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Registration No. 333
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S - 4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
Merchants and Manufacturers Bancorporation, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 6712 39-1413328
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation Industrial Identification
or organization) Classification No.)
Code Number)
14100 West National Avenue
New Berlin, Wisconsin 53151
(414) 827-6713
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------
Michael J. Murry
Chairman of the Board of Directors
Merchants and Manufacturers Bancorporation, Inc.
14100 W. National Avenue
New Berlin, Wisconsin 53151
(414) 827-6713
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------
Copies of all correspondence to:
Erich Mildenberg Frank J. Pelisek
Davis & Kuelthau, S.C. Michael Best & Friedrich, LLP
111 E. Kilbourn Avenue 100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202 Milwaukee, Wisconsin 53202
(414) 276-0200 (414) 225-4928
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective and all
other conditions to the Merger (as defined herein) have been satisfied or
waived.
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If the securities being registered on this Form are 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
Title of Each
Class of Amount Proposed Proposed Amount
Securities to be Maximum Maximum of
to be Registered(2) Offering Aggregate Registra-
Registered(1) Price Offering tion Fee (3)
per Share Price
Common 620,100 Not Not $2,483.65
Stock, $1.00 Shares Applicable Applicable
par value
(1) This Registration Statement relates to securities of the Registrant
issuable to holders of Common Stock of Pyramid Bancorp., Inc
("Pyramid") in the proposed merger of Pyramid with and into a
wholly-owned subsidiary of Registrant (the "Merger").
(2) The actual number of shares of common stock, $1.00 par value of
Merchants and Manufacturers Bancorporation, Inc. ("Merchants") to be
issued in connection with the Merger will be determined based on the
number of shares of common stock, $1.00 par value of Pyramid
outstanding immediately prior to the effective date of the Merger
multiplied by the exchange ratio specified by that certain Agreement
and Plan of Merger, dated March 9, 1999, by and between Merchants and
Pyramid and will further be determined by the number of shares of
Pyramid stock as to which dissenters' rights will be perfected, if any.
(3) Pursuant to Rule 457(f)(2), the registration fee was computed on the
basis of $8,934,000, the book value of Pyramid stock to be exchanged in
the Merger as of June 30, 1999, the latest practicable date.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
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.
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Pyramid Bancorp., Inc.
101 Falls Road
Grafton, WI 53024
, 1999
-----------
Dear Fellow Shareholder:
Following this letter is a notice of a Special Meeting of the
Shareholders of Pyramid Bancorp., Inc.("Pyramid"), a Proxy Statement/Prospectus
and a proxy card for the Special Meeting. The Special Meeting will commence at
_______ ___.m. on _____________, 1999 at ____________________________
_____________________,Wisconsin.
The Pyramid shareholders will be asked to vote on a proposal to approve
an Agreement and Plan of Merger among Merchants and Manufacturers
Bancorporation, Inc. ("Merchants"), Merchants Merger Corp. ("Merger Corp."), a
wholly-owned subsidiary of Merchants, and Pyramid dated as of March 9, 1999, as
amended by the First Amendment to the Agreement and Plan of Merger dated as of
June 10, 1999 (the "Merger Agreement"). Merchants is a Wisconsin bank holding
company owning all of the capital stock of three commercial banks located in
Wisconsin.
Subject to receipt of regulatory approval, approval by holders of a
majority of the shares of Pyramid and satisfaction of other conditions, the
Merger Agreement provides that Pyramid will combine its business and operations
with those of Merger Corp. through a statutory merger (the "Merger"). As
described in the accompanying Proxy Statement/Prospectus, each of the directors
of Pyramid has agreed to vote his shares in favor of approval of the Merger
Agreement.
If the Merger becomes effective, each share of the Pyramid Common Stock
will be converted into 9 shares of Merchants Common Stock. See "THE MERGER -
Merger Consideration" in the accompanying Proxy Statement/Prospectus. Daily Bid
and Ask quotations for Merchants Common Stock are listed in The Milwaukee
Journal/Sentinel under "Other Stocks". The Bid and Ask quotations for Merchants
Common Stock as listed in The Milwaukee Journal/Sentinel on August 20, 1999 were
$42 and $42 1/2 respectively. The shares of Merchants Common Stock to be issued
to you in the Merger will offer greater liquidity than that of Pyramid Common
Stock which you presently own.
The Merger is intended to be tax-free for federal income tax purposes
to Pyramid shareholders who receive Merchants Common Stock in exchange for
Pyramid Common Stock, except as discussed in "THE MERGER-Certain Material
Federal Income Tax Consequences" in the accompanying Proxy Statement/Prospectus.
No fractional shares of Merchants Common Stock will be issued in the Merger.
Pyramid shareholders entitled to a fractional share of Merchants Common Stock
will receive an amount of cash calculated upon the average Bid and Ask
quotations as reported in The Milwaukee Journal/Sentinel for a specified period.
Pyramid shareholders are advised to consult their tax advisors with respect to
income tax consequences of the transaction. Details of the Merger are set forth
in the accompanying Proxy Statement/Prospectus. We encourage you to read it
carefully.
The Board of Directors of Pyramid has unanimously approved the Merger
Agreement as being in the best interest of Pyramid and its shareholders. Your
Board recommends that the Pyramid shareholders vote to approve the Merger
Agreement.
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Whether or not you plan to attend the Special Meeting, holders of
Pyramid Common Stock are asked to please complete, date and sign the enclosed
proxy card, which is solicited by the Board of Directors of Pyramid, and return
it promptly in the accompanying envelope, which requires no postage if mailed in
the United States. If you later find that you may be present at the Special
Meeting or for any other reason desire to revoke your proxy, you may do so at
any time before it is voted.
IN ORDER TO APPROVE THE MERGER AGREEMENT, IT IS NECESSARY THAT HOLDERS
OF AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF PYRAMID VOTE IN FAVOR OF THE
MERGER AGREEMENT.
Very truly yours,
----------------------------------------------
Thomas J. Sheehan
President and Chief Executive Officer
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PYRAMID BANCORP., INC.
101 Falls Road
Grafton, WI 53024
NOTICE OF SPECIAL MEETING OF SHAREHOLDER
TO BE HELD , 1999
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TO THE SHAREHOLDERS OF PYRAMID BANCORP., INC.
A Special meeting of Shareholders of Pyramid Bancorp., Inc. ("Pyramid")
will be held at ____________________, Wisconsin on ______________, 1999 at
_______ __.m. for the purpose of voting on the following matters:
1. To approve the Agreement and Plan of Merger dated as of March 9,
1999 as amended by the First Amendment to the Agreement and Plan
of Merger dated as of June 10 1999 among Merchants and
Manufacturers Bancorporation, INC. ("Merchants"), Merchants
Merger Corp. ("Merger Corp."), a wholly-owned subsidiary of
Merchants and Pyramid Bancorp., Inc. ("Pyramid") (the "Merger
Agreement"), providing for the merger of Pyramid with and into
Merger Corp. ("the Merger"). (A copy of the Merger Agreement is
attached as Exhibits A and A-1 hereto).
2. To transact such other business as may properly come before the
meeting.
THE DIRECTORS OF PYRAMID HAVE UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMEND THAT THE SHAREHOLDERS APPROVE THE MERGER
AGREEMENT.
Any shareholder desiring to exercise dissenters' rights and be paid in
cash for the fair value of his or her shares of Pyramid Common stock in
accordance with the provisions of the Wisconsin Business Corporation Law (i)
must file a written notice of intent to demand payment for his or her shares
before the vote is taken at the Special Meeting of Shareholders, (ii) must not
vote in favor of the Merger, and (iii) must otherwise comply with the
procedures set forth in Subchapter XIII of the Wisconsin Business Corporation
Law, a copy of which is attached as Exhibit D to the Proxy Statement/
Prospectus. See "THE MERGER-Dissenters' Rights" in the accompanying Proxy
Statement/Prospectus.
The Board of Directors has fixed the close of business on ____________,
1999 as the record date for the determination of Pyramid shareholders entitled
to notice of and to vote at the Special Meeting and any adjournment thereof.
Whether or not you plan to attend the Special Meeting, holders of
Pyramid Common Stock are asked to please complete, date and sign the enclosed
proxy card, which is solicited by the Board of Directors of Pyramid, and return
it promptly in the accompanying envelope. No postage is required if mailed in
the United States. The giving of such proxy does not affect your right to vote
in person in the event you attend the Special Meeting. You may revoke the proxy
at any time prior to its exercise in the manner described in the Proxy
Statement/Prospectus.
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The Special Meeting may be postponed or adjourned from time to time
without any notice other than by announcement at the Special Meeting of any
postponement or adjournment thereof, and any and all business for which notice
is hereby given may be transacted at such postponed or adjourned Special
Meeting.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A MAJORITY OF THE
OUTSTANDING SHARES OF PYRAMID COMMON STOCK IS REQUIRED FOR APPROVAL OF THE
MERGER AGREEMENT. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU
OWN.
Shareholders are invited to attend the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
----------------------------------------------
Thomas J. Sheehan
President and Chief Executive Officer
Grafton, Wisconsin
, 1999
- -----------
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING HE SURRENDER OF YOUR
STOCK CERTIFICATES.
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PROXY STATEMENT
PYRAMID BANCORP., INC.
101 Falls Road
Grafton, WI 53024
(414) 377-5511
SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
PROSPECTUS
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
COMMON STOCK
This Proxy Statement/Prospectus is being furnished to the shareholders
of Pyramid Bancorp., Inc., a Wisconsin corporation ("Pyramid"), in connection
with the solicitation of proxies by the Board of Directors of Pyramid, for use
at its special meeting to be held on ______________, 1999, at
________________________________________, Wisconsin, commencing at _____ p.m.,
local time, and any adjournments or postponements thereof (the "Special
Meeting").
At the Special Meeting, holders of Pyramid common stock, $1.00 par
value ("Pyramid Common Stock"), will consider and vote upon the approval and
adoption of the Merger Agreement and the transactions contemplated thereby.
Under the Merger Agreement, each issued and outstanding share of
Pyramid Common Stock (except as otherwise provided therein) will be converted
into the right to receive shares of Merchants Common Stock as described herein.
For a more complete description of the Merger Agreement and the terms of the
Merger, see "THE MERGER" and "CERTAIN PROVISIONS OF THE MERGER AGREEMENT."
This Proxy Statement/Prospectus also constitutes a prospectus of
Merchants with respect to the shares of Merchants Common Stock to be issued in
connection with the Merger.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE 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.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to the registration or qualification under the securities laws of any such
State.
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This Proxy Statement/Prospectus and accompanying form of proxy are
first being mailed to shareholders of Pyramid on or about ______________, 1999.
The date of this Proxy Statement/Prospectus is _______________, 1999.
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Merchants and Manufacturers Bancorporation, Inc.
Pyramid Bancorp., Inc.
Proxy Statement/Prospectus
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
SUMMARY .........................................................................................................6
Merchants and Manufacturers Bancorporation, Inc..........................................................6
Pyramid Bancorp., Inc....................................................................................6
The Special Meeting .....................................................................................6
Votes Required...........................................................................................7
Voting Agreement.........................................................................................7
Reasons for the Merger; Recommendation of the Board of Directors of Pyramid..............................7
Background of Merger.....................................................................................8
TheMerger ...............................................................................................8
General..................................................................................................8
What Pyramid Shareholders will receive in the Merger.....................................................8
Post-Merger Dividend Policy of Merchants.................................................................9
What we need to do to complete the Merger...............................................................10
Exchange of Stock Certificates..........................................................................10
Waivers and Amendments to the Merger Agreement..........................................................11
Termination of the Merger Agreement.....................................................................11
Reimbursement of Expenses...............................................................................11
Break-Up Fee............................................................................................11
Interests of Certain Persons in the Merger..............................................................12
Opinion of Pyramid's Financial Advisor..................................................................12
Dissenting Shareholders' Rights.........................................................................12
Certain Federal Income Tax Consequences of the Merger...................................................13
Accounting Treatment....................................................................................13
Regulatory Approvals....................................................................................13
COMPARATIVE BOOK VALUES, DIVIDENDS AND EARNINGS PER COMMON SHARE.................................................13
COMPARATIVE STOCK PRICES AND DIVIDENDS...........................................................................15
SELECTED HISTORICAL AND PRO FORMA DATA...........................................................................16
THE SPECIAL MEETING..............................................................................................20
Date, Place and Time....................................................................................20
Matters to Be Considered at the Special Meeting.........................................................20
Required Vote...........................................................................................20
Voting of Proxies.......................................................................................20
Revocability of Proxies.................................................................................20
Record Date; Stock Entitled to Vote; Quorum.............................................................20
Solicitation of Proxies.................................................................................21
</TABLE>
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<TABLE>
<S> <C>
THE MERGER.......................................................................................................21
Background of the Merger................................................................................21
Reasons for the Merger; Recommendation of Board of Directors of Pyramid.................................23
Certain Considerations..................................................................................25
Opinion of Pyramid Financial Advisor....................................................................26
Marshall's analysis............................................................................26
Analysis of Selected Comparable Transactions...................................................27
Analysis of Pyramid Valuation Multiples........................................................28
Analysis of Publicly Traded Companies Comparable to Pyramid....................................28
Discounted Earnings Analysis...................................................................28
Analysis of Merchants..........................................................................29
Pro Forma Merger Analysis......................................................................29
Stock Trading Analysis.........................................................................29
Contribution Analysis..........................................................................29
Interests of Certain Persons in the Merger..............................................................30
Merger Consideration....................................................................................31
Regulatory Approvals Required...........................................................................32
Federal ......................................................................................32
Wisconsin......................................................................................33
General ......................................................................................33
The Effective Time......................................................................................33
Conversion of Shares, Procedure for Exchange of Certificates; Fractional Shares.........................34
Description of Merchants Common Stock Issuable in the Merger............................................36
General ......................................................................................36
Dividend Rights................................................................................36
Voting Rights..................................................................................36
Rights Upon Liquidation........................................................................36
Miscellaneous..................................................................................36
Comparison of Shareholder Rights........................................................................37
Authorized Capital Stock.......................................................................37
Required Vote..................................................................................37
Classified Board of Directors..................................................................38
Removal of Directors...........................................................................38
Newly Created Directorships and Vacancies on the Board of Directors............................38
Certain Business Combinations..................................................................38
Resale of Merchants Common Stock Issued Pursuant to the Merger..........................................39
Pre-merger Dividend Policy .............................................................................39
Post-merger Dividend Policy.............................................................................39
Conduct of Business Pending the Merger..................................................................40
Certain Material Federal Income Tax Consequences........................................................40
Anticipated Accounting Treatment........................................................................41
Dissenters' Rights......................................................................................41
The Voting Agreement....................................................................................43
Other Related Party Transactions........................................................................43
Management after the Merger.............................................................................44
CERTAIN PROVISIONS OF THE MERGER AGREEMENT.......................................................................44
The Merger..............................................................................................44
</TABLE>
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<TABLE>
<S> <C>
Representations and Warranties..........................................................................44
Certain Covenants.......................................................................................45
No Solicitation of Transactions.........................................................................46
Conditions to Consummation of the Merger................................................................47
Termination.............................................................................................48
Amendment and Waiver....................................................................................48
Expenses ...............................................................................................48
Break-Up Fee............................................................................................49
CERTAIN PROVISIONS OF THE VOTING AGREEMENT.......................................................................49
CERTAIN INFORMATION CONCERNING MERCHANTS.........................................................................50
CERTAIN INFORMATION CONCERNING PYRAMID...........................................................................51
Ownership of Pyramid Common Stock.......................................................................52
EXPERTS ........................................................................................................53
LEGAL OPINIONS...................................................................................................53
FUTURE SHAREHOLDER PROPOSALS.....................................................................................53
WHERE YOU CAN FIND MORE INFORMATION..............................................................................54
FORWARD-LOOKING STATEMENTS.......................................................................................55
<CAPTION>
INDEX OF EXHIBITS
<S> <C>
Exhibit A - Agreement and Plan of Merger...............................................................A-1
Exhibit A-1 - First Amendment to Agreement and Plan of Merger........................................A-1-1
Exhibit B - Voting Agreement...........................................................................B-1
Exhibit C - Opinion of Marshall Financial Consulting, LLC..............................................C-1
Exhibit D - Subchapter XIII of Wisconsin Business Corporation Law......................................D-1
Exhibit E - Pyramid Bancorp., Inc. and Subsidiary Financial
Statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations.....................................E-1
</TABLE>
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SUMMARY
This Summary highlights selected information from this Proxy
Statement/Prospectus. It does not contain all the information that is important
to you. To understand the Merger fully, you should carefully read the entire
Proxy Statement/Prospectus and the other documents to which the Proxy
Statement/Prospectus refers you. See "WHERE YOU CAN FIND MORE INFORMATION"
(pages 53-55). We have included page numbers parenthetically to direct you to a
more complete description of the topics presented in this Summary.
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC. (pages 50-51)
Merchants and Manufacturers Bancorporation, Inc., a Wisconsin
corporation ("Merchants"), is a multi-bank holding company with three subsidiary
banks, Lincoln State Bank Milwaukee, Wisconsin, Franklin State Bank, Franklin,
Wisconsin and Lincoln Community Bank, Milwaukee, Wisconsin, sometimes
collectively referred to as the "Banks". The Banks operate a total of 17
facilities in Milwaukee and Waukesha Counties. In addition to the Banks,
Merchants owns three non-bank subsidiaries, Lincoln Neighborhood Redevelopment
Corporation, which was organized for the purpose of redeveloping and
rejuvenating certain areas in the City of Milwaukee; M&M Services, Inc., which
provides operational services to the Banks and Achieve Mortgage Corporation,
which is a mortgage brokerage firm.
At June 30, 1999, Merchants had assets of $344 million, net loans of
$270 million, total deposits of $298 million and shareholders' equity of $31
million.
The principal executive office of Merchants is located at 14100 West
National Avenue, New Berlin, Wisconsin, 53151, and its telephone number is (414)
827-6713.
PYRAMID BANCORP., INC. (pages 51-52)
Pyramid Bancorp., Inc. ("Pyramid") was incorporated in October of 1991
under the laws of Wisconsin, with the express purpose to serve as the holding
company for Grafton State Bank (the "Bank"), a Wisconsin charted commercial
bank.
The Bank was founded in 1907 and is one of the area's oldest commercial
banks. The Bank's principal business consists of attracting deposits from the
public and investing those deposits, along with funds generated from operations,
primarily in commercial and consumer loans, including residential real estate
loans. At June 30, 1999, Pyramid had total consolidated assets of $109 million,
loans of $61 million, deposits of $83 million and equity of $8.9 million. The
Bank operates from its executive offices in Grafton, Wisconsin and operates a
facility, including two teller windows and two drive-up lanes, at the
intersection of Pioneer Road and Port Washington Road in the Town of Grafton.
The principal executive office of Pyramid is located at 101 Falls Road,
Grafton, Wisconsin, 53024, and its telephone number is (414)377-5511.
THE SPECIAL MEETING (pages 20-21)
A Special Meeting of the shareholders of Pyramid will be held at
___________________________, on __________, 1999, at ____ p.m., local time. The
close of business on _____________, 1999 is the record date (the "Pyramid Record
Date") for determining the shareholders of record of Pyramid entitled to notice
of and to vote at the Pyramid Special Meeting and any postponement or
adjournment thereof. The purpose of the Pyramid Special Meeting is (i) to
consider and vote upon a proposal to approve the Merger Agreement
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and the transactions contemplated thereby and (ii) to consider such other
matters that may come before the Pyramid Special Meeting.
Shareholders of Merchants are not required to approve the Merger Agreement.
VOTES REQUIRED (page 20)
The Wisconsin Business Corporation Law (the "WBCL") requires that the
Merger Agreement be approved by the affirmative vote of a majority of the
outstanding shares of Pyramid Common Stock entitled to vote at the Special
Meeting.
As of the Pyramid Record Date, there were 68,900 outstanding shares of
Pyramid Common Stock, each of which is entitled to one vote. As of the Pyramid
Record Date, directors and executive officers of Pyramid held or exercised
voting control over approximately 19.3% of the outstanding shares of Pyramid
Common Stock entitled to vote on the Merger.
VOTING AGREEMENT (pages 49-50)
Merchants has entered into a Voting Agreement dated as of March 9, 1999
(the "Voting Agreement") attached hereto as Exhibit B with each of the directors
of Pyramid pursuant to which the directors have agreed to vote their shares (i)
in favor of the adoption and approval of the Merger Agreement and the Merger and
(ii) against any Competing Transaction (as such term is defined herein) which
generally includes an acquisition of control of, or a significant equity
interest in or significant assets of, Pyramid by a third party in the form of a
merger, consolidation, share exchange, business combination or other similar
transaction, acquisition of assets or shares or otherwise, or certain
announcements, proposals or offers with respect thereto. The directors of
Pyramid hold 13,312 shares, or approximately 19.3% of Pyramid Common Stock
entitled to vote at the Special Meeting. The Voting Agreement also provides that
Merchants has the exclusive right to purchase any or all of the shares of
Pyramid Common Stock owned by the directors of Pyramid for $250 per share,
payable in cash, subject to any necessary regulatory approval, after a material
breach of the Merger Agreement by Pyramid or a breach by a director of Pyramid
of the Voting Agreement. The purchase right is not exercisable as of the date
hereof. The purchase price per share under the Voting Agreement equaled
approximately 73% of the value of Pyramid Common Stock based upon the bid price
of Merchants Common Stock on the date the Voting Agreement was requested by
Merchants and based upon the exchange ratio set forth in the Merger Agreement.
The execution and delivery of the Voting Agreement was a condition to Merchants
entering into the Merger Agreement. The Voting Agreement may have the effect of
discouraging persons who might now or in the future be interested in acquiring
all of or a significant interest in Pyramid from considering or proposing such
an acquisition. The Voting Agreement is intended to increase the likelihood that
the Merger will be consummated.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS OF PYRAMID
(pages 23-25)
MERCHANTS.
The Merchants Board, after consideration of the terms and conditions of
the Merger Agreement and other factors deemed relevant by the Merchants Board,
believes that the terms of the Merger Agreement are fair and that the Merger is
in the best interests of Merchants and its shareholders.
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PYRAMID.
The Board of Directors of Pyramid (the "Pyramid Board") unanimously
recommends that holders of Pyramid Common Stock vote FOR approval of the Merger
Agreement and the transactions contemplated thereby. The Pyramid Board, after
consideration of the terms and conditions of the Merger Agreement and other
factors deemed relevant by the Pyramid Board, believes that the terms of the
Merger Agreement are fair and that the Merger is in the best interests of
Pyramid and its shareholders.
BACKGROUND OF MERGER (pages 21-22)
For a description of the background of the Merger, see "THE
MERGER--Background of the Merger."
THE MERGER (page 21)
GENERAL.
Under the terms of the Merger Agreement, Pyramid will, upon the later
of (a) the time of filing of Articles of Merger with the Wisconsin Department of
Financial Institutions, or (b) the effective date and time of the Merger as set
forth in such Articles of Merger and Certificate of Merger (the later of (a) and
(b) above being the "Effective Time") in accordance with the terms of the Merger
Agreement, merge with and into Merger Corp. As a result of the Merger, Grafton
State Bank will become a wholly-owned subsidiary of Merger Corp. which, in turn
is a wholly-owned subsidiary of Merchants. The Merger Agreement is attached to
this document as Exhibit A and an amendment to the Merger Agreement is attached
as Exhibit A-1 to this document. We encourage you to read the Merger Agreement
and the Amendment. They are the legal documents governing the Merger.
WHAT PYRAMID SHAREHOLDERS WILL RECEIVE IN THE MERGER (pages 31-32)
In the Merger, Merchants will issue up to 620,100 shares of Merchants
Common Stock to the Shareholders of Pyramid. As a shareholder of Pyramid, you
will receive nine (9) shares of Merchants Common Stock for each share of Pyramid
Common Stock you own unless you dissent from the Merger and follow the statutory
procedure for perfecting your dissenters' rights.
The nine-for-one ratio at which your Pyramid Common Stock will be
converted into Merchants Common Stock (the "Exchange Ratio") will be
renegotiated by Merchants and Pyramid if the Daily Average Price (as defined
below) of Merchants Common Stock is less than $36 or greater than $44. Shares of
Merchants Common Stock are quoted on the "Pink Sheets", an inter-broker
quotation medium and in the "Over the Counter Bulletin Board", an electronic
quotation service. Merchants Common Stock is quoted in the "Other Stocks"
section of the Milwaukee Journal Sentinel. On August 20, 1999, the Bid price for
Merchants Common Stock was $42 per share. Based on the exchange ratio in the
Merger, which is nine (9) shares of Merchants Common Stock for one (1) share of
Pyramid Common Stock, the market value of the consideration that Pyramid
shareholders will receive for each share of Pyramid Common Stock would be $378.
The market price of Merchants Common Stock may fluctuate prior to consummation
of the Merger, while the exchange ratio is fixed. Shareholders of Pyramid should
obtain current stock price quotations.
The Daily Average Price is the daily average of the "Bid" and "Ask"
quotations of Merchants Common Stock as published in the Milwaukee Journal
Sentinel (or obtained from another source acceptable to Merchants and Pyramid if
such quotations are not published in the Milwaukee Journal Sentinel) on each of
the thirty (30) trading days preceding the third day prior to the Effective
Time. On each of such thirty (30) trading days, the Bid and Ask prices will be
averaged to calculate the market quotation for that day, and the
-8-
<PAGE> 15
resulting thirty market quotations will be summed and the result divided by
thirty to determine the Daily Average Price. In the event that "Ask" quotations
are not listed, or if the "Ask" price exceeds the "Bid" price by more than $2 on
any of the thirty trading days used to compute the Daily Average Price, then the
"Bid" quotes will be used on those days to calculate the Daily Average Price.
If the Daily Average Price (as defined above) is less than $36 or
greater than $44, then Merchants and Pyramid will make a good faith effort to
promptly renegotiate the Exchange Ratio.
Because the market value of Merchants Common Stock at the Effective
Time is not known at this time, the actual value that Merchants would pay and
Pyramid shareholders would receive in the Merger and whether Merchants and
Pyramid will renegotiate the Exchange Ratio will not be known until the
scheduled closing date or shortly before the Effective Time, respectively. It is
currently anticipated that, if approved by Pyramid shareholders, the Merger will
be completed in the fourth calendar quarter of 1999. However, no assurance as to
the exact timing of the completion can be given.
In the event that the Daily Average Price is less than $36 or greater
than $44 and it becomes necessary to renegotiate the Exchange Ratio, Merchants'
Board is likely to consult with its legal and financial advisors regarding the
fairness of such renegotiated ratio.
In addition, the Merchants' Board and its advisors would consider many
of the same factors they considered in determining whether to approve and adopt
the Merger Agreement in the first instance. In particular, the Merchants Board
of Directors would analyze, among other factors, the relationship of the
consideration to be paid by Merchants to the market price and book value and
earnings per share of Pyramid, the financial terms of recent business
combinations in the banking industry and the dilutive or accretive effect of the
renegotiated exchange ratio on Merchants' future earnings and book value.
In the event it becomes necessary to renegotiate the Exchange Ratio
pursuant to the terms of the Merger Agreement, the Pyramid Board of Directors is
likely to consult with its legal and financial advisors to determine the
fairness of a renegotiated exchange ratio. Shareholders of Pyramid should note
that the fairness opinion obtained by the Pyramid Board and included as Exhibit
'C' to this Proxy Statement/Prospectus does not express an opinion as to the
fairness of the Merger, from a financial point of view, in the event that the
Daily Average Price of Merchants Common Stock is less than $36 or more than $44.
No assurance can be given that a fairness opinion regarding such renegotiated
exchange ratio can be obtained. In making a determination on a renegotiated
exchange ratio, the Pyramid Board of Directors would consider many of the same
factors it considered in determining whether to approve and accept the Merger
Agreement in the first instance. In particular, the Pyramid Board would analyze,
among other factors, whether the then current consideration to be received in
the Merger would deliver more value to the shareholders than could be expected
if Pyramid were to continue as an independent entity. In addition, the Pyramid
Board would consider whether, in light of then prevailing market and other
industry conditions, the renegotiated exchange ratio is fair from a financial
point of view to the Pyramid shareholders.
POST-MERGER DIVIDEND POLICY OF MERCHANTS (page 39)
It is presently expected that dividend payments will continue at
Merchants' current quarterly dividend rate of $0.15 per share. Merchants' Board
of Directors determines the level of dividends to be declared each quarter based
on various economic and financial factors.
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<PAGE> 16
WHAT WE NEED TO DO TO COMPLETE THE MERGER (pages 47-48)
The completion of the Merger depends on a number of conditions being
met, including the following:
1. Shareholders of Pyramid vote in favor of the Agreement and Plan
of Merger.
2. We receive all necessary regulatory approvals.
3. Receipt by us of a legal opinion that, for United States federal
income tax purposes, Merchants, Pyramid, Merger Corp. and Pyramid
Shareholders who exchange their shares of Pyramid Common Stock
for shares of Merchants Common Stock, will not recognize any gain
or loss as a result of the Merger, except in connection with the
payment of cash instead of fractional shares. The tax opinion
will be subject to various limitations, and we recommend that you
read the fuller description of material tax consequences on page
40.
4. Receipt by Merchants of a letter from its independent accountant
that the Merger will qualify for "pooling of interests"
accounting treatment.
5. The absence of any injunction or legal restraint blocking the
Merger.
Where the law permits, Merchants or Pyramid could decide to complete
the Merger even though one or more of these conditions has not been met. We
cannot be certain when (or if) the conditions to the Merger will be satisfied or
waived, or that the Merger will be completed.
EXCHANGE OF STOCK CERTIFICATES (pages 34-35).
At or prior to the Effective Time, Merchants will deposit with Firstar Trust
Company (the "Exchange Agent") certificates representing the shares of Merchants
Common Stock to be issued in accordance with the terms of the Merger Agreement
("Merchant Common Stock Certificates") for exchange in accordance with the
Merger Agreement, and cash in lieu of any fractional shares of Merchants Common
Stock.
As soon as practicable after the Effective Time, Merchants will cause
the Exchange Agent to mail to each holder of certificates representing one or
more shares of Pyramid Common Stock converted into the right to receive shares
of Merchants Common Stock pursuant to the Merger Agreement ("Pyramid Common
Stock Certificates") a letter of transmittal and instructions for use in
effecting the surrender of the Pyramid Common Stock Certificates in exchange for
Merchants Common Stock Certificates and any cash in lieu of fractional shares.
Upon proper surrender of an Pyramid Common Stock Certificate for exchange and
cancellation to the Exchange Agent, together with such properly completed letter
of transmittal, the holder of such Pyramid Common Stock Certificate shall be
entitled to receive in exchange therefor, as applicable, (i) Merchants Common
Stock Certificate representing that number of whole shares of Merchants Common
Stock to which such holder of Pyramid Common Stock is entitled pursuant to the
terms of the Merger Agreement and (ii) cash in lieu of fractional shares.
Persons who hold Merchants Common Stock prior to the Merger will not need to
exchange their existing certificates representing shares of Merchants Common
Stock for new stock certificates.
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<PAGE> 17
WAIVERS AND AMENDMENTS TO THE MERGER AGREEMENT. (page 48)
Merchants and Pyramid may amend, modify or waive in writing the terms
and conditions of the Merger Agreement; provided, however, that no amendment may
be made after the approval of the Merger Agreement at the Pyramid Special
Meeting that changes the amount or type of consideration into which each share
of Pyramid Common Stock would be converted. At any time prior to the Effective
Time, either Merchants or Pyramid may by written instrument (a) extend the time
for the performance of any obligations of the other party, (b) waive any
inaccuracies in the representations and warranties and (c) waive compliance with
any agreement or condition contained in the Merger Agreement.
TERMINATION OF THE MERGER AGREEMENT. (page 48)
The Boards of Directors of Merchants and Pyramid can agree at any time
to terminate the Agreement and Plan of Merger without completing the Merger. In
addition, either Merchants or Pyramid can terminate the Merger Agreement if:
1. We do not complete the Merger by December 31, 1999, unless the
failure to complete the Merger by that time is due to a violation
of the Merger Agreement by the party that wants to terminate the
Merger Agreement.
2. Any governmental agency denies an approval we need to complete
the Merger and that denial has become final and nonappealable.
3. The shareholders of Pyramid do not approve the Merger Agreement.
4. Either Merchants or Pyramid breaches the Merger Agreement (and
does not correct the breach promptly) in a way that would entitle
the party that wants to terminate the Merger Agreement to not
complete the Merger, as long as the party wanting to terminate
the Merger Agreement has not materially breached the Merger
Agreement.
5. If the Daily Average Price (see "What Pyramid Shareholders will
receive in the Merger") is less than $36 or greater than $44 and
Merchants and Pyramid cannot agree on a renegotiated exchange
ratio.
REIMBURSEMENT OF EXPENSES. (pages 48-49)
The Merger Agreement provides that expenses incurred by Merchants and
Pyramid in connection with the Merger will be borne by the party which has
incurred the expense. However, if the Merger Agreement is terminated because of
a breach of the Merger Agreement, then the breaching party shall reimburse the
non-breaching party for documented out-of-pocket expenses incurred in connection
with the Merger. Such right to reimbursement is in addition to other remedies
the non-breaching party may have.
BREAK-UP FEE (page 49)
If the Merger Agreement is terminated under certain circumstances
relating to third-party offers or the withdrawal or modification of the approval
or recommendation of the Merger Agreement by the Board of Directors of Pyramid,
Pyramid will be obligated to pay Merchants a fee equal to the lesser of (i) 1.5%
of the aggregate value of the Merger as of the date of termination (based on the
market price of Merchants
-11-
<PAGE> 18
Common Stock multiplied by the 620,100 shares of Merchants Common Stock to be
issued in the Merger or (ii) $400,000 (the "Break-Up Fee").
Provided that Pyramid has not breached the Merger Agreement in any
material respect, Merchants will be obligated to pay the Break-Up Fee to Pyramid
if the Board of Directors of Merchants withdraws, modifies or amends its
approval of the Merger Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (pages 30-31)
Some of the directors and officers of Pyramid have interests in the
Merger that are different from, or in addition to, their interests as
stockholders in Pyramid.
The Directors of Merchants immediately prior to the Effective Time will
continue as the Directors of Merchants, each to hold office in accordance with
the charter and bylaws of Merchants. Additionally, upon consummation of the
Merger, the Chairman and two other current Directors of Pyramid will be elected
to the Board of Directors of Merchants. The persons to be added to the Merchants
Board are Thomas J. Sheehan, Jerome T. Sarnowski and James Kacmarcik. Mr.
Sheehan is Chairman of the Board of Directors, President and Chief Executive
Officer of Pyramid and the Bank; Messrs. Sarnowski and Kacmarcik are Directors
of Pyramid and the Bank. The officers of Merchants immediately prior to the
Effective Time will continue as the officers of Merchants, in each case until
their respective successors are duly elected or appointed. Additionally, Thomas
J. Sheehan, the President and Chief Executive Officer of Pyramid and the Bank
will serve as Vice Chairman of Merchants and will assume responsibility for the
retail banking services of Merchants subsidiary banks. Some of the officers of
Pyramid have entered into employment agreements with the Bank which will
continue in effect after the Bank becomes a subsidiary of Merchants as a result
of the Merger . Merchants (through the Bank as employer) will succeed to the
Bank's obligations with respect to the employment agreements. The Boards of
Directors of Merchants and Pyramid were aware of those interests and took them
into account in approving the Merger Agreement.
OPINION OF PYRAMID'S FINANCIAL ADVISOR (pages 26-30)
Marshall Financial Consulting LLC ("Marshall") delivered to the Pyramid
Board its written opinion dated March 8, 1999, which was confirmed in a written
opinion dated the date of this Proxy Statement/Prospectus that as of such date,
and based upon the matters considered as set forth in such opinion, the Exchange
Ratio is fair, from a financial point of view, to the Pyramid shareholders. The
written opinion of Marshall dated the date of this Proxy Statement/Prospectus is
attached hereto as Exhibit C and is incorporated herein by reference. Holders of
shares of Pyramid Common Stock are urged to read such opinion in its entirety.
For a description of the assumptions made and matters considered by Marshall,
see 'THE MERGER-Opinion of Financial Advisor" and Exhibit C.
DISSENTING SHAREHOLDERS' RIGHTS (pages 41-43)
Shareholders of Pyramid who follow certain procedural requirements may
be entitled to receive cash in the amount of the fair value of their shares
instead of the shares of Merchants Common Stock offered pursuant to the Merger
Agreement. The fair value of the shares of Pyramid Common Stock will be
determined pursuant to Wisconsin law which defines "fair value" as "-- the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable."
-12-
<PAGE> 19
ANY SHAREHOLDER WHO WANTS TO EXERCISE DISSENTERS' RIGHTS MUST NOT VOTE
IN FAVOR OF THE MERGER AGREEMENT AND MUST COMPLY WITH ALL OF THE PROCEDURAL
REQUIREMENTS PROVIDED BY WISCONSIN LAW. A COPY OF THE DISSENTERS' RIGHTS STATUTE
IS ATTACHED AS EXHIBIT D TO THIS DOCUMENT. WE ENCOURAGE YOU TO READ THE STATUTE
CAREFULLY AND TO CONSULT WITH LEGAL COUNSEL IF YOU DESIRE TO EXERCISE YOUR
DISSENTERS' RIGHTS.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (pages 40-41)
We expect that the conversion of your shares of Pyramid Common Stock
into shares of Merchants Common Stock generally will not cause you to recognize
any gain or loss for purposes of the United States federal income tax, except to
the extent that you may receive cash for fractional shares or pursuant to the
exercise of dissenters' rights.
The obligation of Pyramid and Merchants to complete the Merger depends
on receipt of a legal opinion about the federal income tax treatment of Pyramid,
Merchants, Merger Corp. and Pyramid's shareholders. This opinion is not binding
on the Internal Revenue Service which could take a different view.
Determining the actual tax consequences of the Merger to you can be
complicated. They will depend on your specific situation and on variables not
within our control. You should consult your own tax advisor for a full
explanation of the Merger's tax consequences to you.
ACCOUNTING TREATMENT (page 41)
The Merger will be accounted for as a pooling-of-interests pursuant to
generally accepted accounting principles. It is a condition to the Merger that
Merchants shall have received an opinion, dated as of the Effective Time, from
Ernst & Young LLP, confirming that the Merger will qualify for "pooling of
interests" accounting treatment if consummated in accordance with the Merger
Agreement. However, Merchants may waive this condition and consummate the Merger
even if pooling of interests accounting is not available.
REGULATORY APPROVALS (pages 32-33)
The Merger is subject to the approval of the Federal Reserve Board
under the Bank Holding Company Act of 1956, as amended (the "BHCA") and the
Wisconsin Department of Financial Institutions (the "DFI").
COMPARATIVE BOOK VALUES, DIVIDENDS AND EARNINGS PER COMMON SHARE
The following tables present selected comparative per common share data
for Merchants Common Stock for the years ended December 31, 1998, 1997 and 1996
and the six months ended June 30, 1999, and Pyramid Common Stock for the years
ended December 31, 1998, 1997 and 1996 and the six months ended June 30, 1999 on
both a historical and pro forma basis giving effect to the Merger. The pro forma
information has been prepared on the basis of accounting for the Merger as a
pooling-of-interests. The information is derived from the consolidated
historical financial statements of Merchants and Pyramid, including the related
notes thereto, included or incorporated by reference in this Proxy
Statement/Prospectus. This information should be read in conjunction with such
historical financial statements and the related notes thereto. See
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and "INDEX TO FINANCIAL
STATEMENTS."
-13-
<PAGE> 20
This information is not necessarily indicative of the results of the
future operations of the combined entity or the actual results that would have
occurred had the Merger been consummated prior to the periods indicated.
Merchants Common Stock
<TABLE>
<CAPTION>
At or For the Six At or For the Year
Months Ended June Ended December 31,
30, 1999 (unaudited)
1998 1997 1996
<S> <C> <C> <C> <C>
Historical:
Net income $ 0.69 $ 1.81 $ 1.67 $ 0.91
Cash dividends declared 0.30 0.59 0.48 0.48
Book value 20.81 20.80 19.78 18.48
Pro forma combined:
Net income (1) $ 0.68 $ 1.86 $ 1.69 $ 1.07
Cash dividends
declared (2) 0.30 0.59 0.48 0.48
Book value 18.77 19.03 17.90 16.44
</TABLE>
Pyramid Common Stock
<TABLE>
<CAPTION>
At or for the Six At or for the Year
Months Ended June Ended December 31,
30, 1999 (unaudited)
1998 1997 1996
<S> <C> <C> <C> <C>
Historical:
Net income $ 8.73 $ 18.07 $ 15.55 $ 13.43
Cash dividends declared 2.00 2.00 1.00
Book value 131.19 130.40 116.23 101.14
Equivalent pro forma
combined: (3)
Net income $ 0.97 $ 2.01 $ 1.73 $ 1.49
Cash dividends declared 0.22 0.22 0.11
Book Value 14.41 14.49 12.91 11.24
</TABLE>
(1) Pro forma net income was computed assuming 2,110,000; 2,067,355;
2,004,809 and 2,001,160 fully diluted shares of Merchants outstanding
for the periods ended June 30, 1999, December 31, 1998, 1997 and 1996,
respectively.
-14-
<PAGE> 21
(2) Based on historical dividends of Merchants.
(3) The pro forma equivalent per share data for Pyramid has been computed
by multiplying the pro forma combined per share information by 9, which
represents the Exchange Ratio assuming that the Daily Average Price of
Merchants is not greater than $44 or less than $36 per share.
COMPARATIVE STOCK PRICES AND DIVIDENDS
Merchants Common Stock
Merchants Common Stock is quoted on the "Pink Sheets," an inter-broker
quotation medium and in the "Over the Counter Bulletin Board," an electronic
quotation service. Merchants Common Stock is quoted in the "Other Stocks"
section of the Milwaukee Journal Sentinel. The following table sets forth, for
the periods indicated, the High and Low Bid quotations per share as furnished by
Robert W. Baird, Inc., a Wisconsin investment banking firm, and the regular cash
dividends declared for Merchants Common Stock as adjusted to reflect stock
dividends. It should be noted that such Bid quotations do not necessarily
represent actual sales.
<TABLE>
<CAPTION>
MERCHANTS COMMON STOCK
----------------------
HIGH LOW
BID BID DIVIDEND
---- --- --------
<S> <C> <C> <C>
1996
- ----
First quarter $17.73 $16.06 $ 0.10
Second Quarter 17.73 16.82 0.10
Third Quarter 18.18 17.27 0.12
Fourth Quarter 18.18 17.57 0.15
1997
- ----
First Quarter $19.24 $16.97 $ 0.12
Second Quarter 20.00 18.79 0.12
Third Quarter 20.15 19.55 0.12
Fourth Quarter 28.48 20.15 0.12
1998
- ----
First Quarter $30.30 $27.88 $ 0.12
Second Quarter 33.64 28.64 0.13
Third Quarter 35.45 28.10 0.15
Fourth Quarter 39.50 34.63 0.20
1999
- ----
First Quarter $43.00 $38.00 $ 0.15
Second Quarter 43.00 41.50 0.15
</TABLE>
On March 10, 1999, the last trading day before the announcement of the
signing of the Merger Agreement, the Bid price of Merchants Common Stock as
reported in the Milwaukee Journal Sentinel was
-15-
<PAGE> 22
$38 per share. On August 20, 1999, the latest practicable date before the filing
of the Proxy Statement/Prospectus with the Commission, the Bid price of
Merchants Common Stock as reported was $42 per share. Assuming the Merger had
occurred on such date, the equivalent market value per share of Pyramid Common
Stock, calculated by multiplying the Bid price of Merchants Common Stock by the
Exchange Ratio, would have been $378 which represents 288.1% of June 30, 1999
book value of Pyramid and a price to earnings ratio of 21.65x, based on
Pyramid's annualized net income for the first 6 months of 1999. See also "THE
MERGER-Opinion of Pyramid Financial Advisor". Shareholders are urged to obtain
current market prices for Merchants Common Stock. No assurance can be given as
to the market price of Merchants Common Stock prior to the Effective Time or
after consummation of the Merger.
On the Record Date, there were approximately 601 holders of record of
Merchants Common Stock.
Pyramid Common Stock
Pyramid Common Stock is not listed on any exchange or quoted in the
over-the-counter market. There is no established trading market for Pyramid
Common Stock. In the opinion of Pyramid, due to the lack of an active market for
Pyramid Common Stock, transactions in Pyramid Common Stock of which Pyramid is
aware are not frequent enough to produce representative prices. The last sale of
which Pyramid is aware was to the best knowledge of Pyramid at $100 per share on
April 17, 1998.
The Board of Directors of Pyramid declared the following per-share
dividends in 1996, 1997, 1998 and during the first half of 1999, respectively:
$-0-, $1.00, $2.00, $2.00. Pursuant to the Merger Agreement, the ability of
Pyramid to pay dividends on Pyramid Common Stock prior to the Effective Time has
been restricted except that commencing in the first quarter of 1999 Pyramid is
permitted to declare and pay a quarterly dividend not to exceed $1.00 per share.
On the Record Date, there were 111 holders of record of Pyramid Common
Stock.
SELECTED HISTORICAL AND PRO FORMA DATA
The summary below sets forth selected historical and other data and
selected unaudited pro forma financial data. The financial data should be read
in conjunction with the historical consolidated financial statements and related
notes thereto of Merchants and Pyramid and in conjunction with the unaudited pro
forma combined financial statements and related notes thereto of Merchants as
the surviving corporation in the Merger included elsewhere in this Proxy
Statement/Prospectus. See "INDEX TO FINANCIAL STATEMENTS" and "UNAUDITED PRO
FORMA CONSOLIDATED FINANCIAL INFORMATION."
-16-
<PAGE> 23
Selected Historical Financial and Other Data (In thousands, except per-share
data)
Merchants
<TABLE>
<CAPTION>
At or for the Six At or for the Year
Months Ended June Ended December 31,
30, (unaudited)
1999 1998 1998 1997 1996 1995 1994
----------------------------- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $344,164 $312,705 $334,503 $296,678 $267,723 $264,247 $248,181
Loans, net 270,033 231,653 251,815 227,178 189,791 163,650 149,925
Investment
Securities held - - - - - - 4,326
to maturity
Deposits 298,012 280,382 289,230 264,699 232,933 233,083 223,446
Long-term 1,190 260 - - - -
debt
Shareholders'
equity 31,000 30,378 30,997 29,496 28,380 26,543 23,573
Interest income 11,679 11,324 23,215 21,094 19,328 18,383 16,139
Interest 5,131 5,118 10,589 9,090 8,362 7,921 6,155
expense
Provision for
loan losses 100 150 250 192 460 132 43
Other income 925 1,009 2,330 1,656 1,555 1,328 941
Other expenses 5,836 5,511 10,532 9,620 10,021 9,040 8,484
Income tax 502 547 1,468 1,439 730 917 874
Net income 1,035 1,007 2,706 2,409 1,310 1,701 1,524
</TABLE>
-17-
<PAGE> 24
Pyramid
<TABLE>
<CAPTION>
At or for the Six At or for the Year
Months Ended June Ended December 31,
30, (unaudited)
1999 1998 1998 1997 1996 1995 1994
---------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $108,936 $ 97,829 $106,909 $95,007 $90,971 $83,744 $81,586
Loans 61,291 54,158 60,947 53,880 51,544 51,759 53,684
receivable, net
Investment
Securities held
to maturity 7,344 7,049 6,958 6,669 5,274 4,843 5,637
Deposit
accounts 83,456 75,457 82,974 72,580 69,545 63,406 61,948
Borrowed 8,150 5,190 8,750 4,740 5,190 6,890 5,540
funds
Shareholders'
equity 8,934 7,773 8,441 7,276 6,311 5,512 4,590
Interest income 3,794 3,652 7,472 6,933 6,503 6,228 4,959
Interest 1,723 1,757 3,531 3,404 3,236 3,120 2,294
expense
Provision for
loan losses 36 12 64 35 145 24 64
Noninterest
income 311 287 621 519 502 486 801
Noninterest
expenses 1,477 1,344 2,780 2,526 2,427 2,383 2,429
Income tax
expenses 281 275 574 515 359 456 359
Net income 588 551 1,144 972 838 731 614
</TABLE>
-18-
<PAGE> 25
Selected Unaudited Pro Forma Financial Data
($ in thousands except per share data)
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended
June 30, December 31,
1999 1998 1998 1997 1996
----------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement
Interest Income $15,473 $14,976 $30,687 $28,027 $25,831
Interest Expense 6,854 6,875 14,120 12,494 11,598
Net Interest
Income 8,619 8,101 16,567 15,533 14,233
Loss Provision 136 162 314 227 605
Other Income 1,236 1,296 2,951 2,175 2,057
Other Expense 7,313 6,855 13,312 12,146 12,448
Income Before Tax 2,406 2,380 5,892 5,335 3,237
Income Tax 783 822 2,042 1,954 1,089
Net Income 1,623 1,558 3,850 3,381 2,148
Per Share
Basic earnings per
share $ 0.77 $ 0.76 $ 1.86 $ 1.69 $ 1.07
Diluted earnings
per share 0.76 0.74 1.82 1.64 1.05
<CAPTION>
At the Six At the Year Ended
Months ended June 30 December 31
Balance Sheet 1999 1998 1998 1997 1996
----------------------------------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans-Net $331,324 $285,811 $312,762 $281,058 $241,335
Assets 453,100 410,534 441,412 391,685 358,694
Deposits 381,468 355,839 372,204 337,249 302,387
Shareholders'
Equity 39,934 38,151 39,438 36,772 32,691
Weighted Average
Shares
Basic weighted 2,096 2,062 2,067 2,005 2,005
average shares
outstanding
Diluted weighted 2,136 2,106 2,112 2,059 2,052
average shares
outstanding
</TABLE>
-19-
<PAGE> 26
THE SPECIAL MEETING
Date, Place and Time
The Special Meeting will be held at___________________________________,
Wisconsin, on ________________, 1999 at _____ p.m. (local time).
Matters to Be Considered at the Special Meeting.
At the Special Meeting, holders of Pyramid Common Stock will consider
and vote upon a proposal to approve the Merger Agreement and any other matters
that may properly come before the Special Meeting. For a detailed description of
the Merger and the Merger Agreement, see "The Merger" and "Certain Provisions of
the Merger Agreement."
Required Vote
The affirmative vote of the holders of a majority of the outstanding
shares of Pyramid Common Stock entitled to vote at the Special Meeting is
required to approve the Merger Agreement. Each share of Pyramid Common Stock
outstanding on the Record Date (as defined herein) is entitled to one vote.
Shareholders of Merchants are not required to approve the Merger Agreement and
no further corporate authorization by Merchants is required to consummate the
Merger.
Pursuant to the Voting Agreement, the directors who have voting power
with respect to a total of 13,312 shares or approximately 19.3% of Pyramid
Common Stock entitled to vote at the Special Meeting have agreed, among other
things, to vote their shares in favor of the approval and adoption of the Merger
Agreement and against certain other transactions.
Voting of Proxies
Shares represented by all properly executed proxies for Pyramid Common
Stock received in time for the Special Meeting will be voted at the Special
Meeting in the manner specified by the holders thereof. Proxies which do not
contain voting instructions will be voted FOR approval of the Merger Agreement.
It is not expected that any matter other than that referred to herein
will be brought before the Special Meeting. If, however, other matters are
properly presented, the persons named as proxies will vote in accordance with
their judgment with respect to such matters.
Revocability of Proxies
The grant of a proxy on the enclosed form of proxy does not preclude a
shareholder from voting in person. A shareholder may revoke a proxy at any time
prior to its exercise by delivering to the Secretary of Pyramid a duly executed
proxy or revocation of proxy bearing a later date or by voting in person at the
Special Meeting. Attendance at the Special Meeting will not of itself constitute
revocation of a proxy.
Record Date; Stock Entitled to Vote; Quorum
Only holders of record of Pyramid Common Stock at the close of business
on ____________, 1999 (the "Record Date") will be entitled to receive notice of
and to vote at the Special Meeting.
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At the Record Date, 68,900 shares of Pyramid Common Stock were
outstanding. Shares representing a majority of the outstanding shares of Pyramid
Common Stock entitled to vote must be represented in person or by proxy at the
Special Meeting in order for a quorum to be present. Abstentions will be treated
as shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
the Merger Agreement. If a broker or other holder of record indicates on the
proxy that it does not have discretionary authority as to certain shares to vote
on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
Solicitation of Proxies
Pyramid will bear the cost of the solicitation of proxies from its
shareholders, except that Merchants and Pyramid will share equally the cost of
printing this Proxy Statement/Prospectus and all regulatory filing fees in
connection therewith. In addition to solicitation by mail, the directors,
officers and employees of Pyramid may solicit proxies from shareholders of
Pyramid by telephone or telegram, or in person, but will receive no additional
compensation for such services.
SHAREHOLDERS SHOULD NOT RETURN THEIR STOCK CERTIFICATES WITH THEIR
PROXY CARDS. AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVE TIME, PYRAMID
SHAREHOLDERS WILL BE PROVIDED WITH MATERIALS RELATING TO THE EXCHANGE OF
THEIR STOCK CERTIFICATES. SEE "THE MERGER - CONVERSION OF SHARES; PROCEDURES
FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES."
THE MERGER
Background of the Merger
For the past several years, the Board of Directors of Pyramid has
monitored the changes in the banking industry and the future of independent
banks in smaller communities in Wisconsin.
The Pyramid Board considered the increasing competition in the banking
industry, the need for ever-larger capital expenditures to provide desired
customer services and the increasingly complex regulatory and market structure.
The Pyramid Board recognized that the banking industry has substantially changed
in recent years and that changes of equal or greater magnitude are likely in the
future.
In that connection, the Pyramid Board discussed from time to time the
possibility of combining with another bank, forming an expanded bank holding
company and making suitable acquisitions and growing internally.
As a result of these discussions, the Pyramid Board realized that it
would not be possible to realize sufficient growth through small acquisitions
and internally-generated growth to effectively compete with the increasing
numbers of larger competitors entering its market.
The Pyramid Board thus concluded that a combination with another bank
would provide the size and the necessary resources for the Bank to remain an
effective competitor in its market and to properly service its community.
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The Board believed that it was very important for the Bank to retain
its identity as a community bank and also to retain the name of Grafton State
Bank along with its local management. Based on its review of other transactions,
the Board felt that the Bank's customers and the community would suffer a
reduction in service by a sale of the Bank and its conversion to a branch of
another bank, resulting in the decision making process being moved out of the
local community to a corporate headquarters in another location.
To that end, in 1997, the Pyramid Board attempted to effect a
combination with another community bank ("other organization"). The combination
was intended to assure relative independence and local control for both
organizations. However, because of the ownership structure of the other
organization, the Board determined that the combination with that bank would not
be in the best interests of Pyramid, its shareholders or its customers.
Accordingly, discussions were terminated in January, 1998. In the summer of
1998, discussions between Pyramid and the other organization resumed in an
attempt to restructure the ownership of the other organization to protect
Pyramid's interests. After several months of unsuccessful negotiations,
discussions with the other organization were finally terminated.
In 1998, Pyramid also discussed possible combinations with several
other bank holding companies. However, none of the potential acquirors agreed to
allow the Bank to retain its community identity and operate under its own name.
No specific offers were ever received by Pyramid as a result of such
discussions.
The Pyramid Board continued to believe that in order to remain
competitive and provide appropriate banking services to its customers, an
increase in size and resources by means of a combination with another bank was
required.
Over the past several years, Merchants had periodically expressed an
interest in exploring a combination with Pyramid. Pyramid's Board was aware that
Merchants' subsidiary banks were operating under local control and with local
autonomy. Pyramid's Board was also mindful of the desire of many of its
shareholders and customers to retain a community-oriented bank with local
control.
Accordingly, in the second half of 1998, the management and Board of
Directors of Pyramid commenced discussing a possible combination with Merchants.
The Pyramid Board found that the Merchants' banking philosophy closely resembled
Pyramid's. Additionally, Pyramid concluded that the subsidiary banks of
Merchants and Grafton State Bank complemented each other in loan activities
because Merchants had a strong emphasis on commercial lending while Grafton
State Bank emphasized mortgage lending. As a result of the combination, Grafton
State Bank could increase its commercial lending limit to approximately $7
million and would be able to more effectively service many business customers in
its market area which it had difficulty accommodating in the past.
In addition, the Pyramid Board believed that the shareholders of
Pyramid will enjoy greater liquidity for their stock and a means of accurately
valuing their investment through a transaction with Merchants.
As a result, the Pyramid Board determined to pursue further discussions
with Merchants. The Pyramid Board and management held several meetings with the
management and Directors of Merchants to further discuss post-merger operational
matters and the merger consideration. Subsequently, the Pyramid Board engaged
Marshall as a financial advisor to assist it in evaluating the Merchants stock
and advise it on the fairness of the exchange, from a financial point of view.
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On December 19, 1998, the Merchants Board held a special meeting,
attended by its financial advisor and legal counsel, to consider and approve the
terms of a letter of intent to be submitted to Pyramid. The letter of intent was
executed by Merchants on December 28, 1998 and delivered to Pyramid.
After further negotiations and discussions with its financial advisor
and legal counsel regarding the proposed stock exchange, on January 4, 1999, the
Pyramid Board accepted the letter of intent pursuant to which Pyramid
stockholders would receive an aggregate of 620,100 shares of Merchants stock,
subject to renegotiation of the exchange ratio under certain conditions related
to the price of Merchants' stock . The parties issued a joint press release
announcing the execution of the letter of intent.
Following public announcement of the proposed transaction and prior to
the execution of the Agreement and Plan of Merger, a Pyramid shareholder
suggested to the management that Pyramid consider an auction which the
shareholder believed would enhance the value to be received by Pyramid
shareholders. The management and the Board of Directors of Pyramid determined an
auction process was not in the best interests of the Pyramid shareholders or the
customers of the Bank.
After further discussions, an Agreement and Plan of Merger embodying
the terms of the letter of intent was negotiated with the assistance of legal
counsel and executed by Merchants and Pyramid as of March 9, 1999. The parties
issued a joint press release announcing the transaction.
As of June 10, 1999, the First Amendment to the Merger Agreement was
entered into by Merchants and Pyramid. The purpose of the First Amendment was to
provide for the merger of Pyramid with Merchants Merger Corp., a wholly-owned
subsidiary of Merchants organized exclusively to facilitate the Merger
transaction.
The Board of Directors of Pyramid has approved the Merger Agreement and
believes that the proposed Merger is in the best interest of Pyramid and its
shareholders. Accordingly, the Pyramid Board recommends that the shareholders of
Pyramid vote in favor of the adoption of the Merger Agreement as discussed
herein.
Reasons for the Merger; Recommendation of Board of Directors of Pyramid
Merchants. The Merchants Board has concluded that the Merger would be
in the best interests of Merchants and its shareholders. In reaching this
determination, the Merchants Board considered many factors including the
following:
(i) The Merger meets Merchants' strategic objectives of
maintaining and strengthening a locally owned and operated
community-oriented financial institution.
(ii) The Merger will create a significantly larger financial
institution that will have capabilities to offer a wider array of
financial products and services.
For instance, Merchants' current customers will have access to the
products and services offered by Pyramid and, conversely, Pyramid will
offer its products and services to Merchants' customers. Moreover, the
combined resources of the two companies will improve the efficiencies
associated with the development of new products and services to be
offered by Merchants.
(iii) Merchants will have immediate access to the Ozaukee
County market which is currently served by Merchants on a limited
basis.
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(iv) The similarities between the operations of Merchants and
Pyramid will result in cost savings and more efficient utilization of
resources and technology thereby offering economies of scale not
currently available to Merchants.
(v) The size and capital structure of Merchants following
the Merger will provide greater opportunities and flexibility in
responding to the rapidly changing industry for financial service
providers.
(vi) The asset size, capital position, management strength
and market position of Merchants will enable the combined company to
remain competitive and take advantage of current and emerging
opportunities for growth and profitability.
(vii) The opinion of Merchants that the consideration to be
paid by Merchants in the Merger is fair, from a financial point of
view, to Merchants and its shareholders.
Numerous factors were considered by the Merchants Board in approving the terms
of the Merger. These factors included information concerning the financial
structure, results of operations, and prospects of Merchants and Pyramid; the
capital adequacy of the resulting entity; the composition of the businesses of
the two organizations; the overall compatibility of the management and employees
of the organizations; the outlook for the organizations in the rapidly changing
financial services industry; the relationship of the consideration to be paid in
the Merger to market prices and the book value and earnings per share of Pyramid
and the financial terms of certain other recent business combinations in the
banking industry.
Pyramid. In considering the Merger, the Directors of Pyramid reviewed
the terms and conditions of the proposed Merger Agreement, along with certain
business and financial information relating to Merchants and Pyramid. In
addition, the Board of Directors of Pyramid determined to approve the proposed
transaction primarily because the Merger will increase the financial strength of
the Bank by enabling it to better serve its depositors and customers, while at
the same time allowing the Bank to retain its identity as a community bank and
retain the name of Grafton State Bank along with local management; to provide
additional opportunities for professional advancement for the Bank's employees,
and to be more competitive with other bank subsidiaries of large bank holding
companies currently doing business in Ozaukee County or which might locate in
the community. The directors of Pyramid also concluded that the Merger will
enhance both the long-term and short-term value of Pyramid shareholders'
investment. Among the factors important to the Directors of Pyramid in
determining to approve the Merger, were: ( i) the increased opportunity and
resources to serve the Bank's customers; (ii) the possibility for career
enhancement which employees of Pyramid and the Bank might be provided as a
result of the merger; (iii) the increased resources and expertise to keep the
Bank competitive and meet the ever-changing demands of the banking industry;
(iv) the marketability and liquidity of Merchants' Common Stock and the
consistent dividend history and rate of dividends of the Merchants Common stock
to be received in the Merger as compared to the illiquidity and lack of
marketability of Pyramid Common Stock and the dividend history of Pyramid Common
stock; (v) the tax-free nature of the Merger for federal income tax purposes
which would permit Pyramid's shareholders who receive shares of Merchants Common
Stock to defer federal income taxation under certain circumstances; (vi) the
potential for future appreciation of Merchants' Common Stock due to Merchants'
greater market presence and financial resources; and (vii) the financial terms
of other recent business combinations in the financial services industry. See
"THE MERGER - Certain Material Federal Income Tax Consequences."
While each member of Pyramid's Board of Directors evaluated each of the
foregoing as well as other factors, the Board of Directors collectively did not
assign any specific or relative weights to the factors
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<PAGE> 31
considered and did not make any determination with respect to any individual
factor. Pyramid's Board of Directors collectively made its determination with
respect to the Merger based on its unanimous conclusion that the Merger, in
light of the factors which each of them individually considered as appropriate,
is fair and in the best interests of Pyramid's shareholders.
The Board of Directors of Pyramid has determined that the terms of the
Merger are fair to, and in the best interests of, Pyramid and its shareholders
for the reasons stated immediately above.
THE BOARD OF DIRECTORS OF PYRAMID HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
Certain Considerations
In deciding whether to vote in favor of the Merger, the Pyramid
shareholders should consider the following factors, in addition to the other
matters set forth herein.
(i) Uncertain Legislative and Regulatory Environment. The
banking and financial services businesses in which Pyramid and
Merchants engage are highly regulated. The laws and regulations
affecting such businesses may be changed in the future. Such changes
could affect the ability of banks to engage in nationwide branch
banking and the ability of bank holding companies to engage in
non-banking businesses, such as securities underwriting and insurance,
in which they have been allowed to engage only on a limited basis. Such
changes may also affect the capital that banks and bank holding
companies are required to maintain, the premiums paid for or the
availability of deposit insurance or other matters directly affecting
earnings. Neither Pyramid nor Merchants can predict what changes will
occur and the effect that any such changes would have on the ability of
the combined entity to compete effectively or to take advantage of new
opportunities after the Merger.
(ii) Competition. The markets in which Pyramid and Merchants
operate are highly competitive. Competition in such markets is likely
to increase in light of the changing legislative and regulatory
environment in which Pyramid and Merchants operate. In addition,
consolidation and mergers in the banking industry are expected to
continue, resulting in stronger and more effective competitors. Neither
Pyramid nor Merchants can predict the degree to which competition in
the industry will increase in the future or the effect any such
increased competition will have on the combined entity.
(iii) Rapid Technological Changes. Evolving technology will
play a major role in the processing and delivery of financial services.
The effective use of new technology will enable banking and financial
service businesses to improve information concerning their customers
and markets. It will also enable them to reduce overhead expenses while
improving the quality of service to customers. Communications
technology will substantially improve the ability of financial
institutions to exchange information with their customers and
employees. Banks and financial institutions that are unwilling or
unable to access this evolving new technology could experience lower
earnings and a loss of customers.
(iv) Uncertain Economic Environment. Banks and financial
service companies in the Midwest have experienced a relatively long
period of price stability and a growing economy. Price stability
enables banks to better protect themselves against interest rate risks.
A strong economy
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<PAGE> 32
enhances the opportunity of the commercial sector of the economy to
improve earnings and performance. It also provides an environment for
financial institutions to experience positive and profitable growth.
Potentially adverse economic changes present additional risks for banks
and financial service companies.
(v) Nature of Business. The financial performance of Pyramid
results primarily from its retail banking activities located in Ozaukee
County. Pyramid shareholders who receive shares of Merchants Common
Stock will own an interest in a diversified multi-bank holding company
currently operating 17 banking offices located in Milwaukee and
Waukesha Counties,, which is engaged in several non-banking businesses.
Financial performance of Merchants is accordingly dependent on its
activities and the economic factors in such markets and businesses.
(vi) Business Combinations. Merchants seeks additional
expansion opportunities and accordingly may enter into business
combinations with banking and non-banking entities involving the
issuance of its shares or payment of cash consideration which may not
require a vote of holders of Merchants Common Stock at the time of such
additional acquisitions.
(vii) Share Price Fluctuation. The price of shares of Pyramid
Common Stock is based essentially upon the financial condition of
Pyramid and the market value for similar non-publicly traded bank
holding companies and other factors. The share price of Merchants
Common Stock is by nature more subject to the general price
fluctuations in the market for publicly-traded equity securities. Such
fluctuations are not necessarily related to a change in the financial
performance or condition of Merchants.
Opinion of Pyramid Financial Advisor
The Pyramid Board retained Marshall to act as its financial advisor in
connection with the Merger and to assist it in its examination of the fairness,
from a financial point of view, of the merger consideration to the holders of
Pyramid Common Stock. On March 8, 1999, Marshall rendered its opinion to the
Pyramid Board (subsequently confirmed as of the date of this Proxy
Statement/Prospectus) to the effect that the merger consideration was fair, from
a financial point of view, to the holders of Pyramid Common Stock.
THE FULL TEXT OF MARSHALL'S OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE
SCOPE OF REVIEW UNDERTAKEN BY MARSHALL IN RENDERING ITS OPINION, IS ATTACHED AS
EXHIBIT C TO THIS PROXY STATEMENT/PROSPECTUS. THE MARSHALL OPINION IS DIRECTED
ONLY TO THE FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW
TO THE HOLDERS OF PYRAMID COMMON STOCK AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY PYRAMID SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE WITH RESPECT
TO THE MERGER. THE SUMMARY OF THE MARSHALL OPINION SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE OPINION ATTACHED AS AN EXHIBIT HERETO, AND SHAREHOLDERS OF PYRAMID SHOULD
READ THE MARSHALL OPINION CAREFULLY AND IN ITS ENTIRETY.
Marshall's analysis. In conducting its investigation and analysis and
in arriving at its opinion, Marshall reviewed such information and took into
account such financial and economic factors as it deemed relevant. In doing so,
Marshall, among other things; (i) reviewed certain internal information,
primarily financial in nature, including projections, as well as publicly
available information, including but not limited
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to Pyramid's and Merchants' recent filings with regulatory authorities; (ii)
reviewed the Merger Agreement; (iii) compared the historical market prices and
trading activity of Pyramid and Merchants Common Stock with those of certain
other publicly traded companies Marshall deemed relevant; (iv) compared the
financial position and operation results of Pyramid and Merchants with those of
other publicly traded companies Marshall deemed relevant; (v) compared the
proposed financial terms of the Merger with the financial terms of certain other
business combinations involving banking institutions Marshall deemed relevant;
and (vi) reviewed certain potential pro forma effects of the Merger on
Merchants. Marshall held discussions with certain members of Pyramid's and
Merchants' senior management concerning Pyramid's and Merchants' historical and
current financial condition and operating results, as well as the future
prospects of Pyramid and Merchants, respectively. Marshall had not been
requested to, and did not, solicit third party indications of interest in
acquiring all or any party of Pyramid. Marshall also considered such other
information, financial studies, analysis and investigations and financial,
economic and market criteria as Marshall deemed relevant for the preparation of
its opinion. The merger consideration was determined by Pyramid and Merchants in
arm's-length negotiations. Pyramid did not place any limitation upon Marshall
with respect to the procedures followed or factors considered by Marshall in
rendering its opinion.
In arriving at its opinion, Marshall assumed and relied upon the
accuracy and completeness of all of the financial and other information that was
publicly available or provided to it by or on behalf of Pyramid and Merchants,
and was not engaged to independently verify any such information. Marshall
assumed, with Pyramid's and Merchants' consent, that (i) all material assets and
liabilities (contingent or otherwise, known or unknown) of Pyramid and Merchants
are set forth in their respective financial statements; (ii) the Merger will be
accounted for under the pooling of interest method of accounting; (iii) the
Merger will be consummated in accordance with the terms of the Merger Agreement
without any additional amendments thereto and without any condition; (iv) the
prospective cost savings and revenue enhancements contemplated by management of
both companies following the Merger will be realized; and (v) all shareholder
and required regulatory approvals will be obtained in a timely manner. Marshall
also assumed that the financial forecasts examined by it were reasonably
prepared on bases reflecting the best available estimates and good faith
judgments of Pyramid's and Merchants' respective senior management, as to future
performance of their respective companies. Marshall did not undertake or obtain
an independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of Pyramid or Merchants, nor did it make a physical
inspection of the properties or facilities of Pyramid or Merchants. Marshall's
opinion necessarily was based upon economic, monetary and market conditions as
they existed and could be evaluated on the date thereof, and did not predict or
take into account any changes which may occur, or information which may become
available, after the date thereof. Furthermore, Marshall expressed no opinion as
to the pricing or trading range at which shares of Merchants' securities would
trade following the date of such opinion.
Analysis of Selected Comparable Transactions. Marshall reviewed a
selected group of ten completed or pending acquisitions of banks or bank holding
companies that were announced since January 1, 1997. Marshall focused on
transactions where the acquired entity had a transaction value of less than $50
million. The assets of the comparables ranged from $75 million to $171 million
and the mean being $106 million. The equity to asset ratio for the comparables
ranged from 6.97% to 13.57% with the median and the mean being 11.53% and 10.93%
respectively. The return on average assets for the comparables ranged from 1.10%
to 1.86% with the median and the mean being 1.34% and 1.43%, respectively. The
comparables' return on equity ranged from 9.35% to 25.61% with the median and
the mean being 11.68% and 13.88%, respectively. The price to book of the
comparables ranged from 151.00% to 320.57% with the median and the mean being
229.31% and 227.79%, respectively. The price to tangible book for the
comparables ranged from 158.84% to 363.37% with the median and the mean being
229.31% and 236.03%, respectively. The comparables' price to latest twelve
months net income ranged from 11.39x to 30.12x with the median being 18.58x and
the mean being 18.31x, respectively. The tangible premium to core deposits
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for the comparable companies ranged from 8.63% to 25.14% with the median and
mean being 18.45% and 18.38%, respectively.
Analysis of Pyramid Valuation Multiples. Marshall calculated the
"implied Equity Value Per Share" reflected by the terms of the Merger to be $351
for each share of Pyramid Common Stock, obtained by multiplying an Exchange
Ratio of 9 by the bid price share of Merchants Common Stock of $39 on March 1,
1999. Marshall then calculated the "Implied Total Equity Value: to be
$24,183,900 million, obtained by multiplying the implied equity Value Per Share
by the total number of outstanding shares of Pyramid Common Stock, including
shares issuable upon exercise of stock options. In performing its analysis,
Marshall used, among other items, operating statistics for Pyramid's twelve
months through December 31, 1998. Marshall calculated multiples of the Implied
Total Equity Value to Pyramid's earnings per share, book value, tangible book
value and tangible premium to core deposits. The calculations resulted in ratios
of the Implied Total Equity Value to net income ("P/E Ratios") of 21.99x based
on December 31, 1998 results, 288.3% of book value, 288.3% of tangible book
value and an 18.97% tangible premium to core deposits.
As no comparative group or transaction from any comparative group is
identical to the Merger, Marshall indicated to the Pyramid Board that the
analyses described above are not mathematical, but rather involve complex
consideration and judgments concerning differences in operating and financial
characteristics including, among other things, differences in revenue
composition and earnings performance among Pyramid and Merchants and the
selected companies and transactions reviewed.
Analysis of Publicly Traded Companies Comparable to Pyramid. Marshall
reviewed certain publicly available financial and stock market information for
certain publicly traded companies which Marshall deemed relevant. These
companies consisted of: F&M Bancorporation, ANB Corp., Baylake Corp., State
Financial Services, Empire Banc Corp., Princeton National Bancorp., Northern
States Financial Corp., Union Bancorp, Merchants Bancorp and German American
Bancorp (the "Comparable Companies"). The data described below for such group is
as of December 31, 1998 and is compared to Pyramid's financial information, as
reported, as of December 31, 1998.
Marshall noted that the equity to assets for Pyramid was 7.90% compared
with a median of 9.47% and a mean of 9.80% for the Comparable Companies. The
equity to assets for the Comparable Companies ranged from a high of 13.40% to a
low of 8.17%. Marshall also noted the following operating performance statistics
for Pyramid compared to the Comparable Companies: (i) the net interest margin
for Pyramid was 4.28% compared to a median of 4.42% and a mean of 4.44%. (The
range for net interest margin of the Comparable Companies was a high of 4.92% to
a low of 3.99%); (ii) the efficiency ratio for Pyramid was 60.60% compared to a
median of 58.62% and a mean of 60.81% for the Comparable Companies. (The range
for the efficiency ratio for the Comparable Companies was 45.61% to 64.71%);
(iii) the return on average assets for Pyramid was 1.13% compared to a median of
1.18% and a mean of 1.21% for the Comparable Companies. (The range on average
assets was .88% and 1.55% for the Comparable Companies), (iv) the return on
average equity for Pyramid was 14.60% compared to a median of 11.67% and a mean
of 12.36% for the Comparable Companies. (The range for the return on average
equity was 9.94% to 15.85% for the Comparable Companies.)
Discounted Earnings Analysis. Marshall performed a discounted earnings
analysis of Pyramid on a stand-alone basis using Pyramid management's
projections of future earnings for the 5 year period ending December 31, 2003.
Marshall estimated terminal values for Pyramid using asset growth rates of
6.00%, return on average assets of 1.20%, cash dividends of $4.00 per share in
1999 and $7.00 per share in 2000, 2001, 2002, and 2003, discount rates of 9%,
11% and 13%, and terminal book value multiples of 100%, 110% and 120%. Based
upon projections, Marshall calculated an implied per share price from $183 to
$253
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per share of Pyramid Common Stock. Marshall noted that the discounted earnings
analysis was included because it is a widely used valuation methodology, but
noted that the results of such methodology are highly dependent upon the
numerous assumptions that must be made, including earnings growth ratios,
dividend payout rates, terminal values and discount rates.
Analysis of Merchants. In order to assess the relative public market
valuation of the Merchants Common Stock to be issued in the Merger, Marshall
reviewed certain publicly available financial information of the most recently
reported period as of December 31, 1998 for Merchants and stock market
information of certain selected publicly traded companies which Marshall deemed
relevant. Such comparable companies consist of F&M Bancorporation, ANB Corp.,
Baylake Corp., State Financial Services, Empire Banc Corp., Princeton National
Bancorp., Northern States Financial Corp., Union Bancorp, Merchants Bancorp and
German American Bancorp. (the "Merchants' Comparable Companies"). The data
described below for such group is as of December 31, 1998. Marshall noted the
following operating performance statistics for Merchants compared to the
Merchants Comparable Companies: (i) Merchants' net interest margin was 4.45%
compared to a median of 4.42% and a mean 4.44% for the Merchants' Comparable
Companies (the range for net interest margin was 3.99% to 4.92% for the
Merchants' Comparable Companies); (ii) the efficiency ratio for Merchants was
70.88% compared with a median of 58.62% and a mean of 60.81% for the Merchants'
Comparable Companies (The range for the efficiency ratio was 45.61% to 64.71%
for the Merchants' Comparable Companies); (iii) the return on average assets for
Merchants was .86% compared to a median of 1.18% and a mean of 1.21% for the
Merchants' Comparable Companies (The range for the return on average assets was
.88% to 1.55% for the Merchants' Comparable Companies); (iv) the return on
average equity for Merchants was 8.92% compared to a median of 11.67% and a mean
of 12.36% for the Merchants' Comparable Companies (The range for the return on
average equity was 9.94% to 15.85% for the Merchants' Comparable Companies); (v)
the ratio of non-performing assets to total assets for Merchants was .31%
compared with a median of .61% and a mean of .69% for the Merchants' Comparable
Companies (The range for the non-performing assets to total assets was .31% to
1.36% for the Merchants' Comparable Companies).
Pro Forma Merger Analysis. Marshall prepared a pro forma analysis of
the financial impact of the Merger. Using financial forecasts for Pyramid
(prepared by Pyramid's management) and Merchants (prepared by Merchants'
management), Marshall compared Merchants' earnings per share and book value on a
stand-alone basis to earnings and book value of the combined companies on a pro
forma basis. Without any synergies, this analysis indicated that the Merger
would be dilutive to earnings per share in 1999 and after synergies as provided
by Merchants management non-dilutive to earnings per share in 1999. However,
this analysis shows that it is immediately dilutive to book value per share by
10.1%.
Stock Trading Analysis. Marshall reviewed the historical trading prices
and volume of Merchants Common Stock for the two years ending December 31, 1998.
The price of Merchants Common Stock ranged from a high to a low from January 1,
1997 through December 31, 1997 of $16.97 to $29.09, and from $28.03 to $42.50
from January 1, 1998 through December 31, 1998. The trading volumes in calendar
year 1997 and 1998 were 54,185 and 98,565 shares, respectively.
Contribution Analysis. Marshall analyzed the contribution of each of
Pyramid and Merchants to the pro forma company of assets, deposits, net income,
estimated net income, tangible equity and ownership at or through December 31,
1998. Marshall calculated that: Merchants would contribute 75.8% and Pyramid
24.2% of assets; Merchants would contribute 77.7% and Pyramid 22.3% of deposits;
Merchants would contribute 71.1% and Pyramid 28.9% of 1998 net income, Merchants
would contribute 71.1% and Pyramid 28.9% of forecasted 1999 net income;
Merchants would contribute 78.7% and Pyramid 21.3% of tangible
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equity; and Merchants would represent 71.6% and Pyramid 28.4% based on the
issuance by Merchants of 620,100 shares out of a pro forma total of 2,183.961
shares.
In connection with its written opinion dated _____________, 1999,
Marshall confirmed the appropriateness of its reliance on the analyses used to
render its opinion dated March 8, 1999, by performing procedures to update
certain of its analyses and by reviewing assumptions on which such analyses were
based and the factors considered therewith.
The summary of the opinion set forth above does not purport to be a
complete description of the presentation of Marshall to the Pyramid Board or the
analyses performed by Marshall. The preparation of a fairness opinion is a
complex process and is not susceptible to partial analysis or summary
description. Marshall believes that its analysis must be considered as a whole
and that selecting portions of its analyses, without considering all factors and
analyses would create an incomplete view of the processes underlying the
analyses conducted by Marshall and its opinion. Marshall did not attempt to
assign particular weights to particular analyses. Any estimates contained in
Marshall's analyses are not necessarily indicative of actual values, which may
be significantly more or less favorable than as set forth therein. Estimates of
values of companies do not purport to be appraisals or necessarily to reflect
the prices at which companies may actually be sold. Because such estimates are
inherently subject to uncertainty. Marshall does not assume responsibility for
their accuracy.
Marshall, as part of its investment banking business, is engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. Pyramid retained Marshall because of its experience and
expertise in the valuation of businesses and their securities in connection with
mergers and acquisitions.
Pursuant to an agreement, dated December 17, 1998, between Pyramid and
Marshall, Pyramid has paid Marshall a non-refundable retainer fee of $25,000, a
fee of $25,000 for rendering its opinion dated March 8, 1999, and will pay a
closing fee of $15,000. Pyramid also has agreed to reimburse Marshall for
certain of its out-of-pocket expenses incurred in connection with its
engagement. Additionally, Pyramid has agreed to indemnify Marshall against
certain liabilities, including liabilities under the federal securities laws,
incurred in connection with the engagement of Marshall by Pyramid.
Interests of Certain Persons in the Merger
Assuming that the Merger is consummated, the Directors of Merchants
immediately prior to the Effective Time will be the directors of Merchants at
the Effective Time, each to hold office in accordance with the Amended Articles
of Incorporation and By-Laws of Merchants. The officers of Merchants immediately
prior to the Effective Time will be the officers of Merchants at the Effective
Time, in each case until their respective successors are duly elected and
qualified.
Upon consummation of the Merger, Mr. Thomas J. Sheehan, Chairman of the
Board of Directors and President and Chief Executive Officer of Pyramid and the
Bank will be elected to the Board of Directors of Merchants and will serve as
its Vice Chairman. In addition, Mr. Jerome T. Sarnowski and Mr. James Kacmarcik,
Directors of Pyramid and the Bank will be elected to the Board of Directors of
Merchants. Mr. Sheehan will also assume responsibility for the retail banking
services of Merchants subsidiary banks. Mr. Sheehan and three officers of the
Bank have entered into employment agreements with the Bank which will continue
in effect after the Bank becomes a subsidiary of Merchants as a result of the
Merger. The employment agreements are effective as of April 1, 1999, continue
for three years (unless sooner terminated
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as provided in the employment agreements.) and provide for one-year renewals on
each anniversary date, unless notice of non-renewal is given. The employment
agreements provide for Mr. Sheehan to serve as Chief Executive Officer, for Mr.
Jefford Larson to serve as Vice President-Commercial Banking, for Mr. Peter
Schumacher to serve as Controller and for Mr. Richard Belling to serve as Vice
President-Mortgages of the Bank. In addition to an annual base salary, each of
the named officers will be entitled to such other benefits as are generally made
available to others officers serving in comparable positions at the Bank or
other subsidiaries of Merchants. Messrs. Sheehan, Larson, Schumacher and Belling
have agreed not to compete with the Bank or its affiliates during the employment
period or during the lesser of the remaining term of the employment agreement or
12 months following termination of employment.
