<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1999
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------
ANCHOR BANCORP WISCONSIN INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
WISCONSIN 6712 39-1726871
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
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25 WEST MAIN STREET
MADISON, WI 53703
(608) 252-8700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------
DOUGLAS J. TIMMERMAN
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ANCHOR BANCORP WISCONSIN INC.
25 WEST MAIN STREET
MADISON, WI 53703
(608) 252-8700
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
----------
WITH COPIES TO:
<TABLE>
<S> <C> <C> <C>
MARK. D. TIMMERMAN, ESQ. ANDREW J. GUZIKOWSKI, ESQ. JAMES J. ROTHENBACH JAY O. ROTHMAN, ESQ.
ASSISTANT SECRETARY AND WHYTE HIRSCHBOECK DUDEK S.C. PRESIDENT AND CHIEF EXECUTIVE FOLEY & LARDNER
GENERAL COUNSEL 111 EAST WISCONSIN AVENUE OFFICER 777 EAST WISCONSIN AVENUE
ANCHOR BANCORP WISCONSIN INC. SUITE 2100 FCB FINANCIAL CORP. MILWAUKEE, WI 53202
25 WEST MAIN STREET MILWAUKEE, WI 53202 420 SOUTH KOELLER STREET
MADISON, WI 53703 OSHKOSH, WI 54902
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement and all other conditions to the merger described herein have been
satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box./ /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering./ /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering./ /
================================================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
(this facing sheet continues, and the Calculation of
the Registration Fee appears, on the following page)
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED(I) OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED SHARE(I) PRICE(I) FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 7,449,974 shares (ii) $32.6875 (iii) $133,071,597 (iii) $36,993.90 (iv)
$0.10 par value
- ---------------------------------------------------------------------------------------------------------------------------------
Series A Preferred 7,449,974 rights n/a n/a n/a
Share Purchase
Rights (v)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(i) Estimated based upon the number of shares of FCB Financial Corp. common
stock issued and outstanding and the high and low prices thereof as of
April 21, 1999, solely for purposes of calculating the registration fee.
The shares registered are to be offered pursuant to Registrant's proposed
merger with FCB Financial Corp.
(ii) Determined by multiplying the exchange ratio provided for in the Agreement
and Plan of Merger dated January 5, 1999 between the Registrant and FCB
Financial Corp. (1.83 - to - 1.00) times 4,071,024 shares of FCB Financial
Corp. common stock, which is the sum of:
(a) 3,840,680 shares to be acquired by Registrant pursuant to the
merger in exchange for issued and outstanding shares of FCB
Financial Corp. common stock (which does not include the 687,688
shares held in treasury that will be canceled as part of the
merger);
(b) 230,344 shares underlying options issued by FCB Financial Corp.
which, as a result of the merger, will be converted into options
to acquire the Registrant's common stock.
(iii) Pursuant to Rule 457(c) of the Securites Act of 1933, as amended, the
amount shown under "Proposed Maximum Offering Price Per Share" is based
upon the average of the high ($33.50) and low ($31.875) prices of FCB
Financial Corp. common stock on April 21, 1999, and the amount shown under
"Proposed Maximum Aggregate Offering Price" is based upon $32.6875 times
4,071,024 shares of FCB Financial Corp. common stock to be acquired by the
Registrant (see Note (ii), above).
(iv) Of this amount, $25,240.35 has already been paid as part of the
Registrant's filing of its preliminary proxy materials on Schedule 14A on
February 23, 1999, pursuant to Rules 14a-6(i)(1) and 0-11(c)(1) of the
Securities Exchange Act of 1934, as amended. The balance of $11,753.55 is
being paid in connection with the filing of this Registration Statement.
(v) Pursuant to the Rights Agreement, dated as of July 22, 1997, between the
Registrant and Firstar Bank Milwaukee, N.A. (as successor to Firstar Trust
Company), as rights agent, the value attributable to the Series A
Preferred Share Purchase Rights is reflected in the market price of the
Registrant's common stock to which the rights are attached.
<PAGE> 3
ANCHOR LOGO FCB LOGO
JOINT PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED
YOUR VOTE IS VERY IMPORTANT
The boards of directors of Anchor BanCorp Wisconsin Inc. and FCB Financial
Corp. have approved an agreement to merge FCB with and into Anchor. We cannot
complete the merger unless a majority of the shareholders of each company
approves it. We are asking the shareholders of both companies to vote on the
merger, and each company will hold a separate special meeting of its
shareholders on June 7, 1999 for that purpose. YOUR VOTE IS VERY IMPORTANT.
If the merger is completed, FCB shareholders will receive 1.83 shares of
Anchor common stock (together with an equal number of preferred share purchase
rights under Anchor's shareholders' rights plan) for each share of FCB common
stock they own, plus cash in lieu of any fractional shares, and Anchor
shareholders will continue to own Anchor common stock. Based upon the number of
outstanding shares for each company on April 21, 1999, current FCB shareholders
will own approximately 28% of the outstanding Anchor stock if the merger is
completed. On April 26, 1999, Anchor stock, which is listed on The Nasdaq Stock
Market under the trading symbol "ABCW," closed at $19.00 per share and FCB
stock, which is listed on Nasdaq under the trading symbol "FCBF," closed at
$33.75 per share. If the merger is completed, FCB stock will no longer be listed
on Nasdaq.
This document gives you detailed information about the merger and includes
a copy of the merger agreement. It is a joint proxy statement that both
companies are using to solicit proxies for use at our special shareholder
meetings. It is also a prospectus relating to Anchor's issuance of up to
7,449,974 shares of Anchor stock (and the associated preferred share purchase
rights) in connection with the merger.
We are very enthusiastic about the merger and the strength and capabilities
we expect from the combined company. We join all the other members of each
company's board of directors in recommending that you vote in favor of the
merger.
<TABLE>
<S> <C>
/s/ DOUGLAS J. TIMMERMAN /s/ JAMES J. ROTHENBACH
Douglas J. Timmerman James J. Rothenbach
Chairman, President and Chief Executive Officer President and Chief Executive
Anchor BanCorp Wisconsin Inc. Officer
FCB Financial Corp.
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
JOINT PROXY STATEMENT/PROSPECTUS DATED APRIL 28, 1999
FIRST MAILED TO SHAREHOLDERS ON OR ABOUT APRIL 30, 1999
<PAGE> 4
FINDING IMPORTANT INFORMATION
This document contains important information about our companies and the
merger that you should read and consider carefully before you decide how to vote
your shares. The principal sections of this document are located on the pages
referenced in the Table of Contents below. Some of the documents related to the
merger are included as appendices to this document. In addition, we have
incorporated important business and financial information about our companies
from documents filed with the SEC that have not been included in or delivered
with this document.
------------------------------
FINDING INFORMATION
INCORPORATED BY REFERENCE
Information that is
incorporated by reference
in this document is
available to you without
charge upon your written or
oral request. You can
obtain documents
incorporated by reference
in this document, excluding
exhibits, by requesting
them in writing or by
telephone from the
appropriate company at the
following addresses:
Anchor BanCorp Wisconsin
Inc.
25 West Main Street
Madison, WI 53703
Attention: Investor
Relations
Telephone: (608) 252-1810
FCB Financial Corp.
420 South Koeller Street
Oshkosh, WI 54902
Attention: Investor
Relations
Telephone: (920) 303-4900
We will mail any
incorporated documents you
request to you by first
class mail, or another
equally prompt means,
within one business day
after we receive your
request. IN ORDER TO ENSURE
TIMELY DELIVERY OF THESE
DOCUMENTS TO YOU, WE MUST
RECEIVE YOUR REQUEST BY MAY
28, 1999.
See "WHERE YOU CAN FIND
MORE INFORMATION" on page
95 for more information
about the documents
incorporated by reference
in this document.
------------------------------
- --------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Questions and Answers about the Merger......... 1
Summary........................................ 3
Cautionary Statement Regarding Forward-Looking
Information.................................. 18
The Special Meetings........................... 19
The Companies.................................. 22
The Merger..................................... 24
The Merger Agreement........................... 51
The Stock Option Agreement..................... 60
Management and Operations after the Merger..... 65
Unaudited Pro Forma Condensed Combined
Financial Data............................... 67
Anchor Stock and Comparative Rights of
Shareholders................................. 75
Regulation..................................... 80
Legal Matters.................................. 93
Experts........................................ 93
Shareholder Proposals for 1999 Annual
Meetings..................................... 93
Where You Can Find More Information............ 95
Agreement and Plan of Merger............. Appendix A
Stock Option Agreement................... Appendix B
Fairness Opinion of McDonald
Investments Inc........................ Appendix C
Fairness Opinion of Hovde Financial, Inc....Appendix
D
</TABLE>
- --------------------------------------------
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION ABOUT
THE MERGER OR OUR COMPANIES THAT DIFFERS
FROM, OR ADDS TO, THE INFORMATION IN THIS
JOINT PROXY STATEMENT/PROSPECTUS OR IN
DOCUMENTS THAT ARE PUBLICLY FILED WITH THE
SEC. THEREFORE, IF ANYONE DOES GIVE YOU
DIFFERENT OR ADDITIONAL INFORMATION, YOU
SHOULD NOT RELY ON IT.
THE INFORMATION CONTAINED IN THIS JOINT
PROXY STATEMENT/ PROSPECTUS SPEAKS ONLY AS
OF ITS DATE UNLESS THE INFORMATION
SPECIFICALLY INDICATES THAT ANOTHER DATE
APPLIES.
INFORMATION IN THIS JOINT PROXY
STATEMENT/PROSPECTUS ABOUT ANCHOR HAS BEEN
SUPPLIED BY ANCHOR, AND INFORMATION ABOUT
FCB HAS BEEN SUPPLIED BY FCB.
<PAGE> 5
ANCHOR LOGO
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 7, 1999
-------------------------
To the Shareholders of Anchor BanCorp Wisconsin Inc.:
We are hereby giving you notice that Anchor BanCorp Wisconsin Inc. will
hold a special meeting of shareholders on June 7, 1999, at 2:00 p.m., local
time, at the Crowne Plaza -- Madison, 4402 East Washington Avenue, Madison,
Wisconsin, for the following purposes, all of which are more fully described in
the accompanying Joint Proxy Statement/Prospectus:
1. To consider and vote on a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of January 5, 1999, between Anchor and FCB
Financial Corp., and to approve the related merger of our two companies
on the terms set forth in the merger agreement, a copy of which is
included as Appendix A to the Joint Proxy Statement/Prospectus. Approval
of the merger will constitute approval by Anchor's shareholders of the
issuance of up to 7,449,974 shares of Anchor common stock in the merger.
2. To consider such other matters as may properly come before the special
meeting or any adjournments or postponements thereof, including
proposals to adjourn the special meeting to permit further solicitation
of proxies if we have not received sufficient votes to approve the
merger. However, if you vote against the merger, your shares will not be
voted in favor of an adjournment to solicit further proxies.
Our board of directors has fixed the close of business on April 21, 1999,
as the record date for determining which shareholders are entitled to notice of
and to vote at the special meeting and any adjournment or postponement thereof.
Only shareholders of record on that date will be entitled to vote on the merger.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE APPROVAL OF THE MERGER.
We cordially invite you to attend the special meeting in person. However,
to assure that your shares are voted at the special meeting, please complete,
sign, date and promptly mail the enclosed proxy, whether or not you plan to
attend the special meeting. Please return your completed proxy in the enclosed,
pre-addressed envelope (no postage is required if mailed in the United States).
You may revoke your proxy in writing at any time before it is voted, or you may
revoke your proxy and vote in person if you attend the special meeting.
By Order of the Board of Directors,
J. Anthony Cattelino
Vice President and Secretary
Madison, Wisconsin
April 28, 1999
<PAGE> 6
[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE> 7
FCB LOGO
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 7, 1999
-------------------------
To the Shareholders of FCB Financial Corp.:
We are hereby giving you notice that FCB Financial Corp. will hold a
special meeting of shareholders on June 7, 1999, at 9:00 a.m., local time, at
the Ramada Inn, 500 South Koeller Street, Oshkosh, Wisconsin, for the following
purposes, all of which are more fully described in the accompanying Joint Proxy
Statement/Prospectus:
1. To consider and vote on a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of January 5, 1999, between Anchor BanCorp
Wisconsin Inc. and FCB, and to approve the related merger of our two
companies on the terms set forth in the merger agreement, a copy of
which is included as Appendix A to the Joint Proxy Statement/Prospectus.
2. To consider such other matters as may properly come before the special
meeting or any adjournments or postponements thereof, including
proposals to adjourn the special meeting to permit further solicitation
of proxies if we have not received sufficient votes to approve the
merger. However, if you vote against the merger, your shares will not be
voted in favor of an adjournment to solicit further proxies.
Our board of directors has fixed the close of business on April 21, 1999,
as the record date for determining which shareholders are entitled to notice of
and to vote at the special meeting and any adjournment or postponement thereof.
Only shareholders of record on that date will be entitled to vote on the merger.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE APPROVAL OF THE MERGER.
We cordially invite you to attend the special meeting in person. However,
to assure that your shares are voted at the special meeting, please complete,
sign, date and promptly mail the enclosed proxy, whether or not you plan to
attend the special meeting. Please return your completed proxy in the enclosed,
pre-addressed envelope (no postage is required if mailed in the United States).
You may revoke your proxy in writing at any time before it is voted, or you may
revoke your proxy and vote in person if you attend the special meeting.
By Order of the Board of Directors,
Harold L. Hermansen
Vice President and Secretary
Oshkosh, Wisconsin
April 28, 1999
<PAGE> 8
[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE> 9
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT IS THE VALUE OF THE ANCHOR SHARES THAT FCB SHAREHOLDERS WILL RECEIVE?
A: Because the exchange ratio is fixed and the market price of the Anchor stock
that FCB shareholders will receive in the merger will fluctuate, FCB
shareholders cannot be sure of the market value of the Anchor stock they
will receive in the merger. Using the exchange ratio and the last sale price
of a share of Anchor stock on April 26, 1999, a share of FCB stock would
have been exchanged for Anchor stock with a value of $34.77 if the merger
had occurred on that date.
Q: WHAT WILL HAPPEN TO EXISTING ANCHOR SHAREHOLDERS AS A RESULT OF THE MERGER?
A: Anchor shareholders will retain the Anchor stock they currently own.
Q: WHAT SHOULD I DO NOW?
A: Carefully read this document, and indicate on the enclosed proxy card how
you want to vote. Sign and mail the proxy card in the enclosed prepaid
return envelope as soon as possible. To ensure that your shares are
represented and voted at the special meeting, we recommend that you mail
your proxy by June 1, 1999. In order for the merger to occur, a majority of
the outstanding shares of each company must approve the merger agreement. If
you do not vote your shares, the effect will be the same as voting against
the merger. THE BOARDS OF DIRECTORS OF ANCHOR AND FCB UNANIMOUSLY RECOMMEND
THAT YOU VOTE "FOR" THE MERGER.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will not vote your shares unless you follow the directions he or
she provides you regarding how to instruct your broker to vote.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. Just send in a later dated, signed proxy card to your
company's Secretary before the meeting or attend the meeting and vote in
person.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES AT THIS TIME?
A: No. If the merger is completed, Anchor will send FCB shareholders written
instructions for exchanging their stock certificates. Anchor shareholders
will keep their existing stock certificates.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as possible. We must
first obtain the necessary regulatory clearance and the approvals of our
shareholders at the special meetings. We hope to complete the merger in the
second quarter of 1999; however, we cannot assure you as to when or if all
conditions to the merger will be satisfied or waived, and it is possible
that the merger will not be completed.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?
A: Both Anchor and FCB file periodic reports and other information with the
SEC. You may read and copy this information at the SEC's public reference
facilities. Please call the SEC at 1-800-SEC-0330 for information about
these facilities. This information is also available at the Internet site
maintained by the SEC at http://www.sec.gov. You can also request copies of
these documents from us. See "WHERE YOU CAN FIND MORE INFORMATION" on page
95.
<PAGE> 10
Q: WHO CAN ANSWER MY QUESTIONS?
A: For Anchor Shareholders. If you have more questions about the merger, you
should contact:
Anchor BanCorp Wisconsin Inc.
25 West Main Street
Madison, WI 53703
Attention: Investor Relations
Telephone: (608) 252-1810
For FCB Shareholders. If you have more questions about the merger, you
should contact:
FCB Financial Corp.
420 South Koeller Street
Oshkosh, WI 54902
Attention: Investor Relations
Telephone: (920) 303-4900
For Banks and Brokers. If you have questions about the merger, please
contact Morrow & Co., Inc., who is serving as proxy solicitor for both
companies, at the following address:
Morrow & Co., Inc.
445 Park Avenue
New York, NY 10022
Telephone: 1-800-566-9061
2
<PAGE> 11
SUMMARY
This summary highlights selected information from this Joint Proxy
Statement/Prospectus. It does not contain all of the information that is
important to you. We urge you to read carefully this entire document and the
other documents it refers to in order to fully understand the merger. Each of
the headings in this summary is followed by a reference to other pages of this
document where you can read more about that particular topic. See "WHERE YOU CAN
FIND MORE INFORMATION" on page 95 to find out how you can obtain more
information about Anchor and FCB.
Although the articles of incorporation of each company authorize the
issuance of preferred stock, and Anchor has authorized a series of preferred
stock in connection with its preferred share purchase rights plan, neither
company has any shares of preferred stock outstanding. Since each company has
only one class of stock outstanding (common stock), when we use the term "Anchor
stock" we are referring to Anchor common stock (including the associated
preferred share purchase rights), and when we use the term "FCB stock" we are
referring to FCB common stock.
GENERAL [PAGE 24]
We are proposing a merger between Anchor and FCB. The merger will (1)
realize value for FCB shareholders by combining FCB with the largest thrift
institution headquartered in Wisconsin, having a broad market area and diverse
customer base, as well as historically strong stock performance, and (2) create
opportunities for the combined company to realize enhanced revenues and
profitability through mortgage, commercial and consumer loan growth.
In the merger, FCB shareholders will receive 1.83 shares of Anchor stock in
exchange for each share of FCB stock they own. Anchor and FCB stock are listed
on Nasdaq. For information regarding the historical market prices of and
dividends paid on Anchor stock and FCB stock, see pages 16 and 17. We urge you
to obtain current stock price quotations for Anchor and FCB stock. If the merger
is completed, FCB stock will no longer be listed on Nasdaq.
THE COMPANIES [PAGE 22]
ANCHOR BANCORP WISCONSIN INC. Headquartered in Madison, Wisconsin, Anchor
is the parent holding company for AnchorBank, S.S.B., a financial institution
with $2.1 billion in assets, 35 full service offices and two lending-only
facilities in 14 Wisconsin counties. AnchorBank is the largest thrift
institution and fourth largest financial institution in terms of assets
headquartered in Wisconsin. Information about AnchorBank's products and services
can be accessed on the internet at http://www.anchorbank.com.
FCB FINANCIAL CORP. FCB is the parent holding company for Fox Cities Bank,
a $526 million financial institution with 13 full service offices in five
Wisconsin counties. Fox Cities Bank has a strong market presence in the Fox
River Valley. Information about Fox Cities Bank's products and services can be
accessed on the internet at http://www.foxcitiesbank.com.
3
<PAGE> 12
THE SPECIAL MEETINGS [PAGE 19]
The merger will be submitted to the shareholders of both companies for
approval at special meetings to be held as follows:
- FCB's special meeting will be held at 9:00 a.m. local time on Monday,
June 7, 1999 at the Ramada Inn, 500 South Koeller Street, Oshkosh,
Wisconsin.
- Anchor's special meeting will be held at 2:00 p.m. local time on Monday,
June 7, 1999 at the Crowne Plaza -- Madison, 4402 East Washington
Avenue, Madison, Wisconsin.
VOTES REQUIRED; RECORD DATE FOR VOTING [PAGE 19]
ANCHOR. You can vote at Anchor's special meeting if you owned Anchor stock
at the close of business on April 21, 1999. As of that date, there were
18,068,490 shares of Anchor stock outstanding and entitled to vote at Anchor's
special meeting; directors and executive officers of Anchor and their affiliates
held 1,855,316 of these shares. The merger will be approved if a majority of the
shares of Anchor stock outstanding on the record date (at least 9,034,246
shares) is voted for approval of the merger. If you do not vote your shares, the
effect will be the same as if you voted against the merger.
FCB. You can vote at FCB's special meeting if you owned FCB stock at the
close of business on April 21, 1999. As of that date, there were 3,840,680
shares of FCB stock outstanding and entitled to vote at FCB's special meeting;
directors and executive officers of FCB and their affiliates held 371,176 of
these shares. The merger will be approved if a majority of the shares of FCB
stock outstanding on the record date (at least 1,920,341 shares) is voted for
approval of the merger. If you do not vote your shares, the effect will be the
same as if you voted against the merger.
RECOMMENDATIONS TO SHAREHOLDERS [PAGE 31]
ANCHOR SHAREHOLDERS. Anchor's board of directors unanimously recommends
that you vote "FOR" the proposal to approve the merger. You should read the
boards' reasons for their recommendations beginning on page 31.
FCB SHAREHOLDERS. FCB's board of directors unanimously recommends that you
vote "FOR" the proposal to approve the merger. You should read the boards'
reasons for their recommendations beginning on page 32.
NO DISSENTERS' RIGHTS
Under the Wisconsin Business Corporation Law ("WBCL"), which governs the
rights of both Anchor and FCB shareholders, Anchor and FCB shareholders will not
have any right to dissent from the merger and receive payment of the "fair
value" of their shares. Although the WBCL provides these rights generally to
shareholders of merging corporations, they are not available in connection with
the merger because the common stock of both Anchor and FCB are listed on Nasdaq.
EFFECTS OF THE MERGER [PAGE 67]
Among the boards of directors' reasons for recommending approval of the
merger is their belief that, over the long-term, the merger will be beneficial
to Anchor's shareholders, including FCB shareholders who will become Anchor
shareholders if the merger is completed. Anchor believes that one of the
potential benefits of the merger is that the cost savings it believes can be
realized by combining the two companies will enhance Anchor's earnings.
4
<PAGE> 13
Anchor currently expects to reduce expenses by eliminating external
data-processing costs and by combining our accounting, data processing, retail
and lending support and other functions after the merger, which will enable us
to eventually eliminate duplicative positions. Promptly following the completion
of the merger, which is expected to occur during the first quarter of fiscal
2000 (the year ending March 31, 2000), Anchor plans to begin the process of
eliminating redundant functions (such as external data processing) and
identifying and eliminating duplicative personnel.
Because Anchor believes that this process will take the remainder of fiscal
2000 to complete, it has not attempted to quantify what cost savings might be
achieved during fiscal 2000. The amount of any cost savings Anchor may realize
in fiscal 2000 will depend upon how quickly and efficiently Anchor is able to
implement the processes outlined above during the year.
Anchor believes that cost savings of approximately $2.8 million (pre-tax)
can be realized in fiscal 2001 (the year ending March 31, 2001), which
represents approximately 30% of FCB's operating expenses for fiscal 1998. The
$2.8 million in cost savings is based on our assumption that we will be able to
(1) eliminate approximately $1.7 million in compensation and benefits costs, (2)
reduce external data processing costs by approximately $250,000, (3) achieve
economies of scale in our advertising and marketing budgets to produce cost
savings of $225,000, (4) eliminate $200,000 in regulatory and examination fees,
(5) reduce directors' fees by $150,000, and (6) achieve other savings of
approximately $250,000 through reduction or elimination of miscellaneous items
such as subscriptions, insurance premiums, travel and automobile expense, and
investor relations expenses. These estimates are based on our present assessment
of where savings could be realized based upon the present independent operations
of the two companies and our actual savings in some or all of these areas could
be higher or lower than we currently expect.
The companies have prepared financial statements which show the combined
operations and financial condition of the two companies as if the merger had
occurred on April 1, 1995. These are known as "pro forma" financial statements.
The pro forma financial statements are set forth beginning on page 67 and are
summarized on page 14. The pro forma financial statements do not reflect the
following anticipated effects of the merger:
- Under SEC rules, we are not permitted to show the effect of any
anticipated cost savings because those potential savings are based on
management's estimates and we cannot assure you that we will achieve
them.
- Anchor expects to recognize one-time, merger-related charges of
approximately $8.5 million (pre-tax) in the quarter in which the merger
is completed. These charges are explained in greater detail in Note 2 to
the pro forma financial statements on page 74.
- Anchor also believes the merger will create significant opportunities
for increasing its revenues through mortgage, commercial and consumer
loan growth. Anchor has not quantified the increase in revenues which it
hopes to achieve and so we cannot predict what effect it will have on
our post-merger results of operations if we achieve the increase.
The pro forma financial statements show that the merger would have caused a
"dilution" (reduction) in Anchor's earnings per share. This dilution is
reflected in the pro forma financial statements and can be seen in the table
under "Comparative Per Share Data" on page 16 by comparing the section labeled
"Anchor Historical" with the section labeled "Anchor Unaudited Pro Forma." If we
do achieve $2.8 million in cost savings in fiscal 2001, we expect that these
savings will offset the dilution and that the merger will be slightly accretive
to earnings in that year.
There are numerous factors other than the merger that could cause Anchor's
results of operations (including, among other things, earnings per share) to
increase or decrease after the merger. Therefore,
5
<PAGE> 14
we cannot assure you that the anticipated benefits of the merger discussed in
the previous paragraphs will happen. You should read "CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING INFORMATION" on page 18 for a discussion of the
factors that could affect Anchor's future operations and financial condition.
The pro forma financial statements are shown under "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA" on page 67 and are summarized on page 14
under "-- Selected Financial Data -- Selected Unaudited Pro Forma Condensed
Combined Financial Data." You should read these sections carefully.
SOLICITATION OF PROXIES [PAGE 21]
Anchor's board is soliciting proxies from Anchor's shareholders, and FCB's
board is soliciting proxies from FCB's shareholders, for use at the special
meetings. We will also make arrangements with brokerage firms, fiduciaries and
other custodians who hold shares of record to forward solicitation materials to
the beneficial owners of those shares. Morrow & Co., Inc. will assist in the
solicitation of proxies by Anchor and FCB for a joint fee of $10,000, plus
reimbursement of reasonable out-of-pocket expenses to be allocated upon
agreement of Anchor and FCB.
OPINIONS OF FINANCIAL ADVISORS [PAGES 35 AND 42]
ANCHOR. McDonald Investments Inc. has delivered a written opinion to
Anchor's board of directors to the effect that, as of the date of this Joint
Proxy Statement/Prospectus, the exchange ratio was fair to Anchor's shareholders
from a financial point of view. This opinion is not a recommendation to any
Anchor shareholder as to how to vote. We have attached McDonald's opinion to
this document as Appendix C. You should read it completely.
FCB. Hovde Financial, Inc. has delivered a written opinion to FCB's board
of directors to the effect that, as of the date of this Joint Proxy
Statement/Prospectus, the exchange ratio was fair to FCB's shareholders from a
financial point of view. This opinion is not a recommendation to any FCB
shareholder as to how to vote. We have attached Hovde's opinion to this document
as Appendix D. You should read it completely.
THE OPINIONS OF THE COMPANIES' FINANCIAL ADVISORS CONTAIN ASSUMPTIONS AS TO
VARIOUS MATTERS THEY CONSIDERED IN RENDERING THEIR OPINIONS, INCLUDING
HYPOTHETICAL ASSUMPTIONS AS TO THE FUTURE BUSINESS OPERATIONS, FINANCIAL
PERFORMANCE, AND PROSPECTS OF EACH COMPANY. THESE ASSUMPTIONS WERE MADE BY THE
FINANCIAL ADVISORS SOLELY FOR PURPOSES OF RENDERING THEIR OPINIONS AND DO NOT
REPRESENT ASSUMPTIONS WHICH ARE MADE BY EITHER ANCHOR OR FCB. FURTHER, THESE
ASSUMPTIONS ARE NOT MEANT TO PREDICT WHAT WILL HAPPEN IN THE FUTURE AND YOU
SHOULD NOT RELY ON THEM FOR THIS PURPOSE.
INTERESTS OF MEMBERS OF FCB'S BOARD OF DIRECTORS AND MANAGEMENT IN THE MERGER
[PAGE 47]
Some of FCB's directors and executive officers have interests in the merger
that are different from, or in addition to, interests of FCB shareholders. You
should be aware of these interests because they may conflict with your
interests.
FCB STOCK OPTIONS [PAGE 55]
In the merger, each outstanding option to buy FCB stock under FCB's stock
option plans will become an option to buy 1.83 shares of Anchor stock at an
exercise price per share equal to the exercise price of the original option
divided by 1.83. All other terms and conditions of the options will remain the
same as the terms and conditions of the original options.
6
<PAGE> 15
REGULATORY APPROVALS REQUIRED FOR THE MERGER [PAGE 48]
Banking and financial services businesses such as Anchor and FCB are highly
regulated. Anchor and FCB and their banking subsidiaries are subject to federal
and state laws and regulations relating to all aspects of their business,
including, among others, capital requirements, lending practices, disclosure
requirements, limitations on dividends, liquidity requirements and insurance
requirements. In addition, the companies are subject to the examination and
supervision of various state and federal regulatory authorities. For a fuller
explanation of the regulatory environment in which the companies operate, see
"REGULATION" beginning on page 80.
CONDITIONS TO COMPLETION OF THE MERGER [PAGE 56]
The completion of the merger depends on a number of conditions being
satisfied or waived. Some of these conditions include:
- approval of the merger by the holders of a majority of the outstanding
shares of common stock of each company;
- approval of the merger by the regulatory authorities;
- delivery of appropriate opinion letters by FCB's and Anchor's
accountants regarding pooling of interests accounting treatment;
- the absence of any injunction or legal restraint blocking the merger;
and
- material compliance by Anchor and FCB with all agreements and covenants
in the merger agreement.
The merger will occur shortly after all of the conditions to the completion
of the merger have been satisfied or waived. Although we expect to complete the
merger during the second calendar quarter of 1999, we cannot be certain when the
conditions to the merger will be satisfied or waived or that the merger will be
completed.
TERMINATION OF THE MERGER AGREEMENT [PAGE 56]
The companies may agree in writing to terminate the merger agreement at any
time without completing the merger, even after the shareholders of both
companies have approved it, provided that such termination is approved by the
boards of directors of both companies.
In addition, either Anchor or FCB may, without the consent of the other,
terminate the merger agreement under various circumstances, including the
following:
- if the merger is not completed by September 30, 1999;
- if Anchor's or FCB's shareholders do not approve the merger;
- if an injunction is issued preventing the merger;
- if any regulatory body denies approval of the merger and neither company
appeals that denial; or
- if the other company has materially breached any of the representations,
warranties, covenants or agreements contained in the merger agreement
unless the breach, if curable, is cured within thirty (30) days after
notice.
FCB may terminate the merger agreement if as a result of a proposed
acquisition of FCB by a third party, FCB's directors determine that they should
terminate the merger agreement to fulfill their fiduciary obligations to FCB's
shareholders. However, before FCB may do so, it must first advise Anchor
7
<PAGE> 16
of the identity of the third party and the terms of its proposal and give Anchor
an opportunity to negotiate adjustments in the terms of the merger agreement.
See "THE MERGER AGREEMENT -- Fiduciary Termination" on page 57. If this happens,
Anchor will be able to exercise the option to purchase up to 19.9% of FCB's
stock. See "The Stock Option Agreement" below.
Finally, FCB may also terminate the merger agreement if the average price
of Anchor stock, measured during a specified trading period prior to the date we
receive the last approval necessary to complete the merger, falls below $15.00
per share and declines by more than 15% relative to an index of the prices of
the common stocks of a group of other comparable publicly-traded companies. See
"THE MERGER AGREEMENT -- Price Condition" on page 57.
AMENDMENT AND WAIVER [PAGE 59]
The merger agreement may be amended prior to the completion of the merger,
and some of the terms and conditions of the merger agreement may be waived.
THE STOCK OPTION AGREEMENT [PAGE 60]
The companies have entered into a stock option agreement that could
discourage other companies from trying or proposing to combine with FCB before
the merger is completed. The stock option agreement gives Anchor an option to
purchase up to 19.9% of FCB's stock. The option will only become exercisable in
the event of an acquisition or contemplated acquisition of FCB by a party other
than Anchor. As of the date of this Joint Proxy Statement/Prospectus, we did not
know of any such acquisition or contemplated acquisition. A copy of the stock
option agreement is attached as Appendix B.
DIVIDENDS [PAGE 17]
Following completion of the merger, all Anchor shareholders (including
former FCB shareholders) will be entitled to receive dividends, if any, as and
if declared by Anchor's board of directors. Anchor currently anticipates
continuing its practice of paying quarterly cash dividends following the
completion of the merger. The future payment of any dividends by Anchor will
depend upon several factors, including the profitability of the combined
company, capital requirements, financial condition, growth, business
opportunities, tax considerations, industry standards, economic conditions,
restrictions in any then-existing credit agreements, and other factors that
Anchor's board may deem relevant.
COMPARISON OF RIGHTS OF FCB AND ANCHOR SHAREHOLDERS [PAGE 75]
The rights of FCB and Anchor shareholders are governed by the WBCL and each
company's respective articles of incorporation and bylaws. Upon the completion
of the merger, FCB shareholders will become shareholders of Anchor, and will
have different rights under Anchor's articles and bylaws than they have now. In
addition, Anchor shareholders have rights under Anchor's preferred share
purchase rights plan that FCB shareholders do not have.
ACCOUNTING TREATMENT [PAGE 49]
We expect the merger to qualify as a pooling of interests, which means that
the companies will be treated as if they had always been combined for accounting
and financial reporting purposes.
FEDERAL INCOME TAX CONSEQUENCES [PAGE 49]
ANCHOR SHAREHOLDERS. You will not recognize any taxable gain or loss or
other taxable event as a result of the merger.
8
<PAGE> 17
FCB SHAREHOLDERS. You will not recognize taxable gain or loss for federal
income tax purposes upon the exchange of FCB stock for Anchor stock in the
merger, except that you will be taxed on the cash you receive in lieu of
fractional shares, which will be nominal. The tax basis of the Anchor stock you
will receive in the merger generally will be the same as the tax basis of the
FCB stock exchanged. The holding period for the Anchor stock you will receive,
which determines how any gain or loss should be treated for federal income tax
purposes when that stock is sold, generally will include the holding period for
the FCB stock you exchange in the merger.
The merger is conditioned on our receipt of legal opinions that the federal
income tax treatment will be as we have described in this document.
This tax treatment may not apply to some shareholders and may depend on
your specific situation and on variables not within our control. You should
consult your own tax advisor for a full understanding of the tax consequences to
you.
SELECTED FINANCIAL DATA
The tables on the following pages show summary historical financial data
for each of our companies, and similar information reflecting the merger of our
two companies, which we refer to as "pro forma" data.
9
<PAGE> 18
ANCHOR SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The table below and on the next page shows summary historical financial
data about Anchor. When you read this information, you should also read the
historical financial statements we are incorporating by reference in this
document, including the notes to those financial statements. See "WHERE YOU CAN
FIND MORE INFORMATION" on page 95 for instructions on how to obtain these
financial statements and other documents Anchor has filed with the SEC.
We derived the historical consolidated financial data in the table for
fiscal years 1994 through 1998 from Anchor's historical consolidated financial
statements audited by Ernst & Young LLP, independent public accountants. We
derived the historical consolidated financial data in the table for the
nine-month periods ended December 31, 1998 and 1997, from Anchor's unaudited
historical consolidated financial statements. In the opinion of Anchor
management, these unaudited historical consolidated financial statements reflect
all adjustments, consisting of only normal recurring items, that are necessary
for the fair presentation of financial position and results of operations for
those periods.
Anchor's statements of income for fiscal years 1996 through 1998 and the
nine-month periods ended December 31, 1998 and 1997, and its balance sheets for
fiscal years 1997 and 1998 and at December 31, 1998 and 1997, are incorporated
into this document by reference. Anchor's statements of income for fiscal years
1994 and 1995, and its balance sheets at March 31, 1994, 1995 and 1996, are not
incorporated into this document by reference.
<TABLE>
<CAPTION>
AT OR FOR
NINE MONTHS AT OR FOR FISCAL YEAR
ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- --------------------------------------------------------------
1998 1997 1998 1997(1) 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income........ $ 117,256 $ 111,449 $ 148,971 $ 140,551 $ 125,719 $ 104,884 $ 97,306
Interest expense....... 70,779 67,275 89,601 84,716 74,978 54,298 49,539
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income.... 46,477 44,174 59,370 55,835 50,741 50,586 47,767
Provision for loan
losses............... 600 135 300 500 475 1,580 4,348
Non-interest income.... 14,077 8,807 12,212 13,551 9,163 7,508 11,106
Non-interest
expenses............. 30,742 28,049 38,294 47,406 36,964 33,033 32,788
Income taxes........... 11,202 9,545 12,487 7,532 7,959 9,064 8,265
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income............. $ 18,010 $ 15,252 $ 20,501 $ 13,948 $ 14,506 $ 14,417 $ 13,472
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA:
Total assets........... $2,123,461 $1,941,180 $1,999,307 $1,884,983 $1,754,556 $1,510,917 $1,380,276
Investment
securities........... 33,727 52,226 57,142 43,516 32,837 23,632 20,781
Mortgage-related
securities........... 232,728 209,101 194,765 240,401 220,998 160,401 187,710
Loans receivable held
for investment,
net.................. 1,698,609 1,527,716 1,591,089 1,461,423 1,361,080 1,231,107 1,066,945
Deposits............... 1,497,715 1,355,799 1,392,472 1,312,445 1,240,958 1,098,210 1,065,741
Non-performing
assets............... 7,030 15,583 12,863 13,753 10,286 10,466 10,525
Stockholders' equity... 136,166 129,006 127,951 117,887 118,402 111,187 105,137
Shares
outstanding(2)....... 17,900 18,104 17,925 18,325 19,737 20,255 21,577
</TABLE>
10
<PAGE> 19
<TABLE>
<CAPTION>
AT OR FOR
NINE MONTHS AT OR FOR FISCAL YEAR
ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- --------------------------------------------------------------
1998 1997 1998 1997(1) 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (2):
Earnings (3):
Basic................ $ 1.05 $ 0.84 $ 1.13 $ 0.75 $ 0.71 $ 0.69 $ 0.60
Diluted.............. 0.98 0.79 1.06 0.71 0.68 0.67 0.58
Book value at end of
period............... 7.61 7.13 7.14 6.44 6.00 5.49 4.88
Dividends paid......... 0.15 0.12 0.16 0.12 0.08 0.06 0.05
SELECTED RATIOS:
Dividend payout
ratio................ 13.81% 13.69% 13.66% 15.83% 11.27% 8.26% 8.00%
Yield on earning
assets............... 7.85 7.99 7.99 7.91 7.87 7.46 7.42
Cost of funds.......... 4.93 5.00 4.99 4.96 4.96 4.11 4.04
Interest rate spread... 2.92 2.99 3.00 2.95 2.91 3.35 3.38
Net interest margin.... 3.11 3.17 3.18 3.14 3.18 3.60 3.64
Return on average
assets............... 1.16 1.05 1.13 0.76 0.88 1.00 1.00
Return on average
equity............... 18.36 16.24 16.20 11.78 12.13 13.45 12.89
Average equity to
average assets....... 6.30 6.46 6.51 6.42 7.24 7.41 7.74
Non-performing assets
to total assets...... 0.33 0.80 0.64 0.73 0.59 0.69 0.76
Allowance for loan
losses to total
loans................ 1.12 1.38 1.30 1.47 1.59 1.75 1.98
</TABLE>
- ---------------
(1) In fiscal 1997, Anchor paid a one-time assessment to the SAIF of $7,700
($4,600 net of taxes). See "REGULATION -- Insurance of Accounts, Premiums
and Other Assessments" on page 90.
(2) Shares outstanding and per share data have been adjusted to reflect a
five-for-four stock split distributed in October 1995, and two-for-one stock
splits distributed in August 1997 and August 1998.
(3) Basic earnings per share and diluted earnings per share for all periods
shown are restated to reflect the implementation of Statement of Financial
Accounting Standards No. 128 (Earnings Per Share).
11
<PAGE> 20
FCB SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The table below and on the next page shows summary historical financial
data about FCB. When you read this information, you should also read the
historical financial statements we are incorporating by reference in this
document, including the notes to those financial statements. See "WHERE YOU CAN
FIND MORE INFORMATION" on page 95 for instructions on how to obtain these
financial statements and other documents FCB has filed with the SEC.
We derived the historical consolidated financial data in the table for
fiscal years 1994 through 1998 from FCB's historical consolidated financial
statements audited by Wipfli Ullrich Bertelson LLP, independent public
accountants. We derived the historical consolidated financial data in the table
for the nine-month periods ended December 31, 1998 and 1997, from FCB's
unaudited historical consolidated financial statements. In the opinion of FCB
management, these unaudited historical consolidated financial statements reflect
all adjustments, consisting of only normal recurring items, that are necessary
for the fair presentation of financial position and results of operations for
those periods.
These financial statements reflect FCB's acquisition of OSB Financial Corp.
as of May 1, 1997, which was accounted for using the purchase method of
accounting. FCB's statements of income for fiscal years 1996 through 1998 and
the nine-month periods ended December 31, 1998 and 1997, and its balance sheets
for fiscal years 1997 and 1998 and at December 31, 1998 and 1997, are
incorporated into this document by reference. FCB's statements of income for
fiscal years 1994 and 1995, and its balance sheets at March 31, 1994, 1995 and
1996, are not incorporated into this document by reference.
<TABLE>
<CAPTION>
AT OR FOR
NINE MONTHS AT OR FOR FISCAL YEAR
ENDED DECEMBER 31, ENDED MARCH 31,
------------------- ----------------------------------------------------
1998 1997(1) 1998(1) 1997(2) 1996 1995 1994(3)
-------- -------- -------- -------- -------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income.................. $ 29,075 $ 28,129 $ 37,939 $ 19,965 $ 18,319 $ 15,060 $ 13,491
Interest expense................. 16,015 15,857 21,292 10,827 10,081 7,365 6,652
-------- -------- -------- -------- -------- -------- --------
Net interest income.............. 13,060 12,272 16,647 9,138 8,238 7,695 6,839
Provision for loan losses........ 318 800 950 350 200 36 76
Non-interest income.............. 2,735 2,053 3,010 987 765 597 948
Non-interest expenses............ 7,295 7,431 9,843 5,670 4,579 4,380 3,843
Income taxes..................... 3,071 1,996 3,020 1,665 1,667 1,493 1,427
-------- -------- -------- -------- -------- -------- --------
Net Income....................... $ 5,111 $ 4,098 $ 5,844 $ 2,440 $ 2,557 $ 2,383 $ 2,441
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets..................... $525,950 $519,911 $517,772 $271,185 $255,660 $239,305 $196,443
Investment securities............ 49,197 25,306 29,346 12,240 9,581 14,228 15,367
Mortgage-related securities...... 39,908 60,657 59,624 22,894 24,756 26,348 17,309
Loans receivable held for
investment, net................ 373,884 389,246 370,934 221,496 204,897 186,807 143,385
Deposits......................... 329,290 315,978 318,508 153,163 151,115 143,851 138,208
Non-performing assets............ 1,092 1,332 1,338 404 234 270 186
Stockholders' equity............. 76,855 73,284 74,916 47,432 47,192 48,017 49,497
Shares outstanding............... 3,841 3,863 3,867 2,464 2,513 2,632 2,834
</TABLE>
12
<PAGE> 21
<TABLE>
<CAPTION>
AT OR FOR
NINE MONTHS AT OR FOR FISCAL YEAR
ENDED DECEMBER 31, ENDED MARCH 31,
------------------- ----------------------------------------------------
1998 1997(1) 1998(1) 1997(2) 1996 1995 1994(3)
-------- -------- -------- -------- -------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Earnings(4):
Basic.......................... $ 1.37 $ 1.12 $ 1.59 $ 1.03 $ 1.03 $ 0.93 $ 0.84
Diluted........................ 1.34 1.09 1.55 1.01 1.01 0.92 0.83
Book value at end of period...... 20.01 18.97 19.37 19.25 18.78 18.25 17.47
Dividends paid................... 0.64 0.56 0.76 0.69 0.57 0.39 0.06
SELECTED RATIOS:
Dividend payout ratio............ 46.72% 50.00% 47.80% 66.99% 55.34% 41.94% 7.14%
Yield on earning assets.......... 7.51 7.79 7.76 7.78 7.71 7.08 7.25
Cost of funds.................... 4.79 5.09 5.08 5.07 5.21 4.39 4.39
Interest rate spread............. 2.72 2.70 2.68 2.72 2.50 2.69 2.86
Net interest margin.............. 3.38 3.42 3.41 3.57 3.47 3.62 3.67
Return on average assets......... 1.30 1.11 1.17 0.92 1.04 1.09 1.27
Return on average equity......... 8.98 7.61 8.06 5.18 5.27 4.90 6.37
Average equity to average
assets......................... 14.37 14.50 14.49 17.79 19.73 22.19 19.02
Non-performing assets to total
assets......................... 0.21 0.26 0.26 0.15 0.09 0.11 0.09
Allowance for loan losses to
total loans.................... 0.96 0.94 0.91 0.62 0.51 0.47 0.59
</TABLE>
- ---------------
(1) On May 1, 1997, FCB acquired OSB Financial Corp. Operations data for fiscal
1998 and for the nine months ended December 31, 1997 include the results of
OSB Financial Corp. and subsidiaries from May 1, 1997, and reflects $827 of
non-interest expenses related to the acquisition of OSB.
(2) In fiscal 1997, FCB paid a one-time assessment to the SAIF of $970 ($592 net
of taxes). See "REGULATION -- Insurance of Accounts, Premiums and Other
Assessments" on page 90.
(3) Non-interest income reflects $140 from the cumulative effect of a change in
accounting principle.
(4) Basic earnings per share and diluted earnings per share for all periods
shown are restated to reflect the implementation of Statement of Financial
Accounting Standards No. 128 (Earnings Per Share).
13
<PAGE> 22
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The table below and on the next page shows summary unaudited pro forma
financial information for the combined company for fiscal 1996 through 1998 and
for the nine-month periods ended December 31, 1998 and 1997. These pro forma
presentations treat our companies as if they had always been combined for
accounting and financial reporting purposes, a method known as pooling of
interests accounting, which is how we plan to account for the merger. When you
read this information, you should also read the information under "UNAUDITED PRO
FORMA CONDENSED COMBINED FINANCIAL DATA" on page 67.
We expect that we will incur reorganization and restructuring expenses as a
result of combining our companies. The unaudited pro forma operations and per
share data do not reflect any anticipated reorganization and restructuring
expenses resulting from the merger. They do include merger-related costs
associated with FCB's acquisition of OSB Financial Corp. in May 1997.
We anticipate that the merger will provide the combined company with
financial benefits, including reduced operating expenses and opportunities to
earn more revenue. These anticipated cost savings and benefits are not reflected
in the pro forma information. See "-- Effects of the Merger" on page 4.
The pro forma information, while helpful in illustrating the financial
characteristics of the combined company, does not attempt to predict or suggest
future results. The pro forma information also does not attempt to show how the
combined company would actually have performed had the companies been combined
throughout these periods.
<TABLE>
<CAPTION>
AT OR FOR
NINE MONTHS AT OR FOR FISCAL YEAR
ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ------------------------------------
1998 1997 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income............... $ 146,331 $ 139,578 $ 186,910 $ 160,516 $ 144,038
Interest expense.............. 86,794 83,132 110,893 95,543 85,059
---------- ---------- ---------- ---------- ----------
Net interest income........... 59,537 56,446 76,017 64,973 58,979
Provision for loan losses..... 918 935 1,250 850 675
Non-interest income........... 16,812 10,860 15,222 14,538 9,928
Non-interest expenses......... 38,037 35,480 48,137 53,076 41,543
Income taxes.................. 14,273 11,541 15,507 9,197 9,626
---------- ---------- ---------- ---------- ----------
Net income.................... $ 23,121 $ 19,350 $ 26,345 $ 16,388 $ 17,063
========== ========== ========== ========== ==========
BALANCE SHEET DATA:
Total assets.................. $2,649,411 $2,461,091 $2,517,079 $2,156,168 $2,010,216
Investment securities......... 82,924 77,532 86,488 55,756 42,418
Mortgage-related securities... 272,636 269,758 254,389 263,295 245,754
Loans receivable held for
investment, net............ 2,072,493 1,916,962 1,962,023 1,682,919 1,565,977
Non-performing assets......... 8,122 16,915 14,201 14,157 10,520
Deposits...................... 1,827,005 1,671,777 1,710,980 1,465,608 1,392,073
Stockholders' equity.......... 207,821 202,290 202,867 165,319 165,594
Shares outstanding(1)......... 24,929 25,173 25,002 22,834 24,336
</TABLE>
14
<PAGE> 23
<TABLE>
<CAPTION>
AT OR FOR
NINE MONTHS AT OR FOR FISCAL YEAR
ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ------------------------------------
1998 1997 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
PER SHARE DATA(1):
Earnings(2):
Basic...................... $ 0.96 $ 0.78 $ 1.06 $ 0.71 $ 0.68
Diluted.................... 0.91 0.74 1.00 0.68 0.65
Book value at end of period... 8.34 8.04 8.11 7.24 6.80
Dividends paid................ 0.15 0.12 0.16 0.12 0.08
SELECTED RATIOS:
Dividend payout ratio......... 15.10% 14.74% 14.62% 16.90% 11.76%
Yield on earning assets....... 7.80 7.94 7.94 7.90 7.85
Cost of funds................. 4.91 5.02 5.01 4.98 4.99
Interest rate spread.......... 2.89 2.92 2.94 2.92 2.86
Net interest margin........... 3.17 3.21 3.23 3.20 3.21
Return on average assets...... 1.18 1.06 1.08 0.78 0.90
Return on average equity...... 14.92 13.10 13.24 9.90 10.15
Average equity to average
assets..................... 7.94 8.10 8.15 7.84 8.86
Non-performing assets to total
assets..................... 0.31 0.69 0.56 0.66 0.63
Allowance for loan losses to
total loans................ 1.17 1.34 1.29 1.44 1.53
</TABLE>
- ---------------
(1) Shares outstanding and per share data reflect: (a) Anchor's five-for-four
stock split distributed in October 1995, and Anchor's two-for-one stock
splits distributed in August 1997 and August 1998; and (b) outstanding FCB
shares times the Anchor/FCB exchange ratio of 1.83. Per share data are
calculated based on the weighted average of the share price for the period
presented. See "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA"
beginning on page 67 for more information on how per share data are
calculated.
(2) Basic earnings per share and diluted earnings per share for all periods
shown are restated to reflect the implementation of Statement of Financial
Accounting Standards No. 128 (Earnings Per Share).
15
<PAGE> 24
COMPARATIVE PER SHARE DATA
The table below shows the earnings, book value and dividends per share for
Anchor and FCB both on an historical and a pro forma basis. We derived the
Anchor pro forma data by combining historical consolidated financial information
of Anchor and FCB using the pooling of interests method of accounting for
business combinations, all on the basis described under "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA" on page 67. We derived the FCB equivalent pro
forma data by multiplying the Anchor pro forma data by the exchange ratio
(1.83).
You should read the respective audited and unaudited historical
consolidated financial statements and related notes of Anchor and FCB
incorporated by reference into this Joint Proxy Statement/ Prospectus.
<TABLE>
<CAPTION>
AT OR FOR
NINE MONTHS ENDED AT OR FOR FISCAL YEAR
DECEMBER 31, ENDED MARCH 31,
----------------- ------------------------
1998 1997 1998 1997 1996
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
ANCHOR HISTORICAL
Earnings per share:
Basic...................................... $ 1.05 $ 0.84 $ 1.13 $ 0.75 $ 0.71
Diluted.................................... 0.98 0.79 1.06 0.71 0.68
Book value per share......................... 7.61 7.13 7.14 6.44 6.00
Dividends per share.......................... 0.15 0.12 0.16 0.12 0.08
FCB HISTORICAL
Earnings per share:
Basic...................................... $ 1.37 $ 1.12 $ 1.59 $ 1.03 $ 1.03
Diluted.................................... 1.34 1.09 1.55 1.01 1.01
Book value per share......................... 20.01 18.97 19.37 19.25 18.78
Dividends per share.......................... 0.64 0.56 0.76 0.69 0.57
ANCHOR UNAUDITED PRO FORMA
Earnings per share:
Basic...................................... $ 0.96 $ 0.78 $ 1.06 $ 0.71 $ 0.68
Diluted.................................... 0.91 0.74 1.00 0.68 0.65
Book value per share......................... 8.34 8.04 8.11 7.24 6.80
FCB EQUIVALENT PRO FORMA
Earnings per share:
Basic...................................... $ 1.76 $ 1.43 $ 1.94 $ 1.30 $ 1.24
Diluted.................................... 1.67 1.35 1.83 1.24 1.19
Book value per share......................... 15.26 14.71 14.84 13.25 12.44
Dividends per share.......................... 0.27 0.22 0.28 0.22 0.15
</TABLE>
16
<PAGE> 25
MARKET PRICES AND DIVIDENDS
Anchor stock is listed on Nasdaq under the trading symbol "ABCW." FCB stock
is listed on Nasdaq under the trading symbol "FCBF." The following table sets
forth, for the quarters indicated, the range of the high and low sale prices of
Anchor stock and FCB stock, as reported on Nasdaq, and the dividends paid per
share.
<TABLE>
<CAPTION>
ANCHOR STOCK(1) FCB STOCK
----------------------------- -----------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
FISCAL 1998
First Quarter................ $12.688 $10.500 $0.035 $25.500 $20.000 $0.180
Second Quarter............... 15.000 12.063 0.040 28.000 24.750 0.180
Third Quarter................ 18.750 14.500 0.040 30.250 26.500 0.200
Fourth Quarter............... 23.250 16.250 0.040 33.313 28.000 0.200
FISCAL 1999
First Quarter................ 23.375 18.875 0.050 34.000 30.250 0.200
Second Quarter............... 24.000 19.344 0.050 32.000 25.750 0.220
Third Quarter................ 24.125 17.000 0.050 32.500 22.000 0.220
Fourth Quarter............... 24.500 17.125 0.050 40.125 26.250 0.220
FISCAL 2000
First Quarter(2)............. 19.750 15.250 n/a 35.250 27.625 n/a
</TABLE>
- ---------------
(1) Adjusted to reflect two-for-one stock splits distributed in August 1997 and
August 1998.
(2) Through April 26, 1999.
Anchor and FCB have, from time to time, engaged in open-market repurchases
of their stock pursuant to repurchase authorizations issued by their respective
boards of directors. There are no repurchase authorizations currently in effect
for either company. Anchor's repurchase authorization expired in January, 1999,
and was not renewed, and FCB's repurchase authorization was rescinded at the
time the FCB board approved the execution of the merger agreement.
In the table below we show the following prices for each of Anchor stock
and FCB stock:
- the average closing price for the 20 trading days immediately prior to
the public announcement of the merger (after the markets closed on
January 5, 1999);
- the closing price on January 5, 1999 (the date the merger agreement was
executed); and
- the closing price on April 26, 1999, the last practicable trading day
prior to the date of this Joint Proxy Statement/Prospectus.
Also set forth below for each of those prices is the equivalent pro forma
price of FCB stock, which was determined by multiplying the applicable price of
Anchor stock by the exchange ratio (1.83). Because the exchange ratio is fixed
and because the market price of Anchor stock is subject to fluctuation, the
market value of the Anchor stock that FCB shareholders will receive in the
merger may increase or decrease prior to and following the completion of the
merger. We urge you to obtain current market quotations.
<TABLE>
<CAPTION>
ANCHOR FCB FCB EQUIVALENT
STOCK STOCK PRO FORMA
------- ------- --------------
<S> <C> <C> <C>
Average closing price for the 20 trading days prior to
public announcement of the merger.................... $21.497 $28.644 $39.340
Closing price on January 5, 1999....................... $24.063 $26.750 $44.035
Closing price on April 26, 1999........................ $19.000 $33.750 $34.770
</TABLE>
17
<PAGE> 26
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
We make forward-looking statements in this document, including statements
about the financial condition, results of operations, plans, objectives, future
performance and business of each company, as well as information relating to the
merger. These statements generally include the following:
- statements relating to the cost savings and accretion to reported
earnings we expect to result from the merger;
- statements relating to revenues we expect will result from the merger;
- statements relating to integration costs we expect to incur in
connection with the merger; and
- statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," "estimates" or similar words or
expressions.
These forward looking statements are intended to qualify for the safe
harbors from liability provided by the Private Securities Litigation Reform Act
of 1995.
Whether these forward looking statements will prove accurate in the future
will depend on many things beyond our control, including, among other things,
the following factors and potential events:
- Interest rates may fluctuate, which could affect our cost of funds
and/or interest income and reduce our net interest margin.
- We may not realize the expected cost savings from the merger in a timely
manner, or at all, or we may incur additional or unexpected costs.
- Revenues following the merger may be lower than we expect.
- Competitive pressures in the industry or markets in which we operate may
increase.
- We may encounter greater than expected costs or difficulties related to
the integration of our businesses or other acquired businesses.
- There may be changes in general economic or political conditions.
- Technological changes, including "Year 2000" issues, may be more
difficult or expensive to implement than we anticipate.
- Changes may occur in the securities markets which affect us in adverse
ways.
- We may experience difficulties in obtaining regulatory approval of the
merger.
- We may lose key personnel expected to manage the integration of the two
companies.
- Our analyses of these risks and factors may be incorrect or the
strategies we have developed to address them may be unsuccessful.
Because the future accuracy of these forward-looking statements depends on
risks and uncertainties, actual results may differ materially from those
expressed or implied by these forward-looking statements. We caution you not to
place undue reliance on these statements, which speak only as of the date of
this document or, in the case of any document incorporated by reference, the
date of that document.
All subsequent written and oral forward-looking statements attributable to
Anchor or FCB or any person acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained or referred to in this
section.
18
<PAGE> 27
THE SPECIAL MEETINGS
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
Subject to the terms and conditions of the merger agreement, FCB will merge
with and into Anchor. At the time of the merger, each share of FCB stock issued
and outstanding immediately prior to the merger will be converted into the right
to receive 1.83 shares of Anchor stock. The Anchor stock to be issued in the
merger will include associated preferred share purchase rights. We urge you to
read the copy of the merger agreement attached to this document as Appendix A
and the description of Anchor stock and the preferred share purchase rights
under "ANCHOR STOCK AND COMPARATIVE RIGHTS OF SHAREHOLDERS" beginning on page
75.
