<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
__________________________
ALLIANCE BANCORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 6711 36-3811768
(State of Incorporation) (Primary standard industrial (IRSEmployer Identification No.)
classification code number)
</TABLE>
ONE GRANT SQUARE
HINSDALE, ILLINOIS 60521
(630) 323-1776
(Address, including zip code and telephone number,
including area code, of registrant's principal executive offices)
KENNE P. BRISTOL
ALLIANCE BANCORP
ONE GRANT SQUARE
HINSDALE, ILLINOIS 60521
(630) 323-1776
(Name, address, including zip code and telephone number,
including area code, of agent for service)
COPIES TO:
JOHN J. GORMAN, ESQUIRE MARY SJOQUIST, ESQUIRE
ROBERT LIPSHER, ESQUIRE PATTON BOGGS, L.L.P.
LUSE LEHMAN GORMAN 2550 M STREET, NW
POMERENK & SCHICK, P.C. WASHINGTON, DC 20037-1350
5335 WISCONSIN AVENUE, N.W. (202) 457-6000
WASHINGTON, D.C. 20015
(202) 274-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of 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.[_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE REGISTRATION
TO BE REGISTERED AMOUNT TO BE REGISTERED (1) OFFERING PRICE PER UNIT(2) OFFERING PRICE(2) FEE (3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
Par Value $.01................ 3,857,231 $23.934 $92,318,980 $27,235
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the estimated number of shares of common stock, par value $.01
per share, issuable by Alliance Bancorp upon consummation of the Merger
described herein, including shares issuable upon the exercise of outstanding
employee and director stock options.
(2) Pursuant to Rules 457(f)(1) and 457(c), the registration fee for the
Alliance Bancorp common stock is based on the average of the high and low
sale prices of Southwest Bancshares, Inc. ("Southwest Bancshares") on the
Nasdaq National Market on April 30, 1998 ($32.50) and computed based upon
the estimated maximum number of such shares (2,840,584) that may be
exchanged for the securities being registered.
(3) Pursuant to Rule 457(b), a fee of $18,202 was paid in connection with the
filing of preliminary proxy materials. Consequently, the amount paid
herewith is reduced to $9,033.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES AS MAY
BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
ALLIANCE BANCORP
ONE GRANT SQUARE
HINSDALE, ILLINOIS 60521
(630) 323-1776
May ___, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Alliance Bancorp to be held on Tuesday, June 30, 1998, at Ashton Place, 341 W.
75th Street, Willowbrook, Illinois, at 10:00 a.m., Chicago time (the "Annual
Meeting"). Notice of the Annual Meeting, a Joint Proxy Statement/Prospectus and
a form of proxy are enclosed.
At the Annual Meeting, you will be asked to consider and vote upon the
Agreement and Plan of Merger, dated as of December 16, 1997, by and between
Alliance Bancorp and Southwest Bancshares, Inc. ("Southwest Bancshares"), and a
related Plan of Merger (together, the "Agreement"), pursuant to which Southwest
Bancshares will be acquired by Alliance Bancorp (the "Merger").
In connection with the Merger, each share of Southwest Bancshares Common
Stock outstanding immediately prior to consummation of the Merger (other than
shares held directly by Alliance Bancorp or Southwest Bancshares) will be
converted into shares of Alliance Bancorp Common Stock based on an exchange
ratio, as described in the accompanying Joint Proxy Statement/Prospectus.
Consummation of the Merger is conditional upon, among other things, receipt
of all required shareholder and regulatory approvals. YOUR BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE AGREEMENT AND THE MERGER, which the
Board believes is in the best interests of the shareholders of Alliance Bancorp.
The Board of Directors has received the opinion of Friedman, Billings, Ramsey &
Co., Inc., Alliance Bancorp's financial advisor, to the effect that, as of the
date of such opinion and based on the considerations described therein, the
consideration to be paid by Alliance Bancorp in the Merger is fair to the
holders of the outstanding shares of Alliance Bancorp Common Stock from a
financial point of view.
At the Annual Meeting, you will also be asked to vote on an amendment to
Alliance Bancorp's Certificate of Incorporation to increase the number of
authorized shares of Alliance Bancorp Common Stock. In addition, at the Annual
Meeting, you will be asked to vote on the election of four directors and the
ratification of the appointment of independent auditors for the fiscal year
ending December 31, 1998. During the Annual Meeting, we will also report on the
operations of Alliance Bancorp and its subsidiaries. Directors and officers of
Alliance Bancorp, as well as representatives of our independent auditors, will
be present to respond to any questions which stockholders may have.
<PAGE>
We have enclosed a Notice of the Annual Meeting, a Joint Proxy
Statement/Prospectus containing a discussion of the Agreement and the Merger and
a Proxy Card to record your vote on the matters submitted for shareholder action
at the Annual Meeting. Also enclosed is the Alliance Bancorp Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, which serves as the
Annual Report to Stockholders for this meeting, and the Southwest Bancshares
Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
I encourage you to attend the Annual Meeting in person. Whether or not you
do, I hope you will read the Joint Proxy Statement/Prospectus and sign and date
the Proxy Card and return it in the enclosed postage-paid envelope. This will
save Alliance Bancorp additional expense in soliciting proxies and will ensure
that your shares are represented. Please note that you may vote in person at the
Annual Meeting even if you have previously returned the Proxy Card.
Thank you for your attention to this important matter.
Sincerely,
Fredric G. Novy Kenne P. Bristol
Chairman of the Board President and Chief Executive Officer
<PAGE>
SOUTHWEST BANCSHARES, INC.
4062 SOUTHWEST HIGHWAY
HOMETOWN, ILLINOIS 60456
(708) 636-2700
May ___, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Southwest Bancshares, Inc. ("Southwest Bancshares") to be held on Tuesday, June
30, 1998, at The Oak Lawn Hilton Hotel, 9333 South Cicero Avenue, Oak Lawn,
Illinois, at 9:30 a.m., Chicago time (the "Annual Meeting"). Notice of the
Annual Meeting, a Joint Proxy Statement/Prospectus and a form of proxy are
enclosed.
At the Annual Meeting, you will be asked to consider and vote upon the
Agreement and Plan of Merger, dated as of December 16, 1997, by and between
Alliance Bancorp and Southwest Bancshares, and a related Plan of Merger
(together, the "Agreement"), pursuant to which Southwest Bancshares will be
acquired by Alliance Bancorp (the "Merger").
In connection with the Merger, each share of Southwest Bancshares Common
Stock outstanding immediately prior to consummation of the Merger (other than
shares held directly by Alliance Bancorp or Southwest Bancshares) will be
converted into shares of Alliance Bancorp Common Stock based on an exchange
ratio, as described in the accompanying Joint Proxy Statement/Prospectus.
Consummation of the Merger is conditional upon, among other things, receipt
of all required shareholder and regulatory approvals. YOUR BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE AGREEMENT AND THE MERGER, which the
Board believes is in the best interests of the shareholders of Southwest
Bancshares. The Board of Directors has received the opinion of Robert W. Baird
& Co. Incorporated, Southwest Bancshares' financial advisor, to the effect that,
as of the date of such opinion and based on the considerations described
therein, the exchange ratio was fair, from a financial point of view, to the
holders of Southwest Bancshares Common Stock.
The exchange of Southwest Bancshares Common Stock for Alliance Bancorp
Common Stock (other than cash paid in lieu of fractional shares) will be a tax-
free transaction for federal income tax purposes.
We have enclosed a Notice of the Annual Meeting, a Joint Proxy
Statement/Prospectus containing a discussion of the Agreement and the Merger and
a proxy to record your vote on the matters submitted for shareholder action at
the Annual Meeting. Please complete, sign and date the enclosed proxy and
return it as soon as possible in the envelope provided. If you decide to attend
the Annual Meeting, you may vote your shares in person whether or not you have
previously submitted a proxy. It is important to understand that the Agreement
and the Merger must be approved by the holders of a majority of all outstanding
shares of Southwest Bancshares Common
<PAGE>
Stock and that the failure to vote will have the same effect as a vote against
the proposal. On behalf of the Board, thank you for your attention to this
important matter.
At the Annual Meeting, you will also be asked to vote on the election of
two directors to hold office until the Merger is consummated or, if the Merger
is not consummated, for a term of three years each and the ratification of the
appointment of independent auditors for the fiscal year ending December 31,
1998. Directors and officers of Southwest Bancshares, as well as
representatives of our independent auditors, will be present to respond to any
questions which stockholders may have.
We have enclosed a Notice of the Annual Meeting, a Joint Proxy
Statement/Prospectus containing a discussion of the Agreement and the Merger and
a proxy to record your vote on the matters submitted for shareholder action at
the Annual Meeting. Also enclosed is the Southwest Bancshares Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, which serves as the
Annual Report to Stockholders for this meeting and the Alliance Bancorp Annual
Report on Form 10-K for the fiscal year ended December 31, 1997.
I encourage you to attend the Annual Meeting in person. Whether or not you
do, I hope you will read the Joint Proxy Statement/Prospectus and sign and date
the Proxy and return it in the enclosed postage-paid envelope. This will save
Southwest Bancshares additional expense in soliciting proxies and will ensure
that your shares are represented. Please note that you may vote in person at the
Annual Meeting even if you have previously returned the Proxy Form.
Thank you for your attention to this important matter.
Sincerely,
Lawrence M. Cox
Chairman of the Board of Directors
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. YOU WILL RECEIVE
INSTRUCTIONS FOLLOWING THE MERGER FOR EXCHANGE OF STOCK CERTIFICATES.
<PAGE>
ALLIANCE BANCORP
ONE GRANT SQUARE
HINSDALE, ILLINOIS 60521
(630) 323-1776
_________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 30, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Alliance Bancorp will be held on Tuesday, June 30, 1998, at Ashton
Place, 341 W. 75th Street, Willowbrook, Illinois, at 10:00 a.m., Chicago time.
A Proxy Card and a Joint Proxy Statement/Prospectus for the Annual Meeting
are enclosed. The Annual Meeting is being held for the purpose of considering
and voting upon the following matters:
(1) The approval of the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of December 16, 1997, by and between Alliance
Bancorp and Southwest Bancshares, Inc. ("Southwest Bancshares"), a
copy of which is attached to the accompanying Joint Proxy
Statement/Prospectus as Appendix I, and the transactions contemplated
thereby, including the merger of Southwest Bancshares into Alliance
Bancorp, pursuant to which each outstanding share of Southwest
Bancshares Common Stock would be converted into shares of Alliance
Bancorp Common Stock based on an exchange ratio as described in the
accompanying Joint Proxy Statement/Prospectus (with cash paid in lieu
of fractional share interests), and the merger of Southwest Federal
Savings and Loan Association of Chicago into Liberty Federal Bank;
(2) The election of four directors of Alliance Bancorp for a term of three
years each;
(3) The ratification of KPMG Peat Marwick LLP as independent auditors of
Alliance Bancorp for the fiscal year ending December 31, 1998;
(4) The approval of an amendment to Alliance Bancorp's Certificate of
Incorporation to increase the total number of authorized shares of
common stock to 21,000,000; and
(5) To transact such other business as may properly come before the Annual
Meeting or any and all adjournments and postponements thereof,
including proposals to adjourn the Annual Meeting to permit the
further solicitation of proxies by the Board of Directors in the event
that there are not sufficient votes to approve the Merger proposal or
the proposal to amend the Certificate of Incorporation at the time of
the Annual Meeting; provided, however, that a proxy which is voted
against the Merger proposal or the proposal to amend the Certificate
of Incorporation will not be voted in favor of adjournment to solicit
further proxies for such proposal.
<PAGE>
Pursuant to the Bylaws, the Board of Directors has fixed May 14, 1998 as
the voting record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting and any adjournments thereof. Only holders
of the Common Stock of Alliance Bancorp as of the close of business on that date
will be entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. A list of stockholders entitled to vote at the Annual
Meeting will be available at One Grant Square, Hinsdale, Illinois for a period
of ten days prior to the Annual Meeting and will also be available for
inspection at the meeting itself.
By Order of the Board of Directors,
Richard A. Hojnicki
Secretary
Hinsdale, Illinois
May ___, 1998
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
PLAN TO BE PRESENT AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND COMPLETE THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
SOUTHWEST BANCSHARES, INC.
4062 SOUTHWEST HIGHWAY
HOMETOWN, ILLINOIS 60456
(708) 636-2700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 30, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Southwest Bancshares, Inc. ("Southwest Bancshares") is
scheduled to be held Tuesday, June 30, 1998, at The Oak Lawn Hilton Hotel, 9333
South Cicero Avenue, Oak Lawn, Illinois, at 9:30 a.m., Chicago time.
A Proxy form and a Joint Proxy Statement/Prospectus for the Annual Meeting
are enclosed. The Annual Meeting is being held for the purpose of considering
and voting upon the following matters:
(1) The approval of the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of December 16, 1997, by and between Alliance
Bancorp and Southwest Bancshares, a copy of which is attached to the
accompanying Joint Proxy Statement/Prospectus as Appendix I, and the
transactions contemplated thereby, including the merger of Southwest
Bancshares into Alliance Bancorp, pursuant to which each outstanding
share of Southwest Bancshares Common Stock would be converted into
shares of Alliance Bancorp Common Stock based on an exchange ratio as
described in the accompanying Joint Proxy Statement/Prospectus (with
cash paid in lieu of fractional share interests), and the merger of
Southwest Federal Savings and Loan Association of Chicago into Liberty
Federal Bank;
(2) The election of two directors of Southwest Bancshares to hold office
until the Merger is consummated or, if the Merger is not consummated,
for a term of three years each;
(3) The ratification of Cobitz, VandenBerg & Fennessy as independent
auditors of Southwest Bancshares for the fiscal year ending December
31, 1998; and
(4) To transact such other business as may properly come before the Annual
Meeting or any and all adjournments and postponements thereof,
including proposals to adjourn the Annual Meeting to permit the
further solicitation of proxies by the Board of Directors in the event
that there are not sufficient votes to approve the Merger proposal at
the time of the Annual Meeting; provided, however, that a proxy which
is voted against the Merger proposal will not be voted in favor of
adjournment to solicit further proxies for such proposal.
<PAGE>
The Board of Directors has established May 14, 1998 as the record date for
the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and at any adjournments thereof. Only holders of the Common
Stock of Southwest Bancshares as of the close of business on that date will be
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. A list of stockholders entitled to vote at the Annual Meeting will be
available at 4062 Southwest Highway, Hometown, Illinois for a period of ten days
prior to the Annual Meeting and will also be available for inspection at the
meeting itself.
By Order of the Board of Directors
Mary A. McNally
Secretary
Hometown, Illinois
_________________, 1998
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE SOUTHWEST BANCSHARES THE
EXPENSE OF FURTHER REQUESTS FOR PROXIES. AN ADDRESSED ENVELOPE IS ENCLOSED FOR
YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE>
ALLIANCE BANCORP
SOUTHWEST BANCSHARES, INC.
JOINT PROXY STATEMENT
_____________________
PROSPECTUS
FOR
ALLIANCE BANCORP
_____________________
This Joint Proxy Statement/Prospectus is being furnished to the
shareholders of Alliance Bancorp, a Delaware corporation, in connection with the
solicitation of proxies by the Board of Directors of Alliance Bancorp for use at
the Annual Meeting of Stockholders of Alliance Bancorp (the "Alliance Bancorp
Annual Meeting") scheduled to be held Tuesday, June 30, 1998, at Ashton Place,
341 W. 75th Street, Willowbrook, Illinois, at 10:00 a.m., Chicago time, and at
any and all adjournments or postponements thereof.
This Joint Proxy Statement/Prospectus also is being furnished to the
shareholders of Southwest Bancshares, Inc. ("Southwest Bancshares"), a Delaware
corporation, in connection with the solicitation of proxies by the Board of
Directors of Southwest Bancshares for use at the Annual Meeting of Stockholders
of Southwest Bancshares scheduled to be held on Tuesday, June 30, 1998, at The
Oak Lawn Hilton Hotel, 9333 South Cicero Avenue, Oak Lawn, Illinois, at 9:30
a.m., Chicago time (the "Southwest Bancshares Annual Meeting" and, together with
the Alliance Bancorp Annual Meeting, the "Annual Meetings").
At the Annual Meetings, Alliance Bancorp shareholders and Southwest
Bancshares shareholders will be asked to consider and vote upon, among other
things, the proposed merger of Southwest Bancshares with and into Alliance
Bancorp and the merger of Southwest Bancshares' subsidiary, Southwest Federal
Savings and Loan Association of Chicago ("Southwest Federal"), with and into
Alliance Bancorp's principal subsidiary, Liberty Federal Bank (collectively, the
"Merger"), as contemplated by the Agreement and Plan of Merger, dated as of
December 16, 1997 (the "Merger Agreement"), by and between Alliance Bancorp and
Southwest Bancshares. Pursuant to the Merger Agreement, upon consummation of
the Merger, each outstanding share of common stock, par value $.01 per share, of
Southwest Bancshares ("Southwest Bancshares Common Stock") would be converted
into shares of common stock, par value $.01 per share, of Alliance Bancorp
("Alliance
<PAGE>
Bancorp Common Stock") based on an exchange ratio (the "Exchange Ratio"), and
the payment of cash in lieu of fractional shares. The Merger Agreement is
attached as Appendix I to this Joint Proxy Statement/Prospectus and incorporated
herein by reference.
The Exchange Ratio shall be determined as follows: (i) if the "Alliance
Bancorp Market Value" (as described below) is less than or equal to $30.475 and
greater than or equal to $22.525, then 1.1981 shares of Alliance Bancorp Common
Stock; (ii) if the Alliance Bancorp Market Value is greater than $30.475 and
less than or equal to $35.00, then that number of shares of Alliance Bancorp
Common Stock, determined by dividing $36.5125 by the Alliance Bancorp Market
Value; (iii) if the Alliance Bancorp Market Value is greater than $35.00, then
1.0432 shares of Alliance Bancorp Common Stock; and (iv) if the Alliance Bancorp
Market Value is less than $22.525, then that number of shares of Alliance
Bancorp Common Stock, determined by dividing $26.9875 by the Alliance Bancorp
Market Value, subject to the right of Alliance Bancorp to terminate the Merger
Agreement. If the Alliance Bancorp Market Value is less than $19.875, then
Alliance Bancorp shall have the right to terminate the Merger Agreement unless
Southwest Bancshares provides written notice that it wants to proceed with the
Merger, in which event the Exchange Ratio will be 1.3579. The term "Alliance
Bancorp Market Value" is defined in the Merger Agreement to mean the average of
the inside closing bid price of Alliance Bancorp Common Stock on the Nasdaq
National Market System (as reported by The Wall Street Journal) for each of the
twenty (20) consecutive trading days ending on the fifth business day before the
closing date.
Alliance Bancorp's and Southwest Bancshares' respective financial advisors
have rendered opinions to the effect that as of May ____, 1998, from a financial
point of view, the Exchange Ratio was fair to the respective holders of shares
of Alliance Bancorp Common Stock and Southwest Bancshares Common Stock. The
Merger is subject to certain conditions, including the approval of the holders
of shares of Alliance Bancorp Common Stock and Southwest Bancshares Common Stock
and the approval of the Office of Thrift Supervision ("OTS"). For additional
information regarding the Merger Agreement and the terms of the Merger, see "The
Merger."
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
Alliance Bancorp, filed as part of the Registration Statement (defined below)
with respect to [3,339,806] shares of Alliance Bancorp Common Stock to be issued
upon consummation of the Merger pursuant to the terms of the Merger Agreement.
This Joint Proxy Statement/Prospectus does not cover any resales of the
Alliance Bancorp Common Stock offered hereby to be received by the stockholders
deemed to be affiliates of Alliance Bancorp or Southwest Bancshares upon
consummation of the Merger. No person is authorized to make use of this Joint
Proxy Statement/Prospectus in connection with such resales, although such
securities may be traded without the use of this Joint Proxy
Statement/Prospectus by those stockholders of Southwest Bancshares not deemed to
be affiliates of Alliance Bancorp or Southwest Bancshares.
At the Alliance Bancorp Annual Meeting, the holders of Alliance Bancorp
Common Stock will also be asked to consider and vote upon proposals to (i) elect
four directors for a term of three years each, (ii) ratify the appointment of
KPMG Peat Marwick LLP as independent auditors for
<PAGE>
Alliance Bancorp for the fiscal year ending December 31, 1998 and (iii) amend
Alliance Bancorp's Certificate of Incorporation to increase the total number of
authorized shares of Alliance Bancorp Common Stock to 21,000,000.
At the Southwest Bancshares Annual Meeting, the holders of Southwest
Bancshares Common Stock will also be asked to consider and vote upon proposals
to (i) elect two directors to hold office until the Merger is consummated or, if
the Merger is not consummated, for a term of three years each, and (ii) ratify
the appointment of Cobitz, VandenBerg & Fennessy as independent auditors of
Southwest Bancshares for the fiscal year ending December 31, 1998.
This Joint Proxy Statement/Prospectus, and the accompanying notice and
Proxy, are first being mailed to stockholders of Alliance Bancorp and Southwest
Bancshares on or about May 18, 1998.
THE SHARES OF ALLIANCE BANCORP COMMON STOCK OFFERED HEREBY HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF
THRIFT SUPERVISION, ANY STATE SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL
AGENCY, AND NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT
SUPERVISION, ANY STATE SECURITIES COMMISSION NOR ANY OTHER AGENCY HAS PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF ALLIANCE BANCORP COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
______________________
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS MAY __, 1998.
<PAGE>
AVAILABLE INFORMATION
Alliance Bancorp and Southwest Bancshares are subject to the informational
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and, in accordance therewith, file reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC"). Such
reports, proxy statements and other information filed by Alliance Bancorp and
Southwest Bancshares can be obtained, upon payment of prescribed fees, from the
Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549. In addition, such information can be inspected and copied
at the public reference facilities of the SEC located at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the SEC's Regional Offices located at
Northwestern Atrium Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
Alliance Bancorp and Southwest Bancshares file their reports, proxy statements
and other information (including the registration statement referred to below)
with the SEC electronically through the Electronic Data Gathering, Analysis, and
Retrieval ("EDGAR") system, which filings are publicly available through the
SEC's Web site at http://www.sec.gov.
Alliance Bancorp has filed with the SEC a registration statement on Form S-
4 (together with all amendments, schedules, and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Alliance Bancorp Common Stock
to be issued pursuant to and as contemplated by the Merger Agreement. This Joint
Proxy Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the SEC. The Registration Statement is
available for inspection and copying as set forth above. Statements contained in
this Joint Proxy Statement/Prospectus or in any document incorporated by
reference in this Joint Proxy Statement/Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (EXCLUDING
EXHIBITS NOT SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE, WITHOUT
CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY
STATEMENT/PROSPECTUS IS DELIVERED BY OR ON BEHALF OF ALLIANCE BANCORP OR
SOUTHWEST BANCSHARES, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, IN THE
CASE OF DOCUMENTS RELATING TO ALLIANCE BANCORP, TO RICHARD A. HOJNICKI,
CORPORATE SECRETARY, ALLIANCE BANCORP, ONE GRANT SQUARE, HINSDALE, ILLINOIS
60521, TELEPHONE (630) 323-1776; OR IN THE CASE OF DOCUMENTS RELATING TO
SOUTHWEST BANCSHARES, TO MARY A. MCNALLY, SECRETARY, SOUTHWEST BANCSHARES, INC.,
4062 SOUTHWEST HIGHWAY, HOMETOWN, ILLINOIS 60456, TELEPHONE (708) 636-2700. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE ANNUAL MEETINGS,
ANY REQUEST SHOULD BE MADE BY ___________, 1998. PERSONS REQUESTING
(i)
<PAGE>
COPIES OF EXHIBITS TO DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS MAY BE CHARGED THE COST OF REPRODUCTION AND MAILING.
The following documents previously filed with the SEC by Alliance Bancorp
(File No. 0-20082) are hereby incorporated by reference in this Joint Proxy
Statement/Prospectus. Except as noted below, these documents are not presented
or delivered herewith:
1. The Annual Report on Form 10-K of Alliance Bancorp for the fiscal year
ended December 31, 1997.
2. The Current Report on Form 8-K of Alliance Bancorp dated December 16,
1997.
Accompanying this Joint Proxy Statement/Prospectus is Alliance Bancorp's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
The following documents previously filed with the SEC by Southwest
Bancshares (File No. 0-19968) are hereby incorporated by reference in this Joint
Proxy Statement/Prospectus. Except as noted below, these documents are not
presented or delivered herewith:
1. The Annual Report on Form 10-K of Southwest Bancshares for the year
ended December 31, 1997.
2. The Current Report on Form 8-K of Southwest Bancshares dated December
16, 1997.
3. Description of Southwest Bancshares Common Stock set forth in
Southwest Bancshares' registration statement filed pursuant to Section
12 of the Exchange Act, including any amendment or report filed for
purposes of updating any such description.
Accompanying this Joint Proxy Statement/Prospectus is Southwest Bancshares'
Annual Report on Form 10-K for the year ended December 31, 1997
All documents filed by Alliance Bancorp or Southwest Bancshares,
respectively, with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Joint Proxy Statement/Prospectus and prior
to the date of the Annual Meetings shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Joint Proxy Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Joint Proxy Statement/Prospectus.
______________________
(ii)
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All information contained in this Joint Proxy Statement/Prospectus with
respect to Alliance Bancorp and its subsidiaries has been supplied by Alliance
Bancorp, and all information with respect to Southwest Bancshares and its
subsidiaries has been supplied by Southwest Bancshares.
No person is authorized to give any information or to make any
representation other than those contained or incorporated by reference in this
Joint Proxy Statement/Prospectus, and, if given or made, such information or
representation should not be relied upon as having been authorized. This Joint
Proxy Statement/Prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by this Joint Proxy
Statement/Prospectus, or the solicitation of a proxy, in any jurisdiction, to or
from any person to whom or from whom it is unlawful to make such offer,
solicitation of an offer or proxy solicitation in such jurisdiction.
______________________
THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS FORWARD-LOOKING INFORMATION
REGARDING THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR ALLIANCE BANCORP
AND SOUTHWEST BANCSHARES AND THE PRO FORMA INFORMATION REGARDING THE COMBINED
COMPANIES. THIS INFORMATION IS SUBJECT TO NUMEROUS ASSUMPTIONS, RISKS AND
UNCERTAINTIES. THE INFORMATION FOR FUTURE PERIODS IS SUBJECT TO GREATER
UNCERTAINTY BECAUSE OF THE INCREASED LIKELIHOOD OF CHANGES IN THE UNDERLYING
FACTORS AND ASSUMPTIONS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
FORWARD-LOOKING INFORMATION PRESENTED HEREIN.
THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
FORWARD-LOOKING INFORMATION CONTAINED HEREIN INCLUDE THE FOLLOWING: PRICING
PRESSURES ON LOAN AND DEPOSIT PRODUCTS, ACTIONS OF COMPETITORS, CHANGES IN
ECONOMIC CONDITIONS, THE EXTENT AND TIMING OF ACTIONS OF THE FEDERAL RESERVE
BOARD AS TO INTEREST RATES, CONTINUED CONSUMER DISINTERMEDIATION, CUSTOMERS'
ACCEPTANCE OF PRODUCTS AND SERVICES, THE EXTENT AND TIMING OF LEGISLATIVE AND
REGULATORY ACTIONS AND CHANGES, AND THE ABILITY OF ALLIANCE BANCORP TO REALIZE
THE BENEFITS OF ITS INTEGRATION OF THE OPERATIONS OF SOUTHWEST BANCSHARES.
THE FORWARD-LOOKING INFORMATION CONTAINED HEREIN SPEAKS ONLY AS OF THE DATE
OF THIS PRESENTATION. THE COMPANY ASSUMES NO DUTY TO UPDATE THE INFORMATION
CONTAINED HEREIN TO REFLECT CHANGING OR UNANTICIPATED EVENTS OR CIRCUMSTANCES.
(iii)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
AVAILABLE INFORMATION......................................................... (i)
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................... (i)
SUMMARY....................................................................... 1
The Parties to The Merger................................................ 1
Alliance Bancorp and Liberty Federal Bank................................ 1
Southwest Bancshares, Inc. and Southwest Federal Savings and
Loan Association of Chicago............................................. 2
The Annual Meetings...................................................... 3
Alliance Bancorp Annual Meeting.......................................... 3
Southwest Bancshares Annual Meeting...................................... 4
The Merger............................................................... 6
General.................................................................. 6
Reasons for the Merger; Recommendations of the Boards of Directors....... 6
Merger Consideration..................................................... 7
Opinions of Financial Advisors........................................... 8
Effective Date and Closing Date.......................................... 9
No Appraisal Rights...................................................... 9
Interests of Certain Persons in the Merger............................... 9
Conditions to the Merger................................................. 9
Regulatory Approvals..................................................... 9
Waiver and Amendment; Termination........................................ 10
Covenants Pending Closing................................................ 10
Expenses................................................................. 11
Accounting Treatment..................................................... 11
Federal Income Tax Consequences of the Merger............................ 11
Effects of the Merger on Stockholders.................................... 12
Nasdaq Listing........................................................... 12
Certain Related Transactions............................................. 12
Stock Option Agreements.................................................. 12
The Bank Merger Agreement................................................ 13
Unaudited Comparative Per Common Share Data.............................. 13
Comparative Stock Prices and Dividend Information........................ 15
</TABLE>
(iv)
<PAGE>
<TABLE>
<S> <C>
SELECTED CONSOLIDATED FINANCIAL AND OTHER
DATA OF ALLIANCE BANCORP.................................................... 17
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF SOUTHWEST BANCSHARES, INC.................................................. 20
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS............................. 23
Pro Forma Unaudited Combined Condensed Balance Sheet as of
December 31, 1997....................................................... 24
Pro Forma Unaudited Combined Condensed Statements of Income.............. 25
Pro Forma Capital Ratios................................................. 28
ALLIANCE BANCORP AND LIBERTY FEDERAL BANK..................................... 29
Alliance Bancorp......................................................... 29
Liberty Federal Bank..................................................... 29
SOUTHWEST BANCSHARES, INC. AND SOUTHWEST FEDERAL SAVINGS AND
LOAN ASSOCIATION OF CHICAGO................................................. 30
Southwest Bancshares, Inc................................................ 30
Southwest Federal Savings and Loan Association of Chicago................ 30
ALLIANCE BANCORP ANNUAL MEETING............................................... 31
Security Ownership of Certain Beneficial Owners.......................... 34
Election of Alliance Bancorp Directors................................... 35
Meetings of the Board of Directors and Committees of the Board........... 38
Directors' Compensation.................................................. 39
Executive Compensation................................................... 39
Transactions With Certain Related Persons................................ 49
Ratification of Appointment of Independent Auditors...................... 49
Stockholder Proposals.................................................... 50
Advance Notice of Business to Be Conducted at an Annual Meeting.......... 50
Other Matters Which May Properly Come Before
The Alliance Bancorp Annual Meeting..................................... 50
SOUTHWEST BANCSHARES ANNUAL MEETING........................................... 51
Vote Required to Approve the Merger; Principal Stockholders.............. 54
Solicitation of Proxies.................................................. 54
Election of Southwest Bancshares' Directors.............................. 55
Information with Respect to Nominees, Continuing Directors and Certain
Executive Officers...................................................... 55
Meetings of the Board and Committees of the Board........................ 57
Directors' Compensation.................................................. 58
</TABLE>
(v)
<PAGE>
<TABLE>
<S> <C>
Executive Compensation................................................... 59
Indebtedness of Management and Transactions with Certain Related Persons. 68
Security Ownership of Certain Beneficial Owners and Management........... 68
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS........................... 68
Stockholder Proposal..................................................... 69
Notice of Business to be Conducted at an Annual Meeting.................. 69
Other Matters Which May Properly Come Before the Southwest
Bancshares Annual Meeting............................................... 70
THE MERGER.................................................................... 71
Background of the Merger................................................. 71
Reasons for the Merger................................................... 74
Recommendations of the Boards of Directors............................... 77
Merger Consideration..................................................... 78
Treatment of Southwest Bancshares Stock Options.......................... 80
Opinion of Financial Advisor to Alliance Bancorp......................... 80
Opinion of Southwest Bancshares' Financial Advisor....................... 86
Effective Date and Closing Date.......................................... 93
No Appraisal Rights...................................................... 93
Fractional Shares........................................................ 93
Exchange of Certificates................................................. 94
Employment and Consulting Agreements..................................... 95
Supplemental Executive Retirement Plan................................... 96
Board Membership and Advisory Board...................................... 96
Effect on Employees and Employee Benefit Plans of Southwest Bancshares
and Alliance Bancorp.................................................... 97
Representations and Warranties........................................... 97
Conditions to the Merger................................................. 98
Regulatory Approvals..................................................... 99
Amendments, Extensions and Waivers....................................... 100
Termination; Effect of Termination....................................... 100
Covenants Pending Closing................................................ 101
No Solicitation of Bids.................................................. 102
Expenses................................................................. 102
Accounting Treatment..................................................... 103
Resales of Alliance Bancorp Common Stock by Affiliates................... 103
Federal Income Tax Consequences of the Merger............................ 104
Nasdaq Listing........................................................... 106
MANAGEMENT AND OPERATIONS AFTER THE MERGER.................................... 106
CERTAIN RELATED TRANSACTIONS.................................................. 106
</TABLE>
(vi)
<PAGE>
<TABLE>
<S> <C>
Stock Option Agreements.................................................. 106
The Bank Merger Agreement................................................ 110
DESCRIPTION OF ALLIANCE BANCORP CAPITAL STOCK................................. 110
General.................................................................. 111
Common Stock............................................................. 111
Preferred Stock.......................................................... 112
Certain Provisions of Delaware Corporate Law and Alliance Bancorp's...... 113
COMPARISON OF RIGHTS OF STOCKHOLDERS OF ALLIANCE BANCORP AND
SOUTHWEST BANCSHARES, INC................................................... 114
AMENDMENT TO CERTIFICATE OF INCORPORATION OF ALLIANCE BANCORP................. 114
General.................................................................. 114
Increase in Authorized Shares of Capital Stock........................... 115
LEGAL MATTERS................................................................. 116
EXPERTS....................................................................... 116
INDEPENDENT ACCOUNTANTS....................................................... 117
OTHER MATTERS................................................................. 117
</TABLE>
APPENDICES
I Agreement and Plan of Merger (including the Stock Option Agreement and
the Bank Merger Agreement but omitting other schedules and exhibits)
II Text of proposed amendment to Certificate of Incorporation of Alliance
Bancorp
III Fairness Opinion of Friedman, Billings, Ramsey & Co. Inc.
IV Fairness Opinion of Robert W. Baird & Co. Incorporated
(vii)
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SUMMARY
The following is a brief summary of certain information contained elsewhere
or incorporated by reference in this Joint Proxy Statement/Prospectus. Certain
capitalized terms used in this summary are defined elsewhere in this Joint Proxy
Statement/Prospectus. This summary is not intended to be a complete description
of all material facts regarding Alliance Bancorp, Southwest Bancshares and the
matters to be considered at the Annual Meetings and is qualified in its entirety
by, and reference is made to, the more detailed information contained elsewhere
in this Joint Proxy Statement/Prospectus, the accompanying Appendices and the
documents referred to and incorporated by reference herein.
THE PARTIES TO THE MERGER
ALLIANCE BANCORP AND LIBERTY FEDERAL BANK
Alliance Bancorp, a Delaware corporation, is the holding company for
Liberty Federal Bank ("Liberty Federal"), a federally chartered savings bank
headquartered in Hinsdale, Illinois. As of December 31, 1997, Alliance Bancorp
had total consolidated assets of $1.4 billion, deposits of $1.0 billion and
stockholders' equity of $130.9 million. Alliance Bancorp's business has
consisted primarily of the business of Liberty Federal and its subsidiaries. The
executive offices of Alliance Bancorp are located at One Grant Square, Hinsdale,
Illinois 60521, and the telephone number is (630) 323-1776.
Alliance Bancorp is a registered savings and loan holding company
incorporated under the laws of the state of Delaware and is engaged in the
business of providing financial service products to the public through its
wholly-owned subsidiary, Liberty Federal. On February 10, 1997, Hinsdale
Financial Corporation, the holding company for Hinsdale Federal Bank for
Savings, and Liberty Bancorp, Inc., the holding company for Liberty Federal
Savings Bank, consummated their merger of equals transaction in a stock-for-
stock exchange. The resulting organization was renamed Alliance Bancorp.
Liberty Federal Savings Bank was merged into Hinsdale Federal Bank for Savings,
and the resulting Bank operates under the name Liberty Federal Bank.
Liberty Federal is a community-oriented institution providing financial
services through 14 retail banking facilities in DuPage and Cook counties in
Illinois. Liberty Federal offers a variety of deposit products in an attempt to
attract funds from the general public in highly competitive market areas
surrounding its offices. In addition to deposit products, Liberty Federal also
offers its customers financial advice and security brokerage services through
INVEST Financial Corporation ("INVEST"). Liberty Federal invests its retail
deposits in mortgage and consumer loans, investment securities and mortgage-
backed securities, secured primarily by one-to four-family residential loans.
Liberty Federal also owns Preferred Mortgage Associates, Ltd. ("Preferred"),
which is one of the largest mortgage brokers in the Chicago metropolitan area
and which has six mortgage origination offices, including its headquarters in
Downers Grove, Illinois. See "Selected Consolidated Financial
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and Other Data of Alliance Bancorp," "Alliance Bancorp and Liberty Federal Bank"
and "Unaudited Pro Forma Combined Financial Statements."
Additional information concerning Alliance Bancorp and Liberty Federal is
included in the Alliance Bancorp documents incorporated by reference herein. See
"Incorporation of Certain Documents by Reference."
SOUTHWEST BANCSHARES, INC. AND SOUTHWEST FEDERAL SAVINGS AND LOAN ASSOCIATION
OF CHICAGO
Southwest Bancshares was incorporated under Delaware law on February 11,
1992. On June 11, 1992, Southwest Bancshares acquired Southwest Federal as a
part of Southwest Federal's conversion from a mutual to a stock federally
chartered savings and loan association. Southwest Bancshares is a savings and
loan holding company and is subject to regulation by the OTS, the Federal
Deposit Insurance Corporation (the "FDIC") and the SEC. Currently, Southwest
Bancshares does not transact any material business other than through Southwest
Federal, and Southwest Bancshares Development Corporation. Upon consummation of
Southwest Federal's conversion, Southwest Bancshares retained 50% of the net
conversion proceeds amounting to $13.4 million, which was invested in federal
funds and high-grade, marketable securities. At December 31, 1997, Southwest
Bancshares had total assets of $368.3 million and stockholders' equity of $44.0
million, or 12.0% of total assets.
Southwest Federal has operated for over 114 years, and was originally
organized in 1883 as an Illinois-chartered building and loan association. In
1937, it converted to a federally chartered and insured savings and loan
association. Southwest Federal is a member of the Federal Home Loan Bank (the
"FHLB") System and its deposit accounts are insured up to applicable limits by
the FDIC.
Southwest Federal's principal business has been, and continues to be,
attracting retail deposits from the general public and investing those deposits,
together with funds generated from operations, primarily in one- to four-family,
owner-occupied, fixed-rate loans, and to a lesser extent, multi-family
residential mortgage loans, commercial real estate loans, land and construction
loans, mortgage-backed securities and other marketable securities. Southwest
Federal's revenues are derived principally from interest on its mortgage loans
and mortgage-backed securities portfolios and interest and dividends on its
investment securities. Southwest Federal's primary sources of funds are
deposits, principal and interest payments on loans and mortgage-backed
securities and, to a much lesser extent, FHLB-Chicago advances.
Southwest Bancshares Development Corporation, an Illinois corporation, was
incorporated on November 19, 1992, for the primary purpose of engaging in real
estate development projects as a joint venture partner.
For more information about Southwest Bancshares, reference is made to the
1997 Southwest Bancshares Form 10-K, which is incorporated herein by reference.
See "Available Information" and "Incorporation of Certain Documents by
Reference."
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Additional information concerning Southwest Bancshares is included in the
Southwest Bancshares documents incorporated by reference herein. See
"Incorporation of Certain Documents by Reference."
THE ANNUAL MEETINGS
ALLIANCE BANCORP ANNUAL MEETING
Meeting Date. The Alliance Bancorp Annual Meeting will be held on Tuesday,
June 30, 1998, at Ashton Place, 341 W. 75th Street, Willowbrook, Illinois, at
10:00 a.m., Chicago time, and any and all adjournments or postponements thereof.
Record Date. Only holders of record of Alliance Bancorp Common Stock at
the close of business on May 14, 1998 (the "Alliance Bancorp Record Date") are
entitled to notice of and to vote at the Alliance Bancorp Annual Meeting.
Matters to be Considered. At the Alliance Bancorp Annual Meeting, holders
of shares of Alliance Bancorp Common Stock will vote on the following proposals
(the "Alliance Bancorp Proposals"): (i) the approval of the Merger Agreement and
the transactions contemplated thereby, including the Merger of Southwest
Bancshares with and into Alliance Bancorp and the issuance by Alliance Bancorp
of up to [3,339,806] shares of Alliance Bancorp Common Stock in connection with
the Merger; (ii) the election of four directors for a term of three years each;
(iii) the ratification of KPMG Peat Marwick LLP as independent auditors of
Alliance Bancorp for the fiscal year ending December 31, 1998 and (iv) the
approval of an amendment to Alliance Bancorp's Certificate of Incorporation to
increase the total number of authorized shares of Alliance Bancorp Common Stock
to 21,000,000. See "The Merger" and "Amendment to the Certificate of
Incorporation of Alliance Bancorp." ALLIANCE BANCORP'S BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT ALLIANCE BANCORP STOCKHOLDERS VOTE FOR EACH OF THE
ALLIANCE BANCORP PROPOSALS. Alliance Bancorp stockholders may also consider and
vote upon such other matters as are properly brought before the Alliance Bancorp
Annual Meeting, including proposals to adjourn the Alliance Bancorp Annual
Meeting to permit the further solicitation of proxies by Alliance Bancorp's
Board of Directors in the event that there are not sufficient votes to approve
the Merger proposal or the proposal to amend the Certificate of Incorporation at
the time of the Alliance Bancorp Annual Meeting; provided, however, that any
proxy which is voted against the Merger proposal or the proposal to amend the
Certificate of Incorporation will not be voted in favor of adjournment to
solicit further proxies for such proposal.
Votes Required. The affirmative vote of the holders of a majority of the
outstanding shares of Alliance Bancorp Common Stock is required for approval and
adoption of the Merger Agreement, and the amendment to the Alliance Bancorp
Certificate of Incorporation. Directors are elected by a plurality of votes
cast, and the ratification of auditors requires a majority of votes cast. As of
the Alliance Bancorp Record Date, there were [8,024,293] shares of Alliance
Bancorp Common Stock entitled to be voted at the Alliance Bancorp Annual
Meeting.
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With a quorum, or in the absence of such, the affirmative vote of a
majority of the shares represented at the Alliance Bancorp Annual Meeting may
authorize the adjournment of the meeting.
Approval of the Merger Agreement by the holders of shares of Alliance
Bancorp Common Stock is a condition to, and required for, consummation of the
Merger. See "The Merger --Conditions to the Merger."
Proxies. Any proxy given pursuant to this solicitation or otherwise may be
revoked by the person giving it at any time before it is voted either by
delivering to the Secretary of Alliance Bancorp at One Grant Square, Hinsdale,
Illinois 60521 on or before the taking of the vote at the Alliance Bancorp
Annual Meeting, a written notice of revocation bearing a later date than the
date of the proxy or a later dated proxy relating to the same shares, or by
attending the Alliance Bancorp Annual Meeting and voting in person. Attendance
at the Alliance Bancorp Annual Meeting will not in itself constitute the
revocation of a proxy. Moreover, if you are a stockholder whose shares are not
registered in your own name, you will need appropriate documentation from your
record holder to vote personally at the Annual Meeting.
Security Ownership. As of the Alliance Bancorp Record Date, directors and
executive officers of Alliance Bancorp and their affiliates were beneficial
owners of [783,139] shares (excluding shares underlying stock options), or
[9.8]% of the then outstanding shares, of Alliance Bancorp Common Stock. The
directors of Alliance Bancorp have entered into voting agreements with Southwest
Bancshares (the "Southwest Bancshares Voting Agreements") whereby such directors
have agreed to vote or cause to be voted the shares of Alliance Bancorp Common
Stock owned by them ([745,609] shares in the aggregate) for approval and
adoption of the Merger Agreement at the Alliance Bancorp Annual Meeting. As of
the Alliance Bancorp Record Date, directors and executive officers of Southwest
Bancshares and their affiliates owned 2,681 shares of Alliance Bancorp Common
Stock. It is expected that such shares will be voted in favor of the Alliance
Bancorp Proposals.
For additional information, see "Alliance Bancorp Annual Meeting."
SOUTHWEST BANCSHARES ANNUAL MEETING
Meeting Date. The Southwest Bancshares Annual Meeting is scheduled to be
held on Tuesday, June 30, 1998, at The Oak Lawn Hilton Hotel, 9333 South Cicero
Avenue, Oak Lawn, Illinois, at 9:30 a.m., Chicago time, unless adjourned or
postponed.
Record Date. Only holders of record of Southwest Bancshares Common Stock
at the close of business on May 14, 1998 (the "Southwest Bancshares Record
Date") are entitled to notice of and to vote at the Southwest Bancshares Annual
Meeting.
Matters to be Considered. At the Southwest Bancshares Annual Meeting,
holders of shares of Southwest Bancshares Common Stock will vote on the
following proposals (the "Southwest
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Bancshares Proposals"): (i) the approval of the Merger Agreement and the
transactions contemplated thereby, including the Merger of Southwest Bancshares
with and into Alliance Bancorp, (ii) the election of two directors to hold
office until the Merger is consummated or, if the Merger is not consummated, for
a term of three years each and (iii) the ratification of Cobitz, VandenBerg &
Fennessy as independent auditors of Southwest Bancshares for the fiscal year
ending December 31, 1998. SOUTHWEST BANCSHARES' BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT SOUTHWEST BANCSHARES' STOCKHOLDERS VOTE FOR EACH OF THE
SOUTHWEST BANCSHARES PROPOSALS. Southwest Bancshares stockholders also may
consider and vote upon such other matters as are properly brought before the
Southwest Bancshares Annual Meeting, including proposals to adjourn the
Southwest Bancshares Annual Meeting to permit the further solicitation of
proxies by Southwest Bancshares' Board of Directors in the event that there are
not sufficient votes to approve the Merger proposal at the time of the Southwest
Bancshares Annual Meeting; provided, however, that no proxy which is voted
against the Southwest Bancshares Merger Proposal will be voted in favor of
adjournment to solicit further proxies for such proposal.
Vote Required. The affirmative vote of the holders of a majority of the
outstanding shares of Southwest Bancshares Common Stock entitled to vote at the
Southwest Bancshares Annual Meeting is required for approval of the Southwest
Bancshares Merger Proposal. Directors are elected by a plurality of votes cast
and the ratification of auditors requires a majority of votes cast. As of the
Southwest Bancshares Record Date, there were 2,787,585 shares of Southwest
Bancshares Common Stock entitled to be voted at the Southwest Bancshares Annual
Meeting.
With a quorum, or in the absence of such, the affirmative vote of a
majority of the shares of Southwest Bancshares Common Stock represented at the
Southwest Bancshares Annual Meeting may authorize the adjournment of the
meeting.
Approval of the Southwest Bancshares Merger Proposal by the stockholders of
Southwest Bancshares is a condition to, and required for, consummation of the
Merger. See "The Merger --Conditions to the Merger."
Proxies. Any proxy given pursuant to this solicitation or otherwise may be
revoked by the person giving it at any time before it is voted by delivering to
the Secretary of Southwest Bancshares at 4062 Southwest Highway, Hometown,
Illinois 60456 on or before the taking of the vote at the Southwest Bancshares
Annual Meeting, a written notice of revocation bearing a later date than the
proxy or a later dated proxy relating to the same shares of Southwest Bancshares
Common Stock, or by attending the Southwest Bancshares Annual Meeting and voting
in person. Attendance at the Southwest Bancshares Annual Meeting will not in
itself constitute the revocation of a proxy. Moreover, if you are a stockholder
whose shares are not registered in your own name, you will need appropriate
documentation from your record holder to vote personally at the Annual Meeting.
Security Ownership. As of the Southwest Bancshares Record Date, directors
and executive officers of Southwest Bancshares and their affiliates beneficially
owned 952,541 shares, or 34.2% of the then outstanding shares, of Southwest
Bancshares Common Stock. The directors and
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executive officers of Southwest Bancshares have entered into voting agreements
with Alliance Bancorp (the "Alliance Bancorp Voting Agreements") whereby such
directors, executive officers and their affiliates have agreed to vote the
shares of Southwest Bancshares Common Stock owned by them (952,541 shares in the
aggregate) for approval of the Merger Agreement. As of the Southwest Bancshares
Record Date, directors and executive officers of Alliance Bancorp and their
affiliates beneficially owned 500 shares of Southwest Bancshares Common Stock.
For additional information, see "Southwest Bancshares Annual Meeting."
THE MERGER
The following summary is qualified in its entirety by reference to the full
text of the Merger Agreement, which is attached hereto in Appendix I and
incorporated by reference herein.
GENERAL
The holders of shares of Alliance Bancorp Common Stock and Southwest
Bancshares Common Stock, respectively, are each being asked to consider and vote
upon, among other things, a proposal to approve the Merger Agreement. Pursuant
to the Merger Agreement, at the Effective Date of the Merger, Southwest
Bancshares will merge with and into Alliance Bancorp whereby the separate
existence of Southwest Bancshares will cease. At the Effective Date of the
Merger, each outstanding share of Southwest Bancshares Common Stock (other than
shares held directly by Alliance Bancorp or Southwest Bancshares, which shall be
canceled without payment therefore) will be converted, based on the Exchange
Ratio, into and represent the right to receive a number of shares of Alliance
Bancorp Common Stock determined by the Exchange Ratio. Cash will be paid in
lieu of fractional shares of Alliance Bancorp Common Stock. At the Effective
Date of the Merger, each share of Southwest Bancshares Common Stock held by
Alliance Bancorp or Southwest Bancshares, excluding shares held in a fiduciary
capacity, shall be canceled, retired and cease to exist, and no exchange or
payment shall be made with respect thereto. Alliance Bancorp does not directly
hold any shares of Southwest Bancshares Common Stock.
Immediately following the Effective Date of the Merger, Southwest Federal
will merge with and into Liberty Federal in accordance with the Bank Plan of
Merger, and the separate existence of Southwest Federal will cease.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
General. The Boards of Directors of Alliance Bancorp and Southwest
Bancshares believe that the terms of the Merger are fair to and in the best
interest of their respective companies and stockholders and that the Merger will
enhance the operational and strategic value of each of the company's franchise.
See "The Merger -- Reasons for the Merger."
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Alliance Bancorp. The Alliance Bancorp Board of Directors has unanimously
adopted the Merger Agreement and approved the transactions contemplated thereby
and has determined that the Merger and the issuance of the shares of Alliance
Bancorp Common Stock pursuant thereto are fair to, and in the best interests of,
Alliance Bancorp and its stockholders. THE ALLIANCE BANCORP BOARD OF DIRECTORS
THEREFORE RECOMMENDS A VOTE FOR APPROVAL OF THE ALLIANCE BANCORP PROPOSALS AT
THE ALLIANCE BANCORP ANNUAL MEETING.
For a discussion of the factors considered by the Alliance Bancorp Board of
Directors in reaching its decision to adopt the Merger Agreement and approve the
transactions contemplated thereby, see "The Merger -- Reasons for the Merger."
Southwest Bancshares. The Southwest Bancshares Board of Directors has
unanimously adopted the Merger Agreement and approved the transactions
contemplated thereby and has determined that the Merger is fair to, and in the
best interests of, Southwest Bancshares and its stockholders. THE SOUTHWEST
BANCSHARES BOARD OF DIRECTORS THEREFORE RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE SOUTHWEST BANCSHARES PROPOSALS AT THE SOUTHWEST BANCSHARES
ANNUAL MEETING.
For a discussion of the factors considered by the Southwest Bancshares
Board of Directors in reaching its decision to adopt the Merger Agreement and
approve the transactions contemplated thereby, see "The Merger -- Reasons for
the Merger."
MERGER CONSIDERATION
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of Southwest Bancshares Common Stock issued and
outstanding immediately prior to the Merger will be converted into the right to
receive shares of Alliance Bancorp Common Stock based upon the Exchange Ratio
(the "Merger Consideration"). See "The Merger -- Merger Consideration." Each
share of Alliance Bancorp Common Stock issued and outstanding at the Effective
Date (as hereinafter defined) will remain outstanding and unchanged as a share
of Alliance Bancorp Common Stock as a result of the Merger.
The number of shares of Alliance Bancorp Common Stock to be received for
each share of Southwest Bancshares Common Stock will depend upon the "Alliance
Bancorp Market Value" which is defined in the Merger Agreement to mean the
average of the inside closing bid price of Alliance Bancorp Common Stock on the
Nasdaq National Market System (as reported by The Wall Street Journal) for each
of the twenty (20) consecutive trading days ending on the fifth business day
before the Closing Date. The Exchange Ratio shall be determined as follows:
(i) if the "Alliance Bancorp Market Value" (as described above) is less than or
equal to $30.475 and greater than or equal to $22.525, then 1.1981 shares of
Alliance Bancorp Common Stock; (ii) if the Alliance Bancorp Market Value is
greater than $30.475 and less than or equal to $35.00, then that number of
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
shares of Alliance Bancorp Common Stock, determined by dividing $36.5125 by the
Alliance Bancorp Market Value; (iii) if the Alliance Bancorp Market Value is
greater than $35.00, then 1.0432 shares of Alliance Bancorp Common Stock; and
(iv) if the Alliance Bancorp Market Value is less than $22.525, then that number
of shares of Alliance Bancorp Common Stock, determined by dividing $26.9875 by
the Alliance Bancorp Market Value, subject to the right of Alliance Bancorp to
terminate the Merger Agreement. If the Alliance Bancorp Market Value is less
than $19.875, then Alliance Bancorp shall have the right to terminate the Merger
Agreement unless Southwest Bancshares provides written notice that it wants to
proceed with the Merger, in which event the Exchange Ratio will be 1.3579. See
"The Merger--Merger Consideration."
Following the Effective Date (as hereinafter defined), the former
stockholders of Southwest Bancshares would own approximately [3,339,806] shares
or [29]%, of the shares of Alliance Bancorp Common Stock to be outstanding
assuming an Exchange Ratio of 1.1981.
OPINIONS OF FINANCIAL ADVISORS
Alliance Bancorp. Alliance Bancorp has retained Friedman, Billings, Ramsey
& Co., Inc. ("FBR"), as its financial advisor in connection with the
transactions contemplated by the Merger Agreement and to evaluate the financial
terms of the Merger. See "The Merger -- Background of and Reasons for the
Merger."
FBR has delivered opinions to the Alliance Bancorp Board that as of
December 16, 1997 and __________, 1998, the consideration to be paid by Alliance
Bancorp in the Merger is fair to Alliance Bancorp and its stockholders from a
financial point of view. A copy of FBR's opinion dated __________, 1998, is
attached to this Joint Proxy Statement/Prospectus as Appendix III and is
incorporated by reference herein. See "The Merger -- Opinion of Financial
Advisor to Alliance Bancorp."
Southwest Bancshares. Southwest Bancshares has retained Robert W. Baird &
Co. Incorporated ("Baird") as its financial advisor in connection with the
transactions contemplated by the Merger Agreement and to assist the Board of
Directors of Southwest Bancshares in the evaluation of the financial terms of
the Merger. See "The Merger -- Background of the Merger."
On December 16, 1997, Baird delivered its opinion to the Board of Directors
of Southwest Bancshares to the effect that, as of such date, the Exchange Ratio
was fair, from a financial point of view, to the holders of Southwest Bancshares
Common Stock (other than Alliance Bancorp and its affiliates). Baird
subsequently confirmed its earlier opinion and delivered to the Board of
Directors of Southwest Bancshares its written opinion dated May __, 1998, to the
effect that, as of such date, the Exchange Ratio is fair, from a financial point
of view, to such holders. A copy of the opinion of Baird dated __________,
1998, is attached to this Joint Proxy Statement/Prospectus as Appendix IV, and
is incorporated by reference herein. See "The Merger -- Opinion of Southwest
Bancshares' Financial Advisor."
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8
<PAGE>
- --------------------------------------------------------------------------------
EFFECTIVE DATE AND CLOSING DATE
The Merger shall become effective at the time and on the date (the
"Effective Date") of the filing of a certificate of merger with the Secretary of
State of Delaware. Such filing will occur only after the receipt of all
requisite regulatory approvals, approval of the Merger Agreement by the
requisite vote of Alliance Bancorp's and Southwest Bancshares' respective
stockholders and the satisfaction or waiver of all other conditions to the
Merger. The closing of the Merger shall occur within 30 days after the
satisfaction or waiver of all conditions and obligations precedent of Alliance
Bancorp and Southwest Bancshares to consummate the Merger, or at another time
agreed to by Alliance Bancorp and Southwest Bancshares (the "Closing Date").
Unless the parties otherwise agree, the Merger Agreement shall terminate if the
Effective Date does not occur by September 30, 1998.
NO APPRAISAL RIGHTS
Stockholders of Alliance Bancorp and Southwest Bancshares will not have
appraisal rights under the Delaware General Corporation Law (the "DGCL") in
connection with the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Southwest Bancshares' management and the Southwest
Bancshares Board of Directors may be deemed to have certain interests in the
Merger in addition to their interests as stockholders of Southwest Bancshares
generally. These interests include, among others, provisions in the Merger
Agreement relating to indemnification of Southwest Bancshares directors and
officers, directors' and officers' liability insurance, the election or
appointment of Richard E. Webber or his designee as a member of the Board of
Directors of Alliance Bancorp, the establishment of an advisory board of
directors comprised of former members of Southwest Federal's board and the
consulting agreement to be entered into with Richard E. Webber. See "The Merger
- -- Interests of Certain Persons in the Merger."
CONDITIONS TO THE MERGER
The respective obligations of the parties to consummate the Merger are
subject to the satisfaction or waiver of certain conditions specified in the
Merger Agreement, including, among other things, the receipt of the requisite
regulatory and stockholder approvals, the accuracy of the representations and
warranties contained therein, the performance of all obligations imposed
thereby, the receipt by Alliance Bancorp and Southwest Bancshares of certain tax
opinions and the satisfaction of certain other conditions. See "The Merger --
Conditions to the Merger."
REGULATORY APPROVALS
The Merger is subject to the approval of the OTS. On March 16, 1998,
Alliance Bancorp filed an application for approval of the Merger with the OTS.
Alliance Bancorp expects OTS
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
approval of the Merger by mid-June, 1998. No assurance can be given, however, as
to the ultimate timing of OTS approval. Under federal law, a period of 15 days
must expire following approval by the OTS within which period the United States
Department of Justice (the "Department of Justice") may file objections to the
Merger under the federal antitrust laws. The parties do not expect the
Department of Justice to file any such objection to the proposed Merger.
It is a condition to the consummation of the Merger that all requisite
regulatory approvals be obtained without any condition or restriction that would
be unduly burdensome in the reasonable judgement of Alliance Bancorp. See "The
Merger -- Regulatory Approvals."
WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Date, the Alliance Bancorp and Southwest Bancshares
Boards may extend the time for performance of any obligations under the Merger
Agreement, waive any inaccuracies in the representations and warranties
contained in the Merger Agreement and waive compliance with any agreements or
conditions of the Merger Agreement.
Subject to applicable law, the Merger Agreement may be amended by action of
the Alliance Bancorp and Southwest Bancshares Boards at any time before or after
approval of the Merger Agreement by the holders of shares of Alliance Bancorp
Common Stock and Southwest Bancshares Common Stock.
The Merger Agreement may be terminated on or at any time prior to the
Closing Date by the mutual written consent of the parties to the Merger
Agreement. The Closing Date shall be determined by Alliance Bancorp, in its
sole discretion, upon five days prior written notice to Southwest Bancshares,
but in no event later than thirty days after the last condition precedent
pursuant to the Merger Agreement has been fulfilled or waived, or such other
date as Alliance Bancorp and Southwest Bancshares shall agree. In addition, the
Merger Agreement may be terminated by Alliance Bancorp or Southwest Bancshares
in certain circumstances including, among others, generally: (i) certain
breaches of representations, warranties, covenants or other obligations; (ii) if
the Closing Date has not occurred on or before September 30, 1998; (iii) if
either party is notified that a necessary regulatory approval is unlikely to be
granted; or (iv) if stockholder approval is not obtained. In addition, if the
Alliance Bancorp Market Value is less than $19.875, then Alliance Bancorp shall
have the right to terminate the Merger Agreement unless Southwest Bancshares
provides written notice that it wants to proceed with the Merger, in which event
the Exchange Ratio will be 1.3579. See "The Merger--Termination; Effect of
Termination."
COVENANTS PENDING CLOSING
Each of Alliance Bancorp and Southwest Bancshares has agreed to certain
covenants with respect to the conduct of its business and other matters pending
the closing of the Merger. See "The Merger -- Covenants Pending Closing."
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
EXPENSES
All expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby are to be paid by the party incurring such
expenses, except that Alliance Bancorp and Southwest Bancshares shall bear
equally all printing and mailing expenses associated with this Joint Proxy
Statement/Prospectus as well as certain proxy solicitation costs.
In the event of any termination of the Merger Agreement by a party based on
certain breaches of a representation, warranty, or covenant, by the other party
thereto, the breaching party shall pay to the non-breaching party all out-of-
pocket costs and expenses, including, without limitation, reasonable legal,
accounting and investment banking fees and expenses, incurred by the non-
breaching party in connection with entering into the Merger Agreement and
carrying out of any and all acts contemplated thereunder, plus a sum equal to
$500,000.
ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. Under this method of accounting,
the recorded assets and liabilities of Alliance Bancorp and Southwest Bancshares
will be carried forward to the combined corporation at their recorded amounts;
earnings of the combined corporation will include earnings of both Alliance
Bancorp and Southwest Bancshares for the entire fiscal year of Alliance Bancorp
in which the Merger occurs; and the reported earnings of the separate
corporations for prior periods will be combined and restated as earnings of the
combined corporation. Expenses incurred in connection with the Merger will
constitute expenses for the accounting periods to which such expenses relate.
The receipt of a letter from Alliance Bancorp's independent auditors confirming
that the Merger will qualify for "pooling of interests" accounting is a
condition to Alliance Bancorp's obligation to complete the Merger. In order for
the Merger to be accounted for as a "pooling of interests" under generally
accepted accounting principles, it is anticipated that Southwest Bancshares will
sell to a nonaffiliated third party or parties prior to the Effective Date of
the Merger, approximately 53,000 shares of Southwest Bancshares Common Stock
presently held as treasury shares in one or more privately negotiated
transactions.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
It is a condition to the obligations of Alliance Bancorp and Southwest
Bancshares to consummate the Merger that each shall have received an opinion of
Luse Lehman Gorman Pomerenk & Schick to the effect that the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and for federal income tax
purposes no gain or loss will be recognized as a result of the Merger by
Alliance Bancorp, Southwest Bancshares, Liberty Federal, any Alliance Bancorp
stockholder or any Southwest Bancshares stockholder upon receipt solely of
Alliance Bancorp Common Stock in the Merger (except with respect to cash
received by a Southwest Bancshares stockholder in lieu of a fractional share
interest in Alliance Bancorp Common Stock). Each of these conditions is waivable
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
at the option of the party entitled to receipt of the requisite opinion.
Southwest Bancshares stockholders are urged to consult their tax advisors
concerning the specific tax consequences to them of the Merger, including the
applicability and effect of various state, local and foreign tax laws. See "The
Merger -- Federal Income Tax Consequences of the Merger" and "-- Conditions to
the Merger."
