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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
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COMMISSION FILE NUMBER 001-12405
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MAGNA GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 37-0996453
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ONE MAGNA PLACE
1401 SOUTH BRENTWOOD BOULEVARD
ST. LOUIS, MISSOURI 63144-1401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (314) 963-2500
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SECURITIES REGISTERED PURSUANT NAME OF EACH EXCHANGE ON WHICH REGISTERED:
TO SECTION 12(b) OF THE ACT:
COMMON STOCK, $2.00 PAR VALUE NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
7% CONVERTIBLE SUBORDINATED CAPITAL NOTES DUE 1999
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 12, 1997:
Common Stock, $2.00 par value: $1,091,953,431.
There is no established public trading market for the Registrant's Class B
Voting Preferred Stock, which entitles the holder to one vote per share and of
which non-affiliates hold all 1,996 outstanding shares.
The number of shares outstanding of Registrant's Common Stock, as of March
12, 1997, was:
Common Stock, $2.00 par value: 33,313,667 shares outstanding.
--------------------------
DOCUMENTS INCORPORATED BY REFERENCE
As provided herein, portions of the documents below are incorporated herein
by reference:
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DOCUMENT PART-FORM 10-K
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<S> <C>
Annual Report to Stockholders for the Year Ended December 31, 1996.................................. Parts I, II and IV
Proxy Statement for the 1997 Annual Meeting of Stockholders......................................... Part III
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MAGNA GROUP, INC.
PART I
ITEM 1. BUSINESS
GENERAL
Magna Group, Inc. ("Magna" or "Registrant") is a bank holding company
whose business consists primarily of the ownership, supervision and control of
banking institutions located in the states of Missouri, Illinois and Iowa. Magna
also owns certain other non-banking subsidiaries including, a trust company, a
student loan company and brokerage and insurance subsidiaries.
Magna was incorporated under the laws of the State of Delaware in 1974.
Since 1974, Magna has grown from three locations and assets of approximately
$127 million to more than 130 locations and assets of approximately $6.7 billion
at March 1, 1997. This expansion was a result of both internal growth and an
active acquisition program.
Magna is a legal entity separate and distinct from its subsidiaries. Magna
provides its subsidiaries with advice, counsel and specialized services in
various fields of banking policy and operations. Such services include general
administration, asset/liability management, accounting and financial reporting,
internal auditing, lending policies and procedures, purchasing, advertising and
public relations, product development, legal services, data processing and bank
operations, and personnel recruitment and training. Magna and its affiliates had
2,159 full-time employees at December 31, 1996.
AFFILIATE BANKS AND MARKET AREAS
As of March 27, 1997, Magna holds, directly or through affiliates, all of
the voting capital stock of two national banks, three Iowa state banks and a
federal savings bank, which operate from more than 130 locations in Missouri,
Illinois and Iowa (collectively, the "Affiliate Banks").
On March 1, 1997, Magna acquired Homeland Bankshares Corporation, Waterloo,
Iowa ("Homeland"), thereby increasing the scope of its banking franchise to
include the state of Iowa. Total assets of Homeland at the date of acquisition
were approximately $1.2 billion. It is anticipated that the one national bank,
three Iowa state banks and one federal savings bank, acquired by Magna with its
acquisition of Homeland, will eventually be merged with and into Magna's largest
subsidiary bank, Magna Bank, National Association, St. Louis, Missouri.
Additional information regarding this acquisition, included on page 18 of
Magna's 1996 Annual Report to Stockholders under the caption "Financial
Overview," is incorporated herein by reference.
Additional information regarding Magna's banking regions by market area is
included on the inside front cover of Magna's 1996 Annual Report to Stockholders
under the caption "Our Community Banking Franchise" and at page 14 of such
Annual Report under the caption "Magna's Community Presidents" and is
incorporated herein by reference.
PRODUCTS AND SERVICES
The Affiliate Banks operate as community banks and concentrate on
relationship-oriented financial service activities, including business, consumer
and real estate loans; credit cards; and checking, savings and time deposits.
The Affiliate Banks' deposit base consists primarily of core deposits from
within the communities which they serve, and lending activity is targeted to
consumers and small-to-midsized businesses in the banks' immediate geographic
areas. Customers of Magna's Affiliate Banks can conveniently access a broad
range of investment and insurance services through the subsidiaries of MGI
Group, Inc., a subsidiary of Magna Bank, National Association.
The Affiliate Banks serve as correspondent banks for approximately 320
banks, primarily in Illinois, Iowa and Missouri. Correspondent banking services
include the processing of checks and collection items, overline loan assistance,
investment safekeeping, assistance with operations and electronic funds
transfer.
Banking is highly competitive in the market areas which Magna serves. The
Affiliate Banks compete to varying degrees with numerous locally-owned
commercial banks, major regional and money center banks and non-bank
competitors. Non-bank competitors include savings and loan associations, credit
unions, securities firms,
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ITEM 1. BUSINESS--CONTINUED
money market funds, insurance companies, automobile finance companies, mortgage
lending companies and credit card companies.
Competition continues to intensify as non-bank entities broaden their
marketing and financial services and as multibank holding companies continue to
acquire banks and open new facilities in the market areas served by the
Affiliate Banks. Nationwide interstate banking laws may further increase
competition. See "Supervision and Regulation--Interstate Banking."
NON-BANK AFFILIATES
Magna Trust Company provides various trust services including, but not
limited to, the administration of decedents' estates, trusts under wills, trusts
under agreements, escrow agencies, guardianships, farm management and appraisal,
investment services and related activities. Magna Trust Company provides these
services through 11 trust centers and had custodial assets and assets under
management of approximately $2.0 billion at December 31, 1996.
The subsidiaries of MGI Group, Inc. and InBank Group, Inc. provide non-bank
financial products and services to customers of Magna's affiliates and to
customers of unaffiliated banks, respectively.
Magna Student Loan Company, a subsidiary of Magna's federal savings bank,
originates and services government-sponsored student loans for Magna and other
financial institutions.
SUPERVISION AND REGULATION
GENERAL. As a bank holding company, Magna is subject to regulation under the
Bank Holding Company Act of 1956, as amended (the "BHCA"), by the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). Bank
holding companies are required to file reports with the Federal Reserve Board
and to provide such additional information as the Federal Reserve Board may
require. Magna's national bank affiliates are regulated by the Office of the
Comptroller of the Currency ("OCC"), with its state bank affiliates regulated
by the Iowa Division of Banking and the Federal Deposit Insurance Corporation
("FDIC"), and its savings bank affiliate regulated by the Office of Thrift
Supervision ("OTS").
The BHCA requires every bank holding company to obtain the prior approval of
the Federal Reserve Board before it may (i) acquire substantially all of the
assets of any bank, (ii) acquire more than five percent of the voting stock of a
bank or bank holding company which is not already majority owned, or (iii) merge
or consolidate with another bank holding company.
Under the BHCA, a bank holding company is prohibited, with certain
exceptions, from acquiring direct or indirect ownership or control of more than
five percent of the voting shares of any company which is not a bank and from
engaging in business other than that of banking, managing and controlling banks
or performing services for its banking subsidiaries. However, the BHCA
authorizes the Federal Reserve Board to permit bank holding companies to engage
in activities which are so closely related to banking or managing or controlling
banks as to be a proper incident thereto.
CERTAIN TRANSACTIONS WITH AFFILIATES. There are various legal restrictions
on the extent to which a bank holding company and certain of its non-bank
subsidiaries can borrow or otherwise obtain credit from its bank subsidiaries.
In general, these restrictions require that any such extensions of credit must
be on non-preferential terms and secured by designated amounts of specified
collateral and are limited, as to any one of the holding company or non-bank
subsidiaries, to 10% of the lending bank's capital stock and surplus, and as to
the holding company and all such non-bank subsidiaries in the aggregate, to 20%
of such capital stock and surplus.
Any capital loans by Magna to the Affiliate Banks would be subordinate in
right of payment to deposits and certain other indebtedness of the Affiliate
Banks. The right of Magna, and the right of Magna's creditors and stockholders,
to participate in any distribution of the assets or earnings of the Affiliate
Banks is necessarily subject to the prior claims of creditors of the Affiliate
Banks, except to the extent that claims of Magna in its capacity as creditor may
be recognized.
FIRREA AND FDICIA. The Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), enacted primarily to deal with problems in
the savings and loan industry, also affected commercial
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ITEM 1. BUSINESS--CONTINUED
banking organizations. FIRREA mandates public disclosure by commercial banks of
their Community Reinvestment Act ratings and mortgage lending records,
establishes enhanced enforcement measures which are available for bank
regulators to use against commercial banks and bankers and imposes cross
liability on insured institutions under common control with any insured
institution to which the FDIC gives financial assistance. FIRREA also permits
bank holding companies to acquire savings and loan associations, subject to the
approval of the Federal Reserve Board.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") increased funding for the FDIC's bank insurance fund, and
established standards for, and restrictions on, activities of depository
institutions based upon capital status and supervisory evaluation by Federal
banking regulators. Under FDICIA, depository institutions are placed in one of
five capital categories, for which the Federal banking agencies have established
specific capital ratio levels. Pursuant to the agencies' regulations, an
institution is considered "well capitalized" if it has a total risk-based
capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6%
and a leverage capital ratio of at least 5%. In addition, regardless of a bank's
capital level, a bank is not considered "well capitalized" if it is subject to
a cease and desist order, formal agreement, capital directive or prompt
corrective action directive that requires it to achieve or maintain a higher
level of capital. An institution is considered "adequately capitalized" if it
has a total risk-based capital ratio of at least 8%, a Tier 1 risk-based capital
ratio of at least 4% and a leverage capital ratio of at least 4%. Institutions
with capital levels below those necessary to qualify as "adequately
capitalized" are deemed to be either "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized," depending on their
specific capital levels.
FDICIA, through its prompt corrective action system, imposes significant
operational and management restrictions on depository institutions that are not
considered at least "adequately capitalized." Under FDICIA's prompt corrective
action system, a depository institution in the "undercapitalized" category
must submit a capital restoration plan guaranteed by its parent company. The
liability of the parent company under any such guarantee is limited to the
lesser of 5% of the depository institution's assets at the time it became
"undercapitalized," or the amount needed to comply with the plan. A depository
institution in the "undercapitalized" category also is subject to limitations
in numerous areas including, but not limited to: asset growth; acquisitions;
branching; new business lines; acceptance of brokered deposits; and borrowings
from the Federal Reserve. Progressively more burdensome restrictions are applied
to institutions in the "undercapitalized" category that fail to submit or
implement a capital plan and to institutions that are in the "significantly
undercapitalized" or "critically undercapitalized" categories. A depository
institution's primary Federal banking agency is authorized to downgrade the
institution's capital category to the next lower category upon a determination
that the institution is in an unsafe or unsound condition or is engaged in an
unsafe or unsound practice. An unsafe or unsound practice can include receipt by
the institution of a rating on its most recent examination of three or worse.
The capital category assigned to a depository institution also affects its
deposit insurance assessment rate. See "FDIC Assessments."
FDICIA and the regulations issued thereunder also have: (i) limited the use
of brokered deposits to "well capitalized" institutions, and "adequately
capitalized" institutions that have received waivers from the FDIC; (ii)
established restrictions on the permissible investments and activities of
FDIC-insured state chartered depository institutions and their subsidiaries;
(iii) implemented uniform real estate lending rules; (iv) prescribed standards
to limit the risks posed by credit exposure between depository institutions; (v)
revised risk-based capital rules to include components for measuring the risk
posed by interest rate changes; (vi) amended various consumer banking laws;
(vii) increased restrictions on loans to an institution's insiders; (viii)
established standards in a number of areas to assure safety and soundness; and
(ix) implemented additional requirements for institutions that have $500 million
or more in total assets with respect to annual independent audits, audit
committees and management reports related to financial statements, internal
controls and compliance with designated laws and regulations.
CAPITAL ADEQUACY. The Federal Reserve Board has issued standards for
measuring capital adequacy for bank holding companies. These standards are
designed to provide risk-responsive capital guidelines and to incorporate a
consistent framework for use by financial institutions operating in major
international financial markets. The banking regulators have issued standards
for depository institutions that are similar to, but not identical with, the
standards for bank holding companies.
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ITEM 1. BUSINESS--CONTINUED
In general, the risk-related standards require depository institutions and
bank holding companies to maintain capital based on "risk-adjusted" assets so
that categories of assets with potentially higher credit risk will require more
capital backing than categories with lower credit risk. In addition, depository
institutions and bank holding companies are required to maintain capital to
support off-balance sheet activities such as loan commitments.
Under the risk-based capital standard, the minimum consolidated ratio of
total capital to risk-adjusted assets (including certain off-balance sheet
items, such as standby letters of credits) required by the Federal Reserve Board
for bank holding companies is currently 8%. At least one-half of the total
capital must be comprised of common equity, retained earnings, qualifying
noncumulative perpetual preferred stock, a limited amount of qualifying
cumulative perpetual preferred stock and minority interest in the equity
accounts of consolidated subsidiaries, plus certain items such as goodwill and
certain other intangible assets ("Tier 1 Capital"). The remainder may consist
of qualifying hybrid capital instruments, perpetual debt, mandatory convertible
debt securities, a limited amount of subordinated debt, preferred stock that
does not qualify as Tier 1 Capital and a limited amount of loan and lease loss
reserves.
In addition to the risk-based capital standard, the Federal Reserve Board
has established minimum leverage ratio guidelines for bank holding companies.
These guidelines provide for a minimum ratio of Tier 1 capital to adjusted
average total assets less goodwill and certain other intangibles (the "Leverage
Ratio") of 3% for bank holding companies that meet certain specified criteria,
including having the highest regulatory rating. Other bank holding companies
generally are required to maintain a Leverage Ratio of at least 4% to 5%.
The guidelines also provide that bank holding companies experiencing
internal growth or making acquisitions are expected to maintain strong capital
positions substantially above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the Federal Reserve Board has
indicated that it will consider a "tangible Tier 1 capital leverage ratio"
(deducting all intangibles) and other indicia of capital strength in evaluating
proposals for expansion or new activities.
Additional information regarding the capital adequacy standards of Federal
banking regulators and their application to Magna, contained on pages 36 and 50,
respectively, of Magna's 1996 Annual Report to Stockholders under the captions
"Capital" and "Notes to Consolidated Financial Statements--15 Regulatory
Matters," respectively, is incorporated herein by reference.
LIMITATIONS ON DIVIDENDS. Magna is a legal entity separate and distinct from
its banking and other subsidiaries. The principal source of funds to Magna on a
parent company only basis consists of dividends and management fees from the
Affiliate Banks. Various laws and regulations limit the amount of dividends and
management fees the Affiliate Banks can pay to Magna without regulatory
approval.
The approval of the OCC is required for any dividend by a national bank if
the total of all dividends declared by the bank in any calendar year would
exceed the total of its net profits, as defined by the OCC, for such year
combined with its retained net profits for the preceding two years, less any
required transfers to surplus or a fund for the retirement of any preferred
stock. In addition, a national bank may not pay a dividend in an amount greater
than its net profits then on hand, after deducting losses and bad debts. All
debts due to a national bank on which interest is due and unpaid for a period of
six months, unless the same are well secured and in the process of collection,
are considered bad debts.
Iowa law provides that the Board of Directors of an Iowa state bank may
declare such dividends as it shall judge expedient only out of the undivided
profits of the bank. If the bank's surplus fund is at any time less than the
amount of its capital at the close of a dividend period, then at least ten
percent of the net profits of the bank during the dividend period must be
credited to the surplus fund before a dividend may be declared or paid.
The OTS regulations impose various restrictions and requirements on savings
institutions with respect to their ability to pay dividends or make other
capital distributions (such as stock redemptions or repurchases, cash-out
mergers, interest payments on certain convertible debt and other transactions
charged to the capital account).
The OTS utilizes a three-tiered approach to permit savings institutions,
based on their capital level and supervisory condition, to make capital
distributions. Generally, an institution that before and after the proposed
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ITEM 1. BUSINESS--CONTINUED
distribution meets or exceeds its "fully phased in capital requirements" (a
"Tier 1 institution") and has not been informed by the OTS that it is in need
of more than normal supervision, may, after 30 days prior notice to but without
the approval of the OTS, make capital distributions during any calendar year
equal to the higher of (a) 100% of its net income for the year-to-date plus the
amount that would reduce by 50% its "surplus capital ratio" (the percentage by
which the institution's ratio of total capital to assets exceeds the ratio of
its fully phased-in capital requirement to assets) at the beginning of the
calendar year or (b) 75% of its net income over the most recent four-quarter
period. Any additional capital distributions would require prior regulatory
approval. In addition, the OTS could prohibit a proposed capital distribution by
any institution, which would otherwise be permitted by the regulation, if the
OTS determines that such distribution would constitute an unsafe or unsound
practice.
Tier 2 institutions, which are institutions that before and after the
proposed distribution meet or exceed their current minimum capital requirements
but do not meet their fully phased-in capital requirements, may make capital
distributions of up to 75% of their net income for the most recent four-quarter
period after notice is given to the OTS and no objection is made by the OTS
within a 30-day period. Tier 3 institutions, which are institutions that do not
meet current minimum capital requirements, that propose to make a capital
distribution, and Tier 1 and Tier 2 institutions which propose to make a capital
distribution in excess of the noted safe harbor levels described above, must
obtain OTS approval prior to making such a distribution.
During the fourth quarter of 1996, Magna Bank, National Association
requested and received approval from the OCC to pay to Magna a special dividend
sufficient for Magna to fund the cash portion of the Homeland acquisition. As it
would otherwise have been prevented from paying subsequent, future dividends,
the bank also requested and received approval from the OCC to pay dividends in
1997 of up to 50% of its then-current period earnings, while maintaining its
status as a "well capitalized" financial institution. No similar regulatory
restriction exists with respect to Magna's remaining subsidiaries, which were
acquired in the Homeland acquisition.
The payment of dividends and management fees by the Affiliate Banks also may
be affected by other factors, such as the maintenance of adequate capital for
the Affiliate Banks.
In addition to the foregoing, applicable regulatory authorities are
authorized to prohibit the payment of dividends when such payment would
constitute an unsafe and unsound banking practice. The Federal Reserve Board has
indicated that it generally would be an unsafe and unsound banking practice to
pay dividends except out of current operating earnings. As previously indicated,
Federal regulatory authorities have adopted standards for the maintenance of
capital. Adherence to such standards may further limit the ability to pay
dividends. FDICIA prohibits the payment of dividends or management fees by
"undercapitalized" financial institutions and even by "well capitalized"
institutions where the payment of dividends and management fees would render
them "undercapitalized."
Under Federal Reserve Board policy, Magna is expected to act as a source of
financial strength to the Affiliate Banks and to commit resources to support the
Affiliate Banks in circumstances where it might not choose to do so absent such
policy.
Additional information regarding limitations on dividends, contained on
pages 36 and 37 of Magna's 1996 Annual Report to Stockholders under the captions
"Capital," "Dividends and Resource Commitments" and "Credit Facility," is
incorporated herein by reference.
FDIC ASSESSMENTS. Magna's Affiliate Banks are subject to FDIC deposit
insurance assessments. Under FDICIA, the FDIC has adopted a risk-based premium
schedule. Under this schedule, each financial institution is assigned to one of
three capital groups--well capitalized, adequately capitalized or
undercapitalized--and further assigned to one of three subgroups within a
capital group, on the basis of supervisory evaluations by the institution's
primary Federal and, if applicable, state supervisors and on the basis of other
information relevant to the institution's financial condition and the risk posed
to the applicable insurance fund. The actual assessment rate applicable to a
particular institution will, therefore, depend in part upon the risk assessment
classification so assigned to the institution by the FDIC.
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ITEM 1. BUSINESS--CONTINUED
FIRREA required the FDIC to establish separate deposit insurance funds--the
Bank Insurance Fund ("BIF") for banks and the Savings Association Insurance
Fund ("SAIF") for savings associations. The law also required the FDIC to set
deposit insurance assessments at such levels as would cause the BIF and the SAIF
to reach their "designated reserve ratios" of 1.25 percent of the deposits
insured by them within a reasonable period of time. Due to the low costs of
resolving bank insolvencies in the last few years, the BIF reached its
designated reserve ratio in May 1995. As a result, in November 1995, the FDIC
lowered deposit insurance assessment rates for all banks by revising the range
to $.04 to $.31 for every $100 of deposits. In addition, effective January 1,
1996, due to the fact that the BIF had reached its designated reserve ratio, the
FDIC eliminated deposit insurance assessments (except for the minimum $2,000
payment required by law) for banks that are well capitalized and well managed.
The deposit insurance assessment rate for all other banks ranged from $.03 to
$.27 for every $100 of deposits. As of January 1, 1996, the SAIF had not reached
the designated reserve ratio.
The Deposit Insurance Funds Act of 1996 (the "Funds Act"), enacted as part
of the Omnibus Appropriations Bill on September 30, 1996, required the FDIC to
take immediate steps to recapitalize the SAIF and to change the basis on which
funds are raised to make the scheduled payments on the FICO bonds issued in 1987
to replenish the Federal Savings and Loan Insurance Corporation. The new
legislation, combined with regulations issued by the FDIC immediately after
enactment of the Funds Act, provided for a special assessment in the amount of
65.7 basis points per $100 of insured deposits on SAIF-insured deposits held by
depository institutions on March 31, 1995 (the special assessment was required
by the Funds Act to recapitalize the SAIF to the designated reserve ratio of
1.25 percent of the deposits insured by SAIF). Payments of this assessment were
made in November 1996, but were accrued by financial institutions in the third
calendar quarter of 1996. Institutions that have deposits insured by both the
BIF and the SAIF ("Oakar Banks") were required to pay the special assessment
on 80% of their "adjusted attributable deposit amounts" ("AADA"). In
addition, for purposes of future regular deposit insurance assessments, the AADA
on which Oakar Banks pay assessments to SAIF was also reduced by 20%. Commencing
January 1, 1997, BIF insured institutions will be responsible for a portion of
the annual carrying costs of the FICO bonds. Such institutions will be assessed
at 80% of the rate applicable to SAIF-insured institutions until December 31,
1999. Effective January 1, 1997, the Funds Act also reduced ongoing SAIF deposit
insurance assessment rates to a range from 6.4 cents to 23 cents (from previous
rates of 23 cents to 31 cents) per $100 of insured deposits and increased
ongoing BIF deposit insurance assessment rates to a range from zero to 1.3 cents
per $100 of insured deposits. Additionally, pursuant to the Funds Act, if the
reserves in BIF at the end of any semiannual assessment period exceed 1.25% of
insured deposits, the FDIC is required to refund the excess to the BIF-insured
institutions.
The Funds Act contemplates the merger of the SAIF and BIF by 1999, provided
the consolidation/merger of federal bank and thrift charters under applicable
law and regulation has been achieved by that time. Until such time, however,
depository institutions will continue to be prohibited from shifting deposits
from SAIF insurance coverage to BIF insurance coverage in an attempt to avoid
the higher SAIF assessments. The FDIC is required to issue regulations to guard
against the shifting of deposits from SAIF to BIF. A report to Congress
regarding the merger of the SAIF and the BIF is required from the Treasury
Department by March 31, 1997.
FIRREA contains a "cross-guarantee" provision that could result in insured
depository institutions owned by Magna being assessed for losses incurred by the
FDIC in connection with the failure of, or assistance provided by the FDIC to
avert the failure of, any other insured depository institution controlled by
Magna. Under FIRREA, failure to meet certain capital guidelines could subject a
banking institution to a variety of enforcement remedies available to Federal
regulatory authorities, including the termination of deposit insurance by the
FDIC.
Additional information regarding FDIC assessments, contained on page 24 of
Magna's 1996 Annual Report to Stockholders under the caption "Noninterest
Expense," is incorporated herein by reference.
INTERSTATE BANKING. In September 1994, legislation was enacted that is
expected to continue to have a significant effect in restructuring the banking
industry in the United States of America. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 facilitates the interstate expansion and
consolidation of banking organizations (i) by permitting bank holding companies
that are adequately capitalized and managed to acquire banks located in states
outside their home states regardless of whether such acquisitions are authorized
under the law of the host state, (ii) by permitting the interstate merger of
banks after June 1, 1997, subject to the right of
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ITEM 1. BUSINESS--CONTINUED
individual states to "opt in" or to "opt out" of this authority before that
date, (iii) by permitting banks to establish new branches on an interstate basis
provided that such action is specifically authorized by the law of the host
state, (iv) by permitting foreign banks to establish, with approval of the
regulators in the United States of America, branches outside their home states
to the same extent that national or state banks located in the home state would
be authorized to do so, and (v) by permitting banks to receive deposits, renew
time deposits, close loans, service loans and receive payments on loans and
other obligations as agent for any bank or thrift affiliate, whether the
affiliate is located in the same state or a different state. One effect of this
legislation has been to permit Magna to acquire banks located in any state and
to permit bank holding companies located in any state to acquire banks and bank
holding companies located in Missouri, Illinois and Iowa. Overall, this
legislation is likely to continue to have the effects of increasing competition
and promoting consolidation in the banking industry.
RECENT LEGISLATION. The Funds Act contains a variety of regulatory relief
measures, which modify or eliminate some of the more onerous requirements
imposed under Federal banking laws. Among the measures are provisions reducing
certain regulatory burdens imposed on bank holding companies. For example, the
Funds Act eliminates the requirement that bank holding companies seeking to
acquire control of a thrift file an application with the OTS and for approval
to become a unitary savings and loan holding company as a result of such
acquisition. The Funds Act also provides that a bank holding company owning or
controlling a thrift will no longer be subject to the supervision and
regulation of the OTS. The OTS will continue to supervise and regulate all
thrifts acquired in such transactions.
There have also been a number of recent legislative and regulatory proposals
designed to strengthen and improve the overall financial stability of the
banking system of the United States of America and to provide for other changes
in the bank regulatory structure, including proposals to reduce regulatory
burdens on banking organizations and to expand the nature of the products and
services banks and bank holding companies may offer. At this time, it is not
possible to predict whether or in what form these proposals may be adopted in
the future, and, if adopted, what effect they will have on Magna.
MONETARY POLICY AND ECONOMIC CONDITIONS. The earnings of Magna are affected
not only by general economic conditions but also by the policies of various
governmental regulatory authorities. The Federal Reserve Board regulates the
supply of bank credit in order to influence general economic conditions,
primarily through open market operations in U.S. Government obligations, varying
the discount rate on bank borrowings, varying reserve requirements against
member and insured bank deposits and restricting certain borrowings by such
banks and their affiliates.
8
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ITEM 1. BUSINESS--CONTINUED
SELECTED STATISTICAL INFORMATION
The following statistical information and related narrative disclosures
included in Magna's 1996 Annual Report to Stockholders are incorporated by
reference herein:
<TABLE>
<CAPTION>
ANNUAL REPORT
ITEM REFERENCE
- - ---- -------------
<C> <S> <C>
I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and
Interest Differential
A., B. Average Balances/Interest Income and Expense/Average Yields and Rates Table 1, Pages 20 and 21
C. Volume and Rate Variance Table 2, Page 22
II. Investment Portfolio
A. Composition Table 7, Page 29
Table 8, Page 29
B. Maturities and Yields Table 9, Page 29
III. Loan Portfolio
A. Composition Table 5, Page 26
B. Maturities and Sensitivities of Loans Table 6, Page 27
C. Nonperforming Assets Table 15, Page 34
IV. Summary of Loan Loss Experience
A. Reserve for Loan Losses Table 17, Page 35
B. Allocation of the Reserve for Loan Losses Table 18, Page 36
V. Deposits
A. Average Deposits and Interest Rates Table 11, Page 31
B. Amount and Maturities of Time Deposits of $100,000 or More Table 12, Page 31
VI. Return on Equity and Assets Page 17
VII. Short-Term Borrowings Table 14, Page 33
</TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following list sets forth, as of March 27, 1997, the names, ages and
positions held by the executive officers of Magna. There is no family
relationship between any of the named individuals.
<TABLE>
<CAPTION>
NAME AGE ALL POSITIONS HELD WITH REGISTRANT
---- --- ----------------------------------
<S> <C> <C>
G. Thomas Andes 54 Chairman of the Board and Chief Executive Officer of Magna since December 1994.
President and Chief Operating Officer of Magna since 1991. Prior thereto, Mr.
Andes served as Vice Chairman of the Board of Magna from 1982 to 1991.
Ronald A. Buerges 35 Executive Vice President and Chief Financial Officer of Magna since April 1996.
Prior thereto, Mr. Buerges served as Acting Chief Financial Officer of Magna
from November 1995 to April 1996 and as Senior Vice President, Corporate
Finance of Magna from 1993 to 1995. Prior to his employment by Magna, Mr.
Buerges had been a Senior Manager with the accounting firm of Ernst & Young
(now known as Ernst & Young LLP). Mr. Buerges was employed by Ernst & Young
from 1983 to 1993.
</TABLE>
9
<PAGE> 10
ITEM 1. BUSINESS--CONTINUED
<TABLE>
<CAPTION>
NAME AGE ALL POSITIONS HELD WITH REGISTRANT
---- --- ----------------------------------
<S> <C> <C>
Linda K. Fabel 53 Executive Vice President, Retail Banking of Magna since April 1994. Prior
thereto, Ms. Fabel served as Executive Vice President, Management Information
Systems of Magna from 1991 to April 1994. Prior to her employment by Magna, Ms.
Fabel served in a variety of senior capacities with IBM Corporation, including
General Manager of IBM's St. Louis trading area during 1991 and Regional
Manager from 1990 to 1991.
Gary D. Hemmer 43 Executive Vice President, Administration of Magna since April 1994. Prior
thereto, Mr. Hemmer served as Executive Vice President, Retail Banking and
Administration of Magna from 1991 to April 1994 and as Vice President,
Administration of Magna from 1986 to 1991.
Robert S. Kahler 45 Executive Vice President, Financial Markets of Magna since March 1997. Prior
thereto, Mr. Kahler served as Executive Vice President and Chief Financial
Officer of Homeland.
Robert J. Mathias 44 Executive Vice President, Credit Administration of Magna since February 1997.
Prior thereto, Mr. Mathias served in a variety of senior capacities with The
Boatmen's National Bank of St. Louis; most recently as its Executive Vice
President and Division Manager of Corporate Banking.
Robert M. Olson, Jr. 41 Executive Vice President, Operations and Technology of Magna since May 1994.
Prior thereto, Mr. Olson had been a managing director of J. D. Carreker and
Associates, Inc., a management consulting and technology firm, from 1991 to May
1994. Before joining J. D. Carreker and Associates, Inc. in 1991, Mr. Olson was
with Security Pacific, where he held senior positions with the cash management
department of the bank, as well as with the holding company's automation
company.
</TABLE>
ITEM 2. PROPERTIES
Magna's executive offices are located in a ten-story commercial office
building in St. Louis County, Missouri, known as Magna Place. Magna has leased
approximately 31%, or 53,426 square feet, of Magna Place under a long-term lease
from an unaffiliated party.
In the second quarter of 1995, Magna opened its operations facility in
Belleville, Illinois, which enabled Magna to centralize further certain
back-office functions. The facility consists of a two-story, 170,000 square foot
building, which houses various operational and lending support functions. The
overall project involved a capital expenditure of approximately $16.5 million.
Magna's subsidiaries own and lease other facilities in Illinois, Iowa and
Missouri. All of these properties are considered to be in good condition, are
adequately insured and are considered adequate to meet the needs of the
particular user.
A list of the business locations of Magna and its subsidiaries is included
on pages 60 through 63 of Magna's 1996 Annual Report to Stockholders and is
incorporated herein by reference. See also "Notes to Consolidated Financial
Statements--9 Premises and Equipment," included on page 48 of Magna's 1996
Annual Report to Stockholders, and incorporated herein by reference.
10
<PAGE> 11
ITEM 3. LEGAL PROCEEDINGS
Various claims and lawsuits, incidental to the ordinary course of business,
are pending against Magna and its subsidiaries. In the opinion of management,
after consultation with legal counsel, resolution of these matters is not
expected to have a material effect on Magna's financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of the fiscal year
covered by this Report to a vote of Magna's security holders through the
solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information regarding the Common Stock of Magna, included on page 7 and on
the inside back cover, respectively, of Magna's 1996 Annual Report to
Stockholders under the captions "Magna by the Numbers" and "Common Stock
Share Data," respectively, is incorporated herein by reference. Additional
information regarding the ability of Magna's Affiliate Banks to transfer funds
to Magna and Magna's ability to pay dividends is contained in Part I hereof
under the caption "Supervision and Regulation-- Limitations on Dividends" and
included on pages 36 and 37 of Magna's 1996 Annual Report to Stockholders under
the captions "Capital," "Dividends and Resource Commitments" and "Credit
Facility," which are incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data, included on page 17 of Magna's 1996 Annual Report
to Stockholders under the caption "Five Year Selected Financial Data," is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations, included on pages 18 through 38 of Magna's 1996 Annual Report to
Stockholders under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations," is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Magna's Consolidated Financial Statements, the notes thereto and the Report
of Ernst & Young LLP, Independent Auditors, included on pages 39 through 58 of
Magna's 1996 Annual Report to Stockholders, are incorporated herein by
reference. Magna's quarterly financial information (unaudited) for the years
1996 and 1995, included on page 59 of Magna's 1996 Annual Report to
Stockholders, is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors of Magna is contained in Magna's Proxy
Statement for the 1997 Annual Meeting of Stockholders under the caption "Item
1. Election of Directors" and is incorporated herein by reference.
Information regarding executive officers of Magna is contained in Part I
hereof under the caption "Executive Officers of the Registrant."
11
<PAGE> 12
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT--CONTINUED
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934 is included in Magna's Proxy Statement for the 1997 Annual
Meeting of Stockholders under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance," and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is contained in Magna's Proxy
Statement for the 1997 Annual Meeting of Stockholders under the captions
"Compensation of Directors" and "Compensation of Executive Officers," and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is contained in Magna's Proxy Statement for the 1997 Annual Meeting
of Stockholders under the captions "Voting Securities and Principal Holders
Thereof" and "Security Ownership of Management," and is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
contained in Magna's Proxy Statement for the 1997 Annual Meeting of Stockholders
under the caption "Certain Relationships and Related Transactions" and is
incorporated herein by reference.
PART IV
<TABLE>
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
<C> <S>
(a) (1) Financial Statements: All of the following are incorporated by reference in Item 8 from pages
39 through 59 of Magna's 1996 Annual Report to Stockholders:
Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31,
1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
Quarterly Financial Information (Unaudited)
(2) Financial Statement Schedules: All schedules applicable to Magna are included in the
Consolidated Financial Statements or the notes thereto.
12
<PAGE> 13
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM
8-K--CONTINUED
(3) Exhibits:
<C> <S>
3.1 Certificate of Incorporation, as amended (filed as Exhibit 3.1 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1991 (File No. 001-12405) and
incorporated herein by reference)
3.2 By-laws (filed as Exhibit 3.2 to Magna's Annual Report on Form 10-K for the year
ended December 31, 1991 (File No. 001-12405) and incorporated herein by reference)
4.1 Form of Indenture, including form of Note, between Magna and Mark Twain Bank, as
trustee, dated August 1, 1987 for the 7% Convertible Subordinated Capital Notes
due 1999 (filed as Exhibit 1 to Magna's Registration Statement on Form 8-A dated
June 15, 1988 (File No. 001-12405) and incorporated herein by reference)
4.2 Indenture dated as of November 1, 1986 between Landmark Bancshares Corporation
(hereinafter "Landmark") and Centerre Trust Company of St. Louis, regarding the
issuance of $17,250,000 principal amount of Landmark's 8 3/4% Convertible
Subordinated Debentures due November 1, 1998 (filed as Exhibit 4(c) to Landmark's
Annual Report on Form 10-K for the year ended December 31, 1986 (File No. 1-8810)
and incorporated herein by reference)
4.3 First Supplemental Indenture dated December 20, 1991 among Magna, Magna
Acquisition Corporation and Boatmen's National Bank of St. Louis as successor to
Centerre Trust Company of St. Louis, Trustee, assuming the obligations of Landmark
under the Indenture dated November 1, 1986 (filed as Exhibit 4.2 to Magna's
Current Report on Form 8-K dated December 20, 1991 (File No. 001-12405) and
incorporated herein by reference)
4.4 Rights Agreement, including form of Right Certificate, dated as of November 11,
1988 between Magna and Magna Trust Company, Trustee (filed as Exhibits 1 and 2 to
Magna's Registration Statement on Form 8-A dated November 11, 1988 (File No.
001-12405) and incorporated herein by reference)
10.1 Agreement and Plan of Reorganization, dated as of August 30, 1996, by and between
Magna and Homeland Bankshares Corporation ("Homeland") (filed as Exhibit 2 to
Magna's Current Report on Form 8-K (File No. 001-12405) dated August 30, 1996 and
incorporated herein by reference)
10.2 Stock Option Agreement, dated August 30, 1996, between Magna and Homeland (filed
as Exhibit 99.1 to Magna's Current Report on Form 8-K (File No. 001-12405) dated
August 30, 1996 and incorporated herein by reference)
10.3 Amendment to Agreement and Plan of Reorganization, dated as of November 19, 1996,
by and between Magna and Homeland (filed as Exhibit 2.3 to Magna's Registration
Statement on Form S-4 (Reg. No. 333-17797) and incorporated herein by reference)
10.4 Form of Stock Option Agreement under Landmark's 1982 Capital Accumulation Plan,
assumed by Magna as to outstanding obligations pursuant to the acquisition of
Landmark (filed as Exhibit 10.1 to Magna's Annual Report on Form 10-K for the year
ended December 31, 1991 (File No. 001-12405) and incorporated herein by
reference)<F*>
10.5 Form of Stock Option Agreement under Landmark's 1986 Non-Qualified Stock Option
Plan, assumed by Magna as to outstanding obligations pursuant to the acquisition
of Landmark (filed as Exhibit 10.2 to Magna's Annual Report on Form 10-K for the
year ended December 31, 1991 (File No. 001-12405) and incorporated herein by
reference)<F*>
10.6 1987 Stock Option Plan of Magna (filed as Exhibit 10.2 to Magna's Registration
Statement on Form S-4 (Reg. No. 33-15463) and incorporated herein by
reference)<F*>
13
<PAGE> 14
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM
8-K--CONTINUED
<C> <S>
10.7 Landmark's Amended and Restated Supplemental Retirement Plan (filed as Exhibit
10(ff) to Landmark's Annual Report on Form 10-K for the year ended December 31,
1989 (File No. 1-8810) and incorporated herein by reference)<F*>
10.8 Amended and Restated Employment Agreement between Magna and G. Thomas Andes
effective January 1, 1995 and amended and restated June 6, 1996 (filed as Exhibit
10.1 to Magna's Quarterly Report on Form 10-Q for the period ended June 30, 1996
(File No. 001-12405) and incorporated herein by reference)<F*>
10.9 Agreement effective March 1, 1997 between Magna and Linda K. Fabel<F*>
10.10 Agreement effective March 1, 1997 between Magna and Robert J. Mathias<F*>
10.11 Agreement effective March 1, 1997 between Magna and Gary D. Hemmer<F*>
10.12 Agreement effective March 1, 1997 between Magna and Ronald A. Buerges<F*>
10.13 Agreement effective March 1, 1997 between Magna and Robert M. Olson, Jr.<F*>
10.14 Second Amendment to Second Restated Employment Agreement between Magna and S. Lee
Kling (filed as Exhibit 10.24 to Magna's Quarterly Report on Form 10-Q for the
period ended June 30, 1994 (File No. 001-12405) and incorporated herein by
reference)<F*>
10.15 Second Restated Employment Agreement dated as of October 20, 1990, as amended by
Letter Agreement dated August 29, 1991, between Landmark and S. Lee Kling (filed
as Exhibit 10.9 to Magna's Annual Report on Form 10-K for the year ended December
31, 1991 (File No. 001-12405) and incorporated herein by reference)<F*>
10.16 Directors' Survivor Benefit Plan (filed as Exhibit 10.11 to Magna's Annual Report
on Form 10-K for the year ended December 31, 1991 (File No. 001-12405) and
incorporated herein by reference)<F*>
10.17 Directors' Deferred Compensation Plan (filed as Exhibit 10.12 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1991 (File No. 001-12405) and
incorporated herein by reference)<F*>
10.18 Board of Directors Retirement Plan of Magna (filed as Exhibit 10.16 to Magna's
Annual Report on Form 10-K for the year ended December 31, 1994 (File No.
001-12405) and incorporated herein by reference)<F*>
10.19 Magna Directors' Deferred Plan (filed as Exhibit 10.1 to Magna's Quarterly Report
on Form 10-Q for the period ended September 30, 1996 (File No. 001-12405) and
incorporated herein by reference)<F*>
10.20 Magna Directors' Deferred Compensation Plan (filed as Exhibit 10.2 to Magna's
Quarterly Report on Form 10-Q for the period ended September 30, 1996 (File No.
001-12405) and incorporated herein by reference)<F*>
10.21 First Amendment to Magna Board of Directors Retirement Plan (filed as Exhibit 10.3
to Magna's Quarterly Report on Form 10-Q for the period ended September 30, 1996
(File No. 001-12405) and incorporated herein by reference)<F*>
10.22 Executive Supplemental Deferral Plan (filed as Exhibit 10.12 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1987 (File No. 001-12405) and
incorporated herein by reference)<F*>
14
<PAGE> 15
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM
8-K--CONTINUED
<C> <S>
10.23 Form of Director Indemnification Agreement dated as of May 30, 1991 between
Landmark and Donald P. Gallop, Carl G. Hogan, Sr., Franklin A. Jacobs and Ralph F.
Korte, respectively, and Consent dated May 24, 1991 of Magna to Director
Indemnification Agreements dated May 30, 1991 assuming Landmark's obligations
thereunder upon effectiveness of the acquisition (filed as Exhibit 10.14 to
Magna's Annual Report on Form 10-K for the year ended December 31, 1991 (File No.
001-12405) and incorporated herein by reference)<F*>
10.24 Magna Amended and Restated Directors' Stock Option Plan (filed as Exhibit 10.33 to
Magna's Registration Statement on Form S-4 (Reg. No. 333-17797) and incorporated
herein by reference)<F*>
10.25 Magna Amended and Restated 1996 Directors' Stock Option Plan (filed as Exhibit
10.34 to Magna's Registration Statement on Form S-4 (Reg. No. 333-17797) and
incorporated herein by reference)<F*>
10.26 Magna Amended and Restated 1992 Long Term Performance Plan (filed as Exhibit 10.35
to Magna's Registration Statement on Form S-4 (Reg. No. 333-17797) and
incorporated herein by reference)<F*>
10.27 Magna Amended and Restated 1996 Long Term Performance Plan (filed as Exhibit 10.36
to Magna's Registration Statement on Form S-4 (Reg. No. 333-17797) and
incorporated herein by reference)<F*>
10.28 Amendment to Supplemental Executive Retirement Plan of Magna (filed as Exhibit
10.25 to Magna's Quarterly Report on Form 10-Q for the period ended June 30, 1994
(File No. 001-12405) and incorporated herein by reference)<F*>
10.29 Supplemental Executive Retirement Plan of Magna (filed as Exhibit 10.15 to Magna's
Annual Report on Form 10-K for the year ended December 31, 1993 (File No.
001-12405) and incorporated herein by reference)<F*>
10.30 Magna Executive Incentive Compensation Plan (MEICP) 1997<F*>
10.31 Amended and Restated Retirement and Consulting Agreement dated December 30, 1994
between Magna and William S. Badgley (filed as Exhibit 10.24 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1994 (File No. 001-12405) and
incorporated herein by reference)
10.32 Lease between Magna as successor in interest to Landmark, and St. Louis Brentwood
Associates, L.P., dated December 19, 1986, relating to Magna Place, as amended by
the First Amendment dated November 17, 1987, the Addendum dated February 1, 1990
and the Letter Agreement dated January 9, 1992 (filed as Exhibit 10.17 to Magna's
Annual Report on Form 10-K for the year ended December 31, 1991 (File No.
001-12405) and incorporated herein by reference)
10.33 Stock Purchase Agreement dated March 27, 1992, by and among Capital
Bancorporation, Inc., Magna and Landmark Acquisition Corporation, and amendment
thereto (filed as Exhibit 2.1 to Magna's Registration Statement on Form S-3 (Reg.
No. 33-48918) and incorporated herein by reference)
10.34 Supplemental Agreement dated February 29, 1996, between Magna and John G.
Helmkamp, Jr. (filed as Exhibit 10.26 to Magna's Annual Report on Form 10-K for
the year ended December 31, 1995 (File No. 001-12405) and incorporated herein by
reference)<F*>
10.35 Severance Agreement dated March 5, 1997 between Magna and Erl A. Schmiesing<F*>
15
<PAGE> 16
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM
8-K--CONTINUED
<C> <S>
10.36 Loan Agreement dated as of December 30, 1996, between Magna and unaffiliated
lender
10.37 First Amendment to Loan Agreement dated as of March 5, 1997 among Magna and
unaffiliated lenders
11.1 Computation of Net Income Per Common Share
13.1 1996 Annual Report to Stockholders
21.1 List of Subsidiaries
23.1 Consent of Independent Auditors
27.1 Financial Data Schedule
<FN>
- - --------
<F*>Management contract or compensatory plan
<C> <S>
(b) Reports on Form 8-K: No reports on Form 8-K were filed by Magna during the fourth quarter of the fiscal
year covered by this Report.
</TABLE>
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MAGNA GROUP, INC.
Date: March 27, 1997
By /s/ G. THOMAS ANDES
----------------------------
G. Thomas Andes
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ G. THOMAS ANDES Chairman of the Board, Chief Executive March 27, 1997
- - ------------------------------------------ Officer and Director (Principal Executive
G. Thomas Andes Officer)
/s/ RONALD A. BUERGES Executive Vice President and Chief March 27, 1997
- - ------------------------------------------ Financial Officer (Principal Financial
Ronald A. Buerges and Accounting Officer)
Director March , 1997
- - ------------------------------------------ --
James A. Auffenberg, Jr.
/s/ WAYNE T. EWING Director March 27, 1997
- - ------------------------------------------
Wayne T. Ewing
/s/ DONALD P. GALLOP Director March 27, 1997
- - ------------------------------------------
Donald P. Gallop
/s/ RANDALL E. GANIM Director March 27, 1997
- - ------------------------------------------
Randall E. Ganim
Director March , 1997
- - ------------------------------------------ --
John G. Helmkamp, Jr.
/s/ C.E. HEILIGENSTEIN Director March 27, 1997
- - ------------------------------------------
C.E. Heiligenstein
17
<PAGE> 18
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ CARL G. HOGAN, SR. Director March 27, 1997
- - ------------------------------------------
Carl G. Hogan, Sr.
/s/ FRANKLIN A. JACOBS Director March 27, 1997
- - ------------------------------------------
Franklin A. Jacobs
Director March , 1997
- - ------------------------------------------ --
Wendell J. Kelley
/s/ S. LEE KLING Director March 27, 1997
- - ------------------------------------------
S. Lee Kling
/s/ RALPH F. KORTE Director March 27, 1997
- - ------------------------------------------
Ralph F. Korte
/s/ ROBERT E. MCGLYNN Director March 27, 1997
- - ------------------------------------------
Robert E. McGlynn
/s/ ERL A. SCHMIESING Director March 27, 1997
- - ------------------------------------------
Erl A. Schmiesing
/s/ DOUGLAS K. SHULL Director March 27, 1997
- - ------------------------------------------
Douglas K. Shull
Director March , 1997
- - ------------------------------------------ --
Frank R. Trulaske
/s/ DR. GEORGE T. WILKINS, JR. Director March 27, 1997
- - ------------------------------------------
Dr. George T. Wilkins, Jr.
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT INDEX
<C> <S>
3.1 Certificate of Incorporation, as amended (filed as Exhibit 3.1 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1991 (File No. 001-12405)
and incorporated herein by reference)
3.2 By-laws (filed as Exhibit 3.2 to Magna's Annual Report on Form 10-K for the year
ended December 31, 1991 (File No. 001-12405) and incorporated herein by
reference)
4.1 Form of Indenture, including form of Note, between Magna and Mark Twain Bank, as
trustee, dated August 1, 1987 for the 7% Convertible Subordinated Capital Notes
due 1999 (filed as Exhibit 1 to Magna's Registration Statement on Form 8-A dated
June 15, 1988 (File No. 001-12405) and incorporated herein by reference)
4.2 Indenture dated as of November 1, 1986 between Landmark Bancshares Corporation
(hereinafter "Landmark") and Centerre Trust Company of St. Louis, regarding
the issuance of $17,250,000 principal amount of Landmark's 8 3/4% Convertible
Subordinated Debentures due November 1, 1998 (filed as Exhibit 4(c) to
Landmark's Annual Report on Form 10-K for the year ended December 31, 1986 (File
No. 1-8810) and incorporated herein by reference)
4.3 First Supplemental Indenture dated December 20, 1991 among Magna, Magna Acquisi-
tion Corporation and Boatmen's National Bank of St. Louis as successor to
Centerre Trust Company of St. Louis, Trustee, assuming the obligations of
Landmark under the Indenture dated November 1, 1986 (filed as Exhibit 4.2 to
Magna's Current Report on Form 8-K dated December 20, 1991 (File No. 001-12405)
and incorporated herein by reference)
4.4 Rights Agreement, including form of Right Certificate, dated as of November 11,
1988 between Magna and Magna Trust Company, Trustee (filed as Exhibits 1 and 2
to Magna's Registration Statement on Form 8-A dated November 11, 1988 (File No.
001-12405) and incorporated herein by reference)
10.1 Agreement and Plan of Reorganization, dated as of August 30, 1996, by and
between Magna and Homeland Bankshares Corporation ("Homeland") (filed as
Exhibit 2 to Magna's Current Report on Form 8-K (File No. 001-12405) dated
August 30, 1996 and incorporated herein by reference)
10.2 Stock Option Agreement, dated August 30, 1996, between Magna and Homeland (filed
as Exhibit 99.1 to Magna's Current Report on Form 8-K (File No. 001-12405) dated
August 30, 1996 and incorporated herein by reference)
10.3 Amendment to Agreement and Plan of Reorganization, dated as of November 19,
1996, by and between Magna and Homeland (filed as Exhibit 2.3 to Magna's
Registration Statement on Form S-4 (Reg. No. 333-17797) and incorporated herein
by reference)
10.4 Form of Stock Option Agreement under Landmark's 1982 Capital Accumulation Plan,
assumed by Magna as to outstanding obligations pursuant to the acquisition of
Landmark (filed as Exhibit 10.1 to Magna's Annual Report on Form 10-K for the
year ended December 31, 1991 (File No. 001-12405) and incorporated herein by
reference)<F*>
10.5 Form of Stock Option Agreement under Landmark's 1986 Non-Qualified Stock Option
Plan, assumed by Magna as to outstanding obligations pursuant to the acquisition
of Landmark (filed as Exhibit 10.2 to Magna's Annual Report on Form 10-K for the
year ended December 31, 1991 (File No. 001-12405) and incorporated herein by
reference)<F*>
10.6 1987 Stock Option Plan of Magna (filed as Exhibit 10.2 to Magna's Registration
Statement on Form S-4 (Reg. No. 33-15463) and incorporated herein by refer-
ence)<F*>
10.7 Landmark's Amended and Restated Supplemental Retirement Plan (filed as Exhibit
10(ff) to Landmark's Annual Report on Form 10-K for the year ended December 31,
1989 (File No. 1-8810) and incorporated herein by reference)<F*>
19
<PAGE> 20
<CAPTION>
EXHIBIT INDEX--(CONTINUED)
<C> <S>
10.8 Amended and Restated Employment Agreement between Magna and G. Thomas Andes
effective January 1, 1995 and amended and restated June 6, 1996 (filed as
Exhibit 10.1 to Magna's Quarterly Report on Form 10-Q for the period ended June
30, 1996 (File No. 001-12405) and incorporated herein by reference)<F*>
10.9 Agreement effective March 1, 1997 between Magna and Linda K. Fabel<F*>
10.10 Agreement effective March 1, 1997 between Magna and Robert J. Mathias<F*>
10.11 Agreement effective March 1, 1997 between Magna and Gary D. Hemmer<F*>
10.12 Agreement effective March 1, 1997 between Magna and Ronald A. Buerges<F*>
10.13 Agreement effective March 1, 1997 between Magna and Robert M. Olson, Jr.<F*>
10.14 Second Amendment to Second Restated Employment Agreement between Magna and S.
Lee Kling (filed as Exhibit 10.24 to Magna's Quarterly Report on Form 10-Q for
the period ended June 30, 1994 (File No. 001-12405) and incorporated herein by
reference)<F*>
10.15 Second Restated Employment Agreement dated as of October 20, 1990, as amended by
Letter Agreement dated August 29, 1991, between Landmark and S. Lee Kling (filed
as Exhibit 10.9 to Magna's Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 001-12405) and incorporated herein by reference)<F*>
10.16 Directors' Survivor Benefit Plan (filed as Exhibit 10.11 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1991 (File No. 001-12405)
and incorporated herein by reference)<F*>
10.17 Directors' Deferred Compensation Plan (filed as Exhibit 10.12 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1991 (File No. 001-12405)
and incorporated herein by reference)<F*>
10.18 Board of Directors Retirement Plan of Magna (filed as Exhibit 10.16 to Magna's
Annual Report on Form 10-K for the year ended December 31, 1994 (File No.
001-12405) and incorporated herein by reference)<F*>
10.19 Magna Directors' Deferred Plan (filed as Exhibit 10.1 to Magna's Quarterly
Report on Form 10-Q for the period ended September 30, 1996 (File No. 001-12405)
and incorporated herein by reference)<F*>
10.20 Magna Directors' Deferred Compensation Plan (filed as Exhibit 10.2 to Magna's
Quarterly Report on Form 10-Q for the period ended September 30, 1996 (File No.
001-12405) and incorporated herein by reference)<F*>
10.21 First Amendment to Magna Board of Directors Retirement Plan (filed as Exhibit
10.3 to Magna's Quarterly Report on Form 10-Q for the period ended September 30,
1996 (File No. 001-12405) and incorporated herein by reference)<F*>
10.22 Executive Supplemental Deferral Plan (filed as Exhibit 10.12 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1987 (File No. 001-12405)
and incorporated herein by reference)<F*>
10.23 Form of Director Indemnification Agreement dated as of May 30, 1991 between
Landmark and Donald P. Gallop, Carl G. Hogan, Sr., Franklin A. Jacobs and Ralph
F. Korte, respectively, and Consent dated May 24, 1991 of Magna to Director
Indemnification Agreements dated May 30, 1991 assuming Landmark's obligations
thereunder upon effectiveness of the acquisition (filed as Exhibit 10.14 to
Magna's Annual Report on Form 10-K for the year ended December 31, 1991 (File
No. 001-12405) and incorporated herein by reference)<F*>
10.24 Magna Amended and Restated Directors' Stock Option Plan (filed as Exhibit 10.33
to Magna's Registration Statement on Form S-4 (Reg. No. 333-17797) and
incorporated herein by reference)<F*>
20
<PAGE> 21
<CAPTION>
EXHIBIT INDEX--(CONTINUED)
<C> <S>
10.25 Magna Amended and Restated 1996 Directors' Stock Option Plan (filed as Exhibit
10.34 to Magna's Registration Statement on Form S-4 (Reg. No. 333-17797) and
incorporated herein by reference)<F*>
10.26 Magna Amended and Restated 1992 Long Term Performance Plan (filed as Exhibit
10.35 to Magna's Registration Statement on Form S-4 (Reg. No. 333-17797) and
incorporated herein by reference)<F*>
10.27 Magna Amended and Restated 1996 Long Term Performance Plan (filed as Exhibit
10.36 to Magna's Registration Statement on Form S-4 (Reg. No. 333-17797) and
incorporated herein by reference)<F*>
10.28 Amendment to Supplemental Executive Retirement Plan of Magna (filed as Exhibit
10.25 to Magna's Quarterly Report on Form 10-Q for the period ended June 30,
1994 (File No. 001-12405) and incorporated herein by reference)<F*>
10.29 Supplemental Executive Retirement Plan of Magna (filed as Exhibit 10.15 to
Magna's Annual Report on Form 10-K for the year ended December 31, 1993 (File
No. 001-12405) and incorporated herein by reference)<F*>
10.30 Magna Executive Incentive Compensation Plan (MEICP) 1997<F*>
10.31 Amended and Restated Retirement and Consulting Agreement dated December 30, 1994
between Magna and William S. Badgley (filed as Exhibit 10.24 to Magna's Annual
Report on Form 10-K for the year ended December 31, 1994 (File No. 001-12405)
and incorporated herein by reference)
10.32 Lease between Magna as successor in interest to Landmark, and St. Louis
Brentwood Associates, L.P., dated December 19, 1986, relating to Magna Place, as
amended by the First Amendment dated November 17, 1987, the Addendum dated
February 1, 1990 and the Letter Agreement dated January 9, 1992 (filed as
Exhibit 10.17 to Magna's Annual Report on Form 10-K for the year ended December
31, 1991 (File No. 001-12405) and incorporated herein by reference)
10.33 Stock Purchase Agreement dated March 27, 1992, by and among Capital Bancorpora-
tion, Inc., Magna and Landmark Acquisition Corporation, and amendment thereto
(filed as Exhibit 2.1 to Magna's Registration Statement on Form S-3 (Reg. No.
33-48918) and incorporated herein by reference)
10.34 Supplemental Agreement dated February 29, 1996, between Magna and John G.
Helmkamp, Jr. (filed as Exhibit 10.26 to Magna's Annual Report on Form 10-K for
the year ended December 31, 1995 (File No. 001-12405) and incorporated herein by
reference)<F*>
10.35 Severance Agreement dated March 5, 1997 between Magna and Erl A. Schmiesing<F*>
10.36 Loan Agreement dated as of December 30, 1996, between Magna and unaffiliated
lender
10.37 First Amendment to Loan Agreement dated as of March 5, 1997 among Magna and
unaffiliated lenders
11.1 Computation of Net Income Per Common Share
13.1 1996 Annual Report to Stockholders
21.1 List of Subsidiaries
23.1 Consent of Independent Auditors
27.1 Financial Data Schedule
<FN>
- - --------
<F*>Management contract or compensatory plan
</TABLE>
21
<PAGE> 1
MAGNA GROUP, INC.
