller's Proxy Statement for its 1996 Annual Meeting of Stockholders,
to the best knowledge of Seller, no executive officer or director of Seller
or any Subsidiary of Seller, or any "associate" (as such term is defined in
Rule l4a-1 under the Exchange Act) of any such executive officer or director,
has any material interest in any material contract or property (real or
personal, tangible or intangible), used in or pertaining to the business of,
Seller or any Subsidiary of Seller, which in the case of Seller is required
to be disclosed by Item 404 of Regulation S-K promulgated by the Securities
and Exchange Commission or in the case of any such Subsidiary would be re-
quired to be so disclosed if such Subsidiary had a class of securities regis-
tered under Section 12 of the Exchange Act.
(b) Except as set forth in Seller's Proxy Statement for its 1996
Annual Meeting of Stockholders or on Schedule 2.15B, as of June 30, 1996,
there are no loans from Seller or any Seller Subsidiary to any present
officer, director, employee or any associate or related interest of any such
person which was or would be required under any rule or regulation to be
approved by or reported to Seller's or Seller Subsidiary's Board of Directors
("Insider Loans"), and no Insider Loans in excess of $500,000 have been made
since June 30, 1996. All outstanding Insider Loans from Seller or any Seller
Subsidiary were approved by or reported to the appropriate board of directors
in accordance with applicable laws and regulations.
2.16. Employee Benefit Plans. (a) Except as set forth in
------------------------
Schedule
2.16A, neither Seller nor any Seller Subsidiary is a party to any existing
employment, management, consulting, deferred compensation, change-in-control
or other similar contract. "Seller Employee Plans" means all pension,
retirement, supplemental retirement, savings, profit sharing, stock option,
stock purchase, stock ownership, stock appreciation right, deferred
compensation, consulting, bonus, medical, disability, workers' compensation,
vacation, group insurance, severance and other material employee benefit, in-
centive and welfare policies, contracts, plans and arrangements, and all
trust agreements related thereto, maintained (currently or at any time in the
last six years) by or contributed to by Seller or any Seller Subsidiary in
respect of any of the present or former directors, officers, or other
employees of and/or consultants to Seller or any Seller Subsidiary. Schedule
2.16A lists all Seller Employee Plans currently in effect. Seller has
furnished Buyer with the following documents with respect to each Seller
Employee Plan: (i) a true and complete copy of all written documents com-
prising such Seller Employee Plan (including amendments and individual
agreements relating thereto) or, if there is no such written document, an
accurate and complete description of the Seller Employee Plan; (ii) the most
recent Form 5500 or Form 5500-C (including all schedules thereto), if appli-
cable; (iii) the most recent financial statements and actuarial reports, if
any; (iv) the summary plan description currently in effect and all material
modifications thereof, if any; and (v) the most recent IRS determination
letter, if any. Without limiting the generality of the foregoing, Seller has
furnished Buyer with true and complete copies of each form of stock option
grant or stock option agreement that is outstanding under any stock option
plan of Seller or any Seller Subsidiary. Seller has no unfunded liability
under any Seller Employee Plans maintained currently or at any time during
the last six years.
(b) Except as set forth in Schedule 2.16A, all Seller Employee
Plans have been maintained and operated materially in accordance with their
terms and with the material requirements of all applicable statutes, orders,
rules and final regulations, including without limitation ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"). All contributions
required to be made to Seller Employee Plans have been made.
(c) With respect to each of the Seller Employee Plans which is a
pension plan (as defined in Section 3(2) of ERISA) (the
"Pension Plans"):
(i) each Pension Plan which is intended to be "qualified" within the meaning
of Section 401(a) of the Code has been determined to be so qualified by the
IRS and, to the knowledge of Seller, such determination letter may still be
relied upon, and each related trust is exempt from taxation under Section
501(a) of the Code; (ii) the present value of all benefits vested and all
benefits accrued under each Pension Plan which is subject to Title IV of
ERISA, valued using the assumptions in the most recent actuarial report, did
not, in each case, as of the last applicable annual valuation date (as
indicated on Schedule 2.16A), exceed the value of the assets of the Pension
Plan allocable to such vested or accrued benefits; (iii) to the best knowl-
edge of Seller, there has been no "prohibited transaction," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, which could
subject any Pension Plan or associated trust, or the Seller or any Seller
Subsidiary, to any material tax or penalty; (iv) except as set forth on
Schedule 2.16C, no Pension Plan subject to Title IV of ERISA or any trust
created thereunder has been terminated, nor have there been any "reportable
events" with respect to any Pension Plan, as that term is defined in Section
4043 of ERISA on or after January 1, 1985; and (v) no Pension Plan or any
trust created thereunder has incurred any "accumulated funding deficiency",
as such term is defined in Section 302 of ERISA (whether or not waived). No
Pension Plan is a "multiemployer plan" as that term is defined in Section
3(37) of ERISA. With respect to each Pension Plan that is described in Sec-
tion 4063(a) of ERISA (a "Multiple Employer Pension Plan"): (i) neither
Seller nor any Seller Subsidiary would have any liability or obligation to
post a bond under Section 4063 of ERISA if Seller and all Seller Subsidiaries
were to withdraw from such Multiple Employer Pension Plan; and (ii) neither
Seller nor any Seller Subsidiary would have any liability under Section 4064
of ERISA if such Multiple Employer Pension Plan were to terminate.
(d) Except as set forth on Schedule 2.16D, neither Seller nor any
Seller Subsidiary has any liability for any post-retirement health, medical
or similar benefit of any kind whatsoever, except as required by statute or
regulation.
(e) Neither Seller nor any Seller Subsidiary has any material
liability under ERISA or the Code as a result of its being a member of a
group described in Sections 414(b), (c), (m) or (o) of the Code.
(f) Except as set forth on Schedule 2.16F, neither the execution
nor delivery of this Agreement, nor the consummation of any of the
transactions contemplated hereby, will (i) result in any material payment
(including without limitation severance, unemployment compensation or golden
parachute payment) becoming due to any director or employee of Seller or any
Seller Subsidiary from any of such entities, (ii) materially increase any
benefit otherwise payable under any of the Seller Employee Plans or (iii)
result in the acceleration of the time of payment of any such benefit. No
holder of an option to acquire stock of Seller has or will have at any time
through the Effective Time the right to receive any cash or other payment
(other than the issuance of stock of Seller) in exchange for or with respect
to all or any portion of such option. Seller shall use its reasonable best
efforts to insure that no amounts paid or payable by Seller, Seller
Subsidiaries or Buyer to or with respect to any employee or former employee
of Seller or any Seller Subsidiary will fail to be deductible for federal
income tax purposes by reason of Section 280G of the Code. No Seller
Employee Stock Option has an associated "Additional Option Right" or similar
"re-load" feature.
2.17. Conduct of Seller to Date. From and after January 1, 1996
-------------------------
through the date of this Agreement, except as set forth on Schedule 2.17 or
in Seller Financial Statements: (i) Seller and the Seller Subsidiaries have
conducted their respective businesses in the ordinary and usual course con-
sistent with past practices; (ii) Seller has not issued, sold, granted,
conferred or awarded any of its Equity Securities (except shares of Seller
Common Stock upon exercise of Seller Employee Stock Options), or any
corporate debt securities which would be classified under GAAP as long-term
debt on the balance sheets of Seller; (iii) Seller has not effected any stock
split or adjusted, combined, reclassified or otherwise changed its
capitalization; (iv) Seller has not declared, set aside or paid any dividend
(other than its regular quarterly common dividends) or other distribution in
respect of its capital stock, or purchased, redeemed, retired, repurchased,
or exchanged, or otherwise acquired or disposed of, directly or indirectly,
any of its Equity Securities, whether pursuant to the terms of such Equity
Securities or otherwise; (v) neither Seller nor any Seller Subsidiary has
incurred any material obligation or liability (absolute or contingent),
except normal trade or business obligations or liabilities incurred in the
ordinary course of business, or subjected to Lien any of its assets or
properties other than in the ordinary course of business consistent with past
practice; (vi) neither Seller nor any Seller Subsidiary has discharged or
satisfied any material Lien or paid any material obligation or liability
(absolute or contingent), other than in the ordinary course of business;
(vii) neither Seller nor any Seller Subsidiary has sold, assigned, trans-
ferred, leased, exchanged, or otherwise disposed of any of its properties or
assets other than for a fair consideration in the ordinary course of
business; (viii) except as required by contract or law, neither Seller nor
any Seller Subsidiary has (A) increased the rate of compensation of, or paid
any bonus to, any of its directors, officers, or other employees, except
merit or promotion increases in accordance with existing policy or
guidelines, (B) entered into any new, or amended or supplemented any exist-
ing, employment, management, consulting, deferred compensation, severance, or
other similar contract, (C) entered into, terminated, or substantially
modified any of the Seller Employee Plans or (D) agreed to do any of the
foregoing; (ix) neither Seller nor any Seller Subsidiary has suffered any
material damage, destruction, or loss, whether as the result of fire, explo-
sion, earthquake, accident, casualty, labor trouble, requisition, or taking
of property by any Regulatory Authority, flood, windstorm, embargo, riot, act
of God or the enemy, or other casualty or event, and whether or not covered
by insurance; (x) neither Seller nor any Seller Subsidiary has cancelled or
compromised any debt, except for debts charged off or compromised in ac-
cordance with the past practice of Seller and its Subsidiaries, and (xi)
neither Seller nor any Seller Subsidiary has entered into any material
transaction, contract or commitment outside the ordinary course of its busi-
ness.
2.18. Proxy Statement, etc. None of the information regarding
---------------------
Seller
or any Seller Subsidiary supplied or to be supplied by Seller for inclusion
or included in (i) the registration statement on Form S-4 to be filed with
the Securities and Exchange Commission by Buyer for the purpose of
registering the shares of Buyer Common Stock to be exchanged for shares of
Seller Common Stock pursuant to the provisions of this Agreement (the "Reg-
istration Statement"), (ii) the proxy or information statement (the "Proxy
Statement") to be mailed to Seller's stockholders in connection with the
transactions contemplated by this Agreement or (iii) any other documents to
be filed with any Regulatory Authority in connection with the transactions
contemplated hereby will, at the respective times such documents are filed
with any Regulatory Authority and, in the case of the Registration Statement,
when it becomes effective and, with respect to the Proxy Statement, when
mailed, be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
misleading or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the meeting of Seller's stockholders
referred to in Section 5.03 (the "Meeting") (or, if no Meeting is held, at
the time the Proxy Statement is first furnished to Seller's stockholders), be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Meeting. All documents
which Seller or any Seller Subsidiary is responsible for filing with any
Regulatory Authority in connection with the Merger will comply as to form in
all material respects with the provisions of applicable law.
2.19. Registration Obligations. Except as set forth on Schedule
------------------------
2.19, neither Seller nor any Seller Subsidiary is under any obligation,
contingent or otherwise, to register any of its securities under the Se-
curities Act.
2.20. State Takeover Statutes. Seller has taken all actions
-----------------------
necessary to ensure that the transactions contemplated by this Agreement are
not subject to any applicable state takeover laws under the laws of the State
of Iowa.
2.21. Accounting, Tax and Regulatory Matters. Neither Seller nor
---------------------------------------
any Seller Subsidiary has taken or agreed to take any action or has any
knowledge of any fact or circumstance that would (i) prevent the transactions
contemplated hereby from qualifying as a reorganization within the meaning of
Section 368 of the Code or (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement.
2.22. Other Activities. (a) Except as set forth on Schedule
----------------
2.22A, neither Seller nor any of its Subsidiaries engages in any ins-
urance activities other than acting as a principal, agent or broker for
insurance that is directly related to an extension of credit by Seller
or any of its Subsidiaries and limited to assuring the repayment of the
balance due on the extension of credit in the event of the death,
disability or involuntary unemployment of the debtor.
(b) To the knowledge of Seller's management: each Subsidiary or
affiliate that is a bank that performs personal trust, corporate trust and
other fiduciary activities ("Trust Activities") has done so with requisite
authority under applicable law of Regulatory Authorities and in material ac-
cordance with the agreements and instruments governing such Trust Activities,
sound fiduciary principles and applicable law and regulation (specifically
including but not limited to Section 9 of Title 12 of the Code of Federal
Regulations); there is no investigation or inquiry by any governmental entity
pending or threatened against Seller or any of its Subsidiaries or affiliates
thereof relating to the compliance by Seller or any of its Subsidiaries with
sound fiduciary principles and applicable law and regulations; and each
employee of any such bank had the authority to act in the capacity in which
such employee acted with respect to Trust Activities in each case in which
such employee was held out as a representative of such bank; and such bank
has established policies and procedures for the purpose of complying with
applicable laws of governmental entities relating to Trust Activities, has
followed such policies and procedures in all material respects and has
performed appropriate internal audit reviews of Trust Activities, which
audits have disclosed no material violations of applicable laws of
governmental entities or such policies and procedures.
2.23. Interest Rate Risk Management Instruments. (a) Set forth
------------------------------------------
on Schedule 2.23A is a list of all interest rate swaps, caps, floors, and
option agreements and other interest rate risk management arrangements to
which Seller or any of its Subsidiaries is a party or by which any of
their properties or assets may be bound.
