UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2007
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________________
Commission File No. 2-80070
________________
CASS INFORMATION SYSTEMS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 43-1265338
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13001 Hollenberg Drive
Bridgeton, Missouri 63044
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(314) 506-5500
----------------------------------------------------
(Registrant's telephone number, including area code)
_________________
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act.
(Check one)
Large Accelerated Filer |_| Accelerated Filer |X| Non-Accelerated Filer |_|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes |_| No |X|
The number of shares outstanding of registrant's only class of stock as of
November 2, 2007: Common stock, par value $.50 per share - 8,371,189 shares
outstanding.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PART I - Financial Information
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
September 30, 2007 (unaudited) and December 31, 2006 ........................ 3
Consolidated Statements of Income
Three and Nine months ended September 30, 2007 and 2006 (unaudited) ......... 4
Consolidated Statements of Cash Flows
Nine months ended September 30, 2007 and 2006 (unaudited) ................... 5
Notes to Consolidated Financial Statements (unaudited) ........................ 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .................................................... 13
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .................... 24
Item 4. CONTROLS AND PROCEDURES ....................................................... 24
PART II - Other Information - Items 1. - 6. .............................................. 25
SIGNATURES ............................................................................ 27
Forward-looking Statements - Factors That May Affect Future Results
This report may contain or incorporate by reference forward-looking statements
made pursuant to the safe harbor provisions of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements are not guarantees of future performance and
involve risks, uncertainties, and other factors which may cause future
performance to vary from expected performance summarized in the forward-looking
statements, including those set forth in this paragraph and in the "Risk
Factors" section of the Company's Annual Report on Form 10-K, filed with the
Securities and Exchange Commission. Important factors that could cause our
actual results, performance, or achievements to be materially different from any
future results, performance, or achievements expressed or implied by those
statements include, but are not limited to: the failure to successfully execute
our corporate plan, the loss of key personnel or inability to attract additional
qualified personnel, the loss of key customers, increased competition, the
inability to remain current with rapid technological change, risks related to
acquisitions, risks associated with business cycles and fluctuations in interest
rates, utility and system interruptions or processing errors, rules and
regulations governing financial institutions and changes in such rules and
regulations, credit risk related to borrowers' ability to repay loans,
concentration of loans to certain segments such as commercial enterprises,
churches and borrowers in the St. Louis area which creates risks associated with
adverse factors that may affect these groups and volatility of the price of our
common stock. We undertake no obligation to publicly update or revise any
forward-looking statements to reflect changed assumptions, the occurrence of
anticipated or unanticipated events, or changes to future results over time.
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands except Share and Per Share Data)
September 30 December 31
2007 2006
Assets
Cash and due from banks $ 18,056 $ 26,995
Federal funds sold and other short-term investments 177,563 169,509
--------- ---------
Cash and cash equivalents 195,619 196,504
--------- ---------
Securities available-for-sale, at fair value 162,379 102,749
Loans 511,207 504,125
Less: Allowance for loan losses 6,045 6,592
--------- ---------
Loans, net 505,162 497,533
--------- ---------
Premises and equipment, net 12,962 12,898
Investment in bank-owned life insurance 12,407 12,024
Payments in excess of funding 15,965 9,333
Goodwill 7,471 7,471
Other intangible assets, net 946 1,156
Other assets 20,249 18,803
--------- ---------
Total assets $ 933,160 $ 858,471
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 86,162 $ 106,587
Interest-bearing 182,203 183,307
--------- ---------
Total deposits 268,365 289,894
Accounts and drafts payable 552,837 468,393
Short-term borrowings 210 181
Subordinated convertible debentures 3,700 3,700
Liabilities related to discontinued operations -- 277
Other liabilities 13,682 12,105
--------- ---------
Total liabilities 838,794 774,550
--------- ---------
Shareholders' Equity:
Preferred stock, par value $.50 per share; 2,000,000
shares authorized and no shares issued -- --
Common Stock, par value $.50 per share;
20,000,000 shares authorized and 9,112,484
shares issued at September 30, 2007 and
December 31, 2006, respectively 4,556 4,556
Additional paid-in capital 17,501 17,896
Retained earnings 91,645 81,516
Common shares in treasury, at cost (741,295 shares at
September 30, 2007 and 784,773 shares at December 31, 2006) (16,131) (17,077)
Accumulated other comprehensive loss (3,205) (2,970)
--------- ---------
Total shareholders' equity 94,366 83,921
--------- ---------
Total liabilities and shareholders' equity $ 933,160 $ 858,471
========= =========
See accompanying notes to unaudited consolidated financial statements.
-3-
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands except Per Share Data)
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
2007 2006 2007 2006
- --------------------------------------------------------------------------------------------------------------
Fee Revenue and Other Income:
Information services payment and processing revenue $ 11,441 $ 10,359 $ 34,089 $ 29,853
Bank service fees 416 341 1,237 1,266
Other 213 228 658 629
-------- -------- -------- --------
Total fee revenue and other income 12,070 10,928 35,984 31,748
-------- -------- -------- --------
Interest Income:
Interest and fees on loans 9,224 9,331 27,539 27,169
Interest and dividends on securities:
Taxable 212 262 681 800
Exempt from federal income taxes 1,252 636 3,212 1,910
Interest on federal funds sold and
other short-term investments 2,030 2,022 5,564 4,702
-------- -------- -------- --------
Total interest income 12,718 12,251 36,996 34,581
-------- -------- -------- --------
Interest Expense:
Interest on deposits 1,986 1,729 5,911 4,457
Interest on short-term borrowings and other 7 2 32 5
Interest on subordinated convertible debentures 50 50 148 148
-------- -------- -------- --------
Total interest expense 2,043 1,781 6,091 4,610
-------- -------- -------- --------
Net interest income 10,675 10,470 30,905 29,971
Provision for loan losses 225 200 675 500
-------- -------- -------- --------
Net interest income after provision for loan
losses 10,450 10,270 30,230 29,471
-------- -------- -------- --------
Operating Expense:
Salaries and employee benefits 11,700 11,136 35,135 31,673
Occupancy 550 522 1,572 1,462
Equipment 876 732 2,565 2,128
Amortization of intangible assets 70 70 210 156
Other operating expense 2,468 2,561 7,447 7,755
-------- -------- -------- --------
Total operating expense 15,664 15,021 46,929 43,174
-------- -------- -------- --------
Income before taxes and discontinued
operations 6,856 6,177 19,285 18,045
Income tax expense 2,179 2,205 6,230 6,397
-------- -------- -------- --------
Net income from continuing operations 4,677 3,972 13,055 11,648
-------- -------- -------- --------
Loss from discontinued operations
before income tax expense -- (150) -- (475)
Income tax benefit -- 62 -- 198
-------- -------- -------- --------
Net loss from discontinued operations -- (88) -- (277)
-------- -------- -------- --------
Net Income $ 4,677 $ 3,884 $ 13,055 $ 11,371
======== ======== ======== ========
Basic Earnings Per Share:
From continuing operations $ .56 $ .48 $ 1.57 $ 1.40
From discontinued operations -- (.01) -- (.03)
Basic earnings per share .56 .47 1.57 1.37
Diluted Earnings Per Share:
From continuing operations $ .55 $ .47 $ 1.53 $ 1.37
From discontinued operations -- (.01) -- (.03)
Diluted earnings per share .55 .46 1.53 1.34
See accompanying notes to unaudited consolidated financial statements.
-4-
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
Nine Months Ended
September 30
-----------------------
2007 2006
Cash Flows From Operating Activities:
Net income from continuing operations $ 13,055 $ 11,648
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,179 1,484
Provision for loan losses 675 500
Stock-based compensation expense 499 159
Deferred income tax expense (benefit) 1,115 (1,031)
Increase in income tax liability 578 354
Increase in pension liability 1,593 1,566
Other operating activities, net (2,091) (248)
Operating activities of discontinued operations -- (1,562)
--------- ---------
Net cash provided by operating activities 17,603 12,870
--------- ---------
Cash Flows From Investing Activities:
Proceeds from maturities of securities available-for-sale 51,000 65,510
Purchase of securities available-for-sale (111,295) (57,860)
Net (increase) decrease in loans (9,604) 7,703
Increase in payments in excess of funding (6,632) (5,745)
Purchases of premises and equipment, net (1,940) (2,547)
Purchase of NTransit, Inc. -- (3,172)
--------- ---------
Net cash (used in) provided by investing activities (78,471) 3,889
--------- ---------
Cash Flows From Financing Activities:
Net decrease in noninterest-bearing demand deposits (20,425) (16,261)
Net decrease in interest-bearing demand and savings deposits (4,921) (15,829)
Net increase in time deposits 3,817 20,280
Net increase in accounts and drafts payable 84,444 68,382
Net increase (decrease) in short-term borrowings 29 (38)
Cash proceeds from exercise of stock options 16 330
Tax benefit on stock awards 36 64
Cash dividends paid (3,013) (2,669)
Purchase of common shares for treasury -- (870)
--------- ---------
Net cash provided by financing activities 59,983 53,389
--------- ---------
Net (decrease) increase in cash and cash equivalents (885) 70,148
Cash and cash equivalents at beginning of period 196,504 149,692
--------- ---------
Cash and cash equivalents at end of period $ 195,619 $ 219,840
========= =========
Supplemental information:
Cash paid for interest $ 6,092 $ 4,287
Cash paid for income taxes 4,500 6,103
Transfer of loans to foreclosed assets 1,300 --
See accompanying notes to unaudited consolidated financial statements.
-5-
CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with U.S. generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by U.S. generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included. Certain amounts in the 2006 consolidated financial statements
have been reclassified to conform to the 2007 presentation. Such
reclassifications have no effect on previously reported net income or
shareholders' equity. The Company's bank subsidiary sold the assets of
Government e-Management Solutions, Inc. ("GEMS"), its wholly owned subsidiary,
on December 30, 2005. The assets, liabilities and results of operations of GEMS
were presented in the 2006 consolidated financial statements as discontinued
operations. There was no discontinued operations activity in the nine-month
period ended September 30, 2007. The Company issued a 50% stock dividend on
September 15, 2006 and the share and per share information have been restated
for all periods presented in the accompanying consolidated financial statements.
For further information, refer to the audited consolidated financial statements
and related footnotes included in Cass Information System, Inc.'s ("the Company"
or "Cass") Annual Report on Form 10-K for the year ended December 31, 2006.
Note 2 - Intangible Assets
The Company accounts for intangible assets in accordance with Statement of
Financial Accounting Standard s("SFAS") 142, "Goodwill and Other Intangible
Assets," which requires that intangibles with indefinite useful lives be tested
annually for impairment and those with finite useful lives be amortized over
their useful lives. Intangible assets for the periods ended September 30, 2007
and December 31, 2006 are as follows:
September 30, 2007 December 31, 2006
===========================================================================================================
Gross Carrying Accumulated Gross Carrying Accumulated
(In Thousands) Amount Amortization Amount Amortization
===========================================================================================================
Amortized intangible assets:
Software $ 862 $ (532) $ 862 $ (402)
Customer List 750 (134) 750 (54)
- -----------------------------------------------------------------------------------------------------------
Total 1,612 (666) 1,612 (456)
Unamortized intangible assets:
Goodwill 7,698 (227)* 7,698 (227)*
- -----------------------------------------------------------------------------------------------------------
Total unamortized intangibles 7,698 (227) 7,698 (227)
- -----------------------------------------------------------------------------------------------------------
Total intangible assets $9,310 $ (893) $9,310 $ (683)
- -----------------------------------------------------------------------------------------------------------
* Amortization through December 31, 2001 prior to adoption of SFAS 142.
Software is amortized over four to five years and the customer list is amortized
over seven years. Amortization of intangible assets amounted to $210,000 and
$156,000 for the nine-month periods ended September 30, 2007 and 2006,
respectively. Estimated amortization of intangibles over the next five years is
as follows: $301,000 in 2007, $280,000 in 2008, $223,000 in 2009, and $107,000
in 2010 and in 2011.
Note 3 - Equity Investments in Non-Marketable Securities
Non-marketable equity investments in low-income housing projects are included in
other assets on the Company's consolidated balance sheets. The total balance of
these investments at September 30, 2007 was $ 281,000.
Note 4 - Earnings Per Share
Basic earnings per share is computed by dividing net income by the
weighted-average number of common shares outstanding. Diluted earnings per share
is computed by dividing net income, adjusted for the net income effect of the
interest expense on the outstanding convertible debentures, by the sum of the
weighted-average number of common shares outstanding and the weighted-average
number of potential common shares outstanding. The calculations of basic and
diluted earnings per share for the periods ended September 30, 2007 and 2006 are
as follows:
-6-
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
(Dollars in Thousands except Per Share data) 2007 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------
Basic
Net income from continuing operations $ 4,677 $ 3,972 $ 13,055 $ 11,648
Net loss from discontinued operations -- (88) -- (277)
- ------------------------------------------------------------------------------------------------------------------
Net income $ 4,677 $ 3,884 $ 13,055 $ 11,371
- ------------------------------------------------------------------------------------------------------------------
Weighted-average common shares outstanding 8,316,328 8,304,441 8,313,291 8,311,861
- ------------------------------------------------------------------------------------------------------------------
Basic earnings per share from continuing
operations $ .56 $ .48 $ 1.57 $ 1.40
Basic earnings per share from discontinued
operations -- (.01) -- (.03)
- ------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ .56 $ .47 $ 1.57 $ 1.37
- ------------------------------------------------------------------------------------------------------------------
Diluted
Net income from continuing operations $ 4,677 $ 3,972 $ 13,055 $ 11,648
Net income effect of 5.33% convertible
debentures 27 28 81 82
- ------------------------------------------------------------------------------------------------------------------
Net income from continuing operations 4,704 4,000 13,136 11,730
Net loss from discontinued operations -- (88) -- (277)
- ------------------------------------------------------------------------------------------------------------------
Net income $ 4,704 $ 3,912 $ 13,136 $ 11,453
- ------------------------------------------------------------------------------------------------------------------
Weighted-average common shares outstanding 8,316,328 8,304,441 8,313,291 8,311,861
Effect of dilutive stock options and awards 102,981 72,504 99,863 65,923
Effect of 5.33% convertible debentures 172,717 172,717 172,717 172,717
- ------------------------------------------------------------------------------------------------------------------
Weighted-average common shares outstanding
assuming dilution 8,592,026 8,549,662 8,585,871 8,550,501
- ------------------------------------------------------------------------------------------------------------------
Diluted earnings per share from continuing
operations $ .55 $ .47 $ 1.53 $ 1.37
Diluted earnings per share from discontinued
operations -- (.01) -- (.03)
- ------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ .55 $ .46 $ 1.53 $ 1.34
- ------------------------------------------------------------------------------------------------------------------
Share and per share data for 2006 in the schedule above have been restated for
the 50% stock dividend issued on September 15, 2006.
Note 5 - Stock Repurchases
The Company maintains a treasury stock buyback program pursuant to which the
Board of Directors has authorized the repurchase of up to 150,000 shares of the
Company's Common Stock. The Company did not repurchase any shares during the
nine-month period ended September 30, 2007 and repurchased 30,000 shares in the
comparable period in 2006. As of September 30, 2007, 120,000 shares remained
available for repurchase under the program. Repurchases are made in the open
market or through negotiated transactions from time to time depending on market
conditions.
Note 6 - Comprehensive Income
For the nine-month periods ended September 30, 2007 and 2006, unrealized gains
and losses on debt and equity securities available-for-sale were the Company's
only other comprehensive income component. Comprehensive income for the three
and nine month periods ended September 30, 2007 and 2006 is summarized as
follows:
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
(In Thousands) 2007 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------
Net income from continuing operations $ 4,677 $ 3,972 $ 13,055 $ 11,648
Other comprehensive income:
Net unrealized gain (loss) on securities
available-for-sale, net of tax 1,068 793 (235) 307
- ------------------------------------------------------------------------------------------------------------------
Total comprehensive income from continuing
operations $ 5,745 $ 4,765 $ 12,820 $ 11,955
- ------------------------------------------------------------------------------------------------------------------
-7-
Note 7 - Industry Segment Information
The services provided by the Company are classified into two reportable
segments: Information Services and Banking Services. Each of these segments
provides distinct services that are marketed through different channels. They
are managed separately due to their unique service, processing and capital
requirements.
The Information Services segment provides freight, utility and telecommunication
invoice processing and payment services to large corporations. The Banking
Services segment provides banking services primarily to privately-held
businesses and churches.
The Company's accounting policies for segments are the same as those described
in the summary of significant accounting policies in the Company's Annual Report
on Form 10-K for the year ended December 31, 2006. Management evaluates segment
performance based on net income after allocations for corporate expenses and
income taxes. Transactions between segments are accounted for at what management
believes to be market value. Information for prior periods has been restated to
reflect changes in the composition of the Company's segments.
All revenue originates from and all long-lived assets are located within the
United States and no revenue from any customer of any segment exceeds 10% of the
Company's consolidated revenue.
Summarized information about the Company's operations in each industry segment
for the three and nine-month periods ended September 30, 2007 and 2006, is as
follows:
Corporate,
Information Banking Eliminations
(In Thousands) Services Services and Other Total
==================================================================================================================
Quarter Ended September 30, 2007
Total Revenues:
Revenue from customers $ 18,675 $ 3,845 $ -- $ 22,520
Intersegment revenue 474 387 (861) --
Net income from continuing operations 3,738 939 -- 4,677
Total assets 623,070 319,640 (9,550) 933,160
Goodwill 7,335 136 -- 7,471
Other intangible assets, net 947 -- -- 947
Assets related to discontinued operations -- -- -- --
Quarter Ended September 30, 2006
Total Revenues:
Revenue from customers $ 17,593 $ 3,605 $ -- $ 21,198
Intersegment revenue (109) 921 (812) --
Net income from continuing operations 2,837 1,135 -- 3,972
Total assets 569,760 318,136 (1,482) 886,414
Goodwill 7,035 136 -- 7,171
Other intangible assets, net 1,529 -- -- 1,529
Assets related to discontinued operations -- -- 225 225
- ------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 2007
Total Revenues:
Revenue from customers $ 54,754 $ 11,460 $ -- $ 66,214
Intersegment revenue 1,446 1,141 (2,587) --
Net income from continuing operations 10,370 2,685 -- 13,055
Total assets 623,070 319,640 (9,550) 933,160
Goodwill 7,335 136 -- 7,471
Other intangible assets, net 947 -- -- 947
Assets related to discontinued operations -- -- -- --
Nine Months Ended September 30, 2006
Total Revenues:
Revenue from customers $ 49,469 $ 11,750 $ -- $ 61,219
Intersegment revenue 778 1,633 (2,411) --
Net income from continuing operations 8,267 3,381 -- 11,648
Total assets 569,760 318,136 (1,482) 886,414
Goodwill 7,035 136 -- 7,171
Other intangible assets, net 1,529 -- -- 1,529
Assets related to discontinued operations -- -- 225 225
- ------------------------------------------------------------------------------------------------------------------
-8-
Note 8 - Loans by Type
(In Thousands) September 30, 2007 December 31, 2006
================================================================================
Commercial and industrial $ 113,863 $ 113,162
Real estate: (Commercial and church)
Mortgage 361,834 352,044
Construction 28,680 29,779
Industrial revenue bonds 5,514 6,293
Other 1,316 2,847
- --------------------------------------------------------------------------------
Total loans $ 511,207 $ 504,125
================================================================================
Note 9 - Commitments and Contingencies
In the normal course of business, the Company is party to activities that
contain credit, market and operational risks that are not reflected in whole or
in part in the Company's consolidated financial statements. Such activities
include traditional off-balance sheet credit-related financial instruments and
commitments under operating and capital leases. These financial instruments
include commitments to extend credit, commercial letters of credit and standby
letters of credit. The Company's maximum potential exposure to credit loss in
the event of nonperformance by the other party to the financial instrument for
commitments to extend credit, commercial letters of credit and standby letters
of credit is represented by the contractual amounts of those instruments. At
September 30, 2007, no amounts have been accrued for any estimated losses for
these instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commercial
and standby letters of credit are conditional commitments issued by the Company
or its subsidiaries to guarantee the performance of a customer to a third party.
These off-balance sheet financial instruments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. At
September 30, 2007 the balances of unused loan commitments, standby and
commercial letters of credit were $24,000,000, $6,130,000 and $4,310,000,
respectively. Since some of the financial instruments may expire without being
drawn upon, the total amounts do not necessarily represent future cash
requirements. Commitments to extend credit and letters of credit are subject to
the same underwriting standards as those financial instruments included on the
consolidated balance sheets. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary upon extension of the credit, is based on management's credit
evaluation of the borrower. Collateral held varies, but is generally accounts
receivable, inventory, residential or income-producing commercial property or
equipment. In the event of nonperformance, the Company or its subsidiaries may
obtain and liquidate the collateral to recover amounts paid under its guarantees
on these financial instruments.
The following table summarizes contractual cash obligations of the Company
related to operating lease commitments, time deposits and convertible
subordinated debentures at September 30, 2007:
Amount of Commitment Expiration per Period
------------------------------------------
Less than 1-3 3-5 Over 5
(Dollars in Thousands) Total 1 Year Years Years Years
========================================================================================================
Operating lease commitments $ 3,947 $ 713 $ 1,069 $ 896 $ 1,269
Time deposits 92,613 89,532 2,491 590 --
Convertible subordinated debentures* 3,700 -- -- -- 3,700
- --------------------------------------------------------------------------------------------------------
Total $100,260 $ 90,245 $ 3,560 $ 1,486 $ 4,969
========================================================================================================
* Includes principal payments only.
The Company and its subsidiaries are involved in various pending legal actions
and proceedings in which claims for damages are asserted. Management, after
discussion with legal counsel, believes the ultimate resolution of these legal
actions and proceedings will not have a material effect upon the Company's
consolidated financial position or results of operations.
Note 10 - Stock-Based Compensation
On January 16, 2007, the Board approved, and on April 16, 2007, the Company's
shareholders approved, the 2007 Omnibus Incentive Stock Plan ("the Omnibus
Plan") to provide incentive opportunities for key employees and non-employee
directors and to align the personal financial interests of such individuals with
those of the Company's shareholders. The Omnibus Plan permits the issuance of up
to 800,000 shares of the Company's common stock in the form of stock options,
stock appreciation rights, restricted stock, restricted stock units and
performance awards. As of September 30, 2007, no awards have been granted under
the Omnibus Plan.
