<PAGE>
As filed with the Securities and Exchange Commission on November 19, 1998.
Registration Statement No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
ASSOCIATED BANC-CORP
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
WISCONSIN 6711 39-1098068
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
1200 HANSEN ROAD
P.O. BOX 13307
GREEN BAY, WI 54307-3307
(920) 491-7000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
HARRY B. CONLON
ASSOCIATED BANC-CORP
1200 HANSEN ROAD
P.O. BOX 13307
GREEN BAY, WI 54307-3307
(920) 491-7000
(Name, Address, Including Zip Code and Telephone Number,
Including Area Code, of Agent for Service)
with copies to:
JAMES M. BEDORE, ESQ. JAMES C. MELVILLE, ESQ.
REINHART, BOERNER, VAN DEUREN, KAPLAN, STRANGIS AND KAPLAN, P.A.
NORRIS & RIESELBACH, S.C. 5500 NORWEST CENTER
1000 NORTH WATER STREET 90 SOUTH SEVENTH STREET
P.O. BOX 92900 MINNEAPOLIS, MN 55402-4137
MILWAUKEE, WI 53202-0900 (612) 375-1138
(414) 298-1000
Approximate date of commencement of proposed sale of the securities to the
public: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
================================================================================
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Title of Each Class Proposed Maximum Proposed Maximum
Of Securities To Amount To Offering Aggregate Amount Of
Be Registered Be Registered(1) Price Per Unit Offering Price Registration Fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01
par value per share 800,000 Not Applicable Not Applicable $2,549(2)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
(1) Represents the maximum number of shares of the Common Stock of the
Registrant that will be issued under the Agreement and Plan of Merger in
exchange for all outstanding shares of Class A Common Stock and Class B
Common Stock of Windsor Bancshares, Inc. This number is subject to
adjustment in the event of a change in the number of outstanding shares of
Common Stock of the Registrant. Accordingly, this Registration Statement
covers any additional shares of the Common Stock of the Registrant which may
be required to be issued by reason of such adjustments. Subject to increase
in accordance with Rule 416(a) and (b) under the Securities Act of 1933, as
amended, pursuant to stock splits or stock dividends.
(2) Pursuant to Rule 457(f)(2), the registration fee was computed on the basis
of $9,168,766, the book value of the Class A Common Stock and Class B Common
Stock of Windsor Bancshares, Inc. to be exchanged in the Merger as of
September 30, 1998, 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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
2
<PAGE>
WINDSOR BANCSHARES, INC.
740 MARQUETTE AVENUE
MINNEAPOLIS, MINNESOTA 55402
December 1, 1998
Dear Fellow Shareholder:
You are cordially invited to attend our special meeting of shareholders to
be held on December 30, 1998 at 10:00 a.m. (local time) at the offices of
Kaplan, Strangis and Kaplan, P.A., 5500 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota. At the special meeting, you will vote on a proposal to
approve an agreement for the merger of Associated Banc-Corp and Windsor
Bancshares.
Subject to receipt of regulatory approval, approval by the shareholders of
Windsor Bancshares and satisfaction of other conditions, the merger agreement
provides that Windsor Bancshares will combine its business and operations with
those of Associated through a statutory merger. In the merger, Associated will
issue up to 800,000 shares of Associated common stock to the shareholders of
Windsor Bancshares. The shares of Associated common stock issuable in the
merger will be allocated among the shareholders of Windsor Bancshares based upon
a formula which will take into account the number of shares you hold, whether
you hold shares of Class A common stock or Class B common stock, the price at
which your shares were originally purchased from Windsor Bancshares, how long
your shares have been outstanding and the market price of the Associated common
stock. The accompanying proxy statement/prospectus contains a detailed
description of this formula for the exchange of shares of Associated common
stock for shares of Windsor Bancshares common stock in the merger.
Associated common stock trades on the Nasdaq National Market. The shares
of Associated common stock to be issued in the merger will offer greater
liquidity than that of the shares of Windsor Bancshares common stock.
The accompanying Proxy Statement/Prospectus describes the merger in greater
detail. We encourage you to read it carefully.
The Board of Directors of Windsor Bancshares has determined that the merger
is in the best interests of Windsor Bancshares and its shareholders.
Accordingly, the Board has by unanimous vote approved the merger agreement and
the merger and recommends that shareholders vote in favor of the merger
agreement.
Your participation in the special meeting, in person or by proxy, is
especially important because the items to be voted on are very important to
Windsor Bancshares and its shareholders. Whether or not you plan to attend the
special meeting, we urge you to complete, date and sign the enclosed proxy card
and return it promptly in the enclosed postage-paid envelope to ensure that your
shares will be represented at the special meeting. You may revoke your proxy at
any time before it is voted.
<PAGE>
On behalf of the Board of Directors, we thank you for your support and urge
you to vote "for" the approval of the merger agreement.
Very truly yours,
/s/ Thomas H. Healey
Thomas H. Healey,
Chairman of the
Board of Directors
/s/ Samuel L. Kaplan
Samuel L. Kaplan
President
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED THE MERGER DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS
OR THE ASSOCIATED COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER, NOR
HAVE THEY DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Proxy Statement/Prospectus is dated December 1, 1998 and
is first being mailed to shareholders on or about December 1, 1998.
2
<PAGE>
WINDSOR BANCSHARES, INC.
740 MARQUETTE AVENUE
MINNEAPOLIS, MINNESOTA 55402
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 30, 1998
TO THE SHAREHOLDERS OF WINDSOR BANCSHARES, INC.
Notice is hereby given that a Special Meeting of Shareholders (including
any adjournments or postponements thereof, the "Special Meeting") of holders of
the Class A Common Stock, $.01 par value per share (the "Class A Common Stock"),
and of holders of the Class B Common Stock, $.01 par value per share (the "Class
B Common Stock" and together with the Class A Common Stock, the "Company Common
Stock"), of Windsor Bancshares, Inc., a Minnesota corporation (the "Company"),
will be held at the offices of Kaplan, Strangis and Kaplan, P.A., 5500 Norwest
Center, 90 South Seventh Street, Minneapolis, Minnesota, on December 30, 1998 at
10:00 a.m. (local time). The Proxy Statement/Prospectus for the Special Meeting
is attached and a Proxy Card is enclosed.
The Special Meeting is for the purpose of considering and acting upon the
following proposals:
1. To approve the Agreement and Plan of Merger dated as of October 1,
1998, between Associated Banc-Corp ("Associated") and the Company (the
"Merger Agreement") providing for the merger of the Company with and
into Associated (the "Merger") (a copy of the Merger Agreement is
attached as Exhibit A to the Proxy Statement/Prospectus following this
notice).
2. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
THE DIRECTORS OF THE COMPANY HAVE UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMEND THAT THE SHAREHOLDERS APPROVE THE MERGER AGREEMENT.
Only holders of record of Company Common Stock at the close of business on
November 25, 1998, are entitled to notice of, and to vote at, the Special
Meeting. The affirmative vote of the holders of a majority of the voting power
of the outstanding shares of (a) the Class A Common Stock and the Class B Common
Stock, voting together as a single class, (b) the Class A Common Stock, voting
alone as a class, and (c) the Class B Common Stock, voting alone as a class, is
required to approve the Merger Agreement. Each share of the Class A Common
Stock is entitled to one vote and each share of Class B Common Stock is entitled
to two votes. Shareholders of Associated are not required to approve the Merger
Agreement and no further corporate authorization by Associated is required to
consummate the Merger. Holders of Company Common Stock who do not vote their
shares in favor of the Merger Agreement and who strictly comply with Sections
302A.471 and 302A.473 of the Minnesota Business Corporation Act (the "MBCA")
have the right to dissent from the Merger Agreement and make written demand for
payment of the "fair value" of their shares ("Dissenting Shares"). For a
description of the rights of holders of Dissenting Shares, see Sections 302A.471
and 302A.473 of
<PAGE>
the MBCA, a copy of which is included as Exhibit B to the accompanying Proxy
Statement/Prospectus. In addition, the description of the procedures to be
followed in order to obtain payment for Dissenting Shares is set forth under the
caption "The Merger - Dissenters' Rights" in the Proxy Statement/Prospectus.
It is very important that your shares be represented at the Special
Meeting. You are urged to complete and sign the accompanying Proxy Card, which
is solicited by the Board of Directors of the Company, and mail it promptly in
the enclosed envelope. All Proxies are important, so please complete each Proxy
Card sent to you and return it in the envelope provided. Your Proxy will not be
used if you attend and vote at the Special Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Donald Pederson
-------------------
Donald Pederson
Secretary
Minneapolis, Minnesota
December 1, 1998
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK
CERTIFICATES.
2
<PAGE>
WINDSOR BANCSHARES, INC.
AND
ASSOCIATED BANC-CORP
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE MERGER................................... 1
SUMMARY.................................................................. 3
RISK FACTORS............................................................. 7
SELECTED FINANCIAL DATA OF ASSOCIATED BANC-CORP
AND WINDSOR BANCSHARES................................................... 9
PENDING ACQUISITION...................................................... 10
COMPARATIVE STOCK PRICES AND DIVIDENDS................................... 11
Associated Common Stock............................................. 11
The Company Common Stock............................................ 11
COMPARATIVE UNAUDITED PER SHARE DATA..................................... 12
INTRODUCTION............................................................. 14
ASSOCIATED BANC-CORP..................................................... 14
THE SPECIAL MEETING...................................................... 15
Matters to Be Considered at the Special Meeting..................... 15
Required Vote....................................................... 15
Voting of Proxies................................................... 15
Revocability of Proxies............................................. 15
Record Date; Stock Entitled to Vote; Quorum......................... 15
Solicitation of Proxies............................................. 16
THE MERGER............................................................... 16
Background of the Merger............................................ 16
Reasons for the Merger.............................................. 18
Recommendations of the Board of Directors of the Company............ 20
Merger Consideration................................................ 20
Conversion of Shares; Procedures for Exchange of Certificates;
Fractional Shares................................................... 22
Regulatory Approvals Required....................................... 24
The Effective Time.................................................. 26
Description of Associated Common Stock Issuable in the Merger....... 26
Comparison of Shareholder Rights.................................... 27
Authorized Capital Stock....................................... 27
Appraisal Rights and Dissenters' Rights........................ 28
i
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PAGE
----
Required Vote.................................................... 28
Classified Board of Directors.................................... 28
Removal of Directors............................................. 29
Newly Created Directorships and Vacancies
on the Board of Directors........................................ 29
Certain Business Combinations.................................... 29
Advance Notice of Proposals to Be Brought
at the Annual Meeting............................................ 30
Advance Notice of Nominations of Directors....................... 30
Call of Shareholders' Meetings................................... 30
Shareholder Action Without a Meeting............................. 31
Dividends; Stock Repurchases..................................... 31
Indemnification of Directors, Officers and Employees............. 31
Limitation of Personal Liability of Directors.................... 32
Resale of Associated Common Stock Issued Pursuant to the Merger....... 32
Pre-Merger Dividend Policy............................................ 32
Post-Merger Dividend Policy........................................... 33
Conduct of Business Pending the Merger................................ 33
Certain Material Federal Income Tax Consequences...................... 33
Anticipated Accounting Treatment...................................... 35
Dissenters' Rights.................................................... 36
Interests of Certain Persons in the Merger............................ 39
Other Related Party Transactions...................................... 39
Management After the Merger................................................ 39
CERTAIN PROVISIONS OF THE MERGER AGREEMENT................................. 39
The Merger............................................................ 39
Representations and Warranties........................................ 40
Certain Covenants..................................................... 41
No Solicitation of Transactions....................................... 43
Conditions to Consummation of the Merger.............................. 43
Termination........................................................... 45
Termination Fee....................................................... 46
Amendment and Waiver.................................................. 47
Expenses.............................................................. 47
CERTAIN INFORMATION CONCERNING ASSOCIATED.................................. 47
CERTAIN INFORMATION CONCERNING THE COMPANY................................. 49
Principal Stockholders of the Company................................. 49
EXPERTS.................................................................... 51
LEGAL OPINIONS............................................................. 51
FUTURE SHAREHOLDER PROPOSALS............................................... 51
WHERE CAN YOU FIND MORE INFORMATION........................................ 52
ii
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<CAPTION>
PAGE
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<S> <C> <C>
Exhibit A: Agreement and Plan of Merger between Associated Banc-Corp and
Windsor Bancshares, Inc. dated as of October 1, 1998....................... A-1
Exhibit B: Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act........ B-1
Exhibit C: Windsor Bancshares, Inc. and Subsidiary Financial Statements and
Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................. C-1
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE? HOW WILL I BENEFIT?
A: We believe you will benefit from the merger because the potential for the
combined company exceeds, in our opinion, what either company could
accomplish individually.
We believe the merger will increase the financial strength and resources
of Windsor Bancshares and enable Associated to increase its presence and
heighten its visibility in Minnesota. We believe that you will benefit as
a result of the greater liquidity, marketability and dividend paying
capacity of the Associated common stock which you will receive in the
merger.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign, date and
return it as soon as possible. If you sign and send in your proxy and do
not indicate how you want to vote, your proxy will be voted in favor of
the merger. If you do not return your proxy or if you do not vote or you
abstain at the meeting, it will have the effect of a vote not to approve
the merger agreement.
You may attend the special meeting and vote your shares in person, rather
than completing and returning your proxy card. If you do complete and
return your proxy card, you may revoke it at any time up to and including
the day of the special meeting by following the directions on page 15.
PLEASE REMEMBER THAT THE REQUIRED VOTE OF SHAREHOLDERS IS BASED ON THE
TOTAL NUMBER OF OUTSTANDING SHARES, AND NOT UPON THE NUMBER OF SHARES
WHICH ARE ACTUALLY VOTED.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A. No. After the merger is completed, we will send you instructions on how to
receive the merger consideration in exchange for your shares of Windsor
Bancshares common stock.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: In the merger, Associated will issue up to 800,000 shares of Associated
common stock to the shareholders of Windsor Bancshares. The shares of
Associated common stock issuable in the merger will be allocated among the
shareholders of Windsor Bancshares based upon a formula which will take
into account the number of shares you hold, whether you hold shares of
Class A common stock or Class B common stock, the price at which your
shares were originally purchased from Windsor Bancshares, how long your
shares have been outstanding and the market price of the Associated common
stock. To review a detailed description of this formula, see pages 20 to
22.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A. The merger agreement prohibits Windsor Bancshares from declaring or paying
any dividends. After the merger, we presently anticipate that Associated
will pay dividends at the current quarterly rate of $0.29 per share.
However, the directors of Associated will use their discretion to decide
whether to declare dividends and the amount of any dividends.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as possible. In
addition to shareholder approvals, we must obtain regulatory approvals. We
expect the
<PAGE>
merger to be completed shortly after the special meeting.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO ME?
A. The merger will be tax-free for federal income tax purposes. To review the
tax consequences to shareholders in greater detail, see pages 33 to 35.
Q: WHO CAN I CONTACT IF I HAVE MORE QUESTIONS ABOUT THE MERGER?
A: Windsor Bancshares, Inc.
c/o Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402-4137
Attention: Samuel L. Kaplan, Esq.
Phone Number: (612) 375-1138
Q: WHO CAN I CONTACT IF I WOULD LIKE ADDITIONAL COPIES OF THE PROXY
STATEMENT/PROSPECTUS?
A: Associated Banc-Corp
1200 Hansen Road
P.O. Box 13307
Green Bay, Wisconsin 54307-3307
Attention: Brian R. Bodager, Esq.
Phone Number: (920) 491-7000
2
<PAGE>
SUMMARY
This summary highlights selected information from this document and
does not contain all the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the documents to
which we have referred you. See "Where You Can Find More Information" (pages 52
and 53). We have included page references parenthetically to direct you to a
more complete description of the topics presented in this Summary.
THE COMPANIES (PAGES 47-51)
Associated Banc-Corp
1200 Hansen Road
P.O. Box 13307
Green Bay, WI 54307-3307
(920) 491-7000
Associated Banc-Corp is a diversified multi-bank holding company headquartered
in Green Bay, Wisconsin. At September 30, 1998, Associated had $10.6 billion in
assets with more than 3,672 employees. Associated currently has over 215 banking
locations in Wisconsin and Illinois. Associated offers a variety of financial
products and services to complement its traditional line of banking products.
WINDSOR BANCSHARES, INC.
740 Marquette Avenue
Minneapolis, MN 55402
(612) 338-2150
Windsor Bancshares, Inc. is a one-bank holding company which owns 100% of the
stock of Bank Windsor, a state banking association. At September 30, 1998,
Windsor Bancshares had assets of $190.9 million. Bank Windsor has offices in
Minneapolis, Nerstrand, Sleepy Eye and Chisholm, Minnesota.
THE SPECIAL MEETING (PAGES 15-16)
The special meeting of shareholders will be held at the offices of Kaplan,
Strangis and Kaplan, P.A., 5500 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota, at 10:00 a.m. on December 30, 1998. At the special
meeting, shareholders of Windsor Bancshares will be asked to approve the merger
agreement.
RECOMMENDATION TO SHAREHOLDERS
(PAGE 20)
The Board of Directors of Windsor Bancshares believes the merger is fair to you
and in your best interest and unanimously recommends that you vote "for"
approving the merger agreement.
RECORD DATE; VOTING POWER (PAGES 15-16)
You are entitled to vote at the special meeting if you owned shares on November
25, 1998, the Record Date. Each shareholder is entitled to one vote for each
share of Class A common stock and two votes for each share of Class B common
stock.
On the Record Date, there were outstanding 3,190,000 shares of Class A common
stock and 3,150,000 shares of Class B common stock.
VOTE REQUIRED (PAGE 15)
Approval of the merger agreement will require the affirmative vote of a majority
of the voting power of:
. the Class A common stock and the Class B common stock, voting together as a
single class;
. the Class A common stock, voting alone as a class; and
. the Class B common stock, voting alone as a class.
Each share of Class A common stock will be entitled to one vote at the special
meeting and each share of Class B common stock will be entitled to two votes at
the special meeting.
3
<PAGE>
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS
(PAGES 49-51)
At the close of business on the Record Date, directors and executive officers of
Windsor Bancshares possessed sole or shared voting power with respect to 432,022
shares of Class A common stock, which represented approximately 13.5% of the
outstanding shares, and 3,150,000 shares of Class B common stock, which
represented 100% of the outstanding shares.
THE MERGER (PAGES 39-40)
The merger will combine our businesses under a single holding company. As a
result of the merger, Associated will become the holding company for Windsor
Bancshares' banking subsidiary, Bank Windsor, and will remain the holding
company of Associated's current banks and subsidiaries.
The merger agreement is attached as Exhibit A to this document. We encourage you
to read the merger agreement. It is the legal document governing the merger.
WHAT SHAREHOLDERS WILL RECEIVE IN THE MERGER (PAGES 20-22)
In the merger, Associated will issue up to 800,000 shares of Associated common
stock to the shareholders of Windsor Bancshares. The shares of Associated common
stock issuable in the merger will be allocated among the shareholders of Windsor
Bancshares based upon a formula which will take into account the number of
shares you hold, whether you hold shares of Class A common stock or Class B
common stock, the price you at which your shares were originally purchased from
Windsor Bancshares, how long your shares have been outstanding and the market
price of the Associated common stock.
DIVIDEND POLICY OF ASSOCIATED AFTER THE MERGER (PAGE 33)
After the merger, it is presently expected that dividends will continue at
Associated's current quarterly dividend rate of $0.29 per share. Associated's
Board of Directors determines the level of dividends to be declared each quarter
based on various economic and financial factors.
FEDERAL INCOME TAX CONSIDERATIONS (PAGES 33-35)
We must receive an opinion from Associated's outside counsel stating that, as a
general matter, shareholders will not recognize gain or loss for federal income
tax purposes as a result of the merger, except if they receive cash for
fractional shares or pursuant to the exercise of dissenters' rights.
Tax matters are very complicated and the tax consequences to you of the merger
will depend on the facts of your own situation. You should consult your tax
advisors for a full explanation of the tax consequences to you of the merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 39)
Two executive officers of Windsor Bancshares, and a third individual who is an
executive officer of Bank Windsor, hold unvested stock options that will become
fully exercisable 30 days prior to the consummation of the merger.
LISTING OF ASSOCIATED COMMON STOCK
Associated will file an application to list the shares of Associated common
stock to be issued in the merger on the Nasdaq National Market under
Associated's current symbol "ASBC."
STATUS OF ASSOCIATED COMMON STOCK (PAGE 32)
Shares of Associated common stock received in the merger will be freely-tradable
except for shares issued to affiliates of Windsor Bancshares. Windsor Bancshares
has concluded that its only affiliates are its directors and executive officers,
the directors of its bank subsidiary, Bank Windsor, and Ralph Strangis.
4
<PAGE>
CONDITIONS TO THE MERGER (PAGES 43-44)
We will complete the merger only if several conditions are satisfied, including
the following:
. Shareholders of Windsor Bancshares vote in favor of the merger agreement;
. no legal restraints or prohibitions exist which prevent the merger from
being completed;
. we receive all necessary regulatory approvals;
. Associated's counsel delivers an opinion concerning certain federal income
tax consequences of the merger;
. Associated's independent accountants deliver a letter stating that the
merger will qualify for pooling of interests accounting treatment and
Windsor Bancshares' independent accountants deliver a letter stating that
Windsor Bancshares qualifies to have the merger accounted for as a pooling
of interests;
. The sum of the fractional shares of Associated common stock paid in cash
and the number of shares of Associated common stock that is not issued in
the merger due to the exercise of dissenters' rights does not exceed 10% of
the maximum number of shares of Associated common stock which could
otherwise have been issued in the merger;
. Windsor Bancshares has consolidated unaudited after-tax earnings for the
year ended December 31, 1998 of at least $2,110,000 and Bank Windsor has
consolidated unaudited after-tax earnings for the year ended December 31,
1998 of at least $2,318,000, in each case excluding certain adjustments
relating to loan loss reserves, severance payments and expenses relating to
the merger;
. Associated is reasonably satisfied as to the Year 2000 compliance plan of
Windsor Bancshares and Bank Windsor; and
. Associated receives a satisfactory report from its environmental consultant
regarding the environmental condition of Windsor Bancshares' real property.
TERMINATION OF THE MERGER AGREEMENT (PAGES 45-46)
Our boards of directors can jointly agree to terminate the merger agreement at
any time without completing the merger. In addition, we can terminate the merger
agreement if:
. we do not complete the merger by January 25, 1999;
. the shareholders of Windsor Bancshares do not vote in favor of the merger
agreement;
. either party breaches or does not materially comply with the
representations or warranties it made or obligations it has under the
merger agreement, and, as a result, the conditions to completing the merger
cannot be satisfied;
. the board of directors of Windsor Bancshares withdraws or modifies its
recommendation for the merger;
. Windsor Bancshares enters into a definitive agreement to be acquired by a
third party after its Board of Directors determines that the proper
discharge of the directors' duties under Minnesota law requires that
Windsor Bancshares terminate the merger agreement and enter into the
agreement with the third party;
. at any time within three trading days of the scheduled closing date of the
merger if the market price of the Associated common stock at such time is
less than $34 per share and the average market price of the Associated
common stock calculated over a ten-day trading period prior to such
termination as compared to the market price of the Associated common stock
on September 22, 1998 has underperformed an index based on the market
prices of certain comparable publicly traded bank holding companies; or
5
<PAGE>
. the Federal Reserve Board or the Minnesota Department of Commerce Financial
Examination Division denies approval of the merger.
TERMINATION FEE (PAGES 46-47)
If the merger agreement is terminated under certain circumstances relating to
third party offers, the withdrawal or modification of the recommendation of the
board of directors of Windsor Bancshares in favor of the merger agreement or the
failure of the holders of the Class B common stock to approve the merger
agreement, Windsor Bancshares will be obligated to pay Associated a fee equal to
3% of the aggregate value of the merger as of the date of termination (based on
the market price of the Associated common stock at the time of termination
multiplied by the 800,000 shares of Associated common stock to be issued in the
merger).
REGULATORY APPROVALS (PAGES 24-26)
The merger is subject to prior approval by certain regulatory authorities
including the Federal Reserve Board and the Minnesota Department of Commerce.
DISSENTERS' RIGHTS (PAGES 36-38)
Shareholders of Windsor Bancshares 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 Associated common stock offered pursuant to the merger.
The fair value of the shares of Windsor Bancshares common stock would be
determined pursuant to Minnesota law.
ANY SHAREHOLDER WHO WISHES TO EXERCISE DISSENTERS' RIGHTS MUST NOT VOTE IN FAVOR
OF THE MERGER AGREEMENT AND MUST COMPLY WITH ALL OF THE PROCEDURAL REQUIREMENTS
PROVIDED BY MINNESOTA LAW. A COPY OF THE DISSENTERS' RIGHTS STATUTE IS ATTACHED
AS EXHIBIT B 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.
ACCOUNTING TREATMENT (PAGE 35)
The merger agreement provides that Associated must receive an opinion from KPMG
Peat Marwick LLP, Associated's accountants, stating that the merger will qualify
for "pooling of interests" accounting treatment and an opinion from Grant
Thornton LLP, Windsor Bancshares' accountants, stating that Windsor Bancshares
will qualify to have the merger accounted for as a pooling of interests.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
We have made forward-looking statements in this document, and in documents that
we incorporate by reference, that are subject to risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of Associated, Windsor Bancshares or the
combined company. When we use words such as "believes," "expects," "anticipates"
or similar expressions, we are making forward-looking statements.
Shareholders should note that many factors, some of which are discussed
elsewhere in this document and in the documents that we incorporate by
reference, could affect the future financial results of Associated, Windsor
Bancshares or the combined company and could cause those results to differ
materially from those expressed in our forward-looking statements contained or
incorporated by reference in this document. These factors include the following:
. operating, legal and regulatory risks;
. economic, political and competitive forces affecting our banking,
securities, asset management and credit services businesses; and
. the risk that our analyses of these risks and forces could be incorrect
and/or that the strategies developed to address them could be unsuccessful.
6
<PAGE>
RISK FACTORS
In deciding whether to vote in favor of the Merger, shareholders of
Windsor Bancshares should consider the following factors, in addition to the
other matters set forth or incorporated by reference in this document.
Omitted Industry Financial Information. Windsor Bancshares has excluded
certain financial disclosures required of bank holding companies under rules
promulgated by the Securities and Exchange Commission from the Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Windsor Bancshares attached hereto as Exhibit C. The omitted industry financial
information relates to, among other things, certain disclosures as to Bank
Windsor's investments and deposits. Associated and Windsor Bancshares have
determined that as Windsor Bancshares has not been required to make such
disclosures in the past to its shareholders, it has not compiled and would be
unable to create such financial information from existing financial records
without incurring considerable expense, effort and delay. Associated and Windsor
Bancshares have determined that the omission of certain bank holding company
financial disclosure is not material to the shareholders of Windsor Bancshares.
Uncertain Legislative and Regulatory Environment. The banking and
financial services businesses in which Windsor Bancshares and Associated engage
are highly regulated. The laws and regulations affecting such businesses may be
changed dramatically in the near 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 Windsor
Bancshares nor Associated can predict what changes will occur or 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.
Competition. The markets in which Windsor Bancshares and Associated
operate are highly competitive. Competition in such markets is likely to
increase in light of the changing legislative and regulatory environment in
which Windsor Bancshares and Associated operate. In addition, consolidation and
mergers in the banking industry are expected to continue, resulting in stronger
and more effective competitors. Neither Windsor Bancshares nor Associated 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.
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 competitiveness.
Uncertain Economic Environment. Until recently, 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 enhances the
opportunity of the commercial sector of the economy to
7
<PAGE>
improve earnings and performance. It also provides an environment for financial
institutions to experience positive and profitable growth. Recent economic
changes present additional risks for all banks and financial service companies.
Nature of Business. The financial performance of Windsor Bancshares
results primarily from its retail banking activities conducted from four offices
located in Minnesota. Shareholders of Windsor Bancshares who receive shares of
Associated Common Stock will own an interest in a diversified multi-bank holding
company with 215 banking offices, substantially all of which are located in
various communities throughout Wisconsin and Illinois, which is engaged in
several non-banking businesses including personal property lease financing,
commercial and residential mortgage banking, trust services, full service
brokerage and discount brokerage services, reinsurance and general insurance
agency activities. Financial performance of Associated is accordingly dependent
on its activities and the economic factors in such markets and businesses. See
"Certain Information Concerning Associated."
Business Combinations. Associated 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 Associated Common
Stock.
Share Price Fluctuation. The price of shares of the Class A Common
Stock and the Class B Common Stock is based upon the financial condition of
Windsor Bancshares and the market value for similar non-publicly traded bank
holding companies and other factors. The share price of Associated Common Stock
on the Nasdaq National Market is by nature 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 Associated.
8
<PAGE>
SELECTED FINANCIAL DATA OF ASSOCIATED AND WINDSOR BANCSHARES
(In thousands, except per share amounts)
The following financial information is provided to aid in your analysis of
the financial aspects of the merger. The information regarding Associated Banc-
Corp ("Associated") has been derived from audited consolidated financial
statements for 1993 through 1997 and unaudited financial statements for the nine
months ended September 30, 1998 and 1997. The information regarding Windsor
Bancshares, Inc. (the "Company" or "Windsor Bancshares") has been derived from
audited financial statements for 1993 through 1997 and unaudited financial
statements for the nine months ended September 30, 1998 and 1997. The
information is only a summary and you should read it in conjunction with the
historical financial statements (and related notes) of Associated contained in
the annual reports and other information that Associated files with the
Securities and Exchange Commission, which are incorporated by reference in this
document, and the historical financial statements (and related notes) of Windsor
Bancshares contained in Exhibit C hereto. See "Where You Can Find More
Information."
We expect that the merger will be accounted for as a "pooling of interests"
which means that for accounting and financial reporting purposes we will treat
our companies as if they have always been combined. See "The Merger - Accounting
Treatment."
The per share data in the following information is adjusted retroactively
for stock splits and stock dividends. Earnings per share are calculated based
upon the weighted average shares outstanding. Certain amounts in prior period
financial information have been reclassified to conform with the September 30,
1998 presentation.
The results of Associated and Windsor Bancshares for the nine months ended
September 30, 1998 are not necessarily indicative of results expected for the
entire year.
<TABLE>
<CAPTION>
As of and for the Nine
Month Periods
Ended September 30, As of and for the Year Ended December 31,
------------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------------------------- ----------- ----------- ---------- ---------- ----------
ASSOCIATED BANC-CORP: (Unaudited) (In thousands, except per share data)
- --------------------
CONDENSED STATEMENTS OF INCOME:
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income.......................... $ 281,448 $ 280,212 $ 375,582 $ 355,245 $ 336,359 $ 320,990 $ 298,980
Provision for possible loan losses........... 10,511 10,297 31,668 13,695 14,029 9,035 16,441
Non-interest income.......................... 126,098 95,921 96,002 116,870 104,989 84,155 95,713
Non-interest expense......................... 216,483 202,006 323,648 293,231 252,927 245,310 240,318
Income before income taxes and extraordinary
item........................................ 180,552 163,830 116,268 165,189 174,392 150,800 137,934
Income tax expense........................... 61,288 57,669 63,909 57,487 62,381 54,203 49,311
Extraordinary item........................... - - - (686) - - -
Net income................................... 119,264 106,161 52,359 107,016 112,011 96,597 88,623
SHARE DATA:
- -----------
Basic earnings per share:
Income before extraordinary item.......... $ 1.88 $ 1.69 $ 0.83 $ 1.70 $ 1.82 $ 1.59 $ 1.50
Net income................................ 1.88 1.69 0.83 1.69 1.82 1.59 1.50
Diluted earnings per share:
Income before extraordinary item.......... $ 1.86 $ 1.66 $ 0.82 $ 1.67 $ 1.79 $ 1.55 $ 1.44
Net income................................ 1.86 1.66 0.82 1.66 1.79 1.55 1.44
Cash dividends per share..................... 0.75 0.66 0.89 0.76 0.65 0.57 0.50
Weighted average shares outstanding:
Basic..................................... 63,283 62,871 62,884 63,205 61,386 60,747 59,005
Diluted................................... 63,999 63,998 63,935 64,379 62,473 62,144 61,518
SELECTED BALANCE SHEET DATA (PERIOD END):
- ----------------------------------------
Total Assets................................. $10,575,675 $10,707,097 $10,690,442 $10,120,413 $9,393,609 $9,130,522 $8,448,468
Stockholders' equity......................... 883,564 874,026 813,693 803,562 725,211 626,591 560,722
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
As of and for the Nine
Month Periods
Ended September 30, As of and for the Year Ended December 31,
------------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------------------------- --------------- ---------- ---------- -------- ---------
(In thousands, except per share data)
WINDSOR BANCSHARES: (Unaudited)
- -------------------
CONDENSED STATEMENTS OF INCOME:
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income............................. $ 10,611 $ 9,117 $ 12,337 $ 9,445 $ 7,008 $ 4,164 $ 3,075
Interest expense............................ 4,881 3,893 5,292 3,931 2,916 1,338 988
Provision for possible loan losses 375 270 580 420 220 175 123
Net interest income after provision for
possible loan losses...................... 5,355 4,954 6,465 5,094 3,872 2,651 1,964
Non-interest income......................... 315 283 371 303 277 236 289
Non-interest expense........................ 3,075 2,852 3,817 3,368 2,740 2,047 1,682
Net non-interest expense.................... 2,760 2,569 3,446 3,065 2,463 1,811 1,393
Net income.................................. 1,567 1,438 1,823 1,219 840 526 631
SHARE DATA:
- -----------
Net income per share
Basic
Class A................................. $ 0.27 $ 0.26 $ 0.33 $ 0.23 $ 0.17 $ 0.11 $ 0.13
Class B................................. 0.23 0.21 0.26 0.17 0.11 0.06 0.07
Diluted
Class A................................. $ 0.26 $ 0.25 $ 0.31 $ 0.22 $ 0.17 $ 0.11 $ 0.13
Class B................................. 0.23 0.21 0.26 0.17 0.11 0.06 0.07
Cash dividends per share.................... - - - - - - -
Weighted average shares outstanding
Basic
Class A................................... 3,113 3,000 3,000 3,000 3,000 3,000 3,000
Class B................................... 3,150 3,150 3,150 3,150 3,150 3,150 3,150
Diluted
Class A................................... 3,296 3,145 3,156 3,070 3,000 3,000 3,000
Class B................................... 3,150 3,150 3,150 3,150 3,150 3,150 3,150
SELECTED BALANCE SHEET DATA (PERIOD END):
- -----------------------------------------
Total Assets................................ $190,872 $146,073 $157,964 $126,741 $103,352 $ 64,343 $ 46,810
Stockholders' equity........................ 9,169 6,883 7,308 5,408 4,261 3,192 2,896
</TABLE>
PENDING ACQUISITION
On February 17, 1998, Associated announced the signing of a definitive
agreement to acquire Citizens Bankshares, Inc. ("Citizens"), in a stock and cash
merger transaction. Citizens is a $160 million one-bank holding company which
owns 100% of the stock of Citizens Bank, N.A., with its main office in the
Northeastern Wisconsin community of Shawano, and 100% of the stock of Wisconsin
Finance Corporation. Subject to the approval of the shareholders of Citizens and
the satisfaction of other conditions, this transaction is expected to be
completed in December 1998, and will be accounted for using the purchase method
of accounting.
10
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
ASSOCIATED COMMON STOCK
Shares of common stock, par value $0.01 per share, of Associated
("Associated Common Stock") trade on the Nasdaq National Market under the symbol
"ASBC." The following table sets forth, for the periods indicated, the high and
low sales prices per share as reported on the Nasdaq National Market and the
regular cash dividends declared for Associated Common Stock as adjusted to
reflect the 6-for-5 stock split declared on January 22, 1997, effected in the
form of a 20% stock dividend, paid on March 17, 1997, to shareholders of record
on March 5, 1997 and the 5-for-4 stock split, effected in the form of a 25%
stock dividend, paid on June 12, 1998 to shareholders of record of Associated on
June 1, 1998.
