SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB-A
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of
the Securities Exchange Act of 1934
INVESTORSBANCORP, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1854234
(State of other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
W239 N1700 Busse Road, Waukesha, Wisconsin 53188
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 523-1000
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of class)
<PAGE>
PART I
Item 1. Description of Business.
The information provided under the caption "Business" in the
Information Statement filed as Exhibit 15 hereto (the "Information
Statement") is incorporated herein by reference.
Item 2. Management's Discussion and Analysis or Plan of Operation.
The information provided under the caption "Business" in the
Information Statement is incorporated herein by reference.
Item 3. Description of Property.
The information provided under the caption "Business" in the
Information Statement is incorporated herein by reference.
Item 4. Security Ownership of Certain Beneficial Owners and
Management.
The information provided under the captions "Description of INVB
Capital Stock" and "Management -- Stock Ownership of Executive Officers
and Directors" in the Information Statement is incorporated herein by
reference.
Item 5. Directors, Executive Officers, Promoters and Control
Persons.
The information provided under the captions "Management --
Directors and Executive Officers of INVB" is incorporated herein by
reference.
Item 6. Executive Compensation.
The information provided under the captions "Management --
Compensation of Directors," "Management -- Executive Compensation" and
"Management -- INVB 1997 Equity Incentive Plan" in the Information
Statement is incorporated herein by reference.
Item 7. Certain Relationships and Related Transactions.
The information provided under the captions "The Distribution"
and "Arrangements Among BMCC, INVB and the Bank" in the Information
Statement is incorporated herein by reference.
Item 8. Description of Securities.
The information provided under the captions "Description of INVB
Capital Stock" and "Certain Antitakeover Effects" in the Information
Statement is incorporated herein by reference.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and Other Stockholder Matters.
The information provided under the captions "The Distribution --
Listing and Trading of INVB Common Stock" and "Dividend Policy" in the
Information Statement is incorporated herein by reference.
Item 2. Legal Proceedings.
Not applicable.
Item 3. Changes in and Disagreements with Accountants.
Not applicable.
Item 4. Recent Sales of Unregistered Securities.
The information provided under the caption "The Distribution --
Stock Ownership After the Distribution" in the Information Statement is
incorporated herein by reference.
Item 5. Indemnification of Directors and Officers.
The information provided under the caption "Liability of
Directors and Officers; Indemnification" in the Information Statement is
incorporated herein by reference.
PART F/S
The Pro Forma Financial Data and Audited Financial Statements
(consisting only of a Balance Sheet as of July 7, 1997) contained in the
Information Statement are incorporated herein by reference.
PART III
Item 1. Index to Exhibits.
The Index to Exhibits is included herein immediately after the
signature page hereof.
Item 2. Description of Exhibits.
The Exhibits filed herewith are described in the Index to
Exhibits included herein.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to
Form 10-SB-A registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
INVESTORSBANCORP, INC.
Date: August 20, 1997 By: /s/ George R. Schonath
George R. Schonath
President and Chief Executive
Officer
<PAGE>
INDEX TO EXHIBITS
The following documents are filed as part of this registration
statement.
Exhibit
Number Description of Document
2(a) Form of Restated Articles of Incorporation of
InvestorsBancorp, Inc.*
2(b) Form of By-laws of InvestorsBancorp, Inc.*
3 The provisions in registrant's Articles of
Incorporation and By-laws defining the rights
of holders of its equity securities are
included in Exhibits 2(a) and 2(b)*
6(a) Form of Management Services and Allocation of
Expenses Agreement between Bando McGlocklin
Capital Corporation and InvestorsBank*
6(b) Form of Tax Allocation and Services Agreement
between InvestorsBancorp., Inc. and
InvestorsBank*
6(c) Form of InvestorsBancorp, Inc. 1997 Equity
Incentive Plan*
15 Information Statement regarding
InvestorsBancorp, Inc. to be mailed to Bando
McGlocklin Capital Corporation's shareholders
______________________
* Previously Filed.
EXHIBIT 15
INFORMATION STATEMENT
[LOGO]
COMMON STOCK, PAR VALUE $0.01
This Information Statement is being furnished to shareholders of
Bando McGlocklin Capital Corporation, a Wisconsin corporation ("BMCC"), in
connection with the distribution (the "Distribution") by BMCC to its
shareholders of all of the outstanding shares of common stock, par value
$.01 per share (the "INVB Common Stock"), of its subsidiary,
InvestorsBancorp, Inc., a Wisconsin corporation ("INVB" or the "Company")
owned by BMCC. INVB is a proposed bank holding company organized to own
all of the capital stock of InvestorsBank, a proposed Wisconsin-chartered
bank to be located in Pewaukee, Wisconsin (the "Bank").
It is expected that the Distribution will be made on or about
September 6, 1997, on the basis of one share of INVB Common Stock for each
4.19216 shares of common stock, 6-2/3 cents par value, of BMCC (the "BMCC
Common Stock") held on September 5, 1997 (the "Record Date"). No payment
need be made by shareholders of BMCC for the shares of INVB Common Stock
to be received by them in the Distribution. BMCC shareholders will not be
required to surrender or exchange shares of BMCC Common Stock in order to
receive shares of INVB Common Stock.
There is currently no public market for INVB Common Stock.
Shares of INVB Common Stock will not be listed on any securities exchange,
but INVB expects that quotations for the Common Stock will be reported on
the National Association of Securities Dealers' Over-the-Counter Bulletin
Board (the "OTC Bulletin Board") under the symbol "INVB."
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
THIS INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. ANY SUCH OFFERING MAY
ONLY BE MADE BY MEANS OF A SEPARATE PROSPECTUS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND OTHERWISE IN COMPLIANCE WITH APPLICABLE LAW.
The date of this Information Statement is August __, 1997.
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . iii
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . 8
PRO FORMA FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . 9
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Future Capital Requirements . . . . . . . . . . . . . . . . . . 11
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Government Regulation and Monetary Policy . . . . . . . . . . . 11
Dependence on Management . . . . . . . . . . . . . . . . . . . . 11
Lending Risks and Lending Limits . . . . . . . . . . . . . . . . 11
Impact of Interest Rates and Economic Conditions . . . . . . . . 12
Absence of History as a Stand-alone Company . . . . . . . . . . 12
Absence of a Public Market for INVB Common Stock . . . . . . . . 13
Concentration of Share Ownership . . . . . . . . . . . . . . . . 13
Certain Antitakeover Effects . . . . . . . . . . . . . . . . . . 13
THE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Background of and Reasons for the Distribution . . . . . . . . . 15
Manner of Effecting the Distribution . . . . . . . . . . . . . . 15
Certain Federal Income Tax Consequences of the Distribution . . 16
Stock Ownership After the Distribution . . . . . . . . . . . . . 18
Market for INVB Common Stock . . . . . . . . . . . . . . . . . . 18
Conditions; Termination . . . . . . . . . . . . . . . . . . . . 19
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Business Strategy . . . . . . . . . . . . . . . . . . . . . . . 21
Products and Services . . . . . . . . . . . . . . . . . . . . . 22
Market Area . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Bank Premises . . . . . . . . . . . . . . . . . . . . . . . . . 23
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
BMCC Historical Data . . . . . . . . . . . . . . . . . . . . . . 24
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Directors and Executive Officers of INVB . . . . . . . . . . . . 36
Committees of the INVB Board of Directors . . . . . . . . . . . 37
Compensation of Directors . . . . . . . . . . . . . . . . . . . 37
Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . 37
Stock Ownership of Executive Officers and Directors . . . . . . 38
Executive Compensation . . . . . . . . . . . . . . . . . . . . . 39
INVB 1997 Equity Incentive Plan . . . . . . . . . . . . . . . . 39
SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . 44
Supervision and Regulation . . . . . . . . . . . . . . . . . . . 44
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . 45
The Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARRANGEMENTS AMONG BMCC, INVB AND THE BANK . . . . . . . . . . . . . 47
Management Services and Allocation of Expenses Agreement . . . . 48
Tax Allocation and Services Agreement . . . . . . . . . . . . . 48
DESCRIPTION OF INVB CAPITAL STOCK . . . . . . . . . . . . . . . . . . 49
Authorized Capital Stock . . . . . . . . . . . . . . . . . . . . 49
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . 49
CERTAIN ANTITAKEOVER EFFECTS . . . . . . . . . . . . . . . . . . . . 50
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 50
Advance Notice Procedures . . . . . . . . . . . . . . . . . . . 50
Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Wisconsin Business Combination Statute . . . . . . . . . . . . . 51
Control Share Acquisition Statute . . . . . . . . . . . . . . . 52
LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION . . . . . . . . 52
AVAILABLE INFORMATION
INVB has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form 10-SB (the "Registration
Statement") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to the INVB Common Stock described herein.
This Information Statement does not contain all of the information set
forth in the Registration Statement and the exhibits thereto. For further
information, reference is hereby made to the Registration Statement and
exhibits. Statements contained herein concerning any documents are not
necessarily complete and, in each instance, reference is made to the
copies of such documents filed as exhibits to the Registration Statement.
Each such statement is qualified in its entirety by such reference.
Copies of these documents may be inspected without charge at the principal
office of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Regional Offices of the Commission at 7 World Trade
Center, Suite 1300, New York, New York 10049, at Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661, and at 5670
Wilshire Boulevard, Suite 1100, Los Angeles, California 90036, and copies
of all or any part thereof may be obtained from the Commission upon
payment of the charges prescribed by the Commission. Copies of such
material may also be obtained from the Commission's Web Site
(http://www.sec.gov).
Following the Distribution, INVB will be required to comply with
the reporting requirements of the Exchange Act and will file annual,
quarterly and other reports with the Commission. INVB will also be
subject to the proxy solicitation requirements of the Exchange Act and,
accordingly, will furnish audited financial statements to its shareholders
in connection with its annual meetings of shareholders.
BMCC is subject to the informational requirements of the
Exchange Act, and, in accordance therewith, files reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information filed by BMCC with the Commission may be
inspected without charge at the principal office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of
the Commission at 7 World Trade Center, Suite 1300, New York, New York
10049; at Citicorp Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661; and at 5670 Wilshire Boulevard, Suite 1100, Los Angeles,
California 90036; and copies of all or any part thereof may be obtained
from the Commission upon payment of charges prescribed by the Commission.
Copies of such information may also be obtained from the Commission's Web
Site (http://www.sec.gov.).
No person is authorized by BMCC or INVB to give any information
or to make any representations other than those contained in this
Information Statement, and, if given or made, such information or
representations must not be relied upon as having been authorized.
SUMMARY
This summary is qualified by the more detailed information set
forth elsewhere in this Information Statement, which should be read in its
entirety, including the discussion of certain factors set forth under
"Risk Factors." Unless the context otherwise requires, as used herein the
terms "INVB", "InvestorsBancorp" or the "Company" includes INVB and the
Bank.
THE DISTRIBUTION
Distributing Company . . Bando McGlocklin Capital Corporation, a
Wisconsin corporation.
Shares to be Distributed 880,000 shares of INVB Common Stock,
representing all of the outstanding shares of
INVB Common Stock to be held by BMCC on the
Distribution Date. 120,000 shares of the
INVB Common Stock to be outstanding
immediately prior to the Distribution will be
owned by George R. Schonath or certain
entities controlled by Mr. Schonath (the
"Schonath Entities") on the Distribution Date
and will not be distributed in the
Distribution. The shares of INVB Common
Stock were purchased from INVB at a price of
$7.00 per share by both BMCC and the Schonath
Entities. The approval was effected by the
unanimous written consent of the Board of
Directors, including Mr. Schonath. The Board
of Directors of INVB has determined that, as
Chief Executive Officer of the Company and the
Bank, Mr. Schonath should, directly or
indirectly through the Schonath Entities, hold
a substantial equity interest in INVB in order
to closely align Mr. Schonath's interests with
those of INVB's shareholders. See "The
Distribution - Stock Ownership After the
Distribution"
Distribution Ratio . . . One share of INVB Common Stock for each
4.19216 shares of BMCC Common Stock. No
payment need be made by shareholders of BMCC
for the shares of INVB Common Stock to be
received by them in the Distribution, nor
will they be required to surrender or
exchange shares of BMCC Common Stock in order
to receive INVB Common Stock. See "The
Distribution-Manner of Effecting the
Distribution." Shareholders who hold fewer
than five shares of BMCC Common Stock will
receive a cash payment in lieu of a
fractional share and will not receive any
shares of INVB Common Stock.
No Fractional Shares . . No fractional shares of INVB Common Stock
will be distributed. All fractional share
interests will be aggregated and sold by the
Distribution Agent and the cash proceeds
distributed to those shareholders otherwise
entitled to a fractional interest. See "The
Distribution--Manner of Effecting the
Distribution."
Federal Income Tax The Distribution will be a taxable event to
Consequences to BMCC BMCC's shareholders for Federal income tax
Shareholders . . . . . . purposes. The amount of the Distribution
received by each BMCC shareholder will be
treated as a dividend (i.e., as ordinary
income) to such shareholder to the extent of
such shareholder's pro rata share of BMCC's
current earnings and profits. The amount of
the Distribution received by each BMCC
shareholder that is not treated as a dividend
will first be treated as a nontaxable return
of capital to the extent of such
shareholder's basis in its BMCC Common Stock,
and then generally as capital gain. The
amount of the Distribution received by each
BMCC shareholder for Federal income tax
purposes will be the fair market value of the
INVB Common Stock received by such
shareholder as of the Distribution Date.
BMCC will make a determination of the fair
market value of the INVB Common Stock as of
the Distribution Date after such date based
on information and advice to be received by
BMCC from Bankers' Service Corporation, a
subsidiary of Bankers' Bank, Madison,
Wisconsin ("BSC"). Prior to January 31,
1998, BMCC will report the amount of the
Distribution received by each shareholder to
such shareholder and to the IRS on IRS Form
1099-DIV. There is no assurance that the IRS
or the courts will agree with the amount
determined by BMCC. BMCC shareholders are
urged to consult their own tax advisors as to
the specific tax consequences to them of the
Distribution. See "THE DISTRIBUTION --
Certain Federal Income Tax Consequences of
the Distribution."
Federal Income Tax The Distribution may be a taxable event to
Consequences to BMCC . . BMCC for Federal income tax purposes. BMCC
will recognize gain upon the Distribution
equal to the excess, if any, of the fair
market value of the INVB Common Stock on the
Distribution Date over BMCC's tax basis in
such stock. BMCC will not recognize any loss
upon the Distribution, even if its tax basis
in the INVB Common Stock that is distributed
to its shareholders exceeds the fair market
value of such stock on the Distribution Date.
See "THE DISTRIBUTION -- Certain Federal
Income Tax Consequences of the Distribution."
Relationship with BMCC As a result of the Distribution, the Company
after the Distribution . will cease to be a subsidiary of or otherwise
affiliated with BMCC and thereafter will
operate as an independent, publicly held
company. However, as indicated under
"Management" certain executive officers of
BMCC will be executive officers and directors
of the Company and the Bank, and will
continue in such dual capacities for an
indefinite period of time. Other than the
initial $6.16 million capital contribution to
be made by BMCC to INVB immediately prior to
the Distribution Date, no assets of BMCC will
be transferred to INVB or the Bank. BMCC
will retain its entire loan portfolio from
which it derives substantially all of its
revenues and continue its practice of
participating in loans held by other lending
institutions, including the Bank. The
Company, BMCC and the Bank have also entered
an agreement providing for (a) the sharing of
certain facilities and services, (b) the
orderly separation of BMCC, the Company and
the Bank, and (c) the allocation of certain
contracts and liabilities. See "ARRANGEMENTS
AMONG BMCC, INVB AND THE BANK" and
"MANAGEMENT."
Interests of Certain George R. Schonath, who is currently the
Persons in the chief executive officer and a director of
Distribution . . . . . . BMCC, will be the President and Chief
Executive Officer and a director of INVB and
the Bank. Jon McGlocklin, who is currently
the President, Secretary and a director of
BMCC, will be a Senior Vice President and a
director of INVB and the Bank. Salvatore L.
Bando who is currently a director at BMCC,
will be a director of INVB and the Bank. Mr.
Schonath, Mr. McGlocklin and Mr. Bando are
expected to resign as directors of BMCC
immediately prior to the Distribution.
Management of the Company Effective as of the Distribution, the Board
of Directors of the Company will consist of
Salvatore L. Bando, Donald E. Sydow, Terry L.
Mather, Jon McGlocklin and George R.
Schonath. See "Management."
Risk Factors . . . . . . Shareholders should consider certain factors
discussed under "Risk Factors."
