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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _________________
COMMISSION FILE NUMBER 0-8234
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MAGNA GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 37-0996453
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE MAGNA PLACE
1401 SOUTH BRENTWOOD BOULEVARD
ST. LOUIS, MISSOURI 63144-1401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (314) 963-2500
--------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $2.00 PAR VALUE
PREFERRED STOCK PURCHASE RIGHTS
7% CONVERTIBLE SUBORDINATED CAPITAL NOTES DUE 1999
--------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes__X__ No ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 5, 1996:
Common Stock, $2.00 par value: $628,770,722
There is no established public trading market for the Registrant's Class B
Voting Preferred Stock, which entitles the holder to one vote per share and of
which non-affiliates hold all 2,039 outstanding shares.
The number of shares outstanding of Registrant's Common Stock, as of March
5, 1996 was:
Common Stock, $2.00 par value: 28,625,018 shares outstanding.
--------------------------
<TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
As provided herein, portions of the documents below are incorporated herein
by reference:
<CAPTION>
DOCUMENT PART-FORM 10-K
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<S> <C>
Annual Report to Stockholders for the Year Ended December 31, 1995.................................. Parts I, II and IV
Proxy Statement for the 1996 Annual Meeting of Stockholders......................................... Part III
</TABLE>
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<PAGE> 2
MAGNA GROUP, INC.
PART I
ITEM 1. BUSINESS
GENERAL
Magna Group, Inc. (``Magna'' or ``Registrant'') is a bank holding company
whose business consists primarily of the ownership, supervision and control of a
national banking association and a trust company, each of which conducts
business in the States of Missouri and Illinois.
Magna was incorporated under the laws of the State of Delaware in 1974.
Since 1974, Magna has grown from three locations and assets of approximately
$127 million to more than 100 locations and assets of approximately $4.95
billion at December 31, 1995. This expansion was a result of both internal
growth and an active acquisition program.
Magna is a legal entity separate and distinct from its subsidiaries. Magna
provides its subsidiaries with advice, counsel and specialized services in
various fields of banking policy and operations. Such services include general
administration, asset/liability management, accounting and financial reporting,
internal auditing, lending policies and procedures, purchasing, advertising and
public relations, product development, legal services, data processing and bank
operations, and personnel recruitment and training. Magna and its affiliates had
2,262 employees at December 31, 1995.
AFFILIATE BANK AND MARKET AREAS
As of March 29, 1996, Magna holds, directly or through affiliates, all of
the voting capital stock of one bank (Magna Bank, National Association), which
operates from more than 100 locations in Missouri and Illinois, including the
Missouri and Illinois portions of the bi-state St. Louis Metropolitan area and
Central and Southern Illinois.
On February 29, 1996, Magna acquired River Bend Bancshares, Inc.,
reinforcing its retail banking orientation and strengthening its presence in
current markets. The bank subsidiary acquired in this transaction was
simultaneously merged with and into Magna Bank, National Association. Additional
information regarding this acquisition, included on page 19 of Magna's 1995
Annual Report to Stockholders under the caption ``Financial Overview,'' is
incorporated herein by reference.
A map of Magna's banking regions by market area is included on the inside
back cover of Magna's 1995 Annual Report to Stockholders under the caption
``Community Bank Presidents and Regions'' and is incorporated herein by
reference.
PRODUCTS AND SERVICES
Magna's affiliate bank operates as a community bank and concentrates on
relationship-oriented financial service activities, including business, consumer
and real estate loans; credit cards; and checking, savings and time deposits.
The affiliate bank's deposit base consists primarily of core deposits from
within the communities which it serves, and lending activity is targeted to
consumers and small-to-midsized businesses in the bank's immediate geographic
areas. Customers of Magna's affiliate bank can conveniently access a broad range
of investment and insurance services through the subsidiaries of MGI Group,
Inc., a subsidiary of Magna Bank, National Association.
Magna Bank, National Association serves as a correspondent bank for
approximately 160 banks, primarily in Illinois and Missouri. Correspondent
banking services include the processing of checks and collection items, overline
loan assistance, investment safekeeping, assistance with operations and
electronic funds transfer.
Banking is highly competitive in the market areas which Magna serves.
Magna's affiliate bank competes to varying degrees with numerous locally-owned
commercial banks, major regional and money center banks and non-bank
competitors. Non-bank competitors include savings and loan associations, credit
unions, securities firms, money market funds, insurance companies, automobile
finance companies, mortgage lending companies and credit card companies.
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ITEM 1. BUSINESS--CONTINUED
Competition continues to intensify as non-bank entities broaden their
marketing and financial services and as multibank holding companies continue to
acquire banks and open new facilities in the market areas served by Magna's
affiliate bank. Nationwide interstate banking laws may further increase
competition. See ``Interstate Banking.''
NON-BANK AFFILIATES
Magna Trust Company provides various trust services including, but not
limited to, the administration of decedents' estates, trusts under wills, trusts
under agreements, escrow agencies, guardianships, farm management and appraisal,
investment services and related activities. Magna Trust Company provides these
services through 11 trust centers and had custodial assets and assets under
management of approximately $1.9 billion at December 31, 1995.
The subsidiaries of MGI Group, Inc. and InBank Group, Inc. provide non-bank
financial products and services to customers of Magna's affiliates and to
customers of unaffiliated banks, respectively.
SUPERVISION AND REGULATION
GENERAL. As a bank holding company, Magna is subject to regulation under the
Bank Holding Company Act of 1956, as amended (the ``BHCA''), by the Board of
Governors of the Federal Reserve System (the ``Federal Reserve Board''). Bank
holding companies are required to file reports with the Federal Reserve Board
and to provide such additional information as the Federal Reserve Board may
require. Magna's affiliate bank is regulated by the Office of the Comptroller of
the Currency (``OCC'').
The BHCA requires every bank holding company to obtain the prior approval of
the Federal Reserve Board before it may (i) acquire substantially all of the
assets of any bank, (ii) acquire more than five percent of the voting stock of a
bank or bank holding company which is not already majority owned, or (iii) merge
or consolidate with another bank holding company.
Under the BHCA, a bank holding company is prohibited, with certain
exceptions, from acquiring direct or indirect ownership or control of more than
five percent of the voting shares of any company which is not a bank and from
engaging in business other than that of banking, managing and controlling banks
or performing services for its banking subsidiaries. However, the BHCA
authorizes the Federal Reserve Board to permit bank holding companies to engage
in activities which are so closely related to banking or managing or controlling
banks as to be a proper incident thereto.
There are various legal restrictions on the extent to which a bank holding
company and certain of its non-bank subsidiaries can borrow or otherwise obtain
credit from its bank subsidiaries. In general, these restrictions require that
any such extensions of credit must be on non-preferential terms and secured by
designated amounts of specified collateral and are limited, as to any one of the
holding company or non-bank subsidiaries, to 10% of the lending bank's capital
stock and surplus, and as to the holding company and all such non-bank
subsidiaries in the aggregate, to 20% of such capital stock and surplus.
Any capital loans by Magna to its affiliate bank would be subordinate in
right of payment to deposits and certain other indebtedness of the affiliate
bank. The right of Magna, and the right of Magna's creditors and stockholders,
to participate in any distribution of the assets or earnings of the affiliate
bank is necessarily subject to the prior claims of creditors of the affiliate
bank, except to the extent that claims of Magna in its capacity as creditor may
be recognized.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
(``FIRREA''), enacted primarily to deal with problems in the savings and loan
industry, also affected commercial banking organizations. FIRREA mandates public
disclosure by commercial banks of their Community Reinvestment Act ratings and
mortgage lending records, establishes enhanced enforcement measures which are
available for bank regulators to use against commercial banks and bankers and
imposes cross liability on insured institutions under common control with any
insured institution to which the Federal Deposit Insurance Corporation
(``FDIC'') gives financial assistance. FIRREA also permits bank holding
companies to acquire savings and loan associations, subject to the approval of
the Federal Reserve Board.
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ITEM 1. BUSINESS--CONTINUED
The Federal Deposit Insurance Corporation Improvement Act of 1991
(``FDICIA'') increased funding for the FDIC's bank insurance fund, and
establishes standards for, and restrictions on, activities of depository
institutions based upon capital status and supervisory evaluation by Federal
banking regulators. Under FDICIA, banks are placed in one of five capital
categories, for which the Federal banking agencies have established specific
capital ratio levels. Pursuant to the agencies' regulations, an institution is
considered ``well capitalized'' if it has a total risk-based capital ratio of at
least 10%, a Tier 1 risk-based capital ratio of at least 6% and a leverage
capital ratio of at least 5%. In addition, regardless of a bank's capital level,
a bank is not considered ``well capitalized'' if it is subject to a cease and
desist order, formal agreement, capital directive or prompt corrective action
directive that requires it to achieve or maintain a higher level of capital. An
institution is considered ``adequately capitalized'' if it has a total
risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio of
at least 4% and a leverage capital ratio of at least 4%. Institutions with
capital levels below those necessary to qualify as ``adequately capitalized''
are deemed to be either ``undercapitalized,'' ``significantly
undercapitalized'' or ``critically undercapitalized,'' depending on their
specific capital levels.
FDICIA, through its prompt corrective action system, imposes significant
operational and management restrictions on banks that are not considered at
least ``adequately capitalized.'' Under FDICIA's prompt corrective action
system, a bank in the ``undercapitalized'' category must submit a capital
restoration plan guaranteed by its parent company. The liability of the parent
company under any such guarantee is limited to the lesser of 5% of the bank's
assets at the time it became ``undercapitalized,'' or the amount needed to
comply with the plan. A bank in the ``undercapitalized'' category also is
subject to limitations in numerous areas including, but not limited to: asset
growth; acquisitions; branching; new business lines; acceptance of brokered
deposits; and borrowings from the Federal Reserve. Progressively more burdensome
restrictions are applied to banks in the ``undercapitalized'' category that fail
to submit or implement a capital plan and to banks that are in the
``significantly undercapitalized'' or ``critically undercapitalized''
categories. A bank's primary Federal banking agency is authorized to downgrade
the bank's capital category to the next lower category upon a determination that
the bank is in an unsafe or unsound condition or is engaged in an unsafe or
unsound practice. An unsafe or unsound practice can include receipt by the
institution of a rating on its most recent examination of three or worse (on a
scale of 1 (best) to 5 (worst)), with respect to its asset quality, management,
earnings or liquidity. The capital category assigned to a depository institution
also affects its deposit insurance assessment rate. See ``FDIC Assessments.''
FDICIA and the regulations issued thereunder also have (i) limited the use
of brokered deposits to ``well capitalized'' banks, and ``adequately
capitalized'' banks that have received waivers from the FDIC; (ii) established
restrictions on the permissible investments and activities of FDIC-insured state
chartered banks and their subsidiaries; (iii) implemented uniform real estate
lending rules; (iv) prescribed standards to limit the risks posed by credit
exposure between banks; (v) revised risk-based capital rules to include
components for measuring the risk posed by interest rate changes; (vi) amended
various consumer banking laws; (vii) increased restrictions on loans to a bank's
insiders; (viii) established standards in a number of areas to assure bank
safety and soundness; and (ix) implemented additional requirements for
institutions that have $500 million or more in total assets with respect to
annual independent audits, audit committees and management reports related to
financial statements, internal controls and compliance with designated laws and
regulations.
CAPITAL STANDARDS. The Federal Reserve Board has issued standards for
measuring capital adequacy for bank holding companies. These standards are
designed to provide risk-responsive capital guidelines and to incorporate a
consistent framework for use by financial institutions operating in major
international financial markets. The banking regulators have issued standards
for banks that are similar to, but not identical with, the standards for bank
holding companies.
In general, the risk-related standards require banks and bank holding
companies to maintain capital based on ``risk-adjusted'' assets so that
categories of assets with potentially higher credit risk will require more
capital backing than categories with lower credit risk. In addition, banks and
bank holding companies are required to maintain capital to support off-balance
sheet activities such as loan commitments.
The standards classify total capital for this risk-based measure into two
tiers referred to as Tier 1 and Tier 2. Tier 1 capital consists of common
shareholders' equity, certain non-cumulative and cumulative perpetual preferred
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ITEM 1. BUSINESS--CONTINUED
stock, and minority interests in equity accounts of consolidated subsidiaries.
Tier 2 capital consists of the allowance for loan and lease losses (with certain
limits), perpetual preferred stock not included in Tier 1, hybrid capital
instruments, term subordinated debt and intermediate-term preferred stock. Bank
holding companies are required to meet a minimum ratio of 8% of qualifying total
capital to risk-adjusted assets, and a minimum ratio of 4% of qualifying Tier 1
capital to risk-adjusted assets. Capital that qualifies as Tier 2 capital is
limited in amount to 100% of Tier 1 capital in testing compliance with the total
risk-based capital minimum standards.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio of Tier 1 capital to adjusted average total assets (the ``leverage
ratio'') of 3% for bank holding companies that meet certain specified criteria,
including having the highest regulatory rating. Other bank holding companies
generally are required to maintain a leverage ratio of at least 3% plus 100 to
200 basis points. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the Federal Reserve
Board has indicated that it may consider other indicia of capital strength in
evaluating proposals for expansion or new activities.
The federal bank regulatory agencies have issued various proposals to amend
the risk-based capital guidelines for banks and bank holding companies. Under
one proposal, banks would be required to give explicit consideration to interest
rate risk as an element of capital adequacy by maintaining capital to compensate
for such risk in an amount measured by the bank's exposure to interest rate risk
in excess of a regulatory threshold. Another proposal would revise the treatment
given to (i) low-level recourse arrangements to reduce the amount of capital
required and (ii) certain direct credit substitutes provided by banking
organizations to require that capital be maintained against the value of the
assets enhanced or the loans protected. A proposal recently issued by the
Federal Reserve Board and expected to be joined in by the other bank regulatory
agencies increases the amount of capital required to be carried against certain
long-term derivative contracts; in addition, the proposal recognizes the effect
of certain bilateral netting arrangements in reducing potential future exposure
under these contracts. Magna believes that these changes will not, if adopted,
have a material effect on its compliance with capital adequacy requirements.
Additional information regarding the capital adequacy standards of Federal
banking regulators and their application to Magna, contained on page 35 of
Magna's 1995 Annual Report to Stockholders under the caption ``Capital,'' is
incorporated herein by reference.
LIMITATIONS ON DIVIDENDS. Magna is a legal entity separate and distinct from
its banking and other subsidiaries. The principal source of funds to Magna on a
parent company only basis consists of dividends and management fees from its
banking subsidiary. Various Federal statutory provisions limit the amount of
dividends and management fees the banking subsidiary can pay to Magna without
regulatory approval.
The approval of the OCC is required for any dividend by a national bank if
the total of all dividends declared by the bank in any calendar year would
exceed the total of its net profits, as defined by the OCC, for such year
combined with its retained net profits for the preceding two years, less any
required transfers to surplus or a fund for the retirement of any preferred
stock. In addition, a national bank may not pay a dividend in an amount greater
than its net profits then on hand, after deducting losses and bad debts. All
debts due to any national bank on which interest is due and unpaid for a period
of six months, unless the same are well secured and in the process of
collection, are considered bad debts. The payment of dividends and management
fees by Magna's affiliate bank may also be affected by other factors, such as
the maintenance of adequate capital for the affiliate bank.
In addition, applicable regulatory authorities are authorized to prohibit
the payment of dividends when such payment would constitute an unsafe and
unsound banking practice. The Federal Reserve Board has indicated that it
generally would be an unsafe and unsound banking practice to pay dividends
except out of current operating earnings. As previously indicated, Federal
regulatory authorities have adopted standards for the maintenance of capital,
and adherence to such standards may further limit the ability to pay dividends.
FDICIA prohibits the payment of dividends or management fees by
``undercapitalized'' financial institutions and even by ``well
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ITEM 1. BUSINESS--CONTINUED
capitalized'' institutions where the payment of dividends and management fees
would render them ``undercapitalized.''
Under Federal Reserve Board policy, Magna is expected to act as a source of
financial strength to its banking subsidiary and to commit resources to support
its banking subsidiary in circumstances where it might not choose to do so
absent such policy.
Additional information regarding limitations on dividends, contained on page
35 of Magna's 1995 Annual Report to Stockholders under the captions ``Capital''
and ``Dividends and Resource Commitments,'' is incorporated herein by reference.
FDIC ASSESSMENTS. Magna Bank, National Association is subject to FDIC
deposit insurance assessments. Under FDICIA, the FDIC has adopted a risk-based
premium schedule. Under this schedule, each financial institution is assigned to
one of three capital groups--well capitalized, adequately capitalized or
undercapitalized--and further assigned to one of three subgroups within a
capital group, on the basis of supervisory evaluations by the institution's
primary federal and, if applicable, state supervisors and on the basis of other
information relevant to the institution's financial condition and the risk posed
to the applicable insurance fund. The actual assessment rate applicable to a
particular institution will, therefore, depend in part upon the risk assessment
classification so assigned to the institution by the FDIC.
FIRREA required the FDIC to establish separate deposit insurance funds--the
Bank Insurance Fund (``BIF'') for banks and the Savings Association Insurance
Fund (``SAIF'') for savings associations. The law also required the FDIC to set
deposit insurance assessments at such levels as would cause the BIF and the SAIF
to reach their ``designated reserve ratios'' of 1.25 percent of the deposits
insured by them within a reasonable period of time. Due to the low costs of
resolving bank insolvencies in the last few years, the BIF reached its
designated reserve ratio in May 1995. As a result, in November 1995, the FDIC
lowered deposit insurance assessment rates for all banks by revising the range
to $.04 to $.31 for every $100 of deposits. In addition, effective January 1,
1996, due to the fact that the BIF had reached its designated reserve ratio, the
FDIC eliminated deposit insurance assessments (except for the minimum $2,000
payment required by law) for banks that are well capitalized and well managed.
The deposit insurance assessment rate for all other banks ranges from $.03 to
$.27 for every $100 of deposits.
The balance in the SAIF is not expected to reach its designated reserve
ratio until about the year 2002, as the law provides that a significant portion
of the costs of resolving past insolvencies of savings associations must be paid
from this source. Accordingly, it is likely that the SAIF rates will be
significantly higher than the BIF rates in the future. Magna acquired an
insignificant amount of SAIF-insured deposits during the years from 1989 to the
present and is required to pay deposit insurance premiums on those SAIF-insured
deposits at the SAIF rate. Magna does not expect that such additional deposit
insurance costs will have a significant adverse effect on its earnings.
FIRREA contains a ``cross-guarantee'' provision that could result in insured
depository institutions owned by Magna being assessed for losses incurred by the
FDIC in connection with the failure of, or assistance provided by the FDIC to
avert the failure of, any other insured depository institution controlled by
Magna. Under FIRREA, failure to meet certain capital guidelines could subject a
banking institution to a variety of enforcement remedies available to Federal
regulatory authorities, including the termination of deposit insurance by the
FDIC.
Additional information regarding FDIC assessments, contained on page 24 of
Magna's 1995 Annual Report to Stockholders under the caption ``Noninterest
Expense,'' is incorporated herein by reference.
INTERSTATE BANKING. In September 1994, legislation was enacted that is
expected to have a significant effect in restructuring the banking industry in
the United States of America. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 facilitates the interstate expansion and consolidation of
banking organizations (i) by permitting bank holding companies that are
adequately capitalized and managed to acquire banks located in states outside
their home states regardless of whether such acquisitions are authorized under
the law of the host state, (ii) by permitting the interstate merger of banks
after June 1, 1997, subject to the right of individual states to ``opt in'' or
to ``opt out'' of this authority before that date, (iii) by permitting banks to
establish new branches on an
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ITEM 1. BUSINESS--CONTINUED
interstate basis provided that such action is specifically authorized by the law
of the host state, (iv) by permitting foreign banks to establish, with approval
of the regulators in the United States of America, branches outside their home
states to the same extent that national or state banks located in the home state
would be authorized to do so, and (v) by permitting banks to receive deposits,
renew time deposits, close loans, service loans and receive payments on loans
and other obligations as agent for any bank or thrift affiliate, whether the
affiliate is located in the same state or a different state. One effect of this
legislation will be to permit Magna to acquire banks located in any state and to
permit bank holding companies located in any state to acquire banks and bank
holding companies located in Missouri and Illinois. Overall, this legislation is
likely to have the effects of increasing competition and promoting consolidation
in the banking industry.
MONETARY POLICY AND ECONOMIC CONDITIONS. The earnings of Magna are affected
not only by general economic conditions but also by the policies of various
governmental regulatory authorities. The Federal Reserve Board regulates the
supply of bank credit in order to influence general economic conditions,
primarily through open market operations in U.S. Government obligations, varying
the discount rate on bank borrowings, varying reserve requirements against
member and insured bank deposits and restricting certain borrowings by such
banks and their affiliates.
<TABLE>
SELECTED STATISTICAL INFORMATION
The following statistical information and related narrative disclosures
included in Magna's 1995 Annual Report to Stockholders are incorporated by
reference herein:
<CAPTION>
ANNUAL REPORT
ITEM REFERENCE
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<C> <S> <C>
I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and
Interest Differential
A., B. Average Balances/Interest Income and Expense/Average Yields and Rates Table 1, Pages 20 and 21
C. Volume and Rate Variance Table 2, Page 22
II. Investment Portfolio
A. Composition Table 7, Page 27
Table 8, Page 27
B. Maturities and Yields Table 9, Page 28
III. Loan Portfolio
A. Composition Table 5, Page 25
B. Maturities and Sensitivities of Loans Table 6, Page 26
C. Nonperforming Assets Table 15, Page 32
IV. Summary of Loan Loss Experience
A. Reserve for Loan Losses Table 17, Page 33
B. Allocation of the Reserve for Loan Losses Table 18, Page 34
V. Deposits
A. Average Deposits and Interest Rates Table 11, Page 29
B. Amount and Maturities of Time Deposits of $100,000 or More Table 12, Page 30
VI. Return on Equity and Assets Page 18
VII. Short-Term Borrowings Table 14, Page 31
</TABLE>
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ITEM 1. BUSINESS--CONTINUED
<TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following list sets forth, as of March 29, 1996, the names, ages and
positions held by the executive officers of Magna. There is no family
relationship between any of the named individuals.
<CAPTION>
NAME AGE ALL POSITIONS HELD WITH REGISTRANT
---- --- ----------------------------------
<C> <C> <S>
G. Thomas Andes 53 Chairman of the Board and Chief Executive Officer of Magna since December 1994.
President and Chief Operating Officer of Magna since 1991. Prior thereto, Mr.
Andes served as Vice Chairman of the Board of Magna from 1982 to 1991.
Ronald A. Buerges 34 Acting Chief Financial Officer of Magna since November 1995. Senior Vice
President, Corporate Finance of Magna since 1993. Prior thereto, Mr. Buerges
had been a Senior Manager with the accounting firm of Ernst & Young (now known
as Ernst & Young LLP). Mr. Buerges was employed by Ernst & Young from 1983 to
1993.
Linda K. Fabel 52 Executive Vice President, Retail Banking of Magna since April 1994. Prior
thereto, Ms. Fabel served as Executive Vice President, Management Information
Systems of Magna from 1991 to April 1994. Prior to her employment by Magna, Ms.
Fabel served in a variety of senior capacities with IBM Corporation, including
General Manager of IBM's St. Louis trading area during 1991 and Regional
Manager from 1990 to 1991.
David D. Harris 54 Executive Vice President, Credit Administration of Magna since October 1994.
Mr. Harris served as President and Chief Executive Officer of Magna Bank of
Missouri from 1992 to December 1994 and as Chairman of the Board, President and
Chief Executive Officer of Magna Bank of Southern Illinois from 1988 to 1992.
Gary D. Hemmer 42 Executive Vice President, Administration of Magna since April 1994. Prior
thereto, Mr. Hemmer served as Executive Vice President, Retail Banking and
Administration of Magna from 1991 to April 1994 and as Vice President,
Administration of Magna from 1986 to 1991.
Robert M. Olson, Jr. 40 Executive Vice President, Operations and Technology of Magna since May 1994.
Prior thereto, Mr. Olson had been a managing director of J. D. Carreker and
Associates, Inc., a management consulting and technology firm, from 1991 to May
1994. Before joining J. D. Carreker and Associates, Inc. in 1991, Mr. Olson was
with Security Pacific, where he held senior positions with the cash management
department of the bank, as well as with the holding company's automation
company.
</TABLE>
ITEM 2. PROPERTIES
Magna's executive offices are located in a ten-story commercial office
building in St. Louis County known as Magna Place. Magna has leased
approximately 31%, or 53,426 square feet, of Magna Place under a long-term lease
from an unaffiliated party.
Magna's subsidiaries own and lease other facilities in Illinois and
Missouri. See ``Notes to Consolidated Financial Statements--Premises and
Equipment,'' included on page 45 of Magna's 1995 Annual Report to
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ITEM 2. PROPERTIES--CONTINUED
Stockholders, and incorporated herein by reference. All of these properties are
considered to be in good condition, are adequately insured and are considered
adequate to meet the needs of the particular user.
In the second quarter of 1995, Magna opened its operations facility in
Belleville, Illinois, which enabled Magna to centralize further certain
back-office functions. The facility consists of a two-story, 170,000 square foot
building, which houses various operational and lending support functions. The
overall project involved a capital expenditure of approximately $16.5 million.
ITEM 3. LEGAL PROCEEDINGS
Various claims and lawsuits, incidental to the ordinary course of business,
are pending against Magna and its subsidiaries. In the opinion of management,
after consultation with legal counsel, resolution of these matters is not
expected to have a material effect on Magna's financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of the fiscal year
covered by this Report to a vote of Magna's security holders through the
solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information regarding the Common Stock of Magna, included on pages 6 and 7,
respectively, of Magna's 1995 Annual Report to Stockholders under the captions
``Common Stock'' and ``Common Stock Share Data,'' respectively, is incorporated
herein by reference. Additional information regarding the ability of Magna's
banking subsidiary to transfer funds to Magna and Magna's ability to pay
dividends is contained herein under the caption ``Limitations on Dividends'' and
included on page 35 of Magna's 1995 Annual Report to Stockholders under the
captions ``Capital'' and ``Dividends and Resource Commitments,'' which are
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data, included on page 18 of Magna's 1995 Annual Report
to Stockholders under the caption ``Five Year Selected Financial Data,'' is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations, included on pages 19 through 36 of Magna's 1995 Annual Report to
Stockholders under the caption ``Management's Discussion and Analysis of
Financial Condition and Results of Operations,'' is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Magna's Consolidated Financial Statements, the notes thereto and the Report
of Ernst & Young LLP, Independent Auditors, included on pages 37 through 53 of
Magna's 1995 Annual Report to Stockholders, are incorporated herein by
reference. Magna's quarterly financial information (unaudited) for the years
1995 and 1994, included on page 54 of Magna's 1995 Annual Report to
Stockholders, is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
9
<PAGE> 10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors of Magna is contained in Magna's Proxy
Statement for the 1996 Annual Meeting of Stockholders under the caption ``Item
1. Election of Directors'' and is incorporated herein by reference.
Information regarding executive officers of Magna is contained in Part I
hereof under the caption ``Executive Officers of the Registrant.''
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934 is included in Magna's Proxy Statement for the 1996 Annual
Meeting of Stockholders under the caption ``Compliance with Section 16(a) of the
Securities Exchange Act of 1934,'' and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is contained in Magna's Proxy
Statement for the 1996 Annual Meeting of Stockholders under the captions ``Board
of Directors and Committees--Compensation Committee Interlocks and Insider
Participation,'' ``Compensation of Directors'' and ``Compensation of Executive
Officers,'' and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is contained in Magna's Proxy Statement for the 1996 Annual Meeting
of Stockholders under the captions ``Voting Securities and Principal Holders
Thereof'' and ``Security Ownership of Management,'' and is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
contained in Magna's Proxy Statement for the 1996 Annual Meeting of Stockholders
under the captions ``Certain Relationships and Related Transactions'' and
``Board of Directors and Committees--Compensation Committee Interlocks and
Insider Participation,'' and is incorporated herein by reference.
PART IV
<TABLE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
<C> <C> <S>
(a) (1) Financial Statements: All of the following are incorporated by reference in Item 8 from pages
37 through 54 of Magna's 1995 Annual Report to Stockholders:
Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31,
1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
Quarterly Financial Information (Unaudited)
(2) Financial Statement Schedules: All schedules applicable to Magna are included in the
Consolidated Financial Statements or the notes thereto.
10
<PAGE> 11
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K--CONTINUED
(3) Exhibits:
<C> <C> <C> <S>
3.1 Certificate of Incorporation, as amended (filed as Exhibit 3.1 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1991 (File No. 0-8234) and
incorporated herein by reference)
3.2 By-laws (filed as Exhibit 3.2 to Magna's Annual Report on Form 10-K for the year
ended December 31, 1991 (File No. 0-8234) and incorporated herein by reference)
4.1 Form of Indenture, including form of Note, between Magna and Mark Twain Bank, as
trustee, dated August 1, 1987 for the 7% Convertible Subordinated Capital Notes
due 1999 (filed as Exhibit 1 to Magna's Registration Statement on Form 8-A dated
June 15, 1988 (File No. 0-8234) and incorporated herein by reference)
4.2 Indenture dated as of November 1, 1986 between Landmark Bancshares Corporation
(hereinafter ``Landmark'') and Centerre Trust Company of St. Louis, regarding the
issuance of $17,250,000 principal amount of Landmark's 8 3/4% Convertible
Subordinated Debentures due November 1, 1998 (filed as Exhibit 4(c) to Landmark's
Annual Report on Form 10-K for the year ended December 31, 1986 (File No. 1-8810)
and incorporated herein by reference)
4.3 First Supplemental Indenture dated December 20, 1991 among Magna, Magna
Acquisition Corporation and Boatmen's National Bank of St. Louis as successor to
Centerre Trust Company of St. Louis, Trustee, assuming the obligations of Landmark
under the Indenture dated November 1, 1986 (filed as Exhibit 4.2 to Magna's
Current Report on Form 8-K dated December 20, 1991 (File No. 0-8234) and
incorporated herein by reference)
4.4 Rights Agreement, including form of Right Certificate, dated as of November 11,
1988 between Magna and Magna Trust Company, Trustee (filed as Exhibits 1 and 2 to
Magna's Registration Statement on Form 8-A dated November 11, 1988 (File No.
0-8234) and incorporated herein by reference)
10.1 Form of Stock Option Agreement under Landmark's 1982 Capital Accumulation Plan,
assumed by Magna as to outstanding obligations pursuant to the acquisition of
Landmark (filed as Exhibit 10.1 to Magna's Annual Report on Form 10-K for the year
ended December 31, 1991 (File No. 0-8234) and incorporated herein by
reference)<F*>
10.2 Form of Stock Option Agreement under Landmark's 1986 Non-Qualified Stock Option
Plan, assumed by Magna as to outstanding obligations pursuant to the acquisition
of Landmark (filed as Exhibit 10.2 to Magna's Annual Report on Form 10-K for the
year ended December 31, 1991 (File No. 0-8234) and incorporated herein by
reference)<F*>
10.3 1987 Stock Option Plan of Magna (filed as Exhibit 10.2 to Magna's Registration
Statement on Form S-4 (Reg. No. 33-15463) and incorporated herein by
reference)<F*>
10.4 Landmark's Amended and Restated Supplemental Retirement Plan (filed as Exhibit
10(ff) to Landmark's Annual Report on Form 10-K for the year ended December 31,
1989 (File No. 1-8810) and incorporated herein by reference)<F*>
10.5 Employment Agreement dated January 1, 1995 between Magna and G. Thomas Andes
(filed as Exhibit 10.6 to Magna's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 0-8234) and incorporated herein by reference) <F*>
10.6 Agreement dated March 15, 1996 between Magna and Linda K. Fabel<F*>
10.7 Agreement dated March 13, 1996 between Magna and David D. Harris<F*>
10.8 Agreement dated March 12, 1996 between Magna and Gary D. Hemmer<F*>
11
<PAGE> 12
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K--CONTINUED
<C> <C> <C> <S>
10.9 Agreement dated December 5, 1995 between Magna and Ronald A. Buerges<F*>
10.10 Agreement dated March 12, 1996 between Magna and Robert M. Olson, Jr.<F*>
10.11 Second Amendment to Second Restated Employment Agreement between Magna and S. Lee
Kling (filed as Exhibit 10.24 to Magna's Quarterly Report on Form 10-Q for the
period ended June 30, 1994 (File No. 0-8234) and incorporated herein by
reference)<F*>
10.12 Second Restated Employment Agreement dated as of October 20, 1990, as amended by
Letter Agreement dated August 29, 1991, between Landmark and S. Lee Kling (filed
as Exhibit 10.9 to Magna's Annual Report on Form 10-K for the year ended December
31, 1991 (File No. 0-8234) and incorporated herein by reference)<F*>
10.13 Directors' Survivor Benefit Plan (filed as Exhibit 10.11 to Magna's Annual Report
on Form 10-K for the year ended December 31, 1991 (File No. 0-8234) and
incorporated herein by reference)<F*>
10.14 Directors' Deferred Compensation Plan (filed as Exhibit 10.12 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1991 (File No. 0-8234) and
incorporated herein by reference)<F*>
10.15 Board of Directors Retirement Plan of Magna (filed as Exhibit 10.16 to Magna's
Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 0-8234)
and incorporated herein by reference)<F*>
10.16 Executive Supplemental Deferral Plan (filed as Exhibit 10.12 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1987 (File No. 0-8234) and
incorporated herein by reference)<F*>
10.17 Form of Director Indemnification Agreement dated as of May 30, 1991 between
Landmark and Donald P. Gallop, Carl G. Hogan, Sr., Franklin A. Jacobs and Ralph F.
Korte, respectively, and Consent dated May 24, 1991 of Magna to Director
Indemnification Agreements dated May 30, 1991 assuming Landmark's obligations
thereunder upon effectiveness of the acquisition (filed as Exhibit 10.14 to
Magna's Annual Report on Form 10-K for the year ended December 31, 1991 (File No.
0-8234) and incorporated herein by reference)<F*>
10.18 1992 Long Term Performance Plan of Magna (filed as Appendix A to Magna's Proxy
Statement for the 1992 Annual Meeting of Stockholders (File No. 0-8234) and
incorporated herein by reference)<F*>
10.19 Directors' Stock Option Plan of Magna (filed as Appendix B to Magna's Proxy
Statement for the 1992 Annual Meeting of Stockholders (File No. 0-8234) and
incorporated herein by reference)<F*>
10.20 Amendment to Supplemental Executive Retirement Plan of Magna (filed as Exhibit
10.25 to Magna's Quarterly Report on Form 10-Q for the period ended June 30, 1994
(File No. 0-8234) and incorporated herein by reference)<F*>
10.21 Supplemental Executive Retirement Plan of Magna (filed as Exhibit 10.15 to Magna's
Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 0-8234)
and incorporated herein by reference)<F*>
10.22 Magna Executive Incentive Compensation Plan (MEICP) 1996<F*>
12
<PAGE> 13
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K--CONTINUED
<C> <C> <C> <S>
10.23 Amended and Restated Retirement and Consulting Agreement dated December 30, 1994
between Magna and William S. Badgley (filed as Exhibit 10.24 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1994 (File No. 0-8234) and
incorporated herein by reference)
10.24 Lease between Magna as successor in interest to Landmark, and St. Louis Brentwood
Associates, L.P., dated December 19, 1986, relating to Magna Place, as amended by
the First Amendment dated November 17, 1987, the Addendum dated February 1, 1990
and the Letter Agreement dated January 9, 1992 (filed as Exhibit 10.17 to Magna's
Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 0-8234)
and incorporated herein by reference)
10.25 Stock Purchase Agreement dated March 27, 1992, by and among Capital
Bancorporation, Inc., Magna and Landmark Acquisition Corporation, and amendment
thereto (filed as Exhibit 2.1 to Magna's Registration Statement on Form S-3 (Reg.
No. 33-48918) and incorporated herein by reference)
10.26 Supplemental Agreement dated February 29, 1996, between Magna and John G.
Helmkamp, Jr.<F*>
10.27 Form of Restricted Stock Agreement dated December 31, 1994 between Magna and each
of Linda K. Fabel and Robert M. Olson, Jr., respectively (filed as Exhibit 10.29
to Magna's Annual Report on Form 10-K for the year ended December 31, 1994 (File
No. 0-8234) and incorporated herein by reference)<F*>
10.28 Form of Restricted Stock Agreement dated December 31, 1995 between Magna and each
of David D. Harris and Gary D. Hemmer, respectively<F*>
11.1 Computation of Net Income Per Common Share
13.1 1995 Annual Report to Stockholders
21.1 List of Subsidiaries
23.1 Consent of Independent Auditors
27.1 Financial Data Schedule
<FN>
- --------
<F*>Management contract or compensatory plan
</TABLE>
<TABLE>
<C> <C> <S>
(b) Reports on Form 8-K: No reports on Form 8-K were filed by Magna during the fourth quarter
of the fiscal year covered by this Report.
</TABLE>
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MAGNA GROUP, INC.
Date: March 29, 1996
By /s/ G. THOMAS ANDES
----------------------------
G. Thomas Andes
Chairman of the Board
and Chief Executive Officer
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ G. THOMAS ANDES Chairman of the Board, Chief Executive March 29, 1996
- ------------------------------------------ Officer and Director (Principal Executive
G. Thomas Andes Officer)
/s/ RONALD A. BUERGES Senior Vice President, Corporate March 29, 1996
- ------------------------------------------ Finance and Acting Chief Financial Officer
Ronald A. Buerges (Principal Financial and Accounting
Officer)
Director March __, 1996
- ------------------------------------------
James A. Auffenberg, Jr.
/s/ WILLIAM E. CRIBBIN Director March 29, 1996
- ------------------------------------------
William E. Cribbin
/s/ WAYNE T. EWING Director March 29, 1996
- ------------------------------------------
Wayne T. Ewing
/s/ DONALD P. GALLOP Director March 29, 1996
- ------------------------------------------
Donald P. Gallop
/s/ JOHN G. HELMKAMP, JR. Director March 29, 1996
- ------------------------------------------
John G. Helmkamp, Jr.
14
<PAGE> 15
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ C.E. HEILIGENSTEIN Director March 29, 1996
- ------------------------------------------
C.E. Heiligenstein
/s/ CARL G. HOGAN, SR. Director March 29, 1996
- ------------------------------------------
Carl G. Hogan, Sr.
/s/ FRANKLIN A. JACOBS Director March 29, 1996
- ------------------------------------------
Franklin A. Jacobs
Director March __, 1996
- ------------------------------------------
Wendell J. Kelley
/s/ S. LEE KLING Director March 29, 1996
- ------------------------------------------
S. Lee Kling
/s/ RALPH F. KORTE Director March 29, 1996
- ------------------------------------------
Ralph F. Korte
/s/ ROBERT E. MCGLYNN Director March 29, 1996
- ------------------------------------------
Robert E. McGlynn
Director March __, 1996
- ------------------------------------------
Frank R. Trulaske, III
/s/ DR. GEORGE T. WILKINS, JR. Director March 29, 1996
- ------------------------------------------
Dr. George T. Wilkins, Jr.
</TABLE>
15
<PAGE> 16
<TABLE>
EXHIBIT INDEX
<C> <S> <C>
3.1 Certificate of Incorporation, as amended (filed as Exhibit 3.1 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1991 (File No. 0-8234) and
incorporated herein by reference)
3.2 By-laws (filed as Exhibit 3.2 to Magna's Annual Report on Form 10-K for the year
ended December 31, 1991 (File No. 0-8234) and incorporated herein by reference)
4.1 Form of Indenture, including form of Note, between Magna and Mark Twain Bank, as
trustee, dated August 1, 1987 for the 7% Convertible Subordinated Capital Notes
due 1999 (filed as Exhibit 1 to Magna's Registration Statement on Form 8-A dated
June 15, 1988 (File No. 0-8234) and incorporated herein by reference)
4.2 Indenture dated as of November 1, 1986 between Landmark Bancshares Corporation
(hereinafter ``Landmark'') and Centerre Trust Company of St. Louis, regarding
the issuance of $17,250,000 principal amount of Landmark's 8 3/4% Convertible
Subordinated Debentures due November 1, 1998 (filed as Exhibit 4(c) to
Landmark's Annual Report on Form 10-K for the year ended December 31, 1986 (File
No. 1-8810) and incorporated herein by reference)
4.3 First Supplemental Indenture dated December 20, 1991 among Magna, Magna Acquisi-
tion Corporation and Boatmen's National Bank of St. Louis as successor to
Centerre Trust Company of St. Louis, Trustee, assuming the obligations of
Landmark under the Indenture dated November 1, 1986 (filed as Exhibit 4.2 to
Magna's Current Report on Form 8-K dated December 20, 1991 (File No. 0-8234) and
incorporated herein by reference)
4.4 Rights Agreement, including form of Right Certificate, dated as of November 11,
1988 between Magna and Magna Trust Company, Trustee (filed as Exhibits 1 and 2
to Magna's Registration Statement on Form 8-A dated November 11, 1988 (File No.
0-8234) and incorporated herein by reference)
10.1 Form of Stock Option Agreement under Landmark's 1982 Capital Accumulation Plan,
assumed by Magna as to outstanding obligations pursuant to the acquisition of
Landmark (filed as Exhibit 10.1 to Magna's Annual Report on Form 10-K for the
year ended December 31, 1991 (File No. 0-8234) and incorporated herein by
reference)<F*>
10.2 Form of Stock Option Agreement under Landmark's 1986 Non-Qualified Stock Option
Plan, assumed by Magna as to outstanding obligations pursuant to the acquisition
of Landmark (filed as Exhibit 10.2 to Magna's Annual Report on Form 10-K for the
year ended December 31, 1991 (File No. 0-8234) and incorporated herein by
reference)<F*>
10.3 1987 Stock Option Plan of Magna (filed as Exhibit 10.2 to Magna's Registration
Statement on Form S-4 (Reg. No. 33-15463) and incorporated herein by refer-
ence)<F*>
10.4 Landmark's Amended and Restated Supplemental Retirement Plan (filed as Exhibit
10(ff) to Landmark's Annual Report on Form 10-K for the year ended December 31,
1989 (File No. 1-8810) and incorporated herein by reference)<F*>
10.5 Employment Agreement dated January 1, 1995 between Magna and G. Thomas Andes
(filed as Exhibit 10.6 to Magna's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 0-8234) and incorporated herein by reference)<F*>
10.6 Agreement dated March 15, 1996 between Magna and Linda K. Fabel<F*>
10.7 Agreement dated March 13, 1996 between Magna and David D. Harris<F*>
10.8 Agreement dated March 12, 1996 between Magna and Gary D. Hemmer<F*>
10.9 Agreement dated December 5, 1995 between Magna and Ronald A. Buerges<F*>
16
<PAGE> 17
<CAPTION>
EXHIBIT INDEX--(CONTINUED)
<C> <S> <C>
10.10 Agreement dated March 12, 1996 between Magna and Robert M. Olson, Jr.<F*>
10.11 Second Amendment to Second Restated Employment Agreement between Magna and S.
Lee Kling (filed as Exhibit 10.24 to Magna's Quarterly Report on Form 10-Q for
the period ended June 30, 1994 (File No. 0-8234) and incorporated herein by
reference)<F*>
10.12 Second Restated Employment Agreement dated as of October 20, 1990, as amended by
Letter Agreement dated August 29, 1991, between Landmark and S. Lee Kling (filed
as Exhibit 10.9 to Magna's Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 0-8234) and incorporated herein by reference)<F*>
10.13 Directors' Survivor Benefit Plan (filed as Exhibit 10.11 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1991 (File No. 0-8234) and
incorporated herein by reference)<F*>
10.14 Directors' Deferred Compensation Plan (filed as Exhibit 10.12 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1991 (File No. 0-8234) and
incorporated herein by reference)<F*>
10.15 Board of Directors Retirement Plan of Magna (filed as Exhibit 10.16 to Magna's
Annual Report on Form 10-K for the year ended December 31, 1994 (File No.