<TABLE>
<CAPTION>
Associated Common Stock
-----------------------------------------------
1996 High Low Dividend
- ---- -------------- ------------- ------------
<S> <C> <C> <C>
First Quarter............................................ $ 26.33 $ 23.50 $ 0.1800
Second Quarter........................................... $ 26.33 $ 25.00 $ 0.1934
Third Quarter............................................ $ 26.92 $ 25.67 $ 0.1934
Fourth Quarter........................................... $ 29.17 $ 26.33 $ 0.1934
1997
- ----
First Quarter............................................ $ 32.41 $ 27.67 $ 0.1934
Second Quarter........................................... $ 31.59 $ 28.59 $ 0.2320
Third Quarter............................................ $ 39.16 $ 31.20 $ 0.2320
Fourth Quarter........................................... $ 47.00 $ 36.59 $ 0.2320
1998
- ----
First Quarter............................................ $ 43.80 $ 38.09 $ 0.2320
Second Quarter........................................... $ 43.70 $ 36.25 $ 0.2320
Third Quarter............................................ $ 42.38 $ 31.44 $ 0.2900
</TABLE>
On September 30, 1998, the last trading day before the announcement of the
proposed merger between Associated and Windsor Bancshares, the last sale price
of Associated Common Stock as reported on the Nasdaq National Market was $31.44
per share. On November 13, 1998, the last sale price of Associated Common Stock
as reported on the Nasdaq National Market was $35.88 per share. Holders of
shares of Class A Common Stock and Class B Common Stock of the Company are urged
to obtain current market prices for Associated Common Stock.
On October 30, 1998, there were approximately 10,544 holders of record of
Associated Common Stock.
THE COMPANY COMMON STOCK
The Company has two classes of common stock, Class A Common Stock, par
value $0.01 per share ("Class A Common Stock"), and Class B Common Stock, par
value $0.01 per share, of the Company ("Class B Common Stock" and together with
the Class A Common Stock, the "Company Common Stock"). The Company Common Stock
is not listed on any exchange nor quoted in the over-the-counter market, and no
established "bid" or "ask" price is available. In the opinion of the Company,
due to the lack of an active market for shares of the Company Common Stock,
transactions in Company Common Stock of which the Company is aware are not
11
<PAGE>
frequent enough to constitute representative prices. The last sale of Company
Common Stock of which the Company is aware was at $2.70 per share in May 1997.
The Company has not previously paid dividends. Pursuant to the Merger
Agreement, the Company may not pay dividends on the Company Common Stock prior
to the Effective Time. See "The Merger - Pre-Merger Dividend Policy."
On November 25, 1998, the Record Date for the Special Meeting, there were
79 holders of record of Class A Common Stock and three holders of record of
Class B Common Stock.
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for Associated Common Stock and Company
Common Stock unaudited historical and pro forma per share financial information
as of and for nine months ended September 30, 1998, and as of and for each of
the years in the three year period ended December 31, 1997.
The information presented herein should be read in conjunction with the
audited consolidated financial statements of Associated for the years ended
December 31, 1997, 1996 and 1995, and the unaudited consolidated financial
statements for the nine months ended September 30, 1998, incorporated by
reference into this Proxy Statement/Prospectus and the audited consolidated
financial statements of the Company, including the notes thereto, attached
hereto as Exhibit C. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
As of and for the Year
As of and for the Nine Ended
Month Period Ended December 31,
------------------------------------
September 30, 1998 1997 1996 1995
------------------ ------------------------------------
<S> <C> <C> <C> <C>
ASSOCIATED
Basic Net Income Per Common Share:
Historical (2)......................... $1.88 $0.83 $1.69 $1.82
Pro forma (1).......................... 1.89 0.85 1.69 1.81
Diluted Net Income Per Common Share:
Historical (2)......................... $1.86 $0.82 $1.66 $1.79
Pro forma (1).......................... 1.86 0.84 1.66 1.78
Dividends Per Common Share:
Historical (2)......................... $0.75 $0.89 $0.76 $0.65
Pro forma (3).......................... 0.75 0.89 0.76 0.65
Book Value Per Common Share:
Historical (2)......................... $13.96 $12.92
Pro forma (1).......................... 13.93 $12.87
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
As of and for the Year
As of and for the Nine Ended
Month Period Ended December 31,
------------------------------------
September 30, 1998 1997 1996 1995
------------------ ------------------------------------
<S> <C> <C> <C> <C>
WINDSOR BANCSHARES
Basic Net Income Per Common Share:
Class A
Historical (4)......................... $0.27 $0.33 $0.23 $0.17
Pro forma (6)(7)....................... 0.28 0.13 0.26 0.29
Class B.................................
Historical (4) ....................... $0.23 $0.26 $0.17 $0.11
Pro forma (6)(8)....................... 0.18 0.08 0.15 0.15
Diluted Net Income Per Common Share:
Class A
Historical (5)......................... $0.26 $0.31 $0.22 $0.17
Pro forma (6)(7)....................... 0.27 0.12 0.25 0.29
Class B
Historical (5)......................... $0.23 $0.26 $0.17 $0.11
Pro forma (6)(8)....................... 0.18 0.08 0.15 0.15
Dividends Per Common Share:
Historical............................. $ - $ - $ - $ -
Pro forma (9).......................... 0.09 0.11 0.09 0.08
Book Value Per Common Share:
Historical............................. $1.45 $1.19
Pro forma (9).......................... $1.68 $1.55
</TABLE>
(1) Associated pro forma per share amounts give effect to the Merger through
the issuance of 800,000 shares of Associated Common Stock.
(2) Associated historical per share amounts have been adjusted for stock splits
and stock dividends.
(3) The Associated pro forma dividends per share amounts represent historical
dividends of Associated as adjusted retroactively for the stock splits and
stock dividends.
(4) The Company's historical basic net income per share is computed by dividing
net income available to the respective share classes by the weighted
average number of outstanding common shares for each class.
(5) The Company's historical diluted net income per share is computed by
dividing net income available to the respective share classes by the
weighted average number of outstanding common shares by class and common
share equivalents relating to stock options, when dilutive.
(6) The Company pro forma per share amounts are determined by allocating the
Associated pro forma net income per share to Class A Common Stock and Class
B Common Stock based on their historical, proportionate net income
available to respective share classes multiplied by the respective exchange
ratio noted below.
13
<PAGE>
(7) The Company pro forma per share amounts are calculated by multiplying the
Associated pro forma per share amounts by 0.1354. This rate is based on the
weighted average exchange ratios applicable to all shares of Class A Common
Stock, assuming a Daily Average Price (as defined below) of Associated
Common Stock of $34.00 per share. This rate will differ from the exchange
ratio applicable to individual shares of Class A Common Stock. See "The
Merger - Merger Consideration" for a description of the calculation of the
exchange ratios.
(8) The Company pro forma per share amounts are calculated by multiplying the
Associated pro forma per share amounts by 0.1039. This rate is based on the
weighted average exchange ratios applicable to all shares of Class B Common
Stock, assuming a Daily Average Price of Associated Common Stock of $34.00
per share. This rate will differ from the exchange ratio applicable to
individual shares of Class B Common Stock. See "The Merger - Merger
Consideration" for a description of the calculation of the exchange ratios.
(9) The Company pro forma per share amounts are calculated by multiplying the
Associated pro forma per share amounts by 0.1205. This rate is based on the
weighted average exchange ratios applicable to all shares of Company Common
Stock, assuming a Daily Average Price of Associated Common Stock of $34.00
per share. This rate will differ from exchange ratio applicable to
individual shares of Company Common Stock. See "The Merger - Merger
Consideration" for a description of the calculation of the exchange ratios.
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to holders of the
Company Common Stock in connection with the solicitation of proxies by the
Company's Board of Directors for use at the Special Meeting of Shareholders of
the Company (the "Special Meeting") and at any adjournment or postponement
thereof. The Special Meeting will be held at the offices of Kaplan, Strangis and
Kaplan, P.A., 5500 Norwest Center, 90 South Seventh Street, Minneapolis,
Minnesota on December 30, 1998. The Special Meeting will commence at 10:00 a.m.
At the Special Meeting, the shareholders of the Company will be asked to
approve the Agreement and Plan of Merger, dated as of October 1, 1998, between
Associated and the Company (the "Merger Agreement"), as more fully described
herein. The Merger Agreement provides for the merger of Associated and Windsor
Bancshares (the "Merger"). See "The Special Meeting," "The Merger," and "Certain
Provisions of the Merger Agreement." The approximate date on which this Proxy
Statement/Prospectus is first being mailed to shareholders of the Company is on
or about December 1, 1998.
ASSOCIATED BANC-CORP
Associated is a diversified multi-bank holding company registered with the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
pursuant to the Bank Holding Company Act of 1956, as amended (the "BHC Act").
Associated owns directly or indirectly all of the capital stock of 8 commercial
banks located in Wisconsin and Illinois, and all of the capital stock of 27
nonbanking subsidiaries located in Arizona, California, Delaware, Illinois,
Missouri, Nevada and Wisconsin. As of September 30, 1998, Associated had total
assets of $10.6 billion. The principal executive offices of Associated are
located at 1200 Hansen Road, P.O. Box 13307, Green Bay, Wisconsin 54307-3307 and
its telephone number is (920) 491-7000. See "Certain Information Concerning
Associated."
14
<PAGE>
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, holders of the Company 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 voting power of
the outstanding shares of (a) the Class A Common Stock and the Class B Common
Stock, voting together as a single class, (b) the Class A Common Stock, voting
alone as a class, and (c) the Class B Common Stock, voting alone as a class, is
required to approve the Merger Agreement. Each share of the Class A Common Stock
outstanding on the Record Date (as defined herein) is entitled to one vote and
each share of Class B Common Stock outstanding on the Record Date is entitled to
two votes. Shareholders of Associated are not required to approve the Merger
Agreement and no further corporate authorization by Associated is required to
consummate the Merger.
VOTING OF PROXIES
Shares represented by all properly executed proxies for the Company 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 the Company 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 the Company Common Stock at the close of business
on November 25, 1998 (the "Record Date") will be entitled to receive notice of
and to vote at the Special Meeting.
At the Record Date, 3,190,000 shares of the Class A Common Stock were
outstanding and 3,150,000 shares of Class B Common Stock were outstanding.
Shares representing a majority of the outstanding shares of the Company 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.
15
<PAGE>
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
The Company will bear the cost of the solicitation of proxies from its
shareholders, except that Associated and the Company 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 the Company may solicit proxies from shareholders of
the Company 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, THE COMPANY
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
This section of the Proxy Statement/Prospectus describes certain aspects of
the proposed Merger. To the extent that it relates to the Merger Agreement, the
following description does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement which is attached hereto as
Exhibit A and is incorporated herein by reference. All shareholders are urged to
read the Merger Agreement and the other exhibits to this Proxy
Statement/Prospectus in their entirety.
BACKGROUND OF THE MERGER
In 1988, Samuel Kaplan and Ralph Strangis purchased a one-bank holding
company based in Nerstrand, Minnesota, and changed the name of the bank holding
company and the bank to Windsor Bancshares, Inc. and Bank Windsor (the "Bank"),
respectively. In May 1989, the Company completed a private placement of its
Class A Common Stock to investors and in August 1989, the Bank began active
operations in downtown Minneapolis in order to pursue the Company's strategy of
providing high net worth private banking services. Messrs. Kaplan and Strangis
are the beneficial owners of a majority of the Class B Common Stock.
In 1991, the Bank broadened the focus of its lending strategy to encompass
small to mid-market commercial relationships. Since its redirection in 1991, the
Bank has increased its market share in its core businesses while achieving
levels of profitability and asset quality that are competitive with similarly
situated bank holding companies by increasing the number and size of customers
served, expanding banking related activities in its primary markets, and
broadening its product offerings for business and professional customers. In
1995, the Bank purchased its Sleepy Eye and Chisholm, Minnesota, offices from
First Bank System in a transaction that added over $27 million in core deposits
which assisted in funding the rapidly expanding banking operations of the Bank.
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During the same period, the financial services industry witnessed
substantial and rapid change characterized by increasing consolidation,
intensifying competition and acquisition growth of many of the larger domestic
banking organizations. In response to changing regulatory and market conditions,
the Company has regularly considered possible transactions and strategies to
enhance its profitability, competitive position and strategic focus and thereby
increase shareholder value.
In late 1997, as part of the Company's ongoing process, the directors and a
number of significant shareholders of the Company began to study and analyze
whether the Company should (i) continue to function as an independent
organization, (ii) acquire or merge with other banks of similar size, and/or
(iii) be acquired or enter into a business combination with a larger publicly-
held financial institution. It was determined that significant investments in
technology, training, marketing, management development and services would be
required to continue the Company's growth as an independent organization with no
assurance that the Company could achieve sufficient growth to profitably compete
in a consolidating marketplace. Additionally, the Company determined that growth
through acquisition of similarly situated financial institutions that faced the
same challenges would require larger capital investments in a competitive
platform of products and services. It was deemed unlikely that the Company could
consummate transactions that would be accretive to shareholder value due to the
seller favorable acquisition pricing in the marketplace and the Company's lack
of a publicly traded security with which to make acquisitions. The Company
concluded that a business combination with a larger publicly traded organization
was attractive in that it would aid the Company in competitive respects and
provide shareholders with liquidity for their investments.
In March 1998, the Company engaged Piper Jaffray Inc. ("Piper") to assist
in exploring a business combination with a larger financial institution. Over
the course of its engagement, Piper contacted a total of 28 financial
institutions for the purposes of initiating discussions regarding a business
combination with the Company. Piper and the Company prepared a confidential
information memorandum that was distributed to 14 interested parties. During
April and May 1998, six financial institutions expressed varying degrees of
interest in pursuing discussions regarding a business combination with the
Company.
Over the ensuing months, the Company and Piper held substantive discussions
regarding a business combination with five of the six financial institutions
that expressed interest. When necessary or appropriate, the Company provided
additional confidential or proprietary information in order to facilitate the
discussions. On August 11, 1998, Associated, one of the parties with whom the
Company had discussed a potential merger, presented a draft of a letter of
intent for the merger of Associated and the Company pursuant to which the
Company's shareholders would receive an aggregate of 800,000 shares of
Associated Common Stock in exchange for all outstanding shares of Company Common
Stock. The Company's Board of Directors determined to enter into exclusive
negotiations with Associated after analyzing the financial terms of Associated's
offer, Associated's market capitalization and financial position, the
marketability of Associated Common Stock, the perceived level of interest by
Associated in pursuing the transaction, the likelihood that a transaction with
Associated would be consummated if mutually acceptable terms would be agreed
upon, Associated's prior record of making acquisitions, the geographic and
product synergy of the operations of Associated and the Company and the status
of its discussions with other institutions.
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During the course of August and September 1998, the Board of Directors of
the Company and its financial and legal advisors negotiated the terms of a draft
of the Merger Agreement and the related transaction documents with Associated.
At a special meeting of the Company's Board of Directors on October 1,
1998, Piper reviewed with the Board the events leading up to the proposed merger
and provided its financial analysis of the transaction. The Board noted that on
September 30, 1998, the business day immediately preceding the day of the
meeting, the closing price of Associated Common Stock on the Nasdaq National
Market was $31-7/16 per share, resulting in a transaction value of approximately
$25,150,000. The total dollar value of $25,150,000 is approximately 12.5 times
the Company's latest 12-month earnings as of June 30, 1998, and 3.2 times the
Company's June 30, 1998, tangible book value, which in the experience of the
Board based on discussions with other potential merger parties, compared
favorably with other similar and potential transactions. The Board also noted
that the transaction value to Company shareholders would fluctuate with the
market price of Associated Common Stock, but recognized that a fluctuation in
the marketplace's valuation of financial institutions also affected the market
value of the Company. The Board's legal counsel reviewed the fiduciary duties
owed by the Company's Board of Directors to Company shareholders in connection
with the proposed transaction, the Company's Restated Articles of Incorporation
and the terms of the Merger Agreement. Following a review and discussion of the
definitive terms of the transaction, the allocation of shares of Associated
Common Stock among the Company shareholders, the expectation of the Company's
shareholders and numerous other factors (See "The Merger - Reasons for the
Merger"), the Company's Board of Directors, by a unanimous vote of all
directors, (i) determined that the Merger is fair to and in the best interests
of the Company and its shareholders, (ii) determined that the allocation of the
Associated Common Stock between the Company's Class A and Class B shareholders
as provided for in the Merger Agreement is in accordance with the requirements
of the Company's Restated Articles of Incorporation upon a liquidation of the
Company, consistent with shareholder expectations, and fair to and in the best
interests of the Company and its shareholders, (iii) approved and adopted the
Merger Agreement and the transactions contemplated thereby, (iv) directed that
the Merger Agreement be submitted to a vote of Company shareholders, and (v)
recommended that such shareholders approve and adopt the Merger Agreement.
After the Board meeting on October 1, 1998, the Merger Agreement was
executed and the Company and Associated issued a joint press release announcing
the transaction.
REASONS FOR MERGER
The Company. The Company's Board of Directors has unanimously determined
that the Merger and the Merger Agreement, including the allocation of Associated
Common Stock among the Company's shareholders, are fair to and in the best
interests of the Company and its shareholders. In the course of reaching its
decision, the Company's Board of Directors consulted with senior management,
with the Company's legal counsel with respect to the legal duties of the Board,
regulatory matters, the Merger Agreement and issues related thereto, and with
Piper with respect to the financial aspects of the Merger.
Prior to approving the Merger, the Company's Board of Directors received
information regarding, and analyzed and considered, among other things, the
following factors:
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1. information concerning the business, earnings, operations, financial
condition, capital levels and asset quality of Associated and the Company
and the strategic fit of the operating philosophies of the two
institutions;
2. the increased opportunity and resources the combined company would
have to serve the Company's customers and to stay competitive in a
consolidating industry;
3. the favorable valuation of the Company implied by the 800,000 shares
of Associated Common Stock to be received by the Company's shareholders;
4. the current and prospective economic and competitive environments
facing the Company characterized by intensifying competition from larger,
better capitalized institutions, the increasing necessity for fee-based
income producing products and the growing costs associated with regulatory
compliance;
5. the enhanced possibility of career advancement which Bank employees
might be provided as a result of the Merger;
6. the marketability and liquidity of Associated Common Stock and the
dividend history of Associated as compared to the illiquidity and lack of
marketability of Company Common Stock and the Company's historical practice
of not paying dividends;
7. the tax-free nature of the Merger for federal income tax purposes
which would permit the Company's shareholders who received Associated
Common Stock in the Merger to defer federal income taxation under certain
circumstances;
8. the potential for future appreciation of Associated Common Stock due
to Associated's greater resources and strategies; and
9. the belief that the combined company would be well positioned to grow
through future acquisitions or internal development, while not being so
large as to diminish its attractiveness as a possible acquisition
candidate.
While each member of the Company'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 considered and did not
make any determination with respect to any individual factor. The Company'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 that each of them individually considered as appropriate, is fair and in
the best interests of the Company and its shareholders.
Associated. Prior to authorizing the Merger, Associated's Board of
Directors considered, among other things, the improving financial performance
and condition, business operations, capital levels, asset quality and future
growth prospects of the Company. The Board also considered the benefits to
Associated of expanding in Minnesota by acquisition of the Company as opposed to
the opening of a new branch bank, the positive impact of the Merger on
Associated by enhancing its visibility in the region and the terms of the Merger
Agreement.
Associated's Board of Directors believes the Merger will (i) result in
operational and managerial efficiencies which will better enable the Company to
contain costs and grow more rapidly than historic growth rates; (ii) result in
the Company having greater financial strength,
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increased competitiveness and market diversification, thereby also benefiting
Associated and its customers; and (iii) result in an increase in long-term
shareholder value for the shareholders of Associated.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY
The Board of Directors of the Company has determined that the terms of the
Merger are fair to, and in the best interests of, the Company, and its
shareholders for the reasons stated immediately above.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
MERGER CONSIDERATION
Under the Merger Agreement, the holders of outstanding shares of Company
Common Stock at the Effective Time who do not exercise dissenters' rights (the
"Participating Shareholders") will receive an aggregate of up to 800,000 shares
of Associated Common Stock. The actual number of shares of Associated Common
Stock to be issued will depend upon the number of shareholders, if any, who
exercise dissenters' rights and the amount of cash paid by Associated in lieu of
fractional shares of Associated Common Stock. The shares of Associated Common
Stock to be issued in the Merger will be allocated among the Participating
Shareholders in the same manner as the Company's Restated Articles of
Incorporation would require upon a sale of the Bank and a liquidation of the
Company (the "Articles Allocation").
Prior to the Effective Time, the Chief Financial Officer of the Company
will calculate the average of the closing prices of a share of Associated Common
Stock as quoted on the Nasdaq National Market during the ten trading day period
ending on the third business day immediately prior to the day on which the
Effective Time occurs. Such average is referred to herein as the "Daily Average
Price." Each share of Associated Common Stock to be issued in the Merger will be
deemed to have a value equal to the Daily Average Price for purposes of
calculating both the cash value of the aggregate proceeds to be received by all
Participating Shareholders and the number of shares of Associated Common Stock
each Participating Shareholder is to receive. Applying the Daily Average Price
to the Articles Allocation, the shares of Associated Common Stock will be
allocated among the Participating Shareholders in the following manner:
1. Each share of Class A Common Stock will be allocated a number or
fractional number of shares of Associated Common Stock that, when multiplied by
the Daily Average Price, is equal to the original purchase price of such share
of Class A Common Stock when purchased from the Company (or in the case of
shares of Class A Common Stock received upon the exercise of employee stock
options, the exercise price of such options).
2. Each share of Class A Common Stock will be allocated a number or
fractional number of shares of Associated Common Stock that, when multiplied by
the Daily Average Price, is equal to a return of six percent per year from
January 1, 1989 (or in the case of shares issued upon the exercise of employee
stock options, from the date of issuance) on the original purchase price of such
share of Class A Common Stock when purchased from the Company (or in the case of
shares of Class A Common Stock received upon the exercise of employee stock
options, the exercise price of such options).
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3. Each share of Class B Common Stock will be allocated a number or
fractional number of shares of Associated Common Stock that, when multiplied by
the Daily Average Price, is equal to the original purchase price of such share
when purchased from the Company (or in the case of shares of Class B Common
Stock issued as executive compensation, equal to $0.10 per share).
4. Each share of Class B Common Stock will be allocated a number or
fractional number of shares of Associated Common Stock that, when multiplied by
the Daily Average Price, is equal to a return of six percent per year from
January 1, 1989 (or in the case of shares of Class B Common Stock issued as
executive compensation, from the date of issuance) on the original purchase
price of such share when purchased from the Company (or in the case of shares of
Class B Common Stock issued as executive compensation, on the amount of $0.10
per share).
5. The remaining unallocated shares of Associated Common Stock to be
issued in the Merger will be allocated equally between the shares of Class A
Common Stock and the shares of Class B Common Stock with each class receiving
50% of such remaining shares of Associated Common Stock and such shares will
then be distributed within each class on a per share basis.
The actual number of shares of Associated Common Stock to be received in
the Merger by a Participating Shareholder will depend primarily upon the number
of shares of Class A Common Stock or Class B Common Stock held by such
shareholder, the number of shares of Company Common Stock outstanding at the
Effective Time (there are currently outstanding employee stock options to
purchase up to an aggregate of 430,000 shares of Class A Common Stock that will
be exercisable prior to the Effective Time), whether the allocations to be made
in the second and fourth steps referred to above are calculated as of January 1,
1989 or a later date of issuance and the Daily Average Price.
It is assumed that all outstanding employee stock options will be exercised
prior to the Effective Time pursuant to "cashless exercises" under which the
number of shares of Class A Common Stock delivered to the optionees will be
reduced by so many shares as have a value equal to the exercise price for the
shares received. For illustrative purposes, if it were assumed that the
Effective Time of the Merger occurred on December 31, 1998 (the Merger Agreement
requires that the Merger be consummated after December 31, 1998 and on or before
January 25, 1999) and assuming that the Daily Average Price was calculated to be
$34.00 per share (the closing price on November 13, 1998 of a share of
Associated Common Stock reported on the Nasdaq National Market was $35.88), each
outstanding share of Class A Common Stock (other than shares of Class A Common
Stock issued after January 1, 1989 upon the exercise of employee stock options)
would be converted into 0.136587301 shares of Associated Common Stock and each
outstanding share of Class B Common Stock (other than shares of Class B Common
Stock issued as executive compensation) would be converted into 0.103934301
shares of Associated Common Stock. If it were assumed that the Average Daily
Price was calculated to be $30.00 per share, each outstanding share of Class A
Common Stock (other than shares of Class A Common Stock issued after January 1,
1989 upon the exercise of employee stock options) would be converted into
0.139973673 shares of Associated Common Stock and each outstanding share of
Class B Common Stock (other than shares of Class B Common Stock issued as
executive compensation) would be converted into 0.100967132 shares of Associated
Common Stock. Finally, if it were assumed that the Average Daily Price was
calculated to be $38.00 per share, each outstanding share of Class A Common
Stock (other than shares of Class A Common Stock issued after January 1, 1989
upon the exercise of employee stock options) would be converted into 0.13390092
shares of Associated Common Stock and each outstanding share of
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Class B Common Stock (other than shares of Class B Common Stock issued as
executive compensation) would be converted into 0.106291755 shares of Associated
Common Stock. The conversion factor for shares of Class A Common Stock issued
upon the exercise of employee stock options and for shares of Class B Common
Stock issued as executive compensation would vary from the examples described
above due to differences in issue date and exercise price.
The Merger Agreement provides that if, prior to the Effective Time,
Associated pays a stock dividend or makes a distribution on Associated Common
Stock in shares of Associated Common Stock or any security convertible into
Associated Common Stock or combines or subdivides the Associated Common Stock,
then the number of shares of Associated Common Stock issuable in the Merger will
be appropriately adjusted to reflect such stock dividend, distribution,
combination or subdivision.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
At the Effective Time and without any action on the part of Associated, the
Company or the holders of the Company Common Stock, each share of the Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares held by Company shareholders exercising their dissenters'
rights under the Minnesota Business Corporation Act (the "MBCA")) shall be
converted into the right to receive shares of Associated Common Stock. See "The
Merger - Dissenters' Rights." 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 stock certificate previously representing any
such shares of the Company Common Stock (other than shares held by dissenting
shareholders as described above) shall thereafter represent the right to receive
the shares of Associated Common Stock into which such Company Common Stock has
been converted. Certificates previously representing shares of the Company
Common Stock shall be exchanged for the shares of Associated Common Stock to
which such shares are entitled upon the surrender of such certificates as
provided below. No fractional share of Associated Common Stock shall be issued,
and, in lieu thereof, a cash payment shall be made as provided below.
As of the Effective Time, Associated shall deposit, or cause to be
deposited, with a bank or trust company designated by Associated (the "Exchange
Agent"), for the benefit of the holders of shares of the Company Common Stock
and for exchange in accordance with the terms of the Merger Agreement,
certificates representing the shares of Associated Common Stock and an estimated
amount of cash to make any cash payments in lieu of fractional shares (such
certificates for shares of Associated Common Stock to be exchanged for the
Company Common Stock, together with such cash amount the "Company Exchange
Fund") issuable pursuant to the terms of the Merger Agreement in exchange for
outstanding shares of the Company Common Stock.
As soon as reasonably practicable after the approval of the Merger by the
shareholders of the Company, the Exchange Agent shall mail to each holder of
record of a certificate which immediately prior to the Effective Time
represented outstanding shares of the Company Common Stock whose shares were
converted into the right to receive shares of Associated Common Stock, (i) a
letter of transmittal and (ii) instructions for use in effecting the surrender
of the certificates representing shares of the Company Common Stock in exchange
for certificates representing shares of Associated Common Stock. At the
Effective Time and upon surrender of a certificate previously representing
shares of the Company Common Stock to the Exchange Agent together with such duly
executed letter of transmittal, the holder of such certificate shall receive in
exchange therefor a certificate representing that number of whole shares of
Associated Common Stock to which such holder is entitled and cash in lieu of
fractional shares,
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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, the shares of Associated 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 the Company Common Stock shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
shares of Associated Common Stock to which the holder of such certificate is
entitled.
THE COMPANY 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.
No dividends or other distributions declared or made after the Effective
Time with respect to Associated 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 Associated 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 Associated Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of cash
payable with respect to a fractional share of Associated 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
Associated 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 Associated Common Stock.
The shares of Associated Common Stock issued upon conversion of the shares
of the Company Common Stock shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of the Company Common
Stock.
No certificates or scrip representing fractional shares of Associated
Common Stock shall be issued upon the surrender for exchange of the
certificates, and such fractional share interest will not entitle the owner
thereof to vote or to any rights as a shareholder of Associated. 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 average of the daily closing prices of a
share of Associated Common Stock as quoted on the Nasdaq National Market during
the ten consecutive trading day period ending three business days prior to the
Effective Time. 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 Associated and Associated 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 the Company for six months after the Effective Time shall be
delivered to Associated, upon demand, and any shareholders of the Company who
have not theretofore complied with the procedures described above shall
thereafter look only to Associated for payment of their claim for the shares of
Associated Common Stock and any dividends or distributions with respect to
Associated Common Stock.
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Neither Associated nor the Company shall be liable to any holder of
shares of the Company Common Stock for any such shares of the Company 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.
Associated shall be entitled to deduct and withhold from any cash
consideration payable pursuant to the Merger Agreement to any holder of shares
of the Company Common Stock such amounts as Associated 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 the Company shall be
closed, and there shall be no further registration of transfers of shares of the
Company Common Stock thereafter on said record books. From and after the
Effective Time, the holders of certificates shall cease to have any rights with
respect to such shares of the Company Common Stock except as otherwise provided
in the Merger Agreement, or by law. On or after the Effective Time, any
certificates presented to the Exchange Agent or Associated for any reason shall
be converted into the shares of Associated Common Stock to which the holder of
such certificate is entitled in accordance with the terms of the Merger
Agreement as described above.
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. 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 Associated and the Company 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 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.
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Associated 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 October 29, 1998.
Under the regulations of the Federal Reserve Board, the Federal Reserve
Bank will act on the application within the 30-day period that began on the date
the application was accepted for filing (a period that will be tolled by any
public comments or other circumstances that may trigger further request for
information from the Federal Reserve Bank). There can be no assurance that the
Federal Reserve Bank will continue processing the application under delegated
authority.
There can be no assurance that the Federal Reserve Board will approve
the Merger, and if the Merger is approved, there can be no assurance as to the
date of such approval.
Minnesota. The Merger is also subject to prior approval by the
Minnesota Department of Commerce Financial Examination Division (the "Minnesota
Department") under Section 48.93 of the Minnesota Statutes which requires that
the Minnesota Department take into consideration (i) the financial condition of
the acquiring institution; (ii) the competence, experience and integrity of the
management of the acquiring institution; (iii) whether the acquisition will
result in undue concentration of resources or substantial lessening of
competition in Minnesota; and (iv) the CRA compliance record of the acquiring
institution.
Associated filed an application with the Minnesota Department on
October 29, 1998. There can be no assurance that the Minnesota Department will
approve the Merger, and if the Merger is approved, there can be no assurance as
to the date of such approval. The Merger may be consummated at any time within
one year of the date approval is granted by the Minnesota Department (subject to
the foregoing federal approvals).
General. The Merger cannot proceed in the absence of all requisite
regulatory approvals. See "Certain Provisions of the Merger Agreement -
Conditions to Consummation of the Merger." In the Merger Agreement, Associated
and the Company 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.
Associated and the Company have also agreed to take all reasonable action
necessary to obtain approvals of the Federal Reserve Board, the Minnesota
Department 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 Associated 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 the Company to Associated. There can be no assurance that any regulatory
approvals will not contain a term or condition that causes such approvals to
fail to satisfy the conditions described above under "Certain Provisions of the
Merger Agreement - Conditions to Consummation of the Merger."
Associated and the Company 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.
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THE EFFECTIVE TIME
The Merger will be consummated and will become effective upon the
filing of Articles of Merger with the Department of Financial Institutions of
the State of Wisconsin and the Secretary of State of the State of Minnesota (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
is not consummated on or before January 25, 1999. Upon consummation of the
Merger, the Company will be merged into Associated and will not continue its
separate existence or operations, to which Associated as the surviving
corporation will succeed. See "Certain Provisions of the Merger Agreement -
Conditions to Consummation of the Merger" and "Certain Provisions of the Merger
Agreement - Termination."
DESCRIPTION OF ASSOCIATED COMMON STOCK ISSUABLE IN THE MERGER
The following description of Associated 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 Article III of Associated's Articles of Incorporation. The description
set forth below is subject in all respects to the Wisconsin Business Corporation
Law ("WBCL") and Associated's Articles of Incorporation.
THE FOLLOWING DESCRIPTION OF ASSOCIATED COMMON STOCK SHOULD BE READ
CAREFULLY BY THE COMPANY SHAREHOLDERS SINCE, AT THE EFFECTIVE TIME, THE COMPANY
SHAREHOLDERS MAY RECEIVE PART OR ALL OF THE MERGER CONSIDERATION IN THE FORM OF
SHARES OF ASSOCIATED COMMON STOCK.
General. Associated has one class of common stock, the Associated
Common Stock. Of the 100,000,000 shares of Associated Common Stock authorized,
62,414,785 shares were outstanding as of November 13, 1998, exclusive of shares
held in its treasury. Of the 750,000 shares of Associated preferred stock with a
par value of $1.00 per share authorized, none were issued and outstanding as of
November 13, 1998.
Dividend Rights. Dividends on Associated Common Stock will be payable
out of the assets of Associated legally available therefor as, if and when
declared by the Associated Board of Directors. No share of Associated Common
Stock is entitled to any preferential treatment with respect to dividends.
Voting Rights. Each holder of Associated Common Stock will be entitled
at each shareholders' meeting of Associated, as to each matter to be voted upon,
to cast one vote, in person or by proxy, for each share of Associated Common
Stock registered in his or her name on the stock transfer books of Associated.
Such voting rights are not cumulative.
Rights Upon Liquidation. Subject to the rights of holders of any
Associated preferred stock which may be issued from time to time, in the event
of liquidation, dissolution or winding up of Associated, whether voluntary or
involuntary, the holders of Associated Common Stock will be entitled to receive
all assets of Associated remaining for distribution to its shareholders, on a
pro rata basis.
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Miscellaneous. Shares of Associated Common Stock are not convertible
into shares of any other class of capital stock. Shares of Associated Common
Stock are not and will not be entitled to any preemptive or subscription rights.
The issued and outstanding shares of Associated Common Stock are fully paid and
nonassessable (except as otherwise provided under the WBCL).
COMPARISON OF SHAREHOLDER RIGHTS
The following is a summary of material differences between the rights
of holders of Company Common Stock and Associated Common Stock. As the Company
is incorporated under the laws of the State of Minnesota and Associated is
incorporated under the laws of the State of Wisconsin, rights of shareholders of
Associated and the Company have a number of significant differences. Differences
in the rights of shareholders of the Company and Associated generally arise from
the change in governing law as well as from differences between the provisions
of Associated's Articles of Incorporation and Bylaws and those of the Company.
Shareholders of the Company, whose rights are governed by the Company's Restated
Articles of Incorporation, By-laws and the MBCA will, on consummation of the
Merger, become shareholders of Associated. Their rights as Associated
shareholders will then be governed by Associated's Articles of Incorporation and
Bylaws and by the WBCL. The following is a summary of the material differences
between the rights of shareholders of the Company and the rights of shareholders
of Associated.
AUTHORIZED CAPITAL STOCK
The Company. Under the Company's Restated Articles of Incorporation,
the Company is authorized to issue up to 10,000,000 shares of Class A Common
Stock, par value $.01 per share, and up to 5,000,000 shares of Class B Common
Stock, par value $.01 per share. The shares of Class A Common Stock have certain
financial preferences in comparison to the shares of Class B Common Stock. The
holders of Class A Common Stock have one vote per share and the holders of Class
B Common Stock have two votes per share. The Company has no authorized shares of
preferred stock and the Company's Board of Directors has no authority to create
classes of preferred stock.
Associated. Under Associated's Articles of Incorporation, Associated is
authorized to issue 100,000,000 shares of common stock, par value $0.01 per
share and 750,000 shares of preferred stock, $1.00 par value. All shares of
Associated Common Stock are identical in rights and have one vote. For a
description of Associated Common Stock, see "Description of Associated Common
Stock Issuable in the Merger." The preferred stock shall be cumulative and
dividends shall accrue thereon. The Board of Directors may divide the preferred
stock into series and establish the relative rights and preferences of preferred
stock issued in the future as specified in Associated's Articles of
Incorporation without shareholder action and issue such stock in series. As of
the date hereof, no shares of any series of Associated preferred stock are
issued and outstanding.