ANCHOR. At Anchor's special meeting, Anchor's shareholders will vote on a
proposal to approve the merger, including the issuance of up to 7,449,974 shares
of Anchor stock in the merger.
ANCHOR'S BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AND UNANIMOUSLY
RECOMMENDS THAT ANCHOR'S SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER,
INCLUDING THE ISSUANCE OF UP TO 7,449,974 SHARES OF ANCHOR STOCK IN THE MERGER.
FCB. At FCB's special meeting, FCB's shareholders will vote on a proposal
to approve the merger.
FCB'S BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AND UNANIMOUSLY
RECOMMENDS THAT FCB'S SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER.
RECORD DATE
For each company, the record date for determining the shareholders entitled
to vote on the merger at the special meetings is April 21, 1999. Only holders of
record of Anchor stock at the close of business on that date will be entitled to
receive notice of and vote at Anchor's special meeting. Only holders of record
of FCB stock at the close of business on that date will be entitled to receive
notice of and vote at FCB's special meeting.
SHARES OUTSTANDING; QUORUM
ANCHOR. As of April 21, 1999, there were 18,068,490 shares of Anchor stock
outstanding. A majority of the outstanding shares of Anchor stock entitled to
vote, whether present in person or represented by proxy, will constitute a
quorum for the transaction of business at Anchor's special meeting. A list of
Anchor shareholders entitled to vote at Anchor's special meeting is available
for examination, during normal business hours, at Anchor's offices, 25 West Main
Street, Madison, Wisconsin, and will be available at Anchor's special meeting.
FCB. As of April 21, 1999, there were 3,840,680 shares of FCB stock
outstanding. A majority of the outstanding shares of FCB stock entitled to vote,
whether present in person or represented by proxy, will constitute a quorum for
the transaction of business at FCB's special meeting. A list of FCB shareholders
entitled to vote at FCB's special meeting is available for examination, during
normal business hours, at FCB's offices, 420 South Koeller Street, Oshkosh,
Wisconsin, and will be available at FCB's special meeting.
VOTES REQUIRED
ANCHOR. The affirmative vote of holders of a majority of the outstanding
shares of Anchor stock is required to approve the merger. Each share of Anchor
stock is entitled to one vote. As of the April 21, 1999 record date, Anchor
directors and executive officers and their affiliates held 1,855,316 shares, or
19
<PAGE> 28
approximately 10.3%, of the Anchor stock entitled to vote at the special
meeting. Each of the directors and executive officers of Anchor has indicated
that he or she intends to vote for approval of the merger.
FCB. The affirmative vote of holders of a majority of the outstanding
shares of FCB stock is required to approve the merger. Each share of FCB stock
is entitled to one vote. As of the April 21, 1999 record date, FCB directors and
executive officers and their affiliates held 371,176 shares, or approximately
9.7%, of the FCB stock entitled to vote at the special meeting. Each of the
directors and executive officers of FCB has indicated that he intends to vote
for approval of the merger.
HOW SHARES WILL BE VOTED
Shares represented by a proxy will be voted at the special meeting as
specified in the proxy.
PROXIES WITHOUT VOTING INSTRUCTIONS. Proxies that are properly signed and
dated but which do not contain voting instructions will be voted for approval of
the merger.
ABSTENTIONS. We will count a properly executed proxy marked "abstain" for
purposes of determining whether there is a quorum, but the shares represented by
that proxy will not be voted at the special meeting. Because the affirmative
vote of the holders of a majority of the outstanding common stock of each
company is required for the approval of the merger, if you mark your proxy
"abstain" it will have the same effect as if you voted AGAINST the merger.
BROKER NON-VOTES. Your broker will vote your shares for you only if you
provide instructions to your broker on how to vote your shares. You should
follow the directions provided by your broker regarding how to instruct your
broker to vote your shares. In accordance with the rules of Nasdaq, your broker
cannot vote your shares of Anchor or FCB stock without specific instructions
from you. Because the affirmative vote of the holders of a majority of the
outstanding common stock of each company is required to approve of the merger,
if you do not instruct your broker how to vote, it will have the same effect as
if you voted AGAINST the merger.
OTHER MATTERS. Your proxy grants authority to the holders thereof to vote
in their discretion on any other matters that may properly come before the
special meeting (or any adjournments or postponements thereof), including
proposals to adjourn the special meeting to permit further solicitation of
proxies if we have not received sufficient votes to approve the merger. However,
if you vote against the merger, your shares will not be voted in favor of an
adjournment to solicit further proxies. Anchor's management does not presently
know of any other matters to be brought before Anchor's special meeting and
FCB's management does not presently know of any other matters to be brought
before FCB's special meeting.
HOW TO REVOKE A PROXY
Granting a proxy on the enclosed proxy card will not prevent you from
voting in person at the appropriate special meeting or otherwise revoking your
proxy.
An Anchor shareholder may revoke a proxy at any time prior to the special
meeting by delivering a duly executed revocation or a proxy bearing a later date
to J. Anthony Cattelino, Vice President and Secretary of Anchor, 25 West Main
Street, Madison, Wisconsin 53703, or by giving notice of revocation in person at
Anchor's special meeting.
An FCB shareholder may revoke a proxy at any time prior to the special
meeting by delivering a duly executed revocation or a proxy bearing a later date
to Harold L. Hermansen, Vice President and Secretary of FCB, 420 South Koeller
Street, Oshkosh, Wisconsin 54902, or by giving notice of revocation in person at
FCB's special meeting.
20
<PAGE> 29
In addition, your proxy will be considered revoked if you vote your shares
in person at your company's special meeting.
SOLICITATION OF PROXIES
Anchor's board is soliciting proxies from Anchor's shareholders, and FCB's
board is soliciting proxies from FCB's shareholders, for use at the special
meetings. Each company will bear the cost of the solicitation of proxies from
its own shareholders. We will share equally the cost of printing and mailing
this document. In addition to solicitation by mail, our directors, officers and
employees may solicit proxies from shareholders by telephone, in person or
through other means. These persons will not receive additional compensation, but
they will be reimbursed for the reasonable out-of-pocket expenses they incur in
connection with this solicitation. We will also make arrangements with brokerage
firms, fiduciaries and other custodians who hold shares of record to forward
solicitation materials to the beneficial owners of those shares. We will
reimburse these brokerage firms, fiduciaries and other custodians for their
reasonable out-of-pocket expenses in connection with this solicitation. Morrow &
Co., Inc. will assist in the solicitation of proxies by Anchor and FCB for a
joint fee of $10,000, plus reimbursement of reasonable out-of-pocket expenses to
be allocated upon agreement of Anchor and FCB. We will indemnify Morrow against
liabilities and expenses under federal securities laws and against other
liabilities and expenses.
21
<PAGE> 30
THE COMPANIES
ANCHOR
Anchor is a registered savings and loan holding company incorporated in
Wisconsin engaged in the savings and loan business through its wholly-owned
banking subsidiary, AnchorBank, S.S.B. AnchorBank was organized in 1919 as a
Wisconsin-chartered savings institution. On July 15, 1992, AnchorBank converted
from a state-chartered mutual savings institution to a stock savings
institution. As part of the conversion, Anchor acquired all of the outstanding
common stock of AnchorBank. Anchor also has a non-banking subsidiary, Investment
Directions, Inc., which invests in limited partnerships. In March 1997,
Investment Directions, Inc. created a subsidiary, Nevada Investment Directions,
Inc., which also invests in limited partnerships.
AnchorBank has 35 full service offices and two lending-only facilities in
14 Wisconsin counties, primarily serving markets in and around Madison,
Wisconsin and throughout southern and southwestern Wisconsin. AnchorBank blends
an interest in the consumer and small business markets with the willingness to
expand its numerous checking, savings and lending programs to meet customers'
changing financial needs. AnchorBank offers checking, savings, money market
accounts, mortgages, home equity and other consumer loans, student loans, credit
cards, annuities and related consumer financial services. AnchorBank also offers
banking services to businesses, including checking accounts, lines of credit,
secured loans and commercial real estate loans.
AnchorBank has four wholly owned subsidiaries. Anchor Insurance Services,
Inc. offers securities and annuities to AnchorBank's customers and other members
of the general public. ADPC Corporation holds and develops some of AnchorBank's
foreclosed properties. Anchor Investment Corporation was formed for the purpose
of managing a portion of AnchorBank's investment portfolio (primarily
mortgage-related securities). All of AnchorBank's subsidiaries, except Anchor
Investment Corporation, are Wisconsin corporations.
The executive offices of Anchor and AnchorBank are located at 25 West Main
Street, Madison, Wisconsin 53703, and its main telephone number is (608)
252-8700.
Additional information regarding Anchor and AnchorBank is included in
Anchor's 1998 Annual Report on Form 10-K and other reports that Anchor has filed
with the SEC which are incorporated by reference into this Joint Proxy
Statement/Prospectus. Please see "WHERE YOU CAN FIND MORE INFORMATION" on page
95 for additional information on how to find these documents.
FCB
FCB is the holding company for Fox Cities Bank. Fox Cities Bank was
originally established in 1893 and constitutes FCB's primary business.
Fox Cities Bank operates from 13 different locations, including its
principal executive offices in Oshkosh, Wisconsin, as well as 12 branch office
locations in Oshkosh, Neenah, Menasha, Appleton, Winneconne, Berlin, Ripon and
Wautoma, Wisconsin. Fox Cities Bank considers its primary market area to be East
Central Wisconsin (including Winnebago, Outagamie, Calumet, Waushara, Green Lake
and Fond du Lac counties).
The business of Fox Cities Bank is to attract savings deposits from the
general public and use those deposits, together with other funds, to originate
first mortgage loans on one- to four-family homes generally located in our
market area. Fox Cities Bank also makes commercial, commercial real estate, five
or more family residential, consumer and residential construction loans
generally within its market area. In addition, Fox Cities Bank invests in
mortgage-related and short- and intermediate-term
22
<PAGE> 31
government or government agency-backed investment securities and short-term
liquid assets. Through a third party relationship, Fox Cities Bank makes
available various investment securities and tax deferred annuities. Fox Cities
Financial Services, Inc. also holds a 50% limited partnership interest in a
37-unit apartment complex providing housing for low/moderate income and elderly
persons in Menasha, Wisconsin. Fox Cities Bank's other wholly-owned subsidiary,
Fox Cities Investments, Inc., holds a portfolio of investment and
mortgage-related securities.
FCB's executive offices are located at 420 South Koeller Street, Oshkosh,
Wisconsin 54902, and its main telephone number is (920) 303-4900.
Additional information regarding FCB and Fox Cities Bank is included in
FCB's 1998 Annual Report on Form 10-K and other reports that FCB has filed with
the SEC which are incorporated by reference into this Joint Proxy
Statement/Prospectus. Please see "WHERE YOU CAN FIND MORE INFORMATION" on page
95 for additional information on how to find these documents.
23
<PAGE> 32
THE MERGER
GENERAL INFORMATION ABOUT THE MERGER
The merger agreement provides for the merger of FCB with and into Anchor.
Based upon the exchange ratio and the average closing price of Anchor stock for
the 20 trading days immediately prior to the public announcement of the merger
agreement on January 5, 1999 ($21.497 per share), each share of FCB stock would
have been converted into Anchor stock with a value of $39.34, which represented
a 37% premium over the average closing price of FCB stock for the 20 trading
days immediately prior to the public announcement of the merger agreement. On
January 5, 1999, based upon the exchange ratio and that day's closing price of
Anchor stock ($24.0625 per share), each FCB share would have been converted into
Anchor stock with a value of $44.04, which represented a 65% premium over the
closing price of FCB stock on that date. On April 26, 1999, based upon the
exchange ratio and that day's closing price of Anchor stock ($19.00 per share),
each FCB share would have been converted into Anchor stock with a value of
$34.77. At the completion of the merger, the Anchor stock received in exchange
for FCB stock may have a market value that is greater or less than these amounts
depending on the market price of Anchor stock at that time.
Based upon the number of shares of Anchor stock and FCB stock outstanding
on April 21, 1999, following the merger, former shareholders of FCB will hold
approximately 28% of the outstanding Anchor stock, and the Anchor stock held by
Anchor shareholders before the merger will represent approximately 72% of the
outstanding Anchor stock after the merger.
The discussion in this document of the merger and the description of the
principal terms and conditions of the merger agreement and the merger are
subject to and qualified in their entirety by reference to the merger agreement.
A copy of the merger agreement is attached to this document as Appendix A and is
incorporated herein by reference. See "THE MERGER AGREEMENT" beginning on page
51.
BACKGROUND OF THE MERGER
Over the last several years, the financial services industry has become
increasingly competitive, with many financial institutions expanding their size
and market area through consolidation. In May 1997, consistent with this trend
and to enhance its competitive position in the rapidly changing financial
services industry, FCB combined in a merger-of-equals transaction with OSB
Financial Corp., a bank holding company which served a market area proximate to
FCB's market area. The combination of FCB and OSB resulted in an organization
with in excess of $500 million in assets.
Following completion of the merger with OSB, FCB, as the surviving
corporation in the transaction, continued to review its market position in light
of developments in its industry. In particular, management of FCB focused on the
trend of continuing consolidation and increased competition in the banking and
financial services industry in Wisconsin. As part of its effort to enhance FCB's
ability to remain competitive in this environment, FCB's management analyzed,
and discussed from time to time with FCB's board of directors, various strategic
options available to FCB, including the following:
- remaining an independent financial institution and pursuing internal
expansion;
- pursuing external growth either through selected strategic acquisitions
or potential merger-of-equals transactions; and
- entering into a business combination with a larger entity.
During the summer of 1998, FCB's board determined it was appropriate to
expand the scope of its review of FCB's strategic options to maximize
shareholder value and, accordingly, authorized
24
<PAGE> 33
management to retain outside advisors to assist in the process. In September
1998, FCB engaged Hovde as its financial advisor to assist in further analysis
of potential strategic options. Foley & Lardner, FCB's outside counsel, was also
engaged to assist FCB in its review.
On September 21, 1998, the executive committee of FCB's board and
representatives from Hovde met to consider various strategic alternatives
available to FCB. This group discussed, among other things, the potential
advantages and disadvantages to FCB of the following:
- remaining independent and pursuing traditional asset and income growth
through increased deposits and loans;
- pursuing a merger-of-equals transaction with a comparably sized
financial institution competitive in FCB's primary market area; and
- pursuing a selected group of potential acquirors for the sale of FCB
through an auction process.
At the conclusion of this meeting, the executive committee decided to
recommend that the issue be the subject of further deliberation by the entire
board.
At a regularly scheduled meeting on September 28, 1998, FCB's board
discussed the strategic options considered by the executive committee. At that
meeting, the board discussed the strategic alternatives outlined above and the
potential advantages and disadvantages of each, as well as the current
consolidation trend in the financial services industry and potential business
combination partners for FCB. In connection with the discussion of potential
combination partners, FCB's board discussed attributes which it felt were
important in any potential acquiror, including, among others, the following:
- historically strong stock performance and other indications of solid
management and emphasis on maximization of shareholder value;
- a presence in or proximate to FCB's primary market area to help ensure a
smooth transition for and continued quality service to local customers;
and
- a customer base and management philosophy comparable to those of FCB.
Following these deliberations and based on its prior consideration of the
issue, FCB's board decided to consider a possible strategic alliance with one of
a selected group of potential acquirors.
Following FCB's September 28, 1998 board meeting, FCB (with the assistance
of Hovde) prepared a confidential package containing historical financial,
operating and other information to be sent to potential acquirors. The package
was prepared based on discussions between representatives of Hovde and members
of FCB management, as well as due diligence examinations of FCB documents and
records. Hovde advised FCB on potential combination partners and assisted FCB in
selecting those financial institutions which were to receive the confidential
information package. Those financial institutions were selected by FCB and Hovde
based on the attributes described above, as well as industry reputation and
financial strength. Anchor was one of several such selected institutions.
During the next several weeks following initial distribution of the
confidential materials, representatives of FCB and Hovde had discussions with
various potential acquirors, including Anchor, who had received information
packages and expressed an interest in entering into a business combination.
During the week to ten days following Anchor's receipt of the information
package and initial meetings with representatives of FCB and Hovde, Mr. Douglas
Timmerman, the Chairman, President and Chief Executive Officer of Anchor,
informally discussed Anchor's interest in FCB with Anchor's
25
<PAGE> 34
directors and contacted McDonald Investments Inc. with regard to acting as
financial advisor to Anchor. Preliminary discussion and analysis noted the
following:
- that FCB is a financially sound company;
- that FCB would be an attractive geographic fit;
- that such a transaction would significantly strengthen and grow
AnchorBank's presence in the Fox River Valley area of Wisconsin, which
market research identifies as one of Wisconsin's most attractive areas
and one in which AnchorBank had already committed to expanding its
presence;
- that FCB displays a similar commitment and philosophy to building
consumer and business relationships;
- that FCB would be a source of net worth to aid in AnchorBank's
opportunity to grow assets;
- the presence of business and community leaders on FCB's board was an
asset;
- FCB's seasoned senior management with outstanding experience; and
- that FCB's board and management had an overall attitude and commitment
to building shareholder value.
Anchor subsequently retained McDonald as its exclusive financial advisor to
evaluate the materials provided by Hovde. A few days later, McDonald provided an
analysis of the financial data to Anchor. Anchor and McDonald continued to
analyze and discuss the potential merger and FCB's financial materials with
senior management officers and Hovde and advised Anchor's independent auditors
of the possible transaction.
By mid-November 1998, FCB had received preliminary indications of interest
from various potential acquirors, including Anchor. These indications of
interest were analyzed by Hovde based on factors such as the value and type of
consideration offered, the market characteristics of the potential acquiror's
stock (for those acquirors offering stock), and the proposed treatment of FCB
employees in the business combination and related employee concerns.
On November 23, 1998, FCB's board met to discuss and consider the
characteristics, advantages and disadvantages of the potential merger partners
and their respective indications of interest. Representatives from Hovde were
present at the meeting and reviewed with FCB's board the various proposals
received to date from the potential acquirors. FCB's board compared the
proposals by examining, among other things, the following:
- comparative market data among the bidders offering stock;
- historical stock performance of the potential acquirors as compared to
each other and to various market indices;
- historical daily trading volume, growth rate and dividend yields of the
competing bidders;
- a direct comparison of the key issues between the competing bids; and
- the terms and conditions of other recent business combinations in the
financial services industry.
At the meeting, Foley & Lardner reviewed with FCB's directors their
fiduciary duties and responsibilities in considering a business combination.
Following these presentations and after further discussion between FCB's board
and management, FCB's board decided to continue discussions with three of the
parties (including Anchor) that had submitted preliminary indications of
interest. FCB's
26
<PAGE> 35
board directed Foley & Lardner to begin preparation of a draft merger agreement
for distribution to the potential acquirors. In addition, at the meeting, FCB's
board directed Hovde to contact two additional potential merger partners
identified by the directors. Those two parties were thereafter contacted by
Hovde. One party declined to pursue a possible affiliation with FCB, while the
other party provided a verbal indication of interest to Hovde, which was
subsequently reported to FCB's board. FCB's board ultimately determined that,
because of its terms, pursuing the verbal indication of interest was not in the
best interests of FCB shareholders.
On November 24, 1998, Hovde notified Anchor that FCB was interested in
proceeding with more serious negotiations with Anchor. Anchor's board discussed
the proposed transaction in executive session. Mr. Timmerman discussed with
Hovde the possibility of conducting off-site due diligence of FCB. Dual due
diligence lists were created, one for the off-site visit and one for a meeting
between the parties.
On November 30, 1998, members of FCB's management had separate meetings
with representatives of several of the potential acquirors, including Anchor. In
each separate meeting, the parties generally discussed their respective
organizations and management philosophies, as well as their future plans and
strategies. Each potential acquiror also discussed the terms and conditions of
its preliminary bid, including, among other things, the following:
- the proposed exchange ratio to be used in a stock-for-stock transaction;
- the future management of the potential combined entity;
- the potential acquiror's demand for a break-up fee and/or a lock-up
option; and
- potential synergies and other benefits of operating as a combined
company.
At one such meeting on November 30, 1998, Mr. Timmerman met with
representatives of FCB at Anchor's offices to further discuss the proposed
transaction between FCB and Anchor. From Anchor's standpoint, a number of due
diligence issues were satisfied, and Anchor subsequently engaged the law firm of
Whyte Hirschboeck Dudek S.C. to act as its legal advisor.
Over the next several days, senior management at Anchor and FCB exchanged
financial information relative to both organizations, and representatives from
AnchorBank conducted off-site due diligence concentrating on the following:
- board minutes;
- environmental matters;
- human resource programs;
- corporate structure and administration;
- commercial and residential loan file review; and
- various loan related reports and schedules regarding commercial and
residential loans.
On December 7, 1998, Foley & Lardner provided a preliminary draft of the
merger agreement to Anchor and each of the other potential acquirors and their
respective legal counsel for review and comment. Anchor's senior management
officers discussed the draft merger agreement with Hovde and with Anchor's
financial and legal advisors and its accountants. Mr. Timmerman also met with
Anchor's legal advisors regarding implications associated with possible
revisions to the draft merger agreement.
On December 11, 1998, FCB received enhanced indications of interest from
the potential acquirors, including an updated, non-binding indication of
interest from Anchor, which included commentary, suggested changes and proposed
language relating to the draft merger agreement provided to the potential
acquirors.
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On December 14, 1998, FCB's board, and its financial and legal advisors,
met to review these proposals. At that meeting, management representatives from
Anchor and another competing bidder gave presentations to FCB's board regarding
the proposals contained in their respective bids, as well as specific
information regarding the management philosophy and historical operations of
each bidder. Following those presentations, FCB's board, with the assistance of
Hovde, reviewed the proposals and presentations and discussed the advantages and
disadvantages of a potential combination with each bidder. Foley & Lardner was
present at the meeting and distributed a preliminary summary of the terms and
conditions of the enhanced bids which was reviewed and discussed by the
directors. Following these discussions, FCB's board determined to proceed with
negotiations with Anchor, based on, among other factors, the following:
- the exchange ratio proposed by Anchor;
- the consistent historical growth in the value of Anchor stock;
- Anchor's geographical location and commitment to the market areas served
by FCB;
- the philosophy of Anchor's management;
- the potential synergies associated with a combination with Anchor; and
- Anchor's potential for future growth and expansion.
Over the next several days, representatives of FCB and Anchor held
discussions regarding key elements of the draft merger agreement, including a
proposed increase in the exchange ratio, the allocation of risk of stock price
fluctuation prior to the consummation of the combination, the structure of the
board of directors of the surviving entity, Anchor's management succession, the
representations and warranties of the parties, and the lock-up option demanded
by Anchor.
On December 17, 1998, Anchor submitted an updated, non-binding indication
of interest to FCB responding to issues raised at FCB's December 14, 1998 board
meeting and in subsequent discussions.
On December 18, 1998, FCB's board met to consider the status of the
negotiations with Anchor and the terms of the draft merger agreement. Hovde
discussed ongoing negotiations regarding the exchange ratio and the
representation of current FCB directors on the board of directors of the
surviving corporation. Foley & Lardner reviewed the terms and conditions of the
transaction as contained in the draft of the merger agreement and ancillary
documents, copies of which had been previously distributed to the directors,
including the operation of the proposed stock option agreement. Counsel also
reviewed the directors' fiduciary duties and responsibilities in considering and
approving a business combination and indicated that, among other things,
additional due diligence regarding the potential combination partner would be
necessary prior to the execution of a definitive merger agreement. Following
further negotiation between FCB and Anchor, and Anchor's agreement to increase
the proposed exchange ratio and expand FCB representation on the board of the
surviving corporation, FCB's board selected Anchor as the preferred merger
partner and authorized management to continue its negotiations with Anchor
toward a definitive merger agreement.
Subsequent to December 18, 1998, representatives and advisors of Anchor and
FCB continued discussions regarding the transaction and related documentation
and negotiated the terms of the merger agreement, including the conditions to
closing, termination provisions, and specific terms of the stock option
agreement. Revised drafts of the merger agreement, stock option agreement and
other ancillary agreements were distributed to FCB's board for review.
Representatives of FCB also undertook various due diligence investigations
regarding Anchor during this period.
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On December 23, 1998, Anchor held a special board meeting to review the
proposed terms and conditions contained in the draft merger agreement. The
directors identified and discussed the following topics:
- the exchange ratio provision;
- the appointment of two FCB directors to Anchor's board;
- significant deal protection in the form of the stock option agreement
and a limitation on FCB's right to terminate the merger based on
Anchor's stock price;
- FCB's inability to further "shop" the transaction;
- Anchor's assumption of outstanding FCB stock options;
- the "fiduciary-out" provision for FCB's board of directors;
- proposed employment agreements with some executives of FCB and payment
for termination of existing FCB employment agreements;
- the existence of an unfunded deferred compensation plan for FCB
directors;
- the acceleration of vesting of benefits under FCB's employee stock
ownership plan; and
- FCB's schedule of severance payments for employees who are not retained
by Anchor following the merger.
Anchor's financial advisors provided the directors with a comprehensive
analysis of the criteria they took into account in analyzing the exchange ratio.
The criteria identified and discussed included: (1) a relative contribution
analysis for total assets, total loans, total deposits, total equity, tangible
equity, last twelve months net income, and estimated 1999 fiscal year net
income, (2) basic and diluted shares outstanding, (3) current market value, (4)
other transactions in the marketplace, and (5) the financial advisor's
valuations and cost savings projections. The board of directors ratified and
affirmed the engagement of Anchor's financial advisors, accountants and legal
advisors, and all other actions taken by management to date, and resolved to
continue to negotiate the terms of the proposed transaction with FCB.
Between December 23, 1998, and January 5, 1999, work continued on the draft
merger agreement, including extensive discussion and conferences among the
management and legal advisors of FCB and Anchor regarding the crafting of
language and terms of the merger agreement and the appendices, schedules, and
attachments thereto. Senior management officers of Anchor and FCB were in
constant contact with each other, as well as their respective legal and
financial advisors. Substantially final drafts of the merger agreement and stock
option agreement were provided to the directors of Anchor and FCB on December
31, 1998, in preparation for special board meetings scheduled for January 5,
1999.
On January 5, 1999, the boards of directors of FCB and Anchor met to
consider approval of the merger agreement and related documents.
At FCB's board meeting on January 5, 1999, Foley & Lardner reviewed in
detail the terms and conditions of the transaction as contained in the merger
agreement and ancillary documents, including the representations of the merger
partners, the conditions to the consummation of the transaction and the
termination provisions of the merger agreement (including the operation of the
stock option agreement). Counsel also reviewed the handling of various other
issues relating to the transaction, such as the conversion of existing FCB stock
options and the termination of the FCB employee stock ownership plan, as well as
matters related to employee benefit plans, employment agreements for some
executive officers of FCB and the treatment of FCB employees following the
combination. Counsel also
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reviewed with FCB's directors their fiduciary duties and responsibilities in
approving a transaction such as the proposed merger. FCB management also made a
presentation regarding potential synergies associated with the proposed merger,
necessary regulatory approvals, the results of management's due diligence review
of Anchor, and related matters. Representatives from Hovde reviewed various
financial analyses undertaken by Hovde and advised FCB's board that, as of such
date and based upon and subject to the matters discussed, the exchange ratio of
1.83 shares of Anchor stock per share of FCB stock then proposed by Anchor was
fair, from a financial point of view, to FCB's shareholders. FCB's directors
discussed the presentations they had received at this and other board meetings
and, upon conclusion, unanimously approved the merger agreement and authorized
its execution. FCB's board also authorized the execution of the stock option
agreement and the issuance of FCB stock pursuant thereto.
At Anchor's board meeting on January 5, 1999, Anchor's legal advisors
thoroughly reviewed the terms and conditions of the transaction as contained in
the merger agreement and ancillary documents, including the representations of
the merger partners, the conditions to the consummation of the transaction and
the termination provisions of the merger agreement (including the operation of
the stock option agreement). Counsel also presented the results of its due
diligence review of FCB and commented on the due diligence review by Anchor
personnel and Anchor's accountants. Further items presented by counsel and
reviewed by the directors included:
- the exchange ratio and associated issues;
- deal protection for Anchor in the form of a limitation on FCB's right to
terminate the merger based on Anchor's stock price;
- the stock option agreement and no-shop provision;
- the impact of converting FCB's outstanding stock options into Anchor
options;
- the acceleration of vesting of benefits under and termination of FCB's
employee stock ownership plan;
- the proposed employment agreements with some executives of FCB and
payments for termination of existing FCB employment agreements and
associated employee issues;
- Anchor's appointment of two FCB directors to its board;
- treatment of the FCB directors' deferred compensation arrangements;
- Anchor's issuance of approximately seven million shares of common stock
in the transaction;
- the various regulatory filings; and
- a tentative timeline.
Anchor's financial advisors distributed a comprehensive handout and
thoroughly reviewed various financial analyses and pro forma estimates
undertaken by McDonald, as well as identification of and commentary relating to
potential synergies associated with the proposed merger, and advised Anchor's
board that, as of such date and based upon and subject to the matters discussed,
the proposed exchange ratio was fair from a financial point of view to Anchor
shareholders. Anchor's directors discussed the presentations they had received
at this and other board meetings and, upon conclusion, unanimously approved the
merger agreement and stock option agreement and authorized their execution.
Following the January 5, 1999 board meetings, FCB and Anchor executed the
merger agreement and the stock option agreement and issued press releases
announcing that they had reached an agreement to merge FCB with and into Anchor.
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REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
ANCHOR. At a meeting on January 5, 1999, Anchor's board of directors
unanimously approved the merger and decided to recommend approval of the merger
to Anchor's shareholders. In reaching its determination, the Anchor board of
directors consulted with Anchor management, as well as its financial and legal
advisors, and considered the following material factors, each of which supported
the board's recommendation:
- The long-term interests of Anchor and its shareholders, as well as the
interests of Anchor employees, customers, creditors, suppliers and the
communities in which Anchor operates.
- Information concerning the business, earnings, operations, financial
condition and prospects of Anchor and FCB, both individually and on a
combined basis.
- The presentation made by McDonald at Anchor's January 5, 1999 board
meeting and McDonald's opinion that as of such date and based upon and
subject to the matters reviewed with Anchor's board of directors, the
exchange ratio of 1.83-to-1 was fair from a financial point of view to
Anchor's shareholders. This opinion was considered together with the
valuation and other analyses presented to Anchor's board by McDonald. A
description of McDonald's analyses and opinion dated as of the date of
this Joint Proxy Statement/Prospectus is set forth under "-- Opinions of
Anchor's Financial Advisor" on page 35.
- That the merger provides Anchor with opportunities to enhance revenue
and profitability through mortgage, commercial and consumer loan growth.
- That the merger combines companies with strong positions in attractive
markets, providing for complementary strategic and geographic
diversification (including FCB's strong market position in Winnebago
County and Anchor's position as the fourth-largest banking institution
headquartered in Wisconsin in asset size).
- The opportunity to leverage economies of scale and operating
efficiencies and realize a portion of the anticipated $2.8 million in
cost savings through the consolidation of accounting, data processing,
retail and lending support and other functions, resulting in expected
accretion to earnings in fiscal 2001 of approximately 1% to 2%.
- The ability of the combined company to increase market penetration in
the geographic markets currently served by FCB through the marketing of
the expanded menu of services and products Anchor currently offers to
its customers.
- That the merger provides Anchor with the scale, geographic scope,
product diversity and complementary competencies to enable it to serve
its customers better, which should allow the combined company to
benefit, over the long term, from increased financial strength, revenue
diversification and financial flexibility as compared to either company
on a stand-alone basis.
- The terms of the merger agreement, including the conditions that the
merger be accounted for as a pooling of interests and that the merger
will be a tax-free reorganization for federal income tax purposes.
- The effects of the stock option granted by FCB which enables Anchor,
under limited circumstances, to acquire up to 19.9% of FCB's stock if
FCB agrees to merge with or be acquired by another party, including the
potential effect that the stock option agreement may have on the ability
of other parties to make competing business combination proposals to
FCB.
- The recent and historical trading prices of FCB stock and Anchor stock
relative to those of other industry participants, and the potential for
appreciation in the value of Anchor stock following
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the merger. As detailed in "Opinions of FCB's Financial Advisor" on page
42 of this document, based upon Anchor's closing price of $24.00 on
December 31, 1998 and utilizing the exchange ratio of 1.83, the implied
value per share to FCB shareholders resulted in a range of $37.37 to
$43.92 during the last 90 trading days ending December 31, 1998,
representing a premium in the range of 33.75% to 57.21% to FCB's December
31, 1998 closing price of $27.94.
- That current Anchor shareholders would continue to own approximately 71%
of the combined company immediately following the merger.
- The ability to consummate the merger, including, in particular, the
likelihood of obtaining regulatory approvals and the terms of the merger
agreement regarding the obligations of both companies to pursue such
regulatory approvals.
- The measures taken by the parties to provide reasonable assurance to
each other that the merger will occur.
The board of directors of Anchor also considered a variety of inherent
risks and other potentially negative factors in deliberations concerning the
merger. In particular, the board of directors of Anchor considered the risks
associated with integrating the operations of FCB with Anchor's existing
operations (including the loss of key personnel of FCB); difficulty in
integrating corporate, accounting, financial reporting and management
information systems; and strain on existing levels of personnel to operate FCB's
business.
The board of directors of Anchor did not receive a quantitative analysis of
all the factors listed above. However, based on the foregoing, and the
recommendation of management of Anchor, the board of directors of Anchor
concluded that the anticipated benefits of the merger outweighed the possible
detriments.
Based on these factors, Anchor's board approved the merger
consideration -- 1.83 shares of Anchor stock for each share of FCB common stock
issued and outstanding -- which had been negotiated by Anchor management and FCB
management in consultation with their respective financial advisors.
The foregoing discussion is not intended to be exhaustive but includes the
material information and factors considered by the Anchor board of directors in
its consideration of the merger. In view of the wide variety of factors
considered, the Anchor board of directors did not assign relative weights to the
specific factors considered in reaching its determination. The determination was
made after consideration of all of the factors as a whole. In addition,
individual members of the Anchor board of directors may have given different
weights to different factors.
THE ANCHOR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ANCHOR
SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER.
FCB. At a meeting on January 5, 1999, FCB's board of directors unanimously
approved the merger agreement and authorized and approved the merger. At that
meeting, the board of directors decided to recommend that the shareholders of
FCB vote in favor of the approval of the merger at the FCB special meeting.
In reaching its determination, FCB's board of directors consulted with FCB
management, as well as its financial and legal advisors, and considered the
following material factors, each of which supported the board's determination
and recommendation:
- That the merger would provide FCB shareholders an opportunity to receive
a premium for their shares of FCB stock based on the generally
prevailing market prices at the time the board of
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directors approved the merger and on market prices of the two companies'
stocks at various intervals during the 90 trading days prior to December
31, 1998.
- Hovde's opinion to the effect that, as of January 5, 1999, the exchange
ratio was fair to the shareholders of FCB from a financial point of
view. The opinion was considered together with the valuation and other
analyses presented to the board of directors by Hovde. A description of
Hovde's opinion (updated to the date of this Joint Proxy
Statement/Prospectus) and analyses is set forth below under "-- Opinions
of FCB's Financial Advisor" on page 42.
- The current and historical trading prices of FCB stock and Anchor stock
relative to each other and to other similarly situated institutions.
- The historical performance of FCB and Anchor.
- The historical strength of Anchor's stock. In a presentation given by
Hovde dated December 14, 1998, FCB's board of directors reviewed a
historical stock price and volume graph detailing Anchor's performance
from December 31, 1992 to December 11, 1998. During this period,
Anchor's stock price increased from $3.56 on December 31, 1992 to $19.00
on December 11, 1998, representing a compound annual growth rate of
32.5%.
- The potential for growth in the value of Anchor stock following the
merger and the opportunity for FCB shareholders to participate in any
such increase through the ownership of approximately 29% of the
outstanding Anchor shares (based upon the number of shares of Anchor
stock and FCB stock outstanding as of September 30, 1998). In this
regard, FCB's board considered Anchor's expected financial performance
following the merger, including:
- The combined business, operations, financial condition, operating
results and prospects of FCB and Anchor, including Anchor's
expectation that the merger will result in the growth of earnings per
share beginning in fiscal 2001, excluding costs related to the merger;
and
- the potential for cost savings that would be created by combining the
businesses of FCB and Anchor, and weighed against the potential
initial costs that likely would be incurred by Anchor to achieve such
cost savings.
- Various alternatives to the merger available to FCB, including the
alternative of remaining independent, as well as the risks associated
with such alternatives.
- The geographic fit of the operations of the companies, including the
general lack of overlap in the markets served by the companies. The
board of directors noted in particular that Anchor has a leading
position in markets surrounding Madison and Stevens Point, Wisconsin,
and in western and southwestern Wisconsin generally, which are markets
in which FCB does not operate.
- That the merger will enhance Anchor's position as the largest thrift
institution headquartered in Wisconsin, with more than $2.6 billion in
assets after the merger, which is substantially larger than either
Anchor or FCB alone. FCB's board considered this in light of the
continued consolidation of and developing competitive environment in the
financial services industry generally. The FCB board also considered the
conclusion of management that economies of scale, including increased
and operating efficiencies, would likely be required to achieve success
in the financial services industry in the near future.
- The historical performance and reputation of the Anchor management team,
and the belief of FCB management that Anchor and FCB have complementary
approaches to business.
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- The fact that some members of the existing FCB management team would
join Anchor management following the merger. In particular, the board of
directors noted that James J. Rothenbach, FCB's President and Chief
Executive Officer, would become Senior Vice President of the combined
company, and that members of FCB's current board of directors, to be
selected by Anchor, would become members of Anchor's and AnchorBank's
boards of directors following the merger.
- Other terms of the merger agreement, including the reciprocal
representations, warranties and covenants contained in the merger
agreement, and the conditions to each party's obligation to consummate
the merger.
- The ability of FCB and Anchor to complete the merger, including the
likelihood of obtaining necessary regulatory approvals and the
obligations of both companies to attempt to obtain those approvals.
- The social and economic effects of the merger on the employees,
customers, suppliers and other constituents of FCB and its subsidiaries
and on the communities in which FCB operates.
- That pooling of interests accounting treatment should be available for
the merger and that the merger will be a tax-free reorganization for
federal income tax purposes.
FCB's board of directors also considered a variety of risks and other
potentially negative factors concerning the merger, including the following:
- The fact that the merger agreement does not provide for any adjustment
to the exchange ratio and that, as a result, the value of the Anchor
stock that FCB shareholders receive in the merger could be less than
such value on the date FCB's board approved the merger agreement due to
fluctuations in the market price of Anchor stock. This risk was
mitigated in the view of FCB's board by the fact that the merger
agreement allows FCB to terminate its obligation to complete the merger
if Anchor's stock price, and its stock price relative to the price of a
select group of midwestern thrifts, drops below a specified level prior
to closing (see "THE MERGER -- Price Condition" on page 57).
- The fact that FCB shareholders will receive less in annual dividends on
a pro forma basis following the merger assuming that Anchor maintains
its current dividend policy.
- The fact that the merger involves the combination of two companies that
previously have operated independently. Such a combination involves a
number or risks, including the risk that the potential difficulties in
integrating the operations of the two companies will prevent the
achievement of expected cost savings. FCB's board also considered that
these risks were outweighed by the possibility of increased value to FCB
shareholders that could potentially be realized by combining with
Anchor.
- The fact that the merger will result in a charge to Anchor's earnings in
the first quarter following the merger, which was expected to be $10.0
million including transaction fees and costs incidental to the merger.
In this context, FCB's board also considered that the merger is expected
to be accretive to Anchor's earnings in the year 2001.
- That the interests of some FCB officers and directors with respect to
the merger may differ from or conflict with the interests of the
shareholders of FCB. The interests of these officers and directors are
described below under "-- Interests of Members of FCB's Board of
Directors and Management in the Merger" on page 47.
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- That the stock option granted to Anchor by FCB may deter third parties
from proposing an alternative transaction that may be more advantageous
to FCB shareholders.
FCB's board took into account other mitigating factors to these potential
risks in addition to those mentioned above. No greater weight or significance
was attached to any of these factors than any others by FCB's board in
determining to approve the execution of the merger agreement.
Based on these factors, FCB's board approved the merger consideration --
1.83 shares of Anchor stock for each share of FCB common stock issued and
outstanding -- which had been negotiated by Anchor management and FCB management
in consultation with their respective financial advisors.
The foregoing discussion describes the material factors considered by FCB's
board in its consideration of the merger. Following such consideration, and
taking into account the recommendation of management, the board of directors
concluded that the positive factors described above outweighed the negative
factors described above. In view of the variety of factors considered, the board
of directors did not find it practical to, and did not make specific assessments
of, quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. The determination was made after
consideration of all of the factors together. In addition, individual members of
FCB's board of directors may have given different weights to different factors.
THE BOARD OF DIRECTORS OF FCB UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF
FCB VOTE FOR THE APPROVAL OF THE MERGER.
OPINIONS OF ANCHOR'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated November 12, 1998, between Anchor
and McDonald, Anchor retained McDonald to act as its sole financial advisor in
connection with the merger and related matters. As part of its engagement,
McDonald agreed, if requested by Anchor, to render an opinion with respect to
the fairness to the holders of Anchor stock, from a financial point of view, of
the exchange ratio set forth in the merger agreement. McDonald is a nationally
recognized specialist in the financial services industry in general, and in
Midwestern banks and thrifts in particular. McDonald is regularly engaged in
evaluations of similar businesses and in advising institutions with regard to
mergers and acquisitions, as well as raising debt and equity capital for such
institutions. Anchor selected McDonald as its financial advisor based upon its
qualifications, expertise and reputation in such capacity.
For its financial advisory services provided to Anchor, McDonald was paid a
fee of $50,000 when the merger agreement was signed and a fee of $100,000 upon
the delivery of its updated opinion for inclusion in this Joint Proxy
Statement/Prospectus. McDonald will be paid a fee of $200,000 upon the closing
of the merger. In addition, Anchor has agreed to reimburse McDonald for all
reasonable out-of-pocket expenses incurred by it on Anchor's behalf, as well as
indemnify McDonald against liabilities which may arise under federal securities
laws and other liabilities.
McDonald is a member of all principal securities exchanges in the United
States. In the conduct of its broker-dealer activities, McDonald has from time
to time purchased securities from and sold securities to Anchor and/or FCB. As a
market maker, McDonald may also have purchased and sold the securities of Anchor
and/or FCB for McDonald's own account and for the accounts of its customers.
FAIRNESS OPINIONS
On January 5, 1999, McDonald delivered its oral opinion, subsequently
confirmed in writing, that the exchange ratio was fair to Anchor shareholders,
from a financial point of view, as of January 5, 1999. In connection with
rendering its January 5, 1999 opinion, McDonald conducted various investigations
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and procedures and engaged in various analyses, some of which were presented to
Anchor's board on January 5, 1999. These investigations, procedures and analyses
are summarized below.
McDonald updated its January 5, 1999 opinion and delivered to Anchor's
board a written opinion dated as of April 28, 1999, that the exchange ratio was
fair to Anchor shareholders from a financial point of view as of that date. The
full text of McDonald's April 28, 1999 opinion, which sets forth the assumptions
made, matters considered and extent of review by McDonald, is attached as
Appendix C and is incorporated herein by reference. It should be read carefully
and in its entirety in conjunction with this Joint Proxy Statement/Prospectus.
In connection with delivery of its April 28, 1999 opinion, McDonald performed
procedures to update, as necessary, some of its analyses and reviewed the
assumptions on which they were based and the factors it considered in connection
with its January 5, 1999 opinion. McDonald did not perform any analyses in
addition to those described above in updating the opinion.
THE FOLLOWING DISCUSSION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF MCDONALD'S APRIL 28, 1999 OPINION ATTACHED TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AS APPENDIX C. MCDONALD'S OPINIONS DO NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER OF ANCHOR AS TO HOW SUCH SHAREHOLDER SHOULD
VOTE AT ANCHOR'S SPECIAL MEETING.
INVESTIGATIONS AND PROCEDURES
No limitations were imposed by Anchor on McDonald with respect to the
investigations made or the procedures followed in rendering its opinions.
McDonald, in connection with rendering its opinions:
- reviewed Anchor's Annual Reports to Shareholders and Annual Reports on
Form 10-K for each of the years ended March 31, 1998, March 31, 1997 and
March 31, 1996, including the audited financial statements contained
therein, and Quarterly Reports on Form 10-Q for the three-month periods
ended December 31, 1998, September 30, 1998 and June 30, 1998;
- reviewed FCB's audited financial statements for the year ended March 31,
1998, and the Proxy Statement for FCB Financial Corp. and OSB Financial
Corp., dated March 17, 1997 and audited financial statements for FCB for
each of the years ended March 31, 1997 and March 31, 1996, and for OSB
for the year ended December 31, 1996; and FCB's unaudited financial
statements for the three-month periods ended December 31, 1998,
September 30, 1998 and June 30, 1998;
- reviewed other public and non-public information, primarily financial in
nature, relating to the respective businesses, earnings, assets and
prospects of Anchor, FCB and OSB provided to McDonald or publicly
available;
- participated in meetings and telephone conferences with members of
senior management of Anchor concerning the financial condition,
business, assets, financial forecasts and prospects of the respective
companies, as well as other matters McDonald believed relevant to its
inquiry;
- reviewed stock market information for Anchor stock and FCB stock and
compared it with similar information for various publicly traded
companies;
- compared the results of operations and financial condition of Anchor and
FCB with that of other companies which McDonald deemed to be relevant
for purposes of its opinions;
- reviewed the financial terms, to the extent publicly available, of other
acquisition transactions which McDonald deemed to be relevant for
purposes of its opinions;
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- reviewed the merger agreement dated January 5, 1999 and its schedules
and exhibits and other related documents; and
- performed such other reviews and analyses as McDonald deemed
appropriate.
The oral and written opinions provided by McDonald to Anchor were
necessarily based upon economic, monetary, financial market and other relevant
conditions as of the dates thereof.
In connection with its review and arriving at its opinions, McDonald relied
upon the accuracy and completeness of the financial information and other
pertinent information provided by Anchor to McDonald for purposes of rendering
its opinions. McDonald did not independently verify any of the information
provided as being complete and accurate in all material respects. McDonald
developed financial forecasts for Anchor and FCB which it derived by using
third-party projections of future financial performance, where available, and
historical financial performance. McDonald reviewed these forecasts with the
respective management teams of Anchor and FCB, who each indicated that they had
no basis for disagreeing with the methodology employed or the results derived by
McDonald, although neither company endorsed or verified the accuracy of such
forecasts. McDonald also considered projections of cost savings provided by
Anchor and FCB management and assumed that these projections had been reasonably
prepared on bases reflecting the best available estimates and judgments of
Anchor and FCB as to these cost savings. McDonald did not reflect any potential
revenue enhancements or other synergies, which were not quantified by the
companies, in developing its forecasts. These forecasts cannot be assumed to
have been prepared with a view towards public disclosure, and were based upon
numerous variables and assumptions that are inherently uncertain, including,
amongst others, factors relative to the general economic and competitive
conditions facing Anchor and FCB. Accordingly, actual results could vary
significantly from those set forth in the respective projections.
McDonald does not claim to be an expert in the evaluation of loan
portfolios or the allowance for loan losses with respect thereto and therefore
assumes that such allowances for Anchor and FCB are adequate to cover such
losses. In addition, McDonald does not assume responsibility for the review of
individual credit files, did not make an independent evaluation, appraisal or
physical inspection of the assets or individual properties of Anchor or FCB, nor
was McDonald provided with such appraisals. Furthermore, McDonald assumes that
the merger will be consummated in accordance with the terms set forth in the
merger agreement, without any waiver of any material terms or conditions by
Anchor and that obtaining the necessary regulatory approvals for the merger will
not have an adverse effect on either separate institution or the combined
entity. Moreover, in each analysis that involves per share data for Anchor,
McDonald adjusted the data to reflect full dilution, i.e., the exercise of all
outstanding options and/or warrants (utilizing the treasury stock method). In
particular, McDonald assumed that the merger will be recorded as a
"pooling-of-interests" in accordance with generally accepted accounting
principles.
SUPPORTING ANALYSES
In connection with rendering its January 5, 1999 opinion, McDonald
performed a variety of financial and comparative analyses which were presented
to Anchor's board and are briefly summarized below. Such summary of analyses
does not purport to be a complete description of the analyses performed by
McDonald. Moreover, McDonald believes that these analyses must be considered as
a whole and that selecting portions of such analyses and the factors considered,
without considering all such analyses and factors, could create an incomplete
understanding of the scope of the process underlying the analyses and, more
importantly, the opinions derived from them. The preparation of a financial
advisor's opinion is a complex process involving subjective judgments and is not
necessarily susceptible to partial analyses or a summary description of such
analyses. In its full analysis, McDonald also accounted for the
37
<PAGE> 46
assessment of general economic, financial market and other financial conditions.
Furthermore, McDonald drew from its past experience in similar transactions, as
well as its experience in the valuation of securities and its general knowledge
of the banking industry as a whole. Any estimates in McDonald's analyses were
not necessarily indicative of future results or values which may significantly
diverge more or less favorably from such estimates. Estimates of company
valuations do not purport to be appraisals nor to necessarily reflect the prices
at which companies or their respective securities actually may be sold. Most
notably, none of the analyses performed by McDonald were assigned a greater
significance by McDonald than any other in deriving its opinions.
COMPARABLE COMPANY ANALYSIS: McDonald reviewed and compared actual stock
market data and actual and estimated selected financial information for FCB with
corresponding information for 19 publicly traded midwestern thrifts with assets
between $400 million and $800 million, (the "FCB Peer Group"). The FCB Peer
Group is listed below (alphabetically):
Camco Financial Corporation, Cambridge, OH
EFC Bancorp, Inc., Elgin, IL
Emerald Financial Corporation, Strongsville, OH
FFY Financial Corp., Youngstown, OH
Fidelity Bancorp, Inc., Chicago, IL
First Defiance Financial Corp., Defiance, OH
First Federal Financial Corporation,
Elizabethtown, KY
First Federal Savings Bank (MHC),
Sioux City, IA
First Midwest Financial, Inc., Storm Lake, IA
First Northern Capital Corporation, Green Bay, WI
Hallmark Capital Corp., West Allis, WI
Harrington Financial Group, Inc., Richmond, IN
HF Financial Corp., Sioux Falls, SD
HMN Financial, Inc., Spring Valley, MN
Home Federal Bancorp, Seymour, IN
Kankakee Bancorp, Inc., Kankakee, IL
Mutual Savings Bank, FSB, Bay City, MI
PVF Capital Corp., Bedford Heights, OH
The table below represents a summary analysis of the FCB Peer Group based
on market prices as of December 31, 1998 and the latest publicly available
financial data as of September 30, 1998:
<TABLE>
<CAPTION>
MEAN MEDIAN FCB
---- ------ -----
<S> <C> <C> <C>
Last Twelve Month Earnings............................... 15.4x 15.7x 15.5x
Price to Book Value...................................... 130% 134% 141%
Price to Tangible Book Value............................. 138% 134% 141%
Dividend Yield........................................... 1.84% 1.98% 3.15%
Return on Average Assets................................. 0.64% 0.74% 1.32%
Return on Average Equity................................. 5.27% 8.66% 9.22%
Leverage Ratio........................................... 9.43% 9.19% 14.18%
Efficiency Ratio......................................... 64.9% 59.5% 45.5%
</TABLE>
38
<PAGE> 47
McDonald reviewed and compared actual stock market data and actual and
estimated selected financial information for Anchor with corresponding
information for 24 publicly traded midwestern banks and thrifts (the "Anchor
Peer Group"). The Anchor Peer Group is listed below (alphabetically):
<TABLE>
<S> <C>
Alliance Bancorp, Hinsdale, IL First Midwest Bancorp, Inc., Itasca, IL
AMCORE Financial, Inc., Rockford, IL First Northern Capital Corp, Green Bay, WI
Associated Banc-Corp, Green Bay, WI Flagstar Bancorp, Inc., Bloomfield Hills, MI
Brenton Banks, Inc., Des Moines, IA Grand Premier Financial, Wauconda, IL
CFSB Bancorp, Inc., Lansing, MI Hallmark Capital Corp., West Allis, WI
Chemical Financial Corp, Midland, MI MAF Bancorp, Inc., Clarendon Hills, IL
Community First Bankshares, Fargo, ND Metropolitan Financial Corp., Mayfield Heights, OH
Corus Bankshares, Inc., Chicago, IL Mutual Savings Bank, Bay City, MI
F&M Bancorporation, Inc., Kaukauna, WI Ottawa Financial Corp, Holland, MI
First Federal Capital Corp., La Crosse, St. Francis Capital Corp, Brookfield, WI
WI St. Paul Bancorp, Inc., Chicago, IL
First Financial Bancorp., Hamilton, OH TCF Financial Corporation, Minneapolis, MN
First Indiana Corporation, Indianapolis,
IN
</TABLE>
The table below represents a summary analysis of the Anchor Peer Group
based on market prices as of December 29, 1998 and the latest publicly available
financial data as of September 30, 1998:
<TABLE>
<CAPTION>
MEAN MEDIAN ANCHOR
----- ------ ------
<S> <C> <C> <C>
Last Twelve Month Earnings...................... 16.7x 15.9x 19.7x
Price to Next Year Earnings..................... 14.3x 14.1x 19.5x
Price to Book Value............................. 217% 202% 315%
Price to Tangible Book Value.................... 243% 214% 320%
Dividend Yield.................................. 2.21% 2.17% 0.83%
Return on Average Assets........................ 1.13% 1.04% 1.15%
Return on Average Equity........................ 12.97% 12.93% 17.69%
Leverage Ratio.................................. 8.19% 8.32% 6.07%
Efficiency Ratio................................ 55.1% 54.8% 51.1%
</TABLE>
39
<PAGE> 48
COMPARABLE TRANSACTION ANALYSIS: McDonald reviewed and compared actual
information for comparable pending or closed transactions it deemed pertinent to
the merger, including 22 thrift merger and/or acquisition transactions with
seller's assets between $300 million and $1 billion (the "Midwest
Transactions"). The following is a list of the Midwest Transactions:
<TABLE>
<CAPTION>
BUYER SELLER
- ------------------------------------------- -------------------------------------------
<S> <C>
Coal City Corp, Coal City, IL Avondale Financial, Chicago, IL
Fidelity Finl of OH, Cincinnati, OH Glenway Finl Corp. Cincinnati, OH
Fifth Third Bancorp, Cincinnati, OH Enterprise Fedl Bncp, West Chester, OH
FBOP Corporation, Oak Park, IL Calumet Bancorp Inc., Dolton, IL
MAF Bancorp Inc., Clarendon Hills, IL Westco Bancorp Inc., Westchester, IL
Union Planters Corp., Memphis, TN First Mutual Bancorp, Decatur, IL
State Fin'l Svcs Cp, Hales Corners, WI Home Bncp of Elgin, Elgin, IL
Second Bancorp Inc., Warren, OH Trumbull Finl Corp., Warren, OH
FirstMerit Corp, Akron, OH Security First Corp., Mayfield Heights, OH
Charter One Finl, Cleveland, OH CS Financial Corp., Cleveland, OH
Citizens Finl Svcs, Munster, IN SuburbFed Financial, Flossmoor, IL
Alliance Bncp, Hinsdale, IL Southwest Bancshares, Hometown, IL
Commercial Federal, Omaha, NE Perpetual Mdwst Finl, Cedar Rapids, IA
Magna Group, St. Louis, MO Charter Financial, Sparta, IL
Mercantile Bancorp, St Louis, MO HomeCorp Inc., Rockford, IL
Commercial Federal, Omaha, NE Mid Continent Bcshrs, El Dorado, KS
Union Planters Corp., Memphis, TN Sho-Me Financial, Mt. Vernon, MO
Charter One Finl, Cleveland, OH Haverfield Corp., Cleveland, OH
Pinnacle Financial, St. Joseph, MI Indiana Fed'l Corp., Valparaiso, IN
Mutual Savings Bank, Milwaukee, WI First Federal Bcshrs, Eau Claire, WI
Hinsdale Finl Corp, Hinsdale, IL Liberty Bancorp, Chicago, IL
BancFirst Ohio Corp, Zanesville, OH County Savings Bank, Newark, OH
</TABLE>
The following table represents a summary analysis of the Midwest
Transactions based on the announced transaction values:
<TABLE>
<CAPTION>
MEAN MEDIAN FCB
---- ------ ----
<S> <C> <C> <C>
Last Twelve Month Earnings....................... 25.3x 23.7x 24.9x
Price to Book Value.............................. 197% 182% 222%
Price to Tangible Book Value..................... 209% 183% 222%
Price to Assets.................................. 21.6% 19.4% 32.1%
</TABLE>
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<PAGE> 49
CONTRIBUTION ANALYSIS: McDonald analyzed the contribution of each company
to the pro forma company relative to the approximate ownership of the pro forma
company. The analysis indicated that Anchor shareholders would hold
approximately 71% of the pro forma diluted shares. Anchor's approximate
contributions are listed below by category:
<TABLE>
<S> <C>
Assets...................................................... 80%
Loans....................................................... 83%
Deposits.................................................... 82%
Equity...................................................... 63%
Tangible equity............................................. 63%
Last twelve month earnings.................................. 77%
1999 estimated earnings..................................... 75%
1999 estimated earnings with cost savings................... 71%
2000 estimated earnings..................................... 75%
</TABLE>
ACCRETION/DILUTION ANALYSIS: On the basis of financial projections and
estimates of ongoing cost savings accruing to the pro forma company provided to
McDonald by management, as well as estimated one-time costs related to the
transaction, McDonald compared pro forma equivalent earnings, cash dividends,
book value and tangible book value to the stand-alone projections of Anchor.
The accretion/dilution analysis demonstrated, among other things, that the
merger would result in:
- no impact to earnings for Anchor shareholders in fiscal 2000, and 1% to
2% accretion in fiscal 2001;
- similar cash dividends for Anchor shareholders, assuming the board
maintained its current dividend policy;
- accretion to book value of 14% to 17% for Anchor shareholders over the
period of the analysis; and
- accretion to tangible book value of 14% to 18% to Anchor shareholders
over the period of the analysis.
