SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Date of Report (Date of earliest event reported): August 30, 1996
---------------
Magna Group, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-8234 37-0996453
------------------------ ------------ -------------------
(State of Incorporation) (Commission (IRS Employer
File Number) Identification No.)
One Magna Place, 1401 South Brentwood Boulevard,
St. Louis, Missouri 63144-1401
----------------------------------------------------- ----------
(Address of principal executive offices) Zip Code
(314) 963-2500
--------------------------------------------------------
(Registrant's telephone number, including area code) <PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
On August 30, 1996, Magna Group, Inc., a corporation orga-
nized and existing under the laws of the State of Delaware ("Ma-
gna"), and Homeland Bankshares Corporation, a corporation orga-
nized and existing under the laws of the State of Iowa ("Home-
land"), and each registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended, entered into an
Agreement and Plan of Reorganization (the "Merger Agreement"),
pursuant to which Homeland will be merged with a wholly owned sub-
sidiary of Magna (the "Merger"). The Boards of Directors of both
Magna and Homeland approved the Merger Agreement and the transac-
tions contemplated thereby at their meetings held on August 30,
1996.
In accordance with the terms of the Merger Agreement, each
share of Homeland common stock, par value $12.50 per share ("Home-
land Common Stock"), outstanding immediately prior to the effec-
tive time of the Merger (the "Effective Time") may be exchanged
for 1.55 shares of Magna common stock, par value $2.00 per share
("Magna Common Stock"), for 57% of the aggregate consideration or
for $37.50 in cash for 43% of the aggregate consideration, subject
to adjustment as of closing to equalize the value of the cash and
stock consideration. Homeland shareholders may elect to receive
either all Magna Common Stock, all cash or a mixture of Magna Com-
mon Stock and cash for their shares of Homeland Common Stock, sub-
ject to certain limitations.
The Merger is intended to constitute a tax-free reorganiza-
tion under the Internal Revenue Code of 1986, as amended, and to
be accounted for as a purchase. Following the consummation of the
Merger, Erl A. Schmiesing, Chairman, President and Chief Executive
Officer of Homeland, and Douglas K. Shull will become directors of
Magna.
Consummation of the Merger is subject to various conditions,
including: (i) receipt of approval by the shareholders of Homeland
of appropriate matters relating to the Merger Agreement and the
Merger, as required to be approved under applicable law; (ii) re-
ceipt of certain regulatory approvals from the Board of Governors
of the Federal Reserve System and other federal and state regula-
tory authorities; (iii) receipt of opinions of counsel as to the
tax consequences of certain aspects of the Merger; (iv) registra-
tion of the shares of Magna Common Stock to be issued in the
Merger under the Securities Act of 1933, as amended (the "1933
Act") and applicable state securities laws; and (v) satisfaction
of certain other conditions.
The Merger Agreement and the transactions contemplated
thereby will be submitted for approval at a meeting of the share-
holders of Homeland. Prior to such meeting, Magna will file a<PAGE>
registration statement with the Securities and Exchange Commission
registering under the 1933 Act the Magna Common Stock to be issued
in the Merger. Such shares of Magna Common Stock will be offered
to the Homeland shareholders pursuant to a prospectus that will
also serve as a proxy statement for the Homeland shareholders'
meeting.
The preceding description of the Merger Agreement is quali-
fied in its entirety by reference to the copy of the Merger Agree-
ment included as Exhibit 2 hereto and which is hereby incorporated
herein by reference.
Immediately after executing the Merger Agreement, Magna and
Homeland entered into a Stock Option Agreement, dated August 30,
1996 (the "Stock Option Agreement"), pursuant to which Homeland
granted to Magna an option to purchase, under certain circum-
stances, up to 1,134,972 shares of Homeland Common Stock at a
price, subject to certain adjustments, of $34.00 per share (the
"Magna Option"). The Magna Option if exercised, would equal, be-
fore giving effect to the exercise of the Magna Option, 19.9% of
the total number of shares of Homeland Common Stock outstanding as
of August 30, 1996. The Magna Option was granted by Homeland as a
condition and inducement to Magna's willingness to enter into the
Merger Agreement. Under certain circumstances, Homeland may be
required to repurchase the Magna Option or the shares acquired
pursuant to the exercise of the Magna Option.
The preceding description of the Stock Option Agreement is
qualified in its entirety by reference to the copy of the Stock
Option Agreement included as Exhibit 99.1 hereto and which is
hereby incorporated herein by reference.
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits
--------
Exhibit Description
------- -----------
2 Agreement and Plan of Reorganization, dated as of August
30, 1996, by and between Magna Group, Inc. and Homeland
Bankshares Corporation.
99.1 Stock Option Agreement, dated August 30, 1996, between
Magna Group, Inc., as grantee, and Homeland Bankshares
Corporation, as issuer.
99.2 Text of press release, dated September 3, 1996, issued
by Magna Group, Inc.<PAGE>
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
MAGNA GROUP, INC.
(Registrant)
------------
By: /s/ Ronald A. Buerges
------------------------
Ronald A. Buerges
Executive Vice President and
Chief Financial Officer
Dated: September 6, 1996<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
2 Agreement and Plan of Reorganization, dated as of
August 30, 1996, by and between Magna Group, Inc.
and Homeland Bankshares Corporation.
99.1 Stock Option Agreement, dated August 30, 1996, be-
tween Magna Group, Inc., as grantee, and Homeland
Bankshares Corporation, as issuer.
99.2 Text of press release, dated September 3, 1996,
issued by Magna Group, Inc.
Exhibit 2
AGREEMENT AND PLAN OF REORGANIZATION
between
MAGNA GROUP, INC.
as Buyer,
and
HOMELAND BANKSHARES CORPORATION,
as Seller
Dated August 30, 1996
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement") is made and entered into on August 30, 1996 by
and between MAGNA GROUP, INC., a Delaware corporation
("Buyer"), and HOMELAND BANKSHARES CORPORATION, an Iowa cor-
poration ("Seller").
W I T N E S S E T H:
WHEREAS, Buyer is a registered bank holding company
under the Bank Holding Company Act of 1956, as amended (the
"Holding Company Act"); and
WHEREAS, Seller is a registered bank holding com-
pany under the Holding Company Act; and
WHEREAS, the Board of Directors of Seller and the
Board of Directors of Buyer have approved the merger (the
"Merger") of Seller with and into a wholly owned subsidiary
of Buyer organized or to be organized under the laws of Iowa
("Merger Sub") pursuant to the terms and subject to the con-
ditions of this Agreement; and
WHEREAS, as a condition to, and immediately follow-
ing the execution of this Agreement, Buyer and Seller will
enter into a stock option agreement (the "Stock Option Agree-
ment") in the form attached hereto as Exhibit A; and
WHEREAS, the parties desire to provide for certain
undertakings, conditions, representations, warranties and
covenants in connection with the transactions contemplated by
this Agreement.
NOW THEREFORE, in consideration of the premises and
the representations, warranties and agreements herein con-
tained, the parties agree as follows:
ARTICLE I
THE MERGER
1.01. The Merger. (a) Subject to the terms and
conditions of this Agreement, Seller shall be merged with and<PAGE>
into Merger Sub in accordance with the Iowa Business Corpo-
ration Act (the "Iowa Act") and the separate corporate ex-
istence of Seller shall cease. Merger Sub shall be the sur-
viving corporation of the Merger (sometimes referred to here-
in as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Iowa.
1.02. Closing. The closing (the "Closing") of the
Merger shall take place at 10:00 a.m., local time, on the
date that the Effective Time (as defined in Section 1.03)
occurs, or at such other time, and at such place, as Buyer
and Seller shall agree (the "Closing Date").
1.03. Effective Time. The Articles of Merger
filed with the Secretary of State of the State of Iowa shall
specify the Closing Date as the effective date of the Merger
(the "Effective Date", and the effective time of the Merger,
the "Effective Time"). The parties hereto shall take all ac-
tions necessary to satisfy the requirements for effectuating
the Merger in accordance with the Iowa Act, including by
adopting Articles of Merger in the form required under the
Iowa Act. The Articles of Merger shall include the Plan of
Merger set forth as Exhibit B. Subject to the terms and con-
ditions of this Agreement, the Effective Date shall occur on
such date as Buyer shall notify Seller in writing (such no-
tice to be at least five business days in advance of the Ef-
fective Date) but (i) not earlier than the satisfaction of
all conditions set forth in Section 6.01 (the "Approval
Date") and (ii) subject to clause (i), not later than the
first business day of the first full calendar month commenc-
ing at least five business days after the Approval Date. The
Approval Date shall in no event be earlier than January 1,
1997.
1.04. Additional Actions. If, at any time after
the Effective Time, Buyer or the Surviving Corporation shall
consider or be advised that any further deeds, assignments or
assurances or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of Seller or
Merger Sub or (b) otherwise carry out the purposes of this
Agreement, Seller and Merger Sub and each of their respective
officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to
execute and deliver all such deeds, assignments or assurances
and to do all acts necessary or desirable to vest, perfect or
confirm title and possession to such rights, properties or
assets in the Surviving Corporation and otherwise to carry
-2-<PAGE>
out the purposes of this Agreement, and the officers and di-
rectors of the Surviving Corporation are authorized in the
name of Seller and Merger Sub or otherwise to take any and
all such action.
1.05. Articles of Incorporation and Bylaws. The
Articles of Incorporation and Bylaws of Merger Sub in effect
immediately prior to the Effective Time shall be the Articles
of Incorporation and Bylaws of the Surviving Corporation fol-
lowing the Merger until otherwise amended or repealed.
1.06. Boards of Directors and Officers. At the
Effective Time, the directors and officers of Merger Sub im-
mediately prior to the Effective Time shall be directors and
officers, respectively, of the Surviving Corporation follow-
ing the Merger; such directors and officers shall hold office
in accordance with the Surviving Corporation's Bylaws and ap-
plicable law.
1.07. Conversion of Securities. At the Effective
Time, by virtue of the Merger and without any action on the
part of Buyer, Seller or the holder of any of the following
securities:
(i) Each share of the common stock, par value $.01
per share, of Merger Sub that is issued and outstanding im-
mediately prior to the Effective Time shall remain outstand-
ing and shall be unchanged after the Merger and shall there-
after constitute all of the issued and outstanding capital
stock of the Surviving Corporation; and
(ii) Each share of the common stock, par value
$12.50 per share ("Seller Common Stock"), of Seller issued
and outstanding immediately prior to the Effective Time,
other than any Dissenting Shares (as defined in Section
1.13), shall cease to be outstanding and shall be converted
into and become the right to receive, at the election of the
holder thereof as provided in Section 1.08, either:
(A) 1.55 (as adjusted pursuant to Section
1.09, the "Exchange Ratio") shares of common stock
("Buyer Common Stock"), par value $2.00 per share,
of Buyer and associated Preferred Share Purchase
Rights ("Buyer Rights") issued pursuant to the
rights agreement (the "Buyer Rights Agreement"),
dated as of November 11, 1988, by and between Buyer
and Magna Trust Company, as rights agent (as ad-
justed pursuant to Section 1.09, the "Per Share
Stock Consideration"), or
-3-<PAGE>
(B) $37.50 in cash (as adjusted pursuant to
Section 1.09, the "Per Share Cash Consideration");
provided that the aggregate number of shares of Buyer
Common Stock that shall be issued in the Merger shall
not exceed 5,038,934 (the "Stock Amount").
1.08. Election Procedures. Election forms and
other appropriate and customary transmittal materials (which
shall specify that delivery shall be effected, and risk of
loss and title to the certificates theretofore representing
Seller Common Stock ("Certificates") shall pass, only upon
proper delivery of such Certificates to an exchange agent
designated by Buyer (the "Exchange Agent")) in such form as
Buyer and Seller shall mutually agree ("Election Forms")
shall be mailed 30 days prior to the anticipated Effective
Time or on such other earlier date as Seller and Buyer shall
mutually agree ("Mailing Date") to each holder of record of
Seller Common Stock as of five business days prior to the
Mailing Date ("Election Form Record Date").
Each Election Form shall permit the holder (or the
beneficial owner through appropriate and customary documenta-
tion and instructions) either (i) to elect to receive only
Buyer Common Stock with respect to such holder's Seller Com-
mon Stock ("Stock Election Shares"); (ii) to elect to receive
only cash with respect to such holder's Seller Common Stock
("Cash Election Shares"); (iii) to elect to receive Buyer
Common Stock with respect to 57% of such holder's Seller Com-
mon Stock and cash with respect to 43% of such holder's
Seller Common Stock rounded, in each case, to the nearest
whole share ("Mixed Election Shares"); or (iv) to indicate
that such holder makes no election ("No Election Shares").
Dissenting Shares (as defined below) shall be treated as Cash
Election Shares for purposes of this Section but shall not be
converted into the Per Share Cash Consideration or the Per
Share Stock Consideration except as provided in Section 1.13.
Subject to the provisions of this Section, the Mixed Election
Shares shall be divided by the Exchange Agent into such por-
tion (to be approximately 57% in aggregate) with respect to
which the holder has elected to receive Buyer Common Stock
(the "Mixed Stock Shares") and such portion (to be ap-
proximately 43% in aggregate) with respect to which the
holder has elected to receive cash (the "Mixed Cash Shares")
for the purposes of allocating the total consideration as
specified below, it being the intention that, to the fullest
extent possible, subject to all applicable constraints, all
Mixed Election Shares shall receive the consideration with
-4-<PAGE>
respect to which a Mixed election has been made without re-
gard to the pro rata selection process set forth below.
Any Seller Common Stock with respect to which the
holder (or the beneficial owner, as the case may be) shall
not have submitted to the Exchange Agent an effective, prop-
erly completed Election Form on or before 5:00 p.m. on the
25th day following the Mailing Date (or such other time and
date as Buyer and Seller may mutually agree) (the "Election
Deadline") shall also be deemed to be "No Election Shares."
Buyer shall make available up to two separate Elec-
tion Forms, or such additional Election Forms as the Buyer in
its sole discretion may permit, to all persons who become
holders (or beneficial owners) of Seller Common Stock between
the Election Form Record Date and close of business on the
business day prior to the Election Deadline, and Seller shall
provide to the Exchange Agent all information reasonably nec-
essary for it to perform as specified herein.
Any such election shall have been properly made
only if the Exchange Agent shall have actually received a
properly completed Election Form by the Election Deadline.
An Election Form shall be deemed properly completed only if
accompanied by one or more Certificates (or customary affida-
vits and indemnification regarding the loss or destruction of
such Certificates or the guaranteed delivery of such Certifi-
cates) representing all shares of Seller Common Stock covered
by such Election Form, together with duly executed transmit-
tal materials included in the Election Form. Any Election
Form may be revoked or changed by the person submitting such
Election Form at or prior to the Election Deadline. In the
event an Election Form is revoked prior to the Election Dead-
line, the shares of Seller Common Stock represented by such
Election Form shall become No Election Shares and Buyer shall
cause the Certificates to be promptly returned without charge
to the person submitting the Election Form upon written re-
quest to that effect from the person who submitted the Elec-
tion Form. Subject to the terms of this Agreement and of the
Election Form, the Exchange Agent shall have reasonable dis-
cretion to determine whether any election, revocation or
change has been properly or timely made and to disregard im-
material defects in the Election Forms, and any good faith
decisions of the Exchange Agent regarding such matters shall
be binding and conclusive. Neither Buyer nor the Exchange
Agent shall be under any obligation to notify any person of
any defect in an Election Form.
Within five business days after the Election Dead-
line, unless the Effective Time has not yet occurred, in
-5-<PAGE>
which case as soon thereafter as practicable, Buyer shall
cause the Exchange Agent to effect the allocation among the
holders of Seller Common Stock of rights to receive Buyer
Common Stock or cash in the Merger in accordance with the
Election Forms as follows:
(i) Stock Elections Plus the Mixed Stock Shares
Less Than Stock Amount. If the number of shares of
Buyer Common Stock that would be issued upon conversion
in the Merger of the Stock Election Shares and the Mixed
Stock Shares is less than the Stock Amount, then:
(A) all Mixed Stock Shares and Stock Election
Shares shall be converted into the right to receive
the Per Share Stock Consideration,
(B) the Exchange Agent shall then select
first from among the No Election Shares and then
(if necessary) from among the Cash Election Shares,
by a pro rata selection process (as described be-
low), a sufficient number of shares ("Stock Desig-
nated Shares") such that the number of shares of
Buyer Common Stock that will be issued in the
Merger equals as closely as practicable the Stock
Amount, and all Stock Designated Shares shall be
converted into the right to receive the Per Share
Stock Consideration, and
(C) the Cash Election Shares and the No Elec-
tion Shares which are not Stock Designated Shares
and all Mixed Cash Shares shall be converted into
the right to receive the Per Share Cash Consider-
ation.
(ii) Stock Elections and the Mixed Stock Shares
More Than Stock Amount. If the number of shares of
Buyer Common Stock that would be issued upon the conver-
sion into Buyer Common Stock of the Stock Election
Shares is greater than the Stock Amount, then:
(A) all Mixed Cash Shares, Cash Election
Shares and No Election Shares shall be converted
into the right to receive the Per Share Cash Con-
sideration,
(B) the Exchange Agent shall then select from
among the Stock Election Shares, by a pro rata se-
lection process (as described below) a sufficient
number of shares ("Cash Designated Shares") such
that the number of shares of Buyer Common Stock
-6-<PAGE>
that will be issued in the Merger equals as closely
as practicable the Stock Amount, and all Cash Des-
ignated Shares shall be converted into the right to
receive the Per Share Cash Consideration, and
(C) the Stock Election Shares which are not
Cash Designated Shares and all Mixed Stock Shares
shall be converted into the right to receive the
Per Share Stock Consideration.
(iii) Stock Elections and Mixed Stock Shares Equal
to Stock Amount. If the number of shares of Buyer Com-
mon Stock that would be issued upon conversion into
Buyer Common Stock of the Stock Election Shares and
Mixed Stock Shares is equal or nearly equal (as deter-
mined by the Exchange Agent) to the Stock Amount, then
subparagraphs (i) and (ii) above and subparagraphs (iv)
and (v) below shall not apply and all Stock Election
Shares and Mixed Stock Shares shall be converted into
the right to receive the Per Share Stock Consideration
and all Cash Election Shares, Mixed Cash Shares and No
Election Shares shall be converted into the right to
receive the Per Share Cash Consideration; or
(iv) Stock Elections, Mixed Stock Shares and No
Elections Equal to Stock Amount. If the number of
shares of Buyer Common Stock that would be issued upon
the conversion into Buyer Common Stock of the Stock
Election Shares, Mixed Stock Shares and No Election
Shares would equal or nearly equal (as determined by the
Exchange Agent) the Stock Amount, then subparagraphs
(i), (ii) and (iii) above and subparagraph (v) below
shall not apply and all Cash Election Shares and Mixed
Cash Shares shall be converted into the right to receive
the Per Share Cash Consideration and all Stock Election
Shares, Mixed Stock Shares and No Election Shares shall
be converted into the right to receive the Per Share
Stock Consideration.
(v) Mixed Stock Shares More Than Stock Amount. If
the number of shares of Buyer Common Stock that would be
issued upon the conversion in the Merger into Buyer Com-
mon Stock of the Mixed Stock Shares is greater than the
Stock Amount, then;
(A) all Mixed Cash Shares, Cash Election Shares,
No Election Shares and Stock Election Shares shall
be converted into the right to receive the Per
Share Cash Consideration,
-7-<PAGE>
(B) the Exchange Agent shall select from among the
Mixed Stock Shares by a pro rata selection process
(as described below) a sufficient number of shares
("Mixed Designated Shares") such that the number of
shares of Buyer Common Stock that will be issued in
the Merger equals as closely as practicable the
Stock Amount, and all Mixed Designated Shares shall
be converted into the right to receive the Per
Share Cash Consideration, and
(C) the Mixed Stock Shares that are not Mixed Des-
ignated Shares shall be converted into the right to
receive the Per Share Stock Consideration.
The pro rata selection process to be used by the
Exchange Agent shall consist of such equitable pro ration
processes as shall be mutually determined by Buyer and
Seller.