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APPRAISAL RIGHTS AND DISSENTERS' RIGHTS
The Company. Under the MBCA, shareholders have the right, in some
circumstances, to dissent from certain corporate transactions by demanding
payment in cash for their shares equal to the fair value of the shares as
determined by agreement with the corporation or by a court. The MBCA, in
general, affords dissenters' rights in the event of certain amendments to the
articles of incorporation that materially and adversely affect the rights or
preferences of the shares of the dissenting shareholder, the sale or other
disposition of substantially all corporate assets, or certain mergers and
statutory share exchanges involving the corporation, regardless of whether the
shares of the corporation are listed on a national securities exchange or widely
held. Shareholders of the Company have the right to dissent from the Merger. See
"The Merger - Dissenters' Rights."
Associated. Dissenters' rights under the WBCL are not available to
holders of shares, such as shares of Associated Common Stock, which are
registered on a national securities exchange or quoted on Nasdaq on the record
date filed to determine shareholders entitled to notice of the meeting at which
shareholders are to vote on the proposed corporate action. Associated Common
Stock is quoted on the Nasdaq National Market.
REQUIRED VOTE
The Company. Under the MBCA, the Company's Restated Articles of
Incorporation generally can be amended if the proposed amendment is approved by
the Company's Board of Directors and by holders of a majority of the voting
power of the shares of the Company Common Stock present and entitled to vote at
a meeting. Under the MBCA, the affirmative vote of a majority of the voting
power of all shares of the Company Common Stock is required to approve mergers
and certain other extraordinary transactions. In addition, under certain
circumstances under the MBCA, the affirmative vote of a majority of the voting
power of some or all classes of shares of the Company Common Stock is required
to approve amendments to the Company's Restated Articles of Incorporation, share
exchanges and mergers.
Associated. Pursuant to 180.1706(1) of the WBCL, except as otherwise
provided in a corporation's articles of incorporation or bylaws, any amendment
to the articles of incorporation, merger or certain other extraordinary events
involving a corporation organized before January 1, 1973, which did not
expressly elect before January 1, 1991 to be governed by a majority or greater
voting requirement, must be approved by the affirmative vote of two-thirds of
the shares entitled to vote at a meeting called for that purpose. Associated's
Articles of Incorporation were amended in 1992 to reduce the vote required
pursuant to Section 180.1706(1) of the WBCL to a majority vote. Thus, the
affirmative vote of a majority of the shares of Associated is required to adopt
amendments to Associated's Articles of Incorporation which create dissenters'
rights or approve mergers and certain other extraordinary transactions other
than those described in "Comparison of Shareholder Rights - Certain Business
Combinations."
CLASSIFIED BOARD OF DIRECTORS
The Company. The Company's Board of Directors consists of a single
class of directors, each of whom serves for one year or until his or her
successor is elected and qualified.
Associated. The Board of Directors of Associated is divided into three
classes as nearly equal in number as possible, with the directors in each class
serving for staggered three-year terms. However, Associated's Bylaws require
that a director retire as of the first annual meeting
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of shareholders subsequent to the director's 65th birthday unless such
director's term is extended for a one-year term by a two-thirds vote of
Associated's Board of Directors. At each annual meeting of Associated's
shareholders, the successors to the class of directors whose term expires at the
time of such meeting are elected by a majority of the votes cast, assuming a
quorum is present. Associated's Board of Directors consists of 14 directors.
REMOVAL OF DIRECTORS
The Company. The Company's By-laws provide that a director may be
removed from office "for cause or without cause" by a vote of shareholders. In
addition, under the MBCA, a director may be removed, with or without cause, by a
majority of the remaining directors if the director was named by the board to
fill a vacancy and the shareholders have not elected directors in the interval
between the time of appointment to fill a vacancy and the time of the removal.
Associated. Shareholders of Associated may remove a director only for
"cause." "Cause" is defined as conviction of a felony, declaration of unsound
mind by an order of a court of competent jurisdiction, gross dereliction of duty
or commission of an action which constitutes intentional misconduct or a knowing
violation of law and that results in both an improper substantial personal
benefit and a material injury to Associated.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES ON THE BOARD OF DIRECTORS
The Company. Under the MBCA, unless a corporation's articles of
incorporation or by-laws provide otherwise, (i) a vacancy on a corporation's
board of directors resulting from the death, resignation, removal or
disqualification of a director may be filled by the vote of a majority of
directors then in office, although less than a quorum, (ii) a newly created
directorship resulting from an increase in the number of directors may be filled
by the vote of a majority of the directors serving at the time of the increase
and (iii) in either case, any director so elected shall hold office only until a
qualified successor is elected at the next regular or special meeting of
shareholders. The Company's Restated Articles of Incorporation and By-laws
follow these provisions.
Associated. Associated's Articles of Incorporation provide that newly
created directorships and any vacancies on Associated's Board of Directors may
only be filled by the Board of Directors. Associated's Bylaws provide that the
remaining members of Associated's Board of Directors shall appoint a director in
accordance with the WBCL.
CERTAIN BUSINESS COMBINATIONS
The Company. The Company's Articles of Incorporation and By-laws do not
contain any supermajority voting provisions relating to the approval by holders
of the Company Common Stock of mergers or other business combinations. Minnesota
has enacted legislation aimed at regulating takeovers of certain corporations
and protecting shareholders of such corporations in connection with certain
business combinations. In its Restated Articles of Incorporation, the Company
has opted out of the two primary provisions of this nature, namely, the business
combination provision and the control share acquisition provision.
Associated. Article VII of Associated's Articles of Incorporation
provides that an affirmative vote of 80% of Associated's outstanding shares is
required to approve a merger or other business combination involving a
beneficial owner of 10% or more of Associated's outstanding voting shares (an
"interested shareholder"). In addition, if the consideration offered
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in connection with such transaction does not satisfy certain "fair price"
requirements, the affirmative vote of 80% of the "non-interested outstanding
shares" (defined as voting shares not beneficially owned by an interested
shareholder) of Associated will also be required to approve such a transaction.
These requirements do not apply if (a) the board of directors approves the
transaction and a majority of the directors voting to approve the transaction
are "continuing directors" (defined as a director who was either (i) a director
at the time the interested shareholder became "interested" and who is not
otherwise affiliated with such shareholder, or (ii) a director designated (prior
to his or her initial election as a director) as a continuing director by a
majority of the then continuing directors or (b) the transaction is between
Associated and a subsidiary of Associated and no interested shareholder
(together with such shareholder's affiliates and associates) owns any of the
outstanding shares of the subsidiary. The foregoing provision may only be
amended, modified or repealed by the affirmative vote of not less than 80% of
the outstanding shares and the non-interested outstanding shares of Associated.
ADVANCE NOTICE OF PROPOSALS TO BE BROUGHT AT THE ANNUAL MEETING
The Company. The Company's Restated Articles of Incorporation and By-
laws do not contain any provisions relating to advance notice of proposals to be
brought before an annual meeting.
Associated. Pursuant to Article II, Section 5 of Associated's Bylaws,
any shareholder who intends to bring business before an annual meeting of
shareholders (other than nominations for directors) must provide Associated with
notice of such intention, the nature of such proposal and certain other
information regarding the shareholder bringing the proposal, not less than 60
nor more than 75 days prior to the meeting, or within 10 days from the date
notice or public disclosure of the date of such meeting is given, if such
announcement date is less than 70 days before the meeting date.
ADVANCE NOTICE OF NOMINATIONS OF DIRECTORS
The Company. The Company's Restated Articles of Incorporation and By-
laws do not contain any provisions relating to advance notice of nominations of
directors.
Associated. Pursuant to Article II, Section 6 of Associated's Bylaws,
any shareholder who intends to nominate directors for election at a meeting
called for that purpose must provide Associated with notice of such intention,
certain information regarding the proposed nominee and certain information
regarding the nominating shareholder, not less than 60 days nor more than 75
days prior to the meeting, or within 10 days from the date notice or public
disclosure of the date of such meeting is publicly announced, if such
announcement date is less than 70 days before the meeting date.
CALL OF SHAREHOLDERS' MEETINGS
The Company. Under the MBCA, holders of 10% or more of all the
outstanding shares entitled to vote have the right to demand a special
shareholders' meeting, except that a special meeting for the purpose of
considering whether to directly or indirectly facilitate or effect a business
combination must be called by holders of 25% or more of the outstanding shares.
Associated. Under the WBCL, holders of 10% or more of all the
outstanding shares entitled to vote have the right to demand a special
shareholders' meeting.
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SHAREHOLDER ACTION WITHOUT A MEETING
The Company. Under the MBCA, any action which may be taken by the
shareholders at a meeting may be taken without a meeting only by unanimous
written consent of all shareholders entitled to vote on the action.
Associated. Under the WBCL, any action which may be taken by the
shareholders at a meeting may be taken without a meeting only by unanimous
written consent of all shareholders entitled to vote on the action, unless the
articles of incorporation permit approval by the consent of the shareholders who
would be entitled to cast not less than the minimum number of votes that would
be necessary to authorize or take the action at a meeting at which all shares
entitled to vote were present and voted. Associated's Articles of Incorporation
do not contain a provision permitting less than unanimous written consent to
take action without a meeting.
DIVIDENDS; STOCK REPURCHASES
The Company. Under the MBCA, a corporation may pay dividends or
repurchase shares if the corporation will be able to pay its debts in the
ordinary course of business after paying the dividend or repurchasing the
shares, regardless of whether the corporation has surplus or net profits,
subject to certain limitations for the benefit of certain preference shares.
Associated. Under the WBCL, a corporation may pay dividends, repurchase
shares or make other distributions to its shareholders unless, after giving
effect to such dividend, repurchase or other distribution, (i) the corporation
would not be able to pay its debts as they become due in the ordinary course of
business, or (ii) the corporation's total assets would be less than the sum of
total liabilities plus the amount that would be needed, if the corporation were
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
The Company. Unless limited by the articles of incorporation or by-laws
of a corporation, the MBCA provides for mandatory indemnification of a director,
officer, employee or committee member against certain liabilities and expenses
if such person (i) acted in good faith; (ii) received no improper personal
benefit; (iii) in the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful; and (iv) depending upon the capacity in which
such person was serving, either believed the conduct was in the best interests
of the corporation or believed that the conduct was not opposed to the best
interests of the corporation. The Company's By-laws provide for indemnification
of its directors and officers to the extent permitted by the MBCA.
Associated. Unless limited by the articles of incorporation of the
corporation, the WBCL provides for mandatory indemnification of 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, if such person was a party to such proceeding because he or she was
a director or officer of the corporation. In all other cases, the corporation
must 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 corporation, unless liability was incurred because he or she breached or
failed to perform a duty owed to the corporation and such breach or failure to
perform constitutes: (i) a willful failure to deal fairly with the corporation
or its shareholders in connection with a matter in which the director or officer
has a material
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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. Associated's Articles of Incorporation contain no provisions
limiting the indemnification of directors and officers of Associated and
Associated's Bylaws authorize indemnification of officers and directors of
Associated consistent with the description of the indemnification provisions in
the WBCL as described above.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
The Company. The MBCA permits a corporation to eliminate a director's
personal liability to the corporation or its shareholders for monetary damages
for breach of fiduciary duty, except for conduct involving: (i) any breach of
the director's duty of loyalty to the corporation or its shareholders; (ii) acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law; (iii) declarations of illegal distributions and
certain violations of Minnesota securities laws; or (iv) participation in a
transaction from which the director received an improper personal benefit. The
Company's Restated Articles of Incorporation eliminate the liability of
directors to the fullest extent permitted by the MBCA.
Associated. Unless limited by the articles of incorporation of the
corporation, the WBCL provides for the elimination of a director's personal
liability to the corporation or its shareholders for monetary damages for breach
of fiduciary duty, unless the person asserting liability proves that the breach
constitutes any of the following: (i) a willful failure to deal fairly with the
corporation or its shareholders in connection with a matter in which the
director or officer has a material conflict of interest; (ii) a violation of
criminal law, unless the 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. Associated's Articles of
Incorporation contain no provisions limiting the foregoing provision of the
WBCL.
RESALE OF ASSOCIATED COMMON STOCK ISSUED PURSUANT TO THE MERGER
The Associated Common Stock issued pursuant to the Merger will be
registered under the Securities Act of 1933, as amended (the "Securities Act")
and be freely tradable under the Securities Act except for shares issued to any
shareholder of the Company who may be deemed to be an "affiliate" of the Company
for purposes of Rule 145 under the Securities Act. Each affiliate identified by
the Company will enter into an agreement with Associated providing that such
affiliate will be subject to Rule 145(d) of the Securities Act, and shall not
transfer any Associated Common Stock received in the Merger except in compliance
with the Securities Act. This Proxy Statement/Prospectus does not cover resales
of Associated Common Stock received by any person who may be deemed to be an
affiliate of the Company. The Company has concluded that the only affiliates of
the Company are its directors and executive officers, the directors of the Bank
and Ralph Strangis.
PRE-MERGER DIVIDEND POLICY
The Company. Pursuant to the Merger Agreement, the Company 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 Associated.
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Associated. Associated 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 Associated to
continue to declare cash dividends on the Associated Common Stock following the
Merger. The dividend is currently in the amount of $0.29 per quarter or $1.16
per year, in each case per share. Shareholders should note that no such
dividends payable following the date hereof have currently been declared and
that future dividends will be determined by the Associated Board of Directors in
light of the earnings and financial condition of Associated and its subsidiaries
and other factors, including applicable governmental regulations and policies.
In that regard, Associated is a legal entity separate and distinct from its
banking and non-banking subsidiaries, and the principal sources of Associated's
income are dividends and interest from such subsidiaries. The payment of
dividends by Associated's banking subsidiaries is subject to certain
restrictions under applicable governmental regulations. See also "The Merger -
Pre-Merger Dividend Policy."
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, the Company 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 the Company in the Merger Agreement. See "Certain
Provisions of the Merger Agreement - Certain Covenants."
CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Associated and the Company have received an opinion of Reinhart,
Boerner, Van Deuren, Norris & Rieselbach, s.c. that the Merger will qualify as a
tax-free reorganization under Section 368(a)(1)(A) of the Code and that each of
Associated and the Company will be a party to such reorganization within the
meaning of Section 368(b) of the Code. Accordingly, the Company and Associated
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 the Company
Common Stock upon receipt of Associated Common Stock pursuant to the Merger
(except upon the receipt of cash in lieu of fractional shares of Associated
Common Stock or consideration received as a result of the exercise of
dissenters' rights). 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 Reinhart, Boerner, Van Deuren, Norris & Rieselbach, 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. The tax treatment of each holder of Company Common
Stock will depend in part upon such shareholder's particular situation. Special
tax consequences not described below may be applicable to particular classes of
taxpayers, including financial institutions, insurance companies, tax-exempt
organizations, broker-dealers, persons who are not citizens or residents of the
United States or who are legal entities formed under the laws of jurisdictions
outside the United States, and holders of Company Common Stock who acquired
their shares through the
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exercise of employee stock options or otherwise as compensation. This discussion
also assumes that the holders of Company Common Stock hold their Common Stock as
a capital asset.
EACH SHAREHOLDER OF THE COMPANY 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 Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, 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 the Company will result from the Merger:
(i) Provided that the Merger of the Company with and into
Associated qualifies as a statutory merger under applicable law, the
Merger will qualify as a reorganization within the meaning of Sections
368(a)(1)(A) of the Code, and the Company and Associated 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 the
Company Common Stock upon the exchange of the Company Common Stock
solely for Associated Common Stock pursuant to the Merger, except with
respect to cash received in lieu of fractional shares of Associated
Common Stock or consideration received as a result of the exercise of
dissenters' rights. The conclusion discussed in this paragraph is based
in part on private letter rulings which are not binding on the Service,
although the private letter rulings do illustrate a consistent rulings
position by the Service. Due to the absence of authority that is
binding on the Service with respect to this matter, it is possible that
the Service would argue that the portion of the Associated Common Stock
received by the holders of Company Common Stock which is attributable
to the liquidation preference in the Company's Articles of
Incorporation (to the extent measured by the amount of accumulated and
unpaid dividends) represents the receipt of a dividend and is not tax-
free. However, Reinhart, Boerner, Van Deuren, Norris, & Rieselbach,
S.C. believes, based on the authorities cited in its opinion and other
authorities on which it relies, that the receipt of Associated Common
Stock attributable to the liquidation preference is to be accorded the
same treatment as Associated Common Stock for underlying Company Common
Stock.
(iii) A Company shareholder's aggregate basis in the Associated
Common Stock (including any fractional share interest to which he or
she may be entitled) received in the Merger will be the same as the
aggregate basis of the Company Common Stock exchanged therefor.
(iv) The holding period of the Associated Common Stock received
by a holder of Company Common Stock pursuant to the Merger will include
the period during which the Company Common Stock exchanged therefor was
held, provided that the Company Common Stock surrendered was held as a
capital asset as of the time of the Merger.
(v) The receipt by a holder of Company Common Stock of cash in
lieu of a fractional share of Associated Common Stock will be treated
as if he or she received such fractional share from Associated 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.
In rendering its tax opinion, Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, s.c. will rely on certain written representations as to factual
matters made by appropriate officers of Associated and the Company. Such
representations are customary for opinions of this type; however, this tax
opinion cannot be relied upon if any such representation is, or later becomes,
inaccurate.
Backup Withholding. Any cash received in the Merger by a holders of
Company Common Stock may be subject to backup withholding at a rate of 31%.
Backup withholding will
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not apply, however, to a taxpayer who (i) furnishes a correct taxpayer
identification number ("TIN") and certifies that he or she is not subject to
backup withholding on Form W-9 (or an appropriate substitute form), (ii)
provides a certificate of foreign status on Form W-8 (or an appropriate
substitute form), or (iii) is otherwise exempt from backup withholding. The
Service may impose a $50 penalty upon any taxpayer who fails to provide the
correct TIN, as required.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT
TO BE A COMPLETE ANALYSIS OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION OF
A SHAREHOLDER OF THE COMPANY WHETHER TO VOTE IN FAVOR OF THE MERGER. BECAUSE
CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH HOLDER OF COMPANY COMMON STOCK, EACH HOLDER IS URGED TO
CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES
TO SUCH HOLDER OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE,
LOCAL AND FOREIGN TAX LAWS.
The foregoing is only a general description of certain material federal
income tax consequences of the Merger for holders of the Company 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 Company Common Stock. It does not discuss
all of the consequences that may be relevant to holders of the Company 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 Agreements 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 Associated and the Company will be carried forward to the combined
corporation at their recorded amounts; income of the combined corporation will
include income of Associated and the Company 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 Associated to the effect that the Merger qualifies for "pooling of interests"
accounting treatment and the receipt of the opinion of the independent public
accountants of the Company to the effect that the Company qualifies to have the
Merger accounted for as a pooling of interests. IN THE EVENT SUCH CONDITION IS
NOT MET, THE MERGER WOULD NOT BE CONSUMMATED UNLESS THE CONDITION WERE WAIVED BY
ASSOCIATED.
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DISSENTERS' RIGHTS
Sections 302A.471 and 302A.473 of the MBCA provide to each shareholder
the right to dissent from the Merger, and obtain payment for the "fair value" of
such shareholder's shares following the consummation of the Merger.
The following summary of the applicable provisions of Sections 302A.471
and 302A.473 of the MBCA is not intended to be a complete statement of such
provisions and is qualified in its entirety, by reference to such sections, the
full texts of which are attached as Exhibit B to this Proxy
Statement/Prospectus. These sections should be reviewed carefully by any
shareholder who wishes to exercise dissenters' rights or who wishes to preserve
the right to do so, since failure to comply with the procedures set forth herein
or therein will result in the loss of dissenters' rights.
Under the MBCA, holders of Company Common Stock will have the right, by
fully complying with the applicable provisions of Sections 302A.471 and
302A.473, to dissent with respect to the Merger and to receive from Associated
as the surviving corporation in the Merger (the "Surviving Corporation") payment
in cash of the "fair value" of their shares of Company Common Stock after the
Merger is completed. The term "fair value" means the value of the shares of
Company Common Stock immediately before the Effective Time.
All references in Sections 302A.471 and 302A.473 and in this summary to
a "shareholder" are to a record holder of the shares of Company Common Stock as
to which dissenters' rights are asserted. A person having beneficial ownership
of shares of Company Common Stock that are held of record in the name of another
person, such as a broker, nominee, trustee or custodian, must act promptly to
cause the record holder to follow the steps summarized below properly and in a
timely manner in order to perfect whatever dissenters' rights such beneficial
owner may have.
Shareholders of record who desire to exercise their dissenters' rights
must satisfy all of the following conditions. A written notice of intent to
demand fair value for shares must be delivered to the executive offices of the
Company before the taking of the shareholder vote on the Merger. This written
demand must be in addition to and separate from any proxy or vote against the
Merger. Voting against, abstaining from voting or failing to vote on the Merger
does not constitute a demand for appraisal within the meaning of the MBCA.
Shareholders electing to exercise their dissenters' rights under the
MBCA must not vote for adoption of the Merger. A shareholder's failure to vote
against the Merger will not constitute a waiver of dissenters' rights. However,
if a shareholder returns a signed proxy but does not specify a vote against
adoption of the Merger or direction to abstain, the proxy will be voted for
adoption of the Merger, which will have the effect of waiving that shareholder's
dissenters' rights.
Company shareholders may not assert dissenters' rights as to less than
all of the shares registered in such holder's name except where certain shares
are beneficially owned by another person but registered in such holder's name.
If a record owner, such as a broker, nominee, trustee or custodian, wishes to
dissent with respect to shares beneficially owned by another person, such
shareholder must dissent with respect to all of such shares and must disclose
the name and address of the beneficial owner on whose behalf the dissent is
made. A beneficial owner of shares of Company Common Stock who is not the record
owner of such shares may assert dissenters' rights as to shares held on such
person's behalf, provided that such beneficial
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owner submits a written consent of the record owner to the Company at or before
time such rights are asserted.
A shareholder who elects to exercise dissenters' rights must send his
or her written demand, before the taking of the vote on the Merger, to the
Secretary of Windsor Bancshares, Inc., 740 Marquette Avenue, Minneapolis,
Minnesota 55402. The written demand should specify the shareholder's name and
mailing address, the number of shares owned and that the shareholder intends to
demand the value of his or her shares.
After approval of the Merger by the shareholders at the Special
Meeting, the Surviving Corporation will send a written notice to each
shareholder who filed a written demand for dissenters' rights. The notice will
contain the address to which the shareholder shall send a demand for payment and
the stock certificates in order to obtain payment and the date by which they
must be received, a form to be used in connection therewith and other related
information.
In order to receive fair value for his or her shares, a dissenting
shareholder must, within 30 days after the date such notice was given, send his
or her stock certificates, and all other information specified in the notice
from the Surviving Corporation, to the address specified in such notice. A
dissenting shareholder will retain all rights as a shareholder until the
Effective Time. After a valid demand for payment and the related stock
certificates and other information are received, or after the Effective Time,
whichever is later, the Surviving Corporation will remit to each dissenting
shareholder who has complied with statutory requirements the amount that the
Surviving Corporation estimates to be the fair value of such shareholder's
shares, with interest commencing five days after the Effective Time at a rate
prescribed by statute. Remittance will be accompanied by the Surviving
Corporation's closing balance sheet and statement of income for a fiscal year
ending not more than 16 months before the Effective Time, together with the
latest available interim financial data, an estimate of the fair value of the
shareholder's shares and a brief description of the method used to reach the
estimate, a brief description of the procedure to be followed if such holder is
demanding supplemental payment and copies of Sections 302A.471 and 302A.473 of
the MBCA.
If the dissenting shareholder believes that the amount remitted by the
Surviving Corporation is less than the fair value of such holder's shares, plus
interest, the shareholder may give written notice to the Surviving Corporation
of such holder's own estimate of the fair value of the shares, plus interest,
within 30 days after the mailing date of the remittance and demand payment of
the difference. Such notice must be given at the executive offices of Company at
the address set forth above. A shareholder who fails to give such written notice
within this time period is entitled only to the amount remitted by the Surviving
Corporation.
Within 60 days after receipt of a demand for supplemental payment, the
Surviving Corporation must either pay the shareholder the amount demanded or
agreed to by such shareholder after discussion with the Surviving Corporation or
petition a court for the determination of the fair value of the shares, plus
interest. The petition must name as parties all shareholders who have demanded
supplemental payment and have not reached an agreement with the Surviving
Corporation. The court, after determining that the shareholder or shareholders
in question have complied with all statutory requirements, may use any valuation
method or combination of methods it deems appropriate to use, whether or not
used by the Surviving Corporation or the dissenting shareholder, and may appoint
appraisers to recommend the amount of the fair value of the shares. The court's
determination will be binding on all Company shareholders who properly exercised
dissenters' rights and did not agree with the Surviving Corporation as to the
fair value of the shares. Dissenting shareholders are entitled to
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judgment for the amount by which the court-determined fair value per share, plus
interest, exceeds the amount per share, plus interest, remitted to the
shareholders by the Surviving Corporation. The shareholders shall not be liable
to the Surviving Corporation for any amounts paid by the Surviving Corporation
which exceed the fair value of the shares as determined by the court, plus
interest. The costs and expenses of such a proceeding, including the expenses
and compensation of any appraisers, will be determined by the court and assessed
against the Surviving Corporation, except that the court may, in its discretion,
assess part or all of those costs and expenses against any shareholder whose
action in demanding supplemental payment is found to be arbitrary, vexatious or
not in good faith. The court may award fees and expenses to an attorney for the
dissenting shareholders out of the amount, if any, awarded to such shareholders.
Fees and expenses of experts or attorneys may also be assessed against any
person who acted arbitrarily, vexatiously or not in good faith in bringing the
proceeding.
The Company may withhold the remittance of the estimated fair value,
plus interest, for any shares owned by any person who was not a shareholder or
who is dissenting on behalf of a person who was not a beneficial owner on
October 1, 1998, the date on which the proposed Merger was first announced to
the public (the "Public Announcement Date"). The Surviving Corporation will
forward to any such dissenting shareholder who has complied with all
requirements in exercising dissenters' rights the notice and all other materials
sent after shareholder approval of the Merger to all shareholders who have
properly exercised dissenters' rights, together with a statement of the reason
for withholding the remittance and an offer to pay the dissenting shareholder
the amount listed in the materials if the shareholder agrees to accept that
amount in full satisfaction. The shareholder may decline this offer and demand
payment by following the same procedure as that described for demand of
supplemental payment by shareholders who owned their shares as of the Public
Announcement Date. Any shareholder who did not own shares on the Public
Announcement Date and who fails properly to demand payment will be entitled only
to the amount offered by the Company. Upon proper demand by any such
shareholder, rules and procedures applicable in connection with receipt by the
Company of the demand for supplemental payment given by a dissenting shareholder
who owned shares on the Public Announcement Date will also apply to any
shareholder properly giving a demand but who did not own shares of record or
beneficially on the Public Announcement Date, except that any such shareholder
is not entitled to receive any remittance from the Company until the fair value
of the shares, plus interest, has been determined pursuant to such rules and
procedures.
Shareholders considering exercising dissenters' rights should bear in
mind that the fair value of their shares determined under Sections 302A.471 and
302A.473 of the MBCA could be more than, the same as or, in certain
circumstances, less than the consideration they would receive pursuant to the
Merger Agreement if they do not seek appraisal of their shares.
Cash received pursuant to the exercise of dissenters' rights may be
subject to federal or state income tax. See "The Merger - Certain Material
Federal Income Tax Consequences."
ANY HOLDER WHO FAILS TO COMPLY FULLY WITH THE STATUTORY PROCEDURE
SUMMARIZED ABOVE WILL FORFEIT HIS OR HER RIGHTS OF DISSENT AND WILL RECEIVE THE
MERGER CONSIDERATION FOR HIS OR HER SHARES. SEE EXHIBIT B.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
John F. Crinklaw, Executive Vice President and Director of the Company,
holds currently unvested employee stock options to purchase 65,625 shares of
Class A Common Stock, Edward O. Hanson, Jr., Vice President and Treasurer of the
Company, holds currently unvested employee stock options to purchase 32,812
shares of Class A Common Stock, and Peter E. Dahl, Executive Vice President,
Chief Operating Officer and a Director of the Bank, holds currently unvested
employee stock options to purchase 136,000 shares of Class A Common Stock. These
options, in accordance with their terms, will become exercisable 30 days prior
to the consummation of the Merger.
OTHER RELATED PARTY TRANSACTIONS
In the ordinary course of conducting their banking and financial
services businesses, each of Associated, the Company and their respective
subsidiaries, may do business and engage in banking transactions with the other
party and its subsidiaries, which may include but not be limited to interests or
participation in loans and interbank advances.
MANAGEMENT AFTER THE MERGER
In the Merger, the Company will be merged into Associated and the
separate corporate existence of the Company will cease.
The officers and directors of Associated 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 Exhibit A to this Proxy Statement/Prospectus.
The Merger Agreement 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 the Company and the satisfaction or
waiver of the other conditions to the Merger, the Company will be merged with
and into Associated. If the Merger Agreement is approved by the shareholders of
the Company, the Merger will become effective upon the Effective Time.
Under the Merger Agreement, the Participating Shareholders will receive
an aggregate of up to 800,000 shares of Associated Common Stock. The actual
number of shares of Associated Common Stock to be issued will depend upon the
number of shareholders, if any, who exercise dissenters' rights and the amount
of cash paid by Associated in lieu of fractional shares of Associated Common
Stock. The shares of Associated Common Stock to be issued in the Merger will be
allocated among the Participating Shareholders in the same manner as the
Articles Allocation. Each share of Associated Common Stock to be issued in the
Merger will be deemed to have a value equal to the Daily Average Price for
purposes of calculating both the
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cash value of the aggregate proceeds to be received by all Participating
Shareholders and the number of shares of Associated Common Stock each
Participating Shareholder is to receive. Applying the Daily Average Price to the
Articles Allocation, the shares of Associated Common Stock will be allocated
among the Participating Shareholders in the following manner:
1. Each share of Class A Common Stock will be allocated a number or
fractional number of shares of Associated Common Stock that, when multiplied by
the Daily Average Price, is equal to the original purchase price of such share
of Class A Common Stock when purchased from the Company (or in the case of
shares of Class A Common Stock received upon the exercise of employee stock
options, the exercise price of such options).
2. Each share of Class A Common Stock will be allocated a number or
fractional number of shares of Associated Common Stock that, when multiplied by
the Daily Average Price, is equal to a return of six percent per year from
January 1, 1989 (or in the case of shares issued upon the exercise of employee
stock options, from the date of issuance) on the original purchase price of such
share of Class A Common Stock when purchased from the Company (or in the case of
shares of Class A Common Stock received upon the exercise of employee stock
options , the exercise price of such options).
3. Each share of Class B Common Stock will be allocated a number or
fractional number of shares of Associated Common Stock that, when multiplied by
the Daily Average Price, is equal to the original purchase price of such share
when purchased from the Company (or in the case of shares of Class B Common
Stock issued as executive compensation, equal to $0.10 per share).
4. Each share of Class B Common Stock will be allocated a number or
fractional number of shares of Associated Common Stock that, when multiplied by
the Daily Average Price, is equal to a return of six percent per year from
January 1, 1989 (or in the case of shares of Class B Common Stock issued as
executive compensation, from the date of issuance) on the original purchase
price of such share when purchased from the Company (or in the case of shares of
Class B Common Stock issued as executive compensation, on the amount of $0.10
per share).
5. The remaining unallocated shares of Associated Common Stock to be
issued in the Merger will be allocated equally between the shares of Class A
Common Stock and the shares of Class B Common Stock with each class receiving
50% of such remaining shares of Associated Common Stock and such shares will
then be distributed within each class on a per share basis.
The actual number of shares of Associated Common Stock to be received
in the Merger by a Participating Shareholder will depend primarily upon the
number of shares of Class A Common Stock or Class B Common Stock held by such
shareholder, the number of shares of Company Common Stock outstanding at the
Effective Time (there are currently outstanding employee stock options to
purchase up to an aggregate of 430,000 shares of Class A Common Stock that will
be exercisable prior to the Effective Time), whether the allocations to be made
in the second and fourth steps referred to above are calculated as of January 1,
1989 or a later date of issuance and the Daily Average Price. See "The Merger -
Merger Consideration."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties
relating to, among other things, (i) each of Associated's and the Company's and
their respective subsidiaries'
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organization and similar corporate matters; (ii) each of Associated's and the
Company's capital structure; (iii) authorization, execution, delivery,
performance and enforceability of the Merger Agreement and other related
matters; (iv) documents filed by Associated with the Securities and Exchange
Commission (the " Commission") and each of Associated and the Company 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 Associated and the Company 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 in filings by Associated with the Commission and the Company
in the regulatory reports; (viii) filing of tax returns and payment of taxes;
(ix) certain material contracts and contracts relating to certain employment,
consulting and benefits matters of the Company; (x) matters relating to
retirement and other employee plans of the Company; (xi) the absence of any
burdensome contracts, agreements or restrictions; (xii) absence of certain
material changes or events since December 31, 1997, relating to the occurrence
of a material adverse effect in the business operations, properties (including
intangible properties), condition (financial or otherwise), assets or
liabilities (including contingent liabilities) of Associated or its
subsidiaries, taken as a whole, and the Company or its subsidiaries, taken as a
whole; (xiii) maintenance by the Company 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 reorganization under Section
368(a)(1)(A) of the Code; (xv) certain environmental matters relating to the
properties of the Company; (xvi) good title to the properties of the Company and
its subsidiaries, free of liens except as specified; (xvii) certain insurance
matters relating to the Company; and (xviii) absence of substandard or related
party loans by the Bank.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, Associated and the Company 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.
Pursuant to the Merger Agreement, the Company has also agreed that
prior to the Effective Time (and unless the prior written consent of Associated
shall have been obtained) the Company and its subsidiaries will (i) carry on
their business only in the usual, regular and ordinary course consistent with
past practices; (ii) use reasonable efforts to preserve intact their business
organization and assets, maintain their rights and franchises, retain the
services of their officers and key employees and maintain their relationships
with customers; (iii) use reasonable efforts to maintain and keep their
properties good repair and condition; (iv) use reasonable efforts to keep
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 their assets, properties, and business; (vi) comply
with and perform in all material respects all obligations and duties imposed by
all applicable laws; (vii) purchase and sell securities and other investments in
accordance with certain guidelines; (viii) comply with certain capital
requirements; and (ix) maintain as of December 31, 1998 and thereafter an
aggregate loan loss reserve of not less than 1.5% of period ending loans
(excluding overdrafts less than 30 days old).
The Company has also agreed that prior to the Effective Time (and
unless the prior written consent of Associated shall have been obtained),
neither the Company nor its subsidiaries will: (i) grant any general increase in
compensation (except in accordance with past practice or
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as required by law or increases which are not material), effect any change in
retirement benefits to any class of employees or officers (unless required by
applicable law) which would increase its retirement benefit liabilities, adopt,
enter into, amend or modify any employee benefit plan or make any adjustments
pursuant to any employee benefit plan, or 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; (ii) declare or
pay any dividend on, or make any other distribution in respect of, its
outstanding shares of capital stock; (iii) 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; (iv) 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, purchase or otherwise acquire any assets or stock of any
corporation, bank or other business, liquidate, sell, dispose of, or encumber
any assets or acquire any assets, other than in the ordinary course of its
business consistent with past practice, or 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; (v) 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 (except that the Company may, prior to the
Effective Time, issue up to 430,000 shares of Class A Common Stock under the
Company's existing stock option plan); (vi) propose or adopt any amendments to
its corporate charter or Bylaws in any way materially adverse to Associated;
(vii) purchase any shares of Associated Common Stock (except in fiduciary
capacities for the account of customers); (viii) 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; (viii) except for the required loan loss
reserve, change any lending, investment, liability management or other material
policies concerning the business or operations of the Company or the Bank 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; (ix) incur or assume
any material obligation or liability (excluding deposit liabilities and
repurchase agreements in the ordinary course of business and any loan renewal of
a loan not then classified as "substandard," "doubtful," "loss," "other loans
especially mentioned" or any comparable classifications) in an amount greater
than $350,000, (x) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingent or otherwise) for the obligations of
any other person or entity; (xi) mortgage, license, pledge or grant a security
interest in any of its material assets or allow to exist any material lien
thereon; (except for immaterial liabilities and obligations incurred in the
ordinary course of business consistent with past practices or as may be required
under existing agreements to which the Company or the Bank is a party); (xii)
acquire assets (including equipment) in excess of $200,000 in the aggregate
(excluding loans to customers and investments permitted above); (xiii) pay,
discharge, or satisfy any debts or claims not in the ordinary course of business
and consistent with past practices; (xiv) settle any claim, action, suit,
litigation, proceeding, arbitration, investigation or controversy of any kind,
for any amount in excess of $100,000 or in any manner which would restrict in
any material respect the operations or business of the Company or the Bank; (xv)
purchase any new financial product or instrument which involves entering into a
contract with a term of six months or longer (excluding loans to customers and
investments permitted above); (xvi) 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 and the
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Bank, taken as a whole; or (xvii) incur or pay legal or accounting, fees in
connection with the Merger in excess of an aggregate of $200,000.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that the Company 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 (as 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 of its subsidiaries to take any such action. Notwithstanding the
foregoing, the Board of Directors of the Company is not prohibited from
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 the Company if
the Board of Directors of the Company, after consultation with independent legal
counsel, determines in good faith that such action is reasonably required for
the Board of Directors of the Company to comply with its fiduciary duties to
shareholders imposed by law, and if prior to furnishing such information to such
party, the Company receives from such party an executed confidentiality
agreement in reasonably customary form and provides Associated seven days'
notice of the Company's intent to furnish such information.