DISCOUNTED CASH FLOW ANALYSIS: McDonald performed a discounted cash flow
analysis with regard to FCB on a stand-alone basis. This analysis was based on
the First Call estimate of FCB's earnings per share for fiscal 1999 ($1.78), as
well as historical financial performance. First Call is a recognized data
service that monitors and publishes compilations of earnings estimates by
selected research analysts regarding companies of interest to institutional
investors. McDonald extrapolated the First Call estimate for FCB's fiscal 1999
earnings per share based on FCB historical financial performance, which
indicated a 5.5% annual growth rate.
Applying a discount rate of 14% and a range of terminal earnings multiples
of 18.0x to 22.0x to these estimates resulted in a range of present values for
FCB on a stand-alone basis as follows:
<TABLE>
<CAPTION>
TERMINAL MULTIPLE
--------------------------
22.00X 20.00X 18.00X
------ ------ ------
<S> <C> <C> <C>
Present Value per Fully Diluted Share............. $30.10 $27.64 $25.17
Present Value per Fully Diluted Share -- With
Synergies....................................... 37.62 34.59 31.56
</TABLE>
As indicated above, this analysis was based on Anchor and FCB senior
management estimates and is not necessarily indicative of actual value or actual
future results and does not purport to reflect the prices at which any
securities may trade at the present or at any time in the future. McDonald noted
that the discounted cash flow analysis was included because it is a widely used
valuation methodology,
41
<PAGE> 50
but noted that the results of such methodology are highly dependent upon the
numerous assumptions that must be made, including earnings growth rates,
dividend payout rates, terminal values and discount rates. This analysis
indicated that the premium to be received by FCB shareholders upon their receipt
of 1.83 shares of Anchor stock for each share of FCB stock held by them would be
between 17% and 74%, based on Anchor's closing price on December 31, 1998 of
$24.00 per share, and between 1% and 51% based on the 20-day average closing
price of Anchor stock as of December 31, 1998 ($20.81).
OTHER ANALYSES: McDonald also reviewed other information including pro
forma estimated balance sheet composition and pro forma financial performance.
No other company used as a comparison in the above analyses is identical to
Anchor, FCB or the combined entity and no other transaction is identical to the
merger. Accordingly, an analysis of the results of the foregoing is not purely
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial market and operating characteristics of the
companies and other factors that could affect the public trading volume of the
companies to which Anchor, FCB and the combined entity are being compared.
OPINIONS OF FCB'S FINANCIAL ADVISOR
Hovde has delivered to the FCB board its opinion that, based upon and
subject to the various considerations set forth in its written opinion dated
January 5, 1999, the exchange ratio is fair from a financial point of view to
the holders of FCB stock as of such date. In requesting Hovde's advice and
opinion, FCB placed no limitations upon Hovde with respect to the investigations
made or procedures followed by it in rendering its opinion. Hovde updated its
opinion as of the date of this Joint Proxy Statement/Prospectus, the full text
of which is attached hereto as Appendix D. Hovde's April 28, 1999 opinion
describes the procedures followed, assumptions made, matters considered and
limitations on the review undertaken. Holders of FCB stock should read this
opinion in its entirety.
Hovde is a nationally recognized investment banking firm and, as part of
its investment banking business, is continually engaged in the valuation of
financial institutions in connection with mergers and acquisitions, private
placements and valuations for other purposes. As a specialist in securities of
financial institutions, Hovde has experience in, and knowledge of, banks,
thrifts and bank and thrift holding companies. FCB's board of directors selected
Hovde to act as its financial advisor in connection with the merger on the basis
of the firm's reputation and expertise in transactions such as the merger.
Hovde will receive a fee contingent upon the completion of the merger for
services rendered in connection with advising FCB regarding the merger,
including the fairness opinions and financial advisory services provided to FCB,
plus reimbursement of out-of-pocket expenses. As of the date of this Joint Proxy
Statement/Prospectus, such fee would have been approximately $0.9 million, and
Hovde has received approximately $161,000 of such fee.
HOVDE'S OPINIONS ARE DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT
OF VIEW, OF THE EXCHANGE RATIO, AND DO NOT CONSTITUTE A RECOMMENDATION TO ANY
HOLDER OF FCB STOCK AS TO HOW SUCH HOLDER SHOULD VOTE AT THE FCB SPECIAL
MEETING. THE SUMMARY OF HOVDE'S OPINIONS SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF ITS OPINION DATED APRIL 28, 1999 ATTACHED HERETO AS APPENDIX D.
HOVDE'S ANALYSES
The following is a summary of the analyses performed by Hovde in connection
with its fairness opinions. Some of these analyses were presented to the FCB
board by Hovde on January 5, 1999. The summary set forth below does not purport
to be a complete description of either the analyses performed
42
<PAGE> 51
by Hovde in rendering its opinions or the presentation made by Hovde to the FCB
board, but it does summarize all of the material analyses performed and
presented by Hovde.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances. In arriving at its
opinions, Hovde did not attribute any numerical weight to any factor considered
by it, but rather made qualitative judgments as to the significance and
relevance of each factor. Hovde may have given various factors more or less
weight than others. Accordingly, Hovde believes that its analyses and the
following summary must be considered as a whole, and that selecting portions of
its analyses without considering all factors could create an incomplete view of
the process underlying the analyses set forth in its report to the FCB board and
its fairness opinions.
In performing its analyses, Hovde made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of FCB and Anchor. The analyses
performed by Hovde are not necessarily indicative of actual value or actual
future results, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as part of Hovde's analysis
of the fairness of the exchange ratio, from a financial point of view, to the
holders of FCB stock. The analyses do not purport to be an appraisal or to
reflect the prices at which a company might actually be sold or the prices at
which any securities may trade at the present time or at any time in the future.
Hovde's opinions do not address the relative merits of the merger as compared to
any other business combination in which FCB might engage. In addition, as
described above, Hovde's January 5, 1999 opinion and its presentation to the FCB
board were among the many factors taken into consideration by the FCB board in
making its determination to approve the merger agreement.
During the course of its engagement, and as a basis for arriving at its
opinions, Hovde reviewed and analyzed material bearing upon the financial and
operating conditions of FCB and Anchor and material prepared in connection with
the merger, including, among other things, the following:
- the merger agreement;
- historical publicly available information concerning FCB and Anchor;
- the nature and terms of recent merger transactions; and
- financial and other information provided to Hovde by the managements of
FCB and Anchor.
Hovde conducted meetings and had discussions with members of senior
management of FCB and Anchor for purposes of reviewing the future prospects of
FCB and Anchor. Hovde also took into account its experience in other
transactions, as well as its knowledge of the commercial banking and thrift
industries and its general experience in securities valuations.
In rendering its opinions, Hovde assumed, without independent verification,
the accuracy and completeness of the financial and other information and relied
upon the accuracy of the representations of the parties contained in the merger
agreement. Hovde also assumed that the financial forecast furnished to or
discussed with Hovde by FCB or Anchor was reasonably prepared and reflected the
best currently available estimates and judgments of senior management of FCB and
Anchor as to the future financial performance of FCB, Anchor or the combined
entity, as the case may be. Hovde has not made any independent evaluation or
appraisal of any properties, assets or liabilities of FCB. Hovde assumed and
relied upon the accuracy and completeness of the publicly available and other
financial and other information provided to it, relied upon the representations
and warranties of FCB and Anchor made pursuant to the merger agreement, and did
not independently attempt to verify any of such information.
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<PAGE> 52
In connection with the preparation of its January 5, 1999 opinion, Hovde
performed various analyses with respect to FCB. The following is a brief summary
of such analyses, some of which were presented to FCB's board by Hovde on
January 5, 1999. In connection with delivery of its April 28, 1999 opinion,
Hovde performed procedures to update, as necessary, some of its analyses and
reviewed the assumptions on which they were based and the factors it considered
in connection with its January 5, 1999 opinion.
PREMIUM ANALYSIS. Based upon the closing price of Anchor stock on December
31, 1998 (two trading days prior to Hovde's presentation to FCB's board), the
exchange ratio results in an implied price of $43.92 per share of FCB stock,
representing a premium of approximately 57.21% to the closing price of FCB stock
of $27.94 as of December 31, 1998.
IMPLIED OFFER VALUE ANALYSIS BASED ON ANCHOR HISTORICAL TRADING
VALUATION. Hovde reviewed the implied offer value per share to FCB shareholders
based on the price of Anchor stock at different intervals during the period
commencing 90 trading days prior to December 31, 1998, using the 5-day, 10-day,
15-day, 20-day, 30-day, 60-day and 90-day average closing prices of Anchor stock
during such period. Using such average closing prices, Hovde observed that the
implied value per share to FCB shareholders was as follows:
<TABLE>
<CAPTION>
IMPLIED VALUE
ANCHOR AVERAGE PER SHARE TO FCB
CLOSING PRICE SHAREHOLDERS
-------------- ----------------
<S> <C> <C>
December 31, 1998........................ $24.000 $43.92
Last 5 Trading Days...................... $22.375 $40.95
Last 10 Trading Days..................... $21.931 $40.13
Last 15 Trading Days..................... $20.896 $38.24
Last 20 Trading Days..................... $20.813 $38.09
Last 30 Trading Days..................... $20.540 $37.59
Last 60 Trading Days..................... $20.419 $37.37
Last 90 Trading Days..................... $20.980 $38.39
</TABLE>
ANALYSIS OF SELECTED MERGERS. As part of its analysis, Hovde reviewed all
comparable mergers involving thrifts nationwide announced since January 1, 1997,
in which the total assets of the seller were between $250 million and $1
billion, the tangible equity to assets ratio of the seller was above 8.0% and
the return on average assets ratio of the seller was above 1.0% (13
transactions) (the "Nationwide Merger Group").
For each transaction in the Nationwide Merger Group, Hovde calculated the
multiple of the offer value to the acquired company's earnings per share ("EPS")
for the 12 months preceding ("LTM") the announcement date of the transaction;
the multiple of the offer value to the acquired company's book value per share
and tangible book value per share; and the tangible book value premium to core
deposits, each as of the announcement dates of the respective mergers. Hovde
compared these multiples with the corresponding multiples for the merger,
valuing the shares of Anchor stock that would be received pursuant to the merger
agreement at $43.92 per share of FCB stock. In calculating the multiples for the
merger, Hovde used FCB's EPS for the 12 months ended September 30, 1998, and
FCB's book value
44
<PAGE> 53
per share, tangible book value per share, and total deposits as of September 30,
1998. The results of this analysis were as follows:
<TABLE>
<CAPTION>
OFFER VALUE TO RATIO OF TANGIBLE
-------------------------------------- BOOK VALUE
BOOK VALUE TANGIBLE BOOK PREMIUM TO CORE
PER SHARE VALUE PER SHARE LTM EPS DEPOSITS
(X) (X) (X) (%)
---------- --------------- ------- -----------------
<S> <C> <C> <C> <C>
FCB................................... 2.30 2.30 25.3 30.59
Nationwide Merger Group Median........ 1.92 1.92 20.4 19.58
Nationwide Merger Group Average....... 1.84 1.87 19.8 18.82
Nationwide Merger Group High.......... 2.41 2.46 26.4 35.15
Nationwide Merger Group Low........... 1.28 1.28 11.7 7.47
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS. Hovde performed a discounted cash flow
analysis to determine a present value per share of FCB stock assuming FCB
continued to operate as a stand-alone entity and was acquired at a later date.
This present value was determined by projecting FCB's after-tax net income for
the five calendar years ending December 31, 1999 through 2003. For purposes of
this analysis, Hovde assumed that FCB's earnings per share for these five
calendar years would be $1.80, $1.89, $1.98, $2.08 and $2.18, respectively,
based upon FCB's fiscal year 1999 budgeted net income (which information was
provided to Hovde by senior management of FCB) and then applying historical
growth rates for FCB in order to estimate earnings per share in future years.
Hovde shared and reviewed these projections with senior management of FCB. Other
than FCB's fiscal year 1999 budgeted net income, management of FCB provided no
projections or estimates for Hovde's use in performing the analyses contained in
Hovde's opinion. The "terminal value" per share (i.e., the projected 2003 value
per share) of FCB stock was determined by applying a price to earnings multiple
of 20.4 times against FCB's projected earnings at December 31, 2003. The present
value of the terminal value was then determined using an annual discount rate of
11.0%, which Hovde viewed as the appropriate discount rate for a company with
FCB's risk characteristics. The above calculations resulted in a net present
value per share of FCB stock of $33.48. The implied value of $43.92 per share to
FCB shareholders, based on Anchor's closing price of $24.00 on December 31,
1998, results in a premium of 31.18% to FCB's net present value of $33.48 per
share. As part of this analysis, Hovde also provided to FCB's board the table
set forth below which utilizes a discount rate ranging from 9.50% to 13.0% and
varied the terminal multiple value from 17.0 to 25.0 times the earnings
estimates set forth above projected by Hovde for FCB in the year 2003.
<TABLE>
<CAPTION>
DISCOUNT RATE
---------------------------------------------------------------------
TERMINAL VALUE MULTIPLIER 9.50% 10.00% 10.50% 11.00% 11.50% 12.00% 12.50% 13.00%
- ------------------------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
17.00 $30.14 $29.63 $29.14 $28.66 $28.18 $27.72 $27.27 $26.83
18.00 31.66 31.12 30.60 30.09 29.60 29.11 28.63 28.17
19.00 33.18 32.62 32.07 31.53 31.01 30.50 30.00 29.51
20.00 34.69 34.11 33.53 32.97 32.42 31.89 31.36 30.85
21.00 36.21 35.60 35.00 34.41 33.84 33.27 32.72 32.19
22.00 37.73 37.09 36.46 35.85 35.25 34.66 34.09 33.53
23.00 39.25 38.58 37.93 37.29 36.66 36.05 35.45 34.86
24.00 40.77 40.07 39.39 38.73 38.07 37.44 36.81 36.20
25.00 42.29 41.57 40.86 40.17 39.49 38.83 38.18 37.54
</TABLE>
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<PAGE> 54
CONTRIBUTION ANALYSIS. Hovde prepared a contribution analysis showing
percentages of assets, loans, deposits and common equity at September 30, 1998,
and actual fiscal year 1998 net income and estimated calendar year 1999 net
income that would be contributed to the combined company on a pro forma basis by
FCB and Anchor. The results of this analysis showed FCB's projected
contributions to these categories as follows:
<TABLE>
<CAPTION>
FCB CONTRIBUTION
TO ANCHOR
----------------
<S> <C>
Total Assets........................................... 20.19%
Total Net Loans........................................ 17.17%
Total Deposits......................................... 17.92%
Total Equity........................................... 36.84%
Net Income -- Actual Fiscal 1998....................... 22.18%
Net Income -- Estimated Calendar 1999.................. 24.45%
</TABLE>
In addition, this analysis showed that holders of FCB stock would own
approximately 29.14% of the pro forma common shares outstanding of Anchor,
assuming an exchange ratio of 1.83.
FINANCIAL IMPLICATIONS TO FCB'S SHAREHOLDERS. Hovde prepared an analysis
of the financial implications of the Anchor offer to FCB's shareholders. This
analysis indicated that on a pro forma equivalent basis, assuming the exchange
ratio of 1.83 and excluding any potential cost saving and revenue enhancement
opportunities, an FCB shareholder would achieve approximately 19.2% accretion in
earnings per share, a decrease in dividends per share of approximately 58.4% and
a decrease in book value per share of approximately 16.0% in 1999 as a result of
the consummation of the merger. For purposes of this analysis, Hovde assumed
that FCB's earnings per share for the five calendar years 1999-2003 would be
$1.80, $1.89, $1.98, $2.08 and $2.18, respectively, based upon FCB's 1999
budgeted net income (which information was provided to Hovde by senior
management of FCB) and then applying historical growth rates for FCB to estimate
future years' earnings per share. Hovde shared and reviewed these projections
with senior management of FCB. Other than FCB's fiscal year 1999 budgeted
income, management of FCB provided no projections or estimates for Hovde's use
in performing the analyses contained in Hovde's opinion. For Anchor's projected
earnings per share, Hovde assumed that Anchor's earnings per share on a
stand-alone basis for calendar years 1999-2003 would be $1.25, $1.38, $1.51,
$1.66 and $1.83, respectively. The projections used for Anchor's earnings per
share for calendar 1999 were based upon the consensus analysts' estimates; in
discussing these estimates with Anchor's senior management, they indicated that
earnings would not differ materially from the consensus earnings estimates.
Anchor's senior management did not provide any projections for the subsequent
calendar years; rather, Hovde analyzed historical growth rates for Anchor's
earnings per share and reviewed all analysts' estimates for future years to
arrive at the above projections. Assuming that the projected earnings per share
and dividends per share do not materially change from historical growth rate
levels, if the merger is completed, FCB's shareholders would experience an
increase of approximately 38.0% in earnings per share, a decrease of
approximately 26.8% in dividends per share, and an increase of approximately
3.8% in book value per share in 2003. The table below summarizes the results
discussed above.
<TABLE>
<CAPTION>
EARNINGS PER SHARE DIVIDENDS PER SHARE BOOK VALUE PER SHARE
------------------- ------------------- --------------------
1999 2003 1999 2003 1999 2003
-------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
FCB Stand-alone.................. $ 1.80 $ 2.18 $ 0.88 $ 1.20 $ 20.47 $ 24.28
Pro Forma........................ $ 2.15 $ 3.01 $ 0.37 $ 0.88 $ 17.20 $ 25.19
% Accretion (Dilution)........... 19.2% 38.0% (58.4)% (26.8)% (16.0)% 3.8%
</TABLE>
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COMPARATIVE SHAREHOLDER RETURNS. Hovde presented an analysis of
comparative theoretical shareholder returns in several scenarios, including FCB
remaining independent, FCB being acquired in 2003, FCB being acquired by Anchor
through the merger and FCB being acquired by Anchor through the merger with
Anchor in turn being acquired in 2003. This analysis, which was based on the net
present value of projected dividend streams and projected common stock
valuations (using the current price-to-earnings multiples), indicated total
shareholder returns of 10.01% if FCB remained independent, 16.54% for a merger
in 2003, 20.53% based on the acceptance of the offer from Anchor at the exchange
ratio of 1.83 Anchor shares per FCB share, and 29.50% based on the acceptance of
the offer from Anchor at the exchange ratio of 1.83 Anchor shares per FCB share
and Anchor in turn being acquired in 2003.
Based upon the foregoing analyses and other investigations and assumptions
set forth in its opinions, without giving specific weightings to any one factor
or comparison, Hovde determined that the exchange ratio was fair from a
financial point of view to the holders of FCB stock.
INTERESTS OF MEMBERS OF FCB'S BOARD OF DIRECTORS AND MANAGEMENT IN THE MERGER
When considering the recommendations of our boards of directors, you should
be aware that some executive officers of FCB and members of the FCB board of
directors may have interests in the merger that are different from, or in
addition to, your interests. These interests may create potential conflicts of
interest. Our boards of directors were aware of these interests when they
approved the merger and the merger agreement. Except as described below, to the
knowledge of FCB, the executive officers and directors of FCB do not have any
material interest in the merger, apart from their interests as FCB shareholders.
BUYOUT OF EMPLOYMENT CONTRACTS. The following executive officers of FCB
have rights under employment agreements with FCB: James J. Rothenbach, President
and Chief Executive Officer; Theodore W. Hoff, Vice President -- Retail Sales
and Service; Harold L. Hermansen, Vice President -- Retail Lending and
Secretary; James J. Goetz, Vice President -- Business Banking; and Phillip J.
Schoofs, Vice President, Treasurer and Chief Financial Officer. In connection
with the merger, Anchor has agreed to buy out the rights of these executive
officers under their employment agreements for an aggregate cash payment of
approximately $1.4 million. Anchor will make such payments even though Mr.
Rothenbach will enter into an employment agreement with Anchor and the other FCB
executive officers will be offered employment and may continue employment with
Anchor after the merger.
ACCELERATED VESTING OF STOCK OPTIONS. Outstanding but unvested options
under FCB's stock option plans (including options held by directors and
executive officers) will automatically vest according to their terms upon and
remain vested for a period of at least 60 days following the approval of the
merger by FCB's shareholders. Some of these options, although granted at fair
market value as of the date of grant, may have exercise prices at below current
market value.
EMPLOYMENT ARRANGEMENTS. Pursuant to the merger agreement, Anchor will
enter into employment agreements with Mr. Rothenbach and Mr. Donald D. Parker,
FCB's Chairman of the Board. The principal terms of these employment agreements
are as follows:
- Mr. Rothenbach. Assuming the merger is completed, Mr. Rothenbach will
serve as a Senior Vice President of Anchor. Mr. Rothenbach's initial
term of employment under the agreement will be for one year beginning on
the date the merger is completed. The agreement will automatically renew
for another one year term at the end of the initial term and any
subsequent terms, unless written notice is given by Anchor's board to
Mr. Rothenbach at least 180 days prior to the expiration date that the
agreement will not be renewed. He may voluntarily terminate his
employment at any time by giving at least thirty (30) days' written
notice. His
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<PAGE> 56
base salary will be $155,000, subject to increase at the discretion of Anchor's
board, and he will be eligible to participate in all of Anchor's bonus and other
incentive compensative plans, including all stock-based incentive programs. Mr.
Rothenbach will be entitled to participate in Anchor's employee benefit
plans for executive officers and provided other fringe benefits, such as
a club membership, vacation and the use of a company car.
- Mr. Parker. Pursuant to his employment agreement and assuming the
merger is completed, Mr. Parker will serve as a Senior Vice President of
Anchor until his retirement on October 31, 1999. Mr. Parker's new
agreement is substantially identical to and is intended to replace his
existing employment agreement with FCB. Mr. Parker's annual salary
during the term of the agreement will be $159,000, a portion of which
may be paid in advance in Anchor's discretion. Mr. Parker will also be
entitled to receive other benefits comparable to those provided to Mr.
Rothenbach.
In addition, Anchor has offered positions as Vice Presidents or Assistant
Vice Presidents to James Goetz, Harold Hermansen, Theodore Hoff and Phillip
Schoofs, who are all currently officers of FCB. To date, Messrs. Hoff and
Hermansen have indicated that they will accept such positions.
NEW DIRECTORS OF ANCHOR AND ANCHORBANK. The merger agreement provides
that, following the merger, Anchor will do all of the following:
- Take necessary actions, including expansion of the size of its board of
directors, if required, to cause two existing directors of FCB (to be
selected by Anchor) to be appointed to Anchor's board. Each member of
Anchor's board of directors is currently paid a fee of $1,500 for each
regular quarterly board meeting attended, $350 for each regular
committee meeting attended and $750 for each special board meeting
attended. In addition, Anchor directors are entitled to participate in
Anchor's deferred compensation and stock option plans.
- Elect two existing directors of FCB (to be selected by Anchor) to the
AnchorBank board (one or both of these individuals may, in Anchor's
discretion, be the same person or persons who will serve on Anchor's
board). Each member of AnchorBank's board of directors is currently paid
a fee of $1,500 for each regular quarterly board meeting attended, $350
for each regular committee meeting attended and $750 for each special
board meeting attended. In addition, AnchorBank directors are entitled
to participate in Anchor's deferred compensation and stock option plans.
- Appoint all of the directors of FCB, other than the individuals named to
the Anchor and AnchorBank boards, to a newly-created advisory board to
assist AnchorBank in the development of business in the areas currently
served by Fox Cities Bank. As members of the advisory board, these
individuals will be paid a retainer of $2,400 per year.
For more information on these arrangements, see "MANAGEMENT AND OPERATIONS
AFTER THE MERGER" beginning on page 65.
REGULATORY APPROVALS
For an explanation of the regulatory environment in which the companies
operate, see "REGULATION" beginning on page 80.
We cannot complete the merger unless we obtain the approval of the federal
and state agencies that regulate our businesses. At the federal level, we need
approval of the Office of Thrift Supervision, and at the state level, Anchor
needs the approval of the Wisconsin Department of Financial Institutions --
Division of Savings Institutions. As of the date of this Joint Proxy
Statement/Prospectus, applications
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for regulatory approval had been submitted to these institutions; however, these
regulatory approvals had not been obtained. And, although we expect to obtain
them before the date of the special meetings, we cannot be certain when or
whether we will receive them.
ACCOUNTING TREATMENT
We believe the merger will qualify as a pooling of interests for accounting
and financial reporting purposes. Under this method of accounting, the assets
and liabilities of our two companies will be combined based on the respective
carrying values of the accounts in the historical financial statements of each
entity. Results of operations of the combined company will include both our
incomes for the entire fiscal period in which the combination occurs, and the
historical results of operations of the separate companies for fiscal years
prior to the merger will be combined and reported as our results of operations.
The merger agreement requires as a condition to closing that each of the
companies has received letters, at closing, from Anchor's independent auditors
regarding their concurrence with Anchor's conclusion that pooling of interests
accounting for the merger (under APB 16) is appropriate if the merger is
completed in accordance with the merger agreement, as well as a letter from
FCB's independent auditors regarding their concurrence with FCB's conclusion
that FCB meets the conditions necessary for it to enter into the business
combination accounted for as a pooling of interests. See "THE MERGER
AGREEMENT -- Conditions" on page 56 and "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL DATA" on page 67. Transactions with respect to FCB stock or Anchor
stock by our respective affiliates or other events may occur that could prevent
the merger from qualifying as a pooling of interests. See "-- Resale
Restrictions" on page 50.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material federal income tax
consequences of the merger. It is not a complete description of all of the tax
consequences that may be important to Anchor and FCB shareholders, and does not
address filing or reporting obligations generally applicable to all taxpayers,
rules applicable only to certain types of taxpayers, or rules that we assume are
generally known by our shareholders. This summary is based upon the Internal
Revenue Code, IRS Regulations, and judicial interpretations as of the date of
this Joint Proxy Statement/Prospectus, all of which could change, possibly
retroactively, which could change the conclusions expressed in this summary.
We have obtained tax opinions from Whyte Hirschboeck Dudek S.C., tax
counsel to Anchor, and Foley & Lardner, tax counsel to FCB, which are included
as Exhibits 8.1 and 8.2 to the registration statement of which this Joint Proxy
Statement/Prospectus is a part. This summary is based upon assumptions regarding
Anchor and FCB contained in those opinions and the assumption that the merger
will be completed in accordance with the terms of the merger agreement. This
summary also assumes that FCB shareholders hold their shares of FCB stock as
capital assets and does not address the tax consequences that may be relevant to
particular shareholders who are subject to special treatment under federal
income tax laws, including dealers in securities, traders in securities electing
to mark to market, banks, insurance companies, tax-exempt organizations,
non-United States persons and shareholders who acquired shares of FCB stock
pursuant to the exercise of options or otherwise as compensation or through a
tax-qualified retirement plan. Finally, the summary does not address any state,
local or foreign tax consequences.
Based on these assumptions and upon representations and assumptions
contained in the tax opinions, tax counsel are of the opinion that:
- the merger will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code;
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- no gain or loss will be recognized by Anchor or FCB as a result of the
merger;
- no gain or loss will be recognized by the shareholders of FCB who
exchange their FCB stock solely for Anchor shares pursuant to the merger
(except that any cash received in lieu of fractional shares will be
taxed to the shareholder receiving it);
- FCB shareholders will be subject to capital gains tax on the cash they
receive in lieu of fractional shares; however, in most instances where
an FCB shareholder owns FCB stock in a single account (as opposed to
multiple accounts), the cash to be received will not exceed the market
price of one share of Anchor stock, and, therefore, the applicable tax
is expected to be nominal;
- the tax basis of the Anchor stock received by FCB shareholders who
exchange all of their FCB stock for Anchor stock in the merger will be
the same as the tax basis of the FCB stock surrendered in exchange
therefor; and
- the holding period of the Anchor stock received will include the holding
period of shares of FCB stock surrendered in exchange therefor.
The tax opinions cannot be relied upon if any of these factual assumptions
or representations is, or later becomes, inaccurate. No ruling from the Internal
Revenue Service concerning the tax consequences of the merger has been
requested, and the tax opinions will not be binding upon the Internal Revenue
Service or the courts.
EACH FCB SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE MERGER, INCLUDING TAX RETURN
REPORTING REQUIREMENTS, THE APPLICABILITY OF FEDERAL, STATE, LOCAL AND FOREIGN
TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
RESALE RESTRICTIONS
All Anchor stock received by FCB shareholders in the merger will be freely
transferable, except those shares received by persons who are deemed to be
"affiliates," as that term is defined under the Securities Act of 1933, as
amended, of FCB at the time of the FCB special meeting. Anchor stock received by
affiliates may be resold by them only in transactions permitted by the resale
provisions of Rule 144 or Rule 145 under the Securities Act, or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
generally include individuals or entities that control, are controlled by, or
are under common control with, that party and may include the officers and
directors of that party as well as principal holders of stock of that party. The
merger agreement requires FCB to use its reasonable efforts to cause each of its
affiliates to execute a written agreement to comply with the foregoing
requirements. In order for the merger to qualify for pooling of interests
accounting treatment, FCB's affiliates may not, subject to minor exceptions,
sell, transfer or dispose of, or in any other way reduce their risk relative to,
shares of Anchor stock or FCB stock during the period beginning 30 days prior to
the completion of the merger and ending when Anchor publishes financial results
covering at least 30 days of combined operations. The merger agreement requires
FCB to use its reasonable efforts to cause each of its affiliates to execute a
written agreement to comply with these requirements.
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THE MERGER AGREEMENT
This is a summary of the material provisions of the merger agreement, dated
January 5, 1999, a copy of which is attached as Appendix A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the merger agreement.
THE MERGER
The companies entered into the merger agreement providing for the merger of
FCB with and into Anchor. Anchor will be the surviving corporation in the merger
and will continue to operate under the name Anchor BanCorp Wisconsin Inc. The
merger agreement has been approved by the boards of directors of both companies
and, subject to approval by both Anchor and FCB shareholders as well as various
regulatory approvals, the merger is expected to be completed during the second
quarter of 1999. The banking subsidiaries of the two companies are also expected
to merge and will thereafter operate under the name AnchorBank, S.S.B.
Under the terms of the merger agreement, each share of FCB stock issued and
outstanding immediately prior to the effectiveness of the merger will (except as
otherwise provided below) be canceled and converted into the right to receive
1.83 shares of Anchor stock, plus cash in lieu of any fractional shares. When
the merger becomes effective, all shares of FCB stock (1) owned by FCB as
treasury stock or (2) owned by Anchor, will be canceled and no Anchor stock or
other consideration will be given in exchange therefor. Shares of Anchor stock
issued and outstanding at the time of the merger will not be affected by the
merger and will remain outstanding as the same number of shares of Anchor stock
following the merger. Each option to purchase FCB stock under the terms of the
FCB Financial Corp. 1998 Incentive Stock Plan, FCB Financial Corp. 1993 Stock
Option and Incentive Plan, and the OSB Financial Corp. 1992 Stock Option and
Incentive Plan which is outstanding and unexercised prior to the time the merger
becomes effective will be converted into an option to purchase 1.83 shares of
Anchor stock (with fractional shares being rounded up to the nearest whole
number) and will have an exercise price per share equal to the exercise price
under the original option divided by 1.83 (with the exercise price rounded down
to the nearest whole cent).
If the merger is completed, the cancellation and conversion of FCB stock
into shares of Anchor stock at the effective time will cause FCB stock to cease
to be listed on Nasdaq and make FCB stock eligible to terminate its registration
pursuant to the Securities Exchange Act of 1934, as amended.
EFFECTIVE TIME OF THE MERGER
The merger will become effective as soon as practicable following the
satisfaction or waiver of all conditions contained in the merger agreement. We
expect this to occur in the second quarter of 1999, however, we cannot assure
you when, or if, all the conditions to consummation of the merger will be
satisfied or waived. See "-- Conditions" on page 56.
EXCHANGE PROCEDURES
After the merger, Firstar Bank Milwaukee, N.A., as the exchange agent, will
mail to each person who held shares of FCB stock at the time of the completion
of the merger a letter of transmittal to be used by the shareholder in
forwarding FCB stock certificates. This will include instructions for the
exchange of FCB stock certificates for Anchor stock certificates. Upon surrender
to the exchange agent of an FCB stock certificate together with a letter of
transmittal, the holder of the FCB stock certificate will be entitled to receive
an Anchor stock certificate and cash in lieu of any fractional shares. The
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surrendered FCB stock certificate will be canceled. FCB SHAREHOLDERS SHOULD NOT
SEND IN THEIR FCB STOCK CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
No dividends on Anchor stock will be paid with respect to Anchor stock
represented by an FCB stock certificate until that FCB stock certificate is
surrendered for exchange. In addition to a certificate representing Anchor stock
and cash in lieu of any fractional shares, the holder of a surrendered FCB stock
certificate will receive (1) the amount of any dividends or other distributions
payable with respect to the shares represented by the Anchor stock certificate
with a record date after the completion of the merger and not already paid, and
(2) at the appropriate payment date, the amount of any dividends or other
distributions with a record date after the completion of the merger but prior to
surrender and a payment date after surrender. In each case, taxes will be
withheld if required.
After the completion of the merger, no shares of FCB stock that were
outstanding immediately prior to the completion of the merger will be
transferred on FCB's transfer books.
Any Anchor stock certificates issued in the merger and any dividends or
distributions deposited by Anchor with the exchange agent that remain unclaimed
by the former FCB shareholders two years after the completion of the merger will
be returned to Anchor. Any former FCB shareholders who have not complied with
the exchange procedures within two years after completion of the merger may look
only to Anchor for payment of Anchor stock, cash in lieu of any fractional
shares, and any unpaid dividends and distributions on Anchor stock. FCB, Anchor,
the exchange agent or any other person will not be liable to any former holder
of shares of FCB stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
No interest will be paid or accrued on any cash to be paid in lieu of
fractional shares or on unpaid dividends and distributions, if any, which will
be paid upon surrender of FCB stock certificates.
If your FCB stock certificate has been lost, stolen or destroyed, you will
only be entitled to obtain the Anchor stock and any other amounts to which you
may be entitled by providing an affidavit and posting a bond in an amount
sufficient to protect Anchor against claims related to your lost FCB stock
certificate.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations and
warranties made by each of us to the other, including representations and
warranties relating to:
- due organization, power and standing of FCB and Anchor and other
corporate matters;
- capital structure and securities;
- authorization, execution, delivery and enforceability of the merger
agreement;
- subsidiaries;
- absence of conflicts under charter documents, violations of any
instruments or law, and required consents and approvals;
- documents filed with the SEC and the accuracy of the information in
those documents;
- litigation and liabilities;
- conduct of business in the ordinary course and the absence of certain
types of changes and material adverse effects;
- tax matters;
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- retirement and other employee benefit plans;
- regulatory matters and compliance;
- qualification for pooling of interests accounting treatment;
- brokers' and finders' fees with respect to the merger;
- adequacy of loan loss reserves;
- compliance with applicable laws;
- environmental matters;
- contracts and commitments;
- year 2000 compliance; and
- votes required to approve the merger.
COVENANTS
The merger agreement contains covenants of the parties pending the
consummation of the merger which generally include, among others, the covenants
described below.
FCB. FCB is required to continue to carry on its business in the ordinary
course consistent with its past practices, and use all reasonable efforts to
keep its business organization and workforce intact. FCB is prohibited from:
- changing its employee benefit plans or adopting any new plans, or
increasing the compensation and benefits of its employees, except for
normal increases in the ordinary course of business consistent with its
past practices;
- declaring or paying dividends on its stock, except that FCB may continue
to pay regular quarterly cash dividends of up to $0.22 per share;
- redeeming or repurchasing its stock;
- merging with any other company or acquiring the assets or stock of
another company;
- liquidating or selling its assets outside of the ordinary course of its
business;
- splitting or otherwise reclassifying its outstanding stock, or issuing
additional shares of its stock or other equity securities, other than
pursuant to existing stock option plans and agreements;
- amending its articles of incorporation or bylaws;
- changing its methods of accounting;
- changing its lending, investment and other material business policies;
and
- taking any action that would preclude the merger from qualifying for
tax-free treatment under the Internal Revenue Code or for pooling of
interests accounting treatment.
ANCHOR. Anchor is also required to continue to carry on its business in
the ordinary course consistent with its past practices, and use all reasonable
efforts to keep its business organization and workforce intact. Anchor is
prohibited from:
- declaring or paying extraordinary dividends on its stock, unless
appropriate adjustments are made to the exchange ratio;
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- merging with any other company or participating in any similar
transaction as a result of which Anchor or the surviving company in that
transaction would not be required to complete the merger in accordance
with the terms of the merger agreement;
- amending its articles of incorporation or bylaws;
- changing its methods of accounting;
- changing its lending, investment and other material business policies;
and
- taking any action that would preclude the merger from qualifying for
tax-free treatment under the Internal Revenue Code or for pooling of
interests accounting treatment.
NO SOLICITATION OF TRANSACTIONS
The merger agreement prohibits FCB and its officers, directors and
employees from soliciting, initiating, encouraging or making any "takeover
proposal" (as defined below), and from recommending, endorsing or agreeing to
any such takeover proposal, participating in discussions with third parties
relating to any takeover proposal, or providing third parties with any nonpublic
information relating to any takeover proposal. However, these restrictions do
not apply where FCB receives an unsolicited takeover proposal, if FCB, after
consulting with and receiving the advice of its outside legal counsel,
determines in good faith that it is appropriate for FCB's board to consider such
unsolicited takeover proposal in order to discharge its fiduciary duties to
FCB's shareholders. For this purpose, a "takeover proposal" means any offer or
proposal, from a party or parties other than Anchor, for a merger with or an
acquisition of FCB or its stock, assets or business. For more information, see
the discussion under "-- Fiduciary Termination" on page 57.
BOARDS' COVENANT TO RECOMMEND
We have each agreed that our boards of directors will recommend the
approval and adoption of the merger agreement to our respective shareholders,
unless either of us determines in good faith, based on advice of our respective
outside legal counsel, that doing so could reasonably be deemed to violate our
directors' fiduciary duty to our shareholders.
BENEFIT PLANS
Except as otherwise described below, Anchor has agreed to assume and honor
all of FCB's existing agreements relating to employee benefits.
Employees of FCB who become employees of Anchor will be entitled to
participate in Anchor's benefit plans according to the terms of those plans. For
purposes of retirement plan vesting and benefit eligibility, and for all
purposes under welfare benefit plans, Anchor will treat FCB's employees' past
service with FCB as service with Anchor, and will waive any waiting periods and
pre-existing condition exclusions that might otherwise apply to a new Anchor
employee participating in those plans.
With respect to the FCB 401(k) plan, the accounts of all FCB employees who
are participants in that plan will be vested fully as of the effective time of
the merger.
If the employment of any employee of FCB is involuntarily terminated by
Anchor within nine months after the merger, that employee will be entitled to
receive a severance payment from Anchor, based on the length of his or her
service and his or her salary or wage rate at FCB.
The unfunded deferred compensation arrangements that FCB currently has in
place for two of its officers and for its directors will remain in place and be
assumed by Anchor. With respect to the
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deferred compensation plan for FCB's directors, Anchor has agreed to establish a
so-called "Rabbi Trust" for that plan, which will provide that it is to be
funded if and when Anchor or AnchorBank undergoes a change of control or Mr.
Timmerman ceases to hold the office of President, Chairman and Chief Executive
Officer of Anchor.
FCB's existing employee stock ownership plan will be terminated and the
participants' accounts thereunder will be paid to the participants, after Anchor
receives a determination letter from the IRS authorizing such termination and
payment.
Unexercised stock options currently held by FCB employees under FCB's
various option plans and agreements will vest automatically upon approval by
FCB's shareholders of the merger and remain vested for a period of at least 60
days thereafter. With respect to certain options, if they are not exercised
during that 60-day period, they will revert to their previously-existing vesting
schedule. The obligations of FCB to its employees currently holding FCB stock
options will be assumed by Anchor, with the FCB options being converted into
equivalent options to purchase Anchor stock. Each outstanding option to purchase
one share of FCB stock will become an option to purchase 1.83 shares of Anchor
stock with an exercise price per share equal to the original per share exercise
price divided by 1.83.
Upon completion of the merger, the executive officers of FCB who have
employment agreements and related contracts with FCB will receive payments from
Anchor as consideration for the termination of those agreements. For more
information, see "THE MERGER -- Interests of Members of FCB's Board of Directors
and Management in the Merger" on page 47.
GOVERNANCE
The merger agreement provides that, following the merger, Anchor will take
necessary actions, including expansion of the size of its board of directors, if
required, to cause two existing directors of FCB (to be selected by Anchor) to
be appointed to Anchor's board. However, if one of the FCB directors is
appointed to Anchor's board when the merger becomes effective and the merger
becomes effective within 60 days prior to July 27, 1999 (the anticipated date of
Anchor's next annual shareholders' meeting), then Anchor will not be required to
expand the size of its board immediately to appoint the second FCB director. In
that case, the second FCB director may either be nominated for election at, or
be appointed as an Anchor director effective as of, such annual meeting. Anchor
is also required to appoint two FCB directors (one or both of whom may be the
same individuals appointed to Anchor's board) to AnchorBank's board of
directors.
The merger agreement also provides that, after the merger of the parties'
banking subsidiaries, AnchorBank will establish an advisory board, which it will
maintain in place for at least one year. AnchorBank's advisory board will
include all those persons who are currently serving as directors of Fox Cities
Bank, except for those who are appointed to Anchor's or AnchorBank's board of
directors as described in the preceding paragraph.
For more information, see "MANAGEMENT AND OPERATIONS AFTER THE MERGER" on
page 65.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that after the merger becomes effective
Anchor will indemnify, to the greatest extent permitted by applicable law, all
current and former officers or directors of FCB or any of its subsidiaries
against any liability they may incur or that may be asserted against them
pertaining to or as a result of their service as a director or officer of FCB or
any of its subsidiaries (including the costs of defending any such claims). The
merger agreement also requires that Anchor carry directors' and
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officers' liability insurance covering FCB's officers and directors against such
liability for six years, provided that Anchor is not required to expend more
than 200% of the current cost of such insurance to FCB on an annual basis.
CONDITIONS
The merger is subject to customary closing conditions, including, without
limitation, the following:
- the receipt of required shareholder approvals of FCB and Anchor;
- the continued accuracy of the representations and warranties contained
in the merger agreement;
- the satisfaction of the covenants contained in the merger agreement;
- there has not occurred, between the date of the merger agreement and the
date of closing, any change in the financial condition, results of
operations or business of either company which would have a material
adverse effect (as defined in the merger agreement) on such company and
its subsidiaries, taken as a whole;
- there is not any pending material action, proceeding or investigation
challenging or seeking material damages in connection with the merger or
seeking to limit or restrain Anchor's right to exercise ownership of FCB
after the merger;
- the receipt of regulatory approvals, including approval of the Office of
Thrift Supervision, to consummate the merger;
- the receipt of opinions of counsel that the merger will qualify as a
tax-free reorganization; and
- the receipt of an opinion of FCB's accountants that FCB is an entity
that qualifies for pooling of interests accounting treatment and an
opinion of Anchor's accountants that the merger will qualify for
accounting treatment as a pooling of interests.
TERMINATION
The merger agreement may be terminated under the following circumstances:
- by mutual consent of the parties (by the majority votes of their
respective boards of directors);
- by either party if the merger is not completed by September 30, 1999;
- by either party if either of Anchor's or FCB's shareholders vote against
the merger;
- by either party if any permanent injunction is issued preventing the
merger;
- by either party if any regulatory body has denied approval of the merger
and neither party has appealed that denial;
- by the non-breaching party if there exist material breaches of the
representations or warranties contained in the merger agreement, which
breaches, individually or in the aggregate, would result in a material
adverse effect on the breaching party and which (if curable) are not
cured within thirty (30) days after notice;
- by the non-breaching party if there occurs a material breach of any
covenant or agreement in the merger agreement which (if curable) is not
cured within thirty (30) days after notice;
- by FCB, if, as a result of a proposed acquisition of FCB by a third
party, the FCB directors determine that termination is appropriate in
the fulfillment of their fiduciary duties (based on advice of its
counsel), but only after Anchor has first been advised of the identity
of the third
56
<PAGE> 65
party and the terms of its proposal and been given an opportunity to negotiate
adjustments in the terms of the merger agreement (this is referred to as a
"fiduciary termination" and is discussed in greater detail below under
"-- Fiduciary Termination"); and
- by FCB if the average price of Anchor stock during a specified trading
period preceding the time the last approval necessary to complete the
merger has been received falls below $15.00 per share and declines by
more than 15% relative to an index of the prices of the common stocks of
a defined peer group of other comparable publicly-traded companies (the
specifics of this provision are discussed in greater detail below under
"-- Price Condition").
FIDUCIARY TERMINATION
As discussed on page 54 under "-- No Solicitation of Transactions," the
merger agreement prohibits FCB and its officers, directors and employees from
soliciting, initiating, encouraging or making any takeover proposal, and from
recommending, endorsing or agreeing to any such takeover proposal, participating
in discussions with third parties relating to any takeover proposal, or
providing third parties with any nonpublic information relating to any takeover
proposal, except under circumstances where FCB, after consulting with and
receiving the advice of its outside legal counsel, determines in good faith that
it is appropriate for FCB's board to consider such unsolicited takeover proposal
in order to discharge its fiduciary duties to FCB's shareholders.
The merger agreement gives FCB the right to terminate the merger agreement
and not complete the merger if, as a result of an unsolicited takeover proposal
by a party other than Anchor, the FCB board of directors determines in good
faith, after consulting with and receiving the advice of its outside legal
counsel, that the board's failure to accept such takeover proposal could
reasonably be deemed to constitute a breach of its fiduciary obligations to
FCB's shareholders. However, before FCB may terminate the merger agreement under
these circumstances, it must first disclose to Anchor the identity of the third
party making the takeover proposal in question and the financial terms of that
proposal, and must provide Anchor with the opportunity to negotiate changes in
the terms of the merger agreement that would enable FCB to proceed with the
merger.
If FCB exercises its right to terminate the merger under these
circumstances, Anchor would have the right to exercise its option to acquire up
to 19.9% of FCB's stock. See "THE STOCK OPTION AGREEMENT" on page 60.
PRICE CONDITION
Under the merger agreement, FCB has the right to terminate the merger
agreement and abandon the merger if the average price of Anchor stock during a
specified trading period preceding the time the last approval necessary to
complete the merger has been received falls below $15.00 per share and declines
by more than 15% relative to an index of the prices of the common stocks of a
defined peer group of other comparable publicly-traded companies. The specified
trading period is the twenty trading days ending on the fifth trading day prior
to the date that the last approval necessary to complete the merger is received.
For example, if the last approval is received at the special meeting of Anchor
shareholders held on June 7, 1999, the fifth trading day prior to that date
would be Friday, May 28. The trading period would span the period from May 3 to
May 28.
The price condition was included in the merger agreement at FCB's request
in order to provide its shareholders with some measure of protection against a
dramatic decline in the value of Anchor stock between the date of the merger
agreement and the date the merger is completed. However, the second part of the
price condition takes into account the possibility that a decline in Anchor's
stock price could be the result of a general decline in the price of stocks in
the thrift industry, rather than any situation
57
<PAGE> 66
particular to Anchor. Further, the price condition is waivable by FCB, meaning
that FCB's board could decide not to invoke the price condition and proceed with
the merger even if the price condition is not satisfied.
As of the date of this Joint Proxy Statement/Prospectus, assuming that
shareholder approval is received on June 7, 1999 and that is the last approval
necessary to complete the merger, the measurement period for the price condition
has not begun. Therefore, at the present time, we have no way of telling whether
the price condition will be satisfied at the time of the FCB special meeting,
although, if it is not, we would expect to announce this fact to FCB
shareholders at or prior to the FCB special meeting.
In order for FCB to have the right to terminate the merger agreement
because of the price condition, both of the following must happen:
- The average closing price of Anchor stock as reported on Nasdaq over the
20-day trading period (from May 3 to May 28, in the above example) must
be less than $15.00;
AND
- The ratio of the average closing price of Anchor stock as reported on
Nasdaq over the 20-day trading period (from May 3 to May 28, in the
above example) to the average closing price over the same period of a
group of comparable financial institution holding companies must have
fallen by more than 15% when compared to the same ratio measured over
the 20-day trading period which ended on December 28, 1998, the fifth
trading day prior to the date of the merger agreement.
The members of the group of comparable financial institution holding
companies for this purpose (the "Peer Group") are listed in Exhibit D to the
copy of the merger agreement which was filed as an Exhibit to FCB's Current
Report on Form 8-K dated January 14, 1999. See "WHERE YOU CAN FIND MORE
INFORMATION" on page 95 to find out how you can obtain a copy of this document.
The table on the following page illustrates how the price condition would
work.
58
<PAGE> 67
<TABLE>
<CAPTION>
AVERAGE CLOSING PRICE
---------------------- PRICE
PEER CONDITION
ANCHOR GROUP RATIO
--------- --------- ---------
<S> <C> <C> <C> <C>
On December 28, 1998, these were the
applicable prices and ratios............. $20.49 $23.18 0.8840
In order for FCB to be entitled to
terminate the merger agreement based on
the price condition:
Anchor's average closing price would
have to fall below.................... $15.00
AND
The price condition ratio would have
to fall below......................... 0.7514
DECLINE IN PRICE
CONDITION RATIO
-----
EXAMPLES. IF, ON JUNE 7, 1999:
- - THE APPLICABLE PRICES AND RATIOS ARE: $14.50 $19.00 0.7632 13.7%
FCB WOULD NOT have the right to
terminate the
merger agreement because the price
condition ratio did not decline by
more than 15% (even though Anchor's
average price was below $15.00).
- - THE APPLICABLE PRICES AND RATIOS ARE: $15.25 $22.00 0.6932 21.6%
FCB WOULD NOT have the right to
terminate the
merger agreement because Anchor's
average price was above $15.00 (even
though the price condition ratio
declined by more than 15%).
- - THE APPLICABLE PRICES AND RATIOS ARE: $14.75 $22.00 0.6477 26.7%
FCB WOULD have the right to terminate
the merger agreement because Anchor's
average price was below $15.00 and the
price condition ratio declined by more
than 15%.
</TABLE>
AMENDMENT AND WAIVER
The parties may amend the merger agreement prior to the completion of the
merger if the amendment is approved by both parties' boards of directors and is
in writing and signed by both parties. Such amendment could change the structure
of the merger; however, no such amendment may be made after the merger is
approved by FCB's shareholders if its effect would be to reduce the exchange
ratio or otherwise change the amount or type of consideration FCB shareholders
are entitled to receive in the merger. The conditions to each party's obligation
to consummate the merger may be waived by the other party in whole or in part to
the extent permitted by applicable law.
59
<PAGE> 68
THE STOCK OPTION AGREEMENT
GENERAL
FCB granted Anchor an option to purchase up to 764,295 shares of FCB stock
(subject to adjustment to avoid dilution, but not to exceed 19.9% of the shares
of FCB stock issued and outstanding at the time of exercise), at an exercise
price of $27.45 per share. Anchor can only exercise the option if any of the
triggering and exercise events, which generally relate to control of FCB, occur.
None of these events has occurred as of the date of this Joint Proxy
Statement/Prospectus.
The option exercise price was determined by multiplying the exchange ratio
(1.83) times $15.00, which is the lowest price per share Anchor stock could
average during a specified trading period preceding the time of the merger
without triggering FCB's right to terminate the merger agreement if other
conditions relating to the Anchor stock average price are also met. See "THE
MERGER AGREEMENT -- Price Condition" on page 57. The closing price of FCB stock
on January 4, 1999 (the last trading date before the parties executed the merger
agreement and stock option agreement) was $28.00; the closing price of FCB stock
on January 5, 1999 (the last trading date before the parties publicly announced
the execution of the merger agreement and stock option agreement) was $26.75.
ANTI-TAKEOVER EFFECT
The option is intended to increase the likelihood that the merger will be
completed in accordance with the terms of the merger agreement. Some aspects of
the stock option agreement may have the effect of discouraging persons who
might, prior to the time the merger is completed, be interested in acquiring FCB
or a significant interest in FCB from considering or proposing such an
acquisition, even if they were prepared to pay a higher price per share for FCB
stock than the price per share implicit in the exchange ratio used in the merger
agreement. Attempts to acquire FCB or an interest in FCB could cause the option
to become exercisable and give Anchor the right to receive a portion of any
premium offered to FCB shareholders. This right would significantly increase the
cost of a proposed transaction to a potential acquiror when compared to the cost
if the stock option agreement did not exist. This increased cost might
discourage a potential acquiror from considering or proposing an acquisition or
might result in a potential acquiror proposing to pay a lower price per share to
acquire FCB than it might otherwise have been willing to pay. In addition, the
management of FCB believes that exercise of the option is likely to prohibit any
reasonably foreseeable acquiror of FCB (other than Anchor) from accounting for
any acquisition of FCB using the pooling of interests accounting method, thereby
further diminishing FCB's attractiveness to such an acquiror. Finally, because
Anchor would be a 19.9% shareholder of FCB after it exercises the option,
exercise of the option would increase the ability of Anchor to obtain the
approval of FCB's shareholders to consummate the merger with Anchor and
adversely affect the ability of a third party to obtain FCB shareholder approval
for an alternative transaction.
SUMMARY OF THE STOCK OPTION AGREEMENT
The following is a summary of the material provisions of the stock option
agreement. This summary is necessarily selective and incomplete and is qualified
in its entirety by the full text of the stock option agreement appearing as
Appendix B to this Joint Proxy Statement/Prospectus. You should read the stock
option agreement carefully. In this summary, we will use some capitalized terms
which, unless we indicate otherwise, have the meanings given to them in the
stock option agreement.
60
<PAGE> 69
WHEN ANCHOR MAY EXERCISE THE OPTION
Anchor may exercise all or any part of the option within 45 days after a
"Subsequent Triggering Event" occurs if all of the following are true:
- an "Initial Triggering Event" has occurred;
- Anchor has not materially breached any of its representations,
warranties, covenants or agreements contained in the merger agreement or
the stock option agreement (which, in the case of the merger agreement,
would entitle FCB to terminate the merger agreement);
- FCB has not terminated the merger agreement: (1) due to a material
breach by Anchor; (2) due to Anchor's shareholders' failure to approve
the merger; or (3) pursuant to the provision of the merger agreement
which allows FCB to terminate the merger agreement following a decline
in the average price of Anchor stock measured over a specified period
(see "THE MERGER AGREEMENT -- Price Condition" on page 57);
- Anchor has complied with all applicable laws, including obtaining
regulatory approval, if required; and
- the option has not expired.
INITIAL TRIGGERING EVENT. The stock option agreement defines "Initial
Triggering Event" to mean virtually any event which might lead, or is intended
to lead, to an acquisition of control of FCB by a "third party" ("third party"
means any person, or "group" as defined in the federal securities laws, other
than Anchor or any subsidiary of Anchor). Specifically, an "Initial Triggering
Event" occurs if:
- FCB, or any subsidiary of FCB, without Anchor's prior written consent,
authorizes or enters into an agreement to engage in, or FCB's board
recommends that FCB's shareholders approve or accept, an "Acquisition
Transaction" with a third party. "Acquisition Transaction" means:
- a merger (except for the merger with Anchor) or consolidation, or any
similar transaction, involving FCB or Fox Cities Bank;
- the purchase, lease or other disposition of 35% or more of the
consolidated assets, net revenues or net income of FCB; or
- the issuance, sale or other disposition (including by way of merger,
consolidation, share exchange or otherwise) of securities
representing 25% or more of the voting power of FCB or Fox Cities
Bank;
- any third party acquires beneficial ownership or the right to acquire
beneficial ownership of 20% or more of the then outstanding shares of
FCB stock (other than shares held in accounts related to FCB's employee
benefit plans);
- any third party publicly announces a proposal to effect or FCB's
shareholders agree to engage in an Acquisition Transaction;
- if, after it is publicly announced that any third party has made or
intends to make a proposal to engage in an Acquisition Transaction
(unless the merger agreement has been properly terminated for other
reasons), one of the following occurs:
- FCB's special meeting is canceled (in violation of the merger
agreement);
- FCB's special meeting is held but FCB shareholders do not approve the
merger; or
61
<PAGE> 70
- FCB's board withdraws or modifies its recommendation that FCB
shareholders approve the merger;
- any third party commences a tender offer to purchase any shares of FCB
stock, or files a tender offer registration statement or tender offer
materials with respect to, a potential exchange offer or tender offer to
purchase any shares of FCB stock if, upon completion of the tender offer
or exchange offer, the third party would acquire beneficial ownership of
20% or more of the then outstanding shares of FCB stock;
- FCB willfully breaches any covenant or obligation contained in the
merger agreement in anticipation of and in order to facilitate an
Acquisition Transaction, and following such breach Anchor would be
entitled to terminate the merger agreement;
- any third party files an application or notice with the Office of Thrift
Supervision or other federal or state bank regulatory or antitrust
authority for approval to engage in an Acquisition Transaction; or
- any third party acquires a sufficient number of shares of FCB stock to
allow the third party to elect a majority of the members of FCB's board
or otherwise enters into an agreement by which that person would be
entitled to elect or cause the appointment of a majority of the members
of FCB's board.
SUBSEQUENT TRIGGERING EVENT. The stock option agreement generally defines
a "Subsequent Triggering Event" as having occurred if:
- any third party acquires beneficial ownership of 51% or more of the then
outstanding FCB stock; or
- FCB, or any subsidiary of FCB, without Anchor's prior written consent,
authorizes or enters into an agreement to engage in, or FCB's board
recommends that FCB's shareholders approve or accept, an "Acquisition
Transaction" with a third party. "Acquisition Transaction" is defined
differently for this purpose to mean:
- a merger (except for the merger with Anchor) or consolidation, or any
similar transaction, involving FCB or Fox Cities Bank;
- the purchase, lease or other disposition of 35% or more of the
consolidated assets, net revenues or net income of FCB; or
- the sale, issuance or other disposition (including by way of merger,
consolidation, share exchange or otherwise) of securities
representing 51% or more of the voting power of FCB or Fox Cities
Bank.
WHEN THE OPTION EXPIRES
The option expires when any of the following occurs:
- the merger is completed;
- the merger agreement is terminated if such termination occurs prior to
the occurrence of an Initial Triggering Event unless such termination is
a "Listed Termination," which means:
- a termination by Anchor due to a material breach by FCB of any of its
representations, warranties, covenants or agreements contained in the
merger agreement or a failure to make, or a withdrawal or
modification of the recommendation of FCB's board that FCB's
shareholders approve the merger;
62
<PAGE> 71
- a termination by FCB or Anchor due to the failure of FCB's
shareholders to approve the merger if, prior to FCB's special
meeting, it is announced that a third party has made, or intends to
make, a takeover proposal; or
- a termination by FCB if, as a result of an unsolicited takeover
proposal, FCB's board determines that its failure to accept such
takeover proposal could be deemed to constitute a breach of its
fiduciary obligations under applicable law (see "THE MERGER
AGREEMENT -- Fiduciary Termination" on page 57);
- one year after termination of the merger agreement if such termination
is a Listed Termination; or
- one year after termination of the merger agreement if such termination
follows an Initial Triggering Event.