Background of and Reasons
for the Distribution . . . The Board of Directors of BMCC (the "BMCC
Board") has determined that formation of a
bank and bank holding company are in the best
interest of BMCC shareholders due to BMCC's
current business environment. However, due
to certain conflicts between BMCC's status as
a real estate investment trust and certain
conditions required by the Federal Deposit
Insurance Corporation to approve the
formation of the Bank, the BMCC Board has
determined to spin off BMCC's ownership of
INVB and the Bank to its shareholders, rather
than hold them as subsidiaries. See "The
Distribution-Background of and Reasons for
the Distribution."
Trading Market . . . . . There is currently no public market for INVB
Common Stock. The INVB Common Stock will not
be listed on any securities exchange, but
INVB expects that quotations for INVB Common
Stock will be reported on the OTC Bulletin
Board under the symbol "INVB." Robert W.
Baird & Co. Incorporated ("Baird") has also
advised INVB that, upon completion of the
Distribution, it intends to act as a market
maker in the Common Stock, subject to
applicable laws and regulatory requirements.
See "Risk Factors-Absence of a Public Market
for INVB Common Stock" and "The Distribution-
Market For INVB Common Stock."
Record Date . . . . . . . September 5, 1997.
Distribution Date . . . . On or about September 6, 1997 (the "Distribution
Date"). Commencing on or about the Distribution
Date, Firstar Trust Company (the "Distribution
Agent") will commence mailing certificates
reflecting ownership of shares of INVB Common
Stock to holders of BMCC Common Stock on the
Record Date. BMCC shareholders will not be
required to make any payment or to take any
other action to receive the INVB Common Stock
to which they are entitled in the
Distribution. "The Distribution-Manner of
Effecting the Distribution."
Distribution Agent . . . Firstar Trust Company will be the
Distribution Agent for the Distribution.
Conditions to the The Distribution is conditioned upon, among
Distribution . . . . . . other things: (a) the receipt of all state
and federal bank regulatory approvals
necessary for the Bank to commence its
business and (b) the receipt of any material
governmental approvals and third party
consents necessary to consummate the
Distribution; (c) the absence of any order,
injunction, decree or other legal restraint
or prohibition preventing the consummation of
the Distribution; and (d) no other event
occurring that prevents the consummation of
the Distribution. The applications to the
applicable federal banking regulators have
been approved. The application to the
Wisconsin state banking regulators has been
approved pending completion of an inspection
immediately prior to opening for business.
The BMCC Board may, but has no obligation to,
waive any of these conditions. In addition,
regardless of whether these conditions are
satisfied, the BMCC Board has reserved the
right to abandon, defer or modify the
Distribution and the related transactions
described herein at any time prior to the
Distribution Date. See "The Distribution-
Conditions; Termination."
Principal Businesses of After the Distribution, the Bank, on behalf
BMCC after the of BMCC, will manage, service and administer
Distribution . . . . . . BMCC's loan portfolio pursuant to a
Management Services and Allocation of
Expenses Agreement (the "Services and
Expenses Agreement"). As part of the
Services and Expenses Agreement, BMCC has
agreed not to originate any loans, except as
specifically approved in writing by the Bank.
BMCC's principal business following the
Distribution will be to manage its loan
portfolio pursuant to the Services and
Expenses Agreement and continue its practice
of participating in loans held by third party
lending institutions, including the Bank.
BMCC also intends to expand its real estate
lending business into ownership of real
property, including related buildings and
improvements for lease to small businesses.
Additionally, except for George R. Schonath
and Jon McGlocklin, all of the officers and
employees of BMCC will cease their employment
with BMCC and will become employees of the
Bank when the Bank commences operations,
which is expected to occur in the third
quarter of 1997. Mr. Schonath and Mr.
McGlocklin will continue as officers of BMCC
in addition to being officers of INVB and the
Bank.
INVESTORSBANCORP
InvestorsBancorp . . . . InvestorsBancorp is a proposed bank holding
company that will be a subsidiary of BMCC on
the Distribution Date. Immediately prior to
the Distribution BMCC will own approximately
88% of the outstanding INVB Common Stock and
the Schonath Entities will own the remaining
approximately 12%. Immediately after the
Distribution, the shareholders of record of
BMCC on the Record Date will own the
approximately 88% of the outstanding INVB
Common Stock previously owned by BMCC and the
Schonath Entities will continue to own the
remaining 12%. See "The Distribution-Stock
Ownership After the Distribution." INVB will
be the sole shareholder of InvestorsBank.
InvestorsBank . . . . . . InvestorsBank will be a newly-organized
Wisconsin-chartered commercial bank with
depository accounts to be insured by the
Federal Deposit Insurance Corporation (the
"FDIC"). The Bank will provide a full range
of commercial and consumer banking services
in its primary service area in Waukesha
County, Wisconsin, as well as the surrounding
extended market in south-eastern Wisconsin.
While all employees, except Messrs. Schonath
and McGlocklin, will cease their employment
with BMCC and become employees of the Bank,
BMCC will not transfer any of its assets to
the Bank (other than its initial capital
contribution of $6.16 million). Accordingly,
the Bank will begin its operations as a
start-up entity. The Company and the Bank
will have received all necessary regulatory
approvals, subject to the satisfaction of
certain conditions, prior to the
Distribution. See "Business."
Certain Antitakeover Certain provisions of INVB's Articles of
Effects . . . . . . . . . Incorporation (the "Articles") and INVB's By-
laws (the "By-laws"), as each will be in
effect as of the Distribution and of
applicable Wisconsin corporation law, have
the effect of making more difficult an
acquisition of control of INVB in a
transaction not approved by INVB's Board of
Directors. See "Description of INVB Capital
Stock" and "Certain Antitakeover Effects."
Post-Distribution INVB does not anticipate the payment of any
Dividend Policy . . . . . cash dividends on INVB Common Stock in the
foreseeable future. The declaration of
dividends by INVB will be subject to the
discretion of the Board of Directors of INVB.
INVB has no operations and will be dependent
on dividends from the Bank to fund any
dividend INVB may declare. However, the Bank
will be subject to certain restrictions
imposed by applicable banking regulations
that may limit its ability to pay dividends
to INVB. See "Dividend Policy."
Transfer Agent and Firstar Trust Company will be the Transfer
Registrar . . . . . . . . Agent and Registrar for INVB after the
Distribution.
SELECTED FINANCIAL DATA
Set forth below is the consolidated balance sheet of INVB as of
July 7, 1997 which is derived from and qualified by reference to, and
should be read in conjunction with the balance sheet of INVB and notes
thereto which have been audited by Price Waterhouse LLP and which are
included at the end of this Information Statement. The balance sheet of
INVB set forth below reflects only the initial capitalization of INVB
pursuant to a $1,000 investment by George R. Schonath. The following page
of this Information Statement sets forth the Pro Forma Consolidated
Balance Sheet of INVB after it is capitalized by BMCC and the Schonath
Entities.
INVESTORSBANCORP, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
(Audited)
July 7, 1997
ASSETS
Cash $1,000
------
Total Assets $1,000
======
SHAREHOLDER'S EQUITY
Common Stock, $0.01 par value, authorized
9,000,000 shares; issued and outstanding
143 shares $ 1
Additional paid in capital 999
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Total Shareholder's Equity $1,000
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PRO FORMA FINANCIAL DATA
The following is a pro forma consolidated balance sheet of INVB
immediately after it is capitalized pursuant to investments from BMCC and
the Schonath Entities, and assumes that INVB and the Bank are each
capitalized as described herein.
INVESTORSBANCORP, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
Assets:
Investments . . . . . . . . . . . . . . . . . $ -
Loans . . . . . . . . . . . . . . . . . . . . -
Less: Reserve for losses . . . . . . . . . . -
---------
Investments, net -
Cash . . . . . . . . . . . . . . . . . . . . 6,770,000
Fed Funds . . . . . . . . . . . . . . . . . . -
Other Assets - Capitalized Organizational
Costs . . . . . . . . . . . . . . . . . . . . 230,000
---------
Total Assets $7,000,000
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Liabilities and Shareholders' Equity:
Demand Deposits . . . . . . . . . . . . . . . . $ -
Interest Bearing Deposits . . . . . . . . . . . -
Short-term borrowings -
Total Liabilities $ -
Common Stock and Other Shareholders' Equity:
Common Stock . . . . . . . . . . . . . . . . . 10,000
Additional paid-in capital . . . . . . . . . . 6,990,000
Retained earnings . . . . . . . . . . . . . . . -
---------
Total Common Stock and Other Shareholders'
Equity . . . . . . . . . . . . . . . . . . $7,000,000
---------
Total Liabilities, Common Stock and Other
Shareholders' Equity $7,000,000
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INTRODUCTION
INVB is a proposed bank holding company that will be a
subsidiary of BMCC on the Distribution Date. BMCC will own approximately
88% of the outstanding INVB Common Stock and the Schonath Entities will
own the remaining approximately 12%. INVB will be the sole shareholder of
the Bank. The Bank will be a newly-organized Wisconsin-chartered
commercial bank. Other than its initial capital contribution of
$6.16 million, no assets of BMCC will be transferred to INVB or the Bank.
The Distribution to BMCC shareholders of all the outstanding shares of
INVB Common Stock owned by BMCC will complete the formation of
InvestorsBank announced by BMCC in January, 1996. The Schonath Entities
are not distributing any of their shares in the Distribution. See "The
Distribution-Stock Ownership After the Distribution."
The Distribution will be effected by transferring all of the
outstanding shares of INVB Common Stock owned by BMCC on the Distribution
Date to Firstar Trust Company, the Distribution Agent, for transfer and
distribution to the holders of BMCC Common Stock as of the Record Date.
It is expected that the Distribution Date will be on or about September 6,
1997. The Distribution will be a taxable event to shareholders of BMCC.
See "The Distribution-Certain Federal Income Tax Consequences of the
Distribution."
Shareholders of BMCC with inquiries relating to the Distribution
should call the Distribution Agent at (800) 637-7549, Monday through
Friday, 8:00 a.m. to 5:00 p.m. (Central Time). After the Distribution
Date, shareholders of INVB with inquiries relating to their certificates
of INVB Common Stock should contact the Transfer Agent and Registrar at
(800) 637-7549 Monday through Friday, 8:00 a.m. to 5:00 p.m. (Central
Time).
No action is required by BMCC shareholders in order to receive
the INVB Common Stock to which they are entitled in the Distribution.
RISK FACTORS
Shareholders should carefully consider and evaluate all of the
information set forth in this Information Statement, including the risk
factors listed below. INVB also cautions readers that, in addition to the
historical information included herein, this Information Statement
includes certain forward-looking statements and information that are based
on management's beliefs as well as on assumptions made by and information
currently available to management. When used in this Information
Statement, the words "expect", "anticipate," "intend," "plan," "believe,"
"seek," "estimate," and similar expressions are intended to identify such
forward-looking statements. However, this Information Statement also
contains other forward-looking statements. Such statements are not
guarantees of future performance and involve certain risks, uncertainties
and assumptions, including but not limited to the following factors, which
could cause INVB's future results and shareholder values to differ
materially from those expressed in any forward-looking statements made by
or on behalf of INVB. Many of such factors are beyond INVB's ability to
control or predict. Readers are cautioned not to put undue reliance on
forward-looking statements. INVB disclaims any intent or obligation to
update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
Future Capital Requirements
INVB believes that earnings from operations and its additional
paid in capital will be sufficient to satisfy its capital and other
financing requirements for the immediate future; however, no assurance can
be given that such amounts will be sufficient to meet such requirements.
INVB further believes that, if necessary, it will be able to access
capital markets on terms and in amounts that will be satisfactory to it,
although there can be no assurance that will be the case.
Competition
The Company and the Bank will face strong competition for
deposits, loans and other financial services from numerous Wisconsin and
out-of-state banks, thrifts, credit unions and other financial
institutions as well as other entities which provide financial services.
Some of these financial institutions and financial services organizations
with which the Bank will compete are not subject to the same degree of
regulation as the Bank. Many of these financial institutions aggressively
compete for business in the Bank's proposed market area. Most of these
competitors have been in business for many years, have established
customer bases, are larger, have substantially higher lending limits than
the Bank and will be able to offer certain services, including multiple
branches and international banking services, that the Bank can offer only
through correspondents, if at all. In addition, most of these entities
have greater capital resources than the Bank, which, among other things,
may allow them to price their services at levels more favorable to the
customer and to provide larger credit facilities than could the Bank. See
"Business--Market Area" and "Business--Competition."
Government Regulation and Monetary Policy
The Company and the Bank will be subject to extensive state and
federal government supervision and regulation. Existing state and federal
banking laws will subject the Bank to substantial limitations with respect
to loans, purchase of securities, payment of dividends and many other
aspects of its banking business. There can be no assurance that future
legislation or government policy will not adversely affect the banking
industry or the operations of the Bank. Federal economic and monetary
policy may affect the Bank's ability to attract deposits, make loans and
achieve satisfactory interest spreads. See "Supervision and Regulation."
Dependence on Management
The Company and the Bank are, and for the foreseeable future
will be, dependent upon the services of George R. Schonath, the President
and Chief Executive Officer of the Company and the Bank and other senior
managers retained by the Company and the Bank. The loss of any of these
individuals could adversely affect the operations of the Company and the
Bank. See "Business--Employees" and "Management."
Lending Risks and Lending Limits
The risk of nonpayment of loans is inherent in commercial
banking, and such nonpayment, if it occurs, may have a material adverse
effect on the Company's earnings and overall financial conditions as well
as the value of the Common Stock. Moreover, the Bank's focus on small- to
medium-sized businesses may result in a larger concentration by the Bank
of loans to such businesses. As a result, the Bank may assume greater
lending risks than banks which have a lesser concentration of such loans
and tend to make loans to larger companies. Management will attempt to
minimize the Bank's credit exposure by carefully monitoring the
concentration of its loans within specific industries and through prudent
loan application and approval procedures, but there can be no assurance
that such monitoring and procedures will reduce such lending risks.
The Bank's lending limit will initially be approximately
$1,400,000. Accordingly, the size of the loans which most of the Bank's
competitors with larger lending limits are able to offer will be greater.
This limit initially will affect the ability of the Bank to seek
relationships with the area's larger businesses. The Bank expects to
accommodate loan volumes in excess of its lending limit through the sale
of participations in such loans to other banks and financial institutions,
including BMCC. However, there can be no assurance that the Bank will be
successful in attracting or maintaining customers seeking larger loans or
that the Bank will be able to engage in participations of such loans or on
terms favorable to the Bank.
Impact of Interest Rates and Economic Conditions
The results of operations for financial institutions, including
the Bank, may be materially and adversely affected by changes in
prevailing economic conditions, including declines in real estate market
values, rapid changes in interest rates and the monetary and fiscal
policies of the federal government. See "Supervision and Regulation."
The Bank's profitability is in part a function of the spread between the
interest rates earned on investments and loans and the interest rates paid
on deposits and other interest-bearing liabilities. In the early 1990s,
many banking organizations experienced historically high interest rate
spreads. More recently, interest rate spreads have generally narrowed due
to changing market conditions and competitive pricing pressure, and there
can be no assurance that such factors will not continue to exert such
pressure or that such high interest rate spreads will return. Although
economic conditions in the Bank's market area have been generally stronger
than those in other regions of the country, there can be no assurance that
such conditions will continue to prevail. Substantially all the Bank's
loans will be to businesses and individuals in southeastern Wisconsin and
any decline in the economy of this area could have an adverse impact on
the Bank. Like most banking institutions, the Bank's net interest spread
and margin will be affected by general economic conditions and other
factors that influence market interest rates and the Bank's ability to
respond to changes in such rates. At any given time, the Bank's assets
and liabilities will be such that they are affected differently by a given
change in interest rates. As a result, an increase or decrease in rates
could have a positive or negative effect on the Bank's net income, capital
and liquidity. There can be no assurance that the positive trends or
developments discussed in this Prospectus will continue or that negative
trends or developments will not have a material adverse effect on the
Bank. See "Supervision and Regulation."
Absence of History as a Stand-alone Company
INVB and the Bank are newly formed companies. After the
Distribution, BMCC will not provide funds to finance INVB's operations or
for any other purpose. No assets of BMCC other than its initial capital
contribution of $6.16 million to INVB will be transferred to INVB or the
Bank. In addition, after the Distribution, BMCC will have no obligation
to provide assistance to INVB or the Bank except as described in
"Arrangements Among BMCC, INVB and the Bank." Furthermore, BMCC will have
no obligation to enter into new arrangements with INVB and the Bank as the
existing arrangements expire.