(b) All interest rate swaps, caps, floors and option agreements
and other interest rate risk management arrangements to which Seller or any
of its Subsidiaries is a party or by which any of their properties or assets
may be bound were entered into in the ordinary course of business and in
accordance with prudent banking practice and applicable rules, regulations
and policies of Regulatory Authorities and with counterparties believed to be
financially responsible at the time and are legal, valid and binding obli-
gations and are in full force and effect. Seller and each of its
Subsidiaries has duly performed in all material respects all of its
obligations thereunder to the extent that such obligations to perform have
accrued, and there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
2.24. Accuracy of Information. The statements of Seller contained
------------------------
in this Agreement, the Schedules and any other written document executed and
delivered by or on behalf of Seller pursuant to the terms of this Agreement
are true and correct in all material respects, and such statements and
documents do not omit any material fact necessary to make the statements
contained therein not misleading.
2.25. Brokers and Finders. Except for The Chicago Corporation,
-------------------
neither Seller nor any Seller Subsidiary nor any of their respective
officers, directors or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees, and no broker or finder has acted directly or
indirectly for Seller or any Seller Subsidiary in connection with this
Agreement or the transactions contemplated hereby.
ARTICLE III
-----------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer represents and warrants to and covenants with Seller as
follows:
3.01. Organization and Authority. Buyer and each of its
-----------------------------
Subsidiaries
is a corporation, bank, trust company or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of
organization, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and has corporate power and
authority to own its properties and assets and to carry on its business as it
is now being conducted, except, in the case of the Buyer Subsidiaries, where
the failure to be so qualified would not have a material adverse effect on
the Condition of Buyer and its Subsidiaries, taken as a whole. Buyer is
registered as a bank holding company with the Board under the Holding Company
Act. True and complete copies of the Articles of Incorporation and Bylaws of
Buyer and of Magna Bank, N.A., each in effect on the date of this Agreement,
have been provided to Seller. Buyer's bank Subsidiaries (the "Buyer Banks")
are national banking associations chartered by the OCC. The deposits of each
of the Buyer Banks are insured by the BIF or, to the extent transferred to a
Buyer Bank by the Resolution Trust Corporation, by the SAIF of the FDIC. The
Buyer Banks identified as such on Schedule 3.01 are members in good standing
of the Federal Reserve System.
3.02. Capitalization of Buyer. The authorized capital stock of
------------------------
Buyer
consists of (i) 40,000,000 shares of Buyer Common Stock, of which, as of
August 23, 1996, 28,019,668 shares were issued and outstanding, (ii)
1,000,000 shares of preferred stock, no par value ("Buyer Preferred Stock"),
of which no shares are issued or outstanding, (iii) 49,500 of 7.5% Cumulative
Class B Voting Preferred Stock, par value $20.00 per share, of which 2,039
shares were issued and outstanding, and (iv) 1,000,000 shares of Class C Non-
Voting Preferred Stock, par value $0.10 per share, of which no shares were
outstanding. Buyer has designated 400,000 shares of Buyer Preferred Stock
and has reserved such shares under the Buyer Rights Agreement. As of August
23, 1996, Buyer had reserved 5,384,673 shares of Buyer Common Stock for
issuance under the Convertible Subordinated Capital Notes and Convertible
Subordinated Debentures, Buyer's various stock option and incentive plans, a
list of which is set forth on Schedule 3.02 ("Buyer Stock Options"), Buyer's
dividend reinvestment plan and Buyer's employee stock purchase plan. From
August 23, 1996 through the date of this Agreement, no shares of Buyer Common
Stock or other Equity Securities of Buyer have been issued, excluding any
such shares which may have been issued pursuant to stock-based employee
benefit or incentive plans and programs, or pursuant to the foregoing
agreements. Buyer continually evaluates possible acquisitions and may, prior
to the Effective Time, enter into one or more agreements providing for, and
may consummate, the acquisition by it of another bank, association, bank
holding company, savings and loan holding company or other company (or the
assets thereof) for consideration that may include equity securities. In
addition, prior to the Effective Time, Buyer may, depending on market
conditions and other factors, otherwise determine to issue equity, equity-
linked or other securities for financing purposes. Notwithstanding the fore-
going, Buyer will not take any action that would (i) prevent the transactions
contemplated hereby from qualifying as a reorganization within the meaning of
Section 368 of the Code, or (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement. All of the issued and outstand-
ing shares of capital stock of Buyer and its Subsidiaries are validly issued,
fully paid, and nonassessable, and have not been issued in violation of any
preemptive right of any stockholder of Buyer or its Subsidiaries. At the
Effective Time, the Buyer Common Stock to be issued in the Merger will be
duly authorized, validly issued, fully paid and non-assessable, and will not
be issued in violation of any preemptive right of any stockholder of Buyer.
3.03. Authorization. (a) Buyer has the corporate power and
-------------
authority to enter into this Agreement and to carry out its obligations
hereunder. No stockholder vote is required for Buyer to approve this
Agreement. The execution, delivery and performance of this Agreement by
Buyer and the consummation by Buyer of the transactions contemplated hereby
have been duly authorized by all requisite corporate action of Buyer. This
Agreement is a valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms.
(b) Neither the execution, delivery and performance by Buyer of
this Agreement, nor the consummation by Buyer of the transactions
contemplated hereby, nor compliance by Buyer with any of the provisions
hereof, will (i) violate, conflict with or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the creation of, any
Lien upon any of the material properties or assets of Buyer or any Buyer
Subsidiary under any of the terms, conditions or provisions of (x) its ar-
ticles or certificate of incorporation or bylaws, or (y) any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Buyer or any Buyer Subsidiary or any of the
material properties or assets of Buyer or any Buyer Subsidiary is a party or
by which it may be bound, or to which Buyer or any Buyer Subsidiary may be
subject, or (ii) subject to compliance with the statutes and regulations
referred to in paragraph (c) of this Section 3.03, to the best knowledge of
Buyer, violate any judgment, ruling, order, writ, injunction, decree, stat-
ute, rule or regulation applicable to Buyer or any of its Subsidiaries or any
of their respective material properties or assets.
(c) Other than in connection with or in compliance with the
provisions of the Delaware General Corporation Law (the "DGCL"), the Iowa
Act, the Securities Act, the Exchange Act, the securities or blue sky laws of
the various states or filings, consents, reviews, authorizations, approvals
or exemptions required under the Holding Company Act and the HSR Act, or any
required approvals of any other Regulatory Authority, no notice to, filing
with, exemption or review by, or authorization, consent or approval of, any
public body or authority is necessary for the consummation by Buyer of the
transactions contemplated by this Agreement.
(d) Consummation of the transactions contemplated by this
Agreement will be a valid, binding and enforceable obligation of Merger Sub.
At the Effective Time, the capital stock of Merger Sub to be issued will be
duly authorized, validly issued, fully paid and non-assessable.
3.04. Buyer Financial Statements. The consolidated and parent
--------------------------
company only balance sheets of Buyer and its Subsidiaries as of December 31,
1995, 1994 and 1993 and related consolidated statements of income, cash flows
and changes in stockholders' equity for each of the three years in the three-
year period ended December 31, 1995, together with the notes thereto, audited
by Ernst & Young LLP ("Buyer Auditors") as filed with the Securities and
Exchange Commission, and the unaudited consolidated balance sheets of Buyer
and its Subsidiaries as of March 31 and June 30, 1996 and the related
unaudited consolidated statements of income and cash flows for the periods
then ended included in quarterly reports on Form 10-Q as filed with the
Securities and Exchange Commission (collectively, the "Buyer Financial State-
ments"), have been prepared in accordance with GAAP, present fairly the
consolidated financial position of Buyer and its Subsidiaries at the dates
and the consolidated results of operations, changes in stockholders' equity
and cash flows of Buyer and its Subsidiaries for the periods stated therein
and are derived from the books and records of Buyer and its Subsidiaries,
which are complete and accurate in all material respects and have been
maintained in all material respects in accordance with applicable laws and
regulations. Neither Buyer nor any of its Subsidiaries has any material
contingent liabilities that are not described in the financial statements
described above.
3.05. Buyer Reports. Since January 1, 1993, each of Buyer and the
-------------
Buyer Subsidiaries has filed all material reports, registrations and
statements, together with any required material amendments thereto, that it
was required to file with any Regulatory Authority. All such reports and
statements filed with any such Regulatory Authority are collectively referred
to herein as the "Buyer Reports." As of its respective date, each Buyer
Report complied in all material respects with all the rules and regulations
promulgated by the applicable Regulatory Authority and did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.06. Properties and Leases. Except as may be reflected in the
---------------------
Buyer
Financial Statements, except for any Lien for current taxes not yet
delinquent and except with respect to assets classified as real estate owned,
Buyer and its Subsidiaries have good title free and clear of any material
Lien to all the real and personal property reflected in Buyer's consolidated
balance sheet as of June 30, 1996 included in the most recent Buyer Form 10-Q
and, in each case, all real and personal property acquired since such date,
except such real and personal property as has been disposed of in the
ordinary course of business. All leases material to Buyer or any Buyer
Subsidiary pursuant to which Buyer or any Buyer Subsidiary, as lessee, leases
real or personal property, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any material
existing default by Buyer or any Buyer Subsidiary or any event which, with
notice or lapse of time or both, would constitute such a material default.
Substantially all of Buyer's and Buyer Subsidiaries' buildings, structures
and equipment in regular use have been well maintained and are in good and
serviceable condition, normal wear and tear excepted.
3.07. Material Adverse Change. Since June 30, 1996, there has
------------------------
been no material adverse change in the Condition of Buyer and its Subsidia-
ries, taken as a whole.
3.08. Compliance with Laws. (a)(i) Each of Buyer and its
--------------------
Subsidiaries has complied with all laws, regulations, and orders (including
without limitation zoning ordinances, building codes, ERISA, and securities,
tax, environmental, civil rights, and occupational health and safety laws and
regulations and including without limitation in the case of any Buyer
Subsidiary that is a bank, banking organization, thrift, banking corporation
or trust company, all statutes, rules, regulations and policy statements,
pertaining to the conduct of a banking, deposit-taking or lending or related
business or to the exercise of trust powers) and governing instruments appli-
cable to them and to the conduct of their business, except where such failure
to comply would not have a material adverse effect on the Condition of Buyer
and its Subsidiaries, taken as a whole, and (ii) neither Buyer nor any Buyer
Subsidiary is in default under, and no event has occurred which, with the
lapse of time or notice or both, could result in the default under, the terms
of any judgment, order, writ, decree, permit, or license of any Regulatory
Authority or court, whether federal, state, municipal, or local and whether
at law or in equity, except where such default would not have a material
adverse effect on the Condition of Buyer and its Subsidiaries, taken as a
whole. Neither Buyer nor any Buyer Subsidiary is subject to or reasonably
likely to incur a liability as a result of its ownership, operation, or use
of any Property of Buyer (whether directly or, to the best knowledge of
Buyer, as a consequence of such Property being part of the investment
portfolio of Buyer or any Buyer Subsidiary) (A) that is contaminated by or
contains any Toxic Substance, or (B) on which any Toxic Substance has been -
stored, disposed of, placed, or used in the construction thereof; and which,
in each case, reasonably could be expected to have a material adverse effect
on the Condition of Buyer and its Subsidiaries, taken as a whole. Except for
statutory or regulatory restrictions of general application, no Regulatory
Authority has placed any restriction on the business of Buyer or any Buyer
Subsidiary which reasonably could be expected to have a material adverse ef-
fect on the Condition of Buyer and its Subsidiaries, taken as a whole.
Except as disclosed on Schedule 3.08A, no claim, action, suit, or proceeding
is pending against Buyer or any Buyer Subsidiary relating to Property of
Buyer before any court or other Regulatory Authority or arbitration tribunal
relating to hazardous substances, pollution, or the environment, and there is
no outstanding judgment, order, writ, injunction, decree, or award against or
affecting Buyer or any Buyer Subsidiary with respect to the same.
(b) Buyer and each of its Subsidiaries have all permits, licenses,
authorizations, orders and approvals of, and have made all filings,
applications and registrations with, all Regulatory Authorities that are
required in order to permit them to own or lease their properties and assets
and to carry on their business as presently conducted and that are material
to the business of Buyer and its Subsidiaries; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect
and, to the best knowledge of Buyer, no suspension or cancellation of any of
them is threatened; and all such filings, applications and registrations are
current.
(c) From and after January 1, 1993, neither Buyer nor any Buyer
Subsidiary has received any notification or communication which has not been
resolved from any Regulatory Authority (i) asserting that any Buyer or any
Subsidiary of Buyer, is not in substantial compliance with any of the stat-
utes, regulations or ordinances that such Regulatory Authority enforces,
except with respect to matters which (A) are set forth on Schedule 3.08C or
in any writing previously furnished to Buyer or (B) reasonably could not be
expected to have a material adverse effect on the Condition of Buyer and its
Subsidiaries, taken as a whole, (ii) threatening to revoke any license,
franchise, permit or governmental authorization that is material to the
Condition of Buyer and its Subsidiaries, taken as a whole, including without
limitation such company's status as an insured depositary institution under
the Federal Deposit Insurance Act, or (iii) requiring or threatening to
require Buyer or any of its Subsidiaries, or indicating that Buyer or any of
its Subsidiaries may be required, to enter into a cease and desist order,
agreement or memorandum of understanding or any other agreement restricting
or limiting or purporting to direct, restrict or limit in any manner the
operations of Buyer or any of its Subsidiaries, including without limitation
any restriction on the payment of dividends. No such cease and desist order,
agreement or memorandum of understanding or other agreement is currently in
effect.