-9-
The Company also continues to maintain its other stock-based incentive plans for
the restricted common stock previously awarded and the options issued and
outstanding. Restricted shares are amortized to expense over the three-year
vesting period. Options currently vest and expire over a period not to exceed
seven years. The plans authorize the grant of awards in the form of options
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code, options that do not qualify (non-statutory stock options) and
grants of restricted shares of common stock. The Company issues shares out of
treasury stock for restricted shares and option exercises. These plans have been
superseded by the Omnibus Plan and accordingly, any available restricted stock
and stock option grants not yet issued have been cancelled.
As of September 30, 2007, the total unrecognized compensation expense related to
non-vested stock awards was $1,452,000 and the related weighted-average period
over which it is expected to be recognized is approximately 2.2 years. There
were no grants, vestings or forfeitures of stock awards during the three-month
period ending September 30, 2007. Changes in restricted shares outstanding for
the nine months ended September 30, 2007 were as follows:
Nine Months Ended
September 30
------------------------
Shares Fair Value
=================================================================
Balance at December 31, 2006 22,481 $22.88
Granted 43,120 37.03
Vested (10,327) 20.49
Forfeited (600) 29.94
-----------------------------------------------------------------
Balance at September 30, 2007 54,674 $34.41
-----------------------------------------------------------------
As of September 30, 2007, the total unrecognized compensation expense related to
non-vested stock options was $110,000 and the related weighted-average period
over which it is expected to be recognized is approximately 4.2 years.
No stock options were granted, exercised or forfeited during the three month
period ended September 30, 2007. A summary of the Company's stock option program
for the nine-month period ended September 30, 2007 is shown below.
Weighted- Average Aggregate
Average Remaining Intrinsic
Exercise Contractual Value
Shares Price Term Years ($000)
--------------------------------------------------
Outstanding at December 31, 2006 87,805 $15.40
Granted -- --
Exercised (958) 16.64
Forfeited or expired -- --
Outstanding at September 30, 2007 86,847 15.39 3.58 $ 1,770
==================================================
Exercisable at September 30, 2007 16,777 $11.27 2.54 $ 411
==================================================
The total intrinsic value of options exercised was $0 and $105,000 for the
three-month periods ended September 30, 2007 and 2006, respectively, and was
$16,000 and $1,728,000 for the nine-month periods ended September 30, 2007 and
2006, respectively.
There was no non-vested option activity during the three-month period ended
September 30, 2007. A summary of the activity of the non-vested options during
the nine-month period ended September 30, 2007 is shown below.
-10-
Weighted-
Average
Grant Date
Shares Fair Value
- --------------------------------------------------------------
Nonvested at December 31, 2006 85,406 $ 2.38
Granted -- --
Vested (15,336) 1.75
Forfeited -- --
- --------------------------------------------------------------
Nonvested at September 30, 2007 70,070 $ 2.52
- --------------------------------------------------------------
Note 11 - Defined Pension Plans
The Company has a noncontributory defined benefit pension plan, which covers
most of its employees. The Company accrues and makes contributions designed to
fund normal service costs on a current basis using the projected unit credit
with service proration method to amortize prior service costs arising from
improvements in pension benefits and qualifying service prior to the
establishment of the plan over a period of approximately 30 years. Disclosure
information is based on a measurement date of December 31 of the corresponding
year.
The following table represents the components of the net periodic pension costs
for 2006 and an estimate for 2007:
Estimated Actual
(In Thousands) 2007 2006
=========================================================================
Service cost - benefits earned during the year $ 1,622 $ 1,554
Interest cost on projected benefit obligation 1,771 1,565
Expected return on plan assets (1,865) (1,603)
Net amortization 197 270
-------------------------------------------------------------------------
Net periodic pension cost $ 1,725 $ 1,786
-------------------------------------------------------------------------
Pension costs recorded to expense were $431,000 and $586,000 for the three-month
periods ended September 30, 2007 and 2006, respectively, and were $1,263,000 and
$1,339,000 for the nine-month periods ended September 30, 2007 and 2006,
respectively. The Company has not made any contribution to the plan during the
nine-month period ended September 30, 2007, but expects to contribute at least
$1,800,000 in 2007.
In addition to the above funded benefit plan, the Company has an unfunded
supplemental executive retirement plan which covers key executives of the
Company. This is a noncontributory plan in which the Company and its
subsidiaries make accruals designed to fund normal service costs on a current
basis using the same method and criteria as its defined benefit plan. The
following table represents the components of the net periodic pension costs for
2006 and an estimate for 2007:
Estimated Actual
(In Thousands) 2007 2006
=========================================================================
Service cost - benefits earned during the year $ 44 $ 43
Interest cost on projected benefit obligation 233 150
Net amortization 249 111
-------------------------------------------------------------------------
Net periodic pension cost $ 526 $ 304
-------------------------------------------------------------------------
Pension costs recorded to expense were $134,000 and $163,000 for the three-month
periods ended September 30, 2007 and 2006, respectively, and were $361,000 and
$258,000 for the nine-month periods ended September 30, 2007 and 2006,
respectively.
Note 12 - Income Taxes
The Company adopted FASB Interpretation No. 48 ("FIN 48"), "Accounting for
Uncertainty in Income Taxes" effective January 1, 2007. FIN 48 clarifies the
accounting for uncertainty in income taxes in financial statements and
prescribes a recognition threshold and measurement attribute for financial
statement recognition and measurement of a tax position taken or expected to be
taken.
The Company had unrecognized tax benefits of approximately $655,000 as of
January 1, 2007. The total amount of federal and state unrecognized tax benefits
at January 1, 2007 that, if recognized, would affect the effective tax rate was
$488,000, net of federal tax benefit. There have been no significant changes to
-11-
the unrecognized tax benefits during the three and nine month periods ended
September 30, 2007. The Company expects a reduction of $31,000 in unrecognized
tax benefits during the remaining three-month period ending December 31, 2007 as
a result of the lapse of federal and state statutes of limitations.
Interest and penalties were immaterial at the date of adoption. The Company
recognizes interest and penalties related to uncertain tax positions in income
tax expense. The amount of interest recognized during the three and nine-month
periods ended September 30, 2007 was immaterial.
The Company is subject to income tax in the U. S. federal jurisdiction and
numerous state jurisdictions. U.S. federal income tax returns for tax year 2006
remain subject to examination by the Internal Revenue Service ("IRS"). In
addition, the Company is subject to state tax examinations for the tax years
2003 through 2006.
-12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Cass Information Systems, Inc. provides payment and information processing
services to large manufacturing, distribution and retail enterprises from its
processing centers in St. Louis, Missouri, Columbus, Ohio, Boston,
Massachusetts, Greenville, South Carolina and Wellington, Kansas. The Company's
services include freight invoice rating, payment processing, auditing, and the
generation of accounting and transportation information. Cass also processes and
pays utility invoices, which includes electricity, gas and telecommunications
expenses and is a provider of telecom expense management solutions. Cass
extracts, stores and presents information from freight, utility and
telecommunication invoices, assisting its customers' transportation, energy and
information technology managers in making decisions that will enable them to
improve operating performance. The Company receives data from multiple sources,
electronic and otherwise, and processes the data to accomplish the specific
operating requirements of its customers. It then provides the data in a central
repository for access and archiving. The data is finally transformed into
information through the Company's databases that allow client interaction as
required and provide Internet-based tools for analytical processing. The Company
also, through Cass Commercial Bank, its St. Louis, Missouri based bank
subsidiary (the "Bank"), provides banking services in the St. Louis metropolitan
area and Orange County, California. In addition to supporting the Company's
payment operations, the Bank provides banking services to its target markets,
which include privately owned businesses and churches and church-related
ministries.
The specific payment and information processing services provided to each
customer are developed individually to meet each customer's requirements, which
can vary greatly. In addition, the degree of automation such as electronic data
interchange ("EDI"), imaging, and web-based solutions varies greatly among
customers and industries. These factors combine so that pricing varies greatly
among the customer base. In general, however, Cass is compensated for its
processing services through service fees and account balances that are generated
during the payment process. The amount, type and calculation of service fees
vary greatly by service offering, but generally follow the volume of
transactions processed. Interest income from the balances generated during the
payment processing cycle is affected by the amount of time Cass holds the funds
prior to payment and the dollar volume processed. Both the number of
transactions processed and the dollar volume processed are therefore key metrics
followed by management. Other factors will also influence revenue and
profitability, such as changes in the general level of interest rates, which
have a significant effect on net interest income. The funds generated by these
processing activities are invested in overnight investments, investment grade
securities and loans generated by the Bank. The Bank earns most of its revenue
from net interest income, or the difference between the interest earned on its
loans and investments and the interest paid on its deposits. The Bank also
assesses fees on other services such as cash management services.
Industry-wide factors that impact the Company include the acceptance by large
corporations of the outsourcing of key business functions such as freight,
utility and telecommunication payment and audit. The benefits that can be
achieved by outsourcing transaction processing and the management information
generated by Cass' systems can be influenced by factors such as the competitive
pressures within industries to improve profitability, the general level of
transportation costs, deregulation of energy costs and consolidation of
telecommunication providers. Economic factors that impact the Company include
the general level of economic activity that can affect the volume and size of
invoices processed, the ability to hire and retain qualified staff and the
growth and quality of the loan portfolio. The general level of interest rates
also has a significant effect on the revenue of the Company.
On July 7, 2006, the Company acquired 100% of the stock of NTransit, Inc., a
company whose service provides auditing and expense management of parcel
shipments. While this acquisition did not meet the Regulation S-X criteria of a
significant business combination, it positioned the Company to expand its
offerings in the specialized service and expertise in parcel shipping, which is
a unique segment of the transportation industry that has experienced tremendous
growth in recent years.
Currently, management views Cass' major opportunity and challenge as the
continued expansion of its payment and information processing service offerings
and customer base. Management intends to accomplish this by maintaining the
Company's lead in applied technology, which, when combined with the security and
processing controls of the Bank, makes Cass unique in the industry.
-13-
Critical Accounting Policies
The Company has prepared all of the consolidated financial information in this
report in accordance with U.S. generally accepted accounting principles ("U.S.
GAAP"). In preparing the consolidated financial statements in accordance with
U.S. GAAP, management makes estimates and assumptions that affect the reported
amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenue and expenses during the reporting period. These estimates have been
generally accurate in the past, have been consistent and have not required any
material changes. There can be no assurances that actual results will not differ
from those estimates. Certain accounting policies that require significant
management estimates and are deemed critical to our results of operations or
financial position have been discussed with the Audit Committee of the Board of
Directors and are described below.
Allowance for Loan Losses. The Company performs periodic and systematic detailed
reviews of its loan portfolio to assess overall collectability. The level of the
allowance for loan losses reflects management's estimate of the collectability
of the loan portfolio. Although these estimates are based on established
methodologies for determining allowance requirements, actual results can differ
significantly from estimated results. These policies affect both segments of the
Company. The impact and associated risks related to these policies on the
Company's business operations are discussed in the "Provision and Allowance for
Loan Losses" section of this report.
Impairment of Assets. The Company periodically evaluates certain long-term
assets such as intangible assets including goodwill, foreclosed assets,
internally developed software and investments in private equity securities for
impairment. Generally, these assets are initially recorded at cost, and
recognition of impairment is required when events and circumstances indicate
that the carrying amounts of these assets will not be recoverable in the future.
If impairment occurs, various methods of measuring impairment may be called for
depending on the circumstances and type of asset, including quoted market
prices, estimates based on similar assets, and estimates based on valuation
techniques such as discounted projected cash flows. Assets held for sale are
carried at the lower of cost or fair value less costs to sell. These policies
affect both segments of the Company and require significant management
assumptions and estimates that could result in materially different results if
conditions or underlying circumstances change.
Income Taxes. The objectives of accounting for income taxes are to recognize the
amount of taxes payable or refundable for the current year and deferred tax
liabilities and assets for the future tax consequences of events that have been
recognized in an entity's financial statements or tax returns. Judgment is
required in addressing the future tax consequences of events that have been
recognized in the Company's financial statements or tax returns such as the
realization of deferred tax assets, changes in tax laws or interpretations
thereof. In addition, the Company is subject to the continuous examination of
its income tax returns by the Internal Revenue Service and other taxing
authorities. Effective January 1, 2007, the Company adopted FIN No. 48,
"Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement
No. 109." FIN No. 48 provides guidance for the recognition threshold and
measurement attribute for financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. See Note 12 to the
financial statements.
Pension Plans. The amounts recognized in the consolidated financial statements
related to pension are determined from actuarial valuations. Inherent in these
valuations are assumptions including expected return on plan assets, discount
rates at which the liabilities could be settled at December 31, 2006, rate of
increase in future compensation levels and mortality rates. These assumptions
are updated annually and are disclosed in Note 13 to the consolidated financial
statements filed with the Company's annual report on Form 10-K for the year
ended December 31, 2006. In September 2006, the FASB issued Statement No. 158,
"Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R)" ("SFAS No.
158"). SFAS No. 158 requires companies to recognize the overfunded or
underfunded status of a defined benefit postretirement plan as an asset or
liability in its statement of financial position and to recognize changes in
that funded status in the year in which the changes occur through comprehensive
income. The funded status is measured as the difference between the fair value
of the plan assets and the benefit obligation as of the date of its fiscal
year-end. The Company recognized the required changes and disclosures in its
consolidated 2006 financial statements.
Results of Operations
The following paragraphs more fully discuss the results of operations and
changes in financial condition for the three-month period ended September 30,
2007 ("Third Quarter of 2007") compared to the three-month period ended
September 30, 2006 ("Third Quarter of 2006") and the nine-month period ended
September 30, 2007 ("First Nine Months of 2007") compared to the nine-month
period ended September 30, 2006 ("First Nine Months of 2006"). The following
discussion and analysis should be read in conjunction with the consolidated
financial statements and related notes and with the statistical information and
financial data appearing in this report as well as the Company's 2006 annual
report on Form 10-K. Results of operations for the Third Quarter of 2007 are not
necessarily indicative of the results to be attained for any other period.
-14-
Net Income
The following table summarizes the Company's operating results:
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------------ -----------------------------------------
(Dollars in Thousands except Per Share % %
Data) 2007 2006 Change 2007 2006 Change
- -------------------------------------------------------------------------------- -----------------------------------------
Net income $ 4,677 $ 3,884 20.4% $ 13,055 $ 11,371 14.8%
Net income from continuing operations $ 4,677 $ 3,972 17.7% $ 13,055 $ 11,648 12.1%
Diluted earnings per share $ .55 $ .46 19.6% $ 1.53 $ 1.34 14.2%
Diluted earnings per share from
continuing operations $ .55 $ .47 17.0% $ 1.53 $ 1.37 11.7%
Return on average assets 2.04% 1.80% -- 1.98% 1.84% --
Return on average equity 20.51% 19.12% -- 19.94% 19.45% --
- -------------------------------------------------------------------------------------------------------------------------------
Fee Revenue and Other Income from Continuing Operations
The Company's fee revenue is derived mainly from freight and utility processing
and payment fees. As the Company provides its processing and payment services,
it is compensated by service fees which are typically calculated on a per-item
basis and by the accounts and drafts payable balances generated in the payment
process which can be used to generate interest income. Processing volumes
related to fees and accounts and drafts payable for the three and nine-month
periods ended September 30, 2007 and 2006 were as follows:
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------------ -----------------------------------------
% %
(In Thousands) 2007 2006 Change 2007 2006 Change
- -------------------------------------------------------------------------------- -----------------------------------------
Freight Core Invoice Transaction Volume* 6,470 6,154 5.1% 18,996 18,311 3.7%
Freight Invoice Dollar Volume $ 3,669,117 $ 3,648,694 .6% $10,764,558 $10,722,944 .4%
Utility Transaction Volume 2,361 1,701 38.8% 6,872 4,797 43.3%
Utility Transaction Dollar Volume $ 2,081,529 $ 1,538,628 35.3% $ 5,687,627 $ 4,188,578 35.8%
Payment and Processing Fees $ 11,441 $ 10,359 10.4% $ 34,089 $ 29,853 14.2%
- -------------------------------------------------------------------------------------------------------------------------------
* Core invoices exclude parcel shipments.
Third Quarter of 2007 compared to Third Quarter of 2006:
Freight transaction volume and invoice dollar volume for the Third Quarter of
2007 increased slightly compared to the same period in 2006 despite the lack of
growth in shipping activity in the United States, particularly in the large
manufacturing segments. The increase in transaction and dollar volume from
utility transactions increased primarily due to new customers and heightened
activity from existing customers as the growth of this division continues. The
increase in utility transaction volume drove the increase in payment and
processing fees.
Bank service fees increased $75,000 or 22% primarily due to higher commercial
account fees and check processing volume. Other income decreased $15,000 in the
Third Quarter of 2007.
First Nine Months of 2007 compared to First Nine Months of 2006:
Freight and utility transaction volume and dollar volume increased for the First
Nine Months of 2007 compared to 2006 due to the same factors discussed above for
the Third Quarter of 2007.
Bank service fees decreased $29,000 or 2%. This decrease was due primarily to a
penalty charged for the early withdrawal of a certificate of deposit by one
large customer in the first quarter of 2006. Other income increased $29,000 in
the First Nine Months of 2007.
-15-
Net Interest Income
Net interest income is the difference between interest earned on loans,
investments, and other earning assets and interest expense on deposits and other
interest-bearing liabilities. Net interest income is a significant source of the
Company's revenues. The following table summarizes the changes in net interest
income and related factors for the three and nine-month periods ended September
30, 2007 and 2006:
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------------ -----------------------------------------
% %
(Dollars in Thousands) 2007 2006 Change 2007 2006 Change
- -------------------------------------------------------------------------------- -----------------------------------------
Average earnings assets $ 827,757 $ 774,293 6.9% $ 799,144 $ 751,769 6.3%
Net interest income* 11,385 10,842 5.0% 32,747 31,093 5.3%
Net interest margin* 5.46% 5.56% -- 5.48% 5.53% --
Yield on earning assets* 6.44% 6.47% -- 6.50% 6.35% --
Rate on interest bearing liabilities 4.26% 3.83% -- 4.30% 3.44% --
* Presented on a tax-equivalent basis assuming a tax rate of 35%.
Third Quarter of 2007 compared to Third Quarter of 2006:
The increase in net interest income was primarily due to an increase in earning
assets that exceeded the counteracting effect of increases in rates paid on
deposit accounts. There was an increase of $64,811,000 or 98% in tax-exempt
municipal securities. The increase in earning assets was funded by an increase
in accounts and drafts payable due to the increase in dollar volume processed.
Yields on earning assets decreased slightly and rates paid on deposit accounts
increased. However, as the balances of earning assets greatly exceeded the
balances of interest-bearing deposits, the net effect on net interest income was
positive.
Total average loans decreased $10,334,000 or 2%, to $517,450,000. Total average
investment in debt and equity securities increased $60,042,000 or 68% to
$148,776,000 as the Company invested a portion of the increase in payables.
Total average federal funds sold and other short-term investments increased
$3,754,000 or 2% to $161,529,000. This increase provides additional liquidity to
the Company. For more information on the changes in net interest income please
refer to the tables that follow.
First Nine Months of 2007 compared to First Nine Months of 2006:
The increase in net interest income was primarily due to an increase in earning
assets and an increase in yields on earning assets that exceeded the
counteracting effect of increases in rates paid on deposit accounts. There was
an increase of $46,818,000 or 71% in tax-exempt municipal securities. The
increase in earning assets was funded by an increase in accounts and drafts
payable due to the increase in dollar volume processed. Yields on earning assets
and rates paid on deposit accounts both increased as the general level of
interest rates increased. However, as the balances of earning assets greatly
exceeded the balances of interest-bearing deposits, the net effect on net
interest income was positive.
Total average loans decreased $7,489,000 or 1% to $520,761,000. Total average
investment in debt and equity securities increased $40,442,000 or 44% to
$132,114,000 as the Company invested a portion of the increase in payables.
Total average federal funds sold and other short-term investments increased
$14,422,000 or 11% to $146,269,000. This increase provides additional liquidity
to the Company. For more information on the changes in net interest income
please refer to the tables that follow.
The Company is positively affected by increases in the level of interest rates
due to the fact that its rate-sensitive assets significantly exceed its
rate-sensitive liabilities. This is primarily due to the noninterest-bearing
liabilities generated by the Company in the form of accounts and drafts payable.
Changes in interest rates will affect some earning assets, such as federal funds
sold and floating rate loans, immediately and some earning assets, such as fixed
rate loans and municipal bonds, over time.
Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rate and
Interest Differential
The following table shows the condensed average balance sheets for each of the
periods reported, the tax-equivalent interest income and expense on each
category of interest-earning assets and interest-bearing liabilities, and the
average yield on such categories of interest-earning assets and the average
rates paid on such categories of interest-bearing liabilities for each of the
periods reported.
-16-
Third Quarter 2007 Third Quarter 2006
-------------------------------------- --------------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
(Dollars in Thousands) Balance Expense Rate Balance Expense Rate
====================================================================================================================================
Assets (1)
Earning assets:
Loans (2,3):
Taxable $ 511,826 $ 9,158 7.10% $ 522,439 $ 9,273 7.04%
Tax-exempt (4) 5,624 102 7.20 5,345 88 6.53
Debt and equity securities (5):
Taxable 17,831 212 4.72 22,600 263 4.62
Tax-exempt (4) 130,945 1,926 5.84 66,134 978 5.87
Federal funds sold and other
short-term investments 161,529 2,030 4.99 157,775 2,022 5.08
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 827,755 13,428 6.44 774,293 12,624 6.47
Nonearning assets:
Cash and due from banks 23,063 29,914
Premises and equipment, net 12,937 12,886
Bank owned life insurance 12,321 11,818
Goodwill and other intangibles 8,463 5,269
Other assets 30,960 26,355
Assets related to discontinued
operations -- 396
Allowance for loan losses (6,292) (6,313)
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 909,207 $ 854,618
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities And Shareholders' Equity (1)
Interest-bearing liabilities:
Interest-bearing demand
deposits $ 67,696 $ 555 3.25% $ 63,845 $ 429 2.67%
Savings deposits 24,433 213 3.46 26,338 201 3.03
Time deposits of
$100 or more 65,596 857 5.18 61,631 762 4.91
Other time deposits 28,338 361 5.05 28,845 338 4.65
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 186,063 1,986 4.23 180,659 1,730 3.80
Short-term borrowings & other 611 7 4.55 197 2 4.03
Subordinated debentures 3,700 50 5.36 3,700 50 5.36
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 190,374 2,043 4.26 184,556 1,782 3.83
Noninterest-bearing liabilities:
Demand deposits 92,405 98,542
Accounts and drafts payable 521,989 481,988
Other liabilities 13,974 8,664
Liabilities related to discontinued
operations -- 242
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 818,742 773,992
Shareholders' equity 90,465 80,626
Total liabilities and
shareholders' equity $ 909,207 $ 854,618
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income $ 11,385 $ 10,842
Interest spread 2.18% 2.64%
Net interest margin 5.46 5.56
====================================================================================================================================
1. Balances shown are daily averages.
2. For purposes of these computations, nonaccrual loans are included in the
average loan amounts outstanding. Interest on nonaccrual loans is recorded
when received as discussed further in Note 1 to the Company's 2006
Consolidated Financial Statements, filed with the Company's 2006 Annual
Report on Form 10-K.
