<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
-------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ------------------------
Commission file number 1-12405
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MAGNA GROUP, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 37-0996453
- -------------------------------- ----------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
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)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
------ ------
Title of class of Number of shares
common stock outstanding as of November 10, 1997
- ----------------------------- ---------------------------------------
Common stock, $2.00 par value 33,099,748
1
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURE PAGE 23
EXHIBIT INDEX 24
</TABLE>
2
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PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
<TABLE>
MAGNA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1997 1996
<S> ------------ -----------
ASSETS <C> <C>
Cash and due from banks $ 225,775 $ 180,412
Federal funds sold 21,619 34,068
Securities:
Held-to-maturity 143,715 154,729
Available-for-sale 1,800,730 1,501,178
Loans, net of unearned income 4,542,381 3,415,309
Reserve for loan losses (56,207) (45,382)
---------- ----------
Net Loans 4,486,174 3,369,927
Premises and equipment 113,577 81,815
Goodwill and other intangibles 123,378 29,310
Other assets 129,512 107,270
---------- ----------
TOTAL ASSETS $7,044,480 $5,458,709
========== ==========
LIABILITIES
Deposits:
Noninterest bearing $ 657,715 $ 575,504
Interest bearing 4,708,056 3,622,272
---------- ----------
Total Deposits 5,365,771 4,197,776
Federal funds purchased 166,840 25,500
Repurchase agreements 654,694 508,948
Other short-term borrowings 97,214 99,487
Long-term debt 57,047 77,577
Other liabilities 76,839 65,460
---------- ----------
TOTAL LIABILITIES 6,418,405 4,974,748
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Preferred stock:
Class B, voting, $20 par value -
1,996 shares issued and outstanding 40 40
Common stock, $2 par value - 33,638,506
and 28,954,500 shares issued,
respectively 67,277 57,909
Capital surplus 332,306 230,258
Retained earnings 242,715 215,744
Treasury stock - 630,000 and 745,000
shares at cost, respectively (19,960) (17,605)
Net unrealized gains (losses)
on securities 3,697 (2,385)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 626,075 483,961
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,044,480 $5,458,709
========== ==========
See accompanying notes.
</TABLE>
3
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<TABLE>
MAGNA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -----------------
1997 1996 1997 1996
------------------- -----------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 98,049 $72,111 $272,434 $212,503
Securities:
Taxable 25,969 24,221 76,158 69,226
Tax-exempt 3,010 1,769 8,167 5,229
-------- ------- -------- --------
28,979 25,990 84,325 74,455
Other interest income 1,065 461 3,107 1,316
-------- ------- -------- --------
TOTAL INTEREST INCOME 128,093 98,562 359,866 288,274
Interest Expense:
Deposits 54,413 40,399 149,181 116,785
Federal funds purchased 1,072 542 3,940 2,518
Repurchase agreements 8,033 6,010 22,075 15,589
Other short-term borrowings 1,111 1,158 3,548 3,028
Long-term debt 1,525 1,727 4,611 5,221
-------- ------- -------- --------
TOTAL INTEREST EXPENSE 66,154 49,836 183,355 143,141
-------- ------- -------- --------
NET INTEREST INCOME 61,939 48,726 176,511 145,133
Provision for Loan Losses 4,477 2,499 22,906 7,781
-------- ------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 57,462 46,227 153,605 137,352
Noninterest Income:
Service charges on deposits 6,915 5,919 19,273 17,458
Trust 3,190 2,356 9,398 7,102
Securities gains, net 1,123 89 1,974 779
Other 8,009 4,158 19,754 11,977
-------- ------- -------- --------
19,237 12,522 50,399 37,316
Noninterest Expense:
Employee compensation and
other benefits 22,840 17,048 65,603 51,937
Net occupancy 4,975 4,551 14,566 13,536
Equipment 2,335 2,154 7,411 6,627
FDIC insurance premiums 242 442 602 525
Intangible amortization 2,470 766 6,259 2,153
Other 11,871 9,554 33,873 29,391
-------- ------- -------- --------
44,733 34,515 128,314 104,169
-------- ------- -------- --------
INCOME BEFORE INCOME TAXES 31,966 24,234 75,690 70,499
Income Tax Expense 10,723 8,208 25,190 24,271
-------- ------- -------- --------
NET INCOME $ 21,243 $16,026 $ 50,500 $ 46,228
======== ======= ======== ========
Average Shares Outstanding:
Primary 33,341 28,233 32,312 28,409
Fully diluted 34,652 29,792 33,076 29,999
Per Share Data:
Net income:
Primary $.64 $.57 $1.56 $1.63
==== ==== ===== =====
Fully diluted $.63 $.56 $1.54 $1.59
==== ==== ===== =====
Dividends declared $.25 $.22 $ .75 $ .66
==== ==== ===== =====
See accompanying notes.
</TABLE>
4
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<TABLE>
MAGNA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
--------------------
1997 1996
---- ----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 71,211 $ 58,483
INVESTING ACTIVITIES
Proceeds from maturities of held-to-maturity
securities 12,923 7,119
Proceeds from sale of held-to-maturity
securities - 89
Purchases of held-to-maturity securities (1,397) (12,346)
Proceeds from maturities of available-
for-sale securities 785,964 268,048
Proceeds from sales of available-for-
sale securities 392,697 117,639
Purchases of available-for-sale securities (1,303,801) (544,029)
Net increase in loans (233,206) (128,290)
Proceeds from sales of foreclosed property 4,160 5,718
Net purchases of premises and equipment (13,387) (4,567)
Purchase of financial organization,
net of cash received (18,988) (2,233)
----------- ---------
NET CASH USED IN INVESTING ACTIVITIES (375,035) (292,852)
FINANCING ACTIVITIES
Net increase in deposits 222,318 140,776
Cash dividends (23,530) (18,646)
Net increase (decrease) in federal
funds purchased 88,490 (21,595)
Net increase in repurchase agreements 145,745 131,611
Net increase (decrease) in other short-
term borrowings (81,079) 9,204
Proceeds from long-term debt - 25,000
Payments of long-term debt (267) (6)
Purchase of treasury stock (19,960) (17,605)
Other 5,021 4,036
----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 336,738 252,775
----------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 32,914 18,406
Cash and cash equivalents at beginning of period 214,480 222,213
----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 247,394 $ 240,619
=========== =========
See accompanying notes.
</TABLE>
5
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MAGNA GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A--BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements of
Magna Group, Inc. and its affiliates ("Magna") have been prepared in
accordance with generally accepted accounting principles for the banking
industry and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. Reference is hereby made to the notes to consolidated financial
statements contained in Magna's Annual Report on Form 10-K for the year ended
December 31, 1996. In the opinion of management, all adjustments considered
necessary for a fair presentation of the unaudited interim condensed
consolidated financial statements have been included herein and are of a
normal recurring nature. The results of operations for the interim periods
presented herein are not necessarily indicative of the results to be expected
for the full year.
NOTE B--ACQUISITIONS
On March 1, 1997, Magna acquired Homeland Bankshares Corporation
("Homeland") for approximately 5,038,000 shares of common stock and
approximately $92 million in cash. The acquisition contributed approximately
$1.3 billion to total assets and approximately $120 million to stockholders'
equity at the date of acquisition. The acquisition was accounted for under
the purchase method. The following unaudited pro forma information has been
prepared assuming that the Homeland acquisition had taken place at the
beginning of the respective periods, after including the impact of certain
adjustments relevant to the transaction, such as the amortization of goodwill
and the amortization of certain assets acquired based on their respective
fair values.
<TABLE>
PRO FORMA RESULTS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
--------------------
1997 1996
---- ----
<S> <C> <C>
Net Interest Income $183,861 $178,117
Net Income 49,373 49,934
Net Income Per Share:
Primary 1.48 1.52
Fully diluted 1.46 1.49
</TABLE>
6
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The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been consummated on January 1,
1996. In addition, the pro forma results are not intended to be a projection
of future results and do not reflect any synergies anticipated from the
combined operations of Magna and Homeland.
NOTE C--CHANGE IN ACCOUNTING METHODS
On January 1, 1997, Magna adopted Financial Accounting Standards No. 125
(FAS No. 125), "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities." FAS No. 125 requires an entity to
recognize financial and servicing assets it controls and the liabilities it
has incurred and to derecognize financial assets when control has been
surrendered in accordance with the criteria provided in the standard. Magna
will apply the new rules prospectively, other than those deferred by
Financial Accounting Standards No. 127 (FAS No. 127), "Deferral of the
Effective Date of Certain Provisions of FAS No. 125." The adoption of the
standards had no material impact on Magna's financial position or results of
operations.
NOTE D--RECLASSIFICATIONS
Certain amounts in the 1996 financial statements have been reclassified
to conform with the 1997 presentation. Such reclassifications had no effect
on net income.
NOTE E--CAPITAL
Prior to August 30, 1996, Magna repurchased 745,000 shares of its
outstanding common stock. These shares were subsequently reissued in
connection with the Homeland acquisition. During the period from August 30,
1996 through March 1, 1997, the acquisition date of Homeland, Magna did not
repurchase any of its outstanding shares of common stock. Subsequent to the
acquisition date of Homeland, Magna repurchased 630,000 shares issued in
connection with this acquisition.
In June 1997, Magna announced a common stock repurchase program
authorizing the repurchase of 1.7 million shares. As of September 30, 1997,
no shares have been repurchased in connection with this program.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------
OVERVIEW
Net income for the third quarter of 1997 was $21.2 million, or 64 cents
per common share on a primary basis, compared with $16.0 million, or 57 cents
per share, for the third quarter of 1996. For the first nine months of 1997,
net income was $50.5 million, or $1.56 per common share on a primary basis,
compared with $46.2 million, or $1.63 per share, in 1996. On a fully diluted
basis, net income per common share was 63 cents for the third quarter of 1997
compared with 56 cents for the third quarter of 1996 and was $1.54 for the
first nine months of 1997 compared with $1.59 for the first nine months of
1996.
Operating results of the Homeland acquisition consummated on March 1,
1997, are included since the acquisition date and are material to Magna's
financial condition and results of operations for the periods presented.
The increases in net income, for the quarters and nine month periods
compared, were primarily attributable to the operating results of the
acquired entity which were partially offset by Magna's decision to add an
additional $12.5 million to its first quarter 1997 provision for loan losses
to cover potential exposure associated with one sizeable credit.
On July 18, 1997, Magna completed the consolidation of its Iowa banking
operations with and into its largest banking subsidiary, Magna Bank, N.A.,
headquartered in Brentwood, Missouri. As a result, Magna has one banking
subsidiary that operates in the states of Illinois, Iowa and Missouri.
Table 1 summarizes Magna's statement of income and the change in each
category for the periods presented.
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<TABLE>
TABLE 1 -- Comparative Statements of Income
(In thousands)
<CAPTION>
Three Months Ended
September 30 Change
---------------------- -----------------------
1997 1996 Amount Percent
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Total interest income
(fully tax-equivalent) . . . . . . . . $130,112 $99,846 $30,266 30.3%
Total interest expense. . . . . . . . . 66,154 49,836 16,318 32.7
-------- ------- -------
Net interest income. . . . . . . . . 63,958 50,010 13,948 27.9
Provision for loan losses . . . . . . . 4,477 2,499 1,978 79.2
Noninterest income:
Service charges on deposits. . . . . 6,915 5,919 996 16.8
Trust. . . . . . . . . . . . . . . . 3,190 2,356 834 35.4
Other. . . . . . . . . . . . . . . . 8,009 4,158 3,851 92.6
-------- ------- -------
18,114 12,433 5,681 45.7
Securities gains, net. . . . . . . . 1,123 89 1,034 <FNM>
-------- ------- -------
Total . . . . . . . . . . . . . . 19,237 12,522 6,715 53.6
-------- ------- -------
Noninterest expense:
Employee compensation and
other benefits. . . . . . . . . . 22,840 17,048 5,792 34.0
Net occupancy. . . . . . . . . . . . 4,975 4,551 424 9.3
Equipment. . . . . . . . . . . . . . 2,335 2,154 181 8.4
FDIC insurance premiums. . . . . . . 242 442 (200) (45.2)
Intangible amortization. . . . . . . 2,470 766 1,704 222.5
Other. . . . . . . . . . . . . . . . 11,871 9,554 2,317 24.3
-------- ------- -------
Total . . . . . . . . . . . . . . 44,733 34,515 10,218 29.6
-------- ------- -------
Income before income taxes. . . . . . . 33,985 25,518 8,467 33.2
Less: tax-equivalent adjustment . . . . 2,019 1,284 735 57.2
Income tax expense. . . . . . . . . . . 10,723 8,208 2,515 30.6
-------- ------- -------
Net income. . . . . . . . . . . . . . . $ 21,243 $16,026 $ 5,217 32.6
======== ======= =======
<CAPTION>
Nine Months Ended
September 30 Change
---------------------- -----------------------
1997 1996 Amount Percent
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Total interest income
(fully tax-equivalent) . . . . . . . . $365,453 $292,056 $73,397 25.1%
Total interest expense. . . . . . . . . 183,355 143,141 40,214 28.1
-------- -------- -------
Net interest income. . . . . . . . . 182,098 148,915 33,183 22.3
Provision for loan losses . . . . . . . 22,906 7,781 15,125 194.4
Noninterest income:
Service charges on deposits. . . . . 19,273 17,458 1,815 10.4
Trust. . . . . . . . . . . . . . . . 9,398 7,102 2,296 32.3
Other. . . . . . . . . . . . . . . . 19,754 11,977 7,777 64.9
-------- -------- -------
48,425 36,537 11,888 32.5
Securities gains, net. . . . . . . . 1,974 779 1,195 153.4
-------- -------- -------
Total . . . . . . . . . . . . . . 50,399 37,316 13,083 35.1
-------- -------- -------
Noninterest expense:
Employee compensation and
other benefits. . . . . . . . . . 65,603 51,937 13,666 26.3
Net occupancy. . . . . . . . . . . . 14,566 13,536 1,030 7.6
Equipment. . . . . . . . . . . . . . 7,411 6,627 784 11.8
FDIC insurance premiums. . . . . . . 602 525 77 14.7
Intangible amortization. . . . . . . 6,259 2,153 4,106 190.7
Other. . . . . . . . . . . . . . . . 33,873 29,391 4,482 15.2
-------- -------- -------
Total . . . . . . . . . . . . . . 128,314 104,169 24,145 23.2
-------- -------- -------
Income before income taxes. . . . . . . 81,277 74,281 6,996 9.4
Less: tax-equivalent adjustment . . . . 5,587 3,782 1,805 47.7
Income tax expense. . . . . . . . . . . 25,190 24,271 919 3.8
-------- -------- -------
Net income. . . . . . . . . . . . . . . $ 50,500 $ 46,228 $ 4,272 9.2
======== ======== =======
<FN>
<FNM> - Not Meaningful
</TABLE>
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The following paragraphs discuss more fully significant changes and trends as
they relate to Magna's results of operations during the three month and nine
month periods ended September 30, 1997 and its financial condition, asset
quality, capital resources and liquidity as of September 30, 1997. This
discussion should be read in conjunction with Magna's condensed consolidated
financial statements and notes thereto. The results of operations for the
interim periods presented herein are not necessarily indicative of the
results to be expected for the full year.