3.09. Registration Statement, etc. None of the information
-----------------------------
regarding
Buyer or any of its Subsidiaries supplied or to be supplied by Buyer for
inclusion or included in (i) the Registration Statement, (ii) the Proxy
Statement, or (iii) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will, at
the respective times such documents are filed with any Regulatory Authority
and, in the case of the Registration Statement, when it becomes effective
and, with respect to the Proxy Statement, when mailed (or furnished to
stockholders of Seller), be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein not misleading or, in the case of the Proxy Statement or
any amendment thereof or supplement thereto, at the time of the Meeting, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Meeting. All documents
which Buyer or any of its Subsidiaries are responsible for filing with any
Regulatory Authority in connection with the Merger will comply as to form in
all material respects with the provisions of applicable law.
3.10. Labor. No work stoppage involving Buyer or any Buyer
-----
Subsidiary, is pending or, to the best knowledge of Buyer, threatened.
Neither Buyer nor any Buyer Subsidiary is involved in, or, to the best
knowledge of Buyer, threatened with or affected by, any labor dispute,
arbitration, lawsuit or administrative proceeding which reasonably could be
expected to have a material adverse affect on the Condition of Buyer and its
Subsidiaries, taken as a whole. Except as disclosed on Schedule 3.10,
employees of neither Buyer nor any Buyer Subsidiary are represented by any
labor union or any collective bargaining organization.
3.11. Material Interests of Certain Persons. (a) Except as set
-------------------------------------
forth in Buyer's Proxy Statement for its 1996 Annual Meeting of Stockholders,
to the best knowledge of Buyer, no executive officer or director of Buyer or
any Subsidiary of Buyer, or any "associate" (as such term is defined in Rule
l4a-1 under the Exchange Act) of any such officer or director, has any
material interest in any material contract or property (real or personal,
tangible or intangible), used in or pertaining to the business of, Buyer or
any Subsidiary of Buyer, which in the case of Buyer is required to be dis-
closed by Item 404 of Regulation S-K promulgated by the Securities and
Exchange Commission or in the case of any such Subsidiary would be required
to be so disclosed if such Subsidiary had a class of securities registered
under Section 12 of the Exchange Act.
(b) As of June 30, 1996, there are no loans from Buyer or any
Buyer Subsidiary to any present officer, director, employee or any associate
or related interest of any such person which have been made other than in
accordance with applicable laws and regulations.
3.12. Employee Benefit Plans. (a) Except as set forth in
------------------------
Schedule
3.12A, neither Buyer nor any Buyer Subsidiary is a party to any existing
employment, management, consulting, deferred compensation, change-in-control
or other similar contract. "Buyer Employee Plans" means all pension, retire-
ment, supplemental retirement, savings, profit sharing, stock option, stock
purchase, stock ownership, stock appreciation right, deferred compensation,
consulting, bonus, medical, disability, workers' compensation, vacation,
group insurance, severance and other material employee benefit, incentive and
welfare policies, contracts, plans and arrangements, and all trust agreements
related thereto, maintained (currently or at any time in the last five years)
by or contributed to by Buyer or any Buyer Subsidiary in respect of any of
the present or former directors, officers, or other employees of and/or
consultants to Buyer or any Buyer Subsidiary. Schedule 3.12A lists all Buyer
Employee Plans currently in effect. Buyer has furnished Seller with the fol-
lowing documents with respect to each Buyer Employee Plan: (i) a true and
complete copy of all written documents comprising such Buyer Employee Plan
(including amendments and individual agreements relating thereto) or, if
there is no such written document, an accurate and complete description of
the Buyer Employee Plan; (ii) the most recent Form 5500 or Form 5500-C
(including all schedules thereto), if applicable; (iii) the most recent fi-
nancial statements and actuarial reports, if any; (iv) the summary plan
description currently in effect and all material modifications thereof, if
any; and (v) the most recent IRS determination letter, if any. Without
limiting the generality of the foregoing, Buyer has furnished Seller with
true and complete copies of each form of stock option grant or stock option
agreement that is outstanding under any stock option plan of Buyer or any
Buyer Subsidiary.
(b) Except as set forth in Schedule 3.12B, all Buyer Employee
Plans have been maintained and operated materially in accordance with their
terms and with the material requirements of all applicable statutes, orders,
rules and final regulations, including without limitation ERISA and the Code.
All contributions required to be made to Buyer Employee Plans have been made.
(c) With respect to each of the Buyer Employee Plans which is a
pension plan (as defined in Section 3(2) of ERISA) (the "Buyer Pension
Plans"): (i) each Buyer Pension Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined to be
so qualified by the IRS and, to the knowledge of Buyer, such determination
letter may still be relied upon, and each related trust is exempt from
taxation under Section 501(a) of the Code; (ii) the present value of all
benefits vested and all benefits accrued under each Buyer Pension Plan which
is subject to Title IV of ERISA, valued using the assumptions in the most
recent actuarial report, did not, in each case, as of the last applicable
annual valuation date (as indicated on Schedule 3.12A), exceed the value of
the assets of the Buyer Pension Plan allocable to such vested or accrued ben-
efits; (iii) to the best knowledge of Buyer, there has been no "prohibited
transaction," as such term is defined in Section 4975 of the Code or Section
406 of ERISA, which could subject any Buyer Pension Plan or associated trust,
or the Buyer or any Buyer Subsidiary, to any material tax or penalty; (iv)
except as set forth on Schedule 3.12C, no Buyer Pension Plan subject to Title
IV of ERISA or any trust created thereunder has been terminated, nor have
there been any "reportable events" with respect to any Buyer Pension Plan, as
that term is defined in Section 4043 of ERISA on or after January 1, 1985;
and (v) no Buyer Pension Plan or any trust created thereunder has incurred
any "accumulated funding deficiency", as such term is defined in Section 302
of ERISA (whether or not waived). No Buyer Pension Plan is a "multiemployer
plan" as that term is defined in Section 3(37) of ERISA. With respect to
each Multiple Employer Pension Plan: (i) neither Buyer nor any Buyer
Subsidiary would have any liability or obligation to post a bond under
Section 4063 of ERISA if Buyer and all Buyer Subsidiaries were to withdraw
from such Multiple Employer Pension Plan; and (ii) neither Buyer nor any
Buyer Subsidiary would have any liability under Section 4064 of ERISA if such
Multiple Employer Pension Plan were to terminate.
(d) Except as set forth on Schedule 3.12D, neither Buyer nor any
Buyer Subsidiary has any material liability for any post-retirement health,
medical or similar benefit of any kind whatsoever, except as required by
statute or regulation.
(e) Neither Buyer nor any Buyer Subsidiary has any material
liability under ERISA or the Code as a result of its being a member of a
group described in Sections 414(b), (c), (m) or (o) of the Code.
(f) Except as set forth on Schedule 3.12F, neither the execution
nor delivery of this Agreement, nor the consummation of any of the
transactions contemplated hereby, will (i) result in any material payment
(including without limitation severance, unemployment compensation or golden
parachute payment) becoming due to any director or employee of Buyer or any
Buyer Subsidiary from any of such entities, (ii) materially increase any
benefit otherwise payable under any of the Buyer Employee Plans or (iii)
result in the acceleration of the time of payment of any such benefit. No
holder of an option to acquire stock of Buyer has or will have at any time
through the Effective Time the right to receive any cash or other payment
(other than the issuance of stock of Buyer) in exchange for or with respect
to all or any portion of such option. Buyer shall use its reasonable best
efforts to insure that no amounts paid or payable by Buyer or any of its
Subsidiaries to or with respect to any employee or former employee of Buyer
or any Buyer Subsidiary will fail to be deductible for federal income tax
purposes by reason of Section 280G of the Code. No Buyer Employee Stock
Option has an associated "Additional Option Right" or similar "re-load"
feature.
3.13. Commitments and Contracts. Neither Buyer nor any Buyer
-------------------------
Subsidiary is in violation of its charter documents or bylaws or in default
under any material agreement, commitment, arrangement, lease, insurance
policy, or other instrument, whether entered into in the ordinary course of
business or otherwise and whether written or oral, and there has not occurred
any event that, with the lapse of time or giving of notice or both, would
constitute such a default, except, in all cases, where such default would not
have a material adverse effect on the Condition of Buyer and its
Subsidiaries, taken as a whole.
3.14. Litigation and Other Proceedings. Neither Buyer nor any
---------------------------------
Buyer
Subsidiary is a party to any pending or, to the best knowledge of Buyer,
threatened claim, action, suit, investigation or proceeding, or is subject to
any order, judgment or decree, except for matters which, in the aggregate,
will not have, or reasonably could not be expected to have, a material
adverse effect on the Condition of Buyer and its Subsidiaries, taken as a
whole, or which purports or seeks to enjoin or restrain the transactions
contemplated by this Agreement. Without limiting the generality of the fore-
going, there are no actions, suits, or proceedings pending or, to the best
knowledge of Buyer, threatened against Buyer or any Buyer Subsidiary or any
of their respective officers or directors by any stockholder of Buyer or any
Buyer Subsidiary (or any former stockholder of Buyer or any Buyer Subsidiary)
or involving claims under the Securities Act, the Exchange Act, the CRA or
the fair lending laws.
3.15. Taxes. Buyer and each Buyer Subsidiary have timely filed or
-----
will timely (including extensions) file all material tax returns required to
be filed at or prior to the Closing Date ("Buyer Returns"). Each of Buyer
and its Subsidiaries has paid, or set up adequate reserves on the Buyer Fi-
nancial Statements for the payment of, all taxes required to be paid in
respect of the periods covered by the Buyer Financial Statements and has set
up adequate reserves on the most recent financial statements Buyer has filed
under the Exchange Act for the payment of all taxes anticipated to be payable
in respect of all periods up to and including the latest period covered by
such financial statements. Neither Buyer nor any Buyer Subsidiary will have
any liability material to the Condition of Buyer and the Buyer Subsidiaries,
taken as a whole, for any such taxes in excess of the amounts so paid or
reserves so established and no material deficiencies for any tax, assessment
or governmental charge have been proposed, asserted or assessed (tentatively
or definitely) against any of Buyer or any Buyer Subsidiary which would not
be covered by existing reserves. Neither Buyer nor any Buyer Subsidiary is
delinquent in the payment of any material tax, assessment or governmental
charge, nor, except as previously disclosed, has it requested any extension
of time within which to file any tax returns in respect of any fiscal year
which have not since been filed and no requests for waivers of the time to
assess any tax are pending. The federal and state income tax returns of
Buyer and the Buyer Subsidiaries have been audited and settled by the IRS or
appropriate state tax authorities for all periods ended through December 31,
1992. There is no deficiency or material refund litigation or matter in
controversy with respect to Buyer Returns. Neither Buyer nor any Buyer
Subsidiary has extended or waived any statute of limitations on the assess-
ment of any tax due that is currently in effect.
3.16. Accounting, Tax and Regulatory Matters. Neither Buyer nor
---------------------------------------
any Buyer Subsidiary has taken or agreed to take any action or has any know-
ledge of any fact or circumstance that would (i) prevent the trans-
actions contemplated hereby from qualifying as a reorganization within the
meaning of Section 368 of the Code or (ii) materially impede or delay receipt
of any approval referred to in Section 6.01(b) or the consummation of
the transactions contemplated by this Agreement.
3.17. Accuracy of Information. The statements of Buyer contained
-----------------------
in this Agreement, the Schedules and in any other written document executed
and delivered by or on behalf of Buyer pursuant to the terms of this Agree-
ment are true and correct in all material respects, and such statements and
documents do not omit any material fact necessary to make the state-
ments contained herein or therein not misleading.
3.17. Brokers and Finders. Except for Donaldson, Lufkin &
---------------------
Jenrette
Securities Corporation, neither Buyer nor any of its Subsidiaries nor any of
their respective officers, directors or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for Buyer or any of its Subsidiaries in connection
with this Agreement or the transactions contemplated hereby.
ARTICLE IV
----------
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01. Conduct of Businesses Prior to the Effective Time. During
---------------------------------------------------
the period from the date of this Agreement to the Effective Time, each of
Buyer and Seller shall, and shall cause each of their respective Subsidiaries
to, conduct its business according to the ordinary and usual course consis-
tent with past practices and shall, and shall cause each such Subsidiary to,
use its reasonable best efforts to maintain and preserve its busi-
ness organization, employees and advantageous business relationships and
retain the services of its officers and key employees. Seller acknowledges
that Buyer has filed with the OCC a request for approval to establish and
operate certain subsidiaries for, among other things, tax and admini-
strative purposes, and Seller agrees that the establishment and operation
of such subsidiaries shall not be violative of the provisions of this Section.