EFFECTS OF THE MERGER ON STOCKHOLDERS
As a result of the Merger, holders of Southwest Bancshares Common Stock who
receive shares of Alliance Bancorp Common Stock in the Merger will become
stockholders of Alliance Bancorp. The law applicable to, and the corporate
charters and bylaws of, Alliance Bancorp and Southwest Bancshares are
substantially identical. See "Comparison of Rights of Stockholders of Alliance
Bancorp and Southwest Bancshares" For information regarding the financial impact
of the Merger to the respective stockholders of Alliance Bancorp and Southwest
Bancshares, see the unaudited pro forma combined financial information regarding
Alliance Bancorp and Southwest Bancshares upon the consummation of the Merger,
including unaudited pro forma per share data, in "Unaudited Comparative Per
Common Share Data" and "Unaudited Pro Forma Combined Financial Statements."
NASDAQ LISTING
Both Alliance Bancorp Common Stock and Southwest Bancshares Common Stock
currently are quoted on the Nasdaq National Market (symbols: ABCL and SWBI,
respectively). It is a condition to consummation of the Merger that the Alliance
Bancorp Common Stock to be issued to the stockholders of Southwest Bancshares
pursuant to the Merger Agreement will be quoted on the Nasdaq National Market.
See "The Merger -- Conditions to the Merger."
CERTAIN RELATED TRANSACTIONS
STOCK OPTION AGREEMENTS
As an inducement and a condition to entering into the Merger Agreement,
Southwest Bancshares granted to Alliance Bancorp an option to purchase under
certain circumstances up to 297,471 shares or approximately 9.9%, of the issued
and outstanding shares of Southwest Bancshares Common Stock pursuant to the
Stock Option Agreement dated as of December 16, 1997. The option may be
exercised only upon the occurrence of an "Initial Triggering Event," such as a
person commencing a tender offer for 25% or more of Southwest Bancshares'
outstanding common stock, followed by a "Subsequent Triggering Event," such as a
person acquiring 25% or more of Southwest Bancshares' Common Stock or Southwest
Bancshares, without the consent of Alliance Bancorp, entering into an agreement
with an other person to enter into various forms of acquisition transactions.
No triggering event has occurred as of the date hereof. The exercise price per
share to purchase Southwest Bancshares Common Stock under the option is equal to
$25.50, subject to adjustment and limitations in certain circumstances. In
addition, the Stock Option Agreement grants
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12
<PAGE>
- --------------------------------------------------------------------------------
to Alliance Bancorp, upon the occurrence of a "Repurchase Event," the right to
require Southwest Bancshares to repurchase for cash the option and any shares
that may have been acquired thereunder.
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger Agreement.
Consequently, certain aspects of the Stock Option Agreement may have the effect
of discouraging persons who might now or prior to the Effective Date be
interested in acquiring all or a significant interest in Southwest Bancshares
from considering or proposing such an acquisition, even if such persons were
prepared to pay a higher price per share for Southwest Bancshares Common Stock
than the price per share implicit in the Merger Consideration.
A copy of the Stock Option Agreement is attached to this Joint Proxy
Statement/Prospectus at Appendix I. For additional information regarding the
Stock Option Agreement, see "Certain Related Transactions -- Stock Option
Agreement."
THE BANK MERGER AGREEMENT
Pursuant to a Plan of Merger, dated December 16, 1997 (the "Bank Merger
Agreement"), by and between Liberty Federal and Southwest Federal, Southwest
Federal will be merged with and into Liberty Federal (the "Bank Merger")
immediately following the Merger of Southwest Bancshares into Alliance Bancorp,
and the resulting financial institution shall operate under the name "Liberty
Federal Bank." See "Certain Related Transactions -- The Bank Merger Agreement."
UNAUDITED COMPARATIVE PER COMMON SHARE DATA
The following table sets forth certain unaudited comparative data relating
to book value per common share, cash dividends declared per common share and
diluted earnings per common share (i) on an historical basis for Alliance
Bancorp and Southwest Bancshares; (ii) on a pro forma basis per share of
Alliance Bancorp Common Stock to reflect consummation of the Merger at the
beginning of each period; and (iii) on an equivalent pro forma basis per share
of Southwest Bancshares Common Stock to reflect consummation of the Merger at
the Exchange Ratio. Pro forma information has been prepared giving effect to
the Merger using the "pooling of interests" accounting method. For a
description of the effect of "pooling of interests" accounting, see "The Merger-
- -Accounting Treatment." The following equivalent per share data assumes an
Exchange Ratio of 1.1981 shares of Alliance Bancorp Common Stock for each share
of Southwest Bancshares Common Stock (based on a closing sale price of $[27.75]
per share for Alliance Bancorp Common Stock as of [MARCH 31], 1998); the
Exchange Ratio is subject to adjustment based on the Alliance Bancorp Market
Value as of the Effective Date. The following pro forma information does not
give effect to any potential cost savings or any Merger-related expenses which
may be realized or incurred as a result of the Merger. This information should
be read in conjunction with the consolidated financial statements of Alliance
Bancorp, which are attached to, or incorporated by reference in, this Joint
Proxy Statement/Prospectus, and the financial statements of Southwest
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Bancshares which are attached to, or incorporated by reference in, this Joint
Proxy Statement/Prospectus. See "Incorporation of Certain Documents by
Reference."
The following information is not necessarily indicative of the results of
operations or combined financial position that would have resulted had the
Merger been consummated at the beginning of the periods indicated, nor is it
necessarily indicative of the results of operations for future periods or future
combined financial position.
<TABLE>
<CAPTION>
AT
DECEMBER 31, 1997
-----------------
<S> <C>
Book Value Per Common Share:
Historical:
Alliance Bancorp....................... $16.32
Southwest Bancshares................... $16.22
Pro Forma:
Pro forma combined per share
of Alliance Bancorp Common Stock (1).. $15.40
Equivalent pro forma per share
of Southwest Bancshares Common
Stock (2)............................. $18.45
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1996 (4) 1995 (5)
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Cash Dividends Declared Per Common Share:
Historical:
Alliance Bancorp.............................. $0.395 -- -- --
Southwest Bancshares.......................... 0.77 0.20 0.73 0.68
Pro Forma:
Combined per share of
Alliance Bancorp Common Stock (1)(3)........ $ 0.44 -- -- --
Equivalent pro forma per share of
Southwest Bancshares Common Stock (2)(3).... 0.527 -- -- --
Diluted Earnings Per Common Share:
Historical:
Alliance Bancorp.............................. $ 1.26 0.26 0.73 1.07
Southwest Bancshares.......................... 1.49 0.33 0.91 1.31
Pro Forma:
Combined per share of Alliance Bancorp
Common Stock (1)............................ $ 1.25 0.26 0.76 1.20
Equivalent pro forma per share of
Southwest Bancshares Common Stock (2)....... 1.50 0.31 0.91 1.44
</TABLE>
_______________________
(1) Pro forma amounts are calculated based upon the assumption that all of the
issued and outstanding shares of Southwest Bancshares Common Stock are
converted into shares of Alliance Bancorp Common Stock assuming an exchange
ratio of 1.1981and that no cash is paid for fractional shares.
(2) The equivalent pro forma amounts are calculated by multiplying the pro
forma combined amounts by the assumed exchange ratio of 1.1981.
(3) Pro forma dividend amounts assume that Alliance Bancorp would have declared
a cash dividend per common share at an annual rate equal to $0.44 per
share.
(4) In 1996 Alliance Bancorp changed its fiscal year end from September 30, to
December 31, therefore, comparable Southwest Bancshares information is for
the year ended December 31, 1996.
(5) Southwest Bancshares information is for the year ended December 31, 1995.
COMPARATIVE STOCK PRICES AND DIVIDEND INFORMATION
Alliance Bancorp Common Stock and Southwest Bancshares Common Stock are
quoted on the Nasdaq National Market (symbols: ABCL and SWBI, respectively).
The following table sets forth the reported high and low sales prices of shares
of Alliance Bancorp Common Stock and Southwest Bancshares Common Stock, as
reported on the Nasdaq National Market, and the quarterly cash dividends per
share declared, for the periods indicated. The stock prices and dividend
amounts have been restated to give the effect to stock splits and stock
dividends. The stock prices do not include retail mark-ups, mark-downs or
commissions.
- --------------------------------------------------------------------------------
15
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Alliance Bancorp Southwest Bancshares
Common Stock Common Stock
----------------- ------------
High Low Dividends High Low Dividends
------ ----- --------- ------ ----- -----------
<S> <C> <C> <C> <C> <C> <C>
1996 CALENDAR YEAR
First Quarter................... $15.00 14.00 $ -- $18.50 17.34 $0.18
Second Quarter.................. 17.83 14.00 -- 18.34 17.84 0.18
Third Quarter................... 18.00 14.50 -- 18.34 17.84 0.18
Fourth Quarter.................. 18.50 15.50 -- 18.75 17.92 0.19
1997 CALENDAR YEAR
First Quarter................... 21.17 16.50 0.067 20.50 18.00 0.19
Second Quarter.................. 20.50 18.33 0.108 21.25 18.75 0.19
Third Quarter................... 24.31 19.92 0.11 21.75 20.00 0.19
Fourth Quarter.................. 28.50 23.94 0.11 30.25 20.75 0.20
1998 CALENDAR YEAR
First Quarter.................... 29.25 24.50 0.11 33.00 28.00 0.20
Second Quarter (through ______).. 0.20
</TABLE>
Alliance Bancorp intends to pay a quarterly cash dividend at an annual rate
of $0.44 per share.
The following table sets forth the last reported sale prices per share of
Alliance Bancorp Common Stock and Southwest Bancshares Common Stock and the
equivalent per share price for Southwest Bancshares Common Stock giving the
effect to the Merger on (i) December 16, 1997, the last trading day preceding
public announcement of the signing of the Merger Agreement; and (ii) May ___,
1998, the last practicable date prior to the mailing of this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
Alliance Bancorp Southwest Bancshares Equivalent Price Per
Common Stock Common Stock Southwest Bancshares Share (1)
------------------- -------------------- ------------------------------
<S> <C> <C> <C>
December 16, 1997........ $27.00 $28.00 $32.35
___________, 1998........
</TABLE>
____________
(1) The equivalent price per share of Southwest Bancshares Common Stock at each
specified date was determined by multiplying (i) the last reported sale
price of Alliance Bancorp Common Stock on such date and (ii) the assumption
that the Exchange Ratio would be 1.1981.
The Exchange Ratio is subject to adjustment based upon the Alliance Bancorp
Market Value as of the Effective Date.
As of March 31, 1998, the [8,024,293] outstanding shares of Alliance
Bancorp Common Stock were held by approximately [786] record owners and the
2,787,585 outstanding shares of Southwest Bancshares Common Stock by
approximately 361 record owners.
The timing and amount of the future dividends of Alliance Bancorp will
depend upon earnings, cash requirements, Alliance Bancorp's financial condition
and other factors deemed
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16
<PAGE>
relevant by the Alliance Bancorp Board of Directors. Dividends may also be
limited by certain regulatory restrictions.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF ALLIANCE BANCORP
The following Alliance Bancorp consolidated financial data is qualified in
its entirety by the information included in the documents incorporated in this
Joint Proxy Statement/Prospectus by reference. Interim financial results, in
the opinion of Alliance Bancorp management, reflect all adjustments necessary
for a fair presentation of the results of operations. All such adjustments are
of a normal nature. The results of operations for an interim period are not
necessarily indicative of results that may be expected for a full year or any
other interim period. See "Incorporation of Certain Information by Reference."
<TABLE>
<CAPTION>
At At
Dec. 31, Dec. 31, At September 30,
--------------------------------------------
1997 1996 1996 1995 1994 1993
--------- -------- -------- -------- --------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Selected Financial Data:
- ------------------------
Total assets......................... $1,354,585 $667,964 $650,897 $703,707 $643,289 $537,832
Investment securities................ 91,475 1,998 1,998 1,998 22,734 37,673
Mortgage-backed securities........... 213,957 5,140 5,367 7,147 30,701 162,349
Loans receivable, net................ 957,897 609,371 590,722 614,371 544,284 286,273
Real estate.......................... 2,510 1,586 1,249 1,872 6,030 6,608
Deposits............................. 1,022,614 462,869 452,472 445,505 419,436 437,632
Collateralized mortgage obligations.. 1,065 2,243 2,542 4,353 6,063 11,278
Borrowed funds....................... 173,531 131,900 128,949 185,339 160,857 37,029
Stockholders' equity................. 130,938 56,626 55,471 51,977 46,716 41,516
Book value per share (1)............. $ 16.32 $ 14.01 $ 13.72 $ 12.93 $ 11.76 $ 10.49
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
For The
For The Three
Year Months
Ended Ended
Dec. 31, Dec. 31, For The Year Ended September 30,
-------------------------------------------
1997 1996 1996 1995 1994 1993
------- ------- ------- ------ ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Selected Operating Data:
- -----------------------
Interest income................................... $92,628 $11,098 $45,701 45,944 $37,028 $34,024
Interest expense.................................. 56,117 6,824 28,967 28,442 18,968 17,933
------- ------- ------- ------ ------- -------
Net interest income............................... 36,511 4,274 16,734 17,502 18,060 16,091
Less provision for loan losses.................... -- -- 50 185 125 300
------- ------- ------- ------ -------- -------
Net interest income after provision
for loan losses................................. 36,511 4,274 16,684 17,317 17,935 15,791
------ ------- ------- ------ -------- -------
Noninterest income:
Gain (loss) on sales of loans receivable,
mortgage-backed securities and investment
securities.................................... (153) 70 452 344 369 1,446
Gain on sales of real estate and other assets... -- -- 61 300 -- --
Other........................................... 15,617 3,086 12,434 6,104 4,713 4,350
------- ------ ------- ------- ------- -------
Total noninterest income.................... 15,464 3,156 12,947 6,748 5,082 5,796
------- ------ ------- ------- ------- -------
Noninterest expense:
General and administrative expenses............ 35,252 5,666 25,696 16,697 15,312 13,915
------- ------ ------- ------- ------- ------
Income before income taxes....................... 16,723 1,764 3,935 7,368 7,705 7,672
Income tax expense............................... 6,474 685 861 2,909 2,989 3,074
------- ------ ------- ------- ------- -------
Net income....................................... 10,249 1,079 3,074 4,459 4,716 4,598
------- ------ ------- ------- ------- -------
Basic earnings per share (1)..................... 1.35 0.27 0.76 1.12 1.19 1.14
Diluted earnings per share (1)................... 1.26 0.26 0.73 1.07 1.13 1.10
------- ------ ------- ------- ------- -------
Cash dividends declared per common share......... $ 0.395 $ -- $ -- $ -- $ -- $ --
======= ====== ======= ======= ======= =======
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
At or For
At or For The Three
The Year Months
Ended Ended At or For the Year Ended
Dec. 31, Dec. 31, September 30,
-----------------------------------------------------------
1997 1996 (2) 1996 1995 1994 1993
----------- ----------- ----------------- -------------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Selected Financial Ratios and Other Data:
- -----------------------------------------
Average assets......................... $1,298,922 $ 649,307 $ 670,430 $ 677,573 $ 584,039 $ 522,837
Return on average assets............... 0.79% 0.66% 0.46% 0.66% 0.81% 0.88%
Return on average equity............... 8.54 7.72 5.69 9.07 10.73 11.61
Average stockholders' equity to
average assets........................ 9.24 8.61 8.06 7.26 7.53 7.57
Stockholders' equity to total assets... 9.67 8.48 8.52 7.39 7.26 7.72
Tangible capital to total assets (Bank
only)................................. 8.40 7.83 7.85 7.15 7.09 7.54
Leverage capital to total assets (Bank
only)................................. 8.50 8.05 8.07 7.15 7.09 7.54
Risk-based capital ratio (Bank only)... 16.48 13.43 13.72 13.64 13.85 17.83
Interest rate spread during the period. 2.55 2.41 2.19 2.35 2.98 3.05
Net yield on average interest-earning
assets................................ 2.93 2.72 2.58 2.67 3.22 3.25
General and administrative expenses
to average assets.................... 2.71 3.49 3.83 2.46 2.62 2.66
Non-performing loans to total loans.... 0.31 0.19 0.16 0.21 0.18 0.32
Non-performing assets to total assets.. 0.27 0.26 0.17 0.18 0.85 1.04
Average interest-earning assets to
average
interest-bearing liabilities......... 1.08x 1.08x 1.09x 1.07x 1.07x 1.06x
Weighted average shares outstanding
(1):
Basic................................ 7,569,751 4,042,628 4,029,553 3,993,867 3,962,106 4,018,664
Diluted.............................. 8,114,996 4,224,758 4,199,590 4,159,447 4,185,420 4,181,133
Loan originations...................... $ 689,512 $ 129,397 $ 542,578 $ 262,154 $ 403,414 $ 228,965
Full-service customer service
facilities............................ 14 9 9 9 9 9
</TABLE>
_____________________
(1) All share amounts have been adjusted to reflect the 50% common stock split
effected in the form of a stock dividend declared on August 22, 1997 and
earnings per share have been restated to adopt the provisions of FASB No.
128, "Earnings per Share."
(2) Ratios were calculated on an annualized basis, as applicable.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
OF SOUTHWEST BANCSHARES, INC.
The following Southwest Bancshares consolidated financial data is qualified
in its entirety by the information included in the documents incorporated in
this Joint Proxy Statement/Prospectus by reference. See "Incorporation of
Certain Information by Reference."
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
------------ --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SELECTED FINANCIAL DATA:
Total assets........................................... $368,283 $382,361 $359,483 $350,400 $322,548
Loans receivable, net.................................. 270,592 262,431 242,859 238,103 207,627
Investment securities.................................. 44,748 57,127 53,305 55,619 55,596
Mortgage-backed securities, net........................ 20,913 32,840 31,268 32,626 30,962
Trading account securities............................. -- -- -- -- 7,519
Interest-bearing deposits.............................. 6,491 5,380 7,574 1,535 1,541
Deposits............................................... 283,053 280,434 255,308 235,679 240,845
Borrowed funds......................................... 33,850 55,158 52,658 60,375 26,300
Stockholders' equity (1)............................... 44,030 39,859 45,820 48,409 49,477
Book value per share (actual shares outstanding)(2).... 16.22 15.11 15.31 14.03 13.55
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------
1997 1996 1995 1994 1993
-------- -------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income..................................................... $28,003 $27,230 $26,870 $24,589 $24,204
Interest expense.................................................... 16,050 15,277 14,391 10,045 8,835
Net interest income................................................ 11,953 11,953 12,479 14,544 15,369
Less provision for loan losses...................................... 24 24 16 30 15
Net interest income after provision for loan losses................ 11,929 11,929 12,463 14,514 15,354
Non-interest income:
Gain on sale of investment securities, mortgage-backed securities,
and loans receivable............................................... 175 4 129 422 165
Insurance commissions.............................................. 191 148 140 145 215
Income from joint ventures......................................... 593 675 477 455 355
Fees and service charges........................................... 141 179 181 247 522
Other.............................................................. 368 301 340 268 487
Total non-interest income......................................... 1,468 1,307 1,267 1,537 1,744
Non-interest expense:
Compensation and benefits.......................................... 4,190 4,320 3,928 3,811 4,142
Office occupancy and equipment expenses............................ 1,206 1,208 1,042 892 844
Insurance premiums................................................. 437 827 841 881 806
SAIF special assessment............................................ -- 1,698 -- -- --
Data processing.................................................... 256 262 243 225 215
Other.............................................................. 1,202 1,087 970 946 1,021
Total non-interest expense........................................ 7,291 9,402 7,024 6,755 7,028
Income before income taxes......................................... 6,106 3,834 6,706 9,296 10,070
Income tax expense................................................. 1,995 1,206 2,174 3,229 3,668
Net income........................................................ $ 4,111 $ 2,628 $ 4,532 $ 6,067 $ 6,402
Basic earnings per share(2)........................................ $ 1.55 $ 0.91 $ 1.31 $ 1.61 $ 1.59
Diluted earnings per share(2)...................................... 1.49 0.91 1.30 1.61 1.59
Dividends declared per common share(2)............................. 0.77 0.73 0.68 0.17 0.80
</TABLE>
(1) Southwest Federal may not pay dividends to Southwest Bancshares on its
stock if its regulatory capital would thereby be reduced below (i) the
aggregate amount then required for the liquidation account, or (ii) the
amount of its regu latory capital requirements.
(2) All share-related information has been restated to reflect the effect of
the 3-for-2 stock split paid on November 13, 1996, including earnings per
share data.
21
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Return on average assets(1).............................................. 1.09% 0.72% 1.26% 1.80% 2.03%
Return on average stockholders' equity(2)................................ 9.94 6.30 9.26 12.12 12.49
Average stockholders' equity to average assets........................... 10.97 11.45 13.67 14.84 16.23
Stockholders' equity to total assets..................................... 11.96 10.42 12.75 13.82 15.34
Interest rate spread during period....................................... 3.02 3.08 3.15 4.17 4.74
Net interest margin(3)................................................... 3.39 3.47 3.68 4.60 5.18
Operating expenses to average assets(4).................................. 1.93 2.57 1.96 2.00 2.23
Non-performing loans to total loans(5)................................... 0.24 0.30 0.30 0.24 0.26
Non-performing assets to total assets(6)................................. 0.18 0.24 0.23 0.21 0.18
Allowance for loan losses to non-performing loans........................ 115.50 92.60 98.69 125.30 124.65
Allowance for loan losses to non-performing assets....................... 115.50 80.93 92.97 101.79 124.65
Net interest income to operating expenses................................ 1.64x 1.27x 1.78x 2.15x 2.19x
Average interest-earning assets to average interest-bearing liabilities.. 1.08 1.09 1.12 1.14 1.15
Loan originations........................................................ $55,092 $66,603 $50,630 $67,116 $74,133
Number of deposit accounts............................................... 22,473 22,402 21,080 19,282 19,184
Number of offices........................................................ 6 6 5 5 5
</TABLE>
_______________________
(1) Return on average assets was calculated on an annualized basis. The 1996
ratio would have been 1.00% without the one-time SAIF assessment.
(2) Return on average stockholders' equity for 1996 would have been 8.74%
without the one-time SAIF assessment.
(3) Calculation is based upon net interest income before provision for loan
losses divided by interest-earning assets.
(4) For purposes of calculating these ratios, operating expenses equal non-
interest expense less amortization of excess of cost over net assets
acquired.
(5) Non-performing loans consist of loans 90 days or more delinquent.
(6) Non-performing assets consist of non-performing loans and real estate
owned.
22
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following tables set forth selected unaudited condensed pro forma
financial data giving effect to the Merger. The pro forma balance sheet has
been prepared as if the Merger were consummated on December 31, 1997, and the
pro forma income statements have been prepared as if the Merger were consummated
as of the beginning of the periods presented. The pro forma information has
been prepared assuming that Southwest Bancshares stockholders received in the
Merger 1.1981 shares of Alliance Bancorp Common Stock for each share of
Southwest Bancshares Common Stock they own (based on a closing sale price of
$_______ per share of Alliance Bancorp Common Stock as of _____________, 1998).
This Exchange Ratio is subject to adjustment based on the Alliance Bancorp
Market Value. See "The Merger--Terms of the Merger." The pro forma financial
information included in this Joint Proxy Statement/Prospectus is presented for
illustrative purposes only. It does not include the effect of anticipated
merger expenses nor the anticipated cost savings expected to be achieved
following the Merger. It also does not reflect any adjustments related to the
proposed sale of approximately 53,000 additional shares of Southwest Bancshares
Common Stock prior to the Effective Date in order to enable the Merger to
qualify for pooling of interests accounting treatment, which issuance is
immaterial to the pro forma financial presentation. Such pro forma financial
information does not necessarily reflect what the actual results of Alliance
Bancorp would be following completion of the Merger.
The following pro forma information does not give effect to any potential
cost savings, expenses or non-recurring charges which may be realized or
incurred as a result of the Merger. See "The Merger--Management and Operations
After the Merger."
23
<PAGE>
PRO FORMA UNAUDITED COMBINED CONDENSED BALANCE SHEET AS OF DECEMBER 31, 1997
The following unaudited pro forma combined condensed balance sheet
information reflects (i) the historical consolidated balance sheets of Alliance
Bancorp and Southwest Bancshares as of December 31, 1997 and (ii) the pro forma
combined condensed balance sheet of Alliance Bancorp as of such date, after
giving effect to the Merger. The Merger has been reflected as a "pooling of
interests" effective as of December 31, 1997. The unaudited information should
be read in conjunction with the historical consolidated financial statements of
Alliance Bancorp and Southwest Bancshares, including the notes thereto,
incorporated by reference in this Joint Proxy Statement/Prospectus. See
"Summary--Comparative Per Common Share Data" and "Incorporation of Certain
Documents by Reference."
<TABLE>
<CAPTION>
At December 31, 1997
---------------------------------------------------
Alliance Southwest Pro Forma Pro Forma
Bancorp Bancshares Adjustments(1) Combined
----------- ----------- ------------ -----------
(In thousands)
<S> <C> <C> <C> <C>
Assets:
Cash and interest-bearing deposits.............. $ 44,623 $ 13,890 $ -- $ 58,513
Investment securities........................... 91,475 42,014 -- 133,489
Mortgage-backed securities...................... 213,957 20,913 -- 234,870
Loans (net)..................................... 957,897 270,592 -- 1,228,489
Real Estate..................................... 2,510 -- -- 2,510
Investments in Joint Ventures................... -- 7,614 -- 7,614
Stock in FHLB................................... 12,855 2,734 -- 15,589
Premises and Equipment.......................... 7,729 2,907 -- 10,636
Other assets.................................... 23,539 7,619 -- 31,158
---------- -------- ----------- ----------
Total assets.................................. $1,354,585 $368,283 $ 0 $1,722,868
========== ======== =========== ==========
Liabilities and Stockholders' Equity:
Liabilities:
Deposits........................................ $1,022,614 $283,053 $ -- $1,305,667
Borrowed Funds.................................. 173,531 33,850 -- 207,381
Other liabilities............................... 27,502 7,350 -- 34,852
---------- -------- ----------- ----------
Total liabilities............................. 1,223,647 324,253 -- 1,547,900
---------- -------- ----------- ----------
Stockholders' equity:
Common stock.................................... 82 45 (12) 115
Paid-in Capital................................. 86,553 29,801 (27,393) 88,961
Retained Earnings............................... 44,167 41,779 -- 85,946
Treasury stock.................................. (1,502) (27,405) 27,405 (1,502)
Unearned ESOP shares............................ -- (320) -- (320)
Net Unrealized Gain on securities............... 1,638 130 -- 1,768
---------- -------- ----------- ----------
Total stockholders' equity.................. 130,938 44,030 -- 174,968
---------- -------- ----------- ----------
Total liabilities and stockholders' equity.. $1,354,585 $368,283 $ -- $1,722,868
========== ======== =========== ==========
</TABLE>
(1) Reflects accounting of the merger as a "pooling of interests," through the
exchange of 2,787,585 shares of Southwest Bancshares Common Stock for
[3,339,806] shares of Alliance Common Stock and the elimination of
treasury stock.
____________
PRO FORMA UNAUDITED COMBINED CONDENSED STATEMENTS OF INCOME
The following unaudited pro forma combined condensed statements of income
reflect the historical consolidated statements of income of Alliance Bancorp and
Southwest Bancshares, as indicated below, for each period presented and the pro
forma combined condensed statements of income of Alliance Bancorp, after giving
effect to the Merger. The Merger has been reflected as a "pooling of
interests." See "The Merger--Accounting Treatment." The pro forma combined
condensed statements of income for the years ended December 31, 1997, three
months ended
24
<PAGE>
December 31, 1996 and years ended September 30, 1996 and 1995 were prepared on
the assumption that the Merger had been effected as of the beginning of the
applicable annual period and that the Exchange Ratio is 1.1981. The unaudited
information should be read in conjunction with the historical consolidated
financial statements of Alliance Bancorp and Southwest Bancshares, including the
notes thereto, incorporated by reference in the Joint Proxy
Statement/Prospectus. See "Incorporation of Certain Documents by Reference."
Pro Forma Unaudited Combined Condensed Statements of Income for the Year
Ended December 31, 1997.
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1997
---------------------------------------------
Alliance Southwest Pro Forma
Bancorp Bancshares Combined
-------------- -------------- -------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Interest income...................................... $92,628 $28,003 $120,631
Interest expense..................................... 56,117 16,050 72,167
------- ------- --------
Net interest income.................................. 36,511 11,953 48,464
Less provision for loan losses....................... -- 24 24
------- ------- --------
Net interest income after provision for loan losses.. 36,511 11,929 48,440
Noninterest income................................... 15,464 1,468 16,932
Noninterest expense.................................. 35,252 7,291 42,543
------- ------- --------
Income before income taxes........................... 16,723 6,106 22,829
Income tax expense................................... 6,474 1,995 8,469
------- ------- --------
Net income......................................... $10,249 $ 4,111 $ 14,360
======= ======= ========
Diluted earnings per share*........................ $ 1.26 $ 1.49 $ 1.25
======= ======= ========
</TABLE>
_____________
*Reflects pro forma combined net income divided by diluted shares of 11,454,802
(8,114,996 existing shares plus 3,339,806 shares issued in the Merger).
Pro Forma Unaudited Combined Condensed Statements of Income for the Three
Months Ended December 31, 1996.
<TABLE>
<CAPTION>
Three Months Ended December 31, 1996
----------------------------------------
Alliance Southwest Pro Forma
Bancorp Bancshares Combined
---------- ------------ ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Interest income...................................... $11,098 $7,102 $18,200
Interest expense..................................... 6,824 4,138 10,962
------- ------ -------
Net interest income.................................. 4,274 2,964 7,238
Less provision for loan losses....................... -- 6 6
------- ------ -------
Net interest income after provision for loan losses.. 4,274 2,958 7,232
Noninterest income................................... 3,156 275 3,431
Noninterest expense.................................. 5,666 1,868 7,534
------- ------ -------
Income before income taxes........................... 1,764 1,365 3,129
Income tax expense................................... 685 455 1,140
------- ------ -------
Net income.......................................... $ 1,079 $ 910 $ 1,989
======= ====== =======
Diluted earnings per share*......................... $ 0.26 $ 0.33 $ 0.26
======= ====== =======
</TABLE>
______________
*Reflects pro forma combined net income divided by diluted shares of 7,564,564
(4,224,758 existing shares plus 3,339,806 shares issued in the Merger).
25
<PAGE>
Pro Forma Unaudited Combined Condensed Statements of Income for the Year
Ended September 30, 1996 for Alliance Bancorp and December 31, 1996 for
Southwest Bancshares.
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year
Ended Ended
September 30, December 31,
1996 1996
Alliance Southwest Pro Forma
Bancorp Bancshares Combined
--------------- ------------- -------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Interest income...................................... $45,701 $27,230 $72,931
Interest expense..................................... 28,967 15,277 44,244
------- ------- -------
Net interest income.................................. 16,734 11,953 28,687
Less provision for loan losses....................... 50 24 74
------- ------- -------
Net interest income after provision for loan losses.. 16,684 11,929 28,613
Noninterest income................................... 12,947 1,307 14,254
Noninterest expense.................................. 25,696 9,402 35,098
------- ------- -------
Income before income taxes........................... 3,935 3,834 7,769
Income tax expense................................... 861 1,206 2,067
------- ------- -------
Net income......................................... $ 3,074 $ 2,628 $ 5,702
======= ======= =======
Diluted earnings per share*........................ $ 0.73 $ 0.91 $ 0.76
======= ======= =======
</TABLE>
____________
*Reflects pro forma combined net income divided by diluted shares of 7,539,396
(4,199,590) existing shares plus 3,339,806 shares issued in the Merger).
Pro Forma Unaudited Combined Condensed Statements of Income for the Year
Ended September 30, 1995 for Alliance Bancorp and December 31, 1995 for
Southwest Bancshares.
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year
Ended Ended
September 30, December 31,
1995 1995
Alliance Southwest Pro Forma
Bancorp Bancshares Combined
--------------- ------------- -------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Interest income...................................... $45,944 $26,870 $72,814
Interest expense..................................... 28,442 14,391 42,833
------- ------- -------
Net interest income.................................. 17,502 12,479 29,981
Less provision for loan losses....................... 185 16 201
------- ------- -------
Net interest income after provision for loan losses.. 17,317 12,463 29,780
Noninterest income................................... 6,748 1,267 8,015
Noninterest expense.................................. 16,697 7,024 23,721
------- ------- -------
Income before income taxes........................... 7,368 6,706 14,074
Income tax expense................................... 2,909 2,174 5,083
------- ------- -------
Net income......................................... $ 4,459 $ 4,532 $ 8,991
======= ======= =======
Diluted earnings per share*........................ $ 1.07 $ 1.30 $ 1.20
======= ======= =======
</TABLE>
____________
*Reflects pro forma combined net income divided by diluted shares of 7,496,253
(4,159,447 existing shares plus 3,339,806 shares issued in the Merger).
26
<PAGE>
PRO FORMA CAPITAL RATIOS
Set forth below are certain historical and pro forma consolidated capital
ratios for Southwest Federal and Liberty Federal at December 31, 1997, assuming
consummation of the Merger as of that date.
<TABLE>
<CAPTION>
At December 31, 1997
---------------------------------
Liberty Federal
----------------
Southwest
Federal Pro Forma Regulatory
Actual Actual Combined Requirement
------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Core capital to total tangible assets......... 8.20% 8.50% 8.44% 3.00%
Tangible equity to total tangible assets (1).. 8.20% 8.40% 8.36% 1.50%
Core capital to risk-adjusted assets (2)...... 13.47% 15.89% 15.33% --
Total capital to risk-adjusted assets (3)..... 13.82% 16.48% 15.86% 8.00%
</TABLE>
____________
(1) In the case of Liberty Federal, core capital and tangible equity capital
both equal total stockholders' equity less goodwill. The current OTS core
capital requirement for savings associations is 3% of total adjusted
assets. The OTS has proposed core capital requirements which would require
a core capital ratio of 3% of total adjusted assets for thrifts that
receive the highest supervisory rating for safety and soundness ("CAMEL"
rating), and a 4% to 5% core capital ratio requirement for all other
thrifts.
(2) Based on risk-based capital requirements under OTS regulations. The OTS
recently issued a rule which adds an interest rate risk ("IRR") component
to the risk-based capital requirements; however, the OTS has indefinitely
deferred implementation of the interest rate risk component. Based upon
their preliminary review of the final rule, management of Liberty Federal
and Southwest Federal have calculated that if the interest rate risk rule
were in effect and were applicable, deductions of $5.6 million and $1.5
million, respectively, would be made from total capital in calculating
their risk-based capital calculations. In each case capital would have
remained in excess of regulatory requirements.
(3) Total capital equals core capital plus supplementary capital, comprised of
the general loan loss reserves.
27
<PAGE>
ALLIANCE BANCORP AND LIBERTY FEDERAL BANK
ALLIANCE BANCORP
Alliance Bancorp is a registered savings and loan holding company
incorporated under the laws of the state of Delaware and is engaged in the
business of providing financial service products to the public through its
wholly-owned subsidiary, Liberty Federal. On February 10, 1997, Hinsdale
Financial Corporation, the holding company for Hinsdale Federal Bank for
Savings, and Liberty Bancorp, Inc., the holding company for Liberty Federal
Savings Bank, consummated their merger of equals transaction in a stock-for-
stock exchange. The resulting organization was renamed Alliance Bancorp.
Liberty Federal Savings Bank was merged into Hinsdale Federal Bank for Savings,
and the resulting Bank operates under the name Liberty Federal Bank.
As of December 31, 1997, Alliance Bancorp had total consolidated assets of
$1.4 billion, deposits of $1.0 billion and stockholders' equity of $130.9
million. The executive offices of Alliance Bancorp are located at One Grant
Square, Hinsdale, Illinois 60521, and the telephone number is (630) 323-1776.
LIBERTY FEDERAL BANK
Liberty Federal, a Federal savings bank chartered under the authority of
the OTS, originally was organized in 1934, and changed its charter from a
federal savings and loan association to a federal savings bank in 1991. Liberty
Federal is a member of the Federal Home Loan Bank ("FHLB") System and its
deposit accounts are insured to the maximum allowable amount by the FDIC.
Liberty Federal is regulated by the OTS and the FDIC and is further regulated by
the Board of Governors of the Federal Reserve System as to reserves required to
be maintained against deposits and certain other matters.
Liberty Federal is a community-oriented institution providing financial
services through fourteen retail banking facilities in Chicago, north and
western Cook county and DuPage county in Illinois. Liberty Federal offers a
variety of deposit products in an attempt to attract funds from the general
public in highly competitive market areas surrounding its offices. In addition
to deposit products, Liberty Federal also offers its customers financial advice
and security brokerage services through INVEST. Liberty Federal invests its
retail deposits in mortgage and consumer loans, investment securities and
mortgage-backed securities, secured primarily by one-to four-family residential
loans. Liberty Federal also owns Preferred Mortgage Associates, Ltd., which is
one of the largest mortgage brokers in the Chicago metropolitan area and which
has six mortgage origination offices, including its headquarters in Downers
Grove, Illinois.
For more information about Alliance Bancorp, reference is made to the 1997
Alliance Bancorp Form 10K, which is incorporated herein by reference. See
"Available Information" and "Incorporation of Certain Documents by Reference."
28
<PAGE>
SOUTHWEST BANCSHARES, INC. AND SOUTHWEST FEDERAL SAVINGS AND
LOAN ASSOCIATION OF CHICAGO
SOUTHWEST BANCSHARES, INC.
Southwest Bancshares was incorporated under Delaware law on February 11,
1992. On June 11, 1992, Southwest Bancshares acquired Southwest Federal as a
part of Southwest Federal's conversion from a mutual to a stock federally
chartered savings and loan association. Southwest Bancshares is a savings and
loan holding company and is subject to regulation by the OTS, the FDIC and the
SEC. Currently, Southwest Bancshares does not transact any material business
other than through Southwest Federal, and Southwest Bancshares Development
Corporation. Upon consummation of Southwest Federal's conversion, Southwest
Bancshares retained 50% of the net conversion proceeds amounting to $13.4
million, which was invested in federal funds and high-grade, marketable
securities. At December 31, 1997, Southwest Bancshares had total assets of
$368.3 million and stockholders' equity of $44.0 million, or 12.0% of total
assets.
SOUTHWEST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHICAGO
Southwest Federal has operated for over 114 years, and was originally
organized in 1883 as an Illinois-chartered building and loan association. In
1937, it converted to a federally chartered and insured savings and loan
association. Southwest Federal is a member of the FHLB System and its deposit
accounts are insured up to applicable limits by the FDIC.
Southwest Federal's principal business has been, and continues to be,
attracting retail deposits from the general public and investing those deposits,
together with funds generated from operations, primarily in one- to four-family,
owner-occupied, fixed-rate loans, and to a lesser extent, multi-family
residential mortgage loans, commercial real estate loans, land and construction
loans, mortgage-backed securities and other marketable securities. Southwest
Federal's revenues are derived principally from interest on its mortgage loans
and mortgage-backed securities portfolios and interest and dividends on its
investment securities. Southwest Federal's primary sources of funds are
deposits, principal and interest payments on loans and mortgage-backed
securities and, to a much lesser extent, FHLB-Chicago advances.
Southwest Bancshares Development Corporation, an Illinois corporation, was
incorporated on November 19, 1992, for the primary purpose of engaging in real
estate development projects as a joint venture partner.
For more information about Southwest Bancshares, reference is made to the
1997 Southwest Bancshares, Form 10-K, which is incorporated herein by reference.
See "Available Information" and "Incorporation of Certain Documents by
Reference."
29
<PAGE>
ALLIANCE BANCORP ANNUAL MEETING
General. The Alliance Bancorp Annual Meeting is scheduled to be held on
Tuesday, June 30, 1998, at Ashton Place, 341 W. 75th Street, Willowbrook,
Illinois, at 10:00 a.m., Chicago time. This Joint Proxy Statement/Prospectus is
being sent to holders of record, and certain beneficial owners, of Alliance
Bancorp Common Stock as of the Alliance Bancorp Record Date and is accompanied
by a form of proxy which the Alliance Bancorp Board of Directors requests that
stockholders execute and return to Alliance Bancorp for use at the Alliance
Bancorp Annual Meeting and at any and all adjournments or postponements thereof.
Matters to Be Considered. At the Alliance Bancorp Annual Meeting, holders
of shares of Alliance Bancorp Common Stock will vote on the following proposals
(the "Alliance Bancorp Proposals"): (i) the approval of the Merger Agreement and
the transactions contemplated thereby, including the Merger of Southwest
Bancshares with and into Alliance Bancorp and the issuance by Alliance Bancorp
of up to 3,742,840 shares of Alliance Bancorp Common Stock in connection with
the Merger; (ii) the election of four directors for a term of three years each;
(iii) the ratification of the appointment of KPMG Peat Marwick LLP as
independent auditor for Alliance Bancorp for the fiscal year ended December 31,
1998; and (iv) the approval of an amendment to Alliance Bancorp's Certificate of
Incorporation to increase the total number of authorized shares of Alliance
Bancorp Common Stock to 21,000,000. Alliance Bancorp stockholders also may
consider and vote upon such other matters as may properly be brought before the
Alliance Bancorp Annual Meeting, including proposals to adjourn the Alliance
Bancorp Annual Meeting in the event there are not sufficient votes to approve
the Merger proposal at the time of the Alliance Bancorp Annual Meeting;
provided, however, that any proxy which is voted against the Merger Proposal
will not be voted in favor of adjournment to solicit further proxies for such
proposal. The Board of Directors of Alliance Bancorp knows of no business that
will be presented for consideration at the Alliance Bancorp Annual Meeting other
than the matters described in this Joint Proxy Statement/Prospectus.
Alliance Bancorp Record Date. The Alliance Bancorp Board of Directors has
fixed the close of business on May 14, 1998 as the Alliance Bancorp Record Date
for determining holders of Alliance Bancorp Common Stock who are entitled to
notice of and to vote at the Alliance Bancorp Annual Meeting. Only holders of
record of Alliance Bancorp Common Stock at the close of business on the Alliance
Bancorp Record Date will be entitled to notice of and to vote at the Alliance
Bancorp Annual Meeting. As of the Alliance Bancorp Record Date, there were
outstanding and entitled to vote at the Alliance Bancorp Annual Meeting
_________ shares of Alliance Bancorp Common Stock.
Votes Required. Except as indicated below, each holder of record of shares
of Alliance Bancorp Common Stock on the Alliance Bancorp Record Date will be
entitled to cast one vote per share on the Alliance Bancorp Proposals at the
Alliance Bancorp Annual Meeting. Such vote may be exercised in person or by
properly executed proxy.
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<PAGE>
In accordance with the provisions of the Alliance Bancorp Certificate of
Incorporation, record holders of Alliance Bancorp Common Stock who beneficially
own in excess of 10% of the outstanding shares of Common Stock (the "Alliance
Bancorp Limit") are not entitled to any vote with respect to the shares held in
excess of the Alliance Bancorp Limit. The Alliance Bancorp Certificate of
Incorporation authorizes the Board of Directors (i) to make all determinations
necessary to implement and apply the Alliance Bancorp Limit, including
determining whether persons or entities are acting in concert, and (ii) to
demand that any person who is reasonably believed to beneficially own stock in
excess of the Alliance Bancorp Limit supply information to Alliance Bancorp to
enable the Alliance Bancorp Board of Directors to implement and apply the
Alliance Bancorp Limit.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Alliance Bancorp Common Stock entitled to
vote at the Alliance Bancorp Annual Meeting is necessary to constitute a quorum.
Abstentions and broker non-votes (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owners or other persons as to certain proposals on which such beneficial owners
or persons are entitled to vote their shares but with respect to which the
brokers or nominees have no discretionary power to vote without such
instructions) will be treated as shares present at the Alliance Bancorp Annual
Meeting for purposes of determining the presence of a quorum.
With a quorum, or in the absence of such, the affirmative vote of a
majority of the shares represented at the Alliance Bancorp Annual Meeting may
authorize the adjournment of the meeting.
As to the Merger Proposal, the proxy card being provided by the Board of
Directors enables a stockholder to check the appropriate box on the proxy card
to (i) vote FOR, (ii) vote AGAINST, or (iii) vote to ABSTAIN from voting on,
such matter. The affirmative vote of the holders of a majority of the
outstanding shares of Alliance Bancorp Common Stock is required for approval and
adoption of the Merger Agreement. Therefore, abstentions and broker non-votes
will have the same effect as votes against approval of the Merger Proposal.
Approval of the Merger Agreement by the holders of shares of Alliance
Bancorp Common Stock is a condition to, and required for, consummation of the
Merger. See "The Merger --Conditions to the Merger."
As to the election of Directors, the proxy card being provided by the
Alliance Bancorp Board of Directors enables a stockholder to vote FOR the
election of the nominees proposed by the Board of Directors, or to WITHHOLD
AUTHORITY to vote for one or more of the nominees being proposed. Under Delaware
law and the Alliance Bancorp's Certificate of Incorporation and Bylaws,
directors are elected by a plurality of votes cast, without regard to either
broker non-votes, or proxies as to which authority to vote for one or more of
the nominees being proposed is withheld.
As to the ratification of KPMG Peat Marwick LLP as independent auditors of
Alliance Bancorp for the fiscal year ended December 31, 1998, by checking the
appropriate box, a
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<PAGE>
stockholder may: (i) vote FOR the item; (ii) vote AGAINST the item; or (iii)
ABSTAIN from voting on such item. Under Alliance Bancorp's Certificate of
Incorporation and Bylaws, the ratification of this matter shall be determined by
a majority of the votes cast, without regard to broker non-votes, or proxies
marked ABSTAIN.
As to the Proposal to amend the Alliance Bancorp Certificate of
Incorporation, the proxy card being provided by the Board of Directors enables a
stockholder to check the appropriate box on the proxy card to (i) vote FOR, (ii)
vote AGAINST, or (iii) vote to ABSTAIN from voting on, such matter. The
affirmative vote of the holders of a majority of the outstanding shares of
Alliance Bancorp Common Stock is required for approval of the proposed
amendment. Therefore, abstentions and broker non-votes will have the same
effect as votes against approval of the proposal amendment.
Any other matters that may be brought before the Annual Meeting will be
determined by majority of the votes cast, without regard to broker non-votes, or
any proxies as to which a stockholder abstains.
Proxies solicited hereby will be returned to Alliance Bancorp, and will be
tabulated by an inspector of election designated by the Board of Directors, who
will not be employed by, or a director of, Alliance Bancorp or any of its
affiliates.
As of the Alliance Bancorp Record Date, the directors and executive
officers of Alliance Bancorp and their affiliates beneficially owned in the
aggregate [783,139] shares (excluding shares underlying stock options), or
approximately [9.8]% of the then outstanding shares, of Alliance Bancorp Common
Stock entitled to vote at the Alliance Bancorp Annual Meeting. The directors of
Alliance Bancorp have entered into the Southwest Bancshares Voting Agreements
whereby such directors have agreed to vote all shares of Alliance Bancorp Common
Stock owned by them ([745,609] shares in the aggregate) for approval of the
Merger Agreement. As of the Alliance Bancorp Record Date, the directors and
executive officers of Southwest Bancshares and their affiliates beneficially
owned _____ shares of Alliance Bancorp Common Stock. It is also expected that
such shares will be voted in favor of the Alliance Bancorp Proposals.
Proxies. Shares of Alliance Bancorp Common Stock represented by properly
executed proxies received prior to or at the Alliance Bancorp Annual Meeting
will, unless such proxies have been revoked, be voted at the Alliance Bancorp
Annual Meeting and any adjournments or postponements thereof, in accordance with
the instructions indicated in the proxies. If no instructions are indicated on a
properly executed proxy, the shares will be voted FOR the Alliance Bancorp
Proposals.
Any proxy given pursuant to this solicitation or otherwise may be revoked
by the person giving it at any time before it is voted either by delivering to
the Secretary of Alliance Bancorp at One Grant Square, Hinsdale, Illinois 60521
on or before the taking of the vote at the Alliance Bancorp Annual Meeting, a
written notice of revocation bearing a later date than the date of the
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<PAGE>
proxy or a later dated proxy relating to the same shares or by attending the
Alliance Bancorp Annual Meeting and voting in person. Attendance at the Alliance
Bancorp Annual Meeting will not in itself constitute the revocation of a proxy.
Moreover, if you are a stockholder whose shares are not registered in your own
name, you will need appropriate documentation from your record holder to vote
personally at the Annual Meeting.
If any other matters are properly presented at the Alliance Bancorp Annual
Meeting for consideration, the persons named in the proxy or acting thereunder
will have discretion to vote on such matters in accordance with their best
judgment. As of the date hereof, the Alliance Bancorp Board of Directors knows
of no such other matters.
In addition to solicitation by mail, directors, officers and employees of
Alliance Bancorp, who will not be specifically compensated for such services,
may solicit proxies from the stockholders of Alliance Bancorp, personally or by
telephone, telegram or other forms of communication. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy material to beneficial owners. In addition,
Alliance Bancorp has engaged Kissel-Blake, Inc., a proxy solicitation firm
("Kissel"), to assist Alliance Bancorp in distributing proxy materials and
contacting record and beneficial owners of Alliance Bancorp Common Stock.
Alliance Bancorp has agreed to pay Kissel approximately $40,000, plus out-of-
pocket expenses, for its services to be rendered on behalf of Alliance Bancorp.
Except as to the expense of printing and mailing the Joint Proxy
Statement/Prospectus (which Alliance Bancorp and Southwest Bancshares shall bear
equally), Alliance Bancorp will bear its own expenses in connection with the
solicitation of proxies for the Alliance Bancorp Annual Meeting.
HOLDERS OF ALLIANCE BANCORP COMMON STOCK ARE REQUESTED TO COMPLETE, DATE
AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY TO ALLIANCE BANCORP
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Persons and groups owning in excess of 5% of Alliance Bancorp's Common
Stock are required to file certain reports regarding such ownership with
Alliance Bancorp and with the SEC, in accordance with the Exchange Act. The
following table sets forth information regarding persons known to be beneficial
owners of more than five percent of the Common Stock outstanding as of [MAY 1],
1998.
33
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNERS OWNERSHIP OF CLASS
- -------------- ---------------------- ----------------- ----------
<S> <C> <C> <C>
Common stock Investors of America, 434,690 (1) 5.4%
Limited Partnership
(formerly known as Dierberg
Four, L.P.)
39 Glen Eagles Drive
St. Louis, MO 63124
Common stock Jeffrey L. Gendell (2) 533,360 (2) 6.6%
200 Park Avenue
Suite 3900
New York, NY 10166
Common stock LaSalle Financial Partners 422,167 (3) 5.3%
Limited Partnership,
Richard J. Nelson, Peter
T. Kross and
Florence Nelson
259 E. Michigan, Suite 405
Kalamazoo, MI 49007
</TABLE>
_____________________________
(1) Investors of America, Limited Partnership, is a Nevada limited partnership,
the general partner of which is First Securities America, Inc., a Missouri
corporation. James F. Dierberg is the controlling shareholder of First
Securities America, Inc.
(2) According to an Amended Schedule 13D, dated as of September 9, 1997, filed
by Mr. Gendell and certain related persons, Mr. Gendell beneficially owns
533,360 shares of Alliance Bancorp Common Stock, held in the name of Tontine
Financial Partners, L.P., Tontine Management, L.L.C., and Tontine Oversees
Associates, L.L.C.
(3) Based upon information filed in a Schedule 13D dated April 13, 1998, LaSalle
Financial Partners, Limited Partnership ("LaSalle") is a limited
partnership. LaSalle's general partners are LaSalle Capital Management,
Inc., a Michigan corporation owned by Richard J. Nelson and his wife
Florence Nelson, and Talman Financial, Inc., a Michigan corporation owned by
Peter T. Kross. LaSalle, Richard J. Nelson and Peter T. Kross claim shared
voting and dispositive power over the 422,167 shares owned by the group.
Florence Nelson disclaims any sole or shared voting or dispositive power
over the shares.
ELECTION OF ALLIANCE BANCORP DIRECTORS
The Alliance Bancorp Board of Directors is comprised of 14 members divided
into three classes. Directors are elected for staggered terms of three years
each, with the term of office of only one class of Directors expiring in each
year. Directors serve until their successors are elected and qualified.
The names of the four nominees for election to the Board of Directors are
set forth below, along with certain other information concerning such
individuals, and the other members of the Board, as of ______________, 1998.
Management believes that such nominees will stand for election and will serve if
elected as Directors. However, if any person nominated by the Board of Directors
fails to stand for election or is unable to accept election, the proxies will be
voted for the election of such other person as the Board of Directors may
recommend. Each director and nominee has served on the Board of Directors of
Alliance Bancorp since the consummation of the merger of
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<PAGE>
equals transaction in February 1997, except for Mr. Nusrala who was first
appointed to the Board in April 1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
NOMINEES WHOSE NAMES APPEAR BELOW.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME, AGE, PRINCIPAL OCCUPATION AND YEAR FIRST ELECTED OWNERSHIP OF PERCENT OF
BUSINESS EXPERIENCE FOR PAST 5 YEARS TO BOARD (1) TERM TO EXPIRE STOCK (2) CLASS
- -------------------------------------- ------------------- -------------- ------------------- ----------
NOMINEES
<S> <C> <C> <C> <C>
Kenne P. Bristol, Age 55 (3)........................ 1986 2001 146,676(4) 1.68%
President and Chief Executive Officer of
Alliance Bancorp and Liberty Federal Bank;
previously President and Chief Executive
Officer of Hinsdale Financial and Hinsdale
Federal.
Howard A. Davis, Age 50............................. 1995 2001 22,500(5) 0.26%
President and Chief Executive Officer of
Preferred Mortgage Associates, Ltd., a
subsidiary of Liberty Federal Bank.
H. Verne Loeppert, Age 76........................... 1964 2001 73,972(6) 0.85%
Retired; until December 31, 1996, President and
Chief Executive Officer of CDV Corporation, a
holding company whose subsidiaries are
engaged in metal working tool manufacturing.
David D. Mill, Age 69 (3)(7)........................ 1967 2001 128,057(8) 1.47%
Dentist; Dr. Mill has owned his own general
dental practice since 1957.
CONTINUING DIRECTORS
Edward J. Burns, Age 68 (3)......................... 1963 1999 201,096(9) 2.31%
Retired; Chairman of the Board of Liberty
Bancorp from 1991 and Liberty Federal Savings
from 1982 until February 1997. President and
Chief Executive Officer of Liberty Bancorp and
Liberty Federal Savings until 1994.
Whit G. Hughes, Age 72.............................. 1982 1999 101,639(8) 1.17%
Chairman and former Chief Executive Officer of
Hughes Enterprises, Inc., a distributor of
appliances and parts and a developer and
operator of self-service laundry stores.
Howard R. Jones, Age 62............................. 1991 2000 60,544(10) 0.69%
President of Packaging Design Corporation, a
manufacturer of corrugated containers and
specialties.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME, AGE, PRINCIPAL OCCUPATION AND YEAR FIRST ELECTED OWNERSHIP OF PERCENT OF
BUSINESS EXPERIENCE FOR PAST 5 YEARS TO BOARD (1) TERM TO EXPIRE STOCK (2) CLASS
- -------------------------------------- ------------------- -------------- ------------------- ----------
<S> <C> <C> <C> <C>
Fredric G. Novy, Age 59 (3).......................... 1994 2000 261,787(11) 3.00%
Chairman of the Board of Directors of Alliance
Bancorp and Liberty Federal Bank; President
and Chief Executive Officer of Liberty Bancorp
and Liberty Federal Savings from 1994 to
February 1997. President of Cragin Financial
Corporation and Cragin Federal Bank for
Savings from 1990 through 1994.
Edward J. Nusrala, Age 58 (3)........................ 1997 1999 16,500(12) 0.19%
Founder, owner and President of Famous Brand
Shoes, Inc., a retail shoe company.
William C. O'Donnell, Age 75......................... 1979 2000 147,074(8) 1.69%
President of ODON Communications Group, a
radio broadcasting company.
William R. Rybak, Age 47 (3)......................... 1986 1999 58,668(10) 0.67%
Chairman of the Board of Directors of Hinsdale
Federal from 1990 to February 1997, and
Chairman of the Board of Hinsdale Financial
from its formation in 1992 to February 1997.
Executive Vice President and Chief Financial
Officer of Van Kampen American Capital, Inc.,
a financial services company specializing in
money management and the distribution of
mutual funds.
Russell F. Stephens, Jr., Age 65..................... 1971 2000 44,939(10) 0.52%
President of Insurance Concepts & Design Inc.,
an insurance agency.
Donald E. Sveen, Age 66 (3).......................... 1971 1999 98,044(10) 1.13%
Retired; prior to July 1996, President, Chief
Operating Officer and Director of The John
Nuveen Company and Subsidiaries and
Chairman, Chief Executive Officer and Director
of the Nuveen Select Tax-Free Income Portfolio
Funds. Nuveen is a financial services company
specializing in tax-exempt investments and
money management.
Vernon B. Thomas, Jr., Age 64 (3).................... 1969 2000 150,587(10) 1.73%
Attorney whose practice concentrates in
corporate, banking, real estate and estate
planning.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Richard A. Hojnicki, Age 48.......................... -- -- 73,947(13) 0.85%
Mr. Hojnicki is Executive Vice President,
Secretary and Chief Financial Officer of`
Alliance Bancorp and Liberty Federal Bank
Edward J. Munin, Age 44.............................. -- -- 750 0.01%
Mr. Munin is a Senior Vice President of Liberty
Federal Bank
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME, AGE, PRINCIPAL OCCUPATION AND YEAR FIRST ELECTED OWNERSHIP OF PERCENT OF
BUSINESS EXPERIENCE FOR PAST 5 YEARS TO BOARD (1) TERM TO EXPIRE STOCK (2) CLASS
- -------------------------------------- ------------------- -------------- ------------------- ----------
<S> <C> <C> <C> <C>
All directors and executive officers as a group (16 -- -- 1,586,780(14)(15) 18.21%
persons)
</TABLE>
_____________________
(1) Includes service on the Board of Directors of Hinsdale Federal Bank for
Savings and Liberty Federal Savings Bank.
(2) Unless otherwise indicated, each person effectively exercises sole (or
shared with spouse) voting and dispositive power as to the shares reported.
(3) Also serves on the Board of Directors of Liberty Federal Bank, the wholly-
owned subsidiary of Alliance Bancorp.
(4) Includes 96,892 shares that may be acquired pursuant to presently
exercisable stock options by Mr. Bristol.
(5) Includes 18,750 shares that may be acquired pursuant to presently
exercisable stock options by Mr. Davis.
(6) Includes 46,495 shares subject to options which may be acquired by Mr.
Loeppert under the Liberty Bancorp, Inc. 1991 Stock Option Plan for Outside
Directors (the "Liberty Bancorp Directors' Option Plan").
(7) Dr. Mill is married to Mr. Burns' first cousin.
(8) Includes 49,657 shares subject to options which may be acquired by each
outside director indicated under the Liberty Bancorp Directors' Option
Plan.
(9) Includes 114,868 shares with respect to Mr. Burns which may be acquired
through the exercise of stock options granted under the Liberty Bancorp,
Inc. Amended and Restated 1991 Incentive Stock Option Plan (the "Liberty
Bancorp Incentive Stock Option Plan"), and 17,138 shares allocated to Mr.
Burns under the Liberty Federal Savings Bank ESOP.
(10) Includes 23,043 shares that may be acquired pursuant to the exercise of
options granted under the Hinsdale Financial Corporation 1992 Stock Option
Plan for Outside Directors (the "Hinsdale Financial Directors' Option
Plan").
(11) Includes 183,669 shares with respect to Mr. Novy which may be acquired
through the exercise of stock options under the Liberty Bancorp Incentive
Stock Option Plan, and 7,726 shares allocated to Mr. Novy under the Liberty
Federal Savings Bank ESOP.
(12) Includes 15,000 shares that may be acquired by Mr. Nusrala pursuant to the
exercise of options granted under the Hinsdale Financial Directors' Option
Plan.
(13) Includes 37,167 shares that may be acquired pursuant to presently
exercisable stock options by Mr. Hojnicki.
(14) Includes 336,478 shares that may be acquired pursuant to presently
exercisable stock options granted to executive officers of Alliance Bancorp
and its subsidiaries, and 352,295 shares that may be acquired pursuant to
presently exercisable stock options granted to directors who are not
executive officers.
(15) Includes 24,864 shares allocated to the accounts of executive officers
under the Hinsdale Federal Bank for Savings and Liberty Federal Savings
Bank ESOPs. Excludes the remaining 345,488 shares of Common Stock owned by
the ESOPs. The ESOP Administrative committee administers the ESOPs. Under
the terms of the ESOPs, shares of Common Stock allocated to the account of
employees are voted in accordance with the instructions of the respective
employees. Unallocated shares are voted by the ESOP Trustee in a manner
that reflects the directions received from employees as to allocated
shares.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During fiscal 1997, the Board of Directors of Alliance Bancorp met eight
times. The Board of Directors of Liberty Federal meets monthly and may have
additional special meetings upon request of the Chairman of the Board, the
President, or one-third of the Directors. During the fiscal year ended December
31, 1997, the Board of Directors of Liberty Federal met 12 times.
Alliance Bancorp and Liberty Federal maintain an Executive Committee, an
Audit and Compliance Committee, and a Compensation and Personnel Administration
Committee. In addition to these committees, Liberty Federal maintains an
Asset/Liability-Budget Committee. No Director attended fewer than 75%, in the
aggregate, of the total number of Board meetings held during fiscal 1997 and the
total number of committee meetings on which he served during the year, as to
both Alliance Bancorp and Liberty Federal.
37
<PAGE>
The Executive Committee currently consists of Directors Rybak (Chairman),
Burns (Vice Chairman), Bristol, Loeppert, Novy, O'Donnell, Stephens, Sveen and
Jones. This Committee exercises the authority of the Board when the Board is not
in session, subject to applicable law. Any activity is reported to the Board on
a monthly basis. The Executive Committee did not meet during fiscal 1997.
The Audit and Compliance Committee currently consists of Directors Loeppert
(Chairman), Jones, Mill, Nusrala and Rybak. This Committee receives reports as
necessary to review the results of the internal audit program, the independent
audit, and other matters that affect Alliance Bancorp or Liberty Federal. The
Audit and Compliance Committee did not meet in fiscal 1997. The Board, as a
whole, receives quarterly internal auditing reports from Liberty Federal's
internal auditor.
Alliance Bancorp's Nominating Committee is not a standing committee but is
convened as needed with director members appointed by the Chairman. While the
Committee will consider nominees recommended by stockholders, it has not
actively solicited recommendations from stockholders. Nominations by
stockholders must comply with certain procedural and informational requirements
set forth in Alliance Bancorp's Bylaws. See "Advance Notice of Business to be
Conducted at an Annual Meeting."
The Compensation and Personnel Administration Committee currently consists
of Directors Sveen (Chairman), Burns, Hughes, Nusrala and Stephens. The
Committee reviews and administers compensation, officer promotions, benefits and
other matters of personnel policy and practice. The Committee met three times
during fiscal 1997.
DIRECTORS' COMPENSATION
Fees. Outside directors of Alliance Bancorp receive a fee of $1,500 per
meeting of the Board. Prior to the merger of equals transaction, directors of
Alliance Bancorp did not receive any directors' fees. Outside Directors of
Liberty Federal receive a monthly fee of $1,500. Directors who are not officers
also receive $300 for each committee meeting attended. Outside directors of
Liberty Federal's subsidiaries receive $300 per quarter for serving on one or
all of these Boards.
Directors' Option Plans. Under the Hinsdale Financial Directors' Option
Plan, each outside Director of Hinsdale Financial, at the time of Hinsdale
Federal's conversion to stock form, received non-statutory options to purchase
23,043 shares of Alliance Bancorp Common Stock at an exercise price of $5.33 per
share, equal to the fair market value of the stock at the time of grant. In
April 1997, Mr. Nusrala received a non-statutory option to purchase 15,000
shares of Alliance Bancorp Common Stock at an exercise price of $18.50 per
share, equal to the fair market value of the stock at the time of grant. Under
the Liberty Bancorp Directors' Option Plan, each outside Director of Liberty
Bancorp was granted options to purchase 49,657 shares of Alliance Bancorp Common
Stock (as adjusted to reflect the exchange ratio in the Merger between Liberty
Bancorp, Inc. and Hinsdale Financial Corporation) at an exercise price which is,
at the discretion of the optionee, either $6.33
38
<PAGE>
per share or $5.37 per share (each, as adjusted) in which latter case the stock
received upon exercise must be held for one year.