Absence of a Public Market for INVB Common Stock
There is currently no public market for INVB Common Stock.
Shares of INVB Common Stock will not be listed on any securities exchange.
Although INVB expects that quotations for INVB Common Stock will be
reported on the OTC Bulletin Board, there can be no assurance as to the
prices or volume at which trading in INVB Common Stock will occur after
the Distribution. Baird has advised INVB that, upon completion of the
Distribution, it intends to act as a market maker in the Common Stock,
subject to applicable laws and regulatory requirements. Making a market
in securities involves maintaining bid and ask quotations and being able,
as principal, to execute transactions in reasonable quantities at those
quoted prices, subject to various securities laws and other regulatory
requirements. The development of a public trading market depends,
however, upon the existence of willing buyers and sellers, the presence of
which is not within the control of INVB, the Bank or any market maker.
Even with a market maker, factors such as the limited size of this
Distribution, the lack of earnings history for INVB and the absence of a
reasonable expectation of dividends within the near future mean that there
can be no assurance of the development in the foreseeable future of an
active and liquid market for the Common Stock. Even if a market develops,
there can be no assurance that a market will continue. Recipients of
Common stock should carefully consider the potentially illiquid and long-
term nature of the shares being distributed hereby.
Until the INVB Common Stock is fully distributed and an orderly
trading market develops, the prices and volume at which trading in such
stock occurs may fluctuate significantly. The prices at which INVB Common
Stock trades will be determined by the marketplace and may be influenced
by many factors, including, among others, INVB's performance and
prospects, the depth and liquidity of the market for INVB Common Stock,
investor perception of INVB and of the banking industry, INVB's dividend
policy, general financial and other market conditions, and domestic and
international economic conditions. In addition, financial markets,
including the over-the-counter market, have experienced extreme price and
volume fluctuations that have affected the market price of many stocks and
that, at times, could be viewed as unrelated or disproportionate to the
operating performance of such companies. Such fluctuations have also
affected the share prices of many newly public issuers. Such volatility
and other factors may materially adversely affect the market price of INVB
Common Stock.
Concentration of Share Ownership
Following the Distribution, the Company's officers and directors
will beneficially own approximately 29.4% of the outstanding shares of
INVB Common Stock, including approximately 17.6% beneficially owned by
George R. Schonath, the Company's President and Chief Executive Officer.
Accordingly, these officers and directors will have the ability to
influence significantly the election of directors and most corporate
actions. Mr. Schonath will also beneficially own warrants to purchase an
additional 100,000 shares of INVB Common Stock, at a price of 110% of his
initial purchase price of $7.00 per share (or $7.70 per share). See
"Management - Stock Ownership of Executive Officers and Directors."
Certain Antitakeover Effects
The Articles and By-laws, and applicable sections of the
Wisconsin Business Corporation Law (the "WBCL") contain several provisions
that may make more difficult the acquisition of control of INVB without
the approval of the INVB Board of Directors. Certain provisions of INVB's
Articles and the By-laws, among other things: (i) classify the INVB Board
of Directors into three classes, each of which serve for staggered three-
year terms; (ii) provide that a director of INVB may be removed by the
shareholders only for cause by the vote of 80% of the stock entitled to
vote generally in the election of directors (the "Voting Stock"); (iii)
provide that shareholders must comply with certain advance notice
procedures in order to nominate candidates for election to the INVB Board
of Directors or to place shareholders' proposals on the agenda for
consideration at meetings of shareholders; and (iv) provide that the
shareholders may amend or repeal any of the foregoing provisions contained
in the Articles or the By-laws only by a vote of 80% of the capital stock
entitled to vote in the election of directors. The WBCL generally imposes
certain restrictions on mergers and other business combinations between
INVB and any holder of 10% or more of the INVB Common Stock if the
holder's acquisition of such position was not approved in advance by the
INVB Board of Directors. See "Description of INVB Capital Stock" and
"Certain Antitakeover Effects."
THE DISTRIBUTION
Background of and Reasons for the Distribution
BMCC was founded in 1980 primarily to provide commercial loans
to companies that were underserved by banks and other traditional
financial institutions. Such loans (and the participation in such loans
held by third-party lending institutions) remain the cornerstone of BMCC's
business. However, beginning in 1994 banks and other traditional
financial institution's began to enter BMCC's markets and compete directly
with BMCC for customers. This competition, coupled with such
institutions' traditionally lower cost of capital compared to BMCC, have
had an adverse effect on BMCC's margins. Therefore, the BMCC Board began
exploring the creation of a banking subsidiary to more effectively compete
with traditional financial institutions. The BMCC Board also determined
to convert BMCC from an investment company into a real estate investment
trust ("REIT") in order to increase BMCC's operational flexibility while
maintaining BMCC's favorable tax status. Such conversion was approved by
BMCC's shareholders at the annual meeting of shareholders held on December
17, 1996, and BMCC effected such conversion at the end of 1996.
At the time of the 1996 annual meeting and through February of
1997, it was intended that the Bank would be a subsidiary of BMCC and that
George R. Schonath would be the only other shareholder of the Bank in a
structure that would preserve BMCC's REIT status. However, in March of
1997 the Federal Deposit Insurance Corporation, upon its review of the
proposed structure, required certain changes to the structure that would
have caused BMCC to lose its REIT status. Rather than jeopardize the tax
benefits of BMCC's REIT status, the BMCC Board of Directors decided in
April, 1997 to spin off the Bank through a distribution of INVB Common
Stock to BMCC's shareholders, while still maintaining Mr. Schonath's
equity position in the Bank through ownership of INVB Common Stock. The
Board determined that the spin-off was the best choice of the limited
options available because it preserved BMCC's favorable tax status and
also created a bank to compete more effectively in the loan market.
Manner of Effecting the Distribution
It is expected that the Distribution will be consummated on
or about September 6, 1997, the Distribution Date. At the time of the
Distribution, share certificates for the INVB Common Stock then owned by
BMCC will be delivered to Firstar Trust Company, as Distribution Agent,
for mailing. On or as soon as practicable after the Distribution Date,
the Distribution Agent will commence mailing the share certificates to
holders of BMCC Common Stock as of the close of business on the Record
Date on the basis of one share of INVB Common Stock for every 4.19216
shares of BMCC Common Stock held on the Record Date. All such shares of
INVB Common Stock will be validly issued, fully paid, nonassessable and
free of preemptive rights. See "Description of INVB Capital Stock."
No certificates or scrip representing fractional shares of INVB
Common Stock will be issued to BMCC shareholders as part of the
Distribution. The Distribution Agent will aggregate fractional shares
into whole shares and sell them in the open market at then prevailing
prices on behalf of holders who otherwise would be entitled to receive
fractional share interests, and such persons will receive instead a cash
payment in the amount of their pro rata share of the total sale proceeds.
Proceeds from sales of fractional shares will be paid by the Distribution
Agent based upon the average gross selling price per share of INVB Common
Stock of all such sales. BMCC will bear the cost of commissions incurred
in connection with such sales. Such sales are expected to be made as soon
as practicable after the Record Date. None of BMCC, INVB or the
Distribution Agent will guarantee any minimum sale price for the shares of
INVB Common Stock, and no interest will be paid on the proceeds.
No holder of BMCC Common Stock will be required to make any
payment for shares of INVB Common Stock to be received in the Distribution
or to surrender or exchange shares of BMCC Common Stock or to take any
other action in order to receive INVB Common Stock to which the holder is
entitled in the Distribution.
Certain Federal Income Tax Consequences of the Distribution
Introduction. The discussion set forth below is a summary of
certain material United States federal income tax consequences to United
States persons with respect to the Distribution. The discussion does not
purport to be a complete analysis of all of the potential tax effects of
the Distribution or of ownership of INVB Common Stock following the
Distribution. The discussion is limited to United States Federal income
tax matters. The discussion is based upon the Internal Revenue Code of
1986, Treasury regulations, Internal Revenue Service ("IRS") rulings, and
judicial decisions now in effect, all of which are subject to change at
any time, possibly with retroactive effect, by legislative, judicial, or
administrative action.
The discussion does not address the tax consequences of receipt
of the Distribution to taxpayers which are subject to special rules that
do not apply to taxpayers generally, such as life insurance companies,
tax-exempt organizations, regulated investment companies, financial
institutions, broker-dealers in securities, foreign entities, and
nonresident alien individuals.
THE TAX CONSEQUENCES OF RECEIVING THE DISTRIBUTION AND OWNING
INVB COMMON STOCK MAY VARY DEPENDING ON A HOLDER'S PARTICULAR SITUATION.
BMCC SHAREHOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES TO THEM OF RECEIPT OF THE DISTRIBUTION AND
OWNERSHIP OF INVB COMMON STOCK, INCLUDING BUT NOT LIMITED TO THE
APPLICATION TO THEM OF FEDERAL ESTATE AND GIFT, STATE, LOCAL, FOREIGN, AND
OTHER TAX LAWS.
Receipt of the Distribution by BMCC Shareholders. The
Distribution will be a taxable event to BMCC's shareholders for Federal
income tax purposes. The amount of the Distribution received by each BMCC
shareholder for Federal income tax purposes will be the fair market value
of the INVB Common Stock received by such shareholder as of the
Distribution Date (plus the amount of any cash received in lieu of
fractional shares). The amount of the Distribution received by each BMCC
shareholder will be treated as a dividend (i.e., as ordinary income) to
such shareholder to the extent of such shareholder's pro rata share of
BMCC's current earnings and profits as computed for Federal income tax
purposes. The amount of the Distribution received by each BMCC
shareholder that is not treated as a dividend will first be treated as a
nontaxable return of capital to the extent of such shareholder's basis in
its BMCC Common Stock, and then as an amount received by such shareholder
from the sale or exchange of property. The amount that is treated as
received by a BMCC shareholder from the sale or exchange of property will
generally be a capital gain, and the capital gain will be long-term
capital gain if the shareholder has held its BMCC stock for more than one
year. For purposes of determining the amount of the Distribution received
by a BMCC shareholder that constitutes a dividend, the shareholder's pro
rata share of BMCC's current earnings and profits will be based on the
shareholder's percentage ownership of BMCC Common Stock.
Based on BMCC's current earnings and profits it is believed that
a substantial amount of the Distribution will result in the recognition by
BMCC's shareholders of return of capital.
For Federal income tax purposes each BMCC shareholder will
acquire an initial tax basis in such shareholder's INVB Common Stock
received in the Distribution equal to the fair market value of the
property, i.e., the value of the INVB Common Stock that is received by
such shareholder as of the Distribution Date. Each BMCC shareholder's
holding period for INVB Common Stock received in the Distribution will
begin on the Distribution Date. Also, certain special rules, that permit
a deduction for certain dividends received by a corporation, commonly
called the "dividends received deduction," will not apply in the case of
corporations that receive the Distribution. Since BMCC is a REIT, the
dividends paid by BMCC do not qualify for the dividends received
deduction.
As mentioned above, the amount of the Distribution received by
each BMCC shareholder for Federal income tax purposes will be the fair
market value of the property, i.e., the value of the INVB Common Stock
that is received by such shareholder as of the Distribution Date (plus the
amount of any cash received in lieu of fractional shares). BMCC will make
a determination of the fair market value of the INVB Common Stock as of
the Distribution Date after such date based information and advice to be
received by BMCC from BSC. Prior to January 31, 1998 BMCC will report the
amount of the Distribution received by each shareholder to such
shareholder and to the IRS on IRS Form 1099-DIV.
There is no assurance that the IRS or the courts will agree that
the amount of the Distribution received by a BMCC shareholder is the
amount determined by BMCC, and it is possible that the IRS and the courts
will ultimately determine that BMCC's shareholders, or some of them,
received a larger Distribution for Federal income tax purposes than the
amounts reported to them by BMCC. If the IRS were to challenge the amount
of the Distribution reportable by any BMCC shareholder on such
shareholder's Federal income tax return, then such shareholder would have
to bear the expense and effort of defending against or otherwise resolving
such challenge.
Payment of the Distribution by BMCC. Distributions of property
made by BMCC to its shareholders with respect to their stock, such as the
Distribution, must in certain circumstances be treated as if BMCC sold the
property in a taxable sale at its fair market value. This rule will apply
to the Distribution if BMCC's tax basis in the distributed property is
less than the fair market value of the property at the Distribution Date.
BMCC estimates that if the fair market value of the INVB Common Stock
distributed in the Distribution exceeds BMCC's tax basis in such property
at the Distribution Date, the Distribution will be treated as a taxable
sale to BMCC and BMCC will recognize gain on the Distribution in an amount
equal to the excess of the fair market value of the distributed property
on the Distribution Date over BMCC's tax basis on such property. If,
however, BMCC's tax basis in the INVB Common Stock exceeds the fair market
value of such property on the Distribution Date, then no gain or loss will
be recognized by BMCC on the Distribution. As described above, the amount
of the Distribution (i.e., the fair market value of the property that is
distributed) will be determined by BMCC after the Distribution based on
information and advice to be received by BMCC from BSC.
Tax Reporting. As indicated above, the amount of the
Distribution received by each BMCC shareholder will be determined by BMCC
after the Distribution is made based on information and advice received by
BMCC from BSC. After this determination is made (and not later than
January 31, 1998) BMCC will report the amount of the dividend received by
each shareholder to such shareholder and to the IRS on IRS Form 1099-DIV.
Backup Withholding. Under Section 3406 of the Code and
applicable regulations thereunder, a holder of BMCC Common Stock may be
subject to backup withholding at the rate of 31 percent with respect to
the amount of the Distribution paid to such holder on such stock. If:
(i) the shareholder ("payee") fails to furnish or certify a taxpayer
identification number to BMCC (the "payor"); (ii) the IRS notifies the
payor that the taxpayer identification number furnished by the payee is
incorrect; (iii) there has been a "notified payee underreporting"
described in Section 3406(c) of the Code; or (iv) there has been a "payee
certification failure" described in Section 3406(d) of the Code, then BMCC
generally will be required to withhold an amount equal to 31 percent of
the amount of the Distribution paid to such shareholder with respect to
such Shareholder's BMCC Common Stock. Any amounts withheld under the
backup withholding rules from a payment to a shareholder will be allowed
as a credit against the shareholder's Federal income tax liability or as a
refund.
The foregoing summary of the federal income tax consequences of
the Distribution is for general information only and may not apply to BMCC
shareholders who are not citizens or residents of the United States, or
who are otherwise subject to special treatment under the Code. All BMCC
shareholders should consult their own tax advisors as to the particular
tax consequences of the Distribution to them, including the application of
state, local and foreign tax laws.
Stock Ownership After the Distribution
Immediately after the Distribution, the shareholders of record
of BMCC on the Record Date will own approximately 88% of the then
outstanding shares of INVB Common Stock. The Schonath Entities, as
shareholders of BMCC on the Record Date, will receive approximately 5.6%
of the then outstanding shares of INVB Common Stock pursuant to the
Distribution.
The Schonath Entities will already own 120,000 or 12% of the
outstanding shares of INVB Common Stock immediately prior to the
Distribution. Such shares will be purchased from INVB pursuant to INVB's
initial capitalization at a price of $7.00 per share, the same price paid
by BMCC for its shares. Therefore, immediately after the Distribution,
the Schonath Entities will own approximately 17.6% of the outstanding INVB
Common Stock. The Board of Directors of INVB determined that it would be
in the best interests of INVB's shareholders to have Mr. Schonath, Chief
Executive Officer of INVB, BMCC and the Bank, hold a substantial equity
interest in INVB. In addition, the INVB Board believes that the
investment by Mr. Schonath and the Schonath Entities in INVB of $840,000,
made at the same price as that paid by BMCC for its interest in INVB, will
closely align Mr. Schonath's interests with that of INVB and its
shareholders and provide significant incentive for Mr. Schonath.
The Schonath Entities will also own a warrant to purchase
100,000 additional shares of INVB Common Stock or 10% of the shares then
outstanding, at a price per share equal to $7.70, or 110% of the price
paid for the shares upon the initial capitalization of INVB. Such warrant
was issued in connection with such initial capitalization, and is
exercisable at any time through September 1, 2004. After the Distribution
and assuming no additional shares of INVB Common Stock are issued, upon
exercise of the warrant the Schonath Entities will own approximately 24.9%
of the outstanding shares of INVB Common Stock.
Market for INVB Common Stock
There is currently no public market for INVB Common Stock. The
INVB Common Stock will not be listed on any securities exchange. Although
INVB expects that quotations for INVB Common Stock will be reported on the
OTC Bulletin Board, there can be no assurance as to the prices at which
trading in INVB Common Stock will occur after the Distribution same.
