<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual report pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended June 30, 1996 Commission file number 0-18121
-------------------
MAF Bancorp, Inc.
Delaware 36-3664868
(State of incorporation) (IRS Employer identification No.)
55th Street & Holmes Avenue, Clarendon Hills, Illinois 60514
Telephone Number (630) 325-7300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share NASDAQ
(Title of Class) (Name of each exchange on which registered)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of 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.
-----
Based upon the closing price of the registrant's common stock as of September 4,
1996, the aggregate market value of the voting stock held by non-affiliates of
the registrant was $210,172,307.*
The number of shares of Common Stock outstanding as of September 4, 1996:
10,476,450
- --------------------------------------------------------------------------------
Documents Incorporated by Reference
PART III - Portions of the Proxy Statement for the 1996 Annual Meeting of
Shareholders to be held on October 23, 1996 are incorporated by reference into
Part III hereof.
- ---------------------------
* Solely for purposes of this calculation, all executive officers and directors
of the registrant are considered to be affiliates. Also included are shares held
by various employee benefit plans where trustees are (i) directors or executive
officers of the registrant or (ii) required to vote a portion of unallocated
shares at the direction of employees.
================================================================================
<PAGE>
PART I
Item 1. Business
General
MAF Bancorp, Inc. ("Company"), is a registered savings and loan holding
company incorporated under the laws of the state of Delaware and is primarily
engaged in the consumer banking business through its wholly owned subsidiaries,
Mid America Federal Savings Bank ("Bank") and secondarily, in the residential
real estate development business through MAF Developments, Inc. ("MAF
Developments").
On May 30, 1996, the Company successfully completed its acquisition of N.S.
Bancorp, Inc. ("NSBI"), which was the sole shareholder of Northwestern Savings
Bank ("Northwestern"). At acquisition date, Northwestern had $749.7 million in
loans receivable, which are primarily one-to four- family residential mortgage
loans, and $872.0 million in deposits, which were serviced from six branch
locations. All but one of the branches are in markets which the Bank did not
service in the past. See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a more detailed review of the
acquisition.
The Bank is a consumer-oriented financial institution offering various
financial services to its customers through 20 retail banking offices. The
Bank's market area is generally defined as the western suburbs of Chicago,
including DuPage County, which has the second highest per capita income in
Illinois, as well as the northwest side of Chicago, due to the acquisition of
NSBI. It is principally engaged in the business of attracting deposits from the
general public and using such deposits, along with other borrowings, to make
loans secured by real estate, primarily one-to four-family residential mortgage
loans. To a lesser extent, the Bank also makes multi-family mortgage,
residential construction, land acquisition and development and a variety of
consumer loans. The Bank also has a small portfolio of commercial real estate.
Through three wholly owned subsidiaries, MAF Developments, Inc. ("MAF
Developments"), and Mid America Development Services, Inc. ("Mid America
Developments"), and NW Financial, Inc. ("NW Financial"), which the Company
acquired with NSBI, the Company and the Bank are also engaged in real estate
development activities. Additionally, the Bank operates an insurance agency,
Mid America Insurance Agency, Inc., which provides general insurance services,
and a brokerage operation through its affiliation with INVEST, a registered
broker-dealer.
As a federally chartered savings bank, the Bank's deposits are insured up to
the applicable limits by the Federal Deposit Insurance Corporation ("FDIC").
The Bank is a member of the Federal Home Loan Bank ("FHLB") of Chicago, which is
one of the twelve regional banks for federally insured savings institutions
comprising the FHLB system. The Bank is regulated by the Office of Thrift
Supervision ("OTS") and the FDIC. The Bank is further regulated by the Board of
Governors of the Federal Reserve System as to reserves required to be maintained
against deposits and certain other matters.
The Company's executive offices are located at 55th Street and Holmes Avenue,
Clarendon Hills, Illinois 60514. The telephone number is (630) 325-7300.
Market Data
Based on total assets at June 30, 1996, the Bank is the one of the largest
financial institutions headquartered in the Chicago metropolitan area, with its
home office located in Clarendon Hills, Illinois in the southeastern portion of
DuPage County. Through its network of 20 retail banking offices, the Bank
serves the residential, commercial and high technology sector west of Chicago,
including western Cook County, northern Will County, eastern Kane County and
DuPage County, as well as the northwest side of the City of Chicago.
2
<PAGE>
Competition
The Bank is faced with increasing competition in attracting retail customer
business, including deposit accounts and loan originations. Competition for
deposit accounts comes primarily from other savings institutions, commercial
banks, money market funds, and insurance companies (primarily in the form of
annuity products). Factors affecting the attraction of customers include
interest rates offered, convenience of branch locations, ease of business
transactions, and office hours. Competition for loan products come primarily
from other mortgage brokers, savings institutions, commercial banks and mortgage
banking companies. Factors affecting business include interest rates, terms,
fees, customer service, and more recently, over-capacity in the loan origination
market.
Regulatory Environment
The Bank is subject to extensive regulation, supervision and examination by
the OTS, as its chartering authority and primary federal regulator, and by the
FDIC, which insures its deposits up to applicable limits. Such regulation and
supervision establish a comprehensive framework of activities in which the Bank
can engage and is designed primarily for the protection of the insurance fund
and depositors. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities. Any change in such regulation, whether by the OTS, the FDIC or
Congress, could have a material impact on the Bank and its operations.
Legislation is pending in Congress to mitigate the effect of the Bank
Insurance Fund ("BIF") Savings Association Insurance Fund ("SAIF") premium
disparity. Under the legislation a special assessment would be imposed on the
amount of deposits held by SAIF-member institutions, including the Bank, as of a
specified date, currently March 31, 1995, to recapitalize the SAIF. The amount
of the special assessment would be left to the discretion of the FDIC but is
generally estimated at between 79 to 85 basis points of insured deposits. The
legislation would also require that the BIF and SAIF be merged, provided that
subsequent legislation is enacted requiring federal savings associations to
become national banks or state chartered banks or thrifts, and that the
Financing Insurance Company ("FICO") payments be spread across all BIF and SAIF
members. The payment of the special assessment would have the effect of
immediately reducing the capital of SAIF-member institutions, net of any tax
effect; however, it would not affect the Bank's compliance with its regulatory
capital requirements. Management cannot predict whether legislation imposing
such an assessment will be enacted, or, if enacted the specific terms of such
legislation including the amount of any special assessment and when and whether
ongoing SAIF insurance premiums will be reduced to a level equal to that of BIF
premiums. Management can also not predict whether or when the BIF and SAIF will
merge. A significant increase in SAIF insurance premiums or a significant
special assessment to recapitalize the SAIF would likely have an adverse effect
on the operating expenses of the Company. The assessment of a 79 to 85 basis
point fee to recapitalize the SAIF would result in a $10.4 million to $11.1
million payment on an after tax basis, based on deposits as of March 31, 1995.
3
<PAGE>
Executive Officers of the Registrant
The following executive officers were employed by the Company and the Bank as
of July 1, 1996.
<TABLE>
<CAPTION>
Name Age Position(s) Held
---- --- ----------------
<S> <C> <C>
Allen H. Koranda 50 Chairman of the Board and Chief Executive
Officer of the Company and the Bank
Kenneth Koranda 46 President and Director of the Company and the
Bank
Jerry A. Weberling 45 Executive Vice President and Chief Financial
Officer of the Company and the Bank
Gerard J. Buccino 35 Senior Vice President and Controller of the
Company and the Bank
William Haider 45 Senior Vice President of the Company and the
Bank; President of Mid America Developments
and MAF Developments
Michael J. Janssen 37 Senior Vice President of the Company and the
Bank
David W. Kohlsaat 42 Senior Vice President of the Company and the
Bank
Thomas Miers 44 Senior Vice President of the Company and the
Bank
Kenneth Rusdal 54 Senior Vice President of the Company and the
Bank
Lois B. Vasto 62 Senior Vice President and Director of the
Company and the Bank
Sharon Wheeler 43 Senior Vice President of the Company and the
Bank
Alan W. Schatz 38 First Vice President of the Bank
Carolyn Pihera 53 Vice President and Corporate Secretary of the
Company and the Bank
Hugo Koranda 81 Chairman Emeritus of the Bank
</TABLE>
4
<PAGE>
Biographical Information
Set forth below is certain information with respect to executive officers of
the Company and the Bank. Unless otherwise indicated, the principal occupation
listed for each person below has been his principal occupation for the past five
years.
Allen H. Koranda has been Chairman of the Board and Chief Executive Officer of
the Company since August, 1989, and of the Bank since May, 1984. He joined the
Bank in 1972. He is also Senior Vice President and a director of Mid America
Developments, a wholly owned subsidiary of the Bank. Mr. Koranda holds Bachelor
of Arts and Juris Doctor degrees from Northwestern University. Mr. Koranda is
the brother of Kenneth Koranda.
Kenneth Koranda has been President of the Company since August, 1989, and of
the Bank since July 1984. He joined the Bank in 1972. He is also Chairman of
Mid America Developments. Mr. Koranda holds a Bachelor of Arts degree from
Stanford University and a Juris Doctor degree from Northwestern University. Mr.
Koranda is the brother of Allen Koranda.
Jerry A. Weberling has been Executive Vice President and Chief Financial
Officer of the Company and the Bank since July 1993. Prior to that, he was
Senior Vice President of the Company since August, 1989, and Senior Vice
President and Chief Financial Officer of the Bank from March 1990 to July 1993.
He was Senior Vice President and Controller from 1986 to March 1990. He joined
the Bank in 1984. He is a certified public accountant. Mr. Weberling holds a
Bachelor of Science degree from Northern Illinois University.
Gerard J. Buccino was named Senior Vice President and Controller of the
Company and the Bank in July 1996. Prior to that he was First Vice President
and Controller of the Company and the Bank from July 1993 to July 1996 and Vice
President and Controller of the Company and the Bank from March 1990 to July
1993. He is a certified public accountant. Mr. Buccino holds a Bachelor of
Science degree from Marquette University and a Master of Business Administration
degree from the University of Chicago Graduate School of Business.
William Haider was named Senior Vice President of the Company and the Bank in
July 1996. Prior to that he was Vice President of the Company since April 1993
and of the Bank since 1987. He is President of Mid America Developments and MAF
Developments, managing the real estate development activities of the Company.
Mr. Haider holds a Bachelor of Science degree from Southern Illinois University.
He joined the Bank in 1984.
Michael J. Janssen was named Senior Vice President - Investor Relations and
Taxation of the Company and the Bank in July 1996. Prior to that he was First
Vice President - Investor Relations and Taxation of the Company and the Bank
from July 1993 to July 1996, and Vice President of the Company from March 1990
to July 1993. He is a certified public accountant. Mr. Janssen holds a
Bachelor of Business Administration degree from the University of Notre Dame,
and a Master of Science of Taxation degree from DePaul University.
David W. Kohlsaat was named Senior Vice President - Administration in July
1996. Prior to that he was First Vice President - Administration of the Company
from July 1993 to July 1996, and is responsible for retail deposit
administration and Human Resources. He has been Vice President of the Company
since April 1993 and of the Bank since 1980. Mr. Kohlsaat holds a Bachelor of
Science degree from Southern Methodist University. He joined the Bank in 1976.
5
<PAGE>
Thomas Miers has been Senior Vice President of the Company since April 1993
and Senior Vice President-Retail Banking of the Bank since January 1992. Prior
to that he was Senior Vice President - Marketing. Mr. Miers holds a Bachelor of
Science degree from George Williams College. He joined the Bank in 1979.
Kenneth Rusdal has been Senior Vice President of the Company since April 1993
and Senior Vice President-Operations and Information System since January 1992.
Prior to that he was Senior Vice President-Information Systems from 1987 through
1991. He also served as Vice President of Software Development for FISERV,
Inc., where he was employed from 1983 to 1987.
Lois B. Vasto has been Senior Vice President of the Company since August,
1989, and Senior Vice President - Loan Operations of the Bank since May 1984.
She joined the Bank in 1953. She is also Senior Vice President of Mid America
Developments and Secretary of Mid America Insurance, wholly-owned subsidiaries
of the Bank.
Sharon Wheeler has been Senior Vice President of the Company since April 1993
and has been Senior Vice President - Residential Lending of the Bank since July
1986. She joined the Bank in 1971.
Alan W. Schatz was named First Vice President - Secondary Marketing of the
Bank in July 1996. Prior to that he was Vice President - Secondary Marketing of
the Bank from September 1992 to July 1996. Prior to that he served as the
Director of Trading and Risk Management at First Illinois Mortgage Corporation
where he was employed from 1987 until 1992. Mr. Schatz holds a Bachelor of
Science degree from the University of Illinois at Chicago and a Master of
Business Administration degree from Rosary College.
Carolyn Pihera has been Vice President since 1979 and Corporate Secretary to
the Board of Directors of the Company since August 1989, and of the Bank since
1980. She joined the Bank in 1959 and currently is also Office Manager of the
Clarendon Hills office.
Hugo Koranda is an executive officer and Chairman Emeritus of the Bank. He
served as Chairman of the Board of the Bank until 1984. He served as a
consultant to the Bank from July 1989 until April 1991. Mr. Koranda is the
father of Allen and Kenneth Koranda.
Employees
The Bank employs a total of 849 full time equivalent employees as of June 30,
1996. Management considers its relationship with its employees to be excellent.
Item 2. Properties
The Company neither owns nor leases any real property. For the time being, it
utilizes the property and equipment of the Bank without payment to the Bank.
The Bank conducts its business through 20 retail banking offices, including
its executive location in Clarendon Hills, Illinois. The Bank has its own data
processing facilities. The data processing equipment primarily consists of
mainframe hardware, personal computers and ATMs. At June 30, 1996, the data
processing equipment owned has a net book value of $2.7 million.
6
<PAGE>
The following table sets forth information regarding the Bank's executive
office and its 20 branches. At June 30, 1996, the total net book value of the
Bank's premises and related equipment was $31.2 million.
<TABLE>
<CAPTION>
Date Leased Date Lease % of Total Net Book Value
Location or Acquired Expires Deposits June 30,1996
-------- ------------ ---------- ----------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Executive and Home Office
55th Street and Holmes Avenue
Clarendon Hills, Illinois 60514 1975/1986 owned 11.05% $ 4,879
Branches
Chicago, Illinois
2300 North Western Avenue 1996 owned 5.81 2,433
3844 West Belmont Avenue 1996 owned 11.59 1,836
6333 North Milwaukee Avenue 1996 2001 4.80 73
5075 South Archer Avenue 1996 owned 7.35 1,017
Norridge, Illinois
4100 North Harlem Avenue 1996 1999 5.42 --
Cicero, Illinois
5900/5847 West Cermak Road 1939/1978 owned 14.41 1,221
4830 West Cermak Road 1970 owned 1.78 458
Berwyn, Illinois
6620 West Ogden Avenue 1996 owned 0.25 1,248
6650 West Cermak Avenue 1996 owned 3.94 1,526
Riverside, Illinois
40 East Burlington 1977 owned 4.44 967
LaGrange Park, Illinois
1921 East 31st Street 1981 owned 4.44 881
Western Springs, Illinois
40 West 47th Street 1978 owned 3.55 782
Naperville, Illinois
1001 South Washington 1974 owned 7.79 1,874
9 East Ogden Avenue 1982 owned 1.81 962
1308 S. Naperville Blvd. 1987 owned 2.65 1,493
3040 Book Road 1993 1997 .66
Wheaton, Illinois
250 East Roosevelt Road 1977 owned 3.77 970
161 Danada Square East 1988 2009 1.53 334
St. Charles, Illinois
2600 East Main Street 1979 owned 2.96 2,161
Other fixed assets -- 6,130
--------- -------
Total 100.00% $ 31,245
========= =======
</TABLE>
7
<PAGE>
Item 3. Legal Proceedings
There are no outstanding legal proceedings against the Company. There are
various actions pending against the Bank but, in the opinion of management, the
probable liability resulting from these suits is unlikely, individually or in
the aggregate, to have a material effect on the Bank's or the Company's
financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held a special meeting of Stockholders on May 29, 1996.
(b) Not applicable.
(c) The following matters were voted upon at the special meeting, and the
number of affirmative votes and negative votes cast with respect to the
matters follows.
(i) Approval and adoption of the Amended and Restated Agreement and Plan
of Reorganization, dated November 29, 1996, by and between MAF
Bancorp and N.S. Bancorp, Inc. pursuant to which N.S. Bancorp, Inc.
will be merged into MAF Bancorp:
For Against Abstain
--- ------- -------
4,118,600 25,257 156,227
(ii) Amendment to the Certificate of Incorporation of MAF Bancorp to
increase the number of authorized shares of its Common Stock from 20
million shares to 40 million shares:
For Against Abstain
--- ------- -------
4,169,899 90,645 39,540
(d) None.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholders
Matters
The Company's common stock is traded over-the-counter and quoted on the
NASDAQ/National Market System under the symbol "MAFB". As of September 4, 1996,
the Company had 1,798 stockholders of record. The table below shows the
reported high and low sales prices of the common stock during the periods
indicated in fiscal 1996 and 1995.
1996 1995
----------- ------------
High Low High Low
----- ----- ----- -----
First Quarter 25.50 20.68 20.91 19.32
Second Quarter 26.25 24.00 20.91 16.36
Third Quarter 25.50 24.50 21.70 17.05
Fourth Quarter 27.00 24.00 21.59 20.45
Such over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.
The Company declared $0.32 per share in dividends during fiscal 1996, and
$0.291 per share in dividends during fiscal 1995. The Company's ability to pay
cash dividends primarily depends on cash dividends received from the Bank.
Dividend payments from the Bank are subject to various restrictions. See Item 7.
"Management's Discussion and Analysis-Regulation and Supervision - Federal
Savings Institution Regulation - Limitation on Capital Distributions."
8
<PAGE>
Item 6. Selected Financial Data
The following table sets forth certain summary consolidated financial data at or
for the periods indicated. This information should be read in conjunction with
the Consolidated Financial Statements and notes thereto included herein. See
Item 8. "Financial Statements and Supplementary Data."
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- --------- --------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Selected Financial Data:
Total assets $ 3,117,149 1,783,076 1,586,334 1,544,439 1,513,331
Loans receivable, net 2,293,399 1,267,453 1,010,992 963,680 946,038
Mortgage-backed securities 418,102 307,390 347,902 362,172 321,356
Interest-bearing deposits 37,496 10,465 29,922 43,312 71,242
Federal funds sold 5,700 9,360 17,450 12,625 11,800
Investment securities 171,251 90,319 97,260 69,606 74,784
Real estate held for development or sale 26,620 11,454 6,404 14,174 13,956
Deposits 2,254,100 1,313,306 1,292,531 1,290,072 1,268,557
Borrowed funds 537,696 307,024 149,856 117,581 130,905
Subordinated capital notes, net 26,676 20,100 20,027 19,962 19,915
Stockholders' equity 242,226 105,419 95,150 85,002 70,202
Book value per share 23.42 19.19 16.77 14.49 12.03
Tangible book value per share 19.98 19.19 16.77 14.49 12.03
For the Year Ended June 30,
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- --------- --------- --------- ---------
(Dollars in thousands, except per share amounts)
Selected Operating Data:
Interest income $ 143,095 114,963 103,778 112,854 122,602
Interest expense 93,221 73,367 69,694 74,311 87,300
---------- --------- --------- --------- ---------
Net interest income 49,874 41,596 34,084 38,543 35,302
Provision for loan losses 700 475 1,200 2,700 4,100
---------- --------- --------- --------- ---------
Net interest income after provision
for loan losses 49,174 41,121 32,884 35,843 31,202
Non-interest income:
Gain (loss) on sale of:
Loans receivable and
mortgage-backed securities 198 (56) 3,135 5,364 4,177
Loan servicing rights - - - - 1,296
Income from real estate operations 4,786 7,497 7,719 3,427 2,749
Gain (loss) on sale and writedown of:
Investment securities 188 (231) 200 (717) 68
Foreclosed real estate 50 181 145 (1,624) (880)
Loan servicing fee income 2,394 2,373 2,456 2,566 2,735
Other 9,484 6,886 5,993 5,297 5,644
---------- --------- --------- --------- ---------
Total non-interest income 17,100 16,650 19,648 14,313 15,789
Non-interest expense:
Compensation and benefits 21,209 18,257 16,954 15,138 15,815
Office occupancy and equipment 3,774 3,522 3,569 3,539 3,753
Federal deposit insurance premiums 3,255 3,003 2,996 2,430 2,699
Other 9,548 8,630 7,797 7,136 7,440
---------- --------- --------- --------- ---------
Total non-interest expense 37,786 33,412 31,316 28,243 29,707
---------- --------- --------- --------- ---------
Income before income taxes
and other items 28,488 24,359 21,216 21,913 17,284
Income taxes 10,805 9,316 7,766 8,402 8,401
---------- --------- --------- --------- ---------
Income before other items 17,683 15,043 13,450 13,511 8,883
Other items (1) (474) - - 435 913
---------- --------- --------- --------- ---------
Net income $ 17,209 15,043 13,450 13,946 9,796
========== ========= ========= ========= =========
Primary earnings per share $ 2.76 2.54 2.22 2.27 1.66
========== ========= ========= ========= =========
Fully-diluted earnings per share $ 2.76 2.54 2.22 2.26 1.63
========== ========= ========= ========= =========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended June 30,
-------------------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Selected Financial Ratios and
Other Data:
Return on average assets .85% .90% .85% .91% .67%
Return on average equity 14.21 15.22 14.80 17.80 15.03
Average stockholders' equity
to average assets 6.00 5.91 5.75 5.09 4.43
Stockholders' equity to total assets 7.77 5.91 6.00 5.50 4.64
Tangible and core capital to
total assets (Bank only) 7.02 5.64 5.90 5.71 5.28
Risk-based capital ratio (Bank only) 15.36 12.07 13.24 12.77 11.06
Interest rate spread during period 2.24 2.29 1.99 2.38 2.31
Net yield on average interest-earning assets 2.62 2.62 2.29 2.66 2.55
Average interest-earning assets to average
interest-bearing liabilities 107.83 107.22 106.48 105.55 103.75
Non-interest expense to average assets 1.87 2.00 1.98 1.83 2.02
Non-interest expense to average assets and
average loans serviced for others 1.27 1.31 1.31 1.18 1.23
Ratio of earnings to fixed charges:
Including interest on deposits 1.30x 1.32x 1.30x 1.29x 1.19x
Excluding interest on deposits 1.94x 2.34x 2.24x 2.43x 2.15x
Non-performing loans to total loans .56 .57 .83 1.37 1.58
Non-performing assets to total assets .44 .42 .75 1.26 1.60
Cumulative one-year gap 5.22 4.89 1.84 4.06 (1.83)
Number of deposit accounts 255,960 164,592 148,519 149,218 152,702
Mortgage loans serviced for others $1,040,260 887,887 823,924 828,776 877,649
Loan originations 989,753 585,882 813,689 809,486 650,883
Full-service customer service facilities 20 13 13 12 12
Stock Price and Dividend Information
High $ 27.00 21.70 22.27 17.42 8.94
Low 20.68 16.36 16.07 8.37 4.24
Close 24.50 21.36 20.91 16.36 8.64
Cash dividends per share .32 .291 - - -
Dividend payout ratio 11.59% 11.46% - - -
</TABLE>
- ----------------------
(1) Other items in 1996 represents a $474,000 extraordinary charge for the early
extinguishment of debt. Other items in 1993 represents a $1.25 million
credit for the cumulative effect of a change in accounting for income taxes,
offset by an $815,000 extraordinary charge incurred on the prepayment of
debt. The other item in 1992 represents an extraordinary credit primarily
from the utilization of net operating loss carryforwards.
10
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Net income for the Company was $17.2 million, or $2.76 per full-diluted share
for the year ended June 30, 1996, compared to $15.0 million, or $2.54 per fully-
diluted share for the year ended June 30, 1995 and $13.5 million, or $2.22 per
fully-diluted share for the year ended June 30, 1994. On an operating basis,
the Company earned $2.84 per fully-diluted share in 1996 before consideration of
a $474,000 or $0.08 per share extraordinary loss on the early repayment of
subordinated capital notes. Earnings improvements are largely a result of
improved net interest margins, and increased fee income, coupled with controlled
operating expenses. Per share income has also been improved as a result of
share repurchase programs over the past two years.
Highlights of results for the Company's performance in fiscal 1996 are as
follows:
. The Company completed the acquisition of N.S. Bancorp, opening the
Company to new, stable deposit markets characterized by loyal low cost
deposit base.
. Assets grew by $1.3 billion, due to the acquisition of NSBI, as well
as due to strong loan portfolio growth originated by the Bank.
. Loan originations increased 69% to $989.8 million in 1996, from $585.9
million in 1995, including a 131% increase in wholesale loan
originations to $360.9 million in 1996.
. Net interest income improved to $49.2 million in 1996 compared to
$41.1 million in 1995, while maintaining an average net interest
margin of 2.62% for both years.
. Deposit account service charges increased 46.2% in 1996, following a
38.6% increase in 1995, due to continued growth in the Bank's checking
account base.
. Non-interest expenses declined as a percentage of average assets
between 1996 and 1995.
Acquisition
On May 30, 1996, the Company completed its acquisition of NSBI, and its
wholly-owned subsidiary, Northwestern, for cash and stock totaling $269.7
million. The Company paid $41.18 per share of NSBI in the form of $20.1799 cash
and .8549 shares of the Company's common stock. The Company issued 5.2 million
shares in the acquisition, nearly doubling the number shares outstanding as a
result of the transaction. The cash portion of the purchase was made from
existing cash, as well as funds from Northwestern in the form of a dividend due
to their excess capital position as of the acquisition date. Additionally, the
Company obtained a $35.0 million unsecured term bank loan with a local
commercial bank. The loan has a final maturity of seven years, and amortizes on
an increasing basis beginning in 1998.
As a result of the merger, the Bank becomes the second largest independent
savings institution and the ninth largest financial institution overall in the
Chicago metropolitan area. Northwestern had $872.0 million of deposits at the
merger date, serviced from six locations in Cook County, Illinois, giving the
Bank access to markets in which it did not operate previously.
The transaction was accounted for under the purchase method. As such, on May
30, 1996, the Company valued the assets and liabilities of NSBI at fair value,
and created goodwill and other intangible assets of $35.9 million as a result of
the transaction. Amortization of these intangibles was immaterial in 1996, and
is expected to be approximately $2.8 million for fiscal 1997.
11
<PAGE>
Net Interest Income
Net interest income is the principal source of earnings for the Company, and
consists of interest on loans, mortgage-backed and investments securities,
offset by interest expense on deposits and borrowed funds. Net interest income
fluctuates due to a variety of reasons, most notably due to the size of the
balance sheet, changes in interest rates, and to a lesser extent asset quality.
The Company seeks to increase net interest income without materially mismatching
maturities of the interest-earning assets it invests in compared to the
interest-bearing liabilities which fund such investments.
Net interest income before the provision for loan losses increased $8.3
million, or 19.9% to $49.9 million for the year ended June 30, 1996, compared to
$41.6 million for the year ended June 30, 1995. This improvement follows a $7.5
million, or 22.0% increase for the year ended June 30, 1995 compared to the year
ended June 30, 1994. The net interest margin (net interest income divided by
average interest-earning assets) remained constant at 2.62% for the years ended
June 30, 1996 and 1995, and increased from 2.29% for the year ended June 30,
1994. The stability in the net interest margin in 1996 was primarily due to a
28 basis point increase in the yield on average interest earning assets, offset
by an increase in the average cost of funds of 33 basis points. Although the
net interest spread declined by 5 basis points, this was offset by growth in the
balance of interest-earning assets over interest-bearing liabilities, due to the
increased capital level of the Bank. The major reason for the increase in the
net interest margin between 1995 and 1994 was due to the Bank's collateralized
mortgage obligation ("CMO") bonds payable. Due to accelerated prepayments of
the mortgage-backed securities which underlie the CMO bonds, the Bank needed to
accelerate amortization of the related CMO bond discount in 1994, which
significantly reduced net interest income. The net negative impact to net
interest income from the CMO bonds was $4.0 million in 1994, while only $467,000
in 1995, and $409,000 in 1996.
Rate/Volume Analysis
The table below describes the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Bank's interest income and interest expense on a
fully taxable equivalent basis during the periods indicated.
<TABLE>
<CAPTION>
1996 vs 1995 1995 vs 1994
------------------------ ----------------------------
Interest Total Due to Total Due to
---------------------------- -------------- -----------------
1996 1995 1994 Change Volume Rate Change Volume Rate
------ ------ ------ ------ ------ ---- ------ ------ ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $ 115,466 86,511 75,781 28,955 27,454 1,501 10,730 9,824 906
Mortgage-backed securities 18,291 19,747 20,304 (1,456) (1,961) 505 (557) (1,095) 538
Investment securities 6,382 5,253 4,958 1,129 859 270 295 (87) 382
Interest-bearing deposits 2,064 2,068 2,390 (4) (593) 589 (322) (1,155) 833
Federal funds sold 1,121 1,596 562 (475) (771) 296 1,034 646 388
------- ------- ------- ------ ------ ----- ------ ------ ------
Total interest income 143,324 115,175 103,995 28,149 24,988 3,161 11,180 8,133 3,047
------- ------- ------- ------ ------ ----- ------ ------ ------
Interest-bearing liabilities:
Deposits 63,325 55,794 53,004 7,531 4,699 2,832 2,790 276 2,514
Borrowed funds 29,896 17,573 16,690 12,323 12,871 (548) 883 6,380 (5,497)
------- ------- ------- ------ ------ ----- ------ ------ ------
Total interest expense 93,221 73,367 69,694 19,854 17,570 2,284 3,673 6,656 (2,983)
------- ------- ------- ------ ------ ----- ------ ------ ------
Net interest income $ 50,103 41,808 34,301 8,295 7,418 877 7,507 1,477 6,030
======= ======= ======= ====== ====== ===== ====== ====== ======
</TABLE>
12
<PAGE>
The average yield on interest-earning assets improved during 1996 to 7.49%
compared to 7.21% in 1995 and to 6.94% in 1994 due to increases in interest
rates, driven primarily by a 13 basis point increase in the yield on loans
receivable, and mostly stable average yields on other interest-earning assets,
due to the relative stability of short-term interest rates during 1996. The
increase in the average yield on interest-earning assets in 1995 was due to
increasing short-term interest rates, which had a more dramatic impact on the
yield on liquid investments, as well as increasing Treasury and Cost of Funds
Index ("COFI") indices leading to improved yields on adjustable-rate loans and
mortgage-backed securities.
The Company's average balance of investment securities, interest-bearing
deposits and federal funds sold has been relatively consistent over the past
three fiscal years, due to the addition of loans receivable over this time
period. The average balance of these assets was $138.9 million in 1996, a level
at which the Bank maintains sufficient liquidity for operating and regulatory
purposes, as well as investment securities for collateral purposes. Average
loans receivable increased by $352.6 million, or 31.1% in 1996, following a
$128.3, or 12.8% increase in 1995. The increase in 1996 was augmented by the
addition of $749.7 million of loans receivable from the NSBI merger. Increases
in loans receivable have been funded primarily with additional borrowings, due
to the lack of available liquidity and the relatively small growth in savings
deposits. As a result of increased loan origination activity, the Bank has
relied less on the purchase of mortgage-backed securities for investment
purposes. The average balance of mortgage-backed securities has declined for
the last two years, decreasing by $31.3 million in 1996, and by $18.1 million in
1995, due to normal amortization and prepayments.
The average cost of savings deposits increased 22 basis points in 1996,
primarily due to increased rates on certificates of deposits. The 20 basis
point increase in the cost of savings deposits in 1995 was due to the ability of
management to lag increases in short-term interest rates when pricing deposit
products while still remaining competitive. Average deposits remained
relatively constant between 1995 and 1994, and increased $102.0 million in 1996,
due to lower savings outflows, higher interest credited to accounts, as well as
the addition of $872.0 million in deposits from the acquisition of NSBI.
Because of the inability to increase savings deposits, the increase in
interest-earning assets in 1996 and 1995 was funded with borrowed funds,
primarily FHLB of Chicago advances, and a limited amount of reverse repurchase
agreements. Average borrowings increased $183.3 million in 1996, after
increasing $75.8 million in 1995. Additional borrowings in 1996 did lead to a
decrease in the average cost of borrowings by 22 basis points, although this is
somewhat attributable to the shorter duration of adjustable-rate advances from
the FHLB of Chicago, and short-term reverse repurchase agreements. Included in
the increase in borrowed funds in 1996 is a $35.0 million unsecured term bank
loan which was obtained for the acquisition of NSBI. The loan carries an
interest rate of the one-month London interbank offering rate ("LIBOR") plus 1%,
or 6.47% at June 30, 1996. The loan is convertible all or in part, with certain
limitations at the end of any repricing period into a fixed rate loan at the
discretion of management at 1.25% over the U.S. Treasury rate corresponding to
the term to the final maturity of the loan, which is December 31, 2003.
Offsetting the increase in borrowed funds was the continued reduction in the
Bank's CMO bonds payable issued by Mid America Finance Corporation ("MAFC"). In
1996 and 1995, the rate of prepayment on the underlying mortgage-backed
securities slowed compared to 1994, leading to a decrease in the CMO bonds
payable of $4.5 million in 1996, compared to $4.7 million in 1995 and $38.9
million in 1994. At June 30, 1996, the outstanding balance of the Bank's CMO
bonds payable issued by MAFC was $14.7 million net of unamortized discounts of
$1.2 million.
13
<PAGE>
Average Balance Sheets
The following table sets forth certain information relating to the Company's
consolidated statements of financial condition and reflects the average yield on
assets and average cost of liabilities for the periods indicated. Such yields
and costs are derived by dividing income or expense, on a tax equivalent basis,
by the average balance of assets or liabilities. Average balances are derived
from average daily balances, and include non-performing loans. The yield/cost at
June 30, 1996 includes fees which are considered adjustments to yield.
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------------------------------------------------
1996 1995
------------------------------------- -------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans receivable $1,485,309 115,466 7.77% $1,132,669 $ 86,511 7.64%
Mortgage-backed securities 289,759 18,291 6.31 321,074 19,747 6.15
Investment securities (1) 100,671 6,382 6.34 86,932 5,253 6.04
Interest-bearing deposits 24,128 2,064 8.55 32,205 2,068 6.42
Federal funds sold 14,088 1,121 7.96 24,389 1,596 6.54
---------- ---------- ---------- ----------
Total interest-earning assets 1,913,955 143,324 7.49 1,597,269 115,175 7.21
Non-interest earning assets 104,543 75,098
---------- ----------
Total assets $2,018,498 $1,672,367
========== ==========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits 1,350,501 63,325 4.69 $1,248,513 55,794 4.47
Borrowed funds 424,461 29,896 7.04 241,141 17,573 7.26
---------- ---------- ---------- ----------
Total interest-bearing liabilities 1,774,962 93,221 5.25 1,489,654 73,367 4.92
Non-interest bearing deposits 57,665 ---------- ------ 47,576 ---------- ------
Other liabilities 64,729 36,320
---------- ----------
Total liabilities 1,897,356 1,573,550
Stockholders' equity 121,142 98,817
---------- ----------
Liabilities and stockholders' equity $2,018,498 $1,672,367
========== ==========
Net interest income/interest rate spread $ 50,103 2.24% $ 41,808 2.29%
========== ====== ========== ======
Net earning assets/net yield on average
interest-earning assets $ 138,993 2.62% $ 107,615 2.62%
========== ====== ========== ======
Ratio of interest-earning assets
to interest-bearing liabilities 107.83% 107.22%
========== ======
</TABLE>
<TABLE>
<CAPTION>
--------------------------------- At June 30,
1994 1996
--------------------------------- ----------------------
Average
Average Yield/ Yield/
Balance Interest Cost Balance Cost
------- -------- ---- ------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans receivable $1,004,342 $ 75,781 7.55% $2,310,653 7.64%
Mortgage-backed securities 339,182 20,304 5.99 418,102 6.91
Investment securities (1) 88,462 4,958 5.60 171,251 6.86
Interest-bearing deposits 53,638 2,390 4.46 37,496 5.89
Federal funds sold 13,065 562 4.30 5,700 5.25
---------- -------- ----------
Total interest-earning assets 1,498,689 103,995 6.94 2,943,202 7.46
Non-interest earning assets 81,251 173,947
---------- ----------
Total assets $1,579,940 $3,117,149
========== ==========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits $1,242,130 53,004 4.27 $2,189,247 4.41
Borrowed funds 165,345 16,690 10.09 564,372 6.36
---------- -------- ----------
Total interest-bearing liabilities 1,407,475 69,694 4.95 2,753,619 4.81
---------- -------- ----- ----
Non-interest bearing deposits 47,517 64,853
Other liabilities 34,094 56,451
---------- ----------
Total liabilities 1,489,086 2,874,923
Stockholders' equity 90,854 242,226
---------- ----------
Liabilities and stockholders' equity $1,579,940 $3,117,149
========== ==========
Net interest income/interest rate spread $ 34,301 1.99% 2.65%
======== ===== ====
Net earning assets/net yield on average
interest-earning assets $ 91,214 2.29% $ 189,583 n/a
========== ===== ==========
Ratio of interest-earning assets
to interest-bearing liabilities 106.48% 106.88%
========== ==========
</TABLE>
- --------------------------
(1) Includes $18.7 million, $10.4 million, and $10.7 million and $30.7
million of Stock in Federal Home Loan Bank of Chicago for the years ended June
30, 1996, 1995, and 1994 and at June 30, 1996, respectively.
14
<PAGE>
Non-interest income
Non-interest income is another significant source of revenue for the Company.
It consists of fees earned on products and services, gains and losses from loan
sale activity and income from real estate operations. Although changes in
interest rates can have an impact on earnings from these sources, the impact is
generally not nearly as dramatic as the impact on net interest income. Non-
interest income was $17.1 million, $16.7 million and $19.6 million for the years
ended June 30, 1996, 1995 and 1994, respectively. The table below shows the
composition of non-interest income for the periods indicated.
<TABLE>
<CAPTION>
For the Year Ended June 30,
------------------------------
1996 1995 1994
--------- --------- --------
(In thousands)
<S> <C> <C> <C>
Gain (loss) on sale of loans and
mortgage-backed securities $ 198 (56) 3,135
Gain (loss) on sale and writedown of
investment securities 188 (231) 200
Gain on sale of foreclosed real estate 50 181 145
Income from real estate operations 4,786 7,497 7,719
Deposit account service charges 4,894 3,347 2,414
Loan servicing fee income 2,394 2,373 2,456
Brokerage commissions 1,711 1,383 1,682
Mortgage loan late charges and other loan fees 948 759 665
Insurance commissions 412 432 448
Safety deposit box fees 273 271 262
Loss on real estate owned operations, net (17) (5) (300)
Other 1,263 699 822
------- ------ ------
$ 17,100 16,650 19,648
======= ====== ======
</TABLE>
The Bank recorded a net gain on the sale of loans receivable and mortgage-
backed securities in 1996 of $198,000, compared to a loss of $56,000 in 1995 and
to a gain of $3.1 million in 1994. In 1996, loan sale volume increased
dramatically, due to a 68.9% increase in loan origination volume from 1995. In
1996, the Bank sold $269.2 million of loans, compared to $95.2 million in 1995
and $343.7 million in 1994. Although loan sale volume increased, margins on
loan sales remained thin due to competitive pricing in the origination market,
which often led to the Bank originating loans at near break even.
The gains and losses on mortgage-backed securities included in the above
figures represents the sale of loans originated by the Bank and swapped into
mortgage-backed securities prior to sale. In 1996, the Bank swapped and sold
$41.2 million of loans into mortgage-backed securities. In 1995, the Bank had
no swap activity. During 1994, the Bank swapped and sold $4.8 million of loans
into mortgage-backed securities.
The Company had net gains on the sale of investment securities during the
current year of $188,000, primarily due to the sale of marketable equity
securities, compared to net losses on the sale and writedown of investment
securities during 1995 of $231,000, and net gains in 1994 of $200,000. The
losses in 1995 are primarily from the write-off of a $159,000 equity investment
in a local community housing organization and from the sale of investment
securities available for sale whose values deteriorated in the wake of rising
interest rates. These losses were offset by gains on the sale of marketable
equity securities. In 1994, the gains are primarily from the sale of marketable
equity securities.
15
<PAGE>
Income from real estate operations decreased $2.7 million to $4.8 million in
1996, compared to $7.5 million in 1995 and $7.7 million in 1994. A summary of
income from real estate operations is as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------------------
1996 1995 1994
------------- -------------- ---------------
Lots Income Lots Lots
Sold (Loss) Sold Income Sold Income
---- ------ ---- ------ ---- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Clow Creek Farm 145 $ 3,537 81 $ 1,711 - -
Ashbury 34 1,392 134 5,364 306 $ 6,975
Woods of Rivermist - - 6 374 15 593
Scott's Crossing - - 1 39 3 151
Creekside of Remington 27 81 6 9 - -
Woodbridge 10 85 - - - -
Reigate Woods 2 98 - - - -
Fields of Ambria 2 17 - - - -
Other - (424) - - - -
--- ----- --- ------ --- -----
220 $ 4,786 228 $ 7,497 324 $ 7,719
=== ===== === ===== === =====
</TABLE>
The Company had strong sales in the 260-lot Clow Creek Farm subdivision during
1996, due to the near sellout of the successful 1,115-lot Ashbury subdivision
adjacent to Clow Creek Farm. As of June 30, 1996, all of the remaining 31 lots
in Ashbury are under contract, and 13 of the remaining 34 lots are under
contract in Clow Creek Farm. The Company expects both of these projects will be
closed-out during fiscal 1997. To replace these projects, the Company plans to
commence development in the 386-lot Harmony Grove subdivision in early fiscal
1997, with closings expected to begin in the first and second quarters of 1997.
A builder pre-sale in this subdivision was very successful, with 126 of the 128
lots offered to builders in the first phase under contract as of June 30, 1996.
The Creekside of Remington project, located in Bolingbrook, Illinois, just east
of Naperville, had strong sales early in 1996, but has since slowed. At June
30, 1996, there are no lots under contract. Margins on these lots are much lower
than previous projects, due to these being smaller, lower priced lots as well as
due to the sharing the development costs and profits, with a joint venture
partner. Woods of Rivermist is the Company's most upscale subdivision,
consisting of 31 lots. None of the remaining 10 lots were sold during 1996,
although 5 are under contract as of June 30, 1996. The Scott's Crossing project
was sold out in 1995.
The sales in Woodbridge, Reigate Woods, and Fields of Ambria are results from
NW Financial, the land development subsidiary of Northwestern acquired in the
acquisition of NSBI. These sales represent home sales, as NW Financial's land
development activity consists of land improvement and homesite construction.
Sales represent one month of activity. The other loss of $424,000 represents
the write-off of the Company's investment related to an option it had acquired
on two parcels of land. The Company chose not to exercise its option to
purchase the parcels following a thorough financial and market assessment of the
project.
Deposit account service charges increased 46.2% in 1996, to $4.9 million,
following a similar increase in 1995. The results are a function of an increase
in the number of checking accounts due to continued success in the Bank's direct
mail checking campaign which is designed to attract new checking accounts for
potential fee revenue. The 1996 improved results are primarily due to an
increase in NSF charges, as the Bank did not increase per item fees on most of
its transactions during 1996. In 1995, the increase in deposit account service
charges was due to an increased volume of NSF transactions, as well as an
increase in service fees per item.
16
<PAGE>
Loan servicing fee income is generated from loans which the Bank has
originated and sold, or from purchased servicing. Loan servicing fee income
totaled $2.4 million, $2.4 million and $2.5 million for 1996, 1995 and 1994,
respectively, on average loans serviced for others of $963.8 million, $881.0
million, and $813.1 million, respectively. The increase in average loans
serviced in 1996 is due to increased sales activity in the wake of higher loan
originations. In 1995, the increase was primarily due to the bulk purchase of
$66.8 million of loan servicing rights. The consistency in income from loan
servicing over the past three years despite an increase in the average balance
of loans serviced for others is due to the continued reduction in the average
loan servicing fee, due to new sales containing only .25% in service fees, as
well as the reduction in income from the amortization of purchased servicing
premiums, and capitalized servicing premiums from wholesale loan originations.
Amortization totaled $253,000 in 1996, $109,000 in 1995, and was diminimus in
1994.
Through the Bank's affiliation with INVEST, the Bank offers non-traditional
investment products to its customers such as mutual funds, annuities and other
brokerage services. Revenues rebounded from the prior year decline to $1.7
million in 1996, compared to $1.4 million in 1995 and $1.7 million in 1994. The
improvement in 1996 over 1995 is due to increased sales of mutual funds and
other non-traditional products, as well as sharing in a greater percentage of
commissions and trailer fee income with INVEST. The decline in 1995 was
attributable to an increase in interest rates which moved certain customers into
certificate of deposit investments, as well as the uncertainty of investing in
the stock market at the record high levels reached during the last half of 1995.
Non-interest expense
Non-interest expense increased $4.4 million, or 13.1% to $37.8 million in 1996
compared to 1995. Non-interest expense in 1995 was $2.1 million, or 6.7% greater
than non-interest expense in 1994. Adding to the large increase in 1996 is one
month of operations of Northwestern. The table below shows the composition of
non-interest expense for the periods indicated.
<TABLE>
<CAPTION>
For the Year Ended June 30,
---------------------------
1996 1995 1994
--------- ------- -------
(In thousands)
<S> <C> <C> <C>
Compensation $16,790 14,474 12,975
Employee benefits 4,419 3,783 3,979
------- ------ ------
Total compensation and benefits 21,209 18,257 16,954
Occupancy expense 2,469 2,274 2,297
Furniture, fixture and equipment expense 1,305 1,248 1,272
Federal deposit insurance premiums 3,255 3,003 2,996
Advertising and promotion 1,746 1,760 1,408
Data processing 1,683 1,473 1,282
Professional fees 904 751 954
Postage 872 659 656
Stationery, brochures and supplies 857 618 599
ATM network fees 527 523 421
Telephone 413 349 329
Insurance costs 260 298 370
Other 2,051 2,199 1,778
Amortization of goodwill and core deposit
intangible 235 - -
------- ------ ------
$ 37,786 33,412 31,316
======= ====== ======
</TABLE>
17
<PAGE>
Compensation and benefits increased $3.0 million, or 16.2% in 1996. The
primary reason for the increase is due to an increase in loan related
compensation, most notably a $1.0 million increase in loan officer commissions,
as well as the addition of employees, primarily to staff a new branch and to
handle increased loan volume. In addition, the acquisition of NSBI increased
compensation and benefits for one month in 1996, or approximately $600,000.
Benefit costs increased $636,000 in 1996 due to additional FICA tax expense, as
well as profit sharing and SERP benefit expenses. The $1.3 million, or 7.7%
increase in 1995 was primarily due to regular annual raises for employees, as
well as a reduction in the deferral of loan origination direct costs. The number
of loans subject to deferral declined by 42.0% in 1995 from 1994 amounts.
FDIC insurance premiums increased slightly in 1996, compared to 1995 and 1994.
Insurance premium expense is strictly a function of average savings deposits
outstanding, as the Bank's insurance premium rate has remained constant for the
last three years.
Advertising expense was consistent in 1996 compared to 1995, while it
increased 25.0% in 1995 when the Bank commenced its new checking account
strategy. The Bank continued its expansive retail marketing strategy during
1996, which resulted in similar expense to 1995. The primary focus of the
marketing strategy is the use of direct mail to attract checking accounts as
well as home equity lines of credit. These increases are a response to
increased competitive pressures in the markets served by the Bank.
Data processing expenses rose $210,000, or 14.3% in 1996, after rising
$191,000 or 14.9% in 1995 due to the upgrading of data processing systems over
the past few years. The Bank has installed PC technology into many of its
operations as a means of controlling general operating expenses as well as
providing the means to improve the speed of processing transactions.
Other operating expenses increased a total of $722,000 in 1996, after a small
increase in 1995, due to the growth in the Bank's loan portfolio, as well as
checking account base, which has led to increased costs for postage, and
stationary and supplies expense. The increase in professional expense in 1996
is due to $92,000 for flood insurance certifications obtained on the Bank's loan
portfolio in response to new FNMA guidelines. Additionally, the Bank recognized
amortization of goodwill and core deposit intangible expense of $235,000 in 1996
due to the acquisition of NSBI.
Provision for loan losses
The provision for loan losses is recorded to provide coverage for losses on
loans unknown to the Bank at the current time. Over the past three years, the
Bank has maintained consistent and historically low levels of non-performing
loan balances, as well as high coverage percentages of the allowance for loan
losses to non-performing loans. The 1996 provision was $700,000, which was
slightly larger than the 1995 provision of $475,000 primarily due to the growth
of the Bank's loan portfolio during the current year. The 1995 provision for
loan losses was $475,000, compared to $1.2 million in 1994 due to a decrease in
the ratio of non-accrual loans to total loans during 1995. Asset quality in the
loan portfolio has remained excellent over the past three years. The ratio of
the allowance for loan losses to total loans receivable increased slightly to
.75% at June 30, 1996, from .73% at June 30, 1995 and .86% at June 30, 1994.
The ratio of the allowance for loan losses to non-performing loans improved to
134.5% at June 30, 1996, compared to 128.2% at June 30, 1995 and 103.3% at June
30, 1994.
18
<PAGE>
Income taxes
For the year ended June 30, 1996, income tax expense attributable to income
from continuing operations totaled $10.8 million, equal to an effective income
tax rate of 37.9%, compared to $9.3 million, or an effective income tax rate of
38.2% for the year ended June 30, 1995, and $7.8 million, or an effective income
tax rate of 36.6% for the year ended June 30, 1994. The lower effective tax
rate in 1994 was attributable to the reversal of certain state income tax
valuation allowances.
Review of Financial Condition
Total assets increased $1.3 billion, or 74.8% to $3.1 billion at June 30,
1996, compared to $1.78 billion at June 30, 1995. The increase was due to the
acquisition of NSBI, as well as growth in loans receivable, which were funded
primarily with borrowed funds. At acquisition date, NSBI had assets
approximately $1.2 billion, and stockholders' equity of $231.6 million.
Cash, interest-bearing deposits and federal funds sold increased a total of
$35.1 million to $94.9 million at June 30, 1996. The higher cash balance is
primarily due to the acquisition, which required the maintenance of more
liquidity due to deposit growth. For most of the year, the Bank used most of
its available cash, in addition to outside borrowings to fund increased loan
volume held for investment purposes.
Investment securities classified as held to maturity increased $49.0 million,
to $102.2 million as of June 30, 1996. The increase is due to the addition of
$146.8 million of investment securities as a result of the acquisition, and
purchases of $21.7 million. Offsetting these increases were maturities of
$101.2 million, which were primarily used to fund the cash portion of the
acquisition, as well as the transferring of $18.0 million of investment
securities into the available for sale category as allowed by an implementation
guide to SFAS No. 115.
Investment securities available for sale increased $14.2 million to $38.3
million at June 30, 1996. Increases due to the transfer of $18.0 million from
investments held to maturity and purchases of $31.1 million were offset by sales
of $34.0 million, as well as the transfer of $2.5 million of the Company's stock
previously owned by NSBI into treasury stock upon acquisition. Net unrealized
gains in the available for sale portfolio were $329,000 at June 30, 1996.
Stock in the FHLB of Chicago increased $17.7 million due to the purchase of
$8.3 million of stock due to the growth in borrowings from the FHLB of Chicago,
as well as $9.7 million of stock acquired from NSBI.
Mortgage-backed securities classified as held to maturity increased $49.4
million to $293.4 million as of June 30, 1996. The increase is primarily due to
$182.1 million acquired from NSBI, offset by amortization and prepayments
totaling $23.7 million and the transfer of $108.7 million of CMOs into its
available for sale portfolio.
Mortgage-backed securities classified as available for sale increased $61.3
million to $124.7 million at June 30, 1996, from $63.4 at June 30, 1995. The
increase is primarily due the transfer of $108.7 million of CMOs into the
available for sale category, offset by amortization and prepayments of $46.1
million. At June 30, 1996, net unrealized losses in the available for sale
portfolio were $1.7 million.
19
<PAGE>
Included in total mortgage-backed securities at June 30, 1996 are $328.1
million of CMO's which have 3-5 year weighted average lives, and are primarily
collateralized by the Federal National Mortgage Association ("FNMA"), the
Federal Home Loan Mortgage Corporation ("FHLMC") and the Government National
Mortgage Association ("GNMA") mortgage-backed securities, and to a lesser extent
by whole loans. Also included in mortgage-backed securities as of June 30, 1996
and 1995 are $44.3 million, and $20.3 million, respectively, of FHLMC securities
with an average yield of 8.54% and 8.52%, respectively, which collateralize a
similar amount of CMO bonds issued by the Bank's special purpose finance
subsidiaries, Mid America Finance Corporation ("MAFC") and Northwestern
Acceptance Corporation ("NWAC"). Principal repayments and prepayments on these
securities are available exclusively for the repayment of the CMO bonds which
they collateralize.
Investment securities and mortgage-backed securities acquired and classified
as available-for-sale represent a secondary source of liquidity to the Bank and
the Company. The market value of these securities fluctuates with interest rate
movements. Net interest income in future periods may be adversely impacted to
the extent interest rates increase and these securities are not sold with the
proceeds reinvested at the higher market rates. The decision whether to sell
the available for sale securities or not, is based on a number of factors,
including but not limited to projected funding needs, reinvestment alternatives
and the relative cost of alternative liquidity sources. Investments and
mortgage-backed securities classified as held to maturity cannot be sold except
under extraordinary and very restrictive circumstances. Generally, these
investments are acquired for investment after taking into account the Bank's
cash flow needs, the investment's projected cash flows, the Bank's overall
interest rate and maturity structure of the liability base used to fund these
investment's and the net interest spread obtained. To the extent the Bank has
been able to maintain funding costs below a market rate of interest, the
potential negative impact from rising interest rates on investments and
mortgage-backed securities held to maturity on net interest income in future
periods has been substantially mitigated.
Loans receivable increased 81.0%, or $1.0 billion to $2.3 billion at June 30,
1996. The increase was primarily due to the acquisition of NSBI, which added
$749.7 million to loans receivable as of the acquisition date. In addition,
loan origination and purchase volume (through the Bank's wholesale loan
origination division) was $989.8 million, offset by amortization and prepayments
of $394.3 million, as well as sales of $269.2 million. The loans sold represent
long-term fixed-rate mortgages, and are sold as an integral part of the Bank's
mortgage banking strategy. During the current year, the Bank originated a
larger percentage of shorter-term adjustable-rate loans, which it holds in its
portfolio than it did fixed-rate loans, which helped fuel the increase in the
outstanding balance of loans receivable held for investment purposes.
The allowance for loan losses increased to $17.3 million as of June 30, 1996,
due to the acquisition of NSBI, which had $7.7 million in its allowance for loan
losses as of the acquisition date, and a current year provision for loan losses
of $700,000. Net charge-offs in 1996 were $365,000. As of June 30, 1996, the
Bank's ratio of the allowance for loan losses to total non-performing loans was
134.5%, compared to 128.2% as of June 30, 1995. In addition, the ratio of the
allowance for loan losses to total loans was relatively consistent at .75% at
June 30, 1996, compared to .73% at June 30, 1995.
20
<PAGE>
Real estate held for development or sale increased $15.2 million to $26.6
million at June 30, 1996. A summary of real estate held for development or sale
is as follows:
<TABLE>
<CAPTION>
June 30,
---------------
1996 1995
------- ------
(in thousands)
<S> <C> <C>
MAF Developments, Inc.
Harmony Grove $ 5,104 2,536
Clow Creek Farm 1,168 3,924
Creekside of Remington 1,807 1,734
Other - 357
------- ------
8,079 8,551
------- ------
Mid America Developments, Inc.
Ashbury 1,196 2,042
Woods of Rivermist 755 861
------- ------
1,951 2,903
------- ------
NW Financial, Inc.
Reigate Woods 7,734 -
Woodbridge 6,475 -
Fields of Ambria 2,381 -
------- ------
16,590 -
------- ------
$ 26,620 11,454
======= ======
</TABLE>
The primary reason for the increase in real estate held for development or
sale is due to the acquisition of NSBI, and its real estate subsidiary, NW
Financial. NW Financial's projects differ from those of the Bank and Company,
as they not only develop lots for single-family development, but also
participate in home construction on these developed lots as well. Currently,
management of the Bank intends to operate NW Financial's projects through their
completion. However, management does not currently plan to seek additional
projects which include home construction.
Activity at MAF Developments, owned by the Company, included the additional
purchase of land for Harmony Grove, which is currently being developed. The
Company held a builder pre-sale in June, 1996 where 128 lots in the first phase
of the project were offered. Of these lots, 126 were sold, and are scheduled to
close in the first and second quarters of 1997. The decline in Clow Creek Farm
is due to the successful sale of a majority of this project. At June 30, 1996,
there are 34 lots remaining, of which 13 are under contract. Creekside of
Remington's investment remained constant due to 27 lot sales being offset by
development costs. No sales are pending in Creekside at June 30, 1996. The
other category represented preliminary costs associated with two parcels of land
which the Company had an option to purchase. During 1996, the Company wrote-off
this investment after deciding not to exercise its right to purchase these
parcels. The write-off totaled $424,000.
Mid America Developments is nearing the completion of its operations with the
continued sales in Ashbury and Woods of Rivermist. At June 30, 1996, all of the
remaining 31 lots of Ashbury are under contract, with sales expected to close by
the end of the second quarter of 1997. The Woods of Rivermist development is
completely developed, with 5 of the 10 remaining lots under contract at June 30,
1996.
Premises and equipment increased $10.1 million to $31.2 million at June 30,
1996. The increase was primarily due to $7.9 million acquired from NSBI (at
fair value), as well as purchases of premises and equipment of $4.3 million.
The primary expenditures related to the construction of a new branch site, as
well as costs in conjunction with the Bank's upgrading of data processing
equipment and remodeling of some of the Bank's branch offices.
21
<PAGE>
Cost in excess of fair value of net assets acquired (goodwill) increased to
$26.9 million as a result of the acquisition of NSBI in May 1996. Total
goodwill created in the acquisition amounted to $27.0 million, and is being
amortized over 20 years on a straight line basis. Amortization expense in 1996
was $113,000.
Other assets increased $19.0 million to $33.9 million at June 30, 1996, due to
$7.6 million from the acquisition of NSBI, as well as the establishment of a
core deposit premium related to the acquisition of $8.9 million, which the Bank
expects to amortize over a 10 year period on an accelerated basis.
Deposits increased $940.8 million to $2.25 billion as of June 30, 1996,
primarily due to $872.0 million of deposits acquired from NSBI. The remainder
of the increase is due to interest credited on deposits of $62.0 million, as
well as net inflows of $6.3 million during the current year.
Borrowed funds, which consist primarily of FHLB of Chicago advances, as well
as CMO bonds payable, and other short-term borrowings, increased $230.7 million,
to $537.7 million at June 30, 1996. During the current year, the Bank borrowed
an additional $160.0 million (net) of FHLB of Chicago advances, primarily to
fund loan volume held for investment purposes. As of June 30, 1996, the Bank
has $420.5 million of FHLB of Chicago advances at a weighted average rate and
term of 6.40%, and 2.2 years, respectively, compared to $260.5 million at a
weighted average rate and term of 7.06%, and 3.3 years, respectively, as of June
30, 1995. The decrease in rate and average term is due to $125.0 million of
advances being adjustable rate, which are tied to short-term interest rate
indices such as LIBOR and the prime rate. CMO bonds payable increased at net
$23.5 million, primarily due to $27.7 million from the acquisition of NSBI,
offset by $6.0 million in repayments on CMO bonds. The Bank also increased its
balance of reverse repurchase agreements by $12.1 million to $39.8 million at
June 30, 1996. These borrowings have an average life of 19 months at June 30,
1996, with an average cost of 6.74%. In addition, as part of the funding for
the acquisition of NSBI, the Company obtained a $35.0 million unsecured term
bank loan. The loan has a final maturity of December 31, 2003, and currently
has a floating interest rate at one-month LIBOR plus 1%, or 6.47% at June 30,
1996.
Subordinated capital notes increased $6.6 million to $26.7 million at June 30,
1996. During 1996, the Bank refinanced $20.9 million of its 10% subordinated
capital notes originally issued in 1993, with $27.6 million of 8.32%
subordinated notes due September 30, 2006. The early repayment of the $20.9
million of subordinated capital notes resulted in an extraordinary after-tax
loss of $474,000 due to the write-off of deferred issuance costs in the second
quarter in 1996. The 8.32% subordinated notes are callable anytime after
September 30, 1998, at par plus accrued interest. The Company received $26.6
million after consideration of $1.0 million of expenses, which were deferred and
are being amortized over the life of the notes.
Other liabilities increased $13.3 million to $32.7 million at June 30, 1996.
The primary reason for the increase is due to $7.9 million from the acquisition
of NSBI.
Stockholders' equity increased $136.8 million to $242.2 million at June 30,
1996. The increase was due to the acquisition of NSBI, which resulted in the
issuance of 5.2 million shares of common stock valued at $131.2 million,
including $3.3 million related to the carryover of stock options, as well as
earnings of $17.2 million, offset by dividends paid to shareholders and the
purchase of treasury shares through the Company's stock buyback programs.
During 1996, the Company repurchased 250,000 shares for $6.2 million. In
addition, 100,000 shares of the Company stock owned by NSBI was transferred to
treasury shares upon the acquisition of NSBI, who had held stock in the Company
at the time of acquisition.
22
<PAGE>
Lending Activities
General. The Bank's lending activities reflect its focus as a consumer
banking institution serving its local market area by concentrating on
residential mortgage lending. Reflective of this focus, the Bank has been one
of the largest originators of residential mortgages in its market area for
years. In the past three years, the Bank started a wholesale lending operation
that purchases loans from brokers and correspondents. In connection with these
activities, the Bank emphasizes the origination of adjustable-rate or shorter-
term loans for its portfolio and sells the majority of its long-term fixed-rate
loans directly into the secondary market. It is the Bank's general policy that
approximately 60-70% of its loan portfolio have adjustable rates or terms to
repricing or maturity of seven years or less. The Bank originates and purchases
long-term fixed-rate mortgage loans in response to customer demand; however,
most conforming long-term fixed-rate mortgage loans and a limited amount of ARM
loans are sold in the secondary market, primarily to the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC").
In 1996, the Bank originated and purchased $441.9 million in fixed-rate one-
to four-family residential mortgage loans, of which $319.3 million, or 72.3%,
conformed to the requirements for sale to FNMA and FHLMC and $122.6 million, or
27.7%, did not conform to the requirements of these agencies. During the year
ended June 30, 1996, the Bank sold $267.4 million of these loans in the
secondary market. The Bank's "nonconforming" loans are generally designated as
such because the principal loan balance exceeds $207,000, which is the current
FHLMC and FNMA purchase limit, and not because the loans present increased risk
of default to the Bank. Generally, nonconforming loans are held in the Bank's
loan portfolio. Loans with such excess balances carry interest rates from one-
eighth to three-eighths of one percent higher than similar, conforming fixed-
rate loans.
As a result of its acquisition of NSBI, the Bank acquired a $749.7 million
loan portfolio. Included in the portfolio as of the acquisition date was a
$670.5 million nationwide portfolio of single-family residential mortgage loans
which had been purchased through brokers as part of NSBI's loan strategy.
Collateral for this portfolio is spread throughout 46 states and the District of
Columbia. Currently, it is not management's intent to continue the purchase
strategy utilized successfully by NSBI, rather management intends to manage this
purchased loan portfolio through its maturity.
While the Bank has primarily focused its lending activities on the origination
of loans secured by first mortgages on owner-occupied one- to four-family
residences, the Bank, to a lesser extent, also originates multi-family mortgage
loans, residential construction loans, land acquisition and development loans,
commercial real estate loans and a variety of consumer loans. At June 30, 1996,
the Bank's net loans receivable amounted to $2.3 billion, excluding $418.1
million in mortgage-backed securities.
23
<PAGE>
Loan Portfolio Composition. The following table sets forth the composition of
the Bank's loan and mortgage-backed securities portfolio in dollar amounts and
in percentages at the dates indicated:
<TABLE>
<CAPTION>
At June 30,
-----------------------------------------------------------------------
1996 1995 1994
----------------------- -------------------- -----------------------
Percent Percent Percent
of of of
Amount Total Amount Total Amount Total
---------- ----------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family:
Held for investment $2,032,102 87.57% $1,032,233 80.25% $ 835,369 81.28%
Held for sale 9,314 0.40 24,984 1.94 8,739 0.85
Multi-family 94,713 4.08 67,248 5.23 49,864 4.85
Commercial 46,101 1.99 47,273 3.68 52,090 5.07
Construction 16,090 0.69 19,984 1.55 13,860 1.35
Land 26,644 1.15 19,281 1.50 15,453 1.50
---------- ---------- ---------- --------- ---------- ---------
Total real estate
loans 2,224,964 95.88 1,211,003 94.15 975,375 94.90
---------- ---------- ---------- --------- ---------- ---------
Other loans:
Consumer loans:
Equity lines of
credit 79,193 3.41 66,710 5.19 46,451 4.52
Home equity loans 10,525 0.45 4,335 0.34 1,112 0.11
Other 4,110 0.18 2,652 0.20 2,471 0.24
---------- ---------- ---------- --------- ---------- ---------
Total consumer loans 93,828 4.04 73,697 5.73 50,034 4.87
Commercial business
loans 1,821 0.08 1,560 0.12 2,341 0.23
---------- ---------- ---------- --------- ---------- ---------
Total other loans 95,649 4.12 75,257 5.85 52,375 5.10
---------- ---------- ---------- --------- ---------- ---------
Total loans
receivable 2,320,613 100.00% 1,286,260 100.00% 1,027,750 100.00%
====== ====== ======
Less:
Loans in process 6,715 8,728 5,161
Unearned discounts,
premiums
and deferred loan
fees, net 3,245 882 2,818
Allowance for loan
losses 17,254 9,197 8,779
----------- ---------- ----------
Loans receivable, net $ 2,293,399 $ 1,267,453 $ 1,010,992
=========== ========== ==========
Mortgage-backed
securities:
GNMA held to maturity $ 3,637 - -
FHLMC held to maturity 157,468 31,560 38,789
FHLMC available for
sale 8,052 - -
FNMA held to maturity 32,044 16,296 19,283
FNMA available for
sale 13,565 - -
CMOs held to maturity 100,232 196,096 289,830
CMOs available for
sale 103,104 63,438 -
----------- ---------- ----------
Total mortgage-backed $ 418,102 307,390 347,902
=========== ========== ==========
</TABLE>
<TABLE>
At June 30,
---------------------------------------------
1993 1992
------------------- -------------------
Percent Percent
of of
Amount Total Amount Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Real estate loans:
One- to four-family:
Held for investment $735,526 74.77% $704,270 73.10%
Held for sale 68,165 6.93 51,233 5.32
Multi-family 46,043 4.68 47,871 4.96
Commercial 56,687 5.76 69,985 7.26
Construction 12,460 1.27 17,171 1.78
Land 17,873 1.82 17,976 1.88
-------- ------- -------- -------
Total real estate
loans 936,754 95.23 908,506 94.30
-------- ------- -------- -------
Other loans:
Consumer loans:
Equity lines of
credit 41,164 4.18 46,299 4.80
Home equity loans 2,040 0.21 4,266 0.44
Other 2,483 0.25 3,339 0.35
-------- ------- -------- -------
Total consumer loans 45,687 4.64 53,904 5.59
Commercial business
loans 1,241 0.13 1,046 0.11
-------- ------- -------- -------
Total other loans 46,928 4.77 54,950 5.70
-------- ------- -------- -------
Total loans
receivable 983,682 100.00% 963,456 100.00%
======= =======
Less:
Loans in process 7,592 5,480
Unearned discounts,
premiums
and deferred loan
fees, net 4,417 6,202
Allowance for loan
losses 7,993 5,736
-------- --------
Loans receivable, net $ 963,680 $ 946,038
======== ========
Mortgage-backed
securities:
GNMA held to maturity - -
FHLMC held to maturity 90,444 125,450
FHLMC available for
sale - -
FNMA held to maturity 40,445 74,627
FNMA available for
sale 4,108 9,326
CMOs held to maturity 227,175 111,953
CMOs available for
sale - -
-------- --------
Total mortgage-backed 362,172 321,356
securities ======== ========
</TABLE>
24
<PAGE>
The following table shows the composition of the Bank's fixed- and adjustable-
rate loan portfolio as well as the Bank's mortgage-backed securities portfolio
as of the dates indicated.
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------------------
1996 1995 1994
-------------------- ------------------- --------------------
Amount Percent Amount Percent Amount Percent
------- --------- -------- ------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Adjustable-rate loans:
Real estate:
One-to four-family held for investment $1,513,732 65.23% $ 728,383 56.63% $ 526,312 51.21%
Multi-family 68,058 2.93 63,030 4.90 46,927 4.57
Commercial 20,178 .87 25,245 1.96 29,391 2.86
Construction 11,812 .51 5,837 .45 5,978 .58
Land 14,872 .64 6,782 .53 4,214 .41
---------- ------ -------- ------ ---------- ------
Total adjustable-rate real estate loans 1,628,652 70.18 829,277 64.47 612,822 59.63
Consumer 79,883 3.44 66,775 5.19 46,518 4.53
Commercial business 911 .04 829 .07 2,219 .21
---------- ------ -------- ------ ---------- ------
Total adjustable-rate loans receivable 1,709,446 73.66 896,881 69.73 661,559 64.37
---------- ------ -------- ------ ---------- ------
Fixed-rate loans:
Real estate:
One-to four-family held for investment 518,370 22.34 303,850 23.62 309,057 30.07
One-to four-family held for sale 9,314 .40 24,984 1.94 8,739 .85
Multi-family 26,655 1.15 4,218 .33 2,937 .29
Commercial 25,923 1.12 22,028 1.71 22,699 2.21
Construction 4,278 .18 14,147 1.10 7,882 .77
Land 11,772 .51 12,499 .97 11,239 1.09
---------- ------ -------- ------ ---------- ------
Total fixed-rate real estate loans 596,312 25.70 381,726 29.67 362,553 35.28
Consumer 13,945 .60 6,922 .54 3,516 .34
Commercial business 910 .04 731 .06 122 .01
---------- ------ -------- ------ ---------- ------
Total fixed-rate loans receivable 611,167 26.34 389,379 30.27 366,191 35.63
---------- ------ -------- ------ ---------- ------
Total loans receivable 2,320,613 100.00% 1,286,260 100.00% 1,027,750 100.00%
====== ====== ======
Less:
Loans in process 6,715 8,728 5,161
Unearned discounts, premiums and
deferred loan fees, net 3,245 882 2,818
Allowance for loan losses 17,254 9,197 8,779
---------- -------- ---------- -
Loans receivable, net $2,293,399 $1,267,453 $ 1,010,992
=========== =========== ===========
Mortgage-backed securities:
Adjustable-rate $ 165,905 39.77% $ 102,614 33.42% $ 107,206 30.89%
Fixed-rate held by the Bank 207,032 49.63 183,924 59.91 214,687 61.87
Fixed-rate held by finance subsidiaries (1) 44,202 10.60 20,470 6.67 25,133 7.24
---------- ------ -------- ------ ---------- ------
Total mortgage-backed securities 417,139 100.00% 307,008 100.00% 347,026 100.00%
====== ====== ======
Plus unamortized premiums 963 382 876
---------- -------- ----------
Mortgage-backed securities, net $ 418,102 $ 307,390 $ 347,902
========== ========= =========
Summary:
Adjustable rate loans:
Loans receivable $ 1,709,446 63.46% $ 896,881 57.03% $ 661,559 49.02%
Mortgage-backed securities 165,905 6.16 102,614 6.52 107,206 7.94
---------- ------ -------- ------ ---------- ------
Total adjustable-rate loans 1,875,351 69.62 999,495 63.55 768,765 56.96
Fixed-rate loans:
Loans receivable 611,167 22.69 389,379 24.76 366,191 27.13
Mortgage-backed securities (2) 207,032 7.69 183,924 11.69 214,687 15.91
---------- ------ -------- ------ ---------- ------
Total fixed-rate loans 818,199 30.38 573,303 36.45 580,878 43.04
---------- ------ -------- ------ ---------- ------
Total loan portfolio (2) $ 2,693,550 100.00% $ 1,572,798 100.00% $ 1,349,643 100.00%
========== ====== ========= ====== ========= ======
- ---------------------------
</TABLE>
(1) See "Subsidiary activities - Mid America Finance Corporation and
Northwestern Acceptance Corporation."
(2) Excludes the fixed-rate mortgage-backed securities held by MAFC and NWAC,
which are duration matched.
25
<PAGE>
Loan Maturity
The following table shows the contractual maturity of the Bank's loan
portfolio at June 30, 1996. The table does not include principal repayments.
Principal repayments and prepayments on mortgage loans totaled $394.3 million,
$231.2 million, and $419.1 million, for the years ended June 30, 1996, 1995, and
1994, respectively.
<TABLE>
<CAPTION>
At June 30, 1996
--------------------------------------------------------------------------------
Real Estate Mortgage Loans Other loans
----------------------------------------------- ------------------
One-to Comm-
Four- Multi- Comm- Con- ercial
Family Family ercial struction Land Consumer Business Total
---------- ------- ------ --------- ------ -------- -------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amount due:
One year or less $ 1,459 299 746 13,119 503 2,383 517 19,026
---------- ------ ------ ------ ------ ------ -------- ----------
After one year:
1 year to 2 years 363 227 9 1,450 2,774 653 39 5,515
2 years to 3 years 691 2,297 8,058 1,521 18,669 1,384 198 32,818
3 years to 5 years 26,760 7,029 3,202 - 45 3,909 503 41,448
5 years to 10 years 152,406 13,457 10,229 - 1,231 51,300 564 229,187
10 years to 20 years 184,678 27,035 19,610 - 3,211 34,199 - 268,733
Over 20 years 1,665,745 44,369 4,247 - 211 - - 1,714,572
---------- ------ ------ ------ ------ ------ -------- ----------
Total after 1 year 2,030,643 94,414 45,355 2,971 26,141 91,445 1,304 2,292,273
---------- ------ ------ ------ ------ ------ -------- ----------
Total amount due $ 2,032,102 94,713 46,101 16,090 26,644 93,828 1,821 2,311,299
========== ====== ====== ====== ====== ====== ======== ==========
Less:
Loans in process 6,715
Deferred yield adjustments 3,245
Allowance for loan losses 17,254
----------
Total loans held for investment 2,284,085
Mortgage loans held for sale 9,314
----------
Total loans, net $2,293,399
==========
</TABLE>
The following table sets forth at June 30, 1996 the dollar amount of gross
loans receivable held for investment due after June 30, 1997, and whether such
loans have fixed interest rates or adjustable interest rates.
<TABLE>
<CAPTION>
Due After June 30, 1997
---------------------------------
Fixed Adjustable Total
---------- ---------- ---------
(In thousands)
<S> <C> <C> <C>
Real estate loans:
One-to four-family $ 498,213 1,532,430 2,030,643
Multi-family 26,623 67,791 94,414
Commercial 24,840 20,515 45,355
Construction 2,077 894 2,971
Land 6,535 19,606 26,141
Consumer 12,526 78,919 91,445
Commercial business 216 1,088 1,304
------- --------- ---------
Total loans receivable $ 571,030 1,721,243 2,292,273
======= ========= =========
</TABLE>
26
<PAGE>
Retail Residential Mortgage Lending. The Bank focuses its lending efforts
primarily on the retail origination of loans secured by first mortgages on
owner-occupied, one-to four-family residences. Residential loan originations are
generated by the Bank's marketing efforts, its present customers, walk-in
customers and referrals from real estate brokers and builders. The Bank's loan
officers are compensated primarily through commissions, based on the level of
loans originated in accordance with the Bank's lending standards. At June 30,
1996, the Bank's one-to four- family residential mortgage loans totaled $2.0
billion, or 88.0% of the Bank's total loans receivable. The Bank emphasizes the
origination of conventional ARM loans and short-term to maturity or repricing
and jumbo fixed-rate loans for retention in its portfolio and fixed-rate
conforming loans for sale in the secondary market. The Bank's retail
residential mortgage originations are predominantly in the Bank's market area.
During the year ended June 30, 1996, the Bank originated $120.7 million of
residential ARM loans, representing 21.9% of the total loans originated by the
Bank during that period. During the same period, the Bank originated $348.6
million of fixed-rate residential mortgage loans, representing 63.2% of the
total mortgage loans originated by the Bank during that period.
The Bank currently makes adjustable-rate one- to four-family residential
mortgage loans. The Bank also offers FHA and VA guaranteed loans, although at
June 30, 1996, such loans represented less than 1.5% of the Bank's total loans
receivable. The Bank currently offers a number of ARM loan programs under which
the interest rate may be fixed for the initial one-, three-, five- or seven-year
period. Most of the Bank's residential ARM loans adjust on an annual basis
following the initial one-, three- or five-year fixed-rate period. The Bank
also offers ARM loans that are fixed for an initial five- or seven-year period
that reprice once at the end of the initial period for the remaining 25 or 23
year term based on a spread above the weekly average of U.S. Treasury securities
adjusted to a constant maturity of ten years (the "ten year Treasury constant
maturity index"). The Bank's ARM loans generally carry an initial interest rate
which is less than the fully indexed rate for the loan. The initial discount
rate is determined by the Bank in accordance with market and competitive
factors. After the initial fixed-rate period, the interest rates on the ARM
loans that adjust annually reprice based on a spread above the published weekly
average yield on United States Treasury securities, adjusted to a constant
maturity of one year (the "one-year Treasury constant maturity index").
Interest rates and origination fees on ARM loans are priced to be competitive in
the local market. These loans are subject to limitations on annual interest
rate adjustments of 2%, as well as a lifetime interest rate cap adjustment of
either 6% or 7%, and are originated for terms of up to 30 years. At June 30,
1996, the weighted average term to repricing of the Bank's ARM loan portfolio
was 1.72 years.
The Bank also offers fixed-rate mortgage loans with terms to maturity of 10,
15, 20 and 30 years and fixed-rate balloon loans that mature after seven years.
The Bank's fixed-rate loan products offer a monthly or bi-weekly repayment
option. Interest rates charged on fixed-rate loans are competitively priced on
a daily basis based on secondary market prices and market conditions. The Bank
generally originates its fixed-rate mortgage loans in a form consistent with
secondary market standards.
The Bank's residential mortgage loans customarily include due-on-sale clauses
giving the Bank the right to declare the loan immediately due and payable in the
event, among other things, the borrower sells or otherwise disposes of the
property subject to the mortgage and the loan is not repaid. The Bank has
enforced due-on-sale clauses in its mortgage contracts for the purpose of
increasing its loan portfolio yield, often through the authorization of
assumptions of existing loans at higher rates of interest and the imposition of
assumption fees. ARM loans may be assumed provided home buyers meet the Bank's
underwriting standards and the applicable fees are paid.
Loan applications are reviewed in accordance with the underwriting standards
approved by the Bank's Board of Directors and which generally conform to FNMA
standards. Loans in excess of $500,000 must be approved by a senior officer and
loans in excess of $1.0 million must be approved by the Loan Committee of the
Board of Directors. In underwriting residential real estate loans, the Bank
evaluates both the borrower's ability to make monthly payments and the value of
the property securing the loan. Potential
27
<PAGE>
borrowers are qualified for ARM loans and fixed-rate loans based on the initial
or stated rate of the loan, except for one-year ARM loans with a loan-to-value
ratio in excess of 70% and a term greater than 15 years, in which case the
borrower is qualified at 2% above the initial note rate.
Upon receipt of a completed loan application from a prospective borrower,
credit reports are ordered and income, employment and financial information is
verified in accordance with FNMA standards. An appraisal of the real estate
intended to secure the proposed loan is undertaken by a Bank appraiser or an
independent appraiser previously approved by the Bank. It is the Bank's policy
to obtain title insurance on all mortgage loans. Borrowers also must obtain
hazard (including fire) insurance prior to closing. The Bank also requires
flood insurance on a property located in special flood hazard areas. Borrowers
are required to advance funds on a monthly basis together with each payment of
principal and interest through a mortgage escrow account from which the Bank
makes disbursements for items such as real estate taxes and hazard insurance
premiums as they become due. The Bank has adopted a policy of limiting the
loan-to-value ratio on originated loans and refinanced loans to 95% and
requiring that loans exceeding 80% of the appraised value of the property or its
purchase price, whichever is less, be insured by a mortgage insurance company
approved by the FNMA in an amount sufficient to reduce the Bank's exposure to no
greater than the 75% level. Despite the benefits of ARM loans to the Bank's
asset/liability management program, they do pose potential additional risks,
primarily because as interest rates rise, the underlying payment requirements of
the borrower rise, thereby increasing the potential of default.
Wholesale Residential Lending. In 1994, the Bank commenced a wholesale loan
origination division which purchases loans from brokers and correspondents for a
broker fee ranging from 1.25% to 1.50%. Generally, the Bank offers the same type
of loan products, both fixed-rate and adjustable-rate loans, at interest rates
similar to those it offers on retail originations. The purchase of these loans
does not necessitate the Bank to incur the processing costs associated with its
retail originations. The Bank acts as the supplier of funds for the mortgage
broker who is responsible for the processing and closing of the loan. The Bank
performs its normal underwriting procedures on wholesale originated loans
similar to retail loans, and can refuse to purchase any loan which does not meet
its underwriting criteria. Wholesale originations were $360.9 million in 1996,
compared to $156.3 million in 1995.
Purchased Loans. At June 30, 1996, the Bank had $664.5 million of purchased
residential mortgage loans, nearly all of which were acquired as part of the
acquisition of NSBI. The Bank does not intend to continue Northwestern's
strategy of purchasing out-of-state loans. The vast majority of purchased
loans are secured by properties which serve as the primary residence of the
borrower, and which are located primarily in metropolitan areas located in 46
states and the District of Columbia. At June 30, 1996, purchased loans were
being serviced by approximately 135 companies, the largest of which serviced
$129.3 million, or 19.4% of total purchased loans at that date. The loans in
this portfolio had to meet Northwestern's underwriting standards, which were
similar to the Bank's in that underwriting needed to follow FNMA and FHLMC
guidelines. One variation from these guidelines is that loans exceeding FNMA
and FHLMC limits could be purchased up to $400,000 with a loan-to-value-ratio of
80% or less, and up to $300,000 with a loan-to-value ratio of 90% or less with
private mortgage insurance. At June 30, 1996, $415.5 million, or 62.5% of the
loans in the purchased loan portfolio are in excess of the current FNMA limit of
$207,000. In addition to these underwriting guidelines, original executed
promissory notes with proper endorsements are in the possession of the Bank.
Construction and Land Lending. The Bank originates loans to finance the
construction of one-to four-family residences, primarily in its market area. At
June 30, 1996, the Bank had $16.4 million of loans to finance the construction
of one- to four-family residences. The Bank also originates loans for the
acquisition and development of unimproved property to be used primarily for
residential purposes in cases where the Bank is to provide the construction
funds to improve the properties. At June 30, 1996, the Bank's construction and
land loans totaled $42.7 million, or 1.8%, of total loans receivable.
28
<PAGE>
The Bank finances the construction of primarily individual, owner-occupied
houses where qualified contractors are involved and on the basis of underwriting
and construction loan guidelines. Construction loans are structured either to
be converted to permanent loans at the end of the construction phase or to be
paid off upon receiving financing from another financial institution.
Construction loans are based on the appraised value of the property, as
determined by an independent appraiser, and an analysis of the potential
marketability and profitability of the project. Construction loans generally
have terms of up to 12 months, with extensions as needed. Loan proceeds are
disbursed in increments as construction progresses and as inspections warrant.
Land loans include loans to developers for the development of residential
subdivisions and loans on improved lots to builders and individuals. At June
30, 1996, the Bank had land loans to developers totaling $14.1 million. At June
30, 1996, the largest aggregate amount of land acquisition and development loans
to a single developer amounted to $11.8 million. Loans to developers are short-
term loans with terms of three to five years. The loan-to-value ratio may not
exceed 80% and generally is less than 75%. The majority of such loans are at
fixed interest rates, although the Bank offers an ARM loan product with interest
rates which adjust based on a stated percentage over the prime rate. Loans
generally are made to customers of the Bank and developers with whom the Bank
has had long-standing relationships. The Bank requires an independent appraisal
of the property and feasibility studies may be required to determine the profit
potential of the development project. All of the Bank's land loans to
developers have been made in the Chicago metropolitan area.
Land loans are also made to local builders for the purchase of improved lots.
At June 30, 1996, the Bank had land loans outstanding to local builders totaling
$8.2 million. Such loans are generally for terms of up to three years and are
made at the prevailing fixed interest rates quoted for 30-year fixed-rate
residential mortgage loans. The loan-to-value ratio on such loans is limited to
80%. Land loans for the purchase of fully improved lots are also made to
individuals. At June 30, 1996, the Bank had land loans to individuals totaling
$4.3 million. Such loans are made for up to 15-year terms with adjustable
interest rates which are generally higher than those granted for one- to four-
family residential ARM loans. The loans adjust in accordance with the one-year
Treasury constant maturity index and are underwritten in accordance with the
same standards used for residential ARM loans.
Construction and land loans afford the Bank the opportunity to increase the
interest rate sensitivity of its loan portfolio and to receive yields higher
than those obtainable on ARM loans secured by existing residential properties.
These higher yields correspond to the higher risks associated with construction
lending. Construction loans involve additional risks attributable to the fact
that loan funds are advanced upon the security of the project under
construction, which is of uncertain value prior to its completion. Because of
the uncertainties inherent in estimating construction costs as well as the
market value of the completed project and the effects of governmental regulation
of real property, it is relatively difficult to evaluate accurately the total
funds required to complete a project and the related loan-to-value ratio. As a
result of the foregoing, construction lending often involves the disbursement of
substantial funds with repayment dependent, in part, on the success of the
ultimate project rather than the ability of the borrower or guarantor to repay
principal and interest. If the Bank is forced to foreclose on a project prior
to or at completion due to a default, there can be no assurance that the Bank
will be able to recover all of the unpaid balance of, and accrued interest on,
the loan as well as related foreclosure and holding costs. In addition, the
Bank may be required to fund additional amounts to complete the project and may
have to hold the property for an unspecified period of time. The Bank has
attempted to address these risks through its underwriting procedures and its
limited amount of construction lending on multi-family and commercial real
estate properties.
29
<PAGE>
Multi-family Lending. The Bank originates multi-family residential mortgage
loans in its market area. At June 30, 1996, the Bank multi-family loans of $94.7
million, including a portfolio of purchased participating interests of $2.2
million related to low-income housing. Multi-family loans represent 4.1% of
total loans receivable at June 30, 1996. ARM loans represented 71.9% of the
multi-family residential loan portfolio at June 30, 1996. Such loans are
offered with initial fixed-rate periods of one, three, five, seven and ten
years. Multi-family residential mortgage loans are made for terms to maturity
of up to 30 years and carry a loan-to-value ratio not greater than 80%. The
Bank requires a positive net operating income to debt service ratio for loans
secured by multi-family residential property. Loans secured by non-owner
occupied properties of more than six units are qualified on the basis of rental
income generated by the property. On loans secured by owner-occupied properties
of six units or less, the Bank will qualify the borrower on the basis of the
borrower's personal income and rental income generated by the property.
Commercial Real Estate Lending. In connection with the Bank's policy of
maintaining an interest-rate sensitive loan portfolio, the Bank has originated
loans secured by commercial real estate, which generally carry a higher yield
and are made for a shorter term than fixed-rate one- to four-family residential
loans. At June 30, 1996, the Bank had $46.1 million of commercial real estate
loans. The Bank's policy has been to curtail the origination of additional
commercial real estate loans. Commercial real estate loans are generally
granted in amounts up to 80% of the appraised value of the property, as
determined by an independent appraiser previously approved by the Bank. The
Bank's commercial real estate loans are secured by improved properties located
in the Chicago metropolitan area. The Bank often requires borrowers to provide
their personal guarantees on loans made for commercial real estate.
Loans secured by commercial real estate properties are generally larger and
involve a greater degree of risk than residential mortgage loans. Because
payments on loans secured by commercial real estate properties are often
dependent on the successful operation or management of the properties, repayment
of such loans may be subject to adverse conditions in the real estate market or
the economy. The Bank seeks to minimize these risks by lending primarily on
existing income-producing properties and generally restricting such loans to
properties in the Chicago area. The Bank analyzes the financial condition of
the borrower and the reliability and predictability of the net income generated
by the security property in determining whether to extend credit. In addition,
the Bank generally requires a net operating income to debt service ratio of at
least 1.15 times.
A loan with an outstanding balance of $6.0 million at June 30, 1996 represents
the Bank's largest single commercial real estate loan to one borrower. The loan
is on a shopping center located in Carol Stream, Illinois and is current as to
the payment of principal and interest at June 30, 1996. At June 30, 1996, the
Bank's ten largest commercial real estate loans totaled $29.3 million, all but
one of which are current and performing in accordance with their original or
restructured terms. See "Asset Quality and Allowance for Loan Losses".
Other Lending. The Bank's other lending activities consist of consumer
lending, primarily home equity lines of credit, and to a lesser extent,
commercial business lending. On June 30, 1996, outstanding balances on home
equity lines represented $79.2 million or 3.4% of the Bank's total loan
portfolio. Home equity lines of credit are extended up to 80% of the appraised
value of the property, less existing liens, at an interest rate of a designated
prime rate plus 1.5%, some of which are subject to floors. To a lesser extent,
the Bank offers home equity lines of credit at greater than 80% of the appraised
value of the property up to 100% of the appraised value. Interest rates on
greater than 80% loan-to-value lines of credit range from prime plus 2.0% to
prime plus 3.5%. The Bank uses the same underwriting standards for home equity
lines of credit as it uses for residential mortgage loans. Other home equity
lending consists of $10.5 million of fixed-rate, second mortgage loans with
original maturities of fifteen years or less.
At June 30, 1996, the Bank's loan portfolio included other loans amounting to
$5.9 million, which consisted of $1.2 million of automobile loans, $1.3 million
of savings account loans, and $3.4 million of
30
<PAGE>
commercial business loans, student loans and other loans. In addition, at June
30, 1996, the Bank had $18.4 million in standby letters of credit, one of which
totals $6.5 million to enhance a developer's industrial revenue bond financing
of commercial real estate located in the Bank's market area. The Bank's second
mortgage on this commercial real estate parcel has been restructured. See "Asset
Quality and Allowance for Loan Losses"
Environmental Issues. The Bank encounters certain environmental risks in its
lending activities. Under federal and state environmental laws, lenders may
become liable for the costs of cleaning up hazardous materials found on security
property. Although environmental risks are usually associated with industrial
and commercial loans, risks may be substantial for residential lenders like the
Bank if environmental contamination makes security property unsuitable for use.
This could also have effect on nearby property values. In accordance with FNMA
and FHLMC guidelines, appraisals for single-family residences on which the Bank
lends include comment on environmental influences. The Bank attempts to control
its risk by training its appraisers and underwriters to be cognizant of signs
indicative of environmental hazards. No assurance can be given, however, that
the values of properties securing loans in the Bank's portfolio will not be
adversely affected by unforeseen environmental risks, although the Bank is
unaware of any environmental issues which would subject it to liability at this
time.
Originations, Purchases, Sales, Swaps of Mortgage Loans and Mortgage-Backed
Securities. The Bank originates and purchases both ARM and fixed-rate loans.
Its ability to originate loans is dependent upon the relative customer demand
for fixed-rate or ARM loans in the origination and purchase market, which is
affected by the term structure (short-term compared to long-term) of interest
rates as well as the current and expected future level of interest rates. The
Bank sells loans in the secondary mortgage market, primarily conforming fixed-
rate mortgages, to reduce its interest rate risk exposure. Substantially all of
these loans are sold without recourse. These loan sales also allow the Bank to
continue to make loans when deposit flows decline or funds are not otherwise
available for lending. Generally, the loans are sold for cash or securitized
and sold in the secondary mortgage market to investors such as FNMA and FHLMC,
as well as investment banks and life insurance companies.
The Bank has also exchanged or swapped loans out of its portfolio for
mortgage-backed securities primarily with FNMA and FHLMC. Generally, the
mortgage-backed securities are used to collateralize borrowings and deposits or
are sold in the secondary market to raise additional funds. Swap activity by
the Bank is governed by pricing levels in the secondary mortgage market for
whole mortgage loans versus securitized mortgage loans, as well as the level of
rates for collateralized borrowings. During the current year, the Bank swapped
and sold $41.2 million of loans originated, while in 1995, it had no swap
activity.
The Bank has purchased mortgage-backed securities and collateralized mortgage
obligations from time to time that coincide with its ongoing asset/liability
management objectives. Purchases were minimal in 1996 and 1995 due to the high
level of originations of adjustable-rate loans which more than utilized the
Bank's available funds. In 1994, the Bank relied more on purchases of
mortgage-backed securities due to the fixed-rate nature of the Bank's
origination activity. The purchases were generally comprised of short-term
fixed-rate CMOs with estimated weighted average lives in the two to five year
range, and adjustable-rate CMOs.
All of the mortgage-backed securities and CMOs in the Bank's portfolio are
issued by or have collateral backed by FNMA, FHLMC or GNMA, or are backed with
whole loan collateral and have an investment grade rating. Coupon rates at June
30, 1996, ranged from 4.83% to 16.25%. At June 30, 1996, mortgage-backed
securities, net, totaled $418.1 million, or 13.4% of total assets, including
$44.3 million which collateralized CMOs issued by the Bank's special purpose
finance subsidiaries. At June 30, 1996, the Bank's mortgage-backed securities
portfolio had a market value of $415.0 million, including $43.8 million related
to the CMO's issued by the Bank's special-purpose finance subsidiaries.
31
<PAGE>
The following table sets forth the Bank's originations, purchases, sales,
swaps and principal repayments of loans receivable and mortgage-backed
securities for the periods indicated.
<TABLE>
<CAPTION>
For the Year Ended June 30,
-----------------------------------
1996 1995 1994
-------------- -------- ---------
(In thousands)
<S> <C> <C> <C>
Loans receivable:
Loans originated:
Adjustable-rate:
Real estate:
One-to four-family $ 120,747 184,874 201,464
Multi-family 16,061 20,425 9,593
Commercial 340 190 679
Construction 20,642 9,142 16,200
Land 19,134 12,528 3,018
Other loans:
Commercial business 811 450 167
Consumer 63,795 57,803 47,461
---------- ------- --------
Total adjustable-rate 241,530 285,412 278,582
Fixed-rate:
Real estate:
One-to four-family 348,629 101,100 466,136
Multi-family 10,847 1,989 832
Commercial 1,052 571 2,894
Construction 6,890 25,171 15,506
Land 7,439 8,433 14,484
Other loans - consumer 10,301 5,861 1,812
---------- ------- --------
Total fixed-rate 385,158 143,125 501,664
---------- ------- --------
Total loans originated 626,688 428,537 780,246
Loans purchased:
Fixed-rate one-to four-family real estate 93,270 31,221 12,071
Adjustable-rate one-to four-family real
estate 267,645 125,054 20,730
Other 2,151 1,070 642
---------- ------- --------
Total loans purchased 363,066 157,345 33,443
---------- ------- --------
Total loans originated and purchased 989,754 585,882 813,689
---------- ------- --------
Loans acquired through merger 749,740 - -
Loans sold:
One-to four-family (fixed rate) 267,352 92,725 341,614
Consumer loans 1,805 2,466 2,069
---------- ------- --------
Total loans sold 269,157 95,191 343,683
FHLMC and FNMA mortgage loan swaps 41,195 - 4,835
Transfer to foreclosed real estate 515 1,016 2,041
Amortization and prepayments 394,274 231,165 419,062
---------- ------- --------
Total loans sold, loan swaps,
amortization and prepayments 705,141 327,372 769,621
---------- ------- --------
Net increase during period $ 1,034,353 258,510 44,068
========== ======= ========
Mortgage-backed securities:
Mortgage-backed securities purchased $ - 10,000 170,623
Mortgage-backed securities acquired
through merger 181,144 - -
Mortgage-backed securities swaps 41,195 - 4,835
Mortgage-backed securities sold (41,195) - (8,170)
Amortization and prepayments (69,790) (49,583) (182,930)
---------- ------- --------
Net increase (decrease) during period $ 111,354 (39,583) (15,642)
========== ======= ========
</TABLE>
32
<PAGE>
Servicing of Mortgage Loans. Upon sale, the Bank normally retains the
responsibility for collecting and remitting loan payments, inspecting properties
securing the loans, assuring that real estate tax payments are made on behalf of
borrowers, and otherwise servicing the loans. Typically, the Bank receives a
servicing fee for performing the aforementioned services equal to at least 1/4
of 1% for fixed-rate mortgages and at least 3/8 of 1% for ARM loans on the
outstanding principal balance of the sold loan being serviced.
The following table sets forth information as to the Bank's loan servicing
portfolio, excluding loans owned by the Bank which are serviced by others. The
increase in loans serviced for others in 1996 was due to the increase in loan
sale volume, while in 1995 the increase was primarily due to bulk purchase of
servicing rights on $66.8 million of loans.
<TABLE>
<CAPTION>
At June 30,
-----------------------------------------------------------------
1996 1995 1994
------------------- ------------------- ------------------
Amount Percent Amount Percent Amount Percent
-------- ------- ------ ------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans owned by the Bank $ 1,646,710 61.28 $ 1,277,532 59.00% $ 1,022,589 55.38%
Loans serviced for others 1,040,260 38.72 887,887 41.00 823,924 44.62
---------- ------ ---------- ------ ---------- ------
Total loans serviced $ 2,686,970 100.00% $ 2,165,419 100.00% $ 1,846,513 100.00%
========== ====== ========== ====== ========= ======
</TABLE>
Information regarding the Bank's servicing fee income from loans serviced for
others is summarized in the following table for the periods indicated:
<TABLE>
<CAPTION>
For the Year Ended June 30,
-------------------------------
1996 1995 1994
--------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Average balance of loans serviced for others $963,757 $881,050 $813,111
Loan servicing income 2,394 2,373 2,456
Net servicing spread during the period (1) .25% .27% .30%
</TABLE>
- -------------------------------------------------------------------------------
(1) Loan servicing income divided by the average daily balance of loans
serviced for others.
Asset Quality and Allowance for Loan Losses
When a borrower fails to make a required payment by the end of the month in
which the payment is due, the Bank generally institutes collection procedures.
The Bank will send a late notice, and in most cases, delinquencies are cured
promptly; however, if a loan has been delinquent for more than 60 days, the Bank
contacts the borrower in order to determine the reason for the delinquency and
to effect a cure, and, where appropriate, reviews the condition of the property
and the financial circumstances of the borrower. Based upon the results of any
such investigation, the Bank may: (1) accept a repayment program for the
arrearage from the borrower; (2) seek evidence, in the form of a listing
contract, of efforts by the borrower to sell the property if the borrower has
stated that he is attempting to sell; (3) request a deed in lieu of foreclosure;
or (4) initiate foreclosure proceedings. When a loan payment is delinquent for
three or more monthly installments, the Bank will initiate foreclosure
proceedings. Interest income on loans is reduced by the full amount of accrued
and uncollected interest on loans which are in process of foreclosure or
otherwise determined to be uncollectible.
33
<PAGE>
On July 1, 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan,"
and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures," which impose certain requirements on the
identification and measurement of impaired loans. A loan is considered impaired
when, based on current information and events, it is probable that a creditor
will be unable to collect all amounts due according to the contractual terms of
the loan. For loans which are not individually significant (i.e. loans under
$500,000), and represent a homogeneous population, the Bank evaluates impairment
collectively based on management reports on the level and extent of
delinquencies, as well as historical loss experience for these types of loans.
The Bank uses this criteria on one-to four-family residential loans, consumer
loans, multi-family residential loans, and land loans. Impairment for loans
considered individually significant and commercial real estate loans are
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate, or the fair value of the collateral if the
loan is collateral dependent. At June 30, 1996, and throughout the year, the
Company had no loans which are considered impaired under the criteria of SFAS
No. 114. Charge-offs of principal occur when a loss has deemed to have occurred
as a result of the book value exceeding the fair value or net realizable value.
The Company's policy for recognition of interest income on impaired loans is
unchanged as a result of the adoption of SFAS No. 114 and 118. A loan (whether
considered impaired or not) is classified as non-accrual when collectibility is
in doubt, and is normally analyzed upon the borrower becoming 90 days past due
on contractual principal or interest payments. When a loan is placed on non-
accrual status, or in the process of foreclosure, previously accrued but unpaid
interest is reversed against interest income. Income is subsequently recorded
to the extent cash payments are received, or at a time when the loan is brought
current in accordance with its original terms.
Delinquent Loans. At June 30, 1996, 1995 and 1994, delinquencies in the
Bank's portfolio were as follows:
<TABLE>
<CAPTION>
61-90 Days 91 or More Days
------------------------------ -------------------------------
Principal Principal
Number Balance of Percent Number Balance of Percent
of Delinquent of of Delinquent of
Loans Loans Total(1) Loans Loans Total(1)
------ ---------- ---------- ------ ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
June 30, 1996 24 $3,107 .14% 38 $5,504 .24%
== ====== === == ====== ===
June 30, 1995 10 $1,077 .09% 30 $2,564 .20%
== ====== === == ====== ===
June 30, 1994 21 $1,534 .15% 41 $3,837 .38%
== ====== === == ====== ===
- --------------------
</TABLE>
(1) Percentage represents principal balance of delinquent loans to total loans
outstanding.
34
<PAGE>
The following table sets forth information regarding non-accrual loans, loans
which are 91 days or more delinquent but on which the Bank is accruing interest,
non-accrual investment securities, and foreclosed real estate held by the Bank
at the dates indicated.
<TABLE>
<CAPTION>
At or For the Year Ended June 30,
------------------------------------------
1996 1995 1994 1993 1992
------- ------ ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
One-to four-family and multi-family loans:
Non-accrual loans (1) $ 5,415 1,972 2,933 3,796 3,622
Accruing loans 91 or more days overdue 1,940 555 482 702 2,086
------- ----- ------ ------ ------
Total 7,355 2,527 3,415 4,498 5,708
------- ----- ------ ------ ------
Commercial real estate, construction and land loans:
Non-accrual loans (1) 433 - 312 - 1,269
Accruing loans 91 or more days overdue 459 100 118 659 104
Restructured or renegotiated 4,299 4,379 4,464 6,933 6,953
------- ----- ------ ------ ------
Total 5,191 4,479 4,894 7,592 8,326
------- ----- ------ ------ ------
Other loans:
Non-accrual loans (1) 287 168 163 419 256
Accruing loans 91 or more days overdue - - 24 15 54
------- ----- ------ ------ ------
Total 287 168 187 434 310
------- ----- ------ ------ ------
Total non-performing loans:
Non-accrual loans (1) 6,135 2,140 3,408 4,215 5,147
Accruing loans 91 or more days overdue 2,399 655 624 1,376 2,244
Restructured or renegotiated 4,299 4,379 4,464 6,933 6,953
------- ----- ------ ------ ------
Total $ 12,833 7,174 8,496 12,524 14,344
======= ===== ====== ====== ======
Non-accrual loans to total loans .27% .17% .33% .46% .57%
Accruing loans 91 or more days overdue to total loans .10 .05 .06 .15 .25
Restructured or renegotiated to total loans .19 .35 .44 .76 .76
----- --- ---- ---- ----
Non-performing loans to total loans .56% .57% .83% 1.37% 1.58%
===== === ==== ==== ====
Foreclosed real estate:
One-to four-family $ 888 311 1,379 386 333
Commercial real estate - 25 2,090 6,544 8,973
------- ----- ------ ------ ------
Total foreclosed real estate, net of related reserves $ 888 336 3,469 6,930 9,306
======= ===== ====== ====== ======
Non-accrual mortgage-derivative securities - - - - 526
======= ===== ====== ====== ======
Total non-performing assets $ 13,721 7,510 11,965 19,454 24,176
======= ===== ====== ====== ======
Total non-performing assets to total assets .44% .42% .75% 1.26% 1.60%
====== ==== ===== ===== =====
</TABLE>
- ---------------------
(1) Consists of loans in the process of foreclosure or for which interest is
otherwise deemed uncollectible.
For the year ended June 30, 1996, 1995, 1994, 1993 and 1992, the amount of
interest income that would have been recorded on non-accrual loans amounted to
$132,000, $98,000, $168,000, $472,000, and $947,000, respectively, if the loans
had been current. For the year ended June 30, 1996, interest income on non-
accrual loans and troubled debt restructurings that was included in net income
amounted to $297,000.
Included in the $5.2 million of non-performing commercial real estate,
construction and land loans at June 30, 1996 are two loans totaling $4.3 million
representing restructured or renegotiated loans which meet the definition of
troubled debt restructurings under SFAS No. 15 "Accounting by Debtors and
Creditors for Troubled Debt Restructurings." These restructured or renegotiated
loans were earning an average rate of 6.48% at June 30, 1996, compared to 6.41%
at June 30, 1995.
35
<PAGE>
Classified Assets. The federal regulators have adopted a classification
system for problem assets of insured institutions which covers all problem
assets. Under this classification system, problem assets of insured
institutions are classified as "substandard," "doubtful" or "loss." An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified, "substandard," with the added characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.