EXECUTIVE COMPENSATION
Compensation Committee Report. Under rules established by the SEC,
Alliance Bancorp is required to provide certain data and information in regard
to the compensation and benefits provided to Alliance Bancorp's Chief Executive
Officer and other executive officers of Alliance Bancorp. The disclosure
requirements for the Chief Executive Officer and other executive officers
include the use of tables and a report explaining the rationale and
considerations that led to fundamental executive compensation decisions
affecting those individuals. In fulfillment of this requirement, the
Compensation and Personnel Administration Committee, at the direction of the
Board of Directors has prepared the following report for inclusion in this proxy
statement, which report relates to Alliance Bancorp's fiscal year ended December
31, 1997.
The compensation committee is composed solely of independent outside
Directors. The Board has delegated to the committee the responsibility of
assuring that the compensation of the Chief Executive Officer and other
executive officers is consistent with the compensation strategy, competitive
practices, the performance of Alliance Bancorp, and the requirements of
appropriate regulatory agencies. Non-employee directors who do not sit on the
compensation committee also participate in executive compensation decision-
making through the review, discussion and ratification of compensation committee
recommendations. All cash compensation paid to executive officers is paid by
Liberty Federal. Alliance Bancorp does not currently pay cash compensation to
executive officers.
Executive Compensation Philosophy. Since the predecessor of Alliance
Bancorp became a public company in 1992, the committee has had the following
goals for the compensation programs impacting the executives of Alliance Bancorp
and Liberty Federal:
. to provide motivation for the executives to enhance shareholder value
by linking a significant portion of their compensation to earnings and
the value of Alliance Bancorp's Common Stock;
. to retain the executive officers who are capable of leading Alliance
Bancorp to high performance levels and to allow Liberty Federal to
attract high quality executives in the future by providing total
compensation opportunities which are consistent with competitive norms
of the industry and Alliance Bancorp's level of performance; and
. to maintain reasonable "fixed" compensation costs by targeting base
salaries at competitive average levels.
The compensation committee of the Board of Directors of Liberty Federal
periodically reviews salaries, stock options and other aspects of executive
compensation. In general, the purpose
39
<PAGE>
of this evaluation is to ensure that Liberty Federal's overall executive
compensation programs remain competitive with savings institutions and banks
that are similar in both asset size and geographical markets to Liberty Federal
and that total executive pay represents both the individual's performance as
well as the current and past performance of Liberty Federal.
For purposes of determining the competitive market for Liberty Federal's
executives, the committee has retained KPMG Peat Marwick LLP to review the
comprehensive compensation paid to top executives of thrifts and banks with
total assets in the range of Liberty Federal's total asset size and performance
results comparable to those of Liberty Federal.
KPMG Peat Marwick LLP reviewed the following published compensation surveys
to determine competitive compensation levels:
The 1996 Bank Cash Compensation Survey, Bank Administration Institute;
and
The 1995 Financial Institutions Compensation Survey By Wyatt Data
Services.
In addition, KPMG Peat Marwick LLP conducted an independent review of the
compensation practices of eleven midwest institutions with assets ranging from
$768 million to $1.9 billion. All compensation data was updated to October 1,
1997.
The surveys provide data for both commercial banks and thrifts. KPMG Peat
Marwick LLP has been recommending to their thrift clients for several years that
for compensation purposes they should compare themselves to commercial banks of
comparable size as well as other thrifts for the following reasons:
. since deregulation, the differences in the balance sheet structure and
the complexity level between operating a thrift and a bank have
significantly narrowed; and
. thrifts are recruiting senior executives from commercial banks more
frequently, and to obtain top talent, the thrifts are required to
provide compensation levels competitive with banks.
In addition, the compensation committee reviewed the salary history and
performance levels for each of the executive officers in determining appropriate
compensation levels. It is expected that the comparative salary data compiled by
KPMG Peat Marwick LLP on comprehensive executive compensation will continue to
be utilized as the primary source of information in subsequent years in
determining compensation levels for executive officers.
Executive officers' compensation consists principally of salary, annual
incentive payments, and stock options. The salaries are generally in the average
range compared to other similar institutions. The incentive payments are based
on performance as well as position.
40
<PAGE>
Compensation of Chief Executive Officer. The compensation committee meets
periodically to evaluate Mr. Bristol's performance and reports on that
evaluation to the Outside Directors of the Board. The Chief Executive's
compensation consists principally of three components:
. Salary
. Annual Incentive Payment
. Stock Option Grants
Under the leadership of the compensation committee, subsequent to the
determination of Mr. Bristol's fiscal 1997 compensation, the Board of Directors
of Liberty Federal, with Mr. Bristol excused, determined his fiscal 1997
compensation giving consideration to the size of Liberty Federal, the duties and
responsibilities of his position and a comparison of the compensation of chief
executive officers of similarly situated financial institutions. Mr. Bristol's
total cash compensation was based on his contribution to the overall long-term
strategy and financial strength and performance of Alliance Bancorp.
In 1993, Liberty Federal adopted a discretionary Annual Incentive
Compensation Program based on achievement of profitability performance goals
while maintaining safety and soundness standards. The program's objective is to
build shareholder value by providing an incentive to executives and staff to
develop those business strategies and take those actions that will impact
Alliance Bancorp's annual as well as long-term profitability. In order to
attract and retain high quality executives, Liberty Federal's executive
compensation strategy is based on providing total target compensation
opportunities that are at, or above, the competitive norms for companies
competing in Liberty Federal's employment market. Alliance Bancorp's total
compensation philosophy is based on a combination of surveyed average base
compensation plus an average to above average incentive opportunity with the
intent of motivating management to continually meet or exceed the goals of
increasing shareholder value.
In addition to projected levels of profitability, the Chief Executive's
annual incentive is dependent on Liberty Federal maintaining certain levels of
performance in the following areas:
. the regulatory capital ratios;
. the interest rate risk as measured by the one year interest rate
sensitivity gap; and
. the ratio of non-performing assets to total assets.
While these measures may change from year-to-year based on the strategic
focus of Alliance Bancorp, the objective of achieving annual profitability goals
and enhancing shareholder value while maintaining long-term safety and soundness
will continue.
The 1997 annual incentive award granted to the Chief Executive Officer is
based on 40% of base salary if the target performance goals are achieved. If the
performance goals are exceeded, the percentage of base salary award can be up to
a maximum of 80%. Liberty Federal performance awards are based on pre-tax
income objectives in addition to safety and soundness considerations.
41
<PAGE>
Based upon the criteria established by the Board, Mr. Bristol received a bonus
of $125,000, representing approximately 54% of his salary, for the fifteen month
period ended December 31, 1997. Also during the fifteen months ended December
31, 1997, the committee also determined to grant Mr. Bristol options to purchase
65,430 shares of Common Stock at an exercise price equal to the fair market
value of the shares at the time of grant.
Compensation Committee
Edward J. Burns, Whit G. Hughes, Russell F. Stephens, Jr.,
Edward J. Nusrala and Donald E. Sveen (Chairman)
42
<PAGE>
Stock Performance Graph. The following table shows a comparison of the
cumulative total stockholder return */ on Alliance Bancorp's Common Stock,
--
based on the market price of Alliance Bancorp's Common Stock, with the
cumulative total return of companies in the Nasdaq National Market and Standard
& Poor's Savings & Loan Companies Index. Alliance Bancorp Common Stock began
trading on July 7, 1992.
COMPARISON OF 63 MONTH CUMULATIVE TOTAL RETURN*
AMONG ALLIANCE BANCORP, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S&P SAVINGS & LOAN COMPANIES INDEX
[GRAPH APPEARS HERE]
____________ Alliance Bancorp
____________ Nasdaq Stock Market (U.S)
------------ S&P Savings & Loan Companies
43
<PAGE>
* $100 INVESTED ON 9/30/92 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
<TABLE>
<CAPTION>
9/92 9/93 9/94 9/95 9/96 12/97
----- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Alliance Bancorp.............. 100.0 177 204 231 245 421
Nasdaq Stock Market (U.S.).... 100.0 131 132 182 216 279
S&P Savings & Loan Companies.. 100.0 134 135 173 200 395
</TABLE>
44
<PAGE>
Summary Compensation Table. The following table sets forth the cash
compensation paid by Liberty Federal, for services rendered during the fiscal
years ended December 31, 1997, and September 30, 1996 and 1995, to the Chief
Executive Officer and other executive officers of Liberty Federal and/or
Alliance Bancorp, who received an amount in salary and bonus in excess of
$100,000 in the fiscal year ended December 31, 1997 ("Alliance Bancorp Named
Executive Officers").
<TABLE>
<CAPTION>
====================================================================================================================================
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------------------------------------
(1) AWARDS PAYOUT
------------------------------
YEARS
ENDED OTHER ALL
12/31/97 ANNUAL RESTRICTED OTHER
NAME AND 9/30/96 SALARY COMPENSATION STOCK OPTIONS/ LTIP COMPENSATION
PRINCIPAL POSITION 9/30/95 (2) BONUS (4) AWARDS SARS (#) PAYOUT (5)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kenne P. Bristol 1997 $230,000 $125,000 (3) $ -- $ -- 65,430 $ -- $ 158,470
President, Chief 1996 220,000 75,000 -- -- 28,125 -- 20,919
Executive Officer 1995 212,700 65,000 -- -- -- -- 15,838
and Director
- ------------------------------------------------------------------------------------------------------------------------------------
Richard A. Hojnicki 1997 $103,000 $41,000 (3) $ -- $ -- 6,750 $ -- $ 70,695
Executive Vice 1996 99,000 23,000 -- -- 8,437 -- 13,388
President, Chief 1995 95,000 23,000 -- -- -- -- 9,793
Financial Officer
and Corporate
Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Fredric G. Novy 1997 $177,534 (6) $100,000 $ -- $ -- -- $ -- $ --
Chairman of the Board of
Directors
- ------------------------------------------------------------------------------------------------------------------------------------
Edward J. Munin 1997 $188,333 (7) $45,000 $ -- $ -- -- $ -- $ --
Senior Vice President
- ------------------------------------------------------------------------------------------------------------------------------------
Howard A. Davis 1997 $200,000 $5,000 $ -- $ -- 11,250 $ -- $ --
President and Chief 1996 200,000 -- -- -- 22,500 -- --
Executive Officer of 1995 66,667 (8) -- -- -- -- -- --
Preferred Mortgage
Associates, Ltd. and
Director
====================================================================================================================================
</TABLE>
____________________________________
(1) In 1996 Alliance Bancorp changed its fiscal year end from September 30 to
December 31. Changes in salary for Mr. Bristol and Mr. Hojnicki were
effective October 1, 1996.
(2) Includes Directors' fees paid to Mr. Bristol. Effective October 1, 1995,
directors who are employees do not receive director's fees.
(3) Bonuses relating to the 15 months ended December 31, 1997 are included in
the 1997 amount.
(4) Perquisites for the fiscal years ended December 31, 1997, September 30,
1996 and 1995 did not exceed the lesser of $50,000 or 10% of the total of
the salary and bonus as reported for the Alliance Bancorp Named Executive
Officers.
(5) Represents the value of shares of Common Stock allocated to the account of
the Alliance Bancorp Named Executive Officer under the ESOP. Allocations as
of December 31, 1994 and 1995, valued at the market price of the Common
Stock as of those dates are included in the fiscal years ended September
30, 1995 and 1996 respectively. In accordance with the Merger with Liberty
Bancorp, Inc., the Hinsdale Federal Bank for Savings ESOP was terminated in
1997; therefore the 1997 amount includes the December 31, 1996 allocation,
valued at the market price on that date and the final termination
allocation valued at the market price of Common Stock as of December 31,
1997.
(6) Includes Mr. Novy's salary from February 10, 1997, the date of the merger
of Liberty Bancorp, Inc. with Alliance Bancorp.
(7) Includes Mr. Munin's salary from the date of his employment in February
1997.
(8) Includes Mr. Davis' 1995 salary from May 31, 1995, the date Preferred
Mortgage Associates, Ltd. was acquired, through the fiscal year end of
September 30, 1995.
45
<PAGE>
Employment Agreements. Liberty Federal has entered into an employment
agreement with Mr. Bristol, which provides for a term of thirty-six months. On
each anniversary date, the agreement may be extended for an additional twelve
months, so that the remaining term shall be thirty-six months. If the agreement
is not renewed, the agreement with Mr. Bristol will expire thirty-six months
following the anniversary date. The current Base Salary for Mr. Bristol is
$260,000. The base salary may be increased but not decreased. In addition to
the Base Salary, the agreement provides for, among other things, disability pay,
participation in stock benefit plans and other fringe benefits applicable to
executive personnel. The agreement provides for termination by Liberty Federal
for cause at any time. In the event Liberty Federal terminates the executive's
employment for reasons other than for cause, or in the event of the executive's
resignation from Liberty Federal upon (i) failure to re-elect the executive to
his current offices, (ii) a material change in the executive's functions, duties
or responsibilities, or relocation of his principal place of employment, (iii)
liquidation or dissolution of Liberty Federal, or (iv) a breach of the agreement
by Liberty Federal, the executive, or in the event of death, his beneficiary
would be entitled to severance pay in an amount equal to 2.99 times the annual
rate of Base Salary at the time of termination. Liberty Federal would also
continue the executive's life, health, dental and disability coverage for the
remaining unexpired term of the agreement.
If termination, voluntary or involuntary, follows a change in control of
Liberty Federal or Alliance Bancorp, the executive or, in the event of death,
his beneficiary, would be entitled to a severance payment equal to 2.99 times
the annual rate of Base Salary at the time of termination, which currently would
be approximately $778,000. Liberty Federal would also continue the executive's
life, health, dental and disability coverage for thirty-six months. A change in
control is generally defined to mean the acquisition by a person or group of
persons having beneficial ownership of 20% or more of Liberty Federal's or
Alliance Bancorp's Common Stock during the term of the agreement, or a merger or
other form of business combination, sale of assets, or contested election of
directors which results in a change of a majority of the Board of Directors.
Alliance Bancorp has agreed to reimburse the executive for any excise taxes that
may be imposed under the federal income tax code in connection with any payments
made following a change in control.
As a result of the merger of Liberty Bancorp and Hinsdale Financial,
Alliance Bancorp and Liberty Federal are parties to employment agreements with
Messrs. Burns and Novy. The employment agreements provide for three-year terms.
Commencing on the first anniversary date and continuing each anniversary date
thereafter, the agreements may be extended by the Board of Directors for an
additional year so that the remaining terms shall remain three years. Base
salaries will be reviewed annually. In 1997, the base salaries of Messrs. Burns
and Novy provided for by the employment agreements were $125,000, and $200,000,
respectively.
In addition to the base salary, the agreements provide for, among other
things, disability pay, participation in stock benefit plans and other fringe
benefits applicable to executive personnel. The agreements provide for
termination by Liberty Federal or Alliance Bancorp for cause at any time. In the
event Liberty Federal or Alliance Bancorp choose to terminate the executive's
employment for reasons other than for cause; or in the event of the executive's
resignation from Liberty Federal
46
<PAGE>
and Alliance Bancorp upon (i) failure to re-elect the executive to his current
offices or nominate for board membership, (ii) a material change in the
executive's functions, duties or responsibilities, or relocation of his
principal place of employment, (iii) liquidation or dissolution of Liberty
Federal or Alliance Bancorp, or (iv) a breach of the agreement by Liberty
Federal or Alliance Bancorp; the executive, or in the event of death, his
beneficiary would be entitled to severance pay. Pursuant to his agreements, in
the event of such termination, Mr. Burns would receive a sum equal to: (i) the
amount of remaining salary payments under the agreement; (ii) the annual
weighted average of the amount of bonus and other compensation paid to or
accrued on behalf of Mr. Burns during the term of the agreement times the
remaining number of years, and any fraction thereof, under the agreement; and
(iii) an amount equal to the average of the annual contributions that were made
on his behalf to any employee benefit plans during the term of the agreement
times the remaining number of years, and any fraction thereof, under the
agreement. Under the terms of their agreements, in the event of such
termination, Mr. Novy would receive the greater of (i) the payments due for the
remaining term of his agreement, or (ii) one times his average annual
compensation for the three preceding taxable years and the amount of any
benefits received pursuant to any employee benefit plans on his behalf during
the term of his agreement.
If termination, voluntary or involuntary, follows a change in control of
Liberty Federal or Alliance Bancorp, the executive or, in the event of death,
his beneficiary, would be entitled to a severance payment equal to three times
his average annual compensation over the past three years of employment with
Liberty Federal or Alliance Bancorp. Liberty Federal and Alliance Bancorp would
also continue the executive's life, medical, dental and disability coverage for
the remaining term of the agreement. A change in control is generally defined
to mean the acquisition by a person or group of persons having beneficial
ownership of 20% or more of Liberty Federal's or Alliance Bancorp's Common Stock
or a merger or other form of business combination, sale of assets, or contested
election of directors which results in a change of a majority of the Board of
Directors during the term of the agreement. Payments to the executive under
Liberty Federal's agreements will be guaranteed by Alliance Bancorp in the event
that payments or benefits are to paid by Liberty Federal.
In the event of a change of control, based upon the past fiscal year's
salary, bonus and fees, Mr. Burns would receive approximately $373,000, and Mr.
Novy would receive approximately $600,000 in severance payments. In addition,
the agreements provide for continued life, medical, dental and disability
coverage for a period of 36 months. Any outstanding options vest upon a change
in control.
Severance Agreements. Liberty Federal has entered into a severance
agreement with Mr. Hojnicki. The severance agreement provides for a term of
twelve months; on the first anniversary date and continuing on each anniversary
thereafter, the severance agreement may be extended so that the remaining term
shall be twelve months. If not renewed, the severance agreement expires twelve
months thereafter. The severance agreement provides that at any time following
a change in control of Alliance Bancorp or Liberty Federal, if Alliance Bancorp
or Liberty Federal terminates the officer's employment for any reason other than
cause, or if the officer
47
<PAGE>
terminates his employment following his demotion, loss of title, office or
significant authority, a reduction in his compensation, or relocation of his
principal place of employment, the officer or, in the event of death, his
beneficiary, would be entitled to receive a severance payment equal to an amount
equal to one and one half times the base salary. Liberty Federal would also
continue the officer's life, health, dental and disability coverage for the
remaining unexpired term of the severance agreement. Payment to the officer
under the severance agreement will be provided by Alliance Bancorp in the event
that payment or benefits are not paid by Liberty Federal. Liberty Federal has
entered into similar severance agreements with twelve other officers of Liberty
Federal paying one times salary.
Stock Option Plans. The Board of Directors of Alliance Bancorp established
stock option plans which provide discretionary awards to its officers and key
employees. The grant of awards to employees under the option plans is
determined by a committee of the Board of Directors of Alliance Bancorp
consisting of "Non-Employee" directors.
Set forth below is information relating to options granted under the
Alliance Bancorp Stock Option Plans to the Alliance Bancorp Named Executive
Officers during fiscal 1997.
<TABLE>
<CAPTION>
============================================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR (1)
============================================================================================================================
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM
- ----------------------------------------------------------------------------------------------------------------------------
PERCENT OF TOTAL
OPTIONS GRANTED
OPTIONS TO EMPLOYEES IN EXERCISE OR EXPIRATION 5% 10%
NAME GRANTED(1) FY 1997 BASE PRICE DATE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kenne P. Bristol 18,000(2) 17 $15.58 10/23/1999 $ 44,204 $ 92,825
- ----------------------------------------------------------------------------------------------------------------------------
Kenne P. Bristol 47,430(3) 44 $19.08 02/10/2000 $142,645 $299,543
- ----------------------------------------------------------------------------------------------------------------------------
Richard A. Hojnicki 6,750(2) 6 $15.58 10/23/1999 $ 16,576 $ 34,810
- ----------------------------------------------------------------------------------------------------------------------------
Howard A. Davis 11,250(2) 10 $15.58 10/23/1999 $ 27,628 $ 58,016
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
____________________________________
(1) Due to the change of fiscal year end in 1996 from September 30 to December
31, all options granted in the fifteen months ended December 31, 1997 are
included.
(2) These option become exercisable in three equal installments commencing
October 23, 1997.
(3) These options become exercisable in three equal installments commencing
February 10, 1998.
The following table provides certain information with respect to the number
of shares of Alliance Bancorp Common Stock represented by stock options held by
the Alliance Bancorp Named Executive Officers as of December 31, 1997. Also
reported are the values for "in-the-money" options which represent the positive
spread between the exercise price of any such existing stock options and the
fiscal year-end price of the Alliance Bancorp Common Stock. No options were
exercised during fiscal 1997.
48
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
====================================================================================================================
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT THE-MONEY OPTIONS AT
FISCAL YEAR-END YEAR-END (1)
--------------------------------------------------------
SHARES ACQUIRED VALUE
NAME UPON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
(#) ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kenne P. Bristol -- -- 81,082/68,805 $1,489,739/$598,712
- --------------------------------------------------------------------------------------------------------------------
Richard A. Hojnicki -- -- 37,167/7,312 $ 714,141/$83,900
- --------------------------------------------------------------------------------------------------------------------
Howard A. Davis -- -- 18,750/15,000 $ 226,438/$280,625
- --------------------------------------------------------------------------------------------------------------------
Fredric G. Novy -- -- 183,669/-- $ 1,790,475/--
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
____________________________________
(1) Equals the difference between the aggregate exercise price of such options
and the aggregate fair market value of the shares of Alliance Bancorp Common
Stock that would be received upon exercise, assuming such exercise occurred
on December 31, 1997, at which date the last sales price of the Alliance
Bancorp Common Stock, as quoted on the Nasdaq National Market, was $26.50.
Retirement Plan. Until November 1997, Liberty Federal maintained the
Pension Plan ("Pension Plan"), for the benefit of certain employees of Liberty
Federal (i.e., those persons who formerly had been employed by Hinsdale Federal
Bank for Savings). In March 1997, Liberty Federal adopted resolutions
terminating the Pension Plan. Subsequent to the Pension Plan's termination, no
additional benefits were accrued by any participants. Liberty Federal requested
and received a favorable determination letter on the termination of the Pension
Plan. In November 1997, the participants' accrued benefits were distributed and
the trust was dissolved.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Liberty Federal does not make loans to its directors and executive officers
except for overdraft lines of credit on checking accounts issued by Liberty
Federal, which are made in the ordinary course of business, and on substantially
the same terms, including interest rates, as those prevailing at the time for
comparable transactions with other persons and do not involve more than the
normal risk of collectibility or present other unfavorable features.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Alliance Bancorp's independent auditors for the fiscal year ended December
31, 1997 were KPMG Peat Marwick LLP. Alliance Bancorp's Board of Directors has
reappointed KPMG Peat Marwick LLP to continue as independent auditors for
Alliance Bancorp for the fiscal year ending December 31, 1998, subject to
ratification of such appointment by the stockholders. Representatives of KPMG
Peat Marwick LLP are expected to attend the Alliance Bancorp Annual Meeting.
They will be given the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions from stockholders
present at the Alliance Bancorp Annual Meeting.
49
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS OF ALLIANCE
BANCORP FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
STOCKHOLDER PROPOSALS
To be considered for inclusion in Alliance Bancorp's proxy statement in
connection with the annual meeting of stockholders to be held following fiscal
year ending December 31, 1998, a stockholder proposal must be received by the
Secretary of Alliance Bancorp, at the address set forth on the first page of
this Proxy Statement, no later than January 19, 1999. Any shareholder proposal
submitted to Alliance Bancorp will be subject to SEC Rule 14a-8 under the
Exchange Act.
ADVANCE NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The Bylaws of Alliance Bancorp provide an advance notice procedure for
certain business, or nominations to the Board of Directors, to be brought before
an annual meeting. In order for a stockholder to properly bring business before
an annual meeting, or to propose a nominee to the Board, the stockholder must
give written notice to the Secretary of Alliance Bancorp not less than ninety
(90) days before the date fixed for such meeting; provided, however, that in the
event that less than one hundred (100) days notice or prior public disclosure of
the date of the meeting is given or made, notice by the stockholder to be timely
must be received not later than the close of business on the tenth day following
the day on which such notice of the date of the Annual Meeting was mailed or
such public disclosure was made. The notice must include the stockholder's name,
record address, and number of shares owned by the stockholder, and describe
briefly the proposed business, the reasons for bringing the business before the
Annual Meeting, and any material interest of the stockholder in the proposed
business. In the case of nominations to the Board of Directors, certain
information regarding the nominee must be provided. Nothing in this paragraph
shall be deemed to require Alliance Bancorp to include in its proxy statement
and proxy relating to an annual meeting any stockholder proposal which does not
meet all of the requirements for inclusion established by the SEC in effect at
the time such proposal is received.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE
THE ALLIANCE BANCORP ANNUAL MEETING
The Board of Directors knows of no business which will be presented for
consideration at the Alliance Bancorp Annual Meeting other than as stated in the
Notice of Annual Meeting of Stockholders. If, however, other matters are
properly brought before the Annual Meeting, it is the intention of the persons
named in the accompanying proxy card to vote the shares represented thereby on
such matters in accordance with their best judgment.
50
<PAGE>
SOUTHWEST BANCSHARES ANNUAL MEETING
General. The Southwest Bancshares Annual Meeting is scheduled to be held
on Tuesday, June 30, 1998, at The Oak Lawn Hilton Hotel, 9333 South Cicero
Avenue, Oak Lawn, Illinois, at 9:30 a.m., Chicago time. This Joint Proxy
Statement/Prospectus is being sent to holders of record, and certain beneficial
owners, of Southwest Bancshares Common Stock as of the Southwest Bancshares
Record Date, and is accompanied by a form of proxy which the Southwest
Bancshares Board requests that stockholders execute and return to Southwest
Bancshares for use at the Southwest Bancshares Annual Meeting and at any and all
adjournments or postponements thereof.
Matters to Be Considered. At the Southwest Bancshares Annual Meeting,
holders of Southwest Bancshares Common Stock as of the Southwest Bancshares
Record Date will vote the following proposals (the "Southwest Bancshares
Proposals"): (i) the approval of the Merger Agreement and the transactions
contemplated thereby, including the Merger of Southwest Bancshares with and into
Alliance Bancorp; (ii) the election of two directors to hold office until the
Merger is consummated or, if the Merger is not consummated, for a term of three
years each; and (iii) the ratification of the appointment of Cobitz, VandenBerg
& Fennessy as independent auditor for Southwest Bancshares for the fiscal year
ended December 31, 1998. Holders of Southwest Bancshares Common Stock also may
consider and vote upon such other matters as are properly brought before the
Southwest Bancshares Annual Meeting, including proposals to adjourn the
Southwest Bancshares Annual Meeting to permit further solicitation of proxies by
Southwest Bancshares' Board of Directors in the event that there are not
sufficient votes to approve the Merger proposal at the time of the Southwest
Bancshares Annual Meeting; provided, however, that any proxy which is voted
against the Southwest Bancshares Merger Proposal will not be voted in favor of
adjournment to solicit further proxies for such proposal. As of the date
hereof, the Southwest Bancshares Board knows of no business that will be
presented for consideration at the Southwest Bancshares Annual Meeting, other
than the matters described in this Joint Proxy Statement/Prospectus.
Southwest Bancshares Record Date. The Southwest Bancshares Board has fixed
the close of business on May 14, 1998 (the "Southwest Bancshares Record Date")
as the time for determining holders of Southwest Bancshares Common Stock who are
entitled to notice of and to vote at the Southwest Bancshares Annual Meeting.
Only holders of record of Southwest Bancshares Common Stock on the Southwest
Bancshares Record Date will be entitled to notice of and to vote at the
Southwest Bancshares Annual Meeting. As of the Southwest Bancshares Record Date,
there were outstanding and entitled to vote at the Southwest Bancshares Annual
Meeting 2,787,585 shares of Southwest Bancshares Common Stock.
Votes Required. Each holder of record of shares of Southwest Bancshares
Common Stock on the Southwest Bancshares Record Date is entitled to cast one
vote per share on the proposal to approve and adopt the Merger Agreement and the
other proposals described herein, and on any other matter properly submitted for
the vote of the Southwest Bancshares stockholders at the Southwest Bancshares
Annual Meeting. The presence, either in person or by properly executed proxy,
of the
51
<PAGE>
holders of at least a majority of the outstanding shares of Southwest Bancshares
Common Stock entitled to vote at the Southwest Bancshares Annual Meeting is
necessary to constitute a quorum at the Southwest Bancshares Annual Meeting,
after subtracting any shares in excess of the Southwest Bancshares Limit, as
defined below, pursuant to Southwest Bancshares' Certificate of Incorporation.
As provided in Southwest Bancshares' Certificate of Incorporation,
recordholders of Common Stock who beneficially own in excess of 10% of the
outstanding shares of Common Stock (the "Southwest Bancshares Limit") are not
entitled to any vote in respect of the shares held in excess of the Southwest
Bancshares Limit. A person or entity is deemed to beneficially own shares owned
by an affiliate of, as well as persons acting in concert with, such person or
entity. Southwest Bancshares' Certificate of Incorporation authorizes the Board
of Directors (i) to make all determinations necessary to implement and apply the
Southwest Bancshares Limit, including determining whether persons or entities
are acting in concert, and (ii) to demand that any person who is reasonably
believed to beneficially own stock in excess of the Southwest Bancshares Limit
to supply information to Southwest Bancshares to enable the Board of Directors
to implement and apply the Southwest Bancshares Limit.
Southwest Bancshares intends to count shares of Southwest Bancshares Common
Stock present in person at the Southwest Bancshares Annual Meeting but not
voting, and shares of Southwest Bancshares Common Stock for which it has
received proxies but with respect to which holders of shares have abstained on
any matter, as present at the Southwest Bancshares Annual Meeting for purposes
of determining the presence or absence of a quorum for the transaction of
business. Since the approval and adoption of the Merger Agreement requires the
affirmative vote of a majority of the outstanding shares of Southwest Bancshares
Common Stock entitled to vote thereon, each such non-voting share and abstention
will have the same effect as a vote AGAINST the approval and adoption of the
Merger Agreement. In addition, brokers who hold shares in street name for
customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers on the approval and
adoption of the Merger Agreement without specific instructions from such
customers. Given that the approval and adoption of the Merger Agreement requires
the affirmative vote of the holders of a majority of the outstanding shares of
Southwest Bancshares Common Stock entitled to vote thereon, any "broker non-
vote" with respect to such shares of Southwest Bancshares Common Stock will have
the same effect as a vote AGAINST the approval and adoption of the Merger
Agreement.
At the Southwest Bancshares Annual Meeting, directors will be elected by a
plurality of the votes of the shares of Southwest Bancshares Common Stock cast
at the Southwest Bancshares Annual Meeting without regard to either (i) broker
non-votes, or (ii) proxies as to which authority to vote for one or more of the
nominees being proposed is withheld. "Plurality" means that the two nominees who
receive the most votes at the Southwest Bancshares Annual Meeting will be
elected as directors. Abstentions will not be counted as votes cast with respect
to the election of directors, and therefore will have no effect on the outcome
of the vote on the election of directors. See "Election of Southwest Bancshares'
Directors" included elsewhere in this Joint Proxy Statement/Prospectus.
52
<PAGE>
As to the ratification of Cobitz, VandenBerg & Fennessy and all other
matters that may properly come before the Southwest Bancshares Annual Meeting,
by checking the appropriate box, a shareholder may: (i) vote "FOR" the item;
(ii) vote "AGAINST" the item; or (iii) "ABSTAIN" from voting on such item. Under
Southwest Bancshares' Certificate of Incorporation and Bylaws, unless otherwise
required by law, all other matters shall be determined by a majority of the
votes cast, without regard to either (a) broker non-votes, or (b) proxies marked
"ABSTAIN" as to that matter.
All shares of Southwest Bancshares Common Stock which are entitled to be
voted and are represented at the Southwest Bancshares Annual Meeting by properly
executed proxies received prior to or at the Southwest Bancshares Annual
Meeting, and which are not revoked, will be voted in accordance with the
instructions indicated on such proxies. If no instructions are indicated, such
proxies will be voted: (i) FOR approval and adoption of the Merger Agreement,
(ii) FOR the election of the Southwest Bancshares Board's two nominees for
director, (iii) FOR the ratification of Cobitz, VandenBerg & Fennessy as
independent auditors of Southwest Bancshares for the year ending December 31,
1998, and (iv) otherwise in the discretion of the proxy holders as to any other
matter which may properly come before the Southwest Bancshares Annual Meeting,
including, among other things, a motion to adjourn or postpone the Southwest
Bancshares Annual Meeting to another time and/or place, for the purpose of
soliciting additional proxies or otherwise; provided, however, that no proxy
which is voted against the proposal to approve and adopt the Merger Agreement
will be voted in favor of any such adjournment or postponement.
If any other matters are properly presented for consideration at the
Southwest Bancshares Annual Meeting, the persons named in the form of proxy
enclosed herewith and acting thereunder will have discretionary authority to
vote on such matters in accordance with their best judgment; provided, however,
that such discretionary authority will only be exercised to the extent allowable
under applicable federal and state securities and corporation laws. Southwest
Bancshares does not have any knowledge of any matters to be presented at the
Southwest Bancshares Annual Meeting other than the matters set forth above.
Any proxy given by a Southwest Bancshares stockholder pursuant to this
solicitation may be revoked by the person giving it at any time before it is
voted by (i) delivering to the Corporate Secretary of Southwest Bancshares, at
or before the taking of the vote of the Southwest Bancshares Annual Meeting, of
a written notice of revocation bearing a later date than the date of the proxy;
(ii) duly executing a later-dated proxy relating to the same shares and
delivering it to the Corporate Secretary of Southwest Bancshares before the
taking of the vote at the Southwest Bancshares Annual Meeting; or (iii)
attending the Southwest Bancshares Annual Meeting and voting in person (although
attendance at the meeting will not in and of itself constitute a revocation of
the proxy). Any written notice of revocation or subsequently executed proxy
should be sent so as to be delivered to Southwest Bancshares, Inc., 4062
Southwest Highway, Hometown, Illinois 60456; Attention: Corporate Secretary, or
hand delivered to Southwest Bancshares' Corporate Secretary at or before the
taking of the vote at the Southwest Bancshares Annual Meeting.
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<PAGE>
VOTE REQUIRED TO APPROVE THE MERGER; PRINCIPAL STOCKHOLDERS
The approval and adoption of the Merger Agreement by Southwest Bancshares
stockholders will require the affirmative vote of at least a majority of the
outstanding shares of Southwest Bancshares Common Stock entitled to vote
thereon. Such stockholder approval is a condition to consummation of the
Merger.
As of the Southwest Bancshares Record Date, directors and executive
officers of Southwest Bancshares and their affiliates beneficially owned 952,541
shares, or approximately 34.2% of the outstanding shares, of Southwest
Bancshares Common Stock entitled to vote at the Southwest Bancshares Annual
Meeting. The directors and executive officers of Southwest Bancshares have
entered into the Alliance Bancorp Voting Agreements whereby such directors,
executive officers and their affiliates have agreed to vote all shares of
Southwest Bancshares Common Stock owned by them (952,541 shares in the
aggregate) for approval of the Merger Agreement. As of the Southwest Bancshares
Record Date, the directors and executive officers of Alliance Bancorp and their
affiliates beneficially owned 500 shares of Southwest Bancshares Common Stock.
Information with respect to beneficial ownership of Southwest Bancshares
Common Stock by entities owning more than 5% of such stock and more detailed
information with respect to beneficial ownership of Southwest Bancshares Common
Stock by directors and executive officers of Southwest Bancshares is set forth
under the section entitled "Election of Southwest Bancshares' Directors --
Information With Respect to Nominees, Continuing Directors and Certain Executive
Officers" and "-- Security Ownership of Certain Beneficial Owners and
Management" which is included elsewhere in this Joint Proxy
Statement/Prospectus.
SOLICITATION OF PROXIES
Southwest Bancshares will bear all expenses of this solicitation of proxies
from the holders of Southwest Bancshares Common Stock, except that the cost of
preparing and mailing this Joint Proxy Statement/Prospectus will be borne
equally by Southwest Bancshares and Alliance Bancorp. In addition to
solicitation by use of the mails, proxies may be solicited by directors,
officers and employees of Southwest Bancshares in person or by telephone,
telegram or other means of communication. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation.
Southwest Bancshares has retained Morrow & Co., a proxy soliciting firm, to
assist in such solicitation. The fee to be paid to such firm is not expected to
exceed $4,500, plus reasonable out-of-pocket costs and expenses. In addition,
Southwest Bancshares will make arrangements with brokerage firms and other
custodians, nominees and fiduciaries to send proxy materials to their principals
and will reimburse such parties for their expenses in doing so.
HOLDERS OF SOUTHWEST BANCSHARES COMMON STOCK ARE REQUESTED TO PROMPTLY
COMPLETE, SIGN AND DATE THE ACCOMPANYING
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<PAGE>
PROXY AND RETURN IT PROMPTLY TO SOUTHWEST BANCSHARES IN THE ENCLOSED POSTAGE-
PAID PRE-ADDRESSED ENVELOPE.
SOUTHWEST BANCSHARES STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES
WITH THEIR PROXY FORMS.
ELECTION OF SOUTHWEST BANCSHARES' DIRECTORS
Pursuant to its Bylaws, the number of directors of Southwest Bancshares is
set at seven (7) unless otherwise designated by the Board of Directors. Each of
the seven members of the Board of Directors of Southwest Bancshares also
presently serves as a director of Southwest Federal. Directors are elected for
staggered terms of three years each, with a term of office of only one of the
three classes of directors expiring each year. Directors serve until their
successors are elected and qualified (or, if earlier, until the Merger is
consummated).
The two nominees proposed for election at the Annual Meeting are Messrs.
Muriello and Rodrigues. All nominees named are presently directors of Southwest
Bancshares and Southwest Federal. No person being nominated as a director is
being proposed for election pursuant to any agreement or understanding between
any person and Southwest Bancshares.
In the event that any nominee is unable to serve or declines to serve for
any reason, it is intended that proxies will be voted for the election of the
balance of those nominees named and for such other persons as may be designated
by the present Board of Directors. The Board of Directors has no reason to
believe that any of the persons named will be unable or unwilling to serve.
UNLESS AUTHORITY TO VOTE FOR THE DIRECTORS IS WITHHELD, IT IS INTENDED THAT THE
SHARES REPRESENTED BY THE ENCLOSED PROXY, IF EXECUTED AND RETURNED, WILL BE
VOTED "FOR" THE ELECTION OF ALL NOMINEES PROPOSED BY THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL NOMINEES
NAMED IN THIS PROXY STATEMENT.
INFORMATION WITH RESPECT TO NOMINEES, CONTINUING DIRECTORS AND CERTAIN
EXECUTIVE OFFICERS
The following table sets forth, as of the Southwest Bancshares Record Date,
the names of the nominees, continuing directors and the Named Executive
Officers, as defined below, as well as their ages, a brief description of their
recent business experience, including present occupations and employment,
certain directorships held by each, the year in which each became a director of
Southwest Federal, and the year in which their terms (or in the case of
nominees, their proposed terms) as director of Southwest Bancshares expire.
This table also sets forth the amount of Common Stock and the percent thereof
beneficially owned by each director and Named Executive Officer and all
directors and executive officers as a group as of the Southwest Bancshares
Record Date.
55
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL EXPIRATION SHARES OF COMMON OWNERSHIP
OCCUPATION AT PRESENT DIRECTOR OF TERM AS STOCK BENEFICIALLY AS A PERCENT
AND FOR THE PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED(2) OF CLASS
--------------------------- --- -------- ---------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
DIRECTOR NOMINEES:
Frank J. Muriello.......................................... 69 1988 1998 43,876 1.57%
Mr. Muriello owns his own real estate consulting and
appraisal firm and is Executive Director of the Housing
Authority of the Village of Oak Park. Mr. Muriello also
performs real estate consulting and quality control
appraisal services for Southwest Federal.
Albert Rodrigues........................................... 69 1969 1998 101,920 3.66
Mr. Rodrigues retired as Executive Vice President of
Southwest Federal on December 31, 1993 and remains as
consultant to Southwest Federal, a Director of Southwest
Bancshares and Southwest Federal, Executive Vice
President and Director of Southwest Service Corporation
and Vice President and Director of Southwest Bancshares
Development Corporation.
CONTINUING DIRECTORS:
Lawrence M. Cox............................................ 67 1963 2000 105,131 3.77
Dr. Cox is Chairman of the Board of Directors of
Southwest Bancshares and Southwest Federal. Dr. Cox has
served as a director since 1963 and as Chairman of the
Board of Southwest Federal since 1990. Dr. Cox is a
physician in the private practice of medicine.
Robert E. Lawler........................................... 66 1990 2000 23,101 0.83
Dr. Lawler has his own dental practice and is the president
of a dental corporation.
Richard E. Webber.......................................... 68 1959 1999 278,578(3) 9.99
Mr. Webber is the President and Chief Financial Officer of
Southwest Bancshares and President and Chief Executive
Officer of Southwest Federal. He has been President of
Southwest Federal since 1970 and Chief Executive Officer
of Southwest Federal since 1959. Mr. Webber also serves
as President, and as a Director of Southwest Service
Corporation and Southwest Bancshares Development
Corporation.
James W. Gee, Sr........................................... 80 1953 1999 33,236 1.19
Retired, Mr. Gee was the owner of a lumber and hardware
store.
Joseph A. Herbert.......................................... 73 1977 1999 44,201 1.59
Mr. Herbert is the owner of a photographic and electronic
supply business.
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL EXPIRATION SHARES OF COMMON OWNERSHIP
OCCUPATION AT PRESENT DIRECTOR OF TERM AS STOCK BENEFICIALLY AS A PERCENT
AND FOR THE PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED(2) OF CLASS
--------------------------- --- -------- ---------- ------------------ ------------
NAMED EXECUTIVE OFFICERS:
(WHO ARE NOT ALSO DIRECTORS)
- ----------------------------
<S> <C> <C> <C> <C> <C>
Ronald D. Phares.......................................... 63 -- -- 42,229(3) 1.51%
Mr. Phares has been Senior Vice President and Chief
Operations Officer of Southwest Federal since September
1988. Mr. Phares is also Vice President and Investor
Relations Officer of Southwest Bancshares.
Mary A. McNally........................................... 40 -- -- 45,414(3) 1.63
Ms. McNally is the Corporate Secretary of Southwest
Bancshares, Vice President, Secretary and Chief Lending
Officer of Southwest Federal, and Secretary of Southwest
Service Corporation and Southwest Bancshares
Development Corporation.
Michael J. Gembara........................................ 38 -- -- 43,669(3) 1.57
Mr. Gembara is Vice President of Southwest Bancshares,
Vice President of Subsidiary Operations of Southwest
Federal and Vice President, Treasurer and Director of
Southwest Bancshares Development Corporation and Vice
President and Director of Southwest Service Corporation.
Stock ownership of all directors and executive officers of -- -- -- 952,541(4)(5) 34.17
Southwest Bancshares as a group (14 persons).
</TABLE>
_________________________________
(1) Includes years of service as a director of Southwest Bancshares'
predecessor, Southwest Federal.
(2) Each person or relative of such person whose shares are included herein
exercises sole (or shared with spouse, relative or affiliate) voting or
dispositive power as to the shares reported.
(3) Includes 23,625, 15,277, 13,131 and 13,926 shares allocated to Messrs.
Webber and Phares, Ms. McNally and Mr. Gembara, respectively, under
Southwest Federal's ESOP.
(4) Includes 37,527 shares held by Southwest Federal's Retirement Plan over
which Messrs. Eckert and Olson, employees of Southwest Bancshares, as co-
trustees, have shared voting or dispositive power as to the shares reported.
(5) Includes 105,834 shares allocated to executive officers under the ESOP.
MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD
The Board of Directors conducts its business through meetings of the Board
and through activities of its committees. The Board of Directors meets monthly
and may have additional meetings as needed. During fiscal 1997, the Board of
Directors of Southwest Bancshares held twelve regular meetings and five special
meetings. All of the directors of Southwest Bancshares attended at least 75% in
the aggregate of the total number of Southwest Bancshares' board meetings held
and committee meetings on which such directors served during 1997. The Board of
Directors of Southwest Bancshares maintains committees, the nature and
composition of which are described below:
57
<PAGE>
Audit Committee. The Audit Committee of Southwest Bancshares and Southwest
Federal consists of all outside directors: Messrs. Cox, Gee, Herbert, Lawler,
Muriello and Rodrigues. The purpose of the Audit Committee is to review
Southwest Federal's budgets and audit performance and evaluate policies and
procedures relating to the auditing functions and controls. This committee also
selects the independent auditors. The committee met twice in 1997.
Nominating Committee. Southwest Bancshares' Nominating Committee for the
1998 Annual Meeting consists of the Board of Directors. The Nominating Committee
considers and recommends the nominees for director to stand for election at
Southwest Bancshares' Annual Meeting of Stockholders. Southwest Bancshares'
Bylaws provide for stockholder nominations of directors. These provisions
require such nominations to be made pursuant to timely written notice to the
Secretary of Southwest Bancshares. The stockholders' notice of nominations must
contain all information relating to the nominee which is required to be
disclosed by Southwest Bancshares' Bylaws and by the Exchange Act. The
Nominating Committee met once in fiscal 1997.
DIRECTORS' COMPENSATION
Directors' Fees and Real Estate Consulting Fees. The directors of Southwest
Federal receive a retainer of $1,100 per month and $600 for each Southwest
Federal meeting attended and directors of Southwest Bancshares receive $100 for
each Southwest Bancshares meeting attended. The Chairman of the Board receives
an additional $300 for each Southwest Federal meeting conducted and $50 for each
Southwest Bancshares meeting conducted. Directors of Southwest Bancshares
Development Corporation ("SBDC") receive $100 for each meeting attended and the
directors of Southwest Service Corporation ("SSC") receive $350 per month. Mr.
Muriello received $5,200 for real estate appraisal reviews and consulting
services performed during 1997. Mr. Rodrigues received $24,000 for real estate
consulting services for the year ended December 31, 1997.
Directors' Option Plan. Under the Directors' Option Plan, each outside
director was granted, effective June 23, 1992, options to purchase 8,400 shares
of Southwest Bancshares Common Stock at an exercise price of $10.00 per share,
not accounting for Southwest Bancshares' 3 for 2 stock split effected on
November 13, 1996. The Chairman of the Board received options to purchase 28,000
shares of Southwest Bancshares Common Stock, not accounting for the stock split.
Each person who is first elected as an outside director subsequent to June 23,
1992 (referred to herein as a subsequent outside director) is granted options to
purchase 1,500 shares of Southwest Bancshares Common Stock at the fair market
value on the date of the grant, if available. Options granted to outside
directors were exercisable immediately.
Southwest Federal Recognition and Retention Plan and Trust. Under Southwest
Federal's Recognition and Retention Plan and Trust ("RRP"), each outside
director was awarded, effective June 23, 1992, 5,400 shares of Southwest
Bancshares Common Stock, not accounting for the stock split, except for the
Chairman who was granted 10,800 shares of Southwest Bancshares Common Stock.
Each subsequent outside director will be granted 1,500 shares of Southwest
Bancshares Common Stock as of the effective date of such election. Outside
directors earn shares awarded to
58
<PAGE>
them at a rate of 20% per year commencing one year from the effective date of
the grant. In accordance with the RRP, dividends are paid on shares awarded or
held in the RRP. As of December 31, 1997, all shares previously awarded under
the RRP had been fully earned.
EXECUTIVE COMPENSATION
The report of the compensation committee and the stock performance graph
shall not be deemed incorporated by reference by any general statement
incorporating by reference this Joint Proxy Statement/Prospectus into any filing
under the Securities Act or the Exchange Act, except as to the extent that
Southwest Bancshares specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
Compensation Committee Report on Executive Compensation. Under rules
established by the SEC, Southwest Bancshares is required to provide certain data
and information in regard to the compensation and benefits provided to Southwest
Bancshares' chief executive officer and the other executive officers of
Southwest Bancshares. The disclosure requirements for these executive officers
include the use of tables and a report explaining the rationale and
considerations that led to fundamental compensation decisions affecting those
individuals. In fulfillment of this requirement, the compensation committee, at
the direction of the Board of Directors, has prepared the following report for
inclusion in this proxy statement.
General. Southwest Bancshares does not pay any cash compensation to the
executive officers of Southwest Bancshares and, therefore, Southwest Bancshares
does not maintain a compensation committee. The compensation committee of the
Board of Directors of Southwest Federal is responsible for establishing the
compensation levels and benefits for the executive officers of Southwest
Federal, who also serve as executive officers of Southwest Bancshares, and for
reviewing the recommendations of management for compensation and benefits for
other officers and employees of Southwest Federal. The compensation committee is
composed of all the outside directors of Southwest Federal.
Compensation Policies. It is the compensation committee's policy to develop
an executive compensation program which will attract, motivate, retain and
reward senior executives and provide appropriate incentives to provide long term
financial results which will benefit Southwest Federal. In order to align the
interests and performance of its executives with the long term interests of its
stockholders, Southwest Bancshares and Southwest Federal adopted a program which
rewards the executives for delivering long term value to Southwest Bancshares
and Southwest Federal through stock ownership.
The compensation package available to executive officers consists of the
following components: base salary, bonus awards and long term incentive
compensation, including options and stock awards. Mr. Webber has an employment
agreement which specifies a minimum base salary and requires periodic review of
such salary. In addition, executive officers participate in other
59
<PAGE>
benefit plans available to all employees including Southwest Federal's Employee
Stock Ownership Plan.
Base Salaries. In determining salary levels, the compensation committee
considers the entire compensation package of the executive officers, including
the equity compensation provided under Southwest Bancshares' stock plans. The
salary levels are intended to be consistent with competitive practices of other
comparable financial institutions and each executive's level of responsibility.
The compensation committee consulted a survey of compensation paid to executive
officers performing similar duties for depository institutions and their holding
companies, with particular focus on the level of compensation paid by comparable
institutions in Southwest Federal's market area. The peer group utilized for
comparison of compensation includes some, but not all, of the companies included
in the peer group used for the Stock Performance Graph.
Although the compensation committee's decisions are discretionary and no
specific formula is used for decision making, salary increases are aimed at
reflecting the overall financial performance of Southwest Bancshares and the
performance of the individual executive officer. Specifically, the compensation
committee considered Southwest Bancshares' asset size, asset quality, return on
average assets, profit on joint ventures and the ratio of compensation expense
to total assets. Each of these factors are weighted equally in determining
compensation. In 1996, Southwest Bancshares' assets increased to $382.4 million
from $359.5 million in 1995. Return on assets, however, declined to 0.72% in
1996 (or 1.00% excluding the effect of the one-time charge to recapitalize the
Savings Association Insurance Fund) from 1.26% in 1995. The compensation
committee also noted the stability in non-performing loans to total loans of
0.30% for both 1996 and 1995; the increase in loan originations to $66.6 million
in 1996 from $50.6 million in 1995; and the increase in joint venture income in
1996 to $675,000 from $477,000 in 1995.
Bonus Awards. In determining bonus awards, the compensation committee again
considers the entire compensation package of the executive officers, including
equity compensation under Southwest Bancshares' stock plans. As discussed under
base salaries, the bonus awards are intended to be consistent with competitive
practices of other comparable financial institutions and each executive's level
of responsibility. The compensation committee consulted a survey of compensation
paid to executive officers focusing on the level of compensation paid by
comparable institutions in Southwest Federal's market area. Although the
compensation committee's decisions are discretionary and no specific formula is
used for decision making, bonus awards are aimed at reflecting the overall
financial performance of Southwest Bancshares and the performance of the
individual executive officer.
Long Term Incentive Compensation. Southwest Bancshares and Southwest
Federal maintain the Incentive Option Plan and the RRP under which executive
officers may receive grants and awards. The compensation committee believes that
stock ownership is a significant incentive in building stockholders' wealth and
aligning the interests of employees and stockholders. In connection with
Southwest Bancshares' initial public offering, all the executive officers
received grants and awards which became fully vested as of June 23, 1997. In
September, 1997, the
60
<PAGE>
compensation committee awarded the remaining 6,000 shares under the RRP to
certain officers. The value of this component of compensation grows as the stock
of Southwest Bancshares appreciates in value.
Compensation of the Chief Executive Officer. After taking into
consideration the factors discussed above, including the overall compensation
package, the survey consulted and the specified performance factors, the
compensation committee determined to maintain Mr. Webber's salary at the same
level for 1997, which was within the range of compensation paid by comparable
institutions in Southwest Federal's market area. In addition, the compensation
committee determined that Mr. Webber's bonus would be $110,417 based on
Southwest Bancshares' performance levels as discussed above, which bonus was the
same as the bonus received in 1996. This bonus amount was comparable to the
amounts provided for executive officers of the surveyed institutions. In
addition, the compensation committee considered the outstanding grants and
awards to Mr. Webber as well as the appreciation of such awards.
COMPENSATION COMMITTEE
Lawrence M. Cox Robert E. Lawler
James W. Gee, Sr. Frank J. Muriello
Joseph A. Herbert Albert Rodrigues
61
<PAGE>
Stock Performance Graph. The following graph shows a comparison of
stockholder return on Southwest Bancshares' Common Stock based on the market
price of Southwest Bancshares Common Stock assuming the reinvestment of
dividends, with the cumulative total returns for the companies on the Nasdaq
Stock Market (U.S.) Index and Nasdaq Financial Stocks Index for the period
beginning on December 31, 1992 through December 31, 1997. The data used to
prepare the graph was prepared by the Center for Research in Security Prices
("CRSP") at the University of Chicago Graduate School of Business.
COMPARISON OF CUMULATIVE TOTAL RETURN
Among Southwest Bancshares, Nasdaq Stock Market (U.S.)
Index and Nasdaq Financial Stocks Index
[GRAPH APPEARS HERE]
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
SUMMARY
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Southwest Bancshares, Inc. 100.0 131.5 143.2 185.7 199.7 337.4
CRSP Index -- Nasdaq Stock Market Index 100.0 114.8 112.2 158.7 195.2 239.5
CRSP Index -- Nasdaq Financial Stock Index 100.0 116.2 116.5 169.7 217.5 333.8
Notes:
A. The lines represent yearly index levels derived from compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the yearly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
D. The index level for all series was set to $100.00 on 12/31/92.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE>
Summary Compensation Table. The following table shows, for the fiscal years
ending December 31, 1997, 1996 and 1995, the cash compensation as well as
certain other compensation paid or accrued for those years, paid by Southwest
Federal, to the President and those executive officers of Southwest Bancshares
who received an amount in salary and bonus in excess of $100,000 in 1997 (the
"Southwest Bancshares Named Executive Officers"). Southwest Bancshares does not
pay any cash compensation.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------- ---------------------------------
AWARDS PAYOUTS
------------------------- -------
SECURITIES
OTHER RESTRICTED UNDERLYING ALL
ANNUAL STOCK OPTIONS/ LTIP OTHER
NAME AND SALARY BONUS COMPENSA- AWARDS SARS PAYOUTS COMPEN-
PRINCIPAL POSITION YEAR ($)(1) ($) TION($)(2) ($)(3) (#)(4) ($)(5) SATION($)
- ------------------- ----- ---------- ------------ ------------ ----------- ------------ --------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard E. Webber 1997 $277,500 $110,417 -- -- -- None $ 257,257(6)
President, Chief 1996 277,000 110,417 -- -- -- None 67,123
Executive Officer 1995 277,000 104,417 -- -- -- None 70,097
and Director
Ronald D. Phares 1997 100,000 16,167 -- 21,000 -- None 78,178(6)
Senior Vice 1996 100,000 16,167 -- -- -- None 49,168
President 1995 90,500 19,771 -- -- -- None 48,682
Mary A. McNally 1997 81,000 22,875 -- 10,500 -- None 69,537(6)
Vice President and 1996 81,000 22,875 -- -- -- None 43,679
Secretary 1995 72,000 29,000 -- -- -- None 43,971
Michael J. Gembara 1997 83,400 33,050 -- 10,500 -- None 74,238(6)
Vice President 1996 83,400 33,050 -- -- -- None 46,599
1995 71,400 40,750 -- -- -- None 46,462
</TABLE>
______________________________
(1) Includes directors' fees for Mr. Webber for serving as director of Southwest
Bancshares, Southwest Federal, SBDC and SSC and for Mr. Gembara for serving
as director of SBDC and SSC.
(2) For 1997, 1996 and 1995, there were no: (a) perquisites over the lesser of
$50,000 or 10% of the individual's total salary and bonus for the year; (b)
payments of above-market or preferential earnings on deferred compensation;
(c) payments of earnings with respect to long-term incentive plans prior to
settlement or maturation; (d) tax payment reimbursements; or (e)
preferential discounts on stock.
(3) At December 31, 1997, Messrs. Webber and Phares, Ms. McNally and Mr. Gembara
had become fully vested in all shares awarded to them in 1992 pursuant to
the RRP. A portion of the remaining shares under the RRP were awarded to Mr.
Phares (1,000 shares), Ms. McNally (500 shares) and Mr. Gembara (500 shares)
on September 23, 1997, which shares had a market value of $29,750, $14,875
and $14,875 as of December 31, 1997. The dollar amounts in the table
represent the market value of such shares on the date of grant. Such awards
were immediately vested.
(4) Southwest Bancshares maintains an Incentive Option Plan. See "Incentive
Stock Option Plan". Messrs. Webber and Phares, Ms. McNally and Mr. Gembara
were fully vested in all options awarded to them under the Incentive Option
Plan.
(5) For 1997, 1996 and 1995 Southwest Bancshares did not maintain a long-term
incentive plan and, therefore, there were no payments or awards under any
long-term incentive plan.
(6) Includes $109,629, $78,034, $69,347 and $74,048 contributed by Southwest
Federal pursuant to the ESOP and allocated respectively for the benefit of
Messrs. Webber and Phares, Ms. McNally and Mr. Gembara for fiscal 1997
including dividends credited to their accounts. Includes $1,026, $144, $190
and $190 attributable to payment of dividends and interest earned on plan
shares under the RRP to Messrs. Webber and Phares, Ms. McNally and Mr.
Gembara, respectively. Includes a distribution to Mr. Webber in the amount
of $146,602 from his Supplemental Executive Retirement Plan paid in fiscal
1997. See "--Supplemental Executive Retirement Plan".
63
<PAGE>
Employment Agreement. Southwest Federal entered into an employment
agreement with Mr. Webber in 1988, which was amended in 1993. Mr. Webber's
employment agreement with Southwest Federal provides for a three-year term. The
Board of Directors reviews the agreement annually and may extend the remaining
term of the agreement for an additional one-year period. The agreement provides
that the base salary for Mr. Webber will be reviewed annually. In 1997, Mr.
Webber's base salary was $250,000 (the "Base Salary").
In addition to the Base Salary, the agreement provides for, among other
things, disability pay and other fringe benefits. The agreement provides for
termination by Southwest Federal for cause at any time. In the event Southwest
Federal chooses to terminate Mr. Webber's employment for reasons other than for
cause, or in the event of Mr. Webber's resignation from Southwest Federal upon:
(i) a material change in Mr. Webber's functions, duties or responsibilities, or
relocation of his principal place of employment; (ii) liquidation, dissolution,
consolidation, reorganization or merger in which Southwest Federal or Southwest
Bancshares is not the resulting entity; (iii) failure to reelect Mr. Webber to
his current office or Board duties; or (iv) a breach of the agreement by
Southwest Federal or Southwest Bancshares, Mr. Webber, or in the event of death,
his beneficiary, would be entitled to severance pay in an amount equal to the
greater of his remaining salary payments under the agreement or the highest
annual Base Salary, including other cash compensation and bonuses received by
Mr. Webber during the term of the agreement and the amount of any benefits
received pursuant to any employee benefit plans, on behalf of Mr. Webber,
maintained by Southwest Federal during the term of the agreement; provided,
however, that if Southwest Federal is not in compliance with its minimum capital
requirements or if such payments would cause Southwest Federal's capital to be
reduced below its minimum capital requirements, such payments shall be deferred
until such time as Southwest Federal is in capital compliance. Southwest Federal
would also cause to be continued life, health and disability coverage
substantially identical to the coverage maintained by Southwest Federal for Mr.
Webber prior to his termination. Such coverage shall cease upon the expiration
of the remaining term of the agreement. The agreement also provides for certain
benefits to be paid upon disability or retirement, including a severance payment
equal to one-half of Mr. Webber's base salary, bonuses and any other cash
compensation in the event of retirement.
If termination, voluntary or involuntary, follows a change in control of
Southwest Federal or Southwest Bancshares, Mr. Webber or, in the event of his
subsequent death, his beneficiary, would be entitled to a severance payment in
an amount equal to the immediately preceding year's base salary plus the
compensation that Mr. Webber would have received during the remaining term of
the agreement subject to the limitation discussed below. Southwest Federal and
Southwest Bancshares would also continue Mr. Webber's life, medical and
disability coverage substantially identical to the coverage maintained by
Southwest Federal for Mr. Webber prior to his termination. Such coverage shall
cease upon the expiration of thirty-six (36) months. A change in control is
generally defined to mean the acquisition by a person or group of persons having
beneficial ownership of 20% or more of Southwest Federal's or Southwest
Bancshares' Common Stock during the term of the agreement or a plan of
reorganization, merger, consolidation, sale of all or substantially all of the
assets of Southwest Federal or Southwest Bancshares or similar transaction
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<PAGE>
in which Southwest Federal or Southwest Bancshares is not the resulting entity,
or contested election of directors which results in a change of a majority of
the Board of Directors.
The agreement contains a provision to the effect that in the event of a
change in control the aggregate payments under the agreement shall not
constitute an excess parachute payment under Section 280G of the Internal
Revenue Code of 1986, as amended, (the "Code"), which imposes an excise tax on
the recipient and denial of the deduction for such excess amount to the
employer. Such provision provides that the payments under the agreement shall be
reduced to one dollar below the amount which would trigger an excise tax under
Section 280G.
Consummation of the Merger will constitute a "change in control" under Mr.
Webber's employment agreement. Pursuant to the Merger Agreement, at the
Effective Date, Mr. Webber will be entitled to receive the cash severance
payments and other amounts that are payable to him under his employment
agreement upon a voluntary or involuntary termination following a change in
control of Southwest Bancshares or Southwest Federal. Based upon the past fiscal
year's salary and fees, Mr. Webber is entitled to receive approximately $1.3
million in severance payments in addition to other non-cash benefits provided
for under the agreement. Pursuant to the terms of the Merger Agreement, Mr.
Webber, or a person selected by Mr. Webber, will be appointed to serve on
Alliance's Board of Directors.
Southwest Federal has also entered into a Supplemental Stock Bonus
Retirement Agreement with Mr. Webber to provide him with stock benefits in the
event that he retires prior to the expiration of the ESOP's term loan. The
purpose of the Agreement is to compensate him for his experience and expertise
by providing him with benefits he would have received under the ESOP had he
remained with Southwest Federal until all vested shares held in the ESOP
suspense account for his benefit were fully allocated.
Incentive Stock Option Plan. Southwest Bancshares maintains the Incentive
Option Plan, which provides discretionary awards to officers and key employees
as determined by a committee. The following table shows options exercised by the
Southwest Bancshares Named Executive Officers during 1997, including the
aggregate value of gains on the date of exercise. In addition, the table
provides information with respect to the number of shares of Southwest
Bancshares Common Stock represented by outstanding stock options held by the
Southwest Bancshares Named Executive Officers as of December 31, 1997. Also
reported are the values for "in-the-money" options, which represent the positive
spread between the exercise price of any such existing stock options and the
year-end price of the Common Stock.