1.09. Adjustments to the Merger Consideration.
(a) The Per Share Stock Consideration and the Per Share Cash
Consideration shall each be adjusted as of the end of the ten
(10) consecutive trading-day period (the "Valuation Period")
during which the shares of Buyer Common Stock are traded on
the Nasdaq Stock Market National Market System ("NASDAQ")
ending on the tenth calendar day immediately prior to the
anticipated Effective Time. The Per Share Stock Consider-
ation shall be adjusted by adjusting the Exchange Ratio such
that the product of the Exchange Ratio (rounded to the near-
est 1/1000th of a share) and the Valuation Period Market
Value shall equal the Average Per Share Consideration. The
Per Share Cash Consideration shall be adjusted to equal the
Average Per Share Consideration.
(b) For purposes of this Agreement the following
definitions shall apply:
"Valuation Period Market Value" shall mean the av-
erage of the closing-sale prices for the Buyer Common Stock
as reported on NASDAQ (as reported in The Wall Street Jour-
nal, Midwest edition, or, in the absence thereof, by another
authoritative source) during the Valuation Period.
"Average Per Share Consideration" shall mean the
Aggregate Consideration divided by the Valuation Period Share
Number (rounder to the nearest cent).
"Aggregate Consideration" shall mean the sum of (x)
the product of 1.55 times the Valuation Period Market Value
-8-<PAGE>
times 0.57 times the Valuation Period Share Number and (y)
$37.50 times 0.43 times the Valuation Period Share Number.
"Valuation Period Share Number" shall mean the to-
tal number of shares of Seller Common Stock outstanding
(other than treasury shares) on the last day of the Valuation
Period.
1.10. Adjustments for Dilution and Other Matters.
If prior to the Effective Time, (i) Seller shall declare a
stock dividend or distribution upon or subdivide, split up,
reclassify or combine the Seller Common Stock, or declare a
dividend or make a distribution on the Seller Common Stock in
any security convertible into Seller Common Stock, or (ii)
Buyer shall declare a stock dividend or distribution upon or
subdivide, split up, reclassify or combine the Buyer Common
Stock or declare a dividend or make a distribution on the
Buyer Common Stock in any security convertible into Buyer
Common Stock, appropriate adjustment or adjustments will be
made to the Per Share Cash Consideration, the Per Share Stock
Consideration and the Stock Amount.
1.11. Illustrative Cases. Appendix A hereto il-
lustrates, among other things, the value to be received per
share of Seller Common Stock, whether in cash or in Buyer
Common Stock, at varying Valuation Period Market Values, as
well as the resulting exchange ratios.
1.12. Exchange Procedures. (a) Subject to Sec-
tion 1.10, each previous holder of a Certificate that has
surrendered such Certificate together with duly executed
transmittal materials included in the Election Form to the
Buyer or, at the election of Buyer, the Exchange Agent, pur-
suant to Section 1.08 will, upon acceptance thereof by Buyer
or the Exchange Agent, be entitled to a certificate or cer-
tificates representing the number of full shares of Buyer
Common Stock or cash into which the Certificate so sur-
rendered shall have been converted pursuant to this Agreement
and any distribution theretofore declared and not yet paid
with respect to such shares of Buyer Common Stock, without
interest.
(b) Buyer or, at the election of Buyer, the Ex-
change Agent shall accept Certificates upon compliance with
such reasonable terms and conditions as Buyer or the Exchange
Agent may impose to effect an orderly exchange thereof in
accordance with customary exchange practices. Certificates
shall be appropriately endorsed or accompanied by such in-
struments of transfer as Buyer or the Exchange Agent may rea-
sonably require.
-9-<PAGE>
(c) Each outstanding Certificate shall until duly
surrendered to Buyer or the Exchange Agent be deemed to evi-
dence ownership of the consideration into which the stock
previously represented by such Certificate shall have been
converted pursuant to this Agreement.
(d) After the Effective Time, holders of Certifi-
cates shall cease to have rights with respect to the stock
previously represented by such Certificates, and their sole
rights shall be to exchange such Certificates for the con-
sideration provided for in this Agreement. After the Effec-
tive Time, there shall be no further transfer on the records
of Seller of Certificates, and if such Certificates are pre-
sented to Seller for transfer, they shall be cancelled
against delivery of the consideration provided therefor in
this Agreement. Buyer shall not be obligated to deliver the
consideration to which any former holder of Seller Common
Stock is entitled as a result of the Merger until such holder
surrenders the Certificates as provided herein. No dividends
declared will be remitted to any person entitled to receive
Buyer Common Stock under this Agreement until such person
surrenders the Certificate representing the right to receive
such Buyer Common Stock, at which time such dividends shall
be remitted to such person, without interest and less any
taxes that may have been imposed thereon. Certificates sur-
rendered for exchange by any person constituting an "affili-
ate" of Seller for purposes of Rule 145 of the Securities Act
of 1933, as amended (together with the rules and regulations
thereunder, the "Securities Act"), shall not be exchanged for
certificates representing Buyer Common Stock until Buyer has
received a written agreement from such person in the form
attached as Exhibit C. Neither the Exchange Agent nor any
party to this Agreement nor any affiliate thereof shall be
liable to any holder of stock represented by any Certificate
for any consideration paid to a public official pursuant to
applicable abandoned property, escheat or similar laws. Buy-
er and the Exchange Agent shall be entitled to rely upon the
stock transfer books of Seller to establish the identity of
those persons entitled to receive consideration specified in
this Agreement, which books shall be conclusive with respect
thereto. In the event of a dispute with respect to ownership
of stock represented by any Certificate, Buyer and the Ex-
change Agent shall be entitled to deposit any consideration
represented thereby in escrow with an independent third party
and thereafter be relieved with respect to any claims there-
to.
1.13. Dissenting Shares. (a) "Dissenting Shares"
means any shares held by any holder who becomes entitled to
payment of the fair value of such shares under the Iowa Act.
-10-<PAGE>
Any holders of Dissenting Shares shall be entitled to payment
for such shares only to the extent permitted by and in ac-
cordance with the provisions of the Iowa Act; provided, how-
ever, that if, in accordance with the Iowa Act, any holder of
Dissenting Shares shall forfeit such right to payment of the
fair value of such shares, such shares shall thereupon be
deemed to have been converted into and to have become ex-
changeable for, as of the Effective Time, the right to re-
ceive the consideration provided in this Article I.
(b) Seller shall give Buyer (i) prompt notice of
any written objections to the Merger and any written demands
for the payment of the fair value of any shares, withdrawals
of such demands, and any other instruments served pursuant to
the Iowa Act received by Seller and (ii) the opportunity to
direct all negotiations and proceedings with respect to such
demands under the Iowa Act. Seller shall not voluntarily
make any payment with respect to any demands for payment of
fair value and shall not, except with the prior written con-
sent of Buyer, settle or offer to settle any such demands.
1.14. No Fractional Shares. Notwithstanding any
other provision of this Agreement, neither certificates nor
scrip for fractional shares of Buyer Common Stock shall be
issued in the Merger. Each holder who otherwise would have
been entitled to a fraction of a share of Buyer Common Stock
shall receive in lieu thereof cash (without interest) in an
amount determined by multiplying the fractional share inter-
est to which such holder would otherwise be entitled by the
Closing Price per share of Buyer Common Stock on the last
business day preceding the Effective Time. With respect to a
share of stock, "Closing Price" shall mean: the closing-sale
price as reported on NASDAQ (as reported in The Wall Street
Journal, Midwest edition, or in the absence thereof, by an
other authoritative source). No such holder shall be en-
titled to dividends, voting rights or any other rights in
respect of any fractional share.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
Seller represents and warrants to and covenants
with Buyer as follows:
-11-<PAGE>
2.01. Organization and Authority. Seller is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Iowa, is duly quali-
fied to do business and is in good standing in all jurisdic-
tions where its ownership or leasing of property or the con-
duct of its business requires it to be so qualified and has
corporate power and authority to own its properties and as-
sets and to carry on its business as it is now being con-
ducted; except where the failure to so qualify would not have
a material adverse effect on the financial condition, results
of operation or the business (collectively, "Condition") of
Seller or Seller Subsidiaries (as defined in Section 2.02),
taken as a whole. Seller is registered as a bank holding
company with the Board of Governors of the Federal Reserve
System (the "Board") under the Holding Company Act. True and
complete copies of the Articles of Incorporation and the By-
laws of Seller and, to the extent requested in writing by
Buyer, of the Articles of Incorporation and Bylaws of the
Seller Subsidiaries (as defined below), each as in effect on
the date of this Agreement, have been provided to Buyer.
2.02. Subsidiaries. Schedule 2.02 sets forth,
among other things, a complete and correct list of all of
Seller's Subsidiaries (each, a "Seller Subsidiary" and col-
lectively, the "Seller Subsidiaries"), all outstanding Equity
Securities of each of which, except as set forth on Schedule
2.02, are owned directly or indirectly by Seller. "Equity
Securities" of an issuer means capital stock or other equity
securities of such issuer, options, warrants, scrip, rights
to subscribe to, calls or commitments of any character what-
soever relating to, or securities or rights convertible into,
shares of any capital stock or other Equity Securities of
such issuer, or contracts, commitments, understandings or
arrangements by which such issuer is or may become bound to
issue additional shares of its capital stock or other Equity
Securities of such issuer, or options, warrants, scrip or
rights to purchase, acquire, subscribe to, calls on or com-
mitments for, or stock appreciation or similar rights in re-
spect of, any shares of its capital stock or other Equity
Securities. Except as set forth on Schedule 2.02, all of the
outstanding shares of capital stock of the Seller Subsidiar-
ies are validly issued, fully paid and nonassessable, and
those shares owned by Seller are owned free and clear of any
lien, claim, charge, option, encumbrance, agreement, mort-
gage, pledge, security interest or restriction (a "Lien")
with respect thereto. Each of the Seller Subsidiaries is a
corporation or association duly incorporated or organized,
validly existing, and in good standing under the laws of its
jurisdiction of incorporation or organization, and has cor-
porate power and authority to own or lease its properties and
-12-<PAGE>
assets and to carry on its business as it is now being con-
ducted. Each of the Seller Subsidiaries is duly qualified to
do business in each jurisdiction where its ownership or leas-
ing of property or the conduct of its business requires it so
to be qualified, except where the failure to so qualify would
not have a material adverse effect on the Condition of Seller
and its Subsidiaries, taken as a whole. Except as set forth
on Schedule 2.02, Seller does not own beneficially, directly
or indirectly, five percent or more of any shares of any
class of Equity Securities or similar interests of any cor-
poration, bank, business trust, association or similar orga-
nization. All of Seller's bank Subsidiaries (the "Banks")
are either state banking associations chartered under the
laws of the State of Iowa, federally chartered savings and
loan associations supervised by the Office of Thrift Supervi-
sion ("OTS") or national banking associations chartered by
the Office of the Comptroller of the Currency ("OCC"). The
deposits of each of the Banks are insured by the Bank Insur-
ance Fund ("BIF") or by the Savings Association Insurance
Fund ("SAIF") of the Federal Deposit Insurance Corporation
(the "FDIC"), including to the extent such deposits were
transferred to a Bank by the Resolution Trust Corporation.
The Banks identified as such on Schedule 2.02 are members in
good standing of the Federal Reserve System. Except as set
forth on Schedule 2.02, neither Seller nor any Seller Subsid-
iary holds any interest in a partnership or joint venture of
any kind.
2.03. Capitalization. The authorized capital
stock of Seller consists of 25,000,000 shares of Seller Com-
mon Stock, of which, as of August 23, 1996, 5,703,378 shares
were issued and outstanding. As of August 23, 1996, Seller
had reserved 16,371 shares of Seller Common Stock for issu-
ance under Seller's stock option plans, a list of which is
set forth on Schedule 2.03 (the "Seller Stock Plans"), pursu-
ant to which options ("Seller Stock Options") covering 15,000
shares of Seller Common Stock were outstanding as of August
23, 1996. Since August 23, 1996, no Equity Securities of
Seller have been issued other than shares of Seller Common
Stock which may have been issued upon the exercise of Seller
Employee Stock Options. Except as set forth above, there are
no other Equity Securities of Seller outstanding. All of the
issued and outstanding shares of Seller Common Stock are val-
idly issued, fully paid, and nonassessable, and have not been
issued in violation of any preemptive right of any stock-
holder of Seller.
2.04. Authorization. (a) Seller has the corpo-
rate power and authority to enter into this Agreement and,
subject to the approval of this Agreement by the stockholders
-13-<PAGE>
of Seller, to carry out its obligations hereunder. The only
stockholder vote required for Seller to approve this Agree-
ment is the affirmative vote of the holders of at least a
majority of the votes entitled to be cast on the Agreement by
the holders of shares of Seller Common Stock. The execution,
delivery and performance of this Agreement by Seller and the
consummation by Seller of the transactions contemplated here-
by have been duly authorized by the Board of Directors of
Seller and are not a "Covered Transaction" as such term is
defined in Seller's Articles of Incorporation. Subject to
approval by the stockholders of Seller, this Agreement is a
valid and binding obligation of Seller enforceable against
Seller in accordance with its terms.
(b) Neither the execution nor delivery nor perfor-
mance by Seller of this Agreement, nor the consummation by
Seller of the transactions contemplated hereby, nor compli-
ance by Seller with any of the provisions hereof, will (i)
violate, conflict with, or result in a breach of any provi-
sions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination
or acceleration of, or result in the creation of, any Lien
upon any of the material properties or assets of Seller or
any Seller Subsidiary under any of the terms, conditions or
provisions of (x) its articles or certificate of incorpora-
tion or bylaws or (y) any material note, bond, mortgage, in-
denture, deed of trust, license, lease, agreement or other
instrument or obligation to which Seller or any Seller Sub-
sidiary is a party or by which it may be bound, or to which
Seller or any Seller Subsidiary or any of the material prop-
erties or assets of Seller or any Seller Subsidiary may be
subject, or (ii) subject to compliance with the statutes and
regulations referred to in paragraph (c) of this Section
2.04, to the best knowledge of Seller, violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Seller or any Seller Subsidiary or
any of their respective material properties or assets.
(c) Other than in connection or in compliance with
the provisions of the Iowa Act, the Securities Act, the Se-
curities Exchange Act of 1934 and the rules and regulations
thereunder (the "Exchange Act"), the securities or blue sky
laws of the various states or filings, consents, reviews,
authorizations, approvals or exemptions required under the
Holding Company Act, and the Hart-Scott-Rodino Antitrust Im-
provements Act of 1976 (the "HSR Act"), or any required ap-
provals of or filings with the Superintendent of the Banking
Division of the Commerce Department of the State of Iowa (the
-14-<PAGE>
"State Bank Regulator"), the OTS or the OCC, no notice to,
filing with, exemption or review by, or authorization, con-
sent or approval of, any public body or authority is neces-
sary for the consummation by Seller of the transactions con-
templated by this Agreement.
2.05. Seller Financial Statements. The consoli-
dated and parent company-only balance sheets of Seller and
its Subsidiaries as of December 31, 1995, 1994 and 1993 and
related consolidated statements of income, cash flows and
changes in stockholders' equity for each of the three years
in the three-year period ended December 31, 1995, together
with the notes thereto, audited by Deloitte & Touche LLP and
included in an annual report on Form 10-K as filed with the
SEC, and the unaudited consolidated balance sheets of Seller
and its Subsidiaries as of March 31 and June 30, 1996 and the
related unaudited consolidated statements of income and cash
flows for the periods then ended included in quarterly re-
ports on Form 10-Q (each a "Seller Form 10-Q") as filed with
the Securities and Exchange Commission (collectively, the
"Seller Financial Statements"), have been prepared in accor-
dance with generally accepted accounting principles applied
on a consistent basis ("GAAP"), present fairly the consoli-
dated financial position of Seller and its Subsidiaries at
the dates and the consolidated results of operations, cash
flows and changes in stockholders' equity of Seller and its
Subsidiaries for the periods stated therein and are derived
from the books and records of Seller and its Subsidiaries,
which are complete and accurate in all material respects and
have been maintained in all material respects in accordance
with applicable laws and regulations. Neither Seller nor any
of its Subsidiaries has any material contingent liabilities
that are not described in the financial statements described
above.
2.06. Seller Reports. Since January 1, 1993, each
of Seller and the Seller Subsidiaries has filed all material
reports, registrations and statements, together with any re-
quired material amendments thereto, that it was required to
file with (i) the Securities and Exchange Commission, includ-
ing, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K
and proxy statements, (ii) the Board, (iii) the FDIC, (iv)
the State Bank Regulator, and (v) any other federal, state,
municipal, local or foreign government, securities, banking,
savings and loan, insurance and other governmental or regula-
tory authority and the agencies and staffs thereof (the enti-
ties in the foregoing clauses (i) through (v) being referred
to herein collectively as the "Regulatory Authorities" and
individually as a "Regulatory Authority"). All such reports
and statements filed with any such Regulatory Authority are
-15-<PAGE>
collectively referred to herein as the "Seller Reports." As
of its respective date, each Seller Report complied in all
material respects with all the rules and regulations promul-
gated by the applicable Regulatory Authority and did not con-
tain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circum-
stances under which they were made, not misleading.
2.07. Properties and Leases. Except as may be
reflected in the Seller Financial Statements, except for any
Lien for current taxes not yet delinquent and except with
respect to assets classified as real estate owned, Seller and
its Subsidiaries have good title free and clear of any mate-
rial Lien to all the real and personal property reflected in
Seller's consolidated balance sheet as of June 30, 1996 in-
cluded in the most recent Seller Form 10-Q and, in each case,
all real and personal property acquired since such date, ex-
cept such real and personal property as has been disposed of
in the ordinary course of business. All leases material to
Seller or any Seller Subsidiary pursuant to which Seller or
any Seller Subsidiary, as lessee, leases real or personal
property, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases,
any material existing default by Seller or any Seller Sub-
sidiary or any event which, with notice or lapse of time or
both, would constitute such a material default. Substan-
tially all of Seller's and Seller Subsidiaries' buildings,
structures and equipment in regular use have been well main-
tained and are in good and serviceable condition, normal wear
and tear excepted.
2.08. Taxes. Seller and each Seller Subsidiary
have timely filed or will timely (including extensions) file
all material tax returns required to be filed at or prior to
the Closing Date ("Seller Returns"). Each of Seller and its
Subsidiaries has paid, or set up adequate reserves on the
Seller Financial Statements for the payment of, all taxes
required to be paid in respect of the periods covered by the
Seller Financial Statements and has set up adequate reserves
on the most recent financial statements Seller has filed un-
der the Exchange Act for the payment of all taxes anticipated
to be payable in respect of all periods up to and including
the latest period covered by such financial statements. To
the best of Seller's knowledge, neither Seller nor any Seller
Subsidiary will have any liability material to the Condition
of Seller and the Seller Subsidiaries, taken as a whole, for
any such taxes in excess of the amounts so paid or reserves
so established and no material deficiencies for any tax, as-
sessment or governmental charge have been proposed, asserted
-16-<PAGE>
or assessed (tentatively or definitely) against any of Seller
or any Seller Subsidiary which would not be covered by exist-
ing reserves. Neither Seller nor any Seller Subsidiary is
delinquent in the payment of any material tax, assessment or
governmental charge, nor, except as previously disclosed, has
it requested any extension of time within which to file any
tax returns in respect of any fiscal year which have not
since been filed and no requests for waivers of the time to
assess any tax are pending. The federal and state income tax
returns of Seller and the Seller Subsidiaries have been au-
dited and settled by the Internal Revenue Service (the "IRS")
or appropriate state tax authorities for all periods ended
through December 31, 1987. There is no material deficiency
or refund litigation or matter in controversy with respect to
Seller Returns. Neither Seller nor any Seller Subsidiary has
extended or waived any statute of limitations on the assess-
ment of any tax due that is currently in effect.
2.09. Material Adverse Change. Since June 30,
1996, there has been no material adverse change in the Con-
dition of Seller and its Subsidiaries, taken as a whole.