Assets classified as substandard at June 30, 1996 and 1995, are summarized as
follows:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------------------ ------------------------
Number of Number of
Loans Amount Loans Amount
--------- ------ --------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Loans receivable:
One-to four-family and multi-family 55 $ 7,355 26 $ 2,527
Commercial, construction and land 5 5,191 4 4,479
Equity line of credit 12 287 7 163
Consumer-secured - - 1 5
--- ------- --- ------
72 12,833 38 7,174
=== ===
Foreclosed real estate 888 336
------- ------
$ 13,721 $ 7,510
======= ======
</TABLE>
When an insured institution classifies problem assets as either substandard or
doubtful, it is required to establish general allowances for loan losses in an
amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but, unlike specific allowances, have not been
allocated to particular problem assets. When an insured institution classifies
problem assets as "loss," it is required either to establish a specific
allowance for losses equal to 100% of the amount of the asset so classified or
to charge off such an amount. An institution's determination as to the
classification of its assets and the amount of its valuation allowances is
subject to review by the institution's Principal Supervisory Agent of the OTS,
who can order the establishment of additional general or specific loss
allowances.
In connection with the filing of its periodic reports with the OTS, the Bank
regularly reviews the problem loans in its portfolio to determine whether any
loans require classification in accordance with applicable regulations. At June
30, 1996 and 1995, the Bank had no loans classified as doubtful or loss. At
June 30, 1996, all non-performing loans are classified as substandard. The Bank
also considers the classification of investment securities, should such
securities show signs of deteriorating quality.
Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity. Such evaluation, which includes a review of all loans of which full
collectibility may not be reasonably assured, considers among other matters, the
estimated net realizable value of the underlying collateral, economic
conditions, historical loan loss experience and other factors that warrant
recognition in providing for an adequate loan loss allowance.
36
<PAGE>
The following table sets forth the Bank's allowance for loan losses at the
dates indicated. The balances below represent general loan loss reserves and
are not allocable to any one type of loan in the Bank's loan portfolio.
<TABLE>
<CAPTION>
At June 30,
----------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 9,197 8,779 7,993 5,736 1,888
Charge-offs:
One-to four-family (376) (72) (223) (221) (125)
Commercial - (7) - (196) (125)
Construction - - (112) - -
Land - - - - -
Consumer - (31) (82) (30) (31)
------- ------- ------ ----- -----
(376) (110) (417) (447) (281)
------- ------ ------ ----- -----
Recoveries:
One-to four-family - - - - 19
Commercial 10 - - - -
Construction - 49 - - -
Consumer 1 4 3 4 10
------- ------ ------ ----- -----
11 53 3 4 29
------- ------ ------ ----- -----
Net charge-offs (365) (57) (414) (443) (252)
Provision for loan losses 700 475 1,200 2,700 4,100
Balance related to acquisition 7,722 - - - -
------- ------ ------ ----- -----
Balance at end of period $17,254 9,197 8,779 7,993 5,736
======= ====== ====== ===== =====
Ratio of net charge-offs to
average loans outstanding .03% .01 .04 .05 .03
Ratio of allowance for loan losses to total
loans receivable .75 .73 .86 .87 .63
Ratio of allowance for loan losses to total
non-performing loans 134.45 128.20 103.33 63.82 39.99
Ratio of allowance for loan losses to total
non-performing assets 125.75 122.46 73.37 41.09 23.73
</TABLE>
At June 30, 1996, the Bank maintained no specific reserves on its loan
portfolio. As such, the $17.3 million allowance for loan losses, based on
currently available information, is a general reserve. As of June 30, 1996,
management is unaware of any specifically identifiable charge-offs in its loan
portfolio. Assuming no significant adverse changes in existing market
conditions, management anticipates charge-offs in fiscal 1996 to increase
moderately over historical amounts as a result of the acquisition of NSBI.
However, no assurances can be made that charge-offs will not be less than or
exceed this estimate if facts or circumstances change in the future.
37
<PAGE>
At June 30, 1996, the Bank's loan portfolio consists of 88.0% of one-to four-
family real estate loans, with an additional 3.9% being equity lines of credit
or home equity loans on one-to four-family real estate. Based on the Bank's
historical high asset quality, low charge-off experience and concentration on
one-to four-family lending in its market area, management considers the risk of
loss due to these loans as minimal. The remaining 8.1% of the Bank's portfolio,
or $189.5 million, consists of multi-family mortgage, commercial real estate,
construction, land, and other loans. These loans generally tend to exhibit
greater risk of loss than do one-to four-family loans, primarily because such
loans typically carry higher loan balances and repayment is dependent, in large
part, on sufficient income to cover operating expenses. In addition, economic
events and government regulations, which are outside the control of the Bank and
the borrower, could impact the security of the loan or the future cash flow of
affected properties. Management has addressed these risks through its
underwriting standards.
With respect to multi-family loans, the Bank has traditionally limited its
lending to small apartment buildings, which management believes lower risk than
larger properties. At June 30, 1996, in the Bank's $94.7 million multi-family
portfolio, only 7 loans are on properties greater than 36 units and the average
multi-family loan size is $246,000. In addition, almost all of the Bank's
construction and land loans are on residential property. All of the Bank's
multi-family, construction and land loans are secured by properties located in
the Chicago metropolitan area.
Investment Activities
Federally chartered savings institutions have the authority to invest in
various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies, certain certificates of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements and federal funds. Subject to various restrictions, federally
chartered savings institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally chartered savings institution is otherwise
authorized to make directly.
Generally, the investment policy of the Bank is to invest funds among various
categories of investments and maturities based upon the Bank's asset/liability
management policies, investment quality and marketability, liquidity needs and
performance objectives.
The Bank is required to maintain liquid assets at minimum levels. See
"Regulation and Supervision - Federal Savings Institution Regulation -
Liquidity." The Bank's liquid investments include interest-bearing deposits,
primarily at the Federal Home Loan Bank of Chicago, federal funds sold and U.S.
Government and federal agency obligations. The Bank invests overnight federal
funds with two large commercial banks in Chicago, based upon periodic review of
these institutions' financial condition. The Bank generally limits overnight
federal funds to amounts ranging up to $25.0 million at each institution.
38
<PAGE>
The table below sets forth information regarding the carrying value, weighted
average yields and maturities of the Company's investment securities.
<TABLE>
<CAPTION>
At June 30, 1996
----------------------------------------------------------------------------------
One Year 1 to 5 to More than
or Less 5 Years 10 Years 10 Years
------------------- ------------------- ------------------- -------------------
Weighted Weighted Weighted Weighted
Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield
-------- --------- -------- --------- -------- --------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and agency
securities:
Held for investment $47,301 7.31% $10,000 4.25% $19,646 7.17% $24,321 7.69 %
Available for sale 10,982 5.24 12,839 5.38 - - - -
Marketable equity securities (1):
Common stock - - - - - - 1,704 2.47
Preferred stock - - - - - - 10,868 9.26
Other investment securities:
Held for investment 957 5.35 - - - - 1 5.00
Available for sale - - - - 1,903 7.79 - -
------- ------- ------- -------
Total $ 59,240 6.89% $ 22,839 4.88% $ 21,549 7.22% $ 36,894 7.91%
======= ===== ======= ==== ======= ==== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Total Investment Securities
---------------------------------------
Average Weighted
Life Carrying Market Average
in Years Value Value Yield
-------- -------- -------- --------
<S> <C> <C> <C> <C>
U.S. Government and agency
securities:
Held for investment 5.39 $101,268 $101,143 7.08%
Available for sale 1.40 23,821 23,821 5.31
Marketable equity securities (1):
Common stock - 1,704 1,704 2.47
Preferred stock - 10,868 10,868 9.26
Other investment securities:
Held for investment .06 958 958 5.35
Available for sale 6.90 1,903 1,903 7.79
-------- --------
Total 4.66 $140,522 $140,397 6.89%
====== ======== ======== =======
</TABLE>
- ------------------------------
(1) Marketable equity securities with no stated maturity are included in the
"More than 10 Years" category.
39
<PAGE>
The following table sets forth certain information regarding the book value of
the Company's and the Bank's liquidity and investment securities portfolio at
the dates indicated. At June 30, 1996 and 1995, the fair value of the
investment securities portfolio was $140.4 million and $77.3 million,
respectively.
<TABLE>
<CAPTION>
At June 30,
----------------------------
1996 1995 1994
------- ----------- ------
(In thousands)
<S> <C> <C> <C>
Interest-bearing deposits $ 37,496 10,465 29,922
======= ======= =======
Federal funds sold $ 5,700 9,360 17,450
======= ======= =======
Investment securities:
Available for sale:
U.S. Government and agency securities $ 23,821 9,993 -
Marketable equity securities 12,572 8,232 7,502
Other investment securities 1,903 5,863 -
------- ------- -------
Total investments available for sale 38,296 24,088 7,502
------- ------- -------
Held to maturity:
U.S. Government and agency securities 101,268 53,085 78,309
Other investment securities 958 121 1,702
------- ------- -------
Total investments held to maturity 102,226 53,206 80,011
------- ------- -------
Total investment securities $ 140,522 77,294 87,513
======= ======= =======
</TABLE>
The classification of investments as available for investment, available for
sale, or for trading purposes is made at the time of purchase based upon
management's intent at that time. At June 30, 1996, $38.3 million of investment
securities were classified as available for sale and appropriately recorded at
fair value (cost basis of $38.0 million). At June 30, 1995, $24.1 million of
investments were categorized as available for sale, with a cost basis of $23.7
million.
Sources of Funds
The Bank's primary sources of funds are deposits, amortization and prepayment
of loan principal (including mortgage-backed securities), borrowings, sales of
mortgage loans, sales or maturities of investment securities, mortgage-backed
securities and short-term investments, and funds provided from operations.
Deposits. The Bank offers a variety of deposit accounts having a wide range
of interest rates and terms. The Bank's deposits consist of passbook accounts,
NOW and checking accounts, money market and certificate accounts. The Bank only
solicits deposits from its market area and does not use brokers to obtain
deposits. The Bank relies primarily on competitive pricing policies,
advertising, and customer service to attract and retain these deposits. The
flow of deposits is influenced significantly by general economic conditions,
changes in money market and prevailing interest rates and competition.
In fiscal 1996, 1995 and 1994, the net increase in deposits resulted primarily
from interest credited on deposits. The Bank had a small net deposit inflows
(exclusive of the acquisition of NSBI) in 1996, while having withdrawals which
exceeded deposits in 1995 and 1994, primarily due to the inability to attract
additional savings dollars at a reasonable cost due to competition from other
financial institutions, as well as from money market funds, bond funds and other
alternative investments.
40
<PAGE>
Deposit Portfolio. The following tables sets forth the distribution and the
weighted average nominal interest rates of the Bank's average deposit accounts
at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------------------------------------------------------
1996 1995 1994
---------------------------------- -------------------------------- ------------------------------
Percent Weighted Percent Weighted Percent Weighted
of Average of Average of Average
Average Total Nominal Average Total Nominal Average Total Nominal
Balance Deposits Rate Balance Deposits Rate Balance Deposits Rate
---------- -------- -------- --------- -------- ------ --------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Passbook accounts $ 288,389 20.48% 3.10% $ 262,691 20.26% 3.13% $ 267,389 20.75% 2.86%
Interest bearing NOW
accounts 121,187 8.61 1.69 110,222 8.50 1.77 101,595 7.88 1.81
Non-interest bearing
checking 27,508 1.95 - 21,914 1.69 - 19,116 1.48 -
Commercial checking
accounts 30,157 2.14 - 25,662 1.98 - 28,400 2.20 -
---------- ------- --------- ------- ---------- ----
Total passbook, NOW
and checking accounts 467,241 33.18 2.35 420,489 32.43 2.42 416,500 32.31 2.28
---------- ------- --------- ------- ---------- ------
Money market accounts 138,837 9.86 3.09 148,291 11.44 2.95 160,861 12.47 2.44
Jumbo deposits 29,993 2.13 5.55 21,220 1.64 5.01 18,291 1.42 4.51
Certificate accounts
with original
maturities of:
7 days to 31 days 343 .02 4.77 359 .03 4.38 287 .02 2.99
32 to 90 days 521 .04 5.29 491 .04 4.03 531 .04 3.00
91 days 9,240 .65 4.75 8,681 .67 4.01 7,700 .60 2.97
6 months 137,525 9.77 5.45 114,833 8.86 4.57 108,753 8.43 3.14
8 months 13,890 .99 5.58 - - -
9 months 8,020 .57 5.25 - - -
10 months 6 - 3.13 4,751 .37 3.78 8,274 .64 3.57
---------- ------- --------- ------- ---------- ------
Total jumbo
certificates of
deposits and 7-day
to 10 month
certificate accounts 199,538 14.17 5.43 150,335 11.61 4.58 143,836 11.15 3.33
---------- ------- --------- ------- ---------- ------
Certificate accounts
with original
maturities of:
12 months 119,531 8.49 5.65 96,162 7.42 4.36 101,126 7.84 3.44
18 months 92,600 6.58 5.86 61,064 4.71 4.91 34,986 2.71 3.78
19 months 4,313 .31 5.89 - - - - - -
24 months 48,596 3.45 5.96 23,128 1.78 4.66 29,751 2.31 4.33
30 months 118,505 8.41 5.89 163,641 12.63 5.37 152,608 11.83 5.31
36 months 2,065 .15 5.12 - - - - - -
42 months 30,713 2.18 5.90 27,763 2.14 5.84 25,266 1.96 6.18
48 months - - - 1,629 .13 7.97 3,712 .29 8.10
60 months 101,004 7.17 6.11 90,310 6.97 6.20 85,803 6.65 7.22
61 months to 120
months 84,438 6.00 8.04 112,652 8.69 8.81 134,659 10.44 9.46
Other 785 .05 5.62 625 .05 5.21 539 .04 4.53
---------- ------- --------- ------- ---------- ------
Total 12-month to
120-month certificate
accounts and other
certificate accounts 602,550 42.79 6.18 576,974 44.52 5.95 568,450 44.07 6.16
---------- ------- --------- ------- ---------- ------
Total deposits $1,408,166 100.00% 4.50% $1,296,089 100.00% 4.30% $1,289,647 100.00% 4.13%
========= ======= ======== ========= ======= ===== ========= ====== =====
</TABLE>
41
<PAGE>
The following table presents the deposit activity of the Bank for the
periods indicated:
<TABLE>
At June 30,
-----------------------------------------------
1996 1995 1994
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Deposits $ 4,458,404 3,547,326 3,564,535
Withdrawals (4,452,055) (3,577,181) (3,611,113)
---------- ---------- -----------
Deposits greater (less) than withdrawals 6,349 (29,885) (46,578)
Deposits acquired, including acquisition premium, net 872,419 - -
Interest credited on deposits 62,026 50,630 49,037
---------- ---------- -----------
Net increase in deposits $ 940,794 20,775 2,459
========== ========== ===========
</TABLE>
The following table presents, by various rate categories, the amount of
certificate accounts outstanding at June 30, 1996, 1995 and 1994, and the
periods to maturity of the certificate accounts outstanding at June 30, 1996.
<TABLE>
<CAPTION>
Period to Maturity June 30, 1996
-------------------------------------
At June 30, Within 1 to 3 Over
--------------------------------
1996 1995 1994 One Year Years 3 Years Total
---------- ----------- ------- -------- ------- ------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Certificate accounts:
3.99% or less $ 1,080 12,814 260,014 1,072 3 5 1,080
4.00% to 4.99% 192,338 103,927 106,670 186,439 5,883 16 192,338
5.00% to 5.99% 746,819 287,222 108,973 528,943 197,729 20,147 746,819
6.00% to 6.99% 217,707 236,593 77,862 82,392 84,773 50,542 217,707
7.00% to 7.99% 30,581 33,077 33,399 10,440 13,181 6,960 30,581
8.00% to 8.99% 41,779 50,186 56,865 5,265 35,641 873 41,779
9.00% to 9.99% 1,191 18,636 18,635 57 1,134 - 1,191
10.00% to 10.99% - 4,163 9,535 - - - -
11.00% to 11.99% - - 16,495 - - - -
12.00% or greater - - 21,721 - - - -
---------- ------- ------- ------- ------- ------ ---------
Total $1,231,495 746,618 710,169 814,608 338,344 78,543 1,231,495
========== ======= ======= ======= ======= ====== =========
</TABLE>
At June 30, 1996, the Bank had outstanding $136.2 million in certificate
accounts in amounts of $100,000 or more maturing as follows:
<TABLE>
<CAPTION>
Period to Maturity Amount
------------------ --------
(In thousands)
<S> <C>
Three months or less $ 34,767
Over three through six months 27,180
Over six through 12 months 26,459
Over 12 months 47,799
--------
Total $ 136,205
========
</TABLE>
Borrowings. Although deposits are the Bank's primary source of funds, the
Bank's policy has been to utilize borrowings, such as advances from FHLB of
Chicago, and reverse repurchase agreements, when they are a less costly source
of funds or can be invested at a positive rate of return.
The Bank obtains advances from the FHLB of Chicago upon the security of its
capital stock in the FHLB of Chicago and a blanket pledge of certain of its
mortgage loans. See "Regulation and Supervision - Federal Home Loan Bank
System." Such advances are made pursuant to several different credit programs,
each of which has its own interest rate and range of maturities. The maximum
amount that the FHLB of Chicago will advance to member institutions, including
the Bank, for purposes other than meeting
42
<PAGE>
withdrawals, fluctuates from time to time in accordance with the policies of the
OTS and the FHLB of Chicago. The maximum amount of FHLB of Chicago advances to a
member institution generally is reduced by borrowings from any other source. At
June 30, 1996, the Bank's FHLB of Chicago advances totaled $420.5 million,
representing 13.5% of total assets.
A summary of the Company's borrowed funds at June 30, 1996, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
Weighted Average
Interest Rate Amount
--------------------- -----------------------------
1996 1995 1994 1996 1995 1994
------ ------ ----- --------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed rate advances from FHLB of Chicago due:
1996% - % 9.73 9.73 $ - 25,000 25,000
1997 7.15 7.15 - 50,000 50,000 -
1998 6.38 6.41 5.33 50,000 25,000 10,000
1999 8.27 8.27 8.27 15,000 15,000 15,000
2000 6.64 6.64 5.87 80,000 80,000 35,000
2001 6.45 6.39 5.77 65,000 40,000 15,000
2002 6.13 5.62 5.62 30,000 5,000 5,000
2003 6.13 6.13 6.13 5,500 5,500 5,500
-------- ------- -------
Total fixed rate advances 6.66 7.06 7.01 295,500 245,500 110,500
Adjustable rate advances from FHLB of Chicago due:
1997 5.79 7.09 - 125,000 15,000 -
-------- ------- -------
Total advances from FHLB of Chicago 6.40 7.06 7.01 420,500 260,500 110,500
-------- ------- -------
Collateralized mortgage obligations:
Issued by MAFC due 2018 (1) 15,928 20,470 25,133
Unamortized discount (1,202) (1,621) (2,116)
-------- ------- -------
11.42 11.19 16.00 14,726 18,849 23,017
Issued by NWAC due 2018 (2) 27,419 - -
Unamortized premium 247 - -
-------- ------- ------
8.05 - - 27,666 - -
-------- ------- -------
Total collateralized mortgage obligations, net 42,392 18,849 23,017
-------- ------- -------
Unsecured term bank loan payable, due 2004 6.47 - - 35,000 - -
Reverse repurchase agreements 6.74 5.96 4.00 39,804 27,675 12,675
Other collateralized borrowings - - 2.00 - - 3,518
Debt of Employee Stock Ownership Plan - - 7.25 - - 146
-------- ------- -------
6.23% 7.22 8.02 $ 537,696 307,024 149,856
===== ===== ===== ======== ======= =======
- ---------------
</TABLE>
(1) See "Subsidiary Activities - Mid America Finance Corporation."
(2) See "Subsidiary Activities - Northwestern Acceptance Corporation."
Subordinated Capital Notes. During the second quarter of fiscal 1996, the
Company refinanced its $20.9 million of 10% Subordinated Capital Notes due June
30, 2002 with $27.6 million of 8.32% Subordinated Notes due September 30, 2005.
The payment of principal and interest on the current notes is subordinated at
all times to any indebtedness or liability of the Company outstanding or
incurred after the date of issuance. Costs incurred in the refinance transaction
amounted to $1.0 million and are being accreted over the life of the notes
yielding an effective interest rate of 8.85%. The capital notes are callable at
the discretion of the Company at any time after September 30, 1998, at par plus
any accrued interest. The indenture provides for restrictions on the amounts of
additional indebtedness the Company may incur as well as the amount of dividends
and other distributions it may pay with respect to its equity securities,
depending on the Company's capital ratio. The refinance transaction resulted in
a $474,000, or $0.08 per share extraordinary charge to earnings due to the early
extinguishment of debt as a result of writing-off the remaining unamortized
transaction costs of $774,000, net of income taxes of $300,000.
43
<PAGE>
Asset/Liability Management
The Bank's overall asset/liability management strategy is directed toward
reducing the Bank's exposure to interest rate risk over time in changing
interest rate environments. Asset/liability management is a daily function of
the Bank's management due to continual fluctuations in interest rates and
financial markets.
As part of its asset/liability strategy, the Bank has implemented a policy to
maintain its cumulative one-year interest sensitivity gap ratio within a range
of (15)% to 15% of total assets, which helps the Bank to maintain a more stable
net interest rate spread in various interest rate environments. The gap ratio
fluctuates as a result of market conditions and management's expectation of
future interest rate trends. Under OTS Thrift Bulletin 13, the Bank is required
to measure its interest rate risk assuming various increases and decreases in
general interest rates, and the effect on net interest income and market value
of portfolio equity. An interest rate risk policy has been approved by the
Board of Directors setting the limits to changes in net interest income and
market value of portfolio equity at the various rate scenarios required. In
addition, the OTS has added an interest rate risk component to its regulatory
capital requirements which could require an additional amount of capital based
on the level of adverse change in a savings institution's market value of
portfolio equity, resulting from changes in interest rates. Management
continually reviews its interest rate risk policies in light of potential higher
capital requirements that could result from the adoption of an interest rate
risk component to the OTS capital requirements.
The Bank's asset/liability management strategy emphasizes the origination of
one- to four-family adjustable-rate loans and other loans which have shorter
terms to maturity or reprice more frequently than fixed-rate mortgage loans,
yet, provide a positive margin over the Bank's cost of funds. In response to
customer demand, the Bank originates fixed-rate mortgage loans, but sells the
majority of these loans in the secondary market in order to maintain its
interest rate sensitivity levels.
In conjunction with the strategy discussed above, management has also hedged
the Bank's exposure to interest rate risk primarily by committing to sell fixed-
rate mortgage loans for future delivery. Under these commitments, the Bank
agrees to sell fixed-rate loans at a specified price and at a specified future
date. The sale of fixed-rate mortgage loans for future delivery has enabled the
Bank to continue to originate new mortgage loans, and to generate gains on sale
of these loans as well as loan servicing fee income, while maintaining its gap
ratio within the parameters discussed above. Most of these forward sale
commitments are conducted with FNMA and FHLMC with respect to loans that conform
to the requirements of these government agencies. The forward commitment of
mortgage loans presents a risk to the Bank if the Bank is not able to deliver
the mortgage loans by the commitment expiration date. If this should occur, the
Bank would be required to pay a fee to the buyer. The Bank attempts to mitigate
this risk by charging potential retail borrowers a 1% fee to fix the interest
rate, or by requiring the interest rate to float at market rates until shortly
before closing. In its wholesale lending operation, there is more risk due to
the competitive inability to charge a rate lock fee to the mortgage brokers,
which the Bank tries to offset by using higher assumed fallout rates. In
addition, the Bank uses U.S. Treasury bond futures contracts to hedge some of
the mortgage pipeline exposure. These futures contracts are used to hedge
mortgage loan production in those circumstances where loans are not sold forward
as described above.
44
<PAGE>
The table below sets forth the scheduled repricing or maturity of the
Bank's assets and liabilities at June 30, 1996, based on the assumptions used by
the FHLB of Chicago with respect to NOW, checking and passbook account
withdrawals and loan prepayment percentages. In a departure from the FHLB of
Chicago assumptions, which assume a 0% prepayment for other borrowings, the Bank
assumes that the collateralized mortgage obligations included in other
borrowings prepay at the same rate used for the mortgage-backed securities
collateralizing these obligations, while the NWAC collateralized mortgage
obligations are adjustable-rate and included in the 6 months or less category.
The effect of these assumptions is to quantify the dollar amount of items
that are interest-sensitive and may be repriced within each of the periods
specified. The table does not necessarily indicate the impact of general
interest rate movements on the Bank's net interest yield because the repricing
of certain categories of assets and liabilities is subject to competitive and
other pressures beyond the Bank's control. As a result, certain assets and
liabilities indicated as maturing or otherwise repricing within a stated period
may, in fact, mature or reprice at different times and at different volumes.
<TABLE>
<CAPTION>
At June 30, 1996
---------------------------------------------------------------------------
Less Than
1/2 Yr. 1/2 - 1 Yr. 1 - 3 Yrs. 3 - 5 Yrs. 5+ Yrs. Total
-------------- ----------- ----------- ---------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $ 851,538 293,341 637,830 254,173 277,014 2,313,896
Mortgage-backed securities 182,335 29,361 58,772 43,862 102,808 417,138
Investment securities (1) 91,357 17,693 12,932 - 50,074 172,056
Interest-bearing deposits 37,496 - - - - 37,496
Federal funds sold 5,700 - - - - 5,700
----------- ------- ------- ------- ------- ---------
Total interest-earning assets 1,168,426 340,395 709,534 298,035 429,896 2,946,286
Less yield adjustments, net (185) 80 (225) (468) (2,286) (3,084)
Impact of hedging activities (2) 7,447 - - - (7,447) -
----------- ------- ------- ------- ------- ---------
Total net interest-earning assets,
adjusted for impact of hedging activities 1,175,688 340,475 709,309 297,567 420,163 2,943,202
Interest-bearing liabilities:
NOW and checking accounts 13,188 11,351 40,762 25,807 54,839 145,947
Money market accounts 139,684 - - - - 139,684
Passbook accounts 57,096 52,245 191,214 118,777 252,404 671,736
Certificate accounts 613,163 225,182 315,049 67,509 10,977 1,231,880
FHLB advances 160,000 15,000 65,000 145,000 35,500 420,500
Other borrowings 64,666 1,800 45,804 4,000 27,602 143,872
----------- ------- ------- ------- ------- ---------
Total interest-bearing liabilities 1,047,797 305,578 657,829 361,093 381,322 2,753,619
----------- ------- ------- ------- ------- ---------
Interest sensitivity gap $ 127,891 34,897 51,480 (63,526) 38,841 189,583
=========== ======= ======= ======= ======= =========
Cumulative gap $ 127,891 162,788 214,268 150,742 189,583
=========== ======= ======= ======= =======
Cumulative gap as a percentage
of total assets 4.10% 5.22 6.87 4.84 6.08
Cumulative net interest-earning assets as
a percentage of interest-bearing liabilities 112.21% 112.03 110.65 106.35 106.88
</TABLE>
- -------------------------
(1) Includes $30.7 million of stock in FHLB of Chicago in 6 months or less.
(2) Represents forward commitments to sell long-term fixed-rate mortgage loans.
45
<PAGE>
Liquidity and Capital Resources
The Company's principal sources of funds are cash dividends paid by the Bank
and MAF Developments, and liquidity generated by the issuance of common stock,
preferred stock, or borrowings. The Company's principal uses of funds are
interest payments on the Company's borrowed funds, cash dividends to
shareholders, loans to and investments in MAF Developments, stock repurchases,
as well as investment purchases with excess cash flow. In addition, cash has
been used to fund stock buyback programs as a means of reducing the number of
shares outstanding. During the last two years, the Company has repurchased
527,675 shares of its common stock for a total of $12.5 million, including
100,000 shares for $2.5 million which were owned by NSBI prior to the
acquisition.
The Company obtained a $35.0 million unsecured term bank loan in conjunction
with its acquisition of NSBI. The loan provides for an interest rate of the
prime rate or 1% over one, two or three-month LIBOR at management's discretion
adjustable and payable at the end of the repricing period. The loan currently
carries an interest rate of 1% over one-month LIBOR. The loan is convertible
all or in part, with certain limitations at the end of any repricing period, at
management's election to a fixed rate at 1.25% over the U.S. Treasury rate with
a maturity corresponding to the remaining term of the loan. The loan requires
increasing annual principal payments starting in December 1997 with $9.2 million
due at the final maturity of the loan on December 31, 2003. Prepayments of
principal are allowed, but fixed-rate portions are subject to penalty. In
conjunction with the term bank loan, the Company also maintains a $15.0 million
one year unsecured revolving line of credit which matures January 26, 1997, but
is renewable. The interest rate on the line of credit is the prime rate or 1%
over one, two, or three-month LIBOR, at management's discretion with interest
payable at the end of the repricing period. No amounts have been drawn on the
line of credit. The financing agreements contain covenants that, among other
things, requires the Company to maintain a minimum stockholders' equity balance
and to obtain certain minimum operating results, as well as requiring the Bank
to maintain "well capitalized" regulatory capital levels and certain non-
performing asset ratios. In addition, the Company has agreed not to pledge any
stock of the Bank or MAF Developments for any purpose. At June 30, 1996, the
Company was in compliance with these covenants.
During the years ended June 30, 1996 and 1995, the Company received cash
dividends from the Bank totaling $69.0 million and $10.0 million, respectively.
The large increase in 1996 was due to the acquisition of NSBI. After the
acquisition was complete, the Company received $65.0 million from the Bank due
to its overcapitalization for regulatory purposes from the merger with
Northwestern. The Company paid $.32 per share in cash dividends to common
shareholders in 1996, compared to $.291 per share in 1995.
The Bank's principal sources of funds are deposits, advances from the FHLB of
Chicago, principal repayments on loans and mortgage-backed securities, proceeds
from the sale of loans and funds provided by operations. While scheduled loan
and mortgage-backed securities amortization and maturing interest-bearing
deposits are a relatively predictable source of funds, deposit flows and loan
and mortgage-backed securities prepayments are greatly influenced by economic
conditions, the general level of interest rates and competition. The Bank
utilizes particular sources of funds based on comparative costs and
availability. The Bank generally manages the pricing of its deposits to maintain
a steady deposit balance, but has from time to time decided not to pay rates on
deposits as high as its competition, and when necessary, to supplement deposits
with longer term and/or less expensive alternative sources of funds, such as
advances from the FHLB of Chicago. During the current year the Bank borrowed
$160.0 million (net) in FHLB of Chicago advances and an additional $12.1 million
(net), under reverse repurchase agreements to fund adjustable-rate loan volume
which has been held in portfolio by the Bank.
46
<PAGE>
The Bank is required by regulation to maintain specific minimum levels of
liquid investments. Regulations currently require the Bank to maintain liquid
assets at least equal to 5.0% of the sum of its average daily balance of net
withdrawable accounts and borrowed funds due in one year or less. This
regulatory requirement may be changed from time to time to reflect current
economic conditions. During the year ended June 30, 1996, the Bank's average
liquidity ratio was 6.86%. At June 30, 1996, total liquidity was $167.1 million,
or 6.81%, which was $44.4 million in excess of the 5.0% regulatory requirement.
This excess liquidity has provided the Bank with the flexibility needed to
maintain its short-term gap ratios within strategic limits, as well as most
recently, to fund the increased loan volume.
During the year ended June 30, 1996, the Bank originated and purchased loans
totaling $989.8 million compared with $585.9 million during the year ended June
30, 1995. The Bank has outstanding commitments to originate loans of $100.9
million and to purchase loans of $65.1 million and commitments to sell loans of
$39.4 million at June 30, 1996. The Company expects to fund current and future
loan commitments using principal repayments on loans and mortgage-backed
securities, as well as outside funding sources.
Subsidiary Activities
Mid America Developments, NW Financial and MAF Developments. The Bank engages
in the business of purchasing unimproved land for development into residential
subdivisions of single family lots through its wholly-owned subsidiary, Mid
America Developments. The Bank has been engaged in this activity since 1974,
and since that time has developed and sold over 4,000 lots in 19 different
subdivisions in the western suburbs of Chicago. Mid America Developments acts
as sole principal or as a joint venture partner in its developments. For those
joint ventures it is engaged in, Mid America Developments has historically
provided essentially all of the capital for a joint venture and receives in
exchange an ownership interest in the joint venture which entitles it to a
percentage of the profit or loss generated by the project. Mid America
Developments only invests in real estate development projects which it believes
it can monitor effectively. To date, such projects have all been located in its
market area. Mid America Developments has a percentage interest in the net
profit of each joint venture, generally 50%, with the exact percentage based
upon a number of factors, including characteristics of the venture, the
perceived risks involved, and the time to completion. The net profits are
generally defined in the joint venture agreement as the gross profits of the
joint venture from sales, less all expenses, loan repayments and capital
contributions.
In the acquisition of NSBI, the Bank acquired NW Financial, which is active in
the development of unimproved land for development into residential
subdivisions, as well as the construction of single-family homesites on the
improved lots. NW Financial currently has three projects whereby it and a
venture partner share in the profits of the projects on a 50/50 basis. NW
Financial also provides the funds, via loans, to the projects. NW Financial was
a borrower from Northwestern, or since acquisition, from the Bank. The projects
are located in the north and northwest suburbs of Chicago.
OTS regulations imposed restrictions on the Bank's participation in real
estate development activities through Mid America Developments. See "Regulation
and Supervision - Federal Savings Institution Regulation - Capital
Requirements." In response to the restrictions imposed by the OTS, Mid America
Developments' activities, since 1989, have been limited to the completion of
then-existing projects. Mid America Developments has not initiated any new
projects since 1989. In 1993, the Company formed a wholly-owned subsidiary, MAF
Developments, to continue its land development activities. As a subsidiary of
the Company, the activities of MAF Developments are not restricted by OTS
regulations as they are for the Bank. The Bank also plans to limit the activity
of NW Financial to the completion of the three existing projects in process as
of the acquisition.
47
<PAGE>
The following is a summary as of June 30, 1996, of the residential real estate
projects Mid America Developments, NW Financial and MAF Developments currently
has an interest in:
<TABLE>
<CAPTION>
Lots
Date Number of Number Available For
Land Lots Sold but Development Total Investment
Description of Project Acquired Sold Not Closed or Sale Lots Balance
- ------------------------- -------- --------- ---------- ------------- ----- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mid America Developments:
Ashbury 1/87-6/87 1,084 31 - 1,115 $ 1,196
1,115 residential lots
13-acre commercial parcel
Woods of Rivermist 6/86 21 5 5 31 755
31 residential lots
NW Financial:
Woodbridge 2/90 357 14 160 531 6,475
531 single-family homes
48-acre commercial parcel
Reigate Woods 10/93 18 14 53 85 7,734
85 single-family homes
Fields of Ambria 9/89-5/91 212 11 17 240 2,381
240 single-family homes
MAF Developments, Inc.:
Clow Creek Farm 6/93 226 13 21 260 1,168
260 residential lots
Creekside of Remington N/A 33 - 137 170 1,807
170 residential lots
Harmony Grove 11/94 126 260 386 5,104
------
386 residential lots
5-acre commercial parcel $ 26,620
======
</TABLE>
The following table is a summary of the Bank's investment in and advances to
Mid America Developments and NW Financial at June 30:
<TABLE>
<CAPTION>
1996 1995 1994
------- ----- ------
(In thousands)
<S> <C> <C> <C>
Common stock $ 1,657 1,397 1,397
Retained earnings 12,308 2,977 8,570
Intercompany advances 7,729 265 2,813
------- ----- ------
$21,694 4,639 12,780
======= ===== ======
</TABLE>
During the years ended June 30, 1996 and 1995, Mid America Developments paid
dividends of $2.0 million and $9.2 million, respectively to the Bank. The
remaining investment is subject to a capital deduction for the Bank in computing
its regulatory capital requirements, equal to 60% or $13.0 million as of June
30, 1996. This deduction increased to 100% as of July 1, 1996. The large
addition in the total balance in 1996 is solely due to the acquisition of NW
Financial.
48
<PAGE>
The following is a description of the current projects involving Mid
America Developments:
Ashbury
The Ashbury subdivision is located in Naperville, Illinois, and consists of
1,115 lots. A venture partner participates in 50% of the profits on 482 of the
total lots under a joint venture agreement. A summary of lots as of June 30,
1996 is as follows:
<TABLE>
<CAPTION>
Non-
Venture Venture Total
------- ------- -----
<S> <C> <C> <C>
Total lots 482 633 1,115
=== === =====
Total sold 466 618 1,084
Pending sales 16 15 31
Remaining - -
--- --- -----
482 633 1,115
=== === =====
</TABLE>
Development of Ashbury was substantially completed during 1995. At June 30,
1996, all of the remaining lots are under contract and are expected to be closed
by the end of the second quarter of 1997.
Mid America Developments also owns a 13-acre commercial site in the Ashbury
development. The Bank opened a temporary branch location on this property in
July 1994 under a land lease with Mid America Developments. The site was sold
in July 1996, at a pre-tax profit of $730,000, with an agreement that the Bank's
temporary branch can remain on the property for a period of two years.
Woods of Rivermist
Mid America Developments is a participant in a joint venture in a 31-lot
development in Naperville, Illinois. Mid America Developments receives 50% of
the profits from the development. At June 30, 1996, Mid America Development's
investment in the Woods of Rivermist joint venture was $755,000. At June 30,
1996, 21 of the 31 lots of this development were sold with 5 lots under contract
as of June 30, 1996.
The following is a summary of projects at MAF Developments, Inc.
Clow Creek Farm
MAF Developments, Inc. purchased a 103 acre parcel of land in 1993 for the
development of 260 lots in Naperville, Illinois, adjacent to the Ashbury
subdivision. As of June 30, 1996, the Company's investment was $1.2 million.
The development is substantially complete, and 226 sales have been closed, with
145 lot sales in 1996. At June 30, 1996, there are 13 lots under contract. The
Company expects to be substantially sold out of Clow Creek Farm by the end of
1997.
Creekside of Remington
MAF Developments, Inc. entered into a joint venture agreement to develop 170
lots in Bolingbrook, Illinois. The joint venture partner contributed the land
while MAF Developments contributes development costs. Development commenced in
late fiscal 1994 in the first unit which consists of 91 lots. Sales during 1996
totaled 27 lots, with no lots under contract as of June 30, 1996. Due to slower
absorption in this development, the Company has not begun development of the
next phase of the project.
49
<PAGE>
Harmony Grove
MAF Developments, Inc. entered into a joint venture to develop 386 lots in
Naperville, Illinois by purchasing 160 acres of land, which includes a 5-acre
commercial parcel, from its venture partner. The Company's investment at June
30, 1996 was $5.1 million. To date, no lots have been sold as development
commenced late in fiscal 1996. As of June 30, 1996, there are 126 lots under
contract in the first phase of the project, which consists of 128 lots. Lot
closings are expected to begin in the first and second quarters of 1997. The
commercial parcel is under contract to be sold, with a closing expected in the
latter half of fiscal 1997.
The following is a summary of projects at NW Financial.
Fields of Ambria
Fields of Ambria consists of approximately 80 acres of land in Mundelein,
Illinois. The subdivision was developed into 240 lots for single-family home
construction by a joint venture partner, who shares in the profits of the
project. The project was funded solely by funds from NW Financial, which have
all been repaid. At June 30, 1996, the Company's investment was $2.4 million,
representing 28 unsold homesites. At June 30, 1996, 11 homesites are pending
sale.
Reigate Woods
Reigate Woods consist of approximately 106 acres of land in Green Oaks,
Illinois. The subdivision was developed into 85 lots for single-family home
construction by a joint venture partner, who shares in the profits of the
project. The project is funded solely by funds from NW Financial. At June 30,
1996, the Company has an investment of $7.7 million, representing 67 unsold
homesites. At June 30, 1996, 14 homesites are pending sale.
Woodbridge
Woodbridge consists of 341 acres of land in Elgin, Illinois. The project is
being developed with a joint venture partner who shares in the projects profits,
if any. The land includes 232 acres for the construction of 531 single-family
homes. At June 30, 1996, 14 of the remaining 174 homesites are under contract.
The project also includes 55 acres of property zoned for multi-family use, which
has been sold, as well as 48 acres of commercially-zoned property. At June 30,
1996, the combined investment in the residential and commercial property is $6.5
million.
Mid America Finance Corporation. In 1988, the Bank issued collateralized
mortgage obligations CMOs through MAFC, a wholly owned special purpose finance
subsidiary. The Bank contributed $149.8 million of mortgage-backed securities
to MAFC which, in turn, pledged the securities to an independent trustee as
collateral for the CMOs. The issuance of the CMOs resulted in net proceeds to
the Bank of $130.9 million which were ultimately used to fund loan originations.
Substantially all of the payments of principal and interest on the underlying
collateral are paid through to the holders of the CMOs.
The CMOs were issued in four maturity classes. The actual maturity of each
class of CMO will vary according to the timing of the cash receipts from the
underlying collateral. The CMOs are accounted for as a financing transaction
and are reflected as borrowed funds in the consolidated financial statements of
the Company. At June 30, 1996, the CMOs had an outstanding balance of $15.9
million. The mortgage-backed securities securing the CMOs had a carrying value
and market value of $15.8 million and $16.2 million, respectively, at June 30,
1996.
50
<PAGE>
The CMO bonds and the mortgage-backed securities which collateralize them both
carry fixed interest rates, adjusted for amortization of discounts based upon
prepayment assumptions. The mortgage-backed securities yield averaged 8.60% for
the year ended June 30, 1996. In contrast, the effective cost of the CMO bonds,
including amortization of bond discount averaged 11.24% during 1995. This
negative spread led to a $409,000 reduction to net interest income for 1996.
Northwestern Acceptance Corporation. In 1986, Northwestern issued $300
million of CMOs through NWAC, a special purpose finance subsidiary. The CMOs
were issued in two classes. Class A-1 CMOs, with an original face of $200
million, have an interest rate that is indexed to LIBOR for three-month
eurodollar deposits, with a maximum rate of 13.5% per year. The Class A-2 CMOs,
originally issued for $100 million, have an interest rate that adjusts in
inverse proportion to the LIBOR rate, but in no event may be less than 0% per
year or greater than 23.89% per year. The CMOs have a stated maturity of
February 20, 2018, although actual maturity of each class of CMO will vary due
to prepayments in the underlying mortgage collateral. The CMOs are also subject
to mandatory and optional redemption provisions, depending on the repayment of
the underlying collateral and the amount of CMOs outstanding.
At June 30, 1996, the CMOs had an outstanding balance of $27.4 million. The
CMOs are collateralized by 9.0% FHLMC mortgage-backed securities which had a
carrying value and market value of $28.5 million and $29.2 million, respectively
at June 30, 1996. In addition to the mortgage-backed securities, cash and
investment securities totaling $1.0 million were held by the trustee to pay
principal and interest on the CMOs. The mortgage-backed securities pledged, as
well as the cash and investment securities held by the trustee are solely for
the repayment of the CMOs.
Mid America Insurance Agency. Mid America Insurance Agency, Inc. ("Mid
America Insurance") is a wholly owned subsidiary of the Bank which provides
insurance brokerage services, including personal and commercial insurance
products, to the Bank's customers. For 1996, 1995 and 1994, Mid America
Insurance generated pre-tax income of $97,000, $102,000, and $116,000,
respectively.
INVEST. On June 23, 1983, the Bank, through Mid America Developments, entered
into an agreement with ISFA Corporation ("ISFA") to become a subscriber to its
INVEST program. ISFA is a registered broker-dealer and provides certain
securities brokerage and investment advisory services under its INVEST service
mark to the general public. Through this program and licensed dual employees,
these services are offered to customers of the Bank. Presently nine brokers are
employed and operate from eight Bank locations. Revenues are generate d from
the sales of securities products in the form of commissions which are
apportioned between ISFA and the Bank. For 1996, 1995 and 1994, pre-tax income
from INVEST operations was $711,000, $460,000 and $769,000, respectively.
51
<PAGE>
REGULATION AND SUPERVISION
General
The Company, as a savings and loan holding company, is required to file
certain reports with, and otherwise comply with the rules and regulations of the
OTS under the Home Owners' Loan Act of 1933, as amended (the "HOLA"). In
addition, the activities of savings institutions, such as the Bank, are governed
by the HOLA and the Federal Deposit Insurance Act ("FDI Act").
The Bank is subject to extensive regulation, examination and supervision by
the OTS, as its primary federal regulator, and the FDIC, as the deposit insurer.
The Bank is a member of the Federal Home Loan Bank ("FHLB") System and its
deposit accounts are insured up to applicable limits by the Savings Association
Insurance Fund ("SAIF") managed by the FDIC. The Bank must file reports with
the OTS and the FDIC concerning its activities and financial condition in
addition to obtaining regulatory approvals prior to entering into certain
transactions such as mergers with, or acquisitions of, other savings
institutions. The OTS and/or the FDIC conduct periodic examinations to test the
Bank's compliance with various regulatory requirements. This regulation and
supervision establishes a comprehensive framework of activities in which an
institution can engage and is intended primarily for the protection of the
insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes. Any change in such regulatory
requirements and policies, whether by the OTS, the FDIC or the Congress could
have a material adverse impact on the Company, the Bank and their operations.
Certain of the regulatory requirements applicable to the Bank and to the Company
are referred to below or elsewhere herein. The description of statutory
provisions and regulations applicable to savings institutions and their holding
companies set forth in this Form 10-K does not purport to be a complete
description of such statutes and regulations and their effects on the Bank and
the Company.
Holding Company Regulation
The Company is a nondiversified unitary savings and loan holding company
within the meaning of the HOLA. As a unitary savings and loan holding company,
the Company generally will not be restricted under existing laws as to the types
of business activities in which it may engage, provided that the Bank continues
to be a qualified thrift lender ("QTL"). See "Federal Savings Institution
Regulation - QTL Test." Upon any non-supervisory acquisition by the Company of
another savings institution or savings bank that meets the QTL test and is
deemed to be a savings institution by the OTS, the Company would become a
multiple savings and loan holding company (if the acquired institution is held
as a separate subsidiary) and would be subject to extensive limitations on the
types of business activities in which it could engage. The HOLA limits the
activities of a multiple savings and loan holding company and its non-insured
institution subsidiaries primarily to activities permissible for bank holding
companies under Section 4(c)(8) of the Bank Holding Company Act of 1956, as
amended ("BHC Act"), subject to the prior approval of the OTS, and activities
authorized by OTS regulation. Recently proposed legislation could restrict the
activities of unitary savings and loan holding companies to those permissible
for multiple savings and loan holding companies.
The HOLA prohibits a savings and loan holding company, directly or indirectly,
or through one or more subsidiaries, from acquiring more than 5% of the voting
stock of another savings institution or holding company thereof, without prior
written approval of the OTS; acquiring or retaining, with certain exceptions,
more than 5% of a nonsubsidiary company engaged in activities other than those
permitted by the HOLA; or acquiring or retaining control of a depository
institution that is not insured by the
52
<PAGE>
FDIC. In evaluating applications by holding companies to acquire savings
institutions, the OTS must consider the financial and managerial resources and
future prospects of the company and institution involved, the effect of the
acquisition on the risk to the insurance funds, the convenience and needs of the
community and competitive factors.
The OTS is prohibited from approving any acquisition that would result in a
multiple savings and loan holding company controlling savings institutions in
more than one state, subject to two exceptions: (i) the approval of interstate
supervisory acquisitions by savings and loan holding companies and (ii) the
acquisition of a savings institution in another state if the laws of the state
of the target savings institution specifically permit such acquisitions. The
states vary in the extent to which they permit interstate savings and loan
holding company acquisitions.
Although savings and loan holding companies are not subject to specific
capital requirements or specific restrictions on the payment of dividends or
other capital distributions, HOLA does prescribe such restrictions on subsidiary
savings institutions, as described below. The Bank must notify the OTS 30 days
before declaring any dividend to the Company. In addition, the financial impact
of a holding company on its subsidiary institution is a matter that is evaluated
by the OTS and the agency has authority to order cessation of activities or
divestiture of subsidiaries deemed to pose a threat to the safety and soundness
of the institution.
Federal Savings Institution Regulation
Capital Requirements. The OTS capital regulations require savings
institutions to meet three minimum capital standards: a 1.5% tangible capital
ratio, a 3% leverage (core capital) ratio and an 8% risk-based capital ratio.
In addition, the prompt corrective action standards discussed below also
establish, in effect, a minimum 2% tangible capital standard, a 4% leverage
(core) capital ratio (3% for institutions receiving the highest rating on the
CAMEL financial institution rating system), and, together with the risk-based
capital standard itself, a 4% Tier I risk-based capital standard. Core capital
is defined as common stockholder's equity (including retained earnings), certain
noncumulative perpetual preferred stock and related surplus, and minority
interests in equity accounts of consolidated subsidiaries less intangibles other
than certain purchased mortgage servicing rights and credit card relationships.
The OTS regulations also require that, in meeting the leverage ratio, tangible
and risk-based capital standards, institutions must generally deduct investments
in and loans to subsidiaries engaged in activities not permissible for a
national bank. For the Bank, this includes its $21.7 million investment in Mid
America Developments at June 30, 1996, which the Bank must deduct 60%, or $13.0
million from regulatory capital for purposes of calculating its capital
requirements.
The risk-based capital standard for savings institutions requires the
maintenance of Tier I (core) and total capital (which is defined as core capital
and supplementary capital) to risk-weighted assets of 4% and 8%, respectively.
In determining the amount of risk-weighted assets, all assets, including certain
off-balance sheet assets, are multiplied by a risk-weight of 0% to 100%, as
assigned by the OTS capital regulation based on the risks OTS believes are
inherent in the type of asset. The components of Tier I (core) capital are
equivalent to those discussed earlier. The components of supplementary capital
currently include cumulative preferred stock, long-term perpetual preferred
stock, mandatory convertible securities, subordinated debt and intermediate
preferred stock and the allowance for loan and lease losses limited to a maximum
of 1.25% of risk-weighted assets. Overall, the amount of supplementary capital
included as part of total capital cannot exceed 100% of core capital.
53
<PAGE>
The OTS regulatory capital requirements also incorporate an interest rate risk
component. Savings institutions with "above normal" interest rate risk exposure
are subject to a deduction from total capital for purposes of calculating their
risk-based capital requirements. A savings institution's interest rate risk is
measured by the decline in the net portfolio value of its assets (i.e., the
difference between incoming and outgoing discounted cash flows from assets,
liabilities and off-balance sheet contracts) that would result from a
hypothetical 200 basis point increase or decrease in market interest rates
divided by the estimated economic value of the institution's assets. In
calculating its total capital under the risk-based capital rule, a savings
institution whose measured interest rate risk exposure exceeds 2% must deduct an
amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
institution's assets. The Director of the OTS may waive or defer a savings
institution's interest rate risk component on a case-by-case basis. A savings
institution with assets of less than $300 million and risk-based capital ratios
in excess of 12% is not subject to the interest rate risk component, unless the
OTS determines otherwise. For the present time, the OTS has deferred
implementation of the interest rate risk component. If the Bank had been
subject to an interest rate risk capital component as of June 30, 1996, the
Bank's total risk-weighted capital would not have been subject to a deduction
based on interest rate risk. At June 30, 1996, the Bank met each of its capital
requirements, in each case on a fully phased-in basis.
At June 30, 1996 and 1995, the Bank was in compliance with the current capital
requirements as follows:
<TABLE>
<CAPTION>
At June 30, 1996 At June 30, 1995
----------------------- -----------------------
Percent of Percent of
Amount Assets Amount Assets
---------- ----------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Stockholder's equity of
the Bank $ 263,346 8.43% $ 101,539 5.73%
======= ===== ======== ======
Tangible capital $ 215,582 7.02% $ 99,723 5.64%
Tangible capital
requirement 46,095 1.50 26,517 1.50
------- ----- -------- ------
Excess $ 169,487 5.52% 73,206 4.14%
======= ===== ======== ======
Core capital $ 215,582 7.02% $ 99,723 5.64%
Core capital requirement 92,189 3.00 53,033 3.00
------- ----- -------- ------
Excess $ 123,393 4.02% $ 46,690 2.64%
======= ===== ======== ======
Core and supplementary
capital $ 232,625 15.36% $ 108,706 12.07%
Risk-based capital
requirement 121,167 8.00 72,068 8.00
------- ----- -------- ------
Excess $ 111,458 7.36% $ 36,638 4.07%
======= ===== ======== ======
Total Bank assets $ 3,122,790 $ 1,770,946
Adjusted total Bank assets 3,072,970 1,767,781
Total risk-weighted assets 1,564,618 904,018
Adjusted total
risk-weighted assets 1,514,587 900,853
Investment in Bank's real
estate subsidiary 21,694 4,639
</TABLE>
The table above assumes a 60% deduction from capital for the Banks' investment
in and advances to Mid America Developments and NW Financial at June 30,1996.
As of July 1, 1996, this deduction increased to 100%. If the 100% deduction had
been applied to the Bank's balance sheet as of June 30, 1996, its tangible and
core capital ratio would have been 6.76% and its risk-based capital ratio would
have been 14.88%.
54
<PAGE>
The following table reflects the Bank's regulatory capital as of June 30, 1996
as it relates to these three capital requirements:
<TABLE>
<CAPTION>
Risk-
Tangible Core Based
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Stockholder's equity of the Bank $ 263,346 263,346 263,346
Goodwill and other non-allowable intangible
assets (35,630) (35,630) (35,630)
Non-permissible subsidiary deduction (13,016) (13,016) (13,016)
Non-includible purchased mortgage servicing
rights (184) (184) (184)
Regulatory capital adjustment for available
for sale securities 1,066 1,066 1,066
Land loans greater than 80% loan-to-value - - (211)
General loan loss reserves - - 17,254
------- ------- -------
Regulatory capital $ 215,582 215,582 232,625
======= ======= =======
</TABLE>
Prompt Corrective Regulatory Action. Under the OTS prompt corrective action
regulations, the OTS is required to take certain supervisory actions against
undercapitalized institutions, the severity of which depends upon the
institution's degree of undercapitalization. Generally, a savings institution
is considered "well capitalized" if its ratio of total capital to risk-weighted
assets is at least 10%, its ratio of Tier I (core) capital to risk-weighted
assets is at least 6%, its ratio of core capital to total assets is at least 5%,
and it is not subject to any order or directive by the OTS to meet a specific
capital level. A savings institution generally is considered "adequately
capitalized" if its ratio of total capital to risk-weighted assets is at least
8%, its ratio of Tier I (core) capital to risk-weighted assets is at least 4%,
and its ratio of core capital to total assets is at least 4% (3% if the
institution receives the highest CAMEL rating). A savings institution that has
a ratio of total capital to weighted assets of less of than 8%, a ratio of Tier
I (core) capital to risk-weighted assets of less than 4% or a ratio of core
capital to total assets of less than 4% (3% or less for institutions with the
highest examination rating) is considered to be "undercapitalized." A savings
institution that has a total risk-based capital ratio less than 6%, a Tier 1
risk-based capital ratio of less than 3% or a leverage ratio that is less than
3% is considered to be "significantly undercapitalized," and a savings
institution that has a tangible capital to assets ratio equal to or less than 2%
is deemed to be "critically undercapitalized." Subject to a narrow exception,
the banking regulator is required to appoint a receiver or conservator for an
institution that is "critically undercapitalized." The regulation also provides
that a capital restoration plan must be filed with the OTS within 45 days of the
date a savings institution receives notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." Compliance
with the plan must be guaranteed by any parent holding company. In addition,
numerous mandatory supervisory actions become immediately applicable to an
undercapitalized institution, including, but not limited to, increased
monitoring by regulators and restrictions on growth, capital distributions and
expansion. The OTS could also take any one of a number of discretionary
supervisory actions, including the issuance of a capital directive and the
replacement of senior executive officers and directors.
Insurance of Deposit Accounts. The FDIC has adopted a risk-based deposit
insurance system that assesses deposit insurance premiums according to the level
of risk involved in an institution's activities. An institution's risk category
is based upon whether the institution is classified as "well capitalized,"
"adequately capitalized" or "undercapitalized" and one of three supervisory
subcategories within each capital group. The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation and information
which the FDIC determines to be relevant to the institution's financial
condition and the risk posed to the deposit insurance fund. Based on its
capital and supervisory subgroups, each Bank Insurance Fund ("BIF") and SAIF
member institution is assigned an annual FDIC assessment rate between 23 basis
points for an institution in the highest category (i.e., well-capitalized and
healthy) and 31 basis points for an institution in the lowest category (i.e.,
undercapitalized and
55
<PAGE>
posing substantial supervisory concern). The FDIC has authority to further raise
premiums if deemed necessary. If such action is taken, it could have an adverse
effect on the earnings of the Bank.
The FDIC recently adopted a new assessment rate schedule of 0 to 27 basis
points for BIF members. Under that schedule, most BIF pay $2,000 per year, the
legal minimum in insurance premiums. With respect to SAIF member institutions,
the existing assessment schedule of 23 to 31 basis points was retained. As long
as the premium disparity remains, it may place SAIF members, such as the Bank,
at a substantial disadvantage to BIF members with respect to pricing of loans
and deposits and the ability to achieve lower operating costs.
Several bills have been introduced in Congress to mitigate the effect of the
BIF/SAIF premium disparity. Among other things, these bills would impose a
special assessment on SAIF members to recapitalize the SAIF fund and would
spread the FICO payments across all BIF and SAIF members. It is presently
estimated that the amount of the one-time fee would range from 79 to 85 basis
points on the amount of deposits held by SAIF-member institutions as of March
31, 1995. An assessment of a 79 to 85 basis point fee to recapitalize the SAIF
would result in a $10.4 million to $11.1 million payment on an after tax basis
for the Bank, based on deposits as of March 31, 1995.
Under the FDI Act, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
OTS. The management of the Bank does not know of any practice, condition or
violation that might lead to termination of deposit insurance.
Loans to One Borrower. Under the HOLA, savings institutions are generally
subject to the limits on loans to one borrower applicable to national banks.
Generally, savings institutions may not make a loan or extend credit to a single
or related group of borrowers in excess of 15% of its unimpaired capital and
surplus. An additional amount may be lent, equal to 10% of unimpaired capital
and surplus, if such loan is secured by readily-marketable collateral, which is
defined to include certain financial instruments and bullion. At June 30, 1996,
the Bank's limit on loans to one borrower was $32.3 million. At June 30, 1996,
the Bank's largest aggregate outstanding balance of loans to one borrower
consisted of a $16.2 million.
QTL Test. The HOLA requires savings institutions to meet a QTL test. Under
the QTL test, a savings and loan association is required to maintain at least
65% of its "portfolio assets" (total assets less (i) specified liquid assets up
to 20% of total assets; (ii) intangibles, including goodwill; and (iii) the
value of property used to conduct business) in certain "qualified thrift
investments" (primarily residential mortgages and related investments, including
certain mortgage-backed securities) in at least 9 months out of each 12 month
period. A savings institution that fails the QTL test is subject to certain
operating restrictions and may be required to convert to a bank charter. As of
June 30, 1996, the Bank maintained 93.5% of its portfolio assets in qualified
thrift investments and, therefore, met the QTL test.
Limitation on Capital Distributions. OTS regulations impose limitations upon
all capital distributions by savings institutions, such as cash dividends,
payments to repurchase or otherwise acquire its shares, payments to shareholders
of another institution in a cash-out merger and other distributions charged
against capital. The rule establishes three tiers of institutions, which are
based primarily on an institution's capital level. An institution that exceeds
all fully phased-in capital requirements before and after a proposed capital
distribution ("Tier 1 Bank") and has not been advised by the OTS that it is in
need of more than normal supervision, could, after prior notice but without
obtaining approval of the OTS, make capital distributions during a calendar year
equal to the greater of (i) 100% of its net earnings to date during the calendar
year plus the amount that would reduce by one-half its "surplus capital ratio"
(the excess capital over its fully phased-in capital requirements) at the
beginning of the calendar year or
56
<PAGE>
(ii) 75% of its net income for the previous four quarters. Any additional
capital distributions would require prior regulatory approval. In the event the
Bank's capital fell below its regulatory requirements or the OTS notified it
that it was in need of more than normal supervision, the Bank's ability to make
capital distributions could be restricted. 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. In December 1994, the OTS proposed
amendments to its capital distribution regulation that would generally authorize
the payment of capital distributions without OTS approval provided the payment
does not make the institution undercapitalized within the meaning of the prompt
corrective action regulation. However, institutions in a holding company
structure would still have a prior notice requirement. At June 30, 1996, the
Bank was a Tier 1 Bank.
Liquidity. The Bank is required to maintain an average daily balance of
specified liquid assets equal to a monthly average of not less than a specified
percentage of its net withdrawable deposit accounts plus short-term borrowings.
This liquidity requirement is currently 5% but may be changed from time to time
by the OTS to any amount within the range of 4% to 10% depending upon economic
conditions and the savings flows of member institutions. OTS regulations also
require each member savings institution to maintain an average daily balance of
short-term liquid assets at a specified percentage (currently 1%) of the total
of its net withdrawable deposit accounts and borrowings payable in one year or
less. Monetary penalties may be imposed for failure to meet these liquidity
requirements. The Bank's liquidity and short-term liquidity ratios for June 30,
1996 were 6.81% and 5.72% respectively, which exceeded the then applicable
requirements. The Bank has never been subject to monetary penalties for failure
to meet its liquidity requirements.
Assessments. Savings institutions are required to pay assessments to the OTS
to fund the agency's operations. The general assessment, paid on a semi-annual
basis, is computed upon the savings institution's total assets, including
consolidated subsidiaries, as reported in the Bank's latest quarterly thrift
financial report. The assessments paid by the Bank for the fiscal year ended
June 30, 1996 totaled $305,000.
Branching. OTS regulations permit nationwide branching by federally
chartered savings institutions to the extent allowed by federal statute. This
permits federal savings institutions to establish interstate networks and to
geographically diversify their loan portfolios and lines of business. The OTS
authority preempts any state law purporting to regulate branching by federal
savings institutions.
Transactions with Related Parties. The Bank's authority to engage in
transactions with related parties or "affiliates" (e.g., any company that
controls or is under common control with an institution, including the Company
and its non-savings institution subsidiaries) is limited by Sections 23A and 23B
of the Federal Reserve Act ("FRA"). Section 23A limits the aggregate amount of
covered transactions with any individual affiliate to 10% of the capital and
surplus of the savings institution. The aggregate amount of covered
transactions with all affiliates is limited to 20% of the savings institution's
capital and surplus. Certain transactions with affiliates are required to be
secured by collateral in an amount and of a type described in Section 23A, and
the purchase of low quality assets from affiliates is generally prohibited.
Section 23B generally provides that certain transactions with affiliates,
including loans and asset purchases, must be on terms and under circumstances,
including credit standards, that are substantially the same or at least as
favorable to the institution as those prevailing at the time for comparable
transactions with non-affiliated companies. In addition, savings institutions
are prohibited from lending to any affiliate that is engaged in activities that
are not permissible for bank holding companies and no savings institution may
purchase the securities of any affiliate other than a subsidiary.
The Bank's authority to extend credit to executive officers, directors and 10%
shareholders, as well as entities such persons control, is governed by Sections
22(g) and 22(h) of the FRA and Regulation O
57
<PAGE>
thereunder. Among other things, such loans are required to be made on terms
substantially the same as those offered to unaffiliated individuals and to not
involve more than the normal risk of repayment. Regulation O also places
individual and aggregate limits on the amount of loans the Bank may make to such
persons based, in part, on the Bank's capital position and requires certain
board approval procedures to be followed.
Enforcement. Under the FDI Act, the OTS has primary enforcement
responsibility over savings institutions and has the authority to bring actions
against the institution and all "institution-affiliated parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution. Formal enforcement action may range from the issuance of a
capital directive or cease and desist order to removal of officers and/or
directors to institution of proceedings for receivership, conservatorship or
termination of deposit insurance. Civil penalties cover a wide range of
violations and may amount to $25,000 per day, or even $1 million per day in
especially egregious cases. Under the FDI Act, the FDIC has the authority to
recommend to the Director of the OTS enforcement action to be taken with respect
to a particular savings institution. If action is not taken by the Director,
the FDIC has authority to take such action under certain circumstances. Federal
law also establishes criminal penalties for certain violations.
Standards for Safety and Soundness. The federal banking agencies have adopted
Interagency Guidelines Prescribing Standards for Safety and Soundness
("Guidelines") and a final rule to implement safety and soundness standards
required under the FDI Act. The Guidelines set forth the safety and soundness
standards that the federal banking agencies use to identify and address problems
at insured depository institutions before capital becomes impaired. The
standards set forth in the Guidelines address internal controls and information
systems; internal audit system; credit underwriting; loan documentation;
interest rate risk exposure; asset growth; and compensation, fees and benefits.
The agencies are expected to adopt a proposed rule that proposes asset quality
and earnings standards which, if adopted in final, would be added to the
Guidelines. If the appropriate federal banking agency determines that an
institution fails to meet any standard prescribed by the Guidelines, the agency
may require the institution to submit to the agency an acceptable plan to
achieve compliance with the standard, as required by the FDI Act. The final
rule establishes deadlines for the submission and review of such safety and
soundness compliance plans when such plans are required.
Federal Home Loan Bank System
The Bank is a member of the FHLB System, which consists of 12 regional FHLBs.
The FHLB provides a central credit facility primarily for member institutions.
The Bank, as a member of the FHLB of Chicago, is required to acquire and hold
shares of capital stock in that FHLB in an amount at least equal to 1% of the
aggregate principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year, or 1/20 of its advances (borrowings)
from the FHLB-Chicago, whichever is greater. At June 30, 1996, the Bank was in
compliance with this requirement, with an investment in FHLB of Chicago stock of
$30.7 million. FHLB of Chicago advances must be secured by specified types of
collateral and may be obtained primarily for the purpose of providing funds for
residential housing finance.
The FHLBs are required to provide funds to cover certain obligations on bonds
issued to fund the resolution of insolvent thrifts and to contribute funds for
affordable housing programs. These requirements could reduce the amount of
dividends that the FHLBs pay to their members and could also result in the FHLBs
imposing a higher rate of interest on advances to their members. For the fiscal
years ended June 30, 1996, 1995, and 1994, dividends from the FHLB of Chicago to
the Bank amounted to $1.3 million, $656,000, and $637,000, respectively. If
FHLB dividends were reduced, or interest on future FHLB advances increased, the
Bank's net interest income might also be reduced.
58
<PAGE>
Federal Reserve System
The Federal Reserve Board regulations require savings institutions to maintain
non-interest earning reserves against their transaction accounts (primarily NOW
and regular checking accounts). The Federal Reserve Board regulations generally
require that reserves be maintained against aggregate transaction accounts as
follows: for accounts aggregating $54.0 million or less (subject to adjustment
by the Federal Reserve Board) the reserve requirement is 3%; and for accounts
greater than $54.0 million, the reserve requirement is $1.6 million plus 10%
(subject to adjustment by the Federal Reserve Board between 8% and 14%) against
that portion of total transaction accounts in excess of $54.0 million. The
first $4.2 million of otherwise reservable balances (subject to adjustments by
the Federal Reserve Board) are exempted from the reserve requirements. The Bank
is in compliance with the foregoing requirements. The balances maintained to
meet the reserve requirements imposed by the Federal Reserve Board may be used
to satisfy liquidity requirements imposed by the OTS.
Impact of New Accounting Standards
In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." SFAS No. 121 is effective for fiscal years beginning
after December 15, 1995. SFAS No. 121 provides guidance for the recognition and
measurement of impairment of long-lived assets, certain identifiable
intangibles, and goodwill related both to assets to be held and used and assets
to be disposed of. SFAS No. 121 requires entities to perform separate
calculations for assets to be held and used to determine whether recognition of
an impairment loss is required and, if so, to measure the impairment. SFAS No.
121 requires long-lived assets and certain identifiable intangibles to be
disposed of to be reported at the lower of carrying amount or fair value less
costs to sell. The Company does not expect the adoption of SFAS No. 121 to have
a material impact on its consolidated financial condition or results of
operations.
In May 1995, the FASB issued SFAS No. 122, "Accounting in Mortgage Banking
Activities." SFAS No. 122 is effective for fiscal years beginning after
December 31, 1995, with earlier application encouraged. SFAS No. 122 requires
the recognition of a separate asset related to rights to service loans for
others, however those servicing rights are acquired. SFAS No. 122 also requires
an assessment of the capitalized mortgage rights for impairment based on the
fair value of those rights. The Bank implemented the provisions of SFAS No. 122
on July 1, 1996. It is anticipated that the implementation will have a positive
impact on earnings, due to the active retail loan origination strategy of the
Bank, although the amount is subject to a variety of factors, including the
general level of interest rates, the mix of loan originations at the time of
implementation, and the estimated value management determines its servicing
rights to have.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 is effective for the Company in fiscal 1997. SFAS
No. 123 allows for alternative accounting treatment for stock-based compensation
which the Company currently reports under Accounting Principles Board ("APB")
No. 25, "Accounting for Stock Issued to Employees." The Company does not intend
to elect the fair value based method of expense recognition for stock-based
compensation as contemplated by SFAS No. 123, but rather will adopt the pro
forma disclosure alternative provided in SFAS No. 123, and continue to account
for stock-based compensation under APB No. 25.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extingushments of Liabilities." This
Statement, among other things, applies a "financial-components approach" that
focuses on control, whereby an entity recognizes the financial and servicing
assets it controls and the liabilities it has incurred, derecognizes assets when
control has been surrendered, and derecognizes liabilities when extinguished.
SFAS No. 125 provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings.
SFAS No. 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. The Company
does not expect this pronouncement to have a significant impact on its
consolidated financial condition or results of operations.
59
<PAGE>
Item 8. Financial Statements and Supplementary Data
MAF Bancorp, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
June 30,
-----------------------
1996 1995
----------- ----------
(In thousands)
<S> <C> <C>
Assets
Cash and due from banks $ 51,665 39,982
Interest-bearing deposits 37,496 10,465
Federal funds sold 5,700 9,360
Investment securities, at amortized cost (fair value
of $102,098 at June 30, 1996 and $53,172 at
June 30, 1995) 102,226 53,206
Investment securities available for sale, at fair value 38,296 24,088
Stock in Federal Home Loan Bank of Chicago, at cost 30,729 13,025
Mortgage-backed securities, at amortized cost (fair
value of $290,249 at June 30, 1996 and $237,697
at June 30, 1995) 293,381 243,952
Mortgage-backed securities available for sale, at fair
value 124,721 63,438
Loans receivable held for sale 9,314 24,984
Loans receivable, net of allowance for loan losses of
$17,254 at June 30, 1996, and $9,197 at June 30, 1995 2,284,085 1,242,469
Accrued interest receivable 19,974 10,246
Foreclosed real estate 888 336
Real estate held for development or sale 26,620 11,454
Premises and equipment, net 31,245 21,135
Excess of cost over fair value of net assets acquired 26,901 -
Other assets 33,908 14,936
--------- ---------
$3,117,149 1,783,076
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Deposits 2,254,100 1,313,306
Borrowed funds 537,696 307,024
Subordinated capital notes, net 26,676 20,100
Advances by borrowers for taxes and insurance 17,056 15,219
Accrued expenses and other liabilities 39,395 22,008
--------- ---------
Total liabilities 2,874,923 1,677,657
Stockholders' equity:
Preferred stock, $.01 par value; authorized
5,000,000 shares; none issued or outstanding - -
Common stock, $.01 par value; authorized 40,000,000
shares; 11,057,498 shares issued and 10,340,673
outstanding at June 30, 1996; 5,859,568 shares
issued and 5,492,743 outstanding at June 30, 1995 111 59
Additional paid-in capital 170,956 39,740
Retained earnings, substantially restricted 88,524 73,447
Unrealized loss on securities available for sale, net
of tax (825) (48)
Treasury stock, at cost; 716,825 shares at June 30,
1996 and 366,825 shares at June 30, 1995 (16,540) (7,779)
--------- ---------
Total stockholders' equity 242,226 105,419
Commitments and contingencies --------- ---------
$3,117,149 1,783,076
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
60
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------
1996 1995 1994
--------- ------------ -----------
(dollars in thousands, except per share data)
---------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans receivable $ 115,466 86,511 75,781
Mortgage-backed securities 18,291 19,747 20,304
Investment securities 6,153 5,041 4,741
Interest-bearing deposits 2,064 2,068 2,390
Federal funds sold 1,121 1,596 562
-------- ------- -------
Total interest income 143,095 114,963 103,778
Interest expense:
Deposits 63,325 55,794 53,004
Borrowed funds and
subordinated capital notes 29,896 17,573 16,690
-------- ------- -------
Total interest expense 93,221 73,367 69,694
-------- ------- -------
Net interest income 49,874 41,596 34,084
Provision for loan losses 700 475 1,200
-------- ------- -------
Net interest income after
provision for loan losses 49,174 41,121 32,884
Non-interest income:
Gain (loss) on sale of:
Loans receivable 203 (56) 2,631
Mortgage-backed securities (5) - 504
Income from real estate operations 4,786 7,497 7,719
Gain (loss) on sale and
writedown of investment securities 188 (231) 200
Gain on sale of foreclosed
real estate 50 181 145
Deposit account service charges 4,894 3,347 2,414
Loan servicing fee income 2,394 2,373 2,456
Brokerage commissions 1,711 1,383 1,682
Other 2,879 2,156 1,897
-------- ------- -------
Total non-interest income 17,100 16,650 19,648
Non-interest expense:
Compensation and benefits 21,209 18,257 16,954
Office occupancy and equipment 3,774 3,522 3,569
Federal deposit insurance premiums 3,255 3,003 2,996
Advertising and promotion 1,746 1,760 1,408
Data processing 1,683 1,473 1,282
Other 6,119 5,397 5,107
-------- ------- -------
Total non-interest expense 37,786 33,412 31,316
-------- ------- -------
Income before income taxes and
extraordinary item 28,488 24,359 21,216
Income taxes 10,805 9,316 7,766
-------- ------- -------
Income before extraordinary item 17,683 15,043 13,450
Extraordinary item-loss on early
extinguishment of debt, net of tax
benefit of $300 (474) - -
-------- ------- -------
Net income $ 17,209 15,043 13,450
======== ======= =======
Primary earnings per share:
Income before extraordinary item $ 2.84 2.54 2.22
Extraordinary item, net of tax (.08) - -
-------- ------- -------
Net income $ 2.76 2.54 2.22
======== ======= =======
Fully diluted earnings per share:
Income before extraordinary item $ 2.84 2.54 2.22
Extraordinary item, net of tax (.08) - -
-------- ------- -------
Net income $ 2.76 2.54 2.22
======== ======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
61
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Unrealized loss
Additional on securities
Common paid-in Retained available for sale,
stock capital earnings net of tax
----- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Balance at June 30, 1993 54 27,006 58,674 -
Net income - - 13,450 -
Proceeds from exercise of 17,643 stock options - 90 - -
Purchase of treasury shares - - - -
Tax benefits from stock-related compensation - 251 - -
Principal payment on ESOP loan - - - -
Distribution of MRP stock awards - - - -
50% stock dividend related to fractional shares - - (7) -
----- ------- ------- --------
Balance at June 30, 1994 54 27,347 72,117 -
Net income - - 15,043 -
Proceeds from exercise of 14,025 stock options - 78 - -
Purchase of treasury shares - - - -
Tax benefits from stock-related compensation - 219 - -
Principal payment on ESOP loan - - - -
Distribution of MRP stock awards - - - -
Cumulative effect of change in accounting for
securities available for sale, net of tax - - - (739)
Change in unrealized loss on securities
available for sale, net of tax - - - 691
Cash dividends declared, $0.291 per share - - (1,612) -
Special 10% stock dividend 5 12,096 (12,101) -
----- ------- ------- --------
Balance at June 30, 1995 59 39,740 73,447 (48)
Net income - - 17,209 -
Issuance of 5,194,710 shares, including value of
option carryovers, for acquisition of N.S. Bancorp 52 131,186 - -
Proceeds from exercise of 3,150 stock options - 17 - -
Purchase of treasury shares - - - -
Tax benefits from stock-related compensation - 13 - -
Change in unrealized loss on securities
available for sale, net of tax - - - (777)
Cash dividends declared, $0.32 per share - - (2,121) -
10% stock dividend related to fractional shares - - (11) -
----- ------- ------- --------
Balance at June 30, 1996 $ 111 170,956 88,524 (825)
===== ======= ======= ========
<CAPTION>
Common stock Common stock
Treasury acquired by acquired by
Stock ESOP MRPs Total
----- ---- ---- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Balance at June 30, 1993 - (383) (349) 85,002
Net income - - - 13,450
Proceeds from exercise of 17,643 stock options - - - 90
Purchase of treasury shares (4,038) - - (4,038)
Tax benefits from stock-related compensation - - - 251
Principal payment on ESOP loan - 237 - 237
Distribution of MRP stock awards - - 165 165
50% stock dividend related to fractional shares - - - (7)
------- ------- ------- --------
Balance at June 30, 1994 (4,038) (146) (184) 95,150
Net income - - - 15,043
Proceeds from exercise of 14,025 stock options - - - 78
Purchase of treasury shares (3,741) - - (3,741)
Tax benefits from stock-related compensation - - - 219
Principal payment on ESOP loan - 146 - 146
Distribution of MRP stock awards - - 184 184
Cumulative effect of change in accounting for
securities available for sale, net of tax - - - (739)
Change in unrealized loss on securities
available for sale, net of tax - - - 691
Cash dividends declared, $0.291 per share - - - (1,612)
Special 10% stock dividend - - - -
------- ------- ------- --------
Balance at June 30, 1995 (7,779) - - 105,419
Net income - - - 17,209
Issuance of 5,194,710 shares, including value of
option carryovers, for acquisition of N.S. Bancorp - - - 131,238
Proceeds from exercise of 3,150 stock options - - - 17
Purchase of treasury shares (8,761) - - (8,761)
Tax benefits from stock-related compensation - - - 13
Change in unrealized loss on securities
available for sale, net of tax - - - (777)
Cash dividends declared, $0.32 per share - - - (2,121)
10% stock dividend related to fractional shares - - - (11)
------- ------- ------- --------
Balance at June 30, 1996 $(16,540) - - 242,226
======= ======= ======= ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
62
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------
1996 1995 1994
---------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Operating activities:
Net income $ 17,209 15,043 13,450
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization 1,996 1,825 1,817
Amortization of premiums, discounts and
deferred loan fees 175 632 2,926
Distribution of MRP awards - 184 165
Provision for loan losses 700 475 1,200
FHLB of Chicago stock dividends - (156) -
Deferred income tax expense (benefit) 1,452 1,423 (2,035)
Extraordinary item, net of tax 474 - -
Net gain on sale of loans, mortgage-backed
securities, and real estate held for
development or sale (4,984) (7,441) (10,854)
(Gain) loss on sale of and writedown of
investment securities, net (188) 231 (200)
(Increase) decrease in accrued interest
receivable (1,849) (777) (97)
Net (increase) decrease in other assets
and liabilities, net of effects from
purchase of NSBI 5,477 4,898 (2,473)
--------- -------- --------
Net adjustments 3,253 1,294 (9,551)
Loans originated for sale (157,961) (74,841) (273,982)
Loans purchased for sale (93,271) (31,221) (12,071)
Sale of mortgage-backed securities available
for sale 41,188 - 8,630
Sale of loans originated and purchased for
sale 267,394 92,246 342,977
--------- -------- --------
Net cash provided by operating
activities 77,812 2,521 69,453
--------- -------- --------
Investing activities:
Loans originated for investment (473,622) (348,610) (528,951)
Principal repayments on loans receivable 394,274 231,165 419,062
Principal repayments on mortgage-backed
securities 69,790 49,583 181,616
Proceeds from maturities of investment
securities available for sale 34,002 137 -
Proceeds from maturities of investment
securities held to maturity 101,194 27,507 712
Proceeds from sale of:
Loans receivable 1,805 - 2,069
Investment securities available for sale 1,155 6,516 4,416
Stock in Federal Home Loan Bank of Chicago 300 - 1,356
Real estate held for development or sale 16,184 19,455 28,905
Premises and equipment 1 55 1
Purchases of:
Loans receivable held for investment (269,796) (126,124) (282)
Investment securities available for sale (31,111) (6,960) (2,466)
Investment securities held to maturity (21,715) (16,938) (31,917)
Mortgage-backed securities available for
sale - (10,003) (31,304)
Mortgage-backed securities held to maturity - - (139,319)
Stock in Federal Home Loan Bank of Chicago (8,300) (3,122) -
Real estate held for development or sale (7,297) (12,588) (6,159)
Premises and equipment (4,282) (2,599) (1,255)
Payment for purchase of N.S. Bancorp, net of
cash acquired (174,730) - -
--------- -------- --------
Net cash used in investing activities (372,148) (192,526) (103,516)
--------- -------- --------
</TABLE>
(Continued)
63
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(continued)
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------
1996 1995 1994
--------- -------- --------
(In thousands)
<S> <C> <C> <C>
Financing activities:
Proceeds from:
FHLB of Chicago advances 205,000 150,000 55,000
Unsecured term bank loan 35,000 - -
Issuance of subordinated notes, net 26,629 - -
Repayments of:
FHLB of Chicago advances (45,000) - -
Subordinated capital notes (20,900) - -
Collateralized mortgage obligations (6,038) (6,477) (40,676)
Net increase (decrease) in reverse repurchase
agreements (56,910) 15,000 12,675
Net decrease in other borrowings - (3,518) (278)
Net additions to deposits 68,375 20,775 2,459
Increase (decrease) in advances by borrowers
for taxes and insurance 809 2,901 (2,236)
Issuance of common stock in conjunction with
acquisition 131,238 - -
Proceeds from exercise of stock options 17 78 90
Purchase of treasury stock (6,299) (3,741) (4,038)
Cash dividends paid (2,531) (1,213) -
------- ------- -------
Net cash provided by financing activities 329,390 173,805 22,996
------- ------- -------
Increase (decrease) in cash and cash
equivalents 35,054 (16,200) (11,067)
Cash and cash equivalents at beginning of year 59,807 76,007 87,074
------- ------- -------
Cash and cash equivalents at end of year $ 94,861 59,807 76,007
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest on deposits and borrowed funds $ 96,294 72,426 69,793
Income taxes 9,150 6,450 10,715
Summary of non-cash transactions:
Transfer of loans receivable to
foreclosed real estate 515 1,016 2,041
Loans receivable swapped into mortgage-backed
securities 41,195 - 4,835
Investment securities transferred to
available for sale category 17,999 16,004 -
Mortgage-backed securities transferred
to available for sale category 108,743 77,827 -
Investment securities of N.S. Bancorp
transferred to treasury stock 2,462 - -
======= ======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
64
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1996, 1995 and 1994
1. Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include
the accounts of MAF Bancorp, Inc. ("Company") and its two wholly-owned
subsidiaries, Mid America Federal Savings Bank ("Bank") and MAF Developments,
Inc., as well as the Bank's wholly-owned subsidiaries, Mid America Development
Services, Inc. ("Mid America Developments"), Mid America Finance Corporation
("MAFC"), Mid America Insurance Agency, Inc., Mid America Mortgage Securities,
Inc., NW Financial, Inc ("NW Financial"), and Northwestern Acceptance
Corporation ("NWAC"). All significant intercompany balances and transactions
have been eliminated in consolidation.
Use of Estimates. The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.
Investment and Mortgage-Backed Securities. All investment securities and
mortgage-backed securities are classified in one of three categories: trading,
held to maturity, or available for sale. Trading securities include investment
and mortgage-backed securities which the Company has purchased and holds for the
purpose of selling in the future. These investments are carried at fair value,
with unrealized gains and losses reflected in income in the current period. Held
to maturity securities include investment and mortgage-backed securities which
the Company has the positive intent and ability to hold to maturity. These
investments are carried at amortized cost, with no recognition of unrealized
gains or losses in the financial statements. All other investment and mortgage-
backed securities are classified as available for sale. These investments are
carried at fair value, with unrealized gains and losses reflected as an
adjustment to stockholders' equity, net of tax.
Amortization of premiums, accretion of discounts, and the amortization of
purchase accounting adjustments for investment and mortgage-backed securities
acquired are recognized in interest income over the period to maturity for
investment securities, or the estimated life of mortgage-backed securities using
the level-yield method. Gains and losses on sales of investment securities,
mortgage-backed securities, and equity securities are determined using the
specific identification method.
The Bank arranges for "swap" transactions with the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC")
which involve the exchange of whole mortgage loans originated by the Bank for
mortgage-backed securities. These securities are generally categorized as
available for sale as they are usually sold in conjunction with the Bank's
mortgage banking strategy.
Upon adoption of Statement of Financial Accounting Standards No. 115 in
1995, the Company transferred $16.0 million of investment securities and $77.8
million of mortgage-backed securities into the available for sale category. The
unrealized loss at the date of transfer was $1.2 million. In accordance with an
implementation guide to SFAS No. 115 issued in November 1995, the Company
transferred $18.0 million of investment securities and $108.7 million of
mortgage-backed securities on December 31, 1995, from held to maturity to
available for sale. The unrealized loss was $267,000 at the date of transfer.
The transfers in both years were made to provide additional flexibility for the
Company in managing its investment and liquidity positions.
65
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
Loans receivable held for sale. The Bank sells, generally without recourse,
whole loans and participation interests in mortgage loans which it originates.
Loans originated are identified as either held for investment or sale upon
origination. Loans which the Bank intends to sell before maturity are classified
as held for sale, and are carried at the lower of cost, adjusted for applicable
deferred loan fees or expenses, or estimated market value in the aggregate.
The Bank enters into forward commitments to sell mortgage loans primarily
with FNMA to deliver mortgage loans originated by the Bank at a specific time
and specific price in the future. Loans subject to forward sales are classified
as held for sale. Unrealized losses, if any, on forward commitments are included
in gain (loss) on sale of mortgage loans in the period the loans are committed.
Loans Receivable. Loans receivable are stated at unpaid principal balances
less unearned discounts, deferred loan origination fees, loans in process and
allowance for loan losses.
Discounts on loans receivable are amortized to interest income using the
level-yield method over the remaining period to contractual maturity, adjusted
for anticipated prepayments. Amortization of purchase accounting discounts are
being amortized over the contractual term of loans receivable acquired, adjusted
for anticipated prepayments, using the level-yield method.
Loan fees and certain direct loan origination costs are deferred, and the
net deferred fee or cost is recognized as an adjustment to yield using the
level-yield method over the contractual life of the loans.
On July 1, 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan,"
as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures," which impose certain requirements on the
identification and measurement of impaired loans. A loan is considered impaired
when, based on current information and events, it is probable that a creditor
will be unable to collect all amounts due according to the contractual terms of
the loan. For loans which are not individually significant (i.e. loans under
$500,000), and represent a homogeneous population, the Bank evaluates impairment
collectively based on management reports on the level and extent of
delinquencies, as well as historical loss experience for these types of loans.
The Bank uses this criteria on one-to four-family residential loans, consumer
loans, multi-family residential loans, and land loans. Impairment for loans
considered individually significant and commercial real estate loans are
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate, or the fair value of the collateral if the
loan is collateral dependent. At June 30, 1996, and throughout the year, the
Company had no loans which are considered impaired under the criteria of SFAS
No. 114. Charge-offs of principal occur when a loss has deemed to have occurred
as a result of the book value exceeding the fair value or net realizable value.
The Company's policy for recognition of interest income on impaired loans is
unchanged as a result of the adoption of SFAS No. 114 and 118. A loan (whether
considered impaired or not) is classified as non-accrual when collectibility is
in doubt, and is normally analyzed upon the borrower becoming 90 days past due
on contractual principal or interest payments. When a loan is placed on non-
accrual status, or in the process of foreclosure, previously accrued but unpaid
interest is reversed against interest income. Income is subsequently recorded
to the extent cash payments are received, or at a time when the loan is brought
current in accordance with its original terms.
66
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
Allowance for Loan Losses. The allowance for loan losses is increased by
charges to operations and decreased by charge-offs, net of recoveries. The
allowance for loan losses reflects management's estimate of the reserves needed
to cover the risks inherent in the Bank's loan portfolio. In determining a
proper level of loss reserves, management periodically evaluates the adequacy of
the allowance based on the Bank's past loan loss experience, known and inherent
risks in the loan portfolio, adverse situations that may affect the borrower's
ability to repay, estimated value of any underlying collateral, and current and
prospective economic conditions.
Foreclosed Real Estate. Real estate properties acquired through, or in lieu
of, loan foreclosure to be sold and are initially recorded at fair value at the
date of foreclosure establishing a new cost basis. Valuations are periodically
performed by management and an allowance for loss is established by a charge to
operations if the carrying value of a property exceeds its estimated fair value
less cost to dispose.
Real Estate Held for Development or Sale. Real estate properties held for
development or sale, are carried at the lower of cost, including capitalized
holding costs or net realizable value. Gains and losses on individual lot sales
in a particular development are based on cash received less the estimated cost
of sales per lot. Cost of sales is calculated as the current investment in the
particular development plus anticipated costs to complete the development, which
includes interest capitalized, divided by the remaining number of lots to be
sold. Periodic estimates are made as to a development's cost to complete. Per
unit cost of sales estimates are adjusted on a prospective basis when, and if,
estimated costs to complete change.
Premises and Equipment. Land is carried at cost. Buildings, leasehold
improvements, furniture, fixtures, and equipment are carried at cost, less
accumulated depreciation and amortization, Buildings, furniture, fixtures, and
equipment are depreciated using the straight-line method over the estimated
useful lives of the assets. Useful lives are 20 to 50 years for office
buildings, 10 to 15 years for parking lot improvements, and 3 to 10 years for
furniture, fixtures, and equipment. The cost of leasehold improvements is being
amortized using the straight-line method over the lesser of the life of the
leasehold improvement or the term of the related lease.
Intangibles. Included in other assets is an identifiable core deposit
intangible established in the acquisition of N.S. Bancorp, which was established
due to the application of the purchase method of accounting and is being
amortized over a 10 year period on an accelerated method of amortization.
The excess of cost over fair value of net assets and identified intangible
assets acquired (goodwill) due to the application of the purchase method of
accounting is being amortized over 20 years using the straight-line method.
Mortgage Servicing Rights. Included in other assets are purchased mortgage
servicing rights which represent the cost of acquiring the right to service
mortgage loans. These costs are initially capitalized and are subsequently
amortized over the estimated life of the loan servicing income stream using the
level-yield method. The Bank conducts periodic impairment analysis by
evaluating the present value of the future economic benefit to be derived from
the servicing rights using current information regarding interest rates,
prepayment assumptions, and the cost to service such loans.
67
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
Borrowed Funds. Discounts and premiums on collateralized mortgage
obligations are amortized using the level-yield method over the remaining
contractual maturities of the underlying mortgage-backed security collateral,
adjusted for estimated prepayments. The discount on subordinated capital notes
is amortized using the level-yield method over the life of the notes.
Income Taxes. The Company and its subsidiaries file a consolidated federal
income tax return. Deferred income taxes are provided for all significant items
of income and expense that are recognized in different periods for financial
reporting purposes and income tax reporting purposes. The asset and liability
approach is used for the financial accounting and reporting of income taxes.
This approach requires companies to take into account changes in the tax rates
when valuing the deferred income tax accounts recorded on the balance sheet. In
addition, it provides that a deferred tax liability or asset shall be recognized
for the estimated future tax effects attributable to "temporary differences" and
loss and tax credit carryforwards. Temporary differences include differences
between financial statement income and tax return income which are expected to
reverse in future periods as well as differences between tax bases of assets and
liabilities and their amounts for financial reporting purposes which are also
expected to be settled in future periods. To the extent a deferred tax asset is
established which more likely than not is not expected to be realized, a
valuation allowance shall be established against such asset.
Derivative Financial Instruments. The Company utilizes for purposes other
than trading the use of forward commitments to sell mortgage loans and interest
rate futures contracts, primarily U.S. Treasury bond futures, as part of its
mortgage loan origination hedging strategy. Gains and losses on open and closed
futures positions are deferred and recognized as an adjustment to gain (loss) on
the sale of loans receivable when the underlying loan being hedged is sold into
the secondary market.
Restrictions on Cash. Based on the types and amounts of deposits received,
the Bank must maintain non-interest bearing cash balances in accordance with
Federal Reserve Bank reserve requirements. The Bank's reserve requirement was
$9.7 million and $9.0 million at June 30, 1996, and 1995, respectively.
Earnings Per Share. Earnings per share is determined by dividing net income
for the year by the weighted average number of shares outstanding. Stock
options are regarded as common stock equivalents and are considered in the
earnings per share calculations. Common stock equivalents are computed using
the treasury stock method. Weighted average shares used in calculating earnings
per share are summarized below for the years ended June 30:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Primary earnings per share 6,238,444 5,912,787 6,054,836
Fully-diluted earnings per share 6,240,842 5,918,892 6,060,981
========= ========= =========
</TABLE>
Statement of Cash Flows. For purposes of reporting cash flows, cash and cash
equivalents include cash and due from banks, interest-bearing deposits and
federal funds sold. Generally, federal funds are sold for one-day periods and
interest-bearing deposits mature within one day to three months.
Reclassifications. Certain reclassifications of prior year amounts have been
made to conform with current year presentation.
68
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
2. Acquisition
On May 30, 1996, the Company acquired N.S. Bancorp, Inc. ("NSBI"), and its
wholly-owned subsidiary Northwestern Savings Bank ("Northwestern") through the
issuance of .8529 shares of MAF Bancorp common stock plus $20.1799 of cash for
each share of NSBI stock as follows (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C>
Cash paid (including acquisition expenses of $7.6 million) $ 130,545
Common stock issued, including $3.3 million value of
option carryovers 131,238
-------
Total consideration 261,783
Less: cash acquired from NSBI 87,053
-------
Purchase of NSBI, net of cash acquired $ 174,730
=======
</TABLE>
The Company issued 5.2 million shares of its common stock in the
acquisition. The funds used for the purchase were obtained from available cash
and cash equivalents, cash acquired, and short-term borrowings, which were
subsequently repaid with NSBI's maturing investment securities. Additionally,
the Company obtained an unsecured long-term bank borrowing for $35.0 million
(See note 10).
The transaction was accounted for as a purchase. Acquisition expenses
incurred in the transaction include professional fees as well as $4.2 million of
severance costs, net of applicable tax benefits. All assets, liabilities and
identified intangible assets of NSBI, and its wholly-owned subsidiaries, were
adjusted to fair value as of the effective date of the merger creating goodwill
in the amount of $27.0 million, which was pushed-down to the Bank, and is being
amortized on the straight line basis over 20 years. Premiums and discounts on
the fair value adjustments amounted to $4.1 million and $8.5 million,
respectively.
The following table summarizes the unaudited proforma financial results for
1996 and 1995 as if NSBI had been acquired on July 1, 1995.
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
(In thousands)
Net interest income after provision for loan losses $ 78,722 66,053
Total non-interest income 24,344 25,799
Total non-interest expense 56,376 53,670
Income taxes 17,945 14,757
Extraordinary item, net of tax (474) -
------- ------
Net income $ 28,271 23,425
======= ======
Earnings per share:
Income before extraordinary item $ 2.62 2.08
Extraordinary item, net of tax (.08) -
------- ------
Net income $ 2.54 2.08
======= ======
</TABLE>
The proforma information is not necessarily indicative of the actual results
of operations which would have occurred had the acquisition of NSBI been
consummated on July 1, 1995, nor is it necessarily indicative of future
operating results.
69
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
3. Investment Securities
Investment securities available for sale and held to maturity are summarized
below at June 30:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------ -------------------------------------------
Gross Gross Gross Gross
Book Unrealized Unrealized Fair Book Unrealized Unrealized Fair
Value Gains Losses Value Value Gains Losses Value
------- ----- ------ ------ ----- ----- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale:
United States government
and agency obligations due:
Within one year $ 10,997 8 (23) 10,982 5,000 - (9) 4,991
After one year to five years 12,998 - (159) 12,839 5,000 2 - 5,002
Marketable equity securities 12,050 526 (4) 12,572 7,871 404 (43) 8,232
Other investment securities 1,922 - (19) 1,903 5,863 - - 5,863
-------- --- ---- ------- ------ --- ---- ------
$ 37,967 534 (205) 38,296 23,734 406 (52) 24,088
======== === ==== ======= ====== === ==== ======
Held to maturity:
United States government
and agency obligations due:
Within one year $ 47,301 4 (29) 47,276 10,084 - (81) 10,003
After one year to five years 10,000 - (323) 9,677 33,030 53 (712) 32,371
After five years to ten years 19,646 374 (60) 19,960 9,971 706 - 10,677
Ten or more years 24,321 - (94) 24,227 - - - -
Other investment securities 958 - - 958 121 - - 121
-------- --- ---- ------- ------ --- ---- ------
$ 102,226 378 (506) 102,098 53,206 759 (793) 53,172
======== === ==== ======= ====== === ==== ======
Weighted average yield at June 30 6.89% 5.68%
======== ======
</TABLE>
During 1996 and 1995, proceeds on the sale of investment securities
available for sale were $1.2 million and $6.5 million, respectively. In 1996,
gross realized gains were $188,000. In 1995, gross realized gains were $199,000,
and gross realized losses were $430,000. During 1994, proceeds on the sale of
investment securities were $5.8 million. Gross realized gains were $200,000.
4. Mortgage-Backed Securities
Mortgage-backed securities available for sale and held to maturity are
summarized below at June 30:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------- ------------------------------------------
Gross Gross Gross Gross
Book Unrealized Unrealized Fair Book Unrealized Unrealized Fair
Value Gains Losses Value Value Gains Losses Value
--------- ---------- ----------- ------- -------- ---------- ----------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale:
FHLMC pass-through certificates $ 8,000 71 (19) 8,052 - - - -
FNMA pass-through certificates 13,232 343 (10) 13,565 - - - -
Collateralized mortgage obligations 105,146 56 (2,098) 103,104 63,872 17 (451) 63,438
-------- ----- ------ ------- ------- ----- ------ -------
$ 126,378 470 (2,127) 124,721 63,872 17 (451) 63,438
======== ===== ====== ======= ======= ===== ====== =======
Held to maturity:
GNMA pass-through certificates $ 3,637 168 (9) 3,796 - - - -
FHLMC pass-through certificates 157,468 2,441 (1,579) 158,330 31,560 778 - 32,338
FNMA pass-through certificates 32,044 223 (109) 32,158 16,296 529 - 16,825
Collateralized mortgage obligations 100,232 30 (4,297) 95,965 196,096 - (7,562) 188,534
-------- ----- ------ ------- ------- ----- ------ -------
$ 293,381 2,862 (5,994) 290,249 243,952 1,307 (7,562) 237,697
======== ===== ====== ======= ======= ===== ====== =======
Weighted average yield at June 30 6.91% 6.39%
======== =======
</TABLE>
70
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
The Bank swaps certain loans it originates into mortgage-backed securities.
Included in mortgage-backed securities at June 30, 1996, and 1995, are $22.6
million and $28.7 million, respectively, of loans originated by the Bank. During
the years ended June 30, 1996, 1995 and 1994, the Bank swapped $41.2 million, $-
0-, and $4.8 million, respectively, all of which were sold in the same year
swapped.
5. Loans Receivable
Loans receivable are summarized as follows at June 30:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(In thousands)
<S> <C> <C>
Real estate loans:
One-to-four family residential $ 2,032,102 1,032,233
Multi-family 94,713 67,248
Commercial 46,101 47,273
Construction 16,090 19,984
Land 26,644 19,281
----------- ---------
Total real estate loans 2,215,650 1,186,019
Unearned discounts, premiums, and deferred loan
fees, net (3,245) (882)
Loans in process (6,602) (8,459)
----------- ---------
2,205,803 1,176,678
Other loans:
Consumer loans:
Equity lines of credit 79,193 66,710
Home equity loans 10,525 4,335
Other 4,110 2,652
----------- ---------
Total consumer loans 93,828 73,697
Commercial business loans 1,821 1,560
----------- ---------
Total other loans 95,649 75,257
Loans in process (113) (269)
----------- ---------
95,536 74,988
----------- ---------
2,301,339 1,251,666
Allowance for loan losses (17,254) (9,197)
----------- ---------
$ 2,284,085 1,242,469
=========== =========
Weighted average yield at June 30 7.64% 7.88%
==== ====
</TABLE>
Adjustable-rate loans totaled $1.7 billion at June 30, 1996, and $896.9
million at June 30, 1995.
Activity in the allowance for loan losses is summarized as follows for the
years ended June 30:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- --------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 9,197 8,779 7,993
Provision for loan losses 700 475 1,200
Balance acquired in merger 7,722 - -
Charge-offs (376) (110) (417)
Recoveries 11 53 3
------- ------- -------
Balance at end of year $17,254 9,197 8,779
======= ======= =======
</TABLE>
71
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
At June 30, 1996, 1995 and 1994, the Bank had $6.1 million, $2.1 million and
$3.4 million, respectively, of loans which were on non-accrual status. Interest
income that would have been recorded on non-accrual loans amounted to $132,000,
$98,000 and $168,000 for the years ended June 30, 1996, 1995 and 1994,
respectively had these loans being accruing under their contractual terms.
Loans receivable accounted for as troubled debt restructuring are summarized
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Aggregate principal balance $ 4,299 4,379 4,464
===== ===== =====
Interest income which would have been recorded 297 283 305
Interest income recognized 297 283 342
----- ----- -----
Interest income foregone (recaptured) $ - - (37)
===== ===== =====
</TABLE>
The Bank has no commitments to lend additional funds to borrowers whose
loans are included above as of June 30, 1996.
The Bank services loans for its own account and for the benefit of others
pursuant to loan servicing agreements. Pursuant to these agreements, the Bank
typically collects from the borrower monthly payments of principal and interest,
as well as funds for the payment of real estate taxes and insurance. The Bank
retains its loan servicing fee from these payments and remits the balance of the
principal and interest payments to the various investors. Mortgage loans
serviced for others are not included in the accompanying consolidated statements
of financial condition. The unpaid principal balances of these loans were $1.04
billion, $887.9 million, and $823.9 million at June 30, 1996, 1995 and 1994,
respectively. Non-interest bearing custodial balances maintained in connection
with mortgage loans serviced for others and included in deposits were $16.6
million and $16.9 million at June 30, 1996 and 1995, respectively.
Activity in purchased mortgage servicing rights is as follows for the years
ended June 30:
<TABLE>
<CAPTION>
1996 1995 1994
------ -------- -------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 1,160 119 -
Additions 933 1,150 121
Amortization (253) (109) (2)
----- ------- ------
Balance at end of year $ 1,840 1,160 119
===== ======= ======
</TABLE>
6. Accrued Interest Receivable
Accrued interest receivable is summarized as follows at June 30:
<TABLE>
<CAPTION>
1996 1995
------- ------
(In thousands)
<S> <C> <C>
Investment securities $ 2,185 838
Mortgage-backed securities 3,020 1,592
Loans receivable 15,558 8,487
Reserve for uncollected interest (789) (671)
------- ------
$19,974 10,246
======= ======
</TABLE>
72
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
7. Real Estate Held for Development or Sale
Real estate held for development or sale is summarized as follows at
June 30:
<TABLE>
<CAPTION>
1996 1995
------ ------
Project (In thousands)
<S> <C> <C>
Reigate Woods $ 7,734 -
Woodbridge 6,475 -
Harmony Grove 5,104 2,536
Fields of Ambria 2,381 -
Creekside of Remington 1,807 1,734
Ashbury 1,196 2,042
Clow Creek Farm 1,168 3,924
Woods of Rivermist 755 861
Other - 357
------- ------
$26,620 11,454
======= ======
</TABLE>
Income from real estate operations is summarized by project as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Clow Creek Farm $3,536 1,711 -
Ashbury 1,392 5,364 6,975
Woods of Rivermist - 374 593
Scott's Crossing - 39 151
Creekside of Remington 81 9 -
Woodbridge 86 - -
Reigate Woods 98 - -
Fields of Ambria 17 - -
Other (424) - -
------ ------ ------
$4,786 7,497 7,719
====== ====== ======
</TABLE>
The loss of $424,000 in 1996 above represents the write-off of capitalized
costs on a parcel of land which the Company decided not to exercise its option
to purchase.
Information regarding revenues, expenses, and minority interest in earnings
is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
(In thousands)
<S> <C> <C> <C>
Gross lot sale revenues $15,688 15,584 23,788
Costs of sales 10,220 7,584 13,641
------- ------ ------
Gross margin from lot sales 5,468 8,000 10,147
Other (424) - -
Minority interest in gross margin (258) (503) (2,428)
------- ------ ------
$ 4,786 7,497 7,719
======= ====== ======
</TABLE>
73
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
Non-interest expense related to real estate operations was $446,000,
$325,000, and $322,000, for the years ended June 30, 1996, 1995 and 1994,
respectively. Interest capitalized to the cost of real estate held for
development or sale amounted to $115,000, $489,000 and $375,000 for the years
ended June 30, 1996, 1995 and 1994, respectively.
8. Premises and Equipment
Premises and equipment are summarized as follows at June 30:
<TABLE>
<CAPTION>
1996 1995
------- -------
(In thousands)
<S> <C> <C>
Land $ 5,697 4,057
Office buildings 23,780 17,670
Furniture, fixtures and equipment 15,956 11,912
Parking lot improvements 558 507
Leasehold improvements 817 733
------- -------
Total office properties and equipment, at cost 46,808 34,879
Less: accumulated depreciation and amortization (15,563) (13,744)
------- -------
$ 31,245 21,135
======= =======
</TABLE>
Depreciation and amortization of premises and equipment, included in data
processing expense and office occupancy and equipment expense was $2.0 million,
$1.8 million, and $1.8 million for the years ended June 30, 1996, 1995 and 1994,
respectively.