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<PAGE>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE (1)(2)(3)(4)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-
ACQUIRED ON VALUE OPTIONS/SARS AT MONEY OPTIONS/SARS AT
NAME EXERCISE (#) REALIZED ($)(5) FISCAL YEAR-END(#)(6) FISCAL YEAR-END($)(7)
- ------------- ---------------- ---------------- ------------------------------ ------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Webber 15,000 $282,450 53,700 -- $1,239,396 --
Ronald D. Phares 1,680 23,654 -- -- -- --
Mary A. McNally 1,680 32,474 -- -- -- --
Michael J. Gembara 3,360 44,579 -- -- -- --
</TABLE>
_______________________
(1) Options granted pursuant to the Incentive Option Plan became exercisable in
equal installments commencing on June 23, 1993 at a rate of 20% of the
original amount awarded per year. All options became exercisable as of June
23, 1997.
(2) The purchase price may be made in whole or in part through the surrender of
previously held shares of Southwest Bancshares Common Stock at the fair
market value of such shares on the date of surrender.
(3) Under limited circumstances, such as death, disability or normal retirement
of an employee, the employee (or his beneficiary) may request that
Southwest Bancshares, in exchange for the employee's surrender of an
option, pay to the employee (or beneficiary), the amount by which the fair
market value of the common stock exceeds the exercise price of the option
on the date of the employee's termination of employment. It is within
Southwest Bancshares' discretion to accept or reject such a request.
(4) Options are subject to limited (SAR) rights pursuant to which the options
may be exercised in the event of a change in control of Southwest
Bancshares. Upon the exercise of a limited right, the optionee would
receive a cash payment equal to the difference between the exercise price
of the related option on the date of grant and the fair market value of the
underlying shares of Southwest Bancshares Common Stock on the date the
limited right is exercised.
(5) Based on the market value of the Southwest Bancshares Common Stock as of
the date of exercise, minus the exercise price.
(6) The options in this table have an exercise price of $6.67.
(7) The price of the Southwest Bancshares Common Stock on December 31, 1997 was
$29.75.
Defined Benefit Plan. Southwest Federal maintains the Southwest Federal
Savings and Loan Association of Chicago Retirement Plan (the "Retirement Plan"),
for the benefit of eligible employees of Southwest Federal. The Retirement Plan
is a noncontributory defined benefit pension plan. The following table sets
forth the estimated annual benefits payable upon retirement at age 65 in
calendar year 1997, expressed in the form of a single life annuity, for the
final average salary and benefit service classifications specified. On January
14, 1997, Mr. Webber received a distribution of $1.1 million under the
Retirement Plan.
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<PAGE>
<TABLE>
<CAPTION>
YEARS OF BENEFIT SERVICE AT RETIREMENT (1)(2)
--------------------------------------------------------------
AVERAGE SALARY 15 20 25 30 35
- -------------------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
$ 25,000 $ 6,743 $ 8,990 $11,238 $13,485 $ 15,733
50,000 13,485 17,980 22,475 26,970 31,465
75,000 20,228 26,970 33,713 40,455 47,198
100,000 26,970 35,960 44,950 53,940 62,930
160,000(3) 43,153 57,537 71,921 86,306 100,690
</TABLE>
___________________________
(1) The compensation utilized for formula purposes includes the salary reported
in the "Summary Compensation Table".
(2) The benefit amounts shown in this table are on a life only basis and are
not subject to any deductions for social security benefits or other offset
amounts.
(3) Maximum allowable salary in 1997.
The following table sets forth the years of credited service (i.e.,
benefit service) as of December 31, 1997 for each of the individuals named in
the Summary Compensation Table.
<TABLE>
<CAPTION>
CREDITED SERVICE
YEARS
------------------
<S> <C>
Richard E. Webber(1) 38
Ronald D. Phares 9
Mary A. McNally 20
Michael J. Gembara 14
</TABLE>
_____________________
(1) Mr. Webber took an in-service distribution of his retirement benefit in
January 1997.
Supplemental Executive Retirement Plan. In 1988, Southwest Federal
entered into a Supplemental Executive Retirement Plan (the "SERP") with Mr.
Webber. The officer becomes vested at a rate equal to 10% for each year of
service, but becomes fully vested upon death, disability or attainment of normal
retirement age. The SERP is an unfunded plan; however, Southwest Federal intends
to use a portion of the cash surrender value of the key employee life insurance
policy purchased by Southwest Federal to provide payment to Mr. Webber, with
retirement or death benefits payable beginning at his retirement or death with
fixed payments for fifteen years. In the event Mr. Webber terminates employment
prior to retirement, limited benefits will be paid to him. In 1994, Southwest
Federal contributed $486,938 for the payment of the premiums on the policy and
no further payments are required. Southwest Federal is both the owner and the
beneficiary of such policy.
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<PAGE>
INDEBTEDNESS OF MANAGEMENT AND TRANSACTIONS WITH CERTAIN RELATED PERSONS
All loans made by Southwest Federal to its executive officers and
directors were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectibility or present other
unfavorable features.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to those persons
believed by management to be beneficial owners of more than 5% of the
outstanding shares of Southwest Bancshares Common Stock on the Southwest
Bancshares Record Date, as disclosed in certain reports regarding such ownership
filed with Southwest Bancshares and with the Securities and Exchange Commission,
in accordance with Sections 13(d) or 13(g) of the Exchange Act by such persons
and groups. Other than those persons listed below, Southwest Bancshares is not
aware of any person or group, as such term is defined in the Exchange Act, that
owns more than 5% of the Southwest Bancshares Common Stock as of the Southwest
Bancshares Record Date. Information regarding the share ownership of Directors
and Named Executive Officers is reported under "Election of Directors -
Information with Respect to Nominees, Continuing Directors and Certain Executive
Officers."
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL NUMBER OF SHARES PERCENT
TITLE OF CLASS OWNER OF CLASS
- ---------------- --------------------------------- ------------------ ----------
<S> <C> <C> <C>
Common Stock Southwest Federal Savings and Loan 328,159(1) 11.77%
Employee Stock Ownership Plan and
Trust ("ESOP")
4062 Southwest Highway
Hometown, Illinois 60456
Common Stock Richard E. Webber 278,578(2) 9.99
4062 Southwest Highway
Hometown, IL 60456
Common Stock LaSalle Financial Partners, Limited 159,500(3) 5.7
Partnership, Richard J. Nelson, Peter
T. Kross and Florence Nelson
259 E. Michigan, Suite 405
Kalamazoo, MI 49007
</TABLE>
__________________________________
(1) The ESOP Committee of the Board of Directors administers the ESOP. The ESOP
Committee may instruct the ESOP Trustee regarding investment of funds
contributed to the ESOP. The ESOP Trustee subject to its fiduciary duty
must vote all allocated shares held in the ESOP in accordance with the
instructions of the participating employees. As of February 25, 1998,
280,159 shares have been allocated to participants' accounts. Under the
ESOP, unallocated shares held in the suspense account will be voted by the
ESOP Trustee in a manner calculated to most accurately reflect the
instructions it has received from participants regarding the allocated stock
so long as such vote is in accordance with the provisions of Employee
Retirement Income Security Act of 1974, as amended (the "ERISA").
(2) Based upon information filed in Amendment No. 6 to Schedule 13D filed by
Richard E. Webber on April 8, 1998.
(3) Based upon information filed in a Schedule 13D on April 23, 1998. LaSalle
Financial Partners, Limited Partnership ("LaSalle") is a limited
partnership. LaSalle's general partners are LaSalle Capital Management,
Inc., a Michigan corporation owned by Richard J. Nelson and his wife
Florence Nelson and Talman Financial, Inc., a Michigan corporation owned by
Peter T. Kross. LaSalle, Richard J. Nelson and Peter T. Kross claim shared
voting and dispositive power over the 159,500 shares owned by the group.
Florence Nelson disclaims any sole or shared voting or dispositive power
over the shares.
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<PAGE>
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
Southwest Bancshares' independent auditors for the fiscal year ended
December 31, 1997 were Cobitz, VandenBerg & Fennessy. Southwest Bancshares'
Board of Directors has reappointed Cobitz, VandenBerg & Fennessy to continue as
independent auditors for Southwest Federal and Southwest Bancshares for the
fiscal year ending December 31, 1998, subject to ratification of such
appointment by the stockholders.
Representatives of Cobitz, VandenBerg & Fennessy will be present at the
Meeting. They will be given an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions from
stockholders present at the Meeting.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
WILL BE VOTED "FOR" RATIFICATION OF THE APPOINTMENT OF COBITZ, VANDENBERG &
FENNESSY AS THE INDEPENDENT AUDITORS OF SOUTHWEST BANCSHARES.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF COBITZ, VANDENBERG AND FENNESSY AS THE INDEPENDENT AUDITORS OF
SOUTHWEST BANCSHARES FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
STOCKHOLDER PROPOSAL
To be considered for inclusion in Southwest Bancshares' proxy statement in
connection with the annual meeting of stockholders to be held following fiscal
year ending December 31, 1998, if the Merger has not been completed prior to the
date the meeting is held, a stockholder proposal must be received by the
Secretary of Southwest Bancshares, no later than January 19, 1999. Any
shareholder proposal submitted to Southwest Bancshares will be subject to SEC
Rule 14a-8 under the Exchange Act.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The Bylaws of Southwest Bancshares provide an advance notice procedure for
certain business to be brought before an annual meeting. In order for a
stockholder to properly bring business before an annual meeting, the stockholder
must give written notice to the Secretary of Southwest Bancshares not less than
ninety (90) days before the time originally fixed for such meeting; provided,
however, that in the event that less than one hundred (100) days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be received no later than the close
of business on the tenth day following the day on which such notice of the date
of an annual meeting was mailed or such public disclosure was made. The notice
must include the stockholder's name and address, as it appears on
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<PAGE>
Southwest Bancshares' record of stockholders, a brief description of the
proposed business, the reason for conducting such business at the annual
meeting, the class and number of shares of Southwest Bancshares' capital stock
that are beneficially owned by such stockholder and any material interest of
such stockholder in the proposed business. In the case of nominations to the
Board, certain information regarding the nominee must be provided. Nothing in
this paragraph shall be deemed to require Southwest Bancshares to include in its
proxy statement and proxy relating to the Annual Meeting any stockholder
proposal which does not meet all of the requirements for inclusion established
by the SEC in effect at the time such proposal is received.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
SOUTHWEST BANCSHARES ANNUAL MEETING
The Board of Directors knows of no business which will be presented for
consideration at the Southwest Bancshares Annual Meeting other than as stated in
the Notice of Southwest Bancshares Annual Meeting of Stockholders. If, however,
other matters are properly brought before the Southwest Bancshares Annual
Meeting, it is the intention of the persons named in the accompanying proxy to
vote the shares represented thereby on such matters in accordance with their
best judgement.
Whether or not you intend to be present at the Southwest Bancshares Annual
Meeting, you are urged to return your proxy promptly. If you are present at the
Southwest Bancshares Annual Meeting and wish to vote your shares in person, your
proxy may be revoked by voting at the Southwest Bancshares Annual Meeting.
70
<PAGE>
THE MERGER
The information in this Joint Proxy Statement/Prospectus concerning the
terms of the Merger is qualified in its entirety by reference to the full text
of the Merger Agreement, which is attached hereto in Appendix I and incorporated
by reference herein. All stockholders are urged to read the Merger Agreement in
its entirety.
BACKGROUND OF THE MERGER
Southwest Bancshares. Southwest Federal converted from the mutual to stock
form of organization in June 1992. The period since the Southwest Federal
conversion has been one of continuous and significant change in the financial
services industry, including intensified competition and consolidation. The
management and Boards of Directors of Southwest Bancshares and Southwest Federal
have closely monitored the changes within the industry, and have sought over the
years to best position Southwest Bancshares and its stockholders. In view of
the Boards' belief that continued consolidation and competition in the financial
services industry would make it increasingly difficult for smaller thrifts and
thrift holding companies such as Southwest Bancshares to maintain their
competitive position and market share, the Boards have over time considered
various strategic alternatives, including remaining an independent entity, as
well as entering into possible business combinations with other financial
institutions.
In March 1997, the Southwest Bancshares' Board of Directors appointed a
committee of the Board to review acquisition issues, including the option of
remaining independent. The Committee was authorized to contact legal counsel to
further review such matters, to ascertain the Board's obligations in considering
its alternatives, especially as related to enhanced shareholder value, and to
consider engaging an investment banking firm to advise the Board regarding the
options available to Southwest Bancshares. The Committee was comprised of
Directors Richard E. Webber, Frank J. Muriello and Lawrence M. Cox. In April
1997, Southwest Bancshares retained Robert W. Baird & Co. Incorporated ("Baird")
as financial advisor to consult with and advise Southwest Bancshares as to its
general financial strategy and planning.
The Committee met a number of times over the following months to discuss
various issues and topics affecting both Southwest Bancshares specifically and
the financial services industry in general. The Committee also met with Baird
on several occasions to discuss and evaluate remaining independent versus
combining with another financial institution. Such discussions included: (1) an
ongoing review of Southwest Bancshares' strategic alternatives; (2) a review of
potential acquisition, merger and sale candidates; and (3) a review of the
financial institutions merger and acquisition market and recent regional
transactions which could impact Southwest Bancshares' ability to compete
effectively; and (4) Southwest Bancshares' acquisition value relative to its
value as an independent entity.
In August 1997, Southwest Bancshares received an unsolicited non-binding
letter of intent from another financial institution in its market area. At its
September 11, 1997 meeting, Southwest
71
<PAGE>
Bancshares' Board of Directors met with Baird and with legal counsel to review
and discuss the offer, as well as the Board's fiduciary obligations, disclosure
duties and strategic planning considerations in relation to such offer. On
October 1, 1997, Southwest Bancshares entered into an agreement with Baird
pursuant to which Baird would provide further financial advisory services,
including contacting representatives of certain selected financial institutions
to discuss their interest in engaging in a potential business combination
transaction with Southwest Bancshares. The three institutions selected were all
institutions that had previously expressed an interest in acquiring Southwest
Bancshares, and were considered by the Southwest Bancshares Board to have
compatible interests.
During that same month, Baird contacted the three financial institutions
concerning their interest in a business combination with Southwest Bancshares.
Each of the institutions provided Southwest Bancshares with preliminary
indications of interest and signed confidentiality agreements, one of which was
Alliance Bancorp. Alliance Bancorp's proposal offered to acquire all of the
outstanding shares of Southwest Bancshares for a purchase price of $31.00 per
share, with the consideration to be comprised of 90% Alliance Bancorp common
stock and 10% cash. The second proposal offered to acquire all of the
outstanding stock of Southwest Bancshares for a market value of $26.50 per
share, 75% of which was to be paid in stock and 25% of which was to be paid in
cash. The third proposal offered an all cash purchase at a price of $25.00 per
share.
At a meeting of Southwest Bancshares' Board on November 18, 1997, Baird
reviewed in detail with the Board the three preliminary indications of interest,
as well as potential alternative acquisition transactions and the alternative of
remaining independent. Baird reviewed financial, operational and stock market
capitalization data with respect to each of the three institutions. The Board
discussed at length the various issues raised by Baird's presentation, as well
as issues relating to the relative merits of a business combination with each of
the institutions. Baird also reviewed again with the Board other strategic
options available to Southwest Bancshares, including remaining independent.
Such discussions included: (1) the general state of the financial services
industry; (2) a financial analysis of Southwest Bancshares on a stand-alone
basis, both currently and on an on-going basis; (3) the terms of recent
financial institution mergers; (4) consolidation trends in Southwest Bancshares'
market area and generally; and (5) the prospects for Southwest Bancshares
continuing as an independent entity, including its earning potential, capital
and financial prospects.
At the close of the Board meeting, the Board determined that further
exploration and discussion of a merger with Alliance Bancorp was in the best
interests of Southwest Bancshares and its stockholders. Southwest Bancshares
determined to pursue discussions with Alliance Bancorp based primarily on the
fact that Alliance Bancorp had offered the highest price per share of the three
proposals. The Board then authorized Baird to continue discussions with
Alliance Bancorp to determine if an agreement acceptable to both Southwest
Bancshares and Alliance Bancorp could be reached.
In the following days, Southwest Bancshares' management and representatives
of Baird held discussions and meetings with Alliance Bancorp's management and
representatives of Friedman,
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<PAGE>
Billings, Ramsey & Co. Inc. ("FBR"), financial advisor to Alliance Bancorp,
concerning the proposed transaction and the terms of a definitive Merger
Agreement. The representatives of each party and their respective counsel
conducted on-site due diligence at the offices of the other party.
The Committee met again on December 5, 1997 to discuss the outcome of these
meetings and discussions, the due diligence review and the terms of the proposed
Merger Agreement and related agreements, including the Stock Option Agreement.
The Committee directed Baird and its legal counsel to continue its discussions
with Alliance Bancorp with a focus on: (1) negotiating an all stock exchange,
rather than a combination of stock and cash, as well as an increase in the
purchase price; (2) negotiating downside price protection; (3) clarifying
certain operating strategies for the combined company; and (4) negotiating a
definitive Merger Agreement with Alliance Bancorp.
On December 16, 1997, the Southwest Bancshares Board met to consider the
terms of a definitive agreement. Presentations were made by both Baird and
Southwest Bancshares' legal counsel. Members of Southwest Bancshares' senior
management, together with its legal and financial advisors, reviewed the
background of the proposed transaction, the potential benefits of the
transaction, a summary of the due diligence investigation of Alliance Bancorp
and financial and valuation analyses of the proposed transaction. Baird then
reviewed its financial analyses performed in connection with its assessment of
the fairness, from a financial point of view, of the proposed Exchange Ratio and
provided to the Board of Directors of Southwest Bancshares its opinion to the
effect that, as of December 16, 1997, the Exchange Ratio was fair, from a
financial point of view, to the holders of Southwest Bancshares Common Stock
(other than Alliance Bancorp and its affiliates). Counsel then reviewed the
terms of the proposed Merger Agreement and Stock Option Agreement and discussed
the obligations of the Southwest Bancshares Board in its consideration of the
proposed merger with Alliance Bancorp. Following the presentations, the Board
discussed at length with its advisors the terms of the Merger Agreement and the
fairness opinion. Upon conclusion of its discussions, the Southwest Bancshares
Board determined that the Alliance Bancorp proposal provided the most attractive
alternative for Southwest Bancshares' stockholders. The Board then unanimously
approved the Merger Agreement and Stock Option Agreement, authorized execution
of the agreements, and recommended approval of those agreements by stockholders.
The agreements were then executed and a press release announcing the Merger was
issued on December 17, 1997.
Alliance Bancorp. The changing competitive situation in banking and
financial services has been evidenced by considerable consolidation activity in
recent years. Alliance Bancorp was formed in February, 1997 through the merger
of Liberty Bancorp, Inc. with and into Hinsdale Financial Corporation and the
related merger of the banking subsidiaries. The Liberty-Hinsdale merger
transaction was undertaken based on the belief that it would enhance the
companies' operational and strategic value and competitive position. The trend
of consolidation in the financial services industry has continued at a rapid
pace since February1997. Management and the Board of Directors of Alliance
Bancorp have committed to pursuing additional acquisition opportunities that
will enhance financial performance and strategic value.
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<PAGE>
In October 1997 Southwest Bancshares' financial advisor approached
management of Alliance Bancorp concerning the interest of Southwest Bancshares
in a possible affiliation with a larger financial institution. Pursuant to
Board of Directors authorization, Alliance Bancorp entered into a
confidentiality agreement with Southwest Bancshares, and engaged FBR. In
November 1997, with the assistance of FBR and counsel, and after further
discussion and review with the Board of Directors, Alliance Bancorp submitted a
preliminary proposal for the acquisition of Southwest Bancshares, which
Southwest Bancshares determined to pursue. Upon the satisfactory completion of
a due diligence investigation by each of the parties, Alliance Bancorp and
Southwest Bancshares, and their respective advisors, negotiated the terms of a
definitive merger agreement, which was submitted to the Board of Directors of
Alliance Bancorp and approved on December 15, and executed on December 16, 1997.
REASONS FOR THE MERGER
Alliance Bancorp's Reasons for the Merger. In reaching its determination
that the Merger and the Merger Agreement are fair to, and in the best interests
of, Alliance Bancorp and its stockholders, the Alliance Bancorp Board of
Directors consulted with its financial advisors with respect to the financial
aspects and fairness of the transaction. The Alliance Bancorp Board of Directors
also considered a number of factors which indicated that the Merger should
produce an institution that is well capitalized, and one which will enjoy
enhanced operational and strategic value and that should foster the potential
for earnings growth. The factors considered by the Alliance Bancorp Board of
Directors included, but were not limited to, the following:
(i) Information concerning the businesses, earnings, operations,
financial condition, prospects, capital levels and asset quality of Alliance
Bancorp and Southwest Bancshares individually and as combined, including the
period within, and extent to which the Merger could be expected to be accretive
to Alliance Bancorp's earnings per share. In this regard, the Alliance Bancorp
Board of Directors considered its internal projections that the Merger would be
accretive to earnings per share within the first 12 months following the
completion of the Merger.
(ii) The financial advice rendered by FBR to Alliance Bancorp that the
Exchange Ratio in the Merger is fair, from a financial point of view, to the
stockholders of Alliance Bancorp. See "--Opinion of Financial Advisor to
Alliance Bancorp."
(iii) The terms of the Merger Agreement, the Stock Option Agreement and the
other documents executed in connection with the Merger, including the
anticipated accounting treatment of the Merger as "pooling of interests" and the
nature of the Merger as a tax-free reorganization for federal income tax
purposes.
(iv) The anticipated extent of cost savings, efficiencies and reduced
expenses available to the combined company as a result of the Merger. In this
regard, the Alliance Bancorp Board of Directors considered its internal
projections that the Merger would result in approximately a 25% reduction in the
expenses attributable to the operations of Southwest Bancshares prior to the
Merger.
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(v) The current and prospective economic, competitive and regulatory
environment facing each institution and the institutions as combined, including
without limitation the consolidation currently underway in the banking industry,
competition from larger institutions and from nonbank providers of financial
services.
(vi) The results of the due diligence investigations of Southwest
Bancshares, including assessment of credit policies, asset quality, interest
rate risk, litigation and adequacy of loan loss reserves.
(vii) The individual and combined prospects for internal growth, and
ability to deliver expanded products and services, and other anticipated impacts
on depositors, employees, customers and communities served by Alliance Bancorp
and Southwest Bancshares.
In reaching its determination to approve the Agreement and the Merger, the
Alliance Bancorp Board of Directors did not assign any specific or relative
weight to any of the foregoing factors, and individual directors may have given
differing weights to different factors.
The Alliance Bancorp Board of Directors also discussed the fact that the
issuance of additional shares in the Merger would dilute the value to Alliance
Bancorp stockholders, of any recovery in the goodwill litigation against the
federal government in this regard. The Alliance Bancorp Board of Directors
considered various issues relating to the goodwill claim, including the fact
numerous defenses and offsets to Liberty Federal's claim would likely be raised
by the federal government, that Liberty Federal might not realize any recovery
for several years. The Alliance Bancorp Board of Directors also considered the
advice it had received that any separate distribution to its stockholders of
rights to receive the net proceeds of any recovery relating to the Goodwill
Claim would be taxable to both Alliance Bancorp and its stockholders, and
therefore did not appear to be an economical alternative for the company or its
stockholders, and would render pooling of interest accounting treatment
unavailable to a merger involving Alliance Bancorp for a significant period of
time. The Alliance Bancorp Board of Directors also believed that the market
price of the Alliance Bancorp Common Stock took into account the market's
perception of the value of the Goodwill Claim.
Southwest Bancshares' Reasons for the Merger. The Southwest Bancshares
Board believes that the Merger is fair to, and in the best interests of,
Southwest Bancshares and its stockholders. ACCORDINGLY, THE SOUTHWEST BANCSHARES
BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE
HOLDERS OF SOUTHWEST BANCSHARES COMMON STOCK VOTE FOR THE APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
THEREBY. See "-- Background of the Merger" above and "-- Opinion of Southwest
Bancshares' Financial Advisor" below.
The terms of the Merger, including the Exchange Ratio, are the result of
arm's-length negotiations between representatives of Southwest Bancshares and
Alliance Bancorp. In reaching its decision to approve the Merger Agreement, the
Southwest Bancshares Board consulted with its
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<PAGE>
legal advisors regarding the legal terms of the transaction and the Southwest
Bancshares Board's obligations in its consideration of the proposed transaction,
with its financial advisor regarding the financial aspects of the proposed
transaction and the fairness of the Exchange Ratio, and with management of
Southwest Bancshares, and considered a number of factors, both from a short-term
and long-term perspective, including, without limitation, the following:
(i) the Southwest Bancshares Board's familiarity with and review of
Southwest Bancshares' business, financial condition, results of operations and
prospects, including, without limitation, its potential growth and profitability
and the business risks associated therewith;
(ii) The current and prospective environment in which Southwest Bancshares
operates, including national and local economic conditions, the competitive
environment for savings and loan associations and other financial institutions
generally and the increasing consolidation in the financial services industry
and the competitive effects of such increased consolidation on smaller financial
institutions such as Southwest Federal;
(iii) the rapid technological advances impacting the financial services
industry in recent years, the significant capital investment necessary for
Southwest Bancshares to keep pace with such technological advances, the
competitive advantage and increased efficiency gained by financial institutions
possessing sufficient resources to enable them to make such capital investments
and to realize such efficiencies and the comparable competitive disadvantage to
smaller institutions such as Southwest Bancshares which generally do not possess
the resources necessary to invest in such technological advances;
(iv) information concerning the business, financial condition, results of
operations and prospects of Alliance Bancorp, including the recent performance
of Alliance Bancorp Common Stock, the historical financial data of Alliance
Bancorp, customary statistical measurements of Alliance Bancorp's financial
performance and the future prospects for Alliance Bancorp Common Stock following
the Merger;
(v) the value to be received by holders of Southwest Bancshares Common
Stock pursuant to the Merger Agreement in relation to the historical trading
prices of Southwest Bancshares Common Stock;
(vi) the information presented by Baird to the Southwest Bancshares Board
with respect to the Merger and the opinion of Baird that, as of the date of such
opinion, the Exchange Ratio was fair from a financial point of view to the
holders of Southwest Bancshares Common Stock (other than Alliance Bancorp and
its affiliates) (see "-- Opinion of Southwest Bancshares' Financial Advisor"
elsewhere herein);
(vii) the financial and other significant terms of the proposed Merger
with Alliance Bancorp, and the review by Southwest Bancshares with its legal and
financial advisors of the provisions of the Merger Agreement and the Stock
Option Agreement;
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(viii) the expected impact of the Merger on Southwest Bancshares' business,
employees, customers and communities, the compatibility of the respective
businesses and management philosophies of Alliance Bancorp and Southwest
Bancshares, and the expectation that Alliance Bancorp will continue to provide
quality service to the customers and the communities served by Southwest
Bancshares;
(ix) the fact that Alliance Bancorp has agreed to appoint Mr. Webber to
the Alliance Bancorp Board and to appoint all other Directors of Southwest
Federal to an Advisory Board of Liberty Federal for a period of one year, both
of which are expected to provide a degree of continuity and involvement by
Southwest Bancshares following the Merger, which Southwest Bancshares believes
will further promote the interests of Southwest Bancshares' stockholders,
customers and employees;
(x) the Southwest Bancshares Board's belief that the receipt of Alliance
Bancorp Common Stock in the Merger generally will permit holders of Southwest
Bancshares Common Stock to defer any federal income tax liability associated
with the increase in the value of their stock as a result of the Merger (see "--
Certain Federal Income Tax Consequences of the Merger" below) and to become
shareholders of Alliance Bancorp, an institution with strong operations,
earnings, performance, dividend payments and share liquidity; and
(xi) the alternative strategic courses available to Southwest Bancshares,
including remaining independent and exploring other potential business
combination transactions.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Alliance Bancorp. The Alliance Bancorp Board of Directors has unanimously
adopted and approved the Merger Agreement and the transactions contemplated
thereby and has determined that the Merger and the issuance of the shares of
Alliance Bancorp Common Stock pursuant thereto are fair to and in the best
interests of Alliance Bancorp and its stockholders. THE ALLIANCE BANCORP BOARD
OF DIRECTORS THEREFORE UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
For a discussion of factors considered by the Alliance Bancorp Board of
Directors in reaching its decision to approve the Merger Agreement, see "--
Background of and Reasons for the Merger."
Southwest Bancshares. The Southwest Bancshares Board of Directors has
unanimously adopted and approved the Merger Agreement and the transactions
contemplated thereby and has determined that the Merger is fair to, and in the
best interests of, Southwest Bancshares and its stockholders. THE SOUTHWEST
BANCSHARES BOARD OF DIRECTORS THEREFORE UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
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For a discussion of factors considered by the Southwest Bancshares Board in
reaching its decision to approve the Merger Agreement, see "-- Background of and
Reasons for the Merger."
MERGER CONSIDERATION
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of Southwest Bancshares Common Stock issued and
outstanding immediately prior to the Merger will be converted into shares of
Alliance Bancorp Common Stock based upon the Exchange Ratio described below, and
cash in lieu of any fractional shares of Southwest Bancshares Common Stock (the
"Merger Consideration"). The Exchange Ratio was determined through arm's-length
negotiations between Alliance Bancorp and Southwest Bancshares, each of which
was advised during such negotiations by its financial advisors. See "--
Background of the Merger." Based upon the outstanding shares of Alliance Bancorp
Common Stock and Southwest Bancshares Common Stock as of March 31, 1998, the
stockholders of Southwest Bancshares would own approximately 29% of the
Alliance Bancorp Common Stock to be outstanding immediately following the
Effective Date, and the stockholders of Alliance Bancorp would own approximately
71% of the Alliance Bancorp Common Stock to be outstanding immediately
following the Effective Date.
Each share of Alliance Bancorp Common Stock issued and outstanding at the
Effective Date will remain outstanding and unchanged as a result of the Merger.
No fractional shares of Alliance Common Stock will be issued in the Merger, and
Southwest Bancshares stockholders who otherwise would be entitled to receive a
fractional share of Alliance Bancorp Common Stock will receive a cash payment in
lieu thereof. See "-- Fractional Shares."
The Exchange Ratio shall be determined as follows: (i) if the "Alliance
Bancorp Market Value" (as defined below) is less than or equal to $30.475 and
greater than or equal to $22.525, then 1.1981 shares of Alliance Bancorp Common
Stock; (ii) if the Alliance Bancorp Market Value is greater than $30.475 and
less than or equal to $35.00, then that number of shares of Alliance Bancorp
Common Stock, determined by dividing $36.5125 by the Alliance Bancorp Market
Value; (iii) if the Alliance Bancorp Market Value is greater than $35.00, then
1.0432 shares of Alliance Bancorp Common Stock; and (iv) if the Alliance Bancorp
Market Value is less than $22.525, then that number of shares of Alliance
Bancorp Common Stock, determined by dividing $26.9875 by the Alliance Bancorp
Market Value, subject to the right of Alliance Bancorp to terminate the Merger
Agreement. If the Alliance Bancorp Market Value is less than $19.875, then
Alliance Bancorp shall have the right to terminate the Merger Agreement unless
Southwest Bancshares provides written notice that it wants to proceed with the
Merger, in which event the Exchange Ratio will be 1.3579. The term "Alliance
Bancorp Market Value" is defined in the Merger Agreement to mean the average of
the inside closing bid price of Alliance Bancorp Common Stock on the Nasdaq
National Market System (as reported by The Wall Street Journal) for each of the
twenty (20) consecutive trading days ending on the fifth business day before the
Closing Date.
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The following table shows the Exchange Ratio at various Alliance Bancorp
Market Values together with the consideration to be received for each share of
Southwest Bancshares, based on the Alliance Bancorp Market Value and the
Exchange Ratio. Because the Alliance Bancorp Market Value is an average price
calculated over a period of time, the market price of Alliance Bancorp Common
Stock at the Effective Date could differ from the Alliance Bancorp Market Value
used to determine the Exchange Ratio, and the actual value of the shares issued
in the Merger therefore could differ from the amount set forth in the following
table.
<TABLE>
<CAPTION>
ALLIANCE BANCORP CONSIDERATION FOR EACH
MARKET VALUE EXCHANGE RATIO(1) SOUTHWEST BANCSHARES SHARE
------------ ----------------- --------------------------
<S> <C> <C>
more than $35.00 1.0432 $36.51 or more
more than $30.475, to $35.00 $36.5125 divided by $36.51
Alliance Bancorp Market Value (2)
$22.525 to $30.475 1.1981 $26.99 to $36.51
less than $22.525 $26.9875 divided by $26.99 or less (3)
Alliance Bancorp Market Value
</TABLE>
___________________
(1) The Exchange Ratio represents the number of shares of Alliance Bancorp
Common Stock that would be received for each share of Southwest Bancshares
Common Stock. For example, if the Alliance Bancorp Market Value is more
than $35.00, then 1.0432 shares of Alliance Bancorp Common Stock would be
received for each share of Southwest Bancshares Common Stock.
(2) If the Alliance Bancorp Market Value equals $30.475 then the Exchange Ratio
will be 1.1981. The Exchange Ratio will decrease as the hypothetical
Alliance Bancorp Market Value increases above $30.475.
(3) Alliance Bancorp may, but need not, terminate the Agreement if the Alliance
Bancorp Market Value is less than $19.875, unless Southwest Bancshares
determines to proceed with the Merger, in which case the Exchange Ratio
will be 1.3579.
The last reported sale price of Alliance Bancorp Common Stock on [MARCH
31], 1998 was at a price of $[27.75]. If the Alliance Bancorp Market Value were
equal to such price, for example, then the Exchange Ratio and the number of
shares of Alliance Bancorp Common Stock that would be received for each share of
Southwest Bancshares Common Stock would be 1.1981. The actual Alliance Bancorp
Market Value will not be determined until the fifth business day before the
Effective Date. Because the Effective Date may be more than five days after the
date of the Annual Meetings, there can be no assurance of the actual Alliance
Bancorp Market Value at the time of such meetings. See "Information with
Respect to Alliance Bancorp" and "Information with Respect to Southwest
Bancshares" for information regarding historical price performance of Alliance
Bancorp Common Stock and Southwest Bancshares Common Stock.
Any cash payment in lieu of any fractional share will be in an amount equal
to such fraction multiplied by the Alliance Bancorp Market Value.
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<PAGE>
In the event that, prior to the Effective Date, the outstanding shares of
Alliance Bancorp Common Stock shall have been increased, decreased, changed into
or exchanged for a different number or kind of shares or securities as a result
of a reorganization, recapitalization, reclassification, stock split, or other
like changes in Alliance Bancorp's capitalization, or if a stock dividend
thereon is declared with a record date before the Effective Date, then an
appropriate and proportionate adjustment shall be made to the Exchange Ratio.
Alliance Bancorp and Southwest Bancshares believe that the Merger will be
completed on the day of the Annual Meetings, although there can be no assurances
in this regard. The Agreement provides that if the Merger has not been
completed on or before September 30, 1998, then in certain circumstances
Alliance Bancorp or Southwest Bancshares may terminate the Agreement. See
"Termination; Effect of Termination."
TREATMENT OF SOUTHWEST BANCSHARES STOCK OPTIONS
Pursuant to the Merger Agreement, on the Effective Date, each outstanding
stock option to purchase Southwest Bancshares Common Stock will be assumed by
Alliance Bancorp. However, as of the Southwest Bancshares Record Date, there
were no Southwest Bancshares Stock Options outstanding.
OPINION OF FINANCIAL ADVISOR TO ALLIANCE BANCORP
FBR has acted as financial advisor to Alliance Bancorp in connection with
the Merger. FBR was selected by Alliance Bancorp based on FBR's experience,
expertise and familiarity with Alliance Bancorp and its business. FBR is a
nationally recognized investment banking firm and is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
In connection with FBR's engagement, Alliance Bancorp requested that FBR
evaluate the fairness, from a financial point of view, to the shareholders of
Alliance Bancorp of the consideration to be paid by Alliance Bancorp in
connection with the proposed Merger. At a meeting of the Alliance Bancorp Board
held on December 15, 1997, FBR made a presentation to the Alliance Bancorp Board
in which FBR analyzed the Exchange Ratio and rendered to the Alliance Bancorp
Board an oral opinion to the effect that, as of such date and based upon and
subject to certain matters, such exchange ratio was fair to the stockholders of
Alliance Bancorp from a financial point of view. At the December 15, 1997
Alliance Bancorp Board meeting, the Alliance Bancorp Board unanimously approved
and authorized the execution and delivery of the Merger Agreement. FBR
confirmed its oral opinions by delivery of a written opinion dated December 16,
1997 and updated its opinion the date of this Joint Proxy Statement/Prospectus.
In connection with its oral opinion of December 15, 1997 and written opinion
dated the date of this Joint Proxy Statement/Prospectus,
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FBR updated certain of its analyses, as necessary, and reviewed the assumptions
on which such analyses were based and the factors considered in connection
therewith.
In arriving at its opinion dated the date of this Joint Proxy
Statement/Prospectus, FBR:
(i) reviewed Southwest Bancshares' Annual Report to Stockholders for the
fiscal year ended December 31, 1996 and Southwest Bancshares' Annual Reports on
Form 10-K filed with the SEC for the fiscal years ended December 31, 1995 and
1996;
(ii) reviewed Hinsdale Financial Corp.'s Annual Report on Form 10-K filed
with the SEC for the fiscal year ended September 30, 1996;
(iii) reviewed Southwest Bancshares' Quarterly Reports on Form 10-Q for
the fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997
filed with the SEC;
(iv) reviewed Alliance Bancorp's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 filed
with the SEC;
(v) reviewed both Southwest Bancshares' and Alliance Bancorp's unaudited
financial statements for the ten months ended October 31, 1997;
(vi) reviewed the reported market prices and trading activity for
Southwest Bancshares' common stock for the period January 1995 through December
12, 1997 and reviewed the reported market prices and trading activity for
Alliance Bancorp common stock for the period February 11, 1997 through December
12, 1997;
(vii) discussed the financial condition, results of operations, business
and prospects of Alliance Bancorp and Southwest Bancshares with the management
of Alliance Bancorp and Southwest Bancshares;
(viii) compared the results of operations and financial condition of
Alliance Bancorp and Southwest Bancshares with those of certain publicly-traded
financial institutions (or their holding companies) that FBR deemed to be
reasonably comparable to Alliance Bancorp or Southwest Bancshares, as the case
may be;
(ix) reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions that FBR deemed to be reasonably comparable;
(x) reviewed a copy of the Merger Agreement; and
(xi) performed such other analyses and reviewed and analyzed such other
information as FBR deemed appropriate.
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In connection with its review, FBR did not assume any responsibility for
independent verification of any of the information provided to or otherwise
reviewed by FBR and relied upon its being complete and accurate in all material
respects. With respect to the financial forecasts reviewed, FBR assumed that
such forecasts were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management teams of Alliance Bancorp
and Southwest Bancshares as to the future financial performance of Alliance
Bancorp and Southwest Bancshares and the cost savings and other potential
synergy's (including the amount, timing and achievability thereof) anticipated
to result from the Merger. FBR did not review individual credit files or make
an independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of Alliance Bancorp or Southwest Bancshares, including loan or
lease portfolios or the allowances for losses with respect thereto, and assumed,
that such allowances for Alliance Bancorp and Southwest Bancshares are in the
aggregate adequate to cover such losses. FBR also assumed, with the consent of
the Alliance Bancorp Board, that in the course of obtaining the necessary
regulatory and third party consents for the Merger, no restriction will be
imposed that will have a material adverse effect on the contemplated benefits of
the Merger or the transactions contemplated thereby. FBR's opinion was
necessarily based on information available to it and financial, stock market and
other conditions as they existed and could be evaluated on the date of its
opinion. FBR expressed no opinion as to what the value of the Alliance Bancorp
Common Stock actually would be when issued to Southwest Bancshares' stockholders
pursuant to the Merger or the prices at which such Alliance Bancorp Common Stock
would trade subsequent to the Merger. No other limitations were imposed by
Alliance Bancorp on FBR with respect to the investigations made or procedures
followed by FBR in rendering its opinion.
THE FULL TEXT OF FBR'S WRITTEN OPINION TO THE ALLIANCE BANCORP BOARD DATED
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN,
IS ATTACHED AS APPENDIX III TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. HOLDERS OF ALLIANCE BANCORP COMMON STOCK ARE
URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. FBR'S OPINIONS ARE
DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF
VIEW TO THE STOCKHOLDERS OF ALLIANCE BANCORP, DO NOT ADDRESS ANY OTHER ASPECT OF
THE PROPOSED MERGER OR ANY RELATED TRANSACTION AND DO NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE
ALLIANCE BANCORP ANNUAL MEETING. THE SUMMARY OF THE OPINION OF FBR SET FORTH IN
THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF SUCH OPINION.
In preparing its opinion for the Alliance Bancorp Board, FBR performed a
variety of financial and comparative analyses, including those described below,
in connection with its presentation to the Alliance Bancorp Board on December
15, 1997. The summary of FBR's analyses set forth below does not purport to be
a complete description of the analyses underlying FBR's
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opinion. The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant methods
of financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. In arriving at its opinion, FBR made qualitative judgments
as to the significance and relevance of each analysis and factors considered by
it. Accordingly, FBR believes that its analyses must be considered as a whole
and that selecting portions of its analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying such analyses and its opinion. In its analyses, FBR made
numerous assumptions with respect to Alliance Bancorp, Southwest Bancshares,
industry performance, regulatory, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Alliance Bancorp and Southwest Bancshares. No company, transaction or business
used in such analyses as a comparison is identical to Alliance Bancorp,
Southwest Bancshares or the Merger, nor is an evaluation of the results of such
analyses entirely mathematical; rather, it involves complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions being analyzed. The estimates
contained in such analyses and the valuations resulting from any particular
analysis are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than those
suggested by such analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which businesses or securities actually may be sold. Accordingly,
because such estimates are inherently subject to substantial uncertainty, none
of Alliance Bancorp, Southwest Bancshares, FBR or any other person assumes
responsibility for their accuracy. As described above, FBR's opinion and
financial analyses were only one of many factors considered by the Alliance
Bancorp Board in its evaluation of the Merger and should not be viewed as
determinative of the views of Alliance Bancorp' Board or management with respect
to the Exchange Ratio or the proposed Merger.
The following is a summary of the material analyses performed by FBR in
connection with its opinion and financial presentations made to the Alliance
Bancorp Board on December 16, 1997:
Introduction. FBR calculated the price per share, premium to market, price
to September 30, 1997 book value and tangible book value, and price to estimated
fiscal 1997 earnings per share ("EPS") for Southwest Bancshares implied by the
Exchange Ratio. Using closing stock prices of $26.500 for Alliance Bancorp
Common Stock and $25.500 for Southwest Bancshares Common Stock on December 12,
1997, the proposed Exchange Ratio implied a price per share for Southwest
Bancshares Common Stock of $31.750, a premium to market of 25.00%, a price to
estimated book value and tangible book value of 2.06x and 2.06x, respectively,
and a price to September 30, 1997 LTM EPS of 22.05x and estimated fiscal 1997
EPS of 21.44x. EPS estimates for Southwest Bancshares were based on consensus
estimates, as of December 12, 1997, published by Institutional Brokers Estimate
System, Inc. ("IBES"), a data service which monitors and publishes a compilation
of earnings estimates produced by selected research analysts on companies of
interest to investors.
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Comparable Transaction Analysis. FBR analyzed certain information relating
to transactions in the thrift industry, including median information for: (i)
11 acquisitions announced in Illinois, Indiana, Michigan and Wisconsin between
January 1, 1997 and December 12, 1997, (ii) 14 thrift acquisitions announced
nationwide involving sellers with total assets between $250 million to $500
million between January 1, 1997 and December 12, 1997, (iii) 18 thrift
acquisitions announced in the U.S. between January 1, 1997 and December 12, 1997
involving sellers with return on average assets ("ROAA") between 1.00% and
1.25%, (iv) 9 U.S. thrifts with tangible equity ratios between 10% and 12%
during the same time period (collectively the "Selected Transactions"). FBR
calculated the following ratios with respect to the Merger (based on the
acquisition of 2,885,085 fully diluted common stock equivalents of Southwest
Bancshares at an exchange ratio of 1.1981 and a stock price of $26.50 for
Alliance Bancorp) and the Selected Transactions:
SUMMARY OF SELECTED 1997 ANNOUNCED THRIFT M&A TRANSACTIONS
----------------------------------------------------------
<TABLE>
<CAPTION>
ANNOUNCED
-----------------------------------------------------
DEAL DEAL DEAL PR/ DEAL PR/ TGBK PREM/
VALUE PR/BK TG BK 4-QTR COREDEPS
($M) (%) (%) EPS (X) (%)
<S> <C> <C> <C> <C> <C>
Transactions in IL, IN, MI, WI
11 Transactions Median 75.5 175.02 182.45 25.34 15.72
Average 269.2 179.48 184.60 28.60 15.54
Nationwide, Assets $250-$500M
14 Transactions Median 60.9 187.64 188.76 21.52 10.87
Average 62.0 183.13 188.11 24.55 13.00
Seller's ROAA 1%-1.25%
18 Transactions Median 57.9 191.92 192.66 20.14 13.73
Average 125.4 197.06 200.46 20.57 13.83
Seller's Tangible Equity Ratio 10%-12%
9 Transactions Median 48.8 174.73 174.73 21.09 12.92
Average 134.1 170.73 174.10 24.63 14.11
ABCL/SWBI 87.6 205.6 205.56 22.05 16.35
</TABLE>
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No Company or transaction used in the above analyses as a comparison is
identical to Southwest Bancshares, Alliance Bancorp, or the Merger. Accordingly,
an analysis of the results of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other facts that
could affect the public trading value of the companies to which they are being
compared.
Contribution Analysis. FBR analyzed the contribution of each of Alliance
Bancorp and Southwest Bancshares to, among other things, total assets, total
deposits, common equity and tangible equity at September 30, 1997, projected net
income for the years ended December 31, 1997 and 1998, number of branch offices
and market capitalization as of December 12, 1997. Alliance Bancorp's
contribution in terms of total assets, total deposits, common equity and
tangible equity at September 30, 1997 equaled approximately 78.5%, 78.4%, 75.2%
and 75.0%, respectively, while Alliance Bancorp's contribution in terms of
branch offices and market capitalization equaled approximately 70.0% and 75.8%.
Alliance Bancorp's contribution in terms of projected net income for the year
ended December 31, 1997 and 1998 equaled approximately 71.0%, and 72.3%. Based
upon the Exchange Ratio, closing stock prices of $26.500 for Alliance Bancorp
Common Stock and Southwest Bancshares Common Stock outstanding on September 30,
1997, holders of Alliance Bancorp Common Stock would own approximately 71.4% of
the combined company upon consummation of the Merger.
Pro Forma Merger Analysis. FBR noted that, based upon estimates of
Alliance Bancorp and Southwest Bancshares' management and after giving effect to
Alliance Bancorp management's net pretax cost savings estimates resulting from
synergies created from The Merger, internal asset and deposit growth estimates
and certain assumptions as to, among other things, the number of shares
outstanding in each respective period, the proposed Merger could, at a 1.1981
Exchange Ratio, be accretive to Alliance Bancorp's reported EPS on a fully
diluted basis in fiscal years 1998 and 1999 by approximately 6.00% and 6.04%.
In this analysis, FBR assumed that both Alliance Bancorp and Southwest
Bancshares would perform substantially in accordance with earnings forecasts
provided to FBR by Alliance Bancorp and Southwest Bancshares' management. The
actual results achieved by the combined company may vary from projected results
and the variations may be material. This analysis is based on the assumption
that The Merger would be accounted for as a pooling of interests, partially
achieved through the sale of a portion of Southwest Bancshares' outstanding
tainted stock.
Certain Other Factors and Comparative Analyses. In rendering its opinion,
FBR considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of the historical financial
results and stock price performance of Alliance Bancorp and Southwest
Bancshares, analysis of stock price, share trading volume history and historical
financial performance of comparable institutions between $250 and $500 million
in assets in the states of Illinois, Indiana, Michigan and Wisconsin, and the
market capitalization of selected companies involved in transactions similar to
the proposed Merger both before and after such transactions.
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Pursuant to the terms of FBR's engagement dated October 23, 1997, Alliance
Bancorp has agreed to pay FBR for its services in connection with the Merger an
aggregate financial advisory fee of $75,000, payable as follows: (i) $10,000
upon execution of the engagement letter; (ii) $18,750 upon the signing of a
definitive agreement providing for the Merger; and (iii) the balance upon the
closing of the Merger. Alliance Bancorp also has agreed to reimburse FBR for
its reasonable out-of-pocket expenses and to indemnify FBR and certain related
entities against certain liabilities, including liabilities under the federal
securities laws.
In the ordinary course of business, FBR and its affiliates may actively
trade the equity securities of Alliance Bancorp and Southwest Bancshares for
their own account and for accounts of customers and, accordingly, may at any
time hold a long or short position in such securities. FBR may provide
additional financial advisory and investment banking services to Alliance
Bancorp in the future.
OPINION OF SOUTHWEST BANCSHARES' FINANCIAL ADVISOR
The Board of Directors of Southwest Bancshares retained Baird to act as its
financial advisor in connection with the Merger and to render its opinion as to
whether or not the Exchange Ratio is fair, from a financial point of view, to
the holders of Southwest Bancshares Common Stock (other than Alliance Bancorp
and its affiliates). On December 16, 1997, Baird delivered its written opinion
to the Board of Directors of Southwest Bancshares to the effect that, as of such
date, the Exchange Ratio was fair, from a financial point of view, to such
holders. Baird subsequently rendered a written opinion, dated May ___, 1998,
confirming its earlier opinion to the effect that, as of such date, the Exchange
Ratio is fair, from a financial point of view, to such holders.
THE FULL TEXT OF BAIRD'S OPINION, DATED MAY ____, 1998, WHICH SETS FORTH
THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY BAIRD IN RENDERING ITS OPINION,
IS ATTACHED AS APPENDIX IV TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. BAIRD'S OPINION IS DIRECTED ONLY TO THE
FAIRNESS, AS OF THE DATE OF THE OPINION AND FROM A FINANCIAL POINT OF VIEW, OF
THE EXCHANGE RATIO TO THE HOLDERS OF SOUTHWEST BANCSHARES COMMON STOCK (OTHER
THAN ALLIANCE BANCORP AND ITS AFFILIATES) AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SOUTHWEST BANCSHARES STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER. BAIRD DID NOT MAKE ANY
RECOMMENDATION TO SOUTHWEST BANCSHARES CONCERNING THE FORM OR AMOUNT OF
CONSIDERATION TO BE RECEIVED IN THE MERGER. THE SUMMARY OF BAIRD'S OPINION SET
FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION ATTACHED HERETO AS APPENDIX IV. SOUTHWEST BANCSHARES STOCKHOLDERS ARE
URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
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In conducting its investigation and analysis and in arriving at its
opinion, Baird reviewed such information and took into account such financial
and economic factors as deemed relevant under the circumstances. In that
connection, Baird, among other things: (i) reviewed certain internal
information, primarily financial in nature, including projections, concerning
the business and operations of Southwest Bancshares and Alliance Bancorp
furnished to Baird for purposes of its analysis, as well as publicly available
information including, but not limited to, the Southwest Bancshares' and
Alliance Bancorp's recent filings with the Securities and Exchange Commission
and equity analyst research reports prepared by various investment banking firms
including Baird; (ii) reviewed the draft Agreement in the form presented to the
Southwest Bancshares' Board of Directors; (iii) compared the historical market
prices and trading activity of Southwest Bancshares Common Stock and Alliance
Bancorp Common Stock with those of certain other publicly traded companies Baird
deemed relevant; (iv) compared the financial position and operating results of
Southwest Bancshares and Alliance Bancorp with those of other publicly traded
companies Baird deemed relevant; (v) reviewed forecasts pertaining to
prospective cost savings following the Merger furnished to Baird by Alliance
Bancorp and deemed reasonable by Southwest Bancshares; (vi) compared the
proposed financial terms of the Merger with the financial terms of certain other
business combinations involving thrift institutions that Baird deemed relevant;
and, (vii) reviewed the potential pro-forma financial effects of the Merger on
Alliance Bancorp. Baird held discussions with members of Southwest Bancshares'
and Alliance Bancorp's senior management concerning Southwest Bancshares' and
Alliance Bancorp's historical and current financial condition and operating
results, as well as the future prospects of Southwest Bancshares and Alliance
Bancorp, respectively, and has consulted with Alliance Bancorp's senior
management concerning Alliance Bancorp's supervisory goodwill lawsuit. As a
part of its engagement, Baird was requested to and did solicit third party
indications of interest in acquiring Southwest Bancshares. Baird also
considered such other information, financial studies, analysis and
investigations and financial, economic and market criteria as Baird deemed
relevant for the preparation of its opinion. The Exchange Ratio was determined
by Southwest Bancshares and Alliance Bancorp in arms-length negotiations.
Southwest Bancshares did not place any limitation upon Baird with respect to the
procedures followed or factors considered by Baird in rendering its opinion.
In arriving at its opinion, Baird assumed and relied upon the accuracy and
completeness of all of the financial and other information that was publicly
available or provided to it by or on behalf of Southwest Bancshares and Alliance
Bancorp and was not engaged to independently verify any such information. Baird
assumed, with Southwest Bancshares' consent, that (i) all material assets and
liabilities (contingent or otherwise, known or unknown) of Southwest Bancshares
and Alliance Bancorp are set forth in their respective financial statements;
(ii) the Merger will be accounted for under the pooling-of-interests method of
accounting; (iii) the prospective cost savings currently contemplated by
Alliance Bancorp and Southwest Bancshares' management following the Merger will
be realized; (iv) the Merger will be consummated in accordance with the terms
of the Merger Agreement without any amendment thereto or waiver by Southwest
Bancshares or Alliance Bancorp of any condition to their respective obligations;
and (v) Alliance Bancorp will receive all regulatory approvals required to
effect the Merger without undue delay. Baird also assumed that the financial
forecasts examined by it were reasonably prepared on bases reflecting the best
available estimates
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and good faith judgements of Southwest Bancshares' and Alliance Bancorp's
respective senior managements as to future performance of Southwest Bancshares
and Alliance Bancorp, respectively. In conducting its review, Baird did not
undertake or obtain an independent evaluation or appraisal of any of the assets
or liabilities (contingent or otherwise) of Southwest Bancshares or Alliance
Bancorp, nor did it make a physical inspection of the properties or facilities
of Southwest Bancshares or Alliance Bancorp. Baird expressed no opinion
concerning the merits of, or ultimate recovery from, Alliance Bancorp's
supervisory goodwill lawsuit. Baird's opinion necessarily was based upon
economic, monetary and market conditions as they existed and could be evaluated
on the date of the opinion, and did not predict or take into account any changes
which may occur, or information which may become available, after the date
thereof. Furthermore, Baird expressed no opinion as to the price or trading
range at which shares of Southwest Bancshares or Alliance Bancorp securities
would trade following the date of such opinion.
The following is a summary of the material financial analyses performed by
Baird in connection with rendering its opinion and making its presentation to
the Board of Directors of Southwest Bancshares on December 16, 1997.
Analysis of Southwest Bancshares Valuation Multiples. Baird reviewed the
terms of the proposed Merger, including the form of the Merger Consideration,
the proposed method of accounting and the indicated value of the Merger per
share of Southwest Bancshares Common Stock. The indicated value for the Merger
was $31.75 per share of Southwest Bancshares Common Stock (the "Indicated
Value"), based upon the closing price of Alliance Bancorp Common Stock on
December 12, 1997.
Baird calculated multiples of the Indicated Value to Southwest Bancshares'
earnings per share ("EPS") for the last twelve months ("LTM") ended September
30, 1997 ("Adjusted LTM Earnings"), Southwest Bancshares management's estimates
of 1998 EPS ("Projected 1998 Earnings") and reported book value per share as of
September 30, 1997 ("Book Value"). These calculations resulted in multiples of
Indicated Value to EPS ("P/E Ratios") of 22.0x based on LTM Earnings and 19.8x
based on Projected 1998 Earnings and a multiple of Indicated Value to Book Value
of 1.983x. These calculations also resulted in an implied deposit premium of
16.2% and an implied core deposit premium of 16.9%.
Analysis of Publicly Traded Southwest Bancshares Comparable Companies.
Baird reviewed certain publicly available financial information as of the most
recently reported period and stock market information as of December 12, 1997
for certain publicly traded companies which Baird deemed relevant. These
companies consisted of: Ameriana Bancorp, First Midwest Financial, Inc., FSF
Financial Corp., First Federal Financial Corp., Glenway Financial Corp.,
Hallmark Capital Corp., Home Bancorp, Permanent Bancorp Inc., Peoples Bancorp,
Perpetual Midwest Financial, PVF Capital Corp., Westco Bancorp and Winton
Financial Corp. (the "Southwest Bancshares Comparable Companies"). The data
described below with respect to the Southwest Bancshares Comparable Companies
consists of the median data for such group as of the most recently reported
period and are compared to the closing price of Southwest Bancshares Common
Stock on December
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12, 1997, and Southwest Bancshares' financial and operating information as
reported as of September 30, 1997.
Baird noted that the ratios of the closing price of Southwest Bancshares
Common Stock to the last quarter earnings per share annualized, projected 1998
earnings (as estimated by Southwest Bancshares senior management for Southwest
Bancshares and as derived from equity research analysts' reports as reported by
I/B/E/S for the Southwest Bancshares Comparable Companies), and Book Value were
16.78x, 15.84x and 159.28%, respectively, for Southwest Bancshares as compared
to 16.67x, 16.96x and 152.08% for the Southwest Bancshares Comparable Companies.
The assets and equity reported for Southwest Bancshares were approximately $375
million and $43 million compared to approximately $386 million and $42 million
for the Southwest Bancshares Comparable Companies. Baird also noted ratios of
LTM earnings items to average assets for (i) net interest income of 3.18% for
Southwest Bancshares and 3.01% for the Southwest Bancshares Comparable
Companies, (ii) provisions for loan losses of 0.01% for Southwest Bancshares and
0.03% for the Southwest Bancshares Comparable Companies, (iii) other (non-
interest) income of 0.11% for Southwest Bancshares and 0.25% for the Southwest
Bancshares Comparable Companies, (iv) G&A expenses of 1.91% for Southwest
Bancshares and 1.93% for the Southwest Bancshares Comparable Companies, (v) net
income (i.e. return on average assets ("ROAA")) of 1.05% for Southwest
Bancshares and 0.88% for the Southwest Bancshares Comparable Companies and (vi)
ratio of LTM earnings to average equity ("ROAE") of 9.84% for Southwest
Bancshares and 8.75% for the Southwest Bancshares Comparable Companies. Baird
also noted LTM annual growth rates in assets, loans and deposits of -0.34%,
5.05% and -0.45% for Southwest Bancshares and 5.14%, 9.80% and 6.66% for the
Southwest Bancshares Comparable Companies. Baird noted capital-to-assets and
tangible capital-to-assets ratios of 11.34% (for both measures) for Southwest
Bancshares and 10.10% and 9.51%, respectively, for the Southwest Bancshares
Comparable Companies. Baird also noted certain asset quality ratios including
non-performing assets plus 90 day and greater delinquent assets to assets and
reserves to loan value ratios of 0.20% and 0.28%, respectively, for Southwest
Bancshares and 0.30% and 0.52%, respectively, for the Southwest Bancshares
Comparable Companies.
Analysis of Alliance Bancorp. In order to assess the relative public
market valuation of the Alliance Bancorp Common Stock to be issued in the
Merger, Baird reviewed certain publicly available financial information as of
the most recently reported period and stock market information as of December
12, 1997 for Alliance Bancorp and certain selected publicly traded companies
which Baird deemed relevant. Such comparable companies consisted of:
Affiliated Community Bancorp, Andover Bancorp Inc., FirstFed America Bancorp
Inc., First Essex Bancorp Inc., First Colorado Bancorp Inc., First Financial
Holdings Inc., First Indiana Corporation, First Liberty Financial Corp., First
SB of Washington Bancorp, Jefferson Savings Bancorp, Medford Bancorp Inc.,
Maryland Federal Bancorp, PennFed Financial Services Inc., Parkvale Financial
Corporation, Queens County Bancorp Inc., SIS Bancorp Inc., St. Francis Capital
Corp., Wilshire Financial Services, WSFS Financial Corp. and York Financial
Corp. (the "Alliance Bancorp Comparable Companies"). The data described below
with respect to the Alliance Bancorp Comparable Companies consist of median data
for such group and are compared to Alliance Bancorp Common Stock price (both
based on
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closing prices as of December 12, 1997) and Alliance Bancorp's financial and
operating information as reported as of September 30, 1997.
Baird noted that the ratios of the closing price of Alliance Bancorp Common
Stock to last quarter earnings per share annualized, projected 1998 earnings (as
estimated by Alliance Bancorp senior management for Alliance Bancorp and as
derived from equity research analysts' reports as reported by I/B/E/S for the
Alliance Bancorp Comparable Companies), and stated book value per share were
17.0x, 19.5x and 164.6%, respectively, for Alliance Bancorp as compared to
17.2x, 16.3x and 191.0% for the Alliance Bancorp Comparable Companies. The
assets and equity reported for Alliance Bancorp were approximately $1.4 billion
and $129.1 million compared to approximately $1.3 billion and $104.8 million for
the Alliance Bancorp Comparable Companies.
Analysis of Selected Comparable Transactions. Baird reviewed certain
information relating to three groups of transactions involving business
combinations of thrift institutions announced from January 1, 1997 through
December 12, 1997: (i) a group of 59 business combinations representing all
such announced transactions as reported by SNL Datasource (the "Entire Group");
(ii) the 21 business combinations included in the Entire Group involving selling
institutions based in Midwestern states (the "Midwestern Group"); and (iii) the
seven business combinations included in the Entire Group involving business
combinations with a total transaction value greater than $75 million and less
than $125 million (the "Value Group"). Baird calculated that: (i) the ratio of
Indicated Value to Southwest Bancshares' Book Value equaled 198.3%, compared
with high, median and low price-to-book ratios of 480.1%, 187.6% and 115.2% for
the Entire Group, 246.1%, 167.0% and 115.2% for the Midwestern Group, 273.3%,
220.9% and 150.7% for the Value Group; (ii) the ratio of Indicated Value to
Southwest Bancshares' tangible book value per share equaled 198.3%, compared
with high, median and low price-to-tangible book ratios of 480.1%, 189.1% and
115.2% for the Entire Group, 255.2%, 175.0% and 115.2% for the Midwestern Group,
273.3%, 220.9% and 150.7% for the Value Group; (iii) the multiple of Indicated
Value to LTM Earnings of Southwest Bancshares equaled 22.0x, compared with high,
median and low P/E Ratios based on LTM earnings of 81.6x, 19.8x and 11.4x for
the Entire Group, 41.8x, 22.6x and 16.8x for the Midwestern Group, 21.0x, 18.2x
and 14.1x for the Value Group; and (iv) the implied "core" deposit premium
indicated by the Merger equaled 16.9%, compared with high, median, low premiums
to "core" deposits of 43.8%, 14.2% and 3.3% for the Entire Group, 24.1%, 15.0%
and 3.3% for the Midwestern Group, 21.7%, 15.2% and 11.6% for the Value Group.
Baird also compared the above ratios for Southwest Bancshares after
adjusting the Indicated Value of the Merger (the "Adjusted Indicated Value") to
reflect the low end of the pricing collar. After adjusting to reflect the price
at the low end of the pricing collar, Baird calculated that: (i) the ratio of
Adjusted Indicated Value to Southwest Bancshares' Book Value equaled 168.6%,
compared with high, median and low price-to-book ratios of 480.1%, 187.6% and
115.2% for the Entire Group; (ii) the ratio of Adjusted Indicated Value to
Southwest Bancshares' tangible book value equaled 168.6%, compared with high,
median and low price-to-tangible book ratios of 480.1%, 189.1% and 115.2% for
the Entire Group; and (iii) the multiple of Adjusted Indicated Value to LTM
Earnings
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of Southwest Bancshares equaled 18.7x, compared with high, median and low P/E
Ratios based on LTM Earnings of 81.6x, 19.8x and 11.4x for the Entire Group.