0-8234) and incorporated herein by reference)<F*>
10.16 Executive Supplemental Deferral Plan (filed as Exhibit 10.12 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1987 (File No. 0-8234) and
incorporated herein by reference)<F*>
10.17 Form of Director Indemnification Agreement dated as of May 30, 1991 between
Landmark and Donald P. Gallop, Carl G. Hogan, Sr., Franklin A. Jacobs and Ralph
F. Korte, respectively, and Consent dated May 24, 1991 of Magna to Director
Indemnification Agreements dated May 30, 1991 assuming Landmark's obligations
thereunder upon effectiveness of the acquisition (filed as Exhibit 10.14 to
Magna's Annual Report on Form 10-K for the year ended December 31, 1991 (File
No. 0-8234) and incorporated herein by reference)<F*>
10.18 1992 Long Term Performance Plan of Magna (filed as Appendix A to Magna's Proxy
Statement for the 1992 Annual Meeting of Stockholders (File No. 0-8234) and
incorporated herein by reference)<F*>
10.19 Directors' Stock Option Plan of Magna (filed as Appendix B to Magna's Proxy
Statement for the 1992 Annual Meeting of Stockholders (File No. 0-8234) and
incorporated herein by reference)<F*>
10.20 Amendment to Supplemental Executive Retirement Plan of Magna (filed as Exhibit
10.25 to Magna's Quarterly Report on Form 10-Q for the period ended June 30,
1994 (File No. 0-8234) and incorporated herein by reference)<F*>
10.21 Supplemental Executive Retirement Plan of Magna (filed as Exhibit 10.15 to
Magna's Annual Report on Form 10-K for the year ended December 31, 1993 (File
No. 0-8234) and incorporated herein by reference)<F*>
10.22 Magna Executive Incentive Compensation Plan (MEICP) 1996<F*>
10.23 Amended and Restated Retirement and Consulting Agreement dated December 30, 1994
between Magna and William S. Badgley (filed as Exhibit 10.24 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1994 (File No. 0-8234) and
incorporated herein by reference)
17
<PAGE> 18
<CAPTION>
EXHIBIT INDEX--(CONTINUED)
<C> <S> <C>
10.24 Lease between Magna as successor in interest to Landmark, and St. Louis
Brentwood Associates, L.P., dated December 19, 1986, relating to Magna Place, as
amended by the First Amendment dated November 17, 1987, the Addendum dated
February 1, 1990 and the Letter Agreement dated January 9, 1992 (filed as
Exhibit 10.17 to Magna's Annual Report on Form 10-K for the year ended December
31, 1991 (File No. 0-8234) and incorporated herein by reference)
10.25 Stock Purchase Agreement dated March 27, 1992, by and among Capital Bancorpora-
tion, Inc., Magna and Landmark Acquisition Corporation, and amendment thereto
(filed as Exhibit 2.1 to Magna's Registration Statement on Form S-3 (Reg. No.
33-48918) and incorporated herein by reference)
10.26 Supplemental Agreement dated February 29, 1996, between Magna and John G.
Helmkamp, Jr.<F*>
10.27 Form of Restricted Stock Agreement dated December 31, 1994 between Magna and
each of Linda K. Fabel and Robert M. Olson, Jr., respectively (filed as Exhibit
10.29 to Magna's Annual Report on Form 10-K for the year ended December 31, 1994
(File No. 0-8234) is incorporated herein by reference)<F*>
10.28 Form of Restricted Stock Agreement dated December 31, 1995 between Magna and
each of David D. Harris and Gary D. Hemmer, respectively<F*>
11.1 Computation of Net Income Per Common Share
13.1 1995 Annual Report to Stockholders
21.1 List of Subsidiaries
23.1 Consent of Independent Auditors
27.1 Financial Data Schedule
<FN>
- --------
<F*>Management contract or compensatory plan
</TABLE>
18
<PAGE> 1
MAGNA GROUP, INC.
AGREEMENT
---------
This agreement ("Agreement") has been entered into this 15th day
of March, 1996, by and between Magna Group, Inc., a Delaware corporation
("Company"), and Linda K. Fabel, an individual ("Executive").
RECITALS
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to
reinforce and encourage the continued attention and dedication of the
Executive to the Company as a member of the Company's management (including,
if applicable, management of a wholly owned subsidiary) and to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change in
Control (as defined below) of the Company. The Board desires to provide
for the continued employment of the Executive on the terms hereof, and the
Executive is willing to commit to continue to serve the Company. Additionally,
the Board believes it is imperative to diminish the inevitable distraction
of the Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change in Control, to encourage the Executive's
full attention and dedication to the Company currently and in the event
of any threatened or pending Change in Control, and to provide the Executive
with compensation and benefits arrangements upon the breach of this Agreement
by the Employer or upon a termination of employment after a Change in Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the following
words and phrases, whether or not capitalized, shall have the meanings
specified below, unless the context plainly requires a different meaning.
1.1(a) "ANNUAL BASE SALARY" means the dollar amount that
would be reported to the Internal Revenue Service as
compensation on Form W-2 or any successor form.
1.1(b) "BOARD" means the Board of Directors of the Company.
1.1(c) "CHANGE IN CONTROL" means a change in control of the
Company of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act;
provided that, for purposes of this Agreement, a
Change in Control shall be deemed to have occurred
if (i) any Person (other than the Company) is or
becomes the
<PAGE> 2
"beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of
securities of the Company which represent 20% or
more of the combined voting power of the Company's
then outstanding securities; (ii) during any period
of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board cease
for any reason to constitute at least a majority
thereof, unless the election, or the nomination for
election, by the Company's stockholders, of each new
director is approved by a vote of at least two-thirds
(2/3) of the directors then still in office who were
directors at the beginning of the period but excluding
any individual whose initial assumption of office
occurs as a result of either an actual or threatened
election contest (as such term is used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies
or consents by or on behalf of a person other than the
Board; (iii) there is consummated any consolidation or
merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to
which shares of the Company's Common Stock is
converted into cash, securities, or other property,
other than a merger of the Company in which the
holders of the Company's Common Stock immediately
prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger; (iv) there is
consummated any consolidation or merger of the
Company in which the Company is the continuing or
surviving corporation in which the holders of the
Company's Common Stock immediately prior to the
merger do not own fifty percent (50%) or more of the
stock of the surviving corporation immediately after
the merger; (v) there is consummated any sale,
lease, exchange, or other transfer (in one
transaction or a series of related transactions) of
all, or substantially all, of the assets of the
Company, or (vi) the stockholders of the Company
approve any plan or proposal for the liquidation
or dissolution of the Company.
1.1(d) "CHANGE IN CONTROL DATE" shall mean the date of the
Change in Control.
1.1(e) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
1.1(f) "COMPANY" means Magna Group, Inc., a Delaware
corporation.
1.1(g) "EFFECTIVE DATE" shall mean January 1, 1996.
1.1(h) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
1.1(i) "INCENTIVE BONUS" shall mean the incentive bonus
provided through any incentive compensation plan,
which is generally available to other peer
executives of the Company, awarded to the Executive
for the year preceding termination. To the extent
such incentive bonus is paid in shares of restricted
stock, Incentive Bonus shall include the value of such
shares on their award date without any discount;
provided, however, such restricted shares shall
include only those awarded in lieu of compensation
payable as determined by the Compensation Committee
of the Board.
-2-
<PAGE> 3
1.1(j) "PERSON" means any "person" within the meaning of
Sections 13(d) and 14(d) of the Exchange Act.
1.1(k) "TERM" means the period that begins on the Effective
Date and ends on the earlier of: (i) the Date of
Termination as defined in Section 3.7, or (ii) the
close of business on December 31 of any calendar
year during which notice is given, by December 1
of such year, by either party (as provided in
Section 7) of such party's intent not to renew this
Agreement.
1.2 GENDER AND NUMBER. When appropriate, pronouns in this
Agreement used in the masculine gender include the feminine gender, words in
the singular include the plural, and words in the plural include the singular.
1.3 HEADINGS. All headings in this Agreement are included solely
for ease of reference and do not bear on the interpretation of the text.
Accordingly, as used in this Agreement, the terms "Article" and "Section" mean
the text that accompanies the specified Article or Section of the Agreement.
1.4 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the state of Missouri, without
reference to its conflict of law principles.
SECTION 2: TERMS AND CONDITIONS OF EMPLOYMENT.
2.1 EMPLOYMENT. If the Executive is in the employ of the Company
(or in the employ of a wholly owned subsidiary) on a Change in Control Date,
then the Executive shall thereafter remain in the employ of the Company
(or in the employ of a wholly owned subsidiary) in accordance with the terms
and provisions of this Agreement.
2.2 POSITIONS AND DUTIES.
2.2(a) Following a Change in Control Date, the Executive
shall continue to serve in the Executive's then current
capacity, subject to the reasonable directions of the Board.
The Executive shall thereafter devote the Executive's full
working time and attention to such business and affairs of
the Company and/or any subsidiary of the Company as directed
by the Board, as may be compatible with the Executive's titles
and positions. In addition, the Executive's position (including
status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in
all material respects with those assigned to, or held and
exercised by, the Executive immediately preceding a Change in
Control Date.
2.2(b) Following a Change in Control Date and thereafter
throughout the Term of this Agreement (but excluding any periods
of vacation and sick leave to which the Executive is entitled),
the Executive shall devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and shall use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities as are assigned
to the Executive under or in accordance with this Agreement;
provided that, it shall not be a violation of this paragraph
for the Executive to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures or fulfill speaking
engagements, or (iii) manage
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personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement or violate the Company's conflict of interest
policy as in effect immediately prior to the Effective Date.
2.3 SITUS OF EMPLOYMENT. Following a Change in Control Date and
thereafter throughout the Term of this Agreement, the Executive's services
shall be performed at the location where the Executive was employed
immediately preceding the Change in Control Date.
2.4 COMPENSATION. For any calendar year including and following
a Change in Control Date, the Executive shall receive an Annual Base Salary
equal to the Annual Base Salary being received immediately prior to a Change
in Control Date, which shall be paid in equal or substantially equal monthly
installments. The Annual Base Salary payable to the Executive shall be
reviewed thereafter at least annually but need not be adjusted upward as a
result of such review and shall not be reduced after any increase thereof.
SECTION 3: TERMINATION OF AGREEMENT.
3.1 DEATH. This Agreement shall terminate automatically upon the
Executive's death during the Term of this Agreement.
3.2 DISABILITY. If, following a Change in Control Date, the
Company determines in good faith that the Disability of the Executive has
occurred during the Term of this Agreement (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 8.1 of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the thirtieth (30th) day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within
the thirty (30) days after such receipt, the Executive shall not have returned
to full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean that the Executive has been unable to
perform the services required of the Executive hereunder on a full-time
basis for a period of one hundred eighty (180) consecutive business days by
reason of a physical and/or mental condition. "Disability" shall be deemed
to exist when certified by a physician selected by the Company or its insurers
and acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably). The Executive
will submit to such medical or psychiatric examinations and tests as such
physician deems necessary to make any such Disability determination.
3.3 PRIOR TO CHANGE IN CONTROL. Executive is employed at will.
Any notice of termination by Executive or Company shall be given in
accordance with Section 3.6 of the Agreement.
3.4 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY COMPANY
FOR CAUSE. Following a Change in Control Date, the Company may terminate
the Executive's employment during the Term of this Agreement for "Cause,"
which shall mean termination based upon: (i) the Executive's willful and
continued failure to substantially perform the Executive's duties with the
Company (other than as a result of incapacity due to physical or mental
condition), after a demand for substantial performance is delivered to the
Executive by the Chief Executive Officer of the Company or the Chairman
of the Compensation Committee of the Board, which specifically identifies
the manner in which the Executive has not substantially performed the
Executive's duties, (ii) the Executive's willful commission of misconduct
which is materially injurious to the Company, monetarily or otherwise,
or (iii) the Executive's material
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<PAGE> 5
breach of any provision of this Agreement. For purposes of this paragraph,
no act, or failure to act on the Executive's part shall be considered
"willful" unless done, or omitted to be done, without good faith and
without reasonable belief that the act or omission was in the best interest
of the Company. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until (i) the Executive
receives a Notice of Termination (as defined in Section 3.6) from the Chief
Executive Officer of the Company or the Chairman of the Compensation
Committee of the Board, (ii) the Executive is given the opportunity, with
counsel to be heard before the Board, and (iii) the Board finds, in its
good faith opinion, the Executive was guilty of the conduct set forth in
the Notice of Termination.
3.5 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY EXECUTIVE
FOR GOOD REASON. Following a Change in Control Date, the Executive may
terminate the Executive's employment with the Company for "Good Reason,"
which shall mean termination based upon:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 2.2(a) or any other action by the Company which results
in a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose any action not
taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(ii) the failure by the Company to continue in effect any
benefit or compensation plan, stock ownership plan, life
insurance plan, health and accident plan or disability plan to
which the Executive is entitled, the taking of any action by the
Company which would adversely affect the Executive's participation
in, or materially reduce the Executive's benefits such plans,
or deprive the Executive of any material fringe benefit enjoyed by
the Executive or the failure by the Company to provide the
Executive with the number of paid vacation days to which the
Executive is entitled.
(iii) the Company's requiring the Executive to be based at
any office or location other than that described in Section 2.3;
(iv) a material breach by the Company of any provision of this
Agreement;
(v) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement;
(vi) within a period ending at the close of business on the
date two (2) years after the Change in Control Date, any failure
by the Company to comply with and satisfy Section 6.2 on or
after the Change in Control Date; or
(vii) within a period ending at the close of business on the
date one (1) year after the Change in Control Date, the
Executive, in the Executive's sole and absolute discretion,
determines and notifies the Company in writing, that the
Executive does not wish to continue employment with the
Company.
For purposes of this Section any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
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<PAGE> 6
3.6 NOTICE OF TERMINATION. Any termination by the Company, or by
the Executive, shall be communicated by Notice of Termination to the other
party, given in accordance with Section 8.1. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provision so indicated, and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days
after the giving of such notice). The failure by the Executive or the Company
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Company hereunder or preclude the Executive or the
Company from asserting such fact or circumstance in enforcing the Executive's
or the Company's rights hereunder.
3.7 DATE OF TERMINATION. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company with or without
Cause, or by the Executive for Good Reason or otherwise, the Date of
Termination shall be the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, or (ii) if the
Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive or
the Disability Effective Date, as the case may be.
SECTION 4: CERTAIN BENEFITS UPON TERMINATION OF EMPLOYMENT.
4.1 TERMINATION WITHOUT CAUSE PRIOR TO A CHANGE IN CONTROL. If,
prior to a Change in Control, during the Term of this Agreement the Company
shall terminate the Executive's employment without Cause, then on the tenth
(10th) business day following the Date of Termination, the Company shall
pay to the Executive the sum of (1) the Executive's Annual Base Salary
prorated through the Date of Termination to the extent not previously paid,
and (2) any accrued vacation pay to the extent not previously paid.
4.2 TERMINATION AFTER A CHANGE IN CONTROL. If a Change in Control
occurs during the Term of this Agreement and within two (2) years after such
Change in Control: (i) the Company shall terminate the Executive's
employment without Cause, or (ii) the Executive shall terminate employment
with the Company for Good Reason, then the Executive shall be entitled to the
benefits provided below:
4.2(a) "Accrued Obligations": On the tenth (10th) business
day following the Date of Termination, the Company shall pay to
the Executive the sum of (1) the Executive's Annual Base Salary
prorated through the Date of Termination to the extent not
previously paid, and (2) any accrued vacation pay to the extent
not previously paid.
4.2(b) "Severance Amount": On the tenth (10th) business day
following the Date of Termination, the Company shall pay to the
Executive as severance pay a lump sum cash payment in an amount
equal to 2 (two) times the sum of the Executive's Annual Base
Salary in effect on the Date of Termination and the Executive's
Incentive Bonus.
4.2(c) "Stock Options": To the extent not otherwise
provided for under the terms of any of the Company's stock
option agreements, all such stock options shall become fully
exercisable as of the Date of Termination and, except for
"incentive stock options" within
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<PAGE> 7
the meaning of Code Section 422 granted prior to the date
hereof, shall remain fully exercisable in accordance with
their terms.
4.2(d) "Other Benefits": To the extent not previously paid
or provided, the Company shall timely pay or provide to the
Executive and/or the Executive's family any other amounts or
benefits required to be paid or provided for which the
Executive and/or the Executive's family is eligible to receive
pursuant to this Agreement and under any plan, program, policy
or practice or contract or agreement of the Company as those
provided generally to other peer executives and their families
during the ninety (90) day period immediately preceding the
Effective Date or, if more favorable to the Executive, as those
provided generally after the Effective Date to other peer
executives of the Company and their families.
4.2(e) "Excess Parachute Payment": Anything in this
Agreement to the contrary notwithstanding, in the event that
an independent accountant shall determine that any payment
or distribution by the Company to or for the benefit of
Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be nondeductible by the Company for Federal
income tax purposes because of Code Section 280G or would
constitute an "excess parachute payment" (as defined in Code
Section 280G), then the aggregate present value of amounts
payable or distributable to or for the benefit of Executive
pursuant to this Agreement (such payments or distributions
pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero)
to the Reduced Amount. For purposes of this paragraph, the
"Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be nondeductible by the
Company because of Code Section 280G or without causing any
portion of the Payment to be subject to the excise tax imposed
by Code Section 4999.
If the independent accountant determines that any Payment
would be nondeductible by the Company because of Code Section
280G or that any portion of the Payment will be subject to the
excise tax imposed by Code Section 4999, the Company shall
promptly give Executive notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount.
The Executive may then elect, in the Executive's sole discretion,
which and how much of the Agreement Payments shall be eliminated
or reduced (as long as after such election the aggregate
present value of the Agreement Payments equals the Reduced
Amount), and shall advise the Company in writing of the
Executive's election within ten (10) days of the Executive's
receipt of such notice. If no such election is made by Executive
within such ten-day period, the Company may elect which and
how much of the Agreement Payments shall be eliminated or
reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and
shall notify the Executive promptly of such election. For
purposes of this paragraph, present value shall be determined
in accordance with Code Section 280G(d)(4). All determinations
made by the independent accountant under this paragraph shall
be binding upon the Company and the Executive and shall be
made within sixty (60) days of a termination of employment of
the Executive. As promptly as practicable following such
determination and the elections hereunder, the Company shall
pay to or distribute to or for the benefit of the Executive
such amounts as are then due to the Executive under this
Agreement and shall
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<PAGE> 8
promptly pay to or distribute for the benefit of the Executive
in the future such amounts as become due to the Executive under
this Agreement.
As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial determination
by the independent accountant hereunder, it is possible that
Agreements Payments will be made by the Company which should not
have been made ("Overpayment") or that additional Agreement
Payments which have not been made by the Company should have been
made ("Underpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder. In the event that
the independent accountant, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company
or the Executive which the independent accountant believes has a
high probability of success, determines that an Overpayment has
been made, any such Overpayment shall be treated for all purposes
as a loan to the Executive which the Executive shall repay to the
Company together with interest at the applicable Federal rate
provided for in Code Section 7872(f)(2); provided, however,
that no amount shall be payable by the Executive to the Company
if and to the extent such payment would not reduce the amount
which is subject to taxation under Code Section 4999 or if the
period of limitations for assessment of tax under Code Section
4999 against the Executive shall have expired. If the Executive
is required to repay an amount under this Section, the Executive
shall repay such amount over a period of time not to exceed
one (1) year for each twenty-five thousand dollars ($25,000)
which the Executive must repay to the Company. In the event
that the independent accountant, based upon controlling
precedent, determines that an Underpayment has occurred, any
such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive together with interest
at the applicable Federal rate provided for in Code
Section 7872(f)(2)(A).
4.3 DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Term of this Agreement (either
prior or subsequent to a Change in Control), this Agreement shall terminate
without further obligations to the Executive's legal representatives under
this Agreement, other than for payment of Accrued Obligations (as defined
in Section 4.1) (which shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within ten (10) days of the Date of
Termination).
4.4 DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Term of this Agreement (either
prior or subsequent to a Change in Control), this Agreement shall terminate
without further obligations to the Executive, other than for payment of
Accrued Obligations (as defined in Section 4.1) (which shall be paid to the
Executive in a lump sum in cash within ten (10) days of the Date of
Termination).
4.5 TERMINATION FOR CAUSE; EXECUTIVE'S TERMINATION OTHER THAN
FOR GOOD REASON AFTER A CHANGE IN CONTROL. If the Executive's employment
shall be terminated for Cause during the Term of this Agreement (either
prior to or subsequent to a Change in Control), this Agreement shall
terminate without further obligations to the Executive other than the
obligation to pay to the Executive Accrued Obligations (as defined in
Section 4.1). If the Executive terminates employment with the Company
during the Term of this Agreement, (other than for Good Reason after a
Change in Control) this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations (as
defined in Section 4.1). In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum cash payment within thirty (30)
days of the Date of Termination. If the
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<PAGE> 9
Executive's employment shall terminate for the reasons stated in this
Section, the provisions of Section 5 shall continue to apply.
4.6 NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company and for which
the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company. Amounts which are vested benefits of which the Executive
is otherwise entitled to receive under any plan, policy, practice or program
of, or any contract or agreement with, the Company at or subsequent to the
Date of Termination, shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified
by this Agreement.
4.7 FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company agrees, only
on and after a Change in Control Date to pay promptly as incurred, to the
full extent permitted by law, all legal fees and expenses which the
Executive may reasonable incur as a result of any contest (regardless of
the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a result of any
contest by the Executive regarding the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Code Section 7872(f)(2)(A).
4.8 RESOLUTION OF DISPUTES. If there shall be any dispute
between the Company and the Executive (i) in the event of any termination
of the Executive's employment by the Company, whether such termination was
for Cause, or (ii) in the event of any termination of employment by the
Executive, whether Good Reason existed, then, unless and until there is a
final, nonappealable judgment by a court of competent jurisdiction
declaring that such termination was for Cause or that the determination
by the Executive of the existence of Good Reason was not made in good faith,
the Company shall, only on and after a Change in Control Date pay all
amounts, and provide all benefits, to the Executive and/or the Executive's
family or other beneficiaries, as the case may be, that the Company would
be required to pay or provide pursuant to Section 4.2 as though such
termination were by the Company without Cause or by the Executive with
Good Reason; provided, however, that the Company shall not be required to
pay any disputed amounts pursuant to this paragraph except upon receipt of
an undertaking by or on behalf of the Executive to repay all such amounts
to which the Executive is ultimately adjudged by such court not to be
entitled.
SECTION 5: CONFIDENTIAL INFORMATION.
CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the
Company and which shall not be or become public knowledge (other than by
acts by the Executive or representatives of the Executive in violation of this
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<PAGE> 10
Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section constitute a basis
for deferring or withholding any amounts otherwise payable to the Executive
under this Agreement.
SECTION 6: SUCCESSORS.
6.1 SUCCESSORS OF EXECUTIVE. This Agreement is personal to the
Executive and, without the prior written consent of the Company, amounts
receivable hereunder shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's legal
representatives.
6.2 SUCCESSORS OF COMPANY. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to obtain such
agreement upon the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to terminate the Agreement
at the Executive's option on or after the Change in Control Date for
Good Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
SECTION 7: TERMS OF AGREEMENT.
This Agreement will automatically renew for annual one-year
periods beginning on January 1 of each year and ending on the following
December 31; provided that, the last annual period shall be the twelve (12)
month period beginning on January 1 and ending on the following December 31
during which written notice is given by December 1, by either party, of
such party's intent not to renew this Agreement. If notice is given by
either party after December 1 of any year, but prior to January 1 of
the next succeeding year, then the last renewal period shall be the twelve
(12) month period which begins on the January 1 following the date notice
is given and ending the following December 31. Notwithstanding the foregoing,
in the event a Change in Control shall have occurred, this Agreement shall
terminate two (2) years after a Change in Control Date.
SECTION 8: MISCELLANEOUS.
8.1 NOTICE. For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses as set forth below; provided that all
notices to the Company shall be directed to the attention of the Chairman
of the Board of the Company with a copy to the Secretary of the Company,
or to such other address as one party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall
be effective only upon receipt.
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Notice to Executive:
-------------------
Linda K. Fabel
16512 Kingspointe Lake Lane
Chesterfield, Missouri 63005
Notice to Company:
-----------------
Magna Group, Inc.
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
8.4 WAIVER. The Executive's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of
this Agreement or the failure to assert any right the Executive or the
Company may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to Section 3.5
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of this
Agreement shall supersede all other employment or other agreements with
respect to severance entered into by and between the Executive and the
Company, or the Executive and any other employer, and this Agreement shall
constitute the sole agreement pursuant to which the Company shall have an
obligation to the Executive upon the termination of the Executive's
relationship with the Company or any subsidiary.
IN WITNESS WHEREOF, the Executive and the Company, pursuant
to the authorization from its Board, have caused this Agreement to be
executed in its name on its behalf, all as of the day and year first
above written.
/s/ Linda K. Fabel
-------------------------------------------
Executive
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
-----------------------------------------
Name: G. Thomas Andes
Title: Chairman of the Board, President and
Chief Executive Officer
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<PAGE> 1
MAGNA GROUP, INC.
AGREEMENT
---------
This agreement ("Agreement") has been entered into this 13th day
of March, 1996, by and between Magna Group, Inc., a Delaware corporation
("Company"), and David D. Harris, an individual ("Executive").
RECITALS
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to
reinforce and encourage the continued attention and dedication of the
Executive to the Company as a member of the Company's management (including,
if applicable, management of a wholly owned subsidiary) and to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change in
Control (as defined below) of the Company. The Board desires to provide
for the continued employment of the Executive on the terms hereof, and the
Executive is willing to commit to continue to serve the Company. Additionally,
the Board believes it is imperative to diminish the inevitable distraction
of the Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change in Control, to encourage the Executive's
full attention and dedication to the Company currently and in the event
of any threatened or pending Change in Control, and to provide the Executive
with compensation and benefits arrangements upon the breach of this Agreement
by the Employer or upon a termination of employment after a Change in Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the following
words and phrases, whether or not capitalized, shall have the meanings
specified below, unless the context plainly requires a different meaning.
1.1(a) "ANNUAL BASE SALARY" means the dollar amount that
would be reported to the Internal Revenue Service as
compensation on Form W-2 or any successor form.
1.1(b) "BOARD" means the Board of Directors of the Company.
1.1(c) "CHANGE IN CONTROL" means a change in control of the
Company of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act;
provided that, for purposes of this Agreement, a
Change in Control shall be deemed to have occurred
if (i) any Person (other than the Company) is or
becomes the
<PAGE> 2
"beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of
securities of the Company which represent 20% or
more of the combined voting power of the Company's
then outstanding securities; (ii) during any period
of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board cease
for any reason to constitute at least a majority
thereof, unless the election, or the nomination for
election, by the Company's stockholders, of each new
director is approved by a vote of at least two-thirds
(2/3) of the directors then still in office who were
directors at the beginning of the period but excluding
any individual whose initial assumption of office
occurs as a result of either an actual or threatened
election contest (as such term is used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies
or consents by or on behalf of a person other than the
Board; (iii) there is consummated any consolidation or
merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to
which shares of the Company's Common Stock is
converted into cash, securities, or other property,
other than a merger of the Company in which the
holders of the Company's Common Stock immediately
prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger; (iv) there is
consummated any consolidation or merger of the
Company in which the Company is the continuing or
surviving corporation in which the holders of the
Company's Common Stock immediately prior to the
merger do not own fifty percent (50%) or more of the
stock of the surviving corporation immediately after
the merger; (v) there is consummated any sale,
lease, exchange, or other transfer (in one
transaction or a series of related transactions) of
all, or substantially all, of the assets of the
Company, or (vi) the stockholders of the Company
approve any plan or proposal for the liquidation
or dissolution of the Company.
1.1(d) "CHANGE IN CONTROL DATE" shall mean the date of the
Change in Control.
1.1(e) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
1.1(f) "COMPANY" means Magna Group, Inc., a Delaware
corporation.
1.1(g) "EFFECTIVE DATE" shall mean January 1, 1996.
1.1(h) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
1.1(i) "INCENTIVE BONUS" shall mean the incentive bonus
provided through any incentive compensation plan,
which is generally available to other peer
executives of the Company, awarded to the Executive
for the year preceding termination. To the extent
such incentive bonus is paid in shares of restricted
stock, Incentive Bonus shall include the value of such
shares on their award date without any discount;
provided, however, such restricted shares shall
include only those awarded in lieu of compensation
payable as determined by the Compensation Committee
of the Board.
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<PAGE> 3
1.1(j) "PERSON" means any "person" within the meaning of
Sections 13(d) and 14(d) of the Exchange Act.
1.1(k) "TERM" means the period that begins on the Effective
Date and ends on the earlier of: (i) the Date of
Termination as defined in Section 3.7, or (ii) the
close of business on December 31 of any calendar
year during which notice is given, by December 1
of such year, by either party (as provided in
Section 7) of such party's intent not to renew this
Agreement.
1.2 GENDER AND NUMBER. When appropriate, pronouns in this
Agreement used in the masculine gender include the feminine gender, words in
the singular include the plural, and words in the plural include the singular.
1.3 HEADINGS. All headings in this Agreement are included solely
for ease of reference and do not bear on the interpretation of the text.
Accordingly, as used in this Agreement, the terms "Article" and "Section" mean
the text that accompanies the specified Article or Section of the Agreement.
1.4 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the state of Missouri, without
reference to its conflict of law principles.
SECTION 2: TERMS AND CONDITIONS OF EMPLOYMENT.
2.1 EMPLOYMENT. If the Executive is in the employ of the Company
(or in the employ of a wholly owned subsidiary) on a Change in Control Date,
then the Executive shall thereafter remain in the employ of the Company
(or in the employ of a wholly owned subsidiary) in accordance with the terms
and provisions of this Agreement.
2.2 POSITIONS AND DUTIES.
2.2(a) Following a Change in Control Date, the Executive
shall continue to serve in the Executive's then current
capacity, subject to the reasonable directions of the Board.
The Executive shall thereafter devote the Executive's full
working time and attention to such business and affairs of
the Company and/or any subsidiary of the Company as directed
by the Board, as may be compatible with the Executive's titles
and positions. In addition, the Executive's position (including
status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in
all material respects with those assigned to, or held and
exercised by, the Executive immediately preceding a Change in
Control Date.
2.2(b) Following a Change in Control Date and thereafter
throughout the Term of this Agreement (but excluding any periods
of vacation and sick leave to which the Executive is entitled),
the Executive shall devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and shall use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities as are assigned
to the Executive under or in accordance with this Agreement;
provided that, it shall not be a violation of this paragraph
for the Executive to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures or fulfill speaking
engagements, or (iii) manage
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<PAGE> 4
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement or violate the Company's conflict of interest
policy as in effect immediately prior to the Effective Date.
2.3 SITUS OF EMPLOYMENT. Following a Change in Control Date and
thereafter throughout the Term of this Agreement, the Executive's services
shall be performed at the location where the Executive was employed
immediately preceding the Change in Control Date.
2.4 COMPENSATION. For any calendar year including and following
a Change in Control Date, the Executive shall receive an Annual Base Salary
equal to the Annual Base Salary being received immediately prior to a Change
in Control Date, which shall be paid in equal or substantially equal monthly
installments. The Annual Base Salary payable to the Executive shall be
reviewed thereafter at least annually but need not be adjusted upward as a
result of such review and shall not be reduced after any increase thereof.
SECTION 3: TERMINATION OF AGREEMENT.
3.1 DEATH. This Agreement shall terminate automatically upon the
Executive's death during the Term of this Agreement.
3.2 DISABILITY. If, following a Change in Control Date, the
Company determines in good faith that the Disability of the Executive has
occurred during the Term of this Agreement (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 8.1 of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the thirtieth (30th) day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within
the thirty (30) days after such receipt, the Executive shall not have returned
to full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean that the Executive has been unable to
perform the services required of the Executive hereunder on a full-time
basis for a period of one hundred eighty (180) consecutive business days by
reason of a physical and/or mental condition. "Disability" shall be deemed
to exist when certified by a physician selected by the Company or its insurers
and acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably). The Executive
will submit to such medical or psychiatric examinations and tests as such
physician deems necessary to make any such Disability determination.
3.3 PRIOR TO CHANGE IN CONTROL. Executive is employed at will.
Any notice of termination by Executive or Company shall be given in
accordance with Section 3.6 of the Agreement.
3.4 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY COMPANY
FOR CAUSE. Following a Change in Control Date, the Company may terminate
the Executive's employment during the Term of this Agreement for "Cause,"
which shall mean termination based upon: (i) the Executive's willful and
continued failure to substantially perform the Executive's duties with the
Company (other than as a result of incapacity due to physical or mental
condition), after a demand for substantial performance is delivered to the
Executive by the Chief Executive Officer of the Company or the Chairman
of the Compensation Committee of the Board, which specifically identifies
the manner in which the Executive has not substantially performed the
Executive's duties, (ii) the Executive's willful commission of misconduct
which is materially injurious to the Company, monetarily or otherwise,
or (iii) the Executive's material
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<PAGE> 5
breach of any provision of this Agreement. For purposes of this paragraph,
no act, or failure to act on the Executive's part shall be considered
"willful" unless done, or omitted to be done, without good faith and
without reasonable belief that the act or omission was in the best interest
of the Company. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until (i) the Executive
receives a Notice of Termination (as defined in Section 3.6) from the Chief
Executive Officer of the Company or the Chairman of the Compensation
Committee of the Board, (ii) the Executive is given the opportunity, with
counsel to be heard before the Board, and (iii) the Board finds, in its
good faith opinion, the Executive was guilty of the conduct set forth in
the Notice of Termination.
3.5 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY EXECUTIVE
FOR GOOD REASON. Following a Change in Control Date, the Executive may
terminate the Executive's employment with the Company for "Good Reason,"
which shall mean termination based upon:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 2.2(a) or any other action by the Company which results
in a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose any action not
taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(ii) the failure by the Company to continue in effect any
benefit or compensation plan, stock ownership plan, life
insurance plan, health and accident plan or disability plan to
which the Executive is entitled, the taking of any action by the
Company which would adversely affect the Executive's participation
in, or materially reduce the Executive's benefits such plans,
or deprive the Executive of any material fringe benefit enjoyed by
the Executive or the failure by the Company to provide the
Executive with the number of paid vacation days to which the
Executive is entitled.
(iii) the Company's requiring the Executive to be based at
any office or location other than that described in Section 2.3;
(iv) a material breach by the Company of any provision of this
Agreement;
(v) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement;
(vi) within a period ending at the close of business on the
date two (2) years after the Change in Control Date, any failure
by the Company to comply with and satisfy Section 6.2 on or
after the Change in Control Date; or
(vii) within a period ending at the close of business on the
date one (1) year after the Change in Control Date, the
Executive, in the Executive's sole and absolute discretion,
determines and notifies the Company in writing, that the
Executive does not wish to continue employment with the
Company.
For purposes of this Section any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
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<PAGE> 6
3.6 NOTICE OF TERMINATION. Any termination by the Company, or by
the Executive, shall be communicated by Notice of Termination to the other
party, given in accordance with Section 8.1. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provision so indicated, and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days
after the giving of such notice). The failure by the Executive or the Company
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Company hereunder or preclude the Executive or the
Company from asserting such fact or circumstance in enforcing the Executive's
or the Company's rights hereunder.
3.7 DATE OF TERMINATION. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company with or without
Cause, or by the Executive for Good Reason or otherwise, the Date of
Termination shall be the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, or (ii) if the
Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive or
the Disability Effective Date, as the case may be.
SECTION 4: CERTAIN BENEFITS UPON TERMINATION OF EMPLOYMENT.
4.1 TERMINATION WITHOUT CAUSE PRIOR TO A CHANGE IN CONTROL. If,
prior to a Change in Control, during the Term of this Agreement the Company
shall terminate the Executive's employment without Cause, then on the tenth
(10th) business day following the Date of Termination, the Company shall
pay to the Executive the sum of (1) the Executive's Annual Base Salary
prorated through the Date of Termination to the extent not previously paid,
and (2) any accrued vacation pay to the extent not previously paid.
4.2 TERMINATION AFTER A CHANGE IN CONTROL. If a Change in Control
occurs during the Term of this Agreement and within two (2) years after such
Change in Control: (i) the Company shall terminate the Executive's
employment without Cause, or (ii) the Executive shall terminate employment
with the Company for Good Reason, then the Executive shall be entitled to the
benefits provided below:
4.2(a) "Accrued Obligations": On the tenth (10th) business
day following the Date of Termination, the Company shall pay to
the Executive the sum of (1) the Executive's Annual Base Salary
prorated through the Date of Termination to the extent not
previously paid, and (2) any accrued vacation pay to the extent
not previously paid.
4.2(b) "Severance Amount": On the tenth (10th) business day
following the Date of Termination, the Company shall pay to the
Executive as severance pay a lump sum cash payment in an amount
equal to 2 (two) times the sum of the Executive's Annual Base
Salary in effect on the Date of Termination and the Executive's
Incentive Bonus.
4.2(c) "Stock Options": To the extent not otherwise
provided for under the terms of any of the Company's stock
option agreements, all such stock options shall become fully
exercisable as of the Date of Termination and, except for
"incentive stock options" within
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<PAGE> 7
the meaning of Code Section 422 granted prior to the date
hereof, shall remain fully exercisable in accordance with
their terms.
4.2(d) "Other Benefits": To the extent not previously paid
or provided, the Company shall timely pay or provide to the
Executive and/or the Executive's family any other amounts or
benefits required to be paid or provided for which the
Executive and/or the Executive's family is eligible to receive
pursuant to this Agreement and under any plan, program, policy
or practice or contract or agreement of the Company as those
provided generally to other peer executives and their families
during the ninety (90) day period immediately preceding the
Effective Date or, if more favorable to the Executive, as those
provided generally after the Effective Date to other peer
executives of the Company and their families.
4.2(e) "Excess Parachute Payment": Anything in this
Agreement to the contrary notwithstanding, in the event that
an independent accountant shall determine that any payment
or distribution by the Company to or for the benefit of
Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be nondeductible by the Company for Federal
income tax purposes because of Code Section 280G or would
constitute an "excess parachute payment" (as defined in Code
Section 280G), then the aggregate present value of amounts
payable or distributable to or for the benefit of Executive
pursuant to this Agreement (such payments or distributions
pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero)
to the Reduced Amount. For purposes of this paragraph, the
"Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be nondeductible by the
Company because of Code Section 280G or without causing any
portion of the Payment to be subject to the excise tax imposed
by Code Section 4999.
If the independent accountant determines that any Payment
would be nondeductible by the Company because of Code Section
280G or that any portion of the Payment will be subject to the
excise tax imposed by Code Section 4999, the Company shall
promptly give Executive notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount.
The Executive may then elect, in the Executive's sole discretion,
which and how much of the Agreement Payments shall be eliminated
or reduced (as long as after such election the aggregate
present value of the Agreement Payments equals the Reduced
Amount), and shall advise the Company in writing of the
Executive's election within ten (10) days of the Executive's
receipt of such notice. If no such election is made by Executive
within such ten-day period, the Company may elect which and
how much of the Agreement Payments shall be eliminated or
reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and
shall notify the Executive promptly of such election. For
purposes of this paragraph, present value shall be determined
in accordance with Code Section 280G(d)(4). All determinations
made by the independent accountant under this paragraph shall
be binding upon the Company and the Executive and shall be
made within sixty (60) days of a termination of employment of
the Executive. As promptly as practicable following such
determination and the elections hereunder, the Company shall
pay to or distribute to or for the benefit of the Executive
such amounts as are then due to the Executive under this
Agreement and shall
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<PAGE> 8
promptly pay to or distribute for the benefit of the Executive
in the future such amounts as become due to the Executive under
this Agreement.
As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial determination
by the independent accountant hereunder, it is possible that
Agreements Payments will be made by the Company which should not
have been made ("Overpayment") or that additional Agreement
Payments which have not been made by the Company should have been
made ("Underpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder. In the event that
the independent accountant, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company
or the Executive which the independent accountant believes has a
high probability of success, determines that an Overpayment has
been made, any such Overpayment shall be treated for all purposes
as a loan to the Executive which the Executive shall repay to the
Company together with interest at the applicable Federal rate
provided for in Code Section 7872(f)(2); provided, however,
that no amount shall be payable by the Executive to the Company
if and to the extent such payment would not reduce the amount
which is subject to taxation under Code Section 4999 or if the
period of limitations for assessment of tax under Code Section
4999 against the Executive shall have expired. If the Executive
is required to repay an amount under this Section, the Executive
shall repay such amount over a period of time not to exceed
one (1) year for each twenty-five thousand dollars ($25,000)
which the Executive must repay to the Company. In the event
that the independent accountant, based upon controlling
precedent, determines that an Underpayment has occurred, any
such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive together with interest
at the applicable Federal rate provided for in Code
Section 7872(f)(2)(A).
4.3 DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Term of this Agreement (either
prior or subsequent to a Change in Control), this Agreement shall terminate
without further obligations to the Executive's legal representatives under
this Agreement, other than for payment of Accrued Obligations (as defined
in Section 4.1) (which shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within ten (10) days of the Date of
Termination).
4.4 DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Term of this Agreement (either
prior or subsequent to a Change in Control), this Agreement shall terminate
without further obligations to the Executive, other than for payment of
Accrued Obligations (as defined in Section 4.1) (which shall be paid to the
Executive in a lump sum in cash within ten (10) days of the Date of
Termination).
4.5 TERMINATION FOR CAUSE; EXECUTIVE'S TERMINATION OTHER THAN
FOR GOOD REASON AFTER A CHANGE IN CONTROL. If the Executive's employment
shall be terminated for Cause during the Term of this Agreement (either
prior to or subsequent to a Change in Control), this Agreement shall
terminate without further obligations to the Executive other than the
obligation to pay to the Executive Accrued Obligations (as defined in
Section 4.1). If the Executive terminates employment with the Company
during the Term of this Agreement, (other than for Good Reason after a
Change in Control) this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations (as
defined in Section 4.1). In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum cash payment within thirty (30)
days of the Date of Termination. If the
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Executive's employment shall terminate for the reasons stated in this
Section, the provisions of Section 5 shall continue to apply.
4.6 NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company and for which
the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company. Amounts which are vested benefits of which the Executive
is otherwise entitled to receive under any plan, policy, practice or program
of, or any contract or agreement with, the Company at or subsequent to the
Date of Termination, shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified
by this Agreement.
4.7 FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company agrees, only
on and after a Change in Control Date to pay promptly as incurred, to the
full extent permitted by law, all legal fees and expenses which the
Executive may reasonable incur as a result of any contest (regardless of
the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a result of any
contest by the Executive regarding the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Code Section 7872(f)(2)(A).
4.8 RESOLUTION OF DISPUTES. If there shall be any dispute
between the Company and the Executive (i) in the event of any termination
of the Executive's employment by the Company, whether such termination was
for Cause, or (ii) in the event of any termination of employment by the
Executive, whether Good Reason existed, then, unless and until there is a
final, nonappealable judgment by a court of competent jurisdiction
declaring that such termination was for Cause or that the determination
by the Executive of the existence of Good Reason was not made in good faith,
the Company shall, only on and after a Change in Control Date pay all
amounts, and provide all benefits, to the Executive and/or the Executive's
family or other beneficiaries, as the case may be, that the Company would
be required to pay or provide pursuant to Section 4.2 as though such
termination were by the Company without Cause or by the Executive with
Good Reason; provided, however, that the Company shall not be required to
pay any disputed amounts pursuant to this paragraph except upon receipt of
an undertaking by or on behalf of the Executive to repay all such amounts
to which the Executive is ultimately adjudged by such court not to be
entitled.
SECTION 5: CONFIDENTIAL INFORMATION.
CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the
Company and which shall not be or become public knowledge (other than by
acts by the Executive or representatives of the Executive in violation of this
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Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section constitute a basis
for deferring or withholding any amounts otherwise payable to the Executive
under this Agreement.
SECTION 6: SUCCESSORS.
6.1 SUCCESSORS OF EXECUTIVE. This Agreement is personal to the
Executive and, without the prior written consent of the Company, amounts
receivable hereunder shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's legal
representatives.
6.2 SUCCESSORS OF COMPANY. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to obtain such
agreement upon the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to terminate the Agreement
at the Executive's option on or after the Change in Control Date for
Good Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
SECTION 7: TERMS OF AGREEMENT.
This Agreement will automatically renew for annual one-year
periods beginning on January 1 of each year and ending on the following
December 31; provided that, the last annual period shall be the twelve (12)
month period beginning on January 1 and ending on the following December 31
during which written notice is given by December 1, by either party, of
such party's intent not to renew this Agreement. If notice is given by
either party after December 1 of any year, but prior to January 1 of
the next succeeding year, then the last renewal period shall be the twelve
(12) month period which begins on the January 1 following the date notice
is given and ending the following December 31. Notwithstanding the foregoing,
in the event a Change in Control shall have occurred, this Agreement shall
terminate two (2) years after a Change in Control Date.
SECTION 8: MISCELLANEOUS.
8.1 NOTICE. For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses as set forth below; provided that all
notices to the Company shall be directed to the attention of the Chairman
of the Board of the Company with a copy to the Secretary of the Company,
or to such other address as one party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall
be effective only upon receipt.
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Notice to Executive:
-------------------
David D. Harris
877 Wellesley Place
Chesterfield, Missouri 63017
Notice to Company:
-----------------
Magna Group, Inc.
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
8.4 WAIVER. The Executive's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of
this Agreement or the failure to assert any right the Executive or the
Company may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to Section 3.5
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of this
Agreement shall supersede all other employment or other agreements with
respect to severance entered into by and between the Executive and the
Company, or the Executive and any other employer, and this Agreement shall
constitute the sole agreement pursuant to which the Company shall have an
obligation to the Executive upon the termination of the Executive's
relationship with the Company or any subsidiary.
IN WITNESS WHEREOF, the Executive and the Company, pursuant
to the authorization from its Board, have caused this Agreement to be
executed in its name on its behalf, all as of the day and year first
above written.
/s/ David D. Harris
-------------------------------------------
Executive
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
-----------------------------------------
Name: G. Thomas Andes
Title: Chairman of the Board, President and
Chief Executive Officer
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<PAGE> 1
MAGNA GROUP, INC.
AGREEMENT
---------
This agreement ("Agreement") has been entered into this 12th day
of March, 1996, by and between Magna Group, Inc., a Delaware corporation
("Company"), and Gary D. Hemmer, an individual ("Executive").
