<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
MARSHALL & ILSLEY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
WISCONSIN 39-0968604 6021
(STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY STANDARD
JURISDICTION IDENTIFICATION NO.) INDUSTRIAL
OF INCORPORATION CLASSIFICATION CODE NO.)
OR ORGANIZATION)
770 NORTH WATER STREET
MILWAUKEE, WISCONSIN 53202
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
M.A. HATFIELD, SECRETARY
MARSHALL & ILSLEY CORPORATION
770 NORTH WATER STREET
MILWAUKEE, WISCONSIN 53202
(414) 765-7801
(NAME ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
RANDALL J. ERICKSON MICHAEL D. REGENFUSS
KENNETH C. HUNT JAY O. ROTHMAN
GODFREY & KAHN, S.C. FOLEY & LARDNER
780 NORTH WATER STREET 777 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202 MILWAUKEE, WISCONSIN 53202
(414) 273-3500 (414) 271-2400
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of the Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE PRICE(2) FEE(2)(3)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $1.00 par
value.................. 4,235,055 N/A 239,986,416 30,874
- ---------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) The number of shares to be registered is based upon an estimate of the
maximum number of shares of Common Stock of the Registrant to be issued to
holders of Common Stock of Advantage Bancorp, Inc. ("Advantage") pursuant
to the Merger Agreement (as defined herein).
(2) The registration fee was computed pursuant to Rule 457(f)(1) under the
Securities Act of 1933, as amended, based upon the average of the high and
low prices of shares of Advantage Common Stock on December 18, 1997
($68.00) reported on the Nasdaq National Market multiplied by the maximum
number of such shares that may be exchanged for the Common Stock of the
Registrant being registered (3,529,212).
(3) In accordance with Rule 457(b), the total registration fee of $70,796 has
been reduced by $39,922, which was previously paid on December 1, 1997
upon filing under the Securities Exchange Act of 1934, as amended, of
preliminary copies of proxy materials of Advantage. Therefore, the
registration fee payable upon filing of this Registration Statement is
$30,874.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRATION
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A) MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[Advantage Letterhead to Come]
December , 1997
Dear Holder of Advantage Bancorp, Inc. Common Stock:
You are cordially invited to attend a special meeting of the shareholders of
Advantage Bancorp, Inc. to be held at the Gateway Technical College Conference
Center, located at 3250 30th Avenue, Kenosha, Wisconsin, at 10:30 A.M.,
Central time, on Thursday, February 5, 1998.
The purpose of the meeting is to vote on a proposal to approve the Agreement
and Plan of Merger, dated as of November 3, 1997, by and between Advantage
Bancorp, Inc. and Marshall & Ilsley Corporation, pursuant to which Advantage
Bancorp, Inc. would be merged with and into Marshall & Ilsley Corporation. The
Agreement and Plan of Merger provides generally for the conversion of each
outstanding share of Advantage Bancorp, Inc. common stock into 1.2 shares of
Marshall & Ilsley Corporation common stock, subject to adjustment in the event
that the average closing price per share of common stock of Marshall & Ilsley
Corporation (as determined pursuant to the Agreement and Plan of Merger) is
below $46.67 or above $61.67 for a specified period prior to the effective
time of the merger. The proposed merger requires regulatory approval and the
approval of the Agreement and Plan of Merger by the holders of a majority of
the outstanding shares of common stock of Advantage Bancorp, Inc.
In reviewing the proposed merger, your Board of Directors considered current
and future trends in the financial services industry, including the continuing
consolidation trend. The Board of Directors believes that the merger will best
position the combined company to compete effectively in the future and that it
is in the best interests of Advantage Bancorp, Inc. and its shareholders. The
Board of Directors has received an opinion from its financial advisor that the
consideration to be received in the merger is fair, from a financial point of
view, to Advantage Bancorp, Inc. shareholders. The enclosed Proxy Statement-
Prospectus explains in detail the proposed merger. Please carefully review and
consider all of this information.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
OF THE AGREEMENT AND PLAN OF MERGER AND THE TRANSACTIONS CONTEMPLATED THEREBY.
It is especially important that your shares be represented and voted at the
meeting. Although you may currently plan to attend the meeting, please
complete, sign, date and promptly return the enclosed proxy card. If you
attend the meeting, you may still vote in person even if you previously
returned your proxy card.
Sincerely yours,
Paul P. Gergen
President and Chief Executive
Officer
<PAGE>
ADVANTAGE BANCORP, INC.
5395 SEVENTH AVENUE
KENOSHA, WISCONSIN 53140
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 5, 1998
----------------
NOTICE IS HEREBY GIVEN, that a Special Meeting of the Shareholders (the
"Special Meeting") of Advantage Bancorp, Inc. ("Advantage") will be held on
Thursday, February 5, 1998, at 10:30 A.M., Central time, at the Gateway
Technical College Conference Center, located at 3250 30th Avenue, Kenosha,
Wisconsin.
The Special Meeting is being held for the purpose of considering and voting
upon the following matters:
1. A proposal to approve the Agreement and Plan of Merger, dated as of
November 3, 1997, between Advantage and Marshall & Ilsley Corporation
("M&I"), a copy of which is attached as Appendix A to the accompanying
Proxy Statement-Prospectus, providing for the merger of Advantage with and
into M&I pursuant to which each outstanding share of common stock, par
value $.01, of Advantage (other than as provided in the Merger Agreement)
will be converted into 1.2 shares of common stock, par value $1.00, of M&I,
subject to adjustment as provided in the Merger Agreement; and
2. Such other matters as may properly come before the Special Meeting or
any adjournment or postponement thereof.
The Board of Directors has fixed December 23, 1997, as the record date for
the determination of shareholders entitled to notice of and to vote at the
Special Meeting and at any adjournment or postponement thereof. Only record
holders of Advantage's common stock as of the close of business on that date
will be entitled to vote at the Special Meeting or any adjournment or
postponement thereof. In the event that at the time of the Special Meeting
there are not sufficient votes to establish a quorum or to approve the Merger
Agreement, the Special Meeting may be adjourned or postponed in order to
permit further solicitation of proxies by Advantage.
The Board of Directors of Advantage believes the proposed merger is in the
best interests of Advantage and its shareholders and unanimously recommends
that the shareholders vote FOR approval of the Merger Agreement.
By Order of the Board of Directors,
John Stampfl
Secretary
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. TO
ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE DATE THE ENCLOSED
PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, SIGN EXACTLY AS YOUR NAME
APPEARS THEREON AND RETURN IT IMMEDIATELY IN THE SELF-ADDRESSED ENVELOPE
ENCLOSED.
Kenosha, Wisconsin
December , 1997
<PAGE>
ADVANTAGE BANCORP, INC.
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FEBRUARY 5, 1998
MARSHALL & ILSLEY CORPORATION
PROSPECTUS
This Proxy Statement-Prospectus is being furnished to the shareholders of
Advantage Bancorp, Inc. ("Advantage"), a Wisconsin corporation, in connection
with the solicitation of proxies by the Board of Directors of Advantage (the
"Advantage Board") for use at the Special Meeting of Shareholders (the
"Special Meeting") of Advantage to be held on February 5, 1998, including any
adjournment or postponement of such Special Meeting.
At the Special Meeting, shareholders of Advantage will vote upon a proposal
to approve and adopt the Agreement and Plan of Merger, dated as of November 3,
1997, by and between Marshall & Ilsley Corporation ("M&I") and Advantage (the
"Merger Agreement"), which provides for the merger of Advantage with and into
M&I (the "Merger").
This Proxy Statement-Prospectus also constitutes the Prospectus of M&I with
respect to up to 4,235,055 shares of M&I common stock, $1.00 per share par
value (the "M&I Common Stock"), to be issued in connection with the Merger,
subject to adjustment as set forth in the Merger Agreement. Upon consummation
of the Merger and subject to the adjustment procedures provided for in the
Merger Agreement, each then outstanding share of Advantage common stock, $.01
per share par value (the "Advantage Common Stock"), except for shares held by
M&I or a subsidiary of M&I for its own account and shares held by certain
trusts and unallocated to participants thereunder, will be converted into 1.2
shares of M&I Common Stock.
This Proxy Statement-Prospectus is first being mailed to Advantage
shareholders on or about December , 1997.
M&I COMMON STOCK IS QUOTED UNDER THE SYMBOL "MRIS" ON THE NASDAQ NATIONAL
MARKET.
----------------
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY STATEMENT-
PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION. SHAREHOLDERS
ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS PROXY STATEMENT-
PROSPECTUS IN ITS ENTIRETY.
----------------
SHARES OF M&I COMMON STOCK OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------
THE SHARES OF M&I COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS
ACCOUNTS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
----------------
The date of this Proxy Statement-Prospectus is December , 1997.
<PAGE>
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS
OR INCORPORATED BY REFERENCE HEREIN IN CONNECTION WITH THE SOLICITATION OF
PROXIES OR THE OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY M&I OR ADVANTAGE. THIS PROXY STATEMENT-PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF M&I OR
ADVANTAGE SINCE THE DATE OF THIS PROXY STATEMENT-PROSPECTUS OR THAT THE
INFORMATION HEREIN OR THE DOCUMENTS OR REPORTS INCORPORATED BY REFERENCE
HEREIN ARE CORRECT AS OF ANY TIME SUBSEQUENT TO SUCH DATE. ALL INFORMATION
CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS RELATING TO M&I AND ITS
SUBSIDIARIES HAS BEEN SUPPLIED BY M&I, AND ALL INFORMATION CONTAINED IN THIS
PROXY STATEMENT-PROSPECTUS RELATING TO ADVANTAGE AND ITS SUBSIDIARIES HAS BEEN
SUPPLIED BY ADVANTAGE.
AVAILABLE INFORMATION
Both M&I and Advantage are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance with the Exchange Act, file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information can be inspected and
copied at the public reference room of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's Regional Offices in New
York, Seven World Trade Center, 13th Floor, New York, New York 10048, and in
Chicago, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies of such material can be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such information may also be
accessed electronically by means of the Commission's home page on the Internet
(http://www.sec.gov).
M&I has filed a Registration Statement with the Commission on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of M&I Common Stock to be issued in connection with the Merger. As
permitted by the rules and regulations of the Commission, this Proxy
Statement-Prospectus omits certain information, exhibits and undertakings
contained in the Registration Statement. For further information pertaining to
the securities offered by this Proxy Statement-Prospectus, reference is made
to the Registration Statement, including the exhibits filed as a part of it.
Statements contained in this Proxy Statement-Prospectus or in any document
incorporated by reference herein as to the contents of any contract or other
document are not necessarily complete and, in each instance where such
contract or document is an exhibit to the Registration Statement or an
incorporated document, reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement or such
incorporated document, each such statement being qualified in all respects by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by M&I (File No. 0-1220) with the Commission
pursuant to the Exchange Act are hereby incorporated by reference into this
Proxy Statement-Prospectus:
(1) M&I's Annual Report on Form 10-K for the year ended December 31,
1996.
(2) M&I's Amendment No. 1 to Annual Report on Form 10-K/A dated June 3,
1997, for the year ended December 31, 1996.
ii
<PAGE>
(3) M&I's Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30, and September 30, 1997.
(4) M&I's Current Reports on Form 8-K dated March 14, March 17, April 13,
October 1, and November 3, 1997.
(5) The description of the M&I Common Stock contained in M&I's
Registration Statement filed pursuant to Section 12(g) of the Exchange Act,
any amendment or report filed for the purpose of updating such description,
and as amended by the description of the M&I Common Stock contained herein.
See "DESCRIPTION OF M&I CAPITAL STOCK."
The following documents filed by Advantage (File No. 0-19794) with the
Commission pursuant to the Exchange Act are hereby incorporated by reference
into this Proxy Statement-Prospectus:
(1) Advantage's Annual Report on Form 10-K for the year ended September
30, 1997.
(2) Advantage's Current Report on Form 8-K dated November 3, 1997.
All documents filed by M&I and Advantage pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date of this Proxy
Statement-Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference into this Proxy Statement-Prospectus
and to be a part hereof from the dates of filing of such documents. Any
statement contained herein, or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference into this Proxy
Statement-Prospectus, shall be deemed to be modified or superseded for
purposes of this Proxy Statement-Prospectus to the extent that a statement
contained in any other subsequently filed document which also is or is deemed
to be incorporated by reference therein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement-
Prospectus.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED IN THIS PROXY STATEMENT-PROSPECTUS OR DELIVERED WITH IT.
THESE DOCUMENTS (EXCLUDING EXHIBITS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO THE INFORMATION INCORPORATED IN THIS PROXY
STATEMENT-PROSPECTUS) ARE AVAILABLE WITHOUT CHARGE TO EACH PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM A PROXY STATEMENT-PROSPECTUS IS DELIVERED, UPON
ORAL OR WRITTEN REQUEST FROM ANY SUCH PERSON. WITH RESPECT TO M&I'S DOCUMENTS,
REQUESTS SHOULD BE DIRECTED TO SECRETARY, MARSHALL & ILSLEY CORPORATION, 770
NORTH WATER STREET, MILWAUKEE, WISCONSIN 53202 (TELEPHONE: (414) 765-7801).
WITH RESPECT TO ADVANTAGE'S DOCUMENTS, REQUESTS SHOULD BE DIRECTED TO DORENE
SANTARELLI, INVESTOR RELATIONS, ADVANTAGE BANCORP, INC., 5935 SEVENTH AVENUE,
KENOSHA, WISCONSIN 53140 (TELEPHONE: (414) 658-5447). IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE SPECIAL MEETING, ANY SUCH
REQUEST SHOULD BE MADE BY JANUARY 22, 1998.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT-PROSPECTUS TO VOTE ON THE MERGER. NEITHER
M&I NOR ADVANTAGE HAS AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS. THIS
PROXY STATEMENT-PROSPECTUS IS DATED DECEMBER , 1997. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS IS ACCURATE
AS OF ANY DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT-PROSPECTUS TO SHAREHOLDERS NOR THE ISSUANCE OF THE M&I COMMON STOCK
IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS RELATING TO M&I
HAS BEEN SUPPLIED BY M&I, AND ALL INFORMATION RELATING TO ADVANTAGE HAS BEEN
SUPPLIED BY ADVANTAGE.
iii
<PAGE>
FORWARD-LOOKING STATEMENTS
Cautionary Statement for Purposes of the Private Securities Litigation
Reform Act of 1995.
This Proxy Statement-Prospectus (including information incorporated by
reference herein), information included in, or incorporated by reference from,
future filings by M&I or Advantage with the Commission, and information
contained in written material, press releases and oral statements issued or
made by or on behalf of M&I or Advantage contain, or may contain, certain
"forward-looking statements" including statements concerning plans, objectives
and future events or performance, and other statements which are other than
statements of historical fact. Forward-looking statements also include
information concerning possible or assumed future results of operations of M&I
and Advantage set forth under "THE MERGER--Reasons for the Merger; Advantage
Board Recommendation" and "SUMMARY--Opinion of Financial Advisor to Advantage"
and those preceded by, followed by or that include the words "believes,"
"expects," "anticipates" or similar expressions. For those statements, M&I and
Advantage claim the protection of the safe harbor provisions for forward-
looking statements contained in the Private Securities Litigation Reform Act
of 1995. It should be understood that the following important factors, in
addition to those discussed elsewhere in this document and in the documents
incorporated by reference, could affect the future results of M&I and
Advantage, and could cause those results to differ materially from those
expressed in such forward-looking statements. Factors that may cause actual
results to differ materially from those contemplated by such forward-looking
statements include, but are not limited to, the following: (i) failure to
fully realize or to realize within the expected time frame expected cost
savings from the Merger; (ii) lower than expected income or revenues following
the Merger, or higher than expected operating costs; (iii) a significant
increase in competitive pressure in the banking and financial services
industry; (iv) business disruption related to the Merger (both before and
after completion); (v) greater than expected costs or difficulties related to
the integration of the management of M&I and Advantage; (vi) litigation costs
and delays caused by litigation; (vii) higher than anticipated costs in
completing the Merger; (viii) unanticipated regulatory delays or constraints
or changes in the proposed transaction required by regulatory authorities;
(ix) reduction in interest margins due to changes in the interest rate
environment; (x) poorer than expected general economic conditions, including
acquisition and growth opportunities, either nationally or in the states in
which the combined company will be doing business; (xi) legislation or
regulatory changes which adversely affect the businesses in which the combined
company would be engaged; and (xii) other unanticipated occurrences which may
delay the consummation of the Merger, increase the costs related to the Merger
or decrease the expected financial benefits of the Merger.
iv
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
AVAILABLE INFORMATION..................................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... ii
FORWARD-LOOKING STATEMENTS................................................ iv
SUMMARY................................................................... 1
The Companies........................................................... 1
The Special Meeting..................................................... 1
The Merger.............................................................. 2
Reasons for the Merger; Advantage Board Recommendation.................. 2
Opinion of Financial Advisor to Advantage............................... 3
Conditions; Termination; Amendment...................................... 3
Regulatory Approval..................................................... 4
Accounting Treatment.................................................... 4
Certain Federal Income Tax Consequences of the Merger................... 4
Interests of Certain Persons in the Merger.............................. 4
Stock Option Agreement.................................................. 5
No Appraisal or Dissenters' Rights...................................... 5
Recent Developments Concerning M&I...................................... 5
Comparative Stock Prices................................................ 5
Comparative Unaudited Per Share Data.................................... 6
Selected Historical and Pro Forma Financial Data........................ 7
THE SPECIAL MEETING....................................................... 11
General................................................................. 11
Proposals to be Considered.............................................. 11
Record Date and Voting Rights........................................... 11
Voting; Revocation of Proxies........................................... 11
Solicitation of Proxies................................................. 12
THE MERGER................................................................ 13
General................................................................. 13
Background of the Merger................................................ 13
Reasons for the Merger; Advantage Board Recommendation.................. 15
Opinion of Financial Advisor to Advantage............................... 17
Merger Consideration.................................................... 22
Effective Time.......................................................... 23
Conversion of Shares; Procedures for Exchange of Certificates;
Fractional Shares; Dividends........................................... 23
Representations and Warranties.......................................... 25
Conditions to the Merger................................................ 26
Termination; Amendment and Waiver....................................... 27
Conduct of Business Pending Merger...................................... 28
No Solicitation of Transactions......................................... 29
Stock Option Agreement.................................................. 29
Dividend Policy after the Merger........................................ 32
Interests of Certain Persons in the Merger.............................. 32
Effect on Employee Benefits and Stock Options........................... 32
Accounting Treatment.................................................... 34
</TABLE>
<PAGE>
TABLE OF CONTENTS CONTINUED
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Certain Federal Income Tax Consequences of the Merger.................... 34
Resale of M&I Common Stock by Affiliates................................. 35
No Appraisal or Dissenters' Rights....................................... 35
CERTAIN REGULATORY CONSIDERATIONS.......................................... 35
DESCRIPTION OF M&I CAPITAL STOCK........................................... 36
In General............................................................... 36
M&I Common Stock......................................................... 36
M&I Preferred Stock...................................................... 36
M&I Series A Preferred Stock............................................. 37
Certain Provisions of the Wisconsin Business Corporation Law............. 37
COMPARISON OF SHAREHOLDER RIGHTS........................................... 38
Authorized Capital Stock................................................. 38
Required Vote............................................................ 39
Size of Board of Directors............................................... 39
Removal of Directors for "Cause"......................................... 39
Advance Notice of Proposals to be Brought at the Annual Meeting.......... 40
Advance Notice of Nominations of Directors............................... 40
Certain Business Combinations............................................ 40
CERTAIN INFORMATION CONCERNING M&I AND ADVANTAGE........................... 41
EXPERTS.................................................................... 41
LEGAL MATTERS.............................................................. 42
SHAREHOLDER PROPOSALS...................................................... 42
APPENDIX A Agreement and Plan of Merger................................... A-1
APPENDIX B Stock Option Agreement......................................... B-1
APPENDIX C Fairness Opinion of Hovde Financial, Inc....................... C-1
</TABLE>
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in the
Proxy Statement-Prospectus. This Summary is not intended to be complete and is
qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement-Prospectus, the attached appendices
and the documents incorporated by reference herein. Shareholders are urged to
read carefully this Proxy Statement-Prospectus and the attached appendices in
their entirety.
THE COMPANIES
M&I. Marshall & Ilsley Corporation ("M&I"), is a registered bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHCA"),
headquartered in Milwaukee, Wisconsin. M&I's principal assets are the stock of
its bank and nonbank subsidiaries and the assets of its Data Services Division
("M&I Data Services"). M&I's bank and savings association subsidiaries provide
a full range of banking services to individuals, businesses and governments
throughout Wisconsin and the Phoenix, Arizona metropolitan area. M&I's nonbank
subsidiaries operate a variety of bank-related businesses, including investment
management services, insurance services, trust services, equipment lease
financing, commercial and residential mortgage banking, venture capital,
brokerage services and financial advisory services. M&I Data Services is a
major supplier of financial and data processing services and software to
banking, financial and related organizations. As of October 31, 1997, M&I had
consolidated total assets of approximately $19.1 billion, consolidated total
deposits of approximately $13.7 billion and consolidated shareholders' equity
of approximately $1.9 billion. M&I's principal executive offices are located at
770 North Water Street, Milwaukee, Wisconsin 53202, and its telephone number is
(414) 765-7801.
Advantage. Advantage is a registered savings and loan holding company
incorporated under the laws of the State of Wisconsin and is engaged in the
savings and loan business through its wholly-owned subsidiary Advantage Bank,
FSB (the "Bank"), a federally chartered stock savings institution. The Bank was
founded in 1902 in Kenosha, Wisconsin. Advantage is the largest financial
institution based in Kenosha County. Advantage operates seven full-service
offices in Kenosha and one full-service office in each of the following
communities: Paddock Lake, Lake Geneva and Racine, Wisconsin; and Gurnee, North
Chicago, Zion, Tinley Park and Burbank, Illinois. Advantage also operates
mortgage loan origination offices in Kenosha, Milwaukee and Racine, Wisconsin
and Grayslake and Naperville, Illinois. The Bank provides retail banking
services to approximately 36,000 households in southeastern Wisconsin and
northeastern Illinois market areas with products including insured savings,
checking and money market accounts, and mortgage, home equity and other
consumer loans. Advantage also provides banking services to over 3,000
businesses including secured and unsecured commercial loans, checking accounts
and other business banking services. As of September 30, 1997, Advantage had
total assets of approximately $1.0 billion. The principal executive office of
Advantage is located at 5935 Seventh Avenue, Kenosha, Wisconsin 53140, and its
telephone number is (414) 658-4861.
THE SPECIAL MEETING
The Special Meeting of the shareholders (the "Special Meeting") of Advantage
will be held on Thursday, February 5, 1998, at 10:30 A.M., Central time, at the
Gateway Technical College Conference Center, 3250 30th Avenue, Kenosha,
Wisconsin. At the Special Meeting, holders of the common stock, $.01 per share
par value, of Advantage ("Advantage Common Stock") will be asked to consider
and vote upon a proposal to approve the Agreement and Plan of Merger dated as
of November 3, 1997, by and between Advantage Bancorp, Inc. and Marshall &
Ilsley Corporation (the "Merger Agreement"), which provides for the merger of
Advantage with and into M&I, with M&I being the surviving corporation (the
"Merger"). Holders of Advantage Common Stock at the close of business on
December 23, 1997 (the "Record Date") will be entitled to notice of and to vote
at the Special Meeting. Each share of Advantage Common Stock is entitled to one
vote. As of the Record Date, there were 3,235,653 outstanding shares of
Advantage Common Stock entitled to vote at the Special Meeting, of which
504,351 shares or approximately 15.59% were beneficially owned by Advantage
directors, executive officers and their affiliates. The affirmative vote of the
holders of a majority of outstanding shares of Advantage Common Stock as of the
Record Date is required to approve the Merger Agreement. See "THE SPECIAL
MEETING."
<PAGE>
An abstention with respect to the proposal to approve the Merger Agreement
will have the effect of a vote cast against the proposal. Brokers who hold
shares of Advantage Common Stock as nominees will not have discretionary
authority to vote such shares on the proposal in the absence of instructions
from the beneficial owners thereof. Any votes which are not cast by the
nominee-broker will have the effect of votes cast against such proposal.
A holder of Advantage Common Stock may revoke a proxy at any time before it
is voted by the filing of an instrument revoking the proxy with, or by the
delivery of a duly executed proxy bearing a later date to, the Secretary of
Advantage prior to or at the Special Meeting, or by attending the Special
Meeting and voting in person. Attendance at the Special Meeting will not by
itself constitute revocation of a proxy.
ADVANTAGE'S BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE IN THE BEST INTERESTS
OF ADVANTAGE AND THE HOLDERS OF ADVANTAGE COMMON STOCK. ACCORDINGLY,
ADVANTAGE'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
ADVANTAGE COMMON STOCK VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
THE MERGER
General. M&I and Advantage have entered into the Merger Agreement which
provides, after satisfaction or waiver of all conditions described therein, for
the Merger. The Merger will become effective (the "Effective Time") upon the
filing of Articles of Merger with the Wisconsin Department of Financial
Institutions ("DFI"), which is expected to occur as promptly as practicable
following shareholder and regulatory approvals and the satisfaction or waiver
of other conditions contained in the Merger Agreement. The Merger Agreement is
included as Appendix A to this Proxy Statement-Prospectus.
Merger Consideration. The Merger Agreement provides that, at the Effective
Time and subject to the adjustment procedures described below, each share of
Advantage Common Stock issued and outstanding at the Effective Time (except for
shares held by M&I or a subsidiary of M&I for its own account and shares held
by the Advantage Bank, F.S.B. Bank Incentive Plan and Trust I and the Advantage
Bank, F.S.B. Bank Incentive Plan and Trust II (collectively, the "Trusts") and
unallocated to participants thereunder, all of which will automatically be
canceled and retired and will cease to exist) will be converted into 1.2 (the
"Exchange Ratio") shares of the common stock, $1.00 per share par value, of M&I
("M&I Common Stock"). If the average closing sale price of M&I Common Stock as
reported on the Nasdaq National Market for the ten consecutive trading days
immediately preceding the fifth business day prior to the Effective Time (the
"Average Price") is below $46.67 per share, the Exchange Ratio will be adjusted
to a number so that the product of the adjusted Exchange Ratio (taken to four
decimal places) and the Average Price equals $56.00 (rounded to the nearest
whole cent), unless M&I exercises its right under the Merger Agreement to
inform Advantage prior to the Effective Time that such adjustment shall not
occur, in which case such adjustment will not occur and Advantage will have the
right to terminate the Merger Agreement (see "THE MERGER--Termination;
Amendment and Waiver"). If the Average Price is above $61.67 per share, then
M&I will have the option, but not the obligation, to adjust the Exchange Ratio
to a number so that the product of the adjusted Exchange Ratio (taken to four
decimal places) and the Average Price equals $74.00 (rounded to the nearest
whole cent), subject to the right of Advantage under the Merger Agreement to
terminate the Merger Agreement in the event of such an adjustment (see "THE
MERGER--Termination; Amendment and Waiver"). See "THE MERGER--Merger
Consideration."
No fractional shares of M&I Common Stock will be issued to any holder of
Advantage Common Stock upon surrender of certificates representing Advantage
Common Stock in connection with the Merger. In lieu thereof, holders of
Advantage Common Stock will be entitled to a cash payment for fractional
shares.
REASONS FOR THE MERGER; ADVANTAGE BOARD RECOMMENDATION
Advantage. THE BOARD OF DIRECTORS OF ADVANTAGE (THE "ADVANTAGE BOARD")
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF ADVANTAGE COMMON STOCK VOTE FOR APPROVAL
OF THE MERGER AGREEMENT. The Advantage
2
<PAGE>
Board, after consideration of the terms and conditions of the Merger Agreement
and other factors deemed relevant by the Advantage Board, believes that the
terms of the Merger Agreement are fair and that the Merger is in the best
interests of Advantage and the holders of Advantage Common Stock. See "THE
MERGER--Reasons for the Merger; Advantage Board Recommendation"; and "--
Background of the Merger."
M&I. The Board of Directors of M&I (the "M&I Board") has determined that the
terms of the Merger are fair to, and in the best interests of, M&I, its
shareholders and other constituencies. See "THE MERGER--Reasons for the Merger;
Advantage Board Recommendation."
See "THE MERGER--Interests of Certain Persons in the Merger" for information
regarding interests of certain officers and directors of Advantage in the
Merger.
OPINION OF FINANCIAL ADVISOR TO ADVANTAGE
Hovde Financial, Inc. ("Hovde") has delivered to the Advantage Board its
written opinion, dated the date of this Proxy Statement-Prospectus, that, as of
such date, and based upon the matters set forth in such opinion, the Exchange
Ratio is fair, from a financial point of view, to the holders of Advantage
Common Stock. HOLDERS OF ADVANTAGE COMMON STOCK ARE URGED TO, AND SHOULD, READ
SUCH OPINION IN ITS ENTIRETY. For a description of the assumptions made and
matters considered by Hovde, see "THE MERGER--Opinion of Financial Advisor to
Advantage" and Appendix C to this Proxy Statement-Prospectus.
CONDITIONS; TERMINATION; AMENDMENT
Consummation of the Merger is subject to various conditions, including (a)
approval of the Merger Agreement by holders of Advantage Common Stock, (b)
receipt of regulatory approval absent any conditions that are materially
burdensome to M&I, (c) the absence of any material adverse change in the
financial condition, results of operations or business of M&I or Advantage, (d)
receipt of opinions of counsel with respect to certain U.S. federal income tax
consequences of the Merger, and (e) receipt of opinions of the independent
public accountants to M&I and Advantage regarding the applicability of
"pooling-of-interests" accounting treatment to Advantage and to the Merger. See
"THE MERGER--Conditions to the Merger."
In addition, the Merger Agreement may be terminated notwithstanding
shareholder approval, if certain specified events occur. For example, either
M&I or Advantage may terminate the Merger Agreement if the Merger has not been
consummated by April 30, 1998, unless the Merger has not been consummated as a
result of certain governmental proceedings or litigation related to the Merger,
in which case either M&I or Advantage may terminate the Merger Agreement if the
Merger has not been consummated by November 30, 1998. In addition, Advantage
may terminate the Merger Agreement prior to the Effective Time if (a) the
Average Price is below $46.67 per share, and (b) M&I informs Advantage prior to
the Effective Time that M&I will not adjust the Exchange Ratio so that the
product of the adjusted Exchange Ratio (taken to four decimal places) and the
Average Price shall equal $56.00 (rounded to the nearest whole cent). Advantage
also may terminate the Merger Agreement prior to the Effective Time if (a) the
Average Price is above $61.67 per share, and (b) M&I elects to adjust the
Exchange Ratio so that the product of the adjusted Exchange Ratio (taken to
four decimal places) and the Average Price shall equal $74.00 (rounded to the
nearest whole cent). IN THE EVENT THAT ADVANTAGE DOES NOT EXERCISE ITS
TERMINATION RIGHT IN THIS INSTANCE, THE EXCHANGE RATIO MAY BE LESS THAN 1.2
SHARES OF M&I COMMON STOCK. In addition, M&I may terminate the Merger Agreement
at any time prior to the Special Meeting if the Advantage Board shall have
withdrawn, modified or changed its recommendation in favor of the Merger
pursuant to its fiduciary obligations as described in Section 6.1 of the Merger
Agreement, and such withdrawal, modification or change is adverse in any
respect to the interests of M&I. See "THE MERGER--Termination; Amendment and
Waiver."
The conditions to the Merger may be waived by the party entitled to assert
the condition.
The Merger Agreement may be amended by the mutual consent of M&I and
Advantage at any time prior to the Effective Time provided that, after approval
of the Merger Agreement by holders of Advantage Common Stock, no amendment may
be made which would reduce the amount or change the type of consideration into
3
<PAGE>
which each share of Advantage Common Stock would be converted. See "THE
MERGER--Termination; Amendment and Waiver."
REGULATORY APPROVAL
The Merger is subject to prior approval by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). M&I submitted an
application seeking approval of the Merger to the Federal Reserve Board on
December 1, 1997. There can be no assurances that the Federal Reserve Board
will approve the Merger, or if approved, as to the date of such approval. There
can also be no assurances that any such approval will not contain a condition
or requirement which causes such approval to fail to satisfy the conditions to
the consummation of the Merger. See "CERTAIN REGULATORY CONSIDERATIONS."
ACCOUNTING TREATMENT
The Merger will be accounted for as a "pooling-of-interests" for accounting
and financial reporting purposes. Consummation of the Merger is conditioned
upon receipt by M&I and Advantage of (i) an opinion from Ernst & Young LLP to
the effect that Advantage is an entity that qualifies for "pooling-of-
interests" accounting treatment pursuant to generally accepted accounting
principles ("GAAP") and applicable regulations of the Securities and Exchange
Commission (the "Commission"), and (ii) an opinion from Arthur Andersen LLP, to
the effect that the Merger qualifies for "pooling-of-interests" accounting
treatment pursuant to GAAP and applicable regulations of the Commission. See
"THE MERGER--Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The Merger has been structured with the intent that it be treated as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). Consummation of the Merger is
conditioned on M&I receiving an opinion from Godfrey & Kahn, S.C. and Advantage
receiving an opinion from Foley & Lardner, each dated as of the Effective Time,
to the effect that, on the basis of facts, representations and assumptions set
forth or referred to in such opinions, which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated for U.S.
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that, with respect to the opinion of Foley & Lardner,
(a) no gain or loss will be recognized by Advantage as a result of the Merger,
(b) no gain or loss will be recognized by the holders of Advantage Common Stock
as a result of the Merger (except with respect to cash received in lieu of a
fractional share interest in M&I Common Stock), and (c) the aggregate tax basis
of the M&I Common Stock received by holders of Advantage Common Stock as a
result of the Merger will be the same as the aggregate tax basis of the
Advantage Common Stock surrendered in exchange therefor (reduced by any amount
allocable to a fractional share interest for which cash is received). In
rendering their opinions, counsel will require and rely upon, and assume the
accuracy of, representations of M&I, Advantage, certain holders of Advantage
Common Stock and others. See "THE MERGER--Certain Federal Income Tax
Consequences of the Merger." HOLDERS OF ADVANTAGE COMMON STOCK SHOULD CONSULT
THEIR TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE MERGER UNDER FEDERAL,
STATE, LOCAL OR OTHER APPLICABLE LAWS.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain executive officers of Advantage may receive economic benefits as a
result of the Merger under various benefit plans and employment agreements.
Pursuant to the terms of the Merger Agreement, Messrs. Paul P. Gergen,
President and Chief Executive Officer of Advantage, and John W. Stampfl, Senior
Vice President and Chief Financial Officer of Advantage, each entered into an
agreement with M&I to amend the terms of their respective employment agreements
with Advantage (the "Employment Agreements") in order to clarify certain terms
contained therein. See "THE MERGER--Interests of Certain Persons in the
Merger."
The Merger Agreement established a bonus pool in the amount of $516,000 (the
"Bonus Pool") which will be used by Advantage to provide an incentive to
employees of Advantage and its subsidiaries to retain key customers and attain
net income targets, as well as to retain key employees. See "THE MERGER--
Interests of Certain Persons in the Merger."
4
<PAGE>
STOCK OPTION AGREEMENT
As a condition for M&I to enter into the Merger Agreement, M&I and Advantage
entered into a Stock Option Agreement (the "Stock Option Agreement") dated as
of November 3, 1997, pursuant to which Advantage granted an option (the
"Option") to M&I to purchase up to 643,930 shares of Advantage Common Stock
(subject to adjustment for certain dilutive events, but in no event in excess
of 19.9% of the issued and outstanding shares of Advantage Common Stock), at an
exercise price of $56.00 per share (the closing price of Advantage Common Stock
on the Nasdaq National Market on the last trading date preceding execution and
delivery of the Merger Agreement and the Stock Option Agreement). A copy of the
Stock Option Agreement is attached as Appendix B to this Proxy Statement-
Prospectus. The Option is only exercisable upon the occurrence of certain
triggering and exercise events generally relating to competing transactions for
control of Advantage. None of such events has occurred as of the date of this
Proxy Statement-Prospectus. In lieu of exercising the Option, M&I can require
Advantage to make a cash payment in an amount equal to the product of (a) the
excess of the per share value of the highest competing transaction, or, if
greater, the highest closing price for Advantage Common Stock during the six
month period preceding the cash election, over $56.00, and (b) the number of
shares of Advantage Common Stock for which the Option may then be exercised.
M&I can also require Advantage to repurchase shares of Advantage Common Stock
issued to M&I pursuant to the Option by making a cash payment to M&I in an
amount equal to the product of (a) the per share value of the highest competing
transaction, or, if greater, the highest closing price for Advantage Common
Stock during the six month period preceding the repurchase election, and (b)
the number of shares of Advantage Common Stock designated by M&I for the
repurchase. The Option also grants M&I certain registration rights with respect
to, and grants Advantage a right of first refusal with respect to, any
Advantage Common Stock acquired upon exercise of the Option. The Stock Option
Agreement may discourage competing offers to the Merger and is intended to
increase the likelihood that the Merger will be consummated in accordance with
the terms of the Merger Agreement. See "THE MERGER--Stock Option Agreement."
NO APPRAISAL OR DISSENTERS' RIGHTS
Under the Wisconsin Business Corporation Law (the "WBCL"), subject to certain
exceptions inapplicable to the Merger, holders of shares of a Wisconsin
corporation quoted on the Nasdaq National Market on the record date fixed to
determine shareholders entitled to notice of a shareholders meeting at which
shareholders are to vote on a merger are not entitled to appraisal or
dissenters' rights. Since the Advantage Common Stock was quoted on the Nasdaq
National Market as of the Record Date, holders of Advantage Common Stock have
no appraisal or dissenters' rights with respect to the Merger. See "THE
MERGER--No Appraisal or Dissenters' Rights."
RECENT DEVELOPMENTS CONCERNING M&I
On October 1, 1997, Security Capital Corporation, a Wisconsin corporation
("Security"), merged with and into M&I (the "Security Merger"). The Security
Merger was a tax-free reorganization under Section 368(a) of the Code and was
accounted for as a purchase. See "SUMMARY--Selected Historical and Pro Forma
Financial Data."
COMPARATIVE STOCK PRICES
M&I Common Stock and Advantage Common Stock are quoted on the Nasdaq National
Market under the symbols MRIS and AADV, respectively. The following table sets
forth the closing sale price per share of M&I Common Stock and Advantage Common
Stock on October 31, 1997, the last trading day preceding the public
announcement of the execution of the Merger Agreement, and on December ,
1997.
<TABLE>
<CAPTION>
ADVANTAGE
HISTORICAL EQUIVALENT
----------------- PER
M&I ADVANTAGE SHARE(1)
------- --------- ----------
<S> <C> <C> <C>
October 31, 1997............................ $51.875 $56 $62.25
December , 1997...........................
</TABLE>
- --------
(1) Represents the closing price of M&I Common Stock on the date presented
multiplied by the Exchange Ratio of 1.2.
5
<PAGE>
Shareholders are urged to obtain current market quotations for shares of M&I
Common Stock and Advantage Common Stock. No assurance can be made or given as
to the market price of M&I Common Stock at the Effective Time or afterward.
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth (i) selected comparative per share data for
each of M&I and Advantage on a historical basis and (ii) combined per share
data on an unaudited pro forma basis after giving effect to the Merger as if
the Merger was completed at the beginning of the respective periods for income
per common share data and as if the Merger was completed on the indicated dates
for book value per common share data.
The unaudited pro forma combined income per common share for the nine months
ended September 30, 1997 and twelve months ended December 31, 1996 and the pro
forma combined book value per share at September 30, 1997 also give effect to
the Security Merger as if the Merger and the Security Merger were completed at
the beginning of the aforementioned periods for income per common share and as
if both mergers were completed on September 30, 1997 for book value per common
share. See "SUMMARY--Selected Historical and Pro Forma Financial Data".
The unaudited pro forma combined per common share data are provided for
illustrative purposes only and are not necessarily indicative of the combined
financial position or combined results of operations that would have been
reported had the transactions occurred on the dates indicated, nor do such data
represent a forecast of the combined financial position or results of
operations for any future period. No pro forma adjustments have been included
herein which reflect potential effects of (a) the efficiencies which may be
obtained by combining M&I, Advantage and Security operations, (b) the costs of
restructuring, integrating or consolidating such operations, or (c) any changes
required or which may be required by regulatory authorities, including
divestitures.
The comparative per share data presented herein are based on and derived
from, and should be read in conjunction with, the historical consolidated
financial statements and the related notes thereto of M&I and Advantage
included in the documents described under "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE." All adjustments consisting of only normal recurring adjustments
necessary for a fair statement of results of interim periods have been
included.
<TABLE>
<CAPTION>
HISTORICAL M&I PRO ADVANTAGE PRO
---------------- FORMA FORMA
M&I ADVANTAGE COMBINED EQUIVALENT(3)
------ --------- -------- -------------
<S> <C> <C> <C> <C>
OPERATING INCOME(1)
Nine Months ended September 30,
1997.............................. $ 1.77 $ 2.39 $ 1.66(2) $ 1.99
Twelve Months ended December 31
(September 30 for Advantage)
1997............................. n/a 3.09 n/a n/a
1996............................. 2.02 0.83 1.72(2) 2.06
1995............................. 1.90 2.20 1.89 2.27
1994............................. 0.93 1.96 0.96 1.15
CASH DIVIDENDS(4)
Nine Months ended September 30,
1997.............................. $0.585 $0.300 $0.585 $0.702
Twelve Months ended December 31
(September 30 for Advantage)
1997............................. n/a 0.380 n/a n/a
1996............................. 0.720 0.304 0.720 0.864
1995............................. 0.645 0.192 0.645 0.774
1994............................. 0.590 -- 0.590 0.708
BOOK VALUE PER COMMON SHARE
As of September 30, 1997........... $14.29 $30.60 $17.40(2) $20.88
As of December 31, 1996............ 13.37 27.53 13.75 16.50
</TABLE>
6
<PAGE>
- --------
(1) M&I historical and pro forma combined earnings per share are on a fully
diluted basis. Operating income is income before extraordinary items.
(2) The pro forma combined information includes the effects of the Security
Merger.
(3) The Advantage pro forma equivalent represents the M&I pro forma combined
amount multiplied by the Exchange Ratio of 1.2.
(4) Pro forma combined dividends per share represent historical dividends per
share paid by M&I.
n/a Not applicable
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables present selected historical consolidated financial data
for the periods and as of the dates indicated for M&I and Advantage and
unaudited pro forma combined financial data of M&I, Advantage and Security. The
unaudited pro forma combined data have been prepared as if the Merger with
Advantage was completed at the beginning of the periods presented and accounted
for as a "pooling-of interests."
On October 1, 1997, M&I acquired Security pursuant to an Agreement and Plan
of Merger dated as of March 14, 1997. Consideration for the outstanding shares
of Security Common Stock consisted of approximately 12.3 million shares of M&I
Common Stock and approximately $376.3 million in cash. The Security Merger was
accounted for using the purchase method of accounting. Accordingly, M&I's
financial statements will include the effect of Security only for the period
subsequent to the October 1, 1997 acquisition date. Initial goodwill of
approximately $247 million and core deposit intangible of $37.4 million were
recorded in connection with the Security Merger. The goodwill is being
amortized on a straight-line basis over 25 years and the core deposit
intangible is being amortized on an accelerated basis.
In addition to the Merger, the unaudited pro forma data assume the Security
Merger was consummated on September 30, 1997 for purposes of the pro forma
balance sheet data and further assume the Security Merger was consummated at
the beginning of the period for pro forma income statement and per share data
for the nine months ended September 30, 1997 and 1996, and the twelve months
ended December 31, 1996.
Data derived for Advantage and Security in preparation of the pro forma
combined financial data have been restated to conform to M&I's fiscal year end.