Merchants (through the Bank as employer) will succeed to the Bank's
obligations with respect to the employment agreements. The Boards of Directors
of Merchants and Pyramid were aware of these interests and took them into
account in approving the Merger Agreement.
Merger Consideration
Upon consummation of the Merger, each share of Pyramid Common Stock
outstanding at the Effective Time will be converted (subject to the provisions
with respect to fractional shares described below) into the right to receive 9
shares of Merchants Common Stock, (the "Exchange Ratio"), subject to
renegotiation of the exchange ratio if the Daily Average Price (as defined
below) of Merchants Common Stock is less than $36 or greater than $44. The Daily
Average Price is the daily average of the "Bid" and "Ask" quotations of
Merchants Common Stock as published in the Milwaukee Journal Sentinel (or
obtained from another source acceptable to Merchants and Pyramid if such
quotations are not published in the Milwaukee Journal Sentinel) on each of the
thirty (30) trading days preceding the third day prior to the Effective Time. On
each of such thirty (30) trading days, the Bid and Ask prices will be averaged
to calculate the market quotation for that day, and the resulting thirty (30)
market quotations will be summed and the result divided by thirty (30) to
determine the Daily Average Price. In the event that "Ask" quotations are not
listed, or if the "Ask" price exceeds the "Bid" price by more than $2 on any of
the thirty (30) trading days used to compute the Daily Average Price, then the
"Bid" quotes will be used on those days to calculate the Daily Average Price. If
the Daily Average Price is less than $36 or greater than $44, then Merchants and
Pyramid will make a good-faith effort to promptly renegotiate the Exchange
Ratio.
Because the market value of Merchants Common Stock at the Effective
Time is not known at this time, the actual value that Merchants would pay and
Pyramid shareholders would receive in the Merger and whether Merchants and
Pyramid will renegotiate the Exchange Ratio will not be known until the
scheduled closing date or shortly before the Effective Time, respectively. It is
currently anticipated that, if approved by Pyramid shareholders, the Merger will
be completed in the fourth calendar quarter of 1999, although no assurance as to
the time of completion can be given.
In the event that the Daily Average Price is less than $36 or greater
than $44 and it becomes necessary to renegotiate the Exchange Ratio, Merchants'
Board is likely to consult with its legal and financial advisors regarding the
fairness of such renegotiated ratio.
In addition, the Merchants' Board and its advisors would consider many
of the same factors they considered in determining whether to approve and adopt
the Merger Agreement in the first instance. In particular, the Merchants Board
of Directors would analyze, among other factors, the relationship of the
consideration to be paid by Merchants to the market price and book value and
earnings per share of Pyramid, the financial terms of recent business
combinations in the banking industry and the dilutive or accretive effect of the
renegotiated exchange ratio on Merchants' future earnings and book value.
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In the event it becomes necessary to renegotiate the Exchange Ratio
pursuant to the terms of the Merger Agreement, the Pyramid Board of Directors is
likely to consult with its legal and financial advisors to determine the
fairness of a renegotiated exchange ratio. Shareholders of Pyramid should note
that the fairness opinion obtained by the Pyramid Board and included as Exhibit
'C' to this Proxy Statement/Prospectus does not express an opinion as to the
fairness of the Merger, from a financial point of view, in the event that the
Daily Average Price of Merchants Common Stock is less than $36 or more than $44.
No assurance can be given that a fairness opinion regarding such renegotiated
exchange ratio can be obtained. In making a determination on a renegotiated
exchange ratio, the Pyramid Board of Directors would consider many of the same
factors it considered in determining whether to approve and accept the Merger
Agreement in the first instance. In particular, the Pyramid Board would analyze,
among other factors, whether the then current consideration to be received in
the Merger would deliver more value to the shareholders than could be expected
if Pyramid were to continue as an independent entity. In addition, the Pyramid
Board would consider whether, in light of then prevailing market and other
industry conditions, the renegotiated exchange ratio is fair from a financial
point of view to the Pyramid shareholders.
Regulatory Approvals Required
Federal. The Merger is subject to prior approval by the Federal Reserve
Board under the BHC Act, which 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 BHC Act 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 to substantially 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 anti-competitive 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. It is highly improbable that the Merger poses any antitrust issues. The
Federal Reserve Board also 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 subsidiaries of Merchants and Pyramid 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 bank's
record of meeting the credit needs of its local communities, including low and
moderate income neighborhoods, consistent with safe and sound operation.
Under the BHC Act, the Merger may not be consummated until up to 30
days following the date of Federal Reserve Board approval, during which time the
United States Department of Justice may challenge the Merger on antitrust
grounds. Although a challenge is highly improbable, there can be no assurance
that the Department of Justice will not challenge the Merger or, if such a
challenge is made, as to the result thereof. The commencement of an antitrust
action would stay the effectiveness of the Federal Reserve Board's approval
unless a court specifically orders otherwise. The BHC Act provides for the
publication of notice and public comment on the applications and authorizes the
regulatory agency to permit interested parties to intervene in the proceedings.
Merchants filed an application with the Federal Reserve Bank of Chicago
(the "Federal Reserve Bank") that was accepted for filing by the Federal Reserve
Bank on May 20, 1999.
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Merchants has been advised that the Federal Reserve Bank has approved
its application to acquire 100% of Pyramid as of June 30, 1999. Merger Corp. has
filed a request for waiver with regard to the application requirements under the
BHCA.
Wisconsin. The Merger is also subject to the prior approval by the
Wisconsin Department of Financial Institutions ("DFI") under Section 221.0901 of
the Wisconsin Statutes which requires that the DFI take into consideration (i)
the financial and managerial resources and future prospects of the respective
institutions and whether the transaction would be contrary to the best interests
of the shareholders or customers of the bank or bank holding company to be
acquired; (ii) whether the action would be detrimental to the safety and
soundness of the respective institutions or any subsidiary or affiliate of the
respective institutions; (iii) the record of performance, management, financial
responsibility and integrity, and the CRA rating of the applicant; and (iv)
whether upon consummation of the transaction, the applicant would control in
excess of 30% of the total amount of deposits of insured depository institutions
in Wisconsin as specified under federal banking law.
Merchants filed an application with the DFI on May 21, 1999. Merchants
has been advised that the DFI has approved the application as of July 19, 1999.
The Merger may be consummated at any time within one year of the date approval
was granted by the DFI (subject to the foregoing federal approvals).
General. The Merger cannot proceed in the absence of all requisite
regulatory approvals and compliance with any waiting periods contained in such
approvals. See "Conditions to Consummation of the Merger." In the Merger
Agreement, Merchants and Pyramid have agreed to take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed
with respect to the Merger, including furnishing information to the Federal
Reserve Board or in connection with approvals or filings with other governmental
entities. Merchants and Pyramid have also agreed to take all reasonable action
necessary to obtain approvals of the Federal Reserve Board, the DFI and other
governmental entities. However, the obligation to take reasonable actions is not
to be construed as including an obligation to accept any terms or conditions to
an agreement or other approval of, or any exemption by, any party that are not
customarily contained in approvals of similar transactions granted by such
regulators or if Merchants in good faith determines that such terms or
conditions would have a material adverse effect on its business or financial
condition or would materially detract from the value of Pyramid to Merchants.
Merchants and Pyramid are not aware of any other governmental
approvals or actions that are required for consummation of the Merger except as
described above. Should any other approval or action be required, it is
presently contemplated that such approval or action would be sought. There can
be no assurance that any such approval or action, if needed, could be obtained
and, if such approvals or actions are obtained, there can be no assurance as to
the timing thereof.
The Effective Time
The Merger will become effective as of the later of (a) the date
Articles of Merger are filed with the DFI or (b) the effective date and time of
the Merger as set forth in such Articles of Merger, (the later of (a) and (b)
being the "Effective Time"). The filing with respect to the Merger will occur as
promptly as practicable after the satisfaction or, if permissible, waiver of the
conditions to the Merger as set forth in the Merger Agreement. The Merger
Agreement may be terminated by either party if, among other reasons, the Merger
shall not have been consummated on or before December 31, 1999. Upon
consummation of the Merger, Pyramid will be merged into Merger Corp. and will
not continue its separate existence or operations, to which Merger Corp. as the
surviving corporation will succeed. See "CERTAIN PROVISIONS OF THE
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MERGER AGREEMENT - Conditions to Consummation of the Merger" and "CERTAIN
PROVISIONS OF THE MERGER AGREEMENT - Termination."
Conversion of Shares, Procedure for Exchange of Certificates; Fractional Shares
At the Effective Time and without any action on the part of Merchants,
Pyramid or the holders of Pyramid Common Stock, each share of Pyramid Common
Stock issued and outstanding immediately prior to the Effective Time (other than
shares held by Pyramid shareholders exercising their dissenters rights under the
WBCL) shall be converted into the right to receive shares of Merchants Common
Stock. See "THE MERGER -- Dissenters' Rights." All such shares of Pyramid Common
Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each stock certificate previously
representing any such shares of Pyramid Common Stock (other than shares held by
dissenting shareholders as described above) shall thereafter represent the right
to receive a certificate representing shares of Merchants Common Stock into
which such Pyramid Common Stock has been converted. Certificates previously
representing shares of Pyramid Common Stock shall be exchanged for certificates
representing whole shares of Merchants Common Stock upon the surrender of such
certificates as provided below. No fractional shares of Merchants Common Stock
will be issued, and, in lieu thereof, a cash payment will be made as provided
below.
As of the Effective Time. Merchants shall deposit, or cause to be
deposited with Firstar Trust Company (the "Exchange Agent'), for the benefit of
the holders of shares of Pyramid Common Stock and for exchange in accordance
with the terms of the Merger Agreement, certificates representing the shares of
Merchants Common Stock (such certificate for shares of Merchants Common Stock,
together with any dividends or distributions with respect thereto (the "Exchange
Fund")) issuable pursuant to the terms of the Merger Agreement.
As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate which
immediately prior to the Effective Time represented outstanding shares of
Pyramid Common Stock whose shares were converted into the right to receive
shares of Merchants Common Stock, (i) a letter of transmittal and (ii)
instructions for use in effecting the surrender of Pyramid Certificates in
exchange for certificates representing shares of Merchants Common Stock. Upon
surrender of a certificate previously representing shares of Pyramid Common
Stock to the Exchange Agent together with such duly executed letter of
transmittal, the holder of such certificate shall receive in exchange therefore
a certificate representing that number of whole shares of Merchants Common Stock
to which such holder is entitled 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 Pyramid, a certificate representing
the proper number of shares of Merchants 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. Until surrendered, each certificate previously representing shares of
Pyramid Common Stock shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender a certificate
representing shares of Merchants Common Stock and cash in lieu of any fractional
shares of Merchants Common Stock as described below.
PYRAMID SHAREHOLDERS SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO THE
EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL NOR RETURN THEIR STOCK
CERTIFICATES WITH THE ENCLOSED PROXY.
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No dividends or other distributions declared or made after the
Effective Time with respect to Merchants Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered certificate
of Pyramid Common Stock with respect to the shares of Merchants Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder, until such certificate is surrendered. Subject to the
effect of applicable laws, following surrender of any such certificate, there
shall be paid to the holder of said certificate, which represents whole shares
of Merchants Common Stock issued in exchange therefor, without interest, (i)
promptly, the amount of cash payable with respect to a fractional share of
Merchants Common Stock to which such holder is entitled and the amount of
dividends or other distributions with a record date after the Effective Time
paid with respect to such whole shares of Merchants 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 occurring after surrender, payable with respect to such whole
shares of Merchants Common Stock.
All shares of Merchants Common Stock issued upon conversion of the
shares of Pyramid 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 Pyramid Common Stock.
No certificates or scrip representing fractional shares of Merchants
Common Stock shall be issued upon the surrender for exchange of Pyramid Common
Stock certificates, and such fractional share interest will not entitle the
owner thereof to vote or to any rights of a shareholder of Merchants. 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 would otherwise be entitled by the Bid price of a share of Merchants
Common Stock as published in the Milwaukee Journal Sentinel on the first
business day following the date the Federal Reserve Board issues an order
approving consummation of the Merger. As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of fractional
share interests, the Exchange Agent shall notify Merchants and Merchants shall
make available such amounts to such holders of such fractional share interests
subject to and in accordance with the terms of the Merger Agreement, as
relevant.
Any portion of the Exchange Fund which remains undistributed to the
shareholders of Pyramid for six months after the Effective Time shall be
delivered to Merchants, upon demand, and any shareholders of Pyramid who have
not theretofore complied with the procedures described above shall thereafter
look only to Merchants for payment of their claim for Merchants Common Stock,
any cash in lieu of fractional shares of Merchants Common Stock and any
dividends or distributions with respect to Merchants Common Stock.
Neither Merchants nor Pyramid shall be liable to any holder of shares
of Pyramid Common Stock for any such shares of Pyramid 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.
Merchants shall be entitled to deduct and withhold from any cash
consideration payable pursuant to the Merger Agreement to any holder of shares
of Pyramid Common Stock such amounts as Merchants is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), or any provision of state, local or
foreign tax law.
At the Effective Time the stock transfer books of Pyramid shall be
closed, and there shall be no further registration of transfers of shares of
Pyramid Common Stock, thereafter on said record books. From and after the
Effective Time, the holders of certificates of Pyramid Common Stock shall cease
to have any rights with respect to such shares of Pyramid Common Stock except as
otherwise provided in the Merger Agreement, or by law. On or after the Effective
Time, any certificate of Pyramid Common Stock presented
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to the Exchange Agent or Merchants for any reason shall be converted into shares
of Merchants Common Stock in accordance with the terms of the Merger Agreement
as described above.
Persons who hold Merchants Common Stock prior to the Merger will not
need to exchange their existing certificates representing shares of Merchants
Common Stock for new stock certificates.
Description of Merchants Common Stock Issuable in the Merger
The following description of Merchants Common Stock issuable in the
Merger is a summary and is qualified in its entirety by reference to the terms
of such security, which is incorporated by reference herein and is set forth in
full in Merchants Amended Articles of Incorporation (the "Merchants Articles").
The description set forth below is subject in all respects to the WBCL and the
Merchants Articles.
Firstar Trust Company is the transfer agent and registrar for all
outstanding Merchants Common Stock.
THE FOLLOWING DESCRIPTION OF MERCHANTS COMMON STOCK SHOULD BE READ
CAREFULLY BY PYRAMID SHAREHOLDERS SINCE, AT THE EFFECTIVE TIME, EACH ISSUED AND
OUTSTANDING SHARE OF PYRAMID COMMON STOCK WILL BE CONVERTED INTO THE RIGHT TO
RECEIVE SHARES OF MERCHANTS COMMON STOCK AT THE EXCHANGE RATIO.
General. Merchants has one class of common stock, the Merchants Common
Stock. Of the 6,000,000 shares of Merchants Common Stock authorized, 1,489,754
shares were outstanding as of the Record Date, exclusive of shares held in its
treasury. The Merchants Articles do not provide authorization for the issuance
of preferred stock.
Dividend Rights. Dividends on Merchants Common Stock will be payable
out of the assets of Merchants legally available therefor as, if and when
declared by the Merchants Board of Directors. No share of Merchants Common Stock
is entitled to any preferential treatment with respect to dividends.
Voting Rights. Each holder of Merchants Common Stock will be entitled
at each shareholders' meeting of Merchants, as to each matter to be voted upon,
to cast one vote, in person or by proxy, for each share of Merchants Common
Stock registered in his or her name on the stock transfer books of Merchants.
Such voting rights are not cumulative.
Rights Upon Liquidation. In the event of liquidation, dissolution or
winding up of Merchants, whether voluntary or involuntary, the holders of
Merchants Common Stock will be entitled to receive all assets of Merchants
remaining for distribution to its shareholders, on a pro rata basis. Since
Merchants has no preferred stock, the rights of holders of Merchants Common
Stock to receive dividends or payment in the event of liquidation or dissolution
are not subject to prior satisfaction of the rights of any other shareholders.
Miscellaneous. Shares of Merchants Common Stock are not convertible
into shares of any other class of capital stock. Shares of Merchants Common
Stock are not entitled to any preemptive or subscription rights. The issued and
outstanding shares of Merchants Common Stock are fully paid and nonassessable
(except as otherwise provided under the WBCL).
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Comparison of Shareholder Rights
The following is a summary of material differences between the rights
of holders of Pyramid Common Stock and Merchants Common Stock. As Pyramid and
Merchants are both incorporated under the laws of the State of Wisconsin, rights
of shareholders are substantially similar. Differences in the rights of
shareholders of Pyramid and Merchants arise from differences between the
provisions of the Merchants Articles and By-laws and those of Pyramid.
Shareholders of Pyramid, whose rights are governed by Pyramid's Articles of
Incorporation, By-laws and the WBCL will, on consummation of the Merger, become
shareholders of Merchants. Their rights as Merchants shareholders will then be
governed by Merchants' Articles of Incorporation and By-laws and by the WBCL.
The following is a summary of the material differences between the rights of
shareholders of Pyramid and the rights of shareholders of Merchants.
Authorized Capital Stock
Pyramid. Under Pyramid's Articles of Incorporation, the aggregate
number of shares which it is authorized to issue is 125,000 shares of one class
of common stock, $1.00 par value. All shares of Pyramid Common Stock are
identical in rights and have one vote. The holders of Pyramid Common Stock are
entitled to such dividends as may be declared from time to time by the Board of
Directors of Pyramid from funds available therefor and upon liquidation are
entitled to receive pro rata all assets of Pyramid available for distribution to
such holders. Pyramid has no authorized shares of preferred stock and,
accordingly, the rights of holders of Pyramid Common Stock to receive dividends
or payment in the event of voluntary or involuntary dissolution, liquidation or
winding up of Pyramid are not subject to the prior satisfaction of the rights of
any other shareholders.
Merchants. Under Merchants' Articles of Incorporation, Merchants is
authorized to issue 6,000,000 shares of common stock, par value $1.00 per share.
All shares of Merchants Common Stock are identical in rights and have one vote.
For a description of Merchants Common Stock, see "THE MERGER - Description of
Merchants Common Stock Issuable in the Merger."
Required Vote
Pyramid. Pursuant to the WBCL, the affirmative vote of a majority of
the shares of Pyramid Common Stock is required to adopt amendments to the
Company's Articles of Incorporation or approve mergers and certain other
extraordinary transactions.
Merchants. Pursuant to the Merchants' Articles of Incorporation, any
merger, consolidation of Merchants with one or more other corporations, or any
sale, lease or exchange of all or substantially all of the assets of Merchants
requires the affirmative vote of at least eighty percent (80%) of the
outstanding shares of Merchants. However, the matters described in the preceding
sentence require the affirmative vote of a majority of the outstanding shares of
Merchants if such matters have the prior approval of a majority of the Board of
Directors of Merchants. The foregoing provisions may only be amended by the
affirmative vote of not less than eighty percent (80%) of the outstanding shares
of Merchants Common Stock unless such amendment was approved in advance by a
majority of the Directors of Merchants, in which case the affirmative vote of a
majority of the outstanding shares of Merchants Common Stock is required for
adoption of the amendments. All other provisions of the Merchants Articles of
Incorporation may be amended by the affirmative vote of a majority of the
outstanding shares of Merchants Common Stock.
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Classified Board of Directors
Pyramid. Pursuant to Pyramid's By-laws, Pyramid's Board of Directors is
divided into three classes as nearly equal in number as possible, with the
Directors in each class serving for staggered three-year terms. Pyramid's Board
consists of not less than six (6) nor more than nine (9), as fixed from time to
time by the shareholders at each annual meeting. At each annual meeting, the
successors to the class of Directors whose term expires at the time of such
meeting are elected for three year terms. The affirmative vote of the holders of
at least 80% of the voting power of the shares of Pyramid entitled to vote for
the election of directors is required to amend or repeal the above provisions of
Pyramid's By-laws.
Pyramid's By-laws provide that no person who has attained the age of
seventy-two (72) shall be nominated for election as a director of Pyramid. The
present Board of Pyramid consists of six (6) directors.
Merchants. Pursuant to the Articles of Incorporation of Merchants, the
Board of Directors of Merchants is divided into three (3) classes as nearly
equal in number as possible, with the directors in each class serving for
staggered three-year terms. Merchants' Board consists of not less than eleven
(11) nor more than twenty (20), the exact number to be determined at each annual
meeting of shareholders or, within such limits by a majority of the Board of
Directors. At each annual meeting of shareholders, the successors of the class
whose term expires at the time of such meeting are elected for three-year terms.
Removal of Directors
Pyramid. Pursuant to Pyramid's By-laws, any director may be removed
from office by the affirmative vote of a majority of the outstanding shares
entitled to vote for the election of such director and any vacancy so created
may be filled by the affirmative vote of a majority of such shares.
Merchants. The By-laws of Merchants provide that any director may be
removed from office by the affirmative vote of a majority of the shares
outstanding entitled to vote for the election of such director taken at a
special meeting of shareholders called for that purpose.
Newly Created Directorships and Vacancies on the Board of Directors
Pyramid. Any vacancy created by removal from office of a director may
be filled by the affirmative vote of a majority of the outstanding shares
entitled to vote for the election of such directors. Any other vacancy occurring
in the Board of Directors, including a vacancy created by an increase in the
number of directors, may be filled by a majority of the directors then in
office.
Merchants. Pursuant to Merchants' Articles of Incorporation, a majority
of the Board of Directors may fill any vacancy on the Board.
Certain Business Combinations
Pyramid. Pyramid's Articles of Incorporation and Bylaws do not contain
any supermajority voting provisions relating to the approval by holders of
Pyramid Common Stock of mergers or other business combinations.
Merchants. Article XI of Merchants' Articles provides that an
affirmative vote of eighty percent (80%) of Merchants' outstanding shares is
required to approve any merger or consolidation of Merchants with one or more
other corporations or any sale, lease or exchange of all or substantially all of
the assets of
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Merchants. The 80% voting requirement does not apply if a majority of Merchants
Directors approve the transaction prior to the mailing of the notice of the
meeting of shareholders at which the matter is to be voted on. In that case, the
affirmative vote of a majority of the outstanding shares of Merchants Common
Stock is required. The foregoing provision may only be amended, modified or
repealed by the affirmative vote of not less than eighty percent (80%) of the
outstanding shares of Merchants Common Stock unless such amendment or
modification has been approved by the Board of Directors. In that case, the
affirmative vote of a majority of the outstanding shares of Merchants Common
Stock is required.
Resale of Merchants Common Stock Issued Pursuant to the Merger
The Merchants Common Stock issued pursuant to the Merger will be
registered under the Securities Act and be freely tradeable under the Securities
Act except for shares issued to any shareholder of Pyramid who may be deemed to
be an "affiliate" of Pyramid for purposes of Rule 145 under the Securities Act.
Each affiliate identified by Pyramid will enter into an agreement with Merchants
providing that such affiliate will be subject to Rule 145(d) of the Securities
Act and shall not transfer any Merchants Common Stock received in the Merger
except in compliance with the Securities Act. In order to comply with pooling of
interests requirements, such persons shall agree to make no disposition of any
shares of Pyramid Common Stock or Merchants Common Stock (or any interests
therein) during the period beginning 30 days before the Effective Time and
ending when the financial results for at least 30 days of combined operations of
Pyramid and Merchants after the Effective Time have been published. This Proxy
Statement/Prospectus does not cover resales of Merchants Common Stock received
by any person who may be deemed to be an affiliate of Pyramid. The foregoing
restrictions are expected to apply to the directors and executive officers of
Pyramid.
Pre-merger Dividend Policy
Pyramid. Pursuant to the Merger Agreement, except for a quarterly
dividend commencing in the first calendar quarter of 1999 not to exceed $1.00
per share, Pyramid is prohibited from declaring or paying any dividend on, or
making any other distribution in respect of, its outstanding shares of capital
stock without the prior written consent of Merchants. Pyramid does not
anticipate paying any other dividends on shares of the Pyramid Common Stock
prior to the Effective Time.
Merchants. Merchants expects to continue to declare, until the
Effective Time, its regularly scheduled dividends.
Post-merger Dividend Policy
It is the current intention of the Board of Directors of Merchants to
continue to declare cash dividends on the Merchants Common Stock following the
Merger. The dividend is currently in the amount of $0.15 per quarter or $0.60
per year, in each case per share. Shareholders should note that future dividends
will be determined by the Merchants Board of Directors in light of the earnings
and financial condition of Merchants and its subsidiaries and other factors,
including applicable governmental regulations and policies. In that regard,
Merchants is a legal entity separate and distinct from its banking and
non-banking subsidiaries, and the principal sources of Merchants' income are
dividends and interests form such subsidiaries. The payment of dividends by
Merchants' banking subsidiaries is subject to certain restrictions under
applicable governmental regulations.
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Conduct of Business Pending the Merger
Pursuant to the Merger Agreement, Pyramid has agreed to carry on its
business, and the business of its subsidiaries, in the usual, regular and
ordinary course in substantially the same manner as conducted prior to the
execution of the Merger Agreement, subject to certain covenants and other
agreements agreed to by Pyramid in the Merger Agreement. See "CERTAIN PROVISIONS
OF THE MERGER AGREEMENT - Certain Covenants."
Certain Material Federal Income Tax Consequences
Merchants and Pyramid have received an opinion of Davis & Kuelthau,
S.C., Counsel for Merchants that the Merger will qualify as a tax-free
reorganization under Section 368(a)(1)(A) of the Code and that each of Merchants
and Pyramid will be a party to such reorganization within the meaning of Section
368(b) of the Code. Accordingly, Pyramid, Merchants and Merger Corp. will
recognize no gain or loss for federal income tax purposes as a result of the
Merger and no gain or loss will be recognized by any holder of Pyramid Common
Stock upon receipt of Merchants Common Stock pursuant to the Merger (except upon
the receipt of cash in lieu of fractional shares of Merchants Common Stock). The
Internal Revenue Service ("Service") has not been asked to rule upon the tax
consequences of the Merger and such request will not be made. The opinion of
Davis & Kuelthau, S.C. is based entirely upon the Code, regulations now in
effect thereunder, current administrative rulings and practice, and judicial
authority, all of which are subject to change. Unlike a ruling from the Service,
an opinion of an advisor is not binding on the Service and there can be no
assurance, and none is hereby given, that the Service will not take a position
contrary to one or more positions reflected herein or that the opinion will be
upheld by the courts if challenged by the Service.
EACH SHAREHOLDER OF PYRAMID IS URGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL
ADVISORS AS TO THE EFFECT OF SUCH FEDERAL INCOME TAX CONSEQUENCES ON HIS OR HER
OWN PARTICULAR FACTS AND CIRCUMSTANCES AND ALSO AS TO ANY STATE, LOCAL, FOREIGN
OR OTHER TAX CONSEQUENCES ARISING OUT OF THE MERGER.
Based upon the opinion of Davis & Kuelthau, S.C. which in turn is based
upon various representations and subject to various assumptions and
qualifications, the following federal income tax consequences to the
shareholders of Pyramid will result from the Merger:
(i) Provided that the Merger of Pyramid with and into Merger
Corp. qualifies as a statutory merger under applicable law, the Merger
will qualify as a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code, and Pyramid, Merchants and
Merger Corp. will each be "a party to a reorganization" within the
meaning of Section 368(b) of the Code for purposes of this
reorganization.
(ii) No gain or loss will be recognized by the holders of
Pyramid Common Stock upon the exchange of Pyramid Common Stock solely
for Merchants Common Stock pursuant to the Merger, except with respect
to cash received in lieu of fractional shares of Merchants Common
Stock.
(iii) A Pyramid shareholder's aggregate basis in the Merchants
Common Stock received in the Merger will be the same as the aggregate
basis of Pyramid Common Stock exchanged therefor.
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(iv) The holding period of the Merchants Common Stock received
by a holder of Pyramid Common Stock pursuant to the Merger will include
the period during which Pyramid Common Stock exchanged therefor was
held, provided that the Pyramid Common Stock surrendered was held as a
capital asset as of the time of the Merger.
(v) The receipt by a holder of Pyramid Common Stock of cash in
lieu of a fractional share of Merchants Common Stock will be treated as
if he or she received such fractional share from Merchants and then had
it redeemed for cash. Such receipt of cash will be treated under
Section 302(b)(1) of the Code as full payment in exchange for the
fractional share.
The foregoing is only a general description of certain material federal
income tax consequences of the Merger for holders of Pyramid Common Stock who
are citizens or residents of the United States and who hold their shares as
capital assets, without regard to the particular facts and circumstances of the
tax situation of each holder of the Pyramid Common Stock. It does not discuss
all of the consequences that may be relevant to holders of Pyramid Common Stock
entitled to special treatment under the Code (such as insurance companies,
financial institutions, dealers in securities, tax-exempt organizations or
foreign persons). The summary set forth above does not purport to be a complete
analysis of all potential tax effects of the transactions contemplated by the
Merger Agreement or the Merger itself. No information is provided herein with
respect to the application and effect of state, local and foreign tax laws and
the possible effects of changes in federal laws or other tax laws.
Anticipated Accounting Treatment
The business combination resulting from the Merger is expected to
qualify as a "pooling of interests" for accounting and financial reporting
purposes. Under this method of accounting, the recorded assets and liabilities
of Merchants and Pyramid will be carried forward to the combined corporation at
their recorded amounts; income of the combined corporation will include income
of Merchants and Pyramid for the entire fiscal year in which the combination
occurs.
The Merger Agreement provides that a condition to the consummation of
the Merger is the receipt of the opinion of the independent public accountants
of Merchants to the effect that the Merger qualifies for "pooling of interests"
accounting treatment. However, Merchants may waive this condition and consummate
the Merger even if the transaction does not qualify for pooling of interests
accounting.
Dissenters' Rights
Under the provisions of Subchapter XIII of the WBCL, a copy of which is
attached to this Proxy Statement/Prospectus as Exhibit D and which provisions
are incorporated herein by reference, any holder of record or beneficial holder
of Pyramid Common Stock has the right to dissent from the Merger and demand
payment of the "fair value" of his or her shares in cash as determined pursuant
to Subchapter XIII of the WBCL ("Dissenters' Rights"). Set forth below is a
summary of the procedures relating to the exercise of Dissenters' Rights. This
summary does not purport to be a complete statement of the provisions of
Subchapter XIII of the WBCL and shareholders wishing to dissent from the Merger
are urged to review Exhibit D in its entirety.
Any shareholder who wishes to assert Dissenters' Rights must deliver a
written notice of his or her intent to exercise such right to Pyramid Bancorp.,
Inc., 101 Falls Road, Grafton, Wisconsin, 53024, Attention: Mr. Thomas Sheehan,
President, before the vote on the Merger Agreement is taken at the Special
Meeting. A PROXY OR VOTE AGAINST THE MERGER AGREEMENT WILL NOT, BY ITSELF, BE
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REGARDED AS A WRITTEN NOTICE OF INTENT TO DEMAND PAYMENT FOR PURPOSES OF
ASSERTING DISSENTERS' RIGHTS.
Furthermore, a Pyramid shareholder wishing to assert Dissenters' Rights
may not vote his or her shares in favor of the Merger.
A record holder of Pyramid Common Stock may assert Dissenters' Rights
as to fewer than all shares registered in that shareholder's name only if the
holder dissents with respect to all shares beneficially owned by any one person
and notifies Pyramid in writing of the name and address of each person on whose
behalf the shareholder asserts such Dissenters' Rights.
A beneficial shareholder may assert Dissenters' Rights as to shares
held on the shareholder's behalf only if, in addition to meeting the other
requirements to dissent, the beneficial shareholder (i) submits to Pyramid the
record shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts Dissenters' Rights and (ii) asserts Dissenters'
Rights with respect to all shares of which the shareholder is the beneficial
shareholder or over which the beneficial shareholder has power to direct the
vote.
If the Merger Agreement is approved by the requisite vote of holders of
Pyramid Common Stock, Pyramid is required to send a notice (the "Dissenters'
Notice") to all dissenting shareholders containing payment demand and stock
certificate surrender information (the "Payment Demand") within 10 days after
such approval. The return date (the "Payment Demand Date") specified by Pyramid
for receiving the Payment Demand from dissenting shareholders may not be less
than 30 nor more than 60 days after the date on which the Dissenters' Notice was
first sent. Upon receipt of the Dissenters' Notice, each dissenting shareholder
must return his payment demand and Certificate for Pyramid Common Stock no later
than the Payment Demand Date as provided in the Dissenters' Notice and certify
whether he or she acquired beneficial ownership of the shares prior to the first
public announcement of the terms of the Merger on March 10, 1999. A Payment
Demand may not be withdrawn without Pyramid's consent.
If the Merger is effectuated, Merchants upon such effectuation, will
pay each dissenting shareholder who properly complied with the statutory
requirements of Subchapter XIII of the WBCL, the amount that Merchants estimates
to be the fair value of such dissenting shareholder's shares, plus accrued
interest from the Effective Time; provided that, with respect to shares acquired
after the first public announcement of the Merger, Merchants may elect to
withhold payment until either such shareholder accepts Merchants offer of fair
value or a court determines the fair value of such shares.
If the Merger is not effectuated within 60 days of the Payment Demand
Date, Pyramid will return all deposited certificates to dissenting shareholders.
If the Merger is thereafter effected, Pyramid will send a new Dissenters' Notice
within 10 days of effecting the Merger and repeat the payment demand procedure
described above.
If any dissenting shareholder is dissatisfied with Merchants'
determination of "fair value," such dissenting shareholder may notify Merchants
in writing of his or her own estimate of the fair value of his or her shares and
the amount of interest due. A dissenting shareholder must assert this right
within 30 days after Merchants makes or offers payment for his or her shares or
the right is waived. Merchants may either accept such dissenting shareholder's
estimate of fair value or commence a proceeding in the Wisconsin Circuit Court
of Ozaukee County to determine the fair value of the shares of all dissenting
shareholders whose own estimates of fair value are not accepted by Merchants.
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Shareholders of Pyramid considering exercising dissenters' rights
should bear in mind that the "fair value" to be paid for their Pyramid stock is
defined under Section 180.1301 of the WBCL as "... the value of the shares
immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation of
the corporate action unless exclusion would be inequitable."
In the event any holder of Pyramid Common Stock fails to perfect his or
her rights to dissent by failing to comply strictly with the applicable
statutory requirements of Subchapter XIII of the WBCL, he or she will be bound
by the terms of the Merger Agreement and will not be entitled to payment for his
or her shares under Subchapter XIII of the WBCL. ANY HOLDER OF PYRAMID COMMON
STOCK WHO WISHES TO OBJECT TO THE TRANSACTION AND DEMAND PAYMENT IN CASH FOR HIS
OR HER SHARES SHOULD CONSIDER CONSULTING HIS OR HER OWN LEGAL ADVISOR.
Because an executed proxy relating to Pyramid Common Stock on which no
voting direction is made will be voted at the Special Meeting in favor of the
Merger, a dissenting shareholder who wishes to have his or her shares of Pyramid
Common Stock represented by Proxy at the Special Meeting but preserve his or her
dissenters' rights must mark his or her proxy either to vote against the Merger
or to abstain form voting thereon, in addition to the foregoing requirements.
The Voting Agreement
Pursuant to the Voting Agreement, attached hereto as Exhibit B, the
execution of which was a condition to Merchants entering into the Merger
Agreement, the directors of Pyramid have agreed to vote their shares (i) in
favor of the adoption and approval of the Merger Agreement and the Merger and
(ii) against any Competing Transaction. The Voting Agreement also provides that
Merchants has the exclusive right to purchase any or all of the shares of
Pyramid Common Stock owned by the directors for $250 per share, payable in cash,
subject to any necessary regulatory approval, after a material breach of the
Merger Agreement by Pyramid or any events or circumstances that lead Merchants
reasonably to believe that Pyramid is likely to materially breach the Merger
Agreement, or a breach by any director of the Voting Agreement. The purchase
right is not exercisable as of the date hereof. The purchase price per share
under the Voting Agreement equaled approximately 73% of the value of Pyramid
Common Stock based upon the trading price of Merchants Common Stock at the date
that the Voting Agreement was requested by Merchants. See "CERTAIN PROVISIONS OF
THE VOTING AGREEMENT."
Anti-Takeover Effect of the Voting Agreement. The Voting Agreement may
have the effect of discouraging persons who might now or in the future be
interested in acquiring all of or a significant interest in Pyramid from
considering or proposing such an acquisition, even if such persons were prepared
to pay a higher price per share for Pyramid's Common Stock than the price per
share implicit in the Exchange Ratio. Certain attempts to acquire Pyramid would
trigger Merchants' right to purchase such shares and to receive any premium
offered to the directors of Pyramid.
Other Related Party Transactions
In the ordinary course of conducting their banking and financial
service businesses, each of Merchants, Pyramid and their respective
subsidiaries, may do business and engage in banking transaction with the other
party and its subsidiaries, which may include, but not be limited to, interests
or participation in loans and interbank advances.
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Management after the Merger
In the Merger, Pyramid will be merged into Merger Corp. and the
separate corporate existence of Pyramid will cease. Merchants will thereby
acquire control of the Bank through Merger Corp.
The officers and directors of Merger Corp. prior to the Merger will
continue as officers and directors of the surviving corporation. The directors
of the Bank prior to the Effective Time will continue as directors after the
Effective Time until their successors shall have been duly elected and
qualified.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, which is attached as Exhibits A and A-1 to this Proxy
Statement/Prospectus and is incorporated herein by reference. Such summary is
qualified in its entirety by reference to the Merger Agreement.
The Merger
The Merger Agreement provides that, following the approval of the
Merger Agreement by the shareholders of Pyramid and the satisfaction or waiver
of the other conditions to the Merger, Pyramid will be merged with and into
Merger Corp. If the Merger Agreement is approved by the shareholders of Pyramid,
the Merger will become effective upon the Effective Time.
At the Effective Time, pursuant to the Merger Agreement, each
outstanding share of Pyramid Common Stock will be converted into the right to
receive 9 shares of Merchants' Common Stock, subject to renegotiation of the
Exchange Ratio if the Daily Average Price (as defined above) of Merchants Common
Stock is less than $36 or greater than $44. See "THE MERGER-Merger
Consideration." With regard to the treatment of fractional share interests, see
"The MERGER - Conversion of Shares; Procedure for Exchange of Certificates;
Fractional Shares."
Representations and Warranties
The Merger Agreement contains customary representations and warranties
relating to, among other things, (i) each of Merchants' and Pyramid's and their
respective subsidiaries' organization and similar corporate matters; (ii) each
of Merchants' and Pyramid's capital structure; (iii) authorization, execution,
delivery, performance and enforceability of the Merger Agreement and other
related matters; (iv) documents filed by Merchants with the Commission and with
the Federal Reserve Board and state banking authorities and the accuracy of
information contained therein; (v) the accuracy of information supplied by each
of Merchants and Pyramid in connection with the Registration Statement and this
Proxy Statement/Prospectus; (vi) compliance with laws including employment and
lending laws; (vii) no material pending or threatened litigation except as
otherwise disclosed by Merchants and Pyramid; (viii) filing of tax returns and
payment of taxes; (ix) certain material contracts and contracts relating to
certain employment, consulting and benefits matters of Pyramid; (x) retirement
and other employee plans and matters of Pyramid relating to ERISA; (xi) the
absence of any burdensome contracts, agreements or restrictions; (xii) the
absence of certain material changes or events since December 31, 1997, 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
Merchants or its subsidiaries, taken as a whole, and Pyramid or its
subsidiaries, taken as a whole; (xiii) maintenance of books of account and
accounting controls, loan documentation and disclosure; (xiv) no action taken
that would prevent using the "pooling of interests" method to account for the
Merger or which would prevent the Merger from qualifying as a tax-free
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reorganization under the Code; (xv) certain environmental matters relating to
the properties of Pyramid; (xvi) good title to the properties of Pyramid and its
subsidiaries, free of liens except as specified; and (xvii) certain insurance
matters.
Certain Covenants
Pursuant to the Merger Agreement, Merchants and Pyramid have each
agreed that prior to the Effective Time (and unless the prior written consent of
the other shall have been obtained) each of them and their respective
subsidiaries will operate their respective businesses in a manner that does not
violate any law. In addition, Pyramid has agreed that prior to the Effective
Time, Pyramid will not propose or adopt any amendments to its corporate charter
or bylaws in any way materially adverse to Merchants.
Pursuant to the Merger Agreement, Merchants and Pyramid have each
agreed that prior to the Effective Time (and unless the prior written consent of
Merchants shall have been obtained) Pyramid and its subsidiaries will ((i) carry
on business in the usual, regular and ordinary course consistent with past
practice, (ii) use reasonable efforts to preserve intact their business
organization and assets (and all rights associated therewith), (iii) use
reasonable efforts to maintain and keep their properties in good repair and
condition, (iv) use reasonable efforts to keep all insurance and bonds in full
force and effect, (v) perform in all material respects all obligations under all
material contracts, leases and documents relating to or affecting the assets,
properties and business of Pyramid and its subsidiaries, (vi) purchase and sell
securities in accordance with agreed upon guidelines, (vii) maintain as of the
date on which all conditions have been met and until the Effective Time, a loan
loss reserve of not less than 1.2% of period ending loans, (viii) fully expense
on its financial statement all expenses payable as a result of the consummation
of the Merger (ix) obtain an independent audit of its financial statements for
the year ended December 31, 1998; and (x) comply with and perform in all
material respects all obligations and duties imposed by all applicable laws.
Pyramid has also agreed that prior to the Effective Time (and unless the prior
written consent of Merchants shall have been obtained), neither Pyramid nor its
subsidiaries will: (i) grant any increase in compensation or bonuses (other than
as specified in the Merger Agreement) or retirement benefits to any employee or
otherwise adopt, enter into, amend or modify any employee benefit plan, or enter
into or amend any employment, severance or similar agreement with any director
or officer (other than as is consistent with the normal policy of Pyramid); (ii)
except for quarterly dividends commencing in the first calendar quarter of 1999
not to exceed $1.00 per share, declare or pay any dividend on its outstanding
shares of capital stock; (iii) redeem, purchase or otherwise acquire any shares
of Pyramid capital stock; (iv) merge or consolidate with or into any other
corporation or bank; (v) purchase or otherwise acquire any assets or stock of
any corporation, bank or other business; (vi) liquidate, sell, dispose of, or
encumber any assets or acquire any assets, other than in the ordinary course of
business consistent with past practice; (vii) split, combine or reclassify any
of the capital stock of Pyramid or issue, authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock; (viii) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale of, any shares of any class
of Pyramid Common Stock or any rights, warrants or options to acquire, any such
shares; (ix) purchase any shares of Merchants Common Stock (except in a
fiduciary capacity for the account of its customers; (x) change any of its
methods of accounting, or methods of reporting income or deductions for federal
income tax purposes, in effect at December 31, 1997, except as may be required
by law or generally accepted accounting principles; (xi) change any lending,
investment, liability management or other material policies concerning the
business or operations of Pyramid or any subsidiary in any material respect;
(xii) organize any new subsidiaries or enter into any new non-bank line of
business or make any material changes in its operations; (xiii) take any action
which is or is reasonably likely to adversely affect the ability of Merchants or
Merger Corp. to obtain any necessary approvals of governmental authorities
required for the transactions contemplated hereby, adversely affect Pyramid's
ability to perform its covenants and agreements under the Merger Agreement or
result in
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any of the conditions to the Merger not being satisfied; (xiv) incur or assume
any material obligation or liability, or make any loan (excluding loan renewals
of a loan not then classified as "substandard," "doubtful," "loss," "other loans
especially mentioned" or any comparable classifications by Pyramid, the Bank or
banking regulators) or investment (excluding U.S. Treasury Securities) in any
amount greater than $100,000; (xv) assume, guarantee, endorse or otherwise
become liable or responsible for the obligations of any other person or entity;
(xvi) mortgage, license, pledge or grant a security interest in any of its
material assets or allow to exist any material lien thereon, except (A)
liabilities and obligations incurred in the ordinary course of business
consistent with past practices and in amounts not material to Pyramid or its
subsidiaries taken as a whole, and (B) as may be required under existing
agreements to which Pyramid or any subsidiary is a party; (xvii) acquire assets
(including equipment)or securities in excess of $25,000 in the aggregate
(excluding loans to customer and investments permitted above); (xviii) enter
into any other contract or agreement involving annual payments by Pyramid or a
subsidiary or the other party or parties thereto in excess of $20,000; (xix)
pay, discharge, or satisfy any debts or claims not in the ordinary course of
business and consistent with past practices and in no event with a value in
excess of $20,000 individually; (xx) settle any claim, action, suit, litigation,
proceeding, arbitration, investigation or controversy of any kind, for any
amount in excess of $25,000 or in any manner which would restrict in any
material respect the operations or business of Pyramid or its subsidiaries;
(xxi) purchase any new financial product or instrument which involves entering
into a contract with a term of six months or longer; or xxii) take any action or
fail to take any action which individually or in the aggregate can be expected
to have a material adverse effect (as defined in the Merger Agreement) or
Pyramid on its subsidiaries, taken as whole.
No Solicitation of Transactions
The Merger Agreement provides that Pyramid and its respective
subsidiaries will not initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to any Competing Transaction or negotiate with any person in
furtherance of such inquiries or to obtain a Competing Transaction, or agree to
or endorse any Competing Transaction, or authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to take any such action. Pyramid must promptly notify Merchants
orally and in writing of all of the relevant details relating to all inquiries
and proposals which it may receive relating to any of such matters.
Notwithstanding the foregoing, the Board of Directors of Pyramid is not
prohibited from (i) furnishing or permitting any of its officers, directors,
employees, investment bankers, financial advisors, attorneys, accountants or
other representatives to furnish information to any party that requests
information as to Pyramid if the Board of Directors of Pyramid, after
consultation with and based upon the written advice of independent legal
counsel, determines in good faith that such action is required for the Board of
Directors of Pyramid to comply with its fiduciary duties to shareholders imposed
by law, and if prior to furnishing such information to such party, Pyramid
receives from such party an executed confidentiality agreement in reasonably
customary form.
For purposes of the Merger Agreement, a "Competing Transaction" shall
mean any of the following involving Pyramid or any of Pyramid's subsidiaries:
(i) any merger, consolidation, share exchange, business combination, or other
similar transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of 10% or more of assets in a single transaction or series
of transactions, excluding from the calculation of such percentage any such
transactions undertaken in the ordinary course of business and consistent with
past practice; (iii) any sale of 10% or more of shares of capital stock (or
securities convertible or exchangeable into or otherwise evidencing, or any
agreement or instrument evidencing, the right to acquire capital stock); (iv)
any tender offer or exchange offer for 10% or more of outstanding shares of
capital stock; (v) any solicitation of proxies in opposition to approval by
Pyramid's shareholders of the
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Merger; (vi) the filing of an acquisition application (or the giving of
acquisition notice) whether in draft or final form under the BHC Act or the
Change in Bank Control Act with respect to Pyramid or its subsidiaries; (vii)
any person shall have acquired beneficial ownership or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder)
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of 10% or more of the then outstanding shares of capital
stock; or (viii) any public announcement of a proposal, plan or intention to do
any of the foregoing.
Conditions to Consummation of the Merger
The respective obligations of each party to effect the Merger is
subject to various conditions which include, in addition to other customary
closing conditions, the following: (i) the Merger shall have been approved by
the holders of Pyramid Common Stock; (ii) 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 Merchants shall also have received all other federal and state
securities permits and authorizations necessary to issue Merchants Common Stock
pursuant to the Merger Agreement; (iii) the Merger shall have been approved by
the Federal Reserve Board and the DFI, which approvals shall not contain any
condition which is not reasonably satisfactory to Merchants or Pyramid and any
waiting periods with respect to the Merger shall have expired; and (iv) there
shall not be any injunction or restraining order preventing the consummation of
the Merger in effect.
In addition, Merchants' or Pyramid's respective obligation to effect
the Merger is subject to one or more of the following additional conditions (any
of which may be waived by such party): (i) the representations and warranties of
the other party to the Merger Agreement shall be true and correct in all
material respects and the other party shall have performed in all material
respects all agreements and covenants required to be performed by it under the
Merger Agreement and any agreements entered into in connection therewith, and
the other party shall have obtained all material consents and approvals required
to consummate the Merger; (ii) there shall not be any pending action, proceeding
or investigation before any court or administrative agency or by any government
agency or any other person (a) challenging or seeking material damages in
connection with the Merger or the conversion of Pyramid Common Stock into
Merchants Common Stock pursuant to the Merger, or (b) seeking to restrain,
prohibit or limit the exercise of full rights of ownership or operation by
Merchants or is subsidiaries of all or any portion of the business or assets of
Pyramid or any of its subsidiaries, which in either case is reasonably likely to
have a material adverse effect on either Pyramid and its subsidiaries, taken as
a whole, or Merchants and its subsidiaries, taken as a whole; (iii) the parties
shall have received the opinion of independent counsel to Merchants that the
Merger will be treated for federal income tax purposes as a "reorganization"
within the meaning of Section 368(a) of the Code (see "The MERGER - Certain
Material Federal Income Tax Consequences," above); (iv) Merchants shall have
received an opinion from Ernst & Young, LLP to the effect that the Merger
qualifies for "pooling of interests" accounting treatment; (v) the aggregate of
(a) fractional share interests in Merchants Common Stock to be paid in cash
pursuant to the Merger Agreement and (b) the number of shares of Merchants
Common Stock which would have been issuable pursuant to the Merger Agreement
that will not be issued due to the exercise of dissenters' rights is not more
than 10% of the maximum aggregate number of shares of Merchants Common Stock
which could be issuable as a result of the Merger; (vi) Merchants and Pyramid
shall have received the opinion of counsel regarding certain issues under the
Securities Act and the WBCL; (vii) Merchants shall have received from each
affiliate of Pyramid a signed letter regarding certain restrictions on the
resale of Merchants Common Stock under Rule 145 of the Securities Act; (viii)
Merchants shall have received from Ernst & Young LLP "Comfort Letters" dated as
of the date of mailing of the Proxy Statement/Prospectus and the Closing Date,
covering matters customary
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in transactions such as the Merger; (ix) Merchants shall have received from the
Directors of Pyramid the Voting Agreement discussed. See "CERTAIN PROVISIONS OF
THE VOTING AGREEMENT."
Termination
The Merger Agreement may be terminated at any time prior to the
Effective Time by the applicable Board of Directors, whether before or after
approval of the matters presented in connection with the Merger by the
shareholders of Pyramid: (i) by mutual consent of Merchants and Pyramid; (ii) by
either Pyramid or Merchants (x) if there has been a breach in any material
respect of any representation, warranty, covenant or agreement on the part of
Pyramid, on the one hand, or Merchants, on the other hand, respectively set
forth in the Merger Agreement, or (y) if any representation or warranty of
Pyramid, on the one hand, or Merchants on the other hand, respectively, shall be
discovered to have become untrue in any material respect, in either case which
breach or other condition has not been cured within 10 business days following
receipt by the non-terminating party of notice of such breach or other condition
(provided that he 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); (iii) by either Merchants or Pyramid if any permanent
injunction preventing the consummation of the Merger shall have become final and
nonappealable; (iv) by either Merchants or Pyramid if the Federal Reserve Board
or the DFI denied approval of the Merger and neither Merchants nor Pyramid 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; (v) by either
Merchants or Pyramid if the Merger has not been consummated by December 31, 1999
for a reason other than the failure of the terminating party to comply with its
obligations under the Merger Agreement; or (vi) by either Merchants or Pyramid
if the required approval of the shareholders of Pyramid has not been obtained.
In the event of termination of the Merger Agreement by either Pyramid
or Merchants, other than as a result of a material breach by the non-terminating
party, each party will pay its own expenses and the Merger Agreement will become
void and there will be no liability or obligation on the part of Merchants or
Pyramid other than under certain specified provisions of the Merger Agreement
dealing with confidential treatment of non-public information. In the event of
termination of the Merger Agreement by a material breach, in addition to other
remedies at law or equity for breach, the party to have breached will reimburse
the non-breaching parties their expenses under the Merger Agreement.
Amendment and Waiver
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
Merchants and Pyramid (except that after the Merger Agreement shall have been
approved by the shareholders of Pyramid, no amendment may be entered into which
would reduce the amount or change the consideration into which each share of
Pyramid Common Stock shall be converted upon consummation of the Merger without
further shareholder approval). At any time prior to the Effective Time the
parties may extend the time for the performance of any of the obligations or
other acts of the other party hereto, waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement and waive compliance with
any of the agreements or conditions contained in the Merger Agreement.
Expenses
Whether or not the Merger is consummated, all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expense (except
that the parties shall share equally in the expense of printing and reproducing
for filing the
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Registration Statement and this Proxy Statement/Prospectus and all Commission
and other regulatory filing fees incurred in connection with the Merger
Agreement), except if the Merger Agreement is terminated due to the breach of
the Merger Agreement by either party thereto, then, in addition to other
remedies at law or equity for breach of the Merger Agreement, the party so found
to have breached the Merger Agreement shall indemnify the other parties for
their respective expenses.
Break-Up Fee
Provided that Merchants has not breached in any material respect its
obligations under the Merger Agreement, Pyramid is obligated to pay to Merchants
a fee ("Break-Up Fee") equal to the lesser of 1.5% of the value of the Exchange
Fund (as defined in the Merger Agreement) or $400,000. The Break-Up Fee is
payable to Merchants if (A) the Board of Directors of Pyramid (i) withdraws,
modifies or amends its approval or recommendation of the Merger Agreement; (ii)
does not at the appropriate time recommend that the shareholders of Pyramid vote
in favor of the Merger Agreement or withdraws or modifies such recommendation or
(iii) does not include such voting recommendation in the Proxy
Statement/Prospectus or (B) Pyramid initiates, solicits or encourages or takes
any other action to lead to any Competing Transaction see "CERTAIN PROVISIONS OF
THE MERGER AGREEMENT - No Solicitation of Transactions."
Provided that Pyramid has not breached in any material respect its
obligations under the Merger Agreement, Merchants is obligated to pay to Pyramid
the Break-Up Fee if the Board of Directors of Merchants withdraws, modifies or
amends in any respect its approval of the Merger Agreement.
CERTAIN PROVISIONS OF THE VOTING AGREEMENT
The following is a brief summary of certain provisions of the Voting
Agreement, which is attached as Exhibit B to this Proxy Statement/Prospectus and
is incorporated herein by reference. The following summary is qualified in its
entirety by reference to the Voting Agreement.
Merchants has entered into the Voting Agreement with Directors of
Pyramid and related parties ("directors"). The directors hold 13,312 shares
representing approximately 19.3 of the total voting power of Pyramid Common
Stock. The Voting Agreement provides that the directors, in consideration of the
substantial expenses incurred by Merchants in connection with the Merger
Agreement and as a condition to Merchants entering into the Merger Agreement,
shall vote or cause to be voted or express a written consent with respect to all
of such director's shares:
(a) in favor of adoption and approval of the Merger Agreement
and the Merger at every meeting of shareholders of Pyramid at which
such matters are considered and at every adjournment thereof and in
connection with every proposal to take action by written consent with
respect thereto, and
(b) against any other Competing Transaction at every meeting
of shareholders of Pyramid at which such matters are considered and at
every adjournment thereof and in connection with every proposal to take
action by written consent with respect thereto.
The Voting Agreement also provides that Merchants has the exclusive
right to purchase any and all of the shares of Pyramid Common Stock owned by
each director for $250.00 per share, payable in cash, subject to any necessary
regulatory approval, after a material breach of the Merger Agreement by Pyramid
or any events or circumstances that lead Merchants reasonably to believe that
Pyramid is likely to materially
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<PAGE> 56
breach the Merger Agreement or a breach by a director of the Voting Agreement.
The purchase right is not exercisable as of the date hereof. The purchase price
per share under the Voting Agreement equaled approximately 73% of the value of
Pyramid Common Stock based upon the trading price of Merchants Common Stock at
the date that the Voting Agreement was requested by Merchants.
The Voting Agreement also provides that:
(a) Each of the directors agrees that such director will not,
nor will such director permit any entity under such director's control,
to deposit any of such director's shares in a voting trust or subject
any of their shares to any agreement, arrangement or understanding with
respect to the voting of such shares inconsistent with the Voting
Agreement.
(b) During the term of the Voting Agreement, each director
agrees not to sell, assign, transfer or dispose (except by means of
certain gifts) of such director's shares.
The Voting Agreement shall terminate upon the earlier of (a) the
Effective Time of the Merger and (b) the date on which the Merger Agreement is
terminated in accordance with its terms. Upon such termination, no party shall
have any further obligations or liabilities under the Voting Agreement; provided
that termination shall not relieve any party from liability for any breach of
the Voting Agreement prior to such termination.
The Voting Agreement binds the actions of the signatories thereto only
in their capacity as shareholders of Pyramid, and such shareholders/directors of
Pyramid were not and could not be contractually bound to abrogate their
fiduciary duties as directors of Pyramid. Accordingly, while such
shareholders/directors are, under the Voting Agreement, contractually bound to
vote as a shareholder in favor of the Merger and against a Competing Transaction
should one be presented, their fiduciary duties as directors nevertheless
require them to act, in their capacity as directors, in the best interests of
Pyramid when they decided to approve and adopt the Merger Agreement. In
addition, such shareholders/directors will continue to be bound by their
fiduciary duties as directors of Pyramid with respect to any decisions they may
take in connection with the Merger or otherwise.
CERTAIN INFORMATION CONCERNING MERCHANTS
Merchants is a registered bank holding company pursuant to the BHC Act.
It was incorporated in Wisconsin in 1982 and pursuant to permission from the
Federal Reserve Board acquired Lincoln State Bank, Milwaukee, Wisconsin and
Franklin State Bank, Franklin, Wisconsin. In 1993 Merchants acquired Lincoln
Savings Bank which was renamed Lincoln Community Bank. The three subsidiary
banks operate a total of seventeen facilities in Milwaukee and Waukesha
Counties. In addition, to the three banks, Merchants owns and operates three
non-bank subsidiaries, Lincoln Neighborhood Redevelopment Corporation, which was
organized to redevelop and rejuvenate certain areas of the City of Milwaukee;
M&M Services, Inc. which provides operational services to the subsidiary banks
and Achieve Mortgage Corporation, which is a mortgage brokerage firm. Merchants
provides advice and specialized services to its bank and nonbank subsidiaries in
various areas including auditing, data processing, marketing/advertising,
investments, personnel services and other financial services closely related to
banking. The respective Boards of Directors and officers of the subsidiaries
retain overall control of and responsibility for their organizations.
As of June 30, 1999, Merchants had consolidated assets of $344 million
and the subsidiary banks had deposits of $298 million.
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Merchants, through its subsidiaries, provides a complete range of
retail banking services to individuals and small-to-medium-size businesses.
These services include checking and savings accounts, NOW, Super NOW and money
market deposit accounts, business loans, personal loans, residential and
condominium mortgage loans, loans for education, MasterCard, VISA and other
consumer-oriented financial services, including IRA and Keogh accounts, safe
deposit and night depository facilities. Automated teller machines, which
provide 24 hour banking services to customers of Merchants have been installed
in many locations in the Merchants service areas. Among the services designed
specifically to meet the needs of small-and medium-size businesses are various
types of specialized financing, cash management services and transfer/collection
facilities.
The Merchants subsidiaries provide lending, depository and related
financial services to commercial, industrial, financial and governmental
customers. In the lending area, these include term loans, revolving credit
arrangements, letters of credit, inventory and accounts receivable financing and
real estate construction lending.
Additional emphasis is given to non-credit services for commercial
customers, such as advice and assistance in the placement of securities,
corporate cash management and financial planning. Merchants subsidiaries make
available check clearing, safekeeping, loan participation, lines of credit,
portfolio analyses, data processing and other services.
Achieve Mortgage Corporation provides certain mortgage banking services
including the origination, underwriting, closing, and the temporary warehousing
of mortgage loans and the sale of loans to investors. The primary focus is on
one-to-four-family residential and multi-family properties, all of which
mortgage loans are saleable into the secondary mortgage market.
Merchants and the Merchants subsidiaries are not dependent upon a
single or a few customers, the loss of which would have a material adverse
effect on Merchants. No material portion of Merchants or Merchants subsidiaries'
business is seasonal.
At December 31, 1998 Merchants and its subsidiaries, as a group,
employed 141 full-time and 55 part-time employees.
CERTAIN INFORMATION CONCERNING PYRAMID
Pyramid is a bank holding company incorporated under the laws of the
State of Wisconsin with its principal office in Grafton, Wisconsin. Pyramid owns
all the issued and outstanding stock of the Bank, a Wisconsin banking
corporation. The Bank owns all the issued and outstanding stock of BGS
Investments, Inc., a Nevada corporation ("GBS"). As of June 30, 1999, Pyramid
had total assets of approximately $109 million and the bank had deposits of
approximately $83 million.
The Bank is a full service bank serving the banking needs of the city
of Grafton and the surrounding Ozaukee County area. The Bank provides commercial
banking services and products, including savings and demand deposits, real
estate, commercial and consumer loans, collection and safe deposit facilities
and other services tailored to meet the needs of the individual and business
customer. The Bank owns its main banking premises located at 101 Falls Road,
Grafton, Wisconsin. BGS was formed to manage the Bank's investment portfolio.
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The Bank operates an additional facility at the intersection of Pioneer
Road and Port Washington Road in the Town of Grafton (the "Pioneer Branch"). The
Pioneer Branch operates two inside teller stations and two drive-up windows.
Pyramid and the Bank are not dependent upon a single or a few
customers, the loss of which would have a material adverse effect on Pyramid or
the Bank. No material portion of Pyramid's or the Bank's business is seasonal.
At December 31, 1998, Pyramid and Bank employed approximately 32
full-time and 25 part-time employees.
Ownership of Pyramid Common Stock
The following table sets forth information regarding the beneficial
ownership of Pyramid Common Stock as of the Record Date by each director,
certain executive officers, all directors and executive officers of Pyramid as a
group and each person who is known by Pyramid to be the beneficial owner of more
than 5% of Pyramid Common Stock. Directors and executive officers are deemed to
own all shares of Pyramid Common Stock which may be owned in joint tenancy, by a
spouse, in the names of minor children or in revocable trusts for which the
individual has voting and investment power. The address for each of the
directors is the executive offices of Pyramid.
<TABLE>
<CAPTION>
NAME OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES CLASS
<S> <C> <C>
Thomas J. Sheehan 5,351 7.76
Jerome T. Sarnowski 1,050 1.52
Thomas N. Holton 5,446 7.90
James Kacmarcik 305 0.44
Richard A. Kranitz 300 0.44
Richard Belling 860 1.25
All Directors and executive
officers as a group (6 persons) 13,312 19.32
James Derse Rev. Trust
c/o General Industries
Investment Corp.
741 N. Milwaukee Street
Milwaukee, WI 53202 3,957 5.74
Band & Co., FBO Zaun
Memorial Foundation
c/o Firstar Trust Co.
P. O. Box 2054
Milwaukee, WI 53201 3,425(1) 4.97
</TABLE>
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<PAGE> 59
Ralph and Edith Zaun
Rev. Trust
1757 - 12th Ave.
Grafton, WI 53024 2,965(1) 4.30
(1) To the knowledge of Pyramid, Mr. Ralph Zaun holds shared voting and
investment power with regard to these shares.
EXPERTS
The consolidated financial statements of Merchants incorporated by
reference in Merchants and Manufacturers Bancorporation, Inc.'s Annual Report
(Form 10-K) for the year ended December 31, 1998, have been audited by Ernst &
Young, LLP, independent auditors, as set forth in their report thereon
incorporated by reference and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of Pyramid as of December 31,
1998 and 1997, and for each of the years in the three-year period ended December
31, 1998, have been included in this Proxy Statement/Prospectus and in the
registration statement in reliance upon the report of Virchow, Krause & Company,
LLP, independent certified public accountants, and upon the authority of said
firm as experts in accounting and auditing.
Merchants has retained Davis & Kuelthau, S.C. to render an opinion on
the federal income tax consequences of the Merger and in connection therewith,
Davis & Kuelthau, S.C. has reviewed the discussion herein entitled "THE MERGER -
Certain Material Federal Income Tax Consequences." Such opinion has been
included in the registration statement in reliance upon the authority of said
firm as experts in tax matters.
LEGAL OPINIONS
The validity of the shares issued in connection with the Merger will be
passed upon for Merchants by Davis & Kuelthau, S.C., Milwaukee, Wisconsin.
Certain other legal matters in connection with the Merger will be passed upon
for Merchants by Davis & Kuelthau, S.C. and for Pyramid by Michael Best &
Friedrich LLP, Milwaukee, Wisconsin.
FUTURE SHAREHOLDER PROPOSALS
If the Merger is consummated, shareholders of Pyramid will become
shareholders of Merchants. Pursuant to Rule 14a-(8) promulgated under the
Exchange Act, Merchants shareholders may present proper proposals for inclusion
in Merchants proxy statement for consideration at the next annual meeting of its
shareholders by submitting their proposals to Merchants in a timely manner.
Shareholders of Pyramid who become shareholders of Merchants may present
proposals for inclusion in Merchants' proxy statement for its year 2000 Annual
Meeting as the 1999 Annual Meeting of Merchants has been held.
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WHERE YOU CAN FIND MORE INFORMATION
Merchants is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files 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 facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Midwest Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Northeast Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material may
also be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of such Web site is http://www.sec.gov.
This Proxy Statement/Prospectus does not contain all of the information
set forth in the Registration Statement on Form S-4 and exhibits thereto (the
"Registration Statement") covering the securities offered hereby which Merchants
has filed with the Commission, certain portions of which have been omitted
pursuant to the rules and regulations of the Commission, and to which portions
reference is hereby made for further information with respect to Merchants and
the securities offered hereby. The Registration Statement is available for
inspection and copying as set forth above. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated by reference in this Proxy
Statement/Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
All information concerning Merchants included in this Proxy
Statement/Prospectus has been furnished by Merchants, and all information
concerning Pyramid included in this Proxy Statement/Prospectus has been
furnished by Pyramid.
No person is authorized to give any information or make any
representation not contained in this Proxy Statement/Prospectus and, if given or
made, the information or representation should not be relied upon as having been
authorized by Merchants or Pyramid. This Proxy Statement/Prospectus does not
constitute an offer to sell or a solicitation of an offer to purchase the
securities offered hereby, or the solicitation of a proxy, in any jurisdiction
to or from any person to whom it is unlawful to make such offer or solicitation
of an offer or proxy in such jurisdiction. Neither the delivery of this Proxy
Statement/Prospectus nor any distribution of the securities to which this Proxy
Statement/Prospectus relates shall, under any circumstances, create any
implication that there has been no change in the affairs of Merchants or Pyramid
since the date of this Proxy Statement/Prospectus.
The Commission allows us to "incorporate by reference" information into
this Proxy Statement/Prospectus, which means that we can disclose information to
you by referring you to another document filed separately with the Commission.
The information that we incorporate by reference is deemed to be part of this
Proxy Statement/Prospectus, except for any information superseded by information
contained in this Proxy Statement/Prospectus. This Proxy Statement/Prospectus
incorporates by reference the documents listed below that Merchants has
previously filed with the Commission. Those documents contain important
information about Merchants and its financial condition.
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a) Merchants' Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.
b) Merchants' Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999.
c) Merchants' Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999.
d) Merchants Notice of Annual Meeting and Proxy Statement dated
May 5, 1999.
Merchants is also incorporating by reference all additional documents
that it will file with the Commission between the date of this Proxy
Statement/Prospectus and the date of the Special Meeting of the shareholders of
Pyramid.
Documents which Merchants incorporates by reference are available from
Merchants without charge, excluding all exhibits unless Merchants has
specifically incorporated by reference an exhibit in this Proxy
Statement/Prospectus. Shareholders may obtain documents incorporated by
reference in this Proxy Statement/Prospectus by requesting them in writing or by
telephone from Merchants at the following address:
Merchants and Manufacturers Bancorporation, Inc.
14100 West National Avenue
New Berlin, WI 53151
Attention: Michael J. Murry, Chairman of the Board
Telephone (414)827-6700
If you would like to request documents from Merchants, please do so by
___________, 1999 to receive them before the Special Meeting.
FORWARD-LOOKING STATEMENTS
Cautionary Statement for Purposes of the Private 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 Merchants with the Commission, and information contained in
written material, press releases and oral statements issued or made by or on
behalf of Merchants or Pyramid 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 include information concerning
possible or assumed future results of operations of Merchants and Pyramid set
forth under "THE MERGER-Reasons for the Merger" and "THE MERGER-Opinion of
Pyramid Financial Advisor" and those preceded by, followed by or that include
the words "believes," "expects," "anticipates" or similar expressions. For those
statements, Merchants and Pyramid 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
Merchants and Pyramid, 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
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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 Merchants and Pyramid; (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.
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AMONG
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
AND
PYRAMID BANCORP., INC.
March 9, 1999
A-1
<PAGE> 64
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I: THE MERGER
<S> <C> <C>
SECTION 1.01 The Merger....................................................................2
SECTION 1.02 Effective Time................................................................2
SECTION 1.03 Effect of the Merger..........................................................3
SECTION 1.04 Articles of Incorporation and Bylaws..........................................3
SECTION 1.05 Directors and Officers........................................................3
SECTION 1.06 Conversion of Securities......................................................3
SECTION 1.07 Exchange of Certificates......................................................4
SECTION 1.08 Stock Transfer Books..........................................................6
SECTION 1.09 Anti-Dilution Adjustment......................................................7
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 2.01 Organization and Qualification of the Company; Subsidiaries...................7
SECTION 2.02 Articles of Incorporation and Bylaws..........................................8
SECTION 2.03 Capitalization................................................................8
SECTION 2.04 Authority.....................................................................9
SECTION 2.05 No Conflict; Required Filings and Consents....................................9
SECTION 2.06 Compliance; Permits..........................................................10
SECTION 2.07 Banking Reports and Financial Statements.....................................10
SECTION 2.08 Absence of Certain Changes or Events.........................................11
SECTION 2.09 Absence of Litigation........................................................11
SECTION 2.10. Employee Benefit Plans.......................................................12
SECTION 2.11 Employment Contracts; Material Contracts.....................................14
SECTION 2.12 Registration Statement; Proxy Statement......................................14
SECTION 2.13 Title to Property............................................................14
SECTION 2.14 Compliance with Environmental Laws...........................................15
SECTION 2.15 Absence of Agreements........................................................17
SECTION 2.16 Taxes........................................................................17
SECTION 2.17 Insurance....................................................................18
SECTION 2.18 Absence of Adverse Agreements................................................18
SECTION 2.19 Internal Controls and Records................................................18
SECTION 2.20 Loans........................................................................19
SECTION 2.21 Labor Matters................................................................19
SECTION 2.22 Brokers......................................................................19
SECTION 2.23 Accounting and Tax Matters...................................................19
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SECTION 2.24 Full Disclosure..............................................................20
SECTION 2.25 Vote Required................................................................20
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF MERCHANTS
SECTION 3.01 Organization and Qualification...............................................20
SECTION 3.02 Articles of Incorporation and Bylaws.........................................20
SECTION 3.03 Capitalization...............................................................21
SECTION 3.04 Authority....................................................................21
SECTION 3.05 No Conflict; Required Filings and Consents...................................21
SECTION 3.06 Compliance; Permits..........................................................22
SECTION 3.07 Securities Reports; Financial Statements.....................................22
SECTION 3.08 Absence of Certain Changes or Events.........................................23
SECTION 3.09 Absence of Litigation........................................................23
SECTION 3.10 Registration Statement; Proxy Statement......................................23
SECTION 3.11 Absence of Agreements........................................................23
SECTION 3.12 Taxes........................................................................24
SECTION 3.13 Brokers......................................................................24
SECTION 3.14 Accounting and Tax Matters...................................................25
SECTION 3.15 Full Disclosure..............................................................25
SECTION 3.16 Vote Required................................................................25
ARTICLE IV: COVENANTS OF THE COMPANY
SECTION 4.01 Affirmative Covenants........................................................25
SECTION 4.02 Negative Covenants...........................................................26
SECTION 4.03. Intentionally left blank.....................................................29
SECTION 4.04. Access and Information.......................................................29
SECTION 4.05 Affiliates; Accounting and Tax Treatment.....................................29
SECTION 4.06 Expenses.....................................................................30
SECTION 4.07 Delivery of Shareholder List.................................................30
ARTICLE V: COVENANTS OF MERCHANTS
SECTION 5.01 Affirmative Covenants........................................................30
SECTION 5.02 Access and Information.......................................................31
SECTION 5.03 Accounting and Tax Treatment.................................................31
ARTICLE VI: ADDITIONAL AGREEMENTS
SECTION 6.01 Registration Statement.......................................................31
SECTION 6.02 Meetings of the Shareholders.................................................32
SECTION 6.03 Appropriate Action; Consents; Filings........................................32
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SECTION 6.04 Notification of Certain Matters..............................................33
SECTION 6.05 Public Announcements.........................................................33
SECTION 6.06 Environmental Matters........................................................33
SECTION 6.07 Break-Up Fee.................................................................33
ARTICLE VII: CONDITIONS OF MERGER
SECTION 7.01 Conditions to Obligation of Each Party to Effect the Merger..................34
SECTION 7.02 Additional Conditions to Obligations of Merchants............................35
SECTION 7.03 Additional Conditions to Obligations of the Company..........................37
ARTICLE VIII: TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination..................................................................38
SECTION 8.02 Effect of Termination........................................................39
SECTION 8.03 Amendment....................................................................39
SECTION 8.04 Waiver.......................................................................39
ARTICLE IX: GENERAL PROVISIONS
SECTION 9.01 Non-Survival of Representations, Warranties and Agreements...................40
SECTION 9.02 Disclosure Schedules.........................................................40
SECTION 9.03 Notices......................................................................40
SECTION 9.04 Certain Definitions..........................................................41
SECTION 9.05 Headings.....................................................................42
SECTION 9.06 Severability.................................................................42
SECTION 9.07 Entire Agreement.............................................................42
SECTION 9.08 Assignment...................................................................42
SECTION 9.09 Parties in Interest..........................................................42
SECTION 9.10 Governing Law................................................................42
SECTION 9.11 Counterparts.................................................................42
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 9, 1999(the
"Agreement"), among MERCHANTS AND MANUFACTURERS BANCORPORATION, INC., a
Wisconsin corporation ("Merchants"), and PYRAMID BANCORP., INC., a Wisconsin
corporation ("Company").
W I T N E S S E T H:
WHEREAS, the Company is a bank holding company, the wholly-owned
subsidiary of which is the Grafton State Bank located in Grafton, Wisconsin (the
"Bank"); and
WHEREAS, the Bank has only one wholly-owned subsidiary, GBS
Investments, Inc. ("GBS"). The Bank and GBS are sometimes individually referred
to herein as a "Subsidiary" and collectively as the "Subsidiaries;" and
WHEREAS, the Company upon the terms and subject to the conditions of
this Agreement and in accordance with the Wisconsin Business Corporation Act
("Wisconsin Law"), will merge with and into Merchants (the "Merger"); and
WHEREAS, the Company and its Board of Directors have determined that
the Merger will enhance the ability of the Bank to better serve its existing
depositors and customers in Grafton, Wisconsin, and increase the financial
strength of the Bank; and
WHEREAS, the Board of Directors of the Company believes that the Merger
with Merchants will benefit the shareholders and the employees of the Company
and the Subsidiaries; and
WHEREAS, the respective Boards of Directors of Merchants and the
Company have (i) determined that the Merger and the exchange of newly issued
shares of Merchants Common Stock (as defined in Section 1.06) for shares of the
Company's Common Stock (as defined in Section 1.06) pursuant and subject to the
terms and conditions of this Agreement are fair to and in the best interests of
the respective corporations and their shareholders, and (ii) approved and
adopted this Agreement and the transactions contemplated hereby; and
WHEREAS, the respective Board of Directors of the Company and Merchants
have, subject to their fiduciary duties under applicable law, resolved to
recommend approval of the Merger by the shareholders of the Company and
Merchants; and
WHEREAS, Merchants and the Company intend to effect a merger that
qualifies for pooling-of-interests accounting treatment and as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended (the "Code");
and
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WHEREAS, as a condition and inducement to Merchants' willingness to
enter into this Agreement, Merchants and certain shareholders of the Company are
entering into concurrently with the execution and delivery hereof, a Voting
Agreement dated as of the date hereof (the "Voting Agreement"), pursuant to
which such shareholders shall make certain agreements with respect to the voting
of their shares of Company Common Stock.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Merchants and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Wisconsin Law, at the
Effective-Time (as defined in Section 1.02) the Company shall be merged with and
into Merchants. As a result of the Merger, the separate corporate existence of
the Company shall cease and Merchants shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 1.02. EFFECTIVE TIME. 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, in such form
as required by, and executed in accordance with the relevant provisions of
Wisconsin Law (a) after the satisfaction, or if permissible, waiver of
conditions set forth in Article VII, and (b) as promptly as possible within the
sixty (60) day period commencing with the latest of the following dates:
(i) The 30th calendar day after the date of approval of the Merger by
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board");
(ii) Such date as may be prescribed by the Federal Reserve Board or any
other agency or authority pursuant to applicable law, rules or regulations,
prior to which consummation of the transaction described and referred to herein
may not be effected;
(iii) The date of the last of the shareholders' meetings of the Company
and Merchants to vote upon the Merger pursuant to Section 6.02; or
(iv) If the transaction contemplated by this Agreement is being
contested in any legal proceeding and Merchants or the Company has elected to
contest the same, the date that such legal proceeding has been brought to a
conclusion favorable, in the judgment of Merchants or the Company, to the
consummation of the transaction contemplated hereby.
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The later of the date and time of the filing of the Articles of Merger
or the effective date and time of the Merger as set forth in such Articles of
Merger is hereinafter referred to as the "Effective Time."
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Wisconsin
Law. 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 Merchants and the Company shall
vest in the Surviving corporation, and all debts, liabilities and duties of
Merchants and the Company shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.04. ARTICLES OF INCORPORATION AND BYLAWS. At the Effective
Time, the Articles of Incorporation and the Bylaws of Merchants, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
and the Bylaws of the Surviving Corporation.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merchants
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Merchants immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 1.06. CONVERSION OF SECURITIES. At the Effective Time, by
virtue of the Merger and without any action on the part of Merchants, the
Company, or the holders of any of the following securities:
(a) each Share of common stock, par value $1 per share, of the Company
(the "Company Common Stock") (all issued and outstanding shares of the Company
Common Stock being hereinafter collectively referred to as the "Shares") issued
and outstanding immediately prior to the Effective Time (other than any Shares
to be canceled pursuant to Section 1.06(b) and other than any Dissenting Shares,
as defined in Section 1.06(c)) shall be converted, in accordance with Section
1.07, into the right to receive nine (9) shares of common stock, par value $1
per share, of Merchants ("Merchants Common Stock"), provided, however, that if
the Daily Average Price (as defined below) is less than $36 or greater than $44,
then Merchants and the Company will make a good faith effort to promptly
renegotiate the ratio at which Merchants Common Stock would be exchanged for
Company Common Stock. For purposes hereof, the Daily Average Price shall mean
the daily average of the "Bid" and "Ask" quotations of Merchants Common Stock as
published in the Milwaukee Journal/Sentinel (or obtained from another source
acceptable to Merchants and the Company if such quotations are not published in
the Milwaukee Journal/Sentinel) on each of the thirty (30) trading days
preceding the third day prior to the Effective Time. On each of the thirty
trading days prior to the third day before the Effective Time, all Bid and Ask
prices will be averaged to calculate the market quotation for that day. The
resulting thirty average quotes will be summed and the result divided by thirty
to determine the Daily Average Price. In the event that "Ask" quotations are not
available or if the "Ask" price exceeds the "Bid" price by more than $2 on any
of the thirty trading days used to compute the Daily Average Price, then the
"Bid" quotes shall be
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used on those days to calculate the Daily Average Price. As of the Effective
Time, all such shares of the Company Common Stock shall no longer be outstanding
and shall automatically 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 Merchants
Common Stock into which such Company Common Stock is convertible. Certificates
previously representing shares of Company Common Stock shall be exchanged for
certificates representing whole shares of Merchants Common Stock issued in
consideration therefor upon the surrender of such certificates in accordance
with the provisions of Section 1.07, without interest. No fractional shares of
Merchants Common Stock shall be issued, and, in lieu thereof, a cash payment
shall be made pursuant to Section 1.07 hereof.
(b) each Share held in the treasury of the Company and each Share owned
by Merchants or any direct or indirect wholly-owned subsidiary of Merchants
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
(c) each Share of the Company Common Stock which shall be issued and
outstanding as of the Effective Time and held by a shareholder who has validly
perfected dissenter's rights in accordance with Wisconsin Law, shall not be
converted into and shall not become Merchants Common Stock hereunder (all such
shares of the Company Common Stock are hereinafter called "Dissenting Shares").
The Company shall give Merchants prompt notice upon receipt by the Company of
any written notice from any such shareholder of the Company ("Dissenting
Shareholder"). The Company agrees that prior to the Effective Time, it will not,
except with prior written consent of Merchants, voluntarily make any payment
with respect to, or settle or offer to settle, any request for withdrawal
pursuant to the exercise of dissenter's rights. Each Dissenting Shareholder who
becomes entitled, pursuant to the provisions of applicable law, to payment for
his or her shares of the Company Common Stock shall receive payment therefor
from Merchants (but only after the amount thereof shall be agreed upon or
finally determined pursuant to the provisions of applicable law). If any
Dissenting Shareholder shall fail to perfect or shall effectively withdraw or
lose his or her right to receive the value of his or her shares of Company
Common Stock, his or her shares shall be thereupon converted into Merchants
Common Stock in accordance with the provisions of Section 1.06(a) and, if
applicable, cash under Section 1.07(e).
SECTION 1.07. EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. As of the Effective Time, Merchants shall deposit,
or shall cause to be deposited, with Firstar Trust Company (the "Exchange
Agent"), and such deposit shall be solely 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 Merchants Common Stock (such
certificates for shares of Merchants Common Stock, and cash in lieu of
fractional shares (if any), together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 1.06 in exchange for outstanding Shares.
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(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail or personally deliver to each
holder of record (or his or her attorney-in-fact) of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"), whose Shares were converted into the
right to receive shares of Merchants Common Stock pursuant to Section 1.06 and
cash in lieu of fractional shares (if any), (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 Merchants may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Merchants
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 Merchants 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 cash in lieu of fractional shares (if any),
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 Company, a certificate representing the proper number of shares
of Merchants 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. Certificates surrendered for
exchange by any affiliate of the Company shall not be exchanged for certificates
representing shares of Merchants Common Stock until Merchants has received a
written agreement from such person as provided in Section 4.05 hereof. Until
surrendered as contemplated by his Section 1.07, 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 Merchants
Common Stock and cash in lieu of any fractional shares of Merchants Common Stock
as contemplated by Section 1.07(e).