REPURCHASE RIGHT
At any time before the option expires and after a Repurchase Event occurs,
at the request of Anchor, FCB must repurchase either:
- the option from Anchor at a price equal to the amount by which the
market/offer price (as defined below) exceeds $27.45, multiplied by the
number of shares for which the option may then be exercised; or
- a number (designated by Anchor) of the shares of FCB stock acquired by
Anchor pursuant to the stock option agreement ("Option Shares") at a
price equal to the market/offer price multiplied by the number of Option
Shares so designated.
The term "market/offer price" used in the stock option agreement means the
highest of:
- the price per share of FCB stock at which a tender or exchange offer
therefor has been made;
- the price per share of FCB stock to be paid by any third party pursuant
to an agreement with FCB;
- the highest closing price for shares of FCB stock within the three-month
period immediately preceding the date Anchor gives notice of the
required repurchase of the option or Option Shares, as the case may be;
or
- in the event of a sale of all or any substantial part of FCB's assets or
deposits, the sum of the net price paid in such sale for such assets or
deposits and the current market value of the remaining net assets of FCB
as determined by a nationally recognized investment banking firm,
divided by the number of shares of FCB stock outstanding at the time of
such sale.
"Repurchase Event" means either (1) the acquisition by any third party of
beneficial ownership of 75% or more of the then outstanding FCB stock, or (2)
the consummation of an Acquisition Transaction (for this purpose, defined in the
same manner as "Acquisition Transaction" is defined for purposes of "Initial
Triggering Event").
63
<PAGE> 72
REGISTRATION RIGHTS AND RIGHT OF FIRST REFUSAL FOR REGISTERED SALE
Anchor has the right, within one year of the exercise of the option, to
require FCB to register any Option Shares under the Securities Act of 1933 so
that Anchor may publicly resell those Option Shares. This right is known as
Anchor's "Registration Right." If Anchor exercises its Registration Right:
- Anchor may require FCB to prepare and file a registration statement
under the Securities Act for the Option Shares; or
- if FCB is registering other shares of FCB stock under the Securities
Act, Anchor may be able to require FCB to include the Option Shares as
part of that registration.
In either case, FCB must also use its reasonable efforts to qualify the
Option Shares under any applicable state securities laws if necessary for Anchor
to be able to sell them. At any time within 30 business days after FCB receives
notice from Anchor that Anchor proposes to sell Option Shares pursuant to the
exercise of its Registration Right, FCB has the right to repurchase such Option
Shares at a cash price equal to their "Fair Market Value." "Fair Market Value"
means the average of the daily closing sales price of a share of FCB stock on
Nasdaq during the five trading days prior to the date on which Anchor notifies
FCB that it is exercising its Registration Right, times the number of Option
Shares to be repurchased.
EXTENSION OF PERIODS
The periods for exercising exercise, registration and repurchase rights
under the stock option agreement will be extended to the extent necessary to
allow the parties to obtain all regulatory approvals for the exercise of such
rights and the expiration of all applicable waiting periods.
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<PAGE> 73
MANAGEMENT AND OPERATIONS AFTER THE MERGER
DIRECTORS
ANCHOR BOARD. Anchor currently has seven members and one vacancy on its
board of directors, including the chairman, Mr. Douglas Timmerman. The seven
current directors are expected to remain on the board following the completion
of the merger. The board is currently divided into three classes, with three
directors serving terms expiring in July 1999, two directors serving terms
expiring in July 2000 (the vacancy exists in the class with terms expiring in
July 2000) and two directors serving terms expiring in July 2001. For
biographical information regarding Anchor's current directors, see Anchor's 1998
Annual Report on Form 10-K which is incorporated into this document by
reference. See "WHERE YOU CAN FIND MORE INFORMATION" on page 95 to find out how
to locate documents incorporated by reference.
The merger agreement provides that, following the merger, Anchor will take
necessary actions, including expansion of the size of its board of directors if
required, to cause two existing directors of FCB (to be selected by Anchor) to
be appointed to or nominated to serve on Anchor's board. One director must be
appointed upon completion of the merger. The other director may be nominated for
election at, or be appointed effective as of, Anchor's 1999 annual meeting. See
"THE MERGER AGREEMENT -- Governance" on page 55.
It is anticipated that Donald D. Parker and Richard A. Bergstrom, who have
served on FCB's board of directors since it was incorporated as the holding
company for Fox Cities Banks in 1993, will be selected to serve on Anchor's
board. Under the terms of the merger agreement, each of the former FCB directors
must be nominated to Anchor's board for a term of at least two years. If, prior
to the completion of the merger, either of these individuals declines or is
unable to serve as a director, Anchor will be required to designate another
individual who currently serves on FCB's board to fill such vacancy.
For biographical information with respect to Messrs. Parker and Bergstrom,
see FCB's 1998 Annual Report on Form 10-K which is incorporated into this
document by reference. See "WHERE YOU CAN FIND MORE INFORMATION" on page 95 to
find out how you can locate documents incorporated by reference.
ANCHORBANK BOARD. AnchorBank's board of directors currently consists of
five members. The merger agreement provides that Anchor will elect two existing
directors of FCB to serve on AnchorBank's board. In Anchor's discretion, one or
both of these individuals may be the individuals appointed to serve as directors
of Anchor. It is currently expected that Mr. Bergstrom and David L. Omachinski
will be selected to serve on the AnchorBank board.
ADVISORY BOARD. The merger agreement provides that following the merger of
AnchorBank and Fox Cities Bank, Anchor will establish an advisory board
consisting of all the directors of FCB and Fox Cities Bank who are not appointed
or elected to serve on the board of directors of Anchor or AnchorBank.
For information regarding compensation of Anchor and AnchorBank directors
and the members of the advisory board, see "THE MERGER -- Interests of Members
of FCB's Board of Directors and Management in the Merger -- New Directors of
Anchor and AnchorBank" on page 48.
OFFICERS
Following the completion of the merger, Douglas J. Timmerman will continue
as Chairman, President and Chief Executive Officer of Anchor and AnchorBank, and
the other executive officers of Anchor and AnchorBank are expected to remain in
their current positions. For biographical information
65
<PAGE> 74
and information regarding the compensation of Anchor's current executive
officers, see Anchor's 1998 Annual Report on Form 10K which is incorporated into
this document by reference. See page 96 for information on how to find documents
incorporated by reference.
Mr. Rothenbach and Mr. Parker will join Anchor as Senior Vice Presidents
pursuant to employment agreements that will be entered into at the time of the
merger. See "THE MERGER -- Interests of Members of FCB's Board of Directors and
Management in the Merger -- Employment Arrangements" on page 47 for additional
information regarding the terms of these employment agreements.
OPERATIONS
Following the merger, Anchor's corporate headquarters will remain in its
current executive offices located at 25 West Main Street, Madison, Wisconsin
53703. Following the bank merger, Fox Cities Bank's main office and all of its
current branch offices will be operated as branch offices of AnchorBank.
Following the bank merger, AnchorBank will consolidate certain functions
including external and internal data processing, retail and lending support, and
other functions, and will operate under the name "AnchorBank, S.S.B."
On January 25, 1999, Anchor Bancorp, Inc., a Minnesota corporation, and two
of its subsidiaries, Anchor Bank, National Association and Anchor Bank West St.
Paul, National Association (collectively "Anchor -- Minnesota") commenced
litigation in the United States District Court for the District of Minnesota
against Anchor and AnchorBank asserting that Anchor and AnchorBank have engaged
in trademark infringement and unfair competition with respect to the use of the
"Anchor" name in connection with banking services. Anchor -- Minnesota, which
holds a federal trademark registration for the use of the name "Anchorbank,"
seeks to limit Anchor's and AnchorBank's use of the "Anchor" name to the 14
Wisconsin counties in which AnchorBank currently has offices (which do not
include all of the Wisconsin counties in which AnchorBank will have additional
branch offices as a result of the bank merger) and is asserting a superior right
to use the "Anchor" name with respect to banking services throughout the
remainder of the United States. In response, Anchor and AnchorBank are seeking
to have Anchor -- Minnesota's federal registration of the "Anchor" name canceled
and are otherwise vigorously defending this litigation while also exploring a
mutually acceptable resolution of this dispute. Anchor's management does not
believe that this litigation will have a material adverse effect on Anchor's or
AnchorBank's business, financial condition or results of operations, although
there can be no assurance to this effect.
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<PAGE> 75
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The unaudited pro forma condensed combined financial statements are based
on the historical consolidated financial statements of Anchor and FCB and give
effect to the merger as a pooling of interests. Such pro forma information
includes:
- the historical results of operations of Anchor for the fiscal years
ended March 31, 1998, 1997 and 1996 and the nine months ended December
31, 1998 and 1997, and the historical balance sheet of Anchor as of
December 31, 1998; and
- the historical results of operations of FCB for the fiscal years ended
March 31, 1998, 1997 and 1996 and the nine months ended December 31,
1998 and 1997, and the historical balance sheet of FCB as of December
31, 1998.
The unaudited pro forma condensed combined balance sheet assumes that the
merger was completed on December 31, 1998. The unaudited pro forma condensed
combined statements of operations assume that the merger was completed on April
1, 1995. The unaudited pro forma adjustments described in the accompanying notes
are based upon preliminary estimates and assumptions that the managements of
Anchor and FCB believe are reasonable. Actual adjustments may differ from those
reflected in the unaudited pro forma condensed combined financial statements.
Anchor and FCB are still in the process of reviewing their respective accounting
policies relative to those followed by the other entity. As a result of this
review, it may be necessary to restate amounts in Anchor's or FCB's financial
statements to conform to those accounting policies that are most appropriate. In
management's opinion, any such restatements will not be material.
The unaudited pro forma financial statements are not necessarily indicative
of the actual or future financial position or results of operations that would
have or will occur upon consummation of the merger, and should be read in
conjunction with the audited and unaudited historical consolidated financial
statements, including the notes thereto, of Anchor and FCB incorporated by
reference. See "WHERE YOU CAN FIND MORE INFORMATION" on page 95.
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<PAGE> 76
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1998
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED
ANCHOR FCB COMPANY
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................. $ 32,067 $ 23,916 -- $ 55,983
Investment securities available for
sale................................... 25,623 4,900 -- 30,523
Investment securities held to maturity.... 8,104 44,297 -- 52,401
Mortgage-related securities available for
sale................................... 53,649 25,527 -- 79,176
Mortgage-related securities held to
maturity............................... 179,079 14,381 -- 193,460
Loans receivable, net:
Held for sale.......................... 22,381 20,189 -- 42,570
Held for investment.................... 1,698,609 373,884 -- 2,072,493
Foreclosed properties and repossessed
assets................................. 2,487 -- -- 2,487
Real estate held for development and
sale................................... 28,924 -- -- 28,924
Office properties and equipment........... 18,272 6,758 -- 25,030
Other assets.............................. 54,266 12,098 -- 66,364
---------- -------- ------- ----------
Total assets........................... $2,123,461 $525,950 -- $2,649,411
========== ======== ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits.................................. $1,497,715 $329,290 -- $1,827,005
Borrowings................................ 473,440 105,850 -- 579,290
Advance payments by borrowers for taxes
and insurance.......................... 1,074 1,223 -- 2,297
Other liabilities......................... 15,066 12,732 5,200(2) 32,998
---------- -------- ------- ----------
Total liabilities...................... 1,987,295 449,095 5,200 2,441,590
---------- -------- ------- ----------
Common stock.............................. 2,500 45 (45)(3) 2,500
Additional paid-in capital................ 50,673 60,310 (48,030)(3) 62,953
Retained earnings......................... 134,205 31,601 (5,200)(2) 160,606
Less: Treasury stock...................... (48,532) (14,535) 48,075(3) (14,992)
Borrowings of Employee Stock Ownership
Plan................................... (1,379) -- -- (1,379)
Common stock purchased by benefit plans... (2,108) (784) -- (2,892)
Net unrealized gain on securities
available for sale, net of tax......... 807 218 -- 1,025
---------- -------- ------- ----------
Total stockholders' equity................ 136,166 76,855 (5,200) 207,821
---------- -------- ------- ----------
Total liabilities and stockholders'
equity............................... $2,123,461 $525,950 -- $2,649,411
========== ======== ======= ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Data
68
<PAGE> 77
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
NINE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMBINED
ANCHOR FCB COMPANY
HISTORICAL HISTORICAL PRO FORMA
---------- ---------- ---------
<S> <C> <C> <C>
Total interest income.................................... $117,256 $29,075 $146,331
Total interest expense................................... 70,779 16,015 86,794
-------- ------- --------
Net interest income...................................... 46,477 13,060 59,537
Provision for loan losses................................ 600 318 918
-------- ------- --------
Net interest income after provision for loan losses...... 45,877 12,742 58,619
Total non-interest income................................ 14,077 2,735 16,812
Total non-interest expenses.............................. 30,742 7,295 38,037
-------- ------- --------
Income before income taxes............................... 29,212 8,182 37,394
Income taxes............................................. 11,202 3,071 14,273
-------- ------- --------
Net income............................................... $ 18,010 $ 5,111 $ 23,121
======== ======= ========
Earnings per share:
Basic.................................................. $1.05 $1.37 $0.96
Diluted................................................ 0.98 1.34 0.91
Average shares outstanding:
Basic.................................................. 17,142 3,731 23,970(4)
Diluted................................................ 18,403 3,804 25,364(4)
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Data
69
<PAGE> 78
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
NINE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
COMBINED
ANCHOR FCB COMPANY
HISTORICAL HISTORICAL PRO FORMA
---------- ---------- ---------
<S> <C> <C> <C>
Total interest income.................................... $111,449 $28,129 $139,578
Total interest expense................................... 67,275 15,857 83,132
-------- ------- --------
Net interest income...................................... 44,174 12,272 56,446
Provision for loan losses................................ 135 800 935
-------- ------- --------
Net interest income after provision for loan losses...... 44,039 11,472 55,511
Total non-interest income................................ 8,807 2,053 10,860
Total non-interest expenses.............................. 28,049 7,431 35,480
-------- ------- --------
Income before income taxes............................... 24,797 6,094 30,891
Income taxes............................................. 9,545 1,996 11,541
-------- ------- --------
Net income............................................... $ 15,252 $ 4,098 $ 19,350
======== ======= ========
Earnings per share:
Basic.................................................. $0.84 $1.12 $0.78
Diluted................................................ 0.79 1.09 0.74
Average shares outstanding
Basic.................................................. 18,124 3,665 24,831(4)
Diluted................................................ 19,296 3,744 26,148(4)
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Data
70
<PAGE> 79
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
COMBINED
ANCHOR FCB COMPANY
HISTORICAL HISTORICAL PRO FORMA
---------- ---------- ---------
<S> <C> <C> <C>
Total interest income.................................... $148,971 $37,939 $186,910
Total interest expense................................... 89,601 21,292 110,893
-------- ------- --------
Net interest income...................................... 59,370 16,647 76,017
Provision for loan losses................................ 300 950 1,250
-------- ------- --------
Net interest income after provision for loan losses...... 59,070 15,697 74,767
Total non-interest income................................ 12,212 3,010 15,222
Total non-interest expenses.............................. 38,294 9,843 48,137
-------- ------- --------
Income before income taxes............................... 32,988 8,864 41,852
Income taxes............................................. 12,487 3,020 15,507
-------- ------- --------
Net income............................................... $ 20,501 $ 5,844 $ 26,345
======== ======= ========
Earnings per share:
Basic.................................................. $1.13 $1.59 $1.06
Diluted................................................ 1.06 1.55 1.00
Average shares outstanding
Basic.................................................. 18,093 3,680 24,827(4)
Diluted................................................ 19,349 3,764 26,237(4)
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Data
71
<PAGE> 80
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
COMBINED
ANCHOR FCB COMPANY
HISTORICAL HISTORICAL PRO FORMA
---------- ---------- ---------
<S> <C> <C> <C>
Total interest income.................................... $140,551 $19,965 $160,516
Total interest expense................................... 84,716 10,827 95,543
-------- ------- --------
Net interest income...................................... 55,835 9,138 64,973
Provision for loan losses................................ 500 350 850
-------- ------- --------
Net interest income after provision for loan losses...... 55,335 8,788 64,123
Total non-interest income................................ 13,551 987 14,538
Total non-interest expenses.............................. 47,406 5,670 53,076
-------- ------- --------
Income before income taxes............................... 21,480 4,105 25,585
Income taxes............................................. 7,532 1,665 9,197
-------- ------- --------
Net income............................................... $ 13,948 $ 2,440 $ 16,388
======== ======= ========
Earnings per share:
Basic.................................................. $0.75 $1.03 $0.71
Diluted................................................ 0.71 1.01 0.68
Average shares outstanding
Basic.................................................. 18,639 2,358 22,954(4)
Diluted................................................ 19,710 2,409 24,119(4)
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Data
72
<PAGE> 81
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
COMBINED
ANCHOR FCB COMPANY
HISTORICAL HISTORICAL PRO FORMA
---------- ---------- ---------
<S> <C> <C> <C>
Total interest income.................................... $125,719 $18,319 $144,038
Total interest expense................................... 74,978 10,081 85,059
-------- ------- --------
Net interest income...................................... 50,741 8,238 58,979
Provision for loan losses................................ 475 200 675
-------- ------- --------
Net interest income after provision for loan losses...... 50,266 8,038 58,304
Total non-interest income................................ 9,163 765 9,928
Total non-interest expenses.............................. 36,964 4,579 41,543
-------- ------- --------
Income before income taxes............................... 22,465 4,224 26,689
Income taxes............................................. 7,959 1,667 9,626
-------- ------- --------
Net income............................................... $ 14,506 $ 2,557 $ 17,063
======== ======= ========
Earnings per share:
Basic.................................................. $0.71 $1.03 $0.68
Diluted................................................ 0.68 1.01 0.65
Average shares outstanding
Basic.................................................. 20,467 2,482 25,009(4)
Diluted................................................ 21,476 2,532 26,110(4)
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Data
73
<PAGE> 82
ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The unaudited Pro Forma Condensed Combined Financial Data has been prepared
assuming the merger will be accounted for under the pooling of interests method
and is based on the historical consolidated financial statements of Anchor and
FCB. The merger is structured as a tax-free exchange. Anchor and FCB are in the
process of reviewing their respective accounting policies. As a result of this
review, it might be necessary to restate amounts in financial statements of the
combined company to conform to those accounting policies that are most
appropriate. Any such restatements are not expected to be material.
NOTE 2 -- MERGER RELATED CHARGES
In connection with the merger, Anchor and FCB expect the combined company
to incur pre-tax merger related charges of approximately $8.5 million. These
charges are expected to include $5.4 million in change of control severance and
other related employee payments, $2.3 million in investment banking, legal and
accounting fees and $0.8 million in direct merger related data processing and
other equipment costs.
The merger related charges and the related tax effect of $3.3 million have
been reflected in the Unaudited Pro Forma Condensed Combined Balance Sheet as of
December 31, 1998, but have not been reflected in the Unaudited Pro Forma
Condensed Combined Statements of Operations as they are not expected to have a
continuing impact on the operations of the combined company.
NOTE 3 -- STOCKHOLDERS' EQUITY
In the merger, FCB shareholders will receive 1.83 shares of Anchor common
stock for each outstanding share of FCB common stock. Cash will be paid, in lieu
of fractional shares at the price per whole share in effect on the day of
closing. In the transaction and based on share information as of December 31,
1998, Anchor will issue 7,028,444 shares of common stock, at an average cost of
$6.84 per share, in exchange for 3,840,680 shares of outstanding FCB common
stock. This includes the adjustment to cause common stock to be equal to its
$0.10 par value. Pro forma retained earnings reflect an adjustment for estimated
merger related charges as described in Note 2 above. Approximately 24,928,536
shares of common stock will be outstanding for the combined company after the
merger.
NOTE 4 -- AVERAGE SHARES OUTSTANDING
The pro forma weighted average shares outstanding is based on the
historical weighted average shares outstanding of Anchor plus the FCB pro forma
weighted average shares outstanding multiplied by the FCB common stock exchange
ratio of 1.83.
74
<PAGE> 83
ANCHOR STOCK AND COMPARATIVE RIGHTS OF SHAREHOLDERS
GENERAL
As a result of the merger, shareholders of FCB will become shareholders of
Anchor and the rights of all former FCB shareholders will be thereafter governed
by the Anchor articles of incorporation and bylaws and the WBCL. The rights of
FCB shareholders are presently governed by the FCB articles of incorporation and
bylaws and the WBCL.
ANCHOR STOCK
Anchor incorporates by reference the description of its capital stock
contained in the Prospectus included in its registration statement on Form S-1
filed with the SEC on March 19, 1992. See "WHERE YOU CAN FIND MORE INFORMATION"
on page 95 to find out how you can locate documents incorporated by reference in
this document.
COMPARISON OF RIGHTS
Upon the completion of the merger, FCB shareholders will become
shareholders of Anchor. Both companies are Wisconsin corporations governed by
the WBCL, which provides various rights to shareholders. Anchor and FCB
shareholders are also provided various rights pursuant to their respective
company's articles of incorporation and bylaws. Many of Anchor's and FCB's
article and bylaw provisions are identical or substantially similar to each
other or to the WBCL. These include provisions relating to the following:
- the manner in which the size of the board of directors is determined and
the method of filling vacancies on the board of directors;
- the method of calling special shareholders' meetings;
- advance notice provisions for shareholder nominations and shareholder
proposals;
- amendments to the articles of incorporation and bylaws;
- approval of transactions with interested shareholders;
- shareholder approval of mergers, acquisitions and various other
transactions;
- the ability of shareholders to act by written consent; and
- the board of directors' ability to consider constituencies other than
shareholders (for example, employees and customers) when making
decisions for the company.
In some of these instances, the companies' articles or bylaws do not
contain any specific provisions, meaning that the WBCL applies to both companies
in the same manner.
Some rights of FCB shareholders as holders of Anchor stock will be
different than they are as holders of FCB stock. You are urged to read the
fuller comparison of your rights that is included below, which includes the
following important differences:
- Anchor has a shareholder rights plan (commonly known as a "poison pill")
while FCB does not -- a shareholder rights plan may have antitakeover
effects (see "-- Shareholder Rights Plan" below); and
- Anchor has stricter provisions for removing directors than FCB (see
"-- Removal of Directors" below).
75
<PAGE> 84
SHAREHOLDER RIGHTS PLAN
In 1997, Anchor adopted a shareholders' rights plan providing for stock
purchase rights to current and future owners of Anchor stock. Each share of
outstanding Anchor stock has one right attached to it, and each share of Anchor
stock issued in the merger will have one right attached to it. You will not
receive a separate certificate evidencing the attached rights you receive along
with your Anchor stock because, unless and until the rights become exercisable,
each Anchor stock certificate will also evidence an equal number of rights. A
share of Anchor stock and the attached right may not be traded separately unless
and until the rights become exercisable. The rights will expire on July 22,
2007, unless they are redeemed by Anchor before then.
The rights plan was adopted to protect Anchor shareholders by providing a
potential acquiror with a disincentive to engage in manipulative or coercive
tactics in attempting to acquire Anchor and an incentive to negotiate with
Anchor's board in good faith and offer Anchor shareholders fair value for their
interests. However, the rights plan has antitakeover effects. The rights may
cause substantial dilution to a person or group that attempts to acquire Anchor
on terms not approved by Anchor's board of directors. Nevertheless, the rights
should not interfere with any merger or other business combination approved by
the board of directors because the rights may be redeemed by Anchor at a nominal
cost.
The rights plan, which is evidenced by a rights agreement between Anchor
and Firstar Bank Milwaukee, N.A., as rights agent, is lengthy and complex. We
have summarized its important provisions below in question and answer format.
However, this summary is qualified in its entirety by reference to the rights
agreement, a copy of which is filed as an exhibit to Anchor's registration
statement for the rights on Form 8-A. See "WHERE YOU CAN FIND MORE INFORMATION"
on page 95 for more information about the documents incorporated by reference in
this document.
Q. WHAT DO THE RIGHTS ENTITLE ME TO?
A. Each right, when it becomes exercisable, entitles the holder to purchase
from Anchor 1/100th of a share of preferred stock at a price of $200.00,
subject to adjustment in the case of stock splits or dividends. However,
after the rights become exercisable, the rights may become rights to
acquire Anchor common (as opposed to preferred) stock (commonly known as
a "flip-in" provision) or the common stock of another company that
acquires Anchor (commonly known as a "flip-over" provision), as discussed
in the next three questions. Until a right is exercised, the right itself
will not entitle the holder thereof to any rights as a shareholder of
Anchor, including, among other things, the right to vote or to receive
dividends.
Q. WHEN DO THE RIGHTS BECOME EXERCISABLE?
A. The rights will become exercisable if anyone acquires, or proposes to
acquire, 20% or more of the outstanding Anchor stock. Specifically, the
rights will become exercisable at the earlier of:
- 10 business days after a public announcement that a person or group of
affiliated persons has acquired, or has obtained the right to acquire,
beneficial ownership of 20% or more of Anchor's outstanding stock; or
- 15 business days after the commencement of a tender offer or exchange
offer for 20% or more of Anchor's outstanding stock.
76
<PAGE> 85
Q. WHEN DO THE RIGHTS "FLIP IN" AND BECOME RIGHTS TO PURCHASE ANCHOR COMMON
STOCK?
A. After the rights become exercisable, the rights will be converted into
rights to purchase Anchor common (as opposed to preferred) stock if any
of the following occur:
- Anchor is the surviving corporation in a merger and its common stock
is not changed or exchanged;
- a person (other than Anchor or its affiliates) becomes the beneficial
owner of 25% or more of the then outstanding common stock;
- an acquiring person engages in one or more "self-dealing" transactions
as defined in the rights agreement; or
- an event occurs that results in an acquiring person's ownership
interest being increased by more than one percent (e.g., a reverse
stock split).
When this happens, each holder of a right will be entitled to receive,
upon exercise, Anchor common stock (or, in under some circumstances,
cash, property or other securities) having a value equal to two times the
exercise price of the right. Assuming the exercise price is not adjusted,
this would mean that each Anchor shareholder would, for each share of
Anchor stock he or she owns, have the right to pay Anchor $200 and
receive additional Anchor common stock with a market value of $400. If
Anchor stock were trading at $50 per share at the time, and a shareholder
owned 100 shares of Anchor stock, the shareholder would be able to pay
Anchor $20,000 ($200 X 100 rights) and receive 800 additional shares
($40,000 worth) of Anchor stock.
Q. WHEN DO THE RIGHTS "FLIP OVER" AND BECOME RIGHTS TO PURCHASE ANOTHER
COMPANY'S COMMON STOCK?
A. After the rights become exercisable, the rights may be converted into
rights to purchase the common stock of another company if any of the
following occur:
- Anchor engages in a merger or other business combination transaction
with the other company in which Anchor is not the surviving
corporation;
- Anchor engages in a merger or other business combination transaction
with the other company in which Anchor is the surviving corporation,
but in which its common stock is changed or exchanged; or
- 50% or more of Anchor's assets or earning power is sold or transferred
to the other company.
When this happens, each holder of a right will be entitled to receive,
upon exercise, the other company's common stock having a value equal to
two times the exercise price of the right. Assuming the exercise price is
not adjusted, this would mean that each Anchor shareholder would, for
each share of Anchor stock he or she owns, have the right to pay the
other company $200 and receive common stock of the other company with a
market value of $400.
Q. WILL THE OTHER COMPANY WHO ACQUIRES ANCHOR STOCK ALSO BE ENTITLED TO
EXERCISE ITS RIGHTS?
A. No. If any of the circumstances cause the rights to become rights to
acquire Anchor (or another company's) common stock (that is, if a
"flip-in" or "flip-over" event occurs), then all rights owned by the
other company will become null and void.
Q. WOULD THE EXISTENCE OF THE RIGHTS HAVE ANY EFFECT IF THE ANCHOR BOARD
DETERMINES THAT THE ACQUISITION OF ANCHOR IS IN THE BEST INTERESTS OF
ANCHOR AND IT SHAREHOLDERS?
A. No, because the board of directors may, within 10 business days
following the public announcement of the transaction that causes the
rights to become exercisable, redeem the rights in whole,
77
<PAGE> 86
but not in part, at a price of $0.01 per right, subject to adjustment to
prevent dilution. After that 10-day period, the board's ability to redeem
the rights becomes much more limited, although it would be reinstated if
the person whose actions caused the rights to become exercisable reduces
its beneficial ownership to 10% or less of the outstanding Anchor common
stock.
Q. WHAT OTHER POWERS DOES THE BOARD HAVE WITH RESPECT TO THE RIGHTS?
A. The board may, at its option, at any time after the right to redeem the
rights has expired or terminated (with limited exceptions), exchange all
or part of the then outstanding and exercisable rights (other than those
held by the acquiring person) for common stock at a ratio of one share of
common stock per right, as adjusted; provided, however, that the board
cannot do so once a person becomes the owner of 50% or more of the
outstanding Anchor common stock. If the board authorizes an exchange, the
rights will immediately cease to be exercisable.
The board also has the right to amend the rights plan, subject to the
conditions set forth in the rights agreement.
SUMMARY OF APPLICABLE LAW AND THE PROVISIONS OF ANCHOR'S AND FCB'S RESPECTIVE
ARTICLES OF INCORPORATION AND BYLAWS
The following summary is not a complete statement of all differences
between rights of the holders of Anchor stock and FCB stock. It sets forth some
important aspects of the WBCL and discusses differences between Anchor's
articles and bylaws and FCB's articles and bylaws. The summary is qualified in
its entirety by reference to the full text of each document and the WBCL. For
information as to how those documents may be obtained, see "WHERE YOU CAN FIND
MORE INFORMATION" on page 95. Where the summary below indicates that there is
"no provision" of Anchor's or FCB's articles or bylaws, the applicable provision
of the WBCL controls.
REMOVAL OF DIRECTORS
WBCL: Shareholders may remove one or more directors with or without
cause unless the articles of incorporation or the bylaws
provide that directors may be removed only for cause.
FCB: Shareholders may remove any director or the entire board of
directors from office only for cause and by an affirmative vote
of the majority of the voting power of the holders of FCB
common stock entitled to elect directors.
ANCHOR: Shareholders may remove any director from office only for cause
and by an affirmative vote of two-thirds of the voting power of
the holders of Anchor common stock entitled to elect directors.
ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS
WBCL: No provision.
FCB: FCB's bylaws contain an "advance notice" provision which states
that, for a shareholder of record to properly introduce
business to be transacted at the annual meeting or a special
meeting of shareholders or to nominate persons for election to
the FCB board, the shareholder must give at least 60 days'
advance notice to FCB. The bylaws specify what information such
a notice must contain, how it is to be presented to FCB, and
what additional information the shareholder must provide in
particular circumstances.
ANCHOR: Anchor's bylaws have provisions which are similar to FCB's.
78
<PAGE> 87
LIABILITY OF DIRECTORS
WBCL: Unless a corporation's articles of incorporation limit the
immunity of a director, a director may not be held liable for a
breach of, or failure to perform, any duty resulting solely
from his or her status as a director, unless the directors
breach or failure to perform constitutes: (a) a willful failure
to deal fairly with the corporation or its shareholders in
connection with a matter in which the director has a material
conflict of interest; (b) a violation of criminal law, unless
the director had reasonable cause to believe that his or her
conduct was lawful; (c) a transaction from which the director
derived an improper personal profit; or (d) willful misconduct.
FCB: No provision.
ANCHOR: A director or officer shall not be personally liable for
monetary damages for any action taken, or any failure to take
any action, as a director or officer except to the extent that
a director's or officer's liability for monetary damages may
not be limited by law.
INDEMNIFICATION OF DIRECTORS
WBCL: A corporation is required to indemnify a director or officer in
the defense of a proceeding for all reasonable expenses
incurred in the proceeding if the director or officer was a
party because he or she is a director or officer of the
corporation, unless the director or officer was found to have
breached a duty to the corporation and to have been guilty of
actions which constitute (a) a willful failure to deal fairly
with the corporation or its shareholders in connection with a
matter in which the director has a material conflict of
interest; (b) a violation of criminal law, unless the director
had reasonable cause to believe that his or her conduct was
lawful; (c) a transaction from which the director derived an
improper personal profit; or (d) willful misconduct. A
corporation is permitted to pay for or reimburse the reasonable
expenses incurred by a director or officer in connection with a
proceeding to which he or she is a party, as those expenses are
incurred.
FCB: To the fullest extent permitted or required by the WBCL, FCB
will indemnify a director or officer against all liabilities
incurred by or on behalf of such director or officer in
connection with a proceeding in which the director or officer
is a party because he or she is director or officer. FCB will
not indemnify a director or officer in connection with a
proceeding which was initiated by the such director or officer
unless the proceeding was authorized by the board of directors.
ANCHOR: To the fullest extent authorized by the WBCL, Anchor will
indemnify and hold harmless a director or officer against all
liabilities and expenses incurred in connection with a
proceeding to which the director or officer has become subject
because he or she is a director or officer of Anchor, unless
the director or officer breached or failed to perform a duty he
or she owes to Anchor which constitutes one of the four actions
outlined above and specified in the WBCL. Anchor will not
indemnify a director or officer in connection with a proceeding
which was initiated by the such director or officer unless the
proceeding was authorized by the board of directors.
79
<PAGE> 88
REGULATION
Banking and financial services businesses such as Anchor and FCB are highly
regulated. Anchor and FCB and their banking subsidiaries are subject to federal
and state laws and regulations relating to all aspects of their business,
including, among others, capital requirements, lending practices, disclosure
requirements, limitations on dividends, liquidity requirements and insurance
requirements. In addition, the companies are subject to the examination and
supervision of various state and federal regulatory authorities.
Below is a brief description of some important laws and regulations that
apply to Anchor and FCB and their banking subsidiaries, AnchorBank and Fox
Cities Bank. The description of these laws and regulations, as well as the
descriptions of laws and regulations contained in other sections of this
document, may not be complete. You should refer to the actual laws and
regulations for additional information.
OVERVIEW
FEDERAL REGULATION. Anchor and FCB are savings and loan holding companies
regulated at the federal level by the Office of Thrift Supervision (the "OTS").
Their banking subsidiaries, AnchorBank and Fox Cities Bank, respectively, are
subject to broad federal regulation and oversight extending to all aspects of
their operations. Their primary federal regulators are the OTS and the Federal
Deposit Insurance Corporation ("FDIC"). The deposits of both AnchorBank and Fox
Cities Bank are federally-insured (up to applicable limits) by the FDIC and they
are members of the FDIC's Savings Association Insurance Fund. AnchorBank and Fox
Cities Bank are also subject to limited regulation by the Federal Reserve Board
and other federal regulatory agencies.
STATE REGULATION. Because AnchorBank is a Wisconsin-chartered institution,
Anchor and AnchorBank are also regulated at the state level by the Wisconsin
Department of Financial Institutions -- Division of Savings Institutions (the
"DFI"). Because Fox Cities Bank is a federally-chartered savings institution,
neither FCB nor Fox Cities Bank are currently regulated by the DFI or any other
state regulator; however, since Fox Cities Bank will merge with and into
AnchorBank as part of the merger, its business will become subject to state
regulations following the merger.
SIMILARITIES AND DIFFERENCES. The principal differences between the way in
which the two companies and their subsidiaries are currently regulated result
from the fact that Anchor and AnchorBank are regulated at the state level while
FCB and Fox Cities Bank are not. Following merger, these differences will
disappear because Fox Cities Bank will merge with and into AnchorBank, which
will continue to be regulated at both the federal and state level in the same
manner as it is now.
In this summary, where regulations apply in the same manner to both Anchor
and FCB, we refer to them together as the "Holding Companies," and where
regulations apply in the same manner to both AnchorBank and Fox Cities Bank, we
refer to them together as the "Banks." In each case, where a regulatory
requirement applies to both Banks, we indicate whether the Banks individually
met these requirements at December 31, 1998, and whether AnchorBank would have
met these requirements on a pro forma basis giving effect to the bank merger as
if it had occurred on December 31, 1998.
REGULATION OF THE HOLDING COMPANIES
FEDERAL. As "unitary savings and loan holding companies" (meaning that
they each only own one savings institution), the Holding Companies are subject
to regulatory oversight by the OTS. The Holding Companies must register and file
reports with, and are subject to regulation and examination by, the OTS. In
addition, the OTS has enforcement authority over the Holding Companies and their
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non-savings institution subsidiaries, which permits the OTS to restrict or
prohibit activities that it determines are a serious risk to a subsidiary
savings bank. The OTS regulations primarily relate to the safety and soundness
of the institutions under jurisdiction of the OTS rather than the protection of
such institutions' shareholders. Unitary savings and loan holding companies
generally are not subject to activity restrictions.
Anchor will continue to be a unitary savings and loan holding company
following the merger; it will not become a "multiple savings and loan holding
company" (which holds more than one savings institution subsidiary) as a result
of the merger because it will cause Fox Cities Bank to merge into AnchorBank
immediately following the merger, and Anchor will continue to own only one
savings institution subsidiary. Although Anchor has no present plans or
intention to do so, it could become a multiple savings and loan holding company
in the future.
If Anchor were to become a multiple savings and loan holding company, it
would be subject to some activity restrictions, unless its savings institution
subsidiaries comply with the qualified thrift lender test (the "QTL Test"),
which is described in the section below entitled "Qualified Thrift Lender Test."
If a savings institution subsidiary of a multiple savings and loan holding
company fails the QTL test, the holding company may not continue any business
activity without the approval of the OTS, except for activities approved for
multiple savings and loan holding companies or their subsidiaries. In addition,
within one year of such failure, the holding company would become subject to
bank holding company regulations which are more restrictive than the savings and
loan holding company regulations.
The Holding Companies must obtain approval from the OTS before acquiring
control of more than 5% of the voting shares of any other SAIF-insured
institution or savings and loan holding company. The OTS prohibits such
acquisitions if they result in a multiple savings and loan holding company
controlling savings associations in more than one state. However, the OTS
permits interstate acquisitions based on specific state statutory authorization
in the state of the target institution or in a supervisory acquisition of a
failing savings institution.
STATE. The DFI has the authority to issue an order prohibiting those
activities of a savings and loan holding company of a state-chartered banking
subsidiary, such as Anchor, which endanger the safety of the savings and loan
association or are contrary to the public interest. The DFI also may direct the
operations of the savings and loan association and its holding company until the
order is complied with, and it may prohibit the savings and loan association
from declaring dividends to its holding company during such period.
REGULATION OF THE BANKS
GENERAL
Primary Regulatory Authorities. The OTS has extensive authority over the
operations of all insured savings associations, including the Banks. The Banks
are required to file periodic reports with the OTS. Because AnchorBank is a
Wisconsin chartered institution, the DFI also regulates and supervises
AnchorBank at the state level, and AnchorBank must file periodic reports with
the DFI.
Examinations. The OTS and the FDIC periodically conduct examinations of
the Banks. The DFI usually conducts its examinations of AnchorBank jointly with
the OTS. During these examinations, the examiners may require the Banks to
provide for higher general or specific loan loss allowances or to write down the
value of certain assets. The OTS and the DFI conducted their last regular joint
examination of AnchorBank in July and August 1998. The FDIC conducted its last
joint regular examination of AnchorBank in November 1992. The OTS last examined
Fox Cities Bank in December 1998 and January 1999.
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Enforcement Authority. The OTS also has extensive enforcement authority
over all savings associations and their holding companies, and affiliated
parties such as directors, officers, employees, agents and certain other persons
providing services to the Banks or the Holding Companies. This enforcement
authority includes, among other things, the ability to assess civil money
penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions. The OTS may initiate these enforcement actions if the Banks
or the Holding Companies violate laws or regulations or engage in unsafe or
unsound practices, or if the Banks or the Holding Companies file misleading or
untimely reports with the OTS. The OTS generally requires public disclosure of
final enforcement actions. The DFI has similar enforcement authority over
AnchorBank and Anchor.
Conflicts of Interest. The OTS has adopted a conflicts of interest
regulation based upon common law principles of "duty of care" and "duty of
loyalty." The regulation provides that directors, officers, employees, persons
having the power to control the management or policies of savings associations,
and other persons who owe fiduciary duties to savings associations, cannot
advance their own personal or business interests, or those of others, at the
expense of the associations. The OTS also clarified that "persons having the
power to control the management or policies of savings associations" include
holding companies such as Anchor and FCB. The OTS corporate opportunity
regulations impose a standard similar to common law standards governing
usurpation of corporate opportunity.
Standards for Safety and Soundness. The OTS's lending and investment
regulations impose general safety and soundness standards on the Banks. In
addition, federal laws and regulations govern the investment and lending
authority of the Banks, and state laws and regulations also govern the
investment and lending authority of AnchorBank. The Banks may not engage in any
activities that are not permitted by such laws and regulations. The Banks are
currently in compliance with the restrictions applicable to each of them, and
Anchor believes that AnchorBank will be in compliance with these restrictions
following the bank merger.
As required by Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") and subsequently amended by the Riegle Community Development and
Regulatory Improvement Act of 1994, the OTS and other federal banking regulators
have adopted interagency guidelines establishing standards for safety and
soundness for depository institutions on matters such as internal controls and
audit systems, loan documentation, credit underwriting, interest-rate risk
exposure, asset growth, asset quality, earnings and compensation and other
benefits. The agencies may request a compliance plan from any institution which
fails to meet one or more of the standards.
COMPLIANCE
CAPITAL AND NET WORTH REQUIREMENTS. Federally-insured savings
associations, such as the Banks, must maintain specified minimum levels of
regulatory capital. The OTS has established three different capital standards:
- a 1.5% "tangible capital" requirement;
- a 3.0% "core capital" requirement; and
- an 8.0% "risk-based capital" requirement.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") mandated that these capital requirements generally must be as
stringent as the comparable capital requirements for national banks. The OTS
also may impose capital requirements on individual associations on a
case-by-case basis in excess of these standards. Savings associations must meet
all of the standards in order to comply with the capital requirements.
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Tangible Capital. An institution's "tangible capital" must comprise at
least 1.5% of adjusted total assets (as defined by regulation). Tangible capital
generally includes common stockholders' equity and retained earnings, and
noncumulative perpetual preferred stock and related surplus and minority
interest in the equity accounts of fully consolidated subsidiaries less equity
and debt investments in subsidiaries which are not "includable" subsidiaries as
defined in the regulation. In addition, all intangible assets, other than a
limited amount of servicing rights, must be deducted from tangible capital.
Core Capital. An institution's "core capital" must equal at least 3.0% of
adjusted total assets. Core capital generally consists of tangible capital plus
up to 25% of specified other intangibles (subject to separate salability and
market valuation limitations). In addition the OTS requires an institution to
maintain a minimum ratio of core capital to total risk-weighted assets of 4.0%.
An institution calculates its risk-weighted assets by multiplying all assets
(including specified off-balance sheet items) times a risk-weight determined by
the OTS based on the risks the OTS believes are inherent in the assets.
Risk-Based Capital. An institution's "risk-based capital" must equal at
least 8% of risk-weighted assets. Risk-based capital equals the sum of core
capital plus supplementary capital (which includes, among other items, some
permanent and maturing capital instruments that do not qualify as core capital
and general loan and lease loss allowances up to 1.25% of risk-weighted assets)
less deductions. The amount of supplementary capital that may be used to satisfy
the risk-based requirement is limited to the extent of core capital.
OTS regulations incorporate an interest rate risk ("IRR") component into
the "risk-based capital" requirement. Under the regulations, an institution with
a greater than normal level of IRR must deduct its IRR component from total
capital for purposes of calculating its risk-based capital. As a result, the
institution must maintain additional capital in order to comply with the
risk-based capital requirement. An institution with a "greater than normal IRR"
is an institution that would suffer a loss of net portfolio value exceeding 2.0%
of the estimated market value of its assets in the event of a 200 basis point
increase or decrease (with minor exceptions) in interest rates. The IRR
component is calculated, on a quarterly basis, as one-half of the difference
between an institution's measured IRR and 2.0%, multiplied by the market value
of its assets.
Net Deferred Taxes. OTS limits the amount of net deferred tax assets that
may be included in regulatory capital (Net deferred tax assets represent
deferred tax assets, less any valuation allowances, in excess of deferred tax
liabilities). Whether or not the limit applies depends upon the institution's
sources of taxable income available to realize deferred tax assets. An
institution's deferred taxes are not limited if the institution realizes
deferred tax assets from taxes paid in prior carryback years and future
reversals of existing taxable temporary differences. If an institution realizes
deferred tax assets based on an institution's future taxable income (exclusive
of reversing temporary differences and carryforwards) or its tax-planning
strategies, such deferred tax assets are limited for regulatory capital purposes
to the lesser of (1) the amount that can be realized within one year of the
quarter-end report date or (2) 10% of core capital. As of December 31, 1998, the
foregoing considerations did not affect the calculation of the Banks' regulatory
capital.
Securities. Under current OTS policy, savings associations must value
securities available for sale at amortized cost for regulatory purposes. This
means that in computing regulatory capital, savings associations must add back
any unrealized losses and deduct any unrealized gains, net of income taxes, on
securities reported as a separate component to stockholders' equity under
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."
Wisconsin-chartered associations, such as AnchorBank, must maintain a net
worth ratio of at least 6.0%. "Net worth ratio" means the association's assets
minus liabilities, plus unallocated general loan loss allowances, divided by the
association's assets. If the DFI determines that the nature of an
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association's operations creates a greater risk, the DFI may require the
association to maintain a higher level of net worth to ensure the association's
stability. If an association fails to comply with the net worth requirement, the
DFI may impose operating restrictions on the association to restore its net
worth to the required level. As of March 31, 1998, AnchorBank had a net worth
ratio of 6.77% which was in compliance with this net worth requirement.
As of December 31, 1998, the Banks (and AnchorBank, on a pro forma basis)
met all regulatory capital and net worth requirements applicable to them, as
follows:
<TABLE>
<CAPTION>
REGULATORY ANCHORBANK
REQUIREMENT ANCHORBANK FOX CITIES BANK PRO FORMA(1)
----------- ---------- --------------- ------------
<S> <C> <C> <C> <C>
Tangible capital....................... 1.50% 5.76% 11.70% 6.94%
Core capital
To adjusted total assets............. 3.00% 5.76% 11.70% 6.94%
To total risk-weighted assets........ 4.00% 8.86% 19.27% 10.82%
Risk-based capital..................... 8.00% 10.11% 20.49% 12.06%
Net worth.............................. 6.00% 6.80% n/a 7.84%
</TABLE>
- ---------------
(1) After giving effect to the merger of the Banks.
QUALIFIED THRIFT LENDER REQUIREMENT. All savings associations, including
the Banks, must meet the QTL test to avoid various restrictions on their
operations. To comply with the QTL test, a savings institution must maintain at
least 65% of its portfolio assets in qualified thrift investments on a monthly
average basis in nine out of every 12 months. Qualified thrift investments
generally consist of housing related loans and investments and certain groups of
assets, such as consumer loans. The term "portfolio assets" means the savings
institution's total assets minus goodwill and other intangible assets, the value
of property used by the savings institution to conduct its business, and liquid
assets held by the savings institution in an amount up to 20% of its total
assets. As of December 31, 1998, the Banks individually, and AnchorBank on a pro
forma basis, were in compliance with the QTL test.
If a savings institution fails to meet the QTL test, the institution must
either convert to a bank charter (other than a savings bank charter) or limit
its future investments and activities (including branching and payments of
dividends) to those permitted for both savings associations and national banks.
Any such savings institution that does not convert to a bank charter will be
ineligible to receive further FHLB advances. In addition, beginning three years
after the loss of QTL status, the institution must repay all outstanding FHLB
advances and dispose of or discontinue any preexisting investment or activities
not permitted for both savings associations and national banks. Further, within
one year of the loss of QTL status, the holding company of a savings institution
that does not convert to a bank charter must register as a bank holding company
and will be subject to all statutes applicable to bank holding companies.
LIQUIDITY. Every savings institution, including the Banks, must maintain
sufficient liquidity to ensure its safe and sound operation. Liquid assets
include cash, specified United States government, state or federal agency
obligations, as well as time deposits, bankers' acceptances, corporate debt
securities, highly rated commercial paper, and securities of mutual funds that
meet certain standards. Specifically, savings associations must maintain an
average daily balance of liquid assets in each calendar quarter equal to a
particular percentage of either (1) the sum of its net withdrawable deposits
plus short-term borrowings (the "liquidity base") at the end of the preceding
quarter, or (2) the average daily balance of its liquidity base during the
preceding quarter. The average liquidity requirement may be changed from time to
time by the OTS (between 4% and 10%), depending upon economic conditions and
deposit flows of all savings associations. At the present time, the minimum
average liquidity requirement is 4%. The
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OTS may impose monetary penalties for a violation of the liquidity ratio
requirement. As of December 31, 1998, the Banks individually, and AnchorBank on
a pro forma basis, were in compliance with these liquidity requirements.
LIMITATIONS ON ACTIVITIES
LOANS-TO-ONE-BORROWER LIMITS. The Banks are subject to federal laws that
set maximum limits on loans to any one borrower. In general, the Banks may make
loans to one borrower up to the greater of $500,000 or 15% of unimpaired capital
and unimpaired surplus. The Banks may loan an additional 10% of unimpaired
capital and unimpaired surplus for loans fully secured by certain types of
readily marketable collateral.
There are exceptions to the above limitations. Under specific
circumstances, and subject to OTS approval, the Banks may make loans to one
borrower up to the lesser of $30 million or 30% of unimpaired capital and
unimpaired surplus for loans to develop domestic residential housing units. In
addition, the Banks may provide purchase money financing for the sale of real
estate acquired in satisfaction of debts previously contracted for without
regard to the loans-to-one-borrower limitation if no new funds are advanced and
the Banks are not placed in a more detrimental position than if they had held
the real property.
Wisconsin law contains loans-to-one-borrower limitations that are
applicable to AnchorBank. Under Wisconsin law, the aggregate amount of loans
that an association may make to any one borrower may not exceed 5% of the
association's mortgage, consumer and commercial assets, unless otherwise
authorized by the Commissioner.
As of December 31, 1998, AnchorBank had no loans to one borrower that
exceeded the federal limitation or the Wisconsin limitation, and Fox Cities Bank
had no loans to one borrower that exceeded the federal limitation. On a pro
forma basis, following the bank merger, AnchorBank will be in compliance with
both federal and state loans-to-one-borrower limitations.
BROKERED DEPOSITS; INTEREST RATE LIMITATIONS. FDIC regulations govern the
acceptance of brokered deposits by insured depository institutions. The capital
position of an institution determines whether and with what limitations an
institution may accept brokered deposits. A "well capitalized" institution (one
that significantly exceeds specified capital ratios) may accept brokered
deposits without restriction. "Adequately capitalized" institutions (those that
are not "well capitalized" or "undercapitalized") may only accept such deposits
with the consent of the FDIC. "Undercapitalized" institutions (those that fail
to meet minimum regulatory capital requirements) may not accept brokered
deposits. Both Banks meet the definition of a "well capitalized" institution and
therefore may accept brokered deposits without restriction. As of December 31,
1998, AnchorBank had $82.7 million in brokered deposits and Fox Cities Bank had
$1.2 million in brokered deposits.
LIMITATION ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS. The OTS
regulations restrict a savings association's ability to pay dividends or to make
other distributions of capital. These restrictions are important because the
ability of FCB and Anchor to pay dividends to their shareholders depends upon
the ability of Fox Cities Bank and AnchorBank, respectively, to pay dividends to
them.
The OTS divides institutions into three tiers (Tier 1, Tier 2 and Tier 3)
for purposes of determining whether the institution may make capital
distributions. The OTS classifies an institution based on its
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capital level and supervisory condition before and after a proposed capital
distribution. The definition of and the ability to make dividend distributions
by Tier 1, Tier 2 and Tier 3 institutions is shown below:
<TABLE>
<CAPTION>
DEFINITION ABILITY TO MAKE DISTRIBUTIONS
--------------------------------------- ---------------------------------------------
<S> <C> <C>
TIER 1 Has net capital equal to or greater May make capital distributions during any
than its fully phased-in regulatory calendar year equal to the higher of:
capital requirement before and after a - 100% of its net income for the year-to-date
proposed capital distribution period, plus 50% of the amount by which the
association's total capital exceeds its
fully phased-in capital requirement (the
"capital surplus"), as measured at the
beginning of the calendar year, or
- 75% of net income over the most recent
four-quarter period
TIER 2 Has net capital equal to its then- May make capital distributions during any
applicable minimum capital requirement calendar year equal to up to 75% of net
both before and after a proposed income over the most recent four-quarter
capital distribution period
TIER 3 Fails to meet its then-applicable May not make any capital distributions
minimum capital requirement either without the prior written approval of the OTS
before or after a proposed capital
distribution
</TABLE>
At December 31, 1998, both Banks, and AnchorBank on a pro forma basis, met
the definition of a "Tier 1" institution.
In addition to restricting an institution's ability to make capital
distributions based upon its tier, the OTS regulations also prohibit an
association from declaring or paying any dividends or from repurchasing any of
its stock if, as a result, the total capital of the association would be reduced
below the amount required to be maintained for the liquidation account
established in connection with the institution's mutual to stock conversion.
Effective April 1, 1999, the OTS amended its capital distribution
regulation. Under the new regulation, the "tiered" approach described above was
replaced and institutions are now permitted to make capital distributions that
will not result in their capital being reduced below the level required to
remain "adequately capitalized," as defined in the OTS regulations. Under the
new regulation, savings associations that are held by a savings and loan holding
company continue to be required to provide advance notice of or, under certain
circumstances, file an application for, the capital distribution to the OTS. The
Banks do not believe that the new regulation will adversely affect their ability
to make capital distributions.
Wisconsin-chartered institutions, such as AnchorBank, may not pay a
dividend or otherwise distribute any profits if it fails to maintain its
required net worth ratio either prior to, or as a result of, such distribution,
unless it obtains prior approval from the DFI.
TRANSACTIONS WITH AFFILIATES. Generally, transactions between savings
associations (or their subsidiaries) and their affiliates must be on terms as
favorable to the association as transactions with non-affiliates. In addition,
some of these transactions are restricted to a percentage of the association's
capital and surplus. Affiliates of the Banks include Anchor and FCB,
respectively, and any company that is under common control with the Banks. In
addition, savings associations may not lend to any affiliate
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engaged in activities not permissible for a bank holding company nor acquire the
securities of most affiliates. The Banks' subsidiaries are not considered
affiliates; however, the OTS has the discretion to treat subsidiaries of savings
associations as affiliates on a case by case basis.
BUSINESS ACTIVITIES. The business activities of savings associations are
governed by the Home Owner's Loan Act of 1933, as amended (the "HOLA") and, in
some respects, by the Federal Deposit Insurance Act. HOLA and the Federal
Deposit Insurance Act were amended by FIRREA and FDICIA, which contain
provisions that affect numerous aspects of the operations and regulation of
federally-insured savings associations. These acts also empower the OTS and the
FDIC, among other agencies, to promulgate regulations implementing the
provisions of the acts.
The federal banking statutes as amended by FIRREA and FDICIA:
- restrict the solicitation of brokered deposits by troubled savings
associations that are not well-capitalized;
- prohibit the acquisition of any corporate debt security that is not
rated in one of the four highest rating categories;
- restrict the aggregate amount of loans secured by non-residential real
property to 400% of capital;
- permit savings and loan holding companies to acquire up to 5% of the
voting shares of non-subsidiary savings associations or savings and loan
holding companies without prior approval;
- permit bank holding companies to acquire healthy savings associations;
and
- require the federal banking agencies to establish, by regulation,
standards for extension of credit secured by real estate lending.
Under HOLA, a savings association may make non-conforming loans (loans in
excess of the specific limitations of HOLA) that do not exceed 5.0% of its total
assets, and construction loans without security for the purpose of financing
what is expected to be residential property that do not exceed the greater of
total capital or 5.0% of its total assets. To assure repayment of such loans,
the association relies substantially on the borrower's general credit standing,
personal guarantees and projected future income on the properties. No loans have
been made by the Banks pursuant to this authority.
UNIFORM LENDING STANDARDS. Under FDICIA, federal bank regulators must
adopt uniform regulations prescribing standards for extensions of credit that
are secured by liens on interests in real estate or made for the purpose of
financing the construction of a building or other improvements to real estate.
Under current regulations, savings associations must adopt and maintain written
policies that establish appropriate limits and standards for extensions of
credit that are secured by liens on or interests in real estate or are made for
the purpose of financing permanent improvements to real estate. These policies
must establish loan portfolio diversification standards, prudent underwriting
standards (including loan-to-value limits) that are clear and measurable, loan
administration procedures and documentation, approval and reporting
requirements. The real estate lending policies must reflect consideration of the
Interagency Guidelines for Real Estate Lending Policies that have been adopted
by federal bank regulators.
COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act ("CRA"),
as implemented by OTS regulations, a savings institution has an obligation to
help meet the credit needs of its entire community, including low and moderate
income neighborhoods. The CRA does not establish specific lending requirements
or programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular
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community, consistent with the CRA. The CRA requires the OTS, in connection with
its examination of a savings institution, to assess the institution's record of
meeting the credit needs of its community and to take such record into account
in its evaluation of applications by such institution. An institution is
assigned one of four overall ratings: "outstanding," "satisfactory," "needs
improvement," or "substantial noncompliance." The CRA also requires all
institutions to make their CRA ratings available to the public. AnchorBank's
latest CRA rating, received in March 1996, was "Outstanding." Fox Cities Bank's
latest CRA rating, received in January 1999, was "Satisfactory."
In 1995, the OTS and other federal financial supervisory agencies issued a
final revised regulation to implement the CRA. The revised regulation, which
became fully effective on July 1, 1997, eliminates the twelve assessment factors
under the prior regulation and substitutes a performance based evaluation
system. Pursuant to the revised regulation, an institution's performance in
meeting the credit needs of its entire community, as required by the CRA, will
generally be evaluated under three tests: the "lending test," the "investment
test" and the "service test."