4.02. Forbearances. Except as otherwise contemplated by this
------------
Agreement and without limiting the provisions of Section 4.01, during the
period from the date of this Agreement to the Effective Time, Seller shall
not, and shall not permit any of its Subsidiaries to, without the prior
written consent of Buyer:
(a) subject to the provisions of Section 5.15, declare, set aside
or pay any dividends or other distributions, directly or indirectly, in
respect of its capital stock (other than its regular quarterly dividend
not to exceed $0.23 per share and dividends from a wholly owned
Subsidiary of Seller to Seller or another wholly owned Subsidiary of
Seller) and provided
--------
further, that Seller shall not declare or pay any dividends on Seller
Common Stock for any period in which its stockholders will be entitled
to receive any regular quarterly dividend on the shares of Buyer Common
Stock to be issued in the Merger; or
(b) enter into or amend any employment, severance or similar
agreement or arrangement with any director or officer or employee, or
materially modify any of the Seller Employee Plans or grant any salary
or wage increase or materially increase any employee benefit (including
incentive or bonus payments), except normal individual increases in
compensation to employees consistent with past practice, or as required
by law or contract; or
(c) authorize, propose or announce an intention to authorize, or
propose, or enter into an agreement in principle with respect to, any
merger, consolidation or business combination (other than the Merger),
any acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities or any release
or relinquishment of any material contract rights; or
(d) propose or adopt any amendments to its articles of
incorporation, association or other charter document or bylaws; or
(e) issue, sell, grant, confer or award any of its Equity
Securities (except shares of Seller Common Stock issued upon exercise of
Seller Employee Stock Options outstanding on the date of this Agreement)
or effect any stock split or adjust, combine, reclassify or otherwise
change its capitalization as it existed on the date of this Agreement;
or
(f) purchase, redeem, retire, repurchase, or exchange, or
otherwise acquire or dispose of, directly or indirectly, any of its
Equity Securities, whether pursuant to the terms of such Equity
Securities or otherwise; or
(g) (i) without first consulting with Buyer, enter into, renew or
increase any loan or credit commitment (including standby letters of
credit) to, or invest or agree to invest in any person or entity or
modify any of the material provisions or renew or otherwise extend the
maturity date of any existing loan or credit commitment (collectively,
"Lend to") in an amount in excess of $1,500,000 or in an amount which,
or when aggregated with any and all loans or credit commitments to such
person or entity, would be in excess of $1,500,000; (ii) Lend to any
person other than in accordance with lending policies as in effect on
the date hereof; or (iii) without first consulting with Buyer, Lend to
any person or entity any of the loans or other extensions of credit to
which or investments in which are on a "watch list" or similar internal
report of Seller or any Seller Subsidiary (except those denoted "pass"
thereon), in an amount in excess of $500,000; provided, however, that
-------- -------
nothing in this paragraph shall prohibit Seller or any Seller Subsidiary
from honoring any contractual obligation in existence on the date of this
Agreement; or
(h) directly or indirectly (including through its officers,
directors, employees or other representatives) initiate, solicit or
encourage any discussions, inquiries or proposals with any third party
relating to the disposition of any significant portion of the business
or assets of Seller or any Seller Subsidiary or the acquisition of
Equity Securities of Seller or any Seller Subsidiary or the merger of
Seller or any Seller Subsidiary with any person (other than Buyer) or
any similar transaction (each such transaction being referred to herein
as an "Acquisition Transaction"), or provide any such person with
information or assistance or negotiate with any such person with respect
to an Acquisition Transaction, and Seller shall promptly notify Buyer -
orally of all the relevant details relating to all inquiries,
indications of interest and proposals which it may receive with respect
to any Acquisition Transaction; or
(i) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Buyer or Seller to obtain any approval of any Regulatory
Authority required for the transactions contemplated by this Agreement
or to perform its covenants and agreements under this Agreement or (B)
prevent the transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the Code; or
(j) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible
or liable for the obligations of any other individual, corporation or
other entity; or
(k) without prior consultation with Buyer, restructure or
materially change its investment securities portfolio, through
purchases, sales or otherwise, or the manner in which the portfolio is
classified or reported, or execute any individual investment transaction
(i) in United States Treasury securities in excess of $5,000,000 and
(ii) in any other investment securities in excess of $1,000,000; or
(l) agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or take or
omit to take any other act which would make any of the representations
and warranties in Article II of this Agreement untrue or incorrect in
any material respect if made anew after engaging in such activity,
entering into such transaction, or taking or omitting such other act.
4.03. Forbearances. Except as set forth on Schedule 4.03 or as
------------
otherwise contemplated by this Agreement and without limiting the provisions
of Section 4.01, during the period from the date of this Agreement to the Ef-
fective Time, Buyer shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Seller:
(a) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Buyer or Seller to obtain any approval of any Regulatory
Authority required for the transactions contemplated by this Agreement
or to perform its covenants and agreements under this Agreement or (B)
prevent the transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the Code; or
(b) agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or take or
omit to take any other act which would make any of the representations
and warranties in Article III of this Agreement untrue or incorrect in
any material respect if made anew after engaging in such activity,
entering into such transaction, or taking or omitting such other act.
ARTICLE V
---------
ADDITIONAL AGREEMENTS
5.01. Access and Information. (a) Buyer and its Subsidiaries, on
----------------------
the one hand, and Seller and its Subsidiaries, on the other hand, shall each
afford to each other, and to the other's accountants, counsel and other
representatives, full access during normal business hours, during the period
prior to the Effective Time, to all their respective properties, books,
contracts, commitments and records and, during such period, each shall
furnish promptly to the other (i) a copy of each report, schedule and other
document filed or received by it during such period pursuant to the require-
ments of federal and state securities laws and (ii) all other information
concerning its business, properties and personnel as such other party may
reasonably request. Each party hereto shall, and shall cause its advisors
and representatives to, (A) hold confidential all information obtained in
connection with any transaction contemplated hereby with respect to the other
party which is not otherwise public knowledge, (B) return all documents
(including copies thereof) obtained hereunder from the other party to such
other party and (C) use its reasonable best efforts to cause all information
obtained pursuant to this Agreement or in connection with the negotiation of
this Agreement to be treated as confidential and not use, or knowingly permit
others to use, any such information unless such information becomes generally
available to the public.
(b) Promptly following the date of this Agreement, each party
shall commence a review of the operations, business affairs, prospects and
financial condition of the other party (the "Due Diligence Review"). Such
Due Diligence Review shall conclude by not later than 15 business days after
the date of this Agreement (the "Due Diligence Period"). Each party shall
promptly advise the other of any situation, event, circumstance or other
matter which first came to the attention of such party after the date hereof
which could result in the termination of this Agreement pursuant to Section
7.01 hereof, or, if applicable, of the absence of any situation, event,
circumstance or other matter. Notwithstanding anything herein or implied to
the contrary, the Due Diligence Review shall not limit, restrict or preclude,
or be construed to limit, restrict or preclude, either party, at any time or
from time to time thereafter, from conducting such further reviews or from
exercising any rights available to it hereunder as a result of the existence
or occurrence prior to the Due Diligence Period of any event or condition
which was not detected in the Due Diligence Review and which would constitute
a breach of any representation, warranty or agreement under this Agreement.
5.02. Registration Statement; Regulatory Matters. (a) Buyer shall
------------------------------------------
prepare and, subject to the review and consent of Seller with respect to
matters relating to Seller, file with the Securities and Exchange Commission
as soon as is reasonably practicable the Registration Statement (or the
equivalent in the form of preliminary proxy material) with respect to the
consideration to be issued by Buyer in the Merger. Buyer shall prepare and
file an application with the Federal Reserve Board, OTS and Iowa Division of
Banking as soon as reasonably practicable. Buyer shall use all reasonable
efforts to cause the Registration Statement to become effective. Buyer shall
also take any action required to be taken under any applicable state blue sky
or securities laws in connection with the issuance of any shares, and Seller
and its Subsidiaries shall furnish Buyer all information concerning Seller
and its Subsidiaries and the stockholders thereof as Buyer may reasonably re-
quest in connection with any such action.
(b) Seller and Buyer shall cooperate and use their respective
reasonable best efforts to prepare all documentation, to effect all filings
and to obtain all permits, consents, approvals and authorizations of all
third parties and Regulatory Authorities necessary to consummate the transac-
tions contemplated by this Agreement and, as and if directed by Buyer, to
consummate such other mergers, consolidations or asset transfers or other
transactions by and among Buyer's Subsidiaries and Seller's Subsidiaries
concurrently with or following the Effective Time.
5.03. Stockholder Approval. Seller shall call a meeting of its
--------------------
stockholders to be held as soon as practicable for the purpose of voting upon
the Merger or take other action for stockholders to authorize the Merger. In
connection therewith, Buyer shall prepare the Proxy Statement and, with the
approval of each of Buyer and Seller, the Proxy Statement shall be filed with
the Securities and Exchange Commission and mailed to the stockholders of
Seller. The Board of Directors of Seller shall (subject to compliance with
its fiduciary duties as advised by counsel) recommend to its shareholders the
approval of this Agreement and the Merger contemplated hereby and use its
reasonable efforts to obtain such approval.
5.04. Current Information. During the period from the date of
--------------------
this
Agreement to the Effective Time, each party shall promptly furnish the other
party with copies of all monthly and other interim financial information or
reports as the same become available and shall cause one or more of its des-
ignated representatives to confer on a regular and frequent basis with
representatives of the other party. Each party shall promptly notify the
other party of any material change in its business or operations and of any
governmental complaints, investigations or hearings (or communications indi-
cating that the same may be contemplated), or the institution or the threat
of material litigation involving such party, and shall keep the other party
fully informed of such events.
5.05. Agreements of Affiliates. As soon as practicable after the
------------------------
date of this Agreement, Seller shall deliver to Buyer a letter identifying
all persons whom Seller believes to be, at the time this Agreement is
submitted to a vote of the stockholders of Seller, "affiliates" of Seller for
purposes of Rule 145 under the Securities Act. Seller shall use its
reasonable best efforts to cause each person who is so identified as an "af-
filiate" to deliver to Buyer as soon as practicable thereafter, and in any
event no later than the publication of notice in the Federal Register of
Buyer's application with the Federal Reserve Board referred to in Section
5.02, a written agreement in Form of Exhibit C providing that from the date
of such agreement each such person will agree not to sell, pledge, transfer
or otherwise dispose of any shares of stock of Seller held by such person or
any shares of Buyer Common Stock to be received by such person in the Merger
except in compliance with the applicable provisions of the Securities Act.
5.06. Expenses. Each party hereto shall bear its own expenses
--------
incident to preparing, entering into and carrying out this Agreement and to
consummating the Merger.
5.07. Miscellaneous Agreements and Consents. Subject to the terms
-------------------------------------
and conditions herein provided, each of the parties hereto agrees to use its
respective reasonable best efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as possible,
including without limitation using its respective reasonable best efforts to
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions con-
templated hereby. Each party shall, and shall cause each of its respective
Subsidiaries to, use its reasonable best efforts to obtain consents of all
third parties and Regulatory Authorities necessary or, in the opinion of
Buyer, desirable for the consummation of the transactions contemplated by
this Agreement.
5.08. Employee Stock Options. At the Effective Time, all rights
----------------------
with
respect to Seller Common Stock pursuant to Seller Employee Stock Options
that are outstanding at the Effective Time, whether or not then exercisable,
shall be converted into and become rights with respect to Buyer Common
Stock, and Buyer shall assume each Seller Employee Stock Option in accordance
with the terms of the stock option plan under which it was issued and the
stock option agreement by which it is evidenced. From and after the
Effective Time, (i) each Seller Employee Stock Option assumed by Buyer shall
be exercised solely for shares of Buyer Common Stock, (ii) the number of
shares of Buyer Common Stock subject to each Seller Employee Stock Option
shall be equal to the number of shares of Seller Common Stock subject to such
Seller Employee Stock Option immediately prior to the Effective Time multi-
plied by the Exchange Ratio and (iii) the per share exercise price under each
Seller Employee Stock Option shall be adjusted by dividing the per share
exercise price under such Seller Employee Stock Option by the Exchange Ratio
and rounding down to the nearest cent; provided, however,
-------- ------
that the terms of each Seller Employee Stock Option shall, in accordance
with its terms, be subject to further adjustment as appropriate to reflect
any stock split, stock dividend, recapitalization or other similar
transaction subsequent to the Effective Time. It is intended that the
foregoing assumption shall be undertaken in a manner that will not constitute
a "modification" as defined in the Code, as to any Seller Employee Stock
Option that is an "incentive stock option."
5.09. Press Releases. Except as may be required by law, Seller
--------------
and Buyer shall consult and agree with each other as to the form, timing
and substance of any proposed press release relating to this Agreement or any
of the transactions contemplated hereby.
5.10. State Takeover Statutes. Seller will take all steps
-------------------------
necessary
to exempt the transactions contemplated by this Agreement and any agreement
contemplated hereby from, and if necessary challenge the validity of, any
applicable state takeover law.
5.11. D&O Indemnification. Buyer agrees that the Merger shall not
-------------------
affect or diminish any of Seller's duties and obligations of indemnification
existing as of the Effective Time in favor of employees, agents, directors or
officers of Seller or its Subsidiaries arising by virtue of their respective
Articles of Incorporation or Bylaws in the form in effect at the date of this
Agreement or arising by operation of law or arising by virtue of any
contract, resolution or other agreement or document existing at the date of
this Agreement, and Buyer agrees to use its reasonable best efforts to assume
such duties and obligations of indemnification, in order that such duties and
obligations shall continue in full force and effect for so long as they would
(but for the Merger) otherwise survive and continue in full force and ef-
fect.