The unaudited pro forma financial data are provided for illustrative purposes
only and are not necessarily indicative of the combined financial position or
combined results of operations that would have been reported had the mergers
occurred on the dates indicated, nor do such data represent a forecast of the
combined financial position or results of operations for any future period. No
pro forma adjustments have been included herein which reflect potential effects
of (a) the efficiencies which may be obtained by combining M&I, Advantage and
Security operations, (b) the costs of restructuring, integrating or
consolidating such operations, or (c) any changes required or which may be
required by regulatory authorities, including divestitures.
The following information should be read in conjunction with the consolidated
financial statements and the related notes thereto of M&I and Advantage
included in the documents described under "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE." All adjustments consisting of only normal recurring adjustments
necessary for a fair statement of results of interim periods have been
included.
7
<PAGE>
MARSHALL & ILSLEY CORPORATION
SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
($ IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF AND FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, (UNAUDITED) AS OF AND FOR THE TWELVE MONTHS ENDED DECEMBER 31,
-------------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------- ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
Interest Income........ $ 799,786 $ 716,081 $ 971,436 $ 924,660 $ 817,306 $ 793,477 $ 851,039
Net Interest Income.... 398,400 372,821 505,719 491,477 491,227 480,279 472,551
Provision for Loan
Losses................ 12,875 11,108 15,194 16,158 24,907 18,034 23,546
Other Income........... 428,395 356,824 503,320 424,182 361,481 371,926 328,411
Other Expense.......... 553,443 501,856 680,704 599,622 659,998 569,587 545,624
Income Before
Extraordinary Items
and Cumulative Effect
of Changes in
Accounting Principles. 173,285 141,561 203,430 193,299 94,398 171,394 156,401
PER SHARE
Primary Income Before
Extraordinary Items
and Cumulative Effect
of Changes in
Accounting Principles. $ 1.78 $ 1.43 $ 2.07 $ 1.96 $ 0.95 $ 1.67 $ 1.55
Fully Diluted Income
Before Extraordinary
Items and Cumulative
Effect of Changes in
Accounting Principles. 1.77 1.40 2.02 1.90 0.93 1.60 1.48
Cash Dividends......... 0.585 0.535 0.720 0.645 0.590 0.540 0.470
BALANCE SHEET
Loans--Net............. $ 10,082,620 $ 9,156,681 $9,145,989 $8,707,472 $8,638,531 $8,483,772 $7,857,040
Assets................. 15,715,116 14,444,337 14,763,313 13,343,097 12,612,949 12,485,937 12,214,471
Deposits............... 11,280,082 10,567,388 10,952,358 10,280,777 9,499,080 10,171,809 10,043,755
Total Borrowings....... 2,639,273 2,281,407 2,170,645 1,437,572 1,764,919 951,134 819,674
Shareholders' Equity... 1,379,413 1,270,740 1,261,210 1,257,617 1,061,296 1,114,513 1,085,669
</TABLE>
8
<PAGE>
ADVANTAGE BANCORP, INC.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
($ IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF AND FOR THE TWELVE MONTHS ENDED SEPTEMBER
30,
------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Interest Income............. $ 76,667 $ 73,590 $ 67,516 $ 47,862 $ 45,918
Net Interest Income......... 30,953 29,825 28,140 22,908 21,669
Provision for Loan Losses... 360 480 460 720 720
Other Income................ 8,320 8,015 4,122 3,275 3,648
Assessment to Recapitalize
Savings Association
Insurance Fund............ -- 4,435 -- -- --
Writedown of Intangible
Assets..................... -- 4,720 -- -- --
Other Expense............... 22,272 23,708 19,133 13,834 13,078
Net Income.................. 10,688 3,033 8,151 7,340 7,165
PER SHARE
Net Income.................. $ 3.09 $ 0.83 $ 2.20 $ 1.96 $ 1.82
Cash Dividends.............. 0.380 0.304 0.192 -- --
BALANCE SHEET
Loans--Net.................. $ 565,259 $ 562,782 $512,282 $425,569 $384,795
Assets...................... 1,037,462 1,016,386 973,234 741,307 653,286
Deposits.................... 670,775 680,851 681,925 507,338 412,500
Total Borrowings............ 248,475 224,265 175,120 135,810 145,160
Stockholders' Equity........ 99,004 88,866 93,078 82,935 80,816
</TABLE>
9
<PAGE>
PRO FORMA COMBINED--UNAUDITED
SELECTED CONSOLIDATED FINANCIAL INFORMATION
($ IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF AND FOR THE NINE
MONTHS ENDED AS OF AND FOR THE TWELVE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- --------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Interest Income....... $ 1,038,578 $ 933,854 $ 1,266,895 $ 996,296 $ 868,114
Net Interest Income... 492,455 458,744 622,654 520,717 515,055
Provision for Loan
Losses............... 19,605 15,084 19,500 16,558 25,627
Other Income.......... 455,926 379,095 533,195 429,598 364,641
Other Expense......... 645,834 618,297 824,996 620,819 674,308
Income Before
Extraordinary Items.. 191,052 133,331 201,981 201,690 101,978
PER SHARE
Primary Income Before
Extraordinary Items.. $ 1.67 $ 1.15 $ 1.75 $ 1.95 $ 0.98
Fully Diluted Income
Before Extraordinary
Items................ 1.66 1.13 1.72 1.89 0.96
Cash Dividends........ 0.585 0.535 0.720 0.645 0.590
BALANCE SHEET
Loans--Net............ $12,918,958 $ 9,719,463 $ 9,717,665 $ 9,223,513 $ 9,117,941
Assets................ 20,200,380 15,460,723 15,794,534 14,316,402 13,506,893
Deposits.............. 14,237,916 11,248,239 11,642,857 10,965,711 10,145,576
Total Borrowings...... 3,475,615 2,505,672 2,405,073 1,611,115 1,914,129
Shareholders' Equity.. 1,956,239 1,359,606 1,351,370 1,354,453 1,143,455
WEIGHTED AVERAGE SHARES
Primary............... 114,273 115,748 115,484 103,187 103,886
Fully Diluted......... 115,276 118,550 118,249 107,421 108,536
</TABLE>
10
<PAGE>
THE SPECIAL MEETING
GENERAL
This Proxy Statement-Prospectus is being furnished to holders of Advantage
Common Stock in connection with the solicitation of proxies by the Advantage
Board for use at the Special Meeting, including any adjournment or
postponement thereof. The Special Meeting will be held on Thursday, February
5, 1998 at 10:30 A.M., Central time, at the Gateway Technical College
Conference Center located at 3250 30th Avenue, Kenosha, Wisconsin.
PROPOSALS TO BE CONSIDERED
The Special Meeting will be held (i) to consider and vote upon a proposal to
approve the Merger Agreement, and (ii) to transact such other business as may
properly come before the Special Meeting.
RECORD DATE AND VOTING RIGHTS
Holders of Advantage Common Stock at the close of business on the Record
Date will be entitled to notice of and to vote at the Special Meeting. Each
share of Advantage Common Stock is entitled to one vote on each proposal
presented. As of the Record Date, there were 3,235,653 outstanding shares of
Advantage Common Stock entitled to vote at the Special Meeting, of which
504,351 shares or approximately 15.59% were beneficially owned by Advantage
directors, executive officers and their affiliates. Directors and executive
officers of Advantage have indicated that they intend to vote their shares in
favor of the Merger Agreement.
Shares of Advantage Common Stock representing, as of the Record Date, one-
third of the outstanding shares of Advantage Common Stock must be represented
in person or by proxy at the Special Meeting for a quorum to be present. The
affirmative vote of a majority of the outstanding shares of Advantage Common
Stock as of the Record Date is required to approve the Merger Agreement.
Abstentions and "broker non-votes" (i.e., shares held by brokers or nominees
which are represented at a meeting but with respect to which the broker or
nominee is not empowered to vote on a particular proposal) will be treated as
present for purposes of determining the presence of a quorum, but have the
same effect as a vote against the Merger Agreement.
VOTING; REVOCATION OF PROXIES
Shares of Advantage Common Stock represented by a proxy properly signed and
received at or prior to the Special Meeting, unless subsequently revoked, will
be voted in accordance with the instructions in such proxy. Shares held in the
account of a participant in Advantage's Employee Stock Ownership Plan ("ESOP")
and in the Advantage Bancorp, Inc. Employee's Profit Sharing and Savings
Retirement Plan ("401(k)") will be included on the proxy for those shares
registered in the name of the trustee of the ESOP and 401(k) and will be voted
by the trustee indicated in such proxy. The trustee of the ESOP and 401(k)
will solicit voting instructions from participants in both plans. Any proxy
may be revoked by the person giving it at any time prior to the voting of the
proxy by giving written notice to the Secretary of Advantage, by properly
executing and submitting a later-dated proxy, or by attending the meeting and
voting in person. If a proxy is signed and returned without indicating any
voting instructions, such proxy will be voted FOR the proposal to approve the
Merger Agreement. If a proxy is signed and returned with a vote against the
Merger Proposal, the shares represented by such proxy may not be voted in
favor of an adjournment or postponement of the Special Meeting. The trustee,
in its discretion, shall vote or not vote all shares that are either (a) not
allocated to a participant's account, or (b) allocated to a participant's
account but are not voted by the participant because the participant has not
directed (or not timely directed) the trustee as to the manner in which such
shares are to be voted, in the same proportion as those shares for which the
trustee has received instructions from participants, unless the trustee
determines that such action would clearly not be in the best interests of
participants.
11
<PAGE>
The Advantage Board is not aware of any business to be acted upon at the
Special Meeting other than as described in this Proxy Statement-Prospectus.
If, however, other matters are properly brought before the Special Meeting,
the persons appointed as proxies will have discretion to vote thereon in
accordance with their best judgment.
SOLICITATION OF PROXIES
The enclosed proxy is being solicited by the Advantage Board for use in
connection with the Special Meeting. Advantage will bear its own expenses in
connection with the Special Meeting, except that M&I and Advantage each agreed
to pay one half of the costs incurred in connection with the printing and
filing of this Proxy Statement-Prospectus and all Commission and other
regulatory filing and listing fees in connection with the Merger. In addition
to solicitation of proxies by mail, directors, officers and employees of
Advantage may make solicitation of proxies for the Special Meeting either
personally or by telephone, telegram or other forms of communication. Such
directors, officers and employees will receive no special compensation for any
solicitation.
HOLDERS OF ADVANTAGE COMMON STOCK SHOULD NOT SEND STOCK CERTIFICATES WITH
THEIR PROXY CARDS.
12
<PAGE>
THE MERGER
The following section of this Proxy Statement-Prospectus describes certain
aspects of the Merger. This section does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement and Stock
Option Agreement, copies of which are attached as Appendices A and B,
respectively, to this Proxy Statement-Prospectus and which are incorporated by
reference herein.
GENERAL
M&I and Advantage have entered into the Merger Agreement which provides,
after satisfaction or waiver of all conditions described therein, for the
Merger. The Merger will become effective at the Effective Time, which will
occur as promptly as practicable following shareholder and regulatory approval
and the satisfaction or waiver of other conditions contained in the Merger
Agreement. At the Effective Time, subject to the adjustment procedures
provided for in the Merger Agreement, each issued and outstanding share of
Advantage Common Stock (except for shares held by M&I or a subsidiary of M&I
for its own account and shares held by the Trusts and unallocated to
participants thereunder, all of which will automatically be canceled and
retired and will cease to exist) will be converted into 1.2 shares of M&I
Common Stock. No fractional shares of M&I Common Stock will be issued to any
holder of Advantage Common Stock. In lieu of fractional shares of M&I Common
Stock, former holders of Advantage Common Stock will receive a cash payment
upon surrender of their certificates representing Advantage Common Stock in
connection with the Merger, based upon the product of the fractional share
interest to which such holder would otherwise be entitled, multiplied by the
Average Price.
BACKGROUND OF THE MERGER
Over the last several years, the financial services industry has become
increasingly competitive and has undergone industry-wide consolidation.
Advantage has from time to time been contacted by other financial institutions
to determine whether Advantage would consider entering into a business
combination. On various occasions, the Advantage Board has discussed the
consolidation trend in the financial services industry and considered
strategic options for increasing shareholder value, including potential
business combinations with other institutions.
On April 25, 1997, the Advantage Board met to consider the then most recent
inquiry received by management regarding whether Advantage would consider
entering into a potential business combination. The Advantage Board discussed
the unsolicited inquiry, as well as other strategic alternatives available to
Advantage, including remaining an independent public company or pursuing a
selected group of potential acquirors for the sale of Advantage. At the
conclusion of the meeting, and based upon the discussions that occurred at
this and prior meetings, the Advantage Board authorized management to retain a
financial advisor to review and analyze the various strategic alternatives
available to Advantage, including a possible sale of the company.
On May 23, 1997, Hovde was retained by Advantage as its exclusive financial
advisor to assist Advantage in analyzing, structuring, negotiating and
effecting a possible sale of the company. Foley & Lardner was similarly
retained to assist the Advantage Board in connection with the proposed
transaction.
Over the next several weeks, meetings were held between Hovde and management
of Advantage regarding strategies, processes and potential partners in a
business combination. Based on due diligence examinations of Advantage
documents and records as well as interviews with management, Hovde assisted
Advantage in preparing a confidential information package for distribution to
potential acquirors. On August 13, 1997, the information package was sent to a
selected group of potential acquirors, each of which had entered into a
confidentiality agreement with Advantage. These financial institutions were
selected by Advantage and Hovde based on considerations such as financial
strength, trading volume, compatibility with the business philosophy and
processes of Advantage, industry reputation and geographic location.
Through late August and early September 1997, management of Advantage had
several contacts with and responded to various questions from certain of the
institutions receiving information packages, including M&I. On September 19,
1997, Advantage received preliminary bids from interested parties, including
M&I. These bids were analyzed and compared by Hovde based on factors such as
the value of the consideration offered, the market characteristics of the
potential acquiror's stock, and community and employee considerations.
13
<PAGE>
Hovde presented its conclusions regarding the various bids to the Advantage
Board at a meeting on September 26, 1997. The Advantage Board reviewed and
considered the various bids and the Hovde presentation and, after further
discussions with management, concluded that two bidders (including M&I)
presented superior offers compared to the others under consideration, and it
was decided that talks would continue exclusively with representatives of
those two institutions.
On October 1, 1997, discussions were held between members of management of
Advantage and M&I. At this meeting, the parties discussed the M&I preliminary
proposal, including the proposed exchange ratio, as well as the business
philosophies and future business plans and strategies of the respective
institutions. The management representatives also discussed the potential
benefits of operating as a combined entity, including the strength and
reputation of M&I, the potential for increased liquidity for holders of
Advantage Common Stock, the relative strength and market share of Advantage in
southeastern Wisconsin and northern Illinois and the potential cost savings
associated with the consolidation of data processing operations, elimination
of duplicate staffing positions and consolidation of administrative functions.
It was determined at the meeting that any potential business combination would
be structured as a stock-for-stock merger between Advantage and M&I, with M&I
continuing as the surviving corporation. M&I indicated that the transaction
would also need to be accounted for as a "pooling-of-interests."
On October 6, 1997, discussions were held between members of management of
Advantage and the remaining competing bidder. At this meeting, the parties
discussed the competing bidder's preliminary proposal, including the proposed
exchange ratio, as well as the business philosophies and future business plans
and strategies of the respective institutions. The respective management
representatives also discussed the potential benefits of operating as a
combined entity, including many of the factors described above.
Through the end of September and into early October 1997, Advantage provided
additional due diligence material to both potential acquirors and conducted
management interviews with the senior officers of each potential acquiror.
Additionally, Hovde held numerous discussions with representatives of both
potential acquirors regarding issues such as the proposed exchange ratio to be
utilized in a stock-for-stock combination, the allocation of the risk of stock
price fluctuation prior to consummation of a business combination and the
potential acquiror's demand for a break-up fee or lock-up option. Based on
these discussions, each bidder submitted enhanced indications of interest to
Advantage.
On October 9, 1997, a meeting of the Advantage Board was held to discuss the
enhanced proposals received from the competing bidders. The Advantage Board,
with the assistance of Hovde, considered and compared the two competing
institutions by examining and analyzing, among other things, (i) operating
characteristics and market data for each of the competing institutions as
compared to each other and as compared to each institution's individual peer
group of companies; (ii) historical stock performance of each entity as
compared to the other and as compared to various market indices; (iii)
historical daily trading volume, growth rates and dividend yields of the
competing entities; (iv) consensus analyst ratings of the competing entities;
(v) ownership structure of each institution; and (vi) a direct comparison on
key issues between the two competing bids. Based on the results of this
analysis, the Advantage Board determined to negotiate with M&I and to proceed,
if the negotiations were successful, toward the signing of a definitive
agreement with M&I. Advantage advised Foley & Lardner to begin preparation of
the definitive merger agreement relating to the proposed M&I transaction and a
draft of such an agreement was thereafter delivered to M&I.
Over the next two weeks, the parties made progress on the negotiations
regarding the terms of the definitive merger agreement. The representatives
and advisors for both parties met and spoke on numerous occasions throughout
this period discussing the transaction and the related documentation and
negotiating the terms of the definitive agreement, including the exchange
ratio and the cap and floor provisions associated therewith, representations
and warranties, conditions to closing, termination provisions, incentive bonus
pool and the terms of a potential break-up fee or a potential lock-up option
agreement.
14
<PAGE>
Following the decision of the Advantage Board to proceed with negotiations
with M&I, the other prospective acquiror submitted a revised proposal. On the
date that this revised proposal was presented, such proposal represented a
lower per share value for Advantage Common Stock in absolute dollar terms than
the M&I proposal. From time to time subsequent to such date, depending upon
the closing prices of M&I Common Stock and the stock of the other prospective
acquiror, this revised proposal represented a higher or lower value in
absolute dollar terms than the M&I proposal. The Advantage Board, assisted by
Hovde, examined this revised proposal and considered various factors including
the trading volume of the potential acquiror's stock and the relative
potential benefits to current customers and employees of Advantage offered by
this revised proposal as compared to the M&I proposal. Considering these and
other factors, the Advantage Board determined to continue negotiating
exclusively with M&I.
On October 24, 1997, the Advantage Board met to consider the status of the
proposed transaction with M&I and the terms of a draft merger agreement that
had been provided to the directors. At the request of the Advantage Board,
Foley & Lardner outlined in detail the terms and conditions of the proposed
definitive agreement and other transaction documents which had been
distributed to the directors. Counsel reviewed such matters as the
representations and warranties of the merger partners, the conditions to the
consummation of the Merger and the termination provisions of the merger
agreement (including the operation of the proposed lock-up option). Counsel
also reviewed the handling of the various other issues relating to the
transaction, such as the conversion of existing Advantage stock options and
the termination of the ESOP, as well as other matters related to employee
benefit plans and the treatment of Advantage employees following the Merger.
Counsel also reviewed with the members of the Advantage Board their fiduciary
duties and responsibilities in approving a transaction such as the Merger.
Advantage management also made presentations regarding the Merger, including a
review of synergies associated with the transaction, necessary regulatory
approvals and related matters. At the meeting, Hovde made a presentation of
the results of various financial analyses undertaken by Hovde and advised the
Advantage Board that, as of such date and based upon and subject to the
matters discussed, the proposed exchange ratio of 1.2 shares of M&I Common
Stock per share of Advantage Common Stock was fair, from a financial point of
view, to the holders of Advantage Common Stock. The members of the Advantage
Board discussed the presentations they had received at this and other meetings
of the Advantage Board and, upon conclusion, unanimously approved the Merger
Agreement (subject to satisfactory resolution of the remaining issues) and
authorized its execution. The Advantage Board also authorized execution of the
Stock Option Agreement as well as the issuance of Advantage Common Stock
pursuant thereto.
On October 30, 1997, representatives and advisors of both parties met to
finalize the remaining details of the Merger Agreement and the Stock Option
Agreement.
The results of the October 30, 1997 meeting were discussed at a meeting of
the Advantage Board on Saturday, November 1, 1997. The Advantage Board found
the October 30 resolution of the remaining issues to be satisfactory and
consistent with the terms of the transaction as approved on October 24, 1997.
In connection with this meeting, Hovde delivered its written opinion to the
effect that the consideration to be received by holders of Advantage Common
Stock in the merger was, as of such date, fair, from a financial point of
view, to holders of Advantage Common Stock, and the Advantage Board reaffirmed
its authorization of the Merger.
The Merger Agreement and the Stock Option Agreement were executed on
November 3, 1997, and the parties thereafter issued a press release announcing
the transaction.
REASONS FOR THE MERGER; ADVANTAGE BOARD RECOMMENDATION
Advantage. The Advantage Board has determined that the terms of the Merger
are fair to, and in the best interests of, Advantage and the holders of
Advantage Common Stock. Accordingly, the Advantage Board unanimously approved
the Merger Agreement and recommends that the holders of Advantage Common Stock
vote FOR approval of the Merger Agreement.
In reaching its determination, the Advantage Board consulted with Foley &
Lardner with respect to the legal and fiduciary duties of the Board of
Directors, regulatory matters, tax matters and the Merger Agreement, Stock
15
<PAGE>
Option Agreement and issues related thereto. The Advantage Board also
consulted with Hovde with respect to the financial aspects and fairness of the
financial terms of the transaction, and with Ernst & Young LLP, Advantage's
independent accountants, with respect to whether Advantage is an entity that
qualifies for "pooling-of-interests" accounting treatment pursuant to GAAP and
applicable regulations of the Commission. The Advantage Board also consulted
with senior management on all of the foregoing issues as well as more
conceptual issues and advantages of the proposed Merger. The Advantage Board
considered a number of factors, without assigning any specific or relative
weight to such factors. The material factors considered were:
(i) Information concerning the businesses, earnings, results of
operations, financial structure, future business prospects, capital levels
and asset quality of Advantage and M&I, both individually and as combined.
In particular, the Advantage Board focused on the strategic fit and the
overall compatibility of management, employees and business philosophies of
the two entities as well as their historical market value, book value,
dividends and earnings multiples;
(ii) The advantages of a combination with another Wisconsin-based
institution, including the building of market share, enhanced exposure to
commercial and consumer banking markets (including immediate access to
markets not previously served by Advantage), and opportunities for
increased efficiencies and cost savings from a combination within the
Wisconsin market resulting in increased potential for profitability of the
combined entity over time;
(iii) The current and prospective economic and competitive environments
facing Advantage and other financial institutions characterized by
consolidation and intensifying competition from both banks and nonbank
financial services organizations;
(iv) The belief that the combined company would be well positioned to
grow through possible future acquisitions or expansion while at the same
time not being so large as to reduce its attractiveness as a possible
acquisition candidate;
(v) The financial advice rendered by Hovde that the consideration to be
paid in the Merger is fair to the holders of Advantage Common Stock from a
financial point of view (see "THE MERGER--Opinion of Financial Advisor to
Advantage");
(vi) The premium over market value of Advantage Common Stock to be
received by holders of Advantage Common Stock in the Merger;
(vii) A comparison of the terms of the Merger Agreement, the Stock Option
Agreement and the other documents relating to the Merger with the terms
customarily seen in similar transactions, including the financial terms of
recent comparable business combinations in the financial institution
industry;
(viii) The impact of the Merger on Advantage's employees in terms of
working environment and career opportunities, on Advantage's depositors and
customers in terms of the wider range of products and services that will be
available from a strong and sound combined institution, and on the
communities which Advantage serves in terms of the enhanced strength and
accessibility of the combined Wisconsin franchise; and
(ix) The Merger would result in holders of Advantage Common Stock
receiving stock in a high quality combined company that should benefit such
holders through enhanced liquidity for their shares, enhanced operating
efficiencies and better penetration of commercial and consumer banking
markets.
The Advantage Board determined that the Merger is preferable to the other
alternatives which might be available to Advantage, such as remaining
independent and growing internally and through future acquisitions, or
engaging in a transaction with another party. It made that determination
because it believes that the Merger will unite two healthy institutions with
complementary business strengths and operating philosophies, thereby creating
a combined institution with greater size, flexibility, diversity of services,
efficiencies, capital strength and profitability potential than either
institution possesses on a stand-alone basis or than Advantage might be
16
<PAGE>
able to achieve through such other alternatives. The Advantage Board believes
that the Merger will permit the combined institution to compete effectively in
the rapidly changing marketplace for banking and financial services and to
take advantage of opportunities for growth and diversification that would not
be available to Advantage on its own.
FOR THE REASONS SET FORTH ABOVE, THE ADVANTAGE BOARD UNANIMOUSLY RECOMMENDS
THAT HOLDERS OF ADVANTAGE COMMON STOCK VOTE TO APPROVE THE MERGER AGREEMENT.
M&I. The M&I Board has determined that the Merger is desirable since it
enhances M&I's overall franchise value, attains for M&I the largest market
position based on deposits in the Kenosha/Racine, Wisconsin market, allows M&I
to enter the metro-Chicago, Illinois market, and provides M&I with a federal
savings bank charter which provides flexibility for future expansion. M&I
expects that the transaction will not be dilutive to M&I's earnings in 1998
before factoring in expense savings or revenue enhancements.
OPINION OF FINANCIAL ADVISOR TO ADVANTAGE
Hovde has delivered to the Advantage Board its opinion, dated as of the date
of this Proxy Statement- Prospectus, that, based upon and subject to the
various considerations set forth in such opinion, the consideration to be
received in the Merger by holders of Advantage Common Stock (the "Merger
Consideration") is fair from a financial point of view to the holders of
Advantage Common Stock. The full text of the opinion of Hovde which describes
the procedures followed, assumptions made, matters considered and limitations
on the review undertaken, is attached hereto as Appendix C. Holders of
Advantage Common Stock are encouraged to read this opinion in its entirety.
Hovde is a nationally recognized investment banking firm within the
financial services industry and, as a part of its investment banking business,
is continually engaged in the valuation of financial institutions in
connection with mergers and acquisitions, private placements and valuations
for other purposes. As specialists in securities of financial institutions,
Hovde has experience in, and knowledge of, banks, thrifts and bank and thrift
holding companies. Advantage selected Hovde as its financial advisor because
of its reputation and because Hovde has substantial experience in transactions
such as the Merger. No material relationship has existed between Hovde and
Advantage within the two year period prior to the date of this Proxy
Statement-Prospectus except for the retention of Hovde as financial advisor in
connection with the Merger. In requesting Hovde's advice and opinion,
Advantage imposed no limitations upon Hovde with respect to the investigations
made or procedures followed by it in rendering its opinion.
Hovde will receive a fee contingent upon the completion of the Merger of
approximately 0.8% of the value of the Merger Consideration for services
rendered in connection with advising Advantage regarding the Merger Agreement,
including the fairness opinion and financial advisory services provided to
Advantage, plus reimbursement of out-of-pocket expenses. Based on the closing
sale price of M&I Common Stock on December 18, 1997, such fee would be
approximately $2,019,000, and Hovde has received $20,000 of such fee.
HOVDE'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE MERGER CONSIDERATION, AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY HOLDER OF ADVANTAGE COMMON STOCK AS TO HOW SUCH HOLDER SHOULD VOTE AT THE
SPECIAL MEETING. THE SUMMARY OF THE OPINION OF HOVDE SET FORTH IN THIS PROXY
STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION.
17
<PAGE>
The following is a brief summary of the analyses performed by Hovde in
connection with its fairness opinion:
During the course of its engagement, and as a basis for arriving at its
opinion, Hovde reviewed and analyzed material bearing upon the financial and
operating condition of M&I and Advantage and material prepared in connection
with the Merger, including, among other things, the following: (i) the Merger
Agreement; (ii) certain historical publicly available information concerning
Advantage and M&I, including the preliminary M&I pro-forma balance sheet and
income statement adjusted for M&I's acquisition of Security which closed on
October 1, 1997; (iii) the nature and terms of recent acquisition and merger
transactions involving thrift institutions and thrift holding companies that
Hovde considered reasonably similar to Advantage in size, financial character,
operating character, historical performance and geographic market; and (iv)
financial and other information provided to Hovde by the management of M&I and
Advantage. Hovde conducted meetings with members of senior management of
Advantage and M&I for purposes of reviewing the future prospects of Advantage
and M&I. Hovde also took into account its experience in other transactions, as
well as its knowledge of the commercial banking and thrift industries and its
general experience in securities valuations.
In rendering its opinion, Hovde assumed, without independent verification,
the accuracy and completeness of the financial and other information and has
relied upon the accuracy of the representations of the parties contained in
the Merger Agreement. Hovde has not made any independent evaluation or
appraisal of any properties, assets or liabilities of Advantage.
In connection with its opinion, Hovde performed various analyses with
respect to Advantage. The following is a brief summary of such analyses,
certain of which were presented to the Advantage Board by Hovde on October 24,
1997.
Analysis of the Merger Consideration. Hovde reviewed the value of the Merger
Consideration to be received by each holder of Advantage Common Stock. Given
M&I's trading price of $51.88 at the time of announcement, Hovde calculated
that the Merger Consideration equated to approximately 233.66% of Advantage's
fully diluted tangible book value at September 30, 1997, a multiple of
approximately 20.8 times Advantage's earnings for the 12 months ended
September 30, 1997, and a premium to core deposits of approximately 21.41%
(excluding $75.6 million in brokered deposits).
Summary of Proposals. Hovde summarized the sales process, the parties
contacted and the level of interest expressed by each party, including the
value of the aggregate consideration offered to the holders of Advantage
Common Stock.
Hovde also compared the significant terms of the M&I proposal to those of
the other bidders submitting proposals, including but not limited to the value
of the consideration offered, the market characteristics of the acquiror's
stock and the community/employee considerations. Furthermore, Hovde examined
the trading price and volume for M&I Common Stock and the relationship between
the trading characteristics of the common stock of the other companies, as
well as to a peer group of comparable companies.
Analysis of Selected Mergers. As part of its analysis, Hovde reviewed three
sets of mergers: (i) selected mergers involving thrifts headquartered anywhere
in the United States announced between January 1, 1996 and October 15, 1997 in
which the return on average assets of the seller was greater than 1.0% and the
tangible equity/asset ratio of the seller was between 7.5% and 10.0% (the
"High Performers"); (ii) selected mergers involving thrifts headquartered
anywhere in the United States announced between January 1, 1996 and October
15, 1997 in which the total assets of the seller were between $750 million and
$2 billion (the "Asset Size Mergers"); (iii) and all mergers involving thrifts
headquartered in the Midwest announced between January 1, 1996 and October 15,
1997 in which the total assets of the seller were greater than $100 million
(the "Midwest Mergers"). The High Performers consisted of 18 mergers; the
Assets Size Mergers consisted of 19 mergers; and the Midwest Mergers consisted
of 20 mergers. For each transaction, Hovde calculated the multiple
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of the offer value to the acquired company's: (i) earnings per share ("EPS")
for the twelve months preceding ("LTM") the announcement date of the
transaction (P/E ratios were adjusted for the one-time special assessment for
the quarter ended September 30, 1996, to recapitalize the Savings Association
Insurance Fund); (ii) book value per share; (iii) tangible book value per
share; and (iv) the tangible book premium to core deposits. The High
Performers, the Asset Size Mergers and the Midwest Mergers are listed in the
table below:
ACQUIRER TARGET
High Performers
<TABLE>
<S> <C>
Star Banc Corporation Great Financial Corp
Commercial Federal Corporation Mid Continent Bancshares
North Fork Bancorporation, Inc. Branford Savings Bank
Union Planters Corporation Sho-Me Financial Corp.
Bay View Capital Corporation America First Financial
Union Planters Corporation Magna Bancorp, Inc.
Pinnacle Financial Services, Inc. CB Bancorp, Inc.
Sovereign Bancorp, Inc. Bankers Corp.
Dime Bancorp, Inc. BFS Bankorp, Inc.
Compass Bancshares, Inc. Horizon Bancorp, Inc.
Washington Mutual United Western Financial
UST Corp. Walden Bancorp, Inc.
BB&T Corporation Fidelity Financial Bankshares
North Fork Bancorporation, Inc. North Side SB
Cathay Bancorp, Inc. First Public Savings Bank, FSB
F&M Bancorp Home Federal Corporation
Union Planters Corporation Leader Financial Corporation
Washington Mutual Utah FSB
Asset Size Mergers
Sovereign Bancorp, Inc. ML Bancorp, Inc.
Golden State Bancorp, Inc. CENFED Financial Corporation
Barnett Banks, Inc. First of America-FL
Bay View Capital Corporation America First Financial
Union Planters Corporation Magna Bancorp, Inc.
BB&T Corporation Virginia First Financial
TCF Financial Corporation Standard Financial, Inc.
CCB Financial Corporation American Federal Bank, FSB
Sovereign Bancorp, Inc. Bankers Corp.
Temple-Inland, Inc. California Financial Holding Company
Vermont Financial Services Corp. Eastern Bancorp, Inc.
Webster Financial Corporation DS Bancor, Inc.
UST Corp. Walden Bancorp, Inc.
North Fork Bancorporation, Inc. North Side SB
Washington Federal, Inc. Metropolitan Bancorp
First Union Corporation Home Financial Corp
Peoples Heritage Financial Group, Inc. Family Bancorp
Allied Irish Banks 1st Washington Bancorp
Norwest Corporation Primerit Bank FSB
</TABLE>
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<PAGE>
Midwest Mergers
<TABLE>
<S> <C>
North Central Bancshares Valley Financial Corp.
Star Banc Corporation Great Financial Corp.
Commercial Federal Corporation Mid Continent Bancshares
Union Planters Corporation Sho-Me Financial Corp.
Charter One Financial, Inc. Haverfield Corporation
TCF Financial Corporation Standard Financial, Inc.
Marshall & Ilsley Corporation Security Capital Corporation
Fifth Third Bancorp Suburban Bancorp
Pinnacle Financial Services, Inc. CB Bancorp, Inc.
Mercantile Bancorporation, Inc. Roosevelt Financial Group, Inc.
ABN AMRO North American, Inc. Standard Federal Bancorporation, Inc.
Shoreline Financial Corporation SJS Bancorp, Inc.
Mutual Savings Bank First Federal Bancshares of Eau Claire, Inc.
Commercial Federal Corporation Heritage Financial Ltd.
Fidelity Financial of Ohio Circle Financial Corporation
Pinnacle Banc Group Financial Security
Security Banc Corp. Third Financial
Old National Bancorp Workingmens Capital
BancFirst Ohio Corp. County Savings Bank
Roosevelt Financial Group, Inc. Sentinel Financial Corporation
</TABLE>
The calculations for the High Performers group yielded a range of multiples
of offer value to LTM EPS of 8.5 times to 22.6 times, with an average of 15.2
times and a median of 15.5 times; a range of multiples of offer value to book
value of 1.38 times to 2.47 times, with an average of 1.86 times and a median
of 1.76 times; a range of multiples of offer value to tangible book value of
1.38 times to 2.55 times, with an average of 1.92 times and a median of 1.93
times; and a range of tangible book premium to core deposits of 4.16% to
24.81%, with an average of 13.69% and a median of 13.73%.
The calculations for the Asset Size Mergers yielded a range of multiples of
offer value to LTM EPS of 11.5 times to 26.9 times, with an average of 16.2
times and a median of 15.2 times; a range of multiples of offer value to book
value of l.06 times to 3.06 times, with an average of l.69 times and a median
of 1.65 times; a range of multiples of offer value to tangible book value of
1.06 times to 3.31 times, with an average of 1.81 times and a median of 1.68
times; and a range of multiples of tangible book premium to core deposits of
3.58% to 26.61%, with an average of 10.13% and a median of 8.12%.
The calculations of the Midwest Mergers yielded a range of multiples of
offer value to LTM EPS of 13.4 times to 25.9 times, with an average of 19.4
times and a median of 19.7 times; a range of multiples of offer value to book
value of 1.10 times to 2.16 times, with an average of 1.61 times and a median
of 1.51 times; a range of multiples of offer value to tangible book value of
1.10 times to 2.52 times, with an average of 1.66 times and a median of 1.52
times; and a range of tangible book premium to core deposits of 2.73% to
23.60%, with an average of 11.05% and a median of 10.42%.
Hovde compared these multiples with the corresponding multiples for the
Merger, valuing the shares of M&I Common Stock that would be received pursuant
to the Merger Agreement at $62.25 per share of Advantage Common Stock. In
calculating the multiples for the Merger, Hovde used Advantage's EPS for the
12 months ended September 30, 1997, book value per share and tangible book
value per share as of September 30, 1997, and Hovde calculated that
Advantage's LTM EPS, book value per share, tangible book value per share and
tangible book premium to core deposits were 20.8 times, 2.24 times, 2.34
times, and 21.41%, respectively.
No company or transaction used in the above analysis as a comparison is
identical to Advantage, M&I or the Merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other facts that could affect the public
trading value of the companies to which they are being compared.
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<PAGE>
Contribution Analysis. Hovde prepared a contribution analysis showing
percentages of assets, deposits, common equity, and estimated 1997 and
estimated 1998 net income contributed to the combined company on a pro forma
basis by Advantage and M&I. This analysis showed, assuming M&I's stock price
was at $51.88 per share, that Advantage, as of November 3, 1997, would
contribute 5.13% of pro forma consolidated total assets, 4.21% of core
deposits, 5.10% of common equity, 4.10% of estimated 1997 net income and 3.72%
of estimated 1998 net income. The holders of Advantage Common Stock would own
approximately 3.72% of the pro forma common shares outstanding of M&I,
assuming M&I's stock price was at $51.88 per share.
Financial Implications to Holders of Advantage Common Stock. Hovde prepared
an analysis of the financial implications of the M&I offer to a holder of
Advantage Common Stock. This analysis indicated that on a pro forma equivalent
basis, at a $62.25 price per share of Advantage Common Stock with M&I trading
at $51.88 per share, a holder of Advantage Common Stock would achieve
approximately no accretion in fully diluted earnings per share, an increase in
fully diluted dividends per share of approximately 125% and a decrease in
fully diluted book value per share of approximately 27% in 1998 as a result of
the consummation of the Merger. Assuming that the projected earnings per share
and dividends per share do not change, the holders of Advantage Common Stock
will experience an increase of approximately 9% in earnings per share, an
increase of approximately 145% in dividends per share, and a decrease of
approximately 23% in book value per share in 2002.
Comparative Shareholder Returns. Hovde presented an analysis of comparative
theoretical shareholder returns in several scenarios, including Advantage
remaining independent, Advantage being acquired in 2002 and Advantage being
acquired by M&I. This analysis, which was based on the net present value of
projected dividend streams and projected 1998 common stock valuations (using
the current price-to-earnings multiples), indicated total shareholder returns
of 10.77% if Advantage remained independent, 16.42% for a merger in 2002 on
the terms specified in the following paragraph, and 20.18% based on the
acceptance of the offer from M&I at a fixed exchange ratio of 1.2 shares of
M&I Common Stock per share of Advantage Common Stock.
Discounted Cash Flow Analysis. Hovde performed a discounted cash flow
analysis to determine a present value per share of Advantage Common Stock
assuming Advantage continued to operate as a stand-alone entity and was
acquired at a later date. This present value was determined by projecting
Advantage's after-tax net income for the five years from September 30, 1998
through 2002. Projected net income was determined through consultation with
Advantage's management and generally included growth in assets (ranging from a
low of 3.0% in 1998 and increasing to 4.5% in 2002). "Terminal value" per
share of Advantage Common Stock was determined by applying a price to earnings
multiple of 19.6 times against Advantage's projected earnings at September 30,
2002. The present value of the terminal value was then determined using an
annual discount rate of 12.5%. The above calculations resulted in a present
value per fully diluted share of Advantage Common Stock of $53.17 per share.
Although the summary set forth above does not purport to be a complete
description of the analysis performed by Hovde, the material analysis
performed by Hovde in rendering its opinion has been summarized above.
However, the preparation of a fairness opinion is not necessarily susceptible
to partial analysis or summary description. Hovde believes that its analysis
and the summary set forth above must be considered as a whole and that
selecting portions of its analysis, without considering all factors and
analysis, would create an incomplete view of the process underlying the
analysis by which Hovde reached its opinion. In addition, Hovde may have given
various analyses more or less weight than other analyses, but no analysis was
given materially more weight than any other analysis. Also, Hovde may have
deemed various assumptions more or less probable than other assumptions so
that the ranges of valuations resulting from any particular analysis described
above should not be taken to be Hovde's view of the actual value of Advantage
or the combined company.
In performing its analysis, Hovde made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Advantage and M&I. The
analysis performed by Hovde is not necessarily indicative of actual value or
actual future results, which may be significantly more or less favorable than
suggested by such analysis. Such analysis was prepared
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<PAGE>
solely as part of Hovde's analysis of the fairness of the Merger
Consideration, from a financial point of view, to the holders of Advantage
Common Stock. The analysis does not purport to be an appraisal or to reflect
the prices at which a company might actually be sold or the prices at which
any securities may trade at the present time or at any time in the future.
Hovde used in its analysis various projections of future performance prepared
by the management of Advantage. The projections are based on numerous
variables and assumptions which are inherently unpredictable and must be
considered not certain of occurrence as projected. Accordingly, actual results
could vary significantly from those assumed in the projections and any related
analysis. Hovde's opinion does not address the relative merits of the Merger
as compared to any other business combination in which Advantage might engage.
In addition, as described above, Hovde's opinion to the Advantage Board was
one of many factors taken into consideration by the Advantage Board in making
its determination to approve the Merger Agreement.
Based upon the foregoing analyses and other investigations and assumptions
set forth in its opinion, without giving specific weightings to any one factor
or comparison, Hovde determined that the Merger Consideration was fair from a
financial point of view to the holders of Advantage Common Stock. Hovde's
fairness opinion does not take into account any potential adjustments to the
Merger Consideration that may be provided for in the Merger Agreement.
THE SUMMARY OF THE PRESENTATION BY HOVDE TO THE ADVANTAGE BOARD AS SET FORTH
ABOVE DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF SUCH PRESENTATION. THE
PREPARATION OF A FAIRNESS OPINION INVOLVES VARIOUS DETERMINATIONS AS TO THE
MOST APPROPRIATE AND RELEVANT METHODS OF FINANCIAL ANALYSES AND THE
APPLICATION OF THOSE METHODS TO THE PARTICULAR CIRCUMSTANCES, AND, THEREFORE,
SUCH AN OPINION IS NOT READILY SUSCEPTIBLE TO SUMMARY DESCRIPTION.
FURTHERMORE, IN ARRIVING AT ITS OPINION, HOVDE DID NOT ATTRIBUTE ANY
PARTICULAR WEIGHT TO ANY ANALYSIS OR FACTOR CONSIDERED BY IT, BUT RATHER MADE
QUALITATIVE JUDGMENTS AS TO THE SIGNIFICANCE AND RELEVANCE OF EACH ANALYSIS
AND FACTOR. ACCORDINGLY, HOVDE BELIEVES THAT ITS ANALYSES AND THE SUMMARY SET
FORTH ABOVE MUST BE CONSIDERED AS A WHOLE AND THAT SELECTING PORTIONS OF ITS
ANALYSES, WITHOUT CONSIDERING ALL FACTORS AND ANALYSES, COULD CREATE AN
INCOMPLETE VIEW OF THE PROCESS UNDERLYING THE OPINION. IN PERFORMING ITS
ANALYSES, HOVDE MADE NUMEROUS ASSUMPTIONS WITH RESPECT TO INDUSTRY
PERFORMANCE, GENERAL BUSINESS AND ECONOMIC CONDITIONS AND OTHER MATTERS, MANY
OF WHICH ARE BEYOND THE CONTROL OF M&I OR ADVANTAGE. THE ANALYSES PERFORMED BY
HOVDE ARE NOT NECESSARILY INDICATIVE OF ACTUAL VALUES OR ACTUAL FUTURE
PERFORMANCE.
MERGER CONSIDERATION
The Merger Agreement provides that, at the Effective Time and subject to
adjustment procedures described below, each share of Advantage Common Stock
issued and outstanding immediately prior to the Effective Time (except for
shares held by M&I or a subsidiary of M&I for its own account and shares held
by the Trusts and unallocated to participants thereunder) will cease to be
outstanding and will be converted into, and become the right to receive, 1.2
shares of M&I Common Stock. Each share of Advantage Common Stock held as
treasury stock, held by M&I or a subsidiary of M&I for its own account, or
held by the Trusts and unallocated to participants thereunder, will be
canceled and extinguished without conversion thereof into M&I Common Stock or
payment therefor.
