<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
Baylake Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
BAYLAKE CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 5, 2000
April 30, 2000
TO THE SHAREHOLDERS OF BAYLAKE CORP.
NOTICE IS HEREBY GIVEN that the Annual Meeting of the shareholders of
Baylake Corp., a Wisconsin corporation and registered bank holding company
("Baylake"), will be held at Baylake Bank Conference Center, 222 North Third
Avenue, Sturgeon Bay, Wisconsin on Monday, June 5, 2000, at 7:30 p.m., local
time, for the purpose of considering and voting upon the following matters:
1. ELECTION OF THREE (3) DIRECTORS OF CLASS III, WHOSE TERMS WILL
EXPIRE IN 2003;
2. SUCH OTHER BUSINESS RELATING TO THE FOREGOING AS MAY PROPERLY
BE BROUGHT BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF;
each matter as set forth in the accompanying PROXY STATEMENT.
The Baylake Corp. Board of Directors has fixed the close of business on
April 21, 2000 as the record date for the determination of shareholders entitled
to receive notice of and to vote at the Annual Meeting or any adjournment
thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE,
AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING,
WHETHER YOUR HOLDINGS ARE LARGE OR SMALL. IF FOR ANY REASON YOU SHOULD DESIRE TO
REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS VOTED.
<PAGE> 3
STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
OF
BAYLAKE CORP.
This Proxy Statement is being furnished to the shareholders of Baylake
Corp. ("Baylake") in connection with the solicitation of proxies on behalf of
Baylake's Board of Directors to be voted at the Annual Meeting of Shareholders
to be held at 7:30 p.m., local time, on Monday, June 5, 2000, at the Baylake
Bank Conference Center, 222 North Third Avenue, Sturgeon Bay, Wisconsin, and at
any adjournment thereof (the "Annual Meeting"). This Proxy Statement and the
enclosed proxy card are being mailed to the shareholders on or about April 30,
2000.
At the Annual Meeting, Baylake shareholders will be asked to elect
three (3) directors to serve as Class III directors, whose terms as directors
will expire in 2003. Presence, in person or by proxy, of the holders of a
majority of the outstanding shares of Baylake Common for any matter constitutes
a quorum for all matters to be considered at the Annual Meeting. Abstentions and
broker non-votes are counted for purposes of determining the presence or absence
of a quorum. The Inspector of Election appointed by the Board of Directors will
determine the shares represented at the Annual Meeting and the validity of
proxies and ballots, and will count all votes and ballots. The voting
requirements and procedures described below are based upon the provisions of the
Wisconsin Business Corporation Law, Baylake's charter documents and any other
requirements applicable to the matters to be voted upon. Each shareholder of
record of Baylake Common at the close of business on April 21, 2000, will be
entitled to one vote for each share of Baylake Common registered in such
shareholder's name. At that date there were 7,444,274 shares of Baylake Common
issued and outstanding, all of which are entitled to vote.
Shares represented at the Annual Meeting by properly executed proxy
will be voted in accordance with the specifications made on the proxy. Unless
otherwise directed, proxies will be voted FOR the election of the named
individuals in Class III. If any of the nominees would decline or be unable to
act, which eventuality is not foreseen, proxies will be voted with discretionary
authority for a substitute nominee to be designated by the Board of Directors.
Directors are elected by a plurality of the votes cast by holders of
Baylake Common entitled to vote in the election at a meeting at which a quorum
is present. "Plurality" means that the individuals who receive the largest
number of votes are elected as directors up to the maximum number of directors
to be chosen at the meeting. Therefore, any shares not voted, whether by
withheld authority, broker non-vote or otherwise, have no effect in the election
of directors except to the extent that the failure to vote for an individual
results in another individual receiving a larger number of votes.
Any shareholder submitting a proxy has the right to revoke the proxy at
any time before it is voted by giving written notice to the secretary of
Baylake, by giving oral notice to the presiding officer during the Annual
Meeting that the shareholder intends to vote in person, or by submitting a
subsequently dated proxy. Attendance by a shareholder at the Annual Meeting will
not in and of itself constitute revocation of a proxy.