9. Deposits
Deposit account balances by interest rate are summarized as follows at June
30:
<TABLE>
<CAPTION>
1996 1995
----------------------------------- ------------------------------
Weighted Weighted
% of Average % of Average
Amount Total Rate Amount Total Rate
----------- ----- ---- -------- ----- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial checking accounts $ 31,687 1.4% - % $ 30,184 2.3% - %
Non-interest bearing checking 33,166 1.5 - 24,834 1.9 -
Interest bearing NOW accounts 145,947 6.5 1.69 114,408 8.7 1.86
Money market accounts 139,684 6.2 3.36 141,166 10.8 3.48
Passbook accounts 671,736 29.8 2.86 256,096 19.5 3.07
---------- -------- ---------- -------
1,022,220 45.4 566,688 43.2
---------- -------- ---------- -------
Certificate accounts:
3.00% to 3.99% 1,080 0.1 3.01 12,814 1.0 3.66
4.00% to 4.99% 192,338 8.5 4.84 103,927 7.9 4.60
5.00% to 5.99% 746,819 33.1 5.41 287,222 21.9 5.49
6.00% to 6.99% 217,707 9.6 6.44 236,593 18.0 6.39
7.00% to 7.99% 30,581 1.4 7.21 33,077 2.5 7.26
8.00% to 8.99% 41,779 1.8 8.52 50,186 3.8 8.48
9.00% to 10.99% 1,191 0.1 9.03 22,799 1.7 9.65
---------- -------- ---------- -------
1,231,495 54.6 746,618 56.8
---------- -------- ---------- -------
Unamortized premium 385 - - -
---------- -------- ---------- -------
Total deposits $2,254,100 100.0% $1,313,306 100.0%
========== ======== ========== =======
Weighted average
interest rate at June 30 4.28% 4.56%
==== ====
</TABLE>
74
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
Scheduled maturities of certificate accounts at June 30, 1996 are as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Less than 12 months $ 814,607
12 to 24 months 247,800
25 to 36 months 90,545
Over 36 months 78,543
---------
$1,231,495
=========
</TABLE>
Interest expense on deposit accounts is summarized as follows for the years
ended June 30:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(In thousands)
<S> <C> <C> <C>
NOW and money market accounts $ 6,376 6,393 5,833
Passbook accounts 8,967 8,289 7,691
Certificate accounts 47,982 41,112 39,480
------ ------ ------
$ 63,325 55,794 53,004
====== ====== ======
</TABLE>
The aggregate amount of certificates of deposit with a minimum denomination
of $100,000 was $136.2 million, $90.8 million and $87.0 million at June 30,
1996, 1995 and 1994, respectively.
At June 30, 1996, U.S. Treasury Notes, FHLMC and FNMA mortgage-backed
securities, as well as mortgage loans with an aggregate carrying value and
market value of $18.2 million, were pledged as collateral for certain jumbo
certificates aggregating $14.4 million.
75
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
10. BORROWED FUNDS
Borrowed funds are summarized as follows at June 30:
<TABLE>
<CAPTION>
Weighted Average
Interest Rate Amount
---------------- ------------------
1996 1995 1996 1995
-------- ------ -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Fixed rate advances from FHLB of
Chicago due:
1996 - 9.73% $ - 25,000
1997 7.15 7.15 50,000 50,000
1998 6.38 6.41 50,000 25,000
1999 8.27 8.27 15,000 15,000
2000 6.64 6.64 80,000 80,000
2001 6.45 6.39 65,000 40,000
2002 6.13 5.62 30,000 5,000
2003 6.13 6.13 5,500 5,500
------- -------
Total fixed rate advances 6.66 7.06 295,500 245,500
Adjustable rate advances from FHLB of
Chicago due:
1997 5.79 7.09 125,000 15,000
------- -------
Total advances from FHLB of Chicago 6.40 7.06 420,500 260,500
------- -------
Collateralized mortgage obligations:
Issued by MAFC due 2018 15,928 20,470
Unamortized discount (1,202) (1,621)
------- -------
11.42 11.19 14,726 18,849
------- -------
Issued by NWAC due 2018 27,419 -
Unamortized premium 247 -
------- -------
8.05 - 27,666 -
------- -------
Total collateralized mortgage
obligations, net 42,392 18,849
------- -------
Reverse repurchase agreements 6.74 5.96 39,804 27,675
Unsecured term bank loan, due 2003 6.47 - 35,000 -
------- -------
Total borrowed funds 6.23% 7.22 $ 537,696 307,024
===== ===== ======= =======
</TABLE>
The Bank has adopted a collateral pledge agreement whereby the Bank has
agreed to at all times keep on hand, free of all other pledges, liens, and
encumbrances, first mortgages with unpaid principal balances aggregating no less
than 167% of the outstanding secured advances from the Federal Home Loan Bank
("FHLB") of Chicago. All stock in the FHLB of Chicago is pledged as additional
collateral for these advances. At June 30, 1996, adjustable rate advances have
interest rates which adjust as follows: $85.0 million at the 7th District FHLB
daily investment deposit rate plus .45%; $25.0 million at the London interbank
offering rate ("LIBOR") for three months less .05%; and $15.0 million at the
prime rate less 2.01%.
The Bank issued collateralized mortgage obligations ("CMOs") in 1988 through
MAFC. The CMOs are collateralized by mortgage-backed securities of the Bank.
Substantially all of the collections of principal and interest from the
underlying collateral are paid through to the holders of the CMOs. The CMOs
were issued in four traunches. The actual maturity of each traunche of the CMO
varies depending upon the timing of cash receipts from the underlying
collateral. At June 30, 1996 and 1995, the CMOs
76
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
are secured by mortgage-backed securities of the Bank with a carrying value of
$15.8 million and $20.3 million and a fair value of $16.2 million and $20.9
million, respectively. For the years ended June 30, 1996, 1995, and 1994, the
effective annual cost of the CMOs was approximately 11.24%, 11.13% and 19.31%,
respectively.
Through acquisition, the Bank has CMOs which were issued by NWAC in 1988.
The CMOs were issued in two classes, which have floating interest rates tied to
LIBOR. The CMOs are collateralized by mortgage-backed securities of the Bank.
Substantially all of the collections of principal and interest from the
underlying collateral are paid through to the holders of the CMOs. At June 30,
1996, the CMOs are secured by mortgage-backed securities of the Bank with a
carrying value and fair value of $32.1 million and $30.6 million, respectively.
For the year ended June 30, 1996, the effective annual cost of the CMOs was
approximately 8.05%.
The Bank enters into sales of securities under agreements to repurchase the
identical securities ("reverse repurchase agreements") with nationally
recognized primary securities dealers and are treated as financings. The
securities underlying the agreements are delivered to the dealers who arrange
the transaction and are reflected as assets. The following table presents
certain information regarding reverse repurchase agreements as of June 30 and
the years then ended:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- -------
(in thousands)
<S> <C> <C> <C>
Balance at end of year $ 39,804 27,675 12,675
Maximum month-end balance 78,826 27,675 12,675
Average balance 18,619 16,626 9,515
Weighted average rate at end of year 6.74% 5.96% 4.00%
Weighted average rate on average balance 7.25 5.79 4.00
</TABLE>
At June 30, 1996 and 1995, the reverse repurchase agreements were
collateralized by CMOs with a carrying value of $42.1 million and $29.9 million
and a market value of $42.4 million and $29.5 million, respectively. At June
30, 1996, the reverse repurchase agreements have maturities of more than one
year.
The Company obtained a $35.0 million unsecured term bank loan in conjunction
with its acquisition of NSBI. The loan provides for an interest rate of the
prime rate or 1% over one, two or three-month LIBOR at management's discretion
adjustable and payable at the end of the repricing period. The loan currently
carries an interest rate of 1% over one-month LIBOR. The loan is convertible
all or in part, with certain limitations at the end of any repricing period, at
management's election to a fixed rate at 1.25% over the U.S. Treasury rate with
a maturity corresponding to the remaining term of the loan. The loan requires
increasing annual principal payments starting in December 1997 with $9.2 million
due at the final maturity of the loan on December 31, 2003. Prepayments of
principal are allowed, but fixed-rate portions are subject to penalty. In
conjunction with the term bank loan, the Company also maintains a $15.0 million
one year unsecured revolving line of credit which matures January 26, 1997, but
is renewable. The interest rate on the line of credit is the prime rate or 1%
over one, two, or three-month LIBOR, at management's discretion with interest
payable at the end of the repricing period. No amounts have been drawn on the
line of credit. The financing agreements contain covenants that, among other
77
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
things, requires the Company to maintain a minimum stockholders' equity balance
and to obtain certain minimum operating results, as well as requiring the Bank
to maintain "well capitalized" regulatory capital levels and certain non-
performing asset ratios. In addition, the Company has agreed not to pledge any
stock of the Bank or MAF Developments for any purpose. At June 30, 1996, the
Company was in compliance with these covenants.
Maturities of the unsecured term bank loan are as follows as of June 30,
1996 (in thousands):
<TABLE>
<S> <C>
December 31, 1997 $ 500
December 31, 1998 1,500
December 31, 1999 3,100
December 31, 2000 4,500
December 31, 2001 7,000
Thereafter 18,400
-------
$35,000
=======
</TABLE>
11. Subordinated Capital Notes
During the second quarter of fiscal 1996, the Company refinanced its $20.9
million of 10% Subordinated Capital Notes due June 30, 2002 with $27.6 million
of 8.32% Subordinated Notes due September 30, 2005. The payment of principal
and interest on the current notes is subordinated at all times to any
indebtedness or liability of the Company outstanding or incurred after the date
of issuance. Costs incurred in the refinance transaction amounted to $1.0
million which were deferred and are being accreted over the life of the notes to
yield an effective interest rate of 8.85%. The capital notes are callable at the
discretion of the Company at any time after September 30, 1998, at par plus any
accrued interest. The indenture provides for restrictions on the amounts of
additional indebtedness the Company may incur as well as the amount of dividends
and other distributions it may pay with respect to its equity securities,
depending on the Company's capital ratio. The refinance transaction resulted in
a $474,000, or $0.08 per share extraordinary charge to earnings due to the early
extinguishment of debt as a result of writing-off the remaining unamortized
transaction costs of $774,000, net of income taxes of $300,000.
12. Income Taxes
Total income tax expense for the years ended June 30, 1996, 1995 and 1994
was allocated as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Income from continuing
operations $10,805 9,316 7,766
Extraordinary item, for debt
extinguishment (300) - -
Stockholders' equity, for
compensation expense for tax purposes
in excess of amounts recognized
for financial reporting purposes (13) (219) (251)
Stockholders' equity, for change in
unrealized loss on marketable securities (471) (32) -
------- ----- -----
$10,021 9,065 7,515
======= ===== =====
</TABLE>
Retained earnings at June 30, 1996, include $53.9 million of "base-year" tax
bad debt reserves for which no provision for federal income taxes has been made
(including reserves of Northwestern). If in the future this amount, or a
portion thereof, is used for certain purposes other than to absorb losses on bad
debts, a federal income tax liability will be imposed on the amount so used at
the then current corporate income tax rate.
78
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
Income tax expense (benefit) attributable to income from continuing
operations for the years ended June 30, 1996, 1995 and 1994 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ 8,218 6,613 8,348
State 1,135 1,280 1,453
------- ----- ------
9,353 7,893 9,801
Deferred:
Federal 1,189 1,285 (1,447)
State 263 138 (588)
------- ----- ------
1,452 1,423 (2,035)
------- ----- ------
Total income tax expense attributed to
income from continuing operations $10,805 9,316 7,766
======= ===== ======
</TABLE>
The significant components of income tax expense attributable to income
from continuing operations for the years ended June 30, 1996, 1995 and 1994 are
as follows :
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ------------------ -------------------
Current Deferred Current Deferred Current Deferred
------- -------- ------- --------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Income tax expense (exclusive of the effects
of other components listed below) $9,340 1,452 7,674 1,575 9,637 (1,631)
Adjustments to tax assets and liabilities for enacted
changes in tax laws and rates, including impact of
retroactive effective dates - - - - 100 (94)
Tax expense resulting from allocating tax benefits
from stock-related compensation directly to
stockholders' equity 13 - 219 - 251 -
Decrease in beginning of year balance of valuation
allowance for deferred tax assets - - - (152) (187) (310)
------ -------- ------- -------- ----- ------
$9,353 1,452 7,893 1,423 9,801 (2,035)
====== ======== ======= ======== ===== ======
</TABLE>
The reasons for the differences between the effective income tax rate
attributable to income from continuing operations and the corporate federal
income tax rate are summarized in the following table:
<TABLE>
<CAPTION>
Percentage of Income
Before Income Taxes
-----------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0 35.0
Items affecting effective income tax rate:
State income taxes, net of federal benefit 3.2 4.4 5.0
Reversal of deferred tax valuation allowance - (0.6) (2.3)
Other items, net (0.3) (0.6) (1.1)
---- ---- ----
Effective income tax rate 37.9% 38.2 36.6
==== ==== ====
</TABLE>
79
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
1996 and 1995, are presented below:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Loan origination fees $ 637 550
Deferred compensation 2,406 1,574
Book general loan loss reserves 6,931 3,879
Book versus tax basis of real estate
held for sale 1,410 108
Book versus tax state income tax
expense 810 712
Book versus tax basis of loans
receivable 2,173 -
Book versus tax basis of securities 847 32
Other 554 295
-------- ------
Subtotal 15,768 7,150
Less: Valuation allowance (27) (27)
-------- ------
Total deferred tax assets 15,741 7,123
Deferred tax liabilities:
Loan origination fees (1,398) (106)
CMO REMIC - treatment of bond discount
amortization (83) (208)
Excess of tax bad debt reserve over
base year amount (2,010) (1,166)
Book versus tax basis of FHLB stock (1,020) (596)
Book versus tax state income tax
expense (55) (37)
Book versus tax basis of real estate
held for sale (517) (507)
Book versus tax basis of land and
fixed assets (1,704) (249)
Book versus tax basis of capitalized
servicing (473) (172)
Book versus tax basis of intangible
assets (3,500) -
Other (310) (67)
-------- ------
Total deferred tax liabilities (11,070) (3,108)
-------- ------
Net deferred tax asset $ 4,671 4,015
======== ======
</TABLE>
The Company believes that it is more likely than not that the net deferred
tax asset will be realized, based on historical taxable income levels and
anticipated future earnings and taxable income levels. The Company has reported
federal taxable income and pre-tax book income amounts totaling approximately
$58 million and $73 million over the past three fiscal years, respectively.
13. COMMITMENTS AND CONTINGENCIES
The Bank is obligated under non-cancelable leases primarily on four of its
branch offices. Rent expense under these leases for the years ended June 30,
1996, 1995, and 1994 approximated $260,000, $226,000 and $173,000, respectively.
The projected minimum rentals under existing leases (excluding lease
escalations) as of June 30, 1996, are as follows (in thousands):
<TABLE>
<S> <C>
1997 $ 469,000
1998 427,000
1999 228,000
2000 168,000
2001 155,000
Thereafter 1,054,000
----------
Total $2,501,000
==========
</TABLE>
80
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
14. FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
requires the disclosure of estimated fair values of all asset, liability and
off-balance sheet financial instruments. The estimated fair value amounts under
SFAS No.107 have been determined as of a specific point in time utilizing
various available market information, assumptions and appropriate valuation
methodologies. Accordingly, the estimated fair values presented herein are not
necessarily representative of the underlying value of the Company. Rather the
disclosures are limited to reasonable estimates of the fair value of only the
Company's financial instruments. The use of assumptions and various valuation
techniques, as well as the absence of secondary markets for certain financial
instruments, will likely reduce the comparability of fair value disclosures
between financial institutions. The Company does not plan to sell most of its
assets or settle most of its liabilities at these fair values.
The estimated fair values of the Company's financial instruments as of June
30, 1996 and 1995 are set forth in the following table below.
<TABLE>
<CAPTION>
1996 1995
--------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 94,861 94,861 59,807 59,807
Investment securities 171,251 171,123 90,319 90,285
Mortgage-backed securities 418,102 414,970 307,390 301,135
Loans receivable, net 2,293,399 2,279,272 1,267,453 1,262,805
Interest receivable 19,974 19,974 10,246 10,246
---------- --------- --------- ---------
Total financial assets $2,997,587 2,980,200 1,735,215 1,724,278
========== ========= ========= =========
Financial liabilities:
Non-maturity deposits $1,022,220 1,022,220 566,688 566,688
Deposits with stated maturities 1,231,495 1,237,102 746,618 750,671
Borrowed funds 564,372 561,330 327,124 329,067
Interest payable 5,293 5,293 2,102 2,102
---------- --------- --------- ---------
Total financial liabilities $2,823,380 2,825,945 1,642,532 1,648,528
========== ========= ========= =========
</TABLE>
The following methods and assumptions are used by the Company in estimating
the fair value amounts for its financial instruments.
Cash and cash equivalents. The carrying value of cash and cash equivalents
approximates fair value due to the relatively short period of time between the
origination of the instruments and their expected realization.
Investment securities and mortgage-backed securities. The fair value of
these financial instruments were estimated using quoted market prices, when
available. If quoted market prices were not available, fair value was estimated
using quoted market prices for similar assets. The fair value of FHLB of Chicago
stock is based on its redemption value.
81
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
Loans receivable. The fair value of loans receivable held for investment is
estimated based on contractual cash flows adjusted for prepayment assumptions,
discounted using the current rate at which similar loans would be made to
borrowers with similar credit ratings and remaining terms to maturity. The fair
value of mortgage loans held for sale are based on estimated values that could
be obtained in the secondary market.
Interest receivable and payable. The carrying value of interest receivable,
net of the reserve for uncollected interest, and interest payable approximates
fair value due to the relatively short period of time between accrual and
expected realization.
Deposits. The fair value of deposits with no stated maturity, such as demand
deposit, passbook savings, NOW and money market accounts, are disclosed as the
amount payable on demand. The fair value of fixed-maturity deposits is the
present value of the contractual cash flows discounted using interest rates
currently being offered for deposits with similar remaining terms to maturity.
Borrowed funds. The fair value of FHLB of Chicago advances and reverse
repurchase agreements is the present value of the contractual cash flows,
discounted by the current rate offered for similar remaining maturities. The
carrying value of the unsecured term bank loan approximates fair value due to
the short term to repricing and adjustable rate nature of the loan.
The fair values of the subordinated capital notes and CMO bonds payable were
estimated using quoted market prices.
Commitments to extend credit and standby letters of credit. The fair value
of commitments to extend credit is estimated based on current levels of interest
rates versus the committed rates. As of June 30, 1996 and 1995, the fair value
of the Bank's mortgage loan commitments of $166.0 million and $130.2 million,
respectively, was $(1.4) million and $700,000, respectively, which represents
the differential between the committed value and value at current rates. The
fair value of the standby letters of credit approximate the recorded amounts of
related fees and are not material at June 30, 1996 and 1995.
82
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
15. Regulatory Capital
The Bank is subject to regulatory capital requirements under the OTS.
Failure to meet minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary actions by regulators which could have a
material impact on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines as calculated under regulatory accounting
practices.
OTS regulations require all savings institutions to meet three capital
requirements: a tangible capital to adjusted total assets ratio of 1.5%, a core
capital to adjusted total assets ratio of 3.0%, and a risk-based capital to
total risk-weighted assets ratio of 8.0%. Management believes, as of June 30,
1996, that the Bank meets all capital adequacy requirements to which it is
subject. The following table reflects the Bank's regulatory capital as of June
30, 1996 as it relates to its three capital adequacy requirements.
<TABLE>
<CAPTION>
Risk-
Tangible Core Based
--------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Stockholder's equity of the Bank $ 263,346 263,346 263,346
Goodwill and other non-allowable intangible
assets (35,630) (35,630) (35,630)
Non-permissible subsidiary deduction (13,016) (13,016) (13,016)
Non-includible purchased mortgage servicing
rights (184) (184) (184)
Regulatory capital adjustment for available
for sale securities 1,066 1,066 1,066
Land loans greater than 80% loan-to-value - - (211)
General loan loss reserves - - 17,254
-------- ------- -------
Regulatory capital 215,582 215,582 232,625
Minimum requirement 46,095 92,189 121,167
-------- ------- -------
Excess over minimum requirement $ 169,487 123,393 111,458
======== ======= =======
Capital ratios of the Bank 7.02% 7.02 15.36
======== ======= =======
</TABLE>
Core capital is defined as common stockholder's equity plus non-cumulative
perpetual preferred stock and related surplus and minority interest in equity
accounts of consolidated subsidiaries, plus 90% of the fair market value of
readily marketable purchased mortgage servicing rights, less non-qualifying
intangible assets, such as goodwill and core deposit intangibles. Tangible
capital is defined as core capital less all intangible assets other than a
limited amount of readily marketable purchased mortgage servicing rights. The
risk-based capital requirement requires the Bank to maintain risk-based capital
of 8% of total risk-weighted assets. Assets of the Bank, including certain off-
balance sheet items, are adjusted to reflect degrees of credit risk to compute
total risk-weighted assets. Capital for this computation includes core capital
plus supplementary capital, which includes general loan loss reserves.
OTS regulations require that in meeting the tangible, core and risk-based
capital standards, institutions must generally deduct investments in and loans
to subsidiaries engaged in activities not permissible for a national bank. For
the Bank, this includes its $21.7 million investment in Mid America Developments
and NW Financial at June 30, 1996, which the Bank must deduct 60%, or $13.0
million from regulatory capital for purposes of calculating its capital
requirements. As of July 1, 1996, the Bank is required to deduct 100% of this
investment for capital purposes.
83
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
As of June 30, 1996, the most recent notification from the OTS categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. There are no conditions or events since that notification
that management believes have changed the Bank's category. To be categorized as
well capitalized the Bank must maintain a minimum core capital ratio of 5%, a
minimum risk-based capital ratio of 10%, as well as a ratio of core capital to
adjusted risk-weighted assets of 6%. At June 30, 1996, the Bank's ratios were
7.02%, 15.36% and 14.23%, respectively.
16. Officer, Director and Employee Plans
Mid America Federal Employee Stock Ownership Plan (ESOP)/Profit Sharing
Plan/401(k) Plan. The Mid America Federal ESOP covers substantially all
employees with more than one year of employment who have attained the age of 21.
The ESOP borrowed $1.7 million from an unaffiliated third party bank and
purchased 321,750 common shares of the Company in the initial public offering.
The ESOP loan was paid off in 1995. Contributions to the ESOP by the Bank are
made to fund the principal and interest payments on any debt of the ESOP or to
purchase additional common shares of the Company's stock. For the years ended
June 30, 1996, 1995 and 1994, total contributions to the ESOP were $360,000,
$146,000 and $246,000, respectively.
The Company maintains a Profit Sharing/401(k) Plan to which it made
discretionary contributions of $360,000, $450,000 and $200,000 for the years
ended June 30, 1996, 1995 and 1994, respectively. Employees are allowed to make
pre-tax contributions of up to 15% of their compensation and after-tax
contributions of up to 10% of compensation, subject to certain limitations.
Northwestern ESOP/401(k) Plan. The Northwestern ESOP was terminated on the
effective date of the merger. The Northwestern 401(k) Plan will be merged with
the Mid America Federal Profit Sharing/401(k) Plan. There is no financial
statement impact for the years ended June 30, 1996, 1995 and 1994 for either of
these plans.
Stock Option Plans. The Company and its shareholders have adopted an
incentive stock option plan ("Incentive Plan") and a premium price stock option
plan ("Premium Plan") for the benefit of employees of the Bank. In connection
with acquisition of NSBI, certain options previously granted to employees of
Northwestern have been converted into options to purchase the Company's common
stock.
The number of shares of common stock authorized under the Incentive Plan is
523,463. The option exercise price must be at least 100% of the fair market
value of the common stock on the date of grant, and the option term cannot
exceed 10 years.
Under the Incentive Plan, there were 497,830 outstanding option grants at
June 30, 1996 all of which were exercisable. During the last three fiscal years,
no options were granted under the Incentive Plan. At June 30, 1996, options for
81 shares were available for grant under the Incentive Plan. Options for 3,220,
3,850, and 1,650 shares were exercised in 1996, 1995 and 1994, respectively,
under the plan, at prices ranging from $5.15 to $8.48 per share.
The number of shares of common stock authorized under the Premium Plan is
247,500. The option exercise price equals 133% of the fair market value of the
common stock on the date of grant with respect to executive officers, 110% with
respect to directors and 100% with respect to non-executive officers. The
option term cannot exceed 10 years.
84
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
Under the Premium Plan, there were 96,081 outstanding option grants at June
30, 1996, of which 26,567 were exercisable. During 1996, 1995 and 1994, there
were options of 43,357, 25,748 and 26,976 granted under the Premium Plan,
respectively, at exercise prices ranging from $26.15 to $33.58 per share. At
June 30, 1996, options for 151,419 shares were available for grant under the
Premium Plan. To date, there have been no options exercised under the Premium
Plan.
Pursuant to the terms of the acquisition of NSBI, a total of 100,000 options
previously granted to employees of Northwestern have been converted into options
to purchase 167,233 shares of the Company's common stock at an exercise price of
$4.78 per share. The value of these options was included in the purchase price
and added to additional paid-in capital in the consolidated statement of
financial condition. No such options were exercised in 1996.
The table below presents a summary of the aggregate options outstanding
under the Incentive Plan and Premium Plan. Information shown for the year ended
June 30, 1994 includes 10,175 fully exercisable options under the Directors'
Option Plan which terminated during fiscal 1995.
<TABLE>
<CAPTION>
Number of Shares Price of Shares Under Option
--------------------- ----------------------------
Under Eligible for Weighted
Option Exercise Per share Average
------- ------------ ---------------- ----------
<S> <C> <C> <C> <C>
June 30, 1996 761,144 691,630 $ 4.78 - 33.58 $ 8.36
June 30, 1995 553,774 510,042 5.15 - 26.30 7.88
June 30, 1994 542,051 513,425 5.15 - 26.30 6.95
</TABLE>
Management Recognition / Retention Plans. In conjunction with the Bank's
conversion, the Company formed two Management Recognition and Retention Plans
and Trusts ("MRPs"), each of which purchased 80,438 common shares of the
Company. The funds used to acquire the MRPs' shares were contributed by the
Bank. These shares are available for issuance to employees in key management
positions with the Bank. At June 30, 1996, there were no plan share awards
outstanding. An additional 147 shares owned by the MRPs have not yet been
awarded. For the years ended June 30, 1996, 1995 and 1994, -0-, 35,517 and
31,996 shares, respectively, were vested and distributed to employees. For the
years ended June 30, 1996, 1995 and 1994, $-0-, $59,000 and $165,000,
respectively, was reflected as an expense.
Supplemental Executive Retirement Plan. During fiscal 1995, the Bank adopted
a supplemental executive retirement plan ("SERP") for the purpose of providing
certain retirement benefits to executive officers and other corporate officers
approved by the Board of Directors. The annual retirement plan benefit under the
SERP is calculated equal to 2% of final average salary times the years of
service after 1994. Ten additional years of service are credited to participants
in the event of a change in control transaction although in no event may total
years of service exceed 20 years. The maximum annual retirement is equal to 40%
of final average salary. Benefits are payable in various forms in the event of
retirement, death, disability and separation from service, subject to certain
conditions defined in the plan. The SERP also provides for certain death
benefits to the extent such amounts exceed a participant's accrued benefit at
the time of death. The Company has life insurance policies which are intended to
be used to satisfy obligations of the SERP. For the years ended June 30, 1996
and 1995, $258,000 and $120,000 was reflected as an expense for the SERP. The
vested liability under the SERP was approximately $56,000 and $18,000 as of June
30, 1996 and 1995, respectively.
85
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
17. Financial Instruments with Off-Balance Sheet Risk and Concentrations of
Credit Risk
The Bank is a party to various financial instruments with off-balance sheet
risk in the normal course of its business. These instruments include commitments
to extend credit, standby letters of credit, and forward commitments to sell
loans. These financial instruments carry varying degrees of credit and interest-
rate risk in excess of amounts recorded in the financial statements.
Commitments to purchase and originate loans of $166.0 million at June 30,
1996, represent amounts which the Bank plans to fund within the normal
commitment period of 60 to 90 days of which $96.0 million were fixed-rate, with
rates ranging from 6.25% to 9.25%, and $70.0 million were adjustable-rate loans.
Because the credit worthiness of each customer is reviewed prior to extension of
the commitment, the Bank adequately controls their credit risk on these
commitments, as it does for loans recorded on the balance sheet. As part of its
effort to control interest-rate risk on these commitments, the Bank sells fixed-
rate mortgage loan commitments, for future delivery, at a specified price and at
a specified future date. Such commitments for future delivery present a risk to
the Bank, in the event it cannot deliver the loans during the delivery period.
This could lead to the Bank being charged a fee for non-performance, or being
forced to reprice the mortgage loans at a lower rate, causing a loss to the
Bank. The Bank seeks to mitigate this potential loss by charging potential
borrowers, at the time of application, a fee to fix the interest rate, or by
requiring the interest rate to float at market rates until closing. At June 30,
1996, forward commitments to sell mortgage loans for future delivery were $39.4
million, of which $7.8 million are related to loans held for sale, and $31.6
million are unfunded as of June 30, 1996.
Additionally, the Bank has approved, but unused, home equity lines of credit
of $77.2 million at June 30, 1996. Approval of equity lines is based on
underwriting standards that generally do not allow total borrowings, including
the equity line of credit to exceed 80% of the current appraised value of the
customer's home, which is similar to guidelines used when the Bank originates
first mortgage loans, and are a means of controlling its credit risk on the
loan. However, the Bank offers home equity lines of credit up to 100% of the
homes current appraised value, less existing liens, at a commensurably higher
interest rate.
The Bank had 22 standby letters of credit totaling $18.4 million, two of
which total $13.3 million, which enhance a developer's industrial revenue bond
financings of commercial real estate in the Bank's market. At June 30, 1996, the
Bank had pledged mortgage-backed securities and investment securities with an
aggregate carrying value and market value of $25.8 million and $25.9 million
respectively, as collateral for these two standby letters of credit. Standby
letters of credit are conditional commitments issued by the Bank to guarantee
the performance of a customer to a third party. The credit risk involved in
these transactions is essentially the same as that involved in extending a loan
to a customer, as performance under the letters of credits creates a first
position lien in favor of the Bank. Additionally, at June 30, 1996, the Company
had 8 standby letters of credit totaling $6.3 million, which insure the
completion of land development improvements on behalf of MAF Developments, Inc.
86
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
In addition to financial instruments with off-balance sheet risk, the Bank
is exposed to varying risks with concentrations of credit. Concentrations of
credit include significant lending activities in specific geographical areas and
large extensions of credit to individual borrowers. At June 30, 1995, the Bank's
loan portfolio included over 95% of loans that the Bank has originated within
its primary lending area of western Cook, DuPage, northern Will and eastern Kane
counties of Illinois. During 1996, with the acquisition of N.S. Bancorp, the
Bank obtained a purchased loan portfolio, consisting of primarily single-family,
owner-occupied residential loans located in 46 states and the District of
Columbia. The following table identifies the geographic distribution of the
Bank's collateral on real estate loans at June 30, 1996.
<TABLE>
<CAPTION>
Purchased Bank originated Total
Real estate loans Real estate loans Real estate loans
--------------------- -------------------- -------------------
Amount Percent Amount Percent Amount Percent
-------- -------- ---------- -------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Alabama $ 42,198 6.6% $ - -% $ 42,198 1.9%
California 142,164 21.4 488 0.1 142,652 6.4
Colorado 31,099 4.7 1,456 0.1 32,555 1.5
Georgia 68,983 10.4 1,070 0.1 70,053 3.2
Illinois 100,494 15.1 1,525,155 98.3 1,625,649 73.4
Minnesota 21,244 3.2 872 0.1 22,116 1.0
New Jersey 35,397 5.3 1,579 0.1 36,976 1.7
New York 22,671 3.4 1,446 0.1 24,117 1.1
Texas 27,723 4.2 1,427 0.1 29,150 1.3
Utah 27,816 4.2 - - 27,816 1.2
All other 144,661 21.5 17,707 1.0 162,368 7.3
-------- ------- ---------- ----- --------- -------
Total $ 664,450 100.0% $ 1,551,200 100.0% $ 2,215,650 100.0%
======== ======= ========== ===== ========== =======
</TABLE>
18. Derivative Financial Instruments
The Bank enters into forward commitments to sell mortgage loans for future
delivery as a means of limiting exposure to changing interest rates between the
date a loan customer commits to a given rate, or closes the loan, whichever is
sooner, and the sale date, which is generally 10 to 60 days after the closing
date. These commitments to sell require the Bank to deliver mortgage loans at
stated coupon rates within the specified forward sale period, and subject the
Bank to risk to the extent the loans do not close. The Bank attempts to
mitigate this risk by collecting a non-refundable commitment fee, where
possible, and by estimating a percentage of fallout when determining the amount
of forward commitments to sell.
The following is a summary of the Bank's forward sales commitment activity
for the years ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- --------
(In thousands)
<S> <C> <C>
Balance at beginning of year $ 42,100 10,595
New forward commitments to deliver loans 305,488 123,638
Loans delivered to satisfy forward commitments (308,157) (92,133)
-------- -------
Balance at end of year $ 39,431 42,100
======== =======
</TABLE>
87
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
The Bank also enters into interest rate futures contracts to hedge its
exposure to price fluctuations on firm commitments to originate loans intended
for sale, that have not been covered by forward commitments to sell loans for
future delivery. Included in gain (loss) on sale of mortgage loans in 1996 and
1995 are $75,000 of net futures gains and $437,000 of net futures losses,
respectively, from hedging activities. At June 30, 1996, $4,000 of losses were
explicitly deferred and will be recognized in operations when the loans are
sold, comprised of deferred gains of $59,000 on closed positions and $63,000 of
deferred losses on open positions. At June 30, 1995, the Bank had $109,000 in
deferred losses, of which $98,000 were deferred losses on closed positions, and
$11,000 were deferred losses on open positions.
The following is a summary of the notional amount of interest rate futures
contract activity for the years ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(In thousands)
<S> <C> <C>
Balance at beginning of year $ 2,700 5,000
Interest rate futures contracts sold 116,800 57,500
Interest rate futures contracts closed (113,000) (59,800)
-------- -------
Balance at end of year $ 6,500 2,700
======== =======
</TABLE>
19. Parent Company Only Financial Information
The information as of June 30, 1996 and 1995, and for the three years ended
June 30, 1996 presented below should be read in conjunction with the other Notes
to Consolidated Financial Statements.
<TABLE>
<CAPTION>
Statements of Financial Condition 1996 1995
-------- --------
(In thousands)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 25,495 8,371
Investment securities 4,761 2,982
Loans receivable 514 -
Equity in net assets of subsidiaries 268,070 104,648
Other assets 10,346 10,121
------- -------
$309,186 126,122
======= =======
Liabilities and Stockholders' Equity:
Unsecured term bank loan $ 35,000 -
Subordinated capital notes, net 26,676 20,100
Accrued expenses 5,284 603
------- -------
Total liabilities 66,960 20,703
------- -------
Stockholders' equity:
Common stock 111 59
Additional paid-in capital 170,956 39,740
Retained earnings 88,524 73,447
Treasury stock (16,540) (7,779)
Unrealized loss on marketable securities, net of tax (825) (48)
------- -------
Total stockholders' equity 242,226 105,419
------- -------
$309,186 126,122
======= =======
</TABLE>
88
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
<CAPTION>
Statements of Operations 1996 1995 1994
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Interest income $ 1,231 1,056 517
Interest expense 2,641 2,163 2,157
-------- ------- -------
Net interest expense (1,410) (1,107) (1,640)
Gain (loss) on sale of investment
securities, net 188 (72) 208
Non-interest expense 1,446 1,256 909
Extraordinary loss, net of tax (474) - -
-------- ------- -------
Net loss before income taxes and
equity
in earnings of subsidiaries (3,142) (2,435) (2,341)
Income tax benefit (1,107) (999) (1,093)
-------- ------- -------
Net loss before equity in earnings of
subsidiaries (2,035) (1,436) (1,248)
Equity in earnings of subsidiaries 19,244 16,479 14,698
-------- ------- -------
Net income $ 17,209 15,043 13,450
======== ======= =======
<CAPTION>
Statements of Cash Flows 1996 1995 1994
--------- ------- -------
(In thousands)
<S> <C> <C> <C>
Operating activities:
Net income $ 17,209 15,043 13,450
Equity in earnings of subsidiaries (19,244) (16,479) (14,698)
Dividends received from the Bank 69,000 10,000 12,500
Extraordinary loss, net of tax 474 - -
(Gain) loss on sale of investment
securities (188) 72 (208)
Amortization of premiums and discounts (28) 80 71
Net decrease (increase) in other
assets and liabilities,
net of effects from purchase of NSBI 7,284 (9,156) (772)
Decrease in ESOP loan - 146 237
-------- ------- -------
Net cash provided by (used in)
operating activities 74,507 (294) 10,580
Investing activities:
Proceeds from sale of investment
securities 1,155 6,516 1,503
Proceeds from maturity of investment
securities 44,000 53 -
Repayment of loans receivable 18,432
Purchases of investment securities (26,367) (960) (8,029)
Investment in and loans to subsidiary (320) 1,275 (700)
Payment for purchase of NSBI, net of
cash acquired (257,437) - -
-------- ------- -------
Net cash provided by (used in)
investing activities (220,537) 6,884 (7,226)
Financing activities:
Proceeds from issuance of common stock 131,255 78 90
Proceeds from borrowings 61,629 - -
Repayment of borrowings (20,900) (146) (237)
Cash dividends paid (2,531) (1,213) -
Purchases of treasury stock (6,299) (3,741) (4,038)
-------- ------- -------
Net cash provided by (used in)
financing activities 163,154 (5,022) (4,185)
-------- ------- -------
Increase (decrease) in cash and cash
equivalents 17,124 1,568 (831)
Cash and cash equivalents at beginning
of year 8,371 6,803 7,634
-------- ------- -------
Cash and cash equivalents at end of $ 25,495 8,371 6,803
year ======== ======= =======
</TABLE>
89
<PAGE>
MAF Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
20. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following are the consolidated results of operations on a quarterly
basis:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income $32,920 33,969 34,199 42,007
------ ------ ------ ------
Interest expense 21,751 22,877 22,452 26,141
------ ------ ------ ------
Net interest income 11,169 11,092 11,747 15,866
Provision for loan losses 100 150 200 250
------ ------ ------ ------
Net interest income
after provision for
loan losses 11,069 10,942 11,547 15,616
Net gain on sale of assets 143 158 76 59
Income from real estate
operations 1,513 1,307 1,550 416
Other income 2,784 2,849 2,848 3,397
Non-interest expense 8,638 8,635 9,165 11,348
------ ------ ------ ------
Income before income
taxes and extraordinary
item 6,871 6,621 6,856 8,140
Income taxes 2,651 2,552 2,655 2,947
------ ------ ------ ------
Income before
extraordinary item 4,220 4,069 4,201 5,193
Extraordinary item - (474) - -
------ ------ ------ ------
Net income $ 4,220 3,595 4,201 5,193
====== ====== ====== ======
Earnings per share before
extraordinary item $ .72 .69 .74 .69
Extraordinary item - (.08) - -
------ ------ ------ ------
Earnings per share $ .72 .61 .74 .69
====== ====== ====== ======
Cash dividends declared
per share $ .08 .08 .08 .08
====== ====== ====== ======
Stock price range:
High $ 25.50 26.25 25.50 27.00
Low 20.68 24.00 24.50 24.00
Close 25.13 25.00 24.88 24.50
<CAPTION>
YEAR ENDED JUNE 30, 1995
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(Dollars in thousands, except per share amounts)
Interest income $26,473 27,769 29,441 31,280
Interest expense 16,844 17,603 18,645 20,275
------ ------ ------ ------
Net interest income 9,629 10,166 10,796 11,005
Provision for loan losses 150 175 - 150
------ ------ ------ ------
Net interest income
after provision for
loan losses 9,479 9,991 10,796 10,855
Net gain (loss) on sale
and writedown of assets 351 (201) 5 (261)
Income from real estate
operations 932 3,406 664 2,495
Other income 2,160 2,233 2,252 2,614
Non-interest expense 8,194 8,052 8,455 8,711
------ ------ ------ ------
Income before income
taxes 4,728 7,377 5,262 6,992
Income taxes 1,816 2,858 1,954 2,688
------ ------ ------ ------
Net income $ 2,912 4,519 3,308 4,304
====== ====== ====== ======
Earnings per share $ .48 .77 .56 .73
====== ====== ====== ======
Cash dividends declared
per share $ .0727 .0727 .0727 .0727
====== ====== ====== ======
Stock price range:
High $ 20.91 20.91 21.70 21.59
Low 19.32 16.36 17.05 20.45
Close 20.68 17.05 21.36 21.36
</TABLE>
90
<PAGE>
Independent Auditors' Report
The Board of Directors
MAF Bancorp, Inc.
We have audited the accompanying consolidated statements of financial
condition of MAF Bancorp, Inc. and subsidiaries as of June 30, 1996 and 1995,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended June
30, 1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MAF Bancorp,
Inc. and subsidiaries as of June 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
August 19, 1996
91
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosures
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding directors of the registrant is included in the
Registrant's proxy statement under the heading "Election of Directors" and the
information included therein is incorporated herein by reference. Information
regarding the executive officers of the registrant and the Bank is included in
Part I. Business.
Item 11. Executive Compensation
Information regarding compensation of executive officers and directors is
included in the registrant's proxy statement under the headings "Directors
Compensation," "Executive Compensation - Summary Compensation Table,"
"Employment and Special Termination Agreements," "Supplemental Executive
Retirement Plan," "Option Plans," and "Long Term Incentive Plan," and the
information included therein 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 included in the registrant's proxy statement under the headings
"Voting Securities" and "Security Ownership of Certain Beneficial Owners," and
"Information With Respect to Nominees, Continuing Directors and Others," and the
information included therein is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions is
included in the registrant's proxy statement under the heading "Transactions
with Certain Related Persons," and the information included therein is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(a)(1) Financial Statements
The following consolidated financial statements of the registrant and
its subsidiaries are filed as a part of this document under Item 8.
Financial Statements and Supplementary Data
Consolidated Statements of Financial Condition at June 30, 1996 and
1995.
Consolidated Statements of Operations for each of the years in the
three-year period ended June 30, 1996.
Consolidated Statements of Changes in Stockholders' Equity for each of
the years in the three-year period ended June 30, 1996.
92
<PAGE>
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended June 30, 1996.
Notes to Consolidated Financial Statements.
Independent Auditors' Report
(a)(2) Financial Statement Schedules
All schedules are omitted because they are not required or are not
applicable or the required information is shown in the consolidated
financial statements or notes thereto.
(a)(3) Exhibits
The following exhibits are either filed as part of this report or are
incorporated herein by reference:
Exhibit No. 2. Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession.
Amended and Restated Agreement and Plan of Reorganization among
MAF Bancorp, Inc. and N.S. Bancorp, Inc. dated November 29, 1995
(Incorporated by reference to Exhibit No. 2 to Registrant's Form
S-4 Registration Statement No. 333-2330).
Exhibit No. 3. Certificate of Incorporation and By-laws.
(i) Certificate of Incorporation, as amended.
(ii) Bylaws of Registrant, as amended. (Incorporated herein by
reference to exhibit No. 3 to Registrant's 1990 Form 10-K ).
Exhibit No. 4. Instruments Defining the Rights of Security Holders.
Indenture between MAF Bancorp, Inc. and Harris Trust and Savings
Bank (Trustee) dated as of September 27, 1995, for the 8.32%
Subordinated Notes due September 30, 2005. (Incorporated by
reference to Exhibit No. 4 to Registrant's Form S-3 Registration
Statement No. 33-96754).
Exhibit No. 10. Material Contracts
(i) Mid America Federal Savings Bank Employee Stock Ownership Plan;
as amended.
(ii) Mid America Federal Savings Bank Employee Stock Ownership Trust
Loan and Security Agreement. (Incorporated herein by reference
to Exhibit No. 10 to Registrant's 1990 Form 10-K).
(iii) Trust Agreement between Mid America Federal Savings Bank and NBD
Bank, N.A., Trustee (as successor to INB National Bank and
Chesterton State Bank) for the Mid America Federal Savings Bank
Employee Stock Ownership Trust. (Incorporated herein by
reference to Exhibit No. 10 to Registrant's 1990 Form 10-K).
(iv) Mid America Federal Savings Bank Management Recognition and
Retention Plan and Trust Agreement. (Incorporated herein by
reference to Exhibit No. 10 to Registrant's 1992 Form 10-K).
93
<PAGE>
(v) MAF Bancorp, Inc. 1990 Incentive Stock Option Plan, as amended
(Incorporated herein by reference to Exhibit 4.3 to
Registrant's Registration Statement on Form S-8 (33-45794) as
filed with the SEC on February 14, 1992).
(vi) MAF Bancorp, Inc. 1993 Amended and Restated Premium Price
Stock Option Plan
(vii) Credit Agreement dated as of May 22, 1996, as amended, between
MAF Bancorp, Inc. and Harris Trust and Savings Bank.
(viii) Mid America Federal Savings Bank Employees' Profit Sharing
Plan, as amended.
(ix) Mid America Federal Savings and Loan Association Deferred
Compensation Trust Agreement. (Incorporated herein by
reference to Exhibit No. 10 to Registrant's 1990 Form 10-K).
(x) Mid America Federal Savings Bank Directors' Deferred
Compensation Plan. (Incorporated herein by reference to
Exhibit No. 10 to Registrant's 1993 Form 10-K).
(xi) Mid America Federal Savings Bank Executive Deferred
Compensation Plan. (Incorporated herein by reference to
Exhibit No. 10 to Registrant's 1993 Form 10-K).
(xii) MAF Bancorp, Inc. Executive Annual Incentive Plan.
(Incorporated herein by reference to Exhibit No. 10 to
Registrant's 1994 Form 10-K).
(xiii) MAF Bancorp, Inc. Shareholder Value Long-Term Incentive Plan.
(Incorporated herein by reference to Exhibit No. 10 to
Registrant's 1995 Form 10-K).
(xiv) Mid America Federal Savings Bank Supplemental Executive
Retirement Plan. (Incorporated herein by reference to Exhibit
No. 10 to Registrant's 1995 Form 10-K).
(xv) Form of Employment Agreement, as amended, between MAF Bancorp,
Inc. and various officers.
(xvi) Form of Employment Agreement, as amended, between Mid America
Federal Savings Bank and various officers.
(xvii) Form of Special Termination Agreement, as amended, between MAF
Bancorp, Inc. and various officers.
(xviii) Form of Special Termination Agreement, as amended, between Mid
America Federal Savings Bank and various officers.
(xix) Consultant Agreement dated August 27, 1996 between Mid America
Federal Savings Bank and Nicholas J. DiLorenzo, Sr.
(xx) N.S. Bancorp, Inc. 1990 Incentive Stock Option Plan, as
amended (Incorporated by reference to Registrant's Form S-8
Registration Statement No. 333-06593).
(xxi) Northwestern Savings and Loan Association Employee Stock
Ownership Plan, as amended.
(xxii) MAF Severance Benefits Program for Northwestern Employees.
94
<PAGE>
Exhibit No. 11. Statement re: Computation of Per Share Earnings for the
years ended June 30:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Net income
$ 17,209,000 15,043,000 13,450,000
=========== ========== ==========
Weighted average shares outstanding
Common stock equivalents due to dilutive 5,825,501 5,557,334 5,788,107
effect on stock options
412,943 355,453 266,729
----------- ---------- ----------
Total weighted average common shares
and equivalents outstanding
6,238,444 5,912,787 6,054,836
=========== ========== ==========
Primary earnings per share
$ 2.76 2.54 2.22
==== ==== ====
Total weighted average common shares
and equivalents outstanding
6,238,444 5,912,787 6,054,836
Additional dilutive shares using the end of
period market value versus the average market
value when applying the treasury stock method
2,398 6,105 6,145
----------- ---------- ----------
Total weighted average common shares and
equivalents outstanding for fully diluted
computation
6,240,842 5,918,892 6,060,981
=========== ========== ==========
Fully diluted earnings per share
$ 2.76 2.54 2.22
==== ==== ====
</TABLE>
Exhibit No. 12. Statements re: computation of ratio of earnings to fixed
charges.
Exhibit No. 21. Subsidiaries of the Registrant
A list of the Company's and Mid America Federal Savings Bank's
subsidiaries is included as an exhibit to this report.
Exhibit No. 23. Consent of KPMG Peat Marwick LLP
Exhibit No. 99 Additional Exhibits
(i) Stock Option Agreement dated as of November 29, 1995 between MAF
Bancorp, Inc. and N.S. Bancorp, Inc. (Incorporated by reference to
Exhibit No. 99.3 to Registrant's Form S-4 Registration Statement No.
333-2330).
(ii) Form of Stockholder Voting Agreements dated November 29, 1995, between
MAF Bancorp, Inc. and the directors and executive officers of N.S.
Bancorp, Inc.
(b) Reports on Form 8-K
On April 16, 1996, the Company announced that earnings for the three
months ended March 31, 1996 totaled $4.2 million, or $.74 per share.
On June 11, 1996, the Company filed an announcement that it had competed
its merger with N.S. Bancorp, Inc. on May 30,1996 pursuant to a
definitive merger agreement dated as of November 29, 1995.
95
<PAGE>
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.
MAF Bancorp, Inc.
------------------------------
(Registrant)
By: /s/ Allen H. Koranda
------------------------------
Allen H. Koranda
Chairman of the Board and
Chief Executive Officer
September 4, 1996
------------------------------
(Date)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Allen H. Koranda or Kenneth Koranda or either of them,
his true and lawful attorney-in-fact and agents, with full power of substitution
and re-substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Annual Report on Form 10-K,
and to file the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming said attorneys-in-fact and agents or their substitutes or substitute
may lawfully do or cause to be done by virtue hereof.
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.
By: /s/ Allen H. Koranda September 4, 1996
----------------------------------- --------------------------------
Allen H. Koranda (Date)
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Jerry A. Weberling September 4, 1996
----------------------------------- --------------------------------
Jerry A. Weberling (Date)
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: /s/ Gerard J. Buccino September 4, 1996
----------------------------------- --------------------------------
Gerard J. Buccino (Date)
Senior Vice President
and Controller
(Principal Accounting Officer)
96
<PAGE>
By: /s/ Robert Bowles, M.D. September 4, 1996
--------------------------------- ---------------------------------
Robert Bowles, M.D. (Date)
Director
By: /s/ Nicholas J. DiLorenzo, Sr. September 4, 1996
--------------------------------- ---------------------------------
Nicholas J. DiLorenzo, Sr. (Date)
Director
By: /s/ Terry Ekl September 4, 1996
--------------------------------- ---------------------------------
Terry Ekl (Date)
Director
By: /s/ Joe. F. Hanauer September 4, 1996
--------------------------------- ---------------------------------
Joe F. Hanauer (Date)
Director
By: /s/ Richard Kallal September 4, 1996
--------------------------------- ---------------------------------
Richard Kallal (Date)
Director
By: /s/ Kenneth Koranda September 4, 1996
--------------------------------- ---------------------------------
Kenneth Koranda (Date)
Director
By: /s/ Henry Smogolski September 4, 1996
--------------------------------- ---------------------------------
Henry Smogolski (Date)
Director
By: /s/ F. William Trescott September 4, 1996
--------------------------------- ---------------------------------
F. William Trescott (Date)
Director
By: /s/ Lois B. Vasto September 4, 1996
--------------------------------- ---------------------------------
Lois B. Vasto (Date)
Director
By: /s/ Andrew J. Zych September 4, 1996
--------------------------------- ---------------------------------
Andrew J. Zych (Date)
Director
97
<PAGE>
Exhibit No. 3(i) Certificate of Incorporation, as amended.
<PAGE>
CERTIFICATE OF INCORPORATION
OF
MAF BANCORP, INC.
FIRST: The name of the Corporation is MAF Bancorp, Inc. (hereinafter
-----
sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH:
------
A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is fifteen million (15,000,000)
consisting of:
(a) five million (5,000,000) shares of Preferred Stock, par value
one cent ($.01) per share (the "Preferred Stock"); and
(b) ten million (10,000,000) shares of Common Stock, par value one
cent ($.01) per share (the "Common Stock").
B. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of Preferred Stock
in series, and by filing a certificate pursuant to the applicable law of the
State of Delaware (such certificate being hereinafter referred to as a
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences, and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. The number of authorized
shares of Preferred Stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the Common Stock, without
<PAGE>
a vote of the holders of the Preferred Stock, or of any series thereof, unless a
vote of any such holders is required pursuant to the terms of any Preferred
Stock Designation.
C. 1. Notwithstanding any other provision of this Certificate of
Incorporation, in no event shall any record owner of any outstanding Common
Stock which is beneficially owned, directly or indirectly, by a person who, as
of any record date for the determination of stockholders entitled to vote on any
matter, beneficially owns in excess of 10% of the then-outstanding shares of
Common Stock (the "Limit"), be entitled, o permitted to any vote in respect of
the shares held in excess of the Limit. The number of votes which may be cast
by any record owner by virtue of the provisions hereof in respect of Common
Stock beneficially owned by such person owning shares in excess of the Limit
shall be a number equal to the total number of votes which a single record owner
of all Common Stock owned by such person would be entitled to cast, multiplied
by a fraction, the numerator of which is the number of shares of such class or
series beneficially owned by such person and owned of record by such record
owner and the denominator of which is the total number of shares of Common Stock
beneficially owned by such person owning shares in excess of the Limit.
2. The following definitions shall apply to this Section C of this
Article FOURTH:
(a) An "affiliate" of a specified person shall mean a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified.
(b) "Beneficial ownership" shall be determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Securities Exchange Act
of 1934 (or any successor rule or statutory provision), or, if said Rule
13d-3 shall be rescinded and there shall be no successor rule or statutory
provision thereto, pursuant to said Rule 13d-3 as in effect on August 1,
1989; provided, however, that a person shall, in any event, also be deemed
the "beneficial owner" of any Common Stock:
(1) which such person or any of its affiliates
beneficially owns, directly or indirectly;
(2) which such person or any of its affiliates has (i)
the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding (but shall not be deemed
to be the beneficial owner of any voting shares solely by reason
of an agreement, contract, or other arrangement with this
Corporation to effect any transaction which is described in any
one or more of clauses of Section A of Article
3
<PAGE>
EIGHTH) or upon the exercise of conversion rights, exchange
rights, warrants, or options or otherwise, or (ii) sole or shared
voting or investment power with respect thereto pursuant to any
agreement, arrangement, understanding, relationship or otherwise
(but shall not be deemed to be the beneficial owner of any voting
shares solely by reason of a revocable proxy granted for a
particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, with respect to shares
of which neither such person nor any such affiliate is otherwise
deemed the beneficial owner); or
(3) which are beneficially owned, directly or indirectly,
by any other person with which such first mentioned person or any
of its affiliates acts as a partnership, limited partnership,
syndicate or other group pursuant to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of this Corporation; and
providing further, however, that (1) no director or officer of
this Corporation (or any affiliate of any such director or
officer) shall, solely by reason of any or all of such directors
or officers acting in their capacities as such, be deemed, for any
purposes hereof, to beneficially own any Common Stock beneficially
owned by any other such director or officer (or any affiliate
thereof), and (2) neither any employee stock ownership or similar
plan of this Corporation or any subsidiary of this Corporation nor
any trustee with respect thereto (or any affiliate of such
trustee) shall, solely by reason of such capacity of such trustee,
be deemed, for any purposes hereof, to beneficially own any Common
Stock held under any such plan. For purposes of computing the
percentage beneficial ownership of Common Stock of a person the
outstanding Common Stock shall include shares deemed owned by such
person through application of this subsection but shall not
include any other Common Stock which may be issuable by this
Corporation pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise. For all
other purposes, the outstanding Common Stock shall include only
Common Stock then outstanding and shall not include any Common
Stock which may be issuable by this Corporation pursuant to any
agreement, or upon the exercise of conversion rights, warrants or
options, or otherwise.
(c) A "person" shall mean any individual, firm, corporation, or other
entity.
4
<PAGE>
(d) The board of directors shall have the power to construe and apply
the provisions of this section and to make all determinations necessary or
desirable to implement such provisions, including but not limited to matters
with respect to (1) the number of shares of Common Stock beneficially owned
by any person, (2) whether a person is an affiliate of another, (3) whether
a person has an agreement, arrangement, or understanding with another as to
the matters referred to in the definition of beneficial ownership, (4) the
application of any other definition or operative provision of the section to
the given facts, or (5) any other matter relating to the applicability or
effect of this section.
3. The board of directors shall have the right to demand that any
person who is reasonably believed to beneficially own Common Stock in excess
of the Limit (or holds of record Common Stock beneficially owned by any
person in excess of the Limit) supply the corporation with complete
information as to (1) the record owner(s) of all shares beneficially owned
by such person who is reasonably believed to own shares in excess of the
Limit, (2) any other factual matter relating to the applicability or effect
of this section as may reasonably be requested of such person.
4. Except as otherwise provided by law or expressly provided in this
Section C, the presence, in person or by proxy, of the holders of record of
shares of capital stock of the Corporation entitling the holders thereof to
cast a majority of the votes (after giving effect, if required, to the
provision of this section) entitled to be cast by the holders of shares of
capital stock of the Corporation entitled to vote shall constitute a quorum
at all meetings of the stockholders, and every reference in this Certificate
of Incorporation to a majority or other proportion of capital stock (or the
holders thereof) for purposes of determining any quorum requirement or any
requirement for stockholder consent or approval shall be deemed to refer to
such majority or other proportion of the votes (or the holders thereof) then
entitled to be cast in respect of such capital stock.
5. Any constructions, applications, or determinations made by the
Board of Directors, pursuant to this section in good faith and on the basis
of such information and assistance as was then reasonably available for such
purpose shall be conclusive and binding upon the Corporation and its
stockholders.
6. In the event any provision (or portion thereof) of this Section C
shall be found to be invalid, prohibited or unenforceable for any reason,
the remaining provisions (or portions thereof) of this Section
5
<PAGE>
shall remain in full force and effect, and shall be construed as if such
invalid, prohibited or unenforceable provision had been stricken herefrom or
otherwise rendered inapplicable, it being the intent of this Corporation and
its stockholders that each such remaining provision (or portion thereof) of
this Section C remain, to the fullest extent permitted by law, applicable
and enforceable as to all stockholders, including stockholders owning an
amount of stock over the Limit, notwithstanding any such finding.
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. In addition to the
powers and authority expressly conferred upon them by Statute or by this
Certificate of Incorporation or the By-laws of the Corporation, the
directors are hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation.
(b) The directors of the Corporation need not be elected by written
ballot unless the By-laws so provide.
(c) Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special
meeting of stockholders of the Corporation and may not be effected by any
consent in writing by such stockholders.
(d) Special meetings of stockholders of the Corporation may be called
only by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any
such resolution is presented to the Board for adoption) (the "Whole Board").
SIXTH:
-----
A. The number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board. The directors shall be divided into three classes,
as nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the first annual meeting of stockholders, the term of
office of the second class to expire at the annual meeting of stockholders one
year thereafter and the term of office of the third class to expire at the
annual meeting of stockholders following
6
<PAGE>
such initial classification and election, directors elected to succeed those
directors whose terms expire shall be elected for a term of office to expire at
the third succeeding annual meeting of stockholders after their election.
B. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been elected expires. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
C. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
By-laws of the Corporation.
D. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any directors, or the entire Board of Directors, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least 80 percent of the voting power of all of the
then-outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (after giving effect to the provisions of
Article FOURTH of this Certificate of Incorporation ("Article FOURTH"), voting
together as a single class.
SEVENTH: The Board of Directors is expressly empowered to adopt, amend or
-------
repeal By-laws of the Corporation. Any adoption, amendment or repeal of the By-
laws of the Corporation by the Board of Directors shall require the approval of
a majority of the Whole Board. The stockholders shall also have power to adopt,
amend or repeal the By-laws of the Corporation. In addition to any vote of the
holders of any class or series of stock of this Corporation required by law or
by this Certificate of Incorporation, the affirmative vote of the holders of at
least 80 percent of the voting power of all of the then-outstanding shares of
the capital stock of the Corporation entitled to vote generally in the election
of directors (after giving effect to the provisions of Article FOURTH), voting
together as a single class, shall be required to adopt, amend or repeal any
provisions of the By-laws of the Corporation.
EIGHTH:
------
7
<PAGE>
A. In addition to any affirmative vote required by law or this
Certificate of Incorporation, and except as otherwise expressly provided in this
Section:
1. Any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested
Stockholder (as hereinafter defined) or (ii) any other corporation
(whether or not itself an Interested Stockholder) which is, or after
such merger or consolidation would be, an Affiliate (as hereinafter
defined) of an Interest Stockholder); or
2. Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder, or any Affiliate of any Interested
Stockholder, of any assets of the Corporation or any Subsidiary having
an aggregate Fair Market Value (as hereafter defined) equaling or
exceeding 25% or more of the combined assets of the Corporation and its
Subsidiaries; or
3. The issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate Fair Market Value (as hereinafter defined) equaling or
exceeding 25% of the combined assets of the Corporation and its
Subsidiaries except pursuant to an employee benefit plan of the
Corporation or any Subsidiary thereof; or
4. The adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested Stockholder;
or
5. Any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
an Interested Stockholder or any Affiliate of any Interested
Stockholder;
8
<PAGE>
shall require the affirmative vote of the holders of at least 80% of the voting
power of the then outstanding shares of stock of the Corporation entitled to
vote in the election of directors (the "Voting Stock"), voting together as a
single class. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be specified, by
law or by any other provisions of this Certificate of Incorporation or any
Preferred Stock Designation or in any agreement with any national securities
exchange or otherwise.
The term "Business Combination" as used in this Article EIGHTH shall
mean any transaction which is referred to in any one or more of paragraphs 1
through 5 of Section A of this Article EIGHTH.
B. The provisions of Section A of this Article EIGHTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only the affirmative vote of the majority of the outstanding
shares of capital stock entitled to vote, or such vote as is required by law or
by this Certificate of Incorporation, if, in the case of any Business
Combination that does not involve any cash or other consideration being received
by the stockholders of the Corporation solely in their capacity as stockholders
of the Corporation, the condition specified in the following paragraph 1 is met
or, in the case of any other Business Combination, all of the conditions
specified in either of the following paragraphs 1 and 2 are met:
1. The Business Combination shall have been approved by a
majority of the Disinterested Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business
Combination of consideration other than cash to be received
per share by the holders of Common Stock in such Business
Combination shall at least be equal to the higher of the
following:
I. (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the
Interested Stockholder or any of its Affiliates for any
shares of Common Stock acquired by it (X) within the two-
year period immediately prior to the first public
announcement of the proposal of the Business Combination
(the "Announcement Date"), or (Y) in the transaction which
it became an Interested Stockholder, whichever is higher.
9
<PAGE>
II. the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the
Interested Stockholder became an Interested Stockholder
(such latter date is referred to in this Article EIGHTH as
the "Determination Date"), whichever is higher.
(b) The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business
Combination of consideration other than cash to be received
per share by holders of shares of any class of outstanding
Voting Stock other than Common Stock shall be at least equal
to the highest of the following (it being intended that the
requirements of this subparagraph (b) shall be required to be
met with respect to every such class of outstanding Voting
Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class of
Voting Stock):
I. (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the
Interested Stockholder for any shares of such class of
Voting Stock acquired by it (X) within the two-year period
immediately prior to the Announcement Date, or (Y) in the
transaction in which it became an Interest Stockholder,
whichever is higher;
II. (if applicable) the highest preferential amount
per share to which the holders of shares of such class of
Voting Stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation; and
III. the Fair Market Value per share of such class
of Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher.
(c) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including
Common Stock) shall be in cash or in the same form as the
Interested Stockholder has previously paid for shares of such
class of Voting Stock. If the Interested Stockholder has paid
for shares of any class of Voting Stock with varying forms of
consideration, the form of consideration to be received per
share by holders of shares of such class of Voting Stock
shall be either cash or the form used to acquire the largest
number of
10
<PAGE>
shares of such class of Voting Stock previously acquired by
the Interested Stockholder. The price determined in
accordance with subparagraph B.2 of this Article EIGHTH shall
be subject to appropriate adjustment in the event of any
stock dividend, stock split, combination of shares or similar
event.
(d) After such Interested Stockholder has become and
Interested Stockholder and prior to the consummation of such
Business Combination: (i) except as approved by a majority of
the Disinterested Directors, there shall have been no failure
to declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) on any
outstanding stock having preference over the Common Stock as
to dividends or liquidation; (ii) there shall have been (X)
no reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any subdivision
of the Common Stock), except as approved by a majority of the
Disinterested Directors, and (Y) an increase in such annual
rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure to so increase
such annual rate is approved by a majority of the
Disinterested Directors, and (iii) neither such Interested
Stockholder or any of its Affiliates shall have become the
beneficial owner of any additional shares of Voting Stock
except as part of the transaction which results in such
Interested Stockholder becoming an Interested Stockholder.
(e) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not
have received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such
Business Combination or otherwise.
(f) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations)
11
<PAGE>
shall be mailed to stockholders of the Corporation at least
30 days prior to the consummation of such Business
Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or
subsequent provisions).
C. For the purposes of this Article EIGHTH:
1. A "Person" shall include an individual, a group acting in
concert, a corporation, a partnership, an association, a joint
venture, a pool, a joint stock company, a trust, an unincorporated
organization or similar company, a syndicate or any other group
formed for the purpose of acquiring, holding or disposing of
securities.
2. "Interested Stockholder" shall mean any person (other than
the Corporation or any Holding Company or Subsidiary thereof) who
or which:
(a) is the beneficial owner, directly or indirectly, of
more than 10% of the voting power of the outstanding Voting
Stock; or
(b) is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, of
10% or more of the voting power of the then outstanding
Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the two-
year period immediately prior to the date in question
beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act of
1933.
3. A person shall be a "beneficial owner" of any Voting
Stock:
(a) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934, as in effect on August
1, 1989; or
(b) which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether such right
is exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
12
<PAGE>
exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding (but neither such person nor any such Affiliate
or Associate shall be deemed to be the beneficial owner of
any shares of solely by reason of revocable proxy granted for
a particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, and with respect to
which shares neither such person nor any such Affiliate or
Associate is otherwise deemed the beneficial owner); or
(c) which are beneficially owned, directly or indirectly
within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as in effect on August 1, 1989, by any
other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding
for the purposes of acquiring, holding, voting (other than
solely by reason of a revocable proxy as described in
subparagraph (b) of this paragraph 3.) or disposing of any
shares of Voting Stock;
provided, however, that in the case of any employee stock
ownership or similar plan of the Corporation or of any Subsidiary
in which the beneficiaries thereof possess the right to vote any
shares of Voting Stock held by such plan, no such plan nor any
trustee with respect thereto (nor any Affiliate or such trustee),
solely by reason of such capacity of such trustee, shall be
deemed, for any purposes hereof, to beneficially own any shares
of Voting Stock held under any such plan.
4. For the purpose of determining whether a person is an
Interested Stockholder pursuant to Paragraph 2 of this Section C,
the number of shares of Voting Stock deemed to be outstanding
shall include shares deemed owned through application of
Paragraph 3 of this Section C but shall not include any other
shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
5. "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as in effect on August 1, 1989.
13
<PAGE>
6. "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by
the Corporation; provided, however, that for the purposes of the
definition of Interested Stockholder set forth in Paragraph 2 of
this Section C, the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity security
is owned, directly or indirectly, by the Corporation.
7. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and
was a member of the Board of Directors prior to the time that the
Interested Stockholder, and any director who is thereafter chosen
to fill any vacancy of the Board of Directors or who is elected
and who, in either event, is unaffiliated with the Interested
Stockholder and in connection with his or her initial assumption
of office is recommended for appointment or election by a
majority of Disinterested Directors then on the Board of
Directors.
8. "Fair Market Value" means: (a) in the case of stock, the
highest closing sales price of the stock during the 30-day period
immediately preceding the date in question of a shares of such
stock on the National Association of Securities Dealers Automated
Quotation System or any system then in use, or, if such stock is
admitted to trading on a principal United States securities
exchange registered under the Securities Exchange Act of 1934,
Fair Market Value shall be the highest sale price reported during
the 30-day period preceding the date in question, or, if no such
quotations are available, the Fair Market Value on the date in
question of a share of such stock as determined by the Board of
Directors in good faith, in each case with respect to any class
of stock, appropriately adjusted for any dividend or distribution
in shares of such stock or any combination or reclassification of
outstanding shares of such stock into a smaller number of shares
of such stock, and (b) in the case of property other than cash or
stock, the Fair Market Value of such property on the date in
question as determined by the Board of Directors in good faith.
9. References to "Highest Per Share Price" shall in each case
with respect to any class of stock reflect an appropriate
adjustment for any dividend or distribution in shares of such
stock or any stock split or reclassification of outstanding
shares of such stock into a greater number of
14
<PAGE>
shares of such stock or any combination or reclassification of
outstanding shares of such stock into a similar number of shares
of such stock.
10. In the event of any Business Combination in which the
Corporation survives, the phrase "other consideration to be
received" as used in Subparagraphs (a) and (b) of Paragraph 2 of
Section B of this Article EIGHTH shall include the shares of
Common Stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
D. A majority of the Directors of the Corporation shall have the
power and duty to determine for the purposes of this Article EIGHTH, on the
basis of information known to them after reasonable inquiry, (a) whether a
person is an Interested Stockholder; (b) the number of shares of Voting Stock
beneficially owned by any person; (c) whether a person is an Affiliate or
Associate of another; and (d) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any Subsidiary in any Business
Combination has an aggregate Fair Market Value equaling or exceeding 25% of the
combined assets of the Corporation and its Subsidiaries. A majority of the
Directors shall have the further power to interpret all of the terms and
provisions of this Article EIGHTH.
E. Nothing contained in this Article EIGHTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
F. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least 80 percent of the voting power of all of the then-
outstanding shares of the Voting Stock, voting together as a single class, shall
be required to alter, amend or repeal this Article EIGHTH.
NINTH: The Board of Directors of the Corporation, when evaluating any
-----
offer or another Person (as defined in Article EIGHTH hereof) to (A) make a
tender or exchange offer for any equity security of the Corporation, (B) merge
or consolidate the Corporation with another corporation or entity or (C)
purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation, may, in connection with the exercise of its judgment
in determining what is in the best interest of the Corporation and its
stockholders, give due
15
<PAGE>
consideration to all relevant factors, including, without limitation, the social
and economic effect of acceptance of such offer on the Corporation's present and
future customers and employees and those of its Subsidiaries (as defined in
Article EIGHTH hereof); on the communities in which the Corporation and its
Subsidiaries operate or are located; on the ability of the Corporation to
fulfill its corporate objectives as a savings and loan holding company and on
the ability of its subsidiary savings association to fulfill the objectives of a
federally-chartered stock form savings association under applicable statutes and
regulations.
TENTH:
-----
A. Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith; provided, however, that, except as provided
in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. The right to indemnification conferred in Section A of this Article
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses") provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and
16
<PAGE>
not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections A and B of this Article shall
be contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article is not paid in full by
the Corporation within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suite brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforced a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of
17
<PAGE>
expenses pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses,under this Article or otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the Corporation's
certificate of incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ELEVENTH: A director of this Corporation shall not be personally liable to
--------
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders of
the corporation shall not adversely affect any right or protection of a director
of the corporation existing at the time of such repeal or modification.
TWELFTH: The Corporation reserves the right to amend or repeal any
-------
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights conferred
18
<PAGE>
upon stockholders are granted subject to this reservation; provided, however,
-------- -------
that, notwithstanding any other provision of this Certificate of Incorporation
or any provision of law which might otherwise permit a lesser vote or no vote,
but in addition to any vote of the holders of any class or series of the stock
of this Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least 80 percent of the voting power of
all of the then-outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of directors (after giving effect to
the provisions of Article FOURTH), voting together as a single class, shall be
required to amend or repeal this Article TWELFTH, clauses (c) or (d) of Article
FIFTH, Article SIXTH, Article SEVENTH, Article EIGHTH or Article TENTH.
THIRTEENTH: The name and mailing address of the sole incorporator are as
----------
follows:
Name Mailing Address
---- ---------------
John F. Grossbauer 1201 N. Market Street
Wilmington, Delaware 19801
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and, accordingly, have hereto set my hand this 2nd day of August, 1989.
----------------------------------
John F. Grossbauer
19
<PAGE>
Exhibit No. 10 Mid America Federal Savings Bank Employee Stock Ownership Plan;
as amended.
<PAGE>
CERTIFICATE OF RESOLUTION
I, Carolyn Pihera, do hereby certify that I am the duly elected and acting
Secretary of Mid America Federal Savings Bank and that the following is a true
and correct copy of a certain resolution adopted by the Board of Directors of
said Corporation at their regular meeting held March 19, 1996, at which meeting
a quorum of said Corporation were present and acting throughout:
RESOLVED, that the Mid America Federal Savings Bank Employee Stock
Ownership Plan and its related Trust be amended to provide that the Trustee
thereunder shall vote and take other actions with respect to allocated stock for
which no participant instructions are received in a manner calculated to most
accurately reflect the instructions it has received from participants with
respect to allocated stock to the same extent that such proportional rule is
applicable under the Plan and Trust to voting and other actions with respect to
unallocated stock;
FURTHER RESOLVED, that the appropriate officers of the Bank be and hereby
are authorized and directed in the name and on behalf of the Bank and the Board
of Directors to cause to be prepared and to execute such amendments to the Plan
and Trust as deemed necessary or advisable to effectuate the foregoing
resolution and amendment of said Plan and Trust.
I do further certify that the foregoing resolution has not been altered or
amended, but remains in force and effect.
IN WITNESS WHEREOF, I have executed this Certificate and affixed the
Corporation's seal this 29th day of March, 1996.
/s/ Carolyn Pihera
- ------------------
Corporate Secretary
<PAGE>
Amendment to the Mid America Federal Savings Bank
Employee Stock Ownership Plan
March 19, 1996
Section 7.1 of the Mid America Federal Savings Bank Employee Stock Ownership
Plan is hereby amended, effective March 19, 1996, by deleting subsection (ii) in
its entirety and replacing it with the following:
(ii) the Trustee shall vote any allocated Stock for which no written
instructions have been received, and any unallocated Stock, in a manner
calculated to most accurately reflect the instructions it has received from
Participants regarding the allocated Stock.
<PAGE>
MID AMERICA FEDERAL SAVINGS BANK
EMPLOYEE STOCK OWNERSHIP PLAN
(Adopted effective July 1, 1989, and conformed to amendments made effective July
1, 1991, January 28, 1992, January 1, 1993, July 1, 1993, July 1, 1994, and July
1, 1995.)
<PAGE>
MID AMERICA FEDERAL SAVINGS BANK
EMPLOYEE STOCK OWNERSHIP PLAN
(adopted effective July 1, 1989 and conformed to amendments made
effective July 23, 1991, January 28, 1992, July 1, 1992, January 1, 1993,
July 4, 1994 and May 23, 1995)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
Section 1. Plan Identity............................................... 1
-------------
1.1 Name........................................................ 1
----
1.2 Purpose..................................................... 1
-------
1.3 Effective Date.............................................. 1
--------------
1.4 Fiscal Period............................................... 1
-------------
1.5 Single Plan for All Employers............................... 1
-----------------------------
1.6 Interpretation of Provisions................................ 1
----------------------------
Section 2. Definitions................................................. 2
-----------
Section 3. Eligibility for Participation............................... 14
-----------------------------
3.1 Initial Eligibility......................................... 14
-------------------
3.2 Definition of Eligibility Year.............................. 15
------------------------------
3.3 Terminated or Part-Time Employees........................... 15
---------------------------------
3.4 Certain Employees Ineligible................................ 15
----------------------------
3.5 Waiver of Participation..................................... 15
-----------------------
3.6 Participation and Reparticipation........................... 16
---------------------------------
Section 4. Employer Contributions and Credits.......................... 16
----------------------------------
4.1 Discretionary Contributions................................. 16
---------------------------
4.2 Contributions for Stock Obligations......................... 16
-----------------------------------
4.3 Definitions Related to Contribution......................... 18
-----------------------------------
4.4 Conditions as to Contributions.............................. 19
------------------------------
Section 5. Limitations on Contributions and Allocations................ 20
--------------------------------------------
5.1 Limitation on Annual Additions.............................. 20
---------------------------
5.2 Coordinated Limitation With Other Plans..................... 20
---------------------------------------
5.3 Effect of Limitations....................................... 22
---------------------
5.4 Limitations as to Certain Participants...................... 22
--------------------------------------
Section 6. Trust Fund and Its Investment............................... 23
-----------------------------
6.1 Creation of Trust Fund...................................... 23
----------------------
6.2 Stock Fund and Investment Fund.............................. 24
------------------------------
6.3 Acquisition of Stock........................................ 24
--------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C> <C>
6.4 Participants' Option to Diversify.............................. 25
---------------------------------
Section 7. Voting Rights and Dividends on Stock........................... 26
------------------------------------
7.1 Voting of Stock................................................ 26
---------------
7.2 Dividends on Stock............................................. 27
------------------
Section 8. Adjustments to Accounts........................................ 27
-----------------------
8.1 Adjustments for Transactions................................... 27
----------------------------
8.2 Valuation of Investment Fund................................... 28
----------------------------
8.3 Adjustments for Investment Experience.......................... 28
-------------------------------------
Section 9. Vesting of Participants' Interests............................. 29
----------------------------------
9.1 Deferred Vesting in Accounts................................... 29
----------------------------
9.2 Computation of Vesting Years................................... 29
----------------------------
9.3 Full Vesting Upon Certain Events............................... 30
--------------------------------
9.4 Full Vesting Upon Plan Termination............................. 30
----------------------------------
9.5 Forfeiture, Repayment, and Restoral............................ 30
-----------------------------------
9.6 Accounting for Forfeitures..................................... 31
--------------------------
9.7 Vesting and Nonforfeitability.................................. 31
-----------------------------
Section 10. Payment of Benefits............................................ 32
-------------------
10.1 Benefits for Participants...................................... 32
-------------------------
10.2 Benefits on a Participant's Death.............................. 33
---------------------------------
10.3 Marital Status................................................. 34
--------------
10.4 Delay in Benefit Determination................................. 34
------------------------------
10.5 Accounting for Benefit Payments................................ 34
-------------------------------
10.6 Options to Receive and Sell Stock.............................. 34
---------------------------------
10.7 Restrictions on Disposition of Stock........................... 35
------------------------------------
10.8 Deemed Distribution............................................ 36
-------------------
10.9 Type of Payment................................................ 36
---------------
Section 11. Rules Governing Benefit Claims and Review of Appeals........... 37
----------------------------------------------------
11.1 Claim for Benefits............................................. 37
------------------
11.2 Notification by Committee...................................... 37
-------------------------
11.3 Claims Review Procedure........................................ 38
-----------------------
Section 12. The Committee and Its Function................................. 38
------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C> <C>
12.1 Authority of Committee.................................................. 38
----------------------
12.2 Identity of Committee................................................... 39
---------------------
12.3 Duties of Committee..................................................... 39
-------------------
12.4 Valuation of Stock...................................................... 40
------------------
12.5 Compliance with ERISA................................................... 41
---------------------
12.6 Action by Committee..................................................... 41
-------------------
12.7 Execution of Documents.................................................. 41
----------------------
12.8 Adoption of Rules....................................................... 41
-----------------
12.9 Responsibilities to Participants........................................ 42
--------------------------------
12.10 Alternative Payees in Event of Incapacity............................... 42
-----------------------------------------
12.11 Indemnification by Employers............................................ 42
----------------------------
12.12 Nonparticipation by Interested Member................................... 42
-------------------------------------
Section 13. Adoption, Amendment, or Termination of the.............................. 43
------------------------------------------
13.1 Adoption of Plan by Other Employers..................................... 43
-----------------------------------
13.2 Adoption of Plan by Successor........................................... 43
-----------------------------
13.3 Plan Adoption Subject to Qualification.................................. 44
--------------------------------------
13.4 Right to Amend or Terminate............................................. 44
---------------------------
Section 14. Miscellaneous Provisions................................................ 45
------------------------
14.1 Plan Creates No Employment Rights....................................... 45
---------------------------------
14.2 Nonassignability of Benefits............................................ 46
----------------------------
14.3 Limit of Employer Liability............................................. 46
---------------------------
14.4 Treatment of Expenses................................................... 46
---------------------
14.5 Number and Gender....................................................... 46
-----------------
14.6 Nondiversion of Assets.................................................. 47
----------------------
14.7 Separability of Provisions.............................................. 47
--------------------------
14.8 Service of Process...................................................... 47
------------------
14.9 Governing State Law..................................................... 47
-------------------
14.10 Special Rules for Persons Subject to Section 16(b) Requirements......... 47
---------------------------------------------------------------
Section 15. Top-Heavy Provisions.................................................... 48
--------------------
15.1 Determination of Top-Heavy Status....................................... 48
---------------------------------
15.2 Minimum Contributions................................................... 50
---------------------
15.3 Minimum Vesting......................................................... 51
---------------
15.4 Maximum Compensation.................................................... 52
--------------------
</TABLE>
iii
<PAGE>
MID AMERICA FEDERAL SAVINGS BANK
EMPLOYEE STOCK OWNERSHIP PLAN
Section 1. Plan Identity.
--------------
1.1 Name. The name of this Plan is "Mid America Federal Savings Bank
----
Employee Stock Ownership Plan".
1.2 Purpose. The purpose of this Plan is to describe the terms and
--------
conditions under which contributions made pursuant to the Plan will be credited
and paid to the Participants and their Beneficiaries.
1.3 Effective Date. The Effective Date of this Plan is July 1, 1989.
---------------
1.4 Fiscal Period. This Plan shall be operated on the basis of a
-------------
July 1 - June 30 fiscal year for the purpose of keeping the Plan's books and
records and distributing or filing any reports or returns required by law.
1.5 Single Plan for All Employers. This Plan shall be treated as a
-----------------------------
single plan with respect to all participating Employers for the purpose of
crediting contributions and forfeitures and distributing benefits, determining
whether there has been any termination of Service, and applying the limitations
set forth in Section 5.
1.6 Interpretation of Provisions. The Employers intend this Plan and the
----------------------------
Trust to be a qualified stock bonus plan under Section 401(a) of the Code and an
employee stock ownership plan within the meaning of Section 407(d)(6) of ERISA
and Section 4975(e)(7) of the Code. The Plan is intended to have its assets
invested primarily in qualifying employer securities of one or more Employers
within the meaning of Section 407(d)(3) of ERISA, and to satisfy any
1
<PAGE>
requirement under ERISA or the Code applicable to such a plan. Accordingly, the
Plan and Trust Agreement shall be interpreted and applied in a manner consistent
with this intent and shall be administered at all times and in all respects in a
nondiscriminatory manner.
Section 2. Definitions. The following capitalized words and phrases shall
------------
have the meanings specified when used in this Plan and in the Trust Agreement,
unless the context clearly indicates otherwise:
"Account" means a Participant's interest in the assets accumulated
under this Plan as expressed in terms of a separate account balance which is
periodically adjusted to reflect his Employer's contributions, the Plan's
investment experience, and distributions and forfeitures.
"Active Participant" means any Employee who has satisfied the
eligibility requirements of Section 3 and who qualifies as an Active Participant
for a particular Plan Year under Section 4.3.
"Beneficiary" means the person or persons who are designated by a
Participant to receive benefits payable under the Plan on the Participant's
death. In the absence of any designation or if all the designated Beneficiaries
shall die before the Participant dies or shall die before all benefits have been
paid, the Participant's Beneficiary shall be his surviving spouse, if any, or
his estate if he is not survived by a spouse. The Committee may rely upon the
advice of the Participant's executor or administrator as to the identify of the
Participant's spouse.
"Break in Service" means any five or more consecutive 12-month
periods beginning July 1 in which an Employee has 500 or fewer Hours of Service
per period. Solely for this purpose, an Employee shall be considered employed
for his normal hours of paid
2
<PAGE>
employment during a Recognized Absence, unless he does not resume his Service at
the end of the Recognized Absence. Further, if an Employee is absent for any
period beginning on or after January 1, 1985, (i) by reason of the Employee's
pregnancy, (ii) by reason of the birth of the Employee's child, (iii) by reason
of the placement of a child with the Employee in connection with the Employee's
adoption of the child, or (iv) for purposes of caring for such child for a
period beginning immediately after such birth or placement, the Employee shall
be credited with the Hours of Service which would normally have been credited
but for such absence, up to a maximum of 501 Hours of Service, in the first 12-
month period which would otherwise be counted toward a Break in Service.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee responsible for the administration of
this Plan in accordance with Section 12.
"Company" means Mid America Federal Savings Bank, and any entity which
succeeds to the business of Mid America Federal Savings Bank and adopts this
Plan as its own pursuant to Section 14.2.
"Direct Rollover" means a payment by the Plan to the Eligible Retirement
Plan specified by the Distributee.
"Disability" means only a disability which renders the Participant
unable, as a result of bodily or mental disease or injury, to perform the duties
for an Employer for which he was responsible prior to the occurrence of such
bodily or mental disease or injury, which disability is expected to be permanent
or of long and indefinite duration. However, this term
3
<PAGE>
shall not include any disability directly or indirectly resulting from or
related to habitual drunkenness or addiction to narcotics, a criminal act
occurring while compensation to the Participant is suspended, or any injury
which is intentionally self-inflicted. Further, this term shall apply only if
(i) the Participant is sufficiently disabled to qualify for the payment of
disability benefits under the federal Social Security Act or Veterans Disability
Act; or (ii) the Participant's disability is certified by a physician selected
by the Committee.
Unless the Participant is sufficiently disabled to qualify for disability
benefits under the federal Social Security Act or Veterans Disability Act, the
Committee may require the Participant to be appropriately examined from time to
time by one or more physicians chosen by the Committee, and no Participant who
refuses to be examined shall be treated as having a disability. In any event,
the Committee's good faith decision as to whether a Participant's Service has
been terminated by disability shall be final and conclusive.
"Distributee" means an Employee or former Employee. In addition, the
Employee's or former Employee's surviving Spouse and the Employee's or former
Employee's Spouse or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(q) of the Code, are
Distributees with regard to the interest of the Spouse or former spouse.
"Early Retirement" means retirement on or after a Participant's
attainment of age 55.
"Effective Date" means July 1, 1989.
4
<PAGE>
"Eligible Retirement Plan" means an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan described in Section
403(a) of the Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to the
surviving Spouse, an Eligible Retirement Plan is an individual retirement
account or an individual retirement annuity.
"Eligible Rollover Distribution" means any distribution of all or any
portion of the balance to the credit of the distributee, except that an Eligible
Rollover distribution may not include:
(a) any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life
(or life expectancy) of the Distributee and the Distributee's designated
Beneficiary; or
(b) any distribution for a specified period of ten years or more; or
(c) any distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; or
(d) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to Employer Stock).
"Employee" means any individual who is or has been employed or self-
employed by an Employer. "Employee" also means an individual employed by a
leasing organization who, pursuant to an agreement between an Employer and the
leasing organization, has performed
5
<PAGE>
services for the Employer and any related persons (within the meaning of Section
414(n)(6) of the Code) on a substantially full-time basis for more than one
year, if such services are of a type historically performed by employees in the
Employer's business field. However, such a "leased employee" shall not be
considered an Employee if (i) he participates in a money purchase pension plan
sponsored by the leasing organization which provides for immediate
participation, immediate full vesting, and an annual contribution of at least 10
percent of the Employee's Total Compensation, and (ii) leased employees do not
constitute more than 20 percent of the Employer's total work force (including
leased employees, but excluding Highly Paid Employees and any other employees
who have not performed services for the Employer on a substantially full-time
basis for at least one year).
"Employer" means the Company or any affiliate within the purview of
section 414(b), (c) or (m) and 415(h) of the Code, any other corporation,
partnership, or proprietorship which adopts this Plan with the Company's consent
pursuant to Section 13.1, and any entity which succeeds to the business of any
Employer and adopts the Plan pursuant to Section 13.2.
"Entry Date" means January 1 and July 1 of each Plan Year.
"ERISA" means the Employee Retirement Income Security Act of 1974 (P.L.
93-406, as amended).
"Highly Paid Employee" for any Plan Year means an Employee who, during
either of that or the immediately preceding Plan Year, (i) owned more than five
percent of the outstanding equity interest or the outstanding voting interest in
any Employer, (ii) had Total Compensation exceeding $75,000 (as adjusted
pursuant to section 415(d) of the Code), (iii) had
6
<PAGE>
Total Compensation exceeding $50,000 (as adjusted pursuant to section 415(d) of
the Code) and was among the most highly compensated one-fifth of all Employees,
or (iv) was at any time an officer of an Employer and had Total Compensation
exceeding $45,000 (or 1.5 times the currently applicable dollar limit under
Section 415(b)(1)(A) of the Code). For this purpose:
(a) "Total Compensation" shall include any amount which is excludable
from the Employee's gross income for tax purposes pursuant to Sections 125,
402(a)(8), 402(h)(1)(B), or 403(b) of the Code.
(b) The number of Employees in "the most highly compensated one-fifth of
all Employees" shall be determined by taking into account all individuals
working for all related employer entities described in the definition of
"Service", but excluding any individual who has not completed six months of
Service, who normally works fewer than 17-1/2 hours per week or in fewer than
six months per year, who has not reached age 21, whose employment is covered by
a collective bargaining agreement, or who is a nonresident alien who receives no
earned income from United States sources.
(c) The number of individuals counted as "officers" shall not be more
than the lesser of (i) 50 individuals and (ii) the greater of 3 individuals or
10 percent of the total number of Employees. If no officer earns more than
$45,000 (or the adjusted limit), then the highest paid officer shall be a Highly
Paid Employee.
(d) A former employee shall be treated as a highly compensated employee
if such employee was a highly paid employee when such employee separated from
service, or if such employee was a highly paid employee at any time after
attaining age 55.
7
<PAGE>
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual compensation of each Employee
taken into account under the Plan shall not exceed the 1993 Omnibus Budget
Reconciliation Act (OBRA '93) annual compensation limit. the OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for increases in
the cost of living in accordance with Section 401(a) (17) of the Internal
Revenue Code. the cost-of-living adjustment in effect for a calendar year
applies to any period, not exceeding 12 months, over which compensation is
determined (determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of which is
the number of months in the determination period, and the denominator of which
is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into account is
determining an Employee's benefits accruing in the current Plan Year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
8
<PAGE>
"Hours of Service" means hours to be credited to an Employee under the
following rules:
(a) Each hour for which an Employee is paid or is entitled to be paid for
services to an Employer is an Hour of Service.
9
<PAGE>
(b) Each hour for which an Employee is directly or indirectly paid or is
entitled to be paid for a period of vacation, holidays, illness, disability,
lay-off, jury duty, temporary military duty, or leave of absence is an Hour of
Service. However, except as otherwise specifically provided, no more than 501
Hours of Service shall be credited for any single continuous period which an
Employee performs no duties. Further, no Hours of Service shall be credited on
account of payments made solely under a plan maintained to comply with worker's
compensation, unemployment compensation, or disability insurance laws, or to
reimburse an Employee for medical expenses.
(c) Each hour for which back pay (ignoring any mitigation of damages) is
either awarded or agreed to by an Employer is an Hour of Service. However, no
more than 501 Hours of Service shall be credited for any single continuous
period during which an Employee would not have performed any duties.
(d) Hours of Service shall be credited in any one period only under one
of the foregoing paragraphs (a), (b) and (c); an Employee may not get double
credit for the same period.
(e) If an Employer finds it impractical to count the actual Hours of
Service for any class or group of non-hourly Employees, each Employee in that
class or group shall be credited with 45 Hours of Service for each weekly pay
period in which he has at least one Hour of Service. However, an Employee shall
be credited only for his normal working hours during a paid absence.
10
<PAGE>
(f) Hours of Service to be credited on account of a payment to an
Employee (including back pay) shall be recorded in the period of Service for
which the payment was made. If the period overlaps two or more Plan Years, the
Hours of Service credit shall be allocated in proportion to the respective
portions of the period included in the several Plan Years. However, in the case
of periods of 31 days or less, the Administrator may apply a uniform policy of
crediting the Hours of Service to either the first Plan Year or the second.
(g) In all respects an Employee's Hours of Service shall be counted as
required by Section 2530.200b-2(b) and (c) of the Department of Labor's
regulations under Title I of ERISA.
"Investment Fund" means that portion of the Trust Fund consisting of
assets other than Stock.
"Normal Retirement Date" means a Participant's 65th birthday.
"Participant" means any Employee who is participating in the Plan, or who
has previously participated in the Plan and still has a balance credited to his
Account.
"Plan Year" means each period of 12 consecutive months beginning on July
1 of 1989 and each succeeding year.
"Recognized Absence" means a period for which -
(a) an Employer grants and Employee a leave of absence for a limited
period, but only if an Employer grants such leaves on a nondiscriminatory basis;
or
(b) an Employee is temporarily laid off by an Employer because of a
change in business conditions; or
11
<PAGE>
(c) an Employee is on active military duty, but only to the extent that
his employment rights are protected by the Military Selective Service Act of
1967 (38 U.S.C. sec. 2021).
"Service" means an Employee's period(s) of employment or self-employment
with an Employer, excluding for initial eligibility purposes any period in which
the individual was a nonresident alien and did not receive from an Employer any
earned income which constituted income from sources within the United States. An
Employee's Service shall include any service which constitutes service with a
predecessor employer within the meaning of Section 414(a) of the Code. An
Employee's Service shall also include any service with an entity which is not an
Employer, but only either (i) for a period after 1975 in which the other entity
is a member of a controlled group of corporations or is under common control
with other trades and businesses within the meaning of Section 414(b) or 414(c)
of the Code, and a member of the controlled group or one of the trades and
businesses is an Employer, or (ii) for a period after 1979 in which the other
entity is a member of an affiliated service group within the meaning of Section
414(m) of the Code, and a member of the affiliated service group is an Employer.
"Spouse" means the individual, if any, to whom a Participant is lawfully
married on the date benefit payments to the Participant are to begin, or on the
date of the Participant's death, if earlier.
"Stock" means shares of the Company's voting common stock or preferred
stock meeting the requirements of Section 409(e)(3) of the Code issued by an
Employer or an affiliated corporation.
12
<PAGE>
"Stock Fund" means that portion of the Trust Fund consisting of Stock.
"Stock Obligation" means an indebtedness arising from any extension of
credit to the Plan or the Trust which was obtained for the purpose of buying
Stock and which satisfies the requirements set forth in Section 6.3.
"Total Compensation" means a Participant's wages, salary, overtime,
bonuses, commissions, and any other amounts received for personal services
rendered while in Service from any Employer or an affiliate (within the purview
of Section 414(b), (c), and (m) of the Code), plus his earned income from any
such entity as defined in Section 401(c)(2) of the Code if he is self-employed.
"Total Compensation" shall include (i) severance payments and amounts paid as a
result of termination, (ii) amounts excludable from gross income under Section
911 or deductible under Section 913 of the Code, (iii) amounts described in
Sections 104(a)(3), 105(a), and 105(h) of the Code to the extent includable in
gross income, (iv) amounts described in Section 105(d) of the Code, (v) amounts
received from an Employer for moving expenses which are not deductible under
Section 217 of the Code, (vi) amounts includable in gross income in the year of,
and on account of, the grant of a nonqualified stock option, (vii) amounts
includable in gross income pursuant to Section 83(b) of the Code, and (viii)
amounts includable in gross income under an unfunded nonqualified plan of
deferred compensation, but shall exclude, (ix) Employer contributions to or
amounts received from a funded or qualified plan of deferred compensation, (x)
Employer contributions to a simplified employee pension account to the extent
deductible under Section 219 of the Code, (xi) Employer contributions to a
Section 403(b) annuity contract, (xii) amounts includable in gross income
pursuant to Section 83(a) of the Code,
13
<PAGE>
(xiii) amounts includable in gross income upon the exercise of nonqualified
stock option or upon the disposition of stock acquired under any stock option,
and (xiv) any other amounts expended by the Employer on the Participant's behalf
which are excludable from his income or which receive special tax benefits. A
Participant's Total Compensation shall exclude any compensation in any
limitation year beginning after 1988 in excess of $200,000 (or the limit
currently in effect under Section 401(a)(17) of the Code).
"Trust" or "Trust Fund" means the trust fund created under this Plan.
"Trust Agreement" means the agreement between the Company and the Trustee
concerning the Trust Fund. If any assets of the Trust Fund are held in a co-
mingled trust fund with assets of other qualified retirement plans, "Trust
Agreement" shall be deemed to include the trust agreement governing that co-
mingled trust fund. With respect to the allocation of investment responsibility
for the assets of the Trust Fund, the provisions of Section 2.2 of the Trust
Agreement are incorporated herein by reference.
"Trustee" means one or more corporate persons and individuals selected
from time to time by the Company to serve as trustee or co-trustees of the Trust
Fund.
"Unallocated Stock Fund" means that portion of the Stock Fund consisting
of the Plan's holding of stock which have been acquired in exchange for one or
more Stock obligations and which have not yet been allocated to the
Participant's Accounts in accordance with Section 4.2.
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<PAGE>
"Valuation Date" means the last day of the Plan Year and each other date
as of which the committee shall determine the investment experience of the
Investment Fund and adjust the Participants' accounts accordingly.
"Valuation Period" means the period following a Valuation Date and ending
with the next Valuation Date.
15
<PAGE>
"Vesting Year" means a unit of Service credited to a Participant pursuant
to Section 9.2 for purposes of determining his vested interest in his Account.
Section 3. Eligibility for Participation.
------------------------------
3.1 Initial Eligibility. An Employee shall first be eligible to
-------------------
participate in the Plan as of the Entry Date coinciding with or next following
the later of the following dates: (a) the last day of the Employee's first
Eligibility Year, and (b) the Employee's 21st birthday. However, if an Employee
is not in active Service with an Employer on the date he would otherwise first
be eligible to participate in the Plan, his eligibility to participate shall be
deferred until the next day he is in Service.
The Employer shall notify all Employees when they become eligible to
participate in the Plan and shall instruct them that they may elect not to
participate. Upon request, the Committee shall provide eligible Employees with
an Agreement of Non-Participation. An eligible Employee may elect not to become
a Participant in the Plan by signing and delivering to the Committee the
Agreement of Non-Participation within ninety (90) days after receiving it. Any
Employee who elects not to become a Participant as of the first Entry Date on
which he was eligible may become a Participant as of any succeeding Entry Date
if he is still eligible by executing a revocation of the Agreement of Non-
Participation and delivering the same to the Committee within ninety (90) days
of any succeeding Entry Date. Any Employee who first met the provisions of the
eligibility on or before July 23, 1991 has ninety days from such date to elect
not to become a Participant or continue participation in the Plan by executing
an Agreement of Non-Participation and delivering the same to the Committee.
However, such execution of an
16
<PAGE>
Agreement of Non-Participation shall not affect any contribution credited to the
Employee's account prior to July 23, 1991.
3.2 Definition of Eligibility Year. An "Eligibility Year" means an
-------------------------------
applicable eligibility period (as defined below) in which the Employee has at
least 1,000 Hours of Service. For this purpose,
(a) an Employee's first "eligibility period" is the 12-consecutive month
period beginning on the first day on which he has an Hour of Service, and
(b) his subsequent eligibility periods will be 12-consecutive month
periods beginning on each July 1 after that first day of Service.
3.3 Terminated or Part-Time Employees. No Employee shall have any interest
----------------------------------
or rights under this Plan if (i) he is never in active Service with an Employer
on or after the Effective Date, or (ii) he had 500 or fewer hours of Service in
any eligibility period beginning before the Effective Date and he never has an
Eligibility Year after such period.
3.4 Certain Employees Ineligible. No Employee shall participate in the Plan
-----------------------------
while his Service is covered by a collective bargaining agreement between an
Employer and the Employee's collective bargaining representative if (i)
retirement benefits have been the subject of good faith bargaining between the
Employer and the representative and (ii) the collective bargaining agreement
does not provide for the Employee's participation in the Plan. No Employee shall
participate in the Plan while he is actually employed by a leasing organization
rather than an Employer.
17
<PAGE>
3.5 Waiver of Participation. Any eligible employee who does not wish to
------------------------
participate in the Plan shall file with the Committee a waiver of participation
on a form provided for this purpose. A waiver shall be effective until the first
day of the Plan Year following the Employee's revocation of the waiver.
3.6 Participation and Reparticipation. Subject to the satisfaction of
---------------------------------
the foregoing requirements, an Employee shall participate in the Plan during
each period of his Service from the date on which he first becomes eligible
until his termination. For this purpose, an Employee returning within five years
of his or her termination who previously satisfied the initial eligibility
requirements shall re-enter the Plan as of the date of his return to Service
with an Employer.
Section 4. Employer Contributions and Credits.
-----------------------------------
4.1 Discretionary Contributions. Each Employer shall from time to time
----------------------------
contribute, with respect to a Plan Year, such amounts as it may determine from
time to time. An Employer shall have no obligation to contribute any amount
under this Plan except as so determined in its sole discretion. The Employers'
contributions and available forfeitures for a Plan Year shall be credited as of
the last day of the year to the Accounts of the Active Participants in
proportion to their amounts of Cash Compensation.
4.2 Contributions for Stock Obligations. If the Trustee, upon
-----------------------------------
instructions from the Committee, incurs any Stock obligation upon the purchase
of Stock, the Employers shall contribute for each Plan Year an amount sufficient
to cover all payments of principal and interest as they come due under the terms
of the Stock Obligation. If there is more than one Stock Obligation, the
Employers shall designate the one to which any contribution is to be applied.
The
18
<PAGE>
Employers' obligation to make contributions under this Section 4.2 shall be
reduced to the extent of any investment earnings realized on such contributions
and any dividends paid by the Employers on Stock held in the Unallocated Stock
Account, which earnings and dividends shall be applied to the Stock Obligation
related to that Stock.
In each Plan Year in which Employer contributions, earnings on contributions,
or dividends on unallocated Stock are used as payments under a Stock Obligation,
a certain number of shares of the Stock acquired with that Stock Obligation
which is then held in the Unallocated Stock Fund shall be released for
allocation among the Participants. The number of shares released shall bear the
same ratio to the total number of those shares then held in the Unallocated
Stock Fund (prior to the release) as (i) the principal and interest payments
made on the Stock Obligation in the current Plan Year bears to (ii) the sum of
(i) above, and the remaining principal and interest payments required (or
projected to be required on the basis of the interest rate in effect at the end
of the Plan Year) to satisfy the Stock Obligation.
At the direction of the Committee, the current and projected payments of
interest under a Stock Obligation may be ignored in calculating the number of
shares to be released in each year if (i) the Stock Obligation provides for
annual payments of principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments of such amounts for 10 years, (ii)
the interest included in any payment is ignored only to the extent that it would
be determined to be interest under standard loan amortization tables, and (iii)
the term of the Stock Obligation, by reason of renewal, extension, or
refinancing, has not exceeded 10 years from the original acquisition of the
Stock.
19
<PAGE>
For these purposes, each Stock Obligation, the Stock purchased with it, and
any dividends on such Stock, shall be considered separately. The Stock released
from the Unallocated Stock Fund in any Plan Year shall be credited as of the
last day of the year to the Accounts of the Active Participants in proportion to
their amounts of Cash Compensation.
4.3 Definitions Related to Contributions. For the purposes of this Plan, the
-------------------------------------
following terms have the meanings specified:
"Active Participant" means a Participant who has satisfied the
eligibility requirements under Section 3 and who has at least 1,000 Hours of
Service during the current Plan Year. However, a Participant shall not qualify
as an Active Participant unless (i) he is in active Service with an Employer on
the last day of the Plan Year, or (ii) his Service terminated during the Plan
Year by reason of death.
"Cash Compensation" means a Participant's compensation from his Employer
with respect to that portion of a Plan Year in which he is an Active
Participant. A Participant's compensation shall be based upon the cash method
of accounting; overtime pay, bonuses, stock bonuses, commissions, taxable sick
pay, severance pay, any compensation deferred under a qualified cash or deferred
arrangement, and similar items shall be included, but any compensation income
realized under a stock option, amounts paid by or received from an Employer to
cover travel, entertainment, moving or similar expenses, and the value of any
fringe benefits not received in cash shall be excluded.
Notwithstanding anything herein to the contrary, if the Cash Compensation of
any Participant consists of or includes commissions, then the Participant's Cash
Compensation
20
<PAGE>
eligible for the allocation of Contributions and Forfeitures shall exclude any
Cash Compensation in any Plan Year in excess of $75,000, effective with the Plan
Year beginning July 1, 1992, with adjustment for cost of living increases
identical to the cost of living increases announced by the Internal Revenue
Service for retirement plan limitations.
A Participant's Cash Compensation shall exclude any compensation in any Plan
Year beginning after 1988 and in subsequent Plan Years up to and including the
Plan Year beginning in 1993 in excess of $200,000 (or the limit currently in
effect under Section 401(a)(17) of the Code).
For any Plan Year beginning after 1993, a Participant's Cash Compensation
shall exclude any compensation in excess of the OBRA '93 annual compensation
limit of $150,000, as adjusted for increases in cost of living in accordance
with Section 401(a)(17)(B) of the Code. For any Plan Year beginning after 1994,
a Participant's Cash Compensation shall exclude any compensation paid to a
Participant which results from the sale of any vacation benefits.