AGREEMENT
---------
This agreement ("Agreement") has been entered into this
24th day of March, 1997, by and between Magna Group, Inc.,
a Delaware corporation ("Company"), and Linda K. Fabel, an individual
("Executive").
RECITALS
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its
stockholders to reinforce and encourage the continued attention and
dedication of the Executive to the Company as a member of the
Company's management (including, if applicable, management of a
wholly owned subsidiary) and to assure that the Company will have
the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change in Control (as
defined below) of the Company. The Board desires to provide for
the continued employment of the Executive on the terms hereof, and
the Executive is willing to commit to continue to serve the
Company. Additionally, the Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending or
threatened Change in Control, to encourage the Executive's full
attention and dedication to the Company currently and in the event
of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon the
breach of this Agreement by the Employer or upon a termination of
employment after a Change in Control which ensure that the
compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the
following words and phrases, whether or not capitalized, shall have
the meanings specified below, unless the context plainly requires
a different meaning.
1.1(a) "ANNUAL BASE SALARY" means the
dollar amount 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 March 1,
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;
-5-
<PAGE> 6
(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:
-6-
<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
-7-
<PAGE> 8
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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<PAGE> 9
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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<PAGE> 10
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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<PAGE> 11
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:
-------------------
Linda K. Fabel
16512 Kingspointe Lake Lane
Chesterfield, Missouri 63005
Notice to Company:
-----------------
Magna Group, Inc.
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any
amounts payable under this Agreement such Federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
8.4 WAIVER. The Executive's or the Company's failure to
insist upon strict compliance with any provision hereof or any
other provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 3.5 shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of
this Agreement shall supersede all other employment or other
agreements with respect to severance entered into by and between
the Executive and the Company, or the Executive and any other
employer, and this Agreement shall constitute the sole agreement
pursuant to which the Company shall have an obligation to the
Executive upon the termination of the Executive's relationship with
the Company or any subsidiary.
IN WITNESS WHEREOF, the Executive and the Company, pursuant
to the authorization from its Board, have caused this Agreement to
be executed in its name on its behalf, all as of the day and year
first above written.
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<PAGE> 12
/s/ Linda K. Fabel
--------------------------------------------
Executive
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
------------------------------------------
Name: G. Thomas Andes
Title: Chairman of the Board, President and
Chief Executive Officer
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<PAGE> 1
MAGNA GROUP, INC.
AGREEMENT
---------
This agreement ("Agreement") has been entered into this
24th day of March, 1997, by and between Magna Group, Inc.,
a Delaware corporation ("Company"), and Robert J. Mathias, 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 March 1,
1997.
1.1(h) "EXCHANGE ACT" means the Securities
Exchange Act of 1934, as amended.
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<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.
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<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.
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<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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<PAGE> 6
(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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<PAGE> 8
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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<PAGE> 9
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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<PAGE> 10
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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<PAGE> 11
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 J. Mathias
7214 Creveling Drive
St. Louis, Missouri 63130-4123
Notice to Company:
-----------------
Magna Group, Inc.
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any
amounts payable under this Agreement such Federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
8.4 WAIVER. The Executive's or the Company's failure to
insist upon strict compliance with any provision hereof or any
other provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 3.5 shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of
this Agreement shall supersede all other employment or other
agreements with respect to severance entered into by and between
the Executive and the Company, or the Executive and any other
employer, and this Agreement shall constitute the sole agreement
pursuant to which the Company shall have an obligation to the
Executive upon the termination of the Executive's relationship with
the Company or any subsidiary.
IN WITNESS WHEREOF, the Executive and the Company, pursuant
to the authorization from its Board, have caused this Agreement to
be executed in its name on its behalf, all as of the day and year
first above written.
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<PAGE> 12
/s/ Robert J. Mathias
--------------------------------------------
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
24th day of March, 1997, by and between Magna Group, Inc.,
a Delaware corporation ("Company"), and Gary D. Hemmer, an individual
("Executive").
RECITALS
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its
stockholders to reinforce and encourage the continued attention and
dedication of the Executive to the Company as a member of the
Company's management (including, if applicable, management of a
wholly owned subsidiary) and to assure that the Company will have
the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change in Control (as
defined below) of the Company. The Board desires to provide for
the continued employment of the Executive on the terms hereof, and
the Executive is willing to commit to continue to serve the
Company. Additionally, the Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending or
threatened Change in Control, to encourage the Executive's full
attention and dedication to the Company currently and in the event
of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon the
breach of this Agreement by the Employer or upon a termination of
employment after a Change in Control which ensure that the
compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the
following words and phrases, whether or not capitalized, shall have
the meanings specified below, unless the context plainly requires
a different meaning.
1.1(a) "ANNUAL BASE SALARY" means the
dollar amount 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 March 1,
1997.
1.1(h) "EXCHANGE ACT" means the Securities
Exchange Act of 1934, as amended.
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<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.
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<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.
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<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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<PAGE> 6
(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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<PAGE> 8
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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<PAGE> 9
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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<PAGE> 10
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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<PAGE> 11
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:
-------------------
Gary D. Hemmer
24 Barrett Court
Swansea, Illinois 62221
Notice to Company:
-----------------
Magna Group, Inc.
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any
amounts payable under this Agreement such Federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
8.4 WAIVER. The Executive's or the Company's failure to
insist upon strict compliance with any provision hereof or any
other provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 3.5 shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of
this Agreement shall supersede all other employment or other
agreements with respect to severance entered into by and between
the Executive and the Company, or the Executive and any other
employer, and this Agreement shall constitute the sole agreement
pursuant to which the Company shall have an obligation to the
Executive upon the termination of the Executive's relationship with
the Company or any subsidiary.
IN WITNESS WHEREOF, the Executive and the Company, pursuant
to the authorization from its Board, have caused this Agreement to
be executed in its name on its behalf, all as of the day and year
first above written.
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/s/ Gary D. Hemmer
--------------------------------------------
Executive
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
------------------------------------------
Name: G. Thomas Andes
Title: Chairman of the Board, President and
Chief Executive Officer
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<PAGE> 1
MAGNA GROUP, INC.
AGREEMENT
---------
This agreement ("Agreement") has been entered into this
24th day of March, 1997, by and between Magna Group, Inc.,
a Delaware corporation ("Company"), and Ronald A. Buerges, an individual
("Executive").
RECITALS
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its
stockholders to reinforce and encourage the continued attention and
dedication of the Executive to the Company as a member of the
Company's management (including, if applicable, management of a
wholly owned subsidiary) and to assure that the Company will have
the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change in Control (as
defined below) of the Company. The Board desires to provide for
the continued employment of the Executive on the terms hereof, and
the Executive is willing to commit to continue to serve the
Company. Additionally, the Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending or
threatened Change in Control, to encourage the Executive's full
attention and dedication to the Company currently and in the event
of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon the
breach of this Agreement by the Employer or upon a termination of
employment after a Change in Control which ensure that the
compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the
following words and phrases, whether or not capitalized, shall have
the meanings specified below, unless the context plainly requires
a different meaning.
1.1(a) "ANNUAL BASE SALARY" means the
dollar amount approved by the 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 March 1,
1997.
1.1(h) "EXCHANGE ACT" means the Securities
Exchange Act of 1934, as amended.
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<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.
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<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.
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<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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<PAGE> 6
(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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<PAGE> 8
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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<PAGE> 9
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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<PAGE> 10
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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<PAGE> 11
on the January 1 following the date notice is given and ending the
following December 31. Notwithstanding the foregoing, in the event a
Change in Control shall have occurred, this Agreement shall terminate
two (2) years after a Change in Control Date.
SECTION 8: MISCELLANEOUS.
8.1 NOTICE. For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered
or mailed by certified or registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses
as set forth below; provided that all notices to the Company shall
be directed to the attention of the Chairman of the Board of the
Company with a copy to the Secretary of the Company, or to such
other address as one party may have furnished to the other in
writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
Notice to Executive:
-------------------
Ronald A. Buerges
13328 Bahnfyre
St. Louis, Missouri 63128
Notice to Company:
-----------------
Magna Group, Inc.
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any
amounts payable under this Agreement such Federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
8.4 WAIVER. The Executive's or the Company's failure to
insist upon strict compliance with any provision hereof or any
other provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 3.5 shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of
this Agreement shall supersede all other employment or other
agreements with respect to severance entered into by and between
the Executive and the Company, or the Executive and any other
employer, and this Agreement shall constitute the sole agreement
pursuant to which the Company shall have an obligation to the
Executive upon the termination of the Executive's relationship with
the Company or any subsidiary.
IN WITNESS WHEREOF, the Executive and the Company, pursuant
to the authorization from its Board, have caused this Agreement to
be executed in its name on its behalf, all as of the day and year
first above written.
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/s/ Ronald A. Buerges
--------------------------------------------
Executive
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
------------------------------------------
Name: G. Thomas Andes
Title: Chairman of the Board, President and
Chief Executive Officer
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<PAGE> 1
MAGNA GROUP, INC.
AGREEMENT
---------
This agreement ("Agreement") has been entered into this
24th day of March, 1997, by and between Magna Group, Inc.,
a Delaware corporation ("Company"), and Robert M. Olson, Jr., an individual
("Executive").
RECITALS
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its
stockholders to reinforce and encourage the continued attention and
dedication of the Executive to the Company as a member of the
Company's management (including, if applicable, management of a
wholly owned subsidiary) and to assure that the Company will have
the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change in Control (as
defined below) of the Company. The Board desires to provide for
the continued employment of the Executive on the terms hereof, and
the Executive is willing to commit to continue to serve the
Company. Additionally, the Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending or
threatened Change in Control, to encourage the Executive's full
attention and dedication to the Company currently and in the event
of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon the
breach of this Agreement by the Employer or upon a termination of
employment after a Change in Control which ensure that the
compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the
following words and phrases, whether or not capitalized, shall have
the meanings specified below, unless the context plainly requires
a different meaning.
1.1(a) "ANNUAL BASE SALARY" means the
dollar amount 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 March 1,
1997.
1.1(h) "EXCHANGE ACT" means the Securities
Exchange Act of 1934, as amended.
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<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.
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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.
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<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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<PAGE> 6
(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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<PAGE> 8
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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<PAGE> 9
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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<PAGE> 10
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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<PAGE> 11
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 M. Olson, Jr.
17706 Gingertree Court
Chesterfield, Missouri 63005
Notice to Company:
-----------------
Magna Group, Inc.
1401 South Brentwood Blvd
St. Louis, Missouri 63144
8.2 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
8.3 WITHHOLDING. The Company may withhold from any
amounts payable under this Agreement such Federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
8.4 WAIVER. The Executive's or the Company's failure to
insist upon strict compliance with any provision hereof or any
other provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 3.5 shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
8.5 EFFECT ON OTHER EMPLOYMENT AGREEMENTS. The terms of
this Agreement shall supersede all other employment or other
agreements with respect to severance entered into by and between
the Executive and the Company, or the Executive and any other
employer, and this Agreement shall constitute the sole agreement
pursuant to which the Company shall have an obligation to the
Executive upon the termination of the Executive's relationship with
the Company or any subsidiary.
IN WITNESS WHEREOF, the Executive and the Company, pursuant
to the authorization from its Board, have caused this Agreement to
be executed in its name on its behalf, all as of the day and year
first above written.
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<PAGE> 12
/s/ Robert M. Olson, Jr.
--------------------------------------------
Executive
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
------------------------------------------
Name: G. Thomas Andes
Title: Chairman of the Board, President and
Chief Executive Officer
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<PAGE> 1
[LOGO] MAGNA
GROUP, INC.
MAGNA EXECUTIVE INCENTIVE COMPENSATION PLAN
(MEICP)
1997
<PAGE> 2
1. PURPOSE OF THE PLAN
-------------------
The purpose of the Magna Executive Incentive Compensation
Plan (MEICP) is to maximize the efficiency and effectiveness
of Magna Group, Inc. operations by providing significant,
incentive compensation opportunities to certain key
executives. The Plan is intended to:
/ / Attract, retain and motivate key executives;
/ / Link compensation to performance;
/ / Shift part of future compensation expense from
fixed to variable; and
/ / Reinforce Company and Subsidiary objectives.
This Plan is designed to provide significant incentive
compensation opportunities and presumes a market
competitive base salary program. Incentive Awards made
under the Plan are in addition to Base Salary and Base
Salary adjustments awarded to maintain market
competitiveness.
2. DEFINITIONS, GENDER AND NUMBER
------------------------------
2.1 Definitions
-----------
Whenever used herein, the following terms shall have
their respective meanings set forth below:
A. "BOARD" means the Board of Directors of Magna
Group, Inc. or any Committee thereof as designated
by the Board.
B. "CHIEF EXECUTIVE OFFICER" or "CEO" means the Chief
Executive Officer of Magna Group, Inc.
C. "COMPANY" means the Magna Group, Inc.
D. "EARNINGS PER SHARE (EPS)" means primary earnings
available to common shareholders, after deducting
preferred stock dividend requirements, divided by
the average number of common share and common share
equivalents outstanding.
E. "INCENTIVE AWARD" is the cash bonus, expressed as a
percentage of Base Salary, received by Participants
in this Plan when expected performance results are
attained. Awards shall be calculated as provided
in Paragraph 7 of the Plan.
F. "NET INCOME" is the final, bottom line profit from
all sources, after taxes and all adjustments,
during the period.
<PAGE> 3
G. "PARTICIPANT" means an executive of Magna Group,
Inc. or one of the Subsidiary organizations who is
eligible to participate in the Plan.
H. "PERFORMANCE PERCENTAGE" means the percentage of
each Participant's portion of the total award to be
received from performance of the Company and the
Individual. The Performance Percentage is assigned
to each Participant by the CEO and approved by the
Board prior to the beginning of each Plan Year.
I. "PLAN" means this Magna Executive Incentive
Compensation Plan, as amended periodically by the
Board.
J. "RESPONSIBILITY FACTOR PERCENTAGE" is an assigned
responsibility factor expressed as a percentage to
represent a Participant's level of responsibility.
The Responsibility Factor Percentage is assigned to
each Participant by the CEO and approved by the
Board prior to the beginning of each Plan Year.
K. "BASE SALARY" means the base rate of compensation
paid to a Participant by the Company for the year
and excludes all other forms of compensation such
as benefits, pension contributions and other cash
payments.
L. "SUBSIDIARY" means a wholly-owned subsidiary entity
of Magna Group, Inc.
M. "YEAR" or "PLAN YEAR" means the Company's fiscal
year.
2.2 Gender and Number
-----------------
Except when otherwise indicated by the context, words in
the masculine gender, when used in the Plan, shall
include the feminine gender, the singular shall include
the plural, and the plural shall include the singular.
3. ADMINISTRATION
--------------
The Plan is administered by the Board. The Board has the
sole authority to:
/ / Approve Plan Participants.
/ / Approve Participant Incentive Awards as
determined under the Plan.
/ / Approve the Responsibility Factor Percentage
for each Participant.
/ / Approve the projected Company and Subsidiary
performance levels.
/ / Approve the Entity Designation Percentage for
each Participant.
<PAGE> 4
The Board also has the sole authority to make any
decisions to administer the Plan or otherwise operate the
Plan, establish any rules or regulations relating to the
Plan and to make any other determinations necessary to
administer the Plan. All modifications or amendments to
the Plan shall be approved by the Board. All actions,
determinations and decisions made by the Board will be
final, conclusive and binding upon all parties concerned.
Any action or recommendation by the Board will be based
on a majority of those members verbally expressing their
vote at a meeting, or in writing without a meeting. Any
officer may not participate in any way in any decisions
affecting his personal Incentive Award. Individuals
serving as Board members will not be liable in any way to
any Participant or his designated beneficiaries as a
result of decisions rendered in the proper administration
of the Plan.
4. PARTICIPATION
-------------
In addition to the CEO, Participants in the Plan are
those executives who have a major impact on the overall
operations of the Company and/or Subsidiary. The Board
may add or delete Participants from the Plan at any time.
Participants who terminate due to death, disability, or
retirement during a Plan Year, will have their
participation for the year of termination determined on
an individual basis by the Board. All other Participants
who terminate during that year will forfeit their awards
for the entire year.
Individuals employed in the Plan Year will have their
participation for the year determined on an individual
basis by the Board.
Participants who have responsibility changes during the
year or who enter or exit the Plan will have their award
adjusted on a pro rata basis determined by the time spent
in each position of responsibility.
Participants are to be approved by the Board prior to the
beginning of the Year during which they are a
Participant.
<PAGE> 5
5. RESPONSIBILITY FACTOR PERCENTAGE
--------------------------------
Each Participant will be assigned a Responsibility Factor
Percentage for calculation of the Incentive Award. This
percentage will be based on each Participant's level of
responsibility and potential impact on corporate
profitability. Assignment of the Responsibility Factor
Percentage will be approved by the Board prior to the
beginning of each Plan Year. A guideline for the
Responsibility Factor Percentages by Participant class
appear below.
<TABLE>
<CAPTION>
Level Participants % of Salary
---- ------------ -----------
<C> <S> <C>
I. Chairman and Chief Executive Officer. . . . . . . . . 65
II. Executive Vice Presidents (Division Manager). . . . . 50
III. Other Executive Vice Presidents . . . . . . . . . . . 45
IV. Community Presidents. . . . . . . . . . . . . . . . .
Deposits Over 1 Billion . . . . . . . . . . . . . . 40
Deposits Over $500M-$999M . . . . . . . . . . . . . 35
Deposits Over $100M - $499M . . . . . . . . . . . . 30
Deposits Under $100M. . . . . . . . . . . . . . . . 25
V. Regional Loan Managers. . . . . . . . . . . . . . . . 40
VI. Subsidiary/Division Presidents . . . . . . . . . . . 35
VII. Other Selected Executives . . . . . . . . . . . . . . 30
VIII. Subsidiary Officers . . . . . . . . . . . . . . . . . 25
IX. New Participants . . . . . . . . . . . . . . . . . . 10
</TABLE>
If a Participant changes positions during the year such
that the Responsibility Factor Percentage is changed, the
award target will be pro rated amounts to reflect the time
served in each position. The Community Presidents
Responsibility factor will be determined based on data
associated with deposit size of their respective region
as of the beginning of the plan year.
6. PERFORMANCE PERCENTAGE
----------------------
A Participant's annual Incentive Award is determined based
on two factors: 1) Company Performance and 2) Individual
Performance. Magna Trust Company and MGI-Investments
participants have an additional factor based upon their
Subsidiary Performance.
Each Participant is assigned Entity Designation
Percentages which determine the portion of his Incentive
Award which is derived from Company Performance,
Subsidiary Performance and Individual Performance. The
assignments for 1997 are shown on the following page.
<PAGE> 6
<TABLE>
Percentage of Incentive Award Determined by:
<CAPTION>
Company Individual Subsidiary
Performance Performance Performance
----------- ----------- -----------
<S> <C> <C> <C>
I. Chairman, CEO, 80 20
and EVP's
II. Corporate Officers 80 20
III. Magna Staff Officers 80 20
IV. Magna Trust Company, 20 20 60
Magna Investments, Magna
Finance, Magna Student Loans
</TABLE>
Entity Designation Percentages shall be reviewed annually
and updated prior to the beginning of the Plan Year.
Performance goals for the Company and Subsidiaries are
based upon the earnings projections as approved by the
Board, which may be adjusted during the Plan Year at the
Board's discretion. Company Performance is based on EPS.
Performance indices shall be prepared to establish the
award levels corresponding to various performance levels.
The CEO will have the responsibility of recommending
several Individual Performance goals for each Executive
Vice President. Each Executive Vice President will, in
turn, recommend several Individual Performance goals for
his officers who are Participants.
All Individual Performance goals will be reviewed for
approval by the Board and communicated to the Participants
in order to allow them sufficient time to focus on these
objectives.
7. CALCULATION OF INCENTIVE AWARD
------------------------------
The Incentive Award is equivalent to the Company
Performance Percentage plus the Individual Performance
Percentage times the Participant's Responsibility Factor
Percentage times the Participant's Base Salary for the
Plan Year.
At the discretion of the CEO, each Participant's
calculated award may be reduced or increased by maximum
of twenty percent (20%) of the award amount to reflect the
quantity and quality of Individual Effort.
<PAGE> 7
However, no Incentive Awards will be paid if the Company does
not achieve a minimum performance level, defined as 95% of the
EPS target.
8. PAYMENT OF AWARD
----------------
Incentive Awards shall be payable as soon as practicable after
the end of the Plan Year, following verification of the
accuracy of all awards by the Company's external auditor and
approval of the Board. Participants will receive payment in
two forms: 75% of the Incentive Award will be paid in cash and
25% of the Incentive Award will be paid in restricted shares
of Magna common stock. The number of shares will be based on
the average closing price of stock the last 20 trading days of
the plan year. However, if the number of shares to be
distributed to an individual is determined to be less than 10,
the full award will be paid in cash. Dividends and voting
rights will be passed through to Participants immediately;
however, Participants may not sell the shares for five years,
when the restrictions lapse. Magna Group, Inc. is not liable
for payment of any interest upon any Incentive Award.
9. TERMINATION OF EMPLOYMENT
-------------------------
In the event that a Participant shall cease to be employed by
the Company or any Subsidiary during the Plan Year for any
reason other than death, disability or retirement, then such
Participant shall forfeit all rights to receive Incentive
Awards that would otherwise be calculated for the Plan Year.
In the event a Participant terminates by reason of death,
disability or retirement, his participation and Incentive
Award calculation shall be determined in the discretion of the
Board. The Board shall also determine what terminations shall
constitute disability or retirement.
10. MISCELLANEOUS PROVISIONS
------------------------
A. The granting of Incentive Awards to Participants under
the provisions of the Plan represents only an interest to
receive compensation. Nothing in the Plan shall be
deemed to give any Participant or any person or entity
claiming under or through him, any contract or right to
participate in the benefits of the Plan. Furthermore,
the Plan grants no right to, or interest in, either
express or implied, any equity position or ownership in
the Company or any Subsidiary.
B. The Plan is not a contract of employment. Accordingly,
neither the establishment of the Plan nor the awarding of
any Incentive Awards under the Plan shall interfere with
or limit in any way the right of the Company, or
Subsidiary, as the case may be, to terminate any
Participant's employment, nor confer upon any Participant
any right to continue in the employ of the Company or
Subsidiary.
C. The Board may at any time terminate the Plan, and from
time to time may amend or modify it, provided that no
such action shall adversely affect any
<PAGE> 8
right or obligation with respect to any Incentive Awards
theretofore granted.
D. A Participant's rights, benefits, and interest under the
Plan shall not be subject to alienation, assignment,
transfer, garnishment, execution or levy of any kind.
E. Payments under the Plan shall be subject to applicable
federal, state, and local tax withholding requirements.
F. The Plan shall be unfunded. The Company shall not be
required to segregate any assets to pay Incentive Awards.
Any liability of the Company to pay any Participant with
respect to Incentive Awards shall be based solely upon
the written provisions of this Plan; no such obligation
shall be deemed to be secured by any pledge or
encumbrance on any property of the Company.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed in its name and behalf on this 18th day of December,
1996 by its officers thereunto duly authorized.
MAGNA GROUP, INC.
By: /s/ G. Thomas Andes
--------------------------------
<PAGE> 9
ADDENDUM
ANNUAL AWARD CALCULATION
------------------------
A Participant's Incentive Award is determined by the achievement of
annual goals subject to organizational and environmental
constraints. At the beginning of the Plan Year each Participant
will develop mutually acceptable goals with the executive to whom
he reports.
A. COMPANY PERFORMANCE PERCENTAGE
------------------------------
The Company goal will be established at the beginning of the
Plan year and communicated to the management team.
Company performance awards will be based on EPS. A
performance index will be established and award levels will be
determined by straight-line interpolation between minimum and
maximum performance levels.
B. INDIVIDUAL PERFORMANCE PERCENTAGE
---------------------------------
The CEO will have the responsibility of recommending several
Individual Performance goals for each Executive Vice
President. Each Executive Vice President will, in turn,
recommend several Individual Performance goals for his
officers who are Participants.
All Individual Performance goals will be reviewed for approval
by the Board and communicated to the Participants in order to
allow them sufficient time to focus on these objectives.
As soon as practical after the end of the Plan Year,
Individual Performance will be reviewed by the responsible
executive to evaluate the level at which individual goals were
met. In the case of the CEO, the Board will evaluate
performance.
The evaluator will take into account the accomplishment of
goals involving capital to asset ratio, loan delinquencies and
loan loss reserve positions, non-interest income and non-
interest expense accomplishments, staff utilization,
organizational development, management succession planning,
employee relations and others, as well as how effectively
unforeseen difficulties and unexpected opportunities which
developed during the year were addressed. Individual
performance should be reviewed at least annually, but more
frequently if appropriate.
C. INCENTIVE AWARD CALCULATION
---------------------------
Incentive Awards are calculated for each Participant in the
following manner:
<PAGE> 10
Step 1 Performance %
------ -------------
Add the award percentages determined by evaluating
Company, Subsidiary and Individual Performance:
(Company Performance Index X Participant %) +
(Subsidiary Performance Index X Participant %) +
(Individual Performance Index X Participant %) = Award %
(expressed as a decimal fraction)
Step 2 Responsibility Factor
------ ---------------------
Multiply the Award % (expressed as a decimal fraction)
times the Responsibility Factor (expressed as a decimal
-----
fraction) times the Base Salary to calculate the
-----
Incentive Award.
------- X --------------------- X $----------- = $---------
Award % Responsibility Factor Base Salary Award
<PAGE> 1
[letterhead of Magna Group, Inc.]
March 5, 1997
Mr. Erl A. Schmiesing
Chief Executive Officer
Homeland Bankshares Corporation
229 East Park Avenue
Waterloo, Iowa 57304
Dear Erl:
This letter agreement serves to formalize our agreement with
respect to your future relationship with Magna Group, Inc.
("Magna") following the combination of Homeland Bankshares
("Homeland") and Magna pursuant to the Merger Agreement between
Magna and Homeland dated as of August 30, 1996 (the "Merger
Agreement"). Terms not otherwise defined herein shall have the
meanings ascribed to them in the Merger Agreement.
Commencing on the Closing Date of Magna's acquisition of
Homeland, you will be elected as a member of the Board of Directors
of Magna Group, Inc. and will continue as a member of the Board
until the third annual anniversary of the Closing Date. As a
director, you agree to meet the usual responsibilities as a
director in promoting banking, trust, and correspondent business
for Magna and to report on any business development or other
director-related activities to G. Thomas Andes, the Chief Executive
Officer.
Effective on the Closing Date, you will retire as an officer
and employee of Homeland, and you agree to resign your positions as
Chairman, President, and Chief Executive Officer of Homeland
Bankshares Corporation and Chairman of Homeland Bank, N.A.,
Homeland Bank (Indianola), Homeland Bank (Oelwein), Homeland Bank
(Monticello) and Homeland Bank FSB (collectively known as
Homeland).
In lieu of the provisions of your October 15, 1992 Severance
Agreement between you and Iowa National Bankshares Corporation as
to severance payments due upon a Change of Control, you agree to
accept an annual amount of $261,714 for three years beginning July
1, 1997. Since you wish to be paid on a quarterly basis, the
quarterly payments will be $65,428.50 beginning July 1, 1997 and
continuing for three years. In the event of your death before the
payments to you have been completed, the remaining balance of
payments will be made to your assignee or estate, in the event no
assignment has been made by you.
All payments owed to you pursuant to the terms of the Homeland
Bankshares Corporation Pension Plan and Trust and the Homeland
Bankshares Corporation Profit Sharing and 401(k) Plan will be
honored. Magna will also pay your sick leave accumulated up to
March 1,1997 per Homeland policy, which is $67,063. In addition,
Magna will pay for any
<PAGE> 2
Mr. Erl A. Schmiesing
March 5, 1997
Page 2
vacation time not used per Homeland/Magna policy. This amount is
$20,522. Both lump sum payments will be made to you within thirty
days of the Closing Date.
All payments owed to you under the Homeland Bankshares
Corporation Supplemental Retirement Income Plan ("SERP") dated June
20, 1995 will also be honored. You agree that pursuant to the
provisions of the SERP, your payments will be $94,039 annually for
fifteen years. In the event of your death before the payments to
you have been completed, the remaining balance of payments will be
made to your assignee or estate, in the event no assignment has
been made by you.
Magna agrees to pay for you to maintain your current country
club membership for three years after the Closing Date. Magna also
agrees to pay you $27,500, the value of the automobile previously
provided to you.
As of March 1, 1997 you and your spouse, individually or
jointly, shall be entitled from and after that date through March
of 2005, to be covered, at your sole cost and expense, under
Magna's major medical health insurance plan with such coverage to
be the same as or comparable to those that are in effect during
said period for the officers of Magna and their dependents.
Magna shall, at its expense, provide you with an office and
telephone at a location agreed to by the Chief Executive Officer of
Magna, from the Closing Date until the third anniversary of the
Closing Date; provided, however, you shall have no authority over
any employee or officer of Magna.
This agreement contains the entire agreement between Magna and
you and supersedes and replaces any existing oral or written
agreements between you and Magna or Homeland Bankshares Corporation
(or any subsidiary or predecessor of either corporation) respecting
your employment, its termination, or benefits or rights in the
event of a change of control or employment termination. All such
prior or existing agreements are terminated, and neither party
shall have any further rights thereunder.
Beginning on your Retirement Date (March 1, 1997) and
continuing through the period ending three years after you cease to
be a member of the Magna Group, Inc. Board of Directors, you shall
not, without the prior written approval of the Magna Board of
Directors, become an officer, employee, agent, partner or director
of any business enterprise in substantial direct competition (as
hereinafter defined) with Magna. For purposes of this section, a
business enterprise with which you become associated as an officer,
employee, agent, partner or director shall be considered in
substantial direct competition with Magna if such entity (i)
competes with Magna in any business in which Magna is engaged as of
your Retirement Date or at any time during the period described
above and (ii) is within Magna's market area (as defined herein).
Magna's market area is defined for this purpose as the area which
constitutes central and southern Illinois, the eastern one-half of
the State of Missouri,
<PAGE> 3
Mr. Erl A. Schmiesing
March 5, 1997
Page 3
and the eastern one-half of the State of Iowa; and, if Magna
becomes the successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) after the date hereof to all
or substantially all of the business and/or assets of another
business enterprise, it is also the geographical areas in which
such predecessor business enterprise conducts substantial business
activity.
This agreement may be executed in counterparts.
If you have any questions on the provisions of this agreement,
please give me a call at (314) 963-3005.
Sincerely,
/s/ G. Thomas Andes
G. Thomas Andes
Chairman of the Board and
Chief Executive Officer
Accepted On March 6, 1997
By /s/ Erl A. Schmiesing
--------------------------------
<PAGE> 1
================================================================================
LOAN AGREEMENT
DATED AS OF DECEMBER 30, 1996
AMONG
MAGNA GROUP, INC.
AND
LASALLE NATIONAL BANK
THE LENDERS FROM TIME
TO TIME PARTIES HERETO
AND
LASALLE NATIONAL BANK
AS AGENT
================================================================================
<PAGE> 2
<TABLE>
INDEX
-----
<CAPTION>
Page No.
--------
<S> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1
1.1 General Terms. . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . 11
1.3 Certain Matters of Construction. . . . 12
2. LOANS; FEES; TERMS OF PAYMENT . . . . . . . . . . . . 12
2.1 Revolving Credit Facility . . . . . . 12
2.2 Term Loan. . . . . . . . . . . . . . . 12
2.3 Borrowing Procedures . . . . . . . . . 13
2.4 Payments and Prepayments . . . . . . . 14
2.5 Pro Rata Treatment.. . . . . . . . . . 15
2.6 Non-Receipt of Funds by the Agent. . . 15
2.7 Sharing of Payments, Etc.. . . . . . . 16
2.8 Interest . . . . . . . . . . . . . . . 17
2.9 Fees . . . . . . . . . . . . . . . . . 19
2.10 Agent Monthly Statements . . . . . . . 20
2.11 Payment Dates. . . . . . . . . . . . . 20
2.12 Regulations Affecting Loans. . . . . . 20
2.13 Renewals: Conversion and Continuation
of Revolving Loans . . . . . . . . . . 21
2.14 Indemnity. . . . . . . . . . . . . . . 22
2.15 Change in Legality . . . . . . . . . . 22
2.16 Unavailability of Deposits or
Inability to Ascertain, or Inadequacy
of Libor Rate. . . . . . . . . . . . . 23
2.17 Increased Cost and Reduced Return. . . 24
2.18 Discretion of Lenders as to Manner of
Funding. . . . . . . . . . . . . . . . 25
3. TERM OF THIS AGREEMENT; PREPAYMENTS . . . . . . . . . 25
3.1 Term . . . . . . . . . . . . . . . . . 25
3.2 Prepayment; Termination. . . . . . . . 25
4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . 25
4.1 Closing; Conditions to Initial Loan and
Closing. . . . . . . . . . . . . . . . 26
4.2 Condition to All Loans . . . . . . . . 27
5. GENERAL CONTINUING WARRANTIES AND REPRESENTATIONS . . 28
5.1 Office . . . . . . . . . . . . . . . . 28
5.2 Existence. . . . . . . . . . . . . . . 29
5.3 Authority. . . . . . . . . . . . . . . 29
5.4 Validity . . . . . . . . . . . . . . . 29
5.5 No Breach . . . . . . . . . . . . . . 29
5.6 Solvency . . . . . . . . . . . . . . . 29
5.7 Compliance With Laws . . . . . . . . . 29
<PAGE> 3
5.8 Actions or Proceedings . . . . . . . . 30
5.9 Trademarks, Licenses, etc. . . . . . . 30
5.10 Financial Statements . . . . . . . . . 30
5.11 Conduct of Business. . . . . . . . . . 30
5.12 Environmental Laws . . . . . . . . . . 31
5.13 Permits and Licenses . . . . . . . . . 32
5.14 ERISA. . . . . . . . . . . . . . . . . 32
5.15 Other Names. . . . . . . . . . . . . . 32
5.16 Tax Obligations. . . . . . . . . . . . 33
5.17 Employee Controversies . . . . . . . . 33
5.18 Investment Company Act . . . . . . . . 33
5.19 Subsidiaries . . . . . . . . . . . . . 33
5.20 Full Disclosure. . . . . . . . . . . . 33
6. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . 34
6.1 Sale, Transfer or Encumbrance of Assets 34
6.2 Guaranties . . . . . . . . . . . . . . 34
6.3 Change in Business . . . . . . . . . . 34
6.4 Loans and Investments. . . . . . . . . 34
6.5 Affiliate Transactions . . . . . . . . 35
6.6 Consolidations, Mergers. . . . . . . . 35
6.7 Transactions Not in the Ordinary Course;
Liquidations . . . . . . . . . . . . . 35
6.8 Suspension of Business . . . . . . . . 36
6.9 Dividends, Distributions . . . . . . . 36
6.10 Unpermitted Uses of Loans. . . . . . . 36
6.11 ERISA. . . . . . . . . . . . . . . . . 36
7. AFFIRMATIVE COVENANTS - GENERAL. . . . . . . . . 36
7.1 Taxes. . . . . . . . . . . . . . . . . 36
7.2 Insurance. . . . . . . . . . . . . . . 36
7.3 Litigation . . . . . . . . . . . . . . 37
7.4 Books and Records. . . . . . . . . . . 37
7.5 Compliance with Laws . . . . . . . . . 37
7.6 Expense Reimbursements . . . . . . . . 38
7.7 ERISA Reportable Events. . . . . . . . 38
8. AFFIRMATIVE COVENANTS - REPORTING. . . . . . . . 38
8.1 Collateral Activity Report, Covenant
Compliance Certificates. . . . . . . . 38
8.2 Financial and Other Reports . . . . . 39
8.3 Accounting Information . . . . . . . . 41
8.4 Other Information and Changes. . . . . 41
9. COVENANTS - FINANCIAL. . . . . . . . . . . . . . 41
9.1 Non-Performing Assets to Total Equity
Capital. . . . . . . . . . . . . . . . 41
9.2 Capitalization . . . . . . . . . . . . 42
9.3 Capital Guidelines . . . . . . . . . . 42
ii
<PAGE> 4
9.4 Return on Average Assets . . . . . . . 42
9.5 Funded Debt to Total Equity Capital. . 42
9.6 Total Equity Capital . . . . . . . . . 42
10. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . 42
10.1 Payment. . . . . . . . . . . . . . . 42
10.2 Breach of Covenants. . . . . . . . . 43
10.3 Breach of Representation . . . . . . 43
10.4 Attachment or Levy . . . . . . . . . 43
10.5 Voluntary Insolvency . . . . . . . . 43
10.6 Involuntary Insolvency . . . . . . . 43
10.7 Injunction . . . . . . . . . . . . . 43
10.8 Governmental Lien. . . . . . . . . . 44
10.9 Judgment . . . . . . . . . . . . . . 44
10.10 Other Indebtedness . . . . . . . . . 44
10.11 ERISA Reportable Event . . . . . . . 44
11. RIGHTS AND REMEDIES. . . . . . . . . . . . . . . 44
11.1 Rights and Remedies Generally. . . . . 45
11.2 Rights Cumulative. . . . . . . . . . . 45
12. TAXES AND EXPENSES . . . . . . . . . . . . . . . 45
13. CERTAIN WAIVERS. . . . . . . . . . . . . . . . . 46
13.1 Application of Payments. . . . . . . . 46
13.2 Demand, etc. . . . . . . . . . . . . . 46
14. NOTICES. . . . . . . . . . . . . . . . . . . . . 46
15. AGENT. . . . . . . . . . . . . . . . . . . . . . 47
16. CHOICE OF LAW AND VENUE. . . . . . . . . . . . . 51
17. INDEMNITY. . . . . . . . . . . . . . . . . . . . 52
18. GENERAL PROVISIONS . . . . . . . . . . . . . . . 52
18.1 Acceptance . . . . . . . . . . . . . 52
18.2 Binding Agreement. . . . . . . . . . 52
18.3 Section Headings.. . . . . . . . . . 53
18.4 Construction . . . . . . . . . . . . 53
18.5 Severability . . . . . . . . . . . . 53
18.6 Entire Agreement . . . . . . . . . . 53
18.7 No Fiduciary Relationship or Joint
Venture. . . . . . . . . . . . . . . 53
18.8 Publicity. . . . . . . . . . . . . . 53
18.9 Counterparts . . . . . . . . . . . . 54
18.10 Conflict . . . . . . . . . . . . . . 54
19. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . 54
</TABLE>
iii
<PAGE> 5
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT, dated as of December 30, 1996, is
entered into among "Agent", "Lenders" and "Borrower"
(hereinafter defined).
R E C I T A L S:
---------------
A. Borrower has requested that Lenders make certain
revolving and term loan financing accommodations available to
Borrower, and Agent and Lenders are willing to make the
accommodations requested by Borrower upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the parties' mutual
agreements contained herein, the parties hereto agree as
follows:
1. DEFINITIONS
1.1 GENERAL TERMS
-------------
As used in this Agreement, the following terms shall have
the following definitions:
"AFFILIATE" shall mean any Person (a) that directly
-----------
or indirectly, through one or more intermediaries, controls or
is controlled by, or is under common control with Borrower,
(b) that directly or beneficially owns or holds five percent
(5%) or more of any class of the interests of Borrower,
(c) five percent (5%) or more of whose voting stock (or in the
case of a Person which is not a corporation, five percent (5%)
or more of the equity interest or economic value of which) is
owned directly or beneficially or held by Borrower, or (d) five
percent (5%) or more of whose voting stock (or in case of a
Person which is not a corporation, five percent (5%) or more of
the equity interest or economic value of which) is owned
directly or beneficially or held by a Person referred to in
(a), (b) or (c) above.
"AGENT" shall mean LaSalle National Bank in its
-----
separate capacity as agent for Lenders.
"APPLICABLE LENDING OFFICE" shall mean for Agent and
-------------------------
each Lender and for each loan or extension of credit hereunder,
the lending office of the Agent or Lender designated on the
signature pages hereof or such other office of such Lender as
such Lender may from time to time specify to the Agent and
Borrower in writing as the office by which its Loans are to be
made and maintained.
"AGREEMENT" shall mean this Loan Agreement, any and
---------
all exhibits or schedules thereto, any and all concurrent or
subsequent riders to this Loan Agreement and any extensions,
supplements, amendments, modifications or restatements to or of
this Loan Agreement and/or to or of any such rider.
<PAGE> 6
"ANNUALIZED NET INCOME" shall mean for any fiscal
---------------------
period, Borrower's actual year-to-date Consolidated Net Income
for such fiscal period divided by the actual number of days in
the year-to-date fiscal period, multiplied by the actual number
of days in Borrower's Fiscal Year during which such fiscal
period falls..
"AUTHORIZED REPRESENTATIVE" shall mean G. Thomas
-------------------------
Andes, Chairman of the Board and Chief Executive Officer, James
D. Jolley, Executive Vice President, Ronald Buerges, Executive
Vice President and Chief Financial Officer, Jon Henderson,
Senior Vice President and any other corporate officer
designated in writing to Agent by any of the aforementioned
officers.
"BANK SUBSIDIARY" means any insured depository
---------------
institution (within the meaning of 12 U.S.C. Section 1813(c),
as amended, supplemented or otherwise modified from time to
time, which is controlled (within the meaning of 12 U.S.C.
Section 1841, as amended, supplemented or otherwise modified
from time to time) by the Borrower or any Subsidiary of
Borrower.
"BENEFIT PLAN" shall mean an employee pension benefit
------------
plan of Borrower or an ERISA Affiliate, as defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA.
"BORROWER" shall mean Magna Group, Inc., a Delaware
----------
corporation, with its chief executive office and principal
place of business at 1401 S. Brentwood Boulevard, St. Louis,
Missouri 63144.
"BORROWER'S BOOKS" shall mean all of Borrower's books
------------------
and records including, but not limited to: minute books;
ledgers; records indicating, summarizing, or evidencing
Borrower's assets, liabilities, and all information relating
thereto; records indicating, summarizing, or evidencing
Borrower's business operations or financial condition; records
indicating, summarizing, or evidencing Borrower's compliance
with or problems or activities concerning Laws; and all
computer programs, disc or tape files, printouts, runs, and
other computer prepared information and the equipment
containing such information and any software necessary to
operate the same.
"BORROWER'S LOAN ACCOUNT" shall mean a loan account
-------------------------
maintained by Agent on its books in which shall be recorded (i)
all loans and advances made by Lenders to Borrower pursuant to
this Agreement, (ii) all payments made by Borrower on all such
loans and advances, and (iii) all other appropriate debits and
credits as provided in this Agreement, including, without
limitation, all Out-of-Pocket Fees and Costs and interest; all
such entries shall be made by Agent in accordance with Agent's
customary accounting practices as in effect from time to time.
"BUSINESS DAY" shall mean (a) any day other than a
--------------
Saturday, Sunday, or other day on which banks in Illinois are
required to be closed, and (b) relative to the making of
Eurodollar Loans, any day on which dealings in Dollars are
carried on in the interbank eurodollar market which also
satisfies the criteria set forth in (a) above.
2
<PAGE> 7
"CAPITAL EXPENDITURES" shall mean, with respect to
----------------------
any period, the aggregate of all expenditures (whether paid in
cash or accrued as liabilities and including expenditures for
capitalized lease obligations) by Borrower during such period
that are required by Generally Accepted Accounting Principles
to be included in or reflected by the property, plant, or
equipment or similar fixed asset accounts in the balance sheet
of Borrower.
"CHANGE OF CONTROL" shall mean a change in the direct
-------------------
or indirect power to direct or cause the direction of the
management and policies of a Person, whether through the
ownership of voting stock, by transfer of interests in any
partnership or limited liability company, by transfer of
interests in any partnership or limited liability company which
is an owner of voting stock, by contract or otherwise.
"CLOSING" shall have the meaning set forth in
---------
Section 4.1 hereof.
- - -----------
"CODE" shall mean the Uniform Commercial Code of the
------
State of Illinois as in effect from time to time during the
term hereof and any and all terms used in this Agreement which
are not otherwise defined herein but are defined in the Code
shall be construed and defined in accordance with the meaning
and definition ascribed to such terms under the Code.
"COMMITMENT" shall mean with respect to any Lender
------------
its Revolving Loan Commitment and Term Loan Commitment.
"COMMITMENTS" shall mean collectively the Revolving
-------------
Loan Commitments and the Term Loan Commitments.
"CONSOLIDATED FINANCIAL STATEMENTS" means the
---------------------------------
Consolidated Financial Statements for Bank Holding Companies
with Total Consolidated Assets of $150,000,000 or More, or With
More Than One Subsidiary Bank - FRY-9C, filed by Borrower with
the Regulatory Agencies, as such report may be amended or
modified from time to time, and any similar report required to
be filed by Borrower with any Regulatory Agency.
"CONSOLIDATED NET INCOME" means, for any period, the
-------------------------
consolidated net income of Borrower and its Subsidiaries during
such period, determined in a manner consistent with the
Generally Accepted Accounting Principles used in the
preparation of Borrower's quarterly report on Form 10-Q filed
with the Securities and Exchange Commission for Borrower's
fiscal quarter ended September 30, 1996.
"CONTRIBUTING SPONSOR" shall mean any person
----------------------
described in Section 4001(a)(13) of ERISA with respect to a
-------------------
Benefit Plan.
"CONVERSION DATE" shall have the meaning set forth in
-----------------
Section 2.2 hereof.
- - -----------
"DEFAULT RATE" shall have the meaning set forth in
--------------
Section 2.8(B) hereof.
- - --------------
3
<PAGE> 8
"DOLLAR(S)" and the sign "$" shall mean lawful
-----------
currency of the United States of America.
"EFFECTIVE DATE" shall mean the date on which the
----------------
conditions precedent for initial loans under Section 4
---------
hereof have been satisfied and the initial Revolving Loans have
been made.
"ENVIRONMENTAL LAWS" shall mean any applicable laws,
--------------------
statutes, rules, regulations, orders, consent decrees, permits
or licenses of any governmental authority, relating to
prevention, remediation, reduction or control of pollution, or
protection of the environment, natural resources and/or human
health and safety, including, without limitation, such
applicable laws, statutes, rules, regulations, orders, consent
decrees, permits or licenses relating to (a) solid waste and/or
Hazardous Materials treatment, storage, disposal, general and
transactions, (b) air, water, and noise pollution, (c) soil,
ground, water or groundwater contamination, (d) the generation,
handling, storage, transportation or Release into the
environment of Hazardous Materials, and (e) regulation of
underground and above ground storage tanks.
"ERISA" shall mean the Employee Retirement Income
-------
Security Act of 1974, as amended, and all references to
sections thereof shall include such sections and any
predecessor and successor provisions thereto.
"ERISA AFFILIATE" shall mean each trade or business
-----------------
(whether or not incorporated) which, together with Borrower,
would be treated as a single employer under Section 4001(a)(14)
of ERISA or IRC Section 414(b), (c), (m), (n) or (o), as
applicable.
"EURODOLLAR LOAN" shall mean any Loan with respect to
-----------------
which the Borrower shall have selected an interest rate based
on the Libor Rate in accordance with the provisions of Section
2.3(a) of this Agreement; provided, however, that there shall
not be in excess of five (5) Eurodollar Loans outstanding at
any one time.
"EVENT OF DEFAULT" shall mean the occurrence of any
------------------
one or more of the events set forth in Section 10 of this
----------
Agreement.
"EXCESS INTEREST" shall have the meaning set forth in
-----------------
Section 2.8(c) hereof.
- - --------------
"FAIR VALUE" shall mean Borrower's assets and
------------
liabilities as determined in accordance with Generally Accepted
Accounting Principles, except that assets shall be reflected at
present fair saleable value and liabilities shall reflect a
complete statement of liabilities, fixed or contingent, direct
or indirect, disputed or undisputed, whether or not required to
be reflected on a balance sheet prepared in accordance with
Generally Accepted Accounting Principles.
"FASB" shall mean the Financial Accounting Standards
------
Board.
4
<PAGE> 9
"FEDERAL FUNDS EFFECTIVE RATE" shall mean for any
------------------------------
day, a fluctuating rate of interest equal for each day during
such period to (i) the weighted average of the rates on
overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as
published for such day by the Federal Reserve Bank of New York;
or (ii) if such rate is not so published for any day, the
average of the quotations for such day on such transactions
received by Agent from three (3) federal funds brokers of
recognized standing selected by it.
"FISCAL YEAR" shall mean with respect to Borrower,
-------------
the fiscal accounting period of Borrower each year ending on
December 31 of each calendar year.
"FUNDED DEBT" of a Person means all Indebtedness for
-------------
borrowed money of such Person having a maturity (or extendable
to a maturity at the option of such Person) of more than one
year from the date of the creation thereof.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall
------------------------------------------
mean, with respect to any date of determination, generally
accepted accounting principles as used by the Financial
Accounting Standards Board and/or the American Institute of
Certified Public Accountants consistently applied and
maintained throughout the periods indicated.
"HAZARDOUS MATERIALS" shall mean any flammable or
---------------------
explosive materials, petroleum (including crude oil and its
fractions), radioactive materials, hazardous wastes, toxic
substances or related hazardous materials, including without
limitation polychlorinated biphenyls, friable asbestos, and any
substances defined as, or included in the definition of toxic
or hazardous substances, wastes, or materials under any federal
or applicable state or local laws, ordinances, rules or
regulations including Environmental Laws.
"HOMELAND" shall have the meaning set forth in
----------
Section 9.6 of this Agreement.
- - -----------
"INDEBTEDNESS" shall mean, with respect to any
--------------
Person, (a) indebtedness for borrowed money or for the deferred
purchase price of property or services in respect of which such
Person is liable, contingently or otherwise, as obligor or
otherwise, including without limitation accounts payable and
accrued indebtedness owed by such Person or any commitment by
which such Person assures a creditor against loss, including
contingent reimbursement obligations with respect to letters of
credit, (b) indebtedness guaranteed in any manner by such
Person, including guarantees in the form of an agreement to
repurchase or reimburse, (c) obligations under leases which
shall have been or should be, in accordance with Generally
Accepted Accounting Principles, recorded as capital leases, in
respect of which obligations such Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such Person assures a
creditor against loss, and (d) any unfunded obligation of such
Person to any Benefit Plan or Multi-employer Plan.
"INDEMNIFIED PERSONS" shall have the meaning set
---------------------
forth in Section 17 hereof.
----------
"INSOLVENCY PROCEEDING" shall mean, with respect to
-----------------------
any Person, any proceeding commenced by or against such Person,
under any provision of the United States Bankruptcy
5
<PAGE> 10
Code, as amended, or under any other bankruptcy, reorganization or
insolvency law, or any assignment for the benefit of creditors,
formal or informal moratorium, compositions or extensions with
some or all creditors of such Person.
"INTEREST PERIOD" shall mean: (i) as to any
-----------------
Eurodollar Loan, the period commencing on the date of such
Eurodollar Loan and ending on the numerically corresponding day
(or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months
thereafter, as the Borrower may elect, and (ii) as to any
Reference Rate Loan, the period commencing on the date of such
Reference Rate Loan and ending on the earlier of (A) the last
Business Day of each calendar month, and (B) the expiration or
earlier termination of this Agreement; provided, however, that
(i) if any Interest Period would end on a day that shall not be
a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless, with respect to Eurodollar
Loans only, such next succeeding Business Day would fall in the
next calendar month, in which case such Interest Period shall
end on the immediately preceding Business Day, (ii) no Interest
Period with respect to any Revolving Loan shall end later than
the Revolving Loan Termination Date, (iii) no Interest Period
with respect to the Term Loan shall end later than the Term
Loan Termination Date, and (iv) interest shall accrue from and
including the first day of an Interest Period to and excluding
the last day of such Interest Period.
"IRC" shall mean the Internal Revenue Code of 1986,
-----
as amended, and all references to sections thereof shall
include such sections and any predecessor and successor
provisions thereto.
"JUDICIAL OFFICER OR ASSIGNEE" shall mean any
------------------------------
trustee, receiver, controller, custodian, assignee for the
benefit of creditors or any other Person or entity having
powers or duties like or similar to the powers and duties of a
trustee, receiver, controller, custodian, or assignee for the
benefit of creditors.
"LAWS" means all ordinances, statutes, rules,
------
regulations, codes, orders, injunctions, writs or decrees of
any government, whether federal, state, municipal or local, of
any political subdivision or agency thereof, or of any court,
board or similar entity established by any of the foregoing
having jurisdiction over the property, assets, business or
operations of a Person.
"LASALLE" shall mean LaSalle National Bank, a
---------
national banking association, located at 120 South LaSalle
Street, Chicago, Illinois 60603.
"LENDER" shall mean the individual reference to
------
LaSalle, in its capacity as a Lender hereunder and each of the
lending institutions listed on the signature pages of this
Agreement and their respective successors and assigns.
"LENDERS" shall mean the collective reference to
-------
LaSalle, in its capacity as Lender, and the other lending
institutions listed on the signature pages of this Agreement
and their successors and assigns.
6
<PAGE> 11
"LIBOR RATE" shall mean, with respect to any
------------
Eurodollar Loan for any Interest Period, the interest rate per
annum equal to the quotient obtained by dividing (x) the rate
of interest determined by Agent to be the average of the rate
per annum at which deposits in U.S. dollars are generally
offered in the London Interbank Bank at 11:00 A.M. London time,
two (2) Business Days before the first day of such Interest
Period, for a period equal to such Interest Period and in the
amount of the applicable Eurodollar Loan, by (y) the difference
between one hundred percent (100%) and any applicable reserve
requirements (rounded upward to the nearest whole multiple of
one hundredth (1/100) of one percent (1%) per annum),
including, without limitation, any statutory maximum
requirement for Lenders to hold reserves for "Eurocurrency
Liabilities" under Regulation D of the Board of Governors of
the Federal Reserve System (or any similar reserves under any
successor regulation or regulations).
"LIEN" shall mean any mortgage, deed of trust,
------
pledge, fixed or floating charge, lien, security interest, or
encumbrance or security arrangement of any nature whatsoever,
whether arising by written or oral agreement or by operation of
law, including without limitation any conditional sale or title
retention arrangement and any assignment, deposit arrangement
or lease intended as or having the effect of, security.
"LOAN DOCUMENTS" shall mean all agreements,
----------------
instruments and documents, including without limitation this
Agreement, the Notes, all amendments, supplements, restatements
and renewals thereof, and all other written matter, whether
heretofore, now or hereafter executed by or on behalf of
Borrower, or any other Person in connection with the
Obligations or the transactions contemplated hereby (including
without limitation any guarantor of the Obligations), and
delivered to Agent or Lenders, together with all agreements,
instruments and documents referred to therein or contemplated
thereby whether heretofore, now or hereafter executed by or on
behalf of Borrower or any such other Persons and delivered to
Agent or Lenders, and all amendments, supplements, restatements
and renewals thereof, but not including any proposal letter,
commitment letter or other comparable documents delivered by
Agent prior to the date hereof and not expressly incorporated
herein and made a part hereof.
"LOANS" shall mean individually, the Revolving Loans
-------
or the Term Loans and, collectively, the Revolving Loans and
Term Loan.
"LOSSES" shall have the meaning set forth in
--------
Section 17 hereof.
- - ----------
"MAJORITY LENDERS" shall mean, at any time, while no
----------------
Obligations are outstanding, Lenders having at least 67% of the
aggregate amount of the Commitments and, at any time while
Obligations are outstanding, Lenders holding at least 67% of
the outstanding aggregate principal amount of the Obligations.
"MATERIAL ADVERSE EFFECT" shall mean (i) any
-------------------------
materially adverse change in the business, operations,
condition (financial or otherwise) or properties of Borrower or
its Subsidiaries, or (ii) any fact or circumstance as to which
singly or in the aggregate, there is a reasonable possibility
of (A) a materially adverse change described in (i) above with
7
<PAGE> 12
respect to Borrower or its Subsidiaries or (B) the inability of
Borrower to perform in any material respect its obligations
under this Agreement or the other Loan Documents or the
inability of Agent or Lenders to enforce in any material
respect their rights under this Agreement or the other Loan
Documents.
"MAXIMUM FACILITY" shall mean $100,000,000.
------------------
"MULTIEMPLOYER PLAN" shall mean a plan described in
--------------------
Section 4001(a)(3) of ERISA which covers employees of Borrower
or any ERISA Affiliate.
"NEGOTIABLE COLLATERAL" shall mean a letter of
-----------------------
credit, advice of credit, instrument, money, negotiable
document, warehouse receipt, bill of lading, letter of credit,
certificated security, certificate of title, certificate of
deposit, chattel paper, or similar property, and proceeds
thereof.
"NON-PERFORMING ASSETS" means the total of Borrower's
-----------------------
and its Subsidiaries' (i) Non-Performing Loans, (ii) Other Real
Estate Owned, and (ii) without duplication for amounts included
as Other Real Estate Owned, property acquired pursuant to in
substance foreclosures.
"NON PERFORMING LOANS" means the total of
----------------------
Borrower's and it's Subsidiaries' (i) loans which are on a
nonaccrual status, (ii) loans which are past due 90 days or
more and are still accruing interest, and (iii) loans and
leases restructured and in compliance with such modified terms,
in each case determined in a manner consistent with that used
in preparing Borrower's Consolidated Financial Statements.
"NOTES" shall mean the Revolving Loan Notes and Term
-------
Loan Notes.
"OBLIGATIONS" shall mean all loans, advances,
-------------
overdrafts, debts, liabilities (including without limitation
any and all amounts charged to Borrower's account pursuant to
any agreement authorizing Agent to charge Borrower's Loan
Account), obligations, covenants, lease payments, guarantees
and duties owing by Borrower to Agent or Lenders of any kind or
description (whether advanced pursuant to or evidenced by this
Agreement, by the Revolving Loan Notes and Term Loan Notes, by
any other Loan Document or other agreement, instrument or
document or otherwise), whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter
arising, and including without limitation any debt, liability
or obligation owing from Borrower to another Person which Agent
or Lenders may have obtained by assignment of which notice is
provided to Borrower (or otherwise as a result of a payment
made by Agent or Lenders on behalf of Borrower as permitted
under this Agreement or any other Loan Documents) and further
including without limitation all interest, all Out-of-Pocket
Fees and Costs which Borrower is required to pay or reimburse
by this Agreement or any other Loan Document, by law or
otherwise.