The expense of preparing, printing and mailing this Proxy Statement and
the solicitation of proxies will be borne by Baylake. In addition to
solicitation by mail, directors, officers and employees of Baylake may solicit
proxies by telephone, facsimile transmission or personal contact, but will
receive no additional compensation for such services.
1
<PAGE> 4
Baylake shareholders of record or beneficially on April 21, 2000, may
obtain a copy (without exhibits) of Baylake's (i) Annual Report on Form 10-K, as
amended, for the year ended December 31, 1999, and (ii) Quarterly Report on Form
10-Q, for the three months ended March 31, 2000, without charge, upon the
written request of such person to: Steven Jennerjohn, Chief Financial Officer,
Baylake Corp., 217 N. Fourth Avenue, P.O. Box 9, Sturgeon Bay, WI 54235.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
THE BOARD OF DIRECTORS OF BAYLAKE UNANIMOUSLY RECOMMENDS:
a vote FOR each of the nominees for Class III director,
AS THE BOARD BELIEVES SUCH ACTION TO BE IN THE BEST INTERESTS
OF BAYLAKE AND ITS SHAREHOLDERS
Election of Directors
The Bylaws of Baylake provide for classification of the Board of
Directors into three classes as nearly equal in number as practicable, each to
serve staggered three-year terms, with the term of one class expiring each year.
The Bylaws also provide that the Board may consist of not less than five (5) nor
more than seventeen (17) directors as shall be determined from year to year by
the shareholders. The Board of Directors currently consists of twelve (12)
directors, including four (4) Class I directors, whose terms expire in 2001,
four (4) Class II directors whose terms expire in 2002, and four (4) Class III
directors whose terms expire in 2000. The Board of Directors has nominated three
(3) individuals named below for election as directors of Class III, to serve for
terms expiring at the 2003 Annual Meeting of Shareholders and upon the election
of their successors. All of the nominees are currently directors of Baylake.
The following also sets forth information as to current directors of
Baylake who will serve as directors for the indicated terms. Except as otherwise
indicated, each of the directors has been employed in such director's current
occupation for at least five years. All of the directors of Baylake also serve
as directors of Baylake Bank.
NOMINEES FOR ELECTION AS CLASS III DIRECTORS FOR TERM EXPIRING IN 2003:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND DIRECTOR
NAME AND AGE BUSINESS EXPERIENCE SINCE
------------ ------------------------ --------
<S> <C> <C>
Ronald D. Berg (65) Retired; formerly, Senior Vice President of 1979
(1)(3) Baylake Bank
Richard A. Braun (57) Executive Vice President and Vice Chairman 1994
(1)(4)(5) of Baylake; previously President of Baylake
Ex officio:(2) Bank - Kewaunee and President of
Kewaunee County Banc-Shares, Inc.
Ruth Nelson (65) General Manager of Ephraim Shores 1983
(1)(5) (motel and restaurant)
</TABLE>
2
<PAGE> 5
CONTINUING CLASS I DIRECTORS WHOSE TERM EXPIRES IN 2001:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND DIRECTOR
NAME AND AGE BUSINESS EXPERIENCE SINCE
------------ ------------------------ --------
<S> <C> <C>
John W. Bunda (65) Retired Retailer 1972
(3)
L. George Evenson (71) Dairy Farmer 1978
(1)(2)(4)
Thomas L. Herlache (57) President, Chief Executive Officer and; 1970
(1)(2)(4) Chairman of Baylake; President, Chief
Ex officio:(3)(5) Executive Officer, Chairman and
Trust Officer of Baylake Bank
Paul Jay Sturm (49) Of Counsel Omholt & Forsythe 1998
(4)(5) Attorney at Law
</TABLE>
CONTINUING CLASS II DIRECTORS WHOSE TERM EXPIRES IN 2002:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND DIRECTOR
NAME AND AGE BUSINESS EXPERIENCE SINCE
------------ ------------------------ --------
<S> <C> <C>
John D. Collins (69) Owner of C&S Manufacturing 1979
(2) (metal production)
George Delveaux, Jr. (57) Dairy Farmer 1981
(3)
Glenn Miller (69) Retired; formerly Vice President of 1983
(2) Sturgeon Bay Yacht Harbor and Co-Owner
of Ephraim Yacht Harbor
Joseph Morgan (57) President of Mary Morgan, Inc. (printing) 1995
(4)(5)
</TABLE>
(1) Member of the Executive Committee, which reviews the financial,
administrative and regulatory, activities of Baylake and Baylake Bank.