If the Average Price is below $46.67 per share, the Exchange Ratio will be
adjusted to a number so that the product of the adjusted Exchange Ratio (taken
to four decimal places) and the Average Price equals $56.00 (rounded to the
nearest whole cent) unless M&I exercises its right under the Merger Agreement
to inform Advantage prior to the Effective Time that such adjustment shall not
occur, in which case such adjustment will
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<PAGE>
not occur and Advantage will have the right to terminate the Merger Agreement
(see "THE MERGER--Termination; Amendment and Waiver"). If the Average Price is
above $61.67 per share, then M&I will have the option, but not the obligation,
to adjust the Exchange Ratio to a number so that the product of the adjusted
Exchange Ratio (taken to four decimal places) and the Average Price equals
$74.00 (rounded to the nearest whole cent), subject to the right of Advantage
under the Merger Agreement to terminate the Merger Agreement in the event of
such an adjustment (see "THE MERGER--Termination; Amendment and Waiver"). IN
THE EVENT THAT ADVANTAGE DOES NOT EXERCISE ITS TERMINATION RIGHT, THE EXCHANGE
RATIO MAY BE LESS THAN 1.2 SHARES OF M&I COMMON STOCK.
Under the Merger Agreement, if between the date of the Merger Agreement and
the Effective Time, either Advantage or M&I declares a stock dividend or
distribution upon or subdivides, splits up, reclassifies or combines its
common stock, or declares a dividend or makes a distribution on its common
stock in any security convertible into its common stock, appropriate
adjustment or adjustments will be made to the Exchange Ratio.
The shares of M&I Common Stock outstanding at the Effective Time will remain
outstanding shares of M&I Common Stock following the Effective Time.
At the Effective Time, all rights with respect to Advantage Common Stock
pursuant to stock options granted by Advantage under Advantage's stock option
plans, whether or not then exercisable, will be converted into and will become
rights with respect to M&I Common Stock, and M&I will assume each stock option
in accordance with the terms of the applicable stock option plan under which
it was issued (and, where applicable, as amended), as adjusted to reflect the
Exchange Ratio. See "THE MERGER--Effect on Employee Benefits and Stock
Options."
No fractional shares of M&I Common Stock will be issued in the Merger.
Instead, M&I will pay to each holder of Advantage Common Stock who would
otherwise be entitled to a fractional share an amount of cash equal to the
fraction of a share of M&I Common Stock to which the holder of Advantage
Common Stock would otherwise be entitled multiplied by the Average Price.
The terms of the Merger were determined by M&I and Advantage on the basis of
arm's-length negotiations.
For a description of the M&I Common Stock to be received in connection with
the Merger, see "DESCRIPTION OF M&I CAPITAL STOCK," and for a description of
certain differences in the rights of shareholders of M&I and Advantage, see
"COMPARISON OF SHAREHOLDER RIGHTS."
EFFECTIVE TIME
Advantage and M&I will cause the Merger to be consummated by filing Articles
of Merger with DFI. The filing with respect to the Merger will occur as
promptly as practicable after the satisfaction or, if permissible, waiver of
the conditions to M&I's and Advantage's obligations to effect the Merger. The
parties currently anticipate that the Merger will be completed on or about
April 1, 1998, subject to receipt of shareholder and regulatory approvals.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL
SHARES; DIVIDENDS
Conversion of Shares. At the Effective Time, by virtue of the Merger and
without any action on the part of M&I, Advantage, or the holders of M&I Common
Stock or Advantage Common Stock, each share of Advantage Common Stock issued
and outstanding immediately prior to the Effective Time (except for shares
held by M&I or a subsidiary of M&I for its own account and shares held by the
Trusts and unallocated to participants thereunder, all of which will
automatically be canceled and retired and will cease to exist) will be
converted into the right to receive 1.2 shares of M&I Common Stock, subject to
adjustment as described above. All such shares of Advantage Common Stock will
no longer be outstanding and will automatically be canceled and retired and
will cease to exist, and each certificate previously representing any such
shares of Advantage Common Stock will thereafter represent the right to
receive a certificate representing shares of M&I Common Stock into which such
Advantage Common Stock is convertible plus cash in lieu of fractional shares.
Certificates previously representing shares of Advantage Common Stock will be
exchanged for certificates representing whole shares of M&I Common Stock upon
the surrender of such certificates as provided below, without interest. No
fractional share of M&I Common Stock will be issued, and, in lieu thereof, a
cash payment will be made as provided below.
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<PAGE>
Procedures for Exchange of Certificates. As of the Effective Time, M&I will
deposit, or cause to be deposited, with a bank or trust company designated by
M&I which is reasonably acceptable to Advantage (the "Exchange Agent"),
certificates representing the shares of M&I Common Stock (such certificates
for shares of M&I Common Stock (and any dividends or distributions with
respect to such M&I Common Stock) being hereinafter referred to as the
"Exchange Fund") issuable pursuant to the terms of the Merger Agreement to
holders of Advantage Common Stock at the Effective Time. As soon as reasonably
practicable after the Effective Time, the Exchange Agent will mail to each
holder of record of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Advantage Common Stock
(the "Certificates"), whose shares of Advantage Common Stock were converted
into the right to receive shares of M&I Common Stock, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates will pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as M&I may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of M&I Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with a duly executed letter of
transmittal, the holder of such Certificate will receive a certificate
representing that number of whole shares of M&I Common Stock which such holder
has the right to receive in respect of the Certificate surrendered (after
taking into account all shares then held by such holder) and cash in lieu of
any fractional shares, and the Certificate so surrendered will be canceled. In
the event of a transfer of ownership of shares of Advantage Common Stock which
is not registered in the transfer records of Advantage, a certificate
representing the proper number of shares of M&I Common Stock may be issued to
a transferee if the Certificate representing such shares of Advantage Common
Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. In the event any Certificate
has been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen or destroyed
and the payment by such person of a bond in such reasonable amount as M&I may
direct as indemnity against any claim that may be made against it or the
Exchange Agent with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate, a certificate
representing the proper number of shares of M&I Common Stock. Until
surrendered, each Certificate will, after the Effective Time, represent only
the right to receive upon such surrender a certificate representing shares of
M&I Common Stock, dividends, and cash in lieu of any fractional share of M&I
Common Stock as described below.
HOLDERS OF ADVANTAGE COMMON STOCK SHOULD NOT FORWARD CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED A LETTER OF TRANSMITTAL AND
INSTRUCTIONS. HOLDERS OF ADVANTAGE COMMON STOCK SHOULD NOT RETURN CERTIFICATES
WITH THE ENCLOSED PROXY.
All shares of M&I Common Stock issued upon conversion of shares of Advantage
Common Stock (including any cash paid for fractional shares) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such
shares of Advantage Common Stock.
No certificates or scrip representing fractional shares of M&I Common Stock
will be issued upon the surrender for exchange of Certificates, and each
fractional share interest will not entitle the owner thereof to vote or to
claim any rights of a holder of M&I Common Stock. Each holder of a fractional
share interest will be paid an amount in cash based upon the product of the
fractional share interest to which such holder would otherwise be entitled,
multiplied by the Average Price. As soon as practicable after the
determination of the amount of cash to be paid to holders of fractional share
interests, the Exchange Agent will notify M&I and M&I will make available such
amounts to such holders of such fractional share interests subject to and in
accordance with the terms of the Merger Agreement.
Any portion of the Exchange Fund which remains undistributed to the former
holders of Advantage Common Stock for six months after the Effective Time will
be delivered to M&I, upon demand, and any former holders of Advantage Common
Stock who have not complied with the procedure described above will thereafter
look only to M&I for payment of their claim for M&I Common Stock, any cash in
lieu of fractional shares of M&I Common Stock and any dividends or
distributions with respect to M&I Common Stock.
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Neither M&I nor Advantage shall be liable to any former holder of shares of
Advantage Common Stock for any such shares of former Advantage Common Stock
(or dividends or distributions with respect thereto) or cash delivered to a
public official pursuant to any abandoned property, escheat or similar law.
M&I is entitled to deduct and withhold from the Merger Consideration such
amounts as M&I is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by M&I, such withheld
amounts shall be treated for purposes of the Merger Agreement as having been
paid to the former holder of such shares of Advantage Common Stock in respect
of which such deduction and withholding was made by M&I.
At the Effective Time, the stock transfer books of Advantage shall be closed
and there shall be no further registration or transfers of shares of Advantage
Common Stock thereafter on the records of Advantage. From and after the
Effective Time, the holders of Certificates shall cease to have any rights
with respect to such shares of Advantage Common Stock represented thereby
except as otherwise provided in the Merger Agreement or by law. On or after
the Effective Time, any Certificates presented to the Exchange Agent or M&I
for any reason shall be converted into shares of M&I Common Stock in
accordance with the terms of the Merger Agreement as described above.
Dividends. No dividends or other distributions declared or made after the
Effective Time with respect to M&I Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate
with respect to the shares of M&I Common Stock represented thereby, and no
cash payment in lieu of fractional shares will be paid to any such holder,
until the holder of record of such Certificate surrenders the Certificate.
Subject to the effect of applicable laws, following surrender of any
Certificate, there will be paid to the holder of the certificates representing
whole shares of M&I Common Stock issued in exchange, without interest, (i)
promptly, the amount of any cash payable in lieu of a fractional share of M&I
Common Stock and the amount of dividends or other distributions with record
and payment dates after the Effective Time and before the date of such
surrender with respect to whole shares of M&I Common Stock; and (ii) at the
appropriate payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to the whole shares of M&I
Common Stock. In no event shall the persons entitled to receive such
dividends, distributions and cash in lieu of fractional shares be entitled to
receive interest on the amounts payable.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain customary representations and
warranties of each of M&I and Advantage (and in certain cases also relating to
their respective subsidiaries) including, but not limited to: (a)
organization, regulatory registrations or authorizations and similar corporate
matters; (b) capital structures; (c) authorization, execution, delivery,
performance and enforceability of the Merger Agreement and other related
matters; (d) compliance with laws; (e) documents filed with the Commission and
other applicable securities or banking authorities and the accuracy of
information contained therein; (f) no material pending or threatened
litigation or governmental investigations or agreements except as otherwise
disclosed in filings with the Commission; (g) retirement and other employee
plans and matters relating to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and, with respect to Advantage, certain matters
relating to employment contracts, options and similar matters; (h) the
accuracy of information supplied by each of M&I and Advantage in connection
with the Registration Statement and this Proxy Statement-Prospectus; (i) good
title to properties, free of liens; (j) with respect to Advantage only, the
absence of certain environmental matters; (k) the absence of any burdensome
contracts, agreements or restrictions; (l) certain tax matters; (m) with
respect to Advantage only, certain insurance matters; (n) absence of certain
material changes or events since June 30, 1997 (in the case of Advantage) and
December 31, 1996 (in the case of M&I), including changes or events relating
to the incurrence of a material adverse effect in the business, operations,
properties (including intangible properties), condition (financial or
otherwise), assets or liabilities (including contingent liabilities) of M&I
and its subsidiaries, taken as a whole, or of Advantage and its subsidiaries,
taken as a whole; (o) no action taken that
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would prevent using the "pooling-of-interests" method for accounting for the
Merger or which would prevent the Merger from qualifying as a tax-free
reorganization under the Code; (p) material contracts; (q) full disclosure
with regard to all written information furnished pursuant to the Merger
Agreement; (r) with respect to Advantage only, the opinion of its financial
advisor; and (s) with respect to Advantage only, the shareholder vote required
to approve the Merger Agreement.
The Merger Agreement also contains additional representations and warranties
by Advantage to M&I that the Advantage Board has taken all actions necessary
to ensure that none of (a) the restrictions of Sections 180.1130-32, 180.1134,
180.1140-44 and 180.1150 of the WBCL (relating to business combinations with
interested shareholders and other potential restrictions on M&I's ability to
consummate the Merger, generally discussed under "DESCRIPTION OF M&I CAPITAL
STOCK--Certain Provisions of the Wisconsin Business Corporation Law"), and (b)
the provisions set forth in Article 4.C and Article 11 of the Restated
Articles of Incorporation of Advantage (the "Advantage Articles"), apply to
the Merger or, except in the case of Article 4.C., the Stock Option Agreement.
Certain of the representations and warranties of M&I and Advantage contained
in the Merger Agreement are qualified by materiality standards contained in
the Merger Agreement and by the disclosure schedules of M&I and Advantage
delivered pursuant to the Merger Agreement.
CONDITIONS TO THE MERGER
The Merger Agreement contains certain conditions to the obligations of M&I
and Advantage to consummate the Merger. In addition to other customary closing
conditions, the following conditions are contained in the Merger Agreement:
(a) the Merger shall have been approved by the requisite vote of the holders
of Advantage Common Stock; (b) the Registration Statement shall have been
declared effective by the Commission under the Securities Act (and no stop
order suspending the effectiveness of the Registration Statement shall have
been issued) and M&I shall also have received all other federal and state
securities permits and authorizations necessary to issue M&I Common Stock
pursuant to the Merger Agreement; (c) the Merger shall have been approved by
applicable regulatory authorities without the imposition of any condition that
is materially burdensome to M&I and all conditions required to be satisfied
prior to the Effective Time imposed by such approval shall have been satisfied
and all waiting periods relating to such approval shall have expired; (d)
there shall not be any injunction or restraining order or regulatory
impediment preventing the consummation of the Merger; (e) there shall not be
any pending material action, proceeding or investigation (i) challenging or
seeking material damages in connection with the Merger or (ii) seeking to
limit the exercise of ownership rights by M&I of the business or assets of
Advantage which in either case is reasonably likely to have a Material Adverse
Effect (as such term is defined in the Merger Agreement) on Advantage or M&I;
(f) M&I's and Advantage's representations and warranties contained in the
Merger Agreement shall be true and correct unless the failure to be true and
correct would not have a Material Adverse Effect on M&I or Advantage; (g) all
agreements and covenants of each of M&I and Advantage required to be performed
by it under the Merger Agreement shall have been performed by it in all
material respects; (h) all consents, approvals, authorizations or orders
required to be obtained in connection with the Merger by either M&I or
Advantage shall have been obtained by it, unless the failure to obtain such
consents, approvals, authorizations or orders would not have a Material
Adverse Effect on M&I or Advantage; (i) the opinions of Godfrey & Kahn, S.C.
and Foley & Lardner that the Merger will be treated for federal income tax
purposes as a "reorganization" within the meaning of Section 368(a) of the
Code shall be rendered substantially as described in the Merger Agreement; (j)
the opinions of Foley & Lardner and Godfrey & Kahn, S.C. as to certain matters
in connection with the Merger shall be rendered substantially in the forms
contemplated by the Merger Agreement; and (k) each party to the Merger
Agreement shall have received from (i) Ernst & Young LLP an opinion to the
effect that Advantage is an entity that qualifies for "pooling-of-interests"
accounting treatment pursuant to GAAP and applicable regulations of the
Commission, and (ii) Arthur Andersen LLP an opinion to the effect that the
Merger qualifies for "pooling-of-interests" accounting treatment pursuant to
GAAP and applicable regulations of the Commission.
In addition to the mutual conditions discussed above, M&I's obligation to
consummate the Merger is subject to the additional condition that M&I shall
have received from Ernst & Young LLP a "comfort letter" with respect to
Advantage's financial statements included or incorporated by reference in this
Proxy Statement-Prospectus.
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The parties currently anticipate that the Merger will be completed on or
about April 1, 1998, subject to receipt of shareholder and regulatory
approvals.
TERMINATION; AMENDMENT AND WAIVER
Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger Agreement by
the holders of Advantage Common Stock at the Special Meeting: (a) by mutual
consent of M&I and Advantage by a vote of a majority of the members of their
respective Boards of Directors; (b) by either Advantage or M&I if any approval
of holders of Advantage Common Stock required for the consummation of the
Merger shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of such holders or at any adjournment or
postponement thereof; (c) by either M&I or Advantage (i) if there has been a
breach in any material respect (except when any statement in a representation
or warranty expressly includes a standard of materiality, such statement shall
have been breached in any respect) of any representation, warranty, covenant
or agreement set forth in the Merger Agreement on the part of M&I or
Advantage, respectively, or (ii) if any representation or warranty of M&I or
Advantage, respectively, shall be discovered to have become untrue in any
material respect (except when any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall have been
breached in any respect), in either case which breach or other condition has
not been cured within 30 business days following receipt by the nonterminating
party of notice of such breach or other condition, or which breach by its
nature, cannot be cured prior to closing of the Merger and would cause such
party to fail to meet its conditions to the Merger (provided that the Merger
Agreement may not be terminated by the breaching party or party making any
representation or warranty which shall have become untrue in any material
respect); (d) by either M&I or Advantage if any permanent injunction
preventing the consummation of the Merger shall have become final and
nonappealable; (e) by either M&I or Advantage if the Merger shall not have
been consummated on or prior to April 30, 1998, for a reason other than the
failure of the terminating party to comply with its obligations under the
Merger Agreement; provided that if the Merger shall not have been consummated
by April 30, 1998, as a result of proceedings of a governmental authority or
litigation, then the date on which either M&I or Advantage may terminate the
Merger Agreement shall be extended to the earlier of (i) the lapse of a
reasonable period of time necessary to consummate the Merger following the
final termination of proceedings of a governmental authority or litigation or
(ii) November 30, 1998; (f) by either M&I or Advantage if any regulatory
authority has denied approval of the Merger, and neither M&I nor Advantage
has, within 30 days after the entry of such order denying approval, filed a
petition seeking review of such order as provided by applicable law; or (g) by
M&I at any time prior to the Special Meeting if the Advantage Board shall have
withdrawn, modified or changed its recommendation in favor of the Merger
pursuant to its fiduciary obligations as described in Section 6.1 of the
Merger Agreement, and such withdrawal, modification or change is adverse in
any respect to the interests of M&I.
The Merger Agreement may also be terminated by Advantage if both (a) the
Average Price is below $46.67 per share, and (b) M&I has informed Advantage
prior to the Effective Time that the Exchange Ratio shall not be adjusted to a
number such that the product of the adjusted Exchange Ratio (taken to four
decimal places) and the Average Price shall equal $56.00 (rounded the to the
nearest whole cent). The Merger Agreement may also be terminated by Advantage
if both (a) the Average Price is above $61.67 per share, and (b) M&I has
elected prior to the Effective Time to adjust the Exchange Ratio to a number
such that the product of the adjusted Exchange Ratio (taken to four decimal
places) and the Average Price shall equal $74.00 (rounded to the nearest whole
cent). IF ADVANTAGE DOES NOT EXERCISE ITS RIGHT TO TERMINATE IN THIS INSTANCE,
THE EXCHANGE RATIO MAY BE LESS THAN 1.2 SHARES OF M&I COMMON STOCK.
In the event of termination of the Merger Agreement by either M&I or
Advantage, the Merger Agreement will become void and there will be no
liability or obligation on the part of M&I or Advantage other than under
certain specified provisions of the Merger Agreement dealing with confidential
treatment of non-public information and expenses, and other than any
liabilities incurred or suffered by a party as a result of a willful breach of
the Merger Agreement. The Stock Option Agreement will be governed by its own
terms with respect to termination. See "THE MERGER--Stock Option Agreement."
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Amendment and Waiver. Subject to applicable law, (i) the Merger Agreement
may be amended at any time prior to the Effective Time by action taken or
authorized by the respective Boards of Directors of M&I and Advantage (except
that after the Merger Agreement is approved by the holders of Advantage Common
Stock, no amendment may be made which would reduce the amount or change the
type of consideration into which each share of Advantage Common Stock will be
converted pursuant to the terms of the Merger Agreement at the Effective Time)
and (ii) at any time prior to the Effective Time, the parties may extend the
time for performance of the obligations of the other parties to the Merger
Agreement, and waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or any document delivered pursuant thereto
or may waive compliance with any agreements or conditions for their respective
benefit contained in the Merger Agreement.
CONDUCT OF BUSINESS PENDING MERGER
The Merger Agreement contains certain affirmative and negative covenants of
M&I and Advantage. Pursuant to the Merger Agreement, each party has agreed
promptly to notify the other of any impending or threatened occurrence of an
event or condition which would cause any of its representations or warranties
contained in the Merger Agreement to be untrue or inaccurate or cause either
party to fail to comply with or satisfy any covenant, condition or agreement
to be complied with under the Merger Agreement. In addition, Advantage has
agreed that prior to the Effective Time, Advantage and each of its
subsidiaries will (a) operate its business only in the ordinary course
consistent with past practices; (b) use reasonable efforts to preserve intact
its business organization and assets, maintain its rights and franchises,
retain the services of its officers and key employees and maintain its
relationships with customers; (c) use all reasonable efforts to maintain and
keep its properties in good repair and condition ordinary wear and tear
excepted; (d) use all reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that now
maintained by it; (e) use all reasonable efforts to perform in all material
respects all obligations to be performed by it under all material contracts,
leases and documents relating to or affecting its assets, properties and
business; (f) take such reasonable actions as are requested by M&I to complete
the Merger; and (g) use its reasonable best efforts to obtain (i) consent and
waiver agreements from holders of options to purchase Advantage Common Stock,
and (ii) amendments to certain employment agreements.
Advantage has also agreed that prior to the Effective Time, neither
Advantage nor any of its subsidiaries will (without the prior written consent
of M&I), except as provided in the Merger Agreement: (a) (i) adopt, amend,
renew or terminate any of the benefit plans, programs or arrangements or any
of the material employment, termination or severance agreements with respect
to which Advantage or any subsidiary of Advantage has any obligations
(collectively the "Plans"), or (ii) except for normal increases in the
ordinary course of business consistent with past practice, the specific
provisions set forth in the Merger Agreement, and the requirements of
applicable law, increase the base salary, bonus incentive compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any plan or agreement in effect as of the date of the Merger
Agreement, (b) declare or pay any dividend other than (i) regular quarterly
cash dividends on Advantage Common Stock not in excess of $0.10 per share
(provided that in the quarter that the Effective Time occurs, holders of
Advantage Common Stock will receive cash dividends only with respect to shares
of Advantage Common Stock held or with respect to shares of M&I Common Stock
received pursuant to the Merger Agreement, but not both) or (ii) dividends by
a subsidiary of Advantage to Advantage; (c) redeem, purchase or otherwise
acquire any shares of Advantage capital stock; (d) merge with or into any
other corporation or bank or permit any other corporation or bank to merge
into it or consolidate with any other corporation or bank, or effect any
reorganization or recapitalization; (e) other than in the ordinary course of
business and consistent with past practice, (i) purchase or otherwise acquire
any substantial portion of the assets, or more than 5% of the stock, of any
corporation, bank or other business or (ii) liquidate, sell or dispose of, or
encumber any assets or acquire any assets; (f) split, combine, or reclassify
any of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution of such capital
stock; (g) issue any shares of Advantage's capital stock other than (i)
pursuant to outstanding employee or director stock options or (ii) pursuant to
the Plans; (h) propose or adopt any amendment to the Advantage Articles or its
Bylaws
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in any way adverse to M&I; (i) change any of its methods of accounting, or
methods of reporting income or deductions for federal income tax purposes, in
effect at June 30, 1997; and (j) change any lending, investment, liability
management or other material policies concerning the business or operations of
Advantage or any of its subsidiaries.
Pursuant to the Merger Agreement, M&I has agreed that prior to the Effective
Time, M&I will (a) maintain its corporate existence in good standing and
maintain all books and records in accordance with GAAP as utilized in M&I's
financial statements applied on a consistent basis; and (b) conduct its
business in a manner that does not violate any laws.
M&I has also agreed that prior to the Effective Time, it will not declare or
pay any extraordinary dividend (except for increases of the quarterly cash
dividend on M&I Common Stock) on or make any other extraordinary or special
distribution in respect of its capital stock unless appropriate adjustment is
made to the Exchange Ratio. M&I has also agreed that prior to the Effective
Time, M&I will not, and will not allow its subsidiaries to (a) take any action
to cause any of its representations or warranties to become untrue in any
material respect; (b) take any action which would disqualify the Merger as a
reorganization under Section 368 of the Code or for "pooling-of-interests"
treatment under GAAP; (c) amend the Restated Articles of Incorporation of M&I
(the "M&I Articles") or its Bylaws in a manner which would adversely affect
the terms of the M&I Common Stock or the ability of M&I to consummate the
Merger; and (d) enter into any agreement providing for any transaction in
which the surviving company of such transaction would be prohibited from
consummating the Merger in accordance with the terms of the Merger Agreement.
M&I has also agreed to use reasonable efforts to cause shares of M&I Common
Stock to be issued in the Merger to be approved for listing on the Nasdaq
National Market prior to the Effective Time.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that Advantage will not authorize or permit
any of its officers, directors, employees or agents to directly or indirectly
solicit, initiate or encourage any inquiries relating to, or the making of any
proposal which constitutes, a "takeover proposal" (as defined below), or (i)
recommend or endorse any takeover proposal, (ii) participate in any
discussions or negotiations with respect to a takeover proposal, or (iii)
provide third parties with any nonpublic information relating to any such
inquiry or proposal. Advantage may, and may authorize and permit its officers,
directors, employees or agents to, provide third parties with nonpublic
information, otherwise facilitate any effort or attempt by any third party to
make or implement a takeover proposal, and participate in discussions and
negotiations with any third party relating to any takeover proposal, if
Advantage, after having consulted with and considered the advice of outside
counsel, has determined in good faith that such actions are necessary for the
discharge of the fiduciary duties of the Advantage Board.
At the time the Merger Agreement was entered into, Advantage agreed to cease
and cause to be terminated any existing activities, discussions or
negotiations previously conducted with any parties other than M&I with respect
to any of the foregoing. Advantage has agreed to notify M&I immediately if any
such inquiries or takeover proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, Advantage, and Advantage shall keep M&I informed,
on a current basis, of the status of any such discussions and negotiations.
The term "takeover proposal" means any tender or exchange offer, proposal for
a merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Advantage or any Seller
Subsidiary (as defined in the Merger Agreement) or any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial
portion of the assets of, Advantage or any Seller Subsidiary other than the
transactions contemplated or permitted by the Merger Agreement.
STOCK OPTION AGREEMENT
General. Pursuant to the Stock Option Agreement and as a condition for M&I
to enter into the Merger Agreement, Advantage has granted to M&I the Option to
purchase up to 643,930 shares of Advantage Common
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Stock (subject to adjustment for certain dilutive events, but in no event in
excess of 19.9% of the shares of Advantage Common Stock issued and outstanding
at the time of exercise), at an exercise price of $56.00 per share (the
closing price of Advantage Common Stock on October 31, 1997, which was the
last trading date preceding execution and delivery of the Merger Agreement and
Stock Option Agreement). The Option may only be exercised by M&I upon the
occurrence of certain triggering and exercise events, discussed below, which
generally relate to control of Advantage. No such events have occurred as of
the date hereof.
Exercise of Option. The Option may be exercised by M&I, in whole or in part,
within three months after the occurrence of a "Subsequent Triggering Event" if
(i) both an "Initial Triggering Event" and a Subsequent Triggering Event have
occurred prior to an "Exercise Termination Event," (ii) M&I is not in material
breach of any of its representations, warranties, covenants or agreements
contained in the Merger Agreement or the Stock Option Agreement (which, in the
case of the Merger Agreement, would entitle Advantage to terminate the Merger
Agreement), and (iii) Advantage has not terminated the Merger Agreement due to
such a material breach or pursuant to its termination rights upon certain
circumstances involving changes in the Average Price (see "THE MERGER--
Termination; Amendment and Waiver"). Any purchase of shares of Advantage
Common Stock pursuant to the Option is subject to compliance with all
applicable laws, including the Federal Reserve Board and Office of Thrift
Supervision ("OTS").
For purposes of the Option, an "Initial Triggering Event" is defined as any
of the following events or transactions: (a) Advantage, or any subsidiary of
Advantage, without prior written consent of M&I, enters into an agreement with
any person other than M&I or any subsidiary of M&I ("person" as used in the
Stock Option Agreement has the meaning defined in the Exchange Act and the
rules and regulations thereunder) to engage in, or the Advantage Board shall
have recommended that the holders of Advantage Common Stock approve or accept,
(each an "Acquisition Transaction") (i) a merger (except for the Merger) or
consolidation, or any similar transaction, involving Advantage or the Bank,
(ii) a purchase, lease or other disposition of 15% or more of the consolidated
assets, net revenues or net income or Advantage or (iii) an issuance, sale or
other disposition (including by way of merger, consolidation, share exchange
or otherwise) of securities representing 10% or more of the voting power of
Advantage or the Bank; (b) any person, other than M&I or any subsidiary of
M&I, acquires beneficial ownership ("beneficial ownership" as used in the
Stock Option Agreement has the meaning defined in the Exchange Act and the
rules and regulations thereunder) or the right to acquire beneficial ownership
of, or any "group" (as such term is defined under the Exchange Act) is formed
which beneficially owns or has the right to acquire beneficial ownership of,
20% or more of the then outstanding shares of Advantage Common Stock (other
than shares held in accounts related the Plans); (c)(i) the holders of
Advantage Common Stock vote and fail to approve the Merger Agreement at the
Special Meeting, (ii) the Special Meeting, in violation of the Merger
Agreement, is not held, or (iii) the Special Meeting is canceled prior to the
termination of the Merger Agreement, if, in any event, prior to the Special
Meeting (or if such meeting was not held or was canceled, prior to the
termination of the Merger Agreement), it is publicly announced that any person
(other than M&I or a subsidiary of M&I) made, or disclosed an intention to
make, a proposal to engage in an Acquisition Transaction; (d) the Advantage
Board withdraws or modifies its recommendation that the holders of Advantage
Common Stock approve the transactions contemplated by the Merger Agreement, or
Advantage or any subsidiary of Advantage authorizes an agreement to engage in
an Acquisition Transaction with any person other than M&I or a subsidiary of
M&I; (e) any person other than M&I or a subsidiary of M&I makes a publicly-
announced proposal to Advantage or the holders of Advantage Common Stock to
engage in an Acquisition Transaction; (f) any person other than M&I or any
subsidiary of M&I commences (as such term is defined in Rule 14d-2 under the
Exchange Act), or files with the Commission a registration statement under the
Exchange Act or tender offer materials with respect to, a potential exchange
offer or tender offer to purchase any shares of Advantage Common Stock such
that, upon consummation of such offer, such person or a group of which such
person is a member would acquire beneficial ownership of 20% or more of the
then outstanding shares of Advantage Common Stock; (g) Advantage willfully
breaches any covenant or obligation contained in the Merger Agreement in
anticipation of and in order to facilitate engaging in an Acquisition
Transaction, and following such breach M&I would be entitled to terminate the
Merger Agreement; and (h) any person other than M&I or any subsidiary
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of M&I files an application or notice with the Federal Reserve Board, OTS or
other federal or state bank regulatory or antitrust authority, which
application or notice has been accepted for processing, for approval to engage
in an Acquisition Transaction.
For purposes of the Option, a "Subsequent Exercise Event" is defined as
either of the following: (a) the acquisition by any person of beneficial
ownership of 30% or more of the then outstanding Advantage Common Stock or (b)
the occurrence of a Triggering Event (as such term is defined in the Stock
Option Agreement) of the type specified in subsection (a) of the preceding
paragraph, except that the percentage referred to in clause (iii) of
subsection (a) is 30%.
Expiration of the Option. The Option expires upon any of the following (each
an "Exercise Termination Event"): (a) the Effective Time; (b) termination of
the Merger Agreement if such termination occurs prior to the occurrence of an
Initial Triggering Event except (i) a termination by M&I due to a material
breach by Advantage of any of its representations, warranties, covenants or
agreements contained in the Merger Agreement or a failure to make, withdrawal
or modification of the recommendation of the Advantage Board that the holders
of Advantage Common Stock approve the transactions contemplated by the Merger
Agreement, (ii) a termination by Advantage or M&I of the Merger Agreement due
to the failure of the holders of Advantage Common Stock to approve the
consummation of the Merger if prior to, or within three months after, the
Special Meeting it is announced that any person (other than M&I or a
subsidiary of M&I) made, or disclosed an intention to make, a proposal to
engage in an Acquisition Transaction (each of (i) and (ii), above, is referred
to as a "Listed Termination"), or (c) the passage of twelve months after
termination of the Merger Agreement if such termination follows the occurrence
of an Initial Triggering Event or is a Listed Termination.
Closing for the purchase of Advantage Common Stock pursuant to the exercise
of the Option is subject to all required regulatory approvals. The periods for
exercising certain exercise, registration and repurchase rights under the
Stock Option Agreement shall be extended to the extent necessary to allow the
parties to obtain all regulatory approvals for the exercise of such rights and
the expiration of all applicable statutory waiting periods.
Repurchase Right. At any time after the occurrence of a Repurchase Event (as
defined below), at the request of M&I, delivered prior to an Exercise
Termination Event, Advantage shall repurchase either (i) the Option from M&I
at a price equal to the amount by which (A) the market/offer price (as defined
below) exceeds (B) $56.00, multiplied by the number of shares for which the
Option may then be exercised, or (ii) a number (designated by M&I) of the
shares of Advantage Common Stock acquired by M&I pursuant to the Stock Option
Agreement ("Option Shares") at a price equal to the market/offer price
multiplied by the number of Option Shares so designated. The term
"market/offer price" used in the Stock Option Agreement means the highest of
(i) the price per share of Advantage Common Stock at which a tender or
exchange offer therefor has been made, (ii) the price per share of Advantage
Common Stock to be paid by any third party pursuant to an agreement with
Advantage, (iii) the highest closing price for shares of Advantage Common
Stock within the six-month period immediately preceding the date M&I gives
notice of the required repurchase of the Option or Option Shares, as the case
may be, or (iv) in the event of a sale of all or any substantial part of
Advantage's assets or deposits, the sum of the net price paid in such sale for
such assets or deposits and the current market value of the remaining net
assets of Advantage as determined by a nationally recognized investment
banking firm, divided by the number of shares of Advantage Common Stock
outstanding at the time of such sale.
Registration Rights. M&I has the right within twelve months of a Subsequent
Triggering Event that occurs prior to an Exercise Termination Event to require
Advantage to prepare and file up to two registration statements under the
Securities Act for the shares of Advantage Common Stock issued or issuable
upon exercise of the Option and to use its best efforts to qualify the shares
under any applicable state securities laws if necessary for M&I to be able to
sell the shares (such rights being M&I's "Registration Rights").
Right of First Refusal for Registered Sale. In the event M&I proposes to
sell Option Shares pursuant to a registration statement under the Securities
Act, Advantage has the right, at any time within three business days after
Advantage receives notice from M&I of the exercise of M&I's Registration
Rights (the "Registration
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Notice") to purchase such Option Shares at a cash price equal to the product
of (i) the number of shares to be so purchased by Advantage, and (ii) the Fair
Market Value (as defined below) of such a share. The term "Fair Market Value"
means the average of the daily closing sales price of a share of Advantage
Common Stock on the Nasdaq National Market during the five trading days prior
to the date on which the Registration Notice is received by Advantage.
Anti-Takeover Effect of the Stock Option Agreement. Certain aspects of the
Stock Option Agreement may have the effect of discouraging persons who might
now or prior to the Effective Time be interested in acquiring all of or a
significant interest in Advantage from considering or proposing such an
acquisition, even if such persons were prepared to pay a higher price per
share for Advantage Common Stock than the price per share implicit in the
Exchange Ratio. The Option granted to M&I under the Stock Option Agreement is
intended to increase the likelihood that the Merger will be consummated in
accordance with the terms of the Merger Agreement. Certain attempts to acquire
Advantage or an interest in Advantage would cause the Option to become
exercisable as described above, and would trigger M&I's right to receive any
premium offered to holders of Advantage Common Stock. This right would
significantly increase the cost of a proposed transaction to a potential
acquiror as compared to the cost it would incur had the Stock Option Agreement
not been entered into. Such increased cost might discourage a potential
acquiror from considering or proposing an acquisition or might result in a
potential acquiror proposing to pay a lower per share price to acquire
Advantage than it might otherwise propose to pay. In addition, the management
of Advantage believes that exercise of the Option is likely to prohibit any
reasonably foreseeable acquiror of Advantage (other than M&I) from accounting
for any acquisition of Advantage using the "pooling-of-interests" accounting
method. Finally, exercise of the Option would increase the ability of M&I to
obtain the approval of the holders of Advantage Common Stock to consummate the
Merger and adversely affect the ability of a third party to obtain the
approval of such holders to consummate an alternative transaction.
DIVIDEND POLICY AFTER THE MERGER
M&I has no present intention to change its existing dividend policy in
connection with the Merger. Any M&I dividends are subject to declaration by
the M&I Board and applicable governmental regulations and policies.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Pursuant to the terms of the Merger Agreement, Messrs. Gergen and Stampfl
each entered into an agreement with M&I to amend the terms of their respective
Employment Agreements with Advantage in order to clarify certain terms
contained therein (the "Amendments"). The Amendments serve to clarify that the
Merger, if consummated, will satisfy the conditions contained in Section 8 of
the Employment Agreements for a lump sum cash payment to Messrs. Gergen and
Stampfl, and that the maximum amount of any such payment shall be $1,094,802
and $455,802, respectively. Additionally, the Amendments provide that, with
the exception of continuation of health insurance coverage through March 20,
2000, the terms of the Employment Agreements will not govern the terms and
conditions of the employment of Messrs. Gergen and Stampfl with the Bank or
any successor thereto after the Merger.
The Merger Agreement established the Bonus Pool to provide an incentive to
employees of Advantage and its subsidiaries to retain key customers and attain
net income targets, as well as to retain key employees. The Bonus Pool will be
administered by a committee of three persons including Messrs. Gergen and
Stampfl and Mr. Dennis J. Kuester, the President of M&I. The committee will
designate participants, set targets and do all other things necessary to
administer the Bonus Pool. The initial allocation of the Bonus Pool will be
determined by Mr. Gergen and may thereafter be changed only with his written
consent. Neither Mr. Gergen nor Mr. Stampfl will receive payments from the
Bonus Pool.
EFFECT ON EMPLOYEE BENEFITS AND STOCK OPTIONS
Generally. Except as described below under the heading "Severance Plan" and
above in the section entitled, "Interests of Certain Persons in the Merger,"
employees of Advantage who continue employment with
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M&I after the Effective Time ("Affected Employees") will be integrated into
the welfare and employee benefit plans of M&I as of the Effective Time or not
later than January 1, 1999. Advantage's benefit plans will generally continue
in force until such time. Affected Employees will have their years of service
with Advantage and its subsidiaries recognized for purposes of eligibility and
vesting under M&I's qualified and nonqualified retirement, profit sharing or
vacation plans or arrangements, and for purposes of eligibility under M&I's
welfare benefit plans. The cost of retiree medical insurance for eligible
Affected Employees will be borne by such Affected Employees. M&I will, in
general, waive all limitations as to preexisting conditions and waiting
periods with respect to participation and coverage requirements applicable to
Affected Employees under any welfare benefit plans in which they are eligible
to participate.
401(k) Plan. Accounts in Advantage's 401(k) of participants who are employed
at the Effective Time by Advantage or its subsidiaries will be fully vested as
of the Effective Time. M&I reserves the right thereafter to merge or freeze
Advantage's 401(k).
ESOP. As of the Effective Time, Advantage will amend the ESOP to appoint
three persons who are not affiliated or associated with M&I to serve as the
Administrator and Advisory Committee (as defined in the ESOP) of the ESOP
(collectively, the "Administrator"), with all of the powers and duties
previously vested under the ESOP in the Administrator, Advisory Committee and
the Advantage Board. In the event any of these three individuals resign or
otherwise vacates his or her appointment, the remaining person or persons
constituting the Administrator will appoint the successor for the vacant
position. Pursuant to the Merger Agreement, (a) a contribution for 1997 will
be made by Advantage to the ESOP on the day prior to the Effective Time, which
contribution will give rise to an allocation to eligible participants'
accounts, (b) the ESOP will terminate and all account balances will become
fully vested and nonforfeitable as of the Effective Time, and (c) the assets
remaining in the ESOP, after payment by the ESOP of any remaining indebtedness
to Advantage, will be allocated among ESOP participants, generally based on
their relative account balances in the ESOP. The specific method of allocation
(including the treatment of allocations in excess of Code limitations) may be
adjusted if such adjustment is required in order to secure a favorable
determination letter from the Internal Revenue Service (the "Service")
regarding the tax-qualified status of the ESOP upon its termination.
Distributions to ESOP participants will be made as soon as practicable after
the later to occur of either (i) the Effective Time, or (ii) the receipt of
said determination letter.
Severance Plan. Severance payments to former employees of Advantage who are
terminated by M&I will be made in accordance with M&I's normal severance
schedule, pursuant to the M&I Severance Plan as in effect on the date of such
employee's termination of employment. Notwithstanding the foregoing, all
employees of Advantage, including Messrs. Gergen and Stampfl, who have written
agreements in effect at the Effective Time pertaining to payments on
termination of their employment with Advantage will not be entitled to any
payments pursuant to the M&I Severance Plan upon termination of employment
unless they waive all rights to compensation, severance and benefits under
those other agreements.
Bonuses. Pursuant to the Merger Agreement, bonuses for the employees of
Advantage and its subsidiaries, other than those employees participating in
Advantage's Officer Incentive Compensation Plan for fiscal 1998, will be paid
pursuant to the terms of any bonus plans, or, in the absence of any plans,
consistent with past practice of Advantage and its subsidiaries, except that
any other bonus amounts which, in a manner consistent with past practice, have
been accrued as of the end of fiscal 1997 may also be paid. All bonuses in
respect of fiscal 1998 which, in a manner consistent with past practice, are
accrued but unpaid as of the Effective Time will be paid promptly following
the Effective Time. Participants in the Officer Incentive Compensation Plan
will be paid a prorated bonus for fiscal year 1998 based on their bonus for
fiscal year 1997. In addition, the Advantage Board established the Bonus Pool
upon signing of the Merger Agreement of $516,000 for employees of Advantage.
The Bonus Pool will be used to (a) incent employees of Advantage and
subsidiaries to retain Advantage's customers, (b) incent employees of
Advantage and subsidiaries to attain net income targets, and (c) retain key
Advantage employees during the period prior to the Effective Time. The Bonus
Pool will be administered by a committee of Messrs. Gergen and Stampfl of
Advantage and Mr. Kuester of M&I.
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Executive Salary Continuation Agreements. The Executive Salary Continuation
Agreements for Messrs. Gergen and Stampfl will be assumed in full by M&I in
connection with the consummation of the Merger.
Trusts. The Trusts will be assumed in full by M&I in connection with the
consummation of the Merger.
Stock Options. At the Effective Time, M&I will assume Advantage's 1991 Stock
Option and Incentive Plan (the "1991 Plan"), the 1995 Equity Incentive Plan
(the "1995 Plan") and the 1996 Non-Employee Director Stock Option Plan
(collectively, the "Option Plans") and all of Advantage's obligations
thereunder. At the Effective Time, each outstanding option issued pursuant to
the Option Plans shall be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under such option (as amended by
the Option Agreements, defined below, and including, without limitation, the
time periods allowed for exercise), a number of shares of M&I Common Stock
equal to the product of the Exchange Ratio and the number of shares of
Advantage Common Stock subject to such option at a price per share equal to
the exercise price per share of the shares of Advantage Common Stock subject
to such option divided by the Exchange Ratio. Prior to the Effective Time,
Advantage will use its reasonable best efforts to obtain a consent and waiver
of each person granted an option under the 1991 Plan and the 1995 Plan
agreeing to certain amendments of the 1991 Plan, the 1995 Plan and associated
option grant forms and waiving any rights he or she might have had under the
former applicable sections of the 1991 Plan, the 1995 Plan and associated
option grant forms (the "Option Agreements").