2.10. Commitments and Contracts. (a) Except as
set forth on Schedule 2.10A, neither Seller nor any Seller
Subsidiary is a party or subject to any of the following
(whether written or oral, express or implied):
(i) any material agreement, arrangement or commit-
ment (A) not made in the ordinary course of business or
(B) pursuant to which Seller or any of its Subsidiaries
is or may become obligated to invest in or contribute
capital to any Seller Subsidiary;
(ii) any agreement, indenture or other instrument
not disclosed in the Seller Financial Statements relat-
ing to the borrowing of money by Seller or any Seller
Subsidiary or the guarantee by Seller or any Seller Sub-
sidiary of any such obligation (other than trade pay-
ables or instruments related to transactions entered
into in the ordinary course of business by any Seller
Subsidiary, such as deposits and Fed Funds borrowings);
(iii) any contract, agreement or understanding
with any labor union or collective bargaining
organization;
(iv) any contract containing covenants which limit
the ability of Seller or any Seller Subsidiary to com-
pete in any line of business or with any person or which
involve any restriction of the geographical area in
-17-<PAGE>
which, or method by which, Seller or any Seller Subsid-
iary may carry on its business;
(v) any other contract or agreement which is a
"material contract" within the meaning of Item
601(b)(10) of Regulation S-K promulgated by the Securi-
ties and Exchange Commission; or
(vi) any lease with annual rental payments aggre-
gating $250,000 or more.
(b) Neither Seller nor any Seller Subsidiary is in
violation of its charter documents or bylaws or in default
under any material agreement, commitment, arrangement, lease,
insurance policy, or other instrument, whether entered into
in the ordinary course of business or otherwise and whether
written or oral, and there has not occurred any event that,
with the lapse of time or giving of notice or both, would
constitute such a default, except, in all cases, where such
default would not have a material adverse effect on the Con-
dition of Seller and its Subsidiaries, taken as a whole.
2.11. Litigation and Other Proceedings. Except as
set forth on Schedule 2.11, neither Seller nor any Seller
Subsidiary is a party to any pending or, to the best knowl-
edge of Seller, threatened claim, action, suit, investigation
or proceeding, or is subject to any order, judgment or de-
cree, except for matters which, in the aggregate, will not
have, or reasonably could not be expected to have, a material
adverse effect on the Condition of Seller and its Subsidiar-
ies, taken as a whole, or which purports or seeks to enjoin
or restrain the transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, there are
no actions, suits, or proceedings pending or, to the best
knowledge of Seller, threatened against Seller or any Seller
Subsidiary or any of their respective officers or directors
by any stockholder of Seller or any Seller Subsidiary (or any
former stockholder of Seller or any Seller Subsidiary) or
involving claims under the Securities Act, the Exchange Act,
the Community Reinvestment Act of 1977, as amended ("CRA"),
or the fair lending laws.
2.12. Insurance. Set forth on Schedule 2.12 is a
list of all insurance policies maintained by or for the ben-
efit of Seller or its Subsidiaries or their directors, of-
ficers, employees or agents.
2.13. Compliance with Laws. (a) Seller and each
of its Subsidiaries have all permits, licenses, authoriza-
tions, orders and approvals of, and have made all filings,
-18-<PAGE>
applications and registrations with, all Regulatory Authori-
ties that are required in order to permit them to own or
lease their properties and assets and to carry on their busi-
ness as presently conducted and that are material to the bus-
iness of Seller and its Subsidiaries; all such permits, li-
censes, certificates of authority, orders and approvals are
in full force and effect and, to the best knowledge of
Seller, no suspension or cancellation of any of them is
threatened; and all such filings, applications and registra-
tions are current.
(b) Except for failures to comply or defaults
which individually or in the aggregate would not have a ma-
terial adverse effect on the Condition of Seller and its Sub-
sidiaries, taken as a whole, (i) each of Seller and its Sub-
sidiaries has complied with all laws, regulations and orders
(including without limitation zoning ordinances, building
codes, the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and securities, tax, environmental,
civil rights, and occupational health and safety laws and
regulations and including without limitation in the case of
any Seller Subsidiary that is a bank or savings association,
banking organization, banking corporation or trust company,
all statutes, rules, regulations and policy statements per-
taining to the conduct of a banking, deposit-taking, lending
or related business, or to the exercise of trust powers) and
governing instruments applicable to them and to the conduct
of their business, and (ii) neither Seller nor any Seller
Subsidiary is in default under, and no event has occurred
which, with the lapse of time or notice or both, could result
in the default under, the terms of any judgment, order, writ,
decree, permit, or license of any Regulatory Authority or
court, whether federal, state, municipal, or local and
whether at law or in equity. Except for liabilities which
individually or in the aggregate would not have a material
adverse effect on the Condition of Seller and its Subsidiar-
ies, taken as a whole, and neither Seller nor any Seller Sub-
sidiary is subject to or reasonably likely to incur a li-
ability as a result of its ownership, operation, or use of
any Property (as defined below) of Seller (whether directly
or, to the best knowledge of Seller, as a consequence of such
Property being part of the investment portfolio of Seller or
any Seller Subsidiary) (A) that is contaminated by or con-
tains any hazardous waste, toxic substance, or related mate-
rials, including without limitation asbestos, PCBs, pesti-
cides, herbicides, and any other substance or waste that is
hazardous to human health or the environment (collectively, a
"Toxic Substance"), or (B) on which any Toxic Substance has
been stored, disposed of, placed, or used in the construction
thereof. "Property" of a person shall include all property
-19-<PAGE>
(real or personal, tangible or intangible) owned or con-
trolled by such person, including without limitation property
under foreclosure, property held by such person or any Sub-
sidiary of such person in its capacity as a trustee and prop-
erty in which any venture capital or similar unit of such
person or any Subsidiary of such person has an interest. No
claim, action, suit, or proceeding is pending against Seller
or any Seller Subsidiary relating to Property of Seller be-
fore any court or other Regulatory Authority or arbitration
tribunal relating to hazardous substances, pollution, or the
environment, and there is no outstanding judgment, order,
writ, injunction, decree, or award against or affecting
Seller or any Seller Subsidiary with respect to the same.
Except for statutory or regulatory restrictions of general
application, no Regulatory Authority has placed any restric-
tion on the business of Seller or any Seller Subsidiary which
reasonably could be expected to have a material adverse ef-
fect on the Condition of Seller and its Subsidiaries, taken
as a whole.
(c) From and after January 1, 1993, neither Seller
nor any Seller Subsidiary has received any notification or
communication which has not been resolved from any Regulatory
Authority (i) asserting that any Seller or any Subsidiary of
Seller is not in compliance in any material respect with any
of the statutes, regulations or ordinances that such Regula-
tory Authority enforces, or (ii) threatening to revoke any
license, franchise, permit or governmental authorization that
is material to the Condition of Seller and its Subsidiaries,
taken as a whole, including without limitation such company's
status as an insured depositary institution under the Federal
Deposit Insurance Act, or (iii) requiring or threatening to
require Seller or any of its Subsidiaries, or indicating that
Seller or any of its Subsidiaries may be required, to enter
into a cease and desist order, agreement or memorandum of un-
derstanding or any other agreement restricting or limiting or
purporting to direct, restrict or limit in any manner the op-
erations of Seller or any of its Subsidiaries, including
without limitation any restriction on the payment of divi-
dends. No such cease and desist order, agreement or memoran-
dum of understanding or other agreement is currently in ef-
fect.
(d) Neither Seller nor any Seller Subsidiary is
required by Section 32 of the Federal Deposit Insurance Act
to give prior notice to any federal banking agency of the
proposed addition of an individual to its board of directors
or the employment of an individual as a senior executive of-
ficer.
-20-<PAGE>
2.14. Labor. No work stoppage involving Seller or
any Seller Subsidiary, is pending or, to the best knowledge
of Seller, threatened. Neither Seller nor any Seller Sub-
sidiary is involved in, or, to the best knowledge of Seller,
threatened with or affected by, any labor dispute, arbitra-
tion, lawsuit or administrative proceeding which reasonably
could be expected to have a material adverse effect on the
Condition of Seller and its Subsidiaries, taken as a whole.
Employees of neither Seller nor any Seller Subsidiary are
represented by any labor union or any collective bargaining
organization.
2.15. Material Interests of Certain Persons. (a)
Except as set forth in Seller's Proxy Statement for its 1996
Annual Meeting of Stockholders, to the best knowledge of
Seller, no executive officer or director of Seller or any
Subsidiary of Seller, or any "associate" (as such term is
defined in Rule l4a-1 under the Exchange Act) of any such
executive officer or director, has any material interest in
any material contract or property (real or personal, tangible
or intangible), used in or pertaining to the business of,
Seller or any Subsidiary of Seller, which in the case of
Seller is required to be disclosed by Item 404 of Regulation
S-K promulgated by the Securities and Exchange Commission or
in the case of any such Subsidiary would be required to be so
disclosed if such Subsidiary had a class of securities reg-
istered under Section 12 of the Exchange Act.
(b) Except as set forth in Seller's Proxy State-
ment for its 1996 Annual Meeting of Stockholders or on Sched-
ule 2.15B, as of June 30, 1996, there are no loans from Sell-
er or any Seller Subsidiary to any present officer, director,
employee or any associate or related interest of any such
person which was or would be required under any rule or regu-
lation to be approved by or reported to Seller's or Seller
Subsidiary's Board of Directors ("Insider Loans"), and no
Insider Loans in excess of $500,000 have been made since June
30, 1996. All outstanding Insider Loans from Seller or any
Seller Subsidiary were approved by or reported to the appro-
priate board of directors in accordance with applicable laws
and regulations.
2.16. Employee Benefit Plans. (a) Except as set
forth in Schedule 2.16A, neither Seller nor any Seller Sub-
sidiary is a party to any existing employment, management,
consulting, deferred compensation, change-in-control or other
similar contract. "Seller Employee Plans" means all pension,
retirement, supplemental retirement, savings, profit sharing,
-21-<PAGE>
stock option, stock purchase, stock ownership, stock appre-
ciation right, deferred compensation, consulting, bonus, med-
ical, disability, workers' compensation, vacation, group in-
surance, severance and other material employee benefit, in-
centive and welfare policies, contracts, plans and arrange-
ments, and all trust agreements related thereto, maintained
(currently or at any time in the last six years) by or con-
tributed to by Seller or any Seller Subsidiary in respect of
any of the present or former directors, officers, or other
employees of and/or consultants to Seller or any Seller Sub-
sidiary. Schedule 2.16A lists all Seller Employee Plans cur-
rently in effect. Seller has furnished Buyer with the fol-
lowing documents with respect to each Seller Employee Plan:
(i) a true and complete copy of all written documents com-
prising such Seller Employee Plan (including amendments and
individual agreements relating thereto) or, if there is no
such written document, an accurate and complete description
of the Seller Employee Plan; (ii) the most recent Form 5500
or Form 5500-C (including all schedules thereto), if appli-
cable; (iii) the most recent financial statements and actu-
arial reports, if any; (iv) the summary plan description cur-
rently in effect and all material modifications thereof, if
any; and (v) the most recent IRS determination letter, if
any. Without limiting the generality of the foregoing,
Seller has furnished Buyer with true and complete copies of
each form of stock option grant or stock option agreement
that is outstanding under any stock option plan of Seller or
any Seller Subsidiary. Seller has no unfunded liability un-
der any Seller Employee Plans maintained currently or at any
time during the last six years.
(b) Except as set forth in Schedule 2.16A, all
Seller Employee Plans have been maintained and operated ma-
terially in accordance with their terms and with the material
requirements of all applicable statutes, orders, rules and
final regulations, including without limitation ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"). All
contributions required to be made to Seller Employee Plans
have been made.
(c) With respect to each of the Seller Employee
Plans which is a pension plan (as defined in Section 3(2) of
ERISA) (the "Pension Plans"): (i) each Pension Plan which is
intended to be "qualified" within the meaning of Section
401(a) of the Code has been determined to be so qualified by
the IRS and, to the knowledge of Seller, such determination
letter may still be relied upon, and each related trust is
exempt from taxation under Section 501(a) of the Code; (ii)
the present value of all benefits vested and all benefits
accrued under each Pension Plan which is subject to Title IV
-22-<PAGE>
of ERISA, valued using the assumptions in the most recent
actuarial report, did not, in each case, as of the last ap-
plicable annual valuation date (as indicated on Schedule
2.16A), exceed the value of the assets of the Pension Plan
allocable to such vested or accrued benefits; (iii) to the
best knowledge of Seller, there has been no "prohibited
transaction," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA, which could subject any Pension
Plan or associated trust, or the Seller or any Seller Subsid-
iary, to any material tax or penalty; (iv) except as set
forth on Schedule 2.16C, no Pension Plan subject to Title IV
of ERISA or any trust created thereunder has been terminated,
nor have there been any "reportable events" with respect to
any Pension Plan, as that term is defined in Section 4043 of
ERISA on or after January 1, 1985; and (v) no Pension Plan or
any trust created thereunder has incurred any "accumulated
funding deficiency", as such term is defined in Section 302
of ERISA (whether or not waived). No Pension Plan is a "mul-
tiemployer plan" as that term is defined in Section 3(37) of
ERISA. With respect to each Pension Plan that is described
in Section 4063(a) of ERISA (a "Multiple Employer Pension
Plan"): (i) neither Seller nor any Seller Subsidiary would
have any liability or obligation to post a bond under Section
4063 of ERISA if Seller and all Seller Subsidiaries were to
withdraw from such Multiple Employer Pension Plan; and (ii)
neither Seller nor any Seller Subsidiary would have any li-
ability under Section 4064 of ERISA if such Multiple Employer
Pension Plan were to terminate.
(d) Except as set forth on Schedule 2.16D, neither
Seller nor any Seller Subsidiary has any liability for any
post-retirement health, medical or similar benefit of any
kind whatsoever, except as required by statute or regulation.
(e) Neither Seller nor any Seller Subsidiary has
any material liability under ERISA or the Code as a result of
its being a member of a group described in Sections 414(b),
(c), (m) or (o) of the Code.
(f) Except as set forth on Schedule 2.16F, neither
the execution nor delivery of this Agreement, nor the con-
summation of any of the transactions contemplated hereby,
will (i) result in any material payment (including without
limitation severance, unemployment compensation or golden
parachute payment) becoming due to any director or employee
of Seller or any Seller Subsidiary from any of such entities,
(ii) materially increase any benefit otherwise payable under
any of the Seller Employee Plans or (iii) result in the ac-
celeration of the time of payment of any such benefit. No
holder of an option to acquire stock of Seller has or will
-23-<PAGE>
have at any time through the Effective Time the right to re-
ceive any cash or other payment (other than the issuance of
stock of Seller) in exchange for or with respect to all or
any portion of such option. Seller shall use its reasonable
best efforts to insure that no amounts paid or payable by
Seller, Seller Subsidiaries or Buyer to or with respect to
any employee or former employee of Seller or any Seller Sub-
sidiary will fail to be deductible for federal income tax
purposes by reason of Section 280G of the Code. No Seller
Employee Stock Option has an associated "Additional Option
Right" or similar "re-load" feature.
2.17. Conduct of Seller to Date. From and after
January 1, 1996 through the date of this Agreement, except as
set forth on Schedule 2.17 or in Seller Financial Statements:
(i) Seller and the Seller Subsidiaries have conducted their
respective businesses in the ordinary and usual course con-
sistent with past practices; (ii) Seller has not issued,
sold, granted, conferred or awarded any of its Equity Secu-
rities (except shares of Seller Common Stock upon exercise of
Seller Employee Stock Options), or any corporate debt secu-
rities which would be classified under GAAP as long-term debt
on the balance sheets of Seller; (iii) Seller has not ef-
fected any stock split or adjusted, combined, reclassified or
otherwise changed its capitalization; (iv) Seller has not
declared, set aside or paid any dividend (other than its reg-
ular quarterly common dividends) or other distribution in
respect of its capital stock, or purchased, redeemed, re-
tired, repurchased, or exchanged, or otherwise acquired or
disposed of, directly or indirectly, any of its Equity Secu-
rities, whether pursuant to the terms of such Equity Securi-
ties or otherwise; (v) neither Seller nor any Seller Subsid-
iary has incurred any material obligation or liability (abso-
lute or contingent), except normal trade or business obliga-
tions or liabilities incurred in the ordinary course of busi-
ness, or subjected to Lien any of its assets or properties
other than in the ordinary course of business consistent with
past practice; (vi) neither Seller nor any Seller Subsidiary
has discharged or satisfied any material Lien or paid any
material obligation or liability (absolute or contingent),
other than in the ordinary course of business; (vii) neither
Seller nor any Seller Subsidiary has sold, assigned, trans-
ferred, leased, exchanged, or otherwise disposed of any of
its properties or assets other than for a fair consideration
in the ordinary course of business; (viii) except as required
by contract or law, neither Seller nor any Seller Subsidiary
has (A) increased the rate of compensation of, or paid any
bonus to, any of its directors, officers, or other employees,
except merit or promotion increases in accordance with exist-
ing policy or guidelines, (B) entered into any new, or
-24-<PAGE>
amended or supplemented any existing, employment, management,
consulting, deferred compensation, severance, or other simi-
lar contract, (C) entered into, terminated, or substantially
modified any of the Seller Employee Plans or (D) agreed to do
any of the foregoing; (ix) neither Seller nor any Seller Sub-
sidiary has suffered any material damage, destruction, or
loss, whether as the result of fire, explosion, earthquake,
accident, casualty, labor trouble, requisition, or taking of
property by any Regulatory Authority, flood, windstorm, em-
bargo, riot, act of God or the enemy, or other casualty or
event, and whether or not covered by insurance; (x) neither
Seller nor any Seller Subsidiary has cancelled or compromised
any debt, except for debts charged off or compromised in ac-
cordance with the past practice of Seller and its Subsidiar-
ies, and (xi) neither Seller nor any Seller Subsidiary has
entered into any material transaction, contract or commitment
outside the ordinary course of its business.
2.18. Proxy Statement, etc. None of the informa-
tion regarding Seller or any Seller Subsidiary supplied or to
be supplied by Seller for inclusion or included in (i) the
registration statement on Form S-4 to be filed with the Secu-
rities and Exchange Commission by Buyer for the purpose of
registering the shares of Buyer Common Stock to be exchanged
for shares of Seller Common Stock pursuant to the provisions
of this Agreement (the "Registration Statement"), (ii) the
proxy or information statement (the "Proxy Statement") to be
mailed to Seller's stockholders in connection with the trans-
actions contemplated by this Agreement or (iii) any other
documents to be filed with any Regulatory Authority in con-
nection with the transactions contemplated hereby will, at
the respective times such documents are filed with any Regu-
latory Authority and, in the case of the Registration State-
ment, when it becomes effective and, with respect to the
Proxy Statement, when mailed, be false or misleading with
respect to any material fact, or omit to state any material
fact necessary in order to make the statements therein not
misleading or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the
meeting of Seller's stockholders referred to in Section 5.03
(the "Meeting") (or, if no Meeting is held, at the time the
Proxy Statement is first furnished to Seller's stockholders),
be false or misleading with respect to any material fact, or
omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the
solicitation of any proxy for the Meeting. All documents
which Seller or any Seller Subsidiary is responsible for fil-
ing with any Regulatory Authority in connection with the
Merger will comply as to form in all material respects with
the provisions of applicable law.
-25-<PAGE>
2.19. Registration Obligations. Except as set
forth on Schedule 2.19, neither Seller nor any Seller Sub-
sidiary is under any obligation, contingent or otherwise, to
register any of its securities under the Securities Act.
2.20. State Takeover Statutes. Seller has taken
all actions necessary to ensure that the transactions contem-
plated by this Agreement are not subject to any applicable
state takeover laws under the laws of the State of Iowa.
2.21. Accounting, Tax and Regulatory Matters.
Neither Seller nor any Seller Subsidiary has taken or agreed
to take any action or has any knowledge of any fact or cir-
cumstance that would (i) prevent the transactions contem-
plated hereby from qualifying as a reorganization within the
meaning of Section 368 of the Code or (ii) materially impede
or delay receipt of any approval referred to in Section
6.01(b) or the consummation of the transactions contemplated
by this Agreement.