The following discussion contains certain forward looking statements
with respect to the financial condition, results of operations and business
of Magna. These forward looking statements involve certain risks and
uncertainties. For example, by accepting deposits at fixed rates at
different times and for different terms and lending funds at fixed rates for
fixed periods, a bank accepts the risk that the cost of funds may rise and
the use of the funds may be at a fixed rate. Similarly, the cost of funds
may fall, but a bank may have committed by virtue of the term of a deposit to
pay what becomes an above market rate. Investments may decline in value in a
rising interest rate environment. Loans have the risk that the borrower will
not repay all funds in a timely manner as well as the risk of total loss.
Collateral may or may not have the value attributed to it. The loan loss
reserve, while believed adequate, may prove inadequate if one or more large
borrowers, or numerous mid-range borrowers, or a combination of both,
experience financial difficulty for individual or national or international
reasons. Because the business of banking is highly regulated, decisions of
governmental authorities, such as the rate of deposit insurance, can have a
major effect on operating results. All of these uncertainties, as well as
others, are present in a banking operation and stockholders are cautioned
that management's view of the future on which it prices its products,
evaluates collateral, sets loan reserves and estimates costs of operation and
regulation may prove to be other than as anticipated.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Tax-equivalent net interest income increased 27.9% for the third quarter
of 1997 compared with 1996 and increased 22.3% for the first nine months of
1997 compared with the same period in 1996. The increases in tax-equivalent
net interest income were principally attributable to increased volumes of
interest earning assets and interest bearing liabilities derived from the
Homeland acquisition.
The net interest margin was 3.96% for the third quarter of 1997 compared
with 3.94% for the third quarter of 1996. The net interest margin for the
first nine months of 1997 was 3.98% compared with 4.04% for the first nine
months of 1996. The decline, for the nine month periods compared, occurred
as the cost of funds, driven by a competitive rate environment, increased at
a greater rate than the yield on earning assets. The increase in the yield
on earning assets was attributable to a combination of increased rates earned
on Magna's investment and loan portfolios. The increased cost of funds was
10
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associated with higher rates paid on time deposits and various categories of
borrowings, particularly other short-term borrowings acquired from Homeland.
PROVISION FOR LOAN LOSSES
Factors which influence management's determination of the provision for
loan losses include, among other things, evaluation of the anticipated impact
on the loan portfolio of current and projected economic conditions,
historical loss trends, a review of individual loans and changes in the
character and size of the portfolio. The increase in the provision for loan
losses for the quarters compared was primarily attributable to overall growth
in the loan portfolio, along with a higher level of net charge-offs. The
increase in the provision for loan losses during the first nine months of
1997 compared with the first nine months of 1996, was primarily due to the
additional provision described under "Overview." Activity in the reserve for
loan losses and nonperforming loan data are presented and discussed under
"ASSET QUALITY."
NONINTEREST INCOME
Total noninterest income was $19.2 million for the third quarter of 1997
compared with $12.5 million for the third quarter of 1996. Noninterest
income for the first nine months of 1997 was $50.4 million compared with
$37.3 million for the same period of 1996. Service charges on deposit
accounts increased $1.0 million for the third quarter of 1997 compared with
the third quarter of 1996 and increased $1.8 million for the nine month
periods compared. The increases in service charges on deposit accounts for
the periods compared were primarily attributable to the Homeland acquisition.
The increases in income from trust services for the quarters and the nine
month periods compared were primarily due to an increase in the market value
of trust assets on which certain fees are based and from the Homeland
acquisition. The increases in other noninterest income for the periods
compared resulted primarily from various sources of fee income of the
acquired entity coupled with higher levels of fee income from brokerage and
insurance activities along with increased levels of fee income associated
with automatic teller machines ("ATMs"). This particular source of ATM fee
income is derived from charges to non-Magna customers for their use of
Magna's ATMs. The increases in net securities gains for the 1997 periods
compared to the 1996 periods were the result of management's decision, in the
second quarter of 1997, to reconfigure certain segments of the
available-for-sale portion of the investment portfolio. The reconfiguration
of the available-for-sale portfolio continued through the third quarter.
11
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NONINTEREST EXPENSE
Total noninterest expense was $44.7 million for the third quarter of
1997 compared with $34.5 million for the third quarter of 1996. For the
first nine months of 1997, total noninterest expense was $128.3 million
compared with $104.2 million for the same period of 1996. The increases in
employee compensation and other benefits for the 1997 periods, compared with
1996, were attributable to the Homeland acquisition coupled with normal merit
increases. The increases in net occupancy and equipment expenses for the
1997 periods compared with 1996 were attributable to direct expenses of the
acquired entity. Federal Deposit Insurance Corporation ("FDIC") premiums
include assessments levied in connection with the Bank Insurance Fund ("BIF")
and the Savings Association Insurance Fund ("SAIF"). During the third
quarter of 1996, FDIC insurance premiums included a special assessment which
was mandated by federal legislation enacted on September 30, 1996. This
one-time special assessment recorded by Magna during the third quarter of
1996, amounted to $.4 million. This federal legislation reduced ongoing SAIF
deposit insurance assessment rates and increased ongoing BIF deposit
insurance assessment rates beginning January 1, 1997. Excluding the effects
of the special assessment, the change in the insurance assessment rate
structure, along with increased levels of insured deposits resulting from the
acquired entity, were the primary factors contributing to the increases in
FDIC insurance premiums for the periods compared. Substantially all of
Magna's deposits are insured by the BIF. The increases in intangible
amortization for the periods compared were primarily associated with
amortization of goodwill attributable to the acquired entity. The increases
in other noninterest expense for the periods compared were attributable to
the acquired entity.
Magna recorded income tax expense of $10.7 million for the third quarter
of 1997 compared with $8.2 million for the third quarter of 1996. For the
first nine months of 1997, income tax expense was $25.2 million compared with
$24.3 million for the same period of 1996. The effective income tax rate was
33.5% and 33.9% for the third quarter of 1997 and 1996, respectively. The
effective income tax rate was 33.3% and 34.4% for the first nine months of
1997 and 1996, respectively. The decrease in the effective tax rate for the
nine month periods compared resulted primarily from increased levels of
tax-exempt interest as a percentage of total interest income.
FINANCIAL CONDITION
GENERAL
Certain components of Magna's consolidated balance sheet at September
30, 1997 compared with December 31, 1996 and September 30, 1996 are presented
in summary form in Table 2. The increase in total assets at September 30,
1997 compared with December 31, 1996 reflects, primarily, the acquisition
consummated in the first quarter of 1997.
12
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<TABLE>
TABLE 2 -- Selected Comparative Balance Sheet Items
(In thousands)
<CAPTION>
September 30 December 31 September 30
1997 1996 1996
------------ ----------- ------------
<S> <C> <C> <C>
Total assets . . . . . . . . $7,044,480 $5,458,709 $5,384,481
Loans, net of
unearned income . . . . . . 4,542,381 3,415,309 3,367,661
Investments . . . . . . . . . 1,944,445 1,655,907 1,596,466
Deposits . . . . . . . . . . 5,365,771 4,197,776 4,164,860
Federal funds purchased . . . 166,840 25,500 20,195
Repurchase agreements:
Cash management . . . . . . 583,271 428,701 421,879
Other . . . . . . . . . . . 71,423 80,247 79,408
Other short-term borrowings . 97,214 99,487 98,628
Long-term debt. . . . . . . . 57,047 77,577 79,117
</TABLE>
LOANS
Loans, net of unearned income, increased 33.0%, or $1.1 billion, from
year-end 1996 to September 30, 1997. The majority of this increase was
derived from the Homeland acquisition. In addition to acquired loans, Magna
also has experienced growth in all categories of real estate loans as well as
consumer loans, primarily indirect automobile loans.
Table 3 presents the composition of the loan portfolio by type of
borrower and major loan category and the percentage of each to the total
portfolio for the periods presented.
<TABLE>
TABLE 3 -- Loan Portfolio Composition
(In thousands)
<CAPTION>
September 30 December 31 September 30
1997 1996 1996
---------------- ---------------- ----------------
Commercial borrowers: Amount Percent Amount Percent Amount Percent
- --------------------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural . . . . . . . $ 828,458 18.3% $ 648,881 19.0% $ 630,705 18.7%
Commercial real estate. . . . . 1,454,834 32.0 1,156,402 33.9 1,099,213 32.7
Real estate
construction . . . . . . . . . 269,542 5.9 150,157 4.4 162,238 4.8
---------- ----- ---------- ----- ---------- -----
Total commercial. . . . . . 2,552,834 56.2 1,955,440 57.3 1,892,156 56.2
---------- ----- ---------- ----- ---------- -----
Consumer borrowers:
- -------------------
1-4 family residential
real estate. . . . . . . . . . 1,303,397 28.7 942,053 27.6 934,861 27.8
Other consumer loans,
net of unearned income . . . . 686,150 15.1 517,816 15.1 540,644 16.0
---------- ----- ---------- ----- ---------- -----
Total consumer. . . . . . . 1,989,547 43.8 1,459,869 42.7 1,475,505 43.8
---------- ----- ---------- ----- ---------- -----
Total loans, net of
unearned income . . . . . . $4,542,381 100.0% $3,415,309 100.0% $3,367,661 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
INVESTMENTS
Total investments increased 17.4%, or $288.5 million, at September 30,
1997 compared with year-end 1996. The increase in investment securities from
year-end 1996 resulted primarily from the Homeland acquisition coupled with
growth in U. S. Government
13
<PAGE> 14
agency and tax-exempt securities. The growth in U. S. Government agency
securities resulted from reinvestment of U. S. Treasury security maturities
coupled with associated growth in cash management repurchase agreements. See
"Federal Funds Purchased and Repurchase Agreements." In addition, during the
first nine months of 1997, management lengthened the duration of the
investment portfolio. During this time frame, longer term tax-exempt
securities were emphasized, due to their attractive after-tax yields compared
to other alternative investments. Magna's investment portfolio serves three
important functions. First, it is a vehicle for managing balance sheet rate
sensitivity. Second, it is a means for investment of excess funds. Third, the
available-for-sale portion of the portfolio provides a resource from which
liquidity needs may be satisfied.
Table 4 presents the composition of investments for the periods
presented.
<TABLE>
TABLE 4 -- Investment Securities Portfolio Composition
(In thousands)
<CAPTION>
September 30 December 31 September 30
1997 1996 1996
------------ ----------- ------------
<S> <C> <C> <C>
Held-to-maturity securities . . $ 143,715 $ 154,729 $ 141,848
Available-for-sale securities . 1,800,730 1,501,178 1,454,618
---------- ---------- ----------
Total investments. . . . . . $1,944,445 $1,655,907 $1,596,466
========== ========== ==========
</TABLE>
GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles increased $94.1 million at September 30,
1997 from year-end 1996. Virtually all of this increase is attributable to
goodwill associated with the first quarter 1997 acquisition of Homeland.
This goodwill is being amortized over a period of 15 years.
DEPOSITS
Total deposits increased $1.2 billion to $5.4 billion at September 30,
1997 from year-end 1996. The majority of this increase was derived from the
Homeland acquisition. Excluding the effects of the acquisition, the time
deposit component of interest bearing deposits increased from year-end 1996.
This increase was partially offset by decreases in noninterest bearing
deposits, interest bearing demand deposits and savings and market rate
deposits. The decrease in noninterest bearing deposits was primarily due to
seasonal factors which generally increase the level of these deposits at the
end of a calendar year. The decreases in interest bearing demand deposits
and savings and market rate deposits occurred, in part, because of a shift
towards higher yielding time deposits. More aggressive sales efforts also
contributed to the increase in time deposits.
14
<PAGE> 15
Table 5 sets forth the composition of deposits and the changes in each
category for the periods presented.
<TABLE>
TABLE 5 -- Deposit Liability Composition
(In thousands)
<CAPTION>
September 30 December 31 September 30
1997 1996 1996
--------------- --------------- ---------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing . . . . . . $ 657,715 12.3% $ 575,504 13.7% $ 532,436 12.8%
Interest bearing demand
deposits . . . . . . . . . . . 617,357 11.5 542,268 12.9 522,485 12.5
Savings and market
rate deposits. . . . . . . . . 977,458 18.2 811,077 19.3 818,365 19.7
Time deposits less than
$100,000 . . . . . . . . . . . 2,375,697 44.3 1,780,188 42.4 1,794,637 43.1
Time deposits $100,000
or more. . . . . . . . . . . . 737,544 13.7 488,739 11.7 496,937 11.9
---------- ----- ---------- ----- ---------- -----
Total deposits . . . . . . . $5,365,771 100.0% $4,197,776 100.0% $4,164,860 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
FEDERAL FUNDS PURCHASED AND REPURCHASE AGREEMENTS
Federal funds purchased increased $141.3 million from year-end 1996.
Federal funds purchased are short-term sources of funds utilized by Magna's
banking subsidiary and are primarily obtained from its network of
correspondent and respondent banks. As such, levels of federal funds
purchased can fluctuate significantly. A substantial portion of the
increased level of federal funds purchased at September 30, 1997, was
attributable to federal funds purchased from additional correspondent banks
that resulted from the Homeland acquisition. Seasonally high demand deposit
levels at the end of a calendar year also tend to reduce the level of federal
funds purchased at that time. Cash management repurchase agreements increased
$154.6 million from year-end 1996. Such accounts involve the daily transfer
of excess funds from a noninterest bearing deposit account into the interest
bearing cash management repurchase agreement account. The cash management
repurchase agreement accounts are viewed by management as a stable source of
funds from commercial depositors. A portion of the increased level of cash
management repurchase agreements was attributable to marketing efforts
associated with Iowa customers as the acquired entity did not offer this form
of repurchase agreement account. Repurchase agreements, other than cash
management repurchase agreements, decreased $8.8 million from year-end 1996.