4.4 Conditions as to Contributions. Employers' contributions shall in all
-------------------------------
event be subject to the limitation set forth in Section 5. Contributions may be
made in the form of cash, or securities and other property to the extent
permissible under ERISA, including Stock, and shall be held by the Trustee in
accordance with the Trust Agreement. In addition to the provisions of Section
13.3 for the return of an Employer's contributions in connection with a failure
of the Plan to qualify initially under the Code, any amount contributed by an
Employer due to a good faith mistake of fact, or based upon a good faith but
erroneous determination of its deductibility under Section 404 of the Code,
shall be returned to the Employer within one year after the date on
21
<PAGE>
which the contribution was originally made, or within one year after its
nondeductibility has been finally determined. However, the amount to be returned
shall be reduced to take account of any adverse investment experience within the
Trust Fund in order that the balance credited to each Participant's Account is
not less that it would have been if the contribution had never been made.
Section 5. Limitations on Contributions and Allocations.
---------------------------------------------
5.1 Limitation on Annual Additions. Notwithstanding the provisions of
-------------------------------
Section 4, the annual addition to a Participant's accounts under this and any
other defined contribution plans maintained by the Employers or an affiliate
(within the purview of Section 414(b), (c), and (m) and Section 415(h) of the
Code, which affiliate shall be deemed an Employer for this purpose) shall not
exceed for any limitation year an amount equal to the lesser of --
5.1-1 $30,000, or the dollar limitation currently in effect; or
5.1-2 25 percent of the Participant's Total Compensation for such
limitation year. For purposes of this Section 5.1 and the following Section 5.2,
the "annual addition" to a Participant's accounts means the sum of (i) the
Employer contributions and Employee forfeitures credited to a Participant's
accounts with respect to a limitation year, plus (ii) the Participant's total
voluntary contributions for that year. The $30,000 and $90,000 limitations
referred to shall, for each limitation year ending after 1988, be automatically
adjusted to the new dollar limitations determined by the Commissioner of
Internal Revenue for the calendar year beginning in that limitation year.
Notwithstanding the foregoing, if the special limitations on annual additions
described in section 415(c)(6) of the Code applies, the limitations described in
this section shall
22
<PAGE>
be adjusted accordingly. A "limitation year" means each 12 consecutive month
period beginning July 1.
5.2 Coordinated Limitation With Other Plans. Aside from the limitation
----------------------------------------
prescribed by Section 5.1 with respect to the annual addition to a Participant's
accounts for any single limitation year, if a Participant has ever participated
in one or more defined benefit plans maintained by an Employer or an affiliate,
then the annual additions to his accounts shall be limited on a cumulative basis
so that the sum of his defined contribution plan fraction and his defined
benefit plan fraction does not exceed one. For this purpose:
5.2-1 A Participant's defined contribution plan fraction with respect to
a Plan Year shall be a fraction, (i) the numerator of which is the sum of the
annual additions to his accounts through the current year, and (ii) the
denominator of which is the sum of the lesser of the following amounts -A- and -
B- determined for the current limitation year and each prior limitation year of
Service with an Employer: -A- is 1.25 times $30,000, or 1.0 times such dollar
limitation if the Plan is top-heavy, and -B- is 35 percent of the Participant's
Total Compensation for such year. Further, if the Participant participated in
any related defined contribution plan in any years beginning before 1976, any
excess of the sum of the actual annual additions to the Participant's accounts
for those years over the maximum annual additions which could have been made in
accordance with Section 5.1 shall be ignored, and voluntary contributions by the
Participant during those years shall be taken into account as to each such year
only to the extent that his average annual voluntary contribution in those years
exceeded 10 percent of his average annual Total Compensation in those years.
23
<PAGE>
5.2-2 A Participant's defined benefit plan fraction with respect to a
limitation year shall be a fraction, (i) the numerator of which is his projected
annual benefit payable at normal retirement under the Employers' defined benefit
plans, and (ii) the denominator of which is the lesser of (a) 1.25 times
$90,000, or 1.0 times such dollar limitation if the Plan is top-heavy, and (b)
1.4 times the Participant's average Total Compensation during his highest-paid
three consecutive limitation years.
24
<PAGE>
5.3 Effect of Limitations. The Committee shall take whatever action may be
----------------------
necessary from time to time to assure compliance with the limitations set forth
in Section 5.1 and 5.2. Specifically, the Committee shall see that each Employer
restrict its contributions for any Plan Year to an amount which, taking into
account the amount of available forfeitures, may be completely allocated to the
Participants consistent with those limitations. Where the limitations would
otherwise be exceeded by any Participant, further allocations to the Participant
shall be curtailed to the extent necessary to satisfy the limitations. Where an
excessive amount is contributed on account of a mistake as to one or more
Participants' compensation, or there is an amount of forfeitures which may not
be credited in the Plan Year in which it becomes available, the amount shall be
held in a suspense account to be allocated in lieu of any Employer contributions
in future years until it is eliminated, and to be returned to the Employer if it
cannot be credited consistent with these limitations before the termination of
the Plan.
5.4 Limitations as to Certain Participants. Aside from the limitations set
---------------------------------------
forth in Section 5.1 and 5.2, if the Plan acquires any Stock in a transaction as
to which a selling shareholder or the estate of a deceased shareholder is
claiming the benefit of Section 1042 or 1057 of the Code, the Committee shall
see that none of such Stock, and no other assets in lieu of such Stock, are
allocated to the Accounts of certain Participants in order to comply with
Section 409(n) of the Code.
This restriction shall apply at all times to a Participant who owns (taking
into account the attribution rules under Section 318(a) of the Code, without
regard to the exception for employee plan trusts in Section 318(a)(2)(B)(i) more
than 25 percent of any class of stock of a corporation
25
<PAGE>
which issued the Stock acquired by the Plan, or another corporation within the
same controlled group, as defined in Section 409(1)(4) of the Code (any such
class of stock hereafter called a "Related Class"). For this purpose, a
Participant who owns more than 25 percent of any Related Class at any time
within the one year preceding the Plan's purchase of the Stock shall be subject
to the restriction as to all allocations of the Stock, but any other Participant
shall be subject to the restriction only as to allocations which occur at a time
when he owns more than 25 percent of any Related Class.
Further, this restriction shall apply to the selling shareholder claiming the
benefit of Section 1042, the deceased shareholder whose estate is claiming the
benefit of Section 2057, and any other Participant who is related to such a
shareholder within the meaning of Section 267(b) of the Code, during the period
beginning on the date on which the Plan purchases the Stock and ending 10 years
after the later of (i) the date of such purchase, and (ii) the date of the
allocation under Section 4.2 attributable to the final payment on whatever Stock
Obligations were incurred with the purchase.
This restriction shall not apply to any Participant who is a lineal
descendant of a deceased shareholder if the aggregate amounts allocated under
the Plan for the benefit of all such descendants do not exceed five percent of
the Stock acquired from the shareholder's estate.
Section 6. Trust Fund and Its Investment.
------------------------------
6.1 Creation of Trust Fund. All amounts received under the Plan from
-----------------------
Employers and investments shall be held as the Trust Fund pursuant to the terms
of this Plan and of the Trust Agreement between the Company and the Trustee. The
benefits described in this
26
<PAGE>
Plan shall be payable only from the assets of the Trust Fund, and none of the
Company, any other Employer, its board of directors or trustees, its
stockholders, its officers, its employees, the Committee, and the Trustee shall
be liable for payment of any benefit under this Plan except from the Trust Fund.
6.2 Stock Fund and Investment Fund. The Trust Fund held by the Trustee
-------------------------------
shall be divided into the Stock Fund, consisting entirely of Stock, and the
Investment Fund, consisting of all assets of the Trust other than Stock. The
Trustee shall have no investment responsibility for the Stock Fund, but shall
accept any Employer contributions made in the form of Stock, and shall acquire,
sell, exchange, distribute, and otherwise deal with and dispose of Stock in
accordance with the instructions of the Committee. The Trustee shall have full
responsibility for the investment of the Investment Fund, except to the extent
such responsibility may be delegated from time to time to one or more investment
managers pursuant to Section 2.2 of the Trust Agreement.
6.3 Acquisition of Stock. From time to time the Committee may, in its
---------------------
sole discretion, direct the Trustee to acquire Stock from the issuing Employer
or from shareholders,including shareholders who are or have been Employees,
Participants, or fiduciaries with respect to the Plan. The Trustee shall pay for
such Stock no more than its fair market value, which shall be determined
conclusively by the Committee pursuant to Section 12.4. The Committee may direct
the Trustee to finance the acquisition of Stock by incurring or assuming
indebtedness to the seller or another party (including the Internal Revenue
Service in the case of Stock acquired from a deceased shareholder's estate in
accordance with Section 2210 of the
27
<PAGE>
Code), which indebtedness shall be called a "Stock Obligation". Any Stock
Obligation shall be subject to the following conditions and limitations:
6.3-1 A Stock Obligation shall be for a specific term, shall not be
payable on demand except in the event of default, and shall bear a reasonable
rate of interest.
6.3-2 A Stock Obligation may, but need not, be secured by a collateral
pledge of either the Stock acquired in exchange for the Stock Obligation, or the
Stock previously pledged in connection with a prior Stock Obligation which is
being repaid with the proceeds of the current Stock Obligation. No other assets
of the Plan and Trust may be used as collateral for a Stock Obligation, and no
creditor under a Stock Obligation shall have any right or recourse to any Plan
and Trust assets other than Stock remaining subject to a collateral pledge.
6.3-3 Any pledge of Stock to secure a Stock Obligation must provide for
the release of pledged Stock in connection with payments on the Stock
Obligations in the ratio prescribed in Section 4.2.
6.3-4 Repayments of principal and interest on any Stock Obligation shall
be made by the Trustee only from Employer cash contributions designated for such
payments, from earnings on such contributions, and from cash dividends received
on Stock held in the Unallocated Stock Fund.
6.4 Participants' Option to Diversify. The Committee shall provide for a
----------------------------------
procedure under which each Participant may, during the first five years of a
certain six-year period, elect to have up to 25 percent of the value of his
Account committed to alternative investment options within the Investment Fund.
For the sixth year in this period, the Participant may elect to have up
28
<PAGE>
to 50 percent of the value of his Account committed to other investments. The
six-year period shall begin with the Plan Year following the first Plan Year in
which the Participant has both reached aged 55 and completed 10 years of
participation in the Plan; a Participant's election to diversify his Account
must be made within the 90-day period immediately following the last day of each
of the six Plan Years. The Committee shall see that the Investment fund includes
a sufficient number of investment options to comply with Section 401(a)(28)(B)
of the Code. The Trustee shall comply with any investment directions received
from Participants in accordance with the procedures adopted from time to time by
the Committee under this Section 6.4.
Section 7. Voting Rights and Dividends on Stock.
-------------------------------------
7.1 Voting of Stock. The Trustee generally shall vote all shares of
----------------
Stock held under the Plan in accordance with the written instructions of the
Committee. However, if any Employer has registration-type class of securities
within the meaning of Section 409(e)(4) of the Code, or if a matter submitted to
the holders of the Stock involves a merger, consolidation, recapitalization,
reclassification, liquidation, dissolution, or sale of substantially all assets
of an entity, then (i) the shares of Stock which have been allocated to
Participants' Accounts shall be voted by the Trustee in accordance with the
Participants' written instructions, (ii) the Trustee shall not vote any
allocated Stock for which it has no written instructions, and (iii) the Trustee
shall vote any unallocated Stock in a manner calculated to most accurately
reflect the instructions it has received from Participants regarding the
allocated Stock. Whenever such voting rights are to be exercised, the Employers,
the Committee, and the Trustee shall see that all Participants are provided with
the same notices and other materials as are provided to other holders of the
Stock,
29
<PAGE>
and are provided with adequate opportunity to deliver their instructions
to the Trustee regarding the voting of Stock allocated to their Accounts.
7.2 Dividends on Stock. Dividends on Stock which are received by the
-------------------
Trustee in the form of additional Stock shall be retained in the Stock Fund, and
shall be allocated among the Participant's Accounts and the Unallocated Stock
Fund in accordance with their holdings of the Stock on which the dividends have
been paid. Dividends on Stock credited to Participants' Accounts which are
received by the Trustee in the form of cash shall, at the direction of the
Employer paying the dividends, either (i) be credited to the Accounts in
accordance with their holdings of the Stock and invested as part of the
Investment Fund, (ii) be distributed immediately to the Participants in
accordance with the holdings of the Stock credited to their Accounts or (iii) be
distributed to the Participants within 90 days of the close of the Plan Year in
which paid in accordance with the holdings of the Stock credited to their
Accounts. Dividends on Stock held in the Unallocated Stock Fund which are
received by the Trustee in the form of cash shall be applied as soon as
practicable to payments of principal and interest under the Stock Obligation
incurred with the purchase of the Stock.
Section 8. Adjustments to Accounts.
------------------------
8.1 Adjustments for Transactions. An Employer contribution pursuant to
-----------------------------
Section 4.1 shall be credited to the Participants' Accounts as of the last day
of the Plan Year for which it is contributed. Stock released from the
Unallocated Stock Fund upon the Trust's repayment of a Stock Obligation pursuant
to Section 4.2 shall be credited to the Participants' Accounts as of the last
day of the Plan Year in which the repayment occurred. Any excess amounts
remaining from
30
<PAGE>
the use of proceeds of a sale of Stock from the Unallocated Stock Fund to repay
a Stock Obligation shall be allocated as of the last day of the Plan Year in
which the repayment occurred among the Participants' Accounts in proportion to
the opening balance in each Account. Any benefit which is paid to a Participant
or Beneficiary pursuant to Section 10 shall be charged to the Participant's
Account as of the first day of the Valuation Period in which it is paid. Any
forfeiture or restoral shall be charged or credited to the Participant's Account
as of the first day of the Valuation Period in which the forfeiture or restoral
occurs pursuant to Section 9.6.
8.2 Valuation of Investment Fund. As of each Valuation Date, the
-----------------------------
Trustee shall prepare a balance sheet of the Investment Fund, recording each
asset (including any contribution receivable from an Employer) and liability at
its fair market value. Any liability with respect to short positions or options
and any item of accrued income or expense and unrealized appreciation or
depreciation shall be included; provided, however, that such an item may be
estimated or excluded if it is not readily ascertainable unless estimating or
excluding it would result in a material distortion. The Committee shall then
determine the net gain or loss of the Investment Fund since the preceding
Valuation Date, which shall mean the entire income of the Investment Fund,
including realized and unrealized capital gains and losses, net of any expenses
to be charged to the general Investment Fund and excluding any contributions by
the Employer. The determination of gain or loss shall be consistent with the
balance sheets of the Investment Fund for the current and preceding Valuation
Dates.
8.3 Adjustments for Investment Experience. Any net gain or loss of the
--------------------------------------
Investment Fund during a Valuation Period, as determined pursuant to Section
8.2, shall be
31
<PAGE>
allocated as of the last day of the Valuation Period among the Participants'
Accounts in proportion to the opening balance in each Account, as adjusted for
benefit payments and forfeitures during the Valuation Period, without regard to
whatever Stock may be credited to an Account.
Section 9. Vesting of Participants' Interests.
-----------------------------------
9.1 Deferred Vesting in Accounts. A Participant's vested interest in
-----------------------------
his Account shall be based on his Vesting Years in accordance with the following
Table, subject to the balance of this Section 9:
<TABLE>
<CAPTION>
Vesting Percentage of
Years Interest Vested
<S> <C>
fewer than 3 0%
3 20%
4 40%
5 60%
6 80%
7 or more 100%
</TABLE>
9.2 Computation of Vesting Years. For purposes of this Plan, a "Vesting
-----------------------------
Year" means each 12-month period beginning July 1, in which an Employee has at
least 1,000 Hours of Service, beginning with his initial Service with any
Employer, and including certain Service with other employers as provided in the
definition of "Service". However, a Participant's Vesting Years shall be
computed subject to the following conditions and qualifications:
32
<PAGE>
(a) A Participant's Vesting Years shall not include any Service prior to
the 12-month period in which the Participant reached age 18.
(b) A Participant's vested interest in his Account accumulated before a
Break in Service shall be determined without regard to any Service after the
Break. Further, if a Participant has a Break in Service before his interest in
his Account has become vested to some extent, he shall lose credit for any
Vesting Year before the Break.
(c) Unless otherwise specifically excluded, a Participant's Vesting Years
shall include any period of active military duty to the extent required by the
Military Selective Service Act of 1967 (38 U.S.C. Section 2021).
9.3 Full Vesting Upon Certain Events. Notwithstanding Section 9.1, a
---------------------------------
Participant's interest in his Account shall fully vest on the Participant's
Normal Retirement Date, provided the Participant is in Service on or after that
date. The Participant's interest shall also fully vest in the event that his
Service is terminated by Early Retirement, Disability or by death.
9.4 Full Vesting Upon Plan Termination. Notwithstanding Section 9.1, a
-----------------------------------
Participant's interest in his Account shall fully vest if he is in active
Service upon termination of this Plan or upon the permanent and complete
discontinuance of contributions by his Employer. In the event of a partial
termination, the interest of each Participant who is in Service shall fully vest
with respect to that part of the Plan which is terminated.
9.5 Forfeiture. Repayment, and Restoral. If a Participant's Service
------------------------------------
terminates before his interest in his Account is fully vested, that portion
which has not vested shall be forfeited when he has a 1-Year Break in Service.
In the case of a terminated Participant who does not receive a
33
<PAGE>
distribution of his entire vested interest and whose Service resumes before a
Break in Service occurs, any undistributed vested balance from his prior
participation shall be maintained as a fully vested sub-account with his
Account.
If any former Participant shall be reemployed by an Employer before five
consecutive 1-Year Breaks in Service have occurred, and such former Participant
has received a distribution of all his vested assets in the Plan, the unvested
portion of his assets shall be reinvested to his Account if he repays the full
amount distributed to him within the earlier of five years after the first date
on which he is reemployed by an Employer or the close of the first period of
five consecutive 1-Year Breaks in Service commencing after the distribution.
Upon repayment of the entire distribution within the required time period, the
forfeited unvested assets shall be restored in full.
9.6 Accounting for Forfeitures. A forfeiture shall be charged to the
---------------------------
Participant's Account as of the first day of the first Valuation Period in which
the forfeiture becomes certain pursuant to Section 9.5. Except as otherwise
provided in that Section, a forfeiture shall be added to the contributions of
the terminated Participant's Employer which are to be credited to other
Participants pursuant to Section 4.1 as of the last day of the Plan Year in
which the forfeiture becomes certain.
9.7 Vesting and Nonforfeitability. A Participant's interest in his Account
------------------------------
which has become vested shall be nonforfeitable for any reason.
Section 10. Payment of Benefits.
--------------------
34
<PAGE>
10.1 Benefits for Participants. A Participant whose Service ends for any
--------------------------
reason shall receive the vested portion of his Account in a single payment on a
date selected by the Committee. That date shall be on or before the 60th day
after the end of the Plan Year in which his Service ends. Notwithstanding the
foregoing, if the balance credited to his Account exceeds $3,500, his benefits
shall not be paid before the latest of his 65th birthday or the tenth
anniversary of the year in which he commenced participation in the Plan unless
he elects an early payment date in a written election filed with the Committee.
A Participant may modify such an election at any time, provided any new benefit
payment date is at least 30 days after a modified election is delivered to the
Committee. In all events, a Participant's benefits shall be paid by April 1st of
the calendar year in which he reaches age 71-1/2. A Participant's benefits from
that portion of his Account committed to the Investment Fund shall be calculated
on the basis of the most recent Valuation Date before the day of payment.
10.2 Benefits on a Participant's Death. If a Participant dies before his
----------------------------------
benefits are paid pursuant to Section 10.1, the balance credited to his Account
shall be paid to his Beneficiary in a single distribution on or before the 60th
day after the end of the Plan Year in which he died. The benefits from that
Portion of the Account committed to the Investment Fund shall be calculated on
the basis of the most recent Valuation Date before the date of payment.
If a married Participant dies before his benefit payments begin, than unless
he has specifically elected otherwise the Committee shall cause the balance in
his Account to be paid to his Spouse. No election by a married Participant of a
different Beneficiary shall be valid unless the election is accompanied by the
Spouse's written consent, which (i) must acknowledge the
35
<PAGE>
effect of the election, (ii) must explicitly provide either that the designated
beneficiary may not subsequently be changed by the Participant without the
Spouse's further consent, or that it may be changed without such consent, and
(iii) must be witnessed by the Committee, its representative, or a notary
public. (This requirement shall not apply if the Participant establishes to the
Committee's satisfaction that the Spouse may not be located.)
10.3 Marital Status. The Committee shall from time to time take whatever
---------------
steps it deems appropriate to keep informed of each Participant's marital
status. Each Employer shall provide the Committee with the most reliable
information in the Employer's possession regarding its Participants' marital
status, and the Committee may, in its discretion, require a notarized affidavit
from any Participant as to his marital status. The Committee, the Plan, the
Trustee, and the Employers shall be fully protected and discharged from any
liability to the extent of any benefit payments made as a result of the
Committee's good faith and reasonable reliance upon information obtained from a
Participant and his Employer as to his marital status.
10.4 Delay in Benefit Determination. If the Committee is unable to determine
-------------------------------
the benefits payable to a Participant or Beneficiary on or before the latest
date prescribed for payment pursuant to Section 10.1 or 10.2, the benefits shall
in any event be paid within 60 days after they can first be determined, with
whatever makeup payments may be appropriate in view of the delay.
10.5 Accounting for Benefit Payments. Any benefit payment shall be charged
--------------------------------
to the Participant's Account as of the first day of the Valuation Period in
which the payment is made.
36
<PAGE>
10.6 Options to Receive and Sell Stock. Unless ownership of virtually all
----------------------------------
Stock is restricted to active Employees and qualified retirement plans for the
benefit of Employees pursuant to the certificates of incorporation or by-laws of
the Employers issuing Stock, a terminated Participant or the Beneficiary of a
deceased Participant may instruct the Committee to distribute the Participant's
entire vested interest in his Account in the form of Stock. In that event, the
Committee shall apply the Participant's vested interest in the Investment Fund
to purchase sufficient Stock from the Stock Fund or from any owner of stock to
make the required distribution. In all other cases, the Participant's vested
interest in the Stock Fund shall be distributed in shares of Stock, and his
vested interest in the Investment Fund shall be distributed in cash.
Any Participant who receives Stock pursuant to Section 10.1, and any person
who has received Stock from the Plan or from such a Participant by reason of the
Participant's death or incompetency, by reason of divorce or separation from the
Participant, or by reason of a rollover contribution described in Section
402(a)(5) of the Code, shall have the right to require the Employer which issued
the Stock to purchase the Stock for its current fair market value (hereinafter
referred to as the "put right"). The put right shall be exercisable by written
notice to the Committee during the first 60 days after the Stock is distributed
by the Plan, and, if not exercised in that period, during the first 60 days in
the following Plan Year after the Committee has communicated to the Participant
its determination as to the Stock's current fair market value. However, the put
right shall not apply to the extent that the Stock, at the time the put right
would otherwise be exercisable, may be sold on an established market in
accordance with federal and
37
<PAGE>
state securities laws and regulations. If the put right is exercised, the
Trustee may, if so directed by the Committee in its sole discretion, assume the
Employer's rights and obligations with respect to purchasing the Stock.
The Employer or the Trustee, as the case may be, may elect to pay for the
Stock in equal periodic installments, not less frequently than annually, over a
Period not longer than five years from the 30th day after the put right is
exercised, with adequate security and interest at a reasonable rate on the
unpaid balance, all such terms to be set forth in a promissory note delivered to
the seller with normal terms as to acceleration upon any uncured default.
Nothing contained herein shall be deemed to obligate any Employer to register
any Stock under any federal or state securities law or to create or maintain a
public market to facilitate the transfer or disposition of any Stock. The put
right described herein may only be exercised by a person described in the second
preceding paragraph, and may not be transferred with any Stock to any other
person. As to all Stock purchased by the Plan in exchange for any Stock
Obligation, the put right be nonterminable. The put right for Stock acquired
through a Stock Obligation shall continue with respect to such Stock after the
Stock Obligation is repaid or the Plan ceases to be an employee stock ownership
plan.
10.7 Restrictions on Disposition of Stock. Except in the case of Stock which
-------------------------------------
is traded on an established market, a Participant who receives Stock pursuant to
Section 10.1, and any person who has received Stock from the Plan or from such a
Participant by reason of the Participant's death or incompetency, by reason of
divorce or separation from the Participant, or by reason of a rollover
contribution described in Section 402(a)(5) of the Code, shall, prior to any
sale or other
38
<PAGE>
transfer of the Stock to any other person, first offer the Stock to the issuing
Employer and to the Plan at its current fair market value. This restriction
shall apply to any transfer, whether voluntary, involuntary, or by operation of
law, and whether for consideration or gratuitous. Either the Employer or the
Trustee may accept the offer within 14 days after it is delivered. Any Stock
distributed by the Plan shall bear a conspicuous legend describing the right of
first refusal under this Section 10.7, as well as any other restrictions upon
the transfer of the Stock imposed by federal and state securities laws and
regulations.
10.8 Deemed Distribution. For purposes of this section, if a Participant
--------------------
terminates service and the value of the Participant's vested account balance is
zero, the Participant shall be deemed to have received a distribution of such
vested account balance.
10.9 Type of Payment. This Section 10.8 applies to distributions made on or
----------------
after January 1, 1993, pursuant to Section 401(a)(31) of the Code and the
regulations thereunder.
(a) Direct Rollover.
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this section, a
Distributee may elect, at the time and in the manner prescribed by the
Committee, to have any portion of an Eligible Rollover Distribution
processed as a Direct Rollover and paid directly to an Eligible
Retirement Plan selected by the Distributee.
(b) Payment to Participant or Beneficiary.
If a distribution is an Eligible Rollover Distribution, and the
Participant or Beneficiary elects to have payment made to himself, then
the distribution will be
39
<PAGE>
subject to mandatory 20% federal income tax
withholding, unless the distribution is less than $200 or consists solely
of Employer Stock and $200 or less in cash.
(c) Limitations.
If the Distributee requests that an Eligible Rollover Distribution be
processed as a Direct Rollover, all the assets shall be processed as a
Direct Rollover to a single Eligible Retirement Plan.
Section 11. Rules Governing Benefit Claims and Review of Appeals.
-----------------------------------------------------
11.1 Claim for Benefits. Any Participant or Beneficiary who qualifies for
-------------------
the payment of benefits shall file a claim for his benefits with the Committee
on a form provided by the Committee. The claim, including any election of an
alternative benefit form, shall be filed at least 30 days before the date on
which the benefits are to begin. If a Participant or Beneficiary fails to file a
claim by the 30th day be!fore the date on which benefits become payable, he
shall be presumed to have filed a claim for payment for the Participant's
benefits in the standard form prescribed by Sections 10.1 or 10.2.
11.2 Notification by Committee. Within 90 days after receiving a claim for
--------------------------
benefits (or within 180 days, if special circumstances require an extension of
time and written notice of the extension is given to the Participant or
Beneficiary within 90 days after receiving the claim for benefits), the
Committee shall notify the Participant or Beneficiary whether the claim has been
approved or denied. If the Committee denies a claim in any respect, the
Committee shall set forth in a written notice to the Participant or Beneficiary:
(i) each specific reason for the denial;
40
<PAGE>
(ii) specific references to the pertinent Plan provisions on which the
denial is based;
(iii) a description of any additional material or information which could
be submitted by the Participant or Beneficiary to support his claim, with
an explanation of the relevance of such information; and
(iv) an explanation of the claims review procedures set forth in Section
11.3.
11.3 Claims Review Procedure. Within 60 days after a Participant or
------------------------
Beneficiary receives notice from the Committee that his claim for benefits has
been denied in any respect, he may file with the Committee a written notice of
appeal setting forth his reasons for disputing the Committee's determination. In
connection with his appeal the Participant or Beneficiary or his representative
may inspect or purchase copies of pertinent documents and records to the extent
not inconsistent with other Participants' and Beneficiaries' rights of privacy.
Within 60 days after receiving a notice of appeal from a prior determination (or
within 120 days, if special circumstances require an extension of time and
written notice of the extension is given to the Participant or Beneficiary and
his representative within 60 days after receiving the notice of appeal), the
Committee shall furnish to the Participant or Beneficiary and his
representative, if any, a written statement of the Committee's final decision
with respect to his claim, including the reasons for such decision and the
Particular Plan provisions upon which it is based.
Section 12. The Committee and Its Functions.
--------------------------------
12.1 Authority of Committee. The Committee shall be the "plan administrator"
-----------------------
within the meaning of ERISA and shall have exclusive responsibility and
authority to control and
41
<PAGE>
manage the operation and administration of the Plan, including the
interpretation and application of its provisions, except to the extent such
responsibility and authority are otherwise specifically (i) allocated to the
Company, the Employers, or the Trustee under the Plan and Trust Agreement, (ii)
delegated in writing to other persons by the Company, the Employers, the
Committee, or the Trustee, or (iii) allocated to other parties by operation of
law. The Committee shall have no investment responsibility with respect to the
Investment Fund except to the extent, if any, specifically provided in the Trust
Agreement. In the discharge of its duties, the Committee may employ accountants,
actuaries, legal counsel, and other agents (who also may be employed by an
Employer or the Trustee in the same or some other capacity) and may pay their
reasonable expenses and compensation.
12.2 Identity of Committee. The Committee shall consists of three or more
----------------------
individuals selected by the Company. Any individual, including a director,
trustee, shareholder, officer, or employee of an Employer, shall be eligible to
service as a member of the Committee. The Company shall have the power to remove
any individual serving on the Committee at any time without cause upon 10 days
written notice, and any individual may resign from the Committee at any time
upon 10 days written notice to the Company. The Company shall notify the Trustee
of any change in membership of the Committee.
12.3 Duties of Committee. The Committee shall keep whatever records may be
--------------------
necessary to implement the Plan and shall furnish whatever reports may be
required from time to time by the Company. The Committee shall furnish to the
Trustee whatever information may be necessary to properly administer the Trust.
The Committee shall see to the filing with the
42
<PAGE>
appropriate government agencies of all reports and returns required of the plan
Committee under ERISA and other laws.
Further, the Committee shall have exclusive responsibility and authority with
respect to the Plan's holdings of Stock and shall direct the Trustee in all
respects regarding the purchase, retention, sale, exchange, and pledge of Stock
and the creation and satisfaction of Stock Obligations. The Committee shall at
all times act consistently with the Company's long-term intention that the Plan,
as an employee stock ownership plan, be invested primarily in Stock. Subject to
the direction of the Board as to the application of Employer contributions to
Stock Obligations, and subject to the provisions of Sections 6.4 and 10.6 as to
Participants rights under certain circumstances to have their Accounts invested
in Stock or in assets other than Stock, the Committee shall determine in its
sole discretion the extent to which assets of the Trust shall be used to repay
Stock Obligations, to purchase Stock, or to invest in other assets to be
selected by the Trustee or an investment manager. No provision of the Plan
relating to the allocation or vesting of any interests in the Stock Fund or the
Investment Fund shall restrict the Committee from changing any holdings of the
Trust, whether the changes involve an increase or a decrease in the Stock or
other assets credited to Participants' Accounts. In determining the proper
extent of the Trust's investment in Stock, the Committee shall be authorized to
employ investment counsel, legal counsel, appraisers, and other agents to pay
their reasonable expenses and compensation.
12.4 Valuation of Stock. If the valuation of any Stock is not established by
-------------------
reported trading on a generally recognized public market, the Committee shall
have the exclusive
43
<PAGE>
authority and responsibility to determine its value for all purposes under the
Plan. Such value shall be determined as of each Valuation Date, and on any other
date as of which the Plan purchases or sells such Stock. The Committee shall use
generally accepted methods of valuing stock of similar corporations for purposes
of arm's length business and investment transactions, and in this connection the
Committee shall obtain, and shall be protected in relying upon, the valuation of
such Stock as determined by an independent appraiser experienced in preparing
valuations of similar businesses.
44
<PAGE>
12.5 Compliance with ERISA. The Committee shall perform all acts necessary
----------------------
to comply with ERISA. Each individual member or employee of the Committee shall
discharge his duties in good faith and in accordance with the applicable
requirements of ERISA.
12.6 Action by Committee. All actions of the Committee shall be governed by
--------------------
the affirmative vote of a number of members which is a majority of the total
number of members currently appointed, including vacancies. The members of the
Committee may meet informally and may take any action without meeting as a
group.
12.7 Execution of Documents. Any instrument executed by the Committee shall
-----------------------
be signed by any member or employee of the Committee.
12.8 Adoption of Rules. The Committee shall adopt such rules and regulations
------------------
of uniform applicability as it deems necessary or appropriate for the proper
administration and interpretation of the Plan.
12.9 Responsibilities to Participants. The Committee shall determine which
---------------------------------
Employees qualify to enter the Plan. The Committee shall furnish to each
eligible Employee whatever summary plan descriptions, summary annual reports,
and other notices and information may be required under ERISA. The Committee
also shall determine when a Participant or his Beneficiary qualifies for the
payment of benefits under the Plan. The Committee shall furnish to each such
Participant or Beneficiary whatever information is required under ERISA (or is
otherwise appropriate) to enable the Participant or Beneficiary to make whatever
elections may be available pursuant to Sections 6 and 10, and the Committee
shall provide for the payment of benefits in the proper form and amount from the
assets of the Trust Fund. The Committee may
45
<PAGE>
decide in its sole discretion to permit modifications of elections and to defer
or accelerate benefits to the extent consistent with applicable law and the best
interests of the individuals concerned.
12.10 Alternative Payees in Event of Incapacity. If the Committee finds at
------------------------------------------
any time that an individual qualifying for benefits under this Plan is a minor
or is incompetent, the Committee may direct the benefits to be paid, in the case
of a minor, to his parents, his legal guardian, a custodian for him under the
Uniform Gifts to Minors Act, or the person having actual custody of him, or, in
the case of an incompetent, to his spouse, his legal guardian, or the person
having actual custody of him, the payments to be used for the individual's
benefit. The Committee and the Trustee shall not be obligated to inquire as to
the actual use of the funds by the person receiving them under this Section
12.10, and any such payment shall completely discharge the obligations of the
Plan, the Trustee, the Committee, and the Employers to the extent of the
payment.
12.11 Indemnification by Employers. Except as separately agreed in writing,
-----------------------------
the Committee, and any member or employee of the Committee, shall be indemnified
and held harmless by the Employers, jointly and severally, to the fullest extent
permitted by law against any and all costs, damages, expenses, and liabilities
reasonably incurred by or imposed upon it or him in connection with any claim
made against it or him or in which it or he may be involved by reason of its or
his being, or having been, the Committee, or a member or employee of the
Committee, to the extent such amounts are not paid by insurance.
46
<PAGE>
12.12 Nonparticipation by Interested Member. Any member of the Committee who
--------------------------------------
also is a Participant in the Plan shall take no part in any determination
specifically relating to his own participation or benefits, unless his
abstention would leave the Committee incapable of acting on the matter.
Section 13. Adoption. Amendment, or Termination of the Plan.
------------------------------------------------
13.1 Adoption of Plan by Other Employers. With the consent of the Company,
------------------------------------
any entity may become a participating Employer under the Plan by (i) taking such
action as shall be necessary to adopt the Plan, (ii) becoming a party to the
Trust Agreement establishing the Trust Fund, and (iii) executing and delivering
such instruments and taking such other action as may be necessary or desirable
to put the Plan into effect with respect to the entity's Employees.
13.2 Adoption of Plan by Successor. In the event that any Employer shall be
------------------------------
reorganized by way of merger, consolidation, transfer of assets or otherwise, so
that an entity other than an Employer shall succeed to all or substantially all
of the Employer's business, the successor entity may be substituted for the
Employer under the Plan by adopting the Plan and becoming a party to the Trust
Agreement. Contributions by the Employer shall be automatically suspended from
the effective date of any such reorganization until the date upon which the
substitution of the successor entity for the Employer under the Plan becomes
effective. If, within 90 days following the effective date of any such
reorganization, the successor entity shall not have elected to become a party to
the Plan, or if the Employer shall adopt a Plan of complete liquidation other
than in connection with a reorganization, the Plan shall be automatically
terminated with respect to Employees of the Employer as of the close of business
on the 90th day following the effective
47
<PAGE>
date of the reorganization, or as of the close of business on the date of
adoption of a plan of complete liquidation, as the case may be.
13.3 Plan Adoption Subject to Qualification. Notwithstanding any other
---------------------------------------
provision of the Plan, the adoption of the Plan and the execution of the Trust
Agreement are conditioned upon their being determined initially by the Internal
Revenue Service to meet the qualification requirements of Section 401(a) of the
Code, so that the Employers may deduct currently for federal income tax purposes
their contributions to the Trust and so that the Participants may exclude the
contributions from their gross income and recognize income only when they
receive benefits. In the event that this Plan is held by the Internal Revenue
Service not to qualify initially under Section 401(a), the Plan may be amended
retroactively to the earliest date permitted by U.S. Treasury Regulations in
order to secure qualification under Section 401(a). If this Plan is held by the
Internal Revenue Service not to qualify initially under Section 401(a) either as
originally adopted or as amended, each Employer's contributions to the Trust
under this Plan (including any earnings thereon) shall be returned to it and
this Plan shall be terminated. In the event that this Plan is amended after its
initial qualification and the Plan as amended is held by the Internal Revenue
Service not to qualify under Section 401(a), the amendment may be modified
retroactively to the earliest date permitted by U.S. Treasury Regulations in
order to secure approval of the amendment under Section 401(a).
13.4 Right to Amend or Terminate. The Company intends to continue this Plan
----------------------------
as a permanent program. However, each participating Employer separately reserves
the right to suspend, supersede, or terminate the Plan at any time and for any
reason, as it applies to that
48
<PAGE>
Employer's Employees, and the Company reserves the right to amend, suspend,
supersede, merge, consolidate, or terminate the Plan at any time and for any
reason, as it applies to the Employees of all Employers. No amendment,
suspension, supersession, merger, consolidation, or termination of the Plan
shall reduce any Participant's or Beneficiary's proportionate interest in the
Trust Fund, or shall divert any portion of the Trust Fund to purposes other than
the exclusive benefit of the Participants and their Beneficiaries prior to the
satisfaction of all liabilities under the Plan. Except as is required for
purposes of compliance with the Code or ERISA, each as amended from time to
time, neither the provisions of Sections 4.1 and 4.2 relating to the crediting
of contributions, forfeitures and shares of Stock released from the Unallocated
Stock Fund, nor any other provisions of the Plan relating to the allocation of
benefits to Participants, amy be amended more frequently than once every six
months. Moreover, there shall not be any transfer of assets to a successor plan
or merger or consolidation with another plan unless, in the event of the
termination of the successor plan or the surviving plan immediately following
such transfer, merger, or consolidation, each participant or beneficiary would
be entitled to a benefit equal to or greater than the benefit he would have been
entitled to if the plan in which he was previously a participant or beneficiary
had terminated immediately prior to such transfer, merger, or consolidation.
Following a termination of this Plan by the Company, the Trustee shall continue
to administer the Trust and pay benefits in accordance with the Plan as amended
from time to time and the Committee's instructions.
Section 14. Miscellaneous Provisions.
-------------------------
49
<PAGE>
14.1 Plan Creates No Employment Rights. Nothing in this Plan shall be
----------------------------------
interpreted as giving any Employee the right to be retained as an Employee by an
Employer, or as limiting or affecting the rights of an Employer to control its
Employees or to terminate the Service of any Employee at any time and for any
reason, subject to any applicable employment or collective bargaining
agreements.
14.2 Nonassignability of Benefits. No assignment, pledge, or other
-----------------------------
anticipation of benefits from the Plan will be permitted or recognized by the
Employers, the Committee, or the Trustee. Moreover, benefits from the Plan shall
not be subject to attachment, garnishment, or other legal process for debts or
liabilities of any Participant or Beneficiary, to the extent permitted by law.
This prohibition on assignment or alienation shall apply to any judgment,
decree, or order (including approval of a property settlement agreement) which
relates to the provision of child support, alimony, or property rights to a
present or former spouse, child or other dependent of a Participant pursuant to
a State domestic relations or community property law, unless the judgment,
decree, or order is determined by the Committee to be a qualified domestic
relations order within the meaning of Section 414(p) of the Code.
14.3 Limit of Employer Liability. The liability of the Employers with
----------------------------
respect to Participants under this Plan shall be limited to making contributions
to the Trust from time to time, in accordance with Section 4.
14.4 Treatment of Expenses. All expenses incurred by the Committee and the
----------------------
Trustee in connection with administering this Plan and Trust Fund shall be paid
by the Trustee from the
50
<PAGE>
Trust Fund to the extent the expenses have not been paid or assumed by the
Employers or by the Trustee.
14.5 Number and Gender. Any use of the singular shall be interpreted to
------------------
include the plural, and the plural the singular. Any use of the masculine,
feminine, or neuter shall be interpreted to include the masculine, feminine, or
neuter, as the context shall require.
51
<PAGE>
14.6 Nondiversion of Assets. Except as provided in Sections 5.3 and 13.3,
-----------------------
under no circumstances shall any portion of the Trust Fund be diverted to or
used for any purpose other than the exclusive benefit of the Participants and
their Beneficiaries prior to the satisfaction of all liabilities under the Plan.
14.7 Separability of Provisions. If any provision of this Plan is held to be
---------------------------
invalid or unenforceable, the other provisions of the Plan shall not be affected
but shall be applied as if the invalid or unenforceable provision had not been
included in the Plan.
14.8 Service of Process. The agent for the service of process upon the Plan
-------------------
shall be the president of the Company, or such other person as may be designated
from time to time by the Company.
14.9 Governing State Law. This Plan shall be interpreted in accordance with
--------------------
the laws of the State of Illinois to the extent those laws are applicable under
the provisions of ERISA.
14.10 Special Rules for Persons Subject to Section 16(b) Requirements.
---------------------------------------------------------------
Notwithstanding anything herein to the contrary, any former Participant who is
subject to the provisions of Section 16(b) of the Securities Exchange Act of
1934, who becomes eligible to again participate in the Plan, may not become a
Participant prior to the date that is six months from the date such former
Participant terminated participation in the Plan.
In addition, any person subject to the provisions of Section 16(b) of the 1934
Act receiving a distribution of Stock from the Plan must hold such Stock for a
period of six months commencing with the date of such distribution. However,
these restrictions will not apply to
52
<PAGE>
Stock distributions made in connection with death, retirement, disability,
termination of employment or made pursuant to the terms of a qualified domestic
relations order.
Section 15. Top-Heavy Provisions.
---------------------
15.1 Determination of Top-Heavy Status. The Committee shall determine on a
----------------------------------
regular basis whether each Plan Year is or is not a "Top-Heavy Year" for
purposes of implementing the provisions of Sections 15.2, 15.3, 15.4, and 5.2
which apply only to the extent the Plan is top-heavy or super top-heavy within
the meaning of Section 416 and the Treasury Regulations promulgated thereunder.
In making this determination, the Committee shall use the following definitions
and principles:
15.1-1 The "Employer" includes all business entities which are considered
commonly controlled or affiliated within the meaning of Sections 414(b), 414(c),
and 414(m) of the Code.
15.1-2 The "plan aggregation group" includes each qualified retirement
plan maintained by the Employer (i) in which a Key Employee is a Participant
during the Plan Year, or (ii) which enables any plan described in clause (i) to
satisfy the requirements of Section 401(a)(4) or 410 of the Code, or (iii) which
provides contributions or benefits comparable to those of the plans described in
clauses (i) and (ii) and which is designated by the Committee as part of the
plan aggregation group.
15.1-3 The "determination date", with respect to the first Plan Year of
any plan, means the last day of that Plan Year, and with respect to each
subsequent Plan Year, means the last day of the preceding Plan Year. If any
other plan has a determination date which differs from
53
<PAGE>
this Plan's determination date, the top-heaviness of this Plan shall be
determined on the basis of the other plan's determination date falling within
the same calendar years as this Plan's determination date.
15.1-4 A "Key Employee", with respect to a Plan Year, means an Employee
who at any time during the five years ending on the top-heavy determination date
for the Plan Year has received compensation from an Employer and has been (i) an
officer of the Employer having Total Compensation greater than 150 percent of
the limit then in effect under Section 415(c)(1)(A) of the Code, (ii) one of
the-10 Employees owning the largest interests in the Employer having Total
Compensation greater than the limit then in effect under Section 415(c)(1)(A),
(iii) an owner of more than five percent of the outstanding equity interest or
the outstanding voting interest in any Employer, or (iv) an owner of more than
one percent of the outstanding equity interest or the outstanding voting
interest in an Employer whose Total Compensation exceeds $150,000. In
determining which individuals are Key Employees, the rules of Section 415(i) of
the Code and Treasury Regulations promulgated thereunder shall apply. The
Beneficiary of a Key Employee shall also be considered a Key Employee.
15.1-5 A "Nonkey Employee" means an Employee who at any time during the
five years ending on the top-heavy determination date for the Plan Year has
received compensation from an Employer and who has never been a Key Employee,
and the Beneficiary of any such Employee.
15.1-6 The "aggregated benefits" for any Plan Year means (i) the adjusted
account balances in defined contribution plans on the determination date, plus
(ii) the adjusted value of
54
<PAGE>
accrued benefits in defined benefit plans, calculated as of the annual valuation
date coinciding with or next preceding the determination date, with respect to
key Employees and Nonkey Employees under all plans within the plan aggregation
group which includes this Plan. For this purpose, the "adjusted account balance"
for and the "adjusted value of accrued benefit" for any Employee shall be
increased by all plan distributions made with respect to the Employee during the
five years ending on the determination date. Further, the adjusted account
balance under a plan shall not include any amount attributable to a rollover
contribution or similar transfer to the plan initiated by an Employee and made
after 1983, unless both plans involved are maintained by the Employer, in which
event the transferred amount shall be counted in the transferee plan and ignored
for all purposes in the transferor plan. Finally, the adjusted value of accrued
benefits under any defined benefit plan shall be determined by assuming
whichever actuarial assumptions were applied by the Pension Benefit Guaranty
Corporation to determine the sufficiency of plan assets for plans terminating on
the valuation date.
15.1-7 This Plan shall be "top-heavy" for any Plan Year in which the
aggregated benefits of the Key Employees exceed 60 percent of the total
aggregated benefits for both Key Employees and Nonkey Employee.
15.1-8 This Plan shall be "super top-heavy" for any Plan Year in which
the aggregated benefits of the Key Employees exceed 90 percent of the total
aggregated benefits for both Key Employees and Nonkey Employees.
15.1-9 A "Top-Heavy Year" means a Plan Year in which the Plan is top-
heavy.
55
<PAGE>
15.2 Minimum Contributions. For any Top-Heavy Year, each Employer shall make
----------------------
a special contribution on behalf of each Participant so that each Nonkey
Employee's allocation of Employer Contributions and Forfeitures shall be equal
to the lesser of (i) 3% of such Nonkey Employee's Total Compensation, or (ii)
the highest ratio of such allocation of Employer Contributions and Forfeitures
received by an Key Employee for that Plan Year. For purposes of the special
contribution of this Section 15.2, a Key Employee's Total Compensation shall
include amounts the Key Employee elected to defer under a qualified 401(k)
arrangement. Such a special contribution shall be made on behalf of each
Participant who is employed by the Employer on the last day of the Plan Year,
regardless of his Hours of Service.
For any Plan Year when (i) the Plan is top-heavy and (ii) a Nonkey Employee
is a Participant in both this Plan and a defined benefit plan included in the
plan aggregation group which is top heavy, the sum of the Employer Contributions
and Forfeitures allocated to the Account of each such Nonkey Employee shall be
equal to at least 5% of such Nonkey Employee's Total Compensation for that Plan
Year.
If the Employer has more than one plan, the required minimum Top-Heavy Year
contribution shall be met in the other plan.
15.3 Minimum Vesting. If a Participant's vested interest in his Account is
----------------
to be determined in a Top-Heavy Year, it shall be based on the following "top-
heavy table":
<TABLE>
<CAPTION>
Vesting Percentage
Years Interest Vested
------------------------ ----------------
<S> <C>
fewer than 2 0%
</TABLE>
56
<PAGE>
<TABLE>
<S> <C>
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
15.4 Maximum Compensation. For any Top-Heavy Year, a Participant's "Cash
---------------------
Compensation" as defined in Section 4.3, and his "Total Compensation" for
purposes of Section 15.2, shall not exceed $200,000 (or the limit currently in
effect under Section 415(d) of the Code).
For any Plan Year beginning after 1993, a Participant's "Cash Compensation"
and his "Total Compensation" shall exclude any compensation in excess of the
OBRA '93 annual compensation limit of $150,000, as adjusted for increases in
cost of living in accordance with Section 401(a)(17)(B) of the Code.
57
<PAGE>
Exhibit 10(vi) MAF Bancorp, Inc. 1993 Amended and Restated Premium Price Stock
Option Plan
1
<PAGE>
MAF BANCORP, INC. EXHIBIT A
AMENDED AND RESTATED 1993 PREMIUM PRICE STOCK OPTION PLAN
1. PURPOSE. The purpose of the MAF Bancorp, Inc. (the "Holding Company")
-------
Amended and Restated 1993 Premium Price Stock Option Plan (the "Plan") is to
advance the interests of the Holding Company and its shareholders by providing
those directors, officers and employees of the Holding Company and
its affiliates, including Mid America Federal Savings Bank (the "Bank"), upon
whose judgment, initiative and efforts the successful conduct of the business of
the Holding Company and its affiliates largely depends, with additional
financial incentive to act in the long term interest of the Holding Company and
its shareholders.
2. DEFINITIONS.
-----------
(a) "Affiliate" means (i) a member of a controlled group of corporations of
which the Holding Company is a member or (ii) an unincorporated trade or
business which is under common control with the Holding Company as determined in
accordance with Section 414(c) of the Internal Revenue Code of 1986, as amended,
(the "Code") and the regulations issued thereunder. For purposes hereof, a
"controlled group of corporations" shall mean a controlled group of corporations
as defined in Section 1563(a) of the Code determined without regard to Section
1563(a)(4) and (e)(3)(C).
(b) "Award" means a grant of Non-statutory Options, Incentive Options,
and/or Limited Rights under the provisions of this Plan.
(c) "Base Salary," for purposes of this Plan only, means the fixed
portion of the Participant's compensation. It specifically excludes any amount
paid pursuant to any annual or long-term incentive plan of the Holding Company
or the Bank.
(d) "Board of Directors" or "Board" means the board of directors of MAF
Bancorp, Inc.
(e) "Change in Control" of the Bank or the Holding Company means a Change
in Control of a nature that: (i) would be required to be reported in response to
Item 1(a) of the current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); or (ii) results in a Change in Control of the Bank or the
Holding Company within the meaning of the Home Owners' Loan Act of 1933, as
amended, and the Rules and Regulations promulgated by the Office of Thrift
Supervision ("OTS") (or its predecessor agency), as in effect on the Effective
Date, as defined in Section 17 hereof (provided, that in applying the definition
of change in control as set forth under the rules and regulations of the OTS,
the Board shall substitute its judgment for that of the OTS); or (iii)
without limitation such a Change in Control shall be deemed to have occurred at
such time as (a) any "person" (as the term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank
or the Holding Company representing 20% or more of the Bank's or the Holding
Company's outstanding securities ordinarily having the right to vote at the
election of directors except for any securities of the Bank purchased by the
Holding Company in connection with the conversion of the Bank to the stock form
and any securities purchased by the Bank's employee stock benefit plans; or (b)
individuals who constitute the Board of Directors of the Holding Company or the
Bank on the date hereof (the "Incumbent Board"), cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director
2
<PAGE>
subsequent to the date hereof whose election was approved by a vote of
at least 75% of the directors comprising the Incumbent Board, or whose
nomination for election by the Holding Company's shareholders was approved by
the same Nominating Committee serving under an Incumbent Board, shall be, for
purposes of this clause (b), considered as though he were a member of the
Incumbent Board; (c) a plan of reorganization, merger, consolidation, sale of
all or substantially all the assets of the Bank or the Holding Company or
similar transaction occurs in which the Bank or Holding Company is not the
resulting entity or (d) the approval by shareholders of a proxy statement
proposal soliciting proxies from shareholders of the Holding Company, by someone
other than the current management of the Holding Company, seeking stockholder
approval of a plan of reorganization, merger or consolidation of the Holding
Company or the Bank or similar transaction with one or more corporations as a
result of which the outstanding shares of the class of securities then subject
to the plan or transaction are exchanged for or converted into cash or property
or securities not issued by the Bank or the Holding Company; or (e) a tender
offer is made and completed for 20% or more of the voting securities of the Bank
or the Holding Company.
However, notwithstanding anything contained in this section to the contrary,
a Change in Control shall not be deemed to have occurred as a result of an event
described in (i), (ii), or (iii) (a), (c), or (e) above which resulted from an
acquisition or proposed acquisition of stock of the Holding Company by a person,
as defined in the OTS' Acquisition of Control Regulations (12 C.F.R. (S)574)
(the "Control Regulations"), who was an executive officer of the Holding Company
on January 19, 1990 and who has continued to serve as an executive officer of
the Holding Company as of the date of the event described in (i), (ii) or (iii)
(a), (c) or (e) above (an "incumbent officer"). In the event a group of
individuals acting in concert satisfies the definition of "person" under the
Control Regulations, the requirements of the preceding sentence shall be
satisfied and thus a change in control shall not be deemed to have occurred if
at least one individual in the group is an incumbent officer.
(f) "Committee" means the Administrative/Compensation Committee of the
Board of Directors consisting of non-employee members of the Board of Directors,
all of whom are "disinterested directors" as such term is defined under Rule
16b-3 under the Exchange Act, as amended, as promulgated by the Securities and
Exchange Commission.
(g) "Common Stock" means the Common Stock of MAF Bancorp, Inc., par value
$.01 per share.
(h) "Date of Grant" means the date an Award granted by the Committee is
effective pursuant to the terms hereof.
(i) "Disability" shall have the same meaning as such term is defined in the
Mid America Federal Savings Bank Employees' Profit Sharing Plan.
(j) "Fair Market Value" means, when used in connection with the Common
Stock on a certain date, the average of the reported closing bid and ask prices
of the Common Stock as reported by the Nasdaq National Market (as published by
the Wall Street Journal, if published) on such date or if the Common Stock was
not traded on such date, on the next preceding day on which the Common Stock was
traded thereon or the last previous date on which a sale is reported.
(k) "Incentive Option" means an Option granted by the Committee to a
Participant, which Option is designed as an Incentive Option pursuant to Section
9.
3
<PAGE>
(l) "Limited Right" means the right to receive an amount of cash based upon
the terms set forth in Section 10.
(m) "Non-statutory Option" means an Option granted by the Committee to a
Participant and which is not designated by the Committee as an Incentive Option,
pursuant to Section 8.
(n) "Normal Retirement" means, with respect to employees including
executive officers, retirement at the normal retirement date as set
forth in the Mid America Federal Savings Bank Employees' Profit Sharing Plan,
unless otherwise determined by the Committee. Normal Retirement means, with
respect to non-employee directors, retirement at the mandatory retirement age
established by the Board of Directors of the Holding Company or
Bank.
(o) "Option" means an Award granted under Section 8 or Section 9.
(p) "Participant" means a director, officer or employee of the Holding
Company or its Affiliates chosen by the Committee to participate in the Plan.
(q) "Plan Year(s)" means a fiscal year or years commencing on or after June
30, 1995.
(r) "Termination for Cause" means the termination upon an intentional
failure to perform stated duties, breach of a fiduciary duty involving personal
dishonesty, which results in material loss to the Holding Company or one of its
Affiliates or willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease-and-desist order which
results in material loss to the Holding Company or one of its Affiliates.
3. ADMINISTRATION.
--------------
The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it sees necessary for the proper administration of the Plan and
to make whatever determinations and interpretations in connection with the Plan
it sees as necessary or advisable. All determinations and interpretations made
by the Committee shall be binding and conclusive on all Participants in the Plan
and on their legal representatives and beneficiaries.
4. TYPES OF AWARDS.
---------------
Awards under the Plan may be granted in any one or a combination of:
(a) Non-statutory Options;
(b) Incentive Options; and
(c) Limited Rights
as defined below in paragraphs 8 through 10 of the Plan.
5. STOCK SUBJECT TO THE PLAN.
-------------------------
Subject to adjustment as provided in Section 14, the maximum number of
shares reserved for purchase pursuant to the exercise of options granted under
the Plan is 247,500 shares of Common Stock. These shares of Common Stock may be
either authorized but unissued shares or shares previously issued and reacquired
by the Holding Company. To the extent that Options or Limited Rights are granted
under
4
<PAGE>
the Plan, the shares underlying such Options will be unavailable for future
grants under the Plan except that, to the extent that Options together with any
related Limited Rights granted under the Plan terminate, expire or are cancelled
without having been exercised (in the case of Limited Rights, exercised for
cash) new Awards may be made with respect to these shares. Subject to adjustment
as provided in Section 14, no participant under the Plan may receive awards with
respect to shares of Common Stock that in the aggregate exceed 25,000 shares
underlying options in any calendar year.
6. ELIGIBILITY.
-----------
Executive officers and employees of the Holding Company or its Affiliates
shall be eligible to receive Incentive Options, Non-statutory Options and/or
Limited Rights under the Plan. Directors who are not employees of the Holding
Company or its Affiliates shall be eligible to receive Non-statutory Options
under the Plan.
(a) Executive Officers. Participants who are executive officers of the
Holding Company or its affiliates shall initially be classified into four
groups. At the Committee's discretion, the composition of such groups may be
changed. Initially, these four groups shall include:
Group I: The Chairman/Chief Executive Officer and President
Group II: Selected executives with company-wide responsibilities.
Initially this shall include: the Chief Financial Officer and
Senior Vice President of Loan Operations.
Group III: Selected executives with primary accountability for one or
more key functional areas. Initially this shall include:
- Senior Vice President-Operations/Information
Systems
- Senior Vice President-Retail Banking
- Senior Vice President-Residential Lending
- First Vice President and Controller
- First Vice President- Administration/Savings
- First Vice President -Investor
Relations/Taxation
- Vice President- Secondary Mortgage Marketing
- President of MAF Developments, Inc.
Group IV: Selected executives with accountability for other functional
areas. Initially this shall include:
- Vice President-Check Operations
- Vice President-Teller Operations
(b) Directors. Any non-employee director of the Holding Company who
is serving as a director on the Effective Date (as defined in section 17) shall
become a Participant in the Plan on the Effective Date. Any non-employee
director of the Holding Company who is not serving as a director on the
Effective Date shall become a Participant in the Plan on the date he is first
elected as a director of the Holding Company by
5
<PAGE>
the affirmative vote of shareholders. Notwithstanding the foregoing, former
directors of N.S. Bancorp, Inc. who serve as non-employee directors of the
Holding Company following the merger of N.S. Bancorp, Inc. with the Holding
Company, shall become Participants in the Plan on the date of the first annual
meeting of shareholders following the date of the merger.
(c) Employees other than executive officers. Employees who are not
executive officers of the Holding Company or its Affiliates will be eligible to
be a Participant in the Plan at the discretion of the Committee.
7. OPTION AWARDS.
-------------
(a) Executive Officers. Before the beginning of each fiscal year, the
Committee shall establish award opportunities for each Participant group of
executive officers. As a general guideline, award opportunities shall correspond
to the competitive market practices and the relative priority placed by the
Company on achieving annual versus long-term performance goals. The dollar value
of the initial award levels shall be:
. 25 percent of Base
Salaries for Group I
Participants;
. 20 percent of Base Salaries for Group II
Participants;
. 11 percent of Base Salaries for Group III
Participants; and
. 6 percent of Base Salaries for Group IV
Participants.
The determination of the number of options to be granted will be equivalent
to the dollar value of the Award divided by the value of the options on the Date
of Grant, determined based on an appropriate pricing model or similar
computation.
(b) Directors. Non-employee directors of the Holding Company shall receive
an initial grant of 1,000 options on the date they become a Participant in the
Plan except that in the event a non-employee director did not previously receive
a grant of options under the MAF Bancorp, Inc. Stock Option Plan for Outside
Directors he shall receive an initial grant of 2,500 options on the date he
becomes a Participant in the Plan. In each year subsequent to the year in which
a non-employee director receives an initial grant of options under the Plan in
accordance with the previous sentence, any non-employee director who is a
Participant in the Plan who is serving as a director of the Holding Company on
the Date of Grant, shall receive an annual grant of 1,000 options on the day
following the day on which the annual meeting of shareholders for such year is
formally adjourned. In the event there are not sufficient options available
under the Plan to satisfy an initial grant or annual grant of options to one or
more non-employee directors, such director or directors shall receive a grant of
such lesser number of shares as remain in the Plan, sharing pro-rata with all
such non-employee directors entitled to receive option awards.
6
<PAGE>
If, pursuant to this section, a non-employee director who is eligible
to be a Participant in the Plan receives an initial grant of options to purchase
fewer than the number of shares of Common Stock to which he is entitled pursuant
to the previous paragraph, and options for shares subsequently become available
under the Plan, such options for shares shall first be allocated as options
granted, as of the date of availability, to any non-employee director who is
eligible to be a Participant in the Plan and who has not previously been granted
an initial grant of options covering the full number of shares of Common Stock
to which he is entitled pursuant to the previous paragraph. Such options shall
be granted to purchase a number of shares of Common Stock no greater than the
number of shares covered by an initial grant of options to other non-employee
directors, but who have received an initial grant of options to purchase fewer
than the number of shares of Common Stock to which they are entitled pursuant to
the previous paragraph. Options for any remaining shares shall then be granted
pro rata among all non-employee directors who received an initial grant of
options to purchase fewer than the number of shares of Common Stock to which
they are entitled pursuant to the previous paragraph. No non-employee director
shall receive an initial grant of options to purchase more than 2,500 shares of
Common Stock. No non-employee director shall be entitled to receive an annual
grant of 1,000 options until all non-employee directors eligible to be
Participants in the Plan have received in full, an initial grant of options to
which such director is entitled pursuant to the previous paragraph.
If, after making and fully satisfying an initial grant of options to all
non-employee directors eligible to be Participants, options for sufficient
shares are not available under the Plan to fulfill the annual grant of 1,000
options to a non-employee director or directors and thereafter options become
available, such non-employee director shall then receive options to purchase
shares of Common Stock, sharing pro rata among each such non-employee director
in the number of shares then available under the Plan (not to exceed the amount
to which he is entitled under this section).
(c) Employees other than executive officers. The Committee may from time to
time, grant options to employees other than executive officers in amounts that
it, in its sole discretion, may determine.
8. NON-STATUTORY OPTIONS.
---------------------
8.1 Grant of Non-statutory Options.
------------------------------
Upon such terms and conditions as stated herein and as the Committee may
determine, the Committee may grant new Non-statutory options or may grant Non-
statutory options in exchange for and upon surrender of previously granted
Awards under this Plan. All options granted to non-employee directors
pursuant to Section 7(b) shall be Non-statutory options. Non-statutory
Options granted under this Plan are subject to the following terms and
conditions:
(a) Price. The purchase price per share of Common Stock deliverable upon
-----
the exercise of each Non-statutory Option shall be (i) 133 percent of the Fair
Market Value of the Common Stock on the Date of Grant of the option with respect
to options granted to executive officers pursuant to Section 7(a), (ii) 110% of
the Fair Market Value of the Common Stock on the Date of Grant of the option
with respect to options granted to non-employee directors pursuant to Section
7(b), and (iii) not less than 100% of the Fair Market Value of the Common Stock
on the Date of Grant of the option with respect to options granted to employees
other than executive officers pursuant to Section 7(c). Shares may be purchased
only upon full payment of the purchase price. Payment of the purchase price may
be made, in whole or in part in cash or through the surrender of shares of the
Common Stock at the Fair Market Value of such shares on the date of surrender
determined in the manner described in Section 2(j).
7
<PAGE>
(b) Terms of Options. With respect to Non-statutory Options granted to
----------------
executive officers and employees, the term during which each Non-statutory
Option may be exercised shall be determined by the Committee, but in no event
shall a Non-statutory Option be exercisable in whole or in part more than 10
years from the Date of Grant. Non-statutory Options granted to non-employee
directors shall have a term of 10 years from the date of Grant. non-statutory
Options shall become exercisable in three equal annual installments, with the
first such installment to become exercisable one year after the Date of Grant,
except that the Committee may determine otherwise the respect to Non-statutory
Options granted to executive officers and employees. The shares comprising each
installment may be purchased in whole or in part at any time after such
installment becomes purchasable. With respect to Non-statutory Options granted
to executive officers and employees, the Committee may, in its sole discretion,
accelerate the time at which any Non-statutory Option may be exercised in whole
or in part. Notwithstanding the above, in the event of a Change in Control of
the Bank or the Holding Company, all Non-statutory Options shall become
immediately exercisable.
(c) Termination of Employment. Upon the termination of a Participant's
-------------------------
service for any reason other than Disability, Normal Retirement, Change in
Control, death or Termination for Cause, the Participant's Non-statutory Options
shall be exercisable only as to those shares which were immediately purchasable
by the Participant at the date of termination and only for a period of three
months following termination. In the event of Termination for Cause, all rights
under the Participant's Non-statutory Options shall expire upon termination. In
the event of the death, Disability, Change in Control or Normal Retirement of
any Participant, all Non-statutory Options held by the Participant, whether or
not exercisable at such time, shall be exercisable by the Participant or his
legal representatives or beneficiaries of the Participant for three years
following the date of the Participant's death, Normal Retirement or cessation of
employment due to Change in Control or Disability, except that the Committee may
designate a longer period for Non-statutory Options granted to executive
officers and employees, provided that in no event shall the period extend beyond
the expiration of the Non-statutory Option term.
9. INCENTIVE OPTIONS.
-----------------
9.1 Grant of Incentive Options.
--------------------------
Incentive Options granted pursuant to the Plan shall be available to be
granted to executive officers and employees and shall be subject to the
following terms and conditions:
(a) Price. The purchase price per share of Common Stock deliverable upon
-----
the exercise of each Incentive Option shall be (i) 133 percent of the Fair
Market Value of the Common Stock on the Date of Grant of the option with respect
to options granted to executive officers pursuant to Section 7(a); and (ii) not
less than 100% of the Fair Market Value of the Common Stock on the Date of Grant
of the option with respect to options granted to employees other than executive
officers pursuant to Section 7(c). Shares may be purchased only upon payment of
the full purchase price. Payment of the purchase price may be made, in whole or
in part, in cash or through the surrender of shares of the Common Stock at the
Fair Market Value of such shares on the date of surrender determined in the
manner described in Section 2(j).
(b) Amounts of Options. Incentive Options may be granted to any
------------------
Participant (other than non-employee directors) in such amounts stated herein
and as determined by the Committee. In the case of an option intended to qualify
as an Incentive Option, the aggregate Fair Market Value (determined as of the
time the option is granted) of the Common Stock with respect to which Incentive
Options granted are
8
<PAGE>
exercisable for the first time by the Participant during any calendar year
(under all plans of the Participant's employer corporation and its parent and
subsidiary corporations) shall not exceed $100,000. The provisions of this
Section 9.1(b) shall be construed and applied in accordance with Section 422(d)
of the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations, if any, promulgated thereunder. To the extent an Award under this
Section 9.1 exceeds this $100,000 limit, the portion of the Award in excess of
such limit shall be deemed a Non-statutory Option.
9
<PAGE>
(c) Terms of Options. The term during which each Incentive Option may be
----------------
exercised shall be determined by the Committee, but in no event shall an
Incentive Option be exercisable in whole or in part more than 10 years from the
Date of Grant. If at the time an Incentive Option is granted to an executive
officer or employee, the executive officer or employee owns Common Stock
representing more than 10% of the total combined voting power of the Holding
Company (or, under Section 424(d) of the Code, is deemed to own Common
Stock representing more than 10% of the total combined voting power of all such
classes of Common Stock, by reason of the ownership of such classes of Common
Stock, directly or indirectly, by or for any brother, sister, spouse, ancestor
or lineal descendent of such executive officer, or by or for any corporation,
partnership, estate or trust of which such executive officer is a shareholder,
partner or beneficiary), the Incentive Option granted to such executive
officer shall not be exercisable after the expiration of five years from the
Date of Grant and, with respect to an employee, shall not be exercisable at a
price which is less than 110% of the fair market value of the Common Stock on
the Date of Grant. No Incentive Option granted under this Plan is transferable
except by will or the laws of descent and distribution and is exercisable in his
lifetime only by the executive officer or employee to whom it is granted.
Incentive Options shall become exercisable in three equal annual
installments with the first such installment to become exercisable one year
after the Date of Grant, unless determined otherwise by the Committee. The
shares comprising each installment may be purchased in whole or in part at any
time after such installment becomes purchasable, provided that the amount able
to be first exercised in a given year is consistent with the terms of Section
422 of the Code. The Committee may, in its sole discretion, accelerate the time
at which any Incentive Option may be exercised in whole or in part,
provided that it is consistent with the terms of Section 422 of the Code.
Notwithstanding the above, in the event of a Change in Control of the Bank or
the Holding Company, all Incentive Options shall become immediately exercisable.
(d) Termination of Employment. Upon the termination of a Participant's
-------------------------
service for any reason other than Disability, Normal Retirement, Change in
Control, death or Termination for Cause, the Participant's Incentive Options
shall be exercisable only as to those shares which were immediately purchasable
by the Participant at the date of termination and only for a period of three
months following termination. In the event of Termination for Cause all rights
under the Participant's Incentive Options shall expire upon termination.
In the event of death or Disability of any executive officer, all Incentive
Options held by such Participant, whether or not exercisable at such time,
shall be exercisable by the Participant or the Participant's legal
representatives or beneficiaries for one year following the date of the
Participant's death or cessation of employment due to Disability. Upon
termination of the Participant's service due to Normal Retirement or a Change in
Control, all Incentive Options held by such Participant, whether or not
exercisable at such time, shall be exercisable for a period of one year
following the date of Participant's cessation of employment, provided however,
that such option shall not be eligible for treatment as an Incentive Option in
the event such option is exercised more than three months following the date of
the Participant's termination of employment. In no event shall the exercise
period extend beyond the expiration of the Incentive Option term.
(e) Compliance with Code. The options granted under this Section 9
--------------------
of the Plan are intended to qualify as incentive stock options within the
meaning of Section 422 of the Code, but the Holding Company makes no warranty as
to the qualification of any option as an incentive stock option within the
meaning of Section 422 of the Code.
10
<PAGE>
10. LIMITED RIGHTS.
--------------
10.1 Grant of Limited Rights.
-----------------------
Simultaneously with the grant of any option, the Committee may grant a
Limited Right to executive officers and employees with respect to all or some of
the shares covered by such option. Limited Rights granted under this Plan are
subject to the following terms and conditions:
(a) Terms of Rights. In no event shall a Limited Right be exercisable in
---------------
whole or in part before the expiration of six months from the Date of Grant of
the Limited Right. A Limited Right may be exercised only in the event of a
Change in Control of the Holding Company.
The Limited Right may be exercised only when the underlying option is
eligible to be exercised, and only when the Fair Market Value of the underlying
shares on the day of exercise is greater than the exercise price of the related
option.
Upon exercise of a Limited Right, the related option shall cease to be
exercisable. Upon exercise or termination of an option, any related Limited
Right shall terminate. The Limited Rights may be for no more than 100% of the
difference between the exercise price and the Fair Market Value of the Common
Stock subject to the underlying option. The Limited Right is transferable only
when the underlying option is transferable and under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the Participant
-------
shall promptly receive from the Holding Company an amount of cash equal to the
difference between the exercise price per share on the Date of Grant of the
related option and the Fair Market Value of the underlying shares on the date
the Limited Right is exercised, multiplied by the number of shares with respect
to which such Limited Right is being exercised.
(c) Termination of Employment. Upon the termination of a Participant's
-------------------------
service for any reason other than Termination for Cause, any Limited Rights held
by the Participant shall then be exercisable for a period of one year following
termination. In the event of Termination for Cause, all Limited Rights held by
the Participant shall expire immediately. Upon termination of the Participant's
employment for reason of death, Normal Retirement or Disability, all Limited
Rights held by such Participant shall be exercisable by the Participant or the
Participant's legal representative or beneficiaries for a period of one year
from the date of such termination. In no event shall the period extend beyond
the expiration of the term of the related option.
11. RIGHTS OF A SHAREHOLDER; NONTRANSFERABILITY.
-------------------------------------------
No Participant shall have any rights as a shareholder with respect to any
shares covered by a Non-statutory and/or Incentive Option until the date of
issuance of a stock certificate for such shares. Nothing in this Plan or in any
Award granted confers on any person any right to continue in the employ of the
Holding Company or its Affiliates or to continue to perform services for the
Holding Company or its Affiliates or interferes in any way with the right of the
Holding Company or its Affiliates to terminate a Participant's services as a
director, executive officer or employee at any time.
11
<PAGE>
No Award under the Plan shall be transferable by the optionee other than by
will or the laws of descent and distribution and may only be exercised during
his lifetime by the optionee, or by a guardian or legal representative.
12. AGREEMENT WITH GRANTEES.
-----------------------
Each Award of Options, and/or Limited Rights will be evidenced by a written
agreement, executed by the Participant and the Holding Company or its Affiliates
which describes the conditions for receiving the Awards including the date of
Award, the purchase price if any, applicable periods, and any other terms and
conditions as may be required by the Board of Directors or applicable securities
law.
13. DESIGNATION OF BENEFICIARY.
--------------------------
A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any stock option or Limited Rights
Award to which the Participant would then be entitled. Such designation will be
made upon forms supplied by and delivered to the Holding Company and may be
revoked in writing. If a Participant fails effectively to designate a
beneficiary, then the Participant's estate will be deemed to be the beneficiary.
14. DILUTION AND OTHER ADJUSTMENTS.
------------------------------
In the event of any change in the outstanding shares of Common Stock of the
Holding Company by reason of any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or exchange of
shares, or other similar corporate change, or other increase or decrease in such
shares effected without receipt or payment of consideration by the Holding
Company, the Committee will make such adjustments to previously granted Awards,
to prevent dilution or enlargement of the rights of the Participant, including
any or all of the following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
which may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
covered by Awards already made under the Plan;
(c) adjustments in the maximum number of shares of Common Stock which may
be awarded under the Plan to a Participant in any one calendar year;
or
(d) adjustments in the purchase price of outstanding Incentive and/or Non-
statutory Options, or any Limited Rights attached to such options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award.
15. TAX WITHHOLDING.
---------------
There shall be deducted from each distribution of cash and/or Common Stock
under the Plan the amount required by any governmental authority to be withheld
for income tax purposes.
12
<PAGE>
16. AMENDMENT OF THE PLAN.
---------------------
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect; provided, however, that Sections 8.1, 9.1 and
-------- -------
10.1 governing grants of options and Limited Rights shall not be amended more
than once every six months other than to comport with the Internal Revenue Code
or the Employee Retirement Income Security Act of 1974, as amended; provided
further that if it has been determined to continue to qualify the Plan under the
Securities and Exchange Commission Rule 16b-3, shareholders' approval shall be
required for any such modification or amendment which:
(a) increases the maximum number of shares for which options may be
granted under the Plan (subject, however, to the provisions of Section
14 hereof);
(b) reduces the exercise price at which Awards may be granted (subject,
however, to the provisions of Section 14 hereof):
(c) extends the period during which options may be granted or exercised
beyond the times originally prescribed; or
(d) changes the persons eligible to participate in the Plan.
Failure to ratify or approve amendments or modifications to subsections (a)
through (d) of this Section by shareholders shall be effective only as to the
specific amendment or modification requiring such ratification. Other
provisions, sections, and subsections of this Plan will remain in full force and
effect.
No such termination, modification or amendment may affect the rights of a
Participant under an outstanding Award.
17. EFFECTIVE DATE OF PLAN.
----------------------
The Plan, as amended, shall become effective on the date of the 1995 Annual
Meeting of Shareholders, October 25, 1995 (the "Effective Date"). The Plan shall
be presented to shareholders of the Holding Company for ratification for
purposes of: (i) obtaining favorable treatment under Section 16(b) of the
Securities Exchange Act of 1934; (ii) satisfying one of the requirements of
Section 422 of the Code governing the tax treatment for Incentive Options; and
(iii) maintaining listing on the Nasdaq National Market. The failure to obtain
shareholder ratification will result in termination of the amended Plan by the
Board. In such a case, the Plan approved by shareholders on October 27, 1993
shall remain effective and all awards previously granted under this Plan shall
remain effective for all purposes.
18. TERMINATION OF THE PLAN.
-----------------------
The right to grant Awards under the Plan will terminate upon the earlier of
(a) failure to obtain shareholder approval (in which case, the plan approved by
shareholders on October 27, 1993 shall remain effective); (b) ten (10) years
after the Effective Date of the Plan; or (c) the issuance of Common Stock or the
exercise of options or related Limited Rights equivalent to the maximum number
of shares reserved under the Plan as set forth in Section 5. The Board of
Directors has the right to suspend or terminate the Plan at any time, provided
that no such action will, without the consent of a Participant, adversely affect
his rights under a previously granted Award.
13
<PAGE>
19. APPLICABLE LAW.
--------------
The Plan will be administered in accordance with the laws of the State of
Delaware.
20. COMPLIANCE WITH SECTION 16.
--------------------------
If this Plan is qualified under 17 C.F.R. (S) 240.16b-3 of the Exchange Act
Rules, with respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the
extent any provisions of the Plan or action by the Committee fail to so comply,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
<PAGE>
Exhibit 10(Vii) Credit Agreement Dated As Of May 22, 1996, As Amended,
Between MAF Bancorp, Inc. And Harris Trust And Savings Bank
<PAGE>
First Amendment To Credit Agreement
Harris Trust and Savings Bank
Chicago, Illinois
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of May
22, 1996 (the "Credit Agreement"), between the undersigned, MAF Bancorp, Inc., a
Delaware corporation (the "Company") and you (the "Lender"). All capitalized
terms used herein without definition shall have the same meanings herein as such
terms have in the Credit Agreement.
The Company has requested that the Term Loan to be made to the Company
under the Term Loan Commitment be in the amount of $35,000,000 and, as a result
thereof, has requested that the Lender increase its Revolving Credit Commitment
from $10,000,000 to $15,000,000, and the Lender is willing to do so under the
terms and conditions set forth in this Amendment.
1. Amendments.
Upon your acceptance hereof in the space provided for that purpose below,
the Credit Agreement shall be and hereby is amended as follows:
(a) The definition of "Revolving Credit Commitment" appearing in Section
4.1 of the Credit Agreement shall be amended by deleting the amount "10,000,000"
appearing therein and inserting the amount "$15,000,000" in lieu thereof.
(b) Exhibit A to the Credit Agreement shall be amended in its entirety,
and as amended shall be restated to read as set forth on Exhibit A attached
hereto.
2. Conditions Precedent.
<PAGE>
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
(a) The Company and the Lender shall have executed and delivered
this Amendment, and the Company shall have executed and delivered to the
Lender a replacement Revolving Credit Note in the form attached hereto as
Exhibit A.
(b) Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Lender and its counsel.
3. MISCELLANEOUS.
(a) Except as specifically amended herein, the Credit Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement,
the Notes, or any other instrument or document executed in connection therewith,
or in any certificate, letter or communication issued or made pursuant to or
with respect to the Credit Agreement, any reference in any of such items to the
Credit Agreement being sufficient to refer to the Credit Agreement as amended
hereby.
(b) This Amendment may be executed in any number of counterparts, and by
the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.
Dated as of June 3, 1996.
MAF Bancorp, Inc.
By /s/ Jerry Weberling
--------------------------------------------
-3-
<PAGE>
-----------------------------------------------
Its Executive Vice President and
CFO
-----------------------------------------------
Accepted and agreed to in Chicago, Illinois as of
the date and year last above written.
HARRIS TRUST AND SAVINGS BANK
By /s/ Richard Loncar
--------------------------------------------
Its Vice President
-4-
<PAGE>
Exhibit A
MAF Bancorp, Inc.
Revolving Credit Note
Chicago, Illinois
$15,000,000 June 3, 1996
On the Revolving Credit Termination Date, for value received, the
undersigned, MAF BANCORP, INC., a Delaware corporation (the "Company"), hereby
promises to pay to the order of HARRIS TRUST AND SAVING BANK (the "Lender"), at
the principal office of the Lender in Chicago, Illinois, the principal sum of
(I) Fifteen Million and no/100 Dollars ($15,000,000), or (ii) such lesser amount
as may at the time of the maturity hereof, whether by acceleration or otherwise,
be the aggregate unpaid principal amount of all Revolving Credit Loans owing
from the Company to the Lender under the Revolving Credit provided for in the
Credit Agreement hereinafter mentioned.
This Note is issued in substitution and replacement for, and evidences
the indebtedness evidenced by, the Revolving Credit Note of the Company dated
May 22, 1996, and, in addition, evidences additional loans constituting part of
a "Domestic Rate Portion" and "LIBOR Portions" as such terms are defined in that
certain Credit Agreement dated as of May 22, 1996, between the Company and the
Lender (said Credit Agreement, as the same may be amended, modified or restated
from time to time, being referred to herein as the "Credit Agreement") made and
to be made to the Company by the Lender under the Revolving Credit provided for
under the Credit Agreement, and the Company hereby promises to pay interest at
the office described above on each loan evidenced hereby at the rates and at the
times and in the manner specified therefor in the Credit Agreement.
Each loan made under the Revolving Credit against this Note, any
repayment of principal hereon, the status of each such loan from time to time as
part of the Domestic Rate Portion or a LIBOR
-5-
<PAGE>
Portion and, in the case of any LIBOR Portion, the interest rate and Interest
Period applicable thereto shall be endorsed by the holder hereof on a schedule
to this Note or recorded on the books and records of the holder hereof (provided
that such entries shall be endorsed on a schedule to this Note prior to any
negotiation hereof). The Company agrees that in any action or proceeding
instituted to collect or enforce collection of this Note, the entries so
endorsed on a schedule to this Note or recorded on the books and records of the
holder hereof shall be prima facie evidence (absent manifest error) of the
unpaid principal balance of this Note, the status of each such loan from time to
time as part of the Domestic Rate Portion or a LIBOR Portion, and, in the case
of any LIBOR Portion, the interest rate and Interest Period applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary prepayments
may be made hereon, and certain prepayments are required to be made hereon, all
in the events, on the terms and with the effects provided in the Credit
Agreement. All capitalized terms used herein without definition shall have the
same meanings herein as such terms are defined in the Credit Agreement.
The Company hereby promises to pay all costs and expenses (including
attorneys' fees) suffered or incurred by the holder hereof in collecting this
Note or enforcing any rights in any collateral therefor. The Company hereby
waives presentment for payment and demand. THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
MAF BANCORP, INC.
-6-
<PAGE>
By
-------------------------------------------
,
---------------------
--------------
(Print or Type Name) (Title)
-7-
<PAGE>
===============================================================================
CREDIT AGREEMENT
DATED AS OF MAY 22, 1996,
BETWEEN
MAF BANCORP, INC.
AND
HARRIS TRUST AND SAVINGS BANK
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION DESCRIPTION Page
<S> <C> <C>
SECTION 1. THE CREDITS...................................... 1
Section 1.1. Revolving Credit................................ 1
Section 1.2. Revolving Credit Loans.......................... 1
Section 1.3. Letters of Credit............................... 2
Section 1.4. Term Credit..................................... 4
Section 1.5. Manner and Disbursement of Loans................ 5
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES............. 6
Section 2.1. Interest Rate Options........................... 6
Section 2.2. Minimum Fixed Rate Portions..................... 7
Section 2.3. Computation of Interest......................... 7
Section 2.4. Manner of Rate Selection........................ 7
Section 2.5. Change of Law................................... 8
Section 2.6. Unavailability of Deposits or Inability to
Ascertain Adjusted LIBOR........................ 8
Section 2.7. Taxes and Increased Costs....................... 8
Section 2.8. Funding Indemnity............................... 9
Section 2.9. Treasury Rate Portion Prepayment Fee............ 10
Section 2.10. Lending Branch.................................. 11
Section 2.11. Discretion of Lender as to Manner of Funding.... 11
SECTION 3. FEES, PREPAYMENTS, TERMINATIONS, AND
APPLICATIONS..................................... 11
Section 3.1. Fees............................................ 11
Section 3.2. Voluntary Prepayments........................... 12
Section 3.3. Mandatory Termination........................... 12
Section 3.4. Voluntary Terminations.......................... 13
Section 3.5. Place and Application of Payments............... 13
Section 3.6. Notations....................................... 13
SECTION 4. DEFINITIONS; INTERPRETATION...................... 14
Section 4.1. Definitions..................................... 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.2. Interpretation.................................. 21
Section 5. REPRESENTATIONS AND WARRANTIES.................. 21
Section 5.1. Organization and Qualification.................. 21
Section 5.2. Subsidiaries.................................... 22
Section 5.3. Corporate Authority and Validity of
Obligations..................................... 22
Section 5.4. Use of Proceeds; Margin Stock................... 23
Section 5.5. Financial Reports............................... 23
Section 5.6. No Material Adverse Change...................... 24
Section 5.7. Full Disclosure................................. 24
Section 5.8. Good Title...................................... 24
Section 5.9. Litigation and Other Controversies.............. 24
Section 5.10. Taxes........................................... 24
Section 5.11. Approvals....................................... 24
Section 5.12. Affiliate Transactions.......................... 25
Section 5.13. Investment Company; Public Utility Holding
Company......................................... 25
Section 5.14. ERISA........................................... 25
Section 5.15. Compliance with Laws............................ 25
Section 5.16. Other Agreements................................ 26
Section 5.17. Merger.......................................... 26
Section 5.18. No Default...................................... 26
Section 6. CONDITIONS AND PRECEDENTS....................... 26
Section 6.1. All Advances.................................... 26
Section 6.2. Initial Advance................................. 27
Section 7. COVENANTS........................................ 29
Section 7.1. Maintenance of Business......................... 29
Section 7.2. Maintenance of Properties....................... 29
Section 7.3. Taxes and Assessments........................... 30
Section 7.4. Insurance....................................... 30
Section 7.5. Financial Reports............................... 30
Section 7.6. Inspection...................................... 32
Section 7.7. Non-Performing Assets........................... 32
Section 7.8. Regulatory Capital Requirements................. 32
Section 7.9. Tangible Capital Ratio.......................... 33
Section 7.10. Adjusted Net Worth.............................. 33
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 7.11. Adjusted Net Income............................. 33
Section 7.12. Indebtedness for Borrowed Money................. 33
Section 7.13. Liens........................................... 34
Section 7.14. Mergers and Consolidations...................... 34
Section 7.15. Maintenance of Subsidiaries..................... 34
Section 7.16. Dividends and Certain Other Restricted
Payments........................................ 34
Section 7.17. Subordinated Debt............................... 35
Section 7.18. ERISA........................................... 35
Section 7.19. Compliance with Laws............................ 35
Section 7.20. Burdensome Contracts With Affiliates............ 35
Section 7.21. Change in the Nature of Business................ 35
Section 7.22. Regulatory-Mandated Disposition of MAF.......... 35
Developments.................................... 35
Section 8. EVENTS OF DEFAULT AND REMEDIES................... 36
Section 8.1. Events of Default............................... 36
Section 8.2. Non-Bankruptcy Defaults......................... 38
Section 8.3. Bankruptcy Defaults............................. 38
Section 8.4. Collateral for Undrawn Letters of Credit........ 39
Section 9. MISCELANEOUS..................................... 39
Section 9.1. Non-Business Days............................... 39
Section 9.2. No Waiver, Cumulative Remedies.................. 39
Section 9.3. Amendments...................................... 40
Section 9.4. Costs and Expenses.............................. 40
Section 9.5. Documentary Taxes............................... 40
Section 9.6. Survival of Representations..................... 40
Section 9.7. Participations.................................. 40
Section 9.8. Notices......................................... 41
Section 9.9. Confidentiality................................. 41
Section 9.10. Headings........................................ 42
Section 9.11. Severability of Provisions...................... 42
Section 9.12. Counterparts.................................... 42
Section 9.13. Entire Understanding............................ 42
Section 9.14. Binding Nature, Governing Law, Etc.............. 42
Section 9.15. Submission to Jurisdiction; Waiver of Jury...... 42
Trial........................................... 43
</TABLE>
-11-
<PAGE>
Signature ....................................................
Exhibit A - Revolving Credit Note
Exhibit B - Term Note
Exhibit C - Compliance Certificate
Exhibit D-1 - Opinion of Counsel
Exhibit D-2 - Opinion of Company Counsel/Merger
Schedule 5.2 - Subsidiaries
Schedule 7.12 - Existing Indebtedness
-12-
<PAGE>
Credit Agreement
Harris Trust and Savings Bank
Chicago, Illinois
Ladies and Gentlemen:
The undersigned, MAF Bancorp, Inc., a Delaware corporation (the "Company"),
applies to you (the "Lender") for your commitment, subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, to extend credit to the Company, all as more fully
hereinafter set forth.
Section 1. The Credits.
Section 1.1. Revolving Credit. Subject to the terms and conditions
hereof, the Lender agrees to extend a revolving credit (the "Revolving Credit")
to the Company which may be availed of by the Company from time to time during
the period from and including the date hereof to but not including the Revolving
Credit Termination Date, at which time the commitment of the Lender to extend
credit under the Revolving Credit shall expire. The Revolving Credit may be
utilized by the Company in the form of Revolving Credit Loans and Letters of
Credit, all as more fully hereinafter set forth, provided that the aggregate
principal amount of Revolving Credit Loans and Letters of Credit outstanding at
any one time shall not exceed the Revolving Credit Commitment. During the
period from and including the date hereof to but not including the Revolving
Credit Termination Date, the Company may use the Revolving Credit Commitment by
borrowing, repaying and reborrowing Revolving Credit Loans in whole or in part
and/or by having the Lender issue Letters of Credit, having such Letters of
Credit expire or otherwise terminate without having been drawn upon or, if drawn
upon, reimbursing the Lender for each such drawing, and having the Lender issue
new Letters of Credit, all in accordance with the terms and conditions of this
Agreement. For purposes of this Agreement, where a determination of the unused
or available
-13-
<PAGE>
amount of the Revolving Credit Commitment is necessary, the Revolving Credit
Loans and Letters of Credit shall be deemed to utilize the Revolving Credit
Commitment in an amount equal to the outstanding principal amounts thereof.
Section 1.2. Revolving Credit Loans. Subject to the terms and
conditions hereof, the Revolving Credit may be availed of by the Company in the
form of loans (individually a "Revolving Credit Loan" and collectively the
"Revolving Credit Loans"). Each Revolving Credit Loan shall be in an amount of
$500,000 or such greater amount which is an integral multiple of $100,000;
provided, however, that a Revolving Credit Loan, or part thereof, which bears
interest with reference to the Adjusted LIBOR shall be in such greater amount as
is required by Section 2.2 hereof. All Revolving Credit Loans made by the
Lender shall be made against and evidenced by a single Revolving Credit Note of
the Company (the "Revolving Credit Note") payable to the order of the Lender in
the amount of its Revolving Credit Commitment, with the Revolving Credit Note to
be in the form (with appropriate insertions) attached hereto as Exhibit A. The
Revolving Credit Note shall be dated the date of issuance thereof, be expressed
to bear interest as set forth in Section 2 hereof, and be expressed to mature on
the Revolving Credit Termination Date. Without regard to the principal amount
of the Revolving Credit Note stated on its face, the actual principal amount at
any time outstanding and owing by the Company on account thereof shall be the
sum of all advances then or theretofore made thereon less all payments of
principal actually received.
Section 1.3. Letters of Credit.
(a) General Terms. Subject to the terms and conditions hereof, the
Revolving Credit may be availed of by the Company in the form of standby letters
of credit issued by the Lender for the account of the Company or, at the
Company's option, for the account of the Company and MAF Developments, jointly
and severally (individually a "Letter of Credit" and collectively the "Letters
of Credit"), provided that the aggregate amount of Letters of Credit issued and
outstanding hereunder shall not at
-14-
<PAGE>
any time exceed $10,000,000. For purposes of this Agreement, a Letter of Credit
shall be deemed outstanding as of any time in an amount equal to the maximum
amount which could be drawn thereunder under any circumstances and over any
period of time plus any unreimbursed drawings then outstanding with respect
thereto. If and to the extent any Letter of Credit expires or otherwise
terminates without having been drawn upon, the availability under the Revolving
Credit Commitment shall to such extent be reinstated.
(b) Term. Each Letter of Credit issued hereunder shall expire not
later than 18 months from the date of issuance (or be cancelable not later than
18 months from the date of issuance and each renewal); provided, however, that
for any Letter of Credit with an expiry date extending beyond the Revolving
Credit Termination Date, the Company hereby agrees to (i) deposit cash with the
Lender on or before the Revolving Credit Termination Date in an amount equal to
the aggregate amount of such Letter of Credit or (ii) deposit with the Lender on
or before the Revolving Credit Termination Date investments in direct
obligations of the United States of America or of any agency or instrumentality
thereof whose obligations constitute full faith and credit obligations of the
United States of America in amounts and with such maturities as are acceptable
to the Lender, in each case to be held by the Lender in the Account referred to
in Section 8.4 hereof as collateral security for any and all Obligations
pursuant to the terms of Section 8.4 hereof, provided that if the amount of any
such Letter of Credit is thereafter reduced, and so long as no Default or Event
of Default has occurred and is continuing, at the request of the Company, the
Lender will immediately return any cash or investments in the Account, and any
proceeds or earnings on such cash and investments, in excess of the remaining
amount of such Letter of Credit.
(c) General Characteristics. Each Letter of Credit issued hereunder
shall be payable in U.S. Dollars, conform to the general requirements of the
Lender for the issuance of standby letters of credit as to form and substance,
and be a letter of credit which the Lender may lawfully issue.
-15-
<PAGE>
(d) Applications. At the time the Company requests each Letter of
Credit to be issued (or prior to the first issuance of a Letter of Credit in the
case of a continuing application), the Company shall execute and deliver to the
Lender an application for such Letter of Credit in the form then customarily
prescribed by the Lender (individually an "Application" and collectively the
"Applications"). Subject to the other provisions of this subsection, the
obligation of the Company to reimburse the Lender for drawings under a Letter of
Credit shall be governed by the Application for such Letter of Credit. Anything
contained in the Applications to the contrary notwithstanding, (i) in the event
the Lender is not reimbursed by the Company for the amount the Lender pays on
any draft drawn under a Letter of Credit issued hereunder by 2:00 p.m. (Chicago
time) on the date when such drawing is paid, the obligation of the Company to
reimburse the Lender for the amount of such draft paid shall bear interest
(which the Company hereby promises to pay on demand) from and after the date the
draft is paid until payment in full thereof at a fluctuating rate per annum
determined by adding 2% to the Domestic Rate as from time to time in effect
(computed on the basis of a year of 360 days for the actual number of days
elapsed), (ii) the Company shall pay fees in connection with each Letter of
Credit as set forth in Section 3 hereof, (iii) except during the existence of a
Default or an Event of Default, the Lender will not call for additional
collateral security for the obligations of the Company under the Applications
except as otherwise provided in Section 1.3(b) hereof, and (iv) except during
the existence of a Default or an Event of Default, the Lender will not call for
the funding of a Letter of Credit by the Company prior to being presented with a
draft drawn thereunder (or, in the event the draft is a time draft, prior to its
due date) except as otherwise provided in Section 1.3(b) hereof.
(e) Change in Laws. If the Lender shall determine that any change in
any applicable law, regulation or guideline (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law, regulation or guideline, or any interpretation of any of the foregoing by
any governmental authority charged with the administration thereof or any
central bank or other fiscal, monetary or other authority having
-16-
<PAGE>
jurisdiction over the Lender (whether or not having the force of law), shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against the Letters of Credit, or the
Lender's or the Company's liability with respect thereto; or
(ii) impose on the Lender any penalty with respect to the
foregoing or any other condition regarding this Agreement, the
Applications or the Letters of Credit;
and the Lender shall determine that the result of any of the foregoing is to
increase the cost (whether by incurring a cost or adding to a cost) to the
Lender of issuing or maintaining the Letters of Credit hereunder (without
benefit of, or credit for, any prorations, exemptions, credits or other offsets
available under any such laws, regulations, guidelines or interpretations
thereof), then the Company shall pay on demand to the Lender from time to time
as specified by the Lender such additional amounts as the Lender shall determine
are sufficient to compensate and indemnify it for such increased cost. If the
Lender makes such a claim for compensation, it shall provide the Company a
certificate setting forth the computation of the increased cost as a result of
any event mentioned herein in reasonable detail and such certificate shall be
conclusive if reasonably determined (absent manifest error).
Section 1.4. Term Credit. Subject to the terms and conditions hereof,
the Lender agrees to make a loan (the "Term Loan") to the Company in an amount
up to the Lender's Term Loan Commitment. There shall be a single borrowing under
the Term Loan Commitment which shall be made, if at all, on or before August 31,
1996, at which time the commitment of the Lender to make a Term Loan under the
Term Loan Commitment shall expire. There shall be one borrowing under the Term
Loan Commitment, and any portion of the Term Loan Commitment not requested by
the Company on the occasion of such borrowing shall thereupon expire. The Term
Loan made by the Lender to the Company shall be evidenced by a Term Note of the
Company (the "Term Note")
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<PAGE>
payable to the order of the Lender in the amount of its Term Loan Commitment,
with the Term Note to be in the form (with appropriate insertions) attached
hereto as Exhibit B. The Term Note shall be dated the date of issuance thereof
and be expressed to bear interest as set forth in Section 2 hereof. The Company
hereby promises to make principal payments on the Term Note in installments on
the dates set forth in column A below each in an amount equal to the amount set
forth in column B below opposite the relevant due date:
If the original principal amount of the Term Loan is $30,000,000, or less,
then principal payments on the Term Note shall be as follows:
<TABLE>
<CAPTION>
A B
Scheduled Principal Payment
Payment Date on Term Note
<S> <C>
12/31/1997 $ 500,000
12/31/1998 $1,500,000
12/31/1999 $2,600,000
12/31/2000 $3,800,000
12/31/2001 $6,000,000
12/31/2002 $7,800,000
12/31/2003 remaining principal balance of Term Loan
</TABLE>
If the original principal amount of the Term Loan is more than $30,000,000, but
less than or equal to $35,000,000, then principal payments on the Term Note
shall be as follows:
<TABLE>
<CAPTION>
A B
Scheduled Principal Payment
Payment Date on Term Note
<S> <C>
12/31/1997 $ 500,000
12/31/1998 $1,500,000
12/31/1999 $3,100,000
12/31/2000 $4,500,000
12/31/2001 $7,000,000
</TABLE>
-18-
<PAGE>
<TABLE>
<S> <C>
12/31/2002 $9,200,000
12/31/2003 remaining principal balance of Term Loan
</TABLE>
If the original principal amount of the Term Loan is more than $35,000,000, but
less than or equal to $40,000,000, then principal payments on the Term Note
shall be as follows:
<TABLE>
<CAPTION>
A B
Scheduled Principal Payment
Payment Date on Term Note
<S> <C>
12/31/1997 $ 500,000
12/31/1998 $ 1,500,000
12/31/1999 $ 3,500,000
12/31/2000 $ 5,500,000
12/31/2001 $ 8,000,000
12/31/2002 $10,500,000
12/31/2003 remaining principal balance of Term Loan
</TABLE>
Section 1.5. Manner and Disbursement of Loans. The Company shall give
written or telephonic notice to the Lender (which notice shall be irrevocable
once given) by no later than 11:00 a.m. (Chicago time) on the date the Company
requests that any Loan be made to it under the Commitments. Each such notice
shall specify the date of the Loan requested (which must be a Business Day), the
type of Loan being requested, and the amount thereof. Each Loan shall initially
constitute part of the applicable Domestic Rate Portion except to the extent the
Company has otherwise timely elected that such Loan, or any part thereof,
constitute part of a Fixed Rate Portion as provided in Section 2 hereof. The
Company agrees that the Lender may rely upon any written or telephonic notice
given by any person the Lender in good faith believes is an Authorized
Representative without the necessity of independent investigation and, in the
event any telephonic notice conflicts with any written confirmation, such
telephonic notice shall govern if the Lender has acted in reliance thereon.
Subject to the provisions of Section 6 hereof, the proceeds of each Loan shall
be made
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<PAGE>
available to the Company at the principal office of the Lender in Chicago,
Illinois, in immediately available funds.
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES.
Section 2.1. Interest Rate Options.
(a) Portions. Subject to the terms and conditions of this Section 2,
portions of the principal indebtedness evidenced by the Notes (all of the
indebtedness evidenced by Notes of the same type bearing interest at the same
rate for the same period of time being hereinafter referred to as a "Portion")
may, at the option of the Company, bear interest with reference to the Domestic
Rate ("Domestic Rate Portions") or with reference to the Adjusted LIBOR ("LIBOR
Portions") or, with respect to indebtedness evidenced by the Term Note, with
reference to the Treasury Rate ("Treasury Rate Portions"). Subject to the terms
and conditions of this Section 2, the Domestic Rate Portion or LIBOR Portions of
Notes of the same type may be converted from time to time from one basis to the
other, and, with reference to the indebtedness evidenced by the Term Note, the
Domestic Rate Portion and any LIBOR Portions thereof may be converted from time
to time during the term of this Agreement into one or more Treasury Rate
Portions. Once a Treasury Rate Portion is selected with respect to all or any
part of the indebtedness evidenced by the Term Note, such Portion shall remain a
Treasury Rate Portion hereunder until paid in full. All of the indebtedness
evidenced by a Note which is not part of a LIBOR Portion or, with reference to
the Term Note, a Treasury Rate Portion shall constitute a single Domestic Rate
Portion applicable to such Note. All of the indebtedness evidenced by a Note
which bears interest with reference to a particular Adjusted LIBOR for a
particular Interest Period shall constitute a single LIBOR Portion applicable to
such Note. There shall not be more than five LIBOR Portions applicable to the
Revolving Credit Note outstanding at any one time. There shall be not more than
seven Fixed Rate Portions applicable to the Term Note outstanding at any one
time, and there shall not be more than five Treasury Rate Portions applicable to
the Term Note during the term of this Agreement. Anything contained herein to
the contrary notwithstanding, the
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<PAGE>
obligation of the Lender to create, continue or effect by conversion any Fixed
Rate Portion shall be conditioned upon the fact that at the time no Default or
Event of Default shall have occurred and be continuing. The Company hereby
promises to pay interest on each Portion at the rates and times specified in
this Section 2.
(b) Domestic Rate Portion. Each Domestic Rate Portion shall bear
interest at the rate per annum determined equal to the Domestic Rate as in
effect from time to time, provided that if a Domestic Rate Portion or any part
thereof is not paid when due (whether by lapse of time, acceleration or
otherwise) such Portion shall bear interest, whether before or after judgment,
until payment in full of the amount then due at the rate per annum determined by
adding 2% to the interest rate which would otherwise be applicable thereto from
time to time. Interest on each Domestic Rate Portion shall be payable quarterly
in arrears on the last day of each March, June, September and December in each
year (commencing September 30, 1996) and at maturity of the applicable Note, and
interest after maturity (whether by lapse of time, acceleration or otherwise)
shall be due and payable upon demand. Any change in the interest rate on the
Domestic Rate Portions resulting from a change in the Domestic Rate shall be
effective on the date of the relevant change in the Domestic Rate.
(c) LIBOR Portions. Each LIBOR Portion shall bear interest for each
Interest Period selected therefor at a rate per annum determined by adding 1% to
the Adjusted LIBOR for such Interest Period, provided that if any LIBOR Portion
is not paid when due (whether by lapse of time, acceleration or otherwise) such
Portion shall bear interest, whether before or after judgment, until payment in
full of the amount then due through the end of the Interest Period then
applicable thereto at the rate per annum determined by adding 2% to the interest
rate which would otherwise be applicable thereto, and effective at the end of
such Interest Period such LIBOR Portion shall automatically be converted into
and added to the applicable Domestic Rate Portion and shall thereafter bear
interest at the interest rate applicable to such Domestic Rate Portion.
-21-
<PAGE>
Interest on each LIBOR Portion shall be due and payable on the last day of each
Interest Period applicable thereto, and interest after maturity (whether by
lapse of time, acceleration or otherwise) shall be due and payable upon demand.
The Company shall notify the Lender on or before 11:00 a.m. (Chicago time) on
the third Business Day preceding the end of an Interest Period applicable to a
LIBOR Portion whether such LIBOR Portion is to continue as a LIBOR Portion, in
which event the Company shall notify the Lender of the new Interest Period
selected therefor, and in the event the Company shall fail to so notify the
Lender, such LIBOR Portion shall automatically be converted into and added to
the applicable Domestic Rate Portion as of and on the last day of such Interest
Period.
(d) Treasury Rate Portion. Each Treasury Rate Portion of the Term
Note shall bear interest at a fixed rate per annum determined by adding 1-1/4%
to the Treasury Rate determined with respect to such Portion, provided that if
any Treasury Rate Portion, or any part thereof, is not paid when due (whether by
lapse of time, acceleration or otherwise), such Portion shall bear interest,
whether before or after judgment, until payment in full of the amount then due
at the rate per annum determined by adding 2% to the interest rate which would
otherwise be applicable thereto. Interest on each Treasury Rate Portion of the
Term Note shall be payable quarterly in arrears on the last day of each March,
June, September and December in each year (commencing on the first such date
occurring after such Treasury Rate Portion is selected by the Company pursuant
to Section 2.4 hereof) and at maturity of the Term Note, and interest after
maturity (whether by lapse of time, acceleration or otherwise) shall be due and
payable upon demand.