Baird has advised INVB that, upon completion of the Distribution, it
intends to act as a market maker in the Common Stock, subject to
applicable laws and regulatory requirements. Making a market in
securities involves maintaining bid and ask quotations and being able, as
principal, to execute transactions in reasonable quantities at those
quoted prices, subject to various securities laws and other regulatory
requirements. The development of a public trading market depends,
however, upon the existence of willing buyers and sellers, the presence of
which is not within the control of INVB, the Bank or any market maker.
Even with a market maker, factors such as the limited size of this
Distribution, the lack of earnings history for INVB and the absence of a
reasonable expectation of dividends within the near future mean that there
can be no assurance of the development in the foreseeable future of an
active and liquid market for the Common Stock. Even if a market develops,
there can be no assurance that a market will continue. Recipients of
Common stock should carefully consider the potentially illiquid and long-
term nature of the shares being distributed hereby.
Until INVB Common Stock is fully distributed and an orderly
trading market develops, the prices at which trading in such stock occurs
may fluctuate significantly. The prices at which INVB Common Stock trades
will be determined by the marketplace and may be influenced by many
factors, including, among others, INVB's performance and prospects, the
depth and liquidity of the market for INVB Common Stock, investor
perception of INVB and of the banking industry, INVB's dividend policy,
general financial and other market conditions, and domestic and
international economic conditions. In addition, financial markets,
including the OTC Bulletin Board, have experienced extreme price and
volume fluctuations that have affected the market price of many stocks and
that, at times, could be viewed as unrelated or disproportionate to the
operating performance of such companies. Such fluctuations have also
affected the share prices of many newly public issuers. Such volatility
and other factors may materially adversely affect the market price of INVB
Common Stock.
INVB initially will have approximately four thousand
shareholders of record, based on the number of record holders of BMCC
Common Stock on the Record Date. The Transfer Agent and Registrar for the
INVB Common Stock will be Firstar Trust Company. For certain information
regarding options and other equity-based employee benefit awards involving
INVB Common Stock that may become outstanding after the Distribution, see
"Management-INVB 1997 Equity Incentive Plan."
Shares of INVB Common Stock distributed to BMCC shareholders in
the Distribution will be freely transferable, except for securities
received by persons who may be deemed to be "affiliates" of INVB under the
Securities Act of 1933, as amended (the "Securities Act"). Persons who
may be deemed to be affiliates of INVB after the Distribution generally
include individuals or entities that control, are controlled by, or are
under common control with, INVB and may include certain officers and
directors of INVB as well as principal shareholders of INVB, if any.
Persons who are affiliates of INVB will be permitted to sell their shares
of INVB Common Stock only pursuant to an effective registration statement
under the Securities Act or an exemption from the registration
requirements of the Securities Act, such as the exemption afforded by
Section 4(2) of the Securities Act (relating to private sales) or by Rule
144 under the Securities Act.
See "Risk Factors-Absence of a Public Market for INVB Common
Stock."
Conditions; Termination
The Distribution is conditioned upon, among other things: (a)
the receipt of all state and federal bank regulatory approvals necessary
for the Bank to commence operations (b) the receipt of and any material
governmental approvals and third party consents necessary to consummate
the Distribution; (c) the absence of any order, injunction, decree or
other legal restraint or prohibition preventing the consummation of the
Distribution; and (d) no other event occurring that prevents the
consummation of the Distribution. The BMCC Board may, but has no
obligation to, waive any of these conditions. In addition, regardless of
whether these conditions are satisfied, the BMCC Board has reserved the
right to abandon, defer or modify the Distribution and the related
transactions described herein at any time prior to the Distribution Date.
DIVIDEND POLICY
INVB does not anticipate the payment of any cash dividends on
INVB Common Stock in the foreseeable future. The declaration of dividends
by INVB will be subject to the discretion of the Board of Directors of
INVB. INVB has no operations and will be dependent on dividends from the
Bank to fund any dividend INVB may declare. However, the Bank will be
subject to certain restrictions imposed by applicable banking laws that
may limit its ability to pay dividends to INVB.
BUSINESS
General
The Company is a proposed bank holding company organized under
Wisconsin law to own all of the common stock of the Bank. The Bank is
organizing as a Wisconsin-chartered commercial bank with depository
accounts to be insured by the FDIC. The Bank intends to provide a full
range of commercial and consumer banking services in its primary service
area in Waukesha County, Wisconsin (which is in the Milwaukee Metropolitan
area), as well as the surrounding extended market in south-eastern
Wisconsin. The Bank will have received all necessary regulatory approvals
prior to the Distribution Date and assuming BMCC's capital contribution to
the Bank of approximately $6.16 million and the Schonath Entities' capital
contributions of $840,000 immediately prior to the Distribution Date,
anticipates commencing business during August of 1997. The Bank will
begin as a start-up entity with no loan portfolio, no deposits and no
other existing business. On the Distribution Date, all of the employees
of BMCC will cease their employment with BMCC and become employees of the
Bank, except for Messrs. Schonath and McGlocklin who will be officers of
both the Bank and BMCC. BMCC will continue to operate as a real estate
investment trust ("REIT"). As a REIT, BMCC will manage its current loan
portfolio through its relationship with the Bank pursuant to the Services
and Expenses Agreement; continue participating in loans held by third
parties, including the Bank; and expand its real estate lending business
into ownership of real property, including related buildings and
improvements for lease to small businesses.
Background
The liberalization of the interstate banking laws of Wisconsin
in recent years has led to substantial consolidation of the banking
industry. At the same time, recent technological innovations, including
automatic teller machines, automated telephone teller systems and Internet
banking, have reduced the need for and importance of branch banking. In
the opinion of the Company's management, these factors have created a
favorable opportunity for a new commercial bank with headquarters in
Waukesha County. Management of the Company believes that such a bank can
attract those customers who prefer to conduct business with a locally-
managed institution that offers exemplary technologically advanced
personal service, demonstrates an active interest in their businesses and
personal financial affairs and that offers attractive and competitive
interest rates. The Company believes that a locally managed institution
will be able to deliver more timely responses to customer requests,
provide customized financial products or services addressing out-of-the-
ordinary matters and offer the personal attention of personal banking
officers. The Company also believes that by fully utilizing available
automated account technology, it will be able to effectively compete with
larger multi-branch banks. The Bank will seek to take advantage of these
opportunities by emphasizing in its marketing plan the Bank's local
management and the Bank's ties and commitment to the Bank's market area
and by contracting with a data processing company to provide specialized
automated account services to its customers.
The Company and the Bank are both in the organizational and
development stage, have not been capitalized, have no earnings or history
of operations, have no employees, and no current business. BMCC has paid
all organizational expenses of both the Company and the Bank to date and
will pay such expenses through the Distribution Date. BMCC has also
constructed and furnished the building that will serve as the Bank's
offices, and BMCC has negotiated or is in the process of negotiating
contracts on behalf of the Company and the Bank and coordinated the
purchasing, leasing and installation of all equipment necessary for the
Bank to commence operations. Immediately prior to the Distribution Date,
and after the Bank is capitalized, the Bank will commence operations and
all of BMCC's officers and employees, except Mr. Schonath and Mr.
McGlocklin, will leave the employ of BMCC and become employees of the
Bank, and in certain cases, INVB. Mr. Schonath and Mr. McGlocklin will
remain officers of BMCC in addition to becoming officers of INVB and the
Bank. The Bank will lease its offices, furnishings and equipment, from
BMCC after the Distribution. See "Arrangements Among BMCC, INVB and the
Bank."
Business Strategy
A cornerstone of the Bank's business strategy will be to
emphasize the Bank's commitment to personalized customer service and the
Bank's local management and commitment to the Bank's market area. George
R. Schonath, the President and Chief Executive Officer of the Company and
the Bank, has over 35 years of financial services experience in the
greater Milwaukee area. The Company's goal will be to emphasize the
Bank's local focus in order to distinguish the Bank as a very "customer-
driven" organization. The Bank also intends to offer automated account
services and very attractive and competitive interest rates on all of its
interest-bearing accounts. The Bank will strive to establish a high
standard of quality in each service it provides and the employees of the
Bank will be expected to emphasize service in their dealings with
customers. Because the Bank intends to commence operations with a staff
of fewer than 20 full time employees, employees will need to be flexible
in the duties they perform in an effort to satisfy customers.
Employees will be encouraged to be active in the community.
Both Messrs. Schonath and McGlocklin currently hold, and have held in the
past, leadership positions in a number of community organizations, and
intend to continue this active involvement in future years. Other members
of the management team will also be encouraged to volunteer for such
positions.
The Bank intends to implement a marketing campaign utilizing a
variety of local media sources and community-based promotions. The
campaign will emphasize the Bank's independence, local management, special
focus on customer service and its attractive and competitive interest
rates. All employees will be expected to actively market the Bank's
services.
The Bank intends to concentrate on the financial services needs
of individuals and small businesses. The Bank's initial lending limit
will be approximately $1,400,000. Due to the Bank's special relationship
with BMCC and Mr. Schonath's previous experience and relationships with a
number of the region's other financial institutions, the Bank hopes to
originate significant loan volumes in excess of its lending limit and sell
participations in such loans to BMCC and other banks. See "Arrangements
Among BMCC, INVB and the Bank."
Although the Bank may make real estate mortgage loans which
might have been made by BMCC if the Bank were not in existence, it is
impossible to predict if, in fact, any such loans will be made and, if so,
the amount of any such loans. BMCC intends to maintain and service its
mortgage loan portfolio through its relationship with the Bank pursuant to
the Services and Expenses Agreement; continue its business of purchasing
participation interests in real estate mortgage loans held by other
lending institutions; and begin acquiring real property, including related
buildings and improvements for lease to small businesses.
Products and Services
The Bank intends to offer a broad range of deposit services,
including checking accounts, NOW accounts, savings and other time deposits
of various types. The transaction accounts and time certificates will be
tailored to the principal market area at attractive and competitive
interest rates. All deposit accounts will be insured by the FDIC up to
the maximum amount permitted by law. The Bank intends to solicit these
accounts from individuals, businesses, associations, organizations,
commercial financial institutions and government authorities.
The Bank also plans to offer a full range of short to
intermediate term personal and commercial loans. The Bank intends to make
personal loans directly to individuals for various purposes, including
purchases of automobiles, boats and other recreational vehicles, home
improvements, education and personal investments. The Bank anticipates
that substantially all of the residential mortgage loans it generates will
be sold to third party investors. Commercial loans will be made primarily
to small and mid-sized businesses. These loans will generally be secured
and will be available for the acquisition of fixed assets, including real
estate, purchases of equipment and machinery, financing of inventory and
accounts receivable, as well as any other business purpose considered
appropriate.
The Bank currently plans to offer other services, including
credit cards, money orders, traveler's checks and automated teller
services with access to one or more regional or national automated teller
networks. Although the Bank has been involved in discussions with a
number of vendors regarding the provision of such services, the Bank does
not expect to make final decisions with respect to the providers of such
services until approximately 30 days before its commencement of business.
The Bank also intends to establish relationships with correspondent banks
and other financial institutions to provide other services for its
customers.
Market Area
The Bank's primary market area and the location of its main
office will be in Waukesha County, Wisconsin. The secondary market area
of the Bank is expected to include all of southeastern Wisconsin.
Competition
The Bank's intended market area is competitive. The Bank will
face competition from large regional multi-branch banks, smaller local
banks, finance companies, insurance companies, mortgage companies,
securities brokerage firms, money market funds, loan production offices
and other providers of financial services. Most of the Bank's competitors
have been in business for many years, have established customer bases, are
substantially larger, have substantially larger lending limits than the
Bank and can offer certain services, including multiple branches and
international banking services, that the Bank will be able to offer only
through correspondent banks, if at all. In addition, most of these
entities have greater capital resources than the Bank, which among other
things, may allow them to price their services at levels more favorable to
customers and to provide larger credit facilities than could the Bank.
The Company anticipates that the Bank's lending limit of approximately
$1,400,000 together with loan participation arrangements with BMCC,
correspondent banks and others will be adequate to satisfy the credit
needs of most of its customers.
The Company will compete for loans principally through the range
and quality of the services it will provide, interest rates and loan fees.
The Company believes that its personal service philosophy will enhance its
ability to compete favorably in attracting individuals and small
businesses. The Company will actively solicit deposit-related clients and
will compete for deposits by offering customers personal attention,
professional service and competitive interest rates.
Bank Premises
The Bank will sub-lease a portion of the premises at W239 N170
Busse Road, Waukesha, Wisconsin from BMCC. See "Arrangement Among BMCC,
INVB and the Bank." The building was built in 1996. The Bank's
operations will occupy approximately 4,700 square feet of the building.
BMCC leases the building from Bando McGlocklin Real Estate Investment
Corp. ("BMREIC"). BMREIC is not affiliated with BMCC, INVB or the Bank.
However, SKBM, Inc., a company owned by George R. Schonath, the President
and Chief Executive Officer and a director of INVB and the Bank, and Jon
McGlocklin, the Senior Vice President and a director of INVB and the Bank,
provides management services to BMREIC.
Employees
INVB will have only three employees. George R. Schonath will be
President and Chief Executive Officer, Jon McGlocklin will be Senior Vice
President and Secretary, and Susan J. Hauke will be Vice President-
Finance, Controller and Assistant Secretary.
The Bank will commence operations with a staff of fewer than 20
full time employees. George R. Schonath will be the President and Chief
Executive Officer of the Bank, and Jon McGlocklin will be Senior Vice
President. The Bank's other officers will be Susan J. Hauke, Vice
President-Finance, Controller, Treasurer and Secretary; Scott J. Russell,
Senior Vice President and Lending Officer; Joel C. Obermeier, Vice
President-Residential Loans; and Denise L. Kreuger, Personal Banking
Officer. Mr. Schonath will be responsible for overall operations. Mr.
McGlocklin and Mr. Russell will concentrate on business banking. Ms.
Hauke's primary responsibility will be financial, accounting and
administrative matters. Mr. Obermeier will be in charge of residential
loans and Ms. Krueger will coordinate personal banking efforts.
Virtually all data processing services will be purchased on a
contract basis, reducing the number of persons otherwise required to
handle the operational functions of the Bank. Arrangements with a data
processing company have been finalized by BMCC and the Bank will enter
into data processing services contract with such company immediately after
the Bank is capitalized.
In addition to the officers indicated above, it is anticipated
that virtually all of the employees of BMCC that have been involved in day
to day operations will transfer their employment to the Bank when the Bank
commences its operations.
BMCC Historical Data
As discussed above, all employees of BMCC will transfer their
employment to the Bank when the Bank commences operations (except for
Messrs. Schonath and McGlocklin who will serve as officers of both BMCC
and the Bank). The Bank will provide a full range of commercial and
consumer banking services. One aspect of the Bank's business will be the
origination of loans to small businesses, a function which has
historically been performed by BMCC. The following sets forth certain
financial and other historical data for BMCC for the periods indicated.
This data is intended to provide the reader with financial and other data
related to BMCC's loan origination business, substantially all of which
will be assumed by the Bank pursuant to the transfer of employees from
BMCC to the Bank and the terms of the Services and Expenses Agreement
which provides that, except as specifically approved in writing by the
Bank, BMCC will not originate any loans during the term of the Services
and Expenses Agreement and any renewals thereof. Readers should be
cautioned, however, that the Bank will be a start-up entity with no assets
(other than its initial capital), no loan portfolio, no deposits, and no
other existing business and, therefore, while the following financial and
other data may be relevant to an assessment of the Bank's future
performance in the loan origination business, it should not be considered
relevant to an assessment of the Bank's future performance in general.
Prior to January 2, 1997, BMCC and its 100% owned subsidiary, Bando
McGlocklin Small Business Lending Corporation ("BMSBLC") were registered as
investment companies under the Investment Company Act of 1940 ("1940 Act").
Effective January 2, 1997, BMCC and BMSBLC deregisterd as investment
companies under the 1940 Act. BMCC now reports under the Securities
Exchange Act of 1934 ("Exchange Act").
Under the 1940 Act, the investments in Bando McGlocklin Investment
Corporation ("BMIC"), a 99% owned subsidiary of BMCC, and Lee Middleton
Original Dolls, Inc., ("Middleton Doll") and License Products, Inc.