For purposes of the Merger Agreement, a "Competing Transaction" means
any of the following involving the Company or any of the Company'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 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 BHC Act or the Change in Bank Control Act with respect to the Company
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 the Company 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 Associated shall also have received all other federal and state
securities permits and authorizations necessary to issue Associated Common Stock
pursuant to the Merger
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Agreement; (iii) the Merger shall have been approved by the Federal Reserve
Board, the Minnesota Department and all other required regulatory agencies,
which approvals shall not contain any condition which is not reasonably
satisfactory to Associated or the Company, and any waiting periods with respect
to the Merger shall have expired; (iv) the shares of Associated Common Stock to
be issued in the Merger have been authorized for listing on the Nasdaq National
Market, subject to notice of issuance, and (v) there shall not be any injunction
or restraining order preventing the consummation of the Merger in effect.
In addition, Associated's or the Company'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 the Company Common
Stock into Associated Common Stock pursuant to the Merger, or (b) seeking to
restrain, prohibit or limit the exercise of full rights of ownership or
operation by Associated or its subsidiaries of all or any portion of the
business or assets of the Company or any of its subsidiaries, which in either
case is reasonably likely to have a material adverse effect on either the
Company and its subsidiaries, taken as a whole, or Associated and its
subsidiaries, taken as a whole; (iii) Associated and the Company shall have
received the opinion of independent counsel to Associated that the Merger will
be treated for federal income tax purposes as a "reorganization" within the
meaning of Section 368(a)(1)(A) of the Code (see "The Merger - Certain Material
Federal Income Tax Consequences," above); (iv) the number of shares of
Associated 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 Associated Common
Stock which could be issuable as a result of the Merger; (v) Associated and the
Company each shall have received the opinion of counsel to the other party
regarding certain issues under the Securities Act and state corporate law; (vi)
Associated shall have received from each affiliate of the Company a signed
letter regarding certain restrictions on the resale of Associated Common Stock
under Rule 145 of the Securities Act; (vii) Associated shall have received a
written environmental evaluation by Associated's environmental consultant of the
Company's real property stating that the Company's property complies with
environmental laws and that there are no material contingent liabilities or that
the Company shall have taken reasonably appropriate action in response to any
environmental condition identified by Associated's environmental consultant;
(viii) Associated shall have received an opinion from KPMG Peat Marwick LLP,
Associated's independent accountants, stating the Merger qualifies for "pooling
of interests" accounting treatment and an opinion of Grant Thornton LLP, the
independent accountants of the Company, stating that the Company qualifies to
have the Merger accounted for as a "pooling of interests"; (ix) the Company
shall have consolidated after-tax earnings for the year ended December 31, 1998
of at least $2,110,000 and the Bank shall have consolidated after-tax earnings
for the year ended December 31, 1998 of at least $2,318,000, in each case
excluding certain adjustments relating to loan loss reserves, severance payments
and expenses relating to the Merger; (x) Associated shall be reasonably
satisfied that the Company and the Bank have undertaken a Year 2000 compliance
plan designed to comply with applicable banking regulations; and (xi) the Bank
shall have provided to Associated evidence that the Bank has achieved a
satisfactory rating and performance under the CRA.
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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 the Company:
1. by mutual consent of Associated and the Company;
2. by either the Company or Associated if (a) there has been a breach
in any material respect of any representation, warranty, covenant or agreement
on the part of the Company, on the one hand, or Associated, on the other hand,
respectively, set forth in the Merger Agreement, or (b) any representation or
warranty of the Company, on the one hand, or Associated, 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 20
business days following receipt by the non-terminating party of notice of such
breach or other condition (provided that the Merger Agreement may not be
terminated by the breaching party or party making any representation or warranty
which shall have become untrue in any material respect);
3. by either Associated or the Company if any permanent injunction
preventing the consummation of the Merger shall have become final and
nonappealable;
4. by either Associated or the Company if the Federal Reserve Board
or the Minnesota Department denies approval of the Merger and neither Associated
nor the Company 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;
5. by either Associated or the Company if the Merger has not been
consummated by January 25, 1999 for a reason other than the failure of the
terminating party to comply with its obligations under the Merger Agreement;
6. by Associated or the Company if all of the conditions to the
terminating party's obligation to consummate the Merger have not been satisfied
on or before January 25, 1999;
7. by Associated, if at any time prior to the Special Meeting, the
Company's Board of Directors withdraws or modifies or changes in a manner
adverse to the interests of Associated its recommendation to the Company
shareholders to vote in favor of the Merger;
8. by the Company, if the Company enters into a definitive agreement
with a third party immediately after such termination providing for an
Acquisition Transaction (as defined below) on terms determined, in good faith,
by the Board of Directors of the Company, after consultation with independent
counsel and financial advisors, to be such that termination of the Merger
Agreement and entry into such third-party agreement is required in order to
discharge properly the directors' duties in accordance with Minnesota law; or
9. by the Company at any time after the end of the third trading day
preceding the Effective Time, if both (a) the average of the daily closing
prices (the "Associated Average Price") of a share of Associated Common Stock on
the Nasdaq National Market during the during the ten consecutive trading days
ending on and including the third trading day preceding the day on which the
Effective Time occurs (the "Calculation Period") is less than $34, and (b) the
number obtained by dividing the Associated Average Price by $35.31, the closing
price of
45
<PAGE>
a share of Associated Common stock on September 22, 1998, is less than the
number obtained by dividing the Final Index Price (as defined below) by the
Initial Index Price (as defined below) and subtracting .20 from such quotient.
The Merger Agreement defines an "Acquisition Transaction" as a
transaction or series of transactions that, directly or indirectly, in substance
constitutes a disposition of all or substantially all of the assets or business
of the Company or the Bank, taken as a whole, whether by means of (i) a merger
or consolidation, share exchange or any similar transaction, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition or (iii) a
purchase or other acquisition (including by way of a merger or consolidation,
share exchange or otherwise) of securities representing 50% or more of the
voting power of the Company or 50% or more of the Bank; provided, however, in
each of the situations described in clauses (i), (ii) or (iii), that the
Acquisition Transaction shall represent consideration having an aggregate value
(reasonably determined) to the Company or its shareholders in excess of the
consideration to be received in the Merger.
The Merger Agreement defines the "Final Index Price" as the average of
the daily closing prices of a share of common stock of each company belonging to
the index group, as reported on the consolidated transactions reporting system
for the market or exchange on which such stock is principally traded, during the
Calculation Period. The Merger Agreement defines the "Initial Index Price" as
the average of the per share closing prices on September 22, 1998, of the common
stock of the companies comprising the index group, as reported on the
consolidated transactions reporting system for the market or the exchange on
which such common stock is principally traded.
In the event of termination of the Merger Agreement by either the
Company or Associated, other than as a result of a material breach by the
non-terminating party or as described under "The Merger - Termination Fee"
below, 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 Associated or
the Company 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 party's expenses under the Merger Agreement.
TERMINATION FEE
If (i) Associated terminates the Merger Agreement pursuant to the
section of the Merger Agreement described in paragraph 7 of the preceding
section or the Company terminates the Merger Agreement pursuant to the section
of the Merger Agreement described in paragraph 8 of the preceding section and,
in either case, prior thereto or within twelve months after such termination the
Company shall have entered into an agreement to engage in an Acquisition
Transaction, or (ii) the Merger Agreement is terminated by Associated solely due
to the failure of the holders of Class B Common Stock to approve the Merger at
the Special Meeting, then the Company will be obligated to pay Associated a fee
equal to three percent of the aggregate value of the Merger as of the date of
termination. For these purposes, the value of the Merger will be deemed equal to
the average closing price per share of Associated Common Stock as quoted on the
Nasdaq National Market on the ten trading days immediately preceding the date of
termination multiplied by 800,000. If such fee becomes payable under the
circumstances described in clause (i) above, the Company will be obligated to
pay the fee to Associated within two business days after the date of entering
into the agreement for an Acquisition Transaction
46
<PAGE>
and if such fee becomes payable under the circumstances described in clause (ii)
above, the Company will be obligated to pay the fee to Associated within two
business days of termination of 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
Associated and the Company (except that after the Merger Agreement shall have
been approved by the shareholders of the Company, no amendment may be entered
into which would reduce the amount or change the consideration into which each
share of the Company Common Stock shall be converted upon consummation of the
Merger without further shareholder approval). At any time prior to the Effective
Time, either of the parties to the Merger Agreement may extend the time for the
performance of any of the obligations or other acts of the other party, 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 filing the
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 party for its
expenses.
CERTAIN INFORMATION CONCERNING ASSOCIATED
Associated is a registered bank holding company pursuant to the BHC
Act. It was incorporated in Wisconsin in 1964 and was inactive until 1969, when
permission was received from the Federal Reserve Board to acquire three banks.
Associated currently owns 8 commercial banks located in Wisconsin and Illinois
serving their local communities and, measured by total assets held at September
30, 1998, was the third largest commercial bank holding company headquartered in
Wisconsin. As of November 12, 1998, Associated owned 27 nonbanking subsidiaries
located in Arizona, California, Delaware, Illinois, Missouri, Nevada and
Wisconsin.
Associated provides advice and specialized services to its bank and
nonbank subsidiaries (the "Associated Affiliates") in various areas of banking
policy and operations, including auditing, data processing,
marketing/advertising, investing, personnel services, trust services and other
financial services functionally related to banking. Responsibility for the
management of the Associated Affiliates remains with their respective Boards of
Directors and officers. Services rendered to the Associated Affiliates by
Associated are intended to assist the local management of the Associated
Affiliates to expand the scope of the banking services offered by them. At
November 12, 1998, bank affiliates of Associated provided services through 215
locations in 150 communities.
47
<PAGE>
Associated, through the Associated Affiliates, provides a complete
range of retail banking services to individuals and businesses. These services
include checking and savings accounts, NOW, Super NOW and money market deposit
accounts, business loans, personal loans, residential and commercial mortgage
loans, loans for education, MasterCard, VISA and other consumer-oriented
financial services, including IRA and Keogh accounts, and safe deposit and night
depository facilities. Automated teller machines ("ATMs"), which provide 24 hour
banking services to customers of the Associated Affiliates, have been installed
in many locations in the Associated Affiliates' service areas. The Associated
Affiliates are members of an interstate shared ATM network which allows their
customers to perform banking transactions from their checking, savings or credit
card accounts at ATM terminals in a multi-state environment. Among the services
designed specifically to meet the needs of businesses are various types of
specialized financing, cash management services and transfer/collection
facilities.
The Associated Affiliates provide lending, depository and related
financial services to commercial, industrial, financial and governmental
customers. Term loans, revolving credit arrangements, letters of credit,
inventory and accounts receivable financing, real estate construction lending
and international banking services are available.
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. The Associated Affiliates make
available check clearing, safekeeping, loan participation, lines of credit,
portfolio analyses, data processing and other services to approximately 150
correspondent financial institutions.
Four of the Associated Affiliates offer a wide variety of fiduciary,
investment management, advisory and corporate agency services to individuals,
corporations, charitable trusts, foundations and institutional investors. They
also administer (as trustee and in other fiduciary and representative
capacities) pension, profit sharing and other employee benefit plans, and
personal trusts and estates.
Investment subsidiaries provide discount and full-service brokerage
services, including the sale of fixed and variable annuities, mutual funds, and
securities, to the affiliates' customers and the general public. Insurance
brokerage subsidiaries provide commercial and individual insurance services,
including various life, property, casualty, credit, and mortgage products to the
affiliates' customers and the general public. Several investment subsidiaries
located in Nevada hold, manage, and trade cash, stock, and securities
transferred from the Associated Affiliates and reinvest investment income. A
leasing subsidiary provides lease financing for a variety of capital equipment
for commerce and industry. An appraisal subsidiary provides real estate
appraisals for customers, government agencies, and the general public.
The Associated Affiliates also provide certain mortgage banking
services including the origination and 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 the mortgage loans are
saleable into the secondary mortgage market.
Associated and the Associated Affiliates are not dependent upon a
single or a few customers, the loss of which would have a material adverse
effect on Associated. No material portion of Associated's or the Associated
Affiliates' business is seasonal.
48
<PAGE>
At September 30, 1998 Associated and the Associated Affiliates, as a
group, employed 3,672 full-time equivalent employees.
CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a bank holding company incorporated under the laws of
the State of Minnesota with its principal office in Minneapolis, Minnesota. The
Company owns all the issued and outstanding stock of the Bank, a state banking
association under the laws of the State of Minnesota. As of September 30, 1998,
the Company had total assets of approximately $190.9 million and the Bank had
deposits of approximately $162.7 million.
The Bank has offices in Minneapolis, Chisholm, Sleepy Eye and
Nerstrand, Minnesota. Each of the offices offers a range of financial services
to commercial and individual customers, including checking accounts, short- and
medium-term loans and various savings programs.
The Company and the Bank are not dependent upon a single or a few
customers, the loss of which would have a material adverse effect on the Company
or the Bank. No material portion of the Company or the Bank's business is
seasonal.
At September 30, 1998, the Company and Bank employed approximately 40
full-time and two part-time employees.
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth, as of the Record Date, certain
information regarding the beneficial ownership of the Class A Common Stock and
the Class B Common Stock by (i) each person who is a beneficial owner of more
than 5% of the outstanding Class A Common Stock or the Class B Common Stock,
(ii) each director of the Company, (iii) each executive officer of the Company,
and (iv) all directors and officers as a group. The address of the directors and
executive officers is the executive offices of the Company. Except as otherwise
noted, the named beneficial owner has sole voting and/or investment power of the
shares of Company Common Stock indicated.
49
<PAGE>
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
------------------------------------- -------------------------------------
Name Shares Percent Shares Percent
- ---------------------------------------------- ---------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Samuel L. Kaplan (1) 317,022 9.9% 3,000,000 95.2%
Director and President
John F. Crinklaw (2) 134,375 4.0 --- ---
Director and Executive
Vice President
Donald G. Pederson --- --- 150,000 4.8
Director, Vice President and
Secretary
Edward O. Hanson, Jr. (3) 62,188 1.9 --- ---
Vice President and Treasurer
Thomas H. Healey (1) 365,355 11.5 3,000,000 95.2
Director and Chairman
All Directors and Executive Officers 613,585 18.2 3,150,000 100.0
(5 persons) (1) (2) (3)
Richard M. Mast (4) 403,125 12.6 --- ---
Maurice Filister (5) 178,840 5.6 --- ---
Ralph Strangis (1) (6) 317,022 9.9 3,000,000 95.2
Sheldon Kaplan (7) 230,506 7.3 --- ---
Peter M. Ramme (1) (8) 440,355 13.8 3,000,000 95.2
</TABLE>
- ---------------
(1) Includes 265,355 shares of Class A Common Stock and 3,000,000 shares of
Class B Common Stock held in the name of Windsor Synergy Partners, a
Minnesota general partnership, for which Samuel L. Kaplan, Ralph Strangis,
Thomas H. Healey and Peter M. Ramme share indirect voting and investment
power.
(2) Includes 134,375 shares of Class A Common Stock subject to options
exercisable within 60 days of the Record Date. Does not include options
held by Mr. Crinklaw to purchase up to 65,625 shares of Class A Common
Stock, which options will become exercisable prior to the Effective Time.
(3) Includes 47,188 shares of Class A Common Stock subject to options
exercisable within 60 days of the Record Date. Does not include options
held by Mr. Hanson to purchase up to 32,812 shares of Class A Common
Stock, which options will become exercisable prior to the Effective Time.
(4) Mr. Mast's address is 2301 Traffic Street N.E., Minneapolis, Minnesota
55413.
50
<PAGE>
(5) Mr. Filister's address is 5750 East River Road, Minneapolis, Minnesota
55432.
(6) Mr. Strangis' address is 5500 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota 55402.
(7) Includes 155,506 shares of Class A Common Stock held jointly with Helene
B. Kaplan and 75,000 shares of Class A Common Stock held by Harvey F.
Kaplan and Bruce J. Parker as trustees under the Kaplan, Strangis and
Kaplan, P.A. Profit Sharing Trust for the benefit of Sheldon Kaplan. Mr.
Kaplan's address is 5500 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota 55402.
(8) Mr. Ramme's address is 13875 Chestnut Drive, Suite 124, Eden Prairie,
Minnesota 55344.
EXPERTS
The consolidated financial statements of Associated as of December 31,
1997 and 1996, and for each of the years in the three-year period ended December
31, 1997, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated herein by reference, which are based
in part on the reports of Ernst & Young LLP, independent certified public
accountants, incorporated herein by reference, and upon the authority of said
firms as experts in accounting and auditing.
Associated has retained Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, s.c. to render an opinion on the federal income tax consequences of
the Merger and in connection therewith, Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, 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.
The consolidated financial statements of the Company as of December 31,
1997 and 1996, and for each of the years in the three-year period ended December
31, 1997, have been included herein and in the registration statement in
reliance upon the report of Grant Thornton LLP, independent certified public
accountants, included herein, and upon the authority of said firm as experts in
accounting and auditing.
LEGAL OPINIONS
The validity of the shares issued in connection with the Merger and
certain other matters will be passed upon for Associated by Reinhart, Boerner,
Van Deuren, Norris & Rieselbach, s.c., Milwaukee, Wisconsin.
FUTURE SHAREHOLDER PROPOSALS
If the Merger is consummated, shareholders of the Company will become
shareholders of Associated. Pursuant to Rule 14a-8 promulgated under the
Exchange Act, Associated shareholders may present proper proposals for inclusion
in Associated's proxy statement for consideration at the next annual meeting of
its shareholders by submitting their proposals to Associated in a timely manner.
Shareholders of the Company who become shareholders of Associated may present
proposals for inclusion in Associated's proxy statement for its 2000
51
<PAGE>
Annual Meeting, as the date for inclusion in the proxy statement for the 1999
Annual Meeting has already passed. Any such proposal must comply with Rule
14a-8.
WHERE YOU CAN FIND MORE INFORMATION
Associated files annual, quarterly and special reports, proxy
statements and other information with the Commission. You may read and copy any
such reports, statements or other information at the Commission's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. Associated's Commission filings are also available to
the public from commercial document retrieval services and at the world wide web
site maintained by the Commission at "http://www.sec.gov."
Associated has filed a Registration Statement on Form S-4 (the
"Registration Statement") to register with the Commission the Associated Common
Stock to be issued to shareholders of Windsor Bancshares in the Merger. This
Proxy Statement/Prospectus is a part of the Registration Statement and
constitutes a prospectus of Associated in addition to being a proxy statement of
Windsor Bancshares for the Special Meeting. As allowed by Commission rules, this
Proxy Statement/Prospectus does not contain all the information you can find in
the Registration Statement or the exhibits to the Registration Statement, which
are incorporated herein by reference.
The Commission allows us to "incorporate by reference" information into
this Proxy Statement/Prospectus, which means that we can disclose important
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 in this Proxy Statement/Prospectus. This Proxy
Statement/Prospectus incorporates by reference the documents set forth below
that Associated has previously filed with the Commission. These documents
contain important information about Associated and its finances.
<TABLE>
<CAPTION>
Associated Commission Filings Period
----------------------------- -------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Report on Form 10-Q For the quarter ended March 31, 1998
Quarterly Report on Form 10-Q For the quarter ended June 30, 1998
Quarterly Report on Form 10-Q For the quarter ended September 30, 1998
1998 Notice of Annual Meeting and
Proxy Statement, dated March 20, 1998 Dated March 20,
Description of the Associated Com
Stock set forth in Associated's Registration
Statement pursuant to Section 12 of the
Exchange Act
</TABLE>
Associated also is 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.
Associated has supplied all information contained or incorporated by
reference in this Proxy Statement/Prospectus relating to Associated, and the
Company has supplied all such information relating to the Company.
52
<PAGE>
Documents which Associated incorporates by reference are available from
Associated without charge, excluding all exhibits unless Associated 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 Associated at the following address:
Associated Banc-Corp
1200 Hansen Road
P.O. Box 13307
Green Bay, WI 54307-3307
(920) 491-7000
If you would like to request documents from Associated, please do so by
December 15, 1998 to receive them before the Special Meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS
DATED DECEMBER 1, 1998. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THE PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE,
AND NEITHER THE MAILING OF THE PROXY STATEMENT/PROSPECTUS TO SHAREHOLDERS NOR
THE ISSUANCE OF ASSOCIATED COMMON STOCK IN THE MERGER SHALL CREATE ANY
IMPLICATION TO THE CONTRARY.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION.
53
<PAGE>
EXHIBITS TO THE PROXY STATEMENT/PROSPECTUS
Exhibit A: Agreement and Plan of Merger
Exhibit B: Sections 302A.471 and 302A.473 of the Minnesota
Business Corporation Act
Exhibit C: Windsor Bancshares, Inc. and Subsidiary Financial
Statements and management's discussion and analysis of
Financial Condition and Results of Operations
54
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BETWEEN
ASSOCIATED BANC-CORP
AND
WINDSOR BANCSHARES, INC.
OCTOBER 1, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I
---------
THE MERGER
----------
SECTION 1.01. The Merger.......................................A-2
SECTION 1.02. Effective Time...................................A-2
SECTION 1.03. Effect of the Merger.............................A-3
SECTION 1.04. Articles of Incorporation and Bylaws.............A-3
SECTION 1.05. Directors and Officers...........................A-3
SECTION 1.06. Conversion of Securities.........................A-3
SECTION 1.07. Exchange of Certificates.........................A-7
SECTION 1.08. Stock Options....................................A-9
SECTION 1.09. Stock Transfer Books.............................A-9
SECTION 1.10. Anti-Dilution Adjustment........................A-10
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
SECTION 2.01. Organization and Qualification of the Company;
Subsidiary......................................A-10
SECTION 2.02. Articles of Incorporation and Bylaws............A-11
SECTION 2.03. Capitalization..................................A-11
SECTION 2.04. Authority.......................................A-12
SECTION 2.05. No Conflict; Required Filings and Consents......A-12
SECTION 2.06. Compliance; Permits.............................A-13
SECTION 2.07. Banking Reports and Financial Statements........A-14
SECTION 2.08. Absence of Certain Changes or Events............A-14
SECTION 2.09. Absence of Litigation...........................A-15
SECTION 2.10. Employee Benefit Plans..........................A-16
SECTION 2.11. Employment Contracts; Material Contracts........A-18
SECTION 2.12. Registration Statement..........................A-18
SECTION 2.13. Title to Property...............................A-18
SECTION 2.14. Compliance with Environmental Laws..............A-19
SECTION 2.15. Absence of Agreements...........................A-21
SECTION 2.16. Taxes...........................................A-21
SECTION 2.17. Insurance.......................................A-22
SECTION 2.18. Absence of Adverse Agreements...................A-23
SECTION 2.19. Internal Controls and Records...................A-23
SECTION 2.20. Loans...........................................A-23
SECTION 2.21. Labor Matters...................................A-24
<PAGE>
SECTION 2.22. Brokers.........................................A-24
SECTION 2.23. Accounting and Tax Matters......................A-24
SECTION 2.24. Year 2000 Compliance............................A-24
SECTION 2.25. Full Disclosure.................................A-25
SECTION 2.26. Vote Required...................................A-25
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF
ASSOCIATED
----------
SECTION 3.01. Organization and Qualification..................A-25
SECTION 3.02. Articles of Incorporation and Bylaws............A-26
SECTION 3.03. Capitalization..................................A-26
SECTION 3.04. Authority.......................................A-26
SECTION 3.05. No Conflict; Required Filings and Consents......A-26
SECTION 3.06. Compliance; Permits.............................A-27
SECTION 3.07. Securities Reports; Financial Statements........A-27
SECTION 3.08. Absence of Certain Changes or Events............A-28
SECTION 3.09. Absence of Litigation...........................A-29
SECTION 3.10. Registration Statement..........................A-29
SECTION 3.11. Absence of Agreements...........................A-29
SECTION 3.12. Taxes...........................................A-30
SECTION 3.13. Brokers.........................................A-31
SECTION 3.14. Accounting and Tax Matters......................A-31
SECTION 3.15. Full Disclosure.................................A-31
SECTION 3.16. Absence of Adverse Agreements...................A-31
ARTICLE IV
----------
COVENANTS OF THE COMPANY
------------------------
SECTION 4.01. Affirmative Covenants...........................A-31
SECTION 4.02. Negative Covenants..............................A-32
SECTION 4.03. Access and Information..........................A-35
SECTION 4.04. Affiliates; Accounting and Tax Treatment........A-36
SECTION 4.05. Expenses........................................A-37
SECTION 4.06. Delivery of Shareholder List....................A-37
ii
<PAGE>
ARTICLE V
---------
COVENANTS OF ASSOCIATED
-----------------------
SECTION 5.01. Affirmative Covenants.................................A-37
SECTION 5.02. Access and Information................................A-38
SECTION 5.03. Accounting and Tax Treatment..........................A-38
SECTION 5.04. Eligibility for Dividends.............................A-38
ARTICLE VI
----------
ADDITIONAL AGREEMENTS
---------------------
SECTION 6.01. Registration Statement................................A-39
SECTION 6.02. Meetings of Shareholders..............................A-40
SECTION 6.03. Appropriate Action; Consents; Filings.................A-40
SECTION 6.04. Notification of Certain Matters.......................A-41
SECTION 6.05. Public Announcements..................................A-41
SECTION 6.06 Environmental Matters.................................A-41
SECTION 6.07 Employee Benefits.....................................A-41
SECTION 6.08 Indemnification.......................................A-42
ARTICLE VII
-----------
CONDITIONS OF MERGER
--------------------
SECTION 7.01. Conditions to Obligation of Each Party to Effect the
Merger................................................A-44
SECTION 7.02. Additional Conditions to Obligations of Associated....A-45
SECTION 7.03. Additional Conditions to Obligations of the Company...A-48
ARTICLE VIII
------------
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 8.01. Termination...........................................A-49
SECTION 8.02. Effect of Termination.................................A-53
SECTION 8.03. Amendment.............................................A-53
SECTION 8.04. Waiver................................................A-53
iii
<PAGE>
ARTICLE IX
----------
GENERAL PROVISIONS
------------------
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements.......................................A-54
SECTION 9.02. Disclosure Schedules.............................A-54
SECTION 9.03. Notices..........................................A-54
SECTION 9.04. Certain Definitions..............................A-55
SECTION 9.05. Headings.........................................A-56
SECTION 9.06. Severability.....................................A-56
SECTION 9.07. Entire Agreement.................................A-56
SECTION 9.08. Assignment.......................................A-57
SECTION 9.09. Parties in Interest..............................A-57
SECTION 9.10. Governing Law....................................A-57
SECTION 9.11. Counterparts.....................................A-57
EXHIBITS
1.06 Calculation of Merger Exchange Ratios
1.07 Share Conversion Table
4.01 Capital Requirements; Purchase and Sale of Securities
4.04 Affiliate Letter
7.02(e) Legal Opinion of Company Counsel
7.03(d) Legal Opinion of Associated Counsel
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 1, 1998 (the
"Agreement"), between ASSOCIATED BANC-CORP, a Wisconsin corporation
("Associated") and WINDSOR BANCSHARES, INC., a Minnesota 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 Bank Windsor, a state banking association located in Nerstrand,
Minnesota (the "Bank" or the "Subsidiary"); and
WHEREAS, the Company upon the terms and subject to the conditions of this
Agreement and in accordance with the Wisconsin Business Corporation Law
("Wisconsin Law") and the Minnesota Business Corporation Act ("Minnesota Law"),
will merge with and into Associated (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 and increase the financial strength of the Bank; and
WHEREAS, the Board of Directors of the Company believes that the Merger
with Associated will benefit the shareholders and the employees of the Company
and the Subsidiary; and
WHEREAS, the respective Boards of Directors of Associated and the Company
have (i) determined that the Merger and the exchange of newly issued shares of
Associated Common Stock (as defined in Section 1.06) for shares of Company
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 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
WHEREAS, Associated 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").
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<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Associated 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 and Minnesota
Law, at the Effective Time (as defined in Section 1.02), the Company shall be
merged with and into Associated. As a result of the Merger, the separate
corporate existence of the Company shall cease and Associated 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 and the
Secretary of State of the State of Minnesota, in such form as required by, and
executed in accordance with the relevant provisions of Wisconsin Law and
Minnesota Law (a) after the satisfaction, or if permissible, waiver of
conditions set forth in Article VII, and (b) as promptly as possible within the
thirty (30) day period commencing with the latest of the following dates:
(i) The date of expiration of any applicable waiting period
after approval by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "BHCA");
(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 shareholders meeting of the Company to
vote upon the Merger pursuant to Section 6.02;
(iv) If the transaction contemplated by this Agreement is being
contested in any legal proceeding and Associated 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 Associated and the Company, to the
consummation of the transaction contemplated hereby; or
(v) January 1, 1999.
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<PAGE>
The date and time of the filing of the 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
and Minnesota 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 Associated and the
Company shall vest in the Surviving Corporation, and all debts, liabilities and
duties of Associated 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 Associated, 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 Associated
----------------------
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
Associated 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 Associated, the Company or
the holders of any of the following securities:
(a) each share of Class A Common Stock of the Company, par value $.01
per share (the "Class A Common Stock"), and each share of Class B Common Stock,
par value $.01 per share (the "Class B Common Stock"), of the Company
(collectively, 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,
including Shares of Class A Common Stock issued upon the exercise of employee
stock options (the "Stock Options") (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 that number of shares or fraction of a share of common stock,
par value $.01 per share, of Associated ("Associated Common Stock") as shall be
equal to the results of the following formulae (such results are hereinafter
collectively referred to as the "Merger Exchange Ratios"):
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<PAGE>
(i) each Share of Class A Common Stock shall be automatically
converted into and become that number of shares or fraction of a share of
Associated Common Stock as shall be equal to the result of the following formula
with the result rounded to nine decimal places (such results are hereinafter
referred to as the "Class A Merger Exchange Ratios"):
Basic Amount
plus
an amount equal to
800,000 - (ACABA + ACBBA) x 1
------------------------- --------------------
2 Number of Shares
of Class A Common
Stock Outstanding
(ii) each Share of Class B Common Stock shall be automatically
converted into and become that number of shares or fraction of a share of
Associated Common Stock as shall be equal to the result of the following formula
with the result rounded to nine decimal places (such results are hereinafter
referred to as the "Class B Merger Exchange Ratios")"
Basic Amount
plus
an amount equal to
800,000 - (ACABA + ACBBA) x 1
------------------------- --------------------
2 Number of Shares
of Class A Common
Stock Outstanding
An example of the calculation of Merger Exchange Ratios is attached as Exhibit
1.06.
A-4
<PAGE>
(iii) as used in this Section 1.06:
"Face Amount" means, with respect to each Share of Company
Common Stock, the original purchase price of such Share when purchased from the
Company; provided that for Shares issued for other than the payment of money,
the Face Amount of each such Share means the fair market value of such Share at
the date of issuance as determined by the Board of Directors of the Company, all
as set forth on Schedule 1.06 to this Agreement. The Face Amount of Shares of
Class A Common Stock issued after the date of this Agreement and on or before
the Effective Time upon exercise of the Stock Options shall be the exercise
price per Share with respect to such Stock Options.
"Daily Average Price" means the average of the closing
prices of a share of Associated Common Stock as quoted on the NASDAQ National
Market during the ten day trading period ending on the third business day prior
to the day on which the Effective Time occurs (the "Calculation Date"),
"Return Amount" means, with respect to each Share of
Company Common Stock, an amount equal to a return of six percent (6%) per annum
on the Face Amount of such Share from the date identified as the Return
Initiation Date with respect to such Share on Schedule 1.06 of this Agreement
through and including the Calculation Date, rounded to the nearest cent,
calculated for fractional years on the basis of the actual number of days in a
365-day year. The Return Initiation Date for any Shares of Class A Common Stock
issued after the date of this Agreement on account of the exercise of Stock
Options shall be the date of such issuance.
"Basic Amount" means, with respect to each Share of
Company Common Stock, an amount, rounded to nine decimal places equal to (i) the
sum of [a] the Face Amount of such Share plus [b] the Return Amount of such
Share, divided by (ii) the Daily Average Price.
"ACABA" or "Aggregate Class A Basic Amounts" means the
aggregate Basic Amounts applicable to all issued and outstanding Shares of Class
A Common Stock.
"ACBBA" or "Aggregate Class B Basic Amounts" means the
aggregate Basic Amounts applicable to all issued and outstanding Shares of Class
B Common Stock.
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
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<PAGE>
Associated 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 Associated 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 Associated 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 Associated or any direct or indirect wholly-owned subsidiary of
Associated 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 not voted
such Shares in favor of the Merger, who shall have delivered, prior to any vote
on the Merger, a written demand for the fair value of such Shares in the manner
provided in section 302A.473 of Minnesota Law and who, as of the Effective Time,
shall not have effectively withdrawn or lost such right to dissenters' rights,
shall not be converted into and shall not become Associated Common Stock
hereunder (all such shares of the Company Common Stock are hereinafter called
"Dissenting Shares"), but the holders thereof shall be entitled only to such
rights as are granted by section 302A.473 of Minnesota Law. The Company shall
give Associated 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 Associated, voluntarily make any payment with respect to, or
settle or offer to settle, any demand for fair value under section 302A.473 of
Minnesota Law. 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 pursuant to sections 302A.471 and 302A.473 of Minnesota Law
shall receive payment therefor from Associated (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 appraisal and payment of his or
her Shares of Company Common Stock, such Dissenting Shareholder shall forfeit
the right to appraisal of such Shares and, at the Effective Time, such Shares
shall be thereupon converted into Associated Common Stock in accordance with the
provisions of Section 1.06(a) and, if applicable, cash under Section 1.07(e).
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<PAGE>
SECTION 1.07. Exchange of Certificates.
------------------------
(a) Exchange Agent. As of the Effective Time, Associated shall
--------------
deposit, or shall cause to be deposited, with a bank or trust company designated
by Associated and acceptable to the 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 Associated Common Stock together with an estimated
amount of cash necessary to make payment in lieu of fractional shares (such
certificates for shares of Associated 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. Prior to the
Effective Time, the Company shall deliver a certificate executed by the Chief
Financial Officer and the President of the Company to Associated and the
Exchange Agent setting forth the Class A Merger Exchange Ratios and the Class B
Merger Exchange Ratios applicable to, and the number of shares of Associated
Common Stock to be received on account of, the Shares of issued and outstanding
Class A Common Stock and Class B Common Stock held by each shareholder of the
Company, together with a completed table (the "Share Conversion Table") in the
form of Exhibit 1.07 to this Agreement.
(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 Associated 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 Associated may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Associated
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 Associated 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 Associated Common Stock may be issued to a transferee if the
A-7
<PAGE>
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 Associated Common Stock
until Associated has received a written agreement from such person as provided
in Section 4.04 hereof. Until surrendered as contemplated by this 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 Associated Common Stock and cash in lieu of any
fractional shares of Associated 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
Associated 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 Associated 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 Associated Common Stock issued in exchange therefor, without interest, (i)
promptly, the amount of any cash payable with respect to a fractional share of
Associated 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
Associated 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 Associated Common stock.
(d) No Further Rights in the Shares. All shares of Associated 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 Associated 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
Associated. 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 "Daily
Average Price."
A-8
<PAGE>
(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 Associated, upon demand, and any
shareholders of the Company who have not theretofore complied with this Article
I shall thereafter look only to Associated for payment of their claim for
Associated Common Stock, any cash in lieu of fractional shares of Associated
Common Stock and any dividends or distributions with respect to Associated
Common Stock.