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Merchants 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
Merchants Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 1.07(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 Merchants Common Stock issued in exchange therefor, without interest, (i)
promptly, the amount of any cash payable with respect to a fractional share of
Merchants Common Stock to which such holder is entitled pursuant to Section
1.07(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
Merchants 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 occurring after surrender, payable
with respect to such whole shares of Merchants Common stock.
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(d) No Further Rights in the Shares. All shares of Merchants Common
Stock issued upon conversion of the Shares in accordance with the terms hereof
(including any cash paid pursuant to Section 1.07(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 Merchants 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
Merchants. 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 "Order Date Price".
For purposes hereof, the "Order Date Price" shall mean the "Bid" price of a
share of Merchants Common Stock published in the Milwaukee Journal/Sentinel on
the first business day following the date the Federal Reserve Board issues an
order approving consummation of the Merger.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the shareholders of the Company for six months
after the Effective Time shall be delivered to Merchants, upon demand, and any
shareholders of the Company who have not theretofore complied with this Article
I shall thereafter look only to Merchants for payment of their claim for
Merchants Common Stock, any cash in lieu of fractional shares of Merchants
Common Stock and any dividends or distributions with respect to Merchants Common
Stock.
(g) Liability. Neither Merchants, nor the Company shall be liable to
any holder of Shares for any such Shares (or dividends or distributions with
respect thereto) or cash delivered to a public official pursuant to any
abandoned property, escheat or similar law.
(h) Withholding Rights. Merchants shall be entitled to deduct and
withhold from any cash consideration payable pursuant to this Agreement to any
holder of Shares such amounts as Merchants 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
Merchants, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by Merchants.
SECTION 1.08. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of the Company's Common Stock thereafter on
the records of the Company. From and after the Effective Time, the holders of
certificates evidencing ownership of shares of the Company's Common Stock
outstanding immediately prior to the Effective Time 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 Merchants for any reason shall be converted into shares of Merchants
Common Stock in accordance with this Article I.
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SECTION 1.09. ANTI-DILUTION ADJUSTMENT. If, subsequent to the date
hereof and prior to the Effective Time, Merchants shall pay a stock dividend or
make a distribution on Merchants Common Stock in shares of Merchants Common
Stock or any security convertible into Merchants Common Stock or shall combine
or subdivide its stock, then in each such case, from and after the record date
for determining the shareholders entitled to receive such dividend or
distribution or the securities resulting from such combination or subdivision,
an appropriate adjustment shall be made to the conversion ratio set forth in
Section 1.06 above, for purposes of determining the number of shares of
Merchants Common Stock into which the Company's Common Stock shall be converted.
For purposes hereof, the payment of a dividend in Merchants Common Stock, or the
distribution on Merchants Common Stock in securities convertible into Merchants
Common Stock, shall be deemed to have effected an increase in the number of
outstanding shares of Merchants Common Stock equal to the number of shares of
Merchants Common Stock into which such securities shall be initially convertible
without the payment by the holder thereof of any consideration other than the
surrender for cancellation of such convertible securities. Notwithstanding the
foregoing, this Section shall not apply to any stock options issued under option
plans of Merchants existing as of the date of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule attached hereto (the
"Company Disclosure schedule"), the Company hereby represents and warrants to
Merchants that:
SECTION 2.01. ORGANIZATION AND QUALIFICATION OF THE COMPANY;
SUBSIDIARIES. The Company is a corporation duly organized and validly existing
under the laws of the State of Wisconsin. The Bank is a duly organized and
validly existing Wisconsin bank. GBS is duly organized, validly existing and in
good standing under the laws of Nevada. The Bank is the only subsidiary of the
Company. GBS is the only subsidiary of the Bank. The Company and Subsidiaries
each has the requisite corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("Company Approvals") necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority and Company Approvals would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
below) on the Company and the Subsidiaries, taken as a whole. The term "Material
Adverse Effect" as used in this Agreement shall mean any change or effect that
is or is reasonably likely to be materially adverse to a party's business,
operations, properties (including intangible properties), condition (financial
or otherwise), assets or liabilities (including contingent liabilities). Neither
the Company nor any Subsidiary has received notice of proceedings relating to
the revocation or modification of any Company Approvals. The Company, the Bank
and GBS are duly qualified or licensed as a foreign corporations to do business,
and are in good standing, in each jurisdiction where the character of their
properties owned, leased or operated by them or the nature of their activities
makes such qualification or licensing necessary,
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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 or the Subsidiaries, taken as a whole.
The Company is registered with the Federal Reserve Board as a one bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHCA").
Except for the Subsidiaries, the Company holds no interest, either directly or
indirectly, in any other entity.
SECTION 2.02. ARTICLES OF INCORPORATION AND BYLAWS. The Company has
heretofore furnished to Merchants a complete and correct copy of the Articles of
Incorporation and the Bylaws, as amended or restated, of the Company and the
Subsidiaries and such Articles of Incorporation and Bylaws of the Company and
the Subsidiaries are in full force and effect and neither the Company nor the
Subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws.
SECTION 2.03. CAPITALIZATION.
(a) Capitalization of the Company. The authorized capital stock of the
Company consists of 125,000 shares of Common Stock, par value $1 per share. As
of the date of this Agreement, (i) 68,900 shares of the Company's Common Stock
are issued and outstanding, all of which are validly issued, fully paid and
non-assessable (except as provided in section 180.0622(2)(b) of the Wisconsin
Business Corporation Law), and all of which have been issued in compliance with
applicable securities laws, and (ii) no shares of the Company's Common Stock are
held in the Company's treasury. Except as set forth in the Company's Disclosure
Schedule at Section 2.03(a), 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
obligating the Company to issue or sell any shares of capital stock of, or other
equity interests in the Company. There are no obligations, contingent or
otherwise, of the Company to repurchase, redeem or otherwise acquire any shares
of the Company's Common Stock or to provide funds to or make any investment (in
the form of a loan, capital contribution or otherwise) in any other entity.
(b) Capitalization of the Bank. The authorized capital stock of the
Bank consists of 10,000 shares of common stock, par value $100 per share. As of
the date of this Agreement, (i) 10,000 shares of the Bank's common stock are
issued and outstanding, all of which are validly issued, fully paid and
non-assessable, and all of which have been issued in compliance with applicable
securities laws, and (ii) the Company owns all of the Bank's capital stock.
Except as set forth in the Company's Disclosure Schedule at Section 2.03(b), 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 Bank or obligating the Bank to issue or sell
any shares of capital stock of, or other equity interests in the Bank. There are
no obligations, contingent or otherwise, of the Bank to repurchase, redeem or
otherwise acquire any shares of the Bank's capital stock or to provide funds to
or make any investment (in the form of a loan, capital contribution or
otherwise) in any other entity.
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(c) Capitalization of GBS. The authorized capital stock of GBS consists
of 1,000 shares of common stock, par value $1 per share. As of the date of this
Agreement, (i) 1,000 shares of GBS's common stock are issued and outstanding,
all of which are validly issued, fully paid and non-assessable, and all of which
have been issued in compliance with applicable securities laws, and (ii) the
Bank owns all of GBS's capital stock. Except as set forth in the Company's
Disclosure Schedule at Section 2.03(c), 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
GBS or obligating GBS to issue or sell any shares of capital stock of, or other
equity interests in GBS. There are no obligations, contingent or otherwise, of
GBS to repurchase, redeem or otherwise acquire any shares of GBS's capital stock
or to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any other entity.
SECTION 2.04. AUTHORITY. The Company has the requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a majority
of the outstanding shares of the Company's Common Stock in accordance with
Wisconsin Law and the Company's Articles of Incorporation and Bylaws). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Merchants, constitutes
the legal, valid and binding obligation of the Company enforceable in accordance
with its terms.
SECTION 2.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) To the best knowledge of the Company, after inquiry of its
executive officers, the execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company shall not, (i)
conflict with or violate the Articles of Incorporation or Bylaws of the Company
or the Subsidiaries, (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 Company or the Subsidiaries,
or by which their respective properties are 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 or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or the Subsidiaries pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or its or any of their respective properties are bound
or affected, except for any such breaches, defaults or other occurrences that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company or the Subsidiaries, taken as a whole. The Board of Directors of the
Company has taken all actions necessary under Wisconsin Law, including approving
the transactions contemplated
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herein, to insure that none of the restrictions set forth in Wisconsin Law do or
will apply to the transactions contemplated herein.
(b) To the best knowledge of the Company, after inquiry of its
executive officers, the execution and delivery of this Agreement by the Company
does 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 of 1933,
as amended (the "Securities Act"), and the Securities Exchange of 1934, as
amended (the "Exchange Act"), state securities or blue sky laws ("Blue Sky
Laws"), BHCA, the banking laws and regulations of the State of Wisconsin (the
"WBL"), and the filing and recordation 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 otherwise prevent the
Company from performing its obligations under this Agreement, and would not have
a Material Adverse Effect on the Company or the Subsidiaries, taken as a whole.
SECTION 2.06. COMPLIANCE; PERMITS. To the best knowledge of the Company
after inquiry of its executive officers, neither the Company nor any Subsidiary
is in conflict with, or in default or violation of, (a) any law applicable to
the Company or any Subsidiary or by which any of their respective properties are
bound or affected, or (b) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective properties are 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 Company or the
Subsidiaries, taken as a whole.
SECTION 2.07. BANKING REPORTS AND FINANCIAL STATEMENTS.
(a) The Company and the Subsidiaries have timely filed all forms,
reports and documents required to be filed with the Federal Reserve Board, the
Wisconsin Department of Financial Institutions and any other applicable federal
or state securities or banking authorities (all such reports and statements are
collectively referred to 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 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 of the Company
(including, in each case, any related notes thereto) delivered to Merchants
whether or not contained in the Company Reports (the "Financial Statements"),
including, but not limited to, any Company Reports filed since the date of this
Agreement and prior to or at the Effective Time, have been prepared in
accordance
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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 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 as and to the extent set forth on the consolidated balance
sheet of the Company and the Subsidiaries as of December 31, 1997, including all
notes thereto (the "Company Balance Sheet"), neither the Company nor any of the
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on a
balance sheet, or in the notes thereto, prepared in accordance with generally
accepted accounting principles, except (i) for liabilities or obligations
incurred in the ordinary course of business since December 31, 1997, that would
not, individually or in the aggregate have a Material Adverse Effect on the
Company or the Subsidiaries, taken as a whole, or (ii) as otherwise reflected in
the reports referred to in Section 2.07(a) hereof.
SECTION 2.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Financial Statements, since December 31, 1997 to the date of this
Agreement, the Company and the Subsidiaries have conducted their businesses only
in the ordinary course and in a manner consistent with past practice and, since
December 31, 1997, there has not been (a) any change in the financial condition,
results of operations or business of the Company or the Subsidiaries having a
Material Adverse Effect on the Company or the Subsidiaries, taken as a whole,
(b) any damage, destruction or loss (whether or not covered by insurance) with
respect to any assets of the Company or the Subsidiaries having a Material
Adverse Effect on the Company or the Subsidiaries, taken as a whole, (c) any
change by the Company or the Subsidiaries in their accounting methods,
principles or practices, except for compliance with applicable new requirements
of the Financial Accounting Standards Board, (d) any revaluation by the Company
or the Subsidiaries of any of their material assets in any material respect, (e)
any entry by the Company or any Subsidiary into any commitment or transactions
material to the Company or the Subsidiaries, taken as a whole, (f) any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of the Company's Common Stock or any redemption, purchase or
other acquisition of any of its securities or any of the securities of any
Subsidiary, or (g) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in compensation
payable or to become payable to any officers or key employees of the Company or
any of the Subsidiaries.
SECTION 2.09. ABSENCE OF LITIGATION. Except as disclosed in the
Company's Disclosure Schedule at Section 2.09, (a) neither the Company nor any
Subsidiary is subject to any continuing order of, or written agreement or
memorandum of understanding with, or continuing material investigation by, any
federal or state banking authority or other governmental entity, or any
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judgment, order, writ, injunction, decree or award of any governmental entity or
arbitrator, including, without limitation, cease-and-desist or other orders of
any bank regulatory authority, (b) there is no claim of any kind, action, suit,
litigation, proceeding, arbitration, investigation, or controversy affecting the
Company or any Subsidiary pending or, to the knowledge of the Company,
threatened, and (c) there are no uncured material violations, or violations with
respect to which material refunds or restitutions may be required, cited in any
compliance report to the Company or any Subsidiary as a result of the
examination by any regulatory authority.
SECTION 2.10. EMPLOYEE BENEFIT PLANS.
(a) The Company Disclosure Schedule at Section 2.10 lists all "employee
pension benefit plans," as such term is defined in section 3(2) of the Employee
Retirement Income Security Act of 1974 (ERISA) without regard to any exemptions
from any requirements thereunder issued by the United States Department of Labor
in regulations or otherwise, maintained, sponsored or contributed to by the
Company or any Subsidiary (the "Pension Plans"). The term "Pension Plan" shall
also include any terminated "employee pension benefit plan" previously
maintained, sponsored or contributed to by the Company or any Subsidiary which,
as of the Effective Time, has not distributed all of its assets in full
satisfaction of accrued benefits and/or obligations.
(b) The Company Disclosure Schedule at Section 2.10 lists all "employee
welfare benefit plans," as defined in ERISA section 3(1) without regard to any
exemptions from any requirements thereunder issued by the United States
Department of Labor in regulations or otherwise, maintained, sponsored or
contributed to by the Company or any Subsidiary (the "Welfare Plans"). The term
"Welfare Plans" shall also include any terminated employee welfare benefit plan
previously maintained, sponsored or contributed to by the Company or any
Subsidiary which, as of the Effective Time, has not distributed all of its
assets and/or satisfied all of its obligations.
(c) The Company has made available to Merchants true and complete
copies of the documents governing each of the Pension Plans and Welfare Plans as
in effect at the Effective Time.
(d) The Company Disclosure Schedule at Section 2.10 lists all plans or
programs to provide fringe benefits to the Company's and Subsidiaries' employees
(other than Pension Plans and Welfare Plans) including, but not limited to
vacation, sick leave, disability, medical, hospitalization, life insurance and
other insurance plans or related benefits (the "Fringe Benefit Plans").
(e) The Company has made available to Merchants true and complete
copies of the documents governing each Fringe Benefit Plan.
(f) The Company has no direct or indirect, formal or informal, plan,
fund or program to change any Pension Plan, Welfare Plan or Fringe Benefit Plan
that would affect any of the Company's or any Subsidiary's employees. Neither
the Company nor any Subsidiary has made a material modification, within the
meaning of ERISA section 102 and the regulations thereunder, to
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any existing Pension Plan, Welfare Plan or Fringe Benefit Plan which is not set
forth in the Pension Plan, Welfare Plan or Fringe Benefit Plan documents
provided to Merchants.
(g) For purposes of this Section 2.10, "Company" shall include the
Company, the Subsidiaries and all members of any controlled group of
corporations (within the meaning of Code section 414(b), relevant Treasury
Regulations and Pension Benefit Guaranty Corporation regulations issued pursuant
to ERISA section 4001), any group of trades or businesses under common control
(within the meaning of Code section 414(c), relevant Treasury Regulations and
Pension Benefit Guaranty Corporation regulations issued pursuant to ERISA
section 4001) and any affiliated service group (within the meaning of Code
section 414(m) and relevant Treasury Regulations and proposed Treasury
Regulations) of which the Company or any Subsidiary is a member.
(h) Neither the Company nor any Subsidiary has ever been obligated to
contribute to any multi-employer plan within the meaning of ERISA section 3(37).
(i) To the Company's knowledge, the Pension Plans, Welfare Plans and
Fringe Benefit Plans and the trusts and other funding vehicles related to the
Pension Plans, Welfare Plans and Fringe Benefit Plans have been administered in
all respects in compliance with the applicable requirements of ERISA, the Code,
the plan documents and all other applicable rules, regulations and laws. The
Pension Plans, Welfare Plans and Fringe Benefit Plans and the trusts or other
funding vehicles related to the Pension Plans, Welfare Plans and Fringe Benefit
Plans meet all applicable requirements, in form and in operation, for favorable
tax treatment under the Code. All required contributions pursuant to the Pension
Plans, Welfare Plans and Fringe Benefit Plans for all periods prior to the
Effective Time have been made or will be made prior to the Effective Time. There
are no pending or, to the Company's knowledge, threatened claims, lawsuits or
arbitrations which have been asserted or instituted against the Pension Plans,
Welfare Plans or Fringe Benefit Plans or any fiduciaries thereof with respect to
their duties to the Pension Plans, Welfare Plans or Fringe Benefit Plans or the
assets of any of the trusts under any Pension Plans, Welfare Plans or Fringe
Benefit Plans. No representations or communications with respect to
participation, eligibility for benefits, vesting, benefit accrual or coverage
under the Pension Plans, Welfare Plans or Fringe Benefit Plans have been made to
the Company's or Subsidiaries employees other than those which are in accordance
with the terms of such Pension Plans, Welfare Plans or Fringe Benefit Plans in
effect immediately prior to the Effective Time.
(j) With respect to any Welfare Plan which is a "group health plan" as
defined in Code section 4980B, the Company or Subsidiary in question has
complied with the continuation coverage requirements of Code section 4980B for
any periods prior to the Effective Time.
(k) The Company has furnished to Merchants copies of all documents
relating to the Pension Plans, Welfare Plans or Fringe Benefit Plans, including,
but not limited to, the following: any service provider agreements, any
investment management agreements, fiduciary insurance policies, fidelity bonds,
rules, regulations or policies of the trustees or any committee thereunder, all
of which are true and complete.
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(1) Since December 31, 1974, no fiduciary of the Pension Plans or
Welfare Plans has engaged in any "prohibited transaction" (as defined in ERISA
section 406 or Code section 4975) nor has any fiduciary breached any fiduciary
responsibility, as described in Part 4 of Title I of ERISA with respect to such
Pension Plans or Welfare Plans.
(m) The Company has no knowledge of the occurrence of any event with
respect to any Pension Plan which could result in a liability of the Company,
any Subsidiary or any member of the Company's controlled group to the Pension
Benefit Guaranty Corporation ("PBGC"), other than the timely payment of premiums
pursuant to section 4007 of ERISA. All required PBGC premiums have been paid for
the periods through the Effective Time.
(n) Except as set forth in the Company's Disclosure Schedule at Section
2.10, no Welfare Plan or Fringe Benefit Plan provides any form of
post-retirement health benefits to retired employees of the Company or any
Subsidiary, other than benefits required to be provided pursuant to Code section
4980B.
SECTION 2.11. EMPLOYMENT CONTRACTS; MATERIAL CONTRACTS. Except as set
forth in the Company Disclosure Schedule at Section 2.11, neither the Company
nor any Subsidiary is a party to or bound by (a) any employment or consulting
contract that is not terminable without penalty by the Company or such
Subsidiary on 60 days' or less notice, (b) any contract or commitment for
capital expenditures in excess of $10,000.00 for any one (1) project, or (c)
contracts or commitments for the purchase of materials or supplies or for the
performance of services over a period of more than 60 days from the date of this
Agreement.
SECTION 2.12. REGISTRATION STATEMENT; PROXY STATEMENT. None of the
information supplied or to be supplied by the Company for inclusion in (a) the
Registration Statement (as defined in Section 6.01), (b) the Proxy Statement/
Prospectus (as defined in Section 6.01), or (c) any other document to be filed
with the Securities and Exchange Commission (the "SEC") or other regulatory
authority in connection with the transactions contemplated hereby, at the
respective times such documents are filed and, in the case of the Registration
Statement, when it becomes effective and at the Effective Time, and with respect
to the Proxy Statement/Prospectus, when mailed, shall be false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading. In the case of the Proxy
Statement/Prospectus or any amendment thereof or supplement thereto, none of
such information at the time of the Company's and Merchants' shareholders
meeting (pursuant to Section 6.02) (the "Meetings") shall be false or misleading
with respect to any material fact or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Meetings.
SECTION 2.13. TITLE TO PROPERTY. The Company Disclosure Schedule at
Section 2.13 correctly identifies all real property owned and leased by the
Company and the Subsidiaries. The Company and each of the Subsidiaries has good
and defensible title to all of their properties and assets, real and personal,
tangible and intangible free and clear of all mortgage liens, and free and
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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 to 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 or the
Subsidiaries, taken as a whole; and all leases pursuant to which the Company or
any Subsidiary leases from others real or personal property including, without
limitation, leases for branch offices 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 any Subsidiary has not taken adequate steps to
prevent such a default from occurring). The Company's and each Subsidiary's
buildings and equipment in regular use have been reasonably maintained and are
in good and serviceable condition, reasonable wear and tear excepted. None of
the buildings, structures or appurtenances owned or leased by the Company or any
Subsidiary for their operation or maintenance as now operated or maintained,
contravenes any zoning ordinances or other administrative regulations (whether
or not permitted because of prior non-conforming use) or violates any
restrictive covenant or any provision of law, the effect of which would
materially interfere with or prevent the continued use of such properties for
the purposes for which they are now being used or would materially and adversely
affect the value thereof.
SECTION 2.14. COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) The term "Company's Property" shall mean any real property and
improvements currently owned, leased, used, operated or occupied by the Company
or any Subsidiary, including properties acquired by foreclosure, properties
which the Bank has a present right to acquire upon foreclosure and which are
owned by customers of the Bank who have received written notification of
default, or properties held or operated in a fiduciary or managerial capacity;
(b) The term "Environmental Claims" shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law or Environmental
Permit;
(c) The term "Environmental Laws" shall mean all federal, state and
local laws including statutes, regulations and other governmental restrictions
and requirements relating to the discharge of air pollutants, water pollutants
or process wastewater or the disposal of solid or hazardous waste or otherwise
relating to the environment or hazardous substances or employee health and
safety.
(d) The term "Environmental Permits" shall mean all permits, approvals,
identification numbers, licenses and other authorizations required under any
applicable Environmental Law.
(e) The term "Hazardous Substances" shall mean all hazardous and toxic
substances, wastes and materials; any pollutants or contaminants (including,
without limitation, petroleum
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products, asbestos and raw materials which include hazardous constituents); and
any other similar substances or materials which are regulated under
Environmental Laws.
(f) The Environmental Permits (if any) are in full force and effect
and, to the Company's knowledge, constitute all permits, licenses, approvals and
consents relating to Environmental Laws or Hazardous Substances required for the
conduct of the Company's and Subsidiaries, businesses and the use of the
Company's Property (as presently conducted and used) in compliance with
Environmental Laws.
(g) The Company and the Subsidiaries have filed all reports, returns
and other filings required to be filed with respect to the Company's Property
under Environmental Laws and the Environmental Permits except where the failure
to do so would not have a material adverse effect on the Company's or
Subsidiaries, businesses or financial condition, taken as a whole.
(h) Except as set forth in the Company's Disclosure Schedule at Section
2.14(h), to the Company's knowledge, the business of the Company and the
Subsidiaries and the Company's Property have been and are being operated by the
Company in accordance with all Environmental Laws and Environmental Permits and
neither the Company nor any of the Subsidiaries has received any written notice
nor does the Company or any of the Subsidiaries have knowledge that the
Company's Property is not in material compliance with all Environmental Laws and
Environmental Permits and no proceeding for the suspension, revocation or
cancellation of any Environmental Permit is pending or, to Company's knowledge,
threatened.
(i) Except as set forth in the Company's Disclosure Schedule at Section
2.14(i), there are no actions pending, or to the Company's knowledge, threatened
against the Company or any of the Subsidiaries (naming the Company or any
Subsidiary), which in any case assert or allege (i) the Company or any
Subsidiary (naming the Company or any Subsidiary) violated any Environmental Law
or Environmental Permit or are in default with respect to any Environmental
Permit or any order, writ, judgment, variance, award or decree of any government
authority; (ii) the Company or any of the Subsidiaries is required to clean up
or take remedial or other response action due to the disposal, discharge or
other release of any Hazardous Substance on the Company's Property or elsewhere;
or (iii) the Company or any of the Subsidiaries is required to contribute to the
cost of any past, present or future cleanup or remedial or other response action
which arises out of or is related to the disposal, discharge or other release of
any Hazardous Substance by the Company, the Subsidiaries or others. The Company,
the Subsidiaries, and the Company's Property are not subject to any judgment,
stipulation, order, decree or agreement arising under Environmental Laws.
(j) Except as set forth in the Company's Disclosure Schedule at Section
2.14(j), with respect to the period during which the Company or any of the
Subsidiaries occupied the Company's Property (i) no Hazardous Substances have
been treated, recycled or disposed of by the Company or any of the Subsidiaries
(intentionally or unintentionally) on, under or at the Company's Property; (ii)
there has been no release or threatened release by the Company or any of the
Subsidiaries of any Hazardous Substance from the Company's Property; (iii) to
the Company's knowledge, there have
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been no activities on the Company's Property which would subject Merchants, the
Subsidiaries, or any subsequent occupier of the Company's Property to damages,
penalties, injunctive relief or cleanup costs under any Environmental Laws
or-common law theory of liability.
SECTION 2.15. ABSENCE OF AGREEMENTS. Neither the Company nor any
Subsidiary is a party to any written 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 any 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 Subsidiary may carry on its business), or in any
manner relates to its capital adequacy, its credit policies or its management
nor has the Company or any Subsidiary 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.
SECTION 2.16. TAXES. The Company and the Subsidiaries have timely filed
all Tax Returns (as defined below) required to be filed by them, and the Company
and the Subsidiaries have timely paid and discharged all 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 the
Company is maintaining reserves adequate for their payment. To the best
knowledge of the Company, 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, (a) 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, (b) customs
duties, imposts, charges, levies or other similar assessments of any kind, and
(c) 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. Neither the IRS nor any other governmental
entity or taxing authority or agency is now asserting, either through audits,
administrative proceedings, court proceedings or otherwise, or, to the best of
the Company's knowledge, threatening to assert against the Company or any
Subsidiary any deficiency or claim for additional Taxes. Neither the Company nor
any Subsidiary has granted any waiver of any statute of limitation with respect
to, or any extension of a period for the assessment of any tax. There are no tax
liens on any assets of the Company or any Subsidiary. Neither the Company nor
any Subsidiary has received a ruling or entered into an agreement with the
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IRS or any other governmental entity or taxing authority or agency that would
have a Material Adverse Effect on the Company or the Subsidiaries, taken as a
whole, after the Effective Time. The accruals and reserves for taxes reflected
in the Company's Balance Sheet are adequate to cover all Taxes accruable by the
Company and the Subsidiaries on a consolidated basis through the date thereof
(including Taxes being contested) in accordance with generally accepted
accounting principles. Except as may be set forth in the Company Disclosure
Schedule at Section 2.16, no agreements relating to allocating or sharing of
Taxes exist between the Company and the Subsidiaries.
SECTION 2.17. INSURANCE. Complete and correct copies of all material
policies of fire, product or other liability, workers' compensation and other
similar forms of insurance owned or held by the Company and the Subsidiaries
have been delivered to Merchants. Subject to expirations and renewals of
insurance policies in the ordinary course of business, all such policies are in
full force and effect, all premiums with respect thereto covering all periods up
to and including the date as of which this representation is being made have
been paid (other-than retrospective premiums which may be payable with respect
to workers' compensation insurance policies), and no notice of cancellation or
termination has been received with respect to any such policy. Such policies are
and shall remain valid, outstanding and enforceable policies, and will not be
terminated prior to the Effective Time. To the best knowledge of the Company,
the insurance policies to which the Company or the Subsidiaries are parties are
sufficient for compliance with all material requirements of law and all material
agreements to which the Company or the Subsidiaries are parties and will be
maintained by the Company and the Subsidiaries until the Effective Time. Neither
the Company nor any Subsidiary has been refused any insurance with respect to
any material assets or operations, nor has coverage been limited in any respect
material to their operations by any insurance carrier to which they have applied
for any such insurance or with which they have carried insurance during the last
five (5) years.
SECTION 2.18. ABSENCE OF ADVERSE AGREEMENTS. Neither the Company nor
any Subsidiary is a party to any agreement or instrument or any judgment, order
or decree or any rule or regulation of any court or other governmental agency or
authority which materially and adversely affects or in the future may have a
Material Adverse Effect on the financial condition, results or operations,
assets, business or prospects of the Company or the Subsidiaries, taken as a
whole.
SECTION 2.19. INTERNAL CONTROLS AND RECORDS. The Company and each
Subsidiary maintain books of account which accurately and validly reflect, in
all material respects, all loans, mortgages, collateral and other business
transactions and maintain accounting controls sufficient to ensure that all such
transactions are (a) in all material respects, executed in accordance with its
management's general or specific authorization, and (b) recorded in conformity
with generally accepted accounting principles. There is no amendment to any
ending agreement, collateral document or security which is not fully reflected
in the books and records of the Company or the Subsidiaries.
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SECTION 2.20. LOANS. Except as disclosed in the Company Disclosure
Schedule at Section 2.20, (a) the Bank is not a party to any written or oral
loan agreement, note or borrowing arrangement which has been classified as
"substandard," "doubtful," "loss," "other loans especially mentioned" or any
comparable classifications by the Company or the Subsidiaries or banking
regulators; (b) neither the Company nor any Subsidiary is a party to any written
or oral loan agreement, note, or borrowing arrangement, including any loan
guaranty, with any director or executive officer of the Company or any
Subsidiary, or any person, corporation or enterprise controlling, controlled by
or under common control with any of the foregoing; or (c) neither the Company
nor any Subsidiary is a party to any written or oral loan agreement, note or
borrowing arrangement in violation of any law, regulation or rule of any
governmental authority and which violation could have a material Adverse Effect
on the Company or the Subsidiaries, taken as a whole.
SECTION 2.21. LABOR MATTERS.
(a) The Company and the Subsidiaries are in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice. (b) There is no unfair labor practice complaint against the
Company or any Subsidiary pending before the National Labor Relations Board; (c)
there is no labor strike, dispute, slowdown, representation campaign or work
stoppage actually pending or threatened against or affecting the Company or any
Subsidiary; (d) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claim therefor has been
asserted against the Company or any Subsidiary; and (e) neither the Company nor
any Subsidiary is experiencing any material work stoppage.
SECTION 2.22. BROKERS. Except as set forth in the Company's Disclosure
Schedule at Section 2.22, 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 or the Subsidiaries.
SECTION 2.23. ACCOUNTING AND TAX MATTERS.
(a) To the best knowledge of the Company, neither the Company nor any
of its affiliates has through the date of this Agreement taken or agreed to take
any action that would prevent Merchants from accounting for the business
combinations to be effected by the Merger as a pooling-of-interests or would
prevent the Merger from qualifying as a reorganization under Section
368(a)(1)(A) of the Code.
(b) To the best knowledge of the Company, there is no plan or intention
on the part of shareholders of the Company who will receive Merchants Common
Stock to sell or otherwise dispose of an amount of Merchants Common Stock to be
received in the Merger which would reduce their ownership of Merchants Common
Stock to a number of shares having in the aggregate a value
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at the time of the Merger of less than fifty percent (50%) of the total value of
the Company's Common Stock outstanding immediately prior to the Merger.
SECTION 2.24. FULL DISCLOSURE. No statement contained in any document,
certificate, or other writing furnished or to be furnished by or at the
direction of the Company to Merchants in, or pursuant to the provisions of, this
Agreement contains or shall contain any untrue statement of a material fact or
omits or shall omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
SECTION 2.25. VOTE REQUIRED. The affirmative vote of a majority of the
votes that holders of the outstanding shares of the Company's Common Stock are
entitled to cast is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MERCHANTS
Except as set forth in the Disclosure Schedule attached hereto (the
"Merchants Disclosure Schedule"), Merchants hereby represents and warrants to
the Company that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION. Merchants is a bank
holding company duly organized and validly existing under the laws of the State
of Wisconsin. Merchants is registered with the Federal Reserve Board as a bank
holding company under the BHCA. Merchants has the requisite corporate power and
authority and is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders (the
"Merchants Approvals") necessary to own, lease and operate its properties and to
carry on its businesses as they are now being conducted, including appropriate
authorizations from the Federal Reserve Board, except where the failure to be so
organized and existing or to have such power, authority and Merchants Approvals
would not, individually or in the aggregate, have a Material Adverse Effect on
Merchants taken as a whole. Merchants has not received any notice of proceedings
relating to the revocation or modification of any such Merchants Approvals.
Merchants is duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of 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 Merchants.
SECTION 3.02. ARTICLES OF INCORPORATION AND BYLAWS. Merchants has
heretofore made available to the Company a complete and correct copy of its
Articles of Incorporation and Bylaws, as amended or restated. Such Articles of
Incorporation and Bylaws are in full force and effect. Merchants is not in
violation of any of the provisions of its Articles of Incorporation or Bylaws.
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SECTION 3.03. CAPITALIZATION. The outstanding capital stock of
Merchants is, and the shares of Merchant's Common Stock to be issued pursuant to
the Merger, when so issued, will be, duly authorized, validly issued, fully paid
and non-assessable, (except as provided in section 180.0622(2)(b) of Wisconsin
Business Corporation Law) fully registered under the Securities Act and have
not, and will not have, been issued in violation of the preemptive rights of any
person.
SECTION 3.04. AUTHORITY. Merchants has have the requisite corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Merchants and the consummation
by Merchants of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Merchants and no
other corporate proceedings on the part of Merchants are necessary to authorize
this Agreement or to consummate the transactions so contemplated hereby (other
than, with respect to the Merger, the approval and adoption of this Agreement by
the holders of a majority of the outstanding shares of Merchants Common Stock in
accordance with Wisconsin law and Merchants' Articles of Incorporation and
Bylaws). This Agreement has been duly and validly executed and delivered by
Merchants and, assuming the due authorization, execution and delivery by the
Company, constitutes the legal, valid and binding obligation of Merchants.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) To the best knowledge of Merchants, the execution and delivery of
this Agreement by Merchants does not, and the performance of this Agreement by
Merchants shall not, (i) conflict with or violate the Articles of Incorporation
or Bylaws of Merchants, (ii) conflict with or violate any laws applicable to
Merchants or by which its properties are 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 or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of
Merchants pursuant to any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Merchants is a party or by which Merchants or its properties are bound or
affected, except for any such breaches, defaults or other occurrences that would
not, individually or in the aggregate, have a material Adverse Effect on
Merchants.
(b) To the best knowledge of Merchants, the execution and delivery of
this Agreement by Merchants does not, and the performance of this Agreement by
Merchants 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 of the Securities
Act, the Exchange Act, Blue Sky Laws, the BHCA, the WBL and the filing and
recordation 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 otherwise prevent Merchants from
performing its obligations under this Agreement, and would not have a Material
Adverse Effect on Merchants.
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SECTION 3.06. COMPLIANCE; PERMITS. To the best knowledge of Merchants,
Merchants is not in conflict with, or in default or violation of (a) any Law
applicable to Merchants or by which its property is bound or affected, or (b)
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Merchants is a
party or by which Merchants or any of its 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 Merchants.
SECTION 3.07. SECURITIES REPORTS; FINANCIAL STATEMENTS.
(a) As of the date of this Agreement, Merchants has made available to
the Company 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 and 1997, respectively,
(ii) Quarterly Reports on Form 10-Q for the periods ended March 31, 1998, June
30, 1998 and September 30, 1998, (iii) all definitive proxy statements relating
to Merchants meetings of shareholders (whether annual or special) held since
December 31, 1993, (iv) all Reports on Form 8-K filed by Merchants with the SEC
since December 31, 1993, (v) all other reports or registration statements filed
by Merchants with the SEC since December 31, 1993, and (vi) all amendments and
supplements to all such reports and registration statements filed by Merchants
with the SEC since December 31, 1993 (collectively, the "Merchants SEC
Reports"). The Merchants' SEC Reports, including all Merchants SEC 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
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 Merchants SEC Reports,
including any 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 Merchants and its 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 as set forth on the consolidated balance sheet of Merchants
and its subsidiaries as of December 31, 1997, including all notes thereto,
neither Merchants nor its subsidiaries have any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with generally accepted accounting principles, except for
liabilities or obligations incurred in the ordinary course of business since
December 31, 1997, that would not have a Material Adverse Effect on Merchants.
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SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Merchants SEC Reports filed prior to the date of this Agreement, since
December 31, 1997, to the date of this Agreement, Merchants and its subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since December 31, 1997, there has not been
(a) any change in the financial condition, results of operations or business of
Merchants or its subsidiaries having a Material Adverse Effect on Merchants or
its subsidiaries, taken as a whole, (b) any damage, destruction or loss (whether
or not covered by insurance) with respect to any assets of Merchants or its
subsidiaries having a Material Adverse Effect on Merchants or its subsidiaries,
taken as a whole, (c) any change by Merchants in its accounting methods,
principles or practices, (d) any revaluation by Merchants of any of its material
assets in any material respect, or (e) to the date of this Agreement, any entry
by Merchants or any of its subsidiaries into any commitment or transactions
material to Merchants or its subsidiaries, taken as a whole.
SECTION 3.09. ABSENCE OF LITIGATION. Except as disclosed in the
Merchants Disclosure Schedule at Section 3.09 and in the Merchants SEC Reports
filed prior to the date of this Agreement, there is no claim, action, suit,
litigation, proceeding, arbitration, investigation, or controversy of any kind
affecting Merchants or. any of Merchants' subsidiaries pending or, to the
knowledge of Merchants, threatened, except for matters which will not have, and
cannot reasonably be expected to have, a material Adverse Effect on Merchants or
its subsidiaries taken as a whole, and there are no uncured material violations,
or violations with respect to which material refunds or restitutions may be
required, cited in any compliance report to Merchant or any of Merchants'
subsidiaries as a result of an examination by any bank regulatory authority.
SECTION 3.10. REGISTRATION STATEMENT; PROXY STATEMENT. None of the
information supplied or to be supplied by Merchants for inclusion in (a) the
Registration Statement (as defined in Section 6.01) (b) the Proxy Statement/
Prospectus (as defined in Section 6.01), or (c) any other document to be filed
with the SEC or other regulatory authority in connection with the transactions
contemplated hereby, at the respective time such documents are filed and, in the
case of the Registration Statement, when it becomes effective and at the
Effective Time, and with respect to the Proxy Statement/Prospectus, when mailed,
shall be false or misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements therein not
misleading. In the case of the Proxy Statement/Prospectus or any amendment
thereof or supplement thereto, none of such information at the time of the
Meeting (as provided for in Section 6.02) shall be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Meeting. All documents filed with the SEC or
other regulatory authority by Merchants in connection with the Merger shall
comply as to form in all material respects with the provisions of applicable
law.
SECTION 3.11. ABSENCE OF AGREEMENTS. Neither Merchants nor any of its
subsidiaries is a party to any written 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
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(including any contract containing covenants which limit the ability of
Merchants or its subsidiaries to compete in any line of business or with any
person or which involve any restriction of the geographical area in which, or
any method by which, Merchants or its subsidiaries may carry on their business
(other than as may be required by Law or applicable regulatory authorities)), or
in any manner relates to their capital adequacy, their credit policies or
management, except for those the existence of which has been disclosed to the
Company prior to the date of this Agreement, nor has Merchants or any of its
subsidiaries 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.
SECTION 3.12. TAXES. Merchants and its subsidiaries have timely filed
all Tax Returns required to be filed by them, and Merchants and its subsidiaries
have timely paid and discharged all Taxes 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 Merchants is maintaining reserves adequate for their
payment. To the best knowledge of Merchants, the liability for Taxes set forth
on each such Tax Return adequately reflects the Taxes required to be reflected
on such Tax Return. Neither the IRS nor any other governmental entity or taxing
authority or agency is now asserting, either through audits or administrative
proceedings, court proceedings or otherwise, or, to the best of Merchants'
knowledge, threatening to assert against Merchants or any of its subsidiaries
any deficiency or claim for additional Taxes. Neither Merchants nor any of its
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. There are no
tax liens on any assets of Merchants or any of its subsidiaries. Neither
Merchants nor any of its subsidiaries has received a ruling or entered into an
agreement with the IRS or any other governmental entity or taxing authority or
agency that would have a Material Adverse Effect on Merchants or its
subsidiaries, taken as a whole, after the Effective Time. The accruals and
reserves for taxes reflected in the Merchants Balance Sheet are adequate to
cover all Taxes accruable through the date thereof (including Taxes being
contested) in accordance with generally accepted accounting principles. Except
as set forth in Merchants Disclosure Schedule, at Section 3.12, no agreements
relating to allocating or sharing of Taxes exist among Merchants and its
subsidiaries and no tax indemnities given by Merchants or its subsidiaries in
connection with a sale of stock or assets remain in effect. Except as disclosed
in the Merchants Disclosure Schedule at Section 3.12, neither Merchants nor any
of its subsidiaries is required to include in income either (i) any amount in
respect of any adjustment under Section 481 of the Code, or (ii) any installment
sale gain. Neither Merchants nor any of its subsidiaries has made an election
under Section 341(f) of the Code.
SECTION 3.13. 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 Merchants.
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SECTION 3.14. ACCOUNTING AND TAX MATTERS. To the best knowledge of
Merchants, neither Merchants nor any of its affiliates has through the date of
this Agreement taken or agreed to take any action that would prevent Merchants
from accounting for the business combinations to be effected by the Merger as a
pooling-of-interests or would prevent the Merger from qualifying as a
reorganization under Section 368(a)(1)(A) of the Code.
SECTION 3.15. FULL DISCLOSURE. No statement contained in any document,
certificate, or other writing furnished or to be furnished by or at the
direction of Merchants to the Company in, or pursuant to the provisions of, this
Agreement contains or shall contain any untrue statement of a material fact or
omits or shall omit to state any material fact necessary, in the light of the
circumstances under which it has been made, in order to make the statements
herein or therein not misleading.
SECTION 3.16. VOTE REQUIRED. The approval by the holders of a majority
of the votes entitled to be cast by the holders of Merchants Common Stock to
approve the Merger (including the issuance of shares of Merchants Common Stock
in connection therewith) is the only vote of the holders of any class or series
of the capital stock of Merchants required for any of the transactions
contemplated by this Agreement.
ARTICLE IV
COVENANTS OF THE COMPANY
SECTION 4.01. AFFIRMATIVE COVENANTS. The Company hereby covenants and
agrees with Merchants that prior to the Effective Time, unless the prior written
consent of Merchants shall have been obtained and except as otherwise
contemplated herein, it will and/or it will cause each Subsidiary to:
(a) operate its business only in the usual, regular and 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 reasonable efforts to maintain and keep its properties in as
good repair and condition as at present, ordinary wear and tear excepted;
(d) use 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;
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(e) 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) purchase and sell securities in accordance with the guidelines set
forth on the Schedule at Section 4.01;
(g) with respect to the Bank, maintain as of the date on which all of
the conditions set forth in Article VII have been satisfied or waived and
thereafter a loan loss reserve of not less than 1.2 percent of loans;
(h) comply with and perform in all material respects all obligations
and duties imposed upon it by all applicable laws;
(i) obtain an independent audit of its financial statements for the
year ended December 31, 1998;
(j) fully expense as of the date on which all conditions set forth in
Article VII have been satisfied or waived all expenses (including fees) incurred
in connection with the consummation of the transaction contemplated hereby.
SECTION 4.02. NEGATIVE COVENANTS. Except as specifically contemplated
by this Agreement, from the date of this Agreement until the Effective Time, the
Company shall not do, or permit the Subsidiaries to do, without the prior
written consent of Merchants, any of the following:
(a) (i) grant any increase in compensation or grant any bonuses
(incentive or special) to its employees as a class, or to its officers or
directors, (ii) effect any change in retirement benefits to any class of
employees or officers (unless any such change shall be required by applicable
law) which would increase its retirement benefit liabilities, (iii) adopt, enter
into, amend or modify any employee benefit plan or make any adjustments pursuant
to any employee benefit plan, or (iv) enter into or amend any employment,
severance or similar agreements or arrangements with any directors or officers,
other than as is consistent with the normal severance policies of the Company
and the Subsidiaries in effect on the date of this Agreement;
(b) except as set forth on Schedule 4.02, declare or pay any dividend
on, or make any other distribution in respect of, its outstanding shares of
capital stock;
(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 assets or stock of any corporation, bank or
other business; (iv) liquidate, sell, dispose of, or encumber any assets or
acquire
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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 its
capital stock (including shares held in treasury) or any rights, warrants or
options to acquire, any such shares;
(e) initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Competing Transaction (as such term is defined below),
or negotiate with any person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any Subsidiary to take any such action, and the
Company shall promptly notify Merchants orally and in writing of all of the
relevant details relating to all inquiries and proposals which it may receive
relating to any of such matters; provided, however, that nothing contained in
this subsection (e) shall prohibit the Board of Directors of the Company from
furnishing or permitting any of its officers, directors, employees, investment
bankers, financial advisors, attorneys, accountants or other representative to
furnish information to any party that requests information as to the Company and
the Subsidiaries if (i) the Board of Directors of the Company, after
consultation with and based upon the written advice of independent legal
counsel, determines in good faith that such action is required for the Board of
Directors of the Company to comply with its fiduciary duties to shareholders
imposed by law and (ii) prior to furnishing such information to such party, the
Company receives from such party an executed confidentiality agreement in
reasonably customary form. For purposes of this Agreement, "Competing
Transaction" shall mean any of the following involving the Company or any
Subsidiary: (i) any merger, consolidation, share exchange, business combination,
or other similar transactions; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of ten percent or more of assets in a single
transaction or series of transactions, excluding from the calculation of the
percentage hereunder any such transactions undertaken in the ordinary course of
business and consistent with past practice; (iii) any sale of ten percent or
more of shares of capital stock (or securities convertible or exchangeable into
or otherwise evidencing, or any agreement or instrument evidencing, the right to
acquire capital stock); (iv) any tender offer or exchange offer for ten percent
or more of outstanding shares of capital stock; (v) any solicitation of proxies
in opposition to approval by the Company's shareholders of the Merger; (vi) the
filing of an acquisition application (or the giving of acquisition notice)
whether in draft or final form under the BHCA or the Change in Bank Control Act
with respect to the Company or the subsidiaries; (vii) any person shall have
acquired beneficial ownership or the right to acquire beneficial ownership of,
or any "group" (as such term is defined under Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of, 10%
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or more of the then outstanding shares of capital stock; or (viii) any public
announcement of a proposal, plan or intention to do any of the foregoing;
(f) propose or adopt any amendments to the corporate charter or Bylaws
in any way materially adverse to Merchants;
(g) except in their fiduciary capacities for the account of customers,
purchase any shares of Merchants Common Stock;
(h) change any of its methods of accounting in effect at December 31,
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, 1997, except as may be
required by law or generally accepted accounting principles;
(i) change any lending, investment, liability management or other
material policies concerning the business or operations of the Company or any
Subsidiary in any material respect; organize any new subsidiaries or enter into
any new non-banking line of business whether or not permissible under applicable
Federal or state law, or make any material changes in its operations;
(j) (i) incur or assume any material obligation or liability, including
without limitation any obligation for borrowed money, whether or not evidenced
by a note, bond, debenture or similar instrument and whether or not being
incurred to reduce other existing liabilities, or make any loan (not including
any loan renewal of a loan not then classified as "substandard," "doubtful,"
"loss," "other loans especially mentioned" or any comparable classifications by
the Company, the Subsidiaries or banking regulators) or investment (excluding
U.S. Treasury Securities) in an amount greater than $100,000, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingent or otherwise) for the obligations of any other person or entity;
(iii) mortgage, license, pledge or grant a security interest in any of its
material assets or allow to exist any material lien thereon; except (A) for
liabilities and obligations (including corporate debt issuances) incurred in the
ordinary course of business consistent with past practices and in amounts not
material to the Company or the Subsidiaries; and (B) as may be required under
existing agreements to which the Company or any Subsidiary is a party; (iv)
acquire assets (including equipment) or securities in excess of $25,000 in the
aggregate (excluding loans to customers and investments permitted in (i) above;
(v) enter into any other contract or agreement involving annual payments by the
Company or any Subsidiary or the other party or parties thereto in excess of
$20,000; (vi) pay, discharge, or satisfy any debts or claims not in the ordinary
course of business and consistent with past practices and in no event with a
value in excess of $20,000 individually; (vii) settle any claim, action, suit,
litigation, proceeding, arbitration, investigation or controversy of any kind,
for any amount in excess of $25,000 or in any manner which would restrict in any
material respect the operations or business of the Company or the Subsidiaries;
(viii) purchase any new financial product or instrument which involves entering
into a contract with a term of six months or longer; or (ix) 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 Company or the Subsidiaries, taken as a
whole; or
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(k) agree in writing or otherwise to do any of the foregoing.
SECTION 4.03. INTENTIONALLY LEFT BLANK.
SECTION 4.04. ACCESS AND INFORMATION.
(a) Upon reasonable notice, and without unreasonable disruption to the
business carried on by the Company or the Subsidiaries, the Company shall (and
shall cause the Subsidiaries to) afford to Merchants' officers, employees,
accountants, legal counsel and other representatives 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
Subsidiary to) furnish promptly to Merchants (i) a copy of each Company Report
filed by it (to the extent permitted by Law) 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; (ii) the monthly
consolidated financial statements of the Company and the Subsidiaries; (iii) the
audited consolidated financial statements of the Company and the Subsidiaries
for the year ended December 31, 1998; (iv) a summary of any action taken by the
Board of Directors, or any committee thereof, of the Company and the
Subsidiaries; (v) all other information concerning the business, properties and
personnel of the Company or the Subsidiaries as Merchants may reasonably
request.
(b) Any information provided to Merchants by the Company or the
Subsidiaries, whether prior to or subsequent to the date of this Agreement,
shall be kept confidential by the representatives of Merchants (and shall be
used by them only in connection with this Agreement and the transactions
contemplated hereby) except to the extent that (i) it was already known to such
representatives when received, (ii) it hereafter becomes lawfully obtainable
from other sources, or (iii) it is required to be disclosed by Merchants in any
document required to be filed with any government agency. Upon any termination
of this Agreement pursuant to Section 8 hereof, Merchants agrees to promptly
return all information and documents that it has obtained from the Company in
connection herewith.
SECTION 4.05. AFFILIATES; ACCOUNTING AND TAX TREATMENT. Within thirty
(30) days after the date of this Agreement, (a) the Company shall deliver to
Merchants a letter identifying all persons who are then "affiliates" of the
Company, including, without limitation, all directors and executive officers of
the Company for purposes of Rule 145 promulgated under the Securities Act and
(b). the Company shall advise the persons identified in such letter of the
resale restrictions imposed by applicable securities laws and required to cause
the Merger to qualify for 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 4.05.
The Company shall use reasonable efforts to obtain from any person who becomes
an affiliate of the Company after the Company's delivery of the letter referred
to above, and on or prior to the Effective Time, a written agreement
substantially in the form attached hereto as Exhibit 4.05 as soon as practicable
after attaining such status. The Company will use its best efforts to cause the
Merger to
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qualify for pooling-of-interests accounting treatment and as a reorganization
under Section 368(a)(1) (A) of the Code.
SECTION 4.06. EXPENSES.
(a) Except as provided in Section 8.02, below, all Expenses (as
described below) incurred by Merchants and the Company shall be borne solely and
entirely by the party which has incurred the same, except that the parties shall
share equally in the expense of printing and filing the Registration Statement
and the Proxy Statement/Prospectus and all SEC and other regulatory filing 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, the
solicitation of shareholder approvals and all other matters related to the
closing of the transactions contemplated hereby.
SECTION 4.07. DELIVERY OF SHAREHOLDER LIST. The Company shall arrange
to have its transfer agent deliver to Merchants 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 shareholders of the Company, their holdings of stock
as of the latest practicable date, and such other shareholder information as
Merchants may reasonably request.
ARTICLE V
COVENANTS OF MERCHANTS
SECTION 5.01. AFFIRMATIVE COVENANTS. Merchants 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:
(a) maintain its corporate existence in good standing and maintain all
books and records in accordance with accounting principles and practices as
utilized in Merchants' financial Statements applied on a consistent basis;
(b) conduct its business 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 Merchants or its subsidiaries, taken as a whole; and
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(c) will, to the best of its ability and in all material respects, (i)
comply with applicable Blue Sky Laws and regulations, the Securities Act, and
the Exchange Act, and (ii) remain qualified under the Exchange Act and the rules
and regulations thereunder.
SECTION 5.02. ACCESS AND INFORMATION.
(a) After the date of this Agreement and prior to the Effective Time,
upon reasonable notice, Merchants shall (and shall cause each of its
subsidiaries to) furnish promptly to the Company (i) a copy of each Merchants
SEC Report filed by it or received by it (to the extent permitted by law) 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 Merchants or its subsidiaries as the Company may
reasonably request.
(b) Any information provided to the Company by Merchants whether prior
to or subsequent to the date of this Agreement shall be kept confidential by the
representatives of the Company (and shall be used by them only in connection
with this Agreement and the transactions contemplated hereby) except to the
extent that (i) it was already known to such representatives when received, (ii)
it hereafter becomes lawfully obtainable from other sources, or (iii) it is
required to be disclosed by the Company in any document required to be filed
with the Company or any government authority or agency.
SECTION 5.03. ACCOUNTING AND TAX TREATMENT. Merchants will use its 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.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. REGISTRATION STATEMENT. As promptly as practicable after
the execution of this Agreement, Merchants shall prepare and file a registration
statement on Form S-4 (the registration statement together with the amendments
thereto are defined as the "Registration Statement" and the prospectus and proxy
materials contained therein are defined as the "Proxy Statement/Prospectus")
with the SEC covering the Merchants Common Stock to be issued in the Merger
(subject to the immediately following sentence), with a view toward permitting
the Registration Statement to become effective as soon as reasonably
practicable. Merchants does not undertake to file post-effective amendments to
Form S-4 or to file a separate registration statement to register the sale of
Merchants Common Stock by affiliates of the Company pursuant to Rule 145
promulgated under the Securities Act. The Company will furnish to Merchants all
information concerning the Company and the Subsidiaries required to be set forth
in the Registration Statement
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and Merchants will provide the Company and its counsel the opportunity to review
and approve such information as set forth in the Registration Statement and
Proxy Statement/Prospectus. Merchants and the Company will each render to the
other its full cooperation in preparing, filing, prosecuting the filing of, and
amending the Registration Statement such that it comports at all times with the
requirements of the Securities Act and the Exchange Act. Specifically, but
without limitation, each will promptly advise the other if at any time before
the Effective Time any information provided by it for inclusion in the
Registration Statement appears to have been, or shall have become, incorrect or
incomplete and will furnish the information necessary to correct such
misstatement or omissions. As promptly as practicable after the effective date
of the Registration Statement, the Company and Merchants will mail to their
respective shareholders (a) the Proxy Statement/Prospectus, and (b) as promptly
as practicable after approval thereof by Merchants and the Company, such other
supplementary proxy materials as may be necessary to make the Proxy
Statement/Prospectus comply with the requirements of the Securities Act and the
Exchange Act. Except as provided above and except with the prior written consent
of Merchants, the Company will not mail or otherwise furnish or publish to
shareholders of the Company any proxy solicitation material or other material
relating to the Merger that constitute a "prospectus" within the meaning of the
Securities Act. Merchants shall also take any action required to be taken under
any applicable Blue Sky Law in connection with the issuance of the shares of
Merchants Common Stock to be issued as set forth in this Agreement and the
Company and the Subsidiaries shall furnish all information concerning the
Company and the Subsidiaries, and the holders of the Company's Common Stock and
other assistance as Merchants may reasonably request in connection with such
action.
SECTION 6.02. MEETINGS OF THE SHAREHOLDERS. Each of Merchants and the
Company shall: (a) cause a shareholders meeting to be duly called and held as
soon as practicable to consider and vote upon the Merger and any related matters
in accordance with the applicable provision of applicable law, (b) submit this
Agreement to the shareholders together with a unanimous recommendation for
approval by the respective Board of Directors of Merchants and the Company, (c)
solicit the approval thereof by the shareholders of Merchants and the Company by
mailing or delivering to each shareholder a combined Prospectus/Proxy Statement,
and (d) use their best efforts to obtain the approval and adoption of the Merger
by the requisite percentage of the respective shareholders.
SECTION 6.03. APPROPRIATE ACTION; CONSENTS; FILINGS. The Company and
Merchants shall use all reasonable efforts to (a) 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; (b) 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) in connection with the authorization, execution and delivery of this
Agreement and the consummation by them of the transactions contemplated hereby
and thereby, including, without limitation, the Merger; and (c) make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (i) the Securities Act
and the Exchange Act and the rules and regulations thereunder, and any other
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applicable federal and state securities law, (ii) any applicable federal or
state banking laws and (iii) any other applicable law; provided that Merchants
and the Company 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 Company and Merchants shall furnish all information required or
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 6.04. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Merchants, and Merchants shall give prompt notice to the
Company, of (a) 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 (b) any
failure of the Company or Merchants, 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 6.04 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.05. PUBLIC ANNOUNCEMENTS. Merchants and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation and without
mutual consent of both parties, except as may be required by law.
SECTION 6.06. ENVIRONMENTAL MATTERS. In the event Merchants or its
environmental consultants discover or determine the existence of any
environmental condition (including, without limitation, a spill, discharge or
contamination) the result of which may require investigative or remedial action
pursuant to any federal, state, or local law, statute or regulation or may be
the basis for the assertion of any third-party claims, including the claims of
governmental entitles, Merchants shall promptly notify the Company thereof and
the Company shall, at its sole cost and expense, proceed with due diligence to
take reasonably appropriate action in response thereto.
SECTION 6.07. BREAK-UP FEE.
(a) Provided that Merchants has not breached in any material respect
its obligations under this Agreement, as a condition and inducement to
Merchants' willingness to enter into and perform this Agreement, the Company
shall pay Merchants a fee ("Break-Up Fee") equal to the lesser of 1.5% of the
value of the Exchange Fund (as defined in Section 1.07(a) of this Agreement) or
$400,000. The Break-Up Fee shall be payable by the Company to Merchants only if:
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(i) (A) The Board of Directors of the Company (1) shall have
withdrawn, modified or amended in any respect its approval or
recommendation of this Agreement or the transactions contemplated
thereby, or (2) shall not at the appropriate time have recommended or
shall have withdrawn, modified or amended in any respect its
recommendation that its shareholders vote in favor of this Agreement,
or (3) shall not have included such recommendation in the Proxy
Statement/Prospectus or (B) the Board of Directors of the Company shall
have resolved to do any of the foregoing; or
(ii) the Company violates Section 4.02(e) hereof.
(b) Provided that the Company has not breached in any material respect
its obligations under this Agreement, as a condition to the Company's
willingness to enter into and perform this Agreement, Merchants shall pay to the
Company the Break-Up Fee in the amount set forth in paragraph (a) above if the
Board of Directors of Merchants shall have taken action or resolved to take such
action as described in subparagraph 6.07(a)(i) above.
(c) The Break-Up Fee shall be paid within three (3) days subsequent to
a termination of this Agreement and shall be considered liquidated damages and
shall be payable in addition to any other damages, fees or expenses to which
either party may be entitled pursuant to the terms of this Agreement or remedies
at law or equity.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.01. 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
Merchants or the Company, threatened by the SEC. Merchants shall have received
all other federal or state securities permits and other authorizations necessary
to issue Merchants Common Stock in exchange for the Company Common Stock and to
consummate the Merger.
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(b) Shareholder Approval. This Agreement and the Merger shall
have been approved and adopted by the respective requisite vote of the
shareholders of the Company and Merchants.
(c) Regulatory Approvals. The Agreement and the transactions
contemplated therein shall have been approved by the Federal Reserve Board and
the Department of Financial Institutions, which approval shall not contain any
conditions which are not reasonably satisfactory to Merchants or the Company,
all conditions required to be satisfied prior to the Effective Time imposed by
the terms of such approvals shall have been satisfied and all waiting periods
relating to such approvals 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 temporary, preliminary or permanent) which is in effect restricting,
preventing or prohibiting consummation of the transactions contemplated by this
Agreement.
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF MERCHANTS. The
obligation of Merchants to effect the Merger are also subject to the following
conditions:
(a) Representations and Warranties. Each of the representations
and warranties of the Company contained in this Agreement shall be complete and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects) as of the Effective Time as
though made at the Effective Time with the same force and effect as if made on
and as of the Effective Time. Merchants shall have received a certificate of the
Chief Executive Officer of the Company to that 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 Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made by the Company 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 Company.
(d) No Challenge. There shall not be pending any action,
proceeding or investigation before any court or administrative agency or by any
governmental agency or any other person (i) challenging or seeking material
damages in connection with the Merger or the conversion of the Company Common
Stock into Merchants Common Stock pursuant to the Merger, or (ii) seeking to
restrain, prohibit or limit the exercise of full rights of ownership or
operation by Merchants or its
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subsidiaries of all or any portion of the business or assets of the Company or
any of the Subsidiaries, which in either case is reasonably likely to have a
Material Adverse Effect on either the Company or the Subsidiaries, taken as a
whole, or Merchants or its subsidiaries, taken as a whole.
(e) Opinion of Counsel. Merchants shall have received from Michael,
Best & Friedrich or other independent counsel for the Company reasonably
satisfactory to Merchants, an opinion dated the Effective Time, in form and
substance reasonably satisfactory to Merchants, covering the matters set forth
in Exhibit 7.02(e) hereto, which opinion shall be based on such assumptions and
containing such qualifications and limitations as are appropriate and reasonably
satisfactory to Merchants.
(f) Tax Opinion. An opinion of independent counsel for Merchants, to
the effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that
Merchants and the Company will each be a party to that reorganization within the
meaning of Section 368(b) of the Code, dated on or about the date that is two
business days prior to the date the Proxy Statement/Prospectus is first mailed
to shareholders of the Company, shall have been delivered and shall not have
been withdrawn or modified in any material respect.
(g) No Material Adverse Change. Since the date of this Agreement (i) no
event shall have occurred which has a Material Adverse Effect on the Company or
its subsidiaries, and (ii) no condition, event, fact, circumstances or other
occurrence shall have occurred that may reasonably be expected to have or result
in such a Material Adverse Effect on the Company or its subsidiaries.
(h) Pooling Opinions. Merchants shall have received an opinion from
Ernst & Young LLP to the effect that the Merger qualifies for
pooling-of-interests accounting treatment if consummated in accordance with this
Agreement,
(i) Affiliate Agreements. Merchants shall have received from each
person who is identified in the affiliate letter as an "affiliate" of the
Company a signed affiliate agreement in the form attached hereto as Exhibit
4.05.
(j) Burdensome Condition. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable, to the Merger, by any federal or state governmental entity which, in
connection with the grant of any regulatory approval, imposes any condition or
restriction upon the Company or Merchants or their respective subsidiaries (or
the Surviving Corporation or its subsidiaries after the Effective Time),
including, without limitation, any requirement to raise additional capital,
which would so materially adversely impact the economic or business benefits of
the transactions contemplated by this Agreement as to render inadvisable the
consummation of the Merger.
(k) Fractional Shares; Dissenters. The aggregate of (i) the fractional
share interests in Merchants Common Stock to be paid in cash pursuant to Section
1.07 of this Agreement and (ii) the
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shares of Merchants Common Stock that would be issuable by virtue of the Merger
with respect to shares of the Company's Common Stock outstanding on the record
date for the meeting of the Company's shareholders to consider the Merger that
will not be converted into Merchants Common Stock due, directly or indirectly,
to the exercise of dissenters' rights, if available under Wisconsin law, shall
not be more than 10% of the maximum aggregate number of shares of Merchants
Common Stock which could be issued as a result of the Merger.
(l) Voting Agreement. Concurrently with the execution and delivery of
this Agreement, Merchants and certain shareholders of the Company shall have
executed and delivered the Voting Agreement in the form of Exhibit 7.02(l).
(m) Comfort Letters. Merchants shall have received from Ernst & Young
LLP "comfort letters" dated as of the date of mailing of the Joint Proxy
Statement and the Closing Date, covering matters customary in transactions such
as the Merger and in form and substance reasonably satisfactory to Merchants.
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to effect the Merger is also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Merchants contained in this Agreement shall be complete and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a statement of materiality, such
statement shall be true and correct in all respects) as of the Effective Time as
though made on and as of the Effective Time with the same force and effect as if
made on and as of the Effective Time. The Company shall have received a
certificate of the President of Merchants to that effect.
(b) Agreements and Covenants. Merchants 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 material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made by Merchants 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 Merchants.
(d) Opinion of Counsel. The Company shall have received from Davis &
Kuelthau, s.c. or other independent counsel for Merchants reasonably
satisfactory to the Company, an opinion dated the Effective Time, in form and
substance reasonably satisfactory to the Company, covering the matters set forth
in Exhibit 7.03(d), which opinions shall be based on such assumptions and
contains such qualifications and limitations as are appropriate and reasonably
satisfactory to the Company.
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(e) Tax Opinion. An opinion of independent counsel for Merchants,
to the effect that the Merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code, and that
Merchants and the Company will each be a party to that reorganization within the
meaning of Section 368(b) of the Code, dated on or about the date that is two
business days prior to the date the Proxy/Statement/Prospectus is first mailed
to shareholders of the Company, shall have been delivered and shall not have
been withdrawn or modified in any material respect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION.
(a) This Agreement may be terminated at any time prior to the
Effective Time. whether before or after approval of the matters presented in
connection with the Merger by the shareholders of the Company or Merchants:
(i) by mutual written consent of Merchants and the Company;
(ii) by Merchants 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 the Company, on the one hand, or
Merchants, on the other hand, respectively, set forth in this Agreement, or (B)
if any representation of warranty of the Company, on the one hand, or Merchants,
on the other hand, respectively, 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 10 business days following receipt by the
nonterminating party of notice of such breach or other condition, provided,
however, this Agreement may not be terminated pursuant to this clause (ii) by
the breaching party or party making any representation or warranty which shall
have become untrue in any material respect.
(iii) by either Merchants or the Company if any permanent
injunction preventing the consummation of the Merger shall have become final and
nonappealable;
(iv) by either Merchants or the Company if the merger shall
not have been consummated before December 31, 1999, for a reason other than the
failure of the terminating party to comply with its obligations under this
Agreement.
(v) by either Merchants or the Company if the Federal Reserve
Board or the Department of Financial Institutions has denied approval of the
Merger and neither Merchants nor
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the Company has, within thirty (30) days after the entry of such order denying
approval, filed a petition seeking review of such order as provided by
applicable law;
(vi) by either Merchants or the Company if any approval of the
shareholders of Merchants or the Company 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 shareholders or at any adjournment
thereof.
(b) In the event of termination and abandonment by any party as
provided above, written notice shall forthwith be given to other party, which
notice shall specifically describe the basis for such termination.
SECTION 8.02. EFFECT OF TERMINATION.
(a) If the merger is not consummated as the result of termination of
this Agreement caused otherwise than by breach of a party hereto, the Company
and Merchants each shall pay its own Expense (as defined in Section 4.06 above)
and this Agreement shall immediately terminate, except as set forth in Section
9.01 hereof, and neither the Company nor Merchants shall have any liability
under this Agreement for damages or otherwise.
(b) If termination of this Agreement shall have been caused by breach
of this Agreement by any party hereto, then, in addition to other remedies at
law or equity for breach of this Agreement, the party so found to have breached
this Agreement shall promptly (but not later than five (5) business days after
receipt of notice from the non-breaching party) pay the non-breaching party for
its documented out-of-pocket expenses and fees incurred in connection with or
related to the Merger.
The foregoing subsections (a) and (b) of this Section 8.02 are in
addition to and shall not limit the obligations of the parties pursuant to
Section 6.07 of this Agreement.
SECTION 8.03. 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 Company and Merchants, no amendment may
be made which would change the amount or type of consideration into which each
Share of Company 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 8.04. WAIVER. At any time prior to the Effective Time, any
party 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
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contained herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, 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
shall survive the Effective Time indefinitely and those set forth in Sections
4.04(b), 4.06, 5.02(b), 8.02 and Article IX hereof shall survive termination
indefinitely.
SECTION 9.02. DISCLOSURE SCHEDULES. The schedules and information set
forth in the Disclosure Schedules specifically refer to the Section (and
paragraph, if applicable) of this Agreement to which such schedule and
information is responsive. The Disclosure schedules shall not vary, change or
alter the literal meaning of the representations and warranties of the parties
contained in this Agreement, other than creating exceptions thereto which are
directly responsive to the language of the representations and warranties
contained in this Agreement.
SECTION 9.03. NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following address (or at such other address for
a party as shall be specified by like changes of address) and shall be effective
upon receipt:
(a) If to Merchants:
Merchants & Manufacturers Bancorporation, Inc.
14100 West National Avenue
New Berlin, WI 53151
Telecopier: (414) 827-5614
Attention: Michael Murry
With a copy to:
Davis & Kuelthau, S.C.
111 East Kilbourn Avenue
Milwaukee, WI 53202
Telecopier: (414) 276-9369
Attention: Erich Mildenberg
(b) If to Company:
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Pyramid Bancorp., Inc.
101 Falls Road
Grafton, WI 53024
Telecopier: (414)
Attention: Thomas Sheehan
With a copy to:
Michael, Best & Friedrich
100 East Wisconsin Avenue, Suite 3300
Milwaukee, WI 53202
Telecopier: (414) 277-0656
Attention: Frank J. Pelisek
SECTION 9.04. 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 the Company (either alone, or through or together with
any subsidiary) has, directly or indirectly, an interest of 5% or more;
(b) "beneficial owner" with respect to any Shares, means a person who
shall be deemed to be the beneficial owner of such Shares (i) which such person
or any of its affiliates or associates beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates (as
such term defined in Rule 12b-2 of the Exchange Act) has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warranties or options, or otherwise, or (B) the right to vote
pursuant to any agreement , arrangement or understanding, (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purposes of acquiring, holding, voting or disposing of any
Shares or (iv) pursuant to Section 13(d) of the Exchange Act and any rules or
regulations promulgated thereunder;
(c) 'business day" means any day other than a day on which banks in
Wisconsin are required or authorized to be closed;
(d) "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; and
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(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the "Exchange Act).
SECTION 9.05. 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 9.06. 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 9.07. ENTIRE AGREEMENT. This Agreement together with the
Disclosure Schedules and Exhibits hereto constitutes the entire agreement of the
parties and supersedes 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 9.08. ASSIGNMENT. This agreement shall not be assigned by
operation of law or otherwise, except that Merchants may assign all or any of
its rights hereunder to any affiliate provided that no such assignment shall
relieve the assigning party of its obligations hereunder, and the assignee
agrees to be bound by the terms and conditions of this Agreement including the
requirement of conversion and delivery of shares of Merchants Common Stock
pursuant to Section 1.06 hereof.
SECTION 9.09. PARTIES IN INTEREST. This Agreement 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.
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 the applicable principles of
conflicts of law.
SECTION 9.11. COUNTERPARTS. This Agreement may be executed in one or
more 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.
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IN WITNESS WHEREOF, Merchants and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
MERCHANTS & MANUFACTURERS
BANCORPORATION, INC.
By: Michael J. Murry
-----------------------------------------
Name: Michael J. Murry
Title: Chairman of the Board of Directors
PYRAMID BANCORP., INC.
By: Thomas Sheehan
-----------------------------------------
Name: Thomas Sheehan
Title: President and Chief Executive
Officer
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EXHIBIT A-1
FIRST AMENDMENT TO AGREEMENT
AND PLAN OF MERGER
This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the "First
Amendment") is made as of this 10th day of June, 1999 between Merchants and
Manufacturers Bancorporation, Inc. ("Merchants") and Pyramid Bancorp., Inc.
("Company") and Merchants Merger Corp. ("Merger Corp.").
RECITALS
A. Merchants and the Company entered into an Agreement and Plan of
Merger dated March 9, 1999 (the "Agreement").
B. Merchants and the Company deem it to be in the interests of their
respective organization and its shareholders to merge the Company into Merger
Corp., a newly organized, wholly-owned subsidiary of Merchants.
C. Merchants and the Company desire to amend the Agreement in
accordance with the terms of this First Amendment to effect the intent and
purpose of Recital B.
AGREEMENTS
In consideration of the recitals and the mutual covenants contained
herein and in the Agreement, the parties agree as follows:
1. The first paragraph of the Agreement is hereby amended to read as
follows:
AGREEMENT AND PLAN OF MERGER dated as of March 9, 1999 (the
"Agreement"), among Merchants and Manufacturers Bancorporation, Inc., a
Wisconsin corporation ("Merchants"), Merchants Merger Corporation, a
Wisconsin corporation ("Merger Corp.") and Pyramid Bancorp., Inc., a
Wisconsin corporation ("Company").
2. The third recital of the Agreement is hereby amended to read as
follows:
WHEREAS, THE Company upon the terms and subject to the
conditions of this Agreement and in accordance with the Wisconsin
Business Corporation Act ("Wisconsin Law"), will merge with and into
Merger Corp., a wholly owned subsidiary of Merchants (the "Merger");
and
3. the fifth recital of the Agreement is hereby amended to read as
follows:
WHEREAS, THE BOARD OF Directors of the Company believes that
the Merger with Merger Corp. will benefit the shareholders and
employees of the Company and Subsidiaries; and
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4. The seventh recital of the Agreement is hereby amended to read as
follows:
WHEREAS, THE Board of Directors of the Company has, subject to
its fiduciary duties under applicable law, resolved to recommend
approval of the Merger by the shareholders of the Company; and
5. The eighth recital of the Agreement is hereby amended to read as
follows:
WHEREAS, Merger Corp. and the Company intend to effect a
merger that qualifies for pooling-of-interests accounting treatment and
as a tax-free reorganization under the Internal Revenue Code of 1986,
as amended (the "Code"); and
6. The NOW, THEREFORE clause of the Agreement is hereby amended to read
as follows:
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained and intending to be
legally bound hereby, Merchants, Merger Corp. AND THE Company hereby
agree as follows:
7. Section 1.01 of the Agreement is hereby amended to read as follows:
SECTION 1.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with
Wisconsin Law, at the Effective- Time (as defined in Section 1.02) the
Company shall be merged with and into Merger Corp. As a result of the
Merger, the separate corporate existence of the Company shall cease and
Merger Corp. shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
8. Section 1.02 (iii) of the Agreement is hereby amended to read as
follows:
(iii) The date of the shareholders' meeting of the Company to
vote upon the Merger pursuant to Section 6.02; or
9. Section 1.03 of the Agreement is hereby amended to read as follows:
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions
of Wisconsin Law. 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
Merger Corp. and the Company shall vest in the Surviving corporation,
and all debts, liabilities and duties of Merger Corp. and the Company
shall become the debts, liabilities and duties of the Surviving
Corporation.
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10. Section 1.04 of the Agreement is hereby amended to read as follows:
SECTION 1.04. ARTICLES OF INCORPORATION AND BYLAWS. At the
Effective Time, the Articles of Incorporation and the Bylaws of Merger
Corp., as in effect immediately prior to the Effective Time, shall be
the Articles of Incorporation and the Bylaws of the Surviving
Corporation.
11. Section 1.05 of the Agreement is hereby amended to read as follows:
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merger
Corp. immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation, and the officers of Merger Corp. immediately
prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors
are duly elected or appointed and qualified.
12. Section 1.06 of the Agreement is hereby amended to read as follows:
SECTION 1.06. CONVERSION OF SECURITIES. At the Effective Time,
by virtue of the Merger and without any action on the part of
Merchants, Merger Corp., the Company, or the holders of any of the
following securities:
13. Section 1.07(g) of the Agreement is hereby amended to read as
follows:
(g) Liability. Neither Merchants, Merger Corp., nor the
Company shall be liable to any holder of Shares for any such Shares (or
dividends or distributions with respect thereto) or cash delivered to a
public official pursuant to any abandoned property, escheat or similar
law.
14. The first paragraph under Article II of the Agreement is hereby
amended to read as follows:
Except as set forth in the Disclosure Schedule attached hereto
(the "Company Disclosure schedule"), the Company hereby represents and
warrants to Merchants and Merger Corp. that:
15. Section 3.01 of the Agreement is hereby amended to read as follows:
SECTION 3.01. ORGANIZATION AND QUALIFICATION. Merchants is a
bank holding company duly organized and validly existing under the laws
of the State of Wisconsin. Merchants is registered with the Federal
Reserve Board as a bank holding company under the BHCA. Merchants and
Merger Corp. have the requisite corporate power and authority and are
in possession of all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals and
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orders (the "Merchants Approvals") necessary to own, lease and operate
their properties and to carry on their businesses as they are now being
conducted, including appropriate authorizations from the Federal
Reserve Board, except where the failure to be so organized and existing
or to have such power, authority and Merchants Approvals would not,
individually or in the aggregate, have a Material Adverse Effect on
Merchants or Merger Corp. taken as a whole. Merchants has not received
any notice of proceedings relating to the revocation or modification of
any such Merchants Approvals. Merchants and Merger Corp. are duly
qualified or licensed as foreign corporations to do business, and are
in good standing, in each jurisdiction where the character of
properties owned, leased or operated by them or the nature of their
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 Merchants or Merger Corp.
16. Section 3.02 of the Agreement is hereby amended to read as follows:
SECTION 3.02. ARTICLES OF INCORPORATION AND BYLAWS. Merchants
and Meger Corp. have heretofore made available to the Company a
complete and correct copy of their Articles of Incorporation and
Bylaws, as amended or restated. Such Articles of Incorporation and
Bylaws are in full force and effect. Merchants or Merger Corp. is not
in violation of any of the provisions of its Articles of Incorporation
or Bylaws.
17. Section 3.04 of the Agreement is hereby amended to read as follows:
SECTION 3.04. AUTHORITY. Merchants and Merger Corp. have the
requisite corporate power and authority to execute and deliver this
Agreement and to perform their obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of
this Agreement by Merchants and Merger Corp. and the consummation by
Merchants and Merger Corp. of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on
the part of Merchants and Merger Corp. and no other corporate
proceedings on the part of Merchants and Merger Corp. are necessary to
authorize this Agreement or to consummate the transactions so
contemplated hereby (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of
the outstanding shares of Merger Corp. Common Stock in accordance with
Wisconsin law and Merger Corp.'s Articles of Incorporation and Bylaws).
This Agreement has been duly and validly executed and delivered by
Merchants and Merger Corp. and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and
binding obligation of Merchants and Merger Corp.
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18. Section 3.05(a) of the Agreement is hereby amended to read as
follows:
(a) To the best knowledge of Merchants, the execution and
delivery of this Agreement by Merchants and Merger Corp. does not, and
the performance of this Agreement by Merchants and Merger Corp. shall
not, (i) conflict with or violate the Articles of Incorporation or
Bylaws of Merchants or Merger Corp., (ii) conflict with or violate any
laws applicable to Merchants or Merger Corp. or by which their
properties are 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 or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or
assets of Merchants or Merger Corp. pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Merchants or
Merger Corp. is a party or by which Merchants or Merger Corp. or their
properties are bound or affected, except for any such breaches,
defaults or other occurrences that would not, individually or in the
aggregate, have a material Adverse Effect on Merchants or Merger Corp.
19. Section 3.05(b) of the Agreement is hereby amended to read as
follows:
(b) To the best knowledge of Merchants, the execution and
delivery of this Agreement by Merchants and Merger Corp. does not, and
the performance of this Agreement by Merchants and Merger Corp. 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
of the Securities Act, the Exchange Act, Blue Sky Laws, the BHCA, the
WBL and the filing and recordation 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 otherwise prevent Merchants or Merger Corp. from
performing its obligations under this Agreement, and would not have a
Material Adverse Effect on Merchants or Merger Corp.
20. Section 3.06 of the Agreement is hereby amended to read as follows:
SECTION 3.06. COMPLIANCE; PERMITS. To the best knowledge of
Merchants, neither Merchants nor Merger Corp. is in conflict with, or
in default or violation of (a) any Law applicable to Merchants or
Merger Corp. or by which their property is bound or affected, or (b)
any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
Merchants or Merger Corp. is a party or by which Merchants or Merger
Corp. or any of their 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 Merchants or Merger
Corp.
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21. Section 3.16 of the Agreement and Merchants Disclosure Schedule are
hereby deleted.
22. Section 4.01 of the Agreement is hereby amended to read as follows:
SECTION 4.01. AFFIRMATIVE COVENANTS. The Company hereby
covenants and agrees with Merchants and Merger Corp. that prior to the
Effective Time, unless the prior written consent of Merchants shall
have been obtained and except as otherwise contemplated herein, it will
and/or it will cause each Subsidiary to:
23. Section 5.01 of the Agreement is hereby amended to read as follows:
SECTION 5.01. AFFIRMATIVE COVENANTS. Merchants 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 will
cause Merger Corp. to:
24. Section 6.01 of the Agreement is hereby amended to read as follows:
SECTION 6.01. REGISTRATION STATEMENT. As promptly as
practicable after the execution of this Agreement, Merchants shall
prepare and file a registration statement on Form S-4 (the registration
statement together with the amendments thereto are defined as the
"Registration Statement" and the prospectus and proxy materials
contained therein are defined as the "Proxy Statement/Prospectus") with
the SEC covering the Merchants Common Stock to be issued in the Merger
(subject to the immediately following sentence), with a view toward
permitting the Registration Statement to become effective as soon as
reasonably practicable. Merchants does not undertake to file
post-effective amendments to Form S-4 or to file a separate
registration statement to register the sale of Merchants Common Stock
by affiliates of the Company pursuant to Rule 145 promulgated under the
Securities Act. The Company will furnish to Merchants all information
concerning the Company and the Subsidiaries required to be set forth in
the Registration Statement and Merchants will provide the Company and
its counsel the opportunity to review and approve such information as
set forth in the Registration Statement and Proxy Statement/Prospectus.
Merchants and the Company will each render to the other its full
cooperation in preparing, filing, prosecuting the filing of, and
amending the Registration Statement such that it comports at all times
with the requirements of the Securities Act and the Exchange Act.
Specifically, but without limitation, each will promptly advise the
other if at any time before the Effective Time any information provided
by it for inclusion in the Registration Statement appears to have been,
or shall have become, incorrect or incomplete and will furnish the
information necessary to correct such misstatement or omissions. As
promptly as practicable after the effective date of the Registration
Statement, the Company will mail to its shareholders (a) the Proxy
Statement/Prospectus, and (b) as promptly as practicable after approval
thereof by Merchants and the Company, such other supplementary
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proxy materials as may be necessary to make the Proxy
Statement/Prospectus comply with the requirements of the Securities Act
and the Exchange Act. Except as provided above and except with the
prior written consent of Merchants, the Company will not mail or
otherwise furnish or publish to shareholders of the Company any proxy
solicitation material or other material relating to the Merger that
constitute a "prospectus" within the meaning of the Securities Act.
Merchants shall also take any action required to be taken under any
applicable Blue Sky Law in connection with the issuance of the shares
of Merchants Common Stock to be issued as set forth in this Agreement
and the Company and the Subsidiaries shall furnish all information
concerning the Company and the Subsidiaries, and the holders of the
Company's Common Stock and other assistance as Merchants may reasonably
request in connection with such action.