ACCOUNTING TREATMENT
The Merger is intended to qualify as a "pooling-of-interests" for accounting
and financial reporting purposes. Under the "pooling-of-interests" method of
accounting, the historical basis of the assets and liabilities of M&I and
Advantage will be retroactively combined for the entire fiscal period in which
the Merger occurs and for all periods prior to the Merger at historically
recorded amounts. Consummation of the Merger is conditioned upon receipt by
M&I and Advantage of opinions from (i) Ernst & Young LLP to the effect that
Advantage is an entity that qualifies for "pooling-of-interests" accounting
treatment pursuant to GAAP and applicable regulations of the Commission, and
(ii) Arthur Andersen LLP to the effect that the Merger qualifies for "pooling-
of-interests" accounting treatment pursuant to GAAP and applicable regulations
of the Commission, if consummated in accordance with the terms of the Merger
Agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a discussion of the material U.S. federal income tax
consequences of the Merger to a holder of Advantage Common Stock. The
discussion set forth below does not address all aspects of federal taxation
and may not apply to a holder subject to special treatment under the Code,
such as a holder that is a bank, an insurance company, a dealer in securities
or foreign currencies, a tax-exempt organization or that acquired its
Advantage Common Stock pursuant to the exercise of an employee stock option or
otherwise as compensation. In addition, this summary only applies to a holder
of Advantage Common Stock holding its Advantage Common Stock as a capital
asset and who is a U.S. person (as defined in Section 7701(a)(30) of the
Code). This discussion is based upon the Code, administrative pronouncements,
judicial decisions and Treasury Regulations in effect as of the date hereof,
all of which are subject to change (possibly with retroactive effect). No
ruling will be requested from the Service regarding the tax consequences of
the Merger, and, accordingly, there can be no assurance that the Service will
agree with the discussion of the tax consequences of the Merger set forth
below. In addition, the discussion does not address the state, local or
foreign tax consequences of the Merger.
Consummation of the Merger is conditioned upon the receipt by M&I of an
opinion from Godfrey & Kahn, S.C., to the effect that the Merger will be
treated for federal income tax purposes as reorganization within the meaning
of Section 368(a) of the Code and that, accordingly, Advantage will recognize
no gain or loss as a result of the Merger, based on customary assumptions and
representations. Consummation of the Merger is also conditioned upon the
receipt by Advantage of an opinion from Foley & Lardner, based on customary
assumptions and representations, that (a) the Merger will constitute a
reorganization within the meaning of
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Section 368(a) of the Code, (b) no gain or loss will recognized by Advantage
as a result of the Merger, (c) no gain or loss will be recognized by holders
of Advantage Common Stock as a result of the Merger, except as discussed below
for cash received in lieu of fractional shares, and (d) the tax basis of the
shares of M&I Common Stock received by holders of Advantage Common Stock will
be the same as the tax basis of their converted Advantage Common Stock,
reduced by any amount allocable to any fractional share interest for which
cash is received.
Any holder of Advantage Common Stock entitled to receive cash in lieu of a
fractional share of M&I Common Stock in connection with the Merger will
recognize gain (or loss) equal to the difference between such cash amount and
the holder's basis in the fractional share. Any gain (or loss) recognized will
be a capital gain (or loss) if the shares of Advantage Common Stock are held
as a capital asset at the Effective Time.
RESALE OF M&I COMMON STOCK BY AFFILIATES
The offer and sale of shares of M&I Common Stock to be issued to holders of
Advantage Common Stock upon consummation of the Merger have been registered
under the Securities Act. Such shares may be traded freely and without
restriction by those holders not deemed to be "affiliates" (as such term is
defined under the Securities Act) of Advantage. "Affiliates" are generally
defined as persons who control, are controlled by, or are under common control
with Advantage. Accordingly, "affiliates" include directors and executive
officers of Advantage. Shares of M&I Common Stock received by those holders of
Advantage Common Stock deemed to be "affiliates" may not be sold without
registration, except as permitted by Rules 145 and 144 under the Securities
Act, or as otherwise permitted under the Securities Act. This Proxy Statement-
Prospectus does not cover resales of any M&I Common Stock received by
"affiliates" of Advantage. Advantage has agreed to use reasonable efforts to
cause each person identified as an "affiliate" of Advantage to enter into an
agreement which provides that such affiliate will not transfer any M&I Common
Stock received in the Merger except in compliance with the Securities Act.
NO APPRAISAL OR DISSENTERS' RIGHTS
Under Section 180.1302(4) of the WBCL, subject to certain exceptions
inapplicable to the Merger, holders of shares of a Wisconsin corporation
quoted on the Nasdaq National Market on the record date fixed to determine
shareholders entitled to notice of a shareholders meeting at which
shareholders are to vote on a merger are not entitled to appraisal or
dissenters' rights. Advantage Common Stock was quoted on the Nasdaq National
Market as of the Record Date. Accordingly, holders of Advantage Common Stock
have no appraisal or dissenters' rights with respect to the Merger.
CERTAIN REGULATORY CONSIDERATIONS
The Merger is subject to the approval of the Federal Reserve Board under
Section 4 of the BHCA. M&I filed the necessary application with the Federal
Reserve Board on December 1, 1997.
Section 4 of the BHCA requires that the Federal Reserve Board take into
consideration, among other factors, the financial and managerial resources and
future prospects of the respective institutions and the convenience and needs
of the communities to be served. The BHCA prohibits the Federal Reserve Board
from approving the Merger if it would result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States, or if its
effect in any section of the country may be substantially to lessen
competition or to tend to create a monopoly, or if it would in any other
manner be a restraint of trade, unless the Federal Reserve Board finds that
the anticompetitive effects of the Merger are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. The Federal Reserve Board has the
authority to deny an application if it concludes that the combined
organization would have an inadequate capital position. Furthermore, the
Federal Reserve Board must also assess the records of the Bank and the
depository subsidiaries of M&I under the Community Reinvestment Act of 1977,
as amended (the "CRA"). The CRA requires that the Federal Reserve Board
analyze, and take into account when evaluating an application, each depository
institution's record meeting the credit needs of its local communities,
including low- and moderate-income neighborhoods, consistent with safe and
sound operation.
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Pursuant to the BHCA, the Merger may not be consummated until the 30th day
or, in the event that the Federal Reserve Board receives no adverse
competitive comments from the United States Department of Justice ("DOJ"), the
15th day following the date of Federal Reserve Board approval, during which
time the DOJ may challenge the Merger on antitrust grounds. The commencement
of such an antitrust action would stay the effectiveness of the Federal
Reserve Board's approval unless a court specifically orders otherwise.
Acquisitions subject to Federal Reserve Board approval are generally exempt
from the requirements of the Hart-Scott-Rodino Anti-trust Improvements Act of
1976 (the "HSR Act"). Under the HSR Act, the exemption of non-banking
acquisitions under Section 4 of the BHCA is available if the acquiring company
provides copies of its Federal Reserve Board application to the Federal Trade
Commission ("FTC") and DOJ at least 30 days prior to consummation of the
proposed transaction. On December 1, 1997, M&I forwarded copies of its Federal
Reserve Board application to the FTC and DOJ.
DESCRIPTION OF M&I CAPITAL STOCK
IN GENERAL
The authorized capital stock of M&I currently consists of 160,000,000 shares
of M&I Common Stock, and 5,000,000 shares of Preferred Stock, $1.00 par value
(the "M&I Preferred Stock"), of which 2,000,000 shares have been designated by
the M&I Board as Series A Convertible Preferred Stock, $1.00 par value (the
"M&I Series A Preferred Stock"). As of October 27, 1997, 101,364,755 shares of
M&I Common Stock were outstanding and 685,314 shares of M&I Series A Preferred
Stock were outstanding. The M&I Common Stock is quoted on the Nasdaq National
Market. The M&I Series A Preferred Stock is not publicly traded.
M&I COMMON STOCK
The following description of M&I Common Stock, which is to be issued to
holders of Advantage Common Stock in connection with the Merger, does not
purport to be a complete description of the applicable provisions of the M&I
Articles and Bylaws, as amended, or of applicable statutory or other law, and
is qualified, in its entirety by reference thereto.
Voting. Each holder of M&I Common Stock is entitled at each shareholders'
meeting of M&I, as to each matter to be voted upon, to cast one vote, in
person or by proxy, for each share of M&I Common Stock registered in his or
her name on the stock transfer books of M&I, except to the extent that the
voting power of shares held by any person in excess of 20% of the voting power
in the election of directors may be limited (in voting on any matter) to one-
tenth of the full voting power of those shares under (S)180.1150 of the WBCL.
Such voting rights are not cumulative.
Dividends. The holders of M&I Common Stock are entitled to receive
dividends, when and if declared by the M&I Board out of any funds legally
available therefore after dividends have been paid to the holders of the M&I
Preferred Stock.
Liquidation. Upon liquidation of M&I, the holders of M&I Common Stock are
entitled to receive the net assets of M&I after satisfaction in full of the
prior rights of creditors of M&I and holders of the M&I Preferred Stock.
Miscellaneous. M&I Common Stock is not convertible into shares of any other
class of capital stock. Holders of M&I Common Stock are not and will not be
entitled to any preemptive rights. The issued and outstanding shares of M&I
Common Stock are fully paid and non-assessable (except as otherwise provided
under (S)180.0622(2)(b) of the WBCL).
M&I PREFERRED STOCK
The M&I Preferred Stock is issuable in one or more series and, with respect
to any series, the M&I Board, subject to certain limitations, is authorized
to: (a) fix the number of shares; (b) designate any series and the number of
shares which shall constitute the series; (c) determine voting rights; (d)
determine dividend rates, payment dates and whether dividends shall be
cumulative; (e) determine the amount per share payable on the
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shares of each series in the event of the liquidation or dissolution or
winding up of M&I; (f) determine any redemption provisions; (g) determine any
sinking fund provisions; (h) determine any conversion provisions; and (i)
determine any other terms, limitations and relative rights and preferences of
the series as may lawfully be determined by the M&I Board and as shall not be
inconsistent with the M&I Articles and the WBCL.
Shares of M&I Preferred Stock that are redeemed, repurchased or otherwise
acquired by M&I shall be returned and restored to the status of authorized,
unissued shares, but may be reissued only as a part of the M&I Preferred Stock
other than the series of which they were originally a part.
M&I SERIES A PREFERRED STOCK
Voting. The holders of M&I Series A Preferred Stock only have voting rights
as provided by the WBCL, which generally occurs only if a proposed amendment
to the M&I Articles or a merger or share exchange would affect the M&I Series
A Preferred Stock.
The WBCL provides that whenever an amendment shall affect the holders of
shares of one or more but not all the series of any preferred or special
class, at the time outstanding, the holders of the outstanding shares of the
series affected shall be deemed a separate class and entitled to vote as a
class on such amendment.
Dividends. The holders of M&I Series A Preferred Stock are entitled to
receive cash dividends when and as cash dividends are declared and become
payable with respect to the M&I Common Stock equal to the amount of the cash
dividend that such holder would have received had such holder converted M&I
Series A Preferred Stock into M&I Common Stock. Dividends on M&I Series A
Preferred Stock are noncumulative. Holders of M&I Series A Preferred Stock are
not entitled to any other earnings of M&I, except for the preference, if any,
as may be payable in case of liquidation, dissolution or winding up.
Liquidation. In the event of any liquidation, dissolution, or winding up of
M&I, the holders of M&I Series A Preferred Stock shall be entitled to receive
$100 per share plus an amount equal to all dividends, if any, which have
accrued thereon as the result of the declaration of dividends on the M&I
Common Stock but which remain unpaid to the date of distribution. If, upon any
liquidation, dissolution or winding up of M&I, the assets of M&I to be paid or
distributed to the holders of the shares of the M&I Preferred Stock shall be
insufficient to pay in full the M&I Series A Preferred Stock liquidation
preference and the liquidation preference of any other equally ranking series
of M&I Preferred Stock, then such assets shall be shared ratably by the
holders of M&I Series A Preferred Stock and such other series of M&I Preferred
Stock.
Conversions. The holders of M&I Series A Preferred Stock have the right to
convert such shares into shares of M&I Common Stock at any time. Each share of
M&I Series A Preferred Stock shall be valued at $100 for the purposes of such
conversion. The price at which shares of M&I Common Stock shall be delivered
upon conversion is at the same ratio that the M&I Common Stock was exchanged
for M&I Series A Preferred Stock.
CERTAIN PROVISIONS OF THE WISCONSIN BUSINESS CORPORATION LAW
The WBCL provides that shareholders of Wisconsin domestic corporations are
personally liable, up to the par value of their shares ($1.00 per share in the
case of the M&I Common Stock), for all debts owed by the corporation to
employees for services performed but not exceeding six months' service in any
one case. While the WBCL specifies that such liability is limited to the par
value of the shares, par value has been interpreted by a Wisconsin court to
mean the consideration paid to the corporation for its shares.
The WBCL prohibits a "business combination" (defined to include a merger,
share exchange or a disposition of 5% or more of the aggregate market value of
all assets or stock of the corporation) between a "resident domestic
corporation" and an "interested stockholder" (defined as the beneficial owner
of at least 10% of the voting power of the outstanding stock) for three years
following the stock acquisition date (i.e., the date the person became an
interested stockholder), unless the board of directors approves the business
combination or the purchase of stock by the interested stockholder before the
stock acquisition date. Business combinations after the three-year period
following the stock acquisition date are permitted only if (i) the Board
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of Directors approved the acquisition of the stock prior to the stock
acquisition date; (ii) the business combination is approved by a majority of
the outstanding voting stock not beneficially owned by the interested
stockholder; or (iii) the consideration to be received by shareholders meets
certain requirements of the statute with respect to form and amount. M&I is a
"resident domestic corporation" within the meaning of the WBCL.
Under the WBCL, the voting power of shares, including shares issuable upon
conversion of convertible securities or exercise of options or warrants, of a
"resident domestic corporation" held by any person or persons acting as a
group in excess of 20% of the voting power in the election of directors is
limited (in voting on any matter) to 10% of the full voting power of those
excess shares. This restriction does not apply to shares acquired (a) before
April 22, 1986, or under an agreement entered into before April 22, 1986, (b)
directly from the resident domestic corporation, (c) in a merger or share
exchange to which the resident domestic corporation is a party, (d) in certain
specified non-market transactions (i.e., gifts, distributions upon death and
pledges), or (e) in a transaction incident to which the corporation's
shareholders have approved restoration of the full voting power of the
otherwise restricted shares.
The WBCL provides that, in addition to the vote otherwise required by law or
the articles of incorporation of a "resident domestic corporation," the
approval by a majority vote of the holders of the corporation's shares
entitled to vote is required before such corporation can take certain actions
while a "takeover offer" (as defined in the WBCL) is being made or after a
takeover offer has been publicly announced and before it is concluded. Under
the WBCL, such shareholder approval is required for the corporation to (i)
acquire more than 5% of the corporation's outstanding voting shares at a price
above the market price from any individual or organization that owns more than
3% of the outstanding voting shares and has held such shares for less than two
years, unless a similar offer is made to acquire all voting shares or (ii)
sell or option assets of the corporation which amount to at least 10% of the
market value of the corporation, unless the corporation has at least three
independent directors and a majority of the independent directors vote not to
have this provision apply to the corporation.
The WBCL also provides for certain super-majority voting and fair price
provisions in connection with certain business combinations substantially
similar to provisions contained in M&I's Articles. See "COMPARISON OF
SHAREHOLDER RIGHTS--Certain Business Combinations."
Under the WBCL, in discharging his or her duties to the corporation and in
determining what he or she believes to be in the best interests of the
corporation, a director or officer may, in addition to considering the effects
of any action on the corporation's shareholders, consider the effects of the
action on the employees, suppliers, customers, the communities in which the
corporation operates and any other factors that the director or officer
considers pertinent.
COMPARISON OF SHAREHOLDER RIGHTS
The following is a summary of the material differences between the rights of
holders of M&I Common Stock and the rights of holders of Advantage Common
Stock prior to the Merger. As both M&I and Advantage are organized under the
laws of Wisconsin, rights of shareholders are substantially similar.
Differences in the rights provided to shareholders of M&I and Advantage arise
from the provisions of their respective Articles of Incorporation and Bylaws.
This summary does not purport to be a complete discussion of and is qualified
in its entirety by reference to the governing law and the Articles of
Incorporation and Bylaws of the respective companies.
AUTHORIZED CAPITAL STOCK
M&I. The M&I Articles authorize the issuance of up to 165,000,000 shares of
capital stock, consisting of 160,000,000 shares of M&I Common Stock, of which
101,364,755 shares were issued and outstanding as of October 27, 1997, and up
to 5,000,000 shares of M&I Preferred Stock. M&I Preferred Stock is issuable in
series, each having such rights and preferences as the M&I Board may, by
adoption of an amendment of the M&I Articles, fix and determine. As of October
27, 1997, 685,314 shares of M&I Series A Preferred were issued and
outstanding. The availability of authorized shares for issuance could render
more difficult or discourage a merger, tender offer, proxy contest or other
attempt to obtain control of M&I. See "DESCRIPTION OF M&I CAPITAL STOCK."
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Advantage. The Advantage Articles authorize the issuance of up to 15,000,000
shares of capital stock, consisting of 10,000,000 shares of Advantage Common
Stock, of which 3,235,830 shares were issued and outstanding as of November 3,
1997, and up to 5,000,000 shares of Advantage Preferred Stock, par value $.01
per share, no shares of which were outstanding as of November 3, 1997.
REQUIRED VOTE
M&I. Pursuant to (S)180.1706(1) of the WBCL, except as otherwise provided in
a corporation's articles of incorporation or by-laws, any amendment to the
articles of incorporation, merger, or certain other events involving a
corporation organized before January 1, 1973, which did not expressly elect
before January 1, 1991 to be governed by a majority or greater voting
requirement, must be approved by the affirmative vote of two-thirds of the
shares entitled to vote at a meeting called for that purpose. The M&I Articles
were amended prior to January 1, 1991 to reduce the vote required for a
merger, consolidation or certain other extraordinary events to a majority vote
of the M&I capital stock entitled to vote, provided that three-quarters of the
M&I Board shall have approved the transaction. The M&I Articles were not
amended prior to January 1, 1991 to reduce the vote required to amend the M&I
Articles. Consequently, any amendment to the M&I Articles requires the
affirmative vote of two-thirds of the outstanding shares of M&I capital stock
entitled to vote at a meeting called for that purpose. The requirement that
two-thirds of the outstanding shares of M&I capital stock entitled to vote at
a meeting to approve any amendment to the M&I Articles could make it more
difficult for any party seeking to take control of M&I through a merger,
tender offer, proxy contest, or otherwise to amend the M&I Articles in
furtherance of any such action, such as the repeal of provisions classifying
the M&I Board or permitting the removal of directors other than for "cause."
Advantage. Advantage was organized after January 1, 1973 and, thus, is not
subject to the voting requirements stated in (S)180.1706 of the WBCL. However,
the Advantage Articles require the affirmative vote of 80% of the shares of
Advantage capital stock entitled to vote to amend or repeal Articles 4.C, 5,
6, 7, 9, 10, 11 or 12 of the Advantage Articles, which contain provisions,
among others, classifying the Advantage Board and allowing the removal of
directors only for "cause."
SIZE OF BOARD OF DIRECTORS
M&I. The M&I Articles and Bylaws provide that the M&I Board will consist of
not less than three directors (exclusive of directors, if any, elected by the
holders of one or more classes or series of M&I Preferred Stock pursuant to
the M&I Articles applicable thereto), the number of which may be established
within such limits by resolution adopted by the affirmative vote of a majority
of the entire Board of Directors then in office; provided, that, the Board of
Directors may not decrease the number if the term of any incumbent director
would thereby be effected.
Advantage. The Advantage Articles and Bylaws provide that the Advantage
Board will consist of one or more directors, the number of which may be
established from time to time by resolution adopted by the affirmative vote of
a majority of the entire Advantage Board; provided that the Advantage Board
may not decrease the number if the term of any incumbent director would
thereby be effected.
REMOVAL OF DIRECTORS FOR "CAUSE"
M&I. Exclusive of directors, if any, elected by holders of one or more
classes of M&I Preferred Stock, holders of M&I Common Stock may remove a
director only for "cause" and then only by a vote of two-thirds of the
outstanding shares of capital stock of M&I entitled to vote at a meeting of
shareholders called for that purpose. "Cause" is defined solely as malfeasance
arising from the performance of a director's duties which has a materially
adverse effect on the business of M&I. This provision could deter or
discourage a party seeking to obtain control of M&I by removing one or more
directors from the M&I Board.
Advantage. A director may be removed from his position as director only for
"cause" and by the affirmative vote of not less than 80% of the issued and
outstanding shares of capital stock of Advantage entitled to vote generally in
an election of directors, voting together as a single class, at a duly
constituted meeting of shareholders called for that purpose. "Cause" is not
defined in either the Advantage Articles or Bylaws.
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ADVANCE NOTICE OF PROPOSALS TO BE BROUGHT AT THE ANNUAL MEETING
M&I. Pursuant to Section 2.5 of the M&I Bylaws, any shareholder who intends
to bring business before an annual meeting of shareholders must provide M&I
with notice of such intention, the nature of such proposal, the reasons for
conducting such business at the annual meeting and certain information
regarding the shareholder bringing the proposal not less than 90 days prior to
the anniversary date of the annual meeting of shareholders in the immediately
preceding year. This provision could render more difficult or discourage an
attempt to obtain control of M&I through a proposal brought before an annual
meeting of shareholders. M&I would have to be given advance notice of any such
proposal in accordance with the M&I Bylaws which notice to M&I may discourage
the making of such proposal.
Advantage. Pursuant to Section 6(b) of the Advantage Bylaws, any shareholder
who intends to bring any proposals for any business to be considered at any
annual meeting of shareholders of Advantage must provide the Secretary of
Advantage with notice of such intention, the nature of such proposal, the
reasons for conducting such business at the meeting and certain information
regarding the shareholder making the proposal not less than 60 days prior to
the date of the annual meeting; provided, however, that if less than 40 days
notice of the date of the meeting is made to shareholders, notice by the
shareholder must be no later than the tenth day following the day on which
notice of the meeting was mailed or otherwise publicly disclosed to
shareholders.
ADVANCE NOTICE OF NOMINATIONS OF DIRECTORS
M&I. Pursuant to Article VI of the M&I Articles and Section 2.6 of the M&I
Bylaws, any shareholder who intends to nominate directors for election at a
meeting called for that purpose must provide M&I with notice of such
intention, a written consent of the nominee to serve as a director, certain
information regarding the proposed nominee and certain information regarding
the nominating shareholder not less than 90 days prior to the anniversary date
of the annual meeting of shareholders in the immediately preceding year. This
provision could deter or discourage a party seeking to obtain control of M&I
by electing directors to the M&I Board. Any such party would be required to
comply with the M&I Articles and M&I Bylaws in nominating directors to the M&I
Board and such compliance could deter or discourage such party from nominating
directors to the M&I Board.
Advantage. Pursuant to Section 6(c) of the Advantage Bylaws, any shareholder
who intends to nominate directors for election at a meeting called for that
purpose must provide the Secretary of Advantage with written notice of such
intention, certain information regarding the proposed nominee and certain
information regarding the nominating shareholder not less than 30 days prior
to the date of such meeting; provided that if less than 40 days notice of the
date of the meeting is made to shareholders, notice by the shareholder must be
no later than the tenth day following the day on which notice of the meeting
was mailed to or otherwise publicly disclosed to shareholders.
CERTAIN BUSINESS COMBINATIONS
M&I. Article XI of M&I's Articles provides that an affirmative vote of 80%
of M&I's outstanding capital stock entitled to vote in the election of
directors voting together as a single class, or two-thirds of the shares
entitled to so vote excluding shares of M&I capital stock held by an
"interested stockholder" (as hereinafter defined), is required to approve a
merger or other business combination involving M&I, or any subsidiary, and any
interested stockholder or an affiliate or associate of an interested
stockholder (excluding M&I or any subsidiary thereof or employee benefit plan
for the benefit of employees of M&I or its subsidiaries).
An interested stockholder refers to (a) the beneficial owner of more than
10% of M&I's outstanding capital stock entitled to vote in the election of
directors, (b) an affiliate or associate of M&I that at any time within the
two-year period preceding the combination was a beneficial owner of 10% or
more of the outstanding M&I capital stock entitled to vote in the election of
directors or (c) an assignee of or successor to any M&I capital stock entitled
to vote in the election of directors previously beneficially owned within the
two year period preceding the combination by another interested stockholder,
if such assignment or succession occurred involved a transaction not involving
a public offering within the meaning of the Securities Act.
40
<PAGE>
These provisions of the M&I Articles do not apply if (a) the consideration
offered in connection with such transaction ratifies certain "fair price"
requirements or (b) a majority of the "disinterested directors" (defined as a
director who is not affiliated with the interested stockholder and who either
was (i) a member of the M&I Board prior to the date that the interested
stockholder became such or (ii) elected or recommended for election by a
majority of the disinterested directors in office at the time such director
was nominated for election) approves the transaction. The supermajority voting
provisions could deter or discourage an "interested stockholder" from
proposing or pursuing a business combination with M&I.
Advantage. Article 11 of Advantage's Articles provides that an affirmative
vote of 80% of Advantage's outstanding capital stock entitled to vote in the
election of directors, voting together as a single class, is required to
approve a merger or other business combination involving Advantage, or any
subsidiary, and any "interested stockholder" (which is defined substantially
the same as "interested stockholder" is defined under the M&I Articles) or an
affiliate or associate of an interested stockholder. The supermajority voting
provisions contained in Article 11 of the Advantage Articles are inapplicable
in comparable circumstances as those when the supermajority provisions
contained in Article XI of the M&I Articles are inapplicable.
Article 4.C of the Advantage Articles provides that any record owner who
beneficially owns greater than 10% of the outstanding shares of Advantage
Common Stock (the "Limit") as of any record date for the determination of
shareholders entitled to vote on any matter shall not be entitled to vote with
respect to those shares which exceed the Limit. The number of votes which may
be cast by any record owner who beneficially owns shares in excess of the
Limit is determined in accordance with a fractional formula. Article 4.C of
the Advantage Articles would make it more difficult for a party seeking to
take control of Advantage to exercise voting control over Advantage.
(S)180.1150 of the WBCL contains control share voting restrictions with
respect to acquisitions of more than twenty percent (20%) of the voting power
in the election of directors. As a Wisconsin corporation, M&I is also subject
to (S)180.1150 of the WBCL.
CERTAIN INFORMATION CONCERNING M&I AND ADVANTAGE
Information regarding the names, ages, positions and business backgrounds of
the executive officers and directors of M&I and Advantage, respectively, as
well as additional information, including (i) executive compensation, (ii)
ownership of Advantage Common Stock by certain beneficial owners and
management, and (iii) certain relationships and related transactions, is
incorporated herein by reference to (i) M&I's Annual Report on Form 10-K for
the year ended December 31, 1996, which incorporates portions of its Proxy
Statement for the 1997 Annual Meeting of Shareholders and (ii) Advantage's
Annual Report on Form 10-K for the year ended September 30, 1997.
EXPERTS
The consolidated financial statements of M&I and its subsidiaries
incorporated by reference in this Proxy Statement-Prospectus have been audited
by Arthur Andersen LLP, independent public accountants, and are included
herein in reliance upon the authority of said firm as experts in accounting
and auditing.
The consolidated financial statements of Advantage and its subsidiaries
incorporated by reference in Advantage's Annual Report on Form 10-K for the
year ended September 30, 1997, and incorporated by reference in this Proxy
Statement-Prospectus, have been audited by Ernst & Young LLP, independent
public accountants, as set forth in their report on such Form 10-K
incorporated by reference in such Form 10-K and incorporated herein by
reference, in reliance upon such report given upon the authority of Ernst &
Young LLP, as experts in accounting and auditing.
41
<PAGE>
The consolidated statements of financial condition of Security and its
subsidiaries as of June 30, 1997 and 1996, and the related consolidated
statements of income, stockholder's equity and cash flows for each of the
years in the three-year period ended June 30, 1997, in the Current Report on
Form 8-K of M&I dated October 1, 1997, and incorporated by reference in this
Proxy Statement-Prospectus, have been audited by KPMG Peat Marwick LLP,
independent public accountants, as set forth in their report on Security's
Annual Report on Form 10-K for the year ended June 30, 1997 and incorporated
herein by reference, in reliance upon such report given upon the authority of
KPMG Peat Marwick LLP as experts in accounting and auditing.
LEGAL MATTERS
The validity of the M&I Common Stock to be issued in connection with the
Merger will be passed upon for M&I by Godfrey & Kahn, S.C., Milwaukee,
Wisconsin.
SHAREHOLDER PROPOSALS
The 1998 Annual Meeting of M&I's Shareholders is scheduled for April 28,
1998. In accordance with M&I's Bylaws, nominations, other than by or at the
direction of the M&I Board, of candidates for election as directors at the
1998 Annual Meeting of Shareholders and any other shareholder proposed
business to be brought before the 1998 Annual Meeting of Shareholders must be
submitted to M&I not later than January 22, 1998. Shareholder proposed
nominations and other shareholder proposed business must be made in accordance
with M&I's Bylaws which provide, among other things, that shareholder proposed
nominations must be accompanied by certain information concerning the nominee
and the shareholder submitting the nomination, and that shareholder proposed
business must be accompanied by certain information concerning the proposal
and the shareholder submitting the proposal.
Assuming consummation of the Merger, the Advantage Board does not expect to
hold any future annual meeting of Advantage's shareholders.
42
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ADVANTAGE BANCORP, INC.
AND
MARSHALL & ILSLEY CORPORATION
NOVEMBER 3, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
ARTICLE I--THE MERGER.................................................... A-1
SECTION 1.1 The Merger.............................................. A-1
SECTION 1.2 Effective Time ......................................... A-1
SECTION 1.3 Effect of the Merger.................................... A-1
SECTION 1.4 Articles of Incorporation; By-Laws...................... A-2
SECTION 1.5 Directors and Officers.................................. A-2
SECTION 1.6 Conversion of Securities................................ A-2
SECTION 1.7 Adjustments for Dilution and Other Matters.............. A-3
SECTION 1.8 Exchange of Certificates................................ A-3
SECTION 1.9 Stock Transfer Books.................................... A-4
SECTION 1.10 Company Common Stock.................................... A-5
ARTICLE II--REPRESENTATIONS AND WARRANTIES OF THE SELLER................. A-5
SECTION 2.1 Organization and Qualification; Subsidiaries............ A-5
SECTION 2.2 Articles of Incorporation and By-Laws................... A-6
SECTION 2.3 Capitalization.......................................... A-6
SECTION 2.4 Authority............................................... A-6
SECTION 2.5 No Conflict; Required Filings and Consents.............. A-7
SECTION 2.6 Compliance; Permits..................................... A-7
SECTION 2.7 Securities and Banking Reports; Financial Statements.... A-7
SECTION 2.8 Absence of Certain Changes or Events.................... A-8
SECTION 2.9 Absence of Litigation................................... A-9
SECTION 2.10 Employee Benefit Plans.................................. A-9
SECTION 2.11 Registration Statement; Proxy Statement/Prospectus...... A-11
SECTION 2.12 Title to Property....................................... A-11
SECTION 2.13 Environmental Matters................................... A-11
SECTION 2.14 Absence of Agreements................................... A-12
SECTION 2.15 Taxes................................................... A-12
SECTION 2.16 Insurance............................................... A-13
SECTION 2.17 Brokers................................................. A-13
SECTION 2.18 Tax Matters and Pooling................................. A-13
SECTION 2.19 Material Adverse Effect................................. A-13
SECTION 2.20 Material Contracts...................................... A-13
SECTION 2.21 Opinion of Financial Advisor............................ A-14
SECTION 2.22 Vote Required........................................... A-14
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-14
SECTION 3.1 Organization and Qualification; Subsidiaries............ A-14
SECTION 3.2 Articles of Incorporation and By-Laws................... A-14
SECTION 3.3 Capitalization.......................................... A-15
SECTION 3.4 Authority............................................... A-15
SECTION 3.5 No Conflict; Required Filings and Consents.............. A-15
SECTION 3.6 Compliance; Permits..................................... A-16
SECTION 3.7 Securities and Banking Reports; Financial Statements.... A-16
SECTION 3.8 Absence of Certain Changes or Events.................... A-17
SECTION 3.9 Absence of Litigation................................... A-17
SECTION 3.10 Employee Benefit Plans.................................. A-17
SECTION 3.11 Registration Statement; Proxy Statement/Prospectus...... A-18
SECTION 3.12 Title to Property....................................... A-18
</TABLE>
i
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<TABLE>
<CAPTION>
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<C> <S> <C>
SECTION 3.13 Absence of Agreements.................................. A-19
SECTION 3.14 Taxes.................................................. A-19
SECTION 3.15 Brokers................................................ A-19
SECTION 3.16 Tax Matters and Pooling................................ A-19
SECTION 3.17 Material Adverse Effect................................ A-20
ARTICLE IV--COVENANTS OF THE SELLER..................................... A-20
SECTION 4.1 Affirmative Covenants.................................. A-20
SECTION 4.2 Negative Covenants..................................... A-20
SECTION 4.3 Letter of the Seller's Accountants..................... A-22
SECTION 4.4 Access and Information................................. A-23
SECTION 4.5 Update and Disclosure; Breaches........................ A-23
SECTION 4.6 Affiliates............................................. A-24
SECTION 4.7 Tax Treatment and Pooling.............................. A-24
SECTION 4.8 Expenses............................................... A-24
SECTION 4.9 Delivery of Shareholder List........................... A-24
ARTICLE V--COVENANTS OF THE COMPANY..................................... A-24
SECTION 5.1 Affirmative Covenants.................................. A-24
SECTION 5.2 Negative Covenants..................................... A-25
SECTION 5.3 Access and Information................................. A-25
SECTION 5.4 Update and Disclosure; Breaches........................ A-25
SECTION 5.5 Stock Exchange Listing................................. A-26
SECTION 5.6 Tax Treatment and Pooling.............................. A-26
SECTION 5.7 Stock Options.......................................... A-26
ARTICLE VI--ADDITIONAL AGREEMENTS....................................... A-26
SECTION 6.1 Proxy Statement/Prospectus; Registration Statement..... A-26
SECTION 6.2 Meeting of Seller's Shareholders....................... A-26
SECTION 6.3 Appropriate Action; Consents; Filings.................. A-27
Employee Stock Options and Other Employee Benefit
SECTION 6.4 Matters................................................ A-27
Directors' and Officers' Indemnification and
SECTION 6.5 Insurance.............................................. A-27
SECTION 6.6 Notification of Certain Matters........................ A-28
SECTION 6.7 Public Announcements................................... A-28
SECTION 6.8 Customer Retention..................................... A-29
SECTION 6.9 Incentive Bonus Pool................................... A-29
SECTION 6.10 Recission of Repurchase Programs....................... A-29
ARTICLE VII--CONDITIONS OF MERGER....................................... A-29
Conditions to Obligations of Each Party to Effect the
SECTION 7.1 Merger................................................. A-29
SECTION 7.2 Additional Conditions to Obligations of the Company.... A-30
SECTION 7.3 Additional Conditions to Obligations of the Seller..... A-31
ARTICLE VIII--TERMINATION, AMENDMENT AND WAIVER......................... A-32
SECTION 8.1 Termination............................................ A-32
SECTION 8.2 Effect of Termination.................................. A-33
SECTION 8.3 Amendment.............................................. A-33
SECTION 8.4 Waiver................................................. A-33
</TABLE>
ii
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<TABLE>
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<C> <S> <C>
ARTICLE IX--GENERAL PROVISIONS.......................................... A-33
Non-Survival of Representations, Warranties and
SECTION 9.1 Agreements............................................. A-33
SECTION 9.2 Enforcement of Agreement............................... A-33
SECTION 9.3 Notices................................................ A-34
SECTION 9.4 Certain Definitions.................................... A-34
SECTION 9.5 Headings............................................... A-35
SECTION 9.6 Severability........................................... A-35
SECTION 9.7 Entire Agreement....................................... A-35
SECTION 9.8 Assignment............................................. A-35
SECTION 9.9 Parties in Interest.................................... A-35
SECTION 9.10 Governing Law.......................................... A-35
SECTION 9.11 Counterparts........................................... A-35
SECTION 9.12 Time is of the Essence................................. A-35
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 3, 1997 (the "Agreement")
between ADVANTAGE BANCORP, INC., a Wisconsin corporation (the "Seller"), and
MARSHALL & ILSLEY CORPORATION, a Wisconsin corporation (the "Company").
WHEREAS, the Boards of Directors of the Company and the Seller have each
determined that it is fair to and in the best interests of their respective
shareholders for the Seller to merge with and into the Company (the "Merger")
upon the terms and subject to the conditions set forth herein and in
accordance with the Wisconsin Business Corporation Law (the "WBCL");
WHEREAS, the respective Boards of Directors of the Company and the Seller
have each approved the Merger of the Seller with and into the Company, upon
the terms and subject to the conditions set forth herein, and adopted in this
Agreement;
WHEREAS, concurrently with this Agreement and as a condition to the
willingness of the Company to enter into this Agreement, the Seller and the
Company have entered into a stock option agreement granting the Company, under
the conditions set forth therein, the option to purchase newly-issued shares
of common stock of the Seller (the "Stock Option Agreement");
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for financial accounting purposes it is intended that the Merger
shall be accounted for as a pooling of interests; and
WHEREAS, the Company and the Seller desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, and subject to
the terms and conditions set forth herein, the parties hereto hereby agree as
follows:
ARTICLE I--THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the WBCL, at the Effective
Time (as defined in Section 1.2) the Seller shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of the
Seller shall cease and the Company shall continue as the surviving corporation
of the Merger (the "Surviving Corporation").
Section 1.2 Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing articles of merger (the "Articles of Merger") with the Department of
Financial Institutions of the State of Wisconsin (the "DFI"), in such form as
required by, and executed in accordance with the relevant provisions of, the
WBCL (the date and time of such filing is referred to herein as the "Effective
Time").
Section 1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the WBCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of the Company and the
Seller shall vest in the surviving Corporation, and all debts, liabilities and
duties of the Company and the Seller shall become the debts, liabilities and
duties of the Surviving Corporation.
A-1
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Section 1.4 Articles of Incorporation: By-Laws. At the Effective Time, the
Articles of Incorporation, as amended, of the Company (the "Company Articles")
and the By-Laws, as amended, of the Company ("Company By-Laws"), as in effect
immediately prior to the Effective Time, shall be the Articles of
Incorporation and the By-Laws of the Surviving Corporation.
Section 1.5 Directors and Officers. At the Effective Time, the directors of
the Company immediately prior to the Effective Time shall be the directors of
the Surviving Corporation, each to hold office in accordance with the Articles
of Incorporation and By-Laws of the Surviving Corporation. At the Effective
Time, the officers of the Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed.
Section 1.6 Conversion of Securities. Subject to Section 1.8(e) regarding
fractional shares, at the Effective Time, by virtue of the Merger and without
any action on the part of the Company, the Seller or the holder of the
following securities:
(a) Each share of the common stock, par value $.01 per share of the Seller
("Seller Common Stock"), issued and outstanding immediately prior to
the Effective Time (all such shares of Seller Common Stock issued and
outstanding immediately prior to the Effective Time being referred to
herein as the "Shares"), other than (i) Shares held by the Company for
its own account or any Company Subsidiary (as defined in
Section 3.1(a), below) for its own account and (ii) Shares held by the
Advantage Bank, F.S.B. Bank Incentive Plan and Trust I and the
Advantage Bank, F.S.B. Bank Incentive Plan and Trust II and unallocated
to participants thereunder, shall cease to be outstanding and, subject
to Section 1.6(e) below, shall be converted into and become the right
to receive 1.2 shares (the exchange ratio, as adjusted pursuant to
Section 1.6(e), is hereinafter referred to as the "Exchange Ratio") of
common stock, $1.00 per share par value, of the Company ("Company
Common Stock"). All such Shares shall no longer be outstanding and
shall immediately be canceled and retired and shall cease to exist, and
each certificate previously representing any such Shares shall
thereafter represent the right to receive a certificate representing
shares of Company Common Stock into which such Seller Common Stock
shall have been converted. Certificates representing shares of Seller
Common Stock shall be exchanged for certificates representing whole
shares of Company Common Stock issued in consideration therefor upon
the surrender of such certificates in accordance with the provisions of
Section 1.8 hereof, without interest.
(b) Each share of Seller Common Stock held as treasury stock shall be
canceled and extinguished without conversion thereof into Company
Common Stock or payment therefor.
(c) Each share of Seller Common Stock held by the Company for its own
account or any Company Subsidiary for its own account shall be canceled
and extinguished without conversion thereof into Company Common Stock
or payment therefor.
(d) Each share of Seller Common Stock held by the Advantage Bank, F.S.B.
Bank Incentive Plan and Trust I and the Advantage Bank, F.S.B. Bank
Incentive Plan and Trust II and unallocated to participants thereunder
shall be canceled and extinguished without conversion thereof into
Company Common Stock or payment therefor.
(e) If the average closing sale price of Company Common Stock as reported
on the NASDAQ-NMS for the ten consecutive trading days immediately
preceding the fifth business day prior to the Effective Time (the
"Average Price") is
(i) below $46.67 per share, then the Exchange Ratio shall be adjusted
to a number such that the product of the Exchange Ratio (taken to
four decimal places) and the Average Price shall equal $56.00
(rounded to the nearest whole cent) (provided, however, that if
prior to the Effective Time the Company has, by written notice to
the Seller, informed the Seller that such adjustment (if
applicable) shall not occur, then such adjustment shall not occur
and the Seller shall have the right to terminate this Agreement
immediately with the effect as set forth in Section 8.2 hereof); or
A-2
<PAGE>
(ii) above $61.67 per share, then the Company shall have the option,
but not the obligation, to adjust the Exchange Ratio to a number
such that the product of the Exchange Ratio (taken to four decimal
places) and the Average price shall equal $74.00 (rounded to the
nearest whole cent); if prior to the Effective Time the Company
has, by written notice to the Seller, elected to adjust the
Exchange Ratio as provided in this subsection (ii) (if
applicable), then such adjustment shall occur and the Seller shall
have the right to terminate this Agreement immediately with the
effect as set forth in Section 8.2 hereof.
Section 1.7 Adjustments for Dilution and Other Matters. If prior to the
Effective Time, (i) the Seller shall declare a stock dividend or distribution
upon or subdivide, split up, reclassify or combine the Seller Common Stock, or
declare a dividend or make a distribution on Seller Common Stock in any
security convertible into Seller Common Stock, or (ii) the Company shall
declare a stock dividend or distribution upon or subdivide, split up,
reclassify or combine the Company Common Stock or declare a dividend or make a
distribution on Company Common Stock in any security convertible into Company
Common Stock, appropriate adjustment or adjustments will be made to the
Exchange Ratio and the methodology for calculating the Exchange Ratio as set
forth in Section 1.6 hereof.
Section 1.8 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, the Company shall deposit, or
shall cause to be deposited with an exchange agent chosen by the Company and
which is reasonably acceptable to the Seller (the "Exchange Agent"), for the
benefit of the holders of Shares for exchange in accordance with this
Article I, through the Exchange Agent, certificates representing the shares of
Company Common Stock and cash in lieu of fractional shares (such certificates
for shares of Company Common Stock, together with the amount of cash payable
in lieu of fractional shares and any dividends or distributions with respect
to such Company Common Stock are referred to herein as the "Exchange Fund")
payable and issuable pursuant to Section 1.6 in exchange for outstanding
Shares; provided, however, that the Company need not deposit the cash for
fractional shares into the Exchange Fund until such time as such funds are to
be distributed by the Exchange Agent.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares which Shares were converted into the right to
receive shares of Company Common Stock pursuant to Section 1.6 (a
"Certificate" or "Certificates"), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as the
Company may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Company Common Stock. Upon surrender of a Certificate for cancellation to
the Exchange Agent together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares of Company
Common Stock which such holder has the right to receive in respect of the
Certificate surrendered pursuant to the provisions of this Article I (after
taking into account all Shares then held by such holder), and the Certificate
so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of the
Seller, a certificate representing the proper number of shares of Company
Common Stock may be issued to a transferee if the Certificate representing
such Shares is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate to be lost, stolen or
destroyed and the posting by such person of a bond in such amount as the
Company may direct as indemnity against any claim that may be made against it
or the Exchange Agent with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate a
certificate representing the proper number of shares of Company Common Stock.