3. Interest income on loans includes net loan fees of $56,000 and $55,000 for
the Third Quarter of 2007 and 2006, respectively.
4. Interest income is presented on a tax-equivalent basis assuming a tax rate
of 35%. The tax-equivalent adjustment was approximately $710,000 and
$373,000 for the Third Quarter of 2007 and 2006, respectively.
5. For purposes of these computations, yields on investment securities are
computed as interest income divided by the average amortized cost of the
investments.
-17-
First Nine Months of 2007 First Nine Months of 2006
-------------------------------------- --------------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
(Dollars in Thousands) Balance Expense Rate Balance Expense Rate
====================================================================================================================================
Assets (1)
Earning assets:
Loans (2,3):
Taxable $ 514,813 $ 27,330 7.10% $ 522,940 $ 26,994 6.90%
Tax-exempt (4) 5,948 322 7.24 5,310 268 6.75
Debt and equity securities (5):
Taxable 19,130 681 4.76 25,506 800 4.19
Tax-exempt (4) 112,984 4,941 5.85 66,166 2,939 5.94
Federal funds sold and other
short-term investments 146,269 5,564 5.09 131,847 4,702 4.77
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 799,144 38,838 6.50 751,769 35,703 6.35
Nonearning assets:
Cash and due from banks 24,604 28,921
Premises and equipment, net 12,880 12,506
Bank owned life insurance 12,195 11,702
Goodwill and other intangibles 8,529 5,287
Other assets 29,538 23,067
Assets related to discontinued
operations -- 233
Allowance for loan losses (6,622) (6,265)
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 880,268 $ 827,220
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities And Shareholders' Equity (1)
Interest-bearing liabilities:
Interest-bearing demand deposits $ 65,597 $ 1,592 3.24% $ 71,612 $ 1,282 2.39%
Savings deposits 23,235 596 3.43 22,444 420 2.50
Time deposits of
$100 or more 67,285 2,620 5.21 50,909 1,778 4.67
Other time deposits 29,401 1,103 5.02 30,551 977 4.28
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 185,518 5,911 4.26 175,516 4,457 3.40
Short-term borrowings & other 301 32 14.21 166 5 4.03
Subordinated debentures 3,700 148 5.35 3,700 148 5.35
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 189,519 6,091 4.30 179,382 4,610 3.44
Noninterest-bearing liabilities:
Demand deposits 94,376 99,104
Accounts and drafts payable 495,350 462,314
Other liabilities 13,493 7,575
Liabilities related to discontinued
operations -- 662
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 792,738 749,037
Shareholders' equity 87,530 78,183
Total liabilities and
shareholders' equity $ 880,268 $ 827,220
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income $ 32,747 $ 31,093
Interest spread 2.20% 2.91%
Net interest margin 5.48 5.53
====================================================================================================================================
1. Balances shown are daily averages.
2. For purposes of these computations, nonaccrual loans are included in the
average loan amounts outstanding. Interest on nonaccrual loans is recorded
when received as discussed further in Note 1 to the Company's 2006
Consolidated Financial Statements, filed with the Company's 2006 Annual
Report on Form 10-K.
3. Interest income on loans includes net loan fees of $150,000 and $164,000
for the First Nine Months of 2007 and 2006, respectively.
4. Interest income is presented on a tax-equivalent basis assuming a tax rate
of 35%. The tax-equivalent adjustment was approximately $1,842,000 and
$1,122,000 for the First Nine Months of 2007 and 2006, respectively.
5. For purposes of these computations, yields on investment securities are
computed as interest income divided by the average amortized cost of the
investments.
-18-
Analysis of Net Interest Income Changes
The following table presents the changes in interest income and expense between
periods due to changes in volume and interest rates. That portion of the change
in interest attributable to the combined rate/volume variance has been allocated
to rate and volume changes in proportion to the absolute dollar amounts of the
change in each.
Third Quarter
2007 Over 2006
--------------------------
(In Thousands) Volume Rate Total
================================================================================
Increase (decrease) in interest income:
Loans (1,2):
Taxable $(189) $ 74 $(115)
Tax-exempt (3) 5 9 14
Debt and equity securities:
Taxable (57) 6 (51)
Tax-exempt (3) 953 (5) 948
Federal funds sold and other
short-term investments 48 (40) 8
- --------------------------------------------------------------------------------
Total interest income 760 44 804
- --------------------------------------------------------------------------------
Interest expense on:
Interest-bearing demand deposits 27 99 126
Savings deposits (15) 27 12
Time deposits of $100 or more 51 44 95
Other time deposits (6) 29 23
Short-term borrowings & other 5 0 5
Subordinated debentures -- -- --
Total interest expense 62 199 261
- --------------------------------------------------------------------------------
Net interest income $ 698 $(155) $ 543
================================================================================
1. Average balances include nonaccrual loans.
2. Interest income includes net loan fees.
3. Interest income is presented on a tax-equivalent basis assuming a tax rate
of 35%.
First Nine Months
2007 Over 2006
--------------------------
(In Thousands) Volume Rate Total
================================================================================
Increase (decrease) in interest income:
Loans (1,2):
Taxable $(424) $ 760 $ 336
Tax-exempt (3) 34 20 54
Debt and equity securities:
Taxable (218) 99 (119)
Tax-exempt (3) 2,048 (46) 2,002
Federal funds sold and other
short-term investments 536 326 862
- --------------------------------------------------------------------------------
Total interest income 1,976 1,159 3,135
- --------------------------------------------------------------------------------
Interest expense on:
Interest-bearing demand deposits (115) 425 310
Savings deposits 15 161 176
Time deposits of $100 or more 620 222 842
Other time deposits (38) 164 126
Short-term borrowings & other 7 20 27
Subordinated debentures -- -- --
Total interest expense 489 992 1,481
- --------------------------------------------------------------------------------
Net interest income $1,487 $ 167 $1,654
================================================================================
1. Average balances include nonaccrual loans.
2. Interest income includes net loan fees.
3. Interest income is presented on a tax-equivalent basis assuming a tax rate
of 35%.
-19-
Provision and Allowance for Loan Losses
An important determinant of the Company's operating results is the provision for
loan losses and the level of loans charged off. There were provisions of
$225,000 and $200,000 made for loan losses during the Third Quarter of 2007 and
the Third Quarter of 2006, respectively. There were provisions of $675,000 and
$500,000 made for loan losses during the First Nine Months of 2007 and the First
Nine Months of 2006, respectively. As discussed below, the Company continually
analyzes the outstanding loan portfolio based on the performance, financial
condition and collateralization of the credits. There were $1,023,000 and
$583,000 of net loan charge-offs in the Third Quarter of 2007 and 2006,
respectively. There were $1,222,000 of net loan charge-offs in the First Nine
Months of 2007 and $855,000 in the First Nine Months 2006.
The allowance for loan losses at September 30, 2007 was $6,045,000 and at
December 31, 2006 was $6,592,000. The ratio of allowance for loan losses to
total loans outstanding at September 30, 2007 was 1.18% compared to 1.31% at
December 31, 2006. At September 30, 2007, nonperforming loans, which are also
considered impaired, consisted of $310,000 in non-accrual loans as shown in the
following table. This total consists of three loans, two of which relate to
businesses that have collateral deficiencies. Nonperforming loans at December
31, 2006 consisted of $795,000 in non-accrual loans and relate to one of the
same borrowers. Total nonperforming loans decreased $644,000 from September 30,
2006 to September 30, 2007. This decrease was primarily due to the charge-off of
two of the loans.
In addition to the nonperforming loans discussed above, at September 30, 2007,
approximately $6,060,000 of loans not included in the table below have been
identified by management as having potential credit problems. They may also be
classified for regulatory purposes. These loans are excluded from the table due
to the fact they are current under the original terms of the loans, however
circumstances have raised doubts as to the ability of the borrowers to comply
with the current loan repayment terms. Included in this balance is $2,765,000
related to one borrower that was renegotiated several years ago and, although
current under the new terms of the contract, management believes, due to the
financial condition of the borrower, there still remains risk as to the
collectability of all amounts under the loan agreement. The remaining loans are
closely monitored by management and have specific reserves established for the
estimated loss exposure.
Foreclosed assets and accruing loans 90 days or more past due aggregated
$1,300,000 and $1,902,000, respectively, at September 30, 2007. The increase in
foreclosed assets and net charge-offs in the three-month period ended September
30, 2007, primarily relates to the foreclosure of one loan which was secured by
a commercial real estate building in St. Louis County, Missouri. The increase in
accruing loans 90 days or more past due is primarily related to one loan that is
past maturity due to an administrative issue with the renewal process. All
contractual payments on that loan have been made as required by the loan's terms
and management expects it to be renewed in the normal course.
The allowance for loan losses has been established and is maintained to absorb
probable losses in the loan portfolio. An ongoing assessment of risk of loss is
performed to determine if the current balance of the allowance is adequate to
cover probable losses in the portfolio. A charge or credit is made to expense to
cover any deficiency or reduce any excess. The current methodology employed to
determine the appropriate allowance consists of two components, specific and
general. The Company develops specific valuation allowances on commercial, real
estate, and construction loans based on individual review of these loans and an
estimate of the borrower's ability to repay the loan given the availability of
collateral, other sources of cash flow and collection options available. The
general component relates to all other loans, which are evaluated based on loan
grade. The loan grade assigned to each loan is typically evaluated on an annual
basis, unless circumstances require interim evaluation. The Company assigns a
reserve amount consistent with each loan's rating category. The reserve amount
is based on derived loss experience over prescribed periods. In addition to the
amounts derived from the loan grades, a portion is added to the general reserve
to take into account other factors including national and local economic
conditions, downturns in specific industries including loss in collateral value,
trends in credit quality at the Company and the banking industry, and trends in
risk rating changes. As part of their examination process, federal and state
agencies review the Company's methodology for maintaining the allowance for loan
losses and the balance in the account. These agencies may require the Company to
increase the allowance for loan losses based on their judgments and
interpretations about information available to them at the time of their
examination.
-20-
Summary of Asset Quality
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- ---------------------
(Dollars in Thousands) 2007 2006 2007 2006
===================================================================================================================
Allowance at beginning of period $ 6,843 $ 6,312 $ 6,592 $ 6,284
Provision charged to expense 225 200 675 500
Loans charged off 1,065 586 1,350 864
Recoveries on loans previously charged off 42 3 128 9
- -------------------------------------------------------------------------------------------------------------------
Net loans charged-off 1,023 583 1,222 855
Allowance at end of period $ 6,045 $ 5,929 $ 6,045 $ 5,929
- -------------------------------------------------------------------------------------------------------------------
Loans outstanding:
Average $517,450 $527,784 $520,761 $528,250
September 30 511,207 520,748 511,207 520,748
Ratio of allowance for loan losses to loans outstanding:
Average 1.17% 1.12% 1.16% 1.12%
September 30 1.18 1.14 1.18% 1.14
Nonperforming loans:
Nonaccrual loans $ 310 $ 954 $ 310 $ 954
Loans past due 90 days or more -- -- -- --
Renegotiated loans -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Total non performing loans $ 310 $ 954 $ 310 $ 954
Foreclosed assets 1,300 -- -- --
- -------------------------------------------------------------------------------------------------------------------
Nonperforming loans as percentage of average loans .06% .18% .06% .18%
- -------------------------------------------------------------------------------------------------------------------
Accruing loans 90 days or more past due $ 1,902 -- -- --
- -------------------------------------------------------------------------------------------------------------------
As of September 30, 2007, the Bank had one property which it was carrying as
other real estate owned at what management believes to be fair value less cost
to sell. The property was foreclosed on July 31, 2007 and is recorded at
$1,300,000. Nonperforming loans do not include accruing loans 90 days or more
past due.
Operating Expense from Continuing Operations
Total operating expense for the Third Quarter of 2007 increased $643,000 or 4%
to $15,664,000 compared to the Third Quarter of 2006 due primarily to expenses
related to the growth in processing activity. Total operating expense for the
First Nine Months of 2007 increased $3,755,000 or 9% to $46,929,000 compared to
the First Nine Months of 2006 also due to expenses related to the growth in
processing activity.
Salaries and benefits expense for the Third Quarter of 2007 increased $564,000
or 5% to $11,700,000 compared to the Third Quarter of 2006 and increased
$3,462,000 or 11% to $35,135,000 for the First Nine Months of 2007 compared to
the First Nine Months of 2006 primarily due to additional headcount to service
new transaction business and an increase in bonuses related to the earnings
increase over the comparable period last year.
Occupancy expense for the Third Quarter of 2007 increased $28,000 or 5% to
$550,000 from the Third Quarter of 2006 and increased $110,000 or 8% from the
First Nine Months of 2006 compared to the First Nine Months of 2007.
Equipment expense for the Third Quarter of 2007 increased $144,000 or 20%
compared to the Third Quarter of 2006 due to additional depreciation on asset
purchases and increased $437,000 or 21% from the First Nine Months of 2006
compared to the First Nine Months of 2007 also due to asset purchases and
additional software licenses.
Amortization of intangible assets was $70,000 for the Third Quarter of 2007 and
in 2006 and $210,000 for the First Nine Months of 2007 compared to $156,000 in
2006. The increase was related to the customer list acquired with the NTransit
purchase in July 2006.
Other operating expense for the Third Quarter of 2007 decreased $93,000, or 4%
compared to the Third Quarter of 2006 and decreased $308,000 from the First Nine
Months of 2006 compared to the First Nine Months of 2007. The decreases were due
to lower legal and outside services expenses.
Income tax expense for the Third Quarter of 2007 decreased $26,000 or 1%
compared to the Third Quarter of 2006 and decreased $167,000 for the First Nine
Months of 2007 compared to the First Nine Months of 2006. The effective tax rate
was 31.8% and 35.7% for the Third Quarters of 2007 and 2006, respectively and
was 32.3% and 35.5% for the First Nine Months of 2007 and 2006, respectively.
The decreases reflect the impact of the increase in tax-exempt securities.
-21-
Financial Condition
Total assets at September 30, 2007 were $933,160,000, an increase of
$74,689,000, or 9% from December 31, 2006. The most significant changes in asset
balances during this period were an increase of $8,054,000 or 5% in federal
funds sold and other short-term investments and an increase of $59,630,000 in
securities available for sale. Changes in federal funds sold and other
short-term investments reflect the Company's daily liquidity position and are
affected by the changes in the other asset balances and changes in deposit and
accounts and draft payable balances.
Total liabilities at September 30, 2007 were $838,794,000, an increase of
$64,244,000, or 8% from December 31, 2006. Total deposits at September 30, 2007
were $268,365,000, a decrease of $21,529,000 or 7% from December 31, 2006.
Accounts and drafts payable at September 30, 2007 were $552,837,000, an increase
of $84,444,000 or 18%. Total shareholders' equity at September 30, 2007 was
$94,366,000, a $10,445,000 or 12% increase from December 31, 2006.
Deposits in the First Nine Months of 2007 decreased as customers moved funds
into other higher-yielding investments. Accounts and drafts payable will
fluctuate from period-end to period-end due to the payment processing cycle,
which results in lower balances on days when checks clear and higher balances on
days when checks are issued. For this reason, average balances are a more
meaningful measure of accounts and drafts payable (for average balances refer to
the tables under the "Distribution of Assets, Liabilities and Stockholders'
Equity; Interest Rate and Interest Differential" section of this report).
The increase in total shareholders' equity resulted from net income of
$13,055,000, cash received on the exercise of stock options of $16,000, $36,000
tax benefit on stock and option awards, $499,000 from stock-based compensation
expense and the FIN 48 tax adjustment of $87,000 offset by dividends paid of
$3,013,000 ($.12 per share) and an increase in other comprehensive loss of
$235,000.
Liquidity and Capital Resources
The balance of liquid assets consists of cash and cash equivalents, which
include cash and due from banks, federal funds sold and money market funds, and
was $195,619,000 at September 30, 2007, a decrease of $885,000 or less than 1%
from December 31, 2006. At September 30, 2007 these assets represented 21% of
total assets. These funds are the Company's and its subsidiaries' primary source
of liquidity to meet future expected and unexpected loan demand, depositor
withdrawals or reductions in accounts and drafts payable.
Secondary sources of liquidity include the investment portfolio and borrowing
lines. Total investment in securities was $162,379,000 at September 30, 2007, an
increase of $59,630,000 from December 31, 2006. These assets represented 17% of
total assets at September 30, 2007. Of this total, 98% were state and political
subdivision securities and 2% were U.S. government agencies. Of the total
portfolio, 1% mature in one year, 26% mature in one to five years, and 73%
mature in five or more years. During the Third Quarter of 2007 the Company did
not sell any securities.
The Bank has unsecured lines of credit at correspondent banks to purchase
federal funds up to a maximum of $29,000,000. Additionally, the Bank maintains a
line of credit at unaffiliated financial institutions in the maximum amount of
$63,137,000 collateralized by U.S. Treasury and agency securities and commercial
and residential mortgage loans.
The deposits of the Company's banking subsidiary have historically been stable,
consisting of a sizable volume of core deposits related to customers that
utilize other commercial products of the Bank. The accounts and drafts payable
generated by the Company have also historically been a stable source of funds.
Net cash flows provided by operating activities were $17,603,000 for the First
Nine Months of 2007 compared with $12,870,000 for the First Nine Months of 2006.
This increase is attributable to the increase in net income of $1,407,000, the
increase in taxes deferred and payable of $2,370,000, the absence of a loss of
$1,562,000 in operating activities related to discontinued operations and the
other normal fluctuations in asset and liability accounts. Net cash flows from
investing and financing activities fluctuate greatly as the Company actively
manages its investment and loan portfolios and customer activity influences
changes in deposit and accounts and drafts payable balances. Other causes for
the changes in these account balances are discussed earlier in this report. Due
to the daily fluctuations in these account balances, the analysis of changes in
average balances, also discussed earlier in this report, can be more indicative
of underlying activity than the period-end balances used in the statements of
cash flows. Management anticipates that cash and cash equivalents, maturing
investments and cash from operations will continue to be sufficient to fund the
Company's operations and capital expenditures in 2007.
-22-
The Company faces market risk to the extent that its net interest income and
fair market value of equity are affected by changes in market interest rates.
For information regarding the market risk of the Company's financial
instruments, see Item 3. "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK".
Risk-based capital guidelines require the Company to meet a minimum total
capital ratio of 8.0% of which at least 4.0% must consist of Tier 1 capital.
Tier 1 capital generally consists of (a) common shareholders' equity (excluding
the unrealized market value adjustments on the available-for-sale securities),
(b) qualifying perpetual preferred stock and related surplus subject to certain
limitations specified by the Federal Deposit Insurance Corporation ("FDIC"), (c)
minority interests in the equity accounts of consolidated subsidiaries less (d)
goodwill, (e) mortgage servicing rights within certain limits, and (f) any other
intangible assets and investments in subsidiaries that the FDIC determines
should be deducted from Tier 1 capital. The FDIC also requires a minimum
leverage ratio of 3.0%, defined as the ratio of Tier 1 capital less purchased
mortgage servicing rights to total assets, for banking organizations deemed the
strongest and most highly rated by banking regulators. A higher minimum leverage
ratio is required of less highly-rated banking organizations. Total capital, a
measure of capital adequacy, includes Tier 1 capital, allowance for loan losses,
and debt considered equity for regulatory capital purposes.
The Company and the Bank continue to exceed all regulatory capital requirements,
as evidenced by the following capital amounts and ratios at September 30, 2007
and December 31, 2006:
September 30, 2007 (In Thousands) Amount Ratio
===============================================================================
Total capital (to risk-weighted assets)
Cass Information Systems, Inc. $ 95,547 14.50%
Cass Commercial Bank 41,755 14.66
Tier I capital (to risk-weighted assets)
Cass Information Systems, Inc. $ 85,802 13.02%
Cass Commercial Bank 38,184 13.41
Tier I capital (to average assets)
Cass Information Systems, Inc. $ 85,802 9.53%
Cass Commercial Bank 38,184 11.69
===============================================================================
December 31, 2006 (In Thousands) Amount Ratio
===============================================================================
Total capital (to risk-weighted assets)
Cass Information Systems, Inc. $ 85,205 13.64%
Cass Commercial Bank 42,242 14.19
Tier I capital (to risk-weighted assets)
Cass Information Systems, Inc. $ 74,913 11.99%
Cass Commercial Bank 38,511 12.94
Tier I capital (to average assets)
Cass Information Systems, Inc. $ 74,913 8.65%
Cass Commercial Bank 38,511 11.25
===============================================================================
Inflation
The Company's assets and liabilities are primarily monetary, consisting of cash,
cash equivalents, securities, loans, payables and deposits. Monetary assets and
liabilities are those that can be converted into a fixed number of dollars. The
Company's consolidated balance sheet reflects a net positive monetary position
(monetary assets exceed monetary liabilities). During periods of inflation, the
holding of a net positive monetary position will result in an overall decline in
the purchasing power of a company. Management believes that replacement costs of
equipment, furniture, and leasehold improvements will not materially affect
operations. The rate of inflation does affect certain expenses, such as those
for employee compensation, which may not be readily recoverable in the price of
the Company's services.