These term repurchase agreements serve as an alternative source of funds to
deposit funding sources. As such, the level of funds derived from such
repurchase agreements can fluctuate. Certain forms of these term repurchase
agreements represent an alternative to short-term certificates of deposit
offered to Magna's commercial and public fund customer base.
15
<PAGE> 16
OTHER SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Other short-term borrowings reflected a modest decrease of $2.3 million
at September 30, 1997 compared with year-end 1996. Other short-term
borrowings attributable to the acquired entity included various Federal Home
Loan Bank advances and an additional borrowing in the form of a treasury tax
and loan note option account. One of the Federal Home Loan Bank advances in
the amount of $40.0 million matures on June 5, 2000 but is callable by the
holder, on a quarterly basis. A second advance, in the amount of $10.0
million, matured on September 12, 1997. The increase in other short-term
borrowings, that resulted from the acquired entity, was offset by other
activities in the other short-term borrowings category as recorded on the
books of Magna. This additional activity included maturities, during the
first nine months, of various Federal Home Loan Bank advances totaling $38.5
million and an additional advance in the amount of $50.0 million which was
called for redemption in March 1997. This activity was partially offset by
the addition of a $25.0 million Federal Home Loan Bank advance which was
reclassified from long-term debt to other short-term borrowings as a result
of its September 1998 maturity. As with federal funds purchased and
repurchase agreements, other short-term borrowings serve as an alternative
source of funds to deposit funding sources. The decrease in long-term debt
from year-end 1996 of $20.5 million was primarily attributable to the above
referenced Federal Home Loan Bank advance reclassification to other
short-term borrowings, which was partially offset by the addition of several
Federal Home Loan Bank advances of the acquired entity, having various
interest rates and maturity dates.
ASSET QUALITY
Magna's asset quality management program includes the establishment of
investment and credit policies, the continued evaluation of the quality and
trends of material assets and the prompt implementation of appropriate
actions in view of the results of such evaluation. The objective of Magna's
asset quality management program, particularly with regard to loans, is to
manage credit exposure, a significant risk faced by all financial
institutions, and to support the growth of a profitable and higher quality
portfolio. Management continues to monitor the asset quality of the loan
portfolio, promptly following up on problem credits and implementing workout
strategies to manage the level of nonperforming assets.
At September 30, 1997, nonperforming assets totaled $46.0 million, or
.65% of total assets, compared with nonperforming assets at year-end 1996 of
$30.2 million, or .55% of total assets. The level of nonperforming assets at
September 30, 1997, includes those resulting from the Homeland acquisition.
Excluding the nonperforming loans associated with the acquired entity, all
categories of nonperforming loans remained relatively stable at September 30,
1997, when compared to year-end 1996,
16
<PAGE> 17
with the exception of the commercial, financial and agricultural category.
Nonperforming loans associated with the commercial, financial and
agricultural category increased $8.9 million at September 30, 1997 compared
to year-end 1996. This increase primarily related to one credit in the
amount of $14.9 million, which was placed on nonaccrual status as of March
31, 1997. Since the credit was originally placed on nonaccrual status,
certain collateral has been liquidated, thus reducing the balance due on the
credit. In addition to the portion of this credit being placed on nonaccrual
status, approximately $14.4 million was charged to the reserve for loan
losses. Management continues to take action to maximize Magna's potential
recovery with respect to this credit. The level of foreclosed property was
$2.0 million at September 30, 1997 compared to $2.9 million at year-end 1996.
Magna does not anticipate any significant losses on the disposition of other
real estate owned at September 30, 1997.
Net charge-offs for the first nine months of 1997 totaled $25.2 million
compared with $6.2 million for the first nine months of 1996. Net
charge-offs increased to $4.0 million for the third quarter of 1997 from $1.9
million for the third quarter of 1996. With the exception of the specific
charge-off discussed herein and net charge-offs associated with loans
acquired from Homeland, net charge-offs associated with all loan categories
remained relatively stable for the periods compared. The ratio of the
reserve for loan losses to total loans was 1.24% and 1.34% at September 30,
1997 and 1996, respectively. Management believes that the reserve for loan
losses is adequate to provide for possible losses inherent in the loan
portfolio. However, no assurance can be given that subsequent changes in
economic conditions, risk elements and other factors will not require
significant changes in the level of the loan loss reserve.
Table 6 sets forth a summary of Magna's loan portfolio mix and
nonperforming assets.
17
<PAGE> 18
<TABLE>
TABLE 6 -- Loan Portfolio Mix and Nonperforming Assets
(In thousands)
<CAPTION>
September 30, 1997 December 31, 1996
------------------------ -------------------------
Loans and Non- Loans and Non-
Foreclosed performing Foreclosed performing
Property Assets Property Assets
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial borrowers:
---------------------
Commercial, financial and
agricultural . . . . . . . . . . $ 828,458 $15,627 $ 648,881 $ 6,684
Commercial real estate. . . . . . 1,454,834 7,448 1,156,402 7,229
Real estate construction. . . . . 269,542 2,524 150,157 730
---------- ------- ---------- -------
Total commercial. . . . . . . . 2,552,834 25,599 1,955,440 14,643
Consumer borrowers:
-------------------
1-4 family residential
real estate. . . . . . . . . . . 1,303,397 14,721 942,053 9,971
Other consumer loans, net
of unearned income . . . . . . . 686,150 3,760 517,816 2,694
---------- ------- ---------- -------
Total consumer. . . . . . . . . 1,989,547 18,481 1,459,869 12,665
---------- ------- ---------- -------
Total loans, net of
unearned income. . . . . . . . . 4,542,381 44,080 3,415,309 27,308
Foreclosed property . . . . . . . . 1,964 1,964 2,906 2,906
---------- ------- ---------- -------
Total . . . . . . . . . . . . . . $4,544,345 $46,044 $3,418,215 $30,214
========== ======= ========== =======
Nonaccrual loans. . . . . . . . . . $29,239 $17,133
Loans past due 90 days or more. . . 14,605 10,175
Restructured loans. . . . . . . . . 236 -
------- -------
Total nonperforming loans . . . . 44,080 27,308
Foreclosed property . . . . . . . . 1,964 2,906
------- -------
Total nonperforming assets. . . . $46,044 $30,214
======= =======
Nonperforming loans to
total loans . . . . . . . . . . . .97% .80%
Nonperforming assets to total
loans and foreclosed property . . 1.01 .88
Nonperforming assets to
total assets. . . . . . . . . . . .65 .55
</TABLE>
Table 7 presents information pertaining to the activity in and an
analysis of Magna's reserve for loan losses for the periods presented.
18
<PAGE> 19
<TABLE>
TABLE 7 -- Reserve For Loan Losses
(In thousands)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1997 1996 1997 1996
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Balance at beginning of period . . . . . . $55,726 $44,464 $ 45,382 $ 42,623
Reserves of acquired institutions . . . . . - - 13,146 890
Loans charged off:
Commercial borrowers:
Commercial, financial and agricultural . (1,661) (925) (20,230) (3,478)
Commercial real estate . . . . . . . . . (99) (748) (1,386) (1,587)
Real estate construction . . . . . . . . (23) (45) (48) (317)
------- ------- -------- --------
Total commercial . . . . . . . . . . . (1,783) (1,718) (21,664) (5,382)
Consumer borrowers:
1-4 family residential real estate . . . (263) (455) (656) (1,147)
Other consumer loans . . . . . . . . . . (2,849) (1,004) (5,937) (3,524)
------- ------- -------- --------
Total consumer . . . . . . . . . . . . (3,112) (1,459) (6,593) (4,671)
------- ------- -------- --------
Total charge-offs . . . . . . . . . (4,895) (3,177) (28,257) (10,053)
------- ------- -------- --------
Recoveries of loans previously charged off:
Commercial borrowers:
Commercial, financial and agricultural . 497 770 1,388 2,175
Commercial real estate . . . . . . . . . 30 123 178 411
Real estate construction . . . . . . . . 26 3 211 20
------- ------- -------- --------
Total commercial . . . . . . . . . . . 553 896 1,777 2,606
Consumer borrowers:
1-4 family residential real estate . . . 70 140 199 372
Other consumer loans . . . . . . . . . . 276 271 1,054 874
------- ------- -------- --------
Total consumer . . . . . . . . . . . . 346 411 1,253 1,246
------- ------- -------- --------
Total recoveries . . . . . . . . . . 899 1,307 3,030 3,852
------- ------- -------- --------
Net loans charged off . . . . . . . . . . . (3,996) (1,870) (25,227) (6,201)
------- ------- -------- --------
Provision for loan losses charged
to operations . . . . . . . . . . . . . . 4,477 2,499 22,906 7,781
------- ------- -------- --------
Balance at end of period . . . . . . . . . $56,207 $45,093 $ 56,207 $ 45,093
======= ======= ======== ========
Net loan charge-offs (annualized) to
average loans . . . . . . . . . . . . . . .35% .22% .80% .25%
Reserve for loan losses to total loans . . 1.24 1.34 1.24 1.34
Reserve for loan losses to
nonperforming loans . . . . . . . . . . . 127.51 171.12 127.51 171.12
</TABLE>
19
<PAGE> 20
CAPITAL RESOURCES AND LIQUIDITY
CAPITAL
Financial institutions are subject to various regulatory capital
guidelines administered by the federal banking agencies. The guidelines are
commonly known as "Risk-Based Guidelines" as they define the capital level
requirements of a financial institution based upon the level of risk
associated with holding various categories of assets. The Risk-Based
Guidelines require minimum ratios of Tier 1 and Total capital to
risk-weighted assets of 4% and 8%, respectively. At September 30, 1997,
Magna's Tier 1 and Total capital ratios were 10.97% and 12.12%, respectively.
In addition to the Risk-Based Guidelines, the federal banking agencies have
established a minimum leverage ratio guideline for financial institutions
(the "Leverage Ratio Guideline"). The Leverage Ratio Guideline provides for
a minimum ratio of Tier 1 capital to average assets of 3% for financial
institutions that meet certain specified criteria, including having the
highest regulatory ratings. Other financial institutions generally are
required to maintain a leverage ratio of at least 4% to 5%. Magna's leverage
ratio at September 30, 1997 was 7.34%.
DIVIDENDS AND RESOURCE COMMITMENTS
The primary source of funds to Magna, on a parent company only basis,
consists of dividends and management fees paid by its banking subsidiary
whose ability to pay dividends and management fees is subject to limitations
under various laws and regulations, and to prudent and sound banking
principles. Because of such limitations, during the fourth quarter of 1996,
Magna's banking subsidiary requested and received approval from the Office of
the Comptroller of the Currency (the "OCC") to pay to Magna a special
dividend sufficient for Magna to fund the cash portion of the acquisition
consummated on March 1, 1997. The banking subsidiary also requested and
received approval from the OCC to pay dividends in 1997 of up to 50% of its
then-current period earnings, subject to the banking subsidiary maintaining
its status as a "well capitalized" financial institution.
Magna believes that the earnings of its banking subsidiary will be
sufficient to provide capital to fund asset growth and to permit the
distribution of cash dividends to Magna sufficient to meet Magna's operating
and debt service requirements, as well as anticipated dividends, for the
foreseeable future.
20
<PAGE> 21
CREDIT FACILITY
Magna has entered into a three year unsecured revolving credit facility
(the "Credit Facility") with a syndicate of unaffiliated banks, which
provides for borrowings by Magna of up to $100 million. Under the terms of
the Credit Facility, Magna may elect to convert the principal balance of any
outstanding revolving loans into term loans for a term ending no later than
December 30, 2002. The Credit Facility contains specific covenants which,
among other things, limit dividend payments, restrict the sale of assets by
Magna under certain circumstances, provide for possible acceleration of the
repayment terms upon the merger of Magna or its subsidiaries with and into
unaffiliated entities and require the maintenance by Magna of certain
financial ratios. At September 30, 1997, there were no amounts outstanding
under the Credit Facility.
21
<PAGE> 22
PART II - OTHER INFORMATION
- ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits: See Exhibit Index on page 24 hereof.
(b) Reports on Form 8-K: No reports on Form 8-K were filed by Magna
during the third quarter of 1997.
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAGNA GROUP, INC.
--------------------------------------
(Registrant)
DATE: November 10, 1997 By:/s/ G. Thomas Andes
- ------------------------------ -------------------------------------
G. Thomas Andes
Chairman of the Board and
Chief Executive Officer
DATE: November 10, 1997 By:/s/ Robert S. Kahler
- ------------------------------ -------------------------------------
Robert S. Kahler
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
23
<PAGE> 24
<TABLE>
EXHIBIT INDEX
-------------
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.1 Supplemental Executive Retirement Plan
of Magna Group, Inc. dated October, 1997.
10.2 Agreement dated October 20, 1997, between
Magna Group, Inc. and Robert S. Kahler.
10.3 Agreement dated October 17, 1997, between
Magna Group, Inc. and Bradford W. Koeneman.
11.1 Computation of Net Income Per Common
Share.
27.1 Financial Data Schedule.
</TABLE>
24
<PAGE> 1
Magna Group, Inc.
Supplemental Executive
Retirement Plan
October, 1997
<PAGE> 2
<TABLE>
Table of Contents
-----------------
<CAPTION>
Article Content Page
- ------- ------- ----
<C> <S> <C>
I DEFINITIONS 1
II PARTICIPATION 9
III BENEFITS 10
IV NO FUNDING OBLIGATION 14
V ADMINISTRATION 15
VI AMENDMENT OR TERMINATION 20
VII GENERAL LIMITATION AND PROVISIONS 21
</TABLE>
<PAGE> 3
MAGNA GROUP, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
--------------------------------------
ARTICLE I
DEFINITIONS
Whenever used herein with the initial letter capitalized, words and phrases
shall have the meanings stated below unless a different meaning is plainly
required by the context. All masculine terms shall include the feminine and
all singular terms shall include the plural, unless the context clearly
indicates the gender or number. Some of the words and phrases used in the
Plan are not defined in this Article, but, for convenience, are defined as
they are introduced into the text.
1.01 ACCRUED BENEFIT means the portion of Retirement Income payable at
Normal Retirement Date which has accrued as of the determination
date based upon Years of Service at such determination date.