(g) No Liability. Neither Associated or 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. Associated shall be entitled to deduct and
------------------
withhold from any cash consideration payable pursuant to this Agreement to any
holder of Shares such amounts as Associated 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
Associated, 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 Associated.
SECTION 1.08. Stock Options. At the Effective Time, all theretofore
-------------
unexercised Stock Options shall terminate and thereupon become null and void in
accordance with their terms.
SECTION 1.09. 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 Company 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 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 Associated for any reason shall be converted into shares of Associated
Common Stock in accordance with this Article I.
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<PAGE>
SECTION 1.10. Anti-Dilution Adjustment. If, subsequent to the date hereof
------------------------
and prior to the Effective Time, Associated shall pay a stock dividend or make a
distribution on Associated Common Stock or other capital stock of Associated in
shares of Associated Common Stock or any security convertible into Associated
Common Stock or shall combine, subdivide, reclassify or recapitalize 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 (if
any) shall be made to the conversion formula set forth in Section 1.06 above,
for purposes of determining the number of shares of Associated Common Stock into
which the Company Common Stock shall be converted. For purposes hereof, the
payment of a dividend in Associated Common Stock, or the distribution on
Associated Common Stock in securities convertible into Associated Common Stock,
shall be deemed to have effected an increase in the number of outstanding shares
of Associated Common Stock equal to the number of shares of Associated 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 shares of Associated Common Stock reserved
for issuance under option plans of Associated 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
Associated that:
SECTION 2.01. Organization and Qualification of the Company; Subsidiary.
---------------------------------------------------------
The Company is a corporation duly organized and validly existing under the laws
of the State of Minnesota. The Bank is a duly organized and validly existing
state banking association under the laws of the State of Minnesota. The Bank is
and has been the only subsidiary of the Company. The Company and its Subsidiary
each has the requisite corporate power and authority and are in possession of
all franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("Company Approvals") necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or 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 its Subsidiary, 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,
A-10
<PAGE>
properties (including intangible properties), condition (financial or
otherwise), assets or liabilities (including contingent liabilities) except that
a Material Adverse Effect shall not be deemed to have occurred as a result of
any change or effect resulting from a change in law, rule, regulation, generally
accepted accounting principle or regulatory accounting principle, in each case,
affecting financial institutions or their holding companies generally. The
Company has not received any notice of proceedings relating to the revocation or
modification of any Company Approvals. The Company is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect on the Company and its Subsidiary, taken as a whole. The
Company is registered with the Federal Reserve Board as a one bank holding
company under the BHCA. Except for the Subsidiary, the Company holds no
interest, either directly or indirectly, in any other entity. The Bank 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 Associated complete and correct copies of the Articles
of Incorporation and the Bylaws, as amended or restated, of the Company and its
Subsidiary and such Articles of Incorporation and Bylaws of the Company and its
Subsidiary are in full force and effect and neither the Company nor its
Subsidiary 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 10,000,000 shares of Class A Common Stock, par value
$.01 per share, and 5,000,000 shares of Class B Common Stock, par value $.01 per
share. As of the date of this Agreement, (i) 3,190,000 shares of Class A 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, (ii) 3,150,000 shares of Class B 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 (iii) no shares of Class A Common Stock and no shares of
Class B 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
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<PAGE>
obligations, contingent or otherwise, of the Company to repurchase, redeem or
otherwise acquire any shares of the capital stock of the Company 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 330 shares of common stock, par value $100 per share. As of
the date of this Agreement, (i) 330 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 Common Stock. 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 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.
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 voting power of all the outstanding shares of (a) the Company Common
Stock, (b) the Class A Common Stock voting as a class and (c) the Class B Common
Stock voting as a class in accordance with Minnesota Law and the Company's
Articles of Incorporation and Bylaws and the filing of the appropriate merger
documents required by Minnesota Law and Wisconsin Law). This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Associated, 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 knowledge of the Company, 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
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<PAGE>
Incorporation or Bylaws of the Company or the Subsidiary, (ii) conflict with or
violate any domestic (federal, state or local) or foreign law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively, "Laws")
applicable to the Company or the Subsidiary, 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 Subsidiary
pursuant to any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or the Subsidiary is a party or by which the Company or the Subsidiary
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 and the Subsidiary,
taken as a whole.
(b) To the knowledge of the Company, 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
Minnesota (the "BL"), the filing and recordation of appropriate merger or other
documents as required by Wisconsin Law and Minnesota 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 and its Subsidiary, taken as a whole.
SECTION 2.06. Compliance; Permits. To the knowledge of the Company,
-------------------
neither the Company nor its Subsidiary is in conflict with, or in default or
violation of, (a) any Law applicable to the Company or the 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 the
Subsidiary is a party or by which the Company or the 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 and the Subsidiary, taken as a whole.
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<PAGE>
SECTION 2.07. Banking Reports and Financial Statements.
----------------------------------------
(a) The Company and its Subsidiary have timely filed all forms,
reports and documents together with any amendments required to be made with
respect thereto that were required to be filed with the Federal Reserve Board,
the Minnesota Department of Commerce Financial Examinations Division, the Office
of the Comptroller of the Currency and any other applicable federal or state
securities or banking authorities (all such reports and statements and
amendments thereto 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 (including, in each
case, any related notes thereto) contained in the Company Reports, including any
Company Reports filed since the date of this Agreement and prior to or on the
Effective Time, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each fairly
presents the consolidated financial position of the Company and its Subsidiary
as of the respective dates thereof and the consolidated results of their
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 its Subsidiary as of December 31, 1997, including all
notes thereto (the "Company Balance Sheet"), neither the Company nor the
Subsidiary 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 and the Subsidiary, 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 Company Reports filed prior to the date of this Agreement, since December
31, 1997, to the date of this Agreement, the Company and its Subsidiary have
conducted their businesses only in the ordinary course and in a manner
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<PAGE>
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 its Subsidiary having a Material Adverse Effect on the Company
and its Subsidiary, 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 its Subsidiary having a Material Adverse Effect on the Company and its
Subsidiary, taken as a whole, (c) any change by the Company or its Subsidiary in
its 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 its Subsidiary of any of its material assets in
any material respect, (e) except in the ordinary course of business, any entry
by the Company or its Subsidiary into any commitment or transaction material to
the Company and its Subsidiary, taken as a whole, (f) any declaration, setting
aside or payment of any dividends or distributions in respect of shares of the
Company Common Stock or any redemption, purchase or other acquisition of any of
its securities or any of the securities of the 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 the
Subsidiary.
SECTION 2.09. Absence of Litigation. Except as disclosed in the Company
---------------------
Disclosure Schedule at Section 2.09 or in the Company Reports filed prior to the
date of this Agreement: (a) neither the Company nor its 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 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
its Subsidiary pending or, to the knowledge of the Company, threatened, except
for matters which (i) as of the date of this Agreement individually seek damages
not in excess of $20,000 and (ii) otherwise will not have, and cannot
reasonably be expected to have, a Material Adverse Effect on the Company and its
Subsidiary, taken as a whole, 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 the Subsidiary as a
result of the examination by any bank regulatory authority.
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<PAGE>
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"), maintained, sponsored
or contributed to by the Company or the 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 the
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), maintained,
sponsored or contributed to by the Company or the 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 the Subsidiary which, as of the Effective Time, has not distributed
all of its assets and/or satisfied all of its obligations.
(c) The Company Disclosure Schedule at Section 2.10 lists all plans or
programs to provide fringe benefits to the Company's and the Subsidiary's
employees (other than Pension Plans and Welfare Plans) including, but not
limited to, vacation, sick leave, severance pay, nonqualified deferred
compensation plans and other insurance plans or benefits (the "Fringe Benefit
Plans").
(d) The Company has furnished or otherwise made available to
Associated true and complete copies of the documents governing each of the
Pension Plans and Welfare Plans as in effect at the Effective Time.
(e) The Company has furnished or otherwise made available to
Associated true and complete copies of the documents governing each Fringe
Benefit Plan.
(f) The Company has no announced or unannounced plan to change any
Pension Plan, Welfare Plan or Fringe Benefit Plan that would materially affect
any Pension Plan, Welfare Plan or Fringe Benefit Plan. As of the Effective
Time, neither the Company nor the Subsidiary has made any material modification,
within the meaning of ERISA section 102 and the regulations thereunder, to 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 or otherwise made available to Associated.
(g) For purposes of this section 2.10 the "Company" shall include the
Company, the Subsidiary and all members of any controlled group of
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<PAGE>
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), relevant Treasury Regulations and proposed Treasury Regulations)
of which Company or the Subsidiary is a member.
(h) Neither the Company nor the Subsidiary has ever been obligated to
contribute to any multiemployer plan within the meaning of ERISA section 3(37).
(i) To the knowledge of the Company, the Pension Plans, Welfare Plans
and Fringe Benefit Plans including 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, including
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 knowledge of the
Company, 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, including 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 the
Subsidiary's 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 and the Subsidiary have materially
complied with the continuation coverage requirements of Code section 4980B for
any periods prior to the Effective Time.
(k) With respect to each Pension Plan, Welfare Plan and Fringe Benefit
Plan, the Company has furnished to Associated copies of any investment
management agreements, fiduciary insurance policies, fidelity bonds, rules,
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<PAGE>
regulations or policies of the trustees or any committee thereunder, all of
which are true and complete.
(l) 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 or
the 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) No Welfare Plan or Fringe Benefit Plan provides any form of post-
retirement health benefits to retired employees of the Company or the
Subsidiary, other than benefits required to be provided pursuant to Code section
4980B.
SECTION 2.11. Employment Contracts; Material Contracts. Neither the
----------------------------------------
Company nor the Subsidiary is a party to or bound by (a) any employment or
consulting contract, (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 requiring a
payment or aggregate payments in excess of $10,000 per annum.
SECTION 2.12. Registration 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 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 Prospectus, when mailed and
at the time of the Meeting (as provided in Section 6.02), 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.
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 its Subsidiary. The Company and its Subsidiary have good and
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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 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 and its
Subsidiary, taken as a whole; and all leases pursuant to which the Company or
the 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 or there has not
occurred, 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 the Subsidiary has not
taken adequate steps to prevent such a default from occurring). The Company's
and its 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 the 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 the Subsidiary. The term "Company's Property" shall also include any real
property or improvements 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 and 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 applicable 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
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<PAGE>
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 products, asbestos and raw materials which include
hazardous constituents); and any other similar substances or materials which are
regulated under applicable Environmental Laws.
(f) The Environmental Permits (if any) are in full force and effect
and constitute all permits, licenses, approvals and consents relating to
Environmental Laws or Hazardous Substances required for the conduct of the
Company's and the Subsidiary's businesses and the use of the Company's Property
(as presently conducted and used) in compliance with applicable Environmental
Laws.
(g) The Company or the Subsidiary has 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 and the
Subsidiary's businesses or financial condition, taken as a whole. The Company
and/or the Subsidiary has made no environmental filings after January 1, 1996.
(h) To the knowledge of the Company, the business of the Company and
the Subsidiary and the Company's Property have been and are being operated by
the Company and Subsidiary in accordance with all applicable Environmental Laws
and Environmental Permits. Neither the Company nor the Subsidiary has received
any written notice nor does the Company or the Subsidiary 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 the knowledge of the
Company, threatened.
(i) There are no actions pending, or to the knowledge of the Company,
threatened against the Company or the Subsidiary (naming the Company or the
Subsidiary), which in any case assert or allege (i) the Company or the
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 the
Subsidiary is required to clean up or take remedial or other response action due
to
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<PAGE>
the disposal, discharge or other release of any Hazardous Substance on the
Company's Property or elsewhere; or (iii) the Company or the Subsidiary 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 or any Hazardous Substance by the Company,
the Subsidiary or others. The Company, the Subsidiary and the Company's Property
are not subject to any judgment, stipulation, order, decree or agreement arising
under Environmental Laws.
(j) With respect to the period during which the Company or the
Subsidiary occupied the Company's Property, (i) no Hazardous Substances have
been treated, recycled or disposed of by the Company or the Subsidiary
(intentionally or unintentionally) on, under or at the Company's Property; (ii)
there has been no release or threatened release by the Company or the Subsidiary
of any Hazardous Substance on or from the Company's Property; (iii) to the
knowledge of the Company, there have been no activities on the Company's
Property which would subject Associated, the Subsidiary 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 the
---------------------
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 the 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 the 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 the 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 its Subsidiary have timely filed all
-----
Tax Returns (as defined below) required to be filed by them, and the Company and
its Subsidiary 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 knowledge of the
Company, the liability for Taxes set forth on each such Tax Return adequately
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<PAGE>
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 knowledge of the Company, threatening to
assert against the Company or the Subsidiary any deficiency or claim for
additional Taxes. Neither the Company nor the Subsidiary 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 the Company
or the Subsidiary except liens for current Taxes not yet due. Neither the
Company nor the Subsidiary 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 the Company and its Subsidiary, taken as
a whole, after the Effective Time. The accruals and reserves for taxes
reflected in the Company Balance Sheet are adequate to cover all Taxes accruable
by the Company and its Subsidiary 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 Subsidiary.
SECTION 2.17. Insurance. Complete and correct copies of all material
---------
policies of fire, product or other liability, workers' compensation, directors
and officers, financial institutions bond, errors and omissions and all other
similar forms of insurance owned or held by the Company and its Subsidiary have
been delivered or made available to Associated. 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
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<PAGE>
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 knowledge of the Company, the insurance
policies to which the Company or its Subsidiary are parties are sufficient for
compliance with all material requirements of law and all material agreements to
which the Company and its Subsidiary are parties and will be maintained by the
Company and its Subsidiary until the Effective Time. Neither the Company nor the
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 the
-----------------------------
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 could reasonably be expected
to materially and adversely affect in the future the financial condition,
results or operations, assets, business or prospects of the Company and its
Subsidiary, taken as a whole, except for such judgments, orders, decrees, rules
or regulations affecting financial institutions and their holding companies
generally.
SECTION 2.19. Internal Controls and Records. The Company and its
-----------------------------
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
lending agreement, collateral document or security which is not fully reflected
in the books and records of the Company and its Subsidiary.
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 Bank or banking regulators; (b)
neither the Company nor the 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 the Subsidiary, or any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing; and (c) neither the Company nor the 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, which
violation could
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<PAGE>
have a Material Adverse Effect on the Company and the Subsidiary, taken as a
whole.
SECTION 2.21. Labor Matters. Except as will not cause a Material Adverse
-------------
Effect to the Company and its Subsidiary, taken as a whole, (a) the Company and
its Subsidiary 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 its 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 its 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 its Subsidiary; and (e) neither the Company nor its 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 its Subsidiary.
SECTION 2.23. Accounting and Tax Matters.
--------------------------
(a) To the knowledge of the Company, neither the Company nor any of
its affiliates has taken or agreed to take any action that would prevent
Associated 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 knowledge of the Company, there is no plan or intention on
the part of shareholders of the Company who will receive Associated Common Stock
to sell or otherwise dispose of an amount of Associated Common Stock to be
received in the Merger which would reduce their ownership of Associated Common
Stock to a number of shares having in the aggregate a value 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. Year 2000 Compliance. The Company has furnished to
--------------------
Associated true and complete copies of the Company's Year 2000 Project Plan,
Year 2000 Testing Program/Contingency Plans and minutes of the meetings of the
Bank's Year 2000 Committee.
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<PAGE>
SECTION 2.25. Full Disclosure. No statement contained in this Agreement,
---------------
including the Company Disclosure Schedule, or any certificate furnished or to be
furnished by or at the direction of the Company to Associated 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 2.26. Votes Required. The affirmative vote of the holders of a
--------------
majority of the voting power of all of the outstanding shares of (a) Company
Common Stock, (b) the Class A Common Stock and (c) the Class B Common Stock are
the only votes 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 ASSOCIATED
Except as set forth in the Disclosure Schedule attached hereto (the
"Associated Disclosure Schedule"), Associated hereby represents and warrants to
the Company that:
SECTION 3.01. Organization and Qualification. Associated is a bank
------------------------------
holding company duly organized and validly existing under the laws of the State
of Wisconsin. Associated is registered with the Federal Reserve Board as a bank
holding company under the BHCA. Associated and each of its subsidiaries has the
requisite corporate power and authority and is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders (the "Associated Approvals") necessary to own, lease and
operate its properties and to carry on its business as it is 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 Associated Approvals would not, individually or in the aggregate,
have a Material Adverse Effect on Associated and its subsidiaries, taken as a
whole. Associated has not received any notice of proceedings relating to the
revocation or modification of any such Associated Approvals. Associated 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 Associated.
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<PAGE>
SECTION 3.02. Articles of Incorporation and Bylaws. Associated has
------------------------------------
heretofore furnished to the Company a complete and correct copy of its Articles
of Incorporation and the Bylaws, as amended or restated. Such Articles of
Incorporation and Bylaws are in full force and effect. Associated is not in
violation of any of the provisions of its Articles of Incorporation or Bylaws.
SECTION 3.03. Capitalization. The outstanding capital stock of Associated
--------------
is, and the shares of Associated 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 Law).
SECTION 3.04. Authority. Associated has 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 Associated and the consummation by Associated
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Associated and no other corporate
proceedings on the part of Associated are necessary to authorize this Agreement
or to consummate the transactions so contemplated hereby. This Agreement has
been duly and validly executed and delivered by Associated and, assuming the due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligation of Associated enforceable in accordance with its
terms.
SECTION 3.05. No Conflict; Required Filings and Consents.
------------------------------------------
(a) To the knowledge of Associated, the execution and delivery of this
Agreement by Associated does not, and the performance of this Agreement by
Associated shall not, (i) conflict with or violate the Articles of Incorporation
or Bylaws of Associated, (ii) conflict with or violate any Laws applicable to
Associated or its subsidiaries or by which its or 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 Associated or any subsidiary of Associated pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Associated or any subsidiary of
Associated is a party or by which Associated or any subsidiary of Associated or
any of 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 Associated and its subsidiaries, taken as a
whole.
A-26
<PAGE>
(b) To the knowledge of Associated, the execution and delivery of this
Agreement by Associated does not, and the performance of this Agreement by
Associated shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, Blue Sky Laws, the BHCA, the BL, the banking
laws and regulations of the State of Wisconsin, the filing and recordation of
appropriate merger or other documents as required by Wisconsin Law and Minnesota
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 Associated
from performing its obligations under this Agreement, and would not have a
Material Adverse Effect on Associated.
SECTION 3.06. Compliance; Permits. To the knowledge of Associated, neither
-------------------
Associated nor any of its subsidiaries is in conflict with, or in default or
violation of (a) any Law applicable to Associated or any subsidiary of
Associated or by which its or 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 Associated or any
subsidiary of Associated is a party or by which Associated or any subsidiary of
Associated or any of its or their 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 Associated and its
subsidiaries, taken as a whole.
SECTION 3.07. Securities Reports; Financial Statements.
----------------------------------------
(a) As of the date of this Agreement, Associated has delivered 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) all definitive proxy statements relating to Associated's meetings of
shareholders (whether annual or special) held since December 31, 1994, (iii) all
Reports on Form 8-K filed by Associated with the SEC since December 31, 1994,
(iv) its Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998, (v) all other reports or registration statements (other than
Reports on Form 10-Q and registration statements on Form S-8) filed by
Associated with the SEC since December 31, 1994 and (vi) all amendments and
supplements to all such reports and registration statements filed by Associated
with the SEC since December 31, 1994 (collectively, the "Associated SEC
Reports"). The Associated SEC Reports, including all Associated SEC Reports
filed after the date of this Agreement, (i) were or will be prepared in all
material respects in accordance with the requirements of applicable law and (ii)
did not at the time they were filed, or will not at the time they are filed,
contain any untrue statement of material fact or omit to state a material fact
required to be stated
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<PAGE>
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 Associated SEC Reports,
including any Associated 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
Associated 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 and to the extent set forth on the consolidated balance
sheet of Associated and its subsidiaries as of December 31, 1997, including all
notes thereto (the "Associated Balance Sheet"), neither Associated 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,
individually or in the aggregate, have a Material Adverse Effect on Associated
and its subsidiaries, taken as a whole.
(d) Neither Associated nor any of its subsidiaries is a party to or
bound by any contract, arrangement, commitment or understanding which is a
material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC)
to be performed after the date of this Agreement that has not been filed or
incorporated by reference in the Associated SEC Reports filed prior to the date
of this Agreement
SECTION 3.08. Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
the Associated SEC Reports filed prior to the date of this Agreement and except
for the restructuring charges described in the Associated Disclosure Schedule at
Section 3.08, since December 31, 1997, to the date of this Agreement, Associated
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 Associated or its subsidiaries having a Material
Adverse Effect on Associated and its subsidiaries, taken as a whole, (b) any
damage, destruction or loss (whether or not covered by insurance) with respect
to any assets of Associated or its subsidiaries having a Material Adverse Effect
on
A-28
<PAGE>
Associated and its subsidiaries, taken as a whole, (c) any change by Associated
in its accounting methods, principles or practices, (d) any revaluation by
Associated of any of its material assets in any material respect, or (e) to the
date of this Agreement, any entry by Associated or any of its subsidiaries into
any commitment or transaction material to Associated and its subsidiaries, taken
as a whole.
SECTION 3.09. Absence of Litigation. Except as disclosed in the Associated
---------------------
Disclosure Schedule at Section 3.09 or in the Associated SEC Reports filed prior
to the date of this Agreement, (a) neither Associated nor any of its
subsidiaries 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 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, action, suit, litigation,
proceeding, arbitration, investigation, or controversy of any kind affecting
Associated or any of Associated's subsidiaries pending or, to the knowledge of
Associated, threatened, except for matters which (i) as of the date of this
Agreement individually seek damages not in excess of $100,000 and (ii) otherwise
will not have, and cannot reasonably be expected to have, a Material Adverse
Effect on Associated and its subsidiaries taken as a whole, 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
Associated or any of Associated's subsidiaries as a result of an examination by
any bank regulatory authority.
SECTION 3.10. Registration Statement. None of the information supplied or
----------------------
to be supplied by Associated for inclusion in (a) the Registration Statement (as
defined in Section 6.01) (b) the 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 Prospectus,
when mailed and at the time of the Meeting (as provided in Section 6.02), 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.
All documents filed with the SEC or other regulatory authority by Associated 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 Associated 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
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<PAGE>
which restricts materially the conduct of its or their business (including any
contract containing covenants which limit the ability of Associated or any
subsidiary of Associated 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, Associated or any subsidiary of Associated may carry on its
business (other than as may be required by Law or applicable regulatory
authorities)), or in any manner relates to its or their capital adequacy, credit
policies or management, except for those the existence of which has been
disclosed to the Company pursuant to Sections 3.07 and 3.08, nor has Associated
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, except as may be disclosed by Associated in the
Associated Disclosure Schedule at Section 3.11.
SECTION 3.12. Taxes. Associated and its subsidiaries have timely filed all
-----
Tax Returns required to be filed by them, and Associated 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 Associated is maintaining reserves adequate for their
payment. To the knowledge of Associated, 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 Section 3.12, references to Associated and
its subsidiaries include former subsidiaries of Associated for the periods
during which any such corporations were owned, directly or indirectly, by
Associated. 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 knowledge of Associated,
threatening to assert against Associated or any of its subsidiaries any
deficiency or claim for additional Taxes. Neither Associated 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 Associated or any of its subsidiaries except liens
for current Taxes not yet due. Neither Associated 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 Associated and its subsidiaries, taken as a whole, after the
Effective Time. The accruals and reserves for taxes reflected in the Associated
Balance Sheet are adequate to cover all Taxes accruable through the date thereof
(including Taxes being contested) in accordance with generally accepted
accounting principles. No agreements relating to allocating or sharing of Taxes
exist among Associated and its subsidiaries.
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<PAGE>
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 Associated.
SECTION 3.14. Accounting and Tax Matters. To the knowledge of Associated,
--------------------------
neither Associated nor any of its affiliates has taken or agreed to take any
action that would prevent Associated 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 this Agreement,
---------------
including the Associated Disclosure Schedule, or any certificate furnished or to
be furnished by or at the direction of Associated 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. Absence of Adverse Agreements. Neither Associated nor any of
-----------------------------
its subsidiaries 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 could reasonably
be expected to materially and adversely affect in the future the financial
condition, results or operations, assets, business or prospects of Associated
and its subsidiaries, taken as a whole, except for such judgments, orders,
decrees, rules or regulations affecting financial institutions and their holding
companies generally.
ARTICLE IV
----------
COVENANTS OF THE COMPANY
------------------------
SECTION 4.01. Affirmative Covenants. The Company hereby covenants and
---------------------
agrees with Associated that prior to the earlier of the Effective Time or the
termination of this Agreement, unless the prior written consent of Associated
shall have been obtained and except as otherwise contemplated herein, it will
and it will cause the Subsidiary to:
(a) operate its business only in the usual, regular and ordinary
course consistent with past practices;
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<PAGE>
(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;
(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) comply with and perform in all material respects all obligations
and duties imposed upon it by all applicable laws;
(g) purchase and sell securities and other investments in accordance
with the guidelines set forth in Exhibit 4.01;
(h) comply with the capital requirements set forth on Exhibit 4.01;
and
(i) with respect to the Subsidiary, maintain as of December 31, 1998
and thereafter an aggregate loan loss reserve of not less than 1.5% of period
ending loans (excluding overdrafts less than 30 days old).
SECTION 4.02. Negative Covenants. Except as specifically contemplated by
------------------
this Agreement or the Company Disclosure Schedule, from the date of this
Agreement until the Effective Time, the Company shall not do, or permit the
Subsidiary to do, without the prior written consent of Associated, any of the
following:
(a) (i) grant any general increase in compensation to its employees as
a class, or to its officers or directors, except in accordance with past
practice or as required by Law or increases which are not material, (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
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<PAGE>
normal severance policies of the Company and its Subsidiary in effect on the
date of this Agreement;
(b) 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 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; provided, however, that the Company may,
prior to the Effective Time, issue up to 430,000 shares of Class A Common Stock
under the Company's existing stock option plan.
(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 the Subsidiary to take any such action;
provided, however, that (i) the Company may, upon the request of one or more of
its shareholders, register transfers of Shares of Company Common Stock and (ii)
the Company's Board of Directors may provide (or authorize the provision of)
information to, and may engage in (or authorize) such negotiations or
discussions with, any person, directly or through representatives, if [a] the
Board of Directors, after having consulted with independent counsel (which may
be or include Kaplan, Strangis and Kaplan, P.A.), has determined in good faith
that providing such information or engaging in such negotiations or discussions
is reasonably required in order to properly discharge the directors' fiduciary
duties in
A-33
<PAGE>
accordance with Minnesota Law, [b] prior to furnishing such information to such
person or engaging in such negotiations or discussions, the Company provides
Associated with at least seven days' notice to the effect that it is furnishing
information to, or entering into negotiations or discussions with, such person,
and [c] prior to furnishing such information to such person, the Company has
received from such person an executed confidentiality agreement in customary
form. For purposes of this Agreement, "Competing Transaction" shall mean any of
---------------------
the following involving the Company or its Subsidiary: (i) any merger,
consolidation, share exchange 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 Subsidiary; (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 of the Company; 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 Associated;
(g) except in their fiduciary capacities for the account of customers,
purchase any shares of Associated 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) subject to section 4.01(i), change any lending, investment,
liability management or other material policies concerning the business or
operations of the Company or its Subsidiary in any material respect; organize
any new subsidiaries or enter into any new non-banking line of business whether
or not
A-34
<PAGE>
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 (except
deposit liabilities and repurchase agreements in the ordinary course of
business), 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 Subsidiary or banking regulators)
in an amount greater than $350,000, (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 its
Subsidiary; and (B) as may be required under existing agreements to which the
Company or the Subsidiary is a party; (iv) acquire assets (including equipment)
in excess of $200,000 in the aggregate (excluding loans to customers and
repurchase agreements permitted in (i) above, investments permitted under
Section 4.01(g) and federal fund sales)); (vi) pay, discharge, or satisfy any
debts or claims not in the ordinary course of business and consistent with past
practices; (vii) settle any claim, action, suit, litigation, proceeding,
arbitration, investigation or controversy of any kind, for any amount in excess
of $100,000.00 or in any manner which would restrict in any material respect the
operations or business of the Company or its Subsidiary; (viii) purchase any new
financial product or instrument which involves entering into a contract with a
term of six months or longer (excluding loans to customers and repurchase
agreements permitted in (i) above, investments permitted under Section 4.01(g),
customer deposits and federal fund sales)); 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 and its Subsidiary, taken as a whole; or
(x) incur or pay legal or accounting, fees in connection with the transaction
contemplated hereby in excess of an aggregate of $200,000; or
(k) agree in writing or otherwise to do any of the foregoing.
SECTION 4.03. Access and Information.
----------------------
(a) Prior to the Effective Time and upon reasonable notice, and
without unreasonable disruption to the business carried on by the Company or its
Subsidiary, the Company shall (and shall cause its Subsidiary to) afford to
Associated's officers, employees, accountants, legal counsel and other
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<PAGE>
representatives access, during normal business hours, to all its properties,
books, contracts, commitments and records (other than the portion of Company
board of director minutes or other materials which discuss merger proposals).
Prior to the Effective Time, the Company shall (and shall cause the Subsidiary
to) furnish promptly to Associated (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 Subsidiary; (iii) the audited
consolidated financial statements of the Company and the Subsidiary for the year
ended December 31, 1998 (if issued); (iv) a summary of any action taken by the
Board of Directors, or any committee thereof, of the Company and its Subsidiary;
and (v) all other information concerning the business, properties and personnel
of the Company or its Subsidiary as Associated may reasonably request.
(b) Any information provided to Associated by the Company or its
Subsidiary, whether prior to or subsequent to the date of this Agreement, shall
be kept confidential by the representatives of Associated (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 Associated in any
document required to be filed with any government authority or agency. Upon any
termination of this Agreement pursuant to Article VIII hereof, Associated agrees
to promptly return all information and documents that it has obtained from the
Company in connection herewith.
SECTION 4.04. Affiliates; Accounting and Tax Treatment. Within thirty (30)
----------------------------------------
days after the date of this Agreement, (a) the Company shall deliver to
Associated 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 4.04.
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 4.04 as soon as practicable
after attaining such status. The Company will use its reasonable best efforts to
cause the Merger to qualify for
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<PAGE>
pooling-of-interests accounting treatment and as a reorganization under Section
368(a)(1)(A) of the Code.
SECTION 4.05. Expenses.
--------
(a) Except as provided in Section 8.02, below, and subject to Section
4.02(j)(x), all Expenses (as defined below) incurred by Associated 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 Prospectus and all SEC and other
regulatory filing fees incurred in connection herewith. Notwithstanding the
foregoing, the Company's portion of such printing and filing expenses and fees
shall not, under any circumstances, exceed $25,000.
(b) "Expenses" as used in this Agreement shall include all 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 4.06. Delivery of Shareholder List. The Company shall deliver to
----------------------------
Associated 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 Associated may reasonably request.
ARTICLE V
---------
COVENANTS OF ASSOCIATED
-----------------------
SECTION 5.01. Affirmative Covenants. Associated 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 Associated's financial statements applied on 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
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<PAGE>
insofar as reasonably can be foreseen, in the future will not, have a
Material Adverse Effect on Associated and its subsidiaries, taken as a whole;
and
(c) will, to the best of its reasonable ability and in all material
respects, (i) comply with applicable Blue Sky Laws and regulations, the
Securities Act, and the Exchange Act, (ii) remain qualified under the Exchange
Act and the rules and regulations thereunder, and (iii) maintain the listing of
shares of Associated Common Stock on the Nasdaq Stock Market's National Market.
SECTION 5.02. Access and Information.
----------------------
(a) After the date of this Agreement and prior to the Effective Time,
upon reasonable notice, Associated shall (and shall cause each of its
subsidiaries to) furnish promptly to the Company (i) a copy of each Associated
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 Associated or its subsidiaries as the Company may
reasonably request.
(b) Any information provided to the Company by Associated 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 any government authority or agency. Upon any termination of this
Agreement pursuant to Article VIII hereof, the Company agrees to promptly return
all information and documents that it has obtained from Associated in connection
herewith.
SECTION 5.03. Accounting and Tax Treatment. Associated will use its
----------------------------
reasonable best efforts to cause the Merger to qualify for pooling-of-interests
accounting treatment and as a reorganization under Section 368(a)(1)(A) of the
Code.
SECTION 5.04. Eligibility for Dividend. Associated agrees to use
------------------------
reasonable efforts to take all steps necessary to consummate the Merger on or
before the close of business on the date the Board of Directors of Associated
determines to be the record date for purposes of establishing those shareholders
of
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<PAGE>
Associated eligible to receive the dividend to be declared and paid by
Associated in the first calendar quarter of 1999.
ARTICLE VI
----------
ADDITIONAL AGREEMENTS
---------------------
SECTION 6.01. Registration Statement. As promptly as practicable after
----------------------
the execution of this Agreement, Associated 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 contained therein are defined as the "Prospectus") with the SEC
covering the Associated 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. Associated
does not undertake to file post-effective amendments to Form S-4 or to file a
separate registration statement to register the sale of Associated Common Stock
by affiliates of the Company pursuant to Rule 145 promulgated under the
Securities Act. The Company will furnish to Associated all information
concerning the Company and its Subsidiary required to be set forth in the
Registration Statement and Associated will provide the Company and its counsel
the opportunity to review and approve such information as set forth in the
Registration Statement and Prospectus. Associated 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 appear to have been, or shall have become,
incorrect or incomplete and will furnish the information necessary to correct
such misstatements or omissions. As promptly as practicable after the effective
date of the Registration Statement, the Company will mail to its shareholders
(a) a notice of the Company's shareholders meeting described in Section 6.02
below and the Prospectus, and (b) as promptly as practicable after approval
thereof by Associated, such other supplementary proxy materials as may be
necessary to make the 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 Associated, 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 constitutes a "prospectus" within the
meaning of the Securities Act. Associated shall also take any reasonable action
required to be taken under any applicable Blue Sky Laws in connection with the
issuance of the shares of Associated Common Stock to be issued as set forth in
this Agreement and the Company and the Subsidiary shall furnish all information
concerning the Company and the Subsidiary, and the holders of the Company's
Common Stock
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<PAGE>
and other assistance as Associated may reasonably request in connection with
such action.
SECTION 6.02. Meeting of Shareholders. The Company and its officers and
-----------------------
directors shall: (a) cause the Company's shareholders meeting (the "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 provisions of
applicable law, (b) submit this Agreement to the Company's shareholders together
with a recommendation for approval by the Board of Directors of the Company, and
(c) use their best efforts to obtain the approval and adoption of the Merger by
the requisite percentage of the Company's shareholders; provided, however, that
the Company's Board of Directors may fail to make the recommendation, or to seek
to obtain the shareholder approval, or withdraw, modify or change any such
recommendation, if the Board of Directors, after having consulted with
independent counsel (which may be or include Kaplan, Strangis and Kaplan, P.A.),
has determined in good faith that such action is reasonably required in order to
properly discharge the directors' fiduciary duties in accordance with Minnesota
Law.
SECTION 6.03. Appropriate Action; Consents; Filings. The Company and
-------------------------------------
Associated 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 or state securities laws, (ii) any applicable federal or
state banking laws and (iii) any other applicable law; provided that Associated
--------
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 Associated shall furnish all information required for any
application or other filing to be made pursuant to the rules and regulations of
any applicable law (including all information required to be included in the
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
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<PAGE>
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 Associated, and Associated 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 Associated, 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. Associated 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 with
mutual consent of both parties, except as may be required by law or any listing
agreement with the National Association of Securities Dealers.
SECTION 6.06. Environmental Matters. In the event DPRA Incorporated (the
---------------------
"Environmental Consultant") discovers or determines (a) that the Company's
Property does not comply in all material respects with all Environmental Laws;
(b) that material capital improvements may reasonably be required to maintain
compliance with all Environmental Laws; (c) that there are material contingent
liabilities affecting the Company's Property arising under Environmental Laws or
under Environmental Permits; or (d) the existence of any environmental condition
(including, without limitation, a spill, discharge or contamination) the result
of which, in the opinion of the Environmental Consultant, requires investigative
or remedial action pursuant to any applicable Environmental Law or may be the
basis for the assertion of any third party claims, including the claims of
government entities, Associated shall promptly provide the Company, with written
notice thereof. Associated shall obtain from the Environmental Consultant a
written environmental evaluation of the Company's Property with respect to the
foregoing matters as soon as reasonably practicable after the date hereof.