Section 2.2. Minimum Fixed Rate Portions. Each LIBOR Portion applicable
to the Revolving Credit Note shall be in an amount equal to $1,000,000 or such
greater amount which is an integral multiple of $1,000,000, and each Fixed Rate
Portion applicable to the Term Note shall be in an amount equal to $5,000,000 or
such greater amount which is an integral multiple of $1,000,000.
-22-
<PAGE>
Section 2.3. Computation of Interest. All interest on the Notes shall be
computed on the basis of a year of 360 days for the actual number of days
elapsed.
Section 2.4. Manner of Rate Selection. The Company shall notify the
Lender by 11:00 a.m. (Chicago time) at least three Business Days prior to the
date upon which the Company requests that (i) any LIBOR Portion be created or
that any part of the applicable Domestic Rate Portion be converted into a LIBOR
Portion and (ii) any Treasury Rate Portion be created or that any part of the
Domestic Rate Portion or any part of a LIBOR Portion applicable to the Term Note
be converted into a Treasury Rate Portion (each such notice to specify in each
instance the amount thereof and the Interest Period selected therefor). If any
request is made to convert a LIBOR Portion into another type of Portion
available hereunder, such conversion shall only be made so as to become
effective as of the last day of the Interest Period applicable thereto. All
requests for the creation, continuance and conversion of Portions under this
Agreement shall be irrevocable. Such requests may be written or oral and the
Lender is hereby authorized to honor telephonic requests for creations,
continuances and conversions received by it from any person the Lender in good
faith believes to be an Authorized Representative without the necessity of
independent investigation, the Company hereby indemnifying the Lender from any
liability or loss ensuing from so acting.
Section 2.5. Change of Law. Notwithstanding any other provisions of
this Agreement or any Note, if at any time the Lender shall determine that any
change in applicable laws, treaties or regulations or in the interpretation
thereof makes it unlawful for the Lender to create or continue to maintain any
LIBOR Portion, it shall promptly so notify the Company and the obligation of the
Lender to create, continue or maintain any such LIBOR Portion under this
Agreement shall terminate until it is no longer unlawful for the Lender to
create, continue or maintain such LIBOR Portion. The Company, on demand, shall,
if the continued maintenance of any such LIBOR Portion is unlawful, thereupon
prepay the outstanding principal amount of the affected LIBOR Portion, together
with all interest accrued
-23-
<PAGE>
thereon and all other amounts payable to the Lender with respect thereto under
this Agreement; provided, however, that the Company may elect to convert the
principal amount of the affected LIBOR Portion into another type of Portion
available hereunder, subject to the terms and conditions of this Agreement.
Section 2.6. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR. Notwithstanding any other provision of this Agreement or any
Note, if prior to the commencement of any Interest Period, the Lender shall
determine that deposits in the amount of any LIBOR Portion scheduled to be
outstanding during such Interest Period are not readily available to the Lender
in the relevant market or, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining Adjusted
LIBOR, then the Lender shall promptly give notice thereof to the Company and the
obligation of the Lender to create, continue or effect by conversion any such
LIBOR Portion in such amount and for such Interest Period shall terminate until
deposits in such amount and for the Interest Period selected by the Company
shall again be readily available in the relevant market and adequate and
reasonable means exist for ascertaining Adjusted LIBOR.
Section 2.7. Taxes and Increased Costs. With respect to any LIBOR
Portion, if the Lender shall determine that any change in any applicable law,
treaty, regulation or guideline (including, without limitation, Regulation D of
the Board of Governors of the Federal Reserve System) or any new law, treaty,
regulation or guideline, or any interpretation of any of the foregoing by any
governmental authority charged with the administration thereof or any central
bank or other fiscal, monetary or other authority having jurisdiction over the
Lender or its lending branch or the LIBOR Portions contemplated by this
Agreement (whether or not having the force of law), shall:
(i) impose, increase, or deem applicable any reserve, special
deposit or similar requirement against assets held by, or deposits in or
for the account of, or loans by, or any other acquisition of funds or
disbursements by, the
-24-
<PAGE>
Lender which is not in any instance already accounted for in computing
the interest rate applicable to such LIBOR Portion;
(ii) subject the Lender, any LIBOR Portion or a Note to the extent
it evidences any LIBOR Portion to any tax (including, without limitation,
any United States interest equalization tax or similar tax however named
applicable to the acquisition or holding of debt obligations and any
interest or penalties with respect thereto), duty, charge, stamp tax, fee,
deduction or withholding in respect of this Agreement, any LIBOR Portion or
a Note to the extent it evidences any LIBOR Portion, except such taxes as
may be measured by the overall net income or gross receipts of the Lender
or its lending branches and imposed by the jurisdiction, or any political
subdivision or taxing authority thereof, in which the Lender's principal
executive office or its lending branch is located;
(iii) change the basis of taxation of payments of principal and
interest due from the Company to the Lender hereunder or under a Note to
the extent it evidences any LIBOR Portion (other than by a change in
taxation of the overall net income or gross receipts of the Lender or its
lending branches); or
(iv) impose on the Lender any penalty with respect to the foregoing
or any other condition regarding this Agreement, any LIBOR Portion, or a
Note to the extent it evidences any LIBOR Portion;
and the Lender shall determine that the result of any of the foregoing is to
increase the cost (whether by incurring a cost or adding to a cost) to the
Lender of creating or maintaining any LIBOR Portion hereunder or to reduce the
amount of principal or interest received or receivable by the Lender (without
benefit of, or credit for, any prorations, exemption, credits or other offsets
available under any such laws, treaties, regulations, guidelines or
interpretations thereof), then the Company shall pay on demand to the Lender
from time to time as
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<PAGE>
specified by the Lender the additional amounts as the Lender shall reasonably
determine are sufficient to compensate and indemnify it for such increased cost
or reduced amount. If the Lender makes such a claim for compensation, it shall
provide to the Company a certificate setting forth the computation of the
increased cost or reduced amount as a result of any event mentioned herein in
reasonable detail and such certificate shall be conclusive if reasonably
determined.
Section 2.8. Funding Indemnity. In the event the Lender shall incur
any loss, cost or expense (including, without limitation, any loss (including
loss of profit), cost or expense incurred by reason of the liquidation or re-
employment of deposits or other funds acquired or contracted to be acquired by
the Lender to fund or maintain its part of any LIBOR Portion or the relending or
reinvesting of such deposits or other funds or amounts paid or prepaid to the
Lender) as a result of:
(i) any payment of a LIBOR Portion on a date other than the last day
of the then applicable Interest Period for any reason, whether before or
after default, and whether or not such payment is required by any
provisions of this Agreement; or
(ii) any failure by the Company to create, borrow, continue or
effect by conversion a LIBOR Portion on the date specified in a notice
given pursuant to this Agreement;
then, upon the demand of the Lender, the Company shall pay to the Lender such
amount as will reimburse the Lender for such loss, cost or expense. If the
Lender requests such reimbursement under this Section, it shall provide to the
Company a certificate setting forth the computation of the loss, cost, or
expense giving rise to the request for reimbursement in reasonable detail and
such certificate shall be conclusive if reasonably determined (absent manifest
error).
Section 2.9. Treasury Rate Portion Prepayment Fee. If the Company
makes any prepayment of principal of any Treasury Rate Portion of the Term Note
(after giving effect to any application
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direction given by the Company in accordance with Section 3.5 hereof) or is
required to pay any Treasury Rate Portion of the Term Note prior to its stated
maturity for any reason (including, without limitation, payments required after
the occurrence of an Event of Default under Sections 8.2 and 8.3 hereof), the
Company shall pay upon demand by the Lender the amount determined based on this
Section 2.9 in good faith by the Lender by which the Current Value (as
hereinafter defined) of the interest which would have accrued on such Treasury
Rate Portion, or portion thereof, to its next regularly scheduled payment
date(s) (for purposes of this determination, each remaining principal payment of
the Term Loan shall be deemed to consist of a ratable amount of each outstanding
Portion of the Term Loan based upon the principal amounts thereof), exceeds the
Current Value (as hereinafter defined) of the amount which the Lender could earn
on an investment in the principal amount paid or prepaid to the Lender maturing
on such date(s), and yielding interest at the Treasury Yield (as hereinafter
defined). The Company hereby agrees that the amount recoverable under this
Section is a reasonable pre-estimate of loss and is not a penalty, and that such
amount is payable as liquidated damages to the Lender for the loss it suffers as
a result of the occurrence of any of the events specified hereunder. Payment of
the amount specified hereunder is without prejudice to the payment of the
principal of and accrued interest on such Treasury Rate Portion, as specified in
Section 2.1 hereof, together with all other amounts payable under this
Agreement. For purposes hereof, the following terms shall have the following
meanings:
"Current Value" means, with respect to the interest payable on the relevant
Treasury Rate Portion and the amount which the Lender could earn on the
alternative investment referred to above, such amounts discounted on an
annual basis to their current value (computed on the basis of a year of 360
days, as the case may be, and actual days elapsed) from the date such amounts
would have been paid to the date of determination at a discount rate equal to
the Treasury Yield.
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"Treasury Yield" means the average of the yields to maturity, expressed on
a bond equivalent basis, which two leading United States government
securities dealers of recognized standing selected by the Lender reasonably
estimate to be the highest yield the Lender could have obtained if it had
purchased on the date of determination United States Treasury Bonds, Notes or
Bills in an aggregate principal amount equal to the principal amount paid or
prepaid to the Lender maturing on a date or dates reasonably close to the
next regularly scheduled payment date(s) of the Term Note (determined as set
forth above in the Section 2.9), and being traded in the secondary market in
reasonable volume at a price reasonably close to par, all in accordance with
United States domestic practice prevailing as of the date of determination.
If the Lender requests such indemnification under this Section, it shall provide
to the Company a certificate setting forth the computation of the loss, cost or
expense giving rise to the request for indemnification in reasonable detail and
such certificate shall be conclusive if reasonably determined (absent manifest
error).
Section 2.10. Lending Branch. The Lender may, at its option, elect
to make, fund or maintain the Loans hereunder at the branches or offices
specified on the signature pages hereof or at such of its branches or offices as
the Lender may from time to time elect.
Section 2.11. Discretion of Lender as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, the Lender
shall be entitled to fund and maintain its funding of all or any part of the
Notes in any manner it sees fit (provided the same is in accordance with this
Agreement), it being understood, however, that for purposes of this Agreement
all determinations hereunder with respect to LIBOR Portions (including, without
limitation, determinations under Sections 2.6, 2.7 and 2.8 hereof) shall be made
as if the Lender had actually funded and maintained each LIBOR Portion during
each Interest Period applicable thereto through the purchase of
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deposits in the relevant market in the amount of such LIBOR Portion, having a
maturity corresponding to such Interest Period, and bearing an interest rate
equal to the LIBOR for such Interest Period.
SECTION 3. FEES, PREPAYMENTS, TERMINATIONS, AND APPLICATIONS.
Section 3.1. Fees. (a) Commitment Fee. For the period from and
including the date hereof to but not including the Revolving Credit Termination
Date, the Company shall pay to the Lender a commitment fee at the rate of 1/4 of
1% per annum (computed on the basis of a year of 360 days for the actual number
of days elapsed) on the average daily unused portion of the Revolving Credit
Commitment. Such commitment fee shall be payable quarterly in arrears on the
last day of each March, June, September, and December in each year (commencing
September 30, 1996) and on the Revolving Credit Termination Date.
(b) Letter of Credit Fees. On the date of issuance of each Letter of
Credit, and as condition thereto, and annually thereafter, the Company shall pay
to the Lender a letter of credit fee computed at the rate of 1% per annum
(computed on the basis of a year of 360 days for the actual number of days
elapsed) on the maximum amount of the related Letter of Credit which is
scheduled to be outstanding during the immediately succeeding twelve (12)
months. In addition to the letter of credit fee called for above, the Company
further agrees to pay to the Lender such processing and transaction fees and
charges as the Lender from time to time customarily imposes in connection with
any amendment, cancellation, negotiation and/or payment of letters of credit and
drafts drawn thereunder.
(c) Arrangement Fee. On the date hereof, the Company shall pay to the
Lender a fee as mutually agreed upon by the Company and the Lender.
Section 3.2. Voluntary Prepayments. The Company shall have the
privilege of prepaying the Revolving Credit Loans and the Term Loan in whole or
in part (but if in part, then (i) if such Loans constitute part of a Domestic
Rate Portion, in an amount
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not less than $100,000, (ii) if such Loan constitutes part of a LIBOR Portion,
in an amount not less than $1,000,000, (iii) if, in the case of the Term Loan,
such Loan constitutes part of the Treasury Rate Portion, in an amount not less
than $1,000,000, and (iv) in each case, in an amount such that the minimum
amount required for a borrowing of Revolving Credit Loans, for a LIBOR Portion
of the relevant Loans, or for a Treasury Rate Portion of the Term Loan pursuant
to Sections 1.2, 2.2 and 2.4 hereof remains outstanding) at any time upon 1
Business Day prior notice to the Lender (such notice if received subsequent to
2:00 p.m. (Chicago time) on a given day to be treated as though received at the
opening of business on the next Business Day), by paying to the Lender the
principal amount to be prepaid and (i) if such a prepayment prepays the Term
Note in whole or in part, accrued interest thereon to the date of prepayment,
(ii) if such a prepayment prepays the Revolving Credit Note in full and is
accompanied by the termination in whole of the Revolving Credit Commitment,
accrued interest thereon to the date of prepayment, and (iii) any amounts due to
the Lender under Sections 2.8 or 2.9 hereof.
Section 3.3. Mandatory Termination. After the occurrence of a Change
of Control, the Lender may, by written notice to the Company at any time on or
before the date occurring 120 days after the date the Company notifies the
Lender of such Change of Control, terminate the remaining Commitments and all
other obligations of the Lender hereunder on the date stated in such notice
(which shall in no event be sooner than 120 days after the occurrence of such
Change of Control). On the date the Commitments are so terminated, all
outstanding Obligations (including, without limitation, all principal of and
accrued interest on the Notes) shall forthwith be due and payable without
further demand, presentment, protest, or notice of any kind and the Company
shall immediately pay to the Lender the full amount then available for drawing
under each Letter of Credit, such amount to be held in the Account referred to
in Section 8.4 hereof (the Company agreeing to immediately make such payment on
the date the Commitments are so terminated and acknowledging and agreeing that
the Lender would not have an adequate remedy at law for the failure by the
Company to honor any such demand and that
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the Lender shall have the right to require the Company to specifically perform
such undertaking whether or not any drawings or other demands for payment have
been made under any Letter of Credit).
Section 3.4. Voluntary Terminations. The Company shall have the
right at any time and from time to time, upon 1 Business Day prior notice to the
Lender, to terminate without premium or penalty and in whole or in part (but if
in part, then in an aggregate amount not less than $1,000,000 or such greater
amount which is an integral multiple of $1,000,000) the Revolving Credit
Commitment, provided that the Revolving Credit Commitment may not be reduced to
an amount less than the aggregate principal amount of the Revolving Credit Loans
and Letters of Credit then outstanding. Any termination of the Revolving Credit
Commitment pursuant to this Section may not be reinstated.
Section 3.5. Place and Application of Payments. All payments of
principal, interest, fees and all other Obligations payable hereunder and under
the other Loan Documents shall be made to the Lender at its office at 111 West
Monroe Street, Chicago, Illinois (or at such other place as the Lender may
specify) on the date any such payment is due and payable. Payments received by
the Lender after 2:00 p.m. (Chicago time) shall be deemed received as of the
opening of business on the next Business Day. All such payments shall be made
in lawful money of the United States of America, in immediately available funds
at the place of payment, without set-off or counterclaim and without reduction
for, and free from, any and all present or future taxes, levies, imposts,
duties, fees, charges, deductions, withholdings, restrictions and conditions of
any nature imposed by any government or any political subdivision or taxing
authority thereof (but excluding any taxes imposed on or measured by the net
income of the Lender). No amount paid or prepaid on the Term Note may be
reborrowed, and partial prepayments of the Term Note shall be applied in the
order of their scheduled maturities. Prior to the occurrence of a Default or an
Event of Default, the Company may direct the application of all payments and
prepayments of the Term Note to
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the relevant Portions then outstanding. After the occurrence of a Default or an
Event of Default, unless the Company and the Lender agree otherwise, all
payments and prepayments of the Term Note shall be applied ratably to the
outstanding Portions thereof based on the principal amount of each such Portion
at the time of payment. Unless the Company otherwise directs, principal payments
of the Revolving Credit Notes shall be first applied to the applicable Domestic
Rate Portion until payment in full thereof, with any balance applied to the
relevant LIBOR Portions in the order in which their Interest Periods expire.
Section 3.6. Notations. Each Loan made against a Note, the status of
all amounts evidenced by a Note as constituting part of the Domestic Rate
Portion or a Fixed Rate Portion, and, in the case of any Fixed Rate Portion, the
rates of interest and Interest Periods applicable to such Portions shall be
recorded by the Lender on its books and records or, at its option in any
instance, endorsed on a schedule to its Note and the unpaid principal balance
and status, rates and Interest Periods so recorded or endorsed by the Lender
shall, absent manifest error, be prima facie evidence in any court or other
proceeding brought to enforce such Note of the principal amount remaining unpaid
thereon, the status of the Loan or Loans evidenced thereby and the interest
rates and Interest Periods applicable thereto; provided that the failure of the
Lender to record any of the foregoing shall not limit or otherwise affect the
obligation of the Company to repay the principal amount of each Note together
with accrued interest thereon. Prior to any negotiation of a Note, the Lender
shall record on a schedule thereto the status of all amounts evidenced thereby
as constituting part of the applicable Domestic Rate Portion or a Fixed Rate
Portion and, in the case of any Fixed Rate Portion, the rates of interest and
the Interest Periods applicable thereto.
SECTION 4. DEFINITIONS; INTERPRETATION.
Section 4.1. Definitions. The following terms when used herein shall
have the following meanings:
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"Adjusted LIBOR" means a rate per annum determined by the Lender in
accordance with the following formula:
Adjusted LIBOR = LIBOR
-------------------------
100%-Reserve Percentage
"Reserve Percentage" means, for the purpose of computing Adjusted LIBOR, the
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental or other special reserves) imposed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D on Eurocurrency liabilities (as such term is defined in Regulation
D) for the applicable Interest Period as of the first day of such Interest
Period, but subject to any amendments to such reserve requirement by such Board
or its successor, and taking into account any transitional adjustments thereto
becoming effective during such Interest Period. For purposes of this
definition, LIBOR Portions shall be deemed to be Eurocurrency liabilities as
defined in Regulation D without benefit of or credit for prorations, exemptions
or offsets under RegulationED. "LIBOR" means, for each Interest Period, (a) the
LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if
the LIBOR Index Rate cannot be determined, the arithmetic average of the rates
of interest per annum (rounded upward, if necessary, to the nearest 1/100th of
1%) at which deposits in U.S. Dollars in immediately available funds are offered
to the Lender at 11:00 a.m. (London, England time) 2 Business Days before the
beginning of such Interest Period by 3 or more major banks in the interbank
eurodollar market selected by the Lender for a period equal to such Interest
Period and in an amount equal or comparable to the applicable LIBOR Portion
scheduled to be outstanding during such Interest Period. "LIBOR Index Rate"
means, for any Interest Period, the rate per annum (rounded upwards, if
necessary, to the next higher one hundred-thousandth of a percentage point) for
deposits in U.S. Dollars for a period equal to such Interest Period which
appears on the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the
date 2 Business Days before the commencement of such Interest Period. "Telerate
Page 3750" means the display designated as "Page 3750" on the Telerate Service
(or such other page as may replace Page 3750 on that service or
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such other service as may be nominated by the British Bankers' Association as
the information vendor for the purpose of displaying British Banker's
Association Interest Settlement Rates for U.S. Dollar deposits). Each
determination of LIBOR made by the Lender shall be conclusive and binding on the
Company absent manifest error.
"Adjusted Net Income" means, with reference to any period, Net Income,
before extraordinary items (including, without limitation, for purposes of this
definition charges relating to SAIF recapitalization and the recapture of tax
bad debt reserves), of the Company and its Subsidiaries for such period computed
on a consolidated basis.
"Adjusted Net Worth" means, at any time the same is to be determined, Net
Worth of the Company and its Subsidiaries determined on a consolidated basis
minus the sum of (i) investments in, and loans and advances to, MAF Developments
and (ii) goodwill associated with Mid America.
"Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control another Person for the purposes of this
definition if such Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
Person, whether through the ownership of voting securities, common directors,
trustees or officers, by contract or otherwise.
"Agreement" means this Credit Agreement, as the same may be amended,
modified or restated from time to time in accordance with the terms hereof.
"Application" is defined in Section 1.3 hereof.
"Authorized Representative" means those persons shown on the list of
officers provided by the Company pursuant to Section 6.2(a) hereof or on any
update of any such list provided by the Company to the Lender, or any further or
different officer
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of the Company so named by any Authorized Representative of the Company in a
written notice to the Lender.
"Banking Subsidiary" means any Subsidiary of the Company which is a bank or
thrift organized under the laws of the United States of America or any state
thereof.
"Business Day" means any day other than a Saturday or Sunday on which banks
are not authorized or required to close in Chicago, Illinois and, when used with
respect to LIBOR Portions, a day on which banks are also dealing in United
States Dollar deposits in London, England and Nassau, Bahamas.
"Capital Lease" means any lease of Property which in accordance with GAAP
is required to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means the amount of the liability shown on
the balance sheet of any Person in respect of a Capital Lease determined in
accordance with GAAP.
"Change of Control" means, during the 12-month period occurring after the
date of this Agreement and each 12-month period occurring thereafter,
individuals who at the beginning of such period were directors of the Company
shall cease for any reason to constitute a majority of the board of directors of
the Company; provided that the two members of the board of directors of the
Company appointed in connection with the N.S. Acquisition at or about the
initial funding of Loans hereunder shall, for purposes hereof, be deemed to have
been members of the Company's board of directors on the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Commitments" means and includes the Revolving Credit Commitment and the
Term Loan Commitment.
"Company" is defined in the introductory paragraph hereof.
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"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a letter of credit.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Company or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"Domestic Rate" means, for any day, the rate of interest announced by the
Lender from time to time as its prime commercial rate, as in effect on such day
(it being understood and agreed that such rate may not be the Lender's best or
lowest rate).
"Domestic Rate Portions" is defined in Section 2.1(a) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.
"Event of Default" means any event or condition identified as such in
Section 8.1 hereof.
"Fixed Rate Portions" means and includes the LIBOR Portions and the
Treasury Rate Portions.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied by the Company and its
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Subsidiaries on a basis consistent with the preparation of the Company's most
recent financial statements furnished to the Lender pursuant to Section 5.5
hereof.
"Indebtedness for Borrowed Money" means for any Person (without
duplication) (i) all indebtedness created, assumed or incurred in any manner by
such Person representing money borrowed (including by the issuance of debt
securities), (ii) all indebtedness for the deferred purchase price of property
or services (other than trade accounts payable arising in the ordinary course of
business), (iii) all indebtedness secured by any Lien upon Property of such
Person, whether or not such Person has assumed or become liable for the payment
of such indebtedness, (iv) all Capitalized Lease Obligations of such Person,
(v) all Contingent Obligations of such Person, (vi) all obligations of such
Person on or with respect to letters of credit, bankers' acceptances and other
extensions of credit whether or not representing obligations for borrowed money,
and (vii) Permitted Banking Subsidiary Indebtedness of such Person.
"Interest Period" means, with respect to any LIBOR Portion, the period
commencing on, as the case may be, the creation, continuation or conversion date
with respect to such LIBOR Portion and ending 1, 2 or 3 months thereafter as
selected by the Company in its notice as provided herein; provided that, all of
the foregoing provisions relating to Interest Periods are subject to the
following:
(i) if any Interest Period would otherwise end on a day which is
not a Business Day, that Interest Period shall be extended to the next
succeeding Business Day, unless the result of such extension would be
to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(ii) no Interest Period may extend beyond the final maturity date
of the relevant Note;
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(iii) the interest rate to be applicable to each Portion for each
Interest Period shall apply from and including the first day of such
Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto the Company will be unable to make a principal payment
scheduled to be made during such Interest Period without paying part of
a LIBOR Portion on a date other than the last day of the Interest
Period applicable thereto.
For purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, provided, however, if an
Interest Period begins on the last day of a month or if there is no
numerically corresponding day in the month in which an Interest Period
is to end, then such Interest Period shall end on the last Business Day
of such month.
"Lender" is defined in the introductory paragraph hereof.
"Letter of Credit" is defined in Section 1.3 hereof.
"LIBOR Portions" is defined in Section 2.1(a) hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, Capital Lease or other title
retention arrangement.
"Loan Documents" means this Agreement, the Notes, the Applications, and
each other instrument or document to be delivered hereunder or thereunder or
otherwise in connection therewith.
"Loans" means and includes Revolving Credit Loans and the Term Loan.
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"MAF Developments" means MAF Developments, Inc., an Illinois corporation,
and its successors and assigns.
"Merger" means, collectively, the merger of N.S. with and into the Company,
with the Company surviving the merger, and the merger of Northwestern Savings
Bank with and into Mid America, with Mid America surviving the merger.
"Merger Documents" means the Amended and Restated Agreement and Plan of
Reorganization, dated as of November 29, 1995, between the Company and N.S., and
all other instruments and documents executed and delivered in connection
therewith and the consummation of the Merger described therein.
"Mid America" means Mid America Federal Savings Bank, a federally chartered
savings bank.
"N.S." means N.S. Bancorp, Inc., a Delaware corporation.
"N.S. Bancorp Acquisition" means the acquisition by the Company of N.S. and
its subsidiaries pursuant to the Merger Documents.
"Net Income" means, with reference to a Person for any period, the net
income (or net loss) of such Person for such period, computed in accordance with
GAAP.
"Net Worth" means, with reference to any Person at any time the same is to
be determined, the total shareholders' equity (including capital stock,
additional paid-in capital and retained earnings after deducting treasury stock,
but excluding any minority interests in subsidiaries) which would appear on the
balance sheet of such Person determined in accordance with GAAP or, when such
term is used with respect to the Tangible Capital Ratio of a Banking Subsidiary,
regulatory accounting principles of the applicable bank or thrift regulatory
authority.
"Non-Performing Assets" means with reference to any Person, as of any time
the same is to be determined, the sum of all non-performing assets of such
Person as determined in accordance with
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regulatory accounting principles applicable to such Person, but in any event
including, without limitation, (i) loans or other extensions of credit on which
any payment (whether principal or interest or otherwise) is not made within 90
days of its original due date, (ii) loans which have been placed on a non-
accrual basis, (iii) loans restructured so as to not bear interest at a then
market rate or so that other terms thereof have been compromised, and (iv)
property acquired by repossession or foreclosure and, without duplication,
property acquired pursuant to in-substance foreclosure.
"Notes" means and includes the Revolving Credit Note and the Term Note.
"Obligations" means all obligations of the Company to pay principal and
interest on the Loans, all reimbursement obligations owing under the
Applications, all fees and charges payable hereunder, and all other payment
obligations of the Company arising under or in relation to any Loan Document, in
each case whether now existing or hereafter arising, due or to become due,
direct or indirect, absolute or contingent, and howsoever evidenced, held or
acquired.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"Permitted Banking Subsidiary Indebtedness" means obligations incurred by
any Banking Subsidiary in the ordinary course of business in such circumstances
as may be incidental or usual in carrying on the banking or trust business of a
bank, thrift or trust company incurred in accordance with applicable laws and
regulations and safe and sound banking practices.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title IV of ERISA
or subject to the minimum funding standards
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under Section 412 of the Code that either (i) is maintained by a member of the
Controlled Group for employees of a member of the Controlled Group, or (ii) is
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"Portion" is defined in Section 2.1(a) hereof.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Revolving Credit" is defined in Section 1.1 hereof.
"Revolving Credit Commitment" means $10,000,000, as such amount may be
reduced pursuant hereto.
"Revolving Credit Loan" is defined in Section 1.2 hereof.
"Revolving Credit Note" is defined in Section 1.2 hereof.
"Revolving Credit Termination Date" means January 25, 1997, or such earlier
date on which the Revolving Credit Commitment is terminated in whole pursuant to
Section 3.3, 3.4, 8.2 or 8.3 hereof.
"Subordinated Debt" means indebtedness for borrowed money of the Company
owing pursuant to the terms of that certain Indenture dated as of September 27,
1995, between the Company and Harris Trust and Savings Bank, as trustee, and any
other indebtedness for borrowed money of the Company owing to any other Person
or group of Persons on substantially the same terms and conditions or on such
other terms and conditions which are reasonably acceptable to the Lender, which
is subordinated (subject to applicable standstill provisions) in right of
payment to the prior payment in full of the Obligations.
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"Subsidiary" means any corporation or other Person more than 50% of the
outstanding ordinary voting shares or other equity interests of which is at the
time directly or indirectly owned by the Company, by one or more of its
Subsidiaries, or by the Company and one or more of its Subsidiaries.
"Tangible Capital" means, at any time the same is to be determined, for any
Banking Subsidiary, Net Worth of such Banking Subsidiary minus intangible assets
of such Banking Subsidiary (excluding, however, from the determination of
intangible assets investments of such Banking Subsidiary in any of its real
estate subsidiaries to the extent characterized as an intangible asset).
"Tangible Capital Ratio" means, at any time the same is to be determined,
for any Banking Subsidiary, the ratio of (i) Tangible Capital of such Banking
Subsidiary to (ii) total assets minus intangible assets of such Banking
Subsidiary, all as defined and determined, except as otherwise provided herein,
from time to time by applicable bank or thrift regulatory authorities.
"Term Loan" is defined in Section 1.4 hereof.
"Term Loan Commitment" means $40,000,000.
"Term Note" is defined in Section 1.4 hereof.
"Treasury Rate" means a rate per annum determined by the Lender on the date
on which the Term Loan, or any part thereof, is to be created as, or converted
into, a Treasury Rate Portion to be the average of the yields to maturity,
expressed on a bond equivalent basis, which two leading United States government
securities dealers of recognized standing selected by the Lender reasonably
estimate to be the highest yield the Lender could have obtained if it had
purchased on such day United States Treasury Bonds, Notes or Bills with a
maturity nearest to December 31, 2003, or seven years after the making thereof,
whichever is less, and in an amount comparable to the Treasury Rate Portion
selected by the Company to be outstanding and being traded in the secondary
market in reasonable volume at a price reasonably close to par, all in
accordance with United States domestic practice
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prevailing as of such date. The determination of the Treasury Rate by the Lender
in accordance with this paragraph shall be conclusive and binding on the Company
except in the case of manifest error.
"Treasury Rate Portions" is defined in Section 2.1(a) hereof.
"Unfunded Vested Liabilities" means, for any Plan at any time, the amount
(if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of ERISA.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the issued and
outstanding shares of capital stock (other than directors' qualifying shares as
required by law) or other equity interests are owned by the Company and/or one
or more Wholly-Owned Subsidiaries within the meaning of this definition.
Section 4.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. The
words "hereof", "herein", and "hereunder" and words of like import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All references to time of day herein
are references to Chicago, Illinois time unless otherwise specifically provided.
Where the character or amount of any asset or liability or item of income or
expense is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, it shall
be done in accordance with GAAP except where such principles are inconsistent
with the specific provisions of this Agreement.
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SECTION 5. REPRESENTATIONS AND WARRANTIES.
At the time the Company requests the initial extension of credit under this
Agreement and at all times thereafter in accordance with Section 6.1 hereof, the
Company represents and warrants to the Lender as follows:
Section 5.1. Organization and Qualification. The Company is duly
organized, validly existing and in good standing as a corporation under the laws
of the State of Delaware, has full and adequate corporate power to own its
Property and conduct its business as now conducted, and is duly licensed or
qualified and in good standing in each jurisdiction in which the nature of the
business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying, except where the failure to so qualify
will not have a material adverse effect on the financial condition, Properties,
business or operations of the Company. Without limiting the generality of the
foregoing, the Company is a savings and loan holding company and, as such, the
Company has received all necessary approvals from, and has filed all necessary
reports with, all applicable federal and state regulatory authorities.
Section 5.2. Subsidiaries. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated or organized, as the case may be, has full and adequate
power to own its Property and conduct its business as now conducted, and is duly
licensed or qualified and in good standing in each jurisdiction in which the
nature of the business conducted by it or the nature of the Property owned or
leased by it requires such licensing or qualifying, except where the failure to
so qualify will not have a material adverse effect on the financial condition,
Properties, business or operations of such Subsidiary. Schedule 5.2 hereto
identifies each Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and outstanding
shares of each class of its capital stock or other equity interests owned by the
Company and the Subsidiaries and, if such percentage is not 100% (excluding
directors' qualifying shares as required by law), a description of each class of
its
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authorized capital stock and other equity interests and the number of shares
of each class issued and outstanding, in each case after giving effect to the
Merger. All of the outstanding shares of capital stock and other equity
interests of each Subsidiary are validly issued and outstanding and fully paid
and nonassessable and all such shares and other equity interests indicated on
Schedule 5.2 as owned by the Company or a Subsidiary are or will be owned
immediately after giving effect to the Merger, beneficially and of record, by
the Company or such Subsidiary free and clear of all Liens. There are no
outstanding commitments or other obligations of any Subsidiary to issue, and no
options, warrants or other rights of any Person to acquire, any shares of any
class of capital stock or other equity interests of any Subsidiary, except as
disclosed on Schedule 5.2 hereof.
Section 5.3. Corporate Authority and Validity of Obligations. The
Company has full right and authority to enter into this Agreement and the other
Loan Documents, to make the borrowings herein provided for, to issue its Notes
in evidence thereof, and to perform all of its obligations hereunder and under
the other Loan Documents. The Loan Documents delivered by the Company have been
duly authorized, executed and delivered by the Company and constitute valid and
binding obligations of the Company enforceable in accordance with their terms
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law); and this Agreement and the
other Loan Documents do not, nor does the performance or observance by the
Company of any of the matters and things herein or therein provided for,
contravene or constitute a default under any provision of law or any judgment,
injunction, order or decree binding upon the Company or any provision of the
charter, articles of incorporation or by-laws of the Company or any covenant,
indenture or agreement of or affecting the Company or any of its Properties, or
result in the creation or imposition of any Lien on any Property of the Company.
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Section 5.4. Use of Proceeds; Margin Stock. The Company shall use
the proceeds of (i) the Revolving Credit Loans and Letters of Credit made
available hereunder for general working capital purposes and (ii) the Term Loan
to finance the N.S. Bancorp Acquisition. No part of the proceeds of any
Revolving Credit Loan or Letter of Credit made hereunder will be used to
purchase or carry any margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System), or to extend credit to others
for the purpose of purchasing or carrying any such margin stock. No part of the
proceeds of the Term Loan will be used to purchase or carry any margin stock (as
defined above), or to extend credit to others for the purpose of purchasing or
carrying any such margin stock, in violation of such Regulation U. After giving
effect to the Merger, margin stock (as defined above) constitutes less than 25%
of those assets of the Company and its Subsidiaries which are subject to any
limitation on sale, pledge, or other restriction hereunder.
Section 5.5. Financial Reports. (a) The consolidated balance sheet
of the Company and its Subsidiaries as of June 30, 1995, and the related
consolidated statements of income, retained earnings and cash flows of the
Company and its Subsidiaries for the fiscal year then ended, and accompanying
notes thereto, which financial statements are accompanied by the audit report of
KPMG Peat Marwick, independent public accountants, and the unaudited interim
consolidated balance sheet of the Company and its Subsidiaries as of March 31,
1996, and the related consolidated statements of income, retained earnings and
cash flows of the Company and its Subsidiaries for the nine (9) months then
ended, heretofore furnished to the Lender, fairly present the consolidated
financial condition of the Company and its Subsidiaries as at said dates and the
consolidated results of their operations and cash flows for the periods then
ended in conformity with generally accepted accounting principles applied on a
consistent basis, subject to year-end audit adjustments in the case of such
interim financial statements.
(b) To the best of the Company's knowledge, the financial statements
of N.S. and its subsidiaries referred to in the Joint
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Proxy Statement of the Company and N.S. and Prospectus of the Company dated
April 25, 1996, fairly present the consolidated financial condition of N.S. and
its subsidiaries and the consolidated results of their operations and cash flows
as of the dates of such statements in conformity with generally accepted
accounting principles applied on a consistent basis, subject to year-end audit
adjustments in the case of interim financial statements.
(c) Neither the Company nor any Subsidiary has contingent liabilities
which are material to the Company and its Subsidiaries on a consolidated basis
other than as indicated on the financial statements referred to in clause (a)
above and, to the best of the Company's knowledge, neither N.S. nor any of its
subsidiaries has contingent liabilities which are material to N.S. and its
subsidiaries on a consolidated basis other than as indicated on the financial
statements referred to in clause (b) above or, in all cases, with respect to
future periods, on the financial statements furnished pursuant to Section 7.5
hereof.
Section 5.6. No Material Adverse Change. Since March 31, 1996, there
has been no material adverse change in the condition (financial or otherwise) or
business prospects of the Company and its Subsidiaries taken as a whole and, to
the best of the Company's knowledge, there has been no material adverse change
in the condition (financial or otherwise) or business prospects of N.S. and its
subsidiaries taken as a whole.
Section 5.7. Full Disclosure. The statements and information
furnished to the Lender in connection with the negotiation of this Agreement and
the other Loan Documents and the commitments by the Lender to provide all or
part of the financing contemplated hereby do not contain any untrue statements
of a material fact or omit a material fact necessary to make the material
statements contained herein or therein not misleading, the Lender acknowledging
that as to any projections furnished to the Lender, the Company only represents
that the same were prepared on the basis of information and estimates the
Company believed to be reasonable.
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Section 5.8. Good Title. The Company and its Subsidiaries each have
good and defensible title to their assets as reflected on the most recent
consolidated balance sheet of the Company and its Subsidiaries furnished to the
Lender (except for assets and Properties disposed of in the ordinary course of
business and assets subject to Liens which, individually and in the aggregate,
do not have a material adverse effect on the financial condition, Properties,
business or operations of the Company or any Subsidiary) and, in the case of
assets consisting of stock or other equity interests in Subsidiaries, subject to
no Liens.
Section 5.9. Litigation and Other Controversies. There is no
litigation or governmental proceeding or labor controversy pending, nor to the
knowledge of the Company threatened, against the Company or any Subsidiary which
if adversely determined would (a) impair the validity or enforceability of, or
impair the ability of the Company to perform its obligations under, this
Agreement or any other Loan Document or (b) result in any material adverse
change in the financial condition, Properties, business or operations of the
Company or any Subsidiary.
Section 5.10. Taxes. All tax returns required to be filed by the
Company or any Subsidiary in any jurisdiction have, in fact, been filed, and all
taxes, assessments, fees and other governmental charges upon the Company or any
Subsidiary or upon any of their respective Properties, income or franchises,
which are shown to be due and payable in such returns, have been paid, except
for taxes, assessments, fees and other governmental charges being contested in
good faith and for which adequate reserves therefor have been established on the
books of the Company or any Subsidiary, as applicable. The Company does not
know of any proposed additional tax assessment against it or its Subsidiaries
under applicable tax laws in effect at the time this representation is made or
deemed made for which adequate provision in accordance with GAAP has not been
made on its accounts. Adequate provisions in accordance with GAAP for taxes on
the books of the Company and each Subsidiary have been made for all open years,
and for its current fiscal period.
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Section 5.11. Approvals. No authorization, consent, license, or
exemption from, or filing or registration with, any court or governmental
department, agency or instrumentality, nor any approval or consent of the
stockholders of the Company or any other Person, is or will be necessary to the
valid execution, delivery or performance by the Company of this Agreement or any
other Loan Document, except for such consents and approvals which have been or
will be obtained prior to the initial extension of credit made under this
Agreement.
Section 5.12. Affiliate Transactions. Neither the Company nor any
Subsidiary is a party to any contracts or agreements with any of its Affiliates
on terms and conditions which are less favorable to the Company or such
Subsidiary than would be usual and customary in similar contracts or agreements
between Persons not affiliated with each other.
Section 5.13. Investment Company; Public Utility Holding Company.
Neither the Company nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 5.14. ERISA. To the best of the Company's knowledge, the
Company and each other member of its Controlled Group has fulfilled its
obligations under the minimum funding standards of and is in compliance in all
material respects with ERISA and the Code to the extent applicable to it and has
not incurred any liability to the PBGC or a Plan under Title IV of ERISA other
than a liability to the PBGC for premiums under Section 4007 of ERISA. Neither
the Company nor any Subsidiary has any material contingent liabilities with
respect to any post-retirement benefits under a Welfare Plan, other than
liability for continuation coverage described in article 6 of Title I of ERISA.
Section 5.15. Compliance with Laws. To the best of the Company's
knowledge, the Company and each of its Subsidiaries are in compliance with the
requirements of all federal, state and
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local laws, rules and regulations applicable to or pertaining to their
Properties or business operations, non-compliance with which could have a
material adverse effect on the financial condition, Properties, business or
operations of the Company or any Subsidiary. Neither the Company (or any of its
directors or officers) nor any Banking Subsidiary (or any of its directors or
officers) is a party to, or subject to, any agreement with, or directive or
order issued by, any federal or state bank or thrift regulatory authority which
imposes restrictions or requirements on it which are not generally applicable to
banks or thrifts, or their holding companies (other than the effect of the
Federal Deposit Insurance Corporation's "needs to improve" rating given to
Northwestern Savings Bank in effect prior to the Merger); and no action or
administrative proceeding is pending or, to the Company's knowledge, threatened
against the Company or any Banking Subsidiary or any of their directors or
officers which seeks to impose any such restriction or requirement. Neither the
Company nor any Subsidiary has received written notice to the effect that its
operations are not in compliance with any of the requirements of applicable
federal, state or local environmental, health and safety statutes and
regulations or are the subject of any governmental investigation evaluating
whether any remedial action is needed to respond to a release of any toxic or
hazardous waste or substance into the environment, which non-compliance or
remedial action could have a material adverse effect on the financial condition,
Properties, business or operations of the Company or any Subsidiary.
Section 5.16. Other Agreements. Neither the Company nor any
Subsidiary is in default under the terms of any covenant, indenture or agreement
of or affecting the Company, any Subsidiary or any of their Properties, which
default if uncured would have a material adverse effect on the financial
condition, Properties, business or operations of the Company or any Subsidiary.
Section 5.17. Merger. The Company and Mid America each have full
right and authority to enter into the Merger Documents executed by it and, prior
to the Company's request for the initial extension of credit to be made under
this Agreement and
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at all times thereafter, to perform its obligations under, and consummate the
transactions described in, the Merger Documents executed by it. The Merger
Documents have been duly authorized, executed, and delivered by the Company and
Mid America and constitute valid and binding obligations of the Company and Mid
America enforceable against them in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law); and the Merger Documents do
not, nor will the performance or observance by the Company or Mid America of any
of the matters or things therein provided for, after giving effect to the
required consents and approvals referred to in Section 5.11 hereof, contravene
or constitute default under any provision of law or any judgment, injunction,
order or decree binding upon the Company or Mid America or any provision of the
charter, articles of incorporation, or by-laws of the Company or Mid America or
any covenant, indenture, or agreement of or affecting the Company or Mid America
or any of their Properties, or result in the creation or imposition of any Lien
on any Property of the Company or Mid America. Prior to or concurrently with the
Company requesting the initial extension of credit under this Agreement, all
conditions to the Merger shall have been satisfied (including, without
limitation, all necessary shareholder and governmental consents), all filings
and other matters necessary to make the Merger effective shall have been done
and performed, and the Merger shall have become effective in accordance with the
terms of the Merger Documents.
Section 5.18. No Default. No Default or Event of Default has occurred
and is continuing.
SECTION 6. CONDITIONS PRECEDENT.
The obligation of the Lender to make any Loan or to issue any Letter of
Credit under this Agreement is subject to the following conditions precedent:
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Section 6.1. All Advances. As of the time of the making of each
extension of credit (including the initial extension of credit) hereunder:
(a) each of the representations and warranties set forth in
Section 5 hereof and in the other Loan Documents shall be true and correct
in all material respects as of such time, except to the extent the same
expressly relate to an earlier date;
(b) no Default or Event of Default shall have occurred and be
continuing or would occur as a result of making such extension of credit;
(c) after giving effect to such extension of credit the aggregate
principal amount of all Revolving Credit Loans and Letters of Credit
outstanding under this Agreement shall not exceed the Revolving Credit
Commitment then in effect;
(d) in the case of the issuance of any Letter of Credit, the Lender
shall have received a properly completed Application therefor together with
the fees called for hereby; and
(e) such extension of credit shall not violate any order, judgment
or decree of any court or other authority or any provision of law or
regulation applicable to the Lender (including, without limitation,
Regulation U of the Board of Governors of the Federal Reserve System) as
then in effect.
The Company's request for any Loan or Letter of Credit shall constitute its
warranty as to the facts specified in subsections (a) through (d), both
inclusive, above.
Section 6.2. Initial Advance. At or prior to the making of the
initial extension of credit hereunder, the following conditions precedent shall
also have been satisfied:
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(a) the Lender shall have received the following (each to be
properly executed and completed) and the same shall have been approved as
to form and substance by the Lender:
(i) the Notes;
(ii) copies (executed or certified, as may be appropriate)
of all legal documents or proceedings taken in connection with the
execution and delivery of this Agreement and the other Loan
Documents to the extent the Lender or its counsel may reasonably
request;
(iii) an incumbency certificate containing the name, title and
genuine signatures of each of the Company's Authorized
Representatives; and
(iv) an arrangement fee letter.
(b) the Lender shall have received for itself the initial fees
called for hereby;
(c) the Lender shall have received the favorable written opinion
of counsel for the Company in substantially the form attached hereto as
Exhibit D-1 (which opinion letter shall be addressed to the Lender);
(d) the Lender shall have received the favorable written opinion
of counsel for the Company in substantially the form attached hereto as
Exhibit D-2 (which opinion letter shall either be addressed to the Lender
or which, by its terms, expressly states the Lender is entitled to rely on
the opinion letter in extending credit to the Company);
(e) the Lender shall have been furnished copies, certified as
being true and correct by the Secretary or other officer of the Company
acceptable to the Lender, of (i) the Joint Proxy and Prospectus stated
April 25, 1996, and all amendments and supplements thereto, (ii) the
Amended and Restated Agreement and Plan of Reorganization between
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the Company and N.S., and all amendments and supplements thereto, (iii) the
file-stamped copy of the Certificate of Merger filed with and approved by
the Delaware Secretary of State as to the merger of N.S. with and into the
Company, (iv) the notice letter to NASDAQ effectuating the delisting of
N.S. common stock, (v) approval letters as to the Merger from the Office of
Thrift Supervision and Illinois Commissioner of Savings and Residential
Finance, (vi) waiver letter from the Federal Reserve Board, (vii) a no
action letter from the Federal Deposit Insurance Corporation as to the
Merger, (viii) evidence of shareholder approval of the Merger from the
shareholders of the Company and of N.S., (ix) the file-stamped copy of the
Certificate of Merger filed with and approved by the Illinois Commissioner
of Savings and Residential Finance as to the merger of Northwestern Savings
Bank with and into Mid America, (x) certified copies of the Resolutions
adopted by the Board of Directors of the Company and of N.S. authorizing
the execution, delivery, and performance of the Merger Documents and the
consummation of the transaction contemplated thereby, and (xi) the opinion
letter delivered by counsel to N.S. to the Company with respect to the
Merger;
(f) the Lender shall have received a good standing certificate
for the Company (dated as of the date no earlier than 30 days prior to the
date hereof) from the office of the secretary of state of the state of its
incorporation and each state in which it is qualified to do business as a
foreign corporation, and a certificate from the Office of Thrift
Supervision as to the registration of the Company as a savings and loan
holding company;
(g) the Lender shall have been furnished a statement by the
Company as to the sources and uses of cash required to finance the Merger;
(h) by signing in the space provided for that purpose below, the
parties agree that the $15,000,000 revolving line of credit established
under that certain Credit Agreement dated as of January 26, 1995, between
the Company and the
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Bank, the loans outstanding under which are evidenced by that certain
promissory note of the Company dated January 26, 1995, payable to the order
of the Bank in the principal amount of $15,000,000 (the "Prior Note"), will
be, effective upon the making of the initial extension of credit hereunder,
terminated and no further borrowings may be made thereunder, and any loans
outstanding and evidenced by the Prior Note shall be repaid in full on the
date thereof; and
(i) the Company shall have, as of the date of the initial
extension of credit under this Agreement, Net Worth of the Company and its
Subsidiaries determined on a consolidated basis in an amount not less than
the difference between (x) $220,000,000 minus (y) the difference between
$40,000,000 minus the original Term Loan amount.
SECTION 7. COVENANTS.
The Company agrees that, at the time the initial extension of credit is
made to the Company under this Agreement and thereafter so long as any credit is
available to or in use by the Company hereunder, except to the extent compliance
in any case or cases is waived in writing by the Lender:
Section 7.1. Maintenance of Business. The Company shall, and shall
cause each Subsidiary to, preserve and maintain its existence; provided,
however, that nothing in this Section shall prevent the Company from dissolving
any Subsidiary (other than a Banking Subsidiary or MAF Developments) if such
action is, in the judgment of the Company, desirable in the conduct of its
business and is not disadvantageous in any material respect to the Lender. The
Company shall, and shall cause each Subsidiary to, preserve and keep in force
and effect all licenses, permits and franchises necessary to the proper conduct
of its business; provided, however, that nothing in this Section shall prevent
the Company or any Subsidiary (other than a Banking Subsidiary or MAF
Developments) from permitting any license, permit or franchise to lapse if such
action is, in the judgment of the Company, desirable in the conduct of its
business and is not disadvantageous in any material respect to the Lender.
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Section 7.2. Maintenance of Properties. The Company shall maintain,
preserve and keep its property, plant and equipment in good repair, working
order and condition (ordinary wear and tear excepted) and shall from time to
time make all needful and proper repairs, renewals, replacements, additions and
betterments thereto so that at all times the efficiency thereof shall be
preserved and maintained in all material respects, and shall cause each
Subsidiary to do so in respect of Property owned or used by it; provided,
however, that nothing in this Section shall prevent (a) the Company or any
Subsidiary (other than a Banking Subsidiary or MAF Developments) from
discontinuing the operation and maintenance of any of its properties if such
discontinuation is, in the judgment of the Company, desirable in the conduct of
its business and is not disadvantageous in any material respect to the Lender or
(b) any Banking Subsidiary from closing or selling a branch office if such
closing or sale is, in the judgment of the Company, desirable in the conduct of
its business and is not disadvantageous in any material respect to the Lender.
Section 7.3. Taxes and Assessments. The Company shall duly pay and
discharge, and shall cause each Subsidiary to duly pay and discharge, all taxes,
rates, assessments, fees and governmental charges upon or against it or its
Properties, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves are provided therefor.
Section 7.4. Insurance. The Company shall insure and keep insured,
and shall cause each Subsidiary to insure and keep insured, with good and
responsible insurance companies, all insurable Property owned by it which is of
a character usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in such
amounts, as are insured by Persons similarly situated and operating like
Properties; and the Company shall insure, and shall cause each Subsidiary to
insure, such other hazards and risks (including employers' and public liability
risks) with good and responsible insurance companies as and to the extent
usually
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insured by Persons similarly situated and conducting similar businesses.
The Company shall upon request furnish to the Lender a certificate setting forth
in summary form the nature and extent of the insurance maintained pursuant to
this Section.
Section 7.5. Financial Reports. The Company shall, and shall cause
each Subsidiary to, maintain a standard system of accounting in accordance with
GAAP and shall furnish to the Lender and its duly authorized representatives,
subject to Section 9.9 hereof, such information respecting the business and
financial condition of the Company and its Subsidiaries (including non-financial
information and examination reports and supervisory letters to the extent
permitted by applicable regulatory authorities) as the Lender may reasonably
request; and without any request, shall furnish to the Lender:
(a) as soon as available, and in any event within 50 days after the
close of each fiscal quarter of the Company, a copy of the consolidated
balance sheet of the Company and its Subsidiaries as of the last day of
such period and the consolidated statements of income of the Company and
its Subsidiaries for the quarter and for the fiscal year-to-date period
then ended and the consolidated statements of stockholders' equity and cash
flows for the fiscal year-to-date period then ended, each in reasonable
detail showing in comparative form the figures for the corresponding date
and period in the previous fiscal year, prepared by the Company in
accordance with GAAP (subject to year-end audit adjustments and the absence
of footnote disclosures) and certified to by the President or chief
financial officer of the Company;
(b) as soon as available, and in any event within 120 days after the
close of each fiscal year of the Company, a copy of the consolidated
balance sheet of the Company and its Subsidiaries as of the close of such
fiscal year and the consolidated statements of income, retained earnings
and cash flows of the Company and its Subsidiaries for such fiscal year,
and accompanying notes thereto, each in reasonable detail showing in
comparative form the figures
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for the previous fiscal year, accompanied by an unqualified opinion thereon
of KPMG Peat Marwick or another firm of independent public accountants of
recognized national standing selected by the Company, to the effect that
the financial statements have been prepared in accordance with GAAP and
present fairly in accordance with GAAP the consolidated financial condition
of the Company and its Subsidiaries as of the close of such fiscal year and
the results of their operations and cash flows for the fiscal year then
ended and that an examination of such accounts in connection with such
financial statements has been made in accordance with generally accepted
auditing standards and, accordingly, such examination included such tests
of the accounting records and such other auditing procedures as were
considered necessary in the circumstances;
(c) as soon as available, and in any event within 50 days after the
close of each fiscal quarter of each Banking Subsidiary, all call reports
and other financial statements required to be delivered by such Banking
Subsidiary to any governmental authority or authorities having jurisdiction
over such Banking Subsidiary and all schedules thereto;
(d) promptly after receipt thereof, any additional written reports,
management letters or other detailed information contained in writing
concerning significant aspects of the Company's or any Subsidiary's
operations and financial affairs given to it by its independent public
accountants;
(e) promptly upon the furnishing thereof to the shareholders of the
Company, copies of all financial statements, reports and proxy statements
so furnished;
(f) promptly upon the filing thereof, copies of all registration
statements, Form 10-K, Form 10-Q and Form 8-K reports and proxy statements
which the Company or any of its Subsidiaries file with the Securities and
Exchange Commission;
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(g) promptly upon the receipt or execution thereof, (i) notice by
the Company or any Banking Subsidiary that (1) it has received a request or
directive from any federal or state regulatory agency which requires it to
submit a capital maintenance or restoration plan or restricts the payment
of dividends by any Banking Subsidiary to the Company or (2) it has
submitted a capital maintenance or restoration plan to any federal or state
regulatory agency or has entered into a memorandum or agreement with any
such agency, including, without limitation, any agreement which restricts
the payment of dividends by any Banking Subsidiary to the Company or
otherwise imposes restrictions or requirements on it which are not
generally applicable to banks or thrifts or their holding companies, and
(ii) copies of any such plan, memorandum, or agreement, unless
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Event of Default has occurred during such period, setting forth a description of
such Default or Event of Default and specifying the action, if any, taken by the
Company to remedy the same. Such certificate shall also set forth the
calculations supporting such statements with respect to Sections 7.7, 7.9, 7.10,
and 7.11 of this Agreement.
Section 7.6. Inspection. Subject to Section 9.9 hereof, the Company
shall, and shall cause each Subsidiary to, permit the Lender and its duly
authorized representatives and agents to visit and inspect any of the
Properties, corporate books and financial records of the Company and each
Subsidiary, to examine and make copies of the books of accounts and other
financial records of the Company and each Subsidiary, and to discuss the
affairs, finances and accounts of the Company and each Subsidiary with, and to
be advised as to the same by, its officers, employees and independent public
accountants (and by this provision the Company hereby authorizes such
accountants to discuss with the Lender the finances and affairs of the Company
and of each Subsidiary) at such reasonable times and reasonable intervals as the
Lender may designate; provided, however, that neither the Company nor any
Subsidiary shall be required to make available to the Lender any customer lists
or other proprietary information unless such information is required by the
Lender to determine the financial condition of the Company or any Subsidiary or
to determine the ability of the Company to meet its obligations hereunder.
Section 7.7. Non-Performing Assets. The Company shall, as of the
last day of each fiscal quarter, maintain on a consolidated basis with its
Subsidiaries, and shall cause each Banking Subsidiary to maintain as of such day
on a consolidated basis with its subsidiaries, a ratio (a) of Non-Performing
Assets of the Company or such Banking Subsidiary on a consolidated basis, as the
case may be, to (b) the sum of (i) stockholders' equity for the Company or core
capital for such Banking Subsidiary, as the case may be, plus (ii) loan loss
reserves established by the Company or such Banking Subsidiary, as the case may
be, on a consolidated basis in accordance with regulatory accounting
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principles applicable to the Company or such Banking Subsidiary, of not more
than .25 to 1.0.
Section 7.8. Regulatory Capital Requirements. (a) Each Banking
Subsidiary shall at all times be at least "well capitalized" as defined in the
Federal Deposit Insurance Corporation Improvement Act of 1991 and any
regulations to be issued thereunder, as such statute or regulations may each be
amended or supplemented from time to time.
(b) The requirements described in subsection (a) above shall be
computed and determined in accordance with the rules and regulations as in
effect from time to time established by the rules and regulations as in effect
from time to time established by the appropriate governmental authority having
jurisdiction over the Company or such Banking Subsidiary. In addition to the
provisions set forth above, the Company shall, and shall cause each Banking
Subsidiary to, comply with any and all capital guidelines and requirements as in
effect from time to time established by the relevant governmental authority or
authorities having jurisdiction over the Company or any Banking Subsidiary.
Section 7.9. Tangible Capital Ratio. If, as of the last day of any
fiscal quarter of Mid America, the Tangible Capital Ratio of Mid America is less
than .07 to 1.0, then in that event the Company agrees to cause Tangible Capital
of Mid America to be increased over the immediately succeeding 12-month period
by an amount not less than 25% of Net Income of Mid America accrued over the
same period unless and until the Tangible Capital Ratio of Mid America increases
to an amount equal to or greater than .07 to 1.0.
Section 7.10. Adjusted Net Worth. The Company shall, as of the date
hereof and as of the last day of each fiscal quarter of the Company, maintain
Adjusted Net Worth of the Company and its Subsidiaries determined on a
consolidated basis in an amount not less than $150,000,000.
Section 7.11. Adjusted Net Income. As of the last day of each fiscal
year of the Company (commencing with the fiscal year
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beginning July 1, 1996), the Company shall have Adjusted Net Income for the year
then ended of not less than $15,000,000.
Section 7.12. Indebtedness for Borrowed Money. The Company shall
not, nor shall it permit any Subsidiary to, issue, incur, assume, create or have
outstanding any Indebtedness for Borrowed Money; provided, however, that the
foregoing shall not restrict nor operate to prevent:
(a) the Obligations of the Company owing to the Lender hereunder and
under the other Loan Documents and any other indebtedness or obligations of
the Company or any Subsidiary owing to the Lender;
(b) Permitted Banking Subsidiary Indebtedness;
(c) indebtedness of the Company or any Subsidiary owing to the
Company or any Subsidiary;
(d) Contingent Obligations incurred with respect to the endorsement
of instruments for deposit or collection in the ordinary course of
business;
(e) Subordinated Debt of the Company in an aggregate principal
amount not to exceed $27,600,000 at any one time outstanding;
(f) obligations of the Company or MAF Developments arising under or
in connection with letters of credit issued by the Company or MAF
Developments relating to land development activities of the Company or MAF
Developments in an aggregate amount not to exceed $10,000,000 at any one
time outstanding;
(g) currently outstanding indebtedness of the Company and of its
Subsidiaries not otherwise permitted under this Section which is disclosed
on Schedule 7.12(g) attached hereto; and
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(h) unsecured indebtedness of the Company or any Subsidiary not
otherwise permitted under this Section in an aggregate amount not to exceed
$5,000,000 at any one time outstanding, except that, in the event the
Revolving Credit Commitment is terminated in whole either at the Revolving
Credit Termination Date or otherwise (except by virtue of an Event of
Default), the limitation on additional indebtedness imposed by this
Section 7.12(h) shall be increased to $15,000,000 in the aggregate at any
one time outstanding.
Section 7.13. Liens. The Company shall not, nor shall it permit any
Subsidiary to, create, incur or permit to exist any Lien of any kind on any
stock or other equity interest of any kind in any Subsidiary, whether now or
hereafter owned, directly or indirectly, by the Company or any other Subsidiary.
Section 7.14. Mergers and Consolidations. The Company shall not, nor shall
it permit any Banking Subsidiary or MAF Developments to, be a party to any
merger or consolidation in which the Company, the Banking Subsidiary or MAF
Developments is not the surviving entity unless, at or prior to the consummation
of any such event, the Obligations are paid in full and the Commitments are
terminated in full.
Section 7.15. Maintenance of Subsidiaries. The Company shall not assign,
sell or transfer, or permit any Banking Subsidiary or MAF Developments to issue,
assign, sell or transfer, any shares of capital stock of a Banking Subsidiary or
MAF Developments unless, at or prior to the consummation of any such event, the
Obligations are paid in full and the Commitments are terminated in full;
provided that the foregoing shall not operate to prevent the issuance, sale and
transfer to any person of any shares of capital stock of a Banking Subsidiary or
MAF Developments solely for the purpose of qualifying, and to the extent legally
necessary to qualify, such person as a director of such Banking Subsidiary or
MAF Developments.
Section 7.16. Dividends and Certain Other Restricted Payments. The Company
shall not during any fiscal year (a) declare or pay any dividends on or make any
other distributions in respect of
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any class or series of its capital stock (other than dividends payable solely in
its capital stock) or (b) directly or indirectly purchase, redeem or otherwise
acquire or retire any of its capital stock (collectively, "Restricted
Payments"); provided, however, that the Company may make any such Restricted
Payment so long as no Default or Event of Default then exists or would arise
after giving effect thereto.
Section 7.17. Subordinated Debt. The Company shall not amend or modify in
any material respect any of the terms and conditions relating to any
Subordinated Debt nor shall the Company make any voluntary prepayment thereof or
effect any voluntary redemption thereof or make any payment on account of any
Subordinated Debt which is prohibited under the terms of any instrument or
agreement subordinating the same to the Obligations.
Section 7.18. ERISA. The Company shall, and shall cause each Subsidiary
to, promptly pay and discharge all obligations and liabilities arising under
ERISA of a character which if unpaid or unperformed might result in the
imposition of a Lien against any of its Properties. The Company shall, and shall
cause each Subsidiary to, promptly notify the Lender of (i) the occurrence of
any material adverse reportable event (as defined in ERISA) with respect to a
Plan, (ii) receipt of any notice from the PBGC of its intention to seek
termination of any Plan or appointment of a trustee therefor, (iii) its
intention to terminate or withdraw from any Plan, and (iv) the occurrence of any
event with respect to any Plan which would result in the incurrence by the
Company or any Subsidiary of any material liability, fine or penalty, or any
material increase in the contingent liability of the Company or any Subsidiary
with respect to any post-retirement Welfare Plan benefit.
Section 7.19. Compliance with Laws. The Company shall, and shall cause
each Subsidiary to, comply in all respects with the requirements of all federal,
state and local laws, rules, regulations, ordinances and orders applicable to or
pertaining to their Properties or business operations, non-compliance with which
could have a material adverse effect on the financial condition, Properties,
business or operations of the Company and
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its Subsidiaries taken as a whole or could result in a Lien upon any material
portion of their Property.
Section 7.20. Burdensome Contracts With Affiliates. The Company shall not,
nor shall it permit any Subsidiary to, enter into any material contract,
agreement or business arrangement with any of its Affiliates on terms and
conditions which are less favorable to the Company or such Subsidiary than would
be usual and customary in similar contracts, agreements or business arrangements
between Persons not affiliated with each other.
Section 7.21. Change in the Nature of Business. The Company shall not, and
shall not permit any Subsidiary to, engage in any business or activity if as a
result the general nature of the business of the Company or any Subsidiary would
be changed in any material respect from the general nature of the business
engaged in by the Company or such Subsidiary on the date of this Agreement
(after giving effect to the consummation of the N.S. Bancorp Acquisition and the
Merger).
Section 7.22. Regulatory-Mandated Disposition of MAF Developments. In the
event the Company is required by applicable bank or thrift regulatory
authorities to dispose of MAF Developments, then in that event 40% of the net
proceeds (i.e., gross proceeds net of out-of-pocket expenses incurred in
effecting the sale or other disposition thereof, including reasonable legal
fees) from such disposition shall be applied as and for a mandatory prepayment
of the Obligations (which shall be applied first to the outstanding principal
balance of the Term Note until payment in full thereof, thereafter to be applied
as a mandatory prepayment of the Revolving Credit Note with the Revolving Credit
Commitment being terminated by a like amount notwithstanding anything contained
in Section 3.4 hereof to the contrary) unless the Company and the Lender agree
otherwise. Any prepayment of the Term Note made pursuant to this Section shall
not, however, be subject to the prepayment fee called for by Section 2.9 hereof.
In the event the Company is so required to dispose of MAF Developments as a
result of the events mentioned above, such disposition shall not constitute a
breach of, or a
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default under, Sections 7.1, 7.2, 7.14, 7.15, 8.1(h), 8.1(j), or 8.1(k) of this
Agreement.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
Section 8.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
(a) default in the payment when due of all or any part of the
principal of any Note (whether at the stated maturity thereof or at any
other time provided for in this Agreement) or of any reimbursement
obligation owing under any Application, or default for a period of 5 days
in the payment when due of any interest on any Note or of any fee or other
Obligation payable by the Company hereunder or under any other Loan
Document; or
(b) default in the observance or performance of any covenant set
forth in Sections 7.5(i), 7.7, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14, or
7.15 hereof; or
(c) default in the observance or performance of any provision of
Section 7.5 hereof (other than Section 7.5(i) referred to in Section 8.1(b)
above) which is not remedied within 5 days after the occurrence thereof, or
default in the observance or performance of any other provision hereof or
of any other Loan Document which is not remedied within 30 days after
written notice thereof is given to the Company by the Lender; or
(d) any representation or warranty made by the Company herein or in
any other Loan Document, or in any statement or certificate furnished by it
pursuant hereto or thereto, or in connection with any extension of credit
made hereunder, proves untrue in any material respect as of the date of the
issuance or making thereof; or
(e) default shall occur under any Indebtedness for Borrowed Money
aggregating more than $5,000,000 issued, assumed or guaranteed by the
Company or any Subsidiary, or
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under any indenture, agreement or other instrument under which the same may
be issued, and such default shall continue for a period of time sufficient
to permit the acceleration of the maturity of any such Indebtedness for
Borrowed Money (whether or not such maturity is in fact accelerated), or
any such Indebtedness for Borrowed Money shall not be paid when due
(whether by lapse of time, acceleration or otherwise); or
(f) any judgment or judgments, writ or writs, or warrant or warrants
of attachment, or any similar process or processes, the aggregate amount of
which (after reduction by the amount covered by insurance) exceeds
$5,000,000, shall be entered or filed against the Company or any Subsidiary
or against any of their Property and which remains unvacated, unbonded,
unstayed or unsatisfied for a period of 45 days; or
(g) the Company or any member of its Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess of $500,000 which
it shall have become liable to pay to the PBGC or to a Plan under TitleEIV
of ERISA; or notice of intent to terminate a Plan or Plans having aggregate
Unfunded Vested Liabilities in excess of $500,000 (collectively, a
"Material Plan") shall be filed under Title IV of ERISA by the Company or
any other member of its Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Material Plan or a proceeding shall be instituted by a
fiduciary of any Material Plan against the Company or any member of its
Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated; or
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(h) dissolution or termination of the existence of the Company or
any Banking Subsidiary or MAF Developments.; or
(i) any conservator or receiver shall be appointed for the Company
or any Banking Subsidiary under applicable federal or state law applicable
to banks, thrifts, or their holding companies, or any Banking Subsidiary
shall suspend payment of any material portion of its obligations, or any
Banking Subsidiary shall cease to be a federally insured depositary
institution, or a cease and desist order shall be issued against the
Company or any Banking Subsidiary pursuant to applicable federal or state
law applicable to banks, thrifts, or their holding companies which has or
is reasonably likely to have a material adverse effect on the condition
(financial or otherwise), Properties or business prospects of such Persons,
or the Company or any Banking Subsidiary shall enter into any commitment to
maintain the capital of an insured depository institution in a required
amount with any federal or state regulator or any such regulator shall
require the Company or any Banking Subsidiary to submit a capital
maintenance or restoration plan; or
(j) the Company, any Banking Subsidiary, or MAF Developments shall
(i) have entered involuntarily against it an order for relief under the
United States Bankruptcy Code, as amended, (ii) not pay, or admit in
writing its inability to pay, its debts generally as they become due,
(iii) make an assignment for the benefit of creditors, (iv) apply for,
seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
substantial part of its Property, (v) institute any proceeding seeking to
have entered against it an order for relief under the United States
Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to
file an answer or other pleading denying the material
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allegations of any such proceeding filed against it, (vi) take any
corporate action in furtherance of any matter described in parts (i)
through (v) above, or (vii) fail to contest in good faith any appointment
or proceeding described in Section 8.1(k) hereof; or
(k) a custodian, receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Company, any Banking Subsidiary, or MAF
Developments or any substantial part of any of their Property, or a
proceeding described in Section 8.1(j)(v) shall be instituted against the
Company, any Banking Subsidiary, or MAF Developments, and such appointment
continues undischarged or such proceeding continues undismissed or unstayed
for a period of 60 days.
Section 8.2. Non-Bankruptcy Defaults. When any Event of Default other than
those described in subsection (j) or (k) of Section 8.1 hereof has occurred and
is continuing, the Lender may, by written notice to the Company, do all or any
of the following: (a) terminate the remaining Commitments and all other
obligations of the Lender hereunder on the date stated in such notice (which may
be the date thereof); (b) declare the principal of and the accrued interest on
all outstanding Notes to be forthwith due and payable and thereupon all
outstanding Notes, including both principal and interest thereon, shall be and
become immediately due and payable together with all other amounts payable under
the Loan Documents without further demand, presentment, protest or notice of any
kind; and (c) demand that the Company immediately pay to the Lender the full
amount then available for drawing under each or any Letter of Credit, and the
Company agrees to immediately make such payment and acknowledges and agrees that
the Lender would not have an adequate remedy at law for failure by the Company
to honor any such demand and that the Lender shall have the right to require the
Company to specifically perform such undertaking whether or not any drawings or
other demands for payment have been made under any Letter of Credit.
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Section 8.3. Bankruptcy Defaults. When any Event of Default described in
subsection (j) or (k) of Section 8.1 hereof has occurred and is continuing, then
all outstanding Notes shall immediately become due and payable together with all
other amounts payable under the Loan Documents without presentment, demand,
protest or notice of any kind, the obligation of the Lender to extend further
credit pursuant to any of the terms hereof shall immediately terminate and the
Company shall immediately pay to the Lender the full amount then available for
drawing under all outstanding Letters of Credit, the Company acknowledging and
agreeing that the Lender would not have an adequate remedy at law for failure by
the Company to honor any such demand and that the Lender shall have the right to
require the Company to specifically perform such undertaking whether or not any
draws or other demands for payment have been made under any of the Letters of
Credit.
Section 8.4. Collateral for Undrawn Letters of Credit. (a) If the
prepayment of the amount available for drawing under any or all outstanding
Letters of Credit is required under Section 1.3(b), 3.3, 8.2, or 8.3 hereof, the
Company shall forthwith pay the amount required to be so prepaid, to be held by
the Lender as provided in subsection (b) below.
(b) All amounts prepaid pursuant to subsection (a) above shall be held
by the Lender in a separate collateral account (such account, and the credit
balances, properties and any investments from time to time held therein, and any
substitutions for such account, any certificate of deposit or other instrument
evidencing any of the foregoing and all proceeds of and earnings on any of the
foregoing being collectively called the "Account") as security for, and for
application by the Lender (to the extent available) to, the reimbursement of any
payment under any Letter of Credit then or thereafter made by the Lender, and to
the payment, after the occurrence of any Event of Default, of the unpaid balance
of any Loans and all other Obligations. The Account shall be held in the name
of and subject to the exclusive dominion and control of the Lender. If and when
requested by the Company, the Lender shall invest funds held in the Account from
time to time in direct obligations of, or obligations the
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principal of and interest on which are unconditionally guaranteed by, the United
States of America with a remaining maturity of one year or less, provided that
the Lender is irrevocably authorized to sell investments held in the Account
when and as required to make payments out of the Account for application to
amounts due and owing from the Company to the Lender; provided, however, that if
(i) the Company shall have made payment of all such obligations referred to in
subsection (a) above, (ii) all relevant preference or other disgorgement periods
relating to the receipt of such payments have passed, and (iii) no Letters of
Credit, Commitments, or other Obligations then due and owing remain outstanding
hereunder, then the Lender shall release to the Company, at its request, any
remaining amounts held in the Account.
SECTION 9. MISCELLANEOUS.
Section 9.1. Non-Business Days. If any payment hereunder becomes due
and payable on a day which is not a Business Day, the due date of such payment
shall be extended to the next succeeding Business Day on which date such payment
shall be due and payable. In the case of any payment of principal falling due
on a day which is not a Business Day, interest on such principal amount shall
continue to accrue during such extension at the rate per annum then in effect,
which accrued amount shall be due and payable on the next scheduled date for the
payment of interest.
Section 9.2. No Waiver, Cumulative Remedies. No delay or failure on
the part of the Lender or on the part of any holder of any of the Obligations in
the exercise of any power or right shall operate as a waiver thereof or as an
acquiescence in any default, nor shall any single or partial exercise of any
power or right preclude any other or further exercise thereof or the exercise of
any other power or right. The rights and remedies hereunder of the Lender and
any of the holders of the Obligations are cumulative to, and not exclusive of,
any rights or remedies which any of them would otherwise have.
Section 9.3. Amendments. Any provision of this Agreement or the
other Loan Documents may be amended or waived if, but only
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if, such amendment or waiver is in writing and is signed by the Company and the
Lender.
Section 9.4. Costs and Expenses. The Company agrees to pay on demand
the costs and expenses of the Lender in connection with the negotiation,
preparation, execution and delivery of this Agreement, the other Loan Documents
and the other instruments and documents to be delivered hereunder or thereunder,
and in connection with the transactions contemplated hereby or thereby, and in
connection with any consents hereunder or waivers or amendments hereto or
thereto, including the fees and expenses of Messrs. Chapman and Cutler, counsel
for the Lender, with respect to all of the foregoing (whether or not the
transactions contemplated hereby are consummated). The Company further agrees
to pay to the Lender all costs and expenses (including court costs and
attorneys' fees), if any, incurred or paid by the Lender in connection with any
Default or Event of Default or in connection with the enforcement of this
Agreement or any of the other Loan Documents or any other instrument or document
delivered hereunder or thereunder. The Company further agrees to indemnify and
save the Lender and any security trustee for the Lender harmless from any and
all liabilities, losses, costs and expenses incurred by the Lender, or any such
security trustee, in connection with any action, suit or proceeding brought
against the Lender, or any such security trustee, by any Person which arises out
of the transactions contemplated or financed hereby or out of any action or
inaction by the Lender or any such security trustee hereunder or thereunder,
except for such thereof as is caused by the gross negligence or willful
misconduct of the party seeking to be indemnified. The provisions of this
Section and the protective provisions of Section 2 hereof shall survive payment
of the Obligations.
Section 9.5. Documentary Taxes. The Company agrees to pay on demand
any documentary, stamp or similar taxes payable in respect of this Agreement or
any other Loan Document, including interest and penalties, in the event any such
taxes are assessed, irrespective of when such assessment is made and whether or
not any credit is then in use or available hereunder.
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Section 9.6. Survival of Representations. All representations and
warranties made herein or in any of the other Loan Documents or in certificates
given pursuant hereto or thereto shall survive the execution and delivery of
this Agreement and the other Loan Documents, and shall continue in full force
and effect with respect to the date as of which they were made as long as any
credit is in use or available hereunder.
Section 9.7. Participations. The Lender may grant participations in
its extensions of credit hereunder to any other bank or other lending
institution (a "Participant"), provided that (i) no Participant shall thereby
acquire any direct rights under this Agreement, (ii) any agreement pursuant to
which such participation is granted shall provide that the Lender shall retain
the sole right and responsibility to enforce the obligations of Company under
this Agreement and the other Loan Documents including, without limitation, the
right to approve any amendment, modification, or waiver of any provision of the
Loan Documents, except that such agreement may provide that the Lender will not
agree to any amendment, modification, or waiver of the Loan Documents without
such participantOs consent that would reduce the principal amount of or interest
owing on, or extend the scheduled maturity date of, any Obligation in which such
participant has an interest or that relates to Sections 7.7, 7.8, 7.9, 7.10,
7.11, 7.12, 7.14, 7.17, or 7.21 of this Agreement, and (iii) no sale of a
participation in extensions of credit shall in any manner relieve the Lender of
its obligations hereunder.
Section 9.8. Notices. Except as otherwise specified herein, all
notices hereunder shall be in writing (including, without limitation, notice by
telecopy) and shall be given to the relevant party at its address or telecopier
number set forth below, in the case of the Company, or on the appropriate
signature page hereof, in the case of the Lender, or such other address or
telecopier number as such party may hereafter specify by notice to the other
given by United States certified or registered mail, by telecopy or by other
telecommunication device capable of creating a written record of such notice and
its receipt. Notices hereunder to the Company shall be addressed to:
MAF Bancorp., Inc.
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55th and Holmes
Clarendon Hills, Illinois 60514
Attention: Mr. Jerry Weberling
Telephone: (708) 887-5999
Telecopy: (708) 325-0407
with a copy of all written notices of default also to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
Attention: Ms. Jennifer R. Evans
Telephone: (312) 609-7500
Telecopy: (312) 609-5005
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the addresses specified in this Section; provided that any notice given pursuant
to Section 1 or Section 2 hereof shall be effective only upon receipt.
Section 9.9. Confidentiality. The Lender shall hold in confidence
any nonpublic information delivered or made available to it by the Company or
any Subsidiary or their respective officers, employees and independent public
accountants. The foregoing to the contrary notwithstanding, nothing herein
shall prevent the Lender from disclosing any information delivered or made
available to it by the Company or any Subsidiary (i) upon the order of any court
or administrative agency, (ii) upon the request or demand of any regulatory
agency or authority, (iii) which has been publicly disclosed other than as a
result of a disclosure by the Lender which is not permitted by this Agreement,
(iv) in connection with any litigation to which the Lender or any of its
Affiliates may be a party, along with the Company, any Subsidiary or any of
their respective Affiliates, (v) to the extent reasonably required in connection
with the
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exercise of any right or remedy under this Agreement, the other Loan Documents
or otherwise, (vi) to legal counsel and financial consultants and independent
auditors of the Lender, and (vii) to any actual or proposed participant or
assignee of all or part of its rights under the credit contemplated hereby
provided such participant or assignee agrees in writing to be bound by the duty
of confidentiality under this Section to the same extent as if it were the
Lender hereunder.
Section 9.10. Headings. Section headings used in this Agreement are
for convenience of reference only and are not a part of this Agreement for any
other purpose.
Section 9.11. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. All rights, remedies and powers provided in this Agreement and
the other Loan Documents may be exercised only to the extent that the exercise
thereof does not violate any applicable mandatory provisions of law, and all the
provisions of this Agreement and the other Loan Documents are intended to be
subject to all applicable mandatory provisions of law which may be controlling
and to be limited to the extent necessary so that they will not render this
Agreement or the other Loan Documents invalid or unenforceable.
Section 9.12. Counterparts. This Agreement may be executed in any
number of counterparts, and by different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
Section 9.13. Entire Understanding. This Agreement together with the
other Loan Documents constitute the entire understanding of the parties with
respect to the subject matter hereof and any prior agreements, whether written
or oral, with respect thereto are superseded hereby.
-75-
<PAGE>
Section 9.14. Binding Nature, Governing Law, Etc. This Agreement
shall be binding upon the Company and its successors and assigns, and shall
inure to the benefit of the Lender and the benefit of its successors and
assigns, including any subsequent holder of an interest in the Obligations. The
Company may not assign its rights hereunder without the written consent of the
Lender. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 9.15. Submission to Jurisdiction; Waiver of Jury Trial.
The Company hereby submits to the non-exclusive jurisdiction of the United
States District Court for the Northern District of Illinois and of any Illinois
State court sitting in the City of Chicago for purposes of all legal proceedings
arising out of or relating to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby. The Company irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. THE COMPANY AND THE LENDER EACH HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.
Dated as of this 22nd day of May, 1996.
MAF Bancorp, Inc.
By
------------------ , ---------
(Print or Type Name)
(Title)
-76-
<PAGE>
Accepted and Agreed to at Chicago, Illinois as of the day and year last
above written.
Harris Trust And Savings Bank
By
------------------ , ---------
(Print or Type Name)
(Title)
111 West Monroe Street
Chicago, Illinois 60603
Attention: Mr. Michael
Cameli
Telephone: (312) 461-2396
Telecopy: (312) 765-8382
-77-
<PAGE>
EXHIBIT A
MAF BANCORP, INC.
REVOLVING CREDIT NOTE
Chicago, Illinois
$10,000,000 May 22, 1996
On the Revolving Credit Termination Date, for value received, the
undersigned, MAF Bancorp, Inc., a Delaware corporation (the "Company"), hereby
promises to pay to the order of Harris Trust and Savings Bank (the "Lender"), at
the principal office of the Lender in Chicago, Illinois, the principal sum of
(i) Ten Million and no/100 Dollars ($10,000,000), or (ii) such lesser amount as
may at the time of the maturity hereof, whether by acceleration or otherwise, be
the aggregate unpaid principal amount of all Revolving Credit Loans owing from
the Company to the Lender under the Revolving Credit provided for in the Credit
Agreement hereinafter mentioned.
This Note evidences loans constituting part of a "Domestic Rate Portion"
and "LIBOR Portions" as such terms are defined in that certain Credit Agreement
dated as of May 22, 1996, between the Company and the Lender (said Credit
Agreement, as the same may be amended, modified or restated from time to time,
being referred to herein as the "Credit Agreement") made and to be made to the
Company by the Lender under the Revolving Credit provided for under the Credit
Agreement, and the Company hereby promises to pay interest at the office
described above on each loan evidenced hereby at the rates and at the times and
in the manner specified therefor in the Credit Agreement.
Each loan made under the Revolving Credit against this Note, any repayment
of principal hereon, the status of each such loan from time to time as part of
the Domestic Rate Portion or a LIBOR Portion and, in the case of any LIBOR
Portion, the interest rate and Interest Period applicable thereto shall be
endorsed by the holder hereof on a schedule to this Note or recorded on the
books and records of the holder hereof (provided that such entries shall be
endorsed on a schedule to this Note prior to any
78
<PAGE>
negotiation hereof). The Company agrees that in any action or proceeding
instituted to collect or enforce collection of this Note, the entries so
endorsed on a schedule to this Note or recorded on the books and records of the
holder hereof shall be prima facie evidence (absent manifest error) of the
unpaid principal balance of this Note, the status of each such loan from time to
time as part of the Domestic Rate Portion or a LIBOR Portion, and, in the case
of any LIBOR Portion, the interest rate and Interest Period applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary prepayments
may be made hereon, and certain prepayments are required to be made hereon, all
in the events, on the terms and with the effects provided in the Credit
Agreement. All capitalized terms used herein without definition shall have the
same meanings herein as such terms are defined in the Credit Agreement.
The Company hereby promises to pay all costs and expenses (including
attorneys' fees) suffered or incurred by the holder hereof in collecting this
Note or enforcing any rights in any collateral therefor. The Company hereby
waives presentment for payment and demand. THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
MAF Bancorp, Inc.
By
------------------ , ---------
(Print or Type Name)
(Title)
-79-
<PAGE>
EXHIBIT B
MAF BANCORP, INC.
TERM NOTE
Chicago, Illinois
$40,000,000 May 22, 1996
For Value Received, the undersigned, MAF Bancorp, Inc., a Delaware
corporation (the "Company"), hereby promises to pay to the order of Harris Trust
and Savings Bank (the "Lender"), at the principal office of the Lender in
Chicago, Illinois, the principal sum of Forty Million and no/100 Dollars
($40,000,000) or, if less, the aggregate principal amount of the Term Loan made
to the Company under Section 1.4 of the Credit Agreement hereinafter referred
to, in seven (7) consecutive annual principal installments in the amounts called
for by Section 1.4 of the Credit Agreement hereinafter referred to, commencing
on December 31, 1997, and continuing on the last day of each December thereafter
to and including December 31, 2003, the final maturity hereof.
This Note evidences a loan constituting part of the "Domestic Rate
Portion", "Treasury Rate Portions", and/or "LIBOR Portions" as such terms are
defined in that certain Credit Agreement dated as of May 22, 1996, between the
Company and the Lender (said Credit Agreement, as the same may be amended,
modified or restated from time to time, being referred to herein as the "Credit
Agreement") made to the Company by the Lender under the Term Loan Commitment
provided for under the Credit Agreement, and the Company hereby promises to pay
interest at the office specified above on the loan evidenced hereby at the rates
and at the times and in the manner specified therefor in the Credit Agreement.
The loan made under the Term Loan Commitment against this Note, any
repayment of principal hereon, the status of such loan from time to time as part
of the Domestic Rate Portion or a Fixed Rate Portion and, in the case of any
Fixed Rate Portion, the interest rate and Interest Period applicable thereto
shall be
<PAGE>
endorsed by the holder hereof on a schedule to this Note or recorded on the
books and records of the holder hereof (provided that such entries shall be
endorsed on a schedule to this Note prior to any negotiation hereof). The
Company agrees that in any action or proceeding instituted to collect or enforce
collection of this Note, the entries so endorsed on a schedule to this Note or
recorded on the books and records of the holder hereof shall be prima facie
evidence (absent manifest error) of the unpaid balance of this Note and the
status of such loan from time to time as part of the Domestic Rate Portion or a
Fixed Rate Portion and, in the case of any Fixed Rate Portion, the interest rate
and Interest Period applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity and voluntary
prepayments may be made hereon, all in the events, on the terms and with the
effects provided in the Credit Agreement. All capitalized terms used herein
without definition shall have the same meanings herein as such terms are defined
in the Credit Agreement.
The Company hereby promises to pay all costs and expenses (including
attorneys' fees) suffered or incurred by the holder hereof in collecting this
Note or enforcing any rights in any collateral therefor. The Company hereby
waives presentment for payment and demand. THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAW.
MAF Bancorp, Inc.
By
------------------ , ---------
(Print or Type Name)
(Title)
-81-
<PAGE>
-82-
<PAGE>
Exhibit C
Compliance Certificate
To: Harris Trust and Savings
Bank
Chicago, Illinois
This Compliance Certificate is furnished to Harris Trust and Savings Bank
pursuant to that certain Credit Agreement dated as of May 22, 1996, between MAF
Bancorp, Inc. and you (the "Credit Agreement"). Unless otherwise defined
herein, the terms used in this Compliance Certificate have the meanings ascribed
thereto in the Credit Agreement.
The Undersigned hereby certifies that:
1. I am the duly elected _________________________________ of the
Company;
2. In my corporate capacity, I have reviewed the terms of the Credit
Agreement and I have made, or have caused to be made under my supervision, a
detailed review of the transactions and conditions of the Company and its
Subsidiaries during the accounting period covered by the attached financial
statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or the occurrence of any
event which constitutes a Default or Event of Default during or at the end of
the accounting period covered by the attached financial statements or as of the
date of this Certificate, except as set forth below;
4. The financial statements required by Section 7.5 of the Credit
Agreement and being furnished to you concurrently with this Certificate are
true, correct and complete as of the date and for the periods covered thereby;
and
<PAGE>
5. The Attachment hereto sets forth financial data and computations
evidencing the Company's compliance with certain covenants of the Credit
Agreement, all of which data and computations are, to the best of my knowledge,
true, complete and correct and have been made in accordance with the relevant
Sections of the Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Company has taken, is taking, or proposes to
take with respect to each such condition or event:
------------------------------------------------------------------------
- ------------------
------------------------------------------------------------------------
- ------------------
------------------------------------------------------------------------
- ------------------
------------------------------------------------------------------------
- ------------------
The foregoing certifications, together with the computations set forth in
the Attachment hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this _________ day of
__________________ 19___.
---------------------------------
------------------, -------------
(Print or Type Name) (Title)
-84-
<PAGE>
ATTACHMENT TO COMPLIANCE CERTIFICATE
MAF BANCORP, INC.
Compliance Calculations for Credit Agreement
Dated as of May 22, 1996
Calculations as of _____________, 19___
- --------------------------------------------------------------------------------
- ----------------
A. Ratio of Non-Performing Assets to Stockholders' equity/Core capital and
Loan loss reserves (Section 7.7)
1. Non-Performing Assets for Company
a. Loans more than 90 days past due $
-------------
b. Loans placed on non-accrual basis $
-------------
c. Loans restructured $
-------------
d. Assets acquired by repossession or
foreclosure $
-------------
Sum of Lines 1a - 1d
$
=============
2. Stockholders' equity and loan loss reserves
(a) Stockholders' equity of Company $
-------------
(b) Loan loss reserves of Company $
-------------
Sum of Lines 2a - 2b
$
=============
3. Ratio of Line 1 to Line 2 :
---- ---
4. Non-Performing Assets for Banking Subsidiary
a. Loans more than 90 days past due $
-------------
b. Loans placed on non-accrual basis $
-------------
c. Loans restructured $
-------------
d. Assets acquired by repossession or
<PAGE>
foreclosure $
-------------
Sum of Lines 4a - 4d
$
=============
5. Core capital and loan less reserves
(a) Core capital of Banking Subsidiary $
-------------
(b) Loan loss reserves of Banking
Subsidiary $
-------------
Sum of Lines 5a - 5b
$
=============
6. Ratio of Line 4 to Line 5 :
---- ---
7. Line 4 and Line 6 ratios each must be not more than .25:1.0
8. Company is in compliance?
(Circle Yes or No) Yes/No
======
B. Tangible Capital Ratio (Section 7.9)
1. Total stockholders' equity of Mid America
$
------------
2. Intangible assets (excluding those consisting of
investments in real estate subsidiaries)
$
------------
3. Line 1 minus Line 2
$
------------
-86-
<PAGE>
4. Total consolidated assets
$
------------
5. Intangible assets
$
------------
6. Line 4 minus Line 5
$
------------
7. Ratio of Line 3 to Line 6 ___:1.
8. Line 7 ratio to be equal to or greater than .07:1.
9. Company is in compliance?
(Circle Yes or No) Yes/No
-87-
<PAGE>
C. Adjusted Net Worth (Section 7.10)
1. Total stockholders' equity of the Company
$
------------
2. Sum of
(i) investments in, and loans and
advances to, MAF Developments $
----------
(ii) goodwill of Mid America $
----------
$
----------
3. Line 1 minus Line 2
$
------------
4. Line 3 must be greater than or
equal to $150,000,000
5. Company is in compliance?
(Circle Yes or No) Yes/No
D. Adjusted Net Income (Section 7.11)
1. Net income of the Company, before
extraordinary items $
-------------
2. Line 1 must be greater than $ 15,000,000
3. Company is in compliance?
(Circle Yes or No) Yes/No
-88-
<PAGE>
EXHIBIT D-1
<PAGE>
EXHIBIT D-2
<PAGE>
SCHEDULE 5.2
SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION PERCENTAGE
NAME OF OWNERSHIP
INCORPORATION
<S> <C> <C>
Mid America Federal United States Company - 100%
Savings Bank
MAF Developments, Inc. Illinois Company - 100%
Mid America Development Illinois Mid America Federal
Services, Inc. Savings Bank - 100%
Mid America Finance Illinois Mid America Federal
Corporation Savings Bank - 100%
Mid America Mortgage Illinois Mid America Federal
Services, Inc. Savings Bank - 100%
Mid America Insurance Illinois Mid America Development
Agency, Inc. Services, Inc. - 100%
N.W. Acceptance Corp. Delaware Mid America Federal
Savings Bank - 100%
N.W. Financial Corporation Illinois Mid America Federal
Savings Bank - 100%
Route 22 Development Corp. Illinois N.W. Financial Corporation - 100%
Ambria Development Corp. Illinois N. W. Financial Corporation - 100%
Randall Road Development Illinois N. W. Financial Corporation - 100%
Corp.
Reigate Woods Development Illinois N. W. Financial Corporation - 100%
Corp.
North-West Insurance Illinois N. W. Financial Corporation - 100%
Agency of Chicago, Inc.
</TABLE>
<PAGE>
SCHEDULE 7.12
<TABLE>
<CAPTION>
COMPANY DESCRIPTION BALANCE AT 4/30/96
<S> <C> <C>
Mid-America Finance Corp. Collateralized Mortgage
Obligation Bonds $17,117,424
N.W. Acceptance Corp. Collateralized Mortgage
Obligation Bonds $32,058,286
</TABLE>
<PAGE>
Exhibit 10.8
MID AMERICA FEDERAL SAVINGS BANK
EMPLOYEES' PROFIT SHARING PLAN
(Adopted effective July 1, 1983, and conformed to amendments made
effective July 1, 1987, July 1, 1989, January 28, 1992, July 1,
1992, January 1, 1993, July 1, 1994, and July 1, 1995.)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C>
Section 1. Plan Identity 1
-------------
1.1 Name 1
1.2 Purpose 1
1.3 Effective Date 1
1.4 Fiscal Period 1
1.5 Single Plan for All Employers 1
1.6 Interpretation of Provisions 1
Section 2. Definitions 1
-----------
Section 3. Eligibility for Participation 11
-----------------------------
3.1 Eligibility to Receive Employer Matching and
Employer Discretionary Contributions 11
3.1(a) Initial Eligibility 11
3.1(b) Eligibility Year 12
3.1(c) Recognized Absence 12
3.1(d) Maternity or Paternity Leave 12
3.1(e) Certain Employees Ineligible 12
3.1(f) Enrollment 13
3.1(g) Waiver of Participation 13
3.1(h) Participation and Reparticipation 13
3.2 Eligibility to Make Elective Deferral
Contributions 13
3.2(a) Initial Eligibility 13
3.2(b) Enrollment 13
Section 4. Contributions 14
-------------
4.1 Contributions by Employer 14
4.1(a) Elective Deferral Contributions 14
4.1(b) Matching Contributions 14
4.1(c) Discretionary Contributions 15
4.1(d) Qualified Matching Contributions 15
4.1(e) Qualified Non-elective Contributions 15
4.2 Contributions by Participants 15
4.2(a) Nondeductible Voluntary Contributions 15
4.2(b) Rollover Contributions 15
4.3 Excess Elective Deferral Contributions 16
4.4 Actual Deferral Percentage Test 16
4.5 Excess Contributions 17
4.6 Recharacterization 18
4.7 Actual Contribution Percentage Test 19
4.8 Excess Aggregate Contributions 20
4.9 Conditions as to Contributions 21
4. Contributions Not Forfeitable 21
Section 5. Allocations 21
-----------
5.1 Contributions 21
5.1(a) Employer Contribution Account 22
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
5.1(b) Voluntary Contribution Account 23
5.1(c) Rollover Contribution Account 23
5.1(d) Elective Deferral Account 23
5.2 Forfeitures 23
5.3 Income on Investments 23
5.3(a) Employer Contribution, Voluntary Contribution,
and Rollover Contribution Accounts 23
5.3(b) Elective Deferral Accounts 24
Section 6. Limitations on Contributions and Allocations 24
--------------------------------------------
6.1 Limitation on Annual Additions 24
6.2 Coordinated Limitation with Other Plans 25
6.3 Effect of Limitations 25
Section 7. Investments 26
-----------
7.1 General Fund 26
7.2 Participation Direction of Assets from
General Fund to Employer Stock 26
7.3 Elective Deferral Accounts 26
7.4 Voting of Employer Stock 27
7.5 Restrictions on Insider Trading 27
Section 8. Vesting 28
-------
8.1 Vesting Schedule 28
8.2 Computation of Vesting Years 28
8.3 Full Vesting upon Certain Events 29
8.4 Full Vesting upon Plan Termination 29
8.5 Forfeiture, Repayment, and Restoral 29
8.6 Accounting for Forfeitures 29
8.7 Vesting and Nonforfeitability 29
Section 9. Payment of Benefits 30
-------------------
9.1 Upon Termination of Employment 30
9.2 Upon Death of Participant 30
9.2(a) Distribution Options if Distribution to
Participant Have Not Begun 31
9.2(b) Distribution Options if Distribution to
Participant Have Begun 31
9.3 Upon Attainment of Age 70 1/2 31
9.4 In-Service Distributions 31
9.4(a) Non-deductible Voluntary Contribution 31
9.4(b) Hardship Distribution 32
9.5 Type of Payment 33
9.5(a) Direct Rollover 33
9.5(b) Payment To Participant or Beneficiary 33
9.6 Form of Payment 33
9.6(a) Cash or "In Kind" 33
9.6(b) Employer Stock 33
9.6(c) Annuity 34
9.7 Timing of Distribution 34
9.8 Deemed Distribution 34
9.9 Qualified Domestic Relations Order 35
9.10 Beneficiary Designation 35
9.11 Marital Status of Participant 36
</TABLE>
- ii -
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
Section 10. Rules Governing Benefit Claims and Review
-----------------------------------------
of Appeals 36
----------
10.1 Claim for Benefits 36
10.2 Notification by Committee 36
10.3 Claims Review Procedure 37
Section 11. Administration of Plan 37
----------------------
11.1 Authority of Committee 37
11.2 Identity of Committee 37
11.3 Duties of Committee 38
11.4 Valuation of Employer Stock 38
11.5 Compliance with ERISA 38
11.6 Action by Committee 38
11.7 Execution of Documents 38
11.8 Adoption of Rules 38
11.9 Responsibilities to Participants 38
11.10 Alternate Payees in Event of Incapacity 39
11.11 Idemnification by Employers 39
11.12 Nonparticipation by Interested Member 39
Section 12. Powers and Duties of Plan Trustee 39
---------------------------------
12.1 Appointment of Trustees 39
12.2 Basic Responsibilities of Trustees 40
12.3 Investment Powers and Duties 40
12.4 Duties Regarding Payment of Benefits 42
12.5 Execution of Contracts and Payment of Benefits 42
12.6 Trustee Expenses 42
12.7 Trust Fund Annual Report 42
12.8 Audit 43
12.9 Idemnification by Employers 43
12.10 Nonparticipation by Interested Member 43
Section 13. Amendment and Termination of Plan 44
---------------------------------
13.1 Adoption of Plan by Other Employers 44
13.2 Adoption of Plan by Successor 44
13.3 Right to Amend or Terminate Plan 44
Section 14. Miscellaneous Provisions 45
------------------------
14.1 Plan Creates No Employment Rights 45
14.2 Nonassignability of Benefits 45
14.3 Limit of Employer Liability 45
14.4 Treatment of Expenses 45
14.5 Number and Gender 45
14.6 Nondiversion of Assets 45
14.7 Separability of Provisions 46
14.8 Service of Process 46
14.9 Governing State Law 46
Section 15. Top-Heavy Provisions 46
--------------------
15.1 Determination of Top-Heavy Status 46
15.2 Minimum Contributions 48
15.3 Top-Heavy Vesting Schedule 48
15.4 Maximum Compensation 48
</TABLE>
- iii -
<PAGE>
SECTION 1 - PLAN IDENTITY
-------------------------
1.1 Name. The name of this Plan is "MidAmerica Federal Savings Bank Employees'
----
Profit Sharing Plan".
1.2 Purpose. The purpose of this Plan Document is to describe the terms and
-------
conditions under which contributions made pursuant to the Plan will
becredited and paid to the Participants and their Beneficiaries.
1.3 Effective Date. The Effective Date of this Plan is July 1, 1983.
--------------
1.4 Fiscal Period. This Plan shall be operated on the basis of a July 1 - June
-------------
30 fiscal year for the purpose of keeping the Plan's books and records, and
distributing or filing any reports or returns required by law.
1.5 Single Plan for All Employers. This Plan shall be treated as a single plan
-----------------------------
with respect to all participating Employers for the purpose of crediting
contributions and forfeitures, distributing benefits, determining whether
there has been any termination of Service, and applying the limitations set
forth in Section 6.
1.6 Interpretation of Provisions. The Employers intend this Plan and Trust to
----------------------------
be a qualified profit-sharing plan under Section 401(a) of the Code. The
Plan and Trust shall be interpreted and applied in a manner consistent with
this intent and shall be administered at all times and in all respects in a
nondiscriminatory manner.
SECTION 2 - DEFINITIONS
-----------------------
The following words and phrases, for which the first letter is capitalized,
shall have the meaning specified when used in this Plan, unless the context
clearly indicates otherwise:
"Account" means a Participant's interest in the assets accumulated under
this Plan as expressed in terms of a separate account balance which is
periodically adjusted to reflect contributions, the Plan's investment
experience, distributions, and forfeitures.
"Active Participant" means any Employee who has satisfied the eligibility
requirements of Section 3.1 and who qualifies as an Active Participant for
a particular Plan Year under Section 4.1.
"Actual Contribution Percentage" means, for a specified group of
Participants for a Plan Year, the average of the ratios (calculated
separately for each Participant in such group) of (i) Employer Matching
Contributions and Employee Voluntary Contributions actually paid to the
Trust on behalf of such Participant for the Plan Year to (ii) the
Participant's Total Compensation for such Plan Year, as set forth in
Section 4.7.
"Actual Deferral Percentage" means, for a specified group of Participants
for a Plan Year, the average of the ratios (calculated separately for each
Participant in such group) of (i) the amount of Employer contributions
actually paid to the Trust on behalf of such Participant for the Plan Year
1
<PAGE>
to (ii) the Participant's Total Compensation for such Plan Year, as set
forth in Section 4.4. Employer contributions on behalf of any Participant
shall include(i) any Elective Deferrals made pursuant to the Participant's
deferral election (including Excess Elective Deferrals of Highly
Compensated Employees), but excluding (a) Excess Elective Deferrals of Non-
highly Compensated Employees that arise solely from Elective Deferrals made
under the Plan or plans of this Employer and (b) Elective Deferrals that
are taken into account in the Contribution Percentage test(provided the ADP
test is satisfied both with and without exclusion of these Elective
Deferrals); and (ii) at the election of the Employer, Qualified Non-
elective Contributions and Qualified Matching Contributions. For purposes
of computing the Actual Deferral Percentages, an Employee who would be a
Participant but for the failure to make Elective Deferrals shall be treated
as a Participant on whose behalf no Elective Deferrals are made.
"Aggregate Limit" means the sum of (i) 125 percent of the greater of the
ADP of the Non-highly Compensated Employees for the Plan Year or the ACP of
Non-highly Compensated Employees under the Plan subject to Section 401(m)
of the Code for the Plan Year beginning with or within the Plan Year of the
CODA and (ii) the lesser of 200% or two plus the lesser of such ADP or ACP.
"Lesser" is substituted for "greater" in (i) above, and "greater" is
substituted for "lesser" after "two plus the" in (ii) if it would result in
a larger Aggregate Limit.
"Anniversary Date" means the last day of each Plan Year.
"Beneficiary" means the person, persons, or entity designated by a
Participant to receive benefits payable under the Plan on the Participant's
death. In the absence of any designation, or if all the designated
Beneficiaries shall die before the Participant dies or shall die before all
benefits have been paid, the Participant's Beneficiary shall be his
surviving Spouse, if any, or his estate if he is not survived by a spouse.
The Committee may rely upon the advice of the Participant's executor or
administrator as to the identity of the Participant's Spouse.
"Break in Service" means any five or more consecutive 12-month periods
beginning July 1 in which an Employee has 500 or fewer Hours of Service per
period. Solely for this purpose, an Employee shall be considered employed
for his normal hours of paid employment during a Recognized Absence, unless
he does not resume his Service at the end of the Recognized Absence.
Further, if an Employee is absent for any period beginning on or after
January 1, 1985, (i) by reason of the Employee's pregnancy; (ii) by reason
of the birth of the Employee's child; (iii) by reason of the placement of
a child with the Employee in connection with the Employee's adoption of the
child; or (iv) for purposes of caring for such child for a period beginning
immediately after such birth or placement, the Employee shall be credited
with the Hours of Service which would normally have been credited but for
such absence, up to a maximum of 501 Hours of Service, in the first 12-
month period which would otherwise be counted toward a Break in Service.
"Cash Compensation" means a Participant's compensation from his Employer
with respect to that portion of a Plan Year in which he is an Active
Participant. A Participant's Cash Compensation shall be based upon the
2
<PAGE>
cash method of accounting; overtime pay, bonuses, stock bonuses,
commissions, taxable sick pay, severance pay, any compensation deferred
under a qualified cash or deferred arrangement, and similar items shall be
included, but any compensation income realized under a stock option,
amounts paid by or received from an Employer to cover travel,
entertainment, moving, or similar expenses, and the value of any fringe
benefits not received in cash shall be excluded.
Notwithstanding anything herein to the contrary, if the Cash Compensation
of any Participant consists of or includes commissions, then the
Participant's Cash Compensation eligible for the allocation of
contributions and forfeitures shall exclude any Cash Compensation in any
Plan Year in excess of $75,000, effective with the Plan Year beginning July
1, 1992, with adjustment for cost of living increases identical to the cost
of living increases announced by the Internal Revenue Service for
retirement plan limitations.