It is authorized by the Board of Directors to act on its behalf on any
matter permitted by law. This committee generally meets on a weekly
basis (except for the third Tuesday of each month), and held 29
meetings during 1999.
(2) Member of the Director Loan Committee which reviews certain loan
transactions of Baylake Bank. This committee meets on a weekly basis
and held 52 meetings during 1999.
(3) Member of the Audit and Legal Committee which reviews financial and
legal matters of Baylake and held 12 meetings in 1999.
3
<PAGE> 6
(4) Member of the Personnel and Compensation Committee, which reviews the
personnel policies and annual compensation levels of Baylake Bank.
Officers and employees of Baylake receive no separate compensation, as
all compensation is paid by Baylake Bank. This committee held 1 meeting
during 1999.
(5) Member of the Special Services Committee, which reviews the function
and administration of the trust and financial services departments of
Baylake Bank and Baylake's non-bank subsidiaries. This committee meets
on a monthly basis and held 12 meetings during 1999.
Each member of the Board of Directors attended at least 75% of the
meetings of the Board of Directors and of all committees on which such directors
served during 1999 except that Glen Miller attended 58% of board meetings and
52% of Director Loan Committee meetings.
Ownership of Baylake Common
The table below sets forth information regarding the beneficial
ownership of Baylake Common as of April 21, 2000 by each director and nominee
for director (including the named executive officer in the Summary Compensation
Table below) and by all executive officers and directors of Baylake and its
subsidiaries as a group. Such information, including addresses, is also given
for all persons who are known to Baylake to beneficially own more than 5% of the
outstanding shares of Baylake Common as of such date.
<TABLE>
<CAPTION>
Name (1) Number of Shares Percent
-------- ---------------- -------
<S> <C> <C>
Thomas L. Herlache 112,549 1.51%
Ronald D. Berg 12,622 *
Marie Bertschinger 161,074 2.16%
Richard A. Braun 83,000(2) 1.11%
John W. Bunda 5,556 *
John D. Collins 68,169 *
George Delveaux, Jr. 1,532 *
L. George Evenson 6,568 *
Glenn Miller 11,368 *
Joseph Morgan 14,580 *
Ruth Nelson 114,564 1.53%
Paul Jay Sturm 15,000 *
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C> <C>
All executive officers and directors 665,997 (2) 8.95%
as a group (21 persons)
Ellsworth L. Peterson 580,270 7.79%
55 Utopia Circle
Sturgeon Bay, WI 54235
Oliver Ulvilden 412,843 5.55%
P.O. Box 189
Ephraim, WI 54211
</TABLE>
----------
* Less than 1%
(1) For all listed persons, the number includes shares held by,
jointly with, or in trust for the benefit of, spouse and
dependent children. Shares are reported in such cases on the
presumption that the individual may share voting and/or
investment power because of the family relationship.
(2) In addition, there are also options to purchase 11,100 shares
exercisable currently or within 60 days of the date hereof.
(3) In addition, there are also options to purchase aggregate of
394,840 shares exercisable currently or within 60 days of the
date hereof.
Directors' Fees and Benefits
Directors of Baylake or Baylake Bank are paid $250 for each general
board meeting attended, and $200 for each board meeting which is not attended.
Members of any of the identified committees also receive $250 for each committee
meeting attended.
Baylake also has deferred compensation agreements with certain of its
directors, including Marie Bertschinger, John W. Bunda, George Delveaux, Jr., L.