2.22. Other Activities. (a) Except as set forth
on Schedule 2.22A, neither Seller nor any of its Subsidiaries
engages in any insurance activities other than acting as a
principal, agent or broker for insurance that is directly
related to an extension of credit by Seller or any of its
Subsidiaries and limited to assuring the repayment of the
balance due on the extension of credit in the event of the
death, disability or involuntary unemployment of the debtor.
(b) To the knowledge of Seller's management: each
Subsidiary or affiliate that is a bank that performs personal
trust, corporate trust and other fiduciary activities ("Trust
Activities") has done so with requisite authority under ap-
plicable law of Regulatory Authorities and in material ac-
cordance with the agreements and instruments governing such
Trust Activities, sound fiduciary principles and applicable
law and regulation (specifically including but not limited to
Section 9 of Title 12 of the Code of Federal Regulations);
there is no investigation or inquiry by any governmental en-
tity pending or threatened against Seller or any of its Sub-
sidiaries or affiliates thereof relating to the compliance by
Seller or any of its Subsidiaries with sound fiduciary prin-
ciples and applicable law and regulations; and each employee
of any such bank had the authority to act in the capacity in
which such employee acted with respect to Trust Activities in
each case in which such employee was held out as a represen-
tative of such bank; and such bank has established policies
and procedures for the purpose of complying with applicable
laws of governmental entities relating to Trust Activities,
has followed such policies and procedures in all material
-26-<PAGE>
respects and has performed appropriate internal audit reviews
of Trust Activities, which audits have disclosed no material
violations of applicable laws of governmental entities or
such policies and procedures.
2.23. Interest Rate Risk Management Instruments.
(a) Set forth on Schedule 2.23A is a list of all interest
rate swaps, caps, floors, and option agreements and other
interest rate risk management arrangements to which Seller or
any of its Subsidiaries is a party or by which any of their
properties or assets may be bound.
(b) All interest rate swaps, caps, floors and op-
tion agreements and other interest rate risk management ar-
rangements to which Seller or any of its Subsidiaries is a
party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business
and in accordance with prudent banking practice and appli-
cable rules, regulations and policies of Regulatory Authori-
ties and with counterparties believed to be financially re-
sponsible at the time and are legal, valid and binding obli-
gations and are in full force and effect. Seller and each of
its Subsidiaries has duly performed in all material respects
all of its obligations thereunder to the extent that such
obligations to perform have accrued, and there are no mate-
rial breaches, violations or defaults or allegations or as-
sertions of such by any party thereunder.
2.24. Accuracy of Information. The statements of
Seller contained in this Agreement, the Schedules and any
other written document executed and delivered by or on behalf
of Seller pursuant to the terms of this Agreement are true
and correct in all material respects, and such statements and
documents do not omit any material fact necessary to make the
statements contained therein not misleading.
2.25. Brokers and Finders. Except for The Chicago
Corporation, neither Seller nor any Seller Subsidiary nor any
of their respective officers, directors or employees has em-
ployed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or
indirectly for Seller or any Seller Subsidiary in connection
with this Agreement or the transactions contemplated hereby.
-27-<PAGE>
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer represents and warrants to and covenants with
Seller as follows:
3.01. Organization and Authority. Buyer and each
of its Subsidiaries is a corporation, bank, trust company or
other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of organization,
is duly qualified to do business and is in good standing in
all jurisdictions where its ownership or leasing of property
or the conduct of its business requires it to be so qualified
and has corporate power and authority to own its properties
and assets and to carry on its business as it is now being
conducted, except, in the case of the Buyer Subsidiaries,
where the failure to be so qualified would not have a mate-
rial adverse effect on the Condition of Buyer and its Sub-
sidiaries, taken as a whole. Buyer is registered as a bank
holding company with the Board under the Holding Company Act.
True and complete copies of the Articles of Incorporation and
Bylaws of Buyer and of Magna Bank, N.A., each in effect on
the date of this Agreement, have been provided to Seller.
Buyer's bank Subsidiaries (the "Buyer Banks") are national
banking associations chartered by the OCC. The deposits of
each of the Buyer Banks are insured by the BIF or, to the
extent transferred to a Buyer Bank by the Resolution Trust
Corporation, by the SAIF of the FDIC. The Buyer Banks iden-
tified as such on Schedule 3.01 are members in good standing
of the Federal Reserve System.
3.02. Capitalization of Buyer. The authorized
capital stock of Buyer consists of (i) 40,000,000 shares of
Buyer Common Stock, of which, as of August 23, 1996,
28,019,668 shares were issued and outstanding, (ii) 1,000,000
shares of preferred stock, no par value ("Buyer Preferred
Stock"), of which no shares are issued or outstanding, (iii)
49,500 of 7.5% Cumulative Class B Voting Preferred Stock, par
value $20.00 per share, of which 2,039 shares were issued and
outstanding, and (iv) 1,000,000 shares of Class C Non-Voting
Preferred Stock, par value $0.10 per share, of which no
shares were outstanding. Buyer has designated 400,000 shares
of Buyer Preferred Stock and has reserved such shares under
the Buyer Rights Agreement. As of August 23, 1996, Buyer had
reserved 5,384,673 shares of Buyer Common Stock for issuance
under the Convertible Subordinated Capital Notes and Convert-
ible Subordinated Debentures, Buyer's various stock option
and incentive plans, a list of which is set forth on Schedule
3.02 ("Buyer Stock Options"), Buyer's dividend reinvestment
-28-<PAGE>
plan and Buyer's employee stock purchase plan. From August
23, 1996 through the date of this Agreement, no shares of
Buyer Common Stock or other Equity Securities of Buyer have
been issued, excluding any such shares which may have been
issued pursuant to stock-based employee benefit or incentive
plans and programs, or pursuant to the foregoing agreements.
Buyer continually evaluates possible acquisitions and may,
prior to the Effective Time, enter into one or more agree-
ments providing for, and may consummate, the acquisition by
it of another bank, association, bank holding company, sav-
ings and loan holding company or other company (or the assets
thereof) for consideration that may include equity securi-
ties. In addition, prior to the Effective Time, Buyer may,
depending on market conditions and other factors, otherwise
determine to issue equity, equity-linked or other securities
for financing purposes. Notwithstanding the foregoing, Buyer
will not take any action that would (i) prevent the transac-
tions contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code, or (ii) mate-
rially impede or delay receipt of any approval referred to in
Section 6.01(b) or the consummation of the transactions con-
templated by this Agreement. All of the issued and outstand-
ing shares of capital stock of Buyer and its Subsidiaries are
validly issued, fully paid, and nonassessable, and have not
been issued in violation of any preemptive right of any
stockholder of Buyer or its Subsidiaries. At the Effective
Time, the Buyer Common Stock to be issued in the Merger will
be duly authorized, validly issued, fully paid and non-
assessable, and will not be issued in violation of any pre-
emptive right of any stockholder of Buyer.
3.03. Authorization. (a) Buyer has the corporate
power and authority to enter into this Agreement and to carry
out its obligations hereunder. No stockholder vote is re-
quired for Buyer to approve this Agreement. The execution,
delivery and performance of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby
have been duly authorized by all requisite corporate action
of Buyer. This Agreement is a valid and binding obligation
of Buyer enforceable against Buyer in accordance with its
terms.
(b) Neither the execution, delivery and perfor-
mance by Buyer of this Agreement, nor the consummation by
Buyer of the transactions contemplated hereby, nor compliance
by Buyer with any of the provisions hereof, will (i) violate,
conflict with or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) or result in
the termination of, or accelerate the performance required
-29-<PAGE>
by, or result in a right of termination or acceleration of,
or result in the creation of, any Lien upon any of the mate-
rial properties or assets of Buyer or any Buyer Subsidiary
under any of the terms, conditions or provisions of (x) its
articles or certificate of incorporation or bylaws, or (y)
any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation
to which Buyer or any Buyer Subsidiary or any of the material
properties or assets of Buyer or any Buyer Subsidiary is a
party or by which it may be bound, or to which Buyer or any
Buyer Subsidiary may be subject, or (ii) subject to compli-
ance with the statutes and regulations referred to in para-
graph (c) of this Section 3.03, to the best knowledge of
Buyer, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Buyer or
any of its Subsidiaries or any of their respective material
properties or assets.
(c) Other than in connection with or in compliance
with the provisions of the Delaware General Corporation Law
(the "DGCL"), the Iowa Act, the Securities Act, the Exchange
Act, the securities or blue sky laws of the various states or
filings, consents, reviews, authorizations, approvals or ex-
emptions required under the Holding Company Act and the HSR
Act, or any required approvals of any other Regulatory Au-
thority, no notice to, filing with, exemption or review by,
or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Buyer of the
transactions contemplated by this Agreement.
(d) Consummation of the transactions contemplated
by this Agreement will be a valid, binding and enforceable
obligation of Merger Sub. At the Effective Time, the capital
stock of Merger Sub to be issued will be duly authorized,
validly issued, fully paid and non-assessable.
3.03. Buyer Financial Statements. The consoli-
dated and parent company only balance sheets of Buyer and its
Subsidiaries as of December 31, 1995, 1994 and 1993 and re-
lated consolidated statements of income, cash flows and
changes in stockholders' equity for each of the three years
in the three-year period ended December 31, 1995, together
with the notes thereto, audited by Ernst & Young LLP ("Buyer
Auditors") as filed with the Securities and Exchange Commis-
sion, and the unaudited consolidated balance sheets of Buyer
and its Subsidiaries as of March 31 and June 30, 1996 and the
related unaudited consolidated statements of income and cash
flows for the periods then ended included in quarterly re-
ports on Form 10-Q as filed with the Securities and Exchange
Commission (collectively, the "Buyer Financial Statements"),
-30-<PAGE>
have been prepared in accordance with GAAP, present fairly
the consolidated financial position of Buyer and its Subsid-
iaries at the dates and the consolidated results of opera-
tions, changes in stockholders' equity and cash flows of Buy-
er and its Subsidiaries for the periods stated therein and
are derived from the books and records of Buyer and its Sub-
sidiaries, which are complete and accurate in all material
respects and have been maintained in all material respects in
accordance with applicable laws and regulations. Neither
Buyer nor any of its Subsidiaries has any material contingent
liabilities that are not described in the financial state-
ments described above.
3.05. Buyer Reports. Since January 1, 1993, each
of Buyer and the Buyer Subsidiaries has filed all material
reports, registrations and statements, together with any re-
quired material amendments thereto, that it was required to
file with any Regulatory Authority. All such reports and
statements filed with any such Regulatory Authority are col-
lectively referred to herein as the "Buyer Reports." As of
its respective date, each Buyer Report complied in all mate-
rial respects with all the rules and regulations promulgated
by the applicable Regulatory Authority and did not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the cir-
cumstances under which they were made, not misleading.
3.06. Properties and Leases. Except as may be
reflected in the Buyer Financial Statements, except for any
Lien for current taxes not yet delinquent and except with
respect to assets classified as real estate owned, Buyer and
its Subsidiaries have good title free and clear of any mate-
rial Lien to all the real and personal property reflected in
Buyer's consolidated balance sheet as of June 30, 1996 in-
cluded in the most recent Buyer Form 10-Q and, in each case,
all real and personal property acquired since such date, ex-
cept such real and personal property as has been disposed of
in the ordinary course of business. All leases material to
Buyer or any Buyer Subsidiary pursuant to which Buyer or any
Buyer Subsidiary, as lessee, leases real or personal prop-
erty, are valid and effective in accordance with their re-
spective terms, and there is not, under any of such leases,
any material existing default by Buyer or any Buyer Subsid-
iary or any event which, with notice or lapse of time or
both, would constitute such a material default. Substan-
tially all of Buyer's and Buyer Subsidiaries' buildings,
structures and equipment in regular use have been well main-
tained and are in good and serviceable condition, normal wear
and tear excepted.
-31-<PAGE>
3.07. Material Adverse Change. Since June 30,
1996, there has been no material adverse change in the Con-
dition of Buyer and its Subsidiaries, taken as a whole.
3.08. Compliance with Laws. (a)(i) Each of Buyer
and its Subsidiaries has complied with all laws, regulations,
and orders (including without limitation zoning ordinances,
building codes, ERISA, and securities, tax, environmental,
civil rights, and occupational health and safety laws and
regulations and including without limitation in the case of
any Buyer Subsidiary that is a bank, banking organization,
thrift, banking corporation or trust company, all statutes,
rules, regulations and policy statements, pertaining to the
conduct of a banking, deposit-taking or lending or related
business or to the exercise of trust powers) and governing
instruments applicable to them and to the conduct of their
business, except where such failure to comply would not have
a material adverse effect on the Condition of Buyer and its
Subsidiaries, taken as a whole, and (ii) neither Buyer nor
any Buyer Subsidiary is in default under, and no event has
occurred which, with the lapse of time or notice or both,
could result in the default under, the terms of any judgment,
order, writ, decree, permit, or license of any Regulatory
Authority or court, whether federal, state, municipal, or
local and whether at law or in equity, except where such de-
fault would not have a material adverse effect on the Condi-
tion of Buyer and its Subsidiaries, taken as a whole. Nei-
ther Buyer nor any Buyer Subsidiary is subject to or rea-
sonably likely to incur a liability as a result of its owner-
ship, operation, or use of any Property of Buyer (whether
directly or, to the best knowledge of Buyer, as a consequence
of such Property being part of the investment portfolio of
Buyer or any Buyer Subsidiary) (A) that is contaminated by or
contains any Toxic Substance, or (B) on which any Toxic Sub-
stance has been stored, disposed of, placed, or used in the
construction thereof; and which, in each case, reasonably
could be expected to have a material adverse effect on the
Condition of Buyer and its Subsidiaries, taken as a whole.
Except for statutory or regulatory restrictions of general
application, no Regulatory Authority has placed any restric-
tion on the business of Buyer or any Buyer Subsidiary which
reasonably could be expected to have a material adverse ef-
fect on the Condition of Buyer and its Subsidiaries, taken as
a whole. Except as disclosed on Schedule 3.08A, no claim,
action, suit, or proceeding is pending against Buyer or any
Buyer Subsidiary relating to Property of Buyer before any
court or other Regulatory Authority or arbitration tribunal
-32-<PAGE>
relating to hazardous substances, pollution, or the environ-
ment, and there is no outstanding judgment, order, writ, in-
junction, decree, or award against or affecting Buyer or any
Buyer Subsidiary with respect to the same.
(b) Buyer and each of its Subsidiaries have all
permits, licenses, authorizations, orders and approvals of,
and have made all filings, applications and registrations
with, all Regulatory Authorities that are required in order
to permit them to own or lease their properties and assets
and to carry on their business as presently conducted and
that are material to the business of Buyer and its Subsid-
iaries; all such permits, licenses, certificates of author-
ity, orders and approvals are in full force and effect and,
to the best knowledge of Buyer, no suspension or cancellation
of any of them is threatened; and all such filings, applica-
tions and registrations are current.
(c) From and after January 1, 1993, neither Buyer
nor any Buyer Subsidiary has received any notification or
communication which has not been resolved from any Regulatory
Authority (i) asserting that any Buyer or any Subsidiary of
Buyer, is not in substantial compliance with any of the stat-
utes, regulations or ordinances that such Regulatory Author-
ity enforces, except with respect to matters which (A) are
set forth on Schedule 3.08C or in any writing previously fur-
nished to Buyer or (B) reasonably could not be expected to
have a material adverse effect on the Condition of Buyer and
its Subsidiaries, taken as a whole, (ii) threatening to re-
voke any license, franchise, permit or governmental autho-
rization that is material to the Condition of Buyer and its
Subsidiaries, taken as a whole, including without limitation
such company's status as an insured depositary institution
under the Federal Deposit Insurance Act, or (iii) requiring
or threatening to require Buyer or any of its Subsidiaries,
or indicating that Buyer or any of its Subsidiaries may be
required, to enter into a cease and desist order, agreement
or memorandum of understanding or any other agreement re-
stricting or limiting or purporting to direct, restrict or
limit in any manner the operations of Buyer or any of its
Subsidiaries, including without limitation any restriction on
the payment of dividends. No such cease and desist order,
agreement or memorandum of understanding or other agreement
is currently in effect.
3.09. Registration Statement, etc. None of the
information regarding Buyer or any of its Subsidiaries sup-
plied or to be supplied by Buyer for inclusion or included in
(i) the Registration Statement, (ii) the Proxy Statement, or
(iii) any other documents to be filed with any Regulatory
-33-<PAGE>
Authority in connection with the transactions contemplated
hereby will, at the respective times such documents are filed
with any Regulatory Authority and, in the case of the Regis-
tration Statement, when it becomes effective and, with re-
spect to the Proxy Statement, when mailed (or furnished to
stockholders of Seller), be false or misleading with respect
to any material fact, or omit to state any material fact nec-
essary in order to make the statements therein not misleading
or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Meeting, be
false or misleading with respect to any material fact, or
omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the
solicitation of any proxy for the Meeting. All documents
which Buyer or any of its Subsidiaries are responsible for
filing with any Regulatory Authority in connection with the
Merger will comply as to form in all material respects with
the provisions of applicable law.
3.10. Labor. No work stoppage involving Buyer or
any Buyer Subsidiary, is pending or, to the best knowledge of
Buyer, threatened. Neither Buyer nor any Buyer Subsidiary is
involved in, or, to the best knowledge of Buyer, threatened
with or affected by, any labor dispute, arbitration, lawsuit
or administrative proceeding which reasonably could be ex-
pected to have a material adverse affect on the Condition of
Buyer and its Subsidiaries, taken as a whole. Except as dis-
closed on Schedule 3.10, employees of neither Buyer nor any
Buyer Subsidiary are represented by any labor union or any
collective bargaining organization.
3.11. Material Interests of Certain Persons. (a)
Except as set forth in Buyer's Proxy Statement for its 1996
Annual Meeting of Stockholders, to the best knowledge of
Buyer, no executive officer or director of Buyer or any Sub-
sidiary of Buyer, or any "associate" (as such term is defined
in Rule l4a-1 under the Exchange Act) of any such officer or
director, has any material interest in any material contract
or property (real or personal, tangible or intangible), used
in or pertaining to the business of, Buyer or any Subsidiary
of Buyer, which in the case of Buyer is required to be dis-
closed by Item 404 of Regulation S-K promulgated by the Secu-
rities and Exchange Commission or in the case of any such
Subsidiary would be required to be so disclosed if such Sub-
sidiary had a class of securities registered under Section 12
of the Exchange Act.
(b) As of June 30, 1996, there are no loans from
Buyer or any Buyer Subsidiary to any present officer, di-
rector, employee or any associate or related interest of any
-34-<PAGE>
such person which have been made other than in accordance
with applicable laws and regulations.
3.12. Employee Benefit Plans. (a) Except as set
forth in Schedule 3.12A, neither Buyer nor any Buyer Sub-
sidiary is a party to any existing employment, management,
consulting, deferred compensation, change-in-control or other
similar contract. "Buyer Employee Plans" means all pension,
retirement, supplemental retirement, savings, profit sharing,
stock option, stock purchase, stock ownership, stock appre-
ciation right, deferred compensation, consulting, bonus, med-
ical, disability, workers' compensation, vacation, group in-
surance, severance and other material employee benefit, in-
centive and welfare policies, contracts, plans and arrange-
ments, and all trust agreements related thereto, maintained
(currently or at any time in the last five years) by or con-
tributed to by Buyer or any Buyer Subsidiary in respect of
any of the present or former directors, officers, or other
employees of and/or consultants to Buyer or any Buyer Sub-
sidiary. Schedule 3.12A lists all Buyer Employee Plans cur-
rently in effect. Buyer has furnished Seller with the fol-
lowing documents with respect to each Buyer Employee Plan:
(i) a true and complete copy of all written documents com-
prising such Buyer Employee Plan (including amendments and
individual agreements relating thereto) or, if there is no
such written document, an accurate and complete description
of the Buyer Employee Plan; (ii) the most recent Form 5500 or
Form 5500-C (including all schedules thereto), if applicable;
(iii) the most recent financial statements and actuarial re-
ports, if any; (iv) the summary plan description currently in
effect and all material modifications thereof, if any; and
(v) the most recent IRS determination letter, if any. With-
out limiting the generality of the foregoing, Buyer has fur-
nished Seller with true and complete copies of each form of
stock option grant or stock option agreement that is out-
standing under any stock option plan of Buyer or any Buyer
Subsidiary.