1.02 AFFILIATE means those organizations which are now or ever have been a
member of a controlled group of corporations as that term is
defined in Section 1563(a) of the Code.
1.03 ACTUARIAL Equivalent means benefits of equivalent value when computed
on the basis of Actuarial Assumptions as defined in Section 1.04.
1.04 ACTUARIAL ASSUMPTIONS means the same rate of interest and rates of
mortality as are utilized in computing the benefits provided by
the Company's defined benefit pension plan.
<PAGE> 4
1.05 ACTUARY means that individual enrolled actuary or firm
including one or more enrolled actuaries selected by the
Committee to provide actuarial services in connection with the
administration of the Plan.
1.06 ALTERNATE RETIREMENT INCOME means the Actuarial
Equivalent amount of a Participant's Retirement Income payable in
the form of a joint and survivor annuity. Such joint and
survivor annuity shall be valued based on either (a) monthly
income for the Participant's life and upon his death, his spouse,
if living, shall receive a monthly life income which is equal to
two-thirds (2/3) of the amount of monthly life income the
Participant was receiving with one hundred twenty (120) monthly
payments guaranteed collectively or (b) a monthly income for the
Participant's life and upon his death, his spouse, if living,
shall receive a monthly life income which is equal to one-half
(1/2) of the amount of monthly life income the Participant was
receiving with one hundred twenty (120) monthly payments
(guaranteed collectively). If the Participant and his spouse die
before one hundred twenty (120) monthly payments have been made
then the balance of said guaranteed one hundred twenty (120)
monthly payments shall be made to the Participant's Beneficiary
if the Participant survived his spouse or to the Participant's
spouse's estate if she survived the Participant.
2
<PAGE> 5
1.07 BENEFICIARY OR BENEFICIARIES means the person or persons
designated by Participant to receive amounts under the Plan
payable by reason of the Participant's death. If the Beneficiary
of a Participant predeceases him, or if a Participant dies
without having designated a Beneficiary, then the full amount
payable upon the death of the Participant shall be paid to his
surviving spouse or, if none, shall be paid to the Participant's
estate.
1.08 BOARD means the Board of Directors of the Company.
1.09 CHANGE OF CONTROL means a change in control of the
Company of a nature that would be required to be reported in
response to item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act; provided that, for purposes
of this Agreement, a Change in Control shall be deemed to have
occurred if (i) any Person (other than the Company) is or becomes
the "beneficial owner" (as defined in rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company which represent 20% or more of the combined voting power
of the Company's then outstanding securities; (ii) during any
period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board cease for any
reason to constitute at least a majority thereof, unless the
election, or the nomination for election, by the Company's
stockholders, of each new director is approved by a vote of at
least two-thirds (2/3) of the directors, there still in
3
<PAGE> 6
office who were directors at the beginning of the period, but excluding
any individuals whose initial assumption of office occurs as a
result of either an actual or threatened solicitation of proxies
or consents by or on behalf of a person other than the Board;
(iii) there is consummated any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common
Stock are converted into cash, securities or other property,
other than a merger of the Company in which the holders of the
Company's Common Stock immediately prior to the merger have the
same proportionate ownership of common stock of the surviving
corporation immediately after the merger; (iv) there is
consummated any consolidation or merger of the Company in which
the Company is the continuing or surviving corporation in which
the holders of the Company's Common Stock immediately prior to
the merger do not own fifty- percent (50%) or more of the stock
of the surviving corporation immediately after the merger; (v)
there is consummated any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, or (vi) the
stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company.
1.10 CAUSE means (i) the Participant's willful and continued
failure to perform substantially his/her duties with the
4
<PAGE> 7
Company (other than as a result of incapacity due to physical or mental
condition), after a demand for substantial performance is delivered to
him/her by the Chairman of the Compensation Committee of the Board or
the Chief Executive Officer, which specifically identifies the manner
in which the Participant has not substantially performed his/her
duties, (ii) the Participant's willful commission of misconduct which
is materially injurious to the Company, monetarily or otherwise, or
(iii) the Participant's material breach of any provision of this
Agreement. For purposes of this paragraph, no act, or failure to
act on the Participant's part shall be considered "willful"
unless done, or omitted to be done, without good faith and
without reasonable belief that the act or omission was in the
best interest of the Company. Notwithstanding the foregoing, the
Participant shall not be deemed to have been terminated for Cause
unless and until (i) he receives a Notice of Termination (as
defined in Section 7.06 and 7.07) from the Chairman of the
Compensation Committee of the Board or the Chief Executive
Officer, (ii) he/she is given the opportunity with counsel, to be
heard before the Board, and (iii) the Board finds, in its good
faith opinion, that the Participant was guilty of the conduct set
forth in the Notice of Termination.
1.11 CODE means the Internal Revenue Code of 1986, as
amended.
1.12 COMMITTEE means the compensation committee of the Board.
5
<PAGE> 8
1.13 COMPANY means Magna Group, Inc., an organization
incorporated under the laws of the State of Delaware, and any
Affiliate thereof.
1.14 COMPENSATION means the sum of a Participant's Annual Base
Salary and Magna Executive Incentive Compensation Plan ("MEICP")
cash bonus and the value of the MEICP restricted stock award
(valued as of the date of grant) paid or accrued with respect to
any year.
1.15 DISABILITY means that the Participant has been unable to
perform the services required of the Participant hereunder on a
full-time basis for a period of one hundred eighty (180)
consecutive business days by reason of a physical and/or mental
condition. "Disability" shall be deemed to exist when certified
by a physician selected by the Company or its insurers and
acceptable to the Participant or the Participant's legal
representative (such agreement as to acceptability not to be
withheld unreasonably). The Participant will submit to such
examinations and tests as such physician deems necessary to make
any such Disability determination.
1.16 ELIGIBLE EMPLOYEE means an individual employed by the Company in a
senior management position.
1.17 FINAL MONTHLY EARNINGS means one-twelfth (1/12) of a
Participant's average annual Compensation computed using the
highest five (5) complete calendar years out of the last ten (10)
complete calendar years of his employment
6
<PAGE> 9
with the Company which precedes the earlier of (a) his termination of
employment for any reason or, (b) date of termination of this Plan. If
a Participant completes fewer than five (5) complete calendar years
of employment with the Company prior to the determination of his
Final Monthly Earnings hereunder then Final Monthly Earnings
shall mean one-twelfth (1/12) of his average annual Compensation
for all complete calendar years of employment with the Company
preceding the earlier of (a) his termination of employment for
any reason or (b) the date of the termination of this Plan.
1.18 NORMAL RETIREMENT DATE means a Participant's sixty-fifth
(65) birthday.
1.19 OTHER RETIREMENT BENEFITS means those Actuarial Equivalent amounts
which are due and payable to such Participant, his spouse, or his
Beneficiaries under any other Company defined benefit pension plan
qualified under section 401(a) of the Code and in the event of
Disability those Actuarial Equivalent amounts due and payable to the
Participant under any Company sponsored long term disability program
or plan.
1.20 PARTICIPANT means any Eligible Employee who is participating in the
Plan in accordance with the provisions of Section 2.01.
1.21 PLAN means the Magna Group, Inc. Supplemental Executive Retirement Plan
as set forth in this document.
7
<PAGE> 10
1.22 RETIREMENT INCOME means a monthly benefit payable for the
life of the Participant with one hundred twenty (120) monthly
payments guaranteed equal to 1.4285714 percent times the
Participant's number of Years of Service (up to a maximum of
fifty percent (50%)) times the Participant's Final Monthly
Earnings, provided, however, such amount shall be offset and
reduced by Other Retirement Benefits.
1.23 YEARS OF SERVICE means any calendar year during which a
Participant was employed by the Company, or any entity that
merged with, consolidated with, or became part of the Company,
for One thousand (1,000) hours or more.
8
<PAGE> 11
ARTICLE II
PARTICIPATION
2.01 The Company in its sole discretion shall determine when an
Eligible Employee of the Company shall become a Participant in
the Plan. The Committee may require all Eligible Employees, as a
condition of participation, to file with the Company any
enrollment form, optional payment form or other pertinent
information concerning the Eligible Employee.
9
<PAGE> 12
ARTICLE III
BENEFITS
3.01 If the Participant is in the employ of the Company on his
Normal Retirement Date the Participant shall be entitled, unless
his employment terminates subsequent thereto by reason of
Disability or death, to the payment of Retirement Income
commencing within thirty (30) days following his actual
termination of employment.
3.02 Except as provided in Section 3.08, if the Participant
terminates employment with the Company for any reason other than
following a Change of Control or as a result of Disability or
death prior to his Normal Retirement Date, the Provisions of this
Plan shall automatically terminate as to such Participant and
such Participant and/or his Beneficiary shall have no rights to
any benefits hereunder and the Company shall be relieved of all
obligations under this Plan to such Participant, and/or his
Beneficiary. If this Plan is terminated by the Company prior to
any such voluntary termination of employment by the Participant
then the Participant and/or his Beneficiary shall be entitled to
such benefits as are described in Section 3.06.
3.03 If the Participant terminates employment with the Company
at any time within two (2) years following a Change of Control,
such Participant shall be entitled to payment of Retirement
Income equal to the Accrued Benefit, as of the Change of Control
date, based on actual Years of Service to
10
<PAGE> 13
the Change of Control date plus two (2) added years. The benefit will
be payable at Participant's Normal Retirement Date or an Actuarial
Equivalent lump sum payable within thirty (30) days of his actual
termination of employment.
3.04 If the Participant terminates employment by reason of
Disability, he shall be entitled to payment of his Accrued
Benefit as of the date of his Disability, commencing at age 65 or
the Actuarial Equivalent lump sum thereof payable within thirty
(30) days of his termination of employment, irrespective of his
age on the date of his Disability.
3.05 If the Participant dies at any time while employed by the
Company, he shall forfeit any right to Retirement Income, but his
Beneficiary shall receive 50% of the benefit described in Section
3.04 above, commencing on the date the Participant would have
attained age 65 or the Actuarial Equivalent lump sum payable
within thirty (30) days of his death.
3.06 If this Plan is amended at any time by the Company prior
to the Participant being entitled to receive any benefits
hereunder the amendment shall not reduce the "benefit otherwise
payable" under the terms of this Plan to such Participant and/or
his Beneficiary. For purposes hereof the term "benefit otherwise
payable" shall mean Participant's Accrued Benefit determined as
of the date of any such amendment provided, however, in order for
the Participant or his Beneficiary to receive any benefits
11
<PAGE> 14
hereunder the Participant must satisfy the distribution
requirements of the Plan or the Plan as amended if such
distribution requirements are less restrictive as to such
Participant.
3.07 If this Plan is terminated by the Company for any reason
while the Participant is still in the employment of the Company
and prior to the Participant being entitled to receive any
benefits hereunder, the Participant, or his Beneficiary, in the
event of a Participant's death subsequent to termination of this
Plan, shall be entitled to the Actuarial Equivalent lump sum
amount of his Accrued Benefit determined as of the date of
termination of the Plan payable within sixty (60) days following
his death or actual termination of employment with the Company
for any other reason.
3.08 If the Participant is involuntarily terminated without
Cause by the Company prior to his Normal Retirement Date, the
Participant shall be entitled to the Actuarial Equivalent lump
sum amount of his Accrued Benefit determined as of his date of
termination of employment from the employment of the Company and
payable to him within sixty (60) days thereof, irrespective of
his age on such date.
3.09 If a Participant is entitled to Retirement Income under
this Plan, the Participant may elect, within a reasonable time
prior to the commencement of Retirement Income
12
<PAGE> 15
payments, and with the consent and approval of the Committee, to
receive his benefits under the Plan in the form of an Actuarial
Equivalent lump sum amount, or; if married at such time, with the
consent and approval of the Committee, to receive his benefits under
the Plan in the form of Alternate Retirement Income.
3.10 Notwithstanding the provisions of Section 3.02 above, in
the event a Participant terminates employment with the Company
other than following a Change of Control, or as a result of
death, Disability or attaining his Normal Retirement Date, the
Committee may recommend, and the Board may approve the continued
application of the provisions of the Plan to a Participant and/or
the Participant's Beneficiary. In such an event, the Participant
and/or his Beneficiary will be entitled to such benefits as are
approved by the Board in its sole discretion.
3.11 The Company may withhold or cause to be withheld from any
distribution all Federal, state, city, or other taxes as shall be
required pursuant to any law or governmental regulation or
ruling.
13
<PAGE> 16
ARTICLE IV
NO FUNDING OBLIGATION
4.01 Nothing contained in this Plan and no action taken
pursuant to the provisions of this Plan shall create or be
construed to create a trust of any kind, or a fiduciary
relationship between the Company and the Participant, his spouse
or any other person. The Company may, although shall not be
required, establish a grantor trust and/or set aside funds to
meet its contingent obligations hereunder, and may invest such
funds in stocks, bonds, common funds, other securities or
interest bearing instruments selected by the Committee in its
sole discretion. Any funds which may be set aside and invested
under the provisions of this Plan shall continue for all purposes
to be a part of the general funds of the Company, and no person
other than the Company shall by virtue of the provisions of this
Plan have any interest in such funds. To the extent that any
person acquires a right to receive payments from the Company
under this Plan, such right shall be no greater than the right of
any unsecured general creditor of the Company.
14
<PAGE> 17
ARTICLE V
ADMINISTRATION
5.01 The Company through the Committee shall have general
administrative authority under the Plan. In addition, the Board
may appoint other individuals, firms or organizations to act as
agent of the Company in carrying out administrative duties under
the Plan.
5.02 The Committee shall have such authority as may be
necessary to discharge its responsibilities under the Plan,
including the following rights, powers, and duties:
(a) The Committee may adopt rules governing its
procedures not inconsistent herewith and shall keep a
permanent record of its meetings and actions. The Company
shall maintain the Accounts of Participants and
Beneficiaries under the Plan or shall cause them to be
maintained under its direction.
(b) The Company through the Committee shall have the
sole responsibility for the administration of the Plan
and, except as herein expressly provided, the Company
through the Committee shall have the exclusive right to
interpret the provisions of the Plan and to determine any
question arising hereunder or in connection with the
administration of the Plan, including the remedying of
any omission, inconsistency, or ambiguity, and its
decision or action in respect thereof shall be conclusive
and
15
<PAGE> 18
binding upon any and all Participants, former
Participants, Beneficiaries, heirs, distributees,
executors, administrators, and assigns.