George Evenson, and Ruth Nelson. Under these agreements, participating directors
may elect to defer their annual directors' fees until retirement, termination,
death or disability, at which time the deferred amount, including any income or
gains thereon, are payable in a lump sum or in annual installments. At death,
all sums held in the account of a participating director are payable to
designated beneficiaries. Although Baylake maintains policies of insurance to
support payments under these agreements, participating directors have no
interest in such policies or any benefits accruing under such policies.
Executive Compensation
Compensation Summary. The following table summarizes certain
information for each of the last three years concerning all compensation awarded
or paid to or earned by the Chief Executive Officer of Baylake and the other
most highly compensated officers of Baylake Bank.
5
<PAGE> 8
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(6)
<TABLE>
<CAPTION>
Options/ All other
Name and Principal Salary Bonus SARs Compensation
Position Year ($)(1) ($)(2) (#)(3) ($)(4)
- ------------------ ---- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Thomas L. Herlache 1999 298,533(5) 98,000 12,000 18,000
President and Chief 1998 283,413(5) 80,800 12,000 14,000
Executive Officer 1997 263,972(5) 67,515 12,000 14,500
Michael J. Gilson 1999 104,658 4,349 12,000 10,330
Senior Vice President 1998 99,075 4,027 12,000 9,750
Commercial Division 1997 93,150 5,905 12,000 9,300
</TABLE>
(1) The salary amount set forth include base salaries, directors' fees and
employee contributions made to the account of the named executive
officer pursuant to the Baylake Bank's 401(k) Plan.
(2) Consists of bonuses earned during the year indicated pursuant to
Baylake Bank's Pay-for-Performance Program and prior bonus plans, which
amounts were paid as soon as practicable in the following year. See
"Board of Directors/Compensation Committee Report on Management
Compensation -- Year-end Bonuses" below for more detailed information.
(3) Consists solely of non-qualified stock options granted to the named
executive officer under Baylake's 1993 Stock Option Plan, as amended.
These have been adjusted for the 3 for 2 stock dividend paid on May 15,
1998 and the 2 for 1 stock dividend paid on November 15, 1999.
(4) Consists of employer matching and other contributions made to the
account of the named executive officer under Baylake Bank's 401(k)
Plan.
(5) Includes annual compensation deferred at Mr. Herlache's election
pursuant to the Thomas L. Herlache Deferred Compensation Plan, under
which Mr. Herlache may defer a portion of his annual compensation in an
amount equal to the greater of $20,500 or 15.6% of his base salary.
Amounts deferred are held in a rabbi trust for the benefit of Mr.
Herlache.
(6) Although the named individual received perquisites or other personal
benefits in the years shown, in accordance with SEC regulations the
value of these benefits is not shown because they did not in the
aggregate exceed 10% of the individual's salary and bonus in any year.
Mr. Herlache also has a Preferred Compensation Agreement with Baylake
Bank under which Mr. Herlache is entitled to receive a minimum cash benefit of
$20,000 per year (payable in monthly installments) upon his death, disability or
retirement at age 65. Such payment will be made for a period of at least ten
years. If Mr. Herlache decides to retire before age 65, he will be entitled to
reduced annual benefits (with the reduction equal to 6.5% multiplied by the
difference between his age at early retirement and age 65); however, Mr.
Herlache will not be entitled to any such benefits upon retirement prior to age
60.
Stock Options. The following tables set forth certain information
concerning grants of options to purchase Baylake Common made to the named
executive officer during 1999 and the number and value of options outstanding at
the end of 1999 for the named executive officer.
6
<PAGE> 9
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants(1)
Potential Realizable
Percent of Value at Assumed
Total Options/ Annual Rates of Stock
Options/ SARs Granted Exercise Market Price Price Appreciation
SARs to Employees or Base at Date Expiration For Option Term
Name Granted(#) in Fiscal Year Price($/sh) of Grant Date 5%($) 10%($)
---- ---------- -------------- ----------- -------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas L. Herlache 12,000 9.5% $15.25 $15.25 1/4/09 115,088 291,655
Michael J. Gilson 12,000 9.5% $15.25 $15.25 1/4/09 115,088 291,655
</TABLE>
(1) Consists entirely of non-qualified stock option granted pursuant to
Baylake's 1993 Stock Option Plan. All options granted after April 30,
1993 have and will have exercise prices equal to 100% of Baylake Common
fair market value on the date of grant. The options granted to date
become exercisable 20% per year, commencing one year from date of
grant.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options/SARs at Fiscal In-the-Money Options/SARs
Year-End (#) at Fiscal Year-End ($)(3)
Shares Acquired Value
Name on Exercise (#) Realized ($)(2) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Herlache 24,000 $335,008 12,000 30,000 245,441 243,091
Michael J. Gilson 5,000 $101,667 55,000 24,000 856,885 319,020
</TABLE>
(1) Consists entirely of non-qualified stock options; no SARs have been
granted or exercised.