Impact of New Accounting Pronouncements
In June 2006, the FASB issued FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes", an Interpretation of SFAS No. 109 "Accounting for
Income Taxes". FASB Interpretation No. 48 clarifies the accounting for
uncertainty in income taxes in financial statements and prescribes a recognition
threshold and measurement attribute for financial statement recognition and
measurement of a tax position taken or expected to be taken. The Interpretation
also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. The FASB
Interpretation is effective for fiscal years beginning after December 15, 2006.
The Company implemented FASB Interpretation No. 48 on January 1, 2007, which did
not have a material impact on the Company's consolidated financial statements.
-23-
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements". The
objective of SFAS No. 157 is to increase consistency and comparability in fair
value measurements and to expand disclosures about fair value measurements. SFAS
No. 157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS No. 157 applies under other accounting pronouncements
that require or permit fair value measurements and does not require any new fair
value measurements. The provisions of SFAS No. 157 are effective for fair value
measurements made in fiscal years beginning after November 15, 2007. The
adoption of this statement is not expected to have a material effect on the
Company's consolidated financial statements.
In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB
Statements No. 87, 88, 106, and 132(R)" ("SFAS No. 158"). SFAS No. 158 requires
companies to recognize the overfunded or underfunded status of a defined benefit
postretirement plan as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income. The funded status is measured as the
difference between the fair value of the plan assets and the projected benefit
obligation as of the date of its fiscal year-end. The Company recognized the
required changes and disclosures in its consolidated 2006 financial statements.
In September 2006, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" ("SAB No. 108"). SAB No. 108 provides interpretive guidance on the
consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of a materiality assessment. This statement
is effective for fiscal years ending after November 15, 2006. This bulletin did
not have an impact on the Company's consolidated financial statements.
In February 2007, the FASB issued Statement No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS No. 159
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosures about fair
value measurements. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. The Company is currently assessing the impact of SFAS No.
159 on its financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As described in the Company's annual report on Form 10-K for the year ended
December 31, 2006, the Company manages its interest rate risk through
measurement techniques that include gap analysis and a simulation model. As part
of the risk management process, asset/liability management policies are
established and monitored by management. The policy objective is to limit the
change in annualized net interest income to 15% from an immediate and sustained
parallel change in interest rates of 200 basis points. Based on the Company's
most recent evaluation, management does not believe the Company's risk position
at September 30, 2007 has changed materially from that at December 31, 2006.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to ensure that
the information it is required to disclose in the reports it files with the SEC
is recorded, processed, summarized and reported to management, including the
Chief Executive Officer and Principal Financial Officer, within the time periods
specified in the rules of the SEC. The Company's Chief Executive Officer and
Principal Financial Officer have evaluated the Company's disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of September 30, 2007 and based on their
evaluation, believe that, as of September 30, 2007, these controls and
procedures were effective at the reasonable assurance level to ensure that the
Company is able to collect, process and disclose the information it is required
to disclose in the reports it files with the SEC within the required time
periods.
There were no changes in the third quarter of 2007 in the Company's internal
control over financial reporting identified by the Chief Executive Officer and
Principal Financial Officer in connection with their evaluation that materially
affected or are reasonably likely to materially affect the Company's internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934, as amended).
-24-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are not involved in any pending
proceedings other than ordinary routine litigation incidental to its
businesses. Management believes none of these proceedings, if
determined adversely, would have a material effect on the business
or financial conditions of the Company or its subsidiaries.
ITEM 1A. RISK FACTORS
The Company has included in Part I, Item 1A of its annual report on
Form 10-K for the year ended December 31, 2006, a description of
certain risks and uncertainties that could affect the Company's
business, future performance or financial condition (the "Risk
Factors"). There are no material changes to the Risk Factors as
disclosed in the Company's 2006 annual report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
(a) None
(b) There have been no material changes to the procedures by which
security holders may recommend nominees to the Company's Board
of Directors since the filing of the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30,
2007.
-25-
ITEM 6. EXHIBITS
Exhibit 10.1 Amended and Restated 2007 Omnibus Incentive Stock Plan.
Exhibit 10.2 Amendment and Restatement of the Supplemental Executive
Retirement Plan
Exhibit 10.3 Form of Restricted Stock Agreement Award Agreement
Exhibit 10.4 Form of Stock Appreciation Rights Award Agreement
Exhibit 31.1 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
-26-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASS INFORMATION SYSTEMS, INC.
DATE: November 7, 2007 By /s/ Lawrence A. Collett
----------------------------------------
Lawrence A. Collett
Chairman and Chief Executive Officer
DATE: November 7, 2007 By /s/ P. Stephen Appelbaum
----------------------------------------
P. Stephen Appelbaum
Chief Financial Officer
(Principal Financial and Accounting Officer)
-27-
Exhibit 10.1
CASS INFORMATION SYSTEMS, INC.
2007 OMNIBUS INCENTIVE STOCK PLAN
ARTICLE I
PURPOSE
The purpose of the Cass Information Systems, Inc. 2007 Omnibus Incentive
Stock Plan (the "Plan") is to provide incentive opportunities for Non-Employee
Directors and key Employees, and to align their personal financial interest with
the Company's stockholders. The Plan includes provisions for stock options,
stock appreciation rights, restricted stock, restricted stock units and
performance related awards.
ARTICLE II
DEFINITIONS
2.1 "BOARD" OR "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.2 "CHANGE OF CONTROL" means one or more of the following occurrences:
(a) Any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any other entity or any
group of persons acting in concert, becomes a beneficial owner (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934) of securities
of the Company possessing more than one-third (1/3) of the voting power for the
election of the Board of Directors;
(b) The consummation of any consolidation, merger, or other business
combination involving the Company in which holders of voting securities of the
Company, immediately prior to such consummation, own, as a group, immediately
after such consummation, voting securities of the Company (or, if the Company
does not survive such transaction, voting securities of the entity surviving
such transaction) having less than two-thirds (2/3) of the total voting power in
an election of the directors of the Company or such other surviving entity;
(c) During any period of two (2) consecutive years, individuals, who
at the beginning of such period, constitute members of the Board of Directors
cease for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the Company's stockholders, of each
new director of the Company is approved by a vote of at least two-thirds (2/3)
of the members of the Board of Directors then still in office who are directors
of the Company at the beginning of any such period; or
(d) The consummation of any sale, lease, exchange, or other transfer
(in one transaction or in a series of related transactions) of all, or
substantially all, of the assets of the Company (on a consolidated basis) to a
party which is not controlled by or under common control with the Company.
In the event that any provision of this definition of Change in Control provides
for a smaller degree of change of ownership than that required in the
corresponding meaning of change in the ownership or effective control of the
Company, or a change in the ownership of a substantial portion of the assets of
the Company under Proposed Treasury Regulation 1.409A-3(g)(5) or any successor
regulation and the benefit which becomes vested or payable on account of a
Change in Control is subject to Code Section 409A, the determination as to
whether there has been a Change in Control shall be determined by the provisions
of such Proposed Treasury Regulation 1.409A-3(g)(5) or any successor regulation.
2.3 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
2.4 "COMPANY" means Cass Information Systems, Inc., a Missouri
corporation, and any successor corporation by merger or otherwise. When the
context so admits or requires, "Company" includes Subsidiaries.
2.5 "COMMITTEE" means a committee of two (2) or more members of the Board
appointed by the Board of Directors to administer the Plan pursuant to Article
III herein. A person may serve on the Committee only if he or she is a
"non-employee director" for purposes of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended, and satisfies the requirements of an "outside director"
for purposes of Code Section 162(m).
2.6 "EMPLOYEE" means any person employed by the Company or a Subsidiary on
a full-time salaried basis. The term "Employee" shall not include a person hired
as an independent contractor, leased employee, consultant or a person otherwise
designated by the Committee at the time of hire as not eligible to participate
in the Plan.
2.7 "FAIR MARKET VALUE" means, as of any given date, the value of Stock
determined as follows:
(i) the last reported sale price of the Stock as quoted on The
NASDAQ Stock Market on such date (or, if such date is not a trading day, the
immediately preceding trading day) or, if no such reported sale takes place on
any such date, the average of the closing bid and asked prices on such date (or,
if such date is not a trading day, the immediately preceding trading day);
(ii) if the Stock is then listed on another national securities
exchange, the last reported sale price or, if no such reported sale takes place
on any such day, the average of the closing bid and asked prices on the
principal national securities exchange on which the Stock is listed or admitted
to trading; or
(iii) if none of the foregoing is applicable, then the Fair Market
Value of a share of Stock shall be determined in good faith by the Committee in
its discretion.
2.8 "INCENTIVE STOCK OPTION" or "ISO" means an Option grant which meets or
complies with the terms and conditions set forth in the Code Section 422 and
applicable regulations.
2.9 "INDICATORS OF PERFORMANCE" means the criteria used by the Committee
to evaluate the Company's performance with respect to awards under the Plan
including: the Company's Pretax Income; Net Income; Earnings Per Share; Revenue;
Fee Revenue; Expenses; Return on Assets; Return on Equity; Return on Investment;
Net Profit Margin; Operating Profit Margin; Discretionary Cash Flow (net cash
provided by operating activities, less estimated total changes in operating
assets and liabilities); Total Stockholder Return; Share Price; Lease Operating
Expenses; Earnings before Income Tax, Depreciation and Amortization (EBITDA);
Capitalization; Liquidity; Reserve Adds or Replacement; Funding and Development
Costs; Production Volumes; Results of Customer Satisfaction Surveys and other
measures of Quality, Safety, Productivity, Cost Management or Process
Improvement or other measures the Committee approves. The Committee has the
discretion to select the particular Indicators of Performance to be utilized in
determining awards, and such Indicators of Performance may vary between
Performance Periods and different awards. In addition, such Indicators of
Performance may be determined solely by reference to the performance of the
Company, a Subsidiary, or a division or unit of any of the foregoing, or based
upon comparisons of any of the performance measures relative to other companies.
In establishing an Indicator of Performance, the Committee may exclude the
impact of any event or occurrence which the Committee determines should
appropriately be excluded such as, for example, a restructuring or other
nonrecurring charge, an event either not directly related to the operations of
the Company or not within the reasonable control of the Company's management, or
a change in accounting standards required by U.S. generally accepted accounting
principles.
2.10 "NON-EMPLOYEE DIRECTOR" means any person duly elected a director of
the Company who is not an Employee of the Company.
2.11 "OPTION" or "STOCK OPTION" means a right granted under the Plan to an
Participant to purchase a stated number of shares of Stock at a stated exercise
price.
2.12 "PARTICIPANT" means an Employee or Non-Employee Director who has
received or been granted a benefit under the Plan.
2.13 "PERFORMANCE AWARD" means an award established by the Committee
pursuant to Article X.
2.14 "PERFORMANCE AWARD PARTICIPANT" means any eligible Employee so
designated by the Committee.
2.15 "PERFORMANCE PERIOD" means a period established by the Committee of
not less than one year, at the conclusion of which performance-based
compensation, subject to the terms of the Performance Award, becomes vested and
non-forfeitable or settlement is made with a Performance Award Participant with
respect to the Performance Award.
2.16 "RESTRICTED STOCK" means Stock granted pursuant to Article VIII of
the Plan.
2.17 "RESTRICTED STOCK UNIT" or "RSU" means Restricted Stock Unit granted
pursuant to Article IX of the Plan. RSU's are similar to Restricted Stock except
that no shares of stock are actually issued to a Participant. Instead, a
Participant is granted units and each unit has a Fair Market Value equal to the
Fair Market Value of a share of Stock as of any given date.
2.18 "RESTRICTION PERIOD" is the period of time during which shares of
Restricted Stock or RSUs are subject to forfeiture if the restrictions
applicable to such shares or RSUs are violated, as determined by the Committee.
2.19 "SPREAD" means, with respect to a SAR, the difference of the Fair
Market Value of a share of Stock on the exercise date and the Fair Market Value
of a share of Stock on the grant date.
2.20 "STOCK" means the common stock of the Company.
2.21 "STOCK APPRECIATION RIGHT" or "SAR" means a right to receive a
payment equal to the excess of the Fair Market Value of Stock as of the exercise
date over the exercise price specified in the SAR.
2.22 "SUBSIDIARY" means any corporation or similar legal entity (other
than the Company) in which the Company or a Subsidiary of the Company owns fifty
percent (50%) or more of the total combined voting power of all classes of
stock, provided that, with regard to Incentive Stock Options, "Subsidiary" shall
have the meaning provided under Section 424(f) of the Code.
2.23 "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) Stock possessing more than ten
percent (10%) of the total combined voting power of all classes of Stock of the
Company or any of its affiliates.
2.24 "TERMINATED FOR CAUSE" and "TERMINATION FOR CAUSE" means termination
by the Company of the Participant's employment or service by reason of: (a) an
order of any federal or state regulatory authority having jurisdiction over the
Company or any Subsidiary; (b) the willful failure of the Participant
substantially to perform his or her duties set forth by his or her employment
agreement (other than any such failure due to the Participant's physical or
mental illness); (c) a willful breach by the Participant of any material
provision of any written agreement with the Company or any Subsidiary; (d) the
Participant's commission of a crime that constitutes a felony or other crime of
moral turpitude or criminal fraud; (e) chemical or alcohol dependency which
materially and adversely affects the Participant's performance of his or her
duties to the Company or any Subsidiary; (f) any act of disloyalty or breach of
responsibilities to the Company or any Subsidiary, which is intended by the
Participant to cause material harm to the Company; (g) misappropriation (or
attempted misappropriation) of any of the Company's or any Subsidiary's funds or
property by the Participant; or (h) the Participant's material and intentional
violation of any Company or Subsidiary policy applicable to the Participant.
2.25 "TOTAL DISABILITY" and "TOTALLY DISABLED" means the permanent and
total disability of a person within the meaning of Section 22(e)(3) of the Code,
as determined by the Committee in good faith, upon receipt of and reliance on
sufficient competent medical advice.
ARTICLE III
ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Committee.
Subject to such approvals and other authority as the Board may reserve to itself
from time to time, the Committee shall, consistent with the provisions of the
Plan, from time to time establish such rules and regulations and appoint such
agents as it deems appropriate for the proper administration of the Plan, and
make such determinations under, and such interpretations of, and take such steps
in connection with the Plan, Options, SARs, Restricted Stock, RSUs or
Performance Awards as it deems necessary or advisable.
3.2 AUTHORITY OF THE COMMITTEE. Subject to the provisions herein, the
Committee shall have the full power to determine the size and types of grants of
Options, SARs, Restricted Stock, RSUs and Performance Awards; to determine the
terms and conditions of such grants and Performance Awards in a manner
consistent with the Plan; to construe and interpret the Plan and any agreement
or instrument entered into under the Plan; to establish, amend or waive rules
and regulations for the Plan's administration; and to amend the terms and
conditions of any outstanding Options, SARs, Restricted Stock, RSUs or
Performance Awards to the extent such terms and conditions are within the sole
discretion of the Committee as provided in the Plan and subject to the
limitations and restrictions otherwise applicable under the Plan including those
contained in Article XIII. The Committee may not, however, reduce the exercise
price of an Option or SAR below the amounts specified in Sections 6.2 and 7.2
and the settlement value of an RSU below the amount specified in Section 9.1,
except that such amounts are subject to adjustment under Article XI. Further,
the Committee shall make all other determinations which may be necessary or
advisable for the administration of the Plan. As permitted by law, the Committee
may delegate its authority hereunder. The Committee may take any action
consistent with the terms of the Plan which the Committee deems necessary to
comply with any government laws or regulatory requirements of a foreign country,
including, but not limited to, modifying the terms and conditions governing any
Options, SARs, Restricted Stock, RSUs or Performance Awards, or establishing any
local country plans as sub-plans to this Plan.
3.3 DECISIONS BINDING. All determinations and decisions of the Committee
as to any disputed question arising under the Plan, including questions of
construction and interpretation, shall be final, binding and conclusive upon all
parties.
3.4 COMMITTEE AWARDS. Award to non-employee directors of the Company who
are Committee members shall be made by the Board of Directors except that a
Committee member shall not participate in any Board determinations relating to
grants of awards to such Committee member.
ARTICLE IV
ELIGIBILITY
Those Employees who, in the judgment of the Committee, may make key
contributions to the profitability and growth of the Company shall be eligible
to receive Options, SARs, Restricted Stock, RSUs and Performance Awards under
the Plan. All Non-Employee Directors shall be eligible to receive Options (other
than ISOs), SARs, Restricted Stock and RSUs under the Plan.
ARTICLE V
MAXIMUM SHARES AVAILABLE
5.1 AUTHORIZED SHARES OF STOCK. The Stock to be distributed under the Plan
may be either authorized and issued shares or unissued shares of the Stock,
including but not limited to such shares held as treasury shares. Subject to
Article XI, the maximum amount of Stock which may be issued under the Plan in
satisfaction of exercised award or issued as Restricted Stock shall not exceed,
in the aggregate, eight hundred thousand (800,000) shares.
5.2 INDIVIDUAL LIMITS ON GRANTS. Under the Plan, no Employee or
Non-Employee Director shall be awarded, during the term of the Plan, Options,
SARs, RSUs and Restricted Stock covering more than eighty thousand (80,000)
shares of Stock on an annual basis. For purposes of this Section 5.2, a grant of
one SAR or RSU shall be treated as a grant of one share of Stock.
5.3 LAPSED AWARDS. Stock subject to an Option which for any reason is
cancelled or terminated without having been exercised or Stock awarded as
Restricted Stock which is forfeited, shall again be available for grants under
the Plan.
ARTICLE VI
STOCK OPTIONS
6.1 GRANT OF OPTIONS.
(a) The Committee may, at any time and from time to time on or after
the effective date of the Plan, grant Options under the Plan to eligible
Participants, for such numbers of shares of Stock and having such terms as the
Committee shall designate, subject however, to the provisions of the Plan. The
Committee may also determine the type of Option granted (e.g., ISO,
nonstatutory, other statutory Options as from time to time may be permitted by
the Code) or a combination of various types of Options. Options designated as
ISOs shall comply with all the provisions of Section 422 of the Code and
applicable regulations and shall not be granted to Non-Employee Directors (for
this purpose only, a Non-Employee Director shall not be considered a
Participant). The aggregate Fair Market Value (determined at the time the Option
is granted) of Stock with respect to which ISOs are exercisable for the first
time by an individual during a calendar year under all plans of the Company, any
Subsidiary shall not exceed one hundred thousand dollars ($100,000). Upon
determination by the Committee that an Option is to be granted to a Participant,
written notice shall be given to such person as soon as practicable, specifying
the terms, conditions, rights and duties related thereto. Awards shall be deemed
to be granted as of the date specified in the grant resolution of the Committee,
which date shall be the date of any related agreement with the Participant. In
the event of any inconsistency between the provisions of the Plan and any such
agreement entered into hereunder, the provisions of the Plan shall govern. Any
individual at any one time and from time to time may hold more than one Option
granted under the Plan or under any other Stock plan of the Company.
(b) Each Option shall be evidenced by a "Stock Option Agreement" in
such form and containing such provisions consistent with the provisions of the
Plan as the Committee from time to time shall approve.
(c) In the event that an ISO does not comply with all the provisions
of Section 422 of the Code and applicable regulations, such Option shall become
a nonqualified stock Option on the date of said noncompliance.
6.2 EXERCISE PRICE. The price at which shares of Stock may be purchased
under an Option shall not be less than one hundred percent (100%) of the Fair
Market Value of the Stock on the date the Option is granted. Notwithstanding the
foregoing, a Ten Percent Stockholder shall not be granted an ISO unless the
exercise price of such Option is at least one hundred ten percent (110%) of the
Fair Market Value of the Stock on the date such Option is granted.
6.3 OPTION PERIOD. The period during which an Option may be exercised
shall be determined by the Committee, provided that such period shall not be
less than one (1) year from the date on which the Option is granted or longer
than: (a) ten (10) years from the date on which the Option is granted in the
case an ISO; (b) five (5) years from the date on which the Option is granted
with respect to a grant of an ISO to a Ten Percent Stockholder; and (c) ten (10)
years and one (1) day from the date on which the Option is granted in the case
of other Options.
6.4 VESTING OF OPTIONS. Except as provided in Section 6.5, the date or
dates on which installment portions of an Option shall vest and may be exercised
during the term of an Option shall be determined by the Committee and may vary
from Option to Option, provided that no more than one-third (1/3) of the shares
of Stock subject to an Option may vest in any one (1) year. The vesting of any
Option may also be conditioned on the achievement of Indicators of Performance
established by the Committee. Notwithstanding anything in this Section 6.4 to
the contrary but subject to the provisions of this Plan and Board approval, the
Committee may, on an individual basis, accelerate the time at which installment
portion(s) of an outstanding Option may be exercised.
6.5 TERMINATION OF SERVICE. Subject to the provisions of this Section 6.5,
an Option shall terminate at the end of and may be exercised, to the extent the
Option is exercisable under the Option Agreement, within the period not to
exceed the lesser of (a) ninety (90) days after the Participant ceases to be an
Employee or Non-Employee Director for any reason other than Total Disability or
death or (b) the remaining term of the Option award. If an Employee's or
Non-Employee Director's employment or service is terminated by reason of Total
Disability, all Options granted to such Participant will become fully
exercisable upon such termination and may be exercised within the period not to
exceed the lesser of: (a) one (1) year following such termination; or (b) the
remaining term of the Option award. If an Employee or Non-Employee Director of
the Company dies while in the employ or service of the Company or a Subsidiary
or within ninety days after the termination of such employment or service,
Options granted to such Participant shall become fully exercisable on the
Participant's death and may, within the lesser of (a) twelve (12) months after
the Participant's death or (b) the remaining term of the Option award, be
exercised by the person or persons to whom the Participant's rights under the
Option shall pass by will or by the applicable laws of descent and distribution.
Unless otherwise specifically provided in the Option agreement, no Option may be
exercised after a Participant's service with the Company or a Subdivision is
Terminated for Cause. In no event may an Option be exercised to any extent by
anyone after the expiration or termination of the Option as provided in this
Section 6.5 except that the Committee may elect to extend the period of Option
exercise and vesting provisions for an Employee or Non-Employee Director whose
employment or service with the Company terminates for any reason.