Until surrendered as contemplated by this Section 1.8, each Certificate shall
be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Company
Common Stock, dividends, cash
A-3
<PAGE>
in lieu of any fractional shares of Company Common Stock as contemplated by
Section 1.8(e) and other distributions as contemplated by Section 1.8(c).
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to
Company Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Company Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 1.8(e),
until the holder of such Certificate shall surrender such Certificate. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole
shares of Company Common Stock issued in exchange therefor, without interest,
(i) promptly, the amount of any cash payable with respect to a fractional
share of Company Common Stock to which such holder is entitled pursuant to
Section 1.8(e) and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Company Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distribution, with a record date after
the Effective Time but prior to surrender and a payment date occurring after
surrender, payable with respect to such whole shares of Company Common Stock.
(d) No Further Rights in the Shares. All shares of Company Common Stock
issued and cash paid upon conversion of the Shares in accordance with the
terms hereof (including any cash paid pursuant to Section 1.8(e)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such Shares.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of Company Common Stock shall be issued upon the surrender for exchange
of Certificates, and such fractional share interest will not entitle the owner
thereof to vote or to any rights of a shareholder of the Company. Each holder
of a fractional share interest shall be paid an amount in cash equal to the
product obtained by multiplying such fractional share interest to which such
holder (after taking into account all fractional share interests then held by
such holder) would otherwise be entitled by the Average Price.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former shareholders of the Seller for six months
after the Effective Time shall be delivered to the Company, upon demand, and
any former shareholders of the Seller who have not theretofore complied with
this Article I shall thereafter look only to the Company to claim their shares
of Company Common Stock, any cash in lieu of fractional shares of Company
Common Stock and any dividends or distributions with respect to Company Common
Stock, in each case without interest thereon, and subject to Section 1.8(g).
(g) No Liability. Neither the Company nor the Seller shall be liable to any
former holder of Shares for any such Shares (or dividends or distributions
with respect thereto) or cash or other payment delivered to a public official
pursuant to any abandoned property, escheat or similar laws.
(h) Withholding Rights. The Company shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
former holder of Shares such amounts as the Company is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are
so withheld by the Company, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the former holder of the
Shares in respect of which such deduction and withholding was made by the
Company.
Section 1.9 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Seller shall be closed and there shall be no further registration
of transfers of shares of the Seller Common Stock thereafter on the records of
the Seller. From and after the Effective Time, the holders of Certificates
shall cease to have any rights with respect to such Shares except as otherwise
provided herein or by law. On or after the Effective Time, any Certificates
presented to the Exchange Agent or the Company for any reason shall be
converted into shares of Company Common Stock and cash in lieu of fractional
shares in accordance with this Article I.
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Section 1.10 Company Common Stock. The shares of Company Common Stock issued
and outstanding immediately prior to the Effective Time shall be unaffected by
the Merger and at the Effective Time, such shares shall remain issued and
outstanding.
ARTICLE II--REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as set forth in the Disclosure Schedule delivered by the Seller to
the Company prior to the execution of this Agreement (the "Seller Disclosure
Schedule"), which will identify exceptions by specific Section references, the
Seller hereby represents and warrants to the Company that:
Section 2.1 Organization and Qualification: Subsidiaries
(a) The Seller is a company duly organized, validly existing and in good
standing under the laws of the State of Wisconsin, and is registered as a
savings and loan holding company under the Home Owners' Loan Act ("HOLA").
Each subsidiary of the Seller ("Seller Subsidiary" or, collectively, "Seller
Subsidiaries") is a federally-chartered savings bank or a corporation duly
organized, validly existing and in good standing under the laws of the state
of its incorporation. Each of the Seller and the Seller Subsidiaries has the
requisite corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("Seller Approvals") necessary to own,
lease and operate its properties and to carry on its business as it is now
being conducted, including, without limitation, appropriate authorizations
from the Federal Deposit Insurance Corporation (the "FDIC") and the Office of
Thrift Supervision ("OTS"), and neither the Seller nor any Seller Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Seller Approvals, except in each case where the failure to
be so organized, existing and in good standing or to have such power,
authority, Seller Approvals and revocations or modifications would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
below) on the Seller and the Seller Subsidiaries, taken as a whole.
(b) The Seller and each Seller Subsidiary is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated
by it or the nature of its activities makes such qualification or licensing
necessary, except where such failures to be so duly qualified or licensed and
in good standing would not, either individually or in the aggregate, have a
Material Adverse Effect on the Seller and the Seller Subsidiaries, taken as a
whole.
(c) A true and complete list of all of the Seller Subsidiaries, together
with (i) the Seller's percentage ownership of each Seller Subsidiary and (ii)
laws under which the Seller Subsidiary is incorporated, is set forth on
Section 2.1(c) of the Seller Disclosure Schedule. Except as set forth on
Section 2.1(c) of the Seller Disclosure Schedule, the Seller and/or one or
more of the Seller Subsidiaries owns beneficially and of record all of the
outstanding shares of capital stock of each of the Seller Subsidiaries. Except
for the subsidiaries set forth on Section 2.1(c) of the Seller Disclosure
Schedule, the Seller does not directly or indirectly own any equity or similar
interests in, or any interests convertible into or exchangeable or exercisable
for any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity other than in the ordinary
course of business, and in no event in excess of 5% of the outstanding equity
securities of such entity.
(d) As used in this Agreement, the term "Material Adverse Effect" means,
with respect to the Company or the Seller, as the case may be, any effect that
(i) is material and adverse to the business, assets, liabilities, results of
operations or financial condition of the Company and the Company Subsidiaries
taken as whole or the Seller and the Seller Subsidiaries taken as a whole,
respectively, or (ii) materially impairs the ability of the Company or the
Seller to consummate the transactions contemplated hereby; provided, however,
that Material Adverse Effect shall not be deemed to include the impact of (a)
actions contemplated by this Agreement, (b) changes in laws and regulations or
interpretations thereof that are generally applicable to the banking or
savings industries, (c) changes in generally accepted accounting principles
that are generally applicable to the banking or savings industries, (d)
reasonable expenses incurred in connection with the transactions contemplated
hereby, and
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(e) changes attributable to or resulting from changes in general economic
conditions affecting banks, savings institutions or their holding companies
generally, including changes in the prevailing level of interest rates.
(e) The minute books of the Seller and each of the Seller Subsidiaries
contain true, complete and accurate records in all material respects of all
meetings and other corporate actions held or taken since September 30, 1994 of
their respective shareholders and Boards of Directors (including committees of
their respective Boards of Directors).
Section 2.2 Articles of Incorporation and By-Laws. The Seller has heretofore
furnished to the Company a complete and correct copy of the Articles of
Incorporation and the By-Laws, as amended or restated, of the Seller ("Seller
Articles" or "Seller By-Laws") and each Seller Subsidiary. Such Articles of
Incorporation and By-Laws of the Seller and each Seller Subsidiary are in full
force and effect. Neither the Seller nor any Seller Subsidiary is in violation
of any of the provisions of its Articles of incorporation or By-Laws.
Section 2.3 Capitalization. The authorized capital stock of the Seller
consists of 10,000,000 shares of Seller Common Stock and 5,000,000 shares of
preferred stock, par value $.01 per share ("Seller Preferred Stock"). As of
the date of this Agreement, (i) 3,235,830 shares of Seller Common Stock are
issued and outstanding (of which 31,635 are restricted shares under employee
benefit plans which have not and will not be awarded), all of which are duly
authorized, validly issued, fully paid and non-assessable, except as provided
by Section 180.0622(2)(b) of the WBCL (such section, including judicial
interpretations thereof and of Section 180.40(6), its predecessor statute, are
referred to herein as Section 180.0622(2)(b) of the WBCL"), and were not
issued in violation of any preemptive right of any Seller shareholder, (ii)
888,950 shares of Seller Common Stock are held in the treasury of the Seller,
(iii) 325,354 shares of Seller Common Stock are reserved for future issuance
pursuant to outstanding employee stock options issued pursuant to the Seller's
stock option plans, and (iv) 643,930 shares of Seller Common Stock are
reserved for future issuance under the Stock Option Agreement. As of the date
of this Agreement, no shares of Seller Preferred Stock are issued and
outstanding. Except as set forth in clauses (iii) and (iv), above, there are
no options, warrants or other rights, agreements, arrangements or commitments
of any character, including without limitation voting agreements or
arrangements, relating to the issued or unissued capital stock of the Seller
or any Seller Subsidiary or obligating the Seller or any Seller Subsidiary to
issue or sell any shares of capital stock of, or other equity interests in,
the Seller or any Seller Subsidiary. All shares of Seller Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified
in the instruments pursuant to which they are issuable, shall be duly
authorized, validly issued, fully paid and non-assessable, except as otherwise
provided by Section 180.0622(2)(b) of the WBCL. There are no obligations,
contingent or otherwise, of the Seller or any Seller Subsidiary to repurchase,
redeem or otherwise acquire any shares of Seller Common Stock or the capital
stock of any Seller Subsidiary or to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any Seller
Subsidiary or any other entity, except for loan commitments and other funding
obligations entered into in the ordinary course of business. Each of the
outstanding shares of capital stock of each Seller Subsidiary are duly
authorized, validly issued, fully paid and non-assessable, except as provided
by Section 180.0622(2)(b) of the WBCL, and were not issued in violation of any
preemptive rights of any Seller Subsidiary shareholder, and such shares owned
by the Seller or another Seller Subsidiary are owned free and clear of all
security interests, liens, claims, pledges, agreements, limitations of the
Seller's voting rights, charges or other encumbrances of any nature
whatsoever.
Section 2.4 Authority. The Seller has the requisite corporate power and
authority to execute and deliver this Agreement and the Stock Option
Agreement, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby (other than, with
respect to the Merger, the approval and adoption of this Agreement by the
Seller's shareholders in accordance with the WBCL and the Seller Articles and
Seller By-Laws). The execution and delivery of this Agreement and the Stock
Option Agreement by the Seller and the consummation by the Seller of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action and no other corporate
proceedings on the part of the Seller are necessary to authorize this
Agreement or the Stock Option Agreement or to consummate the transactions so
contemplated hereby and thereby (other than, with respect to the Merger, the
approval and
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adoption of this Agreement by the Seller's shareholders in accordance with the
WBCL and the Seller Articles and Seller By-Laws). This Agreement and the Stock
Option Agreement have been duly executed and delivered by, and constitute
valid and binding obligations of the Seller and, assuming due authorization,
execution and delivery by the Company, are enforceable against the Seller in
accordance with their respective terms, except as enforcement may be limited
by laws affecting insured depository institutions, general principles of
equity whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
Section 2.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and the Stock Option
Agreement by the Seller does not, and the performance of this Agreement and
the Stock Option Agreement and the transactions contemplated hereby and
thereby by the Seller shall not, (i) conflict with or violate the Seller
Articles or Seller By-Laws or the Articles of Incorporation or By-Laws of any
Seller Subsidiary, (ii) conflict with or violate any domestic (federal, state
or local) or foreign law, statute, ordinance, rule, regulation, order,
judgment or decree (collectively, "Laws") applicable to the Seller or any
Seller Subsidiary or by which its or any of their respective properties is
bound or affected, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Seller or any Seller Subsidiary pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Seller or any
Seller Subsidiary is a party or by which the Seller or any Seller Subsidiary
or its or any of their respective properties is bound or affected, except in
the case of clauses (ii) and (iii) for any such conflicts, violations,
breaches, defaults or other occurrences that would not, individually or in the
aggregate, have a Material Adverse Effect on the Seller and the Seller
Subsidiaries, taken as a whole. The Board of Directors of the Seller has taken
all actions necessary including approving the transactions contemplated herein
and in the Stock Option Agreement to ensure that none of (A) the restrictions
set forth in Sections 180.1130-32, 180.1134, 180.1140-44 and 180.1150 of the
WBCL, and (B) the provisions set forth in Article 4.c. and Article 11 of the
Seller Articles, do or will apply to the transactions contemplated herein or,
except in the case of Article 4.c, in the Stock Option Agreement.
(b) The execution and deliver of this Agreement and the Stock Option
Agreement by the Seller do not, and the performance of this Agreement and the
Stock Option Agreement by the Seller shall not, require any consent, approval,
authorization or permit of, or filing with or notification to any governmental
or regulatory authority, domestic or foreign, except (i) for applicable
requirements, if any, of the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), state securities or blue sky laws ("Blue Sky Laws"), the
HOLA, and the filing of appropriate merger or other documents as required by
the WBCL and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notification, would not
prevent or delay consummation of the Merger or the issuance of Seller Common
Stock pursuant to the Stock Option Agreement, or otherwise prevent the Seller
from performing its obligations under this Agreement and the Stock Option
Agreement and would not have a Material Adverse Effect on the Seller and the
Seller Subsidiaries, taken as a whole.
Section 2.6 Compliance: Permits. Neither the Seller nor any Seller
Subsidiary is in conflict with, or in default or violation of, (i) any Law
applicable to the Seller or any Seller Subsidiary or by which its or any of
their respective properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Seller or any Seller Subsidiary is
a party or by which the Seller or any Seller Subsidiary or its or any of their
respective properties is bound or affected, except for any such conflicts,
defaults or violations which would not, individually or in the aggregate, have
a Material Adverse Effect on the Seller or the Seller Subsidiaries, taken as a
whole.
Section 2.7 Securities and Banking Reports; Financial Statements.
(a) The Seller and each Seller Subsidiary have filed all forms, reports and
documents required to be filed with (x) the Securities and Exchange Commission
(the "SEC") since September 30, 1996, and as of the date of
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this Agreement has delivered to the Company (i) its Annual Reports on Form 10-
K for the fiscal years ended September 30, 1994, 1995 and 1996, respectively,
(ii) its Quarterly Reports on Form 10-Q for the periods ended December 31,
1996, March 31, 1997 and June 30, 1997, (iii) all proxy statements relating to
the Seller's meetings of shareholders (whether annual or special) held since
September 30, 1994, (iv) all Current Reports on Form 8-K filed by the Seller
with the SEC since September 30, 1994, (v) all other reports or registration
statements (other than Quarterly Reports on Form 10-Q not referred to in
clause (ii) above) filed by the Seller with the SEC since September 30, 1994
and (vi) all amendments and supplements to all such reports and registration
statements filed by the Seller with the SEC since September 30, 1994
(collectively, the "Seller SEC Reports") and (y) the OTS, the FDIC and any
other applicable federal or state securities or banking authorities (all such
reports and statements are collectively referred to with the Seller SEC
Reports as the "Seller Reports"). The Seller Reports, including all Seller
Reports filed after the date of this Agreement, (i) were or will be prepared
in all material respects in accordance with the requirements of applicable Law
and (ii) did not at the time they were filed, or will not at the time they are
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Seller SEC Reports, including any
Seller SEC Reports filed since the date of this Agreement and prior to or on
the Effective Time, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each fairly
presents the consolidated financial position of the Seller and the Seller
Subsidiaries as of the respective dates thereof and the consolidated results
of its operations and changes in financial position for the periods indicated,
except that any unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected
to be material in amount.
(c) Except (i) for the liabilities that are fully reflected or reserved
against on the consolidated statement of financial condition of the Seller
included in the Seller's Form 10-Q for the quarter ended June 30, 1997, (ii)
for the liabilities incurred in the ordinary course of business consistent
with past practice since June 30, 1997, and (iii) as set forth in Section 2.7
of the Seller Disclosure Schedule, neither the Seller nor any Seller
Subsidiary has incurred any liability of any nature whatsoever (whether
absolute, accrued, contingent or otherwise due or to become due), that, either
alone or when combined with all similar liabilities, has had, or would
reasonably be expected to have, a Material Adverse Effect on the Seller and
the Seller Subsidiaries, taken as a whole.
Section 2.8 Absence of Certain Changes or Events. Except as disclosed in the
Seller SEC Reports filed prior to the date of this Agreement or set forth in
Section 2.8 of the Seller Disclosure Schedule and except for the transactions
contemplated by this Agreement, since September 30, 1996 to the date of this
Agreement, the Seller and the Seller Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since September 30, 1996, there has not been (i) any change in
the financial condition, results of operations or business of the Seller and
any of the Seller Subsidiaries having a Material Adverse Effect on the Seller
or the Seller Subsidiaries, taken as a whole, (ii) any damage, destruction or
loss (whether or not covered by insurance) with respect to any assets of the
Seller or any of the Seller Subsidiaries having a Material Adverse Effect on
Seller and the Seller Subsidiaries, taken as a whole, (iii) any change by the
Seller in its accounting methods, principles or practices, (iv) any
revaluation by the Seller of any of its assets in any material respect, (v)
except for repurchases pursuant to the Seller's Common Stock Repurchase
Program or for regular quarterly cash dividends on Seller Common Stock with
usual record and payment dates, to the date of this Agreement, any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of Seller Common Stock or any redemption, purchase or other
acquisition of any of its securities or any of the securities of any Seller
Subsidiary, (vi) any strike, work stoppage, slow-down or other labor
disturbance suffered by the Seller or the Seller Subsidiaries, (vii) any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or organization to which the Seller or the Seller
Subsidiaries have been a party, (viii) any union organizing activities
relating to employees of the Seller or the Seller Subsidiaries, or (ix) any
increase in the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any
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executive officer, employee or director, any grant of severance or termination
pay, any contract entered into to make or grant any severance or termination
pay, or any bonus paid other than year-end bonuses for fiscal 1997 as listed
in Section 2.8 of the Seller Disclosure Schedule.
Section 2.9 Absence of Litigation
(a) Except as set forth in Section 2.9 of the Seller Disclosure Schedule,
neither the Seller nor any of the Seller Subsidiaries is a party to any, and
there are no pending or, to the best of the Seller's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against the Seller or
any of the Seller Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement as to which there is reasonable
probability of an adverse determination and which, if adversely determined,
would, individually or in the aggregate, have a Material Adverse Effect on the
Seller and the Seller Subsidiaries, taken as a whole.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon the Seller, any of the Seller Subsidiaries or the
assets of the Seller or any of the Seller Subsidiaries which has had a
Material Adverse Effect on the Seller and the Seller Subsidiaries, taken as a
whole.
Section 2.10 Employee Benefit Plans
(a) Plans of the Seller. Section 2.10(a) of the Seller Disclosure Schedule
lists (i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
all bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all material
employment, termination, severance or other employment contracts or employment
agreements, with respect to which the Seller or any Seller Subsidiary has any
obligation (collectively, the "Plans"). The Seller has furnished or made
available to the Company a complete and accurate copy of each Plan (or a
description of the Plans, if the Plans are not in writing) and a complete and
accurate copy of each material document prepared in connection with each such
Plan, including, without limitation, and where applicable, a copy of (i) each
trust or other funding arrangement, (ii) each summary plan description and
summary of material modifications, (iii) the three (3) most recently filed IRS
Forms 5500 and related schedules, (iv) the most recently issued IRS
determination letter for each such Plan and (v) the three (3) most recently
prepared actuarial and financial statements in connection with each such Plan.
(b) Absence of Certain Types of Plans. Except as disclosed in Section
2.10(b) of the Seller Disclosure Schedule, no member of the Seller's
"controlled group," within the meaning of Section 4001(a)(14) of ERISA,
maintains or contributes to, or within the five years preceding the date of
this Agreement has maintained or contributed to, an employee pension benefit
plan subject to Title IV of ERISA ("Title IV Plan"). No Title IV Plan is a
"multiemployer pension plan" as defined in Section (3)37 of ERISA. Except as
disclosed in Section 2.10(b) of the Seller Disclosure Schedule, none of the
Plans obligates the Seller or any of the Seller Subsidiaries to pay material
separation, severance, termination or similar-type benefits solely as a result
of any transaction contemplated by this Agreement or as a result of a "change
in control," within the meaning of such term under Section 280G of the Code.
Except as disclosed in Section 2.10(b) of the Seller Disclosure Schedule, or
as required by COBRA, none of the Plans provides for or promises retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director or life insurance benefits to any current or
former employee, officer or director of the Seller or any of the Seller
Subsidiaries. Each of the Plans is subject only to the laws of the United
States or a political subdivision thereof.
(c) Compliance with Applicable Law. Except as disclosed in Section 2.10(c)
of the Seller Disclosure Schedule, each Plan has been operated in all respects
in accordance with the requirements of all applicable Law and all persons who
participate in the operation of such Plans and all Plan "fiduciaries" (within
the meaning of Section 3(21) of ERISA) have acted in accordance with the
provisions of all applicable Law, except where such violations of applicable
Law would not, individually or in the aggregate, have a Material Adverse
Effect on the Seller and the Seller Subsidiaries, taken as a whole. The Seller
and the Seller Subsidiaries have performed all obligations required to be
performed by any of them under, are not in any respect in default under or in
violation
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of, and the Seller and the Seller Subsidiaries have no knowledge of any
default or violation by any party to, any Plan, except where such failures,
defaults or violations would not, individually or in the aggregate, have a
Material Adverse Effect on the Seller and the Seller Subsidiaries, taken as a
whole. No legal action, suit or claim is pending or, to the knowledge of the
Seller or the Seller Subsidiaries, threatened with respect to any Plan (other
than claims for benefits in the ordinary course) and, except as disclosed in
Section 2.10(c) of the Seller Disclosure Schedule, to the knowledge of the
Seller or the Seller Subsidiaries, no fact or event exists that could give
rise to any such action, suit or claim. Except as disclosed in Section 2.10(c)
of the Seller Disclosure Schedule, neither the Seller nor any Seller
Subsidiary has incurred any material liability to the Pension Benefit Guaranty
Corporation (other than for premiums which have been paid when due) or any
material liability under Section 302 of ERISA or Section 412 of the Code that
has not been satisfied in full and no condition exists that presents a
material risk of incurring any such liability.
(d) Qualification of Certain Plans. Each Plan that is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust established in connection with such a Plan that is
intended to be exempt from Federal income taxation under Section 501(a) of the
Code) has received a favorable determination letter from the IRS (as defined
herein) that it is so qualified, and, except as disclosed in Section 2.10(d)
of the Seller Disclosure Schedule, the Seller is not aware of any fact or
event that has occurred sine the date of such determination letter from the
IRS to adversely affect the qualified status of any such Plan. Except as
disclosed in Section 2.10(d) of the Seller Disclosure Schedule, no trust
maintained or contributed by the Seller or any of the Seller Subsidiaries is
intended to be qualified as a voluntary employees' beneficiary association or
is intended to be exempt from federal income taxation under Section 501(c)(9)
of the Code.
(e) Absence of Certain Liabilities and Events. Except for matters disclosed
in Section 2.10(e) of the Seller Disclosure Schedule, there has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan. The Seller and each of the Seller
Subsidiaries has not incurred any liability for any excise tax arising under
Section 4972 or 4980B of the Code that would individually or in the aggregate
have a Material Adverse Effect on the Seller and the Seller Subsidiaries,
taken as a whole, and, to the knowledge of the Seller or the Seller
Subsidiaries, no fact or event exists that could give rise to any such
liability.
(f) Plan Contributions. All contributions, premiums or payments required to
be made prior to the Effective Time with respect to any Plan have been made on
or before the Effective Time.
(g) Funded Status of Plans and Rights to Terminate. With respect to each
Title IV Plan, the present value of all accrued benefits under each such Plan,
based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by each such Plan's actuary with respect to
each such Plan did not exceed, as of the most recent valuation date, the then
current value of assets of such Plan, allocable to each accrued benefit. No
provision of any such Plan, nor any amendment thereto, would result in any
limitation on the Seller or the Seller Subsidiaries rights to terminate each
such Plan and to receive any residual amounts under Section 4044 of ERISA.
(h) Stock Options. Section 2.10(h) of the Seller Disclosure Schedule sets
forth a true and complete list of each current or former employee, officer or
director of the Seller or any Seller Subsidiary who holds any option to
purchase Seller Common Stock as of the date of this Agreement, together with
the number of shares of Seller Common Stock subject to such option, the date
of grant of such option, the plan under which the options were granted, the
option price of such option, the vesting schedule for such option, whether
such option is intended to qualify as an incentive stock option within the
meaning of Section 422(b) of the Code (an "ISO"), and the expiration date of
such option. Section 2.10(h) of the Seller Disclosure Schedule also sets forth
the total number of such ISOs and such non-qualified options.
(i) Employment Contracts. Except for employment, severance, consulting or
other similar contracts with any employees, consultants, officers or directors
of the Seller or any of the Seller Subsidiaries disclosed in
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Section 2.10(i) of the Seller Disclosure Schedule, neither the Seller nor any
Seller Subsidiary is a party to any such contracts. Neither the Seller nor any
Seller Subsidiary is a party to any collective bargaining agreements.
(j) Effect of Agreement. Except as disclosed in Section 2.10(j) of the
Seller Disclosure Schedule, the consummation of the transactions contemplated
by this Agreement will not, either alone or in conjunction with another event,
entitle any current or former employee of the Seller or any Seller Subsidiary
to severance pay, unemployment compensation or any other payment, except as
expressly provided herein, or accelerate the time of payment or vesting or
increase the compensation due any such employee or former employee, in each
case, except as expressly provided herein.
Section 2.11 Registration Statement; Proxy Statement/Prospectus. The
information supplied by the Seller for inclusion in the Registration Statement
(as defined in Section 3.11) shall not at the time the Registration Statement
is declared effective contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. The information supplied by the Seller for
inclusion in the proxy statement/prospectus to be sent to the shareholders of
the Seller in connection with the meeting of the Seller's shareholders to
consider the Merger (the "Seller Shareholders' Meeting") (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"Proxy Statement/Prospectus") shall not at the date the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is first
mailed to shareholders, at the time of the Seller Shareholders' Meeting and at
the Effective Time, be false or misleading with respect to any material fact
required to be stated herein, or omit to state any material fact required to
be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they are made, not misleading.
If at any time prior to the Effective Time any event relating to the Seller or
any of its affiliates, officers or directors should be discovered by the
Seller which should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement/Prospectus, the Seller shall promptly
inform the Company. Notwithstanding the foregoing, the Seller makes no
representation or warranty with respect to any information about, or supplied
or omitted by, the Company which is contained in any of the foregoing
documents.
Section 2.12 Title to Property. The Seller and each of the Seller
Subsidiaries has good and marketable title to all of their respective
properties and assets, real and personal, free and clear of all mortgage
liens, and free and clear of all other liens, charges and encumbrances except
liens for taxes not yet due and payable, pledges to secure deposits and such
minor imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which, individually or in the aggregate, would not have a Material Adverse
Effect on the Seller and the Seller Subsidiaries, taken as a whole; and all
leases pursuant to which the Seller or any of the Seller Subsidiaries lease
from others material amounts of real or personal property are in good
standing, valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing material default or event
of default (or event which with notice or lapse of time, or both, would
constitute a material default and in respect of which the Seller or such
Seller Subsidiary has not taken adequate steps to prevent such a default from
occurring). Substantially all of the Seller's and each of the Seller
Subsidiaries' buildings and equipment in regular use have been reasonably
maintained and are in good and serviceable condition, reasonable wear and tear
excepted.
Section 2.13 Environmental Matters. Except as set forth in Section 2.13 of
the Seller Disclosure Schedule, the Seller represents and warrants that to the
best of the Seller's knowledge: (i) each of the Seller, the Seller
Subsidiaries and properties owned and operated by the Seller or the Seller
Subsidiaries, are in compliance with all applicable federal, state and local
laws including common law, rules, guidance, regulations and ordinances and
with all applicable decrees, orders, judgments, and contractual obligations
relating to the environment or Hazardous Materials which are hereinafter
defined as chemicals, pollutants, contaminants, wastes, toxic substances,
compounds, products, solid, liquid, gas, petroleum or other regulated
substances or materials which are hazardous, toxic or otherwise harmful to the
environment ("Environmental Laws"), except for violations which, either
individually or in the aggregate would not have a Material Adverse Effect on
the Seller and the Seller Subsidiaries taken as a whole; (ii) there is no
asbestos or any material amount of
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ureaformaldehyde materials in or on any property owned or operated by the
Seller or Seller Subsidiaries and no electric transformers or capacitors,
other than those owned by public utility companies, on any such properties
contain any PCB's; (iii) there are no underground or aboveground storage tanks
located on, in or under any properties currently or formerly owned or operated
by the Seller or any of the Seller Subsidiaries; (iv) the Seller or the Seller
Subsidiaries have not received any notice from any governmental agency or
third party notifying the Seller or the Seller Subsidiaries of any
Environmental Claim (as defined herein); (v) there are no circumstances with
respect to any properties currently owned or operated by the Seller or any of
the Seller Subsidiaries that to the best of the Seller's knowledge (a) will
form the basis on an Environmental Claim against the Seller or the Seller
Subsidiaries or any properties currently or formerly owned or operated by the
Seller or any of the Seller Subsidiaries or (b) will cause any properties
currently owned or operated by the Seller or any of the Seller Subsidiaries to
be subject to any restrictions or ownership, occupancy, use or transferability
under any applicable Environmental Law or require notification to or consent
of any Governmental Authority (as defined herein) or third party pursuant to
any Environmental Law; and (vi) neither the Seller nor any Seller Subsidiary
has received any written communication from any federal or state agency naming
the Seller or any Seller Subsidiary as a potentially responsible party for
environmental contamination with respect to any property on which the Seller
or any Seller Subsidiary holds a security interest.
The following definitions apply for purposes of this Section 2.13:
(a) "Environmental Claims" shall mean any and all administrative, regulatory,
judicial or private actions, suits, demands, demand letters, notices, claims,
liens, notices of non-compliance or violation, investigations, allegations,
injunctions or proceedings relating in any way to (i) any Environmental Law;
(ii) any Hazardous Material including without limitation any abatements,
removal, remedial, corrective or other response action in connection with any
Hazardous Material, Environmental Law or order of a Governmental Authority or
(iii) any actual or alleged damage, injury, threat or harm to the environment,
which individually or in the aggregate would have a Material Adverse Effect on
the Seller or the Seller Subsidiaries; (b) "Governmental Authority" shall mean
any applicable federal, state, regional, county or local person or body having
governmental authority.
Section 2.14 Absence of Agreements. Neither the Seller nor any Seller
Subsidiary is a party to any agreement or memorandum of understanding with, or
a party to any commitment letter or similar undertaking to, or is subject to
any order or directive by, or is a recipient of any extraordinary supervisory
letter which restricts materially the conduct of its business (including any
contract containing covenants which limit the ability of the Seller or of any
Seller Subsidiary to compete in any line of business or with any person or
which involve any restriction of the geographical area in which, or method by
which, the Seller or any Seller Subsidiary may carry on its business (other
than as may be required by Law or applicable regulatory authorities)), or in
any manner relates to its capital adequacy, its credit policies or its
management, except for those the existence of which has been disclosed to the
Company prior to the date of this Agreement, nor has the Seller been advised
that any federal, state, or governmental agency is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission, except as
disclosed by the Seller in Section 2.14 of the Seller Disclosure Schedule.
Section 2.15 Taxes. The Seller and the Seller Subsidiaries have timely filed
all material Tax Returns (as defined below) required to be filed by them, and
the Seller and the Seller Subsidiaries have timely paid and discharged all
material Taxes (as defined below) due in connection with or with respect to
the filing of such Tax Returns, except such as are being contested in good
faith by appropriate proceedings and with respect to which the Seller is
maintaining reserves adequate for their payment. To the best of the Seller's
knowledge, the liability for Taxes set forth on each such Tax Return
adequately reflects the Taxes required to be reflected on such Tax Return. For
purposes of this Agreement, "Tax" or "Taxes" shall mean taxes, charges, fees,
levies, and other governmental assessments and impositions of any kind,
payable to any federal, state, local or foreign governmental entity or taxing
authority or agency, including, without limitation, (i) income, franchise,
profits, gross receipts, estimated, ad valorem, value added, sales, use,
service, real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers compensation,
unemployment
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compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, (ii) customs duties,
imposts, charges, levies or other similar assessments of any kind, and
(iii) interest, penalties and additions to tax imposed with respect thereto;
and "Tax Returns" shall mean returns, reports, and information statements with
respect to Taxes required to be filed with the United States Internal Revenue
Service (the "IRS") or any other governmental entity or taxing authority or
agency, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns. Except as otherwise disclosed in
Section 2.15 of the Seller's Disclosure Schedule, to the best of the Seller's
knowledge, neither the IRS nor any other governmental entity or taxing
authority or agency is now asserting, either through audits, administrative
proceedings or court proceedings, any deficiency or claim for additional
Taxes. Except as otherwise disclosed in Section 2.15 of the Seller's
Disclosure Schedule, neither the Seller nor any of the Seller Subsidiaries has
granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax. Except as otherwise
disclosed in Section 2.15 of the Seller's Disclosure Schedule and except for
statutory liens for current taxes not yet due, to the best of the Seller's
knowledge there are no material tax liens on any assets of the Seller or any
of the Seller Subsidiaries. Except as otherwise disclosed in Section 2.15 of
the Seller's Disclosure Schedule neither the Seller nor any of the Seller
Subsidiaries has received a ruling or entered into an agreement with the IRS
or any other taxing authority that would have a Material Adverse Effect on the
Seller or the Seller Subsidiaries, taken as a whole, after the Effective Time.
Except as otherwise disclosed in Section 2.15 of the Seller's Disclosure
Schedule, no agreements relating to allocating or sharing of Taxes exist among
the Seller and the Seller Subsidiaries. Neither the Seller nor any of the
Seller Subsidiaries has made an election under Section 341(f) of the Code.
Section 2.16 Insurance. Section 2.16 of the Seller Disclosure Schedule lists
all material policies of insurance of the Seller and the Seller Subsidiaries
currently in effect. To the best of the Seller's knowledge, neither the Seller
nor any of the Seller Subsidiaries has any liability for unpaid premiums or
premium adjustments not properly reflected on the Seller's financial
statements included in the Seller's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
Section 2.17 Brokers. No broker, finder or investment banker (other than
Hovde Financial, Inc.) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Seller. Prior to the date of
this Agreement, the Seller has furnished to the Company a complete and correct
copy of all agreements between the Seller and Hovde Financial, Inc. pursuant
to which such firm would be entitled to any payment relating to the
transactions contemplated hereunder.
Section 2.18 Tax Matters and Pooling.
(a) Neither the Seller nor, to the best of the Seller's knowledge, any of
its affiliates has through the date of this Agreement taken or agreed to take
any action that would prevent the Merger from qualifying as (i) a
reorganization under Section 368(a)(1)(A) of the Code or (ii) for pooling-of-
interests accounting treatment under generally accepted accounting principles
("GAAP").
(b) To the Seller's knowledge, there is no plan or intention on the part of
shareholders of the Seller who will receive Company Common Stock to sell or
otherwise dispose of an amount of Company Common Stock to be received in the
Merger which would reduce their ownership of Company Common Stock to a number
of shares having in the aggregate a value at the time of the Merger of less
than 50 percent of the total value of the Seller Common Stock outstanding
immediately prior to the Merger.
Section 2.19 Material Adverse Effect. Since June 30, 1997, there has been no
Material Adverse Effect on the Seller and the Seller Subsidiaries, taken as a
whole.
Section 2.20 Material Contracts. Except as disclosed in Section 2.20 of the
Seller Disclosure Schedule (which may reference other sections of such
Schedule) and, except as included as exhibits in the Seller SEC Reports,
neither the Seller nor any Seller Subsidiary is a party to or obligated under
any contract, agreement or other instrument or understanding which is not
terminable by the Seller or the Seller Subsidiary without
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additional payment or penalty within 60 days and obligates the Seller or any
Seller Subsidiary for payments or other consideration with a value in excess
of $100,000, or would require disclosure by the Seller pursuant to
item 601(b)(10) of Regulation S-K under the Exchange Act.
Section 2.21 Opinion of Financial Advisor. The Seller has received the
opinion of Hovde Financial, Inc. on the date of this Agreement to the effect
that, as of the date of this Agreement, the consideration to be received in
the Merger by the Seller's shareholders is fair to the Seller's shareholders
from a financial point of view, and Seller will promptly, after the date of
this Agreement, deliver a copy of such opinion to the Company.
Section 2.22 Vote Required. The affirmative vote of a majority of the votes
that holders of the outstanding shares of Seller Common Stock are entitled to
cast is the only vote of the holders of any class or series of the Seller
capital stock necessary to approve the Merger.
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company to
the Seller prior to the execution of this Agreement (the "Company Disclosure
Schedule"), which shall identify exceptions by specific Section references,
the Company hereby represents and warrants to the Seller that:
Section 3.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Wisconsin. The Company is a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended (the "BHCA"). Each subsidiary of the Company (a "Company Subsidiary"
or, collectively, "Company Subsidiaries") is a bank or a corporation duly
organized, validly existing and in good standing under the laws of the state
of its incorporation or the United States of America. Each of the Company and
the Company Subsidiaries have the requisite corporate power and authority and
are in possession of all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals and orders ("Company
Approvals") necessary to own, lease and operate their respective properties
and to carry on their respective business as now being conducted, including
appropriate authorizations from the Federal Reserve Board, FDIC, the DFI or
the Office of the Comptroller of the Currency (the "OCC") and neither the
Company nor any Company Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Company Approvals, except in
each case where the failure to be so organized, existing and in good standing
or to have such power, authority, Company Approvals and revocations or
modifications would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and the Company Subsidiaries, taken as a whole.
(b) The Company and each Company Subsidiary is duly qualified or licensed as
a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated
by it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect on the Company and the Company Subsidiaries, taken as
a whole.
(c) A true and complete list of all of the Company Subsidiaries is set forth
in Exhibit 21 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 ("Exhibit 21") previously delivered to the Seller. Except as
set forth in Section 3.1(c) of the Company Disclosure Schedule, the Company
and/or one or more of the Company Subsidiaries owns beneficially and of record
substantially all of the outstanding shares of capital stock of each of the
Company Subsidiaries. Except for the Company Subsidiaries, set forth on said
Exhibit 21, the Company does not directly or indirectly own any equity or
similar interests in, or any interests convertible into or exchangeable or
exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business, other than in the ordinary
course of business, and in no event in excess of 5% of the outstanding equity
securities of such entity.
Section 3.2 Articles of Incorporation and By-Laws. The Company has
previously furnished to the Seller a complete and correct copy of the Company
Articles and the Company By-Laws. The Company Articles and
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Company By-Laws are in full force and effect. The Company is not in violation
of any of the provisions of the Company Articles or the Company By-Laws.
Section 3.3 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 160,000,000
shares of Company Common Stock of which, as of October 27, 1997, 101,364,755
shares were issued and outstanding, 7,937,835 shares were held in treasury,
6,416,320 shares were reserved for issuance pursuant to outstanding employee
stock options; and (ii) 5,000,000 shares of Preferred Stock, $1.00 par value
("Company Preferred Stock"), of which 2,000,000 shares of Company Preferred
Stock have been designated as Series A Convertible Preferred Stock ("Series A
Preferred Stock") and 685,314 shares of which, as of the date of this
Agreement, are outstanding. All of the outstanding shares of the Company's
capital stock have been duly authorized and validity issued and are fully paid
and non-assessable, except pursuant to Section 180.0622(2)(b) of the WBCL.
Except as set forth in clauses (i) and (ii), above, as of the date of this
Agreement there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or
unissued capital stock of the Company or any Company Subsidiary or obligating
the Company or any Company Subsidiary to issue or sell any shares of capital
stock of, or other equity interests in, the Company or any Company Subsidiary.
(b) The shares of Company Common Stock to be issued pursuant to the Merger
will, upon issuance in accordance with the provisions of this Agreement, be
duly authorized, validly issued, fully paid and non-assessable, except as
otherwise provided by Section 180.0622(2)(b) of the WBCL.
Section 3.4 Authority. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and the Stock Option
Agreement, and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Stock Option Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate
action on the part of the Company and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or the Stock
Option Agreement or to consummate the transactions so contemplated hereby or
thereby. This Agreement and the Stock Option Agreement have been duly and
validly executed and delivered by the Company and constitute valid and binding
obligations of the Company and assuming the authorization, execution and
delivery by the Seller, are enforceable against the Company in accordance with
their respective terms, except as enforcement may be limited by laws affecting
insured depository institutions, general principles of equity, whether applied
in a court of law or a court of equity, and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
Section 3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and the Stock Option
Agreement by the Company do not, and the performance of this Agreement and the
Stock Option Agreement by the Company shall not, (i) conflict with or violate
the Company Articles or Company By-Laws or the Articles of Incorporation or
By-Laws and Company Subsidiary, (ii) conflict with or violate any Laws
applicable to the Company or any Company Subsidiary or by which any of their
respective properties is bound or affected, or (iii) result in any breach of
or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or its or any of their
respective properties is bound or affected, except in the case of clause (ii)
and (iii) for any such conflicts, violations, breaches, defaults or other
occurrences that would not, individually or in aggregate, have a Material
Adverse Effect on the Company and the Company Subsidiaries, taken as a whole.
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(b) The execution and delivery of this Agreement and the Stock Option
Agreement by the Company do not, and the performance of this Agreement by the
Company shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, Blue Sky Laws, the BHCA, the banking laws of
the State of Wisconsin (the "WBL") and the filing of appropriate merger or
other documents as required by Wisconsin Law and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the
Merger or issuance of Seller Common Stock pursuant to the Stock Option
Agreement, or otherwise prevent the Company from performing its obligations
under this Agreement, and would not have a Material Adverse Effect on the
Company or the Company Subsidiaries, taken as a whole.
Section 3.6 Compliance; Permits. Neither the Company nor any Company
Subsidiary is in conflict with, or in default or violation of, (i) any Law
applicable to the Company or any Company Subsidiary or by which its or any of
their respective properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any Company Subsidiary
is a party or by which the Company or any Company Subsidiary or any of its or
any of their respective properties is bound or affected, except for any such
conflicts, defaults or violations which would not, individually or in
aggregate, have a Material Adverse Effect on the Company and the Company
Subsidiaries, taken as a whole.
Section 3.7 Securities and Banking Reports; Financial Statements.
(a) The Company and each Company Subsidiary have filed all forms, reports
and documents required to be filed with (x) the SEC since December 31, 1996,
and as of the date of this Agreement have delivered or made available to
Seller, in the form filed with the SEC, (i) its Annual Reports on Form 10-K
for the fiscal years ended December 31, 1994, 1995, 1996, respectively, (ii)
all proxy statements relating to the Company's meetings of shareholders
(whether annual or special) held since December 31, 1994, (iii) all Current
Reports on Form 8-K filed by the Company with the SEC since December 31, 1994,
(iv) all other reports or registration statements (other than Quarterly
Reports on Form 10-Q not referred to in clause (ii) above) filed by the
Company with the SEC since December 31, 1994, and (v) all amendments and
supplements to all such reports and registration statements filed by the
Company with the SEC since December 31, 1994 (collectively, the "Company SEC
Reports") and (y) the Federal Reserve Board, the DFI and any other applicable
Federal or state securities or banking authorities (all such reports and
statements are collectively referred to with the Company SEC Reports as the
"Company Reports"). The Company Reports, including all Company Reports filed
after the date of this Agreement, (i) were or will be prepared in accordance
with the requirements of applicable Law and (ii) did not at the time they were
filed, or will not at the time they are filed, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports, including any
Company SEC Reports filed since the date of this Agreement and prior to or on
the Effective Time, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each fairly
presents the consolidated financial position of the Company and the Company
Subsidiaries as of the respective dates thereof and the consolidated results
of its operations and changes in financial position for the periods indicated,
except that any unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments, which were not or are not expected
to be material in amount.
(c) Except (i) for the liabilities that are fully reflected or reserved
against on the consolidated statement of financial condition of the Company
included in the Company Form 10-K for the year ended December 31, 1996, (ii)
for the liabilities incurred in the ordinary course of business consistent
with past practice since December 31, 1996, and (iii) as set forth in Section
3.7 of the Company Disclosure Schedule, neither the Company nor any
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Company Subsidiary has incurred any liability of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether due or to
become due) that, either alone or when combined with all similar liabilities,
has had, or would reasonably be expected to have, a Material Adverse Effect on
the Company and the Company Subsidiaries, taken as a whole.