The lending test analyzes lending performance using five criteria:
(1) the number and amount of loans in the institution's assessment area;
(2) the geographic distribution of lending, including the proportion of
lending in the assessment area, the dispersion of lending in the
assessment area, and the number and amount of loans in low-, moderate-,
middle-, and upper-income areas in the assessment area;
(3) borrower characteristics, such as the income level of individual
borrowers and the size of businesses or farms;
(4) the number and amount, as well as the complexity and innovativeness,
of an institution's community development lending; and
(5) the use of innovative or flexible lending practices in a safe and
sound manner to address the credit needs of low- or moderate- income
individuals or areas.
The investment test analyzes investment performance using four criteria:
(1) the dollar amount of qualified investments;
(2) the innovativeness or complexity of qualified investments;
(3) the responsiveness of qualified investments to credit and community
development needs; and
(4) the degree to which the qualified investments made by the institution
are not routinely provided by private investors.
The service test analyzes service performance using six criteria:
(1) the institution's branch distribution among low-, moderate-, middle-
and upper-income areas;
(2) its record of opening and closing branches, particularly in low-and
moderate- income areas;
(3) the availability and effectiveness of alternative systems for
delivering retail banking services;
(4) the range of services provided in low-, moderate-, middle- and
upper-income areas and extent to which those services are tailored to
meet the needs of those areas;
(5) the extent to which the institution provides community development
services; and
(6) the innovativeness and responsiveness of community development
services provided.
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As an alternative to the lending, service and investment tests, an
institution may submit to the OTS for approval its own "strategic plan,"
developed with community input, describing in detail the manner in which it
proposes to meet its CRA obligations. If the OTS approves the plan and the
institution has operated under the plan for at least one year, the institution
will be evaluated based upon its achieving the goals and benchmarks outlined in
the plan.
Institutions with total assets of $250 million or more must collect and
report data on a variety of matters, including originations and purchases of
home mortgage, small business and small farm loans, and information on community
development loans. Collection of information on consumer loans is optional.
Annually, the OTS must prepare and make available to the public individual
CRA Disclosure Statements for each reporting savings association. Each
institution must place its CRA Disclosure Statement in its public file within
three days of receipt of the statement from the OTS. Each institution must
maintain one copy of its public file in each state in which it has its main
office or a branch. The revised CRA regulations will not materially impact the
operations of the Banks.
BRANCHING
Federal (applicable to Fox Cities Bank only). OTS rules permit nationwide
branching by federally-chartered savings associations, such as Fox Cities Bank,
to the extent permitted by federal statute, subject to OTS supervisory
clearance. This permits associations with interstate networks to diversify their
loan portfolios and lines of business. OTS authority preempts any state law
purporting to regulate branching by federal savings associations. However,
federal law generally prohibits branching which would result in formation of a
multiple savings and loan holding company controlling savings associations in
more than one state, unless the statutory law of the additional state
specifically authorizes acquisition of its state-chartered associations by
state-chartered associations or their holding companies in the state where the
acquiring institution or holding company is located.
State. With the approval of the DFI, a Wisconsin-chartered savings
association may establish and maintain a branch office generally within the
normal lending area of the home office (100 miles), anywhere in Wisconsin or in
any one of the regional states of Illinois, Indiana, Iowa, Kentucky, Michigan,
Minnesota, Missouri, and Ohio. Whenever a savings association is absorbed
through a merger, the acquiring savings association may maintain and operate a
branch office at the location of the absorbed savings association if the
Commissioner finds that the continued operation of a branch office at the
location of the absorbed savings association would be in the public interest.
PROMPT CORRECTIVE ACTION REQUIREMENTS. FDICIA establishes a system of
prompt corrective action to resolve the problems of undercapitalized
institutions. Under this system, federal bank regulators must take supervisory
actions with respect to undercapitalized institutions, which depend upon the
institution's degree of capitalization. FDICIA establishes the following 5
capital categories: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." Generally, subject to narrow exceptions, FDICIA requires
federal bank regulators to appoint a receiver or conservator for an institution
that is critically undercapitalized and prohibits such institution from making
any payment of principal or interest on its subordinated debt. FDICIA authorizes
federal bank regulators to specify the ratio of tangible capital to assets at
which an institution becomes critically undercapitalized and requires that ratio
to be no less than 2% of total assets.
An institution is "undercapitalized" if it has a total risk-based capital
ratio of less than 8%, a core risk-based capital ratio of less than 4%, or a
leverage ratio (core capital to adjusted total assets) of less than 4% (3% if
the institution has a CAMELS rating of "1"). An institution which has a total
risk-based capital ratio of less than 6%, a core risk-based capital ratio of
less than 3%, or a leverage ratio of
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less than 3% is "significantly undercapitalized." An institution which has a
ratio of tangible equity (as defined in the regulations) to total assets that is
equal to or less than 2% is "critically undercapitalized." In addition, the OTS
may downgrade an institution to a lower degree of capitalization if the OTS has
any safety or soundness concerns (i.e. if the institution has received a
less-than-satisfactory examination rating for asset quality, management,
earnings or liquidity under the OTS's "CAMELS" rating system for savings
associations).
Subject to limited exceptions, savings associations may not declare
dividends, make any other capital distribution or pay management fees to
controlling persons if afterwards the institution would be undercapitalized.
Undercapitalized institutions are also subject to mandatory supervisory actions,
including increased monitoring, required capital restoration planning and
restricted growth, and acquisition and branching restrictions. Significantly and
critically undercapitalized institutions face even more severe restrictions.
As of December 31, 1998, the Banks individually, and AnchorBank, on a pro
forma basis, were "well capitalized" as defined under the OTS regulations.
INSURANCE OF ACCOUNTS, PREMIUMS AND OTHER ASSESSMENTS
FDIC INSURANCE. The FDIC administers two insurance funds, the Savings
Association Insurance Fund ("SAIF") and the Bank Insurance Fund ("BIF"). The
Banks are members of the SAIF insurance fund of the FDIC which insures the
Banks' savings deposits up to $100,000 per insured member (as defined by law and
regulation). Such insurance is backed by the full faith and credit of the United
States government. As an insurer, the FDIC charges deposit insurance premiums to
the Banks and conducts examinations of the Banks. The Banks periodically must
file reports with the FDIC. The FDIC may prohibit any FDIC-insured institution
from engaging in any activity that the FDIC determines, by regulation or order,
to pose a serious risk to the FDIC. The FDIC also may initiate enforcement
actions against savings associations, after giving the OTS an opportunity to
take such action. The FDIC may terminate an institution's deposit insurance if
the FDIC determines that the institution has engaged, or is engaging in, unsafe
or unsound practices, or is in an unsafe or unsound condition.
FDIC PREMIUM ASSESSMENTS. The Banks pay assessments to the FDIC for their
SAIF deposit insurance based on a percent of their insured deposits. Under the
Federal Deposit Insurance Act, the FDIC must set semi-annual assessments for
SAIF-insured institutions in order to maintain a reserve ratio of the SAIF at
1.25% of estimated deposits. The FDIC may set a higher percentage for a
particular year if it determines that circumstances pose a significant risk of
substantial future losses to the SAIF.
The FDIC has developed a risk-based deposit insurance system. Under this
system, the FDIC classifies all insured depository institutions into assessment
risk classifications based upon the institution's level of capital and
supervisory evaluation. The FDIC assigns all institutions to one of three
capital categories: (1) well capitalized, (2) adequately capitalized, or (3)
undercapitalized. Within each capital category, the FDIC assigns an institution
to one of three supervisory evaluation subgroups based on a supervisory
evaluation by the institution's primary supervisory authority and other
information that the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance fund. An
institution's assessment rate depends upon its assessment risk classification.
Under the FDIC's assessment schedule for SAIF deposit insurance, the
assessment rate for well-capitalized institutions with the highest supervisory
ratings has been reduced to zero effective in 1997. The assessment rate for
institutions in the lowest risk assessment classification is 0.27%. Until
December 31, 1999, however, SAIF-insured institutions must pay assessments to
the FDIC at the rate of 6.4 basis points to help fund interest payments on
certain bonds issued by the Financing Corporation
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("FICO"). FICO is an agency of the federal government established in the 1980s
that finances takeovers of insolvent thrifts. Commencing January 1, 2000, SAIF
members will be assessed at the same rate for FICO payments as BIF members; BIF
members are currently assessed at the rate of 1.22 basis points.
OTS ASSESSMENTS. The OTS assesses all savings associations in order to
fund the operations of the OTS. In addition, the OTS has established a schedule
of fees for the various types of applications and filings made by savings
associations with the OTS. All savings associations must pay a general
assessment twice a year, based on the total assets of the association and its
consolidated subsidiaries as reported in the latest quarterly thrift financial
report. AnchorBank's general assessment to the OTS for the six month period
ending September 30, 1998 was $164,800, and Fox Cities Bank's general assessment
to the OTS for the six month period ending December 31, 1998 was $52,811.
As of January 1, 1999, OTS has revised the method by which it assesses fees
on all savings associations to fund the operations of OTS. According to the OTS,
the new assessment structure will more equitably impose assessments on savings
associations. The general assessment formula, to be paid on a semi-annual basis,
is based on three components: the size of the savings association, its
condition, and the complexity of its operations. The OTS has established a chart
based on asset size, as reported on thrift financial reports, to calculate the
size component. For the complexity component, the OTS will charge a higher
assessment to savings associations that engage in complex activities, such as
those involving off-balance sheet assets and which have more than $1 billion of
recourse obligations or direct credit substitutes. For the condition component,
savings associations that are "troubled" (i.e. have a supervisory rating of "4"
or "5" or are subject to a conservatorship) must pay an additional 50% premium
over the asset-based assessment. Savings associations with a rating of "3" will
pay a 25% premium.
FEDERAL HOME LOAN BANK SYSTEM. The Banks are members of the Federal Home
Loan Bank ("FHLB") of Chicago, which is one of twelve regional FHLBs that
administer the home financing credit function of savings associations. Each FHLB
serves as a reserve or central bank for its members within its assigned region.
The FHLBs are funded primarily from proceeds derived from the sale of
consolidated obligations of the FHLB System. Each FHLB makes loans (or advances)
to members in accordance with policies and procedures established by the board
of directors of the FHLB. The Federal Housing Finance Board regulates and
oversees these policies and procedures. All advances from the FHLB must be fully
secured by sufficient collateral as determined by the FHLB. In addition, all
long-term advances may be made only for the purpose of providing funds for
residential home financing.
As members, the Banks are required to own shares of capital stock in the
FHLB of Chicago. As of December 31, 1998, AnchorBank owned $22.2 million of FHLB
stock and Fox Cities Bank owned $5.5 million of FHLB stock, which complied with
this requirement. The Banks have received substantial dividends on their FHLB
stock. For fiscal 1998, AnchorBank's dividend was $1.4 million and Fox Cities
Bank's dividend was $0.4 million.
Under federal law, the FHLBs must provide funds for resolving troubled
savings associations and contribute to low- and moderately-priced housing
programs through direct loans or interest subsidies on advances targeted for
community investment and low- and moderate-income housing projects. As a result
of these contributions, the FHLBs have paid fewer dividends to their members and
they could continue to do so in the future. In addition, the FHLB's may impose a
higher rate of interest on advances to their members. These contributions could
adversely affect the value of FHLB stock in the future which may reduce the
Banks' shareholders' equity.
FEDERAL RESERVE SYSTEM. The Federal Reserve Board ("FRB") requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily
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checking, NOW and Super NOW checking accounts) and non-personal time deposits.
As of December 31, 1998, the Banks individually, and AnchorBank, on a pro forma
basis, were in compliance with these requirements. These reserves may be used to
satisfy the liquidity requirements imposed by the OTS. See the "Liquidity"
section above. Because required reserves must be maintained in the form of cash
or a non-interest-bearing account at a Federal Reserve Bank, the effect of this
reserve requirement is to reduce the amount of the Banks' interest-earning
assets.
FHLB member institutions may borrow from the Federal Reserve Bank "discount
window." FRB regulations, however, require savings associations to exhaust all
FHLB sources before borrowing from the Federal Reserve Bank.
STATE ASSESSMENTS. AnchorBank must pay an annual state assessment, which
cannot exceed $0.12 per $1,000 of assets or fraction thereof, calculated as of
the end of the preceding calendar year. AnchorBank's annual state assessment for
the year ending June 30, 1998 was $80,600. In addition, each Wisconsin-chartered
institutions must pay examination fees.
RECENT LEGISLATIVE DEVELOPMENTS
On August 1, 1996, Congress enacted legislation to repeal the special bad
debt deduction for federal income tax purposes that had been available for
qualifying thrifts, such as the Banks. The repeal of the bad debt deduction may
result, on an ongoing basis, in an increase in the Banks' federal income tax
liability and potentially in Fox Cities Bank's Wisconsin state tax liability as
well. Such repeal will not have a material effect on the Banks' operations or
their ability to compete in the financial services industry.
Congress introduced several broad financial reform proposals from 1997
through 1999 which could significantly affect federally chartered savings
associations, including proposals which would eliminate the federal thrift
charter and require federal thrifts, such as the Fox Cities Bank, to convert to
national banks.
The Banks are unable to predict whether or when any such legislative
proposal will be enacted into law in its current form or with substantial
modifications and, accordingly, the Banks cannot predict what impact, if any,
such legislation will have on the Holding Companies or the Banks, or Anchor and
AnchorBank following the merger.
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LEGAL MATTERS
The validity of the issuance of Anchor common stock being offered hereby
will be passed upon for Anchor by Whyte Hirschboeck Dudek S.C., Milwaukee,
Wisconsin. Certain legal matters will be passed upon for FCB by Foley & Lardner,
Milwaukee, Wisconsin.
EXPERTS
The consolidated financial statements of Anchor at March 31, 1998 and 1997,
and for each of the three years in the period ended March 31, 1998, included in
Anchor's 1998 Annual Report on Form 10-K which is incorporated by reference in
this Joint Proxy Statement/Prospectus and Registration Statement, have been
audited by Ernst & Young LLP, independent auditors, to the extent indicated in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements have been incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of FCB appearing in FCB's 1998 Annual
Report on Form 10-K, incorporated by reference in this Joint Proxy
Statement/Prospectus have been audited by Wipfli Ullrich Bertelson LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETINGS
As described in Anchor's proxy statement relating to its 1998 Annual
Meeting of Shareholders, any proposals that shareholders of Anchor wish to be
considered for inclusion in the Proxy Statement for the 1999 Annual Meeting of
Shareholders must have been received by Anchor at its principal executive
offices no later than February 19, 1999. In addition, a shareholder who intended
to present business at the 1999 annual meeting was required to comply with the
advance notice provisions of Anchor's bylaws. Among other things, to bring
business before an annual meeting, a shareholder was required to give written
notice thereof to the Secretary of Anchor in advance of the meeting in
compliance with the terms and within the time periods specified in Anchor's
bylaws. Such notice must have been received by April 19, 1999 in order to be
timely with respect to Anchor's 1999 Annual Meeting.
As described in FCB's proxy statement relating to its 1998 Annual Meeting
of Shareholders, in order for proposals of shareholders of FCB to be considered
for inclusion in the proxy statement for the 1999 Annual Meeting of Shareholders
of FCB, if the merger is not completed prior to such meeting, such proposals
must have been received by FCB no later than February 26, 1999. In addition, a
shareholder who otherwise intends to present business at the 1999 Annual Meeting
(if the merger is not completed before such meeting) must comply with the
advance notice provisions in FCB's bylaws. Among other things, to bring business
before an annual meeting, a shareholder must give written notice thereof to the
Secretary of FCB in advance of the meeting in compliance with the terms and
within the time periods specified in FCB's bylaws. Such notice must be received
by May 27, 1999 in order to be timely with respect to FCB's 1999 Annual Meeting
(assuming the merger is not completed by that time).
In either case, the SEC's proxy rules permit us to exclude proposals that
are not received by the dates specified above from our proxy materials for our
1999 annual meetings or dates we specify in proxy statements for future annual
meetings. Further, if proposals are not received by the due dates specified in
our respective bylaws, we do not have to consider the proposals at our annual
meetings and, if such
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proposals are nevertheless considered, the proxy holders will have discretionary
authority to vote on the proposal.
Representatives of Ernst & Young LLP are expected to be present at the
Anchor special meeting, and representatives of Wipfli Ullrich Bertelson LLP are
expected to be present at the FCB special meeting. In each case, such
representatives will have the opportunity to make a statement if they desire to
do so and are expected to be available to respond to appropriate questions.
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WHERE YOU CAN FIND MORE INFORMATION
Anchor has filed with the SEC a registration statement under the Securities
Act that registers the distribution to FCB shareholders of Anchor common stock
to be issued in the merger. The registration statement, including the attached
exhibits and schedules, contains additional relevant information about Anchor
and FCB. The rules and regulations of the SEC allow us to omit such information
from this document.
In addition, we file reports, proxy statements and other information with
the SEC under the Exchange Act. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. You may read and copy this
information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an internet world wide
web site that contains reports, proxy statements and other information about
issuers, including Anchor and FCB, who file electronically with the SEC. The
address of that site is http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this
document. This means that the companies can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this
document, except for any information that is superseded by information that is
included directly in this document.
This document incorporates by reference the documents listed below that we
have previously filed with the SEC. They contain important information about our
companies and their financial condition. Some of these filings have been amended
by later filings, which are also listed.
<TABLE>
<CAPTION>
ANCHOR SEC FILINGS (FILE NO. 0-20006) DESCRIPTION OR PERIOD/AS OF DATE
- ------------------------------------------- -------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended March 31, 1998
Quarterly Reports on Form 10-Q Quarters ended June 30, 1998, September 30,
1998 and December 31, 1998
Registration Statement on Form S-1 filed Description of Anchor stock contained in
with the Commission on March 19, 1992 the Prospectus included in the Registration
(Commission File No. 33-46536) Statement under the caption "Description of
Capital Stock"
Registration Statement on Form 8-A Dated July 28, 1997, relating to Series A
Preferred Share Purchase Rights
Current Report on Form 8-K Filed on January 15, 1999; relating to the
execution of the merger agreement and the
stock option agreement
</TABLE>
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<TABLE>
<CAPTION>
FCB SEC FILINGS (FILE NO. 0-22066) DESCRIPTION OR PERIOD/AS OF DATE
- -------------------------------------------- --------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended March 31, 1998
Quarterly Reports on Form 10-Q Quarters ended June 30, 1998, September 30,
1998 and December 31, 1998
Current Report on Form 8-K Dated January 14, 1999; relating to the
execution of the merger agreement and stock
option agreement
</TABLE>
We incorporate by reference additional documents that either company may
file with the SEC between the date of this document and the date of the Anchor
special meeting and the FCB special meeting. These documents include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document from the SEC through the SEC's web site at the address provided above.
Documents incorporated by reference are available from the companies without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this Joint Proxy
Statement/Prospectus. You can obtain documents incorporated by reference in this
Joint Proxy Statement/Prospectus by requesting them in writing or by telephone
from the appropriate company at the following addresses:
<TABLE>
<S> <C>
Anchor BanCorp Wisconsin Inc. FCB Financial Corp.
25 West Main Street 420 South Koeller Street
Madison, WI 53703 Oshkosh, WI 54902
Attention: Investor Relations Attention: Investor Relations
Telephone: (608) 252-1810 Telephone: (920) 303-4900
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, YOU MUST DO SO BY MAY 28, 1999 TO
RECEIVE THEM BEFORE THE SPECIAL MEETINGS. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that differs from, or adds to,
the information in this document or in our documents that are publicly filed
with the SEC. Therefore, if anyone does give you different or additional
information, you should not rely on it.
If you are in a jurisdiction where it is unlawful to offer to exchange or
sell, or to ask for offers to exchange or buy, the securities offered by this
Joint Proxy Statement/Prospectus or to ask for proxies, or if you are a person
to whom it is unlawful to direct such activities, then the offer presented by
this document does not extend to you.
The information contained in this Joint Proxy Statement/Prospectus speaks
only as of its date unless the information specifically indicates that another
date applies. Information in this document about Anchor has been supplied by
Anchor, and information about FCB has been supplied by FCB.
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FCB FINANCIAL CORP.
AND
ANCHOR BANCORP WISCONSIN INC.
January 5, 1999
<PAGE> 106
TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE I - THE MERGER........................................................ A-1
SECTION 1.1 The Merger................................................. A-1
SECTION 1.2 Effective Time............................................. A-1
SECTION 1.3 Effect of the Merger....................................... A-2
SECTION 1.4 Articles of Incorporation; By-Laws......................... A-2
SECTION 1.5 Board of Directors of the Surviving Corporation............ A-2
SECTION 1.6 Conversion of Securities................................... A-3
SECTION 1.7 Adjustments for Dilution and Other Matters................. A-4
SECTION 1.8 Exchange of Certificates................................... A-5
SECTION 1.9 Stock Transfer Books....................................... A-7
SECTION 1.10 Buyer Common Stock......................................... A-7
SECTION 1.11 The Bank Merger............................................ A-7
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................... A-9
SECTION 2.1 Organization and Qualification; Subsidiaries............... A-9
SECTION 2.2 Articles of Incorporation and By-Laws...................... A-11
SECTION 2.3 Capitalization............................................. A-11
SECTION 2.4 Authority.................................................. A-12
SECTION 2.5 No Conflict; Required Filings and Consents................. A-12
SECTION 2.6 Compliance; Permits........................................ A-13
SECTION 2.7 Environmental Matters...................................... A-13
SECTION 2.8 Contracts.................................................. A-14
SECTION 2.9 Agreements with Regulatory Agencies........................ A-15
SECTION 2.10 Loan Loss Reserves......................................... A-15
SECTION 2.11 Securities and Banking Reports; Financial Statements....... A-15
SECTION 2.12 Absence of Certain Changes or Events....................... A-16
SECTION 2.13 Absence of Litigation...................................... A-16
SECTION 2.14 Employee Benefit Plans..................................... A-17
SECTION 2.15 Registration Statement; Proxy Statement/Prospectus......... A-19
SECTION 2.16 Taxes...................................................... A-19
SECTION 2.17 Brokers.................................................... A-20
SECTION 2.18 Tax Matters and Pooling.................................... A-20
SECTION 2.19 Vote Required.............................................. A-20
SECTION 2.20 Year 2000 Compliance....................................... A-20
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER..................... A-21
SECTION 3.1 Organization and Qualification; Subsidiaries............... A-21
SECTION 3.2 Articles of Incorporation and By-Laws...................... A-22
SECTION 3.3 Capitalization............................................. A-22
SECTION 3.4 Authority.................................................. A-23
SECTION 3.5 No Conflict; Required Filings and Consents................. A-23
SECTION 3.6 Compliance; Permits........................................ A-24
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 3.7 Environmental Matters...................................... A-24
SECTION 3.8 Contracts.................................................. A-25
SECTION 3.9 Agreements with Regulatory Agencies........................ A-25
SECTION 3.10 Loan Loss Reserves......................................... A-25
SECTION 3.11 Securities and Banking Reports; Financial Statements....... A-26
SECTION 3.12 Absence of Certain Changes or Events....................... A-27
SECTION 3.13 Absence of Litigation...................................... A-27
SECTION 3.14 Employee Benefit Plans..................................... A-27
SECTION 3.15 Registration Statement; Proxy Statement/Prospectus......... A-28
SECTION 3.16 Taxes...................................................... A-29
SECTION 3.17 Brokers.................................................... A-29
SECTION 3.18 Tax Matters and Pooling.................................... A-29
SECTION 3.19 Vote Required.............................................. A-30
SECTION 3.20 Year 2000 Compliance....................................... A-30
ARTICLE IV - COVENANTS OF THE COMPANY......................................... A-30
SECTION 4.1 Affirmative Covenants...................................... A-30
SECTION 4.2 Negative Covenants......................................... A-30
SECTION 4.3 Letter of the Company's Accountants........................ A-32
SECTION 4.4 Access and Information..................................... A-33
SECTION 4.5 Update Disclosure; Breaches................................ A-33
SECTION 4.6 Affiliates................................................. A-34
SECTION 4.7 Tax Treatment and Pooling.................................. A-34
ARTICLE V - COVENANTS OF THE BUYER............................................ A-34
SECTION 5.1 Affirmative Covenants...................................... A-34
SECTION 5.2 Negative Covenants......................................... A-34
SECTION 5.3 Access and Information..................................... A-35
SECTION 5.4 Update Disclosure; Breaches................................ A-36
SECTION 5.5 Stock Exchange Listing..................................... A-36
SECTION 5.6 Tax Treatment and Pooling.................................. A-36
SECTION 5.7 Stock Options.............................................. A-36
SECTION 5.8 SEC Filings................................................ A-37
ARTICLE VI - ADDITIONAL AGREEMENTS............................................ A-37
SECTION 6.1 Proxy Statement/Prospectus; Registration Statement......... A-37
SECTION 6.2 Meetings of Shareholders................................... A-37
SECTION 6.3 Appropriate Action; Consents; Filings...................... A-38
SECTION 6.4 Employee Stock Options and Other Employee Benefit Matters.. A-38
SECTION 6.5 Directors' and Officers' Indemnification and Insurance..... A-38
SECTION 6.6 Notification of Certain Matters............................ A-40
SECTION 6.7 Public Announcements....................................... A-40
SECTION 6.8 Recision of Repurchase Programs............................ A-40
SECTION 6.9 Dividends.................................................. A-41
SECTION 6.10 Issuance of Shares......................................... A-41
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 6.11 Expenses................................................... A-41
ARTICLE VII - CONDITIONS OF MERGER............................................ A-41
SECTION 7.1 Conditions to Obligation of Each Party to Effect the Merger A-41
SECTION 7.2 Additional Conditions to Obligations of the Buyer.......... A-42
SECTION 7.3 Additional Conditions to Obligations of the Company........ A-44
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER.............................. A-46
SECTION 8.1 Termination................................................ A-46
SECTION 8.2 Effect of Termination...................................... A-47
SECTION 8.3 Amendment.................................................. A-47
SECTION 8.4 Waiver..................................................... A-47
ARTICLE IX - GENERAL PROVISIONS............................................... A-48
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements. A-48
SECTION 9.2 Enforcement of Agreement................................... A-48
SECTION 9.3 Notices.................................................... A-48
SECTION 9.4 Certain Definitions........................................ A-49
SECTION 9.5 Headings................................................... A-50
SECTION 9.6 Severability............................................... A-50
SECTION 9.7 Entire Agreement........................................... A-50
SECTION 9.8 Assignment................................................. A-50
SECTION 9.9 Parties in Interest........................................ A-50
SECTION 9.10 Governing Law.............................................. A-51
SECTION 9.11 Counterparts............................................... A-51
</TABLE>
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COMPANY DISCLOSURE SCHEDULES
<TABLE>
<S> <C>
Section 2.1(c) Organization and Qualification; Subsidiaries.
Section 2.7 Environmental Matters.
Section 2.11 Securities and Banking Reports; Financial Statements.
Section 2.12 Absence of Certain Changes or Events.
Section 2.13 Absence of Litigation.
Section 2.14(a) Plans of the Company.
Section 2.14(b) Absence of Certain Types of Plans.
Section 2.14(c) Compliance with Applicable Law.
Section 2.14(d) Qualification of Certain Plans.
Section 2.14(e) Absence of Certain Liabilities and Events.
Section 2.14(h) Stock Options.
Section 2.14(i) Employment Contracts.
Section 2.16 Taxes.
Section 2.20 Year 2000 Compliance.
</TABLE>
BUYER DISCLOSURE SCHEDULES
<TABLE>
<S> <C>
Section 3.1(c) Organization and Qualification; Subsidiaries.
Section 3.7 Environmental Matters.
Section 3.11 Securities and Banking Reports; Financial Statements.
Section 3.12 Absence of Litigation.
Section 3.16 Taxes.
Section 3.20 Year 2000 Compliance.
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 5, 1999 (the
"Agreement"), between FCB Financial Corp., a Wisconsin corporation (the
"Company"), and Anchor BanCorp Wisconsin Inc., a Wisconsin corporation (the
"Buyer").
WHEREAS, the Boards of Directors of the Buyer and the Company have each
determined that it is fair to and in the best interests of their respective
shareholders for the Company to merge with and into the Buyer (the "Merger")
upon the terms and subject to the conditions set forth herein and in accordance
with the Wisconsin Business Corporation Law (the "WBCL"); and
WHEREAS, the respective Boards of Directors of the Buyer and the Company
have each approved the Merger of the Company with and into the Buyer, upon the
terms and subject to the conditions set forth herein; and
WHEREAS, as a condition to and immediately after the execution of this
Agreement, the Company and the Buyer are entering into a Stock Option Agreement
(the "Stock Option Agreement") in the form attached hereto as EXHIBIT A; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that the Merger
shall be accounted for as a pooling of interests; and
WHEREAS, the Buyer and the Company desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the parties hereto hereby agree as
follows:
ARTICLE I - THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the WBCL, at the Effective Time
(as defined in Section 1.2) the Company shall be merged with and into the
Buyer. As a result of the Merger, the separate corporate existence of the
Company shall cease and the Buyer shall continue as the surviving corporation
of the Merger (the "Surviving Corporation").
SECTION 1.2 Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto shall cause
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the Merger to be consummated by filing articles of merger (the "Articles of
Merger") with the Department of Financial Institutions of the State of
Wisconsin (the "DFI") in such form as required by, and executed in accordance
with the relevant provisions of, the WBCL (the date and time of such filing is
referred to herein as the "Effective Time").
SECTION 1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable provisions
of the WBCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of the Buyer and the Company
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Buyer and the Company shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 1.4 Articles of Incorporation; By-Laws. At the Effective Time,
the Articles of Incorporation, as amended, of the Buyer (the "Buyer Articles")
and the By-Laws, as amended, of the Buyer ("Buyer By-Laws"), as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
and the By-Laws of the Surviving Corporation.
SECTION 1.5 Board of Directors of the Surviving Corporation.
(a) From and after the Effective Time, the Board of Directors of the
Surviving Corporation shall include the directors of the Buyer immediately
prior to the Effective Time. In addition, the Surviving Corporation and its
Board of Directors shall take such action as may be necessary to cause two (2)
directors of the Company (which directors shall be selected by the Buyer) (the
"Company Directors") to be appointed as directors of the Surviving Corporation
effective at the Effective Time. Such action shall include, if necessary,
expansion of the size of the Board of Directors of the Surviving Corporation to
the extent necessary to create sufficient vacancies for the Company Directors
to be appointed as of the Effective Time ("Necessary Vacancies"); provided,
that if (i) at least one (1) Company Director is appointed as of the Effective
Time and (ii) the Effective Time occurs within sixty (60) days prior to July
27, 1999, the anticipated date of the next annual meeting of shareholders of
the Buyer (the "Next Annual Meeting"), then the Surviving Corporation shall not
be required to expand immediately the size of its Board of Directors to create
a Necessary Vacancy for the second Company Director prior to the Next Annual
Meeting; rather, the Surviving Corporation and its Board of Directors shall
take such action as may be necessary to cause the second Company Director
either to be a Board nominee for election as a director at, or to be appointed
as a director effective as of, the Next Annual Meeting. If the initial term of
any Company Director who is appointed or elected pursuant to the preceding
provisions of this Section 1.5(a) expires less than two (2) years after the
Effective Time, then at the annual meeting at which such Company Director's
initial term expires the Surviving Corporation and its Board of Directors shall
nominate such Company Director for election by the shareholders of the
Surviving Corporation to a full three-year term as a director (a "Subsequent
Full Term"). If the initial term of any Company Director expires two (2) years
after the Effective Time or later, however, the Surviving Corporation and its
Board of Directors shall be under no obligation to
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nominate such Company Director for election to a Subsequent Full Term;
provided, however, that at least one Company Director shall be eligible to be
elected to a Subsequent Full Term hereunder. In the event that a Company
Director shall die, become disabled or otherwise choose to no longer serve as a
Company Director prior to the end of his initial term and any Subsequent Full
Term to which he is entitled to be nominated as provided above, such Company
Director shall be succeeded by an individual (selected by the Buyer) who was
serving as a director of the Company at the Effective Time. Such successor
director shall thereafter be deemed to be a Company Director.
(b) The Surviving Corporation shall, effective as of the Effective Time,
take such action as may be necessary to cause two (2) directors of the Company
(which directors shall be selected by the Buyer) (the "Company Bank Directors")
to be appointed to serve on the Board of Directors of AnchorBank, S.S.B.
("AnchorBank") for a term of not less than three (3) years. The Company
Directors and the Company Bank Directors may be the same or different persons.
In the event a Company Bank Director shall die, become disabled or otherwise
choose to no longer serve as a Company Bank Director prior to the end of such
three-year term, such Company Bank Director shall be succeeded by an individual
(selected by the Buyer) who was serving as a director of the Company at the
Effective Time. Such successor director shall thereafter be deemed to be a
Company Bank Director.
(c) At the Effective Time, the officers of the Buyer immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed; provided,
however, that the following officers of the Company: James J. Rothenbach,
Harold L. Hermansen, James J. Goetz, Theodore W. Hoff, and Phillip J. Schoofs
shall be appointed as officers of the Surviving Corporation in the capacities
to be determined by the Surviving Corporation and, in the case of James J.
Rothenbach, pursuant to the terms and conditions of the Employment Agreement
attached hereto as EXHIBIT B. In addition, Donald D. Parker, the Chairman of
the Board of the Company, shall serve as an officer of the Surviving
Corporation pursuant to the terms and conditions of the Employment Agreement
attached hereto as EXHIBIT C.
(d) The parties hereto agree to take such action as may be necessary to
cause the agreements set forth in this Section 1.5 to be satisfied.
SECTION 1.6 Conversion of Securities. Subject to Section 1.8(e)
regarding fractional shares, at the Effective Time, by virtue of the Merger and
without any action on the part of the Buyer, the Company or the holder of the
following securities:
(a) Each share of the common stock, par value $.01 per share of the
Company ("Company Common Stock"), issued and outstanding immediately prior to
the Effective Time (all such shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time being referred to herein as
the "Shares"), other than Shares held by the Buyer for its own account or any
Buyer Subsidiary (as defined in Section 3.1(a), below) for its own account,
shall cease to be outstanding and shall be converted into and become the right
to receive 1.83 shares, subject to adjustment as provided below (the exchange
ratio, as adjusted
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pursuant to Section 1.7, is hereinafter referred to as the "Exchange Ratio"),
of common stock, $0.10 per share par value, of the Buyer ("Buyer Common Stock,"
which term shall be deemed to include the rights to purchase shares of Buyer
preferred stock, $.10 par value, under the terms of the Rights Agreement, dated
July 22, 1997, by and between Buyer and Firstar Bank Wisconsin, N.A. (as
successor to Firstar Trust Company)). All such Shares shall no longer be
outstanding and shall immediately be canceled and retired and shall cease to
exist, and each certificate previously representing any such Shares shall
thereafter represent the right to receive a certificate representing shares of
Buyer Common Stock into which such Company Common Stock shall have been
converted. Certificates representing shares of Company Common Stock shall be
exchanged for certificates representing whole shares of Buyer Common Stock
issued in consideration therefor upon the surrender of such certificates in
accordance with the provisions of Section 1.8 hereof, without interest.
(b) Each share of Company Common Stock held as treasury stock shall be
canceled and extinguished without conversion thereof into Buyer Common Stock or
payment therefor.
(c) Each share of Company Common Stock held by the Buyer for its own
account or any Buyer Subsidiary for its own account shall be canceled and
extinguished without conversion thereof into Buyer Common Stock or payment
therefor.
(d) If (i) the Anchor Average Price (as defined below) as of the date that
the last approval necessary to consummate the Merger is received is less than
$15.00 and (ii) the Average Price Ratio (as of the date that the last approval
necessary to consummate the Merger is received) is less than 85% of the Average
Price Ratio (as of the date of this Agreement), then the Company shall have the
right to terminate this Agreement immediately with the effect as set forth in
Section 8.2 hereof. For purposes of this Agreement, "Average Price Ratio"
means, as of either date of determination, the ratio of (x) the Anchor Average
Price as of the date of determination, over (y) the average of the closing
prices for the twenty (20) consecutive trading days immediately preceding the
fifth business day prior to the date of determination of the common stock of
the entities identified in EXHIBIT D hereto. For purposes of this Agreement,
the Anchor Average Price shall, as of any date of determination, be the average
of the closing prices of Buyer Common Stock as reported on The Nasdaq Stock
Market for the twenty (20) consecutive trading days immediately preceding the
fifth business day prior to the applicable determination date.
SECTION 1.7 Adjustments for Dilution and Other Matters. If prior to the
Effective Time, (a) the Company shall declare a stock dividend or distribution
upon or subdivide, split up, reclassify or combine the Company Common Stock, or
declare a dividend or make a distribution on Company Common Stock in any
security convertible into Company Common Stock, or (b) the Buyer shall declare
a stock dividend or distribution upon or subdivide, split up, reclassify or
combine Buyer Common Stock or declare a dividend or make a distribution on
Buyer Common Stock in any security convertible into Buyer Common Stock,
appropriate adjustment or adjustments will be made to the Exchange Ratio.
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SECTION 1.8 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, the Buyer shall deposit, or
shall cause to be deposited with an exchange agent chosen by the Buyer and
which is reasonably acceptable to the Company (the "Exchange Agent"), for the
benefit of the holders of Shares for exchange in accordance with this Article
I, through the Exchange Agent, certificates representing the shares of Buyer
Common Stock and cash in lieu of fractional shares (such certificates for
shares of Buyer Common Stock, together with the amount of cash payable in lieu
of fractional shares and any dividends or distributions with respect to such
Buyer Common Stock are referred to herein as the "Exchange Fund") payable and
issuable pursuant to Section 1.6 in exchange for outstanding Shares; provided,
however, that the Buyer need not deposit the cash for fractional shares into
the Exchange Fund until such time as such funds are to be distributed by the
Exchange Agent.
(b) Exchange Procedures. No later than ten (10) days after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate
or certificates which immediately prior to the Effective Time represented
outstanding Shares which Shares were converted into the right to receive shares
of Buyer Common Stock pursuant to Section 1.6 (a "Certificate" or
"Certificates"), (i) a letter of transmittal and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Buyer 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
Buyer Common Stock which such holder has the right to receive in respect of the
Certificate surrendered pursuant to the provisions of this Article I (after
taking into account all Shares then held by such holder), and the Certificate
so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Buyer Common
Stock may be issued to a transferee if the Certificate representing such Shares
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and the
posting by such person of a bond in such amount as the Buyer may reasonably
direct as indemnity against any claim that may be made against it or the
Exchange Agent with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate a certificate
representing the proper number of shares of Buyer Common Stock. Until
surrendered as contemplated by this Section 1.8, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Buyer Common
Stock, dividends, cash in lieu of any fractional shares of Buyer Common Stock
as contemplated by Section 1.8(e) and other distributions as contemplated by
Section 1.8(c).
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Buyer Common Stock
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with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Buyer Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 1.8(e), until the holder of such
Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole shares of Buyer
Common Stock issued in exchange therefor, without interest, (i) promptly, the
amount of any cash payable with respect to a fractional share of Buyer Common
Stock to which such holder is entitled pursuant to Section 1.8(e) and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Buyer
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 Buyer Common Stock.
(d) No Further Rights in the Shares. All shares of Buyer Common Stock
issued and cash paid upon conversion of the Shares in accordance with the terms
hereof (including any cash paid pursuant to Section 1.8(e)) shall be deemed to
have been issued in full satisfaction of all rights pertaining to such Shares.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of Buyer Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interest will not entitle
the owner thereof to vote or to any rights of a shareholder of the Buyer. 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 Anchor Average Price as of
the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former shareholders of the Company for two (2)
years after the Effective Time shall be delivered to the Buyer, upon demand,
and any former shareholders of the Company who have not theretofore complied
with this Article I shall thereafter look only to the Buyer to claim their
shares of Buyer Common Stock, any cash in lieu of fractional shares of Buyer
Common Stock and any dividends or distributions with respect to Buyer Common
Stock, in each case without interest thereon, and subject to Section 1.8(g).
(g) No Liability. Neither the Buyer nor the Company shall be liable to
any former holder of Shares for any such Shares (or dividends or distributions
with respect thereto) or cash or other payment delivered to a public official
pursuant to any abandoned property, escheat or similar laws.
(h) Withholding Rights. The Buyer shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any former holder of Shares such amounts as the Buyer is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are
so withheld by the Buyer, such withheld amounts shall be treated for
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all purposes of this Agreement as having been paid to the former holder of the
Shares in respect of which such deduction and withholding were made by the
Buyer.
SECTION 1.9 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of the Company Common Stock thereafter on
the records of the Company. From and after the Effective Time, the holders of
Certificates shall cease to have any rights with respect to such Shares except
as otherwise provided herein or by law. On or after the Effective Time, any
Certificates presented to the Exchange Agent or the Buyer for any reason shall
be converted into shares of Buyer Common Stock and cash in lieu of fractional
shares in accordance with this Article I.
SECTION 1.10 Buyer Common Stock. The shares of Buyer Common Stock issued
and outstanding immediately prior to the Effective Time shall be unaffected by
the Merger, and at the Effective Time such shares shall remain issued and
outstanding.
SECTION 1.11 The Bank Merger.
(a) Following the Effective Time, Fox Cities Bank ("Fox Cities") shall be
merged and consolidated with and into AnchorBank under the Charter and By-Laws
of AnchorBank (the "Bank Merger"), pursuant to the provisions of, and with the
effect provided in, applicable law, and AnchorBank shall be the surviving bank
and the separate existence of Fox Cities shall thereupon cease (the term
"Surviving Bank" shall refer to AnchorBank following the Bank Merger). Subject
to terms and upon satisfaction of all requirements of law and the conditions
specified herein, the Bank Merger shall become effective on such date as shall
be designated by the Buyer following the Effective Time and subsequent to the
receipt of approvals from all applicable governmental authorities authorizing
the consolidation (the "Bank Merger Effective Date").
(b) Surviving Bank.
(i) The Surviving Bank shall continue the banking business of Fox
Cities in the current locations of Fox Cities as branch offices of
the Surviving Bank.
(ii) The principal office of the Surviving Bank shall be the
principal office of AnchorBank.
(iii) At and as of the Bank Merger Effective Date, the Charter and
By-Laws of AnchorBank, as in effect immediately prior to the Bank
Merger Effective Date, shall be the Charter and By-Laws of the
Surviving Bank until thereafter amended as provided by law.
(iv) On the Bank Merger Effective Date, the Surviving Bank shall
have capital surplus equal to that of AnchorBank and Fox Cities,
combined, immediately prior to the Bank Merger and undivided
profits, including capital reserves, which, when combined with the
capital and surplus, will be equal to
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the capital structure of AnchorBank and Fox Cities as of the date
hereof, adjusted, however, for normal earnings and expenses between
the date hereof and the Bank Merger Effective Date.
(v) As of the Bank Merger Effective Date, the Board of Directors of
AnchorBank (except as otherwise contemplated by this Agreement)
shall continue to serve as the Board of Directors of the Surviving
Bank until such time as their successors have been elected and have
qualified.
(vi) As of the Bank Merger Effective Date, the Surviving Bank will
establish an advisory board (which shall be subject to annual
review and renewal by the Surviving Bank's Board of Directors).
The advisory board shall consist of all persons serving as
directors of Fox Cities as of the Effective Time who are not
appointed or elected to serve either as Company Directors or as
Company Bank Directors. The Buyer recognizes the need for an
advisory board in order for the Surviving Bank to realize its full
potential in the market area now served by Fox Cities, to maintain
close personal and business relationships, and to assist in the
transition of Fox Cities to AnchorBank's system of operations. The
parties believe that the advisory board members, through their
continued identification with the Surviving Bank and active
support, will ensure an ongoing program of interest and commitment
in the former Fox Cities market area. The advisory board will
provide the Surviving Bank's management and Board of Directors with
advice and counsel with respect to the following: (A) loan
originations from the former Fox Cities market area; (B) savings
programs to be offered in the former Fox Cities markets; (C)
advertising programs; (D) community activities and involvement; and
(E) such other business and financial matters as the advisory board
believes may further contribute to the Surviving Bank's successful
operation in the former Fox Cities market area. In conformance
with regulatory guidelines, members of the advisory board will
serve terms of one year, subject to nomination and election
annually by the Board of Directors of the Surviving Bank. The
advisory board shall meet at least quarterly. Each member of the
advisory board will receive a fee of $200 per month for as long as
he shall serve thereon. The Surviving Bank shall maintain the
advisory board for at least one year and thereafter for so long as
the Surviving Bank believes the advisory board can continue to
provide valuable local community assistance.
(c) Corporate Existence; Assets and Liabilities of the Surviving Bank.
Upon the Bank Merger Effective Date:
(i) All rights, franchises and interests of Fox Cities in and to
every type of property (real, personal and mixed) and choses in
action shall be transferred to and vested in the Surviving Bank by
virtue of the Bank Merger without any deed or other transfer, and
the Surviving Bank, without any order or other action on the part
of any court or otherwise, shall hold and enjoy all rights of
property, franchises and interests, including appointments,
designations, nominations, and
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all other rights and interest as trustee, executor, administrator,
registrar of stocks and bonds, guardians of estates, assignee, and
receiver of estates of incompetents, and in every other fiduciary
capacity, in the same manner and to the same extent as such rights,
franchises and interests were held or enjoyed by Fox Cities
immediately prior to the Bank Merger.
(ii) The Surviving Bank shall be liable for all of the liabilities
of Fox Cities and all deposits, debts, liabilities, obligations and
contracts of Fox Cities matured or unmatured, whether insured,
obsolete, contingent or otherwise, and whether or not reflected or
reserved against on balance sheets, books of account, or records of
Fox Cities shall be those of the Surviving Bank and shall not be
relieved or canceled by the Bank Merger and all rights of creditors
and obligees, and all liens on property of Fox Cities shall be
preserved and unimpaired. All assets of Fox Cities, as they exist
at and as of the Bank Merger Effective Date, shall pass to and vest
in the Surviving Bank, without any conveyance or other transfer;
and the Surviving Bank shall be responsible for all liabilities of
Fox Cities of every kind and description existing as of the Bank
Merger Effective Date.
(iii) At any time after the Bank Merger Effective Date, the
officers of the Surviving Bank may, in the name of Fox Cities,
execute and deliver all such deeds, assignments and other
instruments and take or cause to be taken all such further or other
action as the Surviving Bank may deem necessary or desirable in
order to vest, perfect or confirm in the Surviving Bank title to
and possession of all of Fox Cities' property, rights, privileges,
immunities, powers, purposes and otherwise to carry out the
purposes hereof.
(iv) The liquidation account established by Fox Cities pursuant to
the plan of conversion adopted in connection with its conversion
from mutual to stock form shall continue to be maintained by the
Surviving Bank after the Bank Merger Effective Date for the benefit
of those persons and entities who were savings account holders of
Fox Cities on Fox Cities' eligibility record date and who continue
from time to time to have rights therein.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company to
the Buyer prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company hereby represents and warrants to the Buyer that:
SECTION 2.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized and validly existing under
the laws of the State of Wisconsin, and is registered as a savings and loan
holding company under the Home Owners' Loan Act ("HOLA"). Each subsidiary of
the Company ("Company
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Subsidiary" or, collectively, "Company Subsidiaries") is a federally-chartered
savings bank or a corporation duly organized and validly existing under the
laws of the state of its incorporation. Each of the Company and the Company
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 ("Company Approvals")
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted, including, without limitation, appropriate
authorizations from the Federal Deposit Insurance Corporation (the "FDIC") and
the Office of Thrift Supervision ("OTS"), and neither the Company nor any
Company Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Company Approvals, except in each case where
the failure to be so existing or to have such power, authority, Company
Approvals and revocations or modifications would not, individually or in the
aggregate, have a Material Adverse Effect (as defined below) on the Company and
the Company Subsidiaries taken as a whole.
(b) The Company and each Company Subsidiary is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except where such failures to be so duly qualified or licensed and
in good standing would not, either individually or in the aggregate, have a
Material Adverse Effect on the Company and the Company Subsidiaries taken as a
whole.
(c) A true and complete list of all of the Company Subsidiaries, together
with (i) the Company's percentage ownership of each Company Subsidiary and (ii)
laws under which the Company Subsidiary is incorporated, is set forth on
Section 2.1(c) of the Company Disclosure Schedule. Except as set forth on
Section 2.1(c) of the Company Disclosure Schedule, the Company and/or one or
more of the Company Subsidiaries owns beneficially and of record all of the
outstanding shares of capital stock of each of the Company Subsidiaries.
Except for the subsidiaries set forth on Section 2.1(c) of the Company
Disclosure Schedule, the Company does not directly or indirectly own any equity
or similar interests in, or any interests convertible into or exchangeable or
exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity other than
in the ordinary course of business, and in no event in excess of 5% of the
outstanding equity securities of such entity.
(d) As used in this Agreement, the term "Material Adverse Effect" means,
with respect to the Buyer or the Company, as the case may be, any effect that
(i) is material and adverse to the business, assets, liabilities, results of
operations or financial condition of the Buyer and the Buyer Subsidiaries taken
as whole or the Company and the Company Subsidiaries taken as a whole,
respectively, or (ii) materially impairs the ability of the Buyer or the
Company to consummate the transactions contemplated hereby; provided, however,
that Material Adverse Effect shall not be deemed to include the impact of (A)
actions contemplated by this Agreement, (B) changes in laws and regulations or
interpretations thereof that are generally applicable to the banking or savings
industries, (C) changes in generally accepted accounting principles ("GAAP")
that are generally applicable to the banking or savings industries,
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(D) expenses incurred in connection with the transactions contemplated hereby,
and (E) changes attributable to or resulting from changes in general economic
conditions affecting banks, savings institutions or their holding companies
generally, including changes in the prevailing level of interest rates.
SECTION 2.2 Articles of Incorporation and By-Laws. The Company has
heretofore furnished to the Buyer a complete and correct copy of the Articles
of Incorporation and the By-Laws, as amended or restated, of the Company
("Company Articles" or "Company By-Laws") and each Company Subsidiary. Such
Articles of Incorporation and By-Laws of the Company and each Company
Subsidiary are in full force and effect. Neither the Company nor any Company
Subsidiary is in violation of any of the provisions of its Articles of
Incorporation or By-Laws.
SECTION 2.3 Capitalization. The authorized capital stock of the Company
consists of 15,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, par value $.01 per share ("Company Preferred Stock"). As of
the date of this Agreement, (a) 3,840,680 shares of Company Common Stock are
issued and outstanding, all of which are duly authorized, validly issued, fully
paid and non-assessable, except as provided by Section 180.0622(2)(b) of the
WBCL (such section, including judicial interpretations thereof and of Section
180.40(6), its predecessor statute, are referred to herein as "Section
180.0622(2)(b) of the WBCL"), and were not issued in violation of any preemptive
right of any Company shareholder, (b) 687,688 shares of Company Common Stock are
held in the treasury of the Company, (c) 230,344 shares of Company Common Stock
are reserved for future issuance pursuant to outstanding employee stock options
issued pursuant to the Company's equity incentive plans and (d) 764,295 shares
of Company Common Stock are reserved for future issuance under the Stock Option
Agreement. As of the date of this Agreement, no shares of Company Preferred
Stock are issued and outstanding. Except as set forth in clauses (c) and (d)
above, there are no options, warrants or other rights, agreements, arrangements
or commitments of any character pursuant to which the Company or any Company
Subsidiary is a party, including without limitation voting agreements or
arrangements, relating to the issued or unissued capital stock of the Company or
any Company Subsidiary or obligating the Company or any Company Subsidiary to
issue or sell any shares of capital stock of, or other equity interests in, the
Company or any Company Subsidiary. All shares of Company Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and non-assessable, except as otherwise provided by
Section 180.0622(2)(b) of the WBCL. There are no obligations, contingent or
otherwise, of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or the capital stock of any
Company Subsidiary or to provide funds to or make any investment (in the form of
a loan, capital contribution or otherwise) in any Company Subsidiary or any
other entity, except for loan commitments and other funding obligations entered
into in the ordinary course of business and except as required under the Stock
Option Agreement and under currently existing stock option agreements. Each of
the outstanding shares of capital stock of each Company Subsidiary are duly
authorized, validly issued, fully paid and non-assessable, except as provided by
Section 180.0622(2)(b) of the WBCL, and were not
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issued in violation of any preemptive rights of any Company Subsidiary
shareholder, and all such shares owned by the Company or another Company
Subsidiary are owned free and clear of all security interests, liens, claims,
pledges, agreements, limitations of the Company's voting rights, charges or
other encumbrances of any nature whatsoever.
SECTION 2.4 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 (other than,
with respect to the Merger, the approval and adoption of this Agreement by the
Company's shareholders in accordance with the WBCL and the Company Articles and
Company By-Laws). 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 so contemplated hereby (other than,
with respect to the Merger, the approval and adoption of this Agreement by the
Company's shareholders in accordance with the WBCL and the Company Articles and
Company By-Laws). This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of the Company and, assuming due
authorization, execution and delivery by the Buyer, is enforceable against the
Company in accordance with its terms, except as enforcement may be limited by
laws affecting insured depository institutions, general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
SECTION 2.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement and the transactions contemplated hereby
by the Company shall not, (i) conflict with or violate the Company Articles or
Company By-Laws or the Articles of Incorporation or By-Laws of any Company
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 any Company
Subsidiary or by which its or any of their respective properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under,
require the giving of notice to, or the consent of, any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company or any Company Subsidiary pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
Company Subsidiary is a party or by which the Company or any Company Subsidiary
or its or any of their respective properties is bound or affected, except in
the case of clause (iii) for any such conflicts, violations, breaches, defaults
or other occurrences that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company and the Company Subsidiaries taken as a
whole.
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(b) 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"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), state securities or blue sky laws ("Blue Sky Laws"), the HOLA,
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and
the filing of appropriate merger or other documents as required by the WBCL and
(ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or 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 the Company Subsidiaries taken as a whole.
SECTION 2.6 Compliance; Permits. Neither the Company nor any Company
Subsidiary is in conflict with, or in default or violation of, (a) any Law
applicable to the Company or any Company Subsidiary or by which its or any of
their respective properties is bound or affected, or (b) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any Company Subsidiary is
a party or by which the Company or any Company Subsidiary or its or any of their
respective properties is bound or affected, except for any such conflicts,
defaults or violations which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or the Company Subsidiaries taken as a
whole.
SECTION 2.7 Environmental Matters.
(a) Except as set forth in Section 2.7 of the Company Disclosure Schedule,
(i) none of the "Company Real Property" (as that term is defined below) has
been designated, restricted or, to the Company's knowledge, investigated by any
governmental authority as a result of the actual or suspected presence,
spillage, leakage, discharge or other emission of "Hazardous Substances" (as
hereinafter defined), nor to the Company's knowledge is there any basis for any
such designation, restriction or investigation; (ii) neither the Company nor
any Company Subsidiary has received any written notice, order or decree
concerning, or arising by reason of, the actual or suspected presence,
spillage, leakage, discharge, disposal or other emission of any Hazardous
Substance in, on, under, around, about or in the vicinity of, or the
transportation of any Hazardous Substance at, from, or to, any of the Company
Real Property.
(b) Except as disclosed in Section 2.7 of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary nor any Company Real Property is
in violation of, or subject to any liabilities as a result of any past or
current violations of, any existing law (including common law), rule or
regulation of any governmental authority relating to occupational health and
safety or relating to pollution or protection of the environment, including,
without limitation, laws, rules, and regulations relating to the emission,
generation, discharge, spillage, leakage, storage, off-site dumping, release or
threatened release of Hazardous Substances into ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal,
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transport or handling of Hazardous Substances (collectively, "Environmental
Laws"), and no expenditures are required in connection with the operation of
the Company's or any Company Subsidiary's businesses in order to comply with
any such Environmental Laws, except for such violations, liabilities and/or
expenditures as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or any Company Subsidiary.
(c) Except as set forth in Section 2.7 of the Company Disclosure Schedule,
there are no legal, administrative, arbitration or other proceedings, claims,
actions, causes of action or governmental investigations of any nature pending
or, to the Company's knowledge, threatened against the Company or any Company
Subsidiary seeking to impose, or that could reasonably result in the
imposition, on the Company or any Company Subsidiary, of any liability or
obligation arising under any Environmental Law. Except as set forth in Section
2.7 of the Company Disclosure Schedule, to the Company's knowledge, there is no
reasonable basis for any proceeding, claim, action or governmental
investigation that would impose any such liability or obligation.
(d) For purposes of this Agreement, the term "Hazardous Substance" shall
mean any product, substance, chemical, contaminant, pollutant, effluent, waste
or other material whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, emission, discharge,
spill, release or effect, either by itself or in combination with other
materials located on any of the Company Real Property or Buyer Real Property
(as defined herein), as applicable, is either: (i) regulated or monitored by
any applicable governmental authority or (ii) defined or listed in, or
otherwise classified pursuant to, any applicable Environmental Law as
"hazardous substances," "hazardous materials," "hazardous wastes," "infectious
wastes," "toxic substances" or the like. Hazardous Substances shall include,
but not be limited to (i) petroleum and refined petroleum products, (ii)
asbestos, asbestos-containing products, and presumed asbestos-containing
material, (iii) flammable explosives, (iv) radioactive materials, and (v)
polychlorinated biphenyls, whether contained or not.
(e) For purposes of this Agreement, the term "Company Real Property" means
(i) all real property (whether owned or leased) at which the operations of the
Company or any Company Subsidiary are or at any time were conducted and (ii)
all real property held by the Company or any Company Subsidiary as collateral
for any loans made or loans-in-process, or which is otherwise held as "real
estate owned" (REO) as a result of default by the borrower and subsequent
foreclosure by the Company or any Company Subsidiary.
SECTION 2.8 Contracts. Each contract which is material to the business of
the Company and the Company Subsidiaries is in full force and effect; neither
the Company nor any Company Subsidiary, nor, to the knowledge of the Company,
any other party, is in default under any such contract, and no event has
occurred which constitutes, or with the lapse of time or the giving of notice or
both would constitute, a default by the Company or any Company Subsidiary or, to
the knowledge of the Company, by any other party, under any such contract; and
there are no material disputes or disagreements between the Company or any
Company Subsidiary and any other party with respect to any such contract.