(2) Market price at date of exercise of options, less option exercise
price, times number of shares, equals value realized.
(3) Calculated assuming market price of Baylake Common at fiscal year-end
of $25.00 per share.
Board of Directors/Compensation Committee Report on Management Compensation
The Board of Directors determines the compensation of Baylake Bank's
executive officers, based on the recommendations of the Personnel and
Compensation Committee (the "Committee"). However, with respect to the
compensation of Thomas L. Herlache, Baylake Bank's President and Chief Executive
Officer, the Board of Directors determined his compensation based upon an
independent evaluation by Executive Studies Group, comparing financial
institutions of equivalent asset size. Criteria selected for salary comparisons
included return on assets and net income growth and, in addition, return on
equity results. Directors and committee members who are also executive officers
of Baylake Bank do not participate in discussions concerning their compensation.
The Board of Directors unanimously adopted the recommendations of the Committee
without modifications.
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<PAGE> 10
The Committee is comprised of six persons, including three outside
directors, Thomas L. Herlache, Richard A. Braun, and Sharon Haines, Director of
Human Resources. Ms. Haines is substantially responsible for initially
formulating the recommended compensation levels of the salaried employees and
executive officers. The Committee generally meets one time during the year to
consider compensation levels and make recommendations to the Board. It works
with the human resources department which gathers and provides useful
information for the Committee's review.
The general philosophy of the Committee is to offer employees fair and
competitive compensation, based on the employee's individual contribution,
experience and performance and on Baylake Bank's overall growth and performance.
Baylake Bank's executive compensation policies are intended to attract and
retain competent management with a balance of short- and long-term
considerations and to provide incentives to individuals based upon the Bank's
growth and earnings and the attainment of certain goals. The Board of Directors
believes that this policy is critical to the long-term success and
competitiveness of Baylake.
In making its executive compensation recommendations for 1999, the
Committee considered various factors, including the following: (i) the financial
performance of Baylake Bank as a whole on both a short-term and long-term basis
(including net income, an increase in deposits and loans, return on average
shareholders' equity, and return on average assets); (ii) with respect to each
individual executive officer, the financial performance of that area of Baylake
Bank, if any, for which such executive is responsible, including whether or not
that area of the Bank achieved its goals for 1999; (iii) the length of service
of the executive and an evaluation of the executive's overall job performance;
(iv) the compensation levels of executive officers in similar positions with
similar companies; and (v) other information (such as cost of living increases)
and subjective factors which the Committee deems appropriate for a particular
executive. The Committee subjectively analyzes these factors, and certain
factors may weigh more heavily than others with regard to any individual
executive officer.
The main components of Baylake Bank's executive compensation program
consist of base salary, a year-end bonus, and stock options, in addition to
standard medical, life and disability benefits and a 401(k) profit sharing plan
made available to all employees.
Base Salary. The principal component of executive compensation is base
salary. The Committee believes that base salary is most important in retaining
highly qualified officers. Accordingly, it reviews compensation surveys and
comparisons collected by the human resources department and seeks to recommend
salaries at levels above those applicable to other financial institutions and
businesses similarly situated on the basis of type, size and community, although
the Committee and Human Resources department do not perform any mathematical
calculations or statistical analyses to arrive at any percentile comparison.
Salary surveys include both informal surveys conducted by the human resources
department with the cooperation of nearby community financial institutions and
businesses, and formal financial surveys conducted by independent banking
consultants and banking associations.