Section 3.8 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, since December
31, 1996 to the date of this Agreement, the Company and the Company
Subsidiaries have conducted their businesses only in the ordinary course and
in a manner consistent with past practice and, since December 31, 1996, there
has not been (i) any change in the financial condition, results of operations
or business of the Company or any of the Company Subsidiaries having a
Material Adverse Effect on the Company and the Company Subsidiaries, taken as
a whole, (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of the Company or any of the Company
Subsidiaries having a Material Adverse Effect on the Company and the Company
Subsidiaries, taken as a whole, (iii) any change by the Company or any Company
Subsidiaries in its accounting methods, principles or practices, (iv) any
revaluation by the Company or any Company Subsidiaries of any of its assets in
any respect, (v) to the date of this Agreement, any entry by the Company or
any of the Company Subsidiaries into any commitment or transactions material
to the Company and the Company Subsidiaries taken as a whole or (vi) (except
for repurchases pursuant to the Company's Common Stock repurchase program or
for regular quarterly cash dividends of Company Common Stock with usual record
and payment dates, to the date of this Agreement, any declaration, setting
aside or payment of any dividends or distributions in respect of shares of
Company Common Stock or any redemption, purchase or other acquisition of any
of its securities or any of the securities of any Company Subsidiary.
Section 3.9 Absence of Litigation.
(a) Except as set forth in Section 3.9 of the Company Disclosure Schedule,
neither the Company nor any of the Company Subsidiaries is a party to any, and
there are no pending or, to the best of the Company's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against the Company or
any of the Company Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement as to which there is a
reasonable probability of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have a Material Adverse
Effect on the Company and the Company's Subsidiaries, taken as a whole.
(b) There is no injunction, order, judgement, decree or regulatory
restriction imposed upon the Company, any of the Company Subsidiaries or the
assets of the Company or any of the Company Subsidiaries which has had a
Material Adverse Effect on the Company and the Company's Subsidiaries, taken
as a whole.
Section 3.10 Employee Benefit Plans.
(a) Compliance with Applicable Laws. Each of the Company's "employee benefit
plans" within the meaning of Section 3(3) of ERISA, for the benefit of
employees of the Company and the Company Subsidiaries (the "Company Plans")
has been operated in all respects in accordance with the requirements of all
applicable Law and all persons who participate in the operation of such
Company Plans and all Company Plan "fiduciaries" (within the meaning of
Section 3(21) of ERISA) have acted in accordance with the provisions of all
applicable Law, except where such violations of applicable Law would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company and the Company Subsidiaries, taken as a whole. The Company and the
Company Subsidiaries have performed all obligations required to be performed
by any of them under, are not in any respect in default under or in violation
of, and the Company and the Company Subsidiaries have no knowledge of any
defaults or violation by any party to, any Company Plan, except where such
failures, defaults or violations would not, individually or in the aggregate,
have a Material Adverse Effect on the Company and the Company Subsidiaries,
taken as a whole. No legal action, suit or claim is pending or, to the
knowledge of the Company or the Company Subsidiaries, threatened with respect
to any Company Plan (other than claims for benefits in the ordinary course)
and, to the knowledge of the Company or the Company Subsidiaries, no fact or
event exists that could give rise to any such action, suit or claim.
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(b) Qualification of Certain Plans. Each Company Plan that is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust, established in connection with such a Plan that is
intended to be exempt from Federal income taxation under Section 501(a) of the
Code) has received a favorable determination letter from the IRS (as defined
herein) that it is so qualified, and the Company is not aware of any fact or
event that has occurred since the date of such determination letter from the
IRS to adversely affect the qualified status of any Company Plan or the exempt
status of any such trust. Except as disclosed in Section 3.10(b) of the
Company Disclosure Schedule, no trust maintained or contributed to by the
Company or any of the Company Subsidiaries is intended to be qualified as a
voluntary employees' beneficiary association or is intended to be exempt from
federal income taxation under Section 501(c)(9) of the Code.
(c) Absence of Certain Liabilities and Events. There have been no prohibited
transactions (within the meaning of Section 406 of ERISA or Section 4975 of
the Code) with respect to any Company Plan. The Company and each of the
Company Subsidiaries has not incurred any liability for any excise tax arising
under Section 4972 or 4980B of the Code and, to the knowledge of the Company
or the Company Subsidiaries, no fact or event exists that could give rise to
any such liability.
(d) Plan Contributions. All contributions, provisions or payments required
to be made with respect to any Company Plan have been made on or before their
due dates.
Section 3.11 Registration Statement; Proxy Statement/Prospectus. The
information supplied by the Company for inclusion in the registration
statement of the Company (the "Registration Statement") pursuant to which the
shares of Company Common Stock to be issued in the Merger will be registered
with the SEC shall not, at the time the Registration Statement (including any
amendments or supplements thereto) is declared effective by the SEC, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The information supplied by the Company for inclusion in the Proxy
Statement/Prospectus shall not, at the date the Proxy Statement/Prospectus (or
any amendment thereof or supplement thereto) is first mailed to shareholders,
at the time of the Seller Shareholders' Meeting and at the Effective Time, be
false or misleading with respect to any material fact required to be stated
therein, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any event
relating to the Company or any of its affiliates, officers or directors should
be discovered by the Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement/Prospectus, the
Company will promptly inform the Seller. The Registration Statement and the
Proxy Statement/Prospectus shall comply in all material respects as to form
with the requirements of the Securities Act, the Exchange Act and the rules
and regulations thereunder. Notwithstanding the foregoing, the Company makes
no representation or warranty with respect to any information about, or
supplied or omitted by, Seller which is contained in any of the foregoing
documents.
Section 3.12 Title to Property. The Company and each of the Company
Subsidiaries has good and marketable title to all of their respective
properties and assets, real and personal, free and clear of all mortgage
liens, and free and clear of all other liens, charges and encumbrances except
liens for taxes not yet due and payable, pledges to secure deposits and such
minor imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which, individually or in the aggregate, would not have a Material Adverse
Effect on the Company and the Company Subsidiaries, taken as a whole; and all
leases pursuant to which the Company or any of the Company Subsidiaries lease
from others material amounts of real or personal property are in good
standing, valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing material default or event
of default (or event which with notice or lapse of time, or both, would
constitute a material default and in respect of which the Company or such
subsidiary has not taken adequate steps to prevent such a default from
occurring). Substantially all of the Company's and each of the Company
Subsidiaries' buildings and equipment in regular use have been reasonably
maintained and are in good and serviceable condition, reasonable wear and tear
excepted.
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Section 3.13 Absence of Agreements. Neither the Company nor any of the
Company Subsidiaries is a party to any agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter which restricts materially the conduct of its
business (including any contract containing covenants which limit the ability
of the Company or Company Subsidiary to compete in any line of business or
with any person or which involve any restriction of the geographical area in
which, or method by which, the Company or any Company Subsidiary may carry on
its business (other than as may be required by Law or applicable regulatory
authorities)), in any manner relates to its capital adequacy, its credit
policies, or its management, except for those the existence of which has been
disclosed to Seller prior to the date of this Agreement, nor has the Company
been advised that any federal, state, or governmental agency is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar submission,
except as disclosed by the Company in Section 3.13 of the Company Disclosure
Schedule.
Section 3.14 Taxes. The Company and the Company Subsidiaries have timely
filed all Material Tax Returns (as defined below) required to be filed by
them, and the Company and the Company Subsidiaries have timely paid and
discharged all Material Taxes (as defined below) due in connection with or
with respect to the filing of such Tax Returns and have timely paid all other
Taxes as are due, except such as are being contested in good faith by
appropriate proceedings and with respect to which Seller is maintaining
reserves adequate for their payment. For purposes of this Agreement, "Tax" or
"Taxes" shall mean taxes, charges, fees, levies, and other governmental
assessments and impositions of any kind, payable to any federal, state, local
or foreign governmental entity or taxing authority or agency, including,
without limitation, (i) income, franchise, profits, gross receipts, estimated,
ad valorem, value added, sales, use, service, real or personal property,
capital stock, license, payroll, withholding, disability, employment, social
security, workers compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer
and gains taxes, (ii) customs duties, imposts, charges, levies or other
similar assessments of any kind, and (iii) interest, penalties and additions
to tax imposed with respect thereto; and "Tax Returns" shall mean returns,
reports, and information statements with respect to Taxes required to be filed
with the IRS or any other governmental entity or taxing authority or agency,
domestic or foreign, including, without limitation, consolidated combined and
unitary tax returns. Except as otherwise disclosed in Section 3.14 of the
Company Disclosure Schedule, to the best knowledge of the Company, neither the
IRS nor any other governmental entity or taxing authority or agency is now
asserting, either through audits, administrative proceedings or court
proceedings, any deficiency or claim for additional Taxes. Except as otherwise
disclosed in Section 3.14 of the Seller's Disclosure Schedule, neither Company
nor any of the Company's Subsidiaries has granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment
of, any Tax. Except as otherwise disclosed in Section 3.14 of the Company
Disclosure Schedule and except for statutory liens for current taxes not yet
due, there are no material tax liens on any assets of the Company or any of
the Company Subsidiaries. Except as otherwise disclosed in Section 3.14 of the
Company Disclosure Schedule neither the Company nor any of the Company
Subsidiaries has received a ruling or entered into an agreement with the IRS
or any other taxing authority that would have a Material Adverse Effect on the
Company and the Company Subsidiaries, taken as a whole, after the Effective
Time.
Except as otherwise disclosed in Section 3.14 of the Company Disclosure
Schedule, no agreements relating to allocating or sharing of Taxes exist among
the Company and the Company Subsidiaries. Neither the Company nor any of the
Company Subsidiaries has made an election under Section 341(f) of the Code.
Section 3.15 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 3.16 Tax Matters and Pooling. Neither the Company nor, to the
Company's knowledge, any of its affiliates has through the date of this
Agreement taken or agreed to take any action that would prevent the
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Merger from qualifying (i) as a reorganization under Section 368(a)(1)(A) of
the Code or (ii) for pooling-of-interests accounting treatment under GAAP.
Section 3.17 Material Adverse Effect. Since December 31, 1996 there has been
no Material Adverse Effect on the Company and the Company Subsidiaries, taken
as a whole.
ARTICLE IV--COVENANTS OF THE SELLER
Section 4.1 Affirmative Covenants. The Seller hereby covenants and agrees
with the Company that prior to the Effective Time, unless the prior written
consent of the Company shall have been obtained and except as otherwise
contemplated herein, it will and it will cause each Seller Subsidiary to:
(a) operate its business only in the ordinary course consistent with past
practices;
(b) use all reasonable efforts to preserve intact its business organization
and assets, maintain its rights and franchises, retain the services of
its officers and key employees and maintain its relationships with
customers;
(c) use all reasonable efforts to maintain and keep its properties in as
good repair and condition as at present, ordinary wear and tear
excepted;
(d) use all reasonable efforts to keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that now
maintained by it;
(e) use all reasonable efforts to perform in all material respects all
obligations required to be performed by it under all material
contracts, leases, and documents relating to or affecting its assets,
properties, and business;
(f) take such reasonable actions as are requested by the Company to
complete the Merger; and
(g) The Seller will use its reasonable best efforts to cause each holder of
an option to purchase Seller Common Stock under the 1991 Stock Option
and Incentive Plan and the 1995 Equity Incentive Plan to execute a
consent and waiver agreement amending the terms of such option in the
form of Exhibit 4.1 hereof (an "Option Agreement"), and to cause
Messrs. Gergen and Stampfl to execute amendments to their Employment
Agreements in the form of Exhibit 4.1 hereof to clarify their rights
under said Employment Agreements.
Section 4.2 Negative Covenants. Except as specifically contemplated by this
Agreement, from the date of this Agreement until the Effective Time, the
Seller shall not do, or permit any Seller Subsidiary to do, without the prior
written consent of the Company, any of the following:
(a)(i) exept as required by applicable law or to maintain qualification
pursuant to the Code, adopt, amend, renew or terminate any Plan or
any agreement, arrangement, plan or policy between the Seller or any
Seller Subsidiary and one or more of its current or former
directors, officers or employees or (ii) except for normal increases
in the ordinary course of business consistent with past practice,
and subject to the specific provisions of Annex A, or, except as
required by applicable law, increase in any manner the base salary,
bonus incentive compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any plan or
agreement as in effect as of the date hereof (including, without
limitation, the granting of stock options, stock appreciation
rights, restricted stock, restricted stock units or performance
units or shares);
(b)(i) except as provided below declare or pay any dividend on, or make any
other distribution in respect of, its outstanding shares of capital
stock, except for (A) regular quarterly cash dividends on Seller
Common Stock with usual record and payment dates for such dividends
with each such dividend at a rate per share of Seller Common Stock
not in excess of $.10 and (B) dividends by a Seller Subsidiary to
the Seller;
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(ii) declare or pay any dividends or make any distributions in any amount
on Seller Common Stock in or with respect to the quarter in which
the Effective Time shall occur and in which the shareholders of
Seller Common Stock are entitled to receive dividends on the shares
of Company Common Stock into which the shares of Seller Common Stock
have been converted; provided that, it is the intent of this clause
(ii) to provide that the holders of Seller Common Stock will receive
either the payment of cash dividends on their shares of Seller
Common Stock or the payment of cash dividends as the holders of
shares of Company Common Stock received in exchange for the shares
of Seller Common Stock pursuant to this Agreement for the calendar
quarter during which the Effective Time shall occur, but will not
receive and will not become entitled to receive for the same
calendar quarter both the payment of a cash dividend as shareholders
of Seller Common Stock and the payment of a cash dividend as the
holders of shares of Company Common Stock received in exchange for
the shares of Seller Common Stock pursuant to this Agreement; and if
the Seller does not declare and pay cash dividends in a particular
calendar quarter because of the Seller's reasonable expectation that
the Effective Time was to have occurred in such calendar quarter
wherein the holders of Seller Common Stock would have become
entitled to receive cash dividends for such calendar quarter on the
shares of Company Common Stock to have been exchanged for the shares
of Seller Common Stock pursuant to this Agreement, and the Effective
Time does not in fact occur in such calendar quarter, then, as a
result thereof, the Seller shall be entitled to declare and pay a
cash dividend (within the limitations of this clause (ii)) on such
shares of Seller Common Stock for such calendar quarter by the
declaration and payment of such cash dividends as soon as reasonably
practicable after the end of such calendar quarter;
(c)(i) redeem, purchase or otherwise acquire any shares of its capital
stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options,
warrants, conversion or other rights to acquire any shares of its
capital stock or any such securities or obligations; (ii) merge with
or into any other corporation or bank, permit any other corporation
or bank to merge into it or consolidate with any other corporation
or bank, or effect any reorganization or recapitalization;
(iii) purchase or otherwise acquire any substantial portion of the
assets, or more than 5% of any class of stock, of any corporation,
bank or other business other than in the ordinary course of business
and consistent with past practice; (iv) liquidate, sell, dispose of,
or encumber any assets or acquire any assets, other than in the
ordinary course of its business consistent with past practice; or
(v) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock;
(d) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of any class of
capital stock of the Seller or any Seller Subsidiary (including shares
held in treasury) or any rights, warrants or options to acquire, any
such shares, other than the issuance of Seller Common Stock issuable
upon exercise of employee or director stock options outstanding as of
the date of this Agreement or pursuant to Seller Plans, in effect as of
the date of this Agreement;
(e) authorize, permit or cause any of its officers, directors, employees or
agents to directly or indirectly solicit, initiate or encourage any
inquiries relating to, or the making of any proposal which constitutes,
a "takeover proposal" (as defined below), or (i) recommend, endorse or
agree to any takeover proposal, (ii) participate in any discussions or
negotiations with respect to a takeover proposal, or (iii) provide
third parties with any nonpublic information relating to any such
inquiry or proposal; provided, however, that the Seller may, and may
authorize and permit its officers, directors, employees or agents to,
provide third parties with nonpublic information, otherwise facilitate
any effort or attempt by any third party to make or implement a
takeover proposal and participate in discussions and negotiations with
any third party relating to any takeover proposal, if the Seller, after
having consulted with and considered the advice of outside counsel, has
determined in good faith that such actions are necessary for the
discharge of the fiduciary duties of the Seller's Board of Directors.
The Seller will immediately cease and cause to be terminated any
existing activities, discussions or negotiations
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previously conducted with any parties other than the Company with
respect to any of the foregoing. The Seller will notify the Company
immediately if any such inquiries or takeover proposals are received by,
any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, the Seller,
and the Seller shall keep the Company informed, on a current basis, of
the status of any such discussions and negotiations. As used in this
Agreement, "takeover proposal" shall mean any tender or exchange offer,
proposal for a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving the Seller or any Seller Subsidiary or any proposal or offer
to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of, the Seller or any Seller
Subsidiary other than the transactions contemplated or permitted by this
Agreement;
(f) propose or adopt any amendments to its Articles of Incorporation or By-
laws in any way adverse to the Company;
(g) change any of its methods of accounting in effect at June 30, 1997, or
change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of the
federal income tax returns for the taxable year ending December 31,
1996, except as may be required by Law or GAAP;
(h) change in any material respect any lending, investment, liability
management or other material policies concerning the business or
operations of the Seller or any of the Seller Subsidiaries, except as
required by Law, including, without limitation: (i) acquire or sell any
contracts for the purchase or sale of financial or other futures or any
put or call options, or enter into any hedges or interest rate swaps
relating to cash, securities, or any commodities whatsoever or enter
into any other derivative transaction; (ii) except for transactions
disclosed in Section 4.2(h) of the Seller Disclosure Schedule, sell,
assign, transfer, pledge, mortgage or otherwise encumber, or permit any
encumbrances to exist with respect to, any of its assets with a value
in excess of $100,000 individually, except in the ordinary course of
business consistent with past practice; (iii) make any investment with
an interest maturity of five years or more except in the ordinary
course of business consistent with past practice; (iv) incur any
material liabilities or material obligations, whether directly or by
way of guaranty, including any obligation for borrowed money, whether
or not evidenced by a note, bond, debenture or similar instrument,
except in the ordinary course of business consistent with past practice
and in no event in excess of $100,000 individually except for
borrowings from the FHLB or pursuant to repurchase agreements
consistent with past practices; (v) enter into any agreement with
respect to any acquisition of a material amount of assets or securities
or any discharge, waiver, satisfaction, release or relinquishment of
any material contract rights, liens, encumbrances, debt or claims, not
in the ordinary course of business and consistent with past practices
and in no event with a value in excess of $200,000 individually except
for satisfaction of liens on loans receivable consistent with past
practice; (vi) settle any claim, action, suit, litigation, proceeding,
arbitration, investigation or controversy of any kind, for any amount
in excess of $250,000, net of any insurance proceeds, or in any manner
which would restrict in any material respect the operations or business
of the Seller or any of the Seller Subsidiaries; (vii) make any capital
expenditure, except in the ordinary course and consistent with past
practice and in no event in excess of $100,000 individually; or
(viii) take any action or fail to take any action which individually or
in the aggregate can be expected to have a Material Adverse Effect on
the Seller and the Seller Subsidiaries, taken as a whole;
(i) take or cause to be taken any action which would disqualify the Merger
(i) as a tax-free reorganization under Section 368 of the Code or (ii)
for pooling of interests accounting treatment under GAAP; and
(j) agree in writing or otherwise to do any of the foregoing.
Section 4.3 Letter of the Seller's Accountants. The Seller shall use its
reasonable best efforts to cause to be delivered to the Company "comfort"
letters of Ernst & Young LLP, the Seller's independent public accountants,
dated the date on which the Registration Statement shall become effective and
the Effective Time, respectively, and addressed to the Company, in a form
reasonably satisfactory to the Company and reasonably
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customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement and transactions such as those contemplated by this
Agreement.
Section 4.4 Access and Information.
(a) Until the Effective Time and upon reasonable notice, and subject to
applicable laws relating to the exchange of information, the Seller shall, and
shall cause each Seller Subsidiary to, afford to the Company's officers,
employees, accountants, legal counsel and other representatives of the
Company, access, during normal business hours, to all its properties, books,
contracts, commitments and records. Prior to the Effective Time, the Seller
shall (and shall cause each Seller Subsidiary to) furnish promptly (as soon as
available or received by the Seller or any Seller Subsidiary) to the Company
(i) a copy of each Seller Report filed by it or received by it (to the extent
not prohibited by Law and if so prohibited the Seller shall promptly so notify
the Company) after the date of this Agreement and prior to the Effective Time
pursuant to the requirements of federal or state securities laws, the HOLA or
any other federal or state banking laws or any other applicable Laws promptly
after such documents are available, (ii) the monthly financial statements of
the Seller and the Seller Subsidiaries (as prepared by the Seller in
accordance with its normal accounting procedures) promptly after such
financial statements are available without further request by the Company,
(iii) a copy of any action, including all minutes, taken by the Board of
Directors, or any committee thereof, of the Seller and the Seller Subsidiaries
and any documents or other materials of any kind provided to such Boards or
committees promptly after such action, minutes, materials or other documents
become available without further request by the Company, (iv) a copy of each
Tax Return filed by the Seller and each Seller Subsidiary for the three most
recent years available, a copy of any correspondence received from the IRS or
any other governmental entity or taxing authority or agency and any other
correspondence relating to Taxes, and any other documents relating to Taxes as
the Company may reasonably request, and (v) all other information concerning
its business, properties and personnel as the Company may reasonably request,
other than in each case reports or documents which the Seller is not permitted
to disclose under applicable Law or binding agreement entered into prior to
the date of this Agreement. The parties hereto will make appropriate
substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) Unless otherwise required by Law, the parties will hold any such
information which is nonpublic in confidence until such time as such
information becomes publicly available through no wrongful act of either
party, and in the event of termination of this Agreement for any reason each
party shall promptly return all nonpublic documents obtained from any other
party, and any copies made of such documents, to such other party or destroy
such documents and copies.
Section 4.5 Update Disclosure; Breaches.
(a) From and after the date of this Agreement until the Effective Time, the
Seller shall update the Seller Disclosure Statement on a regular basis by
written notice to the Company to reflect any matters which have occurred from
and after the date of this Agreement which, if existing on the date of this
Agreement, would have been required to be described therein; provided that,
(i) to the extent that any information that would be required to be included
in an update under this Section 4.5(a) would have in the past been contained
in internal reports prepared by the Seller or any Seller Subsidiary in the
ordinary course, such update may occur by delivery of such internal reports
prepared in accordance with past practice, with appropriate steps taken by the
Seller to identify relevant information contained therein, and (ii) to the
extent that updating required under this Section is unduly burdensome to the
Seller, the Seller and the Company will use their best efforts to develop
alternate updating procedures utilizing, wherever possible, existing reporting
systems.
(b) The Seller shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or
constitute a material breach (or would have caused or constituted a material
breach had such event occurred or been known prior to the date of this
Agreement) of any of its representations or agreements contained or referred
to herein, given prompt written notice thereof to the Company and use its best
efforts to prevent or promptly remedy the same.
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Section 4.6 Affiliates. Within thirty (30) days after the date of this
Agreement, (a) the Seller shall deliver to the Company a letter identifying
all persons who are then "affiliates" of the Seller, including, without
limitation, all directors and executive officers of the Seller, for purposes
of Rule 145 promulgated under the Securities Act and/or for the purposes of
applicable SEC accounting releases with respect to pooling-of-interests
accounting treatment (each a "Seller Affiliate") and (b) the Seller shall
advise the persons identified in such letter of the resale restrictions
imposed by applicable securities laws and regulations governing pooling-of-
interests accounting treatment and shall use reasonable efforts to obtain from
each person identified in such letter a written agreement, substantially in
the form attached hereto as Exhibit 4.6. The Seller shall use its reasonable
best efforts to obtain from any person who becomes an affiliate of the Seller
after the Seller's delivery of the letter referred to above, and on or prior
to the Effective Time, a written agreement substantially in such form as soon
as practicable after attaining such status.
Section 4.7 Tax Treatment and Pooling. The Seller will use its reasonable
best efforts to cause the Merger to qualify for pooling-of-interests
accounting treatment and as a reorganization under Section 368(a)(1)(A) of the
Code.
Section 4.8 Expenses.
(a) All Expenses (as defined below) incurred by the Company and the Seller
shall be borne solely and entirely by the party which has incurred the same,
except that the parties shall share equally in the out-of-pocket expenses
relating to the printing of the Registration Statement and the Proxy
Statement/Prospectus, and all SEC, NASDAQ, and other regulatory filing and
listing fees incurred in connection herewith.
(b) "Expenses" as used in this Agreement shall include all reasonable out-
of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to the party
and its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation and execution of this Agreement and
the Stock Option Agreement, the solicitation of shareholder approvals and all
other matters related to the closing of the transactions contemplated hereby
and by the Stock Option Agreement.
Section 4.9 Delivery of Shareholder List. The Seller shall arrange to have
its transfer agent deliver to the Company or its designee, from time to time
prior to the Effective Time, a true and complete list setting forth the names
and addresses of the Seller shareholders, their holdings of stock as of the
latest practicable date, and such other shareholder information as the Company
may reasonably request.
ARTICLE V--COVENANTS OF THE COMPANY
Section 5.1 Affirmative Covenants. The Company hereby covenants and agrees
with the Seller that prior to the Effective Time, unless the prior written
consent of the Seller shall have been obtained and except as otherwise
contemplated herein, it will and it will cause each Company Subsidiary to:
(a) maintain its corporate existence in good standing and maintain all
books and records in accordance with accounting principles and
practices as utilized in the Company's or the Company Subsidiaries', as
the case may be, financial statements applied on a consistent basis;
and
(b) conduct its business in the ordinary course of business consistent with
past practices and in a manner that does not violate any Law, except
for possible violations which individually or in the aggregate do not,
and, insofar as reasonably can be foreseen, in the future will not,
have a Material Adverse Effect on the Company and the Company
Subsidiaries, taken as a whole.
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Section 5.2 Negative Covenants. Except as otherwise contemplated by this
Agreement, from the date of this Agreement until the Effective Time, the
Company shall not do, or agree to commit to do, or permit any Company
Subsidiaries to do, without the prior written consent of the Seller any of the
following:
(a) solely in the case of the Company, declare or pay any extraordinary or
special dividends on or make any other extraordinary or special
distributions in respect of any of its capital stock unless appropriate
adjustment or adjustments are made to the Exchange Ratio as set forth
in Section 1.6 hereof; provided, however, that nothing contained herein
shall prohibit the Company from increasing the quarterly cash dividend
on the Company Common Stock;
(b) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or in any
of the conditions to the Merger set forth in Article VII not being
satisfied, or in a violation of any provision of this Agreement except,
in every case, as may be required by applicable Law;
(c) take or cause to be taken any action which would disqualify the Merger
(i) as a tax free organization under Section 368 of the Code or (ii)
for pooling-of-interests accounting treatment under GAAP;
(d) amend its Articles of Incorporation or By-laws or other governing
instrument in a manner which would adversely affect in any manner the
terms of the Company Common Stock or the ability of the Company to
consummate the transactions contemplated hereby;
(e) enter into any agreement providing for, or otherwise participate in,
any merger, consolidation or other transaction in which the Company or
any surviving corporation would be required not to consummate the
Merger or any of the other transactions contemplated hereby in
accordance with the terms of this Agreement, as the case may be; or
(f) agree to do any of the foregoing.
Section 5.3 Access and Information.
(a) Until the Effective Time and upon reasonable notice and subject to
applicable laws relating to the exchange of information, the Company shall,
and shall cause each Company Subsidiary to, afford to the Seller's officers,
employees, accountants, legal counsel and other representatives of the Seller,
access, during normal business hours, to all its properties, books, contracts,
commitments and records. Prior to the Effective Time, the Company shall (and
shall cause each Company Subsidiary to) furnish promptly (as soon as available
or received by the Company or any Company Subsidiary) to the Seller (i) a copy
of each Company Report filed by it or received by it (to the extent not
prohibited by Law and if so prohibited, the Company shall promptly so notify
the Seller) after the date of this Agreement and prior to the Effective Time
pursuant to the requirements of federal or state securities laws, the BHCA,
any other federal or state banking laws or any other applicable Laws promptly
after such documents are available and (ii) all other information concerning
the business, properties and personnel of the Company or the Company
Subsidiaries as the Seller may reasonably request, other than in each case
reports or documents which the Company is not permitted to disclose under
applicable law or binding agreement entered in to prior to the date of this
Agreement. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(b) Unless otherwise required by Law, the parties will hold any such
information which is nonpublic in confidence until such time as such
information becomes publicly available through no wrongful act of either
party, and in the event of termination of this Agreement for any reason each
party shall promptly return all nonpublic documents obtained from any other
party, and any copies made of such documents, to such other party or destroy
such documents or copies.
Section 5.4 Update Disclosure: Breaches.
(a) From and after the date of this Agreement until the Effective Time, the
Company shall update the Company Disclosure Statement on a regular basis by
written notice to the Seller to reflect any matters which have occurred from
and after the date of this agreement which, if existing on the date of this
Agreement, would have been required to be described therein; provided that, to
the extent that updating required under this Section
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is unduly burdensome to the Company, the Company and the Seller will use their
best efforts to develop alternate updating procedures utilizing, wherever
possible, existing reporting systems.
(b) The Company shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or
constitute a material breach (or would have caused or constituted a material
breach had such event occurred or been known prior to the date of this
Agreement) of any of its representations of agreements contained or referred
to herein, give prompt written notice thereof to the Seller and use its best
efforts to prevent or promptly remedy the same.
Section 5.5 Stock Exchange Listing. The Company shall use all reasonable
efforts to cause the shares of Company Common Stock to be issued in the Merger
to be approved for listing on the Nasdaq National Market prior to the
Effective Time.
Section 5.6 Tax Treatment and Pooling. The Company will use its reasonable
best efforts to cause the Merger to qualify (i) as a reorganization under
Section 368(a)(1)(A) of the Code and (ii) for pooling-of-interests accounting
treatment under GAAP.
Section 5.7 Stock Options.
(a) At the Effective Time, the Company will assume the Seller's 1991 Stock
Option and Incentive Plan, the 1995 Equity Incentive Plan and the 1996 Non-
Employee Director Stock Option Plan (the "Option Plans") and all of the
Seller's obligations thereunder. At the Effective Time, each outstanding
option issued pursuant to the Option Plans shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such option (as amended as contemplated in Section 4.1(g) and Annex A)
(including, without limitation, the time periods allowed for exercise), a
number of shares of Company Common Stock equal to the product of the Exchange
Ratio and the number of shares of Seller Common Stock subject to such option
(provided that any fractional shares of Company Common Stock resulting from
such multiplication shall be rounded down to the nearest share), at a price
per share (rounded up to the nearest cent) equal to the exercise price per
share of the shares of Seller Common Stock subject to such option divided by
the Exchange Ratio.
(b) Within five days after the Effective Time, the Company shall file with
the SEC a registration statement on an appropriate form under the Securities
Act with respect to the shares of Company Common Stock subject to options to
acquire Company Common Stock issued pursuant to Section 5.7(a) hereof, and
shall use its best efforts to maintain the current status of the prospectus
related thereto, as well as comply with applicable state securities or Blue
Sky Laws, for so long as such options remain outstanding.
The adjustment provided herein with respect to any options which are ISOs
shall be and is intended to be effected in a manner which is consistent with
Section 424(a) of the Code. The duration and other terms of the new option
shall be the same as the original option, except that all references to the
Seller shall be deemed to be references to the Company.
ARTICLE VI--ADDITIONAL AGREEMENTS
Section 6.1 Proxy Statement/Prospectus; Registration Statement. As promptly
as practicable after the execution of this Agreement, the Seller and the
Company shall prepare and file with the SEC the Proxy Statement/Prospectus and
Registration Statement under the Securities Act and the Exchange Act relating
to the approval of the Merger by the shareholders of the Seller and shall use
all reasonable efforts to cause the Registration Statement to become effective
as soon thereafter as practicable. The Proxy Statement/Prospectus shall
include the recommendation of the Board of Directors of the Seller in favor of
the Merger, unless the Board of Directors of the Seller shall have determined
in good faith based on advice of counsel that such recommendation would
violate its fiduciary duty to the Seller's shareholders.
Section 6.2 Meeting of the Seller's Shareholders. The Seller shall promptly
after the date of this Agreement take all action necessary in accordance with
the WBCL and Seller Articles and the Seller By-Laws
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to convene the Seller Shareholders' Meeting. The Seller shall use its best
efforts to solicit from shareholders of the Seller proxies in favor of the
Merger and shall take all other action necessary or advisable to secure the
vote or consent of shareholders required by the WBCL to approve the Merger,
unless the Board of Directors of the Seller shall have determined in good
faith based on advice of counsel that such actions would violate its fiduciary
duty to the Seller's shareholders.
Section 6.3 Appropriate Action; Consents; Filings. The Seller and the
Company shall use all reasonable efforts to (i) take, or cause to be taken,
all appropriate action, and do, or cause to be done, all things necessary,
proper or advisable under applicable Law to consummate and make effective the
transactions contemplated by this Agreement and the Stock Option Agreement,
(ii) obtain all consents, licenses, permits, waivers, approvals,
authorizations or orders required under Law (including, without limitation,
all foreign and domestic (federal, state and local) governmental and
regulatory rulings and approvals and parties to contracts) required in
connection with the authorization, execution and delivery of this Agreement
and the Stock Option Agreement and the consummation by them of the
transactions contemplated hereby and thereby, including, without limitation,
the Merger and the issuance of Seller Common Stock pursuant to the Stock
Option Agreement, (iii) make all necessary filings, and thereafter make any
other required submissions, with respect to this Agreement, the Stock Option
Agreement and the Merger required under (A) the Securities Act and the
Exchange Act and the rules and regulations thereunder, and any other
applicable federal or state securities laws, (B) applicable federal or state
banking laws and (C) any other applicable Law; provided that, the Company and
the Seller shall cooperate with each other in connection with the making of
all such filings, including providing copies of all such documents to the non-
filing party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
The Seller and the Company shall furnish all information required for any
application or other filing to be made pursuant to the rules and regulations
of any applicable Law (including all information required to be included in
the Proxy Statement/Prospectus and the Registration Statement) in connection
with the transactions contemplated by this Agreement. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall use all reasonable efforts to take all such
necessary action.
Section 6.4 Employee Stock Options and Other Employee Benefit Matters. Annex
A hereto sets forth certain agreements with respect to the Seller's employee
and director stock options and other employee benefit matters.
Section 6.5 Directors' and Officers' Indemnification and Insurance.
(a) In the event of any threatened or actual claim, action, suit, proceeding
or investigation, whether civil, criminal or investigative, including, without
limitation, any such claim, action, suit, proceeding or investigation in which
any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director, officer or
employee of the Seller or any of the Seller Subsidiaries (including his/her
role as a fiduciary of the employee benefit plans of the Seller or the Seller
Subsidiaries, if applicable) (the "Indemnified Parties") is, or is threatened
to be, made a party based in whole or in part on, or arising in whole or in
part out of, or pertaining to (i) the fact that he is or was a director,
officer or employee of the Seller, any of the Seller Subsidiaries or any of
their respective predecessors or (ii) this Agreement or any of the
transactions completed hereby, whether in any case asserted or arising before
or after the Effective Time, the parties hereto agree to cooperate and use
their best efforts to defend against and respond thereto. It is understood and
agreed that after the Effective Time, the Company shall indemnify and hold
harmless, to the fullest extent permitted by law, each such Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses (including
reasonable attorney's fees and expenses in advance of the final disposition of
any claim, suit, proceeding or investigation to each Indemnified Party to the
fullest extent permitted by law upon receipt of any undertaking required by
applicable law), judgments, fines and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit, proceeding or
investigation, and in the event of any such threatened or actual claim,
action, suit, proceeding or investigation (whether asserted or arising before
or after the Effective Time), the Indemnified Parties may retain counsel
satisfactory to them after consultation with the Company;
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provided, however, that the (1) Company shall have the right to assume the
defense thereof and upon such assumption the Company shall not be liable to
any Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by any Indemnified Party in connection with the
defense thereof, except that if the Company elects not to assume such defense
or counsel for the Indemnified Parties reasonably advises that there are
issues which raise conflicts of interest between the Company and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory
to them after consultation with the Company, and the Company shall pay the
reasonable fees and expenses of such counsel for the Indemnified Parties, (2)
Company shall in all cases be obligated pursuant to this Section 6.5(a) to pay
for only one firm of counsel for all Indemnified Parties, (3) the Company
shall not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld) and (4) Company
shall have no obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that indemnification
of such Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. Any Indemnified Party wishing to claim indemnification under
this Section 6.5, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Company thereof, provided that the
failure to so notify shall not effect the obligations of the Company under
this Section 6.5 except to the extent such failure to notify materially
prejudices the Company.
(b) The Company shall purchase, and for a period of three (3) years after
the Effective Time, the Company shall use its best efforts to maintain,
directors and officers liability insurance "tail" or "runoff" coverage with
respect to wrongful acts and/or omissions committed or allegedly committed
prior to the Effective Time. Such coverage shall have an aggregate coverage
limit under the Seller's existing directors and officers liability policy, and
in all other respects shall be at least comparable to such existing policy;
provided, however, that in no event shall the Company be required to expend on
an annual basis more than 200% of the current amount expended by the Seller
(the "Insurance Amount") to maintain or procure insurance coverage, and
further provided that if the Company is unable to maintain or obtain the
insurance called for by this Section 6.5 Company shall use all reasonable
efforts to obtain as much comparable insurance as available for the Insurance
Amount.
(c) In the event the Company or the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all
of its properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns of the
Company or the Surviving Corporation, as the case may be, assume the
obligations set forth in this section.
(d) In addition to the other indemnification obligations set forth in this
Section 6.5, the Company will fulfill the obligations to indemnify directors
and officers of the Seller contained in the Seller Articles.
(e) The provisions of this Section 6.5 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.
Section 6.6 Notification of Certain Matters. The Seller shall give prompt
notice to the Company, and the Company shall give prompt notice to the Seller,
of (i) the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Seller or the Company, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.6 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 6.7 Public Announcements. The Company and the Seller shall consult
with each other before issuing any press release or otherwise making any
public statements with respect to the Merger and shall not
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issue any such press release or make any such public statement prior to such
consultation, except as may be required by Law or any listing agreement with
or rule of the National Association of Securities Dealers, Inc.
Section 6.8 Customer Retention. To the extent permitted by law or applicable
regulation, the Seller shall use all reasonable efforts to assist the Company
in its efforts to retain the Seller's customers for the Surviving Corporation.
Such efforts shall include making introductions of the Company's employees to
such customers, assisting in the mailing of information prepared by the
Company and reasonably acceptable to the Seller, to such customers and
actively participating in any "transitional marketing programs" as the Company
shall reasonably request.
Section 6.9 Incentive Bonus Pool. Promptly following the execution and
delivery of this Agreement, the Seller will establish a bonus pool equal to
$516,000 for employees of the Seller and Seller Subsidiaries (the "Bonus
Pool"). The Bonus Pool will be used to:
(1) incent employees of the Seller and the Seller Subsidiaries to retain
the Seller's customers;
(2) incent employees of the Seller and the Seller Subsidiaries to attain
net income targets; and
(3) retain key employees of the Seller and the Seller Subsidiaries.
The Bonus Pool will be administered by a committee of three persons: Paul P.
Gergen, President and Chief Executive Officer of the Seller, Dennis J.
Kuester, the President of the Company and John W. Stampfl, the Senior Vice
President and Chief Financial Officer of the Seller. The committee will
designate participants, set targets and do all other things necessary to
administer the Bonus Pool. The initial allocation of the Bonus Pool will be
determined by Paul P. Gergen and may thereafter be changed only with his
written consent. The committee shall act by the decision of the majority of
its members, except as stated in the previous sentence.
Section 6.10 Recission of Repurchase Programs. Prior to the Effective Time,
the Company and the Seller shall renounce and rescind their respective
publicly announced share repurchase programs in order to meet the requirements
for pooling of interests accounting treatment for the Merger under GAAP.
ARTICLE VII--CONDITIONS OF MERGER
Section 7.1 Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Effectiveness of the Registration Statement. The Registration Statement
shall have been declared effective by the SEC under the Securities Act.
No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and no proceedings for that
purpose shall, on or prior to the Effective Time, have been initiated
or, to the knowledge of the Company or the Seller, threatened by
the SEC.
(b) Shareholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the shareholders of the
Seller.
(c) Regulatory Approvals. (i) The Merger shall have been approved by the
applicable regulatory authorities, including, without limitation, the
OTS and the Federal Reserve Board, which approvals shall not contain
any materially burdensome conditions that would significantly adversely
affect the Company; (ii) all conditions required to be satisfied prior
to the Effective Time imposed by the terms of such approval shall have
been satisfied; and (iii) all waiting periods relating to such approval
shall have expired.
(d) No Order. No federal or state governmental or regulatory authority or
other agency or commission, or federal or state court of competent
jurisdiction, shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether
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temporary, preliminary or permanent) which is in effect restricting,
preventing or prohibiting consummation of the transactions contemplated
by this Agreement.
(e) Pooling of Interests. The Seller and the Company shall have received a
letter of the Seller's independent public accountants, dated as of the
Closing Date, in form and substance reasonably satisfactory to the
Seller and the Company, stating that the Seller is an entity that
qualifies for pooling of interests accounting treatment pursuant to
GAAP and applicable SEC regulations. The Seller and the Company shall
also have received a letter of the Company's independent accountants,
dated the Closing Date, in form and substance reasonably satisfactory
to the Seller and the Company, stating that the transactions effected
pursuant to this Agreement will qualify as a pooling of interests
pursuant to GAAP and applicable SEC regulations.
Section 7.2 Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Seller contained in this Agreement, without giving
effect to any update to the Seller Disclosure Schedule or notice to the
Company under Section 4.5 or 6.6, shall be true and correct in all
respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of
the Effective Time as though made on and as of the Effective Time;
provided, however, that for purposes of determining the satisfaction of
the condition contained in this clause, no effect shall be given to any
exception in such representations and warranties relating to
materiality or a Material Adverse Effect, and provided, further,
however, that, for purposes of this clause, such representation and
warranties shall be deemed to be true and correct unless the failure or
failures of such representations and warranties to be so true and
correct, individually or in the aggregate, represent a Material Adverse
Effect on the Seller and the Seller Subsidiaries, taken as a whole.
Company shall have received a certificate signed on behalf of the
Seller by the Chief Executive Officer and the Chief Financial Officer
of the Seller to the foregoing effect.
(b) Agreements and Covenants. The Seller shall have performed or complied
in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to
the Effective Time.
(c) Consents Obtained. All Seller Approvals and all filings required to be
made by the Seller for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions
contemplated hereby shall have been obtained and made by the Seller,
except those for which failure to obtain such Seller Approvals or make
such filings would not individually or in the aggregate, have a
Material Adverse Effect on the Seller and the Seller Subsidiaries,
taken as a whole.
(d) No Challenge. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a
government agency (i) challenging or seeking material damages in
connection with, the Merger or the conversion of Seller Common Stock
into Company Common Stock pursuant to the Merger or (ii) seeking to
restrain, prohibit or limit the exercise of full rights of ownership or
operation by the Company or the Company Subsidiaries of all or any
portion of the business or assets of the Seller, which in either case
is reasonably likely to have a Material Adverse Effect on either the
Seller and the Seller Subsidiaries, taken as a whole, or the Company
and the Company Subsidiaries, taken as a whole.
(e) Tax Opinion. An opinion of Godfrey & Kahn, S.C., independent counsel to
the Company, dated as of the Effective Time, substantially to the
effect that on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts
existing at the Effective Time, the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and accordingly that no gain or loss will be
recognized by Seller as a result of the Merger. In rendering such
opinion, Godfrey & Kahn, S.C. may require and rely upon representations
and covenants contained in certificates of officers of the Company, the
Seller and others.