5.12. Insurance. As soon as practicable following the date
---------
hereof, Seller shall, and Seller shall cause its Subsidiaries to, use its
reasonable best efforts to maintain its existing insurance coverage.
5.13. Certain Directors. Buyer agrees to cause Messrs. Erl A.
-----------------
Schmiesing and Douglas K. Shull to be elected or appointed as directors of
Buyer at, or promptly after the Effective Time. Buyer shall take all
corporate action necessary to ensure that Mr. Schmiesing serves on the Board
of Directors of Buyer for a period of three years following the Closing Date.
5.14. Employment Agreements. All employment and change of control
---------------------
agreements with Seller employees in effect prior to the date of this
Agreement and previously disclosed to Buyer will be honored by Buyer in
accordance with their terms; provided, however, that certain named executives
will surrender their existing employment and change of control agreements in
exchange for (i) Buyer change of control or employment agreements, and (ii)
awards of restricted stock with a value of one times Annualized Includible
Compensation (as defined in the applicable agreement) vesting ratably over
five years, with accelerated vesting if terminated without Cause or as result
of a Change of Control (each as defined in the applicable agreement) of
Buyer.
5.15. Dividends. After the date of this Agreement, each of Buyer
---------
and Seller shall coordinate with the other the declaration of any dividends in
respect of Buyer Common Stock and Seller Common Stock and the record dates
and payment dates relating thereto, it being the intention of the parties
hereto that holders of Buyer Common Stock or Seller Common Stock shall not
receive two dividends, or fail to receive one dividend, for any single
calendar quarter with respect to their shares of Buyer Common Stock and/or
Seller Common Stock and any shares of Buyer Common Stock any such holder
receives in exchange therefor in the Merger.
ARTICLE VI
----------
CONDITIONS
6.01. Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment or waiver at or prior to the Effective Time of
the following conditions:
(a) This Agreement shall have received the requisite approval of
stockholders of Seller.
(b) All requisite approvals of this Agreement and the transactions
contemplated hereby shall have been received from the Federal Reserve
Board, the State Bank Regulator, the OTS and any other Regulatory
Authority; provided, however, that such approvals shall not contain or
impose any conditions or requirements that would have a material adverse
effect on the business or financial condition of either party.
(c) The Registration Statement shall have been declared effective
and shall not be subject to a stop order or any threatened stop order.
(d) Neither Seller nor Buyer shall be subject to any order, decree
or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger.
(e) Each of Buyer and Seller shall have received, from counsel
reasonably satisfactory to it, an opinion reasonably satisfactory in
form and substance to it to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are con-
sistent with the state of facts existing at the Effective Time, the
Merger will constitute a reorganization within the meaning of Section
368 of the Code and that accordingly:
(i) no gain or loss will be recognized by Seller or Buyer as
a result of the Merger;
(ii) no gain or loss will be recognized by the stockholders
of Seller who exchange their shares of Seller Common Stock solely for
Buyer Common Stock pursuant to the Merger (except with respect to cash
received in lieu of fractional shares);
(iii) the tax basis of the Buyer Common Stock received by
stockholders who exchange all of their Seller Common Stock solely for
Buyer Common Stock in the Merger will be the same as the tax basis of
the Seller Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest for which cash is re-
ceived).
(iv) gain will be recognized by the stockholders of Seller
who exchange their shares of Seller Common Stock for Buyer Common Stock
and cash to the extent of the lesser of (i) the amount of cash received,
or (ii) the fair market value of the Buyer Common Stock and cash
received less the stockholder's basis in the Seller Common Stock sur-
rendered; and
(v) the tax basis of the Buyer Common Stock received by
stockholders who exchange their shares of Seller Common Stock for Buyer
Common Stock and cash will be the same as the tax basis of the Seller
Common Stock surrendered in exchange therefor, reduced by the amount of
cash received by the stockholder, and increased by the amount of gain
recognized by the stockholder on such exchange.
In rendering such opinion, counsel may require and rely upon representations
contained in certificates of officers of Seller, Buyer and others.
6.02. Conditions to Obligations of Seller to Effect the Merger.
------------------------------------------------------------
The obligations of Seller to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Buyer set forth in Article III of this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as
of the Effective Time (as though made on and as of the Effective Time except
(i) to the extent such representations and warranties are by their express
provisions made as of a specified date or period and (ii) for the effect of
transactions contemplated by this Agreement) and Seller shall have received a
certificate of the chairman or chief financial officer of Buyer to that
effect.
(b) Performance of Obligations. Buyer shall have performed in all
--------------------------
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and Seller shall have received a
certificate of the chairman or chief financial officer of Buyer to that
effect.
6.03. Conditions to Obligations of Buyer to Effect the Merger.
-----------------------------------------------------------
The obligations of Buyer to effect the Merger shall be subject to the fulfill-
ment or waiver at or prior to the Effective Time of the following addi-
tional conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Seller set forth in Article II of this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as
of the Effective Time (as though made on and as of the Effective Time except
(i) to the extent such representations and warranties are by their express
provisions made as of a specific date or period and (ii) for the effect of
transactions contemplated by this Agreement) and Buyer shall have received a
certificate of the chairman of Seller and a certificate of the president and
chief executive officer of Seller to that effect.
(b) Performance of Obligations. Seller shall have performed in
---------------------------
all material respects all obligations required to be performed by it under
this Agreement prior to the Effective Time, and Buyer shall have received
a certificate of the chairman of Seller and a certificate of the president and
chief executive officer of Seller to that effect.
ARTICLE VII
-----------
TERMINATION, AMENDMENT AND WAIVER
7.01. Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time, whether before or after any requisite
stockholder approval:
(a) by mutual consent of the Board of Directors of Buyer and the
Board of Directors of Seller;
(b) by the Board of Directors of Buyer or the Board of Directors
of Seller at any time after the date that is ten months after the date
of this Agreement if the Merger shall not theretofore have been consum-
mated (provided that the terminating party is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein);
(c) by the Board of Directors of Buyer or the Board of Directors
of Seller if (i) any Regulatory Authority has denied approval of the
Merger and such denial has become final and nonappealable, (ii)
stockholders of Seller shall not have approved this Agreement at the
Meeting, or (iii) the approval of any Regulatory Authority required
pursuant to Section 6.01(b) of this Agreement contains or imposes any
conditions or requirements that would have a material adverse effect on
the Condition of either party;
(d) by the Board of Directors of Buyer in the event of a material
breach by Seller of any representation, warranty, covenant or other
agreement contained in this Agreement, which breach is not cured within
30 days after provision of written notice thereof to Seller by Buyer;
(e) by the Board of Directors of Buyer or Seller in the event that
(i) its Due Diligence Review of the other party discloses matters the
impact of which affects the other party in a manner which its Board of
Directors in the good faith exercise of its reasonable judgment believes
either (A) to be inconsistent in any material and adverse respect with
any of the representations or warranties of the other party, or (B) (x)
to be of such significance as to materially and adversely affect the
Condition of the other party, taken as a whole, or (y) to deviate mate-
rially and adversely from the financial statements for the year ended
December 31, 1995 of the other party, (ii) Buyer or Seller, as the case
may be, notifies the other party of such matters within 5 business days
of the expiration of the Due Diligence Period, and (iii) such matters
(A) are not capable of being cured or (B) have not been cured within 30
days after provision of written notice thereof by Buyer or Seller, as
the case may be, to the other party;
(f) by the Board of Directors of Seller in the event of a material
breach by Buyer of any representation, warranty, covenant or other
agreement contained in this Agreement, which breach is not cured within
30 days after written notice thereof is given to Buyer by Seller; or
(g) by the Board of Directors of Seller within five days of the
last day of the Valuation Period, if both of the following conditions
are satisfied:
(i) the Valuation Period Market Value shall be less than
$20; and
(ii) (A) the number obtained by dividing the Valuation
Period Market Value by the Starting Price (such number being
referred to herein as the "Buyer Ratio") shall be less than (B) the
number obtained by dividing the Average Index Price by the Index
Price on the Starting Date and subtracting .15 from the quotient in
this clause (ii)(B) (such number being referred to herein as the
"Index Ratio");
provided, however, that if the Seller elects to exercise its termination
-------
right pursuant to this Section 7.01(g), it shall give prompt written notice
to Buyer; provided further that such notice of election to terminate may be
--------
withdrawn at any time within the aforementioned five-day period.
For purposes of this Section 7.01(g), the following terms shall
have the meanings indicated:
"Average Index Price" means the average of the Index Prices for the
ten consecutive full NASDAQ trading days ending at the close of trading
on the last day of the Valuation Period.
"Index Group" means the group of each of the 35 bank holding
companies listed below, the common stock of all of which shall be
publicly traded and as to which there shall not have been, since the
Starting Date and before the last day of the Valuation Period, any
public announcement of a proposal either (i) for such company to be
acquired or (ii) for such company to acquire another company or
companies in transactions with a value exceeding 25% of the acquiror's
market capitalization. In the event that the common stock of any such
company ceases to be publicly traded or such an announcement is made,
such company will be removed from the Index Group, and the weights
redistributed proportionately for purposes of determining the Index
Price. The 35 bank holding companies and the weights attributed to them
are as follows:
Index
Bank Holding Company Weights
-------------------- -------
AmSouth Bancorporation 1.46844%
Banc One Corporation 11.11981%
Bancorp Hawaii, Inc. 1.02260%
BanPonce Corporation 1.16201%
Boatmen's Bancshares, Inc. 4.56467%
City National Corporation 0.52395%
Comerica Incorporated 3.76169%
Crestar Financial Corporation 1.68270%
Cullen/Frost Bankers, Inc. 0.43216%
Deposit Guaranty Corp. 0.60120%
Fifth Third Bancorp 3.79404%
First Bank System, Inc. 5.82621%
First Chicago NBD Corporation 9.32798%
First Empire State Corporation 1.14701%
First of America Bank Corporation 1.93063%
First Security Corporation 1.39727%
First Tennessee National Corporation 1.48690%
Firstar Corporation 2.21165%
Huntington Bancshares Incorporated 2.16071%
KeyCorp 6.24310%
Mark Twain Bancshares, Inc. 0.40219%
Marshall & Ilsley Corporation 1.69542%
Mercantile Bancorporation, Inc. 1.98926%
National City Corporation 5.74976%
Northern Trust Corporation 2.40936%
Norwest Corporation 9.39383%
Old Kent Financial Corporation 1.20974%
Regions Financial Corporation 1.87689%
Signet Banking Corporation 0.96991%
SouthTrust Corporation 1.89527%
Star Banc Corporation 1.53120%
State Street Boston Corporation 2.93498%
UnionBanCal Corporation 1.75614%
United Carolina Bancshares Corporation 0.37232%
U.S. Bancorp 3.94900%
--------
100.00000%
==========
"Index Price" on a given date means the weighted average (weighted
in accordance with the factors listed above) of the closing prices on
such date of the companies composing the Index Group.
"Starting Date" means the last full day on which NASDAQ was open
for trading prior to the execution of this Agreement.
"Starting Price" shall mean the closing-sale price per share of
Buyer Common Stock on the Starting Date, as reported by NASDAQ (as
reported in The Wall Street Journal, Midwest edition, or, if not
--------------------------
reported therein, in another mutually agreed upon authoritative source).
If any company belonging to the Index Group or Buyer declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the
Starting Date and the last day of the Valuation Period, the prices for
the common stock of such company or Buyer shall be appropriately
adjusted for the purposes of applying this Section 7.01(g).
7.02. Effect of Termination. In the event of termination of this
---------------------
Agreement as provided in Section 7.01 hereof this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
Buyer or Seller or their respective officers or directors except as set forth
in the second sentence of Section 5.01(a) and in Section 5.06; provided that
termination of this Agreement pursuant to Section 7.01(d) or 7.01(f) shall
not relieve the breaching party from liability for any willful breach of any
covenants, undertakings, representations or warranties giving rise to such
termination.
7.03. Amendment. This Agreement may be amended by the parties
---------
hereto, by action taken by or on behalf of their respective Boards of
Directors, at any time before or after approval of this Agreement by the
stockholders of Seller; provided, however, that after any such approval by
-------- -------
the stockholders of
Seller no such modification shall alter or change the amount or kind of
consideration to be received by holders of Seller Common Stock as provided in
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of Buyer and Seller.
7.04. Severability. Any term, provision, covenant or restriction
------------
contained in this Agreement held by a court or a Regulatory Authority of
competent jurisdiction to be invalid, void or unenforceable, shall be
ineffective to the extent of such invalidity, voidness or unenforceability,
but neither the remaining terms, provisions, covenants or restrictions
contained in this Agreement nor the validity or enforceability thereof in any
other jurisdiction shall be affected or impaired thereby. Any term,
provision, covenant or restriction contained in this Agreement that is so
found to be so broad as to be unenforceable shall be interpreted to be as
broad as is enforceable.
7.05. Waiver. Any term, condition or provision of this Agreement
------
may be waived in writing at any time by the party which is, or whose
stockholders are, entitled to the benefits thereof.