25. Section 6.02 of the Agreement is hereby amended to read as follows:
SECTION 6.02. MEETING OF SHAREHOLDERS. The Company and its
officers and directors shall: (a) cause a shareholders meeting to be
duly called and held as soon as practicable to consider and vote upon
the Merger and any related matters in accordance with the applicable
provision of applicable law, (b) submit this Agreement to the
shareholders together with a unanimous recommendation for approval by
the Board of Directors of the Company, (c) solicit the approval thereof
by the shareholders of the Company by mailing or delivering to each
shareholder a combined Prospectus/Proxy Statement, and (d) use their
best efforts to obtain the approval and adoption of the Merger by the
requisite percentage of the Company's shareholders.
26. Section 6.03 of the Agreement is hereby amended to read as follows:
SECTION 6.03. APPROPRIATE ACTION; CONSENTS; FILINGS. The
Company and Merchants and Merger Corp. shall use all reasonable efforts
to (a) 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; (b) 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) in connection with the authorization, execution
and delivery of this Agreement and the consummation by them of the
transactions contemplated hereby and thereby, including, without
limitation, the Merger; and (c) make all necessary filings, and
thereafter make any other required submissions, with respect to this
Agreement and the Merger required under (i) the Securities Act and the
Exchange Act and the rules and regulations thereunder, and any other
applicable federal and state securities law, (ii) any applicable
federal or state banking laws and (iii) any other applicable law;
provided that Merchants and the Company shall cooperate with each other
in connection with the making of all such filings, including providing
copies of all such documents to
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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 Company and Merchants shall
furnish all information required or 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.
27. Section 7.01(b) of the Agreement is hereby amended to read as
follows:
(b) Shareholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the
shareholders of the Company and Merger Corp.
28. Section 7.02(f) of the Agreement is hereby amended to read as
follows:
(f) Tax Opinion. An opinion of independent counsel for
Merchants, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that Merchants, Merger Corp. and the Company
will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, dated on or about the date that is two
business days prior to the date the Proxy Statement/Prospectus is first
mailed to shareholders of the Company, shall have been delivered and
shall not have been withdrawn or modified in any material respect.
29. Section 7.02(m) of the Agreement is hereby amended to read as
follows:
(m) Comfort Letters. Merchants shall have received from Ernst
& Young LLP "comfort letters" dated as of the date of mailing of the
Proxy Statement/Prospectus and the Closing Date, covering matters
customary in transactions such as the Merger and in form and substance
reasonably satisfactory to Merchants.
30. Section 7.03(b) of the Agreement is hereby amended to read as
follows:
(b) Agreements and Covenants. Merchants and Merger Corp. 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 them on or prior to the Effective Time.
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31. Section 7.03(c) of the Agreement is hereby amended to read as
follows:
(c) Consents Obtained. All material consents, waivers,
approvals, authorizations or orders required to be obtained, and all
filings required to be made by Merchants and Merger Corp. 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 Merchants.
32. Section 7.03(e) of the Agreement is hereby amended to read as
follows:
(e) Tax Opinion. An opinion of independent counsel for
Merchants, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that Merchants, Merger Corp. and the Company
will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, dated on or about the date that is two
business days prior to the date the Proxy/Statement/Prospectus is first
mailed to shareholders of the Company, shall have been delivered and
shall not have been withdrawn or modified in any material respect.
33. Section 8.01(a) of the Agreement is hereby amended to read as
follows:
(a) This Agreement may be terminated at any time prior to the
Effective Time. whether before or after approval of the matters
presented in connection with the Merger by the shareholders of the
Company:
34. Section 8.01(a)(vi) of the Agreement is hereby amended to read as
follows:
(vi) by either Merchants or the Company if the approval of
the shareholders of the Company 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 shareholders or at any
adjournment thereof.
35. Section 8.03 of the Agreement is hereby amended to read as follows:
SECTION 8.03. 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
Company, no amendment may be made which would change the amount or type
of consideration into which each Share of Company 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.
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36. Section 9.03(a) of the Agreement is hereby amended to read as
follows:
(a) If to Merchants or Merger Corp.:
Merchants & Manufacturers Bancorporation, Inc.
14100 West National Avenue
New Berlin, WI 53151
Telecopier: (414) 827-5614
Attention: Michael Murry
With a copy to:
Davis & Kuelthau, S.C.
111 East Kilbourn Avenue
Milwaukee, WI 53202
Telecopier: (414) 276-9369
Attention: Erich Mildenberg
37. The execution clause of the Agreement is hereby amended by adding
Merger Corp. as a signatory.
38. All other provisions of the Agreement remain in full force and
effect.
MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
By: Michael J. Murry
-------------------------------------------
Name: Michael J. Murry
Title: Chairman of the Board of Directors
MERCHANTS MERGER CORP.
By: Michael J. Murry
-------------------------------------------
Name: Michael J. Murry
Title: President and Chief Executive
Officer
PYRAMID BANCORP., INC.
By: Thomas Sheehan
-------------------------------------------
Name: Thomas Sheehan
Title: President and Chief Executive
Officer
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IN WITNESS WHEREOF, Merger Corp. has caused this Agreement to be
executed as of the 10th day of June, 1999 by its duly authorized officer.
MERCHANTS MERGER CORP.
By: /s/ Michael J. Murry
-------------------------------------------
Name: Michael J. Murry
Title: President and Chief Executive
Officer
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EXHIBIT B
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement"), dated as of March 9, 1999,
among the undersigned shareholders (the "Shareholders") of PYRAMID BANCORP.,
INC., a Wisconsin corporation (the "Company"), and MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC., a Wisconsin corporation ("Merchants")
RECITALS
The Shareholders, the Company and Merchants acknowledge the following:
A. Concurrent with the execution of this Agreement, the Company and
Merchants have entered into an Agreement and Plan of Merger (the "Merger
Agreement"), providing for the business combination transaction contemplated
therein pursuant to which the Company will merge with and into Merchants
pursuant to the terms and conditions of the Merger Agreement ("Merger").
B. Upon consummation of the Merger, the Shareholders will receive
shares of Merchants Common Stock for each share of Company Common Stock, par
value $1.00 per share (the "Company Common Stock"), owned by them.
C. The Shareholders own the shares of Company Common Stock set forth
opposite such Shareholder's respective names on Exhibit A hereto (such shares
set forth on Exhibit A, and together with all shares of Company Common Stock
subsequently acquired by any Shareholder during the term of this Agreement,
being referred to as the "Shares").
D. In order to induce Merchants to enter into the Merger Agreement and
in consideration of the substantial expenses incurred and to be incurred by
Merchants in connection therewith, the Shareholders have agreed to enter into
and perform this Voting Agreement.
AGREEMENTS
In consideration of the Recitals and the mutual agreements which
follow, Shareholders, the Company and Merchants agree as follows:
1. Agreement to Vote Shares. Each of the Shareholders shall vote or
cause to be voted, or express a written consent with respect to, all of such
Shareholder's Shares (a) in favor of adoption and approval of the Merger
Agreement and the Merger at every meeting of the shareholders of the Company at
which such matters are considered and at every adjournment thereof and in
connection with every proposal to take action by written consent with respect
thereto and (b) against any proposal for a Competing Transaction (as such term
is defined in the Merger Agreement) at every meeting of the shareholders of the
Company at which such matters are considered and at every adjournment thereof
and in connection with every proposal to take action by written consent with
respect thereto; provided, however, that the obligations under this paragraph
1 of those Shareholders
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<PAGE> 122
who are also directors of the Company are subject to any action such
Shareholder/directors, after consultation with and based upon the written advice
of their independent legal counsel, determine, in good faith, is required to
comply with their respective fiduciary duties to shareholders imposed by law. As
of the date hereof, such Shareholder/directors (a) intend to recommend approval
of the Merger Agreement and Merger to the shareholders of the Company and (b)
are aware of no facts or circumstances existing as of the date hereof that could
cause or reasonably be expected to cause any such Shareholder/director to change
such recommendation.
2. No Voting Trusts. Each of the Shareholders agrees that such
Shareholder will not, nor will such Shareholder permit any entity under such
Shareholder's control to, deposit any of such Shareholder's Shares in a voting
trust or subject any of their Shares to any agreement, arrangement or
understanding with respect to the voting of such Shares inconsistent with this
Agreement.
3. Limitation on Sales. During the term of this Agreement, each
Shareholder agrees not to sell, assign, transfer or dispose of any such
Shareholder's Shares. Notwithstanding the foregoing, any Shareholder may, during
the term of this Agreement, make gifts of Shares to the charitable organization
of his or her choice or to members of his or her immediate family, provided any
such charitable organization or family member agrees in writing to be bound to
the terms of this Agreement.
4. Purchase Right. Subject to the terms of this paragraph 4, the
Shareholders hereby grant to Merchants the exclusive right ("Purchase Rights")
to purchase any or all of such Shareholders' Shares for a price of $250 per
share, payable in cash. The exercise of the Purchase Rights by Merchants, with
respect to any amount of Shares that exceeds 5% of the outstanding voting stock
of the Company is subject to the approval of the Board of Governors of the
Federal Reserve System and any other necessary regulatory approvals. The
Purchase Rights are exercisable at any time prior to the earlier of the
Effective Time, as defined in the Merger Agreement, or the termination of the
Merger Agreement and after (a) a material breach by the Company of the Merger
Agreement; (b) a breach by a Shareholder of this Agreement; or (c) any similar
events or circumstances that lead Merchants reasonably to believe that the
Company is likely to materially breach the Merger Agreement.
5. Shareholders' Representations. Each Shareholder severally represents
that: (a) subject to the terms of paragraph 1, such Shareholder has the complete
and unrestricted power and unqualified right to enter into and perform the terms
of this Agreement; (b) this Agreement constitutes a valid and binding agreement
with respect to such Shareholder, enforceable against such Shareholder in
accordance with its terms; and (c) such Shareholder owns the number of Shares
indicated opposite such Shareholder' s name on Exhibit A hereto, has the sole
and unrestricted voting power with respect to such Shares and such Shares are
all of the Shares directly or indirectly held by such Shareholder.
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6. Specific Performance and Remedies. The parties hereto acknowledge
that it will be impossible to measure in money the damage to the other
party(ies) if a party hereto fails to comply with the obligations imposed by
this Agreement and that, in the event of such failure, the other party(ies) will
not have an adequate remedy at law or in damages. Accordingly, each party hereto
agrees that injunctive relief or other equitable remedy, in addition to remedies
at law or in damages, is the appropriate remedy for any such failure. No party
will oppose the granting of such relief on the basis that the other party(ies)
have an adequate remedy at law. Each party hereto agrees that it will not seek,
and agrees o waive any requirement for, the securing or posting of a bond in
connection with any other party's seeking or obtaining such equitable relief. In
addition to all other rights or remedies which any party hereto may have against
any other party hereto who defaults in the performance of such party's
obligations under the Agreement, such defaulting party shall be liable to the
nondefaulting party for all litigation costs and attorneys' fees incurred by the
nondefaulting party(ies) in connection with the enforcement of any of the
nondefaulting party's rights or remedies against the defaulting party.
7. Term of the Agreement; Termination. The term of this Agreement shall
commence on the date hereof and such term and this Agreement shall terminate
upon the earlier to occur of (a) the Effective Time (as defined in the Merger
Agreement) and (b) the date on which the Merger Agreement is terminated in
accordance with its terms. Upon such termination, no party shall have any
further obligations or liabilities hereunder; provided, that such termination
shall not relieve any party from liability for any breach of this Agreement
prior to such termination.
8. Entire Agreement. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by all parties hereto. No waiver of any provisions
hereof by any party shall be deemed a waiver of any other provisions hereof by
any such party, nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.
9. Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission and on the next business day when sent by Federal
Express, Express Mail or other reputable overnight courier service to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Merchants:
Merchants and Manufacturers Bancorporation, Inc.
14100 West National Avenue
New Berlin, WI 53151
Telecopier: (414) 827-5614
Attention: Michael Murry
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With a copy to:
Davis & Kuelthau, S.C.
111 E. Kilbourn Avenue
Milwaukee, WI 53202
Telecopier: (414) 276-9369
Attention: Erich Mildenberg
If to a Shareholder, to the address or telecopy number set forth for
such Shareholder on the signature page hereof:
With a copy to:
Michael, Best & Friedrich
100 East Wisconsin Avenue
Suite 3300
Milwaukee, WI 53202
Telecopier: (414) 277-0656
Attention: Frank J. Pelisek
10. Miscellaneous.
(a) This Agreement shall be deemed a contract made under, and
for all purposes shall be construed in accordance with, the laws of the State of
Wisconsin, without reference to its conflicts of law principles.
(b) If any provision of this Agreement or the application of
such provision to any person or circumstances shall be held invalid or
unenforceable by a court of competent jurisdiction, this Agreement shall be
construed with the invalid or unenforceable provision deleted and the remainder
of this Agreement shall not be affected.
(c) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(d) All Section headings herein are for convenience of
reference only and are not part of this Agreement, and no construction or
reference shall be derived therefrom.
(e) In the event any Shareholder acquires any additional
Shares during the term of this Agreement, then such Shareholder agrees that the
provisions of this Agreement shall apply to such additional Shares.
(f) This Agreement shall be binding upon and inure to the
benefit of Merchants and its successors, and each Shareholder and Shareholder's
spouse and their respective executors, personal representatives, administrators,
heirs, legatees, guardians and other legal representatives.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
By: Michael J. Murry
---------------------------
Its: CHAIRMAN
--------------------------
SHAREHOLDERS:
/s/ Thomas J. Sheehan /s/ James Kacmarcik
- ------------------------------- -----------------------------------
Name: Thomas J. Sheehan Name: James Kacmarcik
Address: 1964 W. Acorn Street Address: N31 W7515 Cedar Pointe Ct.
Grafton, WI 53024 Cedarburg, WI 53012
/s/ Jerome T. Sarnowski /s/ Richard A. Kranitz
- ------------------------------- -----------------------------------
Name: Jerome T. Sarnowski Name: Richard A. Kranitz
Address: W73 N740 Locust Avenue Address: 1221 13th Avenue
Cedarburg, WI 53012 Grafton, WI 53024
/s/ Thomas N. Holton /s/ Richard L. Belling
- ----------------------------- -----------------------------------
Name: Thomas N. Holton Name: Richard L. Belling
Address: 389 Horns Corners Road Address: 100 Friendship Road
Cedarburg, WI 53012 Saukville, WI 53080
/s/ Thomas N. Holton, Pres. /s/ Bernice Sheehan
- ----------------------------- -----------------------------------
Name: Holton Brothers Name: Bernice Sheehan
By: Thomas N. Holton, Pres. Address: 1964 W. Acorn Drive
Address: Grafton, WI 53024 Grafton, WI 53024
/s/ Mary J. Kranitz /s/ Mary E. Belling
- ----------------------------- -----------------------------------
Name: Mary J. Kranitz Name: Mary E. Belling
Address: 1221 13th Ave. Address: 100 Friendship Road
Grafton, WI 53024 Saukville, WI 53080
B-5
<PAGE> 126
EXHIBIT A
<TABLE>
<CAPTION>
Shareholder Name Number of Shares Owned
---------------- ----------------------
<S> <C>
Thomas J. and Bernice Sheehan 5,351
1964 W. Acorn Street
Grafton, WI 53024
Jerome T. or Caecilia K. Sarnowski 1,050
W73 N740 Locust Avenue
Cedarburg, WI 53012
Thomas N. Holton/ Holton Bros. Inc. 5,446
389 Horns Corners Road
Cedarburg, WI 53012
James Kacmarcik 305
N31 W7515 Cedar Pointe Ct.
Cedarburg, WI 53012
Richard A. and Mary J. Kranitz 300
1221 13th Avenue
Grafton, WI 53024
Richard L. and Mary E. Belling 860
100 Friendship Road
Saukville, WI 53080
</TABLE>
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<PAGE> 127
EXHIBIT C
[MARSHALL FINANCIAL COUNSELING LLC LETTERHEAD]
1999
Board of Directors
Pyramid Bancorp, Inc.
101 Falls Road
Grafton, WI 53024
Gentlemen:
Pyramid Bancorp, Inc. ("Pyramid") will enter into an Agreement and Plan of
Merger (the "Agreement") with Merchants & Manufacturers Bancorp ("Merchants").
Pursuant to the Agreement, at the Effective Time (as defined in the Agreement),
Pyramid shall be merged with and into a wholly owned subsidiary of Merchants
and such subsidiary shall continue as the surviving corporation (the "Merger").
Pursuant to the Agreement, each share of common stock of Pyramid issued and
outstanding immediately prior to the Effective Time (as defined in the
Agreement) shall be converted into the right to receive (9) nine shares of
Merchants common stock (the "Consideration") provided, however, that if the
Daily Average Price (as defined in the Agreement) is less than $36 per share or
greater than $44 per share, then Merchants and Pyramid will make a good faith
effort to promptly renegotiate the ratio at which Merchants common stock would
be exchanged for Pyramid common stock.
You have requested our opinion as to the fairness, from a financial point of
view, of the Consideration to the holders of Pyramid's common stock.
Marshall Financial Consulting LLC ("Marshall"), as part of its investment
banking business, is engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes.
In conducting our investigation and analysis and arriving at our opinion
herein, we have reviewed such information and taken into account such financial
and economic factors, as we have deemed relevant under the circumstances. In
that connection, we have, among other things: (i) reviewed certain internal
information, primarily financial in nature, including projections, concerning
the business and operations of Pyramid and Merchants furnished to us for
purposes of our analysis, as well as publicly available information including
but not limited to Pyramid's and Merchant's recent filings with the regulatory
authorities; (ii) reviewed a draft of the Agreement; (iii) compared the
historical market prices and trading activity of Merchants' Common Stock with
those of certain other publicly traded companies we deemed relevant; (iv)
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Pyramid Bancorp, Inc.
, 1999
Page 2
compared the financial position and operating results of Pyramid and Merchants
with those of other publicly traded companies we deemed relevant; (v) compared
the proposed financial terms of the Merger with the financial terms of certain
other business combinations involving banking institutions we deemed relevant;
and (vi) reviewed certain potential pro forma effects of the Merger on
Merchants. We have held discussions with members of Pyramid's and Merchants'
respective senior management concerning Pyramids' and Merchants' historical and
current financial condition and operating results, as well as the future
prospects of Pyramid and Merchants, respectively. We have not been requested to,
and did not, solicit third party indications of interest in acquiring all or any
part of Pyramid. We have also considered such other information, financial
studies, analysis and investigations and financial, economic and market criteria
which we deemed relevant for the preparation of this opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of all of the financial and other information that was publicly
available or provided to us by or on behalf of Pyramid and Merchants and have
not been engaged to independently verify any such information. We have assumed,
with your consent, (i) that all material assets and liabilities (contingent or
otherwise, known or unknown) of Pyramid and Merchants are as set forth in their
respective financial statements; (ii) the Merger will be accounted for under the
pooling of interests method of accounting; (iii) the Merger will be consummated
in accordance with the terms of the Agreement without any amendment thereto and
without waiver of any condition; (iv) the prospective cost savings and revenue
enhancements contemplated by management of both companies following the Merger
will be realized; and (v) all shareholder and required regulatory approvals will
be obtained in a timely manner. We have also assumed that the financial
forecasts examined by us were reasonably prepared on bases reflecting the best
available estimates and good faith judgments of Pyramid's and Merchants',
respective senior Management as to future performance of Pyramid and Merchants,
respectively. In conducting our review, we have not undertaken nor obtained an
independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of Pyramid and Merchants nor have we made a physical
inspection of the properties or facilities of Pyramid or Merchants. Our opinion
necessarily is based upon economic, monetary and market conditions as they exist
and can be evaluated on the date hereof, and does not predict or take into
account any changes which may occur, or information which may become available,
after the date hereof. Furthermore, we express no opinion as to the price or
trading range at which Merchants' common stock will trade following the date
hereof.
Our opinion has been prepared at the request and for the information of the
Board of Directors of Pyramid, and shall not be used for any other purpose or
disclosed to any other party without the prior written consent of Marshall.
This opinion does not address the relative merits of the Merger and any other
potential transactions or business strategies considered by Pyramid's Board of
Directors, and does not constitute a recommendation to any shareholder of
Pyramid as to how
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Pyramid Bancorp, Inc.
, 1999
Page 3
any such shareholder should vote with respect to the Merger. Marshall will
receive a fee for rendering this opinion. In the past, individuals involved in
examinations leading to this opinion have provided investment banking and
financial advisory services to Pyramid for which they received customary
compensation.
Based upon and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Consideration is fair, from a financial point of view, to the
holders of Pyramid common stock.
Very truly yours,
MARSHALL FINANCIAL CONSULTING LLC
Robert Marshall Leonhardt
Managing Director
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<PAGE> 130
EXHIBIT D
SUBCHAPTER XIII DISSENTERS' RIGHTS
180.1301 DEFINITIONS.
In ss.180.1301 to 180.1331:
(1) "Beneficial shareholder" means a person who is a beneficial owner of
shares held by a nominee as the shareholder.
(1m) "Business combination" has the meaning given in 180.1130 (3).
(2) "Corporation" means the issuer corporation or, if the corporate action
giving rise to dissenters' rights under s. 180.1302 is a merger or share
exchange that has been effectuated, the surviving domestic corporation or
foreign corporation of the merger or the acquiring domestic corporation or
foreign corporation of the share exchange.
(3) "Dissenter" means a shareholder or beneficial shareholder who is entitled
to dissent from corporate action under s. 180.1302 and who exercises that right
when and in the manner required by ss. 180.1320 to 180.1328.
(4) "Fair Value", with respect to a dissenter's shares other than in a
business combination, means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. "Fair value", with respect to a dissenter's
shares in a business combination, means market value, as defined in s. 180.1130
(9)(a) 1. to 4.
(5) "Interest" means interest from the effectuation date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all of the circumstances.
(6) "Issuer corporation" means a domestic corporation that is the issuer of
the shares held by a dissenter before the corporate action.
History: 1989a. 303; 1991 a. 16.
180.1302 RIGHT TO DISSENT.
(1) Except as provided in sub.(4) and s. 180.1008(3), a shareholder or
beneficial shareholder may dissent from, and obtain payment of the fair value of
his or her shares in the event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the issuer corporation is a
party if any of the following applies:
1. Shareholder approval is required for the merger by s. 180.1103 or by the
articles of incorporation.
2. The issuer corporation is a subsidiary that is merged with its parent under
s. 180.1104.
(b) Consummation of a plan of share exchange if the issuer corporation's
shares will be acquired, and the shareholder or the shareholder holding shares
on behalf of the beneficial shareholder is entitled to vote on the plan.
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(c) Consummation of a sale or exchange of all, or substantially all, of the
property of the issuer corporation other than in the usual and regular course
of business, including a sale in dissolution, but not including any of the
following:
1. A sale pursuant to court order.
2. A sale for cash pursuant to a plan by which all or substantially all of the
net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale.
(d) Experts as provided in sub. (2), any other corporate action taken pursuant
to a shareholder vote to the extent that the articles of incorporation, bylaws
or a resolution of the board of directors provides that the voting or nonvoting
shareholder or beneficial shareholder may dissent and obtain payment for his or
her shares.
(2) Except as provided in sub. (4) and s. 180.1008 (3), the articles of
incorporation may allow a shareholder or beneficial shareholder to dissent from
an amendment of the articles of incorporation and obtain payment of the fair
value of his or her shares if the amendment materially and adversely affects
rights in respect of a dissenter's shares because it does any of the following:
(a) Alters or abolishes a preferential right of the shares.
(b) Creates, alters or abolishes a right in respect of redemption, including
a provision respecting a sinking fund for the redemption or repurchase, of the
shares.
(c) Alters or abolishes a preemptive right of the holder of shares to acquire
shares or other securities.
(d) Excludes or limits the right of the shares to vote on any matter or to
cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights.
(e) Reduces the number of shares owned by the shareholder or beneficial
shareholder to a fraction of a share if the fractional share so created is to
be acquired for cash under s. 180.0604.
(3) Notwithstanding sub. (1)(a) to (c), if the issuer corporation is a
statutory close corporation under ss. 180.1801 to 180.1837, a shareholder of
the statutory close corporation may dissent from a corporate action and obtain
payment of the fair value of his or her shares, to the extent permitted under
sub. (1)(d) or (2) or s. 180.1803, 180.1813 (1)(d) or (2)(b), 180.1815 (3) or
180.1829 (1)(c).
(4) Except in a business combination or unless the articles of incorporation
provide otherwise, subs. (1) and (2) do not apply to the holders of shares of
any class or series if the shares of the class or series are registered on a
national securities exchange or quoted on the national association of
securities dealers, inc., automated quotations system on the record date fixed
to determine the shareholders entitled to notice of a shareholders meeting at
which shareholders are to vote on the proposed corporate action.
(5) Except as provided in s. 180.1833, a shareholder or beneficial
shareholder entitled to dissent and obtain payment for his or her shares under
ss. 180.1301 to 180.1331 may not challenge the corporate action creating his or
her entitlement unless the action is unlawful or fraudulent with respect to the
shareholder, beneficial shareholder or issuer corporation.
History: 1989 a. 303; 1991 a. 16.
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<PAGE> 132
180.1303 DISSENT BY SHAREHOLDERS AND BENEFICIAL SHAREHOLDERS.
(1) A shareholder may assert dissenters' rights as to fewer than all of the
shares registered in his or her name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
he or she asserts dissenters' rights. The rights of a shareholder who under
this subsection asserts dissenters' rights as to fewer than all of the shares
registered in his or her name are determined as if the shares as to which he or
she dissents and his or her other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares held
on his or her behalf only if the beneficial shareholder does all of the
following:
(a) Submits to the corporation the shareholder's written consent to the
dissent not later than the time that the beneficial shareholder asserts
dissenters' rights.
(b) Submits the consent under par. (a) with respect to all shares of which he
or she is the beneficial shareholder.
History: 1989 a. 303.
180.1320 NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under s.
180.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders and beneficial shareholders are or may be entitled
to assert dissenters' rights under ss. 180.1301, 180.1331, and shall be
accompanied by a copy of those sections.
(2) If corporate action creating dissenters' rights under s. 180.1302 is
authorized without a vote of shareholders, the corporation shall notify, in
writing and in accordance with s. 180.0141, all shareholders entitled to assert
dissenters' rights that the action was authorized and send them the dissenters'
notice described in s. 180.1322.
History: 1989 a. 303.
180.1321 NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under s.
180.1302 is submitted to a vote at a shareholders' meeting, a shareholder or
beneficial shareholder who wishes to assert dissenters' rights shall do all of
the following:
(a) Deliver to the issuer corporation before the vote is taken written notice
that complies with s. 180.0141 of the shareholder's or beneficial shareholder's
intent to demand payment for his or her shares if the proposed action is
effectuated.
(b) Not vote his or her shares in favor of the proposed action.
(2) A shareholder or beneficial shareholder who fails to satisfy sub.(1) is
not entitled to payment for his or her shares under ss. 180.1301 to 180.1331.
History: 1989 a. 303.
180.1322 DISSENTERS' NOTICE.
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(1) If proposed corporate action creating dissenters' rights under s. 180.1302
is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders and beneficial shareholders who
satisfied s. 180.1321.
(2) The dissenters' notice shall be sent no later than 10 days after the
corporate action is authorized at a shareholders' meeting or without a vote of
shareholders, whichever is applicable. The dissenters' notice shall comply with
s. 180.0141 and shall include or have attached all of the following:
(a) A statement indicating where the shareholder or beneficial shareholder
must send the payment demand and where and when certificates for certificated
shares must be deposited.
(b) For holders of uncertificated shares, an explanation of the extent to
which transfer of the shares will be restricted after the payment demand is
received.
(c) A form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the shareholder or beneficial shareholder
asserting dissenters' rights to certify whether he or she acquired beneficial
ownership of the shares before that date.
(d) A date by which the corporation must receive the payment demand, which may
not be fewer than 30 days nor more than 60 days after the date on which the
dissenters' notice is delivered.
(e) A copy of ss. 180.1301 to 180.1331.
History: 1989 a. 303.
180.1323 DUTY TO DEMAND PAYMENT.
(1) A shareholder or beneficial shareholder who is sent a dissenters' notice
described in s. 180.1322, or a beneficial shareholder whose shares are held by
a nominee who is sent a dissenters' notice described in s. 180.1322, must
demand payment in writing and certify whether he or she acquired beneficial
ownership of the shares before the date specified in the dissenters' notice
under s. 180.1322(2)(c). A shareholder or beneficial shareholder with
certificated shares must also deposit his or her certificates in accordance
with the terms of the notice.
(2) A shareholder or beneficial shareholder with certificated shares who
demands payment and deposits his or her share certificates under sub.(1)
retains all other rights of a shareholder or beneficial shareholder until these
rights are canceled or modified by the effectuation of the corporate action.
(3) A shareholder or beneficial shareholder with certificated or
uncertificated shares who does not demand payment by the date set in the
dissenters' notice, or a shareholder or beneficial shareholder with certificated
shares who does not deposit his or her share certificates where required and by
the date set in the dissenters' notice, is not entitled to payment for his or
her shares under ss. 180.1301 to 180.1331.
History: 1989 a. 303.
180.1324 RESTRICTIONS ON UNCERTIFICATED SHARES.
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(1) The issuer corporation may restrict the transfer of uncertificated
shares from the date that the demand for payment for those shares is received
until the corporate action is effectuated or the restrictions released under s.
180.1326.
(2) The shareholder or beneficial shareholder who asserts dissenters'
rights as to uncertificated shares retains all of the rights of a shareholder or
beneficial shareholder, other than those restricted under sub. (1), until these
rights are canceled or modified by the effectuation of the corporate action.
History: 1989 a.303.
180.1325 PAYMENT.
(1) Except as provided in s. 180.1327, as soon as the corporate action is
effectuated or upon receipt of a payment demand, whichever is later, the
corporation shall pay each shareholder or beneficial shareholder who has
completed with s. 180.1323 the amount that the corporation estimates to be the
fair value of his or her shares, plus accrued interest.
(2) The payment shall be accompanied by all of the following:
(a) The corporation's latest available financial statements, audited and
including footnote disclosure if available, but including not less than a
balance sheet as of the end of a fiscal year ending not more than 16 months
before the date of payment, an income statement for that year, a statement of
changes in shareholders' equity for that year and the latest available interim
financial statements, if any.
(b) A statement of the corporation's estimate of the fair value of the
shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment under s.
180.1328 if the dissenter is dissatisfied with the payment.
(e) A copy of ss. 180.1301 to 180.1331.
History: 1989 a. 303.
180.1326 FAILURE TO TAKE ACTION.
(1) If an issuer corporation does not effectuate the corporate action
within 60 days after the date set under s. 180.1322 for demanding payment, the
issuer corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the issuer corporation effectuates the corporate action, the
corporation shall deliver a new dissenters' notice under s. 180.1322 and repeat
the payment demand procedure.
History: 1989 a. 303.
180.1327 AFTER-ACQUIRED SHARES.
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(1) A corporation may elect to withhold payment required by s. 180.1325 from a
dissenter unless the dissenter was the beneficial owner of the shares before the
date specified in the dissenters' notice under s. 180.1322 (2) (c) as the date
of the first announcement to news media or to shareholders of the terms of the
proposed corporate action.
(2) To the extent that the corporation elects to withhold payment under sub.
(1) after effectuating the corporate action, it shall estimate the fair value of
the shares, plus accrued interest, and shall pay this amount to each dissenter
who agrees to accept it in full satisfaction of his or her demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under s. 180.1328 if the
dissenter is dissatisfied with the offer.
History: 1989 a. 303.
180.1328 PROCEDURE IF DISSENTER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may, in the manner provided in sub. (2), notify the
corporation of the dissenter's estimate of the fair value of his or her shares
and amount of interest due, and demand payment of his or her estimate, less any
payment received under s. 180.1325, or reject the offer under s. 180.1327 and
demand payment of the fair value of his or her shares and interest due, if any
of the following applies:
(a) The dissenter believes that the amount paid under s. 180.1325 or offered
under s. 180.1327 is less than the fair value of his or her shares or that the
interest due is incorrectly calculated.
(b) The corporation fails to make payment under s. 180.1325 within 60 days
after the date set under s. 180.1322 for demanding payment.
(c) The issuer corporation, having failed to effectuate the corporate action,
does not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set under s.
180.1322 for demanding payment.
(2) A dissenter waives his or her right to demand payment under this section
unless the dissenter notifies the corporation of his or her demand under sub.
(1) in writing within 30 days after the corporation made or offered payment
for his or her shares. The notice shall comply with s. 180.0141.
History: 1989 a. 303.
180.1330 COURT ACTION.
(1) If a demand for payment under s. 180.1328 remains unsettled, the
corporation shall bring a special proceeding within 60 days after receiving the
payment demand under s. 180.1328 and petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not bring the
special proceeding within 60-day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(2) The corporation shall bring the special proceeding in the circuit court
for the county where its principal office or, if none in this state, its
registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall bring the special proceeding
in the county in this state in which was located the registered office of the
issuer corporation that merged with or whose shares were acquired by the foreign
corporation.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the special proceeding.
Each party to the special proceeding shall be served with a copy of the petition
as provided in s. 801.14.
D-6
<PAGE> 136
(4) The jurisdiction of the court in which the special proceeding is brought
under sub. (2) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the
question of fair value. An appraiser has the power described in the order
appointing him or her or in any amendment to the order. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the special proceeding is entitled to
judgment for any of the following:
(a) The amount, if any, by which the court finds the fair value of his or her
shares, plus interest, exceeds the amount paid by the corporation.
(b) The fair value, plus accrued interest, of his or her shares acquired on
or after the date specified in the dissenter's notice under s. 180.1322 (2) (c),
for which the corporation elected to withhold payment under s. 180.1327.
History: 1989 a. 303.
180.1331 COURT COSTS AND COUNSEL FEES.
(1) (a) Notwithstanding ss. 814.01 to 814.04, the court in a special
proceeding brought under s. 180.1330 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court and shall assess the costs against the corporation,
except as provided in par. (b).
(b) Notwithstanding ss. 814.01 and 814.04, the court may assess costs against
all or some of the dissenters, in amounts that the court finds to be equitable,
to the extent that the court finds the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment under s. 180.1328.
(2) The parties shall bear their own expenses of the proceeding, except that,
notwithstanding ss. 814.01 to 814.04, the court may also assess the fees and
expenses of counsel and experts for the respective parties, in amounts that the
court finds to be equitable, as follows:
(a) Against the corporation and in favor of any dissenter if the court finds
that the corporation did not substantially comply with ss. 180.1320 to 180.1328.
(b) Against the corporation or against a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously or not in good faith with respect to the
rights provided by this chapter.
(3) Notwithstanding ss. 814.01 to 814.04, if the court finds that the
services of counsel and experts for any dissenter were of substantial benefit to
other dissenters similarly situated, the court may award to these counsel and
experts reasonable fees to be paid out of the amounts awarded the dissenters who
were benefited.
History: 1989 a. 303
D-7
<PAGE> 137
Exhibit E
PYRAMID BANCORP, INC. AND SUBSIDIARY
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND RATIO DATA)
<TABLE>
<CAPTION>
As of and for the
six months ended As of and for the year ended
June 30, December 31,
---------------------------------- ---------------------------------------------------
1999 1998 1998 1997 1996
---------------- ----------------- ---------------- ----------------- ----------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Income statement data:
Interest income $ 3,794 $ 3,652 $ 7,472 $ 6,933 $ 6,503
Interest expense 1,723 1,757 3,531 3,404 3,236
---------------- ----------------- ---------------- ----------------- ----------------
Net interest income 2,071 1,895 3,941 3,529 3,267
Provision for loan losses 36 12 64 35 145
Other income 311 287 621 519 502
Other expense 1,477 1,344 2,780 2,526 2,427
---------------- ----------------- ---------------- ----------------- ----------------
Income before income taxes 869 826 1,718 1,487 1,197
Income tax expense 281 275 574 516 359
---------------- ----------------- ---------------- ----------------- ----------------
Net income $ 588 $ 551 $ 1,144 $ 971 $ 838
================ ================= ================ ================= ================
Per common share data:
Net income per share
Basic $8.73 $8.78 $18.07 $15.55 $13.43
Diluted $8.62 $8.37 17.31 14.58 12.65
Weighted average shares outstanding
Basic 67,364 62,774 63,288 62,454 62,400
Diluted 68,196 65,841 66,088 66,588 66,216
Cash dividends per share $2.00 $1.00 $2.00 $1.00 --
Balance sheet data:
Total assets $ 108,936 $ 97,829 $ 106,909 $ 95,007 $ 90,971
Loans 62,045 54,844 61,663 54,556 52,215
Allowance for loan losses 754 686 716 676 671
Total deposits 83,456 75,457 82,974 72,580 69,454
Stockholders' equity 8,934 7,773 8,441 7,276 6,311
</TABLE>
CHANGES IN FINANCIAL CONDITION
Total Company assets at year-end 1998 were $106.9 million. During 1998, assets
increased by $11.9 million or 12.5%. The majority of this increase was in gross
loans, which increased by $7.1 million or 13.0% to $61.6 million. The loan
growth experienced was primarily due to increased residential and commercial
loan activity in the Company primary market area.
Most of the increased loan balances were funded by an increase in total
deposits. Total deposits increased from $72.6 million at December 31, 1997 to
$83.0 million at December 31, 1998, an increase of $10.4 million, or 14.3%.
Substantially all of the deposit growth occurred within the Company's primary
market area. The majority of the deposit increase was in additional time
deposits as well as savings and NOW accounts. Non deposit funding sources also
increased in 1998. Total long-term borrowings consisting primarily of advances,
collateral pledge and security agreements with the Federal Home Loan Bank (FHLB)
increased $4.0 million or 84.6% in 1998.
Stockholders' equity increased by $1.2 million or 16.0% in 1998. This increase
resulted from Company net income of $1.1 million; $128,000 from proceeds
received in connection with the exercise of employee incentive stock options,
and $21,000 in the change in unrealized gains on securities available-for-sale.
The increase was partially offset by a $127,000 dividend paid to shareholders
during the period.
E-1
<PAGE> 138
Total securities increased by $4.0 million in 1998 mainly due to purchases of
mortgage-backed securities. Cash and cash equivalents increased by $1.0 million
in 1998; included in this increase is $3.0 million in additional Federal Funds
Sold.
During the period from December 31, 1998 to June 30, 1999 total assets increased
$2.0 million or 1.9%, from $106.9 million to $108.9 million; the majority of the
growth was in investment securities available for sale, which increased $1.7
million. Total loans also increased by $382,000 during the six month period
ended June 30, 1999.
Total deposits increased by $482,000 during the period from December 31, 1998 to
June 30, 1999. The majority of the growth can be attributed to increases in
savings and NOW accounts.
Stockholders' equity increased $493,000 from December 31, 1998 to June 30, 1999.
The increase resulted from $588,000 of net income, $202,000 from proceeds
received in connection with the exercise of employee incentive stock options and
the remainder from the decline in the market value of securities categorized as
available-for-sale. The increase was partially offset by a $135,000 dividend
paid to shareholders during the period.
RESULTS OF OPERATIONS FOR THE
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH THE
SIX MONTHS ENDED JUNE 30, 1998
For the six months ended June 30, 1999, the Company's net income increased
$37,000 or 6.7% over the same six-month period in 1998. Basic net income per
share was $8.73 and $8.78 for the six-month periods ended June 30, 1999 and
1998, respectively. Diluted net income per share was $8.62 and $8.37 for the
same periods. The decrease in basic earnings per share was due to the greater
percentage increase in the number of shares outstanding in relation to net
income.
Net interest income increased by $176,000, or 9.3%, to $2.1 million. An improved
net interest margin from 4.16% for the six-month period ending June 30, 1998 to
4.29% for the six month period ended June 30, 1999 and an $8.6 million increase
in average earning assets caused the increase.
The balance in the allowance for loan losses is based on management's evaluation
of the loan portfolio. Management determines the adequacy of the allowance for
loan losses based on past loan loss experience, current economic conditions,
composition of the loan portfolio, and the potential for future loss. During the
six month period ended June 30, 1999, there was $4,000 less in net charge-offs
compared with the same period in 1998. Due to increases in the loan portfolio
the provision for loan losses grew by $24,000 to $36,000 for the six-month
period ended June 30, 1999. Management believes the allowance is adequate to
absorb any current or future losses in the loan portfolio.
Other income increased by $24,000, or 8.3% for the first six months of 1999
compared to the first three months of 1998. This change was entirely due to an
increase in service charges on deposit accounts.
Operating expenses increased from $1.35 million to $1.48 million, an increase of
$132,000, or 9.8% for the first six months of 1999 compared to the same period
in 1998. Salary and related benefit costs accounted for $71,000 of this
increase. In addition, premises and equipment expense increased by $39,000.
Income tax expense increased by $6,100 in the first six months of 1999 compared
with the same period in 1998 due to an increase in the before tax income.
RESULTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Net income in 1998 totaled $1.1 million or an increase of $173,000 or 17.8% over
the $971,000 earned in 1997. Net income in 1997 was $133,000 or 15.9% over the
1996 level of $838,000. On a per share basis, basic net income was $18.07,
$15.55 and $13.43 for 1998, 1997 and 1996, respectively. Diluted net income per
share was $17.31, $14.58, and $12.65 during the same three periods. The growth
in net income was due largely to the growth in assets of the Company's
subsidiary bank, increased fee income, and improved operating efficiencies. At
December 31, 1998, 1997 and 1996, the total assets per employee were
approximately $2.7 million, $2.5 million and $2.4 million, respectively.
E-2
<PAGE> 139
Net interest income increased $412,000, or 11.7% to $3.9 million in 1998
compared to $3.5 million in 1997. The 1997 total represented an increase of
$262,000, or 8.0% compared to 1996. The net interest margin for 1998 was 4.24%
compared with 4.19% in 1997 and 4.27% in 1996. The margin has remained
relatively constant even though competitive pressures and reduced market
interest rates have produced lower loan rates as well as higher costs of
retaining deposits. As the yield on earnings assets has declined from 8.25% in
1996, 8.10% in 1997 and 8.04% in 1998, the cost of funding those earning assets
has decreased as well from 3.98% in 1996, 3.91% in 1997 and 3.80% in 1998. The
level of earning assets increased by $4.6 million from 1996 to 1997 and by $12.4
million from 1997 to 1998.
The provision for loan losses was $64,000 for 1998, representing an increase of
$29,000 or 82.9% over the $35,000 of loss provision charged to operations in
1997. The 1997 provision was $110,000 less than the $145,000 provision incurred
in 1996. The increase in 1998 is principally a result of higher loan levels over
the same period. The higher 1996 provision was due to $132,000 in net
charge-offs recorded in the period. Due to the increase in loans outstanding,
the percentage of the allowance for loan losses to total gross loans outstanding
decreased from 1.29% to 1.24% from 1996 to 1997 and from 1.24% to 1.16% from
1997 to 1998. Even though the percentage of the loan loss allowance ratio has
been declining management believes the allowance is adequate to absorb any
current or future losses in the loan portfolio.
Other income consists primarily of deposit account service charges, gains on
sales of loans and related fee income. Other income increased by $102,000 or
19.7% in 1998 compared to 1997 and by $17,000 or 3.4% in 1997 compared to 1996.
Other expenses increased $254,000 or 10.0% in 1998 compared to a $99,000 or
4.08% increase in 1997 over 1996 levels. Salary and related benefit expenses
increased by $189,000 or 13.1% in 1998 due to an increase in the number of full
time equivalent employees and also to an increase in base compensation and
individual performance incentives. Similarly, salary and benefits increased by
$98,000 or 7.3% from 1996 to 1997. Bank premises and equipment expenses
increased by $51,000 or 14.6% in 1998 due partly to additional depreciation
associated with fixed asset expenditures and higher utility costs. Similarly,
bank premises and equipment increased by $37,000 or 11.9% from 1996 to 1997.
Income tax expense increased by $59,000 or 11.5% from 1997 to 1998 while the
increase from 1996 to 1997 was $156,000 or 43.3%. These increases paralleled the
percentage increase in income before taxes, which were 15.6% for 1997 to 1998
and 24.2% from 1996 to 1997. The effective income tax rate was 33.4%, 34.7% and
30.0% for 1998, 1997 and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The concept of liquidity comprises the ability of an enterprise to maintain
sufficient cash flow to meet its needs and obligations on a timely basis. Bank
liquidity must be considered in terms of the nature and mix of the institution's
sources and uses of funds. Bank liquidity is provided from several asset
categories. The asset side of the balance sheet provides liquidity through
maturities of investment securities and repayment and pay-offs of loans. Cash
and amounts due from correspondent banks, interest bearing deposits in banks,
investment securities available for sale and Federal Funds sold are primarily
sources of asset liquidity. At December 31, 1998, these categories totaled
approximately $34.6 million; these categories totaled approximately $35.9
million at June 30, 1999. The Company has no significant plans for major capital
expenditures in 1999.
Management believes that, in the current economic environment, the Bank's
liquidity position is adequate. There are no known trends, nor any known
demands, commitments, events or uncertainties that will result or are reasonably
likely to result in a material increase or decrease in the Bank's liquidity.
EFFECTS OF INFLATION
The Company's consolidated financial statements and notes thereto have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of the Company's operations. Unlike most industrial
companies, nearly all of the assets and liabilities of the Company are monetary
in nature. As a result, interest rates have a greater impact on the Company's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the price
of goods and services.
E-3
<PAGE> 140
YEAR 2000
An issue affecting the Company is whether computer systems and applications will
recognize and process the Year 2000 and beyond. The Company is currently in the
final stages of the assessment, remediation and internal testing of the systems
affected by this issue.
Management believes that it is devoting the necessary resources to timely
address all Year 2000 issues over which it has control and all critical systems
are scheduled to be Year 2000 compliant by mid 1999. The Company is also
monitoring the adequacy of the process of its customers, suppliers and others
will timely resolve their own Year 2000 compliance issues.
Costs related to the year 2000 issues are being expensed during the period in
which they are incurred. The financial impact to the Company of implementing the
systems changes necessary to become Year 2000 compliant has not and is not
anticipated to be material to its business, operations, financial condition,
liquidity and capital resources.
REGULATORY CAPITAL REQUIREMENTS
The Federal Reserve Board, the Company's primary regulator, has adopted
risk-based capital regulations, which require the Company to maintain a
risk-based capital/ratio of at least 8.0%. The Company's capital ratios and
those of the Bank exceed the minimum ratios required by their respective
regulators. The FDIC and the State of Wisconsin Department of Financial
Institutions examine and regulate the Bank.
Management is not aware of any pending regulatory requirements or
recommendations that, if enacted, would have a material adverse impact on the
Company's capital, liquidity, or results of operations.
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
For each period ended shown, the allowance for loan losses has been allocated to
the following categories in amounts deemed reasonably necessary to provide for
the possibility of losses being incurred within each category of loans at the
dates indicated.
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997 December 31, 1996
Percent of Percent of Percent of
loans in loans in loans in
Allowance each Allowance each Allowance each
for loan category for loan category for loan category
Balance at end of period applicable to: losses to total losses to total losses to total
loans loans loans
- ----------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial and commercial real estate
loans $329 46.0% $292 43.2% $457 68.1%
Real estate - mortgage 281 39.2 292 43.2 154 23.0
Installment and other loans 106 14.8 92 13.6 60 8.9
------------ ------------ ------------- ------------ ------------ ------------
$716 100.0% $676 100.0% $671 100.0%
============ ============ ============= ============ ============ ============
</TABLE>
E-4
<PAGE> 141
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
As of and for the year ended December 31,
1998 1997 1996
------------------ ------------------- ------------------
(Amounts in thousands)
<S> <C> <C> <C>
Loan balance at year end $61,663 $54,556 $52,215
------------------ ------------------- ------------------
Balance of allowance for loan losses at beginning of period 676 671 658
Loans charged off:
Commercial loans 21 21 136
Real estate - mortgage loans -- -- --
Installments and other loans 15 15 2
------------------ ------------------- ------------------
Total loans charged off 36 36 138
Recoveries of loans previously charged off:
Commercial loans 5 4 5
Real estate - mortgage loans -- -- --
Installments and other loans 7 2 1
------------------ ------------------- ------------------
Total recoveries 12 6 6
Net loans charged off 24 30 132
Additions to allowance for loan losses charged to operating
expense 64 35 145
------------------ ------------------- ------------------
Balance of allowance for loan losses at end of period $716 $676 $671
================== =================== ==================
Ratios:
Net charge-offs to loans outstanding at period end 0.04% 0.05% 0.25%
Net charge-offs to total allowance 3.35% 4.44% 1.97%
Allowance to year end gross loans outstanding 1.16% 1.24% 1.29%
</TABLE>
LOAN COMPOSITION
The following table summarizes the loan composition at the end of each period.
<TABLE>
<CAPTION>
December 31,
1998 1997
---------------- -----------------
(Amounts in thousands)
<S> <C> <C>
Commercial $16,344 $14,260
Agricultural production 11 19
Real Estate:
Construction 4,341 4,055
Commercial 15,018 15,308
Agricultural 141 120
Residential 23,003 18,235
Installment and consumer 2,673 2,404
Municipal loans 132 155
---------------- -----------------
61,663 54,556
Less: allowance for loan losses 716 676
---------------- -----------------
Loans, net $60,947 $53,880
================ =================
</TABLE>
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES AS OF DECEMBER 31,
1998
<TABLE>
<CAPTION>
Loan maturities (Amounts in thousands)
After 1
through 5
1 Year or less years After 5 years Total
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Commercial real estate $4,505 $8,410 $2,103 $15,018
Commercial 7,518 7,518 1,308 16,344
----------------- ---------------- ----------------- ----------------
Total $12,023 $15,928 $3,411 $31,362
================= ================ ================= ================
Amount over one year with:
Fixed rates $18,179
================
Floating or adjustable rates $ 1,160
================
</TABLE>
E-5
<PAGE> 142
PAST DUE AND NONPERFORMING LOANS
The following table reflects as of the period ended the aggregate amounts of
loans past due and nonperforming.
<TABLE>
<CAPTION>
December 31,
1998 1997 1996
---------------- ----------------- ----------------
(Amounts in thousands)
<S> <C> <C> <C>
Nonaccrual loans $505 $576 $611
Loans contractually past due over 90 days -- -- --
Restructured loans -- -- --
---------------- ----------------- ----------------
Total $505 $576 $611
================ ================= ================
</TABLE>
If interest on the nonaccrual loans had been accrued, such income would have
approximated $16,333, $18,209 and $8,861 for the years ended December 31, 1998,
1997 and 1996.
Loans are normally placed on non-accrual status when they become contractually
past due 90 days or more as to interest or principal payments. Previously
accrued and uncollected interest on such loans is reversed, and income is
recorded only to the extent that interest payments are substantially received in
cash and a determination has been made that the principal balance of the loan is
collectible. If collectibility of the principal is in doubt, payments received
are applied to loan principal.
E-6
<PAGE> 143
PYRAMID BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
YEARS ENDED DECEMBER 31, 1998 AND 1997
E-7
<PAGE> 144
INDEX TO FINANCIAL STATEMENTS
PYRAMID BANCORP., INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report E-9
Consolidated Balance Sheets as of
December 31, 1998 and 1997 E-10
Consolidated Statements of Income for the
years ended December 31, 1998 and 1997 E-11
Consolidated Statements of Changes in
Stockholders Equity for the years ended
December 31, 1998 and 1997 E-12
Consolidated Statements of Cash Flows for the
years ended December 31, 1998 and 1997 E-13
Notes to Consolidated Financial Statements E-14
Unaudited Consolidated Balance Sheet as of
June 30, 1999 E-34
Unaudited Consolidated Statements of Income for
the six months ended June 30, 1999 and 1998 E-35
Unaudited Consolidated Statements of Cash Flow
for the six months ended June 30, 1999 and 1998 E-36
Notes to Unaudited Consolidated Financial Statements
as of June 30, 1999 and 1998 E-37
</TABLE>
E-8
<PAGE> 145
[VIRCHOW, KRAUSE & COMPANY, LLP LOGO]
[VIRCHOW, KRAUSE & COMPANY, LLP LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Pyramid Bancorp, Inc. and Subsidiary
Grafton, Wisconsin
We have audited the accompanying consolidated balance sheets of Pyramid Bancorp,
Inc. and Subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pyramid Bancorp,
Inc. and Subsidiary at December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
VIRCHOW, KRAUSE & COMPANY, LLP
/s/ Virchow, Krause & Company LLP
Brookfield, Wisconsin
February 3, 1999
E-9
<PAGE> 146
PYRAMID BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ASSETS 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks (Note B) $ 3,565,417 $ 3,920,628
Interest-bearing deposits in banks 4,967,333 6,593,734
Federal funds sold 3,000,000 -
Available for sale securities at fair value (Note C) 23,065,083 19,340,514
Held to maturity securities, fair value $7,148,968 and
$6,782,324 in 1998 and 1997 respectively (Note D) 6,958,430 6,668,500
Loans, less allowance for loan losses of $716,040 and $675,988
in 1998 and 1997 respectively (Notes E, F, G and N) 60,946,563 53,880,201
Mortgage loans held for sale - 50,000
Cash surrender value of life insurance 1,386,729 1,312,401
Office buildings and equipment, net (Note H) 1,369,030 1,372,705
Accrued interest receivable and other assets (Note L) 1,650,029 1,868,696
------------------------------------
TOTAL ASSETS $ 106,908,614 $ 95,007,379
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Deposits: (Note I)
Demand deposits $ 15,150,123 $ 14,562,827
Savings and NOW 46,531,194 41,261,719
Other Time 21,292,890 16,755,416
------------------------------------
TOTAL DEPOSITS 82,974,207 72,579,962
Short-term borrowings (Note J) 5,322,821 9,152,062
Long-term borrowings (Note K) 8,750,000 4,740,000
Accrued interest payable and other liabilities (Notes L and P) 1,420,339 1,259,419
------------------------------------
TOTAL LIABILITIES 98,467,367 87,731,443
------------------------------------
COMMITMENTS AND CONTINGENCIES (Note M)
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 125,000 shares authorized; and 64,735 and 62,600
shares issued and outstanding
in 1998 and 1997 respectively 64,735 62,600
Surplus 3,466,481 3,340,516
Retained earnings (Notes R and S) 4,831,579 3,815,026
------------------------------------
8,362,795 7,218,142
Accumulated other comprehensive income 78,452 57,794
------------------------------------
TOTAL STOCKHOLDERS' EQUITY 8,441,247 7,275,936
------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 106,908,614 $ 95,007,379
====================================
</TABLE>
See Notes to Consolidated Financial Statements.
E-10
<PAGE> 147
PYRAMID BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans (Note E) $ 5,420,365 $ 4,928,411
Interest on investment securities:
Taxable 1,270,479 1,242,267
Tax-exempt 285,839 194,889
Interest on federal funds sold 127,986 209,672
Interest on deposits with banks 367,338 357,280
---------------------------------
TOTAL INTEREST INCOME 7,472,007 6,932,519
---------------------------------
INTEREST EXPENSE:
Interest on deposits (Note I) 2,713,444 2,556,589
Interest on short-term borrowings (Note J) 461,519 553,828
Interest on long-term borrowings (Note K) 356,147 293,123
---------------------------------
TOTAL INTEREST EXPENSE 3,531,110 3,403,540
---------------------------------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 3,940,897 3,528,979
Provision for loan losses (Note G) 64,000 35,000
---------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,876,897 3,493,979
---------------------------------
NONINTEREST INCOME:
Service fees 337,393 305,507
Gains on sale of loans 102,374 34,999
Other income 181,517 178,507
---------------------------------
TOTAL NONINTEREST INCOME 621,284 519,013
---------------------------------
NONINTEREST EXPENSES:
Salary 1,262,220 1,136,531
Employee benefits (Note P) 373,718 310,819
Occupancy expense 189,408 173,772
Furniture and equipment 208,749 173,627
Data processing 248,279 241,262
Other expense 497,575 490,436
---------------------------------
TOTAL NONINTEREST EXPENSES 2,779,949 2,526,447
---------------------------------
INCOME BEFORE INCOME TAX EXPENSE 1,718,232 1,486,545
Income tax expense (Note L) 574,459 515,384
---------------------------------
NET INCOME $ 1,143,773 $ 971,161
=================================
BASIC EARNINGS PER SHARE $ 18.07 $ 15.55
=================================
DILUTED EARNINGS PER SHARE $ 17.31 $ 14.58
=================================
WEIGHTED AVERAGE NUMBER OF SHARES 63,288 62,454
=================================
</TABLE>
See Notes to Consolidated Financial Statements.
E-11
<PAGE> 148
PYRAMID BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehensive
stock Surplus earnings income Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES, December 31, 1996 $ 62,400 $ 3,328,716 $ 2,906,465 $ 13,353 $ 6,310,934
----------------
Net income - 1997 - - 971,161 - 971,161
Change in net unrealized gain (loss) on
available for sale securities, net of
reclassification adjustment and
tax effect - - - 44,441 44,441
----------------
Total comprehensive income 1,015,602
----------------
Cash dividends paid - $1.00 per share - - (62,600) - (62,600)
Exercise of stock options 200 11,800 - - 12,000
------------------------------------------------------------------------------
BALANCES, December 31, 1997 62,600 3,340,516 3,815,026 57,794 7,275,936
----------------
Net income - 1998 - - 1,143,773 - 1,143,773
Change in net unrealized gain (loss) on
available for sale securities, net of
reclassification adjustment and
tax effect - - - 20,658 20,658
----------------
Total comprehensive income 1,164,431
----------------
Cash dividends paid; $2.00 per share - - (127,220) - (127,220)
Exercise of stock options 2,135 125,965 - - 128,100
------------------------------------------------------------------------------
BALANCES, December 31, 1998 $ 64,735 $ 3,466,481 $ 4,831,579 $ 78,452 $ 8,441,247
==============================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
E-12
<PAGE> 149
PYRAMID BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,143,773 $ 971,161
-------------------------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 225,817 204,301
Provision for loan losses 64,000 35,000
Provision (benefit) for deferred taxes (54,056) (59,215)
Amortization and accretion of bond premiums and discounts, net 60,830 39,741
Gains on sales of mortgage loans held for sale (102,374) (34,999)
Net decrease in mortgage loans held for sale 152,374 261,567
Increase in cash surrender value of life insurance (74,328) (71,806)
Amortization of intangibles and organization expense 70,695 70,695
Decrease in accrued interest receivable and other assets 202,025 309,683
Increase in accrued interest payable and other liabilities 150,291 198,797
-------------------------------------
TOTAL ADJUSTMENTS 695,274 953,764
-------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,839,047 1,924,925
-------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest bearing deposit with banks 1,626,401 (1,329,936)
Net increase in federal funds sold (3,000,000)
Proceeds from sales, maturities and repayments of securities 11,532,054 8,401,505
Purchase of securities (15,576,093) (13,589,705)
Net decrease in loans (7,130,362) (2,370,779)
Purchases of office buildings and equipment (222,142) (195,328)
-------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (12,770,142) (9,084,243)
-------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 10,394,245 3,126,022
Net increase (decrease) in securities sold under repurchase agreements (2,737,826) 325,950
Proceeds from Federal Home Loan Bank advances 5,750,000 1,000,000
Net decrease in other borrowings (1,091,415) (150,702)
Payment on Federal Home Loan Bank advances (1,740,000) (1,450,000)
Proceeds from exercise of stock options 128,100 12,000
Payment of dividends (127,220) (62,600)
-------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,575,884 2,800,670
-------------------------------------
DECREASE IN CASH AND DUE FROM BANKS (355,211) (4,358,648)
CASH AND DUE FROM BANKS, beginning of year 3,920,628 8,279,276
-------------------------------------
CASH AND DUE FROM BANKS, end of year $ 3,565,417 $ 3,920,628
=====================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 3,427,881 $ 3,456,893
=====================================
Income taxes $ 726,000 $ 520,264
=====================================
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Net change in unrealized gain on available for sale securities $ 20,658 $ 44,441
=====================================
</TABLE>
See Notes to Consolidated Financial Statements.
E-13
<PAGE> 150
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. CONSOLIDATION:
The consolidated financial statements of Pyramid Bancorp, Inc. include the
accounts of its wholly owned subsidiary, Grafton State Bank. Grafton State Bank
includes the accounts of its wholly owned subsidiary, GSB Investments, Inc. The
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and conform to general practices within
the banking industry. All significant intercompany accounts and transactions
have been eliminated in the consolidated financial statements.
2. NATURE OF BANKING ACTIVITIES:
The consolidated income of Pyramid Bancorp, Inc. is principally from income of
its wholly owned subsidiary. The subsidiary Bank grants commercial, residential
and consumer loans, accepts deposits and provides trust services to customers in
southeastern Wisconsin. The subsidiary Bank is subject to competition from other
financial institutions and non-financial institutions providing financial
products. Additionally, the Company and the subsidiary Bank are subject to the
regulations of certain regulatory agencies and undergo periodic examination by
those regulatory agencies.
3. BASIS OF FINANCIAL STATEMENT PRESENTATION:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
4. CASH AND CASH EQUIVALENTS:
For purposes of reporting cash flows, cash and cash equivalents are defined as
those amounts included in the balance sheet caption "cash and due from banks."
The subsidiary Banks maintain amounts due from banks which, at times, may exceed
federally insured limits. The subsidiary Banks have not experienced any losses
in such accounts.
5. AVAILABLE FOR SALE SECURITIES:
Securities classified as available for sale are those debt securities that the
subsidiary Bank intends to hold for an indefinite period of time, but not
necessarily to maturity. Any decision to sell a security classified as available
for sale would be based on various factors, including significant movements in
interest rates, changes in the maturity mix of the subsidiary Bank's assets and
liabilities, liquidity needs, regulatory capital consideration and other similar
factors. Securities classified as available for sale are carried at fair value.
Unrealized gains or losses are reported as increases or decreases in other
comprehensive income, net of the related deferred tax effect. Realized gains or
losses, determined on the basis of the cost of specific securities sold, are
included in earnings.
E-14
<PAGE> 151
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
6. HELD TO MATURITY SECURITIES:
Securities classified as held to maturity are those debt securities the
subsidiary Bank has both the intent and ability to hold to maturity regardless
of changes in market conditions, liquidity needs or changes in general economic
conditions. These securities are carried at cost, adjusted for amortization of
premium and accretion of discount, computed by the interest method over their
contractual lives. The sale of a security within three months of its maturity
date or after collection of at least 85 percent of the principal outstanding at
the time the security was acquired is considered a maturity for purposes of
classification and disclosure.
7. MORTGAGE LOANS HELD FOR SALE:
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are recognized through a valuation allowance by charges to
income. All sales are made without recourse. The subsidiary Bank also services
loans that have been sold with servicing retained by the subsidiary Bank. Such
loans are not included in the accompanying consolidated balance sheet.
8. LOANS:
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or payoff are reported at the amount of unpaid
principal, reduced by the allowance for loan losses. Interest on loans is
calculated by using the simple interest method on daily balances of the
principal amount outstanding. The accrual of interest income on impaired loans
is discontinued when, in the opinion of management, there is reasonable doubt as
to the borrower's ability to meet payment of interest or principal when they
become due. When the interest accrual is discontinued, all unpaid accrued
interest is reversed. Cash collections on impaired loans are credited to the
loan receivable balance, and no interest income is recognized on those loans
until the principal balance is current. Accrual of interest is generally resumed
when the customer is current on all principal and interest payments and has been
paying on a timely basis for a period of time.
9. ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans are charged against the allowance for loan losses when
management believes that the collectability of the principal is unlikely. The
allowance for loan losses is adequate to cover probable credit losses relating
to specifically identified loans, as well as probable credit losses inherent in
the balance of the loan portfolio. In accordance with FASB Statements 5 and 114,
the allowance is provided for losses that have been incurred as of the balance
sheet date. The allowance is based on past events and current economic
conditions, and does not include the effects of expected losses on specific
loans or groups of loans that are related to future events or expected changes
in economic conditions. While management uses the best information available to
make its evaluation, future adjustments to the allowance may be necessary if
there are significant changes in economic conditions. Impaired loans are
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. A loan is impaired when it is probable the creditor will
be unable to collect all contractual principal and interest payments due in
accordance with the terms of the loan agreement.
In addition, various regulatory agencies periodically review the allowance for
loan losses. These agencies may require the subsidiary Bank to make additions to
the allowance for loan losses based on their judgments of collectability based
on information available to them at the time of their examination.
E-15
<PAGE> 152
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
10. OFFICE BUILDINGS AND EQUIPMENT:
Depreciable assets are stated at cost less accumulated depreciation. Provisions
for depreciation are computed on straight-line and accelerated methods over the
estimated useful lives of the assets, which range from 15 to 50 years for
buildings and 3 to 15 years for equipment.
11. OTHER REAL ESTATE OWNED:
Other real estate owned, acquired through partial or total satisfaction of loans
is carried at the lower of cost or fair value less cost to sell. At the date of
acquisition losses are charged to the allowance for loan losses. Revenue and
expenses from operations and changes in the valuation allowance are included in
loss on foreclosed real estate.
12. OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS:
In the ordinary course of business, the subsidiary Bank has entered into
off-balance-sheet financial instruments consisting of commitments to extend
credit, commitments under credit card arrangements, commercial letters of credit
and standby letters of credit. Such financial instruments are recorded in the
financial statements when they are funded or related fees are incurred or
received.
13. PROFIT-SHARING PLAN:
The Company has a contributory 401(k) profit-sharing plan in which contributions
are made in accordance with specified formulas or at the discretion of the Board
of Directors of the Company. The Plan covers substantially all employees.
14. INCOME TAXES:
The Company files a consolidated federal income tax return and individual
subsidiary state income tax returns. Accordingly, amounts equal to tax benefits
of those companies having taxable federal losses or credits are reimbursed by
the other companies that incur federal tax liabilities.
Amounts provided for income tax expense are based on income reported for
financial statement purposes and do not necessarily represent amounts currently
payable under tax laws. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes. The differences relate principally to the reserve
for loan losses, nonaccrual loan income, fixed assets, deferred compensation and
unrealized gains and losses on available for sale securities. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
15. EARNINGS PER SHARE:
Basic earnings per share are based on the Company's weighted average number of
shares outstanding during the year. Diluted earnings per share is computed
assuming stock options are exercised at the beginning of each year and the
proceeds are used to purchase shares of the Company's common stock at the
average market price during the year.
E-16
<PAGE> 153
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (continued)
16. TRUST ASSETS AND FEES:
Property held for customers in fiduciary or agency capacities is not included in
the accompanying balance sheets, since such items are not assets of the Company.
In accordance with established industry practice, income from trust fees is
reported on the cash basis. Reporting of trust fees on an accrual basis would
have no material effect on reported income.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Financial Accounting Standards Board Statement No. 107, "Disclosures About Fair
Value of Financial Instruments", requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement No. 107 excludes certain
financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company.
The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:
CARRYING AMOUNTS APPROXIMATE FAIR VALUES FOR THE FOLLOWING INSTRUMENTS:
Cash and due from banks
Federal funds sold
Interest-bearing deposits in banks
Short-term borrowings
Accrued interest receivable
Accrued interest payable
Variable rate loans that reprice frequently where no
significant change in credit risk has occurred
Mortgage loans held for sale
Demand deposits
Variable rate money market accounts
Variable rate certificate of deposit
Available for sale securities
Cash surrender value of life insurance
QUOTED MARKET PRICES:
Where available, or if not available, based on quoted market prices
of comparable instruments for the following instrument:
Held to maturity securities
E-17
<PAGE> 154
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (continued)
17. FAIR VALUE OF FINANCIAL INSTRUMENTS: (continued)
DISCOUNTED CASH FLOWS:
Using interest rates currently being offered on instruments with
similar terms and with similar credit quality:
All loans except variable rate loans described above
Fixed rate certificates of deposit
Long-term borrowings
QUOTED FEES CURRENTLY BEING CHARGED FOR SIMILAR INSTRUMENTS:
Taking into account the remaining terms of the agreements and the
counterparties' credit standing:
Off-balance-sheet instruments:
Guarantees
Letters of credit
Lending commitments
Since the majority of the Company's off-balance-sheet instruments consists of
nonfee-producing, variable rate commitments, the Company had determined it does
not have a distinguishable fair value.
NOTE B. CASH AND DUE FROM BANKS
The Company's bank subsidiary is required to maintain certain vault cash and
reserve balances with the Federal Reserve Bank based upon a percentage of
deposits. These requirements approximated $439,000 and $434,000 at December 31,
1998 and 1997 respectively.
NOTE C. AVAILABLE FOR SALE SECURITIES
Amortized costs and fair values of available for sale securities as of December
31, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
----------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 5,734,289 $ 36,733 $ 2,833 $ 5,768,189
Obligations of other U.S. Government
agencies and corporations 554,115 286 -- 554,401
Corporate securities 41,002 69 -- 41,071
Obligations of states and political
subdivisions 125,000 1,363 -- 126,363
----------------------------------------------------------------
6,454,406 38,451 2,833 6,490,024
Mortgage-backed securities 15,648,848 116,330 33,083 15,732,095
Federal Home Loan Bank stock 430,000 -- -- 430,000
Federated Money Market fund 411,814 -- -- 411,814
Bankers' Bank stock 1,150 -- -- 1,150
----------------------------------------------------------------
$ 22,946,218 $ 154,781 $ 35,916 $ 23,065,083
================================================================
</TABLE>
E-18
<PAGE> 155
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE C. AVAILABLE FOR SALE SECURITIES (continued)
<TABLE>
<CAPTION>
December 31, 1997
----------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
----------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 5,410,759 $ 14,095 $ 239 $ 5,424,615
Obligations of other U.S. Government
agencies and corporations 1,350,000 660 -- 1,350,660
Corporate securities 80,058 260 -- 80,318
Obligations of states and political
subdivisions 125,000 875 -- 125,875
----------------------------------------------------------------
6,965,817 15,890 239 6,981,468
Mortgage-backed securities 11,837,322 97,382 25,457 11,909,247
Federal Home Loan Bank stock 271,000 -- -- 271,000
Federated Money Market fund 177,649 -- -- 177,649
Bankers' Bank stock 1,150 -- -- 1,150
----------------------------------------------------------------
$ 19,252,938 $ 113,272 $ 25,696 $ 19,340,514
================================================================
</TABLE>
The amortized costs and fair value of available for sale securities as of
December 31, 1998 by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities in mortgage-backed securities, equity
securities and mutual funds since the anticipated maturities are not readily
determinable. Therefore, these securities are not included in the maturity
categories in the following maturity summary:
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------
Amortized Fair
cost value
----------------------------------
<S> <C> <C>
Due in one year or less $ 2,953,088 $ 2,969,439
Due after one year through 5 years 3,156,201 3,175,113
Due after 5 years through 10 years 255,000 255,000
Due after 10 years 90,117 90,472
----------------------------------
$ 6,454,406 $ 6,490,024
==================================
</TABLE>
Available for sale securities with an amortized cost of $10,665,864 and
$12,322,521 as of December 31, 1998 and 1997 respectively were pledged as
collateral on public deposits and for other purposes as required or permitted by
law.
E-19
<PAGE> 156
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE D. HELD TO MATURITY SECURITIES
Amortized costs and fair values of held to maturity securities as of December
31, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of states and political subdivisions $ 5,793,676 $ 187,190 $ 1,229 $ 5,979,637
Mortgage-backed securities 1,164,754 5,998 1,421 1,169,331
---------------------------------------------------------------
$ 6,958,430 $ 193,188 $ 2,650 $ 7,148,968
===============================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of other U.S. Government
agencies and corporations $ 200,000 $ -- $ 500 $ 199,500
Obligations of states and
political subdivisions 4,390,600 115,522 -- 4,506,122
---------------------------------------------------------------
4,590,600 115,522 500 4,705,622
Mortgage-backed securities 2,077,900 9,176 10,374 2,076,702
---------------------------------------------------------------
$ 6,668,500 $ 124,698 $ 10,874 $ 6,782,324
===============================================================
</TABLE>
The amortized costs and fair value of securities held to maturity as of December
31, 1998 by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities in mortgage-backed securities, equity
securities and mutual funds since the anticipated maturities are not readily
determinable. Therefore, these securities are not included in the maturity
categories in the following maturity summary:
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------
Amortized Fair
cost value
----------------------------------
<S> <C> <C>
Due in one year or less $ 330,151 $ 331,636
Due after one year through 5 years 925,214 970,200
Due after 5 years through 10 years 2,959,385 3,069,768
Due after 10 years 1,578,926 1,608,033
----------------------------------
$ 5,793,676 $ 5,979,637
==================================
</TABLE>
E-20
<PAGE> 157
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE E. LOANS
Major classifications of loans are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1998 1997
-----------------------------------
<S> <C> <C>
Commercial $ 16,343,671 $ 14,259,976
Agricultural production 11,281 18,540
Real estate:
Construction 4,340,535 4,055,194
Commercial 15,017,517 15,307,816
Agricultural 141,209 120,499
Residential 23,003,256 18,234,151
Installment and consumer 2,672,721 2,404,050
Municipal loans 132,413 155,963
-----------------------------------
61,662,603 54,556,189
Allowance for loan losses 716,040 675,988
-----------------------------------
NET LOANS $ 60,946,563 $ 53,880,201
===================================
</TABLE>
Impairment of loans having a recorded investment at December 31, 1998 of
$504,535 and $576,310 at December 31, 1997 has been recognized in conformity
with FASB Statement No. 114 as amended by FASB Statement No. 118. The average
recorded investment in impaired loans during 1998 and 1997 was $625,884 and
$689,400 respectively. The total allowance for loan losses related to these
loans was $75,680 and $57,631 on December 31, 1998 and 1997 respectively.
Interest income on impaired loans of $16,333 and $18,209 was recognized for cash
payments received in 1998 and 1997 respectively.
Certain directors, executive officers, and principal shareholders of the Company
and their related interests, had loans outstanding in the aggregate amounts of
$599,442 and $513,553 at December 31, 1998 and 1997 respectively. During 1998,
$209,123 of new loans were made and repayments totaled $123,234. These loans
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the same time for comparable transactions
with other persons and did not involve more than normal risks of collectability
or present other unfavorable features.
NOTE F. LOAN SERVICING
The unpaid principal balance of mortgage loans serviced for others, which are
not included on the consolidated balance sheets, was $67,665,576 and $58,288,587
at December 31, 1998 and 1997 respectively. Custodial escrow balances maintained
in connection with the foregoing loan servicing and included in demand deposits
were approximately $51,779 and $44,461 at December 31, 1998 and 1997
respectively.
E-21
<PAGE> 158
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE G. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected in the consolidated financial statements
represents the allowance available to absorb loan losses. An analysis of changes
in the allowance is presented in the following tabulation:
<TABLE>
<CAPTION>
December 31,
------------------------------
1998 1997
------------------------------
<S> <C> <C>
BALANCE, beginning of year $ 675,988 $ 670,873
Charge-offs, net (23,948) (29,885)
Provision charged to operations 64,000 35,000
------------------------------
BALANCE, end of year $ 716,040 $ 675,988
==============================
</TABLE>
NOTE H. OFFICE BUILDINGS AND EQUIPMENT
Office buildings and equipment are stated at cost less accumulated depreciation
and are summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
Land and land improvements $ 63,018 $ 63,018
Buildings and improvements 2,181,816 2,181,816
Furniture and equipment 2,342,090 2,119,948
---------------------------------
4,586,924 4,364,782
Less accumulated depreciation 3,217,894 2,992,077
---------------------------------
TOTAL OFFICE BUILDINGS AND EQUIPMENT $ 1,369,030 $ 1,372,705
=================================
</TABLE>
Depreciation expense amounted to $225,817 in 1998 and $204,301 in 1997.
NOTE I. DEPOSITS
The aggregate amount of other Time deposits (including CD's), each with a
minimum denomination of $100,000, was approximately $4,775,532 and $1,769,695 in
1998 and 1997 respectively.
At December 31, 1998, the scheduled maturities of other Time deposits are as
follows:
<TABLE>
<S> <C>
1999 $ 17,397,268
2000 2,795,363
2001 1,013,197
2002 4,470
2003 82,592
-----------------
$ 21,292,890
=================
</TABLE>
E-22
<PAGE> 159
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE J. SHORT-TERM BORROWINGS
Short-term borrowings consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
Securities sold under repurchase agreements $ 4,809,135 $ 7,546,961
Treasury tax and loan 213,686 805,101
Note payable - bank 300,000 800,000
---------------------------------
TOTAL SHORT-TERM BORROWINGS $ 5,322,821 $ 9,152,062
================================
</TABLE>
The Company entered into a note with Marshall & Ilsley Bank with interest paid
quarterly at 6.5% in 1998 and 7.28% in 1997, principal due October 31, 1999.
Securities sold under repurchase agreements generally mature within one to 120
days from the transaction date. Information concerning securities sold under
repurchase agreements is summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
----------------------------------
<S> <C> <C>
Average balance during the year $ 7,747,004 $ 6,293,793
Average interest rate during the year 4.91% 5.10%
Maximum month-end balance during the year $ 11,577,245 $ 11,478,501
Securities underlying the agreements at year-end:
Carrying value $ 4,808,235 $ 7,399,000
Estimated fair value $ 4,821,000 $ 7,405,154
</TABLE>
Interest expense on short-term borrowing consists of:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1997
-----------------------------
<S> <C> <C>
Federal funds purchased $ 5,269 $ 1,526
Securities sold under repurchase agreements 391,911 450,336
Treasury tax and loan 19,052 17,722
Note payable - bank 45,287 84,244
-----------------------------
$ 461,519 $ 553,828
=============================
</TABLE>
E-23
<PAGE> 160
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE K. LONG-TERM BORROWINGS
Long-term borrowing consists of:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
Federal Home Loan Bank $ 8,600,000 $ 4,450,000
Unsecured promissory note 150,000 290,000
---------------------------------
TOTAL LONG-TERM BORROWINGS $ 8,750,000 $ 4,740,000
=================================
</TABLE>
On August 21, 1992, the Company entered into an advances, collateral pledge and
security agreement with the Federal Home Loan Bank (FHLB) which provides for
advances to a loanable collateral value. FHLB provides both fixed and floating
rate advances. Floating rates are tied to short-term market rates of interest,
such as Federal Funds and Treasury Bill rates. Fixed rate advances are priced in
reference to market rates of interest at the time of the advance, namely the
rates that FHLB pays to borrowers at various maturities. Various advances were
obtained with total outstanding balances of $8,600,000 and $4,450,000 at
December 31, 1998 and 1997 respectively, and bear applicable interest rates
ranging from 4.35% to 6.10%. Interest is payable monthly with principal payment
due at maturity. The advances are secured by security agreements pledging a
portion of the subsidiary Bank's real estate mortgages and securities
specifically assigned to the Federal Home Loan Bank. The carrying value of this
pledge was approximately $11,279,000 and $15,529,000 at December 31, 1998 and
1997 respectively.
During 1992, the Company entered into an agreement on an unsecured note with a
related party. The outstanding balance of the note was $150,000 and $290,000 at
December 31, 1998 and 1997, respectively, with an applicable interest rate of
7.28%. Interest is payable quarterly, and may be prepaid without penalty.
Future long-term borrowing principal payments required to be made are as
follows:
<TABLE>
<CAPTION>
Years ending December 31,
<S> <C>
1999 $ 1,350,000
2000 1,200,000
2001 4,900,000
2002 900,000
2003 400,000
-----------------
$ 8,750,000
=================
</TABLE>
Interest expense on long-term debt consists of:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1997
-----------------------------
<S> <C> <C>
Federal Home Loan Bank advances $ 340,963 $ 271,576
Unsecured promissory note 15,184 21,547
-----------------------------
$ 356,147 $ 293,123
=============================
</TABLE>
E-24
<PAGE> 161
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE L. INCOME TAXES
The provision for income taxes included in the consolidated financial statements
consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1997
-----------------------------
<S> <C> <C>
CURRENT TAXES:
Federal $ 524,175 $ 479,855
State 104,340 94,744
-----------------------------
628,515 574,599
DEFERRED INCOME TAXES (BENEFIT) (54,056) (59,215)
-----------------------------
TOTAL PROVISION FOR INCOME TAXES $ 574,459 $ 515,384
=============================
</TABLE>
The net deferred tax assets in the accompanying consolidated balance sheets
include the following amounts of deferred tax assets and liabilities:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1997
-----------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Allowance for loan losses $ 172,466 $ 156,761
Depreciation 3,797 9,306
Deferred compensation 191,581 150,105
Other 22,655 24,927
DEFERRED TAX LIABILITIES:
Discount accretion (979) (5,635)
Unrealized gain on available for sale securities (22,200) (29,779)
-----------------------------
NET DEFERRED TAX ASSETS $ 367,320 $ 305,685
=============================
</TABLE>
Management believes it is more likely than not, that the gross deferred tax
assets will be fully realized. Therefore, no valuation allowance has been
recorded as of December 31, 1998 and 1997.
E-25
<PAGE> 162
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE L. INCOME TAXES (continued)
A reconciliation of statutory federal income taxes based upon income before
taxes to the provision for federal and state income taxes, as summarized
previously, is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
1998 1997
------------------------- ----------------------
% of % of
Pretax pretax
Amount Income Amount income
-------------------------------------------------
<S> <C> <C> <C> <C>
Reconciliation of statutory to effective taxes:
Federal income taxes at statutory rate $ 584,200 34.0% $ 505,425 34.0%
Adjustments for:
Tax-exempt interest on municipal obligations (88,148) (5.1) (57,938) (3.9)
Increases in taxes resulting from state income taxes 62,665 3.6 54,650 3.6
Non-deductible amortization of cost over
equity and core deposits 23,073 1.4 23,072 1.6
Cash surrender value of life insurance (23,500) (1.4) (19,994) (1.3)
Other - net 16,169 0.9 10,169 0.7
-------------------------------------------------
EFFECTIVE INCOME TAXES - OPERATIONS $ 574,459 33.4% $ 515,384 34.7%
=================================================
</TABLE>
NOTE M. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the subsidiary Bank is involved in various
legal proceedings. In the opinion of management, any liability resulting from
such proceedings would not have a material adverse effect on the consolidated
financial statements.
The subsidiary Bank is party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit,
financial guarantees and standby letters of credit. They involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
The subsidiary Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. The subsidiary Bank uses the same credit policies in making
commitments and issuing letters of credit as it does for on-balance-sheet
instruments.
A summary of the contract or notional amount of the subsidiary Bank's exposure
to off-balance-sheet risk as of December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit $ 8,389,576 $ 11,378,081
Credit card commitments $ 2,235,083 $ 1,516,368
Standby letters of credit $ 1,568,424 $ 759,284
</TABLE>
E-26
<PAGE> 163
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE M. COMMITMENTS AND CONTINGENCIES (continued)
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Standby letters of credit are conditional
commitments issued to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Company evaluates each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts receivable,
inventory, property and equipment, and income-producing commercial properties.
Credit card commitments are unsecured.