6.6 PAYMENT FOR SHARES. The exercise price of an Option shall be paid to
the Company in full at the time of exercise at the election of the Participant:
(a) in cash; (b) in shares of Stock having a Fair Market Value equal to the
aggregate exercise price of the Option and satisfying such other requirements as
may be imposed by the Committee; (c) partly in cash and partly in such shares of
Stock; (d) through the withholding of shares of Stock (which would otherwise be
delivered to the Participant) with an aggregate Fair Market Value on the
exercise date equal to the aggregate exercise price of the Option; or (e)
through the delivery of irrevocable instructions to a broker to deliver promptly
to the Company an amount equal to the aggregate exercise price of the Option.
The Committee may limit the extent to which shares of Stock may be used in
exercising Options. No Participant shall have any rights to dividends or other
rights of a stockholder with respect to shares of Stock subject to an Option
until the Participant has given written notice of exercise of the Option, paid
in full for such shares of Stock and, if applicable, has satisfied any other
conditions imposed by the Committee pursuant to the Plan.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARs.
(a) The Committee may authorize grants to any Participant of Stock
Appreciation Rights upon such terms and conditions as it may determine in
accordance with this Article VII. A Stock Appreciation Right will be a right of
the Participant to receive from the Company upon exercise an amount determined
by the Committee at the date of grant and expressed as a percentage of the
Spread (not to exceed 100 percent) at the time of exercise.
(b) Each grant will specify the number of shares of Stock in respect
of which it is made and the term during which it may be exercised.
(c) Each SAR shall be evidenced by a "Stock Appreciation Right
Agreement" in such form and containing such provisions consistent with the
provisions of the Plan as the Committee from time to time shall approve.
7.2 EXERCISE PRICE; PAYMENT ON EXERCISE. Each grant made will specify the
exercise price, which will not be less than 100% of the Fair Market Value per
share of Stock on the date of grant for each SAR subject to the grant. A grant
may provide that the amount payable on exercise of a Stock Appreciation Right
may be paid: (a) in cash; (b) in shares of Stock having an aggregate Fair Market
Value per Share equal to the Spread (or the designated percentage of the
Spread); or (c) in a combination thereof, as determined by the Committee in its
discretion. Such payment shall be made no later than March 15 of the year
immediately following the last day of the year in which the exercise occurs or
by a later date by which such payment may be made so that the payment falls
under the short term deferred exception of Code Section 409A. A grant may
specify that the amount payable to the Participant on exercise of a SAR may not
exceed a maximum amount specified by the Committee at the date of grant.
7.3 SUCCESSIVE GRANTS. Successive grants of SARs may be made to the same
Participant whether or not any Stock Appreciation Rights or other award
previously granted to such Participant remain unexercised or outstanding.
7.4 EXERCISABILITY OF SARs.
(a) Each SAR grant shall specify the required period or periods of
continuous service by the Participant with the Company or any Subsidiary that
are necessary before the Stock Appreciation Rights or installments thereof
become exercisable, and provide that (i) no more than one third of the SARs
under a specific grant sale becomes exercisable in one year and (ii) no SAR may
be exercised except at a time when the Spread is positive. Notwithstanding
anything in this Section 7.4 to the contrary but subject to the provisions of
this Plan and Board approval, the Committee may, on an individual basis,
accelerate the time at which installment portions of outstanding SARs may be
exercised.
(b) A grant may specify Indicators of Performance that must be
achieved as a condition to the exercise of the Stock Appreciation Rights.
(c) No Stock Appreciation Right shall be exercisable prior to one
(1) year from the date of grant and more than ten (10) years from the date of
grant.
(d) An SAR shall terminate at the end of, and may be exercised to
the extent the SAR is exercisable under the SAR agreement, within the period not
to exceed the lesser of (a) ninety (90) days after the Participant ceases to be
an Employee or Non-Employee Director for any reason other than Total Disability
or death or (b) the remaining term of the SAR award. If an Employee's or
Non-Employee Director's employment or service with the Company or a Subsidiary
is terminated by reason of Total Disability, all SARs granted to such
Participant will become fully exercisable upon such termination and may be
exercised within the period not to exceed the lesser of: (a) one (1) year
following such termination; or (b) the remaining term of the SAR award. If an
Employee or Non-Employee Director of the Company dies while in the employ or
service of the Company or a Subsidiary or within ninety days after the
termination of such employment or service, SARs granted to such Participant
shall become fully exercisable on the Participant's death and may, within the
lesser of (a) twelve (12) months after the Participant's death or (b) the
remaining term of the SAR award, be exercised by the person or persons to whom
the Participant's rights under the SAR shall pass by will or by the applicable
laws of descent and distribution. In no event may an SAR be exercised to any
extent by anyone after the expiration or termination of the SAR as provided in
this Section 6.5 except that the Committee may elect to extend the period of SAR
exercise and vesting provisions for an Employee or Non-Employee Director whose
employment or service with the Company terminates for any reason.
(e) Unless otherwise specifically provided in the SAR agreement , no
Stock Appreciation Right may be exercised after a Participant's service with the
Company or a Subsidiary has been Terminated for Cause.
7.5 NO RIGHTS AS STOCKHOLDER. No Participant shall have any rights to
dividends or other rights of a stockholder of Stock with respect to an SAR.
ARTICLE VIII
RESTRICTED STOCK
8.1 TERMS OF GRANT. At the time of making a grant of Restricted Stock to a
Participant, the Committee shall establish a Restriction Period during which
shares of Restricted Stock are subject to forfeiture if the restrictions
applicable to such shares are violated. Except as provided in Section 8.3,
forfeiture restrictions on a grant of Restricted Stock shall lapse in a calendar
year with respect to no more than one third of the shares subject to such grant
except that the Committee may, subject to the provisions of this Plan and Board
approval, on an individual basis, accelerate the time at which restrictions on
Restricted stock lapse. The Committee shall and assign such terms, conditions
and other restrictions to the Restricted Stock as it shall determine. The
vesting of any such Restricted Stock may be conditioned on the achievement of
Indicators of Performance during a Performance Period established by the
Committee. All restrictions imposed with respect to a grant of Restricted Stock
must lapse within ten years of such grant.
8.2 RESTRICTED STOCK - RIGHTS. Restricted Stock will be represented by a
Stock certificate registered in the name of the Restricted Stock recipient. Such
certificate, accompanied by a separate, duly-endorsed stock power, shall be
deposited with the Company. Instead of issuing certificates, the Company may
elect to have unvested shares of Restricted Stock held in book entry form on the
books of the Company depository or another institution designated by the Company
if and only to the extent permitted by applicable laws and the Company's
Articles of Incorporation and Bylaws. The recipient shall be entitled to receive
dividends during the Restriction Period and shall have the right to vote such
Restricted Stock and all other stockholder's rights, with the exception that:
(a) the recipient will not be entitled to delivery of the Stock certificate
during the Restriction Period; (b) the Company will retain custody of the
Restricted Stock during the Restriction Period; and (c) the non-fulfillment of
the terms and conditions established by the Committee pursuant to the grant
shall cause a forfeiture of the Restricted Stock. The Committee may, in
addition, prescribe additional restrictions, terms and conditions upon or to the
Restricted Stock.
8.3 TERMINATION OF SERVICE. The Committee may establish such rules
concerning the termination of service of a recipient of Restricted Stock prior
to the expiration of the applicable Restriction Period as it may deem
appropriate; provided, however, that if an Employee or Non-Employee Director
terminates service by reason of death or Total Disability, the applicable
forfeitable restrictions will lapse upon such death or occurrence of Total
Disability. Unless otherwise specifically provided in the Restricted Stock
Agreement, Restricted Stock will be forfeited immediately upon termination of a
Participant's service with the Company or a Subsidiary if the Participant's
employment is Terminated for Cause.
8.4 RESTRICTED STOCK AGREEMENT. Each grant of Restricted Stock shall be
evidenced by a "Restricted Stock Agreement" in such form and containing such
terms and conditions not inconsistent with the provisions of the Plan as the
Committee from time to time shall approve.
8.5 LEGEND ON CERTIFICATES. The Committee may legend the certificates
representing Restricted Stock to give appropriate notice of such restrictions.
For example, the Committee may determine that some or all certificates
representing shares of Restricted Stock shall bear the following legend:
"THE SALE OR OTHER TRANSFER OF THE SHARES OF STOCK
REPRESENTED BY THIS CERTIFICATE, WHETHER
VOLUNTARY, INVOLUNTARY, OR BY OPERATION OF LAW, IS
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE CASS INFORMATION SYSTEMS, INC.
OMNIBUS 2007 INCENTIVE STOCK PLAN, AND IN A
RESTRICTED STOCK AGREEMENT. A COPY OF THE PLAN AND
SUCH RESTRICTED STOCK AGREEMENT MAY BE OBTAINED
FROM THE SECRETARY OF THE COMPANY."
8.6 RETURN OF RESTRICTED STOCK TO COMPANY. On the date set forth in the
applicable Restricted Stock Agreement, the Restricted Stock for which
restrictions have not lapsed shall revert to the Company and thereafter shall be
available for grant under the Plan.
8.7 SECTION 83(b) ELECTION. The Committee may provide in a Restricted
Stock Agreement that the award of Restricted Stock is conditioned upon the
Participant making or refraining from making an election with respect to the
award under Code Section 83(b). If a Participant makes an election pursuant to
Code Section 83(b) with respect to a Restricted Stock award, the Participant
shall be required to promptly file a copy of such election with the Company.
ARTICLE IX
RESTRICTED STOCK UNITS
9.1 GRANT OF RSUs. The Committee may authorize grants to any Participant
of RSUs upon such terms and conditions as it may determine in accordance with
this Article IX. A RSU is the right of the Participant to receive from the
Company, upon vesting of the RSU, an amount or a percentage of the amount not to
exceed 100 percent, equal to the number of RSUs becoming vested multiplied by
the Fair Market Value of a share of Stock on the vesting date.
(a) Each grant will specify the number of RSUs being granted.
(b) Each RSU shall be evidenced by a "Restricted Stock Unit
Agreement" in such form and containing such provisions consistent with the
provisions of the Plan as the Committee from time to time shall approve.
(c) Each grant shall be evidenced by a "Restricted Stock Unit
Agreement," in such form and containing such provisions consistent with the
provisions of the Plan as the Committee from time to time shall approve.
9.2 PAYMENT ON VESTING. A grant may provide that the amount payable on
vesting of a RSU may be paid: (a) in cash; (b) in shares of Stock having an
aggregate Fair Market Value equal to the amount payable (or the designated
percentage of the amount payable); or (c) in a combination thereof, as
determined by the Committee in its discretion. Such payment shall be made no
later than March 15 of the year immediately following the calendar year in which
the vesting occurs or by a later date by which such payment may be made so that
the payment falls under the short term deferral exception of Code Section 409A.
A grant may specify that the amount payable to the Participant on vesting of an
RSU may not exceed a maximum amount specified by the Committee at the date of
grant.
9.3 SUCCESSIVE GRANTS. Successive grants of RSUs may be made to the same
Participant whether or not any RSUs or other award previously granted to such
Participant remain unexercised or outstanding.
9.4 VESTING OF RSUs. At the time of making a grant of RSUs to a
Participant, the Committee shall established a Restriction Period during which
RSUs are subject to forfeiture if restrictions applicable to such RSUs are
violated.
(a) The Committee may assign such terms, conditions and other
restrictions to the RSUs as it will determine.
(b) A grant may specify the Indicators of Performance that must be
achieved as a condition to the vesting of an RSU grant.
(c) No more than one third of the RSUs in a grant shall become
vested in a calendar year except that RSUs shall be fully vested on a
Participant's death or Total Disability and the Committee, subject to the
provisions of this Plan and Board approval, may accelerate the time, on an
individual basis, at which RSUs vest.
(d) RSUs subject to a grant must be fully vested within ten (10)
years from the date of grant.
(e) Unless otherwise specifically provided in the Restricted Stock
Unit Agreement, no RSU may vest after a Participant's service with the Company
or a Subsidiary has been Terminated for Cause.
9.5 NO RIGHTS AS A STOCKHOLDER. No Participant shall have rights to
dividends, vesting, voting or other rights as a shareholder of Stock with
respect to RSUs.
ARTICLE X
PERFORMANCE AWARDS
10.1 PERFORMANCE AWARDS. Performance Awards pursuant to this Article X are
based upon achieving established Indicators of Performance over a Performance
Period. At the time of making a Performance Award, the Committee shall establish
such terms and conditions as it shall determine applicable to such Performance
Award. Performance Awards shall be paid not later than March 15 of the calendar
year immediately following the calendar year in which the Performance Period
ends or by a later date by which such payment may be made so that the payment
falls under the short term deferral exception of Code Section 409A. Recipients
of Performance Awards are not required to provide consideration for such Awards
other than the rendering of service. A Performance Award shall be paid in cash.
For avoidance of doubt, a Performance Award under this Article X is not in lieu
of any annual bonus plan or other bonus program established and approved by the
Board of Directors from time to time.
10.2 ADMINISTRATIVE PROCEDURE. The Committee shall designate Employees as
Performance Award Participants to become eligible to receive Performance Awards
and shall establish Performance Periods, provided that, as calculated by the
Committee: (a) the cash covered by all Awards granted under the Plan during a
calendar year shall not exceed five million dollars ($5,000,000); and (b) the
cash covered by all awards granted to an individual under the Plan during a
calendar year shall not exceed two million five hundred thousand dollars
($2,500,000).
10.3 INDICATORS OF PERFORMANCE. The Committee shall establish Indicators
of Performance applicable to the Performance Period. Indicators of Performance
are utilized to determine amount and timing of Performance Awards, and may vary
between Performance Periods and different Performance Awards.
10.4 AWARD ADJUSTMENT. Subject to the terms of the Performance Award, the
Committee may make downward adjustments in Awards to Performance Award
Participants.
10.5 PARTIAL PERFORMANCE PERIOD PARTICIPATION. Subject to applicable
restrictions under Section 162(m) of the Code, the Committee shall determine the
extent to which an Employee shall participate in a partial Performance Period
because of becoming eligible to be a Performance Award Participant after the
beginning of such Performance Period. In the event a Performance Award
Participant's employment with the Company is terminated for any reason, other
than after a Change of Control, prior to completing at least fifty (50) percent
of the Performance Period for a Performance Award, no payment shall be made
pursuant to the Performance Award. In the event a Performance Award
Participant's employment with the Company is terminated (i) on account of
termination by the Company for other than Termination for Cause, (ii) death or
(iii) Total Disability after completing at least fifty (50) percent of the
Performance Period for a Performance Award, such Performance Award Participant
shall be paid a pro rata portion of the Performance Award, if the Indicators of
Performance are met, no later than March 15 of the year immediately following
the calendar year in which his or her employment is terminated or by a later
date by which such payment may be made so that the payment falls under the short
term deferral exception of Code Section 409A. No payment shall be made pursuant
to a Performance Award if the Performance Award Participant's employment with
the Company is voluntarily terminated by him or her for any reason or is
Terminated for Cause prior to the end of the Performance Period.
ARTICLE XI
ADJUSTMENT UPON CHANGES IN STOCK
The number of shares of Stock, including limits under Sections 5.1 and
5.2, which may be issued pursuant to this Plan, the number of shares covered by,
and the exercise price per share of, each outstanding Option and SAR, the number
of shares granted as Restricted Stock and the number of RSUs, shall be adjusted
proportionately, and any other appropriate adjustments shall be made, for any
increase or decrease in the total number of issued and outstanding shares of
Stock (or change in kind) resulting from any change in the Stock through a
merger, consolidation, reorganization, recapitalization, subdivision or
consolidation of shares or other capital adjustment or the payment of a Stock
dividend or other increase or decrease (or change in kind) in such shares. In
the event of any such adjustment, fractional shares shall be eliminated. Except
as otherwise determined by the Committee, no change shall be made to an
Incentive Stock Option under this Article XI to the extent it would constitute a
"modification" under section 424(h)(3) of the Code.
ARTICLE XII
CHANGE IN CONTROL
Notwithstanding anything to the contrary in the Plan, upon a Change in
Control of the Company, the following shall apply:
(a) If a Change of Control occurs during a Restriction Period(s)
applicable to Restricted Stock and RSUs issued under the Plan, all restrictions
imposed hereunder on such Restricted Stock and RSUs shall lapse effective as of
the date of the Change in Control;
(b) If a Change in Control occurs during a Performance Period(s)
applicable to an award granted under the Plan, a Performance Award Participant
shall earn no less than the award of cash which the Performance Award
Participant would have earned if applicable Indicator(s) of Performance had been
achieved and the Performance Period(s) had terminated as of the date of the
Change in Control; and
(c) Any outstanding Options and SARs that are not exercisable shall
become exercisable effective as of the date of a Change in Control. If an
Participant's employment is terminated within two (2) years after the effective
date of a Change in Control for a reason other than a Termination for Cause, to
the extent that any Option or SAR was exercisable at the time of the
Participant's termination of employment, such Option or SAR, other than an ISO,
may be exercised within the lesser of: (a) twelve (12) months following the date
of termination of employment, or (b) the term of the Option or SAR.
ARTICLE XIII
MISCELLANEOUS
13.1 EFFECT ON OTHER PLANS. Except as otherwise required by law, no action
taken under the Plan shall be taken into account in determining any benefits
under any pension, retirement, thrift, profit sharing, group insurance or other
benefit plan maintained by the Company or any Subsidiary, unless such other plan
specifically provides for such inclusion.
13.2 TRANSFER RESTRICTIONS. No Option (except as provided in Section
13.2), SAR or RSU, grant of Restricted Stock or Performance Award under this
Plan shall be transferable other than by will or the laws of descent and
distribution. Any Option or SAR shall be exercisable: (a) during the lifetime of
an Participant, only by the Participant or, to the extent permitted by the Code,
by an appointed guardian or legal representative of the Participant; and (b)
after death of the Participant, only by the Participant's legal representative
or by the person who acquired the right to exercise such Option or SAR by
bequest or inheritance or by reason of the death of the Participant. The
Committee and the Participant may, in any agreement providing for a grant and/or
award under this Plan, provide that the Participant may designate a beneficiary
or beneficiaries to receive the property granted pursuant to award and/or
exercise of the Participant's rights under the grant and/or award as provided in
this Plan after the death of the Participant.
13.3 TRANSFER OF OPTIONS. The Committee may, in its discretion, authorize
all or a portion of the Options to be granted to an Participant to be on terms
which permit transfer by such Participant to an immediate family member of the
Participant who acquires the options from the Participant through a gift or a
domestic relations order. For purposes of this Article XIII, Section 13.3,
"family member" includes any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, including adoptive
relationships, trusts for the exclusive benefit of these persons and any other
entity owned solely by these persons, provided that the Stock Option agreement
pursuant to which such Options are granted must be approved by the Committee and
must expressly provide for transferability in a manner consistent with this
Section and provided further that subsequent transfers of transferred Options
shall be prohibited except in accordance with Article XIII, Section 13.2.
Following transfer, any such Options shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer. The
events of termination of employment of Article VI, Section 6.5 hereof shall
continue to be applied with respect to the original Participant, following which
the Options shall be exercisable by the transferee only to the extent and for
the periods specified in Article VI, Section 6.5. Notwithstanding the foregoing,
an ISO may not be transferred to a family member in accordance with this Section
13.3.
13.4 WITHHOLDING TAXES. The Company shall have the right to withhold from
any settlement hereunder any federal, state, or local taxes required by law to
be withheld, or require payment in the amount of such withholding. If settlement
hereunder is in the form of Stock, such withholding may be satisfied by the
withholding of shares of Stock by the Company, unless the Participant shall pay
to the Company an amount sufficient to cover the amount of taxes required to be
withheld, and such withholding of shares does not violate any applicable laws,
rules or regulations of federal, state or local authorities.
13.5 TRANSFER OF EMPLOYMENT. Transfer of employment or consulting
assignment between the Company and a Subsidiary shall not constitute termination
of employment or service for the purpose of the Plan. Whether any leave of
absence shall constitute termination of employment for the purposes of the Plan
shall be determined in each case by the Committee.
13.6 ADMINISTRATIVE EXPENSES. All administrative expenses associated with
the administration of the Plan shall be paid by the Company.
13.7 TITLES AND HEADINGS. The titles and headings of the articles in this
Plan are for convenience of reference only and in the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.
13.8 NO GUARANTEE OF CONTINUED EMPLOYMENT OR SERVICE. No grant or award to
an Employee under the Plan or any provisions thereof shall constitute any
agreement for or guarantee of continued employment by the Company and no grant
or award to a Non-Employee Director shall constitute any agreement for or
guarantee of continuing as a Non-Employee Director.
13.9 COMMITTEE DUTIES AND POWERS. The Committee shall have such duties and
powers as may be necessary to discharge its responsibilities under this Plan,
including, but not limited to, the ability to construe and interpret the Plan
and resolve any ambiguities with respect to any of the terms and provisions
hereof as written and as applied to the operation of the Plan.
13.10 PROCEEDS. The proceeds received by the Company from the sale of
Stock under the Plan shall be added to the general funds of the Company and
shall be used for corporate purposes as the Board shall direct.
13.11 GOVERNING LAW AND VENUE. This plan shall be governed by and
construed and enforced in accordance with the laws of the State of Missouri,
excluding conflict of law rules and principles, except to the extent such laws
are preempted by Federal law. Courts located in the State of Missouri shall have
exclusive jurisdiction to determine all matters relating to the Plan and that
venue is proper in such courts.
13.12 FOREIGN JURISDICTIONS. Awards may be granted to employees who are
foreign nationals or employed outside the United States, or both, on such terms
and conditions different from those specified in the Plan as may, in the
judgment of the Committee, be necessary or desirable in order to recognize
differences in local law or tax policy. The Committee also may impose conditions
on the exercise or vesting of awards in order to minimize the Company's
obligation with respect to tax equalization for Participants on assignments
outside their home country.
13.13 SUCCESSORS. All obligations of the Company under the Plan, with
respect to awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise, of all or substantially
all of the business or assets of the Company.
13.14 BENEFICIARY DESIGNATIONS. If permitted by the Committee, a
Participant under the Plan many name a beneficiary or beneficiaries to whom any
vested but unpaid award shall be paid in the event of the Participant's death.