A Participant's Cash Compensation shall exclude any compensation in any
Plan Year beginning after 1988 in excess of $200,000 (or the limit
currently in effect under Section 401(a)(17) of the Code).
For any Plan Year beginning after 1993, a Participant's Cash Compensation
shall exclude any compensation in excess of the 1993 Omnibus Budget
Reconciliation Act (OBRA "93) annual compensation limit of $150,000, as
adjusted for increases in cost of living in accordance with Section 401(a)
(17)(B) of the Code.
In any Plan Year beginning after 1994, a Participant's Cash Compensation
shall exclude any compensation paid to a Participant which results from the
sale of any vacation benefits.
"Code" means the Internal Revenue Code of 1986, as amended or replaced from
time to time.
"Committee" means the Committee responsible for the administration of this
Plan in accordance with Section 11.
"Company" means MidAmerica Federal Savings Bank, and any entity which
succeeds to the business of MidAmerica Federal Savings Bank and adopts this
Plan as its own pursuant to Section 13.2.
"Contract" means a life insurance policy or annuity contract.
"Contribution Percentage" means the ratio (expressed as a percentage) of
the Participant's Contribution Percentage Amounts to the Participant's
Total Compensation for the Plan Year (whether or not the Employee was a
Participant for the entire Plan Year).
"Contribution Percentage Amounts" means the sum of the Employee Voluntary
Contributions, Matching Contributions, Qualified Matching Contributions (to
the extent not taken into account for purposes of the ADP test), and
Qualified Non-elective Contributions (to the extent not take into account
for purposes of the ADP test) made under the Plan on behalf of the
Participant for the Plan Year. Such Contribution Percentage Amounts
shall not include Matching Contributions that are forfeited either to
correct Excess Aggregate Contributions or because the contributions to
which they
3
<PAGE>
relate are Excess Deferrals, Excess Contributions, or Excess Aggregate
Contributions. Elective Deferrals (to the extent not taken into account for
purposes of the ADP test) may be included in the Contribution Percentage
Amounts.
"Direct Rollover" means a payment by the Plan to the Eligible Retirement
Plan specified by the Distributee.
"Disability" means only a disability which renders the Participant unable,
as a result of bodily or mental disease or injury, to perform the duties
for an Employer for which he was responsible prior to the occurrence of
such bodily or mental disease or injury, which disability is expected to be
permanent or of long and indefinite duration. However, this term shallnot
include any disability directly or indirectly resulting from or related to
habitual drunkenness or addiction to narcotics, a criminal act occurring
while compensation to the Participant is suspended, or any injury which is
intentionally self-inflicted. Further, this term shall apply only if (i)
the Participant is sufficiently disabled to qualify for the payment of
disability benefits under the federal Social Security Act or Veterans
Disability Act; or (ii) the Participant's disability is certified by a
physician selected by the Committee.
Unless the Participant is sufficiently disabled to qualify for disability
benefits under the federal Social Security Act or Veterans Disability Act,
the Committee may require the Participant to be appropriately examined from
time to time by one or more physicians chosen by the Committee, and no
Participant who refuses to be examined shall be treated as having a
disability. In any event, the Committee's good faith decision as to
whether a Participant's Service has been terminated by disability shall be
final and conclusive.
"Discretionary Contribution" means an optional Employer Contribution made
to the Plan, with the amount of the contribution, if any, determined by the
Employer each Plan Year.
"Distributee" means an Employee or former Employee. In addition, the
Employee's or former Employee's surviving Spouse and the Employee's or
former Employee's Spouse or former spouse who is the alternate payee under
a qualified domestic relations order, as defined in Section 414(p) of the
Code, are Distributees with regard to the interest of the Spouse or former
spouse.
"Early Retirement" means retirement on or after a Participant's attainment
of age 55.
"Elective Deferral Contribution" means any Employer contribution to the
Plan that is made pursuant to a Participant's Elective Deferral, in lieu of
cash compensation. With respect to any taxable year, an Elective Deferral
Contribution is the sum of all Employer Contributions made on behalf of
such Participant pursuant to Section 4.1(a). The Elective Deferral
Contribution shall not include any deferrals properly distributed as excess
annual additions.
"Elective Deferral Account" means an account established and maintained for
a Participant with respect to his Elective Deferral Contribution made
pursuant to Section 4.1(a).
4
<PAGE>
"Eligible Retirement Plan" means an individual retirement account described
in Section 408(a) of the Code, an individual retirement annuity described
in Section 408(b) of the Code, an annuity plan described in Section 403(a)
of the Code, or a qualified trust described in Section 401(a) of the Code,
that accepts the Distributee's Eligible Rollover Distribution. However, in
the case of an Eligible Rollover Distribution to the surviving Spouse, an
Eligible Retirement Plan is an individual retirement account or an
individual retirement annuity.
"Eligible Rollover Distribution" means any distribution of all or any
portion of the balance to the credit of the Distributee, except that an
Eligible Rollover Distribution may not include:
(a) any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the
life (or life expectancy) of the Distributee and the Distributee's
designated Beneficiary; or
(b) any distribution for a specified period of ten years or more; or
(c) any distribution to the extent such distribution is required under
section 401(a)(9) of the Code; or
(d) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to Employer Stock).
"Employee" means any individual who is or has been employed or self-
employed by the Company. "Employee" shall also mean any Employee of the
Company maintaining the Plan or of any other Company required to be
aggregated with such Company under Sections 414(b), (c), (m), or (o) of the
Code. "Employee" also means an individual employed by a leasing
organization who, pursuant to an agreement between the Company and the
leasing organization, has performed services for the Company and any
related persons (within the meaning of Section 414(n) or (o) of the Code)
on a substantially full-time basis for more than one year, if such services
are of a type historically performed by employees in the Company's business
field. However, such a "leased employee" shall not be considered an
Employee if (i) he participates in a money purchase pension plan sponsored
by the leasing organization which provides for immediate participation,
immediate full vesting, and an annual contribution of at least 10 percent
of the Employee's Cash Compensation; and (ii) leased employees do not
constitute more than 20% of the Employer's total work force (including
leased employees, but excluding Highly Paid Employees and any other
employees who have not performed services for the Employer on a
substantially full-time basis for at least one year).
"Employer" means the Company or any affiliate within the purview of Section
414(b), (c), or (m), and 415(h) of the Code, any other corporation,
partnership, or proprietorship which adopts this Plan with the Company's
consent pursuant to Section 13.1, and any entity which succeeds to the
business of any Employer and adopts the Plan pursuant to Section 13.2.
"Employer Contribution Account" means an account established and maintained
for a Participant with respect to Employer Matching Contributions, Employer
Discretionary Contributions, Qualified Employer Matching Contributions, and
Qualified Employer Non-elective Contributions.
5
<PAGE>
"Employer Stock" means shares of the Company's voting common stock or
preferred stock meeting the requirements of Section 409(e)(3) of the Code
issued by an Employer or an affiliated corporation. Such term shall
specifically include the voting common or preferred stock of MAF Bancorp,
Inc., the Company's holding company.
"Entry Date" means January 1 and July 1 of each Plan Year. "ERISA" means
the Employee Retirement Income Security Act of 1974(P.L. 93-406, as
amended).
"ERISA" means the Employee Retirement Income Security Act of 1974 (P.L.
93-406, as amended).
"Excess Aggregate Contributions" means, with respect to any Plan Year, the
excess of the aggregate amount of the Employer Matching Contributions made
pursuant to Section 4.1(b) and (d), and any Qualified Non-elective
Contributions or Elective Deferral Contributions taken into account
pursuant to Section 4.8 on behalf of Highly Compensated Participants for
such Plan Year, over the maximum amount of such contributions permitted
under the limitations as set forth in Section 6.
"Excess Contributions" means, with respect to any Plan Year, the excess of
Elective Deferral Contributions made on behalf of Highly Compensated
Participants for the Plan Year over the maximum amount of such
contributions permitted as set forth in Section 4.5. Excess Contributions
shall be treated as an "annual addition" pursuant to Section 6.1.
"Excess Elective Deferrals" means those Elective Deferral Contributions
that are includible in a Participant's gross income under Section 402(g) of
the Code to the extent such Participant's Elective Deferral Contributions
for a taxable year exceed the dollar limitation under such Code section.
Excess Elective Deferral Contributions shall be treated as annual additions
under the Plan, unless such amounts are distributed no later than the first
April 15 following the close of the Participant's taxable year.
"Family Member" means, with respect to an affected Participant, such
Participant's Spouse, such Participant's lineal descendants and ascendants,
and their spouses, as described in Section 414(q)(6)(B) of the Code.
"Fiscal Year" means the Employer's accounting year of 12 months beginning
on July 1 and ending on June 30 of the following year.
"Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs after a 1-Year Break in Service.
"General Fund" means all the investments in the Trust, as set forth in
Section 7.1, which have been made with Matching Contributions,
Discretionary Contributions, Qualified Matching Contributions, Qualified
Non-elective Contributions, Employee Voluntary Contributions, and Employee
Rollover Contributions, plus the income (or loss) from these investments,
shall be treated as from a single fund, with the following exception.
Vested assets which have been directed by Plan Participants to be invested
in Employer Stock, as set forth in Section 7.2, shall be segregated and
held in the Employer Stock Fund.
6
<PAGE>
"Highly Compensated Employee" for any Plan Year means an Employee who,
during either of that or the immediately preceding Plan Year (i) owned
more than five percent of the outstanding equity interest or the
outstanding voting interest in any Employer; (ii) had Total Compensation
exceeding $75,000 (as adjusted pursuant to Section 415(d) of the Code);
(iii) had Total Compensation exceeding $50,000 (as adjusted pursuant to
Section 415(d) of the Code) and was among the most highly compensated one-
fifth of all Employees; or (iv) was at any time an officer of an Employer
and had Total Compensation exceeding $45,000 (or 50% of the currently
applicable dollar limit under Section 415(b)(1)(A) of the Code).
For this purpose:
(a) "Total Compensation" shall include any amount which is excludable
from the Employee's gross income for tax purposes pursuant to
Sections 125, 402(a)(8), 401(h)(1)(B), or 403(b) of the Code.
(b) The number of Employees in "the most highly compensated one-fifth
of all Employees" shall be determined by taking into account all
individuals working for all related Employer entities described in
the definition of "Service", but excluding any individual who has
not completed six months of Service, who normally works fewer than
17 1/2 hours per week or in fewer than six months per year, who has
not reached age 21, whose employment is covered by a collective
bargaining agreement, or who is a nonresident alien who receives no
earned income from United States sources.
(c) The number of individuals counted as "officers" shall not be more
than the lesser of (i) 50 individuals; or (ii) the greater of 3
individuals or 10 percent of the total number of Employees. If no
officer earns more than $45,000 (or the adjusted limit), then the
highest paid officer shall be a Highly Compensated Employee.
(d) A former Employee shall be treated as a Highly Compensated Employee
if such Employee was a Highly Compensated Employee when such
Employee separated from service, or if such Employee was a Highly
Compensated Employee at any time after attaining age 55.
If an Employee is, during a determination year or look-back year, a Family
Member of either a 5 percent owner who is an active or former Employee or
Highly Compensated Employee who is one of the 10 most Highly Compensated
Employees ranked on the basis of Total Compensation paid by the Employer
during such year, then the Family Member and the 5 percent owner or top-ten
Highly Compensated Employee shall be aggregated. In such case, the Family
Member and 5 percent owner or top-ten Highly Compensated Employee shall be
treated as a single Employee receiving compensation and plan contributions
or benefits equal to the sum of such compensation and contributions or
benefits of the Family Member and 5 percent owner or top-ten Highly
Compensated Employee. For purposes of this section, Family Member includes
the Spouse, lineal ascendants and descendants of the Employee or former
Employee, and the spouses of such lineal ascendants and descendants.
7
<PAGE>
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid
group, the top 100 Employees, the number of Employees treated as officers,
and the compensation that is considered, will be made in accordance with
Section 414(q) of the Code and the regulations thereunder.
"Hours of Service" means hours to be credited to an Employee under the
following rules:
(a) Each hour for which an Employee is paid or is entitled to be paid
for services to an Employer is an Hour of Service.
(b) Each hour for which an Employee is directly or indirectly paid or
is entitled to be paid for a period of vacation, holidays, illness,
disability, layoff, jury duty, temporary military duty, or leave of
absence is an Hour of Service. However, except as otherwise
specifically provided, no more than 501 Hours of Service shall be
credited for any single continuous period which an Employee
performs no duties. Further, no Hours of Service shall be credited
on account of payments made solely under a plan maintained to
comply with worker's compensation, unemployment compensation, or
disability insurance laws, or to reimburse an Employee for medical
expenses.
(c) Each hour for which back pay (ignoring any mitigation of damages)
is either awarded or agreed to by the Employer is an Hour of
Service. However, no more than 501 Hours of Service shall be
credited for any single continuous period during which an Employee
would not have performed any duties.
(d) Hours of Service shall be credited in any one period only under one
of the foregoing paragraphs (a), (b), and (c); an Employee may not
get double credit for the same period.
(e) If an Employer finds it impractical to count the actual Hours of
Service for any class or group of non-hourly Employees, each
Employee in that class or group shall be credited with 45 Hours of
Service for each weekly pay period in which he has at least one
Hour of Service. However, an Employee shall be credited only for
his normal working hours during a paid absence.
(f) Hours of Service to be credited on account of a payment to an
Employee (including back pay) shall be recorded in the period of
Service for which the payment was made. If the period overlaps two
or more Plan Years, the Hours of Service credit shall be allocated
in proportion to the respective portions of the period included in
the several Plan Years. However, in the case of periods of 31 days
or less, the Committee may apply a uniform policy of crediting the
Hours of Service to either the first Plan Year or the second.
(g) In all respects an Employee's Hours of Service shall be counted as
required by Section 2530.200b-2(b) and (c) of the Department of
Labor's regulations under Title I of ERISA.
8
<PAGE>
"Investment Manager" means an entity that (i) has the power to manage,
acquire, or dispose of Plan assets, and (ii) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm,
or corporation registered as an investment adviser under the Investment
Advisors Act of 1940 and the Investment Advisor Regulatory Enhancement and
Disclosure Act of 1993.
"Matching Contribution" means an Employer Contribution made to this Plan
for a Participant based on such Participant's Elective Deferral.
"Normal Retirement Date" means a Participant's 65th birthday.
"1-Year Break in Service" means a Plan Year during which an Employee has
not completed more than 500 Hours of Service and is not employed on the
last day of the Plan Year.
"Participant" means any Employee who is participating in the Plan, or who
has previously participated in the Plan and still has a balance credited to
his Account.
"Plan" means this document for the MidAmerica Federal Savings Bank
Employees' Profit Sharing Plan, including all amendments thereto.
"Plan Year" means each period of 12 consecutive months beginning on July 1
of 1983 and each succeeding year.
"Qualified Domestic Relations Order" (QDRO) means a domestic relations
order which relates to an alternate payee's right to receive all or a
portion of the benefits payable to a Participant under this Plan, with the
provision of child support, alimony payments, or marital property rights to
a Spouse, former spouse, child, or other dependent of a Participant, that
the Committee has determined meets the requirements of Section 414(p) of
the Code.
"Qualified Matching Contributions" means the Employer Contributions to the
Plan that are made pursuant to Section 4.1(d), which are subject to the
distribution and nonforfeitability requirements of Section 401(k) of the
Code.
"Qualified Non-elective Contributions" means the Employer contributions to
the Plan that are made pursuant to Section 4.1(e), which are subject to the
distribution and nonforfeitability requirements of Section 401(k) of the
Code.
"Recognized Absence" means a period for which
(a) an Employer grants an Employee a leave of absence for a limited
period, but only if an Employer grants such leaves on a
nondiscriminatory basis; or
(b) an Employee is temporarily laid off by an Employer because of a
change in business conditions; or
(c) an Employee is on active military duty, but only to the extent that
his employment rights are protected by the Military Selective
Service Act of 1967 (38 U.S.C. Section 2021).
9
<PAGE>
"Rollover Contribution Account" means an account established and maintained
for a Participant with respect to his Direct Rollover or Rollover
Contributions made pursuant to Sections 4.2(b) and 5.1(c).
"Service" means an Employee's period(s) of employment or self-employment
with an Employer, excluding for initial eligibility purposes any period in
which the individual was a nonresident alien and did not receive from an
Employer any earned income which constituted income from sources within the
United States. An Employee's Service shall include any service which
constitutes service with a predecessor employer within the meaning of
Section 414(a) of the Code. An Employee's Service shall also include any
service with an entity which is not an Employer, but only either (i) for a
period after 1975 in which the other entity is a member of a controlled
group of corporations or is under common control with other trades and
businesses within the meaning of Section 414(b) or 414(c) of the Code, and
a member of the controlled group or one of the trades and businesses is an
Employer; or (ii) for a period after 1979 in which the other entity is a
member of an affiliated service group within the meaning of Section 414(m)
of the Code, and a member of the affiliated service group is an Employer.
"Spouse" means the individual, if any, to whom a Participant is lawfully
married on the date benefit payments to the Participant are to begin, or on
the date of the Participant's death, if earlier.
"Suspense Account" means the total forfeitable portion of all former
Participants' Accounts which have not yet become a Forfeiture during any
Plan Year.
"Total Compensation" means a Participant's wages, salary, overtime,
bonuses, commissions, and any other amounts received for personal services
rendered while in Service from any Employer or an Affiliate (within the
purview of Section 414(b), (c), and (m) of the Code, plus his earned income
from any such entity as defined in Section 401(c)(2) of the Code if he is
self-employed. Total Compensation shall include (i) severance payments and
amounts paid as a result of termination, (ii) amounts excludable from
gross income under Section 911 or deductible under Section 913 of the Code,
(iii) amounts described in Sections 104(a)(3), 105(a), and 105(h) of the
Code to the extent includable in gross income, (iv) amounts described in
Section 105(d) of the Code, (v) amounts received from an Employer for
moving expenses which are not deductible under Section 217 of the Code,
(vi) amounts includable in gross income in the year of, and on account of,
the grant of a nonqualified stock option, (vii) amounts includable in
gross income pursuant to Section 83(b) of the Code, (viii) amounts
includable in gross income under an unfunded nonqualified plan of deferred
compensation; but shall exclude (ix) Employer contributions to or amounts
received from a funded or qualified plan of deferred compensation, (x)
Employer contributions to a simplified employee pension account to the
extent deductible under Section 219 of the Code, (xi) Employer
contributions to a Section 403(b) annuity contract, (xii) amounts
includable in gross income pursuant to Section 83(a) of the Code, (xiii)
amounts includable in gross income upon the exercise of nonqualified stock
option or upon the disposition of stock acquired under any stock option,
and (xiv) any other amounts expended by the Employer on the Participant's
behalf which are excludable from his income or which receive special tax
benefits.
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<PAGE>
A Participant's Total Compensation shall exclude any compensation in any
limitation year beginning after 1988 in excess of $200,000 (or the limit
currently in effect under Section 401(a)(17) of the Code).
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual compensation of
each Employee taken into account under the Plan shall not exceed the OBRA
'93 annual compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with Section 401(a)(17) of the Internal Revenue Code.
The cost-of-living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual compensation
limit will be multiplied by a fraction, the numerator of which is the
number of months in the determination period, and the denominator of which
is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period.
For this purpose, for determination periods beginning before the first day
of the first Plan Year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
"Trust" or "Trust Fund" means the trust fund created under this Plan.
"Trustee" means the individuals selected from time to time by the Company
to serve as co-trustees of the Trust Fund.
"Valuation Date" means the last day of the Plan Year (June 30), the last
day of each quarter during the Plan Year (September 30, December 31, March
31, and June 30), and any other dates selected by the Committee, on which
the income (or losses) for the Trust Fund shall be allocated.
"Vested" means the nonforfeitable portion of any account maintained on
behalf of a Participant.
"Vesting Year" means a period of Service credited to a Participant pursuant
to Section 8.2 for purposes of determining his Vested interest.
"Voluntary Contribution Account" means an account established and
maintained for a Participant with respect to his nondeductible Voluntary
Contributions made pursuant to Section 4.2(a) and 5.1(b).
"Year of Service" means the computation period of 12 consecutive months
during which an Employee has at least 1000 Hours of Service.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an
Hour of Service. The participation computation period beginning after a
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<PAGE>
1-Year Break in Service shall be measured from the date on which an
Employee again performs an Hour of Service. The participation computation
period shall shift to the Plan Year which includes the anniversary of the
date on which the Participant first performed an Hour of Service.
A Year of Service for vesting purposes will begin, for the first 12-month
period, with the date on which the Employee first performs an Hour of
Service. In the subsequent 12-month periods, it will begin on the first
day of the Plan Year containing the first anniversary of the Employee and
will end on the last day of that Plan Year, and each Plan Year thereafter.
SECTION 3 - ELIGIBILITY FOR PARTICIPATION
-----------------------------------------
3.1 Eligibility to Receive Employer Matching Contributions and Employer
-------------------------------------------------------------------
Discretionary Contributions.
---------------------------
(a) Initial Eligibility.
An Employee of the Company who
(i) has completed one Year of Service, and
(ii) has attained the age of 21,
shall be eligible to participate in the Plan as of the Entry Date
coinciding with or next following the later of the following dates:
(i) the last date of the Employee's first Eligibility Year, or
(ii) the Employee's 21st birthday.
However, if an Employee is not in active Service with an Employer on
the date he would otherwise first be eligible to participate in the
Plan, his eligibility to participate in the Plan shall be deferred
until the next day he is in Service.
(b) Eligibility Year.
An "Eligibility Year" means an applicable eligibility period (as
defined below) in which the Employee has at least 1,000 Hours of
Service. For this purpose:
(i) an Employee's first "eligibility period" is the 12-consecutive
month period beginning on the first day on which he performs an
Hour of Service, and
(ii) his succeeding 12-consecutive month periods commence with the
first Plan Year which commences prior to the first anniversary of
the Employee's employment commencement date, regardless of
whether the Employee is entitled to be credited with 1,000 Hours
of Service during the initial eligibility computation period.
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<PAGE>
(c) Recognized Absence.
An Employee shall be considered employed for his normal hours of paid
employment during a Recognized Absence, unless he does not resume his
Service at the end of the Recognized Absence.
(d) Maternity or Paternity Leave.
Beginning on or after January 1, 1985, if any Employee is absent for
any period
(i) by reason of the Employee's pregnancy,
(ii) by reason of the birth of the Employee's child,
(iii) by reason of the placement of a child with the Employee in
connection with the Employee's adoption of the child, or
(iv) for purposes of caring for such child for a period beginning
immediately after such birth or placement,
the Employee shall be credited with the Hours of Service which would
normally have been credited but for such absence, up to a maximum of
501 Hours of Service, in the first 12-month period which would
otherwise be counted toward a Break in Service.
(e) Certain Employees Ineligible.
No Employee shall be eligible to participate while his Service is
covered by a collective bargaining agreement between an Employer and
the Employee's collective bargaining agreement if
(i) retirement benefits have been the subject of good faith
bargaining between the Employer and the representative, and
(ii) the collective bargaining agreement does not provide for the
Employee's participation.
(f) Enrollment.
The Employer shall notify all Employees when they become eligible to
participate in the Plan and shall instruct them that they may elect
not to participate. Upon request, the Committee shall provide eligible
Employees with an Agreement of Non-Participation.
(g) Waiver of Participation.
An eligible Employee may elect not to become a Participant in the Plan
by signing and delivering to the Committee the Agreement of Non-
Participation within ninety (90) days after receiving it.
Any Employee who elects not to become a Participant as of the first
Entry Date on which he was eligible may become a Participant as of any
succeeding Entry Date if he is still eligible by executing a
revocation of this Agreement of Non-Participation and delivering the
same to the Committee within ninety (90) days of any succeeding Entry
Date.
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<PAGE>
(h) Participation and Reparticipation.
Subject to the satisfaction of the foregoing requirements, an Employee
shall participate in the Plan during each period of his Service from
the date on which he first becomes eligible until his termination. For
this purpose, an Employee returning within five years of his
termination who previously satisfied the initial eligibility
requirements for Employer Matching, Employer Discretionary, Qualified
Matching, and Qualified Non-elective Contributions shall re-enter the
Plan as of the date of his return to Service with an Employer.
3.2 Eligibility to Make Elective Deferral Contributions.
---------------------------------------------------
(a) Initial Eligibility.
(i) Employees hired or rehired beginning with July 1, 1994.
Effective with the Plan Year beginning on July 1, 1994, an
Employee of the Company who has completed one Year of Service
shall be eligible to elect to defer a portion of his Cash
Compensation as of theEntry Date coinciding with or next following
the completion of one Year of Service. A Year of Service is a
period of 12 consecutive months during which an Employee has at
least 1000 Hours of Service.
However, if an Employee is not in active Service with an Employer
on the date he would otherwise first be eligible to participate in
the Plan, his eligibility to participate in the Plan shall be
deferred until the next day he is in Service.
There is no minimum age requirement for a Participant to be
eligible to defer a portion of his Cash Compensation.
(ii) Employees hired or regired prior to July 1, 1994.
An Employee hired or regired prior to July 1, 1994 is eligible to
elect to defer a portion of his Cash Compensation, with no Year of
Service requirement and no minimum age requirement.
(b) Enrollment.
An Employee shall elect to become a Participant by signing and
delivering to the Committee an Agreement of Participation.
14
<PAGE>
SECTION 4 - CONTRIBUTIONS
-------------------------
4.1 Contributions by Employer.
-------------------------
All Employees shall be eligible to defer a portion of their Cash
Compensation as Elective Deferrals.
An Employee shall be eligible to receive an Employer Matching, Employer
Discretionary, Qualified Matching, and Qualified Non-elective Contributions
if he is an Active Participant.
Active Participant means a Participant who has satisfied the eligibility
requirements for these contributions, as set forth in Section 3.1, and who
has at least 1,000 Hours of Service during the current Plan Year. However,
a Participant shall not qualify as an Active Participant unless (i) he is
in active Service with an Employer on the last day of the Plan Year, or
(ii) his Service terminated during the Plan Year by reason of death.
For each Plan Year, the Employer shall contribute to the Plan:
(a) Elective Deferral Contributions.
Effective with the Plan Year beginning on July 1, 1987, an amount equal
to the total Elective Deferrals of all Participants during the Plan
Year.
The balance in each Participant's Elective Deferral Account shall be
100% vested and not subject to Forfeiture for any reason.
(i) Each Employee may elect to defer an amount not to exceed the
lesser of 15% of his Cash Compensation or the dollar limitation
contained in Section 402(g) of the Code in effect at the
beginning of such taxable year.
(ii) A Participant may elect to change the amount of his Elective
Deferral, cancel his Elective Deferral, or resume his Elective
Deferral once each quarter, or more frequently at the discretion
of the Committee.
(iii) The termination of a Participant's Service with an Employer shall
be deemed to revoke any Elective Deferral agreement then in
effect, effective immediately following the close of the pay
period within which such termination occurs.
(iv) A Participant may elect to change his Elective Deferral
investment selections once each quarter, or more frequently at
the discretion of the Committee.
(b) Matching Contributions.
Effective with the Plan Year beginning on July 1, 1987, pursuant to
Section 3.1, a Matching Contribution shall be made to Elective
Deferrals made by Active Participants after their Entry Date into the
Plan as follows:
(i) A Matching Contribution of 35% shall be made to Elective
Deferrals which do not exceed 4% of a Participant's Cash
Compensation which is not in excess of $30,000.
(ii) A Matching Contribution of 25% shall be made to Elective
Deferrals which do not exceed 2% of a Participant's Cash
Compensation which is in excess of $30,000.
For any Plan Year beginning prior to July 1, 1994 and effective with
the Plan Year beginning on July 1, 1987, a Matching Contribution of 25%
was made to Elective Deferrals made after the Entry Date of an Active
Participant which did not exceed 2% of the Participant's Cash
Compensation.
15
<PAGE>
The balance in a Participant's Employer Contribution Account based on
Matching Contributions shall be subject to the vesting schedule set
forth in Section 8.1.
(c) Discretionary Contributions.
An additional discretionary amount may be contributed from current or
accumulated net earnings by the Employer.
The balance in a Participant's Employer Contribution Account based on
Discretionary Contributions shall be subject to the vesting schedule
set forth in Section 8.1.
(d) Qualified Matching Contributions.
Qualified Matching Contributions may be made to Non-highly Compensated
Active Participants in order to satisfy the ADP and/or the ACP tests.
The Committee shall determine the amount to be allocated in order to
satisfy the ADP and/or the ACP tests.
Qualified Matching Contributions shall be 100% vested and not subject
to Forfeiture for any reason.
(e) Qualified Non-elective Contributions.
Qualified Non-elective Contributions may be made to Non-highly
Compensated Active Participants in order to satisfy the ADP and/or the
ACP tests. The Committee shall determine the amount to be allocated in
order to satisfy the ADP and/or ACP tests. Qualified Non-elective
Contributions shall be 100% vested and not subject to Forfeiture for
any reason.
4.2 Contributions by Participants
-----------------------------
(a) Nondeductible Voluntary Contributions.
A Participant may elect to contribute an amount not to exceed 10% of
his Cash Compensation as a nondeductible Voluntary Contribution.
The balance in a Participant's Voluntary Contribution Account shall be
100% vested and not subject to Forfeiture for any reason.
16
<PAGE>
(b) Rollover Contributions.
If a Participant in this Plan receives a distribution from another
qualified retirement plan in which he was a participant, or if a
Participant in this Plan receives a distribution from his Conduit IRA,
other than a required minimum distribution, then a Rollover
Contribution to this Plan may be made on or before the 60th day after
the distribution was received by the Participant.
Effective January 1, 1993, a Participant who is eligible to receive an
Eligible Rollover Distribution from an employee's trust (as described
in Section 401(a) of the Code and tax exempt under Section 501(a) of
the Code); or an annuity plan (as described in Section 403(a) of the
Code); or an individual retirement account (as described in Section
408(a) of the Code); or an individual retirement annuity (as described
in Section 408(b) of the Code) may, pursuant to Section 401(a)(31) of
the Code and with the consent of the Trustee, have such distribution
processed as a Direct Rollover to this Plan.
The balance in a Participant's Rollover Contribution Account shall be
100% vested and not subject to Forfeiture for any reason.
4.3 Excess Elective Deferral Contributions.
--------------------------------------
If a Participant's Elective Deferral Contributions under this Plan,
together with any elective deferrals (as defined in Regulation 1.402(g)-
1(b)) made in another qualified cash or deferred arrangement (under Section
401(k) of the Code), a simplified employee pension plan (under Section
408(k) of the Code), a salary reduction arrangement (under Section
3121(a)(5)(D) of the Code), a deferred compensation plan under Section 457
of the Code), or a trust described in Section 501(c)(18) of the Code,
exceed the limitation of Section 402(g) of the Code for such Participant's
taxable year, the Participant may, not later than March 1 following the
close of his taxable year, notify the Committee in writing of such excess,
and request the withdrawal of his Excess Elective Deferrals from this Plan.
Upon proper notification by the Participant, the Committee may direct the
Trustee to distribute the excess amount (including any income attributable
to such excess amount) to the Participant not later than April 15 following
the close of the Participant's taxable year.
4.4 Actual Deferral Percentage Test.
-------------------------------
The Actual Deferral Percentage (hereinafter referred to as "ADP") for
Participants who are Highly Compensated Employees for each Plan Year and
the ADP for Participants who are Non-highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
The average of the ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the average of the ADP for
Participants who are Non-highly Compensated Employees for the same Plan
Year multiplied by 1.25; or
The average of the ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the average of the ADP for
Participants who are Non-highly Compensated Employees for the
17
<PAGE>
same Plan Year multiplied by 2.0, provided that the average of the ADP
for Participants who are Highly Compensated Employees does not exceed
the average of the ADP for Participants who are Non-highly Compensated
Employees by more than two percentage points.
The ADP for any participant who is a Highly Compensated Employee for
thePlan Year and who is eligible to have Elective Deferrals (and Qualified
Non-elective Contributions or Qualified Matching Contributions, or both, if
treated as Elective Deferrals for purposes of the ADP test) allocated to
his account under two or more arrangements described in Section 401(k) of
the code, that are maintained by the Employer, shall be determined as if
such Elective Deferrals (and, if applicable, such Qualified Non-elective
Contributions or Qualified Matching Contributions, or both) were made under
a single arrangement. If a Highly Compensated Employee participates in two
or more cash or deferred arrangements that have different Plan Years, all
cash or deferred arrangements ending with or within the same calendar year
shall be treated as a single arrangement. Notwithstanding the foregoing,
certain plans shall be treated as separate if mandatorily disaggregated
under regulations under Section 401(k) of the Code.
In the event that this Plan satisfies the requirements of Sections 401(k),
401(a)(4), or 410(b) of the Code only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements of such
sections of the Code only if aggregated with this Plan, then this section
shall be applied by determining the ADP of employees as if all such plans
were a single plan. For Plan Years beginning after December 31, 1989, plans
may be aggregated in order to satisfy Section 401(k) of the Code only if
they have the same Plan Year.
For purposes of determining the ADP of a Participant who is a 5% owner or
one of the ten most highly-paid Highly Compensated Employees, the Elective
Deferral Contributions (and Qualified Non-elective Contributions or
Qualified Matching Contributions, or both, if treated as Elective Deferral
Contributions for purposes of the ADP test) and Total Compensation of such
Participant shall include the Elective Deferral Contributions (and, if
applicable, Qualified Non-elective Contributions and Qualified Matching
Contributions, or both) and Total Compensation for the Plan Year of Family
Members (as defined in Section 414(q)(6) of the Code). Family Members, with
respect to such Highly Compensated Employees, shall be disregarded as
separate Employees in determining the ADP both for Participants who are
Non-highly Compensated Employees and for Participants who are Highly
Compensated Employees.
For purposes of determining the ADP test, Elective Deferrals, Qualified
Non-elective Contributions, and Qualified Matching Contributions must be
made before the last day of the 12-month period immediately following the
Plan Year to which such contributions relate.
The Employer shall maintain records sufficient to demonstrate satisfaction
of the ADP test and the amount of Qualified Non-elective Contributions or
Qualified Matching Contributions, or both, used in such test.
The determination and treatment of ADP amounts of any Participant shall
satisfy such other requirements as may be prescribed by the Secretary of
the Treasury.
18
<PAGE>
4.5 Excess Contributions.
--------------------
Notwithstanding any other provision of this Plan, Excess Contributions,
plus any income and minus any loss allocable thereto, shall be distributed
no later than the last day of each Plan Year to Participants to whose
accounts such Excess Contributions were allocated for the preceding Plan
Year. If such excess amounts are distributed more than 2 1/2 months after
the last day of the Plan Year in which such excess amounts arose, a 10%
excise tax will be imposed on the Employer maintaining the Plan with
respect to such amounts. Such distributions shall be made to Highly
Compensated Employees on the basis of the respective portions of the Excess
Contributions attributable to each such Employee. Excess Contributions of
Participants who are subject to Family Member aggregation rules shall be
allocated among the Family Members in proportion to the Elective Deferrals
(and amounts treated as Elective Deferrals) of each Family Member that are
combined to determine the combined ADP.
Excess Contributions (including the amounts recharacterized) shall be
treated as annual additions under the Plan.
Excess Contributions shall be adjusted for any income or loss up to the
date of distribution. The income or loss allocable to Excess Contributions
is the sum of (i) the income or loss allocable to the Participant's
Elective Deferral Account (and, if applicable, the Qualified Non-elective
Contribution account or the Qualified Matching Contribution account, or
both) for the Plan Year multiplied by a fraction, the numerator of which is
such Participant's Excess Contributions for the Plan Year and the
denominator is the Participant's account balance attributable to Elective
Deferrals (and Qualified Non-elective Contributions or Qualified Matching
Contributions, or both, if any such contributions are included in the ADP
test) without regard to any income or loss occurring during such Plan Year;
and (ii) 10% of the amount determined under (i) multiplied by the number of
whole calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if the distribution occurs
after the 15th of such month.
Excess Contributions shall be distributed from the Participant's Elective
Deferral Account and Qualified Matching Contribution Account (if
applicable) in proportion to the Participant's Elective Deferrals and
Qualified Matching Contributions (to the extend used in the ADP test) for
the Plan Year. Excess Contributions shall be distributed from the
Participant's Qualified Non-elective Contribution Account only to the
extent that such Excess Contributions exceed the balance in the
Participant's Elective Deferral Account and Qualified Matching Contribution
Account.
4.6 Recharacterization.
------------------
A Participant may treat his Excess Contributions as an amount distributed
to the Participant and then contributed by the Participant to the Plan as a
Voluntary Contribution. Recharacterized amounts will remain nonforfeitable
and subject to the same distribution requirements as Elective Deferrals.
Amounts may not be recharacterized by a Highly Compensated Employee to the
extent that such amount in combination with other Voluntary Contributions
made by that Employee would exceed 10% of his Cash Compensation, as set for
in Sections 4.2(a) and 5.1(b).
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<PAGE>
Recharacterization must occur no later than 2 1/2 months after the last day
of the Plan Year in which such Excess Contributions arose, and is deemed to
occur no earlier than the date the last Highly Compensated Employee is
informed in writing of the amount recharacterized and the consequences
thereof. Recharacterized amounts will be taxable to the Participant for the
Participant's tax year in which the Participant would have received them in
cash.
Recharacterized amounts will be treated as Employer Contributions for
purposes of Sections 404, 409, 411, 412, 415, 416, and 417 of the Code.
4.7 Actual Contribution Percentage Test.
-----------------------------------
The Actual Contribution Percentage (hereinafter referred to as "ACP") for
Participants who are Highly Compensated Employees for each Plan Year and
the ACP for Participants who are Non-highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
The average of the ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the average of the ACP for
Participants who are Non-highly Compensated Employees for the same Plan
Year multiplied by 1.25; or
The average of the ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the average of the ACP for
Participants who are Non-highly Compensated Employees for the same Plan
Year multiplied by 2.0, provided that the average of the ACP for
Participants who are Highly Compensated Employees does not exceed the
average of the ACP for Participants who are Non-highly Compensated
Employees by more than two percentage points.
Multiple use: If one or more Highly Compensated Employees participate in
both a CODA and a plan subject to the ACP test maintained by the Employer,
and the sum of the ADP and ACP of those Highly Compensated Employees
subject to either or both tests exceeds the Aggregate Limit, then the ACP
of those Highly Compensated Employees who also participate in a CODA will
be reduced (beginning with such Highly Compensated Employee whose ACP is
the highest) so that the limit is not exceeded. The amount by which each
Highly Compensated Employee's Contribution Percentage Amount is reduced
shall be treated as an Excess Aggregate Contribution. The ADP and ACP of
the Highly Compensated Employees are determined after any corrections
required to meet the ADP and ACP tests. Multiple use does not occur if
either the ADP or ACP of the Highly Compensated Employees does not exceed
1.25 multiplied by the ADP and ACP of the Non-highly Compensated Employees.
For purposes of this section, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible to
have Contribution Percentage Amounts allocated to his account under two or
more plans described in Section 401(a) of the Code, or arrangements
described in Section 401(k) of the Code that are maintained by the
Employer, shall be determined as if the total of such Contribution
Percentage Amounts was made under each plan. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements that
have different plan years, all cash or deferred arrangements ending with or
within the same calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated as separate
20
<PAGE>
plans if mandatorily disaggregated under regulations under Section 401(m)
of the Code.
In the event that this Plan satisfies the requirements of Sections 401(m),
401(a)(4), or 410(b) of the Code only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements of such
sections of the Code only if aggregated with this Plan, then this section
shall be applied by determining the Contribution Percentage of Employees as
if all such plans were a single plan. For plan years beginning after
December 31, 1989, plans may be aggregated in order to satisfy Section
401(m) of the Code only if they have the same Plan Year.
For purposes of determining the Contribution Percentage of a Participant
who is a 5% owner or one of the ten most highly-paid Highly Compensated
Employees, the Contribution Percentage Amount and Total Compensation of
such Participant shall include the Contribution Percentage Amount and Total
Compensation for the Plan Year of Family Members (as defined in Section
414(q)(6) of the Code). Family Members, with respect to Highly Compensated
Employees, shall be disregarded as separate employees in determining the
Contribution Percentage both for Participants who are Non-highly
Compensated and for Participants who are Highly Compensated Employees.
For purposes of the ACP test, Employee Voluntary Contributions are
considered to have been made in the Plan Year in which contributed to the
Trust. Matching Contributions and Qualified Non-elective Contributions will
be considered made for a Plan Year if made no later than the end of the 12-
month period beginning on the day after the close of the Plan Year.
The Employer shall maintain records sufficient to demonstrate satisfaction
of the ACP test, and the amount of Qualified Non-elective or Qualified
Marching Contributions, or both, used in such test.
The determination and treatment of the Contribution Percentage of any
Participant shall satisfy other requirements as may be prescribed by the
Secretary of the Treasury.
4.8 Excess Aggregate Contributions.
------------------------------
Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall
be forfeited, if forfeitable, or if not forfeitable, distributed no later
than the last day of each Plan Year to Participants to whose accounts such
Excess Aggregate Contributions were allocated for the preceding Plan Year.
Excess Aggregate Contributions of Participants who are subject to the
Family Member aggregation rules shall be allocated among the Family Members
in proportion to the Employee Voluntary and Matching Contributions (or
amounts treated as Matching Contributions) of each Family Member that are
combined to determine the combined ACP. If such Excess Aggregate
Contributions are distributed more the 2 1/2 months after the last day of
the Plan Year in which such excess amounts arose, a 10% excise tax will be
imposed on the Employer maintaining the Plan with respect to those amounts.
Excess Aggregate Contributions shall be treated as annual additions under
the Plan.
Excess Aggregate Contributions shall be adjusted for any income or loss up
to the date of distribution. The income or loss allocable to Excess
21
<PAGE>
Aggregate Contributions is the sum of (i) the income or loss allocable to
the Participant's Voluntary Contribution Account, Matching Contribution
Account, Qualified Matching Contribution Account (if any, and if all
amounts therein are not used in the ADP test) and, if applicable, Qualified
Non-elective Contribution Account and Elective Deferral Account for the
Plan Year multiplied by a fraction, the numerator of which is
suchParticipant's Excess Aggregate Contributions for the Plan Year and the
denominator is the Participant's account balance(s) attributable to
Contribution Percentage Amounts without regard to any income or loss
occurring during such Plan Year; and (ii) 10% of the amount determined
under (i) multiplied by the number of whole calendar months between the end
of the Plan Year and the date of distribution, counting the month of
distribution if distribution occurs after the 15th of such month.
Forfeitures of Excess Aggregate Contributions shall be reallocated to the
accounts of Non-highly Compensated Employees.
Excess Aggregate Contributions shall be forfeited, if forfeitable, or
distributed on a pro-rata basis from the Participant's Voluntary
Contribution Account, Matching Contribution Account, and Qualified Matching
Contribution Account (and, if applicable, the Participant's Qualified Non-
elective Contribution Account or Elective Deferral Account, or both).
4.9 Conditions as to Contributions.
------------------------------
Employers' contributions shall in all events be subject to the limitation
set forth in Section 6. Any amount contributed by an Employer due to a good
faith but erroneous determination of its deductibility under Section 404 of
the Code shall be returned to the Employer within one year after the date
on which the contribution was originally made, or within one year after its
nondeductibility has been finally determined. However, the amount to be
returned shall be reduced to take into account any adverse investment
experience within the Trust Fund in order that the balance credited to each
Participant's Account is not less than it would have been if the
contribution had never been made.
4.10 Contributions Not Forfeitable.
-----------------------------
The Participant's accrued benefit derived from Elective Deferrals,
Qualified Non-elective Contributions, Qualified Matching Contributions,
Voluntary Contributions, and Rollover Contributions is nonforfeitable.
SECTION 5 - ALLOCATIONS
-----------------------
5.1 Contributions
-------------
The Employer shall provide the Committee all information necessary to make
the allocation of Contributions and Forfeitures for each Plan Year. The
Employer shall pay the Employer Contributions to the Trustee for investment
in the Trust Fund for each Plan Year within the time prescribed by law for
the filing of the Employer's federal income tax return, including
extensions, for the Fiscal Year.
22
<PAGE>
Elective Deferral Contributions accumulated through payroll deductions
shall be paid to the Trustee at the earliest date in which such
contributions can reasonably be segregated from the Employer's general
assets, but in any event within 90 days from the date on which such amounts
would otherwise have been payable to the Participant in cash. The
provisions of Department of Labor Regulations 2510.3-102 are incorporated
herein by reference. Furthermore, any additional Employer Contributions
which are allocable to the Participant's Elective Deferral Account for a
Plan Year shall be paid to the Plan no later than the 12-month period
immediately following the close of such Plan Year.
(a) Employer Contribution Account.
Matching Contributions and Discretionary Contributions shall be
maintained for each Participant in the Employer Contribution Account,
subject to the vesting schedule in Section 8.1.
In addition, Qualified Matching and Qualified Non-elective
Contributions, if any, shall be maintained for each Participant in the
Employer Contribution Account, which shall be nonforfeitable.
If a Participant has satisfied the eligibility requirements for
Matching Contributions, Discretionary Contributions, Qualified Matching
Contributions, and Qualified Non-elective Contributions, is employed by
an Employer on the Anniversary Date, and has at least 1,000 Hours of
Service during the Plan Year, his share of these Contributions shall be
determined as follows:
(i) Employer Matching Contributions:
An Active Participant shall receive a Matching Contribution of 25%
of Elective Deferrals made after the Participant's Entry Date,
which do not exceed 2% of the Participant's Cash Compensation,
pursuant to Section 4.1(b).
(ii) Employer Discretionary Contributions:
A Discretionary Contribution shall be allocated to the account of
each Active Participant in proportion to the ratio which his Cash
Compensation for the Plan Year bears to the Cash Compensation of
all Active Participants for such Plan Year, pursuant to Section
4.1(c).
(iii)Qualified Matching Contributions:
An optional Qualified Matching Contribution shall be allocated to
the account of each Non-highly Compensated Employee who is an
Active Participant with Elective Deferrals made after the
Participant's Entry Date in such Plan Year, pursuant to Section
4.1(d). The percent of the Qualified Matching Contribution shall
be discretionary.
23
<PAGE>
(iv) Qualified Non-elective Contributions:
An optional Qualified Non-elective contributions shall be
allocated to the account of each Non-highly Compensated Employee
who is an Active Participant in proportion to the ratio which his
Cash Compensation for the Plan Year bears to the Cash Compensation
of all Non-highly Compensated Employees who are Active
Participants for such Plan Year, pursuant to Section 4.1(e).
Employer Contribution Account assets shall be invested by the Plan
Trustee in the Plan's General Fund, together with the Voluntary
Contribution Account assets and the Rollover Contribution Account cash
assets.
(b) Voluntary Contribution Account.
A Participant may elect to contribute a maximum of 10% of his Cash
Compensation each Plan Year as nondeductible Voluntary Contributions.
Voluntary Contributions shall be maintained for each Participant in the
Voluntary Contribution Account.
Voluntary Contribution Account assets shall be invested by the Plan
Trustee in the Plan's General Fund, together with the Employer
Contribution Account assets and the Rollover Contribution Account cash
assets.
(c) Rollover Contribution Account.
Rollover Contributions shall be maintained for each Participant in the
Rollover Contribution Account.
Rollover Contribution Account cash assets shall be invested by the Plan
Trustee in the Plan's General Fund, together with the Employer
Contribution Account assets and the Voluntary Contribution Account
assets.
If a Rollover Contribution consists of property other than cash, such
property shall be considered an earmarked investment for such
Participant.
(d) Elective Deferral Account.
Elective Deferral Contributions shall be maintained for each
Participant in an Elective Deferral Account.
5.2 Forfeitures.
-----------
If a Participant has satisfied the eligibility requirements for Employer
Matching and Employer Discretionary Contributions, is employed by the
Company on an Anniversary Date, and has at least 1,000 Hours of Service
during the Plan Year, his share of Forfeitures shall be determined in the
following manner.
Any assets which have become Forfeitures since the last Anniversary Date
shall first be used to reinstate any previously forfeited account balances
of former Participants, if any, pursuant to Section 8.5. The remaining
24
<PAGE>
Forfeitures, if any, shall be allocated to each Active Participant in
proportion to the ratio which his Cash Compensation for the Plan Year bears
to the Cash Compensation of all Active Participants for such Plan Year.
5.3 Income on Investments.
---------------------
(a) Employer Contribution, Voluntary Contribution, and Rollover
Contribution Accounts.
(i) General Fund. On each Anniversary Date, the income (or loss) for
the Employer Contribution Account, Voluntary Contribution Account,
and Rollover Contribution Account shall be allocated based on the
beginning balance on the first day of the Plan Year for each
Active Participant and former Participant with Vested assets
remaining in the Plan on the Anniversary Date, less an adjustment
for distributions, withdrawals, or forfeitures during the Plan
Year on a time-weighted basis.
(ii) Earmarked Investment. Any income, expense, gain, or loss earned or
incurred with respect to such investment shall be credited solely
to the earmarked investment.
(b) Elective Deferral Accounts.
(i) Pooled Investment. On September 30, December 31, March 31, and
June 30 of each Plan Year, the income (or loss) for each pooled
Elective Deferral Account shall be allocated based on the
beginning balance on the first day of every calendar quarter for
each Participant with assets remaining in the Plan on the
Valuation Date for such quarter, less an adjustment for
distributions and withdrawals during the quarter on a time-
weighted basis, plus an adjustment for transfers from other
investments on a time-weighted basis, plus one-half of Elective
Deferral Contributions made during the quarter.
(ii) Earmarked Investment. Any income, expense, gain, or loss earned or
incurred with respect to such investment shall be credited solely
to the earmarked investment.
SECTION 6 - LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
--------------------------------------------------------
6.1 Limitation on Annual Additions.
------------------------------
Notwithstanding the provisions of Section 5, the annual addition to a
Participant's accounts under this and any other defined contribution plans
maintained by the Employers or an affiliate (within the purview of Section
414(b), (c), and (m) and Section 415(h) of the Code, which affiliate shall
be deemed an Employer for this purpose) shall not exceed for any limitation
year an amount equal to the lesser of (i) $30,000 or if greater, one-fourth
of the defined benefit dollar limitation set forth in Section 415(b)(1) of
the Code as in effect for the limitation year, or (ii) 25% of the
Participant's Total Compensation for such limitation year.
25
<PAGE>
For purposes of this Section 6.1 and the following Section 6.2, the "annual
addition" to a Participant's accounts means the sum of (i) the Employer
Contributions and Forfeitures credited to a Participant's Account with
respect to a limitation year, plus (ii) the Participant's total
nondeductible Voluntary Contributions for that year. The $30,000 and
$90,000 limitations referred to shall, for each limitation year ending
after 1988, be automatically adjusted to the new dollar limitations
determined by the Commissioner of Internal Revenue for the calendar year
beginning in that limitation year. Notwithstanding the foregoing, if the
special limitations on annual additions described in Section 415(c)(6) of
the Code applies, the limitations described in this section shall be
adjusted accordingly. A "limitation year" means each 12 consecutive month
period beginning July 1.
6.2 Coordinated Limitation with Other Plans.
---------------------------------------
Aside from the limitation prescribed by Section 6.1 with respect to the
annual addition to a Participant's accounts for any single limitation year,
if a Participant has ever participated in one or more defined benefit plans
maintained by an Employer or an affiliate, then the annual additions to his
accounts shall be limited on a cumulative basis so that the sum of his
defined contribution plan fraction and his defined benefit plan fraction
does not exceed one. For this purpose:
(a) A Participant's defined contribution plan fraction with respect to a
Plan Year shall be a fraction, (i) the numerator of which is the sum of
the annual additions to his accounts through the current year Plan
Year, and (ii) the denominator of which is the sum of the lesser of the
following amounts -A- and -B- determined for the current limitation
year and each prior limitation year of Service with an Employer: -A- is
1.25 times $30,000, or 1.0 times such dollar limitation if the Plan is
top-heavy; and-B- is 35% of the Participant's Total Compensation for
such year. Further, if the Participant participated in any related
defined contribution plan in any years beginning before 1976, any
excess of the sum of the actual annual additions to the Participant's
accounts for those years over the maximum annual additions which could
have been made in accordance with Section 6.1 shall be ignored, and
Voluntary Contributions by the Participant during those years shall be
taken into account as to each such year only to the extent that his
average annual Voluntary Contribution in those years exceeded 10% of
his average annual Total Compensation in those years.
(b) A Participant's defined benefit plan fraction with respect to a
limitation year shall be a fraction (i) the numerator of which is his
projected annual benefit payable at normal retirement under the
Employers' defined benefit plans, and (ii) the denominator of which is
the lesser of the following amounts -A- and -B- with an Employer: -A-
is 1.25 times $90,000, or 1.0 times such dollar limitation if the Plan
is top-heavy, and -B- 1.4 times the Participant's average Total
Compensation during his highest-paid three consecutive limitation
years.
6.3 Effect of Limitations.
---------------------
The Committee shall take whatever action may be necessary from time to time
to assure compliance with the limitations set forth in Section 6.1
26
<PAGE>
and 6.2. Specifically, the Committee shall see that each Employer restrict
its contributions for any Plan Year to an amount which, taking into account
the amount of available Forfeitures, may be completely allocated to the
Participants consistent with those limitations. Where the limitations would
otherwise be exceeded by any Participant, further allocations to the
Participant shall be curtailed to the extent necessary to satisfy the
limitations. Where an excessive amount is contributed on account of a
mistake as to one or more Participants' compensation, or there is an amount
of Forfeitures which may not be credited in the Plan Year in which it
becomes available, the amount shall be held in a Suspense Account to be
allocated in lieu of any Employer Contributions in future years until it is
eliminated, and to be returned to the Employer if it cannot be credited
consistent with these limitations before the termination of the Plan.
SECTION 7 - INVESTMENTS
-----------------------
7.1 General Fund.
------------
Matching Contributions, Discretionary Contributions, Qualified Matching
Contributions, Qualified Non-elective Contributions, Employee Voluntary
Contributions, and Employee Rollover Contributions shall be held in a
"General Fund".
The Trustees shall have full power and authority to receive, collect,
receipt for, hold, manage, and care for all amounts paid and contributed to
the General Fund, and the proceeds thereof, and the income and profits
therefrom, as a single fund, and to invest and reinvest the same, pursuant
to the provisions of Section 12.3. The Trustees may invest in "qualifying
employer real property" and qualifying employer securities" as defined in
Section 407(d)(4) and (5) of ERISA, including Employer Stock.
7.2 Participant Direction of Assets from General Fund to Employer Stock.
-------------------------------------------------------------------
Effective on July 1, 1989, the Trustees were expressly authorized to
receive from each Participant on an annual basis an irrevocable election
directing the Trustees to have all or a part of the Vested portion of each
such Participant's assets in the General Fund to be invested in Employer
Stock. A Participant's initial election required a minimum investment of
$250.
Effective with the Plan Year beginning on July 1, 1992, this annual
election was rescinded. However, any investments in Employer Stock and any
directions for investment made prior to the Plan Year beginning on July 1,
1992 shall continue to be valid and shall not be affected.
The net income from Employer Stock investments in the Employer Contribution
Account shall be invested primarily in Employer Stock and such cash or
short term investments as the Trustees shall deem necessary to meet any
contingencies.
7.3 Elective Deferral Accounts.
--------------------------
The Trustees shall have full power and authority to receive, collect,
receipt for, hold, manage, and care for all amounts held, paid, and
27
<PAGE>
contributed through Elective Deferrals.
Each Participant shall choose the investments for his Elective Deferrals
from those selected by the Trustees for this purpose. These investments
shall be chosen within the guidelines of ERISA. The investment selections
shall include, but not be limited to, the following:
(a) At least three diversified investments with different goals and
different risk factors.
(b) One or more investments with no market risk, which are fully insured
against loss by the United States or an agency of the United States.
(c) Employer Stock.
7.4 Voting of Employer Stock.
------------------------
The Participants shall have full voting rights with respect to Employer
Stock purchased with Participant direction. All shares of Employer Stock
purchased through Participant direction shall be voted by the Trustees as
directed by the Participants. The Trustees shall vote shares of Employer
Stock in the General Fund in proportion to the manner in which the shares
of Employer Stock purchased with Participant direction are voted by the
Participants. The Trustees shall adopt such rules and procedures as they
deem necessary to carry out the intent of this provision.
7.5 Restrictions on Insider Transactions.
------------------------------------
On January 28, 1992, the following "Restrictions on Insider Transactions"
became effective.
Notwithstanding any other provisions in the Plan to the contrary,
transactions by Participants who are deemed to be insiders within the
meaning of Section 16 of the Securities Exchange Act of 1934 shall also be
restricted by the following provisions:
(a) For initial or periodic transactions resulting from an election to
participate or change levels of participation with respect to
securities of the issuer:
(i) Officer or director Participants making withdrawals must cease
further purchases in the Plan for six months, or the securities so
distributed must be held by the Participant six months prior to
disposition; provided, however, that extraordinary distributions
of all of the issuer's securities held by the Plan and
distributions in connection with death, retirement, disability,
termination of employment, or a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, are not subject to
this requirement.
(ii) Officer or director Participants who cease participation in the
Plan may not participate again for at least six months.
(b) For intra-plan transfers between an equity securities of the issuer
fund and another fund, the transaction is pursuant to an election made
on a quarterly date at least six months after the date of the
28
<PAGE>
previous intra-plan transfer election relating to an equity securities
of the issuer fund. The quarterly date referred to in the previous
sentence shall begin on the third business day following the public
release of quarterly and annual summary statements of earnings of the
Company and ending on the twelfth business day following such date.
SECTION 8 - VESTING
-------------------
8.1 Vesting Schedule
----------------
(a) Employer Contribution Account for Employer Matching Contributions and
Employer Discretionary Contributions.
Upon termination of employment for any reason other than death, total
or permanent disability, or attainment of the Plan's Early Retirement
age, a Participant's Vested (nonforfeitable) portion of his assets in
the Employer Contribution Account maintained for Employer Matching and
Employer Discretionary Contributions shall be a percentage based on his
Years of Service as determined by the following schedule, and subject
to the provisions in the balance of this Section 8:
<TABLE>
<CAPTION>
Vesting Schedule
----------------
Years of Service Percent Vested Interest
----------------- ------------------------
<S> <C>
Less than 3 years 0%
3 20%
4 40%
5 60%
6 80%
7 or more years 100%
</TABLE>
(b) Accounts for Qualified Matching Contributions, Qualified Non-elective
Contributions, Elective Deferral Contributions, Employee Voluntary
Contributions and Employee Rollover Contributions.
These Accounts are not subject to the Vesting Schedule in Section
8.1(a), and shall be 100% vested and not forfeitable for any reason.
8.2 Computation of Vesting Years.
----------------------------
For purposes of this Plan, a "Vesting Year" means each 12-month period
beginning July 1, in which an Employee has at least 1,000 Hours of Service,
beginning with his initial Service with any Employer and including certain
Service with other employers as provided in the definition of "Service".
However, a Participant's Vesting Years shall be computed subject to the
following conditions and qualifications:
(a) A Participant's Vested interest in his Account accumulated before a
Break in Service shall be determined without regard to any Service
after the Break. Further, if a Participant has a Break in Service
before his interest in his Account has become Vested to some extent, he
shall lose credit for any Vesting Year before the Break.
29
<PAGE>
(b) Unless otherwise specifically excluded, a Participant's Vesting Years
shall include any period of active military duty to the extent required
by the Military Selective Service Act of 1967 (38 U.S.C. Section 2021).
8.3 Full Vesting upon Certain Events.
--------------------------------
Notwithstanding Section 8.1(a), a Participant's interest in his Account
shall fully vested on the Participant's Normal Retirement Date, provided
the Participant is in Service on or after that date. The Participant's
interest shall also fully vest in the event that his Service is terminated
by Early Retirement, Disability, or death.
8.4 Full Vesting upon Plan Termination.
----------------------------------
Notwithstanding Section 8.1(a), a Participant's interest in his Account
shall fully vest if he is in active Service upon termination of this Plan
or upon the permanent and complete discontinuance of contributions by his
Employer. In the event of a partial termination, the interest of each
Participant who is in Service shall fully vest with respect to that part of
the Plan which is terminated.
8.5 Forfeiture, Repayment, and Restoral.
-----------------------------------
If a Participant's Service terminates before his interest in his Account is
fully Vested, that portion which has not Vested shall be forfeited when he
has a 1-Year Break in Service. In the case of a terminated Participant who
does not receive a distribution of his entire Vested interest and whose
Service resumes before a Break in Service occurs, any undistributed Vested
balance from his prior participation shall be maintained as a fully Vested
sub-account with his Account.
If any former Participant shall be reemployed by an Employer before five
consecutive 1-Year Breaks in Service have occurred, and such former
Participant has received a distribution of all his Vested assets in the
Plan, the unvested portion of his assets shall be reinstated to his Account
if he repays the full amount distributed to him within the earlier of five
years after the first date on which he is reemployed by an Employer or the
close of the first period of five consecutive 1-Year Breaks in Service
commencing after the distribution. Upon repayment of the entire
distribution within the required time period, the forfeited unvested assets
shall be restored in full.
8.6 Accounting for Forfeitures.
--------------------------
A Forfeiture shall be charged to the Participant's Account as of the first
Plan Year in which there is a 1-Year Break in Service. Except as otherwise
provided in Section 8.5, a Forfeiture shall be first used to reinstate any
previously forfeited account balances of former Participants, if any, with
the remaining Forfeitures, if any, allocated to the Active Participants,
pursuant to Section 5.2.
8.7 Vesting and Nonforfeitability.
-----------------------------
A Participant's interest in his Account which has become Vested shall be
nonforfeitable for any reason.
30
<PAGE>
SECTION 9 - PAYMENT OF BENEFITS
-------------------------------
9.1 Upon Termination of Employment
------------------------------
A Participant whose Service ends for any reason shall receive the Vested
portion of his Account in either: (i) a single payment; or (ii) over a
period not to exceed ten years.
Pursuant to Section 401(a)(31) of the Code, effective January 1, 1993, if a
Participant elects to receive the distribution in a single payment, payment
may be made either to the Participant or to an Eligible Retirement Plan as
a Direct Rollover.
A terminated Participant shall receive information from the Committee
pertaining to his distribution options and the tax consequences of the
distribution. Pursuant of Section 401(a)(31) of the Code and the
regulations thereunder, unless the Participant waives the 30-day waiting
period and elects to make or not to make a Direct Rollover, the
distribution shall not be made until at least 30 days have elapsed after
the Participant has been advised of his distribution options. If the
Participant has not attained the Plan's Normal Retirement age, the
Participant may elect to wait to receive his benefits until he becomes age
65.
A Participant may modify his distribution election at any time, provided
any new benefit payment date is at least 30 days after a modified election
is delivered to the Committee.
A Participant's benefits shall be calculated based on the most recent
Valuation Date before the date of payment.
9.2 Upon Death of Participant.
-------------------------
The Beneficiary of a Participant shall receive information from the
Committee pertaining to his distribution options and the tax consequences
of the distribution.
Pursuant to Section 401(a)(31) of the Code, effective January 1, 1993, if
the Beneficiary is a surviving Spouse, the distribution is an Eligible
Rollover Distribution, and payment may be made either to the Spouse, or to
the surviving Spouse's IRA as a Direct Rollover. If the Beneficiary is an
alternate payee spouse or former spouse, the distribution is an Eligible
Rollover Distribution, and payment may be made either to the alternate
payee spouse or former spouse, or to an Eligible Retirement Plan of the
alternate payee spouse or former spouse as a Direct Rollover.
If the distribution is an Eligible Rollover Distribution, pursuant to
Section 401(a)(31) of the Code and the regulations thereunder, unless the
Beneficiary waives the 30-day waiting period and elects to make or not to
make a Direct Rollover, the distribution shall not be made until at least
30 days have elapsed after the Beneficiary has been advised of his
distribution options.
A Beneficiary's benefits shall be calculated based on the most recent
Valuation Date before the date of payment.
31
<PAGE>
(a) Distribution options if distribution to Participant have not begun.
If a Participant dies before distribution has begun, his entire Account
shall be distributed to his Beneficiary no later than the earlier of
the Participant's required minimum distribution beginning date or five
years after death, unless one of the following is applicable:
(i) The Beneficiary elects and begins to receive payment over his life
expectancy by December 31 of the year following the year of the
death of the Participant.
(ii) The Beneficiary is the surviving Spouse. In this circumstance, the
distribution beginning date shall be the Participant's required
minimum distribution beginning date.
(iii)The Beneficiary is a child, and upon the attainment of the child's
majority (or other circumstance permitted in the Code and the
regulations thereunder) the surviving Spouse will becomethe
recipient of the payment of benefits, then the distribution
beginning date shall be the Participant's required minimum
distribution beginning date.
(b) Distribution options if distribution to Participant has begun.
If a Participant dies after his distribution has begun but before his
entire Account has been paid to him, then the balance of his Account
shall be distributed to his Beneficiary at least as rapidly as under
the distribution schedule elected by the Participant.
9.3 Upon Attainment of Age 70 1/2
-----------------------------
Distributions must commence to a terminated Participant no later than the
April 1 following the calendar year in which the Participant attained age
70 1/2.
Effective January 1, 1989, if a Participant is in Service upon the
attainment of age 70 1/2, minimum distribution payments shall commence by
April 1 of the calendar year following the calendar year in which the
Participant attained age 70 1/2. However, any Participant who was in
Service and became age 70 1/2 prior to January 1, 1989, except for a
Participant who was a 5% owner, shall not be subject to minimum
distribution payments until termination from Service with an Employer.
The distribution shall be made based on one of the following
irrevocableelections: (i) over the life of the Participant, or over the
joint lives of the Participant and his designated Beneficiary; or (ii) over
a period certain not to exceed the life expectancy of the Participant, or
the life expectancy of the Participant and his designated Beneficiary.
9.4 In-Service Distributions.
------------------------
(a) Non-deductible Voluntary Contribution Distribution.
A distribution from a Non-deductible Voluntary Contribution Account may
be made at any time.
32
<PAGE>
(b) Hardship Distribution.
A hardship distribution may be made from the Account of a Participant
subject to the following limitations:
(i) A hardship distribution shall be limited to the amount which is
necessary to satisfy an immediate and heavy financial need of the
Participant. The amount of an immediate and heavy financial need
may include any amounts necessary to pay any federal, state, or
local income taxes or penalties reasonably anticipated to result
from the distribution.
(ii) A distribution may be made to satisfy the financial need if the
Participant's need:
(I) Cannot be met through reimbursement or compensation by
insurance or otherwise; or
(II) Cannot be met by liquidation of the Participant's assets; or
(III)Cannot be met by cessation of Elective Deferral Contributions
under the Plan; or
(IV) Cannot be met by other distributions or nontaxable (at the
time of the loan) loans from plans maintained by an Employer
or any other employer; or
(V) Cannot be met by borrowing from commercial sources on
reasonable commercial terms, in an amount sufficient to
satisfy the need.
(iii)A hardship distribution may be made for one of the following
purposes:
(I) to pay medical expenses incurred by the Participant, the
Participant's Spouse, or any dependents of the Participant;
(II) costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage payments);
(III)payment of tuition and related educational fees for the next
12 months of post-secondary education for the Participant, the
Participant's Spouse, children, or dependents;
(IV) payments necessary to prevent eviction of the Participant from
the Participant's principal residence or foreclosure on the
mortgage of that residence; or
(V) because of other events approved by the Secretary of the
Treasury or his delegate.
(iv) A hardship distribution may not be in excess of the amount needed
to satisfy the immediate and heavy financial need.
33
<PAGE>
(v) For plan years beginning after December 31, 1988, any hardship
distribution from the Participant's Elective Deferral Account must
be limited to the distributable amount. The distributable amount
is equal to the Participant's total Elective Deferral
Contributions as of the date of distribution, reduced by the
amount of previous hardship distributions, plus income earned on
Elective Deferrals which were credited to the Participant's
Elective Deferral Account as of June 30, 1989.
Upon the receipt of a hardship distribution, a Participant is prohibited
from making Elective Deferrals and Voluntary Contributions to this Plan and
all other plans maintained by the Employer for at least 12 months. However,
this prohibition to making contributions to other plans does not include a
health or welfare benefit plan, including one which is part of a cafeteria
plan, pursuant to Section 125 of the Code.
9.5 Type of Payment.
---------------
This Section 9.5 applies to distributions made on or after January 1, 1993,
pursuant to Section 401(a)(31) of the Code and the regulations thereunder.
(a) Direct Rollover.
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this section, a
Distributee may elect, at the time and in the manner prescribed by the
Committee, to have any portion of an Eligible Rollover Distribution
processed as a Direct Rollover and paid directly to an Eligible
Retirement Plan selected by the Distributee.
(b) Payment to Participant or Beneficiary.
If a distribution is an Eligible Rollover Distribution, and the
Participant or Beneficiary elects to have payment made to himself, then
the distribution will be subject to mandatory 20% federal income tax
withholding, unless the distribution is less than $200 or consists
solely of Employer Stock and $200 or less in cash.
9.6 Form of Payment.
---------------
(a) Cash or "In Kind".
Distributions shall be made in cash or, if there are investments in
non-cash accounts, distributions may be made, at the election of the
Distributee, in cash and/or in kind.
(b) Employer Stock.
Notwithstanding the foregoing in Section 9.6(a), any earmarked
investments in Employer Stock shall be distributed, to the greatest
extent possible, in the form of whole shares of Employer stock,
provided that Employer Stock is readily tradeable on an established
securities market at the time of distribution.
34
<PAGE>
(c) Annuity.
In lieu of making payments directly from a terminated or deceased
Participant's Account, the Trustees may, in their sole discretion,
invest all or a portion of a Participant's Account in one or more
annuity Contracts and assign such Contract or Contracts to such
Participant or his Beneficiary in such manner as the Trustees deem
advisable. Before assigning any Contract to a terminated Participant or
a Beneficiary of a deceased Participant, the Trustees shall cause such
Contract to be made non-assignable by the assignee. Any Contract
obtained after July 31, 1983 shall be issued on a unisex basis and all
the terms and conditions under any such Contracts, including benefits,
premiums, options, loan values, and cash surrender values, shall be the
same for both male and female.
If any Contract on the life of a terminated or deceased Participant is
purchased, such Contract shall be endorsed to provide for payments
thereunder in accordance with the preceding provisions of this
section.
9.7 Timing of Distribution.
----------------------
Pursuant to Section 401(a)(31) of the Code and the regulations thereunder,
effective January 1, 1993, a Participant or Beneficiary shall be notified
of all distribution options at least thirty days prior to making a
distribution election. However, a Participant shall be permitted to waive
the 30-day period requirement which is given a Distributee to review all
distribution options, and may elect to make or not to make a Direct
Rollover to an Eligible Retirement Plan sooner.
If the value of a Participant's Vested assets exceeds (or at the time of
any prior distribution exceeded) $3,500, the Participant must consent to
the distribution in writing. However, the consent of the Participant shall
not be required to satisfy the commencement of minimum required
distributions, pursuant to Section 401(a)(9) of the Code.
Unless the Participant elects otherwise, distribution of benefits shall
begin no later than the 90th day after the close of the Plan Year in which
the Participant attains age 65.
A Participant's Vested assets are immediately distributable, subject to the
requirements of Section 401(a)(31) of the Code, if they do not exceed
$3,500. Payment will be made to the Participant or Beneficiary if a
distribution election has not been received within 90 days after
notification of all distribution options.
9.8 Deemed Distribution.
-------------------
For purposes of this section, if a Participant terminates service and the
value of the Participant's vested account balance is zero, the Participant
shall be deemed to have received a distribution of such vested account
balance.
9.9 Qualified Domestic Relations Order.
----------------------------------
Under a Qualified Domestic Relations Order (QDRO), the following shall be
applicable:
35
<PAGE>
(a) The alternate payee may receive a payment of benefits under this Plan
in accordance with the distribution options described in Section 9.
(b) The alternate payee may receive a payment of benefits under this Plan
prior to the Normal Retirement age if the QDRO specifically provides
for such earlier payment. If the present value of the payment exceeds
$3,500, the alternate payee must consent in writing to such
distribution.
(c) Upon receipt of an order which appears to be a domestic relations
order, the Committee will promptly notify the Participant and each
alternate payee of the receipt of the order, and provide them with a
copy of the procedures established by the Plan for determining whether
the order is a QDRO. While the determination is being made, a separate
accounting will be made with respect to any amounts which would be
payable under the order.
If the Committee or a court determines that the order is a QDRO, within
18 months after receipt, the Committee will begin making payments,
including the separately accounted for amounts, pursuant to the order
when required or as soon as administratively practical.
If the Committee or court determines that the order is not a QDRO, or
if no determination is made within 18 months after receipt, then the
separately accounted for amounts will be either restored to the
Participant's account or distributed to the Participant, as if the
order did not exist. If the order is subsequently determined to be a
QDRO, such determination shall be applied prospectively to payments
made after the determination.
9.10 Beneficiary Designation.
-----------------------
Each Participant shall designate the person, persons, or entity to receive
benefits payable under the Plan upon the death of the Participant.
No election by a married Participant of a primary Beneficiary who is not
the Participant's Spouse shall be valid unless the election is accompanied
by the Spouse's written consent, which
(a) must acknowledge the effect of the election,
(b) must explicitly provide either that the designated Beneficiary may not
subsequently be changed by the Participant without the Spouse's further
consent, or that it may be changed without such consent, and
(c) must be witnessed by the Committee, its representative, or a notary
public. (This requirement shall not apply if the Participant
establishes to the Committee's satisfaction that the Spouse may not be
located.)
9.11 Marital Status of Participant.
-----------------------------
The Committee shall from time to time take whatever steps it deems
appropriate to keep informed of each Participant's marital status. Each
Employer shall provide the Committee with the most reliable information in
36
<PAGE>
the Employer's possession regarding its Participants' marital status, and
the Committee may, in its discretion, require a notarized affidavit from
any Participant as to his marital status.
The Committee, the Plan, the Trustee, and the Employers shall be fully
protected and discharged from any liability to the extent of any benefit
payments made as a result of the Committee's good faith and reasonable
reliance upon information obtained from a Participant and his Employer as
to his marital status.
SECTION 10 - RULES GOVERNING BENEFIT CLAIMS AND REVIEW OF APPEALS
-----------------------------------------------------------------
10.1 Claim for Benefits.
------------------
Any Participant or Beneficiary who qualifies for payment of benefits shall
file a claim for his benefits with the Committee on a form provided by the
Committee. The claim, including any election of an alternative benefit
form, shall be filed at least 30 days before the date on which the benefits
are to be begin. If a Participant or Beneficiary fails to file a claim by
the 30th day before the date on which benefits become payable, he shall be
presumed to have filed a claim for payment for the Participant's benefits
in the standard form prescribed in Section 9.
10.2 Notification by Committee.
-------------------------
Within 90 days after receiving a claim for benefits (or within 180 days, if
special circumstances require an extension of time, and written noticeof
the extension is given to the Participant or Beneficiary within 90 days
after receiving the claim for benefits), the Committee shall notify the
Participant or Beneficiary whether the claim has been approved or denied.
If the Committee denies a claim in any respect, the Committee shall set
forth in a written notice to the Participant or Beneficiary:
(a) Each specific reason for the denial;
(b) Specific references to the pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information which could be
submitted by the Participant or Beneficiary to support his claim, with
an explanation of the relevance of such information; and
(d) An explanation of the claims review procedures set forth in Section
10.3.
10.3 Claims Review Procedure.
-----------------------
Within 60 days after a Participant or Beneficiary receives notice from the
Committee that his claim for benefits has been denied in any respect, he
may file with the Committee a written notice of appeal setting forth his
reasons for disputing the Committee's determination. In connection with his
appeal, the Participant or Beneficiary or his representative may inspect or
purchase copies of pertinent documents and records to the extent not
inconsistent with other Participants' and Beneficiaries' rights
37
<PAGE>
of privacy.
Within 60 days after receiving a notice of appeal from a prior
determination (or within 120 days, if special circumstances require an
extension of time, and written notice of the extension is given to the
Participant or Beneficiary and his representative within 60 days after
receiving the notice of appeal), the Committee shall furnish to the
Participant or Beneficiary and his representative, if any, a written
statement of the Committee's final decision with respect to his claim,
including the reasons for such decision and the particular Plan provisions
upon which it is based.
SECTION 11 - ADMINISTRATION OF PLAN
-----------------------------------
11.1 Authority of Committee.
----------------------
The Committee shall be the "plan administrator" within the meaning of ERISA
and shall have exclusive responsibility and authority to control and manage
the operation and administration of the Plan, including the interpretation
and application of its provisions, except to the extent such responsibility
and authority are otherwise specifically
(a) allocated to the Company, the Employers, or the Trustees under the
Plan,
(b) delegated in writing to other persons by the Company, the Employers,
the Committee, or the Trustees, or
(c) allocated to other parties by operation of law.
The Committee shall have no investment responsibility with respect to the
Trust Fund. In the discharge of its duties, the Committee may employ
accountants, actuaries, legal counsel, and other agents (who also may be
employed by an Employer or the Trustees in the same or some other capacity)
and may pay their reasonable expenses and compensation.
11.2 Identity of Committee.
---------------------
The Committee shall consist of three or more individuals selected by the
Company. Any individual, including a director, trustee, shareholder,
officer, or employee of an Employer, shall be eligible to serve as a member
of the Committee. The Company shall have the power to remove any individual
serving on the Committee at any time without cause upon 10 days written
notice, and any individual may resign from the Committee at any time upon
10 days written notice to the Company. The Company shall notify the Trustee
of any change in membership of the Committee.
11.3 Duties of Committee.
-------------------
The Committee shall keep whatever records may be necessary to implement the
Plan and shall furnish whatever reports may be required from time to time
by the Company. The Committee shall furnish to the Trustees whatever
information may be necessary to properly administer the Trust. The
Committee shall see to the filing with the appropriate government agencies
all reports and returns required of the Plan Committee under ERISA and
38
<PAGE>
other laws.
11.4 Valuation of Employer Stock.
---------------------------
If the valuation of any Employer Stock is not established by reported
trading on a generally recognized public market, the Committee shall have
the exclusive authority and responsibility to determine its value for all
purposes under the Plan. Such value shall be determined as of each
Valuation Date, and on any other date the Plan purchases or sells such
Employer Stock. The Committee shall use generally accepted methods of
valuing stock of similar corporations for purposes of arm's length business
and investment transactions, and in this connection, the Committee shall
obtain, and shall be protected in relying upon, the valuation of such
Employer Stock as determined by an independent appraiser experienced in
preparing valuations of similar businesses.
11.5 Compliance with ERISA.
---------------------
The Committee shall perform all acts necessary to comply with ERISA. Each
individual member or employee of the Committee shall discharge his duties
in good faith and in accordance with the applicable requirements of ERISA.
11.6 Action by Committee.
-------------------
All actions of the Committee shall be governed by the affirmative vote of a
number of members which is a majority of the total number of members
currently appointed, including vacancies. The members of the Committee may
meet informally and may take any action without meeting as a group.
11.7 Execution of Documents.
----------------------
Any instrument executed by the Committee shall be signed by any member or
employee of the Committee.
11.8 Adoption of Rules.
-----------------
The Committee shall adopt such rules and regulations of uniform
applicability as it deems necessary or appropriate for the proper
administration and interpretation of the Plan.
11.9 Responsibilities to Participants.
--------------------------------
The Committee shall determine which Employees qualify to enter the Plan.
The Committee shall furnish to each eligible Employee whatever summary plan
descriptions, summary annual reports, and other notices and information may
be required by ERISA. The Committee also shall determine when a Participant
or his Beneficiary qualifies for the payment of benefits under the Plan.
The Committee shall furnish to each such Participant or Beneficiary
whatever information is required under ERISA (or is otherwise appropriate)
to enable the Participant or Beneficiary to make whatever elections may be
available pursuant to Section 9, and the Committee shall provide for the
payment of benefits in the proper form and amount from the assets of the
Trust Fund. The Committee may decide in its sole discretion to permit
modifications of elections and to defer or accelerate benefits to the
extent consistent with applicable law and the best interests of the
individuals concerned.
39
<PAGE>
11.10 Alternative Payees in Event of Incapacity.
-----------------------------------------
If the Committee finds at any time that an individual qualifying for
benefits under this Plan is a minor or is incompetent, the Committee may
direct the benefits to be paid, in the case of a minor, to his parents, his
legal guardian, a custodian for him under the Uniform Gifts to Minors Act,
or the person having actual custody of him, or, in the case of an
incompetent, to his spouse, his legal guardian, or the person having actual
custody of him, the payments to be used for the individual's benefit. The
Committee and the Trustee shall not be obligated to inquire as to the
actual use of the funds by the person receiving them under this Section
11.10, and any such payment shall completely discharge the obligations of
the Plan, the Trustee, the Committee, and the Employers to the extent of
the payment.
11.11 Indemnification by Employers.
----------------------------
Except as separately agreed in writing, the Committee, and any member or
employee of the Committee, shall be indemnified and held harmless by the
Employers, jointly and severally, to the fullest extent permitted by law
against any and all costs, damages, expenses, and liabilities reasonably
incurred by or imposed upon it or him in connection with any claim made
against it or him or in which it or him may be involved by reason of its or
his being, or having been, the Committee, or a member or employee of the
Committee, to the extent such amounts are not paid by insurance.
11.12 Nonparticipation by Interested Member.
-------------------------------------
Any member of the Committee who also is a Participant in the Plan shall
take no part in any determination specifically relating to his own
participation or benefits, unless his abstention would leave the Committee
incapable of acting on the matter.
SECTION 12 - POWERS AND DUTIES OF PLAN TRUSTEES
-----------------------------------------------
12.1 Appointment of Trustees.
-----------------------
The Board of Directors of the Company shall appoint a minimum of three
individuals to serve as Trustees of the Plan. The Board of Directors of the
Company shall have the right at any time, and from time to time, to remove
any Trustee without cause. An individual may resign as a Trustee at any
time upon 10 days written notice to the Company.
12.2 Basic Responsibilities of the Trustees
--------------------------------------
The Trustees shall have the following primary responsibilities:
(a) To invest, manage, and control the Plan assets in a manner consistent
with Section 7.
At the discretion of the Trustees, one or more Investment Managers may
be appointed to direct the investment of all or any portion of the
Trust Fund. An Investment Manager shall accept the appointment in
writing, acknowledging that he is a fiduciary pursuant to Section 401
of ERISA, and certifying his registration under the Investment Advisors
Act of 1940 and the Investment Advisor Regulatory
40
<PAGE>
Enhancement and Disclosure Act of 1993. The Investment Manager, as a
Plan fiduciary, is subject to the fidelity bond requirement of Section
412 of ERISA, and shall furnish evidence that this requirement has been
satisfied each Plan Year. The Trustees shall be under no obligation to
review or question any investment decision made by the Investment
Manager, and shall have no liability for losses sustained with respect
to any investments made or retained by the Investment Manager, or for
any acts or omissions of the Investment Manager.
(b) At the direction of the Committee, to pay benefits to Participants in
the Plan and, in the event of their death, to their Beneficiaries.
(c) To maintain records of all receipts and disbursements, and to furnish
to the Employer a written annual report.
12.3 Investment Powers and Duties
----------------------------
The Trustees shall carry out their duties with skill and prudence, giving
due regard to any limitations imposed by the Code or ERISA. The Trustees,
in addition to all power and authority granted to it under common law,
statutory authority, and other provisions of the Plan, shall be empowered:
(a) To purchase, or subscribe for, any securities or other property and to
retain the same. In conjunction with the purchase of securities, margin
accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to purchase, or
otherwise dispose of any securities or other property held by the
Trustees, by private contract or at public auction. No person dealing
with the Trustees shall be bound to see to the application of the
purchase money or to inquire into the validity, expediency or propriety
of any such sale or other disposition, with or without advertisement;
(c) To vote upon any stocks, bonds, or other securities; to give general or
special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription
rights, or other options, and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate in, corporate
reorganizations or other changes affecting corporate securities, and to
delegate discretionary powers, and to pay any assessments or charges in
connection therewith; and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities, or other property.
(d) To cause any securities or other property to be registered in the
Trustees' own name, and to hold any investments in bearer form, but the
books and records of the Trustees shall at all times show that all such
investments are part of the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in such amount,
and upon such terms and conditions, as the Trustees shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustees, and to secure the repayment thereof by pledging all, or any
part, of the Trust Fund; and no person lending money to the
41
<PAGE>
Trustees shall be bound to see the application of the money lent or to
inquire into the validity, expediency, or propriety of any borrowing;
(f) To keep such a portion of the Trust Fund in cash or cash balances as
the Trustees may, from time to time, deem to be in the best interests
of the Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustees may deem advisable
any securities or other property received or acquired as Trustee
hereunder, whether or not such securities or other property would
normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be
purchased as investments hereunder;
(i) To settle, compromise, or submit to arbitration any claims, debts, or
damages due or owing to or from the Plan, to commence or defend suits
of legal or administrative proceedings, and to represent the Plan in
all suits and legal and administrative proceedings;
(j) To employ suitable agents and counsel and to pay their reasonable
expenses and compensation, and such agent or counsel may or may not be
agent or counsel for the Employer;
(k) To apply for and procure from responsible insurance companies, to be
selected by the Committee, as an investment of the Trust Fund such
annuity, or other Contracts (on the life of any Participant) as the
Committee shall deem proper; to exercise, at any time or from time to
time, whatever rights and privileges may be granted under such annuity
or other Contracts; to collect, receive, and settle for the proceeds of
all such annuity or other Contracts as and when entitled to do so under
the provisions thereof;
(l) To invest funds of the Trust in time deposits or savings accounts
bearing a reasonable rate of interest in the Trustees' bank;
(m) To invest in Treasury Bills and other forms of United States government
obligations;
(n) To sell, purchase, and acquire put or call options if the options are
traded on and purchased through a national securities exchange
registered under the Securities Exchange Act of 1934, as amended, or,
if the options are not traded on a national securities exchange, are
guaranteed by a member firm of the New York Stock Exchange;
(o) To deposit monies in federally insured savings accounts or certificates
of deposit in banks or savings and loan associations;
(p) To pool all or any of the Trust Fund, from time to time, with assets
belonging to any other qualified employee pension benefit trust created
by the Employer or an affiliated company of the Employer, and to
commingle such assets and make joint or common investments and carry
joint accounts on behalf of this Plan and such other trust or trusts,
allocating undivided shares or interests in such investments
42
<PAGE>
or accounts or any pooled assets of the two or more trusts in
accordance with their respective interests;
(q) To establish and maintain investments as directed by the Participants
for their Elective Deferral Contributions.
(r) To do all such acts and exercise all such rights and privileges,
although not specifically mentioned herein, as the Trustee may deem
necessary to carry out the purposes of the Plan.
12.4 Duties Regarding Payment of Benefits.
------------------------------------
At the direction of the Committee, the Trustee shall, in accordance with
the terms of the Plan, make payment of benefits and expenses from the Trust
Fund.
12.5 Execution of Contracts and Payment of Benefits
----------------------------------------------
Execution or endorsement of any contract or check shall require the written
approval of any two Trustees acting together.
12.6 Trustee Expenses.
----------------
The Trustees shall be reimbursed for any necessary expenses, including
reasonable fees for legal counsel. Such expenses shall be paid from the
Trust Fund, unless the Company elects to pay all or any portion of such
expenses. All extraordinary expenses and liabilities, such as the cost of
litigation or the payment of adverse claims shall be paid from the Trust
Fund. All taxes of any kind that may be levied or assessed under existing
or future laws upon, or in respect of, the Trust Fund or the income
thereof, shall be paid from the Trust Fund.
12.7 Trust Fund Annual Report.
------------------------
The Trustees shall maintain detailed and accurate records and accounts of
all transactions, which shall be available for inspection and audit by any
person or persons designated by the Committee. At the direction of the
Committee, the Trustees shall submit any valuations, reports, or other
information that may be required to the auditors.
Within a reasonable time following the later of the last day of the Plan
Year or receipt by the Trustees of the final Employer Contribution to the
Plan, the Trustees shall furnish to the Company and the Committee a written
account which shall contain: (i) the net income, or loss, of the Trust
Fund; (ii) the gains, or losses, realized by the Trust Fund from the sale
or other disposition of assets; (iii) the increase, or decrease, in the
value of the Trust Fund; (iv) all payments and distributions made from the
Trust Fund; and (v) any additional information that the Company or
Committee deems appropriate.
Upon receipt of the Trust Fund accounting, the Company shall advise the
Trustees of its approval or disapproval within thirty days. If no objection
has been filed by the Company, or if the account has been adjusted pursuant
to agreement between the Company and the Trustees, it shall be deemed to be
approved by the Company except as to matters, if any, covered by written
objections from the Company. The approval by the Company of any statement
of account shall be binding as to all matters
43
<PAGE>
embraced therein to the same extent as if the account of the Trustees had
been settled by judgment or decree in an action for a judicial settlement
of its account in a court of competent jurisdiction in which the Trustees,
the Company, and all persons having or claiming an interest in the Plan
were parties; provided, however, that nothing herein contained shall
deprive the Trustees of having its accounts judicially settled if the
Trustees so desires.
12.8 Audit.
-----
If an audit of the Plan's records shall be required by ERISA and the
regulations thereunder for any Plan Year, the Committee shall direct the
Trustees to engage on behalf of all Participants an independent qualified
public accountant for that purpose. Such accountant shall, after an audit
of the books and records of the Plan in accordance with generally accepted
auditing standards, within a reasonable period after the close of the Plan
Year, furnish to the Committee and the Trustees a report of his audit,
setting forth his opinion as to whether any statements or schedules which
are required to be filed by Section 103 of ERISA or by the Secretary of
Labor with the Plan's annual report, are presently fairly in conformity
with generally accepted accounting principles applied consistently.
All auditing and accounting fees shall be an expense of and, at the
election of the Company, paid from the Trust Fund.
12.9 Idemnification by Employers.
---------------------------
Except as separately agreed in writing, the Trustees shall be idemnified
and held harmless by the Employers, jointly and severally, to the fullest
extent permitted by law against any and all costs, damages, expenses, and
liabilities reasonably incurred by or imposed upon them in connection with
any claim made against them or in which they may be involved as Trustees,
to the extent such amounts are not paid by insurance.
12.10 Nonparticipation by Interest Member.
-----------------------------------
Any Trustee who also is a Participant in the Plan shall take no part in any
determination specifically relating to his own participation or benefits,
unless his abstention would leave the other Trustees incapable of acting on
the matter.
SECTION 13 - AMENDMENT AND TERMINATION OF PLAN
----------------------------------------------
13.1 Adoption of Plan by Other Employers.
-----------------------------------
With the consent of the Company, any entity may become a participating
Employer under the Plan by (i) taking such action as shall be necessary to
adopt the Plan, and (ii) executing and delivering such instruments and
taking such other action as may be necessary or desirable to put the Plan
into effect with respect to the entity's Employees.
13.2 Adoption of Plan by Successor.
-----------------------------
In the event that any Employer shall be reorganized by way of merger,
consolidation, transfer of assets or otherwise, so that an entity other
44
<PAGE>
than an Employer shall succeed to all or substantially all of the
Employer's business, the successor entity may be substituted for the
Employer under the Plan by adopting the Plan. Contributions by the Employer
shall be automatically suspended from the effective date of any such
reorganization until the date upon which the substitution of the successor
entity for the Employer under the Plan becomes effective. If, within 90
days following the effective date of any such reorganization, the successor
entity shall not have elected to become a part to the Plan, or if the
Employer shall adopt a plan of complete liquidation other than in
connection with a reorganization, the Plan shall be automatically
terminated with respect to Employees of the Employer as of the close of
business on the 90th day following the effective date of the
reorganization, or as of the close of business on the date of adoption of a
plan of complete liquidation, as the case may be.
13.3 Right to Amend or Terminate.
---------------------------
The Company intends to continue this Plan as a permanent program. However,
each participating Employer separately reserves the right to suspend,
supersede, or terminate the Plan at any time and for any reason, as it
applies to that Employer's Employees, and the Company reserves the right to
amend, suspend, supersede, merge, consolidate, or terminate the Plan at any
time and for any reason, as it applies to the Employees of all Employers.
No amendment, suspension, supersession, merger, consolidation, or
termination of the Plan shall reduce any Participant's or Beneficiary's
proportionate interest in the Trust Fund, or shall divert any portion of
the Trust Fund to purposes other than the exclusive benefit of the
Participants and their Beneficiaries prior to the satisfaction of all
liabilities under the Plan. Moreover, there shall not be any transfer of
assets to a successor plan or merger or consolidation with another plan
unless, in the event of the termination of the successor plan or the
surviving plan immediately following such transfer, merger, or
consolidation, each participant or beneficiary would be entitled to a
benefit equal to or greater than the benefit he would have been entitled to
if the plan in which he was previously a participant or beneficiary had
terminated immediately prior to such transfer, merger, or consolidation.
Following a termination of this Plan by the Company, the Trustee shall
continue to administer the Trust and pay benefits in accordance with the
Plan as amended from time to time and the Committee's instructions.
SECTION 14 - MISCELLANEOUS PROVISIONS
-------------------------------------
14.1 Plan Creates No Employment Rights.
---------------------------------
Nothing in this Plan shall be interpreted as giving any Employee the right
to be retained as an Employee by an Employer, or as limiting or affecting
the rights of an Employer to control its Employees or to terminate the
Service of any Employee at any time and for any reason, subject to any
applicable employment or collective bargaining agreements.
14.2 Nonassignability of Benefits.
----------------------------
No assignment, pledge, or other anticipation of benefits from the Plan will
be permitted or recognized by the Employers, the Committee, or the Trustee.
Moreover, benefits from the Plan shall not be subject to
45
<PAGE>
attachment, garnishment, or other legal process for debts or liabilities of
any Participant or Beneficiary, to the extent permitted by law. This
prohibition on assignment or alienation shall apply to any judgment,
decree, or order (including approval of a property settlement agreement)
which relates to the provision of child support, alimony, or property
rights to a present or former spouse, child, or other dependent of a
Participant pursuant to a State domestic relations or community property
law, unless the judgment, decree, or order is determined by the Committee
to be a Qualified Domestic Relations Order within the meaning of Section
414(p) of the Code.
14.3 Limit of Employer Liability.
---------------------------
The liability of the Employers with respect to Participants under this Plan
shall be limited to making contributions to the Trust from time to time, in
accordance with Section 4.
14.4 Treatment of Expenses.
---------------------
All expenses incurred by the Committee and the Trustee in connection with
administering this Plan and Trust Fund shall be paid by the Trustee from
the Trust Fund to the extent the expenses have not been paid or assumed by
the Employer.
14.5 Number and Gender.
-----------------
Any use of the singular shall be interpreted to include the plural, and the
plural the singular. Any use of the masculine, feminine, or neuter shall be
interpreted to include the masculine, feminine, or neuter, as the context
shall require.
14.6 Nondiversion of Assets.
----------------------
Except as provided in Section 6.3, under no circumstances shall any portion
of the Trust Fund be diverted to or used for any purpose other than the
exclusive benefit of the Participants and their Beneficiaries prior to the
satisfaction of all liabilities under the Plan.
14.7 Separability of Provisions.
--------------------------
If any provision of this Plan is held to be invalid or unenforcable, the
other provisions of the Plan shall not be affected but shall be applied as
if the invalid or unenforcable provision had not been included in the Plan.
14.8 Service of Process.
------------------
The agent for the service of process upon the Plan shall be the president
of the Company, or such other person as may be designated from time to time
by the Company.
14.9 Governing State Law.
-------------------
This Plan shall be interpreted in according with the laws of the State of
Illinois to the extent those laws are applicable under the provisions of
ERISA.
46
<PAGE>
SECTION 15 - TOP-HEAVY PROVISIONS
---------------------------------
15.1 Determination of Top-Heavy Status.
---------------------------------
The Committee shall determine on a regular basis whether each Plan Year is
or is not a "Top-Heavy Year" for purposes of implementing the provisions of
Sections 15.2, 15.3, and 15.4, which shall apply only to the extent the
Plan is top-heavy or super top-heavy within the meaning of Section 416 of
the Code and the Treasury Regulations promulgated thereunder. In making
this determination, the Committee shall use the following definitions and
principles:
(a) The "Employer" includes all business entities which are considered
commonly controlled or affiliated within the meaning of Sections
414(b), 414(c), and 414(m) of the Code.
(b) The "plan aggregation group" includes each qualified retirement plan
maintained by the Employer (i) in which a Key Employee is a Participant
during the Plan Year, or (ii) which enables any plan described in
clause (i) to satisfy the requirements of Section 401(a)(4) or 410 of
the Code, or (iii) which provides contributions or benefits comparable
to those of the plans described in clauses (i) and (ii) and which is
designated by the Committee as part of the plan aggregation group.
(c) The "determination date", with respect to the first Plan Year of any
plan, means the last day of that Plan Year, and with respect to each
subsequent Plan Year, means the last day of the preceding Plan Year. If
any other plan has a determination date which differs from this Plan's
determination date, the top-heaviness of this Plan shall be determined
on the basis of the other plan's determination date falling within the
same calendar year as this Plan's determination date.
(d) A "Key Employee", with respect to a Plan Year, means an Employee who at
any time during the five years ending on the top-heavy determination
date of the Plan Year has received compensation from an Employer and
has been (i) an officer of the Employer having Total Compensation
greater than 150 percent of the limit then in effect under Section
415(c)(1)(A) of the Code, (ii) one of the 10 Employees owning the
largest interests in the Employer having Total Compensation greater
than the limit then in effect under Section 415(c)(1)(A), (iii) an
owner of more than five percent of the outstanding equity interest or
outstanding voting interest in any Employer, or (iv) an owner of more
than one percent of the outstanding equity interest or the outstanding
voting interest in an Employer whose Total Compensation exceeds
$150,000. In determining which individuals are Key Employees, the rules
of Section 415(i) of the Code and Treasury Regulations promulgated
thereunder shall apply. The Beneficiary of a Key Employee shall also be
considered a Key Employee.
(e) A Non-key Employee means an Employee who at any time during the five
years ending on the top-heavy determination date for the Plan Year has
received compensation from an Employer and who has never been a Key
Employee, and the Beneficiary of any such Employee.
47
<PAGE>
(f) The "aggregated benefits" for any Plan Year means (i) the adjusted
account balances in defined contribution plans on the determination
date, plus (ii) the adjusted value of accrued benefits in defined
benefit plans, calculated as to the annual valuation date coinciding
with or next preceding the determination date, with respect to Key
Employees and Non-key Employees under all plans with the plan
aggregation group which includes this Plan. For this purpose, the
"adjusted account balance" and the "adjusted value of accrued benefit"
for any Employee shall be increased by all plan distributions made with
respect to the Employee during the five years ending on the
determination date. Further, the adjusted account balance under a plan
shall not include any amount attributable to a Rollover Contribution or
similar transfer to the Plan initiated by an Employee and made after
1983, unless both plans involved are maintained by the Employer, in
which event the transferred amount shall be counted in the transferee
plan and ignored for all purposes in the transferor plan. Finally, the
adjusted value of accrued benefits under any defined benefit plan shall
be determined by assuming whichever actuarial assumptions were applied
by the Pension Benefit Guaranty Corporation to determine the
sufficiency of plan assets for plans terminating on the valuation date.
(g) This Plan shall be "top-heavy" for any Plan Year in which the
aggregated benefits of the Key Employees exceed 60 percent of the total
aggregated benefits for both Key Employees and Non-key Employees.
(h) This Plan shall be "super top-heavy" for any Plan Year in which the
aggregated benefits of the Key Employees exceed 90 percent of the total
aggregated benefits for both Key Employees and Non-key Employees.
(i) A "Top-Heavy Year" means a Plan Year in which the Plan is top-heavy.
15.2 Minimum Contributions.
---------------------
For any Top-Heavy Year, a special contribution shall be made on behalf of
each Participant so that each Non-key Employee's allocation of Employer
Contributions and Forfeitures shall be equal to the lesser of (i) 3% of
such Non-key Employee's Total Compensation, or (ii) the highest ratio of
such allocation of Employer Contributions and Forfeitures received by any
Key Employee for that Plan Year. For purposes of the special contribution
of this Section 15.2, a Key Employee's Total Compensation shall include
amounts the Key Employee elected to defer under a qualified 401(k)
arrangement. Such a special contribution shall be made on behalf of each
Participant who is employed by the Employer on the last day of the Plan
Year, regardless of his Hours of Service.
Neither Elective Deferrals nor Matching Contributions may be taken into
account for the purpose of satisfying the minimum top-heavy contribution
requirement.
For any Plan Year when (i) the Plan is top-heavy and (ii) a Non-key
Employee is a Participant in both this Plan and a defined benefit plan
included in the plan aggregation group which is top heavy, the sum of the
Employer Contributions and Forfeitures allocated to the Account of each
such Non-key Employee shall be equal to at least 5% of such Non-key
48
<PAGE>
Employee's Total Compensation for that Plan Year.
If the Employer has more than one plan, the required minimum Top-Heavy Year
contribution shall be met in this Plan.
15.3 Top-Heavy Vesting Schedule.
--------------------------
In a Top-Heavy Plan Year, a Participant's Vested interest in that portion
of his Employer Contribution Account maintained for Employer Matching and
Employer Discretionary Contributions shall be based on the following top-
heavy vesting schedule:
<TABLE>
<CAPTION>
Vesting Schedule
----------------
Years of Service Percent Vested Interest
----------------- ------------------------
<S> <C>
Less than 2 years 0%
2 20%
3 40%
4 60%
5 80%
6 or more years 100%
</TABLE>
15.4 Maximum Compensation.
--------------------
For any Top-Heavy Year, a Participant's "Cash Compensation" as defined in
Section 2, and his "Total Compensation" for purposes of Section 15.2, shall
not exceed $200,000 (or the limit currently in effect under Section 415(d)
of the Code).
For any Plan Year beginning after 1993, a Participant's "Cash Compensation"
and his "Total Compensation" shall exclude any compensation in excess of
the OBRA '93 annual compensation limit of $150,000, as adjusted for
increases in cost of living in accordance with Section 401(a)(17)(B)
of the Code.
49
<PAGE>
Exhibit No. 10(xv) Form of Employment Agreement, as amended,
Between MAF Bancorp, Inc. and various officers
The attached Employment Agreement dated April 19, 1990, as amended, between MAF
Bancorp, Inc. and Allen Koranda is substantially identical in all material
respects (except as otherwise noted below) with the other contracts listed below
which are not being filed:
Parties to Employment Agreement
-------------------------------
MAF Bancorp, Inc. and Kenneth Koranda (1)
MAF Bancorp, Inc. and Jerry A. Weberling (1)
MAF Bancorp, Inc. and Lois B. Vasto (1)
/(1)/ Employment Agreements provide for different minimum salaries
<PAGE>
MAF BANCORP, INC.
EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of April 19, 1990 by and between MAF
Bancorp, Inc. and the "Holding Company"), a corporation organized under the laws
of the State of Delaware with its principal administrative office at 55th &
Holmes Street, Clarendon Hills, Illinois, and Allen H. Koranda ("Executive").
Any reference to "Bank" herein shall mean Mid America Federal Savings Bank or
any successor thereto.
WHEREAS, the Holding Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Holding Company on
a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual convenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to serve as
Chairman of the Board of Directors and Chief Executive Officer of the Holding
Company. During said period, Executive also agrees to serve, if elected, as an
officer and director of any subsidiary or affiliate of the Holding Company.
Failure to reelect Executive as Chief Executive Officer or failure to nominate
Executive to the Board of Directors or failure to elect the Executive as the
Chairman of the Board if elected as a director, without the consent of the
Executive shall constitute a breach of this Agreement.
2. TERMS AND DUTIES.
(a) The period of Executive's employment under this Agreement shall be
deemed to have commenced as of the date first above written and shall continue
for a period of sixty (60) full calendar months thereafter. Commencing on the
third anniversary date of this Agreement, and continuing at each anniversary
date thereafter, the Agreement shall automatically renew for an additional year
such that the remaining term shall be three (3) years unless written notice is
provided to Executive at least ten (10) days and not more than twenty (20) days
prior to such anniversary date, that his employment shall cease at the end of
twenty-four (24) months following the next anniversary date.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable
1
<PAGE>
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder including activities and services
related to the organization, operation and management of the Holding Company;
provided, however, that with the approval of the Board of Directors of the
Holding Company ("Board"), as evidenced by a resolution of such Board, from time
to time, Executive may serve, or continue to serve, on the boards of directors
of, and hold any other offices or positions in, companies or organizations,
which, in such Board's judgment, will not present any conflict of interest with
the Holding Company, or materially affect the performance of Executive's duties
pursuant to this Agreement.
(c) In the event that Executive's duties and responsibilities with respect
to the Bank are temporarily or permanently terminated pursuant to Section 8 or
16 of the Employment Agreement dated April 19, 1990, between Executive and the
Bank ("Bank Agreement") and the course of conduct upon which such termination is
based would not constitute grounds for Termination for Cause under Section 8 of
this Agreement, then Executive shall assume such duties and responsibilities
formerly performed at the Bank as part of his duties and responsibilities as
Chief Executive Officer and Chairman of the Board of Directors of the Holding
Company and receive the compensation benefits provided hereunder by the Holding
Company. Nothing in this provision shall be interpreted as restricting the
Holding Company's right to remove Executive for Cause in accordance with Section
8 of this Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 2(b). The Holding
Company shall pay Executive as compensation a salary of not less than $239,000
per year ("Base Salary"). Such salary shall be payable semi-monthly. During
the period of this Agreement, Executive's salary shall be reviewed at least
annually; the first such review will be made no later than December 31, 1990.