Baird also analyzed the premiums represented by the Indicated Value over
the market price of Southwest Bancshares Common Stock at December 15, 1997, and
one month, three months and one year prior thereto, compared to the prices paid
in the Entire Group of comparable business combinations relative to the market
value of the acquired company's equity one day, one month, three months and one
year prior to the announcement date of such transaction. Such analysis yielded
premiums of 16.5%, 25.7%, 54.9% and 72.8% for Southwest Bancshares, compared to
median premiums of 18.9%, 26.4%, 39.3% and 74.0% for the Entire Group.
Discounted Earnings Analysis. Baird performed a discounted earnings
analysis of Southwest Bancshares on a stand alone basis using Southwest
Bancshares management's earnings projections through 2002, without taking into
account any cost savings and synergies that may be realized following the
Merger. In such analysis, Baird assumed terminal value multiples ranging from
14.0x to 22.0x such projected earnings and discount rates ranging from 8% to
13%. Such analysis produced implied values of Southwest Bancshares Common Stock
ranging from $20.61 to $35.98. Baird noted that the discounted earnings analysis
was included because it is a widely used valuation methodology, but noted that
the results of such methodology are highly dependent upon the numerous
assumptions that must be made, including earnings growth rates, dividend payout
rates, terminal values and discount rates.
Analysis of the Market's Valuation of Alliance Bancorp's Supervisory
Goodwill Lawsuit. In assessing the relative public market valuation of Alliance
Bancorp Common Stock, Baird analyzed the possible effect on such public market
price of Alliance Bancorp's supervisory goodwill lawsuit (the "Lawsuit"). In
connection with such analysis, Baird reviewed: (i) the effect of Lawsuit-
related announcements on Alliance Bancorp's stock price; (ii) the effect of
Lawsuit-related announcements on the stock prices of other institutions affected
by goodwill lawsuits; (iii) the market's pricing of CalFed's Contingent
Litigation Participation Certificates; and (iv) the implied market valuation of
tradable goodwill certificates representing 100% of any after-tax proceeds (net
of expenses) to be received by Coast Savings Financial, Inc. ("CSF")
shareholders pursuant to CSF's acquisition by H. F. Ahmanson & Company. Based
on the foregoing review and analysis, Baird estimated that the public market
valuation of the Lawsuit is approximately $3.00 to $6.00 per share or $25.9
million to $51.7 million in the aggregate. Baird noted that the price of
Alliance Bancorp Common Stock, when adjusted to eliminate the estimated upper-
range valuation of the Lawsuit, is below peer group median price to earnings
(13.1x versus 17.2x) and below peer group price to book (127.3% versus 191.0%).
Baird has not conducted an independent evaluation of the Lawsuit and did not
opine as to the merits of, or ultimate recovery from, the Lawsuit.
Pro Forma Merger Analysis. Baird prepared a pro forma analysis of the
financial impact of the Merger. Using earnings estimates for Southwest
Bancshares (prepared by Southwest Bancshares management) and Alliance Bancorp
(prepared by Alliance Bancorp management), Baird compared Alliance Bancorp's
earnings per share and book value on a stand alone basis to the earnings per
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share of common stock and book value of the combined companies on a pro forma
basis. In conducting this analysis, Baird assumed certain effects of the Merger
would be realized as estimated by Southwest Bancshares and Alliance Bancorp
management, including cost savings, operating synergies, transaction and
severance costs and tax effects resulting from the Merger. This analysis
indicated that the Merger would be accretive to Alliance Bancorp's pro forma
earnings per share in calendar year 1998 and would be dilutive to Alliance
Bancorp's pro forma book value.
Contribution Analysis. Baird analyzed Southwest Bancshares and Alliance
Bancorp's relative contribution to the Combined Company resulting from the
Merger with respect to assets, deposits, historical income, market
capitalization and tangible equity. As a result of the Merger, and assuming an
exchange ratio of 1.1981, Alliance Bancorp's stockholders will own approximately
71.4% of the outstanding Alliance Bancorp Common Stock, which compares to
Southwest Bancshares' contribution of 21.5% of assets, 21.6% of deposits, 24.1%
of historical income 24.2% of market capitalization and 25.0% of tangible
equity.
In conducting its analysis, Baird also reviewed the historical trading
prices and volume of Southwest Bancshares Common Stock and Alliance Bancorp
Common Stock on a daily basis from December 10, 1996 to December 12, 1997.
In connection with its written opinion dated May ___, 1998, Baird confirmed
the appropriateness of its reliance on the analyses used to render its opinion
dated December 16, 1997, by performing procedures to update certain of its
analyses and by reviewing the assumptions on which such analyses were based and
the factors considered therewith.
The foregoing summary, does not purport to be a complete description of the
analyses performed by Baird. The preparation of a fairness opinion is a
complete process and is not susceptible to partial analysis or a summary
description. Baird believes that its analyses must be considered as a whole and
that selecting portions of such analyses without considering all factors and
analyses would create an incomplete view of the processes underlying its
opinion. In its analyses, Baird relied upon numerous assumptions made by senior
management of Southwest Bancshares and Alliance Bancorp with respect to industry
performance, general business and economic conditions, and other matters, many
of which are beyond the control of Southwest Bancshares or Alliance Bancorp.
Analyses based upon forecasts of future results are not necessarily indicative
of actual values, which may be significantly more or less favorable than
suggested by such analyses. No company or transaction used as a comparison in
the analyses is identical to Southwest Bancshares or Alliance Bancorp or to the
Merger. Accordingly, an analysis of the results of the foregoing necessarily
involves complex considerations and judgements concerning financial and
operating characteristics of the companies and other factors that could affect
the public trading volume of the companies to which Southwest Bancshares and
Alliance Bancorp and the Merger are being compared. Additionally, any estimates
included in Baird's analyses do not purport to be appraisals and are not
necessarily reflective of the prices at which businesses actually may be sold.
Because such estimates are inherently subject to uncertainty, Baird does not
assume responsibility for their accuracy.
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Baird, as part of its investment banking business, is engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements, and
valuations for estate, corporate and other purposes. Southwest Bancshares
retained Baird because of its experience and expertise in the valuation of
business and their securities in connection with mergers and acquisitions. In
the ordinary course of business, Baird may from time to time trade equity
securities of Southwest Bancshares and Alliance Bancorp for its own account and
for accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.
Compensation. Pursuant to an engagement letter dated October 1, 1997
between Southwest Bancshares and Baird, Baird has earned a retainer fee of
$40,000, a fee of $100,000 for the rendering of its Opinion dated December 16,
1997 and a fee of $50,000 for the rendering of its opinion dated May ____, 1998.
In addition, upon consummation of the Merger, Baird will receive a fee equal to
0.75 percent of the value of the total consideration payable in the Merger up to
$50 million plus 0.50 percent of the value of the total consideration in excess
thereof. Such fee is contingent upon consummation of the Merger. Southwest
Bancshares also agreed to reimburse Baird for its expenses of legal counsel.
Southwest Bancshares has also agreed to indemnify Baird, its affiliates and
their respective directors, officers, employees, agents and controlling persons
against certain liabilities relating to or arising out of its engagement,
including liabilities under the federal securities laws. Baird has provided
certain investment banking and advisory services to Southwest Bancshares and
Alliance Bancorp from time to time, for which it has received customary
compensation, including acting as financial advisor to Hinsdale Financial
Corporation (a predecessor-in-interest to Alliance Bancorp) in its business
combination with Liberty Bancorp, Inc. in 1996.
EFFECTIVE DATE AND CLOSING DATE
The Merger shall become effective at the time and on the date of the filing
of a certificate of merger with the Secretary of State of Delaware (the
"Effective Date"). Such filing will occur only after the receipt of all
requisite regulatory approvals, the approval of the Merger Agreement by the
requisite vote of Alliance Bancorp's and Southwest Bancshares' respective
stockholders and the satisfaction or waiver of all other conditions to the
Merger. The closing of the Merger shall occur within 30 days after the
satisfaction or waiver of all conditions and obligations precedent of Alliance
Bancorp and Southwest Bancshares to consummate the Merger, or at another time
agreed to by Alliance Bancorp and Southwest Bancshares (the "Closing Date").
NO APPRAISAL RIGHTS
Stockholders of Alliance Bancorp and Southwest Bancshares will have no
appraisal rights under the DGCL in connection with the Merger.
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FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Alliance Bancorp
Common Stock will be issued upon the surrender for exchange of certificates
representing Southwest Bancshares Common Stock, no dividend or distribution of
Alliance Bancorp will relate to any fractional shares, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Alliance Bancorp. Each stockholder of Southwest Bancshares who
would be entitled to a fractional share in the Merger will receive a cash
payment (without interest) determined by multiplying (i) the Alliance Bancorp
Market Value by (ii) the fractional share interest to which the holder would
otherwise be entitled pursuant to the terms of the Merger Agreement.
EXCHANGE OF CERTIFICATES
As soon as practicable after the Effective Date, an exchange agent
designated by Alliance Bancorp and Southwest Bancshares (the "Exchange Agent")
will deliver to each Southwest Bancshares holder of record of a certificate or
certificates, which immediately prior to the Effective Date represented
outstanding shares of Southwest Bancshares Common Stock (the "Certificates"), a
transmittal letter and instructions to be used in surrendering Certificates in
exchange for (i) certificates representing the number of shares of Alliance
Bancorp Common Stock into which their shares of Southwest Bancshares Common
Stock were converted pursuant to the Merger Agreement, and (ii) a check
representing the amount of cash in lieu of fractional shares, if any, which such
stockholder has the right to receive in respect of the Certificates surrendered
in connection with the Merger. No interest will be paid or accrued on the cash
in lieu of fractional shares payable to holders of Southwest Bancshares Common
Stock.
SOUTHWEST BANCSHARES STOCKHOLDERS SHOULD NOT FORWARD THEIR SOUTHWEST
BANCSHARES STOCK CERTIFICATES UNTIL THEY RECEIVE THE TRANSMITTAL LETTER AND
INSTRUCTIONS.
Until such surrender and subject to the effect, if any, of applicable law,
the Certificates will as of the Effective Date represent ownership of the number
of shares of Alliance Bancorp Common Stock into which such shares were converted
in the Merger, and the holders will be entitled to all rights and privileges of
holders of Alliance Bancorp Common Stock, except that holders of Certificates
will not be entitled to receive dividends or any other distributions declared by
Alliance Bancorp until the Certificates are so surrendered. Following surrender
of the Certificates in accordance with the terms of the Merger Agreement, the
holders of newly issued Alliance Bancorp Certificates will be paid, without
interest, any dividends or other distributions with respect to the shares of
Alliance Bancorp Common Stock the record date for which is after the Effective
Date (less any taxes that may have been imposed thereon).
Any Certificate representing shares of Alliance Bancorp Common Stock to be
issued in a name other than that in which the Certificate is registered must be
properly endorsed and otherwise
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in proper form for transfer, and the holder requesting such exchange must pay to
the Exchange Agent in advance any transfer or other taxes in connection
therewith.
In the event any Certificate has been lost, stolen or destroyed, upon the
mailing of an affidavit of that fact by the holder of such Certificate and the
posting of any bond required by Alliance Bancorp or the Exchange Agent, Alliance
Bancorp or the Exchange Agent will issue for such lost, stolen or destroyed
Certificate, the shares of Alliance Bancorp Common Stock and deliver cash due to
the holder of such Certificate under the terms of the Merger Agreement.
After the Effective Date, there will be no further transfers on the records
of Southwest Bancshares of the Certificates, and, if such Certificates are
presented to Alliance Bancorp for transfer, they will be canceled against
delivery of certificates for Alliance Bancorp Common Stock.
After the Effective Date, holders of unsurrendered Certificates shall be
entitled to vote at any meeting of Alliance Bancorp stockholders at which
holders of Alliance Bancorp Common Stock are eligible to vote, regardless of
whether such holders have exchanged their Certificates.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Set forth below are descriptions of interests of directors and executive
officers of Southwest Bancshares and Alliance Bancorp in the Merger in addition
to their interests as stockholders of Southwest Bancshares and Alliance Bancorp
generally. The respective Southwest Bancshares and Alliance Bancorp Boards were
aware of these interests and considered them in approving the Merger Agreement
and the transactions contemplated thereby.
Employment Agreement. The existing employment agreements and/or special
termination agreements ("Employment Agreements") that Southwest Bancshares has
entered into with its officers and employees will be honored by Alliance Bancorp
and Liberty Federal Bank, subject to any adjustment in title as contemplated in
the Merger Agreement. Unless otherwise agreed to in writing by the affected
officer and employee, the consummation of the transactions contemplated
constitute a change in control under the employment agreement entered into by
Southwest Bancshares. In accordance with the Merger, Richard E. Webber,
President of Southwest Bancshares and Southwest Federal, will terminate
employment. Accordingly, under his employment agreement ("Agreement"), he will
be entitled to receive as a severance benefit an amount equal to one (1) times
the immediately preceding year's Base Salary plus the compensation that he would
have been entitled to receive for the remaining term of the Agreement, payable
at his election, in a lump sum or during a 36 month period immediately following
his termination. In addition, Mr. Webber will be entitled to continued life,
medical, dental and disability coverage for 36 months following his termination
of employment. Under the Agreement, Mr. Webber will be entitled to a severance
payment of $1.3 million, excluding the payment of life, medical, dental and
disability coverage.
Consulting Agreement. At the Effective Date, Alliance Bancorp will enter
into a consulting agreement with Richard E. Webber, President of Southwest
Bancshares and Southwest Federal. The
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consulting agreement provides for a three (3) year term, and is terminable by
either party on 60 days written notice. For his consulting services, Mr. Webber
will be paid $125,000 per year and receive a company car and reimbursement of
out-of-pocket expenses. In addition, Mr. Webber will be provided with a
secretary and an office on the Bank's premises.
Indemnification; Insurance. Pursuant to the Merger Agreement, Alliance
Bancorp has agreed that from and after the Effective Date through the sixth
anniversary thereof, it will indemnify, defend and hold harmless each present
and former officer or director of Southwest Bancshares and its Subsidiaries (as
defined in the Merger Agreement) (the "Indemnified Parties") against all losses,
claims, damages, costs, expenses (including reasonable attorney's fees and
expenses), liabilities, judgments and amounts that are paid in settlement (with
the approval of Alliance Bancorp, which approval shall not be unreasonably
withheld) of or in connection with any threatened or actual claim, action, suit,
proceeding or investigation (each a "Claim"), based in whole or in part on, or
arising in whole or in part out of, the fact that such person is or was a
director or officer of Southwest Bancshares or any of its Subsidiaries,
regardless of whether such Claim is asserted or arises before or after the
Closing Date to the fullest extent to which directors and officers of Southwest
Bancshares are entitled under the DGCL, Southwest Bancshares Certificate of
Incorporation and Bylaws, or other applicable law in effect on the date of the
Merger Agreement (and Alliance Bancorp will pay expenses in advance of the final
disposition of any such action or proceeding to the fullest extent permitted to
a Delaware corporation or under the DGCL or Southwest Bancshares certificate of
incorporation and bylaws provided that the person to whom such expenses are
advanced agrees to repay such expenses if it is ultimately determined that such
person is not entitled to indemnification.)
Alliance Bancorp has further agreed, to use its best efforts for a period
of six years after the Effective Date, to cause the persons serving as officers
and directors of Southwest Bancshares immediately prior to the Effective Date to
continue to be covered by Southwest Bancshares' current directors' and officers'
liability insurance policy (provided that Alliance Bancorp may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are substantially no less advantageous than such policy) with
respect to acts or omissions occurring prior to the Effective Date which were
committed by such officers and directors in their capacity as such.
Supplemental Executive Retirement Plan. In 1988, Southwest Federal entered
into a Supplemental Executive Retirement Plan (the "SERP") with Mr. Webber. The
officer becomes vested at a rate equal to 10% for each year of service, but
becomes fully vested upon death, disability or attainment of normal retirement
age. The SERP is an unfunded plan; however Southwest Federal intends to use a
portion of the cash surrender value of the key employee life insurance policy
purchased by Southwest Federal to provide payment to Mr. Webber, with retirement
or death benefits payable beginning at his retirement or death with fixed
payments for fifteens years. In the event Mr. Webber terminates employment
prior to retirement, limited benefits will be paid to him. In 1994, Southwest
Federal contributed $486,938 for the payment of the premiums on the policy and
no further payments are required. Southwest Federal is both the owner and the
beneficiary of such
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policy. Pursuant to the terms of the Merger Agreement, Alliance Bancorp will
maintain the SERP, and will provide Mr. Webber with full benefits thereunder.
Board Membership. Upon consummation of the Merger, Richard E. Webber, the
President and Chief Financial Officer of Southwest Bancshares, shall be
appointed to Alliance Bancorp's Board of Directors immediately following the
Effective Date. Mr. Webber will be elected to a class of directors providing
for no less than a two year term following the Effective Date. In addition, Mr.
Webber will be included in the list of nominees for director for which Alliance
Bancorp solicits proxies at the annual meeting of shareholders following the
Merger. In the event Mr. Webber is unable to serve as a member of the Board of
Directors of Alliance Bancorp, a substitute nominee shall be appointed by Mr.
Webber, subject to the approval of Alliance Bancorp.
Advisory Board. At the Effective Date, Liberty Federal will establish an
advisory board of directors comprised of the following members of Southwest
Federal's Board of Directors: Lawrence M. Cox, James W. Gee, Sr, Joseph Herbert,
Robert E. Lawler, Frank J. Muriello, Albert Rodrigues, and Richard E. Webber.
The advisory board shall meet at least quarterly. Each member will receive an
annual retainer of $4,500, and a fee of $375 per meeting, with the Chairman
receiving a fee of $575 per meeting.
EFFECT ON EMPLOYEES AND EMPLOYEE BENEFIT PLANS OF SOUTHWEST BANCSHARES AND
ALLIANCE BANCORP
Following the Merger, any former employees of Southwest Bancshares whose
employment is terminated, other than for cause, shall be provided with severance
benefits in accordance with the Liberty Federal severance plan in effect on the
date of execution of the Merger Agreement.
Employee Benefit Plans. To the extent permitted by applicable law, the
employee pension and welfare benefit plans (collectively, "Benefit Plans") of
Southwest Federal will continue to be maintained separately or consolidated, at
the election of Alliance Bancorp. In the event of consolidation or termination
of any or all of Southwest Federal Benefit Plans, Southwest Federal employees
who continue to work for Alliance Bancorp or Liberty Federal ("Continuing
Employees") will receive credit for service under any Alliance Bancorp benefit
plan in which such Continuing Employee would be eligible to enroll for purposes
of eligibility and vesting but not for benefit accrual purposes.
Liberty Federal will make health coverage available to Continuing Employees
on the same basis as is provided to other employees of Liberty Federal. In the
event of termination or consolidation of any Southwest Bancshares health plan
with any Liberty Federal health plan, full time Continuing Employees who were
eligible for continued coverage under the terminated or consolidated plan will
have immediate coverage of any pre-existing condition. Southwest Bancshares
employees whose employment has been terminated, and their qualified
beneficiaries, or Continuing Employees who do not satisfy the requirements for
coverage under the Liberty Federal health plans will have the right to continued
health care coverage provided by law.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties
relating to, among other things: (a) the corporate organization of the parties;
(b) the capital structures of the parties; (c) the due authorization, execution,
delivery, performance and enforceability of the Merger Agreement; (d) consents
or approvals of regulatory authorities or third parties necessary to complete
the Merger; (e) the consistency of financial statements with generally accepted
accounting principles and, where appropriate, applicable regulatory accounting
principles; (f) the absence of material adverse effects since September 30,
1997, in the consolidated assets, business, financial condition or results of
operations of the parties; (g) the filing of tax returns and payment of taxes;
(h) the absence of undisclosed material pending or threatened litigation; (i)
compliance with applicable laws and regulations; (j) retirement and other
employee plans and matters relating to the Employee Retirement Income Security
Act of 1974 ("ERISA"); (k) the quality of title to assets and properties; (1)
the maintenance of adequate insurance; (m) the absence of undisclosed brokers'
or finders' fees; (n) the absence of material environmental violations, actions
or liabilities; (o) the consistency of the allowance for loan losses with
generally accepted accounting principles and all applicable regulatory criteria;
(p) the accuracy of information supplied by the parties in connection with this
Joint Proxy Statement/Prospectus and all applications filed with regulatory
authorities for approval of the Merger; and (q) documents filed with the
Commission and the accuracy of information contained therein.
The Merger Agreement also contains other representations and warranties by
Southwest Bancshares relating to, among other things, certain contracts relating
to employment, consulting and benefits matters, and transactions with
affiliates.
CONDITIONS TO THE MERGER
The obligations of Alliance Bancorp and Southwest Bancshares to consummate
the Merger are subject to the satisfaction or mutual waiver at or prior to the
Effective Date of the following conditions, among others: (a) the taking of all
required corporate action; (b) the receipt of all required approvals of the
Merger by regulatory authorities without the imposition of unduly burdensome
conditions and the expiration or termination of all notice and waiting periods
required thereunder; (c) that there is no order in effect that enjoins or
prohibits consummation of the Merger; (d) that since September 30, 1997, there
shall not have occurred any "material adverse effect" (as defined in the Merger
Agreement) on the assets, financial condition or results of operations of
Alliance Bancorp or Southwest Bancshares; (e) the receipt of opinions of
counsel in form and substance reasonably satisfactory to Alliance Bancorp and
Southwest Bancshares; (f) all required approvals by state securities
authorities with respect to the transactions contemplated by the Merger
Agreement, shall have been obtained; (g) the receipt of an opinion of Luse
Lehman Gorman Pomerenk & Schick, P.C. that, among other things, the Merger will
be treated for federal income tax purposes as a "reorganization" within the
meaning of the Internal Revenue Code of 1986, as amended (the "Code") (see
"Certain federal Income Tax Consequences") herein; (h) the approval of
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the Merger Agreement by the stockholders of Alliance Bancorp and Southwest
Bancshares; (i) the receipt by Southwest Bancshares of a written opinion from
its financial advisor to the effect that the consideration to be received by
stockholders of Southwest Bancshares pursuant to the Merger Agreement is fair,
from a financial point of view, to such stockholders, and the receipt by
Alliance Bancorp of a written opinion from its financial advisor to the effect
that the Merger is fair to Alliance Bancorp stockholders; and (j) the shares of
Alliance Bancorp Common Stock which shall be issued to the stockholders of
Southwest Bancshares upon consummation of the Merger shall have been authorized
for listing on the Nasdaq National Market System.
The obligations of Alliance Bancorp under the Merger Agreement shall be
subject to satisfaction of each of the following additional conditions: (a) the
receipt of (i) an opinion from Alliance Bancorp's independent auditor to the
effect that the merger will be treated as a "pooling of interests," as defined
by generally accepted accounting principles, for financial accounting purposes
and (ii) a letter, in a form satisfactory to Alliance Bancorp's independent
auditor, from Southwest Bancshares' independent auditor representing that they
are not aware of any transactions or of any events or circumstances that would
preclude the Merger from being treated as a "pooling of interests" for financial
accounting purposes; and (b) that the Merger shall not require Alliance Bancorp
or Southwest Bancshares to distribute to depositors the liquidation account
established by Southwest Bancshares in connection with its mutual-to-stock
conversion.
At any time prior to the Effective Date, the parties may waive compliance
with any of the conditions set forth in the Agreement if such waiver is set
forth in writing and is signed by a duly authorized officer on behalf of the
waiving party.
For additional information, see Article VI of the Merger Agreement attached
hereto in Appendix I.
There can be no assurance that the conditions to consummation of the Merger
will be satisfied or waived. In the event the conditions to either party's
obligations become impossible of satisfaction in any material respect, the other
party may elect to terminate the Merger Agreement. See "Termination; Effect of
Termination."
REGULATORY APPROVALS
The Merger is subject to the approval of the OTS. On March 16, 1998,
Alliance Bancorp filed an application for approval of the Merger with the OTS.
Alliance Bancorp expects OTS approval of the Merger by mid-June, 1998.
Under federal law, a period of 15 days must expire following approval by
the OTS within which period the Department of Justice may file objections to the
Merger under the federal antitrust laws. The parties do not expect that the
Department of Justice will object to the Merger.
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It is a condition to the consummation of the Merger that all requisite
regulatory approvals be obtained without any conditions that are in Alliance
Bancorp's reasonable judgement unduly burdensome. Although not expected, no
assurance can be given that OTS approval will not contain any such condition or
restriction. See "-- Conditions to the Merger."
AMENDMENTS, EXTENSIONS AND WAIVERS
Subject to applicable law, at any time prior to the consummation of the
transactions contemplated by the Merger Agreement, the parties may: (a) amend
the Merger Agreement; (b) extend the time for the performance of any of the
obligations under the Merger Agreement; (c) waive any inaccuracies in the
representations and warranties contained therein or in any document delivered
pursuant thereto; or (d) waive compliance with any of the agreements or
conditions contained in the Merger Agreement. The Merger Agreement may not be
amended except by an instrument in writing authorized by the respective Boards
of Directors and signed, by duly authorized officers, on behalf of the parties
thereto. Any agreement to any extension or waiver must be set forth in writing
and must be signed by a duly authorized officer.
TERMINATION; EFFECT OF TERMINATION
The Merger Agreement may be terminated on or at any time prior to the
Closing Date by the mutual written consent of the parties to the Merger
Agreement. In addition, the Merger Agreement may be terminated by Alliance
Bancorp or Southwest Bancshares: (i) if there is any breach of any
representation, warranty, covenant or other obligation that results in a
"material adverse effect" (as defined in the Merger Agreement) to the breaching
party, and such breach is not remedied within 30 days after receipt of a written
notice requesting that it be remedied; (ii) if the Closing Date shall not have
occurred on or before September 30, 1998, unless the failure to close is due to
the failure of the party seeking to terminate the Merger Agreement to perform or
observe its agreements under the Merger Agreement; or (iii) if either party has
been informed in writing by a regulatory authority whose approval or consent has
been requested that such approval or consent is unlikely to be granted, unless
the failure to receive such approval is due to the failure of the party seeking
to terminate the Merger Agreement to perform or observe its agreements under the
Merger Agreement; or (iv) by either Alliance Bancorp or Southwest Bancshares if
any approval of the stockholders of Alliance Bancorp or Southwest Bancshares
required for the consummation of the Merger shall not have been obtained.
In addition, if the Alliance Bancorp Market Value is less than $19.875,
then Alliance Bancorp shall have the right to terminate the Merger Agreement
unless Southwest Bancshares provides written notice that it wants to proceed
with the Merger, in which event the Exchange Ratio will be 1.3579.
If the Merger Agreement is terminated it shall generally become void, and
there shall be no further liability on the part of Alliance Bancorp or Southwest
Bancshares to the other, except for any liability arising out of any willful
breach of any provision of the Merger Agreement. In the event
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of any termination of the Merger Agreement by a party based on certain breaches
of a representation, warranty, or covenant, by the other party thereto, the
breaching party shall pay to the non-breaching party all out-of-pocket costs and
expenses, including, without limitation, reasonable legal, accounting and
investment banking fees and expenses, incurred by the non-breaching party in
connection with entering into the Merger Agreement and carrying out of any and
all acts contemplated hereunder, plus a sum equal to $500,000; provided,
however, that the Merger Agreement will not be construed to relieve or release a
breaching party from any additional liabilities or damages arising out of its
willful breach of any provision of the Merger Agreement.
COVENANTS PENDING CLOSING
Pursuant to the Merger Agreement, Alliance Bancorp and Southwest Bancshares
have each agreed to use their best efforts to preserve their business
organizations intact, to maintain good relationships with employees and to
preserve the goodwill of customers and others with whom business relationships
exist. In addition, Southwest Bancshares has agreed to conduct its business and
to engage in transactions only in the ordinary course of business, consistent
with past practice, except as otherwise required by the Merger Agreement or with
the written consent of Alliance Bancorp.
In addition, Southwest Bancshares has agreed in the Merger Agreement that
it may not, without the written consent of Alliance Bancorp, among other things:
(i) amend or change its Certificate of Incorporation or Bylaws; (ii) change the
number of authorized or issued shares of its capital stock or issue or grant any
option or similar right relating to its capital stock or split, combine or
reclassify any shares of capital stock, or declare or pay any dividend or other
distribution in respect of capital stock (other than the quarterly cash dividend
of $.20 per share), or redeem or otherwise acquire any shares of capital stock,
except for shares of Southwest Bancshares Common Stock that may be issued upon
the exercise of options identified in the Merger Agreement as outstanding as of
the date of the Merger Agreement; (iii) except pursuant to the arrangements
identified in the Merger Agreement, grant any severance or termination pay to,
or enter into any new or amend any existing employment agreement with, or
increase the compensation of (except for normal increases in the ordinary course
of business consistent with past practice), any employee, officer or director of
Southwest Bancshares; (iv) engage in any merger, acquisition or similar
transaction; (v) sell or dispose of any capital stock or assets other than in
the ordinary course of business; (vi) take any action which would result in any
of its representations and warranties becoming untrue as of a later date; (vii)
change any accounting practices; (viii) waive, grant or transfer any material
rights of value or materially modify or change any existing material agreement
or indebtedness other than in the ordinary course of business, consistent with
past practice; (ix) implement any new employee plan, or materially amend any
existing plan except to the extent such amendments do not result in an increase
in cost, or contribute to any employee benefit plan other than in amounts and in
a manner consistent with past practice; (x) purchase any security for its
investment portfolio not rated "A" or higher by either Standard & Poor's
Corporation or Moody's Investor Services, Inc.; (xi) fail to review with a
representative of Alliance Bancorp proposed loans or commitments, other than
one- to four-family residential real estate loans, in excess of $1.0 million, or
any renewal or modification of any existing loan or commitment outstanding in
excess of $1.0
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million; (xii) except as set forth in the Merger Agreement, enter into or modify
any other transaction with any affiliate; (xiii) enter into any interest rate
swap or similar arrangement; (xiv) except for the execution of the Merger
Agreement, take any action that would give rise to a right of payment to any
individual under any employment agreement; (xv) intentionally and knowingly take
any action that would preclude satisfaction of the condition to closing
contained in the Merger Agreement relating to the financial accounting treatment
of the Merger; (xvi) change its material banking policies in any material
respect except as may be required by changes in applicable law or regulations or
in response to examination comments by a regulatory authority; or (xvii) enter
into any new joint venture or partnership agreement or any new land acquisition
or real estate development project, or increase the amount of credit that
Southwest Bancshares or any of its subsidiaries is committed to extend to any
joint venture or partnership in connection with land acquisition or real estate
development activities.
Under the Merger Agreement, unless provided for in a business plan or
similar document, it shall not be considered in the ordinary course of business
for Southwest Bancshares to do any of the following: (i) make any capital
expenditure of $50,000 or more not disclosed in the Merger Agreement, without
the prior written consent of Alliance Bancorp; (ii) except as set forth in the
Merger Agreement, make any disposition of any assets having a book or market
value in excess of $1.0 million, other than certain transactions made in the
ordinary course of business; or (iii) enter into any commitment, other than in
the normal course of business, involving a payment by Southwest Bancshares of
more than $50,000 annually, or containing a material financial commitment and
extending beyond 12 months from the date of the Merger Agreement.
NO SOLICITATION OF BIDS
The Merger Agreement required Southwest Bancshares to terminate any
discussions or negotiations with any parties with respect to any Acquisition
Proposal, as defined in the Merger Agreement. The Merger Agreement also
requires Southwest Bancshares to use all reasonable efforts to cause its
directors, officers, employees, agents and representatives not to solicit any
inquiries or offers with respect to an acquisition proposal, or engage in any
discussions or negotiations with any person relating to an acquisition proposal.
EXPENSES
All expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby are to be paid by the party incurring such
expenses, except that Alliance Bancorp and Southwest Bancshares shall bear
equally all printing and mailing expenses associated with this Joint Proxy
Statement/Prospectus.
In the event of any termination of the Merger Agreement by a party based on
certain breaches of a representation, warranty, or covenant, by the other party
thereto, the breaching party shall pay to the non-breaching party all out-of-
pocket costs and expenses, including, without limitation,
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reasonable legal, accounting and investment banking fees and expenses, incurred
by the non-breaching party in connection with entering into the Merger Agreement
and carrying out of any and all acts contemplated thereunder, plus a sum equal
to $500,000.
ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. Under this method of accounting,
the recorded assets and liabilities of Alliance Bancorp and Southwest Bancshares
will be carried forward to the combined corporation at their recorded amounts;
earnings of the combined corporation will include earnings of both Alliance
Bancorp and Southwest Bancshares for the entire fiscal year of Alliance Bancorp
in which the Merger occurs; and the reported earnings of the separate
corporations for prior periods will be combined and restated as earnings of the
combined corporation. Expenses incurred in connection with the Merger will
constitute expenses for the accounting periods to which such expenses relate.
The receipt of a letter from Alliance Bancorp's independent auditors confirming
that the Merger will qualify for "pooling of interests" accounting is a
condition to Alliance Bancorp's obligation to complete the Merger. In order for
the Merger to be accounted for as a "pooling of interests" under generally
accepted accounting principles, it is anticipated that Southwest Bancshares will
sell to a nonaffiliated third party or parties prior to the Effective Date of
the Merger approximately 53,000 shares of Southwest Bancshares Common Stock
presently held as treasury shares in one or more privately negotiated
transactions.
RESALES OF ALLIANCE BANCORP COMMON STOCK BY AFFILIATES
The shares of Alliance Bancorp Common Stock to be issued in the Merger will
be registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares issued to any stockholder who may be deemed to
be an "affiliate" of Alliance Bancorp or Southwest Bancshares for purposes of
Rule 145 under the Securities Act. Affiliates of Alliance Bancorp or Southwest
Bancshares may not sell their shares of Alliance Bancorp Common Stock acquired
in connection with the Merger except pursuant to an effective registration
statement under the Securities Act covering such shares or in compliance with
Rule 145 or another applicable exemption from the registration requirements of
the Securities Act. Persons who may be deemed to be affiliates of Alliance
Bancorp or Southwest Bancshares generally include individuals or entities that
control, are controlled by or are under common control with Alliance Bancorp or
Southwest Bancshares, and may include certain officers and directors of Alliance
Bancorp and Southwest Bancshares as well as certain principal stockholders of
Alliance Bancorp and Southwest Bancshares.
In addition, each director and senior executive officer of Southwest
Bancshares and their affiliates has entered into an Affiliate Agreement with
Alliance Bancorp providing that, as an affiliate, he or she will not transfer
any Alliance Bancorp Common Stock received in the Merger except in compliance
with the Securities Act and pursuant to the terms of his or her Affiliate
Agreement, and will make no dispositions of any Alliance Bancorp Common Stock or
Southwest Bancshares Common Stock (or any interest therein) during the period
commencing 30 days prior to
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the Effective Date through the date on which financial results covering at least
30 days of combined operations of Alliance Bancorp and Southwest Bancshares
after the Merger have been made public. This Joint Proxy Statement/Prospectus
does not cover resales of Alliance Bancorp Common Stock received by any person
who may be deemed an affiliate of Southwest Bancshares or Alliance Bancorp.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Set forth below is a discussion of federal income tax consequences of the
Merger to Alliance Bancorp, Alliance Bancorp stockholders, Southwest Bancshares
and Southwest Bancshares stockholders who are citizens or residents of the
United States. THE FOLLOWING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION WHETHER
TO VOTE IN FAVOR OF APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY. FURTHER, THE DISCUSSION DOES NOT ADDRESS THE TAX
CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR ALLIANCE BANCORP OR SOUTHWEST
BANCSHARES STOCKHOLDER SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN FEDERAL INCOME
TAX LAWS, SUCH AS DEALERS IN SECURITIES, BANKS, INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS, NON-UNITED STATES PERSONS AND STOCKHOLDERS WHO ACQUIRED THEIR
SHARES AS COMPENSATION, NOR ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, LOCALITY OR FOREIGN JURISDICTION. THE DISCUSSION IS BASED UPON THE CODE,
TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT DECISIONS
AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE, AND ANY SUCH
CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION.
HOLDERS OF SOUTHWEST BANCSHARES COMMON STOCK ARE URGED TO CONSULT THEIR TAX
ADVISERS AS TO THE PARTICULAR EFFECT OF THEIR OWN PARTICULAR FACTS AND
CIRCUMSTANCES ON THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THEM, AND
ALSO AS TO THE EFFECT OF ANY STATE, LOCAL, FOREIGN AND OTHER FEDERAL TAX LAWS.
Under current federal income tax law, and based upon assumptions and
representations to be made by Alliance Bancorp and Southwest Bancshares, and
assuming that the Merger and the Bank Merger are each consummated in the manner
set forth in the Merger Agreement, it is anticipated that the following federal
income tax consequences would result:
(i) the Merger and the Bank Merger will each qualify as a reorganization
under Section 368(a) of the Code;
(ii) no gain or loss will be recognized by Alliance Bancorp, Liberty
Federal, Alliance Bancorp stockholders, Southwest Bancshares or Southwest
Federal as a result of the Company Merger or the Bank Merger;
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(iii) no gain or loss will be recognized by any Southwest Bancshares
stockholder upon the exchange of Southwest Bancshares Common Stock solely for
Alliance Bancorp Common Stock pursuant to the Merger (except with respect to
cash received in lieu of a fractional share interest in Alliance Bancorp Common
Stock, if any, as discussed below);
(iv) the aggregate tax basis of the Alliance Bancorp Common Stock received
by each stockholder of Southwest Bancshares who exchanges Southwest Bancshares
Common Stock for Alliance Bancorp Common Stock in the Merger will be the same as
the aggregate tax basis of the Southwest Bancshares Common Stock surrendered in
exchange therefor (subject to any adjustments required as the result of receipt
of cash in lieu of a fractional share interest in Alliance Bancorp Common
Stock);
(v) the holding period of the shares of Alliance Bancorp Common Stock
received by a Southwest Bancshares stockholder in the Merger will include the
holding period of the Southwest Bancshares Common Stock surrendered in exchange
therefor, provided that such shares of Southwest Bancshares Common Stock were
held as a capital asset by such stockholder at the Effective Date; and
(vi) cash received in the Merger by a Southwest Bancshares stockholder in
lieu of a fractional share interest of Alliance Bancorp Common Stock will be
treated as having been received as a distribution in full payment in exchange
for the fractional share interest of Alliance Bancorp Common Stock which such
stockholder would otherwise be entitled to receive, and will qualify as capital
gain or loss (assuming the Southwest Bancshares Common Stock surrendered in
exchange therefor was held as a capital asset by such stockholder at the
Effective Date).
Based upon representations to be made by Alliance Bancorp and Southwest
Bancshares as of the Effective Date, Luse Lehman Gorman Pomerenk & Schick will
render an opinion, dated as of the Effective Date, to both Alliance Bancorp and
Southwest Bancshares that the Merger and the Bank Merger will each qualify as a
reorganization under the Code with the consequences set forth above. The opinion
also would be subject to the assumptions that the Merger and the Bank Merger are
consummated in the manner and in accordance with the terms of the Merger
Agreement, that the Merger will qualify as a merger under the applicable laws of
Delaware and that the Bank Merger will qualify as a merger under applicable
feder al law. The opinion would be based entirely upon the Code, regulations
then in effect or proposed thereunder, then-current administrative rulings and
practice and judicial authority, all of which would be subject to change,
possibly with retroactive effect. Subject to waiver by both Alliance Bancorp and
Southwest Bancshares, which waiver is not expected to be made, consummation of
the Merger is conditioned upon the receipt by Alliance Bancorp and Southwest
Bancshares of the opinion of Luse Lehman Gorman Pomerenk & Schick. See "--
Conditions to the Merger."
No ruling has been or will be requested from the Internal Revenue Service
("IRS"), including any ruling as to federal income tax consequences of the
Merger to Alliance Bancorp, Southwest Bancshares or Southwest Bancshares
stockholders. Unlike a ruling from the IRS, the opinions of
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counsel are not binding on the IRS. There can be no assurance that the IRS will
not take a position contrary to the positions reflected in such opinions or that
such opinions would be upheld by the courts if challenged.
NASDAQ LISTING
Both Alliance Bancorp Common Stock and Southwest Bancshares Common Stock
currently are quoted on the Nasdaq National Market. It is a condition to
consummation of the Merger that the Alliance Bancorp Common Stock to be issued
to the stockholders of Southwest Bancshares pursuant to the Merger Agreement
will be quoted on the Nasdaq National Market. See "-- Conditions to the Merger."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Upon consummation of the Merger, Richard E. Webber, the President and Chief
Financial Officer of Southwest Bancshares, shall be appointed to Alliance
Bancorp's Board of Directors. Mr. Webber will be elected to a class of
directors providing for no less than a two year term following the Effective
Date. In the event Mr. Webber is unable to serve as a member of the Board of
Directors of Alliance Bancorp, a substitute nominee shall be appointed, subject
to the approval of Alliance Bancorp. Subject to the foregoing the directors and
executive officers of Alliance Bancorp prior to the Effective Date will continue
to serve in their respective capacities following the Effective Date.
At the Effective Date, Liberty Federal will establish an advisory board of
directors comprised of the following members of Southwest Federal's Board of
Directors: Lawrence M. Cox, James W. Gee, Sr., Joseph Herbert, Robert E.
Lawler, Frank J. Muriello, Albert Rodrigues, and Richard E. Webber. The
advisory board shall meet at least quarterly.
Alliance Bancorp presently intends to continue to operate all Southwest
Federal offices as branches of Liberty Federal, although there can be no
assurance that Alliance Bancorp may not make a different determination in the
future.
CERTAIN RELATED TRANSACTIONS
STOCK OPTION AGREEMENTS
The information in this Joint Proxy Statement/Prospectus concerning the
terms of the Stock Option Agreement is qualified in its entirety by reference to
the full text of the Stock Option Agreement which is attached hereto in Appendix
I and incorporated by reference herein.
General. As an inducement and a condition to entering into the Merger
Agreement, Alliance Bancorp received a stock option to purchase shares of
Southwest Bancshares' Common Stock representing up to 9.9% of the issued and
outstanding shares of such common stock. The option may
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be exercised only upon the occurrence of an "Initial Triggering Event," such as
a person commencing a tender offer for 25% or more of Southwest Bancshares'
outstanding common stock, followed by a "Subsequent Triggering Event," such as a
person acquiring 25% or more of Southwest Bancshares' common stock or the
issuer, without the grantee's consent, entering into an agreement with an other
person to enter into various forms of acquisition transactions. No triggering
event has occurred as of the date hereof. Pursuant to the Stock Option
Agreement, Southwest Bancshares granted to Alliance Bancorp an option to
purchase up to 297,471 shares of Southwest Bancshares Common Stock at an
exercise price of $25.50 per share, subject to the terms and conditions set
forth therein. In addition, the Stock Option Agreement grants the holder of the
option, upon the occurrence of a "Repurchase Event," the right to require the
other party to repurchase for cash the option and any shares that may have been
acquired thereunder.
Effect of Stock Option Agreements. The Stock Option Agreement is intended
to increase the likelihood that the Merger will be consummated in accordance
with the terms of the Merger Agreement. Consequently, certain aspects of the
Stock Option Agreement may have the effect of discouraging persons who might now
or prior to the consummation of the Merger be interested in acquiring all of or
a significant interest in Southwest Bancshares from considering or proposing
such an acquisition, even if such persons were prepared to pay a higher price
per share for the Southwest Bancshares Common Stock than the value per share
contemplated by the Merger Agreement. The acquisition of the issuer or of a
significant interest in the issuer, or an agreement to do either, could cause
the Option to become exercisable. The existence of such Option could
significantly increase the cost to a potential acquiror of acquiring the issuer
compared to its cost had the Stock Option Agreement not been entered into. Such
increased costs might discourage a potential acquiror from considering or
proposing an acquisition or might result in a potential acquiror proposing to
pay a lower per share price to acquire the issuer than it might otherwise have
proposed to pay. The exercise of either Option or the Repurchase Right may
prohibit any acquiror of the issuer from accounting for an acquisition of the
issuer using the pooling of interests accounting method for a period of two
years. This could discourage or preclude an acquisition of Southwest Bancshares.
Terms of Stock Option Agreement. The following is a brief summary of
certain provisions of the Stock Option Agreement, which is attached hereto in
Appendix I. The following summary is qualified in its entirety by reference to
the Stock Option Agreement. For purposes of this summary, the term "Issuer"
refers to Southwest Bancshares, and the term "Grantee" refers to Alliance
Bancorp.
Pursuant to the Stock Option Agreement, the Option becomes exercisable in
whole or in part at any time after the occurrence of both an Initial Triggering
Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined). An "Initial Triggering Event" will occur if (i) the Issuer, without
receiving Grantee's prior consent, enters into an agreement with any person
(other than Grantee) to effect (A) a merger, consolidation or similar
transaction involving Issuer or any of its Significant Subsidiaries (as defined
in Rule 1-02 of Regulation S-X promulgated by the SEC), (B) the purchase, lease
or other acquisition of all or substantially all of the assets of Issuer or any
of its Significant Subsidiaries, or (C) the purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
beneficial ownership of securities representing 25%
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or more of the voting power of Issuer or its Significant Subsidiaries (any of
the foregoing being hereinafter referred to as an "Acquisition Transaction";
provided, however, that any internal merger or consolidation involving only
Issuer and/or its subsidiaries will not be considered an Acquisition
Transaction); (ii) any person (other than Grantee, a subsidiary of Grantee or a
subsidiary of Issuer acting in a fiduciary capacity (each, an "Excluded
Person")), alone or together with affiliates and associates, acquires beneficial
ownership of, or the right to acquire beneficial ownership of, or any group is
formed (other than a group of which an Excluded Person is a member) that
beneficially owns, 25% or more of the then outstanding shares of Issuer Common
Stock; (iii) any person (other than Grantee or a subsidiary of Grantee) makes a
proposal to Issuer or its stockholders to (A) engage in an Acquisition
Transaction or (B) commences a tender or exchange offer, the consummation of
which would result in such person acquiring beneficial ownership of securities
representing 25% or more of Issuer's voting power; (iv) the Board of Directors
of Issuer fails to recommend to its stockholders the adoption of the Merger
Agreement or withdraws, modifies or changes its recommendation in a manner
adverse to Grantee; (v) the Issuer, following a proposal by a third party (other
than an Excluded Person) to engage in an Acquisition Transaction, intentionally
and knowingly breaches any representation, warranty, covenant or agreement
contained in the Merger Agreement which entitles Grantee to terminate the Merger
Agreement in accordance with its terms and which has not been cured prior to
written notice to Issuer by Grantee of its intention to exercise the Option; or
(vi) any person (other than Grantee or a subsidiary of Grantee), without the
prior consent of Grantee, files an application or notice with the OTS or other
federal or state bank regulatory authority for approval to engage in an
Acquisition Transaction, which application or notice has been accepted for
processing.
A "Subsequent Triggering Event" will occur if (i) any person, other than an
Excluded Person, acquires beneficial ownership of 25% or more of the then
outstanding shares of Issuer Common Stock or (ii) the Issuer, without receiving
Grantee's prior consent, enters into an agreement with any person (other than
Grantee) to effect an Acquisition Transaction.
The Option expires upon the earliest to occur of (i) the Effective Date,
(ii) the termination of the Merger Agreement in accordance with its terms prior
to the occurrence of an Initial Triggering Event or (iii) 12 months after
termination of the Merger Agreement, if such termination follows or occurs at
the same time as an Initial Triggering Event. Any purchase of shares pursuant to
the Stock Option Agreement is subject to compliance with applicable law.
The number and type of securities subject to the Option and the purchase
price of such securities will be appropriately adjusted for any change in Issuer
Common Stock by reason of a stock dividend, split-up, merger, recapitalization,
combination, exchange of shares or similar transaction. The number of shares of
Issuer Common Stock subject to the Option will also be adjusted in the event
Issuer issues additional shares of its common stock such that the number of
shares of Issuer Common Stock subject to the Option, together with shares
previously purchased pursuant thereto, represents 9.9% of Issuer Common Stock
then issued and outstanding, without giving effect to shares subject to or
issued pursuant to the Option.
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In the event Issuer enters into any agreement to (i) consolidate with or
merge into any person other than Grantee or one of its subsidiaries, such that
the Issuer is not the surviving corporation, (ii) permit any person, other than
Grantee or one of its subsidiaries, to merge into Issuer and Issuer is the
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock are changed into or exchanged for stock or other
securities of any other person or cash or any other property, or the outstanding
shares of Issuer Common Stock immediately prior to such merger shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) sell or otherwise transfer all or substantially
all of its assets to any person other than Grantee or one of its subsidiaries,
then, and in each such case, the agreement governing the transaction must
provide that, upon consummation of the transaction, the Option will be converted
into or exchanged for an option (the "Substitute Option") to purchase securities
(the "Substitute Common Stock") of either the acquiring person, a person that
controls the acquiring person, Issuer (if Issuer is the surviving entity) or the
transferee of all or substantially all of Issuer's assets, in all cases at the
election of Grantee. In no event will the Substitute Option be exercisable for
more than 9.9% of the Substitute Common Stock outstanding prior to the exercise
of the Substitute Option.
The Stock Option Agreement also provides the Grantee with certain
registration rights with respect to shares of Issuer Common Stock acquired by
Grantee upon exercise of the Option. These rights require that Issuer file up to
two registration statements under the Securities Act if requested by Grantee at
the time of and together with the written notice of exercise required under the
Stock Option Agreements. The first of such registration statements will be at
Issuer's expense, while the second will be at Grantee's expense.
Repurchase Right. At the request of Grantee at any time commencing upon
the first occurrence of a "Repurchase Event" and ending 12 months immediately
thereafter, Issuer shall repurchase from Grantee (i) the Option and (ii) all
shares of Issuer Common Stock purchased by Grantee pursuant hereto with respect
to which Grantee then has beneficial ownership. Such repurchase shall be at an
aggregate price equal to the sum of:
(i) the aggregate Option Price paid by Grantee for any shares of Issuer
Common Stock acquired pursuant to the Option with respect to which Grantee then
has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined below)
for each share of Common Stock over (y) the Option Price (subject to
adjustment), multiplied by the number of shares of Common Stock with respect to
which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the Option Price
(subject to adjustment) paid (or payable) by Grantee for each share of Common
Stock with respect to which the Option has been exercised and with respect to
which Grantee then has beneficial ownership, multiplied by the number of such
shares.
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The term "Applicable Price" means the highest of (i) the highest price per
share of Common Stock paid for any such share by the person or groups, (ii) the
price per share of Common Stock received by Grantees of Common Stock in
connection with any merger or other business combination transaction described
in the Agreement, or (iii) the highest closing sales price per share of Issuer
Common Stock quoted on the Nasdaq National Market System (or if Issuer Common
Stock is not quoted on the Nasdaq National Market System, the highest bid price
per share as quoted on the principal trading market or securities exchange on
which such shares are traded as reported by a recognized source chosen by
Grantee) during the 40 business days preceding the Request Date; provided,
however, that in the event of a sale of less than all of Issuer's assets, the
Applicable Price shall be the sum of the price paid in such sale for such assets
and the current market value of the remaining assets of Issuer as determined by
a nationally recognized investment banking firm selected by Grantee, divided by
the number of shares of Common Stock outstanding at the time of such sale.
As a general matter, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of, or the right to acquire beneficial ownership of, or any "group"
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 50% or more of the then outstanding shares of Issuer
Common Stock.
THE BANK MERGER AGREEMENT
In connection with the Merger, Liberty Federal and Southwest Federal
executed the Bank Merger Agreement on December 16, 1997. Pursuant to the Bank
Merger Agreement, Southwest Federal will be merged with and into Liberty Federal
following the Merger, and the resulting institution will operate under the name
Liberty Federal Bank. The respective obligations of Liberty Federal and
Southwest Federal to consummate the Bank Merger are conditioned upon the
satisfaction or waiver by Alliance Bancorp and Southwest Bancshares of all
conditions to consummation of the Merger set forth in the Merger Agreement and
approval by the OTS. The Bank Merger Agreement will terminate automatically upon
any termination of the Merger Agreement.
This information is qualified in its entirety by reference to the full text
of the Bank Merger Agreement which is included as Exhibit A to the Merger
Agreement attached hereto in Appendix I.
DESCRIPTION OF
ALLIANCE BANCORP CAPITAL STOCK
The following description contains a summary of all of the material
features of the capital stock of Alliance Bancorp but does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Alliance Bancorp Certificate of Incorporation which is filed as an exhibit to
the Registration Statement of which this Joint Proxy Statement/Prospectus is a
part.
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GENERAL
The Alliance Bancorp Certificate of Incorporation authorizes the issuance
by Alliance Bancorp of up to 12,500,000 shares of its capital stock consisting
of 11,000,000 shares of Alliance Bancorp Common Stock (par value $.01 per share)
and 1,500,000 shares of Alliance Bancorp Preferred Stock (par value $.01 per
share). As of [MARCH 31], 1998, [8,024,293] shares of Alliance Bancorp Common
Stock and no shares of Alliance Bancorp Preferred Stock were issued and
outstanding. The Alliance Bancorp Common Stock is quoted on the Nasdaq National
Market under the symbol "ABCL." See "Comparative Stock Prices and Dividend
Information." The stock transfer agent and registrar for the Alliance Bancorp
Common Stock is Harris Trust and Savings Bank.
The Alliance Bancorp Board of Directors has approved a proposed amendment
to the Alliance Bancorp Certificate of Incorporation which would increase the
number of authorized shares of Alliance Bancorp Common Stock from 11,000,000 to
21,000,000. Upon consummation of the Merger, Alliance Bancorp anticipates that
approximately [11,364,099] shares of Alliance Bancorp Common Stock and no shares
of Alliance Bancorp Preferred Stock will be outstanding. The Alliance Bancorp
Board believes that the authorization of additional shares of Alliance Bancorp
Common Stock is advisable to provide Alliance Bancorp with the flexibility to
take advantage of opportunities to issue such stock in order to obtain capital,
as consideration for possible acquisitions, and for other purposes (including,
without limitation, stock splits and stock dividends in appropriate
circumstances). See "Amendments to Certificate of Incorporation of Alliance
Bancorp."
COMMON STOCK
Each share of the Alliance Bancorp Common Stock has the same relative
rights and is identical in all respects with each other share of the Alliance
Bancorp Common Stock. The Alliance Bancorp Common Stock represents non-
withdrawable capital, is not of an insurable type and is not insured by the FDIC
or any other government agency.
Subject to any prior rights of the holders of any Alliance Bancorp
Preferred Stock then outstanding, holders of the Alliance Bancorp Common Stock
are entitled to receive such dividends as are declared by the Alliance Bancorp
Board of Directors out of funds legally available therefor. Full voting rights
are vested in the holders of Alliance Bancorp Common Stock, and except as
indicated below, each share being entitled to one vote, subject to the rights of
the holders of any Alliance Bancorp Preferred Stock then outstanding. In
accordance with the provisions of the Alliance Bancorp Certificate of
Incorporation, record holders of Alliance Bancorp Common Stock who beneficially
own in excess of 10% of the outstanding shares of Common Stock (the "Alliance
Bancorp Limit") are not entitled to any vote with respect to the shares held in
excess of the Alliance Bancorp Limit. The Alliance Bancorp Certificate of
Incorporation authorizes the Board of Directors (i) to make all determinations
necessary to implement and apply the Alliance Bancorp Limit, including
determining whether persons or entities are acting in concert, and (ii) to
demand that any person who is reasonably believed to beneficially own stock in
excess of the Alliance Bancorp Limit
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supply information to the Company to enable the Board of Directors to implement
and apply the Alliance Bancorp Limit.
The Alliance Bancorp Certificate of Incorporation authorizes the Alliance
Bancorp Board of Directors to issue authorized shares of Alliance Bancorp Common
Stock without stockholder approval. However, Alliance Bancorp Common Stock is
included for quotation on the Nasdaq National Market which requires stockholder
approval of the issuance of additional shares of Alliance Bancorp Common Stock
under certain circumstances, including the issuance of Alliance Bancorp Common
Stock pursuant to the Merger Agreement. Subject to any prior rights of the
holders of any Alliance Bancorp Preferred Stock then outstanding, in the event
of liquidation, dissolution or winding up of Alliance Bancorp, holders of shares
of Alliance Bancorp Common Stock are entitled to receive pro rata, any assets
distributable to stockholders in respect of shares held by them. Holders of
shares of Alliance Bancorp Common Stock do not have any preemptive rights to
subscribe for any additional securities which may be issued by Alliance Bancorp
or cumulative voting rights. The outstanding shares of Alliance Bancorp Common
Stock are fully paid and non-assessable.
Certain provisions of the Alliance Bancorp Certificate of Incorporation may
have the effect of delaying, deferring or preventing a change in control of
Alliance Bancorp pursuant to an extraordinary corporate transaction involving
Alliance Bancorp, including a merger, reorganization, tender offer, transfer of
substantially all of its assets or a liquidation. See "Comparison of Rights of
Stockholders of Alliance Bancorp and Southwest Bancshares, Inc."
PREFERRED STOCK
The Alliance Bancorp Certificate of Incorporation authorizes the issuance
by Alliance Bancorp of up to 1,500,000 shares of Alliance Bancorp Preferred
Stock (par value $.01 per share), none of which was issued and outstanding as of
[MARCH 31], 1998.
The Alliance Bancorp Preferred Stock may be issued in one or more series at
such time or times and for such consideration or considerations as the Alliance
Bancorp Board of Directors may determine. The Alliance Bancorp Board of
Directors is expressly authorized at any time, and from time to time, to provide
for the issuance of Alliance Bancorp Preferred Stock with such voting and other
powers, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the Alliance Bancorp Board of Directors resolution
providing for the issuance thereof. The Alliance Bancorp Board of Directors is
authorized to designate the series and the number of shares comprising such
series, the dividend rate on the shares of such series, the redemption rights,
if any, any purchase, retirement or sinking fund provisions, any conversion
rights and any special voting rights. The ability of the Alliance Bancorp Board
of Directors to issue Alliance Bancorp Preferred Stock without stockholder
approval could make an acquisition by an unwanted suitor of a controlling
interest in Alliance Bancorp more difficult, time-consuming or costly, or
otherwise discourage an attempt to acquire control of Alliance Bancorp.
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Shares of Alliance Bancorp Preferred Stock redeemed or acquired by Alliance
Bancorp may return to the status of authorized but unissued shares, without
designation as to series, and may be reissued by the Alliance Bancorp Board of
Directors.
CERTAIN PROVISIONS OF DELAWARE CORPORATE LAW AND ALLIANCE BANCORP'S CERTIFICATE
OF INCORPORATION
Alliance Bancorp's Certificate of Incorporation and Bylaws contain certain
provisions which may have the effect of deterring or discouraging, among other
things, a non-negotiated tender or exchange offer for Alliance Bancorp stock, a
proxy contest for control of Alliance Bancorp, the assumption of control of
Alliance Bancorp by a holder of a large block of Alliance Bancorp's stock and
the removal of Alliance Bancorp's management. These provisions: (1) eliminate
voting rights for Common Stock owned by any person in an amount in excess of 10%
of the shares of Common Stock outstanding; (2) empower the Alliance Bancorp
Board of Directors, without shareholder approval, to issue preferred stock the
terms of which, including voting power, are set by the Alliance Bancorp Board of
Directors; (3) divide the Alliance Bancorp Board of Directors into three classes
serving staggered three-year terms; (4) restrict the ability of shareholders to
call special meetings or remove directors; (5) require that shares with at least
80% of total voting power approve mergers and other similar transactions with a
person or entity holding stock with more than 10% of Alliance Bancorp's voting
power, if the transaction is not approved, in advance, by the Alliance Bancorp
Board of Directors; (6) prohibit shareholders' actions without a meeting; (7)
require that shares with at least 80%, or in certain instances a majority, of
total voting power approve the repeal or amendment of Alliance Bancorp's
Certificate of Incorporation; (8) eliminate cumulative voting in elections of
directors; (9) require that shares with at least 80% of total voting power
approve, repeal or amend Alliance Bancorp's Bylaws; (10) require advance notice
of both nominations for the election of directors and the presentation of
shareholder proposals at meetings of shareholders. The Certificate of
Incorporation and Bylaws of Southwest Bancshares include substantially similar
provisions.
In addition, Section 203 of the Delaware General Corporation Law ("Section
203") generally provides that a "Person" (as defined therein) who owns 15% or
more of the outstanding voting stock of a Delaware corporation (an "Interested
Stockholder") may not consummate a merger or other business combination
transaction with such corporation at any time during the three-year period
following the date such "Person" became an Interested Stockholder. The term
"business combination" is defined broadly to cover a wide range of corporate
transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.
The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person became
an Interested Stockholder, the Board of Directors approved either the business
combination or the transaction which resulted in the shareholder becoming an
Interested Stockholder; (ii) any business combination involving a person who
acquired at least 85% of the outstanding voting stock in the transaction in
which he or she
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became an Interested Stockholder, calculated without regard to those shares
owned by the corporation's directors who are also officers or certain employee
stock plans; (iii) any business combination with an Interested Stockholder that
is approved by the Board of Directors and by a two-thirds vote of the
outstanding voting stock not owned by the Interested Stockholder; and (iv)
certain business combinations that are proposed after the corporation had
received other acquisition proposals and which are approved or not opposed by a
majority of certain continuing members of the Board of Directors. A corporation
may exempt itself from the requirements of the statute by adopting an amendment
to its Certificate of Incorporation or Bylaws electing not to be governed by
Section 203. At the present time, the Board of Directors of Alliance Bancorp
does not intend to propose any such amendment.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF ALLIANCE BANCORP AND SOUTHWEST
BANCSHARES
Upon the consummation of the Merger, holders of Southwest Bancshares Common
Stock, whose rights are presently governed by Delaware law and Southwest
Bancshares' Certificate of Incorporation and Bylaws (the "Southwest Bancshares
Certificate" and "Southwest Bancshares Bylaws," respectively) and, indirectly,
Southwest Federal's charter and bylaws, will become stockholders of Alliance
Bancorp, also a Delaware corporation. The Alliance Bancorp Certificate of
Incorporation and Bylaws are substantially identical to the Southwest Bancshares
Certificate of Incorporation and Bylaws. Accordingly, there are no material
differences in the rights of shareholders of Southwest Bancshares compared to
the rights of stockholders of Alliance Bancorp.
AMENDMENT TO CERTIFICATE OF INCORPORATION OF
ALLIANCE BANCORP
GENERAL
The Alliance Bancorp Board of Directors has approved a proposed amendment
to the Alliance Bancorp Certificate of Incorporation to increase the number of
authorized shares of Alliance Bancorp Common Stock, par value $.01 per share,
from 11,000,000 to 21,000,000 (the "Certificate Amendment"). The affirmative
vote of the holders of a majority of the outstanding shares of Alliance Bancorp
Common Stock is required for approval and adoption of the Certificate Amendment.
The following description of the Certificate Amendment is qualified in its
entirety by reference to the full text thereof, which is attached as Appendix II
to this Joint Proxy Statement/Prospectus and incorporated by reference herein.
Stockholders are urged to read carefully the full text of the Certificate
Amendment.
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INCREASE IN AUTHORIZED SHARES OF CAPITAL STOCK
General. Alliance Bancorp is currently authorized to issue 11,000,000
shares of Alliance Bancorp Common Stock. As of [MARCH 31], 1998, [8,024,293]
shares of Alliance Bancorp Common Stock were issued and outstanding and
[1,660,218] shares were reserved for issuance pursuant to the Alliance Bancorp
stock option plans. Alliance Bancorp is also currently authorized to issue
1,500,000 shares of Alliance Bancorp Preferred Stock, none of which were
outstanding as of [MARCH 31], 1998. The Alliance Bancorp Board of Directors has
unanimously approved the proposed Certificate Amendment to the Alliance Bancorp
Certificate of Incorporation which would increase the number of authorized
shares of Alliance Bancorp Common Stock from 11,000,000 to 21,000,000.