8
<PAGE> 13
"OTHER REAL ESTATE OWNED" means Other Real Estate Owned
-------------------------
as defined in 12 C.F.R. Section 7.3025 (1989), as such
regulation may be amended or supplemented from time to time,
determined in a manner consistent with that used in preparing
the Borrower's Consolidated Financial Statements.
"OUT-OF-POCKET FEES AND COSTS" shall have the
------------------------------
meaning set forth in Section 2.9(c) hereof.
--------------
"PBGC" shall mean the Pension Benefit Guaranty
------
Corporation or any successor agency.
"PARTICIPANT" shall mean any Person now or from time
-------------
to time hereafter participating with Lenders in any of the
Loans made or issued by Lenders to Borrower pursuant to this
Agreement.
"PERMITTED LIENS" shall have the meaning set forth in
-----------------
Section 8.1 hereof.
- - -----------
"PERSON" shall mean any individual, sole
--------
proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation,
institution, entity or governmental entity.
"POTENTIAL DEFAULT" shall mean any event which
-------------------
through the passage of time, service of notice or both, would
mature into an Event of Default.
"PROHIBITED TRANSACTION" shall mean any
-----------------------
transaction described in Section 406 of ERISA which is not
exempt by reason of Section 408 of ERISA, and any transaction
described in Section 4975(c) of the IRC which is not exempt by
reason of Sections 4975(c)(2) or (d) of the IRC, and which
could result in any excise tax, fine, penalty or other
liability being imposed on Borrower.
"PRO RATA SHARE" shall mean, with respect to any
--------------
Lender, a fraction (expressed as a percentage), the numerator
of which shall be the aggregate amount of such Lender's
Commitment and the denominator of which shall be the aggregate
Commitments.
"RATE" shall have the meaning set forth in Section
------ -------
2.8(A) hereof.
- - ------
"REFERENCE RATE" shall mean the greater of (i)
----------------
variable per annum rate of interest announced from time to time
by LaSalle at its corporate headquarters in Chicago, Illinois,
as its Prime Rate or equivalent rate, or (ii) the Federal Funds
Effective Rate in effect from time to time, plus one-half of
one percent (.50%) per annum. The "Prime Rate" is one of
LaSalle's index rates and merely serves as a basis under which
effective rates of interest are calculated for loans making
reference thereto and may not be the lowest or best rate at
which LaSalle calculates interest or extends credit.
9
<PAGE> 14
"REFERENCE RATE LOAN" shall mean any Loan with
---------------------
respect to which Borrower shall have selected an interest rate
based upon the Reference Rate in accordance with the provisions
of Section 2.3(a) of this Agreement.
"REGULATORY AGENCIES" means any national, federal,
---------------------
state, local or other government or political subdivision or
any agency, authority, bureau, central bank, commission,
department or instrumentality thereof, or any court, foreign or
domestic.
"REGULATORY CAPITAL REPORTS" means all reports
----------------------------
required to be filed by the Borrower or any of the Bank
Subsidiaries by the Regulatory Agencies having jurisdiction
over Borrower or any of the Bank Subsidiaries, containing
calculations of capital and capital ratios of Borrower and/or
such Bank Subsidiaries.
"RELEASE" shall mean any actual or threatened past,
---------
present or future releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, seeping, injecting,
escaping, leaching, dumping or disposing, whether intentional
or not.
"REPORTABLE EVENT" shall mean a reportable event
------------------
described in Section 4043 of ERISA or the regulations
thereunder, for which the thirty (30) day notice requirement
has not been waived.
"RETURN ON AVERAGE ASSETS" shall mean Annualized Net
--------------------------
Income divided by Total Consolidated Average Assets.
----------
"REVOLVING LOAN COMMITMENT" shall mean as to each
--------------------------
Lender, the amount set forth opposite its name on the signature
pages hereto under the heading "Revolving Loan Commitment."
"REVOLVING LOAN COMMITMENT PERCENTAGE" shall mean as
-------------------------------------
to any Lender, the percentage set forth opposite its name on
the signature pages hereto under the heading "Revolving Loan
Commitment Percentage".
"REVOLVING LOAN NOTES" shall have the meaning set
----------------------
forth in Section 2.1 hereof.
-----------
"REVOLVING LOAN TERMINATION DATE" shall have the
---------------------------------
meaning set forth in Section 2.1 hereof.
-----------
"REVOLVING LOANS" shall have the meaning set forth in
-----------------
Section 2.1 hereof.
- - -----------
"SUBSIDIARY" shall mean any corporation of which
------------
more than fifty percent (50%) of the outstanding capital stock
having ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether at
the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or
indirectly, owned by Borrower or by one or more of its
Subsidiaries. Notwithstanding the foregoing, "Subsidiary" of
the Borrower shall also mean any Bank Subsidiary, or any
partnership, limited liability company
10
<PAGE> 15
or joint venture of which more than fifty percent (50%) of the
outstanding equity or ownership interests are at the time,
directly or indirectly, owned by Borrower or by one or more of its
Subsidiaries.
"TERM LOANS" shall have the meaning set forth in
------------
Section 2.2 of this Agreement.
- - -----------
"TERM LOAN COMMITMENT" shall mean as to each Lender,
--------------------
the amount set forth opposite its name on the signature pages
hereto under the heading "Term Loan Commitment".
"TERM LOAN COMMITMENT PERCENTAGE" shall mean, as to
-------------------------------
any Lender, the percentage set forth opposite its name on the
signature pages hereto under the heading "Term Loan Commitment
Percentage".
"TERM LOAN NOTES" shall have the meaning set forth in
-----------------
Section 2.2 of this Agreement.
- - -----------
"TERM LOAN TERMINATION DATE" shall have the meaning
----------------------------
set forth in Section 2.2 of this Agreement.
-----------
"TOTAL CONSOLIDATED ASSETS" shall mean the Borrower's
---------------------------
total consolidated assets determined in a manner consistent
with Generally Accepted Accounting Principles used in the
preparation of Borrower's quarterly report on Form 10-Q filed
with the Securities and Exchange Commission for Borrower's
fiscal quarter ended September 30, 1996.
"TOTAL CONSOLIDATED AVERAGE ASSETS" shall mean for
-----------------------------------
any fiscal period, Borrower's Total Consolidated Assets for
each day in the year-to-date fiscal period divided by the
actual number of days in the year-to-date fiscal period.
"TOTAL EQUITY CAPITAL" means the Borrower's total
----------------------
equity capital determined in a manner consistent with that used
in preparing Borrower's consolidated financial statements for
its fiscal year ending December 31, 1995.
"UNCURED DEFAULT" shall mean an Event of Default
-----------------
which shall be continuing.
1.2 ACCOUNTING TERMS
----------------
Any accounting terms used in this Agreement which are not
specifically defined herein shall have the meanings customarily
given them in accordance with Generally Accepted Accounting
Principles. In the event that changes in Generally Accepted
Accounting Principles shall be mandated by the Financial
Accounting Standards Board and/or the American Institute of
Certified Public Accountants or any similar accounting body of
comparable standing, or shall be recommended by Borrower's
certified public accountants, to the extent that such changes
would modify such accounting terms or the interpretation or
computation thereof as contemplated by this Agreement at the
time of
11
<PAGE> 16
execution hereof, then in such event such changes shall be
followed in defining such accounting terms only after the Borrower
and Agent shall have agreed to amend this Agreement to reflect the
original intent of such terms in light of such changes, and such
terms shall continue to be applied and interpreted without such
change until such agreement.
1.3 CERTAIN MATTERS OF CONSTRUCTION.
-------------------------------
The terms "herein" "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and
not to any particular section, paragraph or subdivision. Any
pronoun used shall be deemed to cover all genders. The section
titles, table of contents and list of exhibits appear as a
matter of convenience only and shall not affect the
interpretation of this Agreement. All references to statutes
and related regulations shall include any amendments of same
and any successor statutes and regulations. All references to
any instruments or agreements, including, without limitation,
references to any of the Loan Documents shall include any and
all modifications or amendments thereto and any and all
extensions or renewals thereof. The Recitals to this Agreement
are incorporated into this Agreement in their entirety and
deemed to be a part hereof.
2. LOANS; FEES; TERMS OF PAYMENT
2.1 REVOLVING CREDIT FACILITY
-------------------------
Subject to the terms and provisions of this Agreement
including without limitation, that no Event of Default or
Potential Default has occurred and all other conditions
precedent to lending under Section 5 hereof have been
---------
satisfied, upon the request of Borrower, made at any time and
from time to time prior to December 30, 1999 (the "Revolving
Loan Termination Date"), or such earlier date as Borrower
elects to convert the outstanding principal balance of the
Revolving Loan to Term Loans as provided in Section 2.2
-----------
below, each of the Lenders severally and not jointly agrees to
make loans and advances (hereinafter individually referred to
as a "Revolving Loan" and collectively as "Revolving Loans") to
Borrower from time to time in the amount of each Lender's
Revolving Loan Commitment Percentage of the Revolving Loans
requested by Borrower so long as the aggregate amount of the
Revolving Loans outstanding at any time does not exceed the
Maximum Facility, and in the case of each Lender, up to but
not exceeding each Lender's Revolving Loan Commitment.
The Revolving Loans shall be evidenced by, and repayable
in accordance with, Revolving Loan Notes substantially in the
form of Exhibit 2.1 ("Revolving Loan Notes").
-----------
2.2 TERM LOAN
---------
Subject to the terms and provisions of this Agreement, at
any time prior to the Revolving Loan Termination Date and upon
fulfillment of all the conditions precedent to any Loans under
Section 5 hereof, Borrower may elect by notice in writing to
Agent and Lenders, to convert the outstanding principal balance
of the Revolving Loans to term loans for a term commencing on
the Conversion Date and ending not later than December 30,
12
<PAGE> 17
2002, and each of the Lenders, severally and not jointly, agree
to make a term loan to Borrower in the amount of its Term Loan
Commitment Percentage of the outstanding principal balance of
the Revolving Loans, but in no event more than its Term Loan
Commitment (each a "Term Loan" and collectively the "Term
Loans"). The Revolving Loans shall convert into the Term Loans
upon the fifth (5th) Business Day following the date of notice
to convert from Borrower to Agent and Lenders ("Conversion
Date"), which notice shall specify the term elected by
Borrower. The Term Loans shall be evidenced by, and repayable
in accordance with, the Term Loan Notes substantially in the
form of Exhibit 2.2 ("Term Loan Notes") providing for
-----------
repayment of the outstanding principal balance thereof in equal
quarterly installments based upon the term elected by Borrower,
with a final payment of all outstanding principal and interest
on the expiration of the term selected by Borrower ("Term Loan
Termination Date"). Borrower shall execute and deliver a Term
Loan Note to each Lender for its Term Loan, dated as of the
Conversion Date, prior to the Conversion Date.
2.3 BORROWING PROCEDURES.
--------------------
(a) Agent shall have received, on or before 11:00 a.m.
Chicago time, on the day a Loan is to be made, if a
Reference Rate Loan, or three (3) Business Days
prior to the date a Loan is to be made, if a
Eurodollar Loan, (i) an oral request from Borrower
for a Loan in a specific amount (and a request in
writing, which shall be delivered to Agent on the
same Business Day, executed by an Authorized
Representation of Borrower), (ii) designation
whether the Loan is to be a Eurodollar Loan or a
Reference Rate Loan, and if such Loan is to be a
Eurodollar Loan, the Interest Period or Interest
Periods with respect thereto, and (iii) copies of
all other documents which the Borrower is required
to deliver to Agent hereunder. If such request for
a Loan is received by Agent before 11:00 a.m.
Chicago time on the day a Reference Rate Loan is to
be made before 11:00 a.m. Chicago time three (3)
Business Days prior to the date a Eurodollar Loan is
to be made, subject to the other terms and
conditions of this Agreement, Agent will make such
Loan on the applicable day on which such Loan is to
be funded hereunder, subject to any delays beyond
Agent's reasonable control, provided that Agent
shall not be liable for any damages or liabilities
for the failure to so make any Loan on the day
requested unless such failure was due to Agent's
gross negligence or wilful misconduct. If no
election as to the type of Loan is specified in any
such notice by Borrower, then such Loan shall be a
Reference Rate Loan. If no Interest Period is
specified with respect to a Eurodollar Loan in such
notice, then Borrower shall be deemed to have
selected an Interest Period of one month's duration.
Each request for a Reference Rate Loan shall be in a
minimum amount of $100,000. Notwithstanding
anything contained in this Agreement to the
contrary, Borrower may not have more than five (5)
Eurodollar Loans outstanding at any one time, and
each request for a Eurodollar Loan shall be in a
minimum initial increment of $5,000,000.
13
<PAGE> 18
(b) Upon receipt by Agent of a notice from Borrower of
a request for a Loan, Agent shall promptly, but not
later than 1:00 p.m. Chicago time on the date of
receipt, notify Lenders of the amount, term and
proportionate share of such Loan to be funded by
each Lender. Two (2) Business Days prior to the
date specified for funding of such Eurodollar Loan
in the notice from Borrower provided under (a)
above, Agent shall notify Lenders and Borrower of
the Libor Rate in effect for such Eurodollar Loan.
Each Lender shall make available its proportionate
share of any Loan, by federal funds wire transfer to
Agent at Agent's Applicable Lending Office, in
immediately available funds, by not later than 2:00
p.m. Chicago time, on the date specified for a Loan
hereunder as provided in (a) above. The amount of
any Loan shall, subject to the terms of this
Agreement, be made available to Borrower by
depositing same, in immediately available funds, in
an account of Borrower, as designated by Borrower,
maintained at Agent's Applicable Lending Office, or
by wiring the same, in immediately available funds,
to any account specified by Borrower in its notice
of borrowing.
(c) The failure of any Lender to make any Loan to be
made by it on any date specified therefor shall not
relieve any other Lender of its obligation to make
its Loan on such date, but neither the Agent nor any
Lender shall be responsible for the failure of any
other Lender to make a Loan.
2.4 PAYMENTS AND PREPAYMENTS.
-------------------------
(a) Borrower shall make each payment in respect of the
principal of and interest on the Revolving Loans,
Term Loans and any other payments due under this
Agreement not later than 12:00 p.m. Chicago time on
the day when due, in Dollars, to the Agent for the
account of each Lender at the Agent's Applicable
Lending office in Chicago, Illinois in immediately
available funds.
(b) After the occurrence of an Event of Default, any
Lender for whose account any such payment is to be
made may (but shall not be obligated to) debit the
amount of any such payment which is not made by such
time to any ordinary deposit account of Borrower
with such Lender and shall give notice thereof to
the Agent and Borrower, provided the failure to give
such notice does not affect the validity of such
debit.
(c) Borrower shall, at the time of making such payment
under this Agreement, the Revolving Credit Notes, or
the Term Loan Notes, specify to the Agent the Loans
or other amounts payable by Borrower hereunder to
which such payment is to be applied; provided that
all such payments shall be applied prorata with
respect to the Loans so specified due to each of the
Lenders (and in the event that it fails to so
specify, or if an Event of Default has occurred and
is an Uncured Default, the Agent shall distribute
14
<PAGE> 19
such payment to the Lenders in such manner as Agent
may determine to be appropriate, subject to Section
2.5 hereof).
(d) Each payment received by the Agent under this
Agreement, any Revolving Credit Note, or Term Loan
Note for account of a Lender shall be paid promptly
to such Lender on the same Business Day of receipt
by Agent if received by 12:00 p.m. Chicago time, or
otherwise on the next successive Business Day, at
the Applicable Lending Office for the Revolving Loan
or other obligation in respect of which such payment
is made.
(e) Subject to Section 2.14 of this Agreement and
------------
except as otherwise provided herein, any prepayment
of the Obligations by Borrower shall be without
premium or penalty, other than the imposition of the
Default Rate of interest, where applicable. Except
as otherwise provided herein, any prepayments of the
Term Loans shall be applied pro rata to the
installments due thereunder in the inverse order of
their maturity.
(f) Upon the occurrence of a Change of Control Lenders
Commitments shall terminate and Borrower shall make
a mandatory prepayment of the outstanding balance of
the Obligations within ninety (90) days of the
occurrence of such Change of Control, or such
earlier date as such Obligations may be due or
declared due under any other provision of this
Agreement.
2.5 PRO RATA TREATMENT.
--- -------------------
Except to the extent otherwise provided herein: (i) each
borrowing from the Lenders, and each payment of any fee under
Section 2.12 hereof, shall be made for the account of the
- - ------------
Lenders, according to their respective Pro Rata Shares;
(ii) each payment of principal of the Loans by Borrower shall
be made for the account of the Lenders pro rata in accordance
with the respective unpaid principal amounts of the Loans held
by the Lenders; and (iii) each payment of interest by Borrower
shall be made for account of the Lenders pro rata in accordance
with the amounts of interest due and payable to the respective
Lenders.
2.6 NON-RECEIPT OF FUNDS BY THE AGENT.
---------------------------------
Unless the Agent shall have been notified by a Lender or
Borrower (the "Payor") prior to the date on which the Payor is
scheduled to make payment to the Agent of (in the case of a
Lender) the proceeds of a Loan to be made by it hereunder or
(in the case of Borrower) a payment to the Agent for the
account of one or more of the Lenders hereunder (such payment
being herein called the "Required Payment"), which notice shall
be effective upon receipt, that the Payor does not intend to
make the Required Payment to the Agent, the Agent may assume
that the Required Payment has been made and may, in reliance
upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient(s) on such
date and, if the Payor has not in fact made the Required
Payment to the Agent, the recipient(s) of such Payment shall,
on demand, repay to the
15
<PAGE> 20
Agent the amount so made available together with interest thereon
in respect of each day during the period commencing on the date
such amount was so made available by the Agent until the date the
Agent recovers such amount at a rate per annum equal to the
Default Rate for such period and, if such recipient(s) shall fail
promptly to make such payment, the Agent shall be entitled to
recover such amount, on demand, from the Payor, together with
interest as aforesaid. Notwithstanding the foregoing to the
contrary, the Agent shall not charge the Lenders, and the Lenders
shall not be responsible to pay the Agent, any interest described
in this Section 2.6 to the extent such interest has otherwise
been paid by Borrower to the Agent.
2.7 SHARING OF PAYMENTS, ETC.
-------------------------
(a) Borrower agrees that, in addition to (and
without limitation of) any right of set-off,
bankers' lien or counterclaim a Lender might
otherwise have, each Lender shall be entitled,
at its option, to offset balances held by it
for the account of Borrower at any of its
offices, against any principal of or interest
on any of such Lender's Loans or any other
amount payable to such Lender hereunder, which
is not paid when due subject to any applicable
grace periods (regardless of whether such
balances are then due to Borrower), in which
case it shall promptly notify Borrower and the
Agent thereof, provided that such Lender's
failure shall not affect the validity thereof.
(b) If any Lender (i) shall obtain payment of any
principal of or interest on any Loan made by it to
Borrower under this Agreement through the exercise
of any right of set-off, banker's lien or
counterclaim or similar right or otherwise, whether
or not under Section 2.7(a) above, and, as a
--------------
result of such payment, such Lender shall have
received a greater percentage of the Obligations
with respect to the Loans then due hereunder by
Borrower to such Lender than the percentage of the
Obligations received by the other Lender, or
(ii) such Lender's percentage of the outstanding
Obligations relating to Loans is less than its Pro
Rata Share of such Obligations, it shall promptly
purchase from such other Lenders participations in
(or, if and to the extent specified by such Lender,
direct interests in) the Loans made by such other
Lenders (or in interest due thereon or other
Obligations with respect to the Loans due to such
Lender, as the case may be) in such amounts, and
make such other adjustments from time to time as
shall be equitable, to the end that (x) each Lender
shall have made advances of Obligations relating to
Loans according to its Pro Rata Share of its
Commitment of such Obligations, and (y) all of the
Lenders shall share the benefit of such excess
payment (net of any expense which may be incurred by
such Lender in obtaining or preserving such excess
payment) pro rata in accordance with the unpaid
Obligations with respect to the Loans due to each of
the Lenders. To such end all the Lenders shall make
appropriate adjustments among themselves (by the
resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored.
16
<PAGE> 21
(c) Borrower agrees that any Lender so purchasing a
participation (or direct interest) in the
Obligations with respect to the Loans due to any
other Lender (or in interest due thereon, as the
case may be) may exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with
respect to such participation as fully as if such
other Lenders were a direct holder of Loans in the
amount of such participation.
(d) Nothing contained herein shall require any Lender
to exercise any such right or shall affect the right
of any Lender to exercise, and retain the benefits
of exercising, any such right with respect to any
other indebtedness or obligation of Borrower. If,
under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in
lieu of a payment or set-off to which this
Section 2.7 applies, such Lender shall, to the
-----------
extent practicable, exercise its rights in respect
of such secured claim in a manner consistent with
the rights of the Lenders entitled under this
Section 2.7 to share in the benefits of any
-----------
recovery on such secured claim.
2.8 INTEREST
--------
(a) RATE. All Obligations owed by the Borrower to
-----
Lenders (except for Eurodollar Loans and those
Obligations evidenced by a note other than Notes, or
covered by any other Section of this Agreement or
other agreement which specifically provides for a
rate of interest different from that provided for
herein) shall bear interest, on the unpaid principal
balance thereof, at a rate per annum (computed on
the basis of the actual number of days elapsed over
a 360 day year) (the "Rate") equal to the Reference
Rate, payable monthly in arrears on the first
Business Day of each calendar month.
Subject to the provisions of Section 2 of this
---------
Agreement, each Eurodollar Loan shall bear interest
on the unpaid principal balance thereof at a rate
per annum (computed on the basis of the actual
number of days elapsed over a 360-day year) equal to
the Libor Rate for the Interest Period in effect for
such Loan, plus .90% Interest on Eurodollar Loans
for 1, 2, 3 or 6-month Interest Periods shall be
payable in arrears on the last day of the applicable
Interest Period. Interest on Eurodollar Loans for a
6-month Interest Period shall be payable in arrears
on the 90th day following funding of such Eurodollar
Loan by Lenders and on the last day of such Interest
Period.
In addition to calculations of the Rate as provided
above, in the event that the Reference Rate
announced is, from time to time hereafter, changed,
adjustment in the Rate shall be made on the
effective date of such change in the Reference Rate.
The Rate, as adjusted, shall apply to all
Obligations (except as provided above with respect
to Eurodollar Loans or where otherwise specifically
provided) owed on the date following the date on
which the adjustment is made and shall continue to
apply to such
17
<PAGE> 22
Obligations owed during succeeding months until the
Reference Rate is adjusted again. Agent shall use
reasonable efforts to notify Borrower of each change
in the Reference Rate as soon as practicable, but
Borrower's obligation to pay all interest at the Rate
and Default Rate as provided in this Agreement shall
not be affected by, nor shall Agent have any
liability for, any failure to so notify Borrower.
(b) DEFAULT RATE. Notwithstanding the foregoing, the
------------
Obligations shall bear interest, from and after the
occurrence of an Event of Default and for so long as
an Event of Default shall be an Uncured Default and
without constituting a waiver of any such Event of
Default, on the balances owing from time to time, at
a rate per annum equal to Two percentage points
above the Rate (the "Default Rate"), payable on
demand.
(c) MAXIMUM INTEREST. It is the intention of Agent
----------------
and Borrower to comply with the laws of the State of
Illinois, and notwithstanding any provision to the
contrary contained herein or in the other Loan
Documents, Borrower shall not be required to pay,
and Agent shall not be permitted to collect, any
amount in excess of the maximum amount of interest
permitted by applicable law ("Excess Interest"). If
any Excess Interest is provided for or determined to
have been provided for by a court of competent
jurisdiction in this Agreement or in any of the
other Loan Documents, then in such event (i) the
provisions of this Section shall govern and control;
(ii) Borrower shall not be obligated to pay any
Excess Interest; (iii) any Excess Interest that
Agent may have received hereunder shall be, at
Agent's option, (A) applied as a credit against
either the outstanding principal balance of the
Loans or accrued and unpaid interest hereon, (B)
refunded to the payor thereof, or (C) any
combination of the foregoing; (iv) the interest
rate(s) provided for herein shall be automatically
reduced to the maximum rate allowed under applicable
law, and this Agreement and the other Loan Documents
shall be deemed to have been, and shall be, reformed
and modified to reflect such reduction; and (v)
Borrower shall not have any action against Agent for
any damages arising out of the payment or collection
of any Excess Interest. Notwithstanding the
foregoing, if any interest payment or other charge
or fee payable hereunder or under any of the other
Loan Documents exceeds the maximum amount then
permitted by applicable law, then to the extent
permitted by law, Borrower shall be obligated to pay
the maximum amount then permitted by applicable law
and Borrower shall continue to pay the maximum
amount from time to time permitted by applicable law
until all such interest payments and other charges
and fees otherwise due hereunder or under any of the
other Loan Documents (in the absence of such
restraint imposed by applicable law) have been paid
in full.
18
<PAGE> 23
(d) CHARGES TO LOAN ACCOUNT. Agent may, upon notice
-----------------------
to Borrower, at its option, charge any interest and
fees payable hereunder or under any of the other
Loan Documents to Borrower's Loan Account, and any
amounts so charged shall thereupon constitute
Obligations hereunder and shall thereafter accrue
interest as provided for in this Agreement.
2.9 FEES
----
In consideration of Lenders' establishing the Maximum
Facility hereunder and making of the Loans hereunder, Borrower
shall pay to Agent for the benefit of Agent or Lenders, as
applicable, the following fees and charges:
(a) FACILITY FEE. A facility fee payable quarterly,
------------
in arrears, on the first day of each calendar
quarter commencing January 1, 1997, equal to .10%
per annum (computed on the basis of a year
consisting of 360 days) of the Maximum Facility.
(b) AGENCY FEE. An agency fee payable to Agent as
----------
set forth in the letter agreement between Borrower
and Agent regarding same.
(c) OUT-OF-POCKET FEES, COSTS AND EXPENSES. All
--------------------------------------
reasonable out-of-pocket fees, costs and expenses
("Out-of-Pocket Fees and Costs"), incurred by Agent
or Lenders in connection with (i) any bank charges
in connection with opening and maintaining and
transferring funds from any depository account and
depositing funds for collection by Agent on account
of the Obligations; (ii) wire transfer fees in
connection with Agent's forwarding to Borrower the
proceeds of Loans hereunder; (iii) photocopying and
other mechanical or electronic reproduction expenses
in connection with Agent's rights of inspection
under this Agreement or any other Loan Document or
in connection with any service utilized by Agent to
perform such functions; (iv) expenses in connection
with the documentation, negotiation and closing of
the Revolving Loans and Term Loans (including any
and all amendments or waivers with respect hereto),
(v) the reasonable fees, costs and expenses for
attorneys and paralegals (A) incurred by Agent in
connection with the documentation, negotiation and
Closing of the Loans described herein up to the
aggregate sum of $5,000, or incurred by Agent or
Lenders in connection with any and all amendments or
waivers with respect thereto entered into at or
after the Closing of the Loans, and the enforcement
of Agent's and Lender's rights hereunder and under
the other Loan Documents, (B) incurred by Agent,
Lenders or any Participants in connection with any
suit by or involving Agent, Lenders or any
Participant in enforcing or defending this Agreement
or any portion hereof, including without limitation,
attorneys' and paralegals' fees and costs incurred
in connection with appellate proceedings in any
appeals court, and (C) incurred by Agent, Lenders or
any Participants obtaining advice and legal services
with respect to drafting, negotiating, amending,
restating,
19
<PAGE> 24
restructuring, terminating, enforcing or defending
this Agreement, or any portion hereof or any of the
other Loan Documents, whether or not suit is brought.
All such Out-of-Pocket Fees and Costs shall be part
of the Obligations, payable on demand.
2.10 AGENT MONTHLY STATEMENTS.
-------------------------
Agent shall render monthly statements of the Obligations
owing by Borrower to Lenders, including statements of all
principal, interest, and Out-of-Pocket Fees and Costs owing,
and such statements shall be prima facie evidence to be
----- -----
correct and accurate and constitute an account stated between
Borrower and Lenders unless, within thirty (30) days after
receipt thereof by Borrower, Borrower shall deliver to Agent,
by registered or certified mail, at Agent's place of business
indicated in Section 14 hereof, written objection thereto
----------
specifying the error or errors, if any, contained in any such
statement. Any balance credited to Borrower's account, less
monies remitted, paid or otherwise advanced by Agent to or for
Borrower's account and any amounts that Agent may be obligated
to pay in the future, and less any other sums due to Agent or
Lenders as provided in this Agreement, shall be remitted to
Borrower when all Obligations owed by Borrower to Agent or
Lenders have been paid in full.
2.11 PAYMENT DATES.
--------------
Any payment due under this Agreement on any day other
than a Business Day shall be due on the next succeeding
Business Day, and such payment shall bear interest in
accordance herewith until actually received.
2.12 REGULATIONS AFFECTING LOANS.
----------------------------
If (a) Regulation D or any other regulation of the
Board of Governors of the Federal Reserve System or any other
Federal regulation, or (b) after the date hereof, the adoption
of any applicable law, rule or regulation, or any change,
amendment to, deletion from or revision, modification or other
change therein, or any change in the interpretation or
administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or
administration thereof, or by any court, or compliance by
Agent, Lenders or any Participant with any request or directive
(whether or not having the force of law) of any such authority,
central bank or comparable agency,
(i) shall impose, modify or deem applicable
any reserve (including, without
limitation, any reserve imposed by the
Federal Reserve Board), special deposit,
special assessment or similar requirement
against assets of, deposits with or for
the account of, or credit extended by,
Agent, Lenders or any Participant; or
20
<PAGE> 25
(ii) shall impose on Agent, Lenders or any
Participant any other condition affecting
the Loans;
and the result of any of the foregoing is to increase the cost
to Agent, Lenders or any Participant of making or maintaining
the Loans, or to reduce the amount of any sum received or
receivable by Agent, Lenders or any Participant under this
Agreement or under any Note with respect thereto, then on the
earlier of termination of this Agreement or fifteen days after
demand, Borrower shall pay directly to Agent from time to time
such additional amount or amounts as Agent, Lender or
Participant reasonably determines will compensate it for such
increased cost or such reduction.
2.13 RENEWALS: CONVERSION AND CONTINUATION OF REVOLVING LOANS.
---------------------------------------------------------
(a) Upon maturity of any Eurodollar Loan, the Borrower
may renew all or any part of any Eurodollar Loan to
it from Lenders with a Loan of the same or a
different type from Lenders, subject to the
conditions and limitations set forth herein and
elsewhere in this Agreement. Any Eurodollar Loan or
part thereof so renewed shall be deemed to be repaid
in accordance with this Section 2 with the proceeds
of a new borrowing hereunder and the proceeds of the
new Loan, to the extent such proceeds do not exceed
the principal amount of the Eurodollar Loan being
renewed, shall not be paid by Lenders to Borrower.
(b) The Borrower shall have the right at any time, upon
notice to Agent given in the manner and at the times
specified in this Agreement with respect to the
Loans into which conversion or continuation is to be
made, to convert its Eurodollar Loans into Reference
Rate Loans, to convert its Reference Rate Loans into
Eurodollar Loans (specifying the Interest Period to
be applicable thereto), to convert the Interest
Period applicable to any of its Eurodollar Loans to
another permissible Interest Period, and to continue
any of its Eurodollar Loans into a subsequent
Interest Period of any permissible duration, subject
to the terms and conditions of this Agreement, and
to the following:
(i) each conversion shall be effected by Agent by
applying the proceeds of the new Reference Rate
Loan or Eurodollar Loan, as the case may be, to
the Reference Rate Loan or Eurodollar Loan (or
portion thereof) being converted; accrued
interest on a Loan (or portion thereof) being
converted or continued shall be paid by the
Borrower at the time of conversion or
continuation; and
(ii) If any Eurodollar Loan is converted at any time
other than the end of an Interest Period
applicable thereto, the Borrower shall make
such payments associated therewith as are
required pursuant to Section 2.14 at the
------------
time such Eurodollar Loan shall be converted to
a Reference Rate Loan.
21
<PAGE> 26
The Interest Period applicable to any Eurodollar Loan resulting
from a conversion or continuation shall be specified by the
Borrower in the notice of conversion or continuation delivered
pursuant to this Section 2.13 provided, however, that if no
------------
such Interest Period shall be specified, the Borrower shall be
deemed to have selected an Interest Period of one month's
duration.
2.14 INDEMNITY.
---------
The Borrower shall indemnify Agent and Lenders against
any loss, fee, claim, damage, liability or expense which Agent
or Lenders may sustain or incur as a consequence of (i) any
failure by the Borrower to fulfill on the date of any borrowing
of a Eurodollar Loan hereunder the applicable conditions set
forth in this Agreement, (ii) any failure by the borrower to
borrow hereunder after notice of borrowing pursuant to this
Agreement has been given, (iii) any payment, prepayment or
conversion of a Eurodollar Loan required by any provision of
this Agreement, or otherwise made on a date other than the
last day of the applicable Interest Period, or (iv) the
occurrence of any Event of Default, including, but not limited
to, any loss or reasonable expense sustained or incurred or to
be sustained or incurred in liquidating or employing deposits
from third parties acquired to effect or maintain such Loan or
any part thereof as a Eurodollar Loan. Such loss or reasonable
expense shall include, without limitation, an amount equal to
the excess, if any, as reasonably determined by Agent or a
Lender of its cost of obtaining the funds for the Eurodollar
Loan being paid, prepaid or converted or not borrowed (based on
the Libor Rate applicable thereto) for the period from the date
of such payment, prepayment or conversion or failure to borrow
to the last day of the Interest Period for such Eurodollar Loan
(or, in the case of a failure to borrow, the Interest Period
for such Eurodollar Loan which would have commenced on the date
of such failure to borrow) over the amount of interest (as
reasonably determined by Agent) that could be realized by Agent
and Lenders in re-employing during such period the funds so
paid, prepaid or converted or not borrowed. A certificate of
Agent or a Lender setting forth any amount or amounts which
Agent or a Lender is entitled to receive pursuant to this
Section 2.14 shall be conclusive absent manifest error.
- - ------------
2.15 CHANGE IN LEGALITY.
------------------
(a) Notwithstanding anything to the contrary herein
contained, if any change in any law or regulation or
in the interpretation thereof by any governmental
authority charged with the administration or
interpretation thereof shall make it unlawful for
any Lender or Agent to make or maintain any
Eurodollar Loan or to give effect to its obligations
as contemplated hereby (an "Illegality"), or if
Agent or Lender determine that maintenance of
Eurodollar Loans would cause such Lender to
implement or modify any reserve, special deposit or
assessment or other requirement, or impose any other
condition on Lenders affecting the Loans (each of
the foregoing circumstances called a "Regulatory
Action"), then, by written notice to the Borrower,
Agent shall:
22
<PAGE> 27
(i) declare that Eurodollar Loans will not
thereafter be made by the affected Lender
hereunder, whereupon the Borrower shall be
prohibited from requesting Eurodollar
Loans from such Lender hereunder unless
such declaration is subsequently
withdrawn; provided, however, that if
after the date of any such declaration
there shall occur any change in law or
regulation or in the interpretation
thereof by any government authority
charged with the administration or
interpretation thereof that shall
eliminate such Illegality, such Lender
shall as promptly as reasonably
practicable notify the Borrower, Agent and
each of the other Lenders of such
occurrence and withdraw such declaration;
and
(ii) require that all outstanding Eurodollar
Loans made by such Lender be converted to
Reference Rate Loans, in which event (1)
all such Eurodollar Loans shall be
automatically converted to Reference Rate
Loans as of the effective date of such
notice as provided in paragraph (b) below
and, (2) all payments and prepayments of
principal which would otherwise have been
applied to repay the converted Eurodollar
Loans shall instead be applied to repay
the Reference Rate Loans resulting from
the conversion of such Eurodollar Loans.
(b) for purposes of this Section 2.15 a notice to
------------
the Borrower by Agent or a Lender pursuant to
paragraph (a) above shall be effective on the date
of receipt by the Borrower.
2.16 Unavailability of Deposits or Inability to
------------------------------------------
Ascertain, or Inadequacy of Libor Rate.
--------------------------------------
If on or prior to the first day of any Interest Period
for any Borrowing of Eurodollar Loans:
(a) the Agent advises the Borrower that deposits in
United States Dollars (in the applicable amounts)
are not being offered to it in the off-shore U.S.
Dollar interbank market for such Interest Period, or
(b) the Lenders advise the Agent that the Libor Rate
as determined by the Agent will not adequately and
fairly reflect the cost to such Lenders of funding
their Eurodollar Loans for such Interest Period,
then the Agent shall forthwith give notice thereof
to the Borrower and the Lenders, whereupon until the
Agent notifies the Borrower that the circumstances
giving rise to such suspension no longer exist, the
obligations of the Lenders to make Eurodollar Loans
shall be suspended without liability to Agent or
Lenders.
23
<PAGE> 28
2.17 INCREASED COST AND REDUCED RETURN.
----------------------------------
(a) If on or after the date hereof, the adoption of
any applicable law, rule or regulation, or any
change therein, or any change in the interpretation
or administration thereof by any governmental
authority, central bank or comparable agency charged
with the interpretation or administration thereof,
or compliance by any Lender (or its Lending Office)
with any request or directive (whether or not having
the force of law) of any such authority, central
bank or comparable agency:
(i) shall subject any Lender (or its applicable
Lending Office) to any tax, duty or other
charge with respect to its Eurodollar Loans,
its Notes or its obligation to make Eurodollar
Loans, or shall change the basis of taxation of
payments to any Lender (or its Applicable
Lending Office) of the principal of or interest
on its Eurodollar Loans or any other amounts
due under this Agreement in respect of its
Eurodollar Loans or its obligation to make
Eurodollar Loans (except for changes in the
rate of tax on the overall net income of such
Lender or its Applicable Lending Office imposed
by the jurisdiction in which such lender's
principal executive office or Applicable
Lending Office is located); or
(ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement
(including, without limitation, any such
requirement imposed by the Board of Governors
of the Federal Reserve System, against assets
of, deposits with or for the account of, or
credit extended by, any Lender (or its
Applicable Lending Office) or shall impose on
any Lender (or its Applicable Lending Office)
or on the interbank market any other condition
affecting its Eurodollar Loans, its Notes or
its obligation to make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost
to such Lender (or its Applicable Lending Office) of making or
maintaining any Eurodollar Loan, or to reduce the amount of any
sum received or receivable by such Lender (or its Applicable
Lending Office) under this Agreement or under its Notes with
respect thereto, by an amount deemed reasonably and in good
faith by such Lender to be material, then, Borrower shall,
within fifteen (15) days after demand by such Lender (with a
copy to the Agent), be obligated to pay such Lender such
additional amount or amounts as will compensate such Lender for
such increased cost or reduction (computed commencing on the
effective date of any event mentioned herein). Each Lender
agrees to use its best efforts to give the Borrower and Agent
notice of the occurrence of any event mentioned herein. In
addition, Lenders may, upon notice to Borrower (with a copy to
Agent), elect to increase the interest rate applicable to all
Eurodollar Loans made subsequent thereto, to compensate Lenders
for such increased cost or reduced yield.
24
<PAGE> 29
2.18 DISCRETION OF LENDERS AS TO MANNER OF FUNDING.
----------------------------------------------
Notwithstanding any other provision of this Agreement,
each Lender shall be entitled to fund and maintain its funding
of all or any part of its Loans in any manner it sees fit, it
being understood, however, that for the purposes of this
Agreement all determinations hereunder shall be made as if each
Lender had actually funded and maintained each Eurodollar Loan
through the purchase of deposits in the interbank market having
a maturity corresponding to such Eurodollar Loan's Interest
Period and bearing an interest rate equal to the Libor Rate for
such Interest Period.
3. TERM OF THIS AGREEMENT; PREPAYMENTS
3.1 Term
----
(a) INITIAL TERM AND RENEWAL TERMS. This Agreement
------------------------------
shall have a term commencing on the Effective Date
and expiring on the Revolving Loan Termination Date
with respect to Revolving Loans and the Term Loan
Termination Date with respect to the Term Loans.
(b) AGENT RIGHT TO TERMINATE. Notwithstanding the
-------------------------
foregoing, upon the occurrence of an Event of
Default, Agent may in accordance with Section 11
----------
of this Agreement terminate this Agreement,
except that this Agreement shall terminate
automatically upon an Event of Default under
Section 10.5 or 10.6.
--------------------
(c) EFFECTS OF TERMINATION. On the date of
----------------------
termination or expiration of this Agreement, all
Obligations owed by Borrower shall become
immediately due and payable without notice or demand
and shall be repaid in cash or by a wire transfer of
immediately available funds and Lenders Commitments
shall terminate.
3.2 PREPAYMENT; TERMINATION.
------------------------
Borrower may borrow, repay and reborrow Revolving Loans
subject to the terms of this Agreement. Payments and
prepayments of Term Loans may not be reborrowed. Subject to
the terms of Section 2.14 of this Agreement and this
------------
Section 3.2, Borrower may, at any time, on thirty (30) days
- - -----------
written notice prior to the end of any month, prepay in full
the Loans and terminate this Agreement by paying to Agent, in
cash or by a wire transfer of immediately available funds, the
Obligations. Borrower may, at any time, on thirty (30) day's
written notice prior to the end of any month, elect to reduce
the Maximum Facility in increments of not less than $1,000,000.
Upon receipt by Agent of such notice, the Maximum Facility
shall be reduced by the requested increment effective the first
day of the month following the expiration of the notice period.
4. CONDITIONS PRECEDENT
25
<PAGE> 30
4.1 CLOSING; CONDITIONS TO INITIAL LOAN AND CLOSING.
------------------------------------------------
The initial Revolving Loan and Term Loans hereunder shall
be made upon the Effective Date hereunder at the offices of
Agent's counsel ("Closing"). In addition to those conditions
set forth hereunder in Section 4.2 with respect to all
-----------
Loans hereunder, prior to or contemporaneously with the making
of the initial Revolving Loan hereunder, Agent and Lenders
shall be satisfied that all of the following conditions
precedent shall have been satisfied in a manner satisfactory to
Agent and Lenders.
(a) NO ADVERSE CHANGE.
------------------
There shall have been as determined by Agent and
Lenders in their discretion that (i) no material
adverse change since September 30, 1996 has occurred
in the operations (financial or otherwise) of
Borrower or its Subsidiaries, and (ii) no material
litigation or claims have occurred which would have
a Material Adverse Effect.
(b) REQUIRED DOCUMENTS.
-------------------
Agent shall have received all of the following
documents, each in form and substance satisfactory
to Agent and its counsel, duly executed and dated
the Effective Date (or such other date prior thereto
as shall be satisfactory to Agent):
(i) Agreement. Multiple copies of
---------
this Agreement as requested by Agent.
(ii) Revolving Credit Notes. The
----------------------
Revolving Credit Notes payable to
Lenders.
(iii) Certificate for Certified
-------------------------
Resolutions, Incumbency By-Laws. A
-------------------------------
Secretary's Certificate executed by
the secretary of Borrower with
respect to resolutions of directors
authorizing this Agreement and all
related transactions and incumbency
of the officers of Borrower.
(iv) Legal Opinion. Legal opinion of
--------------
Gallop, Johnson & Newman, L.C.,
counsel for Borrower.
(v) Organizational Documents. A copy
------------------------
of the Articles of Incorporation of
Borrower as amended to and including
the Closing date, certified by the
Secretary of State of Delaware, and a
copy of the by-laws of Borrower, as
amended, to and including the Closing
date, certified by the Secretary of
Borrower.
26
<PAGE> 31
(vi) Insurance. A certified list of
---------
insurance policies of Borrower;
certificates of property, liability
and other third party insurance of
Borrower, each showing Agent as
certificate holder; certificates of
property and boiler and machinery
insurance, each showing Agent as
certificate holder and a certificate
of business interruption insurance of
Borrower, showing Agent as
certificate holder.
(vii) Good Standing Certificates. Good
--------------------------
standing certificates and
qualifications to do business for
Borrower in the States of Delaware,
Missouri, Illinois and in each other
State in which the failure of
Borrower to be qualified to transact
business would have a Material
Adverse Effect.
(viii) Officer's Certificate. A
---------------------
certificate executed by the chief
executive officer or chief financial
officer of Borrower in its capacity
as a corporate officer, stating that
to the best knowledge of such officer
after diligent inquiry and
investigation (a) no Event of Default
or Potential Default has occurred and
is continuing, (b) no material
adverse change in the condition or
operations, financial or otherwise,
or in the business prospects of the
Borrower's or any Subsidiary's
businesses has occurred since
September 30, 1996, (c) no
litigation, investigation or
proceeding, or injunction, writ or
restraining order of the type
described in Section 5.8 or
-----------
Section 7.3 hereof is pending or
-----------
threatened, and (d) such officer
believes sufficient information has
been provided to Agent to meet or
satisfy each of the conditions
precedent to the consummation of the
Loans contemplated hereby.
(ix) Agent shall have received the agency
fee pursuant to the agreement between
Borrower and Agent.
(x) Other. Such other documents as
-----
Agent or Lenders shall reasonably
request.
(c) OUT-OF-POCKET FEES AND COSTS. Lenders and
----------------------------
Agent shall have received reimbursement for all Out-
of-Pocket Fees and Costs which then have been paid
or accrued by Lenders and Agent.
4.2 Condition to All Loans.
----------------------
Notwithstanding any other provisions contained in this
Agreement, the making of each Loan provided for in this
Agreement shall be conditioned upon the satisfaction of the
matters set forth in this Section 4.2, and each request by
-----------
Borrower for a Revolving Loan or
27
<PAGE> 32
Term Loan shall constitute a representation to Agent and Lenders
that each such condition set forth below has been met or
satisfied.
(a) WARRANTIES AND REPRESENTATIONS.
------------------------------
All of the warranties and representations
contained in this Agreement or any other Loan
Document shall be true and correct in all
material respects on and as of the date of such
Loan as if made on such date and each request
for a Loan shall constitute an affirmation by
Borrower that such warranties and
representations are then true and correct in
all material respects.
(b) NO DEFAULT. As determined by Agent in its
-----------
reasonable discretion, no Potential Default
shall have occurred or will result from such
Revolving Loan and no Event of Default shall
have occurred which shall be an Uncured Default
or will result from such Loan.
(c) NO LITIGATION.
--------------
(i) Except as set forth on Schedule 5.8 no
------------
litigation, investigation or proceeding before
any court or other governmental authority shall
be pending or threatened against Borrower or
any Subsidiary or any officer, director, or
employee of Borrower or any Subsidiary which,
in the reasonable opinion of Agent, is likely
to have a Material Adverse Effect; and (ii) no
injunction, writ, restraining order, judgment,
decree, or other order of any nature which
could reasonably have a Material Adverse Effect
shall have been issued or threatened by any
court or other governmental authority.
(d) OTHER REQUIREMENTS AND OTHER DOCUMENTS.
---------------------------------------
Lenders shall have received, in form and
substance reasonably satisfactory to Lenders,
all certificates, orders, authorizations,
consents, affidavits, schedules, instruments
and other documents which are provided for
hereunder, or which Lenders may at any time
reasonably request.
5. GENERAL CONTINUING WARRANTIES AND REPRESENTATIONS.
Borrower warrants and represents that:
5.1 OFFICE.
-------
The chief executive office or principal place of business
of Borrower is at the address indicated in Section 14
----------
hereof and Borrower covenants and agrees that it will not,
during the term of this Agreement, without at least 30 days
prior written notification to Agent, relocate such chief
executive office or principal place of business.
28
<PAGE> 33
5.2 EXISTENCE.
----------
Borrower is and shall at all times hereafter be a
corporation duly organized and existing under the laws of the
state of its organization and is qualified and licensed to do
business, and is in good standing, in any state in which it
conducts its business or in which the failure to qualify could
have a Material Adverse Effect which states include, as of the
date hereof and as of the Closing Date, the states listed on
Schedule 5.2 (provided that inclusion on said Schedule 5.2
- - ------------ ------------
does not mean that failure to qualify in such state would
have a Material Adverse Effect).
5.3 AUTHORITY.
----------
Borrower has full corporate power and is duly authorized
to enter into this Agreement and the other Loan Documents.
5.4 VALIDITY.
---------
This Agreement and all of the other Loan Documents are
the legal, valid and binding obligations of Borrower,
enforceable in accordance with their terms, except as limited
by applicable bankruptcy, reorganization, insolvency or similar
laws affecting the enforcement of creditor's rights generally.
5.5 NO BREACH.
----------
The execution by Borrower of this Agreement and the other
Loan Documents shall not constitute a breach of any provision
contained in Borrower's organizational agreements or by-laws,
nor does it constitute an event of default under any material
agreement to which Borrower is now or hereafter becomes a
party, nor does it violate any order, decree or judgment of any
court or governmental commission or agency.
5.6 SOLVENCY.
---------
On the Effective Date both prior to and after the
transactions contemplated in connection with the Closing, and
at all times thereafter, the Fair Value of Borrower's assets is
and shall be greater than its liabilities; Borrower is and
shall be able to pay its debts as they mature and Borrower does
not and will not have an unreasonably small amount of capital.
Borrower has and at all times hereafter will have sufficient
capital to carry on its business and transactions as now
conducted and as planned to be conducted in the future.
5.7 COMPLIANCE WITH LAWS.
---------------------
Borrower and each Subsidiary is in compliance in all
respects with all applicable Laws, including without
limitation, Laws imposed by any Regulatory Agencies or other
governmental authority, including but not limited to the
Securities Act of 1933, the Securities Exchange Act of 1934,
the Fair Labor Standards Act, Environmental Laws, laws relating
to income, unemployment,payroll or social security taxes and
employee benefit
29
<PAGE> 34
plans (as defined in Section 3(3) of ERISA) as required by ERISA,
except for those laws, rules and regulations the violation of
which would not have a Material Adverse Effect.
5.8 ACTIONS OR PROCEEDINGS.
----------------------
Except as disclosed on Schedule 5.8, there are no
------------
actions or proceedings pending by or against Borrower or any
Subsidiary before any court, administrative agency or other
governmental entity including, without limitation, any
Regulatory Agency which could have a Material Adverse Effect
and Borrower has no knowledge of any pending, threatened or
imminent litigation, governmental investigations or claims,
complaints, actions or prosecutions involving Borrower or any
Subsidiary, or any breaches by Borrower or any other Person of
any agreement to which Borrower is a party, except for actions,
proceedings, litigation, investigations, claims, complaints,
actions, prosecutions and breaches that would not have a
Material Adverse Effect.
5.9 Trademarks, Licenses, etc.
--------------------------
Borrower and each Subsidiary owns or possesses rights to
use all licenses, patents, patent applications, copyrights,
service marks, trademarks and trade names required to continue
to conduct its business as heretofore or presently conducted.
All such licenses, patents, patent applications, copyright
registrations, service marks, trademarks and trade names are
listed on Schedule 5.9. To the best of Borrower's
------------
knowledge, after diligent inquiry, no such license or trademark
has been declared invalid, been limited by order of any
governmental authority or by agreement, or is the subject of
any infringement, interference or similar proceeding or
challenge, except for those licenses or trademarks which if
challenged, limited or rendered invalid, would not have a
Material Adverse Effect.
5.10 FINANCIAL STATEMENTS.
---------------------
All financial statements relating to Borrower and its
Subsidiaries which have been or may hereafter be delivered by
Borrower to Agent or Lenders fairly present the financial
condition of Borrower and its Subsidiaries and have been
prepared in accordance with Generally Accepted Accounting
Principles, subject to year-end adjustments and the absence of
footnotes with respect to interim financial statements, and
there has been no material adverse change in the financial
condition of Borrower and its Subsidiaries, either individually
or on a consolidated basis, since the submission of such
financial information to Agent.
5.11 CONDUCT OF BUSINESS.
-------------------
Since September 30, 1996, Borrower has not: (i) incurred
any debts, obligations, or liabilities (absolute, accrued, or
contingent and whether due or to become due) except current
liabilities incurred in the ordinary course of business, none
of which (individually or in the aggregate) materially and
adversely affects the business or properties of Borrower;
(ii) paid any obligation or liability other than current
liabilities in the ordinary course of business, or discharged
or satisfied any liens or encumbrances other than those
securing
30
<PAGE> 35
current liabilities, in each case in the ordinary course
of business; (iii) except as set forth on Schedule 5.11
-------------
hereto, declared or made any payment to or distribution to
its stockholders as such, or purchased or redeemed any of
its shares of capital stock, or obligated itself to do so;
(iv) mortgaged, pledged, or subjected to any Lien any of its
assets (tangible or intangible); (v) sold, transferred or
leased any of its assets except in the usual and ordinary
course of business; (vi) suffered any physical damage,
destruction or loss (whether or not covered by insurance)
materially and adversely affecting the properties or business
of Borrower; (vii) entered into any transaction other than in
the usual and ordinary course of business and other than as
contemplated hereby; (viii) encountered any labor difficulties
or labor union organizing activities; (ix) except as set forth
on Schedule 5.11 hereto, issued or sold any shares of
-------------
capital stock or other securities or granted any options or
similar rights with respect thereto other than pursuant hereto;
or (x) agreed to do any of the foregoing other than pursuant
hereto. There has been no material adverse change in the
business, financial condition, operations or results of
operations of Borrower since the date of September 30, 1996.
5.12 ENVIRONMENTAL LAWS.
------------------
Except as disclosed on Schedule 5.12, to the best
-------------
of Borrower's knowledge after diligent inquiry: (i)
Borrower and its Subsidiaries and all properties owned or
operated by Borrower and its Subsidiaries comply with all
Environmental Laws, except where such failure to comply would
not have a Material Adverse Effect; (ii) neither Borrower nor
its Subsidiaries are not subject to any actual or threatened
judicial or administrative proceeding, investigation or inquiry
into the possibility of violation of any Environmental Laws;
(iii) neither Borrower nor its Subsidiaries' or their
respective properties are the subject of actual or threatened
governmental authority investigation or inquiry evaluating
whether any remedial action is needed to respond to a Release
of any Hazardous Material or other substance into the
environment, and Borrower does not have knowledge or notice of
the presence on or under any property owned or operated by it
or its Subsidiaries, or of the Release of, any Hazardous
Material in violation of any Environmental Laws; (iv) there is
no claim pending or threatened against Borrower or any of its
Subsidiaries relating to damage, contribution, cost recovery
compensation, loss, or injury resulting from the Release of, or
exposure to, any Hazardous Material, except such claims as
would not have a Material Adverse Effect; and (v) neither
Borrower nor its Subsidiaries has filed, nor was required to
file, any notice under any law, regulation or rule indicating
past or present generation, transportation, treatment, storage
or disposal of a Hazardous Material or reporting a Release of a
Hazardous Material into the environment and has not engaged in
such activity other than in accordance with Environmental Laws
where failure to file such notice or report will not have a
Material Adverse Effect. Neither Borrower nor its Subsidiaries
has any known contingent liability in connection with any
Release of any Hazardous Material into the environment; and
neither Borrower nor its Subsidiaries has received notice, nor
has reason to expect notice, of any potential liability under
any Environmental Law.
31
<PAGE> 36
5.13 PERMITS AND LICENSES.
--------------------
To the best of Borrower's knowledge after diligent
inquiry, Borrower and each of its Subsidiaries has been and is
current and in good standing with respect to all governmental
approvals, permits, certificates, licenses, inspections,
consents and franchises (collectively, the "Licenses")
necessary to continue to conduct its business and to own or
lease and operate its properties as heretofore conducted,
owned, leased or operated, including, without limitation, any
and all Licenses related to banking and trust activities
conducted by the Bank Subsidiaries, except where failure to
hold or maintain such Licenses would not have a Material
Adverse Effect.
5.14 ERISA.
------
To the best of Borrower's knowledge after diligent
inquiry: neither Borrower, any ERISA Affiliate of Borrower, nor
any Benefit Plan is in violation in any material respect of any
of the provisions of ERISA or any of the qualification
requirements of Section 401(a) of the IRC; no Prohibited
--------------
Transaction or Reportable Event has occurred with respect to
any Benefit Plan, nor has any Benefit Plan been the subject of
a waiver of the minimum funding standard under Section 412 of
the IRC; nor has any Benefit Plan experienced an accumulated
funding deficiency under Section 412 of the IRC; nor has any
lien been imposed upon the Borrower or any ERISA Affiliate of
Borrower under Section 412(n) of the IRC; nor has any Benefit
Plan been amended in such a way that the security requirements
of Section 401(a)(29) of the IRC apply; no notice of intent to
terminate a Benefit Plan has been distributed to affected
parties or filed with the PBGC under Section 4041 of ERISA, nor
has any Benefit Plan been terminated under Section 4041(e) of
ERISA; the PBGC has not instituted proceedings to terminate, or
appoint a trustee to administer, a Benefit Plan and no event
has occurred or condition exists which might constitute grounds
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan;
neither Borrower nor any ERISA Affiliate of Borrower would be
liable for any amount pursuant to Sections 4062, 4063 or 4064
of ERISA if all Benefit Plans terminated as of the most recent
valuation dates of such Benefit Plans; neither Borrower nor any
ERISA Affiliate of Borrower maintains any employee welfare
benefit plan, as defined in Section 3(1) of ERISA, which
provides any benefits to an employee or the employee's
dependents with respect to claims incurred after the employee
separates from service other than is required by applicable
law; and neither Borrower nor any ERISA Affiliate of Borrower
has incurred or expects to incur any withdrawal liability to
any Multiemployer Plan.
5.15 OTHER NAMES.
------------
During the previous five years, the business conducted by
Borrower and its Subsidiaries has not been conducted under any
corporate, trade or fictitious name other than those names
listed on Schedule 5.15 hereto.
-------------
32
<PAGE> 37
5.16 TAX OBLIGATIONS.
---------------
Borrower and each of its Subsidiaries has filed complete
and correct federal, state and local tax reports and returns
required to be filed by it, prepared in accordance with any
applicable laws or regulations, and except for extensions duly
obtained, has either duly paid all taxes, duties and charges
owed by it, or made adequate provision for the payment thereof,
unless Borrower is contesting in good faith, by appropriate
proceedings, the validity, amount or imposition of such tax,
duty or charge while maintaining adequate reserves to cover
such tax, duty or charge and where such contest would not have
a Material Adverse Effect. There are no material unresolved
questions or claims concerning any tax liability of Borrower or
any of its Subsidiaries. None of the transactions contemplated
hereby or under any agreements referred to hereunder will
result in any material tax liability for Borrower or any of its
Subsidiaries or result in any other material adverse tax
consequence for Borrower or any of its Subsidiaries.