The Company and the subsidiary Bank do not engage in the use of interest rate
swaps, futures, forwards, or options contracts.
The subsidiary Bank has entered into license agreements to maintain and operate
a branch facility under a noncancelable lease agreement. The following is a
schedule by years of future minimum rental payments required under the
noncancelable lease agreement:
<TABLE>
<S> <C>
1999 $ 5,928
2000 5,928
2001 5,928
2002 5,928
2003 5,434
-------------
$ 29,146
=============
</TABLE>
NOTE N. CONCENTRATION OF CREDIT RISK
Practically all of the subsidiary Bank's loans, commitments and commercial and
standby letters of credit have been granted to customers in the subsidiary
Bank's market area. Although the subsidiary Bank has a diversified loan
portfolio, the ability of its debtors to honor their contracts is dependent on
the economic conditions of the counties surrounding the subsidiary Bank. The
concentration of credit by type of loan are set forth in Note E.
E-27
<PAGE> 164
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE O. STOCK OPTION PLAN
The Company has granted options for 6,500 share of common stock to directors,
officers and employees of the Company. Options were granted in 1993 and
exercisable at an option price per share of $60 and must be exercised within a
ten year period. The options expire on August 24, 2003. Activity relating to the
options is summarized in the following table:
<TABLE>
<CAPTION>
Option
Options Options price
available outstanding per share
---------------------------------------------
<S> <C> <C> <C>
Balances, December 31, 1996 6,500 6,500 $ 60
Options exercised 200 200
-----------------------------
Balances, December 31, 1997 6,300 6,300 $ 60
Options exercised 2,135 2,135
-----------------------------
Balances, December 31, 1998 4,165 4,165 $ 60
=============================
</TABLE>
A reconciliation of the numerators and the denominators of earnings per share
and earnings per share assuming dilution are:
<TABLE>
<CAPTION>
Per share
Income Shares amount
--------------------------------------------
<S> <C> <C> <C>
1998:
Earnings per share - basic $ 1,143,773 63,288 $ 18.07
=======
Effect of options - 2,800
--------------------------------
EARNINGS PER SHARE - assuming dilution $ 1,143,773 66,088 $ 17.31
=======
================================
1997:
Earnings per share - basic $ 971,161 62,454 $ 15.55
=======
Effect of options - 4,134
--------------------------------
EARNINGS PER SHARE - assuming dilution $ 971,161 66,588 $ 14.58
=======
================================
</TABLE>
NOTE P. EMPLOYEE BENEFITS
The subsidiary Bank has deferred compensation contracts with six current
officers of the subsidiary Bank. For the six officers, the subsidiary Bank is
contractually required to make fixed monthly payments for a minimum number of
years upon retirement. The officers' contracts are cancelable if the officer
resigns or is terminated for cause before retirement date. The approximate
present value of these obligations are included in accrued expenses and other
liabilities. Expense related to these contracts was $105,780 in 1998 and $98,618
in 1997.
E-28
<PAGE> 165
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE P. EMPLOYEE BENEFITS (continued)
The subsidiary Bank has a defined contribution plan (the "Plan"). The Plan
covers substantially all full-time employees who are at least twenty years of
age and have a minimum of six (6) months of full-time service. Under the Plan,
the subsidiary Bank matches the contribution made by each participant up to
fifty percent of five percent of the eligible employee's annual compensation.
The matched portion of a participant's contribution is fully vested at the
completion of five years of service. The Plan expense was $22,552 in 1998 and
$15,633 in 1997.
NOTE Q. LEASES
The subsidiary Bank leases space in its building to tenants. Noncancelable
operating leases for such office space expire at various dates over the next
three years. Future minimum payments to be made by tenants as of December 31,
1998 are as follows:
<TABLE>
<S> <C>
1999 $ 100,410
2000 37,100
2001 9,690
-------------
$ 147,200
=============
</TABLE>
NOTE R. RETAINED EARNINGS
The principal source of income and funds of Pyramid Bancorp, Inc. is dividends
from its subsidiary Bank. The subsidiary Bank is prohibited from declaring or
paying any dividends without prior regulatory approval in an amount greater than
$1,538,000. Maintenance of adequate capital at the subsidiary Bank effectively
restricts potential dividends to an amount less than $1,538,000.
NOTE S. REGULATORY CAPITAL REQUIREMENTS
The subsidiary Bank is subject to various regulatory capital requirements
administered by the federal and state banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the subsidiary Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the subsidiary Bank must meet specific capital guidelines that involve
quantitative measures of the subsidiary Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
subsidiary Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk-weightings, and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the subsidiary Bank to maintain minimum amounts and ratios (set forth in
the table on the following page) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of December 31,
1998, the subsidiary Bank meets all capital adequacy requirements to which it is
subject.
As of December 31, 1998 and 1997, the most recent notification from the
regulatory agencies categorized the subsidiary Bank as well-capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well-capitalized, the subsidiary Bank must maintain minimum total risk-based,
Tier I risk-based, and leverage ratios as set forth in the table. There are no
conditions or events since these notifications that management believes have
changed the institution's category.
E-29
<PAGE> 166
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE S. REGULATORY CAPITAL REQUIREMENTS (continued)
Below is a comparison of the Company and subsidiary Bank's 1998 and 1997 actual
with the minimum requirements for well-capitalized and adequately capitalized
banks, as defined by the federal regulatory agencies' Prompt Corrective Action
Rules:
<TABLE>
<CAPTION>
To be well
capitalized under
For capital prompt corrective
Actual adequacy purposes action provisions
-------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total capital (to risk-weighted assets):
Pyramid Bancorp, Inc. $ 8,479,399 13.2% $ 5,128,997 8.0% $ N/A
Grafton State Bank $ 8,952,265 14.0% $ 5,127,347 8.0% $ 6,409,184 10.0%
Tier I capital (to risk-weighted assets):
Pyramid Bancorp, Inc. $ 7,763,359 12.1% $ 2,564,498 4.0% $ N/A
Grafton State Bank $ 8,236,225 12.9% $ 2,563,674 4.0% $ 3,845,511 6.0%
Tier I capital (to average assets):
Pyramid Bancorp, Inc. $ 7,763,359 7.9% $ 2,947,946 3.0% $ N/A
Grafton State Bank $ 8,236,225 8.3% $ 2,972,605 3.0% $ 4,954,342 5.0%
As of December 31, 1997: Total capital (to risk-weighted assets):
Pyramid Bancorp, Inc. $ 7,202,051 13.0% $ 4,434,599 8.0% $ N/A
Grafton State Bank $ 8,306,511 15.0% $ 4,434,599 8.0% $ 5,543,249 10.0%
Tier I capital (to risk-weighted assets):
Pyramid Bancorp, Inc. $ 6,526,063 11.8% $ 2,217,299 4.0% $ N/A
Grafton State Bank $ 7,630,523 13.8% $ 2,217,299 4.0% $ 3,325,949 6.0%
Tier I capital (to average assets):
Pyramid Bancorp, Inc. $ 6,526,063 7.0% $ 3,718,925 4.0% $ N/A
Grafton State Bank $ 7,630,523 8.2% $ 3,724,846 4.0% $ 4,656,058 5.0%
</TABLE>
E-30
<PAGE> 167
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE T. FAIR VALUE OF FINANCIAL INFORMATION
The estimated fair values of the Company's financial instruments are presented
below. Total assets at December 31, 1997 were less than $100,000,000, therefore,
fair value financial information was not required to be disclosed.
<TABLE>
<CAPTION>
December 31, 1998
------------------------------------
Carrying Estimated
amount fair value
------------------------------------
<S> <C> <C>
FINANCIAL ASSETS:
Cash and due from banks $ 3,565,417 $ 3,565,417
====================================
Interest-bearing deposits in banks $ 4,967,333 $ 4,967,333
====================================
Federal funds sold $ 3,000,000 $ 3,000,000
====================================
Securities $ 30,023,513 $ 30,214,051
====================================
Net loans $ 60,946,563 $ 61,482,549
====================================
Accrued interest receivable $ 620,893 $ 620,893
====================================
Cash surrender value of life insurance $ 1,386,729 $ 1,386,729
====================================
FINANCIAL LIABILITIES:
Deposits $ 82,974,207 $ 83,022,709
====================================
Short-term borrowings $ 5,322,821 $ 5,322,821
====================================
Long-term borrowings $ 8,750,000 $ 8,753,736
====================================
Accrued interest payable $ 555,214 $ 555,214
====================================
</TABLE>
The estimated fair value of fee income on letters of credit at December 31, 1998
and 1997 is insignificant. Loan commitments on which the committed interest rate
is less than the current market rate are also insignificant at December 31, 1998
and 1997.
The Company assumes interest rate risk (the risk that general interest rate
levels will change) as a result of its normal operations. As a result, fair
values of the Company's financial instruments will change when interest rate
levels change and that change may be either favorable or unfavorable to the
Company. Management attempts to match maturities of assets and liabilities to
the extent believed necessary to minimize interest rate risk. However, borrowers
with fixed rate obligations are less likely to prepay in a rising rate
environment and more likely to repay in a falling rate environment. Conversely,
depositors who are receiving fixed rates are more likely to withdraw funds
before maturity in a rising rate environment and less likely to do so in a
falling rate environment. Management monitors rates and maturities of assets and
liabilities and attempts to minimize interest rate risk by adjusting terms of
new loans and deposits and by investing in securities with terms that mitigate
the Company's overall interest rate risk.
E-31
<PAGE> 168
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE U. PYRAMID BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
<TABLE>
<CAPTION>
December 31,
---------------------------------
CONDENSED BALANCE SHEETS 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash $ 74,647 $ 71,291
Investment in Bank 8,314,677 7,690,148
Goodwill and organization costs 620,051 690,246
---------------------------------
TOTAL ASSETS $ 9,009,375 $ 8,451,685
=================================
LIABILITIES:
Short-term borrowings $ 300,000 $ 800,000
Long-term borrowings 150,000 290,000
Accrued interest payable and other liabilities 118,128 85,749
---------------------------------
TOTAL LIABILITIES 568,128 1,175,749
---------------------------------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 125,000 shares authorized; and 64,735 and 62,600
shares issued and outstanding
in 1998 and 1997 respectively 64,735 62,600
Surplus 3,466,481 3,340,516
Retained earnings 4,831,579 3,815,026
---------------------------------
8,362,795 7,218,142
Accumulated other comprehensive income 78,452 57,794
---------------------------------
TOTAL STOCKHOLDERS' EQUITY 8,441,247 7,275,936
---------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,009,375 $ 8,451,685
=================================
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------------
CONDENSED STATEMENTS OF INCOME 1998 1997
- -------------------------------------------------------------------------------------------------------------------
INCOME:
<S> <C> <C>
Dividends from subsidiary $ 680,000 $ 660,000
Interest income 2,644 1,211
Equity in undistributed net earnings of the Bank 603,870 450,466
--------------------------------
TOTAL INCOME 1,286,514 1,111,677
--------------------------------
EXPENSES:
Interest 60,471 105,791
Other 101,770 70,225
--------------------------------
TOTAL EXPENSES 162,241 176,016
--------------------------------
Income before income tax benefit 1,124,273 935,661
Income tax benefit 19,500 35,500
--------------------------------
NET INCOME $ 1,143,773 $ 971,161
================================
</TABLE>
E-32
<PAGE> 169
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE U. PYRAMID BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
(continued)
<TABLE>
<CAPTION>
December 31,
--------------------------------
CONDENSED STATEMENTS OF CASH FLOWS 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,143,773 $ 971,161
--------------------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of goodwill and organization costs 70,194 70,194
Net increase (decrease) in accrued interest payable
and other liabilities 32,379 (1,493)
Equity in undistributed income of Bank (603,870) (450,467)
--------------------------------
TOTAL ADJUSTMENTS (501,297) (381,766)
--------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 642,476 589,395
--------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES -
repayment of borrowings (640,000) (500,000)
--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 128,100 12,000
Payment of dividends (127,220) (62,600)
--------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 880 (50,600)
--------------------------------
INCREASE IN CASH 3,356 38,795
CASH, beginning of year 71,291 32,496
--------------------------------
CASH, end of year $ 74,647 $ 71,291
================================
</TABLE>
NOTE V. SUBSEQUENT EVENT
The Pyramid Bancorp, Inc. announced in January 1999, that they have agreed in
principle to merge with Merchants and Manufacturers Bancorporation, Inc. The
merger will involve an exchange of Merchants and Manufacturers common stock for
Pyramid Bancorp common stock. It is also subject to approval by shareholders and
regulators. The transaction is anticipated to close by July 1999.
E-33
<PAGE> 170
PYRAMID BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and due from banks $ 4,475
Interest-bearing deposits in banks 4,444
Federal funds sold 2,200
Available-for-sale securities at fair value: 25,178
Held to maturity securities, fair value $7,356,702 7,344
Loans, less allowance for loan losses of $753,761 61,291
Cash surrender value of life insurance 1,419
Office buildings and equipment, net 1,294
Accrued interest receivable and other assets 1,291
--------------------
TOTAL ASSETS $108,936
====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Demand deposits $ 15,084
Savings and NOW 48,370
Other Time 20,002
--------------------
Total deposits 83,456
Short-term borrowings 7,218
Long-term borrowings 8,150
Accrued interest payable and other liabilities 1,178
--------------------
TOTAL LIABILITIES 100,002
STOCKHOLDERS' EQUITY
Common stock $1 par value; 125,000 authorized;
68,100 shares issued and outstanding: $ 68
Surplus 3,665
Retained earnings 5,284
--------------------
9,017
Accumulated other comprehensive loss (83)
TOTAL STOCKHOLDERS' EQUITY 8,934
--------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $108,936
====================
</TABLE>
See notes to unaudited consolidated financial statements.
E-34
<PAGE> 171
PYRAMID BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------------- ---------------------
(In Thousands, Except Per Share Amounts)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $2,760 $2,621
Interest on investment securities:
Taxable 692 629
Tax-exempt 154 128
Interest on federal funds sold 42 39
Interest on deposits with banks 146 235
-------------------- ---------------------
TOTAL INTEREST INCOME 3,794 3,652
INTEREST EXPENSE:
Interest on deposits 1,328 1,296
Interest on short-term borrowings 168 309
Interest on long-term borrowings 227 152
-------------------- ---------------------
TOTAL INTEREST EXPENSE 1,723 1,757
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 2,071 1,895
Provision for loan losses 36 12
-------------------- ---------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,035 1,883
NONINTEREST INCOME:
Service fees 182 158
Gain on sales of loans 31 31
Other income 98 98
-------------------- ---------------------
TOTAL NONINTEREST INCOME 311 287
NONINTEREST EXPENSES:
Salary 653 599
Employee benefits 201 184
Occupancy expense 106 94
Furniture and equipment 106 78
Data processing 132 124
Other expense 279 265
-------------------- ---------------------
TOTAL NONINTEREST EXPENSE 1,477 1,344
INCOME BEFORE INCOME TAX EXPENSE 869 826
Income taxes expense 281 275
-------------------- ---------------------
NET INCOME $588 $551
==================== =====================
BASIC EARNINGS PER SHARE $ 8.73 $ 8.78
==================== =====================
DILUTED EARNINGS PER SHARE $ 8.62 $ 8.37
==================== =====================
WEIGHTED AVERAGE NUMBER OF SHARES 67,364 62,774
==================== =====================
</TABLE>
See notes to unaudited consolidated financial statements.
E-35
<PAGE> 172
PYRAMID BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $588 $551
Adjustments to reconcile net income to cash provided by operating activities
Depreciation 116 105
Provision for loan losses 36 12
Amortization and accretion of bond premiums and discounts, net 38 18
Gains on sales of mortgage loans held for sale (31) (31)
Increase in cash surrender value of life insurance (32) (32)
Amortization of intangibles and organization expense 36 36
Increase in accrued interest receivable and other assets (86) (115)
Decrease in accrued interest payable and other liabilities (243) (57)
----------------- -----------------
Total adjustments (166) (64)
----------------- -----------------
Net cash provided by operating activities 422 487
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest bearing deposits with banks 523 349
Net decrease (increase) in federal funds sold 800 (3,400)
Proceeds from sales, maturities and repayments of securities 4,515 5,276
Purchase of securities (6,804) (4,212)
Net increase in loans (349) (209)
Purchase of office buildings and equipment (41) (115)
----------------- -----------------
Net cash used in investing activities (1,356) (2,311)
FINANCING ACTIVITIES
Net increase in deposits 482 2,876
Net increase (decrease) in securities sold under repurchase agreements 1,481 (435)
Proceeds from Federal Home Loan Bank advances -- 1,500
Net decrease (increase) in other borrowings 264 (607)
Payment on Federal Home Loan Bank advances (450) (950)
Proceeds from exercise of stock options 202 16
Payment of dividends (135) (63)
----------------- -----------------
Net cash provided by financing activities 1,844 2,337
Increase in cash and due from banks 910 513
Cash and due from banks, beginning of year 3,565 3,921
----------------- -----------------
Cash and due from banks, end of period $4,475 $4,434
================= =================
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 1,733 $ 1,632
================= =================
Income taxes $ 158 $ 340
================= =================
Supplemental schedule of non-cash investing and financing activities:
Net change in unrealized loss on available for sale securities $ (161) $ (9)
================= =================
</TABLE>
See notes to unaudited consolidated financial statements
E-36
<PAGE> 173
PYRAMID BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(UNAUDITED)
NOTE 1 - GENERAL
The accounting and reporting policies of Pyramid Bancorp, Inc. and Subsidiary
(the "Company") conform to generally accepted accounting principles and to
general practices within the banking industry. Significantly accounting policies
used by the Company are described in the summary of significant accounting
policies included as a part of the December 31, 1998 and 1997 consolidated
financial statements.
The financial statements reflect adjustments, all of which are of a normal
recurring nature, and, in the opinion of management, necessary for a fair
statement of results for the interim periods. The operating results for the six
months ended June 30, 1999 and 1998 are not necessarily indicative of the
results, which may be expected for the entire year. The accompanying
consolidated financial statements should be read in conjunction with the
Company's December 31, 1998, and 1997 consolidated financial statements and
related notes.
NOTE 2 - ALLOWANCE FOR LOAN LOSSES
A summary of the changes in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
Six months ended
June 30,
1999 1998
------------------ -------------------
(Amounts in thousands)
<S> <C> <C>
Balance, beginning of period 716 676
Provision charged to expense 36 12
Loans chargeoffs, net of recoveries (2) 2
------------------ -------------------
Balance of allowance for loan losses at end of period $754 $686
Ratios:
Net charge-offs (recoveries) to loans outstanding at period end (0.00)% 0.00%
Net charge-offs (recoveries) to total allowance (0.00)% 0.00%
Allowance to year end gross loans outstanding 1.22% 1.25%
</TABLE>
E-37
<PAGE> 174
NOTE 3 - AVAILABLE FOR SALE SECURITIES
Amortized costs and fair values of available for sale securities as of June 30,
1999 are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized
cost gains losses Fair value
----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 5,901 $ 5 $ 28 $ 5,878
Obligations of other U.S. Government
agencies and corporations 2,230 - 45 2,185
Corporate securities 25 - - 25
Obligations of states and political
subdivisions 410 1 - 411
----------------- ----------------- ---------------- -----------------
8,566 6 73 8,499
Mortgage-backed securities 15,970 85 146 15,909
Federal Home Loan Bank stock 408 - - 408
Federated Money Market fund 361 - - 361
Bankers' Bank stock 1 - - 1
----------------- ----------------- ---------------- -----------------
$ 25,306 $ 91 $ 219 $ 25,178
================= ================= ================ =================
</TABLE>
NOTE 4 - HELD TO MATURITY SECURITIES
Amortized costs and fair values of held to maturity securities as of June 30,
1999 are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized
cost gains losses Fair value
----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Obligations of states and political
subdivisions $ 6,385 $ 61 $ 49 $ 6,397
Mortgage-backed securities 959 3 3 959
----------------- ----------------- ---------------- -----------------
$ 7,344 $ 64 $ 52 $ 7,356
================= ================= ================ =================
</TABLE>
NOTE 5 - COMPREHENSIVE INCOME
The Financial Accounting Standards Board (FASB) has issued SFAS No. 130,
"Reporting Comprehensive Income", which is effective for fiscal years beginning
after December 15, 1997. This statement establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. This
statement requires that all items are required to be recognized in a financial
statement that is displayed with the same prominence as other financial
statements. The Company adopted SFAS No. 130 on January 1, 1998.
The Company's comprehensive income for the six-month periods ended June 30, 1999
and 1998 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
--------------------- ---------------------
<S> <C> <C>
Net income $ 588 $ 551
Other comprehensive income, net of tax
Unrealized holding losses on securities arising during the period
(161) (9)
--------------------- ---------------------
Comprehensive income $ 427 $ 542
</TABLE>
E-38
<PAGE> 175
NOTE 6 - CHANGES IN STOCKHOLDERS' EQUITY
Changes in stockholders' equity for the six months ended June 30, 1999 and 1998
are as follows (dollars in thousands, except share data):
<TABLE>
<CAPTION>
1999 1998
-------------------- ---------------------
<S> <C> <C>
Common stock
Balance, January 1 $ 65 $ 63
Proceeds from exercise of stock options 3 --
--------------------- ---------------------
Balance, June 30 $ 68 $ 63
===================== =====================
Additional paid-in capital
Balance January 1 $ 3,466 $ 3,341
Proceeds from exercise of stock options 199 17
--------------------- ---------------------
Balance, June 30 $ 3,665 $ 3,358
===================== =====================
Retained earnings
Balance January 1 $ 4,831 $ 3,815
Net income 588 551
Cash dividends paid; 1999, $2.00 per share;
1998, $1.00 per share (135) (63)
--------------------- ---------------------
Balance, June 30 $ 5,284 $ 4,303
===================== =====================
Accumulated other comprehensive income
Balance January 1 $ 78 $ 58
Unrealized loss on securities available-for-sale (161) (9)
--------------------- ---------------------
Balance, June 30 $ (83) $ 49
===================== =====================
</TABLE>
NOTE 7 - SUBSEQUENT EVENT
The Pyramid Bancorp, Inc. announced in January 1999, that they have agreed in
principle to merge with Merchants and Manufacturers Bancorporation, Inc. The
merger will involve an exchange of Merchants and Manufacturers common stock for
Pyramid Bancorp common stock. It is also subject to approval by shareholders and
regulators. The transaction is anticipated to close by September 1999.
E-39
<PAGE> 176
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant is incorporated under the Wisconsin Business Corporation
Law (the "WBCL"). Under Section 180.0851 of the WBCL, the Registrant shall
indemnify a director or officer, to the extent such person is successful on the
merits or otherwise in the defense of a proceeding, for all reasonable expenses
incurred in the proceeding because he or she was a director or officer of the
Registrant. In all other cases, the Registrant shall indemnify a director or
officer against liability incurred in a proceeding to which such person was a
party because he or she was a director or officer of the Registrant; unless
liability was incurred because he or she breached or failed to perform a duty
owed to the Registrant and such breach or failure to perform constitutes: (i) a
willful failure to deal fairly with the Registrant 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 director or
officer had reasonable cause to believe his or her conduct was lawful or no
reasonable cause to believe his or her conduct was unlawful; (iii) a transaction
from which the director or officer derived an improper personal profit; or (iv)
willful misconduct. Section 180.0858 of the WBCL provides that subject to
certain limitations, the mandatory indemnification provisions do not preclude
any additional right to indemnification or allowance of expenses that a director
of officer may have under the Registrant's articles of incorporation, bylaws, a
written agreement between the director or officer and the Registrant or a
resolution of the Board of Directors or adopted by majority vote of the
Registrant's shareholders.
Section 180.0859 of the WBCL provides that it is the public policy of
the State of Wisconsin to require or permit indemnification, allowance of
expenses and insurance to the extent required or permitted under Sections
180.0850 to 18.0858 of the WBCL for any liability incurred in connection with a
proceeding involving a federal or state statute, rule or regulation regulating
the offer, sale or purchase of securities.
The Registrant's Articles of Incorporation contain no provisions in
relation to the indemnification of directors and officers o the Registrant.
Under Article X of the Registrant's By-Laws, the Registrant extends
rights of indemnification to any person who is made or threatened to be made a
party to any action or claim or proceeding by reason of the fact that such
person is or was a director, officer, employee or agent of the Registrant,
except as to matters in which he or she is finally adjudged to have been guilty
of fraud in the performance of his or her duty as such director, officer,
employee or agent. Indemnification is provided for expenses and amounts paid in
the final disposition of claims, actions, suits or proceedings including
settling of such matters. The rights of indemnification under the Registrant's
By-Laws are in addition to rights to which such persons may be entitled as a
matter of law, agreement, vote of shareholders or otherwise.
Officers and directors of the Registrant and Registrant's subsidiaries
are covered by directors' and officers' liability insurance under which they are
insured (subject to certain exceptions and limitations specified in the policy)
against expenses and liabilities arising out of proceedings to which they are
parties by reason of being or having been directors or officers of Registrant or
Registrant's subsidiaries.
II-1
<PAGE> 177
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description Sequential Page No.
- ----------- ----------- -------------------
<S> <C> <C>
2(a) Agreement and Plan of Merger dated as of March 9, 1999
among the Registrant, Merchants Merger Corp. and Pyramid
Bancorp., Inc., incorporated by reference to Exhibits A
and A-1 to the Proxy Statement/Prospectus of the
Registrant and Pyramid Bancorp., Inc. (the "Proxy
Statement/Prospectus").
2(b) Voting Agreement dated as of March 9, 1999 among certain
shareholders of Pyramid Bancorp., Inc. and the
Registrant incorporated by reference to Exhibit B to the
Proxy Statement/Prospectus.
3(a) Articles of Incorporation, as amended of Registrant.
3(b) Bylaws, of Registrant incorporated by reference to
Exhibit 3.2 of Registrant's Registration Statement on
Form S-1 filed on October 2, 1992 SEC File No. 33-53002.
4 The Registrant has outstanding certain long term debt.
None of such debt exceeds 10% of the total assets of
the Registrant and its consolidated subsidiaries. Thus,
copies of the constituent instruments defining the
rights of the holders of such debt are not included as
exhibits to this Registration Statement. The Registrant
agrees to furnish copies of such instruments to the
Commission upon request.
5 Opinion of Davis & Kuelthau, S.C. regarding legality of
issuance of the Registrant's securities.
8 Opinion of Davis & Kuelthau regarding certain federal
income tax matters
10(a) The 1996 Incentive Stock Option Plan of the Registrant.
10(b) Salary Continuation Agreement between Lincoln State Bank
and James Bomberg.
</TABLE>
II-2
<PAGE> 178
10(c) Employment agreements between Registrant and Conrad
Kaminski and between Lincoln State Bank and James
Bomberg incorporated by reference to Exhibit 10.2 of
Registrant's Registration Statement on Form S-1 filed on
October 2, 1992, SEC File No. 33-53002.
Employment Agreements between Registrant and Michael
J. Murry, James Mroczkowski and John Krawczyk.
Employment Agreements between M&M Services, Inc.
and Robert Blonski and Gregory Stengel, respectively.
Employment Agreement between Achieve Mortgage
Corporation and Robert Donaj.
Employment Agreement between Grafton State Bank and
Thomas Sheehan.
Pursuant to Instruction 2 of Item 601 - Exhibits,
Employment Agreements between Grafton State Bank and
Peter J. Schumacher, Richard Belling and Jefford R.
Larson, respectively, are omitted. The terms of such
agreements are substantially identical in all material
respects to the agreement between Grafton State Bank and
Thomas Sheehan.
The only material difference between the Sheehan
Agreement and the three omitted agreements are reflected
in "Position and Duties" and "Base Salary" as follows:
<TABLE>
<CAPTION>
Name Position Base Salary
<S> <C> <C> <C>
Peter J. Schumacher Controller $48,300
Richard L. Belling V.P.-Mortgages 67,000
Jefford R. Larson V.P. Commercial 62,000
Lending
</TABLE>
21 List of Subsidiaries of the Registrant.
23(a) Consent of Ernst & Young, LLP as to the financial
statements of the Registrant.
23(b) Consent of Davis & Kuelthau, S.C. incorporated by
reference to Exhibits 5 and 8.
23(c) Consent of Virchow, Krause & Co. LLP as to financial
statements of Pyramid Bancorp., Inc.
23(d) Consent of Marshall Financial Consulting LLC, financial
adviser to Pyramid.
II-3
<PAGE> 179
23(e) Consent of Michael Best & Friedrich LLC.
23(f) Rule 438 Consent of three directors of Pyramid who will
become directors of Registrant upon completion of the
Merger.
24 Powers of Attorney.
(b) No financial statement schedules are required to be filed herewith pursuant
to Item 21(b) or (c) of this Form.
ITEM 22. UNDERTAKINGS
(a)(1) The undersigned Registrant hereby undertakes:
(i) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement: (x) to include any prospectus
required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Securities Act"); (y) 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;
(z) 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.
(ii) That, for the purpose of determining any liability
under the Securities Act, 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 such time
shall be deemed to be the initial bona fide offering
thereof.
(iii) 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.
(2) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act), 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.
(3) The undersigned registrant hereby undertakes as follows: that
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
issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form
with respect to
II-4
<PAGE> 180
reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of
the applicable form.
(4) The registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (3) immediately preceding, or (ii)
that purports to meet the requirements of section 10(a)(3) of
the Securities Act and is used in connection with an offering
of securities subject to Rule 415, will be filed as 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, 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.
(5) Insofar as indemnification for liabilities arising under the
Securities Act 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 Securities Act and is, therefore,
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
or 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 Securities Act
and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Items 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.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in the registration statement when it became effective.
II-5
<PAGE> 181
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New Berlin,
State of Wisconsin, on this 31st day of August, 1999.
MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
By: /s/ Michael J. Murry
--------------------------------------
Michael J. Murry,
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
---------------- ------------------- ------------
<S> <C> <C>
/s/Michael J. Murry Chairman of the Board of August 31, 1999
- ----------------------------------------- Directors (Principal Executive
Michael J. Murry Officer)
/s/James Bomberg President and a Director August 31, 1999
- ----------------------------------------
James Bomberg
/s/James Mroczkowski Vice President, Chief Financial August 31, 1999
- ---------------------------------------- Officer, and Principal Financial
James Mroczkowski and Accounting Officer
* Director August 31, 1999
- ----------------------------------------
J. Michael Bartels
* Director August 31, 1999
- ----------------------------------------
Duane Cherek
* Director August 31, 1999
- ----------------------------------------
Robert Donaj
* Director August 31, 1999
- ----------------------------------------
Thomas Gapinski
* Director August 31, 1999
- ----------------------------------------
Casimir S. Janiszewski
* Director August 31, 1999
- ----------------------------------------
David Kaczynski
</TABLE>
II-6
<PAGE> 182
<TABLE>
<CAPTION>
<S> <C> <C>
* Director August 31, 1999
- ----------------------------------------
Conrad Kaminski
* Director August 31, 1999
- ----------------------------------------
John Krawczyk
* Director August 31, 1999
- ----------------------------------------
Nicholas Logarakis
* Director August 31, 1999
- ----------------------------------------
Longin Prazynski
* Director August 31, 1999
- ----------------------------------------
Gervaise Rose
* Director August 31, 1999
- ----------------------------------------
James Sass
* Director August 31, 1999
- ----------------------------------------
Keith Winters
</TABLE>
*Michael J. Murry hereby signs this registration statement on August
31, 1999 on behalf of each of the indicated persons for whom he is
attorney-in-fact pursuant to a power of attorney filed herewith.
/s/ Michael J. Murry
--------------------------
Michael J. Murry
II-7
<PAGE> 183
EXHIBIT INDEX
Exhibit No. Description Sequential
Page No.
2(a) Agreement and Plan of Merger dated as of March 9,
1999 among the Registrant, Merchants Merger Corp.
and Pyramid Bancorp., Inc., incorporated by
reference to Exhibits A and A-1 to the Proxy
Statement/Prospectus of the Registrant and Pyramid
Bancorp., Inc. (the "Proxy Statement/Prospectus").
2(b) Voting Agreement dated as of March 9, 1999 among
certain shareholders of Pyramid Bancorp., Inc. and
the Registrant incorporated by reference to
Exhibit B to the Proxy Statement/Prospectus.
3(a) Articles of Incorporation, as amended of Registrant.
3(b) Bylaws, of Registrant incorporated by reference to
Exhibit 3.2 of Registrant's Registration Statement on
Form S-1 filed on October 2, 1992 SEC File No. 33-
53002.
4 The Registrant has outstanding certain long term
debt. None of such debt exceeds 10% of the total
assets of the Registrant and its consolidated
subsidiaries. Thus, copies of the constituent
instruments defining the rights of the holders of
such debt are not included as exhibits to this
Registration Statement. The Registrant agrees to
furnish copies of such instruments to the
Commission upon request.
5 Opinion of Davis & Kuelthau, S.C. regarding
legality of issuance of the Registrant's
securities.
8 Opinion of Davis & Kuelthau regarding certain federal
income tax matters
10(a) The 1996 Incentive Stock Option Plan of the
Registrant.
10(b) Salary Continuation Agreement between Lincoln State
Bank and James Bomberg.
II-8
<PAGE> 184
10(c) Employment agreements between Registrant and
Conrad Kaminski and between Lincoln State Bank and
James Bomberg incorporated by reference to Exhibit
10.2 of Registrant's Registration Statement on
Form S-1 filed on October 2, 1992, SEC File No.
33-53002.
Employment Agreements between Registrant and
Michael J. Murry, James Mroczkowski and John
Krawczyk.
Employment Agreements between M&M Services,
Inc. and Robert Blonski and Gregory Stengel,
respectively.
Employment Agreement between Achieve Mortgage
Corporation and Robert Donaj.
Employment Agreement between Grafton State Bank
and Thomas Sheehan.
Pursuant to Instruction 2 of Item 601 - Exhibits,
Employment Agreements between Grafton State Bank
and Peter J. Schumacher, Richard Belling and Jefford
R. Larson, respectively, are omitted. The terms of
such agreements are substantially identical in all
material respects to the agreement between Grafton
State Bank and Thomas Sheehan.
The only material difference between the Sheehan
Agreement and the three omitted agreements are
reflected in "Position and Duties" and "Base Salary"
as follows:
<TABLE>
<CAPTION>
Name Position Base Salary
<S> <C> <C> <C>
Peter J. Schumacher Controller $48,300
Richard L. Belling V.P.-Mortgages 67,000
Jefford R. Larson V.P. Commercial 62,000
Lending
</TABLE>
21 List of Subsidiaries of the Registrant.
23(a) Consent of Ernst & Young, LLP as to the financial
statements of the Registrant.
II-9
<PAGE> 185
23(b) Consent of Davis & Kuelthau, S.C. incorporated by
reference to Exhibits 5 and 8.
23(c) Consent of Virchow, Krause & Co. LLP as to financial
statements of Pyramid Bancorp., Inc.
23(d) Consent of Marshall Financial Consulting LLC,
financial adviser to Pyramid.
23(e) Consent of Michael Best & Friedrich LLC.
23(f) Rule 438 Consent of three directors of Pyramid who
will become directors of Registrant upon completion
of the Merger.
24 Powers of Attorney.
II-10
<PAGE> 1
Exhibit 3(a)
Articles of Incorporation, as amended,
of Registrant
<PAGE> 2
<TABLE>
<CAPTION>
<S><C>
REEL 1444 IMAG 16
- -----------------------------------------------------------------------------------------------
THIS MUST BE RECORDED PROMPTLY WITH THE COUNTY REGISTER OF DEEDS
- -----------------------------------------------------------------------------------------------
REGISTER'S OFFICE ) SS
5539327 UNITED STATES OF AMERICA Milwaukee County, Wis. ) SS
RECORDED AT 8:10 AM
-----
STATE OF WISCONSIN
Office of Secretary of State MAY 11 1982 13 TO
REEL 1444 IMAGE 16
---- -----
--------------- REGISTER OF DEEDS
TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING:
The undersigned, as Secretary of State of the State of Wisconsin,
certifies that the attached is a duplicate of a document accepted and
filed in my office.
IN TESTIMONY WHEREOF, I have
hereunto set my hand and affixed
my official seal, at Madison, on
the date of filing of said docu-
ment.
Vel Phillips
VEL PHILLIPS
Secretary of State
</TABLE>
3(a)1
<PAGE> 3
ARTICLES OF INCORPORATION
OF
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
The undersigned, natural person of the age of eighteen (18) years or more,
acting as incorporators of a Corporation under the Wisconsin Business
Corporation Law, Chapter 180 of the Wisconsin Statutes, adopts the following
Articles of Incorporation for such Corporation.
ARTICLE I
The name of the Corporation shall be MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
ARTICLE II
The period of the Corporation's existence shall be perpetual.
ARTICLE III
The purposes for which the Corporation is organized are to engage in any
lawful activity within the purposes for which Corporations may be organized
under the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin
Statutes, as amended from time to time.
ARTICLE IV
The aggregate number of shares of stock which the Corporation shall have
authority to issue shall be three hundred thousand (300,000) shares of common
stock of the par value of One Dollar ($1.00) per share.
ARTICLE V
No holder of any capital stock of this Corporation shall have any
preemptive or other subscription or conversion rights of any kind, nature or
description whatsoever to any part of the unissued stock of this Corporation or
any additional stock which may be issued by reason of any increase of the
authorized capital stock of this Corporation, and all such additional shares of
stock or securities of obligations convertible into stock
3(a)-2
<PAGE> 4
may be issued and disposed of by the Board of Directors to such person or
persons and on such terms and for such consideration (so far as may be
permitted by law) as the Board of Directors, in its absolute discretion may
deem advisable.
ARTICLE VI
The name of the Corporation's initial registered agent and the address of
its initial registered office are:
Mr. Edward F. Kulinski
2266 South l3th Street
Milwaukee, WI 53215
ARTICLE VII
The number of initial directors is 9 and the names of the initial directors
are: Adrian Choinski, Thomas Gapinski, Casimir H. Janiszewski, Dr. Thomas
Kozina, Nicholas Logarakis, John M. Maliszewski, Michael J. Murry, Hamilton A.
Pinkalla and Eugene V. Roemer. Thereafter, the number of directors shall be such
number as is fixed from time to time by or in the manner provided in the
By-Laws.
ARTICLE VIII
The name and address of the incorporator are:
John M. Murry
2266 South 13th Street
Milwaukee, WI 53215
ARTICLE IX
As provided in the Wisconsin Business Corporation Law, the Corporation is
authorized to purchase, take, receive and redeem or otherwise acquire, hold,
own, pledge, transfer or otherwise dispose of its own shares, directly or
indirectly, without the consent of its shareholders and upon conditions set by
the Board of Directors.
ARTICLE X
These articles may be amended in the manner authorized by law at the time
of amendment.
-2-
3(a)-3
<PAGE> 5
EXECUTED in duplicate: April 22, 1982.
John M. Murry
-------------------------------------
John M. Murry
STATE OF WISCONSIN )
) SS
MILWAUKEE COUNTY )
Personally came before me this 22 day of April, 1982, the above-
named John M. Murry to me known to be the person who executed the foregoing
instrument, and acknowledged the same.
Cynthia M. Moczynski
- -------------------------------------
Notary Public, State of Wisconsin
My Commission Expires 2-2-86
This Document Was Drafted By
Erich Mildenberg, Attorney at Law
[SEAL]
-3-
3(a)-4
<PAGE> 6
Form 3 - Sec. State
(Ref. sec. 180.46 Wis. Stats.)
[SEAL]
UNITED STATES OF AMERICA
THE STATE OF WISCONSIN
DATE: May 3, 1982
OFFICE OF THE SECRETARY OF STATE
TO ALL TO WHOM THESE PRESENTS SHALL COME:
The undersigned, as Secretary of State of the State of Wisconsin, hereby
certifies that, on the date above written, Articles of Incorporation (or
Association) of
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
were filed in my office under the provisions of the Wisconsin Statutes, and in
particular under
(X) Chapter 180 - Wisconsin Business Corporation Law
( ) Section 180.99 - The Service Corporation Law
( ) Chapter 185 - Wisconsin Co-operative Association Act
THE STATE OF WISCONSIN does hereby grant unto said organization the powers
and privileges conferred upon such organization by the Wisconsin Statutes for
the pursuit of any purposes lawful under the chapter or section, of the
Wisconsin Statutes, of its organization except as such purposes may be further
limited in said Articles.
IN TESTIMONY WHEREOF, I have
hereunto set my hand and affixed
my official seal, at Madison, on
May 26 1982
[SEAL]
Vel Phillips
VEL PHILLIPS
Secretary of State
3(a)-5
SEE REVERSE FOR MORE INFORMATION
<PAGE> 7
REEL 1471 IMAG 1018 5566038
- ----------------------------------------------------------------
THIS MUST BE RECORDED PROMPTLY WITH THE COUNTY REGISTER OF DEEDS
- ----------------------------------------------------------------
UNITED STATES OF AMERICA REGISTER'S OFFICE }
Milwaukee County, WI} SS
State of Wisconsin RECORDED AT 10:30 AM
Office of Secretary of State
Sep 27 1982 1017-
----------
TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING: REEL 1471 IMAGE 1018
REGISTER
OF DEEDS
The undersigned, as Secretary of State of the State of Wisconsin, certifies
that the attached is a duplicate of a document accepted and filed in my office.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal, at Madison, on the date
of filing of said document.
[SEAL]
Vel Phillips
VEL PHILLIPS
Secretary of State
3-(a)(6)
<PAGE> 8
REEL 1471 IMAG 1017
FORM 4-SEC STATE 1980 State of Wisconsin CORPORATION DIVISION
STOCK-AMENDMENT SECRETARY OF STATE
Madison, Wisconsin 53702
Resolved, That
Article IV of the Corporation's Articles of Incorporation are amended to
provide as follows:
"The aggregate number of shares of stock which the
Corporation shall have authority to issue shall be six
hundred thousand (600,000) shares of common stock of
the par value of One Dollar ($1.00) per share."
__________________________________
3. (See instruction 6).
The undersigned sole incorporator of Merchants and Manufacturers Bancorporation,
Inc. has effected the above amendment pursuant to Sec. 180.49(4), Wis. Stats. No
shares of the corporation have been subscribed for or issued.
STATE OF WISCONSIN
FILED
SEP 21 1982
VEL PHILLIPS
SECRETARY OF STATE
Executed in duplicate and seal (if any) affixed this 3rd day of August, 1982
/s/ Edward F. Kulinski /s/ John M. Murry
- ---------------------------- ------------------------------
Edward F. Kulinski-Secretary John M. Murry-Incorporator
/s/ Michael Murry
(Affix Seal of State ------------------------------
that there is none) Michael Murry-President
This document was drafted by Peter J. Ruud, Esq. (See instruction 11)
-----------------------------
(Please print or type name)
This document must be filed in Milwaukee County 3(a)-7
<PAGE> 9
AMENDMENT - STOCK
Mail Returned Copy to:
(FILL IN THE NAME AND ADDRESS HERE)
Erich Mildenberg, Esq.
Davis, Kuelthau, Vergeront,
Stover, Werner & Goodland, S.C.
250 East Wisconsin Avenue
Milwaukee, WI 53202-4285
INSTRUCTIONS
1. An amendment may be effected in either of two ways. The first method is by
vote of the shareholders, at a shareholders' meeting. The second method is by
written consent of the shareholders, without a meeting.
2. If the amendment is effected by written consent, use item 1 and strike
item 2.
3. If the amendment is effected by vote of shareholders, use item 2 and strike
item 1.
4. Section 180.25 Wis. Stats. covers the vote necessary to adopt an amendment.
For corporations organized on or after January 1, 1973, the statutory minimum is
a majority of the shares entitled to vote on the matter. For corporations
previously organized the statutory minimum is 2/3 of the shares entitled to vote
unless the Articles provide for the majority vote. (If class voting is
applicable the same minimum requirements must be met for each class as well as
for the total shares entitled to vote.)
5. When the amendment is effected by written consent, ALL shareholders
entitled to vote on the subject matter must sign the consent. See section
180.52 to determine what classes or series are entitled to vote on the subject
matter.
6. The space at item 3 is for use in complying with subsecs. (6) and (7) of
Sec. 180.53 of the statutes, reading:
(6) If such amendment provides for an exchange, reclassification or
cancellation of issued shares, and if the manner in which the same shall be
effected is not set forth in the amendment, then a statement of the manner in
which the same shall be effected:
(7) If such amendment effects a change in the amount of stated capital,
then a statement of the manner in which the same is effected and a statement,
expressed in dollars, of the amount of stated capital as changed by such
amendment.
7. Execute and submit in duplicate original. Furnish Secretary of State with
two identical copies of the document. One copy will be retained (filed) by
Secretary of State and the other copy returned as you indicate in the space
above. The copy that is returned must be recorded with the Register of Deeds of
the county in which the registered office of the corporation is located.
8. Affix corporate seal. Make sure that each of the copies of the document
has an impression of the corporate seal. If the corporation does not have a
seal, write or type "NO SEAL" on each of the copies.
9. Have the President and Secretary of the corporation sign. A Vice-President
may sign in lieu of the President, and an Assistant Secretary may sign in lieu
of the Secretary. Make sure that each of the copies has original signatures --
carbon copy, xerox, or rubber stamp signatures are not acceptable.
10. FEES. The fee for filing amendment is $25, or more, to be submitted with
the document. Make check or money order payable to SECRETARY OF STATE. Your
cancelled check is your receipt. If the amendment relates to shares,
ADDITIONAL FEE may be due. The basic rate on shares is $1.25 per $1,000 on
shares having par value, and/or 2-1/2 cents per share on shares of no par value.
Compute the fee at such rates on the aggregate number of authorized shares AFTER
giving effect to the amendment. Deduct therefrom the fee applicable to the
authorized shares BEFORE amendment. The remainder, is any, is the additional
fee due.
11. Section 14.38(14) Wisconsin Statutes provides that this document shall not
be recorded unless the name of the person (individual) who, or the governmental
agency which, drafted it is printed, typewritten, stamped or written thereon in
a legible manner. The statement printed on this document, if completed, complies
with this provision. This must be completed on each of the duplicate originals.
3(a)-8
<PAGE> 10
UNITED STATES OF AMERICA
Form 14
STATE OF WISCONSIN 5977140
0FFICE OF THE SECRETARY OF STATE
REGISTER'S OFFICE
MILWAUKEE COUNTY, WI
RECORDED AT 9:05 AM
OCT 23 1986 29 ot.
REEL 1979 IMAGE 294
inch
Walter R. Bryak REGISTER
OF DEEDS
5977140
RECORD 12.00
TO ALL TO WHOM THESE PRESENTS SHALL COME:
The undersigned, as Secretary of State of the State of Wisconsin, certifies
that the attached is a duplicate of a document accepted and filed in my office.
IN TESTIMONY WHEREOF, I have
hereunto set my hand and affixed
my official seal, at Madison, on
the date of filing of said
document.
Douglas La Follette
DOUGLAS La FOLLETTE
Secretary of State
[SEAL]
3(a)-9
<PAGE> 11
Form 14
<TABLE>
<CAPTION>
<S><C>
REEL 1979 IMAG. 294 5977140
UNITED STATES OF AMERICA REGISTER'S OFFICE
Milwaukee County, WI}SS
STATE OF WISCONSIN RECORDED AT 905 AM
OFFICE OF THE SECRETARY OF STATE OCT 23 1986
----------------- REEL 1979 IMAGE 290 to 294 incl.
---- ----------------
Walter R. Baryak REGISTER
OF DEEDS
5977140
TO ALL TO WHOM THESE PRESENTS SHALL COME: RECORD 12.00
The undersigned, as Secretary of State of the State of Wisconsin,
certifies that the attached is a duplicate of a document accepted and filed in
my office.
IN TESTIMONY WHEREOF, I have hereunto
[SEAL] set my hand and affixed my official seal, at
Madison, on the date of filing of said
document.
/s/ Douglas La Follette
DOUGLAS LA FOLLETTE
Secretary of State
</TABLE>
3(a)-10
<PAGE> 12
<TABLE>
<S> <C> <C>
(Form 4) - 1983 State of Wisconsin CORPORATION DIVISION
AMENDMENT SECRETARY OF STATE P.O. Box 7846
(stock corp) Madison, WI 53707
</TABLE>
Resolved, That
See attached resolutions designated
Exhibit A, Exhibit B and Exhibit C
---------------------------------------------
The undersigned
officers of Merchants and Manufacturers Bancorporation, Inc. a Wisconsin
corporation
with registered office in Milwaukee County, Wisconsin, CERTIFY:
1
OR (Please strike out the item you do not use) - See instruction 1
1 (B) The foregoing amendments of the articles of incorporation of
said corporation were adopted by the shareholders on the 26th
day of August, 1986 by the following vote:
<TABLE>
<CAPTION>
VOTE ON ADOPTION
Number of Number of Number of Number of Number of
SHARES SHARES "Yes" votes "Yes" votes "No" votes
Class outstanding entitled to vote REQUIRED CAST CAST
<S> <C> <C> <C> <C> <C>
Common 457,500 457,500 228,751 338,192 2,353 Exh. A
338,105 1,452 Exh. B
339,264 1,293 Exh. C
- ---------------------------------------------------------------------------------------------------
Preferred None None for each of
the three
designated
resolutions
- ---------------------------------------------------------------------------------------------------
</TABLE>
STATE OF WISCONSIN
2 (See instruction 2) FILED
OCT 17, 1986
[SEAL] DOUGLAS LA FOLLETTE
SECRETARY OF STATE
Executed in duplicate and seal (if any) affix this 16th day of September,
1986.
Michael J. Murry
---------------------------------------
President
(AFFIX SEAL OR STATE THAT THERE IS NONE) Conrad C. Kaminski
---------------------------------------
Secretary
This document was drafted by Erich Mildenberg (Section
------------------------------------------
(Please print or type name)
14.38(14) Wis Statutes
3(a)-11
<PAGE> 13
EXHIBIT A
RESOLVED, that the Articles of Incorporation of this Corporation be
amended by striking out amended Article IV, relating to Capital, reading as
follows:
"The aggregate number of shares of stock which this Corporation shall
have authority to issue shall be six hundred thousand (600,000) shares
of common stock of the common stock of the par value of One Dollar
($1.00) per share."
and inserting in lieu thereof the following:
"The aggregate number of shares of stock which the Corporation shall
have authority to issue shall be one million (1,000,000) shares of
common stock of the par value of One Dollar ($1.00) per share."
3(a)-12
<PAGE> 14
EXHIBIT B
RESOLVED, that the Articles of Incorporation of this Corporation be amended
by adding Article XI, reading as follows:
ARTICLE XI
"Except as otherwise expressly provided herein:
(a) Any merger or consolidation of the Corporation with one or more other
corporations (regardless of which is the surviving corporation); or
(b) Any sale, lease, or exchange of all or substantially all of the
property and assets of the Corporation to or with one or more
corporations, persons, or other entities shall require the affirmative
vote of the holders of at least eighty percent (80%) of the outstanding
shares of capital stock of the Corporation entitled to vote on the
matter.
However, the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Corporation entitled to vote on a
matter described in paragraphs (a) and (b) above shall apply to any such
transaction which is approved by resolution adopted by the affirmative vote of
the majority of the entire Board of Directors of the Corporation in office at
the time of such approval at any time prior to the mailing to shareholders of
notice of the meeting at which the shareholders' vote on such matter is to be
held.
If, without regard to this Article XI, applicable law or these Articles of
Incorporation would require a vote of shareholders of one or more classes of
the Corporation's outstanding shares, voting separately as a class, for
approval of the transaction described in paragraph (a) or (b) above and
submitted to the shareholders for a vote, then the 80% or majority vote (as
the case may be) required by this Article XI shall also apply to each such
class, voting separately as a class.
Notwithstanding the foregoing, this Corporation may merge into itself any
Corporation, of which at least ninety percent (90%) of the outstanding shares of
each class is owned by this Corporation, without approval by vote of
shareholders of either Corporation in accordance with the procedures set forth
in Section 180.685, Wisconsin Statutes, or any successor statute of similar
import as is in effect at the time of such merger".
3(a)-13
<PAGE> 15
EXHIBIT C
RESOLVED, that the Articles of Incorporation of this Corporation be amended
by striking out Article X reading as follows:
"These articles may be amended in the manner by law at the time of
amendment."
and inserting in lieu thereof the following:
"These articles may be amended in the manner authorized by law at the
time of amendment; provided that in the case of an amendment to Article XI
of these Articles of Incorporation the affirmative vote of the holders of
at least eighty percent (80%) of the outstanding shares of stock of the
Corporation entitled to vote on such amendment shall be required to adopt
such amendment to their Articles of Incorporation.
However, the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Corporation entitled to vote
on an amendment to the Articles of Incorporation shall apply to any such
amendment which is approved by resolution adopted by the affirmative vote
of a majority of the entire Board of Directors of the Corporation in office
at the time of such approval at any time prior to the mailing to
shareholders of the notice of meeting at which the shareholders' vote on
such matter is to be held.
If, without regard to this Article X, applicable law or these Articles
of Incorporation would require a vote of shareholders of one or more
classes of the Corporation's outstanding shares, voting separately as
a class, for approval of an amendment to the Articles of Incorporation,
then the vote required by this Article X shall also apply to each such
class, voting separately as a class."
3(a)-14
<PAGE> 16
Form 4 ***FOR USE ON AND AFTER JANUARY 1, 1991***
Secretary of State
WISCONSIN
11/90
ARTICLES OF AMENDMENT
STOCK (FOR PROFIT)
A. Name of Corporation: Merchants and Manufacturers Bancorporation, Inc.
-----------------------------------------------------
(prior to any change effected by this amendment)
Text of Amendment:
See attachments
B. Amendment(s) to the articles of incorporation adopted on December 16, 1992
-----------------
(date)
Indicate the method of adoption by checking the appropriate choice below:
( ) By the Board of Directors (In accordance with sec. 180.1002,
Wis. Stats.)
OR
( x ) By the Board of Directors and Shareholders (In accordance with sec.
180.1003, Wis Stats.)
OR
( ) By Incorporators or Board of Directors, before issuance of shares (In
accordance with sec. 180.1005, Wis. Stats.)
C. Executed on behalf of the corporation on December 23, 1992
--------------------------------
(date)
Michael J. Murry
--------------------------------
(signature)
Michael J. Murry
--------------------------------
(printed name)
Chairman of the Board of
Directors and Chief Executive
Officer
--------------------------------
(title)
D. This document was drafted by Erich Mildenburg, Attorney at Law
---------------------------------------------
(name of individual required by law)
SEE REVERSE for Instructions, Suggestions, Filing Fees and Procedures
3(a)-15
Printed on Recycled Paper
<PAGE> 17
ARTICLES OF AMENDMENT Stock (for profit)
Erich Mildenberg Please indicate where you would like
Davis & Kuelthau, S.C. the acknowledgement copy of the filed
111 East Kilbourn Avenue, Suite 1400 document sent. Please include complete
Milwaukee, W1 53202 name and mailing address.
Your phone number during the day: (414) 276 - 0200
----- ----------
INSTRUCTIONS (Ref. sec. 180.1006 Wis. Stats. for document content)
Submit one original and one exact copy to Secretary of State, P.O. Box
7846, Madison, Wisconsin, 53707-7846. The original must include an original
manual signature (sec. 180-0120(3)(c), Wis. Stats.)
A. State the name of the corporation (before any changes effected by this
amendment) and the text of the amendment(s).
If an amendment provides for an exchange, reclassification or cancellation
of issued shares, state the provisions for implementing the amendment if not
contained in the amendment itself.
B. Enter the date of adoption of the amendment(s). If there is more than one
amendment, identify the date of adoption of each. Mark one of the three choices
to indicate the method of adoption of the amendment(s).
By Board of Directors - Refer to sec. 180.1002 Wis. Stats. for specific
information on the character of amendments that may be adopted by the Board of
Directors without shareholder action.
By Board of Directors and Shareholders - Amendments proposed by the Board
of Directors and adopted by shareholder approval. Voting requirements differ
with circumstances and provisions in the articles of incorporation. See sec.
180.1003 Wis. Stats. for specific information.
By Incorporators or Board of Directors - Before issuance of shares - See
sec. 180.1005 Wis. Stats. for conditions attached to the adoption of an
amendment approved by a vote or consent of less than 2/3rds of the shares
subscribed for.
C. Enter the date of execution and the name and title of the person signing the
document. The document must be signed by one of the following: An officer (or
incorporator if directors have not been elected) of the corporation or the
fiduciary if the corporation is in the hands of a receiver, trustee, or other
court appointed fiduciary. At least one copy must bear an original manual
signature.
D. If the document is executed in Wisconsin, sec. 14.38(14) Wis. Stats. provides
that it shall not be filed unless the name of the drafter (either an individual
or a governmental agency) is printed in a legible manner.
FILING FEES
Submit the document with a minimum filing fee of $40.00, payable to
SECRETARY OF STATE. If the amendment causes an increase in the number of
authorized shares, provide an additional fee of 1 cent for each new authorized
share. When the document has been filed, an acknowledgement copy stamped "FILED"
will be sent to the address indicated above.
3(a)-16
<PAGE> 18
ARTICLE XII
The business and affairs of the Corporation shall be managed by its Board
of Directors.
(a) The number of directors of the Corporation shall be not less than
eleven (11) nor more than twenty (20), the exact number of directors
to be determined at each annual meeting of shareholders or, from time
to time, within such limits by a majority of the Board of Directors
but in no event shall a decrease in the number of directors shorten
the term of any incumbent director.
(b) A majority of the Board of Directors of the Corporation may by
appointment fill any vacancy on the Board, including any vacancies
resulting from an increase in the authorized number of directors,
until the next succeeding election of the class of directors to which
such appointment was made.
(c) The directors of this Corporation shall be divided into three classes,
designated Class I, Class II, and Class III; the initial term of
office of Class I directors shall expire at the annual meeting of
shareholders to be held in 1993, the initial term of office of Class
II directors shall expire at the annual meeting of shareholders to be
held in 1994 and the initial term of Class III directors shall expire
at the annual meeting of shareholders to be held in 1995, with each
class to hold office until the successors of such class are duly
elected and qualified. At each annual meeting of shareholders, the
successors of the class of directors whose initial term expires at
that meeting shall be elected to hold office for a term expiring at
the annual meeting of shareholders held in the third year following
the year of their election. Each class shall consist, as nearly as
possible, of one-third of the total number of directors constituting
the entire Board of Directors. If the number of directors is changed
pursuant to paragraph (a) of this Article XII, any increase or
decrease shall be apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as possible. Any
director elected or appointed to fill any vacancy in the Board of
Directors, including a vacancy created by an increase in the number of
directors, shall hold office for the remaining term of directors of
the class to which he has been elected or appointed and until his
successors shall be elected and shall qualify.
3(a)-17
<PAGE> 19
ARTICLE XIII
Any sale or merger of any of the Corporation's subsidiaries, including
a sale of substantially all of a subsidiary's assets, shall require the
affirmative vote of eighty percent (80%) or more of the Corporation's Board
of Directors, and any subsequent amendment to the requirement for such
eighty percent (80%) approval shall also require adoption by at least eighty
percent (80%) of the Board of Directors of Merchants.
3(a)-18
<PAGE> 20
STATE OF WISCONSIN
FILED
***FOR USE ON AND AFTER JANUARY 1, 1991*** -------------------
AUG 26 1993
-------------------
DOUGLAS LA FOLLETTE
SECRETARY OF STATE
ARTICLES OF AMENDMENT
STOCK (FOR PROFIT)
A. Name of Corporation: Merchants and Manufacturers Bancorporation, Inc.
-----------------------------------------------------
(prior to any change effected by this amendment)
Text of Amendment:
Resolved, That Article IV of the Articles of Incorporation be amended to
read as follows:
"The aggregate number of shares of stock which the Corporation shall
have authority to issue shall be One Million Five Hundred Thousand
(1,500,000) shares of common stock of the par value of One Dollar
($1.00) per share."
B. Amendment(s) to the articles of incorporation adopted on July 28, 1993
------------------
(date)
Indicate the method of adoption by checking the appropriate choice below:
( ) By the Board of Directors (In accordance with sec. 180.1002, Wis.
Stats.)
OR
( x ) By the Board of Directors and Shareholders (In accordance with sec.
180.1003, Wis. Stats.)
OR
( ) By Incorporators or Board of Directors, before issuance of shares
(In accordance with sec. 180.1005, Wis. Stats.)
C. Executed on behalf of the corporation on August 9, 1993
----------------------------------
(date)
Michael J. Murry
----------------------------------
(signature)
Michael J. Murry
----------------------------------
(printed name)
Chairman of the Board of Directors
and Chief Executive Officer
----------------------------------
(title)
D. This document was drafted by Erich Mildenberg, Attorney at Law
---------------------------------------------
(name of individual required by law)
SEE REVERSE for Instructions, Suggestions, Filing Fees and Procedures
3(a)-19
<PAGE> 21
ARTICLES OF AMENDMENT STOCK (FOR PROFIT)
Erich Mildenberg Please indicate where you would like
Davis & Kuelthau, S.C. the acknowledgement copy of the filed
111 East Kilbourn Ave. - Suite 1400 document sent. Please include complete
Milwaukee, WI 53202 name and mailing address.
Your phone number during the day: (414) 276 - 0200
---- --- ----
INSTRUCTIONS (Ref. sec. 180.1006 Wis. Stats. for document content)
Submit one original and one exact copy to Secretary of State, P.O. Box
7846, Madison, Wisconsin, 53707-7846. The original must include an original
manual signature (sec. 180-0120(3)(c), Wis. Stats.)
A. State the name of the corporation (before any changes effected by this
amendment) and the text of the amendment(s).
If an amendment provides for an exchange, reclassification or cancellation
of issued shares, state the provisions for implementing the amendment if not
contained in the amendment itself.
B. Enter the date of adoption of the amendment(s). If there is more than one
amendment, identify the date of adoption of each. Mark one of the three choices
to indicate the method of adoption of the amendment(s).
By Board of Directors - Refer to sec. 180.1002 Wis. Stats. for specific
information on the character of amendments that may be adopted by the Board of
Directors without shareholder action.
By Board of Directors and Shareholders - Amendments proposed by the Board
of Directors and adopted by shareholder approval. Voting requirements differ
with circumstances and provisions in the articles of incorporation. See sec.
180.1003 Wis. Stats. for specific information.
By Incorporators or Board of Directors - Before issuance of shares - See
sec. 180.1005 Wis. Stats. for conditions attached to the adoption of an
amendment approved by a vote or consent of less than 2/3rds of the shares
subscribed for.
C. Enter the date of execution and the name and title of the person signing the
document. The document must be signed by one of the following: An officer (or
incorporator if directors have not been elected) of the corporation or the
fiduciary if the corporation is in the hands of a receiver, trustee, or other
court appointed fiduciary. At least one copy must bear an original manual
signature.
D. If the document is executed in Wisconsin, sec. 14.38(14) Wis. Stats.
provides that it shall not be filed unless the name of the drafter (either an
individual or a governmental agency) is printed in a legible manner.
FILING FEES
Submit the document with a minimum filing fee of $40.00, payable to
SECRETARY OF STATE. If the amendment causes an increase in the number of
authorized shares, provide an additional fee of 1 cent for each new authorized
share. When the document has been filed, an acknowledgement copy stamped "FILED"
will be sent to the address indicated above.
3(a)-20
<PAGE> 22
STATE OF WISCONSIN
FILED
----------------------
JULY 27, 1998
----------------------
ARTICLES OF AMENDMENT DEPARTMENT OF
STOCK (FOR PROFIT) FINANCING INSTITUTIONS
----------------------
A. Name of Corporation Merchants & Manufacturers Bancorporation, Inc.
-----------------------------------------------------
(prior to any change effected by this amendment)
Text of Amendment (Refer to the existing articles of incorporation and
instruction A. Determine those items to be changed and set forth below
the number identifying the paragraph being changed and how the amended
paragraph is to read.)
RESOLVED, THAT, the articles of incorporation be amended as follows:
Resolved, That Article IV of the Articles of Incorporation be amended to
read as follows:
"The aggregate number of shares of stock which the Corporation shall
have authority to issue shall be Three Million (3,000,000) shares of
common stock of the par value of One Dollar ($1.00) per share."
B. Amendment(s) adopted on May 26, 1998
-------------------------------------
(date)
Indicate the method of adoption by checking the appropriate choice below:
( ) In accordance with sec. 180.1002, Wis. Stats. (By the Board of
Directors)
OR
( x ) In accordance with sec. 180.1003, Wis. Stats. (By the Board of
Directors and Shareholders)
OR
( ) In accordance with sec. 180.1005, Wis. Stats. (By Incorporators or
Board of Directors, before issuance of shares)
C. Executed on behalf of the corporation on July 7, 1998
--------------------------------
(date)
John Krawczyk
----------------------------------
(signature)
John Krawczyk
----------------------------------
(printed name)
Executive Vice President
----------------------------------
(title)
D. This document was drafted by John Krawczyk
---------------------------------------------
(name of individual required by law)
FILING FEE - $40.00 OR MORE
SEE REVERSE for Instructions, Suggestions, Filing Fees and Procedures
3(a)-21
<PAGE> 23
ARTICLES OF AMENDMENT
STOCK (FOR PROFIT)
<TABLE>
<S> <C>
John Krawczyk Please indicate where you would like
Merchants & Manufacturers Bancorporation Inc. the acknowledgement copy of the filed
PO Box 511160 document sent. Please include complete
New Berlin WI 53151-1160 name and mailing address.
</TABLE>
Your phone number during the day: (414) 827-6712
INSTRUCTIONS (Ref. sec. 180.1006 Wis. Stats. for document content)
Submit one original and one exact copy to Dept. of Financial Institutions,
P.O. Box 7846, Madison, Wisconsin 53707-7846. (If sent by Express or Priority
U.S. mail, address to 345 W. Washington Ave. 3rd Floor, Madison WI 53703). The
original must include an original manual signature (sec. 180.0120(3)(c), Wis.
Stats.). If you have any additional questions, please call the Division of
Corporate and Consumer Services at 608/266-3590.
A. State the name of the corporation (before any changes effected by this
amendment) and the text of the amendment(s). The text should recite the
resolution adopted (e.g. "RESOLVED, THAT, Article 1 of the Articles of
Incorporation is hereby amended to read as follows . . . etc.")
If an amendment provides for an exchange, reclassification or cancellation
of issued shares, state the provisions for implementing the amendment if
not contained in the amendment itself.
B. Enter the date of adoption of the amendment(s). If there is more than one
amendment identify the date of adoption of each. Mark one of the three
choices to indicate the method of adoption of the amendment(s).
By Board of Directors - Refer to sec. 180.1002 Wis. Stats. for specific
information on the character of amendments that may be adopted by the Board
of Directors without shareholder action.
By Board of Directors and Shareholders - Amendments proposed by the Board
of Directors and adopted by shareholder approval. Voting requirements
differ with circumstances and provisions in the articles of incorporation.
See sec. 180.1003 Wis. Stats. for specific information.
By Incorporators or Board of Directors - Before issuance of shares - See
sec. 180.1005 Wis. Stats. for conditions attached to the adoption of an
amendment approved by a vote or consent of less than 2/3rds of the shares
subscribed for.
C. Enter the date of execution and the name and title of the person signing
the document. The document must be signed by one of the following: An
officer (or incorporator if directors have not yet been elected) of the
corporation or the fiduciary if the corporation is in the hands of a
receiver, trustee, or other court-appointed fiduciary. At least one copy
must bear an original manual signature.
D. If the document is executed in Wisconsin, sec. 182.01(3) Wis. Stats.
provides that it shall not be filed unless the name of the drafter (either
an individual or a governmental agency) is printed in a legible manner. If
document is NOT drafted in Wisconsin, please so state.
FILING FEES
Submit the document with a minimum filing fee of $40.00, payable to
DEPT. OF FINANCIAL INSTITUTIONS. If the amendment causes an increase in the
number of authorized shares, provide an additional fee of 1 cent for each new
authorized share. When the document has been filed, an acknowledgement copy
stamped "FILED" will be sent to the address indicated above.
3(a)-22
<PAGE> 24
STATE OF WISCONSIN
FILED
ARTICLES OF AMENDMENT ----------------------
STOCK (FOR PROFIT) JUN 16, 1999
----------------------
DEPARTMENT OF
FINANCIAL INSTITUTIONS
----------------------
A. Name of Corporation: Merchants and Manufacturers Bancorporation, Inc.
-----------------------------------------------------
(prior to any change effected by this amendment)
Text of Amendment (Refer to the existing articles of incorporation and
instruction A. Determine those items to be changed and set forth below
the number identifying the paragraph being changed and how the amended
paragraph is to read.)
RESOLVED, THAT, the articles of incorporation be amended as follows:
Resolved, That Article IV of the Articles of Incorporation be amended to
read as follows:
"The aggregate number of shares of stock which the Corporation shall
have authority to issue shall be Six Million (6,000,000) shares of
common stock of the par value of One Dollar ($1.00) per share."
B. Amendment(s) adopted on May 25, 1999
--------------------------------------------------
(date)
Indicate the method of adoption by checking the appropriate choice below:
( ) In accordance with sec. 180.1002, Wis. Stats. (By the Board of
Directors)
OR
( x ) In accordance with sec. 180.1003, Wis. Stats. (By the Board of
Directors and Shareholders)
OR
( ) In accordance with sec. 180.1005, Wis. Stats. (By Incorporators or
Board of Directors, before issuance of shares)
C. Executed on behalf of the corporation on June 7, 1999
--------------------------
(date)
John Krawczyk
--------------------------------
(signature)
John Krawczyk
---------------------------------
(printed name)
Executive Vice President
---------------------------------
(officer's title)
D. This document was drafted by John Krawczyk
------------------------------------
(name of individual required by law)
FILING FEE - $40.00 OR MORE
SEE REVERSE for Instructions, Suggestions, Filing Fees and Procedures
3(a)-23
Printed on Recycled Paper
<PAGE> 25
ARTICLES OF AMENDMENT
STOCK (FOR PROFIT)
<TABLE>
<S> <C>
John Krawczyk Please indicate where you would like
Merchants & Manufacturers Bancorporation, Inc. the acknowledgement copy of the filed
PO Box 511160 document sent. Please include complete
New Berlin, WI 53151-1160 name and mailing address.
</TABLE>
Your phone number during the day: (414) 827-6712
---- --- ----
INSTRUCTIONS (Ref. sec. 180.1006 Wis. Stats. for document content)
Submit one original and one exact copy to Dept. of Financial Institutions,
P.O. Box 7846, Madison, Wisconsin, 53707-7846. (If sent by Express or Priority
U.S. mail, address to 30 W. Mifflin Street, 9th Floor, Madison WI 53703). The
original must include an original, manual signature (sec. 180-0120(3)(c), Wis.
Stats.). If you have any additional questions, please call the Division of
Corporate and Consumer Services at 608/266-3590.
A. State the name of the corporation (before any changes effected by this
amendment) and the text of the amendment(s). The text should recite the
resolution adopted (e.g., "RESOLVED, THAT, Article 1 of the Articles of
Incorporation is hereby amended to read as follows ... etc.")
If an amendment provides for an exchange, reclassification or cancellation
of issued shares, state the provisions for implementing the amendment if
not contained in the amendment itself.
B. Enter the date of adoption of the amendment(s). If there is more than one
amendment, identify the date of adoption of each. Mark one of the three
choices to indicate the method of adoption of the amendment(s).
By Board of Directors - Refer to sec. 180.1002 Wis. Stats. for specific
information on the character of amendments that may be adopted by the Board
of Directors without shareholder action.
By Board of Directors and Shareholders - Amendments proposed by the Board
of Directors and adopted by shareholder approval. Voting requirements
differ with circumstances and provisions in the articles of incorporation.
See sec. 180.1003 Wis. Stats. for specific information.
By Incorporators or Board of Directors - Before issuance of shares - See
sec. 180.1005 Wis. Stats. for conditions attached to the adoption of an
amendment approved by a vote or consent of less than 2/3rds of the shares
subscribed for.
C. Enter the date of execution and the name and title of the person signing
the document. The document must be signed by one of the following: An
officer (or incorporator if directors have not been elected) of the
corporation or the fiduciary if the corporation is in the hands of a
receiver, trustee, or other court-appointed fiduciary. At least one copy
must bear an original manual signature.
D. If the document is executed in Wisconsin, sec. 182.01(3) Wis. Stats.
provides that it shall not be filed unless the name of the drafter (either
an individual or a governmental agency) is printed in a legible manner. If
document is NOT drafted in Wisconsin, please so state.
FILING FEES
Submit the document with a minimum filing fee of $40.00, payable to
DEPT. OF FINANCIAL INSTITUTIONS. If the amendment causes an increase in the
number of authorized shares, provide an additional fee of 1 cent for each new
authorized share. When the document has been filed, an acknowledgement copy
stamped "FILED" will be sent to the address indicated above.
3(a)-24
<PAGE> 1
EXHIBIT 5
OPINION OF DAVIS & KUELTHAU, S.C. REGARDING
LEGALITY OF ISSUANCE OF REGISTRANT'S SECURITIES.
<PAGE> 2
EXHIBIT 5
[date]
Board of Directors
Pyramid Bancorp., Inc.
101 Falls Road
Grafton, W1 53024
Gentlemen:
We have acted as counsel to Merchants and Manufacturers Bancorporation,
Inc. a Wisconsin corporation ("Merchants") in connection with the acquisition
of Pyramid Bancorp, Inc., a Wisconsin corporation ("the Company"), by Merchants
through the merger of the Company with and into Merchants Merger Corp. ("Merger
Corp."), a wholly-owned subsidiary of Merchants, pursuant to the terms and
conditions of the Agreement and Plan of Merger dated as of March 9, 1999 by and
between Merchants and the Company, as amended as of June 10, 1999, (the
"Agreement"). This opinion is being delivered to you pursuant to Section
7.03(d) of the Agreement. All capitalized terms which are defined in the
Agreement shall have the same meanings when used herein, unless otherwise
specified.
We have examined originals or copies, certified, or otherwise identified to
our satisfaction, of all such records of Merchants, agreements and other
instruments, certificates of officers and representatives of Merchants,
certificates of public officials and other documents which we have deemed
necessary as a basis for the opinions hereinafter expressed. As to various
questions of fact material to our opinion, we have relied upon certificates of
officers of Merchants. In rendering this opinion, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to original documents of all documents submitted
to us as copies or drafts of documents to be executed, the due execution of the
Agreement by and the enforceability of the Agreement against the Company.
Whenever this opinion refers to matters within our "knowledge," "known to us" or
of which we "know," such reference is limited to (1) the facts within our actual
knowledge after an inquiry of the attorneys and legal assistants of this firm
who have provided legal services to Merchants within the past 12 months and (2)
facts represented to us in certificates of officers of Merchants, copies of
which are attached hereto (the "Officer's Certificates). We have made no other
inquiry or investigation as to factual matters.
Based on the foregoing and upon such additional investigation of law as we
have deemed necessary, it is our opinion that:
1. Merchants is a corporation existing under the laws of the State of
Wisconsin and, based solely on a certificate of the Department of Financial
Institutions of Wisconsin, (a) has filed with the Department of Financial
Institutions during its most recently completed report year, the required annual
report; (b) is not the subject of a proceeding under Wisconsin Statutes ss.
180.1421 to cause its administrative dissolution; (c) no determination has been
made by the Department of Financial Institutions that grounds exist for such
action; (d) no filing has been made with the Department of Financial
Institutions of a decree of dissolution with respect to Merchants; and (e)
5-1
<PAGE> 3
Board of Directors
[date]
Page 2
Articles of Dissolution of Merchants have not been filed with the Department of
Financial Institutions.
2. Merchants has the corporate power and corporate authority (and
has received appropriate authorizations from applicable regulatory agencies) to
own its properties and assets and to carry on its business as now being
conducted.
3. The execution, delivery and performance of the Agreement by
Merchants has been duly authorized and approved by all requisite corporate
action on the part of Merchants. The Agreement has been duly executed and
delivered by Merchants and constitutes a valid and binding obligation of
Merchants, enforceable against Merchants in accordance with its terms (a) except
as such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditor's rights generally and (b) subject to general principles of equity,
regardless of whether such enforceability is considered in a proceeding equity
or at law.
4. The execution and delivery of the Agreement and the
consummation by Merchants of the transactions contemplated by the Agreement will
not conflict with or result in a breach of or violation of, or default under (a)
the Articles of Incorporation or By-Laws of Merchants, (b) any order, writ,
judgment or decree known to us to which Merchants is subject or (c) any
agreement known to us to which Merchants is a party.
5. To our knowledge, all approvals, consents, authorizations or
modification which are required on the part of Merchants to permit the execution
and performance of Merchants' obligations under the Agreement and the
transaction contemplated therein have been obtained and are in full force and
effect.
6. To our knowledge, except as disclosed in Section 3.09 of the
Merchants' Disclosure Schedule and in the Merchants' SEC Reports filed prior to
the date of the Agreement, there is no (a) litigation, proceeding or
governmental investigation pending or threatened against Merchants or any of its
properties, assets or business or the transaction contemplated by the Agreement
which, if adversely determined, in our judgment, could reasonably be anticipated
to result in any material adverse effect on Merchants or (b) decree (other than
decrees of general applicability to banks generally) or judgment of any court or
government agency to which Merchants is subject and, which, in our judgment,
could reasonably be anticipated to have a material adverse effect on the
financial condition, results of operations, assets, business or prospects of
Merchants.
7. The shares of Merchants Common Stock to be delivered to holders
of the Company Common Stock pursuant to the Agreement have been duly
authorized and such shares of Merchants Common Stock, at the Effective Time,
will be validly issued, fully paid and nonassessable (except as set forth in
Wisconsin Statutes ss. 180.0622, as interpreted).
5-2
<PAGE> 4
Board of Directors
[date]
Page 3
We have not independently determined the accuracy and completeness of
or otherwise verified, and we are not passing upon and assume no responsibility
for the accuracy or completeness of, the statements contained in the Proxy
Statement/Prospectus or the Registration Statement. We have, however, generally
reviewed and discussed the contents of the Proxy Statement/Prospectus and the
Registration Statement with certain officers and employees of Merchants. In the
course of such review and discussions, nothing has come to our attention which
causes us to believe that the Proxy Statement/Prospectus at the time it was
first mailed to holders of the Company Common Stock or at the time of the
Company's shareholder meeting or Registration Statement, at the time it became
effective and at the Effective Time, contained any untrue statement of material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (except that the
foregoing statement does not apply to the financial statements and other
statistical or financial data or information included therein or any information
about or supplied by the Company for use in the Proxy Statement/Prospectus or
the Registration Statement as to which we express no belief).
The opinions herein are limited to the law of the State of Wisconsin
and the federal law of the United States. This opinion is rendered solely for
your information and assistance in connection with the transaction described
above and may not be relied upon by any other person or for any other purpose
without our prior written consent.
We hereby consent to the use of our name beneath the caption "Legal
Matters" in the Proxy Statement/Prospectus forming part of the Registration
Statement and to the filing of a copy of this opinion as an exhibit thereto.
In giving our consent, we do not admit that we are "experts" within the meaning
of Section 11 of the Act or within the category of persons whose consent is
required by Section 7 of the Act.
Very truly yours,
/s/ Davis & Kuelthau, S.C.
DAVIS & KUELTHAU, S.C.
EM: llb
5-3
<PAGE> 1
EXHIBIT 8
OPINION OF DAVIS & KUELTHAU, S.C. REGARDING CERTAIN
FEDERAL INCOME TAX MATTERS.
<PAGE> 2
EXHIBIT 8
[DAVIS & KUELTHAU, S.C. LETTERHEAD]
1999
Merchants and Manufacturers Bancorporation, Inc.
14100 West National Avenue
New Berlin, Wisconsin 53151
Pyramid Bancorp, Inc.
101 Falls Road
Grafton, Wisconsin 53024
Gentlemen:
You have requested our opinion with respect to certain federal income
tax consequences in connection with the Agreement and Plan of Merger ("Merger")
by and among Merchants and Manufacturers Bancorporation, Inc. ("Merchants"), a
Wisconsin corporation, Merchants Merger Corp. ("Merger Corp."), a Wisconsin
corporation and a wholly owned subsidiary of Merchants, and Pyramid Bancorp,
Inc. ("Pyramid"), a Wisconsin corporation. Pursuant to the Merger, and as
described in the Securities and Exchange Commission Form S-4 Registration
Statement, Pyramid will merge with and into Merger Corp. The shareholders of
Pyramid will become shareholders of Merchants, receiving 9 shares of common
stock for each common share of Pyramid. No fractional shares of Merchants will
be issued, and in lieu thereof, a cash payment shall be made.
In rendering our opinion, we have relied upon (1) certain factual
matters and representations set forth in the Agreement and Plan of Merger dated
March 9, 1999, as amended on June 10, 1999, (2) the Securities and Exchange
Commission Form S-4 Registration Statement, and (3) including the following
representations: (i) The fair market value of the Merchants stock and other
consideration received by each Pyramid shareholder will be approximately equal
to the fair market value of the Pyramid stock surrendered in the exchange. (ii)
Following the transaction, Merger Corp. will not issue additional shares of its
stock that would result in Merchants losing control of Merger Corp. within the
meaning of Section 368(c)(1). (iii) Merchants has no plan or intention to
reacquire any of its stock issued in the transaction. (iv) Merchants has no plan
or intention to liquidate Merger Corp.; to merge Merger Corp. with and into
another corporation; to sell or otherwise dispose of the stock of Merger Corp.;
or to cause Merger Corp. to sell or otherwise dispose of any of the assets of
Pyramid acquired in the transaction, except for the dispositions made in the
ordinary course of business or transfers described in Section 368(a)(2)(C) of
the Internal Revenue Code. (v) The liabilities of Pyramid assumed by Merger
Corp. and the liabilities
8-1
<PAGE> 3
, 1999
Page 2
to which the transferred assets of Pyramid are subject were incurred in the
ordinary course of business. (vi) Following the transaction, Merger Corp. will
continue the historic business of Pyramid or use a significant portion of
Pyramid's business assets in a business.
Subject to the foregoing and to the conditions and limitations set
forth below, it is our opinion for federal income tax purposes that:
1. Provided that the merger of Pyramid with and into Merger
Corp. qualifies as a statutory merger under applicable state
law, the Merger will constitute a reorganization within the
meaning of Sections 368(a)(l)(A) and 368(a)(2)(D) of the
Code.
2. Merchants, Merger Corp. and Pyramid each will be a "party to a
reorganization" within the meaning of section 368(b) of the
Code.
3. No gain or loss will be recognized by Merchants or Merger
Corp. or Pyramid, as a result of the Merger.
4. No gain or loss will be recognized by those Pyramid
shareholders who receive solely Merchants common stock in
exchange for their Pyramid common stock, except with respect
to cash received in lieu of fractional shares of Merchants
common Stock.
5. The basis of the Merchants common stock received by a Pyramid
shareholder will be the same as the basis of the Pyramid
common stock exchanged.