In recommending base salary levels for 1999, the Committee (and the
Board, as to the salary of Mr. Herlache) considered such factors as growth in
net income and earnings per share and return on average assets and average
stockholders' equity. With respect to Mr. Herlache's salary in particular, the
Board took into account the sustained top performance of Baylake under his
leadership as well as Baylake's most recent annual performance. In view of these
considerations, the Board and Committee determined that a salary increase for
the executive officers ranging from 1.53% to 10.00% including a salary increase
for Mr. Herlache of 5.94% would be appropriate.
8
<PAGE> 11
Year-End Bonuses. The Board of Directors, in conjunction with the
Committee, implemented a year-end bonus program, called the "Pay-for-Performance
Program," which commenced in 1993. The Pay-for-Performance Program offers
incentives to executive officers and other eligible employees to earn bonuses
directly dependent on the Bank's performance in numerous select areas and in
various divisions. The bonus plans reflect the philosophy of the Board that a
significant portion of executive compensation should be related to the financial
performance of the Bank.
The Pay-for-Performance Program is intended to motivate and reward
management and other employees by linking bonuses to critical financial
performance components of the Bank. Under the Program, key indicators have been
identified which are considered by the Board to have an impact on the earnings
of Baylake Bank. These indicators include the following: growth in net income.
Certain quantitative goals were assigned to each of these indicators (ranging
from goal 1 to goal 10), and each indicator was assigned a weighted value based
on its perceived influence on earnings. The Board determined that achievement of
the maximum goals (goal 10) across all indicators in 1999 should generate at
least $1,980,000 in additional pre-tax income, and that the bonus pool should
constitute 40% of additional net income attributable to the performance
indicators (resulting in a maximum potential bonus pool of approximately
$792,000 for 1999). However, it was agreed that no bonuses would be awarded
unless Baylake's return on average stockholders' equity for 1999 was at least
15.00%.
After determining the bonus pool, a calculation is made as to the size
of the bonus pool set forth as a percentage of total salary expense, and each
employee is eligible to receive a bonus equal to such percentage multiplied by
their base salary.
Based on actual results for 1999 among the various indicators which
achieved prescribed goals, a bonus pool of approximately $266,800 was
established. The goal level of at least 3 was achieved in components relating to
net income. The bonus pool amounted to approximately 4.21% of total salaries.
Executive officers of Baylake Bank received bonuses of 4.21% of their base
salaries (as a result of qualitative criteria affecting the divisions for which
they are responsible).
In addition in 1999, a stretch bonus program was introduced allowing
employees within each division to earn additional compensation based on
achievement of divisional goals. Goals focused on loan quality and growth,
deposit growth, sales goals, technological advances, and various support goals.
For 1999, payouts ranged from 0% to 9%. The bonus payout amounted to 2.88% of
total salaries and totaled $197,288. However, Mr. Herlache did not receive any
pay for performance bonus. The payment of $98,000 or 45.80% of his base salary
was based on recommendations for salary adjustment resulting from the study.
Stock Options. In April 1993, the Board of Directors approved Baylake's
1993 Stock Option Plan (the "Option Plan"), which was later approved by the
shareholders in June 1993. The Option Plan was established to provide a
long-term incentive to the Bank's executive officers and other key employees, to
increase the overall value of Baylake in future years. The Board seeks to
further motivate management by granting them options to purchase shares of
Baylake Common and thus offering them a greater stake in Baylake's future. The
Board also views the Option Plan as a significant component of the Bank's
overall compensation package and is a complement to base salary and bonus. The
Option Plan also enables the Bank to compensate its officers without having to
make any cash payments.
A total of 400,000 shares of Baylake Common has been reserved for
issuance upon exercise of options granted and to be granted under the Option
Plan. Under an Amendment to the Plan dated and filed with the Securities and
Exchange Commission, the number of shares reserved has been increased to
600,000.