(c) The Committee may employ such counsel and agents
in such clerical, accounting, and other services as it
may require in carrying out the provisions of the Plan.
(d) The Company shall employ an actuary to calculate
the benefits due under this Plan and his determination
shall be Conclusive and binding on all parties.
(e) Participants, former Participants, or their
Beneficiaries shall be notified by the Committee or by
the Company of their right to receive benefits.
(f) No member of the Board or any other individual to
whom administrative authority is delegated under the Plan
shall be entitled to act on or decide any matters
relating solely to himself or any of his rights or
benefits under the Plan.
5.03 The Company shall indemnify all officers and employees
assigned any powers or duties under the Plan to the extent that
such officers or employees incur loss or damage which
may result from such officers' or employees' duties, exercises of
discretion under the Plan, or any other acts or omissions
hereunder. Such duties, exercises of discretion, acts, or
omissions will not be indemnified by the Company in the event
that such loss or damage is judi-
16
<PAGE> 19
cially determined or agreed by the officers or employees to be due to
their respective gross negligence or willful misconduct.
5.04 Anyone who is employed by the Company and who is acting
as agent of the Company for purposes of this Plan shall serve
without compensation for services as such, but all proper
expenses incurred by the individual incident to the functioning
of the Plan shall be paid by the Company.
5.05 Any Eligible Employee who believes that he is entitled to
receive a benefit under the Plan may file a claim in writing with
the Committee. The Committee shall, within ninety (90) days
after the receipt of the claim, either allow or deny the claim in
writing. A denial of the claim shall be written in a manner
calculated to be understood by the claimant and shall include:
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent Plan provisions
on which the denial is based;
(c) A description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(d) An explanation of the Plan's review procedure.
A claimant whose claim is denied may, within sixty (60) days
after receipt of denial of his claim:
(a) Seek a review upon written request to the Company;
17
<PAGE> 20
(b) Review pertinent documents; and
(c) Submit issues and comments in writing.
Any written request for review shall contain all additional
information which the claimant wishes the Committee to consider.
The Company may hold any hearing or conduct any independent
investigation which it deems necessary to render its decision.
The Committee shall make its decision within sixty (60) days
after receipt of the request for review unless a greater period
is agreed to by the claimant and the Committee. The decision on
review shall be in writing and shall include specific reasons for
the decision, and shall be written in a manner calculated to be
understood by the claimant and with specific references to the
pertinent Plan provisions on which the decision is based. The
Company shall have the sole authority to interpret the Plan, to
determine benefit eligibility, and to decide any and all matters
arising hereunder, including, without limitation, the right to
interpret ambiguities, inconsistencies, or omissions, and its
decision or action thereon shall be final, conclusive, and
binding upon any and all employees. The ninety (90) and sixty (60) days
described above may be extended at the discretion of the Committee for
a second ninety (90) or sixty (60) day period, as the case may be,
provided that written notice of the extension is furnished to the
claimant prior to the termination of the initial
18
<PAGE> 21
period, indicating the special circumstances requiring such extension
and the date by which a final decision is expected. Any person
submitting a claim may, with the consent of the Committee:
(a) Withdraw the claim at any time; or
(b) Defer the date as of which such Claim shall be deemed
filed for purposes Of This procedure.
19
<PAGE> 22
ARTICLE VI
AMENDMENT OR TERMINATION
6.01 Subject to Section 3.06 in the case of amendment and
Section 3.07 in the case of termination the Company reserves the
right at any time, by resolution of the Board, to amend or
terminate the Plan for any reason and without the consent of any
Eligible Employee, Participant, spouse, Beneficiary, or other
person.
6.02 The Committee shall give notice of any amendment or
termination pursuant to Section 6.01 to all affected
Participants.
20
<PAGE> 23
ARTICLE VII
GENERAL LIMITATIONS AND PROVISIONS
7.01 The Plan shall be binding on each Participant and his
Beneficiary, heirs and personal representative and the Company,
its successors and assigns.
7.02 Nothing contained herein shall give any individual the
right to be retained in the employment of the Company or affect
the right of the Company to terminate any individual's
employment. The adoption and maintenance of the Plan shall not
constitute a contract between the Company and any individual, or
consideration for or an inducement to or condition of the
employment of any individual.
7.03 If the Committee shall find that any person to whom any
amount is payable under the Plan is unable to care for his
affairs, any payment due him (unless a prior claim therefor has
been made by a duly appointed legal representative) may, if the
Committee so elects, be paid to his spouse, a child, a relative,
or any other person maintaining or having custody of such person
otherwise entitled to payment or deemed by the Committee to be a
proper recipient on behalf of such person. Any such payment
shall be a complete discharge of the Company of all liability
under the Plan therefor.
7.04 Neither a Participant nor any other person shall have any
right to commute, sell, assign, transfer, pledge,
21
<PAGE> 24
anticipate, mortgage or otherwise encumber, transfer, hypothecate or
convey in advance of actual receipt the amounts, if any, payable
hereunder, or any part thereof, which are, and all right to which
are, expressly declared to be unassignable and non-transferable.
No part of the amounts payable shall, prior to the actual
payment, be subject to seizure or sequestration for the payment
of any debts, judgments, alimony or separate maintenance owed by
a Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any other
Person's bankruptcy or insolvency.
7.05 Each Participant shall file with the Committees such
pertinent information concerning himself and his spouse or
Beneficiary as the Committee may specify, and no Participant,
spouse, Beneficiary, or other person shall have any rights or be
entitled to any benefits under the Plan unless such information
is filed by or with respect to him.
7.06 All elections, designations, requests, notices, instructions,
and other communications from the Participant, spouse, Beneficiary, or
other person to the Company or the Committee required or permitted
under the Plan shall be in such form as is prescribed from time to time
by the Company or the Committee, shall be mailed by first-class mail or
delivered to the principal office of the Company, and shall be deemed
to have been given and
22
<PAGE> 25
delivered only upon actual receipt thereof at such location.
7.07 All notices, statements, reports, and other communications from the
Company or the Committee to any Eligible Employee, Participant, spouse,
Beneficiary, or other person required or permitted under the Plan shall
be deemed to have been duly given when delivered to, or when mailed by
first-class mail, postage prepaid and addressed to, such Eligible
Employee, Participant, spouse, Beneficiary, or other person at his
address last appearing on the records of the Company.
7.08 The Company does not represent or guarantee that any particular Federal
or state income, payroll, personal property, or other tax consequence
will result from participation in this Plan. A Participant should
consult with professional tax advisers to determine the tax
consequences of his or her participation.
7.09 The Plan and all rights hereunder shall be governed by
and construed in accordance with the Code, and the regulations
promulgated thereunder, and with the laws of The State of
Missouri.
IN WITNESS WHEREOF, this Plan has been executed the day
and year first above written.
MAGNA GROUP, INC.
By: /s/ G. Thomas Andes
-----------------------------
G. Thomas Andes
Chairman of the Board,
Chief Executive Officer and
President
23
<PAGE> 1
MAGNA GROUP, INC.
AGREEMENT
---------
This agreement ("Agreement") has been entered into this 20th day
of October, 1997, by and between Magna Group, Inc., a Delaware corporation
("Company"), and Robert S. Kahler, an individual ("Executive").
RECITALS
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to
reinforce and encourage the continued attention and dedication of the
Executive to the Company as a member of the Company's management (including,
if applicable, management of a wholly owned subsidiary) and to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change in Control
(as defined below) of the Company. The Board desires to provide for the
continued employment of the Executive on the terms hereof, and the Executive
is willing to commit to continue to serve the Company. Additionally, the
Board believes it is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by a
pending or threatened Change in Control, to encourage the Executive's full
attention and dedication to the Company currently and in the event of any
threatened or pending Change in Control, and to provide the Executive with
compensation and benefits arrangements upon the breach of this Agreement by
the Employer or upon a termination of employment after a Change in Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the
following words and phrases, whether or not capitalized, shall have the
meanings specified below, unless the context plainly requires a different
meaning.
1.1(a) "ANNUAL BASE SALARY" means the dollar amount
approved by the Company Director Compensation
Committee or the Company Chief Executive Officer.
1.1(b) "BOARD" means the Board of Directors of the
Company.
1.1(c) "CHANGE IN CONTROL" means a change in control
of the Company of a nature that would be
required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act; provided
that, for purposes of this Agreement, a Change
in Control shall be deemed to have occurred if
(i) any Person (other than the Company) is or
becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act),
<PAGE> 2
directly or indirectly, of securities of the Company
which represent 20% or more of the combined voting
power of the Company's then outstanding
securities; (ii) during any period of two (2)
consecutive years, individuals who at the
beginning of such period constitute the Board
cease for any reason to constitute at least a
majority thereof, unless the election, or the
nomination for election, by the Company's
stockholders, of each new director is approved
by a vote of at least two-thirds (2/3) of the
directors then still in office who were
directors at the beginning of the period but
excluding any individual whose initial
assumption of office occurs as a result of
either an actual or threatened election contest
(as such term is used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a
person other than the Board; (iii) there is
consummated any consolidation or merger of the
Company in which the Company is not the
continuing or surviving corporation or pursuant
to which shares of the Company's Common Stock
is converted into cash, securities, or other
property, other than a merger of the Company in
which the holders of the Company's Common Stock
immediately prior to the merger have the same
proportionate ownership of common stock of the
surviving corporation immediately after the
merger; (iv) there is consummated any
consolidation or merger of the Company in which
the Company is the continuing or surviving
corporation in which the holders of the
Company's Common Stock immediately prior to the
merger do not own fifty percent (50%) or more
of the stock of the surviving corporation
immediately after the merger; (v) there is
consummated any sale, lease, exchange, or other
transfer (in one transaction or a series of
related transactions) of all, or substantially
all, of the assets of the Company, or (vi) the
stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of
the Company.
1.1(d) "CHANGE IN CONTROL DATE" shall mean the date
of the Change in Control. If a Change in
Control occurs and if the Executive's
employment with the Company is terminated prior
to the date on which the Change in Control
occurs, and if it is reasonably demonstrated by
the Executive that such termination of
employment (i) was at the request of a third
party who has taken steps reasonably calculated
to effect a Change in Control or (ii) otherwise
arose in connection with or anticipation of a
Change in Control, then for all purposes of
this Agreement, the "Change in Control Date"
shall mean the date immediately prior to the
date of such termination of employment, and a
Change in Control shall be deemed to have
occurred on the Change in Control Date.
1.1(e) "CODE" shall mean the Internal Revenue Code of
1986, as amended.
1.1(f) "COMPANY" means Magna Group, Inc., a Delaware
corporation.
1.1(g) "EFFECTIVE DATE" shall mean October 20, 1997.
1.1(h) "EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended.
-2-
<PAGE> 3
1.1(i) "INCENTIVE BONUS" shall mean the incentive
bonus provided through any incentive
compensation plan, which is generally available
to other peer executives of the Company,
awarded to the Executive for the year preceding
termination. To the extent such incentive
bonus is paid in shares of restricted stock,
Incentive Bonus shall include the value of such
shares on their award date without any
discount; provided, however, such restricted
shares shall include only those awarded in lieu
of compensation payable as determined by the
Compensation Committee of the Board.
1.1(j) "PERSON" means any "person" within the meaning
of Sections 13(d) and 14(d) of the Exchange Act.
1.1(k) "TERM" means the period that begins on the
Effective Date and ends on the earlier of: (i)
the Date of Termination as defined in Section
3.7, or (ii) the close of business on December
31 of any calendar year during which notice is
given, by December 1 of such year, by either
party (as provided in Section 7) of such
party's intent not to renew this Agreement.
1.2 GENDER AND NUMBER. When appropriate, pronouns in
this Agreement used in the masculine gender include the feminine gender,
words in the singular include the plural, and words in the plural include the
singular.
1.3 HEADINGS. All headings in this Agreement are included
solely for ease of reference and do not bear on the interpretation of the
text. Accordingly, as used in this Agreement, the terms "Article" and
"Section" mean the text that accompanies the specified Article or Section of
the Agreement.
1.4 APPLICABLE LAW. This Agreement shall be governed by
and construed in accordance with the laws of the state of Missouri, without
reference to its conflict of law principles.
SECTION 2: TERMS AND CONDITIONS OF EMPLOYMENT.
2.1 EMPLOYMENT. If the Executive is in the employ of the
Company (or in the employ of a wholly owned subsidiary) on a Change in
Control Date, then the Executive shall thereafter remain in the employ of the
Company (or in the employ of a wholly owned subsidiary) in accordance with
the terms and provisions of this Agreement.
2.2 POSITIONS AND DUTIES.
2.2(a) Following a Change in Control Date, the Executive
shall continue to serve in the Executive's then
current capacity, subject to the reasonable
directions of the Board. The Executive shall
thereafter devote the Executive's full working time
and attention to such business and affairs of the
Company and/or any subsidiary of the Company as
directed by the Board, as may be compatible with the
Executive's titles and positions. In addition, the
Executive's position (including status, offices,
titles and reporting requirements), authority,
duties and responsibilities shall be at least
commensurate in all material respects with those
assigned to, or held and exercised by, the Executive
immediately preceding a Change in Control Date.
-3-
<PAGE> 4
2.2(b) Following a Change in Control Date and thereafter
throughout the Term of this Agreement (but excluding
any periods of vacation and sick leave to which the
Executive is entitled), the Executive shall devote
reasonable attention and time during normal business
hours to the business and affairs of the Company and
shall use the Executive's reasonable best efforts to
perform faithfully and efficiently such
responsibilities as are assigned to the Executive
under or in accordance with this Agreement;
provided that, it shall not be a violation of this
paragraph for the Executive to (i) serve on
corporate, civic or charitable boards or committees,
(ii) deliver lectures or fulfill speaking
engagements, or (iii) manage personal investments,
so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in
accordance with this Agreement or violate the
Company's conflict of interest policy as in effect
immediately prior to the Effective Date.
2.3 SITUS OF EMPLOYMENT. Following a Change in Control
Date and thereafter throughout the Term of this Agreement, the Executive's
services shall be performed at the location where the Executive was employed
immediately preceding the Change in Control Date.
2.4 COMPENSATION. For any calendar year including and
following a Change in Control Date, the Executive shall receive an Annual
Base Salary equal to the Annual Base Salary being received immediately prior
to a Change in Control Date, which shall be paid in equal or substantially
equal monthly installments. The Annual Base Salary payable to the Executive
shall be reviewed thereafter at least annually but need not be adjusted
upward as a result of such review and shall not be reduced after any increase
thereof.