Such review shall be conducted by a Committee designated by the Board, and such
Committee may increase said salary. In addition to the salary provided in this
Section 3(a), the Holding Company shall provide Executive at no cost to
Executive with all such other benefits as are provided uniformly to permanent
full-time employees of the Holding Company and the Bank.
(b) The Holding Company will provide Executive with employee benefit plans,
arrangements and perquisites
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substantially equivalent to those in which Executive was participating or
otherwise deriving benefit from immediately prior to the beginning of the term
of this Agreement, and the Holding Company will not, without Executive's prior
written consent, make any changes in such plans, arrangements or perquisites
which would adversely affect Executive's rights or benefits thereunder. Without
limiting the generality of the foregoing provisions of this Subsection (b),
Executive will be entitled to participate in or receive benefits under any
employee benefit plans including retirement plans, pension plans, profit-sharing
plans, deferred compensation plans, health-and-accident plan, medical coverage
or any other employee benefit plan or arrangement made available by the Holding
Company in the future to its senior executives and management employees, subject
to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements. Executive will be entitled to
incentive compensation and bonuses as provided in any plan of the Holding
Company in which Executive is eligible to participate. Nothing paid to the
Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which the Executive is entitled under this Agreement.
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the Holding Company shall pay or reimburse Executive for all
reasonable travel and other reasonable expenses incurred by Executive performing
his obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(c) of this Agreement by reason of one of
the circumstances contained in Section 2(c) of this Agreement, and the Executive
receives or will receive less than the full amount of compensation and benefits
formerly entitled to him under the Bank Agreement, the Holding Company shall
assume the obligation to provide Executive with his compensation and benefits in
accordance with the Bank Agreement less any compensation and benefits received
from the Bank, subject to the terms and conditions of this Agreement, including
the Termination for Cause provisions in Section 8.
4. PAYMENTS TO EXECUTIVE UPON TERMINATION OF EMPLOYMENT.
The provisions of this Section shall in all respects be subject to the terms
and conditions stated in Sections 8 and 16.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during the Executive's term of employment under this Agreement, the provisions
of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean
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and include any one or more of the following:(i) the termination by the
Holding Company of Executive's full-time employment hereunder for any reason
other than a Change in Control, as defined in Section 5(a) hereof or for Cause,
as defined in Section 8 hereof; (ii) Executive's resignation from the Holding
Company's employ, upon any (A) failure to elect or reelect Executive as the
Chief Executive Officer or failure to nominate or renominate Executive to the
Board of Directors or failure to elect or reelect Executive as Chairman of the
Board if elected as a director, (B) material change in Executive's function,
duties, or responsibilities, which change would cause Executive's position to
become one of lesser responsibility, importance, or scope from the position and
attributes thereof described in Section 1, above, (and any such material change
shall be deemed a continuing breach of this Agreement), (C) liquidation,
dissolution, consolidation, or merger of the Holding Company in which the
Holding Company is not the resulting entity, or (D) breach of this Agreement by
the Holding Company. Upon the occurrence of any event described in clauses (A),
(B), (C) or (D), above, Executive shall have the right to elect to terminate his
employment under this Agreement by resignation upon not less than sixty (60)
days prior written notice given within a reasonable period of time not to
exceed, except in case of a continuing breach, four calendar months after the
event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the Holding Company
shall pay Executive, or, in the event of his subsequent death, his beneficiary
or beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to the greater of three (3) times the
average of the three (3) preceding years' Base Salary paid to the Executive or
the salary payable to the Executive for the remaining term of this Agreement;
provided, however, that if the Bank is not in compliance with its minimum
- -------- -------
capital requirements, such payments shall be deferred until such time as the
Bank is in capital compliance. At the discretion of the Executive, such payments
shall be made in a lump sum immediately upon the occurrence of an Event of
Termination, subject only to the proviso above, or paid monthly during thirty-
six (36) months following the Executive's termination.
(c) Upon the occurrence of an Event of Termination, the Holding Company will
cause to be continued life, health and disability coverage substantially
identical to the coverage maintained by the Holding Company for Executive prior
to his termination. Such coverage shall cease upon the earlier of Executive's
employment by another employer or thirty six (36) months.
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<PAGE>
(d) On an annual basis on January 2, or if January 2 is not a regular
business day, then on the next such regular business day, of each year,
Executive shall elect whether, in the event amounts are payable under Section
4(b) hereof, such amounts shall be paid in a lump sum or on a pro rate basis
pursuant to such section. Such election shall be irrevocable for the year for
which such election is made.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there shall have
been a Change in Control of the Holding Company, as set forth below. For
purposes of this Agreement, a "Change in Control" of Holding Company shall mean
an event of a nature that: (1) would be required to be reported in response to
Item 1 of the current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); or (ii) results in a Change in Control of the Bank or the
Holding Company within the meaning of the Home Owners' Loan Act of 1933, as
amended, and the Rules and Regulations promulgated by the Office of Thrift
Supervision (or its predecessor agency), as in effect on the date hereof,
including Section 574 or such regulations; or (iii) without limitation such a
Change in Control shall be deemed to have occurred at such time as (a) any
"person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities or makes an offer to
purchase securities of the Holding Company representing 20% or more of the
Holding Company's outstanding securities ordinarily having the right to vote at
the election of directors except for securities purchased by any employee stock
ownership plan and trust of the Bank; or (b) individuals who constitute the
Board on the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Holding Company's shareholders was approved
by the same Nominating Committee serving under an Incumbent Board, shall be, for
purposes of this clause (b), considered as though he were a member of the
Incumbent Board; or (c) a merger, consolidation or sale of all or substantially
all the assets of the Holding Company occurs; or (d) a proxy statement shall be
distributed soliciting proxies from stockholders of the Holding Company, by
someone other than the current management of the Holding Company, seeking
stockholder approval of a plan of reorganization, merger or consolidation
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of the Holding Company or Bank with one or more corporations as a result of
which the outstanding shares of the class of securities then subject to the Plan
are exchanged for or converted into cash or property or securities not issued by
the Bank or Holding Company; or (e) a tender offer is made for 20% or more of
the outstanding securities of the Bank or Holding Company.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred or the Board of the Holding Company has
determined that a Change in Control has occurred, Executive shall be entitled to
the benefits provided in paragraphs (c), (d), (e), (f) and (g) of this Section 5
upon his subsequent termination of employment at any time during the term of
this Agreement (regardless of whether such termination results from his
resignation or his dismissal), unless such termination is because of his death,
disability or for cause. Upon the Change in Control, Executive shall have the
right to elect to terminate his employment with the Holding Company at any time
during the term of this Agreement.
(c) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Holding Company shall pay Executive, or in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum equal
to three (3) times the average of the three (3) preceding years' Base Salary
paid to the Executive. At the discretion of the Executive, such payment may be
made in a lump sum immediately upon a Change in Control and termination of
employment of Executive or paid monthly during the thirty-six (36) months
following the Executive's termination.
(d) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Holding Company will cause to be continued life,
health and disability coverage substantially identical to the coverage
maintained by the Bank for the Executive prior to his severance. Such coverage
shall cease upon the earlier of Executive's employment by another employer or
thirty-six (36) months.
(e) Upon the occurrence of a Change in Control, the Executive will have such
rights as specified in the Holding Company's Incentive Stock Option Plan or any
other employee benefit plan with respect to options and such other rights as may
have been granted to Executive under such plans.
(f) Upon the occurrence of a Change in Control, the Executive will be
entitled to the benefits under the Bank's Management Recognition and Retention
Plans.
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(g) Notwithstanding the preceding paragraphs of this Section 5, in the event
that:
(i) the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits") would be
deemed to include an "excess parachute payment" under 280G of the
Code or any successor thereto, and
(ii) if such Termination Benefits were reduced to an amount (the "Non-
Triggering Amount"), the value of which is one dollar ($1.00) less
than an amount equal to three (3) times Executive's "base amount", as
determined in accordance with said Section 280G, and the Non-
Triggering Amount would be greater than the aggregate value of the
Termination Benefits (without such reduction) minus the amount of tax
required to be paid by Executive thereon by Section 4999 of the Code,
then the Termination Benefits shall be reduced to the Non-Triggering
Amount. The allocation of the reduction required hereby among the
Termination Benefits provided by the preceding paragraphs of this
Section 5 shall be determined by the Executive. In the event that
Executive receives the Non-Triggering Amount pursuant to this
paragraph (g) and it is subsequently determined by the Internal
Revenue Service or judicial authority that Executive is deemed to
have received an amount in excess of the Non-Triggering Amount, the
Holding Company shall pay to Executive an amount equal to the value
of the payments or benefits in excess of the Non-Triggering Amount he
is so deemed to have received.
(h) On an annual basis on January 2, or if January 2 is not a regular
business day, then on the next such regular business day, of each year,
Executive shall elect whether, in the event amounts are payable under Section
5(c) hereof, such amounts shall be paid in a lump sum or on a pro rata basis
pursuant to such section. Such election shall be irrevocable for the year for
which such election is made.
6. TERMINATION FOR DISABILITY
(a) If, as a result of Executive's incapacity due to physical or mental
illness, he shall have been absent from his duties with the Holding Company on a
full-time basis for six (6) consecutive months, and within thirty (30) days
after
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<PAGE>
written notice of potential termination is given he shall not have returned to
the full-time performance of his duties, the Holding Company may terminate
Executive's employment for "Disability."
(b) The Holding Company will pay Executive, as disability pay, a monthly
payment equal to the greater amount of three-quarters (3/4) of Executive's
monthly rate of Base Salary on the effective date of such termination or
$14,937.50. These disability payments shall commence on the effective date of
Executive's termination and will end on the earlier of (i) the date Executive
returns to the full-time employment of the Holding Company in the same capacity
as he was employed prior to his termination for Disability and pursuant to any
employment agreement between Executive and the Holding Company; (ii) Executive's
full-time employment by another employer; (iii) Executive attaining the normal
age of retirement; or (iv) Executive's death. Notwithstanding any other
provision to the contrary, the Bank may apply any proceeds from disability
income insurance for Executive which was paid for by the Bank or Holding Company
as partial satisfaction of its obligation under this Section. The disability
payments will be in addition to any benefit payable from any qualified or non-
qualified retirement plans, stock benefit plans or other programs maintained by
the Bank or Holding Company.
(c) The Holding Company will cause to be continued life, health and
disability coverage substantially identical to the coverage maintained by the
Holding Company for the Executive prior to his termination for Disability. This
coverage shall cease upon the earlier of (i) the date Executive returns to the
full-time employment of the Holding Company, in the same capacity as he was
employed prior to his termination for Disability and pursuant to an employment
agreement between Executive and the Holding Company; (ii) Executive's full-time
employment by another employer; (iii) Executive's attaining the normal age of
retirement, or (iv) the Executive's death.
(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
7. TERMINATION UPON RETIREMENT
Termination by the Holding Company of the Executive based on "Retirement"
shall mean termination in accordance with any retirement arrangement established
with Executive's consent with respect to him. Upon termination of Executive
upon
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<PAGE>
Retirement, Executive shall be entitled to all benefits under any retirement
plan of the Holding Company and other plans to which Executive is a party. In
addition, the Holding Company will cause to be continued health coverage
substantially identical to the coverage maintained by the Holding Company and
the Bank for the Executive prior to his Retirement until his death.
8. TERMINATION FOR CAUSE
The term "Termination for Cause" shall mean termination upon intentional
failure to perform stated duties, personal dishonesty which results in loss to
the Holding Company or one of its affiliates or willful violation of any law,
rule, regulation or final cease and desist order which results in substantial
loss to the Holding Company or one of its affiliates or any material breach of
this Agreement. For purposes of this Section, no act, or the failure to act, on
Executive's part shall be "willful" unless done, or omitted to be done, not in
good faith and without reasonable belief that the action or omission was in the
best interest of the Holding Company or its affiliates. Notwithstanding the
foregoing, Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to him a copy of a resolution
duly adopted by the Board at a meeting of the Board called and held for that
purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct justifying
termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after termination for Cause. Any stock options granted to Executive
under any stock option plan of the Bank, the Holding Company or any subsidiary
or affiliate thereof, shall become null and void effective upon Executive's
receipt of Notice of Termination for Cause pursuant to Section 9 hereof, and
shall not be exercisable by Executive at any time subsequent to such Termination
for Cause.
9. NOTICE
Any purported termination by the Holding Company or by Executive shall be
communicated by Notice of Termination to the other party hereto.
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<PAGE>
For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated. "Date of Termination" shall mean (A) if Executive's
employment is terminated for Disability, thirty (30) days after a Notice of
Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall not be less than thirty (30) days from the date such Notice of
Termination is given); provided that if, within thirty (30) days after any
Notice of Termination is given, the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination, the
Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgement, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected) and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice pursues the
resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Holding Company will continue to pay Executive
his full compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, Base Salary) and continue him as a
participant in all compensation, benefit and insurance plans in which he was
participating when the notice of dispute was given, until the dispute is finally
resolved in accordance with this Agreement. Amounts paid under this Section are
in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 10 during
the term of this Agreement and for one (1) full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Holding Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party.
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11. NON-DISCLOSURE.
Executive recognizes and acknowledges that the knowledge of the business
activities and plans for business activities of the Holding Company and
affiliates thereof, as it may exist from time to time, is a valuable, special
and unique asset of the business of the Bank. Executive will not, during or
after the term of his employment, disclose any knowledge of the past, present,
planned or considered business activities of the Bank or affiliates thereof to
any person, firm, corporation, or other entity for any reason or purpose
whatsoever. Notwithstanding the foregoing, Executive may disclose any knowledge
of banking, financial and/or economic principles, concepts or ideas which are
not solely and exclusively derived from the business plans and activities of the
Holding Company. In the event of a breach or threatened breach by the Executive
of the provisions of this Section, the Holding Company will be entitled to an
injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Holding Company or affiliates thereof, or from rendering any services to any
person, firm, corporation, other entity to whom such knowledge, in whole or in
part, has been disclosed or is threatened to be disclosed. Nothing herein will
be construed as prohibiting the Bank from pursuing other remedies available to
the Holding Company for such breach or threatened breach, including the recovery
of damages from Executive.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be paid in cash or check from
the general funds of the Holding Company. The Holding Company guarantees
payment and provision of all amounts and benefits due to the Executive under the
Employment Agreement by and between the Bank and the Executive, if any amounts
and benefits due from the Bank are not timely paid or provided by the Bank, such
amounts and benefits shall be paid or provided by the Holding Company.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Holding Company or any
predecessor of the Holding Company and Executive, except that this Agreement
shall not affect or operate to reduce any benefit or compensation inuring of
Executive of a kind elsewhere provided. No
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provision of this Agreement shall be interpreted to mean that Executive is
subject to receiving fewer benefits than those available to him without
reference to this Agreement.
14. EFFECT OF ACTION UNDER BANK AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent that
compensation payments and benefits are paid to or received by Executive under
the Employment Agreement dated April 19, 1990, between Executive and the Bank,
such compensation payments and benefits paid by the Bank will be deemed to
satisfy the corresponding obligations of the Holding Company under this
Agreement.
15. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Holding Company and their respective successors and assigns.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition for the future of as to any act other than
that specifically waived.
17. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
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18. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
19. GOVERNING LAW.
This Agreement and its validity, interpretation, performance and
enforcement shall be governed by the laws of Delaware.
20. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the
rules of the American Arbitration Association then in effect. Judgement may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
21. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute of question of interpretation relating to this Agreement shall be paid
or reimbursed by the Holding Company.
22. INDEMNIFICATION
The Holding Company shall provide Executive (including his heirs, executors
and administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under Delaware law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Holding Company (whether or not he continues to be a director
or officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgements, court costs and
attorneys' fees and
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the cost of reasonable settlements, such settlements to be approved by the Board
of Directors of the Holding Company. If such action is brought against Executive
in his capacity as a officer or director of the Holding Company. However, such
indemnification shall not extend to matters as to which Executive is finally
adjudged to be liable for willful misconduct in the performance of his duties.
SIGNATURES
IN WITNESS WHEREOF, the Holding Company has caused this Agreement to be
executed and its seal to be affixed hereunto by its duly authorized officer, and
Executive has signed this Agreement, on the 19th day of April, 1990.
ATTEST: MAF BANCORP, INC.
/s/ Carolyn Pihera BY: /s/ Kenneth Koranda
- --------------------------- ---------------------------
Secretary President
(SEAL)
WITNESS:
/s/ Michael J. Janssen /s/ Allen Koranda
- --------------------------- ---------------------------
Executive
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AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
OF ALLEN KORANDA
----------------
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Employment Agreement of Allen
Koranda dated April 19, 1990 (the "Agreement") by adding the following two new
sentences to the end of Section 5(a) of the Agreement:
However, notwithstanding anything contained in this section to the contrary, a
Change in Control shall not be deemed to have occurred as a result of an event
described in (i), (ii) or (iii) (a), (c) or (e) above which resulted from an
acquisition or proposed acquisition of stock of the Holding Company by a person,
as defined in the OTS' Acquisition of Control Regulations (12 C.F.R. Section
574)(the "Control Regulations"), who was an executive officer of the Holding
Company on January 19, 1990 and who has continued to serve as an executive
officer of the Holding Company as of the date of the event described in (i),
(ii) or (iii)(a), (c) or (e) above (an "incumbent officer"). In the event a
group of individuals acting in concert satisfies the definition of "person"
under the Control Regulations, the requirements of the preceding sentence shall
be satisfied, and thus a change in control shall not be deemed to have occurred,
if at least one individual in the group is an incumbent officer.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this August 28, 1990.
ATTEST: MAF BANCORP, INC.
By: /s/ Carolyn Pihera By: /s/ Kenneth Koranda
--------------------------- ---------------------------
Carolyn Pihera Kenneth Kornada
Corporate Secretary President
EMPLOYEE
By: /s/ Allen Koranda
---------------------------
<PAGE>
Amendment to Employment Agreement
of Allen Koranda
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Employment Agreement of Allen
Koranda dated April 19, 1990, as amended, (the "Agreement"), by adding a new
sentence after the first sentence of Section 1 of the Agreement as shown below,
and by revising Section 2(a) to read as shown below, both such amendments to be
effective as of the date shown below.
(Add after first sentence of Section 1)
The Executive shall render administrative and management services to the Holding
Company such as are customarily performed by persons in a similar executive
capacity.
(Revised Section 2(a))
2. TERMS AND DUTIES
----------------
(a) The period of Executive's employment under this Agreement shall be deemed
to have commenced as of the date first above written and shall continue for a
period of sixty (60) full calendar months thereafter. Commencing on a third
anniversary date of this Agreement, and continuing at each anniversary date
thereafter, the board of directors of the Holding Company ("Board") may extend
the Agreement an additional year. The Board will review the Agreement and the
Executive's performance annually for purposes of determining whether to extend
the Agreement, and the results thereof shall be included in the minutes of the
Board's meeting. In the event the Executive chooses not to renew the Agreement
for an additional period, the Executive shall provide the Holding Company with
written notice at least ten (10) days and not more than twenty (20) days prior
to such anniversary date. If either the Holding Company or the Executive chooses
not to renew the Agreement, the Executive's employment shall terminate at the
end of the remaining term of the Agreement.
In WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this August 10, 1992.
ATTEST: MAF BANCORP, INC.
By: /s/ Carolyn Pihera By: /s/ Kenneth Koranda
--------------------------- ---------------------------
Carolyn Pihera Kenneth Koranda
Corporate Secretary President
EMPLOYEE
By: /s/ Allen Koranda
---------------------------
<PAGE>
Exhibit No. 10(xvi) Form of Employment Agreement, as amended,
Between Mid America Federal Savings Bank and various officers
The attached Employment Agreement dated April 19, 1990, as amended, between
Mid America Federal Savings Bank and Allen Koranda is substantially identical
in all material respects (except as otherwise noted below) with the other
contracts listed below which are not being filed:
Parties to Employment Agreement
-------------------------------
Mid America Federal Savings Bank and Kenneth Koranda /(1)/
Mid America Federal Savings Bank and Jerry A. Weberling /(1)/
Mid America Federal Savings Bank and Lois B. Vasto /(1)/
/(1)/ Employment Agreements provide for different minimum salaries
<PAGE>
MID AMERICA FEDERAL SAVINGS BANK
EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of April 19, 1990 by and between
Mid America Federal Savings Bank and the "Holding Company"), a corporation
organized under the laws of the State of Delaware with its principal
administrative office at 55th & Holmes Street, Clarendon Hills, Illinois, and
Allen H. Koranda ("Executive"). Any reference to "Company" herein shall mean
MAF Bancorp, Inc. or any successor thereto.
WHEREAS, the Bank wishes to assure itself of the services of Executive
for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Holding Company
on a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual convenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to serve as
Chairman of the Board of Directors and Chief Executive Officer of the Bank.
During said period, Executive also agrees to serve, if elected, as an officer
and director of any subsidiary or affiliate of the Bank. Failure to reelect
Executive as Chief Executive Officer or failure to nominate Executive to the
Board of Directors or failure to elect the Executive as the Chairman of the
Board if elected as a director, without the consent of the Executive shall
constitute a breach of this Agreement.
2. TERMS AND DUTIES.
(a) The period of Executive's employment under this Agreement shall be
deemed to have commenced as of the date first above written and shall continue
for a period of sixty (60) full calendar months thereafter. Commencing on the
third anniversary date of this Agreement, and continuing at each anniversary
date thereafter, the Agreement shall automatically renew for an additional year
such that the remaining term shall be three (3) years unless written notice is
provided to Executive at least ten (10) days and not more than twenty (20) days
prior to such anniversary date, that his employment shall cease at the end of
twenty-four (24) months following the next anniversary date.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable
<PAGE>
vacation periods, and reasonable leaves of absence, Executive shall devote
substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder including activities and services
related to the organization, operation and management of the Holding Company;
provided, however, that with the approval of the Board of Directors of the
Bank ("Board"), as evidenced by a resolution of such Board, from time
to time, Executive may serve, or continue to serve, on the boards of directors
of, and hold any other offices or positions in, companies or organizations,
which, in such Board's judgment, will not present any conflict of interest with
the Bank, or materially affect the performance of Executive's duties
pursuant to this Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 2(b). The Holding
Company shall pay Executive as compensation a salary of not less than $239,000
per year ("Base Salary"). Such salary shall be payable semi-monthly. During
the period of this Agreement, Executive's salary shall be reviewed at least
annually; the first such review will be made no later than December 31, 1990.
Such review shall be conducted by a Committee designated by the Board, and such
Committee may increase said salary. In addition to the salary provided in this
Section 3(a), the Bank shall provide Executive at no cost to Executive with all
such other benefits as are provided uniformly to permanent full-time employees
of the Bank.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Bank will not, without
Executive's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefits plans, including retirement plans, pension plans,
profit-sharing plans, deferred compensation plans, health-and-accident plan,
medical coverage or any other employee benefit plan or arrangement made
available by the Bank in the future to its senior executives and management
employees, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and arrangements. Executive will
administration of such plans and arrangements. Executive will be entitled to
incentive compensation and bonuses as provided in any plan of the Bank in which
Executive is eligible to participate. Nothing paid to the Executive under any
such plan or arrangement will be deemed to be in lieu of other compensation to
which the Executive is entitled under this Agreement.
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(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the Bank shall pay or reimburse Executive for all reasonable travel
and other reasonable expenses incurred by Executive performing his obligations
under this Agreement and may provide such additional compensation in such form
and such amounts as the Board may from time to time determine.
4. PAYMENTS TO EXECUTIVE UPON TERMINATION OF EMPLOYMENT.
The provisions of this Section shall in all respects be subject to the terms
and conditions stated in Sections 8 and 16.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during the Executive's term of employment under this Agreement, the provisions
of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following:(i) the
termination by the Bank or the Holding Company of Executive's full-time
employment hereunder for any reason other than a Change in Control, as
defined in Section 5(a) hereof or for Cause, as defined in Section 8 hereof;
(ii) Executive's resignation from the Holding Company's employ, upon any (A)
failure to elect or reelect Executive as the Chief Executive Officer or failure
to nominate or renominate Executive to the Board of Directors or failure to
elect or reelect Executive as Chairman of the Board if elected as a director,
(B) material change in Executive's function, duties, or responsibilities, which
change would cause Executive's position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in
Section 1, above, (and any such material change shall be deemed a continuing
breach of this Agreement), (C) liquidation, dissolution, consolidation, or
merger of the Bank or the Holding Company in which the Bank is not the resulting
entity, or (d) breach of this Agreement by the Bank or the Holding Company. Upon
the occurrence of any event described in clauses (A), (B), (C) or (D), above,
Executive shall have the right to elect to terminate his employment under this
Agreement by resignation upon not less than sixty (60) days prior written notice
given within a reasonable period of time not to exceed, except in case of a
continuing breach, four calendar months after the event giving rise to said
right to elect.
(b) Upon the occurrence of an Event of Termination, the Bank shall pay
Executive, or, in the event of his subsequent death, his beneficiary
or beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to the greater of three (3) times the
average of the three (3) preceding years' Base Salary paid to the Executive or
the salary payable to the Executive for the remaining term of this
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Agreement; provided, however, that if the Bank is not in compliance with its
-------- -------
minimum capital requirements, such payments shall be deferred until such time as
the Bank is in capital compliance. At the discretion of the Executive, such
payments shall be made in a lump sum immediately upon the occurrence of an Event
of Termination, subject only to the proviso above, or paid monthly during
thirty-six (36) months following the Executive's termination.
(c) Upon the occurrence of an Event of Termination, the Bank
will cause to be continued life, health and disability coverage substantially
identical to the coverage maintained by the Holding Company for Executive prior
to his termination. Such coverage shall cease upon the earlier of Executive's
employment by another employer or thirty six (36) months.
(d) On an annual basis on January 2, or if January 2 is not a regular
business day, then on the next such regular business day, of each year,
Executive shall elect whether, in the event amounts are payable under Section
4(b) hereof, such amounts shall be paid in a lump sum or on a pro rate basis
pursuant to such section. Such election shall be irrevocable for the year for
which such election is made.
5. CHANGE IN CONTROL
(a) No benefit shall be payable under this Section 5 unless there shall
have been a Change in Control of the Bank, as set forth below. For purposes of
this Agreement, a "Change in Control" of Bank shall mean an event of a nature
that: (1) would be required to be reported in response to Item 1 of the current
report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); or
(ii) results in a Change in Control of the Bank or the Holding Company within
the meaning of the Home Owners' Loan Act of 1933, as amended, and the Rules and
Regulations promulgated by the Office of Thrift Supervision (or its predecessor
agency), as in effect on the date hereof, including Section 574 or such
regulations; or (iii) without limitation such a Change in Control shall be
deemed to have occurred at such time as (a) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities or makes an offer to purchase securities of the Bank
or the Holding Company representing 20% or more of the Bank or Holding Company's
outstanding securities ordinarily having the right to vote at the election of
directors except for securities of the Bank purchased by
4
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any employee stock ownership plan and trust of the Bank; or (b) individuals who
constitute the Board of the Bank or the Holding Company on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (b), considered as though
he were a member of the Incumbent Board; or (c) a merger, consolidation or sale
of all or substantially all the assets of the Bank or the Holding Company
occurs; or (d) a proxy statement shall be distributed soliciting proxies from
stockholders of the Holding Company, by someone other than the current
management of the Holding Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Holding Company or Bank with one
or more corporations as a result of which the outstanding shares of the class of
securities then subject to the Plan are exchanged for or converted into cash or
property or securities not issued by the Bank or Holding Company; or (e) a
tender offer is made for 20% or more of the outstanding securities of the Bank
or Holding Company.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred or the Board of the Holding Company has
determined that a Change in Control has occurred, Executive shall be entitled to
the benefits provided in paragraphs (c), (d), (e), (f) and (g) of this Section 5
upon his subsequent termination of employment at any time during the term of
this Agreement (regardless of whether such termination results from his
resignation or his dismissal), unless such termination is because of his death,
disability or for cause. Upon the Change in Control, Executive shall have the
right to elect to terminate his employment with the Bank at any time
during the term of this Agreement.
(c) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Bank shall pay Executive, or in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum equal
to three (3) times the average of the three (3) preceding years' Base Salary
paid to the Executive. At the discretion of the Executive, such payment may be
made in a lump sum immediately upon a Change in Control and termination of
5
<PAGE>
employment of Executive or paid monthly during the thirty-six (36) months
following the Executive's termination.
(d) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Bank will cause to be continued life,
health and disability coverage substantially identical to the coverage
maintained by the Bank for the Executive prior to his severance. Such coverage
shall cease upon the earlier of Executive's employment by another employer or
thirty-six (36) months.
(e) Upon the occurrence of a Change in Control, the Executive will have
such rights as specified in the Holding Company's Incentive Stock Option Plan or
any other employee benefit plan with respect to options and such other rights as
may have been granted to Executive under such plans.
(f) Upon the occurrence of a Change in Control, the Executive will be
entitled to the benefits under the Bank's Management Recognition and Retention
Plans.
(g) Notwithstanding the preceding paragraphs of this Section 5, in the
event that:
(i) the aggregate payments or benefits to be made or afforded to Executive
under said paragraphs (the "Termination Benefits") would be deemed to
include an "excess parachute payment" under 280G of the Code or any
successor thereto, and
(ii) if such Termination Benefits were reduced to an amount (the "Non-
Triggering Amount"), the value of which is one dollar ($1.00) less
than an amount equal to three (3) times Executive's "base amount", as
determined in accordance with said Section 280G, and the Non-
Triggering Amount would be greater than the aggregate value of the
Termination Benefits (without such reduction) minus the amount of tax
required to be paid by Executive thereon by Section 4999 of the Code,
then the Termination Benefits shall be reduced to the Non-Triggering
Amount. The allocation of the reduction required hereby among the
Termination Benefits provided by the preceding paragraphs of this
Section 5 shall be determined by the Executive. In the event that
Executive receives the Non-Triggering Amount pursuant to this
paragraph (g) and it is subsequently determined by the Internal
Revenue Service or judicial authority that Executive is
6
<PAGE>
deemed to have received an amount in excess of the Non-Triggering
Amount, the Bank shall pay to Executive an amount equal to the value
of the payments or benefits in excess of the Non-Triggering Amount he
is so deemed to have received.
(h) On an annual basis on January 2, or if January 2 is not a regular
business day, then on the next such regular business day, of each year,
Executive shall elect whether, in the event amounts are payable under Section
5(c) hereof, such amounts shall be paid in a lump sum or on a pro rata basis
pursuant to such section. Such election shall be irrevocable for the year for
which such election is made.
6. TERMINATION FOR DISABILITY
(a) If, as a result of Executive's incapacity due to physical or mental
illness, he shall have been absent from his duties with the Holding Company on a
full-time basis for six (6) consecutive months, and within thirty (30) days
after written notice of potential termination is given he shall not have
returned to the full-time performance of his duties, the Holding Company may
terminate Executive's employment for "Disability."
(b) The Bank will pay Executive, as disability pay, a monthly payment equal
to the greater amount of three-quarters (3/4) of Executive's monthly rate of
Base Salary on the effective date of such termination or $14,937.50. These
disability payments shall commence on the effective date of Executive's
termination and will end on the earlier of (i) the date Executive returns to the
full-time employment of the Bank in the same capacity as he was employed prior
to his termination for Disability and pursuant to any employment agreement
between Executive and the Bank; (ii) Executive's full-time employment by another
employer; (iii) Executive attaining the normal age of retirement; or (iv)
Executive's death. Notwithstanding any other provision to the contrary, the Bank
may apply any proceeds from disability income insurance for Executive which was
paid for by the Bank as partial satisfaction of its obligation under this
Section. The disability payments will be in addition to any benefit payable from
any qualified or non-qualified retirement plans, stock benefit plans or other
programs maintained by the Bank.
(c) The Bank will cause to be continued life, health and disability coverage
substantially identical to the coverage maintained by the Bank for the Executive
prior to his termination for Disability. This coverage shall cease upon the
earlier of
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(i) the date Executive returns to the full-time employment of the Bank, in the
same capacity as he was employed prior to his termination for Disability and
pursuant to an employment agreement between Executive and the Bank; (ii)
Executive's full-time employment by another employer; (iii) Executive's
attaining the normal age of retirement, or (iv) the Executive's death.
(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
7. TERMINATION UPON RETIREMENT
Termination by the Bank of the Executive based on "Retirement"
shall mean termination in accordance with any retirement arrangement established
with Executive's consent with respect to him. Upon termination of Executive
upon Retirement, Executive shall be entitled to all benefits under any
retirement plan of the Bank and other plans to which Executive is a
party. In addition, the Bank will cause to be continued health
coverage substantially identical to the coverage maintained by the Holding
Company and the Bank for the Executive prior to his Retirement until his death.
8. TERMINATION FOR CAUSE
The term "Termination for Cause" shall mean termination because of the
Executive's, personal dishonesty, incompetence, willful misconduct, any breach
of fudiciary duty, intentional failure to perform stated duties or willful
violation of any law, rule, regulation (other than traffic violations or similar
offenses) or final cease and desist order which results in substantial loss to
the Holding Company or one of its affiliates or any material breach of this
Agreement. In determining incompetence, the acts or omissions shall be measured
against standards generally prevailing in the savings institutions industry.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to Executive and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying termination
8
<PAGE>
for Cause and specifying the particulars thereof in detail. The Executive shall
not have the right to receive compensation or other benefits for any period
after termination for Cause. Any stock options granted to Executive under any
stock option plan of the Bank, the Holding Company or any subsidiary or
affiliate thereof, shall become null and void effective upon Executive's receipt
of Notice of Termination for Cause pursuant to Section 9 hereof, and shall not
be exercisable by Executive at any time subsequent to such Termination for
Cause.
9. NOTICE
Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto.
For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated. "Date of Termination" shall mean (A) if Executive's
employment is terminated for Disability, thirty (30) days after a Notice of
Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall not be less than thirty (30) days from the date such Notice of
Termination is given); provided that if, within thirty (30) days after any
Notice of Termination is given, the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination, the
Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgement, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected) and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice pursues the
resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Bank will continue to pay Executive
his full compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, Base Salary) and continue him as a
participant in all compensation, benefit and insurance plans in which he was
participating when the notice of dispute was given, until the
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dispute is finally resolved in accordance with this Agreement. Amounts paid
under this Section are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 10 during
the term of this Agreement and for one (1) full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in
connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party.
11. NON-DISCLOSURE.
Executive recognizes and acknowledges that the knowledge of the business
activities and plans for business activities of the Bank and affiliates thereof,
as it may exist from time to time, is a valuable, special and unique asset of
the business of the Bank. Executive will not, during or after the term of his
employment, disclose any knowledge of the past, present, planned or considered
business activities of the Bank or affiliates thereof to any person, firm,
corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Bank. In the
event of a breach or threatened breach by the Executive of the provisions of
this Section, the Bank will be entitled to an injunction restraining Executive
from disclosing, in whole or in part, the knowledge of the past, present,
planned or considered business activities of the Bank or affiliates thereof, or
from rendering any services to any person, firm, corporation, other entity to
whom such knowledge, in whole or in part, has been disclosed or is threatened to
be disclosed. Nothing herein will be construed as prohibiting the Bank from
pursuing other remedies available to the Bank for such breach or threatened
breach, including the recovery of damages from Executive.
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12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be paid in cash or check from
the general funds of the Bank. The Holding Company guarantees
payment and provision of all amounts and benefits due to the Executive under the
Employment Agreement by and between the Bank and the Executive, if any amounts
and benefits due from the Bank are not timely paid or provided by the Bank, such
amounts and benefits shall be paid or provided by the Holding Company.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement
shall not affect or operate to reduce any benefit or compensation inuring of
Executive of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.
14. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.
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15. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition for the future of as to any act other than
that specifically waived.
16. REQUIRED PROVISIONS.
(a) The Bank may terminate the Employee's employment at any time, but any
termination by the Bank, other than Termination for Cause, shall not prejudice
Employee's right to compensation or other benefits under this Agreement.
Employee shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 8 hereinabove.
(b) If the Employee is suspended from office and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) (12 USC 1818(e)(3)) or 8(g) (12 USC 1818(g)) of the Federal
Deposit Insurance Act, as amended by the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, the Bank's obligations under this contract shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Bank may in its discretion (i)
pay the Employee all or part of the compensation withheld while their contract
obligations were suspended and (ii) reinstate (in whole or in part) any of the
obligations which were suspended.
(c) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 USC (S)1818(e)) or 8(g) (12 USC (S}1818(g)) of the Federal
Deposit Insurance Act, as amended by the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, all obligations of the Bank under this contract
shall terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 USC
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Federal Deposit
Insurance Corporation, at the time FDIC enters into an agreement to provide
assistance to or on behalf of the Bank under the authority contained in
Section 13(c) (12 USC (S)1823(c)) of the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1989; or (ii) by the Office of Thrift Supervision ("OTS") at the time the OTS or
its District Director approves a supervisory merger to resolve problems related
to the operations of the Bank or when the Bank is determined by the OTS or FDIC
to be in an unsafe or unsound condition. Any rights of the parties that have
already vested, however, shall not be affected by such action.
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17. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
18. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
19. GOVERNING LAW.
This Agreement and its validity, interpretation, performance and enforce-
ment shall be governed by the laws of Delaware.
20. ARBITRATION.
Any dispute or controversy arising under or in connection with this Agree-
ment shall be settled exclusively by arbitration in accordance with the rules of
the American Arbitration Association then in effect. Judgement may be entered on
the arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
21. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute of question of interpretation relating to this Agreement shall be paid
or reimbursed by the Bank, which payments are gauranteed by the Holding Company
pursuant to Section 12 hereof.
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22. INDEMNIFICATION
The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under Delaware law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Bank (whether or not he continues to be a director or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgements, court costs and
attorneys' fees and the cost of reasonable settlements, such settlements to be
approved by the Board of Directors of the Bank. If such action is brought
against Executive in his capacity as a officer or director of the Bank. However,
such indemnification shall not extend to matters as to which Executive is
finally adjudged to be liable for willful misconduct in the performance of his
duties.
SIGNATURES
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and its
seal to be affixed hereunto by its duly authorized officer, and Executive has
signed this Agreement, on the 19th day of April, 1990.
ATTEST: MAF BANCORP, INC.
/s/ Carolyn Pihera BY: /s/ Kenneth Koranda
- ------------------ -----------------------
Secretary President
(SEAL)
WITNESS:
/s/ Michael J. Janssen /s/ Allen Koranda
- ---------------------- -----------------
Executive
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AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
OF ALLEN KORANDA
----------------
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Employment Agreement of Allen
Koranda dated April 19, 1990 (the "Agreement") by adding the following two new
sentences to the end of Section 5(a) of the Agreement:
However, notwithstanding anything contained in this section to the contrary, a
Change in Control shall not be deemed to have occurred as a result of an event
described in (i), (ii) or (iii) (a), (c) or (e) above which resulted from an
acquisition or proposed acquisition of stock of the Holding Company by a person,
as defined in the OTS' Acquisition of Control Regulations (12 C.F.R. Section
574)(the "Control Regulations"), who was an executive officer of the Holding
Company on January 19, 1990 and who has continued to serve as an executive
officer of the Holding Company as of the date of the event described in (i),
(ii) or (iii)(a), (c) or (e) above (an "incumbent officer"). In the event a
group of individuals acting in concert satisfies the definition of "person"
under the Control Regulations, the requirements of the preceding sentence shall
be satisfied, and thus a change in control shall not be deemed to have occurred,
if at least one individual in the group is an incumbent officer.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this August 28, 1990.
ATTEST: MAF BANCORP, INC.
By: /s/ Carolyn Pihera By: /s/ Kenneth Koranda
------------------ -------------------
Carolyn Pihera Kenneth Koranda
Corporate Secretary President
EMPLOYEE
By: /s/ Allen Koranda
-----------------
Allen Koranda
<PAGE>
Amendment to Employment Agreement
of Allen Koranda
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Employment Agreement of Allen
Koranda dated April 19, 1990, as amended, (the "Agreement"), by adding a new
sentence after the first sentence of Section 1 of the Agreement as shown below,
and by revising Section 2(a) to read as shown below, both such amendments to be
effective as of the date shown below.
(Add after first sentence of Section 1)
The Executive shall render administrative and management services to the Bank
such as are customarily performed by persons in a similar executive capacity.
(Revised Section 2(a))
2. TERMS AND DUTIES
----------------
(a) The period of Executive's employment under this Agreement shall be deemed to
have commenced as of the date first above written and shall continue for a
period of sixty (60) full calendar months thereafter. Commencing on a third
anniversary date of this Agreement, and continuing at each anniversary date
thereafter, the board of directors of the Bank ("Board") may extend the
Agreement an additional year. The Board will review the Agreement and the
Executive's performance annually for purposes of determining whether to extend
the Agreement, and the results thereof shall be included in the minutes of the
Board's meeting. In the event the Executive chooses not to renew the Agreement
for an additional period, the Executive shall provide the Bank with written
notice at least ten (10) days and not more than twenty (20) days prior to such
anniversary date. If either the Bank or the Executive chooses not to renew the
Agreement, the Executive's employment shall terminate at the end of the
remaining term of the Agreement.
In WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this August 10, 1992.
ATTEST: Mid America Federal Savings Bank
By: /s/ Carolyn Pihera By: /s/ Kenneth Koranda
------------------ -------------------
Carolyn Pihera Kenneth Korand
Corporate Secretary President
EMPLOYEE
By: /s/ Allen Koranda
-----------------
Allen Koranda
<PAGE>
Amendment to Employment Agreement
of Allen Koranda
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Employment Agreement of Allen
Koranda dated April 19, 1990, as amended, (the "Agreement"), as shown below.
Such amendments shall be effective as of the date shown below.
1. Section 4(b) shall be revised to read as follows:
Upon the occurrence of an Event of Termination, the Holding Company shall
pay Executive, or in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to the greater of (A) three (3)
times the average of the three preceding years compensation paid to the
Executive or (B) the compensation payable to the Executive for the
remaining term of the Agreement; provided, however, that if the Bank
-------- -------
is not in compliance with its minimum capital requirements, such
payments shall be deferred until such time as the Bank is in capital
compliance. For purposes of the preceding sentence, compensation shall
include only Base Salary plus payments made under the MAF Bancorp
Executive Annual Incentive Plan (or such other annual cash incentive plan
in effect with respect to years ending prior to July 1, 1993). At the
discretion of the Executive, such payments shall be made in a lump sum
immediately upon the occurrence of an Event of Termination, subject to only
proviso above or paid monthly during the thirty-six (36) months following
the Executive's termination.
2. Section 5(c) shall be revised to read as follows:
Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Holding Company shall pay Executive, or in
the event of his subsequent death, his beneficiary or beneficiaries, or
his estate, as the case may be, as severance pay or liquidated damages,
or both, a sum equal to three (3) times the average of the three preceding
years compensation paid to the Executive. For purposes of the preceding
sentence, compensation shall include only Base Salary plus payments made
under the MAF Bancorp Executive Annual Incentive Plan (or such other annual
cash incentive plan in effect with respect to years ending prior to July 1,
1993). At the discretion of the Executive, such payment may be made in a
lump sum immediately upon a Change in Control and termination of employment
of Executive or paid monthly during the thirty-six (36) months following the
Executive's termination.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this December 20, 1995.
ATTEST: MAF BANCORP, INC.
By: /s/Carolyn Pihera By: /s/ Kenneth Koranda
----------------- -------------------
Carolyn Pihera Kenneth Koranda
Corporate Secretary President
EMPLOYEE
By: /s/ Allen Koranda
-----------------
Allen Koranda
<PAGE>
Amendment to Employment Agreement
of Allen Koranda
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Employment Agreement of Allen
Koranda dated April 19, 1990, as amended, (the "Agreement"), as shown below.
Such amendments shall be effective as of the date shown below.
1. Section 4(b) shall be revised to read as follows:
Upon the occurrence of an Event of Termination, the Bank shall pay
Executive, or in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to the greater of (A) three (3)
times the average of the three preceding years compensation paid to the
Executive or (B) the compensation payable to the Executive for the
remaining term of this Agreement; provided, however, that if the Bank is
-------- -------
not in compliance with its minimum capital requirements, such payments
shall be deferred until such time as the Bank is in capital compliance.
For purposes of the preceding sentence, compensation shall include only
Base Salary plus payments made under the MAF Bancorp Executive Annual
Incentive Plan (or such other annual cash incentive plan in effect with
respect to years ending prior to July 1, 1993). At the discretion of the
Executive, such payments shall be made in a lump sum immediately upon
the occurrence of an Event of Termination subject to only the proviso
-------
above or paid monthly during the thirty-six (36) months following the
Executive's termination.
2. Section 5(c) shall be revised to read as follows:
Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Bank shall pay Executive, or in the event
of his subsequent death, his beneficiary or beneficiaries, or his
estate, as the case may be, as severance pay or liquidated damages, or
both, a sum equal to three (3) times the average of the three preceding
years compensation paid to he Executive. For purposes of the preceding
sentence, compensation shall include only Base Salary plus payments made
under the MAF Bancorp Executive Annual Incentive Plan (or such other
annual cash incentive plan in effect with respect to years ending prior
to July 1, 1993). At the discretion of the Executive, such payment may
be made in a lump sum immediately upon a Change in Control and
termination of employment of Executive or paid monthly during the
thirty-six (36) months following the Executive's termination.
<PAGE>
IN WITNESS WHEREOF, the parties herto have executed this Amendment effective
this December 20, 1995.
ATTEST: MID AMERICA FEDERAL SAVINGS BANK
By: /s/ Carolyn Pihera By: /s/ Kenneth Koranda
--------------------------- -----------------------------
Carolyn Pihera Kenneth Koranda
Corporate Secretary President
EMPLOYEE
By: /s/ Allen Koranda
-----------------------------
Allen Koranda
<PAGE>
Exhibit No. 10(xvii) Form of Special Termination Agreement, as amended,
Between MAF Bancorp, Inc. and various officers
The attached Special Termination Agreement dated April 19, 1990, as amended,
between MAF Bancorp, Inc. and Gerard J. Buccino is substantially identical in
all material respects (except as otherwise noted below) with the other contracts
listed below which are not being filed:
Parties to Special Termination Agreement
----------------------------------------
MAF Bancorp, Inc. and Michael J. Janssen
MAF Bancorp, Inc. and David W. Kohlsaat
MAF Bancorp, Inc. and William Haider
MAF Bancorp, Inc. and Thomas Miers
MAF Bancorp, Inc. and Kenneth Rusdal
MAF Bancorp, Inc. and Sharon Wheeler
MAF Bancorp, Inc. and Gail Brzostek
MAF Bancorp, Inc. and Alan Schatz
MAF Bancorp, Inc. and Diane Stutte
1
<PAGE>
MAF BANCORP, INC.
SPECIAL TERMINATION AGREEMENT
This AGREEMENT is made effective as of April 19, 1990 by and between
MAF Bancorp, Inc. (the "Holding Company"), a corporation organized under the
laws of the State of Delaware, with its office at 55th & Holmes Streets,
Clarendon Hills, Illinois, and Gerard Buccin (the "Executive"). The term "Bank"
refers to Mid America Federal Savings Bank, the wholly-owned subsidiary of the
Company.
WHEREAS, the Holding Company recognizes the substantial experience and
abilities of the Executive and the Company wishes to protect his position
therewith for the period provided in this Agreement; and
WHEREAS, Executive has been elected to, and has agreed to serve in the
position of Vice President for the Holding Company, a position of substantial
responsibility;
NOW, THEREFORE, in consideration of the contribution and
responsibilities of Executive, and upon the other terms and conditions
hereinafter provided, the parties hereto agree as follows:
1. TERM OF AGREEMENT.
-----------------
The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for a period of thirty-six (36) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Agreement
shall automatically renew for an additional year such that the remaining term
shall be three (3) years unless written notice is provided to Executive, at
least ten (10) days and not more than twenty (20) days prior to expiration of
such period, then the term of this Agreement shall cease at the end of twenty-
four (24) months following the next anniversary date, or unless the Executive's
employment is voluntarily or involuntarily terminated with the Holding Company
pursuant to Section 2 hereof.
2. PAYMENTS TO EXECUTIVE UPON CHANGE IN CONTROL.
--------------------------------------------
(a) Upon the occurrence of a Change in Control of the Holding
Company (as herein defined) followed at any time during the term of this
Agreement by the voluntary or involuntary termination of Executive's employment,
other than for Cause, as defined in Section 2(c) hereof, the provisions of
Section 3 shall apply. Upon the occurrence of a Change in Control, Executive
shall have the right to elect to voluntarily terminate his employment at any
time during the term of this Agreement following any demotion, loss of title,
office or significant authority, reduction in his annual compensation, or
relocation of his principal place of employment by more than 50 miles from its
location immediately prior to the Change in Control.
(b) Definition of a Change in Control. A "Change in Control" of the
Bank or the Holding Company shall mean a change in control of a nature that:
(i) would be required to be reported in response to Item 1 of the current report
on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"); or
2
<PAGE>
(ii) results in a Change in Control of the Bank or the Holding Company within
the meaning of the Home Owners Loan Act of 1933 and the Rules and Regulations
promulgated by the Office of Thrift Supervision (or its predecessor agency), as
in effect on the date hereof including Section 574 of such regulations; or (iii)
without limitation, such a Change in Control shall be deemed to have occurred at
such time as (a) any "person" (as the term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities or makes an
offer to purchase securities of the Bank or Holding Company representing 20% or
more of the Bank's or Holding Company's outstanding securities, except for any
securities of the Bank purchased by the Holding Company in connection with the
conversion of the Bank to the stock form and any securities purchased by the
Bank's employee stock ownership plan and trust; or (b) individuals who
constitute the Board of Directors of the Holding Company on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the Holding Company's shareholders was approved by the Holding Company's
Nominating Committee, shall be, for purposes of this clause (b), considered as
though he were a member of the Incumbent Board; or (c) merger, consolidation or
sale of all or substantially all the assets of the Bank or Holding Company
occurs; or (d) a proxy statement shall be distributed soliciting proxies from
stockholders of the Holding Company, by someone other than the current
management of the Holding Company, seeking stockholder approval of the
reorganization, merger or consolidation of the Holding Company or Bank with one
or more corporations as a result of which the outstanding shares of the class of
securities then subject to the Plan are exchanged for or converted into cash or
property or securities not issued by the Bank or Holding Company; or (e) a
tender offer is made for 20% or more of the outstanding securities of the Bank
or Holding Company.
(c) Executive shall not have the right to receive termination
benefits pursuant to Section 3 hereof upon Termination for Cause. The term
"Termination for Cause" shall mean termination upon intentional failure to
perform stated duties, personal dishonesty which results in loss to the Holding
Company or one of its affiliates or willful violation of any law, rule,
regulation or final cease and desist order which results in substantial loss to
the Holding Company or one of its affiliates or any material breach of this
Agreement. For purposes of this Section, no act, or the failure to act, on
Executive's part shall be "willful" unless done, or omitted to be done, not in
good faith and without reasonable belief that the action or omission was in the
best interest of the Holding Company or its affiliates. Notwithstanding the
foregoing, Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to him a copy of a resolution
duly adopted by the affirmative vote of not less than three-fourths of the
members of the Board at a meeting of the Board called and held for that purpose
(after reasonable notice to Executive and an opportunity for him, together with
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, Executive was guilty of conduct justifying termination for Cause
and specifying the particulars thereof in detail. The Executive shall not have
the right to receive compensation or other benefits for any period after
termination for Cause. Any stock options granted to Executive under any stock
option plan of the Bank, the Holding Company or any subsidiary or affiliate
thereof, shall become null and
3
<PAGE>
void effective upon Executive's receipt of Notice of Termination for Cause
pursuant to Section 9 hereof, and shall not be exercisable by Executive at any
time subsequent to such Termination for Cause.
3. TERMINATION BENEFITS.
--------------------
(a) Upon the occurrence of a Change in Control, followed at any time
during the term of this Agreement by the voluntary or involuntary termination of
Executive's employment, other than for Termination for Cause, the Bank and the
Holding Company shall pay Executive, or in the event of his subsequent death,
his beneficiary or beneficiaries, or his estate, as the case may be, as
severance pay or liquidated damages, or both, a sum equal to three (3) times the
average annual base salary paid to Executive for the three (3) years immediately
preceding Executive's termination. In the event the Executive has not been
employed by the Bank or Holding company during all or part of the three
immediately preceding years, the annual base salary paid to Executive for such
periods shall for purposes of this Section 3, be deemed to be equal to the
Executive's initial base salary upon commencing employment with the Bank or
Holding Company adjusted to reflect assumed annual salary increases of ten
percent (10%). At the discretion of the Executive, upon an election pursuant to
Section 3(e) hereof, such payment may be made in a lump sum immediately upon
severance of Executive's employment or paid, on a pro rata basis, semi-monthly
during the thirty-six (36) months following the Executive's termination.
(b) Upon the occurrence of a Change in Control of the Bank or the
Holding Company followed at any time during the term of this Agreement by
Executive's voluntary or involuntary termination of employment, other than for
Termination for Cause, the Holding Company shall cause to be continued life,
health and disability coverage substantially identical to the coverage
maintained by the Bank for Executive prior to his severance. Such coverage
shall cease upon the earlier of Executive's obtaining similar coverage by
another employer or twelve (12) months from the date of Executive's termination.
In the event the Executive obtains new employment and receives less coverage for
life, health or disability, the Holding Company shall provide coverage
substantially identical to the coverage maintained by the Bank for the Executive
prior to termination for a period of twelve (12) months.
(c) Upon the occurrence of a Change in Control, the Executive will
have such rights as specified in the Company's Incentive Stock Option Plan or
any other employee benefit plan with respect to options and such other rights as
may have been granted to Executive under such plans.
(d) Upon the occurrence of a Change in Control, the Executive will
be entitled to the benefits under the Bank's Management Recognition and
Retention Plans.
(e) On an annual basis Executive shall elect whether, in the event
amounts are payable under Sections 3(a) hereof, such amounts shall be paid in a
lump sum or on a pro rata basis pursuant to such sections. Such election shall
be irrevocable for the year for which such election is made.
4
<PAGE>
(f) Notwithstanding the preceding paragraphs of this Section 3, in
the event that:
(i) the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits") would be
deemed to include an "excess parachute payment" under Section 280G of the
Internal Revenue Code of 1986 (the "Code") or any successor thereto, and
(ii) if such Termination Benefits were reduced to an amount (the
"Non-Triggering Amount"), the value of which is one dollar ($1.00) less
than an amount equal to three (3) times Executive's "base amount", as
determined in accordance with said Section 280G, and the Non-Triggering
Amount would be greater than the aggregate value of the Termination
Benefits (without such reduction) minus the amount of tax required to be
paid by Executive thereon by Section 4999 of the Code, then the Termination
Benefits shall be reduced to the Non-Triggering Amount. The allocation of
the reduction required hereby among the Termination Benefits provided by
the preceding paragraphs of this Section 3 shall be determined by
Executive. In the event that Executive receives the Non-Triggering Amount
pursuant to this paragraph (f) and it is subsequently determined by the
Internal Revenue Service or judicial authority that Executive is deemed to
have received an amount in excess of the Non-Triggering Amount, the Holding
Company shall pay to Executive an amount equal to the value of the payments
or benefits in excess of the Non-Triggering Amount he is so deemed to have
received.
4. NOTICE OF TERMINATION.
---------------------
Any purported termination by the Holding Company or by Executive shall
be communicated by Notice of Termination to the other party hereto.
For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated. "Date of Termination" shall mean the date specified in
the Notice of Termination (which, in the case of a Termination for Cause, shall
not be less than thirty (30) days from the date such Notice of Termination is
given); provided that if, within thirty (30) days after any Notice of
Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
5
<PAGE>
5. SOURCE OF PAYMENTS.
------------------
It is intended by the parties hereto that all payments provided in
this Agreement shall be paid in cash or check from the general funds of the
Holding Company. The Company guarantees payment and provision of all amounts and
benefits due to the Executive under the Special Termination Agreement by and
between the Bank and the Executive, if any amounts and benefits due from the
Bank are not timely paid or provided by the Bank, such amounts and benefits
shall be paid or provided by the Company.
6. EFFECT ON PRIOR AGREEMENT AND EXISTING BENEFIT PLANS.
----------------------------------------------------
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the Holding Company and
Executive, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to Executive of a kind elsewhere provided. No
provision of this Agreement shall be interpreted to mean that Executive is
subject to receiving fewer benefits than those available to him without
reference to this Agreement.
7. NO ATTACHMENT.
-------------
(a) Except as required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit
of, Executive, the Holding Company and their respective successors and assigns.
8. MODIFICATION AND WAIVER.
-----------------------
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
9. REINSTATEMENT OF BENEFITS UNDER BANK AGREEMENT.
----------------------------------------------
In the event Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice described in
Section 9(b) of the Special Termination Agreement between Executive and the Bank
dated April 19, 1990 (the "Bank Agreement") during the term of this Agreement
and a Change in Control, as defined herein, occurs the
6
<PAGE>
Holding Company will assume its obligation to pay and the Executive will be
entitled to receive all of the termination benefits provided for under Section 3
of the Bank Agreement upon the notification of the Holding Company of the Bank's
receipt of a dismissal of charges in the Notice.
10. EFFECT OF ACTION UNDER BANK AGREEMENT.
-------------------------------------
Notwithstanding any provision herein to the contrary, to the extent
that payments and benefits are paid to or received by Executive under the
Special Termination Agreement dated April 19, 1990, between Executive and Bank,
such payments and benefits paid by the Bank will be deemed to satisfy the
corresponding obligations of the Holding Company under this Agreement.
11. SEVERABILITY.
------------
If, for any reason, any provision of this Agreement, or any part of
any provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so invalid,
and each such other provision and part thereof shall to the full extent
consistent with law continue in full force and effect.
12. HEADINGS FOR REFERENCE ONLY.
---------------------------
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
13. GOVERNING LAW.
-------------
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Delaware.
14. ARBITRATION.
-----------
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
15. PAYMENT OF LEGAL FEES.
---------------------
All reasonable legal fees paid or incurred by Executive pursuant to
any dispute or question of interpretation relating to this Agreement shall be
paid or reimbursed by the Holding Company.
7
<PAGE>
16. SIGNATURES.
----------
IN WITNESS WHEREOF, the Holding Company has caused this Agreement to
be executed by its duly authorized officer, and Executive has signed this
Agreement, on the 19th day of April, 1990.
ATTEST: MAF BANCORP, INC.
/s/ Carolyn Pihera BY: /s/ Allen Koranda
- ------------------------ -------------------------
Secretary Chief Executive Officer
WITNESS:
/s/ Michael J. Janssen /s/ Gerard J. Buccino
- ------------------------ -------------------------
Seal Executive
8
<PAGE>
AMENDMENT TO SPECIAL TERMINATION AGREEMENT
------------------------------------------
OF GERARD BUCCINO
-----------------
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Special Termination Agreement
of Gerard Buccino dated April 19, 1990 (the "Agreement") by adding the following
two new sentences to the end of Section 2(b) of the Agreement:
However, notwithstanding anything contained in this section to the
contrary, a Change in Control shall not be deemed to have occurred as a
result of an event described in (i), (ii) or (iii) (a), (c) or (e) above
which resulted from an acquisition or proposed acquisition of stock of the
Holding Company by a person, as defined in the OTS' Acquisition of Control
Regulations (12 C.F.R. (S) 574) (the "Control Regulations"), who was an
executive officer of the Holding Company on January 19, 1990 and who has
continued to serve as an executive officer of the Holding Company as of the
date of the event described in (i), (ii) or (iii) (a), (c) or (e) above (an
"incumbent officer"). In the event a group of individuals acting in
concert satisfies the definition of "person" under the Control Regulations,
the requirements of the preceding sentence shall be satisfied, and thus a
change in control shall not be deemed to have occurred, if at least one
individual in the group is an incumbent officer.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this August 28, 1990.
ATTEST: MAF BANCORP, INC.
By: /s/ Carolyn Pihera By: /s/ Allen Koranda
--------------------- -------------------
Carolyn Pihera Allen Koranda
Corporate Secretary Chairman of the Board
EMPLOYEE
By: /s/ Gerard J. Buccino
-----------------------
Gerard Buccino
9
<PAGE>
Amendment to Special Termination Agreement
of Gerard Buccino
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Special Termination Agreement
of Gerard Buccino dated April 19, 1990, as amended, (the "Agreement"), by
revising the third paragraph of the Agreement as shown below, and by revising
Section 1 to read as shown below, all such amendments to be effective as of the
date shown below.
(Revised third paragraph)
WHEREAS, Executive has been elected to and has agreed to serve in the position
of Vice President and Controller for the Holding Company, a position of
substantial responsibility which will require Executive to render
administrative and management services to the Holding Company such as are
customarily performed by persons in a similar executive capacity;
(Revised Section 1)
1. TERM OF AGREEMENT.
-----------------
The term of this Agreement shall be deemed to have commenced as of the date
first above written and shall continue for a period of thirty-six (36) full
calendar months thereafter. At each anniversary date, the board of directors of
the Holding Company ("Board") may extend the Agreement an additional year. The
Board will review the Agreement and the Executive's performance annually for
purposes of determining whether to extend the Agreement, and the results thereof
shall be included in the minutes of the Board's meeting. In the event the
Executive chooses not to renew the Agreement, the Executive shall provide the
Holding Company with written notice at least ten (10) days and not more than
twenty (20) days prior to such anniversary date. If either the Holding Company
or the Executive chooses not to renew the Agreement for an additional period,
the Agreement shall cease at the end of its remaining term unless the
Executive's employment is voluntarily or involuntarily terminated with the
Holding Company pursuant to Section 2 hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this August 10, 1992.
ATTEST: MAF BANCORP, INC.
10
<PAGE>
By: /s/ Carolyn Pihera By: /s/ Allen Koranda
------------------- ------------------
Carolyn Pihera Allen Koranda
Corporate Secretary Chairman and CEO
EMPLOYEE
By: /s/ Gerard J. Buccino
----------------------
Gerard Buccino
11
<PAGE>
Amendment to Special Termination Agreement
of Gerard Buccino
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Employment Agreement of Gerard
Buccino dated April 19, 1990, as amended, (the "Agreement"), as shown below.
Such amendments shall be effective as of the date shown below.
1. Section 3(a) shall be revised to read as follows:
Upon the occurrence of a Change in Control, followed at any time during the
term of this Agreement by the voluntary or involuntary termination of
Executive's employment, other than for Termination for Cause, the Bank and
the Holding Company shall pay Executive, or in the event of his subsequent
death, his beneficiary or beneficiaries, or his estate, as the case may be,
as severance pay or liquidated damages, or both, a sum equal to three (3)
times the average annual compensation paid to Executive for the
three (3) years immediately preceding Executive's termination. For
purposes of the preceding sentence, compensation shall include only base
salary plus payments made under the MAF Bancorp Executive Annual Incentive
Plan (or such other annual cash incentive plan in effect with respect to
years ending prior to July 1, 1993). At the discretion of Executive,
upon an election pursuant to Section 3(e) hereof, such payment may be made
in a lump sum immediately upon severance of Executive's employment or paid,
on a pro rata basis, semi-monthly during the thirty-six (36) months
following Executive's termination.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this December 20, 1995.
ATTEST: MAF BANCORP, INC.
By: /s/ Carolyn Pihera By: /s/ Allen Koranda
------------------- ------------------
Carolyn Pihera Allen Koranda
Corporate Secretary Chief Executive Officer
EMPLOYEE
By: /s/ Gerard J. Buccino
----------------------
Gerard Buccino
12
<PAGE>
Exhibit No. 10(xviii) Form of Special Termination Agreement, as amended,
Between Mid America Federal Savings Bank and various officers
The attached Special Termination Agreement dated April 19, 1990, as amended,
between Mid America Federal Savings Bank and Gerard J. Buccino is substantially
identical in all material respects (except as otherwise noted below) with the
other contracts listed below which are not being filed:
Parties to Special Termination Agreement
----------------------------------------
Mid America Federal Savings Bank and Michael J. Janssen
Mid America Federal Savings Bank and David W. Kohlsaat
Mid America Federal Savings Bank and William Haider
Mid America Federal Savings Bank and Thomas Miers
Mid America Federal Savings Bank and Kenneth Rusdal
Mid America Federal Savings Bank and Sharon Wheeler
1
<PAGE>
MID AMERICA FEDERAL SAVINGS BANK
SPECIAL TERMINATION AGREEMENT
This AGREEMENT is made effective as of April 19, 1990 by and between Mid
America Federal Savings Bank (the "Bank"), a federally chartered savings
institution, with its office at 55th & Holmes Street, Clarendon Hills, Illinois,
and Gerard Buccin (the "Executive"). The Bank is the wholly-owned subsidiary of
the Holding Company (the "Company"), a corporation organized under the laws of
the State of Delaware.
WHEREAS, the Bank recognizes the substantial experience and abilities of
the Executive and the Bank wishes to protect his position therewith for the
period provided in this Agreement; and
WHEREAS, Executive has been elected to, and has agreed to serve in the
position of Vice President for the Bank, a position of substantial
responsibility;
NOW, THEREFORE, in consideration of the contribution and responsibilities
of Executive, and upon the other terms and conditions hereinafter provided, the
parties hereto agree as follows:
1. TERM OF AGREEMENT.
-----------------
The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for a period of thirty-six (36) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, this Agreement
shall automatically renew for an additional year such that the remaining term
shall be three (3) years unless written notice is provided to Executive, at
least ten (10) days and not more than twenty (20) days prior to expiration of
such period, then the term of this Agreement shall cease at the end of twenty-
four (24) months following the next anniversary date, or unless the Executive's
employment is voluntarily or involuntarily terminated with the Bank pursuant to
Section 2 hereof.
2. PAYMENTS TO EXECUTIVE UPON CHANGE IN CONTROL.
--------------------------------------------
(a) Upon the occurrence of a Change in Control of the Bank or the
Company (as herein defined) followed at any time during the term of this
Agreement by the voluntary or involuntary termination of Executive's employment,
other than for Cause, as defined in Section 2(c) hereof, the provisions of
Section 3 shall apply. Upon the occurrence of a Change in Control, Executive
shall have the right to elect to voluntarily terminate his employment at any
time during the term of this Agreement following any demotion, loss of title,
office or significant authority, reduction in his annual compensation, or
relocation of his principal place of employment by more than 50 miles from its
location immediately prior to the Change in Control.
(b) Definition of a Change in Control. A "Change in Control" of the
Bank or the Company shall mean a change in control of a nature that: (i) would
be required to be reported in response to Item 1 of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or (ii) results
2
<PAGE>
in a Change in Control of the Bank or the Holding Company within the meaning of
the Home Owners Loan Act of 1933 and the Rules and Regulations promulgated by
the Office of Thrift Supervision (or its predecessor agency), as in effect on
the date hereof including Section 574 of such regulations; or (iii) without
limitation, such a Change in Control shall be deemed to have occurred at such
time as (a) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities or makes an offer
to purchase securities of the Bank or Company representing 20% or more of the
Bank's or Company's outstanding securities, except for any securities of the
Bank purchased by the Holding Company in connection with the conversion of the
Bank to the stock form and any securities purchased by the Bank's employee stock
ownership plan and trust; or (b) individuals who constitute the Board of
Directors of the Company or the Bank on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the shareholders was
approved by the Nominating Committee, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or (c) merger,
consolidation or sale of all or substantially all the assets of the Bank or
Company occurs; or (d) a proxy statement shall be distributed soliciting proxies
from stockholders of the Company, by someone other than the current management
of the Company, seeking stockholder approval of the reorganization, merger or
consolidation of the Company or Bank with one or more corporations as a result
of which the outstanding shares of the class of securities then subject to the
Plan are exchanged for or converted into cash or property or securities not
issued by the Bank or Company; or (e) a tender offer is made for 20% or more of
the outstanding securities of the Bank or Holding Company.
(c) Executive shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term "Termination
for Cause" shall mean termination because of the Executive's personal
dishonesty, incompetence, willful misconduct, any breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease-and- desist order, or material breach of any
material provision of this Agreement. In determining incompetence, the acts or
omissions shall be measured against standards generally prevailing in the
savings institutions industry. Notwithstanding the foregoing, Executive shall
not be deemed to have been Terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the Board of Directors of the
Bank at a meeting of the Board called and held for that purpose (after
reasonable notice to Executive and an opportunity for him, together with
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, Executive was guilty of conduct justifying Termination for Cause
and specifying the particulars thereof in detail. The Executive shall not have
the right to receive compensation or other benefits for any period after
Termination for Cause. Any stock options or limited rights granted to Executive
under any stock option plan of the Bank, the Company or any subsidiary or
affiliate thereof, shall become null and void effective upon Executive's receipt
of Notice of Termination for Cause and shall not be exercisable by Executive at
any time subsequent to such Termination for Cause.
3
<PAGE>
3. TERMINATION BENEFITS.
--------------------
(a) Upon the occurrence of a Change in Control, followed at any time
during the term of this Agreement by the voluntary or involuntary termination of
Executive's employment, other than for Termination for Cause, the Bank and the
Company shall pay Executive, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be, as severance
pay or liquidated damages, or both, a sum equal to three (3) times the average
annual base salary paid to Executive for the three (3) years immediately
preceding Executive's termination. In the event the Executive has not been
employed by the Bank or Holding Company during all or part of the three
immediately preceding years, the annual base salary paid to Executive for such
periods shall, for purposes of this Section 3, be deemed to be equal to the
Executive's initial base salary upon commencing employment adjusted to reflect
assumed annual base salary increases of ten percent (10%). At the discretion of
Executive, upon an election pursuant to Section 3(e) hereof, such payment may be
made in a lump sum immediately upon severance of Executive's employment or paid,
on a pro rata basis, semi-monthly during the thirty-six (36) months following
the Executive's termination.
(b) Upon the occurrence of a Change in Control of the Bank or the
Company followed at any time during the term of this Agreement by Executive's
voluntary or involuntary termination of employment, other than for Termination
for Cause, the Bank shall cause to be continued life, health and disability
coverage substantially identical to the coverage maintained by the Bank for
Executive prior to his severance. Such coverage shall cease upon the earlier of
Executive's obtaining similar coverage by another employer or twelve (12) months
from the date of Executive's termination. In the event the Executive obtains
new employment and receives less coverage for life, health or disability, the
Bank shall provide coverage substantially identical to the coverage maintained
by the Bank for the Executive prior to termination for a period of twelve (12)
months.
(c) Upon the occurrence of a Change in Control, the Executive will have
such rights as specified in the Company's Incentive Stock Option Plan or any
other employee benefit plan with respect to options and such other rights as may
have been granted to Executive under such plans.
(d) Upon the occurrence of a Change in Control, the Executive will be
entitled to the benefits under the Bank's Management Recognition and Retention
Plans.
(e) On an annual basis Executive shall elect whether, in the event
amounts are payable under Sections 3(a) hereof, such amounts shall be paid in a
lump sum or on a pro rata basis pursuant to such sections. Such election shall
be irrevocable for the year for which such election is made.
(f) Notwithstanding the preceding paragraphs of this Section 3, in the
event that:
4
<PAGE>
(i) the aggregate payments or benefits to be made or afforded to Executive
under said paragraphs (the "Termination Benefits") would be deemed to
include an "excess parachute payment" under Section 280G of the Internal
Revenue Code of 1986 (the "Code") or any successor thereto, and
(ii) if such Termination Benefits were reduced to an amount (the "Non-
Triggering Amount"), the value of which is one dollar ($1.00) less than an
amount equal to three (3) times Executive's "base amount", as determined
in accordance with said Section 280G, and the Non-Triggering Amount would
be greater than the aggregate value of the Termination Benefits (without
such reduction) minus the amount of tax required to be paid by Executive
thereon by Section 4999 of the Code, then the Termination Benefits shall
be reduced to the Non-Triggering Amount. The allocation of the reduction
required hereby among the Termination Benefits provided by the preceding
paragraphs of this Section 3 shall be determined by Executive. In the
event that Executive receives the Non-Triggering Amount pursuant to this
paragraph (f) and it is subsequently determined by the Internal Revenue
Service or judicial authority that Executive is deemed to have received an
amount in excess of the Non-Triggering Amount, the Bank or Company shall
pay to Executive an amount equal to the value of the payments or benefits
in excess of the Non-Triggering Amount he is so deemed to have received.
4. NOTICE OF TERMINATION.
---------------------
Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated. "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given);
provided that if, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the date of Termination shall
be the date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal there from having expired and no appeal having been perfected) and
provided further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
5. SOURCE OF PAYMENTS.
------------------
It is intended by the parties hereto that all payments provided in this
Agreement shall be paid in cash or check from the general funds of the Bank.
The Company, however, guarantees payment and provision of all amounts and
benefits due hereunder to Executive, if such amounts
5
<PAGE>
and benefits due from the Bank are not timely paid or provided by the Bank, such
amounts and benefits shall be paid or provided by the Company.
6. EFFECT ON PRIOR AGREEMENT AND EXISTING BENEFIT PLANS.
----------------------------------------------------
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the Bank and Executive, except
that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to Executive of a kind elsewhere provided. No provision of
this Agreement shall be interpreted to mean that Executive is subject to
receiving fewer benefits than those available to him without reference to this
Agreement.
7. NO ATTACHMENT.
-------------
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Bank and their respective successors and assigns.
8. MODIFICATION AND WAIVER.
-----------------------
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
9. REQUIRED REGULATORY PROVISIONS.
------------------------------
(a) The Bank may terminate the Executive's employment at any time, but
any termination by the Bank, other than Termination for Cause, shall not
prejudice Executive's right to compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in Section 2(c)
hereinabove.
(b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) (12 USC 1818(e)(3)) or 8(g) (12 USC 1818(g)) of the
Federal Deposit Insurance Act, as amended by
6
<PAGE>
the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the
Bank's obligations under this contract shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank may in its discretion (I) pay the Executive all or part
of the compensation withheld while their contract obligations were suspended and
(ii) reinstate (in whole or in part) any of the obligations which were
suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 USC (S) 1818(e)) or 8(g) (12 USC (S) 1818(g)) of the Federal
Deposit Insurance Act, as amended by the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, all obligations of the Bank under this contract
shall terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 USC
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Federal Deposit
Insurance Corporation, at the time FDIC enters into an agreement to provide
assistance to or on behalf of the Bank under the authority contained in Section
12(c) (12 USC (S)1823(c))of the Federal Deposit Insurance Act, as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989; or (ii) by
the Office of Thrift Supervision ("OTS") at the time the OTS or its District
Director approves a supervisory merger to resolve problems related to the
operations of the Bank or when the Bank is determined by the OTS or FDIC to be
in an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.
10. REINSTATEMENT OF BENEFITS UNDER 9(b).
------------------------------------
In the event Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice described in
Section 9(b) hereof (the "Notice") during the term of this Agreement and a
Change in Control, as defined herein, occurs, the Bank will assume its
obligation to pay and the Executive will be entitled to receive all of the
termination benefits provided for under Section 3 of this Agreement upon the
Bank's receipt of a dismissal of charges in the Notice.
11. SEVERABILITY.
------------
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
12. HEADINGS FOR REFERENCE ONLY.
---------------------------
7
<PAGE>
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
13. GOVERNING LAW.
-------------
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by Federal law.
14. ARBITRATION.
-----------
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
15. PAYMENT OF LEGAL FEES.
---------------------
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Bank, which payments are guaranteed by the Company pursuant
to Section 5 hereof.
16. SIGNATURES.
----------
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed by
its duly authorized officer, and Executive has signed this Agreement, on the
19th day of April, 1990.
ATTEST: MID AMERICA FEDERAL SAVINGS BANK
/s/ Carolyn Pihera BY: /s/ Allen Koranda
- ---------------------------- ----------------------------
Secretary Chief Executive Officer
WITNESS:
/s/ Michael J. Janssen /s/ Gerard Buccino
- ---------------------------- ----------------------------
Executive
8
<PAGE>
Seal
9
<PAGE>
AMENDMENT TO SPECIAL TERMINATION AGREEMENT
------------------------------------------
OF GERARD BUCCINO
-----------------
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Special Termination Agreement
of Gerard Buccino dated April 19, 1990 (the "Agreement") by adding the following
two new sentences to the end of Section 2(b) of the Agreement:
However, notwithstanding anything contained in this section to the
contrary, a Change in Control shall not be deemed to have occurred as a
result of an event described in (i), (ii) or (iii) (a), (c) or (e) above
which resulted from an acquisition or proposed acquisition of stock of the
Holding Company by a person, as defined in the OTS' Acquisition of Control
Regulations (12 C.F.R. (S) 574) (the "Control Regulations"), who was an
executive officer of the Holding Company on January 19, 1990 and who has
continued to serve as an executive officer of the Holding Company as of
the date of the event described in (i), (ii) or (iii) (a), (c) or (e)
above (an "incumbent officer"). In the event a group of individuals acting
in concert satisfies the definition of "person" under the Control
Regulations, the requirements of the preceding sentence shall be
satisfied, and thus a change in control shall not be deemed to have
occurred, if at least one individual in the group is an incumbent officer.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this August 28, 1990.
ATTEST: MID AMERICA FEDERAL SAVINGS BANK
By: /s/ Carolyn Pihera By: /s/ Allen Koranda
------------------------- -------------------------
Carolyn Pihera Allen Koranda
Corporate Secretary Chairman of the Board
EMPLOYEE
By: /s/ Gerard Buccino
-------------------------
Gerard Buccino
10
<PAGE>
Amendment to Special Termination Agreement
of Gerard Buccino
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Special Termination Agreement
of Gerard Buccino dated April 19, 1990, as amended, (the "Agreement"), by
revising the third paragraph of the Agreement as shown below, and by revising
Section 1 to read as shown below, all such amendments to be effective as of the
date shown below.
(Revised third paragraph)
WHEREAS, Executive has been elected to and has agreed to serve in the position
of Vice President and Controller for the Bank, a position of substantial
responsibility which will require Executive to render administrative and
management services to the Bank such as are customarily performed by
persons in a similar executive capacity;
(Revised Section 1)
1. TERM OF AGREEMENT.
-----------------
The term of this Agreement shall be deemed to have commenced as of the date
first above written and shall continue for a period of thirty-six (36) full
calendar months thereafter. At each anniversary date, the board of directors of
the Bank ("Board") may extend the Agreement an additional year. The Board will
review the Agreement and the Executive's performance annually for purposes of
determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting. In the event the Executive
chooses not to renew the Agreement, the Executive shall provide the Bank with
written notice at least ten (10) days and not more than twenty (20) days prior
to such anniversary date. If either the Bank or the Executive chooses not to
renew the Agreement for an additional period, the Agreement shall cease at the
end of its remaining term unless the Executive's employment is voluntarily or
involuntarily terminated with the Bank pursuant to Section 2 hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this August 10, 1992.
ATTEST: MID AMERICA FEDERAL SAVINGS BANK
By: /s/ Carolyn Pihera By: /s/ Allen Koranda
------------------------- -------------------------
Carolyn Pihera Allen Koranda
11
<PAGE>
Corporate Secretary Chairman and CEO
EMPLOYEE
By: /s/ Gerard Buccino
-------------------------
Gerard Buccino
12
<PAGE>
Amendment to Special Termination Agreement
of Gerard Buccino
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Employment Agreement of Gerard
Buccino dated April 19, 1990, as amended, (the "Agreement"), as shown below.
Such amendments shall be effective as of the date shown below.
1. Section 2(b)(iii)(a) shall be revised to read as follows:
(a) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities or
makes an offer to purchase and completes the purchase of securities of the
Bank or Company representing 20% or more of the Bank's or the Company's
outstanding securities ordinarily having the right to vote at the election
of directors except for any securities of the Bank purchased by the
Company in connection with the conversion of the Bank to the stock form
and any securities purchased by the Bank's employee stock ownership plan
and trust:
2. Section 2(b)(iii)(e) shall be revised to read as follows:
(e) a tender offer is made and completed for 20% or more of the
outstanding securities of the Bank or Company.
3. Section 2(b)(iii)(d) shall be revised to read as follows:
(d) a proxy statement shall be distributed soliciting
proxies from stockholders of the Company, by someone other
than the current management of the Company, seeking
stockholder approval of a plan of reorganization, merger
or consolidation of the Company or Bank with one or more
corporations as a result of which the outstanding shares
of the class of securities then subject to the Plan are
exchanged for or converted into cash or property or
securities not issued by the Bank or the Company, and
such proxy statement proposal is approved by the shareholders
of the Company.
4. Section 15, "Payment of Legal Fees" shall be amended to
read as follows:
All reasonable legal fees paid or incurred by Executive
pursuant to any dispute or question of interpretation
13
<PAGE>
relating to this Agreement shall be paid or reimbursed by the Bank, if the
Executive is successful on the merits of such dispute or question pursuant
to any legal judgement, arbitration or settlement. Such payments are
guaranteed by the Company pursuant to Section 5 hereof.
6. Section 3(a) shall be amended by adding the following
sentence at the end of this paragraph:
"Notwithstanding the previous sentence, however, the Bank
may, in its sole discretion, require such payments to be
made in a lump sum."
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this December 21, 1993.
ATTEST: MID AMERICA FEDERAL SAVINGS BANK
By: /s/ Carolyn Pihera By: /s/ Allen Koranda
------------------------- -------------------------
Carolyn Pihera Allen Koranda
Corporate Secretary Chairman of the Board and
Chief Executive Officer
EMPLOYEE
By: /s/ Gerard Buccino
-------------------------
Gerard Buccino
14
<PAGE>
Amendment to Special Termination Agreement
of Gerard Buccino
The undersigned, in consideration of their mutual promises and other good and
valuable consideration, hereby agree to amend the Employment Agreement of Gerard
Buccino dated April 19, 1990, as amended, (the "Agreement"), as shown below.
Such amendments shall be effective as of the date shown below.
1. Section 3(a) shall be revised to read as follows:
Upon the occurrence of a Change in Control, followed at any time during
the term of this Agreement by the voluntary or involuntary termination of
Executive's employment, other than for Termination for Cause, the Bank and
the Company shall pay Executive, or in the event of his subsequent death,
his beneficiary or beneficiaries, or his estate, as the case may be, as
severance pay or liquidated damages, or both, a sum equal to three (3)
times the average annual compensation paid to Executive for the three (3)
years immediately preceding Executive's termination. For purposes of the
preceding sentence, compensation shall include only base salary plus
payments made under the MAF Bancorp Executive Annual Incentive Plan (or
such other annual cash incentive plan in effect with respect to years
ending prior to July 1, 1993). At the discretion of Executive, upon an
election pursuant to Section 3(e) hereof, such payment may be made in a
lump sum immediately upon severance of Executive's employment or paid, on
a pro rata basis, semi-monthly during the thirty-six (36) months following
Executive's termination.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective
this December 20, 1995.
ATTEST: MID AMERICA FEDERAL SAVINGS BANK
By: /s/ Carolyn Pihera By: /s/ Allen Koranda
------------------------- -------------------------
Carolyn Pihera Allen Koranda
Corporate Secretary Chief Executive Officer
EMPLOYEE
By: /s/ Gerard Buccino
-------------------------
Gerard Buccino
15
<PAGE>
NICHOLAS J. DILORENZO, SR.
CONSULTANT AGREEMENT
--------------------
This Consultant Agreement made August 27, 1996 between Nicholas J. DiLorenzo,
Sr., of 3607 Shakespeare Lane, City of Naperville, County of DuPage, State of
Illinois, herein referred to as Consultant, and MidAmerica Federal Savings Bank,
a corporation whose principal place of business is located at 55th & Holmes,
Clarendon Hills, State of Illinois, hereinafter referred to as Employer.
The parties stipulate and recite that:
A. Nicholas J. DiLorenzo, Sr., has been connected with the corporation as a
Senior Vice President since November 28, 1960.
B. Due to retirement, Nicholas J. DiLorenzo, Sr., resigned from the Employer
on October 23, 1987.
C. Employer is desirous of employing Nicholas J. DiLorenzo, Sr., based on his
extensive experience in the field of land acquisition and development
construction, and based on his knowledge of the savings and loan industry.
For the reasons recited above, and in consideration of the mutual covenants
contained within this Agreement, Employer and Consultant agree as follows:
SECTION ONE
TERM OF EMPLOYMENT
------------------
MidAmerica Federal Savings Bank hereby retains Nicholas J. DiLorenzo, Sr., as
a Consultant and Nicholas J. DiLorenzo, Sr., accepts such position with
MidAmerica for a term ending October 31, 1997.
Either party may cancel this Agreement on sixty days notice to the other party
in writing by certified mail or personal delivery.
1
<PAGE>
Furthermore, this Consultant Agreement shall cease upon the death of the
Consultant.
SECTION TWO
DUTIES OF CONSULTANT
--------------------
The Consultant will render advisory and consulting services during the term of
this contract, and will give MidAmerica the benefit of his special knowledge,
skill, contacts and business experience in the fields of land development and
the savings and loan industry. Consultant shall respond to reasonable requests
for advice and consultation on matters connected with land and development
construction during regular business hours.
SECTION THREE
SALARY
------
For his services as a Consultant, Consultant shall be paid compensation at the
rate of Forty Thousand and No/100 Dollars ($40,000.00) per year, in equal bi-
monthly installments commencing November 1, 1996. Consultant shall be
reimbursed by Employer for Consultant's out-of-pocket expenses incurred in
rendering such services. MidAmerica will provide Consultant with and will cover
expenses for secretarial services and a car for business purposes.
SECTION FOUR
PRACTICE BY CONSULTANT
----------------------
Consultant may engage in the practice of advising MidAmerica Federal Savings
Bank and MidAmerica Developments in any capacity, except that Consultant may not
represent in such capacity, any of the clients of Employer, or the clients of an
assignee of this contract, who are such clients at that time. Consultant shall
not provide consulting services to any persons, individuals, partnerships,
corporations, or other entities, including clients of the Employer,
2
<PAGE>
and said Consultant shall not become an employee, officer or director of another
person, individual, partnership, corporation, or other entity unless consent is
granted in writing by Employer.
Provided that the company is not in default hereof, the employee covenants and
agrees that he will not during the term which he is entitled to receive
compensation hereunder, engage directly or indirectly in any business (other
than that of the company) which is competitive with that business in which the
company is now engaged.
SECTION FIVE
ASSIGNMENT
----------
Employer's rights under this contract may be assigned by it to any firm
engaged in financial services or real estate development which Employer may form
or which succeeds Employer in its business. Upon such assignment, the assignee
shall assume and perform all the Employer's obligations under this contract.
SECTION SIX
INDEPENDENT CONTRACTOR
----------------------
Both the Company and the Consultant agree that the Consultant will act as an
independent contractor in the performance of his duties under this Agreement.
Accordingly, the Consultant shall be responsible for payment of all taxes,
including Federal, State Income Tax, Social Security Tax, Unemployment Insurance
Taxes and any other taxes or business license fees as required.
3
<PAGE>
SECTION SEVEN
CONFIDENTIAL INFORMATION
------------------------
The Consultant agrees that any information received by the Consultant during
any furtherance of the Consultant's obligations in accordance with this
contract, which concerns the personal, financial or other affairs of the company
will be treated by the Consultant in full confidence and will not be revealed to
any other persons, firms or organizations.
In witness whereof, the parties have executed this Agreement at Clarendon
Hills, Illinois on August 27, 1996.
- --------------------------------------
Nicholas J. DiLorenzo, Sr., Consultant
- --------------------------------------
Kenneth Koranda, President
MidAmerica Federal Savings Bank
4
<PAGE>
Exhibit No. 10(xxi) Northwestern Savings and Loan Association Employee Stock
Ownership Plan, as amended.
<PAGE>
THIRD AMENDMENT TO THE
NORTHWESTERN SAVINGS AND LOAN ASSOCIATION
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Mid America Federal Savings Bank (successor by merger to
Northwestern Savings Bank, formerly known as Northwestern Savings and Loan
Association) (the "Company") maintains the Northwestern Savings and Loan
Association Employee Stock Ownership Plan (the "Plan") for the benefit of
certain of its employees; and
WHEREAS, as provided in Section 13.4 of the Plan, the Company has reserved
the right to amend the Plan; and
WHEREAS, the Company is desirous in amending the Plan to set forth the
effects that the recent merger between N.S. Bancorp, Inc. and MAF Bancorp, Inc.
has on Plan participants.
NOW, THEREFORE, the Plan is hereby amended in the following particulars:
1. Effective May 30, 1996, the Plan is hereby amended by adding the
following new Section 16 thereto immediately after Section 15:
16.1 Purpose. The purpose of this Section 16 is to amend the Plan (and to
-------
the extent inconsistent herewith, the Trust) in furtherance of the orderly
operation of the Plan and application of the Merger Consideration received by
the Trust Fund upon the Merger (as defined below) to Participant Accounts and
toward repayment of the Stock Obligation, and for the allocation of amounts
remaining after such repayment, for the termination of the Plan, and for
liquidation of the Trust Fund, all as contemplated by the Merger Agreement. To
the extent any inconsistencies between the provisions of this Section 16 or the
implementation thereof by the Committee and the other provisions of the Plan or
Trust arise, the provisions of this Section 16 or implementation thereof shall
be controlling, except as may be necessary to retain the Plan's or Trust's
qualified status.
16.2 Definitions. For purposes of this Section 16:
-----------
(a) "Merger" means the merger of N.S. Bancorp, Inc. with and into MAF
Bancorp, Inc. as set forth in the Merger Agreement.
(b) "Merger Agreement" means that certain Amended and Restated Agreement
and Plan of Reorganization entered into as of November 29, 1995, by and between
N.S. Bancorp, Inc., a Delaware corporation ("N.S. Bancorp") and MAF Bancorp,
Inc., a Delaware corporation ("MAF Bancorp").
<PAGE>
(c) "Merger Consideration" means the amount of cash and common stock of MAF
Bancorp into which each share of Stock was converted on the Merger Effective
Date as a result of the Merger. As a result of the Merger, each share of Stock
was converted into $20.1799 in cash and .8529 of a share of MAF Bancorp common
stock.
(d) "Merger Effective Date" means May 30, 1996.
(e) "Stock" means (I) common stock of N.S. Bancorp, Inc. prior to the
Merger Effective Date, and (ii) common stock of MAF Bancorp, Inc. thereafter.
16.3 Allocation of Dividends Received and Other Income
-------------------------------------------------
(a) Cash dividends on Stock (whether such Stock is held in Participant
Accounts or the Unallocated Stock Fund) received by the Trustee on or after the
Merger Effective Date shall be allocated to Participants' Accounts in accordance
with Section 8.3 and invested as part of the Investment Fund; provided, however,
that the Committee may direct that such dividends be distributed to the
Participants immediately following such allocation, or be distributed to the
Participants within 90 days of the close of the Plan Year in which paid.
(b) Investment Income earned from the investment of any assets of the Trust
Fund in a cash account received by the Trustee on or after the Merger Effective
Date shall be allocated to Participants' Accounts as of the Valuation Date
coinciding with or next following the date on which such investment income was
received. The investment income shall be allocated as of any Valuation Date in
proportion with that portion of the Participants' Account balance as of the
beginning of the valuation period that is represented by cash, and invested as
part of the Investment Fund.
16.4 Termination of Plan. The Plan shall terminate as of the Merger
-------------------
Effective Date and the Trust Fund shall be liquidated in accordance with this
Section 16.
16.5 Full Vesting Upon Merger Effective Date. Each Participant shall be
---------------------------------------
fully vested in his interest in his Account as of the Merger Effective Date. In
addition, Participants shall include those individuals whose Service terminated
during 1995 prior to such Participants becoming partially vested in their
Accounts, provided they completed at least 501 Hours of Service during 1995.
16.6 Effect of Merger Agreement and Merger on Employer Contributions,
----------------------------------------------------------------
Stock Obligations and the Unallocated Stock Fund.
- ------------------------------------------------
(a) Effective January 1, 1996, no Employer contributions shall be made to
the Plan or Trust Fund pursuant to Section 4 or otherwise, other than to the
extent contemplated by the
<PAGE>
Merger Agreement or as agreed upon by N.S. Bancorp and MAF Bancorp subsequent to
the execution of the Merger Agreement.
(b) On or as soon as practicable (as determined by the Committee) after the
Merger Effective Date, the cash portion of the Merger Consideration attributable
to the Stock credited to the Unallocated Stock Fund shall be applied by the
Trustee in repayment of the Stock Obligation. In furtherance of Section 8.1, the
excess amount of the cash portion of the Merger Consideration, after repayment
of the Stock Obligation, along with the Stock portion of the Merger
Consideration shall be allocated as earnings of the Trust Fund (together with
any earnings thereon resulting from the investment of such amounts) as of a
special Valuation Date established for such purpose by the Committee among the
Participants' Accounts in proportion to the balance of such Accounts as of
January 1, 1996, which special Valuation Date shall be on or before December 31,
1996, and shall not be considered an annual addition under Section 5.1.
(c) Notwithstanding any provision to the contrary, the Stock released by
reason of the contribution made by N.S. Bancorp prior to the Merger Effective
Date shall be allocated as of the Valuation Date prescribed pursuant to
paragraph (b) above among the Accounts of Active Participants in proportion to
their amounts of Cash Compensation for the period beginning January 1, 1996 and
ending May 29, 1996.
16.7 Effect on Participation. Participation in the Plan shall be frozen
-----------------------
as of the Merger Effective Date.
16.8 Investment of Trust Fund After the Merger Effective Date. After the
--------------------------------------------------------
Merger Effective Date, all assets of the Trust Fund remaining after repayment of
the Stock Obligation shall be maintained by the Trustee as an Investment Fund,
consisting of MAF Bancorp common stock and cash. The cash portion of the
Investment Fund shall be invested as the Committee shall from time to time
direct in short-term interest bearing securities or deposit accounts, pending
distribution in connection with the final liquidation of the Trust Fund. The
last day of each calendar year occurring after the Merger Effective Date and
prior to the final distribution of all assets of the Trust Fund, and any other
date declared by the Committee, shall be a Valuation Date for purposes of
allocating any net earnings or loss on the Investment Fund during the Valuation
Period ending on such Valuation Date.
16.9 Determination Letter. Notwithstanding any other provisions of the
--------------------
Plan to the contrary, the provisions of this Section 16 and the allocations and
distributions contemplated hereby (other than the allocations described in
Section 16.3 and 16.8 and the provisions of Section 16.6(a)) shall be subject to
the issuance of a determination letter by the Internal Revenue Service that the
Plan, as amended by or pursuant to this Section 16 meets the qualifications of
Sections 401(a) and 4975(e)(7) of the Code. This Plan may be further amended,
as contemplated by Section 5.19(e) of the Merger Agreement, provided in no event
shall any Employer or any of its affiliates cause any portion of the Trust Fund
to revert, nor shall any portion of the Trust Fund revert, directly or
indirectly, to any Employer or any affiliate thereof.
<PAGE>
16.10 Payment of Plan Expenses. Nothing in this Article 16 will be
------------------------
construed to preclude the payment of reasonable expenses associated with the
administration of the Plan and Trust from assets in the Trust.
IN WITNESS WHEREOF, the Company has caused this Third Amendment to the
Northwestern Savings and Loan Association Employee Stock Ownership Plan to be
executed this 27th day of August, 1996 by the undersigned duly authorized
officers.
MID AMERICA FEDERAL SAVINGS BANK
(As successor to Northwestern Savings Bank)
By: /s/ Allen Koranda
-----------------
Its: Chief Executive Officer
ATTEST:
/s/ Carolyn Pihera
Secretary
<PAGE>
RESOLUTION OF THE BOARD OF DIRECTORS OF
NORTHWESTERN SAVINGS BANK
REGARDING AMENDMENTS TO
NORTHWESTERN SAVINGS BANK
EMPLOYEE STOCK OWNERSHIP PLAN
March 19, 1996
WHEREAS, The Board of Directors of Northwestern Savings Bank, (the "Bank")
approved and adopted the Northwestern Savings and Loan Association Employee
Stock Ownership Plan ("ESOP"), effective October 8, 1990; and
WHEREAS, Section 13.4 of the ESOP permits the Employer to amend the ESOP
from time to time; and
WHEREAS, the Board has previously approved the Agreement and Plan of
Reorganization Among MAF Bancorp, Inc. ("MAF") and N.S. Bancorp, Inc., dated as
of November 29, 1995 (the "Merger"); and
WHEREAS, the Bank desires to amend the ESOP so that the ESOP will treat as
Active Participants those employees of the Bank who otherwise are eligible for
participation in the ESOP and who will have completed at least 400 Hours of
Service with the Bank as of the effective date of the Merger; and
WHEREAS, the Bank desires to amend the ESOP to provide for its termination
in accordance with the terms of the Merger.
THEREFORE BE IT RESOLVED, that the ESOP be amended as follows:
First Amendment
The definition of "Active Participant" set forth in Section 4.3 shall be
amended by adding the following words at the end thereof:
"Notwithstanding clause (i), above, for Plan Year 1996 a Participant who
has satisfied the eligibility requirements under Section 3 shall qualify as an
Active Participant if the Participant has completed at least 400 Hours of
Service as of the last day of the Plan Year.
Second Amendment
Section 13.1 of the ESOP shall be amended by adding the following sentence
at the end thereof:
<PAGE>
"The ESOP shall be terminated as of the Effective Time as defined in the
Agreement and Plan of Reorganization Among MAF Bancorp, Inc. ("MAF") and N.S.
Bancorp, Inc., dated as of November 29, 1995. Participants' Accounts shall be
distributed as soon as is practicable thereafter."
<PAGE>
NORTHWESTERN SAVINGS AND LOAN ASSOCIATION
EMPLOYEE STOCK OWNERSHIP PLAN
(adopted effective October 8, 1990)
<PAGE>
NORTHWESTERN SAVINGS AND LOAN ASSOCIATION
EMPLOYEE STOCK OWNERSHIP PLAN
This Employee Stock Ownership Plan, executed on 12/14/90 by
Northwestern Savings and Loan Association, a federally chartered savings and
loan association (the "Company"),
W I T N E S S E T H T H A T :
WHEREAS, the board of directors of the Company has resolved to adopt
an employee stock ownership plan for eligible employees in accordance with the
terms and conditions presented to the directors;
NOW, THEREFORE, the Company hereby adopts the following Plan setting
forth the terms and conditions pertaining to contributions by Employers and the
payment of benefits to Participants and Beneficiaries, effective October 8,
1990.
IN WITNESS WHEREOF, the Company has adopted this Plan and caused this
instrument to be executed by its duly authorized officers as of the above date.
ATTEST:
/s/ Gary M. Smogolski By: /s/ Henry Smogolski
- ------------------------------------- ---------------------------------
Gary M. Smogolski Henry Smogolski
Secretary President
<PAGE>
C O N T E N T S
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1. Plan Identity.............................................. 6
-------------
1.1 Name.................................................. 6
----
1.2 Purpose............................................... 6
-------
1.3 Effective Date........................................ 6
--------------
1.4 Fiscal Period......................................... 6
-------------
1.5 Single Plan for All Employers......................... 6
-----------------------------
1.6 Interpretation of Provisions.......................... 6
----------------------------
Section 2. Definitions................................................ 7
-----------
Section 3. Eligibility for Participation.............................. 17
-----------------------------
3.1 Initial Eligibility................................... 17
-------------------
3.2 Definition of Eligibility Year........................ 17
------------------------------
3.3 Terminated or Part-time Employees..................... 18
---------------------------------
3.4 Certain Employees Ineligible.......................... 18
----------------------------
3.5 Participation and Reparticipation..................... 18
---------------------------------
Section 4. Employer Contributions and Credits......................... 18
----------------------------------
4.1 Discretionary Contributions........................... 18
---------------------------
4.2 Contributions for Stock Obligation.................... 19
----------------------------------
4.3 Definitions Related to Contributions.................. 20
----------------------------------
4.4 Conditions as to Contributions........................ 21
------------------------------
Section 5. Limitations on Contributions and Allocations............... 22
--------------------------------------------
5.1 Limitation on Annual Additions........................ 22
------------------------------
5.2 Coordinated Limitation With Other Plans............... 23
---------------------------------------
5.3 Effect of Limitations................................. 24
---------------------
5.4 Limitations as to Certain Participants................ 24
--------------------------------------
5.5 Limitation on Contributions to Highly Paid Employees.. 26
----------------------------------------------------
Section 6. Trust Fund and Its Investment.............................. 26
-----------------------------
6.1 Creation of Trust Fund................................ 26
----------------------
6.2 Stock Fund and Investment Fund........................ 26
------------------------------
6.3 Acquisition of Stock.................................. 27
--------------------
6.4 Participants' Option to Diversify..................... 28
---------------------------------
Section 7. Voting Rights and Dividends on Stock....................... 29
------------------------------------
7.1 Voting and Tendering of Stock........................ 29
------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
7.2 Dividends on Stock.................................... 30
------------------
Section 8. Adjustments to Accounts.................................... 31
-----------------------
8.1 Adjustments for Transactions.......................... 31
----------------------------
8.2 Valuation of Investment Fund.......................... 31
----------------------------
8.3 Adjustments for Investment Experience................. 32
-------------------------------------
Section 9. Vesting of Participants' Interests......................... 32
----------------------------------
9.1 Deferred Vesting in Accounts.......................... 32
----------------------------
9.2 Computation of Vesting Years.......................... 33
----------------------------
9.3 Full Vesting Upon Certain Events...................... 33
--------------------------------
9.4 Full Vesting Upon Plan Termination.................... 34
----------------------------------
9.5 Forfeiture, Repayment, and Restoral................... 34
-----------------------------------
9.6 Accounting for Forfeitures............................ 35
--------------------------
9.7 Vesting and Nonforfeitability......................... 35
-----------------------------
Section 10. Payment of Benefits........................................ 35
-------------------
10.1 Benefits for Participants............................. 35
-------------------------
10.2 Benefits on a Participant's Death..................... 36
---------------------------------
10.3 Marital Status........................................ 36
--------------
10.4 Delay in Benefit Determination........................ 37
------------------------------
10.5 Accounting for Benefit Payments....................... 37
-------------------------------
10.6 Options to Receive and Sell Stock..................... 37
---------------------------------
10.7 Restrictions on Disposition of Stock.................. 39
------------------------------------
10.8 Direct Transfer of Eligible Plan Distributions........ 39
----------------------------------------------
10.9 Definitions........................................... 40
-----------
Section 11. Rules Governing Benefit Claims and Review of Appeals....... 41
----------------------------------------------------
11.1 Claim for Benefits.................................... 41
------------------
11.2 Notification by Committee............................. 41
-------------------------
11.3 Claims Review Procedure............................... 42
-----------------------
Section 12. The Committee and Its Functions............................ 42
-------------------------------
12.1 Authority of Committee................................ 42
----------------------
12.2 Identity of Committee................................. 43
---------------------
12.3 Duties of Committee................................... 43
-------------------
12.4 Valuation of Stock.................................... 44
------------------
12.5 Compliance with ERISA................................. 45
---------------------
12.6 Action by Committee................................... 45
-------------------
12.7 Execution of Documents................................ 45
----------------------
12.8 Adoption of Rules..................................... 45
-----------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
12.9 Responsibilities to Participants.................... 45
--------------------------------
12.10 Alternative Payees in Event of Incapacity........... 46
-----------------------------------------
12.11 Indemnification by Employers........................ 46
----------------------------
12.12 Nonparticipation by Interested Member............... 47
-------------------------------------
Section 13. Adoption Amendment, or Termination of the Plan............. 47
----------------------------------------------
13.1 Adoption of Plan by Other Employers................. 47
-----------------------------------
13.2 Adoption of Plan by Successor....................... 47
-----------------------------
13.3 Plan Adoption Subject to Qualification.............. 48
--------------------------------------
13.4 Right to Amend or Terminate......................... 49
---------------------------
Section 14. Miscellaneous Provisions................................... 50
------------------------
14.1 Plan Creates No Employment Rights................... 50
---------------------------------
14.2 Nonassignability of Benefits........................ 50
----------------------------
14.3 Limit of Employer Liability......................... 50
---------------------------
14.4 Treatment of Expenses............................... 51
---------------------
14.5 Number and Gender................................... 51
-----------------
14.6 Nondiversion of Assets.............................. 51
----------------------
14.7 Separability of Provisions.......................... 51
--------------------------
14.8 Service of Process.................................. 51
------------------
14.9 Governing State Law................................. 51
-------------------
Section 15. Top-Heavy Provisions....................................... 51
--------------------
15.1 Determination of Top-Heavy Status................... 52
---------------------------------
15.2 Minimum Contributions............................... 54
---------------------
15.3 Minimum Vesting..................................... 55
---------------
15.4 Maximum Compensation................................ 56
--------------------
</TABLE>
<PAGE>
NORTHWESTERN SAVINGS AND LOAN ASSOCIATION
EMPLOYEE STOCK OWNERSHIP PLAN
Section 1. Plan Identity.
-------------
1.1 Name. The name of this Plan is "Northwestern Savings and Loan
----
Association Employee Stock Ownership Plan."
1.2 Purpose. The purpose of this Plan is to describe the terms and
--------
conditions under which contributions made pursuant to the Plan will be credited
and paid to the Participants and their Beneficiaries.
1.3 Effective Date. The Effective Date of this Plan is
---------------
October 8, 1990.