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SECTION 2.9 Agreements with Regulatory Agencies. Neither the Company
nor any Company Subsidiary is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or has been
a recipient of any supervisory letter from, or has adopted any board
resolutions at the request of the OTS, the FDIC or any other applicable federal
or state regulatory agency having jurisdiction over the Company or any Company
Subsidiary or its business ("Regulatory Agency"), that currently restricts the
conduct of its business or that relates to its capital adequacy, compliance
with laws, its credit policies, its management or its business (each a
"Regulatory Agreement"), nor has the Company or any Company Subsidiary been
advised by any Regulatory Agency that it is considering issuing or requesting
any such Regulatory Agreement.
SECTION 2.10 Loan Loss Reserves. The reserves for possible loan losses
shown on the September 30, 1998 call reports filed for the Company's
Subsidiaries are adequate in all material respects to provide for possible
losses, net of recoveries relating to loans previously charged off, on loans
outstanding (including accrued interest receivable) as of September 30, 1998.
SECTION 2.11 Securities and Banking Reports; Financial Statements.
(a) The Company and each Company Subsidiary have filed all forms, reports
and documents required to be filed with (i) the Securities and Exchange
Commission (the "SEC") since December 31, 1995, and as of the date of this
Agreement the Company has delivered to the Buyer (A) its Annual Reports on Form
10-K for the fiscal years ended March 31, 1998, 1997 and 1996, respectively,
(B) its Quarterly Reports on Form 10-Q for the periods ended June 30 and
September 30, 1998, (C) all proxy statements relating to the Company's meetings
of shareholders (whether annual or special) held since March 31, 1996, (D) all
Current Reports on Form 8-K filed by the Company with the SEC since March 31,
1996, (E) all other reports or registration statements (other than Quarterly
Reports on Form 10-Q not referred to in clause (B) above) filed by the Company
with the SEC since March 31, 1996 and (F) all amendments and supplements to all
such reports and registration statements filed by the Company with the SEC
since March 31, 1996 (collectively, the "Company SEC Reports") and (ii) the
OTS, the FDIC and any other applicable federal or state securities or banking
authorities (all such reports and statements are collectively referred to with
the Company SEC Reports as the "Company Reports"). The Company Reports,
including all Company Reports filed after the date of this Agreement, (x) were
or will be prepared in all material respects in accordance with the
requirements of applicable Law and (y) did not at the time they were filed, or
will not at the time they are filed, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports,
including any Company SEC Reports filed since the date of this Agreement and
prior to or on the Effective Time, has been prepared
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in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each fairly
presents the consolidated financial position of the Company and the Company
Subsidiaries as of the respective dates thereof and the consolidated results of
its operations and changes in financial position for the periods indicated,
except that any unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments.
(c) Except for (i) those liabilities that are fully reflected or reserved
against in the financial statements that are contained in the Company SEC
Reports, (ii) liabilities disclosed in Section 2.11 of the Company Disclosure
Schedule, and (iii) liabilities incurred in the ordinary course of business
consistent with past practice since September 30, 1998, neither the Company nor
any Company Subsidiary has incurred any liability of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether due or to
become due) that, either alone or when combined with all similar liabilities,
has had, or could reasonably be expected to have, a Material Adverse Effect on
the Company and the Company Subsidiaries taken as a whole.
SECTION 2.12 Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Reports filed prior to the date of this Agreement or set forth
in Section 2.12 of the Company Disclosure Schedule and except for the
transactions contemplated by this Agreement, since September 30, 1998 to the
date of this Agreement, the Company and the Company Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since September 30, 1998, there has not been (a) any change
in the financial condition, results of operations or business of the Company and
any of the Company Subsidiaries having a Material Adverse Effect on the Company
and the Company Subsidiaries taken as a whole, (b) any damage, destruction or
loss (whether or not covered by insurance) with respect to any assets of the
Company or any of the Company Subsidiaries having a Material Adverse Effect on
Company and the Company Subsidiaries taken as a whole, (c) any change by the
Company in its accounting methods, principles or practices, (d) any revaluation
by the Company of any of its assets in any material respect, (e) to the date of
this Agreement, any entry by the Company or any of the Company Subsidiaries into
any commitment or transactions material to the Company and the Company
Subsidiaries taken as a whole or (f) except for regular quarterly cash dividends
on Company Common Stock with usual record and payment dates, to the date of this
Agreement, any declaration, setting aside or payment of any dividends or
distributions in respect of shares of Company Common Stock or any redemption,
purchase or other acquisition of any of its securities or any of the securities
of any Company Subsidiary.
SECTION 2.13 Absence of Litigation.
(a) Except as set forth in Section 2.13 of the Company Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries is a party to
any, and there are no pending or, to the Company's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against the Company or
any of the Company Subsidiaries or challenging the validity or propriety of the
transactions
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contemplated by this Agreement which, if adversely determined, would,
individually or in the aggregate, have a Material Adverse Effect on the Company
and the Company Subsidiaries taken as a whole.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon the Company, any of the Company Subsidiaries or the
assets of the Company or any of the Company Subsidiaries which has had a
Material Adverse Effect on the Company and the Company Subsidiaries taken as a
whole.
SECTION 2.14 Employee Benefit Plans.
(a) Plans of the Company. Section 2.14(a) of the Company Disclosure
Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
all bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all material
employment, termination, severance or other employment contracts or employment
agreements, with respect to which the Company or any Company Subsidiary has any
obligation (collectively, the "Company Plans"). The Company has furnished or
made available to the Buyer a complete and accurate copy of each Company Plan
(or a description of the Company Plans, if the Company Plans are not in
writing) and a complete and accurate copy of each material document prepared in
connection with each such Company Plan, including, without limitation, and
where applicable, a copy of (i) each trust or other funding arrangement, (ii)
each summary plan description and summary of material modifications, (iii) the
three (3) most recently filed IRS Forms 5500 and related schedules, and (iv)
the most recently issued IRS determination letter for each such Plan.
(b) Absence of Certain Types of Plans. No member of the Company's
"controlled group," within the meaning of Section 4001(a)(14) of ERISA,
maintains or contributes to, or within the five years preceding the date of
this Agreement has maintained or contributed to, an employee pension benefit
plan subject to Title IV of ERISA. Except as disclosed in Section 2.14(b) of
the Company Disclosure Schedule, none of the Company Plans obligates the
Company or any of the Company Subsidiaries to pay material separation,
severance, termination or similar-type benefits solely as a result of any
transaction contemplated by this Agreement or as a result of a "change in
control," within the meaning of such term under Section 280G of the Code.
Except as disclosed in Section 2.14(b) of the Company Disclosure Schedule, or
as required by group health continuation rights under Section 4980B of the Code
("COBRA" rights), none of the Company Plans provide for or promises retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director or life insurance benefits to any current or
former employee, officer or director of the Company or any of the Company
Subsidiaries. Each of the Company Plans is subject only to the laws of the
United States or a political subdivision thereof.
(c) Compliance with Applicable Laws. Except as disclosed in Section
2.14(c) of the Company Disclosure Schedule, each Company Plan has been operated
in all respects in
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accordance with the requirements of all applicable Law and all persons who
participate in the operation of such Company Plans and all Company Plan
"fiduciaries" (within the meaning of Section 3(21) of ERISA) have acted in
accordance with the provisions of all applicable Law, except where such
violations of applicable Law would not, individually or in the aggregate, have
a Material Adverse Effect on the Company and the Company Subsidiaries taken as
a whole. The Company and the Company Subsidiaries have performed all
obligations required to be performed by any of them under, are not in any
respect in default under or in violation of, and the Company and the Company
Subsidiaries have no knowledge of any default or violation by any party to, any
Plan, except where such failures, defaults or violations would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
and the Company Subsidiaries taken as a whole.
(d) Qualification of Certain Plans. Each Company Plan that is intended to
be qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust established in connection with such a Plan that is
intended to be exempt from Federal income taxation under Section 501(a) of the
Code) has received a favorable determination letter from the IRS (as defined
herein) that it is so qualified, and, except as disclosed in Section 2.14(d) of
the Company Disclosure Schedule, no event has occurred since the date of such
determination letter from the IRS to adversely affect the qualified status of
any such Plan. Except as disclosed in Section 2.14(d) of the Company
Disclosure Schedule, no trust maintained or contributed to by the Company or
any of the Company Subsidiaries is intended to be qualified as a voluntary
employees' beneficiary association or is intended to be exempt from Federal
income taxation under Section 501(c)(9) of the Code.
(e) Absence of Certain Liabilities and Events. Except for matters
disclosed in Section 2.14(e) of the Company Disclosure Schedule, there has been
no non-exempt prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) with respect to any Plan. The Company and
each of the Company Subsidiaries has not incurred any liability for any excise
tax arising under Section 4972 or 4980B of the Code that would individually or
in the aggregate have a Material Adverse Effect on the Company and the Company
Subsidiaries taken as a whole.
(f) Plan Contributions. All contributions, premiums or payments required
to be made prior to the Effective Time with respect to any Company Plan will
have been made on or before the Effective Time.
(g) Stock Options. Section 2.14(g) of the Company Disclosure Schedule sets
forth a true and complete list of each current or former employee, officer or
director of the Company or any Company Subsidiary who holds any option to
purchase Company Common Stock as of the date of this Agreement, together with
the number of shares of Company Common Stock subject to such option, the date of
grant of such option, the plan under which the options were granted, the option
price of such option, the vesting schedule for such option, whether such option
is intended to qualify as an incentive stock option within the meaning of
Section 422(b) of the Code, and the expiration date of such option.
Section 2.14(g) indicates those of such
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options identified therein, if any, the vesting of which will be accelerated as
a result of the Merger.
(h) Employment Contracts. Except for employment, severance, consulting or
other similar contracts with any employees, consultants, officers or directors
of the Company or any of the Company Subsidiaries disclosed in Section 2.14(h)
of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary is a party to any such contracts. Neither the Company nor any
Company Subsidiary is a party to any collective bargaining agreements.
SECTION 2.15 Registration Statement; Proxy Statement/Prospectus. The
information supplied by the Company for inclusion in the Registration Statement
(as defined in Section 3.15) shall not at the time the Registration Statement is
declared effective contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The information supplied by the Company for
inclusion in the proxy statement/prospectus to be sent to the shareholders of
the Company in connection with the meeting of the Company's shareholders to
consider the Merger (the "Company Shareholders' Meeting") (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"Proxy Statement/Prospectus") shall not at the date the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is first
mailed to shareholders, at the time of the Company Shareholders' Meeting and at
the Effective Time, be false or misleading with respect to any material fact
required to be stated therein, or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event relating to the Company or any of its
affiliates, officers or directors should be discovered by the Company which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement/Prospectus, the Company shall promptly inform
the Buyer. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information about, or supplied or omitted by,
the Buyer which is contained in any of the foregoing documents.
SECTION 2.16 Taxes. The Company and the Company Subsidiaries have timely
filed all material Tax Returns (as defined below) required to be filed by them,
and the Company and the Company Subsidiaries have timely paid and discharged all
material Taxes (as defined below) due in connection with or with respect to the
filing of such Tax Returns, 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 Company's knowledge, the liability
for Taxes set forth on each such Tax Return adequately reflects the Taxes
required to be reflected on such Tax Return. For purposes of this Agreement,
"Tax" or "Taxes" shall mean taxes, charges, fees, levies, and other governmental
assessments and impositions of any kind, payable to any federal, state, local or
foreign governmental entity or taxing authority or agency, including, without
limitation, (i) income, franchise, profits, gross receipts, estimated, ad
valorem, value added, sales, use, service, real or personal property,
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capital stock, license, payroll, withholding, disability, employment, social
security, workers compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes, (ii) customs duties, imposts, charges, levies or other similar
assessments of any kind, and (iii) interest, penalties and additions to tax
imposed with respect thereto; and "Tax Returns" shall mean returns, reports,
and information statements with respect to Taxes required to be filed with the
United States Internal Revenue Service (the "IRS") or any other governmental
entity or taxing authority or agency, domestic or foreign, including, without
limitation, consolidated, combined and unitary tax returns. Except as
otherwise disclosed in Section 2.16 of the Company's Disclosure Schedule, to
the Company's knowledge, neither the IRS nor any other governmental entity or
taxing authority or agency is now asserting, either through audits,
administrative proceedings or court proceedings, any deficiency or claim for
additional Taxes. Except as otherwise disclosed in Section 2.16 of the
Company's Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries has granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of, any Tax. Except as
otherwise disclosed in Section 2.16 of the Company's Disclosure Schedule and
except for statutory liens for current taxes not yet due, to the Company's
knowledge there are no material tax liens on any assets of the Company or any
of the Company Subsidiaries. Except as otherwise disclosed in Section 2.16 of
the Company's Disclosure Schedule neither the Company nor any of the Company
Subsidiaries has received a ruling or entered into an agreement with the IRS or
any other taxing authority that would have a Material Adverse Effect on the
Company or the Company Subsidiaries, taken as a whole, after the Effective
Time. Except as otherwise disclosed in Section 2.16 of the Company's
Disclosure Schedule, no agreements relating to allocating or sharing of Taxes
exist among the Company and the Company Subsidiaries. Neither the Company nor
any of the Company Subsidiaries has made an election under Section 341(f) of
the Code.
SECTION 2.17 Brokers. No broker, finder or investment banker (other than
Hovde Financial, Inc.) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Company.
SECTION 2.18 Tax Matters and Pooling. Neither the Company nor, to the
Company's knowledge, any of its affiliates has through the date of this
Agreement taken or agreed to take or omitted to take any action that would
prevent the Merger from qualifying as (i) a reorganization under Section 368 of
the Code or (ii) for pooling-of-interests accounting treatment under GAAP.
SECTION 2.19 Vote Required. The affirmative vote of a majority of the
votes that holders of the outstanding shares of Company Common Stock are
entitled to cast is the only vote of the holders of any class or series of the
Company capital stock necessary to approve the Merger.
SECTION 2.20 Year 2000 Compliance. Except as identified on Section 2.20
of the Company Disclosure Schedule, none of the personal property, equipment or
assets owned or
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utilized by the Company, including but not limited to computer software,
databases, hardware, controls and peripherals, has characteristics or qualities
that may cause it to fail to (a) operate and produce data on and after January
1, 2000 (including taking into effect that such year is a leap year), or use
data based on time periods on and after January 1, 2000 (including taking into
effect that such year is a leap year), accurately and without delay,
interruption or error relating to the fact that the time at which and the date
on which such software is operating is on or after 12:01 a.m. on January 1,
2000 (including taking into effect that 2000 is a leap year) and (b) accept,
calculate, process, maintain, store and output, accurately and without delay,
interruption or error, all times or dates, or both, whether before, on or after
12:01 a.m. January 1, 2000 or 11:59 on December 31, 1999 (including taking into
effect that 2000 is a leap year), and any time periods determined or to be
determined based on such times or date or both (each a "Year 2000 Defect"),
except for Year 2000 Defects which would not cause a Material Adverse Effect on
the Company and the Company Subsidiaries taken as a whole. Except as
identified in Section 2.20 of the Company Disclosure Schedule, none of the
property or assets owned or utilized by the Company will fail to perform in any
material respect or require any repair, rewrite, conversion or other adaptation
because of, or due in any way to, a Year 2000 Defect, except for Year 2000
Defects which would not cause a Material Adverse Effect on the Company and the
Company Subsidiaries taken as a whole. The Company has no knowledge that a
vendor or supplier of the Company may experience a Year 2000 Defect that could
cause a Material Adverse Effect on the Company and the Company Subsidiaries
taken as a whole.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER
Except as set forth in the Disclosure Schedule delivered by the Buyer to
the Company prior to the execution of this Agreement (the "Buyer Disclosure
Schedule), the Buyer hereby represents and warrants to the Company that:
SECTION 3.1 Organization and Qualification; Subsidiaries.
(a) The Buyer is a corporation duly organized and validly existing under
the laws of the State of Wisconsin, and is registered as a savings and loan
holding company under HOLA. Each subsidiary of the Buyer (a "Buyer Subsidiary"
or, collectively, "Buyer Subsidiaries") is a state-chartered savings
association or a corporation duly organized and validly existing under the laws
of the state of its incorporation. Each of the Buyer and the Buyer
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 ("Buyer Approvals")
necessary to own, lease and operate their respective properties and to carry on
their respective business as now being conducted, including, without
limitation, appropriate authorizations from the FDIC, OTS and the DFI, and
neither the Buyer nor any Buyer Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Buyer Approvals,
except in each case where the failure to be so organized, existing and in good
standing or to have such power, authority, Buyer Approvals and
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revocations or modifications would not, individually or in the aggregate, have
a Material Adverse Effect on the Buyer and the Buyer Subsidiaries taken as a
whole.
(b) The Buyer and each Buyer Subsidiary is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect on the Buyer and the Buyer Subsidiaries taken as a
whole.
(c) A true and complete list of all of the Buyer Subsidiaries, together
with (a) the Buyer's percentage ownership of each Buyer Subsidiary and (b) laws
under which the Buyer Subsidiary is incorporated, is set forth on Section
3.1(c) of the Buyer Disclosure Schedule. Except as set forth on Section 3.1(c)
of the Buyer Disclosure Schedule, the Buyer and/or one or more of the Buyer
Subsidiaries owns beneficially and of record all of the outstanding shares of
capital stock of each of the Buyer Subsidiaries. Except for the subsidiaries
set forth on Section 3.1(c) of the Buyer Disclosure Schedule and except as
provided in the Stock Option Agreement, the Buyer does not directly or
indirectly own any equity or similar interests in, or any interests convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity
other than in the ordinary course of business, and in no event in excess of 5%
of the outstanding equity securities of such entity.
SECTION 3.2 Articles of Incorporation and By-Laws. The Buyer has
previously furnished to the Company a complete and correct copy of the Articles
of Incorporation and the By-Laws, as amended or restated, of the Buyer ("Buyer
Articles" or "Buyer By-Laws") and each Buyer Subsidiary. Such Articles of
Incorporation and By-Laws of the Buyer and each Buyer Subsidiary are in full
force and effect. Neither the Buyer nor any Buyer Subsidiary is in violation of
any of the provisions of its Articles of Incorporation or By-Laws.
SECTION 3.3 Capitalization.
(a) The authorized capital stock of the Buyer consists of 30,000,000
shares of Buyer Common Stock and 5,000,000 shares of preferred stock, $.10 par
value of Buyer ("Buyer Preferred Stock"). As of the date of this Agreement,
(i) 17,899,702 shares of Buyer Common Stock are issued and outstanding, all of
which are duly authorized, validly issued, fully paid and non-assessable,
except as provided by Section 180.0622(2)(b) of the WBCL, and were not issued
in violation of any preemptive right of any Buyer shareholder, (ii) 7,098,946
shares of Buyer Common Stock are held in the treasury of the Buyer, and (iii)
837,944 shares of Buyer Common Stock are reserved for future issuance pursuant
to outstanding employee stock options issued pursuant to the Buyer's stock
option plans. As of the date of this Agreement, no shares of Buyer Preferred
Stock are issued and outstanding. Except as set forth in clause (iii), above,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character, including without limitation voting agreements or
arrangements, relating to the issued or unissued capital stock of the Buyer or
any Buyer
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Subsidiary or obligating the Buyer or any Buyer Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, the Buyer or any
Buyer Subsidiary. All shares of Buyer Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and non-assessable, except as otherwise provided by
Section 180.0622(2)(b) of the WBCL. There are no obligations, contingent or
otherwise, of the Buyer or any Buyer Subsidiary to repurchase, redeem or
otherwise acquire any shares of Buyer Common Stock or the capital stock of any
Buyer Subsidiary or to provide funds to or make any investment (in the form of
a loan, capital contribution or otherwise) in any Buyer Subsidiary or any other
entity, except for loan commitments and other funding obligations entered into
in the ordinary course of business. Each of the outstanding shares of capital
stock of each Buyer Subsidiary are duly authorized, validly issued, fully paid
and non-assessable, except as provided by Section 180.0622(2)(b) of the WBCL,
and were not issued in violation of any preemptive rights of any Buyer
Subsidiary shareholder, and such shares owned by the Buyer or another Buyer
Subsidiary are owned free and clear of all security interests, liens, claims,
pledges, agreements, limitations of the Buyer's voting rights, charges or other
encumbrances of any nature whatsoever.
(b) The shares of Buyer Common Stock to be issued pursuant to the Merger
will, upon issuance in accordance with the provisions of this Agreement, be
duly authorized, validly issued, fully paid and non-assessable, except as
otherwise provided by Section 180.0622(2)(b) of the WBCL.
SECTION 3.4 Authority. The Buyer 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 (other than,
with respect to the Merger, the approval and adoption of this Agreement by the
Buyer's shareholders in accordance with the WBCL and the Buyer Articles and
Buyer By-Laws). The execution and delivery of this Agreement by the Buyer and
the consummation by the Buyer 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 Buyer are necessary to authorize this
Agreement or to consummate the transactions so contemplated hereby (other than,
with respect to the Merger, the approval and adoption of this Agreement by the
Buyer's shareholders in accordance with the WBCL and the Buyer Articles and
Buyer By-Laws). This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of the Buyer and, assuming due
authorization, execution and delivery by the Company, is enforceable against the
Buyer in accordance with its terms, except as enforcement may be limited by laws
affecting insured depository institutions, general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
SECTION 3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Buyer does not,
and the performance of this Agreement and the transactions contemplated hereby
by the Buyer shall
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not, (i) conflict with or violate the Buyer Articles or Buyer By-Laws or the
Articles of Incorporation or By-Laws of any Buyer Subsidiary, (ii) conflict
with or violate any Laws applicable to the Buyer or any Buyer Subsidiary or by
which its or any of their respective properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, require the giving of
notice to, or the consent of, any third party 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
Buyer or any Buyer Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Buyer or any Buyer Subsidiary is a party or by which
the Buyer or any Buyer Subsidiary or its or any of their respective properties
is bound or affected, except in the case of clause (iii) for any such
conflicts, violations, breaches, defaults or other occurrences that would not,
individually or in the aggregate, have a Material Adverse Effect on the Buyer
and the Buyer Subsidiaries taken as a whole.
(b) The execution and delivery of this Agreement by the Buyer does not,
and the performance of this Agreement by the Buyer 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 HOLA, the HSR Act, the banking laws of the State of
Wisconsin (the "WBL") and the filing of appropriate merger or other documents
as required by the WBCL and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay consummation of the Merger or otherwise prevent the
Buyer from performing its obligations under this Agreement, and would not have
a Material Adverse Effect on the Buyer or the Buyer Subsidiaries taken as a
whole.
SECTION 3.6 Compliance; Permits. Neither the Buyer nor any Buyer
Subsidiary is in conflict with, or in default or violation of, (a) any Law
applicable to the Buyer or any Buyer Subsidiary or by which its or any of their
respective properties is bound or affected, or (b) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Buyer or any Buyer Subsidiary is a party
or by which the Buyer or any Buyer Subsidiary or any of its or any of their
respective properties is bound or affected, except for any such conflicts,
defaults or violations which would not, individually or in the aggregate, have a
Material Adverse Effect on the Buyer and the Buyer Subsidiaries taken as a
whole.
SECTION 3.7 Environmental Matters.
(a) Except as set forth in Section 3.7 of the Buyer Disclosure Schedule,
(i) none of the Buyer Real Property (as that term is defined below) has been
designated, restricted, to the Buyer's knowledge, or investigated by any
governmental authority as a result of the actual or suspected presence,
spillage, leakage, discharge or other emission of Hazardous Substances, nor to
the Buyer's knowledge is there any basis for any such designation or
investigation; (ii) neither the Buyer nor any Buyer Subsidiary has received any
written notice, order or decree
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concerning, or arising by reason of, the actual or suspected presence,
spillage, leakage, discharge, disposal or other emission of any Hazardous
Substance in, on, under, around, about or in the vicinity of, or the
transportation of any Hazardous Substance at, from, or to, any of the Buyer
Real Property.
(b) Except as disclosed in Section 3.7 of the Buyer Disclosure Schedule,
neither the Buyer nor any Buyer Subsidiary nor any Buyer Real Property is in
violation of, or subject to any liabilities as a result of any past or current
violations of, any Environmental Laws, and no expenditures are required in
connection with the operation of the Buyer's or any Buyer Subsidiary's
businesses in order to comply with any such Environmental Laws, except for such
violations, liabilities and/or expenditures as would not, individually or in
the aggregate, have a Material Adverse Effect on the Buyer or any Buyer
Subsidiary.
(c) Except as set forth in Section 3.7 of the Buyer Disclosure Schedule,
there are no legal, administrative, arbitration or other proceedings, claims,
actions, causes of action, or governmental investigations of any nature pending
or, to the Buyer's knowledge, threatened against the Buyer or any Buyer
Subsidiary seeking to impose, or that could reasonably result in the
imposition, on the Buyer or any Buyer Subsidiary, of any liability or
obligation arising under any Environmental Law. Except as set forth in Section
3.7 of the Buyer Disclosure Schedule, to the Buyer's knowledge, there is no
reasonable basis for any proceeding, claim, action or governmental
investigation that would impose any such liability or obligation.
(d) For purposes of this Section 3.7, the term "Buyer Real Property" means
(i) all real property (whether owned or leased) at which the operations of the
Buyer or any Buyer Subsidiary are or at any time were conducted and (ii) all
real property held by the Buyer or any Buyer Subsidiary as collateral for any
loans made or loans-in-process, or which is otherwise held as "real estate
owned" (REO) as a result of default by the borrower and subsequent foreclosure
by the Buyer or any Buyer Subsidiary.
SECTION 3.8 Contracts. Each contract which is material to the business of
the Buyer and the Buyer Subsidiaries is in full force and effect; neither the
Buyer nor any Buyer Subsidiary, nor, to the knowledge of the Buyer, any other
party, is in default under any such contract, and no event has occurred which
constitutes, or with the lapse of time or the giving of notice or both would
constitute, a default by the Buyer or any Buyer Subsidiary or, to the knowledge
of the Buyer, by any other party, under any such contract; and there are no
material disputes or disagreements between the Buyer or any Buyer Subsidiary and
any other party with respect to any such contract.
SECTION 3.9 Agreements with Regulatory Agencies. Neither the Buyer nor
any Buyer Subsidiary is subject to any Regulatory Agreements, nor has the Buyer
or any Buyer Subsidiary been advised by any Regulatory Agency that it is
considering issuing or requesting any such Regulatory Agreement.
SECTION 3.10 Loan Loss Reserves. The reserves for possible loan losses
shown on the September 30, 1998 call reports filed for the Buyer's Subsidiaries
are adequate in all material respects to provide for possible losses, net of
recoveries relating to loans previously
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charged off, on loans outstanding (including accrued interest receivable) as of
September 30, 1998.
SECTION 3.11 Securities and Banking Reports; Financial Statements.
(a) The Buyer and each Buyer Subsidiary have filed all forms, reports and
documents required to be filed with (i) the SEC since March 31, 1996, and as of
the date of this Agreement the Buyer has delivered to the Company (A) its
Annual Reports on Form 10-K for the fiscal years ended March 31, 1998, 1997 and
1996, respectively, (B) its Quarterly Reports on Form 10-Q for the periods
ended June 30 and September 30, 1998, (C) all proxy statements relating to the
Buyer's meetings of shareholders (whether annual or special) held since March
31, 1996, (D) all Current Reports on Form 8-K filed by the Buyer with the SEC
since March 31, 1996, (E) all other reports or registration statements (other
than Quarterly Reports on Form 10-Q not referred to in clause (B) above) filed
by the Buyer with the SEC since March 31, 1996 and (F) all amendments and
supplements to all such reports and registration statements filed by the Buyer
with the SEC since March 31, 1996 (collectively, the "Buyer SEC Reports") and
(ii) the OTS, the FDIC, the DFI and any other applicable federal or state
securities or banking authorities (all such reports and statements are
collectively referred to with the Buyer SEC Reports as the "Buyer Reports").
The Buyer Reports, including all Buyer Reports filed after the date of this
Agreement, (x) were or will be prepared in all material respects in accordance
with the requirements of applicable Law and (y) did not at the time they were
filed, or will not at the time they are filed, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Buyer SEC Reports, including
any Buyer SEC Reports filed since the date of this Agreement and prior to or on
the Effective Time, has been prepared in accordance with GAAP 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 Buyer and the Buyer 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.
(c) Except for (i) those liabilities that are fully reflected or reserved
against in the financial statements that are contained in the Buyer SEC
Reports, (ii) liabilities disclosed in Section 3.11 of the Buyer Disclosure
Schedule, and (iii) liabilities incurred in the ordinary course of business
consistent with past practice since September 30, 1998, neither the Buyer nor
any Buyer Subsidiary has incurred any liability of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether due or to
become due) that, either alone or when combined with all similar liabilities,
has had, or could reasonably be expected to have, a Material Adverse Effect on
the Buyer and the Buyer Subsidiaries taken as a whole.
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SECTION 3.12 Absence of Certain Changes or Events. Except as disclosed in
the Buyer SEC Reports filed prior to the date of this Agreement, since September
30, 1998 to the date of this Agreement, the Buyer and the Buyer Subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since September 30, 1998, there has not been
(a) any change in the financial condition, results of operations or business of
the Buyer or any of the Buyer Subsidiaries having a Material Adverse Effect on
the Buyer and the Buyer Subsidiaries taken as a whole, (b) any damage,
destruction or loss (whether or not covered by insurance) with respect to any
assets of the Buyer or any of the Buyer Subsidiaries having a Material Adverse
Effect on the Buyer and the Buyer Subsidiaries, taken as a whole, (c) any change
by the Buyer or any Buyer Subsidiaries in its accounting methods, principles or
practices, (d) any revaluation by the Buyer or any Buyer Subsidiaries of any of
its assets in any respect, (e) to the date of this Agreement, any entry by the
Buyer or any of the Buyer Subsidiaries into any commitment or transactions
material to the Buyer and the Buyer Subsidiaries taken as a whole or (f) except
for repurchases pursuant to the Buyer's Common Stock repurchase program or for
regular quarterly cash dividends of Buyer Common Stock with usual record and
payment dates, to the date of this Agreement, any declaration, setting aside or
payment of any dividends or distributions in respect of shares of Buyer Common
Stock or any redemption, purchase or other acquisition of any of its securities
or any of the securities of any Buyer Subsidiary.
SECTION 3.13 Absence of Litigation.
(a) Except as set forth in Section 3.13 of the Buyer Disclosure Schedule,
neither the Buyer nor any of the Buyer Subsidiaries is a party to any, and
there are no pending or, to the Buyer's knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against the Buyer or any of the
Buyer Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement as to which there is a reasonable probability of
an adverse determination and which, if adversely determined, would,
individually or in the aggregate, have a Material Adverse Effect on the Buyer
and the Buyer's Subsidiaries taken as a whole.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon the Buyer, any of the Buyer Subsidiaries or the assets
of the Buyer or any of the Buyer Subsidiaries which has had a Material Adverse
Effect on the Buyer and the Buyer's Subsidiaries taken as a whole.
SECTION 3.14 Employee Benefit Plans.
(a) Compliance with Applicable Laws. Each of the Buyer's "employee
benefit plans" within the meaning of Section 3(3) of ERISA, for the benefit of
employees of the Buyer and the Buyer Subsidiaries (the "Buyer Plans") has been
operated in all respects in accordance with the requirements of all applicable
Law and all persons who participate in the operation of such Buyer Plans and
all Buyer Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA)
have acted in accordance with the provisions of all applicable Law, except
where such violations of applicable Law would not, individually or in the
aggregate, have a Material
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Adverse Effect on the Buyer and the Buyer Subsidiaries, taken as a whole. The
Buyer and the Buyer Subsidiaries have performed all obligations required to be
performed by any of them under, are not in any respect in default under or in
violation of, and the Buyer and the Buyer Subsidiaries have no knowledge of any
default or violation by any party to, any Buyer Plan, except where such
failures, defaults or violations would not, individually or in the aggregate,
have a Material Adverse Effect on the Buyer and the Buyer Subsidiaries, taken
as a whole. No legal action, suit or claim is pending or, to the knowledge of
the Buyer or the Buyer Subsidiaries, threatened with respect to any Buyer Plan
(other than claims for benefits in the ordinary course) and, to the knowledge
of the Buyer or the Buyer Subsidiaries, no fact or event exists that could give
rise to any such action, suit or claim.
(b) Qualification of Certain Plans. Each Buyer Plan that is intended to
be qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust, established in connection with such a Plan that is
intended to be exempt from Federal income taxation under Section 501(a) of the
Code) has received a favorable determination letter from the IRS (as defined
herein) that it is so qualified, and the Buyer is not aware of any fact or
event that has occurred since the date of such determination letter from the
IRS to adversely affect the qualified status of any Buyer Plan or the exempt
status of any such trust. Except as disclosed in Section 3.14(b) of the Buyer
Disclosure Schedule, no trust maintained or contributed to by the Buyer or any
of the Buyer Subsidiaries is intended to be qualified as a voluntary employees'
beneficiary association or is intended to be exempt from federal income
taxation under Section 501(c)(9) of the Code.
(c) Absence of Certain Liabilities and Events. There have been no
prohibited transactions (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Buyer Plan. The Buyer and each of the
Buyer Subsidiaries has not incurred any liability for any excise tax arising
under Section 4972 or 4980B of the Code and, to the knowledge of the Buyer or
the Buyer Subsidiaries, no fact or event exists that could give rise to any
such liability.
(d) Plan Contributions. All contributions, provisions or payments
required to be made with respect to any Buyer Plan have been made on or before
their due dates.
SECTION 3.15 Registration Statement; Proxy Statement/Prospectus. The
information supplied by the Buyer for inclusion in the Registration Statement of
the Buyer (the "Registration Statement") pursuant to which the shares of Buyer
Common Stock to be issued in the Merger will be registered with the SEC shall
not, at the time the Registration Statement is declared effective by the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The information supplied by the Buyer for inclusion in the Proxy
Statement/Prospectus, which will be sent to the shareholders of the Buyer in
connection with the meeting of the Buyer's shareholders to consider the Merger
(the "Buyer Shareholders' Meeting") shall not at the date the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is first
mailed to shareholders, at the time of the Buyer Shareholders' Meeting and at
the effective
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Time, be false or misleading with respect to any material fact required to be
stated therein, or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading. If at any time prior
to the Effective Time any event relating to the Buyer or any of its affiliates,
officers or directors should be discovered by the Buyer which should be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement/Prospectus, the Buyer shall promptly inform the Company.
Notwithstanding the foregoing, the Buyer makes no representation or warranty
with respect to any information about, or supplied or omitted by, the Buyer
which is contained in any of the foregoing documents.
SECTION 3.16 Taxes. The Buyer and the Buyer Subsidiaries have timely
filed all material Tax Returns (as defined in Section 2.16) required to be filed
by them, and the Buyer and the Buyer Subsidiaries have timely paid and
discharged all material Taxes (as defined in Section 2.16) 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 Company is maintaining
reserves adequate for their payment. Except as otherwise disclosed in Section
3.16 of the Buyer Disclosure Schedule, to the knowledge of the Buyer, neither
the IRS nor any other governmental entity or taxing authority or agency is now
asserting, either through audits, administrative proceedings or court
proceedings, any deficiency or claim for additional Taxes. Except as otherwise
disclosed in Section 3.16 of the Company's Disclosure Schedule, neither Buyer
nor any of the Buyer's Subsidiaries has granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax. Except as otherwise disclosed in Section 3.16 of the Buyer Disclosure
Schedule and except for statutory liens for current taxes not yet due, there are
no material tax liens on any assets of the Buyer or any of the Buyer
Subsidiaries. Except as otherwise disclosed in Section 3.16 of the Buyer
Disclosure Schedule, neither the Buyer nor any of the Buyer Subsidiaries has
received a ruling or entered into an agreement with the IRS or any other taxing
authority that would have a Material Adverse Effect on the Buyer and the Buyer
Subsidiaries taken as a whole, after the Effective Time. Except as otherwise
disclosed in Section 3.16 of the Buyer Disclosure Schedule, no agreements
relating to allocating or sharing of Taxes exist among the Buyer and the Buyer
Subsidiaries. Neither the Buyer nor any of the Buyer Subsidiaries has made an
election under Section 341(f) of the Code.
SECTION 3.17 Brokers. No broker, finder or investment banker (other than
McDonald Investments, Inc.) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Buyer.
SECTION 3.18 Tax Matters and Pooling. Neither the Buyer nor, to the
Buyer's knowledge, any of its affiliates has through the date of this Agreement
taken or agreed or omitted to take any action that would prevent the Merger from
qualifying (i) as a reorganization under Section 368 of the Code or (ii) for
pooling-of-interests accounting treatment under GAAP.
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SECTION 3.19 Vote Required. The affirmative vote of a majority of the
votes that holders of the outstanding shares of Buyer Common Stock are entitled
to cast is the only vote of the holders of any class or series of the Buyer
capital stock necessary to approve the Merger.
SECTION 3.20 Year 2000 Compliance. Except as identified on Section 3.20
of the Buyer Disclosure Schedule, none of the personal property, equipment or
assets owned or utilized by the Buyer, including but not limited to computer
software, databases, hardware, controls and peripherals, has a Year 2000 Defect.
Except as identified on Section 3.20 of the Buyer Disclosure Schedule, none of
the property or assets owned or utilized by the Buyer will fail to perform in
any material respect or require any repair, rewrite, conversion or other
adaptation because of, or due in any way to, a Year 2000 Defect, except for Year
2000 Defects which would not cause a Material Adverse Effect on the Buyer and
the Buyer Subsidiaries taken as a whole. The Buyer has no knowledge that a
vendor or supplier of the Buyer may experience a Year 2000 Defect that could
cause a Material Adverse Effect on the Buyer and the Buyer Subsidiaries taken as
a whole.
ARTICLE IV - COVENANTS OF THE COMPANY
SECTION 4.1 Affirmative Covenants. The Company hereby covenants and
agrees with the Buyer that prior to the Effective Time, unless the prior written
consent of the Buyer shall have been obtained and except as otherwise
contemplated herein, it will and it will cause each Company Subsidiary to:
(a) operate its business only in the ordinary course consistent with past
practices;
(b) use all reasonable efforts to preserve intact its business
organization and assets, maintain its rights and franchises, retain the
services of its officers and key employees and maintain its relationships with
customers;
(c) use all reasonable efforts to maintain and keep its properties in as
good repair and condition as at present, ordinary wear and tear excepted;
(d) use all reasonable efforts to keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that now maintained by
it;
(e) use all reasonable efforts to perform in all material respects all
obligations required to be performed by it under all material contracts,
leases, and documents relating to or affecting its assets, properties, and
business; and
(f) take such reasonable actions as are requested by the Buyer to complete
the Merger.
SECTION 4.2 Negative Covenants. Except as specifically contemplated by
this Agreement and the Stock Option Agreement, from the date of this Agreement
until the
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Effective Time, the Company shall not do, or permit any Company Subsidiary to
do, without the prior written consent of the Buyer, any of the following:
(a) (i) except as required by applicable law or to maintain qualification
pursuant to the Code, adopt, amend, renew or terminate any Plan or any
agreement, arrangement, plan or policy between the Company or any Company
Subsidiary and one or more of its current or former directors or officers or
(ii) except for normal increases in the ordinary course of business consistent
with past practice or except as required by applicable law, increase in any
manner the base salary, bonus incentive compensation or fringe benefits of any
director or officer or pay any benefit not required by any plan or agreement as
in effect as of the date hereof (including, without limitation, the granting of
stock options, stock appreciation rights, restricted stock, restricted stock
units or performance units or shares); provided, however, that notwithstanding
the foregoing, nothing herein shall prohibit the Company and Fox Cities from
extending for an additional year the employment agreements of each of James J.
Rothenbach, Harold L. Hermansen, James J. Goetz, Theodore W. Hoff and Phillip
J. Schoofs if the Effective Time shall not have occurred prior to the deadline
for extending the terms of such employment agreements subject at all times to
Section 3 of Annex A;
(b) declare or pay any dividend on, or make any other distribution in
respect of, its outstanding shares of capital stock, except for (i) regular
quarterly cash dividends on Company Common Stock with usual record and payment
dates for such dividends with each such dividend at a rate per share of Company
Common Stock not in excess of $0.22 and (ii) dividends by a Company Subsidiary
to the Company;
(c) (i) redeem, purchase or otherwise acquire any shares of its capital
stock (except as otherwise provided by currently existing agreements relating
to outstanding stock options) or any securities or obligations convertible into
or exchangeable for any shares of its capital stock, or any options, warrants,
conversion or other rights to acquire any shares of its capital stock or any
such securities or obligations; (ii) merge with or into any other corporation
or bank, permit any other corporation or bank to merge into it or consolidate
with any other corporation or bank, or effect any reorganization or
recapitalization; (iii) purchase or otherwise acquire any substantial portion
of the assets, or more than 5% of any class of stock, of any corporation, bank
or other business other than in the ordinary course of business and consistent
with past practice; (iv) liquidate, sell, dispose of, or encumber any assets or
acquire any assets, other than in the ordinary course of its business
consistent with past practice; or (v) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock;
(d) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of any class of capital
stock of the Company or any Company Subsidiary (including shares held in
treasury) or any rights, warrants or options to acquire, any such shares, other
than the issuance of Company Common Stock issuable upon exercise of employee or
director stock options outstanding as of the date of this Agreement or pursuant
to Company Plans, in effect as of the date of this Agreement;
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(e) authorize, permit or cause any of its officers, directors, employees
or agents to directly or indirectly solicit, initiate or encourage any
inquiries relating to, or the making of any proposal which constitutes, a
"takeover proposal" (as defined below), or (i) recommend, endorse or agree to
any takeover proposal, (ii) participate in any discussions or negotiations with
respect to a takeover proposal, or (iii) provide third parties with any
nonpublic information relating to any such inquiry or proposal; provided,
however, that the Company may, and may authorize and permit its officers,
directors, employees or agents to, provide third parties with nonpublic
information, otherwise facilitate any effort or attempt by any third party to
make or implement an unsolicited takeover proposal and participate in
discussions and negotiations with any third party relating to any unsolicited
takeover proposal, if the Company, after having consulted with and considered
the advice of outside counsel, has determined in good faith that such actions
are appropriate in the discharge of the fiduciary duties of the Company's Board
of Directors. As used in this Agreement, "takeover proposal" shall mean any
tender or exchange offer, proposal for a merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any Company Subsidiary or any proposal or offer to
acquire in any manner substantially all of the stock or the assets of the
Company or any Company Subsidiary other than the transactions contemplated or
permitted by this Agreement;
(f) propose or adopt any amendments to its Articles of Incorporation or
By-laws in any way adverse to the Buyer;
(g) change any of its methods of accounting in effect at September 30,
1998, 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 ended March 31, 1998, except as
may be required by Law or GAAP;
(h) change in any material respect any lending, investment, liability
management or other material policies concerning the business or operations of
the Company or any of the Company Subsidiaries, except as required by Law;
(i) take or cause to be taken or omit to take any action which would
disqualify the Merger (i) as a tax-free reorganization under Section 368 of the
Code or (ii) for pooling of interests accounting treatment under GAAP;
(j) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect, or in any of the conditions
to the Merger set forth in Article VII not being satisfied, or in a violation
of any provision of this Agreement except, in every case, as may be required by
applicable Law; or
(k) agree in writing or otherwise to do any of the foregoing.
SECTION 4.3 Letter of the Company's Accountants. The Company shall use
its reasonable best efforts to cause to be delivered to the Buyer "comfort"
letters of Wipfli Ullrich Bertelson LLP, the Company's independent public
accountants, dated the date on which the
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Registration Statement shall become effective and the Effective Time,
respectively, and addressed to the Buyer, in a form reasonably satisfactory to
the Buyer and reasonably customary in scope and substance for letters delivered
by independent public accountants in connection with registration statements
similar to the Registration Statement and transactions such as those
contemplated by this Agreement.
SECTION 4.4 Access and Information.
(a) Until the Effective Time and upon reasonable notice, and subject to
applicable laws relating to the exchange of information, the Company shall, and
shall cause each Company Subsidiary to, afford to the Buyer's officers,
employees, accountants, legal counsel and other representatives of the Buyer,
access, during normal business hours, to all its properties, books, contracts,
commitments and records. Prior to the Effective Time, the Company shall (and
shall cause each Company Subsidiary to) furnish promptly (as soon as available
or received by the Company or any Company Subsidiary) to the Buyer (i) a copy
of each Company Report filed by it or received by it (to the extent not
prohibited by Law and if so prohibited the Company shall promptly so notify the
Buyer) after the date of this Agreement and prior to the Effective Time
pursuant to the requirements of federal or state securities laws, the HOLA or
any other federal or state banking laws or any other applicable Laws promptly
after such documents are available, (ii) a copy of any correspondence received
from the IRS or any other governmental entity or taxing authority or agency and
any other correspondence relating to Taxes, and any other documents relating to
Taxes as the Buyer may reasonably request, and (iii) all other information
concerning its business, properties and personnel as the Buyer may reasonably
request, other than in each case reports or documents which the Company is not
permitted to disclose under applicable Law or binding agreements entered into
prior to the date of this Agreement. The parties hereto will make appropriate
substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) Unless otherwise required by Law, the parties will hold any such
information which is nonpublic in confidence until such time as such
information becomes publicly available through no wrongful act of either party,
and in the event of termination of this Agreement for any reason each party
shall promptly return all nonpublic documents obtained from any other party,
and any copies made of such documents, to such other party or destroy such
documents and copies.
SECTION 4.5 Update Disclosure; Breaches.
(a) From and after the date of this Agreement until the Effective Time,
the Company shall update the Company Disclosure Statement on a regular basis by
written notice to the Buyer to reflect any matters which have occurred from and
after the date of this Agreement which, if existing on the date of this
Agreement, would have been required to be described therein; provided that, to
the extent that updating required under this Section is unduly burdensome to
the Company, the Buyer and the Company will use their best efforts to develop
alternate updating procedures utilizing, wherever possible, existing reporting
systems.
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(b) The Company shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or constitute
a material breach (or would have caused or constituted a material breach had
such event occurred or been known prior to the date of this Agreement) of any
of its representations or agreements contained or referred to herein, give
prompt written notice thereof to the Buyer and use its best efforts to prevent
or promptly remedy the same.
SECTION 4.6 Affiliates. Within thirty (30) days after the date of this
Agreement, (a) the Company shall deliver to the Buyer 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/or for purposes of applicable SEC
accounting releases with respect to pooling-of-interests accounting treatment
(each a "Company Affiliate") and (b) the Company shall advise the persons
identified in such letter of the resale restrictions imposed by applicable
securities laws and regulations governing pooling-of-interests accounting
treatment and shall use reasonable efforts to obtain from each person identified
in such letter a written agreement, substantially in the form attached hereto as
EXHIBIT E. The Company shall use its 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 such form as soon as practicable after attaining such
status.
SECTION 4.7 Tax Treatment and Pooling. The Company will use its
reasonable efforts to cause the Merger to qualify for pooling-of-interests
accounting treatment and as a reorganization under Section 368 of the Code.
ARTICLE V - COVENANTS OF THE BUYER
SECTION 5.1 Affirmative Covenants. The Buyer hereby covenants and agrees
with the Company that prior to the Effective Time, unless the prior written
consent of the Company shall have been obtained and except as otherwise
contemplated herein, it will and it will cause each Buyer Subsidiary to:
(a) operate its business only in the ordinary course consistent with past
practices;
(b) use all reasonable efforts to preserve intact its business
organization and assets, maintain its rights and franchises, retain the
services of its officers and key employees and maintain its relationships with
customers;
(c) take such reasonable actions as are requested by the Company to
complete the Merger.
SECTION 5.2 Negative Covenants. Except as otherwise contemplated by this
Agreement, from the date of this Agreement until the Effective Time, the Buyer
shall not do, or agree to commit to do, or permit any Buyer Subsidiaries to do,
without the prior written consent of the Company any of the following:
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(a) declare or pay any extraordinary or special dividends on or make any
other extraordinary or special distributions in respect of any of its capital
stock unless appropriate adjustment or adjustments are made to the Exchange
Ratio as set forth in Section 1.6 hereof;
(b) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect, or in any of the conditions
to the Merger set forth in Article VII not being satisfied, or in a violation
of any provision of this Agreement except, in every case, as may be required by
applicable Law;
(c) take or cause to be taken or omit to take any action which would
disqualify the Merger (i) as a tax free reorganization under Section 368 of the
Code or (ii) for pooling-of-interests accounting treatment under GAAP;
(d) amend its Articles of Incorporation or By-laws or other governing
instrument in a manner which would adversely affect in any manner the terms of
the Buyer Common Stock or the ability of the Buyer to consummate the
transactions contemplated hereby;
(e) enter into any agreement providing for, or otherwise participate in,
any merger, consolidation or other transaction in which the Buyer or any
surviving corporation would be required not to consummate the Merger or any of
the other transactions contemplated hereby in accordance with the terms of this
Agreement, as the case may be;
(f) change any of its methods of accounting in effect at September 30,
1998, 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 ended March 31, 1998, except as
may be required by Law or GAAP;
(g) change in any material respect any lending, investment, liability
management or other material policies concerning the business or operations of
the Buyer or any of the Buyer Subsidiaries, except as required by Law; or
(h) agree in writing or otherwise to do any of the foregoing.
SECTION 5.3 Access and Information.
(a) Until the Effective Time and upon reasonable notice and subject to
applicable laws relating to the exchange of information, the Buyer shall, and
shall cause each Buyer Subsidiary to, afford to the Company's officers,
employees, accountants, legal counsel and other representatives of the Company,
access, during normal business hours, to all its properties, books, contracts,
commitments and records. Prior to the Effective Time, the Buyer shall (and
shall cause each Buyer Subsidiary to) furnish promptly (as soon as available or
received by the Buyer or any Buyer Subsidiary) to the Company (i) a copy of
each Buyer Report filed by it or received by it (to the extent not prohibited
by Law and if so prohibited, the Buyer shall promptly so notify the Company)
after the date of this Agreement and prior to the Effective Time pursuant to
the requirements of federal or state securities laws, the BHCA, any other
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federal or state banking laws or any other applicable Laws promptly after such
documents are available and (ii) all other information concerning the business,
properties and personnel of the Buyer or the Buyer Subsidiaries as the Company
may reasonably request, other than in each case reports or documents which the
Buyer is not permitted to disclose under applicable law or binding agreement
entered into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) Unless otherwise required by Law, the parties will hold any such
information which is nonpublic in confidence until such time as such
information becomes publicly available through no wrongful act of either party,
and in the event of termination of this Agreement for any reason each party
shall promptly return all nonpublic documents obtained from any other party,
and any copies made of such documents, to such other party or destroy such
documents or copies.
SECTION 5.4 Update Disclosure; Breaches.
(a) From and after the date of this Agreement until the Effective Time,
the Buyer shall update the Buyer Disclosure Statement on a regular basis by
written notice to the Company to reflect any matters which have occurred from
and after the date of this Agreement which, if existing on the date of this
Agreement, would have been required to be described therein; provided that, to
the extent that updating required under this Section is unduly burdensome to
the Buyer, the Buyer and the Company will use their best efforts to develop
alternate updating procedures utilizing, wherever possible, existing reporting
systems.
(b) The Buyer shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or constitute
a material breach (or would have caused or constituted a material breach had
such event occurred or been known prior to the date of this Agreement) of any
of its representations or agreements contained or referred to herein, give
prompt written notice thereof to the Company and use its best efforts to
prevent or promptly remedy the same.
SECTION 5.5 Stock Exchange Listing. The Buyer shall use its best efforts
to cause the shares of Buyer Common Stock to be issued in the Merger to be
approved for listing on The Nasdaq Stock Market prior to the Effective Time.
SECTION 5.6 Tax Treatment and Pooling. The Buyer will use its reasonable
efforts to cause the Merger to qualify (a) as a reorganization under Section 368
of the Code and (b) for pooling-of-interests accounting treatment under GAAP.
SECTION 5.7 Stock Options.
(a) At the Effective Time, the Buyer will assume the Company's 1993 Stock
Option and Incentive Plan, the Company's 1998 Incentive Stock Plan, and the OSB
Financial Corp. 1992 Stock Option and Incentive Plan (collectively, the "Option
Plans") and all of the Company's obligations thereunder. At the Effective
Time, each outstanding option issued
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pursuant to the Option Plans shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such option
(including, without limitation, the time periods allowed for exercise), a
number of shares of Buyer Common Stock equal to the product of the Exchange
Ratio and the number of shares of Company Common Stock subject to such option
(provided that any fractional shares of Buyer Common Stock resulting from such
multiplication shall be rounded up to the nearest share), at a price per share
(rounded down to the nearest cent) equal to the exercise price per share of the
shares of Company Common Stock subject to such option divided by the Exchange
Ratio. The duration and other terms of the new option shall be the same as the
original option, except that all references to the Company shall be deemed to
be references to the Buyer. The Buyer agrees to take all corporate action
necessary to reserve for issuance a sufficient number of shares of Buyer Common
Stock for delivery upon exercise of options under the Option Plans assumed by
the Buyer in accordance with this Agreement.
(b) Within ten (10) days after the Effective Time, the Buyer shall, to the
extent necessary, file with the SEC a registration statement on an appropriate
form under the Securities Act with respect to the shares of Buyer Common Stock
subject to options to acquire Buyer Common Stock issued pursuant to Section
5.7(a) hereof, and shall use its best efforts to maintain the current status of
the prospectus related thereto, as well as comply with applicable state
securities or Blue Sky Laws, for so long as such options remain outstanding.
SECTION 5.8 SEC Filings. The Surviving Corporation shall make all filings
with the SEC that are described in subsection (c) of Rule 144 under the
Securities Act for a period of two years following the Effective Time.
ARTICLE VI - ADDITIONAL AGREEMENTS
SECTION 6.1 Proxy Statement/Prospectus; Registration Statement. As
promptly as practicable after the execution of this Agreement, the Buyer and the
Company shall prepare and file with the SEC the Proxy Statement/Prospectus and
Registration Statement under the Securities Act and the Exchange Act relating to
the approval of the Merger by the shareholders of the Buyer and the shareholders
of the Company and shall use all reasonable efforts to cause the Registration
Statement to become effective as soon thereafter as practicable. It shall be a
condition precedent to the mailing of the Proxy Statement/Prospectus to the
shareholders of the Buyer and the Company that the Company shall have received
an opinion from Hovde Financial, Inc. that, as of the date thereof, the Exchange
Ratio is fair from a financial point of view to the holders of Company Common
Stock, and the Buyer shall have received an opinion from McDonald Investments,
Inc. that, as of the date thereof, the Exchange Ratio is fair from a financial
point of view to Buyer.
SECTION 6.2 Meetings of Shareholders. The Buyer and the Company shall
promptly after the date of this Agreement take all action necessary in
accordance with the WBCL, the Buyer Articles and the Buyer By-Laws, and the
Company Articles and the Company By-Laws, to convene the Buyer Shareholders'
Meeting and the Company Shareholders' Meeting. The Buyer and the Company shall
use their best efforts to solicit from
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their respective shareholders proxies in favor of the Merger and shall take all
other action necessary or advisable to secure the vote or consent of
shareholders required by the WBCL to approve the Merger (including, without
limitation, recommending that the respective shareholders approve this
Agreement, the Merger and the transactions contemplated hereby and thereby),
unless the Board of Directors of the Company or the Buyer, as the case may be,
shall have determined in good faith based on the advice of counsel that such
actions could reasonably be deemed to violate its fiduciary duty to the
shareholders of the Buyer or the Company, as the case may be.
SECTION 6.3 Appropriate Action; Consents; Filings. The Company and the
Buyer 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 and the Stock Option 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) required in connection with the authorization, execution
and delivery of this Agreement and the Stock Option Agreement and the
consummation by them of the transactions contemplated hereby and thereby, (c)
make all necessary filings, and thereafter make any other required submissions,
with respect to this Agreement, the Stock Option Agreement and the Merger
required under (i) the Securities Act and the Exchange Act and the rules and
regulations thereunder, and any other applicable federal or state securities
laws, (ii) the HSR Act, (iii) applicable federal or state banking laws and (iv)
any other applicable Law; provided that, the Buyer 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 the
Buyer shall furnish all information required for any application or other filing
to be made pursuant to the rules and regulations of any applicable Law
(including all information required to be included in the Proxy
Statement/Prospectus and the Registration Statement) in connection with the
transactions contemplated by this Agreement. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall use all reasonable efforts to take all such necessary
action.
SECTION 6.4 Employee Stock Options and Other Employee Benefit Matters.
Annex A hereto sets forth certain agreements with respect to the Company's
employee and director stock options and other employee benefit matters.
SECTION 6.5 Directors' and Officers' Indemnification and Insurance.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Time, a
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director, officer or employee of the Company or any of the Company Subsidiaries
(including in his/her role as a fiduciary of the employee benefit plans of the
Company or the Company Subsidiaries, if applicable) (the "Indemnified Parties")
is, or is threatened to be, made a party based in whole or in part on, or
arising in whole or in part out of, or pertaining to (i) the fact that he is or
was a director, officer or employee of the Company, any of the Company
Subsidiaries or any of their respective predecessors or (ii) this Agreement or
any of the transactions contemplated hereby, whether in any case asserted or
arising before or after the Effective Time, the parties hereto agree to
cooperate and use their best efforts to defend against and respond thereto. It
is understood and agreed that after the Effective Time, the Buyer shall
indemnify and hold harmless, to the fullest extent permitted by law, each such
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt of any
undertaking required by applicable law), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action,
suit, proceeding or investigation, and in the event of any such threatened or
actual claim, action, suit, proceeding or investigation (whether asserted or
arising before or after the Effective Time), the Indemnified Parties may retain
counsel satisfactory to them; provided, however, that the (A) Buyer shall have
the right to assume the defense thereof and upon such assumption the Buyer
shall not be liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by any Indemnified Party in
connection with the defense thereof, except that if the Buyer elects not to
assume such defense or counsel for the Indemnified Parties reasonably advises
that there are issues which raise conflicts of interest between the Buyer and
the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and the Buyer shall pay the reasonable fees and expenses
of such counsel for the Indemnified Parties, (B) Buyer shall in all cases be
obligated pursuant to this Section 6.5(a) to pay for only one firm of counsel
for all Indemnified Parties, (C) Buyer shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld) and (D) Buyer shall have no obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable Law. Any Indemnified Party
wishing to claim indemnification under this Section 6.5, upon learning of any
such claim, action, suit, proceeding or investigation, shall promptly notify
the Buyer thereof, provided that the failure to so notify shall not affect the
obligations of the Buyer under this Section 6.5 except to the extent such
failure to notify materially prejudices the Buyer.