(b) Except as set forth in Schedule 3.12B, all
Buyer Employee Plans have been maintained and operated ma-
terially in accordance with their terms and with the material
requirements of all applicable statutes, orders, rules and
final regulations, including without limitation ERISA and the
Code. All contributions required to be made to Buyer Em-
ployee Plans have been made.
(c) With respect to each of the Buyer Employee
Plans which is a pension plan (as defined in Section 3(2) of
ERISA) (the "Buyer Pension Plans"): (i) each Buyer Pension
Plan which is intended to be "qualified" within the meaning
-35-<PAGE>
of Section 401(a) of the Code has been determined to be so
qualified by the IRS and, to the knowledge of Buyer, such
determination letter may still be relied upon, and each re-
lated trust is exempt from taxation under Section 501(a) of
the Code; (ii) the present value of all benefits vested and
all benefits accrued under each Buyer Pension Plan which is
subject to Title IV of ERISA, valued using the assumptions in
the most recent actuarial report, did not, in each case, as
of the last applicable annual valuation date (as indicated on
Schedule 3.12A), exceed the value of the assets of the Buyer
Pension Plan allocable to such vested or accrued benefits;
(iii) to the best knowledge of Buyer, there has been no "pro-
hibited transaction," as such term is defined in Section 4975
of the Code or Section 406 of ERISA, which could subject any
Buyer Pension Plan or associated trust, or the Buyer or any
Buyer Subsidiary, to any material tax or penalty; (iv) except
as set forth on Schedule 3.12C, no Buyer Pension Plan subject
to Title IV of ERISA or any trust created thereunder has been
terminated, nor have there been any "reportable events" with
respect to any Buyer Pension Plan, as that term is defined in
Section 4043 of ERISA on or after January 1, 1985; and (v) no
Buyer Pension Plan or any trust created thereunder has in-
curred any "accumulated funding deficiency", as such term is
defined in Section 302 of ERISA (whether or not waived). No
Buyer Pension Plan is a "multiemployer plan" as that term is
defined in Section 3(37) of ERISA. With respect to each Mul-
tiple Employer Pension Plan: (i) neither Buyer nor any Buyer
Subsidiary would have any liability or obligation to post a
bond under Section 4063 of ERISA if Buyer and all Buyer Sub-
sidiaries were to withdraw from such Multiple Employer Pen-
sion Plan; and (ii) neither Buyer nor any Buyer Subsidiary
would have any liability under Section 4064 of ERISA if such
Multiple Employer Pension Plan were to terminate.
(d) Except as set forth on Schedule 3.12D, neither
Buyer nor any Buyer Subsidiary has any material liability for
any post-retirement health, medical or similar benefit of any
kind whatsoever, except as required by statute or regulation.
(e) Neither Buyer nor any Buyer Subsidiary has any
material liability under ERISA or the Code as a result of its
being a member of a group described in Sections 414(b), (c),
(m) or (o) of the Code.
(f) Except as set forth on Schedule 3.12F, neither
the execution nor delivery of this Agreement, nor the con-
summation of any of the transactions contemplated hereby,
will (i) result in any material payment (including without
limitation severance, unemployment compensation or golden
parachute payment) becoming due to any director or employee
-36-<PAGE>
of Buyer or any Buyer Subsidiary from any of such entities,
(ii) materially increase any benefit otherwise payable under
any of the Buyer Employee Plans or (iii) result in the ac-
celeration of the time of payment of any such benefit. No
holder of an option to acquire stock of Buyer has or will
have at any time through the Effective Time the right to re-
ceive any cash or other payment (other than the issuance of
stock of Buyer) in exchange for or with respect to all or any
portion of such option. Buyer shall use its reasonable best
efforts to insure that no amounts paid or payable by Buyer or
any of its Subsidiaries to or with respect to any employee or
former employee of Buyer or any Buyer Subsidiary will fail to
be deductible for federal income tax purposes by reason of
Section 280G of the Code. No Buyer Employee Stock Option has
an associated "Additional Option Right" or similar "re-load"
feature.
3.13. Commitments and Contracts. Neither Buyer
nor any Buyer Subsidiary is in violation of its charter docu-
ments or bylaws or in default under any material agreement,
commitment, arrangement, lease, insurance policy, or other
instrument, whether entered into in the ordinary course of
business or otherwise and whether written or oral, and there
has not occurred any event that, with the lapse of time or
giving of notice or both, would constitute such a default,
except, in all cases, where such default would not have a
material adverse effect on the Condition of Buyer and its
Subsidiaries, taken as a whole.
3.14. Litigation and Other Proceedings. Neither
Buyer nor any Buyer Subsidiary is a party to any pending or,
to the best knowledge of Buyer, threatened claim, action,
suit, investigation or proceeding, or is subject to any or-
der, judgment or decree, except for matters which, in the
aggregate, will not have, or reasonably could not be expected
to have, a material adverse effect on the Condition of Buyer
and its Subsidiaries, taken as a whole, or which purports or
seeks to enjoin or restrain the transactions contemplated by
this Agreement. Without limiting the generality of the fore-
going, there are no actions, suits, or proceedings pending
or, to the best knowledge of Buyer, threatened against Buyer
or any Buyer Subsidiary or any of their respective officers
or directors by any stockholder of Buyer or any Buyer Subsid-
iary (or any former stockholder of Buyer or any Buyer Subsid-
iary) or involving claims under the Securities Act, the Ex-
change Act, the CRA or the fair lending laws.
3.15. Taxes. Buyer and each Buyer Subsidiary have
timely filed or will timely (including extensions) file all
material tax returns required to be filed at or prior to the
-37-<PAGE>
Closing Date ("Buyer Returns"). Each of Buyer and its Sub-
sidiaries has paid, or set up adequate reserves on the Buyer
Financial Statements for the payment of, all taxes required
to be paid in respect of the periods covered by the Buyer
Financial Statements and has set up adequate reserves on the
most recent financial statements Buyer has filed under the
Exchange Act for the payment of all taxes anticipated to be
payable in respect of all periods up to and including the
latest period covered by such financial statements. Neither
Buyer nor any Buyer Subsidiary will have any liability mate-
rial to the Condition of Buyer and the Buyer Subsidiaries,
taken as a whole, for any such taxes in excess of the amounts
so paid or reserves so established and no material deficien-
cies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or definitely)
against any of Buyer or any Buyer Subsidiary which would not
be covered by existing reserves. Neither Buyer nor any Buyer
Subsidiary is delinquent in the payment of any material tax,
assessment or governmental charge, nor, except as previously
disclosed, has it requested any extension of time within
which to file any tax returns in respect of any fiscal year
which have not since been filed and no requests for waivers
of the time to assess any tax are pending. The federal and
state income tax returns of Buyer and the Buyer Subsidiaries
have been audited and settled by the IRS or appropriate state
tax authorities for all periods ended through December 31,
1992. There is no deficiency or material refund litigation
or matter in controversy with respect to Buyer Returns. Nei-
ther Buyer nor any Buyer Subsidiary has extended or waived
any statute of limitations on the assessment of any tax due
that is currently in effect.
3.16. Accounting, Tax and Regulatory Matters.
Neither Buyer nor any Buyer Subsidiary has taken or agreed to
take any action or has any knowledge of any fact or circum-
stance that would (i) prevent the transactions contemplated
hereby from qualifying as a reorganization within the meaning
of Section 368 of the Code or (ii) materially impede or delay
receipt of any approval referred to in Section 6.01(b) or the
consummation of the transactions contemplated by this Agree-
ment.
3.17. Accuracy of Information. The statements of
Buyer contained in this Agreement, the Schedules and in any
other written document executed and delivered by or on behalf
of Buyer pursuant to the terms of this Agreement are true and
correct in all material respects, and such statements and
documents do not omit any material fact necessary to make the
statements contained herein or therein not misleading.
-38-<PAGE>
3.18. Brokers and Finders. Except for Donaldson,
Lufkin & Jenrette Securities Corporation, neither Buyer nor
any of its Subsidiaries nor any of their respective officers,
directors or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, bro-
kerage fees, commissions or finder's fees, and no broker or
finder has acted directly or indirectly for Buyer or any of
its Subsidiaries in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01. Conduct of Businesses Prior to the Effective
Time. During the period from the date of this Agreement to
the Effective Time, each of Buyer and Seller shall, and shall
cause each of their respective Subsidiaries to, conduct its
business according to the ordinary and usual course consis-
tent with past practices and shall, and shall cause each such
Subsidiary to, use its reasonable best efforts to maintain
and preserve its business organization, employees and advan-
tageous business relationships and retain the services of its
officers and key employees. Seller acknowledges that Buyer
has filed with the OCC a request for approval to establish
and operate certain subsidiaries for, among other things, tax
and administrative purposes, and Seller agrees that the es-
tablishment and operation of such subsidiaries shall not be
violative of the provisions of this Section.
4.02. Forbearances. Except as otherwise contem-
plated by this Agreement and without limiting the provisions
of Section 4.01, during the period from the date of this
Agreement to the Effective Time, Seller shall not, and shall
not permit any of its Subsidiaries to, without the prior
written consent of Buyer:
(a) subject to the provisions of Section 5.15,
declare, set aside or pay any dividends or other distri-
butions, directly or indirectly, in respect of its capi-
tal stock (other than its regular quarterly dividend not
to exceed $0.23 per share and dividends from a wholly
owned Subsidiary of Seller to Seller or another wholly
owned Subsidiary of Seller) and provided further, that
Seller shall not declare or pay any dividends on Seller
Common Stock for any period in which its stockholders
will be entitled to receive any regular quarterly divi-
dend on the shares of Buyer Common Stock to be issued in
the Merger; or
-39-<PAGE>
(b) enter into or amend any employment, severance
or similar agreement or arrangement with any director or
officer or employee, or materially modify any of the
Seller Employee Plans or grant any salary or wage in-
crease or materially increase any employee benefit (in-
cluding incentive or bonus payments), except normal in-
dividual increases in compensation to employees consis-
tent with past practice, or as required by law or con-
tract; or
(c) authorize, propose or announce an intention to
authorize, or propose, or enter into an agreement in
principle with respect to, any merger, consolidation or
business combination (other than the Merger), any acqui-
sition of a material amount of assets or securities, any
disposition of a material amount of assets or securities
or any release or relinquishment of any material con-
tract rights; or
(d) propose or adopt any amendments to its ar-
ticles of incorporation, association or other charter
document or bylaws; or
(e) issue, sell, grant, confer or award any of its
Equity Securities (except shares of Seller Common Stock
issued upon exercise of Seller Employee Stock Options
outstanding on the date of this Agreement) or effect any
stock split or adjust, combine, reclassify or otherwise
change its capitalization as it existed on the date of
this Agreement; or
(f) purchase, redeem, retire, repurchase, or ex-
change, or otherwise acquire or dispose of, directly or
indirectly, any of its Equity Securities, whether pur-
suant to the terms of such Equity Securities or other-
wise; or
(g) (i) without first consulting with Buyer, enter
into, renew or increase any loan or credit commitment
(including standby letters of credit) to, or invest or
agree to invest in any person or entity or modify any of
the material provisions or renew or otherwise extend the
maturity date of any existing loan or credit commitment
(collectively, "Lend to") in an amount in excess of
$1,500,000 or in an amount which, or when aggregated
with any and all loans or credit commitments to such
person or entity, would be in excess of $1,500,000; (ii)
Lend to any person other than in accordance with lending
policies as in effect on the date hereof; or (iii) with-
out first consulting with Buyer, Lend to any person or
-40-<PAGE>
entity any of the loans or other extensions of credit to
which or investments in which are on a "watch list" or
similar internal report of Seller or any Seller Subsid-
iary (except those denoted "pass" thereon), in an amount
in excess of $500,000; provided, however, that nothing
in this paragraph shall prohibit Seller or any Seller
Subsidiary from honoring any contractual obligation in
existence on the date of this Agreement; or
(h) directly or indirectly (including through its
officers, directors, employees or other representatives)
initiate, solicit or encourage any discussions, inquir-
ies or proposals with any third party relating to the
disposition of any significant portion of the business
or assets of Seller or any Seller Subsidiary or the ac-
quisition of Equity Securities of Seller or any Seller
Subsidiary or the merger of Seller or any Seller Sub-
sidiary with any person (other than Buyer) or any simi-
lar transaction (each such transaction being referred to
herein as an "Acquisition Transaction"), or provide any
such person with information or assistance or negotiate
with any such person with respect to an Acquisition
Transaction, and Seller shall promptly notify Buyer
orally of all the relevant details relating to all in-
quiries, indications of interest and proposals which it
may receive with respect to any Acquisition Transaction;
or
(i) take any action that would (A) materially im-
pede or delay the consummation of the transactions con-
templated by this Agreement or the ability of Buyer or
Seller to obtain any approval of any Regulatory Author-
ity required for the transactions contemplated by this
Agreement or to perform its covenants and agreements
under this Agreement or (B) prevent the transactions
contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code; or
(j) other than in the ordinary course of business
consistent with past practice, incur any indebtedness
for borrowed money, assume, guarantee, endorse or other-
wise as an accommodation become responsible or liable
for the obligations of any other individual, corporation
or other entity; or
(k) without prior consultation with Buyer, re-
structure or materially change its investment securities
portfolio, through purchases, sales or otherwise, or the
manner in which the portfolio is classified or reported,
or execute any individual investment transaction (i) in
-41-<PAGE>
United States Treasury securities in excess of
$5,000,000 and (ii) in any other investment securities
in excess of $1,000,000; or
(l) agree in writing or otherwise to take any of
the foregoing actions or engage in any activity, enter
into any transaction or take or omit to take any other
act which would make any of the representations and war-
ranties in Article II of this Agreement untrue or incor-
rect in any material respect if made anew after engaging
in such activity, entering into such transaction, or
taking or omitting such other act.
4.03. Forbearances. Except as set forth on Sched-
ule 4.03 or as otherwise contemplated by this Agreement and
without limiting the provisions of Section 4.01, during the
period from the date of this Agreement to the Effective Time,
Buyer shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Seller:
(a) take any action that would (A) materially im-
pede or delay the consummation of the transactions con-
templated by this Agreement or the ability of Buyer or
Seller to obtain any approval of any Regulatory Author-
ity required for the transactions contemplated by this
Agreement or to perform its covenants and agreements
under this Agreement or (B) prevent the transactions
contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code; or
(b) agree in writing or otherwise to take any of
the foregoing actions or engage in any activity, enter
into any transaction or take or omit to take any other
act which would make any of the representations and war-
ranties in Article III of this Agreement untrue or in-
correct in any material respect if made anew after en-
gaging in such activity, entering into such transaction,
or taking or omitting such other act.
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Access and Information. (a) Buyer and its
Subsidiaries, on the one hand, and Seller and its Subsidiar-
ies, on the other hand, shall each afford to each other, and
to the other's accountants, counsel and other representa-
tives, full access during normal business hours, during the
period prior to the Effective Time, to all their respective
-42-<PAGE>
properties, books, contracts, commitments and records and,
during such period, each shall furnish promptly to the other
(i) a copy of each report, schedule and other document filed
or received by it during such period pursuant to the require-
ments of federal and state securities laws and (ii) all other
information concerning its business, properties and personnel
as such other party may reasonably request. Each party here-
to shall, and shall cause its advisors and representatives
to, (A) hold confidential all information obtained in connec-
tion with any transaction contemplated hereby with respect to
the other party which is not otherwise public knowledge, (B)
return all documents (including copies thereof) obtained
hereunder from the other party to such other party and (C)
use its reasonable best efforts to cause all information ob-
tained pursuant to this Agreement or in connection with the
negotiation of this Agreement to be treated as confidential
and not use, or knowingly permit others to use, any such in-
formation unless such information becomes generally available
to the public.
(b) Promptly following the date of this Agreement,
each party shall commence a review of the operations, busi-
ness affairs, prospects and financial condition of the other
party (the "Due Diligence Review"). Such Due Diligence Re-
view shall conclude by not later than 15 business days after
the date of this Agreement (the "Due Diligence Period").
Each party shall promptly advise the other of any situation,
event, circumstance or other matter which first came to the
attention of such party after the date hereof which could
result in the termination of this Agreement pursuant to Sec-
tion 7.01 hereof, or, if applicable, of the absence of any
situation, event, circumstance or other matter. Notwith-
standing anything herein or implied to the contrary, the Due
Diligence Review shall not limit, restrict or preclude, or be
construed to limit, restrict or preclude, either party, at
any time or from time to time thereafter, from conducting
such further reviews or from exercising any rights available
to it hereunder as a result of the existence or occurrence
prior to the Due Diligence Period of any event or condition
which was not detected in the Due Diligence Review and which
would constitute a breach of any representation, warranty or
agreement under this Agreement.
5.02. Registration Statement; Regulatory Matters.
(a) Buyer shall prepare and, subject to the review and con-
sent of Seller with respect to matters relating to Seller,
file with the Securities and Exchange Commission as soon as
is reasonably practicable the Registration Statement (or the
equivalent in the form of preliminary proxy material) with
respect to the consideration to be issued by Buyer in the
-43-<PAGE>
Merger. Buyer shall prepare and file an application with the
Federal Reserve Board, OTS and Iowa Division of Banking as
soon as reasonably practicable. Buyer shall use all reason-
able efforts to cause the Registration Statement to become
effective. Buyer shall also take any action required to be
taken under any applicable state blue sky or securities laws
in connection with the issuance of any shares, and Seller and
its Subsidiaries shall furnish Buyer all information concern-
ing Seller and its Subsidiaries and the stockholders thereof
as Buyer may reasonably request in connection with any such
action.
(b) Seller and Buyer shall cooperate and use their
respective reasonable best efforts to prepare all documenta-
tion, to effect all filings and to obtain all permits, con-
sents, approvals and authorizations of all third parties and
Regulatory Authorities necessary to consummate the transac-
tions contemplated by this Agreement and, as and if directed
by Buyer, to consummate such other mergers, consolidations or
asset transfers or other transactions by and among Buyer's
Subsidiaries and Seller's Subsidiaries concurrently with or
following the Effective Time.
5.03. Stockholder Approval. Seller shall call a
meeting of its stockholders to be held as soon as practicable
for the purpose of voting upon the Merger or take other ac-
tion for stockholders to authorize the Merger. In connection
therewith, Buyer shall prepare the Proxy Statement and, with
the approval of each of Buyer and Seller, the Proxy Statement
shall be filed with the Securities and Exchange Commission
and mailed to the stockholders of Seller. The Board of Di-
rectors of Seller shall (subject to compliance with its fidu-
ciary duties as advised by counsel) recommend to its share-
holders the approval of this Agreement and the Merger contem-
plated hereby and use its reasonable efforts to obtain such
approval.
5.04. Current Information. During the period from
the date of this Agreement to the Effective Time, each party
shall promptly furnish the other party with copies of all
monthly and other interim financial information or reports as
the same become available and shall cause one or more of its
designated representatives to confer on a regular and fre-
quent basis with representatives of the other party. Each
party shall promptly notify the other party of any material
change in its business or operations and of any governmental
complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the insti-
tution or the threat of material litigation involving such
-44-<PAGE>
party, and shall keep the other party fully informed of such
events.
5.05. Agreements of Affiliates. As soon as prac-
ticable after the date of this Agreement, Seller shall de-
liver to Buyer a letter identifying all persons whom Seller
believes to be, at the time this Agreement is submitted to a
vote of the stockholders of Seller, "affiliates" of Seller
for purposes of Rule 145 under the Securities Act. Seller
shall use its reasonable best efforts to cause each person
who is so identified as an "affiliate" to deliver to Buyer as
soon as practicable thereafter, and in any event no later
than the publication of notice in the Federal Register of
Buyer's application with the Federal Reserve Board referred
to in Section 5.02, a written agreement in Form of Exhibit C
providing that from the date of such agreement each such per-
son will agree not to sell, pledge, transfer or otherwise
dispose of any shares of stock of Seller held by such person
or any shares of Buyer Common Stock to be received by such
person in the Merger except in compliance with the applicable
provisions of the Securities Act.