ARTICLE VIII
------------
GENERAL PROVISIONS
8.01. Non-Survival of Representations, Warranties and Agreements.
------------------------------------------------------------
No investigation by the parties hereto made heretofore or hereafter shall
affect the representations and warranties of the parties which are contained
herein and each such representation and warranty shall survive such investi-
gation. Except as set forth below in this Section 8.01, all representations,
warranties and agreements in this Agreement of Buyer and Seller or in any
instrument delivered by Buyer or Seller pursuant to or in connection with
this Agreement shall expire at the Effective Time or upon termination of this
Agreement in accordance with its terms or, in the case of any other such
instrument, in accordance with the terms of such instrument. In the event of
consummation of the Merger, the agreements contained herein which by their
terms are to be performed following the Effective Time shall survive the
Effective Time until performed in accordance with their terms. In the event
of termination of this Agreement in accordance with its terms, the agreements
contained in or referred to in the second sentence of Section 5.01(a), Sec-
tion 5.06 and Section 7.02 shall survive such termination.
8.02. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to be duly received (iv) on the date
given if delivered personally or (v) upon confirmation of receipt, if by fac-
simile transmission or (vi) on the date received if mailed by regis-
tered or certified mail (return receipt requested), or (iv) on the business
date after being delivered to a reputable overnight delivery service, if
by such service, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) if to Buyer:
Magna Group, Inc.
One Magna Place
1401 South Brentwood Boulevard
St. Louis, Missouri 63144-1401
Attention: G. Thomas Andes
Copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Craig M. Wasserman, Esq.
Telecopy: (212) 403-2000
(ii) if to Seller:
Homeland Bankshares Corporation
229 East Park Avenue
P.O. Box 5300
Waterloo, Iowa 50704-5300
Attention: Erl A. Schmiesing
Copy to:
Nyemaster, Goode, McLaughlin, Voigts,
West, Hansell & O'Brien, P.C.
1900 Hub Tower
699 Walnut Street
Des Moines, Iowa 50309
Attention: Gregory P. Page, Esq.
Telecopy: (515) 283-3108
8.03. Miscellaneous. This Agreement (including the Schedules and
-------------
other written documents referred to herein or provided hereunder) (i)
constitutes the entire agreement and supersedes all other prior agreements
and understandings, both written and oral, among the parties, or any of them,
with respect to the subject matter hereof, including any confidentiality
agreement between the parties hereto, (ii) is not intended to confer upon any
person not a party hereto any rights or remedies hereunder, (iii) shall not
be assigned by operation of law or otherwise and (iv) shall be governed in
all respects by the laws of the State of Missouri, except as otherwise
specifically provided herein or required by the Iowa Act. Nothing in this
Agreement shall be construed to require any party (or any subsidiary or
affiliate of any party) to take any action or fail to take any action in vio-
lation of applicable law, rule or regulation. This Agreement may be executed
in counterparts which together shall constitute a single agreement.
IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to
be signed and, by such signature, acknowledged by their respective officers
thereunto duly authorized, and such signatures to be attested to by their
respective officers thereunto duly authorized, all as of the date first
written above.
Attest: MAGNA GROUP, INC.
------
_________________________ By:/s/ G. Thomas Andes
------------------------------
Name: Name: G. Thomas Andes
Title: Title: Chairman and Chief
Executive Officer
Attest: HOMELAND BANKSHARES CORPORATION
------
Marcia C. Borwig By:/s/ Erl A. Schmiesing
------------------------- -------------------------------
Name: Marcia C. Borwig Name: Erl A. Schmiesing
Title: Secretary to the Title: Chairman, President and
Board Chief Executive Officer
EXHIBIT A
STOCK OPTION AGREEMENT
----------------------
See Exhibit 99.1 to Form 8-K.
EXHIBIT B
ARTICLES OF MERGER
OF
HBC ACQUISITION SUB, INC.
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to section 1105 of the Iowa Business Corporation Act, the
undersigned corporation adopts the following Articles of Merger.
I. The Plan of Merger (the "Plan") is attached hereto as Exhibit "A" and by
this reference incorporated herein as if set forth in full.
II. A. HBC Acquisition Sub, Inc., an Iowa corporation.
Shareholder approval of the merger was not required for
shareholders of this corporation.
B. Homeland Bankshares Corporation, an Iowa corporation.
The designation, number of outstanding shares, and number of votes
entitled to be cast by each voting group entitled to vote
separately on the Plan as to this corporation is as follows:
Designation Shares Votes Entitled
of Group Outstanding to be Cast
----------- ----------- -------------
Common __________ ______________
The total number of undisputed votes cast for the Plan by the sole
voting group of this corporation was _________. The number of
votes cast for the Plan by the sole voting group of this
corporation was sufficient for approval by that voting group.
III. The effective time and date of this document is __________ _.m.,
__________________________, 1997.
Dated: ________________________, 1997.
HBC Acquisition Sub, Inc., an Iowa Corporation
By:____________________________
Name:__________________________
Title:_________________________
PLAN OF MERGER
1. The names of the corporations proposing to merge are HBC
Acquisition Sub, Inc., an Iowa corporation (the "Company"), and Homeland
Bankshares Corporation, an Iowa corporation ("Homeland"). In accordance with
the applicable provisions of the Iowa Business Corporation Act (the "Act"),
Homeland shall be merged with and into the Company (the "Merger") as of the
Effective Time (as that term is defined in paragraph 2 below), with the
Company continuing as the surviving corporation. As of the Effective Time of
the Merger, the separate existence of Homeland shall cease.
2. This Plan of Merger ("Plan") shall be submitted to a vote of the
shareholders of Homeland. Approval of the Plan by the shareholders of the
Company is not required under the Act. If this Plan is approved by the
shareholders of Homeland in the manner required by the Act, the Company shall
file Articles of Merger with the Iowa Secretary of State (the "Articles of
Merger"), pursuant to and in accordance with the Act and with that certain
Agreement and Plan of Reorganization dated August 30, 1996 (the "Agreement")
(of which this Plan is a part) and entered into by and between Magna Group,
Inc., a Delaware corporation ("Buyer"), and Homeland. The Merger shall take
effect as of the time and date set forth in the Articles of Merger (the
"Effective Time"), which time and date shall not be earlier than the
satisfaction of all conditions set forth in Section 6.01 of the Agreement
(the "Approval Date") and which shall be not later than the first business
day of the first full calendar month commencing at least five (5) business
days after the Approval Date. The Approval Date shall in no event be earlier
than January 1, 1997.
3. As of the Effective Time:
(a) Homeland will merge with and into the Company, with the Company
continuing as the surviving corporation and the separate existence of
Homeland shall cease.
(b) The title to all real estate and other property owned by Homeland
shall be vested in the Company without reservation or impairment.
(c) The Company shall have all liabilities of Homeland.
(d) The directors and officers of the Company immediately prior to the
Effective Time shall be the directors and officers of the Company following
the Merger, with such directors and officers to continue to hold office in
accordance with the Company's Bylaws and applicable law.
(e) The Articles of Incorporation and Bylaws of the Company in effect
immediately prior to the Effective Time shall continue as the Articles of
Incorporation and Bylaws of the Company, subject to future amendment.
(f) The Merger shall otherwise have all of the effects of a merger as
provided in Section 490.1106 of the Act.
4. (a) Each share of the common stock, par value $.01 per share, of
the Company that is issued and outstanding immediately prior to the Effective
Time shall continue to be and represent one share of common stock of the
Company, and shall remain outstanding and shall be unchanged after the Merger
and shall thereafter constitute all of the issued and outstanding capital
stock of the Company.
(b) Each share of the common stock, par value $12.50 per share, of
Homeland issued and outstanding immediately prior to the Effective Time
("Homeland Common Stock"), other than any Dissenting Shares (as defined in
paragraph 5 below), shall at the Effective Time be, by virtue of the Merger
and without any further action on the part of any holder thereof, converted
into and become the right to receive, at the election of the holder thereof,
either:
(i) 1.55 (as adjusted as described in subparagraph (d) immediately
below, the "Exchange Ratio") shares of the common stock of
Buyer, par value $2.00 per share ("Buyer Common Stock"), and
associated Preferred Share Purchase Rights issued pursuant to
the rights agreement dated as of November 11, 1988, by and be-
tween Buyer and Magna Trust Company, as rights agent (as
adjusted as described in subparagraph (d) immediately below,
the "Per Share Stock Consideration");
(ii) $37.50 in cash (as adjusted as described in subparagraph (d)
immediately below, the "Per Share Cash Consideration"); or
(iii) A combination of 57 percent Per Share Stock Consideration and
43 percent Per Share Cash Consideration (as adjusted as
described in subparagraph (d) immediately below) (the "Mixed
Election"),
provided that the aggregate number of shares of Buyer Common Stock that
shall be issued in the Merger shall not exceed 5,038,934 shares (the "Stock
Amount").
(c) The holders of Homeland Common Stock shall make an election as to
whether they desire to receive the Per Share Stock Consideration, the Per
Share Cash Consideration, or the Mixed Election, pursuant to the procedures
set forth in the Agreement, which procedures shall be set forth in the
notices forwarded to the shareholders of Homeland in connection with the
Merger.
(d) The Per Share Stock Consideration and the Per Share Cash
Consideration shall each be adjusted as of the end of the ten (10)
consecutive day period (the "Valuation Period") during which the shares of
Buyer Common Stock are traded on the Nasdaq Stock Market National Market
System ("NASDAQ") ending on the tenth calendar day immediately prior to the
anticipated Effective Time. The Per Share Stock Consideration shall be
adjusted by adjusting the Exchange Ratio such that the product of the
Exchange Ratio (rounded to the nearest 1/100th of a share) and the Valuation
Period Market Value shall equal the Average Per Share Consideration. The Per
ShareCashConsideration shallbeadjustedtoequal theAveragePerShareConsideration.
For purposes of this subparagraph (d) the following definitions shall
apply;
"Valuation Period Market Value" shall mean the average of the closing-
sale prices for the Buyer Common Stock as reported on NASDAQ (as reported in
The Wall Street Journal or, the absence thereof, by another authoritative
source) during the Valuation Period.
"Average Per Share Consideration" shall mean the Aggregate Consideration
divided by the Valuation Period Share Number (rounded to the nearest cent).
"Aggregate Consideration" shall mean the sum of (x) the product of 1.55
times the Valuation Period Market Value times 0.57 times the Valuation Period
Share Number and (y) $37.50 times 0.43 times the Valuation Period Share
Number.
"Valuation Period Share Number" shall mean the total number of shares of
Homeland Common Stock outstanding (other than treasury shares) on the last
day of the Valuation Period.
(e) If prior to the Effective Time (i) Homeland shall declare a stock
dividend or distribution upon or subdivide, split up, reclassify, or combine
the Homeland Common Stock, or declare a dividend or make a distribution on
the Homeland Common Stock in any security convertible into Homeland Common
Stock, or (ii) Buyer shall declare a stock dividend or distribution upon or
subdivide, split up, reclassify, or combine the Buyer Common Stock, or
declare a dividend or make a distribution on the Buyer Common Stock in any
security convertible into Buyer Common Stock, an appropriate adjustment or
adjustments will be made to the Per Share Cash Consideration, the Per Share
Stock Consideration, and the Stock Amount.
5. "Dissenting Shares" means any shares held by any holder of Homeland
Common Stock who becomes entitled to payment of the fair value of such shares
under the Act. Any holders of Dissenting Shares shall be entitled to payment
for such shares only to the extent permitted by and in accordance with the
provisions of the Act; provided, however, that if, in accordance with the
Act, any holder of Dissenting Shares shall forfeit such right to payment of
the fair value of such shares, such shares shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive the Per Share Cash Consideration pursuant to the
Merger. The Company, as the surviving corporation, hereby agrees that it
will promptly pay to the dissenting shareholders of Homeland, if any, the
amount, if any, to which they shall become entitled under the provisions of
the Act with respect to the rights of dissenting shareholders.
6. The other terms and conditions of the Merger are as set forth in
the Agreement.
EXHIBIT C
FORM OF AFFILIATE LETTER
Magna Group, Inc.
One Magna Place
1401 South Brentwood Boulevard
St. Louis, MO 63144-1401
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Homeland Bankshares Corporation, an Iowa corporation
(the "Company"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commis-
sion") under the Securities Act of 1933, as amended (the "Act"). Pursuant to
the terms of the Agreement and Plan of Reorganization dated as of August 30,
1996 (the "Agreement"), between Magna Group, Inc., a Delaware corporation
("Magna"), and the Company, the Company will be merged with and into Merger
Sub (the "Merger").
As a result of the Merger, I may receive (A) shares of (i) Common Stock,
par value $2.00 per share, of Magna ("Magna Common Stock"). I would receive
such Magna Common Stock in exchange for, respectively, shares (or options for
shares) owned by me of common stock, par value $12.50 per share, of the Com-
pany (the "Company Common Stock").
I represent, warrant and covenant to Magna that in the event I receive
any Magna Common Stock as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of
the Magna Common Stock in violation of the Act or the Rules and
Regulations.
B. I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of
Magna Common Stock to the extent I felt necessary, with my counsel or
counsel for the Company.