SECTION 6.07. Employee Benefits. As of the Effective Time, the employees
-----------------
of the Company and the Bank (the "Company Employees") shall continue employment
with the Surviving Corporation, in the same positions and at the same level of
wages and/or salary and without having incurred a termination of employment or
separation from service; provided, however, except as may be specifically
required by applicable law or any contract, the Surviving Corporation shall not
be obligated to continue any employment relationship with any Company
A-41
<PAGE>
Employee for any period of time. In addition to any obligation required by law
or under any plan of the Company disclosed on the Company Disclosure Schedule at
Section 2.10, Associated and the Company agree that Company Employees whose
employment is terminated without cause on the Effective Date or within six
months thereafter will receive severance payments pursuant to policy described
on the Company Disclosure Schedule at Section 2.08. To the extent any employee
benefit plan, program or policy of Associated or its subsidiaries is made
available to the employees of the Surviving Corporation: (i) service with the
Company (or any subsidiary of the Company) by any Company Employee prior to the
Effective Time shall be credited in determining such employee's eligibility,
vesting and benefit levels, and (ii) with respect to any welfare benefit plans
in which such employees may become eligible to participate, Associated shall
cause such plans to provide credit for any co-payments or deductibles by such
employees and waive all pre-existing condition exclusions and waiting periods,
other than limitations or waiting periods that have not been satisfied under any
welfare plans maintained by the Company for Company Employees prior to the
Effective Time, effective upon the Effective Time.
SECTION 6.08 Indemnification.
---------------
(a) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers and
directors and employees of the Company and the Bank (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages,
liabilities or amounts that are paid in settlement of (with the approval of the
Surviving Corporation, which will not be unreasonably withheld) or otherwise in
connection with, any claim, action, suit, proceeding or investigation (a
"Claim"), based in whole or in part on the fact that such person is or was such
a director, officer or employee and arising out of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), in each case to the fullest extent
that such Indemnified Parties would have been indemnified by the Company under
Minnesota Law (subject to limitations, if any, in the Company's articles of
incorporation or by-laws) or by the Bank under applicable law (subject to
limitations, if any, in the Bank's articles of incorporation and by-laws), as
the case may be, had the transactions contemplated by this Agreement not been
consummated (and shall pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the fullest extent
permitted by Minnesota law (subject to limitations, if any, in the Company's
articles of incorporation or by-laws) in the case of the Company and applicable
law (subject to limitations, if any, in the Bank's articles of incorporation or
by-laws) in the case of the Bank).
(b) Any Indemnified Party wishing to claim indemnification under this
Section 6.08 upon learning of any such Claim, shall notify the Surviving
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<PAGE>
Corporation (although the failure to so notify the Surviving Corporation shall
not relieve it from any liability that the Surviving Corporation may have under
this Section 6.08, except to the extent such failure prejudices the Surviving
Corporation). The Surviving Corporation shall have the right to assume the
defense thereof and if such right is exercised, the Surviving Corporation shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if the Surviving Corporation
elects not to assume such defense or there is a conflict of interest between the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel reasonably satisfactory to the Surviving Corporation and, in such
case, the Surviving Corporation shall pay all reasonable fees and expenses of
such counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that (i) the Surviving Corporation shall not, in
connection with any one such action or proceeding or separate but substantially
similar actions or proceedings arising out of the same general allegations, be
liable for the fees and expenses of more than one separate firm of attorneys at
any time for all Indemnified Parties except to the extent that local counsel, in
addition to such parties' regular counsel, is reasonably necessary or desirable
in order to effectively defend against such action or proceeding, (ii) the
Surviving Corporation and the Indemnified Parties will cooperate in the defense
of any such matter and (iii) the Surviving Corporation shall not be liable for
any settlement effected without its prior written consent, which consent will
not be unreasonably withheld or delayed and provided, further that the Surviving
Corporation shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall ultimately determine and
such determination shall have become final and not subject to further appeal,
that the indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law. No Indemnified Party shall consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release, in form and substance reasonably satisfactory to
such Indemnified Party and the Surviving Corporation, from all liability in
respect of such claim or litigation for which such Indemnified Party would be
entitled to indemnification hereunder.
(c) The Surviving Corporation shall use its reasonable best efforts to
cause to be maintained in effect for not less than one year after the Effective
Time (except to the extent not generally available in the market) directors' and
officers' liability insurance and fiduciary liability insurance that is
substantially equivalent in coverage to the Company's current insurance;
provided, however, that the Surviving Corporation shall not be required to pay
an annual premium for such insurance in excess of 150% of the last annual
premium paid prior to the date of this Agreement and in such case shall purchase
as much comparable coverage as possible for such amount.
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<PAGE>
(d) This Section 6.08 is intended to be for the benefit of, and shall
be enforceable by, the Indemnified Parties referred to herein, their heirs and
personal representatives and shall be binding on the Surviving Corporation and
its respective successors and assigns.
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
Associated or the Company, threatened by the SEC. Associated shall have
received all other federal or state securities permits and other authorizations
necessary to issue Associated Common Stock in exchange for the Company Common
Stock and to consummate the Merger.
(b) Shareholder Approvals. This Agreement and the Merger shall have
---------------------
been approved and adopted by the requisite vote of the shareholders of the
Company.
(c) Regulatory Approvals. The Merger shall have been approved by the
--------------------
Federal Reserve Board, the Minnesota Department of Commerce Financial
Examination Division, and all other required regulatory agencies, which
approvals shall not contain any condition which is not reasonably satisfactory
to Associated 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) Nasdaq Listing. The shares of Associated Common Stock that are to
--------------
be issued to the shareholders of the Company upon consummation of the Merger
shall have been authorized for listing on the Nasdaq Stock Market's National
Market, subject to notice of issuance.
(e) 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
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<PAGE>
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 Associated. The
--------------------------------------------------
obligations of Associated 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 (except that where a representation or warranty
that expressly speaks as of a date other than the Effective Date, such
representation or warranty need only be true as of such date). Associated shall
have received a certificate of the President 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 government
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
Associated Common Stock pursuant to the Merger, or (ii) seeking to restrain,
prohibit or limit the exercise of full rights of ownership or operation by
Associated or its subsidiaries of all or any portion of the business or assets
of the Company or its Subsidiary, which in either case is reasonably likely to
have a Material Adverse Effect on either the Company and its Subsidiary, taken
as a whole, or Associated and its subsidiaries, taken as a whole.
(e) Opinion of Counsel. Associated shall have received from Kaplan,
------------------
Strangis and Kaplan, P.A. or other independent counsel for the Company
reasonably satisfactory to Associated, an opinion dated the Effective Time, in
form
A-45
<PAGE>
and substance reasonably satisfactory to Associated, 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 Associated.
(f) Tax Opinion. Associated shall have received from Reinhart,
-----------
Boerner, Van Deuren, Norris & Rieselbach, s.c., an opinion (i) dated on or about
the date that is two business days prior to the date the Notice of Meeting
Prospectus is first mailed to shareholders of the Company, (ii) which shall not
have been withdrawn or modified in any material respect prior to the Effective
Time, (iii) to the effect that:
[a] the Merger will qualify as a reorganization within the
meaning of section 368(a)(1)(A) of the Code;
[b] the Company and Associated will each be party to a
reorganization within the meaning of Section 368(b) of the Code;
[c] no gain or loss will be recognized by any shareholder
of the Company upon consummation of the Merger (except with respect to cash
received in lieu of a fractional share interest in Associated Common Stock); and
[d] the aggregate income tax basis of Associated Common
Stock received by the shareholders of the Company pursuant to the Merger will be
the same as the aggregate tax basis of the Company Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
(g) Pooling Opinions. Associated shall have received an opinion from
----------------
KPMG Peat Marwick LLP to the effect that the Merger qualifies for pooling-of-
interests accounting treatment if consummated in accordance with this Agreement;
in support of the KPMG Peat Marwick LLP pooling opinion, KPMG Peat Marwick LLP
and Associated shall have received an opinion from Grant Thornton LLP to the
effect that the Company qualifies to have the Merger accounted for as a pooling-
of-interests if consummated in accordance with this Agreement.
(h) Affiliate Agreements. Associated 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
4.04.
(i) Burdensome Condition. There shall not be any action taken, or any
--------------------
statute, rule, regulation or order enacted, entered, enforced or deemed
A-46
<PAGE>
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 Associated 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.
(j) Fractional Shares; Dissenters. The aggregate of (i) the
-----------------------------
fractional share interests in Associated Common Stock to be paid in cash
pursuant to Section 1.07 of this Agreement and (ii) the shares of Associated
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 Associated Common Stock due, directly or indirectly, to the
exercise of dissenter's rights under Minnesota Law, shall not be more than 10%
of the maximum aggregate number of shares of Associated Common Stock which could
be issued as a result of the Merger.
(k) Environmental Report. Associated shall have received from the
--------------------
Environmental Consultant a written environmental evaluation of the Company's
Property evidencing that:
(i) The Company's Property complies in all material respects
with all Environmental Laws;
(ii) No material capital improvements should reasonably be
required to maintain compliance with all Environmental Laws; and
(iii) There are no material contingent liabilities affecting the
Company's Property arising under Environmental Laws or under Environmental
Permits;
(l) Earnings. The Company's and the Bank's consolidated after-tax
--------
earnings for the year ending December 31, 1998 shall be at least $2,110,000 and
$2,318,000, respectively, prior to the impact of the following adjustments,
including the income tax effects thereof: (i) the additional amount of loan
loss reserve established as a result of Section 4.01(i), (ii) the amount
expensed or accrued with respect to severance payments pursuant to the policy
described on the Company Disclosure Schedule at Section 2.08, and (iii) all
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to the Company and its
affiliates and the printing and filing expenses incurred by the Company or the
Bank pursuant to
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<PAGE>
Section 4.05) incurred by the Company or the Bank 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.
(m) Year 2000. Associated shall be reasonably satisfied that the
----------
Company and its Subsidiary have undertaken a Year 2000 compliance plan designed
to comply with FFIEC guidelines, which plan shall include an assessment of the
readiness of the Company's and Subsidiary's systems (including systems critical
to the provision of services to customers of the Subsidiary) and shall contain
appropriate contingency plans to assure that all mission critical systems will
function properly prior to Year 2000.
(n) Community Reinvestment Act. The Bank shall have provided to
--------------------------
Associated evidence that the Bank has achieved a satisfactory rating and
performance under the Community Reinvestment Act.
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 Associated 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 Associated to that effect.
(b) Agreements and Covenants. Associated 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 Associated 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 Associated.
(d) No Challenge. There shall not be pending any action, proceeding
------------
or investigation before any court or administrative agency or by any government
agency or any other person challenging or seeking material damages
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<PAGE>
in connection with the Merger or the conversion of the Company Common Stock into
the Associated Common Stock pursuant to the Merger.
(e) Opinion of Counsel. The Company shall have received from
------------------
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c. or other independent
counsel for Associated 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, which opinions shall be
based on such assumptions and contain such qualifications and limitations as are
appropriate and reasonably satisfactory to the Company.
(f) Tax Opinion. The Company shall have received from Reinhart,
-----------
Boerner, Van Deuren, Norris & Rieselbach, s.c., an opinion (i) 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, (ii) which
shall not have been withdrawn or modified in any material respect prior to the
Effective Time, (iii) to the effect that:
[a] the Merger will qualify as a reorganization within the
meaning of section 368(a)(1)(A) of the Code;
[b] the Company and Associated will each be party to a
reorganization within the meaning of Section 368(b) of the Code;
[c] no gain or loss will be recognized by any shareholder
of the Company upon consummation of the Merger (except with respect to cash
received in lieu of a fractional share interest in Associated Common Stock); and
[d] the aggregate income tax basis of the Associated Common
Stock received by the shareholders of the Company pursuant to the Merger will be
the same as the aggregate tax basis of the Company Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
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:
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<PAGE>
(i) by mutual written consent of Associated and the Company;
(ii) by the Company or Associated (A) if there has been a
breach in any material respect of any representation, warranty, covenant or
agreement on the part of the Company, on the one hand, or Associated, on the
other hand, respectively, set forth in this Agreement, or (B) if any
representation or warranty of the Company, on the one hand, or Associated, on
the other hand, respectively, shall be discovered to have become untrue in any
material respect in either case such that the conditions set forth in Section
7.02(a) or Section 7.03(a) would not be satisfied and such breach or other
condition has not been cured within 20 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 Associated or the Company if any permanent
injunction preventing the consummation of the Merger shall have become final and
nonappealable;
(iv) by either Associated or the Company if the Merger shall
not have been consummated before January 25, 1999, for a reason other than the
failure of the terminating party to comply with its obligations under this
Agreement;
(v) by either Associated or the Company if the Federal Reserve
Board or the Minnesota Department of Commerce Financial Examination Division, or
any other regulatory authority has denied approval of the Merger and neither
Associated nor 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 Associated, if all of the conditions set forth in
Section 7.02 are not satisfied on or before January 25, 1999;
(vii) by the Company, if all of the conditions set forth in
Section 7.03 are not satisfied on or before January 25, 1999;
(viii) by either Associated or the Company if all of the
conditions set forth in Section 7.01 are not satisfied on or before January 25,
1999;.
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<PAGE>
(ix) by Associated, if at any time prior to the Meeting
described in Section 6.02, the Company's Board of Directors shall have failed to
make its recommendation referred to in Section 6.02, or withdrawn such
recommendation or modified or changed such recommendation in a manner adverse to
the interests of Associated;
(x) by the Company, if the Company shall immediately
thereafter enter into a definitive agreement with a third party providing for an
Acquisition Transaction (as such term is defined below) on terms determined, in
good faith, by the Board of Directors of the Company, after consultation with
independent counsel (which may be or include Kaplan, Strangis and Kaplan, P.A.)
and financial advisors to the Board, to be such that termination of this
Agreement and entry into such third-party agreement is required in order to
discharge properly the directors' duties in accordance with Minnesota Law.
"Acquisition Transaction" means a transaction or series of transactions that,
directly or indirectly, in substance constitutes a disposition of all or
substantially all of the assets or business of the Company or its Subsidiary,
taken as a whole, whether by means of (i) a merger or consolidation, share
exchange or any similar transaction, (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition or (iii) a purchase or other acquisition
(including by way of a merger or consolidation, share exchange or otherwise) of
securities representing 50% or more of the voting power of the Company or 50% or
more of its Subsidiary; provided, however, in each of the situations described
in clauses (i), (ii) or (iii), that the Acquisition Transaction shall represent
consideration having an aggregate value (reasonably determined) to the Company
or its shareholders in
excess of the consideration to be received in the Merger; or
(xi) by the Company at any time after the end of the third
trading day preceding the Effective Time, if both of the following conditions
are satisfied:
[a] the Associated Average Price is less than $34, and
[b] the number obtained by dividing the Associated Average
Price by the closing price of a share of Associated Common stock on September
22, 1998, as quoted on the NASDAQ National Market is less than the number
obtained by dividing the Final Index Price (as defined below) by the Initial
Index Price (as defined below) and subtracting .20 from such quotient.
For purposes of this Section 8.01(a)(xi):
The "Associated Average Price" shall mean the average of the
daily closing prices of a share of Associated Common Stock during the
Calculation Period as quoted on the NASDAQ National Market.
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<PAGE>
The "Calculation Period" shall mean the ten consecutive trading
days ending on and including the third trading day preceding the day on which
the Effective Time occurs.
The "Final Index Price" shall mean the average of the Final
Prices for all of the companies comprising the Index Group.
The "Final Price" of any company belonging to the Index Group
shall mean the average of the daily closing prices of a share of common stock of
such company, as reported on the consolidated transactions reporting system for
the market or exchange on which such stock is principally traded, during the
Calculation Period.
The "Index Group" shall mean all of those companies listed on
Exhibit 8.01 hereto the common stock of which is publicly traded and as to which
there is no pending publicly announced proposal at any time during the
Calculation Period for such company to acquire another company or companies in
transactions with a value exceeding 10% of the acquirer's market capitalization
or for such company to be acquired.
The "Initial Index Price" shall mean the average of the per share
closing prices on September 22, 1998, of the common stock of the companies
comprising the Index Group, as reported on the consolidated transactions
reporting system for the market or the exchange on which such common stock is
principally traded.
If Associated or any company belonging to the Index Group
declares a stock dividend or effects a reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction between
September 22, 1998, and the end of the Calculation Period, the closing prices
for the common stock of such company shall be appropriately adjusted for the
purposes of the definitions above so as to be comparable to the price on the
date of this Agreement.
(b) In the event of termination and abandonment by any party as
provided above, written notice shall forthwith be given to the other party,
which notice shall specifically describe the basis for such termination.
(c) Anything to the contrary notwithstanding, Associated shall not,
under any circumstances, be entitled to terminate this Agreement under any
provision hereof as a result of the existence of asbestos in the IDS Building in
Minneapolis, Minnesota.
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<PAGE>
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 Associated each shall pay its own Expenses (as defined in Section 4.05
above) and this Agreement shall immediately terminate, except as set forth in
Section 9.01 hereof, and neither the Company nor Associated 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 indemnify and reimburse the other party for its expenses.
(c) Anything to the contrary notwithstanding, (i) if this Agreement
[a] is terminated by Associated pursuant to Section 8.01(ix) or by the Company
pursuant to Section 8.01(x) and [b] prior thereto or within twelve months after
such termination the Company shall have entered into an agreement to engage in
an Acquisition Transaction or (ii) if this Agreement is terminated by Associated
solely due to the failure of the holders of Class B Common Stock to approve the
Merger at a Meeting as provided in Section 6.02, then the Company shall pay
Associated a fee equal to three percent of the aggregate value of the
transaction contemplated hereby as of the date of termination, which value shall
be deemed equal to the average closing price per share of Associated Common
Stock as quoted on the Nasdaq Stock Market's National Market on the ten trading
days immediately preceding the date of termination multiplied by 800,000. If
such fee becomes payable under the circumstances described in clause (i) above,
it shall be paid to Associated within two business days after the date of
entering into such agreement for an Acquisition Transaction and if such fee
becomes payable under the circumstances described in clause (ii) above, it shall
be paid to Associated within two business days of termination 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, no amendment may be made which
would reduce the amount or change the type of consideration into which each
Share 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
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<PAGE>
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid 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 4.03(b), 4.05,
5.02(b), 6.07, 6.08, 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 addresses (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 Associated:
Associated Banc-Corp
112 North Adams Street
P.O. Box 13307
Green Bay, WI 54307-3307
Telecopier: (920) 433-3261
Attention: Brian R. Bodager
Chief Administrative Officer
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<PAGE>
With a copy to:
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c.
1000 North Water Street, Suite 2100
Milwaukee, WI 53202
Telecopier: (414) 298-8097
Attention: Richard W. Graber, Esq.
(b) If to Company:
Windsor Bancshares, Inc.
740 Marquette Avenue
Minneapolis, MN 55402
Telecopier: (612) 338-2350
Attention: Samuel L. Kaplan
President
with a copy to:
Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Telecopier: (612) 375-1143
Attention: James C. Melville, Esq.
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 other 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
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<PAGE>
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 requiring,
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
(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 and the Confidentiality Agreement dated
March 27, 1998 between the Company and Associated constitute the entire
agreement of the parties and supersede all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other person any rights or remedies hereunder.
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<PAGE>
SECTION 9.08. Assignment. This Agreement shall not be assigned by
----------
operation of law or otherwise, except that Associated 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 Associated 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 its successors, 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, except for the right to receive the
consideration payable pursuant to Article I and the right to indemnification
under Section 6.08.
SECTION 9.10. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Wisconsin, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
SECTION 9.11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, Associated and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
ASSOCIATED BANC-CORP
By: /s/ H.B. Conlon
----------------------------------------
Name: H. B. Conlon
Title: Chairman, President, and Chief
Executive Officer
WINDSOR BANCSHARES, INC.
By: /s/ Samuel L. Kaplan
----------------------------------------
Name: Samuel L. Kaplan
Title: President
By: /s/ Thomas H. Healey
----------------------------------------
Name: Thomas H. Healey
Title: Chairman of the Board
A-58
<PAGE>
EXHIBIT B
SECTIONS 302A.471 AND 302A.473 OF THE MINNESOTA
BUSINESS CORPORATION ACT - DISSENTERS' APPRAISAL RIGHTS
302A.471. Rights of dissenting shareholders.
Subdivision 1. Actions creating rights. A shareholder of a corporation
may dissent from, and obtain payment for the fair value of the shareholder's
shares in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption of
the shares, including provision respecting a sinking fund for the redemption or
repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares to
acquire shares, securities other than shares, or rights to purchase shares or
securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter, or
to cumulate votes, except as the right may be excluded or limited through the
authorization or issuance of securities of an existing or new class or series
with similar or different voting rights; except that an amendment to the
articles of an issuing public corporation that provides that section 302A.671
does not apply to a control share acquisition does not give rise to the right to
obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section 302A.725,
subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the shareholders in accordance with
their respective interests within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B, to
which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the board
directs that dissenting shareholders may obtain payment for their shares.
Subdivision 2. Beneficial owners. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the name of
the shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but
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<PAGE>
registered in the name of the shareholder and discloses the name and address of
each beneficial owner on whose behalf the shareholder dissents. In that event,
the rights of the dissenter shall be determined as if the shares as to which the
shareholder has dissented and the other shares were registered in the names of
different shareholders.
(b) The beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder.
Subdivision 3. Rights not to apply. (a) Unless the articles, the bylaws,
or a resolution approved by the board otherwise provide, the right to obtain
payment under this section does not apply to a shareholder of the surviving
corporation in a merger, if the shares of the shareholder are not entitled to be
voted on the merger.
(b) If a date is fixed according to section 302A.445, subdivision 1, for
the determination of shareholders entitled to receive notice of and to vote on
an action described in subdivision 1, only shareholders as of the date fixed,
and beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
Subdivision 4. Other rights. The shareholders of a corporation who have a
right under this section to obtain payment for their shares do not have a right
at law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the corporation.
302A.473. Procedures for asserting dissenters' rights.
Subdivision 1. Definitions. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1, up to
and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
Subdivision 2. Notice of action. If a corporation calls a shareholder
meeting at which any action described in section 302A.471, subdivision 1 is to
be voted upon, the notice of the meeting shall inform each shareholder of the
right to dissent and shall include a copy of section 302A.471 and this section
and a brief description of the procedure to be followed under these sections.
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<PAGE>
Subdivision 3. Notice of dissent. If the proposed action must be approved
by the shareholders, a shareholder who is entitled to dissent under section
302A.471 and who wishes to exercise dissenters' rights must file with the
corporation before the vote on the proposed action a written notice of intent to
demand the fair value of the shares owned by the shareholder and must not vote
the shares in favor of the proposed action.
Subdivision 4. Notice of procedure; deposit of shares. (a) After the
proposed action has been approved by the board and, if necessary, the
shareholders, the corporation shall send to all shareholders who have complied
with subdivision 3 and to all shareholders entitled to dissent if no shareholder
vote was required, a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired the shares
or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description of
the procedures to be followed under these sections.
(b) in order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
Subdivision 5. Payment; return of shares. (a) After the corporate action
takes effect, or after the corporation receives a valid demand for payment,
whichever is later, the corporation shall remit to each dissenting shareholder
who has complied with subdivisions 3 and 4 the amount the corporation estimates
to be the fair value of the shares, plus interest, accompanied by:
(1) The corporation's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months before the effective date of the
corporate action, together with the latest available interim financial
statements;
(2) An estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) A copy of section 302A.471 and this section, and a brief description of
the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a) a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the
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<PAGE>
dissenter agrees to accept that amount in full satisfaction. The dissenter may
decline the offer and demand payment under subdivision 6. Failure to do so
entitles the dissenter only to the amount offered. If the dissenter makes
demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under subdivision
4 and require deposit or restrict transfer at a later time.
Subdivision 6. Supplemental payment; demand. If a dissenter believes that
the amount remitted under subdivision 5 is less than the fair value of the
shares plus interest, the dissenter may give written notice to the corporation
of the dissenter's own estimate of the fair value of the shares, plus interest,
within 30 days after the corporation mails the remittance under subdivision 5,
and demand payment of the difference. Otherwise, a dissenter is entitled only
to the amount remitted by the corporation.
Subdivision 7. Petition; determination. If the corporation receives a
demand under subdivision 6, it shall, within 60 days after receiving the demand,
either pay to the dissenter the amount demanded or agreed to by the dissenter
after discussion with the corporation or file in court a petition requesting
that the court determine the fair value of the shares, plus interest. The
petition shall be filed in the county in which the registered office of the
corporation is located, except that a surviving foreign corporation that
receives a demand relating to the shares of a constituent domestic corporation
shall file the petition in the county in this state in which the last registered
office of the constituent corporation was located. The petition shall name as
parties all dissenters who have demanded payment under subdivision 6 and who
have not reached agreement with the corporation. The corporation shall, after
filing the petition, serve all parties with a summons and copy of the petition
under the rules of 180 civil procedure. Nonresidents of this state may be
served by registered or certified mail or by publication as provided by law.
Except as otherwise provided, the rules of civil procedure apply to this
proceeding. The jurisdiction of the court is plenary and exclusive. The court
may appoint appraisers, with powers and authorities the court deems proper, to
receive evidence on and recommend the amount of the fair value of the shares.
The court shall determine whether the shareholder or shareholders in question
have fully complied with the requirements of this section, and shall determine
the fair value of the shares, taking into account any and all factors the court
finds relevant, computed by any method or combination of methods that the court,
in its discretion, sees fit to use, whether or not used by the corporation or by
a dissenter. The fair value of the shares as determined by the court is binding
on all shareholders, wherever located. A dissenter is entitled to judgment in
cash for the amount by which the fair value of the shares as determined by the
court, plus interest, exceeds the amount, if any, remitted under subdivision 5,
but shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
Subdivision 8. Costs; fees; expenses. (a) The court shall determine the
costs and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to Comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems
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equitable. These fees and expenses may also be assessed against a person who has
acted arbitrarily, vexatiously, or not in good faith in bringing the proceeding,
and may be awarded to a party injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
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EXHIBIT C
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S 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
nine months ended As of and for the year ended
September 30, December 31,
---------------------------------- ----------------------------------------------------
1998 1997 1997 1996 1995
---------------- ---------------- ---------------- ---------------- ----------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Income statement data:
Interest income $ 10,611 $ 9,117 $ 12,337 $ 9,445 $ 7,008
Interest expense 4,881 3,893 5,292 3,931 2,916
---------- ---------- ---------- ---------- ----------
Net interest income 5,730 5,224 7,045 5,514 4,092
Provision for loan losses 375 270 580 420 220
Other income 315 283 371 303 277
Other expenses 3,075 2,852 3,817 3,368 2,740
---------- ---------- ---------- ---------- ----------
Income before income taxes 2,595 2,385 3,019 2,029 1,409
Income tax expense 1,028 947 1,196 810 569
---------- ---------- ---------- ---------- ----------
Net income $ 1,567 $ 1,438 $ 1,823 $ 1,219 $ 840
========== ========== ========== ========== ==========
Per common share data:
Net income per share
Basic
Class A $ 0.27 $ 0.26 $ 0.33 $ 0.23 $ 0.17
Class B 0.23 0.21 0.26 0.17 0.11
Diluted
Class A $ 0.26 $ 0.25 $ 0.31 $ 0.22 $ 0.17
Class B 0.23 0.21 0.26 0.17 0.11
Weighted average shares outstanding
Basic
Class A 3,112,967 3,000,000 3,000,000 3,000,000 3,000,000
Class B 3,150,000 3,150,000 3,150,000 3,150,000 3,150,000
Diluted
Class A 3,296,441 3,144,653 3,156,431 3,070,116 3,000,000
Class B 3,150,000 3,150,000 3,150,000 3,150,000 3,150,000
Cash dividends per share $ - $ - $ - $ - $ -
Balance sheet data:
Total assets $ 190,872 $ 146,073 $ 157,964 $ 126,741 $ 103,352
Loans 113,495 105,672 109,724 89,666 64,056
Allowances for loan losses 1,330 998 1,283 982 689
Total deposits 162,741 124,177 131,752 108,784 93,856
Stockholders' equity 9,169 6,883 7,308 5,408 4,261
</TABLE>
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<PAGE>
CHANGES IN FINANCIAL CONDITION
Total Company assets at year end 1997 were $157,964,000. During 1997, assets
increased by $31,223,000 or 24.6%. The majority of this increase was in gross
loans, which increased by $20,058,000 or 22.4% to $109,724,000. The loan growth
experienced was primarily due to increased commercial and commercial real estate
loan activity within the Minneapolis metropolitan market.
Most of the increased loan balances were funded by an increase in total
deposits. Total deposits increased from $108,784,000 at December 31, 1996 to
$131,752,000 at December 31, 1997, an increase of $22,968,000, or 21.1%.
Substantially all of the deposit growth occurred within the Company's
Minneapolis metropolitan market area. The majority of the deposit increase was
in additional money market savings deposits. The Company experienced substantial
increases in balances in certain larger customer accounts resulting from
additional customer borrowings at year-end, funds raised from equity offerings,
and growth in customers' business activity. Non deposit funding sources also
increased in 1997. The Company refinanced its note payable and borrowed an
additional $250,000 through this financing. The Company raised an additional
$800,000 in subordinated notes issued through its subsidiary bank during 1997.
Stockholders' equity increased by $1,900,000 or 35.1% in 1997. This increase
resulted from Company net income of $1,823,000 with the balance attributable to
the change in unrealized gains on securities available-for-sale. No dividends
have been paid by the Company.
Total securities increased by $4,943,000 in 1997 paralleling a $4,858,000
increase in repurchase agreements. Cash and cash equivalents increased by
$6,485,000 in 1997; included in this increase is $3,300,000 in additional
Federal funds sold.
During the period from December 31, 1997 to September 30, 1998, total assets
grew by $32,908,000, an increase of 20.8%; the majority of this increase was in
securities which increased by $16,229,000 and Federal Funds sold where the
increase was $17,000,000.
Loan balances grew by a more modest $3,771,000 or 3.4% during the nine month
period. Loan demand softened as the economy began to exhibit signs of a slower
growth rate.
Total deposits increased by $30,989,000, or 23.5% during the period from
December 31, 1997 to September 30, 1998. The Company continued its efforts to
expand depository relationships with its existing customer base. In addition,
several new larger account relationships were initiated within the Twin Cities
market. The most significant increases in deposit balances were in the money
market savings accounts which grew by approximately $24,000,000.
Stockholders' equity increased by $1,861,000 from December 31, 1997 to September
30, 1998. The increase came from $1,567,000 of net income, $240,000 from
proceeds received in connection with the exercise of employee incentive stock
options, $81,000 from tax benefits derived from the exercise of stock options,
and the remainder from the change in unrealized gains on available-for-sale
securities. No dividends were declared or paid.
C-2
<PAGE>
RESULTS OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THE
NINE MONTHS ENDED SEPTEMBER 30, 1997
For the nine months ended September 30, 1998, the Company's net income increased
by $129,000 or 9.0% over the same nine month period in 1997. Basic net income
per share was $0.27 and $0.26 for Class A common shares and $0.23 and $0.21 for
Class B common shares for the nine month periods ended September 30, 1998 and
1997, respectively. Diluted net income per share was $0.26 and $0.25 for Class A
common shares for the same periods. As discussed in further detail below, the
increase resulted primarily from increased net interest income of $506,000
offset by an increase in the provision for loan losses and operating expenses.
Net interest income increased by $506,000, or 9.7%, to $5,730,000. While the
Company's net interest margin declined to 4.74% from 5.16% for the nine month
period ended September 30, 1998 and 1997, respectively, the growth in interest
bearing earning assets of $26.3 million offset by increases in interest bearing
liabilities of $22.8 million was a significant component of the overall increase
in net income. Increased competitive pressure resulted in an increase in deposit
costs by approximately 23 basis points.
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
nine month period ended September 30, 1998, there was $74,000 more in net
charge-offs compared with the same period in 1997. As a result of this and due
to an increase in its loan portfolio, the provision for loan losses was
increased by $105,000 to $375,000 for the nine month period ended September 30,
1998. Management believes the reserve is adequate to absorb any current or
future losses in the loan portfolio.
Other income increased by $32,000, or 11.3% for the first nine months of 1998
compared to the first nine months of 1997. The increase was primarily due to an
increase of $50,000 in securities gains offset by decreased service charges and
other fees of $18,000.
Operating expenses increased from $2,852,000 to $3,075,000, an increase of
$223,000, or 7.8% for the first nine months of 1998 compared to the same period
in 1997. Salary and related benefit costs accounted for $116,000 of this
increase. In addition, legal fees increased by $79,000 primarily as a result of
additional expenses related to litigation involving the collection of a charge-
off loan.
Income tax expense increased by $81,000 in the first nine months of 1998
compared with the same period in 1997 due to an increase of approximately
$210,000 in pre-tax income. The effective tax rate was approximately the same
during both periods.
C-3
<PAGE>
RESULTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996 AND 1995
Net income in 1997 totaled $1,823,000 or an increase of $604,000 or 49.5% over
the $1,219,000 earned in 1996. Net income in 1996 was $379,000 or 45.1% over the
1995 level of $840,000. On a per share basis, basic net income was $.33, $.23
and $.17 for Class A common shares for 1997, 1996 and 1995, respectively. Basic
net income per share for Class B common stock was $.26, $.17 and $.11 during the
same three periods. Diluted net income per share was $.31, $.22 and $.17 for
Class A common shares and there was no dilutive effect on Class B common shares
for the three years. The growth in net income was due largely to the growth in
assets of the Company's subsidiary bank, increased loan fees and improved
operating efficiency. At December 31, 1997, 1996 and 1995, the total assets per
employee were approximately $3.9 million, $3.2 million and $3.0 million,
respectively.
Net interest income increased $1,531,000, or 27.8% to $7,045,000 in 1997
compared to $5,514,000 in 1996. The 1996 total represented an increase of
$1,422,000, or 34.8% compared to 1995. The net interest margin for 1997 was
5.14% compared with 5.25% in 1996 and 5.45% in 1995. The margin has been
compressed during the past two years by increasing competitive pressures.
Although loan yields declined by 27 basis points from 1996 compared to 1997, an
increase in loans as a percentage of earning assets was sufficient to maintain
the yield on earning assets at an approximate level of 9.00% in both 1997 and
1996. Competitive pressures caused the effective rate paid on deposits to
increase from 4.27% in 1996 to 4.46% in 1997. From 1995 to 1996, market interest
rates declined. As a result, the yield on earning assets fell by 34 basis
points, from 9.34% in 1995 to 9.00% in 1996. The related reduction in the cost
of deposits was only 21 basis points. The level of average earning assets
increased by $30.0 million from 1995 to 1996 and by $32.2 million from 1996 to
1997.
The provision for loan losses was $580,000 for 1997, representing an increase of
$160,000 or 38.1% over the $420,000 of loss provision charged to operations in
1996. The 1996 provision was $200,000 or 90.9% greater than the provision of
$220,000 incurred in 1995. The increases are principally a result of higher loan
levels over the same periods. Due to the favorable net charge-off activity
compared to the provision for loan losses, the percentage of the allowances for
loan losses to total gross loans outstanding increased from 1.08% to 1.10% from
1995 to 1996 and from 1.10% to 1.17% from 1996 to 1997.
Other income consists primarily of deposit account service charges and related
fee income. Other income increased by $68,000 or 22.4% in 1997 compared to 1996
and by $26,000 or 9.4% in 1996 compared to 1995.
Other expenses increased $449,000 or 13.3% in 1997 compared to a $628,000 or
23.0% increase in 1996 over 1995 levels. Salary and related benefit expenses
increased by $332,000 or 18.8% in 1997 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
$434,000 or 32.8% from 1995 to 1996. The Company's subsidiary bank acquired two
additional offices through a purchase transaction in mid-1995; as a result, 1996
expenses included a full year of personnel costs while 1995 results included
approximately six months of these expenses. Additionally, data processing and
related expenses increased by $45,000 from 1995 to 1996 while marketing expenses
rose by $43,000.
Income tax expense increased by $386,000 or 47.7% from 1996 to 1997 while the
increase from 1995 to 1996 was $241,000 or 42.4%. These increases paralleled the
percentage increase in income before taxes which was 48.7% for 1996 to 1997 and
44.0% from 1995 to 1996. The effective income tax rates were relatively
unchanged during the years.
C-4
<PAGE>
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 of loans. Cash and amounts due
from correspondent banks, investment securities available for sale and Federal
funds sold are primarily sources of asset liquidity. At December 31, 1997, these
categories totaled approximately $36.3 million; these categories totaled
approximately $68.9 million at September 30, 1998.