6. The holding period of the Merchants common stock received by a
Pyramid shareholder will include the holding period of the
Pyramid stock that was exchanged, provided that such Pyramid
stock is a capital asset in the hands of the shareholder on
the date of exchange.
7. The receipt by a Pyramid shareholder of cash in lieu of a
fractional share of Merchants common stock will be treated
under Section 302(b)(1) of the Code as payment in exchange for
the fractional share.
Our opinion is based on our interpretation of the currently applicable
sections of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, rulings of the Internal Revenue Service and existing court
decisions any of which could be changed at any time. Any such changes may be
retroactive and could modify the statements and opinions expressed herein.
Similarly, any change in the facts and assumptions stated above, upon which this
opinion is based, could modify our conclusions.
8-2
<PAGE> 4
, 1999
Page 3
This opinion represents our best judgment as to the probable outcome
of the tax issues discussed and is not binding on the Internal Revenue Service.
However, no assurance can be given that such interpretations would be followed
if they became the subject of judicial or administrative proceedings. Our
opinion is limited to those federal tax issues specifically considered herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Merger and to the use of our name under
the captions "The Merger - Certain Material Federal Income Tax Consequences" and
"Legal Opinions" in the Proxy Statement/Prospectus contained in such
Registration Statement. In giving such consent, we do not thereby concede that
we are within the 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 and Exchange Commission thereunder.
Sincerely,
DAVIS & KUELTHAU, S.C.
/reb
8-3
<PAGE> 1
EXHIBIT 10(a)
1996 INCENTIVE STOCK OPTION PLAN OF REGISTRANT
<PAGE> 2
EXHIBIT 10(a)
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
1996 INCENTIVE STOCK OPTION PLAN
SECTION 1. ESTABLISHMENT, PURPOSE, AND EFFECTIVE DATE OF PLAN
1.1 ESTABLISHMENT. Merchants and Manufacturers Bancorporation, Inc.,
a Wisconsin corporation (together with any successor thereto, the
"Corporation"), hereby establishes the "MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC. 1996 INCENTIVE STOCK OPTION PLAN" (the "Plan") for Key
Employees of the Corporation and its Subsidiaries. The Plan permits the grant
of Stock Options to such employees.
1.2 PURPOSE. The purpose of the Plan is to advance the interests of
the Corporation and its Subsidiaries by encouraging and providing for the
acquisition of an equity interest in the success of the Corporation by Key
Employees and by enabling the Corporation and its Subsidiaries to attract and
retain the services of Key Employees upon whose judgment, interest, skills, and
special effort the successful conduct of their operations is largely dependent.
1.3 EFFECTIVE DATE. The Plan shall become effective on April 25, 1996,
subject, however, to the approval of the Plan by the shareholders of the
Corporation at the next annual meeting of shareholders within twelve months
following the date of adoption of the Plan by the Board.
SECTION 2. DEFINITIONS; CONSTRUCTION
2.1 DEFINITIONS. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "Board" means the Board of Directors of the Corporation.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Commission" means the United States Securities and Exchange
Commission or any successor agency.
(d) "Committee" means the committee of the Board, as specified
in Section 3, appointed by the Board to administer the Plan which shall
consist of not less than three Directors, each of whom is a
"disinterested person" within the meaning of Rule 16b-3.
(e) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
10(a)-1
<PAGE> 3
(g) "Fair Market Value" means the fair market value of the Stock
determined by such methods or procedures as shall be established from
time to time by the Committee after giving due consideration to recent
sales of Stock; provided, however, that the Fair Market Value
shall not be less than the par value of the Stock; and provided
further,that so long as the Stock is traded on a public market, Fair
Market Value means the average of the high and low prices of a share
of Stock in the over-the-counter market on the specified date, as
reported by NASDAQ (or if no sales occurred on such date, the list
preceding date on which sales occurred).
(h) "Key Employee" means any officer or other key employee of
the Corporation or of any Subsidiary who is responsible for or
contributes to the management, growth or profitability of the
business of the Corporation or any Subsidiary as determined by the
Committee.
(i) "Option" means the right to purchase Stock at a stated price
for a specified period of time. For purposes of the Plan, an Option
will be an "incentive stock option" within the meaning of Section 422
of the Code.
(j) "Option Agreement" shall mean any written agreement,
contract, or other instrument or document evidencing any Option
granted under the Plan.
(k) "Participant" means any Key Employee designated by the
Committee to participate in the Plan.
(l) "Rule l6b-3" means Rule 16b-3 as promulgated by the
Commission under the Exchange Act or any successor rule or regulations
thereto.
(m) "Stock" means the Common Stock of the Corporation, $1.00 par
value per share.
(n) "Subsidiary" means any present or future subsidiary of the
Corporation, as defined in Section 424(f) of the Code.
2.2 NUMBER. Except when otherwise indicated by the context, the
singular shall include the plural, and the plural shall include the singular.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Stock Option Committee of the
Board or by any other committee appointed by the Board consisting of not less
than three (3) Directors. The Committee shall be comprised solely of Directors,
each of whom is a disinterested person within the meaning of Rule 16b-3.
Subject to the terms of the Plan and applicable law, the Committee
shall have full power and authority to: (i) designate Participants; (ii)
determine the number of shares to be covered by Options
10(a)-2
<PAGE> 4
granted to Participants; (iii) determine the terms and conditions of any option
granted to a Participant; (iv) determine whether, to what extent and under what
circumstances options granted to Participants may be cancelled, forfeited, or
suspended; (V) interpret and administer the Plan and any instrument or agreement
relating to, or Option made under, the Plan (including, without limitation, any
Option Agreement); (vi) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan;, and (vii) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with
respect to the Plan or any Option shall be within the sole discretion of the
Committee, may be made at any time, and shall be final, conclusive, and binding
upon all persons, including the Corporation, any Subsidiary, any Participant,
any holder or beneficiary of any Option, any shareholder, and any employee of
the Corporation or of any Subsidiary,
SECTION 4. ELIGIBILITY AND PARTICIPATION
Participants in the Plan shall consist of those individuals selected by
the Committee from among those Key Employees, including any executive officer or
employee of the Corporation or of any Subsidiary, who, in the opinion of the
Committee, are in a position to contribute materially to the Corporation's
continued growth and development and to its long-term financial success.
SECTION 5. STOCK SUBJECT TO PLAN
5.1 NUMBER. Subject to adjustment as provided in Section 5.3, the
total number of shares of Stock with respect to which options may be
granted pursuant to the Plan shall be 13,500. The shares to be delivered
under the Plan may consist, in whole or in part, of authorized but
unissued Stock or treasury Stock, not reserved for any other purpose.
5.2 UNUSED STOCK. If, after the effective date of the Plan, any
shares of Stock covered by an Option granted under the Plan, or to which
any Option relates, are forfeited or if an Option otherwise terminates,
expires or is cancelled prior to the delivery of all of the shares of Stock
issuable pursuant to such Option, then the number of shares of Stock
counted against the number of shares available under the Plan in connection
with the grant of such Option, to the extent of any such forfeiture,
termination, expiration or cancellation, shall again be available for
granting of additional Options under the Plan.
5.3 ADJUSTMENTS IN CAPITALIZATION. In the event that the Committee
shall determine that any dividend or other distribution (whether in the
form of cash, stock, other securities or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of stock or other
securities of the Corporation, issuance of warrants or other rights to
purchase stock or other securities of the Corporation, or other similar
corporate transaction or event affects the Stock such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution
or enlargement of the benefits or potential benefits intended to be made
available under the Plan, then the Committee may, in such manner as it may
deem equitable,
10(a)-3
<PAGE> 5
adjust any or all of (i) the number and type of shares of Stock subject to
the Plan and which thereafter may be made the subject of Options under the
Plan; (ii) the number and type of shares of Stock subject to outstanding
Options; and (iii) the exercise price with respect to any Option; provided,
however, in each case, that with respect to Options that are incentive
stock options, no such adjustment shall be authorized to the extent that
such authority would cause such Options to cease to be treated as incentive
stock options. Any such adjustment shall always be rounded to the nearest
whole number of shares of Stock.
SECTION 6. TERM OF THE PLAN
No Option shall be granted under the Plan after April 24, 2006. However,
unless otherwise expressly provided in the Plan or in an applicable Option
Agreement, any Option theretofore granted may extend beyond such date and, to
the extent set forth in the Plan, the authority of the Committee to amend alter,
adjust, suspend, discontinue or terminate any such Option or to waive any
conditions or restrictions with respect to any such Option, and the authority of
the Board to amend the Plan, shall extend beyond such date.
SECTION 7. STOCK OPTIONS
7.1 GRANT OF OPTIONS TO KEY EMPLOYEES. Subject to the provisions of
Sections 5 and 6, Options may be granted to Participants who are Key Employees
at any time and from time to time as shall be determined by the Committee. The
Committee shall have complete discretion in determining the number of Options
granted to each such Participant. All Options are to be incentive stock options
within the meaning of Section 422 of the Code. In no event shall the Fair Market
Value (determined at the date of grant) of Stock with respect to which incentive
stock options are exercisable for the first time by a Participant during any
calendar year exceed $100,000.
7.2 OPTION AGREEMENT. Each Option shall be evidenced by an Option Agreement
that shall specify the Option price, the duration of the Option, the number of
shares of Stock to which the Option pertains and such other provisions as the
Committee shall determine.
7.3 OPTION PRICE. No Option granted pursuant to the Plan shall have an
Option price that is less than the Fair Market Value of the Stock on the date
the Option's granted, provided, however, that in the case of an Option that is
an incentive stock option granted to any person then owning more than ten
percent (10%) of the outstanding stock of the Corporation (within the meaning of
Section 422(b)(6) of the Code), the Option price shall not be less than one
hundred ten percent (110%) of the Fair Market Value of the Stock on such date.
7.4 DURATION OF OPTION. Each Option shall expire at such time as the
Committee shall determine at the time it is granted, provided, however, that no
Option shall be exercisable later than the tenth (10th) anniversary date of its
grant.
7.5 EXERCISE OF OPTIONS. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which terms need not be the same
for all Participants. In no event shall any Option
10(a)-4
<PAGE> 6
granted to a person then owning more than 10% of the Corporation's outstanding
stock be exercisable after the expiration of five (5) years from the date of the
grant thereof, nor shall any other Option granted hereunder be exercisable after
the expiration of ten (10) years from the date of the grant thereof.
7.6 PAYMENT. The Committee also shall determine the method or methods by
which, and the form or forms by which payment of the exercise price with respect
to an Option may be made or deemed to have been made.
7.7 INCENTIVE-STOCK OPTIONS. The terms of incentive stock options granted
under the Plan shall comply in all respects with the provisions of Section
422 of the Code, or any successor provision thereto, and any regulations
promulgated thereunder.
7.8 RESTRICTIONS ON STOCK TRANSFERABILITY. Subject to the terms of Sections
8 and 9, the Committee may impose such restrictions on any shares of Stock
acquired pursuant to the exercise of an option under the Plan as it may deem
advisable including, without limitation, restrictions imposed by or in order to
comply with registration exemptions under applicable Federal securities law,
under the requirements of any stock exchange upon which such shares of Stock
are then listed and under any blue sky or state securities laws applicable to
such shares.
SECTION 8. ADDITIONAL TRANSFER RESTRICTIONS
No Participant may sell or otherwise dispose of Stock acquired upon the
exercise of an Option before the later of the expiration of the two-year period
beginning on the date of the grant of the Option or the expiration of the
one-year period beginning on the date of the transfer of such shares.
SECTION 9. RIGHTS OF FIRST REFUSAL
9.1 GENERALLY. In addition to the transfer restrictions provided in
Sections 7 and 8, no Participant or personal representative of a deceased
Participant who holds Stock acquired under the Plan pursuant to the exercise of
an Option or any stock issued as a stock dividend thereon or any securities
issued in lieu thereof or in substitution or exchange thereof (together referred
to herein as "Securities") shall sell or otherwise dispose of the Securities
without first offering the Securities to the Corporation in writing for the
consideration and under the terms of payment to apply to the third-party
transfer. The written offer to the Corporation shall contain all of the
information relating to the proposed disposition, including but not limited to
the name and address of the proposed purchaser, the number of shares of Stock to
be transferred and the terms of the transfer.
9.2 RESPONSE TO OFFER. Upon receipt by the Corporation of any such offer,
the Corporation shall have the right for a period of thirty (30) days after such
receipt to purchase such securities or place them with other stockholders of the
Corporation on the terms and at the price stated in such offer. If the
Corporation shall fail to exercise such rights within thirty (30) days after its
receipt of such offer of sale, the offeror may, within sixty (60) days after the
date of delivery of such offer to the Corporation, sell the Securities to the
proposed purchaser upon the same terms
10(a)-5
<PAGE> 7
and price for which they were offered to the Corporation, and after such sale
such Securities shall be free of the restrictions of this Section 9.
9.3 LEGEND ON CERTIFICATES. Certificates for all Securities shall be
endorsed with a legend referring to the restrictions on transfer set forth in
Sections 8 and 9.
9.4 EXCEPTIONS. The provisions of this Section 9 shall not apply to a gift
or bequest of Securities, or disposition of the same pursuant to the laws of
intestate succession, provided, however, that any person who acquires any
Securities by gift, bequest or intestate succession shall be subject to the
provisions of this Section 9 to the same extent as though such person were a
Participant who acquired such Securities under the Plan.
9.5 WAIVER. The provisions of this Section 9 may be waived in whole or in
part in any particular case or cases by the Committee or may be terminated at
any time by the Committee, whenever it may determine that no substantial benefit
to the Corporation is afforded by such provisions.
SECTION 10. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) by
whom any Option under the Plan may be exercised in case of the Participant's
death before he or she exercises the entire Option. Each designation will revoke
all prior designations with respect to the options identified therein, shall be
in a form prescribed by the Committee and will be effective only when filed by
the Participant in writing with the Committee during his or her lifetime. In the
absence of any such designation, Options remaining unexercised at the
Participant's death may be exercised by the personal representative of the
Participant.
SECTION 11. RIGHTS OF PARTICIPANTS
Nothing in the Plan shall interfere with or limit in any way the right of
the Corporation or any Subsidiary to terminate any Participant's employment at
any time nor confer upon any Participant any right to continue in the employ of
the Corporation or any Subsidiary.
SECTION 12. AMENDMENT, MODIFICATIONS AND TERMINATION OF PLAN
12.1 GENERALLY. The Board may at any time terminate, and from time to time
may amend or modify the Plan, provided, however, that, notwithstanding any other
provision of the Plan or any Option Agreement, no such action of the Board,
without approval of the shareholders, may:
(a) Increase the total amount of Stock which may be issued under the
Plan, except as provided in Sections 5.1 and 5.3 of the Plan;
(b) Materially increase the cost of the Plan or materially increase
the benefits to Participants; or
10(a)-6
<PAGE> 8
(c) Change the class of individuals eligible to receive options.
No amendment, modification or termination of the Plan shall in any manner
adversely affect any Option theretofore granted under the Plan, without the
consent of the Participant.
SECTION 13. TAX WITHHOLDING
No later than the date as of which an amount first becomes includible in
the gross income of a Participant for federal income tax purposes with
respect to any Option under the Plan, the Participant shall pay to the
Corporation, or make arrangements satisfactory to the Corporation regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. The obligations of the
Corporation under the Plan shall be conditional on such payment or arrangements,
and the Corporation and any Subsidiary shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment otherwise due to the
Participant. The Committee may establish such procedures as it deems appropriate
for the settling of withholding obligations.
SECTION 14. GENERAL
14.1 RULE 16B-3 SIX-MONTH LIMITATIONS. Notwithstanding any other provision
of the Plan, to the extent required in order to comply with Rule 16b-3, any
equity security offered pursuant to the Plan may not be sold for at least six
months after acquisition, except in the case of death or disability, and any
derivative security issued pursuant to the Plan shall not be exercisable for at
least six months, except in case of death or disability of the holder thereof.
Terms used in the preceding sentence shall, for the purposes of such sentence
only, have the meanings, if any, assigned or attributed to them under Rule
16b-3.
14.2 No Consideration for Options. Options shall be granted to Participants
for no cash consideration unless otherwise determined by the Committee.
14.3 LIMITS ON TRANSFER OF OPTIONS. No Option, and no right under any such
Option, shall be assignable, alienable, saleable or transferable by a
Participant otherwise than by will or by the laws of descent and distribution;
provided, however, that a Participant may designate a beneficiary or
beneficiaries to exercise his or her rights, and to receive any property
distributable, with respect to any Option as provided in Section 10 hereof. Each
Option, and each right under any Option, shall be exercisable during the
lifetime of the Participant only by such individual or, if permissible under
applicable law, by such individual's guardian or legal representative. No
Option, and no right under any such Option, may be pledged, alienated, attached
or otherwise encumbered, and any purported pledge, alienation, attachment or
encumbrance thereof shall be void and unenforceable against the Corporation or
any Subsidiary.
SECTION 15. LEGAL CONSTRUCTION
15.1 REQUIREMENTS OF LAW. The granting of Options under the Plan and the
issuance of shares of Stock in connection with an Option, shall be subject to
all applicable laws, rules and
10(a)-7
<PAGE> 9
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
15.2 GOVERNING LAW. The Plan, and all Option Agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Wisconsin.
15.3 SEVERABILITY. If any provision of the Plan or any Option Agreement or
any Option is or becomes or is deemed to be invalid, illegal or unenforceable in
any jurisdiction, or as to any person or Option, or would disqualify the Plan,
any Option Agreement or any Option under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the intent of the Plan,
any Option Agreement or the Option, such provision shall be stricken as to such
jurisdiction, person or Option, and the remainder of the Plan, any such Option
Agreement and any such Option shall remain in full force and effect.
10(a)-8
<PAGE> 1
EXHIBIT 10(b)
SALARY CONTINUATION AGREEMENT BETWEEN LINCOLN STATE BANK
AND JAMES BOMBERG
<PAGE> 2
EXHIBIT 10(b)
EXECUTIVE EMPLOYEE SALARY CONTINUATION AGREEMENT
FOR
JAMES BOMBERG
THIS AGREEMENT is made this First day of May, 1992, between Lincoln
State Bank, a Wisconsin corporation (the "Company") and James Bomberg (the
"Participant").
WHEREAS, the Participant is an executive employee of the Company and
as such has materially contributed to the Company's position, and
WHEREAS, the Company wishes to establish this Agreement for purposes
of promoting in the Participant the strongest interest in the successful
operation of the Company and increased efficiency in his work and to provide the
Participant benefits upon retirement, death, disability or other termination of
employment, in consideration of services to be performed after the date of this
Agreement but prior to his retirement.
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
1. Definitions.
A. Administrative Committee - "Administrative Committee" shall
mean the committee appointed pursuant to Section 4 of this Agreement.
B. Age - "Age" shall mean the age of the person as of his last
birthday.
C. Change in Control - "Change in Control," shall mean
the first to occur of any of the following events: (a) any person
10(b)-1
<PAGE> 3
or entity becomes, subsequent to the date of this Agreement, the beneficiary
owner, directly or indirectly of 51% or more of the then issued and outstanding
voting stock of the Company (and, for the purposes hereof, a person will be
considered to be a beneficial owner of such stock if such person, directly or
indirectly, through any contract, arrangement, understanding, relationship, or
otherwise has or shares voting power, which includes the power to vote or to
direct the voting of such stock, or investment power, which includes the power
to dispose or direct the disposition of such stock), (b) the Company merges or
consolidates with or reorganizes with or into any other corporation or
corporations other than its affiliates or engages in any other similar business
combination or reorganization, or (c) the Company sells, assigns or transfers
all or substantially all of its business and assets, in one or a series of
related transactions, except any such sales to affiliates.
D. Disability - "Disability" shall mean, if the Participant is
insured under a life insurance policy the premiums for which are paid by the
Company, and which policy contains a "waiver of premium" benefit, the definition
of total disability contained in the insurance policy. If the Participant is not
insured under such a life insurance policy, the Company shall, in its complete
and sole discretion, determine whether the Participant is disabled for the
purposes of this Agreement.
E. Discharge for Cause - "Discharge for Cause" shall
mean the termination of the Participant's employment with the
10(b)-2
<PAGE> 4
Company because of (a) the Participant's willful and continued failure to
substantially perform his duties (other that any such failure resulting from his
incapacity due to physical or mental illness), after a demand for substantial
performance is delivered to him by the Company which specifically identifies the
manner in which the Company believes he has not substantially performed his
duties; (b) any willful act of misconduct by the Participant which is materially
injurious to the Company, monetarily or otherwise; (c) a criminal conviction of
the Participant for any act involving the business and affairs of the Company;
(d) a criminal conviction of the Participant for commission of a felony; or (e)
the removal of the Participant by a regulatory agency. For purposes of this
definition, no act or failure to act on the Participant's part will be
considered "willful" unless done or omitted by him not in good faith and without
reasonable belief that his act or omission was in the best interest of the
Company.
F. Early Retirement Date - "Early Retirement Date" shall mean
the first day of the month following the month in which a Participant reaches
age 60.
G. Normal Retirement Date - "Normal Retirement Date" shall
mean the first day of the month following the month in which a Participant
reaches age 65.
N. Termination of Employment - "Termination of Employment" shall
mean the Participant's ceasing to be employed by the Company for any reason
whatsoever, voluntary or involuntary, including by reason of death or
disability.
10(b)-3
<PAGE> 5
2. Eligibility.
The Participant is eligible for the benefits provided herein
in accordance with the terms of this Agreement upon the execution hereof.
A Participant shall cease to be a Participant at Termination of
Employment. However, the employment of a Participant shall not be deemed to be
terminated by reason of an approved leave a absence granted in accordance with
uniform rules applied in a non-discriminatory manner.
3. Payment of Benefits.
3.1 Benefits Upon Normal Retirement.
Upon a Participant's Termination of Employment on the Normal
Retirement Date, the Company shall pay to the Participant, as compensation for
services rendered prior to such date, the sum of $60,700.00 per year, payable in
monthly installments of $5,058.33 each, commencing on the first day of the month
coincident with or next following the date of Termination of Employment and
continuing on the first day of each month thereafter for a period of fifteen
years, but in any event until a minimum of 180 total monthly payments are made
to the Participant or the Participant's beneficiary per Section 3.6(b).
3.2 Benefits Upon Early Retirement.
Upon a Participant's Termination of Employment on or after
reaching the Early Retirement Date but prior to the Normal Retirement Date, the
Company shall pay to the Participant, as compensation for services rendered
prior to such date, monthly
10(b)-4
<PAGE> 6
payments equal to the benefit described in Schedule A, attached. Such payments
shall commence on the first day of the month coincident with or next following
the date of Termination of Employment and shall continue on the first day of
each month thereafter for a period of fifteen years but in any event until a
minimum of 180 payments are made to the Participant or to the Participant's
beneficiary per Section 3.6(b).
The Participant may elect, on or before December 31 of the year
prior to Termination of Employment, to defer commencement of payment of the
early retirement benefit to a date not later than the Normal Retirement Date.
Such election shall be in writing and submitted to the Company. If a Participant
elects to defer payment of the benefit until his Normal Retirement Date, the
Company shall pay to the Participant the normal retirement benefit described in
Section 3.1 above. If a Participant elects to defer payment of the benefit to a
date prior to the Normal Retirement Date, the Company shall pay to the
Participant a benefit calculated in accordance with the first sentence of this
Section 3.2, but using the date selected by the Participant for the commencement
of his benefit as his "Termination of Employment" date instead of his actual
termination date.
3.3 Benefits Upon Late Retirement.
Upon a Participant's Termination of Employment after the Normal
Retirement Date, the Company shall pay to the Participant as compensation for
services rendered prior to such date, the normal retirement benefit described in
Section 3.1 above, increased by .05
10(b)-5
<PAGE> 7
per year or .00416 for each month that the Participant's Termination of
Employment is deferred beyond the Normal Retirement Date, in equal monthly
installments commencing on the first day of the month coincident with or next
following the date of Termination of Employment and continuing on the first day
of each month thereafter for the periods specified in Section 3.1.
3.4 Benefits Upon Disability.
Upon a Participant's Termination of Employment prior to the
Normal Retirement Date due to Disability, no separate provision is made for a
disability benefit under this Agreement. However, any such Participant shall be
considered, notwithstanding such Termination of Employment, to continue to be a
Participant's death while disabled and for so long as the disability continues
prior to reaching the Early Retirement Date, such Participant's beneficiary
shall receive the survivor's benefits described in Section 3.6(a). In the event
the Participant lives to the Early Retirement Date, the Participant shall be
entitled to receive the early retirement benefit described in Section 3.2.
3.5 Other Terminations of Employment.
a) Voluntary Termination of Employment Prior to the Early
Retirement Date or Discharge for Cause at any Time. Upon a Participant's
voluntary Termination of Employment prior to reaching the Early Retirement Date,
for reasons other than death or Disability, or upon the Participant's Discharge
for Cause at any time, the Company shall not be obligated to pay any benefit to
the Participant pursuant to this Agreement, and the Participant shall
10(b)-6
<PAGE> 8
have no further right to receive any benefit hereunder.
b) Involuntary Termination of Employment Prior to the Early
Retirement Date Other Than Because of Death, Disability or Discharge for Cause.
Upon a Participant's involuntary Termination of Employment prior to reaching the
Early Retirement Date, for reasons other than death, disability, or discharge
for cause, the Company shall pay to the Participant as compensation for services
rendered prior to such Termination of Employment, a sum to be negotiated between
the Participant and the Company at the time of termination.
c) Termination of Employment At or After A Change in Ownership
of Control. If a Participant incurs a voluntary or involuntary Termination of
Employment prior to reaching the Early Retirement Date, for reasons other than
death, disability, or discharge for cause, but on or after the occurrence of a
Change in Control, and in connection with such change, the Participant's title,
duties, responsibilities, or compensation is significantly lessened or his situs
of employment is changed, without his consent, the Company shall pay to the
Participant, as compensation for services rendered prior to such Termination of
Employment, monthly payments equal to the benefit described in Schedule A.
attached.
3.6 Survivorship Benefits.
a) Prior to Commencement of Normal or Early Retirement
Benefits. If a Participant dies while in the service of the Company or after a
Termination of Employment due to Disability and
10(b)-7
<PAGE> 9
while Disabled or after a Termination of Employment on or after the Early
Retirement Date, but prior to commencement of any benefit payments under this
Agreement, the Company shall pay to the Participant's beneficiary a survivor's
benefit of 180 equal monthly installments of $5,058.33 commencing on the first
day of the month after the Participant's death and continuing on the first day
of each month thereafter until all such payments are completed. In the event a
beneficiary dies before receiving all the survivor's benefit payments, the
remaining payments shall be paid to the legal representatives of the
beneficiary's estate. Payment of the survivor's benefit shall relieve the
Company of the obligation to pay any other benefit which the Participant would
have otherwise received, under the terms of this Agreement.
b) After Commencement of Benefits. If a Participant dies after
any benefit payments have commenced, but prior to receiving all of the scheduled
minimum number of monthly payments, the Company shall pay the remaining monthly
payments to the Participant's beneficiary. In the event a beneficiary dies
before receiving all the remaining payments, the then-remaining payments shall
be paid to the legal representatives of the beneficiary's estate.
3.7 Recipients of Payments: Designation of Beneficiary.
All payments to be made by the Company shall be made to the
Participant, if living. In the event of a Participant's death prior to the
receipt of all benefit payments, all subsequent payments to be made under this
Agreement shall be to the
10(b)-8
<PAGE> 10
beneficiary or beneficiaries of the Participant. The Participant shall designate
a beneficiary by filing a written notice of such designation with the Company in
such form as the Company may prescribe. The Participant may revoke or modify
said designation at any time by a further written designation. The Participant's
beneficiary designation shall be deemed automatically revoked in the event of
the death of the beneficiary or, if the beneficiary is the Participant's spouse,
in the event of dissolution of marriage. If no designation shall be in effect at
the time any benefits payable under this Agreement shall become due, the
beneficiary shall be the spouse of the Participant, or if no spouse is then
living, the legal representatives of the Participant's estate.
4. Administration and Interpretation of this Agreement.
The Board of Directors shall appoint an Administrative
Committee consisting of three (3) or more persons to administer and interpret
this Agreement. Interpretation by the Administrative Committee shall be final
and binding upon a Participant. The Administrative Committee may adopt rules and
regulations relating to this Agreement as it may deem necessary or advisable for
the administration thereof.
5. Claims Procedure.
If the Participant or the Participant's beneficiary (hereinafter
referred to as a "Claimant") is denied all or a portion of an expected benefit
under this Plan for any reason, he or she may file a claim with the
Administrative Committee. The Administrative Committee shall notify the Claimant
within 60 days
10(b)-9
<PAGE> 11
of allowance or denial of the claim, unless the Claimant receives written notice
from the Administrative Committee prior to the end of the sixty (60) day period
stating that special circumstances require an extension of the time for
decision. The notice of the Administrative Committee's decision shall be in
writing, sent by mail to Claimant's last known address, and, if a denial of the
claim, must contain the following information:
a) the specific reasons for the denial;
b) specific reference to pertinent provisions of the Plan on
which the denial is based; and
c) if applicable, a description of any additional
information or material necessary to perfect the claim, an explanation of why
such information or material is necessary, and an explanation of the claims
review procedure.
6) Review Procedure.
a) A Claimant is entitled to request a review of any denial of
his claim by the Administrative Committee. The request for review must be
submitted in writing within 60 days of mailing of notice of the denial. Absent a
request for review within the 60-day period, the claim will be deemed to be
conclusively denied. The Claimant or his representative shall be entitled to
review all pertinent documents, and to submit issues and comments orally and in
writing.
b) If the request for review by a Claimant concerns the
interpretation and application of the provisions of the Agreement and the
Company's obligations, then the review shall be conducted
10(b)-10
<PAGE> 12
by a separate committee consisting of three persons designated or appointed by
the Administrative Committee. The separate committee shall afford the Claimant a
hearing and the opportunity to review all pertinent documents and submit issues
and comments orally and in writing and shall render a review decision in
writing, all within sixty (60) days after receipt of a request for a review,
provided that, in special circumstances (such as the necessity of holding a
hearing) the committee may extend the time for decision by not more than sixty
(60) days upon written notice to the Claimant. The Claimant shall receive
written notice of the separate committee's review decision, together with
specific reasons for the decision and reference to the pertinent provisions of
this Agreement.
7. Life Insurance and Funding.
The Company in its discretion may apply for and procure as owner and
for its own benefit, insurance on the life of the Participant, in such amounts
and in such forms as the Company may choose. The Participant shall have no
interest whatsoever in any such policy or policies, but at the request of the
Company he shall submit to medical examinations and supply such information and
execute such documents as may be required by the insurance company or companies
to whom the Company has applied for insurance.
The rights of the Participant, or his beneficiary, or estate, to
benefits under the Plan shall be solely those of an unsecured creditor of the
Company. Any insurance policy or other assets acquired by or held by the Company
in connection with the
10(b)-11
<PAGE> 13
liabilities assumed by it pursuant to the Plan shall not be deemed to be held
under any trust for the benefit of the Participant, his beneficiary, or his
estate, or to be security for the performance of the obligations of the Company
but shall be, and remain, a general, unpledged, and unrestricted asset of the
Company.
If this Agreement is funded through insurance on the life of the
Participant, then in the event of such Participant's death during the first two
(2) years after the effective date of this Agreement, and if such Participant's
death was a result of suicide or if such Participant made any material
misstatement or failed to make a material disclosure of information in any
documentation which the Participant is requested to complete in connection with
this Agreement, then no death benefits under the terms of this Agreement will be
payable, unless and to the extent that the Board of Directors of Company, in
their absolute discretion, may otherwise determine.
8. Assignment of Benefits.
Neither the Participant nor any other beneficiary under the Plan shall
have any right to assign the right to receive any benefits hereunder, and in the
event of any attempted assignment or transfer, the Company shall have no further
liability hereunder.
9. Employment Not Guaranteed by Agreement.
Neither this Agreement nor any action taken hereunder shall be
construed as giving a Participant the right to be retained as an Executive
Employee or as an employee of the Company for any period.
10(b)-12
<PAGE> 14
10. Taxes.
The Company shall deduct from all payments made hereunder all
applicable federal or state taxes required by law to be withheld from such
payments.
11. Amendment and Termination.
The Board of Directors may, at any time, amend or terminate this
Agreement, provided that the Board may not reduce or modify any benefit in pay
status to a Participant or beneficiary hereunder or any benefit that would
become payable hereunder if the Participant were to have died or were to have
been involuntarily terminated under Section 3.5(b) hereof on the day prior to
such action by the Board, without the prior written consent of the Participant.
The Company is entering into this Agreement upon the assumption that
certain existing tax laws will continue in effect in substantially their current
form. In the event of any changes in Federal law relating to and allowing the
tax-free accumulation of earnings within a life insurance policy, the income
tax-free payment of proceeds from life insurance policies or any other law which
would result in a material adverse impact upon the Company's ability to perform
its obligations under this Agreement, the Company shall have an option to
terminate or modify this Agreement subject to the protection afforded
Participant's in the preceding paragraph above.
10(b)-13
<PAGE> 15
12. Construction.
This Agreement shall be construed according to the laws of the
state of Wisconsin.
13. Form of Communication.
Any election, application, claim, notice or other communication
required or permitted to be made by a Participant to the Company shall be made
in writing and in such form as the Company shall prescribe. Such communication
shall be effective upon mailing, if sent by first class mail, postage pre-paid,
and addressed to the Company's office at 2266 South 13th Street Milwaukee,
Wisconsin 53215.
14. Captions.
The captions at the head of a section or a paragraph of this Agreement
are designed for convenience of reference only and are not to be resorted to for
the purpose of interpreting any provision of this Agreement.
15. Severability.
The invalidity of any portion of this Agreement shall not invalidate
the remainder thereof, and said remainder shall continue in full force and
effect.
16. Binding Effect.
This Agreement shall be binding upon and shall inure to the benefit
of the Company and the Participant, and each of their successors, heirs,
personal representatives and permitted assigns. No sale of substantially all of
the Company's assets shall be made without the buyer expressly assuming the
obligation of this Agreement. The Company further agrees that it will not be a
party
10(b)-14
<PAGE> 16
to any merger, consolidation or reorganization unless and until its obligations
hereunder are expressly assumed by the successor or successors.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the
date first set forth above.
By: /s/ Michael J. Murry
--------------------------------------------
Vice Chairman of the Board
Attest: /s/ Edmund P. Glembocki
----------------------------------------
Secretary
/s/ James Bomberg
-----------------------------------------------
Participant
10(b)-15
<PAGE> 17
SCHEDULE A
JAMES BOMBERG
<TABLE>
<CAPTION>
Annual
Salary Cont. Benefit
End of Plan Year Age Liability For 15 Years
- ---------------- --- --------- ------------
<S> <C> <C> <C>
1 48 $ 9,849 $ 1,270
2 49 $ 20,729 $ 2,675
3 50 $ 32,748 $ 4,225
4 51 $ 46,026 $ 5,935
5 52 $ 6O,694 $ 7,825
6 53 $ 76,899 $ 9,915
7 54 $ 94,800 $12,225
8 55 $114,575 $14,775
9 56 $136,422 $17,590
10 57 $160,556 $20,700
11 58 $187,217 $24,140
12 59 $216,670 $27,940
13 60 $249,206 $32,135
14 61 $285,150 $36,770
15 62 $324,858 $41,890
16 63 $368,724 $47,550
17 64 $417,183 $53,795
18 65 $470,716 $60,700
</TABLE>
10(b)-16
<PAGE> 18
BENEFICIARY DESIGNATION NOTICE
To the Plan Administrator of Lincoln State Bank Executive Salary Continuation
Agreement:
Pursuant to the Provisions of my Executive Salary Continuation Agreement with
Lincoln State Bank permitting the designation of a beneficiary or beneficiaries
by a participant, I hereby designate the following persons and entities as
primary and secondary beneficiaries of any benefit under said Agreement payable
by reason of my death:
Primary Beneficiary:
Name Address Relationship
Carol A. Bomberg 5350 Robinwood Court, Spouse
Hales Corners, Wisconsin
Secondary (Contingent) Beneficiary:
Name Address Relationship
Estate
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF BENEFICIARIES AND SECONDARY BENEFICIARIES
ARE HEREBY REVOKED.
The Plan Administrator shall pay all sums payable under this Agreement by reason
of my death to the Primary Beneficiary, if he or she survives me, and if no
Primary Beneficiary survive shall me, then to the Secondary Beneficiary, and if
no named beneficiary survives me, then the Plan Administrator shall pay all
amounts in accordance with the terms of the Executive Salary Continuation
Agreement. In the event that a named beneficiary survives me and dies prior to
receiving the entire benefit payable under said Agreement, then and in that
event, the remaining unpaid benefit, payable according to the terms of the
Agreement, shall be payable to the personal representatives of the estate of
said deceased beneficiary, who survive me, but die prior to receiving the total
benefit.
1/5/93 /s/ James Bomberg
- ---------------------------------- ---------------------------------
Date of Designation Signature of Executive
10(b)-17
<PAGE> 1
EXHIBIT 10(c)
Employment Agreements between:
a) Registrant and Michael Murry, James Mroczkowski, John Krawczyk
b) Grafton State Bank and Thomas Sheehan
c) M&M Services, Inc. and Robert Blonski and Gregory Stengel
d) Achieve Mortgage Corporation and Robert Donaj.
<PAGE> 2
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 2 day of Jan, 1996, between MERCHANTS
AND MANUFACTURES BANCORPORATION, INC. (the "Employer"), a Wisconsin corporation,
its successors and assigns, and MICHAEL J. MURRY (the "Executive").
RECITALS
WHEREAS, Executive is a valued, long-term employee, whose experience
in the industry and continued employment in the position of Chairman of the
Board directors and Chief Executive Officer will benefit the Employer in the
future; and
WHEREAS, Employer desires to provide for management continuity and
stability and for the continued services of Executive.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth below:
1. EMPLOYMENT. Employer shall continue to employ Executive, and
Executive shall continue to serve, on the terms and conditions set forth herein
for the period provided in Section 2.
2. TERM OF EMPLOYMENT. The period of Executive's employment under this
Agreement shall be deemed to have commenced as of the date first above written
and shall continue for a period of sixty (60) calendar months thereafter.
Commencing on the first anniversary date of this Agreement, and continuing at
each anniversary date thereafter, the Agreement shall renew for an additional 12
months such that the remaining term shall be sixty (60) months unless written
notice is provided by either party at least sixty (60) days prior to any such
anniversary date, that the Agreement shall terminate at the end of forty-eight
(48) months following such anniversary date. Prior to the renewal or non-renewal
of the Agreement, the Board of Directors or the Executive Personnel/Compensation
Committee will conduct a performance evaluation of the Executive for the purpose
of determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board or Executive Personnel/Compensation
Committee meeting. The term of employment under this Agreement, as in effect
from time to time, shall be referred to as the "Employment Term."
3. POSITION AND DUTIES. Subject to Section 5(iv)(b), Executive shall
serve Employer or any of Employer's affiliates as an Executive Officer. As such,
he is presently serving in the capacity of Chairman of the Board of Directors
and Chief Executive Officer of Employer
10(c)a-1
<PAGE> 3
("Corporate Position"). Executive shall provide such management services as are
customarily performed by persons serving in similar capacities at other bank
holding companies or their affiliates, and perform such other duties as may be
appropriate to his position and as may be from time to time determined by
Employer's Board of Directors to be necessary to its operations and in
accordance with its bylaws. During the Employment Term the Board of Directors
may modify Executive's duties and responsibilities consistent with continued
executive status; provided, however, there shall be no material change in
Executive's status nor any material increase or decrease in duties and
responsibilities except as agreed to in writing by Executive. It is agreed that
Employer shall have the right to transfer Executive to any home office or branch
office of Employer or any Employer's affiliates, provided that such home office
or branch office is or was operated by Employer or any of Employer's affiliates
prior to a change in control as defined herein. During the Employment Term,
Executive shall devote substantially all his working time and efforts to the
business and affairs of the Employer and shall not engage in any activity which
is competitive with or adverse to the business of the Employer or any of its
affiliates whether done as a partner, director, officer, employee, shareholder
of or consultant or advisor to any other business.
4. COMPENSATION. As compensation for services provided pursuant to
this Agreement, Executive shall receive the compensation and other benefits set
forth below:
(i) BASE SALARY. During the Employment Term, Executive shall
receive an annual base salary ("Base Salary") in such amount as may
from time to time be approved by the Board or the Executive
Personnel/Compensation Committee. The Base Salary in effect as of the
Commencement Date shall be $ 192,000. Such amount shall be subject to
review and to annual adjustment by the Board or the Executive
Personnel/Compensation Committee in accordance with Employer's normal
personnel practices and, once established at a specified annual rate
(including the initial rate), Executive's Base Salary shall not
thereafter be reduced without his consent except pursuant to
subsection 5(v)(c) of this Agreement. No increase in Base Salary or
other compensation shall limit or reduce any other obligation of
Employer. Executive's Base Salary and other compensation shall be paid
in accordance with Employer's regular payroll practices. Review and
adjustment of Executive's Base Salary shall be done on a basis
comparable to, and applied uniformly with, that utilized for other
executives of Employer and/or its affiliates.
(ii) BONUS PAYMENTS. In addition to Base Salary, Executive shall
be entitled, during the Employment Term, to participate in and receive
payments from all bonus and other incentive compensation plans as in
effect from time to time on the same basis as other executive officers
of Employer.
(iii) OTHER BENEFITS. During the Employment Term, Employer shall
provide to Executive, in addition to Base Salary, such other benefits
of employment (or, with Executive's consent, equivalent benefits) as
are made generally available to executive officers serving in
comparable positions at Employer or its affiliates. Such benefits
shall include participation in any group health, life, disability, or
similar insurance program and in any pension, profit-sharing, deferred
compensation, 401(k) or other similar retirement
10(c)a-2
<PAGE> 4
program provided. Executive shall also have the right to participate,
on the same basis as other executives of Employer, in any stock
purchase, stock option or stock appreciation rights plans, or other
stock-based program made available to such executive officers.
Executive shall be entitled to vacation, sick time, personal days
and other perquisites in the same manner and to the same extent as
provided other executives of Employer.
Nothing contained herein shall be construed as granting Executive
the right to continue in any benefit plan or program, or to receive
any other perquisite of employment, provided under this section 4(iii)
(except to the extent Executive had previously earned or otherwise
accumulated vested rights therein) following a valid and lawful
termination or discontinuance of such plan, program or perquisite.
5. TERMINATION. This Agreement may be terminated, subject to payment
of the compensation and other benefits described below, upon occurrence of any
of the events described herein. The date on which Executive ceases to be
employed under this Agreement after giving effect to the period of time
specified in any notice requirement, is referred to as the "Termination Date."
(i) DEATH; DISABILITY; RETIREMENT. This Agreement shall terminate
upon the death, disability or retirement of Executive. As used in this
Agreement, "disability" means Executive's inability, as the result of
physical or mental incapacity, to substantially perform his duties for
a period of 180 consecutive days. If the Executive and Employer cannot
agree as to the existence of a disability, the determination shall be
made by a qualified independent physician acceptable to both parties
or, alternatively, by a physician designated by the president of the
medical society for the county in which Executive resides. The costs
of any such medical examination shall be borne by Employer. If
Executive is terminated due to disability, he shall be paid 100% of
his Base Salary at the rate in effect at the time notice of
termination is given for one year, and thereafter an annual amount
equal to 75% of such Base Salary for the remaining portion of the
Employment Term, such amounts to be paid in substantially equal
monthly installments and offset by any monthly payments actually
received by Executive from: (a) any disability plans or disability
insurance programs provided by Employer, and (b) any governmental
social security or workers compensation program.
As used in this Agreement, the term "retirement" shall mean
Executive's retirement in accordance with and pursuant to any
generally applicable retirement plan of Employer or in accordance with
any retirement arrangement established for Executive with his consent.
If termination occurs as a result of death, disability or
retirement, no additional compensation shall be payable to Executive
under this Agreement except as specifically provided herein.
Notwithstanding anything to the contrary contained herein, Executive
shall receive all compensation and other benefits to which he was
entitled under Section 4 and the plans and programs provided therein,
through the Termination Date and, in
10(c)a-3
<PAGE> 5
addition, shall receive or continue to receive for the remaining
portion of the Employment Term all other benefits available to him
under any applicable group health, life, disability or similar
insurance program as in effect on the date of death, disability or
retirement.
If, following termination by reason of disability and prior to the
expiration of the then remaining balance of the Employment Term,
Executive becomes able to resume his duties, he shall be reinstated to
his Corporate Position or, if such Position has been filled, to a
position as nearly comparable as possible From the date of
reinstatement and for the balance of the Employment Term, Executive
shall be obligated to perform all duties and responsibilities, and
entitled to receive all compensation and other benefits, as provided
in this Agreement.
(ii) CAUSE. Employer may terminate Executive's employment under
this Agreement for cause at any time, and thereafter Employer shall
have no further obligation under this Agreement. Notwithstanding
anything to the contrary contained herein, Executive shall receive all
compensation and other benefits in which he was vested or to which he
was otherwise entitled under Section 4 and the plans and programs
provided therein, by reason of employment through the Termination
Date.
For purposes of this Agreement, "Cause" shall mean:
(a) A failure by Executive to substantially perform his
duties (other than failure resulting from incapacity) after a written
demand by the Board, which demand identifies, with reasonable
specificity, the manner in which the Board believes Executive has not
substantially performed, and Executive's failure to cure within a
reasonable period of time after his receipt of the notice;
(b) A criminal conviction of or plea of nolo contendere by
Executive for any act involving dishonesty, breach of trust or a
violation of the banking or savings and loan laws of the State of
Wisconsin or the United States;
(c) A criminal conviction of or plea of nolo contendere by
Executive the commission of any felony;
(d) A breach of fiduciary duty by Executive involving
personal profit;
(e) A willful violation of any law, rule or order by
Executive (other than traffic violations or similar offenses); or
(f) Incompetence, personal dishonesty or material breach of
any provision of this Agreement or any willful misconduct by
Executive.
For purposes of this subsection 5(ii), no act, or failure to act, on
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by Executive not in good faith and without reasonable belief that the action or
omission was in the best interest of Employer.
10(c)a-4
<PAGE> 6
(iii) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may voluntarily
terminate employment at any time by giving at least ninety (90) days' prior
written notice to Employer. In such event, Employer shall have no further
obligation hereunder, except that Executive shall receive all compensation and
other benefits in which he was vested or to which he was otherwise entitled
under Section 4 and the plans and programs provided therein, by reason of his
employment through the Termination Date.
(iv) TERMINATION BY EXECUTIVE AFTER CHANGE IN CONTROL.
(a) For purpose of this Agreement, a "change in control" shall
be deemed to have occurred if any "individual, entity or group" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act) is
or becomes the beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities representing 25%
or more of the voting power of the securities of Employer or any of
Employer's affiliates or becomes the owner of all or substantially all
of the assets of Employer or any of Employer's affiliates or if the
shareholders of Employer or any affiliate of Employer approve a
reorganization, merger or consolidation of Employer or any affiliates
of Employer. "Change in control" shall not refer to or include any
transaction involving only entities affiliated directly or indirectly
with Employer.
(b) Executive may, at any time within twelve (12) months
following a "change in control," terminate his employment under this
Agreement by giving at least ninety (90) days' prior written notice to
Employer.
(v) TERMINATION BY EXECUTIVE "FOR CAUSE." Executive may terminate
his employment under this Agreement by giving at least ninety (90) days' prior
written notice to Employer at any time after the occurrence of any of the
following without Executive's express written consent:
(a) Executive is assigned to positions, duties or
responsibilities that are substantially less significant than the
positions, duties and responsibilities provided herein;
(b) Executive is removed from or Employer fails to reelect
Executive to his Corporate Position, except in connection with
termination of executive's employment for cause, disability or
retirement, or in connection with suspension or terminating by or
pursuant to regulatory action;
(c) Executive's Base Salary is reduced other than as the result
of a program applied on a proportionately equivalent basis to all
executives of Employer and its affiliates; or any other failure by
Employer to comply with Section 4(i);
(d) Executive is transferred without his consent to a location
other than a home office or branch office of Employer or any of
Employer's affiliates which
10(c)a-5
<PAGE> 7
office is or was operated by Employer or any of Employer's affiliates
prior to a change in control as defined herein.
(vi) SUSPENSION OR TERMINATION REQUIRED BY THE FDIC.
(a) If Executive is suspended and/or temporarily prohibited
from participating in the conduct of Employer's or any of Employer's
affiliates' affairs by a notice served under Section 8(e)(3), or
Section 8(g)(1) of Federal Deposit Insurance Act (12 U.S.C.
S1818(e)(3) and (g)(1) ), respectively,) Employer's obligations under
the Agreement shall be suspended as of the date of service of the
notice unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Employer shall: (1) pay Executive all of the
compensation withheld while its obligations under this Agreement were
suspended; and (2) reinstate any of its obligations which were
suspended.
(b) If Executive is removed and/or permanently prohibited from
participating in the conduct of Employer's or any of Employer's
affiliates' affairs by an order issued under Section 8(e)(4) or
Section 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
S1818(e)(4) and (g)(1)), respectively, the obligations of Employer
under the Agreement shall terminate as of the effective date of the
order, but earned or otherwise vested rights of Executive to
compensation and to any benefits under Section 4 shall not be
affected.
(c) If Employer or any of Employer's affiliates is in default
(as defined in Section 3(x)(1) of the Federal Deposit Insurance Act),
all obligations under the Agreement shall terminate as of the date of
default, but this Subsection 5(vi)(c) shall not affect any vested
rights of Executive, including the right to receive the compensation
and benefits set forth in Section 5(vii) or 5(viii) of this Agreement.
(d) All obligations under the Agreement may be terminated
except to the extent determined that continuation of the contract is
necessary to operation of Employer or any of its affiliates at the
time the Federal Deposit Insurance Corporation ("FDIC") enters into an
agreement to provide assistance to or on behalf of Employer or any of
Employer's affiliates under the authority contained in Section 13(c)
of the Federal Deposit Insurance Act; or when Employer or any of its
affiliates is determined by any appropriate bank regulatory agency to
be in an unsafe or unsound condition. Any rights of the parties that
have been already earned or otherwise vested, however, shall not be
affected by such action, including the right of the Executive to
receive the compensation and benefits set forth in Section 5(vii) or
5(viii) of this Agreement.
(vii) BENEFITS UPON OTHER TERMINATION BY EMPLOYER OR UPON TERMINATION
BY EXECUTIVE FOLLOWING A "CHANGE IN CONTROL." If this Agreement is terminated by
Employer other than for death, disability or retirement under Section 5(i) and
other than for "cause" under Section 5(ii) or other than by regulatory action
under Section 5(vi), or if Executive terminates this Agreement following a
"change in control" pursuant to Section
10(c)a-6
<PAGE> 8
5(iv)(b), then following the Termination Date Executive shall be entitled to
the benefits described in Section 5(viii).
(viii) BENEFITS UPON TERMINATION BY EXECUTIVE "FOR CAUSE" If this
Agreement is terminated by Executive pursuant to Section 5(v), then, following
the Termination Date:
(a) In lieu of any further salary payments, Executive shal1
receive severance payment equal to the sum of the Base Salary in
effect on the Termination Date plus cash bonus for the year prior to
termination times the number of years of the remaining Employment
term, payable in the amount and at the times provided in Sections 4(i)
and (ii). If termination follows a "change in control" under Section
5(iv)(b), Executive may elect to receive the payments specified in the
immediately preceding sentence in a lump sum without any discount,
provided that the amount of such severance payment may not exceed the
limitations established in Section 6.
(b) In addition to the retirement benefits to which Executive
is entitled under tax qualified retirement plans maintained by
Employer (hereinafter collectively referred to as "Plan"), Executive
shall receive as additional severance benefits a retirement benefit
under this Agreement, which (except as provided below) shall be
determined in accordance with, and paid under this Agreement in the
form and at the times provided in, the Plan. Such benefits shall be
determined as though Executive were fully vested under the Plan and
had accumulated (after termination of this Agreement) the additional
years of service and benefit credits under the Plan that he would have
received had he continued employment with Employer for the balance of
the Employment Term at the highest annual rate of Base Salary in
effect during the twelve (12) months immediately preceding the
Termination Date. Such Base Salary, plus the average of Executive's
cash bonuses, if any, for the past four years, shall be deemed to the
present the compensation received by Executive during each such
additional year for purposes of determining additional retirement
benefits under this Subsection 5(viii).
(c) In addition to other amounts payable to Executive under
this Section 5(viii), Executive shall be entitled to receive all other
benefits in which he was vested or to which he was otherwise entitled
under Section 4 and the plans and programs provided therein by reason
of employment through the Termination Date, together with the
continuation, without cost to Executive, of other benefits under
Section 4(iii) for the remaining unexpired Employment Term, all
subject to the limitations set forth in Section 6 below.
(ix) SUSPENSION BY EMPLOYER. Employer in its sole discretion shall
have the right to temporarily suspend Executive from participating in the
conduct of the Employer's or Employer's affiliates' affairs. If Executive is
suspended or temporarily prohibited from participating in the conduct of
Employer's or Employer's affiliates' business, Employer shall pay Executive all
compensation and provide all benefits pursuant to Section 4 of this Agreement
during the period of such suspension.
10(c)a-7
<PAGE> 9
6. LIMITATIONS ON CHANGE IN CONTROL COMPENSATION. In the event
severance benefits under Subsection 5(vii) or 5(viii), or any other payments or
benefits received or to be received by Executive from Employer (whether payable
pursuant to the terms of this Agreement, any other plan, agreement or
arrangement with Employer or any corporation ("Affiliate") affiliated with
Employer within the meaning of Section 1504 of the Internal Revenue Code of
1986. as amended (the "Code") ), constitute, in the opinion of tax counsel
selected by Employer's independent auditors and acceptable to Executive,
"parachute payments" within the meaning of Section 28OG(b)(2) of the Code, and
the present value of such "parachute payments" equals or exceeds three times the
average of the annual compensation payable to Executive by Employer (or an
Affiliate) and includible in Executive's gross income for federal income tax
purposes for the five (5) calendar years preceding the year in which a change in
ownership occurred ("Base Amount"), such Severance Benefits shall be reduced to
an amount the present value of which (when combined with the present value of
any other payments otherwise received or to be received by Executive from
Employer (or an Affiliate) that are deemed "parachute payments") is equal to
2.99 times the Base Amount, notwithstanding any other provision to the contrary
in this Agreement. The Severance Benefits shall not be reduced if (i) Executive
shall have effectively waived his receipt or enjoyment of any such payment or
benefit which triggered, the applicability of this Section 6, or (ii) in the
opinion of tax counsel, the Severance Benefits (in their full amount or as
partially reduced, as the case may be) plus all other payments or benefits which
constitute "parachute payments" within the meaning of Section 28OG(b)(2) of the
Code are reasonable compensation for services actually rendered, within the
meaning of Section 280G(b)(4) of the Code, and such payments are deductible by
Employer. The Base Amount shall include every type and form of compensation
includible in Executive's gross income in respect of his employment by Employer
(or an Affiliate), except to the extent otherwise provided in temporary or final
regulations promulgated under Section 28OG(b) of the Code. For purposes of this
Section 6, a "change in ownership or control" shall have the meaning set forth
in Section 280G(b) of the Code and any temporary or final regulations
promulgated thereunder. The present value of any non-cash benefit or any
deferred cash payment shall be determined by Employer's independent auditors in
accordance with the principles of Section 28OG of the Code.
Executive shall have the right to request that Employer obtain a
ruling from the Internal Revenue Service ("Service") as to whether any or all
payments or benefits determined by such tax counsel are, in the view of the
Service, "parachute payments" under Section 280G. If a ruling is sought pursuant
to Executive's request, no Severance Benefits payable under this Agreement in
excess of the Section 28OG limitation shall be made to Executive until after
fifteen (15) days from the date of such ruling; however, Severance Benefits
shall continue to be paid during this time up to the amount of that limitation.
For purposes of this Section 6, Executive and Employer agree to be bound by the
Service's ruling as to whether payments constitute "parachute payments" under
Section 280G. If the Service declines, for any reason, to provide the ruling
requested, the tax counsel's opinion provided with respect to what payments or
benefits constitute "parachute payments" shall control, and the period during
which the Severance Benefits may be deferred shall be extended to a date fifteen
(15) days from the date of the Service's notice indicating that no ruling will
be forthcoming.
In the event that Section 280G, or any successor statute, is repealed,
this Section 6 shall cease to be effective on the effective date of such repeal.
The parties to this Agreement recognize
10(c)a-8
<PAGE> 10
that final regulations under Section 28OG of the Code may affect the amounts
that may be paid under this Agreement and agree that, upon issuance of such
final regulations, this Agreement may be modified as in good faith deemed
necessary in light of the provisions of such regulations to achieve the purposes
of this Agreement, and that consent to such modifications shall not be
unreasonably withheld.
7. GENERAL-PROVISIONS.
(i) SUCCESSORS; BINDING AGREEMENT.
(a) Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
substantially all of the business and/or assets of Employer
("Successor Organization") to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that
Employer would have been required to perform if no such succession
had taken place. If such succession is the result of a "change in
control" as defined herein, such assumption shall specifically
preserve to Executive, for the then remaining term of this
Agreement, the same rights and remedies (recognizing them as being
available and applicable as the result of the "change in control"
effectuating said succession) provided under this Agreement upon a
"change in control".
As used in this Agreement, Employer shall mean Merchants and
Manufacturers Bancorporation, Inc. and any successor to its
business and/or assets which becomes bound by the terms and
provisions of this Agreement by operation of this Agreement or by
law. Failure of Employer to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Executive to compensation from Employer
in the same amount and on the same terms as he would be entitled to
under this Agreement if he terminated his employment under Section
5(v). For purposes of implementing the foregoing, the date on which
any such succession becomes effective shall be deemed the
Termination Date.
(b) No right or interest to or in any payments or benefits
under this Agreement shall be assignable or transferable in any
respect by the Executive, nor shall any such payment, right or
interest be subject to seizure, attachment or creditor's process
for payment of any debts, judgments, or obligations of Executive.
(c) Any rights and obligations of Employer under this
Agreement may be assigned or transferred by Employer to any of its
affiliates prior to a change in control as defined in this
Agreement.
(d) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by Executive and his heirs,
beneficiaries and personal representatives and Employer and any
success or organization or assignee of Employer.
10(c)-a-9
<PAGE> 11
(ii) NON-COMPETITION/CONFIDENTIALITY PROVISIONS. Executive
acknowledges that the development of personal contacts and
relationships is an essential element of Employer's and Employer's
affiliates' business, that Employer has invested considerable time and
money in his development of such contacts and relationships, that
Employer and its affiliates could suffer irreparable harm if he were
to leave Employers' employment and solicit the business of customers
of Employer or Employer's affiliates and that it is reasonable to
protect Employer against competitive activities by Executive.
Executive covenants and agrees, in recognition of the foregoing and in
consideration of the mutual promises contained herein, that in the
event of a voluntary termination of employment by Executive pursuant
to Section 5(iii), Executive shall not accept employment with any
Significant Competitor of Employer or of any of Employer's affiliates
for a period of twelve (12) months following such termination. In the
event Executive is terminated by Employer, under Section 5(vii) other
than following a change in control, Executive shall not accept
employment with any Significant Competitor of Employer or of any of
Employer's affiliates for the lesser of (a) the remaining term of the
agreement, or (b) a period of twelve (12) months following such
termination. For purposes of this Agreement, the term "Significant
Competitor" means any financial institution including, not limited to,
any commercial bank, savings bank, savings and loan association,
credit union, or mortgage banking corporation which, at the time of
termination of Executive's employment with or during the period of
this covenant not to compete, has a home, branch or other office
within a three (3) mile radius of any office operated or maintained by
Employer or any of Employer's affiliates prior to a change in control
as defined in this Agreement.
Executive agrees that the non-competition provisions set forth
herein are necessary for the protection of Employer and its affiliates
and are reasonably limited as to (a) the scope of activities affected,
(b) their duration and geographic scope, and (c) their effect on
Executive and the public. In the event Executive violates the
non-competition provisions set forth herein, Employer shall be
entitled, in addition to its other legal remedies, to enjoin the
employment of Executive with any Significant Competitor for the period
set forth herein. If Executive violates this covenant and Employer
brings legal action for injunctive or other relief, Employer shall
not, as a result of the time involved in obtaining such relief, be
deprived of the benefit of the full period of the restrictive
covenant. Accordingly, the covenant shall be deemed to have the
duration specified herein, computed from the date relief is granted,
but reduced by any period between commencement of the period and the
date of the first violation.
Executive acknowledges that as a result of his employment with
Employer or its affiliates Executive has access to confidential
information concerning Employer's business, customers and services.
Executive agrees that during the Employment Term and for a period of
one(l) year following termination of employment, he will not, directly
or indirectly, use, disclose or divulge to any person, agency, firm,
corporation or other entity any confidential or proprietary
information, including, without limitation, customer lists, reports,
files, records or information of any kind pertaining to the business
of Employer or any of its affiliates which Executive acquires or has
access to during the Employment Term. Executive agrees that if he
violates the covenants under this section, Employer shall be entitled
to an accounting and repayments of all profits, compensation,
commissions and
10(c)a-10
<PAGE> 12
other remuneration or benefits which the Executive has realized or may
realize as the result of or in connection with any such violation.
Executive further agrees that money damages may be difficult to
ascertain in case of a breach of this covenant, and Executive
therefore agrees that Employer or its affiliates shall be entitled to
injunctive relief in addition to any other remedy to which Employer or
its affiliates may be entitled.
(iii) NOTICE. All notices and other communications provided for in
this Agreement shall be in writing and shall be deemed duly given when
delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Employer:
Merchants and Manufacturers Bancorporation, Inc.
573 West Lincoln Avenue
Milwaukee, WI 53207
Attention: Board of Directors
If to the Executive:
Michael J. Murry
11421 West Abbott Avenue
Hales Corners, WI 53130
or to such other address as either party may have furnished to the
other in writing in accordance herewith.
(iv) EXPENSES. If legal proceedings are necessary to enforce or
interpret this Agreement, or to recover damages for breach, the
prevailing party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements of such proceedings, in addition to any
other relief to which such prevailing party may be entitled.
Notwithstanding the foregoing, in the event of legal proceedings to
enforce or interpret this Agreement following a change in control,
Executive shall be entitled to recover from Employer: (a) reasonable
attorneys, fees, costs and disbursements if Executive is the
prevailing party; or (b) reasonable attorneys' fees, costs and
disbursements of up to $7,500 incurred in such proceedings regardless
of whether Executive is the prevailing party. Recovery of attorneys'
fees and costs following a "change in control" shall be in addition to
any other relief to which Executive is entitled.
(v) WITHHOLDING. Employer shall be entitled to withhold from
amounts to be paid to Executive under this Agreement any federal,
state, or local withholding or other taxes or charges which it is from
time to time required to withhold. Employer shall be entitled to rely
on an opinion of counsel as to the amount or requirement of any such
withholding.
10(c)a-11
<PAGE> 13
(vi) MISCELLANEOUS. No provision of this Agreement may be
amended, waived or discharged unless such Amendment, waiver or
discharge is agreed to in writing and duly executed by Executive and
Employer or its successor in interest. This Agreement constitutes the
entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements and undertaking,
whether written or oral, between the parties with respect thereto; no
agreements or representation, oral or otherwise, express or implied,
have been made by either party with respect to the subject matter
hereof. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Wisconsin.
(vii) VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
(viii) COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which together will constitute one and the same
instrument.
(ix) HEADINGS. Headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of
any provision of this Agreement.
(x) EFFECTIVE DATE. The effective date of this Agreement shall
be the date indicated in the first paragraph of this Agreement,
notwithstanding the actual date of execution by any party.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date first above written.
EXECUTIVE
Michael J. Murry
---------------------------------------(SEAL)
Michael J. Murry
MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
By: Michael J. Murry
------------------------------------------
Title: Chairman/CEO
---------------------------------------
10(c)a-12
<PAGE> 14
FIRST AMENDMENT TO
EXECUTIVE EMPLOYMENT AGREEMENT
This first amendment to the Executive Employment Agreement dated as of June 25,
1997, between MERCHANTS AND MANUFACTURERS BANCORPORATION, INC., a
Wisconsin Corporation ("Employer") and MICHAEL J. MURRY ("Executive"),
RECITALS
A. The parties entered into an Executive Employment Agreement dated January 2,
1996 (the "Agreement");
B. The parties desire to amend the Agreement in accordance with the terms of
this First Amendment.
AGREEMENTS
In consideration of the promises and mutual covenants contained herein and in
the Agreement, the parties agree as follows:
1. The following recital is added after the second recital of the
Agreement:
WHEREAS, Executive desires to assume certain duties as Chief
Financial Officer of General Automotive Manufacturing Company,
Inc., and wishes to delegate certain functions heretofore
personally performed by Executive for Employer to other
executive officers of Employer, while retaining full and
complete overall responsibility as Chief Executive Officer of
Employer.
2. The last sentence of Section 3 of the Agreement is hereby deleted and
the following sentence is inserted in lieu thereof:
During the Employment Term, Executive may devote a portion of
his working time to meet his responsibilities as the Chief
Financial Officer of General Automotive Manufacturing Company,
Inc., provided that he shall devote sufficient time and effort,
as determined from time to time by the Board of Directors of
Employer, to the business and affairs of Employer to fully carry
out his duties and responsibilities as Chief Executive Officer
of Employer. Executive shall continue to have undiminished
overall management responsibility for the affairs of Employer,
notwithstanding the fact that he may, from time to time,
delegate additional duties to other executive officers of
Employer.
10(c)a-13
<PAGE> 15
3. The second sentence of subsection 4(i) is hereby deleted and the
following sentence is inserted in lieu thereof:
The Base Salary in effect as of the commencement date of this
First Amendment shall be $120,000.
4. Subsection 4(ii) shall be deleted in its entirety, and the following
sentence shall be inserted in lieu thereof:
BONUS PAYMENTS: Executive shall not be entitled during the
Employment Term to receive payments from any bonus plan.
5. All other provisions of the Agreement shall remain in full force and
effect.
6. The effective date of this First Amendment to the Agreement shall be
the date indicated in the first paragraph of this First Amendment,
notwithstanding the actual date of execution by any party.
IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as
of the date first above written.
EXECUTIVE
Michael J. Murry
---------------------------------------------
Michael J. Murry
MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
By: James Bomberg
------------------------------------------
Name: James Bomberg
----------------------------------------
Title: President
---------------------------------------
ATTEST:/s/ John Krawczyk
---------------------------
Name: John Krawczyk
-------------------------------
Title: Executive Vice President
----------------------------
10(c)a-14
<PAGE> 16
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 2nd day of January 1996,
between MERCHANTS AND MANUFACTURERS BANCORPORATION, INC. (the "Employer"), a
Wisconsin corporation, its successors and assigns, and JAMES C. MROCZKOWSKI,
(the "Executive").
RECITALS
WHEREAS, Executive is a valued, long-term employee, whose experience
in the industry and continued employment in the position of Vice President and
Chief Financial Officer will benefit the Employer in the future; and
WHEREAS, Employer desires to provide for management continuity and
stability and for the continued services of Executive.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth below:
1. EMPLOYMENT. Employer shall continue to employ Executive, and
Executive shall continue to serve, on the terms and conditions set forth herein
for the period provided in Section 2.
2. TERM OF EMPLOYMENT. The period of Executive's employment under this
Agreement shall be deemed to have commenced as of the date first above written
and shall continue for a period of thirty-six (36) calendar months thereafter.
Commencing on the first anniversary date of this Agreement, and continuing at
each anniversary date thereafter, the Agreement shall renew for an additional 12
months such that the remaining term shall be thirty-six (36) months unless
written notice is provided by either party at least sixty (60) days prior to any
such anniversary date, that the Agreement shall terminate at the end of
twenty-four (24) months following such anniversary date. Prior to the renewal or
non-renewal of the Agreement, the Board of Directors or the Executive
Personnel/Compensation Committee will conduct a performance evaluation of the
Executive for the purpose of determining whether to extend the Agreement, and
the results thereof shall be included in the minutes of the Board or Executive
Personnel/Compensation Committee meeting. The term of employment under this
Agreement, as in effect from time to time, shall be referred to as the
"Employment Term."
3. POSITION AND DUTIES. Subject to Section 5(iv)(b), Executive shall
serve Employer or any of Employer's affiliates as an Executive Officer. As such,
he is presently serving in the capacity of Vice President and Chief Financial
Officer of Employer ("Corporate Position").
10(c)b-1
<PAGE> 17
Executive shall provide such management services as are customarily performed by
persons serving in similar capacities at other bank holding companies or their
affiliates, and perform such other duties as may be appropriate to his position
and as may be from time to time determined by Employer's Board of Directors to
be necessary to its operations and in accordance with its bylaws. During the
Employment Term the Board of Directors may modify Executive's duties and
responsibilities consistent with continued executive status; provided, however,
there shall be no material change in Executive's status nor any material
increase or decrease in duties and responsibilities except as agreed to in
writing by Executive. It is agreed that Employer shall have the right to
transfer Executive to any home office or branch office of Employer or any of
Employer's affiliates, provided that such home office or branch office is or was
operated by Employer or any of Employer's affiliates prior to a change in
control as defined herein. During the Employment Term, Executive shall devote
substantially all his working time and efforts to the business and affairs of
the Employer and shall not engage in any activity which is competitive with or
adverse to the business of the Employer or any of its affiliates whether done
as a partner, director, officer, employee, shareholder of or consultant or
advisor to any other business.
4. COMPENSATION. As compensation for services provided pursuant to
this Agreement, Executive shall receive the compensation and other benefits set
forth below:
(i) BASE SALARY. During the Employment Term, Executive shall
receive an annual base salary ("Base Salary") in such amount as may
from time to time be approved by the Board or the Executive
Personnel/Compensation Committee. The Base Salary in effect as of the
Commencement Date shall be $75,000. Such amount shall be subject to
review and to annual adjustment by the Board or the Executive
Personnel/Compensation Committee in accordance with Employer's normal
personnel practices and, once established at a specified annual rate
(including the initial rate), Executive's Base Salary shall not
thereafter be reduced without his consent except pursuant to
subsection 5(v)(c) of this Agreement. No increase in Base Salary or
other compensation shall limit or reduce any other obligation of
Employer. Executive's Base Salary and other compensation shall be paid
in accordance with Employer's regular payroll practices. Review and
adjustment of Executive's Base Salary shall be done on a basis
comparable to, and applied uniformly with, that utilized for other
executives of Employer and/or its affiliates.
(ii) BONUS PAYMENTS. In addition to Base Salary, Executive shall
be entitled, during the Employment Term, to participate in and receive
payments from all bonus and other incentive compensation plans as in
effect from time to time on the same basis as other executive officers
of Employer.
(iii) OTHER BENEFITS. During the Employment Term, Employer shall
provide to Executive, in addition to Base Salary, such other benefits
of employment (or, with Executive's consent, equivalent benefits) as
are made generally available to executive officers serving in
comparable positions at Employer or its affiliates. Such benefits
shall include participation in any group health, life, disability, or
similar insurance program and in any pension, profit-sharing, deferred
compensation, 401(k) or other similar retirement program provided.
Executive shall also have the right to participate, on the same basis
as
10(c)b-2
<PAGE> 18
other executives of Employer, in any stock purchase, stock option or
stock appreciation rights plans, or other stock-based program made
available to such executive officers.
Executive shall be entitled to vacation, sick time, personal days
and other perquisites in the same manner and to the same extent as
provided other executives of Employer.
Nothing contained herein shall be construed as granting Executive
the right to continue in any benefit plan or program, or to receive
any other perquisite of employment, provided under this section 4(iii)
(except to the extent Executive had previously earned or otherwise
accumulated vested rights therein) following a valid and lawful
termination or discontinuance of such plan, program or perquisite.
5. TERMINATION. This Agreement may be terminated, subject to payment
of the compensation and other benefits described below, upon occurrence of any
of the events described herein. The date on which Executive ceases to be
employed under this Agreement, after giving effect to the period of time
specified in any notice requirement, is referred to as the "Termination Date."
(i) DEATH; DISABILITY; RETIREMENT. This Agreement shall
terminate upon the death, disability or retirement of Executive. As
used in this Agreement, "disability" means Executive's inability, as
the result of physical or mental incapacity, to substantially perform
his duties for a period of 180 consecutive days. If the Executive and
Employer cannot agree as to the existence of a disability, the
determination shall be made by a qualified independent physician
acceptable to both parties or, alternatively, by a physician
designated by the president of the medical society for the county in
which Executive resides. The costs of any such medical examination
shall be borne by Employer. If Executive is terminated due to
disability, he shall be paid 100% of his Base Salary at the rate in
effect at the time notice of termination is given for one year, and
thereafter an annual amount equal to 75% of such Base Salary for the
remaining portion of the Employment Term, such amounts to be paid in
substantially equal monthly installments and offset by any monthly
payments actually received by Executive from: (a) any disability plans
or disability insurance programs provided by Employer, and (b) any
governmental social security or workers compensation program.
As used in this Agreement, the term "retirement" shall mean
Executive's retirement in accordance with and pursuant to any
generally applicable retirement plan of Employer or in accordance with
any retirement arrangement established for Executive with his consent.
If termination occurs as a result of death, disability or
retirement, no additional compensation shall be payable to Executive
under this Agreement except as specifically provided herein.
Notwithstanding anything to the contrary contained herein, Executive
shall receive all compensation and other benefits to which he was
entitled under Section 4 and the plans and programs provided therein,
through the Termination Date and, in addition, shall receive or
continue to receive for the remaining portion of the Employment
10(c)b-3
<PAGE> 19
Term all other benefits available to him under any applicable group
health, life, disability or similar insurance program as in effect on
the date of death, disability or retirement.
If, following termination by reason of disability and prior to the
expiration of the then remaining balance of the Employment Term,
Executive becomes able to resume his duties, he shall be reinstated to
his Corporate Position or, if such position has been filled, to a
position as nearly comparable as possible. From the date of
reinstatement and for the balance of the Employment Term, Executive
shall be obligated to perform all duties and responsibilities, and
entitled to receive all compensation and other benefits, as provided
in this Agreement.
(ii) CAUSE. Employer may terminate Executive's employment under
this Agreement for cause at any time, and thereafter Employer shall
have no further obligation under this Agreement. Notwithstanding
anything to the contrary contained herein, Executive shall receive all
compensation and other benefits in which he was vested or to which he
was otherwise entitled under Section 4 and the plans and programs
provided therein, by reason of employment through the Termination
Date.
For purposes of this Agreement, "Cause" shall mean:
(a) A failure by Executive to substantially perform his
duties (other than failure resulting from incapacity) after a
written demand by the Board, which demand identifies, with
reasonable specificity, the manner in which the Board believes
Executive has not substantially performed, and Executive's failure
to cure within a reasonable period of time after his receipt of the
notice;
(b) A criminal conviction of or plea of nolo contendere by
Executive for any act involving dishonesty, breach of trust or a
violation of the banking or savings and loan laws of the State of
Wisconsin or the United States;
(c) A criminal conviction of or plea of nolo contendere by
Executive for the commission of any felony;
(d) A breach of fiduciary duty by Executive involving
personal profit;
(e) A willful violation of any law, rule or order by
Executive (other than traffic violations or similar offenses); or
(f) Incompetence, personal dishonesty or material breach of
any provision of this Agreement or any willful misconduct by
Executive.
For purposes of this subsection 5(ii), no act, or failure to act,
on Executive's part shall be deemed "willful" unless done, or omitted to be
done, by Executive not in good faith and without reasonable belief that the
action or omission was in the best interest of Employer.
10(c)b-4
<PAGE> 20
(iii) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may
voluntarily terminate employment at any time by giving at least ninety
(90) days' prior written notice to Employer. In such event, Employer
shall have no further obligation hereunder, except that Executive
shall receive all compensation and other benefits in which he was
vested or to which he was otherwise entitled under Section 4 and the
plans and programs provided therein, by reason of his employment
through the Termination Date.
(iv) TERMINATION BY EXECUTIVE AFTER CHANGE IN CONTROL.
(a) For purposes of this Agreement, a "change in control"
shall be deemed to have occurred if any "individual, entity or
group" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule l3d-3 under the Exchange Act), directly or indirectly, of
securities representing 25% or more of the voting power of the
securities of Employer or any of Employer's affiliates or becomes
the owner of all or substantially all of the assets of Employer or
any of Employer's affiliates or if the shareholders of Employer or
any affiliate of Employer approve a reorganization, merger or
consolidation of Employer or any affiliates of Employer. "Change
in control" shall not refer to or include any transaction involving
only entities affiliated directly or indirectly with Employer.
(b) Executive may, at any time within twelve (12) months
following a "change in control," terminate his employment under
this Agreement by giving at least ninety (90) days' prior written
notice to Employer.
(v) TERMINATION BY EXECUTIVE "FOR CAUSE." Executive may
terminate his employment under this Agreement by giving at least
ninety (90) days' prior written notice to Employer at any time after
the occurrence of any of the following without Executive's express
written consent:
(a) Executive is assigned to positions, duties or
responsibilities that are substantially less significant than the
positions, duties and responsibilities provided herein;
(b) Executive is removed from or Employer fails to reelect
Executive to his Corporate Position, except in connection with
termination of Executive's employment for cause, disability or
retirement, or in connection with suspension or termination by or
pursuant to regulatory action;
(c) Executive's Base Salary is reduced other than as the
result of a program applied on a proportionately equivalent basis
to all executives of Employer and its affiliates; or any other
failure by Employer to comply with Section 4(i);
(d) Executive is transferred without his consent to a
location other than a home office or branch office of Employer or
any of Employer's affiliates which
10(c)b-5
<PAGE> 21
office is or was operated by Employer or any of Employer's
affiliates prior to a change in control as defined herein.
(vi) SUSPENSION OR TERMINATION REQUIRED BY THE FDIC.
(a) If Executive is suspended and/or temporarily prohibited
from participating in the conduct of Employer's or any of
Employer's affiliates' affairs by a notice served under Section
8(e)(3), or Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. S1818(e)(3) and (g)(1)), respectively), Employer's
obligations under the Agreement shall be suspended as of the date
of service of the notice unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Employer shall: (1)
pay Executive all of the compensation withheld while its
obligations under this Agreement were suspended; and (2) reinstate
any of its obligations which were suspended.
(b) If Executive is removed and/or permanently prohibited
from participating in the conduct of Employer's or any of
Employer's affiliates' affairs by an order issued under Section
8(e)(4) or Section 8(g)(1) of the Federal Deposit Insurance Act (12
U.S.C. S1818(e)(4) and (g)(1)), respectively, the obligations of
Employer under the Agreement shall terminate as of the effective
date of the order, but earned or otherwise vested rights of
Executive to compensation and to any benefits under Section 4 shall
not be affected.
(c) If Employer or any of Employer's affiliates is in
default (as defined in Section 3(x)(1) of the Federal Deposit
Insurance Act), all obligations under the Agreement shall terminate
as of the date of default, but this Subsection 5(vi)(c) shall not
affect any vested rights of Executive, including the right to
receive the compensation and benefits set forth in Section 5(vii)
or 5(viii) of this Agreement.
(d) All obligations under the Agreement may be terminated
except to the extent determined that continuation of the contract
is necessary to operation of Employer or any of its affiliates at
the time the Federal Deposit Insurance Corporation ("FDIC") enters
into an agreement to provide assistance to or on behalf of Employer
or any of Employer's affiliates under the authority contained in
Section 13(c) of the Federal Deposit Insurance Act; or when
Employer or any of its affiliates is determined by any appropriate
bank regulatory agency to be in an unsafe or unsound condition. Any
rights of the parties that have been already earned or otherwise
vested, however, shall not be affected by such action, including
the right of the Executive to receive the compensation and benefits
set forth in Section 5(vii) or 5(viii) of this Agreement.
(vii) BENEFITS UPON OTHER TERMINATION BY EMPLOYER OR UPON
TERMINATION BY EXECUTIVE FOLLOWING A "CHANGE IN CONTROL." If this
Agreement is terminated by Employer other than for death, disability
or retirement under Section 5(i) and other than for "cause" under
Section 5(ii) or other than by regulatory action under Section 5(vi),
or if Executive terminates this Agreement following a "change in
control" pursuant to Section
10(c)b-6
<PAGE> 22
5(iv)(b), then following the Termination Date Executive shall be
entitled to the benefits described in Section 5(viii).
(viii) BENEFITS UPON TERMINATION BY EXECUTIVE "FOR CAUSE." IF THIS
Agreement is terminated by Executive pursuant to Section 5(v), then,
following the Termination Date:
(a) In lieu of any further salary payments, Executive shall
receive severance payments equal to the sum of the Base Salary in
effect on the Termination Date plus cash bonus for the year prior
to termination times the number of years of the remaining
Employment Term, payable in the amount and at the times provided in
Sections 4(i) and (ii). If termination follows a "change in
control" under Section 5(iv)(b), Executive may elect to receive the
payments specified in the immediately preceding sentence in a lump
sum without any discount, provided that the amount of such
severance payments may not exceed the limitations established in
Section 6.
(b) In addition to the retirement benefits to which
Executive is entitled under tax qualified retirement plans
maintained by Employer (hereinafter collectively referred to as
"Plan"), Executive shall receive as additional severance benefits a
retirement benefit under this Agreement, which (except as provided
below) shall be determined in accordance with, and paid under this
Agreement in the form and at the times provided in, the Plan. Such
benefits shall be determined as though Executive were fully vested
under the Plan and had accumulated (after termination of this
Agreement) the additional years of service and benefit credits
under the Plan that he would have received had he continued
employment with Employer for the balance of the Employment Term at
the highest annual rate of Base Salary in effect during the twelve
(12) months immediately preceding the Termination Date. Such Base
Salary, plus the average of Executive's cash bonuses, if any, for
the past four years, shall be deemed to represent the compensation
received by Executive during each such additional year for purposes
of determining additional retirement benefits under this Subsection
5(viii).
(c) In addition to other amounts payable to Executive under
this Section 5(viii), Executive shall be entitled to receive all
other benefits in which he was vested or to which he was otherwise
entitled under Section 4 and the plans and programs provided
therein by reason of employment through the Termination Date,
together with the continuation, without cost to Executive, of other
benefits under Section 4(iii) for the remaining unexpired
Employment Term, all subject to the limitations set forth in
Section 6 below.
(ix) SUSPENSION BY EMPLOYER. Employer in its sole discretion
shall have the right to temporarily suspend Executive from
participating in the conduct of the Employer's or Employer's
affiliates' affairs. If Executive is suspended or temporarily
prohibited from participating in the conduct of Employer's or
Employer's affiliates' business, Employer shall pay Executive all
compensation and provide all benefits pursuant to Section 4 of this
Agreement during the period of such suspension.