Purpose and Effects. The primary purpose of the Certificate Amendment is to
allow for a sufficient number of authorized shares of Alliance Bancorp Common
Stock to consummate the Merger and satisfy Alliance Bancorp's other obligations
under the Merger Agreement. In addition, the Alliance Bancorp Board of
Directors believes that the authorization of additional shares of Alliance
Bancorp Common Stock is advisable to provide Alliance Bancorp with the
flexibility to take advantage of opportunities to issue such stock in order to
obtain capital, as consideration for possible acquisitions or for other purposes
(including, without limitation, stock splits and stock dividends in appropriate
circumstances). There are, at present, no plans, understandings, agreements or
arrangements concerning the issuance of additional shares of Alliance Bancorp
Common Stock or Alliance Bancorp Preferred Stock, except for the shares of
Alliance Bancorp Common Stock to be issued: (i) pursuant to the Merger; (ii)
upon the exercise of Alliance Bancorp stock options into which Southwest
Bancshares Stock Options will be converted; and (iii) upon the exercise of
Alliance Bancorp stock options currently outstanding or to be granted in the
future. Assuming the issuance of the maximum number of shares Alliance Bancorp
Common Stock pursuant to the obligations of Alliance Bancorp described in
clauses (i) through (iii) above as of [MARCH 31], 1998, there would be
[13,024,316] shares of Alliance Bancorp Common Stock issued and outstanding.
Uncommitted authorized but unissued shares of Alliance Bancorp Common Stock
and Alliance Bancorp Preferred Stock may be issued from time to time to such
persons and for such consideration as the Alliance Bancorp Board of Directors
may determine, and holders of the then-outstanding shares of Alliance Bancorp
Common Stock or Alliance Bancorp Preferred Stock may or may not be given the
opportunity to vote thereon, depending upon the nature of any such transactions,
applicable law, the rules and policies of the Nasdaq National Market and the
judgment of the Alliance Bancorp Board of Directors regarding the submission of
such issuance to a vote of the Alliance Bancorp stockholders. Alliance Bancorp
stockholders have no preemptive rights to subscribe to newly issued shares.
Moreover, it is possible that additional shares of Alliance Bancorp Common
Stock or Alliance Bancorp Preferred Stock would be issued for the purpose of
making an acquisition by an unwanted suitor of a controlling interest in
Alliance Bancorp more difficult, time-consuming or costly or to otherwise
discourage an attempt to acquire control of Alliance Bancorp. Under such
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circumstances the availability of authorized and unissued shares of Alliance
Bancorp Common Stock and Alliance Bancorp Preferred Stock may make it more
difficult for stockholders to obtain a premium for their shares. Such authorized
and unissued shares could be used to create voting or other impediments or to
frustrate a person seeking to obtain control of Alliance Bancorp by means of a
merger, tender offer, proxy contest or other means. Such shares could be
privately placed with purchasers who might cooperate with the Alliance Bancorp
Board of Directors in opposing such an attempt by a third party to gain control
of Alliance Bancorp or could also be used to dilute ownership of a person or
entity seeking to obtain control of Alliance Bancorp. Although Alliance Bancorp
does not currently contemplate taking such action, shares of Alliance Bancorp
Common Stock or one or more series of Alliance Bancorp Preferred Stock could be
issued for the purposes and effects described above and the Alliance Bancorp
Board of Directors reserves its rights (if consistent with its fiduciary
responsibilities) to issue such stock for such purposes.
The Alliance Bancorp Board of Directors believes that the proposed increase
in the number of authorized shares of Alliance Bancorp Common Stock will provide
flexibility needed to meet corporate objectives and is in the best interests of
Alliance Bancorp and its stockholders. The text of proposed Section A of Article
FOURTH as revised by the Certificate Amendment is attached as Appendix II to
this Joint Proxy Statement/Prospectus.
THE ALLIANCE BANCORP BOARD RECOMMENDS THAT ALLIANCE BANCORP STOCKHOLDERS VOTE
FOR THE CERTIFICATE AMENDMENT.
LEGAL MATTERS
The validity of the shares of Alliance Bancorp Common Stock offered hereby
will be passed upon for Alliance Bancorp by Luse Lehman Gorman Pomerenk &
Schick, A Professional Corporation, Washington, D.C. Certain other legal matters
in connection with the Merger will be passed upon for Southwest Bancshares by
Patton Boggs, L.L.P., Washington, DC. Luse Lehman Gorman Pomerenk & Schick will
also pass upon certain tax matters for both Alliance Bancorp and Southwest
Bancshares.
EXPERTS
The consolidated financial statements of Alliance Bancorp as of December
31, 1997 and September 30, 1996, and for the year ended December 31, 1997, each
of the years in the two year period ended September 30, 1996, and the three
months ended December 31, 1996 have been incorporated by reference in this Joint
Proxy Statement/Prospectus in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Southwest Bancshares and
subsidiaries incorporated in this Joint Proxy Statement/Prospectus by reference
from Southwest Bancshares' Annual Report on Form 10-K for the year ended
December 31, 1997 have been audited by Cobitz, VandenBerg &
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Fennessy independent certified public accountants, as stated in their report
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
INDEPENDENT ACCOUNTANTS
Representatives of KPMG Peat Marwick LLP and Cobitz, VandenBerg & Fennessy,
Alliance Bancorp's and Southwest Bancshares' independent accountants,
respectively, are expected to be present at their respective clients' Annual
Meeting. They will be afforded the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
OTHER MATTERS
The Boards of Directors of Alliance Bancorp and Southwest Bancshares are
not aware of any business to come before the Annual Meetings other than those
matters described above in this Joint Proxy Statement/Prospectus. However, if
any other matter should properly come before the Annual Meetings, including
proposals to adjourn an Annual Meeting to permit further solicitation of proxies
in the event that there are not sufficient votes to approve the Merger proposal
at the time of the Annual Meeting, it is intended that holders of the proxies
will act in accordance with their best judgment.
BY ORDER OF THE BY ORDER OF THE
BOARD OF DIRECTORS BOARD OF DIRECTORS
OF ALLIANCE BANCORP OF SOUTHWEST BANCSHARES, INC.
Kenne P. Bristol Richard E. Webber
President and Chief President and Chief Financial Officer
Executive Officer
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APPENDIX I
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ALLIANCE BANCORP
AND
SOUTHWEST BANCSHARES, INC.
DATED AS OF DECEMBER 16, 1997
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions........................................................ 2
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01 Conversion and Exchange of Shares................................ 6
Section 2.02 The Exchange Ratio............................................... 7
Section 2.03 Surviving Corporation in the Company Merger...................... 8
Section 2.04 Authorization for Issuance of Alliance Bancorp Common Stock;
Exchange of Certificates......................................... 9
Section 2.05 No Fractional Shares............................................. 11
Section 2.06 Stock Options.................................................... 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SWB
Section 3.01 Organization....................................................... 12
Section 3.02 Capitalization..................................................... 13
Section 3.03 Authority; No Violation............................................ 14
Section 3.04 Consents........................................................... 15
Section 3.05 Financial Statements............................................... 15
Section 3.06 Taxes.............................................................. 16
Section 3.07 No Material Adverse Effect......................................... 16
Section 3.08 Contracts.......................................................... 16
Section 3.09 Ownership of Property; Insurance Coverage.......................... 17
Section 3.10 Legal Proceedings.................................................. 18
Section 3.11 Compliance With Applicable Law..................................... 18
Section 3.12 ERISA.............................................................. 19
Section 3.13 Brokers, Finders and Financial Advisors............................ 20
Section 3.14 Environmental Matters.............................................. 20
Section 3.15 Loan Portfolio..................................................... 21
Section 3.16 Information to be Supplied......................................... 21
Section 3.17 Securities Documents............................................... 21
</TABLE>
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<TABLE>
<S> <C>
Section 3.18 Related Party Transactions.......................................... 21
Section 3.19 Schedule of Termination Benefits.................................... 22
Section 3.20 Loans............................................................... 22
Section 3.21 Antitakeover Provisions Inapplicable................................ 22
Section 3.22 Fairness Opinion.................................................... 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIANCE BANCORP
Section 4.01 Organization........................................................ 23
Section 4.02 Capitalization...................................................... 23
Section 4.03 Authority; No Violation............................................. 24
Section 4.04 Consents............................................................ 25
Section 4.05 Financial Statements................................................ 25
Section 4.06 Taxes............................................................... 26
Section 4.07 No Material Adverse Effect.......................................... 26
Section 4.08 Ownership of Property; Insurance Coverage........................... 26
Section 4.09 Legal Proceedings................................................... 27
Section 4.10 Compliance With Applicable Law...................................... 28
Section 4.11 Information to be Supplied.......................................... 28
Section 4.12 ERISA and Employment Arrangements................................... 28
Section 4.13 Securities Documents................................................ 29
Section 4.14 Environmental Matters............................................... 30
Section 4.15 Loan Portfolio...................................................... 30
Section 4.16 Brokers, Finders and Financial Advisors............................. 30
Section 4.17 Loans............................................................... 30
Section 4.18 Antitakeover Provisions Inapplicable................................ 31
Section 4.19 Fairness Opinion.................................................... 31
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of SWB's Business........................................... 31
Section 5.02 Access; Confidentiality............................................. 34
Section 5.03 Regulatory Matters and Consents..................................... 35
Section 5.04 Taking of Necessary Action.......................................... 36
Section 5.05 Certain Agreements.................................................. 37
Section 5.06 No Other Bids and Related Matters................................... 38
Section 5.07 Duty to Advise; Duty to Update SWB's Disclosure Schedule............ 38
Section 5.08 Conduct of Alliance Bancorp's Business.............................. 39
Section 5.09 Board and Committee Minutes......................................... 39
Section 5.10 Undertakings by Alliance Bancorp and SWB............................ 39
Section 5.11 Employee and Termination Benefits; Directors and Management......... 42
</TABLE>
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<TABLE>
<S> <C>
Section 5.12 Duty to Advise; Duty to Update Alliance Bancorp's Disclosure Schedule.. 43
Section 5.13 Affiliate Letter....................................................... 43
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to SWB's Obligations under this Agreement................... 44
Section 6.02 Conditions to Alliance Bancorp's Obligations under this Agreement...... 45
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination............................................................ 47
Section 7.02 Effect of Termination.................................................. 48
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Expenses............................................................... 48
Section 8.02 Non-Survival of Representations and Warranties......................... 49
Section 8.03 Amendment, Extension and Waiver........................................ 49
Section 8.04 Entire Agreement....................................................... 49
Section 8.05 No Assignment.......................................................... 49
Section 8.06 Notices................................................................ 49
Section 8.07 Captions............................................................... 50
Section 8.08 Counterparts........................................................... 50
Section 8.09 Severability........................................................... 50
Section 8.10 Governing Law.......................................................... 51
</TABLE>
<PAGE>
EXHIBITS:
Exhibit A Stock Option Agreement
Exhibit B Form of Alliance Bancorp Voting Agreement
Exhibit C Form of SWB Voting Agreement
Exhibit 2.1 Bank Plan of Merger
Exhibit 6.1 Form of Opinion of Counsel for Alliance Bancorp
Exhibit 6.2 Form of Tax Opinion of Luse Lehman Gorman Pomerenk &
Schick, P.C.
Exhibit 6.3 Form of Opinion of Counsel for SWB
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of December
16, 1997, is by and among by and among Alliance Bancorp, a Delaware corporation
and Southwest Bancshares, Inc., a Delaware corporation ("SWB"). Each of
Alliance Bancorp and SWB is sometimes individually referred to herein as a
"party," and Alliance Bancorp and SWB are sometimes collectively referred to
herein as the "parties."
RECITALS
WHEREAS, Alliance Bancorp, a non-diversified, unitary savings and loan
holding company, with principal offices in Hinsdale, Illinois, owns all of the
issued and outstanding capital stock of Liberty Federal Bank, a federally
chartered savings bank ("Liberty Federal"), with principal offices in Hinsdale,
Illinois.
WHEREAS, SWB, a non-diversified, unitary savings and loan holding company,
with principal offices in Hometown, Illinois, owns all of the issued and
outstanding capital stock of Southwest Federal Savings and Loan Association of
Chicago, a federally chartered savings and loan association ("Southwest
Federal"), with principal offices in Hometown, Illinois.
WHEREAS, the Boards of Directors of the respective parties hereto deem it
advisable and in the best interests of the respective stockholders to consummate
the business combination transaction contemplated herein in which SWB, subject
to the terms and conditions set forth herein, shall be merged with and into
Alliance Bancorp (the "Company Merger"), with Alliance Bancorp being the
surviving corporation, in a tax-free, stock-for-stock merger transaction so that
the respective stockholders of SWB will have a continuing equity ownership in
Alliance Bancorp; and
WHEREAS, upon execution and delivery of this Agreement, Liberty Federal,
and Southwest Federal will enter into a Plan of Merger (the "Bank Merger
Agreement") providing for the merger (the "Bank Merger") of Southwest Federal
with and into Liberty Federal, with Liberty Federal as the surviving
institution, and it is intended that the Bank Merger be consummated immediately
following consummation of the Company Merger; and
WHEREAS, in connection with the execution of this Agreement, as an
inducement to Alliance Bancorp to enter into this Agreement, SWB and Alliance
Bancorp have entered into a Stock Option Agreement dated as of even date
herewith pursuant to which SWB will grant Alliance Bancorp the right to purchase
certain shares of SWB Common Stock; and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with Company
Merger, and the other
<PAGE>
transactions contemplated by this Agreement, the Plan of Merger and the Stock
Option Agreement (collectively, the "Merger Documents").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions. Except as otherwise provided herein, as used in
this Agreement, the following terms shall have the indicated meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" means, with respect to any Person, any Person who
directly, or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under common control with, such Person and, without
limiting the generality of the foregoing, includes any executive officer or
director of such Person and any Affiliate of such executive officer or
director.
"Agreement" means this agreement, and any amendment or supplement
hereto.
"Alliance Bancorp Common Stock" has the meaning given to that term in
Section 4.02(a) of this Agreement.
"Alliance Bancorp Disclosure Schedules" means the disclosure schedules
delivered by Alliance Bancorp to SWB pursuant to Article IV of this
Agreement.
"Alliance Bancorp Financials" means (i) the audited consolidated
financial statements of Alliance Bancorp as of September 30, 1995 and 1996
and for the three years ended September 30, 1996, including the notes
thereto, and (ii) the unaudited interim consolidated financial statements
of Alliance Bancorp as of each calendar quarter thereafter included in
Securities Documents filed by Alliance Bancorp.
"Alliance Bancorp Market Value" shall mean the average of the inside
closing bid price of Alliance Bancorp Common Stock on the Nasdaq National
Market System (as reported by The Wall Street Journal) for each of the
twenty (20) consecutive trading days ending on the fifth business day
before the Closing Date.
"Alliance Bancorp Regulatory Reports" means the Quarterly Thrift
Financial Reports of Liberty Federal and accompanying schedules, as filed
with the OTS, for each calendar quarter beginning with the quarter ended
December 31, 1996, through the Closing Date, and
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any Current or Annual Reports on Form H(b)-11 filed with the OTS by
Alliance Bancorp since December 31, 1995.
"Alliance Bancorp Option" means the option granted to Alliance Bancorp
to acquire shares of SWB Common Stock pursuant to the Stock Option
Agreement.
"Alliance Bancorp Subsidiary" means any corporation, 50% or more of
the capital stock of which is owned, either directly or indirectly, by
Alliance Bancorp or Liberty Federal, except any corporation the stock of
which is held as security by Liberty Federal in the ordinary course of its
lending activities.
"Applications" means the applications for regulatory approval which
are required by the transactions contemplated hereby.
"Bank Merger" means the merger of Southwest Federal with and into
Liberty Federal, with Liberty Federal as the surviving institution.
"Bank Merger Effective Date" shall mean the date on which the articles
of combination for the Bank Merger are endorsed by the OTS pursuant to
Section 552.12(k) of the OTS Regulations.
"Closing Date" means the date determined by Alliance Bancorp, in its
sole discretion, upon five (5) days prior written notice to SWB, but in no
event later than thirty (30) days after the last condition precedent
pursuant to this Agreement has been fulfilled or waived (including the
expiration of any applicable waiting period), or such other date as to
which Alliance Bancorp and SWB shall agree.
"Company Merger" means the merger of SWB with and into Alliance
Bancorp, with Alliance Bancorp being the surviving corporation, in a tax-
free, stock-for-stock merger transaction.
"Company Merger Effective Date" means that date upon which the
certificate of merger is filed with the Delaware Secretary of State, or as
otherwise stated in the certificate of merger, in accordance with Section
251 of the DGCL.
"DGCL" means the Delaware General Corporation Law.
"Environmental Laws" means any Federal or state law, statute, rule,
regulation, code, order, judgement, decree, injunction, common law or
agreement with any Federal or state governmental authority relating to (i)
the protection, preservation or restoration of the environment (including
air, water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), (ii) human health or safety, or (iii) exposure to, or the use,
storage, recycling, treatment, generation,
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<PAGE>
transportation, processing, handling, labeling, production, release or
disposal of, hazardous substances, in each case as amended and now in
effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated from time to time thereunder.
"Exchange Agent" means the entity selected by Alliance Bancorp and
agreed to by SWB, as provided in Section 2.01(b) of this Agreement.
"Exchange Ratio" shall have the meaning given to such term in the
Section 2.02 of this Agreement.
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"GAAP" means generally accepted accounting principles as in effect at
the relevant date and consistently applied.
"IRC" means the Internal Revenue Code of 1986, as amended.
"IRS" means the Internal Revenue Service.
"Material Adverse Effect" shall mean, with respect to Alliance Bancorp
or SWB, any adverse effect on its assets, financial condition or results of
operations which is material to its assets, financial condition or results
of operations on a consolidated basis, except for any material adverse
effect caused by (i) any change in the value of the assets of Alliance
Bancorp or SWB resulting from a change in interest rates generally or (ii)
any individual or combination of changes occurring after the date hereof in
any federal or state law, rule or regulation or in GAAP, which change(s)
affect(s) financial institutions generally, including any changes affecting
the Bank Insurance Fund or the Savings Association Insurance Fund. Any
effect caused by any judicial determination or other development relating
to the goodwill lawsuit initiated by Liberty Federal (its predecessor)
against the United States Government shall not be considered a Material
Adverse Effect as to Alliance Bancorp.
"Person" means any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
"Plan of Merger" means the Plan of Merger by and between Southwest
Federal and Liberty Federal.
4
<PAGE>
"Prospectus/Proxy Statement" means the prospectus/proxy statement,
together with any supplements thereto, to be transmitted to holders of SWB
Common Stock and Alliance Bancorp Common Stock in connection with the
transactions contemplated by this Agreement.
"Registration Statement" means the registration statement on Form S-4,
including any pre-effective or post-effective amendments or supplements
thereto, as filed with the SEC under the Securities Act with respect to the
Alliance Bancorp Common Stock to be issued in connection with the
transactions contemplated by this Agreement.
"Regulatory Agreement" has the meaning given to that term in Section
3.11 of this Agreement.
"Regulatory Authority" means any agency or department of any federal
or state government, including without limitation the OTS, the FDIC, the
SEC or the respective staffs thereof.
"Rights" means warrants, options, rights, convertible securities and
other capital stock equivalents which obligate an entity to issue its
securities.
"SAIF" means the Savings Association Insurance Fund, as administered
by the FDIC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated from time to time thereunder.
"Securities Documents" means all registration statements, schedules,
statements, forms, reports, proxy material, and other documents required to
be filed under the Securities Laws.
"Securities Laws" means the Securities Act and the Exchange Act and
the rules and regulations promulgated from time to time thereunder.
"Stock Option Agreement" means the Stock Option Agreement dated as of
even date herewith pursuant to which SWB has granted Alliance Bancorp the
right to purchase certain shares of SWB Common Stock and which is attached
to this Agreement as Exhibit A thereto.
"Subsidiary" means any corporation, 50% or more of the capital stock
of which is owned, either directly or indirectly, by another entity, except
any corporation the stock of which is held as security by either Alliance
Bancorp Bank or SWB, as the case may be, in the ordinary course of its
lending activities.
5
<PAGE>
"SWB Common Stock" means the common stock of SWB described in Section
3.02(a).
"SWB Disclosure Schedules" means the disclosure schedules delivered by
SWB to Alliance Bancorp pursuant to Article III of this Agreement.
"SWB Financials" means (i) the audited consolidated financial
statements of SWB as of December 31, 1995 and1996 and for the three years
ended December 31, 1996, including the notes thereto, and (ii) the
unaudited interim consolidated financial statements of SWB as of each
calendar quarter thereafter included in Securities Documents filed by SWB.
"SWB Regulatory Reports" means the Quarterly Thrift Financial Reports
of Southwest Federal and accompanying schedules for each calendar quarter,
beginning with the quarter ended December 31, 1995, through the Closing
Date, as filed with the OTS, and any Current or Annual Reports on Form
H(b)-11 filed with the OTS by SWB since December 31, 1995.
"SWB Subsidiary" means any corporation, 50% or more of the capital
stock of which is owned, either directly or indirectly, by SWB, except any
corporation the stock of which is held in the ordinary course of the
lending activities of SWB.
ARTICLE II
THE MERGER AND EXCHANGE OF SHARES
Section 2.01 Conversion and Exchange of Shares.
(a) At the Company Merger Effective Date, by virtue of the Company Merger
and without any action on the part of Alliance Bancorp or SWB or the holders of
shares of Alliance Bancorp or SWB Common Stock:
(i) Each outstanding share of SWB Common Stock issued and outstanding
at the Company Merger Effective Date, except as provided in clause (a) (ii) of
this Section and Section 2.05 hereof, shall cease to be outstanding, shall cease
to exist and shall be converted into and represent solely one share of Alliance
Bancorp Common Stock multiplied by the Exchange Ratio as determined below
(rounded to the nearest fourth decimal).
(ii) Any shares of SWB Common Stock which are owned or held by either
party hereto or any of their respective Subsidiaries (other than in a fiduciary
capacity or in connection with debts previously contracted) at the Company
Merger Effective Date shall cease to exist, the certificates for such shares
shall as promptly as practicable be canceled, such shares shall not be converted
into or represent any shares of Alliance Bancorp Common Stock, and no shares of
capital stock of Alliance Bancorp shall be issued or exchanged therefor.
6
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(iii) Each share of Alliance Bancorp Common Stock issued and
outstanding immediately before the Company Merger Effective Date shall remain an
outstanding share of Common Stock of Alliance Bancorp as the surviving
corporation.
(iv) The holders of certificates representing shares of SWB Common
Stock shall cease to have any rights as stockholders of SWB, except such rights,
if any, as they may have pursuant to applicable law.
(b) Prior to the Company Merger Effective Date, Alliance Bancorp shall
appoint a bank, trust company or other stock transfer agent selected by it and
agreed to by SWB as the Exchange Agent to effect the exchange of certificates
evidencing shares of SWB Common Stock (any such certificate being hereinafter
referred to as a "Certificate") for shares of Alliance Bancorp Common Stock to
be received in the share exchange. On the Company Merger Effective Date,
Alliance Bancorp shall have granted the Exchange Agent the requisite power and
authority to effect for and on behalf of Alliance Bancorp the issuance of the
number of shares of Alliance Bancorp Common Stock issuable in the share
exchange. The Exchange Agent shall accept such Certificates upon compliance with
such reasonable terms and conditions as the Exchange Agent may impose to effect
an orderly exchange thereof in accordance with customary exchange practices.
(c) In connection with this Agreement, Liberty Federal and Southwest
Federal shall enter into the Plan of Merger.
Section 2.02 The Exchange Ratio
(a) For purposes of this Agreement, and subject to the provisions of
Section 7.01(c), the Exchange Ratio shall be:
(i) if the Alliance Bancorp Market Value is less than or equal to $30.475
and greater than or equal to $22.525, then 1.1981 shares of Alliance Bancorp
Common Stock;
(ii) if the Alliance Bancorp Market Value is greater than $30.475 and less
than or equal to $35.00, then that number of shares of fully paid and
nonassessable shares of Alliance Bancorp Common Stock, determined by dividing
$36.5125 by the Alliance Bancorp Market Value;
(iii) if the Alliance Bancorp Market Value is greater than $35.00, then
1.0432 shares of Alliance Bancorp Common Stock; and
(iv) if the Alliance Bancorp Market Value is less than $22.525, then that
number of shares of fully paid and nonassessable shares of Alliance Bancorp
Common Stock, determined by dividing $26.9875 by the Alliance Bancorp Market
Value, subject to the provisions of Section 7.01(c) of this Agreement.
7
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(b) In the event that, between the date hereof and prior to the Company
Merger Effective Date, the outstanding shares of Alliance Bancorp Common Stock
shall have been increased, decreased or changed into or exchanged for a
different number or kind of shares or securities by reorganization,
recapitalization, reclassification, stock split or other like changes in the
capitalization of Alliance Bancorp, or if a stock dividend is declared on
Alliance Bancorp Common Stock with a record date (as to a stock split, the pay
date) within such period, then an appropriate and proportionate adjustment shall
be made in the number and kind of shares of Alliance Bancorp Common Stock to be
thereafter delivered pursuant to this Agreement, and the Exchange Ratio set
forth herein, so that each shareholder of SWB shall be entitled to receive such
number of shares of Alliance Bancorp Common Stock or other securities as such
shareholder would have received pursuant to such reorganization,
recapitalization, reclassification, stock split, exchange of shares or
readjustment or other like changes in the capitalization of Alliance Bancorp, or
as a result of a stock dividend on Alliance Bancorp Common Stock, had the record
(or pay) date therefor been immediately following the Company Merger Effective
Date.
Section. 2.03 Surviving Corporation in the Company Merger.
(a) Alliance Bancorp shall be the surviving corporation in the Company
Merger. The headquarters of the surviving corporation shall be located in
Hinsdale, Illinois.
(b) The Certificate of Incorporation of Alliance Bancorp as in effect
immediately prior to the Company Merger Effective Date, except as to the
amendment to increase the number of authorized shares of Common Stock provided
for in Section 5.08 hereof, shall be the Certificate of Incorporation of
Alliance Bancorp as the surviving corporation until subsequently amended.
(c) At the Company Merger Effective Date, the Bylaws of Alliance Bancorp,
as then in effect shall be the Bylaws of Alliance Bancorp as the surviving
corporation, until subsequently amended in accordance with the DGCL.
(d) The directors and executive officers of Alliance Bancorp as the
surviving corporation following the Company Merger shall be the directors and
executive officers as the surviving corporation, except as otherwise provided in
Section 5.11 of this Agreement.
(e) From and after the Company Merger Effective Date:
(i) Alliance Bancorp as the surviving corporation shall possess all
assets and property of every description, and every interest in the assets and
property, wherever located, and the rights, privileges, immunities, powers,
franchises, and authority, of a public as well as of a private nature, of each
of Alliance Bancorp and SWB, and all obligations belonging or due to each of
Alliance Bancorp and SWB, all of which shall vest in Alliance Bancorp as the
surviving corporation without further act or deed. Title to any real estate or
any interest in the real estate vested in Alliance Bancorp or SWB shall not
revert or in any way be impaired by reason of the Company Merger.
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(ii) Alliance Bancorp as the surviving corporation will be liable for
all the obligations of each of Alliance Bancorp and SWB. Any claim existing, or
action or proceeding pending, by or against Alliance Bancorp or SWB, may be
prosecuted to judgement, with right of appeal, as if the Company Merger had not
taken place, or Alliance Bancorp as the surviving corporation may be substituted
in its place.
(iii) All the rights of creditors of each of Alliance Bancorp and SWB
will be preserved unimpaired, and all liens upon the property of Alliance
Bancorp and SWB will be preserved unimpaired only on the property affected by
such liens immediately before the Company Merger Effective Date.
Section 2.04 Authorization for Issuance of Alliance Bancorp Common Stock;
Exchange of Certificates.
(a) Alliance Bancorp shall reserve for issuance a sufficient number of
shares of its common stock for the purpose of issuing its shares to SWB's
stockholders in accordance with this Article II.
(b) After the Company Merger Effective Date, holders of certificates
theretofore representing outstanding shares of SWB Common Stock (other than as
provided in Section 2.01 (a) (ii) hereof), upon surrender of such certificates
to the Exchange Agent, shall be entitled to receive (i) certificates for the
number of whole shares of Alliance Bancorp Common Stock into which shares of SWB
Common Stock theretofore evidenced by the certificates so surrendered shall have
been converted, as provided in Section 2.01 hereof, and (ii) cash payments in
lieu of fractional shares, if any, as provided in Section 2.05 hereof. As soon
as practicable after the Company Merger Effective Date, and in no event more
than five business days thereafter, the Exchange Agent will send a notice and
transmittal form to each SWB stockholder of record at the Company Merger
Effective Date whose SWB Common Stock shall have been converted into Alliance
Bancorp Common Stock advising such stockholder of the effectiveness of the
Company Merger and the procedure for surrendering to the Exchange Agent
outstanding certificates formerly representing SWB Common Stock in exchange for
new certificates for Alliance Bancorp Common Stock. Upon surrender, each
certificate representing SWB Common Stock shall be canceled.
(c) Until surrendered as provided in this Section 2.04, each outstanding
certificate which, before the Company Merger Effective Date, represented SWB
Common Stock (other than shares canceled at the Company Merger Effective Date
pursuant to Section 2.01 (a) (ii) hereof) will be deemed for all corporate
purposes to represent the number of whole shares of Alliance Bancorp Common
Stock into which the shares of SWB Common Stock formerly represented thereby
were converted and the right to receive cash in lieu of fractional shares.
However, until such outstanding certificates formerly representing SWB Common
Stock are so surrendered, no dividend or distribution payable to holders of
record of Alliance Bancorp Common Stock shall be paid to any holder of such
outstanding certificates, but upon surrender of such outstanding certificates by
such holder there shall be paid to such holder the amount of any dividends or
distributions, without
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interest, theretofore paid with respect to such whole shares of Alliance Bancorp
Common Stock, but not paid to such holder, and which dividends or distribution
had a record date occurring on or after the Company Merger Effective Date and
the amount of any cash, without interest, payable to such holder in lieu of
fractional shares pursuant to Section 2.05 hereof. After the Company Merger
Effective Date, there shall be no further registration of transfers on the
records of SWB of outstanding certificates formerly representing shares of SWB
Common Stock and, if a certificate formerly representing such shares is
presented to Alliance Bancorp, it shall be forwarded to the Exchange Agent for
cancellation and exchange for a certificate representing shares of Alliance
Bancorp Common Stock and cash for fractional shares (if any), as herein
provided. Following one year after the Company Merger Effective Date, the
Exchange Agent shall return to Alliance Bancorp as the surviving corporation any
certificates for Alliance Bancorp Common Stock and cash remaining in the
possession of the Exchange Agent (together with any dividends in respect
thereof) and thereafter shareholders of SWB shall look exclusively to Alliance
Bancorp for shares of the Alliance Bancorp Common Stock and cash to which they
are entitled hereunder.
(d) All shares of Alliance Bancorp Common Stock and cash in lieu of any
fractional share issued and paid upon the conversion of SWB Common Stock in
accordance with the above terms and conditions shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to such SWB Common
Stock.
(e) If any new certificate for Alliance Bancorp Common Stock is to be
issued in a name other than that in which the certificate surrendered in
exchange thereof is registered, it shall be a condition of the issuance therefor
that the certificate surrendered in exchange shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
transfer pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of a new certificate representing shares of Alliance
Bancorp Common Stock in any name other than that of the registered holder of the
certificate surrendered, or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(f) Certificates surrendered for exchange by any person who is an
"affiliate" of SWB for purposes of Rule 145(c) under the Securities Act of 1933,
as amended, shall not be exchanged for Certificates representing shares of
Alliance Common Stock until Alliance Bancorp has received the written agreement
of such person contemplated by Section 5.13 of the Agreement.
(g) In the event any certificate representing SWB Common Stock shall have
been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed certificate, upon the making of an affidavit of
that fact by the holder thereof, such shares of Alliance Bancorp Common Stock
and cash for fractional shares, if any, as may be required pursuant hereto;
provided, however, that Alliance Bancorp or the Exchange Agent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate to deliver a bond in such
sum as is reasonably necessary as indemnity against any claim that may be made
against Alliance Bancorp, Alliance Bancorp, SWB, the Exchange Agent or any other
party with respect to the certificate alleged to have been lost, stolen or
destroyed.
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Section 2.05 No Fractional Shares. Notwithstanding any term or provision
hereof, no fractional shares of Alliance Bancorp Common Stock, and no
certificates or scrip therefor, or other evidence of ownership thereof, will be
issued upon the conversion of or in exchange for any shares of SWB Common Stock;
no dividend or distribution with respect to Alliance Bancorp Common Stock shall
be payable on or with respect to any fractional share interest; and no such
fractional share interest shall entitle the owner thereof to vote or to any
other rights of a stockholder of Alliance Bancorp as the Surviving Corporation.
In lieu of such fractional share interest, any holder of SWB Common Stock who
would otherwise be entitled to a fractional share of Alliance Bancorp Common
Stock will, promptly following surrender of his certificate or certificates
representing SWB Common Stock outstanding immediately before the Company Merger
Effective Date, be paid the applicable cash value of such fractional share
interest, which shall be equal to the product of the fraction of the share to
which such holder would otherwise have been entitled and the Alliance Bancorp
Market Value. For the purposes of determining any such fractional share
interests, all shares of SWB Common Stock owned by a SWB stockholder shall be
combined so as to calculate the maximum number of whole shares of Alliance
Bancorp Common Stock issuable to such SWB stockholder.
Section 2.06 Stock Options.
(a) At the Company Merger Effective Date, each option granted by SWB (a
"SWB Option") to purchase shares of SWB Common Stock which is outstanding and
unexercised immediately prior thereto shall, except as otherwise provided in
this Section 2.06(c) hereof, be converted automatically into an option to
purchase shares of Alliance Bancorp Common Stock in an amount and at an exercise
price determined as provided below (and otherwise subject to the terms of the
SWB's Stock Option Plan for Outside Directors and the Incentive Stock Option
Plan (collectively, the "SWB Option Plans")):
(1) The number of shares of Alliance Bancorp Common Stock to be
subject to the new option shall be equal to the product of the number of shares
of SWB Common Stock subject to the original option and the Exchange Ratio,
provided that any fractional share of Alliance Bancorp Common Stock resulting
from such multiplication shall be rounded down to the nearest share; and
(2) The exercise price per share of Alliance Bancorp Common Stock
under the new option shall be equal to the exercise price per share of SWB
Common Stock under the original option divided by the Exchange Ratio, provided
that such exercise price shall be rounded up to the nearest cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code. The duration
and other terms of the new option shall be the same as the original option,
except that all references to the SWB shall be deemed to be references to
Alliance Bancorp.
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(b) Prior to the Company Merger Effective Date, Alliance Bancorp shall
reserve for issuance, the number of shares of Alliance Bancorp Common Stock
necessary to satisfy Alliance Bancorp's obligations under this Section 2.06.
Within thirty days after the Company Merger Effective Date, Alliance Bancorp
shall file with the Securities and Exchange Commission (the "SEC") a
registration statement on an appropriate form under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the shares of Alliance
Bancorp Common Stock subject to options to acquire Alliance Bancorp Common Stock
issued pursuant to Section 2.06(a) hereof, and shall use its reasonable best
efforts to maintain the current status of the prospectus contained therein, as
well as comply with applicable state securities or "blue sky" laws, for so long
as such options remain outstanding.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SWB
SWB represents and warrants to Alliance Bancorp that the statements
contained in this Article III are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article III), except as set forth in the SWB
Disclosure Schedules delivered by SWB to Alliance Bancorp on the date hereof.
SWB has made a good faith effort to ensure that the disclosure on each schedule
of the SWB Disclosure Schedules corresponds to the section reference herein.
However, for purposes of the SWB Disclosure Schedules, any item disclosed on any
schedule therein is deemed to be fully disclosed with respect to all schedules
under which such item may be relevant.
Section 3.01 Organization.
(a) SWB is a corporation duly organized ,validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to carry on its business as now conducted and is duly licensed or
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on SWB.
(b) Southwest Federal is a stock savings and loan association duly
organized and validly existing under the laws of the United States. Except as
set forth in SWB Disclosure Schedule 3.01(b), Southwest Federal is the only SWB
Subsidiary. The deposits of Southwest Federal are insured by the FDIC through
the SAIF to the fullest extent permitted by law, and all premiums and
assessments required to be paid in connection therewith have been paid when due
by Southwest Federal. Each other SWB Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization.
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(c) Southwest Federal is a member in good standing of the Federal Home
Loan Bank of Chicago and owns the requisite amount of stock therein.
(d) Except as disclosed in SWB Disclosure Schedule 3.01(d), the respective
minute books of SWB and each SWB Subsidiary accurately record, in all material
respects, all material corporate actions of their respective shareholders and
boards of directors (including committees) through the date of this Agreement.
(e) Prior to the date of this Agreement, SWB has delivered to Alliance
Bancorp true and correct copies of the of certificate of incorporation and
bylaws of SWB.
Section 3.02 Capitalization.
(a) The authorized capital stock of SWB consists of (a) 5,000,000 shares
of common stock, $0.01 par value ("SWB Common Stock"), of which 2,707,295 shares
are outstanding, validly issued, fully paid and nonassessable and free of
preemptive rights, and 1,756,063 shares are held by SWB as treasury stock
(including 401,921 shares of treasury stock re-acquired by SWB during the two
year period preceding the date of this Agreement) and (b) 1,000,000 shares of
preferred stock, $0.01 par value, none of which are issued or outstanding.
Neither SWB nor any SWB Subsidiary has or is bound by any Right of any character
relating to the purchase, sale or issuance or voting of, or right to receive
dividends or other distributions on any shares of SWB Common Stock, SWB
preferred stock or any other security of SWB or any securities representing the
right to vote, purchase or otherwise receive any shares of SWB Common Stock, SWB
preferred stock or any other security of SWB, other than shares issuable under
the Alliance Bancorp Option and other than as set forth in reasonable detail in
the SWB Disclosure Schedule 3.02. SWB Disclosure Schedule 3.02(a) sets forth the
name of each holder of options to purchase SWB Common Stock, the number of
shares each such individual may acquire pursuant to the exercise of such
options, and the exercise price relating to the options held. SWB Disclosure
Schedule 3.02(a) also sets forth the names of the holders of any unvested awards
of SWB Common Stock under the SWB Recognition and Retention Plan for Outside
Directors and the SWB Recognition and Retention Plan for Officers and Employees,
the number of shares underlying such awards, and the vesting periods relating
thereto.
(b) SWB owns all of the capital stock of Southwest Federal, free and clear
of any lien or encumbrance. Except for the SWB Subsidiaries, SWB does not
possess, directly or indirectly, any material equity interest in any
corporation, except for equity interests held in the investment portfolios of
SWB Subsidiaries, equity interests held by SWB Subsidiaries in a fiduciary
capacity, and equity interests held in connection with the lending activities of
SWB Subsidiaries.
(c) To SWB's knowledge, no Person or "group" (as that term is used in
Section 13(d)(3) of the Exchange Act), is the beneficial owner (as defined in
Section 13(d) of the Exchange Act) of 5% or more of the outstanding shares of
SWB Common Stock, except as disclosed in the SWB Disclosure Schedule 3.02.
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Section 3.03 Authority; No Violation.
(a) SWB has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. Southwest
Federal has full corporate power and authority to execute and deliver the Plan
of Merger and to consummate the Bank Merger. The execution and delivery of this
Agreement by SWB and the completion by SWB of the transactions contemplated
hereby have been duly and validly approved by the Board of Directors of SWB and,
except for approval of the shareholders of SWB, no other corporate proceedings
on the part of SWB are necessary to complete the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by SWB
and, subject to approval by the shareholders of SWB and receipt of the required
approvals of Regulatory Authorities described in Section 4.04 hereof,
constitutes the valid and binding obligation of SWB and Southwest Federal,
enforceable against SWB and Southwest Federal in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and as to Southwest Federal, the conservatorship or
receivership provisions of the FDIA, and subject, as to enforceability, to
general principles of equity. The Plan of Merger, upon its execution and
delivery by Southwest Federal concurrently with the execution and delivery of
this Agreement, will constitute the valid and binding obligation of Southwest
Federal, enforceable against Southwest Federal in accordance with its terms,
subject to applicable conservatorship and receivership provisions of the FDIA,
or insolvency and similar laws affecting creditors' rights generally and
subject, as to enforceability, to general principles of equity.
(b) (A) The execution and delivery of this Agreement by SWB, (B) the
execution and delivery of the Plan of Merger by Southwest Federal, (C) subject
to receipt of approvals from the Regulatory Authorities referred to in Section
4.04 hereof and SWB's and Alliance Bancorp's compliance with any conditions
contained therein, the consummation of the transactions contemplated hereby, and
(D) compliance by SWB or Southwest Federal with any of the terms or provisions
hereof or of the Plan of Merger will not (i) conflict with or result in a breach
of any provision of the certificate of incorporation or bylaws of SWB or any SWB
Subsidiary or the charter and bylaws of Southwest Federal; (ii) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to SWB or any SWB Subsidiary or any of their respective
properties or assets; or (iii) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default), under, result in the termination of,
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of SWB or Southwest Federal
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other investment or
obligation to which SWB or Southwest Federal is a party, or by which they or any
of their respective properties or assets may be bound or affected, except for
such violations, conflicts, breaches or defaults under clause (ii) or (iii)
hereof which, either individually or in the aggregate, will not have a Material
Adverse Effect on SWB.
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Section 3.04 Consents. Except for the consents, waivers, approvals,
filings and registrations from or with the Regulatory Authorities referred to in
Section 4.04 hereof and compliance with any conditions contained therein, and
the approval of this Agreement by the requisite vote of the shareholders of SWB,
no consents, waivers or approvals of, or filings or registrations with, any
governmental authority are necessary, and, to SWB's knowledge, no consents,
waivers or approvals of, or filings or registrations with, any other third
parties are necessary, in connection with (a) the execution and delivery of this
Agreement by SWB, and (b) the completion by Southwest Federal of the
transactions contemplated hereby or by the Plan of Merger. SWB has no reason to
believe that (i) any required consents or approvals will not be received, or
that (ii) any public body or authority, the consent or approval of which is not
required or any filing with which is not required, will object to the completion
of the transactions contemplated by this Agreement.
Section 3.05 Financial Statements.
(a) SWB has previously delivered to Alliance Bancorp the SWB Regulatory
Reports. The SWB Regulatory Reports have been, or will be, prepared in all
material respects in accordance with applicable regulatory accounting principles
and practices throughout the periods covered by such statements, and fairly
present, or will fairly present in all material respects, the consolidated
financial position, results of operations and changes in shareholders' equity of
SWB as of and for the periods ended on the dates thereof, in accordance with
applicable regulatory accounting principles applied on a consistent basis.
(b) SWB has previously delivered to Alliance Bancorp the SWB Financials.
The SWB Financials have been, or will be, prepared in accordance with GAAP, and
(including the related notes where applicable) fairly present, or will fairly
present, in each case in all material respects (subject in the case of the
unaudited interim statements to normal year-end adjustments), the consolidated
financial position, results of operations and cash flows of SWB and the SWB
Subsidiaries as of and for the respective periods ending on the dates thereof,
in accordance with GAAP applied on a consistent basis during the periods
involved, except as indicated in the notes thereto, or in the case of unaudited
statements, as permitted by Form 10-Q.
(c) At the date of each balance sheet included in the SWB Financials or
the SWB Regulatory Reports, SWB did not have, or will not have any liabilities,
obligations or loss contingencies of any nature (whether absolute, accrued,
contingent or otherwise) of a type required to be reflected in such SWB
Financials or SWB Regulatory Reports or in the footnotes thereto which are not
fully reflected or reserved against therein or fully disclosed in a footnote
thereto, except for liabilities, obligations and loss contingencies which are
not material individually or in the aggregate and which are incurred in the
ordinary course of business, consistent with past practice and except for
liabilities, obligations and loss contingencies which are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
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Section 3.06 Taxes. SWB and the SWB Subsidiaries are members of the same
affiliated group within the meaning of IRC Section 1504(a). SWB has duly filed
all federal, state and material local tax returns required to be filed by or
with respect to SWB and all SWB Subsidiaries on or prior to the Closing Date
(all such returns being accurate and correct in all material respects) and has
duly paid or will pay, or made or will make, provisions for the payment of all
material federal, state and local taxes which have been incurred by or are due
or claimed to be due from SWB and any SWB Subsidiary by any taxing authority or
pursuant to any written tax sharing agreement on or prior to the Closing Date
other than taxes or other charges which (i) are not delinquent, (ii) are being
contested in good faith, or (iii) have not yet been fully determined.
Section 3.07. No Material Adverse Effect. SWB and the SWB Subsidiaries,
taken as a whole, have not suffered any Material Adverse Effect since September
30, 1997.
Section 3.08. Contracts.
(a) Except as described in the footnotes to the SWB Financials or in SWB
Disclosure Schedule 3.08(a), neither SWB nor any SWB Subsidiary is a party to or
subject to: (i) any employment, consulting or severance contract or material
arrangement with any past or present officer, director or employee of SWB or any
SWB Subsidiary, except for "at will" arrangements; (ii) any plan, material
arrangement or contract providing for bonuses, pensions, options, deferred
compensation, retirement payments, profit sharing or similar material
arrangements for or with any past or present officers, directors or employees of
SWB or any SWB Subsidiary; (iii) any collective bargaining agreement with any
labor union relating to employees of SWB or any SWB Subsidiary; (iv) any
agreement which by its terms limits the payment of dividends by SWB; (v) any
instrument evidencing or related to material indebtedness for borrowed money
whether directly or indirectly, by way of purchase money obligation, conditional
sale, lease purchase, guaranty or otherwise, in respect of which SWB or any SWB
Subsidiary is an obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, repurchase agreements, bankers' acceptances,
Federal Home Loan Bank of Chicago advances, and "treasury tax and loan" accounts
established in the ordinary course of business and transactions in "federal
funds" or which contains financial covenants or other restrictions (other than
those relating to the payment of principal and interest when due) which would be
applicable on or after the Closing Date to Alliance Bancorp or any Alliance
Bancorp Subsidiary; or (vi) any contract (other than this Agreement) limiting
the freedom, in any material respect, of SWB or Southwest Federal to engage in
any type of banking or bank-related business which SWB is permitted to engage in
under applicable law as of the date of this Agreement. The SWB Subsidiaries
engaged in land acquisition and real estate development projects, as described
in Item 1 to the SWB Annual Report on Form 10-K for the year ended December 31,
1996 under the caption "SUBSIDIARY ACTIVITIES," have conducted their activities
in all material respects in accordance with the partnership and joint venture
agreements entered into in connection with such activities and projects.
(b) True and correct copies of agreements, plans, arrangements and
instruments referred to in Section 3.08(a), have been provided to Alliance
Bancorp on or before the date hereof, are listed
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on SWB Disclosure Schedule 3.08(a) and are in full force and effect on the date
hereof and neither SWB nor any SWB Subsidiary (nor, to the knowledge of SWB, any
other party to any such contract, plan, arrangement or instrument) has breached
any provision of, or is in default in any respect under any term of, any such
contract, plan, arrangement or instrument which breach has resulted in or will
result in a Material Adverse Effect with respect to SWB. Except as set forth in
the SWB Disclosure Schedule 3.08(b), no party to any material contract, plan,
arrangement or instrument will have the right to terminate any or all of the
provisions of any such contract, plan, arrangement or instrument as a result of
the execution of, and the transactions contemplated by, this Agreement. Except
as set forth in SWB Disclosure Schedule 3.08(b), none of the employees
(including officers) of SWB, possess the right to terminate their employment as
a result of the execution of this Agreement. Except as set forth in SWB
Disclosure Schedule 3.08(b), no plan, employment agreement, termination
agreement, or similar agreement or arrangement to which SWB or any SWB
Subsidiary is a party or under which SWB or any SWB Subsidiary may be liable
contains provisions which permit an employee or independent contractor to
terminate it without cause and continue to accrue future benefits thereunder.
Except as set forth in SWB Disclosure Schedule 3.08(b), no such agreement, plan
or arrangement (x) provides for acceleration in the vesting of benefits or
payments due thereunder upon the occurrence of a change in ownership or control
of SWB or any SWB Subsidiary absent the occurrence of a subsequent event; or (y)
requires SWB or any SWB Subsidiary to provide a benefit in the form of SWB
Common Stock or determined by reference to the value of SWB Common Stock. No
such agreement, plan or arrangement with respect to officers of SWB, or to SWB's
knowledge, to its employees, provides for benefits which may cause the
disallowance of a federal income tax deduction under IRC Section 280G. No
limited rights (as such term is defined in the SWB stock option plans identified
in Disclosure Schedule 3.08(a)) have been granted with respect to any employee
or director stock option that is outstanding as of the date of this Agreement.
Section 3.09 Ownership of Property; Insurance Coverage.
(a) Except as disclosed in SWB Disclosure Schedule 3.09, SWB and the SWB
Subsidiaries have good and, as to real property, marketable title to all
material assets and properties owned by SWB or any SWB Subsidiary in the conduct
of their businesses, whether such assets and properties are real or personal,
tangible or intangible, including assets and property reflected in the balance
sheets contained in the SWB Regulatory Reports and in the SWB Financials or
acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of in the ordinary course of business, since the
date of such balance sheets), subject to no material encumbrances, liens,
mortgages, security interests or pledges, except (i) those items which secure
liabilities for public or statutory obligations or any discount with, borrowing
from or other obligations to any Federal Reserve Bank or any Federal Home Loan
Bank, inter-bank credit facilities, or any transaction by a SWB Subsidiary
acting in a fiduciary capacity, (ii) statutory liens for amounts not yet
delinquent or which are being contested in good faith, and (iii) items permitted
under Article IV. SWB and the SWB Subsidiaries, as lessee, have the right under
valid and subsisting leases of real and personal properties used by SWB and its
Subsidiaries in the conduct of their businesses to occupy or use all such
properties as presently occupied and used by each of them.
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Except as disclosed in SWB Disclosure Schedule 3.09, such existing leases and
commitments to lease constitute or will constitute operating leases for both tax
and financial accounting purposes and the lease expense and minimum rental
commitments with respect to such leases and lease commitments are as disclosed
in the Notes to the SWB Financials.
(b) With respect to all material agreements pursuant to which SWB or any
SWB Subsidiary has purchased securities subject to an agreement to resell, if
any, SWB or such SWB Subsidiary, as the case may be, has a lien or security
interest (which to SWB's knowledge is a valid, perfected first lien) in the
securities or other collateral securing the repurchase agreement, and the value
of such collateral equals or exceeds the amount of the debt secured thereby.
(c) SWB and each SWB Subsidiary currently maintains insurance considered
by SWB to be reasonable for their respective operations and similar in scope and
coverage to that customarily maintained by other businesses similarly engaged in
a similar location, in accordance with good business practice. SWB has not
received notice from any insurance carrier that (i) such insurance will be
canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. There are presently no material claims pending under such policies of
insurance and no notices have been given by SWB under such policies. All such
insurance is valid and enforceable and in full force and effect, and within the
last three years SWB has received each type of insurance coverage for which it
has applied and during such periods has not been denied indemnification for any
material claims submitted under any of its insurance policies.
Section 3.10 Legal Proceedings. Except as disclosed in SWB Disclosure
Schedule 3.10, neither SWB nor any SWB Subsidiary is a party to any, and there
are no pending or, to the best of SWB's knowledge, threatened legal,
administrative, arbitration or other proceedings, claims (whether asserted or
unasserted), actions or governmental investigations or inquiries of any nature
(i) against SWB or any SWB Subsidiary, (ii) to which SWB or any SWB Subsidiary's
assets are or may be subject, (iii) challenging the validity or propriety of any
of the transactions contemplated by this Agreement, or (iv) which could
adversely affect the ability of SWB to perform under this Agreement, except for
any proceedings, claims, actions, investigations or inquiries referred to in
clauses (i) or (ii) which, if adversely determined, individually or in the
aggregate, could not be reasonably expected to have a Material Adverse Effect on
SWB and the SWB Subsidiaries, taken as a whole.
Section 3.11 Compliance With Applicable Law.
(a) SWB and SWB Subsidiaries hold all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under, and have complied in all material respects with, applicable laws,
statutes, orders, rules or regulations of any federal, state or local
governmental authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any material
respect on the conduct of their
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respective businesses nor otherwise have a Material Adverse Effect on SWB and
the SWB Subsidiaries, taken as a whole.
(b) Except as disclosed in SWB Disclosure Schedule 3.11, neither SWB nor
any SWB Subsidiary has received any notification or communication from any
Regulatory Authority (i) asserting that SWB or any SWB Subsidiary is not in
material compliance with any of the statutes, regulations or ordinances which
such Regulatory Authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material to SWB or any
SWB Subsidiary; (iii) requiring or threatening to require SWB or any SWB
Subsidiary, or indicating that SWB or any SWB Subsidiary may be required, to
enter into a cease and desist order, agreement or memorandum of understanding or
any other agreement with any federal or state governmental agency or authority
which is charged with the supervision or regulation of banks or engages in the
insurance of bank deposits restricting or limiting, or purporting to restrict or
limit, in any material respect the operations of SWB or any SWB Subsidiary,
including without limitation any restriction on the payment of dividends; or
(iv) directing, restricting or limiting, or purporting to direct, restrict or
limit, in any manner the operations of SWB or any SWB Subsidiary, including
without limitation any restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this sentence is
hereinafter referred to as a "Regulatory Agreement"). Neither SWB nor any SWB
Subsidiary has consented to or entered into any currently effective Regulatory
Agreement, except as set forth in SWB Disclosure Schedule 3.11.
Section 3.12 ERISA. SWB has previously delivered to Alliance Bancorp true
and complete copies of all employee pension benefit plans within the meaning of
ERISA Section 3(2), profit sharing plans, stock purchase plans, deferred
compensation and supplemental income plans, supplemental executive retirement
plans, employment agreements, annual or long term incentive plans, settlement
plans, policies and agreements, group insurance plans, and all other employee
welfare benefit plans within the meaning of ERISA Section 3(1) (including
vacation pay, sick leave, short-term disability, long-term disability, and
medical plans) and all other employee benefit plans, policies, agreements and
arrangements, all of which are set forth in SWB Disclosure Schedule 3.12,
maintained or contributed to for the benefit of the employees or former
employees (including retired employees) and any beneficiaries thereof or
directors or former directors of SWB or any SWB Subsidiary, together with (i)
each trust agreement and group annuity contract, if any, relating to such
benefit plans, (ii) the most recent actuarial (if any) and financial reports
relating to those plans which constitute "qualified plans" under IRC Section
401(a), (iii) the most recent annual reports relating to such plans filed with
any government agency, and (iv) all rulings and determination letters which
pertain to any such plans. Neither SWB, any SWB subsidiary nor any pension plan
maintained by SWB or any SWB Subsidiary, has incurred directly or indirectly,
within the past six (6) years any liability under Title IV of ERISA that has not
been satisfied in full, and no condition exists that presents a material risk of
incurring a liability under such Title, other than liability for premiums due to
the Pension Benefit Guaranty Corporation ("PBGC") which payments have been made
or will be made when due, nor has any "reportable event" under ERISA Section
4043 occurred with respect to such plan. With respect to each employee benefit
plan subject to Title IV of ERISA, the present value of accrued benefits under
such plan or plans, based upon the actuarial assumptions used for
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funding purposes in the most recent actuarial report prepared by such plan's
actuary with respect to such plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such plan and SWB is not aware of
any facts or circumstances that would materially change the funded status of any
such ERISA plan. All contributions required to be made under the terms of any
ERISA plan have been timely made. No such ERISA plan has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA.
To the best of SWB's knowledge, neither SWB nor any SWB Subsidiary has
incurred or is subject to any liability under ERISA Section 4201 for a complete
or partial withdrawal from a multi-employer plan. All "employee benefit plans,"
as defined in ERISA Section 3(3), comply and within the past six (6) years have
complied in all material respects with (i) relevant provisions of ERISA and (ii)
in the case of plans intended to qualify for favorable income tax treatment,
provisions of the IRC relevant to such treatment. To the best of SWB's
knowledge, no prohibited transaction (which shall mean any transaction
prohibited by ERISA Section 406 and not exempt under ERISA Section 408 or any
transaction prohibited under IRC Section 4975) has occurred within the past six
(6) years with respect to any employee benefit plan maintained by SWB or any SWB
Subsidiary which would result in the imposition, directly or indirectly, of an
excise tax under IRC 4975 or other penalty under ERISA or the IRC, which,
individually or in the aggregate, has resulted in or will result in a Material
Adverse Effect with respect to SWB. SWB and the SWB Subsidiaries provide
continuation coverage under group health plans for separating employees and
"qualified beneficiaries" in accordance with the provisions of IRC Section
4980B(f). Such group health plans are in compliance in all material respects
with Section 1862(b)(1) of the Social Security Act. With respect to the
outstanding loan to SWB's employee stock ownership plan, as of September 30,
1997, the principal amount outstanding does not exceed $400,000.
Section 3.13 Brokers, Finders and Financial Advisors. Except for SWB's
engagement of Robert W. Baird & Co. Incorporated ("Baird") in connection with
transactions contemplated by this Agreement, neither SWB nor any SWB Subsidiary,
nor any of their respective officers, directors, employees or agents, has
employed any broker, finder or financial advisor in connection with the
transactions contemplated by this Agreement or the Plan of Merger, or, except
for its commitments disclosed in SWB Disclosure Schedule 3.13, incurred any
liability or commitment for any fees or commissions to any such person in
connection with the transactions contemplated by this Agreement or the Plan of
Merger, which has not been reflected in the SWB Financials.
Section 3.14. Environmental Matters. To the knowledge of SWB, neither SWB
nor any SWB Subsidiary, nor any properties owned or operated by SWB or any SWB
Subsidiary has been or is in violation of or liable under any Environmental Law
which violation or liability, individually or in the aggregate, has resulted, or
will result, in a Material Adverse Effect with respect to SWB and its
Subsidiaries taken as a whole. There are no actions, suits or proceedings, or
demands, claims, notices or, to SWB's knowledge, investigations (including
without limitation notices, demand letters or requests for information from any
environmental agency) instituted or pending, or to the knowledge of SWB,
threatened, relating to the liability of any property owned or operated by SWB
or any SWB Subsidiary under any Environmental Law. SWB Disclosure Schedule 3.14
identifies
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all material reports, studies, sampling data, permits, and governmental filings
in the possession of or reasonably available to SWB or any SWB Subsidiary
concerning the Environmental Laws and SWB or any SWB Subsidiary or any of their
current or former properties or operations.
Section 3.15. Loan Portfolio. The allowance for loan losses reflected, and
to be reflected, in the SWB Regulatory Reports, and shown, and to be shown, on
the balance sheets contained in the SWB Financials have been, and will be,
established in accordance with the requirements of GAAP and all applicable
regulatory criteria. SWB Disclosure Schedule 3.15 sets forth all loans that are
classified by SWB or federal bank regulatory or supervisory authority as
"Special Mention," "Substandard," "Doubtful," "Loss" or "Classified," together
with the aggregate principal amount of and accrued and unpaid interest on such
loans, by category.
Section 3.16. Information to be Supplied. The information to be supplied
by SWB for inclusion in the Registration Statement (including the
Prospectus/Proxy Statement) will not, at the time the Registration Statement is
declared effective pursuant to the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein not misleading. The information supplied, or to be
supplied, by SWB for inclusion in the Applications will, at the time such
documents are filed with any Regulatory Authority, be accurate in all material
aspects.
Section 3.17. Securities Documents. SWB has delivered to Alliance Bancorp
copies of its (i) annual reports on Form 10-K for the years ended December 31,
1996, 1995 and 1994, (ii) quarterly reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997 and (iii) proxy materials
used or for use in connection with its meetings of shareholders held in 1997,
1996 and 1995. Such reports and such proxy materials complied, at the time filed
with the SEC, in all material respects, with the Securities Laws.
Section 3.18. Related Party Transactions. Except as disclosed in SWB
Disclosure Schedule 3.18, or as described in SWB's Proxy Statement distributed
in connection with the 1997 annual meeting of shareholders (which has previously
been provided to Alliance Bancorp), SWB is not a party to any transaction
(including any loan or other credit accommodation) with any Affiliate of SWB
(except a SWB Subsidiary). Except as disclosed in SWB Disclosure Schedule 3.18,
all such transactions (a) were made in the ordinary course of business, (b) were
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other Persons,
and (c) did not involve more than the normal risk of collectability or present
other unfavorable features. Except as set forth on SWB Disclosure Schedule 3.18,
no loan or credit accommodation to any Affiliate of SWB is presently in default
or, during the three year period prior to the date of this Agreement, has been
in default or has been restructured, modified or extended. SWB has not been
notified that principal and interest with respect to any such loan or other
credit accommodation will not be paid when due or that the loan grade
classification accorded such loan or credit accommodation by SWB is
inappropriate.
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Section 3.19. Schedule of Termination Benefits. SWB Disclosure Schedule
3.19 includes a schedule of all termination benefits and related payments that
would be payable to the individuals identified thereon, excluding any options to
acquire SWB Common Stock granted to such individuals, under any and all
employment agreements, special termination agreements, supplemental executive
retirement plans, deferred bonus plans, deferred compensation plans, salary
continuation plans, or any compensation arrangement, or other pension benefit or
welfare benefit plan maintained by SWB solely for the benefit of officers or
directors of SWB or SWB Subsidiaries (the "Benefits Schedule"), assuming their
employment or service is terminated as of December 31, 1997 and the Closing Date
occurs prior to such termination. No other individuals are entitled to benefits
under any such plans. Notwithstanding the foregoing, Alliance Bancorp
acknowledges that additional payments may be required to be made by Southwest
Federal, SWB, or Alliance Bancorp to the Southwest Federal Savings and Loan
Association of Chicago Supplemental Executive Retirement Plan in order to
satisfy the obligations to the beneficiaries of such plan.
Section 3.20. Loans. Each loan reflected as an asset in the SWB Financial
Statements (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and correct in all material respects, (ii)
to the extent secured, to SWB's knowledge has been secured by valid liens and
security interests which have to SWB's knowledge been perfected, and (iii) is
the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles, in each case other
than loans as to which the failure to satisfy the foregoing standards would not
have a Material Adverse Effect on SWB and the SWB Subsidiaries taken as a whole.
Section 3.21. Antitakeover Provisions Inapplicable. Except as set forth on
SWB Disclosure Schedule 3.21, the transactions contemplated by this Agreement
are not subject to any applicable state takeover law.
Section 3.22. Fairness Opinion. SWB has received a written opinion from
Baird to the effect that, subject to the terms, conditions and qualifications
set forth therein, as of the date thereof, the consideration to be received by
the stockholders of SWB pursuant to this Agreement is fair to such stockholders
from a financial point of view. Such opinion has not been amended or rescinded
as of the date of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIANCE BANCORP
Alliance Bancorp represents and warrants to SWB that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article IV), except as set forth in the Alliance
Bancorp Disclosure Schedules delivered by Alliance Bancorp to SWB on the date
hereof. Alliance Bancorp has made a good faith effort to ensure that the
disclosure on each schedule of the Alliance Bancorp
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Disclosure Schedules corresponds to the section reference herein. However, for
purposes of the Alliance Bancorp Disclosure Schedules, any item disclosed on any
schedule therein is deemed to be fully disclosed with respect to all schedules
under which such item may be relevant.
Section 4.01. Organization.
(a) Alliance Bancorp is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with full
corporate power and authority to carry on its business as now conducted and is
duly licensed or qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such qualification, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on Alliance
Bancorp.
(b) Liberty Federal is a stock savings bank duly organized, validly
existing and in good standing under the laws of the United States. Except as
set forth in Alliance Bancorp Disclosure Schedule 4.01(b), Liberty Federal is
the only Alliance Bancorp Subsidiary. The deposits of Liberty Federal are
insured by the FDIC through the SAIF to the fullest extent permitted by law, and
all premiums and assessments required to be paid in connection therewith have
been paid when due by Liberty Federal. Each other Alliance Bancorp Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization.
(c) Liberty Federal is a member in good standing of the Federal Home Loan
Bank of Chicago and owns the requisite amount of stock therein.
(d) Except as disclosed in Alliance Bancorp Disclosure Schedule 4.01(d),
the respective minute books of Alliance Bancorp and each Alliance Bancorp
Subsidiary accurately record, in all material respects, all material corporate
actions of their respective shareholders and boards of directors (including
committees) through the date of this Agreement.