SECTION 3: TERMINATION OF AGREEMENT.
3.1 DEATH. This Agreement shall terminate automatically
upon the Executive's death during the Term of this Agreement.
3.2 DISABILITY. If, following a Change in Control Date,
the Company determines in good faith that the Disability of the Executive has
occurred during the Term of this Agreement (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 8.1 of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the thirtieth (30th) day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the
thirty (30) days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean that the Executive has been unable to
perform the services required of the Executive hereunder on a full-time basis
for a period of one hundred eighty (180) consecutive business days by reason
of a physical and/or mental condition. "Disability" shall be deemed to exist
when certified by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably). The
Executive will submit to such medical or psychiatric examinations and tests
as such physician deems necessary to make any such Disability determination.
3.3 PRIOR TO CHANGE IN CONTROL. Executive is employed
at will. Any notice of termination by Executive or Company shall be given in
accordance with Section 3.6 of the Agreement.
-4-
<PAGE> 5
3.4 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY
COMPANY FOR CAUSE. Following a Change in Control Date, the Company may
terminate the Executive's employment during the Term of this Agreement for
"Cause," which shall mean termination based upon: (i) the Executive's willful
and continued failure to substantially perform the Executive's duties with
the Company (other than as a result of incapacity due to physical or mental
condition), after a demand for substantial performance is delivered to the
Executive by the Chief Executive Officer of the Company or the Chairman of
the Compensation Committee of the Board, which specifically identifies the
manner in which the Executive has not substantially performed the Executive's
duties, (ii) the Executive's willful commission of misconduct which is
materially injurious to the Company, monetarily or otherwise, or (iii) the
Executive's material breach of any provision of this Agreement. For purposes
of this paragraph, no act, or failure to act on the Executive's part shall be
considered "willful" unless done, or omitted to be done, without good faith
and without reasonable belief that the act or omission was in the best
interest of the Company. Notwithstanding the foregoing, the Executive shall
not be deemed to have been terminated for Cause unless and until (i) the
Executive receives a Notice of Termination (as defined in Section 3.6) from
the Chief Executive Officer of the Company or the Chairman of the
Compensation Committee of the Board, (ii) the Executive is given the
opportunity, with counsel to be heard before the Board, and (iii) the Board
finds, in its good faith opinion, the Executive was guilty of the conduct set
forth in the Notice of Termination.
3.5 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY
EXECUTIVE FOR GOOD REASON. Following a Change in Control Date, the
Executive may terminate the Executive's employment with the Company for "Good
Reason," which shall mean termination based upon:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 2.2(a) or any other action by the
Company which results in a material diminution in such
position, authority, duties or responsibilities, excluding
for this purpose any action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) the failure by the Company to continue in effect
any benefit or compensation plan, stock ownership plan, life
insurance plan, health and accident plan or disability plan
to which the Executive is entitled, the taking of any action
by the Company which would adversely affect the Executive's
participation in, or materially reduce the Executive's
benefits such plans, or deprive the Executive of any
material fringe benefit enjoyed by the Executive or the
failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is
entitled.
(iii) the Company's requiring the Executive to be based
at any office or location other than that described in
Section 2.3;
(iv) a material breach by the Company of any provision
of this Agreement;
(v) any failure by the Company to renew this Agreement
so that the Term ends prior to the second anniversary of the
Change in Control Date or any purported termination by the
Company of the Executive's employment otherwise than as
expressly permitted by this Agreement;
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(vi) within a period ending at the close of business on
the date two (2) years after the Change in Control Date, any
failure by the Company to comply with and satisfy
Section 6.2 on or after the Change in Control Date; or
(vii) within a period ending at the close of business
on the date one (1) year after the Change in Control Date,
the Executive, in the Executive's sole and absolute
discretion, determines and notifies the Company in writing,
that the Executive does not wish to continue employment with
the Company.
For purposes of this Section any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
3.6 NOTICE OF TERMINATION. Any termination by the
Company, or by the Executive, shall be communicated by Notice of Termination
to the other party, given in accordance with Section 8.1. For purposes of
this Agreement, a "Notice of Termination" means a written notice which
(i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more
than fifteen (15) days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or Cause shall
not waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
3.7 DATE OF TERMINATION. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company with or
without Cause, or by the Executive for Good Reason or otherwise, the Date of
Termination shall be the date of receipt of the Notice of Termination or any
later date specified therein, as the case may be, or (ii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
SECTION 4: CERTAIN BENEFITS UPON TERMINATION OF EMPLOYMENT.
4.1 TERMINATION WITHOUT CAUSE PRIOR TO A CHANGE IN
CONTROL. If, prior to a Change in Control, during the Term of this
Agreement the Company shall terminate the Executive's employment without
Cause, then on the tenth (10th) business day following the Date of
Termination, the Company shall pay to the Executive the sum of (1) the
Executive's Annual Base Salary prorated through the Date of Termination to
the extent not previously paid, and (2) any accrued vacation pay to the
extent not previously paid.
4.2 TERMINATION AFTER A CHANGE IN CONTROL. If a Change
in Control occurs during the Term of this Agreement and within two (2) years
after such Change in Control: (i) the Company shall terminate the Executive's
employment without Cause, or (ii) the Executive shall terminate employment
with the Company for Good Reason, then the Executive shall be entitled to the
benefits provided below:
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<PAGE> 7
4.2(a) "Accrued Obligations": On the tenth (10th)
business day following the Date of Termination, the Company
shall pay to the Executive the sum of (1) the Executive's
Annual Base Salary prorated through the Date of Termination
to the extent not previously paid, and (2) any accrued
vacation pay to the extent not previously paid.
4.2(b) "Severance Amount": On the tenth (10th) business
day following the Date of Termination, the Company shall pay
to the Executive as severance pay a lump sum cash payment in
an amount equal to 2 (two) times the sum of the Executive's
Annual Base Salary in effect on the Date of Termination and
the Executive's Incentive Bonus.
4.2(c) "Stock Options": To the extent not otherwise
provided for under the terms of any of the Company's stock
option agreements, all such stock options shall become fully
exercisable as of the Date of Termination and, except for
"incentive stock options" within the meaning of Code Section
422 granted prior to the date hereof, shall remain fully
exercisable in accordance with their terms.
4.2(d) "Other Benefits": To the extent not previously
paid or provided, the Company shall timely pay or provide to
the Executive and/or the Executive's family any other
amounts or benefits required to be paid or provided for
which the Executive and/or the Executive's family is
eligible to receive pursuant to this Agreement and under any
plan, program, policy or practice or contract or agreement
of the Company as those provided generally to other peer
executives and their families during the ninety (90) day
period immediately preceding the Effective Date or, if more
favorable to the Executive, as those provided generally
after the Effective Date to other peer executives of the
Company and their families.
4.2(e) "Excess Parachute Payment": Anything in this
Agreement to the contrary notwithstanding, in the event that
an independent accountant shall determine that any payment
or distribution by the Company to or for the benefit of
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be nondeductible by the
Company for Federal income tax purposes because of Code
Section 280G or would constitute an "excess parachute
payment" (as defined in Code Section 280G), then the
aggregate present value of amounts payable or distributable
to or for the benefit of Executive pursuant to this
Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement
Payments") shall be reduced (but not below zero) to the
Reduced Amount. For purposes of this paragraph, the
"Reduced Amount" shall be an amount expressed in present
value which maximizes the aggregate present value of
Agreement Payments without causing any Payment to be
nondeductible by the Company because of Code Section 280G or
without causing any portion of the Payment to be subject to
the excise tax imposed by Code Section 4999.
If the independent accountant determines that any Payment would
be nondeductible by the Company because of Code Section 280G
or that any portion of the Payment will be subject to the
excise tax imposed by Code Section 4999, the Company shall
promptly give Executive notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount.
The Executive may then elect, in the Executive's sole
discretion, which and how much of the Agreement Payments
shall be eliminated or reduced (as long as after
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such election the aggregate present value of the Agreement
Payments equals the Reduced Amount), and shall advise the
Company in writing of the Executive's election within ten
(10) days of the Executive's receipt of such notice. If no
such election is made by Executive within such ten-day
period, the Company may elect which and how much of the
Agreement Payments shall be eliminated or reduced (as long
as after such election the aggregate present value of the
Agreement Payments equals the Reduced Amount) and shall
notify the Executive promptly of such election. For
purposes of this paragraph, present value shall be
determined in accordance with Code Section 280G(d)(4). All
determinations made by the independent accountant under this
paragraph shall be binding upon the Company and the
Executive and shall be made within sixty (60) days of a
termination of employment of the Executive. As promptly as
practicable following such determination and the elections
hereunder, the Company shall pay to or distribute to or for
the benefit of the Executive such amounts as are then due to
the Executive under this Agreement and shall promptly pay to
or distribute for the benefit of the Executive in the future
such amounts as become due to the Executive under this
Agreement.
As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial
determination by the independent accountant hereunder, it is
possible that Agreements Payments will be made by the
Company which should not have been made ("Overpayment") or
that additional Agreement Payments which have not been made
by the Company should have been made ("Underpayment"), in
each case, consistent with the calculation of the Reduced
Amount hereunder. In the event that the independent
accountant, based upon the assertion of a deficiency by the
Internal Revenue Service against the Company or the
Executive which the independent accountant believes has a
high probability of success, determines that an Overpayment
has been made, any such Overpayment shall be treated for all
purposes as a loan to the Executive which the Executive
shall repay to the Company together with interest at the
applicable Federal rate provided for in Code
Section 7872(f)(2); provided, however, that no amount shall
be payable by the Executive to the Company if and to the
extent such payment would not reduce the amount which is
subject to taxation under Code Section 4999 or if the period
of limitations for assessment of tax under Code Section 4999
against the Executive shall have expired. If the Executive
is required to repay an amount under this Section, the
Executive shall repay such amount over a period of time not
to exceed one (1) year for each twenty-five thousand dollars
($25,000) which the Executive must repay to the Company. In
the event that the independent accountant, based upon
controlling precedent, determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive together
with interest at the applicable Federal rate provided for in
Code Section 7872(f)(2)(A).
4.3 DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Term of this Agreement (either
prior or subsequent to a Change in Control), this Agreement shall terminate
without further obligations to the Executive's legal representatives under
this Agreement, other than for payment of Accrued Obligations (as defined in
Section 4.1) (which shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within ten (10) days of the Date of
Termination).
4.4 DISABILITY. If the Executive's employment is
terminated by reason of the Executive's Disability during the Term of this
Agreement (either prior or subsequent to a Change in Control), this
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Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations (as defined in Section 4.1) (which shall
be paid to the Executive in a lump sum in cash within ten (10) days of the Date
of Termination).
4.5 TERMINATION FOR CAUSE; EXECUTIVE'S TERMINATION
OTHER THAN FOR GOOD REASON AFTER A CHANGE IN CONTROL. If the
Executive's employment shall be terminated for Cause during the Term of this
Agreement (either prior to or subsequent to a Change in Control), this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive Accrued Obligations (as defined
in Section 4.1). If the Executive terminates employment with the Company
during the Term of this Agreement, (other than for Good Reason after a Change
in Control) this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations (as defined in Section 4.1).
In such case, all Accrued Obligations shall be paid to the Executive in a
lump sum cash payment within thirty (30) days of the Date of Termination. If
the Executive's employment shall terminate for the reasons stated in this
Section, the provisions of Section 5 shall continue to apply.
4.6 NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the
Company and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company. Amounts which are vested benefits of
which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of, or any contract or agreement with, the Company at or
subsequent to the Date of Termination, shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
4.7 FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether or
not the Executive obtains other employment. The Company agrees, only on and
after a Change in Control Date to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonable incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive regarding the amount of any payment pursuant to this Agreement),
plus in each case interest on any delayed payment at the applicable Federal
rate provided for in Code Section 7872(f)(2)(A).
4.8 RESOLUTION OF DISPUTES. If there shall be any
dispute between the Company and the Executive (i) in the event of any
termination of the Executive's employment by the Company, whether such
termination was for Cause, or (ii) in the event of any termination of
employment by the Executive, whether Good Reason existed, then, unless and
until there is a final, nonappealable judgment by a court of competent
jurisdiction declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good Reason was not made
in good faith, the Company shall, only on and after a Change in Control Date
pay all amounts, and provide all benefits, to the Executive and/or the
Executive's family or other beneficiaries, as the case may be, that the
Company would be required to pay or provide pursuant to Section 4.2 as though
such termination were by the Company without Cause or
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by the Executive with Good Reason; provided, however, that the Company shall not
be required to pay any disputed amounts pursuant to this paragraph except upon
receipt of an undertaking by or on behalf of the Executive to repay all such
amounts to which the Executive is ultimately adjudged by such court not to be
entitled.
SECTION 5: CONFIDENTIAL INFORMATION.
CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company
and which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, or as may otherwise be required by law or legal process, communicate
or divulge any such information, knowledge or data to anyone other than the
Company and those designated by it. In no event shall an asserted violation
of the provisions of this Section constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.
SECTION 6: SUCCESSORS.
6.1 SUCCESSORS OF EXECUTIVE. This Agreement is personal
to the Executive and, without the prior written consent of the Company,
amounts receivable hereunder shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
6.2 SUCCESSORS OF COMPANY. The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Company to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the Company to
obtain such agreement upon the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle the Executive to terminate the
Agreement at the Executive's option on or after the Change in Control Date
for Good Reason. As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
SECTION 7: TERMS OF AGREEMENT.
This Agreement will automatically renew for annual one-year
periods beginning on January 1 of each year and ending on the following December
31; provided that, the last annual period shall be the twelve (12) month period
beginning on January 1 and ending on the following December 31 during which
written notice is given by December 1, by either party, of such party's
intent not to renew this Agreement. If notice is given by either party after
December 1 of any year, but prior to January 1 of the next succeeding year,
then the last renewal period shall be the twelve (12) month period which
begins
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on the January 1 following the date notice is given and ending the
following December 31. Notwithstanding the foregoing, in the event a Change
in Control shall have occurred, this Agreement shall terminate two (2) years
after a Change in Control Date.
SECTION 8: MISCELLANEOUS.
8.1 NOTICE. For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses as set forth below; provided that all notices to the
Company shall be directed to the attention of the Chairman of the Board of
the Company with a copy to the Secretary of the Company, or to such other
address as one party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only
upon receipt.