RECITALS
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to
reinforce and encourage the continued attention and dedication of the
Executive to the Company as a member of the Company's management (including,
if applicable, management of a wholly owned subsidiary) and to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change in
Control (as defined below) of the Company. The Board desires to provide
for the continued employment of the Executive on the terms hereof, and the
Executive is willing to commit to continue to serve the Company. Additionally,
the Board believes it is imperative to diminish the inevitable distraction
of the Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change in Control, to encourage the Executive's
full attention and dedication to the Company currently and in the event
of any threatened or pending Change in Control, and to provide the Executive
with compensation and benefits arrangements upon the breach of this Agreement
by the Employer or upon a termination of employment after a Change in Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the following
words and phrases, whether or not capitalized, shall have the meanings
specified below, unless the context plainly requires a different meaning.
1.1(a) "ANNUAL BASE SALARY" means the dollar amount that
would be reported to the Internal Revenue Service as
compensation on Form W-2 or any successor form.
1.1(b) "BOARD" means the Board of Directors of the Company.
1.1(c) "CHANGE IN CONTROL" means a change in control of the
Company of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act;
provided that, for purposes of this Agreement, a
Change in Control shall be deemed to have occurred
if (i) any Person (other than the Company) is or
becomes the
<PAGE> 2
"beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of
securities of the Company which represent 20% or
more of the combined voting power of the Company's
then outstanding securities; (ii) during any period
of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board cease
for any reason to constitute at least a majority
thereof, unless the election, or the nomination for
election, by the Company's stockholders, of each new
director is approved by a vote of at least two-thirds
(2/3) of the directors then still in office who were
directors at the beginning of the period but excluding
any individual whose initial assumption of office
occurs as a result of either an actual or threatened
election contest (as such term is used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies
or consents by or on behalf of a person other than the
Board; (iii) there is consummated any consolidation or
merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to
which shares of the Company's Common Stock is
converted into cash, securities, or other property,
other than a merger of the Company in which the
holders of the Company's Common Stock immediately
prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger; (iv) there is
consummated any consolidation or merger of the
Company in which the Company is the continuing or
surviving corporation in which the holders of the
Company's Common Stock immediately prior to the
merger do not own fifty percent (50%) or more of the
stock of the surviving corporation immediately after
the merger; (v) there is consummated any sale,
lease, exchange, or other transfer (in one
transaction or a series of related transactions) of
all, or substantially all, of the assets of the
Company, or (vi) the stockholders of the Company
approve any plan or proposal for the liquidation
or dissolution of the Company.
1.1(d) "CHANGE IN CONTROL DATE" shall mean the date of the
Change in Control.
1.1(e) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
1.1(f) "COMPANY" means Magna Group, Inc., a Delaware
corporation.
1.1(g) "EFFECTIVE DATE" shall mean January 1, 1996.
1.1(h) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
1.1(i) "INCENTIVE BONUS" shall mean the incentive bonus
provided through any incentive compensation plan,
which is generally available to other peer
executives of the Company, awarded to the Executive
for the year preceding termination. To the extent
such incentive bonus is paid in shares of restricted
stock, Incentive Bonus shall include the value of such
shares on their award date without any discount;
provided, however, such restricted shares shall
include only those awarded in lieu of compensation
payable as determined by the Compensation Committee
of the Board.
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<PAGE> 3
1.1(j) "PERSON" means any "person" within the meaning of
Sections 13(d) and 14(d) of the Exchange Act.
1.1(k) "TERM" means the period that begins on the Effective
Date and ends on the earlier of: (i) the Date of
Termination as defined in Section 3.7, or (ii) the
close of business on December 31 of any calendar
year during which notice is given, by December 1
of such year, by either party (as provided in
Section 7) of such party's intent not to renew this
Agreement.
1.2 GENDER AND NUMBER. When appropriate, pronouns in this
Agreement used in the masculine gender include the feminine gender, words in
the singular include the plural, and words in the plural include the singular.
1.3 HEADINGS. All headings in this Agreement are included solely
for ease of reference and do not bear on the interpretation of the text.
Accordingly, as used in this Agreement, the terms "Article" and "Section" mean
the text that accompanies the specified Article or Section of the Agreement.
1.4 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the state of Missouri, without
reference to its conflict of law principles.
SECTION 2: TERMS AND CONDITIONS OF EMPLOYMENT.
2.1 EMPLOYMENT. If the Executive is in the employ of the Company
(or in the employ of a wholly owned subsidiary) on a Change in Control Date,
then the Executive shall thereafter remain in the employ of the Company
(or in the employ of a wholly owned subsidiary) in accordance with the terms
and provisions of this Agreement.
2.2 POSITIONS AND DUTIES.
2.2(a) Following a Change in Control Date, the Executive
shall continue to serve in the Executive's then current
capacity, subject to the reasonable directions of the Board.
The Executive shall thereafter devote the Executive's full
working time and attention to such business and affairs of
the Company and/or any subsidiary of the Company as directed
by the Board, as may be compatible with the Executive's titles
and positions. In addition, the Executive's position (including
status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in
all material respects with those assigned to, or held and
exercised by, the Executive immediately preceding a Change in
Control Date.
2.2(b) Following a Change in Control Date and thereafter
throughout the Term of this Agreement (but excluding any periods
of vacation and sick leave to which the Executive is entitled),
the Executive shall devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and shall use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities as are assigned
to the Executive under or in accordance with this Agreement;
provided that, it shall not be a violation of this paragraph
for the Executive to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures or fulfill speaking
engagements, or (iii) manage
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<PAGE> 4
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement or violate the Company's conflict of interest
policy as in effect immediately prior to the Effective Date.
2.3 SITUS OF EMPLOYMENT. Following a Change in Control Date and
thereafter throughout the Term of this Agreement, the Executive's services
shall be performed at the location where the Executive was employed
immediately preceding the Change in Control Date.
2.4 COMPENSATION. For any calendar year including and following
a Change in Control Date, the Executive shall receive an Annual Base Salary
equal to the Annual Base Salary being received immediately prior to a Change
in Control Date, which shall be paid in equal or substantially equal monthly
installments. The Annual Base Salary payable to the Executive shall be
reviewed thereafter at least annually but need not be adjusted upward as a
result of such review and shall not be reduced after any increase thereof.
SECTION 3: TERMINATION OF AGREEMENT.
3.1 DEATH. This Agreement shall terminate automatically upon the
Executive's death during the Term of this Agreement.
3.2 DISABILITY. If, following a Change in Control Date, the
Company determines in good faith that the Disability of the Executive has
occurred during the Term of this Agreement (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 8.1 of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the thirtieth (30th) day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within
the thirty (30) days after such receipt, the Executive shall not have returned
to full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean that the Executive has been unable to
perform the services required of the Executive hereunder on a full-time
basis for a period of one hundred eighty (180) consecutive business days by
reason of a physical and/or mental condition. "Disability" shall be deemed
to exist when certified by a physician selected by the Company or its insurers
and acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably). The Executive
will submit to such medical or psychiatric examinations and tests as such
physician deems necessary to make any such Disability determination.
3.3 PRIOR TO CHANGE IN CONTROL. Executive is employed at will.
Any notice of termination by Executive or Company shall be given in
accordance with Section 3.6 of the Agreement.
3.4 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY COMPANY
FOR CAUSE. Following a Change in Control Date, the Company may terminate
the Executive's employment during the Term of this Agreement for "Cause,"
which shall mean termination based upon: (i) the Executive's willful and
continued failure to substantially perform the Executive's duties with the
Company (other than as a result of incapacity due to physical or mental
condition), after a demand for substantial performance is delivered to the
Executive by the Chief Executive Officer of the Company or the Chairman
of the Compensation Committee of the Board, which specifically identifies
the manner in which the Executive has not substantially performed the
Executive's duties, (ii) the Executive's willful commission of misconduct
which is materially injurious to the Company, monetarily or otherwise,
or (iii) the Executive's material
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<PAGE> 5
breach of any provision of this Agreement. For purposes of this paragraph,
no act, or failure to act on the Executive's part shall be considered
"willful" unless done, or omitted to be done, without good faith and
without reasonable belief that the act or omission was in the best interest
of the Company. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until (i) the Executive
receives a Notice of Termination (as defined in Section 3.6) from the Chief
Executive Officer of the Company or the Chairman of the Compensation
Committee of the Board, (ii) the Executive is given the opportunity, with
counsel to be heard before the Board, and (iii) the Board finds, in its
good faith opinion, the Executive was guilty of the conduct set forth in
the Notice of Termination.
3.5 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY EXECUTIVE
FOR GOOD REASON. Following a Change in Control Date, the Executive may
terminate the Executive's employment with the Company for "Good Reason,"
which shall mean termination based upon:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 2.2(a) or any other action by the Company which results
in a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose any action not
taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(ii) the failure by the Company to continue in effect any
benefit or compensation plan, stock ownership plan, life
insurance plan, health and accident plan or disability plan to
which the Executive is entitled, the taking of any action by the
Company which would adversely affect the Executive's participation
in, or materially reduce the Executive's benefits such plans,
or deprive the Executive of any material fringe benefit enjoyed by
the Executive or the failure by the Company to provide the
Executive with the number of paid vacation days to which the
Executive is entitled.
(iii) the Company's requiring the Executive to be based at
any office or location other than that described in Section 2.3;
(iv) a material breach by the Company of any provision of this
Agreement;
(v) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement;
(vi) within a period ending at the close of business on the
date two (2) years after the Change in Control Date, any failure
by the Company to comply with and satisfy Section 6.2 on or
after the Change in Control Date; or
(vii) within a period ending at the close of business on the
date one (1) year after the Change in Control Date, the
Executive, in the Executive's sole and absolute discretion,
determines and notifies the Company in writing, that the
Executive does not wish to continue employment with the
Company.
For purposes of this Section any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
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<PAGE> 6
3.6 NOTICE OF TERMINATION. Any termination by the Company, or by
the Executive, shall be communicated by Notice of Termination to the other
party, given in accordance with Section 8.1. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provision so indicated, and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days
after the giving of such notice). The failure by the Executive or the Company
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Company hereunder or preclude the Executive or the
Company from asserting such fact or circumstance in enforcing the Executive's
or the Company's rights hereunder.
3.7 DATE OF TERMINATION. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company with or without
Cause, or by the Executive for Good Reason or otherwise, the Date of
Termination shall be the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, or (ii) if the
Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive or
the Disability Effective Date, as the case may be.
SECTION 4: CERTAIN BENEFITS UPON TERMINATION OF EMPLOYMENT.
4.1 TERMINATION WITHOUT CAUSE PRIOR TO A CHANGE IN CONTROL. If,
prior to a Change in Control, during the Term of this Agreement the Company
shall terminate the Executive's employment without Cause, then on the tenth
(10th) business day following the Date of Termination, the Company shall
pay to the Executive the sum of (1) the Executive's Annual Base Salary
prorated through the Date of Termination to the extent not previously paid,
and (2) any accrued vacation pay to the extent not previously paid.
4.2 TERMINATION AFTER A CHANGE IN CONTROL. If a Change in Control
occurs during the Term of this Agreement and within two (2) years after such
Change in Control: (i) the Company shall terminate the Executive's
employment without Cause, or (ii) the Executive shall terminate employment
with the Company for Good Reason, then the Executive shall be entitled to the
benefits provided below:
4.2(a) "Accrued Obligations": On the tenth (10th) business
day following the Date of Termination, the Company shall pay to
the Executive the sum of (1) the Executive's Annual Base Salary
prorated through the Date of Termination to the extent not
previously paid, and (2) any accrued vacation pay to the extent
not previously paid.
4.2(b) "Severance Amount": On the tenth (10th) business day
following the Date of Termination, the Company shall pay to the
Executive as severance pay a lump sum cash payment in an amount
equal to 2 (two) times the sum of the Executive's Annual Base
Salary in effect on the Date of Termination and the Executive's
Incentive Bonus.
4.2(c) "Stock Options": To the extent not otherwise
provided for under the terms of any of the Company's stock
option agreements, all such stock options shall become fully
exercisable as of the Date of Termination and, except for
"incentive stock options" within
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<PAGE> 7
the meaning of Code Section 422 granted prior to the date
hereof, shall remain fully exercisable in accordance with
their terms.
4.2(d) "Other Benefits": To the extent not previously paid
or provided, the Company shall timely pay or provide to the
Executive and/or the Executive's family any other amounts or
benefits required to be paid or provided for which the
Executive and/or the Executive's family is eligible to receive
pursuant to this Agreement and under any plan, program, policy
or practice or contract or agreement of the Company as those
provided generally to other peer executives and their families
during the ninety (90) day period immediately preceding the
Effective Date or, if more favorable to the Executive, as those
provided generally after the Effective Date to other peer
executives of the Company and their families.
4.2(e) "Excess Parachute Payment": Anything in this
Agreement to the contrary notwithstanding, in the event that
an independent accountant shall determine that any payment
or distribution by the Company to or for the benefit of
Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be nondeductible by the Company for Federal
income tax purposes because of Code Section 280G or would
constitute an "excess parachute payment" (as defined in Code
Section 280G), then the aggregate present value of amounts
payable or distributable to or for the benefit of Executive
pursuant to this Agreement (such payments or distributions
pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero)
to the Reduced Amount. For purposes of this paragraph, the
"Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be nondeductible by the
Company because of Code Section 280G or without causing any
portion of the Payment to be subject to the excise tax imposed
by Code Section 4999.
If the independent accountant determines that any Payment
would be nondeductible by the Company because of Code Section
280G or that any portion of the Payment will be subject to the
excise tax imposed by Code Section 4999, the Company shall
promptly give Executive notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount.
The Executive may then elect, in the Executive's sole discretion,
which and how much of the Agreement Payments shall be eliminated
or reduced (as long as after such election the aggregate
present value of the Agreement Payments equals the Reduced
Amount), and shall advise the Company in writing of the
Executive's election within ten (10) days of the Executive's
receipt of such notice. If no such election is made by Executive
within such ten-day period, the Company may elect which and
how much of the Agreement Payments shall be eliminated or
reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and
shall notify the Executive promptly of such election. For
purposes of this paragraph, present value shall be determined
in accordance with Code Section 280G(d)(4). All determinations
made by the independent accountant under this paragraph shall
be binding upon the Company and the Executive and shall be
made within sixty (60) days of a termination of employment of
the Executive. As promptly as practicable following such
determination and the elections hereunder, the Company shall
pay to or distribute to or for the benefit of the Executive
such amounts as are then due to the Executive under this
Agreement and shall
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<PAGE> 8
promptly pay to or distribute for the benefit of the Executive
in the future such amounts as become due to the Executive under
this Agreement.
As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial determination
by the independent accountant hereunder, it is possible that
Agreements Payments will be made by the Company which should not
have been made ("Overpayment") or that additional Agreement
Payments which have not been made by the Company should have been
made ("Underpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder. In the event that
the independent accountant, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company
or the Executive which the independent accountant believes has a
high probability of success, determines that an Overpayment has
been made, any such Overpayment shall be treated for all purposes
as a loan to the Executive which the Executive shall repay to the
Company together with interest at the applicable Federal rate
provided for in Code Section 7872(f)(2); provided, however,
that no amount shall be payable by the Executive to the Company
if and to the extent such payment would not reduce the amount
which is subject to taxation under Code Section 4999 or if the
period of limitations for assessment of tax under Code Section
4999 against the Executive shall have expired. If the Executive
is required to repay an amount under this Section, the Executive
shall repay such amount over a period of time not to exceed
one (1) year for each twenty-five thousand dollars ($25,000)
which the Executive must repay to the Company. In the event
that the independent accountant, based upon controlling
precedent, determines that an Underpayment has occurred, any
such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive together with interest
at the applicable Federal rate provided for in Code
Section 7872(f)(2)(A).
4.3 DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Term of this Agreement (either
prior or subsequent to a Change in Control), this Agreement shall terminate
without further obligations to the Executive's legal representatives under
this Agreement, other than for payment of Accrued Obligations (as defined
in Section 4.1) (which shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within ten (10) days of the Date of
Termination).
4.4 DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Term of this Agreement (either
prior or subsequent to a Change in Control), this Agreement shall terminate
without further obligations to the Executive, other than for payment of
Accrued Obligations (as defined in Section 4.1) (which shall be paid to the
Executive in a lump sum in cash within ten (10) days of the Date of
Termination).
4.5 TERMINATION FOR CAUSE; EXECUTIVE'S TERMINATION OTHER THAN
FOR GOOD REASON AFTER A CHANGE IN CONTROL. If the Executive's employment
shall be terminated for Cause during the Term of this Agreement (either
prior to or subsequent to a Change in Control), this Agreement shall
terminate without further obligations to the Executive other than the
obligation to pay to the Executive Accrued Obligations (as defined in
Section 4.1). If the Executive terminates employment with the Company
during the Term of this Agreement, (other than for Good Reason after a
Change in Control) this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations (as
defined in Section 4.1). In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum cash payment within thirty (30)
days of the Date of Termination. If the
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<PAGE> 9
Executive's employment shall terminate for the reasons stated in this
Section, the provisions of Section 5 shall continue to apply.
4.6 NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company and for which
the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company. Amounts which are vested benefits of which the Executive
is otherwise entitled to receive under any plan, policy, practice or program
of, or any contract or agreement with, the Company at or subsequent to the
Date of Termination, shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified
by this Agreement.
4.7 FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company agrees, only
on and after a Change in Control Date to pay promptly as incurred, to the
full extent permitted by law, all legal fees and expenses which the
Executive may reasonable incur as a result of any contest (regardless of
the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a result of any
contest by the Executive regarding the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Code Section 7872(f)(2)(A).
4.8 RESOLUTION OF DISPUTES. If there shall be any dispute
between the Company and the Executive (i) in the event of any termination
of the Executive's employment by the Company, whether such termination was
for Cause, or (ii) in the event of any termination of employment by the
Executive, whether Good Reason existed, then, unless and until there is a
final, nonappealable judgment by a court of competent jurisdiction
declaring that such termination was for Cause or that the determination
by the Executive of the existence of Good Reason was not made in good faith,
the Company shall, only on and after a Change in Control Date pay all
amounts, and provide all benefits, to the Executive and/or the Executive's
family or other beneficiaries, as the case may be, that the Company would
be required to pay or provide pursuant to Section 4.2 as though such
termination were by the Company without Cause or by the Executive with
Good Reason; provided, however, that the Company shall not be required to
pay any disputed amounts pursuant to this paragraph except upon receipt of
an undertaking by or on behalf of the Executive to repay all such amounts
to which the Executive is ultimately adjudged by such court not to be
entitled.
SECTION 5: CONFIDENTIAL INFORMATION.
CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the
Company and which shall not be or become public knowledge (other than by
acts by the Executive or representatives of the Executive in violation of this
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Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section constitute a basis
for deferring or withholding any amounts otherwise payable to the Executive
under this Agreement.
SECTION 6: SUCCESSORS.
6.1 SUCCESSORS OF EXECUTIVE. This Agreement is personal to the
Executive and, without the prior written consent of the Company, amounts
receivable hereunder shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's legal
representatives.
6.2 SUCCESSORS OF COMPANY. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to obtain such
agreement upon the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to terminate the Agreement
at the Executive's option on or after the Change in Control Date for
Good Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
SECTION 7: TERMS OF AGREEMENT.
This Agreement will automatically renew for annual one-year
periods beginning on January 1 of each year and ending on the following
December 31; provided that, the last annual period shall be the twelve (12)
month period beginning on January 1 and ending on the following December 31
during which written notice is given by December 1, by either party, of
such party's intent not to renew this Agreement. If notice is given by
either party after December 1 of any year, but prior to January 1 of
the next succeeding year, then the last renewal period shall be the twelve
(12) month period which begins on the January 1 following the date notice
is given and ending the following December 31. Notwithstanding the foregoing,
in the event a Change in Control shall have occurred, this Agreement shall
terminate two (2) years after a Change in Control Date.
SECTION 8: MISCELLANEOUS.
8.1 NOTICE. For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses as set forth below; provided that all
notices to the Company shall be directed to the attention of the Chairman
of the Board of the Company with a copy to the Secretary of the Company,
or to such other address as one party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall
be effective only upon receipt.
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Notice to Executive:
-------------------
Gary D. Hemmer
24 Barrett Court
Swansea, Illinois 62221
Notice to Company:
-----------------
Magna Group, Inc.
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
8.4 WAIVER. The Executive's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of
this Agreement or the failure to assert any right the Executive or the
Company may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to Section 3.5
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of this
Agreement shall supersede all other employment or other agreements with
respect to severance entered into by and between the Executive and the
Company, or the Executive and any other employer, and this Agreement shall
constitute the sole agreement pursuant to which the Company shall have an
obligation to the Executive upon the termination of the Executive's
relationship with the Company or any subsidiary.
IN WITNESS WHEREOF, the Executive and the Company, pursuant
to the authorization from its Board, have caused this Agreement to be
executed in its name on its behalf, all as of the day and year first
above written.
/s/ Gary D. Hemmer
-------------------------------------------
Executive
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
-----------------------------------------
Name: G. Thomas Andes
Title: Chairman of the Board, President and
Chief Executive Officer
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<PAGE> 1
MAGNA GROUP, INC.
AGREEMENT
---------
This agreement ("Agreement") has been entered into this 5th
day of December, 1995, by and between Magna Group, Inc., a Delaware
corporation ("Company"), and Ronald A. Buerges, an individual
("Executive").
RECITALS
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its
stockholders to reinforce and encourage the continued attention and
dedication of the Executive to the Company as a member of the
Company's management (including, if applicable, management of a
wholly owned subsidiary) and to assure that the Company will have
the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change in Control (as
defined below) of the Company. The Board desires to provide for
the continued employment of the Executive on the terms hereof, and
the Executive is willing to commit to continue to serve the
Company. Additionally, the Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending or
threatened Change in Control, to encourage the Executive's full
attention and dedication to the Company currently and in the event
of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon the
breach of this Agreement by the Employer or upon a termination of
employment after a Change in Control which ensure that the
compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the
following words and phrases, whether or not capitalized, shall have
the meanings specified below, unless the context plainly requires
a different meaning.
1.1(a) "ANNUAL BASE SALARY" means the dollar amount
approved by the Magna Group, Inc. Director
Compensation Committee.
1.1(b) "BOARD" means the Board of Directors of the
Company.
1.1(c) "CHANGE IN CONTROL" means a change in control
of the Company of a nature that would be
required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act; provided
that, for purposes of this Agreement, a Change
in Control shall be deemed to have occurred if
(i) any Person (other than the Company) is or
becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company
which represent 20% or
<PAGE> 2
more of the combined voting power of the Company's
then outstanding securities; (ii) during any
period of two (2) consecutive years, individuals
who at the beginning of such period constitute the
Board cease for any reason to constitute at least
a majority thereof, unless the election, or the
nomination for election, by the Company's
stockholders, of each new director is approved
by a vote of at least two-thirds (2/3) of the
directors then still in office who were
directors at the beginning of the period but
excluding any individual whose initial
assumption of office occurs as a result of
either an actual or threatened election
contest (as such term is used in Rule 14a-11
of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on
behalf of a person other than the Board;
(iii) there is consummated any consolidation
or merger of the Company in which the Company
is not the continuing or surviving corporation
or pursuant to which shares of the Company's
Common Stock is converted into cash,
securities, or other property, other than a
merger of the Company in which the holders of
the Company's Common Stock immediately prior
to the merger have the same proportionate
ownership of common stock of the surviving
corporation immediately after the merger;
(iv) there is consummated any consolidation or
merger of the Company in which the Company is
the continuing or surviving corporation in
which the holders of the Company's Common
Stock immediately prior to the merger do not
own fifty percent (50%) or more of the stock
of the surviving corporation immediately after
the merger; (v) there is consummated any
sale, lease, exchange, or other transfer (in
one transaction or a series of related
transactions) of all, or substantially all, of
the assets of the Company, or (vi) the
stockholders of the Company approve any plan
or proposal for the liquidation or dissolution
of the Company.
1.1(d) "CHANGE IN CONTROL DATE" shall mean the date
of the Change in Control.
1.1(e) "CODE" shall mean the Internal Revenue Code of
1986, as amended.
1.1(f) "COMPANY" means Magna Group, Inc., a Delaware
corporation.
1.1(g) "EFFECTIVE DATE" shall mean January 1, 1996.
1.1(h) "EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended.
1.1(i) "PERSON" means any "person" within the meaning
of Sections 13(d) and 14(d) of the Exchange
Act.
1.1(j) "TERM" means the period that begins on the
Effective Date and ends on the earlier of: (i)
the Date of Termination as defined in Section
3.7, or (ii) the close of business on December
31 of any calendar year during which notice is
given, by December 1 of such year, by either
party (as provided in Section 7) of such
party's intent not to renew this Agreement.
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<PAGE> 3
1.2 GENDER AND NUMBER. When appropriate, pronouns in
this Agreement used in the masculine gender include the feminine
gender, words in the singular include the plural, and words in the
plural include the singular.
1.3 HEADINGS. All headings in this Agreement are
included solely for ease of reference and do not bear on the
interpretation of the text. Accordingly, as used in this
Agreement, the terms "Article" and "Section" mean the text that
accompanies the specified Article or Section of the Agreement.
1.4 APPLICABLE LAW. This Agreement shall be governed by
and construed in accordance with the laws of the state of Missouri,
without reference to its conflict of law principles.
SECTION 2: TERMS AND CONDITIONS OF EMPLOYMENT.
2.1 EMPLOYMENT. If the Executive is in the employ of the
Company (or in the employ of a wholly owned subsidiary) on a Change
in Control Date, then the Executive shall thereafter remain in the
employ of the Company (or in the employ of a wholly owned
subsidiary) in accordance with the terms and provisions of this
Agreement.
2.2 POSITIONS AND DUTIES.
2.2(a) Following a Change in Control Date, the
Executive shall continue to serve in the Executive's then
current capacity, subject to the reasonable directions of
the Board. The Executive shall thereafter devote the
Executive's full working time and attention to such
business and affairs of the Company and/or any subsidiary
of the Company as directed by the Board, as may be
compatible with the Executive's titles and positions. In
addition, the Executive's position (including status,
offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate
in all material respects with those assigned to, or held
and exercised by, the Executive immediately preceding a
Change in Control Date.
2.2(b) Following a Change in Control Date and
thereafter throughout the Term of this Agreement (but
excluding any periods of vacation and sick leave to which
the Executive is entitled), the Executive shall devote
reasonable attention and time during normal business hours
to the business and affairs of the Company and shall use
the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities as are
assigned to the Executive under or in accordance with this
Agreement; provided that, it shall not be a violation of
this paragraph for the Executive to (i) serve on
corporate, civic or charitable boards or committees,
(ii) deliver lectures or fulfill speaking engagements, or
(iii) manage personal investments, so long as such
activities do not significantly interfere with the
performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement
or violate the Company's conflict of interest policy as in
effect immediately prior to the Effective Date.
2.3 SITUS OF EMPLOYMENT. Following a Change in Control
Date and thereafter throughout the Term of this Agreement, the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Change in Control
Date.
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<PAGE> 4
2.4 COMPENSATION. For any calendar year including and
following a Change in Control Date, the Executive shall receive an
annual base salary equal to the annual base salary being received
immediately prior to a Change in Control Date, which shall be paid
in equal or substantially equal monthly installments. The Annual
Base Salary payable to the Executive shall be reviewed thereafter
at least annually but need not be adjusted upward as a result of
such review and shall not be reduced after any increase thereof.
SECTION 3: TERMINATION OF AGREEMENT.
3.1 DEATH. This Agreement shall terminate automatically
upon the Executive's death during the Term of this Agreement.
3.2 DISABILITY. If, following a Change in Control Date,
the Company determines in good faith that the Disability of the
Executive has occurred during the Term of this Agreement (pursuant
to the definition of Disability set forth below), it may give to
the Executive written notice in accordance with Section 8.1 of its
intention to terminate the Executive's employment. In such event,
the Executive's employment with the Company shall terminate
effective on the thirtieth (30th) day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that,
within the thirty (30) days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean
that the Executive has been unable to perform the services required
of the Executive hereunder on a full-time basis for a period of one
hundred eighty (180) consecutive business days by reason of a
physical and/or mental condition. "Disability" shall be deemed to
exist when certified by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not to be
withheld unreasonably). The Executive will submit to such medical
or psychiatric examinations and tests as such physician deems
necessary to make any such Disability determination.
3.3 PRIOR TO CHANGE IN CONTROL. Executive is employed
at will. Any notice of termination by Executive or Company shall
be given in accordance with Section 3.6 of the Agreement.
3.4 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY
COMPANY FOR CAUSE. Following a Change in Control Date, the Company
may terminate the Executive's employment during the Term of this
Agreement for "Cause," which shall mean termination based upon:
(i) the Executive's willful and continued failure to substantially
perform the Executive's duties with the Company (other than as a
result of incapacity due to physical or mental condition), after a
demand for substantial performance is delivered to the Executive by
the Chief Executive Officer of the Company or the Chairman of the
Compensation Committee of the Board, which specifically identifies
the manner in which the Executive has not substantially performed
the Executive's duties, (ii) the Executive's willful commission of
misconduct which is materially injurious to the Company, monetarily
or otherwise, or (iii) the Executive's material breach of any
provision of this Agreement. For purposes of this paragraph, no
act, or failure to act on the Executive's part shall be considered
"willful" unless done, or omitted to be done, without good faith
and without reasonable belief that the act or omission was in the
best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause
unless and until (i) the Executive receives a Notice of Termination
(as defined in Section 3.6) from the Chief Executive Officer of the
Company or the Chairman of the Compensation Committee of the Board,
(ii) the Executive is given the opportunity, with counsel to be
heard before the Board, and (iii) the Board finds, in its good
faith opinion, the Executive was guilty of the conduct set forth in
the Notice of Termination.
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<PAGE> 5
3.5 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY
EXECUTIVE FOR GOOD REASON. Following a Change in Control Date, the
Executive may terminate the Executive's employment with the Company
for "Good Reason," which shall mean termination based upon:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 2.2(a) or any other action by the
Company which results in a material diminution in such
position, authority, duties or responsibilities, excluding
for this purpose any action not taken in bad faith and
which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) the failure by the Company to continue in effect
any benefit or compensation plan, stock ownership plan,
life insurance plan, health and accident plan or
disability plan to which the Executive is entitled, the
taking of any action by the Company which would adversely
affect the Executive's participation in, or materially
reduce the Executive's benefits such plans, or deprive the
Executive of any material fringe benefit enjoyed by the
Executive or the failure by the Company to provide the
Executive with the number of paid vacation days to which
the Executive is entitled.
(iii) the Company's requiring the Executive to be based
at any office or location other than that described in
Section 2.3;
(iv) a material breach by the Company of any provision
of this Agreement;
(v) any purported termination by the Company of the
Executive's employment otherwise than as expressly
permitted by this Agreement;
(vi) within a period ending at the close of business on
the date two (2) years after the Change in Control Date,
any failure by the Company to comply with and satisfy
Section 6.2 on or after the Change in Control Date; or
(vii) within a period ending at the close of business
on the date one (1) year after the Change in Control Date,
the Executive, in the Executive's sole and absolute
discretion, determines and notifies the Company in
writing, that the Executive does not wish to continue
employment with the Company.
For purposes of this Section any good faith determination of "Good
Reason" made by the Executive shall be conclusive.
3.6 NOTICE OF TERMINATION. Any termination by the
Company, or by the Executive, shall be communicated by Notice of
Termination to the other party, given in accordance with Section
8.1. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and
(iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date
(which date shall be not more than fifteen (15) days after the
giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good
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<PAGE> 6
Reason or Cause shall not waive any right of the Executive or the
Company hereunder or preclude the Executive or the Company from
asserting such fact or circumstance in enforcing the Executive's or
the Company's rights hereunder.
3.7 DATE OF TERMINATION. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company with
or without Cause, or by the Executive for Good Reason or otherwise,
the Date of Termination shall be the date of receipt of the Notice
of Termination or any later date specified therein, as the case may
be, or (ii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date
of death of the Executive or the Disability Effective Date, as the
case may be.
SECTION 4: CERTAIN BENEFITS UPON TERMINATION OF EMPLOYMENT.
4.1 TERMINATION WITHOUT CAUSE PRIOR TO A CHANGE IN
CONTROL. If, prior to a Change in Control, during the Term of this
Agreement the Company shall terminate the Executive's employment
without Cause, then on the tenth (10th) business day following the
Date of Termination, the Company shall pay to the Executive the sum
of (1) the Executive's Annual Base Salary prorated through the Date
of Termination to the extent not previously paid, and (2) any
accrued vacation pay to the extent not previously paid.
4.2 TERMINATION AFTER A CHANGE IN CONTROL. If a Change
in Control occurs during the Term of this Agreement and within two
(2) years after such Change in Control: (i) the Company shall
terminate the Executive's employment without Cause, or (ii) the
Executive shall terminate employment with the Company for Good
Reason, then the Executive shall be entitled to the benefits
provided below:
4.2(a) "Accrued Obligations": On the tenth (10th)
business day following the Date of Termination, the
Company shall pay to the Executive the sum of (1) the
Executive's Annual Base Salary prorated through the Date
of Termination to the extent not previously paid, and (2)
any accrued vacation pay to the extent not previously
paid.
4.2(b) "Severance Amount": On the tenth (10th)
business day following the Date of Termination, the
Company shall pay to the Executive as severance pay a lump
sum cash payment in an amount equal to 1 1/2 (one and one-
half) times the Executive's Annual Base Salary in effect
on the Date of Termination.
4.2(c) "Stock Options": To the extent not otherwise
provided for under the terms of any of the Company's stock
option agreements, all such stock options shall become
fully exercisable as of the Date of Termination and,
except for "incentive stock options" within the meaning of
Code Section 422 granted prior to the date hereof, shall
remain fully exercisable in accordance with their terms.
4.2(d) "Other Benefits": To the extent not
previously paid or provided, the Company shall timely pay
or provide to the Executive and/or the Executive's family
any other amounts or benefits required to be paid or
provided for which the Executive and/or the Executive's
family is eligible to receive pursuant to this Agreement
and under any plan, program, policy or practice or
contract or agreement of the Company as those provided
generally to other peer executives and their families
during the ninety (90) day period
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<PAGE> 7
immediately preceding the Effective Date or, if more favorable
to the Executive, as those provided generally after the
Effective Date to other peer executives of the Company and
their families.
4.2(e) "Excess Parachute Payment": Anything in this
Agreement to the contrary notwithstanding, in the event
that an independent accountant shall determine that any
payment or distribution by the Company to or for the
benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise) (a "Payment") would be
nondeductible by the Company for Federal income tax
purposes because of Code Section 280G or would constitute
an "excess parachute payment" (as defined in Code Section
280G), then the aggregate present value of amounts payable
or distributable to or for the benefit of Executive
pursuant to this Agreement (such payments or distributions
pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below
zero) to the Reduced Amount. For purposes of this
paragraph, the "Reduced Amount" shall be an amount
expressed in present value which maximizes the aggregate
present value of Agreement Payments without causing any
Payment to be nondeductible by the Company because of Code
Section 280G or without causing any portion of the Payment
to be subject to the excise tax imposed by Code
Section 4999.
If the independent accountant determines that any Payment
would be nondeductible by the Company because of Code
Section 280G or that any portion of the Payment will be
subject to the excise tax imposed by Code Section 4999,
the Company shall promptly give Executive notice to that
effect and a copy of the detailed calculation thereof and
of the Reduced Amount. The Executive may then elect, in
the Executive's sole discretion, which and how much of the
Agreement Payments shall be eliminated or reduced (as long
as after such election the aggregate present value of the
Agreement Payments equals the Reduced Amount), and shall
advise the Company in writing of the Executive's election
within ten (10) days of the Executive's receipt of such
notice. If no such election is made by Executive within
such ten-day period, the Company may elect which and how
much of the Agreement Payments shall be eliminated or
reduced (as long as after such election the aggregate
present value of the Agreement Payments equals the Reduced
Amount) and shall notify the Executive promptly of such
election. For purposes of this paragraph, present value
shall be determined in accordance with Code Section
280G(d)(4). All determinations made by the independent
accountant under this paragraph shall be binding upon the
Company and the Executive and shall be made within sixty
(60) days of a termination of employment of the Executive.
As promptly as practicable following such determination
and the elections hereunder, the Company shall pay to or
distribute to or for the benefit of the Executive such
amounts as are then due to the Executive under this
Agreement and shall promptly pay to or distribute for the
benefit of the Executive in the future such amounts as
become due to the Executive under this Agreement.
As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial
determination by the independent accountant hereunder, it
is possible that Agreements Payments will be made by the
Company which should not have been made ("Overpayment") or
that additional Agreement Payments which have not been
made by the Company should have been made
("Underpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder. In the
event that the independent accountant,
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based upon the assertion of a deficiency by the Internal
Revenue Service against the Company or the Executive which the
independent accountant believes has a high probability of
success, determines that an Overpayment has been made, any
such Overpayment shall be treated for all purposes as a loan
to the Executive which the Executive shall repay to the
Company together with interest at the applicable Federal
rate provided for in Code Section 7872(f)(2); provided,
however, that no amount shall be payable by the Executive
to the Company if and to the extent such payment would not
reduce the amount which is subject to taxation under Code
Section 4999 or if the period of limitations for
assessment of tax under Code Section 4999 against the
Executive shall have expired. If the Executive is
required to repay an amount under this Section, the
Executive shall repay such amount over a period of time
not to exceed one (1) year for each twenty-five thousand
dollars ($25,000) which the Executive must repay to the
Company. In the event that the independent accountant,
based upon controlling precedent, determines that an
Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive together with interest at the applicable Federal
rate provided for in Code Section 7872(f)(2)(A).
4.3 DEATH. If the Executive's employment is terminated
by reason of the Executive's death during the Term of this
Agreement (either prior or subsequent to a Change in Control), this
Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other than
for payment of Accrued Obligations (as defined in Section 4.1)
(which shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within ten (10) days of the Date
of Termination).
4.4 DISABILITY. If the Executive's employment is
terminated by reason of the Executive's Disability during the Term
of this Agreement (either prior or subsequent to a Change in
Control), this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations (as defined in Section 4.1) (which shall be paid to the
Executive in a lump sum in cash within ten (10) days of the Date of
Termination).
4.5 TERMINATION FOR CAUSE; EXECUTIVE'S TERMINATION OTHER
THAN FOR GOOD REASON AFTER A CHANGE IN CONTROL. If the Executive's
employment shall be terminated for Cause during the Term of this
Agreement (either prior to or subsequent to a Change in Control),
this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive Accrued
Obligations (as defined in Section 4.1). If the Executive
terminates employment with the Company during the Term of this
Agreement, (other than for Good Reason after a Change in Control)
this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations (as defined in
Section 4.1). In such case, all Accrued Obligations shall be paid
to the Executive in a lump sum cash payment within thirty (30) days
of the Date of Termination. If the Executive's employment shall
terminate for the reasons stated in this Section, the provisions of
Section 5 shall continue to apply.
4.6 NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by
the Company and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company. Amounts which are vested benefits of which the
Executive is otherwise entitled to receive under any plan,
policy, practice or program of, or any contract or agreement
with, the Company at or subsequent to the Date of
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<PAGE> 9
Termination, shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
4.7 FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive
obtains other employment. The Company agrees, only on and after a
Change in Control Date to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the
Executive may reasonable incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive
regarding the amount of any payment pursuant to this Agreement),
plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Code Section 7872(f)(2)(A).
4.8 RESOLUTION OF DISPUTES. If there shall be any
dispute between the Company and the Executive (i) in the event of
any termination of the Executive's employment by the Company,
whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason
existed, then, unless and until there is a final, nonappealable
judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by the
Executive of the existence of Good Reason was not made in good
faith, the Company shall, only on and after a Change in Control
Date pay all amounts, and provide all benefits, to the Executive
and/or the Executive's family or other beneficiaries, as the case
may be, that the Company would be required to pay or provide
pursuant to Section 4.2 as though such termination were by the
Company without Cause or by the Executive with Good Reason;
provided, however, that the Company shall not be required to pay
any disputed amounts pursuant to this paragraph except upon receipt
of an undertaking by or on behalf of the Executive to repay all
such amounts to which the Executive is ultimately adjudged by such
court not to be entitled.
SECTION 5: CONFIDENTIAL INFORMATION.
CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company
or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company and which shall not be or
become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the
Company, or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this Section
constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
SECTION 6: SUCCESSORS.
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6.1 SUCCESSORS OF EXECUTIVE. This Agreement is personal
to the Executive and, without the prior written consent of the
Company, amounts receivable hereunder shall not be assignable by
the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
6.2 SUCCESSORS OF COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree
to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
agreement upon the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive to
terminate the Agreement at the Executive's option on or after the
Change in Control Date for Good Reason. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
SECTION 7: TERMS OF AGREEMENT.
This Agreement will automatically renew for annual one-year
periods beginning on January 1 of each year and ending on the
following December 31; provided that, the last annual period shall
be the twelve (12) month period beginning on January 1 and ending
on the following December 31 during which written notice is given
by December 1, by either party, of such party's intent not to renew
this Agreement. If notice is given by either party after December
1 of any year, but prior to January 1 of the next succeeding year,
then the last renewal period shall be the twelve (12) month period
which begins on the January 1 following the date notice is given
and ending the following December 31. Notwithstanding the
foregoing, in the event a Change in Control shall have occurred,
this Agreement shall terminate two (2) years after a Change in
Control Date.
SECTION 8: MISCELLANEOUS.
8.1 NOTICE. For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered
or mailed by certified or registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses
as set forth below; provided that all notices to the Company shall
be directed to the attention of the Chairman of the Board of the
Company with a copy to the Secretary of the Company, or to such
other address as one party may have furnished to the other in
writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
Notice to Executive:
-------------------
Ronald A. Buerges
13328 Bahnfyre
St. Louis, Missouri 63128
Notice to Company:
-----------------
Magna Group, Inc.
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<PAGE> 11
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any
amounts payable under this Agreement such Federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
8.4 WAIVER. The Executive's or the Company's failure to
insist upon strict compliance with any provision hereof or any
other provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 3.5 shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of
this Agreement shall supersede all other employment or other
agreements with respect to severance entered into by and between
the Executive and the Company, or the Executive and any other
employer, and this Agreement shall constitute the sole agreement
pursuant to which the Company shall have an obligation to the
Executive upon the termination of the Executive's relationship with
the Company or any subsidiary.
IN WITNESS WHEREOF, the Executive and the Company, pursuant
to the authorization from its Board, have caused this Agreement to
be executed in its name on its behalf, all as of the day and year
first above written.
/s/ Ronald A. Buerges
----------------------------------------
Executive
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
-------------------------------------
Name: G. Thomas Andes
Title: Chairman of the Board, President and
Chief Executive Officer
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<PAGE> 1
MAGNA GROUP, INC.
AGREEMENT
---------
This agreement ("Agreement") has been entered into this 12th day
of March, 1996, by and between Magna Group, Inc., a Delaware corporation
("Company"), and Robert M. Olson, Jr., an individual ("Executive").
RECITALS
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to
reinforce and encourage the continued attention and dedication of the
Executive to the Company as a member of the Company's management (including,
if applicable, management of a wholly owned subsidiary) and to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change in
Control (as defined below) of the Company. The Board desires to provide
for the continued employment of the Executive on the terms hereof, and the
Executive is willing to commit to continue to serve the Company. Additionally,
the Board believes it is imperative to diminish the inevitable distraction
of the Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change in Control, to encourage the Executive's
full attention and dedication to the Company currently and in the event
of any threatened or pending Change in Control, and to provide the Executive
with compensation and benefits arrangements upon the breach of this Agreement
by the Employer or upon a termination of employment after a Change in Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the following
words and phrases, whether or not capitalized, shall have the meanings
specified below, unless the context plainly requires a different meaning.
1.1(a) "ANNUAL BASE SALARY" means the dollar amount that
would be reported to the Internal Revenue Service as
compensation on Form W-2 or any successor form.
1.1(b) "BOARD" means the Board of Directors of the Company.
1.1(c) "CHANGE IN CONTROL" means a change in control of the
Company of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act;
provided that, for purposes of this Agreement, a
Change in Control shall be deemed to have occurred
if (i) any Person (other than the Company) is or
becomes the
<PAGE> 2
"beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of
securities of the Company which represent 20% or
more of the combined voting power of the Company's
then outstanding securities; (ii) during any period
of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board cease
for any reason to constitute at least a majority
thereof, unless the election, or the nomination for
election, by the Company's stockholders, of each new
director is approved by a vote of at least two-thirds
(2/3) of the directors then still in office who were
directors at the beginning of the period but excluding
any individual whose initial assumption of office
occurs as a result of either an actual or threatened
election contest (as such term is used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies
or consents by or on behalf of a person other than the
Board; (iii) there is consummated any consolidation or
merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to
which shares of the Company's Common Stock is
converted into cash, securities, or other property,
other than a merger of the Company in which the
holders of the Company's Common Stock immediately
prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger; (iv) there is
consummated any consolidation or merger of the
Company in which the Company is the continuing or
surviving corporation in which the holders of the
Company's Common Stock immediately prior to the
merger do not own fifty percent (50%) or more of the
stock of the surviving corporation immediately after
the merger; (v) there is consummated any sale,
lease, exchange, or other transfer (in one
transaction or a series of related transactions) of
all, or substantially all, of the assets of the
Company, or (vi) the stockholders of the Company
approve any plan or proposal for the liquidation
or dissolution of the Company.