(e) Prior to the date of this Agreement, Alliance Bancorp has delivered to
SWB true and correct copies of the of certificate of incorporation and bylaws of
Alliance Bancorp.
Section 4.02 Capitalization.
(a) The authorized capital stock of Alliance Bancorp consists of (a)
11,000,000 shares of common stock, par value $0.01 per share (the "Alliance
Bancorp Common Stock"), of which, at the date of this Agreement, 8,175,885
shares are validly issued, fully paid and nonassessable and 154,087 shares are
held by Alliance Bancorp as treasury stock, and (b) 1,500,000 shares of
preferred stock, par value $0.01 per share, of which, at the date of this
Agreement, no shares of were issued and outstanding. No shares of Alliance
Bancorp Common Stock were issued in violation of any preemptive rights. Alliance
Bancorp has no Rights authorized, issued or outstanding, other than options to
acquire 1,003,920 shares of Alliance Bancorp Common Stock under Alliance
Bancorp's employee benefit plans and stock option plans.
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(b) To Alliance Bancorp's knowledge, and except as set forth in the
Alliance Bancorp Disclosure Schedule 4.02(b), no Person or "group" (as that term
is used in Section 13(d)(3) of the Exchange Act) is the beneficial owner (as
defined in Section 13(d) of the Exchange Act) of 5% or more of the outstanding
shares of Alliance Bancorp Common Stock.
(c) Alliance Bancorp owns all of the capital stock of Liberty Federal,
free and clear of any lien or encumbrance. Except for the Alliance Bancorp
Subsidiaries, Alliance Bancorp does not possess, directly or indirectly, any
material equity interest in any corporation, except for equity interests held in
the investment portfolios of Alliance Bancorp Subsidiaries, equity interests
held by Alliance Bancorp Subsidiaries in a fiduciary capacity, and equity
interests held in connection with the lending activities of Alliance Bancorp
Subsidiaries.
Section 4.03 Authority; No Violation.
(a) Alliance Bancorp has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Liberty Federal has full corporate power and authority to execute and deliver
the Plan of Merger and to consummate the Bank Merger. The execution and delivery
of this Agreement by Alliance Bancorp and the completion by Alliance Bancorp of
the transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Alliance Bancorp and, except for approval of the
shareholders of Alliance Bancorp, no other corporate proceedings on the part of
Alliance Bancorp are necessary to complete the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Alliance
Bancorp and, subject to approval by the shareholders of Alliance Bancorp and
receipt of the required approvals of Regulatory Authorities described in Section
4.04 hereof, constitutes the valid and binding obligation of Alliance Bancorp
and Liberty Federal, enforceable against Alliance Bancorp and Liberty Federal in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and as to Liberty Federal,
the conservatorship or receivership provisions of the FDIA, and subject, as to
enforceability, to general principles of equity. The Plan of Merger, upon its
execution and delivery by Liberty Federal concurrently with the execution and
delivery of this Agreement, will constitute the valid and binding obligation of
Liberty Federal, enforceable against Liberty Federal in accordance with its
terms, subject to applicable conservatorship and receivership provisions of the
FDIA, or insolvency and similar laws affecting creditors' rights generally and
subject, as to enforceability, to general principles of equity.
(b) (A) The execution and delivery of this Agreement by Alliance Bancorp,
(B) the execution and delivery of the Plan of Merger by Liberty Federal, (C)
subject to receipt of approvals from the Regulatory Authorities referred to in
Section 4.04 hereof and SWB's and Alliance Bancorp's compliance with any
conditions contained therein, the consummation of the transactions contemplated
hereby, and (D) compliance by Alliance Bancorp or Liberty Federal with any of
the terms or provisions hereof or of the Plan of Merger will not (i) conflict
with or result in a breach of any provision of the certificate of incorporation
or bylaws of Alliance Bancorp or any Alliance Bancorp Subsidiary or the charter
and bylaws of Liberty Federal; (ii) violate any statute, code,
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ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Alliance Bancorp or any Alliance Bancorp Subsidiary or any of
their respective properties or assets; or (iii) violate, conflict with, result
in a breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default), under, result in
the termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets of Alliance
Bancorp or Liberty Federal under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other investment or obligation to which Alliance Bancorp or Liberty Federal is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except for such violations, conflicts, breaches or defaults
under clause (ii) or (iii) hereof which, either individually or in the
aggregate, will not have a Material Adverse Effect on Alliance Bancorp.
Section 4.04. Consents. Except for consents, approvals, filings and
registrations from or with the OTS and SEC, and state "blue sky" authorities,
and compliance with any conditions contained therein, and the approval of this
Agreement by the shareholders of Alliance Bancorp in accordance with Nasdaq
requirements applicable to it, and the approval of the Plan of Merger by
Alliance Bancorp as sole shareholder of Liberty Federal, and by the Liberty
Federal Board of Directors, the filing of a certificate of merger with the
Secretary of State of the State of Delaware pursuant to the DGCL, and the
articles of combination with the OTS, no consents or approvals of, or filings or
registrations with, any public body or authority are necessary, and no consents
or approvals of any third parties are necessary, or will be, in connection with
(a) the execution and delivery of this Agreement by Alliance Bancorp or the Plan
of Merger by Liberty Federal, and (b) the completion by Alliance Bancorp of the
transactions contemplated hereby or by Liberty Federal of the Bank Merger.
Alliance Bancorp has no reason to believe that (i) any required consents or
approvals will not be received or will be received with conditions, limitations
or restrictions unacceptable to it or which would adversely impact Alliance
Bancorp's ability to complete the transactions contemplated by this Agreement or
that (ii) any public body or authority, the consent or approval of which is not
required or any filing with which is not required, will object to the completion
of the transactions contemplated by this Agreement.
Section 4.05. Financial Statements.
(a) Alliance Bancorp has previously delivered, or will deliver, to SWB the
Alliance Bancorp Regulatory Reports. The Alliance Bancorp Regulatory Reports
have been, or will be, prepared in accordance with applicable regulatory
accounting principles and practices and fairly present, or will fairly present,
the consolidated financial position, results of operations and changes in
shareholders' equity of Alliance Bancorp as of and for the periods ending on the
dates thereof, in accordance with applicable regulatory accounting principles.
Alliance Bancorp will make the Alliance Bancorp Regulatory Reports available to
SWB for inspection.
(b) Alliance Bancorp has previously delivered to SWB the Alliance Bancorp
Financials. The Alliance Bancorp Financials have been, or will be, prepared in
accordance with GAAP and
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practices applied on a consistent basis throughout the periods covered by such
statements, and (including the related notes where applicable) fairly present,
or will fairly present (subject in the case of the unaudited interim statements
to normal year-end adjustments), the consolidated financial position, results of
operations and cash flows of Alliance Bancorp and the Alliance Bancorp
Subsidiaries as of and for the respective periods ending on the dates thereof,
in accordance with GAAP applied on a consistent basis during the periods
involved, except as indicated in the notes thereto, or in the case of unaudited
statements, as permitted by Form 10-Q.
(c) At the date of each balance sheet included in the Alliance Bancorp
Financials, Alliance Bancorp did not have any liabilities, obligations or loss
contingencies of any nature (whether absolute, accrued, contingent or otherwise)
of a type required to be reflected in such Alliance Bancorp Financials or in the
footnotes thereto which are not fully reflected or reserved against therein or
disclosed in a footnote thereto, except for liabilities, obligations or loss
contingencies which are not material in the aggregate and which are incurred in
the ordinary course of business, consistent with past practice, and except for
liabilities, obligations or loss contingencies which are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal recurring audit adjustments and the
absence of footnotes.
Section 4.06. Taxes. Alliance Bancorp and the Alliance Bancorp
Subsidiaries are members of the same affiliated group within the meaning of IRC
Section 1504(a). Alliance Bancorp has duly filed, and will file, all federal,
state and local tax returns required to be filed by or with respect to Alliance
Bancorp and all Alliance Bancorp Subsidiaries on or prior to the Closing Date
(all such returns being accurate and correct in all material respects) and has
duly paid or will pay, or made or will make, provisions for the payment of all
federal, state and local taxes which have been incurred by or are due or claimed
to be due from Alliance Bancorp and any Alliance Bancorp Subsidiary by any
taxing authority or pursuant to any tax sharing agreement or arrangement
(written or oral) on or prior to the Closing Date other than taxes which (i) are
not delinquent or (ii) are being contested in good faith.
Section 4.07. No Material Adverse Effect. Alliance Bancorp and the
Alliance Bancorp Subsidiaries, taken as a whole, have not suffered any Material
Adverse Effect since September 30, 1997.
Section 4.08. Ownership of Property; Insurance Coverage; Contracts.
(a) Except as set forth in Alliance Bancorp Disclosure Schedule 4.08(a),
Alliance Bancorp and the Alliance Bancorp Subsidiaries have good and, as to real
property, marketable title to all material assets and properties owned by
Alliance Bancorp or any of its Subsidiaries in the conduct of their businesses,
whether such assets and properties are real or personal, tangible or intangible,
including assets and property reflected in the balance sheets contained in the
Alliance Bancorp Financials or acquired subsequent thereto (except to the extent
that such assets and properties have been disposed of for fair value, in the
ordinary course of business, since the date of
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such balance sheets), subject to no material encumbrances, liens, mortgages,
security interests or pledges, except (i) those items that secure liabilities
for borrowed money and that are described in the Alliance Bancorp Disclosure
Schedule 4.08(a) or described in Section 5.01(v) of Article V hereof, and (ii)
statutory liens for amounts not yet delinquent or which are being contested in
good faith. Alliance Bancorp and the Alliance Bancorp Subsidiaries, as lessee,
have the right under valid and subsisting leases of real and personal properties
used by Alliance Bancorp and its Subsidiaries in the conduct of their businesses
to occupy and use all such properties as presently occupied and used by each of
them.
(b) Alliance Bancorp and the Alliance Bancorp Subsidiaries currently
maintain insurance in amounts considered by Alliance Bancorp to be reasonable
for their respective operations, and such insurance is similar in scope and
coverage to that maintained by other businesses similarly engaged. Neither
Alliance Bancorp nor any Alliance Bancorp Subsidiary has received notice from
any insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated or (ii) premium costs with respect to
such insurance will be substantially increased.
(c) Neither Alliance Bancorp nor any Alliance Bancorp Subsidiary is a
party to or subject to: (i) any collective bargaining agreement with any labor
union relating to employees of Alliance Bancorp or any Alliance Bancorp
Subsidiary; (ii) any agreement which by its terms limits the payment of
dividends by Alliance Bancorp; or (iii) any instrument evidencing or related to
material indebtedness for borrowed money whether directly or indirectly, by way
of purchase money obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which Alliance Bancorp or any Alliance Bancorp
Subsidiary is an obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, repurchase agreements, bankers' acceptances,
Federal Home Loan Bank of Chicago advances, and "treasury tax and loan" accounts
established in the ordinary course of business and transactions in "federal
funds" or which contains financial covenants or other restrictions (other than
those relating to the payment of principal and interest when due) which would be
applicable on or after the Closing Date to Alliance Bancorp or any Alliance
Bancorp Subsidiary; or (iv) any contract (other than this Agreement) limiting
the freedom, in any material respect, of Alliance Bancorp or Liberty Federal to
engage in any type of banking or bank-related business which Alliance Bancorp or
Liberty Federal is permitted to engage in under applicable law as of the date of
this Agreement.
Section 4.09. Legal Proceedings. Neither Alliance Bancorp nor any Alliance
Bancorp Subsidiary is a party to any, and there are no pending or, to the best
of Alliance Bancorp's knowledge, threatened legal, administrative, arbitration
or other proceedings, claims, actions or governmental investigations or
inquiries of any nature (i) against Alliance Bancorp or any Alliance Bancorp
Subsidiary, (ii) to which Alliance Bancorp's or any Alliance Bancorp
Subsidiary's assets are or may be subject, (iii) challenging the validity or
propriety of any of the transactions contemplated by this Agreement, or (iv)
which could adversely affect the ability of Alliance Bancorp to perform under
this Agreement, except for any proceedings, claims, actions, investigations or
inquiries referred to in clauses (i) or (ii) which, individually or in the
aggregate, could not be
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reasonably expected to have a Material Adverse Effect on Alliance Bancorp and
the Alliance Bancorp Subsidiaries taken as a whole.
Section 4.10. Compliance With Applicable Law.
(a) Alliance Bancorp and the Alliance Bancorp Subsidiaries hold all
licenses, franchises, permits and authorizations necessary for the lawful
conduct of their businesses under, and have complied in all material respects
with, applicable laws, statutes, orders, rules or regulations of any federal,
state or local governmental authority relating to them, other than where such
failure to hold or such noncompliance will neither result in a limitation in any
material respect on the conduct of their businesses nor otherwise have a
Material Adverse Effect on Alliance Bancorp and its Subsidiaries taken as a
whole.
(b) Neither Alliance Bancorp nor any Alliance Bancorp Subsidiary has
received any notification or communication from any Regulatory Authority (i)
asserting that Alliance Bancorp or any Alliance Bancorp Subsidiary is not in
compliance with any of the statutes, regulations or ordinances which such
Regulatory Authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material to Alliance
Bancorp or any Alliance Bancorp Subsidiary; (iii) requiring or threatening to
require Alliance Bancorp or any Alliance Bancorp Subsidiary, or indicating that
Alliance Bancorp or any Alliance Bancorp Subsidiary may be required, to enter
into a cease and desist order, agreement or memorandum of understanding or any
other agreement restricting or limiting, or purporting to restrict or limit, in
any manner the operations of Alliance Bancorp or any Alliance Bancorp
Subsidiary, including without limitation any restriction on the payment of
dividends; or (iv) directing, restricting or limiting, or purporting to direct,
restrict or limit, in any manner the operations of Alliance Bancorp or any
Alliance Bancorp Subsidiary, including without limitation any restriction on the
payment of dividends (any such notice, communication, memorandum, agreement or
order described in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Neither Alliance Bancorp nor any Alliance Bancorp Subsidiary is a
party to, nor has consented to any Regulatory Agreement.
Section 4.11. Information to be Supplied. The information to be supplied
by Alliance Bancorp for inclusion in the Registration Statement (including the
Prospectus/Proxy Statement) will not, at the time the Registration Statement is
declared effective pursuant to the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein not misleading. The information supplied, or to be
supplied, by Alliance Bancorp for inclusion in the Applications will, at the
time such documents are filed with any Regulatory Authority, be accurate in all
material aspects.
Section 4.12. ERISA and Employment Arrangements. Alliance Bancorp has
previously made available to SWB true and complete copies of the employee
pension benefit plans within the meaning of ERISA Section 3(2), profit sharing
plans, stock purchase plans, deferred compensation and supplemental income
plans, supplemental executive retirement plans, employment and special
termination agreements, annual incentive plans, group insurance plans, and all
other employee
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welfare benefit plans within the meaning of ERISA Section 3(1) (including
vacation pay, sick leave, short-term disability, long-term disability, and
medical plans), and all other employee benefit plans, policies, agreements and
arrangements, all of which are set forth on the Alliance Bancorp Disclosure
Schedule, maintained or contributed to for the benefit of the employees or
former employees (including retired employees) and any beneficiaries thereof or
directors or former directors of Alliance Bancorp or any Alliance Bancorp
Subsidiary, together with (i) the most recent actuarial (if any) and financial
reports relating to those plans which constitute "qualified plans" under IRC
Section 401(a), (ii) the most recent annual reports relating to such plans filed
by them, respectively, with any government agency, and (iii) all rulings and
determination letters which pertain to any such plans. Neither Alliance Bancorp
nor any Alliance Bancorp Subsidiary, and no pension plan maintained by Alliance
Bancorp or any Alliance Bancorp Subsidiary, has incurred, directly or
indirectly, within the past six (6) years any liability under Title IV of ERISA
(including to the Pension Benefit Guaranty Corporation) or to the IRS with
respect to any pension plan qualified under IRC Section 401(a) which liability
has resulted in or will result in a Material Adverse Effect with respect to
Alliance Bancorp, except liabilities to the Pension Benefit Guaranty Corporation
pursuant to ERISA Section 4007, all of which have been fully paid, nor has any
reportable event under ERISA Section 4043 occurred with respect to any such
pension plan. With respect to each of such plans that is subject to Title IV of
ERISA, the present value of the accrued benefits under such plan, based upon the
actuarial assumptions used for funding purposes in the plan's most recent
actuarial report did not, as of its latest valuation date, exceed the then
current value of the assets of such plan allocable to such accrued benefits.
Neither Alliance Bancorp nor any Alliance Bancorp Subsidiary has incurred any
liability under ERISA Section 4201 for a complete or partial withdrawal from a
multi-employer plan. All "employee benefit plans," as defined in ERISA Section
3(3), comply and in the past six (6) years have complied in all material
respects with (i) relevant provisions of ERISA, and (ii) in the case of plans
intended to qualify for favorable income tax treatment, provisions of the IRC
relevant to such treatment. No prohibited transaction (which shall mean any
transaction prohibited by ERISA Section 406 and not exempt under ERISA Section
408 or any transaction prohibited under IRC Section 4975) has occurred within
the past six (6) years with respect to any employee benefit plan maintained by
Alliance Bancorp or any Alliance Bancorp Subsidiary that would result in the
imposition, directly or indirectly, of an excise tax under IRC Section 4975 or
other penalty under ERISA or the IRC, which individually or in the aggregate,
has resulted in or will result in a Material Adverse Effect with respect to
Alliance Bancorp. Alliance Bancorp and the Alliance Bancorp Subsidiaries provide
continuation coverage under group health plans for separating employees in
accordance with the provisions of IRC Section 4980B(f). Such group health plans
are in compliance with Section 1862(b)(1) of the Social Security Act.
Section 4.13. Securities Documents. Alliance Bancorp has delivered, or
will deliver, to SWB copies of its (i) annual reports on SEC Form 10-K for the
years ended September 30, 1996, 1995, and 1994, (ii) quarterly reports on SEC
Form 10-Q for the quarters ended December 31, 1996, March 31, 1997, June 30,
1997 and September 30, 1997, and (iii) proxy statement dated May 1, 1997 used in
connection with its annual meeting of shareholders held in May 1997. Such
reports and such proxy materials complied, at the time filed with the SEC, in
all material respects, with the Exchange Act and the applicable rules and
regulations of the SEC.
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Section 4.14. Environmental Matters. To the knowledge of Alliance Bancorp,
neither Alliance Bancorp nor any Alliance Bancorp Subsidiary, nor any properties
owned or operated by Alliance Bancorp or any Alliance Bancorp Subsidiary has
been or is in violation of or liable under any Environmental Law which violation
or liability, individually or in the aggregate, has resulted, or will result, in
a Material Adverse Effect with respect to Alliance Bancorp and its Subsidiaries
taken as a whole. There are no actions, suits or proceedings, or demands,
claims, notices or, to Alliance Bancorp's knowledge, investigations (including
without limitation notices, demand letters or requests for information from any
environmental agency) instituted or pending, or to the knowledge of Alliance
Bancorp, threatened, relating to the liability of any property owned or operated
by Alliance Bancorp or any Alliance Bancorp Subsidiary under any Environmental
Law.
Section 4.15. Loan Portfolio. The allowance for loan losses reflected, and
to be reflected, in the Alliance Bancorp Regulatory Reports, and shown, and to
be shown, on the balance sheets contained in the Alliance Bancorp Financials
have been, and will be, established in accordance with the requirements of GAAP
and all applicable regulatory criteria. Alliance Bancorp Disclosure Schedule
4.15 sets forth all loans that are classified by Alliance Bancorp or federal
bank regulatory or supervisory authority as "Special Mention," "Substandard,"
"Doubtful," "Loss" or "Classified," together with the aggregate principal amount
of and accrued and unpaid interest on such loans, by category.
Section 4.16. Brokers, Finders and Financial Advisors. Except for Alliance
Bancorp's engagement of Friedman, Billings, Ramsey & Co. Inc. ("FBR") in
connection with transactions contemplated by this Agreement, neither Alliance
Bancorp nor any Alliance Bancorp Subsidiary, nor any of their respective
officers, directors, employees or agents, has employed any broker, finder or
financial advisor in connection with the transactions contemplated by this
Agreement or the Plan of Merger, or, except for its commitments disclosed in
Alliance Bancorp Disclosure Schedule 4.16, incurred any liability or commitment
for any fees or commissions to any such person in connection with the
transactions contemplated by this Agreement or the Plan of Merger, which has not
been reflected in the Alliance Bancorp Financials.
Section 4.17. Loans. Each loan reflected as an asset in the Alliance
Bancorp Financial Statements (i) is evidenced by notes, agreements or other
evidences of indebtedness which are true, genuine and correct (ii) to the extent
secured, has been secured by valid liens and security interests which have been
perfected, and (iii) is the legal, valid and binding obligation of the obligor
named therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles, in
each case other than loans as to which the failure to satisfy the foregoing
standards would not have a Material Adverse Effect on Alliance Bancorp. All
loan transactions with Affiliates (a) were made in the ordinary course of
business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other Persons, and (c) did not involve more than the normal
risk of collectability or present other unfavorable features.
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Section 4.18. Antitakeover Provisions Inapplicable. Except as set forth on
Alliance Bancorp Disclosure Schedule 4.18, the transactions contemplated by this
Agreement are not subject to any applicable state takeover law.
Section 4.19. Fairness Opinion. Alliance Bancorp has received a written
opinion from FBR to the effect that, subject to the terms, conditions and
qualifications set forth therein, as of the date thereof, the Exchange Ratio is
fair to Alliance Bancorp stockholders from a financial point of view. Such
opinion has not been amended or rescinded as of the date of this Agreement.
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01. Conduct of SWB's Business.
(a) From the date of this Agreement to the Closing Date, SWB and Southwest
Federal will conduct their business and engage in transactions, including
extensions of credit, only in the ordinary course and consistent with past
practice and policies, except as otherwise required or contemplated by this
Agreement or with the written consent of Alliance Bancorp. SWB and Southwest
Federal will use its reasonable good faith efforts, to (i) preserve their
business organizations intact, (ii) maintain good relationships with employees,
and (iii) preserve for themselves the good will of their customers and others
with whom business relationships exist. From the date hereof to the Closing
Date, except as otherwise consented to or approved by Alliance Bancorp in
writing or as contemplated or required by this Agreement, SWB will not, and SWB
will not permit any SWB Subsidiary to:
(i) amend or change any provision of its certificate of incorporation,
charter, or bylaws;
(ii) change the number of authorized or issued shares of its capital stock
or issue or grant any Right or agreement of any character relating to its
authorized or issued capital stock or any securities convertible into shares of
such stock, or split, combine or reclassify any shares of capital stock, or
declare, set aside or pay any dividend or other distribution in respect of
capital stock, other than the quarterly cash dividend of $0.20 per share, or
redeem or otherwise acquire any shares of capital stock, except that (A) SWB may
issue shares of SWB Common Stock upon the valid exercise, in accordance with the
information set forth in SWB Disclosure Schedule 3.02, of presently outstanding
options to acquire SWB Common Stock under the SWB Stock Option Plans. After the
dividend paid by SWB in the first calendar quarter in 1998, if requested by
Alliance Bancorp, the Board of Directors of SWB shall promptly cause its regular
quarterly dividend record dates and payment dates to be the same as Alliance
Bancorp's regular quarterly dividend record dates and payment dates for Alliance
Bancorp Common Stock, and SWB shall not change its regular dividend payment
dates and record dates without the prior written consent of Alliance Bancorp.
Nothing contained in this Section 5.01(ii) or in any other Section of this
Agreement shall be construed to permit SWB stockholders to receive two cash
dividends in any quarter;
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(iii) except pursuant to the arrangements set forth in SWB Disclosure
Schedule 5.01, grant any severance or termination pay (other than pursuant to
written policies or written agreements of SWB in effect on the date hereof and
provided to Alliance Bancorp prior to the date hereof) to, or enter into any new
or amend any existing employment agreement with, or increase the compensation of
(except for normal increases in the ordinary course of business consistent in
timing and amount with past practice), any employee, officer or director of SWB
or any SWB Subsidiary;
(iv) merge or consolidate SWB or any SWB Subsidiary with any other
corporation; sell or lease all or any substantial portion of the assets or
business of SWB or any SWB Subsidiary; make any acquisition of all or any
substantial portion of the business or assets of any other person, firm,
association, corporation or business organization other than in connection with
foreclosures, settlements in lieu of foreclosure, troubled loan or debt
restructuring, or the collection of any loan or credit arrangement between SWB,
or any SWB Subsidiary, and any other person; enter into a purchase and
assumption transaction with respect to deposits and liabilities; permit the
revocation or surrender by any SWB Subsidiary of its certificate of authority to
maintain, or file an application for the relocation of, any existing branch
office, or file an application for a certificate of authority to establish a new
branch office;
(v) sell or otherwise dispose of the capital stock of SWB or sell or
otherwise dispose of any asset of SWB or of any SWB Subsidiary other than in the
ordinary course of business consistent with past practice; subject any asset of
SWB or of any SWB Subsidiary to a lien, pledge, security interest or other
encumbrance (other than in connection with deposits, repurchase agreements, SWB
acceptances, advances from the Federal Home Loan Bank of Chicago, "treasury tax
and loan" accounts established in the ordinary course of business and
transactions in "federal funds" and the satisfaction of legal requirements in
the exercise of trust powers) other than in the ordinary course of business
consistent with past practice; incur any indebtedness for borrowed money (or
guarantee any indebtedness for borrowed money), except in the ordinary course of
business consistent with past practice;
(vi) take any action which would result in any of the representations and
warranties of SWB set forth in this Agreement becoming untrue as of any date
after the date hereof or in any of the conditions set forth in Article VI hereof
not being satisfied, except in each case as may be required by applicable law;
(vii) change any method, practice or principle of accounting, except as
may be required from time to time by GAAP (without regard to any optional early
adoption date) or any Regulatory Authority responsible for regulating SWB or
Southwest Federal;
(viii) waive, release, grant or transfer any material rights of value or
modify or change in any material respect any existing material agreement or
indebtedness to which SWB or any SWB Subsidiary is a party, other than in the
ordinary course of business, consistent with past practice;
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(ix) implement any pension, retirement, profit sharing, bonus, welfare
benefit or similar plan or arrangement that was not in effect on the date of
this Agreement, or materially amend any existing plan or arrangement except to
the extent such amendments do not result in an increase in cost; contribute to
any pension, retirement, profit sharing, bonus, welfare benefit or similar plan
or arrangement other than in amounts and in a manner consistent with past
practice;
(x) purchase any security for its investment portfolio not rated "A" or
higher by either Standard & Poor's Corporation or Moody's Investor Services,
Inc.;
(xi) fail to review with a representative of Alliance Bancorp on a
regular basis proposed loans or other credit facility commitments (including
without limitation, lines of credit and letters of credit, but excluding loans
to be secured by mortgages on one- to four-family residential real estate) to
any borrower or group of affiliated borrowers in excess of $1,000,000, or any
increase, compromise, extension, renewal or modification of any existing loan or
commitment outstanding in excess of $1,000,000;
(xii) except as set forth on the SWB Disclosure Schedule 5.01(a)(xii),
enter into, renew, extend or modify any other transaction with any Affiliate;
(xiii) enter into any interest rate swap or similar commitment,
agreement or arrangement;
(xiv) except for the execution of this Agreement, take any action that
would give rise to a right of payment to any individual under any employment
agreement;
(xv) intentionally and knowingly take any action that would preclude
satisfaction of the condition to closing contained in Section 6.02(k) relating
to financial accounting treatment of the Merger;
(xvi) change its lending, investment, asset/liability management or other
material banking policies in any material respect except as may be required by
changes in applicable law or regulations or in response to examination comments
by a Regulatory Authority;
(xvii) enter into any new joint venture or partnership agreement or any
new land acquisition or real estate development project, or increase the amount
of credit that SWB or any SWB Subsidiary is committed to extend to any joint
venture or partnership in connection with land acquisition or real estate
development activities; or
(xviii) agree to do any of the foregoing.
For purposes of this Section 5.01, unless provided for in a business plan,
budget or similar document delivered to Alliance Bancorp prior to the date of
this Agreement, it shall not be considered in the ordinary course of business
for SWB or any SWB Subsidiary to do any of the following: (i) make any capital
expenditure of $50,000 or more not disclosed on SWB Disclosure
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Schedule 5.01, without the prior written consent of Alliance Bancorp; (ii)
except as set forth in SWB Disclosure Schedule 5.01, make any sale, assignment,
transfer, pledge, hypothecation or other disposition of any assets having a book
or market value, whichever is greater, in the aggregate in excess of $1,000,000,
other than pledges of assets to secure government deposits, to exercise trust
powers, sales of assets received in satisfaction of debts previously contracted
in the normal course of business, issuance of loans, sales of previously
purchased government guaranteed loans, or transactions in the investment
securities portfolio by SWB or a SWB Subsidiary or repurchase agreements made,
in each case, in the ordinary course of business; or (iii) undertake or enter
any lease, contract or other commitment for its account, other than in the
normal course of providing credit to customers as part of its banking business,
involving a payment by SWB or any SWB Subsidiary of more than $50,000 annually,
or containing a material financial commitment and extending beyond 12 months
from the date hereof.
Section 5.02. Access; Confidentiality.
(a) From the date of this Agreement through the Closing Date, SWB or
Alliance Bancorp, as the case may be, shall afford to, and shall cause each SWB
Subsidiary or Alliance Bancorp Subsidiary to afford to, the other party and its
authorized agents and representatives, access to their respective properties,
assets, books and records and personnel, during normal business hours and after
reasonable notice; and the officers of SWB and Alliance Bancorp will furnish any
person making such investigation on behalf of the other party with such
financial and operating data and other information with respect to the
businesses, properties, assets, books and records and personnel as the person
making such investigation shall from time to time reasonably request. None of
the parties or their respective subsidiaries shall be required to provide access
to or to disclose information where such access or disclosure would violate or
prejudice the rights of their respective customers, jeopardize the attorney-
client privilege of the institution or company in possession or control of such
information or contravene any law, rule, regulation, order, judgment, decree,
fiduciary duty 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. The parties will hold all such information delivered in
confidence to the extent required by, and in accordance with, the provisions of
the confidentiality agreement, dated December 4, 1997, among SWB and Alliance
Bancorp (the "Confidentiality Agreement").
(b) SWB and Alliance Bancorp each agree to conduct such investigation and
discussions hereunder in a manner so as not to interfere unreasonably with
normal operations and customer and employee relationships of the other party.
(c) In addition to the access permitted by subparagraph (a) above, from
the date of this Agreement through the Closing Date, SWB shall permit employees
of Alliance Bancorp reasonable access to information relating to problem loans,
loan restructurings and loan work-outs of SWB.
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(d) If the transactions contemplated by this Agreement shall not be
consummated, SWB and Alliance Bancorp will each destroy or return all documents
and records obtained from the other party or its representatives, during the
course of its investigation and will cause all information with respect to the
other party obtained pursuant to this Agreement or preliminarily thereto to be
kept confidential, except to the extent such information becomes public through
no fault of the party to whom the information was provided or any of its
representatives or agents and except to the extent disclosure of any such
information is legally required. SWB and Alliance Bancorp shall each give prompt
written notice to the other party of any contemplated disclosure where such
disclosure is so legally required.
Section 5.03. Regulatory Matters and Consents.
(a) Alliance Bancorp and Liberty Federal will prepare all Applications and
make all filings for, and use their best efforts to obtain as promptly as
practicable after the date hereof, all necessary permits, consents, approvals,
waivers and authorizations of all Regulatory Authorities necessary or advisable
to consummate the transactions contemplated by this Agreement.
(b) SWB will furnish Alliance Bancorp with all information concerning SWB
and SWB Subsidiaries as may be necessary or advisable in connection with any
Application or filing made by or on behalf of Alliance Bancorp to any Regulatory
Authority in connection with the transactions contemplated by this Agreement.
(c) Alliance Bancorp and SWB will promptly furnish each other with copies
of all material written communications to, or received by them from any
Regulatory Authority in respect of the transactions contemplated hereby, except
information which is filed by either party which is designated as confidential.
(d) The parties hereto agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and authorizations
of all third parties and Regulatory Authorities. Alliance Bancorp will furnish
SWB with (i) copies of all Applications prior to filing with any Regulatory
Authority and provide SWB a reasonable opportunity to provide changes to such
Applications,, (ii) copies of all Applications filed by Alliance Bancorp and
(iii) copies of all documents filed by Alliance Bancorp under the Securities
Exchange Act of 1934, as amended.
(e) SWB will cooperate with Alliance Bancorp in the foregoing matters and
will furnish Alliance Bancorp with all information concerning SWB and SWB
Subsidiaries as may be necessary or advisable in connection with any Application
or filing (including the Registration Statement and any report filed with the
SEC) made by or on behalf of Alliance Bancorp to any Regulatory Authority in
connection with the transactions contemplated by this Agreement, and such
information will be accurate and complete in all material respects. In
connection therewith, SWB will provide certificates and other documents
reasonably requested by Alliance Bancorp.
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Section 5.04. Taking of Necessary Action.
(a) Alliance Bancorp and SWB shall each use its best efforts in good
faith, and each of them shall cause its Subsidiaries to use their best efforts
in good faith, to (i) furnish such information as may be required in connection
with the preparation of the documents referred to in Section 5.03 of this
Agreement, and (ii) take or cause to be taken all action necessary or desirable
on its part using its best efforts so as to permit completion of the Merger
including, without limitation, (A) obtaining the consent or approval of each
individual, partnership, corporation, association or other business or
professional entity whose consent or approval is required or desirable for
consummation of the transactions contemplated hereby (including assignment of
leases without any change in terms), provided that neither SWB nor any SWB
Subsidiary shall agree to make any payments or modifications to agreements in
connection therewith without the prior written consent of Alliance Bancorp, and
(B) requesting the delivery of appropriate opinions, consents and letters from
its counsel and independent auditors. No party hereto shall take, or cause, or
to the best of its ability permit to be taken, any action that would
substantially impair the prospects of completing the Merger pursuant to this
Agreement and the Plan of Merger; provided that nothing herein contained shall
preclude Alliance Bancorp or SWB from exercising its rights under this Agreement
or the Option Agreement.
(b) Alliance Bancorp shall prepare, subject to the review and consent of
SWB with respect to matters relating to SWB and the transactions contemplated by
this Agreement, a Prospectus/Proxy Statement on Form S-4 to be filed by Alliance
Bancorp with the SEC and to be mailed to the shareholders of SWB and Alliance
Bancorp in connection with the meetings of their respective shareholders and
transactions contemplated hereby, which Prospectus/Proxy statement shall conform
to all applicable legal requirements. The parties shall cooperate with each
other with respect to the preparation of the Prospectus/Proxy Statement.
Alliance Bancorp shall, as promptly as practicable following the preparation
thereof, file the Registration Statement with the SEC and SWB and Alliance
Bancorp shall use all reasonable efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing. Alliance Bancorp will advise SWB, promptly after Alliance Bancorp
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order or the suspension of the qualification of the shares of capital stock
issuable pursuant to the Registration Statement, or the initiation or threat of
any proceeding for any such purpose, or of any request by the SEC for the
amendment or supplement of the Registration Statement or for additional
information. Alliance Bancorp shall use its best efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state securities
laws or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement. Alliance Bancorp will provide SWB with as many
copies of such Registration Statement and all amendments thereto promptly upon
the filing thereof as SWB may reasonably request.
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Section 5.05. Certain Agreements.
(a) From and after the Company Merger Effective Date through the sixth
anniversary thereof, Alliance Bancorp agrees to indemnify, defend and hold
harmless each present and former director and officer of SWB and its
Subsidiaries determined as of the Closing Date (the "Indemnified Parties")
-------------------
against all losses, claims, damages, costs, expenses (including reasonable
attorneys' fees and expenses), liabilities, judgments or amounts paid in
settlement (with the approval of Alliance Bancorp, which approval shall not be
unreasonably withheld) or in connection with any claim, action, suit, proceeding
or investigation arising out of matters existing or occurring at or prior to the
Company Merger Effective Date (a "Claim") in which an Indemnified Party is, or
-----
is threatened to be made, a party or a witness based in whole or in part on, or
arising in whole or in part out of, the fact that such person is or was a
director or officer of SWB or any of its subsidiaries, regardless of whether
such Claim is asserted or claimed prior to, at or after the Closing Date, to the
fullest extent to which directors and officers of SWB are entitled under the
DGCL, SWB's certificate of incorporation and bylaws, or other applicable law as
in effect on the date hereof (and Alliance Bancorp shall pay expenses in advance
of the final disposition of any such action or proceeding to each Indemnified
Party to the extent permissible to a Delaware corporation under the DGCL and
SWB's certificate of incorporation and bylaws as in effect on the date hereof;
provided, that the person to whom expenses are advanced provides an undertaking
- --------
to repay such expenses if it is ultimately determined that such person is not
entitled to indemnification). All rights to indemnification in respect of a
Claim asserted or made within the period described in the preceding sentence
shall continue until the final disposition of such Claim.
(b) Any Indemnified Party wishing to claim indemnification under Section
5.05(a), upon learning of any Claim, shall promptly notify Alliance Bancorp, but
the failure to so notify shall not relieve Alliance Bancorp of any liability it
may have to such Indemnified Party except to the extent that such failure
materially prejudices Alliance Bancorp. In the event of any Claim, (1) Alliance
Bancorp shall have the right to assume the defense thereof (with counsel
reasonably satisfactory to the Indemnified Party) and shall not be liable to
such Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that, if Alliance Bancorp elects not to assume such
defense or counsel for the Indemnified Parties advises that there are issues
which raise conflicts of interest between Alliance Bancorp and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
Alliance Bancorp shall pay all reasonable fees and expenses of such counsel for
the Indemnified Parties promptly as statements therefor are received, provided
further that Alliance Bancorp shall in all cases be obligated pursuant to this
paragraph to pay for only one firm of counsel for all Indemnified Parties, (2)
the Indemnified Parties will cooperate in the defense of any such Claim and (3)
Alliance Bancorp shall not be liable for any settlement effected without its
prior written consent (which consent shall not unreasonably be withheld).
(c) Alliance Bancorp shall use its best efforts to cause the persons
serving as officers and directors of SWB immediately prior to the Company Merger
Effective Date to be covered for a period of six years from the Company Merger
Effective Date by the directors' and officers' liability
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insurance policy maintained by SWB (provided that Alliance Bancorp may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than such
policy) with respect to acts or omissions occurring prior to the Company Merger
Effective Date which were committed by such officers and directors in their
capacity as such.
(d) In the event Alliance Bancorp or any of is successors or assigns (1)
consolidates with or merges into any other Person and shall not continue or
survive such consolidation or merger, or (2) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary, proper provision shall be made so that the
successors and assigns of Alliance Bancorp assume the obligations set forth in
this Section 5.05.
(e) The provisions of this Section 5.05 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
(f) Alliance Bancorp agrees to honor and Alliance Bancorp agrees to cause
Liberty Federal to honor all terms and conditions of the existing employment
agreement disclosed in the SWB Disclosure Schedules. Except as otherwise
provided herein, and unless otherwise agreed to in writing by the affected
officer and employee, Alliance Bancorp agrees for itself and the Alliance
Bancorp Subsidiaries that the consummation of the transactions contemplated
hereby is a "Change in Control" as defined in the employment agreement entered
into by SWB.
Section 5.06. No Other Bids and Related Matters. SWB will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal (as hereinafter defined), will enforce any confidentiality
agreements and will take the necessary steps to inform the appropriate
individuals or entities referred to in the first sentence of this Section 5.06
of the obligations undertaken in this Section 5.06. SWB agrees that neither SWB
nor any of its Subsidiaries shall, and that SWB and its Subsidiaries shall
direct and use all reasonable efforts to cause their respective directors,
officers, employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by it or any of its
subsidiaries) not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer with
respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any substantial part of the assets or any
equity securities of, SWB or any of its Subsidiaries (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal") or engage in any
--------------------
discussions or negotiations with, or provide any confidential information or
data to, any Person relating to an Acquisition Proposal. Nothing contained in
this Section 5.06 shall be deemed to prohibit SWB from taking or disclosing to
shareholders any position necessary in order to comply with the filing and
disclosure requirements of Section 14(d) of the Exchange Act and the related
rules and regulations of the SEC.
Section 5.07. Duty to Advise; Duty to Update SWB's Disclosure Schedule.
SWB shall promptly advise Alliance Bancorp of any change or event having a
Material Adverse Effect on it or on any SWB Subsidiary or which it believes
would or would be reasonably likely to cause or
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constitute a material breach of any of its representations, warranties or
covenants set forth herein. SWB shall update SWB's Disclosure Schedule as
promptly as practicable after the occurrence of an event or fact which, if such
event or fact had occurred prior to the date of this Agreement, would have been
disclosed in the SWB Disclosure Schedule. The delivery of such updated Schedule
shall not relieve SWB from any breach or violation of this Agreement and shall
not have any effect for the purposes of determining the satisfaction of the
condition set forth in Sections 6.02(c) hereof.
Section 5.08. Conduct of Alliance Bancorp's Business.
(a) From the date of this Agreement to the Closing Date, Alliance Bancorp
will use its best efforts to (x) preserve its business organizations intact, (y)
maintain good relationships with employees, and (z) preserve for itself the
goodwill of customers of Liberty Federal. From the date of this Agreement to the
Closing Date, neither Alliance Bancorp nor Liberty Federal will (i) amend its
certificate of incorporation, charter or bylaws in any manner inconsistent with
the prompt and timely consummation of the transactions contemplated by this
Agreement, (ii) issue any equity securities except in connection with the
exercise of any employee or director stock options, (iii) take any action which
would result in any of the representations and warranties of Alliance Bancorp or
Liberty Federal set forth in this Agreement becoming untrue as of any date after
the date hereof or in any of the conditions set forth in Article VI hereof not
being satisfied, except in each case as may be required by applicable law, (iv)
intentionally and knowingly take any action that would preclude satisfaction of
the condition to closing contained in Section 6.01(n) and 6.02(k) relating to
financial accounting treatment of the Merger; or (v) agree to do any of the
foregoing. At the Alliance Bancorp Stockholders' Meeting to be held to obtain
stockholder approval of this Agreement, Alliance Bancorp shall also submit for
stockholder approval an amendment to its certificate of incorporation increasing
the number of authorized shares of all classes of stock to no less than 16.5
million shares and the number of authorized shares of common stock to no less
than 15 million shares.
(b) From the date of this Agreement through the Closing Date, Alliance
Bancorp will not, nor will it permit Liberty Federal to, make or undertake any
acquisition of any company or business that could jeopardize the receipt of the
approval of any Regulatory Authority or materially delay the consummation of the
Merger or the Subsidiary Merger, unless the prior written consent of SWB is
obtained.
Section 5.09. Board and Committee Minutes. Alliance Bancorp and SWB shall
each provide to the other, within thirty (30) days after any meeting of their
respective Board of Directors, or any committee thereof, or any senior
management committee, a copy of the minutes of such meeting, except that with
respect to any meeting held within thirty (30) days of the Closing Date, such
minutes shall be provided to each party prior to the Closing Date.
Section 5.10. Undertakings by Alliance Bancorp and SWB.
(a) From and after the date of this Agreement:
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(i) Voting by Directors. Alliance Bancorp and SWB shall recommend
to all members of their respective Board of Directors to vote all shares of SWB
Common Stock, or Alliance Bancorp Common Stock, as the case may be, beneficially
owned by each such director in favor of this Agreement. As promptly as
practicable following execution of this Agreement, Alliance Bancorp's Directors
shall enter into the agreement set forth as Exhibit B to this Agreement;
(ii) Proxy Solicitor. Alliance Bancorp and SWB shall each retain a
proxy solicitor in connection with the solicitation of shareholder approval of
this Agreement;
(iii) Timely Review. If requested by Alliance Bancorp at Alliance
Bancorp's sole expense, SWB shall cause its independent certified public
accountants to perform a review of its unaudited consolidated financial
statements as of the end of any calendar quarter, in accordance with Statement
of Auditing Standards No. 36, and to issue their report on such financial
statements as soon as is practicable thereafter;
(iv) Outside Service Bureau Contracts. If requested to do so by
Alliance Bancorp, SWB shall use its best efforts to obtain an extension of any
contract with an outside service bureau or other vendor of services to SWB, on
terms and conditions mutually acceptable to SWB and Alliance Bancorp;
(v) Board Meetings. SWB shall respond reasonably and in good faith
to any request of Alliance Bancorp to permit a representative of Alliance
Bancorp, who is reasonably acceptable to SWB, to attend any meeting of SWB's
Board of Directors or the Executive Committee thereof;
(vi) List of Nonperforming Assets. SWB and Alliance Bancorp shall
provide the other, within ten (10) days of the end of each calendar month, a
written list of nonperforming assets (the term "nonperforming assets," for
purposes of this subsection, means (i) loans that are "troubled debt
restructuring" as defined in Statement of Financial Accounting Standards No. 15,
"Accounting by Debtors and Creditors for Troubled Debt Restructuring," (ii)
loans on nonaccrual, (iii) real estate owned, (iv) all loans ninety (90) days or
more past due) as of the end of such month and (iv) and impaired loans; and
(vii) Reserves and Merger-Related Costs. On or before the Effective
Date, SWB shall establish such additional accruals and reserves as may be
necessary to conform the accounting reserve practices and methods (including
credit loss practices and methods) of SWB to those of Alliance Bancorp (as such
practices and methods are to be applied to SWB from and after the Closing Date)
and Alliance Bancorp's plans with respect to the conduct of the business of SWB
following the Merger and otherwise to reflect Merger-related expenses and costs
incurred by SWB, provided, however, that SWB shall not be required to take such
action unless Alliance Bancorp agrees in writing that all conditions to closing
set forth in Section 6.02 have been satisfied or waived (except for the
expiration of any applicable waiting periods); prior to the delivery by Alliance
Bancorp of the writing referred to in the preceding clause, SWB shall provide
Alliance Bancorp a
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written statement, certified without personal liability by the chief executive
officer of SWB and dated the date of such writing, that the representation made
in Section 3.15 hereof is true as of such date or, alternatively, setting forth
in detail the circumstances that prevent such representation from being true as
of such date; and no accrual or reserve made by SWB or any SWB Subsidiary
pursuant to this subsection, or any litigation or regulatory proceeding arising
out of any such accrual or reserve, shall constitute or be deemed to be a breach
or violation of any representation, warranty, covenant, condition or other
provision of this Agreement or to constitute a termination event within the
meaning of Section 7.01(b) hereof.
(b) From and after the date of this Agreement, Alliance Bancorp and SWB
shall each:
(i) Shareholders Meetings. Submit this Agreement to its shareholders
for approval at a meeting to be held as soon as practicable, and have their
Boards of Director recommend approval of this Agreement to their respective
shareholders;
(ii) Filings and Approvals. Cooperate with the other in the
preparation and filing, as soon as practicable, of (A) the Applications, (B) the
Registration Statement and related filings under state securities laws covering
the Alliance Bancorp Common Stock to be issued pursuant to the Merger, (C) all
other documents necessary to obtain any other approvals and consents required to
effect the completion of the Merger, and (D) all other documents contemplated by
this Agreement;
(iii) Identification of SWB's Affiliates. Cooperate with the other and
use its best efforts to identify those persons who may be deemed to be
Affiliates of SWB;
(iv) Public Announcements. Cooperate and cause its respective
officers, directors, employees and agents to cooperate in good faith, consistent
with their respective legal obligations, in the preparation and distribution of,
and agree upon the form and substance of, any press release related to this
Agreement and the transactions contemplated hereby, and any other public
disclosures related thereto, including without limitation communications to SWB
shareholders, SWB's internal announcements and customer disclosures, but nothing
contained herein shall prohibit either party from making any disclosure which
its counsel deems necessary, provided that the disclosing party notifies the
other party reasonably in advance of the timing and contents of such disclosure;
(v) Maintenance of Insurance. Maintain, and cause their respective
Subsidiaries to maintain, insurance in such amounts as are reasonable to cover
such risks as are customary in relation to the character and location of its
properties and the nature of its business;
(vi) Maintenance of Books and Records. Maintain, and cause their
respective Subsidiaries to maintain, books of account and records in accordance
with generally accepted accounting principles applied on a basis consistent with
those principles used in preparing the financial statements heretofore
delivered;
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(vii) Delivery of Securities Documents. Deliver to the other, copies
of all Securities Documents simultaneously with the filing thereof;
(viii) Taxes. File all federal, state, and local tax returns required
to be filed by them or their respective Subsidiaries on or before the date such
returns are due (including any extensions) and pay all taxes shown to be due on
such returns on or before the date such payment is due; or
(ix) Pooling of Interest. Prior to the Company Merger Effective
Date, Alliance Bancorp and SWB will use their best efforts to cure any action
previously taken that would prevent Alliance Bancorp from accounting for the
Company Merger as a "pooling of interest," including cooperating in a private
placement, to take place immediately prior to Closing, of shares of SWB Common
Stock.
Section 5.11. Employee and Termination Benefits; Directors and Management.
(a) Employee Benefits. On and after the Company Merger Effective Date, the
employee pension and welfare benefit plans of Alliance Bancorp and SWB may, at
Alliance Bancorp's election and subject to the requirements of the IRC, continue
to be maintained separately or consolidated, or terminated; provided, however,
that Alliance Bancorp may not terminate the Southwest Federal Supplemental
Executive Retirement Plan in any matter by which the participant of such plan
would not be permitted to continue to receive payments thereunder on a monthly
basis, without the consent of any affected individual. In the event of a
consolidation of any or all of such plans or in the event of termination of the
SWB benefit plans, SWB and SWB employees shall receive credit for service with
SWB under any Alliance Bancorp benefit plan, or new Alliance Bancorp benefit
plan in which such employees would be eligible to enroll for purposes of
eligibility and vesting determination (but not for benefit accrual purposes).
Alliance Bancorp and/or Liberty Federal shall make available to SWB employees
who become employed by Alliance Bancorp or an Alliance Bancorp subsidiary,
employer-provided health coverage on the same basis as it provides such coverage
to Alliance Bancorp or Liberty Federal employees. In the event of any
termination of or consolidation of any SWB health plan with any Alliance Bancorp
health plan, all employees of SWB who become full-time employees of Alliance
Bancorp or Liberty Federal, who were eligible for continued coverage under the
terminated or consolidated plan shall have immediate coverage of any pre-
existing condition. In the event of a termination or consolidation of any SWB
health plan, terminated SWB employees and qualified beneficiaries or retained
SWB employees who do not satisfy the Alliance Bancorp conditions for employer-
provided coverage, will have the right to continue coverage under group health
plans of Alliance Bancorp and/or Alliance Bancorp subsidiaries in accordance
with IRC Section 4980B(f).
(b) After the Company Merger Effective Date, any former employees of SWB
or any SWB Subsidiary whose employment is terminated, other than for cause,
shall be provided with severance benefits in accordance with the Liberty Federal
severance plan in effect on the date hereof, a copy of which plan has been
provided to SWB.
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(c) Alliance Bancorp shall cause its Board of Directors to be expanded by
one member and shall appoint Richard E. Webber (such person, and any substitute
person as provided in the last sentence of this paragraph, the "Nominee") to
Alliance Bancorp's Board of Directors immediately following the Company Merger
Effective Date. Mr. Webber shall be elected to a class of directors which
provides for no less than a two-year term following the Company Merger Effective
Date. Alliance Bancorp shall include the Nominee on the list of nominees for
directors presented by the Board of Directors of Alliance Bancorp and for which
said Board shall solicit proxies at the annual meeting of shareholders of
Alliance Bancorp following the Company Merger Effective Date at which directors
of Alliance Bancorp are elected for such class. In the event that the Nominee
is unable to serve as a director of Alliance Bancorp as a result of illness,
death, resignation or any other reason, such Nominee (or in the event of the
death of nominee, the other Nominee) shall select a substitute nominee to serve
as a member of the Board of Directors of Alliance Bancorp, subject to the
approval of Alliance Bancorp, which shall not be unreasonably withheld and in
accordance with the Alliance Bancorp's By-laws. The provisions of this Section
5.11(c) are intended to be for the benefit of, and shall be enforceable by, the
Nominee.
(d) At the Company Merger Effective Date, Liberty Federal shall establish
an advisory board of directors, which shall be comprised of those members of the
Southwest Federal's Board of Directors set forth in Section 5.11(d) of the
Company Disclosure Schedule. Such advisory board shall meet at such times (not
less than quarterly) and at such places as Liberty Federal shall determine. Each
advisory board member shall receive an annual retainer of $4,500 payable
quarterly or monthly, and a fee of $375 per monthly meeting (the Chairman of the
Advisory Board shall receive a fee of $575 per meeting). The provisions of this
Section 5.11(d) are intended to be for the benefit of, and shall be enforceable
by, each member of such advisory board.
(e) At the Company Merger Effective Date, Alliance Bancorp shall enter
into a consultation agreement in the form attached hereto as Exhibit 5.11.
Section 5.12. Duty to Advise; Duty to Update Alliance Bancorp's Disclosure
Schedule. Alliance Bancorp shall promptly advise SWB of any change or event
having a Material Adverse Effect on it or on any Alliance Bancorp Subsidiary or
which it believes would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties or covenants set forth
herein. Alliance Bancorp shall update Alliance Bancorp's Disclosure Schedules as
promptly as practicable after the occurrence of an event or fact which, if such
event or fact had occurred prior to the date of this Agreement, would have been
disclosed in the Alliance Bancorp Disclosure Schedule. The delivery of such
updated Schedule shall not relieve Alliance Bancorp from any breach or violation
of this Agreement and shall not have any effect for the purposes of determining
the satisfaction of the condition set forth in Sections 5.01(c) hereof.
Section 5.13. Affiliate Letter. No later than five days after the date of
this Agreement, SWB shall use its best efforts to cause to be delivered to
Alliance Bancorp the Letter Agreement attached hereto as Exhibit 1, executed by
each director and executive officer of SWB.
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ARTICLE VI
CONDITIONS
Section 6.01. Conditions to SWB's Obligations under this Agreement. The
obligations of SWB hereunder shall be subject to satisfaction at or prior to the
Closing Date of each of the following conditions, unless waived by SWB pursuant
to Section 7.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on the
part of, Alliance Bancorp and Liberty Federal to authorize the execution,
delivery and performance of this Agreement and the Plan of Merger, respectively,
and the consummation of the transactions contemplated by this Agreement and the
Plan of Merger, shall have been duly and validly taken by Alliance Bancorp and
Liberty Federal; and SWB shall have received certified copies of the resolutions
evidencing such authorizations;
(b) Covenants. The obligations and covenants of Alliance Bancorp required
by this Agreement to be performed by Alliance Bancorp at or prior to the Closing
Date shall have been duly performed and complied with in all respects, except
where the failure to perform or comply with any obligation or covenant would
not, either individually or in the aggregate, result in a Material Adverse
Effect with respect to Alliance Bancorp;
(c) Representations and Warranties. The representations and warranties of
Alliance Bancorp set forth in this Agreement shall be true and correct, as of
the date of this Agreement, and as of the Closing Date as though made on and as
of the Closing Date, except as to any representation or warranty (i) which
specifically relates to an earlier date or (ii) where the breach of the
representation or warranty would not, either individually or in the aggregate,
constitute a Material Adverse Effect with respect to Alliance Bancorp and
Liberty Federal;
(d) Approvals of Regulatory Authorities. Alliance Bancorp shall have
received all required approvals of Regulatory Authorities of the Merger (without
the imposition of any conditions that are in Alliance Bancorp's reasonable
judgement unduly burdensome) and delivered copies thereof to SWB; and all notice
and waiting periods required thereunder shall have expired or been terminated;
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since September 30, 1997, there shall not
have occurred any Material Adverse Effect with respect to Alliance Bancorp;
(g) Officer's Certificate. Alliance Bancorp shall have delivered to SWB a
certificate, dated the Closing Date and signed, without personal liability, by
its chairman of the board or
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president, to the effect that the conditions set forth in subsections (a)
through (f) of this Section 6.01 and Section 6.02(m) have been satisfied, to the
best knowledge of the officer executing the same;
(h) Opinion of Alliance Bancorp's Counsel. SWB shall have received an
opinion of Luse Lehman Gorman Pomerenk & Schick, P.C., counsel to Alliance
Bancorp, dated the Closing Date, in form and substance reasonably satisfactory
to SWB and its counsel to the effect set forth on Exhibit 6.1 attached hereto;
(i) Registration Statement. The Registration Statement shall be effective
under the Securities Act and no proceedings shall be pending or threatened by
the SEC to suspend the effectiveness of the Registration Statement; and all
required approvals by state securities or "blue sky" authorities with respect to
the transactions contemplated by this Agreement, shall have been obtained;
(j) Tax Opinion. SWB shall have received an opinion of Luse Lehman Gorman
Pomerenk & Schick, P.C. substantially to the effect set forth on Exhibit 6.2
attached hereto;
(k) Approval of SWB's Shareholders. This Agreement shall have been
approved by the shareholders of SWB by such vote as is required under applicable
Delaware law, SWB's certificate of incorporation and bylaws, and under Nasdaq
requirements applicable to it;
(l) Investment Banking Opinion. SWB shall have received the written
opinion from Baird on or before the date of this Agreement and updated in
writing as of a date within five (5) days of mailing the Prospectus/Proxy
Statement, to the effect that the Exchange Ratio is fair, from a financial point
of view, to such shareholders;
(m) Stock Exchange Listing. The shares of Alliance Bancorp Common Stock
which shall be issued to the shareholders of SWB upon consummation of the Merger
shall have been authorized for listing on the Nasdaq National Market System,
subject to official notice of issuance; and
(n) Pooling Letter. Alliance Bancorp shall have received an opinion from
KPMG Peat Marwick LLP to the effect that the Company Merger will be treated as a
"pooling of interest," as defined by GAAP, for financial accounting purposes.
Section 6.02. Conditions to Alliance Bancorp's Obligations under this
Agreement. The obligations of Alliance Bancorp hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Alliance Bancorp pursuant to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on the
part of, SWB and Southwest Federal to authorize the execution, delivery and
performance of this Agreement and the Plan of Merger, respectively, and the
consummation of the transactions contemplated by this Agreement and the Plan of
Merger, shall have been duly and validly taken by SWB and Southwest
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Federal; and Alliance Bancorp shall have received certified copies of the
resolutions evidencing such authorizations;
(b) Covenants. The obligations and covenants of SWB, required by this
Agreement to be performed by it at or prior to the Closing Date shall have been
duly performed and complied with in all respects, except where the failure to
perform or comply with any obligation or covenant would not, either individually
or in the aggregate, result in a Material Adverse Effect with respect to SWB;
(c) Representations and Warranties. The representations and warranties of
SWB set forth in this Agreement shall be true and correct as of the date of this
Agreement, and as of the Closing Date as though made on and as of the Closing
Date, except as to any representation or warranty (i) which specifically relates
to an earlier date or (ii) where the breach of the representation or warranty
would not, either individually or in the aggregate, result in a Material Adverse
Effect with respect to SWB;
(d) Approvals of Regulatory Authorities. Alliance Bancorp shall have
received all required approvals of Regulatory Authorities of the Merger (without
the imposition of any conditions that are in Alliance Bancorp's reasonable
judgement unduly burdensome) and delivered copies thereof to SWB; and all notice
and waiting periods required thereunder shall have expired or been terminated;
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since September 30, 1997, there shall not
have occurred any Material Adverse Effect with respect to SWB;
(g) Officer's Certificate. SWB shall have delivered to Alliance Bancorp a
certificate, dated the Closing Date and signed, without personal liability, by
its chairman of the board or president, to the effect that the conditions set
forth in subsections (a) through (f) of this Section 6.02 and Section 6.01(k)
have been satisfied, to the best knowledge of the officer executing the same;
(h) Opinions of SWB's Counsel. Alliance Bancorp shall have received an
opinion of Muldoon, Murphy & Faucette, counsel to SWB, dated the Closing Date,
in form and substance reasonably satisfactory to Alliance Bancorp and its
counsel to the effect set forth on Exhibit 6.3 attached hereto;
(i) Registration Statement. The Registration Statement shall be effective
under the Securities Act and no proceedings shall be pending or threatened by
the SEC to suspend the effectiveness of the Registration Statement; and all
required approvals by state securities or "blue sky" authorities with respect to
the transactions contemplated by this Agreement, shall have been obtained;
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(j) Tax Opinion. Alliance Bancorp shall have received an opinion of Luse
Lehman Gorman Pomerenk & Schick, P.C., its counsel, substantially to the effect
set forth on Exhibit 6.3 attached hereto;
(k) Pooling Letter. Alliance Bancorp shall have received (i) an opinion
from KPMG Peat Marwick LLP to the effect that the Company Merger will be treated
as a "pooling of interest," as defined by GAAP, for financial accounting
purposes and (ii) a letter, in a form satisfactory to KPMG Peat Marwick, LLP,
from SWB's independent auditor representing that they are not aware of any
transactions or of any events or circumstances that would preclude the Merger
from being treated as a "pooling of interest" for financial accounting purposes;
(l) Liquidation Account. Neither the Merger or consummation of the Plan of
Merger shall require Alliance Bancorp or SWB to distribute to depositors the
liquidation account established by Southwest Federal in connection with its
conversion from mutual to stock form;
(m) Approval of Alliance Bancorp's Shareholders. This Agreement shall have
been approved by the shareholders of Alliance Bancorp by such vote as is
required under applicable Delaware law, Alliance Bancorp's certificate of
incorporation and bylaws and under Nasdaq requirements applicable to it; and
(n) Investment Banking Opinion. Alliance Bancorp shall have received the
written opinion from FBR on or before the date of this Agreement and updated in
writing as of a date within five (5) days of mailing the Prospectus/Proxy
Statement to the effect that the Merger is fair to Alliance Bancorp.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination. This Agreement may be terminated on or at any
time prior to the Closing Date:
(a) By the mutual written consent of the parties hereto;
(b) By Alliance Bancorp or SWB:
(i) if there shall have been any breach of any representation,
warranty, covenant or other obligation of Alliance Bancorp which results in a
Material Adverse Effect with respect to Alliance Bancorp, on the one hand, or of
SWB which results in a Material Adverse Effect with respect to SWB, on the other
hand, and such breach cannot be, or shall not have been, remedied within 30 days
after receipt by such other party of notice in writing specifying the nature of
such breach and requesting that it be remedied;
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(ii) if the Closing Date shall not have occurred on or before
September 30, 1998, unless the failure of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform or observe
its agreements set forth in this Agreement required to be performed or observed
by such party on or before the Closing Date; or
(iii) if either party has been informed in writing by a Regulatory
Authority whose approval or consent has been requested that such approval or
consent is unlikely to be granted, unless the failure of such occurrence shall
be due to the failure of the party seeking to terminate this Agreement to
perform or observe its agreements set forth herein required to be performed or
observed by such party on or before the Closing Date; or
(iv) by either Alliance Bancorp or SWB if any approval of the
shareholders of Alliance Bancorp or SWB required for the consummation of the
Merger shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of shareholders or at any adjournment or
postponement thereof.
(c) By Alliance Bancorp by written notice to SWB within four days of the
Closing Date if the Alliance Bancorp Market Value shall be less than $19.875,
provided that Alliance Bancorp's determination to terminate this Agreement shall
be nullified if SWB provides written notice, within three days of the receipt of
notice provided to it by Alliance Bancorp, stating that it wants to proceed with
the Company Merger, in which event the Exchange Ratio shall be 1.3579.
Section 7.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 7.01 hereof, this Agreement shall forthwith become void
(other than Section 6.02(d), Section 6.10(b)(iii) and Section 8.01 hereof, which
shall remain in full force and effect), and there shall be no further liability
on the part of Alliance Bancorp or SWB to the other, except that no party shall
be relieved or released from any liabilities or damages arising out of its
willful breach of any provision of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Expenses. (a) Except for the cost of printing and mailing the
Proxy Statement/Prospectus which shall be shared equally, and except as provided
herein, each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated hereby, including fees and
expenses of its own financial consultants, accountants and counsel.