1.4 Fiscal Period. This Plan shall be operated on the basis of a
--------------
January 1 - December 31 fiscal year for the purpose of keeping the Plan's books
and records and distributing or filing any reports or returns required by the
law.
1.5 Single Plan for All Employers. This Plan shall be treated as a
------------------------------
single plan with respect to all participating Employers for the purpose of
crediting contributions and forfeitures and distributing benefits, determining
whether there has been any termination of Service, and applying the limitations
set forth in Section 5.
1.6 Interpretation of Provisions. The Employers intend this Plan and
-----------------------------
the Trust to be qualified stock bonus plan under Section 401(a) of the Code and
an employee stock ownership plan within the meaning of Section 407(d)(6) of
ERISA and Section 4975(e)(7) of the Code. The Plan is intended to have its
assets invested primarily in qualifying employer securities of one or more
Employers within the meaning of Section 407(d)(5) of ERISA, and to satisfy any
4
<PAGE>
requirement under ERISA or the Code applicable to such a plan. Accordingly, the
Plan and Trust Agreement shall be interpreted and applied in a manner consistent
with this intent and shall be administered at all times and in all respects in a
nondiscriminatory manner.
Section 2. Definitions. The following capitalized words and phrases shall have
------------
the meanings specified when used in this Plan and in the Trust Agreement, unless
the context clearly indicates otherwise:
"Account" means a Participant's interest in the assets accumulated
under this Plan as expressed in terms of a separate account balance which is
periodically adjusted to reflect his Employer's contributions, the Plan's
investment experience, and distributions and forfeitures.
"Active Participant" means any Employee who has satisfied the
eligibility requirements of Section 3 and who qualifies as an Active Participant
for a particular Plan Year under Section 4.3.
"Beneficiary" means the person or persons who are designated by a
Participant to receive benefits payable under the Plan on the Participant's
death. In the absence of any designation or if all the designated BeneficiarieS
shall die before the Participant dies or shall die before all benefits have been
paid, the Participant's Beneficiary shall be his surviving spouse, if any, or
his estate if he is not survived by a spouse. The Committee may rely upon the
advice of the Participant's executor or administrator as to the identity of the
Participant's spouse.
"Break in Service" means any five or more consecutive 12-month periods
beginning January 1 in which an Employee has 500 or fewer Hours of Service per
period. Solely for this purpose, an Employee shall be considered employed for
his normal hours of paid
5
<PAGE>
employment during a Recognized Absence, unless he does not resume his Service at
the end of the Recognized Absence. Further, if an Employee is absent for any
period beginning on or after January 1, 1985, (i) by reason of the Employee's
pregnancy, (ii) by reason of the birth of the Employee's child, (iii) by reason
of the placement of a child with the Employee in connection with the Employee's
adoption of the child, or (iv) for purposes of caring for such child for a
period beginning immediately after such birth or placement, the Employee shall
be credited with the Hours of Service which would normally have been credited
but for such absence, up to a maximum of 501 Hours of Service, in the first 12-
month period which would otherwise be counted toward a Break in Service.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee responsible for the administration of
this Plan in accordance with Section 12.
"Company" means Northwestern Savings and Loan Association, and any
entity which succeeds to the business of the Company and adopts this Plan as its
own pursuant to Section 14.2.
"Disability" means only a disability which renders the Participant
totally unable, as a result of bodily or mental disease or injury, to perform
any duties for an Employer for which he is reasonably fitted, which disability
is expected to be permanent or of long and indefinite duration. However, this
term shall not include any disability directly or indirectly resulting from or
related to habitual drunkenness or addiction to narcotics, a criminal act or
attempt, service in the armed forces of any country, an act of war, declared or
undeclared, any injury or disease
6
<PAGE>
occurring while compensation to the Participant is suspended, or any injury
which is intentionally self-inflicted. Further, this term shall apply only if
(i) the Participant is sufficiently disabled to qualify for the payment of
disability benefits under the federal Social Security Act or Veterans Disability
Act, or (ii) the Participant's disability is certified by a physician selected
by the Committee. Unless the Participant is sufficiently disabled to qualify for
disability benefits under the federal Social Security Act or Veterans Disability
Act, the Committee may require the Participant to be appropriately examined from
time to time by one or more physicians chosen by the Committee, and no
Participant who refuses to be examined shall be treated as having a Disability.
In any event, the Committee's good faith decision as to whether a Participant's
Service has been terminated by Disability shall be final and conclusive.
"Early Retirement" means retirement on or after a Participant's
attainment of age 55 and the completion of ten years of service for an Employer.
"Effective Date" means October 8, 1990.
"Employee" means any individual who is or has been employed or self-
employed by an Employer. "Employee" also means an individual employed by a
leasing organization who, pursuant to an agreement between an Employer and the
leasing organization, has performed services for the Employer and any related
persons (within the meaning of Section 414(n)(6) of the Code) on a substantially
full-time basis for more than one year, if such services are of a type
historically performed by employees in the Employer's business field. However,
such a "leased employee" shall not be considered an Employee if (i) he
participates in a money purchase pension plan sponsored by the leasing
organization which provides for immediate participation,
7
<PAGE>
immediate full vesting, and an annual contribution of at least 10 percent of the
Employee's Total Compensation, and (ii) leased employees do not constitute more
than 20 percent of the Employer's total work force (including leased employees,
but excluding Highly Paid Employees and any other employees who have not
performed services for the Employer on a substantially full-time basis for at
least one year).
"Employer" means the Company or any affiliate within the purview of
section 414(b), (c) or (m) and 415(h) of the Code, any other corporation,
partnership, or proprietorship which adopts this Plan with the Company's consent
pursuant to Section 13.1, and any entity which succeeds to the business of any
Employer and adopts the Plan pursuant to Section 13.2.
"Entry Date" means the Effective Date of the Plan and each January 1
and July 1 of each Plan Year thereafter.
"ERISA" means the Employee Retirement Income Security Act of 1974
(P.L. 93-406, as amended).
"Highly Paid Employee" for any Plan Year means an Employee who, during
either of that or the immediately preceding Plan Year, (i) owned more than five
percent of the outstanding equity interest or the outstanding voting interest in
any Employer, (ii) had Total Compensation exceeding $75,000 (as adjusted
pursuant to section 415(d) of the Code), (iii) had Total Compensation exceeding
$50,000 (as adjusted pursuant to section 415(d) of the Code) and was among the
most highly compensated one-fifth of all Employees, or (iv) was at any time an
officer of an Employer and had Total Compensation exceeding $45,000 (or 50
percent of the currently applicable dollar limit under Section 415(b)(1)(A) of
the Code). For this purpose:
8
<PAGE>
(a) "Total Compensation" shall include any amount which is excludable
from the Employee's gross income for tax purposes pursuant to Sections 125,
402(e)(3), 402(h)(1)(B), or 403(b) of the Code.
(b) The number of Employees in "the most highly compensated one-fifth
of all Employees" shall be determined by taking into account all
individuals working for all related employer entities described in the
definition of "Service", but excluding any individual who has not completed
six months of Service, who normally works fewer than 17-1/2 hours per week
or in fewer than six months per year, who has not reached age 21, whose
employment is covered by a collective bargaining agreement, or who is a
nonresident alien who receives no earned income from United States sources.
(c) The number of individuals counted as "officers" shall not be more
than the lesser of (i) 50 individuals and (ii) the greater of 3 individuals
or 10 percent of the total number of Employees. If no officer earns more
than $45,000 (or the adjusted limit), then the highest paid officer shall
be a Highly Paid Employee.
(d) A former employee shall be treated as a highly compensated
employee if such employee was a highly paid employee when such employee
separated from service, or if such employee was a highly paid employee at
any time after attaining age 55.
"Hours of Service" means hours to be credited to an Employee under the
following rules:
(a) Each hour for which an Employee is paid or is entitled to be paid
for services to an Employer is an Hour of Service.
9
<PAGE>
(b) Each hour for which an Employee is directly or indirectly paid or
is entitled to be paid for a period of vacation, holidays, illness,
disability, lay-off, jury duty, temporary military duty, or leave of
absence is an Hour of Service. However, except as otherwise specifically
provided, no more than 501 Hours of Service shall be credited for any
single continuous period which an Employee performs no duties. Further, no
Hours of Service shall be credited on account of payments made solely under
a plan maintained to comply with worker's compensation, unemployment
compensation, or disability insurance laws, or to reimburse an Employee for
medical expenses.
(c) Each hour for which back pay (ignoring any mitigation of damages)
is either awarded or agreed to by an Employer is an Hour of Service.
However, no more than 501 Hours of Service shall be credited for any single
continuous period during which an Employee would not have performed any
duties.
(d) Hours of Service shall be credited in any one period only under
one of the foregoing paragraphs (a), (b) and (c); an Employee may not get
double credit for the same period.
(e) If an Employer finds it impractical to count the actual Hours of
Service for any class or group of non-hourly Employees, each Employee in
that class or group shall be credited with 45 Hours of Service for each
weekly pay period in which he has at least one Hour of Service. However, an
Employee shall be credited only for his normal working hours during a paid
absence.
10
<PAGE>
(f) Hours of Service to be credited on account of a payment to an
Employee (including back pay) shall be recorded in the period of Service
for which the payment was made. If the period overlaps two or more Plan
Years, the Hours of Service credit shall be allocated in proportion to the
respective portions of the period included in the several Plan Years.
However, in the case of periods of 31 days or less, the Administrator may
apply a uniform policy of crediting the Hours of Service to either the
first Plan Year or the second.
(g) In all respects an Employee's Hours of Service shall be counted as
required by Section 2530.200b-2(b) and (c) of the Department of Labor's
regulations under Title I of ERISA.
"Investment Fund" means that portion of the Trust Fund consisting of
assets other than Stock.
"Normal Retirement Date" means a Participant's 65th birthday.
"Participant" means any Employee who is participating in the Plan, or
who has previously participated in the Plan and still has a balance credited to
his Account.
"Plan Year" means the short plan year commencing Ocotber 8, 1990 and
ending December 31, 1990 and each period of 12 consecutive months beginning on
January 1 of each succeeding year.
"Recognized Absence" means a period for which --
(a) an Employer grants an Employee a leave of absence for a limited
period, but only if an Employer grants such leaves on a nondiscriminatory
basis; or
11
<PAGE>
(b) an Employee is temporarily laid off by an Employer because of a
change in business conditions; or
(c) an Employee is on active military duty, but only to the extent
that his employment rights are protected by the Military Selective Service
Act of 1967 (38 U.S.C. sec. 2021).
"Service" means an Employee's period(s) of employment or self-
employment with an Employer, excluding for initial eligibility purposes any
period in which the individual was a nonresident alien and did not receive from
an Employer any earned income which constituted income from sources within the
United States. An Employee's Service shall include any service which constitutes
service with a predecessor employer within the meaning of Section 414(a) of the
Code. An Employee's Service shall also include any service with an entity which
is not an Employer, but only either (i) for a period after 1975 in which the
other entity is a member of a controlled group of corporations or is under
common control with other trades and businesses within the meaning of Section
414(b) or 414(c) of the Code, and a member of the controlled group or one of the
trades and businesses is an Employer, or (ii) for a period after 1979 in which
the other entity is a member of an affiliated service group within the meaning
of Section 414(m) of the Code, and a member of the affiliated service group is
an Employer.
"Spouse" means the individual, if any, to whom a Participant is
lawfully married on the date benefit payments to the Participant are to begin,
or on the date of the Participant's death, if earlier.
12
<PAGE>
"Stock" means shares of the Company's voting common stock or preferred
stock meeting the requirements of Section 409(e)(3) of the Code issued by an
Employer or an affiliated corporation.
"Stock Fund" means that portion of the Trust Fund consisting of Stock.
"Stock Obligation" means an indebtedness arising from any extension of
credit to the Plan or the Trust which was obtained for the purpose of buying
Stock and which satisfies the requirements set forth in Section 6.3.
"Total Compensation" means a Participant's wages, base wages, salary,
overtime, bonuses, and any other amounts received for personal services
rendered while in Service from any Employer or an affiliate (within the purview
of Section 414(b), (c), and (m) of the Code), plus his earned income from any
such entity as defined in Section 401(c)(2) of the Code if he is self-employed.
"Total Compensation" shall include (i) severance payments and amounts paid as a
result of termination, (ii) amounts excludable from gross income under Section
911 of the Code, (iii) amounts described in Sections 104(a)(3), 105(a), and
105(h) of the Code to the extent includable in gross income, (v) amounts
received from an Employer for moving expenses which are deductible under
Section 217 of the Code, (vi) amounts includable in gross income in the year of,
and on account of, the grant of a nonqualified stock option, (vii) amounts
includable in gross income pursuant to Section 83(b) of the Code, and
(viii) amounts includable in gross income under an unfunded nonqualified plan of
deferred compensation, but shall exclude (ix) Employer contributions or amounts
received from a funded or qualified plan of deferred compensation, (x) Employer
contributions to a simplified employee pension account to the extent
13
<PAGE>
deductible under Section 219 of the Code, (xi) Employer contributions to Section
403(b) annuity contract, and (xii) amounts includable in gross income pursuant
to Section 83(a) of the Code, (xiii) amounts includable in gross income upon the
exercise of nonqualified stock option or upon the disposition of stock acquired
under any stock option, and (xiv) any other amounts expended by the Employer on
the Participant's behalf which are excludable from his income or which receive
special tax benefits, and (xv) any commissions received by the Employee from the
Employer. A Participant's Total Compensation shall exclude any compensation in
any limitation year beginning after 1988 in excess of $200,000 (or the limit
currently in effect under Section 401(a)(17) of the Code).
"Trust" or "Trust Fund" means the trust fund created under this Plan.
"Trust Agreement" means the agreement between the Company and the
Trustee concerning the Trust Fund. If any assets of the Trust Fund are held in a
co-mingled trust fund with assets of other qualified retirement plans, "Trust
Agreement" shall be deemed to include the trust agreement governing that co-
mingled trust fund. With respect to the allocation of investment responsibility
for the assets of the Trust Fund, the provisions of Section 2.2 of the Trust
Agreement are incorporated herein by reference.
"Trustee" means one or more corporate persons and individuals selected
from time to time by the Company to serve as trustee or co-trustees of the Trust
Fund.
"Unallocated Stock Fund" means that portion of the Stock Fund
consisting of the Plan's holding of stock which have been acquired in exchange
for one or more Stock obligations
14
<PAGE>
and which have not yet been allocated to the Participant's Accounts in
accordance with Section 4.2.
"Valuation Date" means the last day of the Plan Year and each other
date as of which the committee shall determine the investment experience of the
Investment Fund and adjust the Participants' accounts accordingly.
"Valuation Period" means the period following a Valuation Date and
ending with the next Valuation Date.
"Vesting Year" means a unit of Service credited to a Participant
pursuant to Section 9.2 for purposes of determining his vested interest in his
Account.
Section 3. Eligibility for Participation.
------------------------------
3.1 Initial Eligibility. An Employee shall enter the Plan as of the
--------------------
Entry Date coinciding with or next following the later of the following dates:
(a) the last day of an Employee's first Eligibility Year, and
(b) the Employee's 21st birthday.
However, if an Employee is not in active Service with an Employer on
the date he would otherwise first enter the Plan, his entry shall be deferred
until the next day he is in Service.
3.2 Definition of Eligibility Year. An "Eligibility Year" means an
------------------------------
applicable eligibility period (as defined below) in which the Employee has at
least 1,000 Hours of Service for the Employer. For this purpose:
(a) an Employee's first "eligibility period" is the 12-consecutive
month period beginning on the first day on which he has an Hour
of Service, and
15
<PAGE>
(b) his subsequent eligibility periods will be 12-consecutive month
periods beginning on each January 1 after that first day of
Service.
3.3 Terminated or Part-time Employees. No Employee shall have any
----------------------------------
interest or rights under this Plan if (i) he is never in active Service with an
Employer on or after the Effective Date, or (ii) he had 500 or fewer Hours of
Service in any eligibility period beginning before the Effective Date and he
never has an Eligibility Year after such period.
3.4 Certain Employees Ineligible. No Employee shall participate in the
-----------------------------
Plan while his Service is covered by a collective bargaining agreement between
an Employer and the Employee's collective bargaining representative if (i)
retirement benefits have been the subject of good faith bargaining between the
Employer and the representative and (ii) the collective bargaining agreement
does not provide for the Employee's participation in the Plan. No Employee shall
participate in the Plan while he is actually employed by a leasing organization
rather than an Employer.
3.5 Participation and Reparticipation. Subject to the satisfaction of
----------------------------------
the foregoing requirements, an Employee shall participate in the Plan during
each period of his Service from the date on which he first becomes eligible
until his termination. For this purpose, an Employee returning within five years
of his or her termination who previously satisfied the initial eligibility
requirements shall re-enter the Plan as of the date of his return to Service
with an Employer.
Section 4. Employer Contributions and Credits.
-----------------------------------
4.1 Discretionary Contributions. Each Employer shall from time to time
----------------------------
contribute, with respect to a Plan Year, such amounts as it may determine from
time to time. An Employer
16
<PAGE>
shall have no obligation to contribute any amount under this Plan except as so
determined in its sole discretion. The Employers' contributions and available
forfeitures for a Plan Year shall be credited as of the last day of the year to
the Accounts of the Active Participants in proportion to their amounts of Cash
Compensation.
4.2 Contributions for Stock Obligations. If the Trustee, upon
------------------------------------
instructions from the Committee, incurs any Stock Obligation upon the purchase
of Stock, the Employer shall, subject to the provisions of the Company's Plan of
Conversion and any regulatory prohibitions, contribute for each Plan Year an
amount sufficient to cover all payments of principal and interest as they come
due under the terms of the Stock Obligation. If there is more than one Stock
Obligation, the Employers shall designate the one to which any contribution is
to be applied. The Employer's obligation to make contributions under this
Section 4.2 shall be reduced to the extent of any investment earnings realized
on such contributions and any dividends paid by the Employers on Stock held in
the Unallocated Stock Account, which earnings and dividends shall be applied to
the Stock Obligation related to that Stock.
In each Plan Year in which the Employer contributions, earnings on
contributions, or dividends on unallocated Stock are used as payments under a
Stock Obligation, a certain number of shares of the Stock acquired with that
Stock Obligation which is then held in the Unallocated Stock Fund shall be
released for allocation among the Participants. The number of shares released
shall bear the same ratio to the total number of those shares then held in the
Unallocated Stock Fund (prior to the release) as (i) the principal and interest
payments made on the Stock Obligation in the current Plan Year bears to (ii) the
sum of (i) above, and the remaining principal
17
<PAGE>
and interest payments required (or projected to be required on the basis of the
interest rate in effect at the end of the Plan Year) to satisfy the Stock
Obligation.
At the direction of the Committee, the current and projected payments of
interest under a Stock Obligation may be ignored in calculating the number of
shares to be released in each year if (i) the Stock Obligation provides for
annual payments of principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments of such amounts for 10 years, (ii)
the interest included in any payment is ignored only to the extent that it would
be determined to be interest under standard loan amortization tables, and (iii)
the term of the Stock Obligation, by reason of renewal, extension, or
refinancing, has not exceeded 10 years from the original acquisition of the
Stock.
For these purposes, each Stock Obligation, the Stock purchased with it,
and any dividends on such Stock, shall be considered separately. The Stock
released from the Unallocated Stock Fund in any Plan Year shall be credited as
of the last day of the year to the Accounts of the Active Participants in
proportion to their amounts of Cash Compensation.
4.3 Definitions Related to Contributions. For the purposes of this Plan,
-------------------------------------
the following terms have the meanings specified:
"Active Participant" means a Participant who has satisfied the
eligibility requirements under Section 3. However, a Participant shall not
qualify as an Active Participant unless (i) the Participant completes at least
1,000 Hours of Service as of the last day of the Plan Year, or (ii) he is on a
Recognized Absence as of that date, or (iii) his Service terminated during the
Plan Year by reason of disability or death.
18
<PAGE>
"Cash Compensation" means a Participant's compensation from his Employer
with respect to that portion of a Plan Year in which he is an Active
Participant. A Participant's compensation shall be based upon the cash method of
accounting; bonuses, taxable sick pay, any compensation deferred under a
qualified cash or deferred arrangement, and similar items shall be included, but
any compensation income realized under a stock option, amounts paid by or
received from an Employer to cover travel, entertainment, moving or similar
expenses, the value of any fringe benefits not received in cash and any
commissions received from the Employer shall be excluded. A Participant's Cash
Compensation shall exclude any compensation in any Plan Year beginning after
1988 in excess of $200,000 (or the limit currently in effect under Section
401(a)(17) of the Code). For Plan Years on or after January 1, 1994, a
Participant's Cash Compensation taken into account under the Plan, shall not
exceed the limit of $150,000, (as adjusted for increases in the cost of living
in accordance with Section 401(a)(17)(B) of the Code).
4.4 Conditions as to Contributions. Employers' contributions shall in
-------------------------------
any event be subject to the limitation set forth in Section 5. Contributions may
be made in the form of cash, or securities and other property to the extent
permissible under ERISA, including Stock, and shall be held by the Trustee in
accordance with the Trust Agreement. In addition to the provisions of Section
13.3 for the return of an Employer's contributions in connection with a failure
of the Plan to qualify initially under the Code, any amount contributed by an
Employer due to a good faith mistake of fact, or based upon a good faith but
erroneous determination of its deductibility under Section 404 of the Code,
shall be returned to the Employer within one year after the date on
19
<PAGE>
which the contribution was originally made, or within one year after its
nondeductibility has been finally determined. However, the amount to be returned
shall be reduced to take account of any adverse investment experience within the
Trust Fund in order that the balance credited to each Participant's Account is
not less that it would have been if the contribution had never been made.
Section 5. Limitations on Contributions and Allocations.
---------------------------------------------
5.1 Limitation on Annual Additions. Notwithstanding the provisions of
-------------------------------
Section 4, the annual addition to a Participant's accounts under this and any
other defined contribution plans maintained by the Employers or an affiliate
(within the purview of Section 414(b), (c), and (m) and Section 415(h) of the
Code, which affiliate shall be deemed an Employer for this purpose) shall not
exceed for any limitation year an amount equal to the lesser of --
5.1-1 $30,000, or the dollar limitation currently in effect; or
5.1-2 25 percent of the Participant's Total Compensation for such
limitation year.
For purposes of this Section 5.1 and the following Section 5.2, the "annual
addition" to a Participant's accounts means the sum of (i) the Employer
contributions and Employee forfeitures credited to a Participant's accounts with
respect to a limitation year, plus (ii) the Participant's total voluntary
contributions for that year. The $30,000 and $90,000 limitations referred to
shall, for each limitation year ending after 1988, be automatically adjusted to
the new dollar limitations determined by the Commissioner of Internal Revenue
for the calendar year beginning in that limitation year. Notwithstanding the
foregoing, if the special limitations on annual additions
20
<PAGE>
described in section 415(c)(6) of the Code applies, the limitations described in
this section shall be adjusted accordingly. A "limitation year" means each 12
consecutive month period beginning January 1.
5.2 Coordinated Limitation With Other Plans. Aside from the limitation
----------------------------------------
prescribed by Section 5.1 with respect to the annual addition to a Participant's
accounts for any single limitation year, if a Participant has ever participated
in one or more defined benefit plans maintained by an Employer or an affiliate,
then the annual additions to his accounts shall be limited on a cumulative basis
so that the sum of his defined contribution plan fraction and his defined
benefit plan fraction does not exceed one. For this purpose:
5.2-1 A Participant's defined contribution plan fraction with
respect to a Plan Year shall be a fraction, (i) the numerator of which is
the sum of the annual additions to his accounts through the current year,
and (ii) the denominator of which is the sum of the lesser of the following
amounts -A- and -B- determined for the current limitation year and each
prior limitation year of Service with an Employer: -A- is 1.25 times
$30,000, or 1.0 times such dollar limitation if the Plan is top-heavy, and
-B- is 35 percent of the Participant's Total Compensation for such year.
Further, if the Participant participated in any related defined
contribution plan in any years beginning before 1976, any excess of the sum
of the actual annual additions to the Participant's accounts for those
years over the maximum annual additions which could have been made in
accordance with Section 5.1 shall be ignored, and voluntary contributions
by the Participant during those years shall be taken into account as to
each such year only to the extent that his average annual
21
<PAGE>
voluntary contribution in those years exceeded 10 percent of his average
annual Total Compensation in those years.
5.2-2 A Participant's defined benefit plan fraction with respect
to a limitation year shall be a fraction, (i) the numerator of which is his
projected annual benefit payable at normal retirement under the Employers'
defined benefit plans, and (ii) the denominator of which is the lesser of
(a) 1.25 times $90,000, or 1.0 times such dollar limitation if the Plan is
top-heavy, and (b) 1.4 times the Participant's average Total Compensation
during his highest-paid three consecutive limitation years.
5.3 Effect of Limitations. The Committee shall take whatever action
----------------------
may be necessary from time to time to assure compliance with the limitations set
forth in Section 5.1 and 5.2. Specifically, the Committee shall see that each
Employer restrict its contributions for any Plan Year to an amount which, taking
into account the amount of available forfeitures, may be completely allocated to
the Participants consistent with those limitations. Where the limitations would
otherwise be exceeded by any Participant, further allocations to the Participant
shall be curtailed to the extent necessary to satisfy the limitations. Where an
excessive amount is contributed on account of a mistake as to one or more
Participants' compensation, or there is an amount of forfeitures which may not
be credited in the Plan Year in which it becomes available, the amount shall be
held in a suspense account to be allocated in lieu of any Employer contributions
in future years until it is eliminated, and to be returned to the Employer if it
cannot be credited consistent with these limitations before the termination of
the Plan.
22
<PAGE>
5.4 Limitations as to Certain Participants. Aside from the limitations
---------------------------------------
set forth in Section 5.1 and 5.2, if the Plan acquires any Stock in a
transaction as to which a selling shareholder or the estate of a deceased
shareholder is claiming the benefit of Section 1042 of the Code, the Committee
shall see that none of such Stock, and no other assets in lieu of such Stock,
are allocated to the Accounts of certain Participants in order to comply with
Section 409(n) of the Code.
This restriction shall apply at all times to a Participant who owns
(taking into account the attribution rules under Section 318(a) of the Code,
without regard to the exception for employee plan trusts in Section
318(a)(2)(B)(i) more than 25 percent of any class of stock of a corporation
which issued the Stock acquired by the Plan, or another corporation within the
same controlled group, as defined in Section 409(1)(4) of the Code (any such
class of stock hereafter called a "Related Class"). For this purpose, a
Participant who owns more than 25 percent of any Related Class at any time
within the one year preceding the Plan's purchase of the Stock shall be subject
to the restriction as to all allocations of the Stock, but any other Participant
shall be subject to the restriction only as to allocations which occur at a time
when he owns more than 25 percent of any Related Class.
Further, this restriction shall apply to the selling shareholder claiming
the benefit of Section 1042 and any other Participant who is related to such a
shareholder within the meaning of Section 267(b) of the Code, during the period
beginning on the date on which the Plan purchases the Stock and ending 10 years
after the later of (i) the date of such purchase, and (ii)
23
<PAGE>
the date of the allocation under Section 4.2 attributable to the final payment
on whatever Stock Obligations were incurred with the purchase.
This restriction shall not apply to any Participant who is a lineal
descendant of a selling shareholder if the aggregate amounts allocated under the
Plan for the benefit of all such descendants do not exceed five percent of the
Stock acquired from the shareholder.
24
<PAGE>
5.5 Limitation on Contributions to Highly Paid Employees.
----------------------------------------------------
Aside from the limitations set forth in Section 5.1, 5.2 and 5.4, the
allocation to Highly Paid Employees under the Plan shall not exceed one third
(1/3) of the total Employer Contributions to all Employees under the Plan.
Where the above limitation would otherwise be exceeded, the allocation of
Employer Contributions to each Highly Paid Employee shall be reduced pro rata
among all Highly Paid Employees to such amount to satisfy the above limitation.
Such excess Employer Contributions shall be held in a suspense account until
such time as said amount may be reallocated among the Highly Compensated
Employees without exceeding the limitation set forth in this Section.
Section 6. Trust Fund and Its Investment.
------------------------------
6.1 Creation of Trust Fund. All amounts received under the Plan from
-----------------------
Employers and investments shall be held as the Trust Fund pursuant to the terms
of this Plan and of the Trust Agreement between the Company and the Trustee. The
benefits described in this Plan shall be payable only from the assets of the
Trust Fund, and none of the Company, any other Employer, its board of directors
or trustees, its stockholders, its officers, its employees, the Committee, and
the Trustee shall be liable for payment of any benefit under this Plan except
from the Trust Fund.
6.2 Stock Fund and Investment Fund. The Trust Fund consisting entirely of
-------------------------------
Stock, and the Investment Fund, consisting of all assets of the Trust other than
Stock. The Trustee shall have no investment responsibility for the Stock Fund,
but shall accept any Employer contributions made in the form of Stock, and shall
acquire, sell, exchange, distribute, and
25
<PAGE>
otherwise deal with and dispose of Stock in accordance with the instructions of
the Committee. The Trustee shall have full responsibility for the investment of
the Investment Fund, held by the Trustee shall be divided into the Stock Fund,
except to the extent such responsibility may be delegated from time to time to
one or more investment managers pursuant to Section 2.2 of the Trust Agreement.
6.3 Acquisition of Stock. From time to time the Committee may, in its sole
---------------------
discretion, direct the Trustee to acquire Stock from the issuing Employer or
from shareholders, including shareholders who are or have been Employees,
Participants, or fiduciaries with respect to the Plan. The Trustee shall pay for
such Stock no more than its fair market value, which shall be determined
conclusively by the Committee pursuant to Section 12.4. The Committee may direct
the Trustee to finance the acquisition of Stock by incurring or assuming
indebtedness to the seller or another party which indebtedness shall be called a
"Stock Obligation". Any Stock Obligation shall be subject to the following
conditions and limitations:
6.3-1 A Stock Obligation shall be for a specific term, shall not be
payable on demand except in the event of default, and shall bear a
reasonable rate of interest.
6.3-2 A Stock Obligation may, but need not, be secured by a
collateral pledge of either the Stock acquired in exchange for the Stock
Obligation, or the Stock previously pledged in connection with a prior
Stock Obligation which is being repaid with the proceeds of the current
Stock Obligation. No other assets of the Plan and Trust may be used as
collateral for a Stock Obligation, and no creditor under a Stock Obligation
shall
26
<PAGE>
have any right or recourse to any Plan and Trust assets other than Stock
remaining subject to a collateral pledge.
6.3-3 Any pledge of Stock to secure a Stock Obligation must provide
for the release of pledged Stock in connection with payments on the Stock
Obligations in the ratio prescribed in Section 4.2.
6.3-4 Repayments of principal and interest on any Stock Obligation
shall be made by the Trustee only from Employer cash contributions
designated for such payments, from earnings on such contributions, and from
cash dividends received on Stock held in the Unallocated Stock Fund.
6.4 Participants' Option to Diversify. The Committee shall provide for a
----------------------------------
procedure under which each Participant may, during the first five years of a
certain six-year period, elect to have up to 25 percent of the value of his
Account committed to alternative investment options within the Investment Fund.
For the sixth year in this period, the Participant may elect to have up to 50
percent of the value of his Account committed to other investments. The six-year
period shall begin with the Plan Year following the first Plan Year in which the
Participant has both reached aged 55 and completed 10 years of participation in
the Plan; a Participant's election to diversify his Account must be made within
the 90-day period immediately following the last day of each of the six Plan
Years. The Committee shall see that the Investment fund includes a sufficient
number of investment options to comply with Section 401(a)(28)(B) of the Code.
The Trustee shall comply with any investment directions received from
Participants in accordance with the procedures adopted from time to time by the
Committee under this Section 6.4.
27
<PAGE>
Section 7. Voting Rights and Dividends on Stock.
-------------------------------------
7.1 Voting and Tendering of Stock. The Trustee generally shall vote all
------------------------------
shares of Stock held under the Plan. However, if any Employer has registration-
type class of securities within the meaning of Section 409(e)(4) of the Code, or
if a matter submitted to the holders of the Stock involves a merger,
consolidation, recapitalization, reclassification, liquidation, dissolution, or
sale of substantially all assets of an entity, then (i) the shares of Stock
which have been allocated to Participants' Accounts shall be voted by the
Trustee in accordance with the Participants' written instructions, and (ii) the
Trustee shall vote any shares of Stock which have been allocated to
Participants' Accounts but for which no written instructions have been received
and any unallocated Stock in a manner calculated to most accurately reflect the
instructions it has received from Participants regarding the allocated Stock. In
the event no shares of Stock have been allocated to Participants' Accounts at
the time Stock is to be voted, each Participant shall be deemed to have one
share of Stock allocated to his or her account for the sole purpose of providing
the Trustee with voting instructions. Notwithstanding any provision hereunder to
the contrary, all shares of Stock which have been allocated to Participants'
Accounts and for which the Trustee has received no written instructions and all
unallocated shares of Stock must be voted by the Trustee in a manner determined
by the Trustee to be solely in the interest of the Participants and
Beneficiaries. Whenever such voting rights are to be exercised, the Employers,
the Committee, and the Trustee shall see that all Participants and Beneficiaries
are provided with the same notices and other materials as are provided to other
holders of the Stock, and are provided with adequate opportunity to deliver
their instructions to the Trustee regarding the
28
<PAGE>
voting of Stock allocated to their Accounts. The instructions of the
Participants' with respect to the voting of allocated shares hereunder shall be
confidential.
7.1-1 In the event of a tender offer, Stock shall be tendered by the
Trustee in the same manner as set forth above with respect to the voting of
Stock. Notwithstanding any provision hereunder to the contrary, Stock must be
tendered by the Trustee in a manner determined by the Trustee to be solely in
the interest of the Participants and Beneficiaries.
7.2 Dividends on Stock. Dividends on Stock which are received by the
-------------------
Trustee in the form of additional Stock shall be retained in the Stock Fund, and
shall be allocated among the Participant's Accounts and the Unallocated Stock
Fund in accordance with their holdings of the Stock on which the dividends have
been paid. Dividends on Stock credited to Participants' Accounts which are
received by the Trustee in the form of cash shall, at the direction of the
Company paying the dividends, either (i) be credited to the Accounts in
accordance with Section 8.3 and invested as part of the Investment Fund, (ii) be
distributed immediately to the Participants in proportion with the Participants'
Account balance; (iii) be distributed to the Participants within 90 days of the
close of the Plan Year in which paid in proportion with the Participants'
Account balance; or (iv) be used to repay principal and interest on the Stock
Obligation used to acquire Stock on which the dividends were paid. Dividends on
Stock held in the Unallocated Stock Fund which are received by the Trustee in
the form of cash shall be applied as soon as practicable to payments of
principal and interest under the Stock Obligation incurred with the purchase of
the Stock.
29
<PAGE>
Section 8. Adjustments to Accounts.
------------------------
8.1 Adjustments for Transactions. An Employer contribution pursuant to
-----------------------------
Section 4.1 shall be credited to the Participants' Accounts as of the last day
of the Plan Year for which it is contributed. Stock released from the
Unallocated Stock Fund upon the Trust's repayment of a Stock Obligation pursuant
to Section 4.2 shall be credited to the Participants' Accounts as of the last
day of the Plan Year in which the repayment occurred. Any excess amounts
remaining from the use of proceeds of a sale of Stock from the Unallocated Stock
Fund to repay a Stock Obligation shall be allocated as of the last day of the
Plan Year in which the repayment occurred among the Participants' Accounts in
proportion to the opening balance in each Account. Any benefit which is paid to
a Participant or Beneficiary pursuant to Section 10 shall be charged to the
Participant's Account as of the first day of the Valuation Period in which it is
paid. Any forfeiture or restoral shall be charged or credited to the
Participant's Account as of the first day of the Valuation Period in which the
forfeiture or restoral occurs pursuant to Section 9.6.
8.2 Valuation of Investment Fund. As of each Valuation Date, the Trustee
-----------------------------
shall prepare a balance sheet of the Investment Fund, recording each asset
(including any contribution receivable from an Employer) and liability at its
fair market value. Any liability with respect to short positions or options and
any item of accrued income or expense and unrealized appreciation or
depreciation shall be included; provided, however, that such an item may be
estimated or excluded if it is not readily ascertainable unless estimating or
excluding it would result in a material distortion. The Committee shall then
determine the net gain or loss of the Investment Fund since the preceding
Valuation Date, which shall mean the entire income of the Investment
30
<PAGE>
Fund, including realized and unrealized capital gains and losses, net of any
expenses to be charged to the general Investment Fund and excluding any
contributions by the Employer. The determination of gain or loss shall be
consistent with the balance sheets of the Investment Fund for the current and
preceding Valuation Dates.
8.3 Adjustments for Investment Experience. Any net gain or loss of the
--------------------------------------
Investment Fund during a Valuation Period, as determined pursuant to Section
8.2, shall be allocated as of the last day of the Valuation Period among the
Participants' Accounts in proportion to the opening balance in each Account, as
adjusted for benefit payments and forfeitures during the Valuation Period,
without regard to whatever Stock may be credited to an Account.
Section 9. Vesting of Participants' Interests.
-----------------------------------
9.1 Deferred Vesting in Accounts. A Participant's vested interest in his
-----------------------------
Account shall be based on his Vesting Years in accordance with the following
Table, subject to the balance of this Section 9:
<TABLE>
<CAPTION>
Vesting Percentage of
Years Interest Vested
----- ---------------
<S> <C>
fewer than 3 0%
3 20%
4 40%
5 60%
6 80%
7 or more 100%
</TABLE>
31
<PAGE>
Provided, however, that any Plan Participant who has completed at least three
years of service with the employer prior to February 19, 1991, shall be given
the opportunity to elect to have the vesting schedule in effect prior to this
amendment used to determine his or her vested benefit.
9.2 Computation of Vesting Years. For purposes of this Plan, a "Vesting
-----------------------------
Year" means each 12-month period in which an Employee has at least 1,000 Hours
of Service, beginning with the Effective Date of the Plan in which the Active
Participant completes 1,000 Hours of Service. However, a Participant's Vesting
Years shall be computed subject to the following conditions and qualifications:
(a) A Participant's vested interest in his Account accumulated before
a Break in Service shall be determined without regard to any Service after
the Break. Further, if a Participant has a Break in Service before his
interest in his Account has become vested to some extent, he shall lose
credit for any Vesting Year before the Break.
(b) Unless otherwise specifically excluded, a Participant's Vesting
Years shall include any period of active military duty to the extent
required by the Military Selective Service Act of 1967 (38 U.S.C. Section
2021).
9.3 Full Vesting Upon Certain Events. Notwithstanding Section 9.1, a
---------------------------------
Participant's interest in his Account shall fully vest on the Participant's
Normal Retirement Date, provided the Participant is in Service on or after that
date. The Participant's interest shall also fully vest in the event that his
Service is terminated by Early Retirement, Disability or by death.
9.4 Full Vesting Upon Plan Termination. Notwithstanding Section 9.1, a
-----------------------------------
Participant's interest in his Account shall fully vest if he is in active
Service upon termination of this Plan or
32
<PAGE>
upon the permanent and complete discontinuance of contributions by his Employer.
In the event of a partial termination, the interest of each Participant who is
in Service shall fully vest with respect to that part of the Plan which is
terminated.
9.5 Forfeiture, Repayment, and Restoral. If a Participant's Service
------------------------------------
terminates before his interest in his Account is fully vested, that portion
which has not vested shall be forfeited if he either (i) receives a distribution
of his entire vested interest pursuant to Section 10.1, or (ii) has a Break in
Service.
If a Participant who has received his entire vested interest returns to
Service before he has a Break in Service, he may repay to the Trustee an amount
equal to the distribution. The Participant may repay such amount at any time
within five years after he has returned to Service. The amount shall be
credited to his account as of the last day of the Plan Year in which it is
repaid; and additional amount equal to that portion of his Account which was
previously forfeited shall be restored to his Account at the same time from
other Employees' forfeitures and, is such forfeitures are insufficient, from a
special contribution by his Employer for that year.
In the case of a terminated Participant who does not receive a distribution
of his entire vested interest and whose Service resumes before a Break in
Service occurs, any undistributed vested balance from his prior participation
shall be maintained as a fully vested subaccount within his Account.
9.6 Accounting for Forfeitures. A forfeiture shall be charged to the
---------------------------
Participant's Account as of the first day of the first Valuation Period in which
the forfeiture becomes certain pursuant to Section 9.5. Except as otherwise
provided in that Section, a forfeiture shall be added
33
<PAGE>
to the contributions of the terminated Participant's Employer which are to be
credited to other Participants pursuant to Section 4.1 as of the last day of the
Plan Year in which the forfeiture becomes certain.
9.7 Vesting and Nonforfeitability. A Participant's interest in his
-----------------------------
Account which has become vested shall be nonforfeitable for any reason.
Section 10. Payment of Benefits.
--------------------
10.1 Benefits for Participants. A Participant whose Service ends for any
--------------------------
reason shall receive the vested portion of his Account in a single payment on a
date selected by the Committee. That date shall be on or before the 60th day
after the end of the Plan Year in which his Service ends. Notwithstanding the
foregoing, if the balance credited to his Account exceeds $3,500, his benefits
shall not be paid before the latest of his 65th birthday or the tenth
anniversary of the year in which he commenced participation in the Plan unless
he elects an early payment date in a written election filed with the Committee.
A Participant may modify such an election at any time, provided any new benefit
payment date is at least 30 days after a modified election is delivered to the
Committee. In all events, a Participant's benefits shall be paid by April 1st of
the calendar year following the year in which he reaches age 70-1/2. A
Participant's benefits from that portion of his Account committed to the
Investment Fund shall be calculated on the basis of the most recent Valuation
Date before the day of payment.
10.2 Benefits on a Participant's Death. If a Participant dies before his
----------------------------------
benefits are paid pursuant to Section 10.1, the balance credited to his Account
shall be paid to his Beneficiary in a single distribution on or before the 60th
day after the end of the Plan Year in which he died. The
34
<PAGE>
benefits from that portion of the Account committed to the Investment Fund shall
be calculated on the basis of the most recent Valuation Date before the date of
payment.
If a married Participant dies before his benefit payments begin, than
unless he has specifically elected otherwise the Committee shall cause the
balance in his Account to be paid to his Spouse. No election by a married
Participant of a different Beneficiary shall be valid unless the election is
accompanied by the Spouse's written consent, which (i) must acknowledge the
effect of the election, (ii) must explicitly provide either that the designated
Beneficiary may not subsequently be changed by the Participant without the
Spouse's further consent, or that it may be changed without such consent, and
(iii) must be witnessed by the Committee, its representative, or a notary
public. This requirement shall not apply if the Participant establishes to the
Committee's satisfaction that the Spouse may not be located.
10.3 Marital Status. The Committee shall from time to time take whatever
---------------
steps it deems appropriate to keep informed of each Participant's marital
status. Each Employer shall provide the Committee with the most reliable
information in the Employer's possession regarding its Participants' marital
status. The Committee, the Plan, the Trustee, and the Employers shall be fully
protected and discharged from any liability to the extent of any benefit
payments made as a result of the Committee's good faith and reasonable reliance
upon information obtained from a Participant and his Employer as to his marital
status.
10.4 Delay in Benefit Determination. If the Committee is unable to
-------------------------------
determine the benefits payable to a Participant or Beneficiary on or before the
latest date prescribed for payment pursuant to Section 10.1 or 10.2, the
benefits shall in any event be paid within 60 days
35
<PAGE>
after they can first be determined, with whatever makeup payments may be
appropriate in view of the delay.
10.5 Accounting for Benefit Payments. Any benefit payment shall be charged
--------------------------------
to the Participant's Account as of the first day of the Valuation Period in
which the payment is made.
10.6 Options to Receive and Sell Stock. Unless ownership of virtually all
----------------------------------
Stock is restricted to active Employees and qualified retirement plans for the
benefit of Employees pursuant to the certificates of incorporation or by-laws of
the Employers issuing Stock, a terminated Participant or the Beneficiary of a
deceased Participant may instruct the Committee to distribute the Participant's
entire vested interest in his Account in the form of Stock. In that event, the
Committee shall apply the Participant's vested interest in the Investment Fund
to purchase sufficient Stock from the Stock Fund or from any owner of stock to
make the required distribution. In all other cases, the Participant's vested
interest in the Stock Fund shall be distributed in shares of Stock, and his
vested interest in the Investment Fund shall be distributed in cash.
Any Participant who receives Stock pursuant to Section 10.1, and any person
who has received Stock from the Plan or from such a Participant by reason of the
Participant's death or incompetency, by reason of divorce or separation from the
Participant, or by reason of a rollover contribution described in Section
402(a)(5) of the Code, shall have the right to require the Employer which issued
the Stock to purchase the Stock for its current fair market value (hereinafter
referred to as the "put right"). The put right shall be exercisable by written
notice to the Committee during the first 60 days after the Stock is distributed
by the Plan, and, if not
36
<PAGE>
exercised in that period, during the first 60 days in the following Plan Year
after the Committee has communicated to the Participant its determination as to
the Stock's current fair market value. However, the put right shall not apply to
the extent that the Stock, at the time the put right would otherwise be
exercisable, may be sold on an established market in accordance with federal and
state securities laws and regulations. If the put right is exercised, the
Trustee may, if so directed by the Committee in its sole discretion, assume the
Employer's rights and obligations with respect to purchasing the Stock.
The Employer or the Trustee, as the case may be, may elect to pay for the
Stock in equal periodic installments, not less frequently than annually, over a
period not longer than five years from the 30th day after the put right is
exercised, with adequate security and interest at a reasonable rate on the
unpaid balance, all such terms to be set forth in a promissory note delivered to
the seller with normal terms as to acceleration upon any uncured default.
Nothing contained herein shall be deemed to obligate any Employer to
register any Stock under any federal or state securities law or to create or
maintain a public market to facilitate the transfer or disposition of any Stock.
The put right described herein may only be exercised by a person described in
the second preceding paragraph, and may not be transferred with any Stock to any
other person. As to all Stock purchased by the Plan in exchange for any Stock
Obligation, the put right be nonterminable. The put right for Stock acquired
through a Stock Obligation shall continue with respect to such Stock after the
Stock Obligation is repaid or the Plan ceases to be an employee stock ownership
plan.
37
<PAGE>
10.7 Restrictions on Disposition of Stock. Except in the case of Stock
-------------------------------------
which is traded on an established market, a Participant who receives Stock
pursuant to Section 10.1, and any person who has received Stock from the Plan or
from such a Participant by reason of the Participant's death or incompetency, by
reason of divorce or separation from the Participant, or by reason of a rollover
contribution described in Section 402(a)(5) of the Code, shall, prior to any
sale or other transfer of the Stock to any other person, first offer the Stock
to the issuing Employer and to the Plan at its current fair market value. This
restriction shall apply to any transfer, whether voluntary, involuntary, or by
operation of law, and whether for consideration or gratuitous. Either the
Employer or the Trustee may accept the offer within 14 days after it is
delivered. Any Stock distributed by the Plan shall bear a conspicuous legend
describing the right of first refusal under this Section 10.7, as well as any
other restrictions upon the transfer of the Stock imposed by federal and state
securities laws and regulations.
10.8 Direct Transfer of Eligible Plan Distributions. This Article applies
-----------------------------------------------
to distributions made on or after January 1, 1993. Notwithstanding any
provision to the plan to the contrary that would otherwise limit a distributee's
election under this Article, a distributee may elect, at the time and in the
manner precribed by the plan administrator, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
38
<PAGE>
10.9 Definitions
-----------
10.9-1 Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of a distributee, except that an eligible rollover distribution does not
include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributees and the distributee's designated beneficiary, or for a
specific period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not includable in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).
10.9-2 Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an anuity
plan described in section 403(a) of the Code, or a qualified trust described in
section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
10.9-3 Distributee: A distributee includes an employee or former
employee. In addition, the employee's or former employee's surviving spouse and
the employee's or former employee's spouse of former spouse who is the alternate
payee under a qualified domestic
39
<PAGE>
relations order, as defined in section 414(p) of the Code, are distributees with
regard to the interest of the spouse or former spouse.
10.9-4 Direct Rollover: A direct rollover is a payment by the
plan to the eligible retirement plan specified by the distributee.
Section 11. Rules Governing Benefit Claims and Review of Appeals.
---------------------------
11.1 Claim for Benefits. Any Participant or Beneficiary who qualifies
------------------
for the payment of benefits shall file a claim for his benefits with the
Committee on a form provided by the Committee. The claim, including any election
of an alternative benefit form, shall be filed at least 30 days before the date
on which the benefits are to begin. If a Participant or Beneficiary fails to
file a claim by the 30th day before the date on which benefits become payable,
he shall be presumed to have filed a claim for payment for the Participant's
benefits in the standard form prescribed by Sections 10.1 or 10.2
11.2 Notification by Committee. Within 90 days after receiving a claim
-------------------------
for benefits (or within 180 days, if special circumstances require an extension
of time and written notice of the extension is given to the Participant or
Beneficiary within 90 days after receiving the claim for benefits), the
Committee shall notify the Participant or Beneficiary whether the claim has been
approved or denied. If the Committee denies a claim in any respect, the
Committee shall set forth in a written notice to the Participant or Beneficiary:
(i) each specific reason for the denial;
(ii) specific references to the pertinent Plan provisions on which
the denial is based;
40
<PAGE>
(iii) a description of any additional material or information which
could be submitted by the Participant or Beneficiary to support his
claim, with an explanation of the relevance of such information;
and
(iv) an explanation of the claims review procedures set forth in
Section 11.3.
11.3 Claims Review Procedure. Within 60 days after a Participant or
------------------------
Beneficiary receives notice from the Committee that his claim for benefits has
been denied in any respect, he may file with the Committee a written notice of
appeal setting forth his reasons for disputing the Committee's determination. In
connection with his appeal the Participant or Beneficiary or his representative
may inspect or purchase copies of pertinent documents and records to the extent
not inconsistent with other Participants' and Beneficiaries' rights of privacy.
Within 60 days after receiving a notice of appeal from a prior determination (or
within 120 days, if special circumstances require an extension of time and
written notice of the extension is given to the Participant or Beneficiary and
his representative within 60 days after receiving the notice of appeal), the
Committee shall furnish to the Participant or Beneficiary and his
representative, if any, a written statement of the Committee's final decision
with respect to his claim, including the reasons for such decision and the
particular Plan provisions upon which it is based.
Section 12. The Committee and Its Functions.
--------------------------------
12.1 Authority of Committee. The Committee shall be the "plan
-----------------------
administrator" within the meaning of ERISA and shall have exclusive
responsibility and authority to control and manage the operation and
administration of the Plan, including the interpretation and application of its
provisions, except to the extent such responsibility and authority are otherwise
specifically
41
<PAGE>
(i) allocated to the Company, the Employers, or the Trustee under the Plan and
Trust Agreement, (ii) delegated in writing to other persons by the Company, the
Employers, the Committee, or the Trustee, or (iii) allocated to other parties by
operation of law. The Committee shall have exclusive responsibility regarding
decisions concerning the payment of benefits under the Plan. The Committee shall
have no investment responsibility with respect to the Investment Fund except to
the extent, if any, specifically provided in the Trust Agreement. In the
discharge of its duties, the Committee may employ accountants, actuaries, legal
counsel, and other agents (who also may be employed by an Employer or the
Trustee in the same or some other capacity) and may pay their reasonable
expenses and compensation.
12.2 Identity of Committee. The Committee shall consist of three or more
----------------------
individuals selected by the Company. Any individual, including a director,
trustee, shareholder, officer, or employee of an Employer, shall be eligible to
service as a member of the Committee. The Company shall have the power to remove
any individual serving on the Committee at any time without cause upon 10 days
written notice, and any individual may resign from the Committee at any time
upon 10 days written notice to the Company. The Company shall notify the Trustee
of any change in membership of the Committee.
12.3 Duties of Committee. The Committee shall keep whatever records may be
--------------------
necessary to implement the Plan and shall furnish whatever reports may be
required from time to time by the Company. The Committee shall furnish to the
Trustee whatever information may be necessary to properly administer the Trust.
The Committee shall see to the filing with the
42
<PAGE>
appropriate government agencies of all reports and returns required of the plan
Committee under ERISA and other laws.
Further, the Committee shall have exclusive responsibility and authority
with respect to the Plan's holdings of Stock and shall direct the Trustee in all
respects regarding the purchase, retention, sale, exchange, and pledge of Stock
and the creation and satisfaction of Stock Obligations. The Committee shall at
all times act consistently with the Company's long-term intention that the Plan,
as an employee stock ownership plan, be invested primarily in Stock. Subject to
the direction of the Board as to the application of Employer contributions to
Stock Obligations, and subject to the provisions of Sections 6.4 and 10.6 as to
Participants' rights under certain circumstances to have their Accounts invested
in Stock or in assets other than Stock, the Committee shall determine in its
sole discretion the extent to which assets of the Trust shall be used to repay
Stock Obligations, to purchase Stock, or to invest in other assets to be
selected by the Trustee or an investment manager. No provision of the Plan
relating to the allocation or vesting of any interests in the Stock Fund or the
Investment Fund shall restrict the Committee from changing any holdings of the
Trust, whether the changes involve an increase or a decrease in the Stock or
other assets credited to Participants' Accounts. In determining the proper
extent of the Trust's investment in Stock, the Committee shall be authorized to
employ investment counsel, legal counsel, appraisers, and other agents to pay
their reasonable expenses and compensation.
12.4 Valuation of Stock. If the valuation of any Stock is not established
-------------------
by reported trading on a generally recognized public market, the Committee shall
have the exclusive
43
<PAGE>
authority and responsibility to determine its value for all purposes under the
Plan. Such value shall be determined as of each Valuation Date, and on any other
date as of which the Plan purchases or sells such Stock. The Committee shall use
generally accepted methods of valuing stock of similar corporations for purposes
of arm's length business and investment transactions, and in this connection the
Committee shall obtain, and shall be protected in relying upon, the valuation of
such Stock as determined by an independent appraiser experienced in preparing
valuations of similar businesses.
12.5 Compliance with ERISA. The Committee shall perform all acts necessary
----------------------
to comply with ERISA. Each individual member or employee of the Committee shall
discharge his duties in good faith and in accordance with the applicable
requirements of ERISA.
12.6 Action by Committee. All actions of the Committee shall be governed by
--------------------
the affirmative vote of a number of members which is a majority of the total
number of members currently appointed, including vacancies. The members of the
Committee may meet informally and may take any action without meeting as a
group.
12.7 Execution of Documents. Any instrument executed by the Committee shall
-----------------------
be signed by any member or employee of the Committee.
12.8 Adoption of Rules. The Committee shall adopt such rules and
------------------
regulations of uniform applicability as it deems necessary or appropriate for
the proper administration and interpretation of the Plan.
12.9 Responsibilities to Participants. The Committee shall determine which
---------------------------------
Employees qualify to enter the Plan. The Committee shall furnish to each
eligible Employee whatever
44
<PAGE>
summary plan descriptions, summary annual reports, and other notices and
information may be required under ERISA. The Committee also shall determine when
a Participant or his Beneficiary qualifies for the payment of benefits under the
Plan. The Committee shall furnish to each such Participant or Beneficiary
whatever information is required under ERISA (or is otherwise appropriate) to
enable the Participant or Beneficiary to make whatever elections may be
available pursuant to Sections 6 and 10, and the Committee shall provide for the
payment of benefits in the proper form and amount from the assets of the Trust
Fund. The Committee may decide in its sole discretion to permit modifications of
elections and to defer or accelerate benefits to the extent consistent with
applicable law and the best interests of the individuals concerned.
12.10 Alternative Payees in Event of Incapacity. If the Committee finds at
------------------------------------------
any time that an individual qualifying for benefits under this Plan is a minor
or is incompetent, the committee may direct the benefits to be paid, in the case
of a minor, to his parents, his legal guardian, a custodian for him under the
Uniform Transfers to Minors Act, or the person having actual custody of him, or,
in the case of an incompetent, to his spouse, his legal guardian, or the person
having actual custody of him, the payments to be used for the individual's
benefit. The Committee and the Trustee shall not be obligated to inquire as to
the actual use of the funds by the person receiving them under this Section
12.10, and any such payment shall completely discharge the obligations of the
Plan, the Trustee, the Committee, and the Employers to the extent of the
payment.
45
<PAGE>
12.11 Indemnification by Employers. Except as separately agreed in
-----------------------------
writing, the Committee, and any member or employee of the Committee, shall be
indemnified and held harmless by the Employers, jointly and severally, to the
fullest extent permitted by law against any and all costs, damages, expenses,
and liabilities reasonably incurred by or imposed upon it or him in connection
with any claim made against it or him or in which it or he may be involved by
reason of its or his being, or having been, the Committee, or a member or
employee of the Committee, to the extent such amounts are not paid by insurance.
12.12 Nonparticipation by Interested Member. Any member of the Committee
--------------------------------------
who also is a Participant in the Plan shall take no part in any determination
specifically relating to his own participation or benefits, unless his
abstention would leave the Committee incapable of acting on the matter.
Section 13. Adoption Amendment, or Termination of the Plan.
-----------------------------------------------
13.1 Adoption of Plan by Other Employers. With the consent of the Company,
------------------------------------
any entity may become a participating Employer under the Plan by (i) taking such
action as shall be necessary to adopt the Plan, (ii) becoming a party to the
Trust Agreement establishing the Trust Fund, and (iii) executing and delivering
such instruments and taking such other action as may be necessary or desirable
to put the Plan into effect with respect to the entity's Employees.
13.2 Adoption of Plan by Successor. In the event that any Employer shall be
------------------------------
reorganized by way of merger, consolidation, transfer of assets or otherwise, so
that an entity other than an Employer shall succeed to all or substantially all
of the Employer's business, the successor entity may be substituted for the
Employer under the Plan by adopting the Plan and
46
<PAGE>
becoming a party to the Trust Agreement. Contributions by the Employer shall be
automatically suspended from the effective date of any such reorganization until
the date upon which the substitution of the successor entity for the Employer
under the Plan becomes effective. If, within 90 days following the effective
date of any such reorganization, the successor entity shall not have elected to
become a party to the Plan, or if the Employer shall adopt a plan of complete
liquidation other than in connection with a reorganization, the Plan shall be
automatically terminated with respect to Employees of the Employer as of the
close of business on the 90th day following the effective date of the
reorganization, or as of the close of business on the date of adoption of a plan
of complete liquidation, as the case may be.
13.3 Plan Adoption Subject to Qualification. Notwithstanding any other
---------------------------------------
provision of the Plan, the adoption of the Plan and the execution of the Trust
Agreement are conditioned upon their being determined initially by the Internal
Revenue Service to meet the qualification requirements of Section 401(a) of the
Code, so that the Employers may deduct currently for federal income tax purposes
their contributions to the Trust and so that the Participants may exclude the
contributions from their gross income and recognize income only when they
receive benefits. In the event that this Plan is held by the Internal Revenue
Service not to qualify initially under Section 401(a), the Plan, may be amended
retroactively to the earliest date permitted by U.S. Treasury Regulations in
order to secure qualification under Section 401(a). If this Plan is held by the
Internal Revenue Service not to qualify initially under Section 401(a) either as
originally adopted or as amended, each Employer's contributions to the Trust
under this Plan (including any earnings thereon) shall be returned to it and
this Plan shall be terminated. In the
47
<PAGE>
event that this Plan is amended after its initial qualification and the Plan as
amended is held by the Internal Revenue Service not to qualify under Section
401(a), the amendment may be modified retroactively to the earliest date
permitted by U.S. Treasury Regulations in order to secure approval of the
amendment under Section 401(a).
13.4 Right to Amend or Terminate. The Company intends to continue this Plan
----------------------------
as a permanent program. However, each participating Employer separately reserves
the right to suspend, supersede, or terminate the Plan at any time and for any
reason, as it applies to that Employer's Employees, and the Company reserves the
right to amend, suspend, supersede, merge, consolidate, or terminate the Plan at
any time and for any reason, as it applies to the Employees of all Employers. No
amendment, suspension, supersession, merger, consolidation, or termination of
the Plan shall reduce any Participant's or Beneficiary's proportionate interest
in the Trust Fund, or shall divert any portion of the Trust Fund to purposes
other than the exclusive benefit of the Participants and their Beneficiaries
prior to the satisfaction of all liabilities under the Plan. Except as is
required for purposes of compliance with the Code or ERISA, each as amended from
time to time, neither the provisions of Section 4.1 and 4.2 relating to the
crediting of contributions, forfeitures and shares of Stock released from the
Unallocated Stock Fund, nor any other provision of the Plan relating to the
allocation of benefits to Participants' may be amended more frequently than once
every six months. Moreover, there shall not be any transfer of assets to a
successor plan or merger or consolidation with another plan unless, in the event
of the termination of the successor plan or the surviving plan immediately
following such transfer, merger, or consolidation, each participant or
beneficiary would be entitled to a benefit equal to or
48
<PAGE>
greater than the benefit he would have been entitled to if the plan in which he
was previously a participant or beneficiary had terminated immediately prior to
such transfer, merger, or consolidation. Following a termination of this Plan by
the Company, the Trustee shall continue to administer the Trust and pay benefits
in accordance with the Plan as amended from time to time and the Committee's
instructions.
Section 14. Miscellaneous Provisions.
-------------------------
14.1 Plan Creates No Employment Rights. Nothing in this Plan shall be
----------------------------------
interpreted as giving any Employee the right to be retained as an Employee by an
Employer, or as limiting or affecting the rights of an Employer to control its
Employees or to terminate the Service of any Employee at any time and for any
reason, subject to any applicable employment or collective bargaining
agreements.
14.2 Nonassignability of Benefits. No assignment, pledge, or other
-----------------------------
anticipation of benefits from the Plan will be permitted or recognized by the
Employers, the Committee, or the Trustee. Moreover, benefits from the Plan shall
not be subject to attachment, garnishment, or other legal process for debts or
liabilities of any Participant or Beneficiary, to the extent permitted by law.
This prohibition on assignment or alienation shall apply to any judgment,
decree, or order (including approval of a property settlement agreement) which
relates to the provision of child support, alimony, or property rights to a
present or former spouse, child or other dependent of a Participant pursuant to
a State domestic relations or community property law, unless the judgment,
decree, or order is determined by the Committee to be a qualified domestic
relations order within the meaning of Section 414(p) of the Code.
49
<PAGE>
14.3 Limit of Employer Liability. The liability of the Employers with
----------------------------
respect to Participants under this Plan shall be limited to making contributions
to the Trust from time to time, in accordance with Section 4.
14.4 Treatment of Expenses. All expenses incurred by the Committee and the
----------------------
Trustee in connection with administering this Plan and Trust Fund shall be paid
by the Trustee from the Trust Fund to the extent the expenses have not been paid
or assumed by the Employers or by the Trustee.
14.5 Number and Gender. Any use of the singular shall be interpreted to
------------------
include the plural, and the plural the singular. Any use of the masculine,
feminine, or neuter shall be interpreted to include the masculine, feminine, or
neuter, as the context shall require.
14.6 Nondiversion of Assets. Except as provided in Sections 5.3 and 13.3,
-----------------------
under no circumstances shall any portion of the Trust Fund be diverted to or
used for any purpose other than the exclusive benefit of the Participants and
their Beneficiaries prior to the satisfaction of all liabilities under the Plan.
14.7 Separability of Provisions. If any provision of this Plan is held to
---------------------------
be invalid or unenforceable, the other provisions of the Plan shall not be
affected but shall be applied as if the invalid or unenforceable provision had
not been included in the Plan.
14.8 Service of Process. The agent for the service of process upon the Plan
-------------------
shall be the president of the Company, or such other person as may be designated
from time to time by the Company.
50
<PAGE>
14.9 Governing State Law. This Plan shall be interpreted in accordance
-------------------
with the laws of the State of Illinois to the extent those laws are applicable
under the provisions of ERISA.
Section 15. Top-Heavy Provisions.
---------------------
15.1 Determination of Top-Heavy Status. The Committee shall determine on
---------------------------------
a regular basis whether each Plan Year is or is not a "Top-Heavy Year" for
purposes of implementing the provisions of Sections 15.2, 15.3, 15.4, and 5.2
which apply only to the extent the Plan is top-heavy or super top-heavy within
the meaning of Section 416 and the Treasury Regulations promulgated thereunder.
In making this determination, the Committee shall use the following definitions
and principles:
15.1-1 The "Employer" includes all business entities which are
considered commonly controlled or affiliated within the meaning of
Sections 414(b), 414(c), and 414(m) of the Code.
15.1-2 The "plan aggregation group" includes each qualified
retirement plan maintained by the Employer (i) in which a Key Employee
is a Participant during the Plan Year, or (ii) which enables any plan
described in clause (i) to satisfy the requirements of Section 401(a)(4)
or 410 of the Code, or (iii) which provides contributions or benefits
comparable to those of the plans described in clauses (i) and (ii) and
which is designated by the Committee as part of the plan aggregation
group.
15.1-3 The "determination date", with respect to the first Plan
Year of any plan, means the last day of that Plan Year, and with respect
to each subsequent Plan Year, means the last day of the preceding Plan
Year. If any other plan has a determination date
51
<PAGE>
which differs from this Plan's determination date, the top-heaviness of
this Plan shall be determined on the basis of the other plan's
determination date falling within the same calendar years as this Plan's
determination date.
15.1-4 A "Key Employee", with respect to a Plan Year, means an
Employee who at any time during the five years ending on the top-heavy
determination date for the Plan Year has received compensation from an
Employer and has been (i) an officer of the Employer having Total
Compensation greater than 50 percent of the limit then in effect under
Section 415(b)(1)(A) of the Code, (ii) one of the 10 Employees owning
the largest interests in the Employer having Total Compensation greater
than the limit then in effect under Section 415(c)(1)(A), (iii) an owner
of more than five percent of the outstanding equity interest or the
outstanding voting interest in any Employer, or (iv) an owner of more
than one percent of the outstanding equity interest or the outstanding
voting interest in an Employer whose Total Compensation exceeds
$150,000. In determining which individuals are Key Employees, the rules
of Section 415(i) of the Code and Treasury Regulations promulgated
thereunder shall apply. The Beneficiary of a Key Employee shall also be
considered a Key Employee.
15.1-5 A "Non-key Employee" means an Employee who at any time
during the five years ending on the top-heavy determination date for the
Plan Year has received compensation from an Employer and who has never
been a Key Employee, and the Beneficiary of any such Employee.
52
<PAGE>
15.1-6 The "aggregated benefits" for any Plan Year means (i) the
adjusted account balances in defined contribution plans on the
determination date, plus (ii) the adjusted value of accrued benefits in
defined benefit plans, calculated as of the annual valuation date
coinciding with or next preceding the determination date, with respect
to Key Employees and Nonkey Employees under all plans within the plan
aggregation group which includes this Plan. For this purpose, the
"adjusted account balance" for and the "adjusted value of accrued
benefit" for any Employee shall be increased by all plan distributions
made with respect to the Employee during the five years ending on the
determination date. Further, the adjusted account balance under a plan
shall not include any amount attributable to a rollover contribution or
similar transfer to the plan initiated by an Employee and made after
1983, unless both plans involved are maintained by the Employer, in
which event the transferred amount shall be counted in the transferee
plan and ignored for all purposes in the transferor plan. Finally, the
adjusted value of accrued benefits under any defined benefit plan shall
be determined by assuming whichever actuarial assumptions were applied
by the Pension Benefit Guaranty Corporation to determine the sufficiency
of plan assets for plans terminating on the valuation date.
15.1-7 This Plan shall be "top-heavy" for any Plan Year in which
the aggregated benefits of the Key Employees exceed 60 percent of the
total aggregated benefits for both Key Employees and Nonkey Employees.
53
<PAGE>
15.1-8 This Plan shall be "super top-heavy" for any Plan Year in
which the aggregated benefits of the Key Employees exceed 90 percent of
the total aggregated benefits for both Key Employees and Nonkey
Employees.
15.1-9 A "Top-Heavy Year" means a Plan Year in which the Plan is
top-heavy.
15.2 Minimum Contributions. For any Top-Heavy Year, each Employer shall
----------------------
make a special contribution on behalf of each Participant to the extent that the
total allocations to his Account pursuant to Section 4 is less than the lesser
of:
(i) four percent of his Total Compensation for that year, or (ii) the
highest ratio of such allocation to Total Compensation received by any
Key Employee for that year. For purposes of the special contribution of
this Section 15.2, a Key Employee's Total Compensation shall include
amounts the Key Employee elected to defer under a qualified 401(k)
arrangement. Such a special contribution shall be made on behalf of each
Participant who is employed by an Employer on the last day of the Plan
Year, regardless of the number of his Hours of Service, and shall be
allocated to his Account.
For any Plan Year when (1) the Plan is top-heavy and (2) a Nonkey
Employee is a Participant in both this Plan and a defined benefit plan included
in the plan aggregation group which is top heavy, the sum of the Employer
contributions and forfeitures allocated to the Account of each such Nonkey
Employee shall be equal to at least five percent (5%) of such Nonkey Employee's
Total Compensation for that year.
15.3 Minimum Vesting. If a Participant's vested interest in his Account is
---------------
to be determined in a Top-Heavy Year, it shall be based on the following "top-
heavy table":
54
<PAGE>
<TABLE>
<CAPTION>
Vesting Percentage of
Years Interest Vested
----- ---------------
<S> <C>
fewer than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
Provided, however, that any Plan Participant who has completed at least three
years of service with the employer prior to February 19, 1991, shall be given
the opportunity to elect to have the vesting schedule in effect prior to this
amendment used to determine his or her vested benefit.
15.4 Maximum Compensation. For any Top-Heavy Year, a Participant's "Cash
--------------------
Compensation" as defined in Section 4.3, and his "Total Compensation" for
purposes of Section 15.2, shall not exceed $200,000 (or the limit currently in
effect under Section 401(a)(17) of the Code).
55
<PAGE>
Exhibit 10(xxii) MAF Severance Benefits Program for Northwestern Employees.
<PAGE>
MAF SEVERANCE BENEFITS PROGRAM
FOR NORTHWESTERN EMPLOYEES
Effective Date: May 30, 1996
<PAGE>
TABLE OF CONTENTS PAGE
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I............................................................. 1
GENERAL.......................................................... 1
1.1 Purpose............................................ 1
-------
1.2 Effective Date..................................... 1
--------------
1.3 Definitions........................................ 1
-----------
1.4 Controlling Authority.............................. 3
---------------------
1.5 Sole Source of Severance Benefits.................. 3
---------------------------------
ARTICLE II............................................................ 3
ELIGIBILITY AND BENEFITS......................................... 3
2.1 Eligibility........................................ 3
-----------
2.2 Eligibility Exclusions............................. 3
----------------------
2.3 Severance Pay...................................... 4
-------------
2.4 Form And Payment Of Severance Benefits............. 5
--------------------------------------
2.5 Lump Sum Death Benefit............................. 5
----------------------
2.6 Other Benefits..................................... 5
--------------
ARTICLE III........................................................... 6
PLAN ADMINISTRATION.............................................. 6
3.1 Administration of Plan............................. 6
----------------------
3.2 Rules and Procedures............................... 6
--------------------
3.3 Claims Procedure................................... 6
----------------
3.4 Actions of the Plan Administrator.................. 7
---------------------------------
3.5 Delegation......................................... 7
----------
3.6 Reliance on Experts................................ 7
-------------------
ARTICLE IV............................................................ 8
LIMITATIONS AND LIABILITIES...................................... 8
4.1 Non-guarantee of Employment........................ 8
---------------------------
4.2 Non-alienation of Assets and Benefits.............. 8
-------------------------------------
4.3 Limitation of Liability............................ 8
-----------------------
4.4 Indemnification.................................... 8
---------------
ARTICLE V............................................................. 8
FUNDING.......................................................... 8
5.1 Funding............................................ 8
-------
ARTICLE VI............................................................ 9
AFFILIATES....................................................... 9
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6.1 Obligation of Employers............................ 9
-----------------------
6.2 Cooperation by Each Employer....................... 9
----------------------------
ARTICLE VII........................................................... 9
AMENDMENT AND TERMINATION........................................ 9
7.1 General............................................ 9
-------
7.2 Amendments......................................... 9
----------
ARTICLE VIII.......................................................... 9
MISCELLANEOUS PROVISIONS......................................... 9
8.1 ERISA.............................................. 9
-----
8.2 Applicable Law..................................... 10
--------------
8.3 Exclusive Benefit of Participants.................. 10
---------------------------------
8.4 Agent for Service of Process....................... 10
----------------------------
</TABLE>
ii
<PAGE>
MAF SEVERANCE BENEFITS PROGRAM
FOR NORTHWESTERN EMPLOYEES
ARTICLE I
GENERAL
1.1 Purpose. It is the intention of MAF Bancorp, Inc. (the "Company") to
-------
create and maintain the MAF Severance Benefits Program for Northwestern
Employees (the "Plan") to provide Eligible Employees with income after
termination of employment under circumstances described herein, including, but
not limited to, the execution of the general release prescribed hereby.
1.2 Effective Date. The Plan shall become effective on the Effective Date
--------------
of the Merger under that certain Amended and Restated Agreement and Plan of
Merger, dated as of November 29, 1995, by and between the Company and N.S.
Bancorp, Inc. (the "Merger Agreement").
1.3 Definitions. Each capitalized term not defined herein shall have the
-----------
meaning ascribed to it under the Merger Agreement, unless the context requires
otherwise. Each term defined herein shall be given its defined meaning wherever
used in this document, unless the context requires otherwise.
"Affiliate" means (1) the Company and any corporation or enterprise,
---------
other than the Company, which, as of a given date, is a member of the same
controlled group of corporations, the same group of trades or businesses
under common control or the same affiliated service group, determined in
accordance with Code Section 414(b),(c),(m) or (o), as is the Company or
(2) a subsidiary of the Company where the Company is an owner of a majority
of the voting securities of such corporation or enterprise or (3) any other
corporation or enterprise deemed to be an affiliate by the Board of
Directors of the Company.
"Base Weekly Pay" means with respect to: (a) a salaried Employee, the
---------------
Employee's base annual salary as of the Severance Event, divided by 52, and
(b) an hourly Employee, the Employee's average weekly earnings based on
such Employee's straight time earnings for the twelve month period ending
with the last full week preceding the Severance Event.
"Beneficiary" means the person or persons designated by an Eligible
-----------
Employee to receive the payment described in Section 2.5 in the event of
the Eligible Employee's death while receiving Severance Pay. Such
designation shall be filed with the Committee on such form as the Committee
may prescribe. In the event an Eligible Employee fails to properly file a
designation, then the "Beneficiary" shall be the Eligible Employee's
estate.
1
<PAGE>
"Company" means MAF Bancorp, Inc.
-------
"Eligible Employee" means a Northwestern Employee who has satisfied
-----------------
all conditions of eligibility as provided in sections 2.1 and 2.2.
"Employer" means the Company and any Affiliate thereof which employs a
--------
Northwestern Employee as an Employee on or after the Effective Date.
"Employee" means an individual who provides services to the Company
--------
and any Affiliate as an employee for remuneration.
"Northwestern Employee" means each Employee of N.S. Bancorp, Inc.,
---------------------
Northwestern Savings Bank (to be merged into Mid America Federal Savings
Bank on the Effective Date) and each other Northwestern subsidiary as of
the Effective Date (collectively, "Northwestern") employed as of the
Effective Date, other than any Northwestern Employee who at any time on or
after November 29, 1995 was or becomes a party to a written employment
agreement with Northwestern, the Company or an Affiliate.
"Plan Administrator" means the First Vice President-Administration of
------------------
the Company or such other person or entity designated to administer the
Plan and be the named fiduciary thereof.
"Plan Year" means the period commencing on the Effective Date and
----------
ending December 31, 1996.
"Severance Event" shall be deemed to have occurred if, and only if, as
---------------
of the Effective Date, or prior to December 31, 1996, the termination of an
Eligible Employee's employment with all Employers occurs, and such
termination is employer-initiated for reasons attributable to the Merger
and other than misconduct or unsatisfactory performance below acceptable
standards pursuant to the Company's progressive discipline policy
applicable to the Eligible Employee.
"Severance Pay" means the benefit provided pursuant to Section 2.3.
-------------
"Week of Severance Pay" shall mean an amount equal to an Eligible
---------------------
Employee's Base Weekly Pay determined as of the Severance Event.
"Year of Service" means each full year of continuous employment with
---------------
the Employer. For purposes hereof, if a Northwestern Employee has had a
termination of employment prior to the Effective Date and was subsequently
reemployed, for the sole purpose of computing the amount of Severance Pay
under the Plan, his Years of Service shall be computed from his
reemployment date.
2
<PAGE>
1.4 Controlling Authority. This Plan document is the sole and controlling
---------------------
source of rights under the Plan. This Plan may only be amended in accordance
with Article VII herein.
1.5 Sole Source of Severance Benefits. This Plan shall be the sole source
---------------------------------
of severance benefits applicable to any Northwestern Employee who is an Eligible
Employee. No Employee, Officer or Director of the Company may promise or grant
severance benefits to any Northwestern Employee except as provided herein and
any other agreement or representation to the contrary is null and void unless
expressly approved in writing by the Board of Directors or Chief Executive
Officer of the Company or Mid America Federal Savings Bank. When such an
agreement exists, its terms and conditions shall apply and the Employee shall no
longer be eligible to receive benefits under this Plan.
ARTICLE II
ELIGIBILITY AND BENEFITS
2.1 Eligibility. Except as provided in Section 2.2 and subject to all
-----------
other exclusions contained in this Plan, a Northwestern Employee will be
eligible to receive Severance Pay if and only if: (a) his employment with all
Employers is terminated in circumstances that constitute a Severance Event; (b)
at the time of such Severance Event, he was employed by an Employer; and (c) he
executes a release of claims as set forth in Appendix A.
2.2 Eligibility Exclusions. Notwithstanding the foregoing, a
----------------------
Northwestern Employee who incurs a Severance Event will not be eligible to
receive Severance Pay if his employment voluntarily or involuntarily terminates
when one or more of the following circumstances is applicable:
(a) The Northwestern Employee is a party to an employment or
severance agreement providing for payments or other benefits as a
result of termination of employment; or
(b) The Northwestern Employee leaves employment voluntarily, either
by resignation (other than in circumstances that constitute a
Severance Event) or retirement; or
(c) The Northwestern Employee is on or commences a leave of absence
or other interruption of employment which does not constitute a
termination of employment; or
3
<PAGE>
(d) The Northwestern Employee is offered to continue in his present
position or is offered another position with the Company or an
Affiliate with comparable base annual or hourly compensation and
job responsibilities as determined at the discretion of the Plan
Administrator and declined to accept such position; or
(e) The Northwestern Employee is transferred to another facility or
location of the Company or an Affiliate at the same or another
position with comparable base annual or hourly compensation and
job responsibilities as determined at the discretion of the Plan
Administrator and declines to accept such transfer; or
(f) Employment is terminated as result of the sale of assets or stock
of an Employer, and the Northwestern Employee is offered the same
or another position with the successor in interest with
comparable base annual or hourly compensation as determined at
the discretion of the Plan Administrator; or
(g) The Northwestern Employee refuses to execute a release of claims
as provided in Section 2.1 hereof; or
(h) The Northwestern Employee terminates employment as a result of
death or disability.
2.3 Severance Pay. The Severance Pay provided by this Plan shall be
-------------
determined based upon the number of Years of Service and Base Weekly Pay of an
Eligible Employee at the time of the Severance Event as follows:
(a) All Eligible Employees shall be entitled to receive a benefit equal to
two (2) Weeks of Severance Pay for each full Year of Service as of the
Severance Event, subject to a maximum benefit of 26 weeks. Any
Eligible Employee who has completed one full Year of Service as of the
Merger Effective Date shall be entitled to receive a minimum benefit
equal to four (4) Weeks of Severance Pay. An Eligible Employee who has
not completed one full Year of Service as of the Merger Effective Date
shall be entitled to receive a minimum benefit equal to two (2) Weeks
of Severance Pay.
(b) Notwithstanding any provision of this Section 2.3 to the contrary,
Severance Pay shall be reduced by, or the Eligible Employee shall be
obligated to refund to the Employer to the extent such Severance Pay
was not so reduced, the amount of unemployment compensation received
by the Eligible Employee under any state or other governmental program
during the period the Severance Pay is payable.
4
<PAGE>
Severance Pay shall be subject to all applicable federal and state deductions
and withholding and shall be paid in such manner as prescribed in Section 2.4.
2.4 Form And Payment Of Severance Benefits. Severance Pay shall be paid
--------------------------------------
in installments on regular pay dates following termination of employment.
Installments shall commence as of the end of the first pay period that occurs on
or after the date the Eligible Employee has executed the release of claims
required by Section 2.1(c) and the seven-day period for revocation thereof has
expired. Installments shall continue until the earlier of the date that (i) the
Eligible Employee dies (in which case the payment described in Section 2.5 shall
be made to the Eligible Employee's Beneficiary); or (ii) all Weeks of Severance
Pay to which the Eligible Employee is entitled are paid.
2.5 Lump Sum Death Benefit. In the event that an Eligible Employee dies
----------------------
after a Severance Event and prior to the payment of all of the Weeks of
Severance Pay to which Eligible Employee was entitled and the installments
terminate pursuant to Section 2.4, then a lump sum death benefit shall be paid
to the Beneficiary within 30 days after the date of death. The lump sum benefit
shall be equal to the aggregate amount of the Weeks of Severance Pay to which
the Eligible Employee was entitled but which had not been paid as of the date of
death. Notwithstanding the foregoing, in the event that as of the date of death
the Eligible Employee had not executed the release described in Section 2.1(c),
or if executed, the time for revocation had not expired, then the payment of the
lump sum shall be subject to the execution by the Beneficiary of a release
substantially similar in scope to the provisions of Appendix A.
2.6 Other Benefits.
--------------
(a) Salaries, Wages and Vacation. Any earned but unpaid salary or wages
----------------------------
and any earned but unused vacation for which an Employee is eligible at time of
termination of employment will be paid in a lump sum at time of termination of
employment, subject to applicable federal and state withholding.
(b) Insurance. Employees may be eligible for COBRA continuation coverage
---------
related to medical at full existing COBRA rates following termination of
employment, as provided in the applicable medical care plan. Applicable
premiums relating to single COBRA continuation coverage will be waived by MAF
Bancorp, Inc. for the first three (3) months of coverage for any Eligible
Employee who receives Severance Pay under this Plan. No other medical or health
insurance cost subsidies will be provided by an Employer, including any subsidy
relating to dependant COBRA continuation coverage or other insurance benefits.
(c) Outplacement Assistance. Eligible Employees shall receive outplacement
-----------------------
assistance, as needed, from the Employer utilizing its resources within sixty
(60) days after a Severance Event.
5
<PAGE>
(d) General Limitations. The severance benefits available to Eligible
-------------------
Employees are limited to the provisions herein. All qualified or non-qualified
retirement or other plan benefits for which the Eligible Employee may be
eligible shall be governed by the applicable plan's specific conditions.
ARTICLE III
PLAN ADMINISTRATION
3.1 Administration of Plan. The Plan shall be administered by the Plan
----------------------
Administrator unless the Board of Directors of MAF Bancorp, Inc. (as
constituted from time to time), or the person or persons designated by it to
carry out its duties or powers under the terms of this Plan, delegates such
authority to another party.
The Plan Administrator shall have authority to control and manage the
operation and administration of the Plan including all rights and powers
necessary or convenient to the carrying out of its functions hereunder, whether
or not such rights and powers are specifically enumerated herein. Without
limiting the generality of the foregoing, and in addition to the other powers
set forth in the Plan, the Plan Administrator shall have the following express
discretionary authorities:
(a) to construe and interpret the Plan, decide all questions of
eligibility and determine the amount, manner and time of payment of
any benefits hereunder;
(b) to prescribe procedures to be followed by Participants for filing
requests and elections under the Plan;
(c) to prepare and distribute, in such manner as determined to be
appropriate, information explaining the Plan;
(d) to receive or request from the Employers or Eligible Employees such
information as shall be necessary for the proper administration of the
Plan;
(e) to furnish the Employers upon request such annual and other reports
with respect to the administration of the Plan as are reasonable and
appropriate; and
(f) to determine the amounts available to provide a benefit and to
administer the claims procedure.
3.2 Rules and Procedures. The Plan Administrator may adopt such rules,
--------------------
regulations and bylaws as it deems necessary or desirable.
6
<PAGE>
3.3 Claims Procedure.
----------------
(a) Any Employee who believes that he is entitled to a benefit under the
Plan in an amount greater than he has received may file a claim for such benefit
by writing to the Plan Administrator.
(b) Every claim which is properly filed shall be answered in writing within
ninety (90) days (or one hundred eighty (180) days if special circumstances
require an extension of time for processing the claim) of receipt stating
whether the claim is granted or denied. If the claim is denied, the claimant
shall be provided specific reasons for denial; specific reference to the
pertinent Plan provisions on which the denial is based; a description of any
information necessary for the claimant to perfect a claim including an
explanation of why such information is necessary; and an explanation of the
Plan's claim appeal procedure including steps to be taken to submit the claim
for review.
(c) Within sixty (60) days after notice that a claim is denied, the
claimant may file a written appeal which shall include any comments, statements
or documents the claimant may wish to provide. Notice of the decision on appeal
shall be sent to the claimant within sixty (60) days of its receipt (or one
hundred twenty (120) days if special circumstances require an extension of time
for processing the appeal). In the event the claim is denied upon appeal, the
notice shall set forth the reasons for denial written in a manner calculated to
be understood by the claimant and specific reference to the pertinent provisions
of the Plan on which the denial is based. Any reasonable request from a
claimant for documents or information relevant to his claim prior to his filing
an appeal shall also be allowed.
(d) If notice of the denial of the claim or appeal is not furnished in the
time limits set forth above, the claim or appeal shall be deemed denied.
3.4 Actions of the Plan Administrator. All determinations,
---------------------------------
interpretations, rules, and decisions of the Plan Administrator or its delegate
shall be conclusive and binding upon all persons having or claiming to have any
interest or right under the Plan and shall be given deference in any judicial or
other proceeding.
3.5 Delegation. The Plan Administrator shall have the power to delegate
----------
specific duties, discretionary and other authorities and responsibilities to
officers or employees of the Company or other individuals or entities. Any
delegation by the Plan Administrator may allow further delegations by the
individual or entity to whom the delegation is made. Any delegation may be
rescinded by the Plan Administrator at any time. Each person or entity to whom
a duty or responsibility has been delegated shall be responsible for the
exercise of such duty or responsibility and shall not be responsible for any act
or failure to act of any other person or entity.
7
<PAGE>
3.6 Reliance on Experts. The Plan Administrator and its delegates shall
-------------------
be entitled to rely on any and all schedules, reports, opinions or advice
furnished by any duly appointed actuary, accountant, legal counsel, physician or
other medical expert and any other duly appointed advisor. Any such advisor may
be a person, firm or other organization acting or employed in like capacity for
an Employer.
ARTICLE IV
LIMITATIONS AND LIABILITIES
4.1 Non-guarantee of Employment. Nothing contained in the Plan shall be
---------------------------
construed as an agreement of employment, or as giving or conferring on any
Employee the right to continued employment, or as a limitation on the right of
an Employer to terminate the employment of an Employee, with or without cause.
Nor shall anything contained in the Plan affect the eligibility requirements
under any other plans maintained by an Employer, nor give any Employee a right
to coverage under any other plan.
4.2 Non-alienation of Assets and Benefits. Except as may be required by
-------------------------------------
applicable law, the benefits payable under the Plan shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, including any such liability which is for alimony or
other payments for the support of a spouse or former spouse, or for any other
relative of the Employee, prior to actually being received by the person
entitled to the benefit under the terms of the Plan; and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or
otherwise dispose of any right to benefits payable hereunder shall be void.
4.3 Limitation of Liability. Neither an Employer nor the Plan
-----------------------
Administrator shall be liable for any act or failure to act which is made in
good faith pursuant to the provisions of the Plan or records of the Plan,
Company, Employer, or any employee benefit plans thereof, except to the extent
required by applicable law.
4.4 Indemnification. The Company and each Employer shall, to the extent
---------------
permitted by its Certificate of Incorporation and Bylaws, and by the laws of the
State in which it is incorporated, indemnify the Plan Administrator, and any
employee, officer or director of an Employer, against any and all liabilities
arising by reason of any act or omission made in good faith pursuant to the
provisions of the Plan, including expenses reasonably incurred in the defense of
any claim relating thereto.
8
<PAGE>
ARTICLE V
FUNDING
5.1 Funding. Benefits shall be paid out of the general assets of the
-------
Company or applicable Employer. Neither the Company nor any other Employer
shall be required to fund or otherwise provide for the payment of benefits in
any manner.
ARTICLE VI
AFFILIATES
6.1 Obligation of Employers. Each Employer agrees to make all payments
-----------------------
required hereunder to be made on behalf of Eligible Employees of such Employer,
and agrees that the liability for making such payments and providing such
benefits shall be the sole and exclusive obligation of such Employer.
6.2 Cooperation by Each Employer. To enable the Plan Administrator to
----------------------------
perform its functions, an Employer shall supply full and timely information to
the Plan Administrator on all matters relating to Base Weekly Pay and Years of
Service of all Employees and cause for termination of employment, and any other
pertinent facts or information as a Plan Administrator, in its sole discretion,
may require.
ARTICLE VII
AMENDMENT AND TERMINATION
7.1 General. The Company reserves the right to amend or terminate the
-------
Plan at any time, prospectively or retroactively, and for any reason; provided,
however, that any such amendment or termination which adversely affects any
Northwestern Employee shall not be effective unless such Employee has consented
thereto in writing.
7.2 Amendments. Any and all amendments shall be made in writing and shall
----------
be signed and approved by the Board of Directors of MAF Bancorp, Inc. (as
constituted from time to time), or the person or persons designated by its to
carry out its duties or powers under the terms of this Plan.
9
<PAGE>
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 ERISA.
-----
(a) Any person or persons may serve in more than one fiduciary
capacity with respect to the Plan.
(b) The Plan Administrator shall be a "named fiduciary" with respect
to the Plan; however, its responsibilities as such shall be limited to the
performance of those duties specifically assigned to it hereunder. The Plan
Administrator shall have no responsibility for the performance of any duty not
specifically so assigned, except to the extent required by applicable law.
(c) The Plan Administrator may allocate or delegate its
responsibilities hereunder to persons who are not named fiduciaries. The
allocation or delegation of any fiduciary responsibility shall be in writing,
and shall become effective upon the written acceptance thereof by the person or
persons to whom such responsibilities are allocated or delegated.
8.2 Applicable Law. This Plan shall be construed in accordance with
--------------
federal law under ERISA; provided, that nothing in this Section 8.2 shall be
construed as placing any restriction upon the right of an Employer acting
pursuant to the Plan to take any action or to incur any liability which it is
authorized to take or incur under its Certificate of Incorporation or Bylaws, or
under the laws of the State in which it is incorporated, except to the extent
that the same are superseded by applicable federal law.
8.3 Exclusive Benefit of Participants. This Plan is for the exclusive
---------------------------------
benefit of Eligible Employees and their beneficiaries.
8.4 Agent for Service of Process. The Plan Administrator shall be the
----------------------------
agent for service of process.
10
<PAGE>
APPENDIX A
RELEASE AND SEVERANCE AGREEMENT
-------------------------------
THIS RELEASE AND SEVERANCE AGREEMENT is made and entered into this
____ day of _______________, _____ by and between MAF Bancorp, Inc., its
subsidiaries and affiliates, including but not limited to Mid America Federal
Savings Bank, successor to Northwestern Savings Bank, and the Northwestern
Savings Bank Severance Benefits Program (collectively "MAF") and the undersigned
employee (hereinafter "EMPLOYEE").
EMPLOYEE'S employment with MAF terminated on ______________, ______;
and EMPLOYEE has voluntarily agreed to the terms of this RELEASE AND SEVERANCE
AGREEMENT in exchange for Severance Pay under the Northwestern Savings Bank
Severance Benefits Program ("Program") to which EMPLOYEE otherwise would not be
entitled.
NOW THEREFORE, in consideration for Severance Pay provided under the
Plan, EMPLOYEE on behalf of himself and his spouse, heirs, executors,
administrators, children, and assigns does hereby fully release and discharge
MAF, its officers, directors, employees, agents, subsidiaries and divisions,
benefit plans and their administrators, fiduciaries and insurers, successors,
and assigns from any and all claims or demands for wages, back pay, front pay,
attorney's fees and other sums of money, insurance, benefits, contracts,
controversies, agreements, promises, damages, costs, actions or causes of action
and liabilities of any kind or character whatsoever, whether known or unknown,
from the beginning of time to the date of these presents, relating to his
employment or termination of employment from MAF, including but not limited to
any claims, actions or causes of action arising under the statutory, common law
or other rules, orders or regulations of the United States or any State or
political subdivision thereof including the Age Discrimination in Employment Act
and the Older Workers Benefit Protection Act.
EMPLOYEE acknowledges that EMPLOYEE'S obligations pursuant to
applicable policies of MAF, copies of which have been provided to EMPLOYEE, and
under applicable law relating to the use or disclosure of confidential
information shall continue to apply to EMPLOYEE.
This Release and Settlement Agreement supersedes any and all other
agreements between EMPLOYEE and MAF except agreements relating to proprietary or
confidential information belonging to MAF, and any other agreements, promises or
representations relating to severance pay or other terms and conditions of
employment are null and void.
This release does not affect EMPLOYEE'S right to any benefits to which
EMPLOYEE may be entitled under any employee benefit plan sponsored by MAF.
Page 1 of 2
<PAGE>
EMPLOYEE and MAF acknowledge that it is their mutual intent that the
Age Discrimination in Employment Act waiver contained herein fully comply with
the Older Workers Benefit Protection Act. Accordingly, EMPLOYEE acknowledges
and agrees that:
(a) The Severance Pay exceeds the nature and scope of that to which
he would otherwise have been legally entitled to receive.
(b) Execution of this Agreement and the Age Discrimination in
Employment Act waiver herein is his knowing and voluntary act;
(c) He has been advised by MAF to consult with his personal attorney
regarding the terms of this Agreement, including the aforementioned waiver;
(d) He has had at least forty-five (45) calendar days within which to
consider this Agreement;
(e) He has the right to revoke this Agreement in full within seven
(7) calendar days of execution and that none of the terms and provisions of
this Agreement shall become effective or be enforceable until such
revocation period has expired;
(f) He has been informed in writing of (i) the eligibility factors
under the Plan, (ii) the group of employees, including the job title and
age of each, eligible to receive Severance Pay, (iii) the ages of all
individuals in the same job classification or organizational unit who are
not eligible to receive Severance Pay, and (iv) any time limit applicable
to the Plan;
(g) He has read and fully understands the terms of this agreement;
and
(h) Nothing contained in this Agreement purports to release any of
EMPLOYEE's rights or claims under the Age Discrimination in Employment Act
that may arise after the date of execution.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
indicated above.
MAF BANCORP, INC., EMPLOYEE
for itself and its Subsidiaries
and Affiliates
By:__________________________ __________________________
Its:_________________________ (Signature)
Page 2 of 2
<PAGE>
___________________________
NORTHWESTERN SAVINGS BANK (Print or type name)
BENEFITS PROGRAM
By:__________________________
Its: Plan Administrator
Page 3 of 2
<PAGE>
Exhibit 12. Statement re:
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Year ended June 30,
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Inclusive of interest on deposits:
Earnings:
Pre-tax income 28,488 24,359 21,216 21,913 17,284
Add: Fixed charges 93,481 73,593 69,867 74,438 87,393
Loss on equity investments 0 0 0 0 0
Loss: Interest capitalized (115) (489) (376) (317) (439)
----------------------------------------------------------------------------
Earnings 121,854 97,463 90,707 96,034 104,238
============================================================================
Fixed charges:
Interest on deposits 63,325 55,794 53,004 59,305 72,717
Interest on borrowed funds 29,896 17,573 16,690 15,006 14,583
Rent expense 260 226 173 127 93
----------------------------------------------------------------------------
Fixed charges 93,481 73,593 69,867 74,438 87,393
============================================================================
Ratio of earnings to fixed charges
inclusive of interest on deposits 1.30 1.32 1.30 1.29 1.19
============================================================================
Exclusive of interest on deposits:
Earnings:
Pre-tax income 28,488 24,359 21,216 21,913 17,284
Add: Fixed charges 30,156 17,799 16,863 15,133 14,676
Loss on equity investments 0 0 0 0 0
Less: Interest capitalized (115) (489) (376) (317) (439)
----------------------------------------------------------------------------
Earnings 58,529 41,669 37,703 36,729 31,521
============================================================================
Fixed charges:
Interest on deposits 0 0 0 0 0
Interest on borrowed funds 29,896 17,573 16,690 15,006 14,583
Rent expense 260 226 173 127 93
----------------------------------------------------------------------------
Fixed charges 30,156 17,799 16,863 15,133 14,676
============================================================================
Ratio of earnings to fixed charges
inclusive of interest on deposits 1.94 2.34 2.24 2.43 2.15
============================================================================
</TABLE>
<PAGE>
Exhibit 21. Subsidiaries of the Registrant
The Company has two wholly-owned subsidiaries. All others listed are
either direct or indirect subsidiaries of the Bank.
<TABLE>
<CAPTION>
Subsidiaries of the Company State of Incorporation
--------------------------- ----------------------
<S> <C>
Mid America Federal Savings Bank Illinois
MAF Developments, Inc. Illinois
Subsidiaries of the Bank
------------------------
Mid America Development Services, Inc. Illinois
Mid America Insurance Agency, Inc. Illinois
Mid America Finance Corporation Illinois
Mid America Mortgage Securities, Inc. Illinois
N.W. Acceptance Corporation Delaware
N.W. Financial Corporation Illinois
Route 22 Development Corporation Illinois
Ambria Development Corporation Illinois
Randall Road Development Corporation Illinois
Reigate Woods Development Corporation Illinois
North-West Insurance Agency of Chicago,Inc. /(1)/ Illinois
</TABLE>
/(1)/ Dissolved on July 31, 1996
<PAGE>
CONSENT OF INDEPENDENT AUDITORS'
--------------------------------
The Board of Directors
MAF Bancorp, Inc.
We consent to incorporation by reference in the registration statements (No.'s
33-40932, 33-45790,33-45794 and 333-06593) on Form S-8 and the registration
statement (No. 33-96754) on Form S-3 of MAF Bancorp, Inc. of our report dated
August 19, 1996, relating to the consolidated statements of financial condition
of MAF Bancorp, Inc. and subsidiaries as of June 30, 1996 and 1995, and the
related statements of income, chnages in stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1996, which report
appears in the June 30, 1996 annual report on Form 10-K of MAF Bancorp, Inc.
KPMG Peat Marwick LLP
Chicago, Illinois
September 19, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000854662
<NAME> MID AMERICA
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 51,665
<INT-BEARING-DEPOSITS> 37,496
<FED-FUNDS-SOLD> 5,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 163,017
<INVESTMENTS-CARRYING> 426,336
<INVESTMENTS-MARKET> 423,076
<LOANS> 2,310,653
<ALLOWANCE> 17,254
<TOTAL-ASSETS> 3,117,149
<DEPOSITS> 2,254,100
<SHORT-TERM> 175,000
<LIABILITIES-OTHER> 419,147
<LONG-TERM> 26,676
0
0
<COMMON> 111
<OTHER-SE> 242,115
<TOTAL-LIABILITIES-AND-EQUITY> 3,117,149
<INTEREST-LOAN> 115,466
<INTEREST-INVEST> 6,153
<INTEREST-OTHER> 21,476
<INTEREST-TOTAL> 143,095
<INTEREST-DEPOSIT> 63,325
<INTEREST-EXPENSE> 93,221
<INTEREST-INCOME-NET> 49,874
<LOAN-LOSSES> 700
<SECURITIES-GAINS> 188
<EXPENSE-OTHER> 37,753
<INCOME-PRETAX> 28,488
<INCOME-PRE-EXTRAORDINARY> 17,683
<EXTRAORDINARY> (474)
<CHANGES> 0
<NET-INCOME> 17,209
<EPS-PRIMARY> 2.76
<EPS-DILUTED> 2.76
<YIELD-ACTUAL> 2.62
<LOANS-NON> 6,135
<LOANS-PAST> 2,399
<LOANS-TROUBLED> 4,299
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9,197
<CHARGE-OFFS> 376
<RECOVERIES> 11
<ALLOWANCE-CLOSE> 17,254
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 17,254
</TABLE>
<PAGE>
Exhibit No. 99(ii) Form of Stockholder Voting Agreements dated November 29,
1995, between MAF Bancorp, Inc. and the directors and executive officers of N.S.
Bancorp, Inc.
<PAGE>
FORM OF STOCKHOLDER VOTING AGREEMENT
------------------------------------
November 29, 1995
MAF Bancorp, Inc.
55th & Holmes
Clarendon Hills, Illinois 60514
Ladies and Gentlemen:
MAF Bancorp, Inc., a Delaware corporation ("MAF") and N.S. Bancorp, Inc., a
Delaware corporation ("N.S. Bancorp"), entered into an Agreement and Plan of
Reorganization dated as of November 29, 1995 ("Merger Agreement") providing,
among other things, for the merger of N.S. Bancorp with and into MAF ("Merger").
The undersigned is a shareholder of N.S. Bancorp ("Stockholder") and a director
or an executive officer of N.S. Bancorp, and pursuant to Section 5.23 of the
Merger Agreement, hereby enters into this stockholder voting agreement (the
"Stockholder Voting Agreement") with respect to shares of common stock, par
value $0.01 per share, of N.S. Bancorp held of record or beneficially owned by
such Stockholder ("N.S. Bancorp Common Stock").
Stockholder understands that MAF has undertaken and will continue to undertake
substantial expenses in connection with the Merger Agreement and the actions
necessary to consummate the Merger and the other transactions contemplated
thereby. In consideration of, and as a condition to, MAF consummating the
transactions contemplated by the Merger Agreement, and in consideration of the
expenses incurred and to be incurred by MAF in connection therewith, Stockholder
and MAF agree as follows:
1. Each Stockholder hereby agrees that at any meeting of the
stockholders of N.S. Bancorp however called, and in any action by written
consent of the stockholders of N.S. Bancorp, such Stockholders (solely in their
capacity as Stockholders) shall vote the N.S. Bancorp Common Stock which the
Stockholder is entitled to vote (a) in favor of the Merger and the transactions
contemplated by the Merger Agreement; (b) against any action or agreement which
would result in a breach of any convenant, representation or warranty or any
other obligation of N.S. Bancorp under the Merger Agreement; and (c) against any
action or agreement which would impede or interfere with the transactions
contemplated by the Merger Agreement, including, but not limited to: (i) any
change in the management or Board of Directors of N.S. Bancorp, except as
otherwise agreed to in writing by MAF; (ii) any change in the present
capitalization or dividend policy of N.S. Bancorp; or (iii) any other material
change in N.S. Bancorp's corporate structure or business.
<PAGE>
MAF Bancorp, Inc.
November 29, 1995
Page 3
2. Stockholder agrees not to vote or execute any written consent to
rescind or amend in any manner any prior vote or written consent to approve or
adopt the Merger Agreement and the transactions contemplated thereby.
3. Stockholder agrees to use his or her best efforts to cause the
Merger and the other transactions contemplated by the Merger Agreement to be
consummated.
4. Prior to the Effective Time (as defined in Section 1.4 of the
Merger Agreement), Stockholder will not sell, assign, transfer or otherwise
dispose of (including, without limitation, by the creation of a Lien (as defined
in paragraph 5 below)), or permit to be sold, assigned, transferred or otherwise
disposed of, any shares of N.S. Bancorp Common Stock owned of record or
beneficially by such Stockholder on the date of this Voting Agreement or are
subsequently acquired, whether pursuant to the exercise of stock options or
otherwise, except (i) for transfers by will or by operation of law (in which
case this Voting Agreement shall bind the transferee); (ii) for sales,
assignments, transfers or other dispositions necessitated by hardship with the
prior written consent of MAF; or (iii) as MAF may otherwise agree in writing.
5. Stockholder represents that (i) Stockholder has the complete and
unrestricted power and the unqualified right to enter into and perform the terms
of this Voting Agreement; (ii) this Voting Agreement constitutes a valid and
binding agreement with respect to such Stockholder, enforceable against such
Stockholder in accordance with its terms; and (iii) such Stockholder owns the
shares of N.S. Bancorp Common Stock free and clear of any liens, claims,
charges or other encumbrances and restrictions of any kind whatsoever ("Liens")
except as noted below, and has sole and unrestricted voting power with respect
in such shares of N.S. Bancorp Common Stock.
___________________________________
___________________________________
___________________________________
6. Notwithstanding anything herein to the contrary, the agreements
contained herein shall remain in full force and effect until the earlier of (i)
the consummation of the Merger; or (ii) the termination of the Merger Agreement
in accordance with Section 7.1 thereof.
7. Notices may be provided to MAF in the manner specified in Section
8.2 of the Merger Agreement.
<PAGE>
MAF Bancorp, Inc.
November 29, 1995
Page 4
8. This Voting Agreement is to be governed by the laws of the State
of Illinois, without giving effect to the principles of conflicts of laws
thereof. If any provision hereof is deemed unenforceable, the enforceability of
the other provisions shall not be affected.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date first above written.
Very truly yours,
----------------------------------------
Stockholder
Number of shares of N.S. Bancorp Common
Stock, including options, subject to this
Voting Agreement: ____________
Accepted and agreed to as of
the date first above written.
MAF BANCORP, INC.
By:
---------------------------
Its:
--------------------------