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.
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
various 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 early 1999. The Company is also
monitoring the adequacy of the processes and progress of its customers,
suppliers and others. However, there can be no assurance that the 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 been and is not
anticipated to be material to its business, operations, financial condition,
liquidity and capital resources. However, there are uncertainties as to the
future costs associated with the Year 2000 which may affect the Company's
expectations. Factors that could influence the amount and timing of future costs
include the success of the Company in identifying systems and programs that are
not Year 2000 compliant, the nature and amount of remediation required to
upgrade or replace each of the affected programs or systems, and the success of
the Company's customers and suppliers.
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/asset ratio of at least 8%. The Company's capital ratios and those of
the Bank exceed the minimum ratios required by their respective regulators. The
FDIC and Commissioner of Commerce for the State of Minnesota 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.
C-5
<PAGE>
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, 1997 December 31, 1996 December 31, 1995
----------------------- ----------------------- -----------------------
Percent of Percent of Percent of
loans in loans in loans in
each each each
Allowances category Allowances category Allowances category
for loan to total for loan to total for loan to total
Balance at end of period applicable to: losses loans losses loans losses loans
- --------------------------------------- ---------- ----------- ---------- ----------- ---------- -----------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial and commercial real estate
loans.................................... $ 904 65.0% $612 57.5% $392 58.2%
Real estate - mortgages.................... 10 3.6 6 2.0 14 2.2
Installment and other loans................ 369 31.4 364 40.5 283 39.6
------ ----- ---- ----- ---- -----
Total............................ $1,283 100.0% $982 100.0% $689 100.0%
====== ===== ==== ===== ==== =====
</TABLE>
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
As of and for the
year ended December 31,
------------------------------------------------------
1997 1996 1995
---------------- ---------------- ----------------
(Amounts in thousands)
<S> <C> <C> <C>
Loan balance at year end....................................... $109,724 $89,666 $64,056
-------- ------- -------
Balance of allowance for loan losses at beginning of period.... 982 689 639
Loans charged off:
Commercial loans.......................................... 268 111 169
Real estate - mortgage loans.............................. - - -
Installment and other loans............................... 12 24 23
-------- ------- -------
Total loans charged off........................................ 280 135 192
-------- ------- -------
Recoveries of loans previously charged off:
Commercial loans.......................................... - - 21
Real estate - mortgage loans.............................. - - -
Installment and other loans............................... 1 8 1
-------- ------- -------
Total recoveries............................................... 1 8 22
-------- ------- -------
Net loans charged off.......................................... 279 127 170
Additions to allowance for loan losses charged to
operating expense............................................. 580 420 220
-------- ------- -------
Balance of allowance for loan losses at end of period.......... $ 1,283 $ 982 $ 689
======== ======= =======
Ratio of net charge-offs during period to loans outstanding
at period end................................................. .25% .14% .27%
======== ======= =======
</TABLE>
C-6
<PAGE>
LOAN COMPOSITION
The following table summarizes the loan composition at the end of each
period.
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1997 1996
-------------------- ------------------
(Amounts in thousands)
<S> <C> <C>
Real estate mortgage..................................................... $ 3,916 $ 1,797
Commercial real estate................................................... 11,324 3,472
Commercial............................................................... 60,031 48,114
Home equity.............................................................. 2,219 3,069
Installment and other.................................................... 32,234 33,214
-------- -------
109,724 89,666
Less: allowance for loan losses.......................................... 1,283 982
-------- -------
Loans, net............................................................... $108,441 $88,684
======== =======
</TABLE>
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES AS OF DECEMBER 31,
1997
<TABLE>
<CAPTION>
Loan maturities
------------------------------------------------------------------
After 1
1 Year through After 5
or less 5 years years Total
--------------- --------------- --------------- ---------------
(Amounts in thousands)
<S> <C> <C> <C> <C>
Commercial real estate.............................. $ 6,258 $ 4,772 $ 294 $11,324
Commercial.......................................... 36,207 21,791 2,033 60,031
------- ------- ------ -------
Total......................................... $42,465 $26,563 $2,327 $71,355
======= ======= ====== =======
Amount over one year with:
Fixed rates...................................... $ 3,275
=======
Floating or adjustable rates..................... $25,615
=======
</TABLE>
PAST DUE AND NONPERFORMING LOANS
The following table reflects as of the periods ended the aggregate amounts
of loans past due and nonperforming.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
1997 1996 1995
---------------- ---------------- ----------------
(Amounts in thousands)
<S> <C> <C> <C>
Nonaccrual loans............................................... $ 475 $ 94 $ 210
Loans contractually past due over 90 days...................... - - 15
Restructured loans............................................. - - -
----- ----- -----
Total.................................................... $ 475 $ 94 $ 225
===== ===== =====
</TABLE>
If interest on the nonaccrual loans had been accrued, such income would
have approximated $21,000, $6,000 and $15,000 for the years ended December 31,
1997, 1996 and 1995.
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.
C-7
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Consolidated Financial Statements of Windsor Bancshares, Inc. and Subsidiary
Report of Independent Certified Public Accountants..................................... C-9
Consolidated Balance Sheets, December 31, 1997 and 1996................................ C-10
Consolidated Statements of Net Income, Years ended December 31, 1997, 1996 and 1995.... C-11
Consolidated Statements of Changes in Stockholders' Equity, Years ended
December 31, 1997, 1996 and 1995..................................................... C-12
Consolidated Statements of Cash Flows, Years ended December 31, 1997, 1996 and 1995.... C-13
Notes to Consolidated Financial Statements............................................. C-14
Unaudited Consolidated Financial Statements of Windsor Bancshares, Inc. and Subsidiary
Consolidated Balance Sheet, September 30, 1998......................................... C-33
Consolidated Statements of Net Income, Nine Months Ended September 30, 1998 and 1997... C-34
Consolidated Statements of Cash Flows, Nine Months Ended September 30, 1998 and 1997... C-35
Notes to Consolidated Financial Statements............................................. C-36
</TABLE>
C-8
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors
Windsor Bancshares, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Windsor
Bancshares, Inc. and subsidiary (a registered holding company) as of December
31, 1997 and 1996 and the related consolidated statements of net income, changes
in stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Windsor
Bancshares, Inc. and subsidiary as of December 31, 1997 and 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Minneapolis, Minnesota
January 9, 1998 (except Note 17, as to
which the date is October 1, 1998)
C-9
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
------------ -------------
<S> <C> <C>
Cash and due from banks $ 9,049,035 $ 5,864,289
Federal funds sold 3,800,000 500,000
Securities 33,441,520 28,498,357
Loans, less allowance for loan losses 108,440,729 88,683,836
Premises and equipment, less accumulated
depreciation 782,698 858,009
Accrued interest receivable and other assets 2,449,554 2,336,280
------------ ------------
Total assets $157,963,536 $126,740,771
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing deposits $ 25,225,614 $ 24,689,626
Interest bearing deposits 106,525,914 84,094,066
------------ ------------
Total deposits 131,751,528 108,783,692
Repurchase agreements 11,894,347 7,036,113
Note payable 3,700,000 3,450,000
Subordinated notes payable to officers, directors and stockholders 2,000,000 1,200,000
Accrued interest payable and other liabilities 1,310,159 863,058
------------ ------------
Total liabilities 150,656,034 121,332,863
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - Class A, $.01 par value; 10,000,000
shares authorized; 3,000,000 shares issued and outstanding 30,000 30,000
Common stock - Class B, $.01 par value; 5,000,000
shares authorized; 3,150,000 shares issued and outstanding 31,500 31,500
Additional paid-in capital 3,388,500 3,388,500
Retained earnings 3,825,511 2,002,205
Unrealized gain (loss) on securities available for
sale, net of tax 31,991 (44,297)
------------ ------------
Total stockholders' equity 7,307,502 5,407,908
------------ ------------
Total liabilities and stockholders' equity $157,963,536 $126,740,771
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
C-10
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF NET INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 9,992,544 $7,366,154 $5,678,068
Interest on securities
Taxable 1,900,748 1,896,843 925,245
Tax exempt 71,361 39,564 24,523
Interest on Federal funds sold 372,275 135,080 368,440
Other interest income - 7,199 11,592
----------- ---------- ----------
Total interest income 12,336,928 9,444,840 7,007,868
INTEREST EXPENSE
Deposits 4,320,868 3,407,953 2,610,729
Repurchase agreements and other borrowed funds 970,781 523,298 304,890
----------- ---------- ----------
Total interest expense 5,291,649 3,931,251 2,915,619
----------- ---------- ----------
Net interest income 7,045,279 5,513,589 4,092,249
PROVISION FOR LOAN LOSSES 580,000 420,000 220,000
----------- ---------- ----------
Net interest income after provision
for loan losses 6,465,279 5,093,589 3,872,249
OTHER INCOME
Service charges and other fees 370,876 298,320 264,861
Securities gains, net - 4,539 11,945
----------- ---------- ----------
Total other income 370,876 302,859 276,806
----------- ---------- ----------
OTHER EXPENSE
Salaries and benefits 2,089,940 1,758,060 1,324,139
Occupancy and equipment 635,777 564,809 497,274
Data processing 188,857 191,759 146,846
Office supplies 110,355 88,848 82,981
Service fees 99,118 81,823 78,581
Professional fees 147,620 169,242 147,252
FDIC examination 30,166 73,897 96,802
Marketing and advertising 147,963 122,359 79,136
Amortization of intangibles 134,511 134,511 70,854
Other 232,742 182,560 216,126
----------- ---------- ----------
Total other expense 3,817,049 3,367,868 2,739,991
----------- ---------- ----------
Income before income taxes 3,019,106 2,028,580 1,409,064
INCOME TAX EXPENSE 1,195,800 810,000 568,600
----------- ---------- ----------
NET INCOME $ 1,823,306 $1,218,580 $ 840,464
=========== ========== ==========
Net income per share
Basic
Class A $ 0.33 $ 0.23 $ 0.17
Class B 0.26 0.17 0.11
Diluted
Class A $ 0.31 $ 0.22 $ 0.17
Class B 0.26 0.17 0.11
Weighted average shares outstanding
Basic
Class A 3,000,000 3,000,000 3,000,000
Class B 3,150,000 3,150,000 3,150,000
Diluted
Class A 3,156,431 3,070,116 3,000,000
Class B 3,150,000 3,150,000 3,150,000
</TABLE>
The accompanying notes are an integral part of these statements.
C-11
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Unrealized
gain
(loss) on
securities
Class A Class B Additional Retained available
common common paid-in earnings for sale,
stock stock capital (deficit) net of tax Total
------- ------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $30,000 $31,500 $3,388,500 $ (56,839) $(201,123) $3,192,038
Unrealized gain on securities
transferred from
held-to-maturity, net of tax - - - - 37,179 37,179
Unrealized gain on securities
available for sale, net of tax - - - - 190,939 190,939
Net income - - - 840,464 - 840,464
------- ------- ---------- ---------- --------- ----------
Balance, December 31, 1995 30,000 31,500 3,388,500 783,625 26,995 4,260,620
Unrealized loss on securities
available for sale, net of tax - - - - (71,292) (71,292)
Net income - - - 1,218,580 - 1,218,580
------- ------- ---------- ---------- --------- ----------
Balance, December 31, 1996 30,000 31,500 3,388,500 2,002,205 (44,297) 5,407,908
Unrealized gain on securities
available for sale, net of tax - - - - 76,288 76,288
Net income - - - 1,823,306 - 1,823,306
------- ------- ---------- ---------- --------- ----------
Balance, December 31, 1997 $30,000 $31,500 $3,388,500 $3,825,511 $ 31,991 $7,307,502
======= ======= ========== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
C-12
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,823,306 $ 1,218,580 $ 840,464
Adjustments
Depreciation and amortization 338,314 304,966 222,535
Provision for loan losses 580,000 420,000 220,000
Deferred income tax expense (benefit) (200,000) 50,000 (188,000)
Securities gains, net - (4,539) (11,945)
Securities amortization and accretion, net (66,025) (12,942) 12,991
Increase in accrued interest receivable and
other assets (98,643) (239,352) (256,800)
Increase (decrease) in accrued interest payable
and other liabilities 447,101 (565,524) 737,910
------------ ------------ ------------
Total adjustments 1,000,747 (47,391) 736,691
------------ ------------ ------------
Net cash provided from operating activities 2,824,053 1,171,189 1,577,155
Cash flows from investing activities:
Proceeds from sales of available-for-sale securities 460,000 7,745,232 1,550,262
Proceeds from maturities of available-for-sale securities 23,388,374 4,400,679 2,721,286
Proceeds from maturities of held-to-maturity securities 2,578,174 1,590,855 7,284,069
Purchases of available-for-sale securities (30,991,541) (9,257,945) (6,698,278)
Purchases of held-to-maturity securities (185,000) (3,958,441) (23,223,566)
Net increase in loans (20,336,893) (25,736,359) (21,308,147)
Capital expenditures (128,491) (223,240) (326,475)
------------ ------------ ------------
Net cash used in investing activities (25,215,377) (25,439,219) (40,000,849)
Cash flows from financing activities:
Net increase in demand and savings deposits $ 20,391,733 $ 7,712,782 $ 14,960,211
Net increase in time deposits 2,576,103 7,214,585 22,186,980
Payment of deposit premium - - (1,273,125)
Net increase (decrease) in repurchase agreements 4,858,234 6,929,273 (2,444,794)
Repayment of note payable (3,450,000) (250,000) -
Proceeds from note payable 3,700,000 - 2,500,000
Proceeds from subordinated notes payable 800,000 1,200,000 -
------------ ------------ ------------
Net cash provided from financing activities 28,876,070 22,806,640 35,929,272
------------ ------------ ------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 6,484,746 (1,461,390) (2,494,422)
Cash and cash equivalents at beginning of year 6,364,289 7,825,679 10,320,101
------------ ------------ ------------
Cash and cash equivalents at end of year $ 12,849,035 $ 6,364,289 $ 7,825,679
============ ============ ============
Supplemental cash flow information:
Interest paid $ 5,109,500 $ 3,982,528 $ 2,344,421
Income taxes paid 1,262,665 1,425,130 567,212
</TABLE>
The accompanying notes are an integral part of these statements.
C-13
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
NOTE 1 - NATURE OF BUSINESS
Windsor Bancshares, Inc., is a registered bank holding company with one wholly-
owned subsidiary bank (Bank Windsor). Nearly all of the Company's business is
conducted through its subsidiary bank. The majority of the subsidiary bank's
business activity is with customers located in Minnesota within the immediate
area of the subsidiary bank and its three branch offices. The subsidiary bank
provides a wide variety of commercial and consumer loan and deposit products
and related services to its customers.
The predominant focus of business in the Minneapolis office is in small to
middle-market commercial lending and in providing banking services to
executives, professionals and business owners. The subsidiary bank's outstate
locations have a customer base which maintains checking, savings, and time
deposit accounts and borrows for agricultural, consumer and business related
purposes.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Windsor Bancshares, Inc. and its
wholly-owned subsidiary conform to practices within the banking industry and
are based on generally accepted accounting principles. A summary of the
Company's significant accounting and reporting policies, consistently applied
in the preparation of the accompanying consolidated financial statements, are
summarized below:
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. All significant intercompany accounts and
transactions have been eliminated.
Statement of Cash Flows
-----------------------
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks and Federal funds sold. Generally, Federal funds
are purchased and sold for one day periods.
Securities
----------
Securities have been classified as either "available-for-sale" or "held-to-
maturity." Securities which are classified as "held-to-maturity" are stated at
cost, adjusted for amortization of premiums and accretion of discounts that are
recognized in interest income. Securities classified as "available-for-sale"
are reported at estimated fair value with unrealized gains and losses, net of
income taxes, reported as a separate component of stockholders' equity.
Premium and discounts are recognized in interest income. Gains and losses on
dispositions of securities are based on the net proceeds and the adjusted cost
of the securities sold using the specific identification method.
C-14
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Loans and Allowance for Loan Losses
-----------------------------------
Loans are stated at the amount of unpaid principal, reduced by an allowance for
loan losses. Loans for which the collection of principal is impaired are
reported at the fair values of the underlying collateral or at an amount based
upon the discounted amounts of the loans' future cash flows. Interest on loans
is calculated by using the simple interest method on daily balances of the
principal amount outstanding.
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 collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to provide for possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans and prior
loan loss experience. The evaluations take into consideration such factors as
changes in the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, and current economic conditions that
may affect the borrower's ability to pay. Accrual of interest is discontinued
on loans when management believes, after considering economic and business
conditions and collection efforts, that the borrower's financial condition is
such that collection of interest is doubtful.
Premises and Equipment
----------------------
Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided on the straight-line method for financial reporting
purposes at rates sufficient to absorb the cost over the estimated useful life
of each asset. For income tax reporting purposes, depreciation is provided
using accelerated methods.
Estimated service lives are as follows:
Buildings 15 - 20 years
Leasehold improvements 10 years
Furniture and equipment 3 - 10 years
Income Taxes
------------
The Company and its subsidiary bank file consolidated Federal and unitary state
income tax returns. The consolidated tax liability is allocated between the
Company and its subsidiary bank in accordance with a formal tax sharing
agreement. The agreement provides that each party is allocated the percentage
of total tax expense or benefit that would have been calculated on a separate
return basis.
Stock-Based Compensation
------------------------
The Company's employee stock option plans are accounted for using the
intrinsic value based method under APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations.
C-15
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Deposit Premium
---------------
During 1995, the subsidiary bank acquired the deposits of two offices of a
Federal savings bank. The deposit premium paid in connection with this
acquisition is being amortized over a ten-year period for financial reporting
purposes using a straight-line method. For income tax reporting purposes, the
premium is being amortized over a fifteen-year period. The unamortized deposit
premium of approximately $955,000 and $1,082,000, at December 31, 1997 and
1996, is included in accrued interest receivable and other assets in the
consolidated balance sheet.
Net Income Per Share
--------------------
The Company's basic net income per share is computed by dividing net income
available to the respective share classes by the weighed average number of
outstanding common shares for each class. The Company's diluted net income per
share is computed by dividing net income available to the respective share
classes by the weighted average number of outstanding common shares by class
and common share equivalents relating to stock options, when dilutive. Options
to purchase 157,500 shares of Class A common stock with a weighted average
exercise price of $1.00 were outstanding during 1995, but were excluded from
the computation of common share equivalents because they were not dilutive.
All outstanding options for Class A common stock during 1996 and 1997 were
dilutive. There were no outstanding stock options for Class B common stock.
Accounting Estimates
--------------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and income and expenses during the reporting period. Actual results could
differ from those estimates.
Reclassifications
-----------------
Certain 1996 and 1995 amounts have been reclassified to conform with the 1997
presentation.
Recently Issued Accounting Standard
-----------------------------------
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, and all
required disclosures will be included beginning with the Company's 1998 annual
financial statements.
C-16
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 3 - SECURITIES
The amortized cost and estimated fair value of securities at December 31, 1997
are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Securities available-for-sale:
U.S. Treasury securities $10,635,845 $ 74,008 $ (5,577) $10,704,276
Obligations of other U.S. government
agencies 5,846,708 4,529 (15,731) 5,835,506
Mortgage-related securities 4,642,398 3,846 (24,811) 4,621,433
Obligations of political subdivisions 599,640 9,994 (515) 609,119
Other securities 1,626,722 10,575 (3,000) 1,634,297
----------- -------- -------- -----------
23,351,313 102,952 (49,634) 23,404,631
----------- -------- -------- -----------
Securities held-to-maturity:
Obligations of U.S. government
agencies 825,137 - (6,738) 818,399
Mortgage-related securities 7,643,521 13,132 (35,740) 7,620,913
Obligations of political subdivisions 1,568,231 14,269 - 1,582,500
----------- -------- -------- -----------
10,036,889 27,401 (42,478) 10,021,812
----------- -------- -------- -----------
$33,388,202 $130,353 $(92,112) $33,426,443
=========== ======== ======== ===========
</TABLE>
The amortized cost and estimated fair value of securities at December 31, 1996
are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Securities available-for-sale:
U.S. Treasury securities $ 8,527,462 $25,922 $ (20,720) $ 8,532,664
Obligations of U.S. government
agencies 2,049,847 - (37,556) 2,012,291
Mortgage-related securities 4,557,727 3,476 (48,474) 4,512,729
Other securities 1,015,000 3,525 - 1,018,525
----------- ------- --------- -----------
16,150,036 32,923 (106,750) 16,076,209
----------- ------- --------- -----------
Securities held-to-maturity:
Obligations of U.S. government
agencies 1,002,075 839 (8,540) 994,374
Mortgage-related securities 9,714,315 3,714 (117,460) 9,600,569
Obligations of political subdivisions 1,705,758 12,622 (8,909) 1,709,471
----------- ------- --------- -----------
12,422,148 17,175 (134,909) 12,304,414
----------- ------- --------- -----------
$28,572,184 $50,098 $(241,659) $28,380,623
=========== ======= ========= ===========
</TABLE>
C-17
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 3 - SECURITIES - Continued
The amortized cost and estimated fair value of securities at December 31, 1997,
by contractual maturity, are shown below:
<TABLE>
<CAPTION>
Estimated
Amortized fair
cost value
----------- -----------
<S> <C> <C>
Securities available-for-sale:
Due in one year or less $ 2,790,907 $ 2,784,952
Due after one year through five years 12,218,688 12,285,908
Due after five years 2,072,598 2,078,041
Mortgage-related securities and other
securities 6,269,120 6,255,730
----------- -----------
23,351,313 23,404,631
Securities held-to-maturity:
Due in one year or less 147,698 145,391
Due after one year through five years 1,329,807 1,334,071
Due after five years 915,863 921,437
Mortgage-related securities 7,643,521 7,620,913
----------- -----------
10,036,889 10,021,812
----------- -----------
$33,388,202 $33,426,443
=========== ===========
</TABLE>
In 1997, there were no gains or losses realized on the sale of available-for-
sale securities. Gross gains of $6,221 and gross losses of $1,682 were
realized on the sale of available-for-sale securities in 1996. During 1995,
gross gains of $11,945 were realized on the sale of available-for-sale
securities. There were no security sales resulting in losses.
Securities with an amortized cost of $17,916,316 and $12,915,754 at December
31, 1997 and 1996 were pledged to secure public deposits and for other purposes
required or permitted by law.
In December 1995, the subsidiary bank reclassified securities with an
amortized cost of $8,675,298 from "held-to-maturity" to "available-for-sale".
The net unrealized gain on those securities transferred was $37,179, net of
deferred tax expense of $24,785.
C-18
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 4 - LOANS
Major classifications of loans at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Real estate mortgage $ 3,915,674 $ 1,797,138
Commercial mortgage 11,324,231 3,471,621
Commercial 60,031,145 48,113,657
Home equity 2,218,823 3,068,974
Installment and other 32,233,921 33,214,296
------------ -----------
109,723,794 89,665,686
Allowance for loan losses (1,283,065) (981,850)
------------ -----------
Loans, net $108,440,729 $88,683,836
============ ===========
</TABLE>
In the ordinary course of business the subsidiary bank has granted loans to
certain directors, officers, principal stockholders and the companies with
which they are associated. The approximate aggregate outstanding amount of all
such loans at December 31, 1997 and 1996 was $1,823,000 and $1,378,000
(exclusive of loans to any such persons which in the aggregate do not exceed
$60,000 in 1997). During 1997, approximately $4,257,000 of new loans were made
and repayments (collection or maturities) totaled approximately $3,812,000.
Deposits attributable to the above parties totaled approximately $5,765,000 and
$2,666,000 at December 31, 1997 and 1996.
Loans on an unsecured basis approximated $30,177,000 and $24,254,000 as of
December 31, 1997 and 1996.
Transactions affecting the allowance for loan losses for the years ended
December 31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Balance, beginning of year $ 981,850 $ 688,594 $ 639,033
Provision for loan losses 580,000 420,000 220,000
Loans charged off (279,824) (135,285) (192,584)
Recoveries of charged off loans 1,039 8,541 22,145
---------- --------- ---------
Balance, end of year $1,283,065 $ 981,850 $ 688,594
========== ========= =========
</TABLE>
C-19
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 5 - PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1997 and 1996 is as
follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Land and buildings $ 124,916 $ 124,916
Leasehold improvements 260,615 254,615
Furniture and equipment 949,687 964,708
------------ ------------
1,335,218 1,344,239
Less accumulated depreciation (552,520) (486,230)
------------ ------------
$ 782,698 $ 858,009
============ ============
</TABLE>
NOTE 6 - DEPOSITS
Deposits consist of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION> 1997 1996
------------ ------------
<S> <C> <C>
Non-interest bearing demand deposits $ 25,225,614 $ 24,689,626
Interest bearing demand deposits 11,803,860 9,563,336
Savings deposits 45,224,321 27,609,100
Time deposits, under $100,000 29,171,953 27,020,733
Time deposits, $100,000 or more 20,325,780 19,900,897
------------ ------------
$131,751,528 $108,783,692
============ ============
</TABLE>
At December 31, 1997, the scheduled maturities of time deposits are as follows:
<TABLE>
<S> <C>
1998 $ 43,447,476
1999 3,778,023
2000 2,272,234
------------
$ 49,497,733
============
</TABLE>
C-20
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 7 - REPURCHASE AGREEMENTS
Repurchase agreements generally mature up to one year from the transaction
date. Information concerning repurchase agreements at December 31 is
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Average balance during the year $10,514,521 $3,205,030
Average interest rate during the year 5.01% 5.44%
Maximum month-end balance during the year $13,262,925 $9,120,328
</TABLE>
Pledged securities underlying the agreements at December 31 which
remain under the subsidiary bank's control are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Carrying value $13,609,728 $7,942,651
Estimated fair value 13,583,945 7,869,064
</TABLE>
NOTE 8 - NOTE PAYABLE
During 1997, the Company refinanced its note payable with a commercial bank.
The obligation is secured by the common stock of the subsidiary bank. The loan
contains various covenants including certain restrictive requirements as to
return on assets, equity to assets, non-performing loans to total loans and
loan loss reserve to non performing loans. In addition, the Company may not
pay dividends (other than in its capital stock) or redeem any shares of its
capital stock. As of December 31, 1997, the balance outstanding under this
loan agreement was $3,700,000. The note provides for interest at 200 basis
points over the 30-day LIBOR rate for an effective rate of 7.79% at December
31, 1997. Interest is payable quarterly. The Company is obligated to repay
the outstanding principal in annual installments. Scheduled annual repayments
are:
<TABLE>
<S> <C>
1998 $ -
1999 370,000
2000 370,000
2001 370,000
2002 370,000
2003 and thereafter 2,220,000
</TABLE>
NOTE 9 - SUBORDINATED NOTES PAYABLE TO OFFICERS, DIRECTORS AND STOCKHOLDERS
In November 1996, the subsidiary bank received regulatory approval to issue up
to $2,000,000 in subordinated notes payable. The notes are unsecured and
subordinated to the claims of the subsidiary bank's depositors and its general
and secured creditors. The notes bear interest at 10%, payable semi-annually,
and mature in 2003. They may be redeemed at any time, at the option of the
subsidiary bank, provided the subsidiary bank has obtained the consent of its
primary Federal and state regulators. Accrued interest payable at December 31,
1997 and 1996 was $97,764 and $2,795. Interest expense for the years ended
December 31, 1997 and 1996 was $159,441 and $2,795.
C-21
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 10 - COMMON STOCK
Holders of Class A common stock have one vote per share and holders of Class B
common stock have two votes per share. Holders of Class A common stock also
have certain preferences over Class B common stock with respect to dividends
and proceeds from the sale or liquidation of the subsidiary bank.
NOTE 11 - STOCK OPTIONS
The Company has stock option plans for the benefit of selected officers and key
employees of the Company and its subsidiary bank. These plans were approved by
the stockholders in 1989, 1992 and 1996. A total of 1,300,000 shares of Class
A common stock are reserved for issuance under the plans. Options under the
Company's plans are granted at or above the fair market value of the common
stock at the date of grant.
A summary of the Company's stock option transactions during the year are
presented below for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ------------------------ -----------------------
Weighted Weighted Weighted
average average average
Shares exercise price Shares exercise price Shares exercise price
------- -------------- -------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year 420,000 $1.00 157,500 $1.00 157,500 $1.00
Granted 200,000 2.00 295,000 1.00 - -
Canceled - - (32,500) 1.00 - -
------- ------- -------
Outstanding at end of year
======= $1.32 ======= $1.00 ======= $1.00
620,000 420,000 157,500
======= ======= =======
Options exercisable at year
end 352,750 $1.18 249,438 $1.00 119,500 $1.00
Weighted-average fair value
of options granted during
the year $ .56 $ .43 $ -
===== ===== =====
</TABLE>
C-22
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 11 - STOCK OPTIONS - Continued
The following information applies to outstanding and exercisable stock options
at December 31, 1997:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------------------------------- ----------------------------------
Weighted Weighted Weighted
average average average
Number remaining exercise Number exercise
Exercise prices outstanding contractual life price exercisable price
- --------------- ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.00 420,000 7 years $1.00 288,750 $1.00
$2.00 200,000 4 years $2.00 64,000 $2.00
------- -------
620,000 352,750
======= =======
</TABLE>
The Company uses the intrinsic value based method of accounting for its stock
options. Had the fair value method been used for valuing options granted
during 1997 and 1996, the effect on the Company's net income would not have
been material. The fair value of options granted is estimated on the date of
grant using the minimum value method with the following weighted average
assumptions used for all grants in 1997 and 1996: zero dividend yield, risk-
free interest rates of 6.750% and 5.725% and expected lives of 6.7 and 9.1
years. The effect on net income may not be representative of future effects.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Commitments
-----------
The subsidiary bank conducts the operations of its Minneapolis, Minnesota
office in leased facilities. The lease provides for payment of certain
operating expenses by the subsidiary bank in addition to base rent. The lease
expires in 2003 and includes an option to renew for an additional ten years
under similar terms.
The net minimum annual rental commitments as of December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
Year ending December 31
-----------------------
<S> <C>
1998 $167,803
1999 171,474
2000 171,474
2001 171,474
2002 171,474
2003 171,474
</TABLE>
Total rent expense for the years ended December 31, 1997, 1996 and 1995 was
approximately $354,000, $336,000 and $316,000, which includes the subsidiary
bank's portion of operating costs.
C-23
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 12 - COMMITMENTS AND CONTINGENCIES - Continued
Financial Instruments with Off-Balance Sheet Risk
-------------------------------------------------
The subsidiary bank is a 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 primarily include commitments to extend
credit and standby letters of credit. The instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheet.
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 these instruments. The subsidiary bank uses the same credit policies in
making commitments and conditional obligations as it does for on-balance sheet
instruments.
The contract or notional amount of financial instruments whose contract amounts
represent credit risk were approximately $25,586,000 for commitments to extend
credit and $5,027,000 for standby letters of credit at December 31, 1997. A
significant amount of the commitments to extend credit represent discretionary
lines of credit which may or may not be funded at the subsidiary bank's option.
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. The subsidiary bank evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the subsidiary bank upon extension
of credit, is based on management's credit evaluation. Collateral held varies
but may include accounts receivable, investment securities, inventory,
property, plant and equipment, and income-producing commercial properties. A
substantial portion of the commitments to extend credit are variable-rate
commitments which reprice daily. These commitments take the form of approved
loans, with terms up to one year.
Standby letters of credit are conditional commitments issued by the subsidiary
bank to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. The subsidiary bank holds
appropriate collateral supporting those commitments for which collateral is
deemed necessary.
Contingencies
-------------
In the ordinary course of business, the subsidiary bank is subject to certain
legal proceedings and claims. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position of the Company.
C-24
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 13 - INCOME TAXES
Income tax expense for the years ended December 31, 1997, 1996 and 1995 is
summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- -------- ---------
<S> <C> <C> <C>
Current
Federal $1,050,300 $564,000 $ 579,200
State 345,500 196,000 177,400
---------- -------- ---------
1,395,800 760,000 756,600
Deferred expense (benefit)
Federal (182,000) 45,000 (171,000)
State (18,000) 5,000 (17,000)
---------- -------- ---------
(200,000) 50,000 (188,000)
---------- -------- ---------
Income tax expense $1,195,800 $810,000 $ 568,600
========== ======== =========
</TABLE>
The tax effects of the cumulative temporary differences between the tax bases
of assets and liabilities and their carrying amounts for financial reporting
purposes are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Loan loss reserve $440,000 $332,000
Intangible assets 42,000 26,000
Depreciation (64,000) (54,000)
Other 22,000 (64,000)
-------- --------
Net deferred tax asset $440,000 $240,000
======== ========
</TABLE>
The net deferred tax asset, for which no valuation allowance has been
established, is included in accrued interest receivable and other assets in the
consolidated balance sheet.
The following is a reconciliation of the Federal statutory income tax rate to
the consolidated effective tax rate:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0%
State taxes, net of federal effect 7.0 6.4 7.4
Other (1.4) (.5) (1.0)
---- ---- ----
39.6% 39.9% 40.4%
==== ==== ====
</TABLE>
C-25
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 14 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The consolidated financial statements include various estimated fair value
information as of December 31, 1997. The fair value estimates are based on
various assumptions, methodologies and subjective considerations, which vary
widely among entities and are subject to change. The following methods and
assumptions were used by the Company in estimating financial instrument fair
values:
CASH AND DUE FROM BANKS: The balance sheet carrying amount for cash and due
from banks have no interest rate risk component and their carrying amount was
assumed to approximate estimated fair value.
FEDERAL FUNDS SOLD: The balance sheet carrying amount for Federal funds sold
approximates the estimated fair value of such assets.
SECURITIES: Fair values for securities are based on quoted market prices, if
available. If quoted market prices are not available, fair values were based
on quoted market prices of comparable instruments.
LOANS: For variable-rate loans that reprice frequently and which entail no
significant change in credit risk, fair values were based on the carrying
values. The estimated fair values of fixed-rate loans were estimated based on
discounted cash flow analyses using interest rates currently offered for loans
with similar terms to borrowers of similar credit quality. Estimated fair
value was based on gross loans.
OFF-BALANCE-SHEET INSTRUMENTS: The substantial majority of the subsidiary
bank's lending commitments and standby letters of credit have variable rates
and do not expose the subsidiary bank to interest rate risk. In the event
these off-balance-sheet instruments are ultimately funded, virtually all
funding will be at their current market rates. The notional carrying amount of
these off-balance-sheet instruments were assumed to approximate estimated fair
value.
DEPOSITS: The fair values estimated for demand deposits, savings accounts and
certain variable-rate money market deposits are, by definition, equal to the
amount payable on demand at the reporting date. Fair values of fixed-rate
certificates of deposit were estimated using a discounted cash flow calculation
that applies interest rates currently being offered to a schedule of aggregate
expected monthly time deposit maturities.
REPURCHASE AGREEMENTS: The carrying amount of repurchase agreements were
assumed to approximate estimated fair value.
NOTE PAYABLE: The carrying amount for the note payable approximates its fair
value in that the obligation is based upon a market rate index.
SUBORDINATED NOTES PAYABLE: The carrying amount of subordinated notes payable
approximates estimated fair value.
C-26
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 14 - FAIR VALUES OF FINANCIAL INSTRUMENTS - Continued
The carrying amounts and estimated fair values of the Company's financial
instruments consisted of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------------------
1997 1996
-------------------------------------------- -------------------------------------------
Carrying Estimated Carrying Estimated
value fair value value fair value
---------------------- -------------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 9,049,035 $ 9,049,035 $ 5,864,289 $ 5,864,289
Federal funds sold 3,800,000 3,800,000 500,000 500,000
Securities 33,441,520 33,426,443 28,498,357 28,380,623
Loans 108,440,729 108,199,588 88,683,836 88,478,532
Deposits 131,751,528 131,832,319 108,783,692 108,833,972
Repurchase agreements 11,894,347 11,894,347 7,036,113 7,036,113
Note payable 3,700,000 3,700,000 3,450,000 3,450,000
Subordinated notes payable
2,000,000 2,000,000 1,200,000 1,200,000
<CAPTION>
Notional Estimated Notional Estimated
amount fair value amount fair value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Letters of credit $ 5,027,000 $ 5,027,000 $ 2,858,000 $ 2,858,000
Loan commitments 25,586,000 25,586,000 23,168,000 23,168,000
</TABLE>
Financial Accounting Standards Board Statement No. 107 excludes certain
financial instruments and all non-financial instruments from its disclosure
requirements. Accordingly, the aggregate estimated net fair value amount does
not represent, and should not be interpreted to represent, the fair value of
the Company.