("License Products"), two 51% owned manufacturing subsidiaries of BMIC,
were accounted for as common stock investments and stated at "fair value"
as determined in good faith by the Board of Directors. Effective
January 2, 1997, under the Exchange Act, these three subsidiaries are
consolidated. This constitutes a change in reporting entity effective
January 2, 1997, which requires a restatement of previously reported
financial positions and results of operations.
The income statement and balance sheet amounts presented in this
section have been restated and are presented as required under the 1934 Act.
These unaudited amounts reflect the consolidation of BMIC, Middleton Doll
and License Products. Loans to these consolidated subsidiaries, and the
associated loan loss reserves, have been eliminated.
Condensed Financial Data
The financial information of BMCC for the periods below is
unaudited but, in the opinion of management of BMCC, reflects all adjust-
ments, consisting only of normal recurring adjustments, necessary to
present fairly such information for those periods. The Income Statement
information for the six months ended June 30, 1997 is not necessarily
indicative of the results to be expected for the full year the financial
information has been derived from the unaudited accounting records of BMCC.
Management believes that the financial information presented for the years
ended June 30, 1995 and 1996 and for the six months ended December 31, 1996
does not contain any material differences from the financial information
which will be derived from the audited financial statements once they have
been prepared for such periods. BMCC intends to file on Form 8-K with the
Securities and Exchange Commission to present audited restated financial
statements for prior periods reflecting the change in reporting entity as
soon as practicable.
The following is a summary of selected financial data of BMCC for the
periods indicated.
<TABLE>
<CAPTION>
Six Months
Six Months Ended Year Ended
Income Statement Ended December 31, June 30, June 30,
Information: June 30, 1997 1996(1) 1996 1995
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest on loans $ 5,173,510 $ 3,579,266 $ 8,409,597 $10,058,072
Net sales of
manufacturing
subsidiaries 7,654,936 7,226,130 1,702,357 1,183,165
Total revenues 13,435,355 10,939,590 10,617,227 11,738,321
Interest expense 2,897,983 1,120,882 3,399,344 5,648,895
Cost of goods sold
of manufacturing
subsidiaries 4,058,523 3,458,375 1,148,146 719,830
Total expenses 10,080,831 8,363,236 7,277,717 8,890,136
Net income 2,096,030 1,112,801 3,374,584 2,897,850
Net income per
common share $0.57 $0.30 $0.88 $0.73
Cash dividends paid
per share $0.18 $1.00 $0.96 $1.00
Weighted average
shares outstanding 3,707,295 3,711,355 3,841,038 3,960,418
<CAPTION>
Balance Sheet At June 30, At December At June 30, At June 30,
Information: 1997 31, 1996 1996 1995
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Loans under
management(2) $136,598,131 $138,416,220 $135,050,994 $126,971,155
Loans(3) 128,495,986 69,468,291 74,262,747 85,332,534
Total assets 140,759,426 79,729,297 85,507,299 91,036,169
Short term
borrowings 32,309,703 31,468,394 24,288,887 24,292,322
Long term
obligations 69,052,691 12,015,286 23,603,990 26,953,334
Preferred stock 16,908,025 16,908,025 16,908,025 16,908,025
Shareholders' equity 16,947,365 15,858,059 18,415,906 21,305,401
_______________
(1) During 1996 BMCC changed its year-end from June 30 to December 31.
(2) Loans under management represent all loans that were originated by BMCC and still
outstanding. Some of the loans have been sold to third parties, but BMCC still
services all the loans.
(3) Loans not sold to third parties.
</TABLE>
Loan Portfolio
The following consolidated schedules of investments categorize BMCC's loan
portfolio by business type for the periods indicated. The loans in BMCC's
portfolio are primarily secured by a first or second mortgage on real
estate.
As of December 31, 1996
Unpaid
Principal
Loans Number of Balance or
Type of Business Loans Cost
Wholesale Goods 22 $ 5,861,628
Fabricated Metal Products 16 8,654,715
Industrial Machinery 46 18,794,532
Services 25 4,721,127
Commercial Printing 30 8,108,672
Rubber Products 2 190,247
Instruments and Related Products 6 1,006,897
Construction 12 4,292,195
Electronic Equipment 7 3,526,554
Retail 11 1,630,161
Manufacturing-Miscellaneous 14 7,317,641
Transportation 8 4,548,434
Miscellaneous 4 815,488
--- ----------
Total Loans 203 $69,468,291
=== ==========
As of June 30, 1996
Unpaid
Principal
Loans Number of Balance or
Type of Business Loans Cost
Wholesale Goods 27 $8,341,930
Fabricated Metal Products 16 9,019,316
Industrial Machinery 46 20,680,327
Services 27 5,583,330
Commercial Printing 32 13,786,126
Rubber Products 3 234,634
Instruments and Related Products 6 1,469,078
Construction 11 2,423,320
Electronic Equipment 6 2,355,177
Retail 9 1,386,877
Manufacturing-Miscellaneous 16 6,190,012
Transportation 6 2,066,300
Miscellaneous 3 726,320
--- ----------
Total Loans 208 $74,262,747
=== ==========
As of June 30, 1995
Unpaid
Principal
Loans Balance or
Type of Business Number Cost
Wholesale Goods 52 $27,194,676
Metalworking Machinery 32 15,847,273
Industrial Machinery 15 3,064,982
Services 26 5,634,046
Commercial Printing 21 9,159,586
Rubber Products 6 2,955,787
Instruments and Related Products 7 861,441
Construction 12 4,420,588
Electronic Equipment 5 3,978,147
Retail 6 936,272
Furniture 3 1,093,569
Electrical Goods 6 947,207
Transportation 8 5,011,348
Miscellaneous 14 4,227,612
--- ----------
Total Loans 213 $85,332,534
=== ==========
Maturities and Sensitivities of Loans to Changes in Interest Rates
As of December 31, 1996 BMCC had loans under management aggregating
$19,645,514 which mature in one year or less, $76,006,716 which mature
after one year but in less than five years and $42,763,990 which mature
after five years. BMCC also had loans under management aggregating
$16,345,509 that were fixed rates and $122,070,711 which had variable
rates as of December 31, 1996.
The loan numbers that were noted in the above paragraphs represent the
loans under management number as of December 31, 1996 and not the loans
that are reflected on the balance sheet.
Risk Elements
BMCC's nonaccrual loans (loans based on facts and circumstances that the
interest is unlikely to be collectible), accruing loans 90 days or more
past due (the principal and interest of which the Board of Directors has
determined is adequately collateralized) and restructured loans (loans
still accruing interest and not 90 days or more past due on which a
concession has been made to the borrower for the repayment of interest) to
small business concerns are summarized in the following table.
<TABLE>
<CAPTION>
At June 30, At December 31, At June 30,
1997 1996 1996 1995
<S> <C> <C> <C> <C>
Nonaccrual loans(1) $ 0 $ 0 $ 0 $ 0
Accruing loans 90 days or more
past due 1,479,867 127,276 249,119 3,358,380
Restructured loans 0 0 0 0
--------- --------- --------- ---------
Total nonperforming loans $1,479,867 $ 127,276 $249,119 $3,358,380
========= ========= ========= ========
(1) Excludes loans to consolidated manufacturing subsidiaries.
Analysis of the Loan Loss Reserve
</TABLE>
The following sets forth a summary of BMCC's loan loss reserves for the
periods indicated.(1)
<TABLE>
<CAPTION>
At June 30, At December 31, At June 30,
1997 1996 1996 1995
<S> <C> <C> <C> <C>
Balance at beginning of period $450,000 $ 38,791 $562,271 $124,036
Charge-offs:
Domestic:
Real estate-mortgage 0 0 (2,651) 0
-------- --------- --------- ----------
Recoveries:
Domestic:
Real estate-mortgage 0 0 0 0
--------- --------- --------- ----------
Net charge-offs 0 0 (2,651) 0
--------- --------- --------- ----------
Change in loan loss reserves 0 411,209 (520,829) 438,235
--------- --------- --------- ----------
Balance at end of period $450,000 $ 450,000 $ 38,791 $562,271
========= ========= ========= ==========
Ratio of net charge-offs during
the period to average loans
outstanding during the period 0.00% 0.00% 0.00% 0.00%
------ ====== ====== =====
(1) Excludes the loan loss reserve associated with loans to consolidated
manufacturing subsidiaries.
</TABLE>
The additions to the loan loss reserve were based upon decisions made by
BMCC's management and the Board of Directors.
Impaired Loans
BMCC routinely monitors its loan portfolio for evidence of loan
impairment. A loan is considered impaired when, based on current
information and events, it is probable that BMCC will be unable to collect
all amounts due according to the contractual terms of the loan.
Historically impairment has not been an indicator of loss. In determining
the need for a loss reserve on the impaired loans, management looks to the
underlying collateral. A loss reserve is established if the estimated
value of the underlying collateral is insufficient to cover the impaired
loan. Accrued interest on the impaired loans is considered fully
collectible.
The following table summarizes the impaired loans, loan loss reserve and
the accrued interest.(1)
At June At December At June 30,
30, 31,
1997 1996 1996 1995
Impaired Loans $1,188,240 $1,022,434 $1,637,906 $1,637,931
Loan Loss Reserve 450,000 450,000 38,791 562,271
Accrued Interest 63,292 51,223 62,197 131,284
(1) Excludes information on loans to consolidated manufacturing
subsidiaries.
Loans Sold Data
Since 1994, BMCC has sold loans to third parties. The following table
summarizes the sales and the outstanding balance of loans sold.
Principal Balance Principal Balance
Sold at Date of Percentage Sold at March 31, Recourse
Sale Sold 1997 Provision
During the six months ended December 31, 1996:
$550,000 58% $544,900 None
97,795 75% 196,977 None
------- -------
$647,795 $741,877
During the year ended June 30, 1996:
$1,671,644 68%-85% $1,589,263 None
1,757,275 100% 1,723,027 None
--------- ---------
$3,428,919 $3,312,290
During the year ended June 30, 1995:
$13,222,580 85% $9,189,813 100%
2,837,677 75%-80% 1,929,486 None
1,455,000 75% -- None
1,605,175 100% -- None
---------- ----------
$19,120,432 $11,119,299
During the year ended June 30, 1994:
$10,397,410 75% $2,995,085 None
During the three months ended March 31, 1997, BMCC repurchased certain
loans which had been sold to third parties, at unpaid principal balances
totalling $32,388,084. As a result of these transactions, the excess
servicing asset and retained loan discount related to the original sale
were reduced $642,319 and $615,763, respectively. Premium expense of
$26,556 was also recognized due to these transactions.
BMCC also sells loans with the option to repurchase them at a later date.
As of March 31, 1997, the balance of loan participations with repurchase
options was $42,754,216. During the three months ended March 31, 1997,
BMCC resold, with an option to repurchase, the loans referred to in the
preceding paragraph at unpaid principal balances totalling $32,388,084.
These sales have been accounted for as secured financings.
For the loans sold with no recourse, BMCC is susceptible to loss on the
loans up to the percentage of the retained interest to the extent the
underlying collateral is insufficient in the event of nonperformance by
the borrower. BMCC's retained interest is subordinated to the portion
sold. For the loans sold with full recourse, BMCC is susceptible to loss
equal to the total principal balance of the loan to the extent the
underlying collateral is insufficient in the event of nonperformance. No
associated loss reserve has been established as of March 31, 1997 for
loans which have been sold.
During the years ended June 30, 1996 and June 30, 1995, BMCC sold loans to
a trust, which issued two classes of certificates as noted in the table
below:
A
Principal B Certificate
Balance Sold A Certificate Certificate Balance at
at Date of Sold to Third A Certificate Sold to March 31,
Sale Party Interest Rate Company 1997
For year ended June 30, 1996:
$8,666,538 $7,453,223 6.938%(1) $1,213,315 $5,959,464
For year ended June 30, 1995:
$6,540,358 $5,246,160 8.00%(2) $1,294,198 $2,138,097
_______________
(1) The interest rate will be reset monthly based upon the 30 day
London Interbank Offered Rate (LIBOR) plus one and one-half
percent.
(2) The interest rate will be reset every three years based upon the
three-year U.S. Treasury Bond yield plus one and one-half percent.
The B Certificates purchased by BMCC are subordinated to the A
Certificates. The B Certificates receive all excess interest after
expenses. BMCC has risk equal to the B Certificates' principal balances
to the extent the underlying collateral is insufficient in the event of
nonperformance by the borrowers. At March 31, 1997, no associated loss
reserve has been established. Under the terms of the Pooling and
Servicing Agreements BMCC retains servicing rights for all the loans sold.
All the loans that are sold to third parties and to the trusts are sold at
par. Premium income (expense) represents the differential at the time a
portion of a loan is sold between the present valued excess servicing
income on the sold portion and the retained loan discount, and subsequent
to sale, amortization of the retained loan discount and excess servicing
asset. The premium income (expense) for the three months ended March 31,
1997, the six months ended December 31, 1996 and fiscal years ended June
30, 1996 and 1995 was ($68,727), ($15,209), $78,978 and $8,805,
respectively. The normal servicing fee income is reflected in interest on
loans.
Interest Rate Swaps Information
BMCC enters into interest rate swap agreements primarily as a means of
managing interest rate risk. To the extent that BMCC's variable-rate
loans are funded with fixed-rate debt, BMCC is subject to interest rate
risk. To reduce interest rate risk, BMCC enters into certain interest
rate swaps designed to convert variable-rate loans into fixed-rate loans.
Although these swaps reduce interest rate risk, the potential for profit
or loss on interest rate swaps still exists depending upon fluctuations in
interest rates. In addition, BMCC enters into interest rate swaps in an
attempt to further manage interest rate risk resulting from interest rate
movements.
The following table summarizes the interest rate swap agreements in effect
at March 31, 1997. No funds were borrowed or are to be repaid under these
arrangements.
<TABLE>
<CAPTION>
Current Interest Rates Paid
Original
Company Bank By Notional Expiration
Bank Payment Payment Company By Bank Amount Date
<S> <C> <C> <C> <C> <C> <C>
Firstar Bank Milwaukee, N.A.
Milwaukee, Wisconsin Floating Fixed 5.65625%(3) 8.77000% $10,000,000(6) 06/30/97
Firstar Bank Milwaukee, N.A.
Milwaukee, Wisconsin Floating Fixed 5.56250%(3) 6.53000% 17,500,000 07/07/97
Firstar Bank Milwaukee, N.A.
Milwaukee, Wisconsin Floating Fixed 5.56250%(3) 6.84700% 1,500,000 07/07/97
Firstar Bank Milwaukee, N.A.
Milwaukee, Wisconsin(1) Floating Floating 5.56250%(3) 6.17144%(4) 25,000,000 09/16/97
First Bank National Association
Minneapolis, Minnesota Floating Fixed 5.85156%(2) 10.20000% 12,600,000 09/23/97
Firstar Bank Milwaukee, N.A.
Milwaukee, Wisconsin(1) Floating Floating 5.56250%(3) 6.12950%(5) 35,000,000 10/06/97
Firstar Bank Milwaukee, N.A.
Milwaukee, Wisconsin Floating Fixed 5.59375%(2) 8.50270% 5,000,000 12/11/97
Norwest Bank Minnesota, N.A.
Minneapolis, Minnesota Floating Fixed 5.56250%(3) 5.29000% 15,000,000 09/16/98
First Bank National Association
Minneapolis, Minnesota(1) Floating Fixed 5.47656%(7) 9.20000% 8,000,000(8) 06/16/99
LaSalle National Bank
Chicago, Illinois Floating Fixed 5.62500%(3) 6.34000% 5,400,000 03/21/01
Firstar Bank Milwaukee, N.A.
Milwaukee, Wisconsin Floating Fixed 5.78125%(3) 7.43500% 10,325,000(9) 09/28/01
LaSalle National Bank
Chicago, Illinois Floating Fixed 5.56250%(3) 7.60000% 5,000,000 03/10/05
LaSalle National Bank
Chicago, Illinois Floating Fixed 5.47266%(3) 6.66000% 5,250,000(10) 05/23/05
LaSalle National Bank
Chicago, Illinois Floating Fixed 5.75000%(3) 6.50000% 5,000,000(11) 09/29/05
LaSalle National Bank
Chicago, Illinois Floating Fixed 5.53906%(3) 7.09000% 12,500,000 09/05/06
_______________
(1) Investment Swap.
(2) Adjusted every six months to the six-month London Interbank Offered
Rate (LIBOR) then in effect.
(3) Adjusted every three months to the three-month LIBOR then in effect.
(4) Adjusted every three months to the three-month LIBOR then in effect
plus a premium, currently at .60894%, subject to a 25 basis point
maximum increase at each adjustment period.