Each such designation shall revoke all prior designations by the Participant and
shall be effective only if given in a form and manner acceptable to the
Committee. In the absence of any such designation, any vested benefits remaining
unpaid at the Participant's death shall be paid to the Participant's estate and,
subject to the terms of the Plan and of the applicable award agreement, any
unexercised vested award may be exercised by the administrator, executor or the
personal representative of the Participant's estate.
13.15 INVESTMENT REPRESENTATION. As a condition to the exercise of an
award, the Committee may require the person exercising such award to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required.
13.16 FRACTIONAL SHARES. No fractional Shares shall be issued or delivered
pursuant to the Plan or any award. The Committee shall determine whether cash,
or awards, or other property shall be issued or paid in lieu of fractional
Shares or whether such fractional Shares or any rights thereto shall be
forfeited or otherwise eliminated.
ARTICLE XIV
AMENDMENT AND TERMINATION
The Board may at any time terminate or amend this Plan in such respect as
it shall deem advisable, provided, the Board may not, without further approval
of the shareholders of the Company, amend the Plan to: (i) increase the number
of shares of Stock which may be issued under the Plan; (ii) change Plan
provisions relating to establishment of the exercise prices under Options or
SARs granted; (iii) extend the duration of the Plan beyond the date approved by
the shareholders; (iv) reprice, replace or regrant Options or SARs through
cancellation, or by lowering the exercise price of a previously granted Option
or SARs; (v) make any change to the Plan considered material under the listing
requirements of The NASDAQ Stock Market or any other exchange on which the
Company's Stock is listed; or (vi) increase the maximum dollar amount of ISOs
which an individual Participant may exercise during any calendar year beyond
that permitted in the Code and applicable rules and regulations of the Treasury
Department. No amendment or termination of the Plan shall, without the consent
of the Participant, alter or impair any of the rights or obligations under any
grants or other rights theretofore granted such person under the Plan.
ARTICLE XV
DURATION OF THE PLAN
This Plan was approved by the Board of Directors on __________, 2007 and
will be effective on April ____, 2007, subject to approval by the Company's
shareholders at the 2007 annual meeting of shareholders. If not sooner
terminated by the Board, this Plan shall terminate on April ____, 2017, but
Options, SARs, Restricted Stock, RSUs and Performance Awards and other rights
theretofore granted and any Restriction Period may extend beyond that date, and
the terms of the Plan shall continue to apply to such grants.
IN WITNESS WHEREOF, the undersigned has caused this Cass Information
Systems, Inc. 2007 Omnibus Incentive Stock Plan to be adopted on behalf of the
Company this ___ day of April, 2007.
CASS INFORMATION SYSTEMS, INC.
By:
--------------------------
President
Exhibit 10.2
AMENDMENT AND RESTATEMENT
OF THE
CASS INFORMATION SYSTEMS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WITNESSETH:
WHEREAS, the Plan was adopted June 16, 1998, effective January 1, 1998, to
provide Key Executive Employees with retirement benefits which are comparable to
those of other Company employees; and
WHEREAS, the Plan was amended December 21, 1999 effective January 1, 1998;
and
WHEREAS, the Company wants to amend and restate the Plan to cause it to
comply with Code Section 409A; and
WHEREAS, the adoption and execution of this Plan has been approved by the
Board:
NOW, THEREFORE, the Company adopts this Amended and Restated Plan
effective January 1, 2005, to wit:
ARTICLE 1. DEFINITIONS
1.1 Affiliated Company. Any corporation which is a member of the same
controlled group of corporations, as determined by Code Section 1563(a) [without
regard to Code Sections 1563(a)(4) and (e)(3)(C)] of which the Company is a
member.
1.2 Beneficiary. An individual, designated in accordance with the terms of
the Plan, to receive benefits in the event of the death of the Participant. In
the event no Beneficiary is designated or a Beneficiary designation cannot be
found, the Participant's estate shall be the Beneficiary.
1.3 Board. The board of directors of the Company.
1.4 Change of Control. Any one or more of the following occurrences:
(a) Any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any other entity or
any group of persons acting in concert becomes the beneficial owner
(within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934) of securities of the Company possessing more than one-third of the
voting power for the election of directors of the Company;
(b) The consummation of any consolidation, merger, or other business
combination involving the Company in which holders of voting securities of
the Company immediately prior to such consummation own, as a group,
immediately after such consummation, voting securities of the Company (or,
if the Company does not survive such transaction, voting securities of the
entity surviving such transaction) having less than two-thirds of the
total voting power in an election of directors of the Company (or such
other surviving corporation);
(c) During any period of two (2) consecutive years, individuals who
at the beginning of such period constitute the directors of the Company
cease for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by the Company's shareholders, of
each new director of the Company was approved by a vote of at least
two-thirds (2/3rds) of the directors of the Company then still in office
who were directors of the Company at the beginning of any such period; or
(d) There shall be consummated any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company (on a consolidated
basis) to a party which is not controlled by or under common control with
the Company.
In the event that any provision of this definition of Change of Control provides
for a smaller degree of change of ownership than that required in the
corresponding meaning of change in the ownership or effective control of a
corporation, or change in the ownership of a substantial portion of the assets
of a corporation in Treasury Regulation 1.409A-3(i)(5) or any successor
regulation, the determination as to whether there has been a Change in Control
shall be determined by the provisions of such Treasury Regulation 1.409A-3(i)(5)
or such successor regulation.
1.5 Code. The Internal Revenue Code of 1986, as amended.
1.6 Company. Cass Information Systems, Inc., a Missouri corporation.
1.7 401(k) Hypothetical Annuity. shall be determined as follows:
(a) For purposes of this Section 1.7, the terms "Elective Deferral
Contributions", "Matching Contributions", "Elective Deferral Contributions
Account", "Matching Contributions Account" and "Plan Year" have the
meanings as provided in the 401(k) Plan.
(b) Determine the total value at the Participant's Normal Retirement
Date of the Participant's Elective Deferral Contributions and Matching
Contributions Accounts assuming, from the first day the Participant is
eligible to participate in the 401(k) Plan, that:
(i) The Participant makes, for each Plan Year through his
Retirement Date, Elective Deferral Contributions in an amount equal
to three percent of his Compensation, up to the maximum permitted
pursuant to Code Sections 401(a)(17) and 402(g).
(ii) Matching Contributions are made on behalf of the
Participant, for each Plan Year through his Retirement Date, in an
amount equal to one half the Participant's Elective Deferral
Contributions.
(iii) The Participant's Elective Deferral Contributions and
Matching Contributions Accounts realize an annual investment return
of eight percent through his Normal Retirement Date.
For purposes of this Subsection 1.7(b), the Retirement Date for a Participant
described in Section 5.8 means his date of death.
(c) Determine the amount of an annual annuity (payable on a monthly
basis for the Participant's life with a ten year certain guarantee) which
is the Actuarial Equivalent of the amount determined under 1.7(b) using
the 1983 Group Annuity Mortality Table and six percent interest.
1.8 401(k) Plan. The Cass Information Systems, Inc. 401(k) Plan.
1.9 Key Executive Employee. A person who serves as a managerial employee
of the Company or an Affiliated Company.
1.10 Normal Form. The form of benefit provided under Section 5.2.
1.11 Optional Form of Benefit. Any form of payment, other than the Normal
Form, which is permitted under the Pension Plan.
1.12 Participant. A Key Executive Employee recommended and approved to
receive the benefits pursuant to this Plan as set forth in Article 3 hereof.
1.13 Pension Plan. The Retirement Plan for Employees of Cass Information
Systems, Inc., as amended.
1.14 Pension Plan Benefit. The annual benefit which would be payable to
the Participant in the Normal Form under the Pension Plan payment of which would
commence on his Normal Retirement Date, assuming that the Participant is not
married on his Normal Retirement Date.
1.15 Pension Plan Terms. The following terms have the meanings as defined
in the Pension Plan:
(a) "Actuarial Equivalent".
(b) "Contingent Annuitant Option".
(c) "Early Retirement".
(d) "Early Retirement Date".
(e) "Earnings" except that the limitation of Code Section
401(a)(17) shall not apply and non-cash remuneration, income
attributed to the exercise of stock options and expense
reimbursements shall not be treated as "Earnings."
(f) "Final Average Earnings".
(g) "50% Joint and Survivor Annuity".
(h) "Life Annuity".
(i) "Normal Retirement".
(j) "Normal Retirement Date".
(k) "Service".
(l) "Spouse"
1.16 Plan. The Cass Information Systems, Inc. Supplemental Executive
Retirement Plan.
1.17 Primary Social Security Benefit. The annual Social Security benefit
to which a Participant is entitled at age sixty five under the Social Security
Act determined as of his Retirement Date, multiplied by the result of the
Participant's full years of Service divided by twenty-five (not to exceed 100
percent). For purposes of determining the annual Social Security Benefit of a
Participant who terminates employment with the Company or an Affiliated Company
before his Normal Retirement Date, it shall be assumed that he continues to have
the same amount of Earnings he had in the calendar year immediately preceding
such termination of employment in each calendar year commencing with the
calendar year in which his termination of employment occurs and each subsequent
calendar year through the end of the calendar year in which his Normal
Retirement Date would occur had he continued to be employed by the Company or an
Affiliated Company until his Normal Retirement Date.
1.18 Retirement Date. Except as otherwise provided herein, the first day
of the month immediately following a Participant's termination of employment
with the Company or an Affiliated Company, for a reason other than death, after
he qualifies for Early or Normal Retirement. The Retirement Date of a
Participant described under Subsection 5.9(a) shall be his earliest Early
Retirement Date assuming he had continued to be an employee of the Company or an
Affiliated Company until such date.
1.19 Specified Employee. A Participant who is a Specified Employee within
the meaning of Code Section 409A(a)(2)(B)(i).
1.20 Supplemental Pension. The pension benefit payable under Section 5.2.
ARTICLE 2. ADMINISTRATION
2.1 The Board shall administer this Plan. The Board shall adopt such
uniform and nondiscriminatory regulations as it shall deem necessary or
appropriate for the administration of this Plan. The Board shall have the full
power and authority to resolve all questions and issues interpreting the terms
and conditions of this Plan which may arise hereunder. The Board may delegate
one or more of its duties or responsibilities to other individuals.
2.2 The Board shall compute the benefit payable, as provided in this Plan,
to Participants, Spouses or Beneficiaries under this Plan.
2.3 The Board shall make all determinations concerning rights to benefits
under this Plan. Any decision by the Board denying a claim by a Key Executive
Employee, Participant, Spouse or Beneficiary for benefits under this Plan shall
be stated in writing and delivered or mailed to the Key Executive Employee,
Participant, Spouse or Beneficiary. Such decision shall set forth the specific
reasons for the denial, written to the best of Company's ability, in a manner
that may be understood without legal or actuarial counsel. In addition, the
Company shall afford a reasonable opportunity to the Participant, Spouse or
Beneficiary for a full and fair review of the decision denying such claim.
2.4 The Board shall keep a record of all proceedings and shall maintain or
cause to be maintained all books of accounts, records or other data as may be
necessary or advisable in the Board's judgment for the proper administration of
the Plan.
ARTICLE 3. ELIGIBILITY FOR PARTICIPATION IN THE PLAN
3.1 A Key Executive Employee, who is recommended by the Chairman and Chief
Executive Officer of the Company to the Board to participate in the Plan, shall
participate in the Plan if the Board approves such recommendation. The Board may
provide that a Key Executive Employee becomes a Participant in the Plan
effective as of any date and such Key Executive Employee shall become a
Participant as of such date.
3.2 Each Participant shall complete and execute an Agreement Schedule, in
the form attached hereto, upon becoming a Participant or at such other time as
the Board may require.
ARTICLE 4. FUNDING
4.1 The Company and/or an Affiliated Company will fund the Plan in such a
manner as shall be approved, from time to time, by the Board. The determination
of the Board as to whether to fund the Plan in advance or as benefits are due,
and if in advance, the amount thereof, shall be conclusive and binding upon all
parties in interest.
4.2 Contributions by Participants are not required nor permitted under
this Plan.
ARTICLE 5. BENEFITS
5.1 Except as provided in Sections 5.9 and 5.11, a Participant, or his
Spouse or Beneficiary, shall not be paid benefits under this Plan until the
Participant has qualified for Early or Normal Retirement. Benefits shall not be
payable under this Plan and shall be forfeited on account of a Participant who
terminates employment with the Company or an Affiliated Company, for a reason
other than specified in Sections 5.9 or 5.11, prior to qualifying for Early or
Normal Retirement.
5.2 The Company shall pay a Participant, who has qualified for Early or
Normal Retirement, a Supplemental Pension pursuant to this Article 5. The
monthly amount of the Supplemental Pension shall be one twelfth of the amount
determined under Section 5.3. The Supplemental Pension shall be paid monthly
commencing on the date payment of the Participant's benefits commences under the
Pension Plan and ending on the first day of the month in which the Participant
dies, and, if such death occurs within ten years of his Retirement Date,
payments shall continue to be made to his Beneficiary until a total of 120
monthly payments shall have been made to the Participant and his Beneficiary. In
the event of the death of both the Participant and his Beneficiary before 120
monthly payments have been made, the Actuarial Equivalent of the remaining
monthly payments shall be paid in a single sum to the estate of the last to
survive of the Participant or his Beneficiary. The form of benefits paid under
this Section 5.2 are called the "Normal Form".
5.3 The Supplemental Pension shall be an annual amount equal to seventy
percent of the Participant's Final Average Earnings, multiplied by the result of
Participant's full years of Service divided by twenty-five (not to exceed 100
percent), less the sum of the Participant's:
(a) Pension Plan Benefit;
(b) Primary Social Security Benefit; and
(c) 401(k) Hypothetical Annuity.
The Supplemental Pension shall be reduced by 1/180 for each of the first sixty
calendar months and 1/360 for each of the next sixty calendar months by which
commencement of payment of the Participant's Supplemental Pension precedes his
Normal Retirement Date and shall not be actuarially increased if payment of the
Supplemental Pension commences after the Participant's Normal Retirement Date.
5.4 If the Participant has a Spouse on his Retirement Date, the
Supplemental Pension shall be paid in the form of a 100 per cent Contingent
Annuitant Option with the Spouse being the surviving annuitant, which shall be
the Actuarial Equivalent of the Normal Form.
5.5 A Participant who has a Spouse on his Retirement Date may elect to
have his Supplemental Pension paid in a Life Annuity or in a Contingent
Annuitant Option rather than a form prescribed by Section 5.2 or 5.4. A
Participant who does not have a spouse may elect to have his Supplemental
Pension paid in a Life Annuity. Any form of benefit paid pursuant to this
Section 5.5 shall be the Actuarial Equivalent of the Normal Form. The rules of
the Pension Plan, governing the election of a Normal or Optional Form of benefit
payment shall apply to such election.
5.6 Notwithstanding anything in this Plan to the contrary, if the single
sum, Actuarial Equivalent of a Participant's Supplemental Pension is $15,000 or
less at the time payment of such Pension is to commence, the Supplemental
Pension shall be paid in an amount equal to the single sum Actuarial Equivalent
of such Supplemental Pension and no other benefits shall be paid under the Plan.
5.7 Payment of the benefits of a Participant (who is a Specified Employee
on his Retirement Date) under Section 5.2, 5.4, 5.5 or 5.6, shall not commence
until the first day of the seventh month immediately following the month in
which payment of benefits would otherwise commence but for this Section 5.7. In
this event, the total of the monthly benefits, that would have otherwise been
paid for the first six months but for this Section 5.7, shall be paid in a
single sum, along with the regular monthly payment for the seventh month, as of
the first day of said seventh month with interest on such amounts at the Six
Month U.S. Treasury Bill rate, compounded annually, as in effect on the first
day such benefits would be paid but for this Section 5.7.
5.8 Benefits payable under this Article 5 shall be suspended upon a
Participant's return to full employment with the Company or an Affiliated
Company. Such benefits shall again commence upon the Participant's subsequent
termination of employment and continue as if such benefits had not been
suspended upon his return to full employment. In the event of suspension of
benefits under this Section 5.8, such benefits, when payment again commences,
shall not be actuarially adjusted for the period of suspension.
5.9 In the event of the death of a Participant, who has a Spouse on his
date of death, before his Retirement Date, there shall be paid to such Spouse
the survivor portion of the annuity to which the Spouse would be entitled under
Section 5.4 as if:
(a) In the case of a Participant who dies before reaching his
earliest possible Early Retirement Date, such Participant:
(i) Continued in the employment of the Company or an
Affiliated Company until his earliest possible Early Retirement
Date;
(ii) Retired from the service of the Company or an Affiliated
Company on his earliest possible Early Retirement Date and retired
with an immediate 100 Percent Contingent Annuity; and
(iii) Died immediately after retiring.
(b) In the case of a Participant who dies after his Early or Normal
Retirement Date, such Participant had retired with an immediate 100 per
cent Contingent Annuity on the day before his date of death.
The benefit payable to the Spouse of a Participant described in Section 5.9(a)
shall commence with what would have been the Participant's earliest Early
Retirement Date, assuming he had survived and remained in the employment of the
Company or an Affiliated Company to such date. The benefit payable to the Spouse
of a Participant described in Section 5.9(b) shall commence with the first day
of the month immediately following the month in which the Participant's death
occurs. Notwithstanding anything in this Section 5.9 to the contrary, a
Participant who dies before his earliest possible Early Retirement Date shall
not accrue Service after his death for purposes of determining the amount of his
Supplemental Pension under Section 5.3. Other than the benefit provided by this
Section 5.9, no other death benefit shall be paid on account of the death of a
Participant before his Retirement Date.
5.10 Notwithstanding any provision in the Plan, if a Participant's
employment with the Company or an Affiliated Company is terminated for Cause,
neither the Participant, his Spouse or Beneficiary shall be entitled to any
benefits under this Plan. "Cause" means termination by the Company of the
Participant's employment or service by reason of: (a) an order of any federal or
state regulatory authority having jurisdiction over the Company or any
Affiliated Company; (b) the willful failure of the Participant substantially to
perform his duties set forth by his employment agreement (other than any such
failure due to the Participant's physical or mental illness); (c) a willful
breach by the Participant of any material provision of any written agreement
with the Company or any Affiliated Company; (d) the Participant's commission of
a crime that constitutes a felony or other crime of moral turpitude or criminal
fraud; (e) chemical or alcohol dependency which materially and adversely affects
the Participant's performance of his duties to the Company or any Affiliated
Company; (f) any act of disloyalty or breach of responsibilities to the Company
or any Affiliated Company, which is intended by the Participant to cause
material harm to the Company; (g) misappropriation (or attempted
misappropriation) of any of the Company's or any Affiliated Company funds or
property by the Participant; or (h) the Participant's material and intentional
violation of any Company or Affiliated Company policy applicable to the
Participant.
5.11 In the event of a Change in Control, each Participant, the payment of
whose benefits under the Plan has not yet commenced, and each Participant,
Spouse and Beneficiary receiving a Supplemental Pension shall be paid, within
sixty days following such Change in Control, in a single sum, the Actuarial
Equivalent of the remaining payments to be made to such individual under the
Supplemental Pension. In the event of a payment on account of Change in Control,
the provisions of Section 5.10 shall not apply. A Participant, Spouse or
Beneficiary who receives a payment on account of a Change of Control and the
Spouse or Beneficiary of a Participant who receives a payment on account of
Change of Control shall not receive further benefits under the Plan.
5.12 Notwithstanding anything in the Plan to the contrary, no benefit
shall be paid under the Plan on account of a Participant who has not
participated in the Plan for less than thirty-six consecutive, full calendar
months following the date the Board provides he becomes a Participant.
Notwithstanding anything in this Section 5.12 to the contrary, benefits shall be
paid on behalf of a Participant, who has not participated in the Plan for at
least thirty-six months, in the event of his death or the occurrence of a Change
in Control or in the event such Participant qualifies for Normal Retirement.
ARTICLE 6. MISCELLANEOUS PROVISIONS
6.1 The Board reserves the right to amend or terminate this Plan; however,
any amendment or termination permitted under this Section 6.1 shall not reduce
or cancel the Accrued Benefit of a Participant, which accrued prior to such
amendment or termination, or the manner of payment of such benefits which are
payable to a Participant, his Spouse or Beneficiary.
6.2 Construction of this Plan shall be governed and construed and enforced
with the laws of Missouri, excluding conflict of law rules and principles,
except to the extent such laws are preempted by Federal law. Courts located in
the State of Missouri shall have exclusive jurisdiction to determine all matters
relating to the Plan and venue is proper in such courts.
6.3 The accounting period for the Plan shall be the annual period ending
on December 31.
6.4 Nothing in this Plan, or any amendment thereto, shall give a
Participant, Key Executive Employee, Spouse, Beneficiary, employee of the
Company or an Affiliated Company or other person, a right unless it is
specifically provided or is accorded by the Company pursuant to this Plan.
Nothing in this Plan or any amendment thereto shall be construed as giving a
Participant the right to remain in the employment of the Company or an
Affiliated Company and all persons shall remain subject to discharge at any time
to the same extent as if this Plan had not been adopted.
6.5 The terms of this Plan shall be binding upon the heirs, executors,
administrators, successors and assigns of all parties in interest.
6.6 Terms in the masculine shall be deemed to include the feminine, and
terms in the singular shall be deemed to include the plural and vice versa,
wherever the context so admits or requires.
6.7 Any amount payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefor shall be deemed paid
when paid to such person's guardian or to the party providing or reasonably
appearing to provide for the care of such person, and such payment shall fully
discharge the Company, any Affiliated Company and the Board with respect
thereto.
6.8 Neither a Participant nor any other person shall acquire any right,
title, or interest in or to any amount outstanding to the Participant's credit
under the Plan other than the actual payment of such portions thereof in
accordance with the terms of the Plan. This Plan shall not be deemed to
constitute or create a trust, or an escrow agreement or any type of fiduciary
relationship between the Company and a Participant and his Spouse and
Beneficiary; nor shall the benefits provided herein be deemed in any way to be
secured by any particular assets of the Company. The Participant's interest and
that of his Spouse shall be only the unsecured contractual right to receive the
benefits provided for herein.