5.06. Expenses. Each party hereto shall bear its
own expenses incident to preparing, entering into and carry-
ing out this Agreement and to consummating the Merger.
5.07. Miscellaneous Agreements and Consents. Sub-
ject to the terms and conditions herein provided, each of the
parties hereto agrees to use its respective reasonable best
efforts to take, or cause to be taken, all action, and to do,
or cause to be done, all things necessary, proper or advis-
able under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agree-
ment as expeditiously as possible, including without limita-
tion using its respective reasonable best efforts to lift or
rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate
the transactions contemplated hereby. Each party shall, and
shall cause each of its respective Subsidiaries to, use its
reasonable best efforts to obtain consents of all third par-
ties and Regulatory Authorities necessary or, in the opinion
of Buyer, desirable for the consummation of the transactions
contemplated by this Agreement.
5.08. Employee Stock Options. At the Effective
Time, all rights with respect to Seller Common Stock pursuant
to Seller Employee Stock Options that are outstanding at the
Effective Time, whether or not then exercisable, shall be
converted into and become rights with respect to Buyer Common
-45-<PAGE>
Stock, and Buyer shall assume each Seller Employee Stock Op-
tion in accordance with the terms of the stock option plan
under which it was issued and the stock option agreement by
which it is evidenced. From and after the Effective Time,
(i) each Seller Employee Stock Option assumed by Buyer shall
be exercised solely for shares of Buyer Common Stock, (ii)
the number of shares of Buyer Common Stock subject to each
Seller Employee Stock Option shall be equal to the number of
shares of Seller Common Stock subject to such Seller Employee
Stock Option immediately prior to the Effective Time multi-
plied by the Exchange Ratio and (iii) the per share exercise
price under each Seller Employee Stock Option shall be ad-
justed by dividing the per share exercise price under such
Seller Employee Stock Option by the Exchange Ratio and round-
ing down to the nearest cent; provided, however, that the
terms of each Seller Employee Stock Option shall, in accor-
dance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend, re-
capitalization or other similar transaction subsequent to the
Effective Time. It is intended that the foregoing assumption
shall be undertaken in a manner that will not constitute a
"modification" as defined in the Code, as to any Seller Em-
ployee Stock Option that is an "incentive stock option."
5.09. Press Releases. Except as may be required
by law, Seller and Buyer shall consult and agree with each
other as to the form, timing and substance of any proposed
press release relating to this Agreement or any of the trans-
actions contemplated hereby.
5.10. State Takeover Statutes. Seller will take
all steps necessary to exempt the transactions contemplated
by this Agreement and any agreement contemplated hereby from,
and if necessary challenge the validity of, any applicable
state takeover law.
5.11. D&O Indemnification. Buyer agrees that the
Merger shall not affect or diminish any of Seller's duties
and obligations of indemnification existing as of the Effec-
tive Time in favor of employees, agents, directors or offic-
ers of Seller or its Subsidiaries arising by virtue of their
respective Articles of Incorporation or Bylaws in the form in
effect at the date of this Agreement or arising by operation
of law or arising by virtue of any contract, resolution or
other agreement or document existing at the date of this
Agreement, and Buyer agrees to use its reasonable best ef-
forts to assume such duties and obligations of indemnifica-
tion, in order that such duties and obligations shall con-
tinue in full force and effect for so long as they would (but
-46-<PAGE>
for the Merger) otherwise survive and continue in full force
and effect.
5.12. Insurance. As soon as practicable following
the date hereof, Seller shall, and Seller shall cause its
Subsidiaries to, use its reasonable best efforts to maintain
its existing insurance coverage.
5.13. Certain Directors. Buyer agrees to cause
Messrs. Erl A. Schmiesing and Douglas K. Shull to be elected
or appointed as directors of Buyer at, or promptly after the
Effective Time. Buyer shall take all corporate action neces-
sary to ensure that Mr. Schmiesing serves on the Board of
Directors of Buyer for a period of three years following the
Closing Date.
5.14. Employment Agreements. All employment and
change of control agreements with Seller employees in effect
prior to the date of this Agreement and previously disclosed
to Buyer will be honored by Buyer in accordance with their
terms; provided, however, that certain named executives will
surrender their existing employment and change of control
agreements in exchange for (i) Buyer change of control or
employment agreements, and (ii) awards of restricted stock
with a value of one times Annualized Includible Compensation
(as defined in the applicable agreement) vesting ratably over
five years, with accelerated vesting if terminated without
Cause or as result of a Change of Control (each as defined in
the applicable agreement) of Buyer.
5.15. Dividends. After the date of this Agree-
ment, each of Buyer and Seller shall coordinate with the
other the declaration of any dividends in respect of Buyer
Common Stock and Seller Common Stock and the record dates and
payment dates relating thereto, it being the intention of the
parties hereto that holders of Buyer Common Stock or Seller
Common Stock shall not receive two dividends, or fail to re-
ceive one dividend, for any single calendar quarter with re-
spect to their shares of Buyer Common Stock and/or Seller
Common Stock and any shares of Buyer Common Stock any such
holder receives in exchange therefor in the Merger.
ARTICLE VI
CONDITIONS
6.01. Conditions to Each Party's Obligation to
Effect the Merger. The respective obligations of each party
to effect the Merger shall be subject to the fulfillment or
-47-<PAGE>
waiver at or prior to the Effective Time of the following
conditions:
(a) This Agreement shall have received the requi-
site approval of stockholders of Seller.
(b) All requisite approvals of this Agreement and
the transactions contemplated hereby shall have been
received from the Federal Reserve Board, the State Bank
Regulator, the OTS and any other Regulatory Authority;
provided, however, that such approvals shall not contain
or impose any conditions or requirements that would have
a material adverse effect on the business or financial
condition of either party.
(c) The Registration Statement shall have been
declared effective and shall not be subject to a stop
order or any threatened stop order.
(d) Neither Seller nor Buyer shall be subject to
any order, decree or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits the
consummation of the Merger.
(e) Each of Buyer and Seller shall have received,
from counsel reasonably satisfactory to it, an opinion
reasonably satisfactory in form and substance to it to
the effect that, on the basis of facts, representations
and assumptions set forth in such opinion which are con-
sistent with the state of facts existing at the Effec-
tive Time, the Merger will constitute a reorganization
within the meaning of Section 368 of the Code and that
accordingly:
(i) no gain or loss will be recognized by
Seller or Buyer as a result of the Merger;
(ii) no gain or loss will be recognized by
the stockholders of Seller who exchange their
shares of Seller Common Stock solely for Buyer Com-
mon Stock pursuant to the Merger (except with re-
spect to cash received in lieu of fractional
shares);
(iii) the tax basis of the Buyer Common Stock
received by stockholders who exchange all of their
Seller Common Stock solely for Buyer Common Stock
in the Merger will be the same as the tax basis of
the Seller Common Stock surrendered in exchange
therefor (reduced by any amount allocable to a
-48-<PAGE>
fractional share interest for which cash is re-
ceived).
(iv) gain will be recognized by the stock-
holders of Seller who exchange their shares of
Seller Common Stock for Buyer Common Stock and cash
to the extent of the lesser of (i) the amount of
cash received, or (ii) the fair market value of the
Buyer Common Stock and cash received less the
stockholder's basis in the Seller Common Stock sur-
rendered; and
(v) the tax basis of the Buyer Common Stock
received by stockholders who exchange their shares
of Seller Common Stock for Buyer Common Stock and
cash will be the same as the tax basis of the
Seller Common Stock surrendered in exchange there-
for, reduced by the amount of cash received by the
stockholder, and increased by the amount of gain
recognized by the stockholder on such exchange.
In rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers of
Seller, Buyer and others.
6.02. Conditions to Obligations of Seller to Ef-
fect the Merger. The obligations of Seller to effect the
Merger shall be subject to the fulfillment or waiver at or
prior to the Effective Time of the following additional con-
ditions:
(a) Representations and Warranties. The repre-
sentations and warranties of Buyer set forth in Article
III of this Agreement shall be true and correct in all
material respects as of the date of this Agreement and
as of the Effective Time (as though made on and as of
the Effective Time except (i) to the extent such repre-
sentations and warranties are by their express provi-
sions made as of a specified date or period and (ii) for
the effect of transactions contemplated by this Agree-
ment) and Seller shall have received a certificate of
the chairman or chief financial officer of Buyer to that
effect.
(b) Performance of Obligations. Buyer shall have
performed in all material respects all obligations re-
quired to be performed by it under this Agreement prior
to the Effective Time, and Seller shall have received a
certificate of the chairman or chief financial officer
of Buyer to that effect.
-49-<PAGE>
6.03. Conditions to Obligations of Buyer to Effect
the Merger. The obligations of Buyer to effect the Merger
shall be subject to the fulfillment or waiver at or prior to
the Effective Time of the following additional conditions:
(a) Representations and Warranties. The repre-
sentations and warranties of Seller set forth in Article
II of this Agreement shall be true and correct in all
material respects as of the date of this Agreement and
as of the Effective Time (as though made on and as of
the Effective Time except (i) to the extent such repre-
sentations and warranties are by their express provi-
sions made as of a specific date or period and (ii) for
the effect of transactions contemplated by this Agree-
ment) and Buyer shall have received a certificate of the
chairman of Seller and a certificate of the president
and chief executive officer of Seller to that effect.
(b) Performance of Obligations. Seller shall have
performed in all material respects all obligations re-
quired to be performed by it under this Agreement prior
to the Effective Time, and Buyer shall have received a
certificate of the chairman of Seller and a certificate
of the president and chief executive officer of Seller
to that effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01. Termination. This Agreement may be termi-
nated at any time prior to the Effective Time, whether before
or after any requisite stockholder approval:
(a) by mutual consent of the Board of Directors of
Buyer and the Board of Directors of Seller;
(b) by the Board of Directors of Buyer or the
Board of Directors of Seller at any time after the date
that is ten months after the date of this Agreement if
the Merger shall not theretofore have been consummated
(provided that the terminating party is not then in ma-
terial breach of any representation, warranty, covenant
or other agreement contained herein);
-50-<PAGE>
(c) by the Board of Directors of Buyer or the
Board of Directors of Seller if (i) any Regulatory Au-
thority has denied approval of the Merger and such de-
nial has become final and nonappealable, (ii) stockhold-
ers of Seller shall not have approved this Agreement at
the Meeting, or (iii) the approval of any Regulatory
Authority required pursuant to Section 6.01(b) of this
Agreement contains or imposes any conditions or require-
ments that would have a material adverse effect on the
Condition of either party;
(d) by the Board of Directors of Buyer in the
event of a material breach by Seller of any representa-
tion, warranty, covenant or other agreement contained in
this Agreement, which breach is not cured within 30 days
after provision of written notice thereof to Seller by
Buyer;
(e) by the Board of Directors of Buyer or Seller
in the event that (i) its Due Diligence Review of the
other party discloses matters the impact of which af-
fects the other party in a manner which its Board of
Directors in the good faith exercise of its reasonable
judgment believes either (A) to be inconsistent in any
material and adverse respect with any of the representa-
tions or warranties of the other party, or (B) (x) to be
of such significance as to materially and adversely af-
fect the Condition of the other party, taken as a whole,
or (y) to deviate materially and adversely from the fi-
nancial statements for the year ended December 31, 1995
of the other party, (ii) Buyer or Seller, as the case
may be, notifies the other party of such matters within
5 business days of the expiration of the Due Diligence
Period, and (iii) such matters (A) are not capable of
being cured or (B) have not been cured within 30 days
after provision of written notice thereof by Buyer or
Seller, as the case may be, to the other party;
(f) by the Board of Directors of Seller in the
event of a material breach by Buyer of any representa-
tion, warranty, covenant or other agreement contained in
this Agreement, which breach is not cured within 30 days
after written notice thereof is given to Buyer by
Seller; or
(g) by the Board of Directors of Seller within
five days of the last day of the Valuation Period, if
both of the following conditions are satisfied:
-51-<PAGE>
(i) the Valuation Period Market Value shall
be less than $20; and
(ii) (A) the number obtained by dividing the
Valuation Period Market Value by the Starting Price
(such number being referred to herein as the "Buyer
Ratio") shall be less than (B) the number obtained
by dividing the Average Index Price by the Index
Price on the Starting Date and subtracting .15 from
the quotient in this clause (ii)(B) (such number
being referred to herein as the "Index Ratio");
provided, however, that if the Seller elects to exercise
its termination right pursuant to this Section 7.01(g),
it shall give prompt written notice to Buyer; provided
further that such notice of election to terminate may be
withdrawn at any time within the aforementioned five-day
period.
For purposes of this Section 7.01(g), the following
terms shall have the meanings indicated:
"Average Index Price" means the average of the In-
dex Prices for the ten consecutive full NASDAQ trading
days ending at the close of trading on the last day of
the Valuation Period.
"Index Group" means the group of each of the 35
bank holding companies listed below, the common stock of
all of which shall be publicly traded and as to which
there shall not have been, since the Starting Date and
before the last day of the Valuation Period, any public
announcement of a proposal either (i) for such company
to be acquired or (ii) for such company to acquire an-
other company or companies in transactions with a value
exceeding 25% of the acquiror's market capitalization.
In the event that the common stock of any such company
ceases to be publicly traded or such an announcement is
made, such company will be removed from the Index Group,
and the weights redistributed proportionately for pur-
poses of determining the Index Price. The 35 bank hold-
ing companies and the weights attributed to them are as
follows:
Index
Bank Holding Company Weights
AmSouth Bancorporation 1.46844%
Banc One Corporation 11.11981%
Bancorp Hawaii, Inc. 1.02260%
-52-<PAGE>
BanPonce Corporation 1.16201%
Boatmen's Bancshares, Inc. 4.56467%
City National Corporation 0.52395%
Comerica Incorporated 3.76169%
Crestar Financial Corporation 1.68270%
Cullen/Frost Bankers, Inc. 0.43216%
Deposit Guaranty Corp. 0.60120%
Fifth Third Bancorp 3.79404%
First Bank System, Inc. 5.82621%
First Chicago NBD Corporation 9.32798%
First Empire State Corporation 1.14701%
First of America Bank Corporation 1.93063%
First Security Corporation 1.39727%
First Tennessee National Corporation 1.48690%
Firstar Corporation 2.21165%
Huntington Bancshares Incorporated 2.16071%
KeyCorp 6.24310%
Mark Twain Bancshares, Inc. 0.40219%
Marshall & Ilsley Corporation 1.69542%
Mercantile Bancorporation, Inc. 1.98926%
National City Corporation 5.74976%
Northern Trust Corporation 2.40936%
Norwest Corporation 9.39383%
Old Kent Financial Corporation 1.20974%
Regions Financial Corporation 1.87689%
Signet Banking Corporation 0.96991%
SouthTrust Corporation 1.89527%
Star Banc Corporation 1.53120%
State Street Boston Corporation 2.93498%
UnionBanCal Corporation 1.75614%
United Carolina Bancshares Corporation 0.37232%
U.S. Bancorp 3.94900%
100.00000%
"Index Price" on a given date means the weighted
average (weighted in accordance with the factors listed
above) of the closing prices on such date of the compa-
nies composing the Index Group.
"Starting Date" means the last full day on which
NASDAQ was open for trading prior to the execution of
this Agreement.
"Starting Price" shall mean the closing-sale price
per share of Buyer Common Stock on the Starting Date, as
reported by NASDAQ (as reported in The Wall Street Jour-
nal, Midwest edition, or, if not reported therein, in
another mutually agreed upon authoritative source).
-53-<PAGE>
If any company belonging to the Index Group or
Buyer declares or effects a stock dividend, reclassifi-
cation, recapitalization, split-up, combination, ex-
change of shares or similar transaction between the
Starting Date and the last day of the Valuation Period,
the prices for the common stock of such company or Buyer
shall be appropriately adjusted for the purposes of ap-
plying this Section 7.01(g).
7.02. Effect of Termination. In the event of ter-
mination of this Agreement as provided in Section 7.01 hereof
this Agreement shall forthwith become void and there shall be
no liability or obligation on the part of Buyer or Seller or
their respective officers or directors except as set forth in
the second sentence of Section 5.01(a) and in Section 5.06;
provided that termination of this Agreement pursuant to Sec-
tion 7.01(d) or 7.01(f) shall not relieve the breaching party
from liability for any willful breach of any covenants, un-
dertakings, representations or warranties giving rise to such
termination.
7.03. Amendment. This Agreement may be amended by
the parties hereto, by action taken by or on behalf of their
respective Boards of Directors, at any time before or after
approval of this Agreement by the stockholders of Seller;
provided, however, that after any such approval by the stock-
holders of Seller no such modification shall alter or change
the amount or kind of consideration to be received by holders
of Seller Common Stock as provided in this Agreement. This
Agreement may not be amended except by an instrument in writ-
ing signed on behalf of each of Buyer and Seller.
7.04. Severability. Any term, provision, covenant
or restriction contained in this Agreement held by a court or
a Regulatory Authority of competent jurisdiction to be in-
valid, void or unenforceable, shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but
neither the remaining terms, provisions, covenants or re-
strictions contained in this Agreement nor the validity or
enforceability thereof in any other jurisdiction shall be
affected or impaired thereby. Any term, provision, covenant
or restriction contained in this Agreement that is so found
to be so broad as to be unenforceable shall be interpreted to
be as broad as is enforceable.
7.05. Waiver. Any term, condition or provision of
this Agreement may be waived in writing at any time by the
party which is, or whose stockholders are, entitled to the
benefits thereof.
-54-<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
8.01. Non-Survival of Representations, Warranties
and Agreements. No investigation by the parties hereto made
heretofore or hereafter shall affect the representations and
warranties of the parties which are contained herein and each
such representation and warranty shall survive such investi-
gation. Except as set forth below in this Section 8.01, all
representations, warranties and agreements in this Agreement
of Buyer and Seller or in any instrument delivered by Buyer
or Seller pursuant to or in connection with this Agreement
shall expire at the Effective Time or upon termination of
this Agreement in accordance with its terms or, in the case
of any other such instrument, in accordance with the terms of
such instrument. In the event of consummation of the Merger,
the agreements contained herein which by their terms are to
be performed following the Effective Time shall survive the
Effective Time until performed in accordance with their
terms. In the event of termination of this Agreement in ac-
cordance with its terms, the agreements contained in or re-
ferred to in the second sentence of Section 5.01(a), Section
5.06 and Section 7.02 shall survive such termination.
8.02. Notices. All notices and other communica-
tions hereunder shall be in writing and shall be deemed to be
duly received (i) on the date given if delivered personally
or (ii) upon confirmation of receipt, if by facsimile trans-
mission or (iii) on the date received if mailed by registered
or certified mail (return receipt requested), or (iv) on the
business date after being delivered to a reputable overnight
delivery service, if by such service, to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to Buyer:
Magna Group, Inc.
One Magna Place
1401 South Brentwood Boulevard
St. Louis, Missouri 63144-1401
Attention: G. Thomas Andes
-55-<PAGE>
Copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Craig M. Wasserman, Esq.
Telecopy: (212) 403-2000
(ii) if to Seller:
Homeland Bankshares Corporation
229 East Park Avenue
P.O. Box 5300
Waterloo, Iowa 50704-5300
Attention: Erl A. Schmiesing
Copy to:
Nyemaster, Goode, McLaughlin, Voigts,
West, Hansell & O'Brien, P.C.
1900 Hub Tower
699 Walnut Street
Des Moines, Iowa 50309
Attention: Gregory P. Page, Esq.