9
<PAGE> 12
As a result of the stock dividend of November 15, 1999, shares reserved total
1,200,000. Options to purchase an additional 60,000 shares were granted in
January 2000 at an exercise price of $25.00 per share, which approximate the
then current market value of the Baylake Common. To date, options to purchase up
to 858,000 shares in aggregate have been granted to a total of eleven executive
officers of the Bank. All options granted will have an exercise price equal to
the market value of the Baylake Common at the date of grant. Option grants have
been and will be made at or near the current market value so that any value is
dependent upon an increase in the market value of the Baylake Common. The
options vest over five years (20% per year), commencing one year after date of
grant, and expire after 10 years if not exercised.
The total number of options earned by Baylake Bank's executive officers
in 1999 was generally based on the Bank's continued performance in 1999 as
compared to 1998, and the number of options granted on an individual basis took
into account the executive officer's relative cash compensation, experience,
responsibilities and attribution to the Bank's past and future performance. In
2000, Mr. Herlache was granted options to purchase 6,000 shares of Baylake
Common, while other divisional vice presidents were granted options to purchase
6,000 shares.
Members of the Salary and Compensation Committee:
L. George Evenson, Sharon Haines (non-director), Thomas L. Herlache,
Joseph Morgan, Richard A. Braun and Paul Jay Sturm
Compensation Committee Interlocks and Insider Participation
As indicated above, Thomas L. Herlache, President and Chief Executive
Officer of Baylake and Baylake Bank, and Sharon Haines, Director of Human
Resources, serve as members of the Personnel and Compensation Committee. Mr.
Herlache is a member of the Baylake Board of Directors, although he does not
participate on decisions affecting his own compensation. Mr. Herlache is also a
director of Alpine, Inc., the organization of which Marie Bertschinger, a
director of Baylake, was assistant manager until 1992. Alpine, Inc. does not
have a compensation committee, and Mr. Herlache has not participated in
decisions regarding compensation for that company.
Certain Transactions with Management
Baylake Bank has, and expects to continue to have, regular dealings
with officers and directors of Baylake as well as their associates. Since
January 1, 1999, several such persons have been indebted to Baylake Bank for
loans made in the ordinary course of business. Loans to all such persons remain
on substantially the same terms including interest rates and collateral, on
those prevailing at the time for comparable transactions with other persons, are
current with respect to payments, and do not involve more than the normal risk
of collectability or present other unfavorable features.
Compliance with Section 16(a) of the Exchange Act
Under Section 16(a) of the Exchange Act, Baylake's directors and
executive officers, and any persons holding more than 10% of the outstanding
Baylake Common are required to report their initial ownership of the Baylake
Common and any subsequent changes to such ownership to the Securities and
Exchange Commission. Specific due dates for these reports have been established,
and Baylake is required to disclose in this Proxy Statement/Prospectus any
failure to file such reports by these dates during 1999.
10
<PAGE> 13
Performance Graph
The following graph shows the cumulative stockholder return on the
Baylake Common over the last five fiscal years compared to the returns of
Standard & Poors 500 Stock Index and the Nasdaq Bank Index, prepared for Nasdaq
by the Center for Research in Securities Prices at the University of Chicago.
[PERFORMANCE GRAPH]
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
Period Ended Baylake Corp NASDAQ S&P 500
<S> <C> <C> <C>
12/31/94 100.00 100.00 100.00
12/31/95 80.47 147.36 137.11
12/31/96 83.67 190.05 168.22
12/31/97 88.84 315.37 223.90
12/31/98 146.06 283.33 287.35
12/31/99 258.17 267.12 347.36
</TABLE>
(1) Assumes $100 invested on December 31, 1994 in Baylake Corp. Common
Stock compared to the same amount invested in other funds shown at the
same time. Dividends are assumed to be reinvested.
11
<PAGE> 14
EXPERTS
The Board of Directors intends to continue to use the accounting firm
of Smith & Gesteland as independent auditors to audit the financial statements
of Baylake for 2000. Representatives of Smith & Gesteland are expected to be
present at the Baylake Annual Meeting to respond to appropriate questions and to
make a statement if they desire to do so.
The standing Audit and Legal Committee has, on a continuing basis,
considered the possibility of a conflict of interest arising as a result of
Smith & Gesteland performing independent audit services and other non-audit
services. In each case, it was determined that no conflict resulted and that the
independence of the auditor was not compromised. Prior authorization was granted
by the Committee in each case before any services were performed.