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(f) Comfort Letters. The Company shall have received from Ernst & Young,
LLP the "comfort" letters referred to in Section 4.3.
(g) No Material Adverse Changes. Since the date of the Agreement, there has
not been any change in the financial condition, results of operations
or business of the Seller and the Seller Subsidiaries, taken as a
whole, that either individually or in the aggregate would have a
Material Adverse Effect on the Seller and the Seller Subsidiaries taken
as a whole. The Company shall have received a certificate of the
President and the Chief Financial Officer of the Seller to that effect.
(h) Opinion of Counsel. The Company shall have received from Foley &
Lardner an opinion dated the Effective Time, in form and substance
reasonably satisfactory to the Company, covering the matters set forth
in Annex B hereto, which opinion shall be based on such assumptions and
containing such qualifications and limitations as are appropriate and
reasonably satisfactory to the Company.
Section 7.3 Additional Conditions to Obligations of the Seller. The
obligation of the Seller to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company set forth in this Agreement, without giving
effect to any notice to the Seller under Section 5.4 or 6.6, shall be
true and correct in all respects as of the date of this Agreement and
(except to the extent such representation and warranties speak as of an
earlier date) as of the Effective Time, as though made on and as of the
Effective Time; provided, however, that for purposes of determining the
satisfaction of the condition contained in this clause, no effect shall
be given to any exception in such representations and warranties
relating to materiality or a Material Adverse Effect, and provided,
further, however, that, for purposes of this clause, such
representations and warranties shall be deemed to be true and correct
unless the failure or failures of such representations and warranties
to be so true and correct, individually or in the aggregate, represent
a Material Adverse Effect on the Company and the Company Subsidiaries,
taken as a whole. The Seller shall have received a certificate signed
on behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company to the foregoing effect.
(b) Agreements and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to
the Effective Time.
(c) Consents Under Agreements. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings
required to be made by the company for the authorizations, execution
and delivery of this Agreement and the consummation by it of the
transactions contemplated hereby shall have been obtained and made by
the Company, except where failure to obtain any consents, waivers,
approvals, authorizations or orders required to be obtained or any
filings required to be made would not have a Material Adverse Effect on
the Company and the Company Subsidiaries, taken as a whole.
(d) Federal Tax Opinion. The Seller shall have received an opinion of Foley
& Lardner ("Seller's Counsel"), in form and substance reasonably
satisfactory to the Seller, dated as of the Effective Time,
substantially to the effect that on the basis of facts, representations
and assumptions set forth in such opinion which are consistent with the
state of facts existing at the Effective Time, the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the
Code, and that, accordingly, for federal income tax purposes:
(i)No gain or loss will be recognized by the Seller as a result of the
Merger;
(ii) No gain or loss will be recognized by the shareholders of the
Seller (except with respect to cash received in lieu of a
fractional share interest in Company Common Stock); and
(ii) The aggregate tax base of the company Common Stock received by
shareholders of Seller pursuant to the Merger will be the same as
the aggregate tax basis of the Seller Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional
share interest for which cash is received).
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In rendering such opinion, the Seller's Counsel may require and rely
upon representations and covenants contained in certificates of
officers of Company, the Seller and others.
(e) No Challenge. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a
government agency (i) challenging or seeking material damages in
connection with, the Merger or the conversion of Seller Common Stock
into Company Common Stock pursuant to the Merger or (ii) seeking to
restrain, prohibit or limit the exercise of full rights of ownership or
operation by the Company or the Company Subsidiaries of all or any
portion of the business or assets of Seller, which in either case is
reasonably likely to have a Material Adverse Effect on either the
Seller and the Seller Subsidiaries, taken as a whole, or the Company
and the Company Subsidiaries, taken as a whole.
(f) No Material Adverse Changes. Since the date of the Agreement, there has
not been any change in the financial condition, results of operations
or business of the Company and the Company Subsidiaries, taken as a
whole, that either individually or in the aggregate would have a
Material Adverse Effect on the Company and the Company Subsidiaries
taken as a whole. The Seller shall have received a certificate of the
President and the Chief Financial Officer of the Company to that
effect.
(g) Opinion of Counsel. The Seller shall have received from Godfrey & Kahn,
S.C. an opinion dated the Effective Time, in form and substance
reasonably satisfactory to the Seller, covering the matters set forth
in Annex C hereto, which opinion shall be based on such assumptions and
contain such qualifications and limitations as are appropriate and
reasonably satisfactory to the Seller.
ARTICLE VIII--TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination.
(a)This Agreement may be terminated at any time prior to the Effective Time:
(i) by mutual consent of the Company and the Seller by a vote of a
majority of the members of the entire Boards of Directors of the
Company and Seller;
(ii) by either the Company or the Seller if any approval of the
shareholders of the Seller required for the consummation of the
Merger shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of such
shareholders or at any adjournment or postponement thereof;
(iii) by the Seller or the Company (A) if there has been a breach in
any material respect (except that where any statement in a
representation or warranty expressly includes a standard of
materiality, such statement shall have been breached in any
respect) of any representation, warranty, covenant or agreement
on the part of Seller, on the one hand, or the Company, on the
other hand, set forth in this Agreement, or (B) if any
representation or warranty of Seller, on the one hand, or the
Company, on the other hand, shall be discovered to have become
untrue in any material respect (except that where any statement
in a representation or warranty expressly includes a standard of
materiality, such statement shall have become untrue in any
respect), in either case which breach or other condition has not
been cured within 30 business days following receipt by the
nonterminating party of notice of such breach or other condition,
or which breach by its nature, cannot be cured prior to Closing;
provided, however, neither party shall have the right to
terminate this Agreement pursuant to this Section 8.1(a)(iii)
unless the breach of any representation or warranty (but not
breaches of covenants or agreements), together with all other
such breaches, would entitle the party receiving such
representation or warranty not to consummate the transactions
contemplated hereby under Section 7.2(a) (in the case of a breach
of a representation or warranty by the Seller) or Section 7.3(a)
(in the case of a breach of a representation or warranty by the
Company); and, provided further this Agreement may not be
terminated pursuant to this clause (iii) by the breaching party
or party making any representation or warranty which shall have
become untrue in any material respect;
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(iv) by either the Company or the Seller if any permanent injunction
preventing the consummation of the Merger shall have become final
and nonappealable;
(v) by either the Company or the Seller if the Merger shall not have
been consummated by April 30, 1998, for a reason other than the
failure of the party seeking termination to comply with its
obligations under this Agreement; provided that if the Merger shall
not have been consummated on or prior to April 30, 1998 as a result
of proceedings of a governmental authority or litigation, then the
date on which either the Company or the Seller may terminate this
agreement under this Section 8.1 (a)(v) shall be extended to the
earlier of (A) the elapse of a reasonable period of time necessary
to consummate the Merger following the final termination of
proceedings of a governmental authority or litigation or (B)
November 30, 1998;
(vi) by either the Company or the Seller if any regulatory authority
has denied approval of the Merger, and neither the Company nor the
Seller has, within 30 days after the entry of such order denying
approval, filed a petition seeking review of such order as
provided by applicable law;
(vii) by the Seller pursuant to Section 1.6(e) hereof; or
(viii) by the Company at any time prior to the Seller Shareholders'
Meeting if the Seller's Board of Directors shall have failed to
make its recommendation referred to in Section 6.1, withdrawn
such recommendation or modified or changed such recommendation
in a manner adverse in any respect to the interests of the
Company.
Section 8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void
and all rights and obligations of any party hereto shall cease except: (i) as
set forth in Section 9.1 of this Agreement and (ii) nothing herein shall
relieve any party from liability for any willful breach of this Agreement or
shall restrict either party's rights in the case thereof.
Section 8.3 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after approval of
the Merger by the shareholders of the Seller, no amendment may be made,
without further approval of such shareholders which would reduce the amount or
change the type of consideration into which each share of Seller Common Stock
shall be converted pursuant to this Agreement upon consummation of the Merger.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
Section 8.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations
or other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE IX--GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations. Warranties and Agreements. The
representation, warranties and agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to
Article VIII, except that the agreements set forth in Article I and Sections
5.7, 6.4 (including Annex A), 6.5 and 6.9 shall survive the Effective Time and
those set forth in Sections 4.4(b), 4.8, 5.3(b) and Article IX hereof shall
survive termination indefinitely.
Section 9.2 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained in
each of Sections 4.4(b), 5.3(b), 5.7, 6.4 (including annex A), 6.5 and 6.9 of
this Agreement were not performed in accordance with its specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of
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<PAGE>
Sections 4.4(b), 5.3(b), 5.7, 6.4 (including Annex A), 6.5 and 6.9 of this
Agreement and to enforce specifically the terms and provisions thereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section 9.3 Notices. All Notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation), mailed by register or certified
mail (postage prepaid, return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice) and shall be effective upon receipt:
(a) If to the company:
Marshall & Ilsley Corporation
770 North Water Street
Milwaukee, Wisconsin 53202
Telecopier: (414) 764-7788
Attention: Michael A. Hatfield
With a copy to:
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
Telecopier: (414) 273-5198
Attention: Kenneth C. Hunt
Randall J. Erickson
(b) If to the Seller:
Advantage Bancorp, Inc.
5935 Seventh Avenue
Kenosha, Wisconsin 53140
Telecopier: (414) 658-2320
Attention: Paul P. Gergen
With a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Telecopier: (414) 297-4900
Attention: Michael D. Regenfuss
Jay O. Rothman
Section 9.4 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; including, without limitation, any
partnership or joint venture in which any person (either alone, or though or
together with any other subsidiary) has, directly or indirectly, an interest
of 5% or more;
(b) "business day" means any day other than a day on which banks in
Wisconsin are required or authorized to be closed;
(c) "control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management or policies of
a person, whether through the ownership of stock or as trustee or executor, by
contract or credit arrangement or otherwise;
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<PAGE>
(d) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d) of the Exchange Act); and
(e) "subsidiary" or "subsidiaries" of Seller, the Company, the Surviving
Corporation, or any other person, means any corporation, partnership, joint
venture or other legal entity of which the Seller, the Company, the Surviving
Corporation or such other person, as the case may be (either alone or through
or together with any other subsidiary), owns, directly or indirectly, 50% or
more of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
Section 9.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.6 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
Section 9.7 Entire Agreement. This Agreement, the Stock Option Agreement,
and the written confidentiality agreement in effect between the parties
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or
any of them, with respect to the subject matter hereof and, except as
otherwise expressly provided herein, are not intended to confer upon any other
person any rights or remedies hereunder.
Section 9.8 Assignment. This Agreement and the Stock Option Agreement shall
not be assigned by operation of law or otherwise, except that the Company may
assign all or any of its rights hereunder and thereunder to any affiliate
provided that no such assignment shall relieve the assigning party of its
obligations hereunder.
Section 9.9 Parties in Interest. This Agreement (including Annex A hereto)
shall be binding upon and inure solely to the benefit of each party hereto,
and nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, other than (i) Section 6.5
(which is intended to be for the benefit of the Indemnified Parties and may be
enforced by such Indemnified Parties) and (ii) Section 5.7, Section 6.4
(including Annex A hereto) and Section 6.9 (which are intended to be for the
benefit of the directors, officers and employees of the Seller and the Seller
Subsidiaries and may be enforced by such persons).
Section 9.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Wisconsin, regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law.
Section 9.11 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
Section 9.12 Time Is of the Essence. Time is of the essence of this
Agreement and the Stock Option Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Seller have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
ADVANTAGE BANCORP, INC.
By: /s/ Paul P. Gergen
-------------------------------------
Paul P. Gergen
Chairman of the Board,
President and Chief Executive Officer
MARSHALL & ILSLEY CORPORATION
By: /s/ James B. Wigdale
-------------------------------------
James B. Wigdale
Chairman of the Board and
Chief Executive Officer
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<PAGE>
ANNEX A
EMPLOYEE BENEFIT MATTERS
1. Conduct of Business Between Date of Signing the Agreement and the
Effective Time. Between the date of signing of the Agreement and the Effective
Time (i) there will be no increases in base salary for Messrs. Gergen and
Stampfl; (ii) other employees may receive increases in base salary and bonuses
in the ordinary course of business consistent with past practice, subject to
Paragraphs 10 and 11 hereof; (iii) no new programs, plans or agreements
providing compensation for employees or directors will be adopted or
implemented, existing programs, plans or agreements will not be amended or
modified except as provided herein or in agreements executed by employees
and/or directors in connection herewith, and no further grants or awards will
be made under existing programs or agreements except as explicitly provided
herein; (iv) no new employment agreements will be granted and the existing
employment agreements will not be amended except as provide herein or in the
agreements executed by employees contemporaneously herewith; (v) Seller shall
not make any contributions, other than employee elective deferrals, to its
401(k) plan but shall make contributions to Seller's ESOP (as defined in
Paragraph 9) at levels consistent with prior Seller contributions and as
further permitted under Paragraph 9; and (vi) Seller or Seller Subsidiaries
will only pay severance to those employees who are terminated by their
employer and then only in amounts and for a period consistent with past
practice of the employer.
2. General
(a) Those individuals who are employed by the Seller or the Seller
Subsidiaries as of the Effective Time and who remain, at the Company's
discretion, employees of the Company or its subsidiaries following the
Effective Time shall be referred to hereinafter as "Affected Employees".
(b) The Company will give Affected Employees full credit for their prior
service with the Seller or the Seller Subsidiaries (or any service credited as
such in connection with a previous acquisition by Seller or any Seller
Subsidiary) (i) for purposes of eligibility (including initial participation
and eligibility for retirement benefits) and vesting under any qualified or
nonqualified retirement or profit sharing plans maintained by the Company in
which employees of Seller and Seller Subsidiaries may be eligible to
participate and (ii) for all purposes under any welfare benefit plans
(including severance) and vacation plans and arrangements maintained by the
Company. Further, the Company shall treat compensation received from the
Seller or Seller Subsidiaries (or any compensation credited as such in
connection with a previous acquisition by Seller or any Seller Subsidiary) as
compensation received from the Company for all purposes under any welfare
benefit plans (including severance) and vacation plans and arrangements
maintained by the Company. Notwithstanding the preceding sentences of this
Section 2(b) or anything else contained in this Annex or the Merger Agreement
to the contrary, for purposes of the Company's retiree health plan, Affected
Employees will be given access to the retiree health plan if they meet the
eligibility criteria for the plan with no credit for prior service with Seller
or Seller Subsidiaries (or any service credited as such in connection with a
previous acquisition by Seller or any Seller Subsidiary), but the cost of
health insurance under the plan will be borne 100% by the Affected Employees
with no subsidy by the Company.
(c) The Company will, or will cause the Seller or the Seller Subsidiaries
to, waive all limitations as to preexisting conditions and waiting periods
with respect to participant and coverage requirements applicable to the
Affected Employees under any welfare benefit plans that such employees may be
eligible to participate in on or after the Effective Time, other than
limitations or waiting periods that are already in effect with respect to such
employees and that have not been satisfied as of the Effective Time under any
welfare plan maintained for the Affected Employees immediately prior to the
Effective Time.
3. 401(k) Plan. Accounts in Seller's 401(k) plan of participants who are
employed at the Effective Time by the Seller or Seller Subsidiaries will be
fully vested as of the Effective Time. The Company reserves the right
thereafter to merge or freeze Seller's 401(k) plan.
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<PAGE>
4. Employment Agreements. The Employment Agreements for Messrs. Gergen and
Stampfl are being contemporaneously amended by execution of agreements between
the executive, Seller, Seller's bank subsidiary and the Company in the form
attached to the Merger Agreement as Exhibit 4.1 setting the maximum amount to
be paid under Sections 8(a)(i) and (ii) of the Employment Agreements
consistent with prior information provided to the Company, and making payment
of compensation under each Employment Agreement subject to a complete and
permanent release of all claims arising out of the applicable executive's
employment, including age discrimination (but not including any vested accrued
benefits under the Seller's or Seller's bank subsidiary's qualified or
nonqualified retirement or profit sharing plans), which release is not revoked
during the statutory period allowed for revocation.
5. Employee Welfare Benefits. Affected Employees will be integrated into the
employee welfare benefit plans of the Company, including health, dental, group
term life insurance, tuition reimbursement, long-term disability and other
employee benefit plans available to similarly situated employees, as of the
later of (i) the Effective Time; or (ii) at the discretion of the Company,
such later date as is administratively practicable but no later than January
1, 1999, provided, however, that Seller's employee welfare benefit plans shall
continue in force until the applicable Company employee welfare benefit plan
applies to the Affected Employees. Company reserves the right, at anytime and
from time to time, to modify or amend, in whole or in part, any or all
provisions of such plans of the Company, except to the extent otherwise
provided in this Annex.
6. Severance Plan. Severance payments to former employees of Seller or
Seller Subsidiaries who are terminated by Company or its subsidiaries will be
made in accordance with the Company's normal severance schedule, as attached
hereto, pursuant to the M&I Severance Plan as in effect on the date of such
employee's termination of employment. Notwithstanding the foregoing, all
employees of Seller or Seller Subsidiaries, including Messrs. Gergen and
Stampfl, who have written agreements in effect at the Effective Time
pertaining to payments on termination of their employment with Seller or
Seller Subsidiaries will not be entitled to any payments pursuant to the M&I
Severance Plan upon termination of employment unless they waive all rights to
compensation, severance and benefits under those other agreements.
7. Executive Salary Continuation Agreement. The Executive Salary
Continuation Agreements for Messrs. Gergen and Stampfl shall be assumed in
full by the Company.
8. Bank Incentive Plans and Trusts I and II. The Bank Incentive Plans and
Trusts I and II will be assumed in full by the Company.
9. ESOP
(a) As of the Effective Time, Seller shall amend its Employee Stock
Ownership Plan (the "ESOP") as necessitated by the remaining provisions of
this Section 9 and to provide that effective as of the Effective Time, Seller
shall appoint three (3) independent persons who shall serve as the
Administrator and Advisory Committee (as defined in the ESOP) of the ESOP
(collectively, the "Administrator"), with all of the powers and duties
previously vested under the ESOP in the Administrator, Advisory Committee and
Seller's board of Directors, including but not limited to, complete authority
to administer, amend and terminate the ESOP in accordance with the terms and
intent of this Agreement. Notwithstanding the foregoing, such amendment shall
also provide that in the event any of these three individuals resigns or
otherwise vacates his appointment, the remaining person or persons
constituting the Administrator shall appoint the successor for the vacant
position.
(b) As of the day (the "Contribution Date") immediately prior to the
Effective Time, the Seller shall make a contribution to the Seller's ESOP,
which, together with any dividends on Seller's stock held in the ESOP, will
equal the amount the Seller would have contributed to the ESOP pursuant to
Section 3.03(b)(ii) of the ESOP to pay the currently maturing obligation under
the Exempt Loan (as defined in the ESOP) for the then current Plan Year, (as
defined in the ESOP) multiplied by a fraction (the "Fraction"), the numerator
of which is the number of days in the current Plan Year through and including
the Effective Time and the denominator of which is 365, and shall cause the
Trustee of the ESOP to use the full amount of such contribution promptly to
repay a portion of the outstanding Exempt Loan. As a result of the
aforementioned contribution and repayment, the Seller shall
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<PAGE>
take such action as may be necessary or appropriate to cause shares of the
Seller's stock to be released from the suspense account maintained under the
ESOP and allocated to the accounts of certain Participants (as defined in the
ESOP) as follows:
(i) first, if (A) Seller paid cash dividends on one or more dividend dates
that coincide with or precede the Contribution Date and (B) allocations
have not yet been made on or before such Contribution Date to the
accounts of eligible Participants in accordance with Section 3.03(d)(i)
of the ESOP as of such dividend dates, then full and fractional shares
of Seller's stock shall be allocated as of each respective dividend
date to Participants who otherwise would have received or had allocated
to their accounts cash dividends on such dividend date but for the fact
that such dividends were used in accordance with Section 3.03(b)(i) of
the ESOP to pay principal and interest on the Exempt Loan. Such
allocation shall be made in accordance with Section 3.03(d)(i) of the
ESOP; and
(ii) second, as of the Contribution Date, to the accounts of each
Participant who would be entitled to an allocation for the then
current Plan Year if (A) the Contribution Date were the last day of
such Plan Year and (B) the 1,000 Hour of Service requirements set
forth in Section 3.01(b)(i) and (ii) and Section 3.02(b)(i) and (ii)
of the ESOP were multiplied by the Fraction; such allocation of the
Employer Matching Contribution (as defined in the ESOP) for such Plan
Year shall be made under Section 3.01(a) of the ESOP, in accordance
with each such Participant's Deposits (as defined in the ESOP) under
Seller's 401(k) Plan for the portion of such Plan Year through the end
of the last payroll period ending on or before the Contribution Date;
such allocation of the Other Employer Contribution (as defined in the
ESOP) shall be made, under Section 3.02(a) of the ESOP, in accordance
with the ratio of (A) the Compensation (as defined in the ESOP) of
each such Participant for the portion of the Plan Year through the end
of the last payroll period ending on or before the Contribution date
to (B) the aggregate Compensation through the end of the last payroll
period ending on or before the Contribution Date of all Participants
entitled to such allocation.
(c) The Company, Seller and the Administrator agree to take such action as
may be necessary or appropriate:
(i) to cause the ESOP to terminate as of the Effective Time and for all
Account balances to become fully vested and nonforfeitable as of such
date;
(ii) to cause the Trustee of the ESOP to sell, from the suspense account
maintained under the ESOP, shares of stock of the Company with an
aggregate value equal to the remaining outstanding ESOP indebtedness,
after giving effect to the repayment described in paragraph (a)
hereof, and to use the proceeds of such sale to repay in full all such
outstanding ESOP indebtedness;
(iii) to cause those shares of stock of the Company (and any cash)
remaining in the suspense account maintained under the ESOP, after
giving effect to the aforementioned sale (the "Remaining Shares"), to
be allocated among all Participants in proportion to the number of
shares allocated to such Participants' ESOP Accounts as of the
Effective Time or in such other manner as may be required by the
Internal Revenue Service (the "Service") as a condition to its
issuance of a favorable determination letter regarding the qualified
status of the ESOP upon its termination; and
(iv) for the Account balances of all Participants to be distributed in a
lump sum (or transferred in accordance with Section 401(a)(31) of the
Code) as soon as practicable, and consistent with any requirements in
the determination letter from the Service, following the later of (A)
the Effective Time or (B) the date of receipt of such favorable
determination letter from the Service.
(d) As soon as practicable after the date hereof, the Seller and the Company
shall jointly file a request for an advance determination letter from the
Service regarding the continued qualified status of the ESOP upon its
termination, and the parties hereby agree to cooperate fully in all matters
pertaining to such filing (including, but not limited to, making such changes
to the ESOP and the proposed allocations described herein as may be requested
by the Service as a condition to its issuance of a favorable determination
letter; and authorizing and directing their respective counsel jointly to
perform all acts necessary to secure such favorable determination
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<PAGE>
letter from the Service (including preparing the determination letter
application, filing such application with the Service, and dealing with any
employee of the Service who reviews such application)). The Seller and the
Company recognize that time is of the essence, and the parties hereby agree to
use their best efforts to secure a favorable determination letter from the
Service prior to the Effective Time. If, despite the Seller's and the
Company's attempts to obtain such a favorable determination letter, the
Service does not permit all or any portion of the Remaining Shares to be
allocated as of the Effective Time as contemplated hereby, the parties hereby
agree to take such action as may be necessary to allocate the Remaining Shares
(or amounts attributable thereto) as rapidly as possible among Participants in
the ESOP in such other manner as is consistent with meeting their respective
fiduciary duties under ERISA and with obtaining the Service's determination
that the ESOP retains its qualified status upon its termination, including,
without limitation, and notwithstanding paragraph 9(b)(i) hereof, to cause the
ESOP to remain open after the Effective Time, until all of the Remaining
Shares have been allocated among such Participants' accounts and upon such
basis as the Service may require or as may be necessary to avoid the
imposition of any tax or other liability upon the Company in connection with
the ESOP; provided, however, that no such action shall create any liability
for the Company to make any contributions to the ESOP or to provide any
replacement benefits to Participants outside the ESOP. In all events, it is
the intention that the Participants in the ESOP will receive the entire
benefit of the Remaining shares which are unallocated after application of the
above provisions. In the event that any action under this Agreement needs to
be take with respect to the ESOP on or after the Effective Time, such action
may only be take by and shall be the sole and exclusive responsibility of the
Administrator; provided, however, that any and all such actions shall be taken
in accordance with the provisions and intent of this Agreement.
(e) The Trustee (as defined in the ESOP) fees and expenses described in
Section 9.09 of the ESOP shall be paid consistent with the historic practice
of the ESOP and the Seller.
10. Officer Incentive Compensation Plan. For that portion of fiscal 1998
ending on the earlier of (a) a participant's termination of employment or (b)
the Effective Time, participant will receive a prorated portion of the bonus
payment paid to such participant under the Sellers' Officer Incentive
Compensation Plan for fiscal year 1997, based on the number of days which
elapsed during such period as a percentage of 365 days.
11. Bonuses. Bonuses for employees of the Seller or Seller Subsidiaries
other than those participating in the Officer Incentive Compensation Plan, for
fiscal 1998 shall be paid pursuant to the terms of any such bonus plans, or in
the absence of a plan, consistent with past practice of Seller or Seller
Subsidiaries. Any bonus amounts which, in a manner consistent with past
practice, have been accrued as of the end of fiscal 1997, including amounts
accrued under the Seller's Excell Bonus Plan and Seller's Officer Incentive
Compensation Plan, may also be paid. All bonuses in respect of fiscal 1998
which, in a manner consistent with past practice, are accrued but unpaid as of
the Effective Time shall be paid promptly following the Effective Time. In
addition, Seller or Seller Subsidiaries may make bonus payments to employees
(whether or not such employees are participating in the Officer Incentive
Compensation Plan) from the Bonus Pool established pursuant to Section 6.9 of
the Merger Agreement.
12. Amendments. The Company agrees that the Seller shall be permitted, prior
to the Effective Time, to make the amendments to, and to take such other
actions with respect to, its plans and agreements, as described herein, but to
make no other amendments or changes in policy without the consent of the
Company.
13. Amendment of Option Plans and Participant Consent. The Seller will amend
its 1991 Stock Option and Incentive Plan (the "1991 Plan"), contemporaneously
with the execution of the Agreement, to add the following sentence to the end
of Section 13 of the 191 Plan:
"Notwithstanding anything contained herein to the contrary, if any merger or
consolidation of the Corporation is to be treated as a pooling of interests
for accounting purposes, the Committee shall not provide a Participant
exercising any Option or Right pursuant to this Paragraph with any
consideration therefor other than stock of the acquiring corporation."
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The Seller, contemporaneously with the execution of the Agreement to the
extent practicable, but in no event later than the Effective Time, will use
its reasonable best efforts to obtain a consent and waiver, in the form
attached to the Agreement as Exhibit 4.1, of each person granted an option
under the 1991 Plan agreeing to the amendment to the 1991 Plan and to the same
amendment to Section 8 of the option grant form and waiving any rights he or
she might have had under Section 13 of the 1991 Plan or Section 8 of the
option grant form before such amendment. The Seller will amend,
contemporaneously with the execution of the Agreement, its 1995 Equity
Incentive Plan (the "1995 Plan") to delete the following clause in Section
4(b)(iii) thereof: ". . . or, if deemed appropriate, make provisions for a
cash payment to the holder of an outstanding Award, . . .". In addition,
contemporaneously with the execution of the Agreement to the extent
practicable, but in no event later than the Effective Time, Seller will use
its reasonable best efforts to obtain a consent and waiver, in the form
attached to the agreement as Exhibit 4.1, of each person granted options under
the 1995 Plan agreeing to the amendment of Section 8 of the option grant forms
as set forth above and waiving any rights he or she might have had under
Section 4(b)(iii) of the 1995 Plan before such amendment.
SCHEDULE OF SEVERANCE PAYMENTS
<TABLE>
<CAPTION>
Your Position Severance Pay
- -------------------------------------------------------------------------------
<S> <C>
Nonexempt Employee 2 weeks, plus 1 week for each full year of continuous employment.
Minimum: 4 weeks
Maximum: 26 weeks
- -------------------------------------------------------------------------------
Exempt Employee 2 weeks, plus 2 weeks for each full year of continuous employment.
(Non-Officer) Minimum: 8 weeks
Maximum: 26 weeks
- -------------------------------------------------------------------------------
Officer/Assistant Vice 2 weeks, plus 2 weeks for each full year of continuous employment.
President Minimum: 12 weeks
Maximum: 36 weeks
- -------------------------------------------------------------------------------
Vice President or Above 2 weeks, plus 2 weeks for each full year of continuous employment.
Minimum: 24 weeks
Maximum: 52 weeks
</TABLE>
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<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated November 3, 1997, between Marshall & Ilsley
Corporation, a Wisconsin corporation ("Grantee"), and Advantage Bancorp, Inc.,
a Wisconsin corporation ("Issuer").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger (the "Merger Agreement");
WHEREAS, as a condition and an inducement to Grantee's entering into the
Merger Agreement, Issuer is granting Grantee the Option (as hereinafter
defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties
hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to an aggregate of
643,930 (as adjusted or set forth in Sections 1(b) and 5(b) hereof) fully paid
and nonassessable, except as provided by Section 180.0622(2)(b) of the
Wisconsin Business Corporation Law ("WBCL"), shares of the common stock, par
value $0.01 per share, of Issuer ("Issuer Common Stock") at a price per share
of $56.00 (the "Option Price"); provided, however, that in the event
Issuer issues or agrees to issue any shares of Issuer Common Stock (other than
shares of Issuer Common Stock issued pursuant to stock options granted
pursuant to any director or employee benefit or stock option plan prior to the
date hereof) at a price less than $56.00 (as adjusted pursuant to subsection
(b) of Section 5 hereof), the Option Price shall be equal to such lesser
price; provided, further, that in no event shall the number of shares for
which this Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock. The number of shares of Issuer Common Stock
that may be received upon the exercise of the Option and the Option Price are
subject to adjustment as herein set forth.
(b) In the event that any additional shares of Issuer Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement and other than pursuant to an event described
in Section 5(a) hereof), the number of shares of Issuer Common Stock subject
to the Option shall be increased so that, after such issuance, such number
together with any shares of Issuer Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Issuer Common Stock then
issued and outstanding without giving effect to any shares subject or issued
pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in
this Agreement shall be deemed to authorize Issuer to issue shares of Issuer
Common Stock in breach of any provision of the Merger Agreement.
2. (a) Grantee may exercise the Option, in whole or part, if, but only if,
both an Initial Triggering Event (as hereinafter defined) and a Subsequent
Triggering Event (as hereinafter defined) shall have occurred prior to the
occurrence of an Exercise Termination Event (as hereinafter defined);
provided, however, that Grantee shall have sent the written notice of such
exercise (as provided in subsection (e) of this Section 2) within three (3)
months following such Subsequent Triggering Event (or such later period as
provided in Section 10 hereof). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of
the Merger Agreement in accordance with the provisions thereof if such
termination occurs prior to the occurrence of an Initial Triggering Event
except a termination by Grantee pursuant to Section 8.1(a)(iii) or
8.1(a)(viii) of the Merger Agreement, or by Grantee or Issuer pursuant to
Section 8.1(a)(ii) of the Merger Agreement if prior to, or within three months
after, the duly held meeting of the shareholders of the Issuer at which the
required vote to approve the Merger was not obtained it shall have been
publicly announced or
B-1
<PAGE>
disclosed that any person (other than Grantee or any Grantee Subsidiary (as
defined below)) shall have made, or disclosed an intention to make, a proposal
to engage in an Acquisition Transaction (as defined below) (each, a "Listed
Termination"); or (iii) the passage of twelve (12) months (or such longer
period as provided in Section 10) after termination of the Merger Agreement if
such termination follows the occurrence of an Initial Triggering Event or is a
Listed Termination. Notwithstanding anything to the contrary contained herein,
(i) the Option may not be exercised at any time when Grantee shall be in
material breach of any of its representations, warranties, covenants or
agreements contained in this Agreement or in the Merger Agreement such that,
in the case of the Merger Agreement, Issuer shall be entitled to terminate the
Merger Agreement pursuant to Section 8.1(a)(iii) thereof and (ii) this
Agreement shall automatically terminate upon the proper termination of the
Merger Agreement by Issuer either pursuant to Section 8.1(a)(iii) thereof as a
result of the material breach by Grantee of its covenants or agreements
contained in the Merger Agreement or pursuant to Section 8.1(vii) thereof.
Notwithstanding the occurrence of an exercise Termination Event, Grantee shall
be entitled to purchase those shares of Issuer Common stock with respect to
which it has exercised the Option in accordance with the terms hereof prior to
the Exercise Termination event.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any subsidiary of Issuer (an "Issuer Subsidiary"), without
having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes
of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the rules and regulations thereunder)
other than Grantee or any of the subsidiaries of Grantee (each a
"Grantee Subsidiary") or the Board of Directors of Issuer (the
"Issuer Board") shall have recommended that the shareholders of
Issuer approve or accept any Acquisition Transaction other than the
Merger (as defined in the Merger Agreement). For purposes of this
Agreement, "Acquisition Transaction" shall mean either (x) a merger
or consolidation, or any similar transaction, involving Issuer or
Advantage Bank, F.S.B. (other than internal mergers, consolidations
or similar transactions involving solely Issuer and/or one or more
existing wholly-owned Issuer Subsidiaries, provided, that any such
transaction is not entered into in violation of the terms of the
Merger Agreement), (y) a purchase, lease or other disposition of 15%
or more of the consolidated assets, net revenues or net income of
Issuer (on a consolidated basis), or (z) an issuance, sale or other
disposition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the
voting power of Issuer or Advantage Bank, F.S.B.;
(ii) Any person (other than Grantee or any Grantee Subsidiary) shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3
under the 1934 Act) or the right to acquire beneficial ownership of,
or any "group" (as such term is defined under the 1934 Act) shall
have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 20% or more of the then outstanding shares
of Issuer Common Stock (other than shares held in accounts related
to Issuer's employee benefit plans);
(iii) The shareholders of Issuer shall have voted and failed to approve
the Merger Agreement and the Merger at a meeting which has been
held for that purpose, or such meeting, in violation of the Merger
Agreement, shall not have been held, or such meeting shall have
been cancelled prior to termination of the Merger Agreement if, in
any event, prior to such meeting (or if such meeting shall not have
been held or shall have been cancelled, prior to the termination of
the Merger Agreement), it shall have been publicly announced or
disclosed that any person (other than Grantee or any Grantee
Subsidiary) shall have made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction;
(iv) The Board of Directors of the Issuer shall have withdrawn or
modified (or publicly announced its intention to withdraw or
modify), in any manner adverse in any respect to Grantee, its
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recommendation that the shareholders of Issuer approve the
transactions contemplated by the Merger Agreement, or Issuer or any
Issuer Subsidiary shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose)
an agreement to engage in an Acquisition Transaction with any person
other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall have
made a proposal to Issuer or its shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly
announced;
(vi) Any person other than Grantee or any Grantee Subsidiary shall have
commenced (as such term is defined in Rule 17d-2 under the 1934
Act), or shall have filed with the SEC a registration statement
under the 1934 Act or tender offer materials with respect to, a
potential exchange offer or tender offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such
person or a "group" (as such term is defined under the 1934 Act) of
which such person is a member, would acquire beneficial ownership
(as such term is defined in Rule 13d-3 of the 1934 Act), or the
right to acquire beneficial ownership, of 20% or more of the then
outstanding shares of Issuer Common Stock;
(vii) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of and in order
to facilitate engaging in an Acquisition Transaction, and following
such breach Grantee would be entitle to terminate the Merger
Agreement (whether immediately or after the giving of notice or
passage of time or both); or
(viii) Any person other than Grantee or any Grantee Subsidiary shall have
filed an application or notice with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), the Office
of Thrift Supervision ("OTS"), or other federal or state bank
regulatory or antitrust authority, which application or notice has
been accepted for processing, for approval to engage in an
Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 30% or more of the then
outstanding shares of Issuer Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in clause
(i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be
30%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of Grantee to exercise the
Option.
(e) In the event Grantee is entitled to and wishes to exercise the Option
(or any portion thereof), it shall send to Issuer a written notice (the date
of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 30 business
days from the Notice Date for the closing of such purchase (the "Closing
Date"); provided, that if the closing of the purchase and sale pursuant to the
Option cannot be consummated by reason of any applicable judgment, decree,
order, law or regulation, the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which such restriction or
consummation has expired or been terminated; and, provided, further, without
limiting the foregoing, that if prior notification to or approval of the
Federal Reserve Board, OTS or any other regulatory or antitrust authority is
required in connection with such purchase, Grantee shall promptly file the
required notice or application for approval, shall promptly notify Issuer of
such filing (and the Issuer shall fully cooperate with Grantee in the filing
of any notice or application and the obtaining of any such approval), and
shall expeditiously process the same, and the period of time that
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otherwise would run pursuant to this sentence shall run instead from the date
on which any required notification periods have expired or been terminated or
such approvals have been obtained, and in either event, any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, Grantee
shall (i) pay to Issuer the aggregate purchase price for the shares of Issuer
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and
(ii) present and surrender this Agreement to Issuer at its principal executive
offices; provided, however, that the failure or refusal of the Issuer to
designate such a bank account or accept surrender of this Agreement shall not
preclude Grantee from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to Grantee a certificate or certificates representing the number of
shares of Issuer Common Stock purchased by Grantee and, if the Option should
be exercised in part only, a new Option evidencing the rights of Grantee
thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Issuer Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS
OR BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK
OPTION AGREEMENT, DATED NOVEMBER 3, 1997, A COPY OF WHICH MAY BE OBTAINED
FROM THE ISSUER UPON REQUEST."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if Grantee shall have delivered to Issuer a copy of a
letter from the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that such legend is
not required for purposes of the 1993 Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference in the
opinion of counsel to Grantee, which opinion shall be reasonably satisfactory
to Issuer; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by Grantee to Issuer of the written notice of exercise
of the Option provided for under subsection (e) of this Section 2 and the
tender of the applicable purchase price in immediately available funds, the
Issuer shall deliver to Grantee a certificate or certificates in definitive
form representing the shares of Issuer Common Stock issued upon such exercise,
which shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever, except as provided by
Section 180.0622(2)(b) of the WBCL, and Grantee shall be deemed to be the
holder of record of such shares, notwithstanding that the stock transfer books
of Issuer shall then be closed. Issuer shall pay its out-of-pocket expenses
payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of Grantee or its assignee,
transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock; (ii) that it will not, by charter amendment or through
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reorganization, consolidation, merger, dissolution or sale of assets, or by
any other voluntary act, avoid or seek to avoid the observance or performance
of any of the covenants, stipulations or conditions to be observed or
performed hereunder by Issuer; (iii) promptly to take all action as may from
time to time be required (including (x) complying with all applicable
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. Section 18a and regulations promulgated thereunder and (y) in the
event, under any state or federal banking law, prior approval of or notice to
the Federal Reserve Board, OTS or to any state or other federal regulatory
authority is necessary before the Option may be exercised, cooperating fully
with Grantee in preparing such applications or notices and providing such
information to the Federal Reserve Board, OTS or such state or other federal
regulatory authority as they may require) in order to permit Grantee to
exercise the Option and Issuer duly and effectively to issue shares of Issuer
Common Stock pursuant hereto; and (iv) promptly to take all action provided
herein to protect the rights of Grantee against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of Grantee, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling Grantee to purchase, on the
same terms and subject to the same conditions as are set forth therein, in the
aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any
Agreements and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Issuer Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1
of this Agreement, the number of shares of Issuer Common stock purchasable
upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5.
(a) In the event of any change in, or distributions (other than the payment
of cash dividends in the ordinary course consistent with past practice) in
respect of, the Issuer Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares or the like, the type and number of shares of Issuer Common Stock
purchasable upon exercise hereof shall be appropriately adjusted and proper
provision shall be made so that, in the event that any additional shares of
Issuer Common Stock are to be issued or otherwise become outstanding as a
result of any such change (other than pursuant to an exercise of the Option),
the number of shares of Issuer Common Stock that remain subject to the Option
shall be increased so that, after such issuance and together with shares of
Issuer Common Stock previously issued pursuant to the exercise of the Option
(as adjusted on account of any of the foregoing changes in the Issuer Common
Stock), it equals 19.9% of the number of shares of Issuer Common Stock then
issued and outstanding.
(b) Whenever the number of shares of Issuer Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Issuer Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Issuer Common Stock purchasable after the
adjustment.
6. (a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event Grantee may, within twelve (12) months
(or such later period as provided in Section 10) of such Subsequent Triggering
Event, by written notice (the "Registration Notice") to Issuer request Issuer
to register under the 1933 Act all or any part of the shares of capital stock
of Issuer acquired by Grantee pursuant to this Agreement beneficially owned by
Grantee (the "Registrable Securities").
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(b) Issuer shall thereupon have the option exercisable by written notice
delivered to Grantee within three (3) business days after the receipt of the
Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities proposed to be so sold for cash at a price equal to the
product of (i) the number of Registrable Securities to be so purchased by the
Issuer and (ii) the Fair Market Value (as defined below) of a share of such
Registrable Securities. As used herein, the "Fair Market Value" of any share
of Registrable Securities shall be the average of the daily closing sales
price for a share of Issuer Common Stock on the Nasdaq National Market during
the five (5) trading days prior to the date on which the Registration Notice
for such share is received by Issuer.
(c) Any purchase of Registrable Securities by Issuer under Section 6(b)
shall take place at a closing to be held at the principal executive offices of
Issuer or at the offices of its counsel at any reasonable date and time
designated by Issuer in such notice with ten (10) business days after delivery
of such notice, and payment of the purchase price for the shares to be so
purchase shall be made by delivery at the time of such closing in immediately
available funds.
(d) If Issuer does not elect to exercise its option pursuant to this Section
6 with respect to all Registrable Securities, it shall use its best efforts to
effect, as promptly as practicable, and keep current the registration under
the 1933 Act of the unpurchased Registrable Securities proposed to be sold.
Issuer will use its reasonable best efforts to cause such registration
statement promptly to become effective and then to remain effect for such
period not in excess of 120 days from the day such registration statement
first becomes effective or such shorter time as may be reasonably necessary to
effect the sale or other disposition of the Registrable Securities; provided,
however, that
(i) Grantee shall not be entitle to demand more than two (2) effective
registration statements hereunder, and
(ii) Issuer will not be required to file any such registration
statement during any period of time (not to exceed 90 days after
such request in the case of clauses (A) and (B) below or 120 days
in the case of clause (C) below) when
(A) Issuer is in possession of material non-public information which
it reasonably believes would be detrimental to be disclosed at
such time and, in the opinion of counsel to Issuer, such
information would be required to be disclosed if a registration
statement were filed at that time;
(B) Issuer is required under the 1933 Act to include audited
financial statements for any period in such registration
statement and such financial statements are not yet available
for inclusion in such registration statement; or
(C) Issuer determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or
other material transaction involving Issuer or any of its
affiliates.
(e) Issuer shall use its reasonable best efforts to cause any Registrable
Securities registered pursuant to this Section 6 to be qualified for sale
under the securities or "blue sky" laws of such jurisdictions as Grantee may
reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; provided, however, that Issuer shall not be
required to qualify to do business in, or consent to general service of
process in, any jurisdiction by reason of this provision.
(f) The registration rights set forth in this Section 6 are subject to the
condition that Grantee shall provide Issuer with such information with respect
to the Registrable securities, the plans for the distribution thereof, and
such other information with respect to such holder as, in the reasonable
judgment of counsel for Issuer, is necessary to enable Issuer to include in
such registration statement all material facts required to be disclosed with
respect to a registration thereunder.
(g) A registration effected under this Section 6 shall be effected at
Issuer's expense, except for underwriting discounts and commissions, broker'
fees and the fees and the expenses of counsel and other advisors to Grantee,
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and Issuer shall provide to the underwriters, if any, such documentation
(including certificates, opinions of counsel and "comfort" letters from
auditors) as is customary in connection with underwritten public offerings as
such underwriters may reasonably require.