6.9 No right or benefit under this Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or change, and any attempt to
anticipate, alienate, sell, assign, pledge encumber or change the same shall be
void. No right or benefit hereunder shall in any manner be liable for or subject
to the debts, contracts, liabilities or torts of the person entitled to such
benefit. If a Participant, his Spouse or Beneficiary shall become bankrupt or
attempt to anticipate, alienate, sell, assign, pledge, encumber or change any
right or benefit hereunder, then such right or benefit shall, in the discretion
of the Board, cease and terminate; and in such event, the Company may hold or
apply the same or any part thereof for the benefit of such Participant, his
Spouse or Beneficiary at any time and in such proportion as the Board may deem
proper. Notwithstanding anything in this Plan to the contrary, a payment may be
made to satisfy a domestic relations order within the meaning of Code Section
414(p)(1)(B); provided, however, that no Plan benefits shall be distributed
pursuant to such a domestic relations order before they would otherwise be
distributed to the Participant or his Beneficiary under the terms of the Plan.
6.10 The cost of administering the Plan shall be paid by the Company.
6.11 This Amendment and Restatement of the Plan shall become operative and
in effect as of January 1, 2005.
6.12 The headings have been inserted for convenience only and shall not
affect the meaning or interpretation of the Plan.
6.13 The parties hereto agree that the Company shall, without prejudice to
any other remedies, be entitled to injunctive relief for any breach of covenant
contained in this Plan.
6.14 In the event a Key Executive Employee is also a member of the Board,
he shall not be eligible to participate in any determination reserved to the
Board under this Plan as it relates such Employee.
6.15 The Participant, his Spouse and any Beneficiary shall submit his
current mailing address to the Company. It shall be the duty of the Participant,
and his Spouse and any Beneficiary to notify Company promptly of any change of
address. In absence of such notice, the Company shall be entitled, for all
purposes, to rely on the last known address of the Participant, his Spouse or
any Beneficiary.
6.16 If any provision of this Plan is found to be invalid, it will not
render the remainder of the Plan invalid.
6.17 The Company shall have the right to withhold from any payment
hereunder any federal, state, or local taxes required by law to be withheld, or
require payment in the amount of such withholding.
6.18 Subject to the approval by the Board, an Affiliated Company may adopt
this Plan for the benefit of one or more of its employees. In this event,
reference to the "Company" herein shall be deemed a reference to the Affiliated
Company which has adopted this Plan pursuant to this Section 6.18, where the
context so admits or requires.
6.19 All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Plan shall be in writing and shall
be deemed to have been given when delivered personally; mailed by certified or
registered mail, return receipt requested and postage prepaid; delivered by a
nationally recognized overnight delivery service or sent by facsimile and
confirmed by first class mail, to the recipient. Such notices, demands and other
communications shall be sent to the parties at the addresses indicated below:
(a) If to a Participant: At the last known address of such person.
his Spouse or
Beneficiary
(b) If to the Company: Vice President - Human Resources
Cass Information Systems, Inc.
13001 Hollenberg Drive
Bridgeton, Missouri 63044
or to such other address or to the attention of such other party as the
recipient party has specified by prior written notice to the sending party.
IN WITNESS WHEREOF, the Company has caused this Cass Information Systems,
Inc. Supplemental Executive Retirement Plan to be executed by its President and
attested by its Secretary thereto duly authorized as of the day and year first
above written.
ATTEST: CASS INFORMATION SYSTEMS, INC.
By:
- -------------------------------- --------------------------------
Secretary President
AGREEMENT SCHEDULE
Cass Information Systems, Inc.
Supplemental Executive Retirement Plan
__________________________________________, (the "Participant"), an
employee of Cass Information Systems, Inc. (the "Company"), has been selected
and is hereby designated pursuant to a resolution adopted by the Board of
Directors of the Company to participate in the Cass Information Systems, Inc.
Supplemental Executive Retirement Plan ("Plan") effective ____________________,
200____.
I have been furnished a copy of and have read and understand the Plan. I
hereby acknowledge my designation as a Participant in the Plan and agree to its
terms and elect to have my Plan benefits distributed as provided above.
If you wish to accept the benefits of the Plan, please complete and
execute a copy of this schedule at the place indicated below.
Dated this ______ day of ____________________, 200____.
_______________________________________
Participant
Received this ____ day of __________ on behalf of the Company.
By ____________________________________
Title: ________________________________
CASS INFORMATION SYSTEMS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
BENEFIT ELECTION FORM
I, ________________________ (the "Participant"), qualify for Early or
Normal Retirement under the Cass Information Systems, Inc. Supplemental
Executive Retirement Plan (the "Plan"). I hereby elect the following form of
benefit payments:
A. Complete this section if you are not married:
1. ______ Normal Form (10 year certain, life annuity)
2. ______ Straight Life Annuity
If A.1.is selected, complete the following information regarding the contingent
beneficiary:
__________________________________________
Name
__________________________________________
Street Address
__________________________________________
City, State and Zip Code
B. Complete this section if you are married:
1. ______ Normal Form - 100% joint and survivor annuity with your
spouse
2. ______ Straight Life Annuity
3. ______ Contingent Annuity with _______ [50%, 75% or 100%] to
beneficiary
If B.3. is selected, complete the following information regarding the contingent
beneficiary:
__________________________________________
Name
__________________________________________
Street Address
__________________________________________
City, State and Zip Code
If you do not complete this form, your benefits will be paid in the Normal Form.
All sums payable under the Plan by reason of your death shall be paid to your
beneficiary if he or she survives you.
I have completed this election form this ______ day of _________________, 20__.
_______________________________________
Signature
_______________________________________
Print Name
CONSENT OF SPOUSE:
I am the spouse of the Participant. I hereby consent to the Participant's above
elections of form of benefits under the Plan and the Participant's designation
of beneficiary.
_______________________________________
Signature
_______________________________________
Print Name
_______________________________________
Date
STATE OF MISSOURI )
) SS:
COUNTY OF ST. LOUIS )
Before me, the undersigned, a Notary Public, personally appeared
__________________, who executed the above Consent of Spouse as a free and
voluntary act.
IN WITNESS WHEREOF, I have signed my name and affixed my official notary
seal this _______ day of __________________, 20__.
_______________________________________
Notary Public
My Commission Expires:
Accepted on behalf of Cass Information Systems, Inc. this ____ day of
_______________, 20__.
_______________________________________
Signature
_______________________________________
Print Name
_______________________________________
Title
Exhibit 10.3
CASS INFORMATION SYSTEMS, INC.
2007 OMNIBUS INCENTIVE STOCK PLAN
RESTRICTED STOCK AGREEMENT
Participant Name: ______________________________________________________________
Date of Grant: _________________________________________________________________
Number of Shares of Restricted Stock subject to this Award: ____________________
We are pleased to inform you that, as an employee or director of Cass
Information Systems, Inc. ("Cass") or one of its Subsidiaries, you are granted
an Award of Shares of Restricted Stock under the Cass Information Systems, Inc.
2007 Omnibus Incentive Stock Plan (the "Plan"). The shares of common stock of
Cass Information Systems, Inc. granted pursuant to this Agreement are
hereinafter called "Shares". Each Share under this Award is composed of one
share of Cass common stock, $0.50 par value per share. This Award is subject to
your acceptance as provided in Section 1 below and the terms and conditions that
follow in this Agreement.
The date of the Award evidenced by the Agreement (the "Date of Grant") is set
forth above.
The terms and conditions of this Award, including non-standard provisions
permitted by the Plan, are set forth below.
1. Acceptance of Award. This Award is to be accepted by signing your name on the
signature page of two copies of this Agreement and causing them to be delivered
to the Vice President - Human Resources of Cass, 13001 Hollenberg Drive,
Bridgeton, MO 63044, before 4:30 p.m. Central time on the 30th day after the
Date of Grant. If the Vice President - Human Resources does not receive your
properly signed copies of this Agreement before the time and date specified in
the previous sentence, then, despite anything else provided in this Agreement,
this Award will be void as if it was never awarded to you and will be of no
effect. Your signing and timely delivering the copies of this Agreement will
evidence your acceptance on the terms and conditions stated in this Agreement.
2. Issuance of Restricted Stock.
(a) Subject to the provisions of this Agreement and except as any of the
Shares may be issued in book entry form, Cass shall issue and
register on its books and records in your name a certificate
(certificates) evidencing the number of Shares subject to this Award
as set forth above. Each certificate shall bear a legend,
substantially in the following form:
"THE SALE OR OTHER TRANSFER OF THE SHARES OF STOCK REPRESENTED
BY THIS CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY
OPERATION OF LAW, IS SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE CASS INFORMATION SYSTEMS, INC.
2007 OMNIBUS INCENTIVE STOCK PLAN AND IN THE RESTRICTED STOCK
AGREEMENT. A COPY OF THE PLAN AND SUCH RESTRICTED STOCK
AGREEMENT MAY BE OBTAINED FROM THE VICE PRESIDENT - HUMAN
RESOURCES OF CASS INFORMATION SYSTEMS, INC."
The certificate(s) shall be retained by Cass (or its designee) until
the time that all restrictions or conditions applicable to the
Shares have been satisfied or lapsed. You agree to (i) deliver to
Cass, as a precondition to the issuance of any certificate or
certificates with respect to Unvested Shares, one or more stock
powers, endorsed in blank, with respect to such Shares, (ii) sign
such other powers, take such other actions as Cass may reasonably
request to accomplish the transfer or forfeiture of any Unvested
Shares that are forfeited under this Agreement and (iii) authorize
Cass to cause such Unvested Shares to be cancelled or transferred in
the event they are forfeited pursuant to this Agreement. As used in
this Agreement, "Unvested Shares" means Shares which are subject to
forfeiture under this Agreement.
(b) If Unvested Shares are held in book entry form, Subsection 2(a)
shall not be applicable and you agree that Cass may give stop
transfer instructions to the depository of such Shares to ensure
compliance with the provisions of this Agreement. You hereby (i)
acknowledge that the Unvested Shares may be held in book entry form
on the books of Cass's depository (or another institution specified
by Cass), (ii) irrevocably authorize Cass to take such actions as
may be necessary or appropriate to effect a transfer or cancellation
of the record ownership of any such Unvested Shares that are
forfeited in accordance with this Agreement, (iii) agree to take
such other actions as Cass may reasonably request to accomplish the
forfeiture of any Unvested Shares that are forfeited under this
Agreement, and (iv) authorize Cass to cause such Shares to be
cancelled or transferred in the event they are forfeited pursuant to
this Agreement.
3. Restrictions. In association with the other terms of this Agreement and in
accordance with the Plan, the Shares shall be subject to the following
restrictions:
(a) Neither (i) the Shares or any interest in them, (ii) the right to
vote the Shares, (iii) the right to receive dividends on the Shares,
or (iv) any other rights under this Agreement may be sold,
transferred, donated, exchanged, pledged, hypothecated, assigned, or
otherwise transferred, alienated or encumbered, by operation of law
or otherwise, until (and then only to the extent of) the Shares are
delivered to you or, in the event of your death, your Designated
Beneficiary or Beneficiaries or testamentary transferee or
transferees.
(b) You shall have, with respect to the Shares, all of the rights of a
holder of Shares, including the right to vote such Shares and to
receive any cash dividends thereon, except as otherwise provided in
the Plan. Additional Shares of Cass common stock resulting from
adjustments under Section XI of the Plan with respect to Shares
subject to this Agreement shall be treated as additional Shares
subject to the same restrictions and other terms of this Award and
you shall comply with the provisions of Sections 2(a) or (b), as
appropriate, with respect to such additional Shares. Cash dividends
paid on Unvested Shares are taxable to you as compensation income,
and not dividend income, and are deductible by Cass or its
Subsidiaries for income tax purposes as compensation income. Such
dividends shall be paid to you at the time they are paid to other
holders of shares of Cass Common Stock.
(c) During your lifetime, Shares shall only be delivered to you. Any
Shares transferred in accordance with this Agreement shall continue
to be subject to the terms and conditions of this Agreement. Any
transfer permitted under this Agreement shall be promptly reported
in writing to Cass's Vice President - Human Resources.
(d) You may designate a beneficiary or beneficiaries ("Designated
Beneficiary or Beneficiaries") on the Designated Beneficiary form
attached to this Agreement to receive Shares which vest on your
death. If you do not complete the Beneficiary Designation form or
if, after your death, your Designated Beneficiary or Beneficiaries
has or have died or cannot be located, Shares which become vested on
your death shall be transferred in accordance with your will or, if
you have no will, in accordance with applicable state laws of
descent and distribution.
4. Lapse of Restrictions and Delivery of Shares of Restricted Stock. Unless
previously forfeited or transferred on account of your death, Retirement, Total
Disability or a Change in Control, the Restriction Period will lapse with
respect to applicable Shares, and Cass shall deliver the Shares subject to this
Award to you, as follows:
(a) Restrictions shall lapse with respect to one-third of the Shares and
such Shares shall be delivered one year from the Date of Grant;
(b) Restrictions shall lapse with respect to the next one-third of the
Shares and such Shares shall be delivered two years from the Date of
Grant; and
(c) Restrictions shall lapse with respect to the remaining one-third of
the Shares and such Shares shall be delivered three years from the
Date of Grant.
Cass shall deliver the Shares to you by transferring certificates to you
evidencing your ownership of the Shares without the legend provided by Section
2(a) but with any legend required by federal and state securities laws. The
appropriate officers of Cass may, in their discretion, cause the Shares as
described in this Section 4 to instead be held in book entry form in your name
without the restrictions imposed by this Agreement. For purposes of this
Agreement, "Retirement" or "Retire" means normal or postponed retirement under
the Retirement Plan for Employees of Cass Information Systems, Inc.
5. Effect of Death, Retirement, Total Disability or Change of Control.
Notwithstanding anything in this Agreement to the contrary, if you die while in
the employment or service of Cass or its Subsidiaries, all Shares granted
pursuant to this Agreement, to the extent not forfeited or previously
transferred prior to your death, shall be transferred as provided in Section 4
and shall not be subject to forfeiture after your death. If you Retire or become
Totally Disabled or a Change of Control occurs while you are employed by or in
the service of Cass or its Subsidiaries, all Shares granted pursuant to the
Agreement, to the extent not forfeited or previously transferred prior to your
Retirement, Total Disability or occurrence of the Change of Control, shall,
notwithstanding anything in this Agreement to the contrary, be transferred to
you at the time your Retirement, Total Disability or a Change of Control occurs
and shall not be subject to forfeiture after the occurrence of your Retirement,
Total Disability or a Change of Control. Shares transferred pursuant to this
Section 5 shall be delivered in the same manner as provided in Section 4.
6. Effect of Other Causes of Termination of Employment.
(a) If your employment or service with Cass or any of its Subsidiaries
terminates prior to the lapse of restrictions on Shares in
accordance with Section 4 other than by reason of your death,
Retirement, or Total Disability or after a Change of Control, you
shall forfeit all such Shares.
(b) For the purposes of this Agreement, your employment or service by a
Subsidiary of Cass shall be considered terminated on the date that
the company for which you are employed or serve is no longer a
Subsidiary of Cass.
(c) Notwithstanding anything in this Agreement to the contrary, no
Shares shall be delivered to you under this Agreement if your
employment or service with Cass or a Subsidiary is Terminated for
Cause including Termination for Cause.
7. Transfer of Employment; Leave of Absence. A transfer of your employment from
Cass to a Subsidiary or vice versa, or from one Subsidiary to another, without
an intervening period, shall not be deemed a termination of employment. If you
are granted an authorized leave of absence, you shall be deemed to have remained
in the employ or service of the company by which you are employed or of which
you serve as a director during such leave of absence.
8. Tax Matters.
(a) Federal Income tax withholding (and state and local income tax
withholding, if applicable) may be required with respect to the
taxation of income realized when restrictions are removed from the
Shares or in the event you make the election described in Section
18. You agree to deliver to Cass only the amounts the Committee
determines should be withheld, provided, however, that you may pay a
portion or all of such withholding taxes by electing to have (i)
Cass withhold a portion of the Shares that would otherwise be
delivered to you or (ii) you can deliver to Cass Shares that you
have owned for at least six months, in either case, having a Fair
Market Value (as of the date that the amount of taxes is to be
withheld) in the sum of the amount to be withheld plus reasonable
expenses of selling such Shares, and provided further that your
election shall be irrevocable and subject to the approval of the
Committee.
(b) You should consult with your tax advisor regarding the tax
consequences of receiving shares and making the election described
in Section 18.
9. Employment and Service. Nothing contained in this Agreement or the Plan shall
confer any right to continue in the employ or other service of Cass or any of
its Subsidiaries or limit in any way the right of Cass or a Subsidiary to change
your compensation or other benefits or to terminate your employment or other
service with or without Cause.
10. Listing: Securities Considerations. Despite anything else in this Agreement,
if at any time the Board determines, in its sole discretion, the listing,
registration or qualification (or an updating of any such document) of the
Shares issuable under this Agreement is necessary on any securities exchange or
under any federal or state securities or blue sky law, or that the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with the issuance of the Shares, or the removal
of any restrictions imposed on such Shares, such Shares shall not be issued, in
whole or in part, or the restrictions on the Shares removed, unless such
listing, registration, qualifications, consent or approval shall have been
effected or obtained free of any conditions not acceptable to Cass.
11. Binding Effect. This Agreement shall inure to the benefit of and be binding
on the parties to this Agreement and their respective heirs, executors,
administrators, legal representatives and successors. Without limiting the
generality of the foregoing, whenever the term "you" is used in any provision of
this Agreement under circumstances where the provision appropriately applies to
the heirs, executors, administrators, or legal representatives to whom Shares
may be transferred by the Beneficiary Designation, will or the laws of descent
and distribution, the term "you" shall be deemed to include such person or
persons.
12. Plan Provisions Govern.
(a) This Award is subject to the terms, conditions, restrictions and
other provisions of the Plan as if all those provisions were set
forth in their entirety in this Agreement. If any provision of this
Agreement conflicts with a provision of the Plan, the Plan provision
shall control.
(b) You acknowledge that a copy of the Plan and a prospectus summarizing
the Plan was distributed or made available to you and that you were
advised to review that material before entering into this Agreement.
You waive the right to claim that the provisions of the Plan are not
binding on you and your heirs, executors, administrators, legal
representatives and successors.
(c) Capitalized terms used but not defined in this Agreement have the
meanings given those terms in the Plan.
(d) By your signature below, you represent that you are familiar with
the terms and provisions of the Plan, and hereby accept this
Agreement subject to all of the terms and provisions of the Plan.
You have reviewed the Plan and this Agreement in their entirety and
fully understand all provisions of the Plan and this Agreement. You
agree to accept as binding, conclusive and final all decisions or
interpretations of the Committee on any questions arising under the
Plan or this Agreement.
13. Governing Law and Venue. This Agreement shall be governed by and construed
in accordance with the laws of the State of Missouri despite any laws of that
state that would apply the laws of a different state. In the event of litigation
arising in connection with this Agreement and/or the Plan, the parties hereto
agree to submit to the jurisdiction of state and Federal courts located in
Missouri.
14. Severability. If any term or provision of this Agreement, or the application
of this Agreement to any person or circumstance, shall at any time or to any
extent be invalid, illegal or unenforceable in any respect as written, both
parties intend for any court construing this Agreement to modify or limit that
provision so as to render it valid and enforceable to the fullest extent allowed
by law. Any provision that is not susceptible of reformation shall be ignored so
as to not affect any other term or provision of this Agreement, and the
remainder of this Agreement, or the application of that term or provision to
persons of circumstances other than those as to which it is held invalid,
illegal or unenforceable, shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
15. Entire Agreement; Modification. The Plan and this Agreement contain the
entire agreement between the parties with respect to the subject matter
contained in this Agreement and it may not be modified, except as provided in
the Plan, as it may be amended from time to time in the manner provided in the
Plan, or in this Agreement, as it may be amended from time to time by a written
document signed by each of the parties to this Agreement. Any oral or written
agreements, representations, warranties, written inducements, or other
communications with respect to the subject matter contained in this Agreement
made before the signing of this Agreement shall be void and ineffective for all
purposes.
16. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute one and the same Agreement.
17. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
18. Notices; Electronic Delivery. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally; mailed by certified or registered mail, return receipt requested and
postage prepaid; delivered by a nationally recognized overnight delivery service
or sent by facsimile and confirmed by first class mail, to the recipient. Such
notices, demands and other communications shall be sent to the parties at the
addresses indicated below:
(a) If to you: ____________________________________
____________________________________
____________________________________
(b) If to the Company: Vice President - Human Resources
Cass Information Systems, Inc.
13001 Hollenberg Drive
Bridgeton, Missouri 63044
or to such other address or to the attention of such other party as the
recipient party has specified by prior written notice to the sending party. You
agree during the term of this Agreement to keep Cass informed of your current
mailing address and of receiving written notice from Cass in accordance with
this Section 18. In lieu of receiving documents in paper format, you agree, to
the fullest extent permitted by law, to accept electronic delivery of any
documents that may be required to be delivered to you (including, but not
limited to, prospectuses, prospectus supplements, grant or award notifications
and agreements, account statements, annual and quarterly reports, and all other
forms of communications) in connection with this and any other award made or
offered by Cass. Electronic delivery may be via electronic mail system or by
reference to a location on a Cass intranet to which you have access. You hereby
consent to any and all procedures Cass has established or may establish for an
electronic signature system for delivery and acceptance of any such documents
that may be required to be delivered to you, and agree that your electronic
signature is the same as, and shall have the same force and effect as, your
manual signature.
19. Section 83(b) Election. In the event you make an election under Section
83(b) of the Internal Revenue Code of 1986, as amended, with respect to Shares,
the parties hereto shall cooperate to insure such election is effective.
20. Authority to Receive Payments. Any amount payable to or for the benefit of a
minor, an incompetent person or other person incapable of receiving such payment
shall be deemed paid when paid to the conservator of such person's estate or to
the party providing or reasonably appearing to provide for the care of such
person, and such payment shall fully discharge Cass and Members of the Committee
and the Board with respect thereto.
In Witness Whereof, the parties have caused this Agreement to be signed and
delivered as of the day and year first above written.
CASS INFORMATION SYSTEMS, INC. PARTICIPANT:
______________________________ ______________________________
Signature Signature
______________________________ ______________________________
By: Date:
______________________________
Title:
______________________________
Date:
CASS INFORMATION SYSTEMS, INC.
2007 OMNIBUS INCENTIVE STOCK PLAN
RESTRICTED STOCK AGREEMENT
BENEFICIARY DESIGNATION
To the Vice President - Human Resources of Cass Information Systems, Inc.