FINANCIAL STATEMENTS AND ANNUAL REPORT
A copy of the 1999 Annual Report to shareholders is enclosed with your
proxy materials. The consolidated statements of Baylake are contained in the
1999 Annual Report. However, such report and financial statements contained
therein are not to be considered as part of this proxy statement.
Future Shareholder Proposals
Shareholder proposals must be received by Baylake no later than
December 30, 2000 in order to be considered at Baylake's 2001 Annual Meeting of
Shareholders.
STURGEON BAY, WISCONSIN
DATE: APRIL 30, 2000 BAYLAKE CORP.
12
<PAGE> 15
[BAYLAKE CORP. LETTERHEAD]
April 30, 2000
Dear Baylake Shareholder:
You are invited to attend the Annual Meeting of Shareholders of
Baylake Corp. to be held on Monday, June 5, 2000 at the Baylake Bank Conference
Center, 222 North Third Avenue, Sturgeon Bay, Wisconsin. The Annual Meeting
will begin at 7:30 p.m.
At the Annual Meeting, you will be asked to elect three (3) directors
in Class III, whose terms will expire in 2003 and to take up consideration of
any other matters which may properly come before the meeting.
To assure that your shares are represented in voting on these very
important matters, please complete and return the accompanying Proxy card
promptly in the enclosed envelope, whether or not you plan to attend the Annual
Meeting. If you do attend, you may revoke your proxy and vote your shares
in person at the Annual Meeting.
THE ATTACHED REQUEST FORM SHOULD BE COMPLETED BY YOU ONLY IF YOU PLAN
TO ATTEND THE MEETING. Upon receipt of the form, we will send you an Entrance
Card which is to be presented to us when you attend the meeting. Please return
the form by May 15th to allow us to make proper accommodations for those
attending the meeting.
If you have any questions or require assistance, please contact
Stephen A. Kase at Baylake Bank at either 920-743-5551 or 800-267-3610.
- --------------------------------------------------------------------------------
REQUEST FOR ENTRANCE CARD
If you plan to attend the Annual Meeting, please complete and return
in the Proxy envelope.
NAME:
------------------------------------------
ADDRESS:
------------------------------------------
------------------------------------------
HOLDING COMPANY FOR BAYLAKE BANK
<PAGE> 16
BAYLAKE CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - JUNE 5, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Thomas L. Herlache and L. George Evenson as
Proxies, each with the power to appoint his and/or her substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
common stock of Baylake Corp. held on record by the undersigned on April 21,
2000 at the Annual Meeting of shareholders to be held on June 5, 2000, or any
adjournment thereof.
ELECTION OF DIRECTORS - NOMINEES FOR CLASS III OF THE BOARD OF DIRECTORS ARE:
RONALD D. BERG RICHARD A. BRAUN RUTH NELSON
(Instruction: To withhold authority to vote for any individual nominee, strike a
line through the name of the nominee in the list stated above.)
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: Vote for all names above
------------
Vote for all above, except those crossed out
------------
Withhold vote for all names above
------------
</TABLE>
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING:
YES NO
------ ------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED ABOVE BY THE UNDERSIGNED SHAREHOLDER(S). IF PROPERLY SIGNED, BUT NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS NUMBER ONE AND
TWO.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY. When shares are
held by joint tenants, both should sign. When signing as attorney, personal
representative, administrator, trustee, or guardian, please give full title as
such. If a corporation or partnership, please sign in full corporate name, by
the President, other authorized officer, or by an authorized person.
Dated: , 2000.
--------------------
- ------------------------------------ ----------------------------------------
Signature Signature, if jointly held
PLEASE MARK YOUR CHOICES FOR ELECTION OF DIRECTORS AND OTHER BUSINESS, THEN
SIGN AND DATE THIS FORM. PLEASE RETURN THIS FORM PROXY PROMPTLY, USING THE
ENCLOSED ENVELOPE FOR YOUR CONVENIENCE.