(5) Adjusted every three months to the three-month LIBOR then in effect
plus a premium, currently at .567%, subject to a 25 basis point
maximum increase at each adjustment period.
(6) The notional amount decreases by $166,667 each quarter and was
$5,499,991 at March 31, 1997.
(7) Adjusted every month to the one-month LIBOR then in effect.
(8) The notional amount decreases by $83,333 each quarter and was
$5,333,344 at March 31, 1997. $2,583,344 of this contract was
designated as a hedge; $2,750,000 was accounted for as an investment.
(9) The notional amount decreases by $166,667 each quarter and was
$6,658,333 at March 31, 1997.
(10) The notional amount decreases by $100,000 each quarter and was
$4,550,000 at March 31, 1997.
(11) The notional amount decreases by $75,000 each quarter and was
$4,550,000 at March 31, 1997.
</TABLE>
As a result of hedge arrangements, BMCC recognized a $408,728, $732,066,
$1,382,751 and $1,193,506 reduction in interest expense for the three
months ended March 31, 1997, the six months ended December 31, 1996 and
fiscal years ended June 30, 1996 and 1995, respectively, In addition,
BMCC recognized $112,858, $445,568, $412,129 and $73,239 reduction in
interest expense for the three months ended March 31, 1997, the six months
ended December 31, 1996 and fiscal years ended June 30, 1996 and 1995,
respectively, as a result of the investment swap contracts.
MANAGEMENT
Directors and Executive Officers of INVB
Set forth below is certain information concerning the directors
and executive officers of INVB. The INVB Board is currently comprised of
5 directors as indicated in the table below. INVB's Board of Directors is
divided into three classes. Commencing with the annual meeting of
shareholders to be held in 1998, directors for each class will be elected
at the annual meeting of shareholders held in the year in which the term
for such class expires and will serve thereafter for three years. See
"Certain Antitakeover Effects-Board of Directors." It is expected that
the executive officers of INVB following the Distribution Date will be the
persons who currently serve as executive officers of INVB.
Term Position and
Name/Class Age Expires Offices Held
George R. Schonath, Class I 56 1998 President, Chief
Executive Officer and
Director
Jon McGlocklin, Class I 53 1998 Senior Vice President,
Secretary and Director
Salvatore L. Bando, Class II 53 1999 Director
Terry L. Mather, Class II 55 1999 Director
Donald E. Sydow, Class III 62 2000 Director
Susan J. Hauke 31 -- Vice President-Finance,
Controller and Assistant
Secretary
George R. Schonath (President and Chief Executive Officer and Director of
the Company) has served as chief executive officer of BMCC since January
1983, and a director of BMCC since September 1980. Mr. Schonath is
expected to resign as a director of BMCC immediately prior to the
Distribution.
Jon McGlocklin (Senior Vice President of the Company) has served as
President and Secretary of BMCC since November 1991, and as Director of
BMCC since 1980. Mr. McGlocklin is expected to resign as a director of
BMCC immediately prior to the Distribution. Mr. McGlocklin is also a
broadcaster for the Milwaukee Bucks Basketball Club.
Salvatore L. Bando (Director of the Company) has been Senior Vice
President - Director of Baseball Operations of the Milwaukee Brewers
Baseball Club since November 1991. Mr. Bando has also been a Director of
BMCC since 1980 and served as an officer of BMCC until November 1991. Mr.
Bando is expected to resign as a director of BMCC immediately prior to the
Distribution.
Terry L. Mather (Director of the Company) has been a partner of Critical
Solutions, Inc., a business consulting company since 1992.
Donald E. Sydow (Director of the Company) has been President and owner of
Oconomowoc Manufacturing Corp., a manufacturer of ball bearings, since
1983.
Susan J. Hauke (Vice President-Finance, Controller and Assistant
Secretary) has been Controller of BMCC since 1991. Prior thereto, since
1987, Ms. Hauke served as a staff accountant and senior accountant at
Price Waterhouse LLP.
Committees of the INVB Board of Directors
Shortly after the Distribution Date, the INVB Board of Directors
is expected to establish an Audit and Finance Committee and a Compensation
Committee. The INVB Board of Directors may also establish other
committees to facilitate its work.
The Audit and Finance Committee, which is expected to be
comprised of at least three non-employee directors, will be primarily
responsible for providing a means of direct contact and communication
between INVB's independent accountants and the INVB Board of Directors.
The Audit and Finance Committee will review (a) INVB's accounting
principles and policies; (b) INVB's internal and independent accountants'
reports; (c) the adequacy of INVB's internal controls; (d) INVB's annual
audited financial statements; and (e) compliance with key regulatory
requirements. The Audit and Finance Committee will also be responsible
for recommending to the Board of Directors the appointment of INVB's
independent accountants, reviewing, approving and recommending to the
Board of Directors INVB's financial policies and strategies, and reviewing
significant capital or other expenditures.
The Compensation Committee will consist of at least three non-
employee directors. Its primary functions will be to review the
performance of INVB's and the Bank's executive officers and make
recommendations to the Board of Directors with respect to the compensation
of INVB's and the Bank's directors and executive officers. In addition,
the Compensation Committee will review INVB's and the Bank's executive
compensation plans in relation to its corporate strategies, INVB's stock
option and other incentive plans, and INVB's and the Bank's plans for
management succession and development.
Compensation of Directors
INVB expects that each non-employee director will receive an
annual retainer of approximately $5,000 and a meeting fee of $750 for each
Board or committee meeting attended.
Annual Meeting
The INVB By-laws provide that the Company's annual meetings of
shareholders will be held the first Thursday of May each year at INVB's
principal office or on such other date and at such other time and place as
may be fixed by resolution of the INVB Board of Directors. The first
annual meeting for which proxies will be solicited from shareholders will
be held in 1998.
Stock Ownership of Executive Officers and Directors
Prior to the Distribution Date no executive officer or director
will beneficially own any shares of INVB Common Stock, except George R.
Schonath. Mr. Schonath will beneficially own approximately 12% of the
outstanding shares of INVB Common Stock immediately after the initial
capitalization of INVB and the Bank. Mr. Schonath will also beneficially
own a warrant to purchase an additional 10% of the outstanding INVB Common
Stock. See "The Distribution-Stock Ownership After the Distribution."
All of the executive officers and certain of the directors will, however,
receive shares of INVB Common Stock in the Distribution in respect of
shares of BMCC Common Stock held by them on the Record Date. The
following table sets forth the number of shares of BMCC Common Stock
beneficially owned on July 31, 1997 by each of INVB's directors, the
persons expected to serve as directors after the Distribution, the
executive officers named in the Summary Compensation Table below, and all
directors, director nominees and executive officers of INVB as a group.
<TABLE>
<CAPTION>
Percent of
Name/Position at INVB Sole Power Shared Power Aggregate Outstanding
<S> <C> <C> <C> <C>
George R. Schonath/ 196,720(1)(2) 322,760(1)(3)(4) 519,480 13.4%(8)
President, Chief
Executive Officer and
director
Jon McGlocklin/Senior 56,046(1)(5) 193,818(3)(4)(6)(7) 249,864 6.8%(8)
Vice President and
director
Susan J. Hauke/Vice - 1,961(3)(6) 1,961 *
President-Finance,
Controller and
Assistant Secretary
Salvatore L. Bando/director 57,552(1) 204,738(3)(4)(6)(7) 262,290 7.1%(8)
Terry L. Mather/director - - - -
Donald E. Sydow/director 5 - 5 *
All executive officers 310,323 418,114 (4) 728,432 18.7%(9)
and directors as a
group (6 persons)
_________________________
* Less than one percent
(1) Includes shares held in custodial accounts for minor children.
(2) Includes options to acquire 196,390 shares, which options are
exercisable within 60 days of July 31, 1997.
(3) Includes a total of 28,518 shares held by BMCC's 401(k) profit
sharing plan. Mr. Schonath is a co-trustee for such plan, which
also holds the following number of shares on behalf of the
following individuals: Jon McGlocklin (5,248); Salvatore L.
Bando (5,760); and Susan J. Hauke (1,961).
(4) Includes a total of 146,097 shares held by BMS Investment
Corporation, all of the outstanding capital stock of which is
owned by Messrs. Bando and McGlocklin and by the Schonath
Entities.
(5) Includes options to acquire 3,000 shares, which options are
exercisable within 60 days of July 31, 1997.
(6) Includes shares held by BMCC's 401(k) profit sharing plan on
behalf of this individual only.
(7) Includes shares held jointly with or by spouse and/or by minor
children.
(8) Assumes the exercise of all options exercisable within 60 days
held by this optionee.
(9) Assumes the exercise of all options exercisable within 60 days
held by such group.
</TABLE>
Options to purchase INVB Common Stock and other awards based on
INVB Common Stock are expected to be granted in the future to INVB
directors, officers and employees under INVB's benefit plans. See "INVB
1997 Equity Incentive Plan."
Executive Compensation
INVB. All of the officers of INVB will also be officers of the
Bank. It is not anticipated that such officers will receive any salary
for serving as officers of INVB.
The Bank. As a recently formed company, the Bank has not paid
any salaries to officers to date. After the Distribution, it is
anticipated that Mr. Schonath will receive an annual salary of $100,000
from the Bank. The other officers of the Bank will receive annual
salaries equivalent to their current annual salaries at BMCC. Bonuses, if
any and benefits and perquisites will be as determined from time to time
by the Compensation Committee of the INVB Board of Directors and by the
Compensation Committee of the Bank's Board of Directors.
INVB 1997 Equity Incentive Plan
General. The purpose of the INVB 1997 Equity Incentive Plan
(the "Plan") is to promote the best interests of the Company and its
shareholders by providing key employees of the Company and the Bank with
an opportunity to acquire a proprietary interest in the Company. The Plan
is intended to promote continuity of management and to provide increased
incentive and personal interest in the welfare of the Company by those key
employees who are primarily responsible for shaping and carrying out the
long-range plans of the Company and securing the Company's continued
growth and financial success.
Administration and Eligibility. The Plan is required to be
administered by a committee of the INVB Board (the "Committee") consisting
of no less than two "outside directors" within the meaning of Section
162(m) of the Internal Revenue Code. In the event that the Committee is
not appointed, the functions of the Committee will be exercised by those
members of the INVB Board of Directors (the "INVB Board") who qualify as
"outside directors" within the meaning of Section 162(m). The Committee
has been designated as the current administrator of the Plan. Among other
functions, the Committee has the authority to establish rules for the
administration of the Plan; to select the key employees of the Company and
the Bank to whom awards will be granted; to determine the types of awards
to be granted to key employees and the number of shares covered by such
awards; and to set the terms and conditions of such awards. The Committee
may also determine whether the payment of any proceeds of any award shall
or may be deferred by a key employee participating in the Plan. Subject
to the express terms of the Plan, determinations and interpretations with
respect thereto will be in the sole discretion of the Committee, whose
determinations and interpretations will be binding on all parties.
Any key employee of the Company or the Bank, including any
executive officer or employee-director of the Company who is not a member
of the Committee, is eligible to be granted awards by the Committee under
the Plan.
Awards Under the Plan; Available Shares. The Plan authorizes
the granting to key employees of: (a) stock options, which may be either
incentive stock options meeting the requirements of Section 422 of the
Internal Revenue Code ("ISOs") or non-qualified stock options; (b) stock
appreciation rights ("SARs"); (c) restricted stock; and (d) performance
shares. The Plan provides that up to a total of 100,000 shares of INVB
Common Stock (subject to adjustment as described below) will be available
for the granting of awards thereunder.
If any shares subject to awards granted under the Plan, or to
which any award relates, are forfeited or if an award otherwise
terminates, expires or is canceled prior to the delivery of all of the
shares or other consideration issuable or payable pursuant to the award,
such shares will be available for the granting of new awards under the
Plan. Any shares delivered pursuant to an award may be either authorized
and unissued shares of INVB Common Stock or treasury shares held by the
Company.
Awards upon Distribution. The Committee has authorized the
granting on the Distribution Date of 2,500 non-qualified options to
purchase INVB Common Stock to each of Susan J. Hauke, Vice President-
Finance, Controller and Assistant Secretary, Scott J. Russell, Senior Vice
President and lending officer, and Joel C. Obermeier, Vice President-
Residential Loans at an exercise price equal to the fair market value on
such date.
Terms of Awards.
Options. Options granted under the Plan to key employees may be
either ISOs or non-qualified stock options. No individual key employee
may be granted options to purchase in excess of 25,000 shares of INVB
Common Stock under the Plan (subject to adjustment as described below).
The exercise price per share of INVB Common Stock subject to
options granted to key employees under the Plan will be determined by the
Committee, provided that the exercise price may not be less than 100% of
the fair market value of a share of INVB Common Stock on the date of
grant. The term of any option granted to a key employee under the Plan
will be as determined by the Committee, provided that the term of an ISO
may not exceed ten years from the date of its grant. Options granted to
key employees under the Plan will become exercisable in such manner and
within such period or periods and in such installments or otherwise as
determined by the Committee. Options may be exercised by payment in full
of the exercise price, either (at the discretion of the Committee) in cash
or in whole or in part by tendering shares of INVB Common Stock or other
consideration having a fair market value on the date of exercise equal to
the option exercise price. All ISOs granted under the Plan will also be
required to comply with all other terms of Section 422 of the Internal
Revenue Code.
SARs. An SAR granted under the Plan will confer on the key
employee holder a right to receive, upon exercise thereof, the excess of
(a) the fair market value of one share of INVB Common stock on the date of
exercise over (b) the grant price of the SAR as specified by the
Committee. The grant price of an SAR under the Plan will not be less than
100% of the fair market value of a share of INVB Common stock on the date
of grant. The grant price, term, methods of exercise, methods of
settlement (including whether the holder of an SAR will be paid in cash,
shares of INVB Common Stock or other consideration), and any other terms
and conditions of any SAR granted under the Plan will be determined by the
Committee at the time of grant. Pursuant to the terms of the Plan, no
individual key employee may be granted SARs thereunder with respect to in
excess of 15,000 shares of INVB Common Stock (subject to adjustment as
described below).
Restricted Stock. Shares of restricted Common Stock granted to
key employees under the Plan will be subject to such restrictions as the
Committee may impose, including any limitation on the right to vote such
shares or receive dividends thereon. The restrictions imposed on the
shares may lapse separately or in combination at such time or times, or in
such installments or otherwise, as the Committee may deem appropriate.
Except as otherwise determined by the Committee, upon termination of a key
employee's employment for any reason during the applicable restriction
period, all shares of restricted stock still subject to restriction will
be subject to forfeiture by the key employee.
The Plan limits the total number of shares of restricted stock
that may be awarded thereunder to 25,000 shares. In addition, no
individual key employee may be granted in excess of 10,000 shares of
restricted stock under the Plan. The foregoing numerical limitations on
the issuance of shares of restricted stock are subject to adjustment as
described below.
Performance Shares. The Plan also provides for the granting of
performance shares to key employees. The Committee will determine and/or
select the applicable performance period, the performance goal or goals
(and the performance level or levels related thereto) to be achieved
during any performance period, The proportion of payments, if any, to be
made for performance between the minimum and full performance levels for
any performance goal and, if applicable, the relative percentage weighting
given to each of the selected performance goals, the restrictions
applicable to shares of restricted stock received upon payment of
performance shares if payment is made in such manner, and any other terms,
conditions and rights relating to the grant of performance shares. Under
the terms of the Plan, the Committee may select from various performance
goals, including return on equity, return on investment, return on net
assets, economic value added, earnings from operations, pre-tax profits,
net earnings, net earnings per share, net cash provided by operating
activities, market price for the INVB Common Stock and total shareholder
return. In conjunction with selecting the applicable performance goal or
goals, the Committee will also fix the relevant performance level or
levels (e.g., a 15% return on equity) which must be achieved with respect
to the goal or goals in order for the performance shares to be earned by
the key employee. The performance goals selected by the Committee under
the Plan may, to the extent applicable, relate to a specific division or
subsidiary of the Company or apply on a Company-wide basis.
Following completion of the applicable performance period,
payment on performance shares granted to and earned by key employees will
be made in shares of INVB Common Stock (which, at the discretion of the
Committee, may be shares of restricted stock) equal to the number of
performance shares payable. The Committee may provide that, during a
performance period, key employees will be paid cash amounts with respect
to each performance share granted to such key employees equal to the cash
dividend paid on a share of INVB Common Stock. Pursuant to the terms of
the Plan, no key employee may receive more than 10,000 performance shares
thereunder (subject to adjustment as described below).