(b) In the event of any termination of this Agreement by a party pursuant
to Section 7.01(b)(i) hereof based on a breach of a representation or warranty,
or the breach of a covenant, by the other party hereto, the breaching party
shall pay to the non-breaching party all out-of-pocket costs and expenses,
including, without limitation, reasonable legal, accounting and investment
banking fees and expenses, incurred by the non-breaching party in connection
with entering into this
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Agreement and carrying out of any and all acts contemplated hereunder, plus a
sum equal to $500,000; provided, however, that this clause shall not be
construed to relieve or release a breaching party from any additional
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
Section 8.02. Non-Survival of Representations and Warranties. All
representations, warranties and, except to the extent specifically provided
otherwise herein, agreements and covenants, other than those covenants set forth
in Sections 6.05, and 6.11(a), (c), (d) and (e) which will survive the Merger,
shall terminate on the Closing Date.
Section 8.03. Amendment, Extension and Waiver. Subject to applicable law,
at any time prior to the consummation of the transactions contemplated by this
Agreement, the parties may (a) amend this Agreement, (b) extend the time for the
performance of any of the obligations or other acts of either party hereto, (c)
waive any inaccuracies in the representations and warranties contained herein or
in any document delivered pursuant hereto, or (d) waive compliance with any of
the agreements or conditions contained in Articles V and VI hereof or otherwise.
This Agreement may not be amended except by an instrument in writing authorized
by the respective Boards of Directors and signed, by duly authorized officers,
on behalf of the parties hereto. Any agreement on the part of a party hereto to
any extension or waiver shall be valid only if set forth in an instrument in
writing signed by a duly authorized officer on behalf of such party, but such
waiver or failure to insist on strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
Section 8.04. Entire Agreement. This Agreement, including the documents and
other writings referred to herein or delivered pursuant hereto, contains the
entire agreement and understanding of the parties with respect to its subject
matter. This Agreement supersedes all prior arrangements and understandings
between the parties, both written or oral with respect to its subject matter.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors; provided, however, that nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto and their respective successors, any rights, remedies,
obligations or liabilities other than pursuant to Sections 2.04, 2.05(g), 5.05,
and 5.11(a), (c) and (d), with respect to indemnification, employee benefits and
certain other matters, and provided, further, that any such rights, remedies,
obligations or liabilities conferred pursuant to Sections 5.11(b) and (d) shall
terminate and expire one (1) year from the Effective Date.
Section 8.05. No Assignment. Neither party hereto may assign any of its
rights or obligations hereunder to any other person, without the prior written
consent of the other party hereto.
Section 8.06. Notices. All notices or other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
prepaid registered or certified mail (return receipt requested), or sent by
telecopy, addressed as follows:
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(a) If to Alliance Bancorp, to:
Alliance Bancorp
One Grant Square
Hinsdale, Illinois 60522
Attention: Mr. Fredric G. Novy
Chairman of the Board
with a copy to: Luse Lehman Gorman Pomerenk & Schick, PC
5335 Wisconsin Avenue, NW
Washington, D.C. 20015
Attention: John J. Gorman, Esq.
Robert Lipsher, Esq.
(b) If to SWB, to:
Southwest Bancshares, Inc.
4062 Southwest Highway
Hometown, Illinois 60456
Attn: Richard E. Webber
President and Chief Financial Officer
with a copy to:
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attn: Mary M. Sjoquist, Esq.
Section 8.07. Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
Section 8.08. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
Section 8.09. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
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Section 8.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic internal law (including the law of
conflicts of law) of the State of Delaware.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
ALLIANCE BANCORP
By: /s/ Fredric G. Novy
----------------------------------
Fredric G. Novy
Chairman of the Board
SOUTHWEST BANCSHARES, INC.
By: /s/ Richard E. Webber
----------------------------------
Richard E. Webber
President and Chief Financial Officer
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EXHIBIT A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated December 16, 1997, between Alliance Bancorp,
a Delaware corporation ("Grantee") and Southwest Bancshares, Inc. ("Issuer"), a
Delaware corporation.
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated December 16, 1997 (the "Merger Agreement"), which agreement has
been executed by the parties hereto prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
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 297,471
fully paid and nonassessable shares of its common stock, par value $0.01 per
share ("Common Stock"), at a price of $25.50 per share (such price, as adjusted
if applicable, the "Option Price"); provided, however, that in the event Issuer
issues or agrees to issue any shares of Common Stock (other than as permitted
under the Merger Agreement) at a price less than $25.50 per share, such Option
Price shall be equal to such lesser price. The number of shares of 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 Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement), the number of shares of Common Stock subject
to the Option shall be increased so that, after such issuance, it equals 9.9% of
the number of shares of Common Stock then issued and outstanding, giving effect
to any shares subject or issued pursuant to the Option. Nothing contained in
this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The holder or holders of the Option (including Grantee or any
subsequent transferee(s)) (the "Holder") 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 that the Holder shall have sent the written notice of such
exercise (as provided in subsection (e) of this Section 2) within 180 days
following the first such Subsequent Triggering Event. Each of the following
shall be an Exercise Termination Event: (i) the Company Merger Effective Time
(as defined in the Merger Agreement); (ii) termination of the Merger Agreement
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accordance with the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event; or (iii) the passage of twelve months
after termination of the Merger Agreement if such termination follows or occurs
at the same time as the occurrence of an Initial Triggering Event.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, and the rules and regulations thereunder
(the "1934 Act")) other than Grantee or any of its Subsidiaries (each a
"Grantee Subsidiary"). For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the SEC) of Issuer, (y) a
purchase, lease or other acquisition of all or substantially all of the
assets of Issuer or any Significant Subsidiary of Issuer, or (z) a purchase
or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of beneficial ownership of securities representing
25% or more of the voting power of Issuer or any Significant Subsidiary of
Issuer, provided that the term "Acquisition Transaction" does not include
any internal merger or consolidation involving only Issuer and/or Issuer
Subsidiaries;
(ii)(A) Any person other than Grantee, or any Grantee Subsidiary, or
any Issuer Subsidiary acting in a fiduciary capacity (collectively,
"Excluded Persons"), alone or together with such person's affiliates and
associates (as such terms are defined in Rule 12b-2 under the 1934 Act)
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of 25% or more of the outstanding shares of Common Stock (the
term "beneficial ownership" for purposes of this Option Agreement having
the meaning assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder) or (B) any group (as such term is defined
in Section 13(d)(3) of the 1934 Act), other than a group of which only
Excluded Persons are members, shall have been formed that beneficially owns
25% or more of the shares of Common Stock then outstanding;
(iii) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its shareholders by public
announcement or written communication that is or becomes the subject of
public disclosure to (A) engage in an Acquisition Transaction or (B)
commence a tender or exchange offer the consummation of which would result
in such person acquiring beneficial ownership of securities representing
25% or more of Issuer's voting power;
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(iv) The Board of Directors of Issuer shall have failed to recommend
to its stockholders the adoption of the Merger Agreement or shall have
withdrawn, modified or changed its recommendation in a manner adverse to
Grantee;
(v) After a proposal is made by a third party (other than an Excluded
Person) to Issuer to engage in an Acquisition Transaction, Issuer shall
have intentionally and knowingly breached any representation, warranty,
covenant or agreement contained in the Merger Agreement and such breach (x)
would entitle Grantee to terminate the Merger Agreement pursuant to Section
7.01(b) therein (without regard to any grace period provided for therein)
and (y) shall not have been cured prior to the Notice Date (as defined
below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Office
of Thrift Supervision ("OTS") or other federal or state bank regulatory
authority, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person other than an Excluded Person of
beneficial ownership of 25% or more of the then outstanding Common Stock;
or
(ii) The occurrence of the Initial Triggering Event described in
subparagraph (i) of subsection (b) of this Section 2.
(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 the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which is 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 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the OTS or any other regulatory agency is
required in connection with such purchase, the Holder shall promptly file the
required notice or application for approval and shall expeditiously process the
same and 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 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.
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(f) At each closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder 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 the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder hereof
and Issuer and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof without charge
upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933 ("1933 Act") in the above legend shall be removed
by delivery of substitute certificate(s) without such reference if the Holder
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
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; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
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3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase 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) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Home Owners' Loan Act, as
amended ("HOLA"), or the Change in Bank Control Act of 1978, as amended, or any
state banking law, prior approval of or notice to the OTS, or to any state
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the OTS or such state regulatory authority as they
may require) in order to permit the Holder to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights of the Holder
against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof 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 Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, in the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions, or the like, the type and
number, and/or the price, of shares of Common Stock purchasable upon exercise
hereof shall be appropriately adjusted, and proper provision shall be made in
the agreements governing such transaction so that the Holder shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Holder would have received in respect of the Common Stock if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable.
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6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer (including any successor thereto)
shall, at the request of the Holder delivered at the time of and together with a
written notice of exercise in accordance with Section 2(e) hereof (whether on
its own behalf or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto), promptly
prepare, file and keep current a shelf registration statement under the 1933 Act
covering any shares issued or issuable pursuant to this Option and shall use its
best efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by the Holder. Issuer will
use its best efforts to cause such registration statement first to become
effective and then to remain effective for such period not in excess of 180 days
from the day such registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or other dispositions.
The Holder shall have the right to demand not more than two such registrations
under this Agreement and all other agreements, for which this agreement may be
exchanged pursuant to Section 4 hereof; provided, however, that Issuer shall be
required to bear the expenses related only to the first such registration, and
the Holder shall bear such expenses to the extent related to the second. The
foregoing notwithstanding, if, at the time of any request by the Holder for
registration of Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing underwriters,
or, if none, the sole underwriter or underwriters, of such offering the
inclusion of the Holder's Option or Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; and provided, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
7.(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 one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of 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 Common Stock shall after such
merger represent less than 50% of the outstanding shares and share
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equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, 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 the Holder, 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:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power with respect of
the election of directors (or other persons similarly responsible for
direction of the business and affairs) of the issuer of the Substitute
Option.
(3) "Assigned Value" shall mean the highest of (i) the price per
share of Common Stock at which a tender offer or exchange offer therefor
has been made, (ii) the price per share of Common Stock to be paid by any
third party pursuant to an agreement with Issuer, or (iii) in the event of
a sale of all or substantially all of Issuer's assets, the sum of the price
paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than
cash shall be determined by a nationally recognized investment banking firm
selected by the Holder.
(4) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the six months immediately preceding the
consolidation, merger or sale in question, 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 the Holder
may elect.
(c) The Substitute Option shall have the same terms and conditions as the
Option, provided, that if any term or condition of the Substitute Option cannot,
for legal reasons, be the same as the Option, such term or condition shall be as
similar as possible and in no event less advantageous to the Holder. The issuer
of the Substitute Option shall also enter into an agreement
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with the then Holder or Holders of the Substitute Option in substantially the
same form as this Agreement, which 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 (i) the product of (A) the Assigned
Value and (B) the number of shares of Common Stock for which the Option is then
exercisable, divided by (ii) the Average Price. 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 Common Stock for which the Option is then exercisable 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 9.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 7 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
8. The 180-day period for exercise of certain rights under Sections 2 and
6 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, 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.
9. Repurchase at the Option of Holder. (a) At the request of Holder at
any time commencing upon the first occurrence of a Repurchase Event (as defined
in Section 9(d)) and ending 12 months immediately thereafter, Issuer shall
repurchase from Holder (i) the Option and (ii) all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 9 is referred to as the "Request Date". Such repurchase shall be at an
aggregate price (the "Section 9 Repurchase Consideration") equal to the sum of:
(i) the aggregate Option Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which Holder
then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Common Stock over (y) the Option Price (subject to
adjustment pursuant to Sections 1 and 5), multiplied by the number of shares of
Common Stock with respect to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the Option
Price (subject to adjustment pursuant to Sections 1 and 5) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Holder for each
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share of Common Stock with respect to which the Option has been exercised and
with respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 9, Issuer
shall, within 10 business days after the Request Date, pay the Section 9
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and Holder shall
warrant that it has sole record and beneficial ownership of such shares and that
the same are then free and clear of all liens. Notwithstanding the foregoing, to
the extent that prior notification to or approval of any federal or state
regulatory authority is required in connection with the payment of all or any
portion of the Section 9 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 9, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 9 Repurchase Consideration that it is not then so prohibited from paying
and promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
approval). If any federal or state regulatory authority disapproves of any part
of Issuer's proposed repurchase pursuant to this Section 9, Issuer shall
promptly give notice of such fact to Holder. If any federal or state regulatory
authority prohibits the repurchase in part but not in whole, then Holder shall
have the right (i) to revoke the repurchase request or (ii) to the extent
permitted by such regulatory authority, determine whether the repurchase should
apply to the Option and/or Option Shares and to what extent to each, and Holder
shall thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request Date less the sum of
the number of shares covered by the Option in respect of which payment has been
made pursuant to Section 9(a)(ii) and the number of shares covered by the
portion of the Option (if any) that has been repurchased. Holder shall notify
Issuer of its determination under the preceding sentence within five (5)
business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 9 shall terminate on the date of termination of this Option
pursuant to Section 2(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Common Stock paid for any such
share by the person or groups described in Section 9(d)(i), (ii) the price per
share of Common Stock received by holders of Common Stock in connection with any
merger or other business combination transaction described in Section 7(a)(i),
7(a)(ii) or 7(a)(iii), or (iii) the highest closing sales price per share of
Issuer Common Stock quoted on the Nasdaq National Market System (or if Issuer
Common Stock is not quoted on the Nasdaq National Market System, the highest bid
price per share as quoted on the principal trading market or securities exchange
on which such shares are traded as reported by a recognized source chosen by
Holder) during the 40 business days preceding the Request Date; provided,
however, that in the event of a sale of less than all of Issuer's assets, the
Applicable Price shall be the sum of the price paid in such sale for such assets
and the current market value of the
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remaining assets of Issuer as determined by a nationally recognized investment
banking firm selected by Holder, divided by the number of shares of Common Stock
outstanding at the time of such sale. If the consideration to be offered, paid
or received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in good
faith by an independent nationally recognized investment banking firm selected
by Holder and reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 50% or
more of the then outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Section 7(a)(i), 7(a)(ii) or 7(a)(iii) shall be
consummated.
10. Issuer hereby represents and warrants to Grantee as follows:
(a) 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
Board of Directors of Issuer 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. This Agreement is the valid and legally binding
obligation of Issuer.
(b) 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
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all necessary action to exempt this Agreement, and
the transactions contemplated hereby and thereby from, and this Agreement and
the transactions contemplated hereby and thereby are exempt from, (i) any
applicable state takeover laws, (ii) any state laws limiting or restricting the
voting rights of stockholders and (iii) any provision in its or any of its
subsidiaries' articles of incorporation, certificate of incorporation, charter
or bylaws restricting or limiting stock ownership or the voting rights of
stockholders.
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(d) The execution, delivery and performance of this Agreement does not or
will not, and the consummation by Issuer of any of the transactions contemplated
hereby will not, constitute or result in (i) a breach or violation of, or a
default under, its certificate of incorporation or bylaws, or the comparable
governing instruments of any of its subsidiaries, or (ii) a breach or violation
of, or a default under, any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation of it or any of its subsidiaries
(with or without the giving of notice, the lapse of time or both) or under any
law, rule, ordinance or regulation or judgment, decree, order, award or
governmental or nongovernmental permit or license to which it or any of its
subsidiaries is subject, that would, in any case referred to in this clause
(ii), give any other person the ability to prevent or enjoin Issuer's
performance under this Agreement in any material respect.
11. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has full corporate power and authority to enter into this
Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being acquired with a view to the public
distribution thereof and neither this Option nor any Option Shares will be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under applicable federal and state securities laws and
regulations.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except (i)
to any wholly-owned Subsidiary or (ii) that in the event a Subsequent Triggering
Event shall have occurred prior to an Exercise Termination Event, Grantee,
subject to the express provisions hereof, may assign in whole or in part its
rights and obligations hereunder to one or more transferees.
13. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement.
14. Notwithstanding anything to the contrary herein, in the event that the
Holder or any Related Person thereof is a person making an offer or proposal to
engage in an Acquisition Transaction (other than the transactions contemplated
by the Merger Agreement), then in the case of a Holder or any Related Person
thereof, the Option held by it shall immediately terminate and be of no further
force or effect. A Related Person of a Holder means any Affiliate (as defined in
Rule 12b-2 of the rules and regulations under the 1934 Act) of the Holder and
any person that is the beneficial owner of 20% or more of the voting power of
the Holder.
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15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. 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 the Holder is not permitted to acquire the full number of shares of Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire such lesser number of shares as may be permissible, without any
amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
19. 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.
20. 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. Notwithstanding anything to the contrary contained herein or in the
Merger Agreement, in the event a Subsequent Triggering Event shall occur prior
to an Exercise Termination Event, Issuer shall pay to Grantee upon demand the
amount of the expenses incurred by Grantee in connection with this Agreement and
the Merger Agreement and the transactions contemplated hereby and thereby.
21. 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 assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and, as
permitted herein, assignees, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided herein.
12
<PAGE>
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers, all as of the date first above written.
ALLIANCE BANCORP
BY: /s/ Fredric G. Novy
---------------------------------
Fredric G. Novy
Chairman of the Board
SOUTHWEST BANCSHARES, INC.
BY: /s/ Richard E. Webber
---------------------------------
Richard E. Webber
President and Chief Financial Officer
13
<PAGE>
EXHIBIT 2.1
PLAN OF MERGER
OF
SOUTHWEST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF CHICAGO
INTO
LIBERTY FEDERAL BANK
PLAN OF MERGER, dated as of the 16th day of December, 1997 by and between
Liberty Federal Bank, a savings bank chartered under the laws of the United
States of America (the "Bank" or the "Resulting Bank"), and Southwest Federal
Savings and Loan Association of Chicago, a savings association chartered under
the laws of the United States of America ("Southwest Federal"), such
institutions being sometimes hereinafter called the "Constituent Associations"
or, individually, "Constituent Association".
WITNESSETH:
WHEREAS, all of the outstanding capital stock of the Bank is owned directly
by Alliance Bancorp ("Alliance Bancorp");
WHEREAS, Alliance Bancorp, parent corporation of the Bank, and Southwest
Bancshares, Inc. ("SWB"), parent corporation of Southwest Federal, have entered
into an Agreement and Plan of Merger ("Merger Agreement") pursuant to which,
following the merger of SWB with and into Alliance Bancorp, Southwest Federal
shall be merged with and into the Bank; and
WHEREAS, the Boards of Directors of the Bank and of Southwest Federal each
believe that it is in the best interests of their institutions and their
stockholders to merge the Bank and Southwest Federal into a single federally
chartered savings bank in order that (i) the merged institution may operate with
an improved competitive position and operating efficiency and (ii) the parent
company
1
<PAGE>
of the Bank, Alliance Bancorp, will retain the advantage of a unitary
savings and loan holding company status.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
provisions hereinafter contained, and for the purpose of prescribing the terms
and conditions of said merger and mode of carrying the same into effect, the
Bank and Southwest Federal have agreed and do hereby agree and covenant as
follows:
1. Plan of Merger: The merger provided for herein shall be effected as
follows:
(a) The execution and delivery of this Agreement by the Bank and Southwest
Federal shall have been duly approved by at least a two-thirds (2/3) vote of the
Boards of Directors of the Bank and Southwest Federal, respectively.
(b) The Office of Thrift Supervision ("OTS") or any successor thereto
shall have approved the merger.
(c) The merger shall be approved by the shareholder of the Bank and
by the shareholder of Southwest Federal.
(d) Thereupon Southwest Federal shall be merged with and into the Bank.
2. Effect of Merger. When this Plan of Merger shall become effective in
accordance with the laws and regulations of the United States of America:
(a) The separate existence of Southwest Federal shall cease and Southwest
Federal shall be merged into the Bank, which shall be the savings bank resulting
from the merger and shall continue its existence under the name "Liberty Federal
Bank." The date on which such merger becomes effective is hereinafter called
the "Bank Merger Effective Date."
(b) The Charter and Bylaws of the Bank, as in effect at the Bank
Merger Effective Date, shall be the Charter and Bylaws of the Resulting Bank and
may thereafter be amended in accordance with applicable law.
(c) The Directors of the Resulting Bank from and after the Bank Merger
Effective Date shall be nine (9) in number, and shall be those persons whose
names, residence addresses and terms of office are identified in Exhibit 1
hereto.
(d) The executive officers of the Bank following the Bank Merger Effective
Date shall be those persons in office immediately prior to the Bank Merger
Effective Date.
(e) All savings accounts of Southwest Federal shall be and become savings
accounts in the Resulting Bank without change in their respective terms,
maturity, minimum required balances or
2
<PAGE>
withdrawal value. Each savings account of Southwest Federal shall, as of the
Bank Merger Effective Date, be considered, for purpose of interest paid by the
Resulting Bank thereafter, as if it had been a savings account of the Resulting
Bank at the time said savings account was opened in Southwest Federal and at all
times thereafter until such account ceases to be a savings account of the
Resulting Bank. Appropriate evidence of savings account ownership interest in
the Resulting Bank shall be provided by the Resulting Bank to each savings
account holder of Southwest Federal, as necessary, after consummation of the
merger.
(f) All savings accounts of the Bank prior to consummation of the merger
shall continue to be savings accounts in the Resulting Bank after consummation
of the merger without any change whatsoever in any of the provisions of such
savings accounts, including, without limitation, their respective terms,
maturity, minimum required balances or withdrawal value.
(g) All of the assets, properties, obligations and liabilities of every
kind and character, real, personal and mixed, tangible and intangible, choses in
action, rights, and credits then owned by either the Bank or Southwest Federal,
or which would inure or be subject to either of them, shall immediately by
operation of law and without any conveyance or transfer and without any further
act or deed, be vested in and become the property and obligations of the
Resulting Bank which shall have, hold and enjoy the same in its own right as
fully and to the same extent as the same were possessed, held and enjoyed by the
Bank and Southwest Federal immediately prior to the consummation of the merger.
The Resulting Bank shall be deemed to be and shall be a continuation of the
entity and identity both of the Bank and of Southwest Federal and the rights and
obligations of the Bank and of Southwest Federal shall remain unimpaired; and
the Resulting Bank, upon the consummation of the merger, shall succeed to all of
such rights and obligations and the duties and liabilities connected therewith.
(h) The main office of the Bank at One Grant Square, Hinsdale, Illinois,
shall be the main office of the Resulting Bank and branch offices thereof will
be located at the locations set forth in Exhibit 2 hereof.
(i) The liquidation account of Southwest Federal as in effect as of the
Bank Merger Effective Date shall be assumed in full by the Resulting Bank.
3. Disposition of Shares:
(a) All of the shares of Southwest Federal capital stock issued and
outstanding on the Bank Merger Effective Date, and all rights in respect
thereof, shall be cancelled.
(b) The shares of capital stock of the Bank outstanding immediately prior
to consummation of the Bank Merger shall constitute the only outstanding shares
of capital stock of the Resulting Bank following consummation of the merger.
3
<PAGE>
4. Effective Date of Merger. The merger provided for herein shall become
effective on the date of endorsement of the Articles of Combination by the
Secretary of the OTS (the "Bank Merger Effective Date"). The merger shall not
be effective unless and until approved by the OTS. The merger shall also not be
effective until after the effective date of the merger of SWB with and into
Alliance Bancorp as set forth in the Merger Agreement by and between SWB and
Alliance Bancorp.
5. Action by Shareholders: The shareholders of the Bank and Southwest
Federal, respectively, shall take appropriate action to vote to approve this
Plan of Merger.
6. Condition of Closing: The obligations of the parties hereto to
consummate the transactions contemplated herein shall be subject to approval by
the OTS and fulfillment or wavier (as may be applicable) of the conditions set
forth in Article V of the Merger Agreement.
7. Amendment: This Agreement may be amended or modified at any time by a
written instrument signed by the Bank and Southwest Federal.
8. Paragraph Headings: The paragraph headings in this Plan of Merger are
for convenience only; they form no part of this Plan of Merger and shall not
affect its interpretation.
9. Governing Law: This Plan of Merger shall be governed by laws of the
State of Illinois, except to the extent federal law governs.
10. Termination. This Plan of Merger shall automatically terminate without
any further action of the parties hereto upon termination of the Merger
Agreement.
11. Miscellaneous: This Plan of Merger may be executed in counterparts,
each of which shall be deemed an original and all of which constitute one and
the same instrument.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to
be executed on their behalf by their duly authorized representatives as of the
day and year first above written.
SOUTHWEST FEDERAL SAVINGS AND LIBERTY FEDERAL BANK
LOAN ASSOCIATION OF CHICAGO
By: By:
/s/ Richard E. Webber /s/ Fredric G. Novy
- ------------------------------------- ---------------------------
Richard E. Webber Fredric G. Novy
President and Chief Executive Officer Chairman of the Board
5
<PAGE>
APPENDIX II
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
OF
ALLIANCE BANCORP
FOURTH: A. The total number of shares of all classes of stock which the
- ------
Corporation shall have authority to issue is twenty-two million five hundred
thousand (22,500,000) consisting of:
1. one million five hundred thousand (1,500,000) shares of Preferred
Stock, par value one cent ($.01) per share (the "Preferred Stock"); and
2. twenty-one million (21,000,000) shares of Common Stock, par value one
cent ($.01) per share (the "Common Stock").
<PAGE>
APPENDIX III
[FREIDMAN, BILLINGS, RAMSEY & CO., INC. LETTERHEAD]
December 16, 1997
Board of Directors
Alliance Bancorp
One Grant Square
Hinsdale, IL 60521
Board of Directors:
You have requested that Friedman, Billings, Ramsey & Co., Inc. ("FBR"), provide
you with its opinion as to the fairness, from a financial point of view, to
holders of common stock ("Stockholders") of Alliance Bancorp ("Alliance") of the
Consideration (as hereinafter defined) to be paid by Alliance pursuant to the
Agreement and Plan of Merger by and between Alliance and Southwest Bancshares,
Inc. ("SWBI"), dated December 16, 1997 (the "Merger Agreement"), pursuant to
which SWBI will be merged with and into Alliance (the "Merger"). The Merger
Agreement provides, among other things, that each issued and outstanding share
of common stock of SWBI shall be converted into the right to receive from
Alliance 1.1981 shares of Alliance common stock (the "Consideration"), subject
to certain terms and conditions including pricing "collars" on the number of
shares of Alliance common stock to be received by the stockholders of SWBI.
Additionally, each option to purchase shares of SWBI common stock shall be
converted into an option to purchase Alliance common stock, subject to certain
terms and conditions. The Merger Agreement will be considered at a meeting of
the Stockholders of Alliance. The terms of the Merger are more fully set forth
in the Merger Agreement.
In delivering this opinion, FBR has completed the following tasks:
1. reviewed SWBI Annual Report to Stockholders for the fiscal year ended
December 31, 1996 and SWBI Annual Reports on Form 10-K filed with the
Securities and Exchange Commission (the "SEC") for the fiscal years ended
December 31, 1995 and 1996;
2. reviewed Hinsdale Financial Corp.'s Annual Report on Form 10-K filed with the
SEC for the fiscal year ended September 30, 1996 and Liberty Bancorp's
Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1996;
3. reviewed SWBI Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997 filed with the SEC;
4. reviewed Alliance's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997 filed with the
SEC;
5. reviewed both SWBI's and Alliance's unaudited financial statements for the
ten months ended October 31, 1997;
<PAGE>
Board of Directors
Alliance Bancorp
December 16, 1997
Page 2
6. reviewed the reported market prices and trading activity for SWBI common
stock for the period January 1995 through December 12, 1997 and reviewed the
reported market prices and trading activity for Alliance common stock for the
period February 11, 1997 through December 12, 1997;
7. discussed the financial condition, results of operations, business and
prospects of Alliance and SWBI with the managements of Alliance and SWBI;
8. compared the results of operations and financial condition of Alliance and
SWBI with those of certain publicly-traded financial institutions (or their
holding companies) that FBR deemed to be reasonably comparable to Alliance or
SWBI, as the case may be;
9. reviewed the financial terms, to the extent publicly available, of certain
acquisition transactions that FBR deemed to be reasonably comparable;
10. reviewed a copy of the Merger Agreement; and
11. performed such other analyses and reviewed and analyzed such other
information as FBR deemed appropriate.
In rendering this opinion, FBR did not assume responsibility for independently
verifying, and did not independently verify, any financial or other information
concerning Alliance and SWBI furnished to it by Alliance or SWBI, or the
publicly-available financial and other information regarding Alliance, SWBI and
certain other financial institutions (or their holding companies). FBR has
assumed, for the purposes of this opinion, that all such information is accurate
and complete. FBR has further relied on the assurances of management of
Alliance and SWBI that they are not aware of any facts that would make such
financial or other information relating to such entities inaccurate or
misleading. With respect to financial forecasts for SWBI and Alliance provided
to FBR by their respective management, FBR has assumed, for the purposes of this
opinion, that the forecasts have been reasonably prepared on bases reflecting
the best available estimates and judgments of such management at the time of
preparation as to the future financial performance of SWBI and Alliance, as the
case may be. FBR has assumed that there has been no material change in SWBI's
assets, financial condition, result of operations, business or prospects since
September 30, 1997. FBR did not undertake an independent appraisal of the
assets or liabilities of SWBI nor was FBR furnished with any such appraisals.
FBR is not an expert in the evaluation of allowances for loan losses, was not
requested to and did not review such allowances, and was not requested to and
did not review any individual credit files of SWBI. FBR's conclusions and
opinion are necessarily based upon economic, market and other conditions and the
information made available to FBR as of the date of this opinion. FBR expresses
no opinion on matters of a legal, regulatory, tax or accounting nature related
to the Merger.
FBR, as part of its institutional brokerage, research and investment banking
practice, is regularly engaged in the valuation of securities and the evaluation
of transactions in connection with mergers and acquisitions of commercial banks,
savings institutions and financial institution holding companies, initial and
secondary offerings, mutual-to-stock conversions of savings institutions, as
well as business valuations for other corporate purposes for financial
institutions and real estate related companies. FBR has experience in, and
knowledge of, the valuation of bank and thrift securities in Illinois and the
rest of the United States.
<PAGE>
Board of Directors
Alliance Bancorp
December 16, 1997
Page 3
FBR has acted as a financial advisor to Alliance in connection with the Merger
and will receive a fee for services rendered which is contingent upon the
consummation of the Merger. In the ordinary course of FBR's business, it may
effect transactions in the securities of Alliance or SWBI for its own account
and/or for the accounts of its customers and, accordingly, may at any time hold
long or short positions in such securities. From time to time, principals
and/or employees of FBR may also have positions in the securities.
Based upon and subject to the foregoing, as well as any such other matters as we
consider relevant, it is FBR's opinion, as of the date hereof, that the
Consideration is fair, from a financial point of view, to the Stockholders of
Alliance.
Very truly yours,
/s/ Friedman, Billings, Ramsey & Co., Inc.
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
<PAGE>
APPENDIX IV
[ROBERT W. BAIRD & CO. INCORPORATED LETTERHEAD]
December 16, 1997
Board of Directors
Southwest Bancshares, Inc.
4062 Southwest Highway
Hometown, IL 60456
Gentlemen:
Southwest Bancshares, Inc., a Delaware corporation, ( "Southwest") proposes
to enter into an Agreement and Plan of Merger (the "Agreement") with Alliance
Bancorp, a Delaware corporation ("Alliance"). Pursuant to the Agreement (i)
Southwest will merge with and into Alliance (the "Company Merger") at the
Company Merger Effective Date (as defined in the Agreement); and (ii) each
outstanding share of common stock, par value $0.01 per share (the "Southwest
Common Stock") of Southwest (except for those held by Southwest or Alliance or
any of their respective subsidiaries) will be converted into the right to
receive the number of shares of common stock, par value $0.01 per share (the
"Alliance Common Stock") of Alliance equal to the Exchange Ratio (as defined in
the Agreement).
You have requested our opinion as to the fairness, from a financial point
of view, of the Exchange Ratio to the holders of the Southwest Common Stock
(other than Alliance and its affiliates).
Robert W. Baird & Co. Incorporated ("Baird"), as part of its investment
banking business, is engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes.
In conducting our investigation and analysis and in arriving at our opinion
herein, we have reviewed such information and taken into account such financial
and economic factors as we have deemed relevant under the circumstances. In
that connection, we have, among other things: (i) reviewed certain internal
information, primarily financial in nature, including projections, concerning
the business and operations of Southwest and Alliance furnished to us for
purposes of our analysis, as well as publicly available information, including
but not limited to, Southwest's and Alliance's recent filings with the
Securities and Exchange Commission and equity analyst research reports on
<PAGE>
Southwest Bancshares, Inc.
December 16, 1997
Page 2
Southwest and Alliance prepared by various investment banking firms including
Baird; (ii) reviewed the draft Agreement in the form presented to Southwest's
Board of Directors; (iii) compared the historical market prices and trading
activity of the Southwest Common Stock and the Alliance Common Stock with those
of certain other publicly traded companies we deemed relevant; (iv) compared the
financial position and operating results of Southwest and Alliance with those of
other publicly traded companies we deemed relevant; (v) reviewed forecasts
pertaining to prospective cost savings following the Company Merger furnished to
us by Alliance and deemed reasonable by Southwest; (vi) compared the proposed
financial terms of the Company Merger with the financial terms of certain other
business combinations involving thrift institutions that we deemed relevant; and
(vii) reviewed the potential pro forma financial effects of the Company Merger
on Alliance. We have held discussions with members of Southwest's and Alliance's
respective senior management concerning Southwest's and Alliance's historical
and current financial condition and operating results, as well as the future
prospects of Southwest and Alliance, respectively, and have consulted with
Alliance's senior management concerning Alliance's supervisory goodwill lawsuit.
As a part of our engagement, we were requested to and did solicit third party
indications of interest in acquiring Southwest. We have also considered such
other information, financial studies, analysis and investigations and financial,
economic and market criteria which we deemed relevant for the preparation of
this opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of all of the financial and other information that was publicly
available or provided to us by or on behalf of Southwest and Alliance, and have
not been engaged to independently verify any such information. We have assumed,
with your consent, that (i) all material assets and liabilities (contingent or
otherwise, known or unknown) of Southwest and Alliance are as set forth in their
respective financial statements; (ii) the Company Merger will be accounted for
under the pooling-of-interests method; (iii) the prospective cost savings
currently contemplated by Alliance's and Southwest's management following the
Company Merger will be realized; (iv) the Company Merger will be consummated in
accordance with the terms of the Agreement without any amendment thereto or
waiver by Southwest or Alliance of any condition to their respective
obligations; and (v) Alliance will receive all regulatory approvals required to
effect the Company Merger without undue delay. We have also assumed that the
financial forecasts, including but not limited to Southwest and Alliance
management's forecast of prospective cost savings following the Company Merger,
examined by us were reasonably prepared on bases reflecting the best available
estimates and good faith judgments of Southwest's and Alliance's respective
senior managements as to future performance of Southwest and Alliance,
respectively. In conducting our review, we have not undertaken nor obtained an
independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of Southwest and Alliance nor have we made a physical
inspection of the properties or facilities of Southwest or Alliance. We express
no opinion concerning the merits of, or ultimate recovery from, Alliance's
supervisory goodwill lawsuit. Our opinion necessarily is based upon economic,
monetary and market conditions as they exist and can be evaluated on the date
hereof, and does not predict or take into account any changes which may occur,
or information which
<PAGE>
Southwest Bancshares, Inc.
December 16, 1997
Page 3
may become available, after the date hereof. Furthermore, we express no opinion
as to the price or trading range at which the Southwest Common Stock or the
Alliance Common Stock will trade following the date hereof.
Our opinion has been prepared at the request and for the information of the
Board of Directors of Southwest, and shall not be used for any other purpose or
disclosed to any other party without the prior written consent of Baird;
provided, however, that this letter may be reproduced in full in the
Prospectus/Proxy Statement to be provided to Southwest's and Alliance's
stockholders in connection with the Company Merger. This opinion does not
address the relative merits of the Company Merger and any other potential
transactions or business strategies considered by Southwest's Board of
Directors, and does not constitute a recommendation to any shareholder of
Southwest as to how any such shareholder should vote with respect to the Company
Merger. Baird will receive a fee for rendering this opinion and a fee upon
successful completion of the Company Merger. From time to time, Baird has
provided investment banking services to Alliance and its predecessor companies,
for which it has received its customary compensation.
In the ordinary course of our business, we may from time to time trade the
securities of Southwest or Alliance for our own account or the accounts of our
customers and, accordingly, may at any time hold long or short positions in such
securities.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair, from a financial point of view, to
the holders of Southwest Common Stock (other than Alliance and its affiliates).
Very truly yours,
/s/ Robert W. Baird & Co. Incorporated
ROBERT W. BAIRD & CO. INCORPORATED
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article TENTH of the Registrant's Restated Certificate of Incorporation
provides for the following indemnification for Directors and Officers.
A. Each person who was or is made a party-or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a Director or an Officer of the
Corporation or is or was serving at the request of the Corporation as a
Director, Officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a Director, Officer,
employee or agent or in any other capacity while serving as a Director, Officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith; provided, however, that, except as provided
in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. The right to indemnification conferred Section A of this Article TENTH
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a Director or Officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, services to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section or otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections A and B of this Article TENTH shall be contract
rights and such rights shall continue as to an indemnitee who has ceased to be a
Director, Officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not paid in
full by the Corporation within sixty days after a written claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole
or in part in any such suit, or in a suit brought by the Corporation to recover
an advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expenses of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the indemnitee
to enforce a right to an advancement of expenses) it shall be a defense that,
and (ii) in any suit by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
any applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its
<PAGE>
Board of Directors, independent legal counsel, or its stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article TENTH or
otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, By-laws, agreement, vote of stockholders or
Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, 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 to the fullest extent of
the provisions of this Article TENTH with respect to the indemnification and
advancement of expenses of Directors and Officers of the Corporation.
ITEM 21. EXHIBITS & FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
Number Description
------ -----------
(2) The Agreement and Plan of Merger (included as APPENDIX
A to the Joint Proxy Statement/Prospectus).
(3)(a) Restated Certificate of Incorporation of Alliance
Bancorp./1/
(3)(b) By-laws of Alliance Bancorp./2/
(5) Legal Opinion of Luse Lehman Gorman Pomerenk & Schick,
A Professional Corporation.
(8) Tax opinion of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation.
(10)(a) Employment Agreement between Liberty Federal Bank and
Mr. Bristol./2/
(10)(b) Employment Agreements between Fredric G. Novy and
Liberty Bancorp, Inc. and Liberty Federal Savings Bank
and assumed by the Registrant and its subsidiary./1/
(10)(c) Employment Agreement between the Company and Howard A.
Davis (incorporated by reference from Exhibit 10.3 of
Hinsdale Financial's Form 10-K, Annual Report for the
fiscal year ended September 30, 1995).
<PAGE>
(10)(d) Form of Change in Control Agreements entered into
between Alliance Bancorp and its senior officers./1/
(10)(e) Bank Recognition and Retention Plans and Trust./3/
(10)(f) Incentive Stock Option Plan./3/
(10)(g) Stock Option Plan for Outside Directors./3/
(10)(h) 1994 Incentive Stock Option Plan (incorporated by
reference from the attachments to Hinsdale Financial's
Proxy Statement dated December 26, 1994 for the Annual
Meeting of Stockholders held on February 8, 1995.)
(10)(i) 1997 Long-Term Incentive Stock Benefit Plan/4/
(11) Computation of per share earnings
(13) Annual Report to Security Holders/ Form 10-K, as
amended (incorporated by reference to such reports as
previously filed with the Commission)
(23)(a) Consent of KPMG Peat Marwick LLP.
(23)(b) Consent of Cobitz, Vandenberg & Fennessy.
(23)(c) Consent of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation (contained in Exhibits 5 and 8
included in the Form S-4).
(23)(d) Consent of Freidman, Billings, Ramsey & Co., Inc.
(23)(e) Consent of Robert W. Baird & Co., Incorporated
(24) Power of Attorney (included in the signature pages).
(27) Alliance Bancorp's Financial Data Schedule./1/
(99) Form of proxy for the Annual Meeting of Stockholders of
Alliance Bancorp.
Form of proxy for the Annual Meeting of Stockholders of
Southwest Bancshares, Inc.
(b) Financial Statement Schedules - Not applicable.
(c) Not applicable.
_______________________
/1/ Incorporated by reference from the Registrant's 1997 From 10-K.
/2/ Incorporated by reference from Form S-1, Registration Statement,
filed on March 31, 1992, Registration No. 33-46877.
<PAGE>
/3/ Incorporated by reference from the attachments to the Proxy Statement
dated December 27, 1993 for the Annual Meeting of Stockholders held on
February 9, 1994.
/4/ Incorporated by reference into this document from the attachments to
the Proxy Statement dated May 1, 1997 for the Annual Meeting of
Stockholders held on May 28, 1997.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any factors or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of a prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to security-
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X is not set forth in
<PAGE>
the prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such interim financial
information.
(6) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reoffering by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(7) That every prospectus (i) that is filed pursuant to paragraph (6)
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 ((S) 230.415) of this chapter), will be filed as a part of
an amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(8) That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions of this Item 22, or
otherwise (other than insurance), the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(9) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(10) 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hinsdale, State of
Illinois, on May 4, 1998.
ALLIANCE BANCORP
----------------
Date: May 4, 1998
By /s/ Kenne P. Bristol
------------------------------------------
Kenne P. Bristol
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
By so signing, each of the undersigned in his or her capacity as a director
or officer, or both, as the case may be, of the Company, does hereby appoint
Kenne P. Bristol, Fredric G. Novy and Richard A. Hojnicki, and each of them,
with full power of substitution, his or her true and lawful attorneys or
attorney in-fact and agent to execute in his or her name, place or stead, in his
or her capacity as a director or officer or both as the case may be, of the
Company, any and all amendments thereto and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission. Each of said attorneys shall have full power and authority
to do and perform in the name and on behalf of each of the undersigned, in any
and all capacities, every act whatsoever requisite or necessary to be done in
the premises as fully and to all intents and purposes as each of the undersigned
might or could do in person, hereby ratifying and approving the acts of said
attorney and each of them.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Kenne P. Bristol President, Chief Executive Officer May 4, 1998
- ----------------------------- ---------------------
Kenne P. Bristol and Director
/s/ Fredric G. Novy Chairman of the Board of May 4, 1998
- ----------------------------- ---------------------
Fredric G. Novy Directors
/s/ Richard A. Hojnicki Executive Vice President May 4, 1998
- ----------------------------- ---------------------
Richard A. Hojnicki Chief Financial Officer and
Corporate Secretary
(Principal Financial Officer)
/s/ Ilene M. Bock Senior Vice President and Controller May 4, 1998
- ----------------------------- ---------------------
Ilene M. Bock (Principal Accounting Officer)
/s/ Edward J. Burns Director May 4, 1998
- ----------------------------- ---------------------
Edward J. Burns
/s/ Howard A. Davis Director May 4, 1998
- ----------------------------- ---------------------
Howard A. Davis
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Whit G. Hughes Director May 4, 1998
- ----------------------------- ---------------------
Whit G. Hughes
/s/ Howard R. Jones Director May 4, 1998
- ----------------------------- ---------------------
Howard R. Jones
/s/ H. Verne Loeppert Director May 4, 1998
- ----------------------------- ---------------------
H. Verne Loeppert
/s/ David D. Mill Director May 4, 1998
- ----------------------------- ---------------------
David D. Mill
/s/ Edward J. Nusrala Director May 4, 1998
- ----------------------------- ---------------------
Edward J. Nusrala
/s/ William C. O'Donnell Director May 4, 1998
- ----------------------------- ---------------------
William C. O'Donnell
/s/ William R. Rybak Director May 4, 1998
- ----------------------------- ---------------------
William R. Rybak
/s/ Russell F. Stephens, Jr. Director May 4, 1998
- ----------------------------- ---------------------
Russell F. Stephens, Jr.
/s/ Donald E. Sveen Director May 4, 1998
- ----------------------------- ---------------------
Donald E. Sveen
/s/ Vernon B. Thomas, Jr. Director May 4, 1998
- ----------------------------- ---------------------
Vernon B. Thomas, Jr.
</TABLE>
<PAGE>
EXHIBIT INDEX
Number Description
------ -----------
(2) The Agreement and Plan of Merger (included as APPENDIX
A to the Joint Proxy Statement/Prospectus).
(3)(a) Restated Certificate of Incorporation of Alliance
Bancorp./1/
(3)(b) By-laws of Alliance Bancorp./2/
(5) Legal Opinion of Luse Lehman Gorman Pomerenk & Schick,
A Professional Corporation.
(8) Tax opinion of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation.
(10)(a) Employment Agreement between Liberty Federal Bank and
Mr. Bristol./2/
(10)(b) Employment Agreements between Fredric G. Novy and
Liberty Bancorp, Inc. and Liberty Federal Savings Bank
and assumed by the Registrant and its subsidiary./1/
(10)(c) Employment Agreement between the Company and Howard A.
Davis (incorporated by reference from Exhibit 10.3 of
Hinsdale Financial's Form 10-K, Annual Report for the
fiscal year ended September 30, 1995).
(10)(d) Form of Change in Control Agreements entered into
between Alliance Bancorp and its senior officers./1/
(10)(e) Bank Recognition and Retention Plans and Trust./3/
(10)(f) Incentive Stock Option Plan./3/
(10)(g) Stock Option Plan for Outside Directors./3/
(10)(h) 1994 Incentive Stock Option Plan (incorporated by
reference from the attachments to Hinsdale Financial's
Proxy Statement dated December 26, 1994 for the Annual
Meeting of Stockholders held on February 8, 1995.)
(10)(i) 1997 Long-Term Incentive Stock Benefit Plan/4/
(11) Computation of per share earnings
(13) Annual Report to Security Holders/ Form 10-K, as
amended (incorporated by reference to such reports as
previously filed with the Commission)
(23)(a) Consent of KPMG Peat Marwick LLP.
(23)(b) Consent of Cobitz, Vandenberg & Fennessy.
(23)(c) Consent of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation (contained in Exhibits 5 and 8
included in the Form S-4).
(23)(d) Consent of Freidman, Billings, Ramsey & Co., Inc.
(23)(e) Consent of Robert W. Baird & Co., Incorporated
(24) Power of Attorney (included in the signature pages).
<PAGE>
(27) Alliance Bancorp's Financial Data Schedule./1/
(99) Form of proxy for the Annual Meeting of Stockholders of
Alliance Bancorp.
Form of proxy for the Annual Meeting of Stockholders of
Southwest Bancshares, Inc.
(b) Financial Statement Schedules - Not applicable.
(c) Not applicable.
________________________
/1/ Incorporated by reference from the Registrant's 1997 From 10-K.
/2/ Incorporated by reference from Form S-1, Registration Statement,
filed on March 31, 1992, Registration No. 33-46877.
/3/ Incorporated by reference from the attachments to the Proxy Statement
dated December 27, 1993 for the Annual Meeting of Stockholders held on
February 9, 1994.
/4/ Incorporated by reference into this document from the attachments to
the Proxy Statement dated May 1, 1997 for the Annual Meeting of
Stockholders held on May 28, 1997.
<PAGE>
EXHIBIT 5
[LETTERHEAD OF LUSE LEHMAN GORMAN POMERENK & SCHICK]
May 4, 1998
The Board of Directors
Alliance Bancorp
One Grant Square
Hinsdale, Illinois 60521
RE: ALLIANCE BANCORP
COMMON STOCK PAR VALUE $.01 PER SHARE
-------------------------------------
Gentlemen:
You have requested the opinion of this firm as to certain matters in
connection with the issuance of Common Stock, par value $.01 per share ("Common
Stock"), of Alliance Bancorp (the "Company"), in connection with the Agreement
and Plan of Merger, dated December 16, 1997, between the Company and Southwest
Bancshares, Inc. ("Southwest") providing for the merger of Southwest with and
into the Company, with the Company as the surviving entity (the "Merger").
Pursuant to the Merger Agreement and the Merger, shareholders of Southwest will
receive shares of Common Stock of the Company in exchange for their shares of
Southwest Common Stock, as set forth in the Merger Agreement. We have reviewed
the Company's Restated Certificate of Incorporation and the Registration
Statement on Form S-4 ("Form S-4"), as well as applicable statutes and
regulations governing the Company and the offer and sale of the Common Stock.
We are of the opinion that following the declaration of effectiveness of
the Form S-4, the receipt of approvals of the Company's and Southwest's
shareholders and the regulatory authorities, and the satisfaction or waiver of
all conditions precedent to the consummation of the Merger set forth in the
Merger Agreement, the Common Stock, when issued in accordance with the Merger
Agreement, will be legally issued, fully paid and non-assessable.
This opinion has been prepared solely for the use of the Company in
connection with the Form S-4, and should not be used for any other purpose nor
relied upon by any other person (except for the Securities and Exchange
Commission in connection with its processing of the Form S-4), without the prior
written consent of this firm. We hereby consent to our firm being referenced
under the caption "Legal Matters" in the Form S-4.
<PAGE>
Very truly yours,
/s/ Luse Lehman Gorman Pomerenk & Schick, P.C.
LEGAL OPINION OF LUSE LEHMAN GORMAN POMERENK & SCHICK,
A PROFESSIONAL CORPORATION
<PAGE>
EXHIBIT 8
[LETTERHEAD OF LUSE LEHMAN GORMAN POMERENK & SCHICK]
May 6, 1998
Board of Directors
Alliance Bancorp
One Grant Square
Hinsdale, Illinois 60521
Board of Directors
Southwest Bancshares, Inc.
4062 Southwest Highway
Hometown, Illinois 60456
RE: CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER OF
SOUTHWEST BANCSHARES, INC. AND ALLIANCE BANCORP FOLLOWED BY THE
MERGER OF SOUTHWEST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHICAGO
AND LIBERTY FEDERAL BANK
Gentlemen:
We have acted as special counsel to Alliance Bancorp, a non-diversified,
unitary savings and loan holding company, with principal offices in Hinsdale,
Illinois, in connection with the proposed merger of Southwest Bancshares, Inc.
("SWB"), a non-diversified unitary savings and loan holding company with
principal offices in Hometown, Illinois (the "Company Merger"). After the
Company Merger, Southwest Federal Savings and Loan Association of Chicago
("Southwest Federal"), a wholly-owned subsidiary of SWB, will merge into Liberty
Federal Bank ("Liberty Federal") a wholly-owned subsidiary of Alliance Bancorp
(the "Bank Merger"). Both the Company Merger and the Bank Merger (collectively,
the "Merger") are pursuant to the Agreement and Plan of Merger dated as of
December 16, 1997, by and between Alliance Bancorp and Southwest Bancshares,
Inc. ("Merger Agreement") which is described and set forth in the Proxy
Statement of Alliance Bancorp included in the Registration Statement on Form S-4
as filed with the Securities Exchange Commission ("SEC") (the "Proxy"). This
opinion is being rendered pursuant to your request. Terms used but not defined
herein, whether capitalized or not, shall have the meaning given to them in the
Merger Agreement.
For purposes of this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Merger Agreement, (ii) the Registration Statement on Form S-4,filed by
Alliance in connection with the above-noted transactions (the "Registration
Statement"), and (iii) such other documents as we have deemed necessary or
appropriate in order to enable us to render the opinions below. In our
examination, we have assumed the genuineness of all signatures where due
execution and delivery are
<PAGE>
Board of Directors
Alliance Bancorp
Board of Directors
Southwest Bancshares, Inc.
May 6, 1998
Page 2
requirements to the effectiveness thereof, the legal capacity of all natural
persons, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified,
conformed or photostatic copies and the authenticity of the originals of such
copies. In rendering the opinion set forth below, we have relied, with the
consent of Alliance Bancorp and the consent of SWB, upon certain written
representations of Alliance Bancorp and SWB (which representations we have
neither investigated nor verified), copies of which are attached hereto.
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations, pertinent judicial authorities, interpretative rulings of the
Internal Revenue Service and such other authorities as we have considered
relevant. We have also assumed that the transactions contemplated by the
Agreement will be consummated strictly in accordance with the Agreement and as
described in the Proxy, that the Company Merger will qualify as a statutory
merger under the applicable laws of the State of Delaware, and that the Bank
Merger will qualify as a statutory merger under applicable federal law.
Based solely upon and subject to the foregoing, it is our opinion that,
under presently applicable law, the following will be the material federal
income tax consequences of the Company Merger and the Bank Merger.
1. The Company Merger and the Bank Merger will each qualify as a
reorganization under Section 368(a) of the Code.
2. No gain or loss will be recognized by Alliance Bancorp, Liberty
Federal, Alliance Bancorp stockholders, SWB or Southwest Federal as a result of
the Company Merger or the Bank Merger.
3. No gain or loss will be recognized by any SWB stockholder upon the
exchange of SWB Common Stock solely for Alliance Bancorp Common Stock pursuant
to the Merger (except with respect to cash received in lieu of a fractional
share interest in Alliance Bancorp Common Stock, if any, as discussed below).
4. The aggregate tax basis of the Alliance Bancorp Common Stock received
by each stockholder of SWB who exchanges SWB Common Stock for Alliance Bancorp
Common Stock in the Merger will be the same as the aggregate tax basis of the
SWB Common Stock surrendered in exchange therefor (subject to any adjustments
required as the result of receipt of cash in lieu of a fractional share interest
in Alliance Bancorp Common Stock).
<PAGE>
Board of Directors
Alliance Bancorp
Board of Directors
Southwest Bancshares, Inc.
May 6, 1998
Page 3
5. The holding period of the shares of Alliance Bancorp Common Stock
received by a SWB stockholder in the Merger will include the holding period of
the SWB Common Stock surrendered in exchange therefor, provided that such shares
of SWB Common Stock were held as a capital asset by such stockholder at the
Effective Time.
6. Cash received in the Merger by a SWB stockholder in lieu of a
fractional share interest of Alliance Bancorp Common Stock will be treated as
having been received as a distribution in full payment in exchange for the
fractional share interest of Alliance Bancorp Common Stock which such
stockholder would otherwise be entitled to receive, and will qualify as capital
gain or loss (assuming the SWB Common Stock surrendered in exchange therefor was
held as a capital asset by such stockholder at the Effective Time).
This opinion may not be applicable to Alliance Bancorp stockholders who
received their Alliance Bancorp Common Stock pursuant to the exercise of
employee stock options or otherwise as compensation or who are not citizens or
residents of the United States.
We hereby consent to the filing of the opinion as an exhibit to the
Company's Registration Statement on Form S-4 as filed with the SEC. We also
consent to the references to our firm in the Joint Proxy Statement/Prospectus
contained in the Form S-4 under the captions "The Merger--Federal Income Tax
Consequences of the Merger" and "Legal Matters."
Very truly yours,
/s/ Luse Lehman Gorman Pomerenk & Schick
LUSE LEHMAN GORMAN POMERENK
& SCHICK, A Professional Corporation
<PAGE>
EXHIBIT 11
Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share." Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements. The following table sets forth the computation of basic and
diluted earnings per share for the periods indicated:
<TABLE>
<CAPTION>
Three
Year Months Year Ended
Ended Ended September 30,
Dec. 31, Dec. 31, ----------------------------
1997 1996 1996 1995
---------- --------- ------------- -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Numerator:
Net income $ 10,249 1,079 3,074 4,459
Denominator:
Basic earnings per share-weighted average shares 7,569,751 4,042,628 4,029,553 3,993,867
Effect of dilutive securities-stock options 545,245 182,130 170,037 165,580
Diluted earnings per share-adjusted weighted
average shares 8,114,996 4,224,758 4,199,590 4,159,447
Basic earnings per share $ 1.35 0.27 0.76 1.12
Diluted earnings per share $ 1.26 0.26 0.73 1.07
</TABLE>
<PAGE>
EXHIBIT 23(a)
[KPMG PEAT MARWICK, LLP LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Alliance Bancorp
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick, LLP
Chicago, Illinois
May 4, 1998
<PAGE>
EXHIBIT 23(b)
[COBITZ, VANDENBERG & FENNESSY LETTERHEAD]
INDEPENDENT AUDITOR'S CONSENT
We consent to the reference to our firm under the caption "Experts" in the Joint
Proxy Statement of Alliance Bancorp and Southwest Bancshares, Inc. that is made
a part of the Registration Statement (Form S-4 to be filed on or about May 6,
1998) and related Prospectus of Alliance Bancorp for the registration of shares
of its common stock and to the incorporation by reference therein of our report
dated January 23, 1998, with respect to the consolidated financial statements of
Southwest Bancshares, Inc., included in its Annual Report (Form 10-K) for the
year ended December 31, 1997, filed with the Securities and Exchange Commission.
/s/ Cobitz, Vandenberg & Fennessy
May 4, 1998
Palos Hills, Illinois
<PAGE>
EXHIBIT 23(d)
[FREIDMAN, BILLINGS, RAMSEY & CO., INC. LETTERHEAD]
May 4, 1998
Gentlemen:
This letter will constitute our consent to the inclusion of our opinion
regarding the acquisition of Southwest Bancshares, Inc. by Alliance Bancorp
("Alliance") in Alliance's registration statement on Form S-4 (the "Registration
Statement") and to the inclusion of the summary of such opinion and the use of
our name in the Registration Statement. In giving the foregoing consent, we do
not admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended (the "Securities
Act"), or the rules and regulations of the Securities and Exchange Commission
(the "Commission") with respect to any part of such Registration Statement
within the meaning of the term "experts" as used in the Securities Act and the
rules and regulations of the Commission promulgated thereunder.
Very truly yours,
FREIDMAN, BILLINGS, RAMSEY & CO., INC.
/s/ Eugene S. Weil
Eugene S. Weil
Managing Director
<PAGE>
EXHIBIT 23(e)
[ROBERT W. BAIRD & CO., INCORPORATED LETTERHEAD]
Robert W. Baird & Co. Incorporated ("Baird") hereby consents to the inclusion in
the Joint Proxy Statement/Prospectus of Alliance Bancorp and Southwest
Bancshares, Inc. as a part of this Registration Statement on Form S-4 of
Alliance Bancorp, of its opinion regarding the acquisition of Southwest
Bancshares, Inc. by Alliance Bancorp), and to the references made to Baird in
the sections of such Proxy Statement/Prospectus entitled "The Merger -
Background of the Merger, "The Merger--Reasons for the Merger" and "Opinion of
Southwest Bancshares' Financial Advisor". In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
ROBERT W. BAIRD & CO. INCORPORATED
By: /s/ Robert W. Baird & Co. Incorporated
--------------------------------------
May 4, 1998
<PAGE>
EXHIBIT 99
ALLIANCE BANCORP
ANNUAL MEETING OF STOCKHOLDERS
JUNE 30, 1998
The undersigned hereby appoints __________ and __________, with full powers
of substitution, to act as attorneys and proxies for the undersigned to vote all
shares of capital stock of Alliance Bancorp which the undersigned is entitled to
vote at the Annual Meeting of Stockholders (the "Meeting") to be held at Ashton
Place, located at 341 W. 75th Street, Willowbrook, Illinois on June 30, 1998 at
10:00 a.m. and at any and all adjournments and postponements thereof.
1. The approval of the Agreement and Plan of Merger (the "Merger Agreement"),
dated as of December 16, 1997, by and between Alliance Bancorp and Southwest
Bancshares, Inc. ("Southwest Bancshares") and the transactions contemplated
thereby, including the merger of Southwest Bancshares into Alliance Bancorp,
pursuant to which each outstanding share of Southwest Bancshares common stock
would be converted into shares of Alliance Bancorp common stock based on an
exchange ratio as described in the accompanying Joint Proxy
Statement/Prospectus (with cash paid in lieu of fractional share interests),
and the merger of Southwest Federal Savings and Loan Association of Chicago
into Liberty Federal Bank.
[_] FOR [_] AGAINST [_] VOTE WITHHELD
2. The election as directors of all nominees listed below (except as marked to
the contrary):
[_] FOR [_] VOTE WITHHELD
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
IN THAT NOMINEE'S NAME BELOW.
KENNE P. BRISTOL H. VERNE LOEPPERT
HOWARD A. DAVIS DAVID D. MILL
3. The ratification of the appointment of KPMG Peat Marwick LLP as independent
auditors of Alliance Bancorp for the fiscal year ending December 31, 1998.
[_] FOR [_] AGAINST [_] VOTE WITHHELD
4. The approval of an amendment to Alliance Bancorp's Certificate of
Incorporation to increase the total number of authorized shares of common
stock to 21,000,000.
[_] FOR [_] AGAINST [_] VOTE WITHHELD
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Meeting or any adjournment or
postponement thereof, including proposals to adjourn the Annual Meeting to
permit the further solicitation of proxies.
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSALS AND EACH OF THE NOMINEES LISTED
ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE
VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME,
THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSALS
AND THE ELECTION OF THE NOMINEES LISTED ABOVE.
(Continued and to be SIGNED on Reverse Side)
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Should the undersigned be present and choose to vote at the Meeting or at
any adjournments or postponements thereof, and after notification to the
Secretary of Alliance Bancorp at the Meeting of the stockholder's decision to
terminate this proxy, then the power of such attorneys or proxies shall be
deemed terminated and of no further force and effect. This proxy may also be
revoked by filing a written notice of revocation with the Secretary of Alliance
Bancorp or by duly executing a proxy bearing a later date.
The undersigned acknowledges receipt from Alliance Bancorp, prior to the
execution of this proxy, of notice of the Meeting, a Proxy Statement and an
Annual Report to Stockholders.
Dated: _____________, 1998 _______________________________________
Signature of Stockholder
Please sign exactly as your name(s) appear(s)
to the left. When signing as attorney,
executor, administrator, trustee or guardian,
please give your full title. Only one
signature is required in the case of a joint
account.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE
<PAGE>
[FRONT SIDE]
REVOCABLE PROXY
SOUTHWEST BANCSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
June 30, 1998
9:30 a.m. Chicago Time
The undersigned hereby appoints the official proxy committee of the Board
of Directors of Southwest Bancshares, Inc. (the "Company"), each with full power
of substitution, to act as attorneys and proxies for the undersigned, and to
vote all shares of Common Stock of the Company which the undersigned is entitled
to vote only at the Annual Meeting of Stockholders, to be held on June 30, 1998
at 9:30 a.m. Chicago Time, at The Oak Lawn Hilton Hotel, 9333 South Cicero
Avenue, Oak Lawn, Illinois, and at any and all adjournments thereof, as follows:
1. The approval of the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of December 16, 1997, by and between Alliance
Bancorp and Southwest Bancshares, Inc. a copy of which is attached to
the accompanying Joint Proxy Statement/Prospectus as Appendix I, and
the transactions contemplated thereby, including the merger of
Southwest Bancshares, Inc. into Alliance Bancorp, pursuant to which
each outstanding share of Southwest Bancshares, Inc. Common Stock
would be converted into shares of Alliance Bancorp Common Stock based
on an exchange ratio as described in the accompanying Joint Proxy
Statement/Prospectus (with cash paid in lieu of fractional share
interests), and the merger of Southwest Federal Savings and Loan
Association of Chicago into Liberty Federal Bank.
FOR AGAINST ABSTAIN
--- ------- -------
[_] [_] [_]
2. The election as directors of all nominees listed (except as marked to
the contrary below).
Frank J. Muriello and Albert Rodrigues
FOR VOTE WITHHELD
--- -------------
[_] [_]
INSTRUCTION: To withhold your vote for any individual nominee, write that
nominee's name on the space provided below:
________________________________________________________________________________
3. The ratification of Cobitz, VandenBerg & Fennessy as the independent
auditors of Southwest Bancshares, Inc. for the fiscal year ending
December 31, 1998.
FOR AGAINST ABSTAIN
--- ------- -------
[_] [_] [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE
LISTED PROPOSALS.
<PAGE>
[BACK SIDE]
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS
LISTED. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, INCLUDING
WHETHER OR NOT TO ADJOURN THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED
IN THIS PROXY IN THEIR BEST JUDGEMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders and of a
Joint Proxy Statement/Prospectus dated May ___, 1998 and of the Annual Report to
Stockholders on Form 10-K.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
Dated: _______________________________
_________________________________
SIGNATURE OF STOCKHOLDER
_________________________________
SIGNATURE OF STOCKHOLDER
______________________________________
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