5.17 EMPLOYEE CONTROVERSIES.
----------------------
There are no strikes, work stoppages or controversies
pending or, to the best of Borrower's knowledge after diligent
inquiry and investigation, threatened, between either Borrower
or any of its Subsidiaries and any of their employees, other
than employee grievances arising in the ordinary course of
business which will not, individually or in the aggregate, have
a Material Adverse Effect.
5.18 INVESTMENT COMPANY ACT.
-----------------------
Borrower is not an "investment company" or a company
"controlled" by an investment company within the meaning of the
Investment Company Act of 1940, as amended.
5.19 SUBSIDIARIES.
------------
Except as listed on Schedule 5.19 hereto, Borrower
-------------
has no Subsidiaries.
5.20 FULL DISCLOSURE.
----------------
This Agreement, the financial statements delivered in
connection herewith, and the representations and warranties of
Borrower herein and in any other document delivered or to be
delivered by or on behalf of Borrower, do not and will not
contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained
therein or herein, in light of the circumstances under which
they were made, not misleading. There is no material fact
which Borrower has not disclosed to Agent and Lenders in
writing which materially and adversely affects or, so far as
Borrower can foresee, could materially and adversely affect the
assets, business, prospects, profits, or condition (financial
or otherwise) of Borrower, the rights of Agent or the ability
of Borrower to perform this Agreement.
33
<PAGE> 38
6. NEGATIVE COVENANTS.
Borrower will not nor will it permit any of its
Subsidiaries to, without Agent's and Lender's prior written
consent:
6.1 SALE, TRANSFER OR ENCUMBRANCE OF ASSETS.
----------------------------------------
Sell, lease, pledge, encumber, grant or permit a Lien on
(other than Permitted Liens as defined below in this Section 6.1),
-----------
or otherwise dispose of or transfer, whether by sale or
otherwise, any of their assets, except for (A) sales of loans
and investments in the ordinary course of business, or (B)
sales of items of equipment or real property in the ordinary
course of Borrower's and its Subsidiaries' businesses up to an
aggregate sum of $25,000,000 in sales proceeds in any Fiscal
Year and where no Event of Default which is an Uncured Default
or Potential Default exists or would be created thereby. For
purposes of this Agreement, "Permitted Liens" shall mean any or
all of the following: (i) Liens securing the payment of taxes
or other governmental charges not yet due and payable, (ii)
Liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons
imposed without action of such parties, provided that the
--------
payment thereof is not yet required, (iii) Liens incurred or
deposits made in the ordinary course of Borrower's or any
Subsidiary's business in connection with worker's compensation,
unemployment insurance, social security and other like laws,
(iv) Liens in connection with capitalized or operating leases
or purchase money security interests for purchase of equipment
up to all aggregate sum not to exceed $25,000,000 for any
lease or purchase and $50,000,000 in the aggregate for all
leases or purchases during any Fiscal Year; (v) Liens listed on
Schedule 6.1, or (vi) repurchase agreements and other
- - ------------
similar transactions entered into by any Bank Subsidiary in the
ordinary course of its banking or trust business.
6.2 GUARANTIES.
-----------
Guarantee or otherwise become in any way liable with
respect to the obligations of any third party except by
endorsement of instruments or items of payments for deposit.
6.3 CHANGE IN BUSINESS.
-------------------
Enter into any business not related to its present
business or make any change in its financial structure or in
any of its business objectives, purposes, or operations which
could have a Material Adverse Effect.
6.4 LOANS AND INVESTMENTS.
----------------------
Make any material advance, loan or investment other than
(i) advances made to employees in the ordinary course of
business for moving, travel and business related expenses so
long as the aggregate amount of such advances do not exceed
$25,000 in the aggregate outstanding at any time; (ii)
investments in short-term direct obligations of the United
States government; (iii) investments in negotiable certificates
of deposit issued by a bank having capital and surplus of not
less than $100,000,000, payable to its order or to
34
<PAGE> 39
bearer; (iv) investments in commercial paper rated A-1 or P-1;
(v) existing investments in Subsidiaries and other investments in
existence on the date hereof and described in Schedule 6.5;
------------
(vi) investments of any Bank Subsidiary in the ordinary course of
its banking or trust business consisting of extensions of
credit in the form of loans, acceptances, repurchase
agreements, letters of credit, and similar transactions and
investments of any Bank Subsidiary in the ordinary course of
its banking or trust business in community development
organizations such as housing, small business and similar
programs; (vii) investments of any Bank Subsidiary in the
ordinary course of its banking or trust business in marketable
securities and money-market instruments which it is permitted
to hold and invest in under applicable law and regulation; and
(viii) acquisitions of the assets or stock of any Person where
no Event of Default or Potential Default exists at the time
thereof or would be created thereby; and (ix) securities issued
or guaranteed by any territory of the United States, or by the
District of Columbia, or by any state of the United States, or
by any political subdivision of a state or territory, or by any
public instrumentality of one or more states or territories, or
by any Person controlled or supervised by and acting as an
instrumentality of the government of the United States pursuant
to authority granted by the Congress of the United States.
6.5 AFFILIATE TRANSACTIONS.
-----------------------
Except as provided in Section 6.9 of this
-----------
Agreement, transfer any cash or property to any direct or
indirect owner of or beneficial owner of any interest in
Borrower or enter into any transaction, including without
limitation the purchase, lease, sale or exchange of property or
the rendering of any service to or by any direct or indirect
owner of or beneficial owner of any interest in Borrower or
other Affiliate, except for fair value in the ordinary course
of business pursuant to terms that are no less favorable than
the terms upon which such transactions would have been made had
such transfers or transactions been made at arm's length to or
with a Person that is not an Affiliate and in compliance with
all Laws governing transactions among banks or bank holding
company affiliates imposed by Regulatory Agencies.
6.6 CONSOLIDATIONS, MERGERS.
------------------------
Merge or consolidate with any other Person or dissolve,
enter into any joint venture or become a partner in any
partnership, except (i) that a Subsidiary may merge with the
Borrower or a Subsidiary of Borrower, and (ii) the Borrower may
merge with another person; provided that (a) the Borrower is
the surviving entity, and (b) immediately prior to and after
giving effect to such merger no Potential Default or Event of
Default exists.
6.7 TRANSACTIONS NOT IN THE ORDINARY COURSE; LIQUIDATIONS.
------------------------------------------------------
Enter into any transaction not in the usual course of its
business or adopt or undertake a plan of liquidation or
dissolution.
35
<PAGE> 40
6.8 SUSPENSION OF BUSINESS.
-----------------------
Suspend or terminate the transaction of its business.
6.9 DIVIDENDS, DISTRIBUTIONS.
-------------------------
In the case of Borrower only, pay, directly or
indirectly, any cash, stock or other securities or property
dividends or distributions, except for dividends by Borrower to
its shareholders during any Fiscal Year in excess of $1.50 per
share of Borrower's outstanding common stock; provided that
after giving effect to the payment of such dividends, no Event
of Default or Potential Default exists.
6.10 UNPERMITTED USES OF LOANS.
--------------------------
Use any part of the proceeds of the Loans hereunder for
any purpose which constitutes a violation of, or is
inconsistent with, any applicable regulations of the Board of
Governors of the Federal Reserve System, including without
limitation, the purchase or carrying of (or refinancing of
indebtedness originally incurred to purchase or carry) margin
securities.
6.11 ERISA.
------
Adopt or agree to contribute to any tax qualified Plan,
except as previously disclosed to Agent in writing.
7. AFFIRMATIVE COVENANTS - GENERAL.
--------------------------------
So long as any Obligations are outstanding, Borrower
covenants and agrees that:
7.1 TAXES.
------
All assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied or assessed
against, Borrower, any Subsidiary, or any of their property
have been paid, and shall hereafter be paid in full, before
delinquency, except those assessments and taxes the validity of
which is being contested in good faith by appropriate
proceedings, and as to which Borrower shall have set aside
adequate reserves.
7.2 INSURANCE.
----------
Borrower and each Subsidiary, at its expense, shall keep
and maintain its property insured under "all risk" or
equivalent types of policies against loss or damage by fire,
theft, explosion, sprinklers and all other hazards and risks
ordinarily insured against by other owners who use such
properties in similar business for the full insurable value
thereof as necessary to prevent application of any co-insurance
provisions. Borrower shall also keep and maintain business
interruption insurance and public liability insurance relating
to Borrower's ownership and use of its assets. All such
policies of insurance shall be in such
36
<PAGE> 41
form, with such companies, and in such amounts as may be
reasonably satisfactory to Agent. Borrower shall deliver to
Agent certified copies of such policies of insurance and evidence
of the payments of all premiums therefore. Agent, without
waiving or releasing any Obligations or any Event of Default may,
but shall have no obligation to obtain and maintain such policies
of insurance and pay such premiums and take any other action with
respect to such policies which Agent deems advisable. All sums
so disbursed by Agent, as well as reasonable attorneys' fees,
court costs, expenses and other charges relating thereof, shall
constitute Out-of-Pocket Fees and Costs and shall be payable on
demand.
7.3 LITIGATION.
-----------
Borrower shall immediately notify Agent in writing of any
suit in law or equity or administrative proceeding involving
money or property, and seeking damages from Borrower or any
Subsidiary in excess of $25,000,000, or which otherwise may
have a Material Adverse Effect.
7.4 BOOKS AND RECORDS.
------------------
Borrower at all times hereafter shall keep proper books
of record and account in which full and true entries will be
made of all dealings or transactions with respect to or in
relation to the business and affairs of Borrower, and shall
maintain a standard and modern system of accounting, in
accordance with generally accepted accounting practices with
ledger and account cards and/or computer tapes, discs,
printouts, and records which contain information as may from
time to time be reasonably requested by Agent. Borrower shall
notify Agent in writing if Borrower modifies or changes its
method of accounting or enters into, modifies, or terminates
any agreement presently existing, or at any time hereafter
entered into with any third party accounting firm and/or
service bureau for the preparation and/or storage of Borrower's
accounting records; provided, that such accounting firm
--------
and/or service bureau agrees to provide to Agent information
regarding the Borrower's financial condition. Borrower agrees
to permit Agent and any of its employees, officers or agents,
at all times after the occurrence of a Potential Default or
Event of Default, and otherwise upon one (1) Business Day's
prior notice, during Borrower's usual business hours, or the
usual business hours of third Persons having Control thereof,
to have access to and examine all of Borrower's Books relating
to the Collateral, the Obligations, Borrower's financial
condition and the results of Borrower's operations, and, in
connection therewith, permit Agent or any of its agents,
employees or officers to copy and make extracts therefrom.
7.5 COMPLIANCE WITH LAWS.
---------------------
Borrower shall comply in all material respects with all
Federal, State, local and foreign Laws, including, but not
limited to the Securities Act of 1933, the Securities Exchange
Act of 1934, the Fair Labor Standards Act, Environmental Laws,
laws relating to income, unemployment,payroll or social
security taxes and pension funds and retirement benefit
programs as required by ERISA and Laws imposed by any
Regulatory Agency.
37
<PAGE> 42
7.6 EXPENSE REIMBURSEMENTS.
-----------------------
Borrower shall promptly upon demand by Agent, reimburse
Agent and Lenders for all sums expended by Agent or Lenders
which constitute Out-of-Pocket Fees and Costs and Borrower
hereby authorizes and approves all advances and payments by
Agent or Lenders for items constituting Out-of-Pocket Fees and
Costs. Agent shall make all good faith reasonable attempts to
notify Borrower of such advances and payments, but the failure
of Agent to so notify Borrower shall impose no obligation or
liability of any kind upon Agent or Lenders. Agent may charge
any or all of such amounts expended to Borrower's Loan Account
and such amounts shall be part of the Obligations subject to
interest at the Default Rate.
7.7 ERISA REPORTABLE EVENTS.
------------------------
Borrower shall furnish to Agent: (a) as soon as
possible, but in no event later than thirty (30) days after any
executive officer of Borrower has knowledge of or has reason to
know that any Reportable Event with respect to any Benefit Plan
has occurred, a statement of the chief financial officer of
Borrower setting forth the details concerning such Reportable
Event and the action which Borrower proposes to take with
respect thereto, together with a copy of the notice of such
Reportable Event given to the PBGC, if a copy of such notice is
available to Borrower; (b) promptly after the filing thereof
with the United States Internal Revenue Service or the PBGC,
copies of each annual report with respect to each Benefit Plan;
(c) promptly after receipt thereof, a copy of any notice of any
potential material liability, adverse determination letter,
ruling or opinion Borrower may receive from the PBGC or the
Internal Revenue Service with respect to any Benefit Plan; (d)
when the same is made available to participants in a Benefit
Plan, all notices of a significant reduction in the rate of
benefit accrual or plan termination to the participants by the
administrator of such Benefit Plan; and (e) promptly after
receipt thereof, any notice from any Multiemployer Plan to
which Borrower or any ERISA Affiliate of Borrower contributes
which quantifies any actual or potential withdrawal liability
which will or may be imposed upon the withdrawal of the
Borrower or any ERISA Affiliate of Borrower from such
Multiemployer Plan.
8. AFFIRMATIVE COVENANTS - REPORTING.
----------------------------------
Borrower shall furnish or cause to be furnished to Agent
and Lenders the following:
8.1 COLLATERAL ACTIVITY REPORT, COVENANT COMPLIANCE
------------------------------------------------
CERTIFICATES.
-------------
As soon as practicable and in any event within thirty
(30) days following the end of each fiscal quarter of each
Fiscal Year, Borrower shall provide Agent with a certificate
reflecting Borrower's compliance with the financial covenants
set forth in Section 9 of this Agreement as of the last day
---------
of the fiscal period. Such certificate shall be in a form and
with such specificity as is satisfactory to Agent and shall
contain such additional information as Agent may reasonably
require concerning financial covenant calculations included,
38
<PAGE> 43
described or referred to in such certificate and any other
documents in connection therewith requested by Agent.
8.2 FINANCIAL AND OTHER REPORTS. Borrower shall
----------------------------
further cause to be furnished to Agent and Lenders:
(a) PERIODIC FINANCIAL STATEMENTS.
------------------------------
As soon as practicable and in any event within sixty
(60) days following the end of each of the first
three fiscal quarters of each Fiscal Year commencing
with the quarter ending March 31, 1997, (i)
consolidated and consolidating statements of income
of Borrower and its Subsidiaries for each such
fiscal quarter and for the period from beginning of
the then current Fiscal Year of Borrower to the end
of such fiscal quarter, (ii) consolidated and
consolidating statements of cash flow of Borrower
and its Subsidiaries for the period from the
beginning of the then current Fiscal Year of
Borrower to the end of such fiscal quarter, (iii)
consolidated and consolidating balance sheets of
Borrower and its Subsidiaries as of the end of such
fiscal quarter, and (iv) with respect to such
statements of income, in comparative form, figures
for the corresponding periods in the preceding
fiscal year of Borrower and its Subsidiaries, all in
reasonable detail and certified by the chief
financial officer of Borrower as fairly presenting
the financial condition of Borrower and its
Subsidiaries in accordance with Generally Accepted
Accounting Principles, subject to the absence of
footnotes and to year-end adjustments.
(b) REGULATORY CAPITAL REPORTS. As soon as
---------------------------
practicable and in any event within sixty (60) days
following the end of each fiscal quarter of each
Fiscal Year, commencing with the quarter ending
December 31, 1996, a copy of all Regulatory Capital
Reports filed by Borrower and its Subsidiaries as of
the end of such fiscal quarter.
(c) YEARLY FINANCIAL STATEMENTS. As soon as
---------------------------
practicable and in any event within one hundred
twenty (120) days after the end of each Fiscal Year
of Borrower commencing with the Fiscal Year ending
December 31, 1996, (i) consolidated and
consolidating statements of income of Borrower and
its Subsidiaries for such Year, and consolidated and
consolidating balance sheets of Borrower and its
Subsidiaries as of the end of such Fiscal Year, and
(ii) consolidated and consolidating statements of
cash flow of Borrower and its Subsidiaries for such
Fiscal Year, all setting forth in comparative form,
corresponding figures for the period covered by the
preceding annual audit and as of the end of the
preceding Fiscal Year of Borrower, all in reasonable
detail and in scope in accordance with audits
performed for Borrower in prior years and certified
by independent certified public accountants of
recognized national standing selected by Borrower
and satisfactory to Agent, whose opinion shall be
unqualified and shall be in
39
<PAGE> 44
scope in accordance with audits performed for
Borrower in prior years, in form and substance
satisfactory to Agent.
(d) MANAGEMENT LETTERS, TAX DISTRIBUTIONS.
--------------------------------------
As soon as practicable and in any event within ten
(10) days of delivery to Borrower, a copy of any
letter issued by Borrower's independent public
accountants or other management consultants with
respect to Borrower's or any Subsidiary's financial
or accounting systems or controls, including all so-
called "management letters".
(e) REGULATORY AGENCY REPORTS. Promptly upon
-------------------------
their becoming available, one copy of each financial
statement, report, notice or proxy statement sent by
Borrower to its shareholders generally and each
regular or periodic, financial or other report,
registration statement or prospectus filed by
Borrower or any of its Subsidiaries with any
Regulatory Agencies, including without limitation,
the Securities and Exchange Commission and the
Federal Reserve, subject, in each case, to any
statutory and regulatory restrictions on
dissemination of information.
(f) OTHER INFORMATION. With reasonable
-----------------
promptness, such other business or financial data,
reports and projections as Agent may reasonably
request.
All financial statements delivered to Agent or
Lenders pursuant to the requirements of this
subsection (except where otherwise expressly
indicated) shall be prepared in accordance with
Generally Accepted Accounting Principles as provided
in this Agreement. Together with each delivery of
financial statements required by Subsections (A)
---------------
and (B) above, Borrower shall deliver to Agent an
-------
officer's certificate in the form of Exhibit 8.2
-----------
hereto stating that (1) there exists no Event of
Default or Potential Default, or if a Potential
Default or Event of Default exists, specifying the
nature thereof, the period of existence thereof and
what action Borrower proposes to take with respect
thereto, (2) no material adverse change in the
condition, financial or otherwise, business,
property, or results of operations of Borrower has
occurred since the previous certificate was sent to
Agent by Borrower or, if any such change has
occurred, specifying the nature thereof and what
action Borrower has taken or proposes to take with
respect thereto, (3) all insurance premiums then due
have been paid, (4) all taxes then due have been
paid or, for those taxes which have not been paid, a
statement of the taxes not paid and a description of
Borrower's rationale therefor, (5) except as
previously reported to Agent, to the best of
Borrower's knowledge after diligent inquiry, no
litigation, investigation or proceeding, or
injunction, writ or restraining order is pending or
threatened which would have a Material Adverse
Effect, and (6) stating whether or not Borrower is
in compliance with the representations, warranties
and covenants in this Agreement. Together with each
delivery of annual
40
<PAGE> 45
financial statements required by Subsection (B)
--------------
above, Borrower shall, if requested by the Agent,
deliver to Agent a certificate of the accountants who
performed the audit in connection with such
statements stating that in making the audit necessary
to the issuance of a report on such financial
statements, they have obtained no knowledge of any
Event of Default, or, if such accountants have
obtained knowledge of an Event of Default, specifying
the nature and period of existence thereof. Agent
shall exercise reasonable efforts to keep such
information, and all information acquired as a result
of any inspection conducted in accordance with this
Agreement, confidential, provided that Agent may
communicate such information (1) to any other Person
in accordance with the customary practices of
commercial lenders relating to routine trade
inquiries, (2) to any regulatory authority, or
pursuant to any other, judgement or decree of any
court, having jurisdiction over Agent, (3) to
Lenders, (4) to any other Person in connection with
the exercise of Agent's rights hereunder, or (5) to
any Participant or prospective Participant.
8.3 ACCOUNTING INFORMATION.
----------------------
Borrower authorizes Agent to discuss the financial
condition of Borrower with Borrower's independent public
accountants and agrees that such discussion or communication
shall be without liability to either Agent or Borrower's
independent public accountants. Prior to the occurrence of an
Event of Default, Agent shall provide Borrower prior notice of
any proposed discussion with Borrower's accountants. Borrower
shall deliver a letter addressed to such accountants
authorizing them to comply with the provisions of this
subsection, and authorizing Agent to rely on financial
statements of Borrower issued by such accountants, which letter
shall be acknowledged and consented to in writing by such
accountants.
8.4 OTHER INFORMATION AND CHANGES.
------------------------------
Borrower shall promptly supply Agent with such other
information concerning its or its Subsidiaries' affairs as
Agent may reasonably request from time to time hereafter, and
shall promptly notify Agent of any material adverse change in
Borrower's or any Subsidiary's financial condition and of any
condition or event which constitutes a breach of or an Event of
Default under this Agreement.
9. COVENANTS - FINANCIAL.
9.1 NON-PERFORMING ASSETS TO TOTAL EQUITY CAPITAL.
---------------------------------------------
Borrower shall not permit the ratio of its consolidated
Nonperforming Assets to its Total Equity Capital to exceed .25
to 1.0 at any time.
41
<PAGE> 46
9.2 CAPITALIZATION.
--------------
Borrower shall cause each Bank Subsidiary to be
"adequately capitalized" for purposes of 12 U.S.C. 1831(o) and
any rules and regulations issued thereunder by any Regulatory
Agencies, as amended, supplemented or otherwise modified from
time to time.
9.3 CAPITAL GUIDELINES.
------------------
Borrower shall comply and cause each Bank Subsidiary to
comply with all minimum risk-based capital guidelines and other
capital guidelines imposed by any Regulatory Agencies.
9.4 RETURN ON AVERAGE ASSETS.
------------------------
The Borrower will maintain a Return on Average Assets,
calculated on a quarterly basis for the twelve (12) month
period ending as of the end of each fiscal quarter, of not less
than .50%.
9.5 FUNDED DEBT TO TOTAL EQUITY CAPITAL.
-----------------------------------
Borrower shall not permit the ratio of its Funded Debt to
its Total Equity Capital to exceed .25 to 1.0 at any time.
9.6 TOTAL EQUITY CAPITAL.
--------------------
Borrower shall not permit its Total Equity Capital at any
time to be less than the sum of (i) $400,000,000 at all times
prior to the purchase by Borrower of the capital stock of
Homeland Bankshares Corporation, Waterloo, Iowa ("Homeland"),
and (ii) $500,000,000 at all times from and after the purchase
of the capital stock of Homeland, excluding in either case, the
effects of any adjustment required by FASB 115, but in no event
shall such adjustment exceed $75,000,000.
10. EVENTS OF DEFAULT
- - --- -----------------
Any one or more of the following shall constitute an
----------------------------------------------------
Event of Default by Borrower under this Agreement:
- - --------------------------------------------------
10.1 PAYMENT.
---- --------
If Borrower fails to pay when due and payable or when
declared due and payable, all or any portion of the Obligations
owing to Agent or Lenders (whether of principal, interest,
taxes, reimbursement of Out-of-Pocket Fees and Costs, or
otherwise) which is not cured within one (1) Business Day of
notice to Borrower.
42
<PAGE> 47
10.2 BREACH OF COVENANTS.
--------------------
If Borrower fails or neglects to perform, keep or observe
any term, provision, condition, covenant, agreement contained
in this Agreement, any other Loan Document, or any other
present or future agreement between Borrower and Agent or
Lenders and/or evidencing and/or securing the Obligations,
except (i) the failure to comply with Sections 7.3 through 7.7
------------ ---
of this Agreement shall not be an Event of Default unless such
failure continues for a period of fifteen (15) days following
notice by Agent to Borrower and (ii) the failure to comply with
Section 8.2 hereof shall not be an Event of Default unless such
- - -----------
failure remains unremedied for a period of ten (10) Business Days
after such breach.
10.3 BREACH OF REPRESENTATION.
-------------------------
If any representation, warranty, statement, report, or
certificate made or delivered by Borrower, or any of its
officers, partners, employees or agents on behalf of Borrower,
to Agent or Lenders is false or misleading in any material
respect when made or deemed to be made.
10.4 ATTACHMENT OR LEVY.
-------------------
If all or any of Borrower's assets in excess of
$25,000,000 in the aggregate are attached, seized, subjected to
a writ or distress warrant, or are levied upon, or come into
the possession of any Judicial Officer or assignee for the
benefit of creditors unless, with respect to any such assets,
such attachment, seizure, writ, warrant or levy shall be
dismissed, released or stayed within ten (10) days of issuance
thereof.
10.5 VOLUNTARY INSOLVENCY.
---------------------
If an Insolvency Proceeding is commenced by Borrower or
any Subsidiary.
10.6 INVOLUNTARY INSOLVENCY.
-----------------------
If an Insolvency Proceeding is commenced against Borrower
or any Subsidiary, except that if Borrower or its Subsidiary is
contesting such Proceeding in good faith, such Insolvency
Proceeding shall not constitute an Event of Default unless such
Insolvency Proceeding is not dismissed within sixty (60) days
of the commencement of such Insolvency Proceedings.
10.7 INJUNCTION.
-----------
If Borrower or any Subsidiary is enjoined, restrained or
in any way prevented by court order from continuing to conduct
all or any material part of its business affairs.
43
<PAGE> 48
10.8 GOVERNMENTAL LIEN.
------------------
If a notice of lien, levy or assessment in excess of
$25,000,000 in the aggregate, is filed of record with respect
to any or all of Borrower's or any Subsidiary's assets by the
United States Government, or any department, agency or
instrumentality thereof, or by any state, county, municipal or
other governmental agency, or if any taxes or debts owing at
any time hereafter to any one or more of such entities in
excess of $25,000,000 in the aggregate, becomes a Lien, whether
choate or otherwise, upon any or all of Borrower's or any
Subsidiary's assets and the same is not paid on the payment
date thereof.
10.9 JUDGMENT.
---------
If a judgment or other claim in excess of $25,000,000
individually, or $25,000,000 in the aggregate, becomes a Lien
upon any or all of Borrower's or any Subsidiary's assets.
10.10 OTHER INDEBTEDNESS.
-------------------
If there is a default in any agreement with respect to
Indebtedness in excess of $25,000,000, to which Borrower or any
Subsidiary is a party with another Person resulting in a right
by such Person to accelerate the maturity of such Indebtedness
or to exercise any other right or remedy.
10.11 ERISA REPORTABLE EVENT.
-----------------------
If (a) any Reportable Event which Agent determines
constitutes grounds for the termination of any Benefit Plan by
the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer any such Plan,
shall have occurred and be continuing thirty (30) days after
written notice of such determination shall have been given to
Borrower by Agent, or any such Benefit Plan shall be terminated
within the meaning of Title IV of ERISA, or a trustee shall be
appointed by the appropriate United States District Court to
administer any such Plan, or the PBGC shall institute
proceedings to terminate any Benefit Plan; and (b) in case of
any event described above in this Section 10.11, the
-------------
aggregate amount of Borrower's liability under Sections 4062,
4063 or 4064 of ERISA shall exceed one percent (1%) of
Borrower's Total Equity Capital; or (c) there shall be a
withdrawal from any Multiemployer Plan as a result of which the
aggregate amount of Borrower's liability in relation thereto
shall exceed one percent (1%) of Borrower's Total Equity
Capital.
Notwithstanding anything contained in this Section 10 or
contained in any other provision of this Agreement or the other
Loan Documents to the contrary, in the event of the institution
of Insolvency Proceedings against Borrower, Agent and Lenders
shall not be obligated to make advances to Borrower during the
sixty (60) day grace period under Section 10.6.
-------------
11. RIGHTS AND REMEDIES
44
<PAGE> 49
11.1 RIGHTS AND REMEDIES GENERALLY.
------------------------------
Upon the occurrence of an Event of Default by Borrower
under this Agreement and notice thereof by Agent to Borrower,
except as hereinafter provided, Agent may, with the consent of
the Majority Lenders or as otherwise provided under Section
17(c) hereof, and shall at the direction of the Majority
Lenders, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by Notes, or otherwise, immediately due
and payable; provided, that all Obligations shall be
immediately due and payable without notice or demand
upon an Event of Default under Section 10.5 or 10.6;
--------------------
(b) Cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement, or
any other agreement between Borrower and Agent or
Lenders;
(c) Terminate this Agreement as to any future
liability or obligation of Agent or Lender's but
without affecting Agent or Lender's rights and
without affecting the Obligations owing by Borrower
to Agent or Lenders;
(d) Commerce suit for collection of the Obligations or
pursue any other right or remedy available under the
other Loan Documents, or
(e) Borrower shall pay all Out-of-Pocket Fees and
Costs incurred in connection with Agent's
enforcement and exercise of any of its rights and
remedies as herein provided, whether or not suit is
commenced by Agent.
11.2 RIGHTS CUMULATIVE.
------------------
Agent's rights and remedies under this Agreement and all other
Loan Documents shall be cumulative. Agent shall have all other
rights and remedies not inconsistent herewith as provided by
law, or in equity. No exercise by Agent of one right or remedy
shall be deemed an election, and no waiver by Agent of any
default on Borrower's part shall be deemed a continuing waiver.
No delay by Agent shall constitute a waiver, election or
acquiescence by it.
12. TAXES AND EXPENSES
If Borrower fails to pay promptly when due to any other
Person, monies which Borrower is required to pay by reason of
any provision in this Agreement (including without limitation
for any tax, expense or with respect to any Lien), or to
promptly contest same by proper proceedings diligently pursued,
Agent may, but need not, pay the same and charge Borrower's
account therefor, and Borrower shall promptly reimburse Agent.
All such sums shall become additional Obligations owing to
Agent and Lenders and shall bear interest at the Default Rate
hereunder. Any payments made by Agent shall not constitute: (i)
45
<PAGE> 50
agreement by Agent to make similar payments in the future,
or (ii) a waiver by Agent of any Event of Default under this
Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax or Lien and the receipt of
the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing,and
the receipt of any other notice with respect to all other such
monies due hereunder shall be prima facia evidence that
----- -----
the same was validly due and owing.
13. CERTAIN WAIVERS
13.1 APPLICATION OF PAYMENTS.
------------------------
Except as expressly provided in this Agreement with
respect to payments and prepayments on the Term Loans, Borrower
waives the right to direct the application of any and all
payments at any time or times hereafter received by Agent on
account of any Obligations owed by Borrower, and Borrower
agrees that Agent shall have the continuing exclusive right to
apply and reapply such payments in any manner as Agent may deem
advisable, notwithstanding any entry by Agent upon its books.
13.2 DEMAND, ETC.
------------
Except as expressly provided in this Agreement, Borrower
waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any
default, notice of nonpayment at maturity,notice of intent to
accelerate, and notice of acceleration.
14. NOTICES
Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder
shall be in the form and manner specified below, and shall be
addressed to the party to be notified as follows:
If to Agent at: LaSalle National Bank
135 South LaSalle Street, Suite 510
Chicago, Illinois 60603
Attention: Phillip J. Hagglund
Facsimile: 312/904-4880
If to Lenders at: the addresses specified below their
signatures to this Agreement
If to Borrower at: Magna Group, Inc.
1401 S. Brentwood Boulevard
St. Louis, Missouri 63144
Attention: Ronald A. Buerges,
Executive Vice President
Facsimile: 314/963-2691
46
<PAGE> 51
or to such other address as each party designates to the other
by notice in the manner herein prescribed. Notice shall be
deemed given hereunder if (i) delivered personally or otherwise
actually received, (ii) sent by overnight delivery service,
(iii) mailed by first-class United States mail, postage
prepaid, registered or certified, with return receipt
requested, or (iv) sent via telecopy machine with a duplicate
signed copy sent on the same day as provided in clause (ii)
above. Notice mailed as provided in clause (iii) above
------ -----
shall be effective upon the expiration of three (3) Business
Days after its deposit in the United States mail, and notice
telecopied as provided in clause (iv) above shall be
------ ----
effective upon receipt of such telecopy if the duplicate signed
copy is sent under clause (iii) above. Notice given in
------ -----
any other manner described in this section shall be effective
upon receipt by the addressee thereof; provided, however,
--------
that if any notice is tendered to an addressee and delivery
thereof is refused by such addressee, such notice shall be
effective upon such tender unless expressly set forth in such
notice.
15. AGENT.
-----
(a) APPOINTMENT. Each Lender hereby designates and
-----------
appoints LaSalle as Agent of such Lender under this
Agreement, and each Lender hereby irrevocably authorizes
Agent to take such action on its behalf under the
provisions of this Agreement and to exercise such powers
as are set forth herein, together with such other powers
as are incidental thereto. Agent agrees to act as such
on the express conditions contained in this Section 15.
----------
The provisions of this Section 15 are solely for the
----------
benefit of Agent and Lenders, and Borrower shall not have
the right to rely on or enforce any of the provisions
hereof. In performing its functions and duties under
this Agreement, Agent shall act solely as agent of the
Lenders and does not assume and shall not be deemed to
have assumed any obligation toward or relationship of
agency or trust with or for Borrower.
(b) NATURE OF DUTIES. Agent shall not have any duties or
----------------
responsibilities except those expressly set forth in this
Agreement. The duties of Agent shall be mechanical and
administrative in nature. Agent shall not have by reason
of this Agreement a fiduciary relationship in respect of
any Lender. Nothing in this Agreement, express or
implied, is intended to or shall be construed to impose
upon Agent any obligation in respect of this Agreement
except as expressly set forth herein. Each Lender shall
make its own independent investigation of the financial
condition and affairs of Borrower in connection with the
making and the continuance of the Loans hereunder and
shall make its own appraisal of the creditworthiness of
Borrower, and Agent shall not have any duty or
responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its
possession before the date of this Agreement or at any
time or times thereafter, except for documents delivered
to Agent pursuant to this Agreement by or on behalf of
the Borrower. If Agent seeks the consent or approval of
the Majority Lenders to the taking or refraining from
taking any action hereunder, Agent shall send notice
thereof to each Lender.
47
<PAGE> 52
Agent shall promptly notify each Lender at any time that
the Majority Lenders have instructed Agent to act or
refrain from acting pursuant hereto.
(c) RIGHTS, EXCULPATION, ETC. Neither Agent, any
-------------------------
Affiliate of Agent, nor any of their respective officers,
directors, employees, agents, attorneys or consultants,
shall be liable to any Lender for any action taken or
omitted by them hereunder, or in connection herewith,
except that Agent shall be obligated for its gross
negligence or willful misconduct in the performance of
its express duties solely as Agent hereunder. Agent
shall not be liable for any apportionment or distribution
of payments made by it in the absence of willful
misconduct or gross negligence in the performance of its
express duties solely as Agent hereunder, and if any such
apportionment or distribution is subsequently determined
to have been made in error the sole recourse of any
Person to whom payment was due, but not made, shall be to
recover from the recipients of such payments any payment
in excess of the amount to which they are determined to
have been entitled. Agent shall not be responsible to
any Lender for any recitals, statements, representations
or warranties herein or for the enforceability,
collectibility, or sufficiency of this Agreement, or any
of the transactions contemplated hereby and thereby, or
for the financial condition of Borrower. Agent shall not
be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions
or conditions of this Agreement or the financial
condition of Borrower, or the existence or possible
existence of any Event of Default or Potential Default.
Agent may at any time request instructions or
indemnification from Lenders with respect to any actions
or approvals which by the terms of this Agreement Agent
is permitted or required to take or grant, and if such
instructions or indemnification are promptly requested,
Agent shall be absolutely entitled to refrain from taking
any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for
refraining from any action or withholding any approval
under this Agreement until it shall have received such
instructions or indemnification (to Agent's reasonable
satisfaction) from the Lenders. Without limiting the
foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or
refraining from acting under this Agreement in accordance
with the instructions of the Majority Lenders.
Notwithstanding anything to the contrary contained
herein, after the occurrence of an Event of Default, in
the event Agent, after reasonable consultation with the
Majority Lenders, fails to receive the consent or
direction of the Majority Lenders, and Agent reasonably
believes there is a possibility of a material impairment
of the prospect of repayment of all or any material
portion of the Obligations, Agent may, at its sole
election, exercise the rights and remedies under
Section 11 of this Agreement whether or not it has
----------
received the consent of the Majority Lenders.
48
<PAGE> 53
(d) RELIANCE. Agent shall be entitled to rely upon any
--------
written notices, statements, certificates, orders or
other documents or any telephone message believed by it
in good faith to be genuine and correct and to have been
signed, sent or made by the proper Person, and with
respect to all matters pertaining to this Agreement and
its duties hereunder or thereunder, upon advice of legal
counsel (including counsel for Borrower), independent
public accountants and other experts selected by it.
(e) INDEMNIFICATION. To the extent that Agent is not
---------------
reimbursed and indemnified by Borrower, Lenders will
reimburse and indemnify Agent, upon demand, for and
against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or
asserted against it in any way relating to or arising out
of this Agreement or any action taken or omitted by Agent
under this Agreement, in proportion to each Lender's Pro
Rata Share of the Commitments; provided that no Lender
shall be liable for any portion of such liabilities,
obligations losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements
resulting from Agent's gross negligence or willful
misconduct in the performance of its express duties
solely as Agent hereunder. The obligations of Lenders
under this Section 15(e) shall survive the payment in
-------------
full of all Obligations and the termination of this
Agreement.
(f) THE AGENT INDIVIDUALLY. With respect to its Pro Rata
----------------------
Share of the Commitments hereunder and the Revolving
Loans made by it, Agent shall have and may exercise the
same rights and powers hereunder and is subject to the
same obligations and liabilities as and to the extent set
forth herein for any other Lender. The terms "Lender" or
"Lenders" or any similar terms shall include Agent in its
individual capacity as a Lender or one of Lenders.
Except as provided herein, Agent in its individual
capacity may accept deposits from and generally engage in
any kind of banking, trust or other business with
Borrower as if it were not acting as Agent pursuant
hereto.
(g) SUCCESSOR AGENT; RESIGNATION OF AGENT.
-------------------------------------
(1) Agent may resign from the performance of all its
functions and duties hereunder at any time by giving
at least thirty (30) Business Days' prior written
notice to Lenders and Borrower. Such resignation
shall take effect upon the acceptance by a successor
Agent of appointment pursuant to clauses (2) and (3)
below or as otherwise provided below.
(2) Upon any such notice of resignation by Agent, the
Majority Lenders shall appoint a successor Agent who
shall be reasonably satisfactory to Borrower.
(3) If a successor Agent shall not have been so
appointed within said thirty (30) Business Day
period, the resigning Agent, with the consent of
Borrower (which may not be withheld unreasonably),
shall then appoint a successor Agent who shall serve
as Agent until such time, if any, as the
49
<PAGE> 54
Majority Lenders, with the consent of Borrower,
appoint a successor Agent as provided above.
(4) Upon the appointment of a successor Agent, the term
"Agent" shall, for all purposes of this Agreement,
thereafter mean such successor.
h. RELATIONS AMONG LENDERS.
-----------------------
(1) Except as contemplated under this Agreement, no
Lender shall make any loan, advance or other
financial accommodation to Borrower without the
prior written consent of the Majority Lenders.
(2) Each Lender agrees that with respect to any
obligations of Borrower to such Lender, it will not
take any action, nor institute any actions or
proceedings, against Borrower or any other obligor
hereunder without the prior written consent of the
Majority Lenders; provided that this provision shall
not impair or effect Agent's rights and duties to
take actions as provided hereunder.
(i) MISCELLANEOUS. Each Lender agrees that any action
-------------
taken by Agent or the Majority Lenders in accordance with
the provisions of this Agreement, and the exercise by
Agent or the Lenders of the powers set forth herein or
therein, together with such other powers as are
reasonably incidental thereto, shall be authorized and
binding upon all of the Lenders.
(j) PARTICIPATIONS. Each Lender may sell participations
--------------
to one or more banks or other entities in or to all or a
portion of its rights and obligations under this
Agreement (including, without limitation, all or a
portion of its Commitment and the Loans owing to it):
provided, however, that (i) such Lender's
-------- -------
obligations under this Agreement (including, without
limitation, its Commitment to Borrower hereunder) shall
remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the
performance of such obligations, (iii) Borrower, Agent
and the other Lenders shall continue to deal solely and
directly with such Lender in connection with any and all
payments to be made under this Agreement and (iv) the
holder of any such participation shall not be entitled to
voting rights under this Agreement. No Lender may,
without the consent of all Lenders, make an assignment of
its rights or obligations under this Agreement.
(k) WAIVER AND AMENDMENT.
--------------------
(1) Agent's or Lenders' failure, at any time or times
hereafter, to require strict performance by Borrower
of any provision of this Agreement, the Revolving
Credit Notes or Term Loan Notes shall not waive,
affect or diminish any right of Agent or Lenders
thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by
Agent or Lenders of a Potential Default or Event of
Default by Borrower
50
<PAGE> 55
under this Agreement, the Revolving Credit Notes or
Term Loan Notes shall not suspend, waive or affect
any other Potential Default or Event of Default by
Borrower under this Agreement, the Revolving Credit
Notes, or Term Loan Notes whether the same is prior
or subsequent thereto and whether of the same or of a
different kind or character.
(2) No amendment, modification, termination or waiver of
any provision of this Agreement or the Notes
relating to (i) any increase of the Commitments of
any Lender, (ii) any change in the final maturity of
the Loans, (iii) the reduction of interest rates
applicable to the Loans or fees payable under this
Agreement, or (iv) amortization of the Term Loans
shall be effective without the written agreement of
all of the Lenders and Borrower. No amendment,
modification, termination or waiver of any other
provision of this Agreement shall be effective
without the written agreement of the Majority
Lenders and Borrower. Whenever a consent is
required, any of the Lenders shall have the right to
grant or withhold same at their sole discretion.
(3) Notwithstanding the provisions of this Section, no
amendment, modification, termination or waiver of
any provision of this Section 15 or any other
----------
provision referring to Agent's rights hereunder
shall be effective without the written consent of
Agent. Agent may, but shall have no obligation to,
with the concurrence of any Lender, execute
amendments, modifications, waivers or consents on
behalf of such Lender.
16. CHOICE OF LAW AND VENUE
This Agreement shall be deemed to have been made in the
State of Illinois and the validity of this Agreement, its
construction, interpretation and enforcement, and the rights of
parties hereunder and concerning the Collateral, shall be
determined under, governed by and construed in accordance with
the laws of the State of Illinois. The parties agree that all
actions or proceedings arising in connection with this
Agreement shall be tried and litigated only in the state and
federal courts located in the County of Cook, State of
Illinois. Borrower waives any right it may have to assert the
doctrine of forum non conveniens or to object to such venue and
hereby consents to any court ordered relief. Borrower consents
that all service of process upon it be made by registered mail
or messenger directed to it at the address set forth in
Section 14 above and that service so made shall be deemed
- - ----------
to be completed upon the earlier of actual receipt or three (3)
Business Days after the same shall have been posted to
Borrower's address by Borrower's agent as set forth below.
Nothing contained in this Section 16 shall affect the right
----------
of Agent or Lenders to serve legal process in any other manner
permitted by law or affect the right of Agent or Lenders to
bring any action or proceeding against Borrower or its property
in the courts of any other jurisdiction.
51
<PAGE> 56
17. INDEMNITY
Borrower shall indemnify, hold harmless and defend Agent,
Lenders and their directors, officers, agents, counsel and
employees ("Indemnified Persons") from and against all losses,
claims, damages, costs, expenses and liabilities ("Losses"),
whether such Losses arise or notice thereof is received by
Agent or Lenders during the term of this Agreement or after
termination of this Agreement, incurred by any of them arising
principally out of or relating to this Agreement, the Loans,
the other Loan Documents or any other transaction contemplated
hereby or thereby, other than arising out of any intercreditor
relationship between Agent and Lenders or between Lenders and
any Participant or subordinated debt holder and except for any
such losses caused by the gross negligence or willful
misconduct of such Indemnified Persons, and shall reimburse
Agent or Lenders and each other Indemnified Person for any
expenses including in connection with the investigation of,
preparation for or defense of any actual or threatened claim,
action or proceeding arising therefrom (including any such
costs of responding to discovery requests or subpoenas),
regardless of whether any Indemnified Person is a party
thereto. Each Indemnified Person may select its own counsel
with respect to any Losses, in addition to any Borrower's
counsel, and shall be indemnified therefor hereunder. The
provisions of this Section 17 shall survive the termination
----------
of this Agreement.
18. GENERAL PROVISIONS
18.1 ACCEPTANCE.
-----------
This Agreement shall be binding and deemed effective when
executed by Borrower and accepted and executed by Agent and
Lenders.
18.2 BINDING AGREEMENT.
------------------
This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this
- - --------
Agreement or any rights hereunder without Agent's prior written
consent and any prohibited assignment shall be absolutely void.
No consent to an assignment by Agent shall release Borrower
from its obligations to Agent or Lenders. Except as otherwise
provided herein, Agent and Lenders may assign this Agreement
and their rights and duties hereunder, and Borrower shall
execute and deliver such documents in connection with such
assignment as they or such assignee may reasonably request.
Except as otherwise provided herein, Lenders reserve the right
to sell, assign, transfer, negotiate or grant participations in
all or any part of, or any interest in their rights and
benefits hereunder; provided, however, no Lender shall assign
all of its interest hereunder to any other Person without the
prior consent of Borrower, which consent will not unreasonably
be withheld, provided further that no Lender shall be
restricted in making partial assignments or granting
participation interests hereunder. Any partial assignment by a
Lender of its interest hereunder shall (i) require prior notice
to Borrower, Agent and the other Lenders, (ii) be a pro rata
assignment of Lender's interest on all of the Loans by Lender
hereunder, and (iii) be in increments of not less than
$5,000,000. In connection therewith, Lenders may disclose all
documents and
52
<PAGE> 57
information which Agent or Lenders now or hereafter may have
relating to Borrower or Borrower's business, but shall use all
reasonable efforts to ensure that the recipient of such
information maintains the confidentiality of such information.
18.3 SECTION HEADINGS.
-----------------
Section headings and section numbers have been set forth
herein for convenience only. Unless the contrary is compelled
by the context, everything contained in each paragraph applies
equally to this entire Agreement.
18.4 CONSTRUCTION.
-------------
Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Agent, Lenders or
Borrower, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been reviewed by all
parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of the parties hereto.
18.5 SEVERABILITY.
-------------
Each provision of this Agreement shall be severable from
every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
18.6 ENTIRE AGREEMENT.
-----------------
This Agreement cannot be changed or terminated orally.
All prior agreements, understandings, representations,
warranties, and negotiations, if any, are merged into this
Agreement. This Agreement may be amended only by a written
agreement signed by duly authorized officers of Borrower, Agent
and Lenders.
18.7 NO FIDUCIARY RELATIONSHIP OR JOINT VENTURE.
-------------------------------------------
No provision herein or in any of the other Loan Documents
and no course of dealing between the parties hereto shall be
deemed to create any fiduciary relationship between Lenders and
Borrower or Agent and Borrower nor to create any partnership or
joint venture between Lenders and Borrower or Agent and
Borrower.
18.8 PUBLICITY.
----------
Borrower hereby consents to the issuance or dissemination
by Lenders to the public of information describing the credit
accommodations entered into pursuant to this Agreement (as it
may be amended, modified and supplemented from time to time) to
the extent such information is available to the public pursuant
to any filing made by Borrower with any Regulatory Agency,
including without limitation, the name and address of
53
<PAGE> 58
Borrower, a general description of Borrower's business and the
use of Borrower's name and logo in connection therewith.
18.9 COUNTERPARTS.
-------------
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all
of which shall together constitute one and the same instrument.
18.10 CONFLICT.
---------
In the event of a conflict between the terms of this
Agreement and the terms of any Notes or other Loan Documents,
the terms of this Agreement shall be controlling.
19. WAIVER OF JURY TRIAL.
AGENT, BORROWER AND LENDERS ACKNOWLEDGE THAT THE RIGHT TO
A TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT THE RIGHT
MAY BE WAIVED. BORROWER AND LENDERS EACH KNOWINGLY,
VOLUNTARILY, IRREVOCABLY AND WITHOUT COERCION, WAIVE ALL RIGHTS
TO TRIAL BY JURY OF ALL DISPUTES BETWEEN THEM. NEITHER
LENDERS, AGENT NOR BORROWER SHALL BE DEEMED TO HAVE GIVEN UP
THIS WAIVER OF JURY TRIAL UNLESS THE PARTY CLAIMING THAT THIS
WAIVER HAS BEEN RELINQUISHED HAS A WRITTEN INSTRUMENT SIGNED BY
THE OTHER PARTY STATING THAT THIS WAIVER HAS BEEN GIVEN UP.
IN WITNESS WHEREOF, Borrower has executed and delivered
this Agreement.
"BORROWER" MAGNA GROUP, INC.
By: /s/ G. Thomas Andes
-------------------------------------
Title: Chairman of Board & CEO
----------------------------------
54
<PAGE> 59
ACCEPTED this 30th day of December, 1996, at Agent's
place of business in the City of Chicago, State of Illinois.
Revolving Loan Commitment: LASALLE NATIONAL BANK, a national
$50,000,000 banking association, as Agent and Lender
Revolving Loan Commitment:
Percentage: 100%
Term Loan Commitment: By: /s/ Phillip J. Hagglund
$50,000,000 ------------------------------------------
Term Loan Commitment: Title: Vice President
Percentage: 100% ---------------------------------------
Address: 135 S. LaSalle Street, Suite 511
Chicago, Illinois 60603
Attn: Phillip J. Hagglund
Fax No. (312) 904-4880
55
<PAGE> 60
EXHIBIT 2.1
-----------
REVOLVING LOAN NOTE
$50,000,000 Chicago, Illinois
December 30, 1996
FOR VALUE RECEIVED, the undersigned MAGNA GROUP, INC.
("Borrower") promises to pay to the order of LASALLE NATIONAL
BANK ("Lender"), at 135 South LaSalle Street, Chicago, Illinois
60603, or such other place as Lender may from time to time
designate in writing, on or before December 30, 1999, the
principal sum of Fifty Million and 00/100 Dollars ($50,000,000)
or, if less, the aggregate unpaid principal amount of all
advances made by Lender as, or relating to, the Revolving Loans
in accordance with the provisions of a Loan Agreement of even
date herewith, among Borrower, Lender and certain other parties,
as amended and supplemented from time to time ("Loan Agreement").
Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Loan Agreement.
Except as hereinafter provided, Borrower's obligations
and liabilities to Lender under this Note ("Borrower's
Liabilities") unpaid from time to time shall bear interest from
the date hereof until paid at the applicable rate provided in
Section 2.8 of the Loan Agreement. Interest shall be computed on
the basis of actual days elapsed over a 360-day year and shall be
payable in arrears, at the times provided in the Loan Agreement.
If any of Borrower's Liabilities are not paid when due
and payable or declared due and payable, interest, in lieu of the
interest hereinabove provided, shall accrue on Borrower's
Liabilities from the due date of the same until paid, at the
"Default Rate" (as defined in the Loan Agreement). Such amounts
shall be part of Borrower's Liabilities immediately due and
payable by Borrower to Lender without notice by Lender to or
demand by Lender of Borrower.
Borrower warrants and represents to Lender that
Borrower shall use the proceeds represented by this Note solely
for proper business purposes, and consistently with all
applicable laws and statutes. Borrower further warrants and
represents to Lender and covenants with Lender that Borrower is
not in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds represented by this Note will be
used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin
stock.
This Note is a Revolving Loan Note referred to in the
Loan Agreement to which reference is made for a statement of the
terms and conditions under which
<PAGE> 61
prepayments on this Note may and shall be made, for a description
of the circumstances under which this Note may be declared due
and payable.
The occurrence of an Event of Default under the Loan
Agreement, or Borrower's failure to pay any of Borrower's
Liabilities when due and payable or declared due and payable
shall constitute a default by Borrower ("Event of Default") under
this Note.
Upon an Event of Default hereunder, without notice by
Lender to or demand by Lender of Borrower, all of Borrower's
Liabilities shall be due and payable, forthwith. The acceptance
by Lender of any partial payment made hereunder after the time
when any obligation under this Note becomes due and payable will
not establish a custom, or waive any rights of Lender to enforce
prompt payment hereof. Borrower and every endorser hereof waive
presentment, demand and protest and notice of presentment,
protest, default, non-payment, maturity, release, compromise,
settlement, extension or renewal of this Note.
Subject to the provisions of the Loan Agreement, if at
any time or times after the date of this Note, Lender:
(a) employs counsel for advice or other representation (i) to
represent Lender in any litigation, contest, dispute, suit,
proceeding or to commence, defend or intervene or to take any
other action in or with respect to any litigation, contest,
dispute, suit or proceeding (whether instituted by Lender,
Borrower or any other person) in any way or respect relating to
this Note, or (ii) to enforce any rights of Lender against
Borrower; and/or (b) attempts to or enforces any of Lender's
rights and remedies against Borrower or any other party primarily
or otherwise liable with respect to Borrower's Liabilities, the
reasonable costs and expenses incurred by Lender in any manner or
way with respect to the foregoing shall be part of Borrower's
Liabilities, payable by Borrower to Lender on demand. Without
limiting the generality of the foregoing, such expenses, costs,
charges and fees include reasonable attorneys' fees, costs and
expenses.
If any provision of this Note or the application
thereof to any party or circumstance is held invalid or
unenforceable, the remainder of this Note and the application of
such provision to other parties or circumstances will not be
affected thereby and the provisions of this Note shall be
severable in any such instance.
This Note is submitted by Borrower to Lender at
Lender's principal place of business and shall be deemed to have
been made thereat. This Note shall be governed and controlled by
the laws of the State of Illinois as to interpretation,
enforcement, validity, construction, effect, choice of law and in
all other respects.
To induce Lender to accept this Note, Borrower,
irrevocably, agrees that, subject to Lender's sole and absolute
election, all actions or proceedings in any way, manner or
respect, arising out of or from or related to this Note, shall be
litigated in courts having situs within the County of Cook, State
of Illinois. Borrower hereby consents and submits to the
jurisdiction of any local, state or federal court located
-2-
<PAGE> 62
within said county and state. Borrower hereby waives any right
Borrower may have to transfer or change the venue of any
litigation brought against Borrower by Lender in accordance with
this paragraph.
BORROWER AND LENDER EACH WAIVE ANY RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS NOTE.
IN WITNESS WHEREOF, Borrower has caused this Note to be
duly executed on the 30th day of December, 1996.
MAGNA GROUP, INC.
By:
-----------------------------
Title:
-----------------------------
ATTEST:
By:
-----------------------------
Title:
-----------------------------
-3-
<PAGE> 63
EXHIBIT 2.2
-----------
TERM LOAN NOTE
$--------------- Chicago, Illinois
---------------, 199--
FOR VALUE RECEIVED, the undersigned MAGNA GROUP, INC.
("Borrower") promises to pay to the order of
- - ----------------------------- ("Lender"), at
- - --------------------------- or such other place as Lender may
from time to time designate in writing, the principal sum of
- - ---------------------------- and 00/100 Dollars
($---------------), in ----- (--) equal consecutive quarterly
installments in the amount of -------------- Dollars
($--------------------) each, commencing on the ----- day of
- - ------ and on the first day of each calendar quarter thereafter,
together with a final payment of the outstanding principal
balance of this Note and all accrued and unpaid interest on the
- - ---- day of ----------------, ----.
Except as hereinafter provided, Borrower's obligations
and liabilities to Lender under this Note ("Borrower's
Liabilities") unpaid from time to time shall bear interest from
the date hereof until paid at the applicable rate provided in
Section 2.8 of the Loan Agreement dated December 30, 1996, among
Borrower, Lender and certain other parties, as amended and
supplemented from time to time "Loan Agreement"). Interest shall
be computed on the basis of actual days elapsed over a 360-day
year and shall be payable in arrears, at the times provided in
the Loan Agreement. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the
Loan Agreement.
If any of Borrower's Liabilities are not paid when due
and payable or declared due and payable, interest, in lieu of the
interest hereinabove provided, shall accrue on Borrower's
Liabilities from the due date of the same until paid, at the
"Default Rate" (as defined in the Loan Agreement). Such amounts
shall be part of Borrower's Liabilities immediately due and
payable by Borrower to Lender without notice by Lender to or
demand by Lender of Borrower.
Borrower warrants and represents to Lender that
Borrower shall use the proceeds represented by this Note solely
for proper business purposes, and consistently with all
applicable laws and statutes. Borrower further warrants and
represents to Lender and covenants with Lender that Borrower is
not in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds represented by this Note will be
used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin
stock.
<PAGE> 64
This Note is a Term Loan Note referred to in the Loan
Agreement to which reference is made for a statement of the terms
and conditions under which prepayments on this Note may and
shall be made and for a description of the circumstances under
which this Note may be declared due and payable.
The occurrence of an Event of Default under the Loan
Agreement, or Borrower's failure to pay any of Borrower's
Liabilities when due and payable or declared due and payable
shall constitute a default by Borrower ("Event of Default") under
this Note.
Upon an Event of Default hereunder, without notice by
Lender to or demand by Lender of Borrower, all of Borrower's
Liabilities shall be due and payable, forthwith. The acceptance
by Lender of any partial payment made hereunder after the time
when any obligation under this Note becomes due and payable will
not establish a custom, or waive any rights of Lender to enforce
prompt payment hereof. Borrower and every endorser hereof waive
presentment, demand and protest and notice of presentment,
protest, default, non-payment, maturity, release, compromise,
settlement, extension or renewal of this Note.
Subject to the provisions of the Loan Agreement, if at
any time or times after the date of this Note, Lender:
(a) employs counsel for advice or other representation (i) to
represent Lender in any litigation, contest, dispute, suit,
proceeding or to commence, defend or intervene or to take any
other action in or with respect to any litigation, contest,
dispute, suit or proceeding (whether instituted by Lender,
Borrower or any other person) in any way or respect relating to
this Note, or (ii) to enforce any rights of Lender against
Borrower; and/or (b) attempts to or enforces any of Lender's
rights and remedies against Borrower or any other party primarily
or otherwise liable with respect to Borrower's Liabilities, the
reasonable costs and expenses incurred by Lender in any manner or
way with respect to the foregoing shall be part of Borrower's
Liabilities, payable by Borrower to Lender on demand. Without
limiting the generality of the foregoing, such expenses, costs,
charges and fees include reasonable attorneys' fees, costs and
expenses.
If any provision of this Note or the application
thereof to any party or circumstance is held invalid or
unenforceable, the remainder of this Note and the application of
such provision to other parties or circumstances will not be
affected thereby and the provisions of this Note shall be
severable in any such instance.
This Note is submitted by Borrower to Lender at
Lender's principal place of business and shall be deemed to have
been made thereat. This Note shall be governed and controlled by
the laws of the State of Illinois as to interpretation,
enforcement, validity, construction, effect, choice of law and in
all other respects.