(h) In connection with any registration effected under this Section 6, the
parties agree
(i) to indemnify each other and the underwriters, if any, in the
customary manner,
(ii) to enter into an underwriting agreement if the offering is an
underwritten offering in form and substance customary for
transactions of such type with the underwriters participating in
such offering, and
(iii) to take all reasonable further actions which shall be reasonably
necessary to effect such registration and sale (including if the
managing underwriter, if any, reasonably deems it necessary,
participating in road-show presentations).
(i) If Issuer Common Stock or any other securities to be acquired upon
exercise of the Option are then listed on the Nasdaq National Market or a
national securities exchange, Issuer, upon the request of Grantee, will
promptly file an application to list the shares of Issuer Common Stock or
other securities to be acquired upon exercise of the Option on the Nasdaq
National Market or a national securities exchange, as the case may be, and
will its best efforts to obtain approval of such listing as soon as
practicable.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below), (i) at the request of Grantee, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from Grantee at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii)
at the request of Grantee delivered prior to an Exercise Termination Event (or
such later period as provided in Section 10), Issuer (or any successor
thereto) shall repurchase such number of the Option Shares from Grantee as
Grantee shall designate at a price (the "Option Share Repurchase Price") equal
to the market/offer price multiplied by the number of Option Shares so
designated. The term "market/offer price" shall mean the highest of (i) the
price per share of Issuer Common Stock at which a tender or exchange offer
therefor has been made, (ii) the price per share of Issuer Common Stock to be
paid by any third party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of Issuer Common Stock within the six-month
period immediately preceding the date Grantee gives notice of the required
repurchase of this Option or Grantee gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event of a sale of all or
any substantial part of Issuer's assets or deposits, the sum of the net price
paid in such sale for such assets or deposits and the current market value of
the remaining net assets of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee and reasonably acceptable to
Issuer, divided by the number of shares of Issuer Common Stock of Issuer
outstanding at the time of such sale. In determining the market/offer price,
the value of consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by Grantee and reasonably
acceptable to Issuer.
(b) Grantee may exercise its right to require Issuer to repurchase the
Option and any Option Shares pursuant to this Section 7 by surrendering for
such purpose to Issuer, at its principal office, a copy of this Agreement or
certificates for Option Shares, as applicable, accompanied by a written notice
or notices stating that Grantee elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer
shall deliver or cause to be delivered to Grantee the Option Repurchase Price
and/or to Grantee the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or the Option Shares in full, Issuer shall immediately so
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notify Grantee and thereafter deliver or cause to be delivered, from time to
time, to Grantee the portion of the Option Repurchase Price and the Option
Share Repurchase Price, respectively, that it is no longer prohibited from
delivering, within five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to Grantee the Option Repurchase Price
and the Option Share Repurchase Price in full (and Issuer hereby undertakes to
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), Grantee may revoke its notice of repurchase of
the Option and/or the Option Shares whether in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver
to Grantee that portion of the Option Repurchase Price and/or the Option
Shares Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver to Grantee either (A) a new Agreement evidencing the right of
Grantee to purchase that number of shares of Issuer Common Stock obtained by
multiplying the number of shares of Issuer Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase
Price less the portion thereof theretofore delivered to Grantee and the
denominator of which is the Option Repurchase Price, and/or (B) a certificate
for the Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by Issuer described in the first sentence of this subsection (c), or shall be
scheduled to occur at any time before the expiration of a period ending on the
thirtieth day after such date, Grantee shall nonetheless have the right to
exercise the Option until the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed to
have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then
outstanding Issuer Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in
clause (z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person
(other than Grantee or a Grantee Subsidiary), or engage in a plan of exchange
with any person (other than Grantee or a Grantee Subsidiary) and Issuer shall
not be the continuing or surviving corporation of such consolidation or merger
or the acquirer in such plan of exchange, (ii) to permit any person, other
than Grantee or a Grantee Subsidiary, to merge into Issuer or be acquired by
Issuer in a plan of exchange and Issuer shall be the continuing or surviving
or acquiring corporation, but, in connection with such merger or plan of
exchange, the then outstanding shares of Issuer Common Stock shall be changed
into or exchanged for stock or other securities of any other person or cash or
any other property or the then outstanding shares of Issuer Common Stock shall
after such merger or plan or exchange represent less than 50% of the
outstanding shares and share equivalents of the merged or acquiring company,
or (iii) to sell or otherwise transfer all or a substantial part of its or an
Issuer Subsidiary's assets or deposits to any person, other than Grantee or a
Grantee Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Grantee, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which
Issuer is acquired, (iii) the Issuer in a merger or plan of
exchange in which Issuer is the continuing or surviving or
acquiring person, and (iv) the transferee of all or a substantial
part of Issuer's assets or deposits (or the assets or deposits of
the Issuer Subsidiary).
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(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
(iv) "'Averge Price" shall mean the average closing price of a share of
the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale referred to in Section 8(a), but in
no event higher than the closing price of the shares of Substitute
Common Stock on the day preceding such consolidation, merger or
sale; provided, that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a
share of common stock issued by the person merging into Issuer or
by any company which controls or is controlled by such person, as
Grantee may elect.
(v) "Person" as used in this Agreement shall have the meaning specified
in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(c) The Substitute Option shall have the same terms as the Option; provided,
that the exercise price therefor and number of shares subject thereto shall be
as set forth in this Section 8; provided, further, that the Substitute Option
shall be exercisable immediately upon issuance without the occurrence of a
Triggering Event; and provided, further, that if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option, such terms shall
be as similar as possible and in no event less advantageous to Grantee. The
issuer of the Substitute Option shall also enter into an agreement with
Grantee in substantially the same form as this Agreement (subject to the
variations described in the foregoing provisos), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Issuer Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section
8(a), divided by the Average Price, rounded up to the nearest whole share. The
exercise price of the Substitute Option per share of Substitute Common Stock
shall then be equal to the Option Price multiplied by a fraction, the
numerator of which shall be the number of shares of Issuer Common Stock for
which the Option was exercisable immediately prior to the event described in
the first sentence of Section 8(a) and the denominator of which shall be the
number of shares of Substitute Common Stock for which the Substitute Option is
exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding prior to
exercise but for this Section 8(e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Grantee equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this Section 8(e) over (ii) the value of the Substitute Option
after giving effect to the limitation in this Section 8(e). This difference in
value shall be determined by a nationally recognized investment banking firm
selected by Grantee.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 8 are given full force and effect (including,
without limitation, any action that may be necessary so that the holders of
the other shares of common stock issued by Substitute Option Issuer are not
entitled to exercise any rights by reason of the issuance of exercise of the
Substitute Option and the shares of Substitute Common Stock are otherwise in
no way distinguishable from or have lesser economic value than other share of
common stock issued by Substitute Option Issuer (other than any diminution in
value resulting from the fact that the shares of Substitute Common Stock are
restricted securities, as defined in Rule 144 under the 1934 Act or any
successor provision)).
B-9
<PAGE>
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price
of the Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised, and at the
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to the Highest Closing Price multiplied by the number of
Substitute Shares so designated. The term "Highest Closing Price" shall mean
the highest closing price for shares of Substitute Common Stock within the
six-month period immediately preceding the date the Substitute Option Holder
gives notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and Substitute Share Owner, as the case may
be, may exercise its respective rights to require the Substitute Option Issuer
to repurchase the Substitute Option and the Substitute Shares pursuant to this
Section 9 by surrendering for such purpose to the Substitute Option Issuer, at
its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates
for Substitute Shares accompanied by a written notice or notices stating that
the Substitute Option Holder or the Substitute Share Owner, as the case may
be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable and in any event
within five business days after the surrender of the Substitute Option and/or
certificates representing Substitute Shares and the receipt of such notice or
notices relating thereto, the Substitute Option Issuer shall deliver or cause
to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from repurchasing the Substitute Option and/or the Substitute Shares in part
or in full, the Substitute Option Issuer shall immediately so notify the
Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Option Repurchase Price and/or the Substitute Share Repurchase
Price, respectively, which it is no longer prohibited from delivering, within
five (5) business days after the date on which the Substitute Option Issuer is
no longer so prohibited; provided, however, that if the Substitute Option
Issuer is at any time after delivery of a notice of repurchase pursuant to
subsection (b) of this Section 9 prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to
the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchse Price and the Substitute Share
Repurchase Price, respectively, in full (and the Substitute Option Issuer
shall use its reasonable best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder and/or Substitute Share Owner may
reovke its notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of prohibition, whereupon, in the
latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not prohibited from
delivering; and (ii) deliver, as appropriate, either (A) to the Substitute
Option Holder, a new Substitute Option evidencing the right of the Substitute
Option Holder to purchase that number of shares of the Substitute Common Stock
obtained by multiplying the numbert of shares of the Substitute Common Stock
for which the surrendered Substitute Option was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Substitute Option Repurchase Price less the portion thereof theretofore
delivered to the Substitute Option Holder and the denominator of which is the
Substitute Option Repurchase Price, and/or (B) to the Substitute Share Owner,
a certificate for the Substitute Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to
the date
B-10
<PAGE>
of the notice by the Substitute Option Issuer described in the first sentence
of this subsection (c), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the
Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. The 30-day, 3-month, 6-month, or 12-month periods for exercise of
certain rights under Sections 2, 6, 7 and 9 shall be extended: (i) to the
extent necessary to obtain all regulatory approvals for the exercise of such
rights (for so long as Grantee, Substitute Option Holder or Substitute Share
owner, as the case may be, is using commercially reasonable efforts to obtain
such regulatory approvals), and for the expiration of all statutory waiting
periods; and (ii) to the extent necessary to avoid liability under Section
16(b) of the 1934 Act by reason of such exercise.
11. (a) Issuer hereby represents and warrants to Grantee as follows:
(i) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Issuer Board prior to the
date hereof and no other corporate proceedings on the part of the
Issuer are necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by Issuer.
(ii) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance
with its terms will have reserved for issuance upon the exercise
of the Option, that number of shares of Issuer Common Stock equal
to the maximum number of shares of Issuer Common Stock at any time
and from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized, validly
issued, fully paid, nonassessable (except as provided in Section
180.0622(2)(b) of the WBCL, and will be delivered free and clear
of all claims, liens, encumbrance and security interests and not
subject to any preemptive rights.
(b) Grantee hereby represents and warrants to Issuer as follows:
(i) Grantee has corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by Grantee and the
performance of its obligations hereunder by Grantee have been duly
and validly authorized by the Board of Directors of Grantee and no
other corporate proceedings on the part of grantee are necessary to
authorize this Agreement or for Grantee to perform its obligations
hereunder. This Agreement has been duly and validly executed and
delivered by Grantee.
(ii) Any Option Shares acquired upon exercise of this Option by Grantee
will be acquired for Grantee's own account and for investment
purposes only. This Option is not being, and any Option Shares or
other securities acquired by Grantee upon exercise of the Option
will not be, acquired with a view to the public distribution
thereof and will not be transferred or otherwise disposed of
except in a transaction registered or exempt from registration
under the 1933 Act. Grantee acknowledges the limitations which may
be imposed on the transactions contemplated by this Agreement by
Article 4.c of Issuer's Articles of Incorporation.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party. Certificates
representing shares sold in a registered public offering pursuant to Section 9
shall not be required to bear the legend set forth in Section 2(h).
13. Each of Grantee and Issuer will use its reasonable best efforts to make
all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
Federal Reserve Board and OTS
B-11
<PAGE>
for approval to acquire the shares issuable hereunder, but Grantee shall not
be obligated to apply to state banking authorities for approval to acquire the
shares of Issuer Common Stock issuable hereunder until such time, if ever, as
it deems appropriate to do so.
14. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief, this being in addition to any
other remedy to which they are entitled at law or in equity. In connection
therewith both parties waive the posing of any bond or similar requirement.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that Grantee is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Issuer Common Stock provided in Section 1(a) hereof (as adjusted pursuant to
Section 1(b) or Section 5 hereof), it is the express intention of Issuer to
allow Grantee to acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible, without any amendment or modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
17. This Agreement shall be governed by and construed in accordance with the
laws of the State of Wisconsin, without regard to the conflict of law
principles thereof.
18. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
19. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assignees. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assignees, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
21. Each party shall execute and deliver such other documents and
instruments and take such further action that may be necessary in order to
consummate the transactions contemplated hereby.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
B-12
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
Advantage Bancorp, Inc.
By:
/s/ Paul P. Gergen
----------------------------------
Paul P. Gergen
Chairman of the Board, President
and
Chief Executive Officer
Marshall & Ilsley Corporation
By:
/s/ James B. Wigdale
----------------------------------
James B. Wigdale
Chairman of the Board and
Chief Executive Officer
B-13
<PAGE>
APPENDIX C
LOGO
December 29, 1997
Board of Directors
Advantage Bancorp, Inc.
5935 Seventh Avenue
Kenosha, WI 53140-4150
Members of the Board:
Advantage Bancorp, Inc. ("Advantage"), a Wisconsin corporation, and Marshall
& Ilsley Corp. ("Marshall & Ilsley"), an Wisconsin corporation, have entered
into an Agreement and Plan of Merger (the "Agreement") dated November 3, 1997,
pursuant to which Advantage will merge with and into Marshall & Ilsley
(the "Merger"). As is set forth in the Agreement at the effective time of the
Merger, each of the outstanding shares of Advantage common stock ("Advantage
Common Stock") will be converted into and have the right to receive, as
determined pursuant to Section 1.6 and subject to possible adjustment up or
down, as set forth in Section 1.6(e)(i) and (ii) of the Agreement (the "Merger
Consideration"), 1.200 shares of Marshall & Ilsley common stock ("Marshall &
Ilsley Common Stock") (the "Exchange Ratio"). In connection therewith, you
have requested our opinion as to the fairness, from a financial point of view,
of the Merger Consideration to the shareholders of Advantage.
Hovde Financial, Inc. ("Hovde") specializes in providing investment banking
and financial advisory services to commercial bank and thrift institutions.
Our principals are experienced in the independent valuation of securities in
connection with negotiated underwritings, subscription and community
offerings, private placements, merger and acquisition transactions and
recapitalizations. We are familiar with Advantage, having acted as its
financial advisor in connection with, and having participated in the
negotiations leading to, the Agreement.
We were retained by Advantage to act as its exclusive financial advisor with
respect to a review of advantage's strategic alternatives and the possible
sale, merger, consolidation, or other business combination, in one or a series
of transactions, involving all or a substantial amount of the business,
securities or assets of Advantage. We have received and will receive
compensation from Advantage in connection with our services, a significant
portion of which is contingent upon the consummation of the Merger. At your
direction, we solicited the interest of third parties regarding a possible
business combination with Advantage. The Agreement is the result of this
solicitation.
During the course of our engagement, we reviewed and analyzed material
bearing upon the financial and operating conditions of Advantage and Marshall
& Ilsley and material prepared in connection with the proposed transaction,
including the following: the Agreement; certain historical publicly available
information concerning Advantage and Marshall & Ilsley; Marshall & Ilsley's
preliminary pro-forma balance sheet and income statement, adjusted for the
Security Capital Corporation merger; the terms of recent merger and
acquisition transactions involving thrifts and thrift holding companies that
we considered relevant; historical market prices and trading volumes for
Advantage Common Stock and Marshall & Ilsley Common Stock; and financial and
other information provided to us by the managements of Advantage and Marshall
& Ilsley.
In addition, we have conducted meetings with members of the senior
management of Advantage and Marshall & Ilsley for the purpose of reviewing the
future prospects of Advantage and Marshall & Ilsley. We also evaluated the pro
forma ownership of Marshall & Ilsley Common Stock by Advantage's shareholders
relative to the pro forma contribution of Advantage's assets, liabilities,
equity and earnings to the pro forma company, and conducted such other
studies, analyses and examinations as we deemed appropriate. We also took into
account our assessment of general economic, market and financial conditions
and our experience in other transactions, as well as our knowledge of the bank
and thrift industries and our general experience in securities valuations.
C-1
<PAGE>
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations contained in the materials provided to us by
Advantage and Marshall & Ilsley and in the discussions with Advantage and
Marshall & Ilsley management. We did not independently verify and have relied
on and assumed that the aggregate allowances for loan losses set forth in the
balance sheets of each of Advantage and Marshall & Ilsley at September 30,
1997 were adequate to cover such losses and complied fully with applicable
law, regulatory policy and sound banking practices as of the date of such
financial statements. We were not retained to and did not conduct a physical
inspection of any of the properties or facilities of Advantage or Marshall &
Ilsley, nor did we make any independent evaluation or appraisal of the assets,
liabilities or prospects of Advantage or Marshall & Ilsley, nor were we
furnished with any such evaluation or appraisal, and we were not retained to
and did not review any individual credit files.
We have assumed that the Merger is, and will be, in compliance with all laws
and regulations that are applicable to Advantage and Marshall & Ilsley. In
rendering this opinion, we have been advised by Advantage and Marshall &
Ilsley and we have assumed that there are no factors that would impede any
necessary regulatory or governmental approval for the Merger and we have
further assumed that in the course of obtaining the necessary regulatory and
governmental approvals, no restriction will be imposed on Marshall & Ilsley or
the surviving corporation that would have a material adverse effect on
Marshall & Ilsley or the contemplated benefits of the Merger. We have also
assumed that there would not occur any change in the applicable law or
regulation that would cause a material adverse change in the prospects or
operations of Marshall & Ilsley or the surviving corporation after the Merger.
Our opinion is based solely upon the information available to us and the
economic, market and other circumstances as they exist on the date hereof.
Events occurring and information that becomes available after the date thereof
could materially affect the assumptions and analyses used in preparing this
opinion. We have not undertaken to reaffirm or revise this opinion or
otherwise comment upon any events occurring or information that becomes
available after the date hereof.
We are not expressing any opinion herein as to the prices at which shares of
Marshall & Ilsley Common Stock issued in the Merger may trade if and when they
are issued or at any future time, nor does our opinion constitute a
recommendation to any holder of Advantage Common Stock as to how such holder
should vote with respect to the Agreements at any meeting of holders of
Advantage Common Stock.
This letter is solely for the information of the Board of Directors of
Advantage and is not to be used, circulated, quoted or otherwise referred to
for any other purpose, nor is it to be filed with, included in or referred to
in whole or in part in any registration statement, proxy statement or any
other document, except in each case in accordance with our prior written
consent which shall not be unreasonably withheld; provided, however, that we
hereby consent to the inclusion and reference to this letter in any
registration statement, proxy statement, information statement or tender offer
document to be delivered to the holders of Advantage Common Stock in
connection with the Merger if and only if this letter is quoted in full or
attached as an exhibit to such document and this letter has not been withdrawn
prior to the date of such document.
Subject to the foregoing and based on our experience as investment bankers,
our activities and assumptions as described above, and other factors we have
deemed relevant, we are of the opinion as of the date hereof that the Merger
Consideration is fair, from a financial point of view, to the shareholders of
Advantage.
Sincerely,
HOVDE FINANCIAL, INC.
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 180.0850 to 180.0859 of the Wisconsin Statutes require a
corporation to indemnify any director or officer who is a party to any
threatened, pending or completed civil, criminal, administrative or
investigative action, suit, arbitration or other proceeding, whether formal or
informal, which involves foreign, federal, state or local law and which is
brought by or in the right of the corporation or by any other person. A
corporation's obligation to indemnify any such person includes the obligation
to pay any judgment, settlement, penalty, assessment, forfeiture or fine,
including any excise tax assessed with respect to an employee benefit plan,
and all reasonable expenses including fees, costs, charges, disbursements,
attorney's and other expenses except in those cases in which liability was
incurred as a result of the breach or failure to perform a duty which the
director or officer owes to the corporation and the breach or failure to
perform constitutes: (i) a willful failure to deal fairly with the corporation
or its shareholders in connection with a matter in which the director or
officer has a material conflict of interest; (ii) a violation of criminal law,
unless the person has reasonable cause to believe his conduct was lawful or
had no reasonable cause to believe his conduct was unlawful; (iii) a
transaction from which the person derived an improper personal profit; or (iv)
willful misconduct.
Unless otherwise provided in a corporation's articles of incorporation or
bylaws or by written agreement, an officer or director seeking indemnification
is entitled to indemnification if approved in any of the following manners:
(i) by majority vote of a disinterested quorum of the board of directors, or
if such quorum of disinterested directors cannot be obtained, by a majority
vote of a committee of two or more disinterested directors; (ii) by
independent legal counsel; (iii) by a panel of three arbitrators; (iv) by
affirmative vote of shareholders; (v) by a court; or (vi) with respect to any
additional right to indemnification granted by any other method permitted in
Section 180.0858 of the Wisconsin Statutes.
Reasonable expenses incurred by a director or officer who is a party to a
proceeding may be reimbursed by a corporation at such time as the director or
officer furnishes to the corporation written affirmation of his good faith
belief that he has not breached or failed to perform his duties and a written
undertaking to repay any amounts advanced if it is determined that
indemnification by the corporation is not required.
The indemnification provisions of Sections 180.0850 to 180.0859 are not
exclusive. A corporation may expand an officer's or director's right to
indemnification (i) in its articles of incorporation or by-laws; (ii) by
written agreement; (iii) by resolution of its board of directors; or (iv) by
resolution of a majority of all of the corporation's voting shares then issued
and outstanding.
As permitted by Section 180.0858, M&I has adopted indemnification provisions
in its Bylaws which closely track the statutory indemnification provisions
with certain exceptions. In particular, Section 7.1 of M&I's Bylaws, among
other items, provides that (i) any individual shall be indemnified unless it
is proven by a final judicial adjudication that indemnification is prohibited
and (ii) payment or reimbursement of expenses, subject to certain limitations,
will be mandatory rather than permissive. M&I has purchased directors' and
officers' liability insurance which insures M&I's officers and directors
against certain liabilities which may arise under the Securities Act of 1933.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S> <C>
2 Agreement and Plan of Merger (included as Appendix A to
the Proxy Statement-Prospectus)
5 Opinion of Godfrey & Kahn, S.C.
8.1 Opinion of Godfrey & Kahn, S.C. as to certain federal in-
come tax matters
8.2 Opinion of Foley & Lardner as to certain federal income
tax matters
10.1 Stock Option Agreement dated as of November 3, 1997 by and
between Marshall & Ilsley Corporation and Advantage
Bancorp, Inc. (included as Appendix B to the Proxy State-
ment-Prospectus)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Godfrey & Kahn, S.C. (included in Exhibits 5
and 8.1)
23.5 Consent of Foley & Lardner (included in Exhibit 8.2)
23.6 Consent of Hovde Financial, Inc. (included in Appendix C
to the Proxy Statement-Prospectus)
24 Powers of Attorney
99.1 Form of Proxy for the Advantage Special Meeting of Share-
holders
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES. No financial schedules are required to be
filed with regard to M&I or Advantage.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE>
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and therefore is unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer of controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(6) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus
pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(7) The undersigned Registrant hereby undertakes to supply by means of
post-effective amendment all information concerning a transaction, and the
company being acquired or involved therein, that was not the subject of and
included in the registration statement when it became effective.
(8) The undersigned Registrant hereby undertakes as follows: prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the Registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(9) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (8) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
MILWAUKEE, STATE OF WISCONSIN, ON DECEMBER 22, 1997.
Marshall & Ilsley Corporation
(Registrant)
/s/ J.B. Wigdale
By:__________________________________
J.B. Wigdale
Chairman of the Board
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT ON FORM S-4 HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J.B. Wigdale Chairman of the Board and a December 22, 1997
____________________________________ Director (Chief Executive
J.B. Wigdale Officer)
/s/ G.H. Gunnlaugsson Executive Vice President and December 22, 1997
____________________________________ a Director (Chief Financial
G.H. Gunnlaugsson Officer)
/s/ P.R. Justiliano Senior Vice President and December 22, 1997
____________________________________ Corporate Controller
P.R. Justiliano (Principal Accounting
Officer)
* Director
____________________________________
Richard A. Abdoo
* Director
____________________________________
Oscar C. Boldt
* Director
____________________________________
J.P. Bolduc
* Director
____________________________________
Wendell F. Bueche
* Director
____________________________________
Jon F. Chait
* Director
____________________________________
Glenn A. Francke
* Director
____________________________________
G.H. Gunnlaugsson
* Director
____________________________________
Burleigh E. Jacobs
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director
____________________________________
Jack F. Kellner
* Director
____________________________________
James F. Kress
* Director
____________________________________
D.J. Kuester
Director
____________________________________
Katharine C. Lyall
* Director
____________________________________
Edward L. Meyer, Jr.
* Director
____________________________________
Don R. O'Hare
* Director
____________________________________
San W. Orr, Jr.
* Director
____________________________________
Peter M. Platten, III
* Director
____________________________________
J.A. Puelicher
Director
____________________________________
Robert E. Schaefer
* Director
____________________________________
Stuart W. Tisdale
* Director
____________________________________
J.B. Wigdale
* Director
____________________________________
James O. Wright
* Director
____________________________________
Gus A. Zuehlke
/s/ M.A. Hatfield As Attorney-in-Fact* December 22, 1997
____________________________________
M.A. Hatfield
</TABLE>
- --------
* Pursuant to authority granted by powers of attorney, copies of which are
filed herewith.
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
-------------- -------
<C> <S>
Agreement and Plan of Merger (included as Appendix A to the
2 Proxy Statement-Prospectus)
5 Opinion of Godfrey & Kahn, S.C.
Opinion of Godfrey & Kahn, S.C. as to certain federal income
8.1 tax matters
Opinion of Foley & Lardner as to certain federal income tax
8.2 matters
10.1 Stock Option Agreement dated as of November 3, 1997 by and
between Marshall & Ilsley Corporation and Advantage Bancorp,
Inc. (included as Appendix B to the Proxy Statement-Prospectus)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Godfrey & Kahn, S.C. (included in Exhibits 5 and
8.1)
23.5 Consent of Foley & Lardner (included in Exhibit 8.2)
Consent of Hovde Financial, Inc. (included in Appendix C to the
23.6 Proxy Statement-Prospectus)
24 Powers of Attorney
99.1 Form of Proxy for the Advantage Special Meeting of Shareholders
</TABLE>
<PAGE>
EXHIBIT 5
December 23, 1997
Marshall & Ilsley Corporation
770 North Water Street
Milwaukee, WI 53202
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") to be filed by Marshall & Ilsley Corporation (the
"Corporation") with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Act of 1933, as amended (the "Securities Act") with
respect to shares of common stock of the Corporation, $1.00 par value ("Common
Stock") issuable in connection with the merger (the "Merger") of the
Corporation and Advantage Bancorp, Inc., as described in the Proxy Statement-
Prospectus included in the Registration Statement.
As counsel to the Corporation, we are familiar with the Restated Articles of
Incorporation and the By-laws of the Corporation. We have also examined, or
caused to be examined, such other documents and instruments and have made, or
caused to be made, such further investigation as we have deemed necessary or
appropriate to enable us to render this opinion.
Based upon the foregoing, it is our opinion that the shares of Common Stock
of the Corporation when issued upon the effectiveness of the Merger and
delivered to the holders of common stock of Advantage Bancorp, Inc. will be
legally issued, fully paid and nonassessable, except that Section 180.0622 of
the Wisconsin Business Corporation Law, and judicial interpretations thereof,
impose liability upon shareholders for unpaid wage claims of the Corporation's
employees not exceeding six months service in any one case.
We hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement and we further consent to the use of our name in the
Registration Statement under the caption "LEGAL MATTERS." In giving this
consent, we do not admit that we are in the category of persons whose consent
is required under Section 7 of the Securities Act or the rules and regulations
of the Commission issued thereunder.
Godfrey & Kahn, S.C.
<PAGE>
EXHIBIT 8.1
December 23, 1997
Marshall & Ilsley Corporation
770 North Water Street
Milwaukee, Wisconsin 53202
RE: Federal Income Tax Consequences of Merger between Marshall & Ilsley
Corporation and Advantage Bancorp, Inc.
Gentlemen:
We have acted as counsel for Marshall & Ilsley Corporation ("M&I") in
connection with the negotiation and execution of the Agreement and Plan of
Merger by and between Advantage Bancorp, Inc. ("Advantage") and Marshall &
Ilsley Corporation ("M&I") dated as of November 3, 1997 (the "Agreement")
pursuant to which Advantage will be merged with and into M&I (the "Merger").
This letter furnishes you with our opinion, as required pursuant to Section
7.2(e) of the Agreement, as to certain of the federal income tax consequences
of the Merger.
For purposes of the opinions set forth below, we have relied, with the
consent of M&I and the consent of Advantage, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of M&I and Advantage (copies
of which are incorporated herein by reference) and have assumed that such
certificates will be complete and accurate as of the Effective Time. We have
also relied upon the accuracy of the Proxy Statement/Prospectus filed with the
Securities Exchange Commission, as amended through the date hereof (the "Proxy
Statement") in connection with the Merger. Any capitalized term used and not
defined herein has the meaning given to it in the Proxy Statement or the
appendices thereto (including the Agreement).
The following is a description of the relevant terms of the transaction
based on our examination of the Agreement and our understanding of the related
factual background.
Parties
M&I is a registered bank holding company headquartered in Milwaukee,
Wisconsin. M&I's principal assets are the stock of its bank and nonbank
subsidiaries and the assets of its Data Services division ("M&I Data
Services"). M&I's bank and savings association subsidiaries provide a full
range of banking services to individuals, business and governments throughout
Wisconsin and the Phoenix, Arizona metropolitan area. M&I's nonbank
subsidiaries operate a variety of bank-related businesses, including
investment management services, insurance services, trust services, equipment
lease financing, commercial and residential mortgage banking, venture capital,
brokerage services and financial advisory services. M&I Data Services is a
major supplier of financial and data processing services and software to
banking, financial and related organizations. The M&I Common Stock is listed
on the NASDAQ/NMS.
Advantage is a registered savings and loan holding company incorporated
under the laws of the State of Wisconsin and is engaged in the savings and
loan business through its wholly-owned subsidiary, Advantage Bank, FSB, a
federally-chartered stock savings association. Advantage operates full-service
banking offices and mortgage loan origination offices in Southeastern
Wisconsin and Northern Illinois. Advantage's common stock (the "Advantage
Common Stock") is listed on the NASDAQ/NMS.
Proposed Transaction
Pursuant to Section 1.1 of the Agreement, at the Effective Time, Advantage
will be merged with and into M&I. Under Section 1.6 of the Agreement, each
share of Advantage Common Stock outstanding at the Effective
<PAGE>
Time, other than those owned by M&I or any subsidiary of M&I for its own
account or unallocated shares in Advantage's Bank Incentive Plans and Trusts,,
will be converted into the right to receive 1.2 shares of M&I Common Stock,
subject to possible adjustment if the Average Price of M&I Common Stock falls
below $46.67 or above $61.67. Under Section 1.8(e) of the Agreement, each
Advantage shareholder will receive cash in lieu of any fractional shares of
M&I Common Stock to which he would otherwise be entitled in the Merger.
Finally, under Section 4.8 of the Agreement, all out-of-pocket costs, fees
and expenses incurred by M&I and Advantage in the authorization, preparation
and execution of the Agreement and all other matters relating to the Merger
will be borne solely and entirely by the party that incurs them. However, M&I
and Advantage will share equally in the expense of printing and filing the
Registration Statement and the Proxy Statement/Prospectus and SEC and other
regulatory filing and listing fees incurred in connection with the Agreement.
The M&I Board of Directors has determined that the Merger is desirable since
it enhances M&I's overall franchise value, attains for M&I the largest market
position based on deposits in the Kenosha/Racine, Wisconsin market, allows M&I
to enter the metro-Chicago, Illinois market, and provides M&I with a federal
savings bank charter which provides flexibility for future expansion.
The Advantage Board of Directors believes that the terms of the Agreement
are in the best interest of Advantage and its shareholders because of, among
other reasons, the advantages of a combination with another Wisconsin-based
institution, including the building of market share, enhanced exposure to
commercial and consumer banking markets, and the opportunities for increased
efficiencies and significant cost savings from a combination within the
Wisconsin market resulting in increased profitability of the combined entity
over time as opposed to a possible out-of-market business combination. In
addition, the Advantage shareholders would be receiving stock in a high
quality combined entity with enhance liquidity for their shares.
Conclusions
Based on our examination of the Agreement, the foregoing description and the
representations made to us, and assuming that the transaction is consummated
in accordance with the terms of the Agreement, and that the Merger qualifies
as a statutory merger under the applicable laws of the State of Wisconsin, it
is our opinion that for federal income tax purposes:
1. The Merger will be a reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
M&I and Advantage will each be "a party to the reorganization" within the
meaning of Code Section 368(b).
2. Pursuant to Code Sections 361 and 357(a), Advantage will recognize no
gain or loss on the transfer of all of its respective assets to M&I in
exchange for M&I Common Stock and the assumption by M&I of Advantage's
liabilities pursuant to the Merger.
3. Pursuant to Code Section 362(b), the basis of Advantage's assets in
M&I's hands immediately after the transaction will be the same as the basis
of such assets in Advantage's hands immediately prior to the transaction.
4. Pursuant to Code Section 1223(2), the holding period of Advantage's
assets in M&I's hands will include the period during which Advantage held
the assets.
Our opinion is not, nor should it be construed or relied upon as, a
guaranty, nor is it in any way binding on the Internal Revenue Service.
We hereby consent to the use of this opinion as Exhibit 8.1 to the Proxy
Statement and we further consent to the use of our name in the Proxy Statement
under the caption "LEGAL MATTERS." In giving this consent, we do not admit
that we are in a category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities Exchange Commission issued thereunder.
Very truly yours,
Godfrey & Kahn, S.C.
ii
<PAGE>
EXHIBIT 8.2
December 23, 1997
Advantage Bancorp, Inc.
5935 Seventh Avenue
Kenosha, Wisconsin 53140
Gentlemen:
You have requested our opinion as to material federal income tax
consequences of the proposed merger of Advantage Bancorp, Inc. ("Seller") with
and into Marshall & Ilsley Corporation ("Company") pursuant to an Agreement
and Plan of Merger dated November 3, 1997 (the "Agreement") by and between
Seller and Company as more completely described below and as described in the
Proxy Statement/Prospectus included in the Registration Statement on Form S-4
to be filed by Company with the Securities and Exchange Commission (the "Proxy
Statement/Prospectus"). All capitalized terms not otherwise defined herein
shall have the meanings assigned to such terms in the Proxy
Statement/Prospectus.
A. Statement of Facts.
Seller is a Wisconsin corporation and is a registered savings and loan
holding company under the Home Owner's Loan Act. As of December 23, 1997,
the outstanding shares of Seller capital stock consisted of 3,235,653
shares of common stock, $.01 par value per share ("Seller Common Stock").
Company is a Wisconsin corporation. As of December 23, 1997, its
outstanding shares of stock consisted of 101,667,141 shares of common
stock, $1.00 par value per share ("Company Common Stock"), and 685,314
shares of Series A preferred stock, $1.00 par value. The shares of Company
Common Stock are widely held and publicly traded.
The Agreement provides for the merger of Seller with and into Company,
which merger will result in the combination of Company and Seller as a
single corporation (the "Surviving Corporation") that will continue to
operate under the name Marshall and Ilsley Corporation (the "Merger"),
pursuant to which each outstanding share of Seller Common Stock (except as
otherwise provided below) will be canceled and converted into the right to
receive 1.2 shares of Company Common Stock (subject to certain adjustments)
plus cash in lieu of any fractional shares. All shares of Seller Common
stock (i) owned by Seller as treasury stock, (ii) owned by the Advantage
Bank, F.S.B. Bank Incentive Plan and Trust I, and the Advantage Bank,
F.S.B. Bank Incentive Plan and Trust II and not allocated to participants
thereunder or (iii) owned by Company or by any Company Subsidiary for its
own account will be canceled and no Company Common Stock or other
consideration will be given in exchange therefor. Shares of Company Common
Stock that are issued and outstanding at the time of the Merger will not be
affected by the Merger and will remain outstanding as the same number of
shares of the Surviving Corporation. Assuming that persons who have been
granted options by Seller under the terms of its 1991 Stock Option and
Incentive Plan and the 1995 Equity Incentive Plan (the "Seller Option
Plans") consent to the amendment of the Seller Options Plans in certain
respects, each option that is outstanding and unexercised prior to the
Effective Time will be converted into an option to purchase shares of
Company Common Stock equal to the product of the number of shares of
Company Common Stock subject to the original option and the Seller Exchange
Ratio (with fractional shares being rounded up to the nearest whole number)
and will have an exercise price per share equal to the exercise price under
the original option divided by the Seller Exchange Ratio (with the exercise
price rounded down to the nearest whole cent).
B. Representations.
The description in the Proxy Statement/Prospectus under the heading
"Certain Federal Income Tax Consequences of the Merger" and our opinion as
stated herein are based upon and subject to:
<PAGE>
(a) The Merger being effected in the manner described in the Proxy
Statement/Prospectus.
(b) The accuracy and completeness of the statements concerning the
Merger set forth in the Proxy Statement/Prospectus.
(c) The accuracy of the representations made to us by Seller and
Company in their Representation Letters and their continuing accuracy
at all times through the Effective Time.
C. Opinions.
Based upon the foregoing, and subject to the condition and limitations
set forth below, we are of the opinion that:
(i) The Merger will qualify as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code. Seller and Company will each be a
party to a reorganization within the meaning of Section 368(b) of the
Code;
(ii) No gain or loss will be recognized by Seller pursuant to the
Merger;
(iii) No gain or loss will be recognized by any shareholder of Seller
upon consummation of the Merger (except with respect to cash received
in lieu of a fractional share interest in Company Common Stock).
(iv) The aggregate income tax basis of the Company Common Stock
received by the shareholders of Seller pursuant to the Merger will be
the same as the aggregate tax basis of the Seller Common Stock
surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received).
D. Limitations.
We express no opinion on the following matters:
(i) The tax treatment of the Merger under other provisions of the
Code and the regulations thereunder;
(ii) The tax treatment of any conditions existing at the time of, or
effects resulting from, the Merger that are not specifically addressed
herein; or
(iii) The tax treatment of the Merger under the laws of any state or
commonwealth or any other jurisdiction other than the United States.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement on Form S-4
and to the reference to our firm under the heading "Certain Federal Income Tax
Consequences of the Merger" in the Proxy Statement-Prospectus that constitutes
part of the Registration Statement. In giving our consent, we do not admit
that we are "experts" within the meaning of Section 11 of the Securities Act
or within the category of persons whose consent is required by Section 7 of
the Securities Act.
Very truly yours,
Foley & Lardner
2
<PAGE>
EXHIBIT 23.1
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accounts, we hereby consent to the incorporation by
reference in this Proxy Statement-Prospectus regarding the merger of Marshall &
Ilsley Corporation and Advantage Bancorp, Inc., of our report dated January 31,
1997, included in the Marshall & Ilsley Corporation and Subsidiaries' Form 10-K
for the year ended December 31, 1996 and Form 10-K/A dated as of June 3, 1997,
and to all references to our Firm included in such statement.
Arthur Andersen LLP
Milwaukee, Wisconsin
December 1, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in this
Registration Statement on Form S-4 of Marshall & Ilsley Corporation, and to
the incorporation by reference therein of our report dated October 31, 1997,
with respect to the consolidated financial statements of Advantage Bancorp,
Inc. included in its Annual Report (Form 10-K) for the year ended September
30, 1997, filed with the Securities and Exchange Commission.
Ernst & Young LLP
December 19, 1997
Milwaukee, Wisconsin
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Security Capital Corporation:
We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Marshall & Ilsley Corporation of our report dated July 15, 1997,
relating to the consolidated statements of financial condition of Security
Capital Corporation and Subsidiaries as of June 30, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended June 30, 1997, which
report appears in the June 30, 1997 annual report on Form 10-K of Security
Capital Corporation and is included in the Current Report on Form 8-K of
Marshall & Ilsley Corporation dated October 1, 1997 and to the reference to
our Firm under the heading "Experts" in the proxy statement-prospectus.
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
December 17, 1997
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ Richard A. Abdoo
-------------------------------------
Richard A. Abdoo
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ Oscar C. Boldt
-------------------------------------
Oscar C. Boldt
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ J.P. Bolduc
-------------------------------------
J.P. Bolduc
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ Wendell F. Bueche
-------------------------------------
Wendell F. Bueche
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 28th day of October, 1997.
/s/ Jon F. Chait
-------------------------------------
Jon F. Chait
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ Glenn A. Francke
-------------------------------------
Glenn A. Francke
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ G.H. Gunnlaugsson
-------------------------------------
G.H. Gunnlaugsson
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ Burleigh E. Jacobs
-------------------------------------
Burleigh E. Jacobs
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ Jack F. Kellner
-------------------------------------
Jack F. Kellner
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ James F. Kress
-------------------------------------
James F. Kress
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ D.J. Kuester
-------------------------------------
D.J. Kuester
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ Don R. O'Hare
-------------------------------------
Don R. O'Hare
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ Edward L. Meyer, Jr.
-------------------------------------
Edward L. Meyer, Jr.
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ San W. Orr, Jr.
-------------------------------------
San W. Orr, Jr.
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ Peter M. Platten, III
-------------------------------------
Peter M. Platten, III
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ J.A. Puelicher
-------------------------------------
J.A. Puelicher
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ Stuart W. Tisdale
-------------------------------------
Stuart W. Tisdale
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ J.B. Wigdale
-------------------------------------
J.B. Wigdale
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ James O. Wright
-------------------------------------
James O. Wright
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
(FORM S-4 RELATING TO THE PROPOSED MERGER OF ADVANTAGE BANCORP, INC.
WITH AND INTO MARSHALL & ILSLEY CORPORATION)
The undersigned director of Marshall & Ilsley Corporation designates each of
J.B. Wigdale and M.A. Hatfield, with the power of substitution, as his true
and lawful attorney-in-fact for the purpose of: (i) executing in his name and
on his behalf Marshall & Ilsley Corporation's Registration Statement on Form
S-4 relating to the proposed merger of Advantage Bancorp, Inc. with and into
Marshall & Ilsley Corporation and any related amendments (including post-
effective amendments) and/or supplements to said Form S-4; (ii) generally
doing all things in his name and on his behalf in his capacity as a director
to enable Marshall & Ilsley Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission; and
(iii) ratifying and confirming his signature as it may be signed by the
attorney-in-fact to the Form S-4 and any related amendments (including post-
effective amendments) and/or supplements thereto.
Dated this 16th day of October, 1997.
/s/ Gus A. Zuehlke
-------------------------------------
Gus A. Zuehlke
<PAGE>
EXHIBIT 99.1
ADVANTAGE BANCORP, INC.
SPECIAL MEETING - FEBRUARY 5, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul P. Gergen and John W. Stampfl and each or
any one of them (with full power to act without the other) as attorneys and
proxies of the undersigned, with full power of substitution, to vote on behalf
of the undersigned all shares of Common Stock of Advantage Bancorp, Inc. to
which the undersigned is entitled to vote at the Special Meeting of
Shareholders of Advantage Bancorp, Inc. to be held on February 5, 1998 at
10:30 A.M. C.S.T., at the Gateway Technical College Conference Center,
Kenosha, Wisconsin or any adjournments or postponements thereof upon the
matters set forth below:
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted "FOR" approval of the Agreement and Plan of Merger.
<PAGE>
ADVANTAGE BANCORP, INC. SPECIAL MEETING
1. Approval of Agreement and Plan of Merger [_] FOR [_] AGAINST [_] ABSTAIN
2. In their discretion, upon such other matters as may come before the Special
Meeting.
Check appropriate box Date No. of Shares
Indicate changes below:
Address Change? [_] Name Change? [_]
______________________________________][
[_____________________________________]
Signature(s) in Box
Note: Please sign as name appears
hereon. Where shares are held as joint
tenants, both should sign. When
signing as attorney, executer,
administrator, trustee or guardian,
please give title. A proxy on behalf
of a corporation should be signed in
its name by a duly authorized officer.