Adjustments. If any dividend or other distribution,
recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or
exchange of shares of INVB Common Stock or other securities of the
Company, issuance of warrants or other rights to purchase shares of INVB
Common Stock or other securities of the Company, or other similar
corporate transaction or event affects the shares of INVB Common Stock so
that an adjustment is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan, then the Committee will generally have the
authority to, in such manner as it deems equitable, adjust (a) the number
and type of shares subject to the Plan and which thereafter may be made
the subject of awards, (b) the number and type of shares subject to
outstanding awards, and (c) the grant, purchase or exercise price with
respect to any award, or may make provision for a cash payment to the
holder of an outstanding award.
Limits on Transferability. Except as specifically provided for
by the Committee at the time an award is made, no award granted under the
Plan (other than an award of restricted stock on which the restrictions
have lapsed) may be assigned, sold, transferred or encumbered by any
participant, otherwise than by will, by designation of a beneficiary, or
by the laws of descent and distribution. Except as specifically provided
for by the Committee at the time an award is made, each award will be
exercisable during the participant's lifetime only by such participant or,
if permissible under applicable law, by the participant's guardian or
legal representative.
Amendment and Termination. The INVB Board may amend, suspend or
terminate the Plan at any time, except that no such action may adversely
affect any award granted and then outstanding thereunder without the
approval of the respective participant. The Plan further provides that
shareholder approval of any amendment thereto must also be obtained if
required by (a) the rules and/or regulations promulgated under Section 16
of the Exchange Act (in order for the Plan to remain qualified under rule
16b-3), (b) the Internal Revenue Code or any rules promulgated thereunder
(in order to allow for ISOs to be granted thereunder) or (c) the quotation
or listing requirements of the exchange or market on which the Common
stock is then traded (in order to maintain the trading of the Common Stock
on such exchange or market).
Withholding. Not later than the date as of which an amount
first becomes includable in the gross income of a key employee for federal
income tax purposes with respect to any award under the Plan, the key
employee will be required to pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, any federal, state,
local or foreign taxes of any kind required by law to be withheld with
respect to such amount. Unless otherwise determined by the Committee,
withholding obligations arising with respect to awards under the Plan may
be settled with shares of INVB Common Stock (other than shares of
restricted stock), including shares of INVB Common Stock that are part of,
or are received upon exercise of, the award that gives rise to the
withholding requirement. The obligations of the Company under the Plan
are conditional on such payment or arrangements, and the Company and the
Bank will, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the key employee. The
Committee may establish such procedures as it deems appropriate for the
settling of withholding obligations with shares of INVB Common Stock.
Certain Federal Income Tax Consequences.
Stock Options. The grant of a stock option under the Plan will
create no income tax consequences to the key employee. A key employee who
is granted a non-qualified stock option will generally recognize ordinary
income at the time of exercise in an amount equal to the excess of the
fair market value of the INVB Common Stock at such time over the exercise
price. The Company will be entitled to a deduction in the same amount and
at the same time as ordinary income is recognized by the key employee. A
subsequent disposition of the INVB Common Stock will give rise to capital
gain or loss to the extent the amount realized from the sale differs from
the tax basis, i.e., the fair market value of the INVB Common Stock on the
date of exercise. This capital gain or loss will be a long-term capital
gain or loss if the INVB Common Stock has been held for more than one year
from the date of exercise.
In general, a key employee will recognize no income or gain as a
result of exercise of an ISO (except that the alternative minimum tax may
apply). Except as described below, any gain or loss realized by the key
employee on the disposition of the INVB Common Stock acquired pursuant to
the exercise of an ISO will be treated as a long-term capital gain or loss
and no deduction will be allowed to the Company. If the key employee
fails to hold the shares of INVB Common Stock acquired pursuant to the
exercise of an ISO for at least two years from the date of grant of the
ISO and one year from the date of exercise, the key employee will
recognize ordinary income at the time of the disposition equal to the
lesser of (a) the gain realized on the disposition, or (b) the excess of
the fair market value of the shares of INVB Common Stock on the date of
exercise over the exercise price. The Company will be entitled to a
deduction in the same amount and at the same time as ordinary income is
recognized by the key employee. Any additional gain realized by the key
employee over the fair market value at the time of exercise will be
treated as a capital gain. This capital gain will be a long-term capital
gain if the INVB Common Stock has been held for more than one year from
the date of exercise.
Stock Appreciation Rights. The grant of an SAR will create no
income tax consequences for the key employee or the Company. Upon
exercise of an SAR, the key employee will recognize ordinary income equal
to the amount of any cash and the fair market value of any shares of INVB
Common Stock or other property received, except that if the key employee
receives an option or shares of restricted stock upon exercise of an SAR,
recognition of income may be deferred in accordance with the rules
applicable to such other awards. The Company will be entitled to a
deduction in the same amount and at the same time as income is recognized
by the key employee.
Restricted Stock. A key employee will not recognize income at
the time an award of restricted stock is made under the Plan, unless the
election described below is made. However, a key employee who has not
made such an election will recognize ordinary income at the time the
restrictions on the stock lapse in an amount equal to the fair market
value of the restricted stock at such time. The Company will be entitled
to a corresponding deduction in the same amount and at the same time as
the key employee recognizes income. Any otherwise taxable disposition of
the restricted stock after the time the restrictions lapse will result in
capital gain or loss (long-term or short-term depending on the length of
time the restricted stock is held after the time the restrictions lapse).
Dividends paid in cash and received by a participant prior to the time the
restrictions lapse will constitute ordinary income to the participant in
the year paid. The Company will be entitled to a corresponding deduction
for such dividends. Any dividends paid in stock will be treated as an
award of additional restricted stock subject to the tax treatment
described herein.
A key employee may, within 30 days after the date of the award
of restricted stock, elect to recognize ordinary income as of the date of
the award in an amount equal to the fair market value of such restricted
stock on the date of the award. The Company will be entitled to a
corresponding deduction in the same amount and at the same time as the key
employee recognizes income. If the election is made, any cash dividends
received with respect to the restricted stock will be treated as dividend
income to the key employee in the year of payment and will not be
deductible by the Company. Any otherwise taxable disposition of the
restricted stock (other than by forfeiture) will result in capital gain or
loss (long-term or short-term depending on the holding period). If the
key employee who has made an election subsequently forfeits the restricted
stock, the key employee will not be entitled to deduct any loss. In
addition, the Company would then be required to include as ordinary income
the amount of the deduction it originally claimed with respect to such
shares.
Performance Shares. The grant of performance shares will create
no income tax consequences for the key employee or the Company. Upon the
receipt of shares of INVB Common Stock at the end of the applicable
performance period, the key employee will recognize ordinary income equal
to the fair market value of the shares of INVB Common Stock received,
except that if the key employee receives shares of restricted stock in
payment of performance shares, recognition of income may be deferred in
accordance with the rules applicable to such restricted stock. In
addition, the key employee will recognize ordinary income equal to the
dividend equivalents paid on performance shares prior to or at the end of
the performance period. The Company will be entitled to a deduction in
the same amount and at the same time as income is recognized by the key
employee.
Plan Benefits. No awards have been made to date under the Plan
and the Company cannot currently determine the awards that may be granted
in the future to key employees thereunder. Such determinations will be
made from time to time by the Committee.
SUPERVISION AND REGULATION
Supervision and Regulation
The operations of financial institutions, including banks and
bank holding companies, are highly regulated, both at the federal and
state levels. Numerous statutes and regulations affect the business of
the Company and the Bank. To the extent that the information below is a
summary of statutory provisions, such information is qualified in its
entirety by reference to the statutory provisions described. There are
additional laws and regulations having a direct or indirect effect on the
business of the Company or the Bank.
In recent years, the banking and financial industry has been the
subject of numerous legislative acts and proposals, administrative rules
and regulations at both federal and state regulatory levels. As a result
of many of such regulatory changes, the nature of the banking industry in
general has changed dramatically in recent years as increasing competition
and the trend toward deregulation have caused the traditional distinctions
among different types of financial institutions to be obscured. Further
changes along these lines could permit other financially oriented
businesses to offer expanded services, thereby creating greater
competition for the Company and the Bank with respect to services
currently offered or which may in the future be offered by those entities.
Proposals for new legislation or rule making affecting the financial
services industry are continuously being advanced and considered at both
the national and state levels. Neither the Company nor the Bank can
predict the effect that future legislation or regulation will have on the
financial services industry in general or on their businesses in
particular.
The performance and earnings of the Bank, like other commercial
banks, are affected not only by general economic conditions but also by
the policies of various governmental regulatory authorities. In
particular, the Federal Reserve System regulates money and credit
conditions and interest rates in order to influence general economic
conditions primarily through open-market operations in U.S. Government
securities, varying the discount rate on bank borrowings, and setting
reserve requirements against bank deposits. The policies of the Federal
Reserve System have a significant influence on overall growth and
distribution of bank loans, investments and deposits, and affect interest
rates earned on loans and investments. The general effect, if any, of
such policies upon the future business and earnings of the Bank cannot
accurately be predicted.
The Company
As a registered bank holding company, the Company is subject to
regulation under the BHCA and regulations issued thereunder. The BHCA
requires every bank holding company to obtain the prior approval of the
Board of Governors of the Federal Reserve System (the "Board") before it
may merge with or consolidate into another bank holding company, acquire
substantially all the assets of any bank, or acquire ownership or control
of any voting shares of any bank if after such acquisition it would own or
control, directly or indirectly, more than 5% of the voting shares of such
bank.
Under the BHCA, the Company is prohibited, with certain
exceptions, from acquiring direct or indirect ownership or control of more
than 5% of the voting shares of any company which is not a bank or holding
company, and neither the Company nor any subsidiary may engage in any
business other than banking, managing or controlling banks or furnishing
services to or performing services for its subsidiaries. The Company may,
however, own shares of a company the activities of which the Board has
determined to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto, and the holding company itself
may engage in such activities. The Company has no pending acquisition
plans.
As a registered bank holding company, the Company is supervised
and regularly examined by the Board. Under the BHCA, the Company is
required to file with the Board an annual report and such additional
information as may be required. The Board can order bank holding
companies and their subsidiaries to cease and desist from any actions
which in the opinion of the Board constitute serious risk to the financial
safety, soundness or stability of a subsidiary bank and are inconsistent
with sound banking principles or in violation of law. The Board has
adopted regulations which deal with the measure of capitalization for
banking holding companies. Such regulations are essentially the same as
those adopted by the FDIC, described below. The Board's regulations also
provide that its capital requirements will generally be applied on a bank-
only (rather than a consolidated) basis in the case of a bank holding
company with less than $150 million in total consolidated assets. The
Board has also issued a policy statement on the payment of cash dividends
by bank holding companies, wherein the board has stated that a bank
holding company experiencing earnings weaknesses should not pay cash
dividends exceeding its net income or which could only be funded in ways
that weaken the bank holding company's financial health, such as by
borrowing.
Under Wisconsin law, the Company is also subject to supervision
and examination by the Division of Banking of the Wisconsin Department of
Financial Institutions (the "Division"). The Division is empowered to
issue orders to a bank holding company to remedy any condition or policy
which, in its determination, endangers the safety of deposits in any
subsidiary state bank, or the safety of the bank or its depositors. In
the event of noncompliance with such an order, the Division has the power
to direct the operation of the state bank subsidiary and withhold
dividends from the holding company.
The Company, as the holder of the stock of a Wisconsin state-
chartered bank, may be subject to assessment to restore impaired capital
of the bank to the extent provided in Section 220.07, Wisconsin Statutes.
Any such assessment would apply only to the Company and not to any
shareholder of the Company.
Federal law prohibits the acquisition of "control" of a bank
holding company by individuals or business entities or groups or
combinations of individuals or entities acting in concert without prior
notice to the appropriate federal bank regulator. For this purpose,
"control" is defined in certain instances as the ownership of or power to
vote 10% or more of the outstanding shares of the bank holding company.
The Bank
As a state-chartered institution, the Bank is subject to
regulation and supervision by the Division and the Wisconsin Banking
Review Board and is periodically examined by the Division's staff.
Deposits of the Bank are insured by the Bank Insurance Fund administered
by the FDIC and as a result the Bank is also subject to regulation by the
FDIC and periodically examined by its staff.
The Federal Deposit Insurance Act requires that the appropriate
federal regulatory authority -- the FDIC in the case of the Bank (as an
insured state bank which is not a member of the Federal Reserve System) --
approve any acquisition by the Bank through merger, consolidation,
purchase of assets, or assumption of deposits. The same regulatory
authority also supervises compliance by the Bank with provisions of
federal banking laws which, among other things, prohibit the granting of
preferential loans to executive officers, directors, and principal
shareholders of the Bank and of banks which have a correspondent
relationship with the Bank.
Wisconsin banking laws restrict the payment of cash dividends by
state banks by providing that (i) dividends may be paid only out of a
bank's undivided profits, and (ii) prior consent of the Division is
required for the payment of a dividend which exceeds current year income
if dividends declared have exceeded net profits in either of the two
immediately preceding years. The various bank regulatory agencies have
authority to prohibit a bank regulated by them from engaging in an unsafe
or unsound practice; the payment of a dividend by a bank could, depending
upon the circumstances, be considered such an unsafe or unsound practice.
In the event that (i) the FDIC or the Division should increase minimum
required levels of capital; (ii) the total assets of the Bank increase
significantly; (iii) the income of the Bank decreases significantly; or
(iv) any combination of the foregoing occurs, then the Board of Directors
of the Bank may decide or be required by the FDIC or the Division to
retain a greater portion of the Bank's earnings to achieve or maintain the
required capital, thereby reducing the amount available for dividends.
Subsidiary banks of a bank holding company are subject to
certain restrictions imposed by the Federal Reserve Act on any extensions
of credit to the bank holding company or any of its subsidiaries, on
investments in stock or other securities of the bank holding company and
on the taking of such stock or securities as collateral for loans to any
borrower. Under the BHCA and regulations of the Board, a bank holding
company and its subsidiaries are prohibited from engaging in certain tie-
in arrangements in connection with any extension of credit or of any
property or service.
The activities and operations of banks are subject to a number
of additional detailed, complex and sometimes overlapping federal and
state laws and regulations. These include state usury and consumer credit
laws, state laws relating to fiduciaries, the Federal Truth-in-Lending Act
and Regulation Z, the Federal Equal Credit Opportunity Act and Regulation
B, the Fair Credit Reporting Act, the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), the Community Reinvestment
Act, anti-redlining legislation and the antitrust laws. The Community
Reinvestment Act includes provisions under which the federal bank
regulatory agencies must consider, in connection with applications for
certain required approvals, including applications to acquire control of a
bank or holding company or to establish a branch, the records of regulated
financial institutions in satisfying their continuing and affirmative
obligations to help meet the credit needs of their local communities,
including those of low and moderate income borrowers.
FDICIA, among other things, establishes five tiers of capital
requirements: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized. The FDIC
has adopted regulations which define the relevant capital measures for the
five capital categories. An institution is deemed to be "well
capitalized" if it has a total risk-based capital ratio (total capital to
risk-weighted assets) of 10% or greater, a Tier I risk-based capital ratio
(Tier I capital ratio (Tier I Capital to total assets) of 5% or greater,
and is not subject to a regulatory order, agreement, or directive to meet
and maintain a specific capital level for any capital measure. An
institution is deemed to be "adequately capitalized" if it has a total
risk-based capital ratio of 8% or greater, a Tier I risk-based capital of
4% or greater, and (generally) a Tier I leverage capital ratio of 4% or
greater, and the institution does not meet the definition of a well
capitalized institution. An institution is deemed to be
"undercapitalized" if it has a total risk-based capital ratio less than
8%, or a Tier I risk-based capital ratio less than 4%, or (generally) a
Tier I leverage ratio of less than 4%. An institution is deemed to be
"significantly undercapitalized" if it has a total risk-based capital
ratio less than 6%, or a Tier I risk-based capital ratio less than 3%, or
a Tier I leverage ratio less than 3%. An institution is deemed to be
"critically undercapitalized" if it has a ratio of tangible equity (as
defined in the regulations) to total assets that is equal to or less than
2%. Undercapitalized banks are subject to growth limitations and are
required to submit a capital restoration plan. If an undercapitalized
bank fails to submit an acceptable plan, it is treated as if it is
"significantly undercapitalized." Significantly undercapitalized banks
may be subject to a number of requirements and restrictions, including
orders to sell sufficient voting stock to become adequately capitalized,
requirements to reduce total assets, and cessation of receipt of deposits
from correspondent banks. "Critically undercapitalized" institutions may
not, beginning 60 days after become critically undercapitalized, make any
payment of principal or interest on their subordinated debt.
The Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Riegle Act"), among other things, permits bank holding
companies to acquire banks in any state effective September 29, 1995. The
Riegle Act contains certain exceptions relative to acquisitions. For
example, a holding company may not acquire a bank that has not been in
existence for less than a minimum period established by the home state;
however, the minimum period cannot exceed five years. The Riegle Act
makes a distinction between interstate banking and interstate branching.
Under the Riegle Act, banks can merge with banks in another state
beginning June 1, 1997, unless a state has adopted a law preventing
interstate branching. Under terms of the Riegle Act, an acquiring bank
may not control more than 10 percent of federal or 30 percent of state
total deposits of insured depository institutions. Wisconsin law requires
approval by the Division for all acquisitions of Wisconsin banks, whether
by an in-state or out-of-state purchaser and requires, in an interstate
acquisition, that the acquired bank must have been in existence for at
least five years.
ARRANGEMENTS AMONG BMCC, INVB AND THE BANK
In order to manage and formalize certain of the relationships
among BMCC, INVB and the Bank following the Distribution, certain
agreements described below have been prepared. These agreements will not
be entered into until the Bank commences operations. The agreements
summarized below have been filed as exhibits to the Registration Statement
and the summaries of such agreements are qualified in their entirety by
reference to the full text of such agreements. See "Available
Information."
Management Services and Allocation of Expenses Agreement
The Services and Expenses Agreement will be between BMCC and the
Bank. The Services and Expenses Agreement will provide for, among other
things, the Bank's management and servicing of BMCC's loan portfolio, the
Bank's provision of accounting services to BMCC, the Bank's sublease of
its premises from BMCC, the sharing of certain overhead expenses and
BMCC's agreement not to compete with the Bank in the origination of loans,
all as described below. The Services and Expenses Agreement will have a
one year term that automatically renews each year unless canceled by
either party at least sixty days in advance of the termination date.
Loan Management Services. The Bank agrees to service and
administer BMCC's loan portfolio, and is granted full power and authority
to do any and all things in connection with such servicing and
administration that the Bank deems necessary or desirable. BMCC agrees to
pay the Bank a monthly fee equal to one-twelfth of one-quarter of one
percent multiplied by the aggregate amount of the BMCC loan portfolio at
the end of the preceding month, and also agrees to reimburse the Bank for
certain of its out-of-pocket expenses. This monthly fee is equivalent to
a market rate quoted at arm's length by a major third party administrator
and servicer of loans.
Accounting Services. The Bank agrees to provide accounting
services to BMCC, including, but not limited to the preparation of all
internal management report and all external reports to shareholders and
any applicable regulatory agencies. BMCC agrees to pay the Bank monthly
the Bank's actual cost of providing such services, based upon the number
of hours Bank employees actually work to provide such services.
Sublease. BMCC grants the Bank a sublease for the Bank's
premises, and the Bank agrees to pay BMCC each month an amount equal to
29.67% of the amount BMCC owes to the landlord on the prime lease, and
also agrees to pay BMCC each month an amount equal to 50% of BMCC's
electric utility bill for such month. Payments made pursuant to the
sublease are based upon the Bank's expected pro rata usage of the premises
and electricity.
Overhead Expenses. The Bank and BMCC agree to share equally
certain overhead expenses, including but not limited to, expenses for
telephone service, receptionist services, depreciation and other
miscellaneous expenses.
Noncompete. BMCC agrees that except as specifically approved in
writing by the Bank, it will not originate any loans during the term of
the Services and Expenses Agreement and any renewals thereof. Purchasing
loan participations from the Bank or another lending institution is not
deemed to be an origination for purposes of the Services and Expenses
Agreement.
Tax Allocation and Services Agreement
The Tax Allocation and Services Agreement (the "Tax and Services
Agreement") will be between INVB and the Bank. The Tax and Services
Agreement provides for the allocation of consolidated federal, state and
local tax liabilities between INVB and the Bank and Bank's provision of
accounting services to INVB. INVB agrees to pay the Bank monthly the
Bank's actual cost of providing such accounting services, based upon the
number of hours Bank employees actually work to provide such services.
The Tax and Services Agreement's will remain in effect unless and until
INVB and the Bank no longer file consolidated federal income tax returns.
DESCRIPTION OF INVB CAPITAL STOCK
Authorized Capital Stock
Immediately after the Distribution, INVB's authorized capital
stock will consist of one million shares of preferred stock, par value
$0.01 per share (the "Preferred Stock"), and nine million shares of INVB
Common Stock. Immediately following the Distribution, approximately one
million shares of INVB Common Stock will be outstanding. All of the
shares of INVB Common Stock that will be outstanding immediately following
the Distribution will be validly issued, fully paid and nonassessable, and
free of preemptive rights. The following summarizes certain provisions of
the Articles as they are expected to be in effect after the Distribution.
Common Stock
The holders of INVB Common Stock will be entitled to one vote
for each share on all matters voted on by shareholders, including
elections of directors, and, except as otherwise required by law or
provided in any resolution adopted by the INVB Board of Directors with
respect to any series of Preferred Stock, the holders of such shares will
possess all voting power. There is no cumulative voting in the election
of directors. Subject to any preferential rights of any outstanding
series of Preferred Stock created by the INVB Board of Directors from time
to time, the holders of INVB Common Stock will be entitled to such
dividends as may be declared from time to time by the INVB Board of
Directors from funds available therefor, and upon liquidation will be
entitled to receive pro rata all assets of INVB available for distribution
to such holders. See "Dividend Policy." Any such series of preferred
stock may be created by the INVB Board of Directors from time to time
without the consent of the holders of the INVB Common Stock. In any such
event, the rights of the holders of the INVB Common Stock will be subject
to the preferential rights of the holders of the preferred stock. See "-
Preferred Stock."
Preferred Stock
The Articles authorizes the INVB Board of Directors to establish
one or more series of classes of Preferred Stock and to determine, with
respect to any series of Preferred Stock, the terms and rights of such
series.
INVB believes that the ability of the INVB Board of Directors to
issue one or more series of Preferred Stock will provide INVB with
flexibility in structuring possible future financings and acquisitions,
and in meeting other corporate needs which might arise. The authorized
shares of Preferred Stock, as well as shares of INVB Common Stock, will be
available for issuance without further action by INVB's shareholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which INVB's securities may be
listed or traded. If the approval of INVB's shareholders is not required
for the issuance of shares of Preferred Stock or INVB Common Stock, the
INVB Board of Directors may determine not to seek shareholder approval.
Although the INVB Board of Directors has no intention at the
present time of doing so, it could issue a series of Preferred Stock that
could, depending on the terms of such series, impede the completion of a
merger, tender offer or other takeover attempt. The INVB Board of
Directors will make any determination to issue such shares based on its
judgment as to the best interests of INVB and its shareholders. The INVB
Board of Directors, in so acting, could issue Preferred Stock having terms
that could discourage an acquisition attempt through which an acquiror may
be able to change the composition of the INVB Board of Directors,
including a tender offer or other transaction that some, or a majority, of
INVB's shareholders might believe to be in their best interests or in
which shareholders might receive a premium for their stock over the then
current market price of such stock.
Copies of the Articles and By-laws are filed as Exhibits to the
Registration Statement and the summaries thereof in this Information
Statement are qualified in their entirety by reference thereto. See
"Available Information."
CERTAIN ANTITAKEOVER EFFECTS
Board of Directors
The By-laws provide that the directors will be divided into
three classes. The By-laws also provide that INVB will have five
directors, which number may be increased or decreased from time to time by
amending the By-laws. Except as provided by law with respect to directors
elected by shareholders of a class or series, any director or the entire
Board of Directors may be removed with or without cause, by the
affirmative vote of the holders of not less than 80% of the voting power
of all capital stock entitled to vote in the election of directors
("Voting Stock") then outstanding, voting together as a single class.
Except as provided by law with respect to directors elected by
shareholders of a class or series, a vacancy on the Board of Directors may
be filled by a majority of the remaining directors, whether or not
sufficient to constitute a quorum.
These provisions would preclude a third party from removing
incumbent directors and simultaneously gaining control of the INVB Board
of Directors by filling the vacancies created by removal with its own
nominees. Under the classified board provisions described above, it would
take at least two elections of directors for any individual or group to
gain control of the INVB Board of Directors. Accordingly, these
provisions could discourage a third party from initiating a proxy contest,
making a tender offer or otherwise attempting to gain control of INVB.
Advance Notice Procedures
The By-laws establish an advance notice procedure for
shareholders to make nominations of candidates for election as directors
or to bring other business before an annual meeting of shareholders of
INVB (the "Shareholder Notice Procedure"). The Shareholder Notice
Procedure provides that only persons who are nominated by, or at the
direction of, the Board of Directors, or by a shareholder who has given
timely written notice to the Secretary of INVB prior to the meeting at
which directors are to be elected, will be eligible for election as
directors of INVB. The Shareholder Notice Procedure also provides that at
an annual meeting only such business may be conducted as has been brought
before the meeting by, or at the direction of, the INVB Board of
Directors, or by a shareholder who has given timely written notice to the
Secretary of INVB of such shareholder's intention to bring such business
before such meeting. Under the Shareholder Notice Procedure, for notice
of shareholder nominations to be made at an annual meeting to be timely,
such notice must be received by INVB not later than the close of business
on the 90th calendar day nor earlier than the close of business on the
120th calendar day prior to the first anniversary of the preceding year's
annual meeting (except that, in the event that the date of the annual
meeting is more than 30 calendar days before or more than 60 calendar days
after such anniversary date, notice by the shareholder to be timely must
be so delivered not earlier than the close of business on the 120th
calendar day prior to such annual meeting and not later than the close of
business on the later of the 90th calendar day prior to such annual
meeting or the 10th calendar day following the day on which public
announcement of a meeting date is first made by INVB). For purposes of
the Shareholder Notice Procedure, the first anniversary of the 1997 annual
meeting will be deemed to be May 1, 1997.
In addition, under the Shareholder Notice Procedure, a
shareholder's notice to INVB proposing to nominate a person for election
as a director or relating to the conduct of business other than the
nomination of directors must contain certain specified information. If
the chairman of a meeting determines that an individual was not nominated,
or other business was not brought before the meeting, in accordance with
the Shareholder Notice Procedure, such individual will not be eligible for
election as a director, or such business will not be conducted at such
meeting, as the case may be.
Although the Shareholder Notice Procedures do not give the INVB
Board of Directors any power to approve or disapprove shareholder
nominations for the election of directors or proposals for action, they
may have the effect of precluding a contest for the election of directors
or the consideration of shareholder proposals if the proper procedures are
not followed and of discouraging or deterring a third party from
conducting a solicitation of proxies to elect its own slate of directors
or to approve its own proposal, without regard to whether consideration of
such nominees or proposals might be harmful or beneficial to INVB and its
shareholders.
Amendment
The Articles provides that the affirmative vote of the holders
of at least 80% of the Voting Stock, voting together as a single class, is
required to amend provisions of the Articles and By-laws relating to
shareholder action without a meeting; the calling of special meetings; the
number, election and term of INVB's directors; the filling of vacancies;
and the removal of directors. The Articles and By-laws provide that the
related By-laws described above (including the Shareholder Notice
Procedure) may be amended only by the INVB Board of Directors or by the
affirmative vote of the holders of at least 80% of the voting power of the
outstanding shares of Voting Stock, voting together as a single class.
Other amendments to the Articles require the affirmative vote of the
holders of at least a majority of the Voting Stock, voting together as a
single class. In all cases, amendments to the Articles require that the
Board of Directors of INVB determine that the proposed amendment is
advisable.
Wisconsin Business Combination Statute
Sections 180.1140 to 180.1144 of the WBCL provide that, subject
to certain exceptions specified therein, any holder of 10% of the voting
stock of a Wisconsin corporation (an "interested shareholder") may not
engage in any merger or other business combination with the corporation
for a three-year period following the date that such shareholder becomes
an interested shareholder unless prior to such date, the board of
directors of the corporation approved the 10% acquisition. After such
three-year period, any such business combination must either (i) have been
approved by the Board prior to the date the shareholder became an
interested shareholder; (ii) have been approved by the affirmative vote of
at least a majority of the outstanding Voting Stock which is not owned by
the interested shareholder or (iii) meet certain fair price and other
conditions.
Control Share Acquisition Statute
Section 180.1150 of the WBCL provides that the voting power of
shares of a Wisconsin corporation held by any person or persons acting as
a group in excess of 20% of the Voting Stock is limited to 10% of the full
voting power of those shares. This restriction does not apply to shares
acquired directly from such corporation or in certain specified
transactions or shares for which full voting power has been restored
pursuant to a vote of the majority of Voting Stock represented at a
meeting of shareholders.
Copies of the Articles and By-laws are filed as Exhibits to the
Registration Statement and the summaries thereof in this Information
Statement are qualified in their entirety by reference thereto. See
"Available Information."
LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION
The WBCL limits the personal liability of INVB's directors to
the Company and its shareholders for money damages. As a result, neither
INVB nor any INVB shareholder can hold the directors personally liable for
monetary damages, unless the person seeking such damages proves that the
actions of such officer or director constituted (a) a wilful failure to
deal fairly with the Company or its shareholders in connection with a
matter in which the director had a material conflict of interest; (b) a
violation of criminal law, unless the director had reasonable cause to
believe his or her conduct was lawful or no reasonable cause to believe
his or her conduct was unlawful; (c) a transaction from which the director
derived an improper personal benefit; or (d) wilful misconduct.
The INVB Articles provide that INVB will indemnify (a) its
directors and officers, whether serving INVB or, at its request, any other
entity, to the fullest extent required or permitted by the Laws of the
State of Wisconsin now or hereafter in force, including the advance of
expenses under the procedures and to the fullest extent permitted by law
and (b) other employees and agents to such extent as shall be authorized
by the Board of Directors or the By-laws and be permitted by law. The
foregoing rights of indemnification are not exclusive of any other rights
to which those seeking indemnification may be entitled. The Board of
Directors may take such action as is necessary to carry out such
indemnification provisions and is expressly empowered to adopt, approve
and amend from time to time such bylaws, resolutions or contracts
implementing such provisions or such further indemnification arrangements
as may be permitted by law. No amendment of the INVB Articles, or of any
such bylaw, resolution or contract, or repeal of any of their provisions
will limit or eliminate the right to indemnification provided thereunder
with respect to acts or omissions occurring prior to such amendment or
repeal. The INVB By-laws currently contain provisions implementing the
foregoing.
Under current law, directors and officers will be indemnified
when serving in their capacity as directors or officers, unless it is
established that the actions of such officer or director constituted (a) a
wilful failure to deal fairly with the Company or its shareholders in
connection with a matter in which the director had a material conflict of
interest; (b) a violation of criminal law, unless the director had
reasonable cause to believe his or her conduct was lawful or no reasonable
cause to believe his or her conduct was unlawful; (c) a transaction from
which the director derived an improper personal benefit; or (d) wilful
misconduct.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board
of Directors of InvestorsBancorp, Inc.
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of InvestorsBancorp, Inc. (a
Development Stage Company, hereafter referred to as the "company") at
July 7, 1997, in conformity with generally accepted accounting principles.
This financial statement is the responsibility of the company's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial
statement in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Milwaukee, Wisconsin
July 7, 1997
<PAGE>
InvestorsBancorp, Inc.
(A Development Stage Company)
BALANCE SHEET
July 7, 1997
ASSETS
Cash $1,000
------
Total Assets $1,000
======
SHAREHOLDER'S EQUITY
Common stock, $0.01 par value, $ 1
authorized 9,000,000 shares; issued
and outstanding 143 shares
Additional paid in capital 999
------
Total Shareholder's Equity $1,000
======
See accompanying notes to financial
statement.
<PAGE>
InvestorsBancorp, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
Note 1 - Organization and Nature of Business
InvestorsBancorp, Inc. (the "Company") was incorporated under Wisconsin
law on June 12, 1996, for the purpose of holding all of the outstanding
common stock of InvestorsBank (the "Bank"). The Company was capitalized
with a $1,000 contribution. The Company and the Bank to date have
conducted no business, as reflected in the accompanying financial
statement.
Mr. George R. Schonath is the sole shareholder of the Company as of July
7, 1997.
The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form 10-SB (the "Registration
Statement") under the Securities Exchange Act of 1934, as amended. As of
July 7, 1997 the Registration Statement has not been declared effective by
the SEC.
Note 2 - Summary of Significant Accounting Policies
The Company and the Bank plan to file consolidated income tax returns.