To induce Lender to accept this Note, Borrower,
irrevocably, agrees that, subject to Lender's sole and absolute
election, all actions or proceedings in any way, manner or
respect, arising out of or from or related to this Note, shall be
litigated in
-2-
<PAGE> 65
consents and submits to the jurisdiction of any local, state or
federal court located within said county and state. Borrower
hereby waives any right Borrower may have to transfer or change
the venue of any litigation brought against Borrower by Lender in
accordance with this paragraph.
BORROWER AND LENDER EACH WAIVE ANY RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS NOTE.
IN WITNESS WHEREOF, Borrower has caused this Note to be
duly executed on the ---- day of ---------, ----.
MAGNA GROUP, INC.
By:
-----------------------------
Title:
-----------------------------
ATTEST:
By:
-----------------------------
Title:
-----------------------------
-3-
<PAGE> 1
FIRST AMENDMENT TO LOAN AGREEMENT
This First Amendment to Loan Agreement (the
"Amendment") is dated as of the 5th day of March, 1997, by
and among Magna Group, Inc. ("Borrower"), LaSalle National
Bank ("LaSalle"), Mellon Bank, N.A. ("Mellon") and Harris
Trust and Savings Bank ("Harris") (LaSalle, Mellon and Harris
are hereinafter referred to individually as "Lender" and
collectively as "Lenders" and LaSalle in a separate capacity
as Agent for Lenders under the "Loan Agreement" (as
hereinafter defined) is hereinafter referred to as "Agent").
R E C I T A L S
---------------
A. Borrower and LaSalle are parties to a Loan
Agreement dated as of December 30, 1996 (including all exhibits and
riders thereto and as supplemented and amended prior hereto or
hereafter, referred to herein as the "Loan Agreement").
B. Borrower desires to amend the Loan Agreement
to provide for the addition of Harris and Mellon as Lenders
thereunder and to provide for certain other modifications in the
terms thereof.
C. Agent and Lenders are amenable to such
modifications on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements of the parties contained herein and
for other good and valuable consideration, the receipt of
which is hereby acknowledged, Borrower, Agent and Lenders
agree as follows:
SECTION 1. RECITALS. The Recitals to this
--------
Amendment are hereby incorporated herein in their entirety by
this reference thereto and deemed to be a part hereof.
SECTION 2. AMENDMENTS TO LOAN AGREEMENT. Subject
----------------------------
to the terms of this Amendment, the Loan Agreement is hereby
amended as follows:
2.1 The definition of "Bank Subsidiary" as set
forth in Section 1.1 of the Loan Agreement, is hereby amended to
insert a close parenthesis after the words "from time to time"
appearing in the second line thereof.
2.2 The definition of "Interest Period" appearing
in Section 1.1 of the Loan Agreement is hereby amended by deleting
the word "and" where it appears prior to subsection "(iv)" in line
fourteen thereof and inserting the following at the end of
subsection "(iv)" thereof:
", and (v) no Interest Period may be selected if
after giving effect thereto Borrower will be unable
to make a principal payment scheduled to be
<PAGE> 2
made during such Interest Period without paying part
of a Eurodollar Loan on a date other than the last
day of an Interest Period applicable thereto."
2.3 The definition of "Libor Rate" appearing in
Section 1.1 of the Loan Agreement is hereby amended by deleting the
word "Bank" following the word "InterBank" in the fourth line
thereof and inserting in substitution therefor the word "Market".
2.4 The definition of "Majority Lenders" appearing
in Section 1.1 of the Loan Agreement is hereby amended by deleting
the word "Obligations" where it appears therein and inserting in
substitution therefor, the word "Loans".
2.5 The definition of "Obligations" in Section 1.1
of the Loan Agreement is hereby amended in its entirety to read as
follows:
"Obligations" shall mean all loans, advances,
-----------
overdrafts, debts, liabilities (including without
limitation any and all amounts charged to
Borrower's account pursuant to any provision of
this Agreement authorizing Agent to charge
Borrower's Loan Account), obligations, covenants,
lease payments, guaranties, and duties owing by
Borrower to Agent or Lenders of any kind or
description arising out of or related to the Loans,
this Agreement or any other Loan Document, whether
direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising,
and further including without limitation all
interest, all Out-Of-Pocket Fees and Costs which
Borrower is required to pay, or reimburse pursuant
to this Agreement or any other Loan Document, by
law or otherwise."
2.6 Section 1.1 of the Loan Agreement is hereby
amended to add the following new defined term in its proper
alphabetical sequence:
"Maximum Revolving Loan Facility" shall mean
-------------------------------
$100,000,000.
2.7 Section 1.2 of the Loan Agreement is hereby
amended by deleting the word "and" after the word "Borrower"
appearing on line ten thereof, inserting a comma in
substitution therefor, and inserting the following after the
word "Agent" in line ten thereof:
"and the Majority Lenders".
2.8 Sections 2.1 and 2.2 of the Loan Agreement are
hereby amended in their entirety to read as follows:
"2.1 Revolving Credit Facility. Subject to the
-------------------------
terms and provisions of this Agreement including
without limitation, that no Event of Default or
Potential Default has occurred and all other
conditions precedent to
-2-
<PAGE> 3
lending under Section 4 hereof have been satisfied,
---------
upon the request of Borrower, made at any time and
from time to time prior to December 30, 1999 (the
"Revolving Loan Termination Date"), each of the
Lenders severally and not jointly agrees to make
loans and advances (hereinafter individually referred
to as a "Revolving Loan" and collectively as
"Revolving Loans") to Borrower from time to time in
the amount of each Lender's Revolving Loan Commitment
Percentage of the Revolving Loans requested by
Borrower so long as the aggregate amount of the
Revolving Loans outstanding at any time does not
exceed the sum of the Maximum Revolving Loan
Facility, less the amount of all Revolving Loans
from time to time converted to Term Loans as
provided in Section 2.2 below, and in the case of
-----------
each Lender, up to but not exceeding each Lender's
Revolving Loan Commitment, less the amount of its
Pro Rata Share of Revolving Loans converted to Term
Loans.
The Revolving Loans shall be evidenced by, and
repayable in accordance with, the Revolving Loan
Notes substantially in the form of Exhibit 2.1 to
-----------
this Agreement ("Revolving Loan Notes").
2.2 Term Loan. Subject to the terms and
---------
provisions of this Agreement, at any time prior to
the Revolving Loan Termination Date and upon
fulfillment of all the conditions precedent to any
Loans under Section 4 hereof, Borrower may elect by
---------
notice in writing to Agent and Lenders, to convert
all, or a portion of the outstanding principal
balance of the Revolving Loans to term loans for a
term commencing on the Conversion Date and ending
not later than December 30, 2002, and each of the
Lenders, severally and not jointly, agree to make a
term loan to Borrower in the amount of its Term
Loan Commitment Percentage of the outstanding
principal balance of the Revolving Loans being
converted, but in no event more than its Term Loan
Commitment (each a "Term Loan" and collectively the
"Term Loans"). At no time shall the aggregate sum
of all Revolving and Term Loans outstanding exceed
the Maximum Facility and the aggregate sum of all
Revolving Loans converted to Term Loans shall not
exceed $100,000,000. The portion of the Revolving
Loans designated for conversion in Borrower's
notice to Agent and Lenders shall convert into the
Term Loans upon the fifth (5th) Business Day
following the date of notice to convert from
Borrower to Agent and Lenders ("Conversion Date"),
which notice shall specify the term elected by
Borrower. The Term Loans shall be evidenced by,
and repayable in accordance with, the Term Loan
Notes substantially in the form of Exhibit 2.2
-----------
("Term Loan Notes") providing for repayment of the
outstanding principal balance thereof in equal
quarterly installments based upon the term elected
by Borrower, with a final payment of all
outstanding principal and interest on the
expiration of the term selected by Borrower, but in
no event later than December 30, 2002 ("Term Loan
Termination Date"). Borrower shall execute and
deliver a Term Loan Note to each Lender for its
Term Loan, dated as of the Conversion Date,
-3-
<PAGE> 4
prior to the Conversion Date. Each designation by
Borrower of a portion of the Revolving Loans to be
converted shall be apportioned pro rata among the
outstanding Revolving Loans of all Lenders.
2.9 Section 2.3(a) of the Loan Agreement is hereby
amended by inserting the word "or" after the word "made" on
line 12 thereof.
2.10 Section 2.5 of the Loan Agreement is hereby
amended by deleting the reference to Section 2.12 appearing
on the second line thereof and inserting in substitution
therefor a reference to "Section 2.9".
2.11 Section 2.6 of the Loan Agreement is hereby
amended by deleting the reference to the "Default Rate for
such period" appearing on lines 13 and 14 thereof and
inserting in substitution therefor the following:
"effective rate charged to the Agent for overnight
federal funds transactions with member banks of the
federal reserve system for each day as determined
by Agent (or in the case of a day which is not a
Business Day, then the preceding day)"
2.12 Section 2.6 of the Loan Agreement is further
amended to delete the words "as aforesaid" appearing in line
16 thereof and inserting in substitution therefor the words
"Default Rate".
2.13 Section 2.8(a) of the Loan Agreement is hereby
amended by placing a period after the percentage figure
".90%" appearing on the fifth line of the second full
paragraph thereof.
2.14 Section 2.10 of the Loan Agreement is hereby
amended by inserting the words "and Lenders" after the word
"Agent" where it appears in the fifth line thereof, and by
inserting the words "and Lenders'" after the word "Agent's"
where it appears in the sixth line thereof.
2.15 Section 2.12 of the Loan Agreement is hereby
amended by deleting the words "Lenders" and "Lender" wherever
they appear therein and inserting in substitution therefor
the words "any Lender".
2.16 Section 2.13(a) and (b) of the Loan Agreement
are hereby amended by changing the first letter of the first
word of each section from uppercase to lowercase and
inserting the following words at the beginning of each
subsection:
"Provided no Event of Default has occurred,"
2.17 Section 2.15(a) of the Loan Agreement is
hereby amended by inserting the words "and Lenders" after the
word "Borrower" on the eleventh line thereof.
-4-
<PAGE> 5
2.18 Section 2.16(a) and (b) of the Loan Agreement
are hereby amended in their entirety to read as follows:
"(a) The Agent or any Lender advises the Borrower
and Lenders that deposits in United States
Dollars (in the applicable amounts) are not
being offered to it in the off-shore U.S.
Dollar interbank market for such Interest
Period, or
(b) any Lender advises the Agent that the Libor
Rate as determined by the Agent will not
adequately and fairly reflect the cost to such
Lender of funding its Eurodollar Loans for
such Interest Period,
then the Agent shall forthwith give notice thereof
to the Borrower and the Lenders, whereupon until
the Agent notifies the Borrower that the
circumstances giving rise to such suspension no
longer exist, the obligations of the Lenders to
make Eurodollar Loans shall be suspended without
liability to Agent or Lenders."
2.19 Section 5.11 of the Loan Agreement is hereby
amended by adding the words "and its Subsidiaries on a
consolidated basis" after the word "Borrower" where it
appears in the last line thereof.
2.20 The first sentence of Section 6 of the Loan
Agreement is hereby amended in its entirety to read as
follows:
"Borrower will not nor will it permit any of its
Subsidiaries to, without Agent's and Lenders' prior
written consent:".
2.21 Section 6.1 of the Loan Agreement is hereby
amended by deleting the word "all" appearing in the sixteenth
line thereof and inserting the word "an" in substitution
therefor.
2.22 Section 6.9 of the Loan Agreement is hereby
amended by inserting the word "not" after the words "Fiscal
Year" appearing in the third line thereof.
2.23 Section 7.4 of the Loan Agreement is hereby
amended by inserting a "comma" and the words "Lenders" after
the word "Agent" where it appears in the twelfth and
seventeenth lines thereof, and by deleting the word "its"
where it appears in the twelfth and eighteenth lines thereof
and inserting in substitution therefor the word "their".
2.24 Section 8.2(f) of the Loan Agreement is hereby
amended by inserting the words "or any Lender" after the word
"Agent" where it appears in the second line thereof and by
inserting the words "or to any assignee or prospective
assignee of a Lender's interest hereunder" at the conclusion
thereof.
-5-
<PAGE> 6
2.25 Sections 8.3 and 8.4 of the Loan Agreement are
hereby Amended in their entirety to read as follows:
"8.3 Accounting Information.
----------------------
Borrower authorizes Agent and each Lender to
discuss the financial condition of Borrower with
Borrower's independent public accountants and
agrees that such discussion or communication shall
be without liability to Agent, any Lender or
Borrower's independent public accountants. Prior
to the occurrence of an Event of Default, Agent or
the requesting Lender shall provide Borrower prior
notice of any proposed discussion with Borrower's
accountants. Borrower shall deliver a letter
addressed to such accountants authorizing them to
comply with the provisions of this subsection, and
authorizing Agent and each Lender to rely on
financial statements of Borrower issued by such
accountants, which letter shall be acknowledged and
consented to in writing by such accountants.
8.4 Other Information and Changes.
-----------------------------
Borrower shall promptly supply Agent or any
Lender with such other information concerning its
or its Subsidiaries' affairs as Agent or any Lender
may reasonably request from time to time hereafter,
and shall promptly notify Agent and Lenders of any
material adverse change in Borrower's or any
Subsidiary's financial condition and of any
condition or event which constitutes a breach of or
an Event of Default under this Agreement."
2.26 Section 10.4 of the Loan Agreement is hereby
amended by inserting the words "or any Subsidiary's" after
the word "Borrower's" where it appears in the first line
thereof.
2.27 Section 12 of the Loan Agreement is hereby
amended by inserting the following after the words "Agent
may" where it appears in the fourth line thereof:
"with the consent of the Majority Lenders,".
2.28 Section 15(c) of the Loan Agreement is hereby
amended by deleting the last full sentence thereof in its
entirety.
2.29 Section 15(h)(1) of the Loan Agreement is
hereby deleted in its entirety and the following is inserted
in substitution therefor:
"(1) Any Lender may make loans, advances or other
financial accommodations to Borrower outside of
this Agreement; provided that no such loans or
financial accommodations shall be made on a secured
basis if it would cause Borrower to violate Section
6.1 of this Agreement."
-6-
<PAGE> 7
2.30 Section 15(k)(2) of the Loan Agreement is
hereby amended by deleting the word "or" prior to subsection
(iv) on the fifth line thereof and inserting the following
after the word "Borrower" where it appears on the sixth line
thereof:
", or (v) any extension of the time of payment of
principal, interest or fees due under this
Agreement".
2.31 Section 18.2 of the Loan Agreement is hereby
amended by inserting the words "and Lenders'" after the word
"Agent's" where it appears on the third line thereof and by
adding the words "and Lenders" after the word "Agent" where
it appears in the fourth line thereof.
2.32 Exhibit A to the Loan Agreement is hereby
amended by adding thereto the Revolving Credit Notes in favor
of Mellon and Harris in the form of Exhibit A attached to
this Amendment.
2.33 The address and facsimile numbers for Harris
and Mellon for notice purposes under the Loan Agreement shall
be as specified below their signatures to this Amendment.
SECTION 3. ADDITION OF MELLON AND HARRIS AS LENDERS.
----------------------------------------
3.1 Addition of Lenders. Borrower, LaSalle,
-------------------
Mellon and Harris acknowledge and agree that upon the
execution and delivery of this Amendment to Agent by all
parties hereto, Harris and Mellon shall each become a Lender
party to the Loan Agreement effective as of the date of this
Amendment, or such later date on which Borrower has satisfied
all of the conditions precedent to the effectiveness of this
Amendment, and the Revolving Loan Commitment, Term Loan
Commitment, Revolving Loan Commitment Percentage and Term
Loan Commitment Percentage of each Lender shall be amended to
the respective commitments and percentages set forth opposite
each Lender's name on the signature page to this Amendment.
3.2 Funding of Loans. Upon the effectiveness
----------------
of this Amendment with respect to the addition of Mellon and
Harris as Lenders, Mellon and Harris shall each make
available to Agent its proportionate share of any outstanding
Loans and Agent shall make a payment to LaSalle of the amount
by which its percentage of the outstanding Loans exceeds its
Pro Rata Share after giving effect to the Commitments of
Harris and Mellon. Any Eurodollar Loan funded by Mellon and
Harris pursuant to the foregoing paragraph shall be for an
Interest Period coterminous with the remainder of the
Interest Period on any outstanding Eurodollar Loans made by
LaSalle.
SECTION 4. REPRESENTATION OF THE WARRANTIES. To
--------------------------------
induce Agent and Lenders to amend the Loan Agreement,
Borrower represents and warrants to Agent and Lenders that:
-7-
<PAGE> 8
4.1 Compliance with Loan Agreement. On the date
------------------------------
hereof, Borrower is in compliance with the terms and provisions of
the Loan Agreement and no Event of Default or Potential Default
specified therein has occurred.
4.2 Representations and Warranties. On the date
------------------------------
hereof, the representations and warranties set forth in the Loan
Agreement are true and correct with the same effect as if such
representations and warranties have been made on the date hereof
except to the extent such representations and warranties expressly
relate to an earlier date.
4.3 Authority of Borrower. Borrower has full
---------------------
power and authority to enter into this Amendment, which has
been duly authorized by all proper and necessary corporate
action. No consent or approval of any public authority or
regulatory body or any other party, is required as a
condition to the execution, validity or enforceability of
this Amendment.
4.4 Amendment as Binding Agreement. This
------------------------------
Amendment constitutes a valid and legally binding obligation
of Borrower, fully enforceable against Borrower, Agent and
Lenders in accordance with its terms.
SECTION 5. CONDITIONS PRECEDENT. The agreement by
--------------------
Lenders to amend the Loan Agreement pursuant to the terms of
this Amendment is subject to the following conditions
precedent:
5.1 Evidence of Authority. Agent shall have
---------------------
received evidence of the authorization of Borrower to enter
into this Amendment by its Board of Directors in form
acceptable to Agent.
5.2 Revolving Credit Notes. Borrower shall have
----------------------
executed and delivered to Mellon and Harris, the appropriate
Revolving Credit Note in the form of Exhibit A hereto.
---------
SECTION 6. GENERAL PROVISIONS.
------------------
6.1 Except as amended by this Amendment, the terms
and provisions of the Loan Agreement are in all other
respects ratified and confirmed and remain in full force and
effect. In the event of a conflict between the terms of the
Loan Agreement and the terms of this Amendment, the terms of
this Amendment shall be controlling.
6.2 After the effective date hereof, all
references in the Loan Agreement and in all related
agreements and documents to "Agreement", "hereof", or the
like shall refer to the Loan Agreement as herein amended or
modified.
6.3 This Amendment shall not constitute a waiver
of any existing events of default or any other provisions of
the Loan Agreement as amended hereby, except as expressly set
forth herein, and shall not constitute a course of dealing with
-8-
<PAGE> 9
respect to any such events of default or an agreement to
further consents, amendments or waivers under the Loan
Agreement. Agent and Lenders expressly reserve their rights
and remedies, none of which shall be deemed to be waived
hereby.
6.4 Borrower hereby agrees to pay all out-of-
pocket expenses incurred by Agent in connection with the
preparation, negotiation and consummation of this Amendment
and all other documents related thereto, including, without
limitation, the fees and expenses of Agent's counsel.
6.5 This Amendment shall be construed in
accordance with and governed by the laws of the State of
Illinois.
6.6 This Amendment may be executed in any number
of counterparts and by different parties hereto on separate
counterparts, each of which when so executed shall be an
original, but all of which shall constitute one and the same
instrument.
6.7 Capitalized terms used herein which are
defined in the Loan Agreement, shall unless otherwise defined
herein, have the meanings provided in the Loan Agreement.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the Borrower, Agent and Lenders
have caused this Amendment to be duly executed as of the date
first above written.
MAGNA GROUP, INC.
By: /s/ Ronald A. Buerges
--------------------------
Title: EVP & CFO
--------------------------
Revolving Loan Commitment: $50,000,000 LASALLE NATIONAL BANK
Revolving Loan Commitment Percentage: 50%
Term Loan Commitment: $50,000,000
Term Loan Commitment Percentage: 50%
By: /s/ Phillip J. Hagglund
--------------------------
Title: Vice President
--------------------------
Revolving Loan Commitment: $30,000,000 MELLON BANK, N.A.
Revolving Loan Commitment Percentage: 30%
Term Loan Commitment: $30,000,000
Term Loan Commitment Percentage: 30%
By: /s/ Michael Schuster
--------------------------
Title: Vice President
--------------------------
Address: One Mellon Bank Center
Room 4525
Pittsburgh, PA 15258-0001
Attn: Michael Schuster
Fax No: (412) 234-9047
Revolving Loan Commitment: $20,000,000 HARRIS TRUST AND SAVINGS BANK
Loan Commitment Percentage: 20%
Term Loan Commitment: $20,000,000
Term Loan Commitment Percentage: 20%
By: /s/ Patrick A. Horne
--------------------------
Title: Vice President
--------------------------
Address: 111 W. Monroe Street
Chicago, IL 60603
Attn: Patrick A. Horne
Fax No: (312) 765-8353
-10-
<PAGE> 11
Exhibit A
---------
REVOLVING LOAN NOTE
$30,000,000 Chicago, Illinois
March 5, 1997
FOR VALUE RECEIVED, the undersigned MAGNA GROUP, INC. ("Borrower")
promises to pay to the order of MELLON BANK, N.A. ("Lender"), at One Mellon
Bank Center, Pittsburgh, Pennsylvania 15258-0001, or such other place as
Lender may from time to time designate in writing, on or before December 30,
1999, the principal sum of Thirty Million and 00/100 Dollars ($30,000,000) or,
if less, the aggregate unpaid principal amount of all advances made by Lender
as, or relating to, the Revolving Loans in accordance with the provisions of a
Loan Agreement dated as of December 30, 1996, among Borrower, Lender and
certain other parties, as amended and supplemented from time to time ("Loan
Agreement"). Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Loan Agreement.
Except as hereinafter provided, Borrower's obligations and
liabilities to Lender under this Note ("Borrower's Liabilities") unpaid from
time to time shall bear interest from the date hereof until paid at the
applicable rate provided in Section 2.8 of the Loan Agreement. Interest shall
be computed on the basis of actual days elapsed over a 360-day year and shall
be payable in arrears, at the times provided in the Loan Agreement.
If any of Borrower's Liabilities are not paid when due and payable
or declared due and payable, interest, in lieu of the interest hereinabove
provided, shall accrue on Borrower's Liabilities from the due date of the same
until paid, at the "Default Rate" (as defined in the Loan Agreement). Such
amounts shall be part of Borrower's Liabilities immediately due and payable
by Borrower to Lender without notice by Lender to or demand by Lender of
Borrower.
Borrower warrants and represents to Lender that Borrower shall use
the proceeds represented by this Note solely for proper business purposes, and
consistently with all applicable laws and statutes. Borrower further warrants
and represents to Lender and covenants with Lender that Borrower is not in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System), and no proceeds represented by this Note will be
used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
This Note is a Revolving Loan Note referred to in the Loan Agreement
to which reference is made for a statement of the terms and conditions under
which prepayments on this Note may and shall be made, for a description of the
circumstances under which this Note may be declared due and payable.
<PAGE> 12
The occurrence of an Event of Default under the Loan Agreement, or
Borrower's failure to pay any of Borrower's Liabilities when due and payable
or declared due and payable shall constitute a default by Borrower ("Event of
Default") under this Note.
Subject to the provisions of the Loan Agreement, upon an Event of
Default hereunder, without notice by Lender to or demand by Lender of
Borrower, all of Borrower's Liabilities shall be due and payable, forthwith.
The acceptance by Lender of any partial payment made hereunder after the time
when any obligation under this Note becomes due and payable will not establish
a custom, or waive any rights of Lender to enforce prompt payment hereof.
Borrower and every endorser hereof waive presentment, demand and protest and
notice of presentment, protest, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of this Note.
If at any time or times after the date of this Note, Lender: (a)
employs counsel for advice or other representation (i) to represent Lender in
any litigation, contest, dispute, suit, proceeding or to commence, defend or
intervene or to take any other action in or with respect to any litigation,
contest, dispute, suit or proceeding (whether instituted by Lender, Borrower
or any other person) in any way or respect relating to this Note, or (ii) to
enforce any rights of Lender against Borrower; and/or (b) attempts to or
enforces any of Lender's rights and remedies against Borrower or any other
party primarily or otherwise liable with respect to Borrower's Liabilities,
the reasonable costs and expenses incurred by Lender in any manner or way with
respect to the foregoing shall be part of Borrower's Liabilities, payable by
Borrower to Lender on demand. Without limiting the generality of the foregoing,
such expenses, costs, charges and fees include reasonable attorneys' fees,
costs and expenses.
If any provision of this Note or the application thereof to any party
or circumstance is held invalid or unenforceable, the remainder of this Note
and the application of such provision to other parties or circumstances will
not be affected thereby and the provisions of this Note shall be severable in
any such instance.
This Note is submitted by Borrower to Lender at Lender's principal
place of business and shall be deemed to have been made thereat. This Note
shall be governed and controlled by the laws of the State of Illinois as to
interpretation, enforcement, validity, construction, effect, choice of law
and in all other respects.
To induce Lender to accept this Note, Borrower, irrevocably, agrees
that, subject to Lender's sole and absolute election, all actions or
proceedings in any way, manner or respect, arising out of or from or related
to this Note, shall be litigated in courts having situs within the County of
Cook, State of Illinois. Borrower hereby consents and submits to the
jurisdiction of any local, state or federal court located
-2-
<PAGE> 13
within said county and state. Borrower hereby waives any right Borrower may
have to transfer or change the venue of any litigation brought against
Borrower by Lender in accordance with this paragraph.
BORROWER AND LENDER EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING RELATING TO THIS NOTE.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly
executed on the 5th day of March, 1997.
MAGNA GROUP, INC.
By: -------------------------------
Title: -------------------------------
ATTEST:
By: -------------------------------
Title: -------------------------------
-3-
<PAGE> 14
REVOLVING LOAN NOTE
$20,000,000 Chicago, Illinois
March 5, 1997
FOR VALUE RECEIVED, the undersigned MAGNA GROUP, INC. ("Borrower")
promises to pay to the order of HARRIS TRUST AND SAVINGS BANK ("Lender"), at
111 West Monroe Street, Chicago, Illinois 60603, or such other place as Lender
may from time to time designate in writing, on or before December 30, 1999,
the principal sum of Twenty Million and 00/100 Dollars ($20,000,000) or, if
less, the aggregate unpaid principal amount of all advances made by Lender as,
or relating to, the Revolving Loans in accordance with the provisions of a
Loan Agreement dated as of December 30, 1996, among Borrower, Lender and
certain other parties, as amended and supplemented from time to time ("Loan
Agreement"). Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Loan Agreement.
Except as hereinafter provided, Borrower's obligations and
liabilities to Lender under this Note ("Borrower's Liabilities") unpaid from
time to time shall bear interest from the date hereof until paid at the
applicable rate provided in Section 2.8 of the Loan Agreement. Interest shall
be computed on the basis of actual days elapsed over a 360-day year and shall
be payable in arrears, at the times provided in the Loan Agreement.
If any of Borrower's Liabilities are not paid when due and payable
or declared due and payable, interest, in lieu of the interest hereinabove
provided, shall accrue on Borrower's Liabilities from the due date of the same
until paid, at the "Default Rate" (as defined in the Loan Agreement). Such
amounts shall be part of Borrower's Liabilities immediately due and payable
by Borrower to Lender without notice by Lender to or demand by Lender of
Borrower.
Borrower warrants and represents to Lender that Borrower shall use
the proceeds represented by this Note solely for proper business purposes, and
consistently with all applicable laws and statutes. Borrower further warrants
and represents to Lender and covenants with Lender that Borrower is not in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System), and no proceeds represented by this Note will be
used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
This Note is a Revolving Loan Note referred to in the Loan Agreement
to which reference is made for a statement of the terms and conditions under
which prepayments on this Note may and shall be made, for a description of the
circumstances under which this Note may be declared due and payable.
<PAGE> 15
The occurrence of an Event of Default under the Loan Agreement, or
Borrower's failure to pay any of Borrower's Liabilities when due and payable
or declared due and payable shall constitute a default by Borrower ("Event of
Default") under this Note.
Subject to the provisions of the Loan Agreement, upon an Event of
Default hereunder, without notice by Lender to or demand by Lender of
Borrower, all of Borrower's Liabilities shall be due and payable, forthwith.
The acceptance by Lender of any partial payment made hereunder after the time
when any obligation under this Note becomes due and payable will not establish
a custom, or waive any rights of Lender to enforce prompt payment hereof.
Borrower and every endorser hereof waive presentment, demand and protest and
notice of presentment, protest, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of this Note.
If at any time or times after the date of this Note, Lender: (a)
employs counsel for advice or other representation (i) to represent Lender in
any litigation, contest, dispute, suit, proceeding or to commence, defend or
intervene or to take any other action in or with respect to any litigation,
contest, dispute, suit or proceeding (whether instituted by Lender, Borrower
or any other person) in any way or respect relating to this Note, or (ii) to
enforce any rights of Lender against Borrower; and/or (b) attempts to or
enforces any of Lender's rights and remedies against Borrower or any other
party primarily or otherwise liable with respect to Borrower's Liabilities,
the reasonable costs and expenses incurred by Lender in any manner or way with
respect to the foregoing shall be part of Borrower's Liabilities, payable by
Borrower to Lender on demand. Without limiting the generality of the foregoing,
such expenses, costs, charges and fees include reasonable attorneys' fees,
costs and expenses.
If any provision of this Note or the application thereof to any party
or circumstance is held invalid or unenforceable, the remainder of this Note
and the application of such provision to other parties or circumstances will
not be affected thereby and the provisions of this Note shall be severable in
any such instance.
This Note is submitted by Borrower to Lender at Lender's principal
place of business and shall be deemed to have been made thereat. This Note
shall be governed and controlled by the laws of the State of Illinois as to
interpretation, enforcement, validity, construction, effect, choice of law
and in all other respects.
To induce Lender to accept this Note, Borrower, irrevocably, agrees
that, subject to Lender's sole and absolute election, all actions or
proceedings in any way, manner or respect, arising out of or from or related
to this Note, shall be litigated in courts having situs within the County of
Cook, State of Illinois. Borrower hereby consents and submits to the
jurisdiction of any local, state or federal court located
-2-
<PAGE> 16
within said county and state. Borrower hereby waives any right Borrower may
have to transfer or change the venue of any litigation brought against
Borrower by Lender in accordance with this paragraph.
BORROWER AND LENDER EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING RELATING TO THIS NOTE.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly
executed on the 5th day of March, 1997.
MAGNA GROUP, INC.
By: -------------------------------
Title: -------------------------------
ATTEST:
By: -------------------------------
Title: -------------------------------
-3-
<PAGE> 1
<TABLE>
MAGNA GROUP, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
PRIMARY:
Average common shares outstanding............................................... 28,248 27,745 26,516
Net effect of stock options..................................................... 147 147 141
------- ------- -------
Total....................................................................... 28,395 27,892 26,657
======= ======= =======
Net income...................................................................... $63,139 $51,222 $45,030
Less preferred stock dividends:
Class B voting preferred................................................ (3) (3) (3)
------- ------- -------
Primary net income.............................................................. $63,136 $51,219 $45,027
======= ======= =======
Per common share:
Net income.................................................................. $2.22 $1.84 $1.69
======= ======= =======
FULLY DILUTED:
Average common shares outstanding............................................... 28,248 27,745 26,516
Net effect of stock options..................................................... 251 191 141
Assumed conversion of:
7% convertible subordinated capital notes................................... 785 895 969
8 3/4% convertible subordinated debentures.................................. 690 -- --
------- ------- -------
Average common shares and common share equivalents...................... 29,974 28,831 27,626
======= ======= =======
Primary net income.............................................................. $63,136 $51,219 $45,027
Elimination of interest net of related tax effects on:
7% convertible subordinated capital notes................................... 646 757 819
8 3/4% convertible subordinated debentures.................................. 1,437 -- --
------- ------- -------
Fully diluted net income........................................................ $65,219 $51,976 $45,846
======= ======= =======
Per common share:
Net income.................................................................. $2.18 $1.80<FA> $1.66<FA>
======= ======= =======
<FN>
- - --------
<FA>For the years ended December 31, 1995 and 1994, inclusion of common stock
equivalents for the 8 3/4% convertible subordinated debentures in the
computation of fully diluted net income per share results in antidilution,
and therefore, these are excluded from the computation.
</TABLE>
<PAGE> 1
1996 [LOGO] MAGNA
ANNUAL GROUP, INC.
REPORT
EXCEEDING
EXPECTATIONS
[LOGO]
<PAGE> 2
CORPORATE PROFILE
Magna Group, Inc. is a St. Louis-based community banking organization with
total assets as of March 1, 1997, of $6.7 billion. By virtue of its growth
from a small, traditional group of community banks into a multi-billion dollar
holding company, Magna is generally categorized as a "Super Community Bank."
As one of the 80 largest banking organizations in the nation, Magna focuses on
retail and community banking, targeting consumers and small to mid-sized
businesses within its market areas.
Magna delivers services to over 400,000 households through a network of 137
banking centers located in 88 communities within a three state area and via
171 Magna Carta(R) automated teller machines. Magna provides a comprehensive
range of financial services including retail, commercial, trust, brokerage,
correspondent banking and student lending.
MISSION STATEMENT
Magna is committed to enhancing stockholder value by being a profitable and
leading supplier of high quality retail financial services to individuals and
businesses in the community markets it serves.
INSIDE THIS REPORT
------------------
Our Community Banking Franchise
Inside Front Cover
1 FINANCIAL HIGHLIGHTS
Record net income and earnings
per share lead the list of financial
achievements for 1996
2 CHAIRMAN'S LETTER TO STOCKHOLDERS
We exceeded expectations in 1996
6 INVESTOR INFORMATION
Key Magna stock performance and
stockholder services information
8 STRATEGIC OVERVIEW
We are committed to exceeding the
expectations of our stockholders,
customers and communities
14 COMMUNITY BANK PRESIDENTS & REGIONS
Our 19 community bank presidents focus
on building strong relationships with our
customers and communities
16 GLOSSARY
1996 FINANCIAL REVIEW
17 Five Year Selected Financial Data
18 Management's Discussion
39 Consolidated Financial Statements
43 Notes to Consolidated
Financial Statements
58 Report of Independent Auditors
59 Quarterly Financial Information
60 MAGNA LOCATIONS
64 DIRECTORS AND EXECUTIVE OFFICERS
Stockholder Information
Inside Back Cover
<PAGE> 3
[MAP]
OUR COMMUNITY BANKING FRANCHISE
Iowa
Cedar Falls
Oelwein
Waterloo
Monticello
Cedar Rapids
Iowa City
Des Moines
Indianola
Illinois
Peoria
Lincoln
Bloomington
Decatur
Springfield
East Alton
Granite City
Centralia
Carbondale
Columbia
Belleville
Missouri
St. Charles
St. Louis
MAGNA GROUP, INC. (NYSE - MGR)
3 State Franchise
30 Counties
19 Regions
88 Communities
137 Banking Locations
171 Automated Teller Machines
2 Automated Loan Machines
320 Correspondent Banks
2,700 Employees
10,100 Stockholders
OUR EXPANSION INTO IOWA
On March 1, 1997, Magna
completed the acquisition of
Homeland Bankshares Corporation.
The Homeland acquisition adds
$1.2 billion to Magna's total
assets, along with 30 banking
centers and 67 ATMs and
expands Magna's franchise to
20 communities in Iowa. We
welcome the opportunity to
serve our new Iowa customers
and communities, and we are
committed to enhancing
stockholder value for our
newest Magna stockholders.
<PAGE> 4
1996 MAGNA HIGHLIGHTS
*---Achieved fifth consecutive year of record earnings
*---Strengthened our market position by completing the
acquisition of River Bend Bancshares, Inc. a $160
million bank holding company
*---Enhanced opportunities for our stockholders by
listing on the New York Stock Exchange
*---Announced an agreement to acquire Homeland
Bankshares Corporation, the second largest bank
holding company headquartered in Iowa
*---Opened our first convenience store banking location
in Missouri
*---Introduced the first automated loan machine in the
St. Louis metropolitan area
*---Established an alliance with First Merchants
Acceptance Corporation, complementing Magna's
successful auto financing business
<PAGE> 5
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Percent
(In thousands, except per share data) 1996 1995 Change
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER COMMON SHARE
Primary net income $ 2.22 $ 1.84 21%
Fully diluted net income 2.18 1.80 21
Dividends declared .88 .80 10
Book value 17.15 15.93 8
- - ---------------------------------------------------------------------------------------------------------------------------
EARNINGS
Net interest income $194,087 $182,851 6%
Provision for loan losses 10,280 9,992 3
Net income 63,139 51,222 23
- - ---------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $5,458,709 $4,947,499 10%
Securities 1,655,907 1,364,864 21
Total loans 3,415,309 3,202,766 7
Reserve for loan losses 45,382 42,623 6
Total deposits 4,197,776 3,888,266 8
Stockholders' equity 483,961 446,044 9
- - ---------------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS
Return on average assets 1.20% 1.09%
Return on average equity 13.75 12.57
Net interest margin 4.01 4.30
Efficiency ratio 55.63 62.11
Loan reserve to nonperforming loans 166.19 138.30
Nonperforming assets to total loans and
foreclosed property .88 1.12
Nonperforming assets to total assets .55 .72
Stockholders' equity to total assets 8.87 9.02
Tier 1 capital to average assets 8.45 8.73
Tier 1 capital to risk-adjusted assets 12.97 13.06
Total capital to risk-adjusted assets 14.18 14.29
===========================================================================================================================
</TABLE>
Net Income
In millions of dollars
[GRAPH]
Net income increased 23% over 1995,
marking our fifth
consecutive year of record earnings.
Primary Earnings
Per Share
In dollars
[GRAPH]
Earnings per share
have increased at a
compound annual growth
rate of 12%.
Return on Assets
Percent
[GRAPH]
Return on assets
reached a record
1.20% in 1996.
Return on Equity
Percent
[GRAPH]
Return on equity
improved to 13.75%.
1
<PAGE> 6
CHAIRMAN'S LETTER
"Exceeding
expectations is
more than just a
theme for our
annual report.
It is our way of
doing business."
[PHOTO]
MAGNA WAS THE FIRST TO OFFER FULL-SERVICE BANKING, COMPLETE WITH DRIVE UP
LANES, AT A ST. LOUIS AREA CONVENIENCE STORE.
TO OUR STOCKHOLDERS:
In today's increasingly competitive financial services industry, it is no
longer enough to meet expectations. We must exceed them.
We believe that the key to exceeding expectations is to have a focused
strategy -- one that everyone within the organization understands.
For Magna, it is to:
*--Maintain Our "Super Community Bank" Philosophy
*--Grow the Corporation
*--Improve Financial Performance
This focus separates us from our peers and has allowed Magna to generate five
consecutive years of record growth and earnings.
EXCEEDING EXPECTATIONS
I am pleased to report that we exceeded expectations in 1996. Our dedicated
staff accepted the challenge and excelled. Highlights of the year include:
*--Net income increased 23% to $63.1 million, or $2.22 per share
*--Average earning assets grew 14% to $4.97 billion
*--Return on assets was 1.20% and return on equity was 13.75%
*--Nonperforming assets declined 16% to $30.2 million
*--Common stock reached a 52-week high of $31.25 and closed on December
31, 1996 at $29.50 per share, an increase of 24% over the year-end 1995 per
share price of $23.75
*--Magna's common stock was listed on the New York Stock Exchange
EXCEEDING FINANCIAL EXPECTATIONS
The 1990s has been a decade of significant growth for Magna. Throughout
this period of expansion, we have seen our total assets grow from $2.32
billion at December 31, 1990 to $5.46 billion at December 31, 1996. We have
remained committed to producing excellent returns for our stockholders.
Earnings per share have grown at a compound annual growth rate of 12% since
1992. Many of our initiatives, such as the centralization of certain
functions through our operations center and the consolidation of our bank
charters, are now beginning to produce positive results and provide the
foundation on which we can build future earnings. Our goal is to maintain
strong earnings per share growth that exceeds our peer banks. We are committed
to producing results that exceed expectations.
2
<PAGE> 7
EXCEEDING GROWTH EXPECTATIONS
During 1996, growth had no boundaries at Magna.
We pursued our growth by announcing the merger with Homeland Bankshares
Corporation, a $1.2 billion bank holding company with 30 banking centers in
Iowa. Our merger with Homeland, which was completed on March 1, 1997, marked
our first expansion into Iowa, giving us a three-state banking franchise. We
also acquired River Bend Bancshares, Inc., a $160 million bank holding company
that complements our presence in the St. Louis metropolitan area.
We pursued our strategy of growing the corporation through increasing fee
income by entering into an alliance with First Merchants Acceptance
Corporation, a leader in the subprime auto financing market. This
relationship gives Magna a full-service auto financing program
and provides a new source of revenue without assuming any additional risk.
In addition, we grew by increasing our presence in existing markets. We
installed the St. Louis area's first automated loan machines, opened a
banking center inside a Wal-Mart SuperCenter, established a banking center,
with two drive-up lanes, within a Mobil Convenience Store, expanded our
presence in two additional retirement centers and strategically expanded our
ATM network.
Looking ahead, we believe much of our growth will come from nontraditional
products and services. It is an area which we remain committed to
exploring. We have established a separate division responsible for assuring
that we operate efficiently and profitably within our existing framework, as
well as evaluating and implementing new and expanded sources of revenue.
EXCEEDING COMMUNITY EXPECTATIONS
We are proud of the role Magna plays in the communities we serve. Through
our contributions and employee involvement, we are investing dollars and time
into making our communities better places to live and work. Our "Super
Community Bank" philosophy allows us to have a significant presence on Main
Street, while maintaining a structure that is attractive to Wall Street.
Our 19 community bank presidents and community boards of directors allow us
to provide the local, individualized service our customers expect. At the
same time, we have realized significant savings by consolidating and
centralizing many back-office functions. We remain committed to selecting
the right individuals to be part of the Magna
[PHOTO]
MAGNA WAS THE FIRST TO INTRODUCE AUTOMATED LOAN MACHINES IN THE
ST. LOUIS AREA.
"Our goal is to exceed your
expectations by positioning
Magna for continued
growth and improved financial
performance."
3
<PAGE> 8
family, equipping them with the training they need to serve our
customers and incenting them appropriately for the contribution they make to
the organization. These elements will allow us to achieve success in the
retail banking environment and continue to exceed our customers' and
communities' expectations.
LOOKING AHEAD
Exceeding expectations is more than just a theme for our annual report.
It is our way of doing business. While there is much uncertainty in the
financial services industry, one thing remains clear -- change is
constant. Our goal is to exceed your expectations by positioning Magna for
continued growth and improved financial performance. We appreciate your
continued support and look forward to the opportunities ahead.
/s/ G. Thomas Andes
G. Thomas Andes
Chairman of the Board and
Chief Executive Officer
[PHOTO]
WELCOME AND THANKS
In 1996, we welcomed Randall E. Ganim, CPA, President, Ganim, Meder, Childers
& Hoering, P.C., to our Board of Directors. Erl A. Schmiesing, Former
Chairman of the Board, President and Chief Executive Officer, Homeland
Bankshares Corporation and Douglas K. Shull, Treasurer and Chief Financial
Officer, Casey's General Stores, Inc., joined the board on March 1, 1997,
upon the completion of our acquisition of Homeland.
We also want to express our sincere appreciation for the outstanding service
provided by two of our board members who are not standing for reelection.
Both Robert E. McGlynn, attorney, McGlynn & McGlynn and Wendell J. Kelley,
retired Chairman of the Board and Chief Executive Officer, Illinois Power
Company, have had a long association with Magna and have made invaluable
contributions to our organization.
4
<PAGE> 9
MAGNA'S MANAGEMENT TEAM
Magna has assembled a dedicated and talented team of executives to carry out
its strategic plan. This team is committed to making Magna the premier
financial institution in the Midwest.
[PHOTO]
(From left to right)
Robert Mathias
Executive Vice President
Credit Administration
Linda Fabel
Executive Vice President
Retail Banking
Gary Hemmer
Executive Vice President
Administration
Ronald Buerges
Executive Vice President and
Chief Financial Officer
Robert Kahler
Executive Vice President
Financial Markets
Robert Olson, Jr.
Executive Vice President
Operations & Technology
[PHOTO]
(From left to right)
Michelle Durand-Adams, President
Magna Student Loan Company
Jeffrey Auld, President
Magna Investments, Inc.
Matthew Finn, President
Magna Trust Company
Robert Christiansen, President
Magna Finance
[PHOTO]
(From left to right)
Robert Leininger
Executive Vice President
Community Regions
David Bramlet
Executive Vice President
Alternate Delivery Systems
James Jolley
Executive Vice President
Sales and Public Relations
5
<PAGE> 10
INVESTOR INFORMATION
EXCEEDING VALUE
EXPECTATIONS
Magna's focus on creating the Midwest's premier Super Community Banking
organization also translates to enhancing investment value for its
stockholders. Our goal is to exceed our investors' expectations for growth
in their investment. Magna's consistently profitable operations, steady
growth and prudent management are reflected in increased market valuations.
A stockholder who invested $1,000 in Magna stock five years ago, and
reinvested all cash dividends, would now own stock worth more than triple the
original investment. The compound annual rate of return for the five year
period was 27.90%.
[PHOTO]
Five Year Total Return To Stockholders (December 31, 1991 -- December 31, 1996)
In dollars
Five Year Compound Annual Rate of Return = 27.90%
[GRAPH]
(Assumes initial investment of $1,000 and reinvestment of all dividends.)
MGR
Listed
NYSE
THE NEW YORK STOCK EXCHANGE
MAGNA LISTS ON THE NEW YORK STOCK EXCHANGE
On November 20, 1996, Magna listed its common stock for trading on the New
York Stock Exchange under the symbol MGR. The move to the NYSE underscores
Magna's position as a premier financial institution.
Reflecting Magna's current stock price and including the shares issued in the
acquisition of Homeland Bankshares Corporation, Magna's market capitalization
now exceeds one billion dollars.
WHY IS THIS IMPORTANT TO STOCKHOLDERS?
The listing enhances the value for our stockholders by broadening the market
for Magna's shares. A 205 year-old institution, the NYSE is distinguished as
an auction market, where stocks are bought and sold at prices determined by
the bids and offers of investors. These investors are represented on the
trading floor of the exchange by floor professionals who use their
experience, skill and judgment to obtain the best possible prices. Advanced
technology has helped make self-regulated trading on the NYSE floor a fair
and cost-effective tool for capital raising.
6
<PAGE> 11
CONVENIENCE EQUALS VALUE
Magna offers value to stockholders through the services that allow them to
build their investment conveniently and economically.
For more information about the following stockholder services, please contact
Magna Trust Company or return the postage-paid postcard on the inside back
cover of this report.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Stockholders can maximize investment value by building their position in
Magna stock without paying brokerage fees. Through Magna's Dividend
Reinvestment and Stock Purchase Plan, stockholders may conveniently and
automatically reinvest their dividends or purchase additional shares with
optional cash payments. By participating in the plan, the transactions are
conducted automatically with no brokerage fees or commissions.
DIRECT DEPOSIT OF DIVIDENDS
Stockholders may gain immediate use of their paid dividends through direct
deposit. Magna offers registered stockholders the option of having dividends
electronically deposited into the bank account of their choice.
CONVENIENT INFORMATION RESOURCES
Current stockholders and prospective investors can request copies of press
releases, annual and quarterly reports and other materials by contacting the
Investor Relations Department at the company's headquarters:
314-963-2546 or 1-800-785-6244.
Stockholders with inquiries concerning stock accounts, dividends, change of
ownership or address, lost certificates or consolidation of accounts can
contact Magna Trust Company, the transfer agent for Magna:
618-233-2120 or 1-800-900-4548.
Current news and general information about Magna and its wide array of
financial services is available on the Internet at www.magnabank.com.
Magna by the Numbers
As of December 31, 1996:
2,159 employees
8,766 stockholders of record
$29.50 closing price
28,209,500 shares outstanding
19,485,825 shares traded during 1996
Book Value Per Share
In dollars
[GRAPH]
Year-End
Market Capitalization
In millions of dollars
[GRAPH]
Year-End
Dividends Per Share
In dollars
[GRAPH]
Year-End
Common Stock Price Range
In dollars
[GRAPH]
High/Low Trading Prices
Year-End Closing Price
7
<PAGE> 12
STRATEGIC OVERVIEW
EXCEEDING EXPECTATIONS
---------------------------------------------------------------------
EXCEED verb 1. to go beyond the bounds or limits of. 2. to surpass;
be superior to. --Syn. 1. excel 2. outperform.
---------------------------------------------------------------------
Customer satisfaction begins with being where our customers want us, when
they want us. Magna doesn't stop there, however; we exceed our customers'
expectations by going out of our way on a daily basis to find new solutions
to their financial needs. Our commitment to quality products and services is
the driving force behind everything we do: it's what first established Magna
as a community bank and has since helped us grow into a "Super Community
Bank."
SUPER COMMUNITY BANK
A community bank is one that derives most of its funding from the community
it serves and invests those funds back into the same community. Each of
Magna's 137 banking locations maintains a strong community orientation and,
due to the diversity of the communities we serve throughout Illinois, Iowa
and Missouri, we have developed 19 regions to better focus on the needs of
each community. Each region has its own community president and a local
community board of directors to help define Magna's role in the communities
it serves.
What makes Magna a "Super Community Bank" is our three-tiered philosophy of
community banking. That philosophy is based on our ability to:
*--Develop a sales culture that meets the needs of each community we serve
*--Provide quality products and services
*--Generate cost savings that do not compromise the quality of service to
our customers
As a "Super Community Bank," Magna's success is tied to how well we
understand our customers. Understanding our customers -- and ultimately
serving them better -- requires investments in technology, products and
services to develop convenient and innovative solutions to their personal and
commercial banking needs.
Convenience is the Number One Reason People Choose a Bank
Magna has a network of 137 banking centers; 75 blanketing the metropolitan
St. Louis area and 62 in cities and towns throughout a three-state area. As
a leading community bank in our markets, Magna offers convenient,
full-service banking to diverse customer segments -- rural and urban,
corporations and households, farms and businesses, young people, families,
professionals and retirees.
Our network of strategically placed automated teller machines (ATMs) and
automated loan machines (ALMs) delivers fast, convenient banking wherever
people go, such as shopping malls, airports, convenience stores, supermarkets
and hospitals. We also extend convenient access to our services through
banking centers within retirement communities.
We realize our customers' time is valuable and therefore have a staff
dedicated to developing alternate delivery systems for banking services.
Magna's full-service banking centers located inside one of St. Louis' leading
grocery chains have been highly successful, with nearly all locations
exceeding estimates for break even deposits within their first year of
operation.
[PHOTO]
In November 1996, Magna redefined "full-service" when it opened a
banking center in the Plaza 94 Mobil Mart in St. Peters, Missouri. The
center in the Mobil Mart -- a full-service Magna Bank open seven days a week
- - -- is the first of its kind in St. Louis. This location features three
service lines, a private office, two drive-through lanes and a 24-hour ATM.
Magna also opened a full-service banking center in the Wal-Mart SuperCenter
in Carbondale, Illinois in August 1996. This location has
8
<PAGE> 13
[PHOTO]
three tellers, an automated loan machine, a 24-hour ATM and safe deposit
boxes. Plans for 1997 include placing additional banking centers in popular
retail outlets.
As we head into the 21st century, technology will play an integral role in
creating alternate delivery systems. Combining technology with convenience,
Magna is the first and only bank in the St. Louis marketplace offering
automated lending. Magna unveiled two ALMs in October 1996, one in
the St. Louis Galleria and one in the Wal-Mart SuperCenter in Carbondale,
Illinois. Using the ALM, customers can apply electronically for personal
loans and receive a response in about 10 minutes. The ALM can customize the
loan to match the customer's desired loan amount and preferred monthly
payments.
[PHOTO]
Beth Zehms and Joe Armour,
Super Money Market managers
- - ------------------------------------------------------------------------------
1
"Pick up a loaf of bread, a gallon of milk -- and refinance the mortgage."
For the Reed family, Magna's exceptional banking service is as convenient and
easy as a trip to the supermarket. Expecting no more than a typical grocery
store check-cashing "convenience counter," the Reeds were pleased to find
fully trained client executives and a broad array of financial services at
the Magna Super Money Market located in St. Peters, Missouri. Beth Zehms and
Joe Armour showed the Reeds how the Magna Excel program can save on mortgage
interest expense. Magna's outstanding service, convenient location and
extended hours convinced the Reeds to move all of their banking business to
the Super Money Market.
- - ------------------------------------------------------------------------------
9
<PAGE> 14
- - ------------------------------------------------------------------------------
2
"People bank with people, generation after generation."
Years ago, the Schuette family found a banker that would help their company
grow. What started with the financing of one store ultimately has become a
multi-faceted relationship between Magna and Schuette Stores. Today, Mark
Robertson offers the current generation, Tom and Mike Schuette, Magna's
entire family of business services. Magna Link cash management service
allows the Schuettes to use their personal computer and Magna software to
make wire transfers and other transactions on-line. Magna also provides them
with financing, corporate credit cards and an employee 401(k) retirement
program through Magna Trust. Family business is good business, and it has
helped Magna grow as well.
- - ------------------------------------------------------------------------------
Another example of using technology to provide optimal customer service is
Service Express, Magna's 24-hour customer service center. Customers have the
option of using the touch tone phone menu or speaking with a representative
to obtain account information and interest rates or open an account. Service
Express representatives opened more than 3,200 checking, savings, loan and CD
accounts in 1996 and handled an average of 260,000 calls per month.
[PHOTO]
[PHOTO]
Mark Robertson, Senior Vice President
In addition to serving existing customers better, advances in technology
allow us to reach out to prospective customers in new ways. Magna's recently
redesigned Internet web site (http://www.magnabank.com) is one such example.
Magna's site provides users with product and service information, interest
rates and recent company developments, opening the door to the next
generation of computer banking for customers of all ages and abilities.
High Quality and Innovative Services for Families, Businesses and Even
Other Banks
Checking accounts remain Magna's core service for building customer
relationships. Magna offers nine different checking accounts designed to fit
the diverse needs of our customers, with accounts for everyone from students
to seniors.
Club Magna 55, a relationship account for individuals who are age 55 or
better, has more than 82,000 customers comprising just over one third of
Magna's total deposits.
10
<PAGE> 15
[PHOTO]
Magna's first entry into a Wal-Mart SuperCenter in Carbondale, Illinois.
In addition to banking services, Club Magna 55 offers club activities and
travel.
Magna offers customers an array of interest-bearing accounts to meet a
variety of specific needs and preferences. For example, Magna's 21-month CD,
first offered in 1995, gives customers the combination of flexibility and
competitive rate in an often uncertain market environment. If the interest
rate rises at any time during the 21 months, customers can adjust the rate
accordingly. To attract new customers, Magna offered an interest rate bonus
to customers opening a personal checking account.
Magna offers a variety of products and services for its corporate and
institutional customers, too. The Cash Management & Wholesale Operating
Services Department provides services designed to assist businesses with
reducing overhead and improving cash flow. Magna Link is a cash management
service that allows business owners to use their personal computer and Magna
software to make wire transfers and other transactions on-line. Business
Express/PC is an electronic banking program that allows small businesses to
access balance reports, monthly statements, check inquiry and account
reconciliations through a personal computer.
Magna's correspondent banking business is among the largest in the Midwest.
The acquisition of Homeland added 160 correspondent bank customers, doubling
the number of Magna's correspondent bank customers.
It's Community that Counts
Magna gives back to the community both financially and in spirit. Employees
at all levels volunteer their time for organizations such as The Arthritis
Foundation, American Diabetes Association, Junior Achievement, Salvation Army
and The United Way, to name just a few. Employees also volunteer their time
for local school districts, participating on school resource planning
committees as well as mentoring and educational programs.
Through Project Ground Floor, a home ownership project for low income persons
with developmental disabilities, Magna provides thirty year fixed rate loans
to prospective purchasers throughout Illinois. This unique loan program has
assisted individuals in purchasing their own homes and becoming more
independent.
11
<PAGE> 16
[PHOTO]
- - ------------------------------------------------------------------------------
3
"Getting started in business is just the start."
Leanette Owens has conducted her personal banking with Magna for years and
knows the Magna team well. So, when she was ready to start her own
business, she turned to Magna as a knowledgeable business resource. She got
that and more. A 37-year banking professional, Del Tegtmeier provided both
consultation and inspiration. Del helped Leanette to plan for the
challenges of owning and operating a business and to access government
programs designed for women and minority business owners. In addition to
financing, Magna also set up payroll services. After nine months of
groundwork, Nail Options, Inc. opened with five employees and a full
appointment book, including Leanette's next appointment with Magna to
discuss plans to expand her business.
- - ------------------------------------------------------------------------------
[PHOTO]
Del Tegtmeier, Senior Vice President
12
<PAGE> 17
IT ALL ADDS UP TO A BIGGER, BETTER MAGNA
Magna's growth strategy includes both internal and external growth. Magna's
aggressive bank acquisition program has led to the purchase of 49 financial
institutions since 1981, adding over $5.0 billion in assets and strengthening
Magna's presence in the Midwest. River Bend Bancshares, Inc., in East Alton,
Illinois, was acquired in February 1996, adding $160 million in assets.
Homeland Bankshares Corporation, a $1.2 billion bank holding company in
Waterloo, Iowa, was acquired in March 1997. Homeland is Magna's first
presence in Iowa and adds 30 banking locations throughout Central and Eastern
Iowa, a trust company and a student loan company. Each of these acquisitions
is consistent with Magna's strategic plan.
Magna's growth also comes from the generation of fee income through
acquisitions and alliances with nonbank institutions. Magna Finance was
created in 1996 through an alliance with First Merchants Acceptance
Corporation, an automobile finance company that specializes in subprime
credit. The alliance complements Magna's successful auto financing
business.
Magna's successful indirect auto loan program now comprises relationships
with over 350 car dealerships, reinforcing the business and consumer
relationships generated through the purchase of automobiles.
Magna Trust, doing business since 1901, now has over $2.5 billion in total
assets including the addition of Homeland. Recent bank mergers in Missouri
are creating new growth opportunities for Magna Trust to aggressively expand
its services to the St. Louis market. Magna Trust also has the leading
market share of trust business in Southern Illinois.