Notice to Executive:
-------------------
Robert S. Kahler
7836 Chatwell Drive
St. Louis, MO 63119
Notice to Company:
-----------------
Magna Group, Inc.
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any
amounts payable under this Agreement such Federal, state or local taxes as
shall be required to be withheld pursuant to any applicable law or
regulation.
8.4 WAIVER. The Executive's or the Company's failure to
insist upon strict compliance with any provision hereof or any other
provision of this Agreement or the failure to assert any right the Executive
or the Company may have hereunder, including, without limitation, the right
of the Executive to terminate employment for Good Reason pursuant to Section
3.5 shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of
this Agreement shall supersede all other employment or other agreements with
respect to severance entered into by and between the Executive and the
Company, or the Executive and any other employer, and this Agreement shall
constitute the sole agreement pursuant to which the Company shall have an
obligation to the Executive upon the termination of the Executive's
relationship with the Company or any subsidiary.
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IN WITNESS WHEREOF, the Executive and the Company, pursuant to
the authorization from its Board, have caused this Agreement to be executed
in its name on its behalf, all as of the day and year first above written.
/s/ Robert S. Kahler
-------------------------------------------
Executive
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
-----------------------------------------
Name: G. Thomas Andes
Title: Chairman of the Board, President and
Chief Executive Officer
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<PAGE> 1
MAGNA GROUP, INC.
AGREEMENT
---------
This agreement ("Agreement") has been entered into this 17th day of
October, 1997, by and between Magna Group, Inc., a Delaware corporation
("Company"), and Bradford W. Koeneman, an individual ("Executive").
RECITALS
The Board of Directors of the Company (the "Board"), has determined that
it is in the best interests of the Company and its stockholders to reinforce
and encourage the continued attention and dedication of the Executive to the
Company as a member of the Company's management (including, if applicable,
management of a wholly owned subsidiary) and to assure that the Company will
have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change in Control (as defined below)
of the Company. The Board desires to provide for the continued employment of
the Executive on the terms hereof, and the Executive is willing to commit to
continue to serve the Company. Additionally, the Board believes it is
imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change in Control, to encourage the Executive's full attention and dedication
to the Company currently and in the event of any threatened or pending Change
in Control, and to provide the Executive with compensation and benefits
arrangements upon the breach of this Agreement by the Employer or upon a
termination of employment after a Change in Control which ensure that the
compensation and benefits expectations of the Executive will be satisfied and
which are competitive with those of other corporations. Therefore, in order
to accomplish these objectives, the Board has caused the Company to enter
into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the
following words and phrases, whether or not capitalized,
shall have the meanings specified below, unless the context
plainly requires a different meaning.
1.1(a) "ANNUAL BASE SALARY" means the dollar amount
approved by the Company Director Compensation
Committee or the Company Chief Executive Officer.
1.1(b) "BOARD" means the Board of Directors of the
Company.
1.1(c) "CHANGE IN CONTROL" means a change in
control of the Company of a nature that would
be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act; provided that, for
purposes of this Agreement, a Change in Control
shall be deemed to have occurred if (i) any Person
(other than the Company) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act),
<PAGE> 2
directly or indirectly, of securities of the
Company which represent 20% or more of the
combined voting power of the Company's then
outstanding securities; (ii) during any period
of two (2) consecutive years, individuals who at
the beginning of such period constitute the Board
cease for any reason to constitute at least a
majority thereof, unless the election, or the
nomination for election, by the Company's
stockholders, of each new director is approved
by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors
at the beginning of the period but excluding any
individual whose initial assumption of office
occurs as a result of either an actual or
threatened election contest (as such term is used
in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on
behalf of a person other than the Board;
(iii) there is consummated any consolidation or
merger of the Company in which the Company is not
the continuing or surviving corporation or
pursuant to which shares of the Company's
Common Stock is converted into cash, securities,
or other property, other than a merger of the
Company in which the holders of the Company's
Common Stock immediately prior to the merger have
the same proportionate ownership of common
stock of the surviving corporation immediately
after the merger; (iv) there is consummated any
consolidation or merger of the Company in which
the Company is the continuing or surviving
corporation in which the holders of the
Company's Common Stock immediately prior to the
merger do not own fifty percent (50%) or more of
the stock of the surviving corporation immediately
after the merger; (v) there is consummated any
sale, lease, exchange, or other transfer (in
one transaction or a series of related
transactions) of all, or substantially all, of the
assets of the Company, or (vi) the stockholders
of the Company approve any plan or proposal
for the liquidation or dissolution of the Company.
1.1(d) "CHANGE IN CONTROL DATE" shall mean the
date of the Change in Control. If a Change in
Control occurs and if the Executive's employment
with the Company is terminated prior to the date
on which the Change in Control occurs, and if it
is reasonably demonstrated by the Executive
that such termination of employment (i) was at the
request of a third party who has taken steps
reasonably calculated to effect a Change in
Control or (ii) otherwise arose in connection with
or anticipation of a Change in Control, then
for all purposes of this Agreement, the "Change in
Control Date" shall mean the date immediately
prior to the date of such termination of
employment, and a Change in Control shall
be deemed to have occurred on the Change in
Control Date.
1.1(e) "CODE" shall mean the Internal Revenue Code of
1986, as amended.
1.1(f) "COMPANY" means Magna Group, Inc., a Delaware
corporation.
1.1(g) "EFFECTIVE DATE" shall mean October 17,
1997.
1.1(h) "EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended.
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1.1(i) "INCENTIVE BONUS" shall mean the incentive
bonus provided through any incentive compensation
plan, which is generally available to other peer
executives of the Company, awarded to the
Executive for the year preceding termination. To
the extent such incentive bonus is paid in shares
of restricted stock, Incentive Bonus shall include
the value of such shares on their award date
without any discount; provided, however, such
restricted shares shall include only those awarded
in lieu of compensation payable as determined by
the Compensation Committee of the Board.
1.1(j) "PERSON" means any "person" within the meaning of
Sections 13(d) and 14(d) of the Exchange Act.
1.1(k) "TERM" means the period that begins on the
Effective Date and ends on the earlier of:
(i) the Date of Termination as defined in Section
3.7, or (ii) the close of business on December 31
of any calendar year during which notice is given,
by December 1 of such year, by either party
(as provided in Section 7) of such party's intent
not to renew this Agreement.
1.2 GENDER AND NUMBER. When appropriate, pronouns in this
Agreement used in the masculine gender include the feminine gender, words in
the singular include the plural, and words in the plural include the
singular.
1.3 HEADINGS. All headings in this Agreement are included
solely for ease of reference and do not bear on the interpretation of the
text. Accordingly, as used in this Agreement, the terms "Article" and
"Section" mean the text that accompanies the specified Article or Section of
the Agreement.
1.4 APPLICABLE LAW. This Agreement shall be governed by
and construed in accordance with the laws of the state of Missouri, without
reference to its conflict of law principles.
SECTION 2: TERMS AND CONDITIONS OF EMPLOYMENT.
2.1 EMPLOYMENT. If the Executive is in the employ of the
Company (or in the employ of a wholly owned subsidiary) on a Change in
Control Date, then the Executive shall thereafter remain in the employ of the
Company (or in the employ of a wholly owned subsidiary) in accordance with
the terms and provisions of this Agreement.
2.2 POSITIONS AND DUTIES.
2.2(a) Following a Change in Control Date, the
Executive shall continue to serve in the Executive's then
current capacity, subject to the reasonable directions of
the Board.
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The Executive shall thereafter devote the Executive's full
working time and attention to such business and affairs of the
Company and/or any subsidiary of the Company as directed by the
Board, as may be compatible with the Executive's titles and
positions. In addition, the Executive's position (including
status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all
material respects with those assigned to, or held and
exercised by, the Executive immediately preceding a Change
in Control Date.
2.2(b) Following a Change in Control Date and
thereafter throughout the Term of this Agreement (but
excluding any periods of vacation and sick leave to which
the Executive is entitled), the Executive shall devote
reasonable attention and time during normal business hours
to the business and affairs of the Company and shall use the
Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities as are assigned to the
Executive under or in accordance with this Agreement;
provided that, it shall not be a violation of this paragraph
for the Executive to (i) serve on corporate, civic or
charitable boards or committees, (ii) deliver lectures or
fulfill speaking engagements, or (iii) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance
with this Agreement or violate the Company's conflict of
interest policy as in effect immediately prior to the
Effective Date.
2.3 SITUS OF EMPLOYMENT. Following a Change in Control
Date and thereafter throughout the Term of this Agreement, the Executive's
services shall be performed at the location where the Executive was employed
immediately preceding the Change in Control Date.
2.4 COMPENSATION. For any calendar year including and
following a Change in Control Date, the Executive shall receive an Annual
Base Salary equal to the Annual Base Salary being received immediately prior
to a Change in Control Date, which shall be paid in equal or substantially
equal monthly installments. The Annual Base Salary payable to the Executive
shall be reviewed thereafter at least annually but need not be adjusted
upward as a result of such review and shall not be reduced after any increase
thereof.
SECTION 3: TERMINATION OF AGREEMENT.
3.1 DEATH. This Agreement shall terminate automatically
upon the Executive's death during the Term of this Agreement.
3.2 DISABILITY. If, following a Change in Control Date,
the Company determines in good faith that the Disability of the Executive has
occurred during the Term of this Agreement (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 8.1 of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the thirtieth (30th) day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the
thirty (30) days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean that the Executive has been unable to
perform the services required of the Executive hereunder on a full-time basis
for a period of one hundred eighty (180) consecutive business days by reason
of a physical and/or mental condition. "Disability" shall be
-4-
<PAGE> 5
deemed to exist when certified by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal representative
(such agreement as to acceptability not to be withheld unreasonably). The
Executive will submit to such medical or psychiatric examinations and tests
as such physician deems necessary to make any such Disability determination.
3.3 PRIOR TO CHANGE IN CONTROL. Executive is employed
at will. Any notice of termination by Executive or Company shall be given in
accordance with Section 3.6 of the Agreement.
3.4 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY
COMPANY FOR CAUSE. Following a Change in Control Date, the Company may
terminate the Executive's employment during the Term of this Agreement for
"Cause," which shall mean termination based upon: (i) the Executive's willful
and continued failure to substantially perform the Executive's duties with
the Company (other than as a result of incapacity due to physical or mental
condition), after a demand for substantial performance is delivered to the
Executive by the Chief Executive Officer of the Company or the Chairman of
the Compensation Committee of the Board, which specifically identifies the
manner in which the Executive has not substantially performed the Executive's
duties, (ii) the Executive's willful commission of misconduct which is
materially injurious to the Company, monetarily or otherwise, or (iii) the
Executive's material breach of any provision of this Agreement. For purposes
of this paragraph, no act, or failure to act on the Executive's part shall be
considered "willful" unless done, or omitted to be done, without good faith
and without reasonable belief that the act or omission was in the best
interest of the Company. Notwithstanding the foregoing, the Executive shall
not be deemed to have been terminated for Cause unless and until (i) the
Executive receives a Notice of Termination (as defined in Section 3.6) from
the Chief Executive Officer of the Company or the Chairman of the
Compensation Committee of the Board, (ii) the Executive is given the
opportunity, with counsel to be heard before the Board, and (iii) the Board
finds, in its good faith opinion, the Executive was guilty of the conduct set
forth in the Notice of Termination.
3.5 FOLLOWING A CHANGE IN CONTROL - TERMINATION BY
EXECUTIVE FOR GOOD REASON. Following a Change in Control Date, the
Executive may terminate the Executive's employment with the Company for "Good
Reason," which shall mean termination based upon:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 2.2(a) or any other action by the
Company which results in a material diminution in such
position, authority, duties or responsibilities, excluding
for this purpose any action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) the failure by the Company to continue in effect any
benefit or compensation plan, stock ownership plan, life
insurance plan, health and accident plan or disability plan
to which the Executive is entitled, the taking of any action
by the Company which would adversely affect the Executive's
participation in, or materially reduce the Executive's
benefits such plans, or deprive the Executive of any
material fringe benefit enjoyed by the Executive or the
failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is
entitled.
(iii) the Company's requiring the Executive to be based
at any office or location other than that described in
Section 2.3;
-5-
<PAGE> 6
(iv) a material breach by the Company of any provision
of this Agreement;
(v) any failure by the Company to renew this Agreement so
that the Term ends prior to the second anniversary of the
Change in Control Date or any purported termination by the
Company of the Executive's employment otherwise than as
expressly permitted by this Agreement;
(vi) within a period ending at the close of business on
the date two (2) years after the Change in Control Date, any
failure by the Company to comply with and satisfy Section
6.2 on or after the Change in Control Date; or
(vii) within a period ending at the close of business on
the date one (1) year after the Change in Control Date, the
Executive, in the Executive's sole and absolute discretion,
determines and notifies the Company in writing, that the
Executive does not wish to continue employment with the
Company.
For purposes of this Section any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
3.6 NOTICE OF TERMINATION. Any termination by the
Company, or by the Executive, shall be communicated by Notice of Termination
to the other party, given in accordance with Section 8.1. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than
fifteen (15) days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or Cause shall
not waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
3.7 DATE OF TERMINATION. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company with or without
Cause, or by the Executive for Good Reason or otherwise, the Date of
Termination shall be the date of receipt of the Notice of Termination or any
later date specified therein, as the case may be, or (ii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
SECTION 4: CERTAIN BENEFITS UPON TERMINATION OF EMPLOYMENT.
4.1 TERMINATION WITHOUT CAUSE PRIOR TO A CHANGE IN
CONTROL. If, prior to a Change in Control, during the Term of this
Agreement the Company shall terminate the Executive's employment without
Cause, then on the tenth (10th) business day following the Date of
Termination, the Company shall pay to the Executive the sum of (1) the
Executive's Annual Base Salary prorated through the Date of Termination to
the extent not previously paid, and (2) any accrued vacation pay to the
extent not previously paid.
-6-
<PAGE> 7
4.2 TERMINATION AFTER A CHANGE IN CONTROL. If a Change
in Control occurs during the Term of this Agreement and within two (2) years
after such Change in Control: (i) the Company shall terminate the Executive's
employment without Cause, or (ii) the Executive shall terminate employment
with the Company for Good Reason, then the Executive shall be entitled to the
benefits provided below:
4.2(a) "Accrued Obligations": On the tenth (10th)
business day following the Date of Termination, the Company
shall pay to the Executive the sum of (1) the Executive's
Annual Base Salary prorated through the Date of Termination
to the extent not previously paid, and (2) any accrued
vacation pay to the extent not previously paid.