1.1(d) "CHANGE IN CONTROL DATE" shall mean the date of the
Change in Control.
1.1(e) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
1.1(f) "COMPANY" means Magna Group, Inc., a Delaware
corporation.
1.1(g) "EFFECTIVE DATE" shall mean January 1, 1996.
1.1(h) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
1.1(i) "INCENTIVE BONUS" shall mean the incentive bonus
provided through any incentive compensation plan,
which is generally available to other peer
executives of the Company, awarded to the Executive
for the year preceding termination. To the extent
such incentive bonus is paid in shares of restricted
stock, Incentive Bonus shall include the value of such
shares on their award date without any discount;
provided, however, such restricted shares shall
include only those awarded in lieu of compensation
payable as determined by the Compensation Committee
of the Board.
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<PAGE> 3
1.1(j) "PERSON" means any "person" within the meaning of
Sections 13(d) and 14(d) of the Exchange Act.
1.1(k) "TERM" means the period that begins on the Effective
Date and ends on the earlier of: (i) the Date of
Termination as defined in Section 3.7, or (ii) the
close of business on December 31 of any calendar
year during which notice is given, by December 1
of such year, by either party (as provided in
Section 7) of such party's intent not to renew this
Agreement.
1.2 GENDER AND NUMBER. When appropriate, pronouns in this
Agreement used in the masculine gender include the feminine gender, words in
the singular include the plural, and words in the plural include the singular.
1.3 HEADINGS. All headings in this Agreement are included solely
for ease of reference and do not bear on the interpretation of the text.
Accordingly, as used in this Agreement, the terms "Article" and "Section" mean
the text that accompanies the specified Article or Section of the Agreement.
1.4 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the state of Missouri, without
reference to its conflict of law principles.
SECTION 2: TERMS AND CONDITIONS OF EMPLOYMENT.
2.1 EMPLOYMENT. If the Executive is in the employ of the Company
(or in the employ of a wholly owned subsidiary) on a Change in Control Date,
then the Executive shall thereafter remain in the employ of the Company
(or in the employ of a wholly owned subsidiary) in accordance with the terms
and provisions of this Agreement.
2.2 POSITIONS AND DUTIES.
2.2(a) Following a Change in Control Date, the Executive
shall continue to serve in the Executive's then current
capacity, subject to the reasonable directions of the Board.
The Executive shall thereafter devote the Executive's full
working time and attention to such business and affairs of
the Company and/or any subsidiary of the Company as directed
by the Board, as may be compatible with the Executive's titles
and positions. In addition, the Executive's position (including
status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in
all material respects with those assigned to, or held and
exercised by, the Executive immediately preceding a Change in
Control Date.
2.2(b) Following a Change in Control Date and thereafter
throughout the Term of this Agreement (but excluding any periods
of vacation and sick leave to which the Executive is entitled),
the Executive shall devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and shall use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities as are assigned
to the Executive under or in accordance with this Agreement;
provided that, it shall not be a violation of this paragraph
for the Executive to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures or fulfill speaking
engagements, or (iii) manage
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<PAGE> 4
personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement or violate the Company's conflict of interest
policy as in effect immediately prior to the Effective Date.
2.3 SITUS OF EMPLOYMENT. Following a Change in Control Date and
thereafter throughout the Term of this Agreement, the Executive's services
shall be performed at the location where the Executive was employed
immediately preceding the Change in Control Date.
2.4 COMPENSATION. For any calendar year including and following
a Change in Control Date, the Executive shall receive an Annual Base Salary
equal to the Annual Base Salary being received immediately prior to a Change
in Control Date, which shall be paid in equal or substantially equal monthly
installments. The Annual Base Salary payable to the Executive shall be
reviewed thereafter at least annually but need not be adjusted upward as a
result of such review and shall not be reduced after any increase thereof.
SECTION 3: TERMINATION OF AGREEMENT.
3.1 DEATH. This Agreement shall terminate automatically upon the
Executive's death during the Term of this Agreement.
3.2 DISABILITY. If, following a Change in Control Date, the
Company determines in good faith that the Disability of the Executive has
occurred during the Term of this Agreement (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 8.1 of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the thirtieth (30th) day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within
the thirty (30) days after such receipt, the Executive shall not have returned
to full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean that the Executive has been unable to
perform the services required of the Executive hereunder on a full-time
basis for a period of one hundred eighty (180) consecutive business days by
reason of a physical and/or mental condition. "Disability" shall be deemed
to exist when certified by a physician selected by the Company or its insurers
and acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably). The Executive
will submit to such medical or psychiatric examinations and tests as such
physician deems necessary to make any such Disability determination.
3.3 PRIOR TO CHANGE IN CONTROL. Executive is employed at will.
Any notice of termination by Executive or Company shall be given in
accordance with Section 3.6 of the Agreement.
3.4 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY COMPANY
FOR CAUSE. Following a Change in Control Date, the Company may terminate
the Executive's employment during the Term of this Agreement for "Cause,"
which shall mean termination based upon: (i) the Executive's willful and
continued failure to substantially perform the Executive's duties with the
Company (other than as a result of incapacity due to physical or mental
condition), after a demand for substantial performance is delivered to the
Executive by the Chief Executive Officer of the Company or the Chairman
of the Compensation Committee of the Board, which specifically identifies
the manner in which the Executive has not substantially performed the
Executive's duties, (ii) the Executive's willful commission of misconduct
which is materially injurious to the Company, monetarily or otherwise,
or (iii) the Executive's material
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<PAGE> 5
breach of any provision of this Agreement. For purposes of this paragraph,
no act, or failure to act on the Executive's part shall be considered
"willful" unless done, or omitted to be done, without good faith and
without reasonable belief that the act or omission was in the best interest
of the Company. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until (i) the Executive
receives a Notice of Termination (as defined in Section 3.6) from the Chief
Executive Officer of the Company or the Chairman of the Compensation
Committee of the Board, (ii) the Executive is given the opportunity, with
counsel to be heard before the Board, and (iii) the Board finds, in its
good faith opinion, the Executive was guilty of the conduct set forth in
the Notice of Termination.
3.5 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY EXECUTIVE
FOR GOOD REASON. Following a Change in Control Date, the Executive may
terminate the Executive's employment with the Company for "Good Reason,"
which shall mean termination based upon:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 2.2(a) or any other action by the Company which results
in a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose any action not
taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(ii) the failure by the Company to continue in effect any
benefit or compensation plan, stock ownership plan, life
insurance plan, health and accident plan or disability plan to
which the Executive is entitled, the taking of any action by the
Company which would adversely affect the Executive's participation
in, or materially reduce the Executive's benefits such plans,
or deprive the Executive of any material fringe benefit enjoyed by
the Executive or the failure by the Company to provide the
Executive with the number of paid vacation days to which the
Executive is entitled.
(iii) the Company's requiring the Executive to be based at
any office or location other than that described in Section 2.3;
(iv) a material breach by the Company of any provision of this
Agreement;
(v) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement;
(vi) within a period ending at the close of business on the
date two (2) years after the Change in Control Date, any failure
by the Company to comply with and satisfy Section 6.2 on or
after the Change in Control Date; or
(vii) within a period ending at the close of business on the
date one (1) year after the Change in Control Date, the
Executive, in the Executive's sole and absolute discretion,
determines and notifies the Company in writing, that the
Executive does not wish to continue employment with the
Company.
For purposes of this Section any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
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<PAGE> 6
3.6 NOTICE OF TERMINATION. Any termination by the Company, or by
the Executive, shall be communicated by Notice of Termination to the other
party, given in accordance with Section 8.1. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provision so indicated, and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days
after the giving of such notice). The failure by the Executive or the Company
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Company hereunder or preclude the Executive or the
Company from asserting such fact or circumstance in enforcing the Executive's
or the Company's rights hereunder.
3.7 DATE OF TERMINATION. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company with or without
Cause, or by the Executive for Good Reason or otherwise, the Date of
Termination shall be the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, or (ii) if the
Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive or
the Disability Effective Date, as the case may be.
SECTION 4: CERTAIN BENEFITS UPON TERMINATION OF EMPLOYMENT.
4.1 TERMINATION WITHOUT CAUSE PRIOR TO A CHANGE IN CONTROL. If,
prior to a Change in Control, during the Term of this Agreement the Company
shall terminate the Executive's employment without Cause, then on the tenth
(10th) business day following the Date of Termination, the Company shall
pay to the Executive the sum of (1) the Executive's Annual Base Salary
prorated through the Date of Termination to the extent not previously paid,
and (2) any accrued vacation pay to the extent not previously paid.
4.2 TERMINATION AFTER A CHANGE IN CONTROL. If a Change in Control
occurs during the Term of this Agreement and within two (2) years after such
Change in Control: (i) the Company shall terminate the Executive's
employment without Cause, or (ii) the Executive shall terminate employment
with the Company for Good Reason, then the Executive shall be entitled to the
benefits provided below:
4.2(a) "Accrued Obligations": On the tenth (10th) business
day following the Date of Termination, the Company shall pay to
the Executive the sum of (1) the Executive's Annual Base Salary
prorated through the Date of Termination to the extent not
previously paid, and (2) any accrued vacation pay to the extent
not previously paid.
4.2(b) "Severance Amount": On the tenth (10th) business day
following the Date of Termination, the Company shall pay to the
Executive as severance pay a lump sum cash payment in an amount
equal to 2 (two) times the sum of the Executive's Annual Base
Salary in effect on the Date of Termination and the Executive's
Incentive Bonus.
4.2(c) "Stock Options": To the extent not otherwise
provided for under the terms of any of the Company's stock
option agreements, all such stock options shall become fully
exercisable as of the Date of Termination and, except for
"incentive stock options" within
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<PAGE> 7
the meaning of Code Section 422 granted prior to the date
hereof, shall remain fully exercisable in accordance with
their terms.
4.2(d) "Other Benefits": To the extent not previously paid
or provided, the Company shall timely pay or provide to the
Executive and/or the Executive's family any other amounts or
benefits required to be paid or provided for which the
Executive and/or the Executive's family is eligible to receive
pursuant to this Agreement and under any plan, program, policy
or practice or contract or agreement of the Company as those
provided generally to other peer executives and their families
during the ninety (90) day period immediately preceding the
Effective Date or, if more favorable to the Executive, as those
provided generally after the Effective Date to other peer
executives of the Company and their families.
4.2(e) "Excess Parachute Payment": Anything in this
Agreement to the contrary notwithstanding, in the event that
an independent accountant shall determine that any payment
or distribution by the Company to or for the benefit of
Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be nondeductible by the Company for Federal
income tax purposes because of Code Section 280G or would
constitute an "excess parachute payment" (as defined in Code
Section 280G), then the aggregate present value of amounts
payable or distributable to or for the benefit of Executive
pursuant to this Agreement (such payments or distributions
pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero)
to the Reduced Amount. For purposes of this paragraph, the
"Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be nondeductible by the
Company because of Code Section 280G or without causing any
portion of the Payment to be subject to the excise tax imposed
by Code Section 4999.
If the independent accountant determines that any Payment
would be nondeductible by the Company because of Code Section
280G or that any portion of the Payment will be subject to the
excise tax imposed by Code Section 4999, the Company shall
promptly give Executive notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount.
The Executive may then elect, in the Executive's sole discretion,
which and how much of the Agreement Payments shall be eliminated
or reduced (as long as after such election the aggregate
present value of the Agreement Payments equals the Reduced
Amount), and shall advise the Company in writing of the
Executive's election within ten (10) days of the Executive's
receipt of such notice. If no such election is made by Executive
within such ten-day period, the Company may elect which and
how much of the Agreement Payments shall be eliminated or
reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and
shall notify the Executive promptly of such election. For
purposes of this paragraph, present value shall be determined
in accordance with Code Section 280G(d)(4). All determinations
made by the independent accountant under this paragraph shall
be binding upon the Company and the Executive and shall be
made within sixty (60) days of a termination of employment of
the Executive. As promptly as practicable following such
determination and the elections hereunder, the Company shall
pay to or distribute to or for the benefit of the Executive
such amounts as are then due to the Executive under this
Agreement and shall
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<PAGE> 8
promptly pay to or distribute for the benefit of the Executive
in the future such amounts as become due to the Executive under
this Agreement.
As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial determination
by the independent accountant hereunder, it is possible that
Agreements Payments will be made by the Company which should not
have been made ("Overpayment") or that additional Agreement
Payments which have not been made by the Company should have been
made ("Underpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder. In the event that
the independent accountant, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company
or the Executive which the independent accountant believes has a
high probability of success, determines that an Overpayment has
been made, any such Overpayment shall be treated for all purposes
as a loan to the Executive which the Executive shall repay to the
Company together with interest at the applicable Federal rate
provided for in Code Section 7872(f)(2); provided, however,
that no amount shall be payable by the Executive to the Company
if and to the extent such payment would not reduce the amount
which is subject to taxation under Code Section 4999 or if the
period of limitations for assessment of tax under Code Section
4999 against the Executive shall have expired. If the Executive
is required to repay an amount under this Section, the Executive
shall repay such amount over a period of time not to exceed
one (1) year for each twenty-five thousand dollars ($25,000)
which the Executive must repay to the Company. In the event
that the independent accountant, based upon controlling
precedent, determines that an Underpayment has occurred, any
such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive together with interest
at the applicable Federal rate provided for in Code
Section 7872(f)(2)(A).
4.3 DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Term of this Agreement (either
prior or subsequent to a Change in Control), this Agreement shall terminate
without further obligations to the Executive's legal representatives under
this Agreement, other than for payment of Accrued Obligations (as defined
in Section 4.1) (which shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within ten (10) days of the Date of
Termination).
4.4 DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Term of this Agreement (either
prior or subsequent to a Change in Control), this Agreement shall terminate
without further obligations to the Executive, other than for payment of
Accrued Obligations (as defined in Section 4.1) (which shall be paid to the
Executive in a lump sum in cash within ten (10) days of the Date of
Termination).
4.5 TERMINATION FOR CAUSE; EXECUTIVE'S TERMINATION OTHER THAN
FOR GOOD REASON AFTER A CHANGE IN CONTROL. If the Executive's employment
shall be terminated for Cause during the Term of this Agreement (either
prior to or subsequent to a Change in Control), this Agreement shall
terminate without further obligations to the Executive other than the
obligation to pay to the Executive Accrued Obligations (as defined in
Section 4.1). If the Executive terminates employment with the Company
during the Term of this Agreement, (other than for Good Reason after a
Change in Control) this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations (as
defined in Section 4.1). In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum cash payment within thirty (30)
days of the Date of Termination. If the
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<PAGE> 9
Executive's employment shall terminate for the reasons stated in this
Section, the provisions of Section 5 shall continue to apply.
4.6 NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company and for which
the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company. Amounts which are vested benefits of which the Executive
is otherwise entitled to receive under any plan, policy, practice or program
of, or any contract or agreement with, the Company at or subsequent to the
Date of Termination, shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified
by this Agreement.
4.7 FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company agrees, only
on and after a Change in Control Date to pay promptly as incurred, to the
full extent permitted by law, all legal fees and expenses which the
Executive may reasonable incur as a result of any contest (regardless of
the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a result of any
contest by the Executive regarding the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Code Section 7872(f)(2)(A).
4.8 RESOLUTION OF DISPUTES. If there shall be any dispute
between the Company and the Executive (i) in the event of any termination
of the Executive's employment by the Company, whether such termination was
for Cause, or (ii) in the event of any termination of employment by the
Executive, whether Good Reason existed, then, unless and until there is a
final, nonappealable judgment by a court of competent jurisdiction
declaring that such termination was for Cause or that the determination
by the Executive of the existence of Good Reason was not made in good faith,
the Company shall, only on and after a Change in Control Date pay all
amounts, and provide all benefits, to the Executive and/or the Executive's
family or other beneficiaries, as the case may be, that the Company would
be required to pay or provide pursuant to Section 4.2 as though such
termination were by the Company without Cause or by the Executive with
Good Reason; provided, however, that the Company shall not be required to
pay any disputed amounts pursuant to this paragraph except upon receipt of
an undertaking by or on behalf of the Executive to repay all such amounts
to which the Executive is ultimately adjudged by such court not to be
entitled.
SECTION 5: CONFIDENTIAL INFORMATION.
CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the
Company and which shall not be or become public knowledge (other than by
acts by the Executive or representatives of the Executive in violation of this
-9-
<PAGE> 10
Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section constitute a basis
for deferring or withholding any amounts otherwise payable to the Executive
under this Agreement.
SECTION 6: SUCCESSORS.
6.1 SUCCESSORS OF EXECUTIVE. This Agreement is personal to the
Executive and, without the prior written consent of the Company, amounts
receivable hereunder shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's legal
representatives.
6.2 SUCCESSORS OF COMPANY. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to obtain such
agreement upon the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to terminate the Agreement
at the Executive's option on or after the Change in Control Date for
Good Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
SECTION 7: TERMS OF AGREEMENT.
This Agreement will automatically renew for annual one-year
periods beginning on January 1 of each year and ending on the following
December 31; provided that, the last annual period shall be the twelve (12)
month period beginning on January 1 and ending on the following December 31
during which written notice is given by December 1, by either party, of
such party's intent not to renew this Agreement. If notice is given by
either party after December 1 of any year, but prior to January 1 of
the next succeeding year, then the last renewal period shall be the twelve
(12) month period which begins on the January 1 following the date notice
is given and ending the following December 31. Notwithstanding the foregoing,
in the event a Change in Control shall have occurred, this Agreement shall
terminate two (2) years after a Change in Control Date.
SECTION 8: MISCELLANEOUS.
8.1 NOTICE. For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses as set forth below; provided that all
notices to the Company shall be directed to the attention of the Chairman
of the Board of the Company with a copy to the Secretary of the Company,
or to such other address as one party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall
be effective only upon receipt.
-10-
<PAGE> 11
Notice to Executive:
-------------------
Robert M. Olson, Jr.
17706 Gingertree Court
Chesterfield, Missouri 63005
Notice to Company:
-----------------
Magna Group, Inc.
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
8.4 WAIVER. The Executive's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of
this Agreement or the failure to assert any right the Executive or the
Company may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to Section 3.5
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of this
Agreement shall supersede all other employment or other agreements with
respect to severance entered into by and between the Executive and the
Company, or the Executive and any other employer, and this Agreement shall
constitute the sole agreement pursuant to which the Company shall have an
obligation to the Executive upon the termination of the Executive's
relationship with the Company or any subsidiary.
IN WITNESS WHEREOF, the Executive and the Company, pursuant
to the authorization from its Board, have caused this Agreement to be
executed in its name on its behalf, all as of the day and year first
above written.
/s/ Robert M. Olson, Jr.
-------------------------------------------
Executive
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
-----------------------------------------
Name: G. Thomas Andes
Title: Chairman of the Board, President and
Chief Executive Officer
-11-
<PAGE> 1
MAGNA
[LOGO] GROUP, INC.
MAGNA EXECUTIVE INCENTIVE COMPENSATION PLAN
(MEICP)
1996
<PAGE> 2
1. PURPOSE OF THE PLAN
-------------------
The purpose of the Magna Executive Incentive Compensation Plan (MEICP)
is to maximize the efficiency and effectiveness of Magna Group, Inc.
operations by providing significant, incentive compensation opportunities
to certain key executives. The Plan is intended to:
/ / Attract, retain and motivate key executives;
/ / Link compensation to performance;
/ / Shift part of future compensation expense from fixed to variable; and
/ / Reinforce Company and Subsidiary objectives.
This Plan is designed to provide significant incentive compensation
opportunities and presumes a market competitive base salary program.
Incentive Awards made under the Plan are in addition to Base Salary
and Base Salary adjustments awarded to maintain market competitiveness.
2. DEFINITIONS, GENDER AND NUMBER
------------------------------
2.1 Definitions
-----------
Whenever used herein, the following terms shall have their respective
meanings set forth below:
A. "BOARD" means the Board of Directors of Magna Group, Inc. or any
Committee thereof as designated by the Board.
B. "CHIEF EXECUTIVE OFFICER" or "CEO" means the Chief Executive
Officer of Magna Group, Inc.
C. "COMPANY" means the Magna Group, Inc.
D. "EARNINGS PER SHARE (EPS)" means primary earnings available to
common shareholders, after deducting preferred stock dividend
requirements, divided by the average number of common share
and common share equivalents outstanding.
E. "INCENTIVE AWARD" is the cash bonus, expressed as a percentage
of Base Salary, received by Participants in this Plan when
expected performance results are attained. Awards shall be
calculated as provided in Paragraph 7 of the Plan.
F. "NET INCOME" is the final, bottom line profit from all sources,
after taxes and all adjustments, during the period.
1
<PAGE> 3
G. "PARTICIPANT" means an executive of Magna Group, Inc. or one of
the Subsidiary organizations who is eligible to participate in
the Plan.
H. "PERFORMANCE PERCENTAGE" means the percentage of each Participant's
portion of the total award to be received from performance of the
Company and the Individual. The Performance Percentage is assigned
to each Participant by the CEO and approved by the Board prior to
the beginning of each Plan Year.
I. "PLAN" means this Magna Executive Incentive Compensation Plan, as
amended periodically by the Board.
J. "RESPONSIBILITY FACTOR PERCENTAGE" is an assigned responsibility
factor expressed as a percentage to represent a Participant's
level of responsibility. The Responsibility Factor Percentage
is assigned to each Participant by the CEO and approved by the
Board prior to the beginning of each Plan Year.
K. "BASE SALARY" means the base rate of compensation paid to a
Participant by the Company for the year and excludes all other
forms of compensation such as benefits, pension contributions
and other cash payments.
L. "SUBSIDIARY" means a wholly-owned subsidiary entity of Magna
Group, Inc.
M. "YEAR" or "PLAN YEAR" means the Company's fiscal year.
2.2 Gender and Number
-----------------
Except when otherwise indicated by the context, words in the masculine
gender, when used in the Plan, shall include the feminine gender, the
singular shall include the plural, and the plural shall include the
singular.
3. ADMINISTRATION
--------------
The Plan is administered by the Board. The Board has the sole
authority to:
/ / Approve Plan Participants.
/ / Approve Participant Incentive Awards as determined under the Plan.
/ / Approve the Responsibility Factor Percentage for each Participant.
/ / Approve the projected Company and Subsidiary performance levels.
/ / Approve the Entity Designation Percentage for each Participant.
2
<PAGE> 4
The Board also has the sole authority to make any decisions to
administer the Plan or otherwise operate the Plan, establish any
rules or regulations relating to the Plan and to make any other
determinations necessary to administer the Plan. All modifications
or amendments to the Plan shall be approved by the Board. All actions,
determinations and decisions made by the Board will be final, conclusive
and binding upon all parties concerned.
Any action or recommendation by the Board will be based on a majority
of those members verbally expressing their vote at a meeting, or in
writing without a meeting. Any officer may not participate in any way
in any decisions affecting his personal Incentive Award. Individuals
serving as Board members will not be liable in any way to any Participant
or his designated beneficiaries as a result of decisions rendered in the
proper administration of the Plan.
4. PARTICIPATION
-------------
In addition to the CEO, Participants in the Plan are those executives
who have a major impact on the overall operations of the Company
and/or Subsidiary. The Board may add or delete Participants from the
Plan at any time.
Participants who terminate due to death, disability, or retirement
during a Plan Year, will have their participation for the year of
termination determined on an individual basis by the Board. All other
Participants who terminate during that year will forfeit their awards
for the entire Year.
Individuals employed in the Plan Year will have their participation
for the year determined on an individual basis by the Board.
Participants who have responsibility changes during the year or who
enter or exit the Plan will have their award adjusted on a pro rata
basis determined by the time spent in each position of responsibility.
Participants are to be approved by the Board prior to the beginning
of the Year during which they are a Participant.
3
<PAGE> 5
<TABLE>
5. RESPONSIBILITY FACTOR PERCENTAGE
--------------------------------
Each Participant will be assigned a Responsibility Factor Percentage for
calculation of the Incentive Award. This percentage will be based on
each Participant's level of responsibility and potential impact on
corporate profitability. Assignment of the Responsibility Factor
Percentage will be approved by the Board prior to the beginning of
each Plan Year. Assigned Responsibility Factor Percentages by Participant
class appear below.
<CAPTION>
Level Participants % of Salary
----- ------------ -----------
<C> <S> <C>
I. Chairman and Chief Executive Officer . . . . . . . . . . 60
II. Executive Vice Presidents (Magna). . . . . . . . . . . . 45
III. Community Presidents
Assets Over $400M . . . . . . . . . . . . . . . . . . 35
Assets Over $100M - $399M . . . . . . . . . . . . . . 30
Assets Under $100M. . . . . . . . . . . . . . . . . . 25
IV. Regional Loan Managers . . . . . . . . . . . . . . . . . 35
V. Subsidiary Presidents. . . . . . . . . . . . . . . . . . 30
VI. Other Selected Executives. . . . . . . . . . . . . . . . 25
VII. Subsidiary Officers. . . . . . . . . . . . . . . . . . . 20
VIII. New Participants . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
If a Participant changes positions during the year such that the
Responsibility Factor Percentage is changed, the award target will be
pro rated amounts to reflect the time served in each position.
6. PERFORMANCE PERCENTAGE
----------------------
A Participant's annual Incentive Award is determined based on two factors:
1) Company Performance and 2) Individual Performance. Magna Trust
Company and MGI-Investments participants have an additional factor based
upon their Subsidiary Performance.
Each Participant is assigned Entity Designation Percentages which
determine the portion of his Incentive Award which is derived from
Company Performance, Subsidiary Performance and Individual Performance.
The assignments for 1996 are shown on the following page.
4
<PAGE> 6
<TABLE>
Percentage of Incentive Award Determined by:
<CAPTION>
Company Individual Subsidiary
Performance Performance Performance
----------- ----------- -----------
<S> <C> <C> <C>
I. Chairman, CEO, 80 20
and EVP's
II. Corporate Officers 80 20
III. Magna Staff Officers 80 20
IV. Magna Sales Officers 80 20
V. Magna Trust Company 20 20 60
and MGI Investments
</TABLE>
Entity Designation Percentages shall be reviewed annually and updated
prior to the beginning of the Plan Year.
Performance goals for the Company and Subsidiaries are based upon the
earnings projections as approved by the Board, which may be adjusted
during the Plan Year at the Board's discretion. Company Performance
is based on EPS. Performance indices shall be prepared to establish
the award levels corresponding to various performance levels.
The CEO will have the responsibility of recommending several Individual
Performance goals for each Executive Vice President. Each Executive
Vice President will, in turn, recommend several Individual Performance
goals for his officers who are Participants.
All Individual Performance goals will be reviewed for approval by the
Board and communicated to the Participants in order to allow them
sufficient time to focus on these objectives.
7. CALCULATION OF INCENTIVE AWARD
------------------------------
The Incentive Award is equivalent to the Company Performance Percentage
plus the Individual Performance Percentage times the Participant's
Responsibility Factor Percentage times the Participant's Base Salary
for the Plan Year.
At the discretion of the CEO, each Participant's calculated award may
be reduced or increased by maximum of twenty percent (20%) of the
award amount to reflect the quantity and quality of Individual Effort.
5
<PAGE> 7
However, no Incentive Awards will be paid if the Company does not
achieve a minimum performance level, defined as 95% of the EPS
target.
8. PAYMENT OF AWARD
----------------
Incentive Awards shall be payable as soon as practicable after the
end of the Plan Year, following verification of the accuracy of all
awards by the Company's external auditor and approval of the Board.
Participants will receive payment in two forms: 75% of the Incentive
Award will be paid in cash and 25% of the Incentive Award will be
paid in restricted shares of Magna common stock. The number of
shares will be based on the average closing price of stock the last
20 trading days of the plan year. However, if the number of shares
to be distributed to an individual is determined to be less than 10,
the full award will be paid in cash. Dividends and voting rights will
be passed through to Participants immediately; however, Participants
may not sell the shares for five years, when the restrictions lapse.
Magna Group, Inc. is not liable for payment of any interest upon any
Incentive Award.
9. TERMINATION OF EMPLOYMENT
-------------------------
In the event that a Participant shall cease to be employed by the
Company or any Subsidiary during the Plan Year for any reason other
than death, disability or retirement, then such Participant shall
forfeit all rights to receive Incentive Awards that would otherwise
be calculated for the Plan Year. In the event a Participant terminates
by reason of death, disability or retirement, his participation and
Incentive Award calculation shall be determined in the discretion
of the Board. The Board shall also determine what terminations shall
constitute disability or retirement.
11. MISCELLANEOUS PROVISIONS
------------------------
A. The granting of Incentive Awards to Participants under the
provisions of the Plan represents only an interest to receive
compensation. Nothing in the Plan shall be deemed to give any
Participant or any person or entity claiming under or through
him, any contract or right to participate in the benefits of
the Plan. Furthermore, the Plan grants no right to, or interest
in, either express or implied, any equity position or ownership
in the Company or any Subsidiary.
B. The Plan is not a contract of employment. Accordingly, neither the
establishment of the Plan nor the awarding of any Incentive Awards
under the Plan shall interfere with or limit in any way the right
of the Company, or Subsidiary, as the case may be, to terminate
any Participant's employment, nor confer upon any Participant
any right to continue in the employ of the Company or Subsidiary.
C. The Board may at any time terminate the Plan, and from time to
time may amend or modify it, provided that no such action
shall adversely affect any
6
<PAGE> 8
right or obligation with respect to any Incentive Awards
theretofore granted.
D. A Participant's rights, benefits, and interest under the Plan
shall not be subject to alienation, assignment, transfer,
garnishment, execution or levy of any kind.
E. Payments under the Plan shall be subject to applicable federal,
state, and local tax withholding requirements.
F. The Plan shall be unfunded. The Company shall not be required
to segregate any assets to pay Incentive Awards. Any liability
of the Company to pay any Participant with respect to Incentive
Awards shall be based solely upon the written provisions
of this Plan; no such obligation shall be deemed to be secured
by any pledge or encumbrance on any property of the Company.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed in
its name and behalf on this 17th day of January , 19 96 by its
------------ ------------- --
officers thereunto duly authorized.
MAGNA GROUP, INC.
By: /s/ G. Thomas Andes
-----------------------------
G. Thomas Andes
Chairman of the Board and
Chief Executive Officer
7
<PAGE> 9
ADDENDUM
Annual Award Calculation
------------------------
A Participant's Incentive Award is determined by the achievement of annual
goals subject to organizational and environmental constraints. At the
beginning of the Plan Year each Participant will develop mutually acceptable
goals with the executive to whom he reports.
A. COMPANY PERFORMANCE PERCENTAGE
------------------------------
The Company goal will be established at the beginning of the Plan Year
and communicated to the management team.
Company performance awards will be based on EPS. A performance index
will be established and award levels will be determined by straight-line
interpolation between minimum and maximum performance levels.
B. INDIVIDUAL PERFORMANCE PERCENTAGE
---------------------------------
The CEO will have the responsibility of recommending several Individual
Performance goals for each Executive Vice President. Each Executive
Vice President will, in turn, recommend several Individual Performance
goals for his officers who are Participants.
All Individual Performance goals will be reviewed for approval by the
Board and communicated to the Participants in order to allow them
sufficient time to focus on these objectives.
As soon as practical after the end of the Plan Year, Individual
Performance will be reviewed by the responsible executive to evaluate
the level at which individual goals were met. In the case of the CEO,
the Board will evaluate performance.
The evaluator will take into account the accomplishment of goals
involving capital to asset ratio, loan delinquencies and loan
loss reserve positions, non-interest income and non-interest expense
accomplishments, staff utilization, organizational development,
management succession planning, employee relations and others, as well
as how effectively unforeseen difficulties and unexpected opportunities
which developed during the year were addressed. Individual performance
should be reviewed at least annually, but more frequently if appropriate.
C. INCENTIVE AWARD CALCULATION
---------------------------
Incentive Awards are calculated for each Participant in the following
manner:
8
<PAGE> 10
Step 1 Performance %
------ -------------
Add the award percentages determined by evaluating Company and
Individual Performance:
(Company Performance Index X Participant %) +
(Individual Performance Index X Participant %) = Award %
(expressed as a decimal fraction)
Step 2 Responsibility Factor
------ ---------------------
Multiply the Award % (expressed as a decimal fraction) times
-----
the Responsibility Factor (expressed as a decimal fraction)
times the Base Salary to calculate the Incentive Award.
-----
-------- X ------------------------ X $------------ = $---------
(Award %) (Responsibility Factor) (Base Salary) (Incentive
Award)
Step 3 CEO Discretionary Adjustment
------ ----------------------------
Each Participant's calculated award may be reduced or increased
by maximum of twenty percent (20%) of the award amount to
reflect the quantity and quality of individual efforts.
Multiply the amount calculated in Step 2 by 0.20. This yields
the maximum amount available as a discretionary adjustment.
$----------------- X 0.20 = (+-) $-----------------
(Incentive Award) (Discretionary Adjustment)
Step 4 Add (or subtract) the discretionary award adjustment determined
------ in Step 3 to (from) the award basis calculated in Step 2 to
determine the total award.
$-------------------- +- $-------------- = $------------
(Incentive Award) (Discretionary (Award)
Adjustment)
9
<PAGE> 11
<TABLE>
- ------------------------------------------------------------------------------
MAGNA GROUP, INC.
MAGNA EXECUTIVE INCENTIVE COMPENSATION PLAN
1996 PERFORMANCE INDICES
- ------------------------------------------------------------------------------
<CAPTION>
HOLDING TRUST
COMPANY COMPANY MGI
- ------------------------------------------------------------------------------
MEASURE EPS PRE-TAX CONTRIBUTION
MARGIN IN PRE-TAX $$
($) (%) (Millions)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
MINIMUM
TARGET
MAXIMUM
- ------------------------------------------------------------------------------
1996 ACTUAL
PERFORMANCE
- ------------------------------------------------------------------------------
PERFORMANCE
LEVEL
- ------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
SUPPLEMENTAL AGREEMENT
----------------------
This Supplemental Agreement ("Agreement") is made and
entered into as of the 29th day of February, 1996, by and between
Magna Group, Inc., a Delaware corporation ("Magna"), and John G.
Helmkamp, Jr. ("Executive").
W I T N E S S E T H
-------------------
WHEREAS, Executive has been employed by Illinois State
Bank and Trust, an Illinois state-chartered bank ("Bank"), most
recently as its Chairman, and has been responsible for substantial
growth and profitability of the business of Bank; and
WHEREAS, Magna and River Bend Bancshares, Inc., an
Illinois corporation and the sole shareholder of Bank ("River
Bend"), are parties to that certain Agreement and Plan of
Reorganization dated October 11, 1995, as amended as of November
27, 1995 (the "Merger Agreement"), whereby Magna will acquire
indirect control of Bank (the "Merger"); and
WHEREAS, in connection with the Merger, the Board of
Directors of Magna (the "Board of Directors") shall cause Executive
to be appointed to the Board of Directors; and
WHEREAS, in connection with the Merger, Executive will
retire as an officer and employee of Bank; and
WHEREAS, Magna and Executive have made arrangements to
assure that (i) Executive and his immediate dependents will be
entitled to purchase health insurance and (ii) Executive will not
provide services or assistance to other organizations that are or
may in the future be in competition with the businesses of Magna.
NOW, THEREFORE, in consideration of the mutual covenants
and promises contained herein, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties agree as follows:
<PAGE> 2
ARTICLE 1 - RETIREMENT
----------------------
1. Resignation as Chief Executive Officer, Etc. On
--------------------------------------------
February 29, 1996 ("Executive's Retirement Date"), Executive shall
resign his positions as President and Chief Executive Officer of
River Bend and as Chairman of Bank.
2. Retirement Benefits. If Executive retires from his
-------------------
employment with River Bend and Bank on his Retirement Date,
Executive and his spouse shall be entitled from and after
Executive's Retirement Date through the date on which Executive
attains the age of 65 (the "Term"), and each of Executive's
children shall be entitled, from and after the Executive's
Retirement Date through the earlier of (i) the date on which
Executive attains the age of 65 or (ii) the later of the date on
which (A) such child attains the age of 21 or (B) ceases to be a
full-time student (excluding summer and other customary breaks),
but in no event later than the age on which such child attains the
age of 25, to be covered, at Executive's sole cost and expense,
under Magna's major medical health insurance plan with such
coverage to be the same as or comparable to those that are in
effect during said period for the officers of Magna and their
dependents.
3. Other Conditions. Magna shall, at its expense,
----------------
provide Executive with an office, telephone, mail and secretarial
services during the Term of this Agreement; provided, however,
Executive shall have no authority over any employee or officer of
Magna.
ARTICLE 2 - MISCELLANEOUS
-------------------------
1. Restrictive Covenants. Beginning on Executive's
---------------------
Retirement Date and continuing through the period ending three
years after Executive ceases to be a member of the Board of
Directors, Executive shall not, without the prior written approval
of the Board of Directors, become an officer, employee, agent,
partner or director of any business enterprise in substantial
direct competition (as hereinafter defined) with Magna.
For purposes of this Section 1, a business enterprise
with which the Executive becomes associated as an officer,
employee, agent, partner or director shall be considered in
substantial direct
- 2 -
<PAGE> 3
competition with Magna if such entity (i) competes with Magna in any
business in which Magna is engaged as of Executive's Retirement Date
or at any time during the Term of this Agreement and (ii) is within
Magna's market area (as defined herein). Magna's market area is
defined for this purpose as the area which constitutes central and
southern Illinois and the eastern one-half of the State of Missouri
and, if Magna becomes the successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) after the date hereof to
all or substantially all of the business and/or assets of another
business enterprise, the geographical areas in which such predecessor
business enterprise conducts substantial business activity. In the
event any court shall determine that such area where competition is
prohibited or the time period during which competition is
prohibited is overbroad, then the area or time where such
competition is prohibited shall be reduced appropriately as the
court may determine is necessary to make this Article 2, Section 1
enforceable. Notwithstanding the foregoing, Executive shall be
able to purchase shares of capital stock in financial institutions
that are publicly traded as long as Executive's ownership interest
in any such institution would be less than five percent of the
total outstanding shares of capital stock of such institution.
2. Confidential Information. The Executive shall hold
------------------------
in a fiduciary capacity for the benefit of Magna all secret or
confidential information, knowledge or data relating to River Bend,
Bank or Magna or any of their affiliated companies, and their
respective businesses, which shall have been obtained by Executive
and which shall not be or become public knowledge (other than by
acts of the Executive or representatives of the Executive in
violation of this Agreement). After termination of this Agreement,
Executive shall not, without the prior written consent of Magna, or
as may otherwise be required by law or legal process, communicate
or divulge any such information, knowledge or data to anyone other
than Magna and those designated by it.
3. Executive Assignment. No interest of Executive
--------------------
under this Agreement, shall be subject in any manner to sale,
transfer, assignment, pledge, attachment, garnishment or other
alienation or encumbrance of any kind, nor may such interest be
taken, voluntarily or involuntarily, for the
- 3 -
<PAGE> 4
satisfaction of the obligations or debts of, or other claims against,
Executive including claims for alimony, support, separate maintenance
and claims in bankruptcy proceedings.
4. Benefits Unfunded. All rights of Executive
-----------------
hereunder shall at all times be entirely unfunded and no provision
shall at any time be made with respect to segregating any assets of
Magna for payment of any amounts due hereunder. Executive shall
not have any interest in or rights against any specific assets of
Magna and he shall have only the rights of a general unsecured
creditor of Magna.
5. Waiver. The failure of either party to object to or
------
to take affirmative action with respect to any conduct of the other
party which is in violation of the provisions of this Agreement
shall not be construed as a waiver of that violation nor of any
future violation of the provisions of this Agreement. Any such
waiver, in order to be effective in the first instance, must be in
writing and signed by the party against whom the waiver is
asserted. A waiver by either party at any time of any breach by
the other party of, or compliance with, any provision of this
Agreement shall not be deemed or construed to be a waiver of any
subsequent breach by the other party of such provision or a waiver
of any other provisions of this Agreement.
6. Litigation Expenses. In the event that a party
-------------------
breaches any of the provisions of this Agreement, the breaching
party shall pay all costs and expenses incurred by the non-
breaching party in enforcing such provisions and/or in pursuing the
non-breaching party's remedies for such breach, including
reasonable attorneys' fees.
7. Remedies For Breach. In the event of a breach or
-------------------
threatened breach by either party of any of such party's duties or
obligations hereunder, the non-breaching party shall, in addition
to any other remedies available hereunder or under law, be entitled
to a temporary or permanent injunction restraining such breach or
threatened breach and/or a court order requiring the breaching
party to specifically perform his or its duties and obligations
hereunder.
8. Applicable Law. The Agreement shall be construed,
--------------
interpreted and enforced pursuant to the internal laws of the State
of Illinois, without regard to its conflict of law rules.
- 4 -
<PAGE> 5
9. Entire Agreement. This Agreement contains the
----------------
entire agreement between Magna and Executive and supersedes any and
all previous agreements, written or oral, between the Executive and
River Bend and/or Bank relating to the subject matter hereof. No
amendment or modification of the terms of this Agreement shall be
binding upon the parties hereto unless reduced to writing and
signed by Employer and Executive.
10. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original.
11. Severable Provisions. If any term, covenant or
--------------------
condition of this Agreement or the application thereof to any
person or circumstance shall be held to be invalid or
unenforceable, the remainder of this Agreement or the application
of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition
of this Agreement shall be valid and be enforced to the fullest
extent permitted by law.
12. Binding Effect. The Agreement shall be binding upon
--------------
and inure to the benefit of the parties hereto and their respective
heirs, personal representatives and successors.
13. Notices. Notices required under this Agreement
-------
shall be in writing and sent by certified or registered mail,
return receipt requested, to the following addresses or to such
other address as the party being notified may have previously
furnished to the other by written notice:
If to Employer: Magna Group, Inc.
One Magna Place
1401 South Brentwood Blvd.
St. Louis, Missouri 63144-1401
Attention: Chief Executive Officer
If to Executive: John G. Helmkamp, Jr.
P. O. Box 486
East Alton, Illinois 62024
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, Executive has hereunto set his hand,
and Magna has caused these presents to be executed in its name on
its behalf, as of the day and year first above written.
MAGNA GROUP, INC.
By: /s/ G. Thomas Andes
-------------------------------------------
G. Thomas Andes
Chairman and Chief Executive Officer
EXECUTIVE
/s/ John G. Helmkamp, Jr.
---------------------------------------------
John G. Helmkamp, Jr.
- 6 -
<PAGE> 1
MAGNA GROUP, INC.
1992 LONG TERM PERFORMANCE PLAN
RESTRICTED STOCK AGREEMENT
This Restricted Stock Agreement (hereinafter "Agreement"), is
entered into this 31st day of December, 1995, in the County of St. Louis,
Missouri, by and between Magna Group, Inc., a Delaware corporation (hereinafter
"Company") and --------------, (hereinafter "Executive") pursuant to the Magna
Group, Inc. 1992 Long Term Performance Plan (the "Plan").
1. DEFINITIONS. Terms used in this agreement have the meanings
prescribed in the Plan, except that the following terms shall
have the following meanings:
(a) AWARD DATE means the earlier of (i) the first business day
following a Valuation Period and (ii) the day preceding the
day on which there occurs a Change of Control. If an award
date follows a Valuation Period, there may be as many as
three Award Dates as designated below, if the closing price
of Stock equals or exceeds the specified price during a
Valuation Period:
20% Award Date - $28.00
30% Award Date - $31.50
50% Award Date - $35.50
(b) RESTRICTION PERIOD means, with respect to a share of Stock
granted on an Award Date, the period from such Award Date
through and including the day before the earliest of (i) the
date on which Executive's employment with the Company ends
by reason of Retirement, Disability or Death, (ii) the date
on which occurs a Change of Control, or (iii) the eighth
anniversary of such Award Date.
(c) TERMINATION DATE means December 31, 1999.
(d) VALUATION PERIOD means a period of twenty (20) consecutive
trading days ending on or before the Termination Date during
which the closing price of Stock on each day is equal to or
greater than a specified price.
2. CONDITIONAL AWARD OF STOCK. The Company will grant to Executive
up to an aggregate of 10,000 shares of Stock as of the specified
Award Dates if such dates occur before the Termination Date:
<PAGE> 2
On the 20% Award Date - 2,000 Shares
On the 30% Award Date - 3,000 Shares
On the 50% Award Date - 5,000 Shares
Any shares of Stock which have not been granted on or before the
earliest of (i) the date Executive's employment with the Company
ends, (ii) the date on which occurs a Change of Control, or (iii)
the first business day after the Termination Date, shall not be
granted under this Agreement and may be used for other purposes
as allowed by the Plan.
3. ISSUANCE OF STOCK. Certificates for shares of Stock will be
issued to Executive as soon as practicable following an Award
Date. Such certificates will contain a legend reflecting or
incorporating the restrictions on transferability described in
this Agreement. Executive shall have no rights as a Stockholder
with respect to a share of Stock granted pursuant to this
Agreement prior to the issuance of a certificate therefore.
4. INCORPORATION OF LONG TERM PERFORMANCE PLAN. This Agreement is
entered into pursuant to the plan, which Plan is by this reference
incorporated herein and made a part hereof.