Growth for Magna Trust will come from expanded product offerings such as the
SMART K, a 401(k) program, and expansion of the Magna Funds, Magna's
proprietary mutual funds. Magna Trust will continue to emphasize personal
trust services and investment management. We believe our primary strength
is local administration and portfolio management with a high degree of
personal attention.
In addition to a complete range of personal trust services Magna Trust offers
farm management to help farmers meet the constant challenges of the changing
farm economy as well as farm appraisals.
In 1996, our brokerage company changed its name to Magna Investments,
highlighting its commitment to providing investment services through offices
located in Magna banking centers. Magna Investments offers a full range of
investment services, experienced staff and personal service at fees lower
than those offered by many national brokerages.
Magna Student Loan Company is committed to helping students finance their
higher education. The competitive advantage student loans bring to Magna
goes beyond dollars and cents. Student loans are an important source of fee
income for Magna and they are an excellent way to invest in the communities
we serve. By helping students finance their college education, we're
investing in the future -- both theirs and ours.
Internal growth results from building new customer relationships and
strengthening existing ones. Magna employees are key to achieving this
growth. Our client executives regularly review their customers' accounts to
recommend other banking, trust and investment services. Magna has 17
incentive programs designed to increase employee referrals and generate new
customers and, in 1996, more than 50 percent of Magna employees
participated in some type of performance-based pay system.
As Magna approaches the close of the 20th century, we are positioned to
thrive in a rapidly changing environment and unsettled marketplace. Our
knowledgeable staff and vast array of services clearly position Magna to
exceed the service expectations of our current customers and those we will
gain.
13
<PAGE> 18
MAGNA'S COMMUNITY PRESIDENTS
Magna is a network of community banks. Over the past 15 years, Magna has
acquired 49 financial institutions. Each institution prided itself on
providing friendly and personal services and being actively involved in its
local communities. That philosophy remains the central theme to Magna's
community banking strategy. Our 19 regional community presidents are
committed to this concept and focused on building strong relationships with
the customers and communities Magna serves.
This unique approach to banking offers our customers the advantage of local
management, with the support of centralized loan administration and product
management. In addition, our community boards of directors act as
ambassadors for Magna in their regions, building customer and community
relationships. From small agricultural towns to big industrial cities, every
Magna customer can expect to receive the highest quality of service from
community bankers familiar with their specific needs.
[PHOTO]
*--JOHN RATHJEN
Cedar Valley Region, 15 Locations
18 Years Banking Experience
[PHOTO]
*--JOHN FRUIT
Madison Region, 8 Locations
29 Years Banking Experience
[PHOTO]
*--CORYDON NICHOLSON
Decatur Region, 4 Locations
21 Years Banking Experience
[PHOTO]
*--PAUL TENARVITZ
Peoria Region, 7 Locations
24 Years Banking Experience
[PHOTO]
*--KENDALL MESSER
Monticello Region, 1 Location
23 Years Banking Experience
[PHOTO]
*--DALE KRETSCHMAR
Cedar Rapids/Iowa City Region, 2 Locations
13 Years Banking Experience
[PHOTO]
*--THOMAS CURTRIGHT
Springfield Region, 3 Locations
35 Years Banking Experience
[PHOTO]
*--THOMAS COLES
River Bend Region, 6 Locations
26 Years Banking Experience
[PHOTO]
*--WALLACE REESE
Lincoln Region, 3 Locations
36 Years Banking Experience
14
<PAGE> 19
[PHOTO]
*--THOMAS HOLLOWAY
St. Clair Region, 21 Locations
25 Years Banking Experience
[PHOTO]
*--DAVID HEINRICH
St. Charles Region, 9 Locations
32 Years Banking Experience
[PHOTO]
*--DAN CRANDALL
Oelwein Region, 4 Locations
24 Years Banking Experience
[PHOTO]
*--DONALD SCHAACK
Columbia Region, 5 Locations
38 Years Banking Experience
[PHOTO]
*--STEVEN BURROUGHS
Carbondale Region, 5 Locations
14 Years Banking Experience
[PHOTO]
*--JERRY VON ROHR
St. Louis Region, 25 Locations
29 Years Banking Experience
[PHOTO]
*--RICHARD STROYAN
Bloomington Region, 3 Locations
22 Years Banking Experience
[PHOTO]
*--DAVID HARRIS
Centralia Region, 8 Locations
31 Years Banking Experience
[PHOTO]
*--GREGORY O'HARA
Des Moines Region, 3 Locations
16 Years Banking Experience
[PHOTO]
*--THOMAS KILLEEN
Indianola Region, 5 Locations
17 Years Banking Experience
[MAP]
15
<PAGE> 20
GLOSSARY
Average Balance- The sum of the daily balances divided by the number of days
in the period.
Book Value Per Share- The value of a share of common stock determined by
dividing total common stockholders' equity at the end of the period by the
total number of common shares outstanding.
Dividend Payout Ratio- The percentage of net income per common share that
was paid to common stockholders as dividends for the period.
Earning Assets- Assets that generate interest income and yield-related fee
income, such as loans, short-term investments and securities.
Efficiency Ratio- Noninterest expense divided by the sum of tax-equivalent
net interest income plus noninterest income less net securities gains.
Foreclosed Property- Assets acquired through foreclosure or deed in lieu of
foreclosure.
Fully Diluted Net Income Per Common Share- Computed by increasing primary
average common shares and common share equivalents by the assumed conversion
into common stock of all outstanding convertible debt instruments. Net
income for fully diluted net income per share is adjusted for interest
expense and amortization of origination costs, net of related tax effects, on
these convertible debt instruments and preferred stock dividends.
GAP- The amount by which interest-sensitive assets exceed interest-sensitive
liabilities for a designated time period is referred to as a positive GAP.
An excess of liabilities would represent a negative GAP.
Interest Bearing Liabilities- Liabilities upon which interest is paid for the
use of funds, such as savings and time deposits, short-term borrowings and
long-term debt.
Interest Sensitive Assets/Liabilities- Interest earning assets and interest
bearing liabilities whose yields and rates vary within a specific time
period, due to either maturity or in association with market interest rates.
Liquidity- The ability of a corporation to generate adequate funds to meet
its cash flow requirements.
Loan Loss Reserve Coverage Ratio- The reserve for loan losses divided by
nonperforming loans.
Net Interest Income- Net interest income is the difference between the
interest income received from investments, loans and other interest earning
assets and the interest paid to depositors and others. Net interest income
is the principal source of both earnings and profitability.
Net Interest Margin- A measurement of how effectively the bank utilizes its
earning assets in relationship to the interest cost of funding them. It is
computed by dividing tax-equivalent net interest income by average interest
earning assets.
Nonaccrual Loans- Loans on which interest accruals have been discontinued due
to the borrower's financial difficulties. Interest income on these loans is
reported on the cash basis as it is collected.
Nonperforming Loans- The total of nonaccrual loans, loans past due 90 days or
more and restructured loans.
Nonperforming Assets- The sum of nonperforming loans and foreclosed property.
Noninterest Expense- Noninterest expense includes employee compensation and
other benefits, net occupancy, equipment, FDIC insurance premiums and other
operating expenses.
Noninterest Income- Noninterest income includes service charges on deposit
accounts, trust revenues, other fee income associated with products and
services and net securities gains.
Operating Income- Tax-equivalent net interest income plus noninterest income,
excluding net securities gains.
Primary Net Income Per Common Share- Net income after deduction of preferred
stock dividends divided by the weighted average number of common shares and
common share equivalents (which consist of common stock options) outstanding.
Provision for Loan Losses- A charge to operations which appears on the bank's
statement of operations. This charge increases the reserve for loan losses
and decreases net income.
Reserve for Loan Losses- A valuation reserve for possible loan losses. This
reserve represents the amount considered by management to be adequate to
cover estimated losses inherent in the loan portfolio.
Restructured Loans- A loan is considered restructured when a bank for
economic or legal reasons related to the debtor's financial difficulties
grants a concession to the debtor that it would not otherwise consider.
Return on Average Assets (ROA)- A measure of profitability that indicates how
effectively a bank utilizes its assets to generate net income and net income
per share. ROA is calculated by dividing net income by average assets.
Return on Average Equity (ROE)- A measure of profitability that indicates
what the bank earned on its stockholders' investment. ROE is calculated by
dividing net income by total average stockholders' equity.
Risk-Adjusted Assets- Total balance sheet assets and off-balance sheet items
adjusted by assigning risk weightings in accordance with the Federal Reserve
Board's Risk-Based Capital Guidelines for assessing capital adequacy.
Risk-Based Capital- A risk-based capital measure for assessing capital
adequacy that takes into account the broad differences in risks among a
banking organization's assets and off-balance sheet items.
Tax-Equivalent Net Interest Income- The difference between interest earned on
assets and interest paid on liabilities, with adjustments made to present
yields on tax-exempt assets as if such income was fully taxable.
Tier 1 Capital- Tier 1 capital consists principally of stockholders' equity
less goodwill and deposit base intangibles.
Total Capital- The sum of Tier 1 capital plus certain debt instruments and a
portion of the reserve for loan losses.
16
<PAGE> 21
<TABLE>
FIVE YEAR SELECTED FINANCIAL DATA
<CAPTION>
(In thousands, except per share data) 1996 1995 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS
Interest income $387,835 $347,168 $289,561 $244,288 $274,312
Interest expense 193,748 164,317 116,742 99,025 127,539
- - ---------------------------------------------------------------------------------------------------------------------
Net interest income 194,087 182,851 172,819 145,263 146,773
Provision for loan losses 10,280 9,992 4,900 9,589 20,544
- - ---------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 183,807 172,859 167,919 135,674 126,229
Noninterest income 50,358 47,863 47,503 45,840 38,184
Noninterest expense 138,386 146,217 150,213 131,321 129,767
- - ---------------------------------------------------------------------------------------------------------------------
Income before income taxes, extraordinary item and
cumulative effect of a change in accounting
principle 95,779 74,505 65,209 50,193 34,646
Income tax expense 32,640 23,283 20,179 12,706 5,539
- - ---------------------------------------------------------------------------------------------------------------------
Income before extraordinary item and cumulative
effect of a change in accounting principle 63,139 51,222 45,030 37,487 29,107
Extraordinary item less applicable tax and
cumulative effect of a change in accounting principle - - - - 1,085
- - ---------------------------------------------------------------------------------------------------------------------
Net income $ 63,139 $ 51,222 $ 45,030 $ 37,487 $ 30,192
=====================================================================================================================
PER COMMON SHARE
Primary net income before extraordinary item
and cumulative effect adjustment $ 2.22 $ 1.84 $ 1.69 $ 1.53 $ 1.36
Extraordinary item and cumulative effect adjustment - - - - .05
- - ---------------------------------------------------------------------------------------------------------------------
Net income 2.22 1.84 1.69 1.53 1.41
- - ---------------------------------------------------------------------------------------------------------------------
Fully diluted net income before extraordinary item
and cumulative effect adjustment 2.18 1.80 1.66 1.50 1.33
Extraordinary item and cumulative effect adjustment - - - - .05
- - ---------------------------------------------------------------------------------------------------------------------
Net income 2.18 1.80 1.66 1.50 1.38
- - ---------------------------------------------------------------------------------------------------------------------
Dividends declared .88 .80 .76 .72 .68
Book value 17.15 15.93 13.49 14.02 13.39
=====================================================================================================================
BALANCE SHEET DATA
Total assets $5,458,709 $4,947,499 $4,638,502 $4,128,462 $3,728,525
Securities 1,655,907 1,364,864 1,217,174 1,213,673 1,088,410
Total loans 3,415,309 3,202,766 2,968,201 2,564,466 2,272,180
Reserve for loan losses 45,382 42,623 43,991 40,065 38,194
Total deposits 4,197,776 3,888,266 3,672,755 3,494,825 3,224,661
Long-term debt 77,577 93,071 104,453 32,062 35,195
Stockholders' equity 483,961 446,044 371,312 360,649 322,295
Average common shares outstanding:
Primary 28,395 27,892 26,657 24,495 21,304
Fully diluted 29,974 29,524 28,320 26,233 23,162
Common shares outstanding 28,210 27,998 27,512 25,729 24,074
=====================================================================================================================
SELECTED RATIOS
Return on average assets 1.20% 1.09% 1.05% 1.02% .81%
Return on average equity 13.75 12.57 12.41 11.25 10.88
Net interest margin 4.01 4.30 4.49 4.45 4.47
Efficiency ratio 55.63 62.11 66.69 67.98 68.23
Net loan charge-offs to average loans .25 .37 .14 .59 1.59
Loan reserve to total loans 1.33 1.33 1.48 1.56 1.68
Loan reserve to nonperforming loans 166.19 138.30 119.21 78.49 57.87
Nonperforming loan ratio .80 .96 1.24 1.99 2.90
Nonperforming assets to total loans and
foreclosed property .88 1.12 1.48 2.37 3.35
Tier 1 capital to average assets 8.45 8.73 8.57 8.67 8.06
Tier 1 capital to risk-adjusted assets 12.97 13.06 12.79 12.81 12.30
Total capital to risk-adjusted assets 14.18 14.29 14.07 14.10 13.59
Dividend payout ratio 39.64 43.48 44.97 47.06 48.23
=====================================================================================================================
</TABLE>
17
<PAGE> 22
MANAGEMENT'S DISCUSSION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL OVERVIEW
Net income for 1996 was $63.1 million compared with $51.2 million in 1995 and
$45.0 million in 1994, representing a 23.3% increase in net income for 1996
as compared to 1995 and a 13.8% increase for 1995 as compared to 1994. Net
income per share, on a primary basis, for 1996 increased to $2.22 per share
from $1.84 in 1995 and $1.69 in 1994. These results represent a return on
average assets of 1.20% in 1996, 1.09% in 1995 and 1.05% in 1994.
Magna's improved earnings during 1996 over 1995 were primarily driven by
increases in net interest income and a reduction in noninterest expense
coupled with an increase in noninterest income.
Total assets at year-end 1996 increased to $5.46 billion compared with $4.95
billion at year-end 1995 primarily as a result of an acquisition completed in
February 1996, along with increases in the volume of loans and investment
securities. These increases were funded by an increase in deposits,
primarily time deposits, as well as an increase in repurchase agreements.
On March 1, 1997, Magna completed the acquisition of Homeland Bankshares
Corporation, Waterloo, Iowa ("Homeland"), for approximately 5,039,000 shares
of common stock and approximately $92 million in cash. Total assets of
Homeland, as of the acquisition date, were approximately $1.2 billion. The
acquisition is being accounted for as a purchase.
On February 29, 1996, Magna completed the acquisition of River Bend
Bancshares, Inc. ("River Bend"). A total of 550,207 shares of common stock
were issued and approximately $12.4 million in cash was paid in connection
with the acquisition, which was accounted for as a purchase. Total assets of
River Bend, as of the acquisition date, were approximately $160 million.
Nonperforming assets declined 15.7% to $30.2 million at year-end 1996 from
$35.8 million at year-end 1995. The ratio of nonperforming assets to total
assets declined to .55% at year-end 1996 from .72% at year-end 1995. The
ratio of nonperforming assets to total loans and foreclosed property declined
to .88% at year-end 1996 from 1.12% at year-end 1995. Nonperforming loans
declined to $27.3 million at year-end 1996 from $30.8 million at year-end
1995. This reduction in nonperforming loans led to a decline in the ratio of
nonperforming loans to total loans to .80% at year-end 1996 from .96% at
year-end 1995.
In January 1995, Magna announced a common stock repurchase program
authorizing the repurchase of up to 5% of its outstanding shares of common
stock or 1.4 million shares. During 1996, Magna repurchased 745,000 shares
and will consider repurchasing the remaining shares in 1997 following
consummation of the Homeland acquisition.
The following paragraphs discuss more fully Magna's results of operations,
financial condition, asset quality and capital resources and liquidity
during the three year period ended December 31, 1996. This discussion should
be read in conjunction with the Consolidated Financial Statements and the
notes thereto which are included elsewhere in this report.
18
<PAGE> 23
MANAGEMENT'S DISCUSSION
The discussion herein and elsewhere in this report 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, and the
reserve for loan losses, 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, 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 $11.3 million, or 6.0%, to
$199.2 million in 1996 from $187.9 in 1995. Tax-equivalent net interest
income in 1994 was $177.9 million. The increases in 1996 and 1995 were
primarily attributable to higher levels of earning assets offset by reduced
net interest margins. The increase in the level of earning assets in 1996
resulted from the River Bend acquisition, increased loan demand and increases
in the volume of investment securities.
Net interest income is presented on a "tax-equivalent" basis to adjust for
the tax-exempt status of earnings from certain loans and investment
securities, primarily the obligations of states and municipalities.
Table 1 sets forth Magna's average balance sheets for the last five years,
the percentage of each principal category of assets, liabilities and
stockholders' equity to total assets, the interest income and expense
associated with such categories of interest earning assets and interest
bearing liabilities, and the average yields and rates on such categories.
Net interest income is the largest component of earnings and is affected by
the volume of the sources and uses of funds, the respective rates earned and
paid on those funds and the mix of those funds. Table 2 sets forth the
volume and rate variances that affected net interest income.
19
<PAGE> 24
MANAGEMENT'S DISCUSSION
<TABLE>
TABLE 1 -- DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY AND INTEREST RATE INFORMATION
<CAPTION>
Year Ended December 31
---------------------------------------------------------------------------------------
1996 1995
---------------------------------------------------------------------------------------
Percent Interest Average Percent Interest Average
Average of Total Income/ Yield/ Average of Total Income/ Yield/
(Dollars in thousands) Balance Assets Expense Rate Balance Assets Expense Rate
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans<F1><F2> $3,322,542 62.93% $286,980 8.64% $3,088,168 65.63% $267,809 8.67%
Taxable securities 1,486,680 28.16 93,029 6.26 1,145,976 24.35 71,853 6.27
Non-taxable securities<F2> 115,835 2.20 10,437 9.01 108,450 2.31 10,670 9.84
Federal funds sold and
repurchase agreements 45,218 .86 2,514 5.56 31,391 .67 1,903 6.06
- - -----------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 4,970,275 94.15 392,960 7.91 4,373,985 92.96 352,235 8.05
- - -----------------------------------------------------------------------------------------------------------------------------------
Noninterest earning assets:
Cash and due from banks 136,084 2.58 163,781 3.48
Premises and equipment 82,844 1.57 79,212 1.68
Other assets 134,793 2.55 131,782 2.80
Reserve for loan losses (44,628) (.85) (43,426) (.92)
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Assets $5,279,368 100.00% $4,705,334 100.00%
===================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing demand deposits $ 532,615 10.09% 9,256 1.74 $ 520,785 11.07% 9,547 1.83
Savings and market rate deposits 831,381 15.75 24,635 2.96 845,458 17.97 25,179 2.98
Time deposits 2,193,105 41.54 124,297 5.67 1,884,164 40.04 103,299 5.48
Short-term borrowings 595,615 11.28 28,812 4.84 391,789 8.32 20,233 5.16
Long-term debt 87,840 1.66 6,748 7.68 79,828 1.70 6,059 7.59
- - -----------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 4,240,556 80.32 193,748 4.57 3,722,024 79.10 164,317 4.41
- - -----------------------------------------------------------------------------------------------------------------------------------
Noninterest bearing liabilities:
Demand deposits 514,427 9.74 515,461 10.96
Other liabilities 65,160 1.24 60,319 1.28
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 4,820,143 91.30 4,297,804 91.34
Stockholders' Equity 459,225 8.70 407,530 8.66
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities
and Stockholders' Equity $5,279,368 100.00% $4,705,334 100.00%
===================================================================================================================================
Net interest income $199,212 $187,918
===================================================================================================================================
Interest rate spread 3.34% 3.64%
===================================================================================================================================
Net interest margin 4.01% 4.30%
===================================================================================================================================
<FN>
- - --------------
<F1> For purposes of these computations, nonaccrual loans are included in
the daily average loan amounts outstanding; interest on nonaccrual loans
is recorded when received.
<F2> Information presented on a tax-equivalent basis assuming a tax rate of
35% for 1996, 1995, 1994 and 1993 and 34% for 1992. The tax-equivalent
adjustment amounted to approximately $5,125, $5,067, $5,070, $5,451 and
$6,386, for 1996, 1995, 1994, 1993 and 1992, respectively.
</TABLE>
20
<PAGE> 25
MANAGEMENT'S DISCUSSION
<TABLE>
TABLE 1 -- DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY AND INTEREST RATE INFORMATION
<CAPTION>
Year Ended December 31
- - --------------------------------------------------------------------------------------------------------------------------
1994
- - --------------------------------------------------------------------------------------------------------------------------
Percent Interest Average
Average of Total Income/ Yield/
(Dollars in thousands) Balance Assets Expense Rate
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans<F1><F2> $2,723,878 63.63% $221,051 8.12%
Taxable securities 1,118,965 26.14 61,970 5.54
Non-taxable securities<F2> 108,068 2.53 11,046 10.22
Federal funds sold and
repurchase agreements 11,611 .27 564 4.86
- - --------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 3,962,522 92.57 294,631 7.44
- - --------------------------------------------------------------------------------------------------------------------------
Noninterest earning assets:
Cash and due from banks 152,206 3.56
Premises and equipment 69,568 1.63
Other assets 137,594 3.21
Reserve for loan losses (41,347) (.97)
- - --------------------------------------------------------------------------------------------------------------------------
Total Assets $4,280,543 100.00%
==========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing demand deposits $ 536,857 12.54% 10,345 1.93
Savings and market rate deposits 1,003,872 23.45 26,818 2.67
Time deposits 1,490,847 34.83 63,521 4.26
Short-term borrowings 230,638 5.39 9,202 3.99
Long-term debt 96,289 2.25 6,856 7.12
- - --------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 3,358,503 78.46 116,742 3.48
- - --------------------------------------------------------------------------------------------------------------------------
Noninterest bearing liabilities:
Demand deposits 506,889 11.84
Other liabilities 52,369 1.22
- - --------------------------------------------------------------------------------------------------------------------------
Total Liabilities 3,917,761 91.52
Stockholders' Equity 362,782 8.48
- - --------------------------------------------------------------------------------------------------------------------------
Total Liabilities
and Stockholders' Equity $4,280,543 100.00%
==========================================================================================================================
Net interest income $177,889
==========================================================================================================================
Interest rate spread 3.96%
==========================================================================================================================
Net interest margin 4.49%
==========================================================================================================================
MANAGEMENT'S DISCUSSION
</TABLE>
<TABLE>
TABLE 1 -- DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY AND INTEREST RATE INFORMATION
<CAPTION>
Year Ended December 31
- - --------------------------------------------------------------------------------------------------------------------------
1993
- - --------------------------------------------------------------------------------------------------------------------------
Percent Interest Average
Average of Total Income/ Yield/
(Dollars in thousands) Balance Assets Expense Rate
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans<F1><F2> $2,286,299 62.19% $186,997 8.18%
Taxable securities 963,988 26.22 50,290 5.22
Non-taxable securities<F2> 103,636 2.82 11,486 11.08
Federal funds sold and
repurchase agreements 32,793 .90 966 2.95
- - --------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 3,386,716 92.13 249,739 7.37
- - --------------------------------------------------------------------------------------------------------------------------
Noninterest earning assets:
Cash and due from banks 145,640 3.96
Premises and equipment 66,621 1.81
Other assets 116,240 3.16
Reserve for loan losses (39,135) (1.06)
- - --------------------------------------------------------------------------------------------------------------------------
Total Assets $3,676,082 100.00%
==========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing demand deposits $ 452,471 12.31% 9,521 2.10
Savings and market rate deposits 887,617 24.15 24,809 2.80
Time deposits 1,358,336 36.95 57,792 4.25
Short-term borrowings 110,782 3.02 3,111 2.81
Long-term debt 33,136 .90 3,792 11.44
- - --------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 2,842,342 77.33 99,025 3.48
- - --------------------------------------------------------------------------------------------------------------------------
Noninterest bearing liabilities:
Demand deposits 451,935 12.29
Other liabilities 48,590 1.32
- - --------------------------------------------------------------------------------------------------------------------------
Total Liabilities 3,342,867 90.94
Stockholders' Equity 333,215 9.06
- - ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities
and Stockholders' Equity $3,676,082 100.00%
===========================================================================================================================
Net interest income $150,714
===========================================================================================================================
Interest rate spread 3.89%
===========================================================================================================================
Net interest margin 4.45%
===========================================================================================================================
MANAGEMENT'S DISCUSSION
</TABLE>
<TABLE>
TABLE 1 -- DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY AND INTEREST RATE INFORMATION
<CAPTION>
Year Ended December 31
- - ---------------------------------------------------------------------------------------------------------------------------
1992
- - ---------------------------------------------------------------------------------------------------------------------------
Percent Interest Average
Average of Total Income/ Yield/
(Dollars in thousands) Balance Assets Expense Rate
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans<F1><F2> $2,360,795 63.54% $207,811 8.80%
Taxable securities 896,916 24.14 58,071 6.47
Non-taxable securities<F2> 117,649 3.17 12,933 10.99
Federal funds sold and
repurchase agreements 50,147 1.35 1,883 3.75
- - ---------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 3,425,507 92.20 280,698 8.19
- - ---------------------------------------------------------------------------------------------------------------------------
Noninterest earning assets:
Cash and due from banks 140,168 3.77
Premises and equipment 69,214 1.86
Other assets 127,956 3.44
Reserve for loan losses (47,370) (1.27)
- - ---------------------------------------------------------------------------------------------------------------------------
Total Assets $3,715,475 100.00%
===========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing demand deposits $ 407,739 10.97% 11,823 2.90
Savings and market rate deposits 857,705 23.08 30,900 3.60
Time deposits 1,545,915 41.61 76,598 4.95
Short-term borrowings 84,810 2.28 2,814 3.32
Long-term debt 55,938 1.51 5,404 9.66
- - ---------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 2,952,107 79.45 127,539 4.32
- - ---------------------------------------------------------------------------------------------------------------------------
Noninterest bearing liabilities:
Demand deposits 427,121 11.50
Other liabilities 58,802 1.58
- - ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities 3,438,030 92.53
Stockholders' Equity 277,445 7.47
- - ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities
and Stockholders' Equity $3,715,475 100.00%
===========================================================================================================================
Net interest income $153,159
===========================================================================================================================
Interest rate spread 3.87%
===========================================================================================================================
Net interest margin 4.47%
===========================================================================================================================
</TABLE>
21
<PAGE> 26
MANAGEMENT'S DISCUSSION
<TABLE>
TABLE 2 -- VOLUME AND RATE VARIANCE
<CAPTION>
1996 Compared with 1995 1995 Compared with 1994
Increase (Decrease) Due to<F1> Increase (Decrease) Due to<F1>
-------------------------------------------------------------------
(In thousands) Volume Rate Net Volume Rate Net
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans<F2> $20,148 $ (977) $19,171 $30,825 $15,933 $46,758
Taxable securities 21,305 (129) 21,176 1,530 8,353 9,883
Non-taxable securities<F2> 430 (663) (233) 6 (382) (376)
Federal funds sold and
repurchase agreements 769 (158) 611 1,172 167 1,339
- - ------------------------------------------------------------------------------------------------------------
Total interest earning assets 42,652 (1,927) 40,725 33,533 24,071 57,604
- - ------------------------------------------------------------------------------------------------------------
Interest paid on:
Interest bearing demand deposits 205 (496) (291) (292) (506) (798)
Savings and market rate deposits (388) (156) (544) (4,530) 2,891 (1,639)
Time deposits 17,333 3,665 20,998 19,074 20,704 39,778
Short-term borrowings 9,906 (1,327) 8,579 7,770 3,261 11,031
Long-term debt 616 73 689 (1,228) 431 (797)
- - ------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 27,672 1,759 29,431 20,794 26,781 47,575
- - ------------------------------------------------------------------------------------------------------------
Net interest income $14,980 $(3,686) $11,294 $12,739 $(2,710) $10,029
============================================================================================================
<FN>
- - --------------------
<F1>The change in interest due to both rate and volume has been allocated to
rate and volume changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
<F2>Presented on a tax-equivalent basis assuming a tax rate of 35% for 1996
and 1995. The tax-equivalent adjustment relating to the change in interest
income was an increase of $58 for 1996 compared with 1995 and a decrease of
$3 for 1995 compared with 1994.
</TABLE>
During 1996, the average volume of interest earning assets increased $596
million compared with 1995, resulting in an increase in tax-equivalent
interest income of $42.7 million. These increases were principally
attributable to increases in the volume of loans and investment securities.
Changes in yields on the average volume of interest earning assets decreased
tax-equivalent interest income by $1.9 million. The tax-equivalent yield on
the loan portfolio remained relatively stable for 1996 when compared to 1995
even though the prime lending rate decreased slightly. Many of the loans in
the commercial and real estate loan portfolios reprice upward or downward as
the prime rate changes and generally reprice to the same extent. The yield
on taxable securities also remained stable while the yield on tax-exempt
securities decreased 83 basis points in 1996. The decrease in the yield on
tax-exempt securities occurred as certain holdings either matured or were
called for redemption. These securities were replaced with lower yielding
issues.
Included in average noninterest earning assets are cash and due from bank
balances. Average cash and due from bank balances decreased approximately
$28 million for 1996 compared to 1995. During 1996, Magna reconfigured
certain deposit arrangements which resulted in a reduction of average reserve
balances required to be maintained with the Federal Reserve Bank. This
reduction in reserve balances contributed to an increase in the ratio of
earning assets to total assets during 1996 compared to 1995.
The average volume of interest bearing liabilities increased $519 million in
1996 compared with 1995, and included increases of $307 million in average
interest bearing deposits and $204 million in average short-term borrowings.
The increase in average interest bearing deposits was partially attributable
to the acquisition of River Bend coupled with Magna's decision to price these
deposits, particularly time deposits, more competitively. The increase in
average short-term borrowings
22
<PAGE> 27
MANAGEMENT'S DISCUSSION
is discussed under "Borrowings" and represents a significant funding source
for the increased levels of loans and investment securities. The increase in
average long-term debt was principally the result of the procurement of a $25
million Federal Home Loan Bank borrowing in September of 1995, the average of
which was included in long-term debt during the entire 1996 year. The impact
on average long-term debt from this item was partially offset by the effects
of the August 1996 reclassification of a $15 million Federal Home Loan Bank
borrowing from long-term debt to other short-term borrowings as a result of
its August 1997 maturity. Interest expense increased $27.7 million as a
result of the higher volume of interest bearing liabilities. The average
rate paid on total interest bearing liabilities increased 16 basis points
during 1996, principally due to competition in the marketplace to secure
deposits. Interest expense increased $1.8 million as a result of the
increased rate paid on interest bearing liabilities. Increases in rates paid
on time deposits and long-term debt were offset by decreased rates paid on
all other categories of interest bearing liabilities.
During 1996, Magna's net interest margin was 4.01% compared with 4.30% and
4.49% in 1995 and 1994, respectively. Changes in the net interest margin
depend, primarily, on three factors and the interaction between them: 1) the
net interest spread, being the difference between the yield on earning assets
and the rate paid on interest bearing liabilities; 2) the yield earned on
assets funded by funding sources that are interest free such as noninterest
bearing demand deposits; and 3) the percentage of earning assets funded by
interest free funding sources. The reduction in the net interest margin was
primarily due to continued competitive pricing for loans and deposits in the
markets that Magna serves, resulting in an increase in the rates paid on
interest bearing liabilities and a reduction in the yields on earning assets.
PROVISION FOR LOAN LOSSES
The provision for loan losses reflects management's judgment of the cost
associated with credit risks inherent in the loan portfolio. The provision
for loan losses represents the amount necessary to adjust the allowance for
loan losses to the level that management considers appropriate. The
provision for loan losses charged to expense in 1996 increased to $10.3
million compared with $10.0 and $4.9 million in 1995 and 1994, respectively.
Factors which influence management's determination of the provision for loan
losses include, among other things, current and projected economic
conditions, historical loss trends, a review of individual loans and changes
in the character and size of the portfolio. Magna has established
comprehensive credit policies and risk rating processes that address the
individual risk and return characteristics associated with loans in the
portfolio. The modest increase in the provision in 1996 was primarily
related to overall growth in the loan portfolio. The increase in the
provision in 1995 compared to 1994 was primarily related to a higher level of
commercial loan net charge-offs coupled with portfolio growth. Activity in
the reserve for loan losses and nonperforming loan data are presented and
discussed under "ASSET QUALITY."
NONINTEREST INCOME
Excluding net securities gains, noninterest income for 1996 was $49.5 million
compared with $47.5 million and $47.3 million in 1995 and 1994, respectively.
Total noninterest income as a percentage of average assets was .95%, 1.02%
and 1.11% for 1996, 1995 and 1994, respectively. Total noninterest income,
excluding net securities gains, to operating income was 19.92%, 20.18% and
21.02% for 1996, 1995 and 1994, respectively.
23
<PAGE> 28
MANAGEMENT'S DISCUSSION
Table 3 sets forth information pertaining to the major components of
noninterest income.
<TABLE>
TABLE 3 -- NONINTEREST INCOME
<CAPTION>
Year Ended December 31
---------------------------------
(In thousands) 1996 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Service charges on deposits $23,443 $22,487 $21,945
Trust 9,382 8,638 9,063
Credit card 6,013 5,801 4,665
Brokerage and investment
services income 3,341 2,361 2,726
Other income 7,362 8,220 8,946
Securities gains, net 817 356 158
- - -------------------------------------------------------------------------
Total noninterest income $50,358 $47,863 $47,503
=========================================================================
</TABLE>
The largest component of noninterest income, service charges on deposit
accounts, consists of fees on both interest bearing and noninterest bearing
accounts and charges for other items, including insufficient funds,
overdrafts and stop payment requests. Service charges on deposits increased
in 1996 primarily due to higher levels of charges for insufficient funds and
increased service charges associated with Magna's corporate cash management
products.
The increase in income from trust services during 1996 was primarily due to
an increase in the market value of trust assets on which certain fees are
based. Magna Trust Company had custodial assets and assets under management
of $2.0 billion, $1.9 billion and $4.2 billion at December 31, 1996, 1995 and
1994, respectively. The reduction in custodial assets and assets under
management from year-end 1994 resulted from the loss of one custodial account
relationship in January 1995.
Credit card income primarily consists of fees charged to merchants for
processing credit card transactions and interchange fees received on
transactions of Magna's cardholders. The modest increase in credit card
income resulted primarily from increases in merchant related fees due to
expansion of business activities associated with existing merchants, coupled
with increased sales efforts.
Brokerage and investment services income is comprised of commissions derived
from the sale of stocks, bonds, mutual funds, annuities and other investment
vehicles which are offered by Magna's brokerage operations. During 1996,
brokerage and investment services income increased $1.0 million, or 41.5%.
The increase in brokerage and investment services income principally resulted
from expanded sales efforts and additional sales representatives.
Other noninterest income includes such items as interchange fees on ATM
transactions, income from foreclosed properties, fees from mortgage banking
operations, safe deposit box rental fees and other miscellaneous fees. Other
noninterest income in 1995 included the interest portion of certain federal
income tax refunds which totaled approximately $.9 million.
Net securities gains remained at modest levels in 1996 and totaled $.8
million compared to $.4 million and $.2 million in 1995 and 1994,
respectively.
Magna continues to explore additional opportunities to generate increased
noninterest income.
NONINTEREST EXPENSE
Noninterest expense decreased $7.8 million, or 5.4%, to $138.4 million in
1996 compared with $146.2 million and $150.2 million in 1995 and 1994,
respectively. The decrease in 1996 from 1995 was mainly due to reductions in
employee compensation and other benefits coupled with a decrease in Federal
Deposit Insurance Corporation ("FDIC") insurance premiums. Reductions in
these areas, along with a reduction in other operating expenses, contributed
to the reduction in noninterest expense for 1995 from 1994. The efficiency
ratio, a key indicator of the control of noninterest expense, improved
throughout 1996. The efficiency ratio for the year ended December 31, 1996
was 55.6% compared with 62.1% and 66.7% for the years ended December 31, 1995
and 1994, respectively. Noninterest expense as a percentage of average assets
was 2.62%, 3.11% and 3.51% for 1996, 1995 and 1994, respectively.
24
<PAGE> 29
MANAGEMENT'S DISCUSSION
Table 4 sets forth information regarding the major components of noninterest
expense.
<TABLE>
TABLE 4 -- NONINTEREST EXPENSE
<CAPTION>
Year Ended December 31
---------------------------------
(In thousands) 1996 1995 1994
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Employee compensation
and other benefits $ 69,142 $ 72,993 $ 73,545
Net occupancy 17,980 17,677 15,748
Equipment 8,731 8,967 8,974
FDIC insurance premiums 554 4,342 8,079
Other 41,979 42,238 43,867
- - -------------------------------------------------------------------------
Total noninterest expense $138,386 $146,217 $150,213
=========================================================================
</TABLE>
Employee compensation and other benefits is the largest component of
noninterest expense representing approximately 50% of total operating costs.
The decrease in employee compensation and other benefits for 1996 compared to
1995 was attributable to staff reductions that occurred during the first
quarter of 1996. These reductions occurred as Magna continued to achieve
efficiencies in back-office operations and as a result of the merger of
Magna's banking subsidiaries in the fourth quarter of 1995. The reduction in
employee compensation and other benefits resulting from these staff
reductions was partially offset by normal merit increases, severance costs
and compensation and benefits attributable to the acquisition of River Bend.
As a "super community bank," Magna continues to monitor staffing levels to
generate cost efficiencies that do not compromise the quality of customer
service.
Net occupancy and equipment expenses in 1996 remained relatively stable
compared to 1995 and increased from 1994. The increase in these expenses
during 1995 was primarily due to relocation costs and other direct expenses
associated with Magna's operations center, which was placed in service during
the second quarter of that year.
FDIC insurance premiums include assessments levied in connection with the
Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF).
The 1996 FDIC insurance premiums of $.6 million included a special assessment
which was mandated by federal legislation enacted on September 30, 1996.
This legislation called for financial institutions to pay a one time special
assessment on SAIF insured deposit levels as of March 31, 1995. This one
time special assessment recorded by Magna amounted to $.4 million. A
reduction in the BIF deposit insurance assessment rate announced in the third
quarter of 1995 resulted in a reduction in expense to $4.3 million in 1995
from $8.1 million in 1994. The 1996 legislation which mandated the
assessment for SAIF insured deposits also reduced ongoing SAIF deposit
insurance assessment rates from $.230 to $.064 per $100 of insured deposits
and increased ongoing BIF deposit insurance assessment rates from zero to
$.013 per $100 of insured deposits beginning January 1, 1997. Management
anticipates that, as a result of the acquisition of Homeland, Magna's FDIC
insurance premiums will increase in 1997. Substantially all of the combined
companies' deposits will be insured by the BIF.
Other noninterest expense includes such items as legal and professional fees,
advertising costs, postage costs and certain credit card program expenses.
Other noninterest expense declined slightly during 1996 compared to 1995 as
efforts to control costs associated with general operations continue.
Magna recorded income tax expense of $32.6 million in 1996, compared with
$23.3 million in 1995 and $20.2 million in 1994. Income tax expense in 1995
25
<PAGE> 30
MANAGEMENT'S DISCUSSION
included a $.9 million non-recurring benefit. This benefit resulted from the
elimination of valuation allowances on certain federal and state net
operating loss carryforwards, which management believes are more likely than
not to be realizable. Magna's effective income tax rate was 34.1% in 1996,
31.3% in 1995 and 30.9% in 1994. The increase in the effective tax rate for
1996 resulted primarily from generally higher levels of earnings, coupled
with reduced levels of tax-exempt interest as a percentage of total interest
income. As required under Financial Accounting Standards No. 109 (FAS No.
109), "Accounting for Income Taxes," management evaluates, on a continuing
basis, the realizability of Magna's deferred tax asset and the need for an
offsetting valuation allowance. Accordingly, changes to the valuation
allowance could affect Magna's effective tax rate in future periods.
FINANCIAL CONDITION
GENERAL
Total assets at year-end 1996 increased $511 million, or 10.3%, to $5.46
billion compared with $4.95 billion at year-end 1995. This increase in total
assets primarily resulted from an increase in the volume of loans and
investment securities along with the assets received in the River Bend
acquisition.
LOANS
Total average loans represented 66.8%, 70.6% and 68.7% of average interest
earning assets during 1996, 1995 and 1994, respectively. Loans, net of
unearned income, increased 6.6% to $3.42 billion at year-end 1996 from $3.20
billion at year-end 1995. The growth in 1996 was partially attributable to
the acquisition of River Bend, along with loan growth stimulated by more
aggressive sales efforts in a highly competitive market environment.
Table 5 presents the composition of the loan portfolio by type of borrower
and major loan category and the percentage of each to the total portfolio for
the periods presented.
Magna's commercial, financial and agricultural loan portfolio is widely
diversified and includes loans secured by non-real estate collateral to
manufacturers, distributors, retailers, service providers, investors and
farmers. Emphasis is generally placed upon middle-market and community
businesses with known local management and financial stability.
The commercial real estate loan portfolio generally consists of mortgage
loans secured by commercial properties located in the communities served by
Magna's banking centers. These loans are generally made to fund the
acquisition of buildings and real estate for commercial, industrial, office
and retail use. A significant portion of the commercial real estate loan
portfolio is comprised of traditional commercial loans with real estate taken
as additional collateral. Tax-exempt industrial revenue bonds represent a
small part of the commercial real estate portfolio.
<TABLE>
TABLE 5 -- LOAN PORTFOLIO
<CAPTION>
December 31
--------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------------------
(Dollars in thousands) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL BORROWERS:
Commercial, financial
and agricultural $ 648,881 19.0% $ 593,664 18.5% $ 492,538 16.6% $ 468,161 18.3% $ 426,906 18.8%
Commercial real estate 1,156,402 33.9 996,464 31.1 932,553 31.4 858,898 33.5 795,686 35.0
Real estate construction 150,157 4.4 156,978 4.9 130,734 4.4 103,672 4.0 79,294 3.5
- - -------------------------------------------------------------------------------------------------------------------------------
Total commercial 1,955,440 57.3 1,747,106 54.5 1,555,825 52.4 1,430,731 55.8 1,301,886 57.3
- - -------------------------------------------------------------------------------------------------------------------------------
CONSUMER BORROWERS:
1-4 family residential
real estate 942,053 27.6 934,826 29.2 903,082 30.4 748,936 29.2 662,277 29.1
Other consumer loans,
net of unearned income 517,816 15.1 520,834 16.3 509,294 17.2 384,799 15.0 308,017 13.6
- - -------------------------------------------------------------------------------------------------------------------------------
Total consumer 1,459,869 42.7 1,455,660 45.5 1,412,376 47.6 1,133,735 44.2 970,294 42.7
- - -------------------------------------------------------------------------------------------------------------------------------
Total loans $3,415,309 100.0% $3,202,766 100.0% $2,968,201 100.0% $2,564,466 100.0% $2,272,180 100.0%
===============================================================================================================================
</TABLE>
26
<PAGE> 31
MANAGEMENT'S DISCUSSION
The construction loan portfolio consists of 1-4 family residential
construction, commercial construction for retail centers, medical and
business offices, warehouse facilities and multi-family (5 or more family)
residential developments.
Residential mortgage loans are predominantly extended for owner-occupied
residential properties. These loans typically are secured by first mortgages
on the properties financed and are generally limited to 80% of the appraised
value of the properties. The amortization periods for the loans in this
category generally do not exceed 30 years with interest being calculated on a
fixed or floating rate basis. This category also includes home equity lines
of credit and closed-end second mortgage loans. Closed-end second mortgage
loans generally bear a fixed rate of interest over a three to five year term
with a five to fifteen year amortization, while home equity lines of credit
generally have an interest rate indexed to the prime rate.
The consumer loan portfolio consists of both secured and unsecured loans to
individuals for various personal reasons such as automobile financing, home
improvements and recreational and educational purposes. Consumer loans are
typically structured with fixed interest rates and full amortization of
principal and interest within three to five years. In addition, this
category includes revolving credit products such as checking overdraft
protection, and MasterCard and Visa credit cards. Magna continues to realize
significant growth in its indirect loan program, which targets buyers of
automobiles and other recreational vehicles through local dealerships. The
volume of loans generated from this program averaged $19.4 million per month
during 1996 compared to $16.6 million per month in 1995. The increase in
volume from 1995 primarily resulted from efforts to expand the market area
associated with this line of business.
During the fourth quarter of 1996, Magna initiated a new three part program
which calls for the origination of non-traditional direct and indirect loan
products. The program is designed to improve Magna's net interest margin and
to produce additional noninterest income in future periods. In connection
with the first phase of this program, Magna entered into an agreement with a
non-affiliated entity which specializes in the purchasing and servicing of
subprime indirect automobile loans. The sale of these loans to this entity
generates fee income to Magna. Fee income from this program in 1996 was
not significant.
The tax-equivalent yield on the average total loan portfolio was stable in
1996 compared with 1995 and increased 55 basis points in 1995 compared with
1994. The general level of interest rates earned increased during the early
part of 1995 but trended downward during the last half of that year.
Interest rates earned during 1996 have remained relatively stable throughout
the year. At December 31, 1996, 21.6% of Magna's total loan portfolio had
interest rates which are adjustable immediately, and an additional 29.1% are
repriceable within a one year time frame.
Table 6 sets forth the amount of loans outstanding as of December 31, 1996
which, based on remaining scheduled repayments of principal, are due in the
periods indicated. In addition, the amounts due after one year are
classified according to sensitivity to changes in interest rates.
<TABLE>
TABLE 6 -- MATURITIES AND SENSITIVITIES OF LOANS
<CAPTION>
December 31, 1996
Maturing
-----------------------------------------------------------------
After One
In One Through After
(In thousands) Year or Less Five Years Five Years Total
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $336,687 $ 282,047 $ 30,147 $ 648,881
Commercial real estate 183,992 684,230 288,180 1,156,402
Real estate construction 77,235 62,604 10,318 150,157
1-4 family residential real estate 72,252 340,606 529,195 942,053
Other consumer loans, net of unearned income 75,975 420,483 21,358 517,816
- - ------------------------------------------------------------------------------------------------------------------
$746,141 $1,789,970 $879,198 $3,415,309
==================================================================================================================
<CAPTION>
Interest Sensitivity
-----------------------------------------------------------------
Predetermined Floating or Adjustable
Interest Rates Interest Rates
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due after one year $1,741,969 $927,199
==================================================================================================================
</TABLE>
27
<PAGE> 32
MANAGEMENT'S DISCUSSION
SECURITIES
Investments in securities increased $291.0 million, or 21.3%, to $1.66
billion at December 31, 1996. The increase in investment securities
primarily resulted from purchases, net of sales and maturities, in the
available-for-sale category along with investment securities received through
the acquisition of River Bend. Due, in part, to an increase in the amount of
collateral required for cash management repurchase agreement accounts, it was
necessary to increase investment securities. Additional information
regarding Magna's cash management repurchase agreement accounts is presented
and discussed under "Borrowings." The investment portfolio is structured to
maximize the return on invested funds within acceptable interest rate risk
guidelines and to meet pledging requirements, while giving consideration to
loan demand, credit risk, future liquidity needs and the expectations for
trends in interest rates.
Magna manages the quality and risk of investments through its Funds
Management Committee which determines the composition of and monitors the
overall investment portfolio, in accordance with its Funds Management Policy,
which is approved by Magna's Board of Directors. Among other things, the
Funds Management Policy establishes guidelines for the level, type, quality
and mix of investments. With respect to securities purchased by Magna's
banking subsidiaries, such policy does not permit, without the specific
approval of the Funds Management Committee, purchases of obligations of
states, political subdivisions of the United States of America or corporate
bonds rated by either Moody's Rating Service or Standard and Poor's Rating
Service below "A."
Magna classifies investments in securities as available-for-sale,
held-to-maturity or trading based upon, among other things, management's
assessment of changes in interest rate risks and Magna's financial position
and liquidity, including its overall asset/liability management strategy.
As a result of the effects of marking to market the available-for-sale
investment securities, stockholders' equity at December 31, 1996, reflected
net unrealized losses of $2.4 million, net of $1.6 million in deferred income
taxes, compared to net unrealized gains at December 31, 1995, of $1.0
million, net of $.6 million in deferred income taxes. This change was the
result of increases in the overall interest rate environment at year-end 1996
compared to year-end 1995. Approximately 51% of Magna's available-for-sale
portfolio consists of U. S. Treasury securities and securities issued by
U. S. Government agencies. An additional 45% consists of mortgage backed
securities, of which approximately 75% are backed by U. S. Government
agencies. Available-for-sale securities increased $262.6 million, or 21.2%,
to $1.50 billion at December 31, 1996 from $1.24 billion at December 31,
1995. Over 90% of securities contained within Magna's investment securities
portfolio, together with the majority of new securities purchased, are
classified in the available-for-sale category.
Held-to-maturity securities increased $28.5 million, or 22.6%, at December
31, 1996 from year-end 1995. The majority of this increase relates to the
purchase of obligations of states and political subdivisions of the United
States of America.
Tables 7 and 8 set forth the composition of the held-to-maturity and the
available-for-sale securities portfolios, respectively, for the last three
years.
Table 9 sets forth the maturities and the weighted average yields of each
category of held-to-maturity and available-for-sale securities at December
31, 1996 based upon expected maturities of such securities.
28
<PAGE> 33
MANAGEMENT'S DISCUSSION
<TABLE>
TABLE 7 -- HELD-TO-MATURITY SECURITIES
<CAPTION>
December 31
--------------------------------------------
(In thousands) 1996 1995 1994
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury & U.S. Government agencies
& corporations $ 40,338 $ 48,088 $142,760
State and municipal 110,627 74,396 110,409
Mortgage backed - - 10,896
Other 3,764 3,764 3,764
- - ------------------------------------------------------------------------------------------------
Total $154,729 $126,248 $267,829
================================================================================================
</TABLE>
<TABLE>
TABLE 8 -- AVAILABLE-FOR-SALE SECURITIES
<CAPTION>
December 31
--------------------------------------------
(In thousands) 1996 1995 1994
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury & U.S. Government agencies
& corporations $ 767,423 $ 563,154 $429,595
State and municipal 23,392 33,491 1,891
Mortgage backed 679,494 585,995 477,020
Other 30,869 55,976 40,839
- - ------------------------------------------------------------------------------------------------
Total $1,501,178 $1,238,616 $949,345
================================================================================================
</TABLE>
<TABLE>
TABLE 9 -- SECURITIES' MATURITIES AND YIELDS
<CAPTION>
December 31, 1996
Maturing
-----------------------------------------------------------------------------
In One After One Through After Five Through After
Year or Less Five Years Ten Years Ten Years
(Dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HELD-TO-MATURITY SECURITIES:
U.S. Treasury & U.S. Government
agencies & corporations $ - -% $ 40,338 5.23% $ - -% $ - -%
State and municipal<F1> 2,322 6.72 40,357 9.19 43,825 8.87 24,123 9.06
Other - - - - 3,764 9.50 - -
- - ---------------------------------------------------------------------------------------------------------------------------
Total held-to-maturity 2,322 6.72 80,695 7.21 47,589 8.92 24,123 9.06
- - ---------------------------------------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE SECURITIES:
U.S. Treasury & U.S. Government
agencies & corporations 156,230 5.48 521,666 5.85 89,034 6.83 493 8.00
State and municipal<F1> 10,626 9.31 11,925 9.52 - - 841 10.99
Mortgage backed 31,975 6.48 547,793 6.53 53,857 6.46 45,869 6.65
Other 30,221 6.06 503 6.96 - - 145 1.93
- - ---------------------------------------------------------------------------------------------------------------------------
Total available-for-sale 229,052 5.87 1,081,887 6.23 142,891 6.69 47,348 6.73
- - ---------------------------------------------------------------------------------------------------------------------------
Total securities $231,374 5.88% $1,162,582 6.30% $190,480 7.25% $71,471 7.52%
===========================================================================================================================
<FN>
- - --------------------
<F1> Yields presented on a tax-equivalent basis assuming a tax rate of 35%.
</TABLE>
29
<PAGE> 34
MANAGEMENT'S DISCUSSION
The weighted average yield on the taxable securities portfolio remained level
at 6.26% for 1996 compared to 1995 and increased 73 basis points to 6.27% in
1995 compared with 1994. The increase from 1994 to 1995 was reflective of
higher yields obtained on investment securities purchased in 1994.
Average non-taxable securities totaled $116 million in 1996 compared to $108
million during 1995 and 1994. The weighted average tax-equivalent yield was
9.01%, 9.84% and 10.22% during 1996, 1995 and 1994, respectively. All of the
non-taxable securities held qualified for favorable tax treatment under the
interest expense disallowance rules of the Internal Revenue Code of 1986, as
amended. At year-end 1996, approximately 43% of the non-taxable securities
portfolio was invested in municipal bond issues originated within the
communities in which Magna's banking centers are located.
Available-for-sale securities included gross unrealized gains of
approximately $6.2 million and gross unrealized losses of approximately $10.2
million at December 31, 1996. The estimated market value of the securities
classified as held-to-maturity was $157 million, reflecting gross unrealized
gains of $4.0 million and gross unrealized losses of $1.7 million at year-end
1996. Magna's securities portfolio includes mortgage backed securities with
a market value of approximately $679 million, or 41.0% of the portfolio. The
weighted average maturity of the securities portfolio was 3.5 and 4.0 years
at December 31, 1996 and 1995, respectively.
There were no outstanding trading account securities at year-end 1996 or
1995. Trading account activities were not significant to Magna's results of
operations in any year presented.
Average money market investments, consisting of federal funds sold and
interest bearing due from bank balances, were less than 1% of interest
earning assets during 1996, 1995 and 1994. Federal funds sold, the principal
component of money market investments, consist of sales of funds in excess of
Magna's banking subsidiaries reserve requirement to other financial
institutions and generally have a maturity of one day. The average yield on
market investments decreased 50 basis points during 1996 after increasing 120
basis points in 1995 when compared to 1994.
DEPOSITS
Interest earning assets are funded by Magna from a variety of different
sources. Each source is monitored continuously to maintain an appropriate
spread between the yields on earning assets and rates paid for funding
sources. Core deposits originating within the various communities served by
Magna's banking centers continue to be the company's most reliable and most
important source of funds.
Total deposits increased 8.0%, or $310 million, to $4.20 billion at December
31, 1996 from $3.89 billion at December 31, 1995, and represented 76.9% and
78.6% of total assets at such dates, respectively. A portion of the increase
in deposits was derived from the acquisition of River Bend. Noninterest
bearing demand deposits remained relatively stable at year-end 1996 compared
to year-end 1995. This stability was reflective of the interest rate
environment which remained fairly level throughout 1996. The increase in
all categories of interest bearing deposits, particularly time deposits, was
reflective of Magna's sales efforts and its decision to price those deposits
competitively. Magna continues to feature its 21-month certificate of
deposit which grew to $630 million at December 31, 1996 from $383 million at
December 31, 1995. In addition, time deposits of $100,000 or more increased
approximately $136 million at December 31, 1996 compared to year-end 1995.
The increase was partially due to more aggressive sales efforts to obtain
public fund deposits, which was part of Magna's strategy to further develop
its banking relationship with these public entities.
30
<PAGE> 35
MANAGEMENT'S DISCUSSION
Table 10 sets forth the composition of the deposit portfolio for the periods
presented.
<TABLE>
TABLE 10 -- DEPOSIT PORTFOLIO
<CAPTION>
December 31
----------------------------------------------------------
1996 1995
----------------------------------------------------------
(Dollars in thousands) Amount Percent Amount Percent
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Noninterest bearing
demand deposits $ 575,504 13.7% $ 570,262 14.7%
Interest bearing
demand deposits 542,268 12.9 496,590 12.8
Savings and market
rate deposits 811,077 19.3 794,423 20.4
Time deposits less
than $100,000 1,780,188 42.4 1,674,305 43.0
Time deposits $100,000
or more 488,739 11.7 352,686 9.1
- - ------------------------------------------------------------------------------------------------
Total deposits $4,197,776 100.0% $3,888,266 100.0%
================================================================================================
</TABLE>
Average total deposits increased $306 million during 1996 and $227 million
during 1995. The increase in 1996 was partially attributable to the deposits
received in connection with the acquisition of River Bend with the remainder
due to normal growth from operations. The increase in 1995 was also the
result of normal growth from operations. The noninterest bearing component
of the deposit portfolio remained relatively stable when comparing average
balances for 1996 with 1995. Magna's decision to price interest bearing
deposits, particularly time deposits, more competitively, led to the increase
in the average balances of interest bearing deposits for 1996 compared to
1995.
Table 11 sets forth the major categories of average deposits and the weighted
average interest rates paid on such categories for the last three years and
Table 12 sets forth the amount and maturities of time deposits of $100,000 or
more at year-end 1996.
<TABLE>
TABLE 11 -- AVERAGE DEPOSITS AND INTEREST RATES
<CAPTION>
Year Ended December 31
-------------------------------------------------------------------------------
1996 1995 1994
-------------------------------------------------------------------------------
Average Average Average
(Dollars in thousands) Balance Rate Balance Rate Balance Rate
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing demand deposits $ 514,427 -% $ 515,461 -% $ 506,889 -%
Interest bearing demand deposits 532,615 1.74 520,785 1.83 536,857 1.93
Savings and market rate deposits 831,381 2.96 845,458 2.98 1,003,872 2.67
Time deposits 2,193,105 5.67 1,884,164 5.48 1,490,847 4.26
- - ---------------------------------------------------------------------------------------------------------------------
Total deposits $4,071,528 3.89% $3,765,868 3.67% $3,538,465 2.85%
=====================================================================================================================
</TABLE>
<TABLE>
TABLE 12 -- AMOUNT AND MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE
<CAPTION>
December 31, 1996
------------------------------------
Time Other
Certificates Time
(In thousands) of Deposit Deposits Total
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
3 months or less $186,506 $10,214 $196,720
Over 3 through 6 months 114,800 22,633 137,433
Over 6 through 12 months 75,455 - 75,455
Over 12 months 79,131 - 79,131
- - ------------------------------------------------------------------------
Total $455,892 $32,847 $488,739
========================================================================
</TABLE>
31
<PAGE> 36
MANAGEMENT'S DISCUSSION
BORROWINGS
Total borrowings amounted to $712 million at year-end 1996, an increase of
$158 million from $554 million at year-end 1995. Table 13 sets forth the
composition of borrowings for the periods presented.