Telecopy: (515) 283-3108
8.03. Miscellaneous. This Agreement (including
the Schedules and other written documents referred to herein
or provided hereunder) (i) constitutes the entire agreement
and supersedes all other prior agreements and understandings,
both written and oral, among the parties, or any of them,
with respect to the subject matter hereof, including any con-
fidentiality agreement between the parties hereto, (ii) is
not intended to confer upon any person not a party hereto any
rights or remedies hereunder, (iii) shall not be assigned by
operation of law or otherwise and (iv) shall be governed in
all respects by the laws of the State of Missouri, except as
otherwise specifically provided herein or required by the
Iowa Act. Nothing in this Agreement shall be construed to
require any party (or any subsidiary or affiliate of any
party) to take any action or fail to take any action in vio-
lation of applicable law, rule or regulation. This Agreement
may be executed in counterparts which together shall consti-
tute a single agreement.
-56-<PAGE>
IN WITNESS WHEREOF, Buyer and Seller have caused
this Agreement to be signed and, by such signature, acknowl-
edged by their respective officers thereunto duly authorized,
and such signatures to be attested to by their respective
officers thereunto duly authorized, all as of the date first
written above.
Attest: MAGNA GROUP, INC.
/s/ Carolyn B. Ryseff By: /s/ G. Thomas Andes
Name: Carolyn B. Ryseff Name: G. Thomas Andes
Title: Secretary Title: Chairman and Chief
Executive Officer
Attest: HOMELAND BANKSHARES CORPORATION
/s/ Marcia C. Borwig By: /s/ Erl A. Schmiesing
Name: Marcia C. Borwig Name: Erl A. Schmiesing
Title: Secretary to the Title: Chairman, President and
Board Chief Executive Officer
-57-<PAGE>
EXHIBIT A
FILED AS EXHIBIT 99.1 <PAGE>
EXHIBIT B
ARTICLES OF MERGER
OF
HBC ACQUISITION SUB, INC.
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to section 1105 of the Iowa Business Corporation
Act, the undersigned corporation adopts the following Articles
of Merger.
I. The Plan of Merger (the "Plan") is attached hereto as Ex-
hibit "A" and by this reference incorporated herein as if
set forth in full.
II. A. HBC Acquisition Sub, Inc., an Iowa corporation.
Shareholder approval of the merger was not required
for shareholders of this corporation.
B. Homeland Bankshares Corporation, an Iowa corporation.
The designation, number of outstanding shares, and
number of votes entitled to be cast by each voting
group entitled to vote separately on the Plan as to
this corporation is as follows:
Designation Shares Votes Entitled
of Group Outstanding to be Cast
Common __________ ______________
The total number of undisputed votes cast for the
Plan by the sole voting group of this corporation was
_________. The number of votes cast for the Plan by
the sole voting group of this corporation was suf-
ficient for approval by that voting group.
III. The effective time and date of this document is __________
_.m., __________________________, 1997.
Dated: ________________________, 1997.
HBC Acquisition Sub, Inc., an
Iowa Corporation
By:____________________________
Name:__________________________
Title:_________________________<PAGE>
PLAN OF MERGER
1. The names of the corporations proposing to merge are
HBC Acquisition Sub, Inc., an Iowa corporation (the "Company"),
and Homeland Bankshares Corporation, an Iowa corporation
("Homeland"). In accordance with the applicable provisions of
the Iowa Business Corporation Act (the "Act"), Homeland shall
be merged with and into the Company (the "Merger") as of the
Effective Time (as that term is defined in paragraph 2 below),
with the Company continuing as the surviving corporation. As
of the Effective Time of the Merger, the separate existence of
Homeland shall cease.
2. This Plan of Merger ("Plan") shall be submitted to a
vote of the shareholders of Homeland. Approval of the Plan by
the shareholders of the Company is not required under the Act.
If this Plan is approved by the shareholders of Homeland in the
manner required by the Act, the Company shall file Articles of
Merger with the Iowa Secretary of State (the "Articles of
Merger"), pursuant to and in accordance with the Act and with
that certain Agreement and Plan of Reorganization dated August
30, 1996 (the "Agreement") (of which this Plan is a part) and
entered into by and between Magna Group, Inc., a Delaware cor-
poration ("Buyer"), and Homeland. The Merger shall take effect
as of the time and date set forth in the Articles of Merger
(the "Effective Time"), which time and date shall not be ear-
lier than the satisfaction of all conditions set forth in Sec-
tion 6.01 of the Agreement (the "Approval Date") and which
shall be not later than the first business day of the first
full calendar month commencing at least five (5) business days
after the Approval Date. The Approval Date shall in no event
be earlier than January 1, 1997.
3. As of the Effective Time:
(a) Homeland will merge with and into the Company, with
the Company continuing as the surviving corporation and the
separate existence of Homeland shall cease.
(b) The title to all real estate and other property owned
by Homeland shall be vested in the Company without reservation
or impairment.
(c) The Company shall have all liabilities of Homeland.
(d) The directors and officers of the Company immediately
prior to the Effective Time shall be the directors and officers
of the Company following the Merger, with such directors and<PAGE>
officers to continue to hold office in accordance with the
Company's Bylaws and applicable law.
(e) The Articles of Incorporation and Bylaws of the Com-
pany in effect immediately prior to the Effective Time shall
continue as the Articles of Incorporation and Bylaws of the
Company, subject to future amendment.
(f) The Merger shall otherwise have all of the effects of
a merger as provided in Section 490.1106 of the Act.
4. (a) Each share of the common stock, par value $.01
per share, of the Company that is issued and outstanding im-
mediately prior to the Effective Time shall continue to be and
represent one share of common stock of the Company, and shall
remain outstanding and shall be unchanged after the Merger and
shall thereafter constitute all of the issued and outstanding
capital stock of the Company.
(b) Each share of the common stock, par value $12.50 per
share, of Homeland issued and outstanding immediately prior to
the Effective Time ("Homeland Common Stock"), other than any
Dissenting Shares (as defined in paragraph 5 below), shall at
the Effective Time be, by virtue of the Merger and without any
further action on the part of any holder thereof, converted
into and become the right to receive, at the election of the
holder thereof, either:
(i) 1.55 (as adjusted as described in subparagraph (d)
immediately below, the "Exchange Ratio") shares of
the common stock of Buyer, par value $2.00 per share
("Buyer Common Stock"), and associated Preferred
Share Purchase Rights issued pursuant to the rights
agreement dated as of November 11, 1988, by and be-
tween Buyer and Magna Trust Company, as rights agent
(as adjusted as described in subparagraph (d) im-
mediately below, the "Per Share Stock Consider-
ation");
(ii) $37.50 in cash (as adjusted as described in subpara-
graph (d) immediately below, the "Per Share Cash Con-
sideration"); or
(iii) A combination of 57 percent Per Share Stock Consider-
ation and 43 percent Per Share Cash Consideration (as
adjusted as described in subparagraph (d) immediately
below) (the "Mixed Election"),
-2-<PAGE>
provided that the aggregate number of shares of Buyer Common
Stock that shall be issued in the Merger shall not exceed
5,038,934 shares (the "Stock Amount").
(c) The holders of Homeland Common Stock shall make an
election as to whether they desire to receive the Per Share
Stock Consideration, the Per Share Cash Consideration, or the
Mixed Election, pursuant to the procedures set forth in the
Agreement, which procedures shall be set forth in the notices
forwarded to the shareholders of Homeland in connection with
the Merger.
(d) The Per Share Stock Consideration and the Per Share
Cash Consideration shall each be adjusted as of the end of the
ten (10) consecutive day period (the "Valuation Period") during
which the shares of Buyer Common Stock are traded on the Nasdaq
Stock Market National Market System ("NASDAQ") ending on the
tenth calendar day immediately prior to the anticipated Effec-
tive Time. The Per Share Stock Consideration shall be adjusted
by adjusting the Exchange Ratio such that the product of the
Exchange Ratio (rounded to the nearest 1/100th of a share) and
the Valuation Period Market Value shall equal the Average Per
Share Consideration. The Per Share Cash Consideration shall be
adjusted to equal the Average Per Share Consideration.
For purposes of this subparagraph (d) the following defi-
nitions shall apply;
"Valuation Period Market Value" shall mean the average of
the closing-sale prices for the Buyer Common Stock as reported
on NASDAQ (as reported in The Wall Street Journal or, the ab-
sence thereof, by another authoritative source) during the
Valuation Period.
"Average Per Share Consideration" shall mean the Aggregate
Consideration divided by the Valuation Period Share Number
(rounded to the nearest cent).
"Aggregate Consideration" shall mean the sum of (x) the
product of 1.55 times the Valuation Period Market Value times
0.57 times the Valuation Period Share Number and (y) $37.50
times 0.43 times the Valuation Period Share Number.
"Valuation Period Share Number" shall mean the total num-
ber of shares of Homeland Common Stock outstanding (other than
treasury shares) on the last day of the Valuation Period.
(e) If prior to the Effective Time (i) Homeland shall
declare a stock dividend or distribution upon or subdivide,
split up, reclassify, or combine the Homeland Common Stock, or
-3-<PAGE>
declare a dividend or make a distribution on the Homeland Com-
mon Stock in any security convertible into Homeland Common
Stock, or (ii) Buyer shall declare a stock dividend or distri-
bution upon or subdivide, split up, reclassify, or combine the
Buyer Common Stock, or declare a dividend or make a distribu-
tion on the Buyer Common Stock in any security convertible into
Buyer Common Stock, an appropriate adjustment or adjustments
will be made to the Per Share Cash Consideration, the Per Share
Stock Consideration, and the Stock Amount.
5. "Dissenting Shares" means any shares held by any
holder of Homeland Common Stock who becomes entitled to payment
of the fair value of such shares under the Act. Any holders of
Dissenting Shares shall be entitled to payment for such shares
only to the extent permitted by and in accordance with the pro-
visions of the Act; provided, however, that if, in accordance
with the Act, any holder of Dissenting Shares shall forfeit
such right to payment of the fair value of such shares, such
shares shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the Effective Time,
the right to receive the Per Share Cash Consideration pursuant
to the Merger. The Company, as the surviving corporation,
hereby agrees that it will promptly pay to the dissenting
shareholders of Homeland, if any, the amount, if any, to which
they shall become entitled under the provisions of the Act with
respect to the rights of dissenting shareholders.
6. The other terms and conditions of the Merger are as
set forth in the Agreement.
-4-<PAGE>
EXHIBIT C
FORM OF AFFILIATE LETTER
Magna Group, Inc.
One Magna Place
1401 South Brentwood Boulevard
St. Louis, MO 63144-1401
Ladies and Gentlemen:
I have been advised that as of the date of this letter I
may be deemed to be an "affiliate" of Homeland Bankshares Cor-
poration, an Iowa corporation (the "Company"), as the term "af-
filiate" is defined for purposes of paragraphs (c) and (d) of
Rule 145 of the rules and regulations (the "Rules and Regula-
tions") of the Securities and Exchange Commission (the "Commis-
sion") under the Securities Act of 1933, as amended (the
"Act"). Pursuant to the terms of the Agreement and Plan of
Reorganization dated as of August 30, 1996 (the "Agreement"),
between Magna Group, Inc., a Delaware corporation ("Magna"),
and the Company, the Company will be merged with and into
Merger Sub (the "Merger").
As a result of the Merger, I may receive (A) shares of (i)
Common Stock, par value $2.00 per share, of Magna ("Magna Com-
mon Stock"). I would receive such Magna Common Stock in ex-
change for, respectively, shares (or options for shares) owned
by me of common stock, par value $12.50 per share, of the Com-
pany (the "Company Common Stock").
I represent, warrant and covenant to Magna that in the
event I receive any Magna Common Stock as a result of the
Merger:
A. I shall not make any sale, transfer or other
disposition of the Magna Common Stock in violation of the
Act or the Rules and Regulations.
B. I have carefully read this letter and the Agree-
ment and discussed the requirements of such documents and
other applicable limitations upon my ability to sell,
transfer or otherwise dispose of Magna Common Stock to the
extent I felt necessary, with my counsel or counsel for
the Company.<PAGE>
C. I have been advised that the issuance of Magna
Common Stock to me pursuant to the Merger has been regis-
tered with the Commission under the Act on a
Registration Statement Form S-4. However, I have also
been advised that, because at the time the Merger is sub-
mitted for a vote of the stockholders of the Company, (a)
I may be deemed to be an affiliate of the Company and (b)
the distribution by me of the Magna Common Stock has not
been registered under the Act, I may not sell, transfer or
otherwise dispose of Magna Common Stock issued to me in
the Merger unless (i) such sale, transfer or other dispo-
sition is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission un-
der the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion
of counsel reasonably acceptable to Magna, such sale,
transfer or other disposition is otherwise exempt from
registration under the Act.
D. I understand that Magna is under no obligation
to register the sale, transfer or other disposition of the
Magna Common Stock by me or on my behalf under the Act or
to take any other action necessary in order to make com-
pliance with an exemption from such registration available
solely as a result of the Merger.
E. I also understand that there will be placed on
the certificates for the Magna Common Stock issued to me,
or any substitutions therefor, a legend stating in sub-
stance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE IS-
SUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANS-
FERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED ,1996 BETWEEN THE REGISTERED HOLDER
HEREOF AND MAGNA GROUP, INC., A COPY OF WHICH AGREE-
MENT IS ON FILE AT THE PRINCIPAL OFFICES OF MAGNA
GROUP, INC."
F. I also understand that unless a sale or transfer
is made in conformity with the provisions of Rule 145, or
pursuant to a registration statement, Magna reserves the
right to put the following legend on the certificates is-
sued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES
-2-<PAGE>
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE
BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR
FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANS-
FERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OF 1933."
It is understood and agreed that the legends set forth in
paragraphs E and F above shall be removed by delivery of sub-
stitute certificates without such legend if the undersigned
shall have delivered to Magna a copy of a letter from the staff
of the Commission, or an opinion of counsel reasonably satis-
factory to Magna in form and substance reasonably satisfactory
to Magna, to the effect that such legend is not required for
purposes of the Act.
Execution of this letter should not be considered an ad-
mission on my part that I am an "affiliate" of the Company as
described in the first paragraph of this letter, or as a waiver
of any rights I may have to object to any claim that I am such
an affiliate on or after the date of this letter.
Very truly yours,
Name:
Accepted this day of
, 1996, by
MAGNA GROUP, INC.
By
Name:
Title:
-3-
Exhibit 99.1
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Option Agreement") dated
August 30, 1996, between MAGNA GROUP, INC. ("Buyer"), a Dela-
ware corporation registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended (the "Holding
Company Act"), and HOMELAND BANKSHARES CORPORATION ("Seller"),
an Iowa corporation registered as a bank holding company under
the Holding Company Act.
W I T N E S S E T H:
WHEREAS, the Board of Directors of Buyer and the
Board of Directors of Seller have approved an Agreement and
Plan of Reorganization dated as of even date herewith (the
"Merger Agreement") providing for the merger of Seller with and
into a wholly owned subsidiary of Buyer;
WHEREAS, as a condition to Buyer's entering into the
Merger Agreement, Buyer has required that Seller agree, and
Seller has agreed, to grant to Buyer the option set forth
herein to purchase authorized but unissued shares of Seller
Common Stock;
NOW, THEREFORE, in consideration of the premises
herein contained, the parties agree as follows:
1. Definitions.
Capitalized terms used but not defined herein shall
have the same meanings as in the Merger Agreement.
2. Grant of Option.
Subject to the terms and conditions set forth herein,
Seller hereby grants to Buyer an option (the "Option") to
purchase up to 1,134,972 authorized and unissued shares of
Seller Common Stock at a price of $34.00 per share (the "Pur-
chase Price") payable in cash as provided in Section 4 hereof.
3. Exercise of Option.
(a) Buyer may exercise the Option, in whole or in
part, at any time or from time to time if a Purchase Event (as
defined below) shall have occurred; provided, however, that (i)
to the extent the Option shall not have been exercised, it
shall terminate and be of no further force and effect upon the
earliest to occur of the Effective Time of the<PAGE>
Merger and the termination of the Merger Agreement in ac-
cordance with its terms, provided that if such termination
follows an Extension Event (as defined below), the Option shall
not terminate until the date that is 18 months following such
termination; (ii) if the Option cannot be exercised on such day
because of any injunction, order or similar restraint issued by
a court of competent jurisdiction, the Option shall expire on
the 30th business day after such injunction, order or restraint
shall have been dissolved or when such injunction, order or re-
straint shall have become permanent and no longer subject to
appeal, as the case may be; and (iii) that any such exercise
shall be subject to compliance with applicable law, including
the Holding Company Act.
(b) As used herein, a "Purchase Event" shall mean
any of the following events:
(i) Seller or any of its Subsidiaries, without
having received prior written consent from Buyer, shall
have entered into, authorized, recommended, proposed or
publicly announced its intention to enter into, authorize,
recommend, or propose, an agreement, arrangement or
understanding with any individual, corporation, part-
nership, association, bank, joint-stock corporation,
business trust or unincorporated organization ("Person")
(other than Buyer or any of its Subsidiaries) to (A)
effect a merger or consolidation or similar transaction
involving Seller or any of its Subsidiaries, (B) purchase,
lease or otherwise acquire 15% or more of the assets of
Seller and its Subsidiaries, taken as a whole or (C)
purchase or otherwise acquire (including by way of merger,
consolidation, share exchange or similar transaction)
Beneficial Ownership of securities representing 10% or
more of the voting power of Seller or any of its
Subsidiaries;
(ii) any Person (other than Buyer or any Subsidiary
of Buyer, or Seller or any Subsidiary of Seller in a fi-
duciary capacity) shall have acquired Beneficial Ownership
or the right to acquire Beneficial Ownership of 10% or
more of the voting power of Seller; or
(iii) Seller's Board of Directors shall have with-
drawn or modified in a manner adverse to Buyer the rec-
ommendation of Seller's Board of Directors with respect to
the Merger Agreement, in each case after an Extension
Event; or
(iv) the holders of Seller Common Stock shall not
have approved the Merger Agreement at the Meeting, or<PAGE>
such Meeting shall not have been held or shall have been
cancelled prior to termination of the Merger Agreement in
accordance with its terms, in each case after an Extension
Event.
(c) As used herein, the term "Extension Event" shall
mean any of the following events:
(i) a Purchase Event of the type specified in
clauses (b)(i) and (b)(ii) above;
(ii) any Person (other than Buyer or any of its
Subsidiaries) shall have "commenced" (as such term is
defined in Rule 14d-2 under the Exchange Act), or shall
have filed a registration statement under the Securities
Act with respect to, a tender offer or exchange offer to
purchase shares of Seller Common Stock such that, upon
consummation of such offer, such Person would have Ben-
eficial Ownership (as defined below) or the right to ac-
quire Beneficial Ownership of 10% or more of the voting
power of Seller; or,
(iii) any Person (other than Buyer or any Subsidiary
of Buyer, or Seller or any Subsidiary of Seller in a fi-
duciary capacity) shall have publicly announced its
willingness, or shall have publicly announced a proposal,
or publicly disclosed an intention to make a proposal, (x)
to make an offer described in clause (ii) above or (y) to
engage in a transaction described in clause (i) above.
(d) As used herein, the terms "Beneficial Ownership"
and "Beneficially Own" shall have the meanings ascribed to them
in Rule 13d-3 under the Exchange Act.
(e) In the event Buyer wishes to exercise the Op-
tion, it shall deliver to Seller a written notice (the date of
which being herein referred to as the "Notice Date") specifying
(i) the total number of shares it intends to purchase pursuant
to such exercise and (ii) a place and date not earlier than
three business days nor later than 60 calendar days from the
Notice Date for the closing of such purchase (the "Closing
Date").
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3 hereof,
Buyer shall pay to Seller the aggregate purchase price for the
shares of Seller Common Stock purchased pursuant to<PAGE>
the exercise of the Option in immediately available funds by
wire transfer to a bank account designated by Seller.
(b) At such closing, simultaneously with the de-
livery of cash as provided in Section 4(a), Seller shall de-
liver to Buyer a certificate or certificates representing the
number of shares of Seller Common Stock purchased by Buyer,
registered in the name of Buyer or a nominee designated in
writing by Buyer in accordance with the provisions hereof, and
Buyer shall deliver to Seller a letter agreeing that Buyer
shall not offer to sell, pledge or otherwise dispose of such
shares in violation of applicable law or the provisions of this
Option Agreement.