C. I have been advised that the issuance of Magna Common Stock to
me pursuant to the Merger has been registered with the Commission under
the Act on a
Registration Statement Form S-4. However, I have also been advised
that, because at the time the Merger is submitted for a vote of the
stockholders of the Company, (a) I may be deemed to be an affiliate of
the Company and (b) the distribution by me of the Magna Common Stock has
not been registered under the Act, I may not sell, transfer or otherwise
dispose of Magna Common Stock issued to me in the Merger unless (i) such
sale, transfer or other disposition is made in conformity with the
volume and other limitations of Rule 145 promulgated by the Commission
under the Act, (ii) such sale, transfer or other disposition has been
registered under the Act or (iii) in the opinion of counsel reasonably
acceptable to Magna, such sale, transfer or other disposition is
otherwise exempt from registration under the Act.
D. I understand that Magna is under no obligation to register the
sale, transfer or other disposition of the Magna Common Stock by me or
on my behalf under the Act or to take any other action necessary in
order to make compliance with an exemption from such registration
available solely as a result of the Merger.
E. I also understand that there will be placed on the
certificates for the Magna Common Stock issued to me, or any
substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED ,1996 BETWEEN THE REGISTERED HOLDER HEREOF AND
MAGNA GROUP, INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF MAGNA GROUP, INC."
F. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a
registration statement, Magna reserves the right to put the following
legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM
A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE
145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without
such legend if the undersigned shall have delivered to Magna a copy of a
letter from the staff of the Commission, or an opinion of counsel reasonably
satisfactory to Magna in form and substance reasonably satisfactory to Magna,
to the effect that such legend is not required for purposes of the Act.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first
paragraph of this letter, or as a waiver of any rights I may have to object
to any claim that I am such an affiliate on or after the date of this letter.
Very truly yours,
---------------------------------
Name:
Accepted this day of
, 1996, by
MAGNA GROUP, INC.
By ----------------------------------
Name:
Title:
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT ("Option Agreement") dated August 30, 1996,
between MAGNA GROUP, INC. ("Buyer"), a Delaware corporation registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended (the
"Holding Company Act"), and HOMELAND BANKSHARES CORPORATION ("Seller"), an Iowa
corporation registered as a bank holding company under the Holding Company Act.
W I T N E S S E T H:
-------------------
WHEREAS, the Board of Directors of Buyer and the Board of Directors of
Seller have approved an Agreement and Plan of Reorganization dated as of even
date herewith (the "Merger Agreement") providing for the merger of Seller with
and into a wholly owned subsidiary of Buyer;
WHEREAS, as a condition to Buyer's entering into the Merger Agreement,
Buyer has required that Seller agree, and Seller has agreed, to grant to Buyer
the option set forth herein to purchase authorized but unissued shares of Seller
Common Stock;
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions.
-----------
Capitalized terms used but not defined herein shall have the same
meanings as in the Merger Agreement.
2. Grant of Option.
---------------
Subject to the terms and conditions set forth herein, Seller hereby
grants to Buyer an option (the "Option") to purchase up to 1,134,972 authorized
and unissued shares of Seller Common Stock at a price of $34.00 per share (the
"Purchase Price") payable in cash as provided in Section 4 hereof.
3. Exercise of Option.
------------------
(a) Buyer may exercise the Option, in whole or in part, at any time
or from time to time if a Purchase Event (as defined below) shall have occurred;
provided, however, that (i) to the extent the Option shall not have been exer-
- -------- -------
cised, it shall terminate and be of no further force and effect upon the
earliest to occur of the Effective Time of the Merger and the termination of
the Merger Agreement in accordance with its terms, provided that if such
--------
termination follows an Extension Event (as defined below), the Option shall not
terminate until the date that is 18 months following such termination; (ii) if
the Option cannot be exercised on such day because of any injunction, order or
similar restraint issued by a court of competent jurisdiction, the Option shall
expire on the 30th business day after such injunction, order or restraint shall
have been dissolved or when such injunction, order or restraint shall have
become permanent and no longer subject to appeal, as the case may be; and (iii)
that any such exercise shall be subject to compliance with applicable law,
including the Holding Company Act.
(b) As used herein, a "Purchase Event" shall mean any of the
following events:
(i) Seller or any of its Subsidiaries, without having received prior
written consent from Buyer, shall have entered into, authorized,
recommended, proposed or publicly announced its intention to enter into,
authorize, recommend, or propose, an agreement, arrangement or
understanding with any individual, corporation, partnership, association,
bank, joint-stock corporation, business trust or unincorporated
organization ("Person") (other than Buyer or any of its Subsidiaries) to
(A) effect a merger or consolidation or similar transaction involving
Seller or any of its Subsidiaries, (B) purchase, lease or otherwise acquire
15% or more of the assets of Seller and its Subsidiaries, taken as a whole
or (C) purchase or otherwise acquire (including by way of merger, consoli-
dation, share exchange or similar transaction) Beneficial Ownership of
securities representing 10% or more of the voting power of Seller or any of
its Subsidiaries;
(ii) any Person (other than Buyer or any Subsidiary of Buyer, or
Seller or any Subsidiary of Seller in a fiduciary capacity) shall have
acquired Beneficial Ownership or the right to acquire Beneficial Ownership
of 10% or more of the voting power of Seller; or
(iii) Seller's Board of Directors shall have withdrawn or modified in a
manner adverse to Buyer the recommendation of Seller's Board of Directors
with respect to the Merger Agreement, in each case after an Extension
Event; or
(iv) the holders of Seller Common Stock shall not have approved the
Merger Agreement at the Meeting, or such Meeting shall not have been held
or shall have been cancelled prior to termination of the Merger Agreement
in accordance with its terms, in each case after an Extension Event.
(c) As used herein, the term "Extension Event" shall mean any of the
following events:
(i) a Purchase Event of the type specified in clauses (b)(i) and
(b)(ii) above;
(ii) any Person (other than Buyer or any of its Subsidiaries) shall
have "commenced" (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase shares of
Seller Common Stock such that, upon consummation of such offer, such Person
would have Beneficial Ownership (as defined below) or the right to acquire
Beneficial Ownership of 10% or more of the voting power of Seller; or,
(iii) any Person (other than Buyer or any Subsidiary of Buyer, or
Seller or any Subsidiary of Seller in a fiduciary capacity) shall have
publicly announced its willingness, or shall have publicly announced a pro-
posal, or publicly disclosed an intention to make a proposal, (x) to make
an offer described in clause (ii) above or (y) to engage in a transaction
described in clause (i) above.
(d) As used herein, the terms "Beneficial Ownership" and
"Beneficially Own" shall have the meanings ascribed to them in Rule 13d-3 under
the Exchange Act.
(e) In the event Buyer wishes to exercise the Option, it shall
deliver to Seller a written notice (the date of which being herein referred to
as the "Notice Date") specifying (i) the total number of shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 60 calendar days from the Notice Date for the
closing of such purchase (the "Closing Date").
4. Payment and Delivery of Certificates.
------------------------------------
(a) At the closing referred to in Section 3 hereof, Buyer shall pay
to Seller the aggregate purchase price for the shares of Seller Common Stock
purchased pursuant to the exercise of the Option in immediately available funds
by wire transfer to a bank account designated by Seller.
(b) At such closing, simultaneously with the delivery of cash as
provided in Section 4(a), Seller shall deliver to Buyer a certificate or
certificates representing the number of shares of Seller Common Stock purchased
by Buyer, registered in the name of Buyer or a nominee designated in writing by
Buyer in accordance with the provisions hereof, and Buyer shall deliver to
Seller a letter agreeing that Buyer shall not offer to sell, pledge or otherwise
dispose of such shares in violation of applicable law or the provisions of this
Option Agreement.
(c) If at the time of issuance of any Seller Common Stock pursuant to
any exercise of the Option, Seller shall have issued any share purchase rights
or similar securities to holders of Seller Common Stock, then each such share of
Seller Common Stock shall also represent rights with terms substantially the
same as and at least as favorable to Buyer as those issued to other holders of
Seller Common Stock.
(d) Certificates for Seller Common Stock delivered at any closing
hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Homeland Bankshares Corporation, a copy of which is on file
at the principal office of Homeland Bankshares Corporation, and to
resale restrictions arising under the Securities Act of 1933 and any
applicable state securities laws. A copy of such agreement will be
provided to the holder hereof without charge upon receipt by Homeland
Bankshares Corporation of a written request therefor.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Buyer shall have delivered
to Seller an opinion of counsel, in form and substance reasonably satisfactory
to Seller and its counsel, to the effect that such legend is not required for
purposes of the Securities Act and any applicable state securities laws.
5. Authorization, etc.
-------------------
(a) Seller hereby represents and warrants to Buyer that:
(i) Seller has full corporate authority to execute and deliver this
Option Agreement and, subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
the Board of Directors of Seller, and no other corporate proceedings are
necessary therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered and represents a valid and legally binding obligation of Seller,
enforceable against Seller in accordance with its terms and has been
approved in accordance with the provisions of the Articles of Incorporation
of Seller; and
(iv) Seller has taken all necessary corporate action to authorize and
reserve and, subject to Section 11(i), permit it to issue and, at all times
from the date hereof through the date of the exercise in full or the
expiration or termination of the Option, shall have reserved for issuance
upon exercise of the Option, 1,134,972 shares of Seller Common Stock, all
of which, upon issuance pursuant hereto, shall be duly authorized, validly
issued, fully paid and nonassessable, and shall be delivered free and clear
of all claims, liens, encumbrances, restrictions (other than federal and
state securities restrictions) and security interests and not subject to
any preemptive rights.
(b) Buyer hereby represents and warrants to Seller that:
(i) Buyer has full corporate authority to execute and deliver this
Option Agreement and, subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
all requisite corporate action by Buyer, and no other corporate proceedings
are necessary therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered and represents a valid and legally binding obligation of Buyer,
enforceable against Buyer in accordance with its terms; and
(iv) any Seller Common Stock or other securities acquired by Buyer
upon exercise of the Option will not be taken with a view to the public
distribution thereof and will not be transferred or otherwise disposed of
except in compliance with the Securities Act and any applicable state
securities laws.
6. Adjustment upon Changes in Capitalization.
-----------------------------------------
In the event of any change in Seller Common Stock by reason of stock
dividends, split-ups, recapitalizations or the like, the type and number of
shares subject to the Option, and the purchase price per share, as the case may
be, shall be adjusted appropriately. In the event that any additional shares of
Seller Common Stock are issued after the date of this Option Agreement (other
than pursuant to an event described in the preceding sentence or pursuant to
this Option Agreement), the number of shares of Seller Common Stock subject to
the Option shall be adjusted so that, after such issuance, it equals at least
19.9% of the number of shares of Seller Common Stock then issued and outstanding
(without considering any shares subject to or issued pursuant to the Option).
7. Repurchase.
----------
(a) Subject to Section 11(i), at the request of Buyer at any time
commencing upon the occurrence of a Purchase Event and ending 13 months im-
mediately thereafter (the "Repurchase Period"), Seller (or any successor entity
thereof) shall repurchase the Option from Buyer together with all (but not less
than all, subject to Section 10) shares of Seller Common Stock purchased by
Buyer pursuant thereto with respect to which Buyer then has Beneficial
Ownership, at a price (per share, the "Per Share Repurchase Price") equal to the
sum of:
(i) The exercise price paid by Buyer for any shares of Seller Common
Stock acquired pursuant to the Option;
(ii) The difference between (A) the "Market/Tender Offer Price" for
shares of Seller Common Stock (defined as the higher of (x) the highest
price per share at which a tender or exchange offer has been made for -
shares of Seller Common Stock or (y) the highest closing mean of the "bid"
and the "ask" price per share of Seller Common Stock reported by NASDAQ,
the automated quotation system of the National Association of Securities
Dealers, Inc., for any day within that portion of the Repurchase Period
which precedes the date Buyer gives notice of the required repurchase under
this Section 7) and (B) the exercise price as determined pursuant to
Section 2 hereof (subject to adjustment as provided in Section 6), mul-
tiplied by the number of shares of Seller Common Stock with respect to
which the Option has not been exercised, but only if the Market/Tender
Offer Price is greater than such exercise price;
(iii) The difference between the Market/Tender Offer Price and the
exercise price paid by Buyer for any shares of Seller Common Stock
purchased pursuant to the exercise of the Option, multiplied by the number
of shares so purchased, but only if the Market/Tender Offer Price is
greater than such exercise price; and
(iv) Buyer's reasonable out-of-pocket expenses incurred in connection
with the transactions contemplated by the Merger Agreement, including,
without limitation, legal, accounting and investment banking fees.
(b) In the event Buyer exercises its rights under this Section 7,
Seller shall, within 10 business days thereafter, pay the required amount to
Buyer by wire transfer of immediately available funds to an account designated
by Buyer and Buyer shall surrender to Seller the Option and the certificates
evidencing the shares of Seller Common Stock purchased thereunder with respect
to which Buyer then has Beneficial Ownership, and Buyer shall warrant that it
has sole record and Beneficial Ownership of such shares and that the same are
free and clear of all liens, claims, charges, restrictions and encumbrances of
any kind whatsoever.