4.2(b) "Severance Amount": On the tenth (10th)
business day following the Date of Termination, the Company
shall pay to the Executive as severance pay a lump sum cash
payment in an amount equal to 2 (two) times the sum of the
Executive's Annual Base Salary in effect on the Date of
Termination and the Executive's Incentive Bonus.
4.2(c) "Stock Options": To the extent not otherwise
provided for under the terms of any of the Company's stock
option agreements, all such stock options shall become fully
exercisable as of the Date of Termination and, except for
"incentive stock options" within the meaning of Code Section
422 granted prior to the date hereof, shall remain fully
exercisable in accordance with their terms.
4.2(d) "Other Benefits": To the extent not previously
paid or provided, the Company shall timely pay or provide to
the Executive and/or the Executive's family any other
amounts or benefits required to be paid or provided for
which the Executive and/or the Executive's family is
eligible to receive pursuant to this Agreement and under any
plan, program, policy or practice or contract or agreement
of the Company as those provided generally to other peer
executives and their families during the ninety (90) day
period immediately preceding the Effective Date or, if more
favorable to the Executive, as those provided generally
after the Effective Date to other peer executives of the
Company and their families.
4.2(e) "Excess Parachute Payment": Anything
in this Agreement to the contrary notwithstanding, in the
event that an independent accountant shall determine that any
payment or distribution by the Company to or for the benefit
of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be nondeductible by the Company
for Federal income tax purposes because of Code Section 280G
or would constitute an "excess parachute payment" (as defined
in Code Section 280G), then the aggregate present value of
amounts payable or distributable to or for the benefit of
Executive pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are hereinafter
referred to as "Agreement Payments") shall be reduced (but not
below zero) to the Reduced Amount. For purposes of this
paragraph, the "Reduced Amount" shall be an amount expressed
in present value which maximizes the aggregate present value
of Agreement Payments without causing any Payment to be
nondeductible by the Company because of Code Section 280G or
without causing any portion of the Payment to be subject to
the excise tax imposed by Code Section 4999.
-7-
<PAGE> 8
If the independent accountant determines that any Payment
would be nondeductible by the Company because of Code Section
280G or that any portion of the Payment will be subject to the
excise tax imposed by Code Section 4999, the Company shall
promptly give Executive notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount.
The Executive may then elect, in the Executive's sole
discretion, which and how much of the Agreement Payments shall
be eliminated or reduced (as long as after such election the
aggregate present value of the Agreement Payments equals the
Reduced Amount), and shall advise the Company in writing of
the Executive's election within ten (10) days of the
Executive's receipt of such notice. If no such election is
made by Executive within such ten-day period, the Company may
elect which and how much of the Agreement Payments shall be
eliminated or reduced (as long as after such election the
aggregate present value of the Agreement Payments equals the
Reduced Amount) and shall notify the Executive promptly of
such election. For purposes of this paragraph, present value
shall be determined in accordance with Code Section
280G(d)(4). All determinations made by the independent
accountant under this paragraph shall be binding upon the
Company and the Executive and shall be made within sixty (60)
days of a termination of employment of the Executive. As
promptly as practicable following such determination and the
elections hereunder, the Company shall pay to or distribute to
or for the benefit of the Executive such amounts as are then
due to the Executive under this Agreement and shall promptly
pay to or distribute for the benefit of the Executive in the
future such amounts as become due to the Executive under this
Agreement.
As a result of the uncertainty in the application of Code
Sections 280G and 4999 at the time of the initial
determination by the independent accountant hereunder, it is
possible that Agreements Payments will be made by the Company
which should not have been made ("Overpayment") or that
additional Agreement Payments which have not been made by the
Company should have been made ("Underpayment"), in each case,
consistent with the calculation of the Reduced Amount
hereunder. In the event that the independent accountant,
based upon the assertion of a deficiency by the Internal
Revenue Service against the Company or the Executive which the
independent accountant believes has a high probability of
success, determines that an Overpayment has been made, any
such Overpayment shall be treated for all purposes as a loan
to the Executive which the Executive shall repay to the
Company together with interest at the applicable Federal rate
provided for in Code Section 7872(f)(2); provided, however,
that no amount shall be payable by the Executive to the
Company if and to the extent such payment would not reduce the
amount which is subject to taxation under Code Section 4999 or
if the period of limitations for assessment of tax under Code
Section 4999 against the Executive shall have expired. If the
Executive is required to repay an amount under this Section,
the Executive shall repay such amount over a period of time
not to exceed one (1) year for each twenty-five thousand
dollars ($25,000) which the Executive must repay to the
Company. In the event that the independent accountant, based
upon controlling precedent, determines that an Underpayment
has occurred, any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive together
with interest at the applicable Federal rate provided for in
Code Section 7872(f)(2)(A).
4.3 DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Term of this Agreement (either
prior or subsequent to a Change in Control), this Agreement shall terminate
without further obligations to the Executive's legal representatives under
this Agreement,
-8-
<PAGE> 9
other than for payment of Accrued Obligations (as defined in Section 4.1) (which
shall be paid to the Executive's estate or beneficiary, as applicable, in a lump
sum in cash within ten (10) days of the Date of Termination).
4.4 DISABILITY. If the Executive's employment is terminated
by reason of the Executive's Disability during the Term of this Agreement
(either prior or subsequent to a Change in Control), this Agreement shall
terminate without further obligations to the Executive, other than for
payment of Accrued Obligations (as defined in Section 4.1) (which shall be
paid to the Executive in a lump sum in cash within ten (10) days of the Date
of Termination).
4.5 TERMINATION FOR CAUSE; EXECUTIVE'S TERMINATION
OTHER THAN FOR GOOD REASON AFTER A CHANGE IN CONTROL. If the
Executive's employment shall be terminated for Cause during the Term of this
Agreement (either prior to or subsequent to a Change in Control), this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive Accrued Obligations (as defined
in Section 4.1). If the Executive terminates employment with the Company
during the Term of this Agreement, (other than for Good Reason after a Change
in Control) this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations (as defined in Section 4.1).
In such case, all Accrued Obligations shall be paid to the Executive in a
lump sum cash payment within thirty (30) days of the Date of Termination. If
the Executive's employment shall terminate for the reasons stated in this
Section, the provisions of Section 5 shall continue to apply.
4.6 NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the
Company and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company. Amounts which are vested benefits of
which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of, or any contract or agreement with, the Company at or
subsequent to the Date of Termination, shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
4.7 FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether or
not the Executive obtains other employment. The Company agrees, only on and
after a Change in Control Date to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonable incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive regarding the amount of any payment pursuant to this Agreement),
plus in each case interest on any delayed payment at the applicable Federal
rate provided for in Code Section 7872(f)(2)(A).
4.8 RESOLUTION OF DISPUTES. If there shall be any
dispute between the Company and the Executive (i) in the event of any
termination of the Executive's employment by the Company, whether such
termination was for Cause, or (ii) in the event of any termination of
employment by the Executive,
-9-
<PAGE> 10
whether Good Reason existed, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by the Executive of the
existence of Good Reason was not made in good faith, the Company shall, only on
and after a Change in Control Date pay all amounts, and provide all benefits, to
the Executive and/or the Executive's family or other beneficiaries, as the case
may be, that the Company would be required to pay or provide pursuant to Section
4.2 as though such termination were by the Company without Cause or by the
Executive with Good Reason; provided, however, that the Company shall not be
required to pay any disputed amounts pursuant to this paragraph except upon
receipt of an undertaking by or on behalf of the Executive to repay all such
amounts to which the Executive is ultimately adjudged by such court not to be
entitled.
SECTION 5: CONFIDENTIAL INFORMATION.
CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company
and which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, or as may otherwise be required by law or legal process, communicate
or divulge any such information, knowledge or data to anyone other than the
Company and those designated by it. In no event shall an asserted violation
of the provisions of this Section constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.
SECTION 6: SUCCESSORS.
6.1 SUCCESSORS OF EXECUTIVE. This Agreement is personal
to the Executive and, without the prior written consent of the Company,
amounts receivable hereunder shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
6.2 SUCCESSORS OF COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform
it if no such succession had taken place. Failure of the Company to obtain
such agreement upon the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive to terminate the
Agreement at the Executive's option on or after the Change in Control Date
for Good Reason. As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
-10-
<PAGE> 11
SECTION 7: TERMS OF AGREEMENT.
This Agreement will automatically renew for annual one-year
periods beginning on January 1 of each year and ending on the following
December 31; provided that, the last annual period shall be the twelve (12)
month period beginning on January 1 and ending on the following December 31
during which written notice is given by December 1, by either party, of such
party's intent not to renew this Agreement. If notice is given by either
party after December 1 of any year, but prior to January 1 of the next
succeeding year, then the last renewal period shall be the twelve (12) month
period which begins on the January 1 following the date notice is given and
ending the following December 31. Notwithstanding the foregoing, in the
event a Change in Control shall have occurred, this Agreement shall terminate
two (2) years after a Change in Control Date.
SECTION 8: MISCELLANEOUS.
8.1 NOTICE. For purposes of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses as set forth below; provided that all
notices to the Company shall be directed to the attention of the Chairman of
the Board of the Company with a copy to the Secretary of the Company, or to
such other address as one party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
Notice to Executive:
-------------------
Bradford W. Koeneman
5866 Brierhaven Avenue
Memphis, TN 38120
Notice to Company:
-----------------
Magna Group, Inc.
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
8.4 WAIVER. The Executive's or the Company's failure to
insist upon strict compliance with any provision hereof or any other
provision of this Agreement or the failure to assert any right the Executive
or the Company may have hereunder, including, without limitation, the right
of the Executive to terminate employment for Good Reason pursuant to Section
3.5 shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
-11-
<PAGE> 12
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of
this Agreement shall supersede all other employment or other agreements with
respect to severance entered into by and between the Executive and the
Company, or the Executive and any other employer, and this Agreement shall
constitute the sole agreement pursuant to which the Company shall have an
obligation to the Executive upon the termination of the Executive's
relationship with the Company or any subsidiary.
IN WITNESS WHEREOF, the Executive and the Company, pursuant to
the authorization from its Board, have caused this Agreement to be executed
in its name on its behalf, all as of the day and year first above written.
/s/ Bradford W. Koeneman
-------------------------------------------
Executive
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
-----------------------------------------
Name: G. Thomas Andes
Title: Chairman of the Board,President and
Chief Executive Officer
-12-
<PAGE> 1
<TABLE>
MAGNA GROUP, INC. EXHIBIT 11.1
COMPUTATION OF NET INCOME PER COMON SHARE ------------
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
------- ------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Primary:
- --------
Average common shares outstanding 32,953 28,101 31,975 28,287
Net effect of stock options 388 132 337 122
------- ------- ------- -------
Total 33,341 28,233 32,312 28,409
======= ======= ======= =======
Net income $21,243 $16,026 $50,500 $46,228
Less preferred stock dividends:
Class B voting preferred (1) -- (2) (2)
------- ------- ------- -------
Primary net income $21,242 $16,026 $50,498 $46,226
======= ======= ======= =======
Per common share:
Net income $ 0.64 $ 0.57 $ 1.56 $ 1.63
======= ======= ======= =======
Fully Diluted:
- --------------
Average common shares outstanding 32,953 28,101 31,975 28,287
Net effect of stock options 447 214 455 218
Assumed conversion of:
7% convertible subordinated capital notes 621 784 646 801
8-3/4% convertible subordinated debentures 631 693 -- 693
------- ------- ------- -------
Average common shares and common share equivalents 34,652 29,792 33,076 29,999
======= ======= ======= =======
Primary net income $21,242 $16,026 $50,498 $46,226
Elimination of interest net of related tax effects on:
7% convertible subordinated capital notes 130 168 398 505
8-3/4% convertible subordinated debentures 342 361 -- 1,074
------- ------- ------- -------
Fully diluted net income $21,714 $16,555 $50,896 $47,805
======= ======= ======= =======
Per common share:
Net income $ 0.63 $ 0.56 $ 1.54<FA> $ 1.59
======= ======= ======= =======
<FN>
<FA> For the nine months ended September 30, 1997, inclusion of common stock equivalents for the 8-3/4% convertible
subordinated debentures in the computation of fully diluted net income per share results in antidilution, and therefore,
these are excluded from the computation.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the Magna
Group Inc. quarterly report on Form 10Q for the quarterly period ended September
30, 1997, and is qualified in its entirety by reference to such report.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<CASH> 225,775
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 21,619
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,800,730
<INVESTMENTS-CARRYING> 143,715
<INVESTMENTS-MARKET> 146,316
<LOANS> 4,542,381
<ALLOWANCE> 56,207
<TOTAL-ASSETS> 7,044,480
<DEPOSITS> 5,365,771
<SHORT-TERM> 918,748
<LIABILITIES-OTHER> 76,839
<LONG-TERM> 57,047
0
40
<COMMON> 67,277
<OTHER-SE> 558,758
<TOTAL-LIABILITIES-AND-EQUITY> 7,044,480
<INTEREST-LOAN> 272,434
<INTEREST-INVEST> 84,325
<INTEREST-OTHER> 3,107
<INTEREST-TOTAL> 359,866
<INTEREST-DEPOSIT> 149,181
<INTEREST-EXPENSE> 183,355
<INTEREST-INCOME-NET> 176,511
<LOAN-LOSSES> 22,906
<SECURITIES-GAINS> 1,974
<EXPENSE-OTHER> 128,314
<INCOME-PRETAX> 75,690
<INCOME-PRE-EXTRAORDINARY> 75,690
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,500
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.54
<YIELD-ACTUAL> 3.98
<LOANS-NON> 29,239
<LOANS-PAST> 14,605
<LOANS-TROUBLED> 236
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 45,382<F2>
<CHARGE-OFFS> 28,257
<RECOVERIES> 3,030
<ALLOWANCE-CLOSE> 56,207
<ALLOWANCE-DOMESTIC> 56,207
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Information not currently available; is reported on an annual basis only.
<F2>Information does not include the March 1, 1997 balance of $13,146 in the
allowance for loan losses attributable to Homeland Bankshares Corporation
which was acquired by Magna Group, Inc. on that date in a transaction
accounted for under the purchase method.
</TABLE>