During 1996 average long-term debt increased approximately $8 million from
1995. The increase in average long-term debt was principally the result of
the procurement of a $25 million Federal Home Loan Bank borrowing in
September of 1995, the average of which was included in long-term debt during
the entire 1996 year. The impact on average long-term debt from this item
was partially offset by the effects of the August 1996 reclassification of a
$15 million Federal Home Loan Bank borrowing from long-term debt to other
short-term borrowings as a result of its August 1997 maturity.
The weighted average rate of interest on long-term debt was 7.68% in 1996,
7.59% in 1995 and 7.12% in 1994. The increase in the weighted average rate
of interest for 1995 compared with 1994 was reflective of the upward trend in
the interest rate environment during that time. The overall interest rate
environment stabilized during 1996.
Average short-term borrowings, consisting primarily of federal funds
purchased and repurchase agreements, increased $204 million and $161 million
during 1996 and 1995, respectively. These borrowings serve as an alternative
source of funds to deposit funding sources. Approximately $135 million of
the increase in average short-term borrowings in 1996 was in the form of cash
management repurchase agreement accounts. Such accounts involve the daily
transfer of excess funds from a noninterest bearing deposit account into the
interest bearing cash management repurchase agreement account. Magna
continues to aggressively market the cash management product to its
commercial depositors and has also established a similar product to be
offered to individual depositors. Although classified as a form of
short-term borrowing, management views the cash management repurchase
agreement accounts as a stable source of funds from its depositors. The
remainder of the increase in average short-term borrowings in 1996 was
primarily due to an increase in other short-term borrowings, which, at
December 31, 1996, consisted of four Federal Home Loan Bank advances and an
additional borrowing in the form of a treasury tax and loan note option
account which was opened in January 1996.
<TABLE>
TABLE 13 -- BORROWINGS
<CAPTION>
December 31
--------------------------------------------
1996 1995
--------------------------------------------
(Dollars in thousands) Amount Percent Amount Percent
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-term borrowings:
Banking subsidiary:
Federal funds purchased $ 25,500 3.6% $ 41,790 7.6%
Repurchase agreements 508,948 71.5 368,861 66.6
Other 99,487 14.0 50,000 9.0
- - ------------------------------------------------------------------------------------------------
Total short-term borrowings 633,935 89.1 460,651 83.2
Long-term debt:
Parent company:
7% Convertible Subordinated Capital Notes 12,541 1.8 14,440 2.6
8-3/4% Convertible Subordinated Debentures 14,872 2.1 14,958 2.7
- - ------------------------------------------------------------------------------------------------
27,413 3.9 29,398 5.3
Banking subsidiary:
Federal Home Loan Bank advances 50,000 7.0 63,500 11.5
Other 164 - 173 -
- - ------------------------------------------------------------------------------------------------
50,164 7.0 63,673 11.5
- - ------------------------------------------------------------------------------------------------
Total long-term debt 77,577 10.9 93,071 16.8
- - ------------------------------------------------------------------------------------------------
Total borrowings $711,512 100.0% $553,722 100.0%
================================================================================================
</TABLE>
32
<PAGE> 37
MANAGEMENT'S DISCUSSION
Average federal funds purchased remained stable for 1996 compared to 1995.
Federal funds purchased are sources of funds utilized primarily by Magna's
banking subsidiaries, which purchase excess funds from a network of
approximately 153 correspondent banks. Repurchase agreements other than cash
management repurchase agreements generally represent an alternative to
short-term certificates offered to Magna's commercial customer base. The
weighted average rate of interest paid for short-term borrowings was 4.84%,
5.16% and 3.99% in 1996, 1995 and 1994, respectively.
Table 14 sets forth a summary of information pertaining to short-term
borrowings for the periods presented.
ASSET QUALITY
Magna's asset quality management program includes the establishment of
investment and credit policies, the continued evaluation of the quality and
trends of material assets and the prompt implementation of appropriate
actions in view of the results of such evaluation. The objective of Magna's
asset quality management program, particularly with regard to loans, is to
manage credit exposure, a significant risk faced by all financial
institutions, and to support the growth of a profitable and high quality loan
portfolio.
Magna manages loan quality and risk through initial loan analysis and
approval, monthly monitoring of portfolio performance and prompt follow-up on
problem credits. Management is provided with extensive information on risk
levels, trends, delinquencies, portfolio concentrations and internal ratings
which are used in the portfolio analysis. Magna's ongoing loan analysis
process proactively identifies, monitors and works with borrowers for whom
there are indications of future repayment difficulties. Magna's asset
quality division monitors all nonperforming assets, intervenes on significant
credits that have been classified and is responsible for reducing the level
of problem assets through the implementation of workout plans.
Magna's lending philosophy is to invest in high-quality loans in the
communities served by its banking centers so that it can effectively monitor
and control credit risk. The majority of the loan portfolio is comprised of
retail loans and credits to small-to-midsized businesses. The loan portfolio
does not include any loans to foreign countries or highly leveraged
transaction loans.
<TABLE>
TABLE 14 -- SHORT-TERM BORROWINGS
<CAPTION>
1996 1995 1994
--------------------------------------------------------------------
(Dollars in thousands) Amount Rate Amount Rate Amount Rate
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
At December 31:
Federal funds purchased $ 25,500 5.50% $ 41,790 5.75% $129,870 6.59%
Repurchase agreements 508,948 5.47 368,861 4.77 291,645 5.40
Other 99,487 5.27 50,000 4.91 15,000 4.62
- - ------------------------------------------------------------------------------------------------------------------------
Total $633,935 5.44% $460,651 4.87% $436,515 5.73%
========================================================================================================================
For the year ended December 31:
Average daily balance
Federal funds purchased $ 55,410 5.42% $ 58,202 5.95% $ 77,434 4.56%
Repurchase agreements 456,965 4.70 320,409 5.04 145,267 3.67
Other 83,240 5.20 13,178 4.73 7,937 4.32
- - ------------------------------------------------------------------------------------------------------------------------
Total $595,615 4.84% $391,789 5.16% $230,638 3.99%
========================================================================================================================
Maximum month-end balance:
Federal funds purchased $155,435 <FNA> $147,190 <FNA> $148,595 <FNA>
Repurchase agreements 521,794 <FNA> 369,996 <FNA> 291,645 <FNA>
Other 102,259 <FNA> 50,000 <FNA> 15,223 <FNA>
========================================================================================================================
<FN>
- - --------------------
<FNA> - Not applicable
</TABLE>
33
<PAGE> 38
MANAGEMENT'S DISCUSSION
Table 15 sets forth a summary of nonperforming assets and related ratios for
the periods presented.
The credit quality of Magna's loan portfolio continued to improve during 1996
compared with the years ended December 31, 1995 and 1994. Nonperforming
loans decreased 11.4% and nonperforming assets decreased 15.7% in 1996
compared to 1995. The level of foreclosed property also was reduced 42.0% in
1996 due to Magna's sales efforts with respect to such properties. Management
does not anticipate any significant losses upon disposition of the remaining
foreclosed properties. At December 31, 1996, Magna held no other material
interest earning assets considered to be risk elements.
Table 16 sets forth the composition of Magna's loan portfolio and
nonperforming assets in such loan categories at December 31, 1996 and 1995.
<TABLE>
TABLE 15 -- NONPERFORMING ASSETS
<CAPTION>
December 31
---------------------------------------------------------
(Dollars in thousands) 1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $17,133 $24,564 $27,184 $39,073 $54,485
Loans past due 90 days or more 10,175 6,198 8,060 9,520 9,585
Restructured loans - 58 1,658 2,453 1,933
- - --------------------------------------------------------------------------------------------------------------
Total nonperforming loans 27,308 30,820 36,902 51,046 66,003
Foreclosed property 2,906 5,009 7,206 9,889 10,497
- - --------------------------------------------------------------------------------------------------------------
Total nonperforming assets $30,214 $35,829 $44,108 $60,935 $76,500
==============================================================================================================
Nonperforming loans to total loans .80% .96% 1.24% 1.99% 2.90%
Nonperforming assets to total loans
and foreclosed property .88% 1.12% 1.48% 2.37% 3.35%
Nonperforming assets to total assets .55% .72% .95% 1.48% 2.05%
==============================================================================================================
</TABLE>
<TABLE>
TABLE 16 -- LOAN PORTFOLIO AND NONPERFORMING ASSETS COMPOSITION
<CAPTION>
December 31, 1996 December 31, 1995
------------------------------------------------------
Loans and Loans and
Foreclosed Nonperforming Foreclosed Nonperforming
(In thousands) Property Assets Property Assets
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL BORROWERS:
Commercial, financial and agricultural $ 648,881 $ 6,684 $ 593,664 $ 7,197
Commercial real estate 1,156,402 7,229 996,464 8,294
Real estate construction 150,157 730 156,978 1,979
- - ------------------------------------------------------------------------------------------------------
Total commercial 1,955,440 14,643 1,747,106 17,470
CONSUMER BORROWERS:
1-4 family residential real estate 942,053 9,971 934,826 10,914
Other consumer loans, net of unearned income 517,816 2,694 520,834 2,436
- - ------------------------------------------------------------------------------------------------------
Total consumer 1,459,869 12,665 1,455,660 13,350
- - ------------------------------------------------------------------------------------------------------
Total loans 3,415,309 27,308 3,202,766 30,820
Foreclosed property 2,906 2,906 5,009 5,009
- - ------------------------------------------------------------------------------------------------------
Total $3,418,215 $30,214 $3,207,775 $35,829
======================================================================================================
</TABLE>
34
<PAGE> 39
MANAGEMENT'S DISCUSSION
The continued emphasis on improving asset quality and utilization of loan
workout and remediation strategies contributed to the decrease of $3.5
million in nonperforming loans at year-end 1996 compared with year-end 1995.
At December 31, 1996, there were no material commitments to lend additional
funds to borrowers whose loans were accounted for on a nonaccrual basis, 90
days or more past due or restructured.
It is the policy of Magna to discontinue the accrual of interest on loans
when principal or interest is due and has remained unpaid for 90 days or
more, unless the loan is well secured and in the process of collection.
Magna would have recorded interest income of $1.7 million for 1996 if the
loans accounted for as nonaccrual at year-end 1996 had been current in
accordance with their original terms and had been outstanding throughout the
period or since origination if held for part of the period. The amount of
interest included in interest income for 1996 relating to these loans was $.3
million.
Certain loans may require frequent management attention and are reviewed on a
monthly or more frequent basis. Although payments on these loans may be
current or less than 90 days past due, the borrowers presently have or have
had a history of financial difficulties and management has concern as to the
borrowers' ability to comply with present loan repayment terms. Management
believes such loans present more than normal risk of collectibility. As
such, these loans may result in classification at some future point in time
as nonperforming. At December 31, 1996, such loans amounted to $38 million,
of which approximately $29 million was to a single borrower.
Table 17 sets forth information pertaining to Magna's provision for loan
losses charged to operations, the activity in and an analysis of the reserve
for loan losses for the last five years.
<TABLE>
TABLE 17 -- RESERVE FOR LOAN LOSSES
<CAPTION>
Year Ended December 31
-------------------------------------------------------
(Dollars in thousands) 1996 1995 1994 1993 1992
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $42,623 $43,991 $40,065 $38,194 $55,976
Loans charged off:
Commercial, financial and agricultural 4,414 7,065 3,649 5,635 18,351
Real estate:
Commercial 2,059 3,425 2,995 5,660 15,140
Residential 1,550 1,805 1,580 1,850 2,168
Construction 318 142 118 581 1,211
- - ------------------------------------------------------------------------------------------------------------------------
Total real estate 3,927 5,372 4,693 8,091 18,519
- - ------------------------------------------------------------------------------------------------------------------------
Consumer 4,715 3,963 3,146 3,816 4,754
- - ------------------------------------------------------------------------------------------------------------------------
Total charge-offs 13,056 16,400 11,488 17,542 41,624
- - ------------------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 2,607 1,870 4,488 1,576 1,203
Real estate:
Commercial 515 1,257 1,334 687 1,248
Residential 398 683 293 208 162
Construction 23 128 471 78 37
- - ------------------------------------------------------------------------------------------------------------------------
Total real estate 936 2,068 2,098 973 1,447
- - ------------------------------------------------------------------------------------------------------------------------
Consumer 1,102 1,102 1,187 1,420 1,458
- - ------------------------------------------------------------------------------------------------------------------------
Total recoveries 4,645 5,040 7,773 3,969 4,108
- - ------------------------------------------------------------------------------------------------------------------------
Net loans charged off 8,411 11,360 3,715 13,573 37,516
- - ------------------------------------------------------------------------------------------------------------------------
Additions to reserve charged to operations 10,280 9,992 4,900 9,589 20,544
Reserve of acquired (sold) institutions 890 - 2,741 5,855 (810)
- - ------------------------------------------------------------------------------------------------------------------------
Balance at end of year $45,382 $42,623 $43,991 $40,065 $38,194
========================================================================================================================
Net loan charge-offs as a percent of average
total loans .25% .37% .14% .59% 1.59%
Reserve for loan losses as a percent of total loans 1.33% 1.33% 1.48% 1.56% 1.68%
Reserve for loan losses as a percent of nonperforming
loans 166.19% 138.30% 119.21% 78.49% 57.87%
========================================================================================================================
</TABLE>
35
<PAGE> 40
MANAGEMENT'S DISCUSSION
During 1996, Magna recorded net charge-offs of $8.4 million compared to net
charge-offs of $11.4 million in 1995. Net charge-offs in the commercial,
financial and agricultural segment totaled $1.8 million compared to net
charge-offs of $5.2 million in 1995. A $1.3 million credit to a commercial
loan customer was charged off in 1995. Charge-offs and recoveries in all
other loan categories were comprised of a wide variety of borrowers. Net
loan charge-offs as a percent of average total loans decreased to .25% in
1996 compared to .37% in 1995.
The reserve for loan losses at December 31, 1996, increased approximately
$2.8 million from year-end 1995. The reserve to nonperforming loan ratio
increased to 166.19% compared to 138.30% at December 31, 1995. Management
believes that the reserve for loan losses at December 31, 1996 was adequate
to provide for possible losses inherent in the loan portfolio. However, no
assurance can be given that subsequent changes in economic conditions, risk
elements and other factors will not require significant changes in the level
of the reserve for loan losses.
Table 18 sets forth the allocation of the reserve for loan losses by loan
category and the percent of loans in each category to total loans for the
last five years.
CAPITAL RESOURCES AND LIQUIDITY
CAPITAL
Financial institutions are required to maintain ratios of capital to assets
in accordance with guidelines issued by the federal banking regulators. See
the Notes to Consolidated Financial Statements for additional information
concerning Magna's regulatory capital measures.
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 subsidiaries,
whose ability to pay such dividends and management fees is subject to
limitations under various laws and regulations. Because of such limitations,
during the fourth quarter of 1996, Magna's largest banking subsidiary, Magna
Bank, N.A., St. Louis, Missouri, 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
Homeland acquisition. The bank 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. No similar regulatory
<TABLE>
TABLE 18 -- ALLOCATION OF THE RESERVE FOR LOAN LOSSES
<CAPTION>
December 31
-----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------------------------------------------------------
Percent of Percent of Percent of Percent of Percent of
Loans in Loans in Loans in Loans in Loans in
Each Each Each Each Each
Category Category Category Category Category
to Total to Total to Total to Total to Total
(Dollars in thousands) Reserve Loans Reserve Loans Reserve Loans Reserve Loans Reserve Loans
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial and
agricultural $13,453 19.0% $12,183 18.5% $11,458 16.6% $11,563 18.3% $ 9,800 18.8%
Real estate:
Commercial 15,263 33.9 14,259 31.1 14,265 31.4 13,419 33.5 17,324 35.0
Residential 4,346 27.6 4,817 29.2 4,781 30.4 3,104 29.2 2,511 29.1
Construction 1,000 4.4 1,100 4.9 1,093 4.4 1,244 4.0 1,447 3.5
- - --------------------------------------------------------------------------------------------------------------------------
Total real estate 20,609 65.9 20,176 65.2 20,139 66.2 17,767 66.7 21,282 67.6
- - --------------------------------------------------------------------------------------------------------------------------
Consumer 6,250 15.1 5,754 16.3 5,729 17.2 5,054 15.0 4,785 13.6
Not allocated 5,070 <FNA> 4,510 <FNA> 6,665 <FNA> 5,681 <FNA> 2,327 <FNA>
- - --------------------------------------------------------------------------------------------------------------------------
Total $45,382 100.0% $42,623 100.0% $43,991 100.0% $40,065 100.0% $38,194 100.0%
==========================================================================================================================
<FN>
- - --------------------
<FNA> - Not applicable
</TABLE>
36
<PAGE> 41
MANAGEMENT'S DISCUSSION
restriction exists with respect to Magna's remaining banking subsidiaries,
which were acquired in the Homeland acquisition.
Management believes that the earnings of its banking subsidiaries will be
sufficient to provide capital to fund asset growth and to permit the
distribution of cash dividends to Magna sufficient to meet Magna's operating
and debt service requirements both on a long-term and short-term basis. See
the Notes to Consolidated Financial Statements for additional information
with respect to the parent company only sources and uses of funds during the
three year period ended December 31, 1996.
CREDIT FACILITY
On December 30, 1996, Magna entered into a three year, unsecured revolving
credit facility (the "Credit Facility") with an unaffiliated bank, which
provided for borrowings by Magna of up to $50 million. In March 1997, the
amount available under the Credit Facility was increased to $100 million,
with the inclusion of two additional lenders. 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 and provide for possible acceleration of the repayment terms
upon the merger of Magna or its subsidiaries with and into unaffiliated
entities. The Credit Facility also contains certain financial covenants,
including the maintenance by Magna of a maximum nonperforming assets to total
equity capital ratio, minimum return on average assets ratio, maximum funded
debt to total equity capital ratio, minimum levels of total equity capital
and requires that Magna cause each of its banking subsidiaries to, at a
minimum, remain "adequately capitalized," as defined from time-to-time by the
federal banking regulators.
ASSET/LIABILITY MANAGEMENT PROGRAM
The primary goal of Magna's asset/liability management program is to maintain
an appropriate relationship between rate-sensitive assets and liabilities in
order to maximize net interest income within possible changing interest rate
environments. The Funds Management Committee monitors the sensitivity of
Magna's and its banking subsidiaries' assets and liabilities with respect to
changes in interest rates and repricing opportunities and directs the overall
acquisition and allocation of funds.
Table 19 sets forth interest rate sensitivity positions ("GAP") for various
time frames at December 31, 1996 based on repayment schedules of residential
mortgage loans and consumer loans, maturities of deposits, securities and
remaining fixed rate loans and estimated average lives of mortgage backed
securities. Floating rate items are presented based on adjustment dates.
Magna was liability sensitive on a cumulative basis in the near term (12
months or less) at December 31, 1996 based on contractual maturities for
fixed rate items and adjustment dates with respect to floating rate items.
In this regard, an increase in the general level of interest rates should
tend to have an unfavorable effect on Magna's net interest income, as the
repricing of the larger volume of interest-sensitive liabilities would create
a larger amount of interest expense than the additional amount of interest
income created by the repricing of the smaller volume of interest-sensitive
assets.
Interest sensitivity is only one measure of how changes in the level of
interest rates might affect net interest income. Its usefulness in assessing
potential changes in net interest income is limited as the composition of
both the asset and liability portfolios is continually changing.
This traditional GAP presentation does not adequately capture many of the
complex factors used in assessing interest rate risk. As such, Magna
utilizes and places more emphasis on the use of simulation analysis.
Utilizing various rate scenarios, growth assumptions and yield curve shifts,
Magna adjusts its strategies to maintain its net interest income within
certain tolerance ranges.
37
<PAGE> 42
MANAGEMENT'S DISCUSSION
<TABLE>
TABLE 19 -- INTEREST SENSITIVITY ANALYSIS
<CAPTION>
December 31, 1996
----------------------------------------------------------------------
Over Over
3 Months 1 Year
3 Months Through 12 Through Over
(Dollars in thousands) Immediate or Less Months 5 Years 5 Years Total
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Federal funds sold $ 34,068 $ - $ - $ - $ - $ 34,068
Securities - 281,448 125,174 1,053,778 195,507 1,655,907
Loans, net of unearned income 733,561 465,718 523,849 1,441,590 233,458 3,398,176
Effect of interest rate swaps - (50,000) - 50,000 - -
- - -------------------------------------------------------------------------------------------------------------------------
Total interest-sensitive assets $767,629 $ 697,166 $ 649,023 $2,545,368 $428,965 $5,088,151
- - -------------------------------------------------------------------------------------------------------------------------
Liabilities:
Interest bearing demand and
savings deposits <F1> $ - $ 317,053 $ - $ 634,106 $ - $ 951,159
Market rate deposits <F1> - 268,124 - 134,062 - 402,186
Time deposits 86,486 694,477 798,361 678,773 10,830 2,268,927
Short-term borrowings 456,958 142,617 26,311 8,049 - 633,935
Long-term debt - 2 7 62,452 15,116 77,577
- - -------------------------------------------------------------------------------------------------------------------------
Total interest-sensitive liabilities $543,444 $1,422,273 $ 824,679 $1,517,442 $ 25,946 $4,333,784
- - -------------------------------------------------------------------------------------------------------------------------
Interest-sensitivity GAP:
Incremental $224,185 $ (725,107) $(175,656) $1,027,926 $403,019 $ 754,367
- - -------------------------------------------------------------------------------------------------------------------------
Cumulative $224,185 $ (500,922) $(676,578)
- - -------------------------------------------------------------------------------------------------------------------------
Ratio of interest-sensitive
assets to interest-sensitive
liabilities:
Incremental 1.41 (.49) (.79)
Cumulative 1.41 (.75) (.76)
Percentage of interest-
sensitivity GAP to total assets:
Incremental 4.11 (13.28) (3.22)
Cumulative 4.11 (9.18) (12.39)
=====================================================================================
<FN>
- - --------------------
<F1>Interest bearing demand, savings and market rate deposits, while subject
to immediate withdrawal, are considered somewhat insensitive to changes in
interest rates. Therefore, these deposits have been allocated to the three
months or less and over 1 through 5 year categories based on management's
evaluation of the rate and volume patterns of such deposits.
</TABLE>
Asset liquidity at Magna's banking subsidiaries is provided principally
through maturities of loans, securities and other interest earning assets.
However, these assets are not viewed as a continually reliable source of
liquidity because of the impact of volatile interest rates and other outside
influences on marketability. The most important source of liquidity for
Magna's banking subsidiaries is liability liquidity. Liability liquidity is
defined by Magna as the ability to raise new funds and to renew maturing
liabilities in a variety of markets and economic environments. The most
important factor in assuring liability liquidity is the maintenance of
confidence in Magna by suppliers of funds. This confidence is based on
performance and reputation. Management believes the reputation of Magna, as
well as its financial strength and long-term community-based core deposit
customer relationships, will enable it to raise funds to meet its future
funding requirements.
38
<PAGE> 43
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Year Ended December 31
(In thousands, except per share data) 1996 1995 1994
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $285,151 $266,146 $219,566
Securities:
Taxable 93,029 71,853 61,970
Tax-exempt 7,141 7,266 7,461
- - -------------------------------------------------------------------------------------------------------------------------
100,170 79,119 69,431
Other, principally federal funds sold 2,514 1,903 564
- - -------------------------------------------------------------------------------------------------------------------------
Total Interest Income 387,835 347,168 289,561
INTEREST EXPENSE
Deposits 158,188 138,025 100,684
Federal funds purchased 3,006 3,463 3,532
Repurchase agreements 21,481 16,147 5,327
Other short-term borrowings 4,325 623 343
Long-term debt 6,748 6,059 6,856
- - -------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 193,748 164,317 116,742
- - -------------------------------------------------------------------------------------------------------------------------
Net Interest Income 194,087 182,851 172,819
PROVISION FOR LOAN LOSSES 10,280 9,992 4,900
- - -------------------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 183,807 172,859 167,919
NONINTEREST INCOME
Service charges on deposits 23,443 22,487 21,945
Trust 9,382 8,638 9,063
Securities gains, net 817 356 158
Other 16,716 16,382 16,337
- - -------------------------------------------------------------------------------------------------------------------------
Total Noninterest Income 50,358 47,863 47,503
NONINTEREST EXPENSE
Employee compensation and other benefits 69,142 72,993 73,545
Net occupancy 17,980 17,677 15,748
Equipment 8,731 8,967 8,974
FDIC insurance premiums 554 4,342 8,079
Other 41,979 42,238 43,867
- - -------------------------------------------------------------------------------------------------------------------------
Total Noninterest Expense 138,386 146,217 150,213
- - -------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 95,779 74,505 65,209
INCOME TAX EXPENSE 32,640 23,283 20,179
- - -------------------------------------------------------------------------------------------------------------------------
Net Income $ 63,139 $ 51,222 $ 45,030
=========================================================================================================================
AVERAGE SHARES OUTSTANDING
Primary 28,395 27,892 26,657
Fully diluted 29,974 29,524 28,320
PER SHARE DATA
Net income:
Primary $2.22 $1.84 $1.69
Fully diluted 2.18 1.80 1.66
=========================================================================================================================
Dividends declared $ .88 $ .80 $ .76
=========================================================================================================================
See accompanying notes.
</TABLE>
39
<PAGE> 44
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31
(In thousands, except shares) 1996 1995
- - -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 180,412 $ 175,167
Federal funds sold 34,068 47,046
Securities:
Held-to-maturity (estimated market value of $156,993
and $130,365, respectively) 154,729 126,248
Available-for-sale (at estimated market value) 1,501,178 1,238,616
Loans, net of unearned income 3,415,309 3,202,766
Reserve for loan losses (45,382) (42,623)
- - -------------------------------------------------------------------------------------------------
Net Loans 3,369,927 3,160,143
Premises and equipment 81,815 81,691
Accrued interest receivable 39,387 34,664
Goodwill and other intangibles 29,310 19,149
Foreclosed property 2,906 5,009
Other assets 64,977 59,766
- - -------------------------------------------------------------------------------------------------
Total Assets $5,458,709 $4,947,499
=================================================================================================
LIABILITIES
Deposits:
Noninterest bearing $ 575,504 $ 570,262
Interest bearing 3,622,272 3,318,004
- - -------------------------------------------------------------------------------------------------
Total Deposits 4,197,776 3,888,266
Federal funds purchased 25,500 41,790
Repurchase agreements 508,948 368,861
Other short-term borrowings 99,487 50,000
Long-term debt 77,577 93,071
Other liabilities 65,460 59,467
- - -------------------------------------------------------------------------------------------------
Total Liabilities 4,974,748 4,501,455
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Preferred stock 40 41
Common stock, $2 par value--40,000,000 shares authorized;
28,954,500 and 27,997,889 shares issued, respectively 57,909 55,996
Capital surplus 230,258 211,588
Retained earnings 215,744 177,438
Treasury stock-745,000 shares, at cost (17,605) -
Net unrealized gains (losses) on securities (2,385) 981
- - -------------------------------------------------------------------------------------------------
Total Stockholders' Equity 483,961 446,044
- - -------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $5,458,709 $4,947,499
=================================================================================================
See accompanying notes.
</TABLE>
40
<PAGE> 45
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Net
Unrealized Total
Preferred Stock Common Stock Gains Treasury Stock Stock-
--------------- --------------- Capital Retained (Losses) on -------------- holders'
(In thousands) Shares Amount Shares Amount Surplus Earnings Securities Shares Amount Equity
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 2 $41 25,729 $51,458 $199,052 $108,484 $ 1,614 - $ - $360,649
Net income 45,030 45,030
Cash dividends declared (20,128) (20,128)
Issuance of common stock:
Conversion of capital notes 60 120 899 1,019
Acquisitions 1,603 3,206 2,245 15,031 20,482
Various stock issuance plans 120 241 1,497 1,738
Change in net unrealized gains
(losses) on securities (37,478) (37,478)
- - -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 2 41 27,512 55,025 203,693 148,417 (35,864) - - 371,312
Net income 51,222 51,222
Cash dividends declared (22,201) (22,201)
Issuance of common stock:
Conversion of capital notes 111 221 1,671 1,892
Various stock issuance plans 375 750 6,224 6,974
Change in net unrealized gains
(losses) on securities 36,845 36,845
- - -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 2 41 27,998 55,996 211,588 177,438 981 - - 446,044
Net income 63,139 63,139
Cash dividends declared (24,833) (24,833)
Issuance of common stock:
Conversion of capital notes
and debentures 144 287 2,371 2,658
Acquisitions 550 1,100 10,867 11,967
Various stock issuance plans 263 526 5,432 5,958
Purchase of class B stock (1) (1)
Change in net unrealized gains
(losses) on securities (3,366) (3,366)
Purchase of treasury stock (745) (17,605) (17,605)
- - -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 2 $40 28,955 $57,909 $230,258 $215,744 $(2,385) (745) $(17,605) $483,961
===================================================================================================================================
See accompanying notes.
</TABLE>
41
<PAGE> 46
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31
(In thousands) 1996 1995 1994
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 63,139 $ 51,222 $ 45,030
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 10,280 9,992 4,900
Provision for losses on foreclosed property 341 931 1,035
Provision for depreciation, amortization and accretion 13,735 12,405 11,091
Amortization of securities premiums and accretion of discounts (385) 287 3,042
Deferred income tax expense 1,352 2,154 3,915
Securities gains, net (817) (356) (158)
Increase in other assets (10,627) (13,621) (9,814)
Increase in other liabilities 5,964 7,706 6,490
- - ---------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 82,982 70,720 65,531
INVESTING ACTIVITIES
Proceeds from maturities of held-to-maturity securities 12,421 19,676 23,869
Proceeds from sales of held-to-maturity securities 89 7,194 -
Purchases of held-to-maturity securities (30,405) (16,169) (14,087)
Proceeds from maturities of available-for-sale securities 450,713 252,189 226,463
Proceeds from sales of available-for-sale securities 117,639 93,948 114,867
Purchases of available-for-sale securities (756,637) (442,886) (363,063)
Net increase in loans (179,030) (249,968) (313,648)
Proceeds from sales of foreclosed property 8,535 9,775 17,426
Purchases of and proceeds from sales of premises and equipment (7,063) (18,164) (10,448)
Cash and cash equivalents of acquired institutions, net of cash paid (2,233) - 12,523
- - ---------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (385,971) (344,405) (306,098)
FINANCING ACTIVITIES
Net increase in deposits 173,700 215,810 18,923
Cash dividends (24,833) (22,201) (20,128)
Net increase (decrease) in federal funds purchased (16,290) (88,080) 80,746
Net increase in repurchase agreements 139,272 42,216 175,733
Net increase (decrease) in other short-term borrowings 10,063 35,000 (11,864)
Proceeds from the issuance of long-term debt 25,000 25,000 73,500
Payments of long-term debt (8) (64) (596)
Purchase of treasury stock (17,605) - -
Other, net 5,957 6,287 1,223
- - ---------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 295,256 213,968 317,537
- - ---------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (7,733) (59,717) 76,970
Cash and Cash Equivalents at Beginning of Year 222,213 281,930 204,960
- - ---------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 214,480 $ 222,213 $ 281,930
===========================================================================================================================
See accompanying notes.
</TABLE>
42
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1 ORGANIZATION
Magna Group, Inc. (the "Company"), a Delaware corporation, was organized in
1974 and is a registered bank holding company under the Federal Bank Holding
Act of 1956, as amended. The Company owns, indirectly, all of the capital
stock of Magna Bank, National Association, a national banking association
which operates from more than 100 community banking locations serving
Missouri and Illinois. The Company also owns Magna Trust Company and certain
brokerage, insurance and investment subsidiaries.
As discussed in Note 3 to the Consolidated Financial Statements, the Company
anticipates completing the acquisition of Homeland Bankshares Corporation
("Homeland") in the first quarter of 1997. Homeland is a $1,200,000 holding
company, operating 30 community banking locations in Iowa.
The Company primarily serves consumers and small-to-midsized businesses in
its market as a "super community bank," a company whose business centers on a
customer-focused community banking orientation, has cost efficiencies that do
not compromise quality and offers a broad product line that permits a
full-service customer relationship.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company and its subsidiaries
conform to generally accepted accounting principles. Following is a
description of the more significant of those policies.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany accounts and transactions have
been eliminated in consolidation. Certain amounts for 1995 and 1994 were
reclassified to conform with statement presentation for 1996. Such
reclassifications had no effect on net income.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
SECURITIES
The Company categorizes each security within its portfolio into one of three
permitted classifications at the time of purchase and reevaluates such
designation as of each balance sheet date.
Held-to-maturity securities are those which the Company has the ability and
positive intent to hold to maturity. Such securities are carried at cost,
adjusted for amortization of premiums and accretion of
discounts. The adjusted cost of specific securities is used to compute gains
and losses on sales or redemptions.
Available-for-sale securities include all debt securities not classified as
held-to-maturity or trading and marketable equity securities not classified
as trading. Available-for-sale securities are stated at estimated market
value. Unrealized holding gains and losses are reported net of taxes as a
separate component of stockholders' equity until realized. Realized gains
and losses are computed based on cost, adjusted for amortization of premiums
and accretion of discounts and are included in other noninterest income.
Trading securities, including options used in trading activities, are
purchased with the intent for resale within a short period of time in
anticipation of short-term market movements, and are stated at estimated
market value. Gains and losses, both realized and
unrealized, on trading securities are included in other noninterest income.
Dividends and interest income on all securities are included in interest
income.
LOANS
Interest income on loans is accrued and credited to income based on the
principal amount outstanding. The accrual of interest income generally is
discontinued when a loan becomes 90 days past due as to principal or interest
unless, in management's judgment, the loan is well secured and in the process
of collection. When interest accruals are discontinued, unpaid interest
credited to income in the current year is reversed, and interest accrued in
prior years is charged to the reserve for loan losses. Interest income on
these loans is reported on the cash basis as it is collected.
RESERVE FOR LOAN LOSSES
The reserve for loan losses is increased by provisions for losses charged to
expense and reduced by loans charged off, net of recoveries. The reserve is
maintained at a level considered adequate to provide for potential loan
43
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
losses based on management's evaluation of the anticipated impact on the loan
portfolio of current economic conditions, changes in the character and size
of the portfolio, past loan loss experience, potential loan losses on loans
to specific customers and/or industries and other pertinent factors that
management believes require current recognition in estimating possible loan
losses.
Specific reserves are established for any impaired commercial, commercial
real estate and real estate construction loans for which the recorded
investment in the loan exceeds the measured value of the loan. Loans subject
to impairment valuation are defined as nonaccrual loans exclusive of smaller
balance homogeneous loans such as home equity, credit cards, installment and
1-4 family residential loans. The value of the loan is determined based on
the present value of expected future cash flows, the market price of the
loan or the fair value of the underlying collateral, if the loan is
collateral dependent.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation and amortization are computed using principally
straight-line methods over the estimated useful lives of the assets.
INTANGIBLE ASSETS
Intangible assets consist principally of goodwill, which represents the
excess of cost over fair value of net assets acquired in business
combinations accounted for under the purchase method. Goodwill is amortized
on a straight-line basis over the estimated period to be benefited, ranging
from 8 to 15 years. The carrying value of goodwill is reviewed periodically
for impairment.
FORECLOSED PROPERTY
Foreclosed property consists of assets acquired through foreclosure or deed
in lieu of foreclosure. Foreclosed property is valued at the lower of cost
or estimated market value, net of estimated sale expenses. Any loss incurred
at the time of acquisition or reclassification is charged to the reserve for
loan losses. Losses resulting from disposition or periodic reevaluation of
foreclosed property are charged to expense in the current period.
INTEREST RATE SWAPS
The Company enters into interest rate swap agreements as part of its overall
asset/liability management strategy. Such agreements effectively modify the
interest characteristics of certain loans, investments or deposit
liabilities. These agreements involve the exchange of floating and fixed
rate interest amounts over the life of the agreement without an exchange of
the underlying principal amount. The differential to be paid or received is
accrued as interest rates change and recognized as an adjustment to interest
income or interest expense as appropriate. The related amount payable or
receivable from counterparties is included in other assets or other
liabilities. Deferred gains on terminated interest rate swap agreements are
included in other liabilities and are amortized over the remaining original
life of the terminated agreement. The Company had no significant interest
rate swaps at December 31, 1996 other than the one described in Note 19.
INCOME TAXES
Income taxes are accounted for under the asset and liability method in which
deferred income taxes are recognized as a result of temporary differences
between the financial reporting basis and the tax basis of the assets and
liabilities of the Company.
The Company and its subsidiaries file a consolidated federal income tax
return. Each subsidiary provides for income taxes on a separate return
basis, and remits to the Company amounts determined to be currently payable.
NET INCOME PER SHARE
Primary net income per share is computed by dividing net income after
deducting preferred stock dividend requirements, by the weighted average
number of common shares and common share equivalents (which consist of common
stock options) outstanding. Fully diluted net income per share is computed
by increasing such average common shares and common share equivalents by the
assumed conversion into common stock of all outstanding convertible debt
instruments. Net income for fully diluted net income per share is adjusted
for interest expense and amortization of origination costs, net of related
tax effects, on these convertible debt instruments and preferred stock
dividends. Such items are excluded from the computation when their effects
would be antidilutive.
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees," and,
accordingly, recognizes no compensation expense for the stock option grants.
44
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CASH FLOW INFORMATION
For purposes of the statements of cash flows, the Company considers cash and
demand deposits at other financial institutions and federal funds sold with
maturities not exceeding 90 days to be cash equivalents. Cash paid for
interest and income taxes, as well as significant non-cash investing
activities, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- - --------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $192,801 $156,828 $117,369
Income taxes 31,830 17,977 12,688
Loans transferred to
foreclosed property 5,698 8,363 8,979
==========================================================================
</TABLE>
3 ACQUISITIONS
In the third quarter of 1996, the Company entered into a definitive agreement
to acquire Homeland. The agreement provides for the issuance of up to
5,038,934 shares of common stock and approximately $92,000 in cash.
Homeland, with assets of approximately $1,200,000 as of December 31, 1996, is
headquartered in Waterloo, Iowa. The acquisition will be accounted for as a
purchase and is expected to be completed in the first quarter of 1997.
In the first quarter of 1996, the Company completed the acquisition of River
Bend Bancshares, Inc. ("River Bend"). A total of 550,207 shares of common
stock were issued and approximately $12,400 in cash was paid in connection
with the acquisition, which was accounted for as a purchase. At acquisition,
River Bend had approximately $160,000 in assets.
In the third quarter of 1994, the Company completed the acquisition of
Goreville Bancorporation, Inc. In the second quarter of 1994, the Company
completed the acquisitions of The First National Bank in Madison and Bank of
Chesterfield. A total of 1,603,283 shares of common stock were issued in the
1994 acquisitions, which were accounted for as poolings-of-interests. Total
assets of the acquired institutions were approximately $186,000. The effects
of the consummated acquisitions were not significant to the consolidated
financial statements and operating results of the acquired entities are
included since the respective acquisition dates.
4 CHANGES IN ACCOUNTING METHODS
On January 1, 1996, the Company adopted Financial Accounting Standards No.
122 (FAS No. 122), "Accounting for Mortgage Servicing Rights." FAS No. 122
requires capitalization of purchased mortgage servicing rights, as well as
internally originated servicing rights. These mortgage servicing rights are
amortized over the estimated servicing period of the related loans. The
adoption of the standard had no material impact on the Company's financial
position or results of operations.
In 1996, the Company adopted the provisions of Financial Accounting Standards
No. 123 (FAS No. 123), "Accounting for Stock Based Compensation." FAS No.
123 prescribes accounting and reporting standards for all stock based
compensation plans, including employee stock options, restricted stock,
employee stock purchase plans and stock appreciation rights. The standard
encourages companies to adopt the fair value method for expense recognition
in connection with stock based compensation plans but does permit entities
to follow existing rules as provided under APB 25. The Company has elected
to follow APB 25 which provides for the intrinsic value method for expense
recognition.
On January 1, 1995, the Company adopted Financial Accounting Standards No.
114 (FAS No. 114), "Accounting by Creditors for Impairment of a Loan" and No.
118 (FAS No. 118), "Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures." These standards require that certain impaired
loans be measured based on either the present value of expected future cash
flows discounted at the loan's effective rate, the market price of the loan
or the fair value of the underlying collateral if the loan is collateral
dependent. The standards further require that specific reserves be
established for any impaired loan for which the recorded investment
exceeds the measured value of the loan. FAS No. 114 and FAS No. 118 do not
apply to smaller balance, homogeneous loans, which the Company has identified
as consumer loans, such as home equity, installment and 1-4 family
residential loans. FAS No. 114 requires that upon adoption, all loans
classified as in-substance foreclosure be reclassified to an appropriate
loan category if the creditor does not have physical possession of the
collateral. In order to present information consistently for all periods,
in-substance foreclosed assets were reclassified as of December 31, 1994,
from other assets to loans. Adoption of these standards had no impact on
the Company's reserve levels or 1995 earnings.
Effective January 1, 1995, the Company adopted Financial Accounting Standards
No. 121 (FAS No. 121), "Accounting for the Impairment of Long-Lived
45
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets to Be Disposed Of." FAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The adoption of the
standard had no material impact on the Company's financial position or
results of operations.
During 1996, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 125 (FAS No. 125), "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
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. The Company will apply the new rules prospectively beginning in
the first quarter of 1997, other than those deferred by Financial Accounting
Standards No. 127 (FAS No. 127), "Deferral of the Effective Date of Certain
Provisions of FAS Statement No. 125 - an amendment of FAS Statement No.
125." Based on current circumstances, the Company believes the application
of the new rules will not have a significant impact on the Company's
financial position or results of operations.
5 RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
The Company's banking subsidiary is required to maintain average reserve
balances with the Federal Reserve Bank. The average amount of those reserve
balances for the years ended December 31, 1996 and 1995 was approximately
$48,403 and $86,448, respectively.
6 SECURITIES
The carrying value, gross unrealized gains and losses and estimated market
value of held-to-maturity securities at December 31 were as follows:
<TABLE>
<CAPTION>
1996
- - -------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Value Gains Losses Value
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government
agencies $ 40,338 $ - $1,482 $ 38,856
State and municipal 110,627 3,954 208 114,373
Other 3,764 - - 3,764
- - -------------------------------------------------------------------------------------------------------------
$154,729 $3,954 $1,690 $156,993
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1995
- - -------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Market
Value Gains Losses Value
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government
agencies $ 48,088 $ 192 $ - $ 48,280
State and municipal 74,396 4,174 249 78,321
Other 3,764 - - 3,764
- - -------------------------------------------------------------------------------------------------------------
$126,248 $4,366 $249 $130,365
=============================================================================================================
</TABLE>
The amortized cost, gross unrealized gains and losses and estimated market
value of available-for-sale securities at December 31 were as follows:
<TABLE>
<CAPTION>
1996
- - -------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government
agencies $ 771,459 $1,347 $ 5,383 $ 767,423
State and municipal 23,020 413 41 23,392
Mortgage backed 680,537 3,419 4,462 679,494
Other 30,150 1,059 340 30,869
- - -------------------------------------------------------------------------------------------------------------
$1,505,166 $6,238 $10,226 $1,501,178
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1995
- - -------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government
agencies $ 562,568 $ 3,736 $3,150 $ 563,154
State and municipal 32,620 890 19 33,491
Mortgage backed 584,057 5,521 3,583 585,995
Other 55,767 629 420 55,976
- - -------------------------------------------------------------------------------------------------------------
$1,235,012 $10,776 $7,172 $1,238,616
=============================================================================================================
</TABLE>
The carrying value and estimated market value of held-to-maturity securities
at December 31, 1996, by contractual maturity, are shown below.
<TABLE>
<CAPTION>
Estimated
Carrying Market
Value Value
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in 1 year or less $ 2,322 $ 2,330
Due after 1 year through 5 years 80,695 80,827
Due after 5 years through 10 years 47,589 49,215
Due after 10 years 24,123 24,621
- - -------------------------------------------------------------------------------------------------------------
$154,729 $156,993
=============================================================================================================
</TABLE>
46
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The amortized cost and estimated market value of available-for-sale
securities at December 31, 1996, by contractual maturity, are shown below.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in 1 year or less $ 196,047 $ 197,077
Due after 1 year through 5 years 537,665 534,094
Due after 5 years through 10 years 89,437 89,034
Due after 10 years 1,480 1,479
Mortgage backed securities 680,537 679,494
- - -------------------------------------------------------------------------------------------------------------
$1,505,166 $1,501,178
=============================================================================================================
</TABLE>
In December 1995, the Company implemented provisions of the Financial
Accounting Standards Board Special Report (FAS Special Report), "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." Upon adoption, and in accordance with the provisions
of the FAS Special Report, the Company reassessed its securities
classifications and, based on this reassessment, reclassified securities with
a book value of approximately $135,963 from held-to-maturity to
available-for-sale. Upon transfer, market value exceeded carrying value by
approximately $2,830, resulting in an after-tax increase to stockholders'
equity of approximately $1,698. The transfer had no effect on 1995 earnings.
Securities with a book value of $1,308,940 and $994,570 at December 31, 1996
and 1995, respectively, were pledged to secure public deposits and for other
purposes.
There were no trading securities owned at December 31, 1996 or 1995.
There were no securities classified as held-to-maturity during 1996 or 1994
that were transferred to available-for-sale securities; the only transfer of
securities from held-to-maturity to available-for-sale during 1995 was the
December reclassification discussed above.
During the years ended December 31, 1996 and 1995, the Company sold
held-to-maturity securities with a book value of $89 and $7,195,
respectively. Such securities were sold as a result of management's
decision to liquidate certain "odd-lot" holdings and to assimilate the
portfolios of entities that were acquired in previous years. There were no
sales of held-to-maturity securities during 1994; however, certain of such
securities were redeemed by the original issuer of the securities.
The following table presents the components of net securities gains:
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Securities gains on:
Held-to-maturity securities $ 9 $ 103 $ 55
Available-for-sale securities 1,602 1,357 467
- - -----------------------------------------------------------------------------------
Total securities gains 1,611 1,460 522
Securities losses on:
Held-to-maturity securities - 104 -
Available-for-sale securities 794 1,000 364
- - -----------------------------------------------------------------------------------
Total securities losses 794 1,104 364
- - -----------------------------------------------------------------------------------
$ 817 $ 356 $158
===================================================================================
</TABLE>
7 LOANS
Loans were comprised of the following:
<TABLE>
<CAPTION>
December 31
1996 1995
- - --------------------------------------------------------------------------------
<S> <C> <C>
Commercial, financial and agricultural $ 648,881 $ 593,664
Real estate:
Commercial 1,156,402 996,464
Residential 942,053 934,826
Construction 150,157 156,978
- - --------------------------------------------------------------------------------
2,248,612 2,088,268
- - --------------------------------------------------------------------------------
Consumer, net of unearned income 517,816 520,834
- - --------------------------------------------------------------------------------
$3,415,309 $3,202,766
================================================================================
</TABLE>
At December 31, 1996 and 1995, the aggregate principal balances of loans on
which interest was not being accrued were $17,133 and $24,564, respectively.
In addition, the aggregate principal balances on which the yield and/or
repayment terms had been changed due to declining financial condition of
borrowers was $58 at December 31, 1995. The Company had no such principal
balances at December 31, 1996. During 1996 and 1995, the interest income
that would have been recorded in the consolidated statements of income under
the original terms of such nonaccrual and restructured loans was
approximately $1,709 and $2,418, and the interest income actually recorded
was approximately $294 and $69, respectively.
At December 31, 1996 and 1995, the recorded investment in loans that were
considered impaired under FAS No. 114 totaled approximately $12,316 and
$14,376, respectively. At December 31, 1996, the allowance for loan losses
included approximately $2,899 allocated to $5,145 of impaired loans compared
to an allowance for loan loss allocation of $3,043 to $6,819 of impaired
loans at
47
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995. No specific reserves were allocated to the remaining
$7,171 and $7,557 of impaired loans at December 31, 1996 and 1995,
respectively. In 1996 and 1995, impaired loans averaged approximately
$14,271 and $18,661, respectively, and cash basis interest recognized on
these loans, during the time they were impaired, was not significant.
Included in loans at December 31, 1996 and 1995 were loans made to directors
and executive officers of the Company and its principal subsidiaries or to
entities in which such individuals had a beneficial interest. Following is a
summary of activity in such loans for the year ended December 31, 1996:
<TABLE>
- - -----------------------------------------------------------------------
<S> <C>
Balance, January 1, 1996 $ 68,672
New loans made 19,968
Payments received (15,857)
Net change from changes in director
and executive officer status (6,212)
- - -----------------------------------------------------------------------
Balance, December 31, 1996 $ 66,571
=======================================================================
</TABLE>
Such loans were made in the ordinary course of business at normal credit
terms, including interest rates and collateral, prevailing at the time for
comparable transactions with unrelated parties, and do not involve more than
normal risk of collection.
The Company had no loans pledged for any purpose at December 31, 1996. Loans
with a book value of $107,579 at December 31, 1995 were pledged to secure
borrowings from the Federal Reserve Bank.
8 RESERVE FOR LOAN LOSSES
Changes in the reserve for loan losses were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 42,623 $ 43,991 $ 40,065
Loans charged off (13,056) (16,400) (11,488)
Recoveries of loans previously
charged off 4,645 5,040 7,773
- - -------------------------------------------------------------------------------------
Net loans charged off (8,411) (11,360) (3,715)
Provision for loan losses
charged to operations 10,280 9,992 4,900
Reserves of acquired
institutions 890 - 2,741
- - -------------------------------------------------------------------------------------
Balance at end of year $ 45,382 $ 42,623 $ 43,991
=====================================================================================
</TABLE>
9 PREMISES AND EQUIPMENT
Premises and equipment were comprised of the following:
<TABLE>
<CAPTION>
December 31
1996 1995
- - -------------------------------------------------------------------------------
<S> <C> <C>
Land $ 12,775 $ 12,814
Buildings 83,570 80,110
Furniture and equipment 52,631 49,576
- - -------------------------------------------------------------------------------
148,976 142,500
Less allowances for depreciation and
amortization 67,161 60,809
- - -------------------------------------------------------------------------------
$ 81,815 $ 81,691
===============================================================================
</TABLE>
Total depreciation expense charged to operations amounted to $9,119, $8,876
and $8,313 in 1996, 1995 and 1994, respectively.
The Company and its subsidiaries lease certain premises and equipment under
operating lease agreements which expire at various dates through May 2070,
with certain lease agreements containing renewal options. Minimum rental
commitments under all leases for the years 1997 through 2001 and thereafter
were $5,803, $5,568, $5,571, $5,535, $4,315 and $21,202, respectively. Rent
expense in 1996, 1995 and 1994 was $5,800, $5,682 and $5,684, respectively.
10 DEPOSITS
Deposits were comprised of the following:
<TABLE>
<CAPTION>
December 31
1996 1995
- - -------------------------------------------------------------------------------
<S> <C> <C>
Demand deposits $ 575,504 $ 570,262
Interest bearing demand and other
transaction accounts 542,268 496,590
Savings and market rate deposits 811,077 794,423
Time deposits less than $100,000 1,780,188 1,674,305
Time deposits $100,000 or more 488,739 352,686
- - -------------------------------------------------------------------------------
$4,197,776 $3,888,266
===============================================================================
</TABLE>
The maturities of time deposits at December 31, 1996, for the years 1997
through 2001 were $1,557,446, $536,187, $82,430, $59,427 and $22,562,
respectively.
11 REPURCHASE AGREEMENTS
Repurchase agreements totaled $508,948 and $368,861 at December 31, 1996 and
1995, respectively. The average daily balances for repurchase agreements
were $456,965 and $320,409 during 1996 and 1995, respectively. The maximum
balance at any month-end was $521,794 and $369,996 during 1996 and 1995,
respectively. The securities underlying the agreements are maintained under
the Company's control.
48
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12 OTHER SHORT-TERM BORROWINGS
Other short-term borrowings were comprised of the following:
<TABLE>
<CAPTION>
December 31
1996 1995
- - -------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank advances:
maturing in 1997, interest rate of 5.25% $15,000 $ -
maturing in 1997, interest rate of 5.27% 8,500 -
maturing in 1997, interest rate of 6.59% 15,000 -
maturing in 2000, callable on a quarterly
basis by the issuer, interest rate of 4.91% 50,000 50,000
Treasury tax and loan note option account 10,987 -
- - -------------------------------------------------------------------------------------
$99,487 $50,000
=====================================================================================
</TABLE>
13 LONG-TERM DEBT
Long-term debt was comprised of the following:
<TABLE>
<CAPTION>
December 31
1996 1995
- - -------------------------------------------------------------------------------------
<S> <C> <C>
Parent company:
7% Convertible Subordinated
Capital Notes maturing in 1999 $12,541 $14,440
8-3/4% Convertible Subordinated
Debentures maturing in 1998
(net of $1,504 and $2,292
discount, respectively, based on
effective interest rate of 14.65%) 14,872 14,958
- - -------------------------------------------------------------------------------------
27,413 29,398
Banking subsidiary:
Federal Home Loan Bank advances:
maturing in 1997 - 38,500
maturing in 1998 25,000 25,000
maturing in 2001 10,000 -
maturing in 2003 15,000 -
Other 164 173
- - -------------------------------------------------------------------------------------
50,164 63,673
- - -------------------------------------------------------------------------------------
$77,577 $93,071
=====================================================================================
</TABLE>
The 7% Convertible Subordinated Capital Notes and the 8-3/4% Convertible
Subordinated Debentures are convertible into shares of the Company's common
stock at a conversion price of $17.48 and $24.88 per share, respectively,
subject to adjustment in certain circumstances. The Notes and Debentures are
redeemable, in whole or in part, at the option of the Company, subject to
certain conditions, and are subordinated to all senior debt of the Company.
The Notes are redeemable at the option of the holder, subject to certain
limitations. At maturity, the noteholders and debentureholders will receive
either common stock or cash, at the discretion of the Company, equal to the
principal amount of the Notes or Debentures, respectively.
The combined maturities of long-term debt at December 31, 1996, for the years
1997 through 2001 were $9, $39,881, $12,550, $10 and $10,011, respectively.
On December 30, 1996, Magna entered into a three year, unsecured revolving
credit facility (the "Credit Facility") with an unaffiliated bank, which
provides for borrowings by Magna of up to $50 million. Under the terms of
the Credit Facility, Magna may elect to convert the outstanding 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 of certain financial ratios. At December 31,
1996, there were no amounts outstanding under the Credit Facility.
14 CAPITAL STOCK
PREFERRED STOCK
At December 31, 1996 and 1995, there were 49,500 shares authorized and 1,996
and 2,039 shares outstanding, respectively, of the Company's 7.5% cumulative
Class B, voting, $20 par value preferred stock. At December 31, 1996 and
1995, 1,000,000 shares of no par value preferred stock and 1,000,000 shares
of Class C, non-voting, $.10 par value preferred stock, were authorized with
no shares of either category issued. 400,000 shares of the no par value
preferred stock have been designated and were reserved for issuance upon
exercise of the preferred stock purchase rights.
COMMON STOCK
At December 31, 1996, 5,154,477 shares of common stock were reserved for
issuance in connection with conversion of the Convertible Subordinated
Capital Notes and Convertible Subordinated Debentures, the Company's
stock-based compensation plans, the Company's dividend reinvestment plan and
the Company's employee stock purchase plan.
PREFERRED STOCK PURCHASE RIGHTS
One preferred stock purchase right (a "Magna Right") is attached to each
share of common stock issued and outstanding or to be issued prior to certain
designated events. Each Magna Right becomes exercisable only under certain
circumstances and expires in 1998 unless
49
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
first exercised, redeemed or converted. The Magna Rights are designed to
protect the interests of the Company and its stockholders against coercive
takeover tactics. The purpose of the Magna Rights is to encourage potential
acquirers to negotiate with the Company's Board of Directors prior to
attempting a takeover and to give the Board leverage in negotiating, on
behalf of all stockholders, the terms of any proposed takeover.
15 REGULATORY MATTERS
The Company and its banking subsidiary are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure
to meet minimum capital requirements can result in certain mandatory - and
possibly additional discretionary - actions by regulators that, if
undertaken, could have a direct material effect on the Company's consolidated
financial statements. Under capital adequacy guidelines and the regulatory
framework of prompt corrective action, the Company and its banking subsidiary
must meet specific capital guidelines that involve quantitative measures of
assets, liabilities and certain off-balance sheet items calculated under
regulatory accounting practices. The capital amounts and classification are
also subject to qualitative judgments by the regulators about components,
risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and its banking subsidiary to maintain minimum amounts
and ratios of Total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined) and of Tier 1 capital to average assets (as
defined). Management believes that, as of December 31, 1996, the Company and
its banking subsidiary met all capital adequacy requirements to which they
are subject.
As of December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency categorized the Company's banking subsidiary as
well capitalized under the regulatory framework for prompt corrective action.
To be categorized as well capitalized, the banking subsidiary must maintain
minimum Total and Tier 1 capital to risk-weighted assets and Tier 1 capital to
average assets ratios as set forth in the table below. There are no
conditions or events since that notification that management believes have
changed the banking subsidiary's category.
The following table summarizes the actual capital amounts and ratios for the
Company and its banking subsidiary, as well as those required to be
categorized as adequately capitalized and well capitalized.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------- -------------------------- ------------------------------
Amount Ratio Amount Ratio Amount Ratio
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to risk-weighted assets):
Consolidated $499,558 14.18% >or=$281,816 >or= 8.00% NA NA
Magna Bank, N. A. 371,316 10.65 >or= 278,836 >or= 8.00 >or=$348,545 >or=10.00%
Tier 1 Capital (to risk-weighted assets):
Consolidated 457,221 12.97 >or= 141,030 >or= 4.00 NA NA
Magna Bank, N. A. 328,958 9.43 >or= 139,540 >or= 4.00 >or= 209,310 >or= 6.00
Tier 1 Capital (to average assets):
Consolidated 457,221 8.45 >or= 216,372 >or= 4.00 NA NA
Magna Bank, N. A. 328,958 6.12 >or= 215,037 >or= 4.00 >or= 268,796 >or= 5.00
As of December 31, 1995
Total Capital (to risk-weighted assets):
Consolidated 465,476 14.29 >or= 260,641 >or= 8.00 NA NA
Magna Bank, N. A. 454,627 14.09 >or= 258,073 >or= 8.00 >or= 322,591 >or=10.00
Tier 1 Capital (to risk-weighted assets):
Consolidated 425,914 13.06 >or= 130,443 >or= 4.00 NA NA
Magna Bank, N. A. 415,052 12.85 >or= 129,159 >or= 4.00 >or= 193,738 >or= 6.00
Tier 1 Capital (to average assets):
Consolidated 425,914 8.73 >or= 195,260 >or= 4.00 NA NA
Magna Bank, N. A. 415,052 8.71 >or= 190,715 >or= 4.00 >or= 238,394 >or= 5.00
==================================================================================================================================
</TABLE>
50
<PAGE> 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16 RESTRICTED NET ASSETS
Certain restrictions exist regarding the ability of the bank subsidiary to
transfer funds to the Company in the form of cash dividends, loans or
advances. During the fourth quarter of 1996, Magna's banking subsidiary
received, as required, prior regulatory approval to pay a cash dividend to the
Company sufficient to fund the cash portion of the Homeland acquisition. This
dividend exceeded the maximum available without prior regulatory approval.