10(c)b-7
<PAGE> 23
6. LIMITATIONS ON CHANGE IN CONTROL COMPENSATION. In the event
severance benefits under Subsection 5(vii) or 5(viii), or any other payments or
benefits received or to be received by Executive from Employer (whether payable
pursuant to the terms of this Agreement, any other plan, agreement or
arrangement with Employer or any corporation ("Affiliate") affiliated with
Employer within the meaning of Section 1504 of the Internal Revenue Code of
1986. as amended (the "Code") ), constitute, in the opinion of tax counsel
selected by Employer's independent auditors and acceptable to Executive,
"parachute payments" within the meaning of Section 280G(b)(2) of the Code, and
the present value of such "parachute payments" equals or exceeds three times the
average of the annual compensation payable to Executive by Employer (or an
Affiliate) and includible in Executive's gross income for federal income tax
purposes for the five (5) calendar years preceding the year in which a change in
ownership occurred ("Base Amount"), such Severance Benefits shall be reduced to
an amount the present value of which (when combined with the present value of
any other payments otherwise received or to be received by Executive from
Employer (or an Affiliate) that are deemed "parachute payments") is equal to
2.99 times the Base Amount, notwithstanding any other provision to the contrary
in this Agreement. The Severance Benefits shall not be reduced if (i) Executive
shall have effectively waived his receipt or enjoyment of any such payment or
benefit which triggered the applicability of this Section 6, or (ii) in the
opinion of tax counsel, the Severance Benefits (in their full amount or as
partially reduced, as the case may be) plus all other payments or benefits which
constitute "parachute payments" within the meaning of Section 280G(b)(2) of the
Code are reasonable compensation for services actually rendered, within the
meaning of Section 280G(b)(4) of the Code, and such payments are deductible by
Employer. The Base Amount shall include every type and form of compensation
includible in Executive's gross income in respect of his employment by Employer
(or an Affiliate), except to the extent otherwise provided in temporary or final
regulations promulgated under Section 280G(b) of the Code. For purposes of this
Section 6, a "change in ownership or control" shall have the meaning set forth
in Section 280G(b) of the Code and any temporary or final regulations
promulgated thereunder. The present value of any non-cash benefit or any
deferred cash payment shall be determined by Employer's independent auditors in
accordance with the principles of Section 280G of the Code.
Executive shall have the right to request that Employer obtain a
ruling from the Internal Revenue Service ("Service") as to whether any or all
payments or benefits determined by such tax counsel are, in the view of the
Service, "parachute payments" under Section 280G. If a ruling is sought pursuant
to Executive's request, no Severance Benefits payable under this Agreement in
excess of the Section 280G limitation shall be made to Executive until after
fifteen (15) days from the date of such ruling; however, Severance Benefits
shall continue to be paid during this time up to the amount of that limitation.
For purposes of this Section 6, Executive and Employer agree to be bound by the
Service's ruling as to whether payments constitute "parachute payments" under
Section 280G. If the Service declines, for any reason, to provide the ruling
requested, the tax counsel's opinion provided with respect to what payments or
benefits constitute "parachute payments" shall control, and the period during
which the Severance Benefits may be deferred shall be extended to a date fifteen
(15) days from the date of the Service's notice indicating that no ruling will
be forthcoming.
In the event that Section 280G, or any successor statute, is repealed,
this Section 6 shall cease to be effective on the effective date of such repeal.
The parties to this Agreement recognize
10(c)b-8
<PAGE> 24
that final regulations under Section 280G of the Code may affect the amounts
that may be paid under this Agreement and agree that, upon issuance of such
final regulations, this Agreement may be modified as in good faith deemed
necessary in light of the provisions of such regulations to achieve the purposes
of this Agreement, and that consent to such modifications shall not be
unreasonably withheld.
7. GENERAL-PROVISIONS.
(i) SUCCESSORS; BINDING AGREEMENT.
(a) Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
substantially all of the business and/or assets of Employer
("Successor Organization") to expressly assume and agree to
perform this Agreement in the same manner and to the same extent
that Employer would have been required to perform if no such
succession had taken place. If such succession is the result of a
"change in control" as defined herein, such assumption shall
specifically preserve to Executive, for the then remaining term of
this Agreement, the same rights and remedies (recognizing them as
being available and applicable as the result of the "change in
control" effectuating said succession) provided under this
Agreement upon a "change in control".
As used in this Agreement, Employer shall mean Merchants
and Manufacturers Bancorporation, Inc. and any successor to its
business and/or assets which becomes bound by the terms and
provisions of this Agreement by operation of this Agreement or by
law. Failure of Employer to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Executive to compensation from
Employer in the same amount and on the same terms as he would be
entitled to under this Agreement if he terminated his employment
under Section 5(v). For purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be
deemed the Termination Date.
(b) No right or interest to or in any payments or benefits
under this Agreement shall be assignable or transferable in any
respect by the Executive, nor shall any such payment, right or
interest be subject to seizure, attachment or creditor's process
for payment of any debts, judgments, or obligations of Executive.
(c) Any rights and obligations of Employer under this
Agreement may be assigned or transferred by Employer to any of its
affiliates prior to a change in control as defined in this
Agreement.
(d) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by Executive and his heirs,
beneficiaries and personal representatives and Employer and any
successor organization or assignee of Employer.
10(c)b-9
<PAGE> 25
(ii) NON-COMPETITION/CONFIDENTIALITY PROVISIONS. Executive
acknowledges that the development of personal contacts and
relationships is an essential element of Employer's and Employer's
affiliates' business, that Employer has invested considerable time and
money in his development of such contacts and relationships, that
Employer and its affiliates could suffer irreparable harm if he were to
leave Employer's employment and solicit the business of customers of
Employer or Employer's affiliates and that it is reasonable to protect
Employer against competitive activities by Executive. Executive
covenants and agrees, in recognition of the foregoing and in
consideration of the mutual promises contained herein, that in the
event of a voluntary termination of employment by Executive pursuant to
Section 5(iii), Executive shall not accept employment with any
Significant Competitor of Employer or of any of Employer's affiliates
for a period of twelve (12) months following such termination. In the
event Executive is terminated by Employer, under Section 5(vii) other
than following a change in control, Executive shall not accept
employment with any Significant Competitor of Employer or of any of
Employer's affiliates for the lesser of (a) the remaining term of the
agreement, or (b) a period of twelve (12) months following such
termination. For purposes of this Agreement, the term "Significant
Competitor" means any financial institution including, not limited to,
any commercial bank, savings bank, savings and loan association, credit
union, or mortgage banking corporation which, at the time of
termination of Executive's employment with or during the period of this
covenant not to compete, has a home, branch or other office within a
three (3) mile radius of any office operated or maintained by Employer
or any of Employer's affiliates prior to a change in control as defined
in this Agreement.
Executive agrees that the non-competition provisions set forth
herein are necessary for the protection of Employer and its affiliates
and are reasonably limited as to (a) the scope of activities affected,
(b) their duration and geographic scope, and (c) their effect on
Executive and the public. In the event Executive violates the
non-competition provisions set forth herein, Employer shall be
entitled, in addition to its other legal remedies, to enjoin the
employment of Executive with any Significant Competitor for the period
set forth herein. If Executive violates this covenant and Employer
brings legal action for injunctive or other relief, Employer shall not,
as a result of the time involved in obtaining such relief, be deprived
of the benefit of the full period of the restrictive covenant.
Accordingly, the covenant shall be deemed to have the duration
specified herein, computed from the date relief is granted, but reduced
by any period between commencement of the period and the date of the
first violation.
Executive acknowledges that as a result of his employment with
Employer or its affiliates Executive has access to confidential
information concerning Employer's business, customers and services.
Executive agrees that during the Employment Term and for a period of
one(l) year following termination of employment, he will not, directly
or indirectly, use, disclose or divulge to any person, agency, firm,
corporation or other entity any confidential or proprietary
information, including, without limitation, customer lists, reports,
files, records or information of any kind pertaining to the business of
Employer or any of its affiliates which Executive acquires or has
access to during the Employment Term. Executive agrees that if he
violates the covenants under this section, Employer shall be entitled
to an accounting and repayments of all profits, compensation,
commissions and
10(c)b-10
<PAGE> 26
other remuneration or benefits which the Executive has realized or may
realize as the result of or in connection with any such violation.
Executive further agrees that money damages may be difficult to
ascertain in case of a breach of this covenant, and Executive therefore
agrees that Employer or its affiliates shall be entitled to injunctive
relief in addition to any other remedy to which Employer or its
affiliates may be entitled.
(iii) NOTICE. All notices and other communications provided for
in this Agreement shall be in writing and shall be deemed duly given
when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Employer:
Merchants and Manufacturers Bancorporation, Inc.
573 West Lincoln Avenue
Milwaukee, WI 53207
Attention: Board of Directors
If to the Executive:
James C. Mroczkowski
7545 South Mission Drive
Franklin, WI 53132
or to such other address as either party may have furnished to the
other in writing in accordance herewith.
(iv) EXPENSES. If legal proceedings are necessary to enforce or
interpret this Agreement, or to recover damages for breach, the
prevailing party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements of such proceedings, in addition to any
other relief to which such prevailing party may be entitled.
Notwithstanding the foregoing, in the event of legal proceedings to
enforce or interpret this Agreement following a change in control,
Executive shall be entitled to recover from Employer: (a) reasonable
attorneys, fees, costs and disbursements if Executive is the prevailing
party; or (b) reasonable attorneys' fees, costs and disbursements of up
to $7,500 incurred in such proceedings regardless of whether Executive
is the prevailing party. Recovery of attorneys' fees and costs
following a "change in control" shall be in addition to any other
relief to which Executive is entitled.
(v) WITHHOLDING. Employer shall be entitled to withhold from
amounts to be paid to Executive under this Agreement any federal,
state, or local withholding or other taxes or charges which it is from
time to time required to withhold. Employer shall be entitled to rely
on an opinion of counsel as to the amount or requirement of any such
withholding.
10(c)b-11
<PAGE> 27
(vi) MISCELLANEOUS. No provision of this Agreement may be
amended, waived or discharged unless such Amendment, waiver or
discharge is agreed to in writing and duly executed by Executive and
Employer or its successor in interest. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements and undertakings, whether
written or oral, between the parties with respect thereto; no
agreements or representations, oral or otherwise, express or implied,
have been made by either party with respect to the subject matter
hereof. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Wisconsin.
(vii) VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
(viii) COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which together will constitute one and the same
instrument.
(ix) HEADINGS. Headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of
any provision of this Agreement.
(x) EFFECTIVE DATE. The effective date of this Agreement shall
be the date indicated in the first paragraph of this Agreement,
notwithstanding the actual date of execution by any party.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date first above written.
EXECUTIVE
James C. Mroczkowski (SEAL)
---------------------------------
James C. Mroczkowski
MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
By: Michael J. Murry
------------------------------
Title: Chairman CEO
---------------------------
10(c)b-12
<PAGE> 28
EXHIBIT 10(c)c
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 2 day of January, 1996, between
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC. (the "Employer"), a Wisconsin
corporation, its successors and assigns, and JOHN KRAWCZYK (the "Executive").
RECITALS
WHEREAS, Executive is a valued, long-term employee, whose experience in
the industry and continued employment in the position of Executive Vice
President and Chief Operating Officer will benefit the Employer in the future;
and
WHEREAS, Employer desires to provide for management continuity and
stability and for the continued services of Executive.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below:
1. EMPLOYMENT. Employer shall continue to employ Executive, and
Executive shall continue to serve, on the terms and conditions set forth herein
for the period provided in Section 2.
2. TERM OF EMPLOYMENT. The period of Executive's employment under
this Agreement shall be deemed to have commenced as of the date first above
written and shall continue for a period of thirty-six (36) calendar months
thereafter. Commencing on the first anniversary date of this Agreement, and
continuing at each anniversary date thereafter, the Agreement shall renew for an
additional 12 months such that the remaining term shall be thirty-six (36)
months unless written notice is provided by either party at least sixty (60)
days prior to any such anniversary date, that the Agreement shall terminate at
the end of twenty-four (24) months following such anniversary date. Prior to the
renewal or non-renewal of the Agreement, the Board of Directors or the Executive
Personnel/Compensation Committee will conduct a performance evaluation of the
Executive for the purpose of determining whether to extend the Agreement, and
the results thereof shall be included in the minutes of the Board or Executive
Personnel/Compensation Committee meeting. The term of employment under this
Agreement, as in effect from time to time, shall be referred to as the
"Employment Term."
3. POSITION AND DUTIES. Subject to Section 5(iv)(b), Executive shall
serve Employer or any of Employer's affiliates as an Executive Officer. As such,
he is presently serving in the capacity of Executive Vice President and Chief
Operating Officer of Employer ("Corporate
10(c)c-l
<PAGE> 29
Position"). Executive shall provide such management services as are customarily
performed by persons serving in similar capacities at other bank holding
companies or their affiliates, and perform such other duties as may be
appropriate to his position and as may be from time to time determined by
Employer's Board of Directors to be necessary to its operations and in
accordance with its bylaws. During the Employment Term the Board of Directors
may modify Executive's duties and responsibilities consistent with continued
executive status; provided, however, there shall be no material change in
Executive's status nor any material increase or decrease in duties and
responsibilities except as agreed to in writing by Executive. It is agreed that
Employer shall have the right to transfer Executive to any home office or branch
office of Employer or any of Employer's affiliates, provided that such home
office or branch office is or was operated by Employer or any of Employer's
affiliates prior to a change in control as defined herein. During the Employment
Term, Executive shall devote substantially all his working time and efforts to
the business and affairs of the Employer and shall not engage in any activity
which is competitive with or adverse to the business of the Employer or any of
its affiliates whether done as a partner, director, officer, employee,
shareholder of or consultant or advisor to any other business.
4. COMPENSATION. As compensation for services provided pursuant to
this Agreement, Executive shall receive the compensation and other benefits set
forth below:
(i) BASE SALARY. During the Employment Term, Executive shall
receive an annual base salary ("Base Salary") in such amount as may
from time to time be approved by the Board or the Executive
Personnel/Compensation Committee. The Base Salary in effect as of the
Commencement Date shall be $79,404. Such amount shall be subject to
review and to annual adjustment by the Board or the Executive
Personnel/Compensation Committee in accordance with Employer's normal
personnel practices and, once established at a specified annual rate
(including the initial rate), Executive's Base Salary shall not
thereafter be reduced without his consent except pursuant to subsection
5(v)(c) of this Agreement. No increase in Base Salary or other
compensation shall limit or reduce any other obligation of Employer.
Executive's Base Salary and other compensation shall be paid in
accordance with Employer's regular payroll practices. Review and
adjustment of Executive's Base Salary shall be done on a basis
comparable to, and applied uniformly with, that utilized for other
executives of Employer and/or its affiliates.
(ii) BONUS PAYMENTS. In addition to Base Salary, Executive shall
be entitled, during the Employment Term, to participate in and receive
payments from all bonus and other incentive compensation plans as in
effect from time to time on the same basis as other executive officers
of Employer.
(iii) OTHER BENEFITS. During the Employment Term, Employer shall
provide to Executive, in addition to Base Salary, such other benefits
of employment (or, with Executive's consent, equivalent benefits) as
are made generally available to executive officers serving in
comparable positions at Employer or its affiliates. Such benefits shall
include participation in any group health, life, disability, or similar
insurance program and in any pension, profit-sharing, deferred
compensation, 401(k) or other similar retirement program provided.
Executive shall also have the right to participate, on the same basis
as
10(c)c-2
<PAGE> 30
other executives of Employer, in any stock purchase, stock option or
stock appreciation rights plans, or other stock-based program made
available to such executive officers.
Executive shall be entitled to vacation, sick time, personal days
and other perquisites in the same manner and to the same extent as
provided other executives of Employer.
Nothing contained herein shall be construed as granting Executive
the right to continue in any benefit plan or program, or to receive any
other perquisite of employment, provided under this section 4(iii)
(except to the extent Executive had previously earned or otherwise
accumulated vested rights therein) following a valid and lawful
termination or discontinuance of such plan, program or perquisite.
5. TERMINATION. This Agreement may be terminated, subject to payment
of the compensation and other benefits described below, upon occurrence of any
of the events described herein. The date on which Executive ceases to be
employed under this Agreement, after giving effect to the period of time
specified in any notice requirement, is referred to as the "Termination Date."
(i) DEATH; DISABILITY; RETIREMENT. This Agreement shall
terminate upon the death, disability or retirement of Executive. As
used in this Agreement, "disability" means Executive's inability, as
the result of physical or mental incapacity, to substantially perform
his duties for a period of 180 consecutive days. If the Executive and
Employer cannot agree as to the existence of a disability, the
determination shall be made by a qualified independent physician
acceptable to both parties or, alternatively, by a physician designated
by the president of the medical society for the county in which
Executive resides. The costs of any such medical examination shall be
borne by Employer. If Executive is terminated due to disability, he
shall be paid 100% of his Base Salary at the rate in effect at the time
notice of termination is given for one year, and thereafter an annual
amount equal to 75% of such Base Salary for the remaining portion of
the Employment Term, such amounts to be paid in substantially equal
monthly installments and offset by any monthly payments actually
received by Executive from: (a) any disability plans or disability
insurance programs provided by Employer, and (b) any governmental
social security or workers compensation program.
As used in this Agreement, the term "retirement" shall mean
Executive's retirement in accordance with and pursuant to any generally
applicable retirement plan of Employer or in accordance with any
retirement arrangement established for Executive with his consent.
If termination occurs as a result of death, disability or
retirement, no additional compensation shall be payable to Executive
under this Agreement except as specifically provided herein.
Notwithstanding anything to the contrary contained herein, Executive
shall receive all compensation and other benefits to which he was
entitled under Section 4 and the plans and programs provided therein,
through the Termination Date and, in addition, shall receive or
continue to receive for the remaining portion of the Employment
10(c)c-3
<PAGE> 31
Term all other benefits available to him under any applicable group
health, life, disability or similar insurance program as in effect on
the date of death, disability or retirement.
If, following termination by reason of disability and prior to the
expiration of the then remaining balance of the Employment Term,
Executive becomes able to resume his duties, he shall be reinstated to
his Corporate Position or, if such position has been filled, to a
position as nearly comparable as possible From the date of
reinstatement and for the balance of the Employment Term, Executive
shall be obligated to perform all duties and responsibilities, and
entitled to receive all compensation and other benefits, as provided in
this Agreement.
(ii) CAUSE. Employer may terminate Executive's employment under
this Agreement for cause at any time, and thereafter Employer shall
have no further obligation under this Agreement. Notwithstanding
anything to the contrary contained herein, Executive shall receive all
compensation and other benefits in which he was vested or to which he
was otherwise entitled under Section 4 and the plans and programs
provided therein, by reason of employment through the Termination Date.
For purposes of this Agreement, "Cause" shall mean:
(a) A failure by Executive to substantially perform his
duties (other than failure resulting from incapacity) after a
written demand by the Board, which demand identifies, with
reasonable specificity, the manner in which the Board believes
Executive has not substantially performed, and Executive's failure
to cure within a reasonable period of time after his receipt of
the notice;
(b) A criminal conviction of or plea of nolo contendere by
Executive for any act involving dishonesty, breach of trust or a
violation of the banking or savings and loan laws of the State of
Wisconsin or the United States;
(c) A criminal conviction of or plea of nolo contendere by
Executive for the commission of any felony;
(d) A breach of fiduciary duty by Executive involving
personal profit;
(e) A willful violation of any law, rule or order by
Executive (other than traffic violations or similar offenses); or
(f) Incompetence, personal dishonesty or material breach of
any provision of this Agreement or any willful misconduct by
Executive.
For purposes of this subsection 5(ii), no act, or failure to act,
on Executive's part shall be deemed "willful" unless done, or omitted
to be done, by Executive not in good faith and without reasonable
belief that the action or omission was in the best interest of
Employer.
10(c)c-4
<PAGE> 32
(iii) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may
voluntarily terminate employment at any time by giving at least ninety
(90) days' prior written notice to Employer. In such event, Employer
shall have no further obligation hereunder, except that Executive shall
receive all compensation and other benefits in which he was vested or
to which he was otherwise entitled under Section 4 and the plans and
programs provided therein, by reason of his employment through the
Termination Date.
(iv) TERMINATION BY EXECUTIVE AFTER CHANGE IN CONTROL.
(a) For purposes of this Agreement, a "change in control"
shall be deemed to have occurred if any "individual, entity or
group" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule l3d-3 under the Exchange Act), directly or indirectly, of
securities representing 25% or more of the voting power of the
securities of Employer or any of Employer's affiliates or becomes
the owner of all or substantially all of the assets of Employer or
any of Employer's affiliates or if the shareholders of Employer or
any affiliate of Employer approve a reorganization, merger or
consolidation of Employer or any affiliates of Employer. "Change
in control" shall not refer to or include any transaction
involving only entities affiliated directly or indirectly with
Employer.
(b) Executive may, at any time within twelve (12) months
following a "change in control," terminate his employment under
this Agreement by giving at least ninety (90) days' prior written
notice to Employer.
(v) TERMINATION BY EXECUTIVE "FOR CAUSE." Executive may
terminate his employment under this Agreement by giving at least ninety
(90) days' prior written notice to Employer at any time after the
occurrence of any of the following without Executive's express written
consent:
(a) Executive is assigned to positions, duties or
responsibilities that are substantially less significant than the
positions, duties and responsibilities provided herein;
(b) Executive is removed from or Employer fails to reelect
Executive to his Corporate Position, except in connection with
termination of Executive's employment for cause, disability or
retirement, or in connection with suspension or termination by or
pursuant to regulatory action;
(c) Executive's Base Salary is reduced other than as the
result of a program applied on a proportionately equivalent basis
to all executives of Employer and its affiliates; or any other
failure by Employer to comply with Section 4(i);
(d) Executive is transferred without his consent to a
location other than a home office or branch office of Employer or
any of Employer's affiliates which
10(c)c-5
<PAGE> 33
office is or was operated by Employer or any of Employer's
affiliates prior to a change in control as defined herein.
(vi) SUSPENSION OR TERMINATION REQUIRED BY THE FDIC.
(a) If Executive is suspended and/or temporarily prohibited
from participating in the conduct of Employer's or any of
Employer's affiliates' affairs by a notice served under Section
8(e)(3), or Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. S1818(e)(3) and (g)(1) ), respectively), Employer's
obligations under the Agreement shall be suspended as of the date
of service of the notice unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Employer shall:
(1) pay Executive all of the compensation withheld while its
obligations under this Agreement were suspended; and (2) reinstate
any of its obligations which were suspended.
(b) If Executive is removed and/or permanently prohibited
from participating in the conduct of Employer's or any of
Employer's affiliates' affairs by an order issued under Section
8(e)(4) or Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. S1818(e)(4) and (g)(1) ), respectively, the obligations
of Employer under the Agreement shall terminate as of the
effective date of the order, but earned or otherwise vested rights
of Executive to compensation and to any benefits under Section 4
shall not be affected.
(c) If Employer or any of Employer's affiliates is in
default (as defined in Section 3(x)(1) of the Federal Deposit
Insurance Act), all obligations under the Agreement shall
terminate as of the date of default, but this Subsection 5(vi)(c)
shall not affect any vested rights of Executive, including the
right to receive the compensation and benefits set forth in
Section 5(vii) or 5(viii) of this Agreement.
(d) All obligations under the Agreement may be terminated
except to the extent determined that continuation of the contract
is necessary to operation of Employer or any of its affiliates at
the time the Federal Deposit Insurance Corporation ("FDIC") enters
into an agreement to provide assistance to or on behalf of
Employer or any of Employer's affiliates under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act;
or when Employer or any of its affiliates is determined by any
appropriate bank regulatory agency to be in an unsafe or unsound
condition. Any rights of the parties that have been already earned
or otherwise vested, however, shall not be affected by such
action, including the right of the Executive to receive the
compensation and benefits set forth in Section 5(vii) or 5(viii)
of this Agreement.
(vii) BENEFITS UPON OTHER TERMINATION BY EMPLOYER OR UPON
TERMINATION BY EXECUTIVE FOLLOWING A "CHANGE IN CONTROL." If this
Agreement is terminated by Employer other than for death, disability or
retirement under Section 5(i) and other than for "cause" under Section
5(ii) or other than by regulatory action under Section 5(vi), or if
Executive terminates this Agreement following a "change in control"
pursuant to Section
10(c)c-6
<PAGE> 34
5(iv)(b), then following the Termination Date Executive shall be
entitled to the benefits described in Section 5(viii).
(viii) BENEFITS UPON TERMINATION BY EXECUTIVE "FOR CAUSE." If
this Agreement is terminated by Executive pursuant to Section 5(v),
then, following the Termination Date;
(a) In lieu of any further salary payments, Executive shall
receive severance payments equal to the sum of the Base Salary in
effect on the Termination Date plus cash bonus for the year prior
to termination times the number of years of the remaining
Employment Term, payable in the amount and at the times provided
in Sections 4(i) and (ii). If termination follows a "change in
control" under Section 5(iv)(b), Executive may elect to receive
the payments specified in the immediately preceding sentence in a
lump sum without any discount, provided that the amount of such
severance payments may not exceed the limitations established in
Section 6.
(b) In addition to the retirement benefits to which
Executive is entitled under tax qualified retirement plans
maintained by Employer (hereinafter collectively referred to as
"Plan"), Executive shall receive as additional severance benefits
a retirement benefit under this Agreement, which (except as
provided below) shall be determined in accordance with, and paid
under this Agreement in the form and at the times provided in, the
Plan. Such benefits shall be determined as though Executive were
fully vested under the Plan and had accumulated (after termination
of this Agreement) the additional years of service and benefit
credits under the Plan that he would have received had he
continued employment with Employer for the balance of the
Employment Term at the highest annual rate of Base Salary in
effect during the twelve (12) months immediately preceding the
Termination Date. Such Base Salary, plus the average of
Executive's cash bonuses, if any, for the past four years, shall
be deemed to represent the compensation received by Executive
during each such additional year for purposes of determining
additional retirement benefits under this Subsection 5(viii).
(c) In addition to other amounts payable to Executive under
this Section 5(viii), Executive shall be entitled to receive all
other benefits in which he was vested or to which he was otherwise
entitled under Section 4 and the plans and programs provided
therein by reason of employment through the Termination Date,
together with the continuation, without cost to Executive, of
other benefits under Section 4(iii) for the remaining unexpired
Employment Term, all subject to the limitations set forth in
Section 6 below.
(ix) SUSPENSION BY EMPLOYER. Employer in its sole discretion
shall have the right to temporarily suspend Executive from
participating in the conduct of the Employer's or Employer's
affiliates' affairs. If Executive is suspended or temporarily
prohibited from participating in the conduct of Employer's or
Employer's affiliates' business, Employer shall pay Executive all
compensation and provide all benefits pursuant to Section 4 of this
Agreement during the period of such suspension.
10(c)c-7
<PAGE> 35
6. LIMITATIONS ON CHANGE IN CONTROL COMPENSATION. In the event
severance benefits under Subsection 5(vii) or 5(viii), or any other payments or
benefits received or to be received by Executive from Employer (whether payable
pursuant to the terms of this Agreement, any other plan, agreement or
arrangement with Employer or any corporation ("Affiliate") affiliated with
Employer within the meaning of Section 1504 of the Internal Revenue Code of
1986, as amended (the "Code") ), constitute, in the opinion of tax counsel
selected by Employer's independent auditors and acceptable to Executive,
"parachute payments" within the meaning of Section 280G(b)(2) of the Code, and
the present value of such "parachute payments" equals or exceeds three times the
average of the annual compensation payable to Executive by Employer (or an
Affiliate) and includible in Executive's gross income for federal income tax
purposes for the five (5) calendar years preceding the year in which a change in
ownership occurred ("Base Amount"), such Severance Benefits shall be reduced to
an amount the present value of which (when combined with the present value of
any other payments otherwise received or to be received by Executive from
Employer (or an Affiliate) that are deemed "parachute payments") is equal to
2.99 times the Base Amount, notwithstanding any other provision to the contrary
in this Agreement. The Severance Benefits shall not be reduced if (i) Executive
shall have effectively waived his receipt or enjoyment of any such payment or
benefit which triggered the applicability of this Section 6, or (ii) in the
opinion of tax counsel, the Severance Benefits (in their full amount or as
partially reduced, as the case may be) plus all other payments or benefits which
constitute "parachute payments" within the meaning of Section 280G(b)(2) of the
Code are reasonable compensation for services actually rendered, within the
meaning of Section 280G(b)(4) of the Code, and such payments are deductible by
Employer. The Base Amount shall include every type and form of compensation
includible in Executive's gross income in respect of his employment by Employer
(or an Affiliate), except to the extent otherwise provided in temporary or final
regulations promulgated under Section 280G(b) of the Code. For purposes of this
Section 6, a "change in ownership or control" shall have the meaning set forth
in Section 280G(b) of the Code and any temporary or final regulations
promulgated thereunder. The present value of any non-cash benefit or any
deferred cash payment shall be determined by Employer's independent auditors in
accordance with the principles of Section 280G of the Code.
Executive shall have the right to request that Employer obtain a ruling
from the Internal Revenue Service ("Service") as to whether any or all payments
or benefits determined by such tax counsel are, in the view of the Service,
"parachute payments" under Section 280G. If a ruling is sought pursuant to
Executive's request, no Severance Benefits payable under this Agreement in
excess of the Section 280G limitation shall be made to Executive until after
fifteen (15) days from the date of such ruling; however, Severance Benefits
shall continue to be paid during this time up to the amount of that
limitation. For purposes of this Section 6, Executive and Employer agree to be
bound by the Service's ruling as to whether payments constitute "parachute
payments" under Section 280G. If the Service declines, for any reason, to
provide the ruling requested, the tax counsel's opinion provided with respect to
what payments or benefits constitute "parachute payments" shall control, and
the period during which the Severance Benefits may be deferred shall be extended
to a date fifteen (15) days from the date of the Service's notice indicating
that no ruling will be forthcoming.
In the event that Section 280G, or any successor statute, is repealed,
this Section 6 shall cease to be effective on the effective date of such repeal.
The parties to this Agreement recognize
10(c)c-8
<PAGE> 36
that final regulations under Section 280G of the Code may affect the amounts
that may be paid under this Agreement and agree that, upon issuance of such
final regulations, this Agreement may be modified as in good faith deemed
necessary in light of the provisions of such regulations to achieve the purposes
of this Agreement, and that consent to such modifications shall not be
unreasonably withheld.
7. GENERAL-PROVISIONS.
(i) SUCCESSORS; BINDING AGREEMENT.
(a) Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
substantially all of the business and/or assets of Employer
("Successor Organization") to expressly assume and agree to
perform this Agreement in the same manner and to the same extent
that Employer would have been required to perform if no such
succession had taken place. If such succession is the result of a
"change in control" as defined herein, such assumption shall
specifically preserve to Executive, for the then remaining term of
this Agreement, the same rights and remedies (recognizing them as
being available and applicable as the result of the "change in
control" effectuating said succession) provided under this
Agreement upon a "change in control".
As used in this Agreement, Employer shall mean Merchants
and Manufacturers Bancorporation, Inc. and any successor to its
business and/or assets which becomes bound by the terms and
provisions of this Agreement by operation of this Agreement or by
law. Failure of Employer to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Executive to compensation from
Employer in the same amount and on the same terms as he would be
entitled to under this Agreement if he terminated his employment
under Section 5(v). For purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be
deemed the Termination Date.
(b) No right or interest to or in any payments or benefits
under this Agreement shall be assignable or transferable in any
respect by the Executive, nor shall any such payment, right or
interest be subject to seizure, attachment or creditor's process
for payment of any debts, judgments, or obligations of Executive.
(c) Any rights and obligations of Employer under this
Agreement may be assigned or transferred by Employer to any of its
affiliates prior to a change in control as defined in this
Agreement,
(d) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by Executive and his heirs,
beneficiaries and personal representatives and Employer and any
successor organization or assignee of Employer.
10(c)c-9
<PAGE> 37
(ii) NON-COMPETITION/CONFIDENTIALITY PROVISIONS. Executive
acknowledges that the development of personal contacts and
relationships is an essential element of Employer's and Employer's
affiliates' business, that Employer has invested considerable time and
money in his development of such contacts and relationships, that
Employer and its affiliates could suffer irreparable harm if he were to
leave Employer's employment and solicit the business of customers of
Employer or Employer's affiliates and that it is reasonable to protect
Employer against competitive activities by Executive. Executive
covenants and agrees, in recognition of the foregoing and in
consideration of the mutual promises contained herein, that in the
event of a voluntary termination of employment by Executive pursuant to
Section 5(iii), Executive shall not accept employment with any
Significant Competitor of Employer or of any of Employer's affiliates
for a period of twelve (12) months following such termination. In the
event Executive is terminated by Employer, under Section 5(vii) other
than following a change in control, Executive shall not accept
employment with any Significant Competitor of Employer or of any of
Employer's affiliates for the lesser of (a) the remaining term of the
agreement, or (b) a period of twelve (12) months following such
termination. For purposes of this Agreement, the term "Significant
Competitor" means any financial institution including, not limited to,
any commercial bank, savings bank, savings and loan association, credit
union, or mortgage banking corporation which, at the time of
termination of Executive's employment with or during the period of this
covenant not to compete, has a home, branch or other office within a
three (3) mile radius of any office operated or maintained by Employer
or any of Employer's affiliates prior to a change in control as defined
in this Agreement.
Executive agrees that the non-competition provisions set forth
herein are necessary for the protection of Employer and its affiliates
and are reasonably limited as to (a) the scope of activities affected,
(b) their duration and geographic scope, and (c) their effect on
Executive and the public. In the event Executive violates the
non-competition provisions set forth herein, Employer shall be
entitled, in addition to its other legal remedies, to enjoin the
employment of Executive with any Significant Competitor for the period
set forth herein. If Executive violates this covenant and Employer
brings legal action for injunctive or other relief, Employer shall not,
as a result of the time involved in obtaining such relief, be deprived
of the benefit of the full period of the restrictive covenant.
Accordingly, the covenant shall be deemed to have the duration
specified herein, computed from the date relief is granted, but reduced
by any period between commencement of the period and the date of the
first violation.
Executive acknowledges that as a result of his employment with
Employer or its affiliates Executive has access to confidential
information concerning Employer's business, customers and services.
Executive agrees that during the Employment Term and for a period of
one(l) year following termination of employment, he will not, directly
or indirectly, use, disclose or divulge to any person, agency, firm,
corporation or other entity any confidential or proprietary
information, including, without limitation, customer lists, reports,
files, records or information of any kind pertaining to the business of
Employer or any of its affiliates which Executive acquires or has
access to during the Employment Term. Executive agrees that if he
violates the covenants under this section, Employer shall be entitled
to an accounting and repayments of all profits, compensation,
commissions and
10(c)c-10
<PAGE> 38
other remuneration or benefits which the Executive has realized or may
realize as the result of or in connection with any such violation.
Executive further agrees that money damages may be difficult to
ascertain in case of a breach of this covenant, and Executive therefore
agrees that Employer or its affiliates shall be entitled to injunctive
relief in addition to any other remedy to which Employer or its
affiliates may be entitled.
(iii) NOTICE. All notices and other communications provided for
in this Agreement shall be in writing and shall be deemed duly given
when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Employer:
Merchants and Manufacturers Bancorporation, Inc.
573 West Lincoln Avenue
Milwaukee, WI 53207
Attention: Board of Directors
If to the Executive:
John Krawczyk
10332 West Upham Avenue
Hales Corners. WI 53130
or to such other address as either party may have furnished to the
other in writing in accordance herewith.
(iv) EXPENSES. If legal proceedings are necessary to enforce or
interpret this Agreement, or to recover damages for breach, the
prevailing party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements of such proceedings, in addition to any
other relief to which such prevailing party may be entitled.
Notwithstanding the foregoing, in the event of legal proceedings to
enforce or interpret this Agreement following a change in control,
Executive shall be entitled to recover from Employer: (a) reasonable
attorneys, fees, costs and disbursements if Executive is the prevailing
party; or (b) reasonable attorneys' fees, costs and disbursements of up
to $7,500 incurred in such proceedings regardless of whether Executive
is the prevailing party. Recovery of attorneys' fees and costs
following a "change in control" shall be in addition to any other
relief to which Executive is entitled.
(v) WITHHOLDING. Employer shall be entitled to withhold from
amounts to be paid to Executive under this Agreement any federal,
state, or local withholding or other taxes or charges which it is from
time to time required to withhold. Employer shall be entitled to rely
on an opinion of counsel as to the amount or requirement of any such
withholding.
10(c)c-11
<PAGE> 39
(vi) MISCELLANEOUS. No provision of this Agreement may be
amended, waived or discharged unless such Amendment, waiver or
discharge is agreed to in writing and duly executed by Executive and
Employer or its successor in interest. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements and undertakings, whether
written or oral, between the parties with respect thereto; no
agreements or representations, oral or otherwise, express or implied,
have been made by either party with respect to the subject matter
hereof. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Wisconsin.
(vii) VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
(viii) COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which together will constitute one and the same
instrument.
(ix) HEADINGS. Headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of
any provision of this Agreement.
(x) EFFECTIVE DATE. The effective date of this Agreement shall
be the date indicated in the first paragraph of this Agreement,
notwithstanding the actual date of execution by any party.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date first above written.
EXECUTIVE
John Krawczyk (SEAL)
-------------------------------------
John Krawczyk
MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
By: Michael J. Murry
----------------------------------------
Title: Chairman CEO
-------------------------------------
10(c)c-12
<PAGE> 40
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 2nd day of April, 1993, between
Lincoln Savings Bank, S.A. (the "Bank"), a Wisconsin-chartered savings
association, its successors and assigns, and Robert J. Blonski (the
"Executive").
RECITALS
WHEREAS, Executive is a valued, long-term, employee, whose experience
in the industry and continued employment in the position of President and CEO,
will benefit the Bank in the future; and
WHEREAS, effective as of the date of this Agreement, the Bank will
convert from a Wisconsin-chartered mutual savings and loan association to a
Wisconsin-chartered stock savings institution and concurrently issue all of its
capital stock to be outstanding to Merchants and Manufacturers' Bancorporation
("MMB"), a Wisconsin corporation registered under the Bank Holding Company Act
of 1956, as amended, with the Bank thereby becoming a wholly-owned subsidiary
of MMB (the above-described transactions being collectively referred to as the
"Conversion");
WHEREAS, the parties desire to enter into this Agreement to provide
terms and conditions for continued employment relationship between Executive and
Bank following the Conversion;
WHEREAS, the Bank's Board of Directors (hereinafter the "Board") has
approved and authorized the Bank to enter into this Agreement with Executive.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below:
1. Employment. The Bank shall continue to employ Executive, and
Executive shall continue to serve, on the terms and conditions set forth herein
for the period provided in Section 2.
2. Term of Employment. This period of Executive's employment under
this Agreement shall be deemed to have commenced as of the date first above
written and shall continue for a period of thirty-six (36) full calendar months
thereafter. Commencing on the first anniversary date of this Agreement, and
continuing at each anniversary date thereafter, the Agreement shall renew for
an additional year such that the remaining terms shall be three (3) years
unless written notice is provided by either party at least
10(c)d-1
<PAGE> 41
ten (10) days and not more than twenty (20) days prior to any such anniversary
date, that the Agreement shall terminate at the end of twenty-four (24) months
following such anniversary date. Prior to the renewal or non-renewal of the
Agreement, the Board of Directors will conduct a formal performance evaluation
of the Executive for the purpose of determining whether to extend the Agreement,
and the results thereof shall be included in the minutes of the Board's meeting.
The term of employment under this Agreement, as in effect from time to time,
shall be referred to as the "Employment Term".
3. Position and Duties. Subject to Section 5(iv)(b), Executive shall
serve the Bank as an Executive Officer in the capacity of President and CEO
("Corporate Position"). As such, Executive shall be responsible for
establishment of long term Bank goals and strategies, the integration of the
Bank's operations with those of MMB and serving as an ongoing liaison between
the Bank and MMB, oversight of the Bank's general operation and management level
personnel decisions and provide such other management services as are
customarily performed by persons serving in similar capacities at other banks
and savings and loan associations, and perform such other duties as my be
appropriate to his position and as may be from time to time determined by the
Bank's Board of Directors to be necessary to its operations and in accordance
with its bylaws. During the Employment Term the Board of Directors may modify
Executive's duties and responsibilities consistent with continued executive
status; provided, however, there shall be no material change in Executive's
status nor any material increase or decrease in duties and responsibilities
following a "change in control", except as agreed to in writing by Executive.
During the term of this Agreement, Executive shall devote substantially all his
working time and efforts to the business and affairs of the Bank and shall not
engage in any activity which is competitive with or adverse to the business of
the Bank whether done as a partner, director, officer, employee, shareholder of
or consultant or advisor to any other business.
4. Compensation. As compensation for services provided pursuant to
this Agreement, Executive shall receive the compensation and other benefits set
forth below:
(i) Base Salary. During the Employment Term, Executive shall
receive an annual base salary ("Base Salary") in such amount as may from time to
time be approved by the Board. The Base Salary in effect as of the Commencement
Date shall be $114,000. Such amount shall be subject to review and to annual
adjustment by the Board in accordance with the Bank's normal personnel practices
and, once established at a specified annual rate (including the initial rate)
Executive's Base Salary shall not thereafter be reduced without his consent
except pursuant to subsection 5(v)(c) of this Agreement. No increase in Base
Salary or other compensa-
10(c)d-2
<PAGE> 42
tion shall limit or reduce any other obligation of the Bank. Executive's Base
Salary and other compensation shall be paid in accordance with the Bank's
regular payroll practices. Review and adjustment of Executive's Base Salary
shall be done on a basis comparable to, and applied uniformly with, that
utilized for other executives of MMB and/or its subsidiaries and shall
incorporate the then current MMB evaluation form (copy of current form attached
hereto as Exhibit A).
(ii) Bonus Payments. In addition to Base Salary, Executive shall
be entitled, during the Employment Term, to participate in and receive payments
from all bonus and other incentive compensation plans as in effect from time to
time, on the same basis as other Bank executive officers or as other comparably
placed executives of MMB and/or its subsidiaries. It is intended that the bonus
and incentive plans (other than the Management Recognition Plan referenced
below) available to Executives shall be the same as or comparable to those
available to executives of MMB and/or its subsidiaries.
(iii) Other Benefits. During the Employment Term, the Bank shall
provide to Executive, in addition to Base Salary, such other benefits of
employment (or, with Executive's consent, equivalent benefits) as are made
generally available to executive officers serving in comparable positions at MMB
or in other MMB unit banks. Such benefits shall include participation in any
group health, life, disability, or similar insurance program and in any pension,
profit-sharing, deferred compensation, 401(k) or other similar retirement
program provided. Executive's benefits under MMB qualified retirement plans
shall be calculated to include vesting service credit for service with the Bank
both before and after its affiliation with MMB. Executive shall also have the
right to participate, on the same basis as other MMB and MMB unit executives in
any stock purchase, stock option or stock appreciation rights plans, or other
stock based program made available to such executive officers and shall also
participate in the Lincoln Savings Bank S.A. Management Recognition Plan ("MRP")
established solely for management of the Bank.
Executive shall be entitled to vacation, sick time, personal days
and other perquisites in the same manner and to the same extent as provided
other MMB and MMB unit executives and to use of an automobile provided by the
Bank consistent with the policy for MMB and MMB unit executives.
Nothing contained herein shall be construed as granting Executive
the right to continue in any benefit plan or program, or to receive any other
perquisite of employment, provided under this section 4(iii) (except to the
extent Executive had previously earned or otherwise accumulated vested rights
therein) following a
10(c)d-3
<PAGE> 43
valid and lawful termination or discontinuance of such plan, program or
perquisite.
On the date of this Agreement, Executive shall be granted stock
options pursuant to the Qualified Stock Option Plan maintained by MMB to
purchase up to 3,000 shares of common stock of MMB, $1.00 par value, ("MMB
Common Stock") at 100% of the market value of such shares on the date of grant.
Executive shall also receive an MRP grant of MMB Common Stock equal to .75% of
the total shares of stock sold in the conversion as purchased by the MRP in the
Conversion or thereafter.
5. Termination. This Agreement may be terminated, subject to
payment of the compensation and other benefits described below, upon occurrence
of any of the events described herein. The date on which Executive ceases to be
employed under this Agreement, after giving effect to the period of time
specified in any notice requirement, is referred to as the "Termination Date".
(i) Death; Disability; Retirement. This Agreement shall
terminate upon the death, disability or retirement of Executive. As used in this
Agreement, "disability" means Executive's inability, as the result of physical
or mental incapacity, to substantially perform his duties for a period of 180
consecutive days. If the Executive and Bank cannot agree as to existence of a
disability the determination shall be made by a qualified independent physician
acceptable to both parties or, alternatively, by a physician designated by the
president of the medical society for the county in which Executive resides. The
costs of any such medical examination shall be borne by the Bank. If Executive
is terminated due to disability, he shall be paid 100% of his Base Salary at the
rate in effect at the time notice of termination is given for one year, and
thereafter an annual amount equal to 75% of such Base Salary for the remaining
portion of the Employment Term, such amounts to be paid in substantially equal
monthly installments and offset by any monthly payments actually received by
Executive from: (a) any disability plans or disability insurance programs
provided by the Bank and/or (b) any governmental social security or workers
compensation program.
As used in this Agreement, the term "retirement" shall mean
Executive's retirement in accordance with and pursuant to any generally
applicable retirement plan of the Bank or MMB or in accordance with any
retirement arrangement established for Executive with his consent.
If termination occurs as a result of death, disability or
retirement, no additional compensation shall be payable to Executive under this
Agreement except as specifically provided herein. Notwithstanding anything to
the contrary contained herein,
10(c)d-4
<PAGE> 44
Executive shall receive all compensation and other benefits to which he was
entitled under Section 4 and the plans and programs provided therein, through
the Termination Date and, in addition, shall receive or continue to receive for
the remaining portion of the Employment Term all other benefits available to him
under any applicable group health, life, disability or similar insurance program
as in effect on the date of death, disability or retirement.
If, following termination by reason of disability and prior to the
expiration of the then remaining balance of the Employment Term, Executive
becomes able to resume his duties, he shall be reinstated to his Corporate
Position or, if such position has been filled, to a position as nearly
comparable as possible. From the date of reinstatement and for the balance of
the Employment Term, Executive shall be obligated to perform all duties and
responsibilities, and entitled to receive all compensation and other benefits,
as provided in this Agreement.
(ii) Cause. The Bank may terminate Executive's employment under
this Agreement for cause at any time, and thereafter Bank shall have no further
obligation under this Agreement. Notwithstanding anything to the contrary
contained herein, Executive shall receive all compensation and other benefits in
which he was vested or to which he was otherwise entitled under Section 4 and
the plans and programs provided therein, by reason of employment through the
Termination Date.
For purposes of this Agreement, "Cause" shall mean:
(a) A failure by Executive to substantially perform his duties
(other than failure resulting from incapacity) after a
written demand by the Board, which demand identifies, with
reasonable specificity, the manner in which the Board
believes Executive has not substantially performed, and
Executive's failure to cure within a reasonable period of
time after his receipt of the notice;
(b) A criminal conviction of or plea of nolo contendere by
Executive for any act involving dishonesty, breach of trust
or a violation of the banking or savings and loan laws of
the State of Wisconsin or the United States;
(c) A criminal conviction of or plea of nolo contendere by
Executive for the commission of any felony;
(d) A breach of fiduciary duty by Executive involving personal
profit;
10(c)d-5
<PAGE> 45
(e) A willful violation of any law, rule, or order by Executive
(other than traffic violations or similar offenses); or
(f) Incompetence, personal dishonesty or material breach of any
provision of this Agreement or any willful misconduct by
Executive.
For purposes of this Subsection (5)(ii), no act, or failure to
act, on Executive's part shall be deemed "willful" unless done, or omitted to be
done, by Executive not in good faith and without reasonable belief that the
action or omission was in the best interest of the Bank.
(iii) Voluntary Termination by Executive. Executive may
voluntarily terminate employment at any time by giving at least ninety (90)
days' prior written notice to the Bank. In such event, the Bank shall have no
further obligation hereunder, except that Executive shall receive all
compensation and other benefits in which he was vested or to which he was
otherwise entitled under Section 4 and the plans and programs provided therein,
by reason of his employment through the Termination Date.
(iv) Termination by Executive After Change in Control.
(a) For purposes of this Agreement, a "change in control"
shall mean and include: (I) any transaction or series of transactions subject to
the Change in Bank Control Act (12 U.S.C. Section 1817(j)), as amended, in which
any person, acting directly, or indirectly, through or in concert with one or
more other persons, acquires control of the Bank; (II) any transaction or series
of transactions subject to Subsection (e) of the Savings and Loan Holding
Company Act (12 U.S.C. Section 1467a(e)), as amended, in which any savings and
loan holding company directly or indirectly, or through one or more subsidiaries
acquires control of the Bank or of a holding company which controls the Bank;
(III) any transaction or series of transactions subject to the Bank Merger Act
(12 U.S.C. Sections 215a and 1828(c)), as amended, in which the surviving bank
or association is controlled by a person or entity other than the holding
company that controlled the Bank immediately prior to the consummation of said
transaction or series of transactions; and (IV) any sale by MMB of more than
half of the assets of the Bank upon approval of less than an eighty percent
(80%) or greater vote by the MMB Board. "Change in control" shall not refer to
or include any subsequent transaction involving only entities controlled
directly or indirectly by MMB, except to the extent that such transaction by
Bank occurs within four (4) years of the Commencement Date and was approved by
less than an eighty percent (80%) or greater vote of the MMB Board of Directors.
10(c)d-6
<PAGE> 46
(b) Executive may, at any time within twelve (12) months
following a "change in control", terminate his employment under this Agreement
by giving at least ninety (90) days' prior written notice to the Bank.
(v) Termination by Executive "For Cause." Executive may
terminate his employment under this Agreement by giving at least ninety (90)
days' prior written notice to the Bank at any time after the occurrence of any
of the following without Executive's express written consent:
(a) Executive is assigned to positions, duties or
responsibilities that are substantially less significant
than the positions, duties and responsibilities provided
herein;
(b) Executive is removed from or the Bank fails to reelect
Executive to his Corporate Position, except in connection
with termination of Executive's employment for cause,
disability or retirement;
(c) Executive's Base Salary is reduced other than as the result
of a program applied on a proportionately equivalent basis
to all executives of the Bank; or any other failure by the
Bank to comply with Section 4(i);
(d) Executive is transferred without his consent to a location
other than the current home office of the Bank; or
(vi) Suspension or Termination Required by the FDIC or OTS.
(a) If Executive is suspended and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by
a notice served under Section 8(e)(3), or Section 8(g)(1)
of the Federal Deposit Insurance Act (12 U.S.C. Section
1818(e)(3) and (g)(1), respectively), the Bank's
obligations under the Agreement shall be suspended as of
the date of service of the notice unless stayed by
appropriate proceedings. If the charges in the notice are
dismissed, the Bank shall: (I) pay Executive all of the
compensation withheld while its obligations under this
Agreement were suspended; and (II) reinstate any of its
obligations which were suspended.
10(c)d-7
<PAGE> 47
(b) If Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an
order issued under Section 8(e)(4) or Section 8(g)(1) of
the Federal Deposit Insurance Act (12 U.S.C. Section
1818(e)(4) and (g)(1), respectively, the obligations of the
Bank under the Agreement shall terminate as of the
effective date of the order, but earned or otherwise vested
rights of Executive to compensation and to any benefits
under Section 4 shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act), all obligations under
the Agreement shall terminate as of the date of default,
but this Subsection 5(vi)(c) shall not affect any vested
rights of Executive, including the right to receive the
compensation and benefits set forth in Section 5(vii) or
5(viii) of this Agreement.
(d) All obligations under the Agreement may be terminated,
except to the extent determined that continuation of the
contract is necessary to operation of the Bank: (I) by the
Director of the Office of Thrift Supervision ("OTS"), or
his or her designee, at the time the Federal Deposit
Insurance Corporation ("FDIC") or the Resolution Trust
Corporation ("RTC") enters into an agreement to provide
assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance
Act; or (II) by the Director of the OTS, or his or her
designee, at the time the Director or his or her designee
approves a supervisory merger to resolve problems related
to operation of the Bank or when the Bank is determined by
the Director of the OTS to be in an unsafe or unsound
condition. Any rights of the parties that have been already
earned or otherwise vested, however, shall not be affected
by such action, including the right of the Executive to
receive the compensation and benefits set forth in Section
5(vii) or 5(viii) of this Agreement.
(e) In the event that 12 C.F.R. Section 563.39, or any
successor regulation, is repealed, this Section 5(vi) shall
cease to be effective on the effective date of such repeal.
In the event that 12 C.F.R. Section 563.39, or any
successor regulation, is amended or modified, this
Agreement shall be revised to reflect the amended or
modified provisions if:
10(c)d-8
<PAGE> 48
(I) the amended or modified provision is required to be
included in this Agreement; or (II) if not so required,
Executive requests that the Agreement be so revised.
(vii) Benefits Upon Other Termination by the Bank or Upon
Termination by Executive Following a "Change in Control." If this Agreement is
terminated by the Bank other than for death, disability or retirement under
Section 5(i) and other than for "cause" under Section 5(ii), or if Executive
terminates this Agreement following a "change in control" pursuant to Section
5(iv)(b), then following the Termination Date Executive shall be entitled to the
benefits described in Section 5(viii).
(viii) Benefits Upon Termination by Executive "For Cause." If this
Agreement is terminated by Executive pursuant to Section 5(v), then, following
the Termination Date:
(a) In lieu of any further salary payments, Executive shall
receive severance payments equal to the lesser of (1) base
salary plus cash bonuses for the year prior to termination,
plus payment of base salary plus cash bonuses for the
remaining term of the Employment Contract or (2) three
times the Executive's base salary plus cash bonuses for the
year prior to termination, payable in the amount and at the
times provided in Section 4(i) and (ii). If termination
follows a "change in control" under Section 5(iv)(b),
Executive may elect to receive the payments specified in
(1) or (2) above, in a lump sum, provided that the amount
of such severance payments may not exceed the limitations
established in Section 6.
(b) In addition to the retirement benefits to which Executive
is entitled under tax qualified retirement plans maintained
by the Bank (hereinafter collectively referred to as
"Plan"), Executive shall receive as additional severance
benefits a retirement benefit under this Agreement, which
(except as provided below) shall be determined in
accordance with, and paid under this Agreement in the form
and at the times provided in, the Plan. Such benefits shall
be determined as if Executive were fully vested under the
Plan and had accumulated (after termination of this
Agreement) the additional years of service and benefit
credits under the Plan that he would have received had he
continued employment with the Bank for the balance of the
Employment Term at the highest annual rate
10(c)d-9
<PAGE> 49
of Base Salary in effect during the twelve (12) months
immediately preceding the Termination Date. Such Base
Salary, plus the average of Executive's cash bonuses, if
any, for the past four years, shall be deemed to represent
the compensation received by Executive during each such
additional year for purposes of determining additional
retirement benefits under this Subsection 5(viii).
(c) In addition to other amounts payable to Executive under
this Section 5(viii), Executive shall be entitled to
receive all other benefits in which he was vested or to
which he was otherwise entitled under Section 4 and the
plans and programs provided therein by reason of employment
through the Termination Date, together with the
continuation, without cost to Executive, of other benefits
under Section 4(iii) for the remaining unexpired Employment
Term, all subject to the limitations set forth in Section 6
below.
6. Limitations on Change in Control Compensation. In the event
severance benefits under Subsection 5(vii) or 5(viii), or any other payments or
benefits received or to be received by Executive from the Bank (whether payable
pursuant to the terms of this Agreement, any other plan, agreement or
arrangement with the Bank or any corporation ("Affiliate") affiliated with the
Bank within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code") ) constitute, in the opinion of tax counsel selected by the
Bank's independent auditors and acceptable to Executive, "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and the present value of
such "parachute payments" equals or exceeds three times the average of the
annual compensation payable to Executive by the Bank's (or an Affiliate) and
includible in Executive's gross income for federal income tax purposes for the
five (5) calendar years preceding the year in which a change in ownership or
control of the Bank occurred ("Base Amount"), such Severance Benefits shall be
reduced to an amount the present value of which (when combined with the present
value or any other payments or benefits otherwise received or to be received by
Executive from the Bank (or an Affiliate) that are deemed "parachute payments")
is equal to 2.99 times the Base Amount, notwithstanding any other provision to
the contrary in this Agreement. The Severance Benefits shall not be reduced if
(i) Executive shall have effectively waived his receipt or enjoyment of any such
payment or benefit which triggered the applicability of this Section 6, or (ii)
in the opinion of tax counsel, the Severance Benefits (in their full amount or
as partially reduced, as the case may be) plus all other payments or benefits
which constitute "parachute payments" within the meaning of Section 280G(b)(2)
of the Code are
10(c)d-10
<PAGE> 50
reasonable compensation for services actually rendered, within the meaning of
Section 280G (b)(4) of the Code, and such payments are deductible by the Bank.
The Base Amount shall include every type and form of compensation includible in
Executive's gross income in respect of his employment by the Bank (or an
Affiliate), except to the extent otherwise provided in temporary or final
regulations promulgated under Section 280G(b) of the Code. For purposes of this
Section 6, a "change in ownership or control" shall have the meaning set forth
in Section 280G(b) of the Code and any temporary or final regulations
promulgated thereunder. The present value of any non-cash benefit or any
deferred cash payment shall be determined by the Bank's independent auditors in
accordance with the principles of Section 280G of the Code.
Executive shall have the right to request that the Bank obtain a
ruling from the Internal Revenue Service ("Service") as to whether any or all
payments or benefits determined by such tax counsel are, in the view of the
Service, "parachute payments" under Section 280G. If a ruling is sought pursuant
to Executive's request, no Severance Benefits payable under this Agreement in
excess of the Section 280G limitation shall be made to executive until after
fifteen (15) days from the date of such ruling, however Severance Benefits shall
continue to be paid during this time up to the amount of that limitation. For
purposes of this Section 6, Executive and the Bank agree to be bound by the
Service's ruling as to whether payments constitute "parachute payments" under
Section 280G. If the Service declines, for any reason, to provide the ruling
requested, the tax counsel's opinion provided with respect to what payments or
benefits constitute "parachute payments" shall control, and the period during
which the Severance Benefits may be deferred shall be extended to a date fifteen
(15) days from the date of the Service's notice indicating that no ruling would
be forthcoming.
In the event that Section 280G, or any successor statute, is
repealed, this Section 6 shall cease to be effective on the effective date of
such repeal. The parties to this Agreement recognize that final regulations
under Section 280G of the Code may affect the amounts that may be paid under
this Agreement and agree that, upon issuance of such final regulations this
Agreement may be modified as in good faith deemed necessary in light of the
provisions of such regulations to achieve the purposes of this Agreement, and
that consent to such modifications shall not be unreasonably withheld.
10(c)d-11
<PAGE> 51
7. General Provisions.
(i) Successors; Binding Agreement.
(a) The Bank will require any successor (whether direct
or indirect, by purchase, merger, consolidation or
otherwise) to substantially all of the business
and/or assets of the Bank ("successor organization")
to expressly assume and agree to perform this
Agreement in the same manner and to the same extent
that the Bank would have been required to perform if
no such succession had taken place. If such
succession is the result of a "change in control" as
defined herein, such assumption shall specifically
preserve to Executive, for the then remaining term
of this Agreement, the same rights and remedies
(recognizing them as being available and applicable
as the result of the "change in control"
effectuating said succession) provided under this
Agreement upon a "change in control".
As used in this Agreement "Bank" shall mean the Bank
as hereinbefore defined and any successor to its
business and/or assets as aforesaid which becomes
bound by the terms and provisions of this agreement
by operation of this Agreement or law. Failure of
the Bank to obtain such agreement prior to the
effectiveness of any such succession shall be a
breach of this Agreement and shall entitle Executive
to compensation from the Bank in the same amount and
on the same terms as he would be entitled to under
this Agreement if he terminated his employment under
Section 5(v). For purposes of implementing the
foregoing, the date on which any such succession
becomes effective shall be deemed the Termination
Date.
(b) No right or interest to or in any payments or
benefits under this Agreement shall be assignable or
transferable in any respect by the Executive, nor
shall any such payment, right or interest be subject
to seizure, attachment or creditor's process for
payment of any debts, judgments, or obligations of
Executive.
10(c)d-12
<PAGE> 52
(c) This Agreement shall be binding upon and inure to
the benefit of and be enforceable by Executive and
his heirs, beneficiaries and personal
representatives and the Bank and any successor
organization.
(ii) Non-competition Provision. Executive acknowledges that the
development of personal contacts and relationships is an essential element of
the savings and loan business, that Bank has invested considerable time and
money in his development of such contacts and relationships, that Bank, and its
affiliates included on the consolidated federal income tax return filed by
Bank's parent holding company in which Bank is included ("affiliates"), could
suffer irreparable harm if he were to leave Bank's employment and solicit the
business of customers of Bank and/or Affiliates, and that it is reasonable to
protect Bank and its Affiliates against competitive activities by Executive.
Executive covenants and agrees, in recognition of the foregoing and in
consideration of the mutual promises contained herein, that in the event of a
voluntary termination of employment by Executive pursuant to Section 5(iii),
Executive shall not accept employment with any Significant Competitor of Bank or
of any of Bank's Affiliates for a period of twelve (12) months following such
termination. In the event Executive is terminated by the Bank, under Section
5(vii) other than following a change in control, Executive shall not accept
employment with any Significant Competitor of the Bank, or of any of the Bank's
affiliates, for the lesser of (i) the remaining term of the Agreement, or (ii) a
period of twelve (12) months, following such termination. For purposes of this
Agreement, the term "Significant Competitor" means any financial institution
including, but not limited to, any commercial bank, savings bank, savings and
loan association, credit union, or mortgage banking corporation which, at the
time of termination of Executive's employment with Bank, or during the period
of this covenant not to compete, has a home, branch or other office within a
three (3) mile radius of any office of the Bank or of MMB or any MMB unit.
Executive agrees that the non-competition provisions set forth
herein are necessary for the protection of the Bank and its Affiliates and are
reasonably limited as to (a) the scope of activities affected, (b) their
duration and geographic scope, and (c) their effect on Executive and the public.
In the event Executive violates the non-competition provisions set forth herein,
the Bank shall be entitled, in addition to its other legal remedies, to enjoin
the employment of Executive with any Significant Competitor for the period set
forth herein. If Executive violates this covenant and the Bank brings legal
action for injunctive or other relief, the Bank shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the restrictive covenant. Accordingly, the covenant
10(c)d-13
<PAGE> 53
shall be deemed to have the duration specified herein, computed from the date
relief is granted, but reduced by any period between commencement of the period
and the date of the first violation.
(iii) Notice. All notices and other communications provided for in
this Agreement shall be in writing and shall be deemed duly given when delivered
or mailed by United States registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Bank:
c/o Merchants & Manufacturers' Bancorporation
6170 West Loomis Road
Greendale, WI 53129
Attention: President
If to the Executive:
Mr. Robert J. Blonski
President & CEO
Lincoln Savings Bank, S.A.
3131 South 13th Street
Milwaukee, WI 53215
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
(iv) Expenses. If legal proceedings are necessary to enforce or
interpret this Agreement, or to recover damages for breach, the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and
disbursements of such proceedings, in addition to any other relief to which such
prevailing party may be entitled. Notwithstanding the foregoing, in the event of
legal proceedings to enforce or interpret this Agreement following a change in
control, Executive shall be entitled to recover from the Bank: (a) reasonable
attorneys' fees, costs and disbursements if Executive is the prevailing party;
or (b) reasonable attorneys' fees, costs and disbursements of up to $7,500
incurred in such proceedings regardless of whether Executive is the prevailing
party. Recovery of attorneys' fees and costs following a "change in control"
shall be in addition to any other relief to which Executive is entitled.
(v) Withholding. The Bank shall be entitled to withhold from
amounts to be paid to Executive under this Agreement any federal, state, or
local withholding or other taxes or charges which it is from time to time
required to withhold. The Bank shall
10(c)d-14
<PAGE> 54
be entitled to rely on an opinion of counsel as to the amount or requirement of
any such withholding.
(vi) Miscellaneous. No provision of this Agreement may be
amended, waived or discharged unless such Amendment, waiver or discharge is
agreed to in writing and duly executed by Executive and the Bank or its
successor in interest. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof; no agreements or
representations, oral or otherwise, express or implied, have been made by either
party respect to the subject matter hereof. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Wisconsin.
(vii) Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
(viii) Counterparts. This Agreement may be executed in several
counterparts, all of which together will constitute one and the same instrument.
(ix) Headings. Headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
(x) Effective Date. The effective date of this Agreement shall
be the date indicated in the first paragraph of this Agreement, notwithstanding
the actual date of execution by any party.
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the date first above written.
EXECUTIVE
Robert J. Blonski (SEAL)
----------------------------------
Title: President
----------------------------------
LINCOLN SAVINGS BANK, S.A.
By: John Krawczyk
-------------------------------------
Title: Exec VP
----------------------------------
10(c)d-15
<PAGE> 55
ASSIGNMENT OF EXECUTIVE EMPLOYMENT AGREEMENT
Lincoln Community Bank, f/k/a Lincoln Savings Bank, herein referred to
as assignor, a Wisconsin corporation organized and existing under the laws of
the State of Wisconsin, with its principal office located at 3131 South 13
Street, Milwaukee, WI, for value received hereby assigns, orders, and transfers
to M&M Services, Inc. a corporation organized and existing under the laws of the
State of Wisconsin, with its principal office located at 6170 Industrial Court,
Greendale, WI, all the rights, title, and interest of assignor in and to the
Executive Employment Agreement made as of January 2, 1996, between Assignor and
Robert J. Blonski, said Executive Employment Agreement is incorporated in this
assignment by reference.
The assignment shall be binding on and inure to the benefit of the
parties to this assignment and their successors and assigns.
[Signatures Begin on the Next Page]
10(c)d-16
<PAGE> 56
IN WITNESS WHEREOF, Lincoln Community Bank, f/k/a Lincoln Savings Bank,
has caused this assignment to be executed at Milwaukee WI, this 15th day of
April, 1997.
LINCOLN COMMUNITY BANK
By: James Sass
----------------------------------
James Sass, Chairman of the Board
Attest: Dolores M. Wellman
------------------------------
Dolores M. Wellman, Secretary
ACCEPTANCE
M&M Services, Inc., assignees, named in the above assignment, accepts the above
Executive Employment Agreement by assignment and agrees to each and all of the
covenants and conditions in such Executive Employment Agreement.
M&M SERVICES, INC
Dated: April 15, 1997 By: Michael J. Murry
-----------------------------------
Michael J. Murry, Chairman of Board
Attest Edmund P. Glembocki
--------------------------------
Edmund P. Glembocki, Secretary
CONSENT OF EXECUTIVE
Robert J. Blonski, the named Executive in the above Executive
Employment Agreement hereby consents to the above assignment and acknowledges
the validity of the assignment under the terms and conditions of the Executive
Employment Agreement.
Dated: April 15, 1997 Robert J. Blonski
--------------------------------------
Robert J. Blonski
10(c)d-17
<PAGE> 57
Exhibit 10(c)e
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 2nd day of April, 1993, between
Lincoln Savings Bank, S.A. (the "Bank"), a Wisconsin-chartered savings
association, its successors and assigns, and Gregory B. Stengel (the
"Executive").
RECITALS
WHEREAS, Executive is a valued, long-term, employee, whose experience
in the industry and continued employment in the position of Vice President,
Controller, will benefit the Bank in the future; and
WHEREAS, effective as of the date of this Agreement, the Bank will
convert from a Wisconsin-chartered mutual savings and loan association to a
Wisconsin-chartered stock savings institution and concurrently issue all of its
capital stock to be outstanding to Merchants and Manufacturers' Bancorporation
("MMB"), a Wisconsin corporation registered under the Bank Holding Company Act
of 1956, as amended, with the Bank thereby becoming a wholly-owned subsidiary of
MMB (the above-described transactions being collectively referred to as the
"Conversion");
WHEREAS, the parties desire to enter into this Agreement to provide
terms and conditions for continued employment relationship between Executive
and Bank following the Conversion;
WHEREAS, the Bank's Board of Directors (hereinafter the "Board") has
approved and authorized the Bank to enter into this Agreement with Executive.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below:
1. Employment. The Bank shall continue to employ Executive, and
Executive shall continue to serve, on the terms and conditions set forth herein
for the period provided in Section 2.
2. Term of Employment. The period of Executive's employment under
this Agreement shall be deemed to have commenced as of the date set forth above
(the "Commencement Date") and shall continue for a period of thirty-six (36)
full calendar months thereafter. Commencing on the first anniversary date of
this Agreement, and continuing at each anniversary date thereafter, the
Agreement shall renew for an additional year such that the remaining term shall
be three (3) years unless written notice is provided
10(c)e-1
<PAGE> 58
by either party at least ten (10) days and not more than twenty (20) days prior
to any such anniversary date, that the Agreement shall terminate at the end of
twenty-four (24) months following such anniversary date. Prior to the renewal or
non-renewal of the Agreement, the Board of Directors of the Bank ("Board") will
conduct a formal performance evaluation of the Executive for the purpose of
determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting. The term of employment under
this Agreement, as in effect from time to time, shall be referred to as the
"Employment Term".
3. Position and Duties. Subject to Section 5(iv)(b), Executive shall
serve the Bank as an Executive Officer in the capacity of Vice President,
Controller ("Corporate Position"). As such, Executive shall be responsible for
management of the Bank's liquidity investment and mortgage backed securities
portfolios, recommendations with respect to maintenance of the Bank's interest
rate sensitivity position, general budgeting decisions and provide such other
management services as are customarily performed by persons serving in similar
capacities at other banks and savings and loan associations, and perform such
other duties as my be appropriate to his position and as may be from time to
time determined by the Bank's Board of Directors to be necessary to its
operations and in accordance with its bylaws. During the Employment Term the
Board of Directors may modify Executive's duties and responsibilities consistent
with continued executive status; provided, however, there shall be no material
change in Executive's status nor any material increase or decrease in duties and
responsibilities following a "change in control", except as agreed to in writing
by Executive. During the term of this Agreement, Executive shall devote
substantially all his working time and efforts to the business and affairs of
the Bank and shall not engage in any activity which is competitive with or
adverse to the business of the Bank whether done as a partner, director,
officer, employee, shareholder of or consultant or advisor to any other
business.
4. Compensation. As compensation for services provided pursuant to
this Agreement, Executive shall receive the compensation and other benefits set
forth below:
(i) Base Salary. During the Employment Term, Executive shall
receive an annual base salary ("Base Salary") in such amount as may from time to
time be approved by the Board. The Base Salary in effect as of the Commencement
Date shall be $48,000. Such amount shall be subject to review and to annual
adjustment by the Board in accordance with the Bank's normal personnel practices
and, once established at a specified annual rate (including the initial rate)
Executive's Base Salary shall not thereafter be reduced without his consent
except pursuant to subsection 5(v)(c) of this Agreement. No increase in Base
Salary or other
10(c)e-2
<PAGE> 59
compensation shall limit or reduce any other obligation of the Bank. Executive's
Base Salary and other compensation shall be paid in accordance with the Bank's
regular payroll practices. Review and adjustment of Executive's Base Salary
shall be done on a basis comparable to, and applied uniformly with, that
utilized for other executives of MMB and/or its subsidiaries and shall
incorporate the then current MMB evaluation form (copy of current form attached
hereto as Exhibit A).
(ii) Bonus Payments. In addition to Base Salary, Executive shall
be entitled, during the Employment Term, to participate in and receive payments
from all bonus and other incentive compensation plans as in effect from time to
time, on the same basis as other Bank executive officers or as other comparably
placed executives of MMB and/or its subsidiaries. It is intended that the bonus
and incentive plans (other than the Management Recognition Plan referenced
below) available to Executives shall be the same as or comparable to those
available to executives of MMB and/or its subsidiaries.
(iii) Other Benefits. During the Employment Term, the Bank shall
provide to Executive, in addition to Base Salary, such other benefits of
employment (or, with Executive's consent, equivalent benefits) as are made
generally available to executive officers serving in comparable positions at MMB
or in other MMB unit banks. Such benefits shall include participation in any
group health, life, disability, or similar insurance program and in any pension,
profit-sharing, deferred compensation, 401(k) or other similar retirement
program provided. Executive's benefits under MMB qualified retirement plans
shall be calculated to include vesting service credit for service with the Bank
both before and after its affiliation with MMB. Executive shall also have the
right to participate, on the same basis as other MMB and MMB unit executives in
any stock purchase, stock option or stock appreciation rights plans, or other
stock based program made available to such executive officers and shall also
participate in the Lincoln Savings Bank S.A. Management Recognition Plan
("MRP") established solely for management of the Bank.
Executive shall be entitled to vacation, sick time, personal days
and other perquisites in the same manner and to the sam extent as provided other
MMB and MMB unit executives.
Nothing contained herein shall be construed as granting Executive
the right to continue in any benefit plan or program, or to receive any other
perquisite of employment, provided under this section 4(iii) (except to the
extent Executive had previously earned or otherwise accumulated vested rights
therein) following a valid and lawful termination or discontinuance of such
plan, program or perquisite.
10(c)e-3
<PAGE> 60
Executive shall receive an MRP grant of MMB Common Stock equal to
.3% of the total shares of stock sold in the conversion as purchased by the MRP
in the Conversion or thereafter.
5. Termination. This Agreement may be terminated, subject to
payment of the compensation and other benefits described below, upon occurrence
of any of the events described herein. The date on which Executive ceases to be
employed under this Agreement, after giving effect to the period of time
specified in any notice requirement, is referred to as the "Termination Date".
(i) Death; Disability; Retirement. This Agreement shall
terminate upon the death, disability or retirement of Executive. As used in this
Agreement, "disability" means Executive's inability, as the result of physical
or mental incapacity, to substantially perform his duties for a period of 180
consecutive days. if the Executive and Bank cannot agree as to existence of a
disability the determination shall be made by a qualified independent physician
acceptable to both parties or, alternatively, by a physician designated by the
president of the medical society for the county in which Executive resides. The
costs of any such medical examination shall be borne by the Bank. If Executive
is terminated due to disability, he shall be paid 100% of his Base Salary at the
rate in effect at the time notice of termination is given for one year, and
thereafter an annual amount equal to 75% of such Base Salary for the remaining
portion of the Employment Term, such amounts to be paid in substantially equal
monthly installments and offset by any monthly payments actually received by
Executive from: (a) any disability plans or disability insurance programs
provided by the Bank and/or (b) any governmental social security or workers
compensation program.
As used in this Agreement, the term "retirement" shall mean
Executive's retirement in accordance with and pursuant to any generally
applicable retirement plan of the Bank or MMB or in accordance with any
retirement arrangement established for Executive with his consent.
If termination occurs as a result of death, disability or
retirement, no additional compensation shall be payable to Executive under this
Agreement except as specifically provided herein. Notwithstanding anything to
the contrary contained herein, Executive shall receive all compensation and
other benefits to which he was entitled under Section 4 and the plans and
programs provided therein, through the Termination Date and, in addition, shall
receive or continue to receive for the remaining portion of the Employment Term
all other benefits available to him under any applicable group health, life,
disability or similar insurance program as in effect on the date of death,
disability or retirement.
10(c)e-4
<PAGE> 61
If, following termination by reason of disability and prior to the
expiration of the then remaining balance of the Employment Term, Executive
becomes able to resume his duties, he shall be reinstated to his Corporate
Position or, if such position has been filled, to a position as nearly
comparable as possible. From the date of reinstatement and for the balance of
the Employment Term, Executive shall be obligated to perform all duties and
responsibilities, and entitled to receive all compensation and other benefits,
as provided in this Agreement.
(ii) Cause. The Bank may terminate Executive's employment under this
Agreement for cause at any time, and thereafter Bank shall have no further
obligation under this Agreement. Notwithstanding anything to the contrary
contained herein, Executive shall receive all compensation and other benefits in
which he was vested or to which he was otherwise entitled under Section 4 and
the plans and programs provided therein, by reason of employment through the
Termination Date.
For purposes of this Agreement, "Cause" shall mean:
(a) A failure by Executive to substantially perform his duties (other
than failure resulting from incapacity) after a written demand by
the Board, which demand identifies, with reasonable specificity,
the manner in which the Board believes Executive has not
substantially performed, and Executive's failure to cure within a
reasonable period of time after his receipt of the notice;
(b) A criminal conviction of or plea of nolo contendere by Executive
for any act involving dishonesty, breach of trust or a violation
of the banking or savings and loan laws of the State of Wisconsin
or the United States;
(c) A criminal conviction of or plea of nolo contendere by Executive
for the commission of any felony;
(d) A breach of fiduciary duty by Executive involving personal profit;
(e) A willful violation of any law, rule, or order by Executive (other
than traffic violations or similar offenses); or
(f) Incompetence, personal dishonesty or material breach of any
provision of this Agreement or any willful misconduct by
Executive.
10(c)e-5
<PAGE> 62
For purposes of this Subsection (5)(ii), no act, or failure to
act, on Executive's part shall be deemed "willful" unless done, or omitted to be
done, by Executive not in good faith and without reasonable belief that the
action or omission was in the best interest of the Bank.
(iii) Voluntary Termination by Executive. Executive may voluntarily
terminate employment at any time by giving at least ninety (90) days' prior
written notice to the Bank. In such event, the Bank shall have no further
obligation hereunder, except that Executive shall receive all compensation and
other benefits in which he was vested or to which he was otherwise entitled
under Section 4 and the plans and programs provided therein, by reason of his
employment through the Termination Date.
(iv) Termination by Executive After Change in Control.
(a) For purposes of this Agreement, a "change in control" shall mean
and include: (I) any transaction or series of transactions subject to the Change
in Bank Control Act (12 U.S.C. Section 1817(j)), as amended, in which any
person, acting directly, or indirectly, through or in concert with one or more
other persons, acquires control of the Bank; (II) any transaction or series of
transactions subject to Subsection (e) of the Savings and Loan Holding Company
Act (12 U.S.C. Section 1467a(e)), as amended, in which any savings and loan
holding company directly or indirectly, or through one or more subsidiaries
acquires control of the Bank or of a holding company which controls the Bank;
(III) any transaction or series of transactions subject to the Bank Merger Act
(12 U.S.C. Sections 215a and 1828(c)), as amended, in which the surviving bank
or association is controlled by a person or entity other than the holding
company that controlled the Bank immediately prior to the consummation of said
transaction or series of transactions; and (IV) any sale by MMB of more than
half of the assets of the Bank upon approval of less than an eighty percent
(80%) or greater vote by the MMB Board. "Change in control" shall not refer to
or include any subsequent transaction involving only entities controlled
directly or indirectly by MMB, except to the extent that such transaction by
Bank occurs within four (4) years of the Commencement Date and was approved by
less than an eighty percent (80%) or greater vote of the MMB Board of Directors.
(b) Executive may, at any time within twelve (12) months following a
"change in control", terminate his employment under this Agreement by giving at
least ninety (90) days' prior written notice to the Bank.
(v) Termination by Executive "For Cause." Executive may terminate his
employment under this Agreement by giving at least ninety (90) days' prior
written notice to the Bank at any time
10(c)e-6
<PAGE> 63
after the occurrence of any of the following without Executive's express written
consent:
(a) Executive is assigned to positions, duties or responsibilities
that are substantially less significant than the positions, duties
and responsibilities provided herein;
(b) Executive is removed from or the Bank fails to reelect Executive
to his Corporate Position, except in connection with termination
of Executive's employment for cause, disability or retirement;
(c) Executive's Base Salary is reduced other than as the result of a
program applied on a proportionately equivalent basis to all
executives of the Bank; or any other failure by the Bank to
comply with Section 4(i);
(vi) Suspension or Termination Required by the FDIC or OTS.
(a) If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3), or Section 8(g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. Section 1818(e)(3) and (g)(1),
respectively), the Bank's obligations under the Agreement shall be
suspended as of the date of service of the notice unless stayed by
appropriate proceedings. If the charges in the notice are
dismissed, the Bank shall: (I) pay Executive all of the
compensation withheld while its obligations under this Agreement
were suspended; and (II) reinstate any of its obligations which
were suspended.
(b) If Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order
issued under Section 8(e)(4) or Section 8(g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. Section 1818(e)(4) and (g)(1),
respectively, the obligations of the Bank under the Agreement
shall terminate as of the effective date of the order, but earned
or otherwise vested rights of Executive to compensation and to any
benefits under Section 4 shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act), all obligations under the
Agreement shall terminate as
10(c)e-7
<PAGE> 64
of the date of default, but this Subsection 5(vi)(c) shall not
affect any vested rights of Executive, including the right to
receive the compensation and benefits set forth in Section 5(vii)
or 5(viii) of this Agreement.
(d) All obligations under the Agreement may be terminated, except to
the extent determined that continuation of the Contract is
necessary to operation of the Bank: (I) by the Director of the
Office of Thrift Supervision ("OTS"), or his or her designee, at
the time the Federal Deposit Insurance Corporation ("FDIC") or the
Resolution Trust Corporation ("RTC") enters into an agreement to
provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act;
or (II) by the Director of the OTS, or his or her designee, at the
time the Director or his or her designee approves a supervisory
merger to resolve problems related to operation of the Bank or
when the Bank is determined by the Director of the OTS to be in an
unsafe or unsound condition. Any rights of the parties that have
been already earned or otherwise vested, however, shall not be
affected by such action, including the right of the Executive to
receive the compensation and benefits set forth in Section 5(vii)
or 5(viii) of this Agreement.
(e) In the event that 12 C.F.R. ss 563.39, or any successor
regulation, is repealed, this Section 5(vi) shall cease to be
effective on the effective date of such repeal. In the event that
12 C.F.R. ss 563.39, or any successor regulation, is amended or
modified, this Agreement shall be revised to reflect the amended
or modified provisions if: (I) the amended or modified provision
is required to be included in this Agreement; or (II) if not so
required, Executive requests that the Agreement be so revised.
(vii) Benefits Upon Other Termination by the Bank or Upon Termination
by Executive Following a "Change in Control." If this Agreement is terminated by
the Bank other than for death, disability or retirement under Section 5(i) and
other than for "cause" under Section 5(ii), or if Executive terminates this
Agreement following a "change in control" pursuant to Section 5(iv)(b), then
following the Termination Date Executive shall be entitled to the benefits
described in Section 5(viii).
10(c)e-8
<PAGE> 65
(viii) Benefits Upon Termination by Executive "For Cause." If this
Agreement is terminated by Executive pursuant to Section 5(v), then, following
the Termination Date:
(a) In lieu of any further salary payments, Executive shall receive
severance payments equal to the lesser of (1) base salary plus
cash bonuses for the year prior to termination, plus payment of
base salary plus cash bonuses for the remaining term of the
Employment Contract or (2) three times the Executive's base salary
plus cash bonuses for the year prior to termination, payable in
the amount and at the times provided in Section 4(i) and (ii). If
termination follows a "change in control" under Section 5(iv)(b),
Executive may elect to receive the payments specified in (1) or
(2) above, in a lump sum, provided that the amount of such
severance payments may not exceed the limitations established in
Section 6.