5. NON-TRANSFERABILITY OF STOCK. Shares of Stock issued to Executive
pursuant to this Agreement may not be transferred by Executive
during the Restriction Period. This limitation shall not preclude
a transfer by Executive during the Restriction Period to a trust
of which Executive is the grantor, initial trustee and primary
income beneficiary. All restrictions shall terminate as of the
end of the Restriction Period, and upon the surrender of
certificates for shares issued pursuant to this Agreement the
Company shall issue certificates, without any legend or other
indication of restrictions imposed hereunder, for a corresponding
number of shares.
6. FORFEITURE OF STOCK. If Executive's employment with the Company
ends for any reason before the end of the Restriction Period
with respect to a share of Stock, such share shall be forfeited,
and the certificate representing such share shall be returned to
the Company as soon as practicable following such forfeiture.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC. In the
event of the payment of a stock dividend, a split-up or
consolidation of shares, or any like capital adjustment of the
Company before the Termination Date, then to the extent the
shares of Stock which may be awarded hereunder have not yet been
awarded, there shall be a corresponding adjustment as to the
2
<PAGE> 3
number of shares covered under this Agreement, to the end that
Executive shall retain the Executive's proportionate interest in
the Company with respect to shares issued as of a date following
such capital change as he would have received if such change had
not taken place.
8. AWARD CONDITIONED ON APPROVAL AND ACCEPTANCE. This Agreement shall
be void and of no effect unless both (a) the Stockholders of the
Company approve the awards made hereunder at the 1992 Annual
Meeting of Stockholders of the Company, and (b) a copy of this
Agreement is executed by Executive and returned to the Human
Resources Department of the Company not later than 30 days after
the day this Agreement is mailed or delivered to Executive.
IN WITNESS WHEREOF, MAGNA GROUP, INC. has caused this Agreement to be
executed and Executive has signed the same, in duplicate originals as of the day
and year first above written.
EXECUTIVE MAGNA GROUP, INC.
By:---------------------------------- By: -------------------------------
3
<PAGE> 1
<TABLE>
EXHIBIT 11.1
MAGNA GROUP, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
PRIMARY:
Average common shares outstanding............................................... 27,745 26,516 24,369
Net effect of stock options..................................................... 147 141 126
------- ------- -------
Total....................................................................... 27,892 26,657 24,495
======= ======= =======
Net income...................................................................... $51,222 $45,030 $37,487
Less preferred stock dividends:
Class B voting preferred................................................ (3) (3) (3)
------- ------- -------
Primary net income.............................................................. $51,219 $45,027 $37,484
======= ======= =======
Per common share:
Net income.................................................................. $1.84 $1.69 $1.53
======= ======= =======
FULLY DILUTED:
Average common shares outstanding............................................... 27,745 26,516 24,369
Net effect of stock options..................................................... 191 141 163
Assumed conversion of:
7% convertible subordinated capital notes................................... 895 969 1,008
8-3/4% convertible subordinated debentures.................................. -- -- --
------- ------- -------
Average common shares and common share equivalents...................... 28,831 27,626 25,540
======= ======= =======
Primary net income.............................................................. $51,219 $45,027 $37,484
Elimination of interest net of related tax effects on:
7% convertible subordinated capital notes................................... 757 819 856
8-3/4% convertible subordinated debentures.................................. -- -- --
------- ------- -------
Fully diluted net income........................................................ $51,976 $45,846 $38,340
======= ======= =======
Per common share:
Net income.................................................................. $1.80<FA> $1.66<FA> $1.50<FA>
======= ======= =======
<FN>
- --------
<FA>For the years ended December 31, 1995, 1994 and 1993, inclusion of common stock equivalents for the 8-3/4% convertible
subordinated debentures in the computation of fully diluted net income per share results in antidilution, and therefore,
these are excluded from the computation.
</TABLE>
<PAGE> 1
MAGNA
GROUP, INC.
1995 ANNUAL REPORT
E N H A N C I N G STOCKHOLDER VALUE
[LOGO]
MAXIMIZING P r o f i t a b i l i t y
STRENGTHENING O u r M a r k e t P o s i t i o n
INVESTING I n O u r C o m m u n i t i e s
<PAGE> 2
CORPORATE PROFILE
Magna Group, Inc. is a St. Louis-based community banking
organization with $4.95 billion in assets. By virtue of its
growth from a small, traditional group of community banks
into a multi-billion dollar holding company, Magna is generally
categorized as a "Super Community Bank." As one of the 100
largest banking organizations in the nation, it focuses on
retail and community banking, targeting consumers and
small-to-midsized businesses within its market areas.
Magna delivers services to over 315,000 households through a
network of 104 banking centers located in 67 communities and
via 101 Magna Carta(R) automated teller machines. Magna
provides a comprehensive range of financial services
including retail, commercial, trust, brokerage and
correspondent banking. The greater bi-state St. Louis
metropolitan area is Magna's primary market. Magna also
serves key communities in central and southern Illinois.
<TABLE>
TABLE OF CONTENTS
<S> <C>
Financial Highlights 1
Four years of record earnings have added to
stockholder value
Chairman's Letter to Stockholders 2
We are strategically positioned for continued
growth and profitability
Investor Information 6
Key information about our stock and stockholder services
Strategic Dates in Magna's History 8
We have grown from one location in 1874 to over
100 banking centers in two states and 67 communities
Strategic Overview 10
We remain committed to enhancing stockholder value
by maximizing profitability, strengthening our market
position and investing in our communities
Glossary 16
A definition of terms used in our financial discussion
1995 Financial Review 17
Magna Locations 55
Directors and Executive Officers 58
Community Bank Presidents and Regions Inside
Our regional management approach strengthens our Back
ties to the communities we serve Cover
<PAGE> 3
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Percent
(In thousands, except per share data) 1995 1994 Change
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER COMMON SHARE
Primary net income $ 1.84 $ 1.69 9%
Fully diluted net income 1.80 1.66 8
Dividends declared .80 .76 5
Book value 15.93 13.49 18
- ----------------------------------------------------------------------------------------------------------------------
EARNINGS
Net interest income $182,851 $172,819 6%
Provision for loan losses 9,992 4,900 104
Net income 51,222 45,030 14
- ----------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $4,947,499 $4,638,502 7%
Securities 1,364,864 1,217,174 12
Total loans 3,202,766 2,968,201 8
Reserve for loan losses 42,623 43,991 (3)
Total deposits 3,888,266 3,672,755 6
Stockholders' equity 446,044 371,312 20
- ----------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS
Return on average assets 1.09% 1.05%
Return on average equity 12.57 12.41
Net interest margin 4.30 4.49
Efficiency ratio 62.11 66.69
Loan reserve to nonperforming loans 138.30 119.21
Nonperforming assets to total loans and
foreclosed property 1.12 1.48
Stockholders' equity to total assets 9.02 8.00
Leverage capital ratio 8.64 8.29
Tier 1 capital to risk-adjusted assets 13.06 12.79
Total capital to risk-adjusted assets 14.29 14.07
======================================================================================================================
</TABLE>
NET INCOME
In millions of dollars
[GRAPH]
Four consecutive years of record earnings
have enhanced stockholder value.
ASSETS
In billions of dollars
[GRAPH]
Total assets have grown at a compound
annual rate of 7.0% per year since 1991.
NET INCOME PER SHARE
In dollars
[GRAPH]
Consistent increases in net income per
share, 9.3% since 1992, reflect the
success of Magna's core strategies.
1
<PAGE> 4
CHAIRMAN'S LETTER
TO OUR STOCKHOLDERS:
In 1995, we reported record earnings for the fourth consecutive
year, completed our new state-of-the-art operations center, and
continued to expand our core retail franchise. Among the
financial highlights we achieved:
*Net income increased 14% to $51.2 million, or
$1.84 per share.
*Cash dividends on common stock were up 10% to
22 cents per share, effective in 1996.
*Earning assets grew 10% to $4.61 billion.
*Return on assets was 1.09% and return on equity
was 12.57%.
*Loans grew 8% to $3.20 billion.
*Nonperforming assets declined 19% to $35.8
million, or .72% of total assets.
*Capital remained strong at $446.0 million, or
9.02% of total assets.
Magna's 1995 performance reflects our continuing focus on
increasing and diversifying our sources of income while
controlling costs and increasing our effectiveness and efficiency.
We plan to continue to improve in these areas to further enhance
stockholder value.
INCREASING EARNINGS
During the year, we directed our attention to connecting our sales
and service activity to bottom-line results. We revamped our
internal incentive programs to focus on better serving our
customers. In doing so, we have set ambitious but attainable
goals for our staff, goals that correlate rewards to gains in net
income per share.
We bolstered our efforts to improve noninterest income.
Approximately 20% of our revenue comes from fee-generating
services such as trust, brokerage and bank service fees. We
intend to work hard to improve that percentage in the months and
years ahead. As legislation permits, we will explore new sources
of fee income because the traditional "profit margins" of banking
continue to narrow. Our goal is to achieve a level of noninterest
income exceeding that of our peers. We introduced new fee-based
products in 1995 that we believe meet certain target market needs.
An example is Magna Trust's SMART K, a new 401(k) employee
benefits product targeted to small businesses. To increase sales,
MGI, our brokerage company, expanded the number of sales
representatives and brought in new leadership, naming
nineteen-year securities industry professional Jeff Auld as
president.
[PHOTO]
2
<PAGE> 5
Controlling noninterest expense remains a challenge that we
believe we have managed very well. Noninterest expense declined 3%
in 1995 primarily as the result of the lowering of FDIC insurance
premiums in the third quarter of 1995 and other operating
expenses. Further, we recognized that our staffing was somewhat
excessive in certain areas, so we reduced levels by approximately
8% in January 1996. At the same time, we froze the salaries of
our top 50 executives so we could tie their performance to
incentives based on achieving certain levels of earnings.
We also moved into a new, 170,000 square-foot, state-of-the-art
operations center, which enabled us to centralize further certain
back-office functions. In 1995 we began to operate our franchise
as one bank and completed the legal consolidation of our two state
bank charters into one national, interstate bank charter. Both
efforts will enable us to control future operating costs and, at
the same time, improve customer convenience and service. Our goal
is to continue to drive the efficiency ratio below the level of
our competition. The ratio was 62% for 1995, compared with 67%
for 1994. This is the third consecutive year that the ratio
declined. For the last two quarters of 1995, our efficiency ratio
was below 60%.
Diligent work by our Asset Quality department has yielded positive
results. For the first time in Magna's history, the level of
nonperforming loans to total loans was below 1.0%. In light of
the changing economy, our goal is to reduce further the level of
nonperforming loans and assets. Achieving this goal will have a
direct, positive effect on our bottom line.
[PHOTO]
GROWING THE CORPORATION
During 1995, we announced the proposed acquisition of River Bend
Bancshares, Inc., a $160 million, one-bank holding company
strategically located in East Alton, Illinois. This transaction
successfully closed on February 29, 1996. We also opened another
supermarket banking center in the St. Louis metropolitan area,
making a total of six high-impact locations. In December, we
relocated our downtown St. Louis retail banking center to Gateway
One Center, a new downtown site. This location, embodying our new
retailing strategy, blends high-tech, high-touch technology with a
complete range of service selectivity driven by our customers. We
expect to expand this retailing format to other high-visibility
locations during 1996. Convenience remains the number one reason
that people select a financial institution, and we are striving to
make Magna the "most convenient" institution. Our Service Express
telephone center handled an average of 230,000 calls per month
during 1995, up approximately 60,000 per month from the prior
year. This centralized area handles special customer requests
3
<PAGE> 6
and offers selected retail products. Offering Service Express is
just one example of how we are increasing our efficiency and
providing added value to our customers at a fraction of the
previous overhead cost.
As technology advances and as our customers' needs change, we want
to exceed their expectations. In addition to having our network
of 104 banking centers in the two-state area, we are continually
evaluating new, alternative delivery methods from personal
computers to convenience stores to point-of-sale devices.
MAINTAINING COMMITMENT TO THE COMMUNITIES WE SERVE
Through our 13 regions and their respective community presidents
and community boards of directors, we have been able to maintain
our community bank orientation. We are striving to provide
quality products and first-class service to our customers. Not
only are our community presidents and directors active in their
local communities, many of our 2,200 employees take an active
leadership role in the markets we serve. Our strong commitment to
community service is multifaceted:
*We will be a leader for economic development.
*We will encourage and maintain active relationships with
community leaders and groups in order to understand the general
and specific needs of our communities.
*We will invest in our communities through lending programs,
direct contributions and employee involvement.
WELCOME AND THANKS
During the year, we welcomed to our board of directors James A.
Auffenberg, Jr., president of Auffenberg Enterprises of Illinois,
Inc., and Frank R. Trulaske, III, owner and president of True
Fitness Technology, Inc. Most recently, John G. Helmkamp, Jr.
joined the board following our acquisition of River Bend, where he
served as chairman and chief executive officer.
We also want to express our deep appreciation for the outstanding
service of two of our board members. Joseph R. Lowery, partner of
Thompson & Mitchell, did not stand for reelection in 1995.
William E. Cribbin, president of N-K Scratch Pads, Inc., is not
standing for reelection in 1996. Both have had a long association
with Magna and have made invaluable contributions to your company.
Their guidance and counsel will be missed.
[PHOTO]
4
<PAGE> 7
THE FUTURE
As Magna looks toward the 21st Century, we see a dynamic financial
services environment. We believe that Magna is positioned to meet
and respond to the challenges of the future. Our staff of 2,200
is focused on one goal: to enhance stockholder value by becoming
the premier provider of financial products and services in the
markets we serve. We will continue to maximize profitability,
strengthen our market position and invest in our communities.
Magna employees have already proven that they have the ingenuity,
enthusiasm and perseverance to move us forward into the next
century.
I look forward to, and remain optimistic about, the challenges
that lie ahead and appreciate your continued support as we add to
your company's rich 121-year history.
/s/ G. Thomas Andes
G. Thomas Andes
Chairman of the Board and
Chief Executive Officer
[PHOTO]
5
<PAGE> 8
INVESTOR INFORMATION
CORPORATE HEADQUARTERS
Magna Group, Inc.
One Magna Place
1401 South Brentwood Boulevard
St. Louis, Missouri 63144-1401
(314) 963-2500
TRANSFER AGENT
Stockholders with inquiries regarding stock accounts,
dividends, change of ownership or address, lost certificates
or consolidation of accounts should contact:
Magna Trust Company
Corporate Trust Operations
One South Church Street
Belleville, Illinois 62220
(618) 233-2120 or 1-800-900-4548
ANNUAL MEETING
The annual meeting of stockholders will be held
at 10:00 a.m. on Wednesday, May 1, 1996, at the
Regal Riverfront Hotel, 200 South Fourth Street,
St. Louis, Missouri 63102-1804.
COMMON STOCK
The common stock of Magna Group, Inc. is traded on the Nasdaq
National Market tier of The Nasdaq Stock Market(SM) under the symbol
"MAGI." The stock generally appears as "MagGp" or "MagnaGp" in
newspaper stock tables.
At December 31, 1995, Magna had approximately 8,600 stockholders
of record. The closing price of Magna common stock on December
29, 1995 was $23.75. The number of shares of Magna's common stock
traded during the years ended December 31, 1995 and 1994 as
reported by The Nasdaq Stock Market, Inc. were 14,990,441 and
18,893,260, respectively.
STOCKHOLDER SERVICES
For more information about the following Stockholder Services,
please contact Magna Trust Company or return the postage-paid
postcard on the inside back cover of this report.
Dividend Reinvestment Plan and Stock Purchase Plan
Magna's Dividend Reinvestment Plan and Stock Purchase
Plan allows stockholders to conveniently and automatically
reinvest their dividends in Magna common stock, without
brokerage fees. Participating stockholders may also purchase
additional shares with optional cash payments.
Direct Deposit of Dividends
Magna offers its registered stockholders the option of having
their dividends electronically deposited into the bank account of
their choice.
INVESTOR RELATIONS
Analysts and others seeking financial information about
Magna Group, Inc. should contact:
Magna Group, Inc.
Investor Relations Department
1401 South Brentwood Boulevard
St. Louis, Missouri 63144-1401
(314) 963-2546
For the convenience of our stockholders, copies of our
press releases and research can be obtained by calling
1-800-785-MAGI (6244).
FORM 10-K AND OTHER PUBLICATIONS
For copies of the annual report, the Form 10-K
(excluding exhibits) and other financial information,
please contact the Investor Relations Department at the address
and phone number above.
NUMBER OF COMMON SHARES OUTSTANDING
In millions
[GRAPH]
BOOK VALUE
In dollars
[GRAPH]
6
<PAGE> 9
<TABLE>
COMMON STOCK SHARE DATA<F*>
<CAPTION>
Dividends
High Low Close Declared
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Fourth $26.38 $23.00 $23.75 $.20
Third 25.50 21.00 24.25 .20
Second 22.38 20.00 22.00 .20
First 20.75 17.13 20.00 .20
- --------------------------------------------------------------
1994
Fourth $21.50 $16.75 $17.50 $.19
Third 21.38 19.00 20.50 .19
Second 20.38 17.63 19.38 .19
First 20.50 18.13 19.13 .19
==============================================================
<FN>
<F*>High, low and closing trade prices of the common stock
for each quarterly period during 1995 and 1994 as reported
by the Nasdaq Stock Market, Inc.
</TABLE>
TEN-YEAR TOTAL RETURN TO STOCKHOLDERS (December 31, 1985--December 31, 1995)
In dollars
[GRAPH]
Ten-Year Compound Average Annual Total Return = 10.55%
(Assumes initial investment of $1,000 and reinvestment of all dividends.
Adjusted to reflect all stock dividends within the ten-year period.)
MARKET MAKERS
During 1995, the following firms made a market in Magna Group,
Inc. common stock:
ADVEST, INC.
A.G. EDWARDS & SONS, INC.
Bridge Trading Company
Burns Pauli Mahoney Co.
CS First Boston
Donaldson, Lufkin & Jenrette
Edward Jones & Company
Everen Securities, Inc.
Fox-Pitt Kelton, Inc.
George K. Baum & Co.
Herzog, Heine, Geduld, Inc.
J.J.B. HILLIARD, W.L. LYONS, INC.
Jefferies & Company, Inc.
Keefe, Bruyette & Woods, Inc.
Kenny Securities Corp.
Knight Securities L.P.
Mabon Securities Corp.
MacAllister Pitfield MacKay
Mayer & Schweitzer Inc.
Merrill Lynch & Co., Inc.
Morgan Stanley & Co., Inc.
PAULI & COMPANY, INC.
PIPER JAFFRAY INC.
The Robinson-Humphrey Company, Inc.
Rodman & Renshaw
Ryan Beck & Co., Inc.
Sherwood Securities Corp.
Stifel, Nicolaus & Company, Inc.
Troster Singer Corporation
Market makers in bold issued research
reports on Magna Group, Inc. in 1995.
MARKET CAPITALIZATION
In millions of dollars
[GRAPH]
CLOSING PRICE PER COMMON SHARE
In dollars
[GRAPH]
DIVIDENDS PER SHARE
In dollars
[GRAPH]
7
<PAGE> 10
STRATEGIC DATES IN MAGNA'S HISTORY
1874
Organized First National Bank of Belleville, Belleville, Illinois.
First National Bank of Belleville was the
original bank of Magna Group, Inc.
1971
Merged St. Clair National Bank of Belleville, Belleville,
Illinois, into First National Bank of Belleville.
1974
Formed one-bank holding company, First Bancorp
of Belleville, Inc.
1975
Acquired First National Bank of Belleville and Illinois State
Trust Company, East St. Louis, Illinois.
1982
Acquired Bank of Belleville, Belleville, Illinois, and Dupo State
Savings Bank, Dupo, Illinois.
1983
Listed stock on Nasdaq over-the-counter market; changed name of
holding company to Magna Group, Inc. and acquired Fairview Heights
Community Bank, Fairview Heights, Illinois.
1984
Acquired First National Bank of Freeburg, Freeburg, Illinois;
First National Bank of Marissa, Marissa, Illinois; First National
Bank of Smithton, Smithton, Illinois; First National Bank in
Columbia, Columbia, Illinois; The Millikin National Bank of
Decatur, Decatur, Illinois; Capitol Bank & Trust Company,
Springfield, Illinois.
1985
Issued 900,000 shares of common stock at $11.25 per share and sold
$10 million of 7.5% Convertible Subordinated Debentures due
September 2000.
1986
Acquired First National Bank & Trust Company of Centralia and
First State Bank of Centralia, Centralia, Illinois; Ashley State
Bank, Ashley, Illinois; Hoyleton State and Savings Bank,
Hoyleton, Illinois; Northtown Bank & Trust Co. of Decatur,
Decatur, Illinois; Bank of Cahokia, Cahokia, Illinois.
1987
Sold $20 million of 7.0% Convertible Capital Notes due August
1999; acquired First Granite City National Bank and Colonial Bank
of Granite City, Granite City, Illinois; First National Bank in
Lincoln, Lincoln, Illinois.
1988
Acquired First National Bank of Wood River, Wood River, Illinois;
McLean County Bank, Bloomington, Illinois; Stanford State Bank,
Stanford, Illinois; First National Bank of Mascoutah, Mascoutah,
Illinois.
1989
Acquired New Holland Farmers Bank, New Holland, Illinois, and Bank
of Sesser, Sesser, Illinois.
1990
Called for redemption the 7.5% Convertible Subordinated
Debentures; acquired deposits and certain assets of Home Federal
Savings & Loan Association, Centralia, Illinois, and Citizens
Savings & Loan Association FA, Springfield, Illinois.
8
<PAGE> 11
1991
Acquired Landmark Bancshares Corporation, St. Louis, Missouri, and
its ten subsidiary banks and trust company -- Landmark Bank, St.
Louis, Missouri; Landmark Bank of St. Charles County, St.
Charles, Missouri; Landmark Bank of Illinois, Fairview Heights,
Illinois; Landmark Bank of Carbondale, Carbondale, Illinois;
Landmark Bank of Madison County, Highland, Illinois;
Landmark Bank of Randolph County, Sparta, Illinois; Landmark Bank
of Washington County, Nashville, Illinois; Landmark Bank of
Southwest Missouri, Springfield, Missouri; Landmark Bank of
Kansas City, Kansas City, Missouri; Landmark KCI Bank, Kansas
City, Missouri; Landmark Trust Company, Fairview Heights,
Illinois.
1992
Acquired deposits of First Exchange Bank of St. Louis, St. Louis,
Missouri, and issued 4.6 million new shares of common stock at
$13.50 per share.
1993
Acquired Mega Bank, St. Louis, Missouri; The City National Bank,
Murphysboro, Illinois; deposits and certain assets of Community
Bank of Greater Peoria, Peoria, Illinois; MGI Group, Inc., St.
Louis, Missouri (a brokerage company).
1994
Acquired First National Bank in Madison, Madison, Illinois; Bank
of Chesterfield, Chesterfield, Missouri; Goreville State Bank,
Goreville, Illinois, and introduced the Magna Funds-proprietary
mutual funds.
1995
Announced 5% stock repurchase plan; opened Operations Center in
Belleville, Illinois; consolidated two remaining charters into one
national interstate chartered bank, Magna Bank, N.A., and opened
Gateway One Banking Center in downtown St. Louis, Missouri.
[PHOTO]
9
<PAGE> 12
STRATEGIC OVERVIEW
MAXIMIZING PROFITABILITY
From Wall Street to Main Street, financial success is measured by
increasing profits or the return on investment. To that end,
Magna is committed to maximizing profitability. Magna's strategy
to accomplish this goal focuses on three key areas: net interest
income, noninterest income and noninterest expense.
NET INTEREST INCOME
Net interest income improvement is driven by the net interest
margin and the growth in earning assets, especially loans. Retail
community lending has been Magna's focus over the years and
remains a key to the company's future. Automobile loans,
residential mortgages, home equity lines of credit, credit cards
and loans to small-to-midsized businesses within Magna's market
contributed to the $235 million, or 8%, increase in loans in 1995.
To fund loan demand, Magna featured several deposit products
during 1995. In particular, a 21-month certificate of deposit
attracted $383 million. Magna's philosophy is to pay a
competitive market rate for deposits and charge a fair price for
its loans. As Magna further develops its management information
systems, more of its pricing decisions will be based on customer
relationships.
Over the past four years, Magna has developed a niche market in
indirect automobile lending. By providing fast and responsive
service, Magna has been able to grow the book of business with
market area auto dealers. The volume of indirect loans has grown
from a monthly average of $6.5 million in 1992, to $16.6 million
in 1995, resulting in a portfolio of $359 million at year-end
1995.
As Magna looks to expand its loan portfolio, retail community
lending will continue to play a significant role. Magna's
strategy is to sell more services to its existing base of 315,000
households and to further strengthen its customer relationships.
To ensure success, Magna continually assesses the credit needs of
its communities and responds by offering products that are
targeted to meet the needs of the specific market.
Utilizing technology and centralization, Magna has streamlined
loan administration, standardized documentation and reduced
nonperforming assets. At year-end 1995, Magna reported
historically low nonperforming loan and asset ratios. The ratio
of nonperforming loans to total loans was .96%, while
nonperforming assets to total assets was .72%. Going forward,
asset quality remains a top priority.
NONINTEREST INCOME
Noninterest income is driven by fees for bank services, trust and
brokerage sales and the development of new sources of fee-based
revenues. In 1995, Magna redesigned, repackaged and aggressively
marketed its cash management services. Magna's cash management
program is state-of-the-art and is specifically targeted to
Magna's commercial customers who want lock box services, computer
access to data, controlled disbursements or automatic investment
of excess funds. As a result, the number of cash management
customers doubled during the year and monthly fees increased more
than 60%. Magna will continue to develop
[PHOTO]
10
<PAGE> 13
its cash management program and explore new avenues of fee income.
Other key areas for future expansion will be Magna Trust and MGI
brokerage and investment services. Through targeted marketing,
additional sales representatives and new products such as the
SMART K (an employee benefits program for commercial customers)
and Magna Funds (Magna's proprietary mutual funds), Magna should
generate increased fee revenue.
NONINTEREST EXPENSE
Controlling noninterest expense is driven by lowering overhead.
The completion of the new state-of-the-art operations center will
enable Magna to streamline its operations, while employing new
technology. An example of how technology has enabled Magna to
better serve its customers is Service Express, Magna's 24-hour
customer service center. This center handles an average of
230,000 calls per month, providing information on account
balances, interest rates and bank products. To further control
overhead, Magna will continue to consolidate back-office
functions, determine optimal staffing levels, evaluate lower cost
"nontraditional" delivery systems and conduct workflow
re-engineering.
[PHOTO]
11
<PAGE> 14
STRENGTHENING OUR MARKET POSITION
From St. Louis, Missouri, to Hoyleton, Illinois, community banking
is the key to Magna's success. To that end, Magna is committed to
strengthening our market position. Magna's strategy to accomplish
this goal focuses on three key areas: strong community
orientation, convenience and offering a broad array of products.
STRONG COMMUNITY ORIENTATION
Magna has never strayed far from its community banking roots. In
June 1874, First National Bank of Belleville opened its doors to
the citizens of Belleville. A community bank is one that derives
most of its funding from the community it serves and invests those
funds back into the same community.
[PHOTO]
Also, a community bank has a strong commitment to quality
services. This concept is Magna's philosophy. Each of Magna's
104 banking centers retains a strong community orientation and is
committed to delivering quality products and services that will
exceed customers' expectations.
Magna has banking centers in 67 communities throughout Illinois
and Missouri. These communities range from metropolitan St.
Louis, Missouri, to the agricultural community of Hoyleton,
Illinois. To strengthen Magna's ties to these communities, we
have developed 13 regions, each with a community president and a
local community board of directors. This structure helps cement
Magna's relationship to the communities it serves. Magna
challenges its community board members to make customer referrals
for loans, deposits, trust or brokerage services.
Over the past 14 years, Magna has acquired 44 financial
institutions. Through these acquisitions, Magna has been able to
amass a significant market share in many of the communities it
serves. Magna will continue to utilize acquisitions as a strategy
to build the franchise.
CONVENIENCE
Magna has 73 banking centers in the St. Louis metropolitan area,
which is more than any other financial institution. To complement
these banking centers, Magna has a network of ATMs that are
strategically located. Convenience is the number one reason that
people select a financial institution. Within recent years, we
have strategically placed ATMs in more convenient locations such
as supermarkets, airports and drive-up kiosks. In December 1995,
we opened our new Gateway One Banking Center in downtown St. Louis
and installed two touch-screen ATMs that also dispense postage
stamps. We recognize that a person's time is a precious
commodity, and we need to deliver our products and services in
such a way as to accommodate our customers.
12
<PAGE> 15
[PHOTO]
Magna has six full-service banking centers inside one of the
area's leading grocery chains. Magna is looking into opening more
supermarket locations, and we are evaluating other delivery
outlets such as convenience stores and malls.
To lend further support to this concept, we have a staff dedicated
to understanding and developing alternative delivery systems for
banking services through supermarkets, convenience stores,
telephone banking, ATMs and personal computers. We know that the
methods of delivering our products and services are rapidly
changing. As a result, we need to be ready to respond to the
needs of our customers.
BROAD ARRAY OF PRODUCTS
It is essential that Magna offer a wide array of products and
services that will meet the full range of customers' financial
needs. In meeting these needs, customer retention will be
achieved, and the value of the franchise will be maximized.
In 1995, Magna developed Check Connect, a relationship checking
account, targeted to compete with free checking being offered by
the competition. Magna also has an active program for those
individuals who have attained age 55-Club Magna 55. This program
has been in place for 15 years, has more than 75,000 club members
and accounts for approximately one third of Magna's total
deposits. These are examples of how Magna demonstrates its
commitment to meeting the needs of its customers and building
long-term relationships.
13
<PAGE> 16
[PHOTO]
INVESTING IN OUR COMMUNITIES
From commercial loans to residential mortgage loans, providing
funds that foster community growth and development is vital to
Magna's financial growth. To that end, Magna is committed to
investing in our communities. Magna's strategy to accomplish this
goal focuses on three key areas: responsibility, employee
involvement and community development.
RESPONSIBILITY
Magna has a responsibility to reinvest dollars back into its
neighborhoods. We have always maintained a leadership role in
fostering growth and development of the communities where we do
business. Magna's lenders actively assess the credit needs of the
communities we serve and stand ready to lend dollars to businesses
or individuals to help make their dreams a reality.
Throughout our communities, Magna representatives work with local
realtors and builders to promote Magna's Opportunity Plus(SM) loan
program as well as other programs designed for low-to-moderate
income individuals. Since the program's inception in December
1991, Magna has loaned more than $135 million and made more than
4,800 home-purchase and home-improvement loans to participants.
In 1995 alone, nearly 1,380 such loans were made, totaling more
than $41 million.
During 1995, representatives of Magna met on several occasions
with a new organization called St. Louis Reinvestment Corporation
(SLRC) regarding affordable housing and small business lending.
SLRC was formed in the latter part of 1994, and its major goal is
to develop solutions to the current problems
14
<PAGE> 17
related to home ownership, rehabilitation of existing properties
and the development and growth of small businesses within the
community.
As a result of the meetings, Magna committed $5 million for home
loans under a joint affordable housing program whereby SLRC
conducts home ownership counseling and Magna provides mortgage
loans to qualified individuals. Magna also agreed to an
additional $250,000 for micro-business loans through SLRC. In
addition, Magna contributed $10,000 seed money to the newly-formed
organization.
EMPLOYEE INVOLVEMENT
Magna employees volunteer their time to youth groups, hospitals,
schools and other community groups and charitable institutions.
Employees donate thousands of hours of time and energy each year
to organizations such as Girl Scouts and Boy Scouts, American
Diabetes Association, Optimist Clubs, Arthritis Foundation,
Muscular Dystrophy Association and The United Way.
Magna has always supported and encouraged employee involvement in
local communities and organizations. Throughout Magna's market
area, employees have acted as mentors for students in various
school districts. Employees from the St. Louis area planted
flowers, painted houses and repaired roofs as they participated in
Block-Aid(SM), an annual project dedicated to the renovation and
beautification of St. Louis neighborhoods.
In 1995, Magna was the sponsor of the Salvation Army's Mitten Tree
program. In Magna locations in the St. Louis metropolitan area,
Christmas trees were decorated with mittens and scarves.
Employees and customers donated thousands of items, along with
cash, which were given to the Salvation Army for distribution
during the holiday season.
[PHOTO]
COMMUNITY DEVELOPMENT
Magna has been an active participant in local community
development and redevelopment projects. In 1995, Magna invested
$500,000 in the St. Louis Equity Fund, a not-for-profit
corporation founded in 1988 and sponsored by Civic Progress, Inc.
to bring low-income families and affordable housing together.
Magna was also recognized by S.H.I.P. (St. Louis Housing Incentive
Program) Development Corporation as being innovative and
farsighted with respect to construction financing of its modular
housing development in the City of St. Louis.
Corporate contributions play a vital role in community
development. During the year, Magna, through its bank and trust
company, contributed to hundreds of nonprofit organizations in our
market area.
15
<PAGE> 18
GLOSSARY
Average Balance- The sum of the daily balances divided by the
number of days in the period.
Book Value Per Share- The value of a share of common stock
determined by dividing total common stockholders' equity at the
end of the period by the total number of common shares
outstanding.
Dividend Payout Ratio- The percentage of net income per common
share that was paid to common stockholders as dividends for the
period.
Earning Assets- Assets that generate interest income and
yield-related fee income, such as loans, short-term investments
and securities.
Efficiency Ratio- Noninterest expense divided by the sum of
tax-equivalent net interest income plus noninterest income less
net securities gains.
Foreclosed Property- Assets acquired through foreclosure or deed
in lieu of foreclosure.
Fully Diluted Net Income Per Common Share- Computed by increasing
primary average common shares and common share equivalents by the
assumed conversion into common stock of all outstanding
convertible debt instruments. Net income for fully diluted net
income per share is adjusted for interest expense and amortization
of origination costs, net of related tax effects, on these
convertible debt instruments, and preferred stock dividends.
GAP- The amount by which interest-sensitive assets exceed
interest-sensitive liabilities for a designated time period is
referred to as a positive GAP. An excess of liabilities would
represent a negative GAP.
Interest Bearing Liabilities- Liabilities upon which interest is
paid for the use of funds, such as savings and time deposits,
short-term borrowings and long-term debt.
Interest Sensitive Assets/Liabilities- Interest earning assets and
interest bearing liabilities whose yields and rates vary within a
specific time period, due to either maturity or in association
with market interest rates.
Leverage Capital Ratio- Tier 1 capital divided by total assets
less intangible assets.
Liquidity- The ability of a corporation to generate adequate funds
to meet its cash flow requirements.
Loan Loss Reserve Coverage Ratio- The reserve for loan losses
divided by nonperforming loans.
Net Interest Income- Net interest income is the difference between
the interest income received from investments, loans and other
interest earning assets and the interest paid to depositors and
others. Net interest income is the principal source of both
earnings and profitability.
Net Interest Margin- A measurement of how effectively the bank
utilizes its earning assets in relationship to the interest cost
of funding them. It is computed by dividing tax-equivalent net
interest income by average interest earning assets.
Nonaccrual Loans- Loans on which interest accruals have been
discontinued due to the borrower's financial difficulties.
Interest income on these loans is reported on the cash basis as it
is collected.
Nonperforming Loans- The total of nonaccrual loans, loans past due
90 days or more and restructured loans.
Nonperforming Assets- The sum of nonperforming loans and
foreclosed property.
Noninterest Expense- Noninterest expense includes employee
compensation and other benefits, net occupancy, equipment, FDIC
insurance premiums and other operating expenses.
Noninterest Income- Noninterest income includes service charges on
deposit accounts, trust revenues, other fee income associated with
products and services and net securities gains.
Operating Income- Tax-equivalent net interest income plus
noninterest income, excluding net securities gains.
Primary Net Income Per Common Share- Net income after deduction of
preferred stock dividends divided by the weighted average number
of common shares and common share equivalents (which consist of
common stock options) outstanding.
Provision for Loan Losses- A charge to operations which appears on
the bank's statement of operations. This charge increases the
reserve for loan losses and decreases net income.
Reserve for Loan Losses- A valuation reserve for possible loan
losses. This reserve represents the amount considered by
management to be adequate to cover estimated losses inherent in
the loan portfolio.
Restructured Loans- A loan is considered restructured when a bank
for economic or legal reasons related to the debtor's financial
difficulties grants a concession to the debtor that it would not
otherwise consider.
Return on Average Assets (ROA)- A measure of profitability that
indicates how effectively a bank utilizes its assets to generate
net income and net income per share. ROA is calculated by
dividing net income by average assets.
Return on Average Equity (ROE)- A measure of profitability that
indicates what the bank earned on its stockholders' investment.
ROE is calculated by dividing net income by total average
stockholders' equity.
Risk-Adjusted Assets- Total balance sheet assets and off-balance
sheet items adjusted by assigning risk weightings in accordance
with the Federal Reserve Board's Risk-Based Capital Guidelines for
assessing capital adequacy.
Risk-Based Capital- A risk-based capital measure for assessing
capital adequacy that takes into account the broad differences in
risks among a banking organization's assets and off-balance sheet
items.
Tax-Equivalent Net Interest Income- The difference between
interest earned on assets and interest paid on liabilities, with
adjustments made to present yields on tax-exempt assets as if such
income was fully taxable.
Tier 1 Capital- Tier 1 capital consists principally of
stockholders' equity less goodwill and deposit base intangibles.
Total Capital- The sum of Tier 1 capital plus certain debt
instruments and a portion of the reserve for loan losses.
16
<PAGE> 19
MAGNA
GROUP, INC.
1995 FINANCIAL REVIEW
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
Five Year Selected Financial Data 18
Management's Discussion 19
Consolidated Statements of Income 37
Consolidated Balance Sheets 38
Consolidated Statements of Changes
in Stockholders' Equity 39
Consolidated Statements of Cash Flows 40
Notes to Consolidated Financial Statements 41
Report of Independent Auditors 53
Quarterly Financial Information 54
</TABLE>
<PAGE> 20
<TABLE>
FIVE YEAR SELECTED FINANCIAL DATA
<CAPTION>
(In thousands, except per share data) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS
Interest income $347,168 $289,561 $244,288 $274,312 $197,714
Interest expense 164,317 116,742 99,025 127,539 108,627
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income 182,851 172,819 145,263 146,773 89,087
Provision for loan losses 9,992 4,900 9,589 20,544 29,468
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 172,859 167,919 135,674 126,229 59,619
Noninterest income 47,863 47,503 45,840 38,184 21,936
Noninterest expense 146,217 150,213 131,321 129,767 78,127
- ----------------------------------------------------------------------------------------------------------------------------
Income before income taxes, extraordinary item and
cumulative effect of a change in accounting principle 74,505 65,209 50,193 34,646 3,428
Income tax expense (benefit) 23,283 20,179 12,706 5,539 (410)
- ----------------------------------------------------------------------------------------------------------------------------
Income before extraordinary item and cumulative
effect of a change in accounting principle 51,222 45,030 37,487 29,107 3,838
Extraordinary item less applicable tax and
cumulative effect of a change in accounting principle - - - 1,085 -
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 51,222 $ 45,030 $ 37,487 $ 30,192 $ 3,838
============================================================================================================================
PER COMMON SHARE
Primary net income before extraordinary item
and cumulative effect adjustment $ 1.84 $ 1.69 $ 1.53 $ 1.36 $ .28
Extraordinary item and cumulative effect adjustment - - - .05 -
- ----------------------------------------------------------------------------------------------------------------------------
Net income 1.84 1.69 1.53 1.41 .28
- ----------------------------------------------------------------------------------------------------------------------------
Fully diluted net income before extraordinary item
and cumulative effect adjustment 1.80 1.66 1.50 1.33 .28
Extraordinary item and cumulative effect adjustment - - - .05 -
- ----------------------------------------------------------------------------------------------------------------------------
Net income 1.80 1.66 1.50 1.38 .28
- ----------------------------------------------------------------------------------------------------------------------------
Dividends declared .80 .76 .72 .68 .68
Book value 15.93 13.49 14.02 13.39 12.72
============================================================================================================================
BALANCE SHEET DATA
Total assets $4,947,499 $4,638,502 $4,128,462 $3,728,525 $3,777,304
Securities 1,364,864 1,217,174 1,213,673 1,088,410 932,670
Total loans 3,202,766 2,968,201 2,564,466 2,272,180 2,479,163
Reserve for loan losses 42,623 43,991 40,065 38,194 55,976
Total deposits 3,888,266 3,672,755 3,494,825 3,224,661 3,334,623
Long-term debt 93,071 104,453 32,062 35,195 35,932
Stockholders' equity 446,044 371,312 360,649 322,295 249,640
Average common shares outstanding:
Primary 27,892 26,657 24,495 21,304 13,657
Fully diluted 29,524 28,320 26,233 23,162 14,774
Common shares outstanding 27,998 27,512 25,729 24,074 19,471
============================================================================================================================
SELECTED RATIOS
Return on average assets 1.09% 1.05% 1.02% .81% .17%
Return on average equity 12.57 12.41 11.25 10.88 2.04
Net interest margin 4.30 4.49 4.45 4.47 4.56
Efficiency ratio 62.11 66.69 67.98 68.23 67.17
Net loan charge-offs to average loans .37 .14 .59 1.59 1.23
Loan reserve to total loans 1.33 1.48 1.56 1.68 2.26
Loan reserve to nonperforming loans 138.30 119.21 78.49 57.87 52.42
Nonperforming loan ratio .96 1.24 1.99 2.90 4.31
Nonperforming assets to total loans and
foreclosed property 1.12 1.48 2.37 3.35 5.03
Average stockholders' equity to average total assets 8.66 8.48 9.06 7.47 8.34
Leverage capital ratio 8.64 8.29 8.17 8.00 6.07
Tier 1 capital to risk-adjusted assets 13.06 12.79 12.81 12.30 8.87
Total capital to risk-adjusted assets 14.29 14.07 14.10 13.59 10.21
Dividend payout ratio 43.48 44.97 47.06 48.23 242.86
============================================================================================================================
</TABLE>
18
<PAGE> 21
MANAGEMENT'S DISCUSSION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL OVERVIEW
Net income for 1995 was $51.2 million compared with $45.0 million
for 1994 and $37.5 million for 1993. This represents a return on
assets (ROA) of 1.09% in 1995, 1.05% in 1994 and 1.02% in 1993.
Net income per share, on a primary basis, for 1995 increased to
$1.84 per share from $1.69 in 1994 and $1.53 in 1993.
Total assets at year-end 1995 increased to $4.95 billion compared
with $4.64 billion at year-end 1994 primarily as a result of an
increase in the volume of loans and investment securities. These
increases were funded by an increase in deposits, primarily time
deposits.
On February 29, 1996, Magna completed the acquisition of River
Bend Bancshares, Inc. for approximately 550,000 shares of common
stock and approximately $12.3 million in cash. The acquisition is
being accounted for as a purchase. Total assets of River Bend
Bancshares, Inc. as of the acquisition date were approximately
$160 million.
During 1994, Magna completed the acquisitions of The First
National Bank in Madison, Goreville Bancorporation, Inc. and Bank
of Chesterfield through the issuance of 1,603,283 shares of common
stock. These transactions contributed approximately $186 million
of total assets and were accounted for as poolings-of-interests.
In the fourth quarter of 1993, Magna completed the acquisitions of
Mega Bancshares, Inc., City Bancorp, Inc., MGI Group, Inc. and
InBank Group, Inc. through the issuance of 1,506,621 shares of
common stock. These acquisitions contributed approximately $236
million of total assets and were accounted for as
poolings-of-interests. Magna also acquired $184 million of assets
and assumed $200 million of deposits and liabilities of Community
Bank of Greater Peoria in a purchase transaction.
Prior periods were not restated for the 1994 and 1993 acquisitions
due to immateriality in relation to Magna's consolidated financial
statements. See the Notes to the Consolidated Financial Statements
for additional information pertaining to acquisitions.
Nonperforming assets declined 18.8% to $35.8 million at year-end
1995 from $44.1 million at year-end 1994. The ratio of
nonperforming assets to total assets declined to .72% at year-end
1995 from .95% at year-end 1994. The ratio of nonperforming assets
to total loans and foreclosed property declined to 1.12% at
year-end 1995 from 1.48% at year-end 1994. Nonperforming loans
declined to $30.8 million at year-end 1995 from $36.9 million at
year-end 1994. This reduction in nonperforming loans led to a
decline in the ratio of nonperforming loans to total loans to
.96% at year-end 1995 from 1.24% at year-end 1994.
The following paragraphs more fully discuss Magna's results of
operations, financial condition and capital resources and
liquidity during the three-year period ended December 31, 1995.
This discussion should be read in conjunction with the
Consolidated Financial Statements and the notes thereto which are
included elsewhere in this report.
RESULTS OF OPERATIONS
Net Interest Income
Tax-equivalent net interest income increased $10.0 million, or
5.6%, to $187.9 million in 1995 from $177.9 and $150.7 million in
1994 and 1993, respectively. The increase in 1995 was primarily
attributable to a higher level of earning assets offset by a
reduced net interest margin. The increase in the level of earning
assets was mainly the result of increased loan demand. The
increase in 1994 was primarily attributable to a higher level of
earning assets combined with a slightly higher net interest
margin.
Table 1 sets forth Magna's average balance sheets for the last
five years, the percentage of each principal category of assets,
liabilities and stockholders' equity to total assets, the interest
income and expense associated with such categories of interest
earning assets and interest bearing liabilities, and the average
yields and rates on such categories.