(b) The Surviving Corporation shall use its best efforts to purchase, and
for a period of six (6) years after the Effective Time maintain in effect,
directors and officers liability insurance coverage with respect to wrongful
acts and/or omissions committed or allegedly committed by any of the officers
or directors of the Company prior to the Effective Time ("D&O Coverage"). Such
D&O Coverage shall have an aggregate coverage limit over the term of such
policy in an amount no less than the aggregate annual coverage limit under the
Company's existing directors' and officers' liability insurance policy, and in
all other material respects shall be least comparable to such existing policy;
provided, however, that in no event
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will the Surviving Corporation be required to expend, on an annual basis, as
the cost of maintaining such D&O Coverage, more than 200% of the amount
currently expended by the Company to procure its existing D&O Coverage (the
"Maximum Premium"); and provided further, that if the Surviving Corporation is
unable to obtain or maintain the D&O Coverage called for by this Section 6.5(b)
for an amount equal to or less than the Maximum Premium, then the Surviving
Corporation will nonetheless use its best efforts to procure and maintain as
much comparable D&O Coverage as it can obtain for such Maximum Premium.
Notwithstanding the foregoing, the Surviving Corporation, if it so elects, may
satisfy its obligations under this Section 6.5(b) at any time by procuring one
or more so-called "tail" or "runoff" policies of directors' and officers'
liability insurance that insure against the risks that would be insured against
by the D&O Coverage.
(c) In the event the Buyer or the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all
of its properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Buyer or the
Surviving Corporation, as the case may be, assume the obligations set forth in
this section.
(d) In addition to the other indemnification obligations set forth in this
Section 6.5, the Buyer will fulfill the obligations to indemnify directors and
officers of the Company contained in the Company Articles.
(e) The provisions of this Section 6.5 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.
SECTION 6.6 Notification of Certain Matters. The Company shall give
prompt notice to the Buyer, and the Buyer 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 the Buyer, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.6 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.7 Public Announcements. The Buyer 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, except as may be
required by Law or any listing agreement with or rule of the market or exchange
on which the securities of the Buyer or the Company, as the case may be, are
then traded.
SECTION 6.8 Recision of Repurchase Programs. Prior to the Effective Time,
the Buyer and the Company shall renounce and rescind their respective publicly
announced
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share repurchase programs in order to meet the requirements for pooling of
interests accounting treatment for the Merger under GAAP.
SECTION 6.9 Dividends. After the date of this Agreement, each of the
Buyer and the Company shall coordinate with the other the payment of dividends
with respect to the Buyer Common Stock and the Company Common Stock and the
record and payment dates relating thereto, it being the intention of the parties
hereto that the holders of Buyer Common Stock and Company Common Stock shall not
receive two dividends, or fail to receive one dividend, in any single quarter
with respect to their shares of Buyer Common Stock and/or Company Common Stock
or the shares of Buyer Common Stock any holder of Company Common Stock receives
in exchange therefor in the Merger.
SECTION 6.10 Issuance of Shares. If and to the extent necessary to reduce
the aggregate number of "tainted treasury shares" to a number that is consistent
with the accounting of the Merger as a "pooling of interests" under GAAP, each
of the Buyer and the Company shall, prior to the Effective Time, coordinate with
the other party with respect to the issuance of, and pursuant thereto shall
issue, shares of Buyer Common Stock or Company Common Stock, as may be
appropriate, in such manner, and limited to such number, as is necessary.
SECTION 6.11 Expenses.
(a) All Expenses (as defined below) incurred by the Buyer 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 out-of-pocket expenses
relating to the printing of the Registration Statement and the Proxy
Statement/Prospectus.
(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 and the Stock
Option Agreement, the solicitation of shareholder approvals and all other
matters related to the closing of the transactions contemplated hereby and
thereby.
ARTICLE VII - CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose shall, on
or prior to the Effective Time, have been initiated or, to the knowledge of the
Buyer or the Company, threatened by the SEC.
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(b) Shareholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the shareholders of the Buyer and
the Company.
(c) Regulatory Approvals. (i) The Merger shall have been approved by the
applicable regulatory authorities; (ii) all conditions required to be satisfied
prior to the Effective Time imposed by the terms of such approval shall have
been satisfied; and (iii) all waiting periods relating to such approval shall
have expired.
(d) No Order. No federal or state governmental or regulatory authority or
other agency or commission, or federal or state court of competent
jurisdiction, shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect restricting,
preventing or prohibiting consummation of the transactions contemplated by this
Agreement.
(e) Pooling of Interests. The Buyer and the Company shall have received a
letter of the Company's independent accountants, dated as of the Effective
Time, in form and substance reasonably satisfactory to the Buyer and the
Company, stating that the Company is an entity that qualifies for pooling of
interests accounting treatment pursuant to GAAP and applicable SEC regulations.
The Buyer and the Company shall also have received a letter of the Buyer's
independent accountants, dated as of the Effective Time, in form and substance
reasonably satisfactory to the Buyer and the Company, stating that the
transactions effected pursuant to this Agreement will qualify as a pooling of
interests pursuant to GAAP and applicable SEC regulations.
SECTION 7.2 Additional Conditions to Obligations of the Buyer. The
obligations of the Buyer 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, without giving effect to
any update to the Company Disclosure Schedule or notice to the Buyer under
Section 4.5 or 6.6, shall be true and correct in all respects as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Effective Time as though made on and as
of the Effective Time; provided, however, that, for purposes of this clause,
such representations and warranties shall be deemed to be true and correct
unless the failure or failures of such representations and warranties to be so
true and correct, individually or in the aggregate, represent a Material
Adverse Effect on the Company and the Company Subsidiaries taken as a whole.
Buyer shall have received a certificate signed on behalf of the Company by the
Chief Executive Officer and the Chief Financial Officer of the Company to the
foregoing effect.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time.
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(c) Consents Obtained. All Company Approvals 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, except those for which
failure to obtain such Company Approvals or make such filings would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
and the Company Subsidiaries taken as a whole.
(d) No Challenge. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a government
agency (i) challenging or seeking material damages in connection with the
Merger or the conversion of Company Common Stock into Buyer Common Stock
pursuant to the Merger or (ii) seeking to restrain, prohibit or limit the
exercise of full rights of ownership or operation by the Buyer or the Buyer
Subsidiaries of all or any portion of the business or assets of the Company,
which in either case is reasonably likely to have a Material Adverse Effect on
either the Company and the Company Subsidiaries taken as a whole or the Buyer
and the Buyer Subsidiaries taken as a whole.
(e) Federal Tax Opinion. The Buyer shall have received an opinion of
Whyte Hirschboeck Dudek S.C., independent counsel to the Buyer, dated as of the
Effective Time, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and accordingly that no gain or loss will be
recognized by Company as a result of the Merger. In rendering such opinion,
Whyte Hirschboeck Dudek S.C. may require and rely upon representations and
covenants contained in certificates of officers of the Buyer, the Company and
others.
(f) Comfort Letters. The Buyer shall have received from Wipfli Ullrich
Bertelson LLP the "comfort" letters referred to in Section 4.3.
(g) No Material Adverse Changes. Since the date of this Agreement, there
shall not have been any change in the financial condition, results of
operations or business of the Company and the Company Subsidiaries, taken as a
whole, that either individually or in the aggregate would have a Material
Adverse Effect on the Company and the Company Subsidiaries taken as a whole.
For purposes of this Section 7.2(g) only, a Material Adverse Effect on the
Company and the Company Subsidiaries shall be deemed to have been incurred if
there has been (i) any reduction in the CAMELS (Capital, Assets, Management,
Earnings, Liquidity and Sensitivity to Market Risk) composite rating of Fox
Cities to 3 or higher (i.e., 4 or 5) and/or (ii) any reduction in Fox Cities'
CRA (Community Reinvestment Act) rating to "substantial noncompliance" or
worse. The Buyer shall have received a certificate of the Chief Executive
Officer and the Chief Financial Officer of the Company with respect to the
foregoing matters.
(h) Employment Agreements. James J. Rothenbach and Donald D. Parker shall
have entered into Employment Agreements, containing substantially the terms and
conditions set
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forth in EXHIBITS B AND C, hereto, respectively. Each of Harold L. Hermansen,
James J. Goetz, Theodore W. Hoff and Phillip J. Schoofs shall have entered into
a termination agreement relating to their respective employment agreements in a
form reasonably acceptable to the parties and each of said individuals shall
have received the payout amounts due him under his respective employment
agreement.
SECTION 7.3 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 the Buyer set forth in this Agreement, without giving effect to
any notice to the Company under Section 5.4 or 6.6, shall be true and correct
in all respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Effective
Time, as though made on and as of the Effective Time; provided, however, that
for purposes of this clause, such representations and warranties shall be
deemed to be true and correct unless the failure or failures of such
representations and warranties to be so true and correct, individually or in
the aggregate, represent a Material Adverse Effect on the Buyer and the Buyer
Subsidiaries taken as a whole. The Company shall have received a certificate
signed on behalf of the Buyer by the Chief Executive Officer and the Chief
Financial Officer of the Buyer to the foregoing effect.
(b) Agreements and Covenants. The Buyer 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 consents, waivers, approvals, authorizations
or orders required to be obtained, and all filings required to be made by the
Buyer 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 Buyer, except where failure to obtain any consents,
waivers, approvals, authorizations or orders required to be obtained or any
filings required to be made would not have a Material Adverse Effect on the
Buyer and the Buyer Subsidiaries taken as a whole.
(d) Federal Tax Opinion. The Company shall have received an opinion of
Foley & Lardner, independent counsel to the Company, in form and substance
reasonably satisfactory to the Company, dated as of the Effective Time,
substantially to the effect that on the basis of facts, representations,
assumptions and the Buyer's, Company's, and other certificates set forth in
such opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code, and that, accordingly, for federal
income tax purposes:
(i) No gain or loss will be recognized by the Company as a result of
the Merger;
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(ii) No gain or loss will be recognized by the shareholders of the
Company (except with respect to cash received in lieu of a fractional
share interest in Buyer Common Stock);
(iii) The aggregate tax basis of the Buyer Common Stock received by
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); and
(iv) The holding period of Buyer Common Stock received by each
shareholder of the Company in the Merger will include the holding period
of Company Common Stock exchanged therefor, provided that such
shareholder held such Company Common Stock as a capital asset within the
meaning of Section 1221 of the Code on the Effective Time.
In rendering such opinion, the Company's counsel may require and rely upon
representations and covenants contained in certificates of officers of the
Buyer, the Company and others. The Buyer and the Company agree to make such
representations and covenants to the Company's counsel to facilitate the
delivery of such opinion.
(e) No Challenge. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a government
agency (i) challenging or seeking material damages in connection with the
Merger or the conversion of Company Common Stock into Buyer Common Stock
pursuant to the Merger or (ii) seeking to restrain, prohibit or limit the
exercise of full rights of ownership or operation by the Buyer or the Buyer
Subsidiaries of all or any portion of the business or assets of Company, which
in either case is reasonably likely to have a Material Adverse Effect on either
the Company and the Company Subsidiaries taken as a whole or the Buyer and the
Buyer Subsidiaries taken as a whole.
(f) No Material Adverse Changes. Since the date of this Agreement, there
shall not have been any change in the financial condition, results of
operations or business of the Buyer and the Buyer Subsidiaries taken as a
whole, that either individually or in the aggregate would have a Material
Adverse Effect on the Buyer and the Buyer Subsidiaries taken as a whole. For
purposes of this Section 7.3(f) only, a Material Adverse Effect on the Buyer
and the Buyer Subsidiaries shall be deemed to have been incurred if there has
been (i) any reduction in the CAMELS (Capital, Assets, Management, Earnings,
Liquidity and Sensitivity to Market Risk) composite rating of any Buyer
Subsidiary to 3 or higher (i.e., 4 or 5) and/or (ii) any reduction in any Buyer
Subsidiary's CRA (Community Reinvestment Act) rating to "substantial
noncompliance" or worse. The Company shall have received a certificate of the
Chief Executive Officer and the Chief Financial Officer of the Buyer with
respect to the foregoing matters.
(g) Employment Agreements. The Buyer shall have entered into Employment
Agreements, containing substantially the terms and conditions set forth in
EXHIBITS B AND C, hereto, with James J. Rothenbach and Donald D. Parker,
respectively. Each of Harold L. Hermansen, James J. Goetz, Theodore W. Hoff and
Phillip J. Schoofs shall have entered into a
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termination agreement relating to their respective employment agreements in a
form reasonably acceptable to the parties and each of said individuals shall
have received the payout amounts due him under his respective employment
agreement.
(h) Chief Executive Officer. Douglas J. Timmerman shall hold the office
of Chairman of the Board, President and Chief Executive Officer of the Buyer.
(i) Rabbi Trust. The rabbi trust contemplated by Section 7 of Annex A
shall have been established.
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination.
(a) This Agreement may be terminated at any time prior to the Effective
Time:
(i) by mutual consent of the Buyer and the Company by a vote of a
majority of the members of the entire Boards of Directors of the Buyer
and the Company;
(ii) by either the Buyer or the Company if any approval of the
shareholders of the Buyer or the Company required for the consummation of
the Merger shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of such shareholders or
at any adjournment or postponement thereof;
(iii) by the Company or the Buyer (A) if there has been a breach in
any material respect of any representation, warranty, covenant or
agreement on the part of Company, on the one hand, or the Buyer, on the
other hand, set forth in this Agreement, or (B) if any representation or
warranty of the Company, on the one hand, or the Buyer, on the other
hand, shall be discovered to have become untrue in any material respect,
in either case which breach or other condition has not been cured within
30 business days following receipt by the nonterminating party of notice
of such breach or other condition, or which breach by its nature, cannot
be cured prior to the Effective Time; provided, however, neither party
shall have the right to terminate this Agreement pursuant to this Section
8.1(a)(iii) unless the breach of any representation or warranty (but not
breaches of covenants or agreements), together with all other such
breaches, would entitle the party receiving such representation or
warranty not to consummate the transactions contemplated hereby under
Section 7.2(a) (in the case of a breach of a representation or warranty
by the Company) or Section 7.3(a) (in the case of a breach of a
representation or warranty by the Buyer); and, provided further that this
Agreement may not be terminated pursuant to this clause (iii) by the
breaching party or party making any representation or warranty which
shall have become untrue in any material respect;
(iv) by the Company upon two days' prior written notice to the Buyer
if, as a result of an unsolicited takeover proposal (as defined in Section
4.2(e)) by a party other
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than the Buyer or its affiliates, the Board of Directors of the Company
determines in good faith that its failure to accept such takeover proposal
could reasonably be deemed to constitute a breach of its fiduciary
obligations under applicable law after consultation with and receipt of
advice from outside counsel; provided, however, that, prior to any such
termination, the Company (after disclosing to the Buyer the identity of
the party making the takeover proposal and the financial terms thereof)
shall, and shall cause its financial and legal advisors to, negotiate with
the Buyer to make such adjustments in the terms and conditions of this
Agreement as would enable the Company to proceed with the transactions
contemplated herein on such adjusted terms.
(v) by either the Buyer or the Company if any permanent injunction
preventing the consummation of the Merger shall have become final and
nonappealable;
(vi) by either the Buyer or the Company if the Merger shall not have
been consummated by September 30, 1999;
(vii) by either the Buyer or the Company if any regulatory authority
has denied approval of the Merger, and neither the Buyer 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; or
(viii) by the Company pursuant to Section 1.6(d) hereof.
SECTION 8.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and all rights and obligations of any party hereto shall cease except: (a)
as set forth in Section 9.1 of this Agreement and (b) nothing herein shall
relieve any party from liability for any willful breach of this Agreement or
shall restrict either party's rights in the case thereof.
SECTION 8.3 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after approval
of the Merger by the shareholders of the Company, no amendment may be made
without further approval of such shareholders which would reduce the amount or
change the type of consideration into which each share of Company Common Stock
shall be converted pursuant to this Agreement upon consummation of the Merger.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
SECTION 8.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or
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condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX - GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements.
The 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 and Sections
5.7, 5.8, 6.4 (including Annex A) and 6.5 shall survive the Effective Time and
those set forth in Sections 4.4(b), 5.3(b), 6.11 and Article IX hereof shall
survive termination indefinitely.
SECTION 9.2 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that the provisions of this
Agreement (including, without limitation, the provisions contained in each of
Sections 1.6, 4.4(b), 5.3(b), 5.7, 5.8, 6.4 (including Annex A) and 6.5 of this
Agreement) were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 9.3 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation), mailed by 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
notice) and shall be effective upon receipt:
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(a) If to the Buyer:
Anchor BanCorp Wisconsin Inc.
25 West Main Street
Madison, Wisconsin 53703
Attention: Douglas J. Timmerman, Chairman of the Board, President and
Chief Executive Officer
With a copy to:
Whyte Hirschboeck Dudek S.C.
Suite 2100
111 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: John F. Emanuel and Andrew J. Guzikowski
(b) If to the Company:
FCB Financial Corp.
420 South Koeller Street
Oshkosh, Wisconsin 54902
Telecopier: (920) 303-4951
Attention: James J. Rothenbach, President and Chief Executive Officer
With a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Telecopier: (414) 297-4900
Attention: Jay O. Rothman
SECTION 9.4 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; including, without limitation, any
partnership or joint venture in which any person (either alone, or through or
together with any other subsidiary) has, directly or indirectly, an interest of
5% or more;
(b) "business day" means any day other than a day on which banks in
Wisconsin are required or authorized to be closed;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or
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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;
(d) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d) of the Exchange Act); and
(e) "subsidiary" or "subsidiaries" of the Company, the Buyer, the
Surviving Corporation, or any other person, means any corporation, partnership,
joint venture or other legal entity of which the Company, the Buyer, the
Surviving Corporation or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
50% or more of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
SECTION 9.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.7 Entire Agreement. This Agreement (including the agreements
contemplated hereby) and the written confidentiality agreement in effect between
the parties constitute the entire agreement of the parties and supersede all
prior agreements and undertakings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof and, except as
otherwise expressly provided herein, are not intended to confer upon any other
person any rights or remedies hereunder.
SECTION 9.8 Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that the Buyer may assign all or any of its rights
hereunder and thereunder to any affiliate provided that no such assignment shall
relieve the assigning party of its obligations hereunder.
SECTION 9.9 Parties in Interest. This Agreement (including Annex A
hereto) shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, other than (a) Sections 1.5 and
1.11 (which is intended to be for the benefit of the directors and specified
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officers of the Company and may be enforced by such persons), (b) Section 6.5
(which is intended to be for the benefit of the Indemnified Parties and may be
enforced by such Indemnified Parties), (c) Section 5.7 and Section 6.4
(including Annex A hereto) (which are intended to be for the benefit of the
directors, officers and employees of the Company and the Company Subsidiaries
and may be enforced by such persons), and (d) Section 5.8 (which is intended
for the benefit of affiliates of the Company and may be enforced by such
persons).
SECTION 9.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Wisconsin, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
SECTION 9.11 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the Buyer and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
ANCHOR BANCORP WISCONSIN INC.
By: /s/ Douglas J. Timmerman
----------------------------------------
Douglas J. Timmerman
President and Chief Executive Officer
FCB FINANCIAL CORP.
By: /s/ James J. Rothenbach
----------------------------------------
James J. Rothenbach
President and Chief Executive Officer
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ANNEX A
EMPLOYEE BENEFIT MATTERS
1. General
(a) Those individuals who are employed by the Company or the Company
Subsidiaries as of the Effective Time and who remain, at the Buyer's
discretion, employees of the Buyer or the Buyer Subsidiaries following the
Effective Time shall be referred to hereinafter as "Affected Employees".
(b) The Buyer will give Affected Employees full credit for their prior
service with the Company or the Company Subsidiaries (or any service credited
as such in connection with a previous acquisition by the Company or any Company
Subsidiary) (i) for purposes of eligibility (including initial participation
and eligibility for retirement benefits) and vesting under any qualified or
nonqualified retirement or profit sharing plans maintained by the Buyer or any
Buyer Subsidiary in which employees of the Company and the Company Subsidiaries
may be eligible to participate and (ii) for all purposes under any welfare
benefit plans (including severance) and vacation plans and arrangements
maintained by the Buyer or any Buyer Subsidiary. Further, the Buyer shall
treat compensation received from the Company or the Company Subsidiaries (or
any compensation credited as such in connection with a previous acquisition by
the Company or any Company Subsidiary) as compensation received from the Buyer
or any Buyer Subsidiary for all purposes under any welfare benefit plans
(including severance) and vacation plans and arrangements maintained by the
Buyer or any Buyer Subsidiary.
(c) The Buyer will waive or cause to be waived all limitations as to
preexisting conditions and waiting periods with respect to participant and
coverage requirements applicable to the Affected Employees under any welfare
benefit plans that such employees may be eligible to participate in on or after
the Effective Time, other than limitations or waiting periods that are already
in effect with respect to such employees and that have not been satisfied as of
the Effective Time under any welfare plan maintained for the Affected Employees
immediately prior to the Effective Time.
2. 401(k) Plan. Accounts in the Company's 401(k) plan of participants who
are employed at the Effective Time by the Company or any Company Subsidiary
will be fully vested as of the Effective Time.
3. Employment Agreements. The current Employment Agreements with Messrs.
Parker and Rothenbach will be superseded by the new Employment Agreements
contemplated by EXHIBIT B and EXHIBIT C to the Agreement. The Employment
Agreements with Messrs. Schoofs, Hoff, Hermansen and Goetz shall terminate and
a payout shall be made thereunder as contemplated herein and by Section 7.3(g)
of the Agreement. With respect to the Employment Agreements with Messrs.
Schoofs, Hoff, Hermansen and Goetz, the Buyer agrees and acknowledges that the
consummation of the Merger will constitute an involuntary termination of each
of said executives for which they will be entitled to a termination payment as
provided
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in Section 2.6 of each of said Employment Agreements. In each case, such
payment will be equal to the product of 2.0 times the respective executive's
"base amount" at the time of the Merger as determined in accordance with
Section 280G(b)(3) of the Code. The parties intend that the termination
payments will be made contemporaneous with the consummation of the Merger and
that thereafter said Employment Agreements will be of no further force or
effect except that the Surviving Corporation will continue to have the benefit
of the confidentiality provisions set forth in Article IV of such Employment
Agreements or the substantial equivalent thereof. Notwithstanding the
foregoing, it is anticipated that each of Messrs. Schoofs, Hoff, Hermansen and
Goetz will be offered employment with the Surviving Corporation following the
Merger in accordance with Section 1.5 of the Agreement.
4. Employee Welfare Benefits. Affected Employees will be integrated into
the employee welfare benefit plans of the Buyer, including health, dental,
group term life insurance, tuition reimbursement, long-term disability and
other employee benefit plans available to similarly situated employees, as of
the later of (i) the Effective Time; or (ii) at the discretion of the Buyer,
such later date as is administratively practicable; provided, however, that
Company's employee welfare benefit plans shall continue in force until the
applicable Buyer employee welfare benefit plan applies to the Affected
Employees.
5. Severance Plan. Severance payments to employees of the Company or the
Company Subsidiaries who are terminated by the Buyer or the Buyer Subsidiaries
within nine (9) months of the Effective Time will be made in accordance with
the severance schedule attached hereto.
6. Deferred Compensation Agreements. The Deferred Compensation Agreements
for Messrs. Parker and Hermansen shall be assumed in full by the Buyer or,
subject to the agreement of the parties thereto, terminated as of the Effective
Time with an appropriate payout of amounts accrued thereunder being made at the
Effective Time.
7. Unfunded Deferred Compensation Plan for Directors. The Unfunded
Deferred Compensation Plan for Directors shall be assumed in full by the Buyer.
A rabbi trust will be established with respect to such Plan prior to the
Effective Time, which rabbi trust shall be automatically funded in the event
that a change in control of the Surviving Corporation or the Surviving Bank
occurs or in the event that Douglas J. Timmerman no longer holds the office of
Chairman of the Board, President and Chief Executive Officer of the Buyer and
AnchorBank.
8. ESOP.
(a) As of the date (the "Contribution Date") immediately prior to the
Effective Time, the Company shall make a contribution to the Company's Employee
Stock Ownership Plan (the "ESOP"), which, together with any dividends on the
Company Common Stock held in the ESOP, will equal the amount the Company would
have contributed to the ESOP pursuant to Section 3.01 of the ESOP as if the
Effective Time were the last day of a Plan year, and in no event less than the
amount needed to pay the current obligation under the Exempt Loan (as defined
in the ESOP) and shall cause the Trustee of the ESOP to use the full amount of
such contribution promptly to repay a portion of the outstanding Exempt Loan.
As a result
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of the aforementioned contribution and repayment, the Company shall take such
action as may be necessary or appropriate to cause shares of Company Common
Stock to be released from the suspense account maintained under the ESOP and
allocated to the accounts of Participants (as defined in the ESOP) as if the
Contribution Date were the last day of the Plan year, but applying the 1000
hour requirement of Section 3.01(c) by multiplying 1000 by a fraction, the
numerator of which is the days elapsed from the first day of the current Plan
year to and including the Contribution Date and the denominator of which is
365.
(b) The parties agree to take such action as may be necessary or
appropriate:
(i) to cause all ESOP Account balances to become fully vested and
nonforfeitable as the Effective Time, and to freeze further entry
into the ESOP;
(ii) to cause the Trustee of the ESOP to sell, from the suspense
account maintained under the ESOP, shares of stock of the Buyer with
an aggregate value equal to the remaining outstanding ESOP
indebtedness, after giving effect to the repayment described in
paragraph (a) hereof, and to use the proceeds of such sale to repay
in full all such outstanding ESOP indebtedness;
(iii) to cause those shares of Buyer Common Stock (and any cash)
remaining in the suspense account maintained under the ESOP, after
giving effect to the aforementioned sale (the "Remaining Shares"),
to be allocated among all Participants in proportion to the number
of shares allocated to such Participants' ESOP Accounts as of the
Effective Time unless another manner is required by the Internal
Revenue Service (the "Service") as a condition to its issuance of a
favorable determination letter regarding the qualified status of the
ESOP upon its termination; and
(iv) to cause the ESOP to be terminated and for the Account
balances of all Participants to be distributed in a lump sum (or
transferred in accordance with Section 401(a)(31) of the Code) as
soon as administratively prudent and consistent with any
requirements in the determination letter from the Service, following
the later of (A) the Effective Time or (B) the date of receipt of
such favorable determination letter from the Service.
(c) As soon as practicable after the date hereof, the Company shall file a
request for a determination letter from the Service regarding the continued
qualified status of the ESOP upon its termination, and the parties hereby agree
to cooperate fully in all matters pertaining to such filing (including, but not
limited to, making such changes to the ESOP and the proposed allocations
described herein as may be requested by the Service as a condition to its
issuance of a favorable determination letter; and authorizing and directing
their respective counsel jointly to perform all acts necessary to secure such
favorable determination letter from the Service (including preparing the
determination letter application, filing such application with the Service, and
dealing with any employee of the Service who reviews such application)). If,
despite the Company's and the Buyer's attempts to obtain such a favorable
determination letter, the Service does not permit all or any portion of the
Remaining Shares to be allocated as of the Effective Time as contemplated
hereby, the parties hereby agree to take such action as may be
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<PAGE> 165
necessary to allocate the Remaining Shares (or amounts attributable thereto) as
rapidly as possible among Participants in the ESOP in such other manner as is
consistent with meeting their respective fiduciary duties under ERISA and with
obtaining the Service's determination without limitation, and notwithstanding
paragraph 8(b)(i) hereof, to cause the ESOP to remain in effect until all of
the Remaining Shares have been allocated among such Participants' accounts and
upon such basis as the Service may require or as may be necessary to avoid the
imposition of any tax or other liability upon the Buyer in connection with the
ESOP; provided, however, that no such action shall create any liability for the
Buyer to make any contributions to the ESOP or to provide any replacement
benefits to Participants outside the ESOP. In all events, it is the intention
that the Participants in the ESOP will receive the entire benefit of the
Remaining Shares which are unallocated after application of the above
provisions. In the event that any action under this Agreement needs to be
taken with respect to the ESOP on or after the Effective Time, such action may
only be taken by and shall be the sole and exclusive responsibility of the
Trustee; provided, however, that any and all such actions shall be taken in
accordance with the provisions and intent of this Agreement.
(d) The fees and expenses of administration of the ESOP shall be paid
consistent with the historic practice of the ESOP and the Company.
9. Bonus Plan. For that portion of fiscal 1999 or 2000 of the Company,
depending upon and ending as of the Effective Time, each participant (subject
to the proviso set forth in the last sentence of this Section 9) will receive a
prorated portion of the bonus payment payable to such participant under the
Company's Bonus Plan for fiscal year 1999 or 2000, as the case may be, based on
the number of days which elapsed during such fiscal year as a percentage of 365
days. Any bonus payable to Donald D. Parker as contemplated by this Section 9
shall be equal to 50% of the equivalent bonus paid to James J. Rothenbach. In
the event that the Effective Time occurs after March 31, 1999, but before
payment of bonuses under the Company's Bonus Plan for fiscal 1999, accrued
bonuses for fiscal 1999 shall be paid in accordance with the Company's past
practices but in no event later than May 14, 1999. In the event that the
Effective Time occurs after March 31, 1999, the Company's Bonus Plan for fiscal
year 2000 will be substantially identical to the Company's Bonus Plan for
fiscal year 1999 with such benchmarks as the parties may mutually agree;
provided, however, that notwithstanding the foregoing, the Company may, in its
sole discretion, determine not to implement a Bonus Plan for the fiscal year
2000.
10. Assumption of Stock Options. The parties agree to take such actions
as may be necessary to ensure that the Company's outstanding stock options are
converted into options to purchase Buyer Common Stock and assumed by Buyer as
contemplated by Section 5.7 of the Agreement. The Buyer acknowledges and
agrees that the outstanding options will become exercisable (to the extent not
then exercisable) as a result of the transactions contemplated by the
Agreement.
11. Other Agreements. Other agreements of the Company or the Company
Subsidiaries relating to employee benefits shall be assumed in full by the
Buyer. Such agreements are identified in the disclosure schedules to the
Agreement.
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<PAGE> 166
SCHEDULE OF SEVERANCE PAYMENTS
<TABLE>
<CAPTION>
Position Severance Pay
<S> <C>
Nonexempt Employee 2 weeks, plus 1 week for each full year of continuous employment.
Minimum: 4 weeks
Maximum: 26 weeks
Exempt Employee 2 weeks, plus 2 weeks for each full year of continuous employment.
Minimum: 8 weeks
Maximum: 26 weeks
Officer/Assistant Vice President 2 weeks, plus 2 weeks for each full year of continuous employment.
Minimum: 12 weeks
Maximum: 36 weeks
Vice President or Above 2 weeks, plus 2 weeks for each full year of continuous employment.
Minimum: 24 weeks
Maximum: 52 weeks
</TABLE>
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<PAGE> 167
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated January 5, 1999, between Anchor BanCorp
Wisconsin Inc., a Wisconsin corporation ("Grantee"), and FCB Financial Corp., a
Wisconsin corporation ("Issuer").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger (the "Merger Agreement"); and
WHEREAS, as a condition and an inducement to Grantee's entering into the
Merger Agreement, Issuer is granting Grantee the Option (as hereinafter
defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1.(a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to an aggregate of
764,295 (as adjusted as set forth in Sections 1(b) and 5(b) hereof) fully paid
and nonassessable, except as provided by Section 180.0622(2)(b) of the
Wisconsin Business Corporation Law ("WBCL"), shares of the common stock, par
value $0.01 per share, of Issuer ("Issuer Common Stock") at a price per share
of $27.45 (the "Option Price"); provided, however, that in no event shall the
number of shares for which this Option is exercisable exceed 19.9% of the then
issued and outstanding shares of Issuer Common Stock. The number of shares of
Issuer Common Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Issuer Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement and other than pursuant to an event described
in Section 5(a) hereof), the number of shares of Issuer Common Stock subject to
the Option shall be increased so that, after such issuance, such number
together with any shares of Issuer Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Issuer Common Stock then issued
and outstanding without giving effect to any shares subject or issued pursuant
to the Option. Nothing contained in this Section l(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer to issue shares of Issuer Common
Stock in breach of any provision of the Merger Agreement.
2.(a) Grantee may exercise the Option, in whole or part, if, but only if,
both an Initial Triggering Event (as hereinafter defined) and a Subsequent
Triggering Event (as hereinafter defined) shall have occurred prior to the
occurrence of an Exercise Termination Event (as hereinafter defined); provided,
however, that Grantee shall have sent the written notice of such exercise (as
provided in subsection (e) of this Section 2) within forty-five (45) days
following such Subsequent Triggering Event (or such later period as provided in
Section 10 hereof). Each of the
<PAGE> 168
following shall be an Exercise Termination Event: (i) the Effective Time of
the Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event except (x) a termination by Grantee pursuant to
Section 8.1(a)(iii) of the Merger Agreement, (y) a termination by Grantee or
Issuer pursuant to Section 8.1(a)(ii) of the Merger Agreement if prior to the
duly held meeting of the shareholders of the Issuer at which the required vote
to approve the Merger was not obtained it shall have been publicly disclosed
that any person (other than Grantee or any Grantee Subsidiary (as defined
below)) shall have made, or disclosed an intention to make, a "takeover
proposal" (as defined in the Merger Agreement) or (z) a termination by Issuer
pursuant to Section 8.1(a)(iv) of the Merger Agreement (each such exception, a
"Listed Termination"); or (iii) the passage of one (1) year after termination
of the Merger Agreement if such termination follows the occurrence of an
Initial Triggering Event or is a Listed Termination. Notwithstanding anything
to the contrary contained herein, (i) the Option may not be exercised at any
time when Grantee shall be in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or in the
Merger Agreement such that, in the case of the Merger Agreement, Issuer shall
be entitled to terminate the Merger Agreement pursuant to Section 8.1(a)(iii)
thereof and (ii) this Agreement shall automatically terminate upon the proper
termination of the Merger Agreement by Issuer either pursuant to Section
8.1(a)(iii) thereof as a result of the material breach by Grantee of its
covenants or agreements contained in the Merger Agreement, pursuant to Section
8.1(a)(ii) of the Merger Agreement as a result of the failure of Grantee's
shareholders to approve the Merger, or pursuant to Section 8.1(a)(viii) of the
Merger Agreement. Notwithstanding the occurrence of an Exercise Termination
Event, Grantee shall be entitled to purchase those shares of Issuer Common
Stock with respect to which it has exercised the Option in accordance with the
terms hereof prior to the Exercise Termination Event.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any subsidiary of Issuer (an "Issuer
Subsidiary"), without having received Grantee's prior written
consent, shall have entered into an agreement (including any letter
of intent or memorandum of understanding) to engage in an
Acquisition Transaction (as hereinafter defined) with any person
(the term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
the rules and regulations thereunder) other than Grantee or any of
the subsidiaries of Grantee (each a "Grantee Subsidiary") or the
Board of Directors of Issuer (the "Issuer Board") shall have
recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction other than the Merger. For purposes of
this Agreement, "Acquisition Transaction" shall mean either (x) a
merger or consolidation, or any similar transaction, involving
Issuer or Fox Cities Bank (other than internal mergers,
consolidations or similar transactions involving solely Issuer
and/or one or more existing wholly-owned Issuer Subsidiaries,
provided, that any such transaction is not entered into in
violation of the terms of the Merger Agreement), (y) a purchase,
lease or other disposition of 35% or more of the consolidated
assets, net revenues or net income of Issuer (on a consolidated
basis), or (z) an issuance, sale or other disposition (including by
way
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<PAGE> 169
of merger, consolidation, share exchange or otherwise) of
securities representing 25% or more of the voting power of Issuer
or Fox Cities Bank;
(ii) Any person (other than Grantee or any Grantee Subsidiary)
shall have acquired beneficial ownership (as such term is defined
in Rule 13d-3 under the 1934 Act) or the right to acquire
beneficial ownership of, or any "group" (as such term is defined
under the 1934 Act) shall have been formed which beneficially owns
or has the right to acquire beneficial ownership of, 20% or more of
the then outstanding shares of Issuer Common Stock (other than
shares held in accounts related to Issuer's employee benefit
plans);
(iii) The shareholders of Issuer shall have voted and failed
to approve the Merger Agreement and the Merger at a meeting which
has been held for that purpose, or such meeting, in violation of
the Merger Agreement, shall not have been held, or such meeting
shall have been canceled prior to termination of the Merger
Agreement if, in any event, prior to such meeting (or if such
meeting shall not have been held or shall have been canceled, prior
to the termination of the Merger Agreement), it shall have been
publicly announced or disclosed that any person (other than Grantee
or any Grantee Subsidiary) shall have made, or disclosed a bona
fide intention to make, a proposal to engage in an Acquisition
Transaction;
(iv) The Board of Directors of Issuer shall have withdrawn or
modified (or publicly announced its intention to withdraw or
modify) its recommendation that the shareholders of Issuer approve
the transactions contemplated by the Merger Agreement, or Issuer or
any Issuer Subsidiary shall have authorized, recommended, proposed
(or publicly announced its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction with
any person other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its shareholders
to engage in an Acquisition Transaction and such proposal shall
have been publicly announced;
(vi) Any person other than Grantee or any Grantee Subsidiary
shall have commenced (as such term is defined in Rule 14d-2 under
the 1934 Act), or shall have filed with the Securities and Exchange
Commission (the "SEC") a registration statement under the 1934 Act
or tender offer materials with respect to, a potential exchange
offer or tender offer to purchase any shares of Issuer Common Stock
such that, upon consummation of such offer, such person or a
"group" (as such term is defined under the 1934 Act) of which such
person is a member, would acquire beneficial ownership (as such
term is defined in Rule 13d-3 of the 1934 Act), or the right to
acquire beneficial ownership, of 20% or more of the then
outstanding shares of Issuer Common Stock;
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<PAGE> 170
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of and
in order to facilitate engaging in an Acquisition Transaction, and
following such breach Grantee would be entitled to terminate the
Merger Agreement (whether immediately or after the giving of notice
or passage of time or both);
(viii) Any person other than Grantee or any Grantee Subsidiary
shall have filed an application or notice with the Office of Thrift
Supervision ("OTS") or other federal or state bank regulatory or
antitrust authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition
Transaction; or
(ix) Any person (other than Grantee or any Grantee Subsidiary)
shall acquire a sufficient number of outstanding shares of Issuer
Common Stock to allow such person to elect a majority of the
members of the Issuer Board or shall otherwise enter into an
agreement or other arrangement by which such person would be
entitled to elect or cause the appointment of a majority of the
members of the Issuer Board.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 51% or more of the
then outstanding shares of Issuer Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in clause (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (z) of the second sentence thereof
shall be 51%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of Grantee to exercise the Option.
Any period of time specified in this Agreement within which Grantee is
entitled or required to exercise the Option or any other right granted to it
hereunder, or to take any other action, which is specified to run from the
occurrence of a Triggering Event, shall not commence to run until Grantee has
received the notice of such Triggering Event required to be given by Issuer
under this Section 2(d).
(e) In the event Grantee is entitled to and wishes to exercise the Option
(or any portion thereof), it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i) the total
number of shares it will purchase pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 30 business days
from the Notice Date for the closing of such purchase; provided, that if the
closing of the purchase and sale pursuant to the Option cannot be consummated
by reason of any applicable judgment, decree, order, law or regulation, the
period of time that otherwise would run pursuant to
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<PAGE> 171
this sentence shall run instead from the date on which such restriction or
consummation has expired or been terminated; and, provided, further, without
limiting the foregoing, that if prior notification to or approval of the OTS or
any other regulatory or antitrust authority is required in connection with such
purchase, Grantee shall file the required notice or application for approval,
shall notify Issuer of such filing, and shall use its best efforts to process
the same, then the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained,
and in either event, any requisite waiting period or periods shall have passed.
Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
Grantee shall (i) pay to Issuer the aggregate purchase price for the shares of
Issuer Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer and (ii) present and surrender this Agreement to Issuer at its principal
executive offices; provided, however, that the failure or refusal of the Issuer
to designate such a bank account or accept surrender of this Agreement shall
not preclude Grantee from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to Grantee a certificate or certificates representing the number of
shares of Issuer Common Stock purchased by Grantee, which shares shall be free
and clear of all liens, claims, charges and encumbrances of any kind
whatsoever, except as provided by Section 180.0622(2)(b) of the WBCL, and
Grantee shall be deemed to be the holder of record of such shares,
notwithstanding that the stock transfer books of Issuer may then be closed.
Issuer shall pay its out-of-pocket expenses payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of Grantee or its assignee, transferee or designee. If the Option
should be exercised in part only, Issuer shall also deliver to Grantee a new
Option evidencing the rights of Grantee thereof to purchase the balance of the
shares purchasable hereunder.
(h) Certificates for Issuer Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS OR BLUE
SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT,
DATED JANUARY 5, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER UPON
REQUEST."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if Grantee shall have delivered to Issuer a copy of a letter from the
staff of the SEC, or an opinion of counsel, in form and substance satisfactory
to Issuer, to the
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<PAGE> 172
effect that such legend is not required for purposes of the 1933 Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference in the opinion of counsel to Grantee, which opinion shall be
satisfactory to Issuer; and (iii) the legend may be removed in its entirety if
the conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law or this Agreement.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock; (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) to take all action as may from time to time be required in order
to permit Grantee to exercise the Option and duly and effectively to issue
shares of Issuer Common Stock pursuant hereto; and (iv) to take all action
provided herein to protect the rights of Grantee against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of Grantee, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements
providing for Options of different denominations entitling Grantee to purchase,
on the same terms and subject to the same conditions as are set forth herein,
in the aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of satisfactory indemnification and/or an
appropriate indemnity bond, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date.
5. In addition to the adjustment in the number of shares of Issuer Common
Stock that is purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Issuer Common Stock purchasable upon
the exercise of the Option and the Option Price shall be subject to adjustment
from time to time as provided in this Section 5.
(a) In the event of any change in, or distributions (other than the
payment of cash dividends in the ordinary course consistent with past practice)
in respect of, Issuer Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares or the like, the type and number of shares of Issuer Common Stock
purchasable upon exercise hereof shall be appropriately adjusted and proper
provision shall be made so that, in the event that any additional shares of
Issuer Common Stock are to be issued or otherwise become outstanding as a
result of any such change (other than pursuant to an exercise of the Option),
the number of shares of Issuer Common Stock that remain subject to
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<PAGE> 173
the Option shall be increased so that, after such issuance and together with
shares of Issuer Common Stock previously issued pursuant to the exercise of the
Option (as adjusted on account of any of the foregoing changes in the Issuer
Common Stock), such number equals 19.9% of the number of shares of Issuer
Common Stock then issued and outstanding.
(b) Whenever the number of shares of Issuer Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Issuer Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of shares of Issuer Common Stock purchasable after the adjustment.
6. (a) If, within one (1) year following exercise of the Option by Grantee,
Issuer effects any registration or registrations of shares of Issuer Common
Stock under the 1933 Act for its own account or for any other shareholder of
Issuer (other than a registration on Form S-4, Form S-8 or any successor
forms), it will allow Grantee to participate (on the same terms as any other
participant) in such registration or registrations with respect to any or all
of the shares of capital stock of Issuer acquired by Grantee pursuant to this
Agreement that are then beneficially owned by Grantee (the "Registrable
Securities"), subject to any existing priority registration rights granted to
existing holders of Issuer Common Stock; provided, however, that if the
managing underwriters in such offering advise Issuer that, in their written
opinion, the number of Registrable Securities requested by Grantee to be
included in such registration exceeds the number of shares of Issuer Common
Stock which can be sold in such offering, Issuer may exclude from such
registration all or a portion, as may be appropriate, of the Registrable
Securities requested for inclusion by Grantee. Issuer shall provide Grantee
written notice of its intent to effect such a registration and Grantee shall,
by written notice to Issuer within ten (10) business days of receipt of notice
from Issuer, request that a specified number of the Registrable Securities be
included in the registration (the "Piggybank Registration Notice"). In the
event that Grantee fails to provide the Piggyback Registration Notice,
Grantee's rights with respect to participation in such registration shall
lapse. Issuer reserves the right, in its sole discretion, to terminate at any
time a registration effected pursuant to this Section 6(a).
(b) In addition to the rights provided pursuant to Section 6(a) hereof,
at any time within one (1) year after the exercise of the Option, Grantee may,
by written notice to the Issuer (the "Demand Registration Notice"), request the
Issuer to register under the 1933 Act all or any part of the Registrable
Securities.
(c) Upon any request or demand for registration under the preceding
Sections 6(a) and 6(b), Issuer shall have the option exercisable by written
notice delivered to Grantee within thirty (30) business days after the receipt
of the Piggyback Registration Notice or the Demand Registration Notice, as the
case may be, irrevocably to agree to purchase all or any part of the Registrable
Securities proposed to be so sold for cash at a price equal to the product of
(i) the number of Registrable Securities to be so purchased by the Issuer and
(ii) the Fair Market Value (as defined below) of a share of such Registrable
Securities. As used herein, the "Fair Market Value" of any share of Registrable
Securities shall be the average of the daily last bid price for a share of
Issuer Common Stock on the Nasdaq National Market during the five (5) trading
days
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<PAGE> 174
prior to the date on which the Piggyback Registration Notice or the Demand
Registration Notice, as the case may be, for such share is received by Issuer.
(d) Any purchase of Registrable Securities by Issuer under Section 6(c)
shall take place at a closing to be held at the principal executive offices of
Issuer or at the offices of its counsel at any reasonable date and time
designated by Issuer in such notice within thirty (30) business days after
delivery of such notice, and payment of the purchase price for the shares to be
so purchased shall be made by delivery at the time of such closing in
immediately available funds.
(e) If Issuer does not elect to exercise its option pursuant to Section
6(c) with respect to all Registrable Securities in connection with a
registration effected pursuant to Section 6(b) hereof, it shall use its
reasonable efforts to effect and keep current the registration under the 1933
Act of the unpurchased Registrable Securities proposed to be sold. Issuer will
use its reasonable efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
60 (sixty) days from the day such registration statement first becomes
effective or such shorter time as may be reasonably necessary to effect the
sale or other disposition of the Registrable Securities; provided, however,
that
(i) Grantee shall not be entitled to demand more than one (1)
effective registration statement hereunder, and
(ii) Issuer will not be required to file any such registration
statement during any period of time (not to exceed 120 days after
such request in the case of clauses (A) and (B) below or 180 days
in the case of clause (C) below) when
(A) Issuer is in possession of material non-public
information which it believes would be detrimental to be
disclosed at such time and, in the opinion of counsel to
Issuer, such information would be required to be disclosed if
a registration statement were filed at that time;
(B) Issuer is required under the 1933 Act to include
audited financial statements for any period in such
registration statement and such financial statements are not
yet available for inclusion in such registration statement;
or
(C) Issuer determines, in its sole discretion, that such
registration would interfere with any financing, acquisition
or other material transaction involving Issuer or any of its
affiliates.
(f) Issuer shall use its reasonable efforts to cause any Registrable
Securities registered pursuant to this Section 6 to be qualified for sale under
the securities or "blue sky" laws of such jurisdictions as Grantee may
reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; provided, however, that Issuer shall not be
required to qualify to do business in, or consent to general service of process
in, any jurisdiction by reason of this provision.
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(g) The registration rights set forth in this Section 6 are subject to the
condition that Grantee shall provide Issuer with such information with respect
to the Registrable Securities, the plans for the distribution thereof, and such
other information with respect to such holder as, in the judgment of counsel
for Issuer, is necessary to enable Issuer to include in such registration
statement all material facts required to be disclosed with respect to a
registration thereunder.
(h) A registration effected under this Section 6 shall be effected at
Issuer's expense, except for underwriting discounts and commissions, brokers'
fees and the fees and the expenses of counsel and other advisors to Grantee,
and Issuer shall provide to the underwriters, if any, such documentation
(including certificates, opinions of counsel and "comfort" letters from
auditors) as is customary in connection with underwritten public offerings as
such underwriters may reasonably require.
(i) In connection with any registration effected under this Section 6, the
parties agree:
(i) to indemnify each other and the underwriters, if any, in
the customary manner,
(ii) to enter into an underwriting agreement if the offering
is an underwritten offering in form and substance customary for
transactions of such type with the underwriters participating in
such offering, and
(iii) to take all reasonable further actions which shall be
reasonably necessary to effect such registration and sale
(including if the managing underwriter, if any, reasonably deems it
necessary, participating in road-show presentations).
(j) If Issuer Common Stock or any other securities to be acquired upon
exercise of the Option are then listed on the Nasdaq National Market or a
national securities exchange, Issuer, upon the request of Grantee, will
promptly file an application to list the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on the Nasdaq National
Market or a national securities exchange, as the case may be, and will use its
reasonable efforts to obtain approval of such listing as soon as practicable.
7.(a) At any time after the occurrence of a Repurchase Event (as defined
below), (i) at the request of Grantee, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall (subject to applicable law and regulation)
repurchase the Option from Grantee at a price (the "Option Repurchase Price")
equal to the amount by which (A) the market/offer price (as defined below)
exceeds (B) the Option Price, multiplied by the number of shares for which this
Option may then be exercised and (ii) at the request of Grantee delivered prior
to an Exercise Termination Event (or such later period as provided in Section
10), Issuer (or any successor thereto) shall (subject to applicable law and
regulation) repurchase such number of the Option Shares from Grantee as Grantee
shall designate at a price (the "Option Share Repurchase Price") equal to the
market/offer price multiplied by the number of Option Shares so designated.
The term "market/offer price" shall mean the highest of
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(i) the price per share of Issuer Common Stock at which a tender or exchange
offer therefor has been made, (ii) the price per share of Issuer Common Stock
to be paid by any third party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of Issuer Common Stock within the three-month
period immediately preceding the date Grantee gives notice of the required
repurchase of this Option or Grantee gives notice of the required repurchase of
Option Shares, as the case may be, or (iv) in the event of a sale of all or any
substantial part of Issuer's assets or deposits, the sum of the net price paid
in such sale for such assets or deposits and the current market value of the
remaining net assets of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee and reasonably acceptable to
Issuer, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by Grantee and acceptable to Issuer.
(b) Grantee may exercise its right to require Issuer to repurchase the
Option and any Option Shares pursuant to this Section 7 by surrendering for
such purpose to Issuer, at its principal office, a copy of this Agreement or
certificates for Option Shares, as applicable, accompanied by a written notice
or notices stating that Grantee elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within thirty (30)
business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto, Issuer shall deliver or cause to be delivered to Grantee the Option
Repurchase Price and/or to Grantee the Option Share Repurchase Price therefor
or the portion thereof that Issuer is not then prohibited under applicable law
and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall so notify Grantee and
thereafter deliver or cause to be delivered, from time to time, to Grantee the
portion of the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within ten (10)
business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to Grantee the Option Repurchase Price and the Option Share
Repurchase Price in full (and Issuer hereby undertakes to use its reasonable
efforts to obtain all required regulatory and legal approvals and to file any
required notices in order to accomplish such repurchase), Grantee may revoke
its notice of repurchase of the Option and/or the Option Shares whether in
whole or to the extent of the prohibition, whereupon, in the latter case,
Issuer shall (i) deliver to Grantee that portion of the Option Repurchase Price
and/or the Option Share Repurchase Price that Issuer is not prohibited from
delivering; and (ii) deliver to Grantee either (A) a new Agreement evidencing
the right of Grantee to purchase that number of shares of Issuer Common Stock
obtained by multiplying the number of shares of Issuer Common Stock for which
the surrendered Agreement was exercisable at the time of delivery of the notice
of repurchase by a fraction, the numerator of which is the Option Repurchase
Price less the portion thereof theretofore delivered to Grantee and the
denominator of which is the Option Repurchase Price, and/or (B) a certificate
for the Option Shares it is then so prohibited from repurchasing.
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(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 75% or more of the
then outstanding Issuer Common Stock; or
(ii) the consummation of any Acquisition Transaction described
in Section 2(b)(i) hereof.
8.(a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person
(other than Grantee or a Grantee Subsidiary), or engage in a plan of exchange
with any person (other than Grantee or a Grantee Subsidiary) and Issuer shall
not be the continuing or surviving corporation of such consolidation or merger
or the acquirer in such plan of exchange, (ii) to permit any person, other than
Grantee or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer
in a plan of exchange and Issuer shall be the continuing or surviving or
acquiring corporation, but, in connection with such merger or plan of exchange,
the then outstanding shares of Issuer Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property or the then outstanding shares of Issuer Common Stock shall after such
merger or plan of exchange represent less than 50% of the outstanding shares and
share equivalents of the merged or acquiring company, or (iii) to sell or
otherwise transfer all or substantially all of its or an Issuer Subsidiary's
assets or deposits to any person, other than Grantee or a Grantee Subsidiary,
then, and in each such case, the agreement governing such transaction shall make
proper provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "Substitute Option"), at the election of
Grantee, of either (x) the Acquiring Corporation (as hereinafter defined) or (y)
any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other
than Issuer), (ii) the acquiring person in a plan of exchange in
which Issuer is acquired, (iii) the Issuer in a merger or plan of
exchange in which Issuer is the continuing or surviving or
acquiring person, and (iv) the transferee of all or substantially
all of Issuer's assets or deposits (or the assets or deposits of
the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
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(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one year immediately
preceding the consolidation, merger or sale referred to in Section
8(a), but in no event higher than the closing price of the shares
of Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided, that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer
or by any company which controls or is controlled by such person,
as Grantee may elect.
(c) The Substitute Option shall have the same terms as the Option;
provided, that the exercise price therefor and number of shares subject thereto
shall be as set forth in this Section 8; provided, further, that the Substitute
Option shall be exercisable immediately upon issuance without the occurrence of
a Triggering Event; and provided, further that if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option, such terms shall
be as similar as possible and in no event less advantageous to Grantee. The
issuer of the Substitute Option shall also enter into an agreement with Grantee
in substantially the same form as this Agreement (subject to the variations
described in the foregoing provisos), which agreement shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Issuer Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price, rounded up to the nearest whole share. The
exercise price of the Substitute Option per share of Substitute Common Stock
shall then be equal to the Option Price multiplied by a fraction, the numerator
of which shall be the number of shares of Issuer Common Stock for which the
Option was exercisable immediately prior to the event described in the first
sentence of Section 8(a) and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option is
exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than
19.9% of the shares of Substitute Common Stock outstanding prior to exercise
but for this Section 8(e), the issuer of the Substitute Option (the "Substitute
Option Issuer") shall make a cash payment to Grantee equal to the excess of (i)
the value of the Substitute Option without giving effect to the limitation in
this Section 8(e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this Section 8(e). This difference in value shall
be determined by a nationally recognized investment banking firm selected by
Grantee.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 8 are given full force and effect (including,
without limitation, any action that may be necessary so that the holders of the
other shares of common stock issued by Substitute Option Issuer are not
entitled to exercise any rights by reason of the
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issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value than other shares of common stock issued by Substitute Option
Issuer (other than any diminution in value resulting from the fact that the
shares of Substitute Common Stock are restricted securities, as defined in Rule
144 under the 1934 Act or any successor provision)).
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within three-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner
gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, this Agreement) and/or certificates for Substitute
Shares accompanied by a written notice or notices stating that the Substitute
Option Holder or the Substitute Share Owner, as the case may be, elects to
require the Substitute Option Issuer to repurchase the Substitute Option and/or
the Substitute Shares in accordance with the provisions of this Section 9. As
promptly as practicable and in any event within thirty (30) business days after
the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall so notify the Substitute Option Holder
and/or the Substitute Share Owner and thereafter deliver or cause to be
delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within ten (10) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or
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regulation, or as a consequence of administrative policy, from delivering to
the Substitute Option Holder and/or the Substitute Share Owner, as appropriate,
the Substitute Option Repurchase Price and the Substitute Share Repurchase
Price, respectively, in full (and the Substitute Option Issuer shall use its
reasonable efforts to receive all required regulatory and legal approvals in
order to accomplish such repurchase), the Substitute Option Holder and/or
Substitute Share Owner may revoke its notice of repurchase of the Substitute
Option or the Substitute Shares either in whole or to the extent of
prohibition, whereupon, in the latter case, the Substitute Option Issuer shall
(i) deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of Substitute Common
Stock obtained by multiplying the number of shares of Substitute Common Stock
for which the surrendered Substitute Option was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Substitute Option Repurchase Price less the portion thereof theretofore
delivered to the Substitute Option Holder and the denominator of which is the
Substitute Option Repurchase Price, and/or (B) to the Substitute Share Owner, a
certificate for the Substitute Option Shares it is then so prohibited from
repurchasing.
10. The specified periods for exercise of certain rights under Sections 2,
6, 7 and 9 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights (for so long as Grantee,
Substitute Option Holder or Substitute Share Owner, as the case may be, is
using all reasonable efforts to obtain such regulatory approvals), and for the
expiration of all statutory waiting periods; and (ii) to the extent necessary
to avoid liability under Section 16(b) of the 1934 Act by reason of such
exercise.
11. (a) Issuer hereby represents and warrants to Grantee as follows:
(i) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Issuer Board prior to the
date hereof and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by Issuer.
(ii) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon the
exercise of the Option, that number of shares of Issuer Common
Stock equal to the maximum number of shares of Issuer Common
Stock at any time and from time to time issuable hereunder, and
all such shares, upon issuance pursuant thereto, will be duly
authorized, validly issued, fully paid, nonassessable (except as
provided in Section 180.0622(2)(b) of the WBCL), and will be
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delivered free and clear of all claims, liens, encumbrances and
security interests and not subject to any preemptive rights.
(iii) The Issuer Board has approved the granting of the Option
and the issuance of shares of Issuer Common Stock to Grantee for
purposes of Section 180.1141 of the WBCL.
(b) Grantee hereby represents and warrants to Issuer as follows:
(i) Grantee has corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder.
The execution and delivery of this Agreement by Grantee and the
performance of its obligations hereunder by Grantee have been duly
and validly authorized by the Board of Directors of Grantee and no
other corporate proceedings on the part of Grantee are necessary to
authorize this Agreement or for Grantee to perform its obligations
hereunder. This Agreement has been duly and validly executed and
delivered by Grantee.
(ii) Grantee is an "accredited investor" as such term is
defined in the 1933 Act and the regulations promulgated thereunder.
Any Option Shares acquired upon exercise of this Option by Grantee
will be acquired for Grantee's own account and for investment
purposes only. This Option is not being, and any Option Shares or
other securities acquired by Grantee upon exercise of the Option
will not be, acquired with a view to the public distribution
thereof and will not be transferred or otherwise disposed of except
in a transaction registered or exempt from registration under the
1933 Act.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder, and Grantee
may not transfer the Option to any other person, without the express written
consent of the other party.