Magna's banking subsidiary also received regulatory approval to pay dividends
to the Company in 1997 which would not exceed fifty percent of the
then-current period earnings. Payment of these dividends is subject to the
banking subsidiary maintaining its status as a "well capitalized"
institution, as defined by regulatory authorities as set forth in Note 15 to
the Consolidated Financial Statements. Payment of dividends beyond December
31, 1997 may require additional regulatory approval.
17 INCOME TAXES
The components of income tax expense are summarized
as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current taxes $31,288 $21,129 $16,264
Deferred taxes 1,352 2,154 3,915
- - --------------------------------------------------------------------------------------
Income tax expense $32,640 $23,283 $20,179
======================================================================================
</TABLE>
Included in income taxes is tax expense of $286, $124 and $55 in 1996, 1995
and 1994, respectively, related to securities gains, net.
Reconciliations between income tax expense and the amount computed by
applying the statutory federal tax rate to income before income taxes are as
follows:
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate applied to
income before income taxes $33,523 $26,077 $22,823
Effects of:
Tax-exempt income (3,331) (3,293) (3,295)
Goodwill amortization 522 281 285
State tax, net of
federal benefit 2,277 1,680 1,478
Adjustment to valuation
allowance - (935) -
Adjustment to tax basis
of intangibles - - (863)
Other, net (351) (527) (249)
- - --------------------------------------------------------------------------------------
Income tax expense $32,640 $23,283 $20,179
======================================================================================
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities as of December 31, 1996 and 1995
are summarized as follows:
<TABLE>
<CAPTION>
December 31
1996 1995
- - ----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Reserve for loan losses $18,153 $17,049
Markdowns on foreclosed property 144 390
Deferred compensation 4,409 4,270
Net operating loss and built-in loss carryforwards 224 1,646
Alternative minimum tax credit carryforwards 1,067 1,472
Mark-to-market securities adjustment 1,603 -
- - ----------------------------------------------------------------------------
Total deferred tax assets before
valuation allowance 25,600 24,827
Valuation allowance for deferred tax assets (2,282) (1,085)
- - ----------------------------------------------------------------------------
Total deferred tax assets 23,318 23,742
- - ----------------------------------------------------------------------------
Deferred tax liabilities:
Tax over book depreciation 1,254 3,962
Purchase accounting adjustments 2,804 1,373
Mark-to-market securities adjustment - 645
Other, net 2,193 749
- - ----------------------------------------------------------------------------
Total deferred tax liabilities 6,251 6,729
- - ----------------------------------------------------------------------------
Net deferred tax assets $17,067 $17,013
============================================================================
</TABLE>
The Company has net operating loss carryforwards of $559 and alternative
minimum tax credit carryforwards of $1,067 for federal tax purposes. The
alternative minimum tax credit carryforwards have an unlimited carryforward
period. The net operating loss carryforwards expire primarily in the years
1998 to 2002.
18 EMPLOYEE BENEFITS
PENSION PLAN
The Company and its subsidiaries have a non-contributory, defined benefit
retirement plan that covers all employees who have attained age 21 and
completed one year of service. Benefits are accrued for each year of service
based upon percentages of the designated portions of each participant's
annual base compensation. The Company's policy is to fund contributions
annually within the limits prescribed for deduction for federal income tax
purposes. Contributions are intended to provide for benefits attributed to
service to date.
51
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the funded status and amounts recognized in
the Company's balance sheets for the plan.
<TABLE>
<CAPTION>
December 31
1996 1995
- - ---------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of ($20,538) and ($21,778) at
December 31, 1996 and 1995, respectively $(20,924) $(22,037)
===========================================================================
Projected benefit obligation for services
rendered to date $(26,869) $(27,936)
Plan assets at fair value, primarily listed
stocks and corporate and U.S. debt
securities 27,262 24,538
- - ---------------------------------------------------------------------------
Plan assets greater than (less than) projected
benefit obligation 393 (3,398)
Unrecognized net loss (gain) from past
experience different from that assumed
and effect of changes in assumptions (830) 2,404
Unrecognized net asset at beginning of year,
being recognized over 13.8 years
beginning January 1, 1986 (720) (964)
Prior service cost not yet recognized
in net periodic pension cost (564) (661)
- - ---------------------------------------------------------------------------
Accrued pension cost included
in the balance sheets $ (1,721) $ (2,619)
===========================================================================
</TABLE>
Net pension cost included the following components:
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 2,006 $ 1,595 $ 1,732
Interest cost on projected
benefit obligation 1,833 1,805 1,809
Actual (return) loss on
plan assets (4,451) (5,171) 484
Net amortization and deferral 2,076 3,066 (2,728)
- - --------------------------------------------------------------------------------------
Net periodic pension cost $ 1,464 $ 1,295 $ 1,297
======================================================================================
</TABLE>
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.3% and 5.5%, respectively, for 1996 and
7.0% and 5.5%, respectively, for 1995. The expected long-term rate of return
on plan assets was 8.8% for 1996 and 7.5% for 1995 and 1994.
The assets of the plan, which are administered by Magna Trust Company, an
affiliate of the Company, consist of a wide variety of diversified securities
including U.S. Treasury and Government agency obligations, equity securities,
equity and fixed income funds, corporate bonds, market rate deposit accounts
and cash.
SALARY REDUCTION PLANS
The Company has a salary reduction plan which covers all employees of the
Company meeting certain age and length of service requirements. The Company
also has a supplemental salary reduction plan for executives who exceed the
maximum amounts of deferral under the Company's salary reduction plan. The
Company makes contributions to these plans in an amount equal to 50% of
employee contributions, subject to certain limitations. Such contributions,
in the aggregate, amounted to $1,247, $1,249 and $1,400 for the years ended
December 31, 1996, 1995 and 1994, respectively.
SUPPLEMENTAL RETIREMENT PLAN
The Company has a supplemental retirement plan for certain executive officers
that covers benefits that are in excess of the maximum amounts allowable
under the Company's defined benefit pension plan.
COMPENSATION AGREEMENTS
The Company has entered into agreements with certain executives of the
Company and its subsidiaries which become operative upon a change in control
of the Company and provide for termination benefits as defined. Compensation
which might be payable under these agreements has not been accrued in the
financial statements, as a change in control and events of termination, as
defined, have not occurred.
STOCK-BASED COMPENSATION PLANS
The Company has several stock-based compensation plans under which stock
options, restricted stock and performance shares may be granted to key
employees. In addition, the Company sponsors an employee stock purchase plan
which allows employees to purchase shares of the Company's common stock at a
discount from fair market value. The Company also has stock-based
compensation plans for its Board of Directors.
The general provisions of the more significant stock-based compensation plans
are as follows:
The Company's 1992 and 1996 Amended and Restated Long-Term Performance Plans
have authorized the grant of options, appreciation rights, restricted stock
and performance awards to management personnel for up to 900,000 and
1,000,000 shares, respectively, of the Company's common stock, of which no
more than 300,000 (for each plan) may be issued in the form of restricted
stock. All options granted have 10 year terms and vest and become fully
exercisable over periods ranging from 6 months to 2 years.
52
<PAGE> 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's 1992 and 1996 Amended and Restated Directors' Stock Option
Plans have authorized the grant of options to nonemployee members of the
Board of Directors for up to 100,000 shares, under each plan, of the
Company's common stock. All options granted have 10 year terms and vest and
become fully exercisable over periods ranging from immediately to 3 years.
The Company's 1987 Stock Option Plan has authorized the grant of options to
management personnel for up to 607,753 shares of the Company's common stock.
No future options will be granted under this plan. All outstanding options
have 10 year terms and are fully vested.
Pro forma information regarding net income and net income per share is
required by FAS No. 123, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method of that
standard. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1996 and 1995, respectively: risk-free
interest rates of 6.5% and 6.0%; a dividend yield of 3.5% and 3.4%; volatility
factors of the expected market price of the Company's common stock of .15 and
.16; and weighted-average expected lives of the awards of 4.7 and 5.0 years.
For purposes of pro forma disclosures, the estimated fair value of the awards
is amortized to expense over the awards' vesting period. The Company's pro
forma information follows:
<TABLE>
<CAPTION>
1996 1995
- - ---------------------------------------------------------------
<S> <C> <C>
Pro forma net income $62,742 $51,153
Pro forma net income per share:
Primary $2.21 $1.83
Fully diluted 2.16 1.80
===============================================================
</TABLE>
The Company's stock option activity and related information for the years
ended December 31 is summarized in the table below.
OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company does not provide any significant postretirement or postemployment
benefits other than pension.
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of year 776,838 $19.25 827,759 $16.72 669,311 $15.05
Granted 362,678 25.62 221,365 23.62 271,416 19.29
Exercised (91,566) 14.94 (234,298) 14.05 (95,429) 12.02
Forfeited or expired (10,843) 22.77 (37,988) 21.73 (17,539) 18.36
- - -----------------------------------------------------------------------------------------------------------------------------------
Outstanding-end of year 1,037,107 $21.82 776,838 $19.25 827,759 $16.72
===================================================================================================================================
Exercisable-end of year 618,179 $19.47 511,267 $17.36 516,107 $14.66
Weighted-average fair value
of options granted during the year $3.69 $3.96
===================================================================================================================================
Exercise prices for options outstanding as of December 31, 1996 ranged from
$13.63 to $26.00. The weighted-average remaining contractual life of those
options is 7.9 years.
</TABLE>
53
<PAGE> 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19 FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards No. 107 (FAS No. 107), "Disclosures about Fair
Value of Financial Instruments," requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instruments. Intangible values assigned to customer
relationships are not included in reported fair values. Accordingly, the
aggregate fair value amounts presented may not necessarily represent the
underlying value of the Company.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments, which are held for
purposes other than trading:
Cash and Cash Equivalents: The carrying amounts reported in the balance
sheet for cash and due from banks and federal funds sold approximate those
assets' fair values.
Securities: Fair values for held-to-maturity and available-for-sale
securities are based on quoted market prices or dealer quotes, where
available. If quoted market prices are not available for a specific
security, fair values are based on quoted market prices of comparable
instruments.
Loans: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying values.
The fair values for fixed-rate loans are estimated using discounted cash flow
analyses, applying interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. The fair values for
nonperforming loans are estimated using assumptions regarding current
assessments of collectibility and historical loss experience.
Deposits: The fair values disclosed for deposits generally payable on
demand, such as noninterest bearing checking accounts, savings accounts,
interest bearing demand deposit accounts and market rate deposit accounts,
are, by definition, equal to the amount payable on demand at the reporting
date. The carrying amounts for variable-rate, fixed-term market rate deposit
accounts and certificates of deposit approximate their fair values at the
reporting date. Fair values for fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest
rates currently being offered on certificates of similar remaining maturities
to a schedule of aggregated monthly maturities on time deposits.
Federal Funds Purchased, Repurchase Agreements and Other Short-Term
Borrowings: The carrying amounts of federal funds purchased, repurchase
agreements and other short-term borrowings approximate their fair values at
the reporting date.
Long-Term Debt: The fair value of the Company's long-term debt is based on
quoted market prices for similar issues or estimates using discounted cash
flow analyses, based on the Company's current incremental borrowing rates for
similar types of debt instruments.
Off-Balance Sheet Financial Instruments: The fair values of loan commitments
and letters of credit are determined using estimated fees currently charged
to enter into similar agreements. The fair values of these instruments were
not significant to the Company's consolidated financial position.
The fair value of interest rate swaps is estimated using dealer quoted prices
which represent the cost to replace all outstanding contracts at current
market rates, taking into consideration the current creditworthiness of the
counterparties. At December 31, 1996 and 1995, the Company was a party to a
$50,000 notional amount interest rate swap that effectively converted
floating rate available-for-sale securities to fixed rate. The fair value
and carrying amount of this swap reflected unrealized losses of approximately
$200 and $300 which were included in available-for-sale securities at
December 31, 1996 and 1995, respectively.
The carrying amount and estimated fair values of the Company's remaining
financial instruments were as follows:
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and due
from banks $ 180,412 $ 180,412 $ 175,167 $ 175,167
Federal funds sold 34,068 34,068 47,046 47,046
Held-to-maturity
securities 154,729 156,993 126,248 130,365
Available-for-sale
securities 1,501,178 1,501,178 1,238,616 1,238,616
Net loans 3,369,927 3,376,643 3,160,143 3,161,882
===================================================================================================
Financial Liabilities:
Deposits $4,197,776 $4,197,675 $3,888,266 $3,901,862
Federal funds
purchased 25,500 25,500 41,790 41,790
Repurchase
agreements 508,948 508,948 368,861 368,861
Other short-term
borrowings 99,487 99,487 50,000 50,000
Long-term debt 77,577 91,526 93,071 101,575
===================================================================================================
</TABLE>
54
<PAGE> 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Company offers a variety of financial
products to its customers to aid them in meeting their requirements for
liquidity, credit enhancement and interest rate protection. Generally accepted
accounting principles recognize these transactions as contingent liabilities
and, accordingly, they are not reflected in the accompanying financial
statements. Following is a discussion of these transactions.
Letters of Credit: These transactions are used by the Company's customers as
a means of improving their credit standing in transactions with unaffiliated
third parties. Under these agreements, the Company agrees to honor certain
financial commitments in the event that its customers are unable to do so.
Net outstanding standby letters of credit amounted to $39,807 and $33,493 at
December 31, 1996 and 1995, respectively. Commercial letters of credit
outstanding amounted to $478 and $393 at December 31, 1996 and 1995,
respectively.
Management conducts regular reviews of these instruments on an individual
customer basis, and the results are considered in assessing the adequacy of
the Company's reserve for loan losses. Management does not anticipate any
material losses as a result of the letters of credit.
Loan Commitments: At December 31, 1996 and 1995, the Company had commitments
outstanding to extend credit totaling approximately $645,932 and $549,970,
respectively. These commitments generally require the customers to maintain
certain credit standards. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary, is based on management's credit evaluation of the
counterparty and generally consists of certificates of deposit, marketable
securities or deeds of trust, in addition to various other forms of
collateral such as accounts receivable, inventory and fixed assets.
21 LEGAL PROCEEDINGS
Various claims and lawsuits, incidental to the ordinary course of business,
are pending against the Company and its subsidiaries. In the opinion of
management, after consultation with legal counsel, resolution of these
matters is not expected to have a material effect on the Company's financial
statements.
22 PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
Following are the condensed financial statements of Magna Group, Inc. (Parent
Company Only) for the periods indicated:
55
<PAGE> 60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1996 1995
- - ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $127,921 $ 17,678
Held-to-maturity securities (approximates market value) 4,000 4,000
Investment in subsidiaries 360,418 440,128
Premises and equipment 4,060 3,710
Other assets 18,151 15,667
- - ---------------------------------------------------------------------------------------------
Total Assets $514,550 $481,183
=============================================================================================
LIABILITIES
Long-term debt $ 27,413 $ 29,398
Other liabilities 3,176 5,741
- - ---------------------------------------------------------------------------------------------
Total Liabilities 30,589 35,139
TOTAL STOCKHOLDERS' EQUITY 483,961 446,044
- - ---------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $514,550 $481,183
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
Year Ended December 31
1996 1995 1994
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Dividends received from subsidiaries $ 167,865 $32,856 $28,883
Management fee income 34,407 39,509 30,590
Other income 1,670 967 584
- - ---------------------------------------------------------------------------------------------
203,942 73,332 60,057
EXPENSE
Interest 3,142 3,215 3,638
Other expenses 40,127 43,266 37,250
- - ---------------------------------------------------------------------------------------------
43,269 46,481 40,888
Income before income tax benefit and equity
in undistributed (overdistributed) earnings
of subsidiaries 160,673 26,851 19,169
INCOME TAX BENEFIT 2,745 2,822 3,386
- - ---------------------------------------------------------------------------------------------
163,418 29,673 22,555
Equity in undistributed (overdistributed)
earnings of subsidiaries (100,279) 21,549 22,475
- - ---------------------------------------------------------------------------------------------
Net Income $ 63,139 $51,222 $45,030
=============================================================================================
</TABLE>
56
<PAGE> 61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
Year Ended December 31
1996 1995 1994
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 63,139 $ 51,222 $ 45,030
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation, amortization and accretion 3,252 2,574 331
Deferred income tax expense (benefit) (421) (726) 2,555
Equity in (undistributed) overdistributed earnings of subsidiaries 100,279 (21,549) (22,475)
Increase in other assets (2,871) (4,532) (4,103)
Increase (decrease) in other liabilities (2,739) 519 (3,062)
- - ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 160,639 27,508 18,276
INVESTING ACTIVITIES
Purchases of premises and equipment (1,471) (1,737) (1,175)
Cash paid for acquisition (12,444) - -
Purchase of held-to-maturity securities - - (4,000)
- - ---------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (13,915) (1,737) (5,175)
FINANCING ACTIVITIES
Cash dividends (24,833) (22,201) (20,128)
Repurchase of common stock (17,605) - -
Other, net 5,957 6,974 1,738
- - ---------------------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (36,481) (15,227) (18,390)
- - ---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 110,243 10,544 (5,289)
Cash and Cash Equivalents at Beginning of Year 17,678 7,134 12,423
- - ---------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $127,921 $ 17,678 $ 7,134
=====================================================================================================================
Cash paid for interest and income taxes, as well as significant non-cash
financing activities, were as follows:
<CAPTION>
1996 1995 1994
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $2,458 $ 2,598 $ 4,917
Income tax payments (refunds) 928 (2,615) (1,144)
Capital notes and debentures converted into 143,739,
110,567 and 59,833 shares of common stock, respectively 2,689 1,933 1,046
===================================================================================================================
</TABLE>
57
<PAGE> 62
REPORT OF INDEPENDENT AUDITORS
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS
MAGNA GROUP, INC.
We have audited the accompanying consolidated balance sheets of Magna Group,
Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Magna Group,
Inc. at December 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
St. Louis, Missouri
January 15, 1997
58
<PAGE> 63
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Fourth Third Second First
(In thousands, except per share data) Quarter Quarter Quarter Quarter
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Interest income $99,561 $98,562 $96,944 $92,768
Interest expense 50,607 49,836 47,662 45,643
Net interest income 48,954 48,726 49,282 47,125
Provision for loan losses 2,499 2,499 2,799 2,483
Noninterest income 13,042 12,522 12,572 12,222
Noninterest expense 34,217 34,515 34,780 34,874
Income tax expense 8,369 8,208 8,416 7,647
- - ---------------------------------------------------------------------------------------------------
Net income $16,911 $16,026 $15,859 $14,343
===================================================================================================
Per common share
Net income:
Primary $.60 $.57 $.55 $.51
Fully diluted .58 .56 .54 .50
Dividends .22 .22 .22 .22
===================================================================================================
1995
Interest income $91,399 $88,480 $85,026 $82,263
Interest expense 44,862 43,142 39,736 36,577
Net interest income 46,537 45,338 45,290 45,686
Provision for loan losses 2,501 3,562 2,262 1,667
Noninterest income 12,561 12,098 12,123 11,081
Noninterest expense 36,107 34,675 38,146 37,289
Income tax expense 6,437 6,064 4,606 6,176
- - ---------------------------------------------------------------------------------------------------
Net income $14,053 $13,135 $12,399 $11,635
===================================================================================================
Per common share
Net income:
Primary $.50 $.47 $.45 $.42
Fully diluted .49 .46 .44 .41
Dividends .20 .20 .20 .20
===================================================================================================
</TABLE>
59
<PAGE> 64
MAGNA LOCATIONS
MAGNA GROUP, INC.
One Magna Place
1401 South Brentwood Boulevard
St. Louis, Missouri 63144
(314) 963-2500
MAGNA BANK
ILLINOIS LOCATIONS
ALTON
2850 Homer Adams Parkway
Alton, Illinois 62002
(618) 463-4600
ASHLEY
156 North East Railroad Road
P.O. Box 297
Ashley, Illinois 62808
(618) 485-2208
BELLEVILLE
19 Public Square
Belleville, Illinois 62220
(618) 234-0020
Carlyle Plaza
Super Money Market
110 Carlyle Plaza Drive
Belleville, Illinois 62221
(618) 233-9394
655 Carlyle Road
Belleville, Illinois 62221
(618) 234-7985
210 East Washington Street
Belleville, Illinois 62220
(618) 234-3374
4800 West Main Street
Belleville, Illinois 62226
(618) 234-3014
222 East Main Street
Belleville, Illinois 62220
(618) 234-0020
7800 West Main Street
Belleville, Illinois 62223
(618) 394-7788
BLOOMINGTON
1304 East Empire Street
Bloomington, Illinois 61701
(309) 663-1311
CAHOKIA
900 Upper Cahokia Road
Cahokia, Illinois 62206
(618) 332-3100
1304 Camp Jackson Road
Cahokia, Illinois 62206
(618) 332-3100
CARBONDALE
601 East Main
Carbondale, Illinois 62901
(618) 529-2700
Super Money Market
1450 East Main Street
Carbondale, Illinois 62901
(618) 351-9402
CENTRALIA
140 South Locust Street
Centralia, Illinois 62801
(618) 533-2711
1325 East McCord Street
Centralia, Illinois 62801
(618) 533-2711
1324 West Broadway
Centralia, Illinois 62801
(618) 533-2711
COLLINSVILLE
1 Eastport Plaza Drive
Collinsville, Illinois 62234
(618) 344-2000
COLUMBIA
102 North Main Street
Columbia, Illinois 62236
(618) 281-5171
100 Columbia Centre
Columbia, Illinois 62236
(618) 281-5172
CREVE COEUR
100 South Highland
Creve Coeur, Illinois 61610
(309) 698-4303
DECATUR
One Millikin Court
Decatur, Illinois 62523
(217) 429-4253
150 North Church at Main
Decatur, Illinois 62523
(217) 429-4253
Fairview Plaza
1355 West King
Decatur, Illinois 62522
(217) 429-4253
333 East Pershing Road
Decatur, Illinois 62526
(217) 875-5000
DUPO
100 South Second Street
Dupo, Illinois 62239
(618) 286-3777
EAST ALTON
347 West Main Street
East Alton, Illinois 62024
(618) 258-4010
EAST PEORIA
111 West Washington
East Peoria, Illinois 61611
(309) 698-2400
EDGEMONT
8740 State Street
Edgemont, Illinois 62203
(618) 397-2122
FAIRVIEW HEIGHTS
10055 Bunkum Road
Fairview Heights, Illinois 62208
(618) 398-5400
5901 North Illinois Street
Fairview Heights, Illinois 62208
(618) 233-0022
10950 Lincoln Trail
Fairview Heights, Illinois 62208
(618) 397-7200
FREEBURG
202 South State Street
Freeburg, Illinois 62243
(618) 539-5862
GLEN CARBON
1 Cottonwood Road
Glen Carbon, Illinois 62034
(618) 656-6500
GODFREY
821 Homer Adams Parkway
Godfrey, Illinois 62035
(618) 258-4019
GOREVILLE
100 S. Broadway
Goreville, Illinois 62939
(618) 995-2321
GRANITE CITY
1960 Edison Avenue
Granite City, Illinois 62040
(618) 451-5400
3206 Nameoki Road
Granite City, Illinois 62040
(618) 451-5490
2400 Pontoon Road
Granite City, Illinois 62040
(618) 451-5505
HIGHLAND
1223 Broadway
Highland, Illinois 62249
(618) 654-4511
HOYLETON
85 East St. Louis Street
P.O. Box 158
Hoyleton, Illinois 62803
(618) 493-7335
LEBANON
107 East Schuetz Street
Lebanon, Illinois 62254
(618) 537-4428
LINCOLN
303 South Kickapoo Street
Lincoln, Illinois 62656
(217) 735-4321
909 Woodlawn Road
Lincoln, Illinois 62656
(217) 735-4321
MADISON
600 Madison Avenue
Madison, Illinois 62060
(618) 452-3125
MARISSA
111 North Main Street
Marissa, Illinois 62257
(618) 295-2364
60
<PAGE> 65
MAGNA LOCATIONS
MASCOUTAH
121 East Main Street
Mascoutah, Illinois 62258
(618) 566-2333
McLEAN
Hamilton and Franklin Streets
McLean, Illinois 61754
(309) 874-2313
MORTON
805 West Jackson
Morton, Illinois 61550
(309) 263-2100
MURPHYSBORO
1301 Walnut Street
Murphysboro, Illinois 62966
(618) 684-3191
NASHVILLE
112 East St. Louis Street
P.O. Box 71
Nashville, Illinois 62263
(618) 327-3011
NEW HOLLAND
109 West Lincoln Street
New Holland, Illinois 62671
(217) 445-2211
O'FALLON
400 East Highway 50
O'Fallon, Illinois 62269
(618) 624-9000
PEORIA
4516 North Sterling
Peoria, Illinois 61614
(309) 686-6100
107 Southwest Jefferson
Peoria, Illinois 61602
(309) 655-7500
7815 North Knoxville
Peoria, Illinois 61614
(309) 691-7500
210 Northeast Madison
Peoria, Illinois 61602
(309) 655-7573
ROSEWOOD HEIGHTS
251 East Airline
Rosewood Heights, Illinois 62024
(618) 258-4017
SALEM
420 West Main
Salem, Illinois 62881
(618) 548-2050
SCOTT AFB
"J" Street at Main Exchange
Scott Air Force Base, Illinois 62225
(618) 744-1144
SESSER
201 South Park
Sesser, Illinois 62284
(618) 625-2361
SMITHTON
406 North Main Street
Smithton, Illinois 62285
(618) 234-7111
SPARTA
143 West Broadway
Sparta, Illinois 62286
(618) 443-2185
SPRINGFIELD
1825 South Sixth Street
Springfield, Illinois 62703
(217) 788-6400
111 South Durkin Drive
Springfield, Illinois 62704
(217) 788-6400
310 South Grand Avenue East
Springfield, Illinois 62703
(217) 788-6400
STANFORD
206 West Main Street
P.O. Box C
Stanford, Illinois 61774
(309) 379-2841
SWANSEA
1300 North Belt West
Swansea, Illinois 62226
(618) 257-3500
Swansea Plaza
Super Money Market
2665 North Illinois Street
Swansea, Illinois 62226
(618) 233-8333
TROY
100 McDonald Drive
Troy, Illinois 62294
(618) 667-7800
WOOD RIVER
501 Wesley Drive
Wood River, Illinois 62095
(618) 254-7780
100 Wood River Avenue
Wood River, Illinois 62095
(618) 254-7700
IOWA LOCATIONS
ARLINGTON
Main Street
Arlington, Iowa 50606
(319) 634-3855
AURORA
Main & Warren
Aurora, Iowa 50607
(319) 634-3313
CEDAR FALLS
4417 University Avenue
Cedar Falls, Iowa 50613
(319) 291-5100
422 Main Street
Cedar Falls, Iowa 50613
(319) 291-5122
College Square Shopping Center
6301 University
Cedar Falls, Iowa 50613
(319) 291-5125
CEDAR RAPIDS
4357 Czech Lane, N.E.
Cedar Rapids, Iowa 52402
(319) 393-8745
DECORAH
106 Winnebago Avenue
Decorah, Iowa 52101
(319) 382-4284
DES MOINES
623 High Street
Des Moines, Iowa 50309
(515) 283-1951
DYSART
402 Main Street
Dysart, Iowa 52224
(319) 476-5050
GILBERTVILLE
1306 Fifth Street
Gilbertville, Iowa 50634
(319) 291-5491
INDIANOLA
114 North Howard
P.O. Box 279
Indianola, Iowa 50125
(515) 961-6241
1510 North First Street
Indianola, Iowa 50125
(515) 961-9618
IOWA CITY
150 East Court
Iowa City, Iowa 52240
(319) 351-8262
LACONA
103 East Main Street
Lacona, Iowa 50139
(515) 534-3111
MARTENSDALE
368 N. Highway 28
Martensdale, Iowa 50160
(515) 764-2616
61
<PAGE> 66
MAGNA LOCATIONS
MILO
201 Main Street
Milo, Iowa 50156
(515) 942-6221
MONTICELLO
202 West First Street
P.O. Box 231
Monticello, Iowa 52310
(319) 465-3505
OELWEIN
25 North Frederick
P.O. Box 591
Oelwein, Iowa 50662
(319) 283-3361
TRAER
100 North Main Street
Traer, Iowa 50675
(319) 478-8746
URBANDALE
2851 86th Street
Urbandale, Iowa 50322
(515) 237-8630
VINTON
510 A Avenue
Vinton, Iowa 52349
(319) 472-2371
WATERLOO
100 East Park Avenue
P.O. Box 90
Waterloo, Iowa 50703
(319) 291-5200
999 Home Plaza
P.O. Box 2700
Waterloo, Iowa 50704
(319) 234-5523
405 Jefferson Street
Waterloo, Iowa 50701
(319) 236-2154
412 Mulberry Street
Waterloo, Iowa 50703
(319) 291-5255
228 Crossroads Center
Waterloo, Iowa 50702
(319) 291-5278
2532 Crossroads Center
Drive-In
Waterloo, Iowa 50702
(319) 291-5273
224 West Ridgeway Avenue
Waterloo, Iowa 50701
(319) 291-5454
2036 Logan Avenue
Waterloo, Iowa 50703
(319) 291-5406
229 East Park Avenue
Waterloo, Iowa 50704
(319) 291-5260
WEST DES MOINES
3334 Westown Parkway
West Des Moines, Iowa 50265
(515) 235-8340
MISSOURI LOCATIONS
ARNOLD
Arnold Mall
Super Money Market
30 - A Arnold Mall
Arnold, Missouri 63010
(314) 282-2088
BALLWIN
Ballwin Plaza
Super Money Market
15425 Manchester Road
Ballwin, Missouri 63011
(314) 391-4019
BRENTWOOD
One Magna Place
1401 South Brentwood Boulevard
Brentwood, Missouri 63144
(314) 963-2600
2323 South Hanley Road
Brentwood, Missouri 63144
(314) 644-3655
BRIDGETON
12296 St. Charles Rock Road
Bridgeton, Missouri 63044
(314) 291-2845
CHESTERFIELD
100 Chesterfield Industrial Blvd.
Chesterfield, Missouri 63005
(314) 537-0100
Friendship Village
15201 Olive Boulevard
Chesterfield, Missouri 63017
(314) 537-9752
CREVE COEUR
11456 Olive Boulevard
Creve Coeur, Missouri 63141
(314) 993-0000
12395 Olive Boulevard
Creve Coeur, Missouri 63141
(314) 576-7733
FLORISSANT
1100 Shackelford Road
Florissant, Missouri 63031
(314) 837-1510
11920 New Halls Ferry Road
Florissant, Missouri 63033
(314) 831-7770
JENNINGS
9269 Lewis and Clark Boulevard
Jennings, Missouri 63136
(314) 869-1300
LADUE
8866 Ladue Road
Ladue, Missouri 63124
(314) 862-2127
MEHLVILLE
4339 Butler Hill Road
Mehlville, Missouri 63128
(314) 487-1410
OAKVILLE
5505 Telegraph Road
Oakville, Missouri 63129
(314) 487-2200
O'FALLON
1201 State Route K
O'Fallon, Missouri 63366
(314) 978-2282
ST. ANN
10449 St. Charles Rock Road
St. Ann, Missouri 63074
(314) 426-6900
20 Northwest Plaza
St. Ann, Missouri 63074
(314) 291-0660
ST. CHARLES
2216 West Elm Street
St. Charles, Missouri 63301
(314) 947-3616
423 First Capitol Drive
St. Charles, Missouri 63301
(314) 946-6616
100 North Main Street
St. Charles, Missouri 63301
(314) 946-6175
2050 Old Highway 94 South
St. Charles, Missouri 63303
(314) 946-7575
1416 Harvestowne Industrial Drive
St. Charles, Missouri 63304
(314) 928-4700
Lake St. Charles
45 Honey Locust Lane
St. Charles, Missouri 63303
(314) 925-2799
ST. LOUIS
701 Market Street
St. Louis, Missouri 63101
(314) 231-3333
ST. PETERS
St. Peters Square
Super Money Market
581 Mid Rivers Drive
St. Peters, Missouri 63376
(314) 278-9460
3899 South Service Road
St. Peters, Missouri 63376
(314) 441-4664
Plaza 94
6191 Mid Rivers Drive
St. Peters, Missouri 63304
(314) 928-0806
SHREWSBURY
7205 Watson Road
Shrewsbury, Missouri 63119
(314) 481-4480
SPANISH LAKE
1944 Redman Road
Spanish Lake, Missouri 63138
(314) 355-8433
62
<PAGE> 67
SUNSET HILLS
10722 Sunset Hills Plaza
Sunset Hills, Missouri 63127
(314) 821-6444
TOWN & COUNTRY
14323 South Outer Road
Town & Country, Missouri 63017
(314) 434-6664
Super Money Market
1060 Woods Mill Plaza
Town & Country, Missouri 63011
(314) 230-3002
UNIVERSITY CITY
Brentmoor
8600 Delmar Boulevard
University City, Missouri 63124
(314) 991-7901
WELLSTON
6313 Dr. Martin Luther King Drive
Wellston, Missouri 63133
(314) 227-2278
MAGNA TRUST
ILLINOIS LOCATIONS
BELLEVILLE
One South Church Street
Belleville, Illinois 62220
(618) 233-2120
4800 West Main Street
Belleville, Illinois 62223
(618) 234-3014
BLOOMINGTON
1304 East Empire Street
Bloomington, Illinois 61701
(309) 663-1311
CARBONDALE
601 East Main Street
Carbondale, Illinois 62901
(618) 684-3191
CENTRALIA
140 South Locust Street
Centralia, Illinois 62801
(618) 533-2711
DECATUR
100 S. Water Street
Decatur, Illinois 62525
(217) 429-4253
EAST ALTON
347 West Main Street
East Alton, Illinois 62024
(618) 258-4010
GRANITE CITY
1960 Edison Avenue
Granite City, Illinois 62040
(618) 451-5421
MURPHYSBORO
1301 Walnut Street
Murphysboro, Illinois 62966
(618) 684-3191
PEORIA
107 Southwest Jefferson
Peoria, Illinois 61602
(309) 655-7500
SPRINGFIELD
1825 South Sixth Street
Springfield, Illinois 62703
(217) 788-6400
IOWA LOCATIONS
DES MOINES
623 High Street
Des Moines, Iowa 50309
(515) 283-5143
INDIANOLA
114 North Howard
Indianola, Iowa 50125
(515) 961-6241
MONTICELLO
202 West First Street
Monticello, Iowa 52310
(319) 465-3100
OELWEIN
25 North Frederick
Oelwein, Iowa 50662
(319) 283-3361
WATERLOO
100 East Park Avenue
Waterloo, Iowa 50704
(319) 291-5311
MISSOURI LOCATION
ST. LOUIS
1401 South Brentwood Boulevard
St. Louis, Missouri 63144
(314) 963-2401
MAGNA INVESTMENTS, INC.
INBANK GROUP, INC.
ST. LOUIS
1401 South Brentwood Boulevard
Suite 300
St. Louis, Missouri 63144
(314) 968-4131
DES MOINES
623 High Street
Des Moines, Iowa 50309
(515) 223-5475
WATERLOO
100 East Park Avenue
Waterloo, Iowa 50703
(319) 291-5184
999 Home Plaza
Waterloo, Iowa 50704
(319) 234-5523
MAGNA STUDENT LOAN COMPANY
3636 Westown Parkway, Suite 219
West Des Moines, Iowa 50266
(515) 223-7446
63
<PAGE> 68
DIRECTORS AND EXECUTIVE OFFICERS
MAGNA GROUP, INC.
DIRECTORS
- - ------------------------------------------------------------------------------
G. THOMAS ANDES
Chairman of the Board and
Chief Executive Officer
Magna Group, Inc.
JAMES A. AUFFENBERG, JR.<F2>
President and Director
St. Clair AutoMall
Auffenberg Belleville and
Auffenberg Enterprises of Illinois, Inc.
WAYNE T. EWING<F3>
Coal Industry Management Consultant
The Ewing Company
DONALD P. GALLOP<F3>
Chairman
Gallop, Johnson & Neuman, L.C.
RANDALL E. GANIM, CPA<F2>
President
Ganim, Meder, Childers & Hoering, P.C.
C. E. HEILIGENSTEIN<F1>
Attorney
Heiligenstein & Badgley
Professional Corporation
JOHN G. HELMKAMP, JR.<F1>
Retired Chairman of the Board and
Chief Executive Officer
River Bend Bancshares, Inc.
CARL G. HOGAN, SR.<F2>
Chairman of the Board and
Chief Executive Officer
Hogan Motor Leasing, Inc.
FRANKLIN A. JACOBS<F2>
Chairman of the Board and
Chief Executive Officer
Falcon Products, Inc.
WENDELL J. KELLEY<F2>
Retired Chairman of the Board and
Chief Executive Officer
Illinois Power Company
S. LEE KLING<F3>
Chairman of the Board
Kling Rechter & Co.
RALPH F. KORTE<F3>
Chairman of the Board
Korte Construction Company
ROBERT E. McGLYNN<F1>
Attorney
McGlynn & McGlynn
ERL A. SCHMIESING<F1>
Former Chairman of the Board,
President and Chief Executive Officer
Homeland Bankshares Corporation
DOUGLAS K. SHULL<F3>
Treasurer and Chief Financial Officer
Casey's General Stores, Inc.
FRANK R. TRULASKE, III<F1>
Chief Executive Officer
True Fitness Technology, Inc.
GEORGE T. WILKINS, JR., M.D.<F1>
Physician
[FN]
<F1> Member of Audit and Compliance Committee
<F2> Member of Compensation Committee
<F3> Member of Nominating Committee
EXECUTIVE OFFICERS
- - ------------------------------------------------------------------------------
G. THOMAS ANDES
Chairman of the Board and
Chief Executive Officer
RONALD A. BUERGES
Executive Vice President and
Chief Financial Officer
LINDA K. FABEL
Executive Vice President
Retail Banking
GARY D. HEMMER
Executive Vice President
Administration
ROBERT S. KAHLER
Executive Vice President
Financial Markets
ROBERT J. MATHIAS
Executive Vice President
Credit Administration
ROBERT M. OLSON, JR.
Executive Vice President
Operations & Technology
64
<PAGE> 69
If you would like additional information regarding
Magna Stockholder Services please complete and
return the attached postage paid response card.
We provide the following toll free phone numbers
to help you obtain further information about
Magna Group and our services:
Magna Trust Company Magna Student Loan Company
1-800-900-4548 1-800-451-1450
Magna Investments, Inc. Service Express Hotline
1-800-621-6004 1-800-84-MAGNA
Investor Relations Department
1-800-785-6244
==============================================================================
[LOGO] MAGNA
GROUP, INC.
MAGNA STOCKHOLDER SERVICES
Please send me more information about:
/ / MAGNA'S DIVIDEND REINVESTMENT PLAN AND STOCK PURCHASE PLAN
/ / DIRECT DEPOSIT OF DIVIDENDS INTO THE BANK ACCOUNT OF MY CHOICE
/ / OTHER------------------------------------------------------------
-----------------------------------------------------------------
STOCKHOLDER NAME(S)---------------------------------------------------
ADDRESS---------------------------------------------------------------
CITY------------------------------------------- STATE ------ ZIP -----
PHONE NUMBER ( )-------------------------------------------------
/ / THIS IS A NEW ADDRESS. PLEASE CHANGE YOUR RECORDS TO REFLECT
THE ADDRESS ABOVE.
IMPORTANT: TO AUTHORIZE A CHANGE OF ADDRESS, PLEASE PROVIDE
SIGNATURES OF EVERYONE TO WHOM THE STOCK IS REGISTERED.
STOCKHOLDER SIGNATURE(S)----------------------------------------------
- - ----------------------------------------------------------------------
==============================================================================
<PAGE> 70
- - ------------------------------------------------------------- ------------
BUSINESS REPLY MAIL NO POSTAGE
FIRST CLASS MAIL PERMIT NO. 156 ST. LOUIS, MO. NECESSARY
- - ------------------------------------------------------------- IF MAILED
POSTAGE WILL BE PAID BY ADDRESSEE IN THE
UNITED STATES
-------------
[LOGO] MAGNA
GROUP, INC.
One Magna Place
1401 South Brentwood Boulevard
St. Louis, Missouri 63144-9848
<PAGE> 71
<TABLE>
COMMON STOCK SHARE DATA<F*>
<CAPTION>
Dividends
High Low Close Declared
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Fourth $31.25 $26.00 $29.50 $.22
Third 28.13 22.00 28.00 .22
Second 24.50 21.75 24.00 .22
First 24.00 21.88 23.13 .22
- - ------------------------------------------------------------------------------------------------
1995
Fourth $26.38 $23.00 $23.75 $.20
Third 25.50 21.00 24.25 .20
Second 22.38 20.00 22.00 .20
First 20.75 17.13 20.00 .20
================================================================================================
<FN>
<F*>High, low and closing trade prices of the common stock for each
quarterly period during 1996 and 1995 as reported by The Nasdaq Stock
Market through November 19, 1996 and by the New York Stock Exchange
thereafter.
</TABLE>
STOCKHOLDER INFORMATION
CORPORATE HEADQUARTERS
MAGNA GROUP, INC.
ONE MAGNA PLACE
1401 SOUTH BRENTWOOD BOULEVARD
ST. LOUIS, MISSOURI 63144-1401
(314) 963-2500
TRANSFER AGENT
Stockholders with inquiries regarding stock
accounts, dividends, change of ownership or
address, lost certificates or consolidation of
accounts should contact:
MAGNA TRUST COMPANY
CORPORATE TRUST OPERATIONS
ONE SOUTH CHURCH STREET
BELLEVILLE, ILLINOIS 62220
(618) 233-2120 OR
1-800-900-4548
ANNUAL MEETING
The annual meeting of stockholders will be held
at 10:00 a.m. on Wednesday, May 7, 1997,
at the Regal Riverfront Hotel, 200 South Fourth Street,
St. Louis, Missouri 63102-1804.
COMMON STOCK
The common stock of Magna Group, Inc. is
traded on the New York Stock Exchange under the
symbol "MGR." The stock generally appears as
"MagGp" or "MagnaGp" in newspaper stock tables.
INVESTOR RELATIONS
Analysts and others seeking financial information
about Magna Group, Inc. should contact:
MAGNA GROUP, INC.
INVESTOR RELATIONS DEPARTMENT
1401 SOUTH BRENTWOOD BOULEVARD
ST. LOUIS, MISSOURI 63144-1401
(314) 963-2546, 1-800-785-6244
Form 10-K and Other Publications
For copies of the annual report, the Form 10-K
(excluding exhibits) and other financial information,
please contact the Investor Relations Department at
the address and phone number above.
<PAGE> 72
[LOGO] MAGNA
GROUP, INC.
One Magna Place
1401 South Brentwood Boulevard
St. Louis, Missouri 63144
(314) 963-2500
<PAGE> 73
APPENDIX
All page numbers referenced in this Appendix relate to the printed Annual
Report. The order of the sections is as they appear in the printed Annual
Report. The colored graphs and pictures that appear in the printed document
vary in size.
A fold-out page is affixed to the front cover of the 1996 Annual Report. A
map titled "Our Community Banking Franchise" appears on this fold-out page.
The map features the 19 Regions within the States of Illinois, Iowa and
Missouri wherein Magna has its banking locations. Certain major cities
within each region are illustrated.
A bar graph titled "Net Income (In millions of dollars)" appears in the
lower left-hand corner of page 1. The graph shows net income for the past
five years. Listed below are the plot points:
1992 30.19
1993 37.49
1994 45.03
1995 51.22
1996 63.14
The following footnote appears at the base of the graph:
Net income increased 23% over 1995, marking our fifth consecutive year of
record earnings.
A bar graph titled "Primary Earnings Per Share (In dollars)" appears in the
center at the bottom of page 1. The graph shows primary earnings per share
for the past five years. Listed below are the plot points:
1992 1.41
1993 1.53
1994 1.69
1995 1.84
1996 2.22
The following footnote appears at the base of the graph:
Earnings per share have increased at a compound annual growth rate of 12%.
A bar graph titled "Return on Assets (Percent)" appears in the center at
the bottom of page 1. The graph shows return on assets for the past five
years. Listed below are the plot points:
1992 .81
1993 1.02
1994 1.05
1995 1.09
1996 1.20
The following footnote appears at the base of the graph:
Return on assets reached a record 1.20% in 1996.
<PAGE> 74
A bar graph titled "Return on Equity (Percent)" appears in the lower right-
hand corner of page 1. The graph shows return on equity for the past five
years. Listed below are the plot points:
1992 10.88
1993 11.25
1994 12.41
1995 12.57
1996 13.75
The following footnote appears at the base of the graph:
Return on equity improved to 13.75%.
A photo appears in the lower left-hand corner of page 2. The photo depicts
the exterior of Magna's convenience store location.
The following caption describes the photo:
Magna was the first to offer full-service banking, complete with drive up
lanes, at a St. Louis area convenience store.
A photo appears in the upper right-hand corner of page 3. The photo depicts
a Magna customer using an automated loan machine.
The following caption describes the photo:
Magna was the first to introduce automated loan machines in the St. Louis
area.
A photo appears in the lower right-hand corner of page 4. The photo features
G. Thomas Andes, Chairman of the Board and Chief Executive Officer of Magna
Group, Inc.
A photo appears in the upper right-hand corner of page 5. The photo features
six members of Magna's management team.
The following caption reflects the names and titles of the management team:
(From left to right) Robert Mathias, Executive Vice President, Credit
Administration; Linda Fabel, Executive Vice President, Retail Banking; Gary
Hemmer, Executive Vice President, Administration; Ronald Buerges, Executive
Vice President and Chief Financial Officer; Robert Kahler, Executive Vice
President, Financial Markets; Robert Olson, Jr., Executive Vice President,
Operations & Technology
A photo appears in the center at the bottom of page 5. The photo features
four officers of certain Magna affiliates.
The following caption reflects the names, titles and company affiliation of
these officers:
(From left to right) Michelle Durand-Adams, President, Magna Student Loan
Company; Jeffrey Auld,
<PAGE> 75
President, Magna Investments, Inc.; Matthew Finn, President, Magna Trust
Company; Robert Christiansen, President, Magna Finance
A photo appears in the lower right-hand corner of page 5. The photo features
three senior officers of Magna.
The following caption reflects the names and titles of these senior
officers:
(From left to right) Robert Leininger, Executive Vice President, Community
Regions; David Bramlet, Executive Vice President, Alternate Delivery Systems;
James Jolley, Executive Vice President, Sales and Public Relations
A line graph titled "Five Year Total Return To Stockholders (December 31,
1991 - December 31, 1996) (In dollars)" appears in the upper right-hand corner
of page 6. The graph shows the growth of a $1,000 investment made on
December 31, 1991, to $3,423 as of December 31, 1996, which equates to a
five year compound annual rate of return of 27.90%.
Listed below are the plot points:
12/91 1,000
03/92 1,326
06/92 1,330
09/92 1,407
12/92 1,697
03/93 1,803
06/93 1,783
09/93 1,942
12/93 1,999
03/94 2,006
06/94 2,053
09/94 2,191
12/94 1,891
03/95 2,184
06/95 2,424
09/95 2,695
12/95 2,661
03/96 2,615
06/96 2,740
09/96 3,225
12/96 3,423
The following footnote appears at the base of the graph:
(Assumes initial investment of $1,000 and reinvestment of all dividends.)
A photo appears in the lower left-hand corner of page 6. The photo features
G. Thomas Andes, Chairman of the Board and Chief Executive Officer of Magna
Group, Inc., on the balcony overlooking the floor of the New York Stock
Exchange during the announcement of Magna's listing on that exchange.
A combination bar and line graph titled "Common Stock Price Range (In
dollars)" appears in the center on the right-hand side of page 7. The
bar portion of the graph shows the high/low trading prices for a share of
common stock during the past five years. The line portion of the graph shows
the year-end closing price for a share of common stock for the past five
years at December 31. Listed below are the plot points for the bar portion
of the graph:
High Low
1992 17.38 10.63
1993 20.25 15.75
1994 21.50 16.75
1995 26.38 17.13
1996 31.25 21.75
Listed below are the plot points for the line portion of the graph:
1992 17.00
1993 19.25
1994 17.50
1995 23.75
1996 29.50
The following footnote appears at the base of the graph:
High/Low Trading Prices Year-End Closing Price
<PAGE> 76
A bar graph titled "Book Value Per Share (In dollars)" appears in the
lower left-hand corner of page 7. The graph shows the book value of common
shares for the past five years at December 31. Listed below are the plot
points:
1992 13.39
1993 14.02
1994 13.49
1995 15.93
1996 17.15
The following footnote appears at the base of the graph:
Year-End
A bar graph titled "Market Capitalization (In millions of dollars)" appears
in the center at the bottom of page 7. The graph shows the market capitalization
for the past five years at December 31. Listed below are the plot points:
1992 409.3
1993 495.3
1994 481.5
1995 665.0
1996 832.2
The following footnote appears at the base of the graph:
Year-End
A bar graph titled "Dividends Per Share (In dollars)" appears in the center
at the bottom of page 7. The graph shows the dividends per share for the past
five years. Listed below are the plot points:
1992 .68
1993 .72
1994 .76
1995 .80
1996 .88
The following footnote appears at the base of the graph:
Year-End
A photo spans the top of pages 8 and 9. The photo depicts a family using the
banking services provided at one of Magna's supermarket locations. An
additional photo is inset on this photo. The inset photo features two of
Magna's Super Money Market managers.
The following caption describes the inset photo:
Beth Zehms and Joe Armour, Super Money Market managers
An additional caption which relates to the photos appearing on pages 8 and 9
appears at the bottom right-hand corner of page 9 and is as follows:
"Pick up a loaf of bread, a gallon of milk - and refinance the mortgage."
For the Reed family, Magna's exceptional banking service is as convenient and
easy as a trip to the supermarket. Expecting no more than a typical grocery
store check-cashing "convenience counter,"
<PAGE> 77
the Reeds were pleased to find fully trained client executives and a broad
array of financial services at the Magna Super Money Market located in St.
Peters, Missouri. Beth Zehms and Joe Armour showed the Reeds how the Magna
Excel program can save on mortgage interest expense. Magna's outstanding
service, convenient location and extended hours convinced the Reeds to move
all of their banking business to the Super Money Market.
A photo appears in the center at the top of page 10. The photo depicts
members of a family owned business in one of their business locations. An
additional photo is inset on this photo. The inset photo features one of
Magna's banking officers.
The following caption describes the inset photo:
Mark Robertson, Senior Vice President
An additional caption which relates to the photos appearing on page 10
appears in the upper left-hand corner of that page and is as follows:
"People bank with people, generation after generation."
Years ago, the Schuette family found a banker that would help their company
grow. What started with the financing of one store ultimately has become a
multi-faceted relationship between Magna and Schuette Stores. Today, Mark
Robertson offers the current generation, Tom and Mike Schuette, Magna's
entire family of business services. Magna Link cash management service allows
the Schuettes to use their personal computer and Magna software to make wire
transfers and other transactions on-line. Magna also provides them with
financing, corporate credit cards and an employee 401(k) retirement program
through Magna Trust. Family business is good business, and it has helped
Magna grow as well.
A photo appears at the top of page 11. The photo depicts the interior of
Magna's banking location in a Wal-Mart SuperCenter.
The following caption describes the photo:
Magna's first entry into a Wal-Mart SuperCenter in Carbondale, Illinois.
A photo appears on page 12. The photo depicts a Magna customer and business
owner with her employee and client at her place of business. An additional
photo is inset on this photo. The inset photo features one of Magna's banking
officers.
The following caption describes the inset photo:
Del Tegtmeier, Senior Vice President
An additional caption which relates to the photos appears at the bottom left-
hand corner of page 12 and is as follows:
"Getting started in business is just the start."
Leanette Owens has conducted her personal banking with Magna for years and
knows the Magna team well. So, when she was ready to start her own business,
she turned to Magna as a
<PAGE> 78
knowledgeable business resource. She got that and more. A 37-year banking
professional, Del Tegtmeier provided both consultation and inspiration. Del
helped Leanette to plan for the challenges of owning and operating a business
and to access government programs designed for women and minority business
owners. In addition to financing, Magna also set up payroll services. After
nine months of groundwork, Nail Options, Inc. opened with five employees and
a full appointment book, including Leanette's next appointment with Magna to
discuss plans to expand her business.
Individual photos of Magna's 19 community presidents span pages 14 and 15. The
captions beneath each photo include a colored bullet point. These bullet points
correspond to Magna's banking regions within the States of Illinois, Iowa and
Missouri, as associated with the photographs and captions regarding the
individual community presidents. A corresponding map of the States and regions
appears in the lower right-hand corner of page 15.
<PAGE> 1
SUBSIDIARIES OF MAGNA GROUP, INC.
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION OF ORGANIZATION
---------- ----------------------------
<S> <C>
Landmark Bancshares Corporation Missouri
Magna Bank, National Association (Missouri) United States of America
Magna Data Services, Inc. Illinois
Carboro Ltd. Turks & Caicos Islands
Landmark Acquisition Corporation Missouri
Landmark TCI Ltd. Turks & Caicos Islands
Magna Trust Company Illinois
MGI Group, Inc. Missouri
Magna Investments, Inc. Missouri
Magna Insurance Agency, Inc. Missouri
InBank Group, Inc. Missouri
InBank Investments, Inc. Missouri
InBank Insurance Agency, Inc. Missouri
Brentco, Inc. Missouri
Quatre Corp. Missouri
REDC, Inc. Missouri
Mega Insurance Agency, Inc. Missouri
MGR, Inc. Delaware
MHC Holding Company No. 1 Delaware
MHC Holding Company No. 2 Delaware
MHC Holding Company No. 3 Delaware
MHC Holding Company No. 4 Delaware
MHC Holding Company No. 5 Delaware
MICB, Inc. Delaware
MGR Real Estate Investment Trust Delaware
HBC Acquisition Sub, Inc. Iowa
Magna Bank, National Association (Iowa) United States of America
Magna Bank (Indianola) Iowa
Magna Bank (Oelwein) Iowa
Magna Bank (Monticello) Iowa
Magna Bank, FSB United States of America
Homeland Investment Company Iowa
Homeland Financial Corporation Iowa
Homeland Trust Company Iowa
Magna Student Loan Company Iowa
Mid America Financial Products Co. Iowa
Realty Services, Inc. Iowa
</TABLE>
One hundred percent of the capital stock or common equity interest of each
of the above listed subsidiaries is owned directly by Magna Group, Inc. or
indirectly through wholly-owned subsidiaries of Magna Group, Inc.
<PAGE> 1
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Magna Group, Inc. of our report dated January 15, 1997 included in the
1996 Annual Report to Stockholders of Magna Group, Inc.
We also consent to the incorporation by reference into each registration
statement listed below of our report dated January 15, 1997 with respect
to the consolidated financial statements of Magna Group, Inc. incorporated
by reference in the Annual Report (Form 10-K) for the year ended
December 31, 1996.
Form Number
---- ------
S-8 333-02123 Magna Group, Inc. Amended and Restated 1996 Directors'
Stock Option Plan
S-8 333-02125 Magna Group, Inc. Amended and Restated 1996 Long Term
Performance Plan
S-8 33-59087 The Magna Group, Inc. Employee Stock Purchase Plan
S-3 33-88704 Magna Group, Inc. Dividend Reinvestment Plan and
Stock Purchase Plan
S-8 2-98250 Magna Group, Inc. Savings and Stock Investment Plan
S-8 33-61460 Magna Group, Inc. Amended and Restated 1992 Long Term
Performance Plan
S-8 33-61464 Magna Group, Inc. Amended and Restated Directors' Stock
Option Plan
S-8 33-24297 Magna Group, Inc. 1987 Stock Option Plan
S-8 33-47010 Landmark Bancshares Corporation 1982 Capital
Accumulation Plan and 1986 Nonqualified Stock
Option Plan
/s/ Ernst & Young LLP
St. Louis, Missouri
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE MAGNA GROUP, INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 180,412
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 34,068
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,501,178
<INVESTMENTS-CARRYING> 154,729
<INVESTMENTS-MARKET> 156,993
<LOANS> 3,415,309
<ALLOWANCE> 45,382
<TOTAL-ASSETS> 5,458,709
<DEPOSITS> 4,197,776
<SHORT-TERM> 633,935
<LIABILITIES-OTHER> 65,460
<LONG-TERM> 77,577
0
40
<COMMON> 57,909
<OTHER-SE> 426,012
<TOTAL-LIABILITIES-AND-EQUITY> 5,458,709
<INTEREST-LOAN> 285,151
<INTEREST-INVEST> 100,170
<INTEREST-OTHER> 2,514
<INTEREST-TOTAL> 387,835
<INTEREST-DEPOSIT> 158,188
<INTEREST-EXPENSE> 193,748
<INTEREST-INCOME-NET> 194,087
<LOAN-LOSSES> 10,280
<SECURITIES-GAINS> 817
<EXPENSE-OTHER> 138,386
<INCOME-PRETAX> 95,779
<INCOME-PRE-EXTRAORDINARY> 95,779
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,139
<EPS-PRIMARY> 2.22
<EPS-DILUTED> 2.18
<YIELD-ACTUAL> 4.01
<LOANS-NON> 17,133
<LOANS-PAST> 10,175
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 38,130
<ALLOWANCE-OPEN> 42,623
<CHARGE-OFFS> 13,056
<RECOVERIES> 4,645
<ALLOWANCE-CLOSE> 45,382
<ALLOWANCE-DOMESTIC> 45,382
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,070
</TABLE>