Net interest income is the largest component of earnings and is
affected by the volume of the sources and uses of funds, the
respective rates earned and paid on those funds and the mix of
those funds. Table 2 sets forth the volume and rate variances that
affected net interest income.
19
<PAGE> 22
MANAGEMENT'S DISCUSSION
<TABLE>
TABLE 1 -- Distribution of Average Assets, Liabilities and
Stockholders' Equity and Interest Rate Information
<CAPTION>
-------------------------------------------------------------------------------------------
1995 1994
-------------------------------------------------------------------------------------------
Percent Interest Average Percent Interest Average
Average of Total Income/ Yield/ Average of Total Income/ Yield/
(In thousands) Balance Assets Expense Rate Balance Assets Expense Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans<F1><F2> $3,088,168 65.63% $267,809 8.67% $2,723,878 63.63% $221,051 8.12%
Taxable securities 1,145,976 24.35 71,853 6.27 1,118,965 26.14 61,970 5.54
Non-taxable securities<F2> 108,450 2.31 10,670 9.84 108,068 2.53 11,046 10.22
Federal funds sold and
repurchase agreements 31,391 .67 1,903 6.06 11,611 .27 564 4.86
- -------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 4,373,985 92.96 352,235 8.05 3,962,522 92.57 294,631 7.44
- -------------------------------------------------------------------------------------------------------------------------------
Noninterest earning assets:
Cash and due from banks 163,781 3.48 152,206 3.56
Premises and equipment 79,212 1.68 69,568 1.63
Other assets 131,782 2.80 137,594 3.21
Reserve for loan losses (43,426) (.92) (41,347) (.97)
- -------------------------------------------------------------------------------------------------------------------------------
Total Assets $4,705,334 100.00% $4,280,543 100.00%
===============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing demand deposits $ 520,785 11.07% 9,547 1.83 $ 536,857 12.54% 10,345 1.93
Savings and market rate deposits 845,458 17.97 25,179 2.98 1,003,872 23.45 26,818 2.67
Time deposits 1,884,164 40.04 103,299 5.48 1,490,847 34.83 63,521 4.26
Short-term borrowings 391,789 8.32 20,233 5.16 230,638 5.39 9,202 3.99
Long-term debt 79,828 1.70 6,059 7.59 96,289 2.25 6,856 7.12
- -------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 3,722,024 79.10 164,317 4.41 3,358,503 78.46 116,742 3.48
- -------------------------------------------------------------------------------------------------------------------------------
Noninterest bearing liabilities:
Demand deposits 515,461 10.96 506,889 11.84
Other liabilities 60,319 1.28 52,369 1.22
- -------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 4,297,804 91.34 3,917,761 91.52
Stockholders' Equity 407,530 8.66 362,782 8.48
- -------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $4,705,334 100.00% $4,280,543 100.00%
===============================================================================================================================
Net interest income $187,918 $177,889
===============================================================================================================================
Interest rate spread 3.64% 3.96%
===============================================================================================================================
Net interest margin 4.30% 4.49%
===============================================================================================================================
<FN>
- -------------------
<F1>For purposes of these computations, nonaccrual loans are included in the daily average loan amounts outstanding; interest
on nonaccrual loans is recorded when received.
<F2>Information presented on a tax-equivalent basis assuming a tax rate of 35% for 1995, 1994 and 1993 and 34% for 1992 and
1991. The tax-equivalent adjustment amounted to approximately $5,067, $5,070, $5,451, $6,386 and $6,055, for 1995, 1994,
1993, 1992 and 1991, respectively.
</TABLE>
20
<PAGE> 23
MANAGEMENT'S DISCUSSION
<TABLE>
<CAPTION>
Year Ended December 31
- --------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
Percent Interest Average Percent Interest Average Percent Interest Average
Average of Total Income/ Yield/ Average of Total Income/ Yield/ Average of Total Income/ Yield/
Balance Assets Expense Rate Balance Assets Expense Rate Balance Assets Expense Rate
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2,286,299 62.19% $186,997 8.18% $2,360,795 63.54% $207,811 8.80% $1,432,703 63.52% $147,720 10.31%
963,988 26.22 50,290 5.22 896,916 24.14 58,071 6.47 476,806 21.14 38,711 8.12
103,636 2.82 11,486 11.08 117,649 3.17 12,933 10.99 135,087 5.99 14,990 11.10
32,793 .90 966 2.95 50,147 1.35 1,883 3.75 41,163 1.83 2,348 5.70
- --------------------------------------------------------------------------------------------------------------------------------
3,386,716 92.13 249,739 7.37 3,425,507 92.20 280,698 8.19 2,085,759 92.48 203,769 9.77
- --------------------------------------------------------------------------------------------------------------------------------
145,640 3.96 140,168 3.77 84,192 3.73
66,621 1.81 69,214 1.86 45,064 2.00
116,240 3.16 127,956 3.44 58,564 2.60
(39,135) (1.06) (47,370) (1.27) (18,177) (.81)
- --------------------------------------------------------------------------------------------------------------------------------
$3,676,082 100.00% $3,715,475 100.00% $2,255,402 100.00%
================================================================================================================================
$ 452,471 12.31% 9,521 2.10 $ 407,739 10.97% 11,823 2.90 $ 224,019 9.93% 9,799 4.37
887,617 24.15 24,809 2.80 857,705 23.08 30,900 3.60 423,589 18.78 20,930 4.94
1,358,336 36.95 57,792 4.25 1,545,915 41.61 76,598 4.95 1,057,950 46.91 72,620 6.86
110,782 3.02 3,111 2.81 84,810 2.28 2,814 3.32 68,938 3.05 3,553 5.15
33,136 .90 3,792 11.44 55,938 1.51 5,404 9.66 23,837 1.06 1,725 7.24
- --------------------------------------------------------------------------------------------------------------------------------
2,842,342 77.33 99,025 3.48 2,952,107 79.45 127,539 4.32 1,798,333 79.73 108,627 6.04
- --------------------------------------------------------------------------------------------------------------------------------
451,935 12.29 427,121 11.50 241,863 10.72
48,590 1.32 58,802 1.58 27,212 1.21
- --------------------------------------------------------------------------------------------------------------------------------
3,342,867 90.94 3,438,030 92.53 2,067,408 91.66
333,215 9.06 277,445 7.47 187,994 8.34
- --------------------------------------------------------------------------------------------------------------------------------
$3,676,082 100.00% $3,715,475 100.00% $2,255,402 100.00%
================================================================================================================================
$150,714 $153,159 $ 95,142
================================================================================================================================
3.89% 3.87% 3.73%
================================================================================================================================
4.45% 4.47% 4.56%
================================================================================================================================
</TABLE>
21
<PAGE> 24
MANAGEMENT'S DISCUSSION
<TABLE>
TABLE 2 -- Volume and Rate Variance
<CAPTION>
1995 Compared with 1994 1994 Compared with 1993
Increase (Decrease) Due to<F1> Increase (Decrease) Due to<F1>
-------------------------------------------------------------------
(In thousands) Volume Rate Net Volume Rate Net
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans<F2> $30,825 $15,933 $46,758 $35,440 $(1,386) $34,054
Taxable securities 1,530 8,353 9,883 8,455 3,225 11,680
Non-taxable securities<F2> 6 (382) (376) 477 (917) (440)
Federal funds sold and
repurchase agreements 1,172 167 1,339 (875) 473 (402)
- ------------------------------------------------------------------------------------------------------------
Total interest earning assets 33,533 24,071 57,604 43,497 1,395 44,892
- ------------------------------------------------------------------------------------------------------------
Interest paid on:
Interest bearing demand deposits (292) (506) (798) 1,647 (823) 824
Savings and market rate deposits (4,530) 2,891 (1,639) 3,187 (1,178) 2,009
Time deposits 19,074 20,704 39,778 5,591 138 5,729
Short-term borrowings 7,770 3,261 11,031 4,388 1,703 6,091
Long-term debt (1,228) 431 (797) 4,946 (1,882) 3,064
- ------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 20,794 26,781 47,575 19,759 (2,042) 17,717
- ------------------------------------------------------------------------------------------------------------
Net interest income $12,739 $(2,710) $10,029 $23,738 $ 3,437 $27,175
============================================================================================================
<FN>
- ------------------
<F1>The change in interest due to both rate and volume has been allocated to rate and volume changes in
proportion to the relationship of the absolute dollar amounts of the change in each.
<F2>Presented on a tax-equivalent basis assuming a tax rate of 35% for 1995 and 1994. The tax-equivalent
adjustment relating to the change in interest income was a decrease of $3 for 1995 compared with 1994
and a decrease of $381 for 1994 compared with 1993.
</TABLE>
During 1995, the average volume of interest earning assets
increased $411 million compared with 1994, resulting in an
increase in tax-equivalent interest income of $33.5 million. These
increases were principally attributable to increased loan demand.
Changes in yields on the average volume of interest earning assets
increased tax-equivalent interest income by $24.1 million. The
tax-equivalent yield on the loan portfolio increased 55 basis
points in 1995 as the result of a slightly higher rate
environment, particularly in the commercial and real estate loan
portfolios. Many of the loans in these categories reprice upward
or downward as the prime lending rate changes and generally
reprice to the same extent. The prime lending rate increased
steadily from the beginning of 1994 through the second quarter of
1995 and declined slightly over the remainder of the 1995 year.
The increase in the yield on taxable securities was primarily a
result of a decreased level of prepayments on mortgage backed
securities and a general increase in the interest rates earned on
variable rate securities.
The average volume of interest bearing liabilities increased $364
million in 1995 compared with 1994, and included increases of $219
million in average interest bearing deposits and $161 million in
average short-term borrowings. The increase in average short-term
borrowings is discussed under "Borrowings" and represented a
significant funding source for the increased level of loan demand.
The decrease in average long-term debt was principally the result
of a reclassification of a $35 million repurchase agreement from
long-term debt to repurchase agreements which was partially offset
by the procurement of a $25 million Federal Home Loan Bank
borrowing. Interest expense increased $20.8 million as a result of
the higher volume of interest bearing liabilities. The average
cost of funds on total interest bearing liabilities increased 93
basis points during 1995, principally due to increased competition
in the market place to secure deposits. Interest expense increased
$26.8 million as a result of the increased cost of funds. A slight
reduction in rates paid on interest bearing demand deposits was
offset by increased rates paid on all other categories of interest
bearing liabilities.
During 1995, Magna's net interest margin was 4.30% compared with
4.49% and 4.45% in 1994 and 1993, respectively. The increase in
the overall cost of funds associated with interest bearing
liabilities was greater than the increase in the yields on earning
assets which
22
<PAGE> 25
MANAGEMENT'S DISCUSSION
resulted in a negative impact on the net interest margin. This
reduction in net interest margin was directly impacted by
continued competitive pricing for both loans and deposits.
Provision for Loan Losses
The provision for loan losses reflects management's judgment of
the cost associated with credit risk inherent in the loan
portfolio. The provision for loan losses charged to expense in
1995 increased to $10.0 million compared with $4.9 million and
$9.6 million in 1994 and 1993, respectively. Factors which
influence management's determination of the provision for loan
losses include, among other things, evaluation of the anticipated
impact on the loan portfolio of current economic conditions,
changes in the character and size of the portfolio and past loan
loss experience. Magna has established comprehensive credit
policies and risk rating processes which address the individual
risk and return characteristics associated with the loans in the
portfolio. The increase in the provision in 1995 was primarily
related to a higher level of commercial loan net charge-offs
coupled with overall growth in the loan portfolio. The reduction
in the provision in 1994 compared to 1993 was primarily
attributable to a decrease in nonperforming loans and net
charge-offs, as well as improvement in the loan loss reserve
coverage ratio. The reduced level of net charge-offs in 1994 was
principally the result of large recoveries recorded during that
year. Activity in the reserve for loan losses and nonperforming
loan data are presented and discussed under "ASSET QUALITY."
Noninterest Income
Excluding net securities gains, noninterest income for 1995 was
$47.5 million compared with $47.3 million and $40.7 million in
1994 and 1993, respectively. Total noninterest income as a
percentage of average assets was 1.02%, 1.11% and 1.25% for 1995,
1994 and 1993, respectively. Total noninterest income, excluding
net securities gains, to operating income was 20.18%, 21.02% and
21.27% for 1995, 1994 and 1993, respectively.
Table 3 sets forth information pertaining to the major components
of noninterest income.
<TABLE>
TABLE 3 -- Noninterest Income
<CAPTION>
Year Ended December 31
-------------------------------
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Service charges on deposits $22,487 $21,945 $18,020
Trust 8,638 9,063 8,307
Credit card 5,801 4,665 4,454
Brokerage and investment
services income 2,361 2,726 276
Other income 8,220 8,946 9,661
Securities gains, net 356 158 5,122
- ------------------------------------------------------------------------
Total noninterest income $47,863 $47,503 $45,840
========================================================================
</TABLE>
Service charges on deposits, the largest component of noninterest
income, consist of fees on both interest bearing and noninterest
bearing accounts and charges for other items, including
insufficient funds, overdrafts and stop payment requests. Service
charges on deposits increased in 1995 primarily due to higher
levels of automatic teller machine (ATM) fees, increased service
charges associated with one of Magna's package checking account
products and its corporate cash management products.
The decrease in income from trust services during 1995 relates
principally to the loss of one custodial account relationship in
January, 1995. This account, with custodial assets of $2.6 billion
at December 31, 1994, generated fee income during 1994 of $.8
million. Magna Trust Company had custodial assets and assets under
management of $1.9 billion, $4.2 billion and $4.1 billion at
December 31, 1995, 1994 and 1993, respectively.
The increase in credit card income was primarily the result of
growth in merchant related fees due to new merchant business. This
new merchant business was derived from Magna's increased sales
efforts combined with expansion of business activities associated
with existing merchants.
Brokerage and investment services income is comprised of
commissions derived from the sale of stocks, bonds, mutual funds,
annuities and other investment vehicles. During 1995, brokerage
and investment services income decreased $.4 million.
Other noninterest income includes such items as safe-deposit box
rental fees, interchange fees on ATM transactions, income from
foreclosed properties and fees from mortgage banking operations.
The decrease in 1995 was primarily the result of a reduction in
income from foreclosed properties as the level of foreclosed
properties was reduced during the year.
23
<PAGE> 26
MANAGEMENT'S DISCUSSION
Net securities gains in 1995 and 1994 remained at modest levels.
The net securities gains in 1993 resulted primarily from actions
taken to improve Magna's interest sensitivity position and to
provide flexibility for implementation of Magna's asset/liability
management.
Noninterest Expense
Noninterest expense decreased $4.0 million, or 2.7%, to $146.2
million in 1995 compared with $150.2 million and $131.3 million in
1994 and 1993, respectively. The decrease in 1995 from 1994 was
mainly due to reductions in employee compensation and other
benefits, FDIC insurance premiums and other operating expenses.
The increase in 1994 was primarily attributable to acquisitions
completed during 1994 and 1993. The efficiency ratio, a key
indicator of the control of noninterest expense, improved
throughout 1995 as the acquired entities were assimilated into
Magna's organization and consolidation of certain back-office
operations continued. The efficiency ratio for the year ended
December 31, 1995 was 62.1% compared with 66.7% and 68.0% for the
years ended December 31, 1994 and 1993, respectively. During the
last half of 1995, the efficiency ratio fell below 60%.
Noninterest expense as a percentage of average assets was 3.11%,
3.51% and 3.57% for 1995, 1994 and 1993, respectively.
Table 4 sets forth information regarding the major components of
noninterest expense.
<TABLE>
TABLE 4 -- Noninterest Expense
<CAPTION>
Year Ended December 31
--------------------------------
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Employee compensation
and other benefits $ 72,993 $ 73,545 $ 63,683
Net occupancy 17,677 15,748 13,621
Equipment 8,967 8,974 7,989
FDIC insurance premiums 4,342 8,079 7,644
Other 42,238 43,867 38,384
- ------------------------------------------------------------------------
Total noninterest expense $146,217 $150,213 $131,321
========================================================================
</TABLE>
The decrease in employee compensation and other benefits in 1995
was directly the result of staff reductions and continued efforts
to consolidate back-office operations. The increase in employee
compensation and other benefits in 1994 was attributable to
consummated acquisitions, normal merit increases and increases in
other benefits, partially offset by staff reductions associated
with consolidation of certain back-office operations. As Magna
continues to achieve efficiencies in back-office operations and as
a result of the merger of Magna's banking subsidiaries in the
fourth quarter of 1995, additional staff reductions were made
shortly after year-end 1995, the benefits from which will be
realized in 1996 and subsequent years.
The increase in net occupancy expense in 1995 was primarily due to
relocation costs and other direct expenses associated with Magna's
new operations center which was placed in service during the
second quarter of 1995. The operations center, which is located in
Belleville, Illinois, houses data and check processing, loan
administration and more than a dozen other back-office functions
previously housed in separate offices. This center will enable
Magna to gain operating efficiencies, thereby reducing future
overhead costs while continuing to enhance customer service
levels. The increase in net occupancy and equipment expenses in
1994 was attributable to consummated acquisitions.
Federal Deposit Insurance Corporation (FDIC) premiums include
assessments levied in connection with the Bank Insurance Fund
(BIF) and the Savings Association Insurance Fund (SAIF). A
reduction in the BIF deposit assessment rate announced in the
third quarter of 1995, retroactive to June 1, 1995, resulted in a
reduction in expense to $4.3 million in 1995 from $8.1 million in
1994. The increase in FDIC insurance premiums in 1994 was
attributable to the consummated acquisitions. Assuming the FDIC
levies no special assessments and does not further modify the
deposit assessment rate structure, Magna's FDIC insurance premiums
should not exceed $.2 million during 1996, based upon current
deposit levels and the mix of those deposits.
The decrease in other noninterest expense in 1995 was mainly the
result of continued efforts to control internal costs by
consolidating back-office operations and through efforts to
control costs associated with general operations. The increase in
other noninterest expense in 1994 was primarily due to consummated
acquisitions, partially offset by cost savings associated with the
back-office consolidation and other internal cost reductions.
Magna recorded income tax expense of $23.3 million in 1995
compared with $20.2 million in 1994 and $12.7 million in 1993.
Income tax expense in 1995 included a $.9 million non-recurring
benefit. This benefit resulted from the elimination of valuation
allowances on certain federal and state net operating loss
carryforwards which management believes are now more likely than
not to be realizable. In 1993, income tax expense was reduced by a
$1.3 million non-recurring benefit related to the elimination of
valuation allowances against certain deferred state tax assets.
24
<PAGE> 27
MANAGEMENT'S DISCUSSION
Magna's effective income tax rate was 31.3% in 1995, 30.9% in 1994
and 25.3% in 1993. Excluding the effects of the non-recurring tax
benefit in 1995, the increase in the effective tax rate for that
year primarily resulted from generally higher levels of earnings
coupled with reduced levels of tax-exempt interest as a percentage
of total interest income. As required under Financial Accounting
Standards No. 109 (FAS No. 109), "Accounting for Income Taxes,"
management evaluates, on a continuing basis, the realizability of
Magna's deferred tax asset and the need for an offsetting
valuation allowance. Accordingly, changes to the valuation
allowance could affect Magna's effective tax rate in future
periods.
FINANCIAL CONDITION
General
Total assets at year-end 1995 increased $309 million, or 6.7%, to
$4.95 billion compared with $4.64 billion at year-end 1994. This
increase in total assets primarily resulted from an increase in
the volume of loans and investment securities.
Loans
Total loans represented 70.6%, 68.7% and 67.5% of average interest
earning assets during 1995, 1994 and 1993, respectively. Loans,
net of unearned income, increased 7.9% to $3.20 billion at
year-end 1995 from $2.97 billion at year-end 1994. The growth in
1995 was attributable to internal loan volume stimulated by
economic conditions.
Table 5 presents the composition of the loan portfolio by type of
borrower and major loan category and the percentage of each to the
total portfolio for the periods presented.
Magna's commercial, financial and agricultural loan portfolio is
widely diversified and includes loans secured by non-real estate
collateral to manufacturers, distributors, retailers, service
providers, investors and farmers. Loans in the commercial,
financial and agricultural category average less than $.1 million
in size. The borrowers are generally located in the communities
served by Magna's banking centers.
The commercial real estate loan portfolio generally consists of
loans to borrowers located in the communities served by Magna's
banking centers to fund the acquisition of buildings and real
estate for commercial, industrial, office and retail use. A
significant portion of the commercial real estate loan portfolio
is comprised of traditional commercial loans with real estate
taken as additional collateral. Tax-exempt industrial revenue
bonds represent a small part of the commercial real estate
portfolio.
The construction loan portfolio includes loans for the
construction of 1-4 family residential properties and commercial
properties such as medical and business offices, retail centers,
warehouses and multi-family (5 or more family) residential
developments.
<TABLE>
TABLE 5 -- Loan Portfolio
<CAPTION>
December 31
----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------------------------------------
(In thousands) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL BORROWERS:
Commercial, financial
and agricultural $ 593,664 18.5% $ 492,538 16.6% $ 468,161 18.3% $ 426,906 18.8% $ 543,376 21.9%
Commercial real estate 996,464 31.1 932,553 31.4 858,898 33.5 795,686 35.0 804,004 32.4
Real estate construction 156,978 4.9 130,734 4.4 103,672 4.0 79,294 3.5 106,819 4.3
- ------------------------------------------------------------------------------------------------------------------------
Total commercial 1,747,106 54.5 1,555,825 52.4 1,430,731 55.8 1,301,886 57.3 1,454,199 58.6
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER BORROWERS:
1-4 family residential
real estate 934,826 29.2 903,082 30.4 748,936 29.2 662,277 29.1 706,219 28.5
Other consumer loans,
net of unearned income 520,834 16.3 509,294 17.2 384,799 15.0 308,017 13.6 318,745 12.9
- ------------------------------------------------------------------------------------------------------------------------
Total consumer 1,455,660 45.5 1,412,376 47.6 1,133,735 44.2 970,294 42.7 1,024,964 41.4
- ------------------------------------------------------------------------------------------------------------------------
Total loans $3,202,766 100.0% $2,968,201 100.0% $2,564,466 100.0% $2,272,180 100.0% $2,479,163 100.0%
========================================================================================================================
</TABLE>
25
<PAGE> 28
MANAGEMENT'S DISCUSSION
Residential mortgage loans typically are secured by first
mortgages on the properties financed and are generally limited to
80% of appraised value. These loans carry a fixed or floating rate
of interest and typically are fully amortized over periods not
exceeding 30 years. This category also includes closed-end second
mortgage loans and home equity lines of credit. Closed-end second
mortgage loans generally bear a fixed rate of interest over a
three to five year term with a five to fifteen year amortization,
while home equity lines of credit generally have an interest rate
indexed to the prime rate.
Consumer loans primarily include loans to individuals for the
purchase of automobiles, boats, recreational vehicles and home
improvements. Consumer loans are typically structured with fixed
interest rates and full amortization of principal and interest
within three to five years. In addition, this category includes
revolving credit products such as checking overdraft protection,
and MasterCard and Visa credit cards. Magna has realized
significant growth, during recent years, in its indirect auto loan
program, which targets automobile buyers through local auto
dealers. The volume of loans generated from this program averaged
$16.6 million per month during 1995 compared to $19.9 million per
month for 1994. The reduction in volume from 1994 was a
consequence of some softening in the market for new automobiles,
coupled with the competitive environment associated with this line
of business.
The tax-equivalent yield on the average total loan portfolio
increased 55 basis points in 1995 compared with 1994 and was
relatively stable in 1994 compared with 1993. The general level of
interest rates earned increased during 1995 when compared with
1994. However, during the last half of 1995, interest rates
trended downward. As new loans are funded and existing loans renew
or reprice in this decreasing rate environment, the average yield
on the loan portfolio in the future periods should reflect the
lower rates earned. At December 31, 1995, 23.6% of Magna's total
loan portfolio had interest rates which could be adjusted
immediately, and an additional 27.2% could be repriced within a
one-year time period.
Table 6 sets forth the amount of loans outstanding as of December
31, 1995 which, based on remaining scheduled repayments of
principal, are due in the periods indicated. In addition, the
amounts due after one year are classified according to sensitivity
to changes in interest rates.
Securities
Investments in securities increased $147.7 million, or 12.1%, to
$1.36 billion at December 31, 1995. The increase in investment
securities primarily resulted from the purchases, net of sales and
maturities, in the available-for-sale category. Mark-to-market
adjustments in the available-for-sale category also contributed to
the increase.
Magna manages the quality and risk of investments through its
Funds Management Committee which recommends and monitors the
overall investment portfolio policy approved by Magna's Board of
Directors. Among other things, the investment portfolio policy
establishes guidelines for the level, type, quality and mix of
investments. With respect to securities purchased by Magna's
banking subsidiary, such policy does not permit, without the
specific approval of the Funds
<TABLE>
TABLE 6 -- Maturities and Sensitivities of Loans
<CAPTION>
December 31, 1995
Maturing
-------------------------------------------------
After One
In One Through After
(In thousands) Year or Less Five Years Five Years Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $333,567 $ 221,543 $ 38,554 $ 593,664
Commercial real estate 212,341 559,041 225,082 996,464
Real estate construction 91,542 51,733 13,703 156,978
1-4 family residential real estate 83,703 293,572 557,551 934,826
Other consumer loans 91,538 423,324 8,580 523,442
- ------------------------------------------------------------------------------------------------
$812,691 $1,549,213 $843,470 $3,205,374
================================================================================================
<CAPTION>
Interest Sensitivity
-------------------------------------------------
Predetermined Floating or Adjustable
Interest Rates Interest Rates
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Due after one year $1,525,211 $867,472
================================================================================================
</TABLE>
26
<PAGE> 29
MANAGEMENT'S DISCUSSION
Management Committee, purchases of obligations of states and
political subdivisions of the United States or purchases of
corporate bonds rated by either Moody's Rating Service or Standard
and Poor's Rating Service below "A".
Magna classifies investments in securities as available-for-sale,
held-to-maturity or trading based upon, among other things,
management's assessment of changes in interest rate risks and
Magna's financial position and liquidity, including its overall
asset/liability management strategy.
As a result of marking to market the available-for-sale investment
securities, stockholders' equity at December 31, 1995, reflected
net unrealized gains of $1.0 million, net of $.6 million in
deferred income taxes, compared to net unrealized losses at
December 31, 1994, of $35.9 million, net of $24.2 million in
deferred income taxes. This change was the result of decreases in
the overall interest rate environment at year-end 1995 compared to
year-end 1994. Approximately 46% of Magna's available-for-sale
portfolio consists of U. S. Treasury securities and securities
issued by U. S. Government agencies. An additional 47% consists of
mortgage backed securities, of which approximately 77% are backed
by U. S. Government agencies. Available-for-sale securities
increased $289.3 million, or 30.5%, to $1.24 billion at December
31, 1995 from $.95 billion at December 31, 1994. With the
exception of obligations of states and political subdivisions of
the United States, virtually all of Magna's securities are
classified as available-for-sale. The majority of new securities
purchased also are classified in the available-for-sale category.
During the fourth quarter of 1995, the Company implemented
provisions of the Financial Accounting Standards Board Special
Report (FAS Special Report), "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and
Equity Securities." Upon adoption, and in accordance with the
provisions of the FAS Special Report, the Company reassessed its
securities classifications, and based on the reassessment,
reclassified securities with a book value of approximately $136
million from held-to-maturity to available-for-sale.
Held-to-maturity securities decreased $141.6 million, or 52.9%, at
December 31, 1995 from year-end 1994. The majority of this
decrease related to those securities transferred to the
available-for-sale category during the fourth quarter of 1995.
Tables 7 and 8 set forth the composition of the held-to-maturity
and the available-for-sale securities portfolios, respectively,
for the last three years.
Table 9 sets forth the maturities and the weighted average yields
of each category of held-to-maturity and available-for-sale
securities at December 31, 1995 based upon expected cash flows of
such securities.
<TABLE>
TABLE 7 -- Held-to-Maturity Securities
<CAPTION>
December 31
--------------------------------
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury & U.S. Government agencies
& corporations $ 48,088 $142,760 $ -
State and municipal 74,396 110,409 112,842
Mortgage backed - 10,896 -
Other 3,764 3,764 -
- ------------------------------------------------------------------------------------
Total $126,248 $267,829 $112,842
====================================================================================
</TABLE>
<TABLE>
TABLE 8 -- Available-for-Sale Securities
<CAPTION>
December 31
----------------------------------
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury & U.S. Government agencies
& corporations $ 563,154 $429,595 $ 561,327
State and municipal 33,491 1,891 1,617
Mortgage backed 585,995 477,020 509,901
Other 55,976 40,839 27,986
- ------------------------------------------------------------------------------------
Total $1,238,616 $949,345 $1,100,831
====================================================================================
</TABLE>
27
<PAGE> 30
MANAGEMENT'S DISCUSSION
<TABLE>
TABLE 9 -- Securities' Maturities and Yields
<CAPTION>
December 31, 1995
Maturing
--------------------------------------------------------------------------------
In One After One Through After Five Through After
Year or Less Five Years Ten Years Ten Years
(In thousands) Amount Yield Amount Yield Amount Yield Amount Yield
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HELD-TO-MATURITY SECURITIES:
U.S. Treasury & U.S. Government
agencies & corporations $ - -% $ 48,088 5.40% $ - -% $ - -%
State and municipal<F1> - - 23,729 9.61 34,747 9.56 15,920 9.31
Other - - - - 3,764 9.50 - -
- ------------------------------------------------------------------------------------------------------------------
Total held-to-maturity - - 71,817 6.80 38,511 9.56 15,920 9.31
- ------------------------------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE SECURITIES:
U.S. Treasury & U.S. Government
agencies & corporations 77,255 4.86 399,221 5.60 86,678 5.88 - -
State and municipal<F1> 10,236 8.85 23,225 10.13 - - 30 16.58
Mortgage backed 11,350 7.48 335,327 6.70 187,495 6.34 51,823 7.07
Other 31,133 6.19 16,182 6.38 1,185 6.87 7,476 6.74
- ------------------------------------------------------------------------------------------------------------------
Total available-for-sale 129,974 5.72 773,955 6.22 275,358 6.20 59,329 7.03
- ------------------------------------------------------------------------------------------------------------------
Total securities $129,974 5.72% $845,772 6.27% $313,869 6.61% $75,249 7.52%
==================================================================================================================
<FN>
- ----------------------
<F1> Yields presented on a tax-equivalent basis assuming a tax rate of 35%.
</TABLE>
The weighted average yield on the taxable securities portfolio
increased 73 basis points to 6.27% in 1995 compared with 1994 and
increased 32 basis points to 5.54% in 1994 compared with 1993. The
increases in 1995 and 1994 were reflective of the overall rising
interest rate environment.
Average non-taxable securities totaled $108 million during 1995
and 1994, and totaled $104 million during 1993. The weighted
average tax-equivalent yield was 9.84%, 10.22% and 11.08% during
1995, 1994 and 1993, respectively. All of the non-taxable
securities held qualified for favorable tax treatment under the
interest expense disallowance rules of the Internal Revenue Code.
At year-end 1995, approximately 37% of the non-taxable securities
portfolio was invested in municipal bond issues originated within
the communities in which Magna's banking centers are located.
Available-for-sale securities included gross unrealized gains of
approximately $10.8 million and gross unrealized losses of
approximately $7.2 million at December 31, 1995. The estimated
market value of the securities classified as held-to-maturity was
$130 million, reflecting gross unrealized gains of $4.4 million
and gross unrealized losses of $.2 million at year-end 1995.
Magna's securities portfolio includes mortgage backed securities
with a market value of approximately $586 million, or 42.9% of the
portfolio. The weighted average maturity of the securities
portfolio based upon projected cash flows under the relevant
interest rate environment was 4.0 and 3.8 years at December 31,
1995 and 1994, respectively.
There were no outstanding trading account securities at year-end
1995 or 1994. Trading account activities were not significant to
Magna's results of operations in any year presented.
Average money market investments, consisting of federal funds sold
and interest bearing due from bank balances, were less than 1% of
interest earning assets during 1995, 1994 and 1993. Federal funds
sold, the principal component of money market investments, consist
of sales of funds in excess of the banking subsidiary's reserve
requirement to other financial institutions and generally have a
maturity of one day. During 1995 and 1994, consistent with the
overall rise in interest rates, the average yield on money market
investments increased 120 and 191 basis points, respectively.
Deposits
Interest earning assets are funded from a variety of sources. Each
source is monitored continuously to maintain an appropriate spread
between the yields on earning assets and rates paid for funding
sources. The primary source of funds are core deposits originating
within the various communities served by Magna's banking centers.
28
<PAGE> 31
MANAGEMENT'S DISCUSSION
Total deposits increased 5.9%, or $216 million, to $3.89 billion
at December 31, 1995 from $3.67 billion at December 31, 1994, and
represented 78.6% and 79.2% of total assets at such dates,
respectively. The upward movement in the interest rate environment
led to a decline in noninterest bearing deposits from December 31,
1994. The increase in interest bearing deposits resulted from a
higher rate environment along with Magna's decision to price
certain deposit categories, primarily time deposits, more
competitively within its market territory. In particular, Magna
featured a 21-month certificate of deposit which resulted in
balances of $383 million, as of December 31, 1995.
Table 10 sets forth the composition of the deposit portfolio for
the periods presented.
<TABLE>
TABLE 10 -- Deposit Portfolio
<CAPTION>
December 31
-------------------------------------------------------------------
1995 1994
-------------------------------------------------------------------
(In thousands) Amount Percent Amount Percent
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Noninterest bearing
demand deposits $ 570,262 14.7% $ 595,224 16.2%
Interest bearing
demand deposits 496,590 12.8 551,246 15.0
Savings and market
rate deposits 794,423 20.4 920,611 25.1
Time deposits less
than $100,000 1,674,305 43.0 1,396,027 38.0
Time deposits $100,000
or more 352,686 9.1 209,647 5.7
- ---------------------------------------------------------------------------------------------------------
Total deposits $3,888,266 100.0% $3,672,755 100.0%
=========================================================================================================
</TABLE>
Average total deposits increased $227 million during 1995 and $388
million during 1994. The increase in 1995 was the result of normal
growth from operations while the increase in 1994 was primarily
the result of acquisitions. The demand deposit components of the
deposit portfolio remained relatively stable when comparing
average balances for 1995 with 1994. The upward shift in the
interest rate environment, along with Magna's decision to price
competitively, led to the increase in the time deposit component
of the deposit portfolio when comparing average balances for 1995
with 1994. Management of Magna believes that those factors also
led to the movement of balances from the more liquid savings and
market rate deposit categories into the time deposit category.
Table 11 sets forth the major categories of average deposits and
the weighted average interest rates paid on such categories for
the last three years, and Table 12 sets forth the amount and
maturities of time deposits of $100,000 or more at year-end 1995.
Borrowings
Total borrowings amounted to $554 million at year-end 1995, an
increase of $13 million from $541 million at year-end 1994. Table
13 sets forth the composition of borrowings for the periods
presented.
<TABLE>
TABLE 11 -- Average Deposits and Interest Rates
<CAPTION>
Year Ended December 31
-----------------------------------------------------------------
1995 1994 1993
-----------------------------------------------------------------
Average Average Average
(In thousands) Balance Rate Balance Rate Balance Rate
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Noninterest bearing demand deposits $ 515,461 -% $ 506,889 -% $ 451,935 -%
Interest bearing demand deposits 520,785 1.83 536,857 1.93 452,471 2.10
Savings and market rate deposits 845,458 2.98 1,003,872 2.67 887,617 2.80
Time deposits 1,884,164 5.48 1,490,847 4.26 1,358,336 4.25
- -------------------------------------------------------------------------------------------------------------------
Total deposits $3,765,868 3.67% $3,538,465 2.85% $3,150,359 2.92%
===================================================================================================================
</TABLE>
29
<PAGE> 32
MANAGEMENT'S DISCUSSION
<TABLE>
TABLE 12 -- Amount and Maturities of Time Deposits of $100,000 or More
<CAPTION>
December 31, 1995
----------------------------------------------
Time Other
Certificates Time
(In thousands) of Deposit Deposits Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3 months or less $131,345 $ 8,555 $139,900
Over 3 through 6 months 54,073 21,000 75,073
Over 6 through 12 months 71,480 - 71,480
Over 12 months 64,420 1,813 66,233
- ------------------------------------------------------------------------------------------
Total $321,318 $31,368 $352,686
==========================================================================================
</TABLE>
<TABLE>
TABLE 13 -- Borrowings
<CAPTION>
December 31
---------------------------------------------
1995 1994
---------------------------------------------
(In thousands) Amount Percent Amount Percent
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal funds purchased $ 41,790 7.6% $129,870 24.0%
Repurchase agreements 368,861 66.6 291,645 53.9
Other 50,000 9.0 15,000 2.8
- -------------------------------------------------------------------------------------------------
Total short-term borrowings 460,651 83.2 436,515 80.7
Long-term debt:
Parent Company:
7% Convertible Subordinated Capital Notes 14,440 2.6 16,373 3.0
8-3/4% Convertible Subordinated Debentures 14,958 2.7 14,344 2.7
- -------------------------------------------------------------------------------------------------
29,398 5.3 30,717 5.7
Banking Subsidiary:
Federal Home Loan Bank advances 63,500 11.5 38,500 7.1
Repurchase agreement maturing in 1996 - - 35,000 6.5
Other 173 - 236 -
- -------------------------------------------------------------------------------------------------
63,673 11.5 73,736 13.6
- -------------------------------------------------------------------------------------------------
Total long-term debt 93,071 16.8 104,453 19.3
- -------------------------------------------------------------------------------------------------
Total borrowings $553,722 100.0% $540,968 100.0%
=================================================================================================
</TABLE>
During 1995 average long-term debt decreased approximately $16
million from 1994. The decrease in average long-term debt was
primarily the result of a reclassification of a $35 million
long-term repurchase agreement from long-term debt to repurchase
agreements, partially offset by the procurement of a $25 million
Federal Home Loan Bank borrowing which was used as an additional
funding source for increased loan demand.
The weighted average rate of interest on long-term debt was 7.59%
in 1995, 7.12% in 1994 and 11.44% in 1993. The increase in the
weighted average rate of interest for 1995 compared with 1994 was
reflective of the upward trend in the interest rate environment.
Average short-term borrowings, consisting primarily of federal
funds purchased and repurchase agreements, increased $161 million
and $120 million during 1995 and 1994, respectively. These
borrowings serve as an alternative source of funds to deposit
funding sources. Approximately $145 million of the increase in
average short-term borrowings in 1995 was in the form of cash
management repurchase agreement accounts. Such accounts involve
the daily transfer of excess funds from a noninterest bearing
deposit account into the interest bearing cash management
repurchase agreement account. Although classified as a form of
short-term borrowing, management views the cash management
repurchase agreement accounts as a source of funds
30
<PAGE> 33
MANAGEMENT'S DISCUSSION
from its commercial depositors. The balance of the increase in
average short-term borrowings in 1995 was primarily due to a
decrease in federal funds purchased offset by an increase in
repurchase agreements that were not in the form of cash management
repurchase agreement accounts. Federal funds purchased are sources
of funds utilized primarily by Magna's banking subsidiary which
purchases excess funds from its network of approximately 160
correspondent banks. Repurchase agreements other than cash
management repurchase agreements generally represent an
alternative to short-term certificates offered to Magna's
commercial customer base. During 1995, these repurchase agreements
also included a $35 million repurchase agreement with the Federal
Home Loan Bank that was transferred from long-term debt as a
result of its 1996 maturity date. Other short-term borrowings, at
December 31, 1995, consisted of a $50 million Federal Home Loan
Bank advance which has a fixed interest rate of 4.91%. The
weighted average rate of interest paid for short-term borrowings
was 5.16%, 3.99% and 2.81% in 1995, 1994 and 1993, respectively.
Table 14 sets forth a summary of information pertaining to
short-term borrowings for the periods presented.
ASSET QUALITY
Magna's asset quality management program includes the
establishment of investment and credit policies, the continued
evaluation of the quality and trends of material assets and the
prompt implementation of appropriate actions in view of the
results of such evaluation. The objective of Magna's asset quality
management program, particularly with regard to loans, is to
reduce the risk of non-collection, which is the most significant
risk faced by a financial institution.
Magna manages loan quality and risk through initial loan analysis
and approval, monthly monitoring of portfolio performance and
prompt follow-up on problem credits. Magna's ongoing loan analysis
process proactively identifies, monitors and works with borrowers
for whom there are indications of future repayment difficulties.
Magna's asset quality division monitors all nonperforming assets,
intervenes on significant credits that have been classified and is
responsible for reducing the level of problem assets through the
implementation of workout plans.
Magna's lending philosophy is to invest in high-quality loans in
the communities served by its banking centers so that it can
effectively monitor and control credit risk. The majority of the
loan portfolio is comprised of retail loans and credits to
small-to-midsized businesses. The loan portfolio does not include
any loans to foreign countries or highly leveraged transaction
loans.
Table 15 sets forth a summary of nonperforming assets and related
ratios for the periods presented.
<TABLE>
TABLE 14 -- Short-Term Borrowings
<CAPTION>
1995 1994 1993
----------------------------------------------------------------
(In thousands) Amount Rate Amount Rate Amount Rate
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
At December 31,
Federal funds purchased $ 41,790 5.75% $129,870 6.59% $ 49,835 3.88%
Repurchase agreements 368,861 4.77 291,645 5.40 115,912 3.04
Other 50,000 4.91 15,000 4.62 26,864 3.25
- --------------------------------------------------------------------------------------------------------------------
Total $460,651 4.87 $436,515 5.73 $192,611 3.28
====================================================================================================================
For the year ended December 31,
Average daily balance
Federal funds purchased $ 58,202 5.95% $ 77,434 4.56% $ 24,086 3.27%
Repurchase agreements 320,409 5.04 145,267 3.67 80,062 2.60
Other 13,178 4.73 7,937 4.32 6,634 3.61
- --------------------------------------------------------------------------------------------------------------------
Total $391,789 5.16 $230,638 3.99 $110,782 2.81
====================================================================================================================
Maximum month-end balance
Federal funds purchased $147,190 <FNA> $148,595 <FNA> $ 91,155 <FNA>
Repurchase agreements 369,996 <FNA> 291,645 <FNA> 115,912 <FNA>
Other 50,000 <FNA> 15,223 <FNA> 26,864 <FNA>
====================================================================================================================
<FN>
- ---------------------
<FNA> - Not Applicable
</TABLE>
31
<PAGE> 34
MANAGEMENT'S DISCUSSION
The credit quality of Magna's loan portfolio continued to improve
during 1995 compared with the years ended December 31, 1994 and
1993. Nonperforming loans decreased 16.5% in 1995. Nonperforming
assets decreased 18.8% in 1995. The level of foreclosed property
was reduced 30.5% in 1995 due to Magna's continued sales efforts.
Management does not anticipate any significant losses upon
disposition of the remaining foreclosed properties. At December
31, 1995, Magna held no other material interest earning assets
considered to be risk-element assets.
Table 16 sets forth the composition of Magna's loan portfolio and
nonperforming assets in such loan categories at December 31, 1995
and 1994.
The continued emphasis on improving asset quality and utilization
of loan workout and remediation strategies contributed to the
decrease of $6.1 million in nonperforming loans at year-end 1995
compared with year-end 1994. At December 31, 1995, there were no
material commitments to lend additional funds to borrowers whose
loans were accounted for on a nonaccrual basis, where loans were
90 days past due or where loans were restructured.
<TABLE>
TABLE 15 -- Nonperforming Assets
<CAPTION>
December 31
-------------------------------------------------------
(In thousands) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $24,564 $27,184 $39,073 $54,485 $ 69,554
Loans past due 90 days or more 6,198 8,060 9,520 9,585 31,029
Restructured loans 58 1,658 2,453 1,933 6,202
- ------------------------------------------------------------------------------------------------------------
Total nonperforming loans 30,820 36,902 51,046 66,003 106,785
Foreclosed property 5,009 7,206 9,889 10,497 18,981
- ------------------------------------------------------------------------------------------------------------
Total nonperforming assets $35,829 $44,108 $60,935 $76,500 $125,766
============================================================================================================
Nonperforming loans to total loans .96% 1.24% 1.99% 2.90% 4.31%
Nonperforming assets to total loans
and foreclosed property 1.12% 1.48% 2.37% 3.35% 5.03%
Nonperforming assets to total assets .72% .95% 1.48% 2.05% 3.33%
============================================================================================================
</TABLE>
<TABLE>
TABLE 16 -- Loan Portfolio and Nonperforming Assets Composition
<CAPTION>
December 31, 1995 December 31, 1994
-----------------------------------------------------
Loans and Loans and
Foreclosed Nonperforming Foreclosed Nonperforming
(In thousands) Property Assets Property Assets
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL BORROWERS:
Commercial, financial and agricultural $ 593,664 $ 7,197 $ 492,538 $ 9,713
Commercial real estate 996,464 8,294 932,553 13,365
Real estate construction 156,978 1,979 130,734 1,135
- ---------------------------------------------------------------------------------------------------
Total commercial 1,747,106 17,470 1,555,825 24,213
CONSUMER BORROWERS:
1-4 family residential real estate 934,826 10,914 903,082 9,534
Other consumer loans, net of unearned income 520,834 2,436 509,294 3,155
- ---------------------------------------------------------------------------------------------------
Total consumer 1,455,660 13,350 1,412,376 12,689
- ---------------------------------------------------------------------------------------------------
Total loans 3,202,766 30,820 2,968,201 36,902
Foreclosed property 5,009 5,009 7,206 7,206
- ---------------------------------------------------------------------------------------------------
Total $3,207,775 $35,829 $2,975,407 $44,108
===================================================================================================
</TABLE>
32
<PAGE> 35
MANAGEMENT'S DISCUSSION
It is the policy of Magna to discontinue the accrual of interest
on loans when principal or interest is due and has remained unpaid
for 90 days or more, unless the loan is well secured and in the
process of collection. Magna would have recorded interest income
of $2.4 million for 1995 if the loans accounted for as nonaccrual
and restructured at year-end 1995 had been current in accordance
with their original terms and had been outstanding throughout the
period or since origination if held for part of the period. The
amount of interest included in interest income for 1995 relating
to these loans was $.1 million.