(c) In determining the Market/Tender Offer Price, the value of any
consideration other than cash shall be determined by an independent nationally
recognized investment banking firm selected by Buyer and reasonably acceptable
to Seller.
8. Repurchase at Option of Seller and First Refusal.
------------------------------------------------
(a) Except to the extent that Buyer shall have previously exercised
its rights under Section 7, at the request of Seller during the six-month period
commencing 13 months following the first occurrence of a Purchase Event, Seller
may repurchase from Buyer, and Buyer shall sell to Seller, the Option together
with all (but not less than all, subject to Section 10) of the Seller Common
Stock acquired by Buyer pursuant hereto and with respect to which Buyer has
Beneficial Ownership at the time of such repurchase at a price per share equal
to the greater of (i) 110% of the Market/Tender Offer Price per share, (ii) the
Per Share Repurchase Price or (iii) the sum of (A) the aggregate Purchase Price
of the shares so repurchased plus (B) interest on the aggregate Purchase Price
paid for the shares so repurchased from the date of purchase to the date of
repurchase at the highest rate of interest announced by Buyer as its prime or
base lending or reference rate during such period, less any dividends received
on the shares so repurchased, plus (C) Buyer's reasonable out-of-pocket expenses
incurred in connection with the transactions contemplated by the Merger Agree-
ment, including, without limitation, legal, accounting and investment banking
fees (net of the exercise price as determined pursuant to Section 2 hereof
(subject to adjustment as provided in Section 6) in respect of any shares
remaining subject to the Option at the time of such purchase). Any repurchase
under this Section 8(a) shall be consummated in accordance with Section 7(b).
(b) If, at any time after the occurrence of a Purchase Event and
prior to the earlier of (i) the expiration of 18 months immediately following
such Purchase Event or (ii) the expiration or termination of the Option, Buyer
shall desire to sell, assign, transfer or otherwise dispose of any of the shares
of Seller Common Stock acquired by it pursuant to the Option, it shall give
Seller written notice of the proposed transaction (an "Offeror's Notice"),
identifying the proposed transferee, and setting forth the terms of the proposed
transaction. An Offeror's Notice shall be deemed an offer by Buyer to Seller,
which may be accepted within 10 business days of the receipt of such Offeror's
Notice, on the same terms and conditions and at the same price at which Buyer is
proposing to transfer such shares to a third party. The purchase of such shares
by Seller shall be closed within 10 business days of the date of the acceptance
of the offer and the purchase price shall be paid to Buyer by wire transfer of
immediately available funds to an account designated by Buyer. In the event of
the failure or refusal of Seller to purchase all the shares covered by the
Offeror's Notice or if the Board or any other Regulatory Authority disapproves
Seller's proposed purchase of such shares, Buyer may, within 60 days from the
date of the Offeror's Notice, sell all, but not less than all, of such shares to
such third party at no less than the price specified and on terms no more
favorable to the purchaser than those set forth in the Offeror's Notice. The
requirements of this Section 8(b) shall not apply to (i) any disposition as a
result of which the proposed transferee would Beneficially Own not more than 2%
of the voting power of Seller or (ii) any disposition of Seller Common Stock by
a Person to whom Buyer has sold shares of Seller Common Stock issued upon ex-
ercise of the Option.
9. Registration Rights.
-------------------
At any time after a Purchase Event, Seller shall, if requested by any
holder or beneficial owner of shares of Seller Common Stock issued upon exercise
of the Option (except any beneficial holder who acquired all of such holder's
shares in a transaction exempt from the requirements of Section 8(b) by reason
of clause (i) thereof) (each a "Holder"), in the next publicly filed
registration statement of Seller on a form for general use under the Securities
Act, include the shares of Seller Common Stock issued to such Holder upon
exercise of the Option in order to permit the sale or other disposition of such
shares in accordance with the intended method of sale or other disposition
requested by any such Holder (it being understood and agreed that any such sale
or other disposition shall be effected on a widely distributed basis so that,
upon consummation thereof, no purchaser or transferee shall Beneficially Own
more than 2% of the shares of Seller Common Stock then outstanding). Each such
Holder shall provide all information reasonably requested by Seller for in-
clusion in any registration statement to be filed hereunder. Seller shall use
its reasonable best efforts to cause such registration statement first to become
effective and then to remain effective for such period not in excess of 180 days
from the day such registration statement first becomes effective as may be
reasonably necessary to effect such sales or other dispositions. The
registration effected under this Section 9 shall be at Seller's expense except
for underwriting commissions and the fees and disbursements of such Holders'
counsel attributable to the registration of such Seller Common Stock. In no
event shall Seller be required to effect more than one registration hereunder.
The filing of the registration statement hereunder may be delayed for such
period of time as may reasonably be required to facilitate any public distribu-
tion by Seller of Seller Common Stock or if a special audit of Seller would
otherwise be required in connection therewith. If requested by any such Holder
in connection with such registration, Seller shall become a party to any under-
writing agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for
parties similarly situated. Upon receiving any request for registration under
this Section 9 from any Holder, Seller agrees to send a copy thereof to any
other Person known to Seller to be entitled to registration rights under this
Section 9, in each case by promptly mailing the same, postage prepaid, to the
address of record of the Persons entitled to receive such copies.
10. Severability.
------------
Any term, provision, covenant or restriction contained in this Option
Agreement held by a court or a Regulatory Authority of competent jurisdiction to
be invalid, void or unenforceable, shall be ineffective to the extent of such
invalidity, voidness or unenforceability, but neither the remaining terms,
provisions, covenants or restrictions contained in this Option Agreement nor the
validity or enforceability thereof in any other jurisdiction shall be affected
or impaired thereby. Any term, provision, covenant or restriction contained in
this Option Agreement that is so found to be so broad as to be unenforceable
shall be interpreted to be as broad as is enforceable. If for any reason such
court or Regulatory Authority determines that applicable law will not permit
Buyer or any other Person to acquire, or Seller to repurchase or purchase, the
full number of shares of Seller Common Stock provided in Section 2 hereof (as
adjusted pursuant to Section 6 hereof), it is the express intention of the
parties hereto to allow Buyer or such other Person to acquire, or Seller to
repurchase or purchase, such lesser number of shares as may be permissible,
without any amendment or modification hereof.
11. Miscellaneous.
-------------
(a) Expenses. Each of the parties hereto shall pay all costs and
--------
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial con-
sultants, investment bankers, accountants and counsel, except as otherwise
provided herein.
(b) Entire Agreement. Except as otherwise expressly provided herein,
----------------
this Option Agreement and the Merger Agreement contain the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersede all prior arrangements or understandings with respect thereto, written
or oral.
(c) Successors; No Third Party Beneficiaries. The terms and
----------------------------------------
conditions of this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations, or liabilities under or by
reason of this Option Agreement, except as expressly provided herein.
(d) Assignment. Other than as provided in Sections 8 and 9 hereof,
----------
neither of the parties hereto may sell, transfer, assign or otherwise dispose of
any of its rights or obligations under this Option Agreement or the Option
created hereunder to any other person (whether by operation of law or
otherwise), without the express written consent of the other party.
(e) Notices. All notices or other communications which are required
-------
or permitted hereunder shall be in writing and sufficient if delivered in
accordance with Section 8.02 of the Merger Agreement (which is incorporated
herein by reference).
(f) Counterparts. This Option Agreement may be executed in
------------
counterparts, and each such counterpart shall be deemed to be an original
instrument, but both such counterparts together shall constitute but one agree-
ment.
(g) Specific Performance. The parties hereto agree that if for any
--------------------
reason Buyer or Seller shall have failed to perform its obligations under this
Option Agreement, then either party hereto seeking to enforce this Option Agree-
ment against such non-performing party shall be entitled to specific performance
and injunctive and other equitable relief, and the parties hereto further agree
to waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such injunctive or other equitable relief. This
provision is without prejudice to any other rights that either party hereto may
have against the other party hereto for any failure to perform its obligations
under this Option Agreement.
(h) Governing Law. This Option Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Missouri applicable to
agreements made and entirely to be performed within such state. Nothing in this
Option Agreement shall be construed to require any party (or any subsidiary or
affiliate of any party) to take any action or fail to take any action in
violation of applicable law, rule or regulation.
(i) Regulatory Approvals; Section 16(b). If, in connection with (A)
-----------------------------------
the exercise of the Option under Section 3 or a sale by Buyer to a third party
under Section 8, (B) a repurchase by Seller under Section 7 or a repurchase or
purchase by Seller under Section 8, prior notification to or approval of the
Board or any other Regulatory Authority is required, then the required notice or
application for approval shall be promptly filed and expeditiously processed and
periods of time that otherwise would run pursuant to such Sections shall run
instead from the date on which any such required notification period has expired
or been terminated or such approval has been obtained, and in either event, any
requisite waiting period shall have passed. In the case of clause (A) of this
subsection (i), such filing shall be made by Buyer, and in the case of clause
(B) of this subsection (i), such filing shall be made by Seller, provided that
each of Buyer and Seller shall use its reasonable best efforts to make all
filings with, and to obtain consents of, all third parties and Regulatory
Authorities necessary to the consummation of the transactions contemplated
hereby, including without limitation applying to the Board under the Holding
Company Act for approval to acquire the shares issuable hereunder. Periods of
time that otherwise would run pursuant to Sections 3, 7 or 8 shall also be
extended to the extent necessary to avoid liability under Section 16(b) of the
Exchange Act.
(j) No Breach of Merger Agreement Authorized. Nothing contained in
----------------------------------------
this Option Agreement shall be deemed to authorize Seller to issue any shares of
Seller Common Stock in breach of, or otherwise breach any of, the provisions of
the Merger Agreement.
(k) Waiver and Amendment. Any provision of this Agreement may be
--------------------
waived in writing at any time by the party that is entitled to the benefits of
such provision. This Option Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Option Agreement as of the date first written above.
MAGNA GROUP, INC.
By:/s/ G. Thomas Andes
----------------------------
Name: G. Thomas Andes
Title: Chairman and Chief
Executive Officer
HOMELAND BANKSHARES CORPORATION
By:/s/ Erl A. Schmiesing
----------------------------
Name: Erl A. Schmiesing
Title: Chairman, President
and Chief Executive
Officer
NEWS RELEASE
September 3, 1996
6:45 a.m. CDT
FOR IMMEDIATE RELEASE
For more information contact: Erl A. Schmiesing (319) 291-5429
Chairman, President and CEO
Robert S. Kahler (319) 291-5421
Executive Vice President and CFO
MAGNA GROUP AND HOMELAND ANNOUNCE MERGER AGREEMENT
RESULTING $6.6 BILLION BANK GROUP WILL HAVE
139 LOCATIONS IN MISSOURI, ILLINOIS, AND IOWA
*****
WATERLOO, IOWA, -- Magna Group, Inc. (Nasdaq stock market symbol-MAGI)
and Homeland Bankshares Corporation (Nasdaq stock market symbol-HLND),
Waterloo, Iowa, today announced the signing of a definitive agreement
for the acquisition of Homeland by Magna. Homeland ranks as the
second largest bank holding company headquartered in Iowa, with total
assets of $1.20 billion as of June 30, 1996. Homeland owns and
operates four commercial banks and one savings bank and provides
financial services through a network of 33 locations in the state of
Iowa.
Under the terms of the agreement, Magna will issue 5,038,934 shares of
Magna common stock and $91,966,970 in cash in exchange for all of the
outstanding shares of Homeland's common stock. Each share of
Homeland's common stock may be exchanged for approximately 1.55 shares
of Magna common stock or a comparable amount in cash. Homeland
stockholders may elect to receive all Magna common stock, all cash, or
a mixture of stock and cash, subject to certain limitations. The
transaction has a current aggregate market value of approximately $216
million.
After completion of the acquisition, Erl A. Schmiesing, Chairman,
President and CEO of Homeland Bankshares Corporation, and Douglas K.
Shull, Treasurer and CFO of Casey's General Stores, Inc., will become
directors of Magna Group, Inc. The acquisition is scheduled to be
completed in the first quarter of 1997. It is subject to (among other
things) regulatory approval and the vote of the Homeland stockholders.
According to G. Thomas Andes, Chairman and Chief Executive Officer of
Magna, the acquisition will be accretive to earnings within 12 months.
"Based on our analysis, cost savings of approximately $8 million can
be achieved through centralization of systems and procedures and the
consolidation of the various bank charters," stated Andes.
"This acquisition opens a whole new market and offers growth and
revenue enhancement opportunities for Magna," said Andes. "We are
excited about this new partnership and look forward to building on the
rich, community tradition that Homeland has established in Iowa. We
are also delighted to have Erl and Doug join our Board. Both
individuals have strong backgrounds and can help us build our retail
franchise."
"We are very pleased to associate with Magna, a quality organization
that is dedicated to community banking and its employees," said
Schmiesing. "They are committed to delivering superior services; and
we are confident that, with Magna's added resources and technology, we
can be even more effective in providing our customers with products
and services that will exceed their expectations."
Magna Group, Inc. is a St. Louis-based community bank holding company
with $5.35 billion in assets. The Company has 106 banking locations
throughout Illinois and Missouri, and a trust and brokerage company.
Based on a deposit market share, Magna is the third largest banking
institution in the St. Louis Metropolitan area and ranks as the
ninety-fifth largest bank holding company in the country.
###