NOTE 15 - REGULATORY MATTERS
The subsidiary bank is a state chartered institution and is subject to
dividend restrictions established by the Minnesota Department of Commerce.
Under such restrictions, the subsidiary bank may not, without prior approval,
declare dividends in excess of 50% of the prior years' net income nor may the
dividend reduce adjusted equity capital to adjusted total assets to a level
below 6%. The total dividend, as of December 31, 1997, which the subsidiary
bank could declare without prior approval of the Minnesota Department of
Commerce, is approximately $1,002,000.
C-27
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 15 - REGULATORY MATTERS - Continued
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/asset ratio of at least 8%. The Company's capital ratios exceed the
minimum ratios required. The subsidiary bank is also subject to certain
regulatory capital requirements administered by various bank regulatory
agencies. These capital requirements represent 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.
Management believes that, as of December 31, 1997, the subsidiary bank meets
the minimum capital requirements to be considered well capitalized.
<TABLE>
<CAPTION>
For capital
Actual adequacy purposes To be well capitalized
----------------------------- ---------------------------- -----------------------------
Amount Ratio Amount Ratio Amount Ratio
---------------- ----------- --------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total Capital (to risk weighted
assets) $13,252,000 11.1% $9,585,000 * 8% $11,981,000 * 10%
Tier I Capital (to risk weighted
assets) 9,969,000 8.3% 4,792,000 * 4% 7,188,000 * 6%
Tier I Capital (to average assets)
9,969,000 6.7% 5,951,000 * 4% 7,439,000 * 5%
As of December 31, 1996
Total Capital (to risk weighted
assets) 9,870,000 10.2% 7,733,000 * 8% 9,666,000 *10%
Tier I Capital (to risk weighted
assets) 7,688,000 8.0% 3,867,000 * 4% 5,800,000 * 6%
Tier I Capital (to average assets)
7,688,000 6.4% 4,824,000 * 4% 6,030,000 * 5%
</TABLE>
* greater than or equal to
C-28
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 16 - PARENT COMPANY FINANCIAL INFORMATION
Presented below are condensed financial statements for Windsor Bancshares, Inc.
(Parent Company) only:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
----------- ----------
<S> <C> <C>
Assets
Cash $ 68,902 $ 147,172
Securities 11,022 -
Investment in bank subsidiary 10,955,730 8,725,902
Other assets 33,900 116,632
----------- ----------
Total assets $11,069,554 $8,989,706
=========== ==========
Liabilities and Stockholders' Equity
Liabilities
Note payable $ 3,700,000 $3,450,000
Other liabilities 62,052 131,798
----------- ----------
Total liabilities 3,762,052 3,581,798
Stockholders' equity 7,307,502 5,407,908
----------- ----------
Total liabilities and stockholders' equity $11,069,554 $8,989,706
=========== ==========
</TABLE>
C-29
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 16 - PARENT COMPANY FINANCIAL INFORMATION - Continued
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Dividend from subsidiary $ - $ 450,000 $1,100,000
Other interest and dividends 22 - 4,753
---------- ---------- ----------
Total income 22 450,000 1,104,753
Expenses
Interest 283,631 285,820 214,009
Amortization of intangibles 7,198 7,198 7,198
Other operating expenses 7,027 17,427 58,953
---------- ---------- ----------
Total expenses 297,856 310,445 280,160
---------- ---------- ----------
Income (loss) before income taxes and
undistributed net income of subsidiary (297,834) 139,555 824,593
Income tax benefit 117,600 123,000 108,500
---------- ---------- ----------
Income (loss) before undistributed net income of
subsidiary (180,234) 262,555 933,093
Equity in undistributed net income of subsidiary 2,003,540 956,025 (92,629)
---------- ---------- ----------
Net income $1,823,306 $1,218,580 $ 840,464
========== ========== ==========
</TABLE>
C-30
<PAGE>
WINDSOR BANCSHARES, INC. AND SSUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 16 - PARENT COMPANY FINANCIAL INFORMATION - Continued
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,823,306 $1,218,580 $ 840,464
Adjustments:
Amortization 7,198 7,198 7,198
Equity in undistributed net income of
subsidiary (2,003,540) (956,025) 92,629
(Increase) decrease in other assets 75,534 460,665 (255,556)
Increase (decrease) in other liabilities (69,746) (352,165) 174,521
----------- ---------- -----------
Net cash provided from (used in)
operating activities (167,248) 378,253 859,256
Cash flows from investing activities:
Investment in subsidiary (150,000) - (3,425,000)
Purchase of investment securities (11,022) - -
----------- ---------- -----------
Net cash used in investing activities (161,022) - (3,425,000)
Cash flows from financing activities:
Repayment of note payable (3,450,000) (250,000) -
Proceeds from note payable 3,700,000 - 2,500,000
----------- ---------- -----------
Net cash provided from (used in)
financing activities 250,000 (250,000) 2,500,000
----------- ---------- -----------
Net increase (decrease) in cash (78,270) 128,253 (65,744)
Cash, beginning of year 147,172 18,919 84,663
----------- ---------- -----------
Cash, end of year $ 68,902 $ 147,172 $ 18,919
=========== ========== ===========
</TABLE>
C-31
<PAGE>
WINDSOR BANCSHARES, INC. AND SSUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
NOTE 17 - SUBSEQUENT EVENT
On October 1, 1998, the Company entered into an Agreement and Plan of Merger
("Merger Agreement") with Associated Banc - Corp ("Associated") wherein
shareholders of the Company would receive shares of Associated in exchange for
their shares of the Company. The proposed merger is subject to the appropriate
regulatory and shareholder approvals and compliance with the terms of the
Merger Agreement by the Company and Associated. If the merger agreement is
terminated under certain circumstances, the Company will be obligated to pay
Associated a fee equal to 3% of the aggregate value of the merger as of the
date of termination. The terms of the proposed transaction, which is expected
to be consummated in early 1999, require that the transaction be accounted for
as a pooling of interests. Under the terms of the Merger Agreement, each
issued and outstanding share of Class A and Class B common stock of the Company
shall be converted into the right to receive shares of common stock of
Associated under a formula defined in the Merger Agreement. Pursuant to the
Merger Agreement, a total of 800,000 shares are to be issued; a cash payment
will be made in lieu of any fractional shares and to those shareholders who
invoke dissenter's rights.
C-32
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and due from banks $ 4,965,297
Federal funds sold 20,800,000
Securities 49,670,800
Loans, less allowance for loan losses 112,165,612
Premises and equipment, less accumulated depreciation 753,380
Accrued interest receivable and other assets 2,517,267
------------
Total assets $190,872,356
============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Non interest bearing deposits $ 24,325,518
Interest bearing deposits 138,415,804
------------
Total deposits 162,741,322
Repurchase agreements 11,784,034
Note payable 3,700,000
Subordinated notes payable to officers, directors and stockholders 2,000,000
Accrued interest payable and other liabilities 1,478,234
------------
Total liabilities 181,703,590
Commitments and contingencies -
Stockholders' equity
Common stock - Class A, $.01 par value; 10,000,000
shares authorized; 3,190,000 and 3,000,000 shares
issued and outstanding at September 30, 1998 and
December 31, 1997 31,900
Common stock - Class B; $.01 par value; 5,000,000
shares authorized; 3,150,000 shares issued and
outstanding 31,500
Additional paid-in capital 3,707,600
Retained earnings 5,392,613
Accumulated other comprehensive income 5,153
------------
Total stockholders' equity 9,168,766
------------
Total liabilities and stockholders' equity $190,872,356
============
</TABLE>
The accompanying notes are an integral part of these statements.
C-33
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF NET INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 8,384,856 $7,355,033
Interest on securities
Taxable 1,777,154 1,412,310
Tax exempt 52,831 52,092
Interest on Federal funds sold 395,939 297,310
----------- ----------
Total interest income 10,610,780 9,116,745
INTEREST EXPENSE
Deposits 4,110,194 3,195,463
Repurchase agreements and other borrowed funds 770,523 697,871
----------- ----------
Total interest expense 4,880,717 3,893,334
----------- ----------
Net interest income 5,730,063 5,223,411
PROVISION FOR LOAN LOSSES 375,000 270,000
----------- ----------
Net interest income after provision for loan losses 5,355,063 4,953,411
OTHER INCOME
Service charges and other fees 265,567 283,204
Securities gains 49,513 -
----------- ----------
Total other income 315,080 283,204
----------- ----------
OTHER EXPENSE
Salaries and benefits 1,690,322 1,574,164
Occupancy and equipment expense 451,553 476,346
Data processing 143,197 140,278
Professional fees 209,939 110,842
Marketing and advertising 115,365 110,656
Amortization of intangibles 100,584 100,883
Other 364,381 338,359
----------- ----------
Total other expense 3,075,341 2,851,528
----------- ----------
Income before income taxes 2,594,802 2,385,087
INCOME TAX EXPENSE 1,027,700 947,500
----------- ----------
NET INCOME $ 1,567,102 $1,437,587
=========== ==========
Net income per share
Basic
Class A $ 0.27 $ 0.26
Class B 0.23 0.21
Diluted
Class A $ 0.26 $ 0.25
Class B 0.23 0.21
Weighted average shares outstanding
Basic
Class A 3,112,967 3,000,000
Class B 3,150,000 3,150,000
Diluted
Class A 3,296,441 3,144,653
Class B 3,150,000 3,150,000
</TABLE>
The accompanying notes are an integral part of these statements.
C-34
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,567,102 $ 1,437,587
Adjustments:
Depreciation and amortization 247,659 254,708
Provision for loan losses 375,000 270,000
Securities gains (49,513) -
Securities amortization and accretion, net 8,454 (51,906)
Increase in accrued interest receivable and other assets (69,405) (114,839)
Increase in accrued interest payable and other liabilities 168,075 386,656
------------ ------------
Total adjustments 680,270 744,619
------------ ------------
Net cash provided from operating activities 2,247,372 2,182,206
Cash flows from investing activities:
Proceeds from sales of available-for-sale securities 3,023,594 25,000
Proceeds from maturities of available-for-sale securities 9,145,537 9,434,678
Proceeds from maturities of held-to-maturity securities 3,556,333 1,997,716
Purchase of available-for-sale securities (31,958,415) (13,660,916)
Purchases of held-to-maturity securities - (185,000)
Net increase in loans (4,099,883) (16,260,615)
Capital expenditures, net (117,757) (121,074)
------------ ------------
Net cash used in investing activities (20,450,591) (18,770,211)
Cash flows from financing activities:
Net increase in demand and savings deposits 22,927,966 15,842,145
Net increase (decrease) in time deposits 8,061,828 (448,493)
Net increase (decrease) in repurchase agreements (110,313) 1,026,930
Repayment of note payable - (3,450,000)
Proceeds from note payable - 3,700,000
Proceeds from subordinated notes payable - 800,000
Proceeds from exercise of stock options 240,000 -
------------ ------------
Net cash provided from financing activities 31,119,481 17,470,582
------------ ------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 12,916,262 882,577
Cash and cash equivalents at beginning of period 12,849,035 6,364,289
------------ ------------
Cash and cash equivalents at end of period $ 25,765,297 $ 7,246,866
============ ============
Supplemental cash flow information:
Interest paid $ 4,694,723 $ 3,726,682
Income taxes paid 1,069,811 838,665
</TABLE>
Income tax benefits of $81,000 derived from the exercise of stock options in
1998 were recorded as a reduction of current income taxes payable and an
increase in additional paid-in capital.
The accompanying notes are an integral part of these statements.
C-35
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
NOTE 1 - GENERAL
The accounting and reporting policies of Windsor Bancshares, Inc. and
Subsidiary (the "Company") conform to generally accepted accounting principles
and to general practices within the banking industry. Significant accounting
policies used by the Company are described in the summary of significant
accounting policies included as a part of the December 31, 1997, 1996 and 1995
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
nine months ended September 30, 1998 and 1997 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, 1997, 1996 and 1995 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>
Nine months ended
September 30,
-----------------------
1998 1997
---------- ---------
<S> <C> <C>
Balance, beginning of period $1,283,065 $ 981,850
Provision charged to expense 375,000 270,000
Loan chargeoffs, net of recoveries (328,479) (254,094)
---------- ---------
Balance, end of period $1,329,586 $ 997,756
========== =========
</TABLE>
NOTE 3 - SECURITIES
On October 1, 1998, the Company's subsidiary bank reclassified securities with
an amortized cost of $6,495,327 from "held-to-maturity" to "available-for-
sale." This one time transfer was made in connection with the Company's
adoption of Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities. The net unrealized gain on
those securities transferred was $16,910, net of deferred tax expense of
$11,273.
C-36
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
NOTE 4 - 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, and all
required disclosures will be included beginning with the Company's 1998 annual
financial statements.
The Company's comprehensive income for the nine month periods ended September
30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Net income $1,567,102 $1,437,587
Other comprehensive income, net of tax
Unrealized holding gains on securities arising during the period 2,870 37,598
Less: reclassification adjustment for gains realized in net income (29,708) -
---------- ----------
Other comprehensive income (26,838) 37,598
---------- ----------
Comprehensive income $1,540,264 $1,475,185
========== ==========
</TABLE>
NOTE 5 - CHANGES IN STOCKHOLDERS' EQUITY
Changes in stockholders' equity for the nine months ended September 30, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Class A common stock
Balance, January 1 $ 30,000 $ 30,000
Proceeds from exercise of stock options 1,900 -
---------- ----------
Balance, September 30 $ 31,900 $ 30,000
========== ==========
Additional paid-in capital
Balance, January 1 $3,388,500 $3,388,500
Proceeds from exercise of stock options 238,100 -
Tax benefits from exercise of stock options 81,000 -
---------- ----------
Balance, September 30 $3,707,600 $3,388,500
========== ==========
</TABLE>
C-37
<PAGE>
WINDSOR BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
NOTE 5 - CHANGES IN STOCKHOLDERS' EQUITY - Continued
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Retained earnings
Balance, January 1 $3,825,511 $2,002,205
Net income 1,567,102 1,437,587
---------- ----------
Balance, September 30 $5,392,613 $3,439,792
========== ==========
Accumulated other comprehensive income
Balance, January 1 $ 31,991 $ (44,297)
Unrealized gain on securities available-for-sale 2,870 37,598
Reclassification for gains realized in net income (29,708) -
---------- ----------
Balance, September 30 $ 5,153 $ (6,699)
========== ==========
</TABLE>
NOTE 6 - SUBSEQUENT EVENT
On October 1, 1998, the Company entered into an agreement and Plan of Merger
("Merger Agreement") with Associated Banc - Corp ("Associated") wherein
shareholders of the Company would receive shares of Associated in exchange for
their shares of the Company. The proposed merger is subject to the appropriate
regulatory and shareholder approvals and compliance with the terms of the
Merger Agreement by the Company and Associated. If the merger agreement is
terminated under certain circumstances, the Company will be obligated to pay
Associated a fee equal to 3% of the aggregate value of the merger as of the
date of termination. The terms of the proposed transaction, which is expected
to be consummated in early 1999, require that the transaction be accounted for
as a pooling of interests. Under the terms of the Merger Agreement, each
issued and outstanding share of Class A and Class B common stock of the Company
shall be converted into the right to receive shares of common stock of
Associated under a formula defined in the Merger Agreement. Pursuant to the
Merger Agreement, a total of 800,000 shares are to be issued; a cash payment
will be made in lieu of any fractional shares and to those shareholders who
invoke dissenter's rights.
C-38
<PAGE>
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, if such person was a party to such 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 or 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
180.0858 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 contains no provisions in
relation to the indemnification of directors and officers of the Registrant.
Article XI of the Registrant's Bylaws ("Article XI") authorizes
indemnification of officers and directors of the Registrant consistent with the
description of the indemnification provisions in Section 180.0851 of the WBCL as
described above. Article XI provides that the Registrant shall indemnify a
director, officer, employee or agent of the Registrant to the extent such
individual has been successful on the merits or otherwise in the defense of any
threatened, pending or completed civil, criminal, administrative or
investigative action, suit, arbitration or other proceeding, whether formal or
informal (including, but not limited to, any act or failure to act alleged or
determined (i) to have been negligent, (ii) to have violated the Employee
Retirement Income Security Act of 1974; or (iii) to have violated Sections
180.0832, 180.0833 and 180.1202 of the WBCL, or any successor thereto, regarding
loans to directors, unlawful distributions and distributions of assets, which
involves foreign, federal, state or local law and which is brought by or in the
right of the Registrant or by any other person or entity, to which the director,
officer, employee or agent was a party because he or she is a director, officer,
employee or agent. In all other cases, the Registrant shall indemnify a
director, officer, employee or agent of the Registrant against liability and
expenses incurred by such person in a proceeding unless it shall have been
proven by final judicial adjudication that such person breached or failed to
II-1
<PAGE>
perform a duty owed to the Registrant under the circumstances described above as
set forth in Section 180.0851 of the WBCL. Article XI defines a "director,
officer, employee or agent" as (i) a natural person who, is or was a director,
officer, employee or agent of the Registrant, (ii) a natural person who, while a
director, officer, employee or agent of the Registrant, is or was serving either
pursuant to the Registrant's specific request or as a result of the nature of
such person's duties to the Registrant as a director, officer, partner, trustee,
member of any governing or decision making committee, employee or agent of
another corporation or foreign corporation, partnership, joint venture, trust or
other enterprise and (iii) a person who, while a director, officer, employee or
agent of the Registrant, is or was serving an employee benefit plan because his
or her duties to the Registrant also impose duties on, or otherwise involve
services by, the person to the plan or to participants in or beneficiaries of
the plan. Unless the context requires otherwise, Article XI indemnification
extends to the estate or personal representative of a director, officer,
employee or agent.
All officers, directors, employees and agents of controlled subsidiaries of
the Registrant shall be deemed for purposes of Article XI to be serving as such
officers, directors, employees and agents at the request of the Registrant. The
right to indemnification granted to such officers and directors by Article XI is
not subject to any limitation or restriction imposed by any provision of the
Articles of Incorporation or Bylaws of a controlled subsidiary. For purposes of
Article XI, a "controlled subsidiary" means any corporation at least 80% of the
outstanding voting stock of which is owned by the Registrant or another
controlled subsidiary of the Registrant.
Upon written request by a director, officer, employee or agent who is a
party to a proceeding, the Registrant shall pay or reimburse his or her
reasonable expenses as incurred if the director, officer, employee or agent
provides the Registrant with: (i) a written affirmation of his or her good faith
belief that he or she is entitled to indemnification under Article XI; and (ii)
a written undertaking to repay all amounts advanced without interest to the
extent that it is ultimately determined that indemnification under Article XI is
prohibited. The Registrant shall have the power to purchase and maintain
insurance on behalf of any person who is a director, officer, employee or agent
against any liability asserted against or incurred by the individual in any such
capacity arising out of his or her status as such, regardless of whether the
Registrant is required or authorized to indemnify or allow expenses to the
individual under Article XI.
The right to indemnification under Article XI may be amended only by a
majority vote of the shareholders and any reduction in the right to
indemnification may only be prospective from the date of such vote.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
Exhibit No.
- ----------
2(a) Agreement and Plan of Merger dated as of October 1, 1998 between
the Registrant and Windsor Bancshares, Inc., incorporated by
reference to Exhibit A to the Proxy Statement/Prospectus of the
Registrant and Windsor Bancshares, Inc. (the "Proxy
Statement/Prospectus").
II-2
<PAGE>
3(a) Articles of Incorporation, as amended and restated, incorporated
by reference to Exhibit 3 of the Registrant's Quarterly Report on
Form 10-Q filed for the quarter ended June 30, 1993, SEC File No.
0-5519.
3(b) Articles of Amendment to Articles of Incorporation, as amended
and restated, incorporated by reference to Exhibit 3(a) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, SEC File No. 0-5519.
3(c) Bylaws, as amended, incorporated by reference to Exhibit 3(b) of
the Registrant's Annual Report on Form 10-K filed for the year
ended December 31, 1997, SEC File No. 0-5519.
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 Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
s.c. regarding legality of issuance of the Registrant's
securities.
8 Opinion of Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
s.c. regarding certain federal income tax matters.
10(a) The 1982 Incentive Stock Option Plan of the Registrant
incorporated by reference to Exhibit 10 to Annual Report on Form
10-K for fiscal year ended December 31, 1987.
10(b) The Restated Long-Term Incentive Stock Option Plan of the
Registrant incorporated by reference to Exhibit 10 filed with the
Registrant's registration statement (33-86790) on Form S-8 filed
under the Securities Act of 1933.
10(c) Change of Control Plan of the Registrant effective April 25, 1994
incorporated by reference to Exhibit 10(d) of the Registrant's
Annual Report on Form 10-K for fiscal year ended December 31,
1994, SEC File No. 0-5519.
10(d) Deferred Compensation Plan and Deferred Compensation Trust
effective as of December 16, 1993, and Deferred Compensation
Agreement of the Registrant dated December 31, 1994, incorporated
by reference to Exhibit 10(e) of the Registrant's Annual Report
on Form 10-K for fiscal year ended December 31, 1994, SEC File
No. 0-5519.
11 Statement Re Computation of Per Share Earnings incorporated by
reference to Exhibit 11 of the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 and Exhibit 11
of the Registrant's Quarterly Report on Form 10-Q filed for the
quarter ended September 30, 1998, SEC File No. 0-5519.
II-3
<PAGE>
21 List of Subsidiaries of the Registrant incorporated by reference
to Exhibit 21 of the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, SEC File No. 0-5519.
23(a) Consent of KPMG Peat Marwick LLP.
23(b) Consent of Ernst & Young LLP.
23(c) Consent of Grant Thornton LLP.
23(d) Consent of Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
s.c. incorporated by reference to Exhibit 5.
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) 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 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.
(b) 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.
(c) 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.
II-4
<PAGE>
(d) 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>
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 Green Bay, State of
Wisconsin, on this 17th day of November, 1998.
ASSOCIATED BANC-CORP
By: /s/ Harry B. Conlon
-------------------------
Harry B. Conlon,
Chairman and Chief
Executive Officer
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.
Signature Title Date
--------- ----- ----
/s/ Harry B. Conlon Chairman, Chief Executive November 17, 1998
- -----------------------
Harry B. Conlon Officer and a Director
(Principal Financial)
/s/ Joseph B. Selner Chief Financial Officer November 17, 1998
- -----------------------
Joseph B. Selner (Principal Financial Officer
and Principal Accounting
Officer)
/s/ Robert C. Gallagher President, Chief Operating November 17, 1998
- ----------------------- Officer and a Director
Robert C. Gallagher
*
- ----------------------- Vice Chairman and a Director November 17, 1998
John C. Seramur
* Director November 17, 1998
- -----------------------
Robert S. Gaiswinkler
* Director November 17, 1998
- -----------------------
Ronald R. Harder
* Director November 17, 1998
- -----------------------
John S. Holbrook, Jr.
* Director November 17, 1998
- -----------------------
William R. Hutchinson
II-6
<PAGE>
Signature Title Date
- --------- ----- ----
* Director November 17, 1998
- -----------------------
Robert P. Konopacky
* Director November 17, 1998
- -----------------------
Dr. George R. Leach
* Director November 17, 1998
- -----------------------
John C. Meng
* Director November 17, 1998
- -----------------------
J. Douglas Quick
* Director November 17, 1998
- -----------------------
John H. Sproule
* Director November 17, 1998
- -----------------------
Ralph R. Staven
* Director November 17, 1998
- -----------------------
Norman L. Wanta
*Brian R. Bodager hereby signs this registration statement on November 17,
1998 on behalf of each of the indicated persons for whom he is attorney-in-fact
pursuant to a power of attorney filed herewith.
*By: /s/ Brian R. Bodager
------------------------
Brian R. Bodager
II-7
<PAGE>
EXHIBIT INDEX
Exhibit No.
- -----------
2(a) Agreement and Plan of Merger dated as of October 1, 1998 between
the Registrant and Windsor Bancshares, Inc., incorporated by
reference to Exhibit A to the Proxy Statement/Prospectus of the
Registrant and Windsor Bancshares, Inc. (the "Proxy
Statement/Prospectus").
3(a) Articles of Incorporation, as amended and restated, incorporated
by reference to Exhibit 3 of the Registrant's Quarterly Report on
Form 10-Q filed for the quarter ended June 30, 1993, SEC File No.
0-5519.
3(b) Articles of Amendment to Articles of Incorporation, as amended
and restated, incorporated by reference to Exhibit 3(a) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, SEC File No. 0-5519.
3(c) Bylaws, as amended, incorporated by reference to Exhibit 3(b) of
the Registrant's Annual Report on Form 10-K filed for the year
ended December 31, 1997, SEC File No. 0-5519.
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 Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
s.c. regarding legality of issuance of the Registrant's
securities.
8 Opinion of Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
s.c. regarding certain federal income tax matters.
10(a) The 1982 Incentive Stock Option Plan of the Registrant
incorporated by reference to Exhibit 10 to Annual Report on Form
10-K for fiscal year ended December 31, 1987.
10(b) The Restated Long-Term Incentive Stock Option Plan of the
Registrant incorporated by reference to Exhibit 10 filed with the
Registrant's registration statement (33-86790) on Form S-8 filed
under the Securities Act of 1933.
10(c) Change of Control Plan of the Registrant effective April 25, 1994
incorporated by reference to Exhibit 10(d) of the Registrant's
Annual Report on Form 10-K for fiscal year ended December 31,
1994, SEC File No. 0-5519.
10(d) Deferred Compensation Plan and Deferred Compensation Trust
effective as of December 16, 1993, and Deferred Compensation
Agreement of the
<PAGE>
Registrant dated December 31, 1994, incorporated by reference to
Exhibit 10(e) of the Registrant's Annual Report on Form 10-K for
fiscal year ended December 31, 1994, SEC File No. 0-5519.
11 Statement Re Computation of Per Share Earnings incorporated by
reference to Exhibit 11 of the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 and Exhibit 11
of the Registrant's Quarterly Report on Form 10-Q filed for the
quarter ended September 30, 1998, SEC File No. 0-5519.
21 List of Subsidiaries of the Registrant incorporated by reference
to Exhibit 21 of the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, SEC File No. 0-5519.
23(a) Consent of KPMG Peat Marwick LLP.
23(b) Consent of Ernst & Young LLP.
23(c) Consent of Grant Thornton LLP.
23(d) Consent of Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
s.c. incorporated by reference to Exhibit 5.
24 Powers of Attorney.
ii
<PAGE>
EXHIBIT 5
November 17, 1998
Associated Banc-Corp
1200 Hansen Road
P.O. Box 13307
Green Bay, WI 54307
Gentlemen: Re: Registration Statement on Form S-4
We have acted as counsel for Associated Banc-Corp, a Wisconsin corporation
(the "Company"), in connection with the issuance by the Company of up to 800,000
shares of Common Stock, par value $.01 per share, of the Company (the "Shares").
The Shares will be issued to the shareholders of Windsor Bancshares, Inc.
("Windsor") pursuant to the Agreement and Plan of Merger, dated as of October 1,
1998 (as amended, the "Merger Agreement"), by and between the Company and
Windsor.
In such capacity, we have examined, among other documents, the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission on the
date hereof or shortly hereafter (the "Registration Statement"), including the
Proxy Statement/Prospectus contained therein, to effect the registration of the
Shares under the Securities Act of 1933, as amended (the "Act"). In making our
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the conformity to originals of
all documents submitted to us as certified or photostatic copies and the
capacity of each party executing a document to so execute such document.
Based upon the foregoing, and upon such further examination as we have
deemed relevant and necessary, we are of the opinion that the Shares have been
legally and validly authorized under the Articles of Incorporation of the
Company and the laws of the State of Wisconsin and, when issued and delivered to
the shareholders of Windsor pursuant to the Merger Agreement and as provided
under applicable Wisconsin law, the Registration Statement and the Company's
Articles of Incorporation and By-Laws, will be validly issued and outstanding
and fully
<PAGE>
Associated Banc-Corp
November 17, 1998
Page 2
paid and nonassessable, except as set forth in section 180.0622(2)(b) of the
Wisconsin Business Corporation Law, as interpreted.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
We hereby consent to the use of our name beneath the caption "Legal
Opinions" 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.
Yours very truly,
REINHART, BOERNER, VAN DEUREN,
NORRIS & RIESELBACH, s.c.
BY /s/ James M. Bedore
James M. Bedore
<PAGE>
EXHIBIT 8
November 19, 1998
The Board of Directors
Associated Banc-Corp
1200 Hansen Road
P.O. Box 13307
Green Bay, WI 54307-3307
The Board of Directors
Windsor Bancshares, Inc.
740 Marquette Avenue
Minneapolis, MN 55402
Gentlemen: Re: Classification of Merger
You have requested our opinion with respect to certain federal income tax
consequences of the proposed merger (the "Merger") of Windsor Bancshares, Inc.,
a Minnesota corporation ("Windsor") with and into Associated Banc-Corp, a
Wisconsin corporation ("Associated"), pursuant to the Agreement and Plan of
Merger dated as of October 1, 1998 between Associated and Windsor (the
"Agreement"). All capitalized terms which are defined in the Agreement have the
same meanings when used herein, unless otherwise specified.
In connection with the proposed Merger, you have informed us of the
following:
1. Pursuant to the laws of the State of Wisconsin and the State of
Minnesota, Windsor will merge with and into Associated. Associated will be the
surviving corporation.
2. Pursuant to the Merger, all of Windsor's assets will be
transferred to Associated and Associated will assume all of Windsor's
liabilities.
3. At the effective time of the Merger, each outstanding share of
Company Common Stock will be converted into and exchanged for shares of
Associated Common Stock, except for cash received by Windsor shareholders in
lieu of fractional shares of Associated Common Stock or received by Windsor
<PAGE>
The Board of Directors
November 19, 1998
Page 2
shareholders who dissent to the Merger, based on the Merger Exchange Ratios set
forth in the Agreement.
4. As soon as practicable at or after the effective time of the
Merger, the exchange agent will distribute Associated Common Stock and cash in
lieu of fractional shares to holders of Company Common Stock.
5. Associated will continue to conduct one or more of the historic
businesses now being conducted by Windsor.
6. Associated and Windsor each have valid business purposes for the
Merger apart from tax considerations.
7. Windsor has neither paid, nor declared, a dividend to any
shareholder of Windsor since the date the Company Common Stock was issued.
8. Associated has no plan or intention to reacquire any of the
Associated Common Stock issued in the Merger.
9. The fair market value of the Associated Common Stock to be
received by Windsor shareholders with respect to their Company Common Stock will
be, in each instance, approximately equal to the fair market value of Company
Common Stock surrendered in exchange therefore.
In rendering this tax opinion, Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, s.c. has relied on certain written representations as to factual
matters made by appropriate officers of Associated and Windsor. Such
representations are customary for opinions of this type; however, this tax
opinion cannot be relied upon if any such representation is, or later becomes,
inaccurate.
In connection herewith, we have examined the Agreement, the Registration
Statement on Form S-4 to be filed by Associated on the date hereof with the
Securities and Exchange Commission (which contains the Proxy
Statement/Prospectus) and such other information as we have deemed relevant. As
to questions of fact material to the opinions herein, we have relied upon
certificates
<PAGE>
The Board of Directors
November 19, 1998
Page 3
from the management of Associated and Windsor. On the basis of the foregoing, we
are of the opinion that for federal income tax purposes:
1. The Merger will qualify as a reorganization within the meaning of
section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), and Associated and Windsor will each be "a party to the reorganization"
within the meaning of section 368(b) of the Code for the purposes of this
reorganization.
2. No gain or loss will be recognized by a shareholder of Windsor
upon the exchange of Company Common Stock solely for Associated Common Stock
pursuant to the Merger, except with respect to cash received in lieu of
fractional shares of Associated Common Stock.
It is possible that the Internal Revenue Service would argue that the
portion of the Associated Common Stock received by the holders of Company Common
Stock which is attributable to the Windsor liquidation preference (which
according to Windsor's Articles of Incorporation is measured by the amount of
accumulated and unpaid dividends) represents the receipt of a dividend and is
not tax-free.
However, based on the authorities cited in this opinion and other
authorities on which we rely, we believe that the receipt of Associated Common
Stock attributable to the liquidation preference is to be accorded the same
treatment as Associated Common Stock for the underlying Company Common Stock.
Skenandoa Rayon Corp. v. C.I.R., 122 F. 2d 268 (2nd Cir. 1941) and Rev. Rul. 69-
131, 1969-1 C.B. 94. See also PLR 9444021 (August 2, 1994); PLR 9236007
(February 14, 1992) and PLR 8020030 (February 20, 1980), although private letter
rulings are not binding on the Internal Revenue Service, they are cited to
illustrate a consistent rulings position.
3. The aggregate tax basis of the Associated Common Stock received
by a shareholder of Windsor as a result of the Merger will be the same as the
aggregate tax basis of the shares of Company Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
This opinion does not discuss all of the consequences that may be relevant
to holders of Company Common Stock entitled to special treatment under the Code
(such as insurance companies, financial institutions, dealers in securities,
tax-exempt organizations or foreign persons).
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.
This opinion is based upon the existing provisions of the Code and
regulations thereunder (both final and proposed) and upon current Internal
Revenue Service published rulings and existing court decisions, any of which
<PAGE>
The Board of Directors
November 19, 1998
Page 4
could be changed at any time. Any such changes may be retroactive and could
significantly 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 the conclusion.
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, we can give no assurance that the Service will not challenge our
conclusions and prevail in the courts in such a manner as to cause adverse tax
consequences to Associated, Windsor or their shareholders.
Our opinion is limited to those federal tax issues specifically considered
herein and is addressed to and is only for the benefit of Associated and
Windsor. The opinion is furnished to you pursuant to sections 7.02(f) and
7.03(e) of the Agreement and Plan of Merger and may not be used or relied upon
for any other purpose, without our express written consent.
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 "Experts" 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
<PAGE>
The Board of Directors
November 19, 1998
Page 5
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Yours very truly,
REINHART, BOERNER, VAN DEUREN,
NORRIS & RIESELBACH, s.c.
BY /s/ John L. Schliesmann
John L. Schliesmann
<PAGE>
EXHIBIT 23(A)
Consent of Independent Public Accountants
Board of Directors
Associated Banc-Corp:
We consent to the use of our reports incorporated herein by reference and to the
reference of our firm under the "Experts" heading in the registration statement.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
November 13, 1998
<PAGE>
EXHIBIT 23(B)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated January 22, 1998, with respect to the financial
statements of First Financial Corporation incorporated by reference in the
Registration Statement of Associated Banc-Corp for the registration of 800,000
shares of its common stock.
/s/ ERNST & YOUNG LLP
Milwaukee, Wisconsin
November 13, 1998
<PAGE>
EXHIBIT 23(C)
INDEPENDENT AUDITORS CONSENT
We have issued our report dated January 9, 1998 (except Note 17, as to which the
date is October 1, 1998), accompanying the consolidated financial statements of
Windsor Bancshares, Inc. and subsidiary contained in the Associated Banc-Corp
Registration Statement and Prospectus on Form S-4, filed on or about November
16, 1998. We consent to the use of the aforementioned report in the
Registration Statement and Prospectus, and to the use of our name as it appears
under the caption "Experts."
GRANT THORNTON LLP
Minneapolis, Minnesota
November 12, 1998
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ John C. Seramur
----------------------------
John C. Seramur
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ Robert C. Gallagher
--------------------------
Robert C. Gallagher
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ Robert S. Gaiswinkler
-------------------------------------
Robert S. Gaiswinkler
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ John S. Holbrook, Jr.
-----------------------------------
John S. Holbrook, Jr.
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ William R. Hutchinson
---------------------------------------
William R. Hutchinson
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ Robert P. Konopacky
---------------------------------
Robert P. Konopacky
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ John C. Meng
-------------------------------------
John C. Meng
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ J. Douglas Quick
---------------------------------
J. Douglas Quick
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ George R. Leach
------------------------------------
George R. Leach
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ Ralph R. Staven
---------------------------------------
Ralph R. Staven
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ Norman L. Wanta
--------------------------------
Norman L. Wanta
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ John H. Sproule
------------------------------------
John H. Sproule
Director
<PAGE>
EXHIBIT 24
DIRECTOR'S POWER OF ATTORNEY
----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Associated Banc-Corp, a Wisconsin corporation (the "Corporation"), hereby
constitutes and appoints Brian R. Bodager 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
Windsor Bancshares, 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 October, 1998.
/s/ Ronald R. Harder
------------------------------------
Ronald R. Harder
Director