Certain loans may require frequent management attention and are
reviewed on a monthly or more frequent basis. Although payments on
these loans may be current or less than 90 days past due, the
borrowers presently have or have had a history of financial
difficulties and management has concern as to the borrower's
ability to comply with present loan repayment terms. Management
believes such loans present more than normal risk of
collectibility. As such, these loans may result in classification
at some future point in time as nonperforming. At December 31,
1995, such loans amounted to $10 million.
Table 17 sets forth information pertaining to Magna's provision
for loan losses charged to operations, the activity in and an
analysis of the reserve for loan losses for the last five years.
<TABLE>
TABLE 17 -- Reserve for Loan Losses
<CAPTION>
Year Ended December 31
-------------------------------------------------------
(In thousands) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $43,991 $40,065 $38,194 $55,976 $16,673
Loans charged off:
Commercial, financial and agricultural 7,065 3,649 5,635 18,351 8,843
Real estate:
Commercial 3,425 2,995 5,660 15,140 4,236
Residential 1,805 1,580 1,850 2,168 1,349
Construction 142 118 581 1,211 247
- ------------------------------------------------------------------------------------------------------------
Total real estate 5,372 4,693 8,091 18,519 5,832
- ------------------------------------------------------------------------------------------------------------
Consumer 3,963 3,146 3,816 4,754 5,035
- ------------------------------------------------------------------------------------------------------------
Total charge-offs 16,400 11,488 17,542 41,624 19,710
- ------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 1,870 4,488 1,576 1,203 1,076
Real estate:
Commercial 1,257 1,334 687 1,248 59
Residential 683 293 208 162 108
Construction 128 471 78 37 7
- ------------------------------------------------------------------------------------------------------------
Total real estate 2,068 2,098 973 1,447 174
- ------------------------------------------------------------------------------------------------------------
Consumer 1,102 1,187 1,420 1,458 767
- ------------------------------------------------------------------------------------------------------------
Total recoveries 5,040 7,773 3,969 4,108 2,017
- ------------------------------------------------------------------------------------------------------------
Net loans charged off 11,360 3,715 13,573 37,516 17,693
- ------------------------------------------------------------------------------------------------------------
Additions to reserve charged to operations 9,992 4,900 9,589 20,544 29,468
Reserve of acquired (sold) institutions - 2,741 5,855 (810) 27,528
- ------------------------------------------------------------------------------------------------------------
Balance at end of year $42,623 $43,991 $40,065 $38,194 $55,976
============================================================================================================
Net loan charge-offs as a percent of average
total loans .37% .14% .59% 1.59% 1.23%
Reserve for loan losses as a percent of total loans 1.33% 1.48% 1.56% 1.68% 2.26%
Reserve for loan losses as a percent of nonperforming
loans 138.30% 119.21% 78.49% 57.87% 52.42%
============================================================================================================
</TABLE>
33
<PAGE> 36
MANAGEMENT'S DISCUSSION
During 1995 Magna recognized net charge-offs of $5.2 million on
commercial, financial and agricultural loans compared with net
recoveries of $.8 million in 1994 and net charge-offs of $4.1
million in 1993. A $1.3 million credit to a commercial loan
customer was charged off in 1995. Recoveries in 1994 on two
previously charged off commercial loans amounted to $2.2 million
in the aggregate, including $1.5 million related to a loan to a
commercial manufacturing company that was charged off in 1993. The
remaining charge-offs of commercial, financial and agricultural
loans during 1995, 1994 and 1993 were associated with a wide
variety of commercial borrowers.
The charge-offs of commercial real estate loans in 1995 and 1994
were associated with a variety of commercial borrowers.
Charge-offs on six credits accounted for $3 million of the total
charge-offs of $6 million related to commercial real estate loans
in 1993.
The reserve for loan losses at December 31, 1995, decreased
approximately $1.4 million from year-end 1994. However, the
reserve to nonperforming loan ratio increased to 138.30% compared
to 119.21% at December 31, 1994. Management believes that the
reserve for loan losses at December 31, 1995 was adequate to
provide for possible losses inherent in the loan portfolio.
However, no assurance can be given that subsequent changes in
economic conditions, risk elements and other factors will not
require significant changes in the level of the reserve for loan
losses.
Table 18 sets forth the allocation of the reserve for loan losses
by loan category and the percent of loans in each category to
total loans for the last five years.
<TABLE>
TABLE 18 -- Allocation of the Reserve for Loan Losses
<CAPTION>
December 31
----------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------------------------------------------
Percent of Percent of Percent of Percent of Percent of
Loans in Loans in Loans in Loans in Loans in
Each Each Each Each Each
Category Category Category Category Category
to Total to Total to Total to Total to Total
(In thousands) Reserve Loans Reserve Loans Reserve Loans Reserve Loans Reserve Loans
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial and
agricultural $12,183 18.5% $11,458 16.6% $11,563 18.3% $ 9,800 18.8% $27,409 21.9%
Real estate:
Commercial 14,259 31.1 14,265 31.4 13,419 33.5 17,324 35.0 11,037 32.4
Residential 4,817 29.2 4,781 30.4 3,104 29.2 2,511 29.1 3,000 28.5
Construction 1,100 4.9 1,093 4.4 1,244 4.0 1,447 3.5 1,526 4.3
- -------------------------------------------------------------------------------------------------------------------------
Total real estate 20,176 65.2 20,139 66.2 17,767 66.7 21,282 67.6 15,563 65.2
- -------------------------------------------------------------------------------------------------------------------------
Consumer 5,754 16.3 5,729 17.2 5,054 15.0 4,785 13.6 7,097 12.9
Not allocated 4,510 <FNA> 6,665 <FNA> 5,681 <FNA> 2,327 <FNA> 5,907 <FNA>
- -------------------------------------------------------------------------------------------------------------------------
Total $42,623 100.0% $43,991 100.0% $40,065 100.0% $38,194 100.0% $55,976 100.0%
=========================================================================================================================
<FN>
- ---------------------
<FNA> - Not applicable
</TABLE>
34
<PAGE> 37
MANAGEMENT'S DISCUSSION
CAPITAL RESOURCES AND LIQUIDITY
Capital
Financial institutions are required to maintain ratios of capital
to assets in accordance with guidelines adopted in 1989 by the
Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"). The guidelines are commonly known as "Risk-Based
Guidelines" as they define the capital level requirements of a
financial institution based upon the level of risk associated with
holding various categories of assets. The Risk-Based Guidelines
require minimum Tier 1 and Total Capital ratios of 4% and 8%,
respectively. At December 31, 1995, Magna's Tier 1 and Total
Capital ratios were 13.06% and 14.29%, respectively.
In addition, the Federal Reserve Board has established a minimum
leverage capital ratio of 3% which represents the minimum standard
of Tier 1 Capital to tangible assets for bank holding companies.
This minimum leverage capital ratio is considered satisfactory
only with respect to top-rated banking organizations that do not
contemplate expansion. Magna's leverage capital ratio at December
31, 1995 was 8.64%.
Dividends and Resource Commitments
The primary source of funds to Magna on a parent company only
basis consists of dividends and management fees paid by its
banking subsidiary. Dividends available to Magna from its banking
subsidiary without prior regulatory approval amounted to
approximately $174 million at December 31, 1995.
Management believes that the earnings of its banking subsidiary
will be sufficient to provide capital to fund asset growth and to
permit the distribution of cash dividends to Magna sufficient to
meet Magna's operating and debt service requirements both on a
long-term and short-term basis. At December 31, 1995, Magna, on a
parent company only basis, had in addition to the $174 million in
dividends available from its banking subsidiary, approximately $18
million of cash and cash-equivalents available for general
corporate purposes, including the payment of dividends. See the
Notes to Consolidated Financial Statements for additional
information with respect to the parent company only sources and
uses of funds during the three-year period ended December 31,
1995.
Asset/Liability Management Program
The primary goal of Magna's asset/liability management program is
to maintain an appropriate relationship between rate-sensitive
assets and liabilities to maximize net interest income within
possible changing interest rate environments. The Funds Management
Committee monitors the sensitivity of Magna's and its banking
subsidiary's assets and liabilities with respect to changes in
interest rates and repricing opportunities and directs the overall
acquisition and allocation of funds.
Table 19 sets forth interest rate sensitivity positions and GAPs
for various time frames at December 31, 1995 based on repayment
schedules of residential mortgage loans and consumer loans,
maturities of deposits, securities and remaining fixed rate loans
and estimated average lives of mortgage backed securities.
Floating rate items are presented based on adjustment dates.
Magna was liability sensitive on a cumulative basis in the near
term (12 months or less) at December 31, 1995 based on contractual
maturities for fixed rate items and adjustment dates with respect
to floating rate items. In this regard, an increase in the general
level of interest rates should tend to have an unfavorable effect
on Magna's net interest income, as the repricing of the larger
volume of interest-sensitive liabilities would create a larger
amount of interest expense than the additional amount of interest
income created by the repricing of the smaller volume of
interest-sensitive assets.
Interest sensitivity is only one measure of how changes in the
level of interest rates might affect net interest income. Its
usefulness in assessing potential changes in net interest income
is limited as the composition of both the asset and liability
portfolios is continually changing. The basic retail nature of
Magna's business and a high percentage of community-based core
deposits make it difficult to maintain overall flexibility in
managing interest-sensitive liabilities.
This traditional GAP presentation does not adequately capture many
of the complex factors used in assessing interest rate risk. As
such, Magna utilizes and places more emphasis on the use of
simulation analysis. Utilizing various rate scenarios, growth
assumptions and yield curve shifts, Magna adjusts its strategies
to maintain its net interest income within certain tolerance
ranges.
35
<PAGE> 38
MANAGEMENT'S DISCUSSION
<TABLE>
TABLE 19 -- Interest Sensitivity Analysis
<CAPTION>
December 31, 1995
--------------------------------------------------------------------
Over Over
3 Months 1 Year
3 Months Through 12 Through Over
(In thousands) Immediate or Less Months 5 Years 5 Years Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Federal funds sold $ 47,046 $ - $ - $ - $ - $ 47,046
Securities - 301,881 88,040 712,010 262,933 1,364,864
Loans 750,547 349,910 515,216 1,330,200 234,937 3,180,810
Effect of interest rate swaps - (50,000) - 50,000 - -
- ------------------------------------------------------------------------------------------------------------
Total interest-sensitive assets $797,593 $ 601,791 $ 603,256 $2,092,210 $497,870 $4,592,720
- ------------------------------------------------------------------------------------------------------------
Liabilities:
Interest bearing demand and
savings deposits <F1> $ - $ 301,798 $ - $ 603,595 $ - $ 905,393
Market rate deposits <F1> - 257,080 - 128,540 - 385,620
Time deposits 111,468 400,988 795,864 696,892 21,779 2,026,991
Short-term borrowings 341,121 51,691 67,839 - - 460,651
Long-term debt - 2 6 92,936 127 93,071
- ------------------------------------------------------------------------------------------------------------
Total interest-sensitive liabilities $452,589 $1,011,559 $ 863,709 $1,521,963 $ 21,906 $3,871,726
- ------------------------------------------------------------------------------------------------------------
Interest-sensitivity GAP:
Incremental $345,004 $ (409,768) $(260,453) $ 570,247 $475,964 $ 720,994
- ------------------------------------------------------------------------------------------------------------
Cumulative $345,004 $ (64,764) $(325,217)
- ------------------------------------------------------------------------------------------------------------
Ratio of interest-sensitive
assets to interest-sensitive
liabilities:
Incremental 1.76% (.59)% (.70)%
Cumulative 1.76 (.96) (.86)
Percentage of interest-
sensitivity GAP to total assets:
Incremental 6.97 (8.28) (5.26)
Cumulative 6.97 (1.31) (6.57)
=========================================================================
<FN>
- ----------------------
<F1> Interest bearing demand, savings and market rate deposits, while subject to immediate withdrawal, are
considered somewhat insensitive to changes in interest rates. Therefore, these deposits have been
allocated to the three months or less and over 1 through 5 year categories based on management's
evaluation of the rate and volume patterns of such deposits.
</TABLE>
Asset liquidity at Magna's banking subsidiary is provided
principally through maturities of loans, securities and other
interest earning assets. However, these assets are not viewed as a
continually reliable source of liquidity because of the impact of
volatile interest rates and other outside influences on
marketability. The most important source of liquidity for Magna's
banking subsidiary is liability liquidity. Liability liquidity is
defined by Magna as the ability to raise new funds and to renew
maturing liabilities in a variety of markets and economic
environments. The most important factor in assuring liability
liquidity is maintenance of confidence in Magna by suppliers of
funds. This confidence is based on performance and reputation.
Management believes the reputation of Magna, as well as its
financial strength and long-term community-based core deposit
customer relationships, should enable it to raise funds to meet
its future funding requirements.
36
<PAGE> 39
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Year Ended December 31
(In thousands, except per share data) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $266,146 $219,566 $185,296
Securities:
Taxable 71,853 61,970 50,290
Tax-exempt 7,266 7,461 7,736
- ---------------------------------------------------------------------------------------------------------------------
79,119 69,431 58,026
Other, principally federal funds sold 1,903 564 966
- ---------------------------------------------------------------------------------------------------------------------
Total Interest Income 347,168 289,561 244,288
INTEREST EXPENSE
Deposits 138,025 100,684 92,122
Federal funds purchased 3,463 3,532 789
Repurchase agreements 16,147 5,327 2,083
Other short-term borrowings 623 343 239
Long-term debt 6,059 6,856 3,792
- ---------------------------------------------------------------------------------------------------------------------
Total Interest Expense 164,317 116,742 99,025
- ---------------------------------------------------------------------------------------------------------------------
Net Interest Income 182,851 172,819 145,263
PROVISION FOR LOAN LOSSES 9,992 4,900 9,589
- ---------------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 172,859 167,919 135,674
NONINTEREST INCOME
Service charges on deposits 22,487 21,945 18,020
Trust 8,638 9,063 8,307
Securities gains, net 356 158 5,122
Other 16,382 16,337 14,391
- ---------------------------------------------------------------------------------------------------------------------
Total Noninterest Income 47,863 47,503 45,840
NONINTEREST EXPENSE
Employee compensation and other benefits 72,993 73,545 63,683
Net occupancy 17,677 15,748 13,621
Equipment 8,967 8,974 7,989
FDIC insurance premiums 4,342 8,079 7,644
Other 42,238 43,867 38,384
- ---------------------------------------------------------------------------------------------------------------------
Total Noninterest Expense 146,217 150,213 131,321
- ---------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 74,505 65,209 50,193
INCOME TAX EXPENSE 23,283 20,179 12,706
- ---------------------------------------------------------------------------------------------------------------------
Net Income $ 51,222 $ 45,030 $ 37,487
=====================================================================================================================
AVERAGE SHARES OUTSTANDING
Primary 27,892 26,657 24,495
Fully diluted 29,524 28,320 26,233
PER SHARE DATA
Net income:
Primary $1.84 $1.69 $1.53
Fully diluted 1.80 1.66 1.50
=====================================================================================================================
Dividends declared $ .80 $ .76 $ .72
=====================================================================================================================
See accompanying notes.
</TABLE>
37
<PAGE> 40
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31
(In thousands, except shares) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 175,167 $ 264,434
Federal funds sold 47,046 17,496
Securities:
Held-to-maturity (estimated market value of $130,365
and $263,090, respectively) 126,248 267,829
Available-for-sale (at estimated market value) 1,238,616 949,345
Loans 3,205,374 2,976,187
Unearned income (2,608) (7,986)
Reserve for loan losses (42,623) (43,991)
- ---------------------------------------------------------------------------------------------------------------------
Net Loans 3,160,143 2,924,210
Premises and equipment 81,691 72,986
Accrued interest receivable 34,664 32,890
Goodwill and other intangibles 19,149 21,478
Foreclosed property 5,009 7,206
Other assets 59,766 80,628
- ---------------------------------------------------------------------------------------------------------------------
Total Assets $4,947,499 $4,638,502
=====================================================================================================================
LIABILITIES
Deposits:
Noninterest bearing $ 570,262 $ 595,224
Interest bearing 3,318,004 3,077,531
- ---------------------------------------------------------------------------------------------------------------------
Total Deposits 3,888,266 3,672,755
Federal funds purchased 41,790 129,870
Repurchase agreements 368,861 291,645
Other short-term borrowings 50,000 15,000
Long-term debt 93,071 104,453
Other liabilities 59,467 53,467
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities 4,501,455 4,267,190
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Preferred stock 41 41
Common stock, $2 par value - 40,000,000 shares authorized;
27,997,889 and 27,512,462 shares issued and outstanding, respectively 55,996 55,025
Capital surplus 211,588 203,693
Retained earnings 177,438 148,417
Net unrealized gains (losses) on securities 981 (35,864)
- ---------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 446,044 371,312
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $4,947,499 $4,638,502
=====================================================================================================================
See accompanying notes.
</TABLE>
38
<PAGE> 41
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Net
Unrealized Total
Preferred Stock Common Stock Gains Stock-
------------------- ------------------ Capital Retained (Losses) on holders'
(In thousands) Shares Amount Shares Amount Surplus Earnings Securities Equity
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 2 $41 24,074 $48,149 $194,752 $ 79,353 $ - $322,295
Net income 37,487 37,487
Cash dividends declared (17,623) (17,623)
Issuance of common stock:
Conversion of capital notes 15 30 222 252
Acquisitions 1,507 3,013 2,439 9,267 14,719
Various stock issuance plans 133 266 1,639 1,905
Net unrealized gains on securities 1,614 1,614
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 2 41 25,729 51,458 199,052 108,484 1,614 360,649
Net income 45,030 45,030
Cash dividends declared (20,128) (20,128)
Issuance of common stock:
Conversion of capital notes 60 120 899 1,019
Acquisitions 1,603 3,206 2,245 15,031 20,482
Various stock issuance plans 120 241 1,497 1,738
Change in net unrealized gains
(losses) on securities (37,478) (37,478)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 2 41 27,512 55,025 203,693 148,417 (35,864) 371,312
Net income 51,222 51,222
Cash dividends declared (22,201) (22,201)
Issuance of common stock:
Conversion of capital notes 111 221 1,671 1,892
Various stock issuance plans 375 750 6,224 6,974
Change in net unrealized gains
(losses) on securities 36,845 36,845
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 2 $41 27,998 $55,996 $211,588 $177,438 $ 981 $446,044
==============================================================================================================================
See accompanying notes.
</TABLE>
39
<PAGE> 42
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31
(In thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 51,222 $ 45,030 $ 37,487
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 9,992 4,900 9,589
Provision for losses on foreclosed property 931 1,035 2,053
Provision for depreciation, amortization and accretion 12,405 11,091 9,042
Amortization of securities premiums and accretion of discounts 287 3,042 7,336
Deferred income tax expense 2,154 3,915 3,200
Securities gains, net (356) (158) (5,122)
(Increase) decrease in other assets (13,621) (9,814) 12,130
Increase (decrease) in other liabilities 7,706 6,490 (1,351)
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 70,720 65,531 74,364
INVESTING ACTIVITIES
Proceeds from maturities of held-to-maturity securities 19,676 23,869 282,787
Proceeds from sales of held-to-maturity securities 7,194 - 6,648
Purchases of held-to-maturity securities (16,169) (14,087) (129,238)
Proceeds from maturities of available-for-sale securities 252,189 226,463 246,477
Proceeds from sales of available-for-sale securities 93,948 114,867 274,452
Purchases of available-for-sale securities (442,886) (363,063) (691,752)
Net increase in loans (249,968) (313,648) (83,539)
Proceeds from sales of foreclosed property 9,775 17,426 18,792
Purchases of and proceeds from sales of premises and equipment (18,164) (10,448) (1,742)
Cash and cash equivalents of acquired institutions, net of cash paid - 12,523 33,992
Proceeds from sales of subsidiaries - - 1,698
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (344,405) (306,098) (41,425)
FINANCING ACTIVITIES
Net increase (decrease) in deposits 215,810 18,923 (134,489)
Cash dividends (22,201) (20,128) (17,623)
Net increase (decrease) in federal funds purchased (88,080) 80,746 (16,926)
Net increase in repurchase agreements 42,216 175,733 100,837
Net increase (decrease) in other short-term borrowings 35,000 (11,864) 13,332
Proceeds from long-term debt 25,000 73,500 -
Payments of long-term debt (64) (596) (3,336)
Other, net 6,287 1,223 1,733
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities 213,968 317,537 (56,472)
- ---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (59,717) 76,970 (23,533)
Cash and cash equivalents at beginning of year 281,930 204,960 228,493
- ---------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 222,213 $ 281,930 $ 204,960
=====================================================================================================================
See accompanying notes.
</TABLE>
40
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
1 Organization
Magna Group, Inc. (the "Company"), a Delaware corporation, was
organized in 1974 and is a registered bank holding company under
the Federal Bank Holding Act of 1956, as amended. The Company
currently owns, indirectly, all of the capital stock of Magna
Bank, National Association, a national banking association which
operates from more than 100 community banking locations serving
Missouri and Illinois. The Company also owns Magna Trust Company
and certain brokerage, insurance and investment subsidiaries.
The Company primarily serves consumers and small-to-midsized
businesses in its market as a "super community bank," a company
whose business centers on a customer-focused community banking
orientation, has cost efficiencies that do not compromise quality
and offers a broad product line that permits a full-service
customer relationship.
2 Summary of Significant Accounting Policies
The accounting and reporting policies of the Company and its
subsidiaries conform to generally accepted accounting principles.
Following is a description of the more significant of those
policies.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results
could differ from those estimates.
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. Significant intercompany accounts
and transactions have been eliminated in consolidation. Certain
amounts for 1994 and 1993 were reclassified to conform with
statement presentation for 1995. Such reclassifications had no
effect on net income.
Securities
The Company categorizes each security within its portfolio into
one of three permitted classifications at the time of purchase and
reevaluates such designation as of each balance sheet date.
Held-to-maturity securities are those which the Company has the
ability and positive intent to hold to maturity. Such securities
are carried at cost, adjusted for amortization of premiums and
accretion of discounts. The adjusted cost of specific securities
is used to compute gains and losses on sales or redemptions.
Available-for-sale securities include all debt securities not
classified as held-to-maturity or trading and marketable equity
securities not classified as trading. Available-for-sale
securities are stated at estimated market value. Unrealized
holding gains and losses are reported net of taxes as a separate
component of stockholders' equity until realized. Realized gains
and losses are computed based on cost adjusted for amortization of
premiums and accretion of discounts and are included in other
noninterest income.
Trading securities, including options used in trading activities,
are purchased with the intent for resale within a short period of
time in anticipation of short-term market movements, and are
stated at estimated market value. Gains and losses, both realized
and unrealized, on trading securities are included in other
noninterest income.
Dividends and interest income on all securities are included in
interest income.
Loans
Interest income on loans is accrued and credited to income based
on the principal amount outstanding. The accrual of interest
income generally is discontinued when a loan becomes 90 days past
due as to principal or interest unless, in management's judgment,
the loan is well secured and in the process of collection. When
interest accruals are discontinued, unpaid interest credited to
income in the current year is reversed, and interest accrued in
prior years is charged to the reserve for loan losses. Interest
income on these loans is reported on the cash basis as it is
collected.
Reserve for Loan Losses
The reserve for loan losses is increased by provisions for
losses charged to expense and reduced by loans charged off, net of
recoveries. The reserve is maintained at a level considered
adequate to provide for potential loan losses based on
management's evaluation of the anticipated impact on the loan
portfolio of current economic conditions, changes in the character
and size of the portfolio, past loan loss experience, potential
future loan losses on loans to specific customers and/or
industries, and other pertinent factors that management believes
require current recognition in estimating possible loan losses.
41
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Specific reserves are established for any impaired commercial,
commercial real estate and real estate construction loans for
which the recorded investment in the loan exceeds the measured
value of the loan. Loans subject to impairment valuation are
defined as nonaccrual loans exclusive of smaller balance
homogeneous loans such as home equity, credit cards, installment,
and 1-4 family loans. The value of the loan is determined based on
the present value of expected future cash flows, the market price
of the loan, or the fair value of the underlying collateral, if
the loan is collateral dependent.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation and amortization are
computed using principally straight-line methods over the
estimated useful lives of the assets.
Intangible Assets
Intangible assets consist principally of goodwill which represents
the excess of cost over fair value of net assets acquired in
business combinations accounted for under the purchase method.
Goodwill is amortized on a straight-line basis over the estimated
period to be benefited, ranging from 8 to 15 years. The carrying
value of goodwill is reviewed periodically for impairment.
Foreclosed Property
Foreclosed property is included in other assets in the
consolidated balance sheets and consists of assets acquired
through foreclosure or deed in lieu of foreclosure. Foreclosed
property is valued at the lower of cost or estimated market value,
net of estimated sale expenses. Any loss incurred at the time of
acquisition or reclassification is charged to the reserve for loan
losses. Losses resulting from disposition or periodic re-evaluation
of foreclosed property are charged to expense in the
current period.
Interest Rate Swaps
The Company enters into interest rate swap agreements as part of
its overall asset/liability management strategy. Such agreements
effectively modify the interest characteristics of certain loans,
investments or deposit liabilities. These agreements involve the
exchange of floating and fixed rate interest amounts over the life
of the agreement without an exchange of the underlying principal
amount. The differential to be paid or received is accrued as
interest rates change and recognized as an adjustment to interest
income or interest expense as appropriate. The related amount
payable or receivable from counterparties is included in other
assets or other liabilities. Deferred gains on terminated interest
rate swap agreements are included in other liabilities and are
amortized over the remaining original life of the terminated
agreement. The Company had no significant interest rate swaps at
December 31, 1995 other than as described in Note 17.
Income Taxes
Income taxes are accounted for under the asset and liability
method in which deferred income taxes are recognized as a result
of temporary differences between the financial reporting basis and
the tax basis of the assets and liabilities of the Company.
The Company and its subsidiaries file a consolidated federal
income tax return. Each subsidiary provides for income taxes on a
separate return basis, and remits to the Company amounts
determined to be currently payable.
Net Income Per Share
Primary net income per share is computed by dividing net income
after deducting preferred stock dividend requirements, by the
weighted average number of common shares and common share
equivalents (which consist of common stock options), outstanding.
Fully diluted net income per share is computed by increasing such
average common shares and common share equivalents by the assumed
conversion into common stock of all outstanding convertible debt
instruments. Net income for fully diluted net income per share is
adjusted for interest expense and amortization of origination
costs, net of related tax effects, on these convertible debt
instruments, and preferred stock dividends. Such items are
excluded from the computation when their effects would be
antidilutive.
Stock Based Compensation
The Company grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the
shares at the date of grant. The Company accounts for stock option
grants in accordance with APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and, accordingly, recognizes no
compensation expense for the stock option grants.
<TABLE>
Cash Flow Information
For purposes of the statements of cash flows, the Company
considers cash and demand deposits at other financial institutions
and federal funds sold with maturities not exceeding 90 days, to
be cash equivalents. Cash paid for interest and income taxes, as
well as significant non-cash investing activities, were as
follows:
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $156,828 $117,369 $101,436
Income taxes 17,977 12,688 9,270
Loans transferred to
foreclosed property 8,363 8,979 10,903
=====================================================================================
</TABLE>
42
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3 Acquisitions
In the fourth quarter of 1995, the Company entered into a
definitive agreement to acquire River Bend Bancshares, Inc.
("River Bend"). The agreement provides for the issuance of
approximately 550,000 shares of common stock and approximately
$12,300 in cash. The acquisition, which is subject to, among other
things, regulatory approval and the approval of River Bend's
stockholders, will be accounted for as a purchase and is expected
to be completed in the first quarter of 1996. At December 31,
1995, total assets of River Bend were approximately $157,000.
In the third quarter of 1994, the Company completed the
acquisition of Goreville Bancorporation, Inc. In the second
quarter of 1994, the Company completed the acquisitions of The
First National Bank in Madison and Bank of Chesterfield. A total
of 1,603,283 shares of common stock were issued in the 1994
acquisitions which were accounted for as poolings-of-interests.
Total assets of the acquired institutions were approximately
$186,000.
In the fourth quarter of 1993, the Company completed the
acquisitions of Mega Bancshares, Inc., City Bancorp, Inc., MGI
Group, Inc. and InBank Group, Inc. for 1,506,621 shares of common
stock. These acquisitions were accounted for as poolings-of-interests.
Total assets of these institutions were approximately $236,000. The
Company also acquired $184,000 of assets and assumed $200,000 of
deposits and liabilities of Community Bank of Greater Peoria in a
purchase transaction in such quarter.
The effect of the 1994 and 1993 transactions was not significant
to the consolidated financial statements and operating results of
the acquired entities are included since the respective
acquisition dates.
4 Changes in Accounting Methods
On January 1, 1995, the Company adopted Financial Accounting
Standards No. 114 (FAS No. 114), "Accounting by Creditors for
Impairment of a Loan" and No. 118 (FAS No. 118), "Accounting by
Creditors for Impairment of a Loan-Income Recognition and
Disclosures." These statements require that certain impaired loans
be measured based on either the present value of expected future
cash flows discounted at the loan's effective rate, the market
price of the loan, or the fair value of the underlying collateral
if the loan is collateral dependent. The statements further
require that specific reserves be established for any impaired
loan for which the recorded investment exceeds the measured value
of the loan. FAS No. 114 and FAS No. 118 do not apply to smaller
balance, homogeneous loans, which the Company has identified as
consumer loans, such as home equity, installment, and 1-4 family
residential loans. FAS No. 114 requires that upon adoption, all
loans classified as in-substance foreclosure be reclassified to an
appropriate loan category if the creditor does not have physical
possession of the collateral. In order to present information
consistently for all periods, in-substance foreclosed assets were
reclassified as of December 31, 1994 and 1993, from other assets
to loans. Adoption of these standards had no impact on the
Company's reserve levels or 1995 earnings.
The Company adopted the provisions of Financial Accounting
Standards No. 115 (FAS No. 115), "Accounting for Certain
Investments in Debt and Equity Securities," as of December 31,
1993. Prior period financial statements were not restated to
reflect the change. The cumulative effect of adoption of FAS No.
115 had no effect on net income.
Effective January 1, 1995, the Company adopted Financial
Accounting Standards No. 121 (FAS No. 121), "Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of." FAS No. 121
requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The
adoption of the standard had no material impact on the Company's
financial position or results of operations.
The Company will adopt Financial Accounting Standards No. 122 (FAS
No. 122), "Accounting for Mortgage Servicing Rights," effective
January 1, 1996. FAS No. 122 requires capitalization of purchased
mortgage servicing rights, as well as internally originated
mortgage servicing rights. These mortgage servicing rights are
amortized over the estimated servicing period of the related
loans. The Company does not expect the adoption of the standard to
have a material impact on the Company's financial position or
results of operations.
5 Restrictions on Cash and Due from Bank Accounts
The Company's banking subsidiary is required to maintain average
reserve balances with the Federal Reserve Bank. The average amount
of those reserve balances for the years ended December 31, 1995
and 1994 was approximately $86,448 and $79,222, respectively.
43
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
6 Securities
The carrying value, gross unrealized gains and losses, and
estimated market value of held-to-maturity securities at December
31 were as follows:
<CAPTION>
1995
- ------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Value Gains Losses Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government
agencies $ 48,088 $ 192 $ - $ 48,280
State and municipal 74,396 4,174 249 78,321
Other 3,764 - - 3,764
- ------------------------------------------------------------------------------------------------------------
$126,248 $4,366 $249 $130,365
============================================================================================================
<CAPTION>
1994
- ------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Value Gains Losses Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government
agencies $142,760 $ - $4,439 $138,321
State and municipal 110,409 2,938 2,369 110,978
Mortgage backed 10,896 3 872 10,027
Other 3,764 - - 3,764
- ------------------------------------------------------------------------------------------------------------
$267,829 $2,941 $7,680 $263,090
============================================================================================================
</TABLE>
<TABLE>
The amortized cost, gross unrealized gains and losses, and
estimated market value of available-for-sale securities at
December 31 were as follows:
<CAPTION>
1995
- ------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government
agencies $ 562,568 $ 3,736 $3,150 $ 563,154
State and municipal 32,620 890 19 33,491
Mortgage backed 584,057 5,521 3,583 585,995
Other 55,767 629 420 55,976
- ------------------------------------------------------------------------------------------------------------
$1,235,012 $10,776 $7,172 $1,238,616
============================================================================================================
<CAPTION>
1994
- ------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government
agencies $442,938 $114 $13,457 $429,595
State and municipal 2,039 1 149 1,891
Mortgage backed 510,975 382 34,337 477,020
Other 42,599 158 1,918 40,839
- ------------------------------------------------------------------------------------------------------------
$998,551 $655 $49,861 $949,345
============================================================================================================
</TABLE>
<TABLE>
The carrying value and estimated market value of held-to-maturity
securities at December 31, 1995, by contractual maturity, are
shown below.
<CAPTION>
Estimated
Carrying Market
Value Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in 1 year or less $ - $ -
Due after 1 year through 5 years 71,817 73,332
Due after 5 years through 10 years 38,511 40,520
Due after 10 years 15,920 16,513
- ------------------------------------------------------------------------------------------------------------
$126,248 $130,365
============================================================================================================
</TABLE>
<TABLE>
The amortized cost and estimated market value of available-for-sale securities at December 31, 1995,
by contractual maturity, are shown below.
<CAPTION>
Estimated
Amortized Market
Cost Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in 1 year or less $ 118,422 $ 118,624
Due after 1 year through 5 years 438,118 438,628
Due after 5 years through 10 years 86,912 87,863
Due after 10 years 7,503 7,506
Mortgage backed securities 584,057 585,995
- ------------------------------------------------------------------------------------------------------------
$1,235,012 $1,238,616
============================================================================================================
</TABLE>
The gross realized gains and gross realized losses on sales of
available-for-sale securities during the year ended December 31,
1995 totaled $1,357 and $1,000, respectively. Gross realized gains
and gross realized losses on sales of held-to-maturity securities
during the year ended December 31, 1995 totaled $103 and $104,
respectively. During the year ended December 31, 1995, the Company
sold held-to-maturity securities with a book value of $7,195.
These securities were sold as a result of management's decision to
liquidate certain "odd lot" holdings and to assimilate the
portfolios of entities that were acquired in previous years.
Effective December 31, 1995, the Company implemented provisions of
the Financial Accounting Standards Board Special Report (FAS
Special Report), "A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities."
Upon adoption, and in accordance with the provisions of the FAS
Special Report, the Company reassessed its securities
classifications, and based on this reassessment, reclassified
securities with a book value of approximately $135,963 from
held-to-maturity to available-for-sale. Upon transfer, market value
exceeded carrying value by approximately $2,830, resulting in an
after-tax increase to stockholders' equity of approximately
$1,698. The transfer had no effect on 1995 earnings.
44
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Securities with a book value of $994,570 and $807,305 at December
31, 1995 and 1994, respectively, were pledged to secure public
deposits and for other purposes.
There were no trading securities at December 31, 1995 and 1994.
<TABLE>
7 Loans
Loans were comprised of the following:
<CAPTION>
December 31
1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial, financial and agricultural $ 593,664 $ 492,538
Real estate:
Commercial 996,464 932,553
Residential 934,826 903,082
Construction 156,978 130,734
- -------------------------------------------------------------------------------------------------
2,088,268 1,966,369
- -------------------------------------------------------------------------------------------------
Consumer 523,442 517,280
- -------------------------------------------------------------------------------------------------
$3,205,374 $2,976,187
=================================================================================================
</TABLE>
At December 31, 1995 and 1994, the aggregate principal balances of
loans on which interest was not being accrued were $24,564 and
$27,184, respectively, and the aggregate principal balances on
which the yield and/or repayment terms had been changed due to
declining financial condition of borrowers were $58 and $1,658,
respectively. During 1995 and 1994, the interest income which
would have been recorded in the consolidated statements of income
under the original terms of such loans was approximately $2,418
and $2,290, and the interest income actually recorded was
approximately $69 and $180, respectively.
At December 31, 1995, the recorded investment in loans that are
considered impaired under FAS No. 114 totaled approximately
$14,376. The allowance for loan losses included approximately
$3,043 allocated to $6,819 of the impaired loans. No specific
reserve was allocated to the remaining $7,557 of impaired loans.
In 1995, impaired loans averaged approximately $18,661 and cash
basis interest recognized on these loans, during the time they
were impaired, was not significant.
<TABLE>
Included in loans at December 31, 1995 and 1994 were loans made to
directors and executive officers of the Company and its principal
subsidiaries or to entities in which such individuals had a
beneficial interest. Following is a summary of activity in such
loans for the year ended December 31, 1995:
- -------------------------------------------------------------------------
<S> <C>
Balance, January 1, 1995 $ 86,456
New loans made 35,707
Payments received (22,041)
Net change from changes in director
and executive officer status (31,450)
- -------------------------------------------------------------------------
Balance, December 31, 1995 $ 68,672
=========================================================================
</TABLE>
Such loans were made in the ordinary course of business at normal
credit terms, including interest rates and collateral, prevailing
at the time for comparable transactions with unrelated parties,
and do not involve more than normal risk of collection.
Loans with a book value of $107,579 and $105,625 at December 31,
1995 and 1994, respectively, were pledged to secure borrowings
from the Federal Reserve Bank.
<TABLE>
8 Reserve for Loan Losses
Changes in the reserve for loan losses were as follows:
<CAPTION>
Year Ended December 31
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 43,991 $ 40,065 $ 38,194
Loans charged off (16,400) (11,488) (17,542)
Recoveries of loans previously
charged off 5,040 7,773 3,969
- --------------------------------------------------------------------------------------------------------------
Net loans charged off (11,360) (3,715) (13,573)
Provision for loan losses
charged to operations 9,992 4,900 9,589
Reserves of acquired
institutions - 2,741 5,855
- --------------------------------------------------------------------------------------------------------------
Balance at end of year $ 42,623 $ 43,991 $ 40,065
==============================================================================================================
</TABLE>
<TABLE>
9 Premises and Equipment
Premises and equipment were comprised of the following:
<CAPTION>
December 31
1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 12,814 $ 11,872
Buildings 80,110 74,614
Furniture and equipment 49,576 38,494
- ----------------------------------------------------------------------------------------------------
142,500 124,980
Less allowances for depreciation and
amortization 60,809 51,994
- ----------------------------------------------------------------------------------------------------
$ 81,691 $ 72,986
====================================================================================================
</TABLE>
Total depreciation expense charged to operations amounted to
$8,876, $8,313 and $7,440 in 1995, 1994 and 1993, respectively.
The Company and its subsidiaries lease certain premises and
equipment under operating lease agreements which expire at various
dates through May 2070, with certain lease agreements containing
renewal options. Minimum rental commitments under all leases for
the years 1996 through 2000 and thereafter were $5,803, $5,647,
$5,399, $5,174, $3,860 and $20,583, respectively. Rent expense in
1995, 1994 and 1993 was $5,682, $5,684 and $4,928, respectively.
45
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
10 Deposits
Deposits were comprised of the following:
<CAPTION>
December 31
1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Demand deposits $ 570,262 $ 595,224
Interest bearing demand and other
transaction accounts 496,590 551,246
Savings and market rate deposits 794,423 920,611
Time deposits less than $100,000 1,674,305 1,396,027
Time deposits $100,000 or more 352,686 209,647
- -------------------------------------------------------------------------------------------------
$3,888,266 $3,672,755
=================================================================================================
</TABLE>
11 Other Short-Term Borrowings
Other short-term borrowings were $50,000 and $15,000 at December
31, 1995 and 1994, respectively. The 1995 amount consisted of a
Federal Home Loan Bank advance, which has an interest rate of
4.91%. This advance is callable, by the issuer, on December 6,
1996 and quarterly thereafter, and will mature on December 6,
2000. The 1994 amount consisted of a Federal Home Loan Bank
advance which had an interest rate of 4.62% and matured on August
23, 1995.
<TABLE>
12 Long-Term Debt
Long-term debt was comprised of the following:
<CAPTION>
December 31
1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Parent Company:
7% Convertible Subordinated
Capital Notes maturing in 1999 $14,440 $ 16,373
8-3/4% Convertible Subordinated
Debentures maturing in 1998
(net of $2,292 and $2,906
discount, respectively, based on
effective interest rate of 14.65%) 14,958 14,344
- --------------------------------------------------------------------------------------------------
29,398 30,717
Banking Subsidiary:
Federal Home Loan Bank advances
maturing in 1997 38,500 38,500
maturing in 1998 25,000 -
Repurchase agreement maturing in 1996 - 35,000
Other 173 236
- --------------------------------------------------------------------------------------------------
63,673 73,736
- --------------------------------------------------------------------------------------------------
$93,071 $104,453
==================================================================================================
</TABLE>
The 7% Convertible Subordinated Capital Notes and the 8-3/4%
Convertible Subordinated Debentures are convertible into shares of
the Company's common stock at a conversion price of $17.48 and
$24.88 per share, respectively, subject to adjustment in certain
circumstances. The Notes and Debentures are redeemable, in whole
or in part, at the option of the Company, subject to certain
conditions, and are subordinated to all senior debt of the
Company. The Notes, if redeemed by the Company, will be redeemed
at declining premiums. The Notes are redeemable at the option of
the holder, subject to certain limitations. At maturity, the
noteholders and debentureholders will receive either common stock
or cash, at the discretion of the Company, equal to the principal
amount of the Notes or Debentures, respectively.
The combined maturities of long-term debt at December 31, 1995,
for the years 1996 through 2000 were $8, $38,509, $39,967, $14,450
and $10, respectively.
13 Capital Stock
Preferred Stock
At December 31, 1995 and 1994, there were 49,500 shares authorized
and 2,039 and 2,074 shares outstanding, respectively, of the
Company's 7.5% cumulative Class B, voting, $20 par value preferred
stock. At December 31, 1995 and 1994, 1,000,000 shares of no par
value preferred stock and 1,000,000 shares of Class C, non-voting,
$.10 par value preferred stock, were authorized with no shares of
either category issued. 400,000 shares of the no par value
preferred stock have been designated and were reserved for
issuance upon exercise of the preferred stock purchase rights.
Common Stock
At December 31, 1995, 4,490,214 shares of common stock were
reserved for issuance in connection with conversion of the
Convertible Subordinated Capital Notes and Convertible
Subordinated Debentures and, the Company's stock-based
compensation plans, the Company's dividend reinvestment plan and
the Company's employee stock purchase plan.
Preferred Stock Purchase Rights
One preferred stock purchase right (a "Magna Right") is attached
to each share of common stock issued and outstanding or to be
issued prior to certain designated events. Each Magna Right
becomes exercisable only under certain circumstances and expires
in 1998 unless first exercised, redeemed or converted. The Magna
Rights are designed to protect the interests of the Company and
its stockholders against coercive takeover tactics. The purpose of
the Magna Rights is to encourage potential acquirers to negotiate
with the Company's Board of Directors prior to attempting a
takeover and to give the Board leverage in negotiating, on behalf
of all stockholders, the terms of any proposed takeover.
46
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14 Restricted Net Assets
Certain restrictions exist regarding the ability of the bank
subsidiary to transfer funds to the Company in the form of cash
dividends, loans or advances. At December 31, 1995, under the most
restrictive covenants and regulations, approximately $174,368 was
the maximum available for dividends to the Company from the
subsidiary without prior regulatory approval.
<TABLE>
15 Income Taxes
The components of income tax expense are summarized as follows:
<CAPTION>
Year Ended December 31
1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current taxes $21,129 $16,264 $ 9,506
Deferred taxes 2,154 3,915 3,200
- ------------------------------------------------------------------------------------------------------
Income tax expense $23,283 $20,179 $12,706
======================================================================================================
</TABLE>
Included in income taxes is tax expense of $124, $55 and $1,793 in
1995, 1994 and 1993, respectively, related to securities gains,
net.