13. Each of Grantee and Issuer will use its reasonable efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary for the consummation of the transactions contemplated by
this Agreement, including, without limitation, applying to the OTS for approval
to acquire the shares issuable hereunder.
14. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that Grantee is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Issuer Common Stock provided in Section l(a) hereof (as adjusted pursuant to
Section l(b) or Section 5 hereof), it is the express intention of Issuer to
allow Grantee to acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible, without any amendment or modification hereof.
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15. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
16. This Agreement shall be governed by and construed in accordance with
the laws of the State of Wisconsin, without regard to the conflict of law
principles thereof.
17. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
18. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
19. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assignees. Nothing in this Agreement, expressed or implied, is intended to
confer upon any party, other than the parties hereto, and their respective
successors except as assignees, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
20. Each party shall execute and deliver such other documents and
instruments and take such further action that may be necessary in order to
consummate the transactions contemplated hereby.
21. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
FCB FINANCIAL CORP.
By: /s/ James J. Rothenbach
-------------------------------------
James J. Rothenbach
President and Chief Executive Officer
ANCHOR BANCORP WISCONSIN INC.
By: /s/ Douglas J. Timmerman
-------------------------------------
Douglas J. Timmerman
President and Chief Executive Officer
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APPENDIX C
[McDonald Investments Inc. Letterhead]
April 28, 1999
Board of Directors
Anchor BanCorp Wisconsin Inc.
25 W. Main Street
Madison, WI 53703-3329
Attention: Mr. Douglas J. Timmerman
Chairman of the Board and Chief Executive Officer
Ladies and Gentlemen:
You have requested our opinion with respect to the fairness, from a
financial point of view, as of the date hereof, to the holders of common stock,
par value of $0.10 per share (the "Shares"), of Anchor BanCorp Wisconsin Inc.
("Anchor") of the exchange ratio as set forth in Agreement and Plan of Merger
dated January 5, 1999 (the "Agreement"), by and between Anchor and FCB Financial
Corp. ("FCB").
The Agreement provides for the merger (the "Merger") of FCB with and into
Anchor, pursuant to which, among other things, at the Merger Date (as defined in
the Agreement), outstanding shares of FCB common stock, with $.01 par value
("FCB Shares"), will be exchanged for 1.83 Shares as set forth in the Agreement
(the "Exchange Ratio"). The terms and conditions of the Merger are more fully
set forth in the Agreement.
McDonald Investments Inc., as part of its investment banking business, is
customarily engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
<PAGE> 185
Board of Directors
April 28, 1999
Page 2
We have acted as Anchor's financial advisor in connection with, and have
participated in certain negotiations leading to, the execution of the Agreement.
In connection with rendering our opinion set forth herein, we have among other
things:
(i) Reviewed Anchor's Annual Reports to Shareholders and Annual Reports
on Form 10-K for each of the years ended March 31, 1998, March 31, 1997 and
March 31, 1996, including the audited financial statements contained therein and
Quarterly Report on Form 10-Q for the three month periods ended December 31,
1998, September 30, 1998, and June 30, 1998;
(ii) Reviewed FCB's audited financial statement for the year ended March
31, 1998, and the Proxy Statements for FCB Financial Corp. and OSB Financial
Corp., dated March 17, 1997 and audited financial statements for FCB for each of
the years ended March 31, 1997 and March 31, 1996, and for OSB for the year
ended December 31, 1996; and FCB's unaudited financial statements for the three
month periods ended December 31, 1998, September 30, 1998, and June 30, 1998;
(iii) Reviewed certain other public and non-public information, primarily
financial in nature, relating to the respective businesses, earnings, assets and
prospects of Anchor, FCB and OSB provided to us or publicly available;
(iv) Participated in meetings and telephone conferences with members of
senior management of Anchor concerning the financial condition, business,
assets, financial forecasts and prospects of the respective companies, as well
as other matters we believed relevant to our inquiry;
(v) Reviewed certain stock market information for the Shares and FCB
Shares and compared it with similar information for certain companies, the
securities of which are publicly traded;
(vi) Compared the results of operations and financial condition of Anchor
and FCB with that of certain companies which we deemed to be relevant for
purposes of this opinion;
(vii) Reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which we deemed to be relevant for purposes of
this opinion;
(viii) Reviewed the Agreement and its schedules and exhibits and certain
related documents; and
(ix) Performed such other reviews and analyses as we have deemed
appropriate.
<PAGE> 186
Board of Directors
April 28, 1999
Page 3
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information reviewed by us and have relied upon the accuracy and completeness of
the representations, warranties and covenants of Anchor and FCB contained in the
Agreement. We have not been engaged to undertake, and have not assumed any
responsibility for, nor have we conducted, an independent investigation or
verification of such matters. We have not been engaged to and we did not conduct
a physical inspection of any of the assets, properties or facilities of either
Anchor or FCB, nor have we made or obtained or been furnished with any
independent evaluation or appraisal of any of such assets, properties or
facilities or any of the liabilities of either Anchor or FCB. With respect to
financial forecasts used in our analysis, we have assumed that such forecasts
have been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of Anchor and FCB as to the future
performance of Anchor, FCB, and Anchor and FCB combined, as the case may be. We
have not been engaged to assess the reasonableness or achievability of such
financial forecasts or the assumptions on which they are based, and we express
no view as to such financial forecasts or assumptions. We have also assumed that
all of the conditions to the consummation of the Merger, as set forth in the
Agreement, including the tax-free nature of the reorganization for federal
income tax purposes, would be satisfied and that the Merger would be consummated
on a timely basis in the manner contemplated by the Agreement.
We will receive a fee for our services as financial advisor to Anchor, a
portion of which is contingent upon closing of the Merger. We will also receive
a fee for our services in rendering this opinion.
In the ordinary course of business, we may actively trade securities of
Anchor and FCB for our own account and for the accounts of customers and,
accordingly, we may at any time hold a long or short position in such
securities.
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date
hereof. In addition, our opinion is, in any event, limited to the fairness, as
of the date hereof, from a financial point of view, of the Exchange Ratio, to
the holders of the Shares, and does not address the underlying business decision
by Anchor's Board of Directors to effect the Merger or any other terms of the
Merger, and does not constitute a recommendation to any Anchor shareholder as to
how such shareholder should vote with respect to the Merger. This opinion does
not represent our opinion as to what the value of the Shares or FCB Shares may
be at the effective date of the Merger or as to the prospects of Anchor's
business or FCB's business.
<PAGE> 187
Board of Directors
April 28, 1999
Page 4
This opinion is directed to the Board of Directors of Anchor and may not be
reproduced, summarized, described or referred to or given to any other person
without our prior written consent. Notwithstanding the foregoing, we hereby
consent to the inclusion and reference to this opinion in any registration
statement, proxy statement, information statement or tender offer document to be
mailed to the holders of the Shares or filed with the Securities and Exchange
Commission in connection with the Merger, provided that this opinion will be
reproduced in such document in full, and any description of or reference to us
or our actions, or any summary of the opinion in such document, will be in a
form acceptable to us and our counsel.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of the Shares from a
financial point of view.
Very truly yours,
/s/ McDonald Investments Inc.
McDONALD INVESTMENTS INC.
<PAGE> 188
APPENDIX D
[Hovde Financial, Inc. Letterhead]
April 28, 1999
Board of Directors
FCB Financial Corp.
420 South Koeller Street
Oshkosh, WI 54902
Members of the Board:
FCB Financial Corp. ("FCB"), a Wisconsin corporation, and Anchor BanCorp
Wisconsin Inc. ("Anchor"), a Wisconsin corporation, have entered into an
Agreement and Plan of Merger ("Plan of Merger") dated January 5, 1999, pursuant
to which FCB will be merged with and into Anchor (the "Merger"). As is set forth
in Section 1.6 of the Plan of Merger, at the effective time of the Merger each
of the outstanding shares of FCB common stock ("FCB Common Stock") will be
converted into and have the right to receive 1.83 shares (the "Exchange Ratio")
of Anchor common stock ("Anchor Common Stock"), subject to certain adjustments
as set forth in Section 1.7 of the Plan of Merger. In connection therewith, you
have requested our opinion as to the fairness, from a financial point of view,
of the Exchange Ratio to the shareholders of FCB.
Hovde Financial, Inc. ("Hovde") specializes in providing investment banking
and financial advisory services to commercial bank and thrift institutions. Our
principals are experienced in the independent valuation of securities in
connection with negotiated underwritings, subscription and community offerings,
private placements, merger and acquisition transactions and recapitalizations.
We are familiar with FCB, having acted as its financial advisor in connection
with, and having participated in the negotiations leading to, the Plan of
Merger.
We were retained by FCB to act as its exclusive financial advisor with
respect to a review of FCB's strategic alternatives and the possible sale,
merger, consolidation, or other business combination, in one or a series of
transactions, involving all or a substantial amount of the business, securities
or assets of FCB. We will receive compensation from FCB in connection with our
services, a significant portion of which is contingent upon the consummation of
the Merger. At your direction, we solicited the interest of third parties
regarding a possible business combination with FCB. The Plan of Merger is the
result of this solicitation.
<PAGE> 189
Board of Directors
FCB Financial Corp.
April 28, 1999
Page Two
During the course of our engagement, we reviewed and analyzed material
bearing upon the financial and operating conditions of FCB and Anchor and
material prepared in connection with the proposed transaction, including the
following: the Plan of Merger; certain historical publicly available information
concerning FCB and Anchor; the terms of recent merger and acquisition
transactions involving thrifts and thrift holding companies that we considered
relevant; historical market prices and trading volumes for Anchor Common Stock;
and financial and other information provided to us by the managements of FCB and
Anchor.
In addition, we have conducted meetings with members of the senior
management of FCB and Anchor for the purpose of reviewing the future prospects
of FCB and Anchor. We also evaluated the pro forma ownership of Anchor Common
Stock by FCB's shareholders relative to the pro forma contribution of FCB's
assets, liabilities, equity and earnings to the pro forma company, and conducted
such other studies, analyses and examinations as we deemed appropriate. We also
took into account our assessment of general economic, market and financial
conditions and our experience in other transactions, as well as our knowledge of
the banking industry and our general experience in securities valuations.
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations contained in the materials provided to us by FCB
and Anchor and in the discussions with FCB and Anchor management. We did not
independently verify and have relied on and assumed that the aggregate
allowances for loan losses set forth in the balance sheets of each of FCB and
Anchor at September 30, 1998 were adequate to cover such losses and complied
fully with applicable law, regulatory policy and sound banking practices as of
the date of such financial statements. We were not retained to and did not
conduct a physical inspection of any of the properties or facilities of FCB or
Anchor, nor did we make any independent evaluation or appraisal of the assets,
liabilities or prospects of FCB or Anchor, nor were we furnished with any such
evaluation or appraisal, and we were not retained to and did not review any
individual credit files.
<PAGE> 190
Board of Directors
FCB Financial Corp.
April 28, 1999
Page Three
We have assumed that the Merger is, and will be, in compliance with all
laws and regulations that are applicable to FCB and Anchor. In rendering this
opinion, we have been advised by FCB and Anchor and we have assumed that there
are no factors that would impede any necessary regulatory or governmental
approval for the Merger and we have further assumed that in the course of
obtaining the necessary regulatory and governmental approvals, no restriction
will be imposed on Anchor or the surviving corporation that would have a
material adverse effect on Anchor or the contemplated benefits of the Merger. We
have also assumed that there would not occur any change in the applicable law or
regulation that would cause a material adverse change in the prospects or
operations of Anchor or the surviving corporation after the Merger.
Our opinion is based solely upon the information available to us and the
economic, market and other circumstances as they exist as of the date hereof.
Events occurring and information that becomes available after the date hereof
could materially affect the assumptions and analyses used in preparing this
opinion. We have not undertaken to reaffirm or revise this opinion or otherwise
comment upon any events occurring or information that becomes available after
the date hereof.
We are not expressing any opinion herein as to the prices at which shares
of Anchor Common Stock issued in the Merger may trade if and when they are
issued or at any future time, nor does our opinion constitute a recommendation
to any holder of FCB Common Stock as to how such holder should vote with respect
to the Plan of Merger at any meeting of holders of FCB Common Stock.
This letter is for the information of the Board of Directors of FCB and is
not to be used, circulated, quoted or otherwise referred to for any other
purpose, nor is it to be filed with, included in or referred to in whole or in
part in any registration statement, proxy statement or any other document,
except in each case in accordance with our prior written consent which shall not
be unreasonably withheld; provided, however, that we hereby consent to the
inclusion and reference to this letter in any registration statement, proxy
statement, information statement or tender offer document to be filed with the
Securities and Exchange Commission or delivered to the holders of FCB Common
Stock in connection with the Merger if and only if this letter is quoted in full
or attached as an exhibit to such document and this letter has not been
withdrawn prior to the date of such document.
<PAGE> 191
Board of Directors
FCB Financial Corp.
April 28, 1999
Page Four
Subject to the foregoing and based on our experience as investment bankers,
our activities and assumptions as described above, and other factors we have
deemed relevant, we are of the opinion as of the date hereof that the Exchange
Ratio is fair, from a financial point of view, to the shareholders of FCB.
Sincerely,
/s/ Hovde Financial, Inc.
--------------------------------------
HOVDE FINANCIAL, INC.
<PAGE> 192
MAP
If the merger described in this document occurs, Fox Cities Bank, which
primarily serves the Fox River Valley market, will merge with AnchorBank, which
primarily serves markets in the Dane County area and southern and southwestern
Wisconsin. The merger of these two banks with complementary geographic markets
will create an entity with a broader market area and more diverse customer base,
enhancing AnchorBank's position as the largest thrift institution and fourth
largest financial institution in terms of assets headquartered in Wisconsin.
<PAGE> 193
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 180.0850 to 180.0859 of the Wisconsin Business Corporation Law
("WBCL") relate to indemnification and insurance. These provisions provide that
a Wisconsin corporation shall indemnify a director or officer, to the extent he
or she has been successful on the merits or otherwise in the defense of a
proceeding for all reasonable expenses incurred in the proceeding if the
director or officer was a party because he or she is a director or officer of
the corporation. In all other cases, a Wisconsin corporation shall indemnify a
director or officer against liability incurred by a director or officer in a
proceeding to which the director or officer was a party because he or she is a
director of officer of the corporation, unless liability was incurred because
the director or officer breached or failed to perform a duty he or she owes to
the corporation and the breach or failure to perform constitutes any of the
following: (1) a wilful failure to deal fairly with the corporation or its
stockholders in connection with a matter in which the director or officer has a
material conflict of interest, (2) 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, (3) a
transaction from which the director or officer derived an improper personal
profit, or (4) wilful misconduct (the foregoing, which are enumerated in
ss.ss.180.0851(2)(a)1, 2, 3 and 4 of the WBCL, are hereinafter collectively
referred to as a "Breach of Duty").
Registrant's Bylaws require indemnification of officers, directors,
employees, and agents, even if they are not successful defending any such
action, unless there is a final judicial determination that the officer,
director, employee, or agent committed a Breach of Duty to the Registrant.
Registrant's Bylaws make detailed provision for such indemnification. In
summary, Article VI of Registrant's Bylaws provides:
Bylaw ss.6.1 provides certain definitions applicable to the
indemnification provisions of Article VI. In particular:
"Director or officer" includes (i) a former or current director or
officer of the Registrant; (ii) an individual who, while a
director or officer of the Registrant, is or was serving at the
Registrant's request as a director, officer, partner, trustee,
member of any government or decision-making committee, employee or
agent of another corporation or other entity; (iii) an individual
who, while a director or officer of the Registrant, is or was
serving an employee benefit plan of the Registrant because his
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; and (iv) the estate or personal
representative of a director or officer.
"Expenses" includes fees, costs, charges, disbursements, attorneys
fees and any other expenses incurred in connection with a
proceeding.
"Liability" includes the obligation to pay a judgment, settlement,
penalty, assessment, forfeiture or fine, including an excise tax
assessed with respect to an employee benefit plan.
"Proceeding" means any threatened, pending or completed civil,
criminal, administrative or investigative action, suit,
arbitration or other proceeding, whether formal or informal and
including any appeal, which involves foreign, federal, state or
local law, which is brought by any person.
Part II - 1
<PAGE> 194
Bylaw ss.6.2 provides for the following:
The right to indemnification upon written request of a director or
officer to the fullest extent authorized by the WBCL against any
and all liability and expense actually incurred in connection with
a proceeding to which any such person shall have become subject
because he is a director or officer of the Registrant or arising
from his status as such.
That the Registrant may not indemnify any director or officer
against any liabilities or expenses unless it is determined by or
on behalf of the Registrant that the director or officer did not
breach or fail to perform a duty owed to the Registrant which
constitutes a Breach of Duty.
That the Registrant shall not indemnify any such director or
officer in connection with a proceeding or part thereof, which was
initiated by such director or officer unless such proceeding was
authorized by the Registrant's Board of Directors.
That the determination by or on behalf of the Registrant whether a
director or officer is entitled to indemnification must be made by
(i) a majority vote of a quorum of the Board of Directors
consisting of directors not at the time parties to the same or
related proceedings, or (ii) if such a quorum cannot be obtained,
by majority vote of a committee duly appointed by the Board of
Directors, including directors who are parties to the same or
related proceedings, and consisting solely of two or more
directors not at the time parties to the same or related
proceedings, and (iii) that if the required determination cannot
be made in the foregoing manner, it shall be made by independent
legal counsel to the Registrant selected by majority vote of the
Board of Directors, including directors who are parties to the
same or related proceedings.
That the termination of a proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an
equivalent plea, does not, by itself, create a presumption that
indemnification of the director or officer is not required.
That indemnification is not required if the director or officer
has previously received indemnification or allowance of expenses
from any person, including the Registrant, in connection with the
same proceeding.
Bylaw ss.6.3 provides for the advancement by the Registrant of
expenses incurred by a director or officer who is a party to a
proceeding in advance of the final disposition of such proceeding if
the director or officer submits a written request therefor and
provides (1) a written affirmation of his good faith belief that he
has not breached or failed to perform his duties to the Registrant and
(2) a written undertaking to repay the allowance and, if required by
the Registrant, to pay reasonable interest on the allowance to the
extent that indemnification is not required under Article VI or not
ordered by a court under the WBCL. Such undertaking may be accepted by
the Registrant without reference to the director's or officer's
ability to repay and may be secured or unsecured.
Bylaw ss.6.4 sets forth the applicable procedure for indemnification.
It provides that the right to indemnification or advances is
enforceable by the director or officer in court if the Registrant
denies a request therefor or if no disposition thereof is made within
60 days from receipt by the Registrant of a written demand therefor
(and that the expenses incurred in connection with successfully
establishing a right to indemnification are also indemnified by the
Registrant). ss.6.4 also provides that it is a defense to any such
enforcement proceeding that the Registrant has determined that the
claimant committed a Breach of Duty.
Bylaw ss.6.5 provides that the Registrant is not obligated to
reimburse the costs of any settlement to which it has not previously
agreed in writing.
Part II - 2
<PAGE> 195
ss.6.5 limits the Registrant's indemnification obligation, if the
person to be indemnified unreasonably fails to enter into a settlement
thereof offered or assented to by the opposing party in such
proceeding and which is acceptable to the Registrant, to the total of
the amount at which settlement could have been made and the expenses
incurred by such person prior to the time such settlement could
reasonably have been effected.
Bylaw ss.6.6 provides that no subsequent amendment or repeal of
Article VI or of relevant provisions of applicable law will affect or
diminish in any way the right of any director or officer to
indemnification under Article VI hereof with respect to any proceeding
arising out of, or relating to, any matters occurring prior to such
amendment or repeal.
Bylaw ss.6.7 provides that the indemnification provided under Article
VI shall not be deemed exclusive of any other rights to which a
director or officer seeking indemnification may be entitled under the
Articles of Incorporation or Bylaws, a written agreement between the
director or officer and the Registrant, a resolution of the Board of
Directors or a resolution, after notice, adopted by a majority vote of
all of the Registrant's voting shares then issued and outstanding,
provided that the Registrant may not indemnify a director or officer
unless it is determined by or on behalf of the Registrant that the
director or officer did not commit a Breach of Duty. ss.6.7 further
provides that all rights to indemnification under Article VI shall be
deemed to be a contract between the Registrant and each director or
officer and binding upon any successor corporation to the Registrant.
ss.6.7 also provides that if any portion of Article VI is invalidated
by a court, Registrant shall nevertheless indemnify each director or
officer against any liabilities and expenses to the fullest extent
permitted by any applicable portion of Article VI that was not so
invalidated and to the fullest extent permitted by the WBCL.
Bylaw ss.6.8 provides that the Registrant may purchase and maintain
insurance on behalf of a director or officer against liability
asserted against or incurred by him in his capacity as a director or
officer or arising from his status as such, regardless of whether the
Registrant is required or authorized to indemnify or advance expenses
to such director or officer.
Bylaw ss.6.9 provides that the Registrant may, but need not, to the
extent authorized from time to time by the Board of Directors, grant,
rights to indemnification and to the advancement of expenses to any
employee or agent of the corporation who is not a director or officer,
to the fullest extent of the provisions of Article VI and may impose
such conditions and limitations as the Board of Directors deems
appropriate.
The Registrant carries a policy of Directors and Officers liability
insurance which insure against indemnification obligations in most
circumstances. In addition, certain employee benefit plans of the Registrant
include provisions providing for indemnification of the administrators of such
plans.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS. The exhibits listed in the attached Exhibit Index are
filed as part of the Registration Statement or (where so indicated) are
incorporated herein by reference:
(b) FINANCIAL STATEMENT SCHEDULES. Not applicable.
(c) REPORTS, OPINIONS OR APPRAISALS. The opinions of McDonald
Investments Inc. and Hovde Financial, Inc. are filed as Exhibits 99.5 and 99.6
to this Registration Statement (incorporated by reference to Appendices C and D
to the Joint Proxy Statement/Prospectus which forms a part of this Registration
Statement).
Part II - 3
<PAGE> 196
ITEM 22. UNDERTAKINGS.
UNDERTAKINGS PURSUANT TO ITEM 512 OF REGULATION S-K
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, 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 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.
(g)(1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(h) The undersigned registrant hereby undertakes that, insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment for 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 of whether such indemnification by it is against
public policy as expressed in the Act and will governed by the final
adjudication of such issue.
Additional Undertakings Pursuant to Item 22 of Form S-4.
(b) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
Part II - 4
<PAGE> 197
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Madison, Wisconsin on this 27th day of April, 1999.
ANCHOR BANCORP WISCONSIN INC., REGISTRANT
By: /s/ Douglas J. Timmerman
----------------------------------------------
Douglas J. Timmerman,
Chairman of the Board, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated on this 27th of April, 1999. Each person whose
signature appears below hereby constitutes and appoints Douglas J. Timmerman and
Michael W. Helser, and each of them, as his or her attorney in fact, to sign and
to file any amendments, including post-effective amendments, to this
Registration Statement.
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------------------------------ --------------------------------------
<S> <C>
(1) PRINCIPAL EXECUTIVE OFFICER
/s/ Douglas J. Timmerman
- ------------------------------------------------------
Douglas J. Timmerman President, Chief Executive Officer
(2), (3) PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
/s/ Michael W. Helser
- ------------------------------------------------------
Michael W. Helser Treasurer, Chief Financial Officer
4) DIRECTORS
/s/ Douglas J. Timmerman
- ------------------------------------------------------
Douglas J. Timmerman Director(Chairman of the Board)
/s/ Holly Cremer Berkenstadt
- ------------------------------------------------------
Holly Cremer Berkenstadt Director
</TABLE>
<PAGE> 198
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------------------------------ --------------------------------------
<S> <C>
/s/ Donald D. Kropidlowski
- ------------------------------------------------------
Donald D. Kropidlowski Director
/s/ Greg Larson
- ------------------------------------------------------
Greg Larson Director
/s/ Arlie M. Mucks, Jr.
- ------------------------------------------------------
Arlie M. Mucks, Jr. Director
/s/ Pat Richter
- ------------------------------------------------------
Pat Richter Director
/s/ Bruce A Roberston
- ------------------------------------------------------
Bruce A. Robertson Director
</TABLE>
<PAGE> 199
EXHIBIT INDEX
REGISTRATION STATEMENT ON FORM S-4
ANCHOR BANCORP WISCONSIN INC.
<TABLE>
<CAPTION>
EXHIBIT FILED
NUMBER DESCRIPTION HEREWITH
----------- --------------------------------------------------------------------------- -------------
<S> <C> <C>
2.1 Agreement and Plan of Merger dated January 5, 1999 between Registrant X(1)
and FCB Financial Corp.
2.2 Stock Option Agreement dated January 5, 1999 between Registrant and FCB X(2)
Financial Corp.
5.1 Opinion of Whyte Hirschboeck Dudek S.C. regarding legality of issuance X
of securities
8.1 Opinion of Whyte Hirschboeck Dudek S.C. regarding Federal X
income tax consequences of the merger
8.2 Opinion of Foley & Lardner regarding Federal income tax X
consequences of the merger
23.1 Consent of Ernst & Young LLP (Registrant's independent auditors) X
23.2 Consent of Wipfli Ullrich Bertelson LLP (Independent auditors for FCB X
Financial Corp.)
23.4 Consent of Whyte Hirschboeck Dudek S.C. X(3)
23.5 Consent of Foley & Lardner X(4)
23.6 Consent of McDonald Investments Inc. X(5)
23.7 Consent of Hovde Financial, Inc. X(6)
24.1 Powers of Attorney of certain officers and directors of Registrant X(7)
99.1 Notice of Special Meeting of Shareholders of Registrant X(8)
99.2 Notice of Special Meeting of Shareholders of FCB Financial Corp. X(8)
99.3 Forms of Proxies for use at Special Meeting of Shareholders of X
Registrant
99.4 Form of Proxy for use at Special Meeting of Shareholders of FCB X
Financial Corp.
99.5 Opinion of McDonald Investments Inc. X(9)
99.6 Opinion of Hovde Financial, Inc. X(10)
(1) Included as Appendix A to the Joint Proxy Statement/Prospectus
which forms a part of this Registration Statement.
(2) Included as Appendix B to the Joint Proxy Statement/Prospectus
which forms a part of this Registration Statement.
(3) Included as part of Exhibits 5.1 and 8.1 to this Registration Statement.
(4) Included as part of Exhibit 8.2 to this Registration Statement.
</TABLE>
<PAGE> 200
<TABLE>
<S> <C>
(5) Included as part of Appendix C to the Joint Proxy
Statement/Prospectus which forms a part of this Registration
Statement.
(6) Included as part of Appendix D to the Joint Proxy
Statement/Prospectus which forms a part of this Registration
Statement.
(7) Included as part of the signature page to this Registration
Statement.
(8) Included as part of the Joint Proxy Statement/Prospectus which
forms a part of this Registration Statement.
(9) Included as Appendix C to the Joint Proxy Statement/Prospectus
which forms a part of this Registration Statement.
(10) Included as Appendix D to the Joint Proxy Statement/Prospectus
which forms a part of this Registration Statement.
</TABLE>
<PAGE> 1
[WHYTE HIRSCHBOECK DUDEK S.C. LETTERHEAD]
EXHIBIT 5.1
April 27, 1999
Board of Directors
Anchor BanCorp Wisconsin Inc.
25 West Main Street
Madison, WI 53703
Re: Merger of Anchor BanCorp Wisconsin Inc.
and FCB Financial Corp.
Form S-4 Registration Statement
Gentlemen and Ms. Cremer Berkenstadt:
We have acted as counsel to Anchor BanCorp Wisconsin Inc., a Wisconsin
corporation (the "Registrant"), in connection with the preparation and filing of
a Registration Statement on Form S-4, including the Joint Proxy
Statement/Prospectus included as a part thereof (the "Registration Statement"),
to be filed with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the Registrant's
proposed issuance of up to 7,449,974 shares of the Registrant's $0.10 par value
common stock, including an equal number of preferred share purchase rights
associated therewith (the "Stock"), in connection the Registrant's proposed
merger (the "Merger") with FCB Financial Corp. ("FCB") as contemplated by the
Agreement and Plan of Merger dated January 5, 1999 (the "Merger Agreement") by
and between the Registrant and FCB.
We have examined Registration Statement, including the Joint Proxy
Statement/ Prospectus included as a part thereof, and the originals, or
photostatic, certified or conformed copies of such records of Registrant,
certificates of its officers and such other documents as we have deemed relevant
and necessary, as a basis for the opinion set forth herein, including without
limitation, the Registrant's current Articles of Incorporation and Bylaws. In
connection with such examinations, we have assumed the authenticity of all
documents
<PAGE> 2
WHYTE Anchor BanCorp Wisconsin Inc.
HIRSCHBOECK April 27, 1999
DUDEK S.C. Page 2
submitted to us as originals or duplicate originals, the conformity to original
documents of all documents submitted to us as certified, photostatic or
conformed copies, the authenticity of the originals of such latter documents,
and the correctness and completeness of such certificates on which we have
relied.
Based on the foregoing, it is our opinion that, subject to applicable
regulatory and shareholder approvals of the Merger and the Merger Agreement and
any transactions contemplated thereby, the securities being offered by the
Registrant, when issued as contemplated by the Registration Statement, will be
legally issued, fully paid and nonassessable, subject to the limitation
contained in Section 180.0622(2)(b), Wisconsin Statutes, which makes
shareholders personally liable for debts owing to employees for services
performed for the Registrant not exceeding six months service, up to the par
value of the shares they own. We note that "par value" has been construed by a
Wisconsin court for this purpose to mean the initial purchase price of the
stock.
We hereby consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and any amendments thereto (including
post-effective amendments) and to the reference to this firm and to this opinion
under the caption "LEGAL MATTERS" in the Joint Proxy Statement/Prospectus which
forms a part of the Registration Statement. In giving our consent, we do not
admit that we are "experts" within the meaning of Section 11 of the Securities
Act or within the category of persons whose consent is required by Section 7 of
the Securities Act.
Very truly yours,
WHYTE HIRSCHBOECK DUDEK S.C.
/s/ Andrew J. Guzikowski
By:
--------------------------------
Andrew J. Guzikowski
<PAGE> 1
EXHIBIT 8.1
[WHYTE HIRSCHBOECK DUDEK S.C. LETTERHEAD]
April 27, 1999
Board of Directors
Anchor BanCorp Wisconsin Inc.
25 West Main Street
Madison, WI 53707
Re: Merger of FCB Financial Corp. into Anchor BanCorp
Wisconsin Inc.
Gentlemen and Ms. Cremer Berkenstadt:
You have asked for our opinion with regard to the federal income tax
treatment of a proposed merger (the "Merger") of FCB Financial Corp. ("FCBF"), a
Wisconsin corporation, into Anchor BanCorp Wisconsin Inc. ("Anchor"), a
Wisconsin corporation, pursuant to an Agreement and Plan of Merger (the "Plan")
dated January 5, 1999 between Anchor and FCBF. This opinion is provided pursuant
to Section 7.2(e) of the Plan. As more fully described in the "S-4" (as defined
below) and the Plan, the Merger contemplates that FCBF will be merged with and
into Anchor, with the outstanding shares of FCBF being converted into shares of
common stock of Anchor, plus rights associated with such common stock under that
certain Rights Agreement between Anchor and Firstar Bank Milwaukee, N.A. (as
successor to Firstar Trust Company) dated as of July 22, 1997 (the "Anchor
Rights"). No fractional shares of Anchor will be issued in the Merger; rather,
fractional shares will be redeemed for cash as provided in the Plan.
In rendering the opinions herein, we have reviewed the Plan, the
exhibits thereto, the Prospectus/Proxy Statement included as a part of the
Registration Statement on Form S-4 filed by Anchor and FCBF with the Securities
and Exchange Commission in connection with the transactions contemplated by the
Plan (the "S-4"), and the Application H-(e)3 filed by Anchor with the Office of
Thrift Supervision (the "Holding Company Application"). We have assumed:
- the accuracy of all of the statements made by the parties
in the Plan and the exhibits thereto and in the S-4 and
the Holding Company Application (other than the sections
thereof describing the federal income tax consequences of
the transactions);
- that the Merger will be carried out in accordance with the
terms of the Plan, as a merger of FCBF into Anchor
pursuant to the applicable provisions of the Wisconsin
Business Corporation Law ("WBCL"); and
<PAGE> 2
WHYTE Board of Directors
HIRSCHBOECK Anchor BanCorp Wisconsin Inc.
DUDEK S.C. April 27, 1999
Page 2
- the accuracy of the representations made to us by Anchor
and FCBF in their respective certificates to us, dated
this date (the "Representation Certificates"), and the
continued accuracy of those statements through the
Effective Time of the Merger.
Based upon and subject to the foregoing, and subject to such other
qualifications as are hereinafter expressed, we are of the opinion that, for
federal income tax purposes:
A. The Merger will constitute a reorganization described in
Section 368(a)(1)(A) of the Code, and Anchor and FCBF will
be "parties to a reorganization" within the meaning of
Section 368(b) of the Code.
B. No gain or loss will be recognized by those shareholders
of FCBF whose stock in FCBF is converted into stock of
Anchor (plus associated Anchor Rights) as a result of the
Merger, except that those shareholders of FCBF who receive
cash in lieu of fractional shares will be required to
recognize gain attributable to such fractional shares,
determined as though such fractional shares had been
redeemed. Provided that those FCBF shareholders held their
FCBF stock as a capital asset on the effective date of the
Merger, the gain they recognize will be capital gain,
measured by the excess, if any, of the cash they receive
over that portion of their basis in their shares that is
properly allocated to the fractional share deemed to have
been redeemed.
C. Each shareholder of FCBF whose shares of stock in FCBF are
converted into stock of Anchor pursuant to the Merger will
have as the basis of his or her Anchor stock received in
the Merger the same basis as he or she had in his or her
stock in FCBF immediately prior to the Merger, adjusted
for any fractional shares deemed to have been redeemed as
referred to in the preceding paragraph.
D. The holding period for the stock of Anchor so acquired by
a former FCBF shareholder will include the period during
which the shareholder held his or her corresponding shares
of stock in FCBF, provided such corresponding shares of
stock in FCBF were held by the shareholder as a capital
asset on the effective date of the Merger.
E. No gain or loss will be recognized by FCBF or Anchor as a
result of the Merger.
The opinions herein are limited to the federal income tax consequences
of the Merger as set forth above under the Code and the applicable
administrative, regulatory and judicial interpretations thereof as they exist as
of the date hereof. The provisions of the Code and any of such administrative,
regulatory and judicial interpretations could be changed at any time, and
<PAGE> 3
WHYTE Board of Directors
HIRSCHBOECK Anchor BanCorp Wisconsin Inc.
DUDEK S.C. April 27, 1999
Page 3
such changes could be retroactively effective with respect to transactions
occurring prior to such changes, and accordingly could change our opinions
herein. The Internal Revenue Service is not bound by our opinions and may assert
positions contrary to those opinions. While our opinions herein reflect our
interpretations of existing sources of applicable law and what we expect a court
would conclude if asked to apply that law, no assurance can be given that our
interpretations would prevail if they were challenged in an administrative or
judicial proceeding
No opinion is expressed as to any federal tax consequences of the
Merger other than those expressly set forth above, nor on the tax treatment or
the effect of the Merger (on FCBF, Anchor, or their respective shareholders)
under the laws of any state or other jurisdiction.
As stated above, our opinions herein are based on the accuracy of the
assumptions stated herein and the factual representations contained in the
Representation Certificates. Any inaccuracy in any of such assumptions or
factual representations could render the opinions stated herein inapplicable and
result in the Merger's having tax consequences that are different than those
described herein.
The opinions herein are rendered to you in connection with the Merger,
for the benefit of Anchor and FCBF and their respective shareholders, and are
not to be relied upon by any other persons or for any other purposes.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the S-4 and to the reference to our firm
under the heading "THE MERGER - Federal Income Tax Consequences" in the Proxy
Statement/Prospectus filed as a part of the S-4. In giving such consent we do
not admit that we are "experts" within the meaning of Section 11 of the
Securities Act of 1933, as amended, or within the category of persons whose
consent is required by Section 7 of said Act.
Very truly yours,
WHYTE HIRSCHBOECK DUDEK S.C.
By: /s/ John F. Emanuel
----------------------------------
John F. Emanuel
<PAGE> 1
EXHIBIT 8.2
[FOLEY & LARDNER LETTERHEAD]
April 27, 1999
FCB Financial Corp.
420 South Koeller Street
Oshkosh, Wisconsin 54902
Ladies and Gentlemen:
You have requested our opinion as to the federal income tax
consequences of the merger pursuant to an Agreement and Plan of Merger dated
January 5, 1999 (the "Merger Agreement"), by and between FCB Financial Corp.
("Target") and Anchor BanCorp Wisconsin Inc. ("Acquiring"), as more completely
described below and in the Joint Proxy Statement-Prospectus related thereto.
All capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Merger Agreement.
A. Statement of Facts
Acquiring is a Wisconsin corporation registered as a savings and loan
holding company. The outstanding shares of Acquiring capital stock consist of
common stock, $.10 par value per share ("Acquiring Common Stock"). Such shares
are widely held and publicly traded. Acquiring Common Stock has associated
rights ("Acquiring Rights") to purchase shares of Acquiring preferred stock
pursuant to the terms of that certain Rights Agreement between Acquiring and
Firstar Bank Milwaukee, N.A. (as successor to Firstar Trust Company), as Rights
Agent thereunder, dated as of July 22, 1997.
Target is a Wisconsin corporation registered as a savings and loan
holding company. Its outstanding shares of stock consist of common stock, $.01
par value per share ("Target Common Stock"). Such shares are widely held and
publicly traded.
The Merger Agreement provides for: (i) the merger of Target with and
into Acquiring, pursuant to which each outstanding share of Target Common Stock
(other than shares owned by Acquiring and Target, or any of their respective
subsidiaries, which shares will be canceled), will be converted into the right
to receive 1.83 shares of Acquiring Common Stock, together with any associated
Acquiring Rights, subject to adjustment as provided in Section 1.7 of the Merger
Agreement. No fractional shares of Acquiring Common Stock
<PAGE> 2
FCB Financial Corp.
April 27, 1999
Page 2
will be issued and any fractional interests will be redeemed for cash pursuant
to Section 1.8(e) of the Merger Agreement.
B. Representations
Our opinions as stated herein are based upon and subject to:
(a) The Merger qualifying as a statutory merger under the laws of the
State of Wisconsin.
(b) The accuracy and completeness of the statements concerning the
Merger set forth in the Proxy Statement-Prospectus.
(c) The accuracy of the representations made to us by Target and
Acquiring in their respective certificates to us, dated the date hereof, and
their continuing accuracy at all times through the Effective Time.
C. Opinions
Based upon the foregoing, and subject to the conditions and limitations
set forth below, we are of the opinion that:
1. The Merger will qualify as a reorganization within the meaning of
section 368(a)(1)(A) of the Code. Acquiring and Target will each be "a party to
a reorganization" within the meaning of section 368(b) of the Code.
2. No gain or loss will be recognized by Target upon the transfer of
its assets to Acquiring in exchange for shares of Acquiring Common Stock and the
assumption by Acquiring of all of the liabilities of Target (sections 361(a) and
357(a) of the Code).
3. Except with respect to cash received in lieu of issuing a fractional
share of Acquiring Common Stock, each holder of Target Common Stock who
exchanges those shares for shares of Acquiring Common Stock pursuant to the
Merger will not recognize any gain or loss as a result of the Merger (section
354(a)(1) of the Code).
4. Cash received by a Target shareholder paid by Acquiring in lieu of
issuing a fractional share of Acquiring Common Stock will not have the effect of
a dividend, but will be treated as if the fractional share had been distributed
pursuant to the Merger and then redeemed by Acquiring. The former Target
shareholder will be entitled to recognize capital gain or loss (provided that
the shares of Target were held as a capital asset) equal to the difference
between the amount of the cash payment and that portion of the exchanging Target
shareholder's basis that is properly allocable to the fractional share.
<PAGE> 3
FCB Financial Corp.
April 27, 1999
Page 3
5. The aggregate basis of the Acquiring Common Stock to be received by
each Target shareholder in the Merger will be the same as the basis of the
Target Common Stock surrendered in exchange therefor, reduced by any amount
allocable to a fractional share interest for which cash is received (section
358(a)(1) of the Code).
6. The holding period of the Acquiring Common Stock in the hands of
each Target shareholder will include the holding period of the shares of Target
Common Stock surrendered in exchange therefor, provided that the Target Common
Stock was held as a capital asset at the Effective Time (section 1223(1) of the
Code).
We express no opinion on the following matters:
(i) The tax treatment of the Merger under other provisions of the Code
and the regulations thereunder;
(ii) The tax treatment of any conditions existing at the time of, or
effects resulting from, the Merger that are not specifically addressed herein,
including without limitation the tax treatment of any shareholder of Target who
acquired Target Common Stock as compensation; or
(iii) The tax treatment of the Merger under the laws of any state or
commonwealth or of any jurisdiction other than the United States.
Our opinions are based upon the existing provisions of the Code, the
regulations thereunder, published revenue rulings, procedures and releases of
the Internal Revenue Service, and existing court decisions, any of which could
be changed at any time. Any such changes may be retroactive with respect to
transactions entered into prior to the date of such changes and could modify our
opinions retroactively. The Internal Revenue Service is not bound by our
opinions and, accordingly, is not precluded from asserting positions contrary to
our opinions. Further, the opinions expressed herein are based upon our best
interpretations of existing sources of law and express what, based on these
sources, we believe a court would likely conclude if presented with these
issues. However, no assurance can be given that such interpretations would be
followed if they became the subject of judicial or administrative proceedings.
As explained above, our opinions as set forth herein are based upon the
representations and factual statements referred to herein. If any such
representation or factual statement is inaccurate or incorrect in any material
respect now or at the Effective Time, any or all of the opinions expressed
herein with respect to the Merger may become inapplicable.
<PAGE> 4
FCB Financial Corp.
April 27, 1999
Page 4
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement on Form S-4 and
to the reference to our firm under the heading "Federal Income Tax Consequences"
in the Proxy Statement-Prospectus filed as part of the Registration Statement
on Form S-4. In giving our consent, we do not admit that we are "experts" within
the meaning of Section 11 of the Securities Act of 1933, as amended, or within
the category of persons whose consent is required by Section 7 of said Act.
Very truly yours,
/s/ FOLEY & LARDNER
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the Joint
Proxy Statement that is made a part of the Registration Statement (Form S-4) and
related Prospectus of Anchor BanCorp Wisconsin Inc. for the registration of
shares of its common stock and to the incorporation by reference therein of our
report dated April 28, 1998, with respect to the consolidated financial
statements of Anchor BanCorp Wisconsin Inc. included in its Annual Report (Form
10-K) for the year ended March 31, 1998, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Chicago, Illinois
April 27, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
Board of Directors and
Shareholders
FCB Financial Corp.
We consent to the reference to our firm under the caption "Experts" in the Joint
Proxy Statement that is made a part of the Registration Statement (Form S-4) and
related Prospectus of FCB Financial Corp. and to the incorporation by reference
therein of our report dated April 17, 1998, with respect to the consolidated
financial statements of FCB Financial Corp. included in its Annual Report (Form
10-K) for the year ended March 31, 1998, filed with the Securities and Exchange
Commission.
/s/ Wipfli Ullrich Bertelson LLP
---------------------------------
Wipfli Ullrich Bertelson LLP
April 27, 1999
Green Bay, Wisconsin
<PAGE> 1
ANCHOR BANCORP WISCONSIN INC.
SPECIAL MEETING OF SHAREHOLDERS
JUNE 7, 1999
REVOCABLE PROXY
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF ANCHOR BANCORP
WISCONSIN INC. ("ANCHOR") FOR USE AT ITS SPECIAL MEETING OF SHAREHOLDERS TO BE
HELD ON JUNE 7, 1999, AND AT ANY ADJOURNMENT OR POSTPONEMENT OF THE SPECIAL
MEETING.
By signing on the reverse side and returning this proxy, you are
acknowledging that you have received a Joint Proxy Statement/Prospectus
including a Notice of Special Meeting dated April 29, 1999, relating to the
special meeting of the shareholders of Anchor to be held on June 7, 1999, at
2:00 p.m., local time, at the Crowne Plaza - Madison, 4402 East Washington
Avenue, Madison, Wisconsin. You are also appointing Anchor's Board of Directors
or any successors thereto as proxies with full power of substitution, to
represent you at the special meeting, and at any adjournment or postponement of
the special meeting, and to vote on your behalf all the shares of Anchor common
stock that you held of record on April 21, 1999, in accordance with the
instructions you provide on the reverse side of this card.
Your shares will be voted as directed on the reverse side of this card.
However, if you do not check any of the boxes in Proposal No. 1, the proxies
will vote your shares "FOR" approval of the merger agreement and the merger
contemplated thereby as described in Proposal No. 1, and will vote in their
discretion upon any other matters that may be presented at the special meeting
(except that, if you check "AGAINST" in Proposal No. 1, they will not vote your
shares in favor of an adjournment to solicit further proxies). You may revoke
this proxy at any time prior to the special meeting by filing a written notice
of revocation with Anchor's Secretary, by delivering a duly executed proxy
bearing a later date to Anchor, or by attending the special meeting and voting
in person.
ANCHOR'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
OF THE MERGER AGREEMENT AND THE MERGER AS DESCRIBED IN
PROPOSAL 1 ON THE REVERSE SIDE OF THIS CARD.
(CONTINUED ON REVERSE SIDE)
PLEASE MARK, SIGN, DATE, THE REVERSE SIDE OF THIS CARD
DETACH HERE AND RETURN THE TOP PORTION USING THE ENVELOPE PROVIDED
- -------------------------------------------------------------------------------
<PAGE> 2
ANCHOR BANCORP WISCONSIN INC.
SPECIAL MEETING OF SHAREHOLDERS
JUNE 7, 1999
<TABLE>
<S><C>
1. PROPOSAL to approve the Agreement and Plan of Merger dated January 5, 1999 [ ] FOR [ ] ABSTAIN [ ] AGAINST
between Anchor and FCB Financial Corp. and to approve the merger of FCB
Financial Corp. with and into Anchor, including the issuance of up to
7,449,974 shares of Anchor common stock in connection with the merger, as
more fully described in the Joint Proxy Statement/Prospectus.
2. The proxies named above are authorized to vote upon any other matters that
may be presented at the special meeting in their discretion.
DATE NO. OF SHARES
------------------------ -------------------------------------------------
IF YOUR NAME OR ADDRESS HAS CHANGED, PLEASE CHECK
THE APPROPRIATE BOX AND INDICATE CHANGES BELOW.
[ ] NAME CHANGE? [ ] ADDRESS CHANGE? -------------------------------------------------
PLEASE SIGN IN BOX
Please sign your name exactly as it appears on
this proxy. When signing in a representative
capacity, please give title. If shares are held
in two or more names, each person named must
sign. A proxy on behalf of a corporation should
be signed in its name by a duly authorized
officer.
</TABLE>
PLEASE MARK, SIGN, DATE, AND RETURN THIS CARD PROMPTLY
DETACH HERE AND RETURN THE TOP PORTION USING THE ENVELOPE PROVIDED
- -------------------------------------------------------------------------------
ANCHOR BANCORP WISCONSIN INC.
SPECIAL MEETING OF SHAREHOLDERS
JUNE 7, 1999
2:00 P.M.
CROWNE PLAZA - MADISON
4402 EAST WASHINGTON AVENUE
MADISON, WISCONSIN
<PAGE> 3
ANCHOR BANCORP WISCONSIN INC.
SPECIAL MEETING OF SHAREHOLDERS
JUNE 7, 1999
YOUR VOTE IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF ANCHOR BANCORP
WISCONSIN INC. ("ANCHOR") FOR USE AT ITS SPECIAL MEETING OF SHAREHOLDERS TO BE
HELD ON JUNE 7, 1999, AND AT ANY ADJOURNMENT OR POSTPONEMENT OF THE SPECIAL
MEETING.
By signing on the reverse side and returning this proxy, you are
acknowledging that you have received a Joint Proxy Statement/Prospectus,
including a Notice of Special Meeting, dated April 29, 1999, relating to the
special meeting of the shareholders of Anchor to be held on June 7, 1999. You
are also appointing Old Kent Bank, who is the trustee for the Anchor Bank,
S.S.B. Retirement Plan ("Retirement Plan"), to represent you at the special
meeting, and at any adjournment of postponement of the special meeting, and to
vote on your behalf all the shares of Anchor common stock that were allocated to
your Retirement Plan account as April 21, 1999, in accordance with the
instructions you provide on the reverse side.
The shares allocated to your account will be voted as directed on the
reverse side. However, if you do not check any of the boxes in Proposal No. 1
below, the trustee will vote your shares "FOR" approval of the merger agreement
and the merger contemplated thereby as described in Proposal No. 1, and will
vote in its discretion upon any other matters that may be presented at the
special meeting (except that, if you check "AGAINST" in Proposal No. 1, it will
not vote your shares in favor of an adjournment to solicit further proxies).
These instructions may be revoked up to 5 days prior to the special meeting;
please contact the administrator of the Retirement Plan for instructions on how
to do so.
ANCHOR'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT AND THE MERGER AS DESCRIBED IN PROPOSAL 1 ON THE
REVERSE SIDE OF THIS CARD.
(CONTINUED ON REVERSE SIDE)
PLEASE MARK, SIGN, DATE THE REVERSE SIDE OF THIS CARD
DETACH HERE AND RETURN THE TOP PORTION USING THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
<PAGE> 4
401(k)
ANCHOR BANCORP WISCONSIN INC.
SPECIAL MEETING OF SHAREHOLDERS
JUNE 7, 1999
<TABLE>
<S><C>
1. PROPOSAL to approve the Agreement and Plan of Merger dated January 5, 1999 [ ]FOR [ ]ABSTAIN [ ]AGAINST
between Anchor and FCB Financial Corp. and to approve the merger of FCB
Financial Corp. with and into Anchor, including the issuance of up to
7,449,974 shares of Anchor common stock in connection with the merger, as
more fully described in the Joint Proxy Statement/Prospectus.
2. The trustee is authorized to vote upon any other matters that may be
presented at the special meeting in its discretion.
DATE_________________ NO OF SHARES
________________________________________________
IF YOUR NAME OR ADDRESS HAS CHANGED, PLEASE CHECK
THE APPROPRIATE BOX AND INDICATE CHANGES BELOW.
[ ] NAME CHANGE? [ ] ADDRESS CHANGE? ________________________________________________
PLEASE SIGN IN BOX
Please sign your name exactly as it appears on
this voting instruction card.
</TABLE>
PLEASE MARK, SIGN, DATE, AND RETURN THIS CARD PROMPTLY
DETACH HERE AND RETURN THE TOP PORTION USING THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
ANCHOR BANCORP WISCONSIN INC.
SPECIAL MEETING OF SHAREHOLDERS
JUNE 7, 1999
2:00 P.M.
CROWNE PLAZA - MADISON
4402 EAST WASHINGTON AVENUE
MADISON, WISCONSIN
<PAGE> 5
ANCHOR BANCORP WISCONSIN INC.
SPECIAL MEETING OF SHAREHOLDERS
JUNE 7, 1999
YOUR VOTE IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF ANCHOR BANCORP
WISCONSIN INC. (THE "COMPANY") FOR USE AT ITS SPECIAL MEETING OF SHAREHOLDERS TO
BE HELD ON JUNE 7, 1999, AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
By signing on the reverse side and returning this proxy, you are
acknowledging that you have received a Joint Proxy Statement/Prospectus,
including a Notice of Special Meeting dated April 29, 1999, relating to the
special meeting of the shareholders of Anchor to be held on June 7, 1999. You
are also appointing the trustees of the Anchor's Employee Stock Ownership Plan
("ESOP") to represent you at the special meeting and to vote the shares of
Anchor common stock allocated to your ESOP account as of April 21, 1999, in
accordance with the instructions you provide in the reverse side of this card.
The shares allocated to your account will be voted as directed on the
reverse side of this card. However, if you do not check any of the boxes in
Proposal No. 1, the trustees will vote your shares "FOR" approval of the merger
agreement and the merger contemplated thereby as described in Proposal No. 1,
and will vote in their discretion upon any other matters that may be presented
at the special meeting(except that, if you check "AGAINST" in Proposal No. 1,
they will not vote your shares in favor of an adjournment to solicit further
proxies). If no direction is indicated within 3 business days prior to the
special meeting, your shares will be voted by the trustees on Proposal No. 1 in
the same proportion as the allocated shares under the ESOP that have provided
instructions, and upon any other matters that may be presented at the special
meeting in their discretion. These instructions may be revoked up to 5 days
prior to the special meeting; please contact the administrator of the ESOP for
instructions on how to do so.
ANCHOR'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT AND THE MERGER AS DESCRIBED IN PROPOSAL 1 ON THE
REVERSE SIDE OF THIS CARD.
(CONTINUED ON REVERSE SIDE)
PLEASE MARK, SIGN, DATE THE REVERSE SIDE OF THIS CARD
DETACH HERE AND RETURN THE TOP PORTION USING THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
<PAGE> 6
ESOP
ANCHOR BANCORP WISCONSIN INC.
SPECIAL MEETING OF SHAREHOLDERS
JUNE 7, 1999
<TABLE>
<S><C>
1. PROPOSAL to approve the Agreement and Plan of Merger dated January 5, 1999 [ ]FOR [ ]ABSTAIN [ ]AGAINST
between Anchor and FCB Financial Corp. and to approve the merger of FCB
Financial Corp. with and into Anchor, including the issuance of up to
7,449,974 shares of Anchor common stock in connection with the merger, as
more fully described in the Joint Proxy Statement/Prospectus.
2. The trustees are authorized to vote upon any other matters that may be
presented at the special meeting in their discretion.
DATE_________________ NO OF SHARES
________________________________________________
IF YOUR NAME OR ADDRESS HAS CHANGED, PLEASE CHECK
THE APPROPRIATE BOX AND INDICATE CHANGES BELOW.
[ ] NAME CHANGE? [ ] ADDRESS CHANGE? ________________________________________________
PLEASE SIGN IN BOX
Please sign your name exactly as it appears on
this voting instruction card.
</TABLE>
PLEASE MARK, SIGN, DATE, AND RETURN THIS CARD PROMPTLY
DETACH HERE AND RETURN THE TOP PORTION USING THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
ANCHOR BANCORP WISCONSIN INC.
SPECIAL MEETING OF SHAREHOLDERS
JUNE 7, 1999
2:00 P.M.
CROWNE PLAZA - MADISON
4402 EAST WASHINGTON AVENUE
MADISON, WISCONSIN
<PAGE> 7
ANCHOR BANCORP WISCONSIN INC.
SPECIAL MEETING OF SHAREHOLDERS
JUNE 7, 1999
YOUR VOTE IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF ANCHOR BANCORP
WISCONSIN INC. ("ANCHOR") FOR USE AT ITS SPECIAL MEETING OF SHAREHOLDERS TO BE
HELD ON JUNE 7, 1999, AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
By signing below and returning this proxy you are acknowledging that you
have received a Joint Proxy Statement/Prospectus, including a Notice of Special
Meeting dated April 29, 1999, relating to the special meeting of the
shareholders of Anchor to be held on June 7, 1999. You are also appointing the
trustees of Anchor's Management Recognition Plans ("Recognition Plans"), to
represent you at the special meeting, and at any adjournment or postponement of
the special meeting, and to vote on your behalf all the shares of Anchor common
stock granted to you pursuant to the Recognition Plans as of April 21, 1999, in
accordance with the instructions you provide below.
Your shares will be voted as directed below. However, if you do not check
any of the boxes in Proposal No. 1 below, the trustees will vote your shares
"FOR" approval of the merger agreement and the merger contemplated thereby as
described in Proposal No. 1, and will vote in their discretion upon any other
matters that may be presented at the special meeting (except that, if you check
"AGAINST" in Proposal No. 1, they will not vote your shares in favor of an
adjournment to solicit further proxies). These instructions may be revoked up
to 5 days prior to the special meeting; please contact the administrator of the
Recognition Plans for instructions on how to do so.
ANCHOR'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT AND THE MERGER DESCRIBED IN PROPOSAL 1 BELOW.
_________________________________________________
MRP
ANCHOR BANCORP WISCONSIN INC.
SPECIAL MEETING OF SHAREHOLDERS
JUNE 7, 1999
1. PROPOSAL to approve the Agreement and Plan of Merger dated January 5, 1999
between Anchor and FCB Financial Corp. and to approve the merger of FCB
Financial Corp. with and into Anchor, including the issuance of up to
7,449,974 shares of Anchor common stock in connection with the merger, as
more fully described in the Joint Proxy Statement/Prospectus.
[ ] FOR [ ] ABSTAIN [ ] AGAINST
2. The trustees are authorized to vote upon any other matters that may be
presented at the special meeting in their discretion.
DATE: ________________________________
SIGNATURE: ___________________________________________
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PROXY
FCB FINANCIAL CORP.
420 SOUTH KOELLER STREET
OSHKOSH, WISCONSIN 54902
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
By signing below and returning this proxy, you will appoint James J. Rothenbach,
Donald D. Parker and Phillip J. Schoofs, and each of them individually (to act
jointly or if only one acts then by that one), as proxies with the power to
appoint their substitutes, and you will authorize them to represent and to vote
as you have designated on the reverse side of this proxy all of the shares of
Common Stock of FCB Financial Corp. that you held of record on April 21, 1999,
at the special meeting of shareholders to be held on June 7, 1999, or any
adjournment or postponement thereof.
(CONTINUED ON REVERSE SIDE)
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This proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder. If Please mark
no direction is made, this proxy will be voted "FOR" the Agreement and Plan of Merger. your votes as
indicated in [x]
this example
1. APPROVAL OF AGREEMENT AND PLAN OF MERGER [ ]FOR [ ]AGAINST [ ]ABSTAIN
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
I PLAN TO ATTEND THE MEETING. [ ]
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| Please sign exactly as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
DATED:____________________________________________, 1999
________________________________________________________________________
Signature
________________________________________________________________________
Signature (if held jointly)
PLEASE SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
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FCB FINANCIAL CORP.
SPECIAL MEETING OF SHAREHOLDERS
MONDAY, JUNE 7, 1999
9:00 A.M. - C.T.
AT THE
RAMADA INN
500 SOUTH KOELLER STREET
OSHKOSH, WISCONSIN 54902