("Cass")
Pursuant to the provisions of the Cass Information Systems, Inc. 2007 Omnibus
Incentive Stock Plan ("Plan"), permitting the designation of a Beneficiary or
Beneficiaries by a Participant, I hereby designate the following person, persons
or trust as Primary and Secondary Designated Beneficiaries of my benefits under
the Plan and the Cass Information Systems, Inc. 2007 Omnibus Incentive Stock
Plan Restricted Stock Agreement ("Agreement") between Cass and me dated
__________, 20____ payable by reason of my death:
Primary Beneficiary [include address and relationship]:
Secondary Beneficiary [include address and relationship]:
I RESERVE THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION. I HEREBY
REVOKE ALL PRIOR DESIGNATIONS (IF ANY) OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES.
Cass shall cause all Shares of Cass stock to be transferred by reason of my
death pursuant to the Agreement to the Primary Beneficiary, if he, she or it
survives me, and if no Primary Designated Beneficiary shall survive me, then to
my Secondary Designated Beneficiary, and if no named Designated Beneficiary
survives me, then all Shares shall be transferred in accordance with the terms
of the Agreement.
_________________________________ _________________________________
Date of this Designation Signature of Participant
NOTE: Unless the Participant provides otherwise in completing this Beneficiary
Designation, Cass shall transfer all Shares of Cass stock to be transferred to
more than one Designated Beneficiary equally to the living Designated
Beneficiaries.
* * * * *
This Beneficiary Designation was received on behalf of Cass this _____ day of
____________, 20____.
By: _________________________________
Title: ______________________________
CASS INFORMATION SYSTEMS, INC.
2007 OMNIBUS INCENTIVE STOCK PLAN
RESTRICTED STOCK AGREEMENT
BENEFICIARY DESIGNATION
To the Vice President - Human Resources of Cass Information Systems, Inc.
("Cass")
Pursuant to the provisions of the Cass Information Systems, Inc. 2007 Omnibus
Incentive Stock Plan ("Plan") and the Cass Information Systems, Inc. 2007
Omnibus Incentive Stock Plan Restricted Stock Agreement ("Agreement") between
Cass and me dated __________, 20____, permitting the designation of a
Beneficiary or Beneficiaries by a Participant, I hereby designate the following
person, persons or trust as primary and secondary Designated Beneficiaries of my
benefits under the Agreement payable by reason of my death:
Primary Beneficiary [include address and relationship]:
Secondary Beneficiary [include address and relationship]:
I RESERVE THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION. I HEREBY
REVOKE ALL PRIOR DESIGNATIONS (IF ANY) OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES.
Cass shall cause all Shares of Cass stock to be transferred by reason of my
death pursuant to the Agreement to and by my Primary Beneficiary, if he, she or
it survives me, and if no Primary Designated Beneficiary shall survive me, then
to my Secondary Designated Beneficiary, and if no named Designated Beneficiary
survives me, then all Shares of Cass stock shall be transferred in accordance
with the terms of the Agreement.
_________________________________ _________________________________
Date of this Designation Signature of Participant
NOTE: Unless the Participant provides otherwise in completing this Beneficiary
Designation, Cass shall transfer all Shares of Cass stock to be transferred to
more than one Designated Beneficiary equally to the living Designated
Beneficiaries.
* * * * *
This Beneficiary Designation was received on behalf of Cass this _____ day of
____________, 20____.
By: _________________________________
Title: ______________________________
Exhibit 10.4
CASS INFORMATION SYSTEMS, INC.
2007 OMNIBUS INCENTIVE STOCK PLAN
STOCK APPRECIATION RIGHTS AGREEMENT
[STOCK SETTLEMENT FORM]
Participant Name...........................................................
Date of Grant..............................................................
Grant Price ("Grant Price") per Stock Appreciation Right...................
Number of Share equivalents subject to this Award..........................
Expiration Date............................................................
We are pleased to inform you that, as an employee or director of Cass
Information Systems, Inc. ("Cass") or one of its Subsidiaries, you have been
granted an Award of Stock Appreciation Rights (also referred to as a "SARs")
under the Cass Information Systems, Inc. 2007 Omnibus Incentive Stock Plan (the
"Plan"). The SARs give you the opportunity to receive a stock settlement at the
time of exercise of the SARs equal to the result of multiplying (a) the excess
of the Fair Market Value of a share of Cass common stock on the date of exercise
date over the Grant Price by (b) the number of Share equivalents with respect to
which the SAR or SARs is or are exercised. This Award is subject to your
acceptance of this Award as provided in Section 1 below and the terms and
conditions that follow in this Agreement.
The date of the Award evidenced by this Agreement (the "Date of Grant") and the
date the SARs expire (the "Expiration Date") are set forth above.
The terms and conditions of this Award, including non-standard provisions
permitted by the Plan, are set forth below.
1. Acceptance of SARs. This Award is to be accepted by signing your name on the
signature page of two copies of this Agreement and cause them to be delivered to
the Vice President - Human Resources of Cass, 13001 Hollenberg Drive, Bridgeton,
MO 63044, before 4:30 p.m. Central time on the 30th day after the Date of Grant.
If the Vice President - Human Resources does not timely receive your properly
signed copies of this Agreement, then, despite anything else provided in this
Agreement, this Agreement will be void as if it was never awarded to you and
will be of no effect. Your signing and timely delivering the copies of this
Agreement will evidence your acceptance of the SARs on the terms and conditions
stated in this Agreement.
2. When You Can Exercise the SARs; What You Will Receive Upon Exercise.
(a) Unless previously forfeited or subject to the other provisions of
this Agreement, one third of the SARs subject to this grant shall
first be exercisable after the first anniversary of the Date of
Grant; the next one third of the SARs shall first become exercisable
after the second anniversary of the Date of Grant and the remaining
one third of the SARs shall first become exercisable after the third
anniversary of the Date of Grant. For purposes of this Agreement, a
SAR is "vested" when it becomes exercisable.
(b) Except as otherwise provided in Sections 5 and 6, the SARs shall
lapse on the earlier of (i) the Expiration Date or (ii) the tenth
anniversary of the Date of Grant.
(c) SARs shall not become exercisable unless you remain continuously in
the employ or service of Cass or of one of its Subsidiaries, except
as provided in Sections 5 and 6.
(d) The right to exercise shall be cumulative. If the full number of
SARs available for exercise for a period, as provided in Section
2(a), are not exercised, the balance may be exercised at any time or
from time to time thereafter prior to the termination of the SARs.
The SARs shall not, however, be exercisable after their expiration
as provided in Section 2(b).
(e) Upon exercise of a SAR evidenced by this Agreement, you shall
receive a number of shares of common stock of Cass determined as
follows:
(i) Subtract the Grant Price from the Fair Market Value of a share
of Cass common stock on the exercise date.
(ii) Multiply the amount determined under Subsection 2(e)(i) by the
number of SARs being exercised.
(iii) Divide the product determined under Subsection 2(e)(ii) by the
Fair Market Value of a share of Cass common stock on the date
of exercise.
(iv) A number of shares of Cass common stock equal to the result
under Subsection 2(e)(iii) shall be transferred to you no
later than March 15 of the calendar year immediately following
the calendar year in which the SAR is exercised.
(v) If this computation results in a fractional share of Cass
common stock, you shall not receive cash or Cass common stock
in lieu of the fractional share.
3. Notice of Exercise. SARs are exercised by delivering a signed Notice of
Exercise in the form attached to this Agreement to Cass's Vice President - Human
Resources at the office specified in Section 21 below. Delivery of a signed
Notice of Exercise constitutes your legally binding irrevocable exercise of the
SARs. In the case of any delivery by facsimile transmission, the original Notice
of Exercise form shall be promptly forwarded by you by hand delivery or mail to
the Vice President - Human Resources of Cass following such facsimile
transmission. If a properly signed Notice of Exercise form is not received by
Cass's Vice President - Human Resources by the applicable expiration date
specified in Sections 2(b), 5 or 6, the notice will be deemed void and of no
effect. If notice of exercise of the SARs is given by a person other than you,
Cass may require as a condition to exercise of the SARs the submission to Cass
of appropriate proof of the right of such person to exercise the SARs. A SAR is
deemed to have been exercised on the date on which the Notice of Exercise is
received by Cass's Vice President - Human Resources as described above.
4. Transferability of Your SARs. The SARs shall not be transferable by you other
than upon your death pursuant to Beneficiary Designation, your will or the laws
of descent and distribution. During your lifetime the SARs shall be exercisable
only by you. Any transferred SARs shall continue to be subject to the terms and
conditions of this Agreement, including, without limitation, the provisions of
Sections 2(b), 5 and 6. Any transfer permitted under this Agreement shall be
promptly reported in writing to Cass's Vice President - Human Resources. You may
designate a beneficiary or beneficiaries ("Designated Beneficiary or
Beneficiaries") on the Designated Beneficiary form attached to this Agreement to
receive SARs which are exercisable at the time of your death and which become
exercisable on your death. If you do not complete the Beneficiary Designation
form or if, after your death, your Designated Beneficiary or Beneficiaries has
or have died or cannot be located, your SARs shall be transferred in accordance
with your will or, if you have no will, in accordance with the applicable state
laws of descent and distribution.
5. Effect of Death, Retirement or Total Disability. If your employment by or
service with Cass or one of its Subsidiaries terminates by reason of your death,
Retirement or Total Disability or if you die within ninety days of your
termination of employment for other than Retirement or Total Disability, all of
the SARs, to the extent not previously forfeited, become immediately exercisable
in full and non-forfeitable on your death, Retirement or Total Disability and
such SARs, including SARs which became exercisable prior to your death,
Retirement or Total Disability but are not exercised as of the date of your
death, Retirement or Total Disability, shall continue to be exercisable for the
lesser of (i) one year from the date of your termination of service or
employment on account of your death, Retirement or Total Disability, (ii) one
year from your death after termination of employment for a reason other than
Retirement or Total Disability or (iii) the remaining term of the SAR. For
purposes of this Agreement, "Retirement" or "Retire" means normal or postponed
retirement under the Retirement Plan for Employees of Cass Information Systems,
Inc.
6. Effect of Other Causes of Termination of Employment or Service.
(a) If your employment or service with Cass or a Subsidiary terminates
other than by reason of your death, Retirement or Total Disability,
the SARs shall be exercisable only with respect to the number of
Share equivalents which are exercisable on the date of your
termination of employment or service and then must be exercised, if
at all, within the lesser of (i) ninety days after such severance of
employment or (ii) the remaining term of the SAR.
(b) Notwithstanding anything in this Agreement to the contrary, no SARs,
including SARs which become exercisable but are not exercised prior
to such termination of service of employment, shall be exercisable
after your employment or service with Cass or any Subsidiary is
Terminated for Cause, including Termination for Cause after a Change
of Control.
7. Transfer of Employment; Leave of Absence. A transfer of your employment from
Cass to a Subsidiary or vice versa, or from one Subsidiary to another, without
an intervening period, shall not be deemed a termination of employment. If you
are granted an authorized leave of absence, you shall be deemed to have remained
in (i) the employ of the company by which you are employed or (ii) service as a
director of Cass during such leave of absence. Your employment by a Subsidiary
shall be considered terminated on the date the company for which you are
employed is no longer a Subsidiary of Cass.
8. Change in Control. Except as provided in Section 6(b), all SARs subject to
this Agreement shall become fully exercisable on and after a Change in Control.
9. Tax Matters.
(a) You should consult your tax advisor regarding the tax consequences
of receiving the SARs, SARs becoming exercisable and exercising the
SARs.
(b) On exercise of a SAR, Federal income tax withholding (and state and
local income tax withholding, if applicable) may be required in
respect of taxes on income realized. You agree to deliver to Cass
only the amounts the Committee determines should be withheld,
provided, however, that you may pay a portion or all of such
withholding taxes by (i) electing to have Cass withhold a portion of
the shares of Cass stock that would otherwise be delivered to you
upon exercise of a SAR or (ii) delivering shares of Cass stock that
you have owned for at least six months, in either case, having a
Fair Market Value (as of the date that the amount of taxes is to be
withheld) in the sum of the amount to be withheld plus reasonable
expenses of selling such shares, and provided further that your
election shall be irrevocable and subject to the approval of the
Committee.
10. Employment and Service Nothing in this Agreement shall confer any right to
continue in the employ or other service of Cass or any of its Subsidiaries or
limit in any way the right of your employer to change your compensation or other
benefits or to terminate your employment or other service with or without cause.
11. Time of Essence. Time is of the essence regarding the delivery of notices
under this Agreement. There is no grace period.
12. Binding Effect. This Agreement shall inure to the benefit of and be binding
on the parties to this Agreement and their respective heirs, executors,
administrators, legal representatives and successors. Without limiting the
generality of the foregoing, whenever the term "you" is used in any provision of
this Agreement under circumstances where the provision appropriately applies to
the heirs, executors, administrators, or legal representatives to whom this
Award may be transferred by will or by the laws of descent and distribution, the
term "you" shall be deemed to include such person or persons.
13. Plan Provisions Govern.
(a) This Award is subject to the terms, conditions, restrictions and
other provisions of the Plan as if all those provisions were set
forth in their entirety in the Agreement. If any provision of this
Agreement conflicts with a provision of the Plan, the Plan provision
shall control.
(b) You acknowledge that a copy of the Plan and a prospectus summarizing
the Plan was distributed or made available to you and that you were
advised to review that material before entering into this Agreement.
You waive the right to claim that the provisions of the Plan are not
binding on you and your heirs, executors, administrators, legal
representatives and successors.
(c) Capitalized terms used but not defined in this Agreement have the
meanings given those terms in the Plan.
(d) By your signature below, you represent that you are familiar with
the terms and provisions of the Plan and hereby accept this
Agreement subject to all of the terms and provisions of the Plan.
You have reviewed the Plan and this Agreement in their entirety and
fully understand all provisions of the Plan and this Agreement. You
agree to accept as binding, conclusive and final all decisions and
interpretations of the Committee on any questions arising under the
Plan or this Agreement.
14. Governing Law and Venue. This Agreement shall be governed by and construed
in accordance with the laws of the state of Missouri despite any laws of that
state that would apply the laws of a different state. In the event of litigation
arising in connection with this Agreement and/or the Plan, the parties hereto
agree to submit to the jurisdiction of state and Federal courts located in the
state of Missouri.
15. Severability. If any term or provision of this Agreement, or the application
of this Agreement to any person or circumstance, shall at any time or to any
extent be invalid, illegal or unenforceable in any respect as written, both
parties intend for any court construing this Agreement to modify or limit that
provision so as to render it valid and enforceable to the fullest extent allowed
by law. Any provision that is not susceptible of reformation shall be ignored so
as to not affect any other term or provision of this Agreement, and the
remainder of this Agreement, or the application of that term or provision to
persons or circumstances other than those as to which it is held invalid,
illegal or unenforceable, shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
16. Entire Agreement; Modification. The Plan and this Agreement contain the
entire agreement between the parties with respect to the subject matter
contained in this Agreement and may not be modified, except as provided in the
Plan, as it may be amended from time to time in the manner provided in the Plan,
or in this Agreement, as it may be amended from time to time by a written
document signed by each of the parties to this Agreement. Any oral or written
agreements, representations, warranties, written inducements, or other
communications with the respect to the subject matter contained in this
Agreement made before the signing of this Agreement shall be void and
ineffective for all purposes.
17. Listing: Securities Considerations. Despite anything else in this Agreement,
if at any time the Board determines, in its sole discretion, the listing,
registration or qualification (or an updating of any such document) of the SARs
issuable under this Agreement is necessary on any securities exchange or under
any federal or state securities or blue sky law, or that the consent or approval
of any governmental regulatory body is necessary or desirable as a condition of,
or in connection with the issuance of the SARs, or the removal of any
restrictions imposed on such SAR, such SAR shall not be exercisable, in whole or
in part, nor the restrictions on the SARs removed, unless such listing,
registration, qualifications, consent or approval shall have been effected or
obtained free of any conditions not acceptable to Cass.
18. Authority to Receive Payments. Any amount payable to or for the benefit of a
minor, an incompetent person or other person incapable of receiving such
payments therefore shall be deemed paid when paid to the conservator of such
person's estate or to the party providing or reasonably appearing to provide for
the care of such person, and such payment shall fully discharge Cass and members
of the Committee and the Board with respect thereto.
19. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute one and the same Agreement.
20. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
21. Notices; Electronic Delivery. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally; mailed by certified or registered mail, return receipt requested and
postage prepaid; delivered by a nationally recognized overnight delivery service
or sent by facsimile and confirmed by first class mail, to the recipient. Such
notices, demands and other communications shall be sent to the parties at the
addresses indicated below:
(a) If to you: ____________________________________
____________________________________
____________________________________
(b) If to the Company: Vice President - Human Resources
Cass Information Systems, Inc.
13001 Hollenberg Drive
Bridgeton, Missouri 63044
or to such other address or to the attention of such other party as the
recipient party has specified by prior written notice to the sending party. You
agree, during the term of this Agreement to keep Cass informed of your current
mailing address and of receiving written notice from Cass in accordance with
this Section 21. In lieu of receiving documents in paper format, you agree, to
the fullest extent permitted by law, to accept electronic delivery of any
documents that may be required to be delivered to you (including, but not
limited to, prospectuses, prospectus supplements, grant or award notifications
and agreements, account statements, annual and quarterly reports, and all other
forms of communications) in connection with this and any other award made or
offered by Cass. Electronic delivery may be via electronic mail system or by
reference to a location on a Cass intranet to which you have access. You hereby
consent to any and all procedures Cass has established or may establish for an
electronic signature system for delivery and acceptance of any such documents
that may be required to be delivered to you, and agree that your electronic
signature is the same as, and shall have the same force and effect as, your
manual signature.
In Witness Whereof, the parties have caused this Agreement to be signed and
delivered as of the day and year first above written.
CASS INFORMATION SYSTEMS, INC. PARTICIPANT:
______________________________ ______________________________
Signature Signature
______________________________ ______________________________
By: By:
______________________________ ______________________________
Title: Title:
______________________________ ______________________________
Date: Date:
NOTICE OF EXERCISE
To:
Vice President - Human Resources
Cass Information Systems, Inc. ("Cass")
13001 Hollenberg Dr.
Bridgeton, MO 63044 Date of Exercise: _____________
This constitutes notice that I elect to exercise my Stock Appreciation Right
Award under the Cass Information Systems, Inc. 2007 Omnibus Incentive Stock Plan
("Plan") as follows:
Stock Appreciation Right dated: ..................... __________________________
Number of SARs which are exercised: ................. __________________________
Certificates to be issued in the name of: ........... __________________________
By this exercise, I agree (i) to provide such additional documents as you may
require under the terms of the Plan and the Cass Information Systems, Inc. 2007
Omnibus Incentive Stock Plan Stock Appreciation Rights Agreement between Cass
and me dated __________, 20____, and (ii) to provide for the payment by me to
you (in the manner designated by you) of your withholding obligation, if any,
relating to the exercise of this Stock Appreciation Right.
Very truly yours,
____________________________________________
Signature
____________________________________________
Print your name
CASS INFORMATION SYSTEMS, INC.
2007 OMNIBUS INCENTIVE STOCK PLAN
STOCK APPRECIATION RIGHTS AGREEMENT
BENEFICIARY DESIGNATION
To the Vice President - Human Resources of Cass Information Systems, Inc.
("Cass")
Pursuant to the provisions of the Cass Information Systems, Inc. 2007 Omnibus
Incentive Stock Plan ("Plan") and the Cass Information Systems, Inc. 2007
Omnibus Incentive Stock Plan Stock Appreciation Rights Agreement ("Agreement")
between Cass and me dated __________, 20____, permitting the designation of a
Beneficiary or Beneficiaries by a Participant, I hereby designate the following
person, persons or trust as primary and secondary Designated Beneficiaries of my
benefits under the Agreement payable by reason of my death:
Primary Beneficiary [include address and relationship]:
Secondary Beneficiary [include address and relationship]:
I RESERVE THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION. I HEREBY
REVOKE ALL PRIOR DESIGNATIONS (IF ANY) OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES.
Cass shall cause all SARs to be transferred and exercisable by reason of my
death pursuant to the Agreement to and by my Primary Beneficiary, if he, she or
it survives me, and if no Primary Designated Beneficiary shall survive me, then
to my Secondary Designated Beneficiary, and if no named Designated Beneficiary
survives me, then all SARs shall be transferred and be exercisable in accordance
with the terms of the Agreement.
_________________________________ _________________________________
Date of this Designation Signature of Participant
NOTE: Unless the Participant provides otherwise in completing this Beneficiary
Designation, Cass shall transfer, and permit to be exercised, all SARs to be
transferred to and exercisable by more than one Designated Beneficiary equally
to the living Designated Beneficiaries.
* * * * *
This Beneficiary Designation was received on behalf of Cass this _____ day of
____________, 20____.
By: _________________________________
Title: ______________________________
Exhibit 31.1
CERTIFICATIONS
I, Lawrence A. Collett, Chairman and Chief Executive Officer of Cass Information
Systems, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cass Information
Systems, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 7, 2007
/s/ Lawrence A. Collett
--------------------------------------------
Lawrence A. Collett
Chairman and Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, P. Stephen Appelbaum, Chief Financial Officer of Cass Information Systems,
Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cass Information
Systems, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 7, 2007
/s/ P. Stephen Appelbaum
--------------------------------------------
P. Stephen Appelbaum
Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cass Information Systems, Inc. ("the
Company") on Form 10-Q for the period ended September 30, 2007 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I,
Lawrence A. Collett, Chairman and Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Lawrence A. Collett
--------------------------------------------
Lawrence A. Collett
Chairman and Chief Executive Officer
(Principal Executive Officer)
November 7, 2007
A signed original of this written statement required by Section 906 has been
provided to Cass Information Systems, Inc. and will be retained by Cass
Information Systems, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cass Information Systems, Inc. ("the
Company") on Form 10-Q for the period ended September 30, 2007 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, P.
Stephen Appelbaum, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ P. Stephen Appelbaum
--------------------------------------------
P. Stephen Appelbaum
Chief Financial Officer
(Principal Financial and Accounting Officer)
November 7, 2007
A signed original of this written statement required by Section 906 has been
provided to Cass Information Systems, Inc. and will be retained by Cass
Information Systems, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.