(b) In addition to the retirement benefits to which Executive is
entitled under tax qualified retirement plans maintained by the
Bank (hereinafter collectively referred to as "Plan"), Executive
shall receive as additional severance benefits a retirement
benefit under this Agreement, which (except as provided below)
shall be determined in accordance with, and paid under this
Agreement in the form and at the times provided in, the Plan. Such
benefits shall be determined as if Executive were fully vested
under the Plan and had accumulated (after termination of this
Agreement) the additional years of service and benefit credits
under the Plan that he would have received had he continued
employment with the Bank for the balance of the Employment Term at
the highest annual rate of Base Salary in effect during the twelve
(12) months immediately preceding the Termination Date. Such Base
Salary, plus the average of Executive's cash bonuses, if any, for
the past four years, shall be deemed to represent the compensation
received by Executive during each such additional year for
purposes of determining additional retirement benefits under this
Subsection 5(viii).
(c) In addition to other amounts payable to Executive under this
Section 5(viii), Executive shall be entitled to receive all other
benefits in which he was vested or to which he was otherwise
entitled under Section 4 and the plans and programs provided
10(c)e-9
<PAGE> 66
therein by reason of employment through the Termination Date,
together with the continuation, without cost to Executive, of
other benefits under Section 4(iii) for the remaining unexpired
Employment Term, all subject to the limitations set forth in
Section 6 below.
6. Limitations on Change in Control Compensation. In the event
severance benefits under Subsection 5(vii) or 5(viii) or any other payments
or benefits received or to be received by Executive from the Bank (whether
payable pursuant to the terms of this Agreement, any other plan, agreement or
arrangement with the Bank or any corporation ("Affiliate") affiliated with the
Bank within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code")) constitute, in the opinion of tax counsel selected by the
Bank's independent auditors and acceptable to Executive, "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and the present value of
such "parachute payments" equals or exceeds three times the average of the
annual compensation payable to Executive by the Bank's (or an Affiliate) and
includible in Executive's gross income for federal income tax purposes for the
five (5) calendar years preceding the year in which a change in ownership or
control of the Bank occurred ("Base Amount"), such Severance Benefits shall be
reduced to an amount the present value of which (when combined with the present
value or any other payments or benefits otherwise received or to be received by
Executive from the Bank (or an Affiliate) that are deemed "parachute payments")
is equal to 2.99 times the Base Amount, notwithstanding any other provision to
the contrary in this Agreement. The Severance Benefits shall not be reduced if
(i) Executive shall have effectively waived his receipt or enjoyment of any such
payment or benefit which triggered the applicability of this Section 6, or (ii)
in the opinion of tax counsel, the Severance Benefits (in their full amount or
as partially reduced, as the case may be) plus all other payments or benefits
which constitute "parachute payments" within the meaning of Section 280G(b)(2)
of the Code are reasonable compensation for services actually rendered, within
the meaning of Section 280G(b)(4) of the Code, and such payments are deductible
by the Bank. The Base Amount shall include every type and form of compensation
includible in Executive's gross income in respect of his employment by the Bank
(or an Affiliate), except to the extent otherwise provided in temporary or final
regulations promulgated under Section 280G(b) of the Code. For purposes of this
Section 6, a "change in ownership or control" shall have the meaning set forth
in Section 280G(b) of the Code and any temporary or final regulations
promulgated thereunder. The present value of any non-cash benefit or any
deferred cash payment shall be determined by the Bank's independent auditors in
accordance with the principles of Section 280G of the Code.
10(c)e-10
<PAGE> 67
Executive shall have the right to request that the Bank obtain a ruling
from the Internal Revenue Service ("Service") as to whether any or all
payments or benefits determined by such tax counsel are, in the view of the
Service, "parachute payments" under Section 280G. If a ruling is sought pursuant
to Executive's request, no Severance Benefits payable under this Agreement in
excess of the Section 28OG limitation shall be made to executive until after
fifteen (15) days from the date of such ruling, however Severance Benefits shall
continue to be paid during this time up to the amount of that limitation. For
purposes of this Section 6, Executive and the Bank agree to be bound by the
Service's ruling as to whether payments constitute "parachute payments" under
Section 280G. If the Service declines, for any reason, to provide the ruling
requested, the tax counsel's opinion provided with respect to what payments or
benefits constitute "parachute payments" shall control, and the period during
which the Severance Benefits may be deferred shall be extended to a date fifteen
(15) days from the date of the Service's notice indicating that no ruling would
be forthcoming.
In the event that Section 280G, or any successor statute, is repealed,
this Section 6 shall cease to be effective on the effective date of such repeal.
The parties to this Agreement recognize that final regulations under Section
28OG of the Code may affect the amounts that may be paid under this Agreement
and agree that, upon issuance of such final regulations this Agreement may be
modified as in good faith deemed necessary in light of the provisions of such
regulations to achieve the purposes of this Agreement, and that consent to such
modifications shall not be unreasonably withheld.
7. General Provisions.
(i) Successors; Binding Agreement.
(a) The Bank will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
substantially all of the business and/or assets of the Bank
("successor organization") to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that the Bank would have been required to perform if
no such succession had taken place. If such succession is the
result of a "change in control" as defined herein, such
assumption shall specifically preserve to Executive, for the
then remaining term of this Agreement, the same rights and
remedies (recognizing them as being available and applicable
as the result
10(c)e-11
<PAGE> 68
of the "change in control" effectuating said succession)
provided under this Agreement upon a "change in control".
As used in this Agreement "Bank" shall mean the Bank as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which becomes bound by the terms and
provisions of this agreement by operation of this Agreement
or law. Failure of the Bank to obtain such agreement prior to
the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Executive to compensation
from the Bank in the same amount and on the same terms as he
would be entitled to under this Agreement if he terminated
his employment under Section 5(v). For purposes of
implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Termination
Date.
(b) No right or interest to or in any payments or benefits under
this Agreement shall be assignable or transferable in any
respect by the Executive, nor shall any such payment, right
or interest be subject to seizure, attachment or creditor's
process for payment of any debts, judgments, or obligations
of Executive.
(c) This Agreement shall be binding upon and inure to the benefit
of and be enforceable by Executive and his heirs,
beneficiaries and personal representatives and the Bank and
any successor organization.
(ii) Non-competition Provision. Executive acknowledges that the
development of personal contacts and relationships is an essential element of
the savings and loan business, that Bank has invested considerable time and
money in his development of such contacts and relationships, that Bank, and its
affiliates included on the consolidated federal income tax return filed by
Bank's parent holding company in which Bank is included ("affiliates"), could
suffer irreparable harm if he were to leave Bank's employment and solicit the
business of customers of Bank and/or Affiliates, and that it is reasonable to
protect Bank and its Affiliates against competitive activities by Executive.
Executive covenants and agrees, in recognition of the foregoing and in
consideration of he mutual promises contained herein, that in the event of a
voluntary termination of employment by Executive pursuant to Section
10(c)e-12
<PAGE> 69
5(iii), Executive shall not accept employment with any Significant Competitor of
Bank or of any of Bank's Affiliates for a period of twelve (12) months following
such termination. In the event Executive is terminated by the Bank, under
Section 5(vii) other than following a change in control, Executive shall not
accept employment with any Significant Competitor of the Bank, or of any of the
Bank's affiliates, for the lesser of (i) the remaining term of the Agreement, or
(ii) a period of twelve (12) months, following such termination. For purposes
of this Agreement, the term "Significant Competitor" means any financial
institution including, but not limited to, any commercial bank, savings bank,
savings and loan association, credit union, or mortgage banking corporation
which, at the time of termination of Executive's employment with Bank, or during
the period of this covenant not to compete, has a home, branch or other office
within a three (3) mile radius of any office of the Bank or of MMB or any MMB
unit.
Executive agrees that the non-competition provisions set forth herein
are necessary for the protection of the Bank and its Affiliates and are
reasonably limited as to (a) the scope of activities affected, (b) their
duration and geographic scope, and (c) their effect on Executive and the public.
In the event Executive violates the non-competition provisions set forth herein,
the Bank shall be entitled, in addition to its other legal remedies, to enjoin
the employment of Executive with any Significant Competitor for the period set
forth herein. If Executive violates this covenant and the Bank brings legal
action for injunctive or other relief, the Bank shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the restrictive covenant. Accordingly, the covenant shall be deemed to
have the duration specified herein, computed from the date relief is granted,
but reduced by any period between commencement of the period and the date of the
first violation.
(iii) Notice. All notices and other communications provided
for in this Agreement shall be in writing and shall be deemed duly given when
delivered or mailed by United States registered mail, return receipt requested,
postage prepaid, addressed as follows;
If to the Bank:
c/o Merchants & Manufacturers' Bancorporation
6170 West Loomis Road
Greendale, WI 53129
Attention: President
1O(c)e-13
<PAGE> 70
If to the Executive:
Gregory B. Stengel
Lincoln Savings Bank, S.A.
3131 South 13th Street
Milwaukee, WI 53215
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
(iv) Expenses. If legal proceedings are necessary to enforce
or interpret this Agreement, or to recover damages for breach, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
disbursements of such proceedings, in addition to any other relief to which such
prevailing party may be entitled. Notwithstanding the foregoing, in the event of
legal proceedings to enforce or interpret this Agreement following a change in
control, Executive shall be entitled to recover from the Bank: (a) reasonable
attorneys' fees, costs and disbursements if Executive is the prevailing party;
or (b) reasonable attorneys' fees, costs and disbursements of up to $7,500
incurred in such proceedings regardless of whether Executive is the prevailing
party. Recovery of attorneys' fees and costs following a "change in control"
shall be in addition to any other relief to which Executive is entitled.
(v) Withholding. The Bank shall be entitled to withhold from
amounts to be paid to Executive under this Agreement any federal, state, or
local withholding or other taxes or charges which it is from time to time
required to withhold. The Bank shall be entitled to rely on an opinion of
counsel as to the amount or requirement of any such withholding.
(vi) Miscellaneous. No provision of this Agreement may be
amended, waived or discharged unless such Amendment, waiver or discharge is
agreed to in writing and duly executed by Executive and the Bank or its
successor in interest. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof; no agreements or
representations, oral or otherwise, express or implied, have been made by either
party respect to the subject matter hereof. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Wisconsin.
(vii) Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
10(c)e-14
<PAGE> 71
(viii) Counterparts. This Agreement may be executed in several
counterparts, all of which together will constitute one and the same instrument.
(ix) Headings. Headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
(x) Effective Date. The effective date of this Agreement shall be
the date indicated in the first paragraph of this Agreement, notwithstanding the
actual date of execution by any party.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date first above written.
EXECUTIVE
/s/ Gregory B. Stengel (SEAL)
-----------------------
Title: VP / Controller
-----------------------
LINCOLN SAVINGS BANK, S.A.
By: Title: Robert J. Blonski
--------------------------
Title: President
-----------------------
10(c)e-15
<PAGE> 72
ASSIGNMENT OF EXECUTIVE EMPLOYMENT AGREEMENT
Lincoln Savings Bank, S.A., herein referred to as assignor, a savings and
loan association organized and existing under the laws of the State of
Wisconsin, with its principal office located at 3131 South 13th Street,
Milwaukee, Wisconsin, for value received hereby assigns, orders and transfers to
Merchants and Manufacturers Bancorporation, Inc., a corporation organized and
existing under the laws of the State of Wisconsin, with its principal office
located at 6170 West Loomis Road, Greendale, Wisconsin, all the rights, title
and interest of assignor in and to the Executive Employment Agreement made as of
April 2, 1993 between Assignor and Gregory Stengel, a copy of which Executive
Employment Agreement is attached to and incorporated in this assignment by
reference.
The above assignment is made pursuant to the conversion of assignor from a
mutual to stock form of organization and the acquisition of the converted
association by Merchants and Manufacturers Bancorporation, Inc. The assignment
shall be binding on and inure to the benefit of the parties to this assignment
and their successors and assigns.
[Signatures Begin on the Next Page]
10(c)e-16
<PAGE> 73
IN WITNESS WHEREOF, Lincoln Savings Bank, S.A. has caused this assignment
to be executed at Milwaukee, Wisconsin this 15th day of April, 1993.
LINCOLN SAVINGS BANK, S.A.
By: /s/ Robert Blonski
---------------------------------
Robert Blonski, President
Attest: /s/ Mary Ann O'Bara
------------------------------
Mary Ann O'Bara, Secretary
ACCEPTANCE
Merchants and Manufacturers Bancorporation, Inc., assignee, named in the
above assignment, accepts the above Executive Employment Agreement by
assignment and agrees to each and all of the covenants and conditions in such
Executive Employment Agreement.
MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
Dated: April 15, 1993 By: /s/ Michael Murry
---------------------------------
Michael Murry, Chairman of the
Board of Directors
Executive Officer
Attest: /s/ James Mroczkowski
-----------------------------
James Mroczkowski, Secretary
CONSENT OF EXECUTIVE
Gregory Stengel, the named Executive in the above Executive Employment
Agreement hereby consents to the above assignment and acknowledges the validity
of the assignment under the terms and conditions of the Executive Employment
Agreement.
Dated: April 15, 1993 /s/ Gregory Stengel
-------------------------------------
Gregory Stengel
10(c)e-17
<PAGE> 74
EXHIBIT 10(c)f
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 2nd day of April, 1993, between
Lincoln Savings Bank, S.A. (the "Bank") a Wisconsin-chartered savings
association, its successors and assigns, and Robert V. Donaj (the "Executive").
RECITALS
WHEREAS, Executive is a valued, long-term, employee, whose experience
in the industry and continued employment in the position of Senior Vice
President, Director of Lending Operations, will benefit the Bank in the future;
and
WHEREAS, effective as of the date of this Agreement, the Bank will
convert from a Wisconsin-chartered mutual savings and loan association to a
Wisconsin-chartered stock savings institution and concurrently issue all of its
capital stock to be outstanding to Merchants and Manufacturers' Bancorporation
("MMB"), a Wisconsin corporation registered under the Bank Holding Company Act
of 1956, as amended, with the Bank thereby becoming a wholly-owned subsidiary of
MMB (the above-described transactions being collectively referred to as the
"Conversion");
WHEREAS, the parties desire to enter into this Agreement to provide
terms and conditions for continued employment relationship between Executive and
Bank following the Conversion;
WHEREAS, the Bank's Board of Directors (hereinafter the "Board") has
approved and authorized the Bank to enter into this Agreement with Executive.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth below:
1. Employment. The Bank shall continue to employ Executive, and
Executive shall continue to serve, on the terms and conditions set forth herein
for the period provided in Section 2.
2. Term of Employment. The period of Executive's employment under this
Agreement shall be deemed to have commenced as of the date set forth above (the
"Commencement Date") and shall continue for a period of thirty-six (36) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement, and continuing at each anniversary date thereafter, the Agreement
shall renew for an additional year such that the remaining term shall be three
(3) years unless written notice is provided
10(c)f-1
<PAGE> 75
by either party at least ten (10) days and not more than twenty (20) days prior
to any such anniversary date, that the Agreement shall terminate at the end of
twenty-four (24) months following such anniversary date. Prior to the renewal or
non-renewal of the Agreement, the Board of Directors of the Bank ("Board") will
conduct a formal performance evaluation of the Executive for the purpose of
determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting. The term of employment under
this Agreement, as in effect from time to time, shall be referred to as the
"Employment Term".
3. Position and Duties. Subject to Section 5(iv)(b), Executive shall
serve the Bank as an Executive Officer in the capacity of Senior Vice President,
Director of Lending Operations ("Corporate Position"). As such, Executive shall
be responsible for establishment of the Bank's lending policies and programs,
development of new loan programs, general oversight and implementation of the
Bank's lending and lending related activities, and provide such other management
services as are customarily performed by persons serving in similar capacities
at other banks and savings and loan associations, and perform such other duties
as my be appropriate to his position and as may be from time to time determined
by the Bank's Board of Directors to be necessary to its operations and in
accordance with its bylaws. During the Employment Term the Board of Directors
may modify Executive's duties and responsibilities consistent with continued
executive status; provided, however, there shall be no material change in
Executive's status nor any material increase or decrease in duties and
responsibilities following a "change in control", except as agreed to in writing
by Executive. During the term of this Agreement, Executive shall devote
substantially all his working time and efforts to the business and affairs of
the Bank and shall not engage in any activity which is competitive with or
adverse to the business of the Bank whether done as a partner, director,
officer, employee, shareholder of or consultant or advisor to any other
business.
4. Compensation. As compensation for services provided pursuant to
this Agreement, Executive shall receive the compensation and other benefits set
forth below:
(i) Base Salary. During the Employment Term, Executive shall
receive an annual base salary ("Base Salary") in such amount as may from time to
time be approved by the Board. The Base Salary in effect as of the Commencement
Date shall be $56,500. Such amount shall be subject to review and to annual
adjustment by the Board in accordance with the Bank's normal personnel practices
and, once established at a specified annual rate (including the initial rate)
Executive's Base Salary shall not thereafter be reduced without his consent
except pursuant to subsection 5(v)(c) of this Agreement. No increase in Base
Salary or other
10(c)f-2
<PAGE> 76
compensation shall limit or reduce any other obligation of the Bank. Executive's
Base Salary and other compensation shall be paid in accordance with the Bank's
regular payroll practices. Review and adjustment of Executive's Base Salary
shall be done on a basis comparable to, and applied uniformly with, that
utilized for other executives of MMB and/or its subsidiaries and shall
incorporate the then current MMB evaluation form (copy of current form attached
hereto as Exhibit A).
(ii) Bonus Payments. In addition to Base Salary, Executive shall
be entitled, during the Employment Term, to participate in and receive payments
from all bonus and other incentive compensation plans as in effect from time to
time, on the same basis as other Bank executive officers or as other comparably
placed executives of MMB and/or its subsidiaries. It is intended that the bonus
and incentive plans (other than the Management Recognition Plan referenced
below) available to Executives shall be the same as or comparable to those
available to executives of MMB and/or its subsidiaries.
(iii) Other Benefits. During the Employment Term, the Bank shall
provide to Executive, in addition to Base Salary, such other benefits of
employment (or, with Executive's consent, equivalent benefits) as are made
generally available to executive officers serving in comparable positions at MMB
or in other MMB unit banks. Such benefits shall include participation in any
group health, life, disability, or similar insurance program and in any pension,
profit-sharing, deferred compensation, 401(k) or other similar retirement
program provided. Executive's benefits under MMB qualified retirement plans
shall be calculated to include vesting service credit for service with the Bank
both before and after its affiliation with MMB. Executive shall also have the
right to participate, on the same basis as other MMB and MMB unit executives in
any stock purchase, stock option or stock appreciation rights plans, or other
stock based program made available to such executive officers and shall also
participate in the Lincoln Savings Bank S.A. Management Recognition Plan ("MRP")
established solely for management of the Bank.
Executive shall be entitled to vacation, sick time, personal days and
other perquisites in the same manner and to the same extent as provided other
MMB and MMB unit executives.
Nothing contained herein shall be construed as granting Executive the
right to continue in any benefit plan or program, or to receive any other
perquisite of employment, provided under this section 4(iii) (except to the
extent Executive had previously earned or otherwise accumulated vested rights
therein) following a valid and lawful termination or discontinuance of such
plan, program or perquisite.
10(c)f-3
<PAGE> 77
On the date of this Agreement, Executive shall be granted stock
options pursuant to the Qualified Stock Option Plan maintained by MMB to
purchase up to 2,000 shares of common stock of MMB, $1.00 par value, ("MMB
Common Stock") at 100% of the market value of such shares on the date of grant.
Executive shall also receive an MRP grant of MMB Common Stock equal to .75% of
the total shares of stock sold in the conversion as purchased by the MRP in the
Conversion or thereafter.
5. Termination. This Agreement may be terminated, subject to payment
of the compensation and other benefits described below, upon occurrence of any
of the events described herein. The date on which Executive ceases to be
employed under this Agreement, after giving effect to the period of time
specified in any notice requirement, is referred to as the "Termination Date".
(i) Death, Disability; Retirement. This Agreement shall terminate
upon the death, disability or retirement of Executive. As used in this
Agreement, "disability" means Executive's inability, as the result of physical
or mental incapacity, to substantially perform his duties for a period of 180
consecutive days. If the Executive and Bank cannot agree as to existence of a
disability the determination shall be made by a qualified independent physician
acceptable to both parties or, alternatively, by a physician designated by the
president of the medical society for the county in which Executive resides. The
costs of any such medical examination shall be borne by the Bank. If Executive
is terminated due to disability, he shall be paid 100% of his Base Salary at the
rate in effect at the time notice of termination is given for one year, and
thereafter an annual amount equal to 75% of such Base Salary for the remaining
portion of the Employment Term, such amounts to be paid in substantially equal
monthly installments and offset by any monthly payments actually received by
Executive from: (a) any disability plans or disability insurance programs
provided by the Bank and/or (b) any governmental social security or workers
compensation program.
As used in this Agreement, the term "retirement" shall mean
Executive's retirement in accordance with and pursuant to any generally
applicable retirement plan of the Bank or MMB or in accordance with any
retirement arrangement established for Executive with his consent.
If termination occurs as a result of death, disability or retirement,
no additional compensation shall be payable to Executive under this Agreement
except as specifically provided herein. Notwithstanding anything to the contrary
contained herein, Executive shall receive all compensation and other benefits to
which he was entitled under Section 4 and the plans and programs provided
therein, through the Termination Date and, in addition, shall
10(c)f-4
<PAGE> 78
receive or continue to receive for the remaining portion of the Employment Term
all other benefits available to him under any applicable group health, life,
disability or similar insurance program as in effect on the date of death,
disability or retirement.
If, following termination by reason of disability and prior to the
expiration of the then remaining balance of the Employment Term, Executive
becomes able to resume his duties, he shall be reinstated to his Corporate
Position or, if such position has been filled, to a position as nearly
comparable as possible. From the date of reinstatement and for the balance of
the Employment Term, Executive shall be obligated to perform all duties and
responsibilities, and entitled to receive all compensation and other benefits,
as provided in this Agreement.
(ii) Cause. The Bank may terminate Executive's employment under this
Agreement for cause at any time, and thereafter Bank shall have no further
obligation under this Agreement. Notwithstanding anything to the contrary
contained herein, Executive shall receive all compensation and other benefits in
which he was vested or to which he was otherwise entitled under Section 4 and
the plans and programs provided therein, by reason of employment through the
Termination Date.
For purposes of this Agreement, "Cause" shall mean:
(a) A failure by Executive to substantially perform his duties (other
than failure resulting from incapacity) after a written demand by
the Board, which demand identifies, with reasonable specificity,
the manner in which the Board believes Executive has not
substantially performed, and Executive's failure to cure within a
reasonable period of time after his receipt of the notice;
(b) A criminal conviction of or plea of nolo contendere by Executive
for any act involving dishonesty, breach of trust or a violation
of the banking or savings and loan laws of the State of Wisconsin
or the United States;
(c) A criminal conviction of or plea of nolo contendere by Executive
for the commission of any felony;
(d) A breach of fiduciary duty by Executive involving personal profit;
10(c)f-5
<PAGE> 79
(e) A willful violation of any law, rule, or order by Executive (other
than traffic violations or similar offenses); or
(f) Incompetence, personal dishonesty or material breach of any
provision of this Agreement or any willful misconduct by
Executive.
For purposes of this Subsection (5)(ii), no act, or failure to act,
an Executive's part shall be deemed "willful" unless done, or omitted to be
done, by Executive not in good faith and without reasonable belief that the
action or omission was in the best interest of the Bank.
(iii) Voluntary Termination by Executive. Executive may voluntarily
terminate employment at any time by giving at least ninety (90) days' prior
written notice to the Bank. In such event, the Bank shall have no further
obligation hereunder, except that Executive shall receive all compensation and
other benefits in which he was vested or to which he was otherwise entitled
under Section 4 and the plans and programs provided therein, by reason of his
employment through the Termination Date.
(iv) Termination by Executive After Change in Control.
(a) For purposes of this Agreement, a "change in control" shall mean
and include: (I) any transaction or series of transactions subject to the Change
in Bank Control Act (12 U.S.C. s 1817(j)), as amended, in which any person,
acting directly, or indirectly, through or in concert with one or more other
persons, acquires control of the Bank; (II) any transaction or series of
transactions subject to Subsection (e) of the Savings and Loan Holding Company
Act (12 U.S.C. ss.1467a(e)), as amended, in which any savings and loan holding
company directly or indirectly, or through one or more subsidiaries acquires
control of the Bank or of a holding company which controls the Bank; (III) any
transaction or series of transactions subject to the Bank Merger Act (12 U.S.C.
ss 215a and 1828(c)), as amended, in which the surviving bank or association
is controlled by a person or entity other than the holding company that
controlled the Bank immediately prior to the consummation of said transaction or
series of transactions; and (IV) any sale by MMB of more than half of the assets
of the Bank upon approval of less than an eighty percent (80%) or greater vote
by the MMB Board. "Change in control" shall not refer to or include any
subsequent transaction involving only entities controlled directly or indirectly
by MMB, except to the extent that such transaction by Bank occurs within four
(4) years of the Commencement Date and was approved by less than an eighty
percent (80%) or greater vote of the MMB Board of Directors.
10(c)f-6
<PAGE> 80
(b) Executive may, at any time within twelve (12) months following a
"change in control", terminate his employment under this Agreement by giving at
least ninety (90) days' prior written notice to the Bank.
(v) Termination by Executive "For Cause." Executive may terminate his
employment under this Agreement by giving at least ninety (90) days' prior
written notice to the Bank at any time after the occurrence of any of the
following without Executive's express written consent:
(a) Executive is assigned to positions, duties or responsibilities
that are substantially less significant than the positions, duties
and responsibilities provided herein;
(b) Executive is removed from or the Bank fails to reelect Executive
to his Corporate Position, except in connection with termination
of Executive's employment for cause, disability or retirement;
(c) Executive's Base Salary is reduced other than as the result of a
program applied on a proportionately equivalent basis to all
executives of the Bank; or any other failure by the Bank to comply
with Section 4(i);
(vi) Suspension or Termination Required by the FDIC or OTS.
(a) If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3), or Section 8(g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. ss 1818(e)(3) and (g)(1),
respectively), the Bank's obligations under the Agreement shall be
suspended as of the date of service of the notice unless stayed by
appropriate proceedings. If the charges in the notice are
dismissed, the Bank shall: (I) pay Executive all of the
compensation withheld while its obligations under this Agreement
were suspended; and (II) reinstate any of its obligations which
were suspended.
(b) If Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order
issued under Section 8(e)(4) or Section 8(g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. ss 1818(e)(4) and (g)(1),
respectively, the obligations of the Bank under the
10(c)f-7
<PAGE> 81
Agreement shall terminate as of the effective date of the order,
but earned or otherwise vested rights of Executive to compensation
and to any benefits under Section 4 shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act), all obligations under the
Agreement shall terminate as of the date of default, but this
Subsection 5(vi)(c) shall not affect any vested rights of
Executive, including the right to receive the compensation and
benefits set forth in Section 5(vii) or 5(viii) of this Agreement.
(d) All obligations under the Agreement may be terminated, except to
the extent determined that continuation of the contract is
necessary to operation of the Bank: (I) by the Director of the
Office of Thrift Supervision ("OTS"), or his or her designee, at
the time the Federal Deposit Insurance Corporation ("FDIC") or the
Resolution Trust Corporation ("RTC") enters into an agreement to
provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act;
or (II) by the Director of the OTS, or his or her designee, at the
time the Director or his or her designee approves a supervisory
merger to resolve problems related to operation of the Bank or
when the Bank is determined by the Director of the OTS to be in an
unsafe or unsound condition. Any rights of the parties that have
been already earned or otherwise vested, however, shall not be
affected by such action, including the right of the Executive to
receive the compensation and benefits set forth in Section 5(vii)
or 5(viii) of this Agreement.
(e) In the event that 12 C.F.R. ss 563.39, or any successor
regulation, is repealed, this Section 5(vi) shall cease to be
effective on the effective date of such repeal. In the event that
12 C.F.R. ss 5563.39, or any successor regulation, is amended or
modified, this Agreement shall be revised to reflect the amended
or modified provisions if: (I) the amended or modified provision
is required to be included in this Agreement; or (II) if not so
required, Executive requests that the Agreement be so revised.
10(c)f-8
<PAGE> 82
(vii) Benefits Upon Other Termination by the Bank or Upon Termination by
Executive Following a "Change in Control." If this Agreement is terminated by
the Bank other than for death, disability or retirement under Section 5(i) and
other than for "cause" under Section 5(ii), or if Executive terminates this
Agreement following a "change in control" pursuant to Section 5(iv)(b), then
following the Termination Date Executive shall be entitled to the benefits
described in Section 5(viii).
(viii) Benefits Upon Termination by Executive "For Cause." If this
Agreement is terminated by Executive pursuant to Section 5(v), then, following
the Termination Date:
(a) In lieu of any further salary payments, Executive shall receive
severance payments equal to the lesser of (1) base salary plus
cash bonuses for the year prior to termination, plus payment of
base salary plus cash bonuses for the remaining term of the
Employment Contract or (2) three times the Executive's base salary
plus cash bonuses for the year prior to termination, payable in
the amount and at the times provided in Section 4(i) and (ii). If
termination follows a "change in control" under Section 5(iv)(b),
Executive may elect to receive the payments specified in (1) or
(2) above, in a lump sum, provided that the amount of such
severance payments may not exceed the limitations established in
Section 6.
(b) In addition to the retirement benefits to which Executive is
entitled under tax qualified retirement plans maintained by the
Bank (hereinafter collectively referred to as "Plan"), Executive
shall receive as additional severance benefits a retirement
benefit under this Agreement, which (except as provided below)
shall be determined in accordance with, and paid under this
Agreement in the form and at the times provided in, the Plan.
Such benefits shall be determined as if Executive were fully
vested under the Plan and had accumulated (after termination of
this Agreement) the additional years of service and benefit
credits under the Plan that he would have received had he
continued employment with the Bank for the balance of the
Employment Term at the highest annual rate of Base Salary in
effect during the twelve (12) months immediately preceding the
Termination Date. Such Base Salary, plus the average of
Executive's cash bonuses, if any, for the past four years, shall
be deemed to represent the compensation
10(c)f-9
<PAGE> 83
received by Executive during each such additional year for
purposes of determining additional retirement benefits under this
Subsection 5(viii).
(c) In addition to other amounts payable to Executive under this
Section 5(viii), Executive shall be entitled to receive all other
benefits in which he was vested or to which he was otherwise
entitled under Section 4 and the plans and programs provided
therein by reason of employment through the Termination Date,
together with the continuation, without cost to Executive, of
other benefits under Section 4(iii) for the remaining unexpired
Employment Term, all subject to the limitations set forth in
Section 6 below.
6. Limitations on Change in Control Compensation. In the event
severance benefits under Subsection 5 (vii) or 5 (viii), or any other payments
or benefits received or to be received by Executive from the Bank (whether
payable pursuant to the terms of this Agreement, any other plan, agreement or
arrangement with the Bank or any corporation ("Affiliate") affiliated with the
Bank within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code")) constitute, in the opinion of tax counsel selected by the
Bank's independent auditors and acceptable to Executive, "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and the present value of
such "parachute payments" equals or exceeds three times the average of the
annual compensation payable to Executive by the Bank's (or an Affiliate) and
includible in Executive's gross income for federal income tax purposes for the
five (5) calendar years preceding the year in which a change in ownership or
control of the Bank occurred ("Base Amount"), such Severance Benefits shall
be reduced to an amount the present value of which (when combined with the
present value or any other payments or benefits otherwise received or to be
received by Executive from the Bank (or an Affiliate) that are deemed "parachute
payments") is equal to 2.99 times the Base Amount, notwithstanding any other
provision to the contrary in this Agreement. The Severance Benefits shall not be
reduced if (i) Executive shall have effectively waived his receipt or enjoyment
of any such payment or benefit which triggered the applicability of this Section
6, or (ii) in the opinion of tax counsel, the Severance Benefits (in their full
amount or as partially reduced, as the case may be) plus all other payments or
benefits which constitute "parachute payments", within the meaning of Section
280G(b)(2) of the Code are reasonable compensation for services actually
rendered, within the meaning of Section 280G (b)(4) of the Code, and such
payments are deductible by the Bank. The Base Amount shall include every type
and form of compensation includible in Executive's gross income in respect of
his employment by the Bank (or an Affiliate), except to
10(c)f-10
<PAGE> 84
the extent otherwise provided in temporary or final regulations promulgated
under Section 280G(b) of the Code. For purposes of this Section 6, a "change in
ownership or control" shall have the meaning set forth in Section 280G(b) of the
Code and any temporary or final regulations promulgated thereunder. The present
value of any non-cash benefit or any deferred cash payment shall be determined
by the Bank's independent auditors in accordance with the principles of Section
280G of the Code.
Executive shall have the right to request that the Bank obtain a
ruling from the Internal Revenue Service ("Service") as to whether any or all
payments or benefits determined by such tax counsel are, in the view of the
Service, "parachute payments" under Section 280G. If a ruling is sought pursuant
to Executive's request, no Severance Benefits payable under this Agreement in
excess of the Section 280G limitation shall be made to executive until after
fifteen (15) days from the date of such ruling, however Severance Benefits shall
continue to be paid during this time up to the amount of that limitation. For
purposes of this Section 6, Executive and the Bank agree to be bound by the
Service's ruling as to whether payments constitute "parachute payments" under
Section 280G. If the Service declines, for any reason, to provide the ruling
requested, the tax counsel's opinion provided with respect to what payments or
benefits constitute "parachute payments" shall control, and the period during
which the Severance Benefits may be deferred shall be extended to a date fifteen
(15) days from the date of the Service's notice indicating that no ruling would
be forthcoming.
In the event that Section 280G, or any successor statute, is repealed,
this Section 6 shall cease to be effective on the effective date of such repeal.
The parties to this Agreement recognize that final regulations under Section
280G of the Code may affect the amounts that may be paid under this Agreement
and agree that, upon issuance of such final regulations this Agreement may be
modified as in good faith deemed necessary in light of the provisions of such
regulations to achieve the purposes of this Agreement, and that consent to such
modifications shall not be unreasonably withheld.
7. General Provisions.
(i) Successors; Binding Agreement.
(a) The Bank will require any successor (whether direct or
indirect, by purchase, merger, consolidation or
otherwise) to substantially all of the business and/or
assets of the Bank ("successor organization") to
expressly assume and agree to perform this Agreement in
the
10(c)f-11
<PAGE> 85
same manner and to the same extent that the Bank would have
been required to perform if no such succession had taken
place. If such succession is the result of a "change in
control" as defined herein, such assumption shall
specifically preserve to Executive, for the then remaining
term of this Agreement, the same rights and remedies
(recognizing them as being available and applicable as the
result of the "change in control" effectuating said
succession) provided under this Agreement upon a "change in
control".
As used in this Agreement "Bank" shall mean the Bank as
hereinbefore defined and any successor to its business
and/or assets as aforesaid which becomes bound by the terms
and provisions of this agreement by operation of this
Agreement or law. Failure of the Bank to obtain such
agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle
Executive to compensation from the Bank in the same amount
and on the same terms as he would be entitled to under this
Agreement if he terminated his employment under Section
5(v). For purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be
deemed the Termination Date.
(b) No right or interest to or in any payments or benefits
under this Agreement shall be assignable or transferable in
any respect by the Executive, nor shall any such payment,
right or interest be subject to seizure, attachment or
creditor's process for payment of any debts, judgments, or
obligations of Executive.
(c) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by Executive and his heirs,
beneficiaries and personal representatives and the Bank and
any successor organization.
(ii) Non-competition Provision. Executive acknowledges that the
development of personal contacts and relationships is an essential element of
the savings and loan business, that Bank has invested considerable time and
money in his development of such contacts and relationships, that Bank, and its
affiliates included
10(c)f-12
<PAGE> 86
on the consolidated federal income tax return filed by Bank's parent holding
company in which Bank is included ("affiliates"), could suffer irreparable
harm if he were to leave Bank's employment and solicit the business of
customers of Bank and/or Affiliates, and that it is reasonable to protect Bank
and its Affiliates against competitive activities by Executive. Executive
covenants and agrees, in recognition of the foregoing and in consideration of
the mutual promises contained herein, that in the event of a voluntary
termination of employment by Executive pursuant to Section 5(iii), Executive
shall not accept employment with any Significant Competitor of Bank or of any of
Bank's Affiliates for a period of twelve (12) months following such termination.
In the event Executive is terminated by the Bank, under Section 5(vii) other
than following a change in control, Executive shall not accept employment with
any Significant Competitor of the Bank, or of any of the Bank's affiliates, for
the lesser of (i) the remaining term of the Agreement, or (ii) a period of
twelve (12) months, following such termination. For purposes of this Agreement,
the term "Significant Competitor" means any financial institution including, but
not limited to, any commercial bank, savings bank, savings and loan association,
credit union, or mortgage banking corporation which, at the time of termination
of Executive's employment with Bank, or during the period of this covenant not
to compete, has a home, branch or other office within a three (3) mile radius of
any office of the Bank or of MMB or any MMB unit.
Executive agrees that the non-competition provisions set forth herein
are necessary for the protection of the Bank and its Affiliates and are
reasonably limited as to (a) the scope of activities affected, (b) their
duration and geographic scope, and (c) their effect on Executive and the public.
In the event Executive violates the non-competition provisions set forth herein,
the Bank shall be entitled, in addition to its other legal remedies, to enjoin
the employment of Executive with any Significant Competitor for the period set
forth herein. If Executive violates this covenant and the Bank brings legal
action for injunctive or other relief, the Bank shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the restrictive covenant. Accordingly, the covenant shall be deemed to
have the duration specified herein, computed from the date relief is granted,
but reduced by any period between commencement of the period and the date of the
first violation.
(iii) Notice. All notices and other communications provided for
in this Agreement shall be in writing and shall be deemed duly given when
delivered or mailed by United States registered mail, return receipt requested,
postage prepaid, addressed as follows:
10(c)f-13
<PAGE> 87
If to the Bank:
c/o Merchants & Manufacturers' Bancorporation
6170 West Loomis Raod
Greendale, WI 53129
Attention: President
If to the Executive:
Robert V. Donaj
Lincoln Savings Bank, S.A.
3131 South 13th Street
Milwaukee, WI 53215
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
(iv) Expenses. If legal proceedings are necessary to enforce or
interpret this Agreement, or to recover damages for breach, the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and disbursements
of such proceedings, in addition to any other relief to which such prevailing
party may be entitled. Notwithstanding the foregoing, in the event of legal
proceedings to enforce or interpret this Agreement following a change in
control, Executive shall be entitled to recover from the Bank: (a) reasonable
attorneys' fees, costs and disbursements if Executive is the prevailing party;
or (b) reasonable attorneys' fees, costs and disbursements of up to $7,500
incurred in such proceedings regardless of whether Executive is the prevailing
party. Recovery of attorneys' fees and costs following a "change in control"
shall be in addition to any other relief to which Executive is entitled.
(v) Withholding. The Bank shall be entitled to withhold from
amounts to be paid to Executive under this Agreement any federal, state, or
local withholding or other taxes or charges which it is from time to time
required to withhold. The Bank shall be entitled to rely on an opinion of
counsel as to the amount or requirement of any such withholding.
(vi) Miscellaneous. No provision of this Agreement may be
amended, waived or discharged unless such Amendment, waiver or discharge is
agreed to in writing and duly executed by Executive and the Bank or its
successor in interest. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof; no agreements or
representations, oral or otherwise, express or implied, have been made by either
party respect to the subject matter hereof. The validity, interpretation,
10(c)f-14
<PAGE> 88
construction and performance of this Agreement shall be governed by the laws of
the State of Wisconsin.
(vii) Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
(viii) Counterparts. This Agreement may be executed in several
counterparts, all of which together will constitute one and the same instrument.
(ix) Headings. Headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
(x) Effective Date. The effective date of this Agreement
shall be the date indicated in the first paragraph of this Agreement,
notwithstanding the actual date of execution by any party.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date first above written.
EXECUTIVE
/s/ Robert V. Donaj (SEAL)
-----------------------------
Title: Senior Vice President
----------------------------
LINCOLN SAVINGS BANK, S.A.
By: /s/ Robert J. Blonski
-------------------------------
Title: President
----------------------------
10(c)f-15
<PAGE> 89
ASSIGNMENT OF EXECUTIVE EMPLOYMENT AGREEMENT
Lincoln Savings Bank, herein referred to as assignor, a Wisconsin
corporation organized and existing under the laws of the State of Wisconsin,
with its principal office located at 3131 South 13 Street, Milwaukee, WI, for
value received hereby assigns, orders, and transfers to M&M Services, Inc., a
corporation organized and existing under the laws of the State of Wisconsin,
with its principal office located at 6170 Industrial court, Greendale, WI, all
the rights, title, and interest of assignor in and to the Executive Employment
Agreement made as of April 2, 1993, between Assignor and Robert V. Donaj; said
Executive Employment Agreement is incorporated in this assignment by
reference.
The assignment shall be binding on and inure to the benefit of the parties
to this assignment and their successors and assigns.
(Signatures Begin on the Next Page]
10(c)f-16
<PAGE> 90
IN WITNESS WHEREOF, Lincoln Savings Bank has caused this assignment to
be executed at Milwaukee, WI this 23rd day of May, 1995.
LINCOLN SAVINGS BANK
By: /s/ James Sass
---------------------------------------
James Sass, Chairman of the Board
Attest: /s/ Dolores M. Wellman
-----------------------------------
Dolores M. Wellman, Secretary
ACCEPTANCE
M&M Services, Inc., assignees, named in the above assignment, accepts
the above Executive Employment Agreement by assignment and agrees to each and
all of the covenants and conditions in such Executive Employment Agreement.
M&M SERVICES, INC.
Dated, May 23rd, 1995 By: /s/ Michael J. Murry
---------------------------------------
Michael J. Murry, Chairman of Board
Attest: /s/ Edmund P. Glembocki
-----------------------------------
Edmund P. Glembocki, Secretary
CONSENT OF EXECUTIVE
Robert V. Donaj, the named Executive in the above Executive Employment
Agreement hereby consents to the above assignment and acknowledges the validity
of the assignment under the terms and conditions of the Executive Employment
Agreement.
Dated: May 23rd, 1995 /s/ Robert V. Donaj
-----------------------------------
Robert V. Donaj
10(c)f-17
<PAGE> 91
ASSIGNMENT OF EXECUTIVE EMPLOYMENT AGREEMENT
M&M Services, Inc., herein referred to as assignor, a Wisconsin corporation
organized and existing under the laws of the State of Wisconsin, with its
principal office located at 6170 Industrial Court, Greendale, WI, for value
received hereby assigns, orders, and transfers to Achieve Mortgage Corp., a
corporation organized and existing under the laws of the State of Wisconsin,
with its principal office located at 5400 W. Forest Home Avenue, Milwaukee, WI
all the rights, title, and interest of assignor in and to the Executive
Employment Agreement made as of January 2, 1996, between Assignor and Robert V.
Donaj; said Executive Employment Agreement is incorporated in this assignment by
reference.
The assignment shall be binding on and inure to the benefit of the parties
to this assignment and their successors and assigns.
[Signatures Begin on the Next Page]
10(c)f-18
<PAGE> 92
IN WITNESS WHEREOF, Lincoln State Bank has caused this assignment to
be executed at Milwaukee, WI this day of , 1997.
M&M Services, Inc.
By: /s/ Michael Murry
-------------------------------------
Michael Murry, Chairman of Board
Attest: /s/ Edmund P. Glembocki
---------------------------------
Edmund P. Glembocki, Secretary
ACCEPTANCE
Achieve Mortgage Corp. assignees, named in the above assignment,
accepts the above Executive Employment Agreement by assignment and agrees to
each and all of the covenants and conditions in such Executive Employment
Agreement.
ACHIEVE MORTGAGE CORP.
Dated: By: /s/ Michael J. Murry
---------------------- -------------------------------------
Michael J. Murry, Chairman of Board
Attest: /s/ Rosemary Blonski
---------------------------------
Rosemary Blonski, Secretary
CONSENT OF EXECUTIVE
Robert V. Donaj, the named Executive in the above Executive Employment
Agreement hereby consents to the above assignment and acknowledges the validity
of the assignment under the terms and conditions of the Executive Employment
Agreement.
Dated: By: /s/ Robert V. Donaj
---------------------- -------------------------------------
Robert V. Donaj
10(c)f-19
<PAGE> 93
EXHIBIT 10(c)g
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of April, 1999 GRAFTON STATE
BANK, (the "Employer"), a Wisconsin corporation, its successors and assigns, and
Thomas J. Sheehan (the "Executive").
RECITALS
WHEREAS, Executive is a valued, long-term employee, whose experience in
the industry and continued employment in the position of President and CEO will
benefit the Employer in the future; and
WHEREAS, Employer desires to provide for management continuity and
stability and for the continued services of Executive.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below:
1. EMPLOYMENT. Employer shall continue to employ Executive, and
Executive shall continue to serve, on the terms and conditions set forth herein
for the period provided in Section 2.
2. TERM OF EMPLOYMENT. The period of Executive's employment under
this Agreement shall be deemed to have commenced as of the date first above
written and shall continue for a period of thirty-six (36) calendar months
thereafter. Commencing on the first anniversary date of this Agreement, and
continuing at each anniversary date thereafter, the Agreement shall renew for an
additional 12 months such that the remaining term shall be thirty-six (36)
months unless written notice is provided by either party at least sixty (60)
days prior to any such anniversary date, that the Agreement shall terminate at
the end of twenty-four (24) months following such anniversary date. Prior to
the renewal or non-renewal of the Agreement, the Board of Directors or the
Executive Personnel/Compensation Committee will conduct a performance evaluation
of the Executive for the purpose of determining whether to extend the Agreement,
and the results thereof shall be included in the minutes of the Board or
Executive Personnel/Compensation Committee meeting. The term of employment under
this Agreement. As in effect from time to time, shall be referred to as the
"Employment Term."
3. POSITION AND DUTIES. Subject to Section 5(iv)(b), Executive shall
serve Employer as a Chief Executive Officer. Executive shall provide such
management services as are customarily performed by persons serving in similar
capacities at other bank holding companies or their affiliates, and perform such
other duties as may be appropriate to his position and as may be from time to
time determined by Employer's Board of Directors to be necessary to its
10(c)g-1
<PAGE> 94
operations and in accordance with its bylaws. During the Employment Term the
Board of Directors may modify Executive's duties and responsibilities consistent
with continued executive status; provided, however, there shall be no material
change in Executive's status nor any material increase or decrease in duties and
responsibilities except as agreed to in writing by Executive. During the
Employment Term, Executive shall devote substantially all his working, time and
efforts to the business and affairs of the Employer and shall not engage in any
activity which is competitive with or adverse to the business of the Employer or
any of its affiliates whether done as a partner, director, officer, employee,
shareholder of or consultant or advisor to any other business. It is understood
that, notwithstanding the foregoing statement, the Executive does have
responsibilities as an elected national officer of the IBAA and as such is
required to be away from the bank on various occasions through his term as
National President. The Employer agrees that this involvement is considered to
be in the best interests of the Employer.
4. COMPENSATION. As compensation for services provided pursuant to
this Agreement, Executive shall receive the compensation and other benefits set
forth below:
(i) BASE SALARY. During the Employment Term, Executive shall
receive an annual base salary ("Base Salary") in such amount as may
from time to time be approved by the Board or the Executive
Personnel/Compensation Committee. The Base Salary in effect as of the
Commencement Date shall be $111,000. Such amount shall be subject to
review and to annual adjustment by the Board or the Executive
Personnel/Compensation Committee in accordance with Employer's normal
personnel practices and, once established at a specified annual rate
(including the initial rate), Executive's Base Salary shall not
thereafter be reduced without his consent except pursuant to subsection
5(v)(c) of this Agreement. No increase in Base Salary or other
compensation shall limit or reduce any other obligation of Employer.
Executive's Base Salary and other compensation shall be paid in
accordance with Employer's regular payroll practices. Review and
adjustment of Executive's Base Salary shall be done on a basis
comparable to, and applied uniformly with, that utilized for other
executives of Employer and/or its affiliates.
(ii) BONUS PAYMENTS. In addition to Base Salary, Executive shall
be entitled, during the Employment Term, to participate in and receive
payments from all bonus and other incentive compensation plans as in
effect from time to time on the same basis as other executive officers
of Employer.
(iii) OTHER BENEFITS. During the Employment Term, Employer shall
provide to Executive, in addition to Base Salary, such
other benefits of employment (or, with Executive's consent,
equivalent benefits) as are made generally available to
executive officers serving in comparable positions at
Employer of its affiliates. Such benefits shall include
participation in any group health, life, disability, or
similar insurance program and in any pension, profit
sharing, deferred compensation, 401(k) or other similar
retirement program provided. Executive shall also
10(c)g-2
<PAGE> 95
be provided the use of an automobile similar to a Buick
Ultra and be provided with a full membership at Mequon
Country Club.
Executive shall be entitled to vacation, sick time,
personal days and other perquisites in the same manner and
to the same extent as provided other executives of
Employer.
Nothing contained herein shall be construed as granting
Executive the right to continue in any benefit plan or
program, or to receive any other perquisite of employment,
provided under this section 4(iii) (except to the extent
Executive had previously earned or otherwise accumulated
vested rights therein) following a valid and lawful
termination or discontinuance of such plan, program or
perquisite.
5. TERMINATION. This Agreement may be terminated, subject to payment
of the compensation and other benefits described below, upon occurrence of any
of the events described herein. The date on which Executive ceases to be
employed under this Agreement, after giving effect to the period of time
specified in any notice requirement, is referred to as the "Termination Date."
(i) DEATH; DISABILITY; RETIREMENT. This Agreement shall
terminate upon the death, disability or retirement of Executive. As
used in this Agreement, "disability" means Executive's inability, as
the result of physical or mental incapacity, to substantially perform
his duties for a period of 180 consecutive days. If the Executive and
Employer cannot agree as to the existence of a disability, the
determination shall be made by a qualified independent physician
acceptable to both parties or, alternatively, by a physician designated
by the president of the medical society for the county in which
Executive resides. The costs of any such medical examination shall be
borne by Employer. If Executive is terminated due to disability, he
shall be paid 100% of his Base Salary at the rate in effect at the time
notice of termination is given for one year, and thereafter an annual
amount equal to 75% of such Base Salary for the remaining portion of
the Employment Term, such amounts to be paid in substantially equal
monthly installments and offset by any monthly payments actually
received by Executive from: (a) any disability plans or disability
insurance programs provided by Employer, and (b) any governmental
social security or workers compensation program.
As used in this Agreement, the term "retirement" shall mean
Executive's retirement in accordance with and pursuant to any generally
applicable retirement plan of Employer or in accordance with any
retirement arrangement established for Executive with his consent.
If termination occurs as a result of death, disability or
retirement, no additional compensation shall be payable to Executive
under this Agreement except as specifically provided herein.
Notwithstanding anything to the contrary contained herein, Executive
shall receive all compensation and other benefits to which he was
entitled under Section 4
10(c)g-3
<PAGE> 96
and the plans and programs provided therein, through the Termination
Date and, in addition, shall receive or continue to receive for the
remaining portion of the Employment Term all other benefits available
to him under any applicable group health, life, disability or similar
insurance program as in effect on the date of death, disability or
retirement.
If, following termination by reason of disability and prior to the
expiration of the then remaining balance of the Employment Term,
Executive becomes able to resume his duties, he shall be reinstated to
his Corporate Position or, if such position has been filled, to a
position as nearly comparable as possible from the date of
reinstatement and for the balance of the Employment Term, Executive
shall be obligated to perform all duties and responsibilities, and
entitled to receive all compensation and other benefits, as provided in
this Agreement.
(ii) CAUSE. Employer may terminate Executive's employment under
this Agreement for cause at any time, and thereafter Employer shall have no
further obligation under this Agreement. Notwithstanding anything to the
contrary contained herein, Executive shall receive all compensation and other
benefits in which he was vested or to which he was otherwise entitled under
Section 4 and the plans and programs provided therein, by reason of employment
through the Termination Date.
For purposes of this Agreement, "Cause" shall mean:
(a) A failure by Executive to substantially perform his duties
(other than failure resulting from incapacity) after a written demand
by the Board, which demand identifies, with reasonable specificity, the
manner in which the Board believes Executive has not substantially
performed, and Executive's failure to cure within a reasonable period
of time after his receipt of the notice;
(b) A criminal conviction of or plea of nolo contendere by
Executive for any act involving dishonesty, breach of trust or a
violation of the banking laws of the State of Wisconsin or the United
States;
(c) A criminal conviction of or plea of nolo contendere by
Executive for the commission of any felony;
(d) A breach of fiduciary duty by Executive involving personal
profit;
(e) A willful violation of any law, rule or order by Executive
(other than traffic violations or similar offenses); or
(f) Incompetence, personal dishonesty or material breach of any
provision of this Agreement or any willful misconduct by Executive.
For purposes of this subsection 5(ii), no act, or failure to act,
on Executive's part shall be deemed "willful" unless done, or omitted
to be done, by Executive not in good
10(c)g-4
<PAGE> 97
faith and without reasonable belief that the action or omission was in
the best interest of Employer.
(iii) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may voluntarily
terminate employment at any time by giving at least ninety (90) days' prior
written notice to Employer. In such event, Employer shall have no further
obligation hereunder, except that Executive shall receive all compensation and
other benefits in which he was vested or to which he was otherwise entitled
under Section 4 and the plans and programs provided therein, by reason of his
employment through the Termination Date.
(iv) TERMINATION BY EXECUTIVE AFTER CHANGE IN CONTROL.
(a) For purposes of this Agreement, a "change in control" shall
be deemed to have occurred if any "individual, entity or group" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities representing 25%
or more of the voting power of the securities of Employer or any of
Employer's affiliates or becomes the owner of all or substantially all
of the assets of Employer or any of Employer's affiliates or if the
shareholders of Employer or any affiliate of Employer approve a
reorganization, merger or consolidation of Employer or any affiliates
of Employer. "Change in control" shall not refer to or include: 1) any
transaction involving only entities affiliated directly or indirectly
with Employer; or 2) any transaction contemplated by the Agreement and
Plan of Merger between Pyramid Bancorp, Inc. and Merchants &
Manufacturers Bancorporation, Inc. dated March 9, 1999.
(b) Executive may, at any time within twelve (12) months
following a "change in control," terminate his employment under this
Agreement by giving at least ninety (90%) days' prior written notice to
Employer.
(v) TERMINATION BY EXECUTIVE "FOR CAUSE." Executive may terminate his
employment under this Agreement by giving at least ninety (90) days' prior
written notice to Employer at any time after the occurrence of any of the
following without Executive's express written consent:
(a) Executive is assigned to positions, duties or
responsibilities that are substantially less significant than the
positions, duties and responsibilities provided herein;
(b) Executive is removed from or Employer fails to reelect
Executive to his Corporate Position, except in connection with
termination of Executive's employment for cause, disability or
retirement, or in connection with suspension or termination by or
pursuant to regulatory action;
1O(c)g-5
<PAGE> 98
(c) Executive's Base Salary is reduced other than as the result
of a program applied on a proportionately equivalent basis to all
executives of Employer and its affiliates; or any other failure by
Employer to comply with Section 4(i);
(vi) SUSPENSION OR TERMINATION REQUIRED BY THE FDIC.
(a) If Executive is suspended and/or temporarily prohibited
from participating in the conduct of Employer's or any of Employer's
affiliates' affairs by a notice served under Section 8(e)(3), or
Section 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. S1818
(e)(3) and (g)(1)), respectively), Employer's obligations under the
Agreement shall be suspended as of the date of service of the notice
unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Employer shall: (1) pay Executive all of the
compensation withheld while its obligations under this Agreement were
suspended; and (2) reinstate any of its obligations which were
suspended.
(b) If Executive is removed and/or permanently prohibited from
participating in the conduct of Employer's or any of Employer's
affiliates' affairs by an order issued under Section 8(e)(4) or Section
8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. S1818(e)(4) and
(g)(1)), respectively, the obligations of Employer under the Agreement
shall terminate as of the effective date of the order, but earned or
otherwise vested rights of Executive to compensation and to any
benefits under Section 4 shall not be affected.
(c) If Employer or any of Employer's affiliates is in default
(as defined in Section 3(x)(1) of the Federal Deposit Insurance Act),
all obligations under the Agreement shall terminate as of the date of
default, but this Subsection 5(vi)(c) shall not affect any vested
rights of Executive, including the right to receive the compensation
and benefits set forth in Section 5(vii) or 5(viii) of this Agreement.
(d) All obligations under the Agreement may be terminated
except to the extent determined that continuation of the contract is
necessary to operation of Employer or any of its affiliates at the time
the Federal Deposit Insurance Corporation ('FDIC') enters into an
agreement to provide assistance to or on behalf of Employer or any of
Employer's affiliates under the authority contained in Section 13(c) of
the Federal Deposit Insurance Act; or when Employer or any of its
affiliates is determined by any appropriate bank regulatory agency to
be in an unsafe or unsound condition. Any rights of the parties that
have been already earned or otherwise vested, however, shall not be
affected by such action, including the right of the Executive to
receive the compensation and benefits set forth in Section 5(vii) or 5
(viii) of this Agreement.
(vii) BENEFITS UPON OTHER TERMINATION BY EMPLOYER OR UPON TERMINATION
BY EXECUTIVE FOLLOWING A "CHANGE IN CONTROL." If this Agreement is terminated
by Employer other than for death, disability or retirement under Section 5(i)
and other than for "cause" under Section 5(ii) or other than by regulatory
action under Section 5(vi)
10(c)g-6
<PAGE> 99
or if Executive terminates this Agreement following a "change in control"
pursuant to Section 5(iv)(b), then following the Termination Date Executive
shall be entitled to the benefits described in Section 5(viii).
(viii) BENEFITS UPON TERMINATION BY EXECUTIVE "FOR CAUSE." If this
Agreement is terminated by Executive pursuant to Section 5(v), then, following
the Termination Date:
(a) In lieu of any further salary payments, Executive shall
receive severance payments equal to the sum of the Base Salary in
effect on the Termination Date plus cash bonus for the year prior to
termination times the number of years of the remaining Employment Term,
payable in the amount and at the times provided in Sections 4(i) and
(ii). If termination follows a "change in control" under Section
5(iv)(b), Executive may elect to receive the payments specified in the
immediately preceding sentence in a lump sum without any discount,
provided that the amount of such severance payments may not exceed the
limitations established in Section 6.
(b) In addition to the retirement benefits to which Executive
is entitled under tax qualified retirement plans maintained by Employer
(hereinafter collectively referred to as "Plan"), Executive shall
receive as additional severance benefits a retirement benefit under the
Executive Employee Salary Continuation Agreement, which (except as
provided below) shall be determined in accordance with, and paid under
this Agreement in the form and at the times provided in, the Agreement.
Such benefits shall be determined as though Executive were fully vested
under the Plan and had accumulated (after termination of this
Agreement) the additional years of service and benefit credits under
the Plan that he would have received had he continued employment with
Employer for the balance of the Employment Term.
(c) In addition to other amounts payable to Executive under
this Section 5(viii), Executive shall be entitled to receive all other
benefits in which he was vested or to which he was otherwise entitled
under Section 4 and the plans and programs provided therein by reason
of employment through the Termination Date, together with the
continuation, without cost to Executive, of other benefits under
Section 4(iii) for the remaining unexpired Employment Term, all subject
to the limitations set forth in Section 6 below.
(ix) SUSPENSION BY EMPLOYER. Employer in its sole discretion shall have
the right to temporarily suspend Executive from participating in the conduct of
the Employer's or Employer's affiliates' affairs. If Executive is suspended or
temporarily prohibited from participating in the conduct of Employer's or
Employer's affiliates' business, Employer shall pay Executive all compensation
and provide all benefits pursuant to Section 4 of this Agreement during the
period of such suspension
6. LIMITATIONS ON CHANGE IN CONTROL COMPENSATION. In the event
severance benefits under Subsection 5(vii) or 5(viii), or any other payments or
benefits received or to be received by Executive from Employer (whether payable
pursuant to the terms of this
10(c)g-7
<PAGE> 100
Agreement, any other plan, agreement or arrangement with Employer or any
corporation ("Affiliate") affiliated with Employer within the meaning of Section
1504 of the Internal Revenue Code of 1986. as amended (the "Code"), constitute,
in the opinion of tax counsel selected by Employer's independent auditors and
acceptable to Executive, "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and the present value of such "parachute payments"
equals or exceeds three times the average of the annual compensation payable to
Executive by Employer (or an Affiliate) and includible in Executive's gross
income for federal income tax purposes for the five (5) calendar years preceding
the year in which a chance in ownership occurred ("Base Amount"), such Severance
Benefits shall be reduced to an amount the present value of which (when combined
with the present value of any other payments otherwise received or to be
received by Executive from Employer (or an Affiliate) that are deemed "parachute
payments") is equal to 2.99 times the Base Amount, notwithstanding any other
provision to the contrary in this Agreement. The Severance Benefits shall not be
reduced if (i) Executive shall have effectively waived his receipt or enjoyment
of any such payment or benefit which triggered the applicability of this Section
6, or (ii) in the opinion of tax counsel, the Severance Benefits (in their full
amount or as partially reduced, as the case may be) plus all other payments or
benefits which constitute "parachute payments" within the meaning of Section
280G(b)(2) of the Code are reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4) of the Code. and such
payments are deductible by Employer. The Base Amount shall include every type
and form of compensation includible in Executive's gross income in respect of
his employment by Employer (or an Affiliate), except to the extent otherwise
provided in temporary or final regulations promulgated under Section 280G(b) of
the Code. For purposes of this Section 6, a "change in ownership or control"
shall have the meaning set forth in Section 280G(b) of the Code and any
temporary or final regulations promulgated thereunder. The present value of any
non-cash benefit or any deferred cash payment shall be determined by Employer's
independent auditors in accordance with the principles of Section 280G of the
Code.
Executive shall have the right to request that Employer obtain a ruling
from the Internal Revenue Service ("Service") as to whether any or all payments
or benefits determined by such tax counsel are, in the view of the Service,
"parachute payments" under Section 280G. If a ruling is sought pursuant to
Executive's request, no Severance Benefits payable under this Agreement in
excess of the Section 280G limitation shall be made to Executive until after
fifteen (15) days from the date of such ruling; however, Severance Benefits
shall continue to be paid during this time up to the amount of that limitation.
For purposes of this Section 6, Executive and Employer agree to be bound by the
Service's ruling as to whether payments constitute "parachute payments" under
Section 280G. If the Service declines, for any reason, to provide the ruling
requested, the tax counsel's opinion provided with respect to what payments or
benefits constitute "parachute payments" shall control, and the period during
which the Severance Benefits may be deferred shall be extended to a date fifteen
(15) days from the date of the Service's notice indicating that no ruling will
be forthcoming
10(c)g-8
<PAGE> 101
In the event that Section 280G, or any successor statute, is repealed, this
Section 6 shall cease to be effective on the effective date of such repeal. The
parties to this Agreement recognize that final regulations under Section 280G of
the Code may affect the amounts that may be paid under this Agreement and agree
that, upon issuance of such final regulations, this Agreement may be modified as
in good faith deemed necessary in light of the provisions of such regulations to
achieve the purposes of this Agreement, and that consent to such modifications
shall not be unreasonably withheld.
7. GENERAL-PROVISIONS.
(i) SUCCESSORS; BINDING AGREEMENT.
(a) Employer will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to substantially all of the
business and/or assets of Employer ("Successor Organization") to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that Employer would have been required to perform if no such
succession had taken place. If such succession is the result of a "change
in control" as defined herein, such assumption shall specifically preserve
to Executive, for the then remaining term of this Agreement, the same
rights and remedies (recognizing them as being available and applicable as
the result of the "change in control" effectuating said succession)
provided under this Agreement upon a "change in control".
As used in this Agreement, Employer shall mean Grafton State Bank and
any successor to its business and/or assets, which becomes bound by the
terms and provisions of this Agreement by operation of this Agreement or by
law. Failure of Employer to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation from Employer in the same
amount and on the same terms as he would be entitled to under this
Agreement if he terminated his employment under Section 5(v). For purposes
of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Termination Date.
(b) No right or interest to or in any payments or benefits under this
Agreement shall be assignable or transferable in any respect by the
Executive, nor shall any such payment, right or interest be subject to
seizure, attachment or creditor's process for payment of any debts,
judgments, or obligations of Executive.
(c) Any rights and obligations of Employer under this Agreement may be
assigned or transferred by Employer to any of its affiliates prior to a
change in control as defined in this Agreement.
(d) This Agreement shall be binding upon and inure to the benefit of and
be enforceable by Executive and his heirs, beneficiaries and personal
10(c)g-9
<PAGE> 102
representatives and Employer and any successor organization or assignee of
Employer.
(ii) NON-COMPETITION/CONFIDENTIALITY PROVISIONS. Executive acknowledges
that the development of personal contacts and relationships is an essential
element of Employer's and Employer's affiliates' business, that Employer has
invested considerable time and money in his development of such contacts and
relationships, that Employer and its affiliates could suffer irreparable harm if
he were to leave Employer's employment and solicit the business of customers of
Employer or Employer's affiliates and that it is reasonable to protect Employer
a-against competitive activities by Executive. Executive covenants and agrees,
in recognition of the foregoing and in consideration of the mutual promises
contained herein, that in the event of a voluntary termination of employment by
Executive pursuant to Section 5(iii), Executive shall not accept employment with
any Significant Competitor of Employer or of any of Employer's affiliates for a
period of twelve (12) months following such termination. In the event Executive
is terminated by Employer, under Section 5(vii) other than following a change in
control, Executive shall not accept employment with any Significant Competitor
of Employer or of any of Employer's affiliates for the lesser of (a) the
remaining term of the agreement. or (b) a period of twelve (12) months following
such termination. For purposes of this Agreement, the term "Significant
Competitor" means any financial institution including, not limited to, any
commercial bank-, savings bank, savings and loan association, credit union, or
mortgage banking corporation which, at the time of termination of Executive's
employment with or during, the period of this covenant not to compete, has a
home, branch or other office within Ozaukee County or within a three (3) mile
radius of any office operated or maintained by Employer or any of Employer's
affiliates prior to a change in control as defined in this Agreement.
Executive agrees that the non-competition provisions set forth herein
are necessary for the protection of Employer and its affiliates and are
reasonably limited as to (a) the scope of activities affected, (b) their
duration and geographic scope, and (c) their effect on Executive and the public.
In the event Executive violates the non-competition provisions set forth herein,
Employer shall be entitled, in addition to its other legal remedies, to enjoin
the employment of Executive with any Significant Competitor for the period set
forth herein. If Executive violates this covenant and Employer brings legal
action for injunctive or other relief, Employer shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the restrictive covenant. Accordingly, the covenant shall be deemed to
have the duration specified herein, computed from the date relief is granted,
but. reduced by any period between commencement of the period and the date of
the first violation.
Executive acknowledges that as a result of his employment with Employer
or its affiliates Executive has access to confidential information concerning
Employer's business, customers and services. Executive agrees that during the
Employment Term and for a period of one (1) year following termination of
employment, he will not, directly or indirectly, use, disclose or divulge to any
person, agency, firm, corporation or other entity any confidential or
proprietary information, including, without limitation, customer lists, reports,
files, records or information of any kind pertaining to the business of Employer
or any of its affiliates which Executive
10(c)g-10
<PAGE> 103
acquires or has access to during the Employment Term. Executive agrees that if
he violates the covenants under this section, Employer shall be entitled to an
accounting and repayments of all profits, compensation, commissions and other
remuneration or benefits which the Executive has realized or may realize as the
result of or in connection with any such violation. Executive further agrees
that money damages may be difficult to ascertain in case of a breach of this
covenant, and Executive therefore agrees that Employer or its affiliates shall
be entitled to injunctive relief in addition to any other remedy to which
Employer or its affiliates may be entitled.
(iii) NOTICE. All notices and other communications provided for in this
Agreement shall be in writing and shall be deemed duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Employer:
Grafton State Bank
101 Falls Road
Grafton, WI 53024
Attention: Board of Directors
If to the Executive:
Thomas J. Sheehan
1964 W. Acorn Drive
Grafton, WI 53024
or to such other address as either party may have furnished to the other in
writing accordance herewith.
(iv) EXPENSES. If legal proceedings are necessary to enforce or
interpret this Agreement, or to recover damages for breach, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
disbursements of such proceedings, in addition to any other relief to which such
prevailing party may be entitled. Notwithstanding, the foregoing, in the event
of legal proceedings to enforce or interpret this Agreement following a change
in control, Executive shall be entitled to recover from Employer, (a) reasonable
attorneys, fees, costs and disbursements if Executive is the prevailing party;
or (b) reasonable attorneys' fees, costs and disbursements of up to $7,500
incurred in such proceedings regardless of whether Executive is the prevailing
party. Recovery of attorneys' fees and costs following a "chance in control"
shall be in addition to any other relief to which Executive is entitled.
(v) WITHHOLDING. Employer shall be entitled to withhold from amounts to
be paid to Executive under this Agreement any federal, state, or local
withholding or other taxes or charges which it is from time to time required to
withhold. Employer shall be entitled to rely on an opinion of counsel as to
the amount or requirement of any such withholding.
10(c)g-11
<PAGE> 104
(vi) MISCELLANEOUS. No provision of this Agreement may be amended,
waived or discharged unless such Amendment, waiver or discharge is agreed to in
writing and duly executed by Executive and Employer or its successor in
interest. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, whether written or oral, between the parties with respect
thereto; no agreements or representations, oral or otherwise, express or
implied, have been made by either party with respect to the subject matter
hereof. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Wisconsin.
(vii) VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(viii) COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which together will constitute one and the same instrument.
(ix) HEADINGS. Headings contained in this Agreement are for reference
only and shall not affect the meaning or interpretation of any, provision of
this Agreement.
(x) EFFECTIVE DATE. The effective date of this Agreement shall be the
date indicated in the first paragraph of this Agreement notwithstanding, the
actual date of execution by any party.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
of the date first above written.
EXECUTIVE
/s/ THOMAS J. SHEEHAN (SEAL)
- -----------------------
THOMAS J. SHEEHAN
GRAFTON STATE BANK
By: /s/ Jerome Sarnowski BY: /s/ James Kacmarcik
------------------------ ------------------------
Title: Director By: Director
3/31/99 3/31/99
10(c)g-12
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF REGISTRANT
<PAGE> 2
EXHIBIT 21
LIST OF SUBSIDIARIES OF REGISTRANT
NAME STATE OF INCORPORATION
- ---- ----------------------
Lincoln State Bank Wisconsin
Lincoln Community Bank Wisconsin
Franklin State Bank Wisconsin
M&M Services, Inc. Wisconsin
Achieve Mortgage Corp. Wisconsin
Lincoln Neighborhood Wisconsin
Redevelopment Corporation
M&M Lincoln Investment Corp. Nevada
Lincoln Investment Management Corp, Nevada
Merchants Merger Corp. Wisconsin
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF ERNST & YOUNG LLP AS TO THE
FINANCIAL STATEMENTS OF REGISTRANT
<PAGE> 2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the Proxy
Statement/Prospectus of Merchants and Manufacturer's Bancorporation, Inc. that
is made a part of the Registration Statement (Form S-4) of Merchants and
Manufacturer's Bancorporation, Inc. and to the use of our report dated February
26, 1999, incorporated by reference in the Company's 1998 Annual Report to
Shareholders on Form 1O-K, incorporated by reference in the above noted Form
S-4 filed on or about August 31, 1999 for the registration of shares of its
common stock in connection with its merger with Pyramid Bancorp., Inc.
/s/ ERNST & YOUNG LLP
Milwaukee, Wisconsin
August 31, 1999
<PAGE> 1
EXHIBIT 23(c)
CONSENT OF VIRCHOW, KRAUSE & CO. LLP AS TO
FINANCIAL STATEMENTS OF PYRAMID BANCORP., INC.
<PAGE> 2
[VIRCHOW KRAUSE & COMPANY, LLP LETTERHEAD]
EXHIBIT 23(c)
INDEPENDENT AUDITOR'S CONSENT
We have issued our report dated February 3, 1999, accompanying the consolidated
financial statements of Pyramid Bancorp., Inc. and Subsidiary contained in the
Registration Statement on Form S-4 of Merchants and Manufacturers
Bancorporation, Inc. and Proxy Statement/Prospectus contained therein.
We consent to the use of the aforementioned report in the Registration Statement
and Proxy Statement/Prospectus filed on or about August 31, 1999, and to the
use of our name as it appears under the caption "Experts."
/s/ Virchow, Krause & Company LLP
VIRCHOW, KRAUSE & COMPANY, LLP
Brookfield, Wisconsin
August 31, 1999
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF MARSHALL FINANCIAL CONSULTING LLC,
FINANCIAL ADVISER TO PYRAMID
<PAGE> 2
EXHIBIT 23(d)
CONSENT OF INVESTMENT BANKING FIRM
We hereby consent to the use of our firm's name in the Registration Statement on
Form S-4 as filed with the Securities & Exchange Commission and the
Prospectus/Proxy Statement of Merchants & Manufacturers Corporation, Inc.
contained therein relating to the Merger, as defined therein, and consent to the
references to our fairness opinion in such Registration Statement and
Prospectus/Proxy Statement. We further consent to filing of the aforementioned
fairness opinion as an exhibit to the Registration Statement and
Prospectus/Proxy Statement. Our fairness opinion is to be dated as of even date
with Prospectus/Proxy Statement when, as, and if declared effective, provided
that the conditions at the time warrant the giving of such fairness opinion.
/s/ Marshall Financial Consulting LLC
MARSHALL FINANCIAL CONSULTING LLC
Dated 8/31, 1999
<PAGE> 1
EXHIBIT 23(e)
CONSENT OF MICHAEL BEST & FRIEDRICH LLC
<PAGE> 2
EXHIBIT 23(e)
CONSENT
Michael Best & Friedrich LLP, hereby consents to the use of its name under
the heading "Legal Opinions" in the Registration Statement filed on Form S-4 by
Merchants and Manufacturers Bancorporation, Inc., with respect to the common
stock of Merchants and Manufacturer's Bancorporation, Inc. to be issued to the
shareholders of Pyramid Bancorp, Inc. in a transaction described in such
Registration Statement.
August 31, 1999
/s/ MICHAEL BEST & FRIEDRICH LLP
---------------------------------
MICHAEL BEST & FRIEDRICH LLP
<PAGE> 1
EXHIBIT 23 (f)
RULE 438 CONSENT OF THREE DIRECTORS OF PYRAMID
WHO WILL BECOME DIRECTORS OF REGISTRANT UPON
COMPLETION OF THE MERGER
<PAGE> 2
EXHIBIT 23(f)
DIRECTOR DESIGNEE CONSENT
-------------------------
The undersigned hereby consents to being named in this Registration
Statement on Form S-4 of Merchants and Manufacturers Bancorporation, Inc.
(the "Registrant") as a designee to serve as a director of the Registrant
contingent upon the acquisition by the Registrant of all of the capital stock of
Pyramid Bancorp., Inc. Grafton, Wisconsin ("Pyramid") pursuant to the terms of
the amended Agreement and Plan of Merger as of March 9, 1999, between Registrant
and Pyramid.
IN WITNESS WHEREOF, the undersigned has executed this consent in his own
hand on this 10 day of August, 1999.
/s/ Thomas J. Sheehan
-------------------------------
Thomas J. Sheehan
23(f)-1
<PAGE> 3
EXHIBIT 23(f)
DIRECTOR DESIGNEE CONSENT
-------------------------
The undersigned hereby consents to being named in this Registration Statement on
Form S-4 of Merchants and Manufacturers Bancorporation, Inc. (the
"Registrant") as a designee to serve as a director of the Registrant contingent
upon the acquisition by the Registrant of all of the capital stock of Pyramid
Bancorp., Inc. Grafton, Wisconsin ("Pyramid") pursuant to the terms of the
amended Agreement and Plan of Merger as of March 9, 1999, between Registrant and
Pyramid.
IN WITNESS WHEREOF, the undersigned has executed this consent in his own
hand on this 10th day of August, 1999.
/s/ Jerome T. Sarnowski
-----------------------------
Jerome T. Sarnowski
23(f)-2
<PAGE> 4
EXHIBIT 23(f)
DIRECTOR DESIGNEE CONSENT
-------------------------
The undersigned hereby consents to being named in this Registration Statement on
Form S-4 of Merchants and Manufacturers Bancorporation, Inc. (the
"Registrant") as a designee to serve as a director of the Registrant contingent
upon the acquisition by the Registrant of all of the capital stock of Pyramid
Bancorp. Inc. Grafton, Wisconsin ("Pyramid") pursuant to the terms of the
amended Agreement and Plan of Merger as of March 9, 1999, between Registrant and
Pyramid.
IN WITNESS WHEREOF, the undersigned has executed this consent in his own
hand on this 11 day of August, 1999.
/s/ James Kacmarcik
-------------------------------
James Kacmarcik
23(f)-3
<PAGE> 1
EXHIBIT 24
POWERS OF ATTORNEY OF DIRECTORS AND CERTAIN
OFFICERS OF REGISTRANT
<PAGE> 2
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Merchants
and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him and
in his name, place, and stead in any and all capacities, to sign such Form S-4
Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full power
and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as
of the 25 day of June, 1999.
/s/ Thomas Gapinski
-----------------------------
Thomas Gapinski,
Director
24-1
<PAGE> 3
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Merchants
and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him and
in his name, place, and stead in any and all capacities, to sign such Form S-4
Registration Statement and any and all amendments thereto (including post-
effective amendments), with power where appropriate to affix the corporate seal
of the corporation thereto and to attest such seal, and to file such Form S-4
and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full power
and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as
of the 25 day of June, 1999.
/s/ Casimir S. Janiszewski
----------------------------------
Casimir S. Janiszewski,
Director
24-2
<PAGE> 4
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Merchants
and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him and
in his name, place, and stead in any and all capacities, to sign such Form S-4
Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full power
and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as
of the 28th day of June, 1999.
/s/ Conrad C. Kaminski
------------------------------
Conrad Kaminski,
Director
24-3
<PAGE> 5
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Merchants
and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him and
in his name, place, and stead in any and all capacities, to sign such Form S-4
Registration Statement and any and all amendments thereto (including post-
effective amendments), with power where appropriate to affix the corporate seal
of the corporation thereto and to attest such seal, and to file such Form S-4
and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full power
and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as
of the 25 day of June, 1999,
/s/ James Sass
-------------------------
James Sass,
Director
24-4
<PAGE> 6
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Merchants
and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him and
in his name, place, and stead in any and all capacities, to sign such Form S-4
Registration Statement and any and all amendments thereto (including post-
effective amendments), with power where appropriate to affix the corporate seal
of the corporation thereto and to attest such seal, and to file such Form S-4
and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full power
and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as
of the 25 day of June, 1999.
/s/ Duane P. Cherek
------------------------------
Duane Cherek,
Director
24-5
<PAGE> 7
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Merchants and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place, and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 28 day of June, 1999.
/s/ James Bomberg
------------------------------
James Bomberg,
Director
24-6
<PAGE> 8
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Merchants and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place, and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 25 day of June, 1999.
/s/ J. Michael Bartels
-------------------------------
J. Michael Bartels,
Director
24-7
<PAGE> 9
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Merchants and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place, and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including post-
effective amendments), with power where appropriate to affix the corporate seal
of the corporation thereto and to attest such seal, and to file such Form S-4
and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 28 day of June, 1999.
/s/ John Krawczyk
------------------------------------
John Krawczyk,
Director
24-8
<PAGE> 10
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Merchants and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place, and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including post-
effective amendments), with power where appropriate to affix the corporate seal
of the corporation thereto and to attest such seal, and to file such Form S-4
and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 25th day of June, 1999.
/s/ Robert Donaj
--------------------------------
Robert Donaj,
Director
24-9
<PAGE> 11
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Merchants and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place, and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including post-
effective amendments), with power where appropriate to affix the corporate seal
of the corporation thereto and to attest such seal, and to file such Form S-4
and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 28 day of June, 1999.
/s/ David Kaczynski
------------------------------
David Kaczynski,
Director
24-10
<PAGE> 12
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Merchants and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place, and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including
post-effective amendments), with power where appropriate to affix the corporate
seal of the corporation thereto and to attest such seal, and to file such Form
S-4 and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 25 day of June, 1999.
/s/ Longin Prazynski
---------------------------
Longin Prazynski,
Director
24-11
<PAGE> 13
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Merchants and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place, and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including post-
effective amendments), with power where appropriate to affix the corporate seal
of the corporation thereto and to attest such seal, and to file such Form S-4
and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 25th day of June, 1999.
/s/ Keith C. Winters
----------------------------
Keith Winters,
Director
24-12
<PAGE> 14
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Merchants and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation"), hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sign on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place, and stead in any and all capacities, to sign such Form
S-4 Registration Statement and any and all amendments thereto (including post
effective amendments), with power where appropriate to affix the corporate seal
of the corporation thereto and to attest such seal, and to file such Form S-4
and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including POST-EFFECTIVE
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of the 25 day of June, 1999.
/s/ Gervaise Rose
---------------------------------
Gervaise Rose,
Director
24-13
<PAGE> 15
DIRECTOR'S POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Merchants; and Manufacturers Bancorporation, Inc., a Wisconsin corporation (the
"Corporation'% hereby constitutes and appoints Michael J. Murry his true and
lawful attorney-in-fact and agent to sip on his behalf a registration statement
on Form S-4 in connection with the issuance of shares of common stock to
shareholders of Pyramid Bancorp., Inc.
Said attorney-in-fact and agent shall have full power to act for him
and in his name, place, and stead in any and all capacities, to sign such Form
S4 Registration Statement and any and all amendments thereto (including post
effective amendments), with power where appropriate to affix the corporate seal
of the corporation thereto and to attest such seal, and to file such Form S-4
and each amendment (including post-effective amendments) so signed, with all
exhibits thereto, and any and all documents in connection therewith, with the
SEC, and to appear before the SEC in connection with any matter relating to such
Form S-4 and to any and all amendments thereto (including post-effective
amendments).
The undersigned hereby grants such attorney-in-fact and agent full
power and authority to do and perform any and all acts and things requisite and
necessary to be done as he might or could do in person, and hereby ratifies and
confirms all that such attorney-in-fact and agent may lawfully do or cause to be
done by virtue hereof
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney as of the 22nd day of July, 1999.
/s/ Nicholas Logarakis
-------------------------------
Nicholas Logarakis,
Director
24-14