(c) If at the time of issuance of any Seller Common
Stock pursuant to any exercise of the Option, Seller shall have
issued any share purchase rights or similar securities to
holders of Seller Common Stock, then each such share of Seller
Common Stock shall also represent rights with terms
substantially the same as and at least as favorable to Buyer as
those issued to other holders of Seller Common Stock.
(d) Certificates for Seller Common Stock delivered
at any closing hereunder shall be endorsed with a restrictive
legend which shall read substantially as follows:
The transfer of the shares represented by this cer-
tificate is subject to certain provisions of an
agreement between the registered holder hereof and
Homeland Bankshares Corporation, a copy of which is
on file at the principal office of Homeland Bank-
shares Corporation, and to resale restrictions
arising under the Securities Act of 1933 and any
applicable state securities laws. A copy of such
agreement will be provided to the holder hereof
without charge upon receipt by Homeland Bankshares
Corporation of a written request therefor.
It is understood and agreed that the above legend shall be
removed by delivery of substitute certificate(s) without such
legend if Buyer shall have delivered to Seller an opinion of
counsel, in form and substance reasonably satisfactory to
Seller and its counsel, to the effect that such legend is not
required for purposes of the Securities Act and any applicable
state securities laws.<PAGE>
5. Authorization, etc.
(a) Seller hereby represents and warrants to Buyer
that:
(i) Seller has full corporate authority to execute
and deliver this Option Agreement and, subject to Section
11(i), to consummate the transactions contemplated hereby;
(ii) such execution, delivery and consummation have
been authorized by the Board of Directors of Seller, and
no other corporate proceedings are necessary therefor;
(iii) this Option Agreement has been duly and val-
idly executed and delivered and represents a valid and
legally binding obligation of Seller, enforceable against
Seller in accordance with its terms and has been approved
in accordance with the provisions of the Articles of
Incorporation of Seller; and
(iv) Seller has taken all necessary corporate action
to authorize and reserve and, subject to Section 11(i),
permit it to issue and, at all times from the date hereof
through the date of the exercise in full or the expiration
or termination of the Option, shall have reserved for
issuance upon exercise of the Option, 1,134,972 shares of
Seller Common Stock, all of which, upon issuance pursuant
hereto, shall be duly authorized, validly issued, fully
paid and nonassessable, and shall be delivered free and
clear of all claims, liens, encumbrances, restrictions
(other than federal and state securities restrictions) and
security interests and not subject to any preemptive
rights.
(b) Buyer hereby represents and warrants to Seller
that:
(i) Buyer has full corporate authority to execute
and deliver this Option Agreement and, subject to Section
11(i), to consummate the transactions contemplated hereby;
(ii) such execution, delivery and consummation have
been authorized by all requisite corporate action by
Buyer, and no other corporate proceedings are necessary
therefor;
(iii) this Option Agreement has been duly and val-
idly executed and delivered and represents a valid and<PAGE>
legally binding obligation of Buyer, enforceable against
Buyer in accordance with its terms; and
(iv) any Seller Common Stock or other securities
acquired by Buyer upon exercise of the Option will not be
taken with a view to the public distribution thereof and
will not be transferred or otherwise disposed of except in
compliance with the Securities Act and any applicable
state securities laws.
6. Adjustment upon Changes in Capitalization.
In the event of any change in Seller Common Stock by
reason of stock dividends, split-ups, recapitalizations or the
like, the type and number of shares subject to the Option, and
the purchase price per share, as the case may be, shall be
adjusted appropriately. In the event that any additional
shares of Seller Common Stock are issued after the date of this
Option Agreement (other than pursuant to an event described in
the preceding sentence or pursuant to this Option Agreement),
the number of shares of Seller Common Stock subject to the
Option shall be adjusted so that, after such issuance, it
equals at least 19.9% of the number of shares of Seller Common
Stock then issued and outstanding (without considering any
shares subject to or issued pursuant to the Option).
7. Repurchase.
(a) Subject to Section 11(i), at the request of
Buyer at any time commencing upon the occurrence of a Purchase
Event and ending 13 months immediately thereafter (the
"Repurchase Period"), Seller (or any successor entity thereof)
shall repurchase the Option from Buyer together with all (but
not less than all, subject to Section 10) shares of Seller
Common Stock purchased by Buyer pursuant thereto with respect
to which Buyer then has Beneficial Ownership, at a price (per
share, the "Per Share Repurchase Price") equal to the sum of:
(i) The exercise price paid by Buyer for any shares
of Seller Common Stock acquired pursuant to the Option;
(ii) The difference between (A) the "Market/Tender
Offer Price" for shares of Seller Common Stock (defined as
the higher of (x) the highest price per share at which a
tender or exchange offer has been made for shares of
Seller Common Stock or (y) the highest closing<PAGE>
mean of the "bid" and the "ask" price per share of Seller
Common Stock reported by NASDAQ, the automated quotation
system of the National Association of Securities Dealers,
Inc., for any day within that portion of the Repurchase
Period which precedes the date Buyer gives notice of the
required repurchase under this Section 7) and (B) the
exercise price as determined pursuant to Section 2 hereof
(subject to adjustment as provided in Section 6), mul-
tiplied by the number of shares of Seller Common Stock
with respect to which the Option has not been exercised,
but only if the Market/Tender Offer Price is greater than
such exercise price;
(iii) The difference between the Market/Tender Offer
Price and the exercise price paid by Buyer for any shares
of Seller Common Stock purchased pursuant to the exercise
of the Option, multiplied by the number of shares so
purchased, but only if the Market/Tender Offer Price is
greater than such exercise price; and
(iv) Buyer's reasonable out-of-pocket expenses in-
curred in connection with the transactions contemplated by
the Merger Agreement, including, without limitation,
legal, accounting and investment banking fees.
(b) In the event Buyer exercises its rights under
this Section 7, Seller shall, within 10 business days there-
after, pay the required amount to Buyer by wire transfer of im-
mediately available funds to an account designated by Buyer and
Buyer shall surrender to Seller the Option and the certificates
evidencing the shares of Seller Common Stock purchased thereun-
der with respect to which Buyer then has Beneficial Ownership,
and Buyer shall warrant that it has sole record and Beneficial
Ownership of such shares and that the same are free and clear
of all liens, claims, charges, restrictions and encumbrances of
any kind whatsoever.
(c) In determining the Market/Tender Offer Price,
the value of any consideration other than cash shall be de-
termined by an independent nationally recognized investment
banking firm selected by Buyer and reasonably acceptable to
Seller.
8. Repurchase at Option of Seller and First Refusal.
(a) Except to the extent that Buyer shall have
previously exercised its rights under Section 7, at the request
of Seller during the six-month period commencing 13 months
following the first occurrence of a Purchase Event,<PAGE>
Seller may repurchase from Buyer, and Buyer shall sell to
Seller, the Option together with all (but not less than all,
subject to Section 10) of the Seller Common Stock acquired by
Buyer pursuant hereto and with respect to which Buyer has
Beneficial Ownership at the time of such repurchase at a price
per share equal to the greater of (i) 110% of the Market/Tender
Offer Price per share, (ii) the Per Share Repurchase Price or
(iii) the sum of (A) the aggregate Purchase Price of the shares
so repurchased plus (B) interest on the aggregate Purchase
Price paid for the shares so repurchased from the date of
purchase to the date of repurchase at the highest rate of
interest announced by Buyer as its prime or base lending or
reference rate during such period, less any dividends received
on the shares so repurchased, plus (C) Buyer's reasonable out-
of-pocket expenses incurred in connection with the transactions
contemplated by the Merger Agreement, including, without lim-
itation, legal, accounting and investment banking fees (net of
the exercise price as determined pursuant to Section 2 hereof
(subject to adjustment as provided in Section 6) in respect of
any shares remaining subject to the Option at the time of such
purchase). Any repurchase under this Section 8(a) shall be
consummated in accordance with Section 7(b).
(b) If, at any time after the occurrence of a Pur-
chase Event and prior to the earlier of (i) the expiration of
18 months immediately following such Purchase Event or (ii) the
expiration or termination of the Option, Buyer shall desire to
sell, assign, transfer or otherwise dispose of any of the
shares of Seller Common Stock acquired by it pursuant to the
Option, it shall give Seller written notice of the proposed
transaction (an "Offeror's Notice"), identifying the proposed
transferee, and setting forth the terms of the proposed trans-
action. An Offeror's Notice shall be deemed an offer by Buyer
to Seller, which may be accepted within 10 business days of the
receipt of such Offeror's Notice, on the same terms and con-
ditions and at the same price at which Buyer is proposing to
transfer such shares to a third party. The purchase of such
shares by Seller shall be closed within 10 business days of the
date of the acceptance of the offer and the purchase price
shall be paid to Buyer by wire transfer of immediately
available funds to an account designated by Buyer. In the
event of the failure or refusal of Seller to purchase all the
shares covered by the Offeror's Notice or if the Board or any
other Regulatory Authority disapproves Seller's proposed
purchase of such shares, Buyer may, within 60 days from the
date of the Offeror's Notice, sell all, but not less than all,
of such shares to such third party at no less than the price
specified and on terms no more favorable<PAGE>
to the purchaser than those set forth in the Offeror's Notice.
The requirements of this Section 8(b) shall not apply to (i)
any disposition as a result of which the proposed transferee
would Beneficially Own not more than 2% of the voting power of
Seller or (ii) any disposition of Seller Common Stock by a
Person to whom Buyer has sold shares of Seller Common Stock
issued upon exercise of the Option.
9. Registration Rights.
At any time after a Purchase Event, Seller shall, if
requested by any holder or beneficial owner of shares of Seller
Common Stock issued upon exercise of the Option (except any
beneficial holder who acquired all of such holder's shares in a
transaction exempt from the requirements of Section 8(b) by
reason of clause (i) thereof) (each a "Holder"), in the next
publicly filed registration statement of Seller on a form for
general use under the Securities Act, include the shares of
Seller Common Stock issued to such Holder upon exercise of the
Option in order to permit the sale or other disposition of such
shares in accordance with the intended method of sale or other
disposition requested by any such Holder (it being understood
and agreed that any such sale or other disposition shall be ef-
fected on a widely distributed basis so that, upon consummation
thereof, no purchaser or transferee shall Beneficially Own more
than 2% of the shares of Seller Common Stock then outstanding).
Each such Holder shall provide all information reasonably
requested by Seller for inclusion in any registration statement
to be filed hereunder. Seller shall use its reasonable best
efforts to cause such registration statement first to become
effective and then to remain effective for such period not in
excess of 180 days from the day such registration statement
first becomes effective as may be reasonably necessary to ef-
fect such sales or other dispositions. The registration ef-
fected under this Section 9 shall be at Seller's expense except
for underwriting commissions and the fees and disbursements of
such Holders' counsel attributable to the registration of such
Seller Common Stock. In no event shall Seller be required to
effect more than one registration hereunder. The filing of the
registration statement hereunder may be delayed for such period
of time as may reasonably be required to facilitate any public
distribution by Seller of Seller Common Stock or if a special
audit of Seller would otherwise be required in connection
therewith. If requested by any such Holder in connection with
such registration, Seller shall become a party to any under-
writing agreement relating to the sale of such shares, but only
to the extent of obligating itself in respect of representa-
tions, warranties, indemnities and other<PAGE>
agreements customarily included in such underwriting agreements
for parties similarly situated. Upon receiving any request for
registration under this Section 9 from any Holder, Seller
agrees to send a copy thereof to any other Person known to
Seller to be entitled to registration rights under this Section
9, in each case by promptly mailing the same, postage prepaid,
to the address of record of the Persons entitled to receive
such copies.
10. Severability.
Any term, provision, covenant or restriction con-
tained in this Option Agreement held by a court or a Regulatory
Authority of competent jurisdiction to be invalid, void or un-
enforceable, shall be ineffective to the extent of such in-
validity, voidness or unenforceability, but neither the re-
maining terms, provisions, covenants or restrictions contained
in this Option Agreement nor the validity or enforceability
thereof in any other jurisdiction shall be affected or impaired
thereby. Any term, provision, covenant or restriction
contained in this Option Agreement that is so found to be so
broad as to be unenforceable shall be interpreted to be as
broad as is enforceable. If for any reason such court or
Regulatory Authority determines that applicable law will not
permit Buyer or any other Person to acquire, or Seller to
repurchase or purchase, the full number of shares of Seller
Common Stock provided in Section 2 hereof (as adjusted pursuant
to Section 6 hereof), it is the express intention of the
parties hereto to allow Buyer or such other Person to acquire,
or Seller to repurchase or purchase, such lesser number of
shares as may be permissible, without any amendment or
modification hereof.
11. Miscellaneous.
(a) Expenses. Each of the parties hereto shall pay
all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, in-
cluding fees and expenses of its own financial consultants,
investment bankers, accountants and counsel, except as other-
wise provided herein.
(b) Entire Agreement. Except as otherwise expressly
provided herein, this Option Agreement and the Merger Agreement
contain the entire agreement between the parties with respect
to the transactions contemplated hereunder and supersede all
prior arrangements or understandings with respect thereto,
written or oral. <PAGE>
(c) Successors; No Third Party Beneficiaries. The
terms and conditions of this Option Agreement shall inure to
the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this
Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies,
obligations, or liabilities under or by reason of this Option
Agreement, except as expressly provided herein.
(d) Assignment. Other than as provided in Sections
8 and 9 hereof, neither of the parties hereto may sell,
transfer, assign or otherwise dispose of any of its rights or
obligations under this Option Agreement or the Option created
hereunder to any other person (whether by operation of law or
otherwise), without the express written consent of the other
party.
(e) Notices. All notices or other communications
which are required or permitted hereunder shall be in writing
and sufficient if delivered in accordance with Section 8.02 of
the Merger Agreement (which is incorporated herein by ref-
erence).
(f) Counterparts. This Option Agreement may be
executed in counterparts, and each such counterpart shall be
deemed to be an original instrument, but both such counterparts
together shall constitute but one agreement.
(g) Specific Performance. The parties hereto agree
that if for any reason Buyer or Seller shall have failed to
perform its obligations under this Option Agreement, then
either party hereto seeking to enforce this Option Agreement
against such non-performing party shall be entitled to specific
performance and injunctive and other equitable relief, and the
parties hereto further agree to waive any requirement for the
securing or posting of any bond in connection with the ob-
taining of any such injunctive or other equitable relief. This
provision is without prejudice to any other rights that either
party hereto may have against the other party hereto for any
failure to perform its obligations under this Option Agreement.
(h) Governing Law. This Option Agreement shall be
governed by and construed in accordance with the laws of the
State of Missouri applicable to agreements made and entirely to
be performed within such state. Nothing in this Option
Agreement shall be construed to require any party (or any
subsidiary or affiliate of any party) to take any action or<PAGE>
fail to take any action in violation of applicable law, rule or
regulation.
(i) Regulatory Approvals; Section 16(b). If, in
connection with (A) the exercise of the Option under Section 3
or a sale by Buyer to a third party under Section 8, (B) a
repurchase by Seller under Section 7 or a repurchase or
purchase by Seller under Section 8, prior notification to or
approval of the Board or any other Regulatory Authority is
required, then the required notice or application for approval
shall be promptly filed and expeditiously processed and periods
of time that otherwise would run pursuant to such Sections
shall run instead from the date on which any such required
notification period has expired or been terminated or such
approval has been obtained, and in either event, any requisite
waiting period shall have passed. In the case of clause (A) of
this subsection (i), such filing shall be made by Buyer, and in
the case of clause (B) of this subsection (i), such filing
shall be made by Seller, provided that each of Buyer and Seller
shall use its reasonable best efforts to make all filings with,
and to obtain consents of, all third parties and Regulatory
Authorities necessary to the consummation of the transactions
contemplated hereby, including without limitation applying to
the Board under the Holding Company Act for approval to acquire
the shares issuable hereunder. Periods of time that otherwise
would run pursuant to Sections 3, 7 or 8 shall also be extended
to the extent necessary to avoid liability under Section 16(b)
of the Exchange Act.
(j) No Breach of Merger Agreement Authorized.
Nothing contained in this Option Agreement shall be deemed to
authorize Seller to issue any shares of Seller Common Stock in
breach of, or otherwise breach any of, the provisions of the
Merger Agreement.
(k) Waiver and Amendment. Any provision of this
Agreement may be waived in writing at any time by the party
that is entitled to the benefits of such provision. This
Option Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has
executed this Option Agreement as of the date first written
above.
MAGNA GROUP, INC.
By:
Name: G. Thomas Andes
Title: Chairman and Chief
Executive Officer
HOMELAND BANKSHARES CORPORATION
By:
Name: Erl A. Schmiesing
Title: Chairman, President
and Chief Executive
Officer
Exhibit 99.2
[MAGNA GROUP, INC. Logo] NEWS RELEASE
==============================================================
NEWS FOR IMMEDIATE RELEASE
Contact: Gary D. Hemmer Traded: NASDAQ/NMS
314/963-3016 Symbol: MAGI
MAGNA GROUP AND HOMELAND ANNOUNCE MERGER AGREEMENT
RESULTING $6.6 BILLION BANK GROUP WILL HAVE
139 LOCATIONS IN MISSOURI, ILLINOIS, AND IOWA
ST. LOUIS, SEPTEMBER 3, 1996 - Magna Group, Inc. and
Homeland Bankshares Corporation (NASDAQ stock market, symbol -
HLND), Waterloo, Iowa, today announced the signing of a defini-
tive agreement for the acquisition of Homeland by Magna.
Homeland ranks as the second largest bank holding company head-
quartered in Iowa, with total assets of $1.20 billion as of
June 30, 1996. Homeland owns and operates four commercial
banks and one savings bank and provides financial services
through a network of 33 locations in the state of Iowa.
Under the terms of the agreement, each share of Homeland
common stock may be exchanged for 1.55 shares of Magna common
stock (for up to 57 percent of the aggregate consideration) or
for $37.50 in cash (for up to 43 percent of the aggregate con-
sideration), subject to adjustment as of closing to equalize
the value of the cash and stock consideration. Homeland stock-
holders may elect to receive all Magna common stock, all cash,
or a mixture of stock and cash, subject to certain limitations.
The transaction has a current aggregate market value of
approximately $216 million.<PAGE>
-2-
After completion of the acquisition, Erl A. Schmiesing,
Chairman, President, and CEO of Homeland Bankshares
Corporation, and Douglas K. Shull, Treasurer and CFO of Casey's
General Stores, Inc., will become directors of Magna Group,
Inc. The acquisition is scheduled to be completed in the first
quarter of 1997. It is subject to (among other things) regula-
tory approval and the vote of the Homeland stockholders.
According to G. Thomas Andes, Chairman and Chief Executive
Officer of Magna, the acquisition will be accretive to earning
within 12 months. "Based on our analysis, costs savings of
approximately $7 million can be achieved through centralization
of systems and procedures and the consolidation of the various
bank charters," stated Andes.
"This acquisition opens a whole new market and offers
growth and revenue enhancement opportunities for Magna," said
Andes. "We are excited about this new partnership and look
forward to building on the rich, community tradition that
Homeland has established in Iowa. We are also delighted to
have Erl and Doug join our Board. Both individuals have strong
backgrounds and can help us build our retail franchise."
"We are very pleased to associate with Magna, a quality
organization that is dedicated to community banking and its
employees," said Schmiesing. "They are committed to delivering
superior services; and we are confident that, with Magna's
added resources and technology, we can be even more effective<PAGE>
-3-
in providing our customers with products and services that will
exceed their expectations."
Magna Group, Inc. is a St. Louis-based community bank
holding company with $5.35 billion in assets. The Company has
106 banking locations throughout Illinois and Missouri, and a
trust and brokerage company. Based on a deposit market share,
Magna is the third largest banking institution in the St. Louis
metropolitan area and ranks as the ninety-fifth largest bank
holding company in the country.
###
Magna will be conducting an analyst/press conference call
at 3:00 p.m. CDT. To participate in the conference call,
please call 1-800-857-9847 (password is Magna). If you plan to
participate in the conference call, please call Magna's
Investor Relations Department at (314) 963-2546 to have a
detailed packet of information faxed to you.