<TABLE>
Reconciliations between income tax expense and the amount computed
by applying the statutory federal tax rate to income before income
taxes are as follows:
<CAPTION>
Year Ended December 31
1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate applied to
income before income taxes $26,077 $22,823 $17,567
Effects of:
Tax-exempt income (3,293) (3,295) (3,543)
Goodwill amortization 281 285 252
State tax, net of
federal benefit 1,680 1,478 1,175
Adjustment to valuation
allowance (935) - (1,688)
Net effect of a change
in tax rates - - (373)
Adjustment to tax basis
of intangibles - (863) -
Other, net (527) (249) (684)
- ------------------------------------------------------------------------------------------------
Income tax expense $23,283 $20,179 $12,706
================================================================================================
</TABLE>
<TABLE>
Deferred income taxes reflect the net tax effect of temporary
differences between the amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
assets and liabilities as of December 31, 1995 and 1994 are
summarized as follows:
<CAPTION>
December 31
1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Reserve for loan losses $17,049 $17,596
Markdowns on foreclosed property 390 1,238
Deferred compensation 4,270 4,093
Net operating loss and built-in loss carryforwards 1,646 3,531
Alternative minimum tax credit carryforwards 1,472 1,488
Mark-to-market securities adjustment - 24,166
Other, net - 974
- ------------------------------------------------------------------------------------------------
Total deferred tax assets before
valuation allowance 24,827 53,086
Valuation allowance for deferred tax assets (1,085) (2,692)
- ------------------------------------------------------------------------------------------------
Total deferred tax assets 23,742 50,394
- ------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Tax over book depreciation 3,962 4,097
Purchase accounting adjustments 1,373 2,816
Mark-to-market securities adjustment 645 -
Other, net 749 -
- ------------------------------------------------------------------------------------------------
Total deferred tax liabilities 6,729 6,913
- ------------------------------------------------------------------------------------------------
Net deferred tax assets $17,013 $43,481
================================================================================================
</TABLE>
The Company has net operating loss and built-in loss carryforwards
of $4,116 and alternative minimum tax credit carryforwards of
$1,472 for federal tax purposes. The alternative minimum tax
credit carryforwards have an unlimited carryforward period. The
net operating loss and built-in loss carryforwards expire
primarily in the years 1998 to 2002.
16 Employee Benefits
Pension Plan
The Company and its subsidiaries have a non-contributory, defined
benefit retirement plan that covers all employees who have
attained age 21 and completed one year of service. Benefits are
accrued for each year of service based upon percentages of the
designated portions of each participant's annual base
compensation. The Company's policy is to fund contributions
annually within the limits prescribed for deduction for federal
income tax purposes. Contributions are intended to provide for
benefits attributed to service to date.
47
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
The following table sets forth the funded status and amounts
recognized in the Company's balance sheet for the plan.
<CAPTION>
December 31
1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of ($21,778) and
($19,835) at December 31, 1995 and
1994, respectively $(22,037) $(20,048)
==================================================================================================
Projected benefit obligation for services
rendered to date $(27,936) $(24,268)
Plan assets at fair value, primarily listed
stocks and corporate and U.S. debt
securities 24,538 21,959
- --------------------------------------------------------------------------------------------------
Plan assets less than projected
benefit obligation (3,398) (2,309)
Unrecognized net loss from past
experience different from that assumed
and effect of changes in assumptions 2,404 1,944
Unrecognized net asset at beginning of year,
being recognized over 13.8 years
beginning January 1, 1986 (964) (1,208)
Prior service cost not yet recognized
in net periodic pension cost (661) (757)
- --------------------------------------------------------------------------------------------------
Accrued pension cost included
in the balance sheets $ (2,619) $ (2,330)
==================================================================================================
</TABLE>
<TABLE>
Net pension cost included the following components:
<CAPTION>
Year Ended December 31
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 1,595 $ 1,732 $ 1,435
Interest cost on projected
benefit obligation 1,805 1,809 2,080
Actual (return) loss on
plan assets (5,171) 484 (948)
Net amortization and deferral 3,066 (2,728) (1,375)
- --------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 1,295 $ 1,297 $ 1,192
====================================================================================================================
</TABLE>
The weighted average discount rate and the rate of increase in
future compensation levels used in determining the actuarial
present value of the projected benefit obligation were 7.0% and
5.5%, respectively, for 1995 and 1994. The expected long-term rate
of return on plan assets was 7.5% for 1995, 1994 and 1993.
The assets of the plan, which are administered by Magna Trust
Company, an affiliate of the Company, consist of a wide variety of
diversified securities including U.S. Treasury and Government
agency obligations, equity securities, equity and fixed income
funds, corporate bonds, market rate deposit accounts and cash.
Salary Reduction Plans
The Company has a salary reduction plan which covers all employees
of the Company meeting certain age and length of service
requirements. The Company also has a supplemental salary reduction
plan for executives who exceed the maximum amounts of deferral
under the Company's salary reduction plan. The Company makes
contributions to these plans in an amount equal to 50% of employee
contributions, subject to certain limitations. Such contributions,
in the aggregate, amounted to $1,249, $1,400 and $1,116 for the
years ended December 31, 1995, 1994 and 1993, respectively.
Supplemental Retirement Plan
The Company has a supplemental retirement plan for certain
executive officers that covers benefits that are in excess of the
maximum amounts allowable under the Company's defined benefit
pension plan.
Compensation Agreements
The Company has entered into agreements with certain executives of
the Company and its subsidiaries which become operative upon a
change in control of the Company and provide for termination
benefits as defined. Compensation which might be payable under
these agreements has not been accrued in the financial statements,
as a change in control and events of termination, as defined, have
not occurred.
Stock-Based Compensation Plans
<TABLE>
The Company has several stock-based compensation plans under which
stock options, restricted stock and performance shares may be
granted to key employees. The Company also has a stock-based
compensation plan for its Board of Directors. The status of stock
options is summarized as follows:
<CAPTION>
1995 1994
-----------------------------------------------------------------
Price per Price per
Shares Share Shares Share
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options:
Granted 221,365 $20.875 - 24.000 271,416 $ 6.760 - 20.875
Expired 37,988 $16.872 - 24.000 17,539 $13.625 - 18.875
Exercised 234,298 $10.714 - 20.903 95,429 $ 6.760 - 18.500
Outstanding 776,838 $12.870 - 24.000 827,759 $10.714 - 20.903
Exercisable 511,267 $12.870 - 24.000 516,107 $10.714 - 20.903
================================================================================================
</TABLE>
Other Postretirement and Postemployment Benefits
The Company does not provide any significant postretirement or
postemployment benefits other than pension.
48
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17 Fair Value of Financial Instruments
Financial Accounting Standards No. 107 (FAS No. 107), "Disclosures
about Fair Value of Financial Instruments," requires disclosure of
fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instruments. Intangible values
assigned to customer relationships are not included in reported
fair values. Accordingly, the aggregate fair value amounts
presented may not necessarily represent the underlying value of
the Company.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments,
which are held for purposes other than trading:
Cash and Cash Equivalents: The carrying amounts reported in the
balance sheet for cash and due from banks and federal funds sold
approximate those assets' fair values.
Securities: Fair values for held-to-maturity and available-for-sale
securities are based on quoted market prices or dealer quotes, where
available. If quoted market prices are not available for a specific
security, fair values are based on quoted market prices of comparable
instruments.
Loans: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on
carrying values. The fair values for fixed-rate loans are
estimated using discounted cash flow analyses, applying interest
rates currently being offered for loans with similar terms to
borrowers of similar credit quality. The fair values for
nonperforming loans are estimated using assumptions regarding
current assessments of collectibility and historical loss
experience.
Deposits: The fair values disclosed for deposits generally payable
on demand, such as noninterest bearing checking accounts, savings
accounts, interest bearing demand deposit accounts and market rate
deposit accounts, are, by definition, equal to the amount payable
on demand at the reporting date. The carrying amounts for variable-
rate, fixed-term market rate deposit accounts and certificates of
deposit approximate their fair values at the reporting date. Fair
values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently
being offered on certificates of similar remaining maturities to a
schedule of aggregated monthly maturities on time deposits.
Federal Funds Purchased, Repurchase Agreements and Other Short-Term
Borrowings: The carrying amounts of federal funds purchased,
repurchase agreements and other short-term borrowings approximate
their fair values at the reporting date.
Long-Term Debt: The fair value of the Company's long-term debt is
based on quoted market prices for similar issues or estimates
using discounted cash flow analyses, based on the Company's
current incremental borrowing rates for similar types of debt
instruments.
Off-Balance Sheet Financial Instruments: The fair values of loan
commitments and letters of credit are determined using estimated
fees currently charged to enter into similar agreements. The fair
values of these instruments were not significant to the Company's
consolidated financial position.
The fair value of interest rate swaps is estimated using dealer
quoted prices which represent the cost to replace all outstanding
contracts at current market rates, taking into consideration the
current credit worthiness of the counterparties. At December 31,
1995 and 1994, the Company was a party to a $50,000 notional
amount interest rate swap that effectively converted floating rate
available-for-sale securities to fixed rate. The fair value and
carrying amount of this swap reflected unrealized losses of
approximately $300 and $4,800 which were included in available-for-
sale securities at December 31, 1995 and 1994, respectively.
49
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
The carrying amount and estimated fair values of the Company's
remaining financial instruments were as follows:
<CAPTION>
December 31
1995 1994
--------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and due
from banks $ 175,167 $ 175,167 $ 264,434 $ 264,434
Federal funds sold 47,046 47,046 17,496 17,496
Held-to-maturity
securities 126,248 130,365 267,829 263,090
Available-for-sale
securities 1,238,616 1,238,616 949,345 949,345
Net loans 3,160,143 3,161,882 2,924,210 2,885,936
==========================================================================================
Financial Liabilities:
Deposits $3,888,266 $3,901,862 $3,672,755 $3,647,158
Federal funds
purchased 41,790 41,790 129,870 129,870
Repurchase
agreements 368,861 368,861 291,645 291,645
Other short-term
borrowings 50,000 50,000 15,000 15,000
Long-term debt 93,071 101,575 104,453 103,276
==========================================================================================
</TABLE>
18 Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Company offers a variety of
financial products to its customers to aid them in meeting their
requirements for liquidity, credit enhancement and interest rate
protection. Generally accepted accounting principles recognize these
transactions as contingent liabilities and, accordingly, they are not
reflected in the accompanying financial statements. Following is a
discussion of these transactions.
Letters of Credit: These transactions are used by the Company's
customers as a means of improving their credit standing in
transactions with unaffiliated third parties. Under these
agreements, the Company agrees to honor certain financial
commitments in the event that its customers are unable to do so.
Net outstanding standby letters of credit amounted to $33,493 and
$32,058 at December 31, 1995 and 1994, respectively. Commercial
letters of credit outstanding amounted to $393 and $2,017 at
December 31, 1995 and 1994, respectively.
Management conducts regular reviews of these instruments on an
individual customer basis, and the results are considered in
assessing the adequacy of the Company's reserve for loan losses.
Management does not anticipate any material losses as a result of
the letters of credit.
Loan Commitments: At December 31, 1995 and 1994, the Company had
commitments outstanding to extend credit totaling approximately
$549,970 and $507,222, respectively. These commitments generally
require the customers to maintain certain credit standards. The
Company evaluates each customer's credit worthiness on a case-by-
case basis. The amount of collateral obtained, if deemed necessary, is
based on management's credit evaluation of the counterparty and
generally consists of certificates of deposit, marketable securities
or deeds of trust, in addition to various other forms of collateral
such as accounts receivable, inventory and fixed assets.
19 Legal Proceedings
Various claims and lawsuits, incidental to the ordinary course of
business, are pending against the Company and its subsidiaries. In
the opinion of management, after consultation with legal counsel,
resolution of these matters is not expected to have a material
effect on the Company's financial statements.
20 Parent Company Condensed Financial Statements
Following are the condensed financial statements of Magna Group,
Inc. (Parent Company Only) for the periods indicated:
50
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
CONDENSED BALANCE SHEETS
<CAPTION>
December 31
1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 17,678 $ 7,134
Held-to-maturity securities (approximates market value) 4,000 4,000
Investment in subsidiaries 440,128 382,253
Premises and equipment 3,710 2,742
Other assets 15,667 10,995
- ---------------------------------------------------------------------------------------------------------------
Total Assets $481,183 $407,124
===============================================================================================================
LIABILITIES
Long-term debt $ 29,398 $ 30,717
Other liabilities 5,741 5,095
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities 35,139 35,812
TOTAL STOCKHOLDERS' EQUITY 446,044 371,312
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $481,183 $407,124
===============================================================================================================
</TABLE>
<TABLE>
CONDENSED STATEMENTS OF INCOME
<CAPTION>
Year Ended December 31
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Dividends received from subsidiaries $32,856 $28,883 $21,461
Management fee income 39,509 30,590 20,277
Other income 967 584 916
- ---------------------------------------------------------------------------------------------------------------
73,332 60,057 42,654
EXPENSE
Interest 3,215 3,638 3,652
Other expenses 43,266 37,250 27,738
- ---------------------------------------------------------------------------------------------------------------
46,481 40,888 31,390
Income before income tax benefit and equity
in undistributed net income of subsidiaries 26,851 19,169 11,264
INCOME TAX BENEFIT 2,822 3,386 3,619
- ---------------------------------------------------------------------------------------------------------------
29,673 22,555 14,883
Equity in undistributed earnings of subsidiaries 21,549 22,475 22,604
- ---------------------------------------------------------------------------------------------------------------
Net Income $51,222 $45,030 $37,487
===============================================================================================================
</TABLE>
51
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 51,222 $ 45,030 $ 37,487
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation, amortization and accretion 2,574 331 (1,547)
Deferred income tax expense (benefit) (726) 2,555 2,925
Equity in undistributed earnings of subsidiaries (21,549) (22,475) (22,604)
Increase in other assets (4,532) (4,103) (3,708)
Increase (decrease) in other liabilities 519 (3,062) (1,870)
- --------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 27,508 18,276 10,683
INVESTING ACTIVITIES
Capital contributions to subsidiaries - - (8,296)
Purchases of premises and equipment (1,737) (1,175) (1,338)
Cash and cash equivalents of acquired institution,
net of cash paid - - 211
Purchase of held-to-maturity securities - (4,000) -
Other, net - - 30
- --------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (1,737) (5,175) (9,393)
FINANCING ACTIVITIES
Cash dividends (22,201) (20,128) (17,623)
Net decrease in short-term borrowings - - (1,125)
Other, net 6,974 1,738 1,733
- --------------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (15,227) (18,390) (17,015)
- --------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 10,544 (5,289) (15,725)
Cash and cash equivalents at beginning of year 7,134 12,423 28,148
- --------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 17,678 $ 7,134 $ 12,423
==============================================================================================================
During 1995, 1994 and 1993, the parent company received income tax refunds of $2,615, $1,144 and $4,090 and
made interest payments of $2,598, $4,917 and $4,888, respectively. During 1995, 1994 and 1993, the parent
company converted a carrying amount of $1,933, $1,046 and $260 of capital notes into 110,567, 59,833 and
14,872 shares of common stock, respectively.
</TABLE>
52
<PAGE> 55
REPORT OF INDEPENDENT AUDITORS
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
Magna Group, Inc.
We have audited the accompanying consolidated balance sheets of
Magna Group, Inc. as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Magna Group, Inc. at December 31, 1995 and 1994, and
the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
St. Louis, Missouri
January 17, 1996
53
<PAGE> 56
<TABLE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<CAPTION>
Fourth Third Second First
(In thousands, except per share data) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Interest income $91,399 $88,480 $85,026 $82,263
Interest expense 44,862 43,142 39,736 36,577
Net interest income 46,537 45,338 45,290 45,686
Provision for loan losses 2,501 3,562 2,262 1,667
Noninterest income 12,561 12,098 12,123 11,081
Noninterest expense 36,107 34,675 38,146 37,289
Income tax expense 6,437 6,064 4,606 6,176
- --------------------------------------------------------------------------------------------------------
Net income $14,053 $13,135 $12,399 $11,635
========================================================================================================
Per common share
Net income:
Primary $.50 $.47 $.45 $.42
Fully diluted .49 .46 .44 .41
Dividends .20 .20 .20 .20
========================================================================================================
1994
Interest income $80,150 $74,778 $68,979 $65,654
Interest expense 33,376 30,207 26,853 26,306
Net interest income 46,774 44,571 42,126 39,348
Provision for loan losses 1,900 900 1,000 1,100
Noninterest income 11,838 11,576 12,779 11,310
Noninterest expense 37,671 37,365 38,220 36,957
Income tax expense 6,185 5,464 5,143 3,387
- --------------------------------------------------------------------------------------------------------
Net income $12,856 $12,418 $10,542 $ 9,214
========================================================================================================
Per common share
Net income:
Primary $.47 $.46 $.40 $.36
Fully diluted .46 .45 .40 .35
Dividends .19 .19 .19 .19
========================================================================================================
</TABLE>
54
<PAGE> 57
MAGNA LOCATIONS
MAGNA GROUP, INC.
One Magna Place
1401 South Brentwood Boulevard
St. Louis, Missouri 63144
(314) 963-2500
MAGNA BANK
ILLINOIS LOCATIONS
Alton - Region 4
2850 Homer Adams Parkway
Alton, Illinois 62002
(618) 463-4600
Ashley - Region 7
156 North East Railroad Road
P.O. Box 297
Ashley, Illinois 62808
(618) 485-2208
Belleville - Region 2
19 Public Square
Belleville, Illinois 62220
(618) 234-0020
Carlyle Plaza
Super Money Market
110 Carlyle Plaza Drive
Belleville, Illinois 62221
(618) 233-9394
655 Carlyle Road
Belleville, Illinois 62221
(618) 234-7985
210 East Washington Street
Belleville, Illinois 62220
(618) 234-3374
4800 West Main Street
Belleville, Illinois 62223
(618) 234-3014
222 East Main Street
Belleville, Illinois 62220
(618) 234-0020
7800 West Main Street
Belleville, Illinois 62223
(618) 394-7788
Bloomington - Region 13
1304 East Empire Street
Bloomington, Illinois 61701
(309) 663-1311
Cahokia - Region 11
900 Upper Cahokia Road
Cahokia, Illinois 62206
(618) 332-3100
1304 Camp Jackson Road
Cahokia, Illinois 62206
(618) 332-3100
Carbondale - Region 8
601 East Main
Carbondale, Illinois 62901
(618) 529-2700
Centralia - Region 7
140 South Locust Street
Centralia, Illinois 62801
(618) 533-2711
1325 East McCord Street
Centralia, Illinois 62801
(618) 533-2711
1324 West Broadway
Centralia, Illinois 62801
(618) 533-2711
Collinsville - Region 3
1 Eastport Plaza Drive
Collinsville, Illinois 62234
(618) 344-2000
Columbia - Region 11
102 North Main Street
Columbia, Illinois 62236
(618) 281-5171
100 Columbia Centre
Columbia, Illinois 62236
(618) 281-5172
Creve Coeur - Region 9
100 South Highland
Creve Coeur, Illinois 61610
(309) 698-4303
Decatur - Region 6
One Millikin Court
Decatur, Illinois 62523
(217) 429-4253
150 North Church at Main
Decatur, Illinois 62523
(217) 429-4253
Fairview Plaza
1355 West King
Decatur, Illinois 62522
(217) 429-4253
333 East Pershing Road
Decatur, Illinois 62526
(217) 875-5000
Dupo - Region 11
100 South Second Street
Dupo, Illinois 62239
(618) 286-3777
East Alton - Region 4
347 West Main Street
East Alton, Illinois 62024
(618) 259-6111
East Peoria - Region 9
111 West Washington
East Peoria, Illinois 61611
(309) 698-2400
Edgemont - Region 2
8740 State Street
Edgemont, Illinois 62203
(618) 397-2122
Fairview Heights - Region 2
10055 Bunkum Road
Fairview Heights, Illinois 62208
(618) 398-5400
5901 North Illinois Street
Fairview Heights, Illinois 62208
(618) 233-0022
10950 Lincoln Trail
Fairview Heights, Illinois 62208
(618) 397-7200
Freeburg - Region 2
210 West White Street
Freeburg, Illinois 62243
(618) 539-5862
202 South State Street
Freeburg, Illinois 62243
(618) 539-5554
Glen Carbon - Region 3
1 Cottonwood Road
Glen Carbon, Illinois 62034
(618) 656-6500
Godfrey - Region 4
821 Homer Adams Parkway
Godfrey, Illinois 62035
(618) 466-2126
Goreville - Region 8
100 S. Broadway
Goreville, Illinois 62939
(618) 995-2321
Granite City - Region 3
1960 Edison Avenue
Granite City, Illinois 62040
(618) 451-5400
3206 Nameoki Road
Granite City, Illinois 62040
(618) 451-5490
2400 Pontoon Road
Granite City, Illinois 62040
(618) 451-5505
Highland - Region 3
1223 Broadway
Highland, Illinois 62249
(618) 654-4511
55
<PAGE> 58
MAGNA LOCATIONS
Hoyleton - Region 7
85 East St. Louis Street
P.O. Box 158
Hoyleton, Illinois 62803
(618) 493-7335
Lebanon - Region 2
107 East Schuetz Street
Lebanon, Illinois 62254
(618) 537-4428
Lincoln - Region 12
303 South Kickapoo Street
Lincoln, Illinois 62656
(217) 735-4321
909 Woodlawn Road
Lincoln, Illinois 62656
(217) 735-4321
Madison - Region 3
600 Madison Avenue
Madison, Illinois 62060
(618) 452-3125
Marissa - Region 2
111 North Main Street
Marissa, Illinois 62257
(618) 295-2364
Mascoutah - Region 2
121 East Main Street
Mascoutah, Illinois 62258
(618) 566-2333
McLean - Region 13
Hamilton and Franklin Streets
McLean, Illinois 61754
(309) 874-2313
Morton - Region 9
805 West Jackson
Morton, Illinois 61550
(309) 263-2100
Murphysboro - Region 8
1301 Walnut Street
Murphysboro, Illinois 62966
(618) 684-3191
Nashville - Region 7
112 East St. Louis Street
P.O. Box 71
Nashville, Illinois 62263
(618) 327-3011
New Holland - Region 12
109 West Lincoln Street
New Holland, Illinois 62671
(217) 445-2211
O'Fallon - Region 2
400 East Highway 50
O'Fallon, Illinois 62269
(618) 624-9000
Peoria - Region 9
4516 North Sterling
Peoria, Illinois 61614
(309) 686-6100
107 Southwest Jefferson
Peoria, Illinois 61602
(309) 655-7500
7815 North Knoxville
Peoria, Illinois 61614
(309) 691-7500
210 Northeast Madison
Peoria, Illinois 61602
(309) 655-7573
Rosewood Heights - Region 4
251 East Airline
Rosewood Heights, Illinois 62024
(618) 259-1300
Salem - Region 7
420 West Main
Salem, Illinois 62881
(618) 548-2050
Scott AFB - Region 2
"J" Street at Main Exchange
Scott Air Force Base, Illinois 62225
(618) 744-1144
Sesser - Region 8
201 South Park
Sesser, Illinois 62284
(618) 625-2361
Smithton - Region 2
406 North Main Street
Smithton, Illinois 62285
(618) 234-7111
Sparta - Region 2
143 West Broadway
Sparta, Illinois 62286
(618) 443-2185
Springfield - Region 10
1825 South Sixth Street
Springfield, Illinois 62703
(217) 788-6400
111 South Durkin Drive
Springfield, Illinois 62704
(217) 788-6400
310 South Grand Avenue East
Springfield, Illinois 62703
(217) 788-6400
Stanford - Region 13
206 West Main Street
P.O. Box C
Stanford, Illinois 61774
(309) 379-2841
Swansea - Region 2
1300 North Belt West
Swansea, Illinois 62220
(618) 234-3705
Schnucks Swansea Plaza
2665 North Illinois Street
Swansea, Illinois 62221
(618) 233-8333
Troy - Region 3
100 McDonald Drive
Troy, Illinois 62294
(618) 667-7800
Wood River - Region 4
501 Wesley Drive
Wood River, Illinois 62095
(618) 254-7780
100 Wood River Avenue
Wood River, Illinois 62095
(618) 254-7700
MISSOURI LOCATIONS
Arnold - Region 1
Arnold Mall
Super Money Market
30 - A Arnold Mall
Arnold, Missouri 63010
(314) 282-2088
Ballwin - Region 1
Ballwin Plaza
Super Money Market
15425 Manchester Road
Ballwin, Missouri 63011
(314) 391-4019
Brentwood - Region 1
One Magna Place
1401 South Brentwood Boulevard
Brentwood, Missouri 63144
(314) 963-2600
2323 South Hanley Road
Brentwood, Missouri 63144
(314) 644-3655
Bridgeton - Region 1
12296 St. Charles Rock Road
Bridgeton, Missouri 63044
(314) 291-2845
Chesterfield - Region 1
100 Chesterfield Industrial Blvd.
Chesterfield, Missouri 63005
(314) 537-0100
Friendship Village
Chesterfield, Missouri 63017
(314) 537-9752
56
<PAGE> 59
MAGNA LOCATIONS
Creve Coeur - Region 1
11456 Olive Boulevard
Creve Coeur, Missouri 63141
(314) 993-0000
12395 Olive Boulevard
Creve Coeur, Missouri 63141
(314) 576-7733
Florissant - Region 1
1100 Shackelford Road
Florissant, Missouri 63031
(314) 837-1510
11920 New Halls Ferry Road
Florissant, Missouri 63033
(314) 831-7770
Jennings - Region 1
9269 Lewis and Clark Boulevard
Jennings, Missouri 63136
(314) 869-1300
Ladue - Region 1
8866 Ladue Road
Ladue, Missouri 63124
(314) 862-2127
Mehlville - Region 1
4339 Butler Hill Road
Mehlville, Missouri 63128
(314) 487-1410
Oakville - Region 1
5505 Telegraph Road
Oakville, Missouri 63129
(314) 487-2200
O'Fallon - Region 5
1201 State Route K
O'Fallon, Missouri 63366
(314) 978-2282
St. Ann - Region 1
10449 St. Charles Rock Road
St. Ann, Missouri 63074
(314) 426-6900
20 Northwest Plaza
St. Ann, Missouri 63074
(314) 291-0660
St. Charles - Region 5
2216 West Elm Street
St. Charles, Missouri 63301
(314) 946-6616 or 724-4000
423 First Capitol Drive
St. Charles, Missouri 63301
(314) 946-6616 or 724-4000
2050 Old Highway 94 South
St. Charles, Missouri 63303
(314) 946-7575
1416 Harvestowne Industrial Drive
St. Charles, Missouri 63304
(314) 928-4700
St. Louis - Region 1
7th & Chestnut
St. Louis, Missouri 63101
(314) 231-3333
St. Peters - Region 5
St. Peters Square
Super Money Market
581 Mid-Rivers Mall Drive
St. Peters, Missouri 63376
(314) 278-9460
3899 South Service Road
St. Peters, Missouri 63376
(314) 441-4664
Shrewsbury - Region 1
7205 Watson Road
Shrewsbury, Missouri 63119
(314) 481-4480
Spanish Lake - Region 1
1944 Redman Road
Spanish Lake, Missouri 63138
(314) 355-8433
Sunset Hills - Region 1
10722 Sunset Hills Plaza
Sunset Hills, Missouri 63127
(314) 821-6444
Town & Country - Region 1
14323 South Outer Road
Town & Country, Missouri 63017
(314) 434-6664
Super Money Market
1060 Woods Mill Plaza
Town & Country, Missouri 63011
(314) 230-3002
Wellston - Region 1
6313 Dr. Martin Luther King Drive
Wellston, Missouri 63133
(314) 227-2278
MAGNA TRUST COMPANY
ILLINOIS LOCATIONS
Belleville
One South Church Street
Belleville, Illinois 62220
(618) 233-2120
4800 West Main Street
Belleville, Illinois 62223
(618) 234-3014
Bloomington
1304 East Empire Street
Bloomington, Illinois 61701
(309) 663-1311
Centralia
140 South Locust Street
Centralia, Illinois 62801
(618) 533-2711
Decatur
One Millikin Court
Decatur, Illinois 62525
(217) 429-4253
East Alton
347 West Main Street
East Alton, Illinois 62024
(618) 259-6111
Granite City
1960 Edison Avenue
Granite City, Illinois 62040
(618) 451-5421
Murphysboro
1301 Walnut Street
Murphysboro, Illinois 62966
(618) 684-5911
Peoria
107 Southwest Jefferson
Peoria, Illinois 61602
(309) 655-7500
Springfield
1825 South Sixth Street
Springfield, Illinois 62703
(217) 788-6400
MISSOURI LOCATION
St. Louis
1401 South Brentwood Boulevard
St. Louis, Missouri 63144
(314) 963-2401
MGI GROUP, INC.
INBANK GROUP, INC.
1401 South Brentwood Boulevard
Suite 300
St. Louis, Missouri 63144
(314) 968-4131
57
<PAGE> 60
DIRECTORS AND EXECUTIVE OFFICERS
Magna Group, Inc.
Directors
===============================================================================
G. Thomas Andes
Chairman of the Board and
Chief Executive Officer, Magna Group, Inc.
James A. Auffenberg, Jr.
President and Director of
St. Clair AutoMall,
Auffenberg Belleville and
Auffenberg Enterprises of Illinois, Inc.
William E. Cribbin
President, N-K Scratch Pads, Inc.
Wayne T. Ewing
Senior Vice President,
Kerr-McGee Corporation
Donald P. Gallop
Chairman, Gallop, Johnson & Neuman, L.C.
John G. Helmkamp, Jr.
Retired Chairman of the Board and
Chief Executive Officer, River Bend Bancshares, Inc.
C. E. Heiligenstein
Attorney, Heiligenstein & Badgley
Professional Corporation
Carl G. Hogan, Sr.
Chairman of the Board and
Chief Executive Officer,
Hogan Motor Leasing, Inc.
Franklin A. Jacobs
Chairman of the Board and
Chief Executive Officer, Falcon Products, Inc.
Wendell J. Kelley
Retired Chairman of the Board and
Chief Executive Officer, Illinois
Power Company
S. Lee Kling
Chairman of the Board,
Kling Rechter & Co.
Ralph F. Korte
Chairman of the Board,
Korte Construction Company
Robert E. McGlynn
Attorney, McGlynn & McGlynn
Frank R. Trulaske, III
Owner and President,
True Fitness Technology, Inc.
Owner and Director,
True-Titan, Inc.
George T. Wilkins, Jr., M.D.
Physician
Executive Officers
===============================================================================
G. Thomas Andes
Chairman of the Board and
Chief Executive Officer
Linda K. Fabel
Executive Vice President,
Retail Banking
David D. Harris
Executive Vice President,
Credit Administration
Gary D. Hemmer
Executive Vice President,
Administration
Ronald A. Buerges
Senior Vice President and
Acting Chief Financial Officer
Robert M. Olson, Jr.
Executive Vice President,
Operations & Technology
58
<PAGE> 61
If you would like additional
information regarding
Magna Stockholder Services
or
Magna Customer Services,
please complete and return
the attached postage paid
response cards.
We provide the following toll
free phone numbers to help
you obtain further
information about Magna
and our services:
Magna Trust Company
1-800-900-4548
MGI Group, Inc.
1-800-621-6004
Service Express Hotline
1-800-333-1346
Investor Relations
Department
1-800-785-MAGI
Printed on recycled paper
<PAGE> 62
MAGNA
GROUP, INC.
Magna Customer Services
Please send me more information about:
/ / Magna Bank products and services
/ / Checking and Savings Accounts
/ / Certificates of Deposit
/ / Mortgage Loan Products
/ / Credit Cards
/ / Magna Trust services
/ / MGI investment services
/ / Magna's community reinvestment program
/ / Other -----------------------------------------------------------
-----------------------------------------------------------------
Name -----------------------------------------------------------------
Address --------------------------------------------------------------
City ----------------------------- State ------------ Zip ------------
Phone Number ( ) ---------------------------------------------------
MAGNA
GROUP, INC.
Magna Stockholder Services
Please send me more information about:
/ / Magna's Dividend Reinvestment Plan and Stock Purchase Plan
/ / Direct deposit of dividends into the bank account of my choice
/ / Other -----------------------------------------------------------
-----------------------------------------------------------------
Stockholder Name(s) --------------------------------------------------
Address --------------------------------------------------------------
City ----------------------------- State ------------ Zip ------------
Phone Number ( ) ---------------------------------------------------
/ / This is a new address. Please change your records to reflect the
address above.
IMPORTANT: To authorize a change of address, please provide
signatures of everyone to whom the stock is registered.
Stockholder Signature(s): --------------------------------------------
- ----------------------------------------------------------------------
<PAGE> 63
-----------------
! NO POSTAGE !
! NECESSARY !
! IF MAILED !
! IN THE !
! UNITED STATES !
-----------------
- -----------------------------------------------------------
! BUSINESS REPLAY MAIL !
! FIRST CLASS MAIL PERMIT NO. 156 ST. LOUIS, MO !
- -----------------------------------------------------------
POSTAGE WILL BE PAID BY ADDRESSEE
MAGNA GROUP, INC.
INVESTOR RELATIONS DEPARTMENT
1401 South Brentwood Boulevard
St. Louis, Missouri 63144-1401
-----------------
! NO POSTAGE !
! NECESSARY !
! IF MAILED !
! IN THE !
! UNITED STATES !
-----------------
- -----------------------------------------------------------
! BUSINESS REPLAY MAIL !
! FIRST CLASS MAIL PERMIT NO. 156 ST. LOUIS, MO !
- -----------------------------------------------------------
POSTAGE WILL BE PAID BY ADDRESSEE
MAGNA GROUP, INC.
INVESTOR RELATIONS DEPARTMENT
1401 South Brentwood Boulevard
St. Louis, Missouri 63144-1401
<PAGE> 64
COMMUNITY BANK PRESIDENTS AND REGIONS
[COMMUNITY BANK PRESIDENTS AND REGIONS MAP]
[PHOTO]
Jerry Von Rohr 1
St. Louis Region
$992.9 million in deposits
Market Share 3.75%
24 Locations
[PHOTO]
Thomas Holloway 2
St. Clair Region
$853.0 million in deposits
Market Share 33.10%
22 Locations
[PHOTO]
John Fruit 3
Madison Region
$326.0 million in deposits
Market Share 15.85%
8 Locations
[PHOTO] [PHOTO]
Thomas Coles 4 Phillip Melton 5
River Bend Region St. Charles Region
$260.2 million in deposits $236.2 million in deposits
Market Share 19.22% Market Share 11.94%
6 Locations 7 Locations
[PHOTO] [PHOTO]
Corydon Nicholson 6 Clarence DeVore 7
Decatur Region Centralia Region
$219.4 million in deposits $189.8 million in deposits
Market Share 12.80% Market Share 15.12%
4 Locations 8 Locations
[PHOTO] [PHOTO]
John Dosier 8 Paul Tenarvitz 9
Carbondale Region Peoria Region
$179.7 million in deposits $173.4 million in deposits
Market Share 9.75% Market Share 3.57%
4 Locations 7 Locations
[PHOTO] [PHOTO]
Thomas Curtright 10 Donald Schaack 11
Springfield Region Columbia Region
$129.4 million in deposits $125.5 million in deposits
Market Share 4.70% Market Share 29.57%
3 Locations 5 Locations
[PHOTO] [PHOTO]
Wallace Reese 12 Richard Stroyan 13
Lincoln Region Bloomington Region
$95.3 million in deposits $91.5 million in deposits
Market Share 19.30% Market Share 4.80%
3 Locations 3 Locations
<PAGE> 65
MISSION STATEMENT
Magna is committed to enhancing
stockholder value by being a
profitable and leading supplier of
high quality retail financial services
to individuals and businesses in
the community markets it serves.
MAGNA
GROUP, INC.
One Magna Place
1401 South Brentwood Boulevard
St. Louis, Missouri 63144-1401
(314) 963-2500
<PAGE> 66
APPENDIX
All page numbers referenced in this Appendix relate to the printed
Annual Report. The order of the sections is as they appear in the
printed Annual Report. The colored graphs and pictures that appear
in the printed document vary in size.
A bar graph titled "Net Income (In millions of dollars)" appears in
the lower left-hand corner on page 1. The graph shows net income
for the past five years. Listed below are the plot points:
1991 3.84
1992 30.19
1993 37.49
1994 45.03
1995 51.22
The following footnote appears at the base of the graph:
Four consecutive years of record earnings have enhanced stockholder
value.
A bar graph titled "Assets (In billions of dollars)" appears in the
center at the bottom of page 1. The graph shows assets for the
past five years at December 31. Listed below are the plot points:
1991 3.78
1992 3.73
1993 4.13
1994 4.64
1995 4.95
The following footnote appears at the base of the graph:
Total assets have grown at a compound annual rate of 7.0% per year
since 1991.
A bar graph titled "Net Income Per Share (In dollars)" appears in
the lower right-hand corner on page 1. The graph shows primary net
income per share for the past five years. Listed below are the
plot points.
1991 .28
1992 1.41
1993 1.53
1994 1.69
1995 1.84
The following footnote appears at the base of the graph:
Consistent increases in net income per share, 9.3% since 1992,
reflect the success of Magna's core strategies.
A photo appears in the lower right-hand corner on page 2. The
photo depicts the computer room at Magna's new operations center.
The following caption describes the photo:
The computer room at the new operations center.
A photo appears in the upper right-hand corner on page 3. The
photo depicts the exterior of Magna's operations center.
The following caption describes the photo:
Magna's state-of-the-art operations center in Belleville,
Illinois (above right).
A photo appears in the lower right-hand corner on page 4. The
photo depicts the interior of Magna's Gateway One Retail
Banking Center in downtown St. Louis, Missouri.
The following caption describes the photo:
Magna's Gateway One Retail Banking Center in downtown St.
Louis, Missouri.
A photo appears at the bottom of page 5. The photo features G.
Thomas Andes, Chairman of the Board and Chief Executive Officer of
Magna Group, Inc.
A bar graph titled "Number of Common Shares Outstanding (In
millions)" appears in the center at the bottom of page 6. The
graph shows the number of common shares outstanding for the past
five years at December 31. Listed below are the plot points:
1991 19.47
1992 24.07
1993 25.73
1994 27.51
1995 28.00
A bar graph titled "Book Value (In dollars)" appears in the lower
right-hand corner of page 6. The graph shows the book value of
common shares for the past five years at December 31. Listed below
are the plot points:
1991 12.72
1992 13.39
1993 14.02
1994 13.49
1995 15.93
A line graph titled "Ten-Year Total Return To Stockholders (December
31, 1985 - December 31, 1995) (In dollars)" appears in the middle on
the left-hand side of page 7. The graph shows the growth of a $1,000
investment made on December 31, 1985 to $2,725 as of December 31,
1995, which equates to a ten-year compound average annual total
return of 10.55%.
The following footnote appears at the base of the graph:
Assumes initial investment of $1,000 and reinvestment of all
dividends. Adjusted to reflect all stock dividends within the ten-
year period.
A bar graph titled "Market Capitalization (In million of dollars)"
appears in the lower left-hand corner of page 7. The graph shows
the market capitalization for the past five years at December 31.
Listed below are the plot points:
1991 204.4
1992 409.3
1993 495.3
1994 481.5
1995 665.0
A bar graph titled "Closing Price Per Common Share (In dollars)"
appears in the center at the bottom of page 7. The graph shows the
closing price per common share for the past five years at December
31. Listed below are the plot points:
1991 10.50
1992 17.00
1993 19.25
1994 17.50
1995 23.75
A bar graph titled "Dividends Per Share (In dollars)" appears in
the lower right-hand corner on page 7. The graph shows the
dividends per share for the past five years at December 31. Listed
below are the plot points:
1991 .68
1992 .68
1993 .72
1994 .76
1995 .80
A photo appears at the bottom of page 9. The photo features seven
members of Magna's management team.
The following caption which appears on page 8 describes the photo:
Magna's management team is committed to enhancing stockholder value
(left to right) David Bramlet, Executive Vice President, Alternate
Delivery Systems; David Harris, Executive Vice President, Credit
Administration; Ronald Buerges, Senior Vice President, Acting Chief
Financial Officer; Linda Fabel, Executive Vice President, Retail
Banking; James Jolley, Executive Vice President, Investments; Gary
Hemmer, Executive Vice President, Administration; Robert Olson,
Executive Vice President, Operations & Technology.
A photo appears in the lower right-hand corner of page 10. The
photo features two of Magna's affiliates' presidents discussing
financial services with a prospective customer.
The following caption describes the photo:
Magna provides a wide array of financial services to assist
customers in achieving their financial goals. Roger Beaman, (left)
President of Magna Trust and Jeff Auld, President of MGI explain
the benefits of various investment options.
A photo appears on the right side of page 11. The photo depicts a
middle aged couple seeking information on financial services.
A photo appears in the lower left-hand corner on page 12. The
photo features an officer of Magna discussing financial services
with a customer.
The following caption describes the photo:
Building strong customer relationships and providing quality
service is a priority of Magna's employees. Valerie DuCharme,
Assistant Vice President, delivers first class service by visiting
with her customers and understanding their needs.
A photo appears on the left side of page 13. The photo depicts an
elderly couple seeking information on financial services.
A photo appears on the left side of page 14. The photo depicts a
young couple seeking information on financial services.
A photo appears on the upper right-hand corner of page 15. The
photo features two of Magna's lending officers discussing mortgage
options with prospective new homeowners.
The following caption describes the photo:
Magna has developed innovative mortgage products to help customers
make their dreams a reality. Bob Christiansen, (left) Senior Vice
President, and Tom Kaminski, Senior Vice President, discuss
mortgage options with prospective new homeowners (above right).
A map titled "Community Bank Presidents and Regions" appears on the
inside back cover. It features a map of the United States of
America, with the States of Missouri and Illinois enlarged and
extended forward. Within the States are triangles which are
numbered from 1 to 13. The numbers correspond to Magna's regions
within the respective States, as associated with the photographs
and captions regarding the individual community bank presidents.
<PAGE> 1
<TABLE>
EXHIBIT 21.1
SUBSIDIARIES OF MAGNA GROUP, INC.
<CAPTION>
SUBSIDIARY JURISDICTION OF ORGANIZATION
---------- ----------------------------
<S> <C>
Landmark Bancshares Corporation Missouri
Magna Bank, National Association United States of America
Magna Data Services, Inc. Illinois
Carboro Ltd. Turks & Caicos Islands
Landmark Acquisition Corporation Missouri
Landmark TCI Ltd. Turks & Caicos Islands
Magna Trust Company Illinois
MGI Group, Inc. Missouri
MGI Investments, Inc. Missouri
MGI Insurance Agency, Inc. Missouri
InBank Group, Inc. Missouri
InBank Investments, Inc. Missouri
InBank Insurance Agency, Inc. Missouri
Brentco, Inc. Missouri
Quatre Corp. Missouri
REDC, Inc. Missouri
Mega Insurance Agency, Inc. Missouri
Magna Realty Company Missouri
</TABLE>
One hundred percent of the capital stock of each of the above listed
subsidiaries is owned directly by Magna Group, Inc. or indirectly through
wholly-owned subsidiaries of Magna Group, Inc.
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Magna Group, Inc. of our report dated January 17, 1996 included in the 1995
Annual Report to Stockholders of Magna Group, Inc.
We also consent to the incorporation by reference into each registration
statement listed below of our report dated January 17, 1996 with respect to
the consolidated financial statements of Magna Group, Inc. incorporated herein
by reference in the Annual Report (Form 10-K) for the year ended December 31,
1995.
<TABLE>
<CAPTION>
Form Number
- ---- ------
<C> <C> <S>
S-8 33-59087 The Magna Group, Inc. Employee Stock Purchase Plan
S-3 33-88704 Magna Group, Inc. Dividend Reinvestment Plan and Stock
Purchase Plan
S-8 2-98250 Magna Group, Inc. Savings and Stock Investment Plan
S-8 33-61460 Magna Group, Inc. 1992 Long Term Performance Plan
S-8 33-61464 Magna Group, Inc. Directors' Stock Option Plan
S-8 33-24297 Magna Group, Inc. 1987 Stock Option Plan
S-8 33-47010 Landmark Bancshares Corporation 1982 Capital Accumulation
Plan and 1986 Nonqualified Stock Option Plan
</TABLE>
St. Louis, Missouri /s/ Ernst & Young LLP
March 28, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE MAGNA GROUP, INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 175,167
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 47,046
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,238,616
<INVESTMENTS-CARRYING> 126,248
<INVESTMENTS-MARKET> 130,365
<LOANS> 3,202,766
<ALLOWANCE> 42,623
<TOTAL-ASSETS> 4,947,499
<DEPOSITS> 3,888,266
<SHORT-TERM> 460,651
<LIABILITIES-OTHER> 59,467
<LONG-TERM> 93,071
0
41
<COMMON> 55,996
<OTHER-SE> 390,007
<TOTAL-LIABILITIES-AND-EQUITY> 4,947,499
<INTEREST-LOAN> 266,146
<INTEREST-INVEST> 79,119
<INTEREST-OTHER> 1,903
<INTEREST-TOTAL> 347,168
<INTEREST-DEPOSIT> 138,025
<INTEREST-EXPENSE> 164,317
<INTEREST-INCOME-NET> 182,851
<LOAN-LOSSES> 9,992
<SECURITIES-GAINS> 356
<EXPENSE-OTHER> 146,217
<INCOME-PRETAX> 74,505
<INCOME-PRE-EXTRAORDINARY> 74,505
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,222
<EPS-PRIMARY> 1.84
<EPS-DILUTED> 1.80
<YIELD-ACTUAL> 4.30
<LOANS-NON> 24,564
<LOANS-PAST> 6,198
<LOANS-TROUBLED> 58
<LOANS-PROBLEM> 10,342
<ALLOWANCE-OPEN> 43,991
<CHARGE-OFFS> 16,400
<RECOVERIES> 5,040
<ALLOWANCE-CLOSE> 42,623
<ALLOWANCE-DOMESTIC> 42,623
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,510
</TABLE>